Omnicell, Inc.
OMNICELL INC /CA/ (Form: S-1/A, Received: 06/26/2001 17:26:52)

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 2001

REGISTRATION NO. 333-57024



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933


OMNICELL, INC.
(Exact name of registrant as specified in its charter)

           DELAWARE                          3571                         94-3166458
 (State or other jurisdiction    (Primary Standard Industrial          (I.R.S. Employer
              of                 Classification Code Number)         Identification No.)
incorporation or organization)


1101 EAST MEADOW DRIVE
PALO ALTO, CALIFORNIA 94303
(650) 251-6100

(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Sheldon D. Asher President and Chief Executive Officer 1101 East Meadow Drive Palo Alto, California 94303 (650) 251-6100

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

    Robert J. Brigham, Esq.                             Gary J. Kocher, Esq.
      COOLEY GODWARD LLP                             PRESTON GATES & ELLIS LLP
     Five Palo Alto Square                          701 Fifth Avenue, Suite 5000
      3000 El Camino Real                          Seattle, Washington 98104-7078
Palo Alto, California 94306-2155                          (206) 623-7580
        (650) 843-5000


APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

As soon as practicable after the Registration Statement becomes effective.

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

                                               PROPOSED MAXIMUM      PROPOSED MAXIMUM
 TITLE OF SECURITIES       AMOUNT TO BE       OFFERING PRICE PER        AGGREGATE             AMOUNT OF
  TO BE REGISTERED          REGISTERED              SHARE           OFFERING PRICE(1)    REGISTRATION FEE(2)
Common Stock.........       6,900,000               $10.00             $69,000,000             $17,250

(1) Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457 under the Securities Act of 1933, as amended.

(2) Previously paid.

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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.




SUBJECT TO COMPLETION, DATED JUNE 26, 2001

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE SECURITIES AND EXCHANGE COMMISSION DECLARES OUR REGISTRATION STATEMENT 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.


PRELIMINARY PROSPECTUS
6,000,000 SHARES

OMNICELL, INC.
COMMON STOCK                             [LOGO]

$ PER SHARE


-   Omnicell, Inc. is offering 6,000,000       -   This is our initial public offering and
    shares.                                    no public market currently exists for our
                                                   shares.
-   We anticipate that the initial public      -   Proposed trading symbol: Nasdaq National
    offering price will be between $8.00 and       Market - OMCL.
    $10.00 per share.


THIS INVESTMENT INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 6.



                                                              PER SHARE      TOTAL
                                                              ---------   ------------
Public offering price.......................................  $           $
Underwriting discount.......................................  $           $
Proceeds to Omnicell, Inc...................................  $           $



THE UNDERWRITERS HAVE A 30-DAY OPTION TO PURCHASE UP TO 900,000 ADDITIONAL SHARES OF COMMON STOCK FROM US TO COVER OVER-ALLOTMENTS, IF ANY.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OF ANYONE'S INVESTMENT IN THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

U.S. BANCORP PIPER JAFFRAY

CIBC WORLD MARKETS
SG COWEN

THE DATE OF THIS PROSPECTUS IS , 2001.


INSIDE FRONT COVER

Clinical infrastructure and workflow automation solutions for healthcare
(header, centered)

Omnicell Patient Medication Profiling screen shot image (upper left)

Clinical Pharmacology screen shot image (center left)

Person and one automated dispensing cabinet (center right)

OmniBuyer application screen shot (lower left)

Omnicell Logo image (lower right)


TABLE OF CONTENTS

                                                                PAGE
                                                              --------
Summary.....................................................         1
Risk Factors................................................         6
Special Note Regarding Forward-Looking Statements...........        16
Use of Proceeds.............................................        16
Dividend Policy.............................................        16
Capitalization..............................................        17
Dilution....................................................        18
Selected Consolidated Financial Data........................        19
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................        21
Business....................................................        32
Management..................................................        47
Related Party Transactions..................................        60
Principal Stockholders......................................        62
Description of Capital Stock................................        64
Shares Eligible for Future Sale.............................        67
Underwriting................................................        69
Legal Matters...............................................        71
Experts.....................................................        71
Where You Can Find More Information.........................        72
Index to Consolidated Financial Statements..................       F-1


You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state where the offer or sale is not permitted. The information in this prospectus is complete and accurate as of the date on the front cover, but the information may have changed since that date.

Our logo, Omnicell-Registered Trademark-, OmniCenter-Registered Trademark-, OmniRx-Registered Trademark-, See & Touch-TM- and Sure-Med-Registered Trademark- are trademarks of Omnicell, Inc. This prospectus also includes trademarks of other companies.


SUMMARY

THE ITEMS IN THE FOLLOWING SUMMARY ARE DESCRIBED IN MORE DETAIL LATER IN THIS PROSPECTUS. THIS SUMMARY HIGHLIGHTS INFORMATION THAT WE BELIEVE IS IMPORTANT, BUT IT DOES NOT CONTAIN ALL THE INFORMATION YOU SHOULD CONSIDER. THEREFORE, YOU SHOULD ALSO READ THE ENTIRE PROSPECTUS, ESPECIALLY "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES, BEFORE DECIDING TO INVEST IN SHARES OF OUR COMMON STOCK.

OUR BUSINESS

We provide an integrated suite of clinical infrastructure and workflow automation solutions for healthcare facilities. These solutions include pharmacy and supply systems, clinical reference tools, an Internet-based procurement application and decision support tools. We sell and lease our products and related services to a wide range of healthcare facilities such as hospitals, integrated delivery networks and specialty care facilities, which include nursing homes, outpatient surgery centers, catheterization labs and clinics. As of March 31, 2001, we had installed over 18,600 pharmacy and supply systems in over 1,100 healthcare facilities in the United States. In 2000, we generated revenue of $67.4 million from the sale and lease of our products and related services.

Our solutions enable healthcare facilities to acquire, manage, dispense and deliver pharmaceuticals and medical supplies more effectively and efficiently. Our pharmacy and supply systems facilitate the distribution of pharmaceuticals and medical supplies at the point of care. These systems interface with healthcare facilities' existing information systems to accurately capture and display critical patient data. Our Internet-based procurement application automates and integrates healthcare facilities' requisition and approval processes. Furthermore, our Internet-enabled decision support product allows healthcare facilities to monitor trends in drug utilization and diversion, improve regulatory compliance and reduce costs by monitoring usage patterns and optimizing product management. When used in combination, our products and services offer a comprehensive clinical infrastructure and workflow automation solution for healthcare facilities.

OUR MARKET

The delivery of healthcare in the United States is dependent upon predominantly manual and paper-based methods, resulting in a highly fragmented, complex and inefficient system. A primary cause of this inefficiency is the relatively small investment made by healthcare facilities in information technology in the last two decades. Many existing healthcare information systems are unable to support the modernization of healthcare delivery processes and address patient safety initiatives. These factors have contributed to medical errors and unnecessary process costs across the sector.

The Institute of Medicine highlighted the prevalence of medical errors in a November 1999 report based on the results of more than 30 independent studies. The report indicated that medical errors are among the top ten causes of death in the United States, and that medication errors specifically were responsible for more than an estimated 7,000 deaths in 1993. In March 2001, the Institute of Medicine issued a follow-up report that recommended increased investment in information technology as a means of reducing medical errors and improving the overall quality of patient care.

Economic pressures have also dramatically impacted patient care by reducing the flow of funds to healthcare providers and facilities. For example, the passage of the Balanced Budget Act of 1997 proposed a reduction of payments to healthcare providers by more than $250 billion over a five-year period. Continuing consolidation in the healthcare industry and shortages in the U.S. labor market for healthcare professionals have also significantly impacted patient care and contributed to the pressures faced by healthcare providers and facilities.

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OUR SOLUTIONS

Our clinical infrastructure and workflow automation solutions are designed to:

- reduce medication errors;

- reduce costs;

- improve operating efficiency;

- leverage investments in existing information systems;

- simplify the process of ordering pharmaceuticals and medical supplies; and

- monitor utilization trends.

OUR STRATEGY

Our goal is to become the leading provider of clinical infrastructure and workflow automation solutions for the healthcare industry by focusing on the following strategies:

- continue to leverage and extend our solutions to address patient safety and cost-containment pressures facing healthcare facilities;

- continue to collaborate with leading healthcare providers in the definition, development and deployment of our products and services;

- further penetrate our installed customer base, which to date has purchased only a subset of our available products and services;

- develop solutions that enhance our customers' existing systems by preserving, leveraging and upgrading their existing information systems; and

- develop strategic relationships with other healthcare and non-healthcare partners to enhance our product offerings, broaden our automation solutions and increase our sales opportunities.

OUR HISTORY

We have financed our operations since inception primarily through the private placement of equity securities, as well as through equipment financing and secured loan arrangements. Through March 31, 2001, we have raised approximately $77.1 million from the private placement of equity securities, net of redemptions. This includes net proceeds of approximately $28.5 million from our last equity financing in the first quarter of 2000. As of March 31, 2001, our accumulated deficit was approximately $93.3 million, and in 1999 and 2000, we had net losses of $26.3 million and $20.0 million, respectively.

We were incorporated in California in September 1992 under the name OmniCell Technologies, Inc. In September 1999, we changed our name to Omnicell.com. We intend to reincorporate in Delaware and change our name to Omnicell, Inc. immediately prior to the completion of the offering.

OFFICE LOCATION

Our principal executive offices are located at 1101 East Meadow Drive, Palo Alto, California 94303, and our telephone number is (650) 251-6100. Our Web site is located at www.omnicell.com. The information on our Web site is neither incorporated by reference into, nor a part of, this prospectus.

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THE OFFERING

Common stock offered.........................  6,000,000 shares

Common stock outstanding after the
  offering...................................  20,427,625 shares

Offering price...............................  $    per share

Use of proceeds..............................  To expand sales, marketing, research and
                                               development and customer support activities;
                                               to repay debt owed to Baxter Healthcare; to
                                               redeem preferred stock held by Sun
                                               Healthcare; and for working capital and other
                                               general corporate purposes, including
                                               potential acquisitions.

Proposed Nasdaq National Market symbol.......  OMCL

The number of shares of common stock to be outstanding after the offering is based on 14,427,625 shares outstanding as of May 31, 2001 and excludes:

- 3,752,580 shares of our common stock issuable upon exercise of outstanding options;

- 101,389 shares of our common stock issuable upon exercise of outstanding warrants;

- 1,577,251 shares of common stock reserved for issuance under our stock option plan;

- 44,680 shares of common stock reserved for issuance under our employee stock purchase plans; and

- 720,800 shares of our Series J Preferred Stock that will be redeemed in connection with the completion of this offering.

Except as otherwise noted, all information in this prospectus:

- assumes no exercise of the underwriters' over-allotment option;

- reflects our reincorporation into Delaware;

- reflects the completion of a 1-for-1.6 reverse stock split that will occur prior to the closing of this offering; and

- reflects the redemption of all outstanding redeemable convertible preferred stock and the conversion of all outstanding convertible preferred stock and a convertible note into shares of common stock upon completion of this offering.

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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(in thousands, except per share and other data)

You should read the following summary consolidated financial data together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included in this prospectus.

The pro forma net loss per share data and the pro forma as adjusted balance sheet data give effect to (i) the redemption of 720,800 shares of our redeemable convertible preferred stock and (ii) the conversion of all of our convertible preferred stock and a convertible note into shares of our common stock, which we expect to occur upon the completion of this offering. The pro forma as adjusted balance sheet data also give effect to the sale of 6,000,000 shares of common stock by us at an assumed initial public offering price of $9.00 per share and the application of the net proceeds from this offering as discussed in "Use of Proceeds."

                                                                                                                 THREE MONTHS
                                                                                                                     ENDED
                                                                     YEAR ENDED DECEMBER 31,                       MARCH 31,
                                                       ----------------------------------------------------   -------------------
                                                         1996       1997       1998     1999(1)    2000(2)      2000       2001
                                                       --------   --------   --------   --------   --------   --------   --------
                                                                                                                  (UNAUDITED)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.............................................  $ 21,554   $ 36,073   $48,212    $ 55,271   $ 67,365   $14,486    $18,987
Cost of revenues(3)..................................    10,643     16,572    18,144      34,295     26,578     6,681      7,093
                                                       --------   --------   -------    --------   --------   -------    -------
Gross profit.........................................    10,911     19,501    30,068      20,976     40,787     7,805     11,894
Loss from operations(4)..............................   (11,154)   (10,941)     (211)    (24,351)   (18,720)   (7,051)      (753)
Net income (loss)....................................  $(10,460)  $(10,189)  $   643    $(26,267)  $(19,976)  $(7,397)   $(1,364)
                                                       ========   ========   =======    ========   ========   =======    =======
Net income (loss) applicable to common
  stockholders.......................................  $(10,471)  $(10,211)  $   621    $(26,267)  $(19,976)  $(7,397)   $(1,364)
                                                       ========   ========   =======    ========   ========   =======    =======
Net income (loss) per common share:
  Basic..............................................  $ (10.39)  $  (8.93)  $  0.48    $ (17.86)  $ (11.72)  $ (4.40)   $ (0.50)
                                                       ========   ========   =======    ========   ========   =======    =======
  Diluted............................................  $ (10.39)  $  (8.93)  $  0.06    $ (17.86)  $ (11.72)  $ (4.40)   $ (0.50)
                                                       ========   ========   =======    ========   ========   =======    =======
  Pro forma basic and diluted (unaudited)............                                              $  (1.55)             $ (0.10)
                                                                                                   ========              =======

Weighted average common shares outstanding:
  Basic..............................................     1,008      1,144     1,302       1,471      1,704     1,681      2,741
  Diluted............................................     1,008      1,144    11,013       1,471      1,704     1,681      2,741
  Pro forma basic and diluted (unaudited)............                                                12,851               13,889

OTHER DATA(5):
Cumulative number of sites of installed pharmacy and
  supply systems.....................................       119        176       258         910      1,096       965      1,135
Cumulative number of installed pharmacy and supply
  systems............................................     2,227      3,928     5,875      14,242     17,772    15,376     18,698

                                                                  MARCH 31, 2001
                                                              ----------------------
                                                                          PRO FORMA
                                                               ACTUAL    AS ADJUSTED
                                                              --------   -----------
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments...........  $  7,698     $46,205
Total assets................................................    47,105      85,612
Deferred gross profit(6)....................................    25,317      25,317
Long-term obligations, net of current portion...............     8,217       7,867
Redeemable convertible preferred stock......................    10,113          --
Total stockholders' equity (net capital deficiency).........  $(26,321)    $22,649


(1) The amounts shown for the year ended December 31, 1999 include the results of the Sure-Med acquisition from January 29, 1999 to the end of 1999.

(2) The amounts shown for the year ended December 31, 2000 include special charges in the third quarter of 2000 related to: restructuring activities--$2.0 million writedown of Commerce One MarketSite software license, $0.6 million in employee severance expenses and $0.3 million writedown of capitalized software development costs; recognition of $1.1 million expense

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associated with previously deferred offering expenses; and $0.2 million writedown of identified intangible assets remaining from the Sure-Med acquisition.

(3) Cost of revenues for the year ended December 31, 1999 includes: special charges related to the writedown of Sure-Med inventory--$9.7 million; purchase accounting adjustment due to the sale of Sure-Med inventories that had been written-up to fair value--$1.1 million; and costs incurred to complete Sure-Med installation obligations--$0.8 million.

(4) Loss from operations for the year ended December 31, 1999 includes:
integration expenses associated with the Sure-Med acquisition--$0.8 million; and write-off of an equity investment--$0.6 million.

(5) Figures do not include systems installed at Sun Healthcare sites.

(6) Deferred gross profit represents gross profit on sales of pharmacy and supply systems, excluding installation cost, that have been shipped to, accepted and, in most instances, paid for by our customer but not yet installed at the customer site. The revenues and cost of revenues for such items will be recorded upon completion of installation.

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RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE YOU DECIDE TO BUY OUR COMMON STOCK. YOU SHOULD ALSO CONSIDER THE OTHER INFORMATION IN THIS PROSPECTUS. IN ADDITION, THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES FACING US BECAUSE WE ARE ALSO SUBJECT TO ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US. IF ANY OF THESE RISKS ACTUALLY OCCURS, OUR BUSINESS, FINANCIAL CONDITION, OPERATING RESULTS OR CASH FLOWS COULD BE SERIOUSLY HARMED. THIS COULD CAUSE THE TRADING PRICE OF OUR COMMON STOCK TO DECLINE, AND YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT.

RISKS RELATED TO OUR BUSINESS

ANY REDUCTION IN THE GROWTH AND ACCEPTANCE OF OUR PHARMACY AND SUPPLY SYSTEMS AND RELATED SERVICES WOULD HARM OUR BUSINESS.

Our pharmacy and supply systems represent a relatively new approach to managing the distribution of pharmaceuticals and supplies at healthcare facilities. Many healthcare facilities still use traditional approaches that do not include automated methods of pharmacy and supply management. As a result, we must continuously educate existing and prospective customers about the advantages of our products. Our pharmacy and supply systems typically represent a sizeable initial capital expenditure for healthcare organizations. Changes in the budgets of these organizations and the timing of spending under these budgets can have a significant effect on the demand for our pharmacy and supply systems and related services. In addition, these budgets are often characterized by limited resources and conflicting spending priorities among different departments. Any decrease in expenditures by these healthcare facilities, particularly our significant customers, could decrease demand for our pharmacy and supply systems and related services and harm our business. We cannot assure you that we will continue to be successful in marketing our pharmacy and supply systems or that the level of market acceptance of such systems will be sufficient to generate operating income.

THE HEALTHCARE INDUSTRY FACES FINANCIAL CONSTRAINTS AND CONSOLIDATION THAT COULD ADVERSELY AFFECT THE DEMAND FOR OUR PRODUCTS AND SERVICES.

The healthcare industry has faced, and will likely continue to face, significant financial constraints. For example, the shift to managed care in the 1990s put pressure on healthcare organizations to reduce costs, and the Balanced Budget Act of 1997 significantly reduced Medicare reimbursement to healthcare organizations. Our automation solutions often involve a significant financial commitment by our customers, and, as a result, our ability to grow our business is largely dependent on our customers' information technology budgets. To the extent healthcare information technology spending declines or increases more slowly than we anticipate, demand for our products and services would be adversely affected.

Many healthcare providers have consolidated to create larger healthcare delivery organizations with greater market power. If this consolidation continues, it could erode our customer base and could reduce the size of our target market. In addition, the resulting organizations could have greater bargaining power, which may lead to price erosion.

Sun Healthcare Group, Inc., a customer that has accounted for a significant percentage of our sales over the past five years, filed for Chapter 11 bankruptcy protection in 1999. Revenues from Sun Healthcare were significantly reduced in 2000, and we do not expect any purchases of our products and services by Sun Healthcare in 2001 or future years.

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THE CLINICAL INFRASTRUCTURE AND WORKFLOW AUTOMATION MARKET IS HIGHLY COMPETITIVE AND WE MAY BE UNABLE TO COMPETE SUCCESSFULLY AGAINST NEW ENTRANTS AND ESTABLISHED COMPANIES WITH GREATER RESOURCES.

The clinical infrastructure and workflow automation market is intensely competitive and is characterized by evolving technologies and industry standards, frequent new product introductions and dynamic customer requirements. We expect continued and increased competition from current and future competitors, many of whom have significantly greater financial, technical, marketing and other resources than we do. Our current direct competitors in the clinical infrastructure and workflow automation market include Pyxis Corporation (a division of Cardinal Health) and Automated Healthcare (a division of McKessonHBOC).

The competitive challenges we face in the clinical infrastructure and workflow automation market include, but are not limited to:

- Our competitors may develop, license or incorporate new or emerging technologies or devote greater resources to the development, promotion and sale of their products and services.

- Certain competitors have greater name recognition and a more extensive installed base of pharmacy and supply systems or other products and services, and such advantages could be used to increase their market share.

- Other established or emerging companies may enter the clinical infrastructure and workflow automation market.

- Current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties, including larger, more established healthcare supply companies, thereby increasing their ability to develop and offer products and services to address the needs of our prospective customers.

- Our competitors may secure products and services from suppliers on more favorable terms or secure exclusive arrangements with suppliers or buyers that may impede the sales of our products and services.

Competitive pressures could result in price reductions of our products and services, fewer customer orders and reduced gross margins, any of which could harm our business.

WE HAVE A HISTORY OF OPERATING LOSSES AND WE CANNOT ASSURE YOU THAT WE WILL ACHIEVE PROFITABILITY.

For 1996 and 1997, we incurred net losses of approximately $10.5 million and $10.2 million, respectively. We had net income of approximately $0.6 million in 1998 and had net losses of $26.3 million and $20.0 million in 1999 and 2000, respectively. As of March 31, 2001, we had an accumulated deficit of approximately $93.3 million. There can be no assurance we will achieve profitability in the future. Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

IF WE FAIL TO MANAGE OUR GROWING AND CHANGING OPERATIONS, OUR COMPETITIVE POSITION, RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD BE HARMED.

During 2000, we experienced a period of significant fluctuation in our number of employees and expansion of the scope of our operating and financial systems. This has resulted in new and increased responsibilities for management personnel. To accommodate our changing operations, compete effectively and manage potential future growth, we must continue to implement and improve our information systems, procedures and controls, and we must hire competent and qualified personnel. In addition, we must train, motivate and manage our workforce to meet the increasing challenge of expanding our automation solutions business. These demands will require the addition of new management personnel and the training of existing management personnel, including information

7

systems, sales, technical, service support and financial reporting personnel. We cannot assure you that our personnel, systems, procedures and controls will be adequate to support our future operations. Failure to manage our growing and changing operations could harm our competitive position, results of operations and financial condition.

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY AND MAY CAUSE OUR STOCK PRICE TO DECLINE.

Our quarterly operating results have varied significantly in the past and may vary significantly in the future depending on many factors that may include, but are not limited to, the following:

- the size and timing of orders for our pharmacy and supply systems, and their installation and integration;

- the overall demand for healthcare clinical infrastructure and workflow automation solutions;

- changes in pricing policies by us or our competitors;

- the number, timing and significance of product enhancements and new product announcements by us or our competitors;

- the relative proportions of revenues we derive from products and services;

- our customers' budget cycles;

- changes in our operating expenses;

- the performance of our products;

- changes in our business strategy; and

- economic and political conditions, including fluctuations in interest rates and tax increases.

Due to the foregoing factors, our quarterly revenues and operating results are difficult to forecast. Revenues are also difficult to forecast because the clinical infrastructure and workflow automation market is rapidly evolving.

The purchase of our pharmacy and supply systems is often part of a customer's larger initiative to re-engineer their pharmacy, distribution and materials management systems. As a result, the purchase of our pharmacy and supply systems generally involves a significant commitment of management attention and resources by prospective customers and often requires the input and approval of many decision makers, including pharmacy directors, materials managers, nurse managers, financial managers, information systems managers, administrators and boards of directors. For these and other reasons, the sales cycle associated with the sale or lease of our pharmacy and supply systems is often lengthy and subject to a number of delays over which we have little or no control. We cannot assure you that we will not experience delays in the future. A delay in, or loss of, sales of our pharmacy and supply systems could cause our operating results to vary significantly from quarter to quarter and could harm our business. Accordingly, we believe that period-to-period comparisons of our operating results are not necessarily indicative of our future performance. Although we recently experienced revenue growth, this growth should not be considered indicative of future revenue growth, if any, or of future operating results. Fluctuation in our quarterly operating results may cause our stock price to decline.

IF WE ARE UNABLE TO RECRUIT AND RETAIN SKILLED AND MOTIVATED PERSONNEL, OUR COMPETITIVE POSITION, RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD BE HARMED.

Our success is highly dependent upon the continuing contributions of our key management, sales, technical and engineering staff. We believe that our future success will depend upon our ability to attract, train and retain highly skilled and motivated personnel. In particular, we will need to hire a number of information technology, research and development, programming and engineering personnel

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to assist in the continued development of our business. As our products are installed in increasingly complex environments, greater technical expertise will be required. As our installed base of customers increases, we will also face additional demands on our customer service and support personnel, requiring additional resources to meet these demands. We may experience difficulty in recruiting qualified personnel. Competition for qualified technical, engineering, managerial, sales, marketing, financial reporting and other personnel is intense and we cannot assure you that we will be successful in attracting and retaining qualified personnel. Competitors have in the past attempted, and may in the future attempt, to recruit our employees. Failure to attract and retain key personnel could harm our competitive position, results of operations and financial condition.

IF WE ARE UNABLE TO MAINTAIN OUR RELATIONSHIPS WITH GROUP PURCHASING ORGANIZATIONS OR OTHER SIMILAR ORGANIZATIONS, WE MAY HAVE DIFFICULTY SELLING OUR PRODUCTS AND SERVICES.

We have agreements with various group purchasing organizations, such as Premier, Inc., Novation, LLC and Consorta Catholic Resources Partners, that enable us to more readily sell our products and services to customers represented by these organizations. Our relationships with these organizations are terminable at the convenience of either party. The loss of our relationship with Premier, for example, could impact the breadth of our customer base and could impair our ability to increase our revenues. We cannot guarantee that these organizations will renew our contracts on similar terms, if at all, and we cannot guarantee that they will not terminate our contracts before they expire.

WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS FOR OUR PHARMACY AND SUPPLY SYSTEMS AND OUR BUSINESS MAY SUFFER IF WE ARE UNABLE TO OBTAIN AN ADEQUATE SUPPLY OF COMPONENTS AND EQUIPMENT ON A TIMELY BASIS.

Our production strategy for our pharmacy and supply systems is to work closely with several key sub-assembly manufacturers and utilize lower cost manufacturers whenever possible. Although many of the components of our systems are standardized and available from multiple sources, certain components or subsystems are fabricated according to our specifications. At any given point in time, we may only use a single source of supply for certain components. Our failure to obtain alternative vendors, if required, for any of the numerous components used to manufacture our products would limit our ability to manufacture our products and could harm our business. In addition, any failure of a maintenance contractor to perform adequately could harm our business.

WE DEPEND ON SERVICES FROM THIRD PARTIES TO SUPPORT OUR PRODUCTS, AND IF WE ARE UNABLE TO CONTINUE THESE RELATIONSHIPS AND MAINTAIN THEIR SERVICES, OUR COMPETITIVE POSITION, RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD BE HARMED.

Our ability to develop, manufacture and support our existing products and any future products depends upon our ability to enter into and maintain contractual arrangements with others. We currently depend upon services from a number of third-party vendors, including Dade Behring Inc., Gold Standard Multimedia and U.S. Pharmacopeia to support our products. We cannot be sure that we will be able to maintain our existing or future service arrangements, or that we will be able to enter into future arrangements with third parties on terms acceptable to us, or at all. If we fail to maintain our existing service arrangements or to establish new arrangements when and as necessary, our competitive position, results of operations and financial condition could be harmed.

IF WE ARE UNABLE TO SUCCESSFULLY INTEGRATE OUR AUTOMATION SOLUTIONS WITH THE EXISTING INFORMATION SYSTEMS OF OUR CUSTOMERS, THEY MAY CHOOSE NOT TO USE OUR PRODUCTS AND SERVICES.

For healthcare facilities to fully benefit from our automation solutions, our systems must integrate with their existing information systems. This may require substantial cooperation, investment and coordination on the part of our customers. There is little uniformity in the systems currently used by our customers, which complicates the integration process. If these systems are not successfully

9

integrated, our customers could choose not to use or to reduce their use of our automation solutions, which would harm our business.

ANY DETERIORATION IN OUR RELATIONSHIP WITH COMMERCE ONE WOULD ADVERSELY AFFECT OUR INTERNET-BASED PROCUREMENT CAPABILITIES.

We have entered into an agreement with Commerce One, Inc., a provider of business-to-business technology solutions that link buyers and suppliers of goods and services to trading communities over the Internet. Our agreement with Commerce One enables us to implement a customized version of Commerce One's BuySite software at customer sites. We cannot be sure that Commerce One will not license its BuySite technology to our competitors. We cannot guarantee that Commerce One will be able to develop and introduce enhancements to its products that keep pace with emerging technological developments and emerging industry standards. Moreover, we cannot guarantee that the Commerce One network will not experience performance problems or delays. The failure by Commerce One in any of these areas could harm our Internet-based procurement capabilities.

OUR FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS COULD ADVERSELY AFFECT OUR ABILITY TO COMPETE.

We believe that our success will depend in part on our ability to obtain patent protection for products and processes and our ability to preserve our trademarks, copyrights and trade secrets. We have pursued patent protection in the United States and foreign jurisdictions for technology that we believe to be proprietary and for technology that offers us a potential competitive advantage for our products, and we intend to continue to pursue such protection in the future. We currently own ten U.S. patents. In addition, we currently have one U.S. patent allowed and awaiting issue and five U.S. patents in application. The issued patents relate to various features of our pharmacy and supply systems. There are other issued patents and applications in process in Australia, Japan, Hong Kong, Canada and European countries related to issued and pending applications in the United States. There can be no assurance that we will file any patent applications in the future, that any of our patent applications will result in issued patents or that, if issued, such patents will provide significant protection for our technology and processes. Furthermore, there can be no assurance that others will not develop technologies that are similar or superior to our technology or that others will not design around the patents we own. All of our operating system software is copyrighted and subject to the protection of applicable copyright laws. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or obtain and use information that we regard as proprietary.

INTELLECTUAL PROPERTY OR PRODUCT LIABILITY CLAIMS AGAINST US COULD HARM OUR COMPETITIVE POSITION, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

We do not believe that any of our products infringe upon the proprietary rights of third parties. We cannot assure you, however, that third parties will not claim that we have infringed upon their intellectual property rights with respect to current or future products. We expect that developers of pharmacy and supply systems will be increasingly subject to infringement claims as the number of products and competitors in our industry grows and the functionality of products in different industry segments overlaps. We do not possess special insurance that covers intellectual property infringement claims; however, such claims may be covered under our traditional insurance policies. These policies contain terms, conditions and exclusions that make recovery for intellectual infringement claims difficult to guarantee. Any infringement claims, with or without merit, could be time-consuming to defend, result in costly litigation, divert management's attention and resources, cause product shipment delays or require us to enter into royalty or licensing agreements. These royalty or licensing agreements, if required, may not be available on terms acceptable to us, or at all, which could harm our competitive position, results of operations and financial condition.

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We provide products that build clinical infrastructure and automate workflow. Despite the presence of healthcare professionals as intermediaries between our products and patients, if our products fail to provide accurate and timely information or operate as designed, customers, patients or their family members could assert claims against us for product liability. Also, in the event that any of our products is defective, we may be required to recall or redesign such products. Litigation with respect to liability claims, regardless of its outcome, could result in substantial cost to us, divert management's attention from operations and decrease market acceptance of our products. Although we have not experienced any product liability claims to date, the sale and support of our products entail the risk of product liability claims. We possess a variety of insurance policies that include coverage for general commercial liability and technology errors and omissions liability. However, these policies may not be adequate against product liability claims. A successful claim brought against us, or any claim or product recall that results in negative publicity about us, could harm our competitive position, results of operations and financial condition.

CHANGING CUSTOMER REQUIREMENTS COULD DECREASE THE DEMAND FOR OUR PRODUCTS AND SERVICES.

The clinical infrastructure and workflow automation market is intensely competitive and is characterized by evolving technologies and industry standards, frequent new product introductions and dynamic customer requirements that may render existing products obsolete or less competitive. As a result, our position in the clinical infrastructure and workflow automation market could erode rapidly due to unforeseen changes in the features and functions of competing products, as well as the pricing models for such products. Our future success will depend in part upon our ability to enhance our existing products and services and to develop and introduce new products and services to meet changing customer requirements. The process of developing products and services such as those we offer is extremely complex and is expected to become increasingly complex and expensive in the future as new technologies are introduced. If we are unable to enhance our existing products or develop new products to meet changing customer requirements, demand for our products could decrease.

WE MAY BE REQUIRED TO SEEK ADDITIONAL FINANCING TO MEET OUR FUTURE CAPITAL NEEDS, WHICH WE MAY NOT BE ABLE TO SECURE ON FAVORABLE TERMS, OR AT ALL.

We plan to continue to expend substantial funds for research and development activities, product development, integration efforts and expansion of accounts receivable and sales and marketing activities. We may be required to expend greater than anticipated funds if unforeseen difficulties arise in the course of completing the development and marketing of our products or services or in other aspects of our business. One customer accounted for 11.0% of accounts receivable at December 31, 1999. A different customer accounted for 11.0% of accounts receivable at December 31, 2000. Our future liquidity and capital requirements will depend upon numerous factors, including:

- the development of new products and services on a timely basis;

- the receipt of and timing of orders for our pharmacy and supply systems;

- the cost of developing increased manufacturing and sales capacity; and

- the timely collection of accounts receivable.

As a result of the foregoing factors, it is possible that we will be required to raise additional funds through public or private financings, collaborative relationships or other arrangements. We cannot assure you that this additional funding, if needed, will be available on terms attractive to us, if at all. Furthermore, any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants that could affect our ability to pay dividends or raise additional capital. Our failure to raise capital when needed could harm our competitive position, results of operations and financial condition.

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GOVERNMENT REGULATION OF THE HEALTHCARE INDUSTRY COULD ADVERSELY AFFECT DEMAND FOR OUR PRODUCTS.

While the manufacture and sale of our current products are not regulated by the United States Food and Drug Administration (FDA), we cannot assure you that these products, or our future products, if any, will not be regulated in the future. A requirement for FDA approval could have a material adverse effect on the demand for our products. Pharmacies are regulated by individual state boards of pharmacy that issue rules for pharmacy licensure in their respective jurisdictions. State boards of pharmacy do not license or approve our pharmacy and supply systems; however, pharmacies using our equipment are subject to state board approval. The failure of such pharmacies to meet differing requirements from a significant number of state boards of pharmacy could decrease demand for our products and harm our competitive position, results of operations and financial condition. Similarly, hospitals must be accredited by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) in order to be eligible for Medicaid and Medicare funds. The JCAHO does not approve or accredit pharmacy and supply systems; however, disapproval of our customers' pharmacy and supply management methods and their failure to meet the JCAHO requirements could decrease demand for our products and harm our competitive position, results of operations and financial condition.

While we have implemented a Privacy and Use of Information Policy and strictly adhere to established privacy principles, use of customer information guidelines and federal and state statutes and regulations regarding privacy and confidentiality, we cannot assure you that we will be in compliance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA). This legislation requires the Secretary of Health and Human Services (HHS), to adopt national standards for some types of electronic health information transactions and the data elements used in those transactions, adopt standards to ensure the integrity and confidentiality of health information and establish a schedule for implementing national health data privacy legislation or regulations. In December 2000, HHS published its final health data privacy regulations, which will take effect in December 2002. These regulations restrict the use and disclosure of personally identifiable health information without the prior informed consent of the patient. HHS has not yet issued final rules on most of the other topics under HIPAA and has yet to issue proposed rules on some topics. The final rules, if and when issued, may differ from the proposed rules. We cannot predict the potential impact of rules that have not yet been proposed or any other rules that might be finally adopted instead of the proposed rules. In addition, other federal and/or state privacy legislation may be enacted at any time. These laws or regulations, if adopted, could restrict the ability of our customers to obtain, use or disseminate patient information. This could adversely affect demand for our products or force us to redesign our products in order to meet the requirements of any new regulations.

OUR FACILITIES ARE LOCATED NEAR KNOWN EARTHQUAKE FAULT ZONES, AND THE OCCURRENCE OF AN EARTHQUAKE OR OTHER NATURAL DISASTER COULD CAUSE DAMAGE TO OUR FACILITIES AND EQUIPMENT, WHICH COULD REQUIRE US TO CEASE OR CURTAIL OPERATIONS.

Our facilities are located near known earthquake fault zones and are vulnerable to significant damage from earthquakes. We are also vulnerable to damage from other types of disasters, including tornadoes, fires, floods, power loss, communications failures and similar events. If any disaster were to occur, our ability to operate our business at our facilities would be seriously, or potentially completely, impaired or destroyed. The insurance we maintain may not be adequate to cover our losses resulting from disasters or other business interruptions.

WE RELY ON A CONTINUOUS POWER SUPPLY TO CONDUCT OUR OPERATIONS, AND CALIFORNIA'S CURRENT ENERGY CRISIS COULD DISRUPT OUR OPERATIONS AND INCREASE OUR EXPENSES.

California is in the midst of an energy crisis that could disrupt our operations and increase our expenses. In the event of an acute power shortage, that is, when power reserves for the State of

12

California fall below 1.5%, California has on some occasions implemented, and may in the future continue to implement, rolling blackouts throughout the state. We currently do not have backup generators or alternative sources of power in the event of a blackout, and our current insurance does not provide coverage for any damages we or our vendors may suffer as a result of any interruption in our power supply. If blackouts interrupt our power supply, we would be temporarily unable to continue operations at our facilities. Any such interruption in our ability to continue operations at our facilities could damage our reputation, harm our ability to retain existing customers and to obtain new customers, and could result in lost revenue, any of which could substantially harm our business and results of operations.

RISKS RELATED TO THIS OFFERING

OUR STOCK PRICE MAY BE EXTREMELY VOLATILE AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT OR ABOVE THE INITIAL PUBLIC OFFERING PRICE.

Prior to the offering, there has been no public market for our common stock. We do not know the extent to which investor interest will lead to the development of an active public market. The initial public offering price will be determined by negotiations between the representatives of the underwriters and us and may not be indicative of the market price for our common stock after the offering. With the current uncertainty about healthcare reimbursement and coverage in the United States, there has been significant volatility in the market price and trading volume of securities of healthcare related companies unrelated to the performance of these companies. These broad market fluctuations may negatively affect the market price of our common stock. As a consequence, you may not be able to sell the common stock you purchase at or above the initial public offering price.

In the past, securities class action litigation has often been brought against companies following periods of volatility in the market price of their securities. If brought against us, regardless of the outcome, litigation could result in substantial costs and a diversion of our management's attention and resources and could harm our business.

IF WE FAIL TO MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS, THE MARKET PRICE OF OUR COMMON STOCK MAY DECREASE SIGNIFICANTLY.

We may fail to meet the revenue and profitability expectations of public market analysts and investors. If this occurs, the price of our common stock will likely fall.

AFTER THIS OFFERING, OUR OFFICERS, DIRECTORS AND FIVE PERCENT STOCKHOLDERS WILL OWN A LARGE PERCENTAGE OF OUR COMMON STOCK AND WILL BE ABLE TO CONTROL THE OUTCOME OF MATTERS REQUIRING STOCKHOLDER APPROVAL.

Upon the completion of this offering, executive officers, directors and current holders of five percent (5%) or more of our outstanding common stock will, in the aggregate, beneficially own approximately 51.8% of our outstanding common stock. As a result, these stockholders will be able to effectively control all matters requiring approval of our stockholders, including the election of directors and approval of significant corporate transactions. This concentration of ownership may also delay, deter or prevent a change in control and may make some transactions more difficult or impossible to complete without the support of these stockholders, even if the transaction is favorable to our stockholders. In addition, because of their ownership of our common stock, these stockholders will be in a position to significantly affect our corporate actions in a manner that could conflict with the interests of our public stockholders.

SUBSTANTIAL SALES OF COMMON STOCK BY OUR EXISTING STOCKHOLDERS COULD CAUSE OUR STOCK PRICE TO FALL.

The market price of our common stock could decline if our existing stockholders sell substantial amounts of our common stock in the public market after this offering. These sales also might make it

13

more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. Upon completion of this offering, assuming the number of outstanding shares as of May 31, 2001, we will have 20,427,625 shares of common stock outstanding, 21,327,625 shares if the underwriters exercise their over-allotment option in full. Of these shares, 6,042,500 shares, plus an additional 900,000 shares if the underwriters exercise their over-allotment option in full, will be freely tradeable without restriction or further registration under the Securities Act of 1933, as amended. Of the remaining shares, a total of approximately 14,385,125 shares held by our directors, executive officers and our existing stockholders are subject to lock-up agreements providing that these stockholders will not sell or otherwise dispose of any of their shares for a period of 180 days following the date of the final prospectus for this offering without the prior written consent of U.S. Bancorp Piper Jaffray Inc. U.S. Bancorp Piper Jaffray can release these lock-up agreements at any time. In addition, options to purchase 3,752,580 shares of our common stock are outstanding as of May 31, 2001, under our 1992 Equity Incentive Plan, our 1995 Management Stock Option Plan and our 1999 Equity Incentive Plan. Following this offering, we expect to register the shares underlying these options. Subject to the exercise of these options, shares included in such registration will be available for sale in the open market immediately after the 180-day lock-up period expires. See "Shares Eligible For Future Sale" for a more detailed discussion.

After this offering, the holders of approximately 11,143,548 shares of common stock will be entitled to rights with respect to registration of such shares under the Securities Act. If such holders, by exercising their registration rights, cause a large number of securities to be registered and sold in the public market, these sales could have an adverse effect on the market price for our common stock. If we were to initiate a registration and include shares held by these holders pursuant to the exercise of their registration rights, these sales may impair our ability to raise capital.

OUR CERTIFICATE OF INCORPORATION AND BYLAWS CONTAIN PROVISIONS THAT COULD DELAY OR PREVENT A CHANGE IN CONTROL THAT MAY BE FAVORABLE TO OUR STOCKHOLDERS.

Upon the completion of this offering, we will be subject to the Delaware anti-takeover laws regulating corporate takeovers. These laws prevent Delaware corporations from engaging in a merger or sale of more than 10% of their assets with any stockholder who owns 15% or more of the corporation's outstanding voting stock, including all affiliates and associates of any stockholder, for three years following the date that such stockholder acquired 15% or more of the corporation's voting stock unless:

- prior to such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;

- upon consummation of the transaction that resulted in the stockholder's becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding those shares owned by persons who are directors and also officers, and employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

- on or subsequent to such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.

As such, these laws could prohibit or delay mergers or a change of control of us and may discourage attempts by other companies to acquire us.

14

In addition, our Certificate of Incorporation and Bylaws include a number of provisions that may deter or impede hostile takeovers or changes of control or management. These provisions include:

- a Board of Directors classified into three classes of directors with staggered three-year terms;

- the authority of the Board of Directors to issue up to 5,000,000 shares of preferred stock and to determine the price, rights, preferences and privileges of these shares, without stockholder approval; and

- all stockholder actions must be effected at a duly called meeting of stockholders and not by written consent.

YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION OF YOUR SHARES.

The initial public offering price is substantially higher than the pro forma net tangible book value of each outstanding share of our common stock. As a result, investors participating in this offering will suffer immediate and substantial dilution. The dilution will be $7.88 per share in the pro forma net tangible book value of the common stock from the assumed initial public offering price of $9.00 (or $7.57 per share if the underwriters' option to purchase additional shares is exercised in full). This dilution is described in greater detail under "Dilution" in this prospectus. If outstanding options or warrants to purchase shares of common stock are exercised, there will be further dilution.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology including, "anticipates," "believes," "can," "continue," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "should" or "will" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under "Risk Factors," that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that our expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are not under any duty to update any of the forward-looking statements after the date of this prospectus to conform these statements to actual results, unless required by law.

USE OF PROCEEDS

We estimate that our net proceeds from the sale of the 6,000,000 shares of common stock we are offering, assuming an initial public offering price of $9.00 per share, will be approximately $48,620,000, or $56,153,000 if the underwriters' over-allotment option is exercised in full, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Although we have not yet formulated a specific plan, we currently intend to use a significant portion of the net proceeds for the expansion of sales, marketing, research and development and customer support activities. We also intend to use approximately $7.9 million of the net proceeds to repay the outstanding principal and interest related to the note held by Baxter Healthcare incurred in connection with our acquisition of the Sure-Med product line in January 1999. The Baxter Healthcare note accrues interest at a rate of 8.0%. In addition, the principal under the note is repayable in eight equal quarterly installments beginning in March 2002. We also intend to use approximately $10.1 million of the net proceeds to redeem 720,800 shares of redeemable convertible preferred stock held by Sun Healthcare at the closing of this offering.

We expect to use the remainder of the net proceeds for working capital and other general corporate purposes, including potential acquisitions and costs to support our leasing activities to U.S. government entities. We currently have no commitments or agreements and are not involved in any negotiations for acquisitions of complementary products, technologies or businesses.

The amounts that we actually expend on these matters will vary significantly, depending on a number of factors, including future revenue growth, if any, and the amount of cash we generate from operations. As a result, we will retain broad discretion in the allocation of the net proceeds of this offering. Pending use of the net proceeds of this offering, we intend to invest the net proceeds in interest bearing, investment-grade securities.

DIVIDEND POLICY

We currently intend to retain future earnings, if any, to finance the expansion of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future. The terms of our line of credit prohibit the payment of cash dividends on our capital stock without the consent of our lender.

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CAPITALIZATION

The table below presents the following information:

- our actual capitalization as of March 31, 2001; and

- our pro forma as adjusted capitalization as of March 31, 2001 after giving effect to (i) the redemption of 720,800 shares of our redeemable convertible preferred stock and (ii) the conversion of all of our convertible preferred stock and a convertible note into shares of our common stock upon completion of this offering and to reflect the receipt and application of the net proceeds from our sale of 6,000,000 shares of common stock at an assumed initial public offering price of $9.00 per share in this offering, less underwriting discounts and commissions and estimated offering expenses payable by us as discussed in "Use of Proceeds."

You should read this table in conjunction with the financial statements and the other financial information included in this prospectus.

                                                                  MARCH 31, 2001
                                                              ----------------------
                                                                          PRO FORMA
                                                               ACTUAL    AS ADJUSTED
                                                              --------   -----------
                                                                  (in thousands)
Cash, cash equivalents and short-term investments...........  $  7,698     $ 46,205
                                                              ========     ========
Long-term obligations, net of current portion...............  $  8,217     $  7,867
Redeemable convertible preferred stock, no par value;
  1,802,000 shares designated, 720,800 shares issued and
  outstanding, actual; none, pro forma as adjusted..........    10,113           --
Stockholders' equity (net capital deficiency):
  Convertible preferred stock, no par value; 18,500,000
    shares authorized (including 1,802,000 shares designated
    as redeemable convertible preferred stock); 14,538,376
    shares issued and outstanding, actual; 5,000,000 shares
    authorized, no shares issued and outstanding, pro forma
    as adjusted.............................................    62,392           --
  Common stock, no par value, 35,000,000 shares authorized,
    3,126,968 shares issued and outstanding, actual;
    50,000,000 shares authorized, 20,275,337 shares issued
    and outstanding, pro forma as adjusted..................     9,363      120,725
  Notes receivable from stockholders........................    (4,578)      (4,578)
  Deferred stock compensation...............................      (153)        (153)
  Accumulated deficit.......................................   (93,346)     (93,346)
  Accumulated other comprehensive income....................         1            1
                                                              --------     --------
    Total stockholders' equity (net capital deficiency).....   (26,321)      22,649
                                                              --------     --------
      Total capitalization..................................  $ (7,991)    $ 30,516
                                                              ========     ========

This table excludes the following shares issued or issuable as of May 31, 2001:

- 3,752,580 shares of our common stock issuable upon exercise of outstanding options;

- 101,389 shares of our common stock issuable upon exercise of outstanding warrants;

- 1,577,251 shares of common stock reserved for issuance under our equity incentive plans; and

- 44,680 shares of common stock reserved for issuance under our employee stock purchase plan.

Upon completion of the offering, 720,800 of the shares of redeemable convertible preferred stock will be redeemed in accordance with their terms, and the 14,538,376 shares of convertible preferred stock will convert into 11,143,548 shares of common stock.

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DILUTION

Our pro forma net tangible book value (deficiency) as of March 31, 2001, was approximately $(26.0) million, or $(1.82) per share. Pro forma net tangible book value (deficiency) per share represents the amount of pro forma stockholders' equity (or net capital deficiency), assuming (i) the redemption of 720,800 shares of our redeemable convertible preferred stock and (ii) the conversion of all of our convertible preferred stock and a convertible note into common stock, less intangible assets, divided by the pro forma number of shares of common stock outstanding as of March 31, 2001. Dilution per share represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma net tangible book value per share of common stock immediately after completion of this offering.

Pro forma net tangible book value as of March 31, 2001, after giving effect to the sale of 6,000,000 shares of common stock offered by us at an initial public offering price of $9.00 per share and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, would have been approximately $22.6 million, or approximately $1.12 per share. This represents an immediate increase in pro forma net tangible book value of $2.94 per share to existing stockholders and an immediate dilution in pro forma net tangible book value of $7.41 per share to investors purchasing our common stock in this offering, as illustrated in the following table:

Assumed initial public offering price per share.............              $ 9.00
  Pro forma net tangible book value (deficiency) per share
    as of March 31, 2001....................................    (1.82)
  Increase per share attributable to new investors..........     2.94
                                                               ------
Pro forma net tangible book value per share after this
  offering..................................................                1.12
                                                                          ------
Pro forma dilution per share to new investors...............              $ 7.88
                                                                          ======

The table below summarizes as of March 31, 2001, on a pro forma basis, the differences between our existing stockholders and the new investors purchasing our common stock in this offering with respect to the total number of shares purchased from us, the total consideration paid and the average price per share paid, based upon an initial public offering price of $9.00 per share.

                                            SHARES PURCHASED        TOTAL CONSIDERATION
                                          ---------------------   -----------------------   AVERAGE PRICE
                                            NUMBER     PERCENT       AMOUNT      PERCENT      PER SHARE
                                          ----------   --------   ------------   --------   -------------
Existing stockholders...................  14,275,337      70%     $ 77,067,000      59%        $ 5.40

New investors...........................   6,000,000      30        54,000,000      41           9.00
                                          ----------     ---      ------------     ---         ------

  Total.................................  20,275,337     100%     $131,067,000     100%
                                          ==========     ===      ============     ===

If the underwriters exercise their over-allotment in full, the following will occur:

- the number of shares of common stock held by existing stockholders will decrease to approximately 67% of the total number of shares of our common stock outstanding; and

- the number of shares held by new investors will increase to 6,900,000 shares, or approximately 33% of the total number of shares of common stock outstanding after this offering.

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SELECTED CONSOLIDATED FINANCIAL DATA

To aid you in your analysis, we are providing the following information. We derived the selected consolidated statement of operations data for the years ended December 31, 1998, 1999 and 2000 and the consolidated balance sheet data as of December 31, 1999 and 2000 from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated statement of operations data for the years ended December 31, 1996 and 1997 and the consolidated balance sheet data as of December 31, 1996, 1997 and 1998 are derived from audited consolidated financial statements not included in this prospectus. The consolidated statement of operations data set forth below for the three months ended March 31, 2000 and 2001 and the consolidated balance sheet data as of March 31, 2001 are derived from our unaudited consolidated financial statements included elsewhere in this prospectus, which have been prepared on the same basis as the audited consolidated financial statement and, in our opinion, fairly present the information set forth therein. The pro forma net loss per common share and shares used in computing pro forma net loss per share are calculated as if (i) redemption of 720,800 shares of our redeemable convertible preferred stock and (ii) conversion of all of our convertible preferred stock and a convertible note into shares of our common stock occur on the date of their issuance. The other data, although not derived from our financial statements, was derived from a customer information database. When you read this selected consolidated financial data, it is important that you also read the historical consolidated financial statements and related Notes included in this prospectus, as well as the section of this prospectus entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations."

                                                                                                  THREE MONTHS ENDED
                                                       YEAR ENDED DECEMBER 31,                         MARCH 31,
                                         ----------------------------------------------------   -----------------------
                                           1996       1997       1998     1999(1)    2000(2)       2000         2001
                                         --------   --------   --------   --------   --------   ----------   ----------
                                                (in thousands, except per share data)                 (unaudited)
CONSOLIDATED STATEMENT OF OPERATIONS
  DATA:
Product revenues.......................  $ 18,958   $ 26,683   $34,690    $ 44,074   $ 58,458    $ 12,452     $16,726
Product revenues from related
  party(3).............................     1,551      6,864     9,398       4,163      1,097          --          --
Service and other revenues.............     1,045      2,526     4,124       7,034      7,810       2,034       2,261
                                         --------   --------   -------    --------   --------    --------     -------
    Total revenues.....................    21,554     36,073    48,212      55,271     67,365      14,486      18,987
Cost of product revenues...............     9,883     15,155    16,343      28,918     18,856       4,584       5,354
Cost of service and other revenues.....       760      1,417     1,801       5,377      7,722       2,097       1,739
                                         --------   --------   -------    --------   --------    --------     -------
    Total cost of revenues(4)..........    10,643     16,572    18,144      34,295     26,578       6,681       7,093
                                         --------   --------   -------    --------   --------    --------     -------
Gross profit...........................    10,911     19,501    30,068      20,976     40,787       7,805      11,894
Operating expenses:
  Research and development.............     4,052      5,922     5,987       8,745     11,276       3,455       2,534
  Selling, general and
    administrative.....................    18,013     24,520    24,292      35,797     45,323      11,401      10,113
  Integration..........................        --         --        --         785         --          --          --
  Restructuring........................        --         --        --          --      2,908          --          --
                                         --------   --------   -------    --------   --------    --------     -------
    Total operating expenses...........    22,065     30,442    30,279      45,327     59,507      14,856      12,647
                                         --------   --------   -------    --------   --------    --------     -------
Loss from operations(5)................   (11,154)   (10,941)     (211)    (24,351)   (18,720)     (7,051)       (753)
Interest income (expense), net.........       694        953     1,039      (1,767)    (1,156)       (321)       (586)
                                         --------   --------   -------    --------   --------    --------     -------
Income (loss) before income taxes......   (10,460)    (9,988)      828     (26,118)   (19,876)     (7,372)     (1,339)
Provision for income taxes.............        --        201       185         149        100          25          25
                                         --------   --------   -------    --------   --------    --------     -------
Net income (loss)......................  $(10,460)  $(10,189)  $   643    $(26,267)  $(19,976)   $ (7,397)    $(1,364)
                                         ========   ========   =======    ========   ========    ========     =======
Preferred stock accretion..............       (11)       (22)      (22)         --         --          --          --
Net income (loss) applicable to common
  stockholders.........................  $(10,471)  $(10,211)  $   621    $(26,267)  $(19,976)   $ (7,397)    $(1,364)
                                         ========   ========   =======    ========   ========    ========     =======
Net income (loss) per common share:
  Basic................................  $ (10.39)  $  (8.93)  $  0.48    $ (17.86)  $ (11.72)   $  (4.40)    $ (0.50)
                                         ========   ========   =======    ========   ========    ========     =======
  Diluted..............................  $ (10.39)  $  (8.93)  $  0.06    $ (17.86)  $ (11.72)   $  (4.40)    $ (0.50)
                                         ========   ========   =======    ========   ========    ========     =======
  Pro forma basic and diluted
    (unaudited)........................                                              $  (1.55)                $ (0.10)
                                                                                     ========                 =======

Weighted average common shares
  outstanding:
  Basic................................     1,008      1,144     1,302       1,471      1,704       1,681       2,741
  Diluted..............................     1,008      1,144    11,013       1,471      1,704       1,681       2,741
  Pro forma basic and diluted
    (unaudited)........................                                                12,851                  13,889

19

                                                        DECEMBER 31,
                                    ----------------------------------------------------   MARCH 31,
                                      1996       1997       1998     1999(1)    2000(2)      2001
                                    --------   --------   --------   --------   --------   ---------
                                                   (in thousands, except other data)
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and
  short-term investments..........  $20,821    $ 16,540   $ 22,072   $  6,698   $ 11,967   $  7,698
Total assets......................   37,246      43,227     46,498     37,117     43,905     47,105
Deferred gross profit(6)..........    7,883      17,390     20,227     26,695     25,847     25,317
Long-term obligations, net of
  current portion.................      160         160         67      9,252      9,218      8,217
Redeemable convertible preferred
  stock...........................   25,238      25,260     25,282     15,166     10,113     10,113
Total stockholders' equity
  (net capital deficiency)........  $(2,295)   $(11,733)  $(10,474)  $(35,848)  $(25,024)  $(26,321)

OTHER DATA(7):
Cumulative number of sites of
  installed pharmacy and supply
  systems.........................      119         176        258        910      1,096      1,135
Cumulative number of installed
  pharmacy and supply systems.....    2,227       3,928      5,875     14,242     17,772     18,698


(1) The amounts shown for the year ended December 31, 1999 include the results of the Sure-Med acquisition from January 29, 1999 to the end of 1999.

(2) The amounts shown for the year ended December 31, 2000 include special charges in the third quarter of 2000 related to: restructuring activities--$2.0 million writedown of Commerce One MarketSite software license, $0.6 million in employee severance expenses and $0.3 million writedown of capitalized software development costs; recognition of $1.1 million expense associated with previously deferred offering expenses; and $0.2 million writedown of identified intangible assets remaining from the Sure-Med acquisition.

(3) These revenues represent revenues from Sun Healthcare which was formerly a related party to Omnicell.

(4) Cost of revenues for the year ended December 31, 1999 includes: special charges related to the writedown of Sure-Med inventory--$9.7 million; purchase accounting adjustment due to the sale of Sure-Med inventories that had been written up to fair value--$1.1 million; and costs incurred to complete Sure-Med installation obligations--$0.8 million.

(5) Loss from operations for the year ended December 31, 1999 includes:
integration expenses associated with the Sure-Med acquisition--$0.8 million; and write-off of an equity investment--$0.6 million.

(6) Deferred gross profit represents gross profit on sales of pharmacy and supply systems, excluding installation cost, that have been shipped to, accepted and, in most instances, paid for by our customer but not yet installed at the customer site. The revenues and cost of revenues for such items will be recorded upon completion of installation.

(7) Figures do not include systems installed at Sun Healthcare sites.

20

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

YOU SHOULD READ THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES TO THOSE STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION AND ANALYSIS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISK, UNCERTAINTIES AND ASSUMPTIONS. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF MANY FACTORS, INCLUDING BUT NOT LIMITED TO THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

We were formed in 1992 and began offering our supply systems for sale in 1993. In late 1996, we introduced our Omnicell pharmacy system. In January 1999, we expanded our line of pharmacy systems and customer base with the acquisition of the Sure-Med product line from Baxter Healthcare. As of March 31, 2001, we had installed over 18,600 of our pharmacy and supply systems in over 1,100 healthcare facilities.

We sell our pharmacy and supply systems primarily in the United States. We have a direct sales force organized into six regions in the United States and Canada. We sell through distributors in Europe, the Middle East, Asia and Australia. We manufacture the majority of our systems in our production facility in Palo Alto, California, with refurbishment and spare parts activities conducted in our Waukegan, Illinois facility.

Sun Healthcare, a formerly related party, was previously a significant customer of ours, representing 19.7% of our total revenues in 1997, 20.5% in 1998, 9.3% in 1999 and 2.7% in 2000. Sun Healthcare filed for Chapter 11 bankruptcy protection in the third quarter of 1999. We do not anticipate any significant revenue from Sun Healthcare in 2001 or in future years.

REVENUES

Customers acquire our pharmacy and supply systems either through an outright purchase or a non-cancelable long-term lease, which typically has a term of 60 months. We bill our customers upon delivery and acceptance of our pharmacy and supply systems and recognize revenue when the systems are installed. Generally, we try to install our pharmacy and supply systems within three to six months after shipment, but installation, at the customer's request, can be delayed for a year or more. Some customers experience delays in installation due to site construction and delays in receiving interfaces from third parties.

Typically, we will sell our customer lease agreements on a non-recourse basis to third-party leasing companies. Lease revenue is recognized in the amount funded by the leasing company. As part of the initial sale of our pharmacy and supply systems, customers typically sign a one-year service agreement, and service revenues are recognized over the term of these agreements. Service and other revenues also include month to month rentals of our pharmacy and supply systems, amortization of upfront fees received from certain distributors of our pharmacy and supply systems and monthly subscription fees from hospitals utilizing our Internet-based procurement application.

Deferred gross profit on our balance sheet represents pharmacy and supply systems that have been shipped to, accepted, and, in most instances, paid for by our customers but not yet installed at the customer site. We record these shipments as deferred gross profit because title to the inventory has passed to the customer. Deferred gross profit is not equal to gross margin because it does not include installation costs, which are incurred and recorded in the period when revenue is recognized. Our installation process typically takes a week or less to complete.

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Revenues from our pharmacy and supply systems are difficult to forecast because the sales cycle, from initial assessment to product installation, involves a significant commitment of capital and time, varies substantially from customer to customer and can take more than one year. The order approval process of our customers is subject to internal procedures associated with large capital expenditures and the time associated with accepting new technologies. For these and other reasons, the sales cycle associated with the purchase of our pharmacy and supply systems is typically lengthy and subject to a number of significant risks, including customers' budgetary constraints and internal acceptance reviews over which we have little or no control.

In part due to our acquisition of the Sure-Med product line from Baxter Healthcare, sales of pharmacy systems have grown, in dollar terms, from 23% of our product shipments in 1997 to 40% in 2000. As of March 31, 2001, we had generated only minimal revenues from subscription fees for our OmniBuyer application.

COSTS AND EXPENSES

Our current expense levels are based, in part, on our expectations of higher future revenue levels. If revenue levels are below expectations, operating results are likely to be disproportionately impacted given our significant investment in infrastructure. We have never achieved profitability on an annual operating basis, and our current revenues and gross profit are not sufficient to support our operating expenses. Based on the foregoing, we believe that period to period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as indications of future performance.

Cost of product revenues consists primarily of direct materials, labor and overhead required to manufacture pharmacy and supply systems and also includes costs required to install our systems at the customer location. Costs of service and other revenue include spare parts required to maintain and support installed systems and service and maintenance expense, including outsourced contract services. Direct materials and installation costs are mostly variable. Manufacturing labor and overhead remain relatively fixed over ranges of production volume. The cost of service and spare parts has increased as the size of our installed base of customers increases.

Our research and development expenses include engineering and development salaries, wages and benefits, prototyping and laboratory expenses, consulting expenses and engineering-related facilities and overhead charges. Most of the research and development expenses are personnel- or facilities-related and are relatively fixed. Prototyping and consulting expenses will vary depending on the stage of completion of various engineering and development projects.

Our selling, general and administrative expenses include costs to support the sales, marketing, field operations and customer support and administration organizations. Most of these costs are personnel- or facilities-related and are relatively fixed. Bonuses and sales commissions will typically change in proportion to revenue or profitability. Other expenditures, such as advertising, promotions and consulting, are neither fixed nor variable and will fluctuate depending on product introductions, promotional programs and trade shows.

We recorded deferred stock compensation with respect to options granted to employees of approximately $34,000 in the year ended December 31, 2000 and $136,000 in the three months ended March 31, 2001, representing the difference between the deemed fair value of our common stock for financial reporting purposes on the date these options were granted and the exercise price. These amounts have been reflected as components of stockholders' equity (net capital deficiency) and the deferred expense is being amortized to operations over the vesting period of the options, generally four years, using the graded vesting method. We amortized deferred stock compensation of $3,000 in 2000, recorded as a selling, general and administrative expense. In the three months ended March 31, 2001, we amortized deferred stock compensation of $14,000, with $2,000 recorded as research and

22

development expense and $12,000 as a selling, general and administrative expense. At March 31, 2001, we had a total of $153,000 remaining to be amortized over the vesting periods of the stock options. For the year ending December 31, 2001, the total amortization of deferred stock compensation is expected to be approximately $84,000. We also expect to record deferred stock compensation for options granted from April 1, 2001 through June 26, 2001. Our policy is to use the graded vesting method for recognizing compensation costs for fixed awards with pro rata vesting. The graded vesting method provides for vesting of portions of the overall awards at interim dates and results in greater vesting in earlier years than the straightline method.

Due to relatively low demand for our Internet-based procurement application, OmniBuyer, we restructured our e-commerce business in the third quarter of 2000 and reduced operating expenses. In particular, we decreased the number of employees in this area and lowered our spending on sales, marketing and research and development. We decided not to pursue an exchange based on the Commerce One MarketSite license and refocused on marketing OmniBuyer to our hospital and alternate care customers. As part of this restructuring, we recorded a charge of $2.9 million, comprised of a $2.0 million writedown of our Commerce One MarketSite license, $0.6 million in employee severance-related expenses and a $0.3 million writedown of previously capitalized software.

RESULTS OF OPERATIONS

The following table sets forth certain items included in our results of operations for each of the three years in the period ended December 31, 2000 and the three months ended March 31, 2000 and 2001, expressed as a percentage of our total revenues for these periods:

                                                                                            THREE MONTHS
                                                           YEAR ENDED DECEMBER 31,         ENDED MARCH 31,
                                                        ------------------------------   -------------------
                                                          1998       1999       2000       2000       2001
                                                        --------   --------   --------   --------   --------
                                                                                             (unaudited)
STATEMENT OF OPERATIONS:
Product revenues......................................    91.4%      87.3%      88.4%      86.0%      88.1%
Service and other revenues............................     8.6       12.7       11.6       14.0       11.9
                                                         -----      -----      -----      -----      -----
  Total revenues......................................   100.0      100.0      100.0      100.0      100.0

Cost of product revenues..............................    33.9       52.3       28.0       31.6       28.2
Cost of service and other revenues....................     3.7        9.7       11.5       14.5        9.2
                                                         -----      -----      -----      -----      -----
    Total cost of revenues............................    37.6       62.0       39.5       46.1       37.4
                                                         -----      -----      -----      -----      -----

Gross profit..........................................    62.4       38.0       60.5       53.9       62.6
Operating expenses:
  Research and development............................    12.4       15.8       16.7       23.9       13.3
  Selling, general and administrative.................    50.4       64.8       67.4       78.7       53.3
  Integration.........................................      --        1.4         --         --         --
  Restructuring.......................................      --         --        4.3         --         --
                                                         -----      -----      -----      -----      -----
    Total operating expenses..........................    62.8       82.0       88.4      102.6       66.6

Loss from operations..................................    (0.4)     (44.0)     (27.9)     (48.7)      (4.0)
Interest income (expense), net........................     2.1       (3.2)      (1.7)      (2.2)      (3.1)
                                                         -----      -----      -----      -----      -----
Income (loss) before provision for income taxes.......     1.7      (47.2)     (29.6)     (50.9)      (7.1)
Provision for income taxes............................     0.4        0.3        0.1        0.2        0.1
                                                         -----      -----      -----      -----      -----
Net income (loss).....................................     1.3      (47.5)     (29.7)     (51.1)      (7.2)
                                                         =====      =====      =====      =====      =====

Net income (loss) applicable to common stockholders...     1.3%     (47.5)%    (29.7)%    (51.1)%     (7.2)%
                                                         =====      =====      =====      =====      =====

23

THREE MONTHS ENDED MARCH 31, 2001 AND 2000

REVENUES. Total revenues increased 31.1% from $14.5 million for the three months ended March 31, 2000 to $19.0 million for the three months ended March 31, 2001. Product revenues increased by 34.3% from $12.5 million in 2000 to $16.7 million in 2001, due primarily to an increase in the number of automation systems installed.

Service and other revenues increased by 11.2% from $2.0 million for the three months ended March 31, 2000 to $2.3 million for the three months ended March 31, 2001. The increase in service and other revenues was primarily due to the increase in our installed base of automation systems combined with an increase in the number of month-to-month short term rentals. We anticipate that service and other revenues will continue to grow in absolute dollars due to continued growth in our installed base of automation systems.

Deferred gross profit of $25.3 million at March 31, 2001 remained relatively consistent with the balance at December 31, 2000. We anticipate that deferred gross profit will remain relatively constant with the March 31, 2001 balance due to shipments approximating installations in future periods. Delays in installation occur for a variety of reasons, including construction delays and delays in receiving software from third party vendors. We recognize revenue and reduce deferred gross profit when installation is complete.

COST OF REVENUES. Cost of product revenues increased 16.8% from $4.6 million for the three months ended March 31, 2000 to $5.4 million for the three months ended March 31, 2001. Gross profit on product sales was $7.9 million, or 63.2% of product revenues, in the first quarter of 2000 compared to $11.4 million, or 68.0% of product revenues, in the first quarter of 2001. The increase in gross margin was due to favorable manufacturing variances combined with keeping manufacturing overhead at relatively the same level.

Cost of service and other revenues decreased by 17.1% from $2.1 million for the three months ended March 31, 2000 to $1.7 million for the three months ended March 31, 2001. For the same periods, gross margin on service and other revenues was $(0.1) million, or (3.1)% of service and other revenues, in 2000 compared to $0.5 million, or 23.1% of service and other revenues, in 2001. The higher level of cost of service and other revenues for the three months ended March 31, 2000 was due to a high level of expenses for service parts and spares. Sure-Med pharmacy systems require more costly installation kits than Omnicell automation systems. The three month period ending March 31, 2000 had an unusually large percentage of Sure-Med units to be installed including units which had been shipped by Baxter Healthcare prior to January 1999. We were responsible for installing these Sure-Med systems and for providing the required installation kits. The unusually high level of expenses decreased throughout fiscal 2000 as most Sure-Med systems shipped by Baxter Healthcare have been installed. The cost of service and other revenues for the three month period ended March 31, 2001 have a lower volume of Sure-Med installation kits.

RESEARCH AND DEVELOPMENT. Research and development expenses decreased 26.7% from $3.5 million for the three months ended March 31, 2000 to $2.5 million for the three months ended March 31, 2001. The decrease in research and development expenses was primarily the result of decreased spending for development of the internet-based procurement application. To date we have capitalized $1.0 million in software development costs. We anticipate that research and development expenses will increase modestly in absolute dollars.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative costs decreased by 11.3% from $11.4 million for the three months ended March 31, 2000 to $10.1 million for the three months ended March 31, 2001. The decrease was primarily the result of decreased spending in sales and marketing for the internet-based procurement application, and decreases in marketing expenses for advertising and

24

trade shows. We anticipate that selling, general and administrative costs will increase modestly for the remainder of 2001.

INTEREST INCOME (EXPENSE). Net interest expense increased from $321,000 for the three months ended March 31, 2000 to $586,000 for the three months ended March 31, 2001. The increase was due primarily to increased interest expense of approximately $190,000 and decreased earnings on lower invested cash balances.

YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

REVENUES. Total revenues increased 21.9% from $55.3 million for the year ended December 31, 1999 to $67.4 million for the year ended December 31, 2000. Total revenues increased 14.6% from $48.2 million for the year ended December 31, 1998 to $55.3 million for the year ended December 31, 1999.

Product revenues increased by 23.5% from $48.2 million in 1999 to $59.6 million in 2000, due primarily to a change in our product mix to a larger proportion of higher-priced pharmacy systems from 1999 to 2000 and an increase in the number of pharmacy and supply systems installed from 1999 to 2000. Product revenues increased by 9.4% from $44.1 million in 1998 to $48.2 million in 1999, due to an increase in the number of pharmacy and supply systems installed from 1998 to 1999 partially offset by sales of a larger proportion of supply systems from 1998 to 1999. Our slower rate of product revenue growth in 1999 compared to preceding years was due to our largest customer Sun Healthcare's financial difficulties and by delays in purchase decisions by other customers over concerns related to Year 2000.

Service and other revenues increased by 11.0% from $7.0 million in 1999 to $7.8 million in 2000. This increase was due to a higher installed base of systems partially offset by lower service revenue from Sun Healthcare. Under the terms of the Sure-Med acquisition, we assumed from Baxter Healthcare the remaining service obligations to certain Sure-Med lease customers, but we do not receive any service revenue associated with such obligations. Service and other revenues increased by 70.6% from $4.1 million in 1998 to $7.0 million in 1999. The increase in service and other revenues in 1999 was due primarily to the increase in our installed base of pharmacy and supply systems. We anticipate that service and other revenues will continue to grow in dollar terms and as a percentage of our total revenues due to continued growth in our installed base of pharmacy and supply systems.

Deferred gross profit decreased by 3.2% from $26.7 million at December 31, 1999 to $25.8 million at December 31, 2000. This decrease was due to higher cost of sales in the deferred gross profit balance at December 31, 2000 compared to the cost of sales in the deferred gross profit balance at December 31, 1999. Products with a lower average cost of sales were installed in 2000 compared to the average cost of sales for products shipped in 2000. Deferred gross profit increased by 32.0% from $20.2 million at December 31, 1998 to $26.7 million at December 31, 1999 due to significantly more shipments of pharmacy and supply systems than installations during 1999.

COST OF REVENUES. Cost of product revenues decreased by 34.8% from $28.9 million in 1999 to $18.9 million in 2000. Gross profit on product revenues was $19.3 million, or 40.1% of product revenues in 1999, compared to $40.7 million, or 68.3% of product revenues in 2000. The 2000 decrease in cost of product revenues and increase in gross profit percentage were due primarily to a $9.7 million writedown of Sure-Med inventory in the fourth quarter of 1999 because of lower than anticipated demand for Sure-Med pharmacy systems. Subsequent to the January 1999 acquisition of the Sure-Med product line, product integration issues related to the Sure-Med acquisition slowed our sales force's ability to effectively sell the Sure-Med pharmacy systems. This 2000 reduction in cost of product revenues was partially offset by a $2.2 million increase to our estimated liability to provide certain specific functionality to Sure-Med products. This increase resulted from the identification of additional Sure-Med customers who had contractual rights to the specified functionality and a higher than originally estimated materials, labor and shipping costs to fulfill each obligation.

25

Cost of product revenues increased by 76.9% from $16.3 million in 1998 to $28.9 million in 1999. Gross profit on product revenues was $27.7 million, or 62.9% of product revenues in 1998 compared to $19.3 million, or 40.1% of product revenues in 1999. The 1999 increase in cost of product revenues was due primarily to the writedown of Sure-Med inventory. Cost of product revenues and gross profit on product revenues in 1999 were also adversely affected by the minimal gross profit recorded on sales of Sure-Med inventories that had been written up to fair value upon the acquisition.

Excluding the impact of the Sure-Med inventory and other writedowns, cost of product revenues increased to $19.2 million for 1999 compared to $16.3 million in 1998, reflecting an increase in the number of systems installed and higher manufacturing costs per unit. As a percent of product revenues, cost of product revenues, excluding the impact of the Sure-Med inventory and other writedowns, increased from 37.1% in 1998 to 39.8% in 1999.

Cost of service and other revenues increased by 43.6% from $5.4 million in 1999 to $7.7 million in 2000. For the same periods, gross profit on service and other revenues was $1.7 million, or 23.6% of service and other revenues in 1999 compared to $0.1 million, or 1.1% of service and other revenues in 2000. The decline in gross profit on service and other revenue in 2000 compared to 1999 was due to service and maintenance costs on Sure-Med units sold prior to the acquisition, for which we did not receive revenue, being significantly higher than our original estimates reflected in the purchase price allocation. Cost of service and other revenues increased by 198.6% from $1.8 million in 1998 to $5.4 million in 1999. For the same periods, gross profit on service and other revenues was $2.3 million, or 56.3% of service and other revenues in 1998 compared to $1.7 million or 23.6% of service and other revenues in 1999. The lower gross profit on service and other revenues in 1999 compared to 1998 was due primarily to the acquisition of the Sure-Med product line and the higher level of service required for the Sure-Med pharmacy systems.

RESEARCH AND DEVELOPMENT. Research and development expenses increased by 28.9% from $8.7 million in 1999 to $11.3 million in 2000. Research and development expenses represented 15.8% and 16.7% of total revenues in 1999 and 2000, respectively. The increase in research and development expenses was primarily attributable to higher costs associated with additional engineering for enhancements to our pharmacy systems and for customization of Commerce One's technology for OmniBuyer customers. We anticipate that we will continue to commit significant resources to research and development in future periods to enhance and extend our pharmacy and supply systems. We expect that research and development expenses will increase in overall dollars, but not as a percentage of total revenues from current levels. To date, we have capitalized approximately $0.9 million of software development costs in 2000 for our pharmacy and supply systems.

Research and development expenses increased by 46.1% from $6.0 million in 1998 to $8.7 million in 1999. Research and development expenses represented 12.4% and 15.8% of total revenues in 1998 and 1999, respectively. The increase in research and development expenses was primarily attributable to higher costs associated with additional engineering personnel retained as part of the acquisition of the Sure-Med product line from Baxter Healthcare.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative costs increased by 26.6% from $35.8 million in 1999 to $45.3 million in 2000. Selling, general and administrative expenses represented 64.8% and 67.3% of total revenues in 1999 and 2000, respectively. The increase in selling, general and administrative expenses is due primarily to staffing increases associated with the introduction of OmniBuyer and supporting the growth of our pharmacy and supply system business. In addition, we wrote off approximately $1.1 million in previously capitalized offering expenses. We anticipate that we will continue to commit significant resources to our sales, customer support, marketing, finance and administration organizations. We expect that selling, general and administrative expenses will continue to increase in dollar terms. However, we do not anticipate that selling, general and administrative expenses will increase significantly, if at all, as a percentage of total revenues.

26

Selling, general and administrative costs increased by 47.4% from $24.3 million in 1998 to $35.8 million in 1999. Selling, general and administrative expenses represented 50.4% and 64.8% of total revenues in 1998 and 1999, respectively. The increase in selling, general and administrative expenses is due to staffing increases necessary to manage and support our growth in revenues, as well as increased staffing as a result of the acquisition of the Sure-Med product line from Baxter Healthcare. Also included in selling, general and administrative costs in 1999 is $0.6 million relating to the write-off of an equity investment.

INTEGRATION. Integration expenses of $0.8 million in 1999 consist of costs associated with the integration of Omnicell and Sure-Med engineering efforts, product lines and marketing efforts.

RESTRUCTURING. Restructuring charges in 2000 of $2.9 million include the $2.0 million write-off of the Commerce One MarketSite license, $0.3 million write-off of capitalized software development costs and $0.6 million in employee severance and related expenses.

INTEREST INCOME (EXPENSE). Net interest expense was $1.8 million in 1999 compared to net interest expense of $1.2 million in 2000. The lower net interest expense was primarily due to an increase in interest income from employee loans in 2000 as well as higher average cash balances than in 1999 and a reduction in interest paid to Sun Healthcare due to lower average outstanding balances of redeemable preferred stock. Net interest income was $1.0 million in 1998 compared to net interest expense of $1.8 million in 1999, reflecting a reduction in interest income due to a decrease in cash, cash equivalents and short-term investment balances and an increase in interest expense due to debt obligations incurred as part of the Sure-Med acquisition, as well as interest paid to Sun Healthcare for redemption of its redeemable preferred stock.

QUARTERLY RESULTS OF OPERATIONS

In any given quarter, it is common for a few customers to make up a substantial percentage of our pharmacy and supply systems revenues, although the identity of such customers generally varies from quarter to quarter. The timing of purchase decisions by large hospital customers has a material impact on our deferred gross profit position but a less significant impact on quarterly results of operations which depend on our ability to install systems that have already been shipped to customers.

Our quarterly operating results have varied significantly in the past and may vary significantly in the future depending on many factors that may include, but are not limited to, the following:

- the size and timing of significant orders and their fulfillment and installation;

- changes in pricing policies by us or our competitors;

- the number, timing and significance of product enhancements and new product announcements by us or our competitors;

- changes in the level of our operating expenses;

- our customers' budgeting cycles; and

- changes in our strategy and general domestic and international economic and political conditions.

The following tables present certain unaudited statement of operations data for each quarter of 1999 and 2000. These data have been derived from unaudited consolidated financial statements and have been prepared on the same basis as our audited consolidated financial statements which appear elsewhere in this prospectus. In the opinion of our management, these data include all adjustments,

27

consisting only of normal recurring adjustments and, in the fourth quarter of 1999 and third quarter of 2000, special charges described below, necessary for a fair presentation of such data.

                                                                  THREE MONTHS ENDED
                                 -------------------------------------------------------------------------------------
                                 JUN 30,    SEP 30,    DEC 31,    MAR 31,    JUN 30,    SEPT 30,   DEC 31,    MAR 31,
                                   1999       1999       1999       2000       2000       2000       2000       2001
                                 --------   --------   --------   --------   --------   --------   --------   --------
                                                                    (in thousands)
STATEMENT OF OPERATIONS DATA:
Product revenues...............  $ 9,172    $11,309    $ 15,442   $12,452    $14,520    $14,065    $17,421    $16,726
Product revenues from related
  party........................      840        181          52        --         --      1,097         --         --
Service and other revenues.....    1,784      2,098       1,813     2,034      1,853      2,032      1,892      2,261
                                 -------    -------    --------   -------    -------    -------    -------    -------
Total revenues.................   11,796     13,588      17,307    14,486     16,373     17,194     19,313     18,987
Cost of product revenues(1)....    3,562      3,925      17,830     4,584      4,149      4,906      5,217      5,354
Cost of service and other
  revenues.....................      731      1,317       2,428     2,097      2,124      1,627      1,873      1,739
                                 -------    -------    --------   -------    -------    -------    -------    -------
Total cost of revenues.........    4,293      5,242      20,258     6,681      6,273      6,533      7,090      7,093
                                 -------    -------    --------   -------    -------    -------    -------    -------
Gross profit (loss)............    7,503      8,346      (2,951)    7,805     10,100     10,661     12,223     11,894

OPERATING EXPENSES:
  Research and development.....    2,078      2,505       2,343     3,455      2,503      2,623      2,699      2,534
  Selling, general and
    administrative(2)..........    8,400      9,426      10,109    11,401     11,855     11,600     10,465     10,113
  Integration..................      362        137          --        --         --         --         --         --
  Restructuring(3).............       --         --          --        --         --      2,908         --         --
                                 -------    -------    --------   -------    -------    -------    -------    -------
    Total operating expenses...   10,840     12,068      12,452    14,856     14,358     17,131     13,164     12,647
                                 -------    -------    --------   -------    -------    -------    -------    -------
Loss from operations...........   (3,337)    (3,722)    (15,403)   (7,051)    (4,258)    (6,470)      (941)      (753)
Interest expense, net..........     (521)      (569)       (303)     (321)      (221)      (506)      (108)      (586)
                                 -------    -------    --------   -------    -------    -------    -------    -------
Loss before provision for
  income taxes.................   (3,858)    (4,291)    (15,706)   (7,372)    (4,479)    (6,976)    (1,049)    (1,339)
Provision for income taxes.....       40         --          85        25         25         25         25         25
                                 -------    -------    --------   -------    -------    -------    -------    -------
Net loss.......................  $(3,898)   $(4,291)   $(15,791)  $(7,397)   $(4,504)   $(7,001)   $(1,074)   $(1,364)
                                 =======    =======    ========   =======    =======    =======    =======    =======


(1) Includes special charges in the fourth quarter of 1999 related to:
writedown of Sure-Med inventory--$9.7 million; purchase accounting adjustment due to the sale of Sure-Med inventories that had been written up to fair value--$1.1 million; and costs incurred to complete Sure-Med installation obligations--$0.8 million.

(2) Includes a special charge in the fourth quarter of 1999 related to the write-off of an equity investment--$0.6 million. Includes special charges in the third quarter of 2000 related to a $1.1 million expense associated with previously deferred offering expenses and a $0.2 million writedown of identifiable intangible assets remaining from the Sure-Med acquisition.

(3) Includes special charges in the third quarter of 2000 related to:
$2.0 million writedown of Commerce One MarketSite software license; $0.6 million in employee severance expenses; and $0.3 million writedown of capitalized software development costs.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operations since inception primarily through the private placement of equity securities, as well as through equipment financing and secured loan arrangements. Through March 31, 2001, we have raised approximately $77.1 million from the private placement of equity securities, net of redemptions. This includes net proceeds of approximately $28.6 million from our last equity financing in the first quarter of 2000.

As of March 31, 2001, our principal sources of liquidity included approximately $7.7 million in cash, cash equivalents and short-term investments and an undrawn $10.0 million revolving credit facility. Our

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funds are currently invested in U.S. Treasury and government agency obligations, investment grade commercial paper and short-term interest-bearing securities.

In connection with the acquisition of the Sure-Med product line, we incurred a note payable to Baxter Healthcare of approximately $7.9 million. The note is secured by substantially all of the assets supporting the Sure-Med product line. The note is for a term of five years and is repayable in eight equal quarterly installments beginning on March 31, 2002, or earlier upon the closing of an initial public offering. Interest payments are due quarterly at a rate of 8.0% through December 31, 2001, 9% through December 31, 2002 and 10% through December 31, 2003. We expect to utilize a portion of the net proceeds from this offering to repay the Baxter Healthcare note in full.

We have established a credit facility with a bank that provides us with advances of up to 80% of eligible receivables, as defined, up to $10.0 million, and expires on June 30, 2002. Any advances under the credit facility would be secured by substantially all of our assets. Interest under the credit agreement is payable at an annual rate equal to our lender's prime rate plus 2.25%. Our credit agreement contains covenants that include limitations on indebtedness and liens, in addition to thresholds relating to net capital deficiencies that define borrowing availability and restrictions on the payment of dividends. As of March 31, 2001, we had no borrowings under this credit facility, were eligible to borrow approximately $9.7 million, and were in compliance with the covenants.

We used cash of $19.1 million in operating activities in 2000 compared to $5.0 million used in operating activities in 1999 and $6.7 million provided by operating activities in 1998. The net loss of $20.0 million for 2000 included non-cash charges for depreciation and amortization of $2.8 million, non-cash stock compensation charges of $0.7 million and a decrease in deferred gross profit of $0.8 million. The net loss of $26.3 million for 1999 included non-cash charges for depreciation and amortization of $2.0 million, Sure-Med pharmacy systems inventory write-off of $9.7 million, an investment writedown of $0.6 million, and an increase in deferred gross profit of $6.0 million. In 1998, cash was provided by net income of $0.6 million, a decrease in accounts receivable of $2.1 million and an increase in deferred gross profit of $4.0 million. In the three months ended March 31, 2001, we used $3.7 million of cash in operating activities compared to $10.0 million in the comparable period of 2000. This use of cash in 2001 was due principally to our lower net loss.

Cash of $1.4 million was provided from investing activities in 2000 compared to cash of $0.2 million used in investing activities in 1999 and cash of $7.3 million used in investing activities in 1998. Net maturities of short-term investments were $1.9 million in 2000 and $6.4 million in 1999 compared to net purchases of $5.5 million in 1998. Our 2000 expenditures for property and equipment of $0.5 million was less than the $6.2 million expended in 1999 and the $1.8 million expended in 1998. In the three months ended March 31, 2001, we used $3.7 million of cash in investing activities compared to $12.9 million in the prior year, principally due to a decrease in net purchases of short-term investments of $11.8 million.

We generated cash from financing activities of $24.9 million in 2000 primarily due to completing a private placement of $28.5 million in Series K Preferred Stock partially offset by redemptions of redeemable preferred stock. We used $3.8 million of cash in financing activities in 1999 due primarily to redemption of redeemable preferred stock and $0.6 million of cash was provided by financing activities in 1998 through the issuance of common stock. In the three months ended March 31, 2001, we generated $44,000 of cash from financing activities compared to $26.8 million in the prior year. The decrease is attributable to the completion of our Series K preferred stock financing that raised $28.6 million in the 2000 period.

Through March 31, 2001, we had redeemed 1,081,200 shares of Series J redeemable convertible preferred stock from Sun Healthcare for $15.2 million plus interest of $2.7 million. Cash of $11.6 million was used to satisfy this redemption, with the balance paid by offsetting Sun Healthcare's outstanding accounts receivable balances. In January 1999, Sun Healthcare exercised its right to have us

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redeem its 1,802,000 shares of Series J Preferred Stock in ten equal quarterly installments beginning in March 1999. All payments have been made except the four quarterly redemption payments of $2.5 million each that were due in September 2000, December 2000, March 2001 and June 2001, which we were not obligated to make because we did not meet certain balance sheet tests under California law. We will no longer be subject to these restrictions of California law following our reincorporation in Delaware. We plan to redeem the balance of the 720,800 shares of Series J Preferred Stock for approximately $10.1 million upon the closing of this offering with a portion of the net proceeds.

We have not paid any significant amount of taxes to date. As of December 31, 2000, we have a net operating loss carryforward for U.S. income tax purposes of approximately $38.0 million, expiring beginning in 2009. There are certain limitations on the use of this net operating loss carryforward. For more information, please see the notes to our consolidated financial statements.

We may be required to raise additional capital through the public equity market, private financings, collaborative arrangements and debt. If additional capital is raised through the issuance of equity or securities convertible into equity, our stockholders may experience dilution, and such securities may have rights, preferences or privileges senior to those of the holders of the common stock. Additional financing may not be available to us on favorable terms, if at all. If we are unable to obtain financing, or to obtain it on acceptable terms, we may be unable to execute our business plan.

On March 9, 2001, we withdrew our registration statement on Form S-1 (registration no. 333-35258) that was originally filed with the SEC on April 20, 2000.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET AND INTEREST RATE RISK

The following discusses our exposure to market risk related to changes in interest rates, foreign currency exchange rates and equity prices. We reduce the sensitivity of our results of operations to these risks by maintaining an investment portfolio which is comprised solely of highly rated, short-term investments. We do not hold or issue derivative, derivative commodity instruments or other financial instruments for trading purposes. We are exposed to currency exchange fluctuations, as we sell our products internationally. We manage the sensitivity of our international sales by denominating all transactions in U.S. dollars.

We are exposed to interest rate risk, as we use additional debt financing periodically to fund capital expenditures. The interest rate that we may be able to obtain on debt financings will depend on market conditions at that time and may differ from the rates we have secured in the past.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 2000, the Emerging Issues Task Force (EITF) published its consensus on Issue No. 00-2, "Accounting for Web Site Development Costs." This EITF sets forth guidance on whether to capitalize or expense certain development costs. We have adopted EITF 00-2 effective January 1, 2000 and capitalized $260,000 of web site development costs in the year ended December 31, 2000. These costs were written off as a part of the 2000 restructuring activities.

In March, 2000, the FASB issued Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation," an interpretation of APB 25. The Interpretation is applied prospectively to all new awards, modifications to outstanding awards, and changes in employee status after July 1, 2000, with the exception of the definition of employee and stock option repricings as to which the effective date is December 15, 1998. The adoption of this Interpretation did not have a significant effect on our results of operations or financial condition.

In December 1999, the Securities and Exchange Commission issued SAB No. 101, "Revenue Recognition in Financial Statements." SAB 101 provides guidance on the recognition, presentation and disclosure of revenue in financial statements. We have adopted SAB 101 for all periods presented.

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In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS 137 and 138, which is effective for years beginning after June 15, 2000. SFAS 133, as amended, will require us to recognize all derivatives on the balance sheet at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. SFAS 133 will be effective for our financial statements for the year ended December 31, 2001. Management believes that this statement will not have a significant effect on our results of operations or financial condition.

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BUSINESS

OVERVIEW

We provide an integrated suite of clinical infrastructure and workflow automation solutions for healthcare facilities. These solutions include pharmacy and supply systems, clinical reference tools, an Internet-based procurement application and decision support capabilities. We sell and lease our products and related services to a wide range of healthcare facilities such as hospitals, integrated delivery networks and specialty care facilities, which include nursing homes, outpatient surgery centers, catheterization labs and clinics. As of March 31, 2001, we had installed over 18,600 of our pharmacy and supply systems in over 1,100 healthcare facilities in the United States. In 2000, we generated revenue of $67.4 million from the sale and lease of our products and related services.

The healthcare industry's clinical workflow processes are highly inefficient and predominantly manual. The industry's historical reluctance to invest in information technology has contributed to medical errors and high process costs. Our automation solutions are designed to enable healthcare facilities to reduce medication errors, decrease costs, enhance operating efficiency and improve patient care.

Our clinical infrastructure and workflow automation solutions enable healthcare facilities to acquire, manage, dispense and deliver pharmaceuticals and medical supplies more effectively and efficiently. Our pharmacy and supply systems facilitate controlled delivery of pharmaceuticals and medical supplies directly to clinicians at the point of care. Our Internet-based procurement application automates and integrates healthcare facilities' requisition and approval processes. Our decision support product provides healthcare facilities with the ability to identify trends in drug utilization and diversion, improve regulatory compliance and reduce costs by monitoring usage patterns and optimizing product management.

Our goal is to become the leading provider of clinical infrastructure and workflow automation solutions for the healthcare industry. We will continue to be innovative in the expansion and enhancement of our product offerings. We also intend to expand the adoption of our automation solutions by continuing to collaborate with leading healthcare organizations. Furthermore, we believe our sizable installed customer base provides us with a significant opportunity to grow our business through increased sales to our existing customers.

INDUSTRY BACKGROUND

The healthcare delivery system in the United States is highly fragmented, complex and inefficient. Despite significant advances in science and medical technology, the clinical and management processes employed in healthcare facilities have made little progress in the past 20 years. Presently, many major clinical workflow processes at healthcare facilities are still predominantly manual and paper-based, which reflect healthcare facilities' relatively limited investment in information technology. Gartner, Inc., an independent market research organization, estimates that for 2001 the healthcare industry will invest only 1.6% of its revenue in information technology compared to 13.2% and 5.6% for the communications industry and retail industry, respectively.

Existing healthcare information systems are also limited in their ability to support the modernization of healthcare delivery processes or to address evolving patient safety initiatives, requirements of managed care and new healthcare regulations. Today, most healthcare facilities' information systems are oriented toward financial functions such as patient billing. These systems generally do not provide current, real-time information that healthcare providers need to make clinical and managerial decisions. Furthermore, individual departments within the same healthcare facility or network frequently purchase separate systems customized to their specific requirements, forcing the healthcare facility to maintain disparate information systems that do not operate or interface well with one another.

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NEED FOR CLINICAL INFRASTRUCTURE SYSTEMS

In November 1999, the Institute of Medicine issued a report based on the results of over 30 independent studies appearing in medical peer review journals over a 12-year period. The report indicated that medical errors are among the top ten causes of death in the United States, accounting for more deaths than motor vehicle accidents, breast cancer or AIDS. The report also indicated that in 1993 over 7,000 deaths resulted from medication errors. The following findings were noted in the report:

- A 1995 study of 4,031 adult admissions to 11 medical and surgical units at two hospitals estimated that an average of 1,900 adverse drug events occur per hospital per year, with 28% judged to be preventable.

- The same 1995 study found that approximately three out of every four medication errors were caused by one of seven types of systems failures, including drug knowledge dissemination, dose and identity checking, order transcription and medication order tracking.

- A 1997 study of two hospitals over a six-month period estimated that approximately 2% of admissions experienced a preventable adverse drug event, resulting in average increased hospital costs of $4,700 per adverse drug event admission or approximately $2.8 million annually for a 700-bed hospital.

In March 2001, the Institute of Medicine issued a follow-up report that recommended increased investment in information technology as a means of reducing medical errors and improving the overall quality of patient care.

Since the 1999 Institute of Medicine report was released, California has passed legislation requiring the eventual adoption of technologies aimed at reducing avoidable medication errors. Other states are considering similar legislation. Additionally, a consortium of large employers known as the Leapfrog Group was recently formed with the express purpose of pressuring healthcare facilities to provide safer care for employees of Leapfrog member companies. The Leapfrog Group's members, which include companies such as AT&T, Ford Motor Company, General Electric, IBM and 3M, employ approximately 26 million people and spend an estimated $45 billion annually on healthcare. One of the initiatives of the Leapfrog Group is to encourage employees to use healthcare facilities that invest in computerized systems designed to prevent avoidable medical errors.

In January 2001, the JCAHO, an independent, not-for-profit organization that evaluates and accredits approximately 19,000 healthcare facilities in the United States, approved standards directly focused on patient safety and medical error reduction in healthcare facilities. Healthcare facilities seeking accreditation from the JCAHO are required to establish ongoing patient safety programs, including the application of knowledge-based information to reduce risks to patients and the creation of an environment that encourages identification of errors, establishment of remedial steps to reduce the likelihood of recurring errors and identification of risks to patients.

ECONOMIC PRESSURES ON HEALTHCARE FACILITIES

Throughout the 1990s, the increasing cost of providing healthcare led to the rise of managed care. Healthcare providers aligned into networks and health plans established guidelines for reimbursement for healthcare delivery, reducing overall reimbursement rates. Federal policy in the United States also influenced the economic climate of the healthcare industry. Passage of the Balanced Budget Act of 1997 proposed a reduction of payments to healthcare providers of more than $250 billion over a five-year period. This significantly reduced the operating margins of healthcare facilities and limited their access to capital. Although these pressures resulted in lower total spending on healthcare, many of the larger systemic issues in the industry have not been adequately addressed, including improving patient care and upgrading outdated information systems.

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Economic pressures and the need to negotiate more effectively with managed care organizations have also induced a wave of consolidation, both vertically and horizontally, among healthcare providers to form newly defined delivery organizations. Many of these newly created organizations expected to realize significant economies of scale as a result of consolidation. These economies of scale have not fully materialized, however, and new problems have emerged from consolidation, including inefficiencies associated with managing disconnected and disparate information systems. Integrated delivery networks are only now beginning to address these issues.

Labor shortages in the U.S. healthcare market also have adversely impacted patient care and accentuated the need for investment in information technology to improve labor productivity. A December 2000 report from the U.S. Department of Health and Human Services indicated that the United States is experiencing a growing shortage of licensed pharmacists, a trend that it expects to continue. According to the report, the shortage has resulted in less time for pharmacists to counsel patients, longer working hours and a greater potential for fatigue-related errors. Similarly, according to the American Organization of Nurse Executives, most regions in the United States are also experiencing a major nursing shortage. In February 2001, a survey by the American Nursing Association revealed that 75% of nurses feel the quality of patient care has declined over the past two years, and a majority of nurses cited inadequate staffing as the primary cause of this decline.

THE OMNICELL SOLUTION

We provide an integrated suite of clinical infrastructure and workflow automation solutions capable of enterprise-wide implementation by healthcare providers. These solutions include pharmacy and supply systems, clinical reference tools, an integrated Internet-based procurement application and decision support capabilities. Our solutions enable healthcare providers to:

- REDUCE MEDICATION ERRORS. Our pharmacy systems (i) track clinician, patient and drug data, (ii) display a patient's full drug profile,
(iii) alert clinicians to allergies and drug interactions and (iv) track late or missed doses. Our systems interface directly with a healthcare facility's clinical pharmacy system, facilitating the dissemination of clinical pharmacy data and effectively extending the pharmacist's control of dispensed pharmaceuticals to the point of care. Our pharmacy systems are typically equipped with a touch screen Web browser that provides direct access to a third-party drug information database. This functionality allows clinicians to review information on dosage, administration, contra-indications and drug interactions at the point of care. Our pharmacy systems also support drug error detection by providing direct access, via the Internet, to medication error reporting and analysis software.

- REDUCE COSTS. Our pharmacy and supply systems store pharmaceuticals and medical supplies in a closed, controlled environment. By requiring a caregiver to enter their identification code and select a patient's name before removing a pharmaceutical or supply, only the items needed for each particular patient procedure are removed. This ensures that items are allocated properly and charged to the appropriate patient. Our automation systems also capture data on product utilization and inventory levels in real-time, allowing pharmacy and materials management departments to avoid shortages in care areas, improving patient care. Furthermore, by comparing actual utilization rates with standing inventory levels, business managers can optimize inventory levels across the entire enterprise. By controlling and monitoring access to pharmaceuticals and supplies, our systems also discourage stockpiling or theft. We estimate that our supply systems can reduce our customers' annual supply consumption costs by approximately 15% to 20% and reduce their required inventory levels by approximately 25% to 30%.

- IMPROVE OPERATING EFFICIENCY. Our pharmacy and supply systems accurately capture data by patient, physician, location and billing code. These systems interface with our customers' existing clinical pharmacy, financial and materials management systems to automate such processes as medication reporting, patient billing and inventory replenishment. This eliminates manual

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processes and provides our customers with immediate access to data gathered by our systems to facilitate real-time operations management. Use of our pharmacy and supply systems also reduces process costs and increases labor productivity, enabling caregivers to devote more time to delivering patient care and allowing support personnel to provide additional services with fewer people. We estimate that our supply systems can reduce our customers' personnel needs by 1.5 full-time equivalent employees for every 100 occupied hospital beds.

- LEVERAGE INVESTMENTS IN EXISTING INFORMATION SYSTEMS. Because our automation solutions are designed to integrate with healthcare facilities' existing clinical pharmacy, financial and materials management systems, we can preserve their existing investments in these systems and enhance those systems' functionality. We have developed over 1,500 live, proprietary software interfaces that integrate our automation solutions with healthcare facilities' existing information systems. We believe our interface capabilities make our solutions particularly useful to large enterprises, such as integrated delivery networks, that often use multiple, disparate information systems among their facilities.

- SIMPLIFY ORDERING PROCESSES. Our Internet-based procurement application, OmniBuyer, simplifies the predominantly manual, paper-based procurement processes that currently exist in most healthcare facilities. By automating the purchasing process, OmniBuyer reduces administrative work and processing costs, increases contract compliance and improves order accuracy and information management. Used in conjunction with our pharmacy and supply systems, our customers are able to benefit from a fully electronic supply chain, from selected suppliers to the point of use. We estimate that OmniBuyer reduces the cost of issuing a purchase order from an average of $75 to $125 per purchase order to $15 to $30.

- MONITOR UTILIZATION TRENDS. Our Internet-enabled decision support tool, DecisionCenter, tracks pharmaceutical and supply utilization by physician, patient, procedure, item and diagnosis code. DecisionCenter provides healthcare facilities with the ability to identify trends in drug utilization and diversion, improve regulatory compliance and reduce costs by monitoring usage patterns and optimizing product management. DecisionCenter also provides secured trend analysis, decision support and regulatory compliance reports based on data gathered from our pharmacy and supply systems and other information systems within the healthcare facility.

STRATEGY

Our goal is to become the leading provider of clinical infrastructure and workflow automation solutions for the healthcare industry. We intend to achieve this goal through the following strategies:

- CONTINUE TO LEVERAGE AND EXTEND OUR SOLUTIONS. We intend to continue to develop features and functionality for our automation solutions that address the patient safety and cost-containment pressures confronting healthcare facilities. In addition, we intend to continue to add software, hardware and Internet-based solutions that complement and extend our automation solutions. For example, in 1999, we introduced OmniBuyer, which automates healthcare facilities' purchasing processes, to provide a complementary service to our pharmacy and supply systems.

- COLLABORATE WITH LEADING HEALTHCARE PROVIDERS. We work closely with leading healthcare institutions, such as the Cleveland Clinic, Massachusetts General Hospital and New York University Hospitals Center, in the definition, development and deployment of our products and services. These institutions demand innovative and cost-effective products and services that address their clinical infrastructure and workflow automation needs. They also require that our products and services be comprehensive in scope and capable of supporting the operations of an entire healthcare enterprise. Through our collaborations with leading healthcare institutions, we seek to establish our automation solutions as industry standards for clinical infrastructure and workflow automation.

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- FURTHER PENETRATE OUR INSTALLED CUSTOMER BASE. We have a sizable installed base of over 18,600 pharmacy and supply systems in over 1,100 healthcare facilities. Most of our customers have purchased only a subset of our products and services, or have not yet implemented our products and services throughout their facilities. As a result, we believe a significant opportunity exists to expand sales to our existing customers. We intend to leverage our close customer relationships and the measurable benefits of our products and services to capitalize on this opportunity.

- DEVELOP SOLUTIONS THAT ENHANCE OUR CUSTOMERS' EXISTING SYSTEMS. We expect healthcare facilities to continue to demand our clinical infrastructure and workflow automation solutions as a means to preserve, leverage and upgrade their existing information systems. We will continue to deliver Internet-based and fully integrated automation solutions that are cost-effective and enhance our customers' existing information systems. We will also continue to utilize our dedicated interface team, proprietary hardware and software interface technologies and over 1,500 live interfaces to fully integrate our automation solutions with our customers' existing information systems.

- DEVELOP STRATEGIC RELATIONSHIPS. We expect to continue to enter into strategic relationships that enhance our product offerings, broaden our automation solutions and increase our sales opportunities. We expect these relationships to increase the clinical efficacy of our automation solutions and open new markets for them. We currently have a relationship with Gold Standard Multimedia whose Clinical Pharmacology database connects to our pharmacy systems through the Internet, providing important drug allergy and drug interaction information to clinicians as they remove medications from our pharmacy systems. We also have a strategic relationship with Becton, Dickinson and Company that allows us to co-market their bedside Rx System for prevention of medication errors to our installed customer base. The Becton Dickinson system is intended to be fully integrated with our pharmacy systems to promote maximum safety in the delivery of medications to the patient while automating and enhancing workflow.

OMNICELL PRODUCTS AND SERVICES

Our automation solutions include pharmacy and supply systems, an Internet-based procurement application and decision support capabilities. Our pharmacy and supply systems consist of modular, secured and computerized cabinets and related software technology that manage and dispense pharmaceuticals and medical supplies. OmniBuyer automates the healthcare facility's requisition process, and DecisionCenter provides trend analysis and decision support based on data gathered by our pharmacy and supply systems. In pricing our products and services, we take into account our costs of production, customer feedback and our competitors' prices.

PHARMACY SYSTEMS

We offer two lines of pharmacy systems, Omnicell and Sure-Med. Our Omnicell pharmacy systems are highly configurable and are typically installed with high-resolution color touch screens. Our color touch screens provide users with a Windows-based graphical interface that is suited for displaying a patient's medical profile and Internet-based clinical information. In addition, our Omnicell pharmacy systems have dispensing drawers that support multiple levels of security by utilizing single-dose lids, locking lids, sensing lids and patented guiding lights. The systems are configured to support clinical workflow in all areas of the hospital including the operating rooms, emergency rooms, intensive care units and medical/ surgical floors.

We acquired the Sure-Med pharmacy system from Baxter Healthcare in 1999. Our Sure-Med systems incorporate a variety of storage compartments and software that is compatible with all of our automation solutions. Our Sure-Med systems offer a wide range of configuration and dispensing technologies, including unit-dose dispensers and multiple drawer sizes. The unit-dose module dispenses only the requested medication doses and is best suited for medications where regulatory guidelines

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mandate a highly controlled environment. Clinicians prefer this technology in high-security situations because it automates much of the logistical and documentation burden and responsibility associated with dispensing controlled medications. In late 2000, we extended our color touch screens and associated software available on our Omnicell pharmacy system to the Sure-Med pharmacy system. This will enable both systems to function on a common platform, allowing customers to add our other products to their Sure-Med pharmacy systems. We expect broad adoption of this new technology across our Sure-Med installed base.

SUPPLY SYSTEMS

Our primary supply systems are comprised of one, two or three cabinets. Each cabinet is approximately two feet wide, six feet high and two feet deep with capacity for up to 120 stock keeping units. Auxiliary cabinets can be added to the system to provide additional storage capacity. Various shelf, drawer and rack modules facilitate a wide array of storage configurations.

Our supply systems incorporate locked transparent doors that restrict access to the supplies contained in our systems. Users enter their identification number on a console and select the appropriate patient name. Specific doors then open based on the security level of the user. Using our patented "See & Touch" technology, the user is able to record supply utilization by pushing a dedicated reorder button on the shelf in front of the selected item.

COMBINATION SYSTEMS

Our combination systems allow healthcare organizations to store pharmaceuticals and medical supplies in a single system. The architecture of our combination system enables each operating department to manage its products independently of other operating departments, restricting clinician and technician access to only appropriate pharmaceuticals and medical supplies and allowing the tracking of transaction data, inventory levels, expenses and patient treatment costs through a single database. By utilizing our combination systems, healthcare facilities are able to handle pharmaceuticals and medical supplies with greater flexibility and efficiency.

OMNICENTER

OmniCenter is a computerized central server that processes transaction data to and from our pharmacy and supply systems, recording each transaction by user, patient, item quantity, cost, date and time. OmniCenter enables the pharmacy and materials management departments to run reports automatically or on demand, indicating when to restock the systems and when to reorder pharmaceuticals and supplies. OmniCenter also permits the user to generate a wide range of standard and customized reports. As a diagnostic service, we are able to remotely access an installed OmniCenter from our technical support center to monitor the status of the server and all installed pharmacy and supply systems.

OMNIBUYER

OmniBuyer is a secure Internet-based procurement application that automates and integrates a healthcare facility's requisition and approval processes. The application incorporates buyer-specific business rules, such as spending limits, negotiated pricing, approval routing and customized access profiles. In addition, OmniBuyer is integrated with the healthcare facility's existing information systems, further streamlining the purchasing process. OmniBuyer is based on Commerce One's BuySite technology that we have customized to meet the complex needs of the healthcare industry.

OmniBuyer provides a single online point of entry to meet the procurement needs of buyers at healthcare facilities. We typically sell OmniBuyer on an application service provider basis. Using OmniBuyer, our customers determine the specific suppliers, including manufacturers, distributors, marketplaces and exchanges, to which their buyers will have access.

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DECISIONCENTER

DecisionCenter is an Internet-enabled decision support product that provides secure trend analysis, decision support and regulatory compliance reports based on data from our pharmacy and supply systems. It consolidates information from one or more OmniCenters into one database. The data are stored in a raw format as well as aggregated for rapid response to queries. We have developed the "My-Omni" Web page that allows users to configure frequently requested information from a short menu. In addition, we offer sophisticated graphical tools that allow users to make detailed queries across all data fields. These systems are typically interfaced with the healthcare facility's medical records system in order to augment the database with correctly associated diagnosis codes. Data can be viewed by authorized users and personnel at any time, allowing for easy and comprehensive analysis to improve decision making.

SERVICES

We provide three types of services in support of our automation solutions:
(i) post-sales installation services at customer facilities, provided by our field service organization; (ii) integration services in which our interface development team interfaces our solutions with our customers' existing clinical pharmacy, financial, and materials management systems; and
(iii) post-installation technical support. We generate revenue from service contracts for post-installation technical support, which provides our customers with phone support, on-site service, parts, and access to software upgrades. On-site service is provided by a combination of our field service operations team, technical support group and 150 field service representatives from Dade Behring Inc., a third-party service company.

MEDCENTERCITY

We own and operate MedCenterCity, a Web site for healthcare professionals, as a service to the healthcare community. The site includes articles on relevant issues, including the cost of healthcare, reducing medical errors and the Healthcare Information Portability and Accountability Act of 1996.

CUSTOMERS

Our target customers for our automation solutions are healthcare facilities, including hospitals and alternate care facilities. As of March 31, 2001, over 1,100 hospitals and specialty care facilities had purchased or leased our pharmacy and supply systems. The following entities are representative of our largest hospital customers based on pharmacy and supply systems purchased or leased:

- Bellevue Hospital Center                    New York, NY
- Children's Medical Center of Dallas         Dallas, TX
- Cleveland Clinic                            Cleveland, OH
- Jackson Memorial Hospital                   Miami, FL
- Massachusetts General Hospital              Boston, MA
- Madigan Army Medical Center                 Tacoma, WA
- New York University Hospitals Center        New York, NY
- Northwestern Memorial Hospital              Chicago, IL
- Raritan Bay Medical Center                  Perth Amboy, NJ
- Rush-Presbyterian-St. Luke's Medical
Center                                        Chicago, IL
- University of Utah Hospitals and Clinics    Salt Lake City, UT
- University of Texas Medical Branch          Galveston, TX
- Veterans Affairs Medical Center             Washington, D.C.
- Walter Reed Army Medical Center             Washington, D.C.

Rush-Presbyterian, Madigan Army Medical Center and Raritan Bay Medical Center are among the 15 customers that have purchased supplies through OmniBuyer.

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RUSH-PRESBYTERIAN CASE STUDY

Rush-Presbyterian-St. Luke's Medical Center in Chicago, Illinois is an example of a healthcare facility progressively adopting our automation solutions to derive benefits across the enterprise. In December 1993, Rush-Presbyterian installed our supply systems in an area of its facility called the Atrium. A two-year retrospective study was performed to assess the long-term impact of our supply systems on Rush-Presbyterian's inventory management processes. The study found that total supply consumption in the Atrium for the first year, 1994, declined by almost $150,000 or 20.3% versus the baseline year. In 1995, total supply consumption in the Atrium dropped an additional $30,000 below the already reduced first-year level, to 24.3% below the baseline year. Rush-Presbyterian has expanded its use of our supply systems to other areas of the facility, including the Cardiovascular Catheterization Unit (CVCU).

In November 1999, Rush-Presbyterian implemented OmniBuyer in the CVCU. In the CVCU, Rush-Presbyterian has automated the procurement process from the point of use to the supplier. The automation process begins when an item such as a catheter is removed from one of our supply systems. The user then pushes a dedicated reorder button for each item removed. The usage data generated by these transactions are consolidated by our OmniCenter, which interfaces with OmniBuyer. When a reorder point is reached, the manager of the CVCU receives an automatic e-mail message, notifying him to log on to OmniBuyer, where he views a requisition detailing the products to be reordered. The manager is then able to edit and approve the requisition. Once approved, OmniBuyer transmits the requisition to the supplier, accessing current pricing information from the supplier and sends the order to the Rush-Presbyterian enterprise resource planning system in order to generate an accurate purchase order. After the requisition has been received and processed by the supplier, an e-mail message is sent back to the requisitioner to verify that the order has been received and processed. The e-mail message identifies backorder status, which is helpful if a different supplier needs to be contacted to obtain a required product. The e-mail message also identifies discrepancies in supplier pricing by comparing automatically purchased goods to contract prices. This feature has already saved Rush-Presbyterian thousands of dollars in inadvertent supplier overcharges.

STRATEGIC RELATIONSHIPS

We establish and maintain relationships with companies whose products, services, technologies and/or market presence enhance our ability to deliver value to our customers and who open up additional sales opportunities for our automation solutions. Among the most significant relationships are the following:

BECTON, DICKINSON AND COMPANY

Becton Dickinson is a manufacturer of medical supplies, devices and diagnostic systems, including the BD Rx System. The BD Rx System allows nurses to perform a final, bedside safety check by positively identifying the correct patient, medication, dosage, time and method of delivery before administering the medication. The system utilizes a sophisticated hand-held computing platform and bar code scanner that a nurse can transport from patient to patient. In June 2000, we agreed to co-market the BD Rx System to our installed base of pharmacy system customers.

GOLD STANDARD MULTIMEDIA (CLINICAL PHARMACOLOGY)

Gold Standard Multimedia is a provider of multimedia programs for the healthcare market. Gold Standard Multimedia's drug information application, Clinical Pharmacology, was named eHealthcareWorld's 1999 Gold Award winner for best online publication for professionals. We have an agreement with Gold Standard Multimedia to make the Clinical Pharmacology database available to our customers through the Web browser loaded onto all of our color touch screens. Access to the database is integrated with our pharmacy systems so that when a nurse removes a drug for a patient,

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commands are processed through the browser that make clinical information about that drug available to the nurse on our color touch screen. The nurse can view allergy and drug interaction information, locate specific details and view an image of the drug. We believe that access to these types of information from our pharmacy systems can prevent medication errors. Clinical Pharmacology also provides drug information that nurses can print for patients prior to discharge to reinforce patient education.

U.S. PHARMACOPEIA

U.S. Pharmacopeia is a non-profit organization that establishes standards to ensure the quality of medicines. We have a co-marketing agreement with U.S. Pharmacopeia that makes their MedMARx medication error reporting and analysis software available on our pharmacy systems. The MedMARx software provides a standardized framework for medication error reporting. From our color touch screen, clinicians can record medication errors, run standard and customized reports and view the results in chart and graph form. These reports help clinicians follow trends and pinpoint problem areas. U.S. Pharmacopeia also maintains a national medication errors database that allows healthcare facilities to anonymously compare themselves to similar institutions.

ROSEBUD SOLUTIONS

Rosebud Solutions provides software solutions that automate the process of tracking and managing equipment within healthcare facilities. Rosebud Solutions' Medical Equipment Management Systems (MEMS) solution helps healthcare facilities improve asset utilization, reduce cost, simplify processes and improve patient care through better medical equipment management. In particular, MEMS helps reduce the incidence of hospital-associated infections by tracking incidents of patient-to-patient equipment transfer and giving healthcare facility personnel a tool for preventing such transfers. In February 2001, Omnicell entered into an exclusive reseller agreement with Rosebud Solutions to sell its MEMS program and other products to our customers.

INNOVATIVE PRODUCT ACHIEVEMENTS, INC. (SCRUBAVAIL)

Innovative Product Achievements, Inc. is an inventory management systems company focused on the development of innovative solutions for the management of materials in healthcare facilities. We co-market Innovative Product Achievements' ScrubAvail system as an extended offering to our supply systems. ScrubAvail is an advanced inventory control system for surgical scrub suits. The ScrubAvail system is typically installed in the operating room, labor and delivery, emergency room and other high surgical scrub use areas. In the United States, over 4,000,000 scrub suits are dispensed annually through ScrubAvail systems.

COMMERCE ONE, INC.

Commerce One, Inc. is a provider of e-commerce solutions that dynamically link buying and supplying organizations to form real-time trading communities. In August 1999, we entered into an agreement with Commerce One and paid a license fee pursuant to which we received a perpetual license to Commerce One's Hosted BuySite software for use in developing our OmniBuyer application. The agreement also provides for program management services and ongoing maintenance and support of the software for additional fees. The agreement continues perpetually unless otherwise terminated by either party pursuant to the termination provisions of the agreement. In June 2001, we entered into another agreement with Commerce One to allow us to co-sell the licensed version of Commerce One's BuySite software. In addition, our strategic relationship with Commerce One allows for co-marketing and co-development efforts and enables us to utilize their e-commerce technology platform and access their Global Trading Web. In March 2000, Commerce One made an equity investment in our company.

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RESEARCH AND DEVELOPMENT

We commit significant resources to developing new products and technologies that bring value to our customers. We believe that our research and development focus and quality team are key competitive advantages in the industry. As of May 31, 2001, we have 58 employees in research and development, approximately 17% of our entire workforce. Research and development expenses were $6.0 million, $8.7 million and $11.3 million in the years ended December 31, 1998, 1999 and 2000, respectively, representing 12.4%, 15.8% and 16.7% of total revenues in those years.

Our architecture and sophisticated product development process allow for rapid development and testing times. The software architecture for our pharmacy and supply systems is based on database products and development tools centered around the Microsoft Windows NT platform and the Microsoft Internet Information Server. This software is installed at the customer site. We develop application software that is generally applicable to all customers, while retaining broad customization functionality. We maintain a single release applicable to both our pharmacy and supply systems, with each new release containing more configurable options as new features are added, while retaining previous functionality for backward compatibility. Interfacing with our customer's existing information systems is done according to the Health Level Seven (HL7) standards or, for non-compliant systems, is done utilizing our custom interface software. Interface software is kept separate from the main software release. Communication between the OmniCenter server and the pharmacy and supply systems and interface software is accomplished through an application programming interface. Each new release of server software maintains backward compatibility with this application programming interface, so that previous versions of interfaces and pharmacy and supply systems continue to operate when the OmniCenter server software is upgraded. Our products currently do not require approvals beyond standard Underwriters Laboratories or Canadian Safety Association equivalent certification.

A vital part of our automation solutions business and among our core competencies is a dedicated hardware group. While software occupies the majority of our development resources, the knowledge and expertise of our hardware group is one of the significant barriers to entry for potential competitors. Since our pharmacy and supply systems handle physical product, a considerable amount of skill is required in designing mechanisms that will automatically dispense a variety of sizes of pharmaceuticals and medical supplies. Our mechanical and electronic designers use automated design tools to allow full three-dimensional simulation down to individual piece part drawings. In many cases our design documentation is transmitted to suppliers electronically.

For our OmniBuyer application, our strategic relationship with Commerce One allows us to incorporate and extend Commerce One's technology platforms, applications, source code and documentation into healthcare. Their tools allow us to modify their BuySite software to produce our branded OmniBuyer application, minimizing the effort to port specific software changes to the latest Commerce One release.

TECHNOLOGY

Much of our architecture is based on industry standards such as programming languages like C++, Visual Basic and Java, standard HL7 healthcare interfaces, the Microsoft Windows NT operating systems, Intel microprocessors and standard IEEE 802.11b wireless protocols. Our product development teams employ object-oriented analysis and design principles to guide the development of an object-oriented system of software code. Our methodology allows us to utilize the capabilities of object-oriented programming languages like C++ and Java to build reusable components and designs. This methodology also helps reduce the risks inherent in developing complex systems and helps us design our solutions to meet the needs of our customers.

Scalability is a key benefit of our product offering and an area of continuous focus in our research and development activities. Our pharmacy and supply systems deploy current industry standard Microsoft

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Windows NT 4.0 Server operating software and Pentium-class Intel microprocessors. The OmniCenter server is designed to support our systems, fully deployed, at the largest healthcare facility.

Historically, we have typically offered a major upgrade to our application software approximately once a year. Our most recent automation software release was Omnicell 6000, which became commercially available in February 2001. Upgrades are included as part of our standard service contract, and the majority of our customers have a service contract. In some cases, due to requirements of the underlying operating systems, our customers may need to upgrade older OmniCenter PC platforms (not the embedded PCs in the systems). In these cases, our customers are charged a single price for a new PC and on-site installation of the upgrade and database transfer.

Our service contracts include the license to use the software and receive upgrades. In some cases, certain new features in an upgrade may be chargeable items. If the customer declines to purchase the chargeable upgrades, then the upgrade is performed without enabling those chargeable features. In the majority of cases, upgrades to software functionality may also lead to the purchase of additional Omnicell proprietary hardware. New releases of OmniBuyer occur approximately every three months. With each new release, every existing OmniBuyer customer is upgraded, as part of the ASP hosting fee.

Current server hardware is available with single or dual processor platforms with, or without, redundant arrays of independent disks and power supplies, depending on the size of the application. In addition to developing new application features, our software development group makes continuous improvements to our proprietary applications and communications software to optimize the speed and performance of our systems. We maintain a separate software quality assurance department that provides testing of new features and regression testing of the existing features before we release software for test sites. At the successful completion of the testing period, the software is released for general availability.

In the Internet-based procurement area, Commerce One's solution utilizes XML software technology platform servers to generate and securely transmit XML documents over the Internet. Commerce One has also created a common business library designed to enable a common language-based framework for uniting disparate business document types. While we believe that XML software technology is emerging as an industry standard for business-to-business electronic commerce, we have also developed translation technology that converts XML documents into other document formats. This translation technology allows us to deliver purchase orders to suppliers in a wide variety of document formats, including electronic data interchange, Open Buying on the Internet, ASCII flat file, e-mail, Microsoft Excel and facsimile.

Our Internet-based products use 128-bit encryption, HTTPS-SSL and password-protected user access. Our servers are located behind corporate firewalls and access is multiple password-protected. We recognize our obligations to safeguard patient information and other customers' proprietary or confidential information to which we may have access through the use of our automation systems and OmniBuyer. We have implemented a Privacy and Use of Information Policy and strictly adhere to established privacy principles, use of customer information guidelines and federal and state statutes and regulations regarding privacy and confidentiality, including those measures and practices required under the Health Insurance Portability and Accountability Act of 1996.

SALES, MARKETING AND CUSTOMER SUPPORT

We market and sell our products and services to a variety of healthcare organizations, including hospitals and alternate care facilities, targeting hospitals with over 100 beds and alternate care organizations with multiple facilities. In the United States and Canada, we have a direct sales force organized into six regions. We sell through distributors in Europe, the Middle East, Asia and Australia. Each of the members of our direct sales force sells our pharmacy and supply systems, OmniBuyer and DecisionCenter. Our sales representatives have, on average, over eight years of sales experience in the

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healthcare industry. A regional vice president coordinates both the sales and field service operations activities in each region.

Our marketing group is responsible for product marketing, marketing communications, Web site development, public relations, sales support and training. It generates leads through a variety of means, including advertising, direct marketing and participation in trade shows and conferences covering such areas as pharmacy, nursing, anesthesiology, operating room management, hospital administration, materials management, electronic commerce and supply chain management.

The sales cycle for our automation systems is long and can take in excess of 12 months. This is due in part to the cost of our systems and the number of people within a healthcare facility involved in the purchasing decision. To initiate the selling process, the sales representative generally targets the director of pharmacy, the director of materials management and/or other decision makers and is responsible for educating each group within the healthcare facility about the benefits of automation. To assist hospitals in the acquisition of our systems, we offer multi-year, non-cancelable leases that reduce up-front acquisition costs. Typically, we sell our customers' lease agreements to a third-party leasing company. We have contracts with several group purchasing organizations (GPOs) that enable us to sell our automation systems to GPO-member healthcare facilities without going through a lengthy request for proposal and bidding process. These GPO contracts are typically for multiple years with options to renew or extend for up to two years but can be terminated by either party at any time. Our current GPO contracts include Premier, Inc., Novation, LLC, Consorta Catholic Resources Partners, Tenet Healthcare Corporation and the Department of Veterans Affairs.

Our field service operations representatives support our sales force by providing operational and clinical expertise prior to the close of a sale and installing our automation systems post-sale. This group assists the customer with the technical implementation of our automation systems, including configuring our systems to address the specific needs of each individual customer. After the systems are installed, on-site support is provided by a combination of our field service operations team, technical support group and a third-party service company.

We offer technical support through our technical support center in Waukegan, Illinois. The support center is staffed 24 hours a day, 365 days a year. We use the Siebel Systems software package, an industry standard for call centers, to field calls from customers. We have found that two-thirds of all service issues can be addressed either over the phone or by our support center personnel utilizing their on-hand remote diagnostics tools. In addition, we utilize remote dial-in software that monitors customer conditions on a daily basis.

We leverage our sales and field service organizations, along with our technical support center, to sell, implement and support OmniBuyer. In addition, we have added specialists who work solely with healthcare facilities to implement OmniBuyer. The implementation process is done in phases. We work with each healthcare facility to determine its purchasing and approval flows. We also interface OmniBuyer to all relevant information systems, assist with connectivity to suppliers, marketplaces and exchanges and provide training on the application.

MANUFACTURING OF PHARMACY AND SUPPLY SYSTEMS

Our pharmacy and supply systems manufacturing strategy is to produce custom configured systems with rapid turnaround in a high-quality and cost-effective manner. We currently conduct our manufacturing operation in a 23,000 square foot facility in Palo Alto, California operating on one shift. We operate on a continuous flow, just-in-time basis to perform final assembly, configuration and system testing of all products. Our customer service personnel work closely with the end user to determine specific customer requirements for each installation. The detailed customer requirements are transmitted electronically to our manufacturing facility where they are used to custom configure each unit. Our

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operating software is installed as a part of the assembly process. Once assembled, every unit undergoes mechanical and systems testing prior to shipping.

Our production activities consist primarily of final assembly of mechanical components and electronic sub-systems outsourced to key suppliers. While many components of our systems are standardized and available from multiple sources, certain components or subsystems are fabricated according to our specifications. We endeavor to obtain multiple sources of supplies for certain components. We believe we could obtain alternative sources of supplies within two to four months if our current suppliers were unable to provide us with adequate quantities of such components.

Our products are designed with a high degree of modularity that facilitates manufacturing, assembly and configuration and enables rapid deployment of new products and product enhancements. We have automated much of the software quality assurance process and have streamlined key steps in the mechanical prototyping process in order to minimize the time from design prototype to volume production. We work closely with several key fabricators and subassembly manufacturers on new products and utilize lower-cost manufacturers whenever possible while maintaining product quality and availability. We are continuously re-engineering our products to reduce manufacturing costs while improving product reliability and serviceability.

Our quality assurance team inspects and creates an electronic record for every product before it is shipped using personal digital assistants. This information is used to monitor workmanship by recording the number of defects per thousand units. Each manufacturing employee is part of an incentive program tied to reducing defects per thousand units. Quality issues are gathered through weekly field updates and direct calls from our sales and customer support groups. These issues are addressed in weekly reliability meetings, which bring together our engineering, manufacturing and quality assurance teams.

COMPETITION

The clinical infrastructure and workflow automation market is intensely competitive and characterized by evolving technology and industry standards, frequent new product introductions and dynamic customer requirements. Many healthcare facilities still use and may continue to use highly manual approaches that do not utilize automated methods of distribution, inventory tracking or procurement. As a result, we must continuously educate existing and prospective customers regarding the advantages of our products.

We expect continued and increased competition from current and future competitors, many of which have greater financial, technical, marketing and other resources. Our current direct competitors in the pharmacy and supply systems market include Pyxis Corporation (a division of Cardinal Health) and Automated Healthcare (a division of McKessonHBOC).

We believe that companies in the clinical infrastructure and workflow automation market compete based on:

- breadth and depth of product offerings;

- ease of use and efficiency;

- ability to incorporate the customer's requisition and approval process;

- ability to integrate their services with the customer's existing systems and software;

- quality and reliability of product offerings;

- customer service; and

- price.

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We believe our products and services compare favorably with those offered by our competitors, particularly in the areas of flexibility, utilization of advanced technologies, ease of use and quality of integration with existing systems.

GOVERNMENT REGULATION

The manufacture and sale of our current products are not regulated by the FDA. There can be no assurance, however, that these products, or future products, if any, will not be regulated in the future. A requirement for FDA approval could harm our business, results of operations and financial condition. The practice of pharmacy is governed by individual state boards of pharmacy that issue rules for pharmacy licensure in their respective jurisdictions. State boards of pharmacy do not license or approve our distribution systems. However, pharmacies using our equipment are subject to state board approval. Similarly, hospitals must be accredited by the JCAHO in order to be eligible for Medicaid and Medicare funds. The JCAHO does not approve or accredit distribution systems.

Our online services may be subject to a number of laws and regulations that may be adopted or interpreted in the United States and abroad with particular applicability to the Internet. The laws governing Internet transactions remain largely unsettled, even in areas where there has been some legislative action, such as the federal Internet Tax Freedom Act. It is possible that U.S. and foreign governments will enact legislation that may be applicable to us in areas including content, product distribution, network security, encryption, the use of measures for data and privacy protection, electronic authentication, access charges and re-transmission activities. The adoption or modification of laws or regulations relating to the Internet or its related technologies could have a material adverse effect on our OmniBuyer application and also adversely affect our business by increasing our costs and administrative burdens. It may take years to determine whether and how existing laws such as those governing intellectual property, privacy, libel, consumer protection and taxation apply to the Internet. We believe that our Privacy and Use of Information Policy to be posted on our Web site addresses the concerns raised by the recent privacy initiative of the Federal Trade Commission. However, we cannot assure you that this initiative will not negatively affect our business. Compliance with any newly adopted laws may prove difficult for us and could harm our business.

PROPRIETARY RIGHTS AND LICENSING

Our success depends in part upon a combination of copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary rights. We pursue patent protection in the United States and foreign jurisdictions for technology that we believe to be proprietary and that offers a potential competitive advantage for our products. We currently own ten U.S. patents that will expire between 2010 and 2017. In addition, we currently have one U.S. patent allowed and awaiting issue and have filed five U.S. patent applications. The issued patents relate to our "See & Touch" methodology used in our pharmacy and supply systems, the use of guiding lights in the open matrix pharmacy drawers, the use of locking and sensing lids with pharmacy drawers and the methods of restocking these drawers. The above referenced patents also apply to our unit-dose mechanism and methods, the single-dose dispensing mechanism and the methods for restocking the single-dose drawers using exchange liners. There are other issued patents and applications in process in Australia, Japan, Hong Kong, Canada and European countries related to issued and pending applications in the United States. We are not aware that any of our products infringes the proprietary rights of third parties.

All of our operating system software is copyrighted and subject to the protection of applicable copyright laws. We have also obtained registration of our Omnicell logo, Omnicell, OmniCenter, OmniSupplier, OmniRx and Sure-Med trademarks through the United States Patent and Trademark Office. We are in the process of registering other trademarks, in the United States and internationally. We seek to protect and enforce our rights in our patents, copyrights, service marks, trademarks, trade

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dress and trade secrets through a combination of laws and contractual restrictions, such as confidentiality and licensing agreements.

FACILITIES

We lease approximately 113,000 square feet of office, development and manufacturing space in Palo Alto, California and Waukegan, Illinois. Our principal administrative, marketing and research and development facilities are located in approximately 34,000 square feet of leased office space in Palo Alto, California under leases expiring in January 2002 and June 2004. Our principal manufacturing facility is located in approximately 23,000 square feet of leased space in Palo Alto, California under a lease expiring in June 2003, with an option to renew for an additional five years. We also maintain an administrative, marketing, development, technical support and training facility located in approximately 38,000 square feet of leased office space in Waukegan, Illinois under a lease expiring in June 2006, with an option to renew for an additional five years.

EMPLOYEES

As of May 31, 2001, we had a total of 350 employees, including 58 in research and development, 64 in sales, 23 in marketing, 119 in customer support, 39 in administration and 47 in manufacturing. We also employ independent contractors and temporary personnel to support our development, marketing, customer support, field service and administration organizations. None of our employees is represented by a collective bargaining agreement, nor have we experienced any work stoppage. We consider our relations with our employees to be good.

LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

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MANAGEMENT

DIRECTORS AND OFFICERS

The following table sets forth certain information as of May 31, 2001, about our executive officers, other officers and members of our board of directors:

NAME                                       AGE                            POSITION
----                                     --------   -----------------------------------------------------
Sheldon D. Asher.......................        47   President, Chief Executive Officer and Director
Randall A. Lipps.......................        44   Founder, Chairman of the Board and Director
S. Michael Hanna.......................        50   Vice President of Sales and Field Operations
John D. Higham.........................        59   Vice President of Engineering and Chief Technical
                                                    Officer
Robert Y. Newell, IV...................        53   Vice President of Finance and Chief Financial Officer
Jeffrey L. Arbuckle....................        44   Vice President of Business Development
Herbert J. Bellucci....................        51   Vice President of Manufacturing
Joseph E. Coyne........................        38   Vice President of Customer Service
William R. Dimmer......................        57   Vice President of Human Resources
Kenneth E. Perez.......................        40   Vice President of Marketing
Gary E. Wright.........................        47   Vice President of Supplier Relations and
                                                    International
Gordon V. Clemons(1)...................        57   Director
Frederick J. Dotzler(2)................        55   Director
Christopher J. Dunn, M.D.(2)...........        49   Director
Benjamin A. Horowitz...................        34   Director
Kevin L. Roberg........................        50   Director
John D. Stobo, Jr.(1)..................        35   Director
William H. Younger, Jr.(1)(2)..........        51   Director


(1) Member of the Audit Committee

(2) Member of the Compensation Committee

SHELDON D. ASHER has served as President and Chief Executive Officer and a Director of Omnicell since December 1993. From May 1991 to August 1993, Mr. Asher served as President and Chief Executive Officer of Option Care, Inc., a home infusion therapy company. Mr. Asher is also a director of two private companies, American Administrative Group, Inc. and HealthCare Dimensions, Inc. Mr. Asher received a B.S. in finance from the University of Illinois.

RANDALL A. LIPPS has served as Chairman of the Board and a Director of Omnicell since founding Omnicell in September 1992. From 1989 to 1992, Mr. Lipps served as the President of Moxie Technologies, Inc., a direct marketing firm specializing in travel and long-distance communications sales. Mr. Lipps received both a B.S. in economics and a B.B.A. from Southern Methodist University.

S. MICHAEL HANNA has served as Vice President of Sales and Field Operations of Omnicell since July 1998. From July 1996 to July 1998, Mr. Hanna served as a Regional Vice President of Omnicell. From 1981 to July 1996, Mr. Hanna was employed by Air Shields, Inc., a medical equipment manufacturer, in a variety of sales positions, most recently as Director of North American Sales. Mr. Hanna received a B.S. in business administration from Shepard College.

JOHN D. HIGHAM has served as Vice President of Engineering and Chief Technical Officer of Omnicell since June 1993. From 1989 to 1993, Mr. Higham served as Vice President of Engineering of Octel Communications, Inc., a supplier of voicemail systems. Mr. Higham is also a director of DispenseSource, Inc. Mr. Higham received engineering and industrial management degrees from Cambridge University, England, and a master's degree in electrical engineering from Columbia University.

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ROBERT Y. NEWELL, IV has served as Vice President of Finance and Chief Financial Officer of Omnicell since January 2000. From October 1997 to January 2000, Mr. Newell was a partner in the Beta Group, a business development firm. From August 1992 to August 1997, he was Vice President and Chief Financial Officer of Cardiometrics, Inc., a medical device company. Mr. Newell is also a director of two private companies, Pixl Golf Company and ShowMeTV, Inc. Mr. Newell received a B.A. in mathematics from the College of William & Mary and an M.B.A. from Harvard Business School.

JEFFREY L. ARBUCKLE has served as Vice President of Business Development of Omnicell since June 1999. From July 1997 to June 1999, Mr. Arbuckle served as Vice President of Marketing of Omnicell. From February 1994 to June 1997, Mr. Arbuckle served as a Regional Vice President of Omnicell. From 1991 to 1994, Mr. Arbuckle served as Regional Manager of Siemens Infusion, a marketer of drug delivery systems. Mr. Arbuckle received a B.A. from Indiana University.

HERBERT J. BELLUCCI has served as Vice President of Manufacturing of Omnicell since April 1994. From August 1993 to March 1994, Mr. Bellucci served as Vice President of Operations of VidaMed, Inc., a medical device company. Mr. Bellucci received a B.S. in engineering from Brown University and an M.B.A. from the Stanford Graduate School of Business.

JOSEPH E. COYNE has served as Vice President of Customer Service of Omnicell since August 1997. From May 1994 to August 1997, Mr. Coyne served as Director of Interface Development of Omnicell. From 1984 to May 1994, Mr. Coyne was employed by HBO & Company, a healthcare information systems company, in various technical capacities, including Technical Manager and Software Interface Team Manager. Mr. Coyne received a B.S. in chemical engineering from Stanford University and an M.B.A. from the Anderson Graduate School of Management at the University of California, Los Angeles.

WILLIAM R. DIMMER has served as Vice President of Human Resources of Omnicell since March 2000. From July 1998 to March 2000, Mr. Dimmer served as Vice President of Human Resources and Administrative Services for Collagen Aesthetics, Inc., a healthcare dermatology products company. From June 1994 to July 1998, Mr. Dimmer was a Principal and Senior Consultant for Pragma International, an international management and consulting firm. Mr. Dimmer received a B.A. in liberal arts and an advanced management degree from the University of Chicago, C.R.C.

KENNETH E. PEREZ has served as Vice President of Marketing of Omnicell since April 2000. From September 1999 through March 2000, Mr. Perez served as Vice President of e-Strategies of Omnicell. From November 1998 to August 1999, Mr. Perez served as Senior Vice President of Marketing for CyberCash, Inc., an electronic commerce payment solutions company. From 1992 to 1998, Mr. Perez held a number of positions at Hewlett-Packard Company, including Director of Business Development for the Extended Enterprise Business Unit. Mr. Perez received a B.A. in international relations from Stanford University and an M.B.A. from the Anderson Graduate School of Management at the University of California, Los Angeles.

GARY E. WRIGHT has served as Vice President of Supplier Relations and International of Omnicell since July 2000. From September 1999 to June 2000, Mr. Wright served as Vice President of Supplier Relations of Omnicell. From July 1998 until August 1999, Mr. Wright served as Vice President of Business Development of Omnicell, and from June 1994 until June 1998, Mr. Wright served as Vice President of Sales and Field Operations of Omnicell. From September 1993 to May 1994, Mr. Wright served as a Vice President of PCS Health Systems, a managed healthcare company. Mr. Wright received a B.S. from Northern Illinois University.

GORDON V. CLEMONS has served as a Director of Omnicell since December 1995. He has been the President, Chief Executive Officer and Chairman of the Board of CorVel Corp., a provider of managed healthcare services, since 1991. Mr. Clemons received a B.S. in business and technology from Oregon State University and an M.B.A. from the University of Oregon.

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FREDERICK J. DOTZLER has served as a Director of Omnicell since December 1993. He has been a partner with Medicus Venture Partners, a venture capital firm, since 1989, and is a managing director of De Novo Ventures. Mr. Dotzler received a B.S. in industrial engineering from Iowa State University, an M.B.A. from the University of Chicago and an advanced degree in economics from Louvain University, Belgium.

CHRISTOPHER J. DUNN, M.D. has served as a Director of Omnicell since September 1992. Dr. Dunn has been in private medical practice since 1984. Dr. Dunn received an M.D. and a master's degree in health service administration from Stanford University. Dr. Dunn is also Director of the Respiratory Care Unit at Care West Gateway, Director of Subacute Care at Care West Burlingame and Medical Director of Critical Care Transport for American Medical Response--Sacramento Valley. He is a fellow of the American College of Chest Physicians and is an Associate Clinical Professor of Medicine at Stanford University School of Medicine.

BENJAMIN A. HOROWITZ has served as a Director of Omnicell since September 1999. Mr. Horowitz has been President, Chief Executive Officer and a director of Loudcloud, Inc., an Internet company, since September 1999. From March 1999 to September 1999, he served as Vice President and General Manager of the E-commerce Platform division of America Online, Inc. an Internet service provider. From July 1995 to March 1999, Mr. Horowitz was employed by Netscape Communications, an Internet company, in various capacities, including Vice President of the directory and security product line from 1997 to 1998. From 1994 to 1995, Mr. Horowitz was employed by Lotus Development Corporation, a software company. Mr. Horowitz received a B.S. from Columbia University and an M.S. in computer science from the University of California, Los Angeles.

KEVIN L. ROBERG has served as a Director of Omnicell since June 1997. He has been a general partner of Delphi Ventures, a venture capital firm, since October 1999. From August 1998 to September 1999, Mr. Roberg was an independent venture capitalist. From December 1995 to June 1998, Mr. Roberg served as Chief Executive Officer and President of ValueRx, a pharmacy benefit and medication management company and a former subsidiary of Value Health, Inc., a healthcare benefit and information service provider. From April 1995 until it was acquired by ValueRx in December 1995, Mr. Roberg served as President and Chief Executive of Medintell Systems Corporation, a pharmaceutical information management company. From June 1994 to April 1995, Mr. Roberg served as President--Western Health Plans and President--PRIMExtra, Inc. for EBP Health Plans, Inc., a third-party administrator. Mr. Roberg is also a director of Duane Reade, Inc., a retail pharmacy company, Accredo Health, Inc., a bio-pharmaceutical company, and the American Society of Health System Pharmacists Foundation. Mr. Roberg is also a director and the immediate past chairman of Children's Hospitals and Clinics of Minneapolis/St. Paul. Mr. Roberg received a B.S. from the University of Iowa.

JOHN D. STOBO, JR. has served as a Director of Omnicell since February 2000. Since November 1998, he has been a managing member of ABS Partners III, LLC, which is the general partner of ABS Capital Partners III, L.P., a venture capital firm. From December 1993 to November 1998, Mr. Stobo was a principal of ABS Capital Partners and related entities. Prior to joining ABS Capital Partners, Mr. Stobo worked in the healthcare investment banking group at Alex. Brown & Sons Incorporated, an investment banking firm. Mr. Stobo received a B.A. from the University of California, San Diego, and an M.B.A. from Cornell University. Mr. Stobo is also a director of several privately held companies.

WILLIAM H. YOUNGER, JR. has served as a Director of Omnicell since September 1992. Mr. Younger is a managing director of the general partner of Sutter Hill Ventures, a venture capital firm, where he has been employed since 1981. Mr. Younger holds a B.S. in electrical engineering from the University of Michigan and an M.B.A. from Stanford University. Mr. Younger is also a director of Vitria Technology, Inc., Virage, Inc., and several privately held companies.

There are no family relationships between any of the directors and officers of Omnicell.

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BOARD COMMITTEES

Our Board of Directors has a Compensation Committee and an Audit Committee. The Compensation Committee makes recommendations to the Board of Directors concerning salaries and incentive compensation for our officers and employees and administers our stock option plans. The Audit Committee makes recommendations to the Board of Directors regarding the selection of independent auditors, reviews the results and scope of the audit and other services provided by our independent auditors, and reviews and evaluates our audit and control functions. Members of these committees will serve until their successors are appointed. Members of our Compensation Committee are Mr. Dotzler, Dr. Dunn and Mr. Younger. Members of our Audit Committee are Messrs. Clemons, Stobo and Younger.

DIRECTOR COMPENSATION

The members of our Board of Directors do not currently receive compensation for their services as directors, but are reimbursed for travel expenses in connection with attendance at Board and committee meetings. We have typically granted non-employee directors options to purchase 15,625 shares of common stock at the then fair market value upon election to the Board of Directors. In February 1998, Dr. Dunn received a non-qualified stock option to purchase 15,625 shares of common stock at an exercise price of $10.40 per share. In September 1999, Mr. Horowitz received a non-qualified stock option to purchase 15,625 shares of common stock at an exercise price of $10.40 per share. These options vest over a five-year period. In September 1999, each of Messrs. Younger and Dotzler received options to purchase 9,375 shares of common stock at an exercise price of $10.40 per share that vest over a three-year period. In April 2000, Mr. Horowitz received a non-qualified stock option to purchase 6,250 shares of common stock at an exercise price of $10.40 per share that vests over a 30-month period. In August 2000, Messrs. Younger and Dotzler each received a non-qualified stock option to purchase 4,687 shares of common stock at an exercise price of $2.00 per share that will vest over a 36-month period with a six-month cliff, Messrs. Stobo and Clemons each received a non-qualified stock option to purchase 7,812 shares of common stock at an exercise price of $2.00 per share that will vest over a 36-month period with a six-month cliff, Messrs. Dunn and Roberg each received a non-qualified stock option to purchase 7,812 shares of common stock at an exercise price of $2.00 per share that will vest over a 24-month period with a six-month cliff, and Mr. Horowitz received a non-qualified stock option to purchase 10,937 shares of common stock at an exercise price of $2.00 per share that will vest over a 36-month period with a six-month cliff. A six-month cliff means that no shares of a stock option shall vest until the six-month anniversary of the date of the grant, at which time, in the case of a thirty-six month grant, 6/36ths of the shares would become vested, with the balance of the shares vesting in equal monthly installments thereafter. Following this offering, each member of our Board of Directors who is not an employee will be eligible to receive initial and annual stock option grants to purchase our common stock. These grants are more fully described below.

EXECUTIVE COMPENSATION

The following table sets forth all compensation awarded to, earned by or paid to our Chief Executive Officer and our four next most highly compensated executive officers whose annual compensation exceeded $100,000 for the year ended December 31, 2000. These individuals are referred to as the named executive officers in this prospectus.

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SUMMARY COMPENSATION TABLE

                                                                                       LONG-TERM
                                                                                     COMPENSATION
                                                  ANNUAL COMPENSATION(1)                AWARDS
                                            ----------------------------------   ---------------------
                                                                  OTHER ANNUAL   SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION                  SALARY     BONUS     COMPENSATION        OPTIONS(2)
---------------------------                 --------   --------   ------------   ---------------------
Sheldon D. Asher .........................  $312,900   $140,421     $      --           172,798
  President, Chief Executive
  Officer and Director

Randall A. Lipps .........................   312,900    140,421            --           174,098
  Chairman of the Board
  and Director

S. Michael Hanna .........................   160,000    138,546            --            43,282
  Vice President of Sales and
  Field Operations

John D. Higham ...........................   200,000     96,464            --            85,469
  Vice President of Engineering
  and Chief Technical Officer

Robert Y. Newell, IV .....................   164,583     38,753            --           126,562
  Vice President of Finance and
  Chief Financial Officer


(1) In accordance with Securities and Exchange Commission rules, Other Annual Compensation in the form of perquisites and other personal benefits has been omitted where the aggregate amount of such perquisites and other personal benefits constitutes less than the lesser of $50,000 or 10% of the total annual salary and bonus for the named executive officer for the fiscal year.

(2) These shares are subject to exercise under stock options granted under our stock option plans.

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STOCK OPTION GRANTS

The following table sets forth information regarding options granted to each of the named executive officers during the year ended December 31, 2000.

                                              INDIVIDUAL GRANTS
                             ---------------------------------------------------   POTENTIAL REALIZABLE VALUE AT
                             NUMBER OF      PERCENTAGE                                ASSUMED ANNUAL RATES OF
                             SECURITIES      OF TOTAL                               STOCK PRICE APPRECIATION FOR
                             UNDERLYING      OPTIONS                                       OPTION TERM(1)
                              OPTIONS       GRANTED IN     EXERCISE   EXPIRATION   ------------------------------
NAME                         GRANTED(2)   FISCAL 2000(3)   PRICE(4)      DATE           5%               10%
----                         ----------   --------------   --------   ----------   ------------      ------------
Sheldon D. Asher...........    43,750          1.88%        $10.40     04/02/10     $  186,813        $  564,813
                               88,850          3.82           2.00     08/23/10      1,125,730         1,893,394
                               40,198          1.73           2.00     08/23/10        509,309           856,619

Randall A. Lipps...........    43,750          1.88          10.40     04/02/10        186,813           564,813
                               89,062          3.83           2.00     08/23/10      1,128,416         1,897,911
                               41,286          1.78           2.00     08/23/10        523,094           879,805

S. Michael Hanna...........     3,125          0.13          10.40     01/31/10         13,344            40,344
                               15,626          0.67          10.40     04/02/10         66,723           201,732
                                6,328          0.27           2.00     08/23/10         80,176           134,850
                               20,312          0.87           2.00     08/23/10        257,353           432,849
                               40,078          1.72           2.00     08/23/10        507,788           854,062

John D. Higham.............    15,626          0.67          10.40     04/02/10         66,723           201,732
                               18,750          0.81           2.00     08/23/10        237,563           399,563
                                8,906          0.38           2.00     08/23/10        112,839           189,787

Robert Y. Newell, IV.......    75,000          3.23          10.40     01/31/10        320,250           968,250
                                9,375          0.40          10.40     04/02/10         40,031           121,031
                               42,187          1.82           2.00     08/23/10        534,509           899,005


(1) Potential realizable values are computed by multiplying the number of shares of common stock subject to a given option by the assumed initial public offering price of $9.00 per share, assuming that the aggregate stock value derived from that calculation compounds at the annual 5% or 10% rate shown in the table for the entire ten-year term of the option and subtracting from that result the aggregate option exercise price. The 5% and 10% assumed annual rates of stock appreciation are mandated by the rules of the SEC and do not reflect our estimate or projection of future stock price growth.

(2) These options were issued under our 1995 Management Stock Option Plan and our 1999 Equity Incentive Plan. Vesting and exercise terms are as follows:
(a) the options granted in April 2000 vest monthly over a 30-month period and (b) the options granted in August 2000 vest monthly over a 24- or 36-month period.

(3) Based on an aggregate of 2,323,769 shares subject to options granted to our employees (not counting grants to non-employees) in the year ended December 31, 2000, including options granted to the named executive officers.

(4) Options were granted at an exercise price equal to the fair market value of our common stock, as determined by the Board of Directors at the date of the grant.

AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

The following table sets forth for each of the named executive officers the shares acquired and the value realized on each exercise of stock options during the year ended December 31, 2000 and number

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and value of securities underlying unexercised options held by the named executive officers at December 31, 2000.

                                                            NUMBER OF SECURITIES
                                                           UNDERLYING UNEXERCISED         VALUE OF UNEXERCISED
                                    SHARES                       OPTIONS AT              IN-THE-MONEY OPTIONS AT
                                   ACQUIRED                 DECEMBER 31, 2000(1)         DECEMBER 31, 2000(1)(2)
                                      ON       VALUE     ---------------------------   ---------------------------
NAME                               EXERCISE   REALIZED   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----                               --------   --------   -----------   -------------   -----------   -------------
Sheldon D. Asher.................  531,941    $665,536     250,986(3)           --     $  (499,484)      $ --

Randall A. Lipps.................  155,988      20,512     354,447              --      (2,177,018)        --

S. Michael Hanna.................  105,178          --      82,318              --        (592,690)        --

John D. Higham...................   20,249      45,670      99,218              --        (483,059)        --

Robert Y. Newell, IV.............       --          --     126,563              --        (556,875)        --


(1) Some of the shares are immediately exercisable; however, the shares purchasable under such options are subject to repurchase by us at the original exercise price paid per share upon the optionee's cessation of service prior to the vesting of such shares. The shares listed as exercisable are those shares which are unexercised for which we no longer have a right of repurchase if the option is exercised by the holder; similarly, the shares listed as unexercisable include those shares over which we have a right of repurchase if the option is exercised by the holder.

(2) Based on the fair market value of our common stock at year ended December 31, 2000 ($3.20 per share, as determined by our Board of Directors), less the exercise price payable for such shares.

(3) Diane Snedden, Mr. Asher's ex-wife, has the right to receive 128,165 shares upon the exercise of vested options pursuant to a divorce agreement and any and all proceeds from the sale thereof.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Our Compensation Committee consists of Mr. Dotzler, Dr. Dunn and Mr. Younger. None of these individuals is or has been an officer or employee of Omnicell. No member of the Compensation Committee serves as a member of our board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board of Directors.

STOCK PLANS

1992 EQUITY INCENTIVE PLAN AND 1995 MANAGEMENT STOCK OPTION PLAN

Our 1992 Equity Incentive Plan and 1995 Management Stock Option Plan (collectively, the Incentive Plans) were adopted by our Board of Directors in October 1992 and December 1995, respectively. There are currently 3,604,556 shares of common stock authorized for issuance under the Incentive Plans.

The Incentive Plans provide for the grant of incentive stock options under the Internal Revenue Code of 1986, as amended (the Code), to employees and nonstatutory stock options, restricted stock purchase awards and stock bonuses to employees, directors and consultants. The Incentive Plans are administered by our Board of Directors or a committee appointed by the Board of Directors that determines recipients and types of awards to be granted, including the exercise price, number of shares subject to the award and the exercisability thereof.

The term of stock options granted under the Incentive Plans generally may not exceed 10 years. The exercise price of options granted under the Incentive Plans are determined by our Board of Directors, provided that the exercise price for an incentive stock option cannot be less than 100% of the fair market value of our common stock on the date of the option grant and the exercise price for a nonstatutory stock option cannot be less than 85% of the fair market value of our common stock on the date of option grant. Options granted under the Incentive Plans vest at the rate specified in the applicable option agreement. No incentive stock option may be transferred by the optionee other than

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by will, beneficiary designation or the laws of descent or distribution or, in certain limited instances, pursuant to a qualified domestic relations order. Our Board of Directors may grant a nonstatutory stock option that is transferable. An optionee whose relationship with us or any related corporation ceases for any reason, other than by death or permanent and total disability, may exercise options in the three-month period following such cessation, unless such options terminate or expire sooner or later by their terms. Options may be exercised for up to twelve months after an optionee's relationship with us and our affiliates ceases due to death or disability, unless such options expire sooner or later by their terms.

No incentive stock option may be granted to any person who, at the time of the grant, owns, or is deemed to own, stock possessing more than 10% of the total combined voting power of Omnicell or any of our affiliates, unless the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant and the term of the option does not exceed five years from the date of grant. The aggregate fair market value, determined at the time of grant, of the shares of common stock with respect to which incentive stock options are exercisable for the first time by an optionee and its affiliates during any calendar year under all of our plans may not exceed $100,000.

Shares subject to options that have expired or otherwise terminated without having been exercised in full, or vested in the case of restricted stock awards, will again become available for the grant of awards under the Incentive Plans.

Our Board of Directors has the authority to reprice outstanding options and to offer optionees the opportunity to replace outstanding options with new options for the same or a different number of shares.

We may grant restricted stock awards under the Incentive Plans that are subject to a repurchase option by us in accordance with a vesting schedule and at a price determined by our Board of Directors. Restricted stock purchases must be at a price equal to at least 85% of the stock's fair market value on the award date, but stock bonuses may be awarded in consideration of past services without a purchase payment. Rights under a stock bonus or restricted stock purchase agreement may not be transferred other than by will, the laws of descent and distribution or a qualified domestic relations order while the stock awarded pursuant to such an agreement remains subject to the agreement.

Under certain changes in control of Omnicell including a dissolution, liquidation or sale of substantially all of our assets, a merger or consolidation in which we are not the surviving corporation, or a reverse merger in which we are the surviving corporation but the shares of common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether securities, cash or otherwise, then to the extent permitted by applicable law, any surviving corporation will assume any stock awards, including stock options, outstanding under the Incentive Plans or substitute similar stock awards, or such stock awards under the Incentive Plans will continue in full force and effect. In the event any surviving corporation refuses to assume or continue such stock awards, or to substitute similar stock awards for those outstanding under the Incentive Plans, then the stock awards held by participants whose service with us or the surviving corporation has not terminated shall become fully vested and exercisable prior to the change in control and any such stock awards are not exercised prior to the change in control will terminate thereafter.

As of May 31, 2001, 1,780,602 shares of common stock had been issued upon the exercise of options granted under the Incentive Plans, options to purchase 1,817,526 shares of common stock were outstanding at a weighted average exercise price of $5.12 per share and 6,428 shares of common stock remained available for future grant. The 1992 Equity Incentive Plan and the 1995 Management Stock Option Plan will terminate in October 2002 and December 2005, respectively, unless sooner terminated by our Board of Directors.

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1997 EMPLOYEE STOCK PURCHASE PLAN

In March 1997, our Board of Directors approved the 1997 Employee Stock Purchase Plan which was amended in September 1999 and in April 2000. The 1997 plan is intended to qualify as an employee stock purchase plan within the meaning of that term in Section 423 of the Code. Under the 1997 plan, our Board of Directors may authorize participation by eligible employees, including officers, in periodic offerings following the adoption of the 1997 plan. The offering period for any offering will be no more than 27 months.

The 1997 plan, as amended in September 1999 and April 2000, authorizes the issuance of 468,750 shares of common stock under the 1997 plan which amount is increased each January 1 by the lesser of 312,500 or 1.5% of the number of shares of common stock outstanding each January 1 beginning January 1, 2001 and ending January 1, 2007. However, our Board of Directors has the authority to designate a smaller number of shares by which the authorized number of shares of common stock will be increased on each January 1.

Employees are eligible to participate if they are employed by Omnicell or an affiliate of Omnicell designated by our Board of Directors and are regularly employed at least 20 hours per week and five months per year. Employees who participate in an offering can have up to 15% of their earnings withheld pursuant to the 1997 plan and applied, on specified dates determined by the Board of Directors, to the purchase of shares of common stock. The price of common stock purchased under the 1997 plan will be equal to 85% of the lower of the fair market value of the common stock on the commencement date of each offering period or the relevant purchase date. Employees may end their participation in the offering at any time during the offering period, and participation ends automatically on termination of employment with Omnicell.

In the event of certain changes of control of Omnicell, our Board of Directors has discretion to provide that each right to purchase common stock will be assumed or an equivalent right substituted by the successor corporation, or our Board of Directors may shorten the offering period and provide for all sums collected by payroll deductions to be applied to purchase stock immediately prior to the change in control. The 1997 plan will terminate when all shares reserved for issuance under the 1997 plan have been issued or sooner at the the discretion of our Board of Directors.

As of May 31, 2001, we had issued 470,271 shares of common stock under the 1997 plan and 44,680 shares remain available for future issuance.

1999 EQUITY INCENTIVE PLAN

Our 1999 Equity Incentive Plan was adopted by our Board of Directors in September 1999 and amended in April 2000. The 1999 plan was established to replace the Incentive Plans. The 1999 plan will terminate in September 2009, unless sooner terminated by our Board of Directors.

The 1999 plan provides for the grant of incentive stock options under Code
Section 422 to employees, including officers and employee-directors, and nonstatutory stock options, restricted stock purchase awards and stock bonuses to employees, directors and consultants. The 1999 plan is administered by our Board of Directors or a committee appointed by the Board that determines recipients and the terms and types of awards to be granted, including the exercise price, number of shares subject to the award and the exercisability thereof.

Stock option grants under the 1999 plan are made pursuant to an option agreement. The term of stock options granted under the 1999 plan generally may not exceed 10 years. The exercise price of options granted under the 1999 plan is determined by our Board of Directors, provided that the exercise price for an incentive stock option cannot be less than 100% of the fair market value of the common stock on the date of the option grant and the exercise price for a nonstatutory stock option cannot be less than 85% of the fair market value of the common stock on the date of the option grant.

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Options granted under the 1999 plan vest at the rate specified in the option agreement. No incentive stock options may be transferred by the optionee other than by will, beneficiary designation or the laws of descent and distribution or, in certain limited instances, pursuant to a qualified domestic relations order. Our Board of Directors may grant a nonstatutory stock option that is transferable. An optionee whose relationship with us or our affiliates ceases for any reason may exercise options in the three-month period following such cessation, unless such options terminate or expire sooner or later by their terms. Unless the options expire sooner or later by their terms, options may be exercised for up to twelve months after an optionee's relationship with us and our affiliates ceases due to disability and for up to 18 months after an optionee's relationship with us and our affiliates ceases due to death.

No incentive stock options may be granted to any person who, at the time of the grant, owns, or is deemed to own, stock possessing more than 10% of the total combined voting power of us or of our affiliates, unless the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of the grant, and the term of the option does not exceed five years from the date of the grant. The aggregate fair market value, determined at the time of the grant, of the shares of common stock with respect to which incentive stock options are exercisable for the first time by an optionee during any calendar year, under all such plans of ours and our affiliates, may not exceed $100,000.

Under the 1999 plan, 3,125,000 shares of common stock are authorized for issuance. Each January 1, beginning January 1, 2001 and ending on January 1, 2009, the number of shares of common stock authorized for issuance under the 1999 plan will be increased on each January 1 by the lesser of (i) 1,875,000 shares, or (ii) 5.5% of the number of shares of common stock outstanding on that date. However, our Board of Directors has the authority to designate a smaller number of shares by which the authorized number of shares of common stock will be increased on each January 1.

Shares subject to stock awards that have expired or otherwise terminated without having been exercised in full, or vested in the case of restricted stock awards, shall again become available for the grant of awards under the 1999 plan. Shares subject to stock awards issued under the 1999 plan that have expired or otherwise terminated without having been exercised in full, or vested in the case of restricted stock awards, shall also become available for the grant of awards under the 1999 plan. Shares issued under the 1999 plan may be previously unissued shares or reacquired shares bought on the market or otherwise.

Restricted stock purchase awards granted under the 1999 plan may be granted pursuant to a repurchase option in our favor in accordance with a vesting schedule and at a price determined by our Board of Directors. Restricted stock purchases must be at a price equal to 85% of the stock's fair market value on the award date, but stock bonuses may be awarded in consideration of past services without a purchase payment. Rights under a stock bonus or restricted stock purchase agreement may not be transferred other than by will, the laws of descent and distribution or a qualified domestic relations order while the stock awarded pursuant to such an agreement remains subject to the agreement.

Under certain changes in control of Omnicell including a dissolution, liquidation or sale of substantially all of our assets, a merger or consolidation in which we are not the surviving corporation, or a reverse merger in which we are the surviving corporation but the shares of common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether securities, cash or otherwise, then to the extent permitted by applicable law, any surviving corporation will assume any stock awards, including stock options, outstanding under the 1999 plan or substitute similar stock awards, or such stock awards under the 1999 plan will continue in full force and effect. In the event any surviving corporation refuses to assume or continue such stock awards, or to substitute similar stock awards for those outstanding under the 1999 plan, then the stock awards held by participants whose service with us or the surviving corporation has not terminated shall become fully

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vested and exercisable prior to the change in control and any such stock awards that are not exercised prior to the change in control will terminate thereafter.

As of May 31, 2001, 150,264 shares of common stock had been issued upon exercise of options granted under the 1999 plan. Options to purchase 1,935,054 shares of common stock were outstanding at a weighted average exercise price of $8.15 per share and 985,781 shares of common stock remained available for future grant. The 1999 plan will terminate in September 2009, unless sooner terminated by our Board of Directors.

NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS

The 1999 plan provides for automatic stock option grants to non-employee directors on our Board of Directors. After the offering, each person who is not an employee of Omnicell who is elected or appointed to our Board of Directors will be granted an initial grant on the date of his or her election or appointment to purchase 25,000 shares of our common stock at the fair market value of our common stock on that grant date. On the date of the offering, non-employee directors of our Board who have not previously been granted options to purchase our common stock will receive an initial stock option grant as if he or she were first elected or appointed to our Board of Directors after the offering. The non-employee directors become vested in each initial stock option grant 1/36 after each month of service on our Board of Directors from the stock option grant date so that the directors will become vested fully after 36 months of service on our Board of Directors after the grant.

After the offering, each person who is a non-employee director on the day after each annual stockholders' meeting, shall, on that date, be granted an annual stock option grant to purchase 6,250 shares of our common stock at the fair market value of our common stock on that grant date. The non-employee directors become vested in each annual stock option grant 1/12 after each month of service on our Board from the stock option grant date so that the directors will become vested fully after 12 months of service on our Board of Directors after the grant.

The non-employee director stock options will have a maximum term of ten years and generally must be exercised prior to the earliest of 18 months following the death of the non-employee directors, 12 months from the termination of service on our Board of Directors by the non-employee director due to a disability, three months from the termination of the service of non-employee director for any other reason, or the expiration of the original term of the stock options. The stock options shall not be transferable except as otherwise provided in a stock option agreement to the extent permitted by federal securities laws and regulations. If there is a change of control as described above, the directors will become fully vested in their unvested portion of their stock options and the options will be exercisable for a period of the shorter of twelve months following the termination of their service on our Board of Directors or the original term of the stock options.

401(k) PLAN

In October 1993, we adopted a tax-qualified employee savings plan under
Section 401(k) of the Code covering our employees. Pursuant to the 401(k) plan, eligible employees may elect to reduce their current compensation by up to the lesser of 15% of their annual compensation or the statutorily prescribed annual limit and have the amount of such reduction contributed to the 401(k) plan. In addition, eligible employees may make rollover contributions to the 401(k) plan from a tax-qualified retirement plan. The 401(k) plan is intended to qualify under Section 401(a) of the Code, so that contributions by employees or us to the 401(k) plan, and income earned on the 401(k) plan contributions, are not taxable to employees until withdrawn from the 401(k) plan, and so that contributions by us, if any, will be deductible by us when made. We do not presently intend to make any matching or discretionary contributions.

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EMPLOYMENT ARRANGEMENTS

In December 1993, we entered into an employment agreement with Mr. Asher whereby Mr. Asher agreed to serve as our President and Chief Executive Officer. The agreement provides Mr. Asher with an annual base salary of at least $200,000, a performance bonus of at least $50,000 and $1,000,000 of term life insurance, the owner and beneficiary of which are to be designated by Mr. Asher. Pursuant to Mr. Asher's employment agreement, he receives a cash bonus of $12,500 following each of the first three quarters of a given calendar year, and an annual bonus after the close of the fourth quarter of that calendar year. Mr. Asher's annual bonus is based on Omnicell achieving certain business and financial goals and Mr. Asher achieving certain individual objectives, all of which are determined by the executive management team and approved by the Board of Directors. In the event of termination without cause, Mr. Asher will be entitled to receive the base salary amount then in effect plus $50,000 for one year following the date of termination.

In February 1998 and in February 2000, our Board of Directors approved the acceleration, under certain circumstances, of all prior stock options granted to each officer under our equity incentive plans. Under this arrangement, the unvested portion of each officer's stock options under our equity incentive plans becomes fully-vested and exercisable if we are acquired and the officer is terminated without cause, the principal place of performance of the officer's responsibilities and duties is changed, or there is a material reduction in the officer's responsibilities and duties.

INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY

Section 145 of the Delaware General Corporation 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.

As permitted by Delaware law, our Certificate of Incorporation, which will become effective upon the closing of this offering, includes a provision that eliminates the personal liability of our directors for monetary damages for breach of fiduciary duty as a director, except for liability:

- for any breach of the director's duty of loyalty to us or our stockholders;

- for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;

- under Section 174 of the Delaware law regarding unlawful dividends and stock purchases; or

- for any transaction from which the director derived an improper personal benefit.

As permitted by Delaware law, our Certificate of Incorporation and/or our Bylaws, which will become effective upon the closing of this offering, provide that:

- we are required to indemnify our directors and officers to the fullest extent permitted by Delaware law, so long as such person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of Omnicell, and with respect to any criminal action or proceeding, had no reasonable cause to believe the person's conduct was unlawful;

- we are permitted to indemnify our other employees to the extent that we indemnify our officers and directors, unless otherwise required by law, our Certificate of Incorporation, our Bylaws or agreements;

- we are required to advance expenses, as incurred, to our directors and officers in connection with a legal proceeding to the fullest extent permitted by Delaware law, subject to certain very limited exceptions; and

- the rights conferred in our Bylaws are not exclusive.

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Prior to the closing of this offering, we intend to enter into indemnity agreements with each of our current directors and officers to give such directors and officers additional contractual assurances regarding the scope of the indemnification set forth in our Certificate of Incorporation and our Bylaws and to provide additional procedural protections. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees regarding which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification.

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RELATED PARTY TRANSACTIONS

Pursuant to his employment agreement, in December 1993, we loaned Mr. Asher an aggregate of $200,000 with an interest rate of 4% per year for the purchase of 92,165 shares of Series D Preferred Stock. The purchase price of $2.17 per share was equal to the fair market value of the shares at the time of the sale. Twenty percent of this loan matured each year beginning on January 1, 1995 and was forgiven at such time so long as Mr. Asher remained employed by us. This loan has been completely forgiven.

Pursuant to the Series E Preferred Stock Purchase Agreements dated December 22, 1993, the purchasers therein agreed to vote their shares to elect to our Board of Directors a designated representative of Medicus Venture Partners 1993. Medicus' right to elect a representative to our Board of Directors expires following the completion of this offering. Mr. Dotzler has been the designated representative thereunder.

We entered into a Stock Purchase Agreement with Sun Healthcare, dated June 7, 1996, for 1,802,000 shares of Series I Preferred Stock. In July 1996, the non-voting Series I Preferred Stock was converted into voting Series J Preferred Stock on a one-for-one basis.

In the years ended December 31, 1998, 1999 and 2000, we recorded revenues of $9.9 million, $5.1 million and $1.9 million, from sales to Sun Healthcare, representing approximately 20.5%, 9.3% and 2.7% of our revenues, respectively, for the year. Sun Healthcare earned a cash rebate of $0.4 million for purchases made from us during the year ended December 31, 1998.

In January 1999, Sun Healthcare exercised its right to have us redeem all of its Series J Preferred Stock on a quarterly basis over the succeeding ten quarters. During 1999 and 2000, we redeemed 1,081,200 shares of Series J Preferred Stock at an approximate price per share of $14.03 for an aggregate redemption amount of approximately $15.2 million. In addition, we paid Sun Healthcare accrued interest on the Series J Preferred Stock of approximately $2.7 million. These redemptions and interest payments were paid for with cash of $11.6 million and the balance was paid for by offsetting Sun Healthcare's outstanding accounts receivable balances of $6.3 million. We were not obligated to make the four quarterly redemption payments of $2.5 million each that otherwise would have been due in September 2000, December 2000, March 2001 and June 2001 because we did not meet certain balance sheet tests under California law. Upon the closing of this offering, we intend to make such redemption payments.

Pursuant to the terms of the Series K Stock Purchase Agreement, dated January 20, 2000, we agreed to nominate and use our best efforts to elect the designated representative of ABS Capital Partners to our Board of Directors. ABS's right to elect a representative to our Board of Directors expires following the completion of this offering. Mr. Stobo is the current designated representative of ABS Capital Partners.

In April, May, August, September, October and November 2000, we made loans to the following executive officers to exercise stock options:

NAME                                                           AMOUNT            DUE DATE
----                                                        -------------   ------------------
Sheldon D. Asher..........................................  $2,006,879.50      August 28, 2003
Sheldon D. Asher..........................................      57,195.18      August 28, 2003
Sheldon D. Asher..........................................     258,097.50    September 6, 2003
Randall A. Lipps..........................................      30,768.00   September 30, 2003
Randall A. Lipps..........................................     260,697.50   September 30, 2003
S. Michael Hanna..........................................     399,997.00          May 4, 2003
S. Michael Hanna..........................................     133,437.50     October 10, 2003
John D. Higham............................................      30,000.00     October 10, 2003

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The loans totaled $3,177,072 for the exercise of stock options to purchase 808,110 shares of our common stock at an average exercise price of $3.93 per share. Each loan was made under a promissory note secured by the pledge of shares of our common stock acquired upon exercise of stock options. The notes bear interest at 6.20% and 6.71% per year.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to the beneficial ownership of our outstanding common stock as of May 31, 2001, and as adjusted to reflect the sale of the shares of common stock offered hereby: (1) by each person or entity who is known by us to own beneficially more than 5% of the common stock; (2) by each of our directors; (3) by our Chief Executive Officer, (4) by our other named executive officers, and (5) by all of our directors and executive officers as a group. The table assumes the conversion of all outstanding preferred stock into common stock upon the completion of this offering. Except as otherwise noted, the stockholders named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to applicable community property laws. Unless otherwise indicated in the table, the address of each stockholder identified in the table is 1101 East Meadow Drive, Palo Alto, California 94303.

                                                                              SHARES ISSUABLE
                                                                                PURSUANT TO           PERCENT
                                                                                  OPTIONS          BENEFICIALLY
                                                           SHARES OMNICELL      EXERCISABLE          OWNED(1)
                                              SHARES       MAY REPURCHASE     WITHIN 60 DAYS    -------------------
                                           BENEFICIALLY   WITHIN 60 DAYS OF     OF MAY 31,       BEFORE     AFTER
NAME OF BENEFICIAL OWNER                      OWNED         MAY 31, 2001           2001         OFFERING   OFFERING
------------------------                   ------------   -----------------   ---------------   --------   --------
Entities affiliated with Sutter Hill
 Ventures(2).............................   2,586,461            3,645               4,687        18.0       12.7
  755 Page Mill Road, Suite A-200
  Palo Alto, CA 94306
ABS Capital Partners III, L.P.(3)........   1,874,999               --              23,437        13.1        9.3
  505 Sansome Street, Suite 1550
  San Francisco, CA 94111
Medicus Venture Partners(4)..............   1,060,136               --              14,062         7.4        5.3
  12930 Saratoga Avenue, Suite D8
  Saratoga, CA 95070
Nassau Capital Partners L.P..............     986,236               --              14,063         6.9        4.9
  22 Chambers Street
  Princeton, NJ 08542
FFT Partners II, L.P.....................     937,500               --                  --         6.5        4.6
  10 Glenville Street
  Greenwich, CT 06831
William H. Younger, Jr.(2)...............   2,586,461            3,645               4,687        18.0       12.7
John D. Stobo, Jr.(3)....................   1,874,999               --              23,437        13.1        9.3
Randall A. Lipps(4)......................     773,176           84,217             354,447         7.6        5.4
Frederick J. Dotzler(5)..................   1,060,136               --              14,062         7.4        5.3
Sheldon D. Asher(6)......................     707,005           88,850             250,986         6.5        4.6
Christopher J. Dunn, M.D.................      38,604               --              20,833           *          *
Gordon V. Clemons........................           0               --              23,437           *          *
Kevin L. Roberg..........................           0               --              23,437           *          *
Benjamin A. Horowitz.....................           0               --              32,812           *          *
John D. Higham(7)........................     167,961            9,271              99,218         1.8        1.3
S. Michael Hanna.........................     113,485           40,825              82,320         1.4          *
Robert Y. Newell, IV(8)..................      30,583               --             126,562         1.1          *
All directors and executive officers as a
 group (12 persons)......................   7,352,410          226,808           1,056,238        54.3       39.1


* Represents beneficial ownership of less than 1.0%.

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(1) Applicable percentage ownership is based on 14,427,625 shares of common stock outstanding as of May 31, 2001. Beneficial ownership is determined in accordance with the rules of the SEC, based on factors including voting and investment power with respect to shares, subject to the applicable community property laws. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days after May 31, 2001, are deemed outstanding for the purpose of computing the percentage ownership of the person holding such options or warrants, but are not deemed outstanding for computing the percentage ownership of any other person.

(2) Includes 1,198,810 shares of common stock owned by Sutter Hill Ventures, A California Limited Partnership (Sutter Hill); 311,258 shares of common stock owned by Mr. Younger, a member of our Board of Directors and a managing director of Sutter Hill Ventures LLC, the general partner of Sutter Hill; 626,133 shares owned by the four other managing directors and one other director of Sutter Hill Ventures LLC, a retirement trust of one of the managing directors of Sutter Hill LLC, and family partnerships associated with the managing directors of Sutter Hill LLC; and 450,260 shares owned by other entities and individuals associated with Sutter Hill Ventures. Mr. Younger and the other managing directors of Sutter Hill Ventures LLC disclaim beneficial ownership in the shares listed above except as to their individual pecuniary interest therein.

(3) Includes 1,874,999 shares of common stock held by ABS Capital Partners III, L.P. Mr. Stobo, a member of our Board of Directors, is a managing member of ABS Partners III, LLC, the general partner of ABS Capital Partners III, L.P. Mr. Stobo disclaims beneficial ownership of such shares held by ABS Capital Partners except to the extent of his pecuniary interest therein.

(4) Includes an aggregate of 95,000 shares held in trusts, of which Mr. Lipps is a trustee, for the benefit of Mr. Lipps' minor children.

(5) Consists of 12,500 shares of common stock held by Mr. Dotzler, 592,176 shares of common stock held by Medicus Venture Partners 1993, L.P.; 356,138 shares of common stock held by Medicus Venture Partners 1994, L.P.; and 99,320 shares of common stock held by Medicus Venture Partners 1995, L.P. (the Medicus Entities). Medicus Management Partners and a limited partnership affiliated with The Hillman Company are the general partners of each of the Medicus Entities. Mr. Dotzler, a member of our Board of Directors, and John Reher are general partners of Medicus Management Partners. The Hillman Company is controlled by Henry L. Hillman, Elsie Hilliard Hillman and C. G. Grefenstette, Trustees of the Henry L. Hillman Trust U/A dated November 18, 1985. The trustees share the power to vote and dispose of shares representing a majority of the voting shares of the Hillman Company. Mr. Dotzler disclaims beneficial ownership of such shares held by the Medicus Entities, except to the extent of his pecuniary interest therein.

(6) Includes 651,260 shares held by the Sheldon D. Asher Trust, dated August 31, 1998. Diane Snedden, Mr. Asher's ex-wife, has the right to receive 128,165 shares upon the exercise of vested options pursuant to a divorce agreement. Mr. Asher disclaims beneficial ownership of these shares. Also includes 25,000 shares held by the Asher Family Special Trust, dated November 25, 1991, FBO Rachel A. Asher, Mr. Asher's minor child, 25,000 shares held by the Asher Family Special Trust, dated November 25, 1991, FBO Emily R. Asher, Mr. Asher's minor child, for both of which Diane Snedden is Trustee, 688 shares held by Bernard Asher, custodian for Emily Rose Asher under IL Uniform Trust to Minors Act, and 688 shares held by Bernard Asher, custodian for Rachel Ann Asher under IL Uniform Trust to Minors Act. Bernard Asher is Mr. Asher's brother. Mr. Asher disclaims beneficial ownership of these shares.

(7) Includes 138,620 shares held by the Higham-Bunker 1991 Family Trust, John D. Higham or Carol L. Bunker, Trustees; and 6,250 shares held by John D. Higham or Carol L. Bunker, Guardians of Christina L. Higham.

(8) Includes 3,125 shares held by Matthew Newell, Mr. Newell's son. Mr. Newell disclaims beneficial ownership of these shares.

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DESCRIPTION OF CAPITAL STOCK

GENERAL

Upon the closing of this offering, we will be authorized to issue 50,000,000 shares of common stock, $.001 par value, and 5,000,000 shares of undesignated preferred stock, $.001 par value. As of May 31, 2001, there were 14,427,625 shares of common stock outstanding held of record by approximately 579 stockholders, treating all outstanding preferred stock on an as converted basis.

COMMON STOCK

The issued and outstanding shares of common stock are, and the shares of common stock being offered by us hereby will be upon payment therefor, validly issued, fully paid and nonassessable. Subject to the prior rights of the holders of any preferred stock, the holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available therefor at such times and in such amounts as the Board of Directors may from time to time determine. The shares of common stock are neither redeemable nor convertible and the holders thereof have no preemptive or subscription rights to purchase any of our securities. Upon liquidation, dissolution or winding up of Omnicell, the holders of common stock are entitled to receive pro rata our assets which are legally available for distribution, after payment of all debts and other liabilities and subject to the prior rights of any holders of any preferred stock then outstanding. Each outstanding share of common stock is entitled to one vote on all matters submitted to a vote of stockholders and has cumulative voting rights with respect to the election of directors.

WARRANTS

As of May 31, 2001, there were outstanding warrants to purchase an aggregate of 11,521 shares of common stock at an exercise price of $1.74 per share, an aggregate of 14,246 shares of common stock at an exercise price of $9.84 per share, an aggregate of 44,373 shares of common stock at an exercise price of $5.88 per share, and an aggregate of 31,249 shares of common stock at an exercise price of $5.00. Warrants to purchase an aggregate of 61,831 shares of common stock expire three years from the effective date of this offering, an aggregate of 8,310 shares of common stock expire on July 7, 2005 and an aggregate of 31,249 shares of common stock expire on August 11, 2005.

PREFERRED STOCK

Upon the closing of this offering, (i) all outstanding shares of convertible preferred stock (except the Series J Preferred Stock) will be converted into shares of common stock, provided that the price per share to the public is not less than $8.00 and the aggregate price to the public is not less than $25,000,000, in each case prior to the deduction of underwriter commissions and offering expenses and (ii) 720,800 shares of Series J Preferred Stock will be redeemed. Outstanding shares of the Series J Preferred Stock are currently being redeemed at $14.03274 per share on a quarterly basis spread out in ten equal quarterly installments beginning on March 8, 1999. The first six payments have been made. Since September 2000, the three quarterly redemption payments of $2.5 million each that were due in September 2000, December 2000 and March 2001, have not been made as we were not obligated to make them because we did not meet certain balance sheet tests under California law. The unredeemed balance of the Series J Preferred Stock accrues interest at 9.5% per year. Effective upon the closing of this offering, we will be authorized to issue 5,000,000 shares of undesignated preferred stock. The Board of Directors will have the authority to issue the preferred stock in one or more series and to fix the price, rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting a series or the designation of such series, without any further vote or action by our stockholders. The issuance of preferred stock, while providing desirable flexibility

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in connection with possible acquisitions and other corporate purposes, could have the effect of delaying, deferring or preventing a change in control of Omnicell without further action by the stockholders and may adversely affect the market price of the common stock and the voting and other rights of the holders of common stock. We have no current plans to issue any shares of preferred stock.

REGISTRATION RIGHTS

The holders of approximately 11,143,548 shares of common stock, as of May 31, 2001, and their permitted transferees are entitled to certain rights with respect to the registration of these shares under the Securities Act. Under the terms of agreements between us and the holders, the holders of at least 40% of these shares may require, on two occasions, that we use our best efforts to register these shares for public resale. The holders of these shares may not exercise this right until four months after the effective date of this offering. In addition, if we propose to register any of our securities under the Securities Act, either for our own account or for the account of other security holders exercising registration rights, the holders are entitled to notice of such registration and are entitled to include shares of such common stock therein. The holders of these shares may also require us on no more than four occasions to register all or a portion of these shares on Form S-3 under the Securities Act when use of such form becomes available to us. All such registration rights are subject to conditions and limitations, including the right of the underwriters of an offering to limit the number of shares to be included in such registration. If such holders, by exercising their demand registration rights, cause a large number of securities to be registered and sold in the public market, such sales could have an adverse effect on the market price for our common stock. If we were to initiate a registration and include shares held by such holders pursuant to the exercise of their piggyback registration rights, such sales may have an adverse effect on our ability to raise capital.

ANTI-TAKEOVER PROVISIONS

DELAWARE LAW

Upon the closing of this offering, we will be 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 any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder unless:

- prior to the date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;

- upon consummation of the transaction that resulted in the stockholder's becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding those shares owned by persons who are directors and also officers, and employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

- on or subsequent to the date, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.

Section 203 defines "business combination" to include:

- any merger or consolidation involving the corporation and the interested stockholder;

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- any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;

- subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; or

- the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.

CHARTER AND BYLAW PROVISIONS

Our Certificate of Incorporation and Bylaws include a number of provisions that may have the effect of deterring or impeding hostile takeovers or changes of control or management. These provisions include:

- our Board of Directors is classified into three classes of directors with staggered three-year terms;

- the authority of our Board of Directors to issue up to 5,000,000 shares of preferred stock and to determine the price and the rights, preferences and privileges of these shares, without stockholder approval;

- all stockholder action must be effected at a duly called meeting of stockholders and not by written consent; and

- the elimination of cumulative voting.

Such provisions may have the effect of delaying or preventing a change of control.

Our Certificate of Incorporation and Bylaws provide that we will indemnify executive officers and directors against losses that they may incur in investigations and legal proceedings resulting from their services to us, which may include services in connection with takeover defense measures. Such provisions may have the effect of preventing changes in our management.

OPTION ACCELERATION

In February 1998, February 2000 and March 2001 our Board of Directors approved resolutions providing that the unvested portion of each officer's stock options under our equity incentive plans becomes fully vested and exercisable if we are acquired and the officer is thereafter terminated without cause, forced to change the principal place of performance of the officer's responsibilities and duties, or placed in a position with a material reduction in the officer's responsibilities and duties.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is Equiserve.

NATIONAL MARKET LISTING

We have applied for listing of our common stock on the Nasdaq National Market under the symbol "OMCL."

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock. Future sales of substantial amounts of our common stock in the public market could adversely affect prevailing market prices from time to time. For a period of 180 days or more following this offering substantial amounts of our common stock will not be freely tradable due to contractual and legal restrictions as described below. Sales of substantial amounts of our common stock in the public market after these restrictions lapse could depress the prevailing market price and limit our ability to raise equity capital in the future.

Upon the closing of this offering and based on shares outstanding as of May 31, 2001, we will have an aggregate of 20,427,625 shares of common stock outstanding, assuming no exercise of the underwriters' over-allotment option and no exercise of outstanding options or warrants. Of the outstanding shares, the shares sold in this offering will be freely tradable, except that any shares held by our "affiliates", as that term is defined in Rule 144 promulgated under the Securities Act, may only be sold in compliance with the limitations described below. The remaining shares of common stock held by existing stockholders will be deemed restricted securities as defined under Rule 144. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144, 144(k) or 701 promulgated under the Securities Act, which are summarized below. In accordance with the lock-up agreements described below and subject to the provisions of Rules 144, 144(k) and 701 and a right of repurchase in favor of us applicable to some of our common stock, additional shares will be available for sale in the public market at the following times:

NUMBER OF SHARES                                    DATE
----------------        ------------------------------------------------------------
      6,042,500         After the date of this prospectus
      4,967,434         180 days from the date of this prospectus
      9,417,691         At various times after 180 days from the date of this
                        prospectus

In general, under Rule 144, as currently in effect, a person, or persons whose shares are aggregated, including an affiliate, who has beneficially owned shares for at least one year is entitled to sell, within any three-month period commencing 90 days after the date of this prospectus, a number of shares that does not exceed the greater of 1% of the then outstanding shares of common stock, which will equal approximately 204,276 shares immediately after this offering or the average weekly trading volume in the common stock during the four calendar weeks preceding the date on which notice of such sale is filed, subject to certain restrictions. In addition, a person who is not deemed to have been an affiliate of ours at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years would be entitled to sell such shares under Rule 144(k) without regard to the requirements described above. To the extent that shares were acquired from an affiliate of ours, the person's holding period for the purpose of effecting a sale under Rule 144 commences on the date of transfer from the affiliate.

Employees, officers, directors, advisors or consultants who purchased our common stock pursuant to a written compensatory plan or contract are entitled to rely on the resale provisions of Rule 701, which permits non-affiliates to sell their Rule 701 shares without having to comply with the public information, holding period, volume limitation or notice provisions of Rule 144 and permits affiliates to sell their Rule 701 shares without having to comply with Rule 144's holding period restrictions, in each case commencing 90 days after we become subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934.

LOCK-UP AGREEMENTS

Our directors, officers and stockholders who hold approximately 14,385,125 shares in the aggregate, have agreed that they will not offer, sell or agree to sell, directly or indirectly, or otherwise dispose of

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any shares of common stock without the prior written consent of U.S. Bancorp Piper Jaffray for a period of 180 days from the date of this prospectus. Please see "Underwriting."

We have agreed not to sell or otherwise dispose of any shares of common stock during the 180-day period following the date of the prospectus, except we may issue, and grant options to purchase, shares of common stock under the 1992 Equity Incentive Plan, the 1995 Management Stock Option Plan and the 1999 Equity Incentive Plan. In addition, we may issue shares of common stock in connection with any acquisition of another company if the terms of such issuance provide that such common stock shall not be resold prior to the expiration of the 180-day period referenced in the preceding sentence.

REGISTRATION RIGHTS

Following this offering, some of our stockholders will have registration rights. Please see "Description of Capital Stock--Registration Rights."

STOCK OPTIONS AND WARRANTS

Options to purchase an aggregate of 3,752,580 shares of our common stock are outstanding as of May 31, 2001 under our 1992 Equity Incentive Plan, our 1995 Management Stock Option Plan and our 1999 Equity Incentive Plan. Following this offering, we expect to register the shares underlying these options in a registration statement that will automatically become effective upon filing. Accordingly, subject to the exercise of such options, shares included in such registration statement will be available for sale in the open market immediately after the 180-day lock-up period expires.

In addition, 101,389 shares of common stock issuable upon the exercise of warrants will be eligible for sale as restricted securities set forth above, one year after the exercise of these warrants.

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UNDERWRITING

Subject to the terms and conditions of an underwriting agreement dated , 2001, the underwriters named below, who are represented by U.S. Bancorp Piper Jaffray Inc., CIBC World Markets Corp., and SG Cowen Securities Corporation have severally and not jointly agreed to purchase from us, the following respective number of shares of our common stock at a public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus:

                                                              NUMBER OF
UNDERWRITERS                                                   SHARES
------------                                                  ---------
U.S. Bancorp Piper Jaffray Inc..............................
CIBC World Markets Corp.....................................
SG Cowen Securities Corporation.............................
                                                              ---------
        Total...............................................
                                                              =========

The underwriting agreement provides that the obligations of the several underwriters to purchase the shares of common stock offered hereby are subject to certain conditions precedent and that the underwriters will purchase all shares of the common stock offered hereby, other than those covered by the over-allotment option described below, if any of these shares are purchased. In addition, the underwriting agreement provides that, in the event of a default by an underwriter, in certain circumstances the purchase commitments of non-defaulting underwriters may be increased or the underwriting agreement may be terminated.

The underwriters propose to offer the shares of common stock to the public at the public offering price set forth on the cover page of this prospectus and to dealers at a price that represents a concession not in excess of $ per share under the public offering price. The underwriters may allow, and these dealers may re-allow, a concession of not more than $ per share to certain other dealers. After the initial public offering, representatives of the underwriters may change the offering price and other selling terms.

We have granted to the underwriters an option, exercisable not later than 30 days after the date of this prospectus, to purchase up to 900,000 additional shares of common stock at the public offering price, less the underwriting discounts set forth on the cover page of this prospectus. The underwriters may exercise such option solely to cover over-allotments, if any, made in connection with this offering. To the extent that the underwriters exercise this option, each underwriter will become obligated, subject to conditions, to purchase approximately the same percentage of additional shares of common stock as the number of shares of common stock to be purchased by it in the above table bears to the total number of shares of common stock offered hereby. We will be obligated, pursuant to the option, to sell these additional shares of common stock to the underwriters to the extent the option is exercised. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the other shares are being offered.

The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us per share of common stock. The underwriting fee is currently expected to be approximately % of the initial public offering price. We have agreed to pay the underwriters the following fees, assuming either no exercise or full exercise by the underwriters of the underwriters' over-allotment option:

                                                                             TOTAL FEES
                                                            ---------------------------------------------
                                                             WITHOUT EXERCISE OF    WITH FULL EXERCISE OF
                                            FEE PER SHARE   OVER-ALLOTMENT OPTION   OVER-ALLOTMENT OPTION
                                            -------------   ---------------------   ---------------------
Fees paid by Omnicell.....................      $                  $                       $

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In addition, we estimate that our share of the total expenses of this offering, excluding underwriting discounts and commissions, will be approximately $ .

We have agreed to indemnify the underwriters against some specified types of liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect of any of these liabilities.

Each of our officers and directors, and substantially all of our stockholders and holders of options and warrants to purchase our stock, have agreed not to offer, sell, contract to sell or otherwise dispose of, or enter into any transaction that is designed to, or could be expected to, result in the disposition of any shares of our common stock or other securities convertible into or exchangeable or exercisable for shares of our common stock or derivatives of our common stock owned by these persons prior to this offering or common stock issuable upon exercise of options or warrants held by these persons for a period of 180 days after the effective date of the registration statement of which this prospectus is a part without the prior written consent of U.S. Bancorp Piper Jaffray. This consent may be given at any time without public notice. We have entered into a similar agreement with the representatives of the underwriters. There are no agreements between the representatives and any of our stockholders or affiliates releasing them from these lock-up agreements prior to the expiration of the 180-day period.

The representatives of the underwriters have advised us that the underwriters do not intend to confirm sales to any account over which they exercise discretionary authority.

In order to facilitate the offering of our common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the market price of our common stock. Specifically, the underwriters may make short sales of our common stock and may purchase our common stock on the open market to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. "Covered" short sales are sales made in an amount not greater than the underwriters' over-allotment option to purchase additional shares in the offering. The underwriters may close out any covered short position by either exercising their over-allotment option or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. "Naked" short sales are sales in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. Similar to other purchase transactions, the underwriters' purchases to cover the underwriting syndicate short sales may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. In addition, the representatives, on behalf of the underwriters, may also reclaim selling concessions allowed to an underwriter or dealer if the underwriting syndicate repurchases shares distributed by that underwriter or dealer, which may also maintain the market price of our common stock at a level above that which might otherwise exist in the open market. These transactions may be effected on the Nasdaq National Market or otherwise. The underwriters are not required to engage in these activities and, if commenced, may end any of these activities at any time.

At our request, the underwriters have reserved for sale, at the initial public offering price, up to 300,000 shares or 5% of our common stock being sold in this offering for our vendors, employees, family members of employees, customers and other third parties. The number of shares of our common stock available for sale to the general public will be reduced to the extent these reserved shares are purchased. Any reserved shares that are not purchased by these persons will be offered by the underwriters to the general public on the same basis as the other shares in this offering.

70

PRICING OF THE OFFERING

Prior to this offering, there has been no public market for our common stock. Consequently, the initial public offering price for our common stock has been determined by negotiations among us and the representatives of the underwriters. Among the primary factors considered in determining the initial public offering price were:

- prevailing market conditions;

- our results of operations in recent periods;

- the present stage of our development;

- the market capitalization and stage of development of the other companies that we and the representatives of the underwriters believe to be comparable to our business; and

- estimates of our business potential.

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed upon for us by Cooley Godward LLP, Palo Alto, California. Certain legal matters in connection with this offering will be passed upon for the underwriters by Preston Gates & Ellis LLP, Seattle, Washington.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated financial statements at December 31, 1999 and 2000, and for each of the three years in the period ended December 31, 2000, as set forth in their report. We've included our financial statements in this prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP's report, given on their authority as experts in auditing and accounting.

The financial statements of the Sure-Med Division of Baxter Healthcare Corporation, an indirect division of Baxter International Inc., as of December 31, 1998 and for the year ended December 31, 1998 included in this prospectus have been so included in reliance on the report (which report contains an explanatory paragraph relating to the restatement of the financial results as described in Note 2 to the financial statements) of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting.

71

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect to the common stock. For further information regarding us and our common stock, please refer to the registration statement and exhibits and schedules filed as part of the registration statement. Each statement in this prospectus referring to a contract, agreement or other document filed as an exhibit to the registration statement is qualified in all respects by the filed exhibit.

You may read and copy all or any portion of the registration statement or any other information that we file at the Securities and Exchange Commission's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the public reference room. Our Securities and Exchange Commission filings, including the registration statement, are also available to you on the Securities and Exchange Commission's Web site located at WWW.SEC.GOV.

Upon completion of this offering, we will become subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith, will file periodic reports, proxy statements and other information with the SEC.

We intend to provide our stockholders with annual reports containing financial statements audited by an independent public accounting firm and to make available to our stockholders quarterly reports containing unaudited financial data for the first three quarters of each year.

72

OMNICELL, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Omnicell, Inc.
  Report of Ernst & Young LLP, Independent Auditors.........   F-2

  Consolidated Balance Sheets as of December 31, 1999 and
    2000 and March 31, 2001 (unaudited).....................   F-3

  Consolidated Statements of Operations for the years ended
    December 31, 1998, 1999 and 2000 and for the three
    months ended March 31, 2000 and 2001 (unaudited)........   F-4

  Consolidated Statement of Redeemable Convertible Preferred
    Stock and Stockholders' Equity (Net Capital Deficiency)
    for the years ended December 31, 1998, 1999 and 2000 and
    for the three months ended March 31, 2001 (unaudited)...   F-5

  Consolidated Statements of Cash Flows for the years ended
    December 31, 1998, 1999 and 2000 and for the three
    months ended March 31, 2000 and 2001 (unaudited)........   F-6

  Notes to Consolidated Financial Statements................   F-8

Sure-Med Division of Baxter Healthcare Corporation

  Report of PricewaterhouseCoopers LLP, Independent
    Accountants.............................................  F-29

  Balance Sheet as of December 31, 1998.....................  F-30

  Statement of Operations for the year ended December 31,
    1998....................................................  F-31

  Statement of Cash Flows for the year ended December 31,
    1998....................................................  F-32

  Notes to Financial Statements.............................  F-33

F-1

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Omnicell, Inc.

We have audited the accompanying consolidated balance sheets of Omnicell, Inc. as of December 31, 1999 and 2000, and the related consolidated statements of operations, redeemable convertible preferred stock and stockholders' equity (net capital deficiency), and cash flows for each of the three years in the period ended December 31, 2000. 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 auditing standards generally accepted in the United States. 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 consolidated financial position of Omnicell, Inc. at December 31, 1999 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States.

As discussed in Note 18 to the consolidated financial statements, the consolidated balance sheets, statements of operations, redeemable convertible preferred stock and stockholders' equity (net capital deficiency), and cash flows for each of the three years in the period ended December 31, 2000 have been restated.

San Jose, California
February 26, 2001,
except for Note 18, as to which the date is June 20, 2001 and Note 19, as to which the date is , 2001


The foregoing report is in the form that will be signed upon completion of the name change and reverse stock split described in Notes 1 and 19 to the consolidated financial statements.

                                          /s/ Ernst & Young LLP


San Jose, California
June 26, 2001

F-2

OMNICELL, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                                                                                     PRO FORMA AT
                                                                   DECEMBER 31,         MARCH 31,     MARCH 31,
                                                              ----------------------   -----------   ------------
                                                                1999        2000          2001           2001
                                                              --------   -----------   -----------   ------------
                                                                                              (Unaudited)
                           ASSETS
Current assets:
  Cash and cash equivalents.................................  $  2,546    $  9,681      $  2,309       $     --
  Short-term investments....................................     4,152       2,286         5,389             --
  Accounts receivable, net of allowance for doubtful
    accounts of $338 in 1999 and $372 in 2000...............     9,685      11,036        15,366         15,366
  Inventories...............................................     9,324      10,414        12,532         12,532
  Prepaid expenses and other current assets.................     1,909       2,728         2,697          2,697
                                                              --------    --------      --------       --------
    Total current assets....................................    27,616      36,145        38,293         30,595
                                                              --------    --------

Property and equipment, net.................................     7,241       4,913         4,981          4,981
Intangible assets...........................................       274          --            --             --
Other assets................................................     1,986       2,847         3,831          3,831
                                                              --------    --------      --------       --------
      Total assets..........................................  $ 37,117    $ 43,905      $ 47,105       $ 39,407
                                                              ========    ========      ========       ========
  LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
        STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
  Accounts payable..........................................  $  2,234    $  4,416      $  5,516       $  5,516
  Accrued liabilities.......................................    17,299      16,065        19,831         19,831
  Deferred revenue..........................................     2,268       3,233         3,406          3,406
  Deferred gross profit.....................................    26,695      25,847        25,317         25,317
  Current portion of notes payable..........................        51          37         1,026          1,026
  Note payable to redeemable convertible preferred
    stockholder.............................................        --          --            --          2,415
                                                              --------    --------      --------       --------
    Total current liabilities...............................    48,547      49,598        55,096         57,511

Notes payable...............................................     8,440       8,376         7,375          7,025
Other long-term liabilities.................................       812         842           842            842
Commitments and contingencies
Redeemable convertible preferred stock, no par value;
  1,802,000 shares designated; 1,081,200, 720,800 and
  720,800 shares issued and outstanding at December 31, 1999
  and 2000 and March 31, 2001, respectively (no shares pro
  forma)....................................................    15,166      10,113        10,113             --
Stockholders' equity (net capital deficiency):
  Convertible preferred stock, no par value; 18,500,000
    shares authorized (5,000,000 shares authorized pro
    forma), including 1,802,000 shares designated as
    redeemable convertible preferred stock (11,527,848,
    14,538,376 and 14,538,376 shares issued and outstanding
    at December 31, 1999 and 2000 and March 31, 2001,
    respectively)(no shares pro forma) (aggregate
    liquidation preference of $63,747 at December 31, 2000
    and March 31, 2001).....................................    33,854      62,392        62,392             --
  Common stock, no par value; 35,000,000 shares authorized
    (50,000,000 shares authorized pro forma); 1,646,382,
    3,080,140 and 3,126,968 shares issued and outstanding at
    December 31, 1999 and 2000 and March 31, 2001,
    respectively (14,275,337 shares pro forma)..............     2,302       9,171         9,363         72,105
  Notes receivable from stockholders........................        --      (4,578)       (4,578)        (4,578)
  Deferred stock compensation...............................        --         (31)         (153)          (153)
  Accumulated deficit.......................................   (72,006)    (91,982)      (93,346)       (93,346)
  Accumulated other comprehensive income....................         2           4             1              1
                                                              --------    --------      --------       --------
    Total stockholders' equity (net capital deficiency).....   (35,848)    (25,024)      (26,321)       (25,971)
                                                              --------    --------      --------       --------
      Total liabilities, redeemable convertible preferred
        stock, and stockholders' equity (net capital
        deficiency).........................................  $ 37,117    $ 43,905      $ 47,105       $ 39,407
                                                              ========    ========      ========       ========

See accompanying notes.

F-3

OMNICELL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                                                 THREE MONTHS ENDED
                                                   YEAR ENDED DECEMBER 31,            MARCH 31,
                                                ------------------------------   -------------------
                                                  1998       1999       2000       2000       2001
                                                --------   --------   --------   --------   --------
                                                                                     (UNAUDITED)
REVENUES:
Product revenues..............................  $34,690    $ 44,074   $ 58,458   $12,452    $16,726
Product revenues from related party...........    9,398       4,163      1,097        --         --
Service and other revenues....................    4,124       7,034      7,810     2,034      2,261
                                                -------    --------   --------   -------    -------
    Total revenues............................   48,212      55,271     67,365    14,486     18,987
Cost of product revenues......................   16,343      28,918     18,856     4,584      5,354
Cost of service and other revenues............    1,801       5,377      7,722     2,097      1,739
                                                -------    --------   --------   -------    -------
    Total cost of revenues....................   18,144      34,295     26,578     6,681      7,093
                                                -------    --------   --------   -------    -------
Gross profit..................................   30,068      20,976     40,787     7,805     11,894

Operating expenses:
  Research and development....................    5,987       8,745     11,276     3,455      2,534
  Selling, general and administrative.........   24,292      35,797     45,323    11,401     10,113
  Integration.................................       --         785         --        --         --
  Restructuring...............................       --          --      2,908        --         --
                                                -------    --------   --------   -------    -------
    Total operating expenses..................   30,279      45,327     59,507    14,856     12,647
                                                -------    --------   --------   -------    -------
Loss from operations..........................     (211)    (24,351)   (18,720)   (7,051)      (753)
Interest income...............................    1,039         704      1,053       259        184
Interest expense..............................       --      (2,471)    (2,209)     (580)      (770)
                                                -------    --------   --------   -------    -------
Income (loss) before provision for income
  taxes.......................................      828     (26,118)   (19,876)   (7,372)    (1,339)
Provision for income taxes....................      185         149        100        25         25
                                                -------    --------   --------   -------    -------
Net income (loss).............................      643     (26,267)   (19,976)   (7,397)    (1,364)
Preferred stock accretion.....................      (22)         --         --        --         --
                                                -------    --------   --------   -------    -------
Net income (loss) applicable to common
  stockholders................................  $   621    $(26,267)  $(19,976)  $(7,397)   $(1,364)
                                                =======    ========   ========   =======    =======
Net income (loss) per common share:
  Basic.......................................  $  0.48    $ (17.86)  $ (11.72)  $ (4.40)   $ (0.50)
  Diluted.....................................  $  0.06    $ (17.86)  $ (11.72)  $ (4.40)   $ (0.50)
  Pro forma basic and diluted (unaudited).....                        $  (1.55)             $ (0.10)
Weighted average common shares outstanding:
  Basic.......................................    1,302       1,471      1,704     1,681      2,741
  Diluted.....................................   11,013       1,471      1,704     1,681      2,741
  Pro forma basic and diluted (unaudited).....                          12,851               13,889

See accompanying notes.

F-4

OMNICELL, INC.
CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                                                   REDEEMABLE
                                                                   CONVERTIBLE             CONVERTIBLE
                                                                 PREFERRED STOCK         PREFERRED STOCK
                                                              ---------------------   ---------------------
                                                                SHARES      AMOUNT      SHARES      AMOUNT
                                                              ----------   --------   ----------   --------
Balance at December 31, 1997................................   1,802,000   $ 25,260   11,527,848   $33,854
  Net income................................................          --         --           --        --
  Change in unrealized loss on short-term investments.......          --         --           --        --
  Total comprehensive income................................
  Exercise of stock options.................................          --         --           --        --
  Employee stock purchase plan..............................          --         --           --        --
  Amortization of deferred compensation.....................          --         --           --        --
  Accretion of redeemable convertible preferred stock.......          --         22           --        --
                                                              ----------   --------   ----------   -------
Balance at December 31, 1998................................   1,802,000     25,282   11,527,848    33,854
  Net loss..................................................          --         --           --        --
  Change in unrealized loss on short-term investments.......          --         --           --        --
  Total comprehensive loss..................................          --         --           --        --
  Exercise of stock options.................................          --         --           --        --
  Employee stock purchase plan..............................          --         --           --        --
  Amortization of deferred compensation.....................          --         --           --        --
  Redemption of redeemable convertible preferred stock......    (720,800)   (10,116)          --        --
                                                              ----------   --------   ----------   -------
Balance at December 31, 1999................................   1,081,200     15,166   11,527,848    33,854
  Net loss..................................................          --         --           --        --
  Change in unrealized gain on short-term investments.......          --         --           --        --
  Total comprehensive loss..................................          --         --           --        --
  Modification of stock option awards.......................          --         --           --        --
  Issuance of Series K convertible preferred stock for cash
    (less issuance costs of $62)............................          --         --    3,010,528    28,538
  Exercise of stock options.................................          --         --           --        --
  Employee stock purchase plan..............................          --         --           --        --
  Issuance of stockholder notes receivable..................          --         --           --        --
  Issuance of warrant in connection with bank credit
    facility................................................          --         --           --        --
  Deferred stock compensation...............................
  Amortization of deferred stock compensation...............
  Redemption of redeemable convertible preferred stock......    (360,400)    (5,053)          --        --
                                                              ----------   --------   ----------   -------
Balance at December 31, 2000................................     720,800     10,113   14,538,376    62,392
  Net loss (unaudited)......................................          --         --           --        --
  Change in unrealized gain on short-term investments
    (unaudited).............................................          --         --           --        --
  Total comprehensive loss (unaudited)......................          --         --           --        --
  Exercise of stock options (unaudited).....................          --         --           --        --
  Deferred stock compensation (unaudited)...................          --         --           --        --
  Amortization of deferred stock compensation (unaudited)...          --         --           --        --
                                                              ----------   --------   ----------   -------
Balance at March 31, 2001 (unaudited).......................     720,800   $ 10,113   14,538,376   $62,392
                                                              ==========   ========   ==========   =======


                                                                                          NOTES
                                                                   COMMON STOCK         RECEIVABLE
                                                              ----------------------       FROM       DEFERRED STOCK   ACCUMULATED
                                                               SHARES       AMOUNT     STOCKHOLDERS    COMPENSATION      DEFICIT
                                                              ---------   ----------   ------------   --------------   ------------
Balance at December 31, 1997................................  1,281,804   $      807     $    --         $   (28)        $(46,360)
  Net income................................................         --           --          --              --              643
  Change in unrealized loss on short-term investments.......         --           --          --              --               --

  Total comprehensive income................................

  Exercise of stock options.................................     48,923          135          --              --               --
  Employee stock purchase plan..............................     54,506          482          --              --               --
  Amortization of deferred compensation.....................         --           --          --              17               --
  Accretion of redeemable convertible preferred stock.......         --           --          --              --              (22)
                                                              ---------   ----------     -------         -------         --------
Balance at December 31, 1998................................  1,385,233        1,424          --             (11)         (45,739)
  Net loss..................................................         --           --          --              --          (26,267)
  Change in unrealized loss on short-term investments.......         --           --          --              --               --

  Total comprehensive loss..................................         --           --          --              --               --

  Exercise of stock options.................................    200,360          341          --              --               --
  Employee stock purchase plan..............................     60,789          537          --              --               --
  Amortization of deferred compensation.....................         --           --          --              11               --
  Redemption of redeemable convertible preferred stock......         --           --          --              --               --
                                                              ---------   ----------     -------         -------         --------
Balance at December 31, 1999................................  1,646,382        2,302          --              --          (72,006)
  Net loss..................................................         --           --          --              --          (19,976)
  Change in unrealized gain on short-term investments.......         --           --          --              --               --

  Total comprehensive loss..................................         --           --          --              --               --

  Modification of stock option awards.......................         --          728          --              --               --
  Issuance of Series K convertible preferred stock for cash
    (less issuance costs of $62)............................         --           --          --              --               --
  Exercise of stock options.................................  1,251,919        5,146          --              --               --
  Employee stock purchase plan..............................    181,839          883          --              --               --
  Issuance of stockholder notes receivable..................         --           --      (4,578)             --               --
  Issuance of warrant in connection with bank credit
    facility................................................         --           78          --              --               --
  Deferred stock compensation...............................                      34                         (34)
  Amortization of deferred stock compensation...............                                                   3
  Redemption of redeemable convertible preferred stock......         --           --          --              --               --
                                                              ---------   ----------     -------         -------         --------
Balance at December 31, 2000................................  3,080,140        9,171      (4,578)            (31)         (91,982)
  Net loss (unaudited)......................................         --           --          --              --           (1,364)
  Change in unrealized gain on short-term investments
    (unaudited).............................................         --           --          --              --               --

  Total comprehensive loss (unaudited)......................         --           --          --              --               --

  Exercise of stock options (unaudited).....................     46,828           56          --              --               --
  Deferred stock compensation (unaudited)...................         --          136          --            (136)              --
  Amortization of deferred stock compensation (unaudited)...         --           --          --              14               --
                                                              ---------   ----------     -------         -------         --------
Balance at March 31, 2001 (unaudited).......................  3,126,968   $    9,363     $(4,578)        $  (153)        $(93,346)
                                                              =========   ==========     =======         =======         ========

                                                                                   TOTAL
                                                               ACCUMULATED     STOCKHOLDERS'
                                                                  OTHER           EQUITY
                                                              COMPREHENSIVE    (NET CAPITAL
                                                              INCOME (LOSS)     DEFICIENCY)
                                                              --------------   -------------
Balance at December 31, 1997................................      $  (6)         $(11,733)
  Net income................................................         --               643
  Change in unrealized loss on short-term investments.......          4                 4
                                                                                 --------
  Total comprehensive income................................                          647
                                                                                 --------
  Exercise of stock options.................................         --               135
  Employee stock purchase plan..............................         --               482
  Amortization of deferred compensation.....................         --                17
  Accretion of redeemable convertible preferred stock.......         --               (22)
                                                                  -----          --------
Balance at December 31, 1998................................         (2)          (10,474)
  Net loss..................................................         --           (26,267)
  Change in unrealized loss on short-term investments.......          4                 4
                                                                                 --------
  Total comprehensive loss..................................         --           (26,263)
                                                                                 --------
  Exercise of stock options.................................         --               341
  Employee stock purchase plan..............................         --               537
  Amortization of deferred compensation.....................         --                11
  Redemption of redeemable convertible preferred stock......         --                --
                                                                  -----          --------
Balance at December 31, 1999................................          2           (35,848)
  Net loss..................................................         --           (19,976)
  Change in unrealized gain on short-term investments.......          2                 2
                                                                                 --------
  Total comprehensive loss..................................         --           (19,974)
                                                                                 --------
  Modification of stock option awards.......................         --               728
  Issuance of Series K convertible preferred stock for cash
    (less issuance costs of $62)............................         --            28,538
  Exercise of stock options.................................         --             5,146
  Employee stock purchase plan..............................         --               883
  Issuance of stockholder notes receivable..................         --            (4,578)
  Issuance of warrant in connection with bank credit
    facility................................................         --                78
  Deferred stock compensation...............................                           --
  Amortization of deferred stock compensation...............                            3
  Redemption of redeemable convertible preferred stock......         --                --
                                                                  -----          --------
Balance at December 31, 2000................................          4           (25,024)
  Net loss (unaudited)......................................         --            (1,364)
  Change in unrealized gain on short-term investments
    (unaudited).............................................         (3)               (3)
                                                                                 --------
  Total comprehensive loss (unaudited)......................         --            (1,367)
                                                                                 --------
  Exercise of stock options (unaudited).....................         --                56
  Deferred stock compensation (unaudited)...................         --                --
  Amortization of deferred stock compensation (unaudited)...         --                14
                                                                  -----          --------
Balance at March 31, 2001 (unaudited).......................      $   1          $(26,321)
                                                                  =====          ========

See accompanying notes.

F-5

OMNICELL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

                                                                                             THREE MONTHS
                                                            YEAR ENDED DECEMBER 31,         ENDED MARCH 31,
                                                         ------------------------------   -------------------
                                                           1998       1999       2000       2000       2001
                                                         --------   --------   --------   --------   --------
                                                                                              (unaudited)
OPERATING ACTIVITIES
  Net income (loss)....................................  $    643   $(26,267)  $(19,976)  $ (7,397)  $ (1,364)
  Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities:
    Depreciation.......................................     1,375      1,894      2,749        650        406
    Amortization.......................................        --         90         90         90         90
    Loss on disposal of capital equipment..............        45          4         --         --         --
    Amortization of deferred compensation..............        17         11          3         --         14
    Stock compensation.................................        --         --        728        728         --
    Write-off of Sure-Med inventory....................        --      9,722         --         --         --
    Write-off of ADDS investment.......................        --        550         --         --         --
    Write-off of intangible assets.....................        --         --        182         --         --
    Changes in assets and liabilities:
      Accounts receivable..............................     2,066       (453)    (1,351)    (4,634)    (4,330)
      Inventories......................................      (378)     1,978     (1,090)     1,495     (2,118)
      Prepaid expenses and other current assets........    (1,228)      (741)      (741)      (555)        31
      Other assets.....................................      (405)       585       (769)      (840)      (984)
      Accounts payable.................................      (345)     1,608      2,182      1,378      1,100
      Accrued liabilities..............................       158        908     (1,234)    (2,157)     3,766
      Deferred revenue.................................       747        313        965        230        173
      Deferred gross profit............................     4,005      5,954       (848)      (309)      (530)
      Other liabilities................................        --     (1,149)         2      1,291         --
                                                         --------   --------   --------   --------   --------
    Net cash provided by (used in) operating
      activities.......................................     6,700     (4,990)   (19,108)   (10,030)    (3,746)
                                                         --------   --------   --------   --------   --------

INVESTING ACTIVITIES
  Cash paid for Sure-Med acquisition, net of cash
    received...........................................        --       (352)        --         --         --
  Purchases of short-term investments..................   (11,517)    (4,153)    (4,055)   (11,815)    (4,055)
  Maturities of short-term investments.................     6,011     10,504      5,923         --        949
  Capital expenditures.................................    (1,785)    (6,199)      (511)    (1,067)      (564)
                                                         --------   --------   --------   --------   --------
    Net cash provided by (used in) investing
      activities.......................................    (7,291)      (200)     1,357    (12,882)    (3,670)
                                                         --------   --------   --------   --------   --------

FINANCING ACTIVITIES
  Proceeds from issuance of common stock...............       617        878      1,451        269         56
  Proceeds from issuance of Series K preferred stock...        --         --     28,538     28,538         --
  Redemption of redeemable convertible preferred
    stock..............................................        --     (5,058)    (5,053)    (1,973)        --
  Issuance of convertible promissory note..............        --        350         --         --         --
  Payment of principle on long-term debt...............        --         --        (50)        --        (12)
                                                         --------   --------   --------   --------   --------
    Net cash provided by (used in) financing
      activities.......................................       617     (3,830)    24,886     26,834         44
                                                         --------   --------   --------   --------   --------
Net increase (decrease) in cash and cash equivalents...        26     (9,023)     7,135      3,922     (7,372)
Cash and cash equivalents at beginning of period.......    11,543     11,569      2,546      2,546      9,681
                                                         --------   --------   --------   --------   --------
Cash and cash equivalents at end of period.............  $ 11,569   $  2,546   $  9,681   $  6,468   $  2,309
                                                         ========   ========   ========   ========   ========

See accompanying notes.

F-6

OMNICELL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(IN THOUSANDS)

                                                                                        THREE MONTHS
                                                     YEAR ENDED DECEMBER 31,           ENDED MARCH 31,
                                                  ------------------------------   -----------------------
                                                    1998       1999       2000       2000           2001
                                                  --------   --------   --------   --------       --------
                                                                                         (unaudited)
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING
  AND INVESTING ACTIVITIES
Issuance of note payable in Sure-Med
  acquisition...................................  $     --   $  7,914   $     --     $ --           $ --
Change in unrealized gain (loss) on short-term
  investments...................................        (4)        (4)         2       --             (3)
Issuance of note payable for leasehold
  improvements to landlord......................        --        200         --       --             --
Accretion of redeemable convertible preferred
  stock.........................................        22         --         --       --             --
Redemption of preferred stock offset with
  receivables...................................        --      5,750        553      553             --
Issuance of stock purchase warrant..............        --         --         78       --             --
Issuance of notes receivable from stockholders
  to exercise stock options.....................        --         --     (4,578)      --             --
Deferred stock compensation.....................        --         --         34       --            136

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest..........................  $     --   $  2,312   $  1,800     $540           $180

See accompanying notes.

F-7

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF THE COMPANY

The Company was incorporated in the State of California in September 1992 under the name OmniCell Technologies, Inc. In September 1999, the Company changed its name to Omnicell.com and intends to reincorporate in Delaware and change its name to Omnicell, Inc. immediately prior to the completion of the offering. All references in these financial statements will be to "Omnicell, Inc." or the "Company."

The Company provides an integrated suite of clinical infrastructure and workflow automation solutions for healthcare facilities. These solutions include automation systems, clinical reference tools, an Internet-based procurement application and decision support capabilities. The Company sells and leases its products and related services to a wide range of healthcare facilities such as hospitals, integrated delivery networks and alternate care facilities, which include nursing homes, outpatient surgery centers, catheterization labs and clinics.

FUTURE FINANCING

The Company may be required to raise additional capital through the public equity market, private financings, collaborative arrangements and debt. Additional financing may not be available to the Company on favorable terms, if at all. If the Company is unable to obtain financing, or to obtain it on acceptable terms, it may be unable to execute the business plan.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the Company and its wholly owned subsidiaries, Omnicell HealthCare Canada, Inc. and Omnicell Europe SARL. All significant intercompany accounts and transactions are eliminated in consolidation.

INTERIM FINANCIAL INFORMATION

The interim financial information at March 31, 2001 and for the three months ended March 31, 2000 and 2001 is unaudited but, in the opinion of management, has been prepared on the same basis as the annual financial statements and includes all adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for a fair presentation of its financial position at such date and its operating results and cash flows for those periods. Results for the interim period are not necessarily indicative of the results to be expected for the entire year, or any future period.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that materially affect the amounts reported in the consolidated financial statements. Actual results could differ from these estimates.

F-8

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) REVENUE RECOGNITION

Revenues are derived primarily from sales of pharmacy and supply systems and subsequent service agreements. The Company markets these systems for sale or for lease. Pharmacy and supply system sales, which are accounted for in accordance with American Institute of Certified Public Accountant's Statement of Position 97-2 (SOP 97-2), "Software Revenue Recognition," are recognized upon completion of Omnicell's installation obligation at the customer's site. Revenues from leasing arrangements are recognized in accordance with Statement of Financial Accounting Standards (SFAS) No. 13, "Accounting for Leases," upon completion of the Company's installation obligation and commencement of the noncancelable lease term. Post-installation technical support, such as phone support, on-site service, parts and access to software upgrades, is provided by the Company under separate annual service agreements. Revenues on service agreements are recognized ratably over the related service contract period. Deferred revenue represents amounts received under service agreements for which the services have not yet been performed and upfront fees received from certain distributors of our pharmacy and supply systems. These upfront fees are recognized ratably over the period of the distribution agreement. Deferred gross profit represents the profit to be earned by the Company, exclusive of installation costs, on pharmacy and supply systems sales for which customer acceptance has occurred but the Company's installation obligation has not yet been fulfilled. Installation costs are recorded to cost of goods sold when incurred.

Revenues from the Company's Internet-based procurement application, introduced in 1999, are recognized ratably over the subscription period. Internet-based procurement application revenues were not significant in the years ended December 31, 1999 and 2000, and are included in service and other revenues.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company has determined the estimated fair value of financial instruments. The amounts reported for cash and cash equivalents, accounts receivable, notes receivable from stockholders, accounts payable, and accrued expenses approximate fair value because of their short maturities. Short-term investments are reported at their estimated fair value based on quoted market prices of comparable instruments. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its debt obligations approximates fair value.

CASH EQUIVALENTS

The Company considers all highly liquid debt instruments with original maturities of 90 days or less to be cash equivalents.

CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash equivalents, investments, accounts receivable and notes receivable from stockholders. Cash equivalents consist primarily of money market funds and commercial debt securities and are held primarily with two financial institutions. By policy, the Company limits the amounts invested in any type

F-9

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of instrument for investments other than U.S. government treasury instruments. The Company places its investments for safekeeping with an insured creditworthy financial institution.

The Company sells and leases its products and services primarily to hospitals and other healthcare facilities throughout the United States. The majority of leases originated by the Company are sold to unaffiliated finance companies (see Note 3). To date, the Company has had no significant credit losses.

One customer accounted for 20.5% of revenues in 1998. No one customer accounted for over 10.0% of revenues in 1999 or 2000.

One customer accounted for 11.0% of accounts receivable at December 31, 1999. A different customer accounted for 11.0% of accounts receivable at December 31, 2000.

The majority of net revenues are generated from customers in North America totaling 99% of total net revenues in 1998, 1999 and 2000.

SHORT-TERM INVESTMENTS

Short-term investments consist primarily of highly liquid debt instruments purchased with original maturities of greater than 90 days but less than twelve months. The Company classifies these securities as available-for-sale. The differences between amortized cost and fair value, representing unrealized holding gains or losses, are recorded as a separate component of stockholders' equity until realized. Any gains and losses on the sale of short-term investments are determined on a specific identification method, and such gains and losses are reflected as a component of net interest income (expense). The Company has not experienced any significant gains or losses on its investments to date.

INVENTORIES

Inventories are stated at the lower of cost (utilizing standard costs, which approximate the first-in, first-out method) or market. The Company routinely assesses its on-hand inventory for timely identification and measurement of obsolete, slow-moving, or otherwise impaired inventory.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets, generally three to five years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the improvements, generally four to seven years.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of any asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of

F-10

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

SOFTWARE DEVELOPMENT COSTS

Development costs related to software incorporated in the Company's pharmacy and supply systems incurred subsequent to the establishment of technological feasibility are capitalized and amortized over the estimated lives of the related products. Technological feasibility is established upon completion of a working model. At December 31, 2000, capitalized software development costs are approximately $900,000. These costs will be amortized over a 3-year period upon commercial introduction and are reported as a component of other assets. There were no capitalized software development costs at December 31, 1999.

ADVERTISING EXPENSES

The Company expenses the costs of advertising as incurred. Advertising expenses for the years ended December 31, 1998, 1999 and 2000 were approximately $11,000, $628,000 and $1.2 million, respectively.

INTEGRATION EXPENSES

Integration expenses relate to expenses incurred to integrate the Sure-Med product line (see Note 2) into the Company's operations. These expenses include charges for employee severance costs, travel, training and relocation expenses.

STOCK-BASED COMPENSATION

Under SFAS No. 123, "Accounting for Stock-Based Compensation," the Company accounts for stock-based awards to employees using the intrinsic value method established by Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees." Thus, no compensation expense is recognized for options granted with exercise prices equal to the fair value of the Company's common stock on the date of grant.

INCOME TAXES

The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." This statement prescribes the use of the liability method whereby deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse.

COMPREHENSIVE INCOME

In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 130, "Reporting Comprehensive Income," which establishes standards for reporting and displaying comprehensive income and its components in financial statements. The only items of other comprehensive income (loss) that the Company currently reports are unrealized gains (losses) on short-term investments,

F-11

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
which are included in other accumulated comprehensive income (loss) in the consolidated statement of redeemable convertible preferred stock and stockholders' equity (net capital deficiency).

SEGMENT INFORMATION

The Company reports segments in accordance with SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." SFAS No. 131 requires the use of a management approach in identifying segments of an enterprise. Prior to 1999, the Company consisted of one operating segment: pharmacy and supply systems. A second operating segment was created in the second half of 1999 with the introduction of the Company's e-commerce business. The Company's chief operating decision maker reviews information pertaining to reportable segments to the operating income level. There are no significant intersegment sales or transfers. Assets of the operating segments are not segregated and substantially all of the Company's long-lived assets are located in the United States.

For the years ended December 31, 1999 and 2000, substantially all of the Company's total revenues and gross profit were generated by the pharmacy and supply systems operating segment. The Internet-based e-commerce business operating segment generated no revenues in 1999 and less than one percent of consolidated revenues in 2000. The gross loss generated by the segment was less than three percent of consolidated gross profit in both 1999 and 2000, excluding the $2.9 million restructuring charge recorded in 2000.

STOCK SPLIT

All common stock share and per share amounts have been restated to reflect a 1-for-1.6 reverse stock split.

NET INCOME (LOSS) PER SHARE

In accordance with SFAS No. 128, "Earnings Per Share," basic net income (loss) per share is computed by dividing the net income (loss) applicable to common stockholders for the period by the weighted average number of common shares outstanding during the period, less shares subject to repurchase. Diluted net income (loss) per share is computed by dividing the net income (loss) applicable to common stockholders for the period by the weighted average number of common and common equivalent shares outstanding during the period. Potentially dilutive securities, composed of incremental common shares issuable upon the exercise of stock options and warrants, and common shares issuable on conversion of preferred stock, were excluded from historical diluted loss per share for the years ended December 31, 1999 and 2000 because of their anti-dilutive effect. The total number of shares excluded from the calculations of diluted net loss per share for the years ended December 31, 1999 and 2000, was 730,312 and 3,031,119, respectively. The total number of shares excluded from the calculations of diluted net loss per share for the three months ended March 31, 2000 and 2001 was 736,523 and 3,838,374, respectively.

Under the provisions of SAB No. 98, common shares issued for nominal consideration, if any, would be included in the per share calculations as if they were outstanding for all periods presented. No common shares have been issued for nominal consideration.

F-12

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Pro forma net loss per share has been computed as described above and also gives effect to common equivalent shares arising from redeemable convertible preferred stock, convertible preferred stock and a convertible note that will automatically convert upon the closing of the initial public offering contemplated by this prospectus using the if-converted method from the original date of issuance.

The calculation of historical and pro forma basic and diluted net income (loss) per common share is as follows:

                                                                                                  THREE MONTHS
                                                                                                      ENDED
                                                                 YEAR ENDED DECEMBER 31,            MARCH 31,
                                                              ------------------------------   -------------------
                                                                1998       1999       2000       2000       2001
                                                              --------   --------   --------   --------   --------
                                                                (In thousands, except per          (unaudited)
                                                                      share amounts)
HISTORICAL:
  Basic:
    Net income (loss).......................................  $   643    $(26,267)  $(19,976)  $(7,397)   $(1,364)
    Preferred stock accretion...............................      (22)         --         --        --         --
                                                              -------    --------   --------   -------    -------
    Net income (loss) applicable to common
      stockholders..........................................  $   621    $(26,267)  $(19,976)  $(7,397)   $(1,364)
                                                              =======    ========   ========   =======    =======
    Weighted average shares of common stock outstanding.....    1,318       1,477      2,267     1,693      3,125
    Less: Weighted average shares subject to
      repurchase............................................       16           6        563        12        384
                                                              -------    --------   --------   -------    -------
    Weighted average shares outstanding--
      basic.................................................    1,302       1,471      1,704     1,681      2,741
                                                              =======    ========   ========   =======    =======
    Net income (loss) applicable to common shareholders per
      common share..........................................  $  0.48    $ (17.86)  $ (11.72)  $ (4.40)   $ (0.50)
                                                              =======    ========   ========   =======    =======

  Diluted:
    Net income (loss).......................................  $   643    $(26,267)  $(19,976)  $(7,397)   $(1,364)
                                                              =======    ========   ========   =======    =======
    Weighted average shares outstanding--
      basic.................................................    1,302       1,471      1,704     1,681      2,741
    Weighted average number of common shares issuable upon
      the conversion of dilutive preferred shares...........    8,528          --         --        --         --
    Effect of dilutive securities--stock options............    1,183          --         --        --         --
                                                              -------    --------   --------   -------    -------
    Diluted weighted average number of shares outstanding...   11,013       1,471      1,704     1,681      2,741
                                                              =======    ========   ========   =======    =======
    Net income (loss) per common share......................  $  0.06    $ (17.86)  $ (11.72)  $ (4.40)   $ (0.50)
                                                              =======    ========   ========   =======    =======

PRO FORMA BASIC AND DILUTED (UNAUDITED):
  Net loss..................................................                        $(19,976)             $(1,364)
                                                                                    ========              =======
  Shares used above.........................................                           1,704                2,741
  Adjustment to reflect the weighted average effect of the
    assumed conversion of the convertible note payable and
    convertible preferred stock.............................                          11,147               11,148
                                                                                    --------              -------
  Weighted average shares used in computing pro forma basic
    and diluted net loss per share..........................                          12,851               13,889
                                                                                    ========              =======
  Pro forma basic and diluted net loss per common share.....                        $  (1.55)             $ (0.10)
                                                                                    ========              =======

F-13

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) UNAUDITED PRO FORMA BALANCE SHEET

The unaudited pro forma balance sheet information at March 31, 2001 reflects the assumed conversion of all of the Company's convertible preferred stock and a convertible note upon completion of the offering by this prospectus. The unaudited pro forma balance sheet also reflects the assumed redemption of 720,800 shares of redeemable convertible preferred stock at a price of $14.03 per share. In addition, the unaudited pro forma balance sheet assumes the $10.1 million redemption obligation will be fulfilled using all of the Company's available cash and cash equivalents and short-term investments of $7.7 million with the balance of $2.4 million redeemed through the issuance of a short-term note payable to the stockholder.

RECENTLY ISSUED ACCOUNTING STANDARDS

In March 2000, the Emerging Issues Task Force (EITF) published its consensus on Issue No. 00-2, "Accounting for Web Site Development Costs." This EITF sets forth guidance on whether to capitalize or expense certain development costs. The Company has adopted EITF 00-2 effective January 1, 2000 and capitalized $260,000 of Web site development costs in the year ended December 31, 2000. These costs were written off as a part of the 2000 restructuring activities.

In March, 2000, the FASB issued Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation," an interpretation of APB No. 25. The Interpretation is applied prospectively to all new awards, modifications to outstanding awards, and changes in employee status after July 1, 2000, with the exception of the definition of employee and stock option repricings as to which the effective date is December 15, 1998. The adoption of this Interpretation did not have a significant effect on the Company's results of operations or financial condition.

In December 1999, the Securities and Exchange Commission issued SAB No. 101, "Revenue Recognition in Financial Statements." SAB No. 101 provides guidance on the recognition, presentation and disclosure of revenue in financial statements. The Company has adopted SAB No. 101 for all periods presented.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and No. 138, which is effective for years beginning after June 15, 2000. SFAS No. 133, as amended, will require the Company to recognize all derivatives on the balance sheet at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. SFAS No. 133 will be effective for the Company's financial statements for the year ended December 31, 2001. Management believes that this statement will not have a significant effect on the Company's results of operations or financial condition.

NOTE 2. SURE-MED ACQUISITION

Effective January 29, 1999, the Company acquired substantially all of the assets together with certain specified liabilities and obligations of the Sure-Med product line of Baxter Healthcare in a transaction accounted for as a purchase. Baxter Healthcare designed, marketed and sold Sure-Med pharmacy systems to hospitals and other healthcare facilities. The consolidated financial statements include the operating results of Sure-Med from the date of acquisition.

F-14

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 2. SURE-MED ACQUISITION (CONTINUED)

The original purchase price of $15.1 million consisted of a cash payment of $2.0 million to Baxter Healthcare, a promissory note of $12.7 million, and $400,000 of related acquisition expenses. In December 1999, the purchase price was adjusted downward by $6.4 million through a $1.6 million cash payment from Baxter Healthcare to the Company and a $4.8 million reduction in the note payable to Baxter Healthcare. The Company is obligated to repay the principal amount of the promissory note in eight quarterly installments, commencing on March 31, 2002, or earlier upon the closing of an initial public offering. The promissory note bears interest at a rate of 8.0% through December 31, 2001, 9% through December 31, 2002 and 10% through December 31, 2003. Interest is payable quarterly, commencing on March 31, 1999. Upon the sale or issuance by Omnicell of any shares of capital stock, excluding sales or issuances of common stock or options under the Company's stock option and stock purchase plans and private placements in any single year not exceeding 10.0% of its outstanding paid-in capital, the Company is required to prepay the outstanding principal amount of the promissory note plus accrued interest to the extent of 50.0% of the net proceeds of such equity issuance. There is an exception that allows up to $30 million of financing raised during 2000 to be excluded as long as 50.0% of the proceeds shall be applied to redeeming the Series J preferred stock. See Note 14.

The purchase price consideration was allocated to the acquired assets and assumed liabilities based on fair values as follows (in thousands):

Inventories.................................................  $16,098
Other assets, primarily residual value of leased systems....    1,820
Identifiable intangible assets..............................      366
Liabilities.................................................   (9,618)
                                                              -------
Total purchase consideration................................  $ 8,666
                                                              =======

Pro forma results of operations, as if the transaction had occurred on January 1, 1999, are not presented as they would not be materially different than actual 1999 results. Pro forma results of operations, as if the transaction had occurred on January 1, 1998, are as follows (in thousands):

Revenue.....................................................  $ 65,590
Net loss....................................................  $(19,867)
Net loss per share..........................................  $ (15.26)

In the fourth quarter of 1999, after sales of the Sure-Med pharmacy systems were determined to be substantially below original forecasts, the Company recorded a $9.7 million charge to cost of revenues to reflect a writedown of Sure-Med product line inventory to estimated net realizable value. In 1999, the Company also recorded $785,000 of integration expenses associated with the integration of the Company and Sure-Med engineering efforts, product lines, and marketing efforts.

The Sure-Med acquisition was entered into with the expectation that significant sales would be generated in 1999 and 2000. The actual sales for 1999 and 2000 were substantially below the levels anticipated in the Company's forecasts. Product integration issues hindered the Company's sales force in its attempt to sell the Sure-Med pharmacy systems. As a result, during the third quarter of fiscal 2000, the Company significantly reduced its Sure-Med pharmacy systems sales and marketing efforts. It also performed a SFAS 121 impairment analysis on the remaining Sure-Med intangible assets and concluded that, based on estimated negative future cash flows, the $182,000 net balance of its intangible assets was impaired and was therefore written-off to expense.

F-15

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 3. LEASING ARRANGEMENTS (CONTINUED)

In 1999 and 2000, net sales-type lease receivables sold under these agreements totaled approximately $22.3 million and $20.7 million, respectively. The Company records revenue at an amount equal to the cash to be received from the leasing company, which is equivalent to the net present value of the lease streams, utilizing the implicit interest rate under its funding agreements. At December 31, 1999 and 2000, accounts receivable included approximately $2.7 million and $1.5 million, respectively, due from the finance companies for lease receivables sold.

NOTE 4. SHORT-TERM INVESTMENTS

Short-term investments consist of the following (in thousands):

                                             AMORTIZED   UNREALIZED GAIN
                                               COST          (LOSS)        FAIR VALUE
                                             ---------   ---------------   ----------
December 31, 1999:
  Certificates of deposits.................   $2,000        $      --        $2,000
  U.S. commercial debt securities..........    2,150                2         2,152
                                              ------        ---------        ------
                                              $4,150        $       2        $4,152
                                              ======        =========        ======

December 31, 2000:
  Certificates of deposits.................   $2,284        $       2        $2,286
                                              ======        =========        ======

All short-term investments at December 31, 2000 mature in 2001.

NOTE 5. INVENTORIES

Inventories consist of the following (in thousands):

                                                     DECEMBER 31,        MARCH 31,
                                                  -------------------   -----------
                                                    1999       2000        2001
                                                  --------   --------   -----------
                                                                        (unaudited)
Raw materials...................................   $3,650    $ 4,540      $ 4,848
Work-in-process.................................      565        340          876
Finished goods..................................    5,109      5,534        6,808
                                                   ------    -------      -------
  Total.........................................   $9,324    $10,414      $12,532
                                                   ======    =======      =======

F-16

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 6. PROPERTY AND EQUIPMENT

Property and equipment consist of the following (in thousands):

                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       2000
                                                              --------   --------
Equipment...................................................  $ 6,642    $ 9,043
Furniture and fixtures......................................      930      1,323
Leasehold improvements......................................    1,120      1,629
Purchased software..........................................    3,592        526
                                                              -------    -------
                                                               12,284     12,521
Accumulated depreciation and amortization...................   (5,043)    (7,608)
                                                              -------    -------
Property and equipment, net.................................  $ 7,241    $ 4,913
                                                              =======    =======

No equipment was leased under capital leases at December 31, 1999 and 2000.

In August 1999, the Company completed a software license transaction with Commerce One, Inc. Purchased software consists primarily of this software licensed on a perpetual basis to enable customer use of the Company's Internet-based procurement application. Maintenance and support will be provided by the licensor at contractual annual rates. The Company will share with the licensor a portion of the transaction fees collected, if any, from product manufacturers when purchases are made from healthcare suppliers on the Company's Internet-based procurement application.

In the third quarter of 2000, the Company wrote-off the $2.0 million remaining balance of the MarketSite software license as part of the restructuring activities.

NOTE 7. OTHER ASSETS

In 1997, the Company provided a loan of $500,000 to a strategic partner that was in a development stage. The note receivable bore interest at 8.5% and was due in September 2000. The note receivable was automatically convertible to equity of the corporation upon the closing of that entity's next financing of at least $1,000,000 or upon default of payment, based on the unpaid principal balance and accrued interest divided by the fair value price per share. In December 1998, upon the closing of a financing by the corporation, the note was converted into 13,052 shares of its Series D convertible preferred stock. At December 31, 1999, the Company determined that there was a permanent decline in the fair value of this asset and recorded a valuation allowance of $550,000 against the entire investment, including accrued interest.

F-17

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 8. ACCRUED LIABILITIES

Accrued liabilities consist of the following (in thousands):

                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       2000
                                                              --------   --------
Accrued compensation and related benefits...................  $ 2,224    $ 2,139
Accrued license fees........................................    2,523        119
Accrued upgrade costs.......................................    3,960      5,995
Other accrued liabilities...................................    8,592      7,637
Accrued restructuring costs.................................       --        175
                                                              -------    -------
                                                              $17,299    $16,065
                                                              =======    =======

Accrued upgrade costs represent the estimated costs to be incurred by the Company to provide certain specific functionality to Sure-Med products as a result of the acquisition of the Sure-Med product line in January 1999. The following table sets forth the upgrade costs accrual (in thousands):

                                                                  YEAR ENDED
                                                                 DECEMBER 31,        THREE MONTHS
                                                              -------------------       ENDED
                                                                1999       2000     MARCH 31, 2001
                                                              --------   --------   --------------
                                                                                     (unaudited)
Beginning balance...........................................   $   --     $3,960        $5,995
Estimated liability at date of acquisition..................    3,960         --            --
Materials, labor and shipping costs expended................       --       (215)          (12)
Change in estimated liability...............................       --      2,250            --
                                                               ------     ------        ------
                                                               $3,960     $5,995        $5,983
                                                               ======     ======        ======

NOTE 9. RESTRUCTURING

The Company recorded restructuring costs of $2.9 million in the third quarter of fiscal 2000 in connection with a strategic change in its e-commerce business to concentrate primarily on its Internet-based procurement application. This resulted in a workforce reduction of approximately 14 positions. The primary components of the restructuring charge were $2.0 million related to a purchased software license, $260,000 related to capitalized software engineering costs, and $517,000 of employee severance costs. The total cash outlays related to these charges were $404,000 in 2000. As of December 31, 2000, activities related to this restructuring were completed.

F-18

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 9. RESTRUCTURING (CONTINUED)
The following table sets forth the restructuring reserve:

                                                               SEVERANCE
                                                    ASSETS    AND BENEFITS    OTHER      TOTAL
                                                   --------   ------------   --------   --------
                                                                  (in thousands)
Restructuring expense............................  $ 2,290       $ 517         $101     $ 2,908

  Writedown of assets............................   (2,290)         --          (39)     (2,329)
  Cash expenditures..............................       --        (342)         (62)       (404)
                                                   -------       -----         ----     -------
Balance at December 31, 2000.....................       --         175           --         175
  Cash expenditures..............................       --         (13)          --         (13)
                                                   -------       -----         ----     -------
Balance at March 31, 2001........................  $    --       $ 162         $ --     $   162
                                                   =======       =====         ====     =======

NOTE 10. DEFERRED GROSS PROFIT

Deferred gross profit consists of the following (in thousands):

                                                             1999      2000
                                                            -------   -------
Sales of pharmacy and supply systems, which have been
  accepted but not yet installed..........................  $33,511   $34,630
Cost of sales, excluding installation costs...............   (6,816)   (8,783)
                                                            -------   -------
                                                            $26,695   $25,847
                                                            =======   =======

NOTE 11. LONG-TERM NOTES PAYABLE

In October 1999, the Company executed a convertible promissory note with a private party for $350,000 with interest accruing at 6.02%. No interest payments are due until October 1, 2004, the maturity date of the note. If the Company closes an initial public offering of its common stock, the note and accrued interest shall automatically convert to an equivalent number of shares of the Company's common stock at the initial public offering price per share.

In connection with one of the Company's facilities leases, the landlord has advanced $200,000 to the Company for leasehold improvements. The Company has agreed to repay this advance in monthly installments of $4,249. This borrowing arrangement commenced on July 1, 1999, ends June 30, 2004, and bears interest at 10% per annum.

F-19

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 11. LONG-TERM NOTES PAYABLE (CONTINUED)
Scheduled debt repayments under the convertible promissory note, facilities lease advance and Baxter promissory note (Note 2) are as follows:

2001........................................................  $   37
2002........................................................   3,998
2003........................................................   4,003
2004........................................................     375
2005 and thereafter.........................................      --
                                                              ------
                                                               8,413
Less: current portion.......................................      37
                                                              ------
                                                              $8,376
                                                              ======

NOTE 12. CREDIT FACILITY

In January 2000, the Company entered into a credit facility with a bank. This facility, as amended in August 2000, and January, May and June 2001 provides the Company with advances of up to 80% of eligible receivables, as defined, up to $10.0 million, and expires on June 30, 2002. This line of credit bears interest at the prime rate plus 2.25%. The Company has pledged substantially all of its' assets as collateral for this line of credit. The credit facility requires the Company to comply with a tangible net deficit financial covenant and other specified non-financial covenants. At December 31, 2000, the Company had no borrowings under this credit facility, was eligible to borrow approximately $4.4 million, and was in compliance with the covenants.

Under the terms of the credit facility, on December 31, 2000 the Company issued to the bank a warrant to purchase 26,351 shares of its common stock at $9.50 per share with conversion terms on an initial public offering similar to the conversion terms for the Series K preferred stock (Note 15). The warrant expires on December 31, 2005. The warrant will convert to a warrant to purchase 31,249 shares of common stock at $8.00 per share based on the Series K conversion adjustment and the 1-for-1.6 reverse stock split. This warrant has been valued at $78,000 using the Black-Scholes valuation method. This amount is included in other assets and will be amortized through the credit line's expiration date.

NOTE 13. LEASE COMMITMENTS

The Company leases its Palo Alto, California and Waukegan, Illinois offices and manufacturing facilities under noncancelable operating leases. The leases expire beginning January 2002 through June 2006. The Company has an option to renew the Palo Alto manufacturing facility lease (expires June 2003) and Waukegan facility lease (expires June 2006) for an additional five years. Rent expense for all operating leases was $728,000 (net of sublease income of $64,000), $1,629,000 and $2,120,000 (net of sublease income of $286,000) for the years ended December 31, 1998, 1999 and 2000, respectively.

F-20

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 13. LEASE COMMITMENTS (CONTINUED)
At December 31, 2000, future minimum annual operating lease payments, net of aggregate future minimum receipts from subleases, were as follows (in thousands):

2001........................................................   $1,278
2002........................................................    1,451
2003........................................................    1,960
2004........................................................    1,600
2005........................................................      299
Thereafter..................................................      152
                                                               ------
  Total minimum lease payments..............................   $6,740
                                                               ======

NOTE 14. REDEEMABLE CONVERTIBLE PREFERRED STOCK

In June 1996, the Company issued 1,802,000 shares of nonvoting Series I redeemable convertible preferred stock to Sun Healthcare for $25,227,000 (net of issuance costs of approximately $60,000) and authorized an equal number of voting shares of Series J redeemable convertible preferred stock. The Series I redeemable convertible preferred stock was converted into Series J redeemable convertible preferred stock on a one-for-one basis in 1996.

At any time after December 31, 1998, the holders of the Series J redeemable convertible preferred stock were entitled to require the Company to redeem for cash the outstanding shares over 30 months at a per share price equal to the original issue price (subject to adjustment for events of dilution) plus interest at 9.5% per annum (accruing beginning on March 8, 1999).

In January 1999, Sun Healthcare exercised its right to redeem its 1,802,000 shares of Series J redeemable convertible preferred stock in ten equal quarterly installments beginning in March 1999. Through December 31, 2000, the Company had redeemed 1,081,200 shares of Series J redeemable convertible preferred stock from Sun Healthcare for $15.2 million plus interest of $2.7 million. Cash of $11.6 million was used to satisfy this redemption, with the balance of $6.3 million paid by offsetting Sun Healthcare's outstanding accounts receivable balances. All payments have been made except the three quarterly redemption payments of $2.5 million each that were due in September 2000 and December 2000 and March 2001, which the Company was not obligated to make because the Company did not meet certain balance sheet tests under California law. The Company will no longer be subject to these restrictions of California law following its reincorporation in Delaware.

Sun Healthcare has an accounts receivable balance of approximately $260,000 at December 31, 2000. In the past the two parties have offset the Omnicell accounts receivable balance with the redemption payments. At year end, the two parties had not finalized any offsetting agreement.

F-21

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 14. REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)

Significant terms of the Series J redeemable convertible preferred stock are as follows:

- Conversion of the Series J preferred stock is automatic upon completion of an initial public offering. In addition to adjustments for events of dilution, if the Company completes an initial public offering at a price greater than $11.78 per share and less than $13.47 per share, the conversion price of the Series J preferred stock will be adjusted to $17.72 per share from the original purchase price of $22.4523 (as converted per the 1-for-1.6 reverse stock split). If the offering price is less than $11.78 per share, the conversion price of the Series J preferred stock will be adjusted to $16.8370 per share.

- Series J preferred stock has voting rights equivalent to the number of shares of common stock into which it is convertible.

- Dividends may be declared at the discretion of the Board of Directors and are noncumulative. To the extent declared, dividends of $1.12 per share, per annum for Series J preferred stock must be paid prior to any dividends on any other preferred stock or common stock. No such dividends have been declared or paid.

- In the event of liquidation, dissolution, or winding up of the Company, prior to any other preferred stockholders, Series J stockholders shall receive $14.03 per share plus all declared but unpaid dividends. Upon completion of this distribution, the holders of the common stock will receive a pro rata distribution of any remaining assets of the Company. At December 31, 2000, the aggregate liquidation preference for redeemable convertible preferred stock was $10,113,000.

NOTE 15. STOCKHOLDERS' EQUITY

CONVERTIBLE PREFERRED STOCK

During the first quarter of 2000, the Company designated and issued 3,010,528 shares of Series K convertible preferred stock at a price of $9.50 per share subject to adjustment for events of dilution as described below. Net proceeds were approximately $28.5 million.

Conversion of the Series K convertible preferred stock is automatic upon completion of an initial public offering in excess of $25 million at an offering price of not less than $8.00 per share. If the Company completes an initial public offering at a price less than $33.78 per share, the conversion price of the Series K convertible preferred stock will adjust to 45% of the initial public offering price, but in no event will it adjust to less than $8.00 per share. This means that if this offering is completed at a price less than $17.78 per share, the resulting conversion price of the Series K convertible preferred stock will be $8.00 per share, and a total of 3,575,000 shares of common stock will be issued on conversion of such preferred stock exclusive of adjustments for events of dilution.

F-22

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 15. STOCKHOLDERS' EQUITY (CONTINUED)
At December 31, 1999 and 2000, convertible preferred stock consisted of the following (in thousands, net of issuance costs):

                                           DECEMBER 31, 1999        DECEMBER 31, 2000
                              SHARES     ----------------------   ----------------------
                            DESIGNATED   OUTSTANDING    AMOUNT    OUTSTANDING    AMOUNT
                            ----------   -----------   --------   -----------   --------
Series A..................       480           480     $   120          480     $   120
Series B..................       321           321         120          321         120
Series C..................     1,700         1,700       1,014        1,700       1,014
Series D..................     1,328         1,310       1,412        1,310       1,412
Series E..................     1,966         1,965       6,458        1,965       6,458
Series F..................     2,000         1,948      11,527        1,948      11,527
Series G..................     1,000            --          --           --          --
Series H..................     4,000         3,804      13,203        3,804      13,203
Series K..................     3,158            --          --        3,011      28,538
                              ------        ------     -------       ------     -------
  Total...................    15,953        11,528     $33,854       14,539     $62,392
                              ======        ======     =======       ======     =======

Significant terms of the convertible preferred stock are as follows:

- Each share of Series A, B, C, D, E, G, H and K preferred stock is convertible into one share of common stock, and each share of Series F preferred stock is convertible into 1.107 shares of common stock (subject to adjustment for events of dilution). Each share will automatically convert upon an underwritten public offering of common stock meeting specified criteria.

- Each share of convertible preferred stock has voting rights equivalent to the number of shares of common stock into which it is convertible. The holders of Series E preferred stock, voting together as a class, are entitled to elect one director of the Company. The holders of Series H preferred stock, voting together as a class, are also entitled to elect one director of the Company. The holders of Series K preferred stock, voting together as a class, are also entitled to elect one director of the Company.

- Dividends may be declared at the discretion of the Board of Directors and are noncumulative. To the extent declared, dividends of $0.02, $0.03, $0.048, $0.085, $0.265, $0.49, $0.49, $0.29, and $0.76 per share, per annum for Series A, B, C, D, E, F, G, H and K preferred stock, respectively, must be paid prior to any dividends on common stock. No such dividends have been declared or paid.

- In the event of liquidation, dissolution, or winding up of the Company, Series A, B, C, D, E, F, G, H and K stockholders shall receive, after required distributions to the redeemable convertible preferred stockholders, $0.25, $0.375, $0.60, $1.085, $3.30, $6.15, $6.15 and $3.68 and $9.50 per share, respectively, plus all declared but unpaid dividends. Upon completion of this distribution, the holders of the common stock will receive a pro rata distribution of any remaining assets of the Company. At December 31, 2000, the aggregate liquidation preference for preferred stock was $63.7 million.

F-23

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 15. STOCKHOLDERS' EQUITY (CONTINUED)
CONVERTIBLE PREFERRED STOCK WARRANTS

In connection with a capital lease financing in 1994, the Company issued a warrant to purchase 18,434 shares of Series D preferred stock at an exercise price of $1.09 per share (or 11,521 shares of common stock as converted per the 1-for-1.6 reverse stock split at a price of $1.74 per share). The warrant expires three years from the effective date of an initial public offering of the Company's common stock. The value of the warrant was immaterial.

In connection with capital lease financings in 1995, the Company issued warrants to purchase 8,130, 11,382 and 67,934 shares of Series F, G and H preferred stock at $6.15, $6.15 and $3.68 per share, respectively (or 5,081, 7,113 and 42,121 shares of common stock as converted per the 1-for-1.6 reverse stock split at prices of $9.84, $9.84 and $5.89 per share, respectively). The Series F and H warrants expire three years from the effective date of an initial public offering of the Company's common stock. The Series G warrant expires five years from the effective date of an initial public offering of the Company's common stock. The estimated value of these warrants remaining after amortization was expensed in June 1996 when the repayments were made for the borrowings.

NOTES RECEIVABLE FROM STOCKHOLDERS

During 2000, the Company provided all its officers the opportunity to exercise their options to purchase common stock, both vested and unvested, by entering into a full-recourse note receivable with Omnicell. As a result, 1,067,663 options were exercised under note receivable arrangements totaling $4.6 million. These notes bear interest at either 6.2% or 6.71%, compounded annually, with payment of both principal and interest due in 3 years.

Stock options that were exercised prior to vesting have been shown as shares subject to repurchase and total 549,742 shares.

COMMON STOCK

At December 31, 2000, 562,696 shares of common stock are subject to repurchase by the Company at the original issuance price. These repurchase rights generally expire ratably over periods of three to five years.

STOCK OPTION PLANS

The Company has reserved 10,410,000 shares of common stock for issuance under its 1992 Incentive Stock Plan, 1995 Management Option Plan, and 1999 Equity Incentive Plan (the Plans). Under the Plans, incentive and nonqualified stock options or rights to purchase common stock may be granted to employees, directors, and consultants. Incentive options, nonqualified options, and stock purchase rights must be priced to be at least 100%, 85% and 85%, respectively, of the common stock's fair value at the date of grant as determined by the Board of Directors. Options shall become exercisable as determined by the Board of Directors. Sales of stock under stock purchase rights are made pursuant to restricted stock purchase agreements.

In September 1999, the Board of Directors adopted the 1999 Equity Incentive Plan (Incentive Plan) for granting of incentive and nonqualified stock options and rights to purchase common stock to

F-24

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 15. STOCKHOLDERS' EQUITY (CONTINUED)
employees, directors, and consultants. Under the Incentive Plan, 5,000,000 shares of common stock are authorized for issuance. Further, all unissued stock under the Company's 1992 Incentive Stock Plan and 1995 Management Stock Option Plan are added to the 5,000,000 shares reserved.

A summary of stock option activity under the Plans follows (shares in thousands):

                                                     NUMBER OF   WEIGHTED AVERAGE
                                                      SHARES      EXERCISE PRICE
                                                     ---------   ----------------
Outstanding at December 31, 1997...................    2,194          $ 4.27
  Granted..........................................      454           10.40
  Exercised........................................      (49)           2.75
  Canceled.........................................     (110)           8.67
                                                      ------

Outstanding at December 31, 1998...................    2,489            5.23
  Granted..........................................    1,203           10.40
  Exercised........................................     (205)           1.12
  Canceled.........................................     (142)           9.89
                                                      ------

Outstanding at December 31, 1999...................    3,345            7.10
  Granted..........................................    2,308            5.62
  Exercised........................................   (1,252)           4.11
  Canceled.........................................     (691)          10.06
                                                      ------

Outstanding at December 31, 2000...................    3,710            6.62
                                                      ======

Additional information regarding options outstanding as of December 31, 2000 is as follows (shares in thousands):

                                                      WEIGHTED
                                                      AVERAGE
                                                     REMAINING        WEIGHTED                       WEIGHTED
                                        NUMBER      CONTRACTUAL       AVERAGE         NUMBER         AVERAGE
RANGE OF EXERCISE PRICE               OUTSTANDING   LIFE (YEARS)   EXERCISE PRICE   EXERCISABLE   EXERCISE PRICE
-----------------------               -----------   ------------   --------------   -----------   --------------
$0.10 - $1.20......................        584           3.66          $ 0.76            584          $ 0.76
$2.00 - $2.00......................        826           9.67            2.00             15            2.00
$3.20 - $3.20......................         54           8.94            3.20             10            3.20
$6.40 - $6.40......................        263           5.29            6.40            260            6.40
$10.40 - $10.40....................      1,983           8.24           10.40            761           10.40
                                         -----                                         -----
                                         3,710           7.64            6.62          1,630            6.18
                                         =====                                         =====

At December 31, 2000, there were 885,416 shares available for future grant under the Plans, and options to purchase 1,630,000 shares were exercisable. Upon the exercise of certain exercisable options, the Company would have the right to repurchase 3,691,290 shares at the original issuance price. Such a right generally expires over three to five years.

As discussed in Note 1, the Company continues to account for its stock-based awards using the intrinsic value method in accordance with APB 25 and its related interpretations. Accordingly, compensation

F-25

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 15. STOCKHOLDERS' EQUITY (CONTINUED)

expense has not been recognized in the consolidated financial statements for employee stock arrangements except for the difference between the deemed fair value for accounting purposes and the exercise price of certain stock options.

In connection with the grant of certain stock options in December 1995, the Company recorded deferred compensation of $62,000 for the difference between the deemed fair value for accounting purposes and the option price. At December 31, 2000, the deferred compensation has been fully amortized.

The Company has recorded deferred stock compensation with respect to options granted to employees of approximately $34,000 in the year ended December 31, 2000 and $136,000 in the three months ended March 31, 2001, representing the difference between the exercise price of the options and the deemed fair value of the common stock. These amounts are being amortized to operations over the vesting periods of the options using the graded vesting method. Such amortization expense amounted to approximately $3,000 for the year ended December 31, 2000 and approximately $14,000 for the three months ended in March 31, 2001. The Company's policy is to use the graded vesting method for recognizing compensation cost for fixed awards with pro rata vesting. The Company amortizes the deferred stock-based compensation on the graded vesting method over the vesting periods of the applicable stock options, generally four years. The graded vesting method provides for vesting of portions of the overall awards at interim dates and results in greater vesting in earlier years than the straight line method.

For the year ended December 31, 2000, the Company issued options to independent contractors to purchase 24,063 shares of common stock. The value of the options, using the Black-Scholes option pricing model, was not significant and the options were fully vested at issuance.

For the year ended December 31, 2000, the Company recorded compensation expense of approximately $728,000 in connection with granting certain former employees extended periods (beyond the period specified by the Plans) to exercise their stock options upon termination of employment.

SFAS 123 requires the disclosure of pro forma net income (loss) had the Company adopted the fair value method as of the beginning of 1995. Under SFAS 123, the fair value of stock-based awards to employees is calculated through the use of option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company's stock option awards. These models also require subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affects the calculated values. The Company's calculations were made using the Black-Scholes option pricing model with risk-free interest rates of approximately 5.42%, 5.38% and 6.30% in 1998, 1999 and 2000, respectively, and no dividends during the expected term. Volatility assumed was 0 in 1998 and 1999 and 1.7028 in 2000. The Company's calculations are based on a multiple-option valuation approach, and forfeitures are recognized as they occur.

F-26

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 15. STOCKHOLDERS' EQUITY (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of an option is amortized to expense over the option's vesting period. The Company's pro forma information follows (in thousands):

                                                              YEAR ENDED DECEMBER 31,
                                                           ------------------------------
                                                             1998       1999       2000
                                                           --------   --------   --------
Pro forma net income (loss)..............................   $ 106     $(27,075)  $(25,515)
Pro forma net income (loss) per common share:
  Basic..................................................   $0.08     $ (18.41)  $ (14.97)
  Diluted................................................   $0.01     $ (18.41)  $ (14.97)

1997 EMPLOYEE STOCK PURCHASE PLAN

The Company has an Employee Stock Purchase Plan under which employees can purchase shares of the Company's common stock based on a percentage of their compensation, but not greater than 15% of their earnings, up to a maximum of $25,000 of fair value per year. The purchase price per share must be equal to the lower of 85% of the fair value of the common stock at the beginning or end of the six-month offering period. A total of 174,489 shares of common stock are reserved for issuance under the plan. As of December 31, 2000, 340,463 shares had been issued under this plan.

On April 19, 2000 the Board of Directors amended the 1997 Employee Stock Purchase Plan (Purchase Plan) to become effective simultaneously with the effectiveness of the Company's initial public offering. As amended, eligible employees may purchase stock at 85% of the lower of closing prices for the common stock at the beginning of a 24-month offering period or the end of each six-month purchase period.

At December 31, 2000, the Company has reserved shares of common stock for issuance as follows (in thousands):

Conversion of outstanding convertible preferred stock.......  11,716
Issuance under the Plans....................................   4,624
Employee stock purchase plan................................     174
Convertible preferred stock warrants........................      70
Warrants to bank............................................      31
                                                              ------
Total.......................................................  16,615
                                                              ======

401(K) PLAN

During 1994, the Company established a 401(k) tax-deferred savings plan, whereby eligible employees may contribute a percentage of their eligible compensation but not greater than 15.0% of their earnings up to the maximum as required by law. Company contributions are discretionary; no such Company contributions have been made since inception of the plan.

F-27

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 16. INCOME TAXES

The provision for income taxes consists of the following (in thousands):

                                                                    YEAR ENDED
                                                                   DECEMBER 31,
                                                          ------------------------------
                                                            1998       1999       2000
                                                          --------   --------   --------
Current provision:
  Federal...............................................    $105       $ --       $ --
  State.................................................      50        149        100
  Foreign...............................................      30         --         --
                                                            ----       ----       ----
Total current provision.................................    $185       $149       $100
                                                            ====       ====       ====

The difference between the provision for income taxes and the amount computed by applying the Federal statutory income tax rate (35%) to income before taxes is explained below (in thousands):

                                                        YEAR ENDED DECEMBER 31,
                                                     ------------------------------
                                                       1998       1999       2000
                                                     --------   --------   --------
Tax provision (benefit) at federal statutory
  rate.............................................   $ 290     $(9,658)   $(7,858)
State income tax...................................      50         149        100
Federal alternative minimum taxes..................     105          --         --
Foreign taxes......................................      30          --         --
Unutilized (utilized) net operating losses.........    (290)      9,658      7,858
                                                      -----     -------    -------
Total..............................................   $ 185     $   149    $   100
                                                      =====     =======    =======

Significant components of the Company's deferred tax assets are as follows at December 31 (in thousands):

                                                            1999       2000
                                                          --------   --------
Deferred tax assets:
  Net operating loss carryforwards......................  $  4,000   $ 13,824
  Tax credit carryforwards..............................     1,257      2,255
  Inventory related items...............................     5,746      6,391
  Reserves and accruals.................................     3,960      2,338
  Deferred revenue......................................    11,769     12,813
  Capitalized research and development costs............       476        473
  Depreciation and amortization.........................       205      1,978
  Other, net............................................     2,298        124
                                                          --------   --------
Total deferred tax assets...............................    29,711     40,196
Valuation allowance.....................................   (29,711)   (40,196)
                                                          --------   --------
Net deferred tax assets.................................  $     --   $     --
                                                          ========   ========

F-28

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 16. INCOME TAXES (CONTINUED)
The Company has established a valuation allowance equal to the net deferred tax assets due to the uncertainties regarding the realization of deferred tax assets based on the Company's lack of earnings history.

As of December 31, 2000, the Company had a federal net operating loss carryforward of approximately $38.0 million. The federal net operating loss carryforward will expire beginning in 2009. The Company also had federal and state research and development tax credit carryforwards of approximately $1.4 million and $417,000, respectively. The federal research and development tax credit carryforwards will expire at various dates beginning in year 2007 through 2020, if not utilized. The state research and development tax credit carryforward does not expire.

Utilization of the net operating losses and tax credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses and tax credits before utilization.

NOTE 17. RELATED PARTY TRANSACTIONS

The Company recorded revenues of approximately $9.9 million, $5.1 million and $1.9 million in 1998, 1999 and 2000, respectively, from the Series J redeemable convertible preferred stockholder, who was a member of the Company's Board of Directors until August 11, 1999 (of which approximately $302,000 and $263,000 is included in accounts receivable at December 31, 1999 and 2000, respectively). Payment terms are net 45 days.

NOTE 18. RESTATEMENT

The Company has restated its financial statements for the years ended December 31, 1998, 1999 and 2000. The net effect of all adjustments to these years was to increase net income by $7,000 (or $0.00 per diluted share) for the year ended December 31, 1998 and decrease net loss by $6.9 million (or $4.66 per diluted share) and $2.6 million (or $1.53 per diluted share) for the years ended December 31, 1999 and 2000, respectively.

The components comprising the restatements are as follows (in thousands):

                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1998       1999       2000
                                                              --------   --------   --------
Adjustment to gross profit in compliance with SOP 97-2......     $7       $3,739     $2,600
Change in estimated purchase price allocation and related
  effects...................................................     --        1,563         --
Reversal of inventory writedown.............................     --        1,552         --
  Total.....................................................     $7       $6,854     $2,600

The adjustment to gross profit occurred in conjunction with the Company's effort to enhance the memory of its reporting systems and financial data as they relate to revenue recognition and deferred gross profit on its sales of pharmacy and supply systems. This effort identified amounts that were included in deferred gross profit but should have been recognized as revenue as the related systems were installed.

F-29

OMNICELL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001 IS
UNAUDITED)

NOTE 18. RESTATEMENT (CONTINUED)

The change in estimated purchase price allocation occurred in connection with the Company's acquisition of the Sure-Med product line. At the time of acquisition, estimates of the assets and liabilities acquired were made. Subsequent to that time, it was determined that the actual values of certain items had differing values than originally estimated. As a result of these changes, net loss was decreased in 1999 by $1.6 million.

The reversal of inventory writedown was recorded in conjunction with an agreement with a customer to provide free units. The carrying value of the related inventory was originally written down to its fair value, or zero. However, upon further review, it was determined that the supporting agreement did not represent a binding commitment to provide the free units and the inventory could be sold if not used to fulfill the obligation under the agreement. Therefore, the resulting inventory writedown was reversed resulting in a decrease to net loss in 1999 of $1.6 million.

NOTE 19. SUBSEQUENT EVENTS

On March 9, 2001, the Company's Board of Directors took the following actions:

- authorized the filing of a registration statement with the Securities and Exchange Commission to register shares of its common stock in connection with the proposed initial public offering;

- authorized the change of the Company's state of incorporation to Delaware.

- approved an amendment to decrease the number of shares reserved for issuance under the Company's 1992 Equity Incentive Plan and 1995 Management Stock Option Plan by 626,186 shares and to increase the number of shares reserved for issuance under the 1999 Equity Incentive Plan by 626,186 shares.

STOCK OPTION GRANTS

Subsequent to December 31, 2000, the Company approved grants to employees for options to purchase 106,281 shares of its common stock at $5.60 per share in February 2001, 62,813 shares of its common stock at $6.40 per share in March 2001 and 25,813 shares of its common stock at $7.20 per share in May 2001.

STOCK SPLIT

On April 16, 2001, the Company's stockholders approved a 1-for-1.6 reverse stock split on the Company's common stock. Accordingly, all common stock share and per-share data for all periods presented have been restated to reflect this event.

F-30

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors and Stockholders of
Baxter International Inc.

In our opinion, the accompanying balance sheet and the related statements of operations and of cash flows present fairly, in all material respects, the financial position of the Sure-Med Division of Baxter Healthcare Corporation (the Business), an indirect division of Baxter International Inc., at December 31, 1998, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Business' management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Note 2, the financial statements as of and for the year ended December 31, 1998 have been restated to correct an error in accounting for revenue recognition and omission of impairment losses.

/s/ PRICEWATERHOUSECOOPERS LLP


Chicago, Illinois
July 30, 1999, except as to Notes 2 and 12,
which are as of January 23, 2001

F-31

SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION

(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)

BALANCE SHEET

                                                                  AS OF
                                                               DECEMBER 31,
                                                                   1998
                                                              --------------
                                                              (in thousands)
                                                                (restated)
Current assets
  Accounts receivable, net..................................      $ 1,930
  Inventories, net..........................................        9,474
  Prepaid expenses..........................................        2,046
  Deferred costs associated with installations in process...       25,285
                                                                  -------
    Total current assets....................................       38,735
                                                                  -------
Fixed assets, net...........................................          729
Other assets................................................        1,843
                                                                  -------
    Total assets............................................      $41,307
                                                                  =======
Current liabilities
  Accounts payable..........................................      $ 2,096
  Customer deposits.........................................       10,612
  Other accrued liabilities.................................        1,232
                                                                  -------
    Total current liabilities...............................       13,940
                                                                  -------
Long-term liabilities
  Accrued warranty..........................................          592
                                                                  -------
Investment by parent........................................       26,775
                                                                  -------
    Total liabilities and Investment by Parent..............      $41,307
                                                                  =======

The accompanying notes are an integral part of these financial statements.

F-32

SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION

(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)

STATEMENT OF OPERATIONS

                                                                YEAR ENDED
                                                               DECEMBER 31,
                                                                   1998
                                                              --------------
                                                              (in thousands)
                                                                (restated)
Net revenues................................................      $ 17,378
Costs and expenses
  Cost of goods sold (including related party charges of
    $1,058).................................................        15,790
  Selling and marketing expenses (including related party
    charges of $1,924)......................................         8,741
  General and administrative expenses (including related
    party charges of $1,198)................................         2,245
  Research and development expenses (including related party
    charges of
    $108)...................................................         1,347
  Asset impairment charge...................................         9,765
                                                                  --------
Total costs and expenses....................................        37,888
                                                                  --------
Net loss....................................................      $(20,510)
                                                                  ========

The accompanying notes are an integral part of these financial statements.

F-33

SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION

(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)

STATEMENT OF CASH FLOWS

                                                                YEAR ENDED
                                                               DECEMBER 31,
                                                                   1998
                                                              --------------
                                                              (in thousands)
                                                                (restated)
                                                              --------------
                                                                (brackets
                                                               denote cash
                                                                outflows)
                                                               -----------
Cash flows from operations
  Net loss..................................................     $(20,510)
  Adjustments
    Depreciation and amortization...........................        1,233
    Loss on disposal........................................        9,765
    Changes in balance sheet items
      Accounts receivable, net..............................        3,866
      Inventories...........................................        4,295
      Prepaids..............................................         (504)
      Deferred costs associated with installations in
        process.............................................       (5,683)
      Accounts payable......................................       (1,221)
      Accrued liabilities...................................        4,167
                                                                 --------
  Cash flows from operations................................       (4,592)
                                                                 --------
Cash flows from investing activities
Capitalized software costs..................................       (3,690)
Capital expenditures........................................         (453)
Installed base of equipment leased to customers.............         (659)
                                                                 --------
Cash flows from investing activities........................       (4,802)
                                                                 --------
Cash flows from financing activities
Financing from Parent.......................................        9,394
                                                                 --------
Cash flows from financing activities........................        9,394
                                                                 --------
Change in cash and equivalents..............................           --
                                                                 --------
Cash and equivalents at beginning of year...................           --
                                                                 --------
Cash and equivalents at end of year.........................     $     --
                                                                 ========

The accompanying notes are an integral part of these financial statements.

F-34

SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION

(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)

NOTES TO FINANCIAL STATEMENTS

1. NATURE OF ENTITY AND BASIS OF PRESENTATION

The Sure-Med Division of Baxter Healthcare Corporation (the Business) is a division of Baxter Healthcare Corporation (Baxter), which is in turn a subsidiary of Baxter International Inc. (BII or Parent). The Business is principally engaged in the development, manufacturing, marketing and distribution of an automated distribution system designed to control the dispensing of narcotics, medications and supplies in both hospital and alternate site settings. The Business operates mainly in the domestic market, but does sell some of its products through related parties into certain international markets, principally Canada and Western Europe. Historically, the Business had no separate legal status. The accompanying financial statements have been prepared from the historical accounting records as if the Business had operated as a separate entity.

The financial statements include all of the direct operating expenses of the Business and allocations of certain shared costs from Baxter and BII. Allocations are based on actual usage or other methods that approximate actual usage. Management believes that the allocation methods are reasonable. However, these allocations are not necessarily indicative of the costs and expenses that would have resulted if the Business had been operated as a separate entity. The financial statements also include the push down of the Parent's loss on disposal of the business (Notes 2 and 12).

2. RESTATEMENT OF FINANCIAL RESULTS

In the course of reviewing certain customer contracts and related documents, the Business determined that it had made promises to customers to deliver specified software upgrades at future dates. In several cases, the software promise was determined to be a critical part of the arrangement with the customer. The existence of these software upgrade promises and their significance to the customer arrangements caused the Business to conclude that the software component of its product was more than incidental. Accordingly, the Business has determined that its revenues should be accounted for in accordance with the American Institute of Certified Public Accountant's Statement of Position 97-2 ("SOP 97-2"), "Software Revenue Recognition." The effects of applying SOP 97-2 on the financial statements were to defer revenues previously recorded associated with customer arrangements that included promises to deliver software and those when an installation effort remained as of the balance sheet date. The Business has restated its financial statements as of December 31, 1998 and deferred $8.8 million of revenues previously recognized in 1998. Additionally, the Business needed to adjust opening Investment by Parent for the effects of applying SOP 97-2 to prior periods. The effect on Investment by Parent at December 31, 1997 was a loss of approximately $2.8 million, which relates entirely to the application of SOP 97-2 to the year ended December 31, 1997.

In addition, the Parent determined that an impairment of capitalized software and certain other long-lived assets that arose as a result of the decision to sell the business should be reflected in these financial statements. Therefore, an impairment charge of $9.765 million has been reflected in the restated results of operations of the Business for the year ended December 31, 1998.

F-35

SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION

(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

FINANCIAL STATEMENT PRESENTATION

The preparation of the financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates.

REVENUE RECOGNITION

Revenues are derived from the sales of automated distribution systems and subsequent maintenance agreements. The Business markets its systems for sale or for lease. Automated distribution system sales, which are accounted for in accordance with SOP 97-2, are recognized when the system has been shipped, all installation and training services have been provided, no additional performance obligations exist and collection of the resulting receivables are probable. The Business does not provide post-contract customer support. All leasing arrangements are sales-type leases and revenue is recognized when all of the above conditions are met and the non-cancelable lease term has commenced. Revenues from service agreements are recognized ratably over the related contract period.

Upon title transfer to the customer, the cost of inventory is reclassified to deferred costs associated with installations in process. Upon completion of installation and training services and performance of any other obligations, the associated deferred costs are relieved to cost of sales to be matched against the related sales revenue.

CASH

The Business has not maintained any cash accounts and all cash management activities have been performed by Baxter and BII.

ACCOUNTS RECEIVABLE

Accounts receivable are shown net of allowance for doubtful accounts of $278.

INVENTORIES

                                                                  AS OF
                                                               DECEMBER 31,
                                                                   1998
                                                              --------------
                                                              (in thousands)
Raw materials...............................................      $ 2,379
Finished products...........................................        8,673
                                                                  -------
Total gross inventories.....................................       11,052
Inventory reserves..........................................       (1,578)
                                                                  -------
Total net inventories.......................................      $ 9,474
                                                                  =======

Inventories are stated at the lower of cost (first-in, first-out method) or market value. Market value for raw materials is based on replacement costs and, for finished products, on net realizable value.

F-36

SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION

(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) DEFERRED COSTS ASSOCIATED WITH INSTALLATIONS IN PROCESS

Deferred costs associated with installations in process consists of inventory and installation costs related to inventory at customers' locations which is awaiting completion of installation, training or other performance obligations.

FIXED ASSETS

                                                                  AS OF
                                                               DECEMBER 31,
                                                                   1998
                                                              --------------
                                                              (in thousands)
Computer equipment..........................................      $ 1,702
Machinery and equipment.....................................          756
                                                                  -------
Total fixed assets, at cost.................................        2,458
Accumulated depreciation and other write-downs..............       (1,729)
                                                                  -------
Net fixed assets............................................      $   729
                                                                  =======

Fixed assets are carried at cost less accumulated depreciation and other writedowns (Note 2). Expenditures for repairs and maintenance are charged to expense as incurred and were not significant for 1998. Interest costs applicable to the construction of major projects are capitalized when material.

Depreciation is principally calculated on the straight-line method over the estimated useful lives of the related assets, which range from three to five years. Straight-line and accelerated methods of depreciation are used for income tax purposes.

Depreciation expense was $511 in 1998. Capitalized interest was not material in 1998.

LEASE ACCOUNTING

The Business offers lease financing to its customers under the terms of its standard five-year sales-type lease. Leases originated by the business result in the recognition of revenue (present value of lease payments, net of executory costs) and cost of sales (actual cost of automated distribution system), as well as the recording of unearned income (excess of gross receivable plus estimated residual value over the cost of the equipment). Consistent with the Business' revenue recognition policy and concurrent with lease initiation, all leases are automatically included in a pool of leases sold on a non-recourse basis to a third party financial institution under the terms of a rolling lease sale agreement administered by the Parent ("Lease Sale Program"). As a result of this arrangement, all leased receivable balances and associated unearned income amounts are reclassified from their original balance sheet classifications and reflected as net activity within Investment by Parent (Note 11). The Business retains all warranty obligations related to units sold under the Lease Sale Program. The amount of gross leased receivables sold under the Lease Sale Program were $10,870 for the year ended December 31, 1998.

F-37

SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION

(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) WARRANTIES

Estimated future warranty obligations related to products sold or leased are provided by charges to operations in the period of product sale or lease inception. The standard warranty period for products sold or leased is one year and five years, respectively. The cost of warranty obligations is contractually capitated as part of an agreement with a third party.

SEGMENT INFORMATION

BII adopted Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS No. 131) in 1998. This statement establishes standards for the reporting of information about operating segments in annual and interim financial statements. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker(s) in deciding how to allocate resources and in assessing performance. SFAS No. 131 also requires disclosures about products and services, geographic areas and major customers. The adoption of SFAS No. 131 did not affect results of operations, financial position or the disclosure of segment information. Refer to Note 10 for the Business' segment information.

4. TRANSACTIONS WITH RELATED PARTIES

A portion of the operations of the Business involves transactions with subsidiaries and divisions of BII.

A division of Baxter provides accounting, administrative and other services related to the business' sales-type leases with its customers. The Business is charged for such services at a rate which management believes approximates the market rate. As discussed in Note 3, Baxter sells substantially all of the Business' lease receivables to an independent third party.

In addition, the corporate headquarters of BII and the divisional headquarters of Baxter provide to the Business certain other accounting, tax, and administrative services. All significant expenses relating to such services are included in the financial statements of the Business.

The financial statements of the Business include expenses of $4,288 in 1998 for services provided by related parties.

5. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

CONCENTRATIONS OF CREDIT RISK

In the normal course of business, the company provides credit to customers in the health-care industry, performs credit evaluations of these customers and maintains reserves for potential credit losses which, when realized, have been within the range of management's allowance for doubtful accounts.

The carrying values of financial instruments approximate their fair values.

F-38

SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION

(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. CUSTOMER DEPOSITS AND OTHER ACCRUED LIABILITIES

                                                                  AS OF
                                                               DECEMBER 31,
                                                                   1998
                                                              --------------
                                                              (in thousands)
Customer deposits...........................................      $10,612
                                                                  =======
Other current accrued liabilities:
  Employee compensation and withholdings....................          647
  Other.....................................................          585
                                                                  -------
Total.......................................................      $ 1,232
                                                                  =======

Customer deposits represents cash received from customers related to sales for which revenue is not yet eligible for recognition under the Business' revenue recognition policy.

7. STOCK-BASED COMPENSATION PLANS

Certain employees of the Business participate in stock-based compensation plans sponsored by BII. Such plans principally include fixed stock option plans and an employee stock purchase plan. BII applies APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized by BII for its fixed stock option plans and its stock purchase plan. These plans are the sole responsibility of BII and, accordingly, no information is presented herein.

8. RETIREMENT AND OTHER BENEFIT PROGRAMS

Substantially all of the employees of the Business are eligible to participate in BII's contributory defined contribution plan, non-contributory defined benefit pension plans and certain other postretirement benefit plans. These plans are the sole responsibility of BII and, accordingly, no information is presented herein related to those plans. Total expense recognized by the Business relating to these plans was $329 in 1998.

9. INCOME TAXES

The results of the Business' operations are included in the consolidated tax return of BII. These financial statements do not reflect income tax benefit for 1998 or recent prior years in which losses were incurred. As instructed by its parent, the Business calculates its taxes as if it were filing its own return. On a separate return basis, the losses incurred in recent years through December 31, 1998 would have given rise to net operating loss carryforwards and related deferred tax assets. Due to the uncertainty of ultimate utilization of those carryforwards on a separate-return basis, the Business would have recorded valuation allowances for the full amounts of those deferred tax assets. The tax effects of other temporary differences that give rise to deferred tax assets and liabilities at December 31, 1998 were not material.

The Business, on a stand-alone basis, would have a net operating loss carryforward for federal income tax purposes of approximately $48,000 at December 31, 1998. However, since the Business has been included in the consolidated tax filings of BII, its prior losses have been utilized in the BII consolidated

F-39

SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION

(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

9. INCOME TAXES (CONTINUED) tax returns. As such, should the Business actually file separate tax returns in the future, no net operating losses would be available.

10. SEGMENT INFORMATION

The Business operates in one segment, the pharmacy automation market, the activities and products of which are described in Note 1.

GEOGRAPHIC INFORMATION

The following geographic area data include net sales based on product shipment destination.

                                                                1998
                                                              --------
Net Sales
United States...............................................  $16,276
Other countries.............................................    1,102
                                                              -------
Consolidated totals.........................................  $17,378
                                                              =======

11. INVESTMENT BY PARENT

Investment by Parent represents Baxter's ownership interest in the recorded net assets of the Business. All cash transactions with Baxter and BII are reflected in this amount. In addition, all intercompany expenses charged from the Parent are not expected to be settled and, therefore, while recorded as expenses in the appropriate period, have been considered additional contributions from the Parent. The Business has not been charged interest on any investments made by the Parent other than those amounts capitalized into fixed assets as disclosed in Note 2. A summary of the activity is as follows:

Balance at December 31, 1997................................  $ 38,485
Net loss....................................................   (20,510)
Leased receivable transfers, net of unearned income (Note
  3)........................................................    (8,910)
Other net intercompany activity.............................    17,710
                                                              --------
Balance at December 31, 1998................................  $ 26,775
                                                              ========

12. SUBSEQUENT EVENTS

In January 1999, Baxter finalized the terms of its sale of certain assets of the Business to Omnicell Technologies (Omnicell) for proceeds that were finalized in December of 1999 of $2.1 million in cash and Omnicell's note payable of approximately $8.0 million.

F-40

6,000,000 SHARES

OMNICELL, INC.

COMMON STOCK

[LOGO]


PROSPECTUS

Until , 2001, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

U.S. BANCORP PIPER JAFFRAY

CIBC WORLD MARKETS

SG COWEN

, 2001


PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth all expenses, other than the underwriting discounts and commissions, payable by the registrant in connection with the sale of the common stock being registered. All the amounts shown are estimates except for the SEC registration fee and the NASD filing fee.

SEC registration fee........................................  $   17,250
Nasdaq National Market listing fee..........................      17,500
NASD filing fee.............................................       7,400
Printing and engraving expenses.............................     250,000
Legal fees and expenses.....................................     600,000
Accounting fees and expenses................................     550,000
Transfer agent and registrar fees...........................      50,000
Miscellaneous...............................................     107,850
                                                              ----------
Total.......................................................  $1,600,000
                                                              ==========

We intend to pay all expenses of registration, issuance and distribution.

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

Section 145 of the Delaware General Corporation Law (the DGCL) 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.

As permitted by the DGCL, our Certificate of Incorporation, which will become effective prior to the closing of this offering, includes a provision that eliminates the personal liability of our directors for monetary damages for breach of fiduciary duty as a director, except for liability (1) for any breach of the director's duty of loyalty to us or our stockholders; (2) for acts or omissions not in good faith or that involve intentional misconduct or knowing violation of law; (3) under Section 174 of the DGCL regarding unlawful dividends and stock purchases; or (4) for any transaction from which the director derived an improper personal benefit.

As permitted by the DGCL, our Certificate of Incorporation and/or our Bylaws, which will become effective prior to the closing of this offering, provide that (1) we are required to indemnify our directors and officers to the fullest extent permitted by the DGCL, subject to certain very limited exceptions; (2) we are permitted to indemnify our other employees to the extent that we indemnify our officers and directors, unless otherwise required by law, our Certificate of Incorporation, our Bylaws or agreements; (3) we are required to advance expenses, as incurred, to our directors and officers in connection with a legal proceeding to the fullest extent permitted by the DGCL, subject to certain very limited exceptions; and (4) the rights conferred in our Bylaws are not exclusive.

Prior to the closing of this offering, we intend to enter into indemnity agreements with each of our current directors and officers to give such directors and officers additional contractual assurances regarding the scope of the indemnification set forth in our Certificate of Incorporation and our Bylaws and to provide additional procedural protections. At present, there is no pending litigation or proceeding involving a director, officer or employee of Omnicell.com regarding which indemnification is sought, nor are we aware or any threatened litigation that may result in claims for indemnification.

With approval by the board of directors, we expect to obtain directors' and officers' liability insurance. Reference is made to the underwriting agreement contained in Exhibit 1.1 hereto, which contains provisions indemnifying our officers and directors against certain liabilities.

II-1


ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

(a) The Company has issued or sold the following securities within the past three years:

- an aggregate of 3,010,528 shares of Series K convertible preferred stock at $9.50 per share in January and March 2000 to 25 accredited investors, including 105,264 shares sold to Commerce One.

- an aggregate of 26,315 shares of common stock issuable upon exercise of a warrant issued to a financial institution.

(b) As of May 31, 2001, the Company has issued:

- an aggregate of 1,726,124 shares of common stock upon exercise of options under the 1992 Equity Incentive Plan;

- an aggregate of 1,122,839 shares of common stock upon exercise of options under the 1995 Management Stock Option Plan;

- an aggregate of 752,435 shares of common stock under the 1997 Employee Stock Purchase Plan; and

- an aggregate of 240,423 shares of common stock upon exercise of options under the 1999 Equity Incentive Plan.

(c) There were no underwritten offerings employed in connection with the transaction set forth in Item 15(a).

The issuances described in Item 15(a) were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(2) thereof as transactions by an issuer not involving any public offering. The issuances described in Item 15(b) were deemed to be exempt from registration under the Securities Act in reliance upon either (i) Rule 701 promulgated thereunder in that they were offered and sold either pursuant to written compensatory benefit plans or pursuant to a written contract relating to compensation, as provided by Rule 701 or (ii) Section 4(2) of the Securities Act as transactions by an issuer not involving any public offering. In addition, such issuances were deemed to be exempt from registration under Section 4(2) of the Securities Act as transactions by an issuer not involving any public offering. 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 where affixed to the securities issued in such transactions. All recipients had adequate access, through their relationships with the Company, to information about the Registrant.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits.

      EXHIBIT
      NUMBER                             DESCRIPTION OF DOCUMENT
      -------                            -----------------------
1.1*                   Form of Underwriting Agreement.
3.1+                   Amended and Restated Articles of Incorporation of the
                       registrant.
3.2+                   Certificate of Amendment of Amended and Restated Articles of
                       Incorporation of the registrant.
3.2.1                  Certificate of Amendment of Amended and Restated Articles of
                       Incorporation of the registrant.
3.3+                   Certificate of Incorporation of the registrant to be
                       effective upon reincorporation in Delaware.
3.3.1                  Certificate of Amendment of Certificate of Incorporation of
                       the registrant to be effective upon reincorporation in
                       Delaware.

II-2


       EXHIBIT
       NUMBER                             DESCRIPTION OF DOCUMENT
       -------                            -----------------------
 3.4+                   Amended and Restated Certificate of Incorporation of the
                        registrant to be filed following the closing of the
                        offering.
 3.5+                   Bylaws of the registrant.
 3.6+                   Bylaws of the registrant to be effective upon
                        reincorporation in Delaware.
 4.1*                   Form of Common Stock Certificate.
 4.2+                   Amended and Restated Investor Rights Agreement, dated
                        January 20, 2000.
 4.3+                   Warrant Agreement, dated September 30, 1993, between the
                        registrant and Comdisco, Inc.
 4.4+                   Warrant Agreement, dated January 23, 1995, between the
                        registrant and Comdisco, Inc.
 4.5+                   Warrant Agreement, dated July 7, 1995, between the
                        registrant and Comdisco, Inc.
 4.6+                   Warrant Agreement, dated September 29, 1995, between the
                        registrant and Comdisco, Inc.
 4.7+                   Convertible Promissory Note, dated October 1, 1999.
 4.8                    Warrant, dated December 31, 2000, between the registrant and
                        Silicon Valley Bank.
 5.1*                   Opinion of Cooley Godward LLP, counsel to the registrant.
10.1+                   Real Property Lease, dated September 24, 1999, between W.F.
                        Baton & Co., Inc. and the registrant, as amended.
10.2+                   Real Property Lease, effective July 1, 1999, between the
                        registrant and Amli Commercial Properties Limited
                        Partnership.
10.3+                   Real Property Lease, dated April 3, 1996, between O'Donnell
                        Palo Alto Associates and the registrant.
10.4+                   Real Property Lease, dated March 25, 1994, between W.F.
                        Batton & Co., Inc. and the registrant, as amended.
10.5+                   Master Assignment Agreement and Master Sales Agreement,
                        dated September 29, 1994, between Americorp Financial, Inc.
                        and the registrant, as amended.
10.6+                   Group Purchasing Agreement, effective June 1, 1997, between
                        Premier Purchasing Partners, L.P., and the registrant.
10.7+                   Letter Agreement, dated June 27, 1997, between the
                        University Health System Consortium Services Corporation and
                        the registrant.
10.8+                   Federal Supply Schedule Contract No. V797P-3406k, effective
                        August 7, 1997, between the Department of Veterans Affairs
                        and the registrant.
10.9                    Asset Purchase Agreement dated December 18, 1998, between
                        the registrant and Baxter Healthcare Corporation, as
                        amended.
10.10                   Loan and Security Agreement and Standby Facility Agreement,
                        dated January 27, 2000, between Silicon Valley Bank and the
                        registrant, as amended.
10.11**+                Vertical Hosted License Agreement, dated August 21, 1999,
                        between the registrant and Commerce One, Inc., as amended.
10.12+                  Form of Director and Officer Indemnity Agreement.
10.13+                  1992 Equity Incentive Plan, as amended.
10.14+                  1995 Management Stock Option Plan.
10.15                   1997 Employee Stock Purchase Plan, as amended.
10.16                   1999 Equity Incentive Plan, as amended.
10.17+                  Program Agreement, dated June 7, 1999, between General
                        Electric Company and the registrant.

II-3


       EXHIBIT
       NUMBER                             DESCRIPTION OF DOCUMENT
       -------                            -----------------------
10.18+                  Employment Agreement, dated December 13, 1993, between the
                        registrant and Sheldon D. Asher.
10.19**                 Service Agreement, dated August 1, 1998, between the
                        registrant and Dade Behring, Inc., as amended.
21.1+                   Subsidiaries of the registrant.
23.1                    Consent of Ernst & Young LLP, Independent Auditors.
23.2                    Consent of PricewaterhouseCoopers LLP, Independent
                        Accountants.
23.3*                   Consent of Cooley Godward LLP. Reference is made to
                        Exhibit 5.1.
24.1+                   Powers of Attorney. Reference is made to Page II-5.


* To be filed by amendment.

** Confidential treatment requested.

+ Previously filed.

(b) Financial Statement Schedules.

Schedule II--Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

ITEM 17. UNDERTAKINGS.

The Registrant hereby undertakes to provide the Underwriters at the closing specified in the Underwriting Agreement, 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 provisions described in Item 14 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 hereunder, 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 Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, 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 a 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, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-4


SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Palo Alto, State of California, on the 26th day of June, 2001.

OMNICELL, INC.

By:             /s/ SHELDON D. ASHER
     -----------------------------------------
                  Sheldon D. Asher
       PRESIDENT AND CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.

             SIGNATURES                                    TITLE                       DATE
             ----------                                    -----                       ----
        /s/ SHELDON D. ASHER               President and Chief Executive Officer
------------------------------------         and Director (PRINCIPAL EXECUTIVE    June 26, 2001
          Sheldon D. Asher                   OFFICER)

      /s/ ROBERT Y. NEWELL, IV             Vice President and Chief Financial
------------------------------------         Officer (PRINCIPAL FINANCIAL AND     June 26, 2001
        Robert Y. Newell, IV                 ACCOUNTING OFFICER)

                  *
------------------------------------       Chairman of the Board and Director     June 26, 2001
          Randall A. Lipps

                  *
------------------------------------       Director                               June 26, 2001
          Gordon V. Clemons

                  *
------------------------------------       Director                               June 26, 2001
      Christopher J. Dunn, M.D.

                  *
------------------------------------       Director                               June 26, 2001
        Frederick J. Dotzler

                  *
------------------------------------       Director                               June 26, 2001
        Benjamin A. Horowitz

II-5


             SIGNATURES                                    TITLE                       DATE
             ----------                                    -----                       ----
                  *
------------------------------------       Director                               June 26, 2001
           Kevin L. Roberg

                  *
------------------------------------       Director                               June 26, 2001
         John D. Stobo, Jr.

                  *
------------------------------------       Director                               June 26, 2001
       William H. Younger, Jr.

        */s/ SHELDON D. ASHER
------------------------------------
          Sheldon D. Asher
          ATTORNEY-IN-FACT

II-6


SCHEDULE II
OMNICELL, INC.
VALUATION AND QUALIFYING ACCOUNTS

                                                                ADDITIONS
                                                         -----------------------
                                           BALANCE AT    CHARGED TO   CHARGED TO                BALANCE
                                          BEGINNING OF   COSTS AND      OTHER                    END OF
DESCRIPTION                                  PERIOD       EXPENSES     ACCOUNTS    DEDUCTIONS    PERIOD
-----------                               ------------   ----------   ----------   ----------   --------
Year ended December 31, 1998 allowance
  for doubtful accounts.................    $218,368       $60,000           --           --    $278,368
Year ended December 31, 1999 allowance
  for doubtful accounts.................     278,368        60,000           --           --     338,368
Year ended December 31, 2000 allowance
  for doubtful accounts.................     338,368        60,000           --      (26,432)    371,936

S-1

EXHIBIT INDEX

EXHIBIT
NUMBER                               DESCRIPTION OF DOCUMENT
-------            ------------------------------------------------------------
 1.1*              Form of Underwriting Agreement.
 3.1+              Amended and Restated Articles of Incorporation of the
                   registrant.
 3.2+              Certificate of Amendment of Amended and Restated Articles of
                   Incorporation of the registrant.
 3.2.1             Certificate of Amendment of Amended and Restated Articles of
                   Incorporation of the registrant.
 3.3+              Certificate of Incorporation of the registrant to be
                   effective upon reincorporation in Delaware.
 3.3.1             Certificate of Amendment of Certificate of Incorporation of
                   the registrant to be effective upon reincorporation in
                   Delaware.
 3.4+              Amended and Restated Certificate of Incorporation of the
                   registrant to be filed following the closing of the
                   offering.
 3.5+              Bylaws of the registrant.
 3.6+              Bylaws of the registrant to be effective upon
                   reincorporation in Delaware.
 4.1*              Form of Common Stock Certificate.
 4.2+              Amended and Restated Investor Rights Agreement, dated
                   January 20, 2000.
 4.3+              Warrant Agreement, dated September 30, 1993, between the
                   registrant and Comdisco, Inc.
 4.4+              Warrant Agreement, dated January 23, 1995, between the
                   registrant and Comdisco, Inc.
 4.5+              Warrant Agreement, dated July 7, 1995, between the
                   registrant and Comdisco, Inc.
 4.6+              Warrant Agreement, dated September 29, 1995, between the
                   registrant and Comdisco, Inc.
 4.7+              Convertible Promissory Note, dated October 1, 1999.
 4.8               Warrant, dated December 31, 2000, between the registrant and
                   Silicon Valley Bank.
 5.1*              Opinion of Cooley Godward LLP, counsel to the registrant.
10.1+              Real Property Lease, dated September 24, 1999, between W.F.
                   Baton & Co., Inc. and the registrant, as amended.
10.2+              Real Property Lease, effective July 1, 1999, between the
                   registrant and Amli Commercial Properties Limited
                   Partnership.
10.3+              Real Property Lease, dated April 3, 1996, between O'Donnell
                   Palo Alto Associates and the registrant.
10.4+              Real Property Lease, dated March 25, 1994, between W.F.
                   Batton & Co., Inc. and the registrant, as amended.
10.5+              Master Assignment Agreement and Master Sales Agreement,
                   dated September 29, 1994, between Americorp Financial, Inc.
                   and the registrant, as amended.
10.6+              Group Purchasing Agreement, effective June 1, 1997, between
                   Premier Purchasing Partners, L.P., and the registrant.
10.7+              Letter Agreement, dated June 27, 1997, between the
                   University Health System Consortium Services Corporation and
                   the registrant.
10.8+              Federal Supply Schedule Contract No. V797P-3406k, effective
                   August 7, 1997, between the Department of Veterans Affairs
                   and the registrant.
10.9               Asset Purchase Agreement dated December 18, 1998, between
                   the registrant and Baxter Healthcare Corporation, as
                   amended.
10.10              Loan and Security Agreement and Standby Facility Agreement,
                   dated January 27, 2000, between Silicon Valley Bank and the
                   registrant, as amended.


EXHIBIT
NUMBER                               DESCRIPTION OF DOCUMENT
-------            ------------------------------------------------------------
10.11**+           Vertical Hosted License Agreement, dated August 21, 1999,
                   between the registrant and Commerce One, Inc., as amended.
10.12+             Form of Director and Officer Indemnity Agreement.
10.13+             1992 Equity Incentive Plan, as amended.
10.14+             1995 Management Stock Option Plan.
10.15              1997 Employee Stock Purchase Plan, as amended.
10.16              1999 Equity Incentive Plan, as amended.
10.17+             Program Agreement, dated June 7, 1999, between General
                   Electric Company and the registrant.
10.18+             Employment Agreement, dated December 13, 1993, between the
                   registrant and Sheldon D. Asher.
10.19**            Service Agreement, dated August 1, 1998, between the
                   registrant and Dade Behring, Inc., as amended.
21.1+              Subsidiaries of the registrant.
23.1               Consent of Ernst & Young LLP, Independent Auditors.
23.2               Consent of PricewaterhouseCoopers LLP, Independent
                   Accountants.
23.3*              Consent of Cooley Godward LLP. Reference is made to
                   Exhibit 5.1.
24.1+              Powers of Attorney. Reference is made to Page II-5.


* To be filed by amendment.

** Confidential treatment requested.

+ Previously filed.


Exhibit 3.2.1

CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF OMNICELL.COM

Randall A. Lipps and Robert J. Brigham certify that:

1. They are the Chairman of the Board and Secretary, respectively, of OMNICELL.COM, a California corporation.

2. The Board of Directors of the Corporation duly approved the following amendment to the Corporation's Amended and Restated Articles of Incorporation:

Article IV4(b) shall be amended and restated to read in its entirety as follows:

"AUTOMATIC CONVERSION. Each share of Preferred (other than the Series J Preferred) shall automatically be converted into shares of Class A Common at the then effective Conversion Price upon either of (a) the closing of a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Corporation to the public (an "Initial Public Offering") at a price per share (prior to deduction of underwriter commissions and offering expenses) of not less than $5.00 per share (appropriately adjusted for any stock dividends, stock splits, combinations, recapitalizations or similar events) and an aggregate offering price to the public of not less than $25,000,000 (prior to deduction of underwriter commissions and offering expenses), or (b) upon the vote or written consent of the holders of at least a majority of the Series Preferred (other than the Series J Preferred) voting together as a separate class and the vote or written consent of the holders of at least a majority of the Series K Preferred Stock, voting together as a separate class. Each share of Series J Preferred shall automatically be converted into shares of Class A Common at the then effective Conversion Price upon the closing of an Initial Public Offering at a price per share (prior to deduction of underwriter commissions and offering expenses) of not less than $7.36 per share (appropriately adjusted for any stock dividends, stock splits, combinations, recapitalizations or similar events) and an aggregate offering price to the public of not less than $10,000,000 (prior to deduction of underwriter commissions and offering expenses)."

3. Thereafter pursuant to a resolution of the Board of Directors, this Certificate of Amendment was submitted to the stockholders of the Corporation for their approval, and was approved, in accordance with Section 902 of the California Corporations Code. The total number of outstanding shares of Common Stock of the Corporation is 5,003,138, and the total number of outstanding shares of (i) Series A Preferred is 480,000, (ii) Series B Preferred is 320,666,
(iii) Series C Preferred is 1,700,000, (iv) Series D Preferred is 1,309,484, (v) Series E Preferred is 1,965,262, (vi) Series F Preferred s 1,948,090, (vii) Series G Preferred is zero, (viii) Series H Preferred is 3,804,346, (ix) Series I Preferred is zero, (x) Series J Preferred is 720,800 and (xi) Series K Preferred is 3,010,528. The number of shares voting in favor of Amendment and Restatement equaled or exceeded the vote required. The percentage vote required was (i) more than 50% of the Common Stock voting as a class and (ii) more than 50% of the Preferred Stock voting together as a class.

4. All other provisions of the Restated Certificate shall remain in full force and effect.

1.


We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge.

Executed at Palo Alto, California on April 27, 2001.

/s/ RANDALL A. LIPPS
--------------------------------------------
Randall A. Lipps, Chairman of the Board


/s/ ROBERT J. BRIGHAM
--------------------------------------------
Robert J. Brigham, Secretary

2.


Exhibit 3.3.1

CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
OMNICELL MERGER CORPORATION

OMNICELL MERGER CORPORATION, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY:

FIRST: The name of the Corporation is OMNICELL MERGER CORPORATION.

SECOND: The date on which the Certificate of Incorporation of the Corporation was originally filed with the Secretary of State of the State of Delaware is April 14, 2000.

THIRD: The Board of Directors of the Corporation, acting in accordance with the provisions of Sections 141 and 242 of the General Corporation Law of the State of Delaware, adopted resolutions amending the Certificate of Incorporation as follows:

Article V4(b) shall be amended and restated to read in its entirety as follows:

"AUTOMATIC CONVERSION. Each share of Preferred (other than the Series J Preferred) shall automatically be converted into shares of Class A Common at the then effective Conversion Price upon either of (a) the closing of a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Corporation to the public (an "Initial Public Offering") at a price per share (prior to deduction of underwriter commissions and offering expenses) of not less than $5.00 per share (appropriately adjusted for any stock dividends, stock splits, combinations, recapitalizations or similar events) and an aggregate offering price to the public of not less than $25,000,000 (prior to deduction of underwriter commissions and offering expenses), or (b) upon the vote or written consent of the holders of at least a majority of the Series Preferred (other than the Series J Preferred) voting together as a separate class and the vote or written consent of the holders of at least a majority of the Series K Preferred Stock, voting together as a separate class. Each share of Series J Preferred shall automatically be converted into shares of Class A Common at the then effective Conversion Price upon the closing of and Initial Public Offering at a price per share (prior to deduction of underwriter commissions and offering expenses) of not less than $7.36 per share (appropriately adjusted for any stock dividends, stock splits, combinations, recapitalizations or similar events) and an aggregate offering price to the public of not less than $10,000,000 (prior to deduction of underwriter commissions and offering expenses)."

FOURTH: Thereafter pursuant to a resolution of the Board of Directors, this Certificate of Amendment was submitted to the stockholders of the Corporation for their approval, and was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

1.


IN WITNESS WHEREOF, Omnicell Merger Corporation has caused this Certificate of Amendment to be signed by its President and attested to by its Secretary this 27th day of April, 2001.

OMNICELL MERGER CORPORATION

                                          By:     /s/ SHELDON D. ASHER
                                             -----------------------------------
                                               Sheldon D. Asher
                                               President


ATTEST:


/s/ ROBERT J. BRIGHAM
------------------------------------
Robert J. Brigham
Secretary

2.


EXHIBIT 4.8

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

WARRANT TO PURCHASE STOCK

Corporation: OMNICELL.COM

Number of Shares: 26,315 SHARES

Class of Stock: SERIES K PREFERRED

Initial Exercise Price: $9.50 PER SHARE

Issue Date: DECEMBER 31, 2000

Expiration Date: DECEMBER 31, 2005

THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other good and valuable consideration, SILICON VALLEY BANK ("Holder") is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the "Shares") of the corporation (the "Company") at the initial exercise price per Share (the "Warrant Price") all as set forth above and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.

ARTICLE 1. EXERCISE.

1.1 METHOD OF EXERCISE. Holder may exercise this Warrant by delivering a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a check for the aggregate Warrant Price for the Shares being purchased.

1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share. The fair market value of the Shares shall be determined pursuant to Section 1.4.

1.3 INTENTIONALLY OMITTED

1.4 FAIR MARKET VALUE. If the Shares are traded in a public market, the fair market value of the Shares shall be the closing price of the Shares (or the closing price of the Company's stock into which the Shares are convertible) reported for the business day immediately before


Holder delivers its Notice of Exercise to the Company. If the Shares are not traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment.

1.5 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder exercises or converts this Warrant, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the Shares not so acquired.

1.6 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

1.7 REPURCHASE ON SALE, MERGER, OR CONSOLIDATION OF THE COMPANY.

1.7.1. "ACQUISITION". For the purpose of this Warrant, "Acquisition" means any sale, license, or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company's securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction.

1.7.2. ASSUMPTION OF WARRANT. Upon the closing of any Acquisition the successor entity shall assume the obligations of this Warrant, and this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price shall be adjusted accordingly.

1.8 MARKET STAND-OFF AGREEMENT. Holder shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Common Stock (or other securities) of the Company held by Holder, for a period of time specified by the managing underwriter(s) (not to exceed one hundred eighty (180 days) following the effective date of a registration statement of the Company filed under the Securities Act of 1933. Holder agrees to execute and deliver such other agreements as may be reasonably requested by the Company and/or the managing underwriter(s) which are consistent with the foregoing or which are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to such Common Stock (or other securities) until the end of such period. The underwriters of the Company's stock are intended third party beneficiaries of this Section 8 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

ARTICLE 2. ADJUSTMENTS TO THE SHARES.

2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a dividend on its common stock (or the Shares if the Shares are securities other than common stock) payable in common stock, or other securities, subdivides the outstanding common stock into a greater amount of common stock, or, if the Shares are securities other than common stock, subdivides the Shares in a transaction that increases the amount of common stock into which the Shares are convertible, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred.


2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company's Articles of Incorporation upon the closing of a registered public offering of the Company's common stock. The Company or its successor shall promptly issue to Holder a new Warrant for such new securities or other property. The new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.

2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased.

2.5 NO IMPAIRMENT. The Company shall not, by amendment of its Articles of Incorporation or through a reorganization, 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 under this Warrant by the Company, but shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder's rights under this Article against impairment.

2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable upon exercise or conversion of the Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder an amount computed by multiplying the fractional interest by the fair market value of a full Share.

ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.

3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and warrants to the Holder as follows:

(a) All Shares which may be issued upon the exercise of the purchase right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

(b) The Capitalization Table attached to this Warrant is true and complete as of the Issue Date.

3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a) to declare any dividend or distribution upon its common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other


rights; (c) to effect any reclassification or recapitalization of common stock; (d) to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; or (e) offer holders of registration rights the opportunity to participate in an underwritten public offering of the company's securities for cash, then, in connection with each such event, the Company shall give Holder (1) at least 10 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of common stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 10 days prior written notice of the date when the same will take place (and specifying the date on which the holders of common stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights.

ARTICLE 4. REPRESENTATIONS OF THE HOLDER

4.1 ACQUISITION OF WARRANT FOR PERSONAL ACCOUNT. The Holder represents and warrants that it is acquiring the Warrant solely for its account for investment and not with a view to or for sale or distribution of said Warrant or any part thereof. The Holder also represents that the entire legal and beneficial interests of the Warrant and Exercise Shares the Holder is acquiring is being acquired for, and will be held for, its account only.

4.2 SECURITIES ARE NOT REGISTERED.

(a) The Holder understands that the Warrant and the Exercise Shares have not been registered under the Securities Act of 1933, as amended (the "Act") on the basis that no distribution or public offering of the stock of the Company is to be effected. The Holder realizes that the basis for the exemption may not be present if, notwithstanding its representations, the Holder has a present intention of acquiring the securities for a fixed or determinable period in the future, selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the securities. The Holder has no such present intention.

(b) The Holder recognizes that the Warrant and the Exercise Shares must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available. The Holder recognizes that the Company has no obligation to register the Warrant or the Exercise Shares of the Company, or to comply with any exemption from such registration.

(c) The Holder is aware that neither the Warrant nor the Exercise Shares may be sold pursuant to Rule 144 adopted under the Act unless certain conditions are met, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale following the required holding period under Rule 144 and the number of shares being sold during any three month period not exceeding specified limitations. Holder is aware that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company presently has no plans to satisfy these conditions in the foreseeable future.

ARTICLE 5. MISCELLANEOUS.

5.1 TERM. This Warrant is exercisable, in whole or in part, at any time and from time to time on or before the Expiration Date set forth above.


5.2 LEGENDS. This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

5.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder or if there is no material question as to the availability of current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in reasonable detail, the selling broker represents that it has complied with Rule 144(f), and the Company is provided with a copy of Holder s notice of proposed sale.

5.4 TRANSFER PROCEDURE. Subject to the provisions of Section 4.3, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable, directly or indirectly, upon conversion of the Shares, if any) at any time to Silicon Valley Bancshares or The Silicon Valley Bank Foundation, or to any affiliate of Holder, or, to any other transferee by giving the Company notice of the portion of the Warrant being transferred setting forth the name, address and taxpayer identification number of the transferee and surrendering this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). Unless the Company is filing financial information with the SEC pursuant to the Securities Exchange Act of 1934, the Company shall have the right to refuse to transfer any portion of this Warrant to any person who directly competes with the Company.

5.5 NOTICES. All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail at such address as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or such holder from time to time. All notices to be provided under this Warrant shall be sent to the following address:

Silicon Valley Bank Attn: Treasury Department 3003 Tasman Drive Santa Clara, CA 95054

5.6 WAIVER. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.


5.7 GOVERNING LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.

"COMPANY"

OMNICELL.COM

By:    /s/ Robert Y. Newell, IV
   --------------------------------------------
Name:  Robert Y. Newell, IV
Title: Vice President & Chief Financial Officer


APPENDIX 1 to Exhibit A

NOTICE OF EXERCISE

1. The undersigned hereby elects to purchase shares of the Common/Preferred Series ___ [Strike one] Stock of ______________. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full.

1. The undersigned hereby elects to convert the attached Warrant into Shares/cash [strike one] in the manner specified in the Warrant. This conversion is exercised with respect to _____________________ of the Shares covered by the Warrant.

[Strike paragraph that does not apply.]

2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below:


(Name)



(Address)

3. The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws.


(Signature)

(Date)

EXHIBIT B
Capitalization Table


EXHIBIT 10.9

ASSET PURCHASE AGREEMENT

Dated as of December 18, 1998

Between

BAXTER HEALTHCARE CORPORATION

and

OMNICELL TECHNOLOGIES INC.


TABLE OF CONTENTS

                                                                                                   Page
ARTICLE 1      PURCHASE OF ASSETS...............................................................      1
     1.1   Purchased Assets.....................................................................      1
     1.2   Excluded Assets......................................................................      3

ARTICLE 2      CONSIDERATION....................................................................      4
     2.1   Preliminary Purchase Price; Payment of Preliminary Purchase Price....................      4
     2.2   Purchase Price Adjustment............................................................      5
     2.3   Assumption of Liabilities............................................................      6
     2.4   Non-Assignable Contracts.............................................................      7
     2.5   Allocation of Purchase Price.........................................................      7

ARTICLE 3      REPRESENTATIONS AND WARRANTIES OF THE SELLER.....................................      8
     3.1   Organization, Qualification and Corporate Power......................................      8
     3.2   Authorization of Transaction.........................................................      8
     3.3   Noncontravention.....................................................................      8
     3.4   No Material Consents.................................................................      9
     3.5   Latest Balance Sheet.................................................................      9
     3.6   Recent Events........................................................................      9
     3.7   Tax Matters..........................................................................     10
     3.8   Title and Condition of Properties....................................................     10
     3.9   Intellectual Property................................................................     10
     3.10  Contracts............................................................................     11
     3.11  Inventory............................................................................     12
     3.12  Litigation...........................................................................     12
     3.13  Employment Matters...................................................................     13
     3.14  Employees and Executive Compensation.................................................     13
     3.15  Licenses, Permits and Approvals......................................................     13
     3.16  Compliance with Laws.................................................................     14
     3.17  Product Warranty.....................................................................     14
     3.18  Installation.........................................................................     14
     3.19  Brokers' Fees........................................................................     14
     3.20  Accounting for Returns...............................................................     14

i.


TABLE OF CONTENTS

                                                                                                   Page
     3.21  Year 2000 Compliance Obligations.....................................................     14

ARTICLE 4      REPRESENTATIONS AND WARRANTIES OF THE BUYER......................................     15
     4.1   Corporate Status.....................................................................     15
     4.2   Authority for Transaction............................................................     15
     4.3   No Breach or Default.................................................................     15
     4.4   Financial Statements; Books and Records..............................................     15
     4.5   Recent Events........................................................................     16
     4.6   Brokerage............................................................................     16
     4.7   Litigation...........................................................................     16

ARTICLE 5      COVENANTS PRIOR TO CLOSING.......................................................     16
     5.1   Conduct of Operations................................................................     16
     5.2   Buyer Access to Seller's Records and Premises........................................     16
     5.3   Seller Access to Buyer's Records and Premises........................................     17
     5.4   Buyer Confidentiality................................................................     17
     5.5   Seller Confidentiality...............................................................     17
     5.6   Cooperation..........................................................................     18
     5.7   HSR Approval.........................................................................     18
     5.8   Notice of Developments...............................................................     18
     5.9   Certain Employee and Employee Plan Matters...........................................     18
     5.10  Service and Installation.............................................................     21
     5.11  No Third-Party Beneficiaries.........................................................     21
     5.12  No Negotiation.......................................................................     21
     5.13  Use of Seller's Trademarks...........................................................     21
     5.14  Collection of Accounts Receivable....................................................     22
     5.15  Purchase of Leased Equipment.........................................................     22

ARTICLE 6      CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS..................................     23
     6.1   The Seller's Closing Documents.......................................................     23
     6.2   Representations and Warranties.......................................................     23
     6.3   Obligations..........................................................................     23
     6.4   No Injunction or Restraint...........................................................     23

ii.


TABLE OF CONTENTS

                                                                                                   Page
     6.5   Legal Opinion of Counsel for the Seller..............................................     23
     6.6   Consents from Third Parties..........................................................     23
     6.7   HSR Clearance........................................................................     23
     6.8   No Material Adverse Change...........................................................     23
     6.9   Audited Financials...................................................................     24
     6.10  Carve-Out Financials.................................................................     24

ARTICLE 7      CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER............................     24
     7.1   Buyer' Closing Documents.............................................................     24
     7.2   Representations and Warranties.......................................................     24
     7.3   Obligations..........................................................................     24
     7.4   No Injunction or Restraint...........................................................     24
     7.5   No Material Adverse Change...........................................................     24
     7.6   HSR Approval.........................................................................     25
     7.7   Legal Opinion........................................................................     25
     7.8   Consents and Approvals...............................................................     25
     7.9   Loan Agreement.......................................................................     25
     7.10  Companion Sale.......................................................................     25

ARTICLE 8      TERMINATION......................................................................     25
     8.1   Termination..........................................................................     25
     8.2   Effect of Termination................................................................     26

ARTICLE 9      CLOSING..........................................................................     26
     9.1   Time and Place of Closing............................................................     26
     9.2   Deliveries by the Seller.............................................................     26
     9.3   Deliveries by the Buyer..............................................................     27
     9.4   Termination of Distribution Agreement; Credit Against Reimburseable Expenses.........     28

ARTICLE 10     POST-CLOSING OBLIGATIONS OF THE PARTIES..........................................     29
     10.1  Further Obligations of the Parties...................................................     29
     10.2  Taxes................................................................................     29
     10.3  Sales Taxes..........................................................................     30

iii.


TABLE OF CONTENTS

                                                                                                   Page
     10.4  Delivery of 1998 Audited Financials..................................................     30
     10.5  Seller Covenant Not to Compete.......................................................     30

ARTICLE 11     SURVIVAL OF WARRANTIES AND INDEMNIFICATION.......................................     30
     11.1  Survival.............................................................................     30
     11.2  Indemnification by the Seller........................................................     31
     11.3  Limits on the Seller's Indemnification Obligation....................................     31
     11.4  Indemnification by Buyer.............................................................     32
     11.5  Limits on Buyer's Indemnification Obligations........................................     32
     11.6  Matters Involving Third Parties......................................................     32
     11.7  Additional Limitations...............................................................     33

ARTICLE 12     MISCELLANEOUS PROVISIONS.........................................................     34
     12.1  Certain Definitions..................................................................     34
     12.2  Notices..............................................................................     38
     12.3  Assignability; Binding Effect........................................................     39
     12.4  Governing Law; Venue.................................................................     39
     12.5  Counterparts.........................................................................     39
     12.6  Entire Agreement.....................................................................     39
     12.7  Confidentiality......................................................................     39
     12.8  Number/Gender........................................................................     39
     12.9  Captions.............................................................................     40
     12.10 Allocation of Fees and Expenses......................................................     40
     12.11 Severability.........................................................................     40
     12.12 Construction.........................................................................     40
     12.13 No Public Announcement...............................................................     40

Exhibits

Exhibit A  Bill of Sale
Exhibit B  Loan Agreement
Exhibit C  Assumption Agreement
Exhibit D  Legal Opinion of Seller's Counsel
Exhibit E  Legal Opinion of Buyer's Counsel
Exhibit F  Transition Services Agreement
Exhibit G  Service and Installation Agreement

iv.


ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this "Agreement") is made as of this 18/th/ day of December, 1998, by and between Baxter Healthcare Corporation, a Delaware corporation (the "Seller") and OmniCell Technologies Inc., a California corporation (the "Buyer").

Recitals

A. The Seller, through the Productivity Systems business unit of its I.V. Systems Division, designs, develops, markets, distributes and sells the Sure-Med System (the "Business").

B. The Buyer desires to acquire from the Seller, and the Seller desires to sell to the Buyer, pursuant to the terms and conditions of this Agreement, substantially all of the assets and rights owned or held by the Seller and used primarily in the conduct of the Business, together with certain specified liabilities and obligations of the Seller relating to the Business, all as more specifically set forth herein.

C. Certain capitalized terms used in this Agreement are defined in
Section 12.1.

Now Therefore, in consideration of the foregoing recitals, which are hereby incorporated herein, and the mutual promises herein contained, the parties hereby agree as follows:

ARTICLE 1

PURCHASE OF ASSETS

1.1 Purchased Assets. On the terms and subject to the conditions set forth in this Agreement, on the Closing Date, the Buyer shall purchase from the Seller and the Seller shall sell, transfer, assign and deliver to the Buyer, pursuant to a Bill of Sale and Assignment (the "Bill of Sale") to be executed and delivered at closing in the form attached hereto as Exhibit A, all of the Seller's right, title and interest in and to the following assets of the Seller to the extent used primarily in the conduct of the Business, wherever located (collectively, the "Purchased Assets") in each case free and clear of any and all Security Interests:

(a) all machinery, computer equipment and other equipment, together with all parts, tools and accessories relating thereto, and other tangible personal property, including but not limited to those specifically listed on Schedule 1.1(a) attached hereto ("Equipment");

(b) all inventory and supplies reflected on the Latest Balance Sheet (to the extent not sold, leased, consigned or otherwise disposed of in the Ordinary Course of Business prior to Closing) and other inventory and supplies acquired prior to Closing and reflected on the Closing Balance Sheet ("Inventory");

1.


(c) subject to Section 5.13, all packaging materials and other supplies;

(d) all goodwill directly incident to or directly associated with the Business, and only the Business, as a going concern, all customer lists and all other information and data relating to the customers or suppliers, and, whether or not registered, all design and product patents, trademarks, tradenames and service marks (including, without limitation, the name "SureMed" and all combinations with the foregoing), together with all goodwill associated therewith, all copyrightable works and works of authorship, whether or not registered, computer programs and software, (inclusive of all source code and related source code documentation), URLs and domain names, computer software documentation, trade secrets, and all processes, ideas, inventions and know how whether or not patentable, engineering drawings, plans and product specifications, promotional displays and materials, including all the Intellectual Property embodied by or otherwise related to any of the foregoing, and any registrations, applications, continuations and continuations-in-part related to any of the foregoing ("Intangible Assets");

(e) all contracts, arrangements, purchase orders, commitments and other agreements of the Seller ("Contracts") listed in Part 3.10 of the Seller Disclosure Schedule attached hereto and all Contracts which, by virtue of the provisions of Section 3.10, are not required to be disclosed in Part 3.10 of the Seller Disclosure Schedule (collectively, the "Assigned Contracts"), except the Excluded Leases (as defined in Section 1.2(c)), Foreign Customer Contracts, the contract between Seller and Allegiance Healthcare Corporation dated as of October 1, 1996 (the "Allegiance Contract") and other Contracts (the "Excluded Contracts") which are identified on Schedule 1.1(e) attached hereto;

(f) all business and operating Permits (as defined in Section 3.15) and product registrations, to the extent assignable;

(g) all data, books, files and records (provided that Seller may retain copies thereof), other than the original records, files and other information kept for financial reporting purposes, copies of which shall be provided to Buyer and considered Purchased Assets, or income tax purposes, and other than original records, files, invoices and other information related to the product leases and the Foreign Customer Contracts, copies of which shall be provided to Buyer and considered Purchased Assets, ("Business Records");

(h) all deposits, refunds, prepaid rentals, leases and licenses, catalog, packaging, promotional, trade show, advertising and royalty expenditures and unbilled charges and credits, and other prepaid assets to the extent reflected on the Latest Balance Sheet (to the extent not exhausted or realized prior to Closing) and other prepaid assets generated prior to Closing as reflected on the Closing Balance Sheet;

(i) all claims, warranties, choses of action, causes of action, rights of recovery and rights of set-off relating to the Purchased Assets or the Assumed Liabilities or relating primarily to the Business;

(j) all rights to receive and retain mail and other communications relating to the Purchased Assets, the Assumed Liabilities and/or the Business;

2.


(k) Seller's right, title and interest in and to all goods produced by the Business that are returned by a customer after the Closing;

(l) all other properties and assets of every kind, character or description except Excluded Assets.

1.2 Excluded Assets. Notwithstanding anything in Section 1.1 to the contrary, the Purchased Assets shall not include any of the following assets of the Seller ("Excluded Assets"):

(a) all cash and all accounts, notes and loans receivable;

(b) all furniture and fixtures;

(c) all product leases in effect as of the Closing Date and receivables outstanding thereunder (the "Excluded Leases");

(d) minute books and stock record books of the Seller;

(e) any rights under or with respect to any employee benefit plans of the Seller, except to the extent otherwise provided in Section 5.9

(f) all amounts billable or collectible under customer Contracts with respect to products shipped but not invoiced as of the Closing Date;

(g) contracts, agreements, understandings and arrangements with customers outside the United States or Canada (the "Foreign Customer Contracts");

(h) all rights, liabilities and obligations under the Excluded Contracts;

(i) all claims, warranties, choses of action, causes of action, rights of recovery and rights of set-off relating to the Excluded Assets or the Liabilities Not Assumed;

(j) all consideration to be received by and the rights of the Seller under this Agreement;

(k) original records, files and other information kept for financial reporting purposes or information related to the product leases and the Foreign Customer Contracts, provided however that copies of the foregoing shall be provided to Buyer and considered Purchased Assets, and original records, files and other information kept for income tax purposes;

(l) all Contracts of insurance and the proceeds thereof;

(m) Permits not relating exclusively to the Business or that are not transferable to Buyer;

(n) non-transferable software listed on Schedule 1.2(n) hereto;

(o) all equipment that is subject to any product lease;

3.


(p) trademarks, service marks and trade names not set forth in Part 3.9 of the Seller Disclosure Schedule, including the name "Baxter" or the words "Productivity Systems," or any derivation thereof and other marks (other than "SureMed" or any derivation thereof) which serve to identify Seller or Seller's Productivity Systems business unit;

(q) all rights to claims, refunds and causes of action related to the Excluded Assets or the Liabilities Not Assumed;

(r) all other assets, properties and rights of Seller not used primarily in the conduct of the Business and assets or properties located outside of the United States of America and Canada which are used in connection with the Foreign Customer Contracts;

(s) in the event the software license agreement between Seller and Sybase, Inc. dated as of August 29, 1996 (the "Sybase Agreement") is not assigned to Buyer, the amount prepaid thereunder as reflected on the Latest Balance Sheet under the account identified as "Software Licenses" included in the "Other Assets" account shall be an "Excluded Asset"; and

(t) the Allegiance Contract.

ARTICLE 2

CONSIDERATION

2.1 Preliminary Purchase Price; Payment of Preliminary Purchase Price.

(a) At the Closing, the Buyer shall pay an amount (the "Preliminary Purchase Price") equal to the Value of the Business based on the Latest Balance Sheet, less, if the Sybase Agreement is not assigned to Buyer, the amount prepaid thereunder as reflected on the Latest Balance Sheet under the account identified as "Software Licenses" included in the "Other Assets" account. The Preliminary Purchase Price shall be payable by delivery of (a) Two Million One Hundred Thousand Dollars ($2,100,000) in cash and (b) the Buyer's senior promissory note, in the form attached to the Loan Agreement, in the principal amount equal to the Preliminary Purchase Price less Two Million One Hundred Thousand Dollars ($2,100,000) (the "Purchase Note"). In connection with the issuance of the Purchase Note, the Buyer and the Seller shall also enter into a Loan Agreement as of the Closing Date in the form attached as Exhibit B (the "Loan Agreement"). The Preliminary Purchase Price (and therefore the principal amount due under the Purchase Note) will be subject to post-Closing adjustment pursuant to Section 2.2.

(b) For purposes of this Agreement,

(i) the term "Value of the Business" means the sum of (A) the Net Tangible Asset Value of the Business and (B) the Intangible Asset Value of the Business;

(ii) the term "Net Tangible Asset Value" means the assets (excluding the Intangible Assets) minus the liabilities as shown on the Latest Balance Sheet or the Closing Balance Sheet, as the case may be, minus (or plus if such amount is a negative number) the sum of the value shown on the applicable balance sheet of following (to the extent such following

4.


items are collectively in excess of reserves already reflected on the applicable balance sheet): (A) all used or damaged equipment or components held in inventory by Seller that is not capable of being refurbished by Seller; and (B) all equipment or components held in inventory by Seller that Seller does not reasonably expect to be sold during calendar year 1999 based upon market demand for such equipment or components during the twelve months preceding the date of this Agreement;

(iii) the term "Specified Intangible Assets" means the assets included in the accounts identified as (A) "Assets Under Construction Associated with Software Development" and included within the Property, Plant and Equipment account, (B) "Capitalized Software License" and (C) "Capitalized Software Development Costs" included with the "Other Assets" account; and

(iv) the term "Intangible Asset Value of the Business" means (A) the Specified Intangible Assets as shown on the Latest Balance Sheet, plus (B) capital expenditures for software development made by Seller consistent with its past practices between September 30, 1998 and the Closing Date, minus (C) $3,000,000.

(c) The service, warranty and installation obligations being assumed by OmniCell pursuant to this Agreement shall be reflected on the Closing Balance Sheet as accrued liabilities in accordance with the methodology set forth in Schedule 2.1(c) hereto.

2.2 Purchase Price Adjustment

(a) As soon as possible, but in any event on or before the 60/th/ day following the Closing Date, the Seller and its independent accountants ("Seller's Accountants") shall prepare and distribute to the Buyer and Buyer's independent accountants ("Buyer's Accountants") an unaudited statement of assets and liabilities for the Business being acquired hereunder (which shall exclude Excluded Assets and Liabilities Not Assumed) as of the close of business on the Closing Date, including a calculation of Value of the Business (the "Draft Closing Balance Sheet"). The Seller will prepare the Draft Closing Balance Sheet on a basis consistent with the preparation of the Latest Balance Sheet. The Draft Closing Balance Sheet shall also contain a reconciliation to the Audited Carve-out Financial Statements for the year ended December 31, 1997.

(b) Within thirty (30) calendar days after receiving the Draft Closing Balance Sheet, Buyer will deliver to the Seller and Seller's Accountants a written statement specifying the amount in dispute and describing in reasonable detail the basis for such dispute. The parties shall use reasonable efforts to resolve any such objections in good faith, but if they do not obtain a final resolution within thirty (30) calendar days after the Buyer has delivered the statement of objections and if the items remaining in dispute are such that the Purchase Price would be adjusted by more than $50,000, then an independent accounting firm which shall be mutually acceptable to the parties shall be retained to resolve any remaining objections (the "Arbitrating Accountants") and shall within forty-five (45) calendar days after submission determine and report to the parties upon such remaining disputed items. The parties shall bear the fees and disbursements of the Arbitrating Accountants in the same proportion that their respective positions are confirmed or rejected by the Arbitrating Accountants. The determination of the

5.


Arbitrating Accountants will be conclusive and binding on the parties. The statement setting forth the final determinations pursuant to this Section 2.2(b) is referred to herein as the "Closing Balance Sheet." Notwithstanding anything contained in this Section 2.2 to the contrary, if the items successfully disputed by the Buyer are such that the Purchase Price would be adjusted by less than $50,000, no adjustment to the Purchase Price shall be made and the amount of any adjustment that would otherwise be made shall be counted towards the $300,000 threshold of Buyer Indemnifiable Losses specified in Section 11.3(b). Any item disputed by Buyer that is resolved pursuant to this Section 2.2 may not be asserted as a basis for a claim for indemnity by Seller under Article 11.

(c) If the Value of the Business calculated from the Closing Balance Sheet exceeds the Preliminary Purchase Price, then the principal amount of the Purchase Note shall be increased by an amount equal to such excess. If the Value of the Business calculated from the Closing Balance Sheet is less than the Preliminary Purchase Price, then the principal amount of the Purchase Note shall be reduced by an amount equal to such difference. In either case, the interest due under the Purchase Note shall be adjusted retroactively to the Closing Date based on the final Purchase Price. The Preliminary Purchase Price, as adjusted pursuant to this Section 2.2, shall be referred to herein as the "Purchase Price." Promptly following the determination of the Purchase Price pursuant to this Section 2.2, Buyer shall execute and deliver to the Seller in exchange for the return of the original Purchase Note an amended and restated Purchase Note reflecting such increase or reduction, as the case may be.

2.3 Assumption of Liabilities.

(a) As additional consideration for the Purchased Assets, the Buyer shall, pursuant to an assumption agreement to be executed and delivered at Closing in the form attached hereto as Exhibit C (the "Assumption Agreement"), assume the following liabilities and obligations of the Seller relating to the Business (the "Assumed Liabilities"):

(i) those obligations and Liabilities arising under the Assigned Contracts;

(ii) all Liabilities arising out of the operation of the Business after the Closing Date;

(iii) all repair, maintenance and product warranty claims arising with respect to products of the Business sold before, on or after the date of the Closing, including without limitation, with respect to products leased under the Excluded Leases;

(iv) the Liabilities of the Seller to the Business Employees (as defined in Section 3.14) to the extent set forth in Section 5.9;

(v) all Liabilities of the Business that are reflected on the face of the Latest Balance Sheet and Liabilities of the same type which arise out of the operation of the Business through and including the Closing Date in the Ordinary Course of Business and which are reflected on the Closing Balance Sheet;

6.


(vi) all Liabilities, obligations and commitments related to the Intellectual Property included as part of the Purchased Assets;

(vii) all Liabilities and obligations with respect to product return claims arising with respect to products of the Business sold before, on or after the Closing Date; and

(viii) all Liabilities and obligations to continue Seller's program for attaining Year 2000 compliance of the software and other systems included as part of the Purchased Assets.

(b) Except for the Assumed Liabilities, the Buyer shall not assume any other Liabilities of the Seller, whether due or to become due, absolute or contingent, direct or indirect (the "Liabilities Not Assumed"), including but not limited to the following:

(i) any liability or obligation arising from any third party product liability claim which claim is based upon an occurrence on or prior to the Closing Date;

(ii) any liability for Taxes arising from the operation of the Business arising on or prior to the Closing Date; and

(iii) any obligation or liability arising out of or relating to any employee grievance relating to periods on or prior to the Closing Date.

2.4 Non-Assignable Contracts.

(i) Contracts Not Assigned. To the extent that any rights under any Assigned Contracts may not be assigned without the prior consent of any other Person and such consent has not been obtained on or prior to the Closing Date, and if the failure to obtain such consent or such assignment would constitute a material breach of or cause a loss of material benefits under such Contract or result in the imposition of any material liability upon the Buyer or the Business, then, unless and until such consent has been obtained, such Contract shall be deemed not to have been assigned to Buyer and, subject to
Section 2.4(b), neither this Agreement nor any document executed in connection herewith shall constitute an assignment of such Contract.

(b) Further Assurances Concerning Contracts. The Seller and the Buyer shall use reasonable efforts in good faith to obtain all required third-party consents and approvals necessary to assign to the Buyer, and for the Buyer to assume all of the benefits and Liabilities under, the Assigned Contracts.

2.5 Allocation of Purchase Price. For Tax purposes with respect to the sale of the Purchased Assets, the Seller and the Buyer shall each report that the Purchase Price and the value of the Assumed Liabilities in accordance with the Schedule of Asset Allocation set forth on Schedule 2.5 attached hereto.

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller hereby represents and warrants to the Buyer that all of the statements contained in this Article 3 are true and correct as of the date of this Agreement, except as set forth in the disclosure schedule prepared by the Seller and delivered herewith (the "Seller Disclosure Schedule"). The Seller Disclosure Schedule will be organized in parts corresponding to the numbered and lettered sections in this Article 3; provided, that an item disclosed on one part of the Seller Disclosure Schedule as an exception to one particular representation or warranty shall be deemed adequately disclosed on all other parts of the Seller Disclosure Schedule as an exception to the representations and warranties corresponding thereto to the extent that it is reasonably apparent that such disclosure is also an exception to such other representations and warranties.

3.1 Organization, Qualification and Corporate Power. The Seller is a corporation duly incorporated and organized, validly existing and in good standing under the laws of the State of Delaware. The Seller has all requisite corporate power and authority to carry on the Business and to own and use the Purchased Assets. The Seller is qualified to conduct business and is in good standing under the laws of each jurisdiction wherein the Seller's operation of the Business or its ownership of the Purchased Assets requires the Seller to be so qualified, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect.

3.2 Authorization of Transaction. The Seller has all requisite corporate power and authority to execute and deliver this Agreement and each of the other agreements contemplated hereby to which it may become a party and to perform its obligations hereunder and thereunder. Without limiting the generality of the foregoing, the Board of Directors of the Seller has duly authorized the execution, delivery and performance of this Agreement. This Agreement constitutes the valid and legally binding obligation of the Seller enforceable against it in accordance with its terms. Upon the execution of each of the other agreements contemplated hereby at Closing, each of such other agreements to which the Seller is a party will constitute the valid and legally binding obligation of the Seller enforceable against it in accordance with its terms.

3.3 Noncontravention. Except as set forth in Part 3.3 of the Seller Disclosure Schedule, neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby will (a) violate or conflict with any statute, regulation, law, rule, ordinance or common law doctrine to which the Seller is subject, the violation of which would result in a Material Adverse Effect (but no representation is made hereby with respect to the effect of any bulk sales laws or any Federal or State antitrust or similar laws or regulations), (b) violate or conflict in any material respect with any judgment, order, decree, stipulation, injunction, charge or other restriction of any government, governmental agency or court to which the Seller is subject, in connection with the Business, or any provision of the Certificate of Incorporation or By-Laws of the Seller, or (c) conflict with, result in a breach or default under or require any notice, consent or approval under, any contract, agreement, license, franchise, permit, or other arrangement to which the Seller is a party in connection with the Business or to

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which any of the Purchased Assets are subject, except for such violations, conflicts, breaches, defaults or other events would not result in a Material Adverse Effect or materially and adversely affect the consummation of the transactions contemplated hereby.

3.4 No Material Consents. Except for any consents which may need to be obtained in connection with the assignment of the Assigned Contracts to the Buyer and the other consents and approvals contemplated by this Agreement, no authorization, consent or approval of, any government, governmental agency or court, or any other Person is required to be made or obtained, in order for the parties hereto to consummate the transactions contemplated hereby, except where the failure to obtain any such consent or approval would not have a material adverse effect upon the assets, business, financial condition or results of operations of the Business.

3.5 Latest Balance Sheet. Set forth in Part 3.5 of the Seller Disclosure Schedule is a copy of the unaudited statement of assets and liabilities of the Business being acquired hereunder (which shall exclude Excluded Assets and Liabilities Not Assumed) as of September 30, 1998 (the "Latest Balance Sheet"). The Latest Balance Sheet was prepared in accordance with GAAP.

3.6 Recent Events. Except as reflected on the unaudited Carve-out Financial Statements or in Part 3.6 of the Seller Disclosure Schedule, since September 30, 1998 the Seller has not, in connection with the Business:

(a) sold, leased, transferred or assigned any material Purchased Asset, other than the sale of inventory in the Ordinary Course of Business;

(b) accelerated, terminated, modified, canceled, or committed any material breach of any Assigned Contract involving more than $50,000.

(c) granted any license or sublicense of any rights under or with respect to any Intellectual Property other than in the Ordinary Course of Business;

(d) changed in any material and adverse respect the manner in which the Business has been conducted;

(e) made or committed to make any capital expenditures or entered into any other material transaction outside the Ordinary Course of Business and involving any single expenditure in excess of $50,000;

(f) experienced any work interruptions, labor grievances or claims, or any event or condition which would result in a Material Adverse Affect;

(g) consummated any material transaction or entered into any material Assigned Contract outside of the Ordinary Course of Business;

(h) established, adopted or altered any employee benefit plan or changed the compensation of any employee;

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(i) incurred, assumed or otherwise become subject to any liability, other than accounts payable or other liabilities which are not material to the Business incurred by the Seller in transactions entered into in the Ordinary Course of Business except as reflected on the Latest Balance Sheet (or, solely for purposes of determining whether this Section 3.6(i) is true and correct as of the Closing Date pursuant to Section 6.2, as reflected on the Closing Balance Sheet);

(j) the Seller has not, with respect to the Business, changed any of its methods of accounting or accounting practices, or changed any of the prices of any of its products or any of its pricing policies, in any respect; or

(k) committed (orally or in writing) to any of the foregoing.

3.7 Tax Matters The Seller has withheld and paid when due all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee and independent contractor in connection with work and services performed for the Business.

3.8 Title and Condition of Properties

(a) No Real Property. The Seller does not lease any real property in connection with the Business except for the office space located in Grayslake, Illinois, and Seller does not own any real property which is used exclusively in connection with the Business.

(b) Title to Assets. The Seller owns marketable title, free and clear of Security Interests, to all of the Purchased Assets, except for (i) leased assets which the Seller has the right to use under valid leases identified in Part 3.8 of the Seller Disclosure Schedule, (ii) licensed assets which the Seller has the right to use under valid licenses identified in Section 3.9 or 3.10 of the Seller Disclosure Schedule, (iii) Security Interests which secure Liabilities set forth on the Latest Balance Sheet, (iv) imperfections of title which are not material in character, amount or extent and which do not materially detract from the value or materially interfere with the present use of the assets affected thereby, and (v) Security Interests for current Taxes not yet due and payable.

3.9 Intellectual Property

(a) Part 3.9 of the Seller Disclosure Schedule contains a list and brief description of the following: (i) registered and unregistered trademarks, patents, patent applications, continuations or continuations in part and registered copyrights that are owned by the Seller and used primarily in connection with the conduct of the Business as conducted and (ii) each license providing the Seller with the right to use the intellectual property of other Persons used primarily in connection with the Business ("Licenses-In").

(b) Except as set forth in Part 3.9(b) of the Seller Disclosure Schedule, none of the Intellectual Property is subject to any outstanding judgment, order, decree, stipulation, injunction or charge. No charge, complaint, action, suit, proceeding, hearing, investigation, claim, or demand is pending or, to the knowledge of the Seller, threatened, which challenges the legality, validity, enforceability, use or ownership of any of the Intellectual Property. Except pursuant to customer agreements, the Seller has never agreed to indemnify any Person for or

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against any interference, infringement, misappropriation, or other conflict with respect to the Intellectual Property.

(c) No breach or default by the Seller exists or has occurred under any License-In and the consummation of the transactions contemplated by this Agreement will not violate or conflict with or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) or result in a forfeiture under, or constitute a basis for termination of, any such License-In.

(d) The Seller has the unrestricted right to use, and is transferring to the Buyer, all the Intellectual Property, subject in each case to the Licenses-In; and the Intellectual Property covers all patents, trademarks, trade names, service marks and copyrights which are necessary to operate the Business as presently conducted.

(e) None of the Intellectual Property, and no product or service licensed or sold by the Business, infringes any trademark, trade name, copyright, trade secret, patent, or other intellectual property or proprietary right of any Person or would give rise to an obligation to render an accounting to any Person as a result of co-authorship, co-invention or an express or implied contract for any use or transfer. The Seller has not received notice of any adversely held patent, invention, trademark, copyright, service mark, trade name or trade secret of any other Person alleging or threatening to assert that the Seller's use of any of the Intellectual Property or conduct of the Business infringes upon or is in conflict with any intellectual property or proprietary rights of any third party.

(f) Seller has taken measures and precautions to protect and maintain the confidentiality and secrecy of all the Intellectual Property (except Intellectual Property whose value would be unimpaired by public disclosure) and otherwise to maintain and protect the value of all the Intellectual Property that are consistent with the measures and precautions taken by Seller to protect its other similar Intellectual Property.

3.10 Contracts

(a) Part 3.10 of the Seller Disclosure Schedule lists each of the contracts, agreements, licenses, and other documents and instruments of the following types to which the Seller is a party which relates primarily to the Business:

(i) any written arrangement (or group of related written arrangements) for the lease of personal property from or to third parties with annual payments exceeding $50,000 or with a term exceeding one year (other than the Excluded Leases);

(ii) any written arrangement concerning a partnership or joint venture;

(iii) any written arrangement (or group of related written arrangements) under which the Seller has granted a Security Interest on any of the Purchased Assets;

(iv) any written arrangement imposing an obligation of confidentiality or non-competition on the part of Seller;

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(v) any license or royalty agreement or other Contract relating to the Intellectual Property (other than those disclosed in Part 3.9 of the Seller Disclosure Schedule) involving annual payments to the Seller in excess of $50,000;

(vi) any contract or group of related contracts with the same Person (or group of related persons) for or relating to the purchase, sale or lease of products or services, either (A) which differs in any material respect from the Seller's standard forms of purchase and lease agreements which the Seller has delivered to the Buyer and its counsel or (B) which has a term of more than five years.

(vii) any contract or agreement relating to the acquisition or disposal of assets outside of the Ordinary Course of Business;

(viii) any manufacturer's or supplier's warranty or indemnity relating to any fixed assets included in the Purchased Assets with a net book value in excess of $5,000; and

(ix) any enforceable oral agreement which modifies any of the foregoing.

(b) The Seller has delivered or otherwise made available to the Buyer a copy of each written Contract listed in Part 3.10 of the Seller Disclosure Schedule and a summary of the terms of any such Contract that is not written. With respect to each Contract so listed: (i) to the knowledge of Seller, the Contract is legal, valid, binding, enforceable, and in full force and effect;
(ii) neither the Seller nor, to the knowledge of the Seller, any other party to such Contract, is in material breach or default under such Contract; (iii) the Seller has not and, to the knowledge of Seller, no other party has repudiated any material provision of any such Contract; and (iv) to the knowledge of Seller, no event has occurred and no event has occurred, and no circumstance or condition exists, that could reasonably be expected to (with or without notice or lapse of time) (A) result in a violation or breach of any of the provisions of any Contract by the Seller, (B) give any Person the right to declare a default or exercise any remedy under any Contract, (C) give any Person the right to accelerate the maturity or performance of any Contract, or (D) give any Person the right to cancel, terminate or modify any Contract. Copies of the general forms of customer invoices, contracts and license agreements used by the Seller primarily in connection with the Business have been delivered to the Buyer.

3.11 Inventory. All inventory and supplies reflected on the Latest Balance Sheet Inventory consists of (i) items of a quantity and quality useable and/or saleable in all material respects in the Ordinary Course of Business and has a commercial value at least equal to the value shown on the Latest Balance Sheet net of reserves, or (ii) used, damaged or obsolete equipment and components that are not capable of being refurbished and equipment and components that Seller does not reasonably expect to be sold during calendar year 1999 based on market demand for such equipment or components over the twelve months ended on the date of this Agreement, all of which have been written down on the Latest Balance Sheet to estimated realizable market value.

3.12 Litigation. The Seller is not, in connection with the Business, (a) subject to any unsatisfied judgment, order, decree, stipulation, injunction, or charge or (b) a party or, to the

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knowledge of the Seller, threatened to be made a party to, any charge, complaint, action, suit, proceeding, hearing, or investigation.

3.13 Employment Matters.

(a) The Seller is not, in connection with the Business, a party to or bound by any collective bargaining agreement, and the Seller has not experienced any strikes, grievances, other collective bargaining disputes or, to the knowledge of the Seller, material claims of unfair labor practices. The Seller has no knowledge of any organizational effort presently being made or threatened by or on behalf of any labor union with respect to employees of the Business.

(b) The Seller, in connection with the Business, has complied in all material respects with all applicable laws relating to labor and employment, including any provisions thereof relating to wages, termination pay, vacation pay, fringe benefits, collective bargaining and the payment and/or accrual of the same and all Taxes, insurance and all other costs and expenses applicable thereto; to the Seller's knowledge the Seller is not liable for any arrearage, or has Taxes, costs or penalties for failure to comply with any of the foregoing.

3.14 Employees and Executive Compensation.

(a) Part 3.14 of the Seller Disclosure Schedule sets forth a complete list of all full-time and part-time employees of Seller conducting the Business (the "Business Employees"), their salaries and wage rates, amounts payable under the Seller's Management Incentive Compensation Plan bonus arrangement, vacation pay schedule as of the date hereof, benefits, positions, and length of service. Set forth in Part 3.14 of the Seller Disclosure Schedule is a description of the Seller's vacation pay, sick pay and paid time off policies.

(b) Except as set forth in Part 3.14 of the Seller Disclosure Schedule, no Business Employee has any agreement as to length of notice required to terminate his or her employment, other than such as results by law from the employment of an employee without agreement as to such notice or as to length of employment.

(c) To the knowledge of the Seller, except as set forth in Part 3.14 of the Seller Disclosure Schedule, (i) no Business Employee is a party to or is bound by any confidentiality agreement, noncompetition agreement or other Contract (with any Person) that may have any material adverse effect on (A) the performance by such employee of any of his duties or responsibilities as an employee of the Seller or as an employee of the Buyer, or (B) the business of the Seller or the Buyer and (ii) as of the date of this Agreement, no Business Employee has tendered a resignation that will take effect after the date hereof.

(d) The Seller does not contribute, and is not obligated to contribute, to any multiemployer plan (within the meaning of section 4001 of ERISA) with respect to the Business Employees.

3.15 Licenses, Permits and Approvals. Part 3.15 of the Seller Disclosure Schedule lists all governmental and regulatory licenses, authorizations, franchises, certificates, permits and approvals, and all quality, safety and other industry group certifications necessary to the conduct of the Business and as currently conducted ("Permits"). All such Permits are in full force and

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effect to the Seller's knowledge. There are no violations by the Seller of, or any claims or proceedings pending or, to the knowledge of the Seller, threatened, challenging the validity of or seeking to discontinue, any such Permits. The Seller has conducted the Business in compliance in all material respects with the requirements, standards, criteria and conditions set forth in the Permits, and the Seller is not in violation of any of the foregoing where such non-compliance or violation would result in the revocation of such Permit.

3.16 Compliance with Laws. The Seller, in connection with the Business, is, and has been for the last three years, in compliance in all material respects with all applicable laws, rules, regulations or orders (including, without limitation, health and safety laws and consumer product safety laws), and no notice, claim, charge, complaint, action, suit, proceeding, investigation or hearing has been received by the Seller or, to the knowledge of the Seller, threatened, against the Seller, alleging any such violation.

3.17 Product Warranty. Except as set forth in Part 3.17 of the Seller Disclosure Schedule, each product sold, leased, or delivered by the Business has been in material conformity with all applicable contractual commitments, and the Seller has no Liability for replacement or repair thereof or other damages in connection therewith beyond scope of the warranties set forth in the Assigned Contracts.

3.18 Installation.

(a) Part 3.18(a) of the Seller Disclosure Schedule sets forth all equipment which has been shipped but is unbilled and uninstalled as of the date hereof. All equipment set forth in Part 3.18(a) of the Seller Disclosure Schedule is capable of being installed using commercially reasonable efforts by September 30, 1999.

(b) Part 3.18(b) of the Seller Disclosure Schedule sets forth in reasonable detail a list of products shipped prior to the date hereof and products that the Seller reasonably expects to ship prior to January 15, 1999 that the Seller does not reasonably expect to have been delivered and installed prior to January 15, 1999 and additionally sets forth the amount reserved on Seller's balance sheet as of the Closing Date for such delivery and installation.

3.19 Brokers' Fees. Except as set forth in Part 3.19 of the Seller Disclosure Schedule, the Seller has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which Buyer could become liable or otherwise obligated.

3.20 Accounting for Returns. To the knowledge of Seller, there are no liabilities and obligations with respect to product return claims arising with respect to products of the Business sold prior to the date hereof for which the Seller has not established adequate reserves in accordance with customary accounting procedures.

3.21 Year 2000 Compliance Obligations. Part 3.21 of the Seller Disclosure Schedule sets forth the Seller's program for attaining Year 2000 compliance of the software and other systems included as part of the Purchased Assets and the obligations of which Seller has knowledge to continue such program.

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ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer hereby represents and warrants to the Seller that all of the statements contained in this Article 4 are true and correct as of the date of this Agreement.

4.1 Corporate Status. The Buyer is a corporation duly incorporated and organized, validly existing and in good standing under the laws of State of California.

4.2 Authority for Transaction. The Buyer has all requisite corporate power and authority to enter into this Agreement and the other agreements contemplated hereby (including without limitation the Purchase Note) and to perform its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and the other agreements contemplated thereby have been duly authorized by all necessary corporate action on the part of the Buyer. This Agreement constitutes, and on the Closing Date the Purchase Note will constitute, valid and legally binding agreements of the Buyer enforceable against the Buyer in accordance with their respective terms.

4.3 No Breach or Default. Neither the execution and delivery of this Agreement or the Purchase Note, nor the consummation of the transactions contemplated hereby or thereby, will: (i) violate or conflict in any way with any applicable statute, regulation, law, rule or common law doctrine, or with any judgment, order, decree, stipulation, injunction, charge or other restriction of any governmental body, governmental agency or court, to which the Buyer is bound or affected, or with any provision of the Articles of Incorporation or By-Laws of the Buyer, or (ii) conflict with, result in a breach of, constitute a default under (with or without notice or lapse of time, or both), result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice or consent under any contract, agreement, lease, sublease, license, sublicense, franchise, permit, indenture, agreement for borrowed money, instrument of indebtedness, Security Interest or other arrangement to which the Buyer is a party or by which any of its property or assets are subject. Except as disclosed in Part 4.3 of the Buyer Disclosure Schedule, or as otherwise expressly contemplated hereby, the Buyer is not required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government, governmental agency or court, or any other Person in order for the parties to consummate the transactions contemplated by this Agreement and in order that such transactions not constitute a breach or violation of, or result in a right of termination or acceleration or any encumbrance on any of the Buyer's assets pursuant to the provisions of any of the agreements referenced in the preceding sentence.

4.4 Financial Statements; Books and Records

(a) The Buyer has provided the Seller with the following financial statements (collectively the "Buyer Financial Statements"), copies of which are set forth as schedules to Part 4.4 of Buyer Disclosure Schedule: (A) audited balance sheets and related statements of income, changes in stockholders' equity and cash flows for the Buyer as of and for the fiscal year ended December 31, 1997, and (B) unaudited balance sheets and related statements of income for the nine-month period ended September 30,, 1998 (the "Most Recent Period End") (the

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"Buyer Balance Sheet"). The Buyer Financial Statements are correct and complete, have been prepared in accordance with GAAP and fairly present the financial condition and results of operations of the Buyer as of the times and for the periods referred to therein, subject, in the case of the Buyer Balance Sheet, to normal year-end adjustments (none of which will be materially adverse) and the absence of certain footnote information.

4.5 Recent Events. Since the Most Recent Period End, the Buyer has conducted its business only in the ordinary course of business and has not experienced or suffered any material adverse impact upon its business, assets, operations, financial condition or business prospects.

4.6 Brokerage. There are no claims for brokerage commissions, finder's fees or similar compensation in connection with the transactions contemplated by this Agreement or the Purchase Note based on any arrangement or agreement made by or on behalf of the Buyer or any of its Affiliates for which the Seller may be held liable.

4.7 Litigation. There are no actions, suits, proceedings, orders or investigations pending or, to the Buyer's knowledge, threatened against or affecting Buyer, at law or in equity, or before or by any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which would prevent or otherwise adversely affect the Buyer's performance under this Agreement or the Purchase Note or the Purchase Note or the consummation of the transactions contemplated hereby and thereby.

ARTICLE 5

COVENANTS PRIOR TO CLOSING

5.1 Conduct of Operations. During the period from the date of this Agreement through the Closing Date, the Seller shall operate the Business solely in the Ordinary Course of Business and in compliance with the terms of this Agreement, and all additions, substitutions and changes of form of the Purchased Assets occurring from and after the date hereof shall be deemed to constitute Purchased Assets hereunder. Without limiting the generality of the foregoing, the Seller will use commercially reasonable efforts from the date hereof through the Closing Date, to (a) perform all of its material obligations under all material agreements relating to or affecting the Business or the Purchased Assets; (b) keep in full force and effect all permits, franchises and other rights material to the Business; (c) maintain the books, accounts and records of the Business in all material respects in accordance with past custom and practice as used in connection with the preparation of the unaudited Carve-out Financial Statements; and (d) maintain in full force and effect the existence of all material Intellectual Property.

5.2 Buyer Access to Seller's Records and Premises. From and after the date hereof through the Closing Date, the Seller shall give to the Buyer and the Buyer's counsel and accountants, all reasonable access during normal business hours and upon reasonable notice to all documents, books, records, properties of the Business, so that the Buyer may, at its sole expense, investigate and inspect them, and the Seller will furnish to the Buyer copies of all such documents and information concerning the Purchased Assets and the Business as Buyer may reasonably request; provided, that Buyer shall have no access to the Seller's employees, customers, suppliers or other third parties without Seller's express prior consent, which shall not

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be unreasonably withheld. All information obtained or provided to the Buyer in connection with its investigation of the Seller shall be held subject to Section 5.4.

5.3 Seller Access to Buyer's Records and Premises. From and after the date hereof through the Closing Date, Seller shall have the right to discuss the finances and accounts of the Buyer with its officers at reasonable times and as often as may be reasonably required.

5.4 Buyer Confidentiality. Prior to the Closing, the Buyer will treat and hold as confidential all of the confidential information relating to the Business disclosed to the Buyer in the course of the Buyer's investigation of the Business (the "Seller Confidential Information"), and shall refrain from using or disclosing any of the Seller Confidential Information, except (a) to authorized representatives of the Seller expressly in connection with the transactions contemplated hereby, or (b) to counsel or other advisers for such purpose (provided such advisers agree to comply with the confidentiality provisions of this Section 5.4), unless disclosure is required by law or order of any governmental authority under color of law. In the event that, prior to the Closing the Buyer is requested or required (by written request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar legal process) to disclose any Seller Confidential Information, the Buyer will notify the Seller promptly of the request or requirement so that the Seller may seek an appropriate protective order or waive compliance with the provisions of this Section 5.4. If, in the absence of a protective order or the receipt of a waiver hereunder, the Buyer is, based on an opinion of counsel, compelled to disclose any Seller Confidential Information to any tribunal or else stand liable for contempt, the Buyer may disclose the Seller Confidential Information to the tribunal; provided, however, that the Buyer shall, upon the request of the Seller, exert all reasonable efforts to obtain, at the reasonable request of the Seller, an order or other assurance that confidential treatment will be accorded to such portion of the Seller Confidential Information required to be disclosed as the Seller shall reasonably designate.

5.5 Seller Confidentiality. Until the third anniversary of the Closing (or, with respect to information relating to any Assigned Contract, until the termination date of such contract, if later), the Seller will treat and hold as confidential all of the confidential information relating to the Buyer disclosed to the Seller in the course of the Seller's investigation of the Buyer and all of the confidential information relating to the Purchased Assets previously treated by Seller as confidential (the "Buyer Confidential Information"), and shall refrain from using or disclosing any of the Buyer Confidential Information, except (a) to authorized representatives of the Seller expressly in connection with the transactions contemplated hereby, or (b) to counsel or other advisers for such purpose (provided such advisers agree to comply with the confidentiality provisions of this Section 5.5), unless disclosure is required by law or order of any governmental authority under color of law. In the event that the Seller is requested or required (by written request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar legal process) to disclose any Buyer Confidential Information, the Seller will notify the Buyer promptly of the request or requirement so that the Buyer may seek an appropriate protective order or waive compliance with the provisions of this Section 5.5. If, in the absence of a protective order or the receipt of a waiver hereunder, the Seller is, based on an opinion of counsel, compelled to disclose any Buyer Confidential Information to any tribunal or else stand liable for contempt, the Seller may disclose the Buyer Confidential Information to the tribunal; provided, however, that the Seller shall, upon

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the request of the Buyer, exert all reasonable efforts to obtain, at the reasonable request of the Buyer, an order or other assurance that confidential treatment will be accorded to such portion of the Buyer Confidential Information required to be disclosed as the Buyer shall reasonably designate.

5.6 Cooperation. Each party will use commercially reasonable efforts to take all action and to do all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, including satisfying the closing conditions set forth in Articles 6 and 7.

5.7 HSR Approval. As promptly as practicable after the date hereof, Buyer and Seller shall file with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice the notifications and other information required to be filed under the HSR Act, or any rules and regulations promulgated thereunder, with respect to the transactions contemplated hereby. Each party warrants that all such filings by it will be, as of the date filed, true and accurate in all material respects and in material compliance with the requirements of the HSR Act and any such rules and regulations. Each of Buyer and Seller agrees to make available to the other such information as each of them may reasonably request relative to its business, assets and property as may be required of each of them to file any additional information requested by such agencies under the HSR Act and any such rules and regulations. Seller and Buyer will supply each other with copies of all correspondence, filings or communication (or memoranda setting forth the substance thereof) between either of them or their respective representatives and the Federal Trade Commission, the Antitrust Division of the United States Department of Justice or any other governmental agency of authority or members of their respective staffs with respect to this Agreement or the transactions contemplated hereby. Without limiting the generality of Section 5.6, each party will use all commercially reasonable efforts to obtain a waiver from the waiting period under the HSR Act, will respond to any governmental inquiries under the HSR Act, and will make any further filings pursuant to the HSR Act that may be necessary, proper, or advisable.

5.8 Notice of Developments. Prior to Closing, the Seller will give prompt written notice to the Buyer upon learning of any material development affecting the Purchased Assets or the financial condition of the Business taken as a whole. If, after such notice, the Buyer fails to terminate this Agreement pursuant to Section 8.1(b), then such notice shall be deemed to have amended the Seller Disclosure Schedule, to have qualified the representations and warranties contained in Article 3, and to have cured any misrepresentation or breach of warranty that otherwise might have existed hereunder by reason of such development.

5.9 Certain Employee and Employee Plan Matters.

(a) Offers of Employment. The Buyer shall make offers of employment on or prior to the Closing Date to the Business Employees on the list that Buyer shall provide to Seller at least 10 days prior to the Closing Date. Any Business Employee who accepts such an offer on or prior to the Closing Date (collectively, the "Transferred Employees") shall be considered to be an employee of the Buyer as of the Closing Date. The terms of employment offered to Business Employees shall be based on the Buyer's existing employment practices and policies and subject to applicable law, provided that it shall be a term of such offer that each such Business Employee

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be entitled to receive (a) cash compensation (including bonus) which is no less generous than that provided by the Seller to such employee immediately prior to the Closing Date, (b) employee benefits consistent with the Buyer's plans, programs and policies, and (c) severance benefits equivalent to, and subject to the same terms and conditions as, those under the Seller's severance pay policies in effect immediately prior to the Closing as set forth on the Seller Disclosure Schedule (the "Severance Pay Policies"), which obligations with respect to cash compensation (including bonus) and severance benefits shall expire no sooner than one (1) year following the Closing Date.

(b) Remaining Employees; Reimbursement of Severance Payments. The Buyer shall have no obligation to employ Business Employees other than the Transferred Employees (Business Employees other than the Transferred Employees being hereinafter referred to as the "Remaining Employees") following the Closing Date. The eligibility of any Remaining Employee whose employment with the Seller is terminated after the Closing Date to receive severance benefits shall be determined under the terms of the Severance Pay Policies, if any, in effect as of the date of such employee's termination. With respect to all Transferred Employees who become entitled to severance benefits within one (1) year following the Closing Date pursuant to subsection (a) above and all Remaining Employees who become entitled to severance benefits on account of termination of employment occurring on or after the Closing Date and on or before the ninetieth (90/th/) day following the Closing Date, the Buyer and the Seller shall share the costs of such benefits as follows: (i) the Buyer shall be responsible for severance benefits in the amount of one (1) week's base salary for each year of service with the Seller in the case of each Remaining Employee, and, in the case of each Transferred Employee, one (1) week's base salary for each year of such Transferred Employee's aggregate service with Seller and with Buyer and (ii) the Seller and the Buyer shall each be responsible for 50% of the cost of severance benefits payable in excess of the amount set forth in (i). For purposes of the foregoing allocation of severance benefit costs, (i) "base salary" shall have a meaning analogous to "Monthly Compensation," as defined in the Baxter International Inc. and Subsidiaries Severance Pay Plan, but expressed on an annual basis; and (ii) severance benefits which the Buyer and the Seller are obligated to pay to Transferred Employees or Remaining Employees, respectively, on account of the requirements of any state, local or foreign country statute shall be considered as having been paid in accordance with the Severance Pay Policies. The Seller shall make payment of the severance benefits described above to the Remaining Employees eligible to receive such payments, and the Buyer shall make payments of the severance benefits described above to the Transferred Employees eligible to receive such payments. The Buyer or the Seller, as applicable, shall make a reimbursement payment to the other in an amount necessary to allocate the financial responsibility for such payment as set forth above, on the one (1) year anniversary date of the Closing Date; provided, however, that if the Buyer owes a reimbursement payment to the Seller under this Section 5.9(b), the Buyer may set such reimbursement payment off against the Distribution Payable and the Credit Amount pursuant to Section 9.4 hereof. Notwithstanding the foregoing, Seller shall pay the cost of any increased amount of severance benefits attributable to the period of time following the Closing Date during which a Remaining Employee remains in the Seller's employ in order to comply with the Worker Adjustment and Retraining Notification Act ("WARN").

(c) Buyer's Assumption of Employee Liability and Indemnity. The Buyer shall assume responsibility for all accrued liabilities of the Seller relating to accrued vacation pay

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and bonuses of Transferred Employees, including the responsibility to make immediate cash payments for such accrued amounts at any time on or after the Closing Date to the extent required under applicable law.

(d) Benefit Plans and Pension Plans. Except to the extent otherwise provided herein, the Buyer shall not assume any obligations arising under any "employee benefit plan" (as such term is defined in Section 3(3) of ERISA) which the Seller maintains relating to any Business Employee (collectively the "Plans"). The active participation of the Transferred Employees in the Plans shall terminate as of the Closing Date, in each case except to the extent that any rights under the Plans shall have vested, or may vest upon fulfillment of certain conditions, in accordance with the terms contained therein; provided, however, that Transferred Employees shall be 100% vested in their account balances under the Seller's Savings Plan and in their accrued benefits under the Baxter International Inc. and Subsidiaries Pension Plan.

(e) Savings Plans. As soon as practicable after the Closing Date, the Seller shall take any action necessary to distribute to the Transferred Employees their account balances (including loans) under the Seller's Savings Plan, as permitted by Section 401(k)(2)(B)(i)(II) of the Code.

(f) Buyer's Plans. The Buyer shall provide for the participation, commencing on the Closing Date, by such of the Transferred Employees who participated in the Plans prior to the Closing Date in the Buyer's employee benefit plans, provided that for purposes of eligibility to participate and vesting under the Buyer's plans (but not for purposes of benefit accruals), the Buyer shall take any and all action necessary (including amendment of the Buyer's plans) to recognize each Transferred Employee's service with the Seller. The Buyer shall recognize each Transferred Employee's years of service with the Seller for all purposes under the Buyer's sick and disability pay plan. No Transferred Employee's participation in any of the Buyer's employee benefit plans shall be limited or restricted due to a preexisting condition limitation in any such plan.

(g) Continuation Coverage. The Seller shall retain liability for employees (and their qualified beneficiaries) receiving or eligible to receive continuation coverage under Part 6 of Title 1 of ERISA and Section 4980B of the Code as of the Closing Date under the Seller's group health plans. All group health plans established or maintained by the Buyer or its Affiliates on or after the Closing Date and for the benefit of Transferred Employees shall comply with all obligations under Part 6 of Title I of ERISA and Section 4980B of the Code applicable to those plans.

(h) WARN. The Buyer shall comply with all notice and other requirements under WARN and any similar state, local, or foreign country statute with respect to all Transferred Employees and all other employees of the Buyer. The Seller shall comply with all notice and any other requirements under WARN and any similar state, local, or foreign country statute with respect to all Remaining Employees and all other employees of the Seller. As soon as administratively practicable following the date of this Agreement, Seller shall provide WARN notice to all Business Employees and shall continue to employ all Remaining Employees until the date that is at least 60 days following the date of delivery of such notice to each such employee.

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(i) Conduct of the Seller Prior to Closing. From the date hereof to the Closing, the Seller shall not change the compensation or benefits provided to any Business Employee other than in the Ordinary Course of Business. The Seller shall promptly provide written notice to the Buyer of any change to the compensation or benefits provided to any Business Employee regardless of whether such change was made in the Ordinary Course of Business.

(j) Canadian Transferred Employees. Notwithstanding any other provision herein to the contrary, the provisions of this Section 5.9(j) shall apply in the case of all Transferred Employees who are persons employed in the Business in Canada (the "Canadian Transferred Employees"). To the extent required under applicable law, the Seller shall offer continued employment as of and following the Closing Date to all Canadian Transferred Employees on substantially the same terms and conditions of employment as in effect with respect to such employees immediately prior to the Closing Date and shall credit each such employee with such employee's prior service with the Seller for all applicable purposes, including a later occurring termination of employment. Subject to Section 5.9(b), the Buyer shall indemnify and save harmless the Seller from any and all claims, liabilities and losses together with all penalties, interest and reasonable legal fees, arising out of or relating to, directly or indirectly, any matters pertaining to any Canadian Transferred Employee for periods on and after the Closing Date.

5.10 Service and Installation. The Buyer shall perform its service and installation obligations under the Service and Installation Agreement attached as Exhibit G hereto (the "Service and Installation Agreement"). If any equipment is returned to the Seller due to the Buyer's failure to perform under the Service and Installation Agreement, the Buyer agrees to purchase such equipment from Seller at inventory book value, with a reduction for any damage or wear and tear.

5.11 No Third-Party Beneficiaries. This Agreement is between the parties hereto only, and nothing herein shall establish any enforceable rights, legal or equitable, in any person other than the Buyer and the Seller, including any employee of the Business. Any claim, including claims for benefits asserted by any Person with respect to his or her employment with the Buyer after the date hereof, shall be governed solely by applicable employment policies and such benefit plans which the Buyer shall maintain for its employees, construed under applicable law.

5.12 No Negotiation. The Seller shall ensure that prior to the Closing, neither the Seller nor any of the Seller's representatives, directors, officers or managers directly or indirectly (a) solicits or encourages the initiation of any inquiry, proposal or offer from any Person (other than Buyer) relating to the Business or the Purchased Assets; (b) participates in any discussions or negotiations or provides any non-public information to, any Person (other than the buyer) relating to the Business or the Purchased Assets; or (c) considers the merits of any unsolicited inquiry, proposal or offer from any Person (other than the Buyer) relating to the Business or the Purchased Assets.

5.13 Use of Seller's Trademarks. Buyer agrees that neither it not any of its Affiliates shall use any trademark, service mark or trade name of Seller or any of its Affiliates. Buyer

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shall, promptly after the Closing Date, make such alterations to the Purchased Assets as may be necessary to, at the Buyer's option, either (i) remove, or (ii) permanently conceal, any markings (including, without limitation, trademarks, service marks and trade names) which reference or suggest any association of the Purchased Assets with Seller. Notwithstanding the inclusion of the packaging materials in the Purchased Assets, Buyer shall be solely responsible for labeling in accordance with all requirements of law, all products sold by it following the Closing Date, and it will indicate on such packaging that it is the manufacturer of such products.

5.14 Collection of Accounts Receivable.

(a) Seller shall be entitled to control all collection actions related to the accounts receivable retained by Seller pursuant to Section 1.2(a) or (c), including the determination of what actions are necessary or appropriate and when and how to take any such action. In furtherance thereof, Seller may, in its discretion, bring any action to recover the equipment or other products that are the subject of any such account receivable that may be overdue. In such event, Seller shall be entitled to retain any such recovered equipment or other products in full or partial satisfaction of the indebtedness to Seller represented by such account receivable, and Buyer agrees to deliver to Seller, upon request, Buyer's acknowledgement of Seller's right to retain such equipment and other products or an assignment to Seller of any rights or claims that Buyer may have in or to such equipment or products. In addition, upon request of Seller, Buyer shall purchase any recovered equipment or other products from Seller, on an "as is, where is" basis, at the lower of (i) cost less five year straight line depreciation or (ii) fair market value. Notwithstanding anything to the contrary in this Section 5.14(a) Seller and Buyer shall cooperate to collect such accounts receivable and avoid the recovery of equipment or products in satisfaction of receivables and subsequent required purchase of such recovered equipment by Buyer.

(b) If, after the Closing Date, Buyer shall receive any remittance from any account debtors with respect to the accounts receivable of Seller, including any accounts receivable included in the Excluded Assets, Buyer shall endorse such remittance to the order of Seller and forward it to Seller immediately upon receipt thereof. In connection with payments received by Buyer, if a payment is received from an account debtor who has not designated the invoice being paid thereby, such payment shall be applied to the earliest invoice outstanding with respect to indebtedness of such account debtor owing to either Buyer or Seller.

5.15 Purchase of Leased Equipment. In the event that the current term of any Excluded Lease retained by Seller pursuant to Section 1.2(c) shall expire without default by the lessee thereunder, Buyer shall upon request of Seller, purchase from Seller all equipment and other products that were the subject of such Excluded Lease. Such purchase shall be on an "as is, where is" basis, without warranties other than as to defects in title arising through Seller, and shall be for a purchase price of $1.00. Upon any such purchase, Seller shall delivery to Buyer any and all instruments and other documents as Buyer may reasonably request to evidence the transfer of such equipment and other products from Seller to Buyer.

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ARTICLE 6

CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS

The obligations of the Buyer to consummate the transactions contemplated by this Agreement are subject to the satisfaction or waiver of each of the following conditions precedent on or prior to the Closing Date:

6.1 The Seller's Closing Documents. The Seller shall have executed and delivered to the Buyer on or before the Closing Date all of the documents to be provided by the Seller pursuant to Section 9.2 hereof.

6.2 Representations and Warranties. All representations and warranties of the Seller contained in this Agreement shall have been true and correct as of the date hereof and shall be true and correct on the Closing Date as if made again on the Closing Date (unless such representations and warranties expressly speak as of a specific date other than the date hereof or thereof and in all cases, without giving effect to any standard, qualification or exception with respect to "materiality"), except as would not have a Material Adverse Effect and except for changes therein specifically permitted or contemplated by this Agreement or expressly consented to in writing by the Buyer or any transaction permitted by Section 5.1.

6.3 Obligations. The Seller shall have performed in all material respects all covenants and obligations required by this Agreement to be performed by the Seller prior to or on the Closing Date.

6.4 No Injunction or Restraint. No injunction or restraining order shall have been issued by any court of competent jurisdiction and be in effect which restrains or prohibits any material transaction contemplated hereby and no petition in bankruptcy, insolvency or similar proceeding shall have been instituted against Seller and Seller shall not have made a general assignment for the benefit of creditors.

6.5 Legal Opinion of Counsel for the Seller. The Buyer shall have received an opinion of counsel for the Seller, addressed to the Buyer and dated the Closing Date, in substantially the form of Exhibit D attached hereto.

6.6 Consents from Third Parties. All governmental consents, permissions and approvals, if any, necessary to consummate the transactions contemplated herein and to permit the continuation of the Business by the Buyer after the Closing shall have been received by Buyer on or prior to the Closing Date, except where the failure to obtain any such consent, permission or approval would not have a Material Adverse Effect.

6.7 HSR Clearance. All applicable waiting periods under the HSR Act shall have expired or otherwise been terminated with respect to the transactions contemplated hereby.

6.8 No Material Adverse Change. Since the date hereof, there shall have occurred no Material Adverse Effect.

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6.9 Audited Financials. The Buyer shall have received from the Seller financial statements relating to the Business for the years ended December 31, 1996 and 1997 meeting the requirements of Rules 3-01 and 3-02 of Regulation S-X (the "Carve-out Financial Statements") which have been audited by PricewaterhouseCoopers LLP, the Seller's independent auditors

6.10 Carve-Out Financials. The Buyer shall have received from Seller by January 25, 1999 a reconciliation of the Latest Balance Sheet to the unaudited Carve-out Financial Statements, prepared in accordance with GAAP.

Any conditions specified in this Article 6 may be waived only in writing by the Buyer.

ARTICLE 7

CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER

The obligations of the Seller to consummate the transactions contemplated by this Agreement are subject to the satisfaction or waiver, on or prior to the Closing Date, of each of the following conditions precedent:

7.1 Buyer' Closing Documents. The Buyer shall have executed (as appropriate) and delivered to the Seller on or before the Closing Date, all of the documents which are to be delivered to the Seller pursuant to Section 9.3 hereof.

7.2 Representations and Warranties. All representations and warranties of the Buyer contained in this Agreement and the Loan Agreement shall be true and correct as of the date hereof and on the Closing Date as if made again on and with respect to the Closing Date (unless such representations and warranties expressly speak as of a specific date other than the date hereof or thereof and in all cases, without giving effect to any standard, qualification or exception with respect to "materiality"), except as would not have a Material Adverse Effect and except for changes therein specifically permitted or contemplated by this Agreement or expressly consented to in writing by the Seller.

7.3 Obligations. The Buyer shall have tendered the Purchase Note and shall have performed in all material respects all covenants and obligations required by this Agreement and the Loan Agreement to be performed by Buyer prior to or on the Closing Date.

7.4 No Injunction or Restraint. No injunction or restraining order shall have been issued by any court of competent jurisdiction and be in effect which restrains or prohibits any material transaction contemplated hereby and no petition in bankruptcy, insolvency or similar proceeding shall have been instituted against Buyer and Buyer shall not have made a general assignment for the benefit of creditors.

7.5 No Material Adverse Change. Since the date hereof, there shall have been no material adverse effect or impact upon the assets, business, financial condition or results of operations of the Buyer other than (a) the assumption of debt in connection with the transactions contemplated hereby and by the Purchase Note or the Loan Agreement, (b) changes (i) relating

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to generally applicable economic conditions or the industry of the Buyer in general, (ii) resulting from the announcement by Buyer of its intention to purchase the Purchased Assets or (iii) resulting from the execution of this Agreement or the consummation of the transactions contemplated hereby.

7.6 HSR Approval. All applicable waiting periods under the HSR Act shall have expired or otherwise been terminated with respect to the transactions contemplated hereby.

7.7 Legal Opinion. The Seller shall have received an opinion of Cooley Godward LLP, counsel for Buyer, addressed to the Seller and dated the Closing Date, in substantially the form of Exhibit E

7.8 Consents and Approvals. All governmental consents, permissions and approvals, if any, necessary to consummate the transactions contemplated herein shall have been received on or prior to the Closing Date except where the failure to obtain any such consent, permission or approval would not have a material adverse effect upon the assets, business, financial condition or results of operations of the Seller.

7.9 Loan Agreement. No Event of Default under the Loan Agreement shall have occurred.

7.10 Companion Sale. Seller shall have executed an agreement to sell the assets of the Seller's ATC and Optifill businesses, on terms and conditions acceptable to Seller at the time of such execution, on or before December 31, 1998 and such agreement shall be in full force and effect on December 31, 1998.

Any conditions specified in this Article 7 may be waived only in writing by the Seller.

ARTICLE 8

TERMINATION

8.1 Termination. This Agreement may be terminated any time prior to the Closing:

(a) by the mutual written consent of Buyer and the Seller;

(b) by Buyer at any time after the close of business on December 31, 1998 if Seller shall not have delivered a written notice to Buyer by the close of business on December 31, 1998 that Section 7.10 has been satisfied or waived;

(c) by Buyer upon written notice to the Seller within fifteen (15) business days of the receipt by Buyer of any notice by Seller pursuant to
Section 5.8 if the development that is the subject of such notice has had or will have a Material Adverse Effect;

(d) by Buyer, upon written notice to the Seller at any time prior to the Closing, if (i) there has been a material misrepresentation, a material breach of warranty or material breach of a covenant on the part of the Seller which has not been cured to the Buyer's

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reasonable satisfaction within ten (10) business days after notice of such breach has been received by the Seller or (ii) at any time after March 31, 1999; or

(e) by the Seller upon written notice to the Buyer at any time prior to the Closing, if (i) there has been a material misrepresentation, a material breach of warranty or material breach of a covenant on the part of the Buyer which has not been cured to the Seller's reasonable satisfaction within ten (10) business days after notice of such breach has been received by the Buyer, or
(ii) at any time after March 31, 1999.

8.2 Effect of Termination. In the event of termination of this Agreement pursuant to Section 8.1, this Agreement will forthwith become void and there will be no further liability on the part of Buyer or the Seller hereunder, except liability of any party for breaches of this Agreement prior to the time of such termination, and except that the covenants and agreements set forth in Sections 5.4, 5.5, 12.7, 12.10, and this Section 8.2, shall survive such termination indefinitely.

ARTICLE 9

CLOSING

9.1 Time and Place of Closing. The consummation of the purchase and sale of the Purchased Assets and the related transactions contemplated hereby ("Closing") shall take place at 10:00 a.m., local time on the later of January 29, 1999 or the business day immediately following the satisfaction or waiver of the conditions set forth in Article 6 and Article 7, at the offices of Sidley & Austin, One First National Plaza, Chicago, Illinois, 60603 or at such other time, date or place as the parties hereto may mutually agree. The date and time of Closing are referred to herein as the "Closing Date."

9.2 Deliveries by the Seller. At the Closing the Seller shall deliver the following instruments and documents to the Buyer or their designees:

(a) the Bill of Sale as provided in Section 1.1;

(b) copies of resolutions of the Seller's Board of Directors authorizing the execution of this Agreement and the consummation of the transactions and conveyance of Purchased Assets contemplated herein, which resolutions shall have been certified as true, correct and in full force and effect as of the Closing Date by the Secretary of the Seller;

(c) Deliver possession to Buyer at the Round Lake, Illinois, location of the Business, all Seller's books, records, documents and other written materials included as part of the Purchased Assets;

(d) the opinion of counsel provided for in Section 6.5;

(e) an executed counterpart to the Assumption Agreement as provided in Section 2.3;

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(f) A certificate, dated as of the Closing Date ("Seller Closing Certificate") and executed by an officer of the Seller, certifying that (i) all representations and warranties of the Seller contained in this Agreement were true and accurate as of the date of this Agreement (unless such representations and warranties expressly speak as of a specific date other than the date hereof, and in any case, without giving effect to any standard, qualification or exception with respect to "materiality"), except as would not have a Material Adverse Effect and except for changes therein specifically permitted or contemplated by this Agreement or expressly consented to in writing by the Buyer; (ii) all of said representations and warranties are, by the execution and delivery of the Seller Closing Certificate, made again on and as of the Closing Date and are then true and accurate as though then made (unless such representations and warranties expressly speak as to a specific date other than the date thereof and, in any case, without giving effect to any standard, qualification or exception with respect to "materiality"), except as would not have a Material Adverse Effect and except for changes therein specifically permitted or contemplated by this Agreement or expressly consented to in writing by the Buyer); and (iii) the Seller has performed and complied in all material respects with all the covenants, agreements and conditions required by this Agreement to be performed or complied with by the Seller prior to or on the Closing Date;

(g) An executed counterpart to the Transition Services Agreement in the form attached hereto as Exhibit F (the "Transition Services Agreement"); and

(h) An executed counterpart to the Service and Installation Agreement.

9.3 Deliveries by the Buyer. At the Closing, the Buyer shall deliver the following instruments, documents and consideration:

(a) copies of resolutions of the Buyer's Board of Directors authorizing the execution of this Agreement, the Loan Agreement, the Purchase Note and the other agreements contemplated hereby and thereby and the consummation of the transactions contemplated herein and therein which resolutions are certified as true, correct and in full force and effect as of the Closing Date by the Secretary of the Buyer;

(b) $2,000,000 by wire transfer of immediately available funds;

(c) the executed original Loan Agreement;

(d) the executed original Purchase Note;

(e) an executed counterpart of the Assumption Agreement as provided in Section 2.3;

(f) the opinion of counsel provided for in Section 7.7;

(g) a certificate dated the Closing Date (the "Buyer's Closing Certificate"), executed by an officer of the Buyer and certifying that (i) all representations and warranties of the Buyer contained in this Agreement were true and accurate as of the date of this Agreement (unless such representations and warranties expressly speak as of a specific date other than the date hereof, and in any case, without giving effect to any standard, qualification or exception

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with respect to "materiality"), except as would not have a Material Adverse Effect and except for changes therein specifically permitted or contemplated by this Agreement or expressly consented to in writing by the Seller; (ii) all of said representations and warranties are, by the execution and delivery of the Buyer's Closing Certificate, made again on and as of the Closing Date and are then true and accurate as though then made (unless such representations and warranties expressly speaks as of a specific date other than the date thereof, and in any case, without giving effect to any standard, qualification or exception with respect to "materiality"), except as would not have a Material Adverse Effect and except for changes therein specifically permitted or contemplated by this Agreement or expressly consented to in writing by the Seller; and (iii) the Buyer has performed and complied in all material respects with all the covenants, agreements and conditions required by this Agreement to be performed or complied with by the Buyer prior to or on the Closing Date;

(h) an executed counterpart to the Transition Services Agreement; and

(i) an executed counterpart to the Service and Installation Agreement.

9.4 Termination of Distribution Agreement; Credit Against Reimburseable Expenses. Seller and Buyer hereby agree that the Distribution Agreement, dated as of the 13/th/ day of August, 1996 between Seller and Buyer (the "Distribution Agreement") shall automatically terminate as of the Closing notwithstanding any terms to the contrary set forth in such Distribution Agreement. The parties agree that $606,968 is due under the Distribution Agreement as of the date hereof and that the sum of such amount and any amounts due from Seller to Buyer pursuant to the Distribution Agreement which are incurred between the date hereof and the Closing, (such sum the "Distribution Payable") shall not be due and payable until the first anniversary of the Closing Date notwithstanding anything to the contrary in the Distribution Agreement. In addition, in consideration for $100,000 of the Purchase Price, Buyer shall also be entitled to a credit in the amount of $100,000 (the "Credit Amount") against its obligation to make a reimbursement payment under Section 5.9(b). To the extent that on the first anniversary of the Closing Date the sum of the Distribution Payable and the Credit Amount exceeds any amounts Buyer owes to Seller under
Section 5.9, Buyer may at its option set off any such excess amount (the "Setoff Amount") against the Purchase Note (as hereinafter described) or require Seller to pay in cash, such excess amount. Buyer shall provide notice to Seller, on the first anniversary of the Closing Date, of its election to setoff the Setoff Amount against the "Obligations" (as defined in the Loan Agreement) owed to Seller. The Setoff Amount shall be applied against the amount due on the first "Interest Payment Date" (as defined in the Loan Agreement) to occur after the first anniversary of the Closing Date. In the event the Setoff Amount exceeds the amount due on such Interest Payment Date, Buyer shall apply and Seller shall accept such excess against each Interest Payment thereafter until the Setoff Amount is reduced to $0. The Seller and Buyer hereby agree to amend such Loan Agreement to allow for the setoff contemplated above in the event Buyer makes such an election. Except as set forth herein, Seller and Buyer each release the other from any and all liabilities and obligations under or arising from the Distribution Agreement.

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ARTICLE 10

POST-CLOSING OBLIGATIONS OF THE PARTIES

10.1 Further Obligations of the Parties. On and after the Closing Date:

(a) Each party shall execute all certificates, instruments and other documents and take all actions reasonably requested by the other party to effectuate the purposes of this Agreement and to consummate and evidence the consummation of the transactions herein provided for including, without limitation, such documents as may be required to effectuate the assignment and transfer of the Intangible Assets, including the Intellectual Property. Without limiting the generality of the foregoing, the Seller and the Buyer, agree to cooperate with each other and to provide each other with all information and documentation reasonably necessary to permit the preparation and filing of all United States Federal, state, local, and other Tax returns and Tax elections with respect to the Business.

(b) The Seller shall take all action reasonably necessary or appropriate to put the Buyer in immediate actual possession and operating control of all of the Purchased Assets.

(c) The Buyer and the Seller each agree to deliver to the other party (or to such governmental or taxing authority as the other party reasonably directs) any form of document that may be required or reasonably requested in order to obtain an exemption with respect to any Federal, state municipal or other, sales, use or other transfer Taxes that may otherwise be required to be paid on the transfer of the Purchased Assets or that may otherwise be due with respect to such transfer, promptly upon the earlier of (i) reasonable demand by the other party or (ii) learning that such form or document is required.

(d) The Buyer shall preserve and keep the records of the Business existing on the Closing Date for a period of ten (10) years from the Closing Date, or for any longer period as may be required by any government agency or ongoing litigation, and shall make such records available to the Seller as may be reasonably required by the Seller in connection with any legal proceedings against or governmental investigations of the Seller with respect to the Business. The Buyer shall notify the Seller sixty days prior to destroying such records and shall afford the Seller the opportunity to have such records sent to the Seller at Seller's sole expense.

(e) The Buyer shall perform its obligations under the Services and Installation Agreement.

10.2 Taxes. The Buyer will assist the Seller with the preparation of the portion of the Seller's 1998 and 1999 consolidated federal income tax returns and state or local income tax returns relating to the operations of the Business during the period beginning on January 1, 1998 and ending on the Closing Date in a timely manner consistent with prior practices. The Buyer shall be responsible for filing all federal, state and local income Tax returns and other state and local Tax returns for the Business which are due (after taking into account any applicable extensions of time to file) after the Closing Date for periods beginning on or after the Closing Date and for making required payments due with such returns. Without limiting the generality of Section 10.1(a), the Seller and the Buyer agree to cooperate with each other in connection with

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any official Tax inquiry, Tax examination or Tax-related legal proceeding with respect to the Business.

10.3 Sales Taxes. The Seller shall bear and pay, and if assessed against or paid by the Buyer, shall (after receipt of appropriate documentation from the Buyer) reimburse the Buyer for sales taxes, use taxes, transfer taxes, documentary changes, recording fees or similar taxes, charges or fees that may properly become payable in connection with the sale of the Purchased Assets to the Buyer. Buyer shall provide Seller with a reasonable opportunity to review all tax returns relating to such taxes prior to filing such returns.

10.4 Delivery of 1998 Audited Financials. On or before March 15, 1999 the Seller shall deliver to Buyer financial statements relating to the Business for the year ended December 31, 1998 meeting the requirements of Rules 3-01 and 3-02 of Regulation S-X which have been audited by PricewaterhouseCoopers LLP, the Seller's independent auditors.

10.5 Seller Covenant Not to Compete. Seller agrees that for a period of three years after the Closing Date, neither it nor any of its Affiliates will, directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of, any business whether in corporate, proprietorship or partnership form or other wise as more than a five percent owner in such business where such business is engaged in the manufacture or sale of storage and dispensing cabinets for medication that include hardware and software designed to track the dispensing of medications ("Competitive Products") provided, however, that the foregoing shall not prohibit Seller or any of such Affiliates from acquiring an interest in an entity or business which manufactures or sells Competitive Products so long as Seller or any such Affiliate divests itself of the assets of such acquired entity or business which manufactures or sells Competitive Products within twelve months of such acquisition; and provided further that nothing in this Section 10.5 shall prevent the Seller from acquiring a passive investment of less than 5% of the outstanding shares of capital stock of such an entity or business so long as Seller does not have rights to hold a seat on the Board of Directors or otherwise have rights to exercise control over such an entity. The parties hereto specifically acknowledge and agree that the remedy at law for any breach of the foregoing will be inadequate and that Buyer, in addition to any other relief available to it, shall be entitled to temporary and permanent injunctive relief without the necessity of proving actual damage. In the event that the provisions of this Section 10.5 should ever be deemed to exceed the limitation provided by applicable law, then the parties hereto agree that such provisions shall be reformed to set forth the maximum limitations permitted.

ARTICLE 11

SURVIVAL OF WARRANTIES AND INDEMNIFICATION

11.1 Survival.

(a) Subject to Section 11.1(b), all of the representations and warranties of each party made in this Agreement shall survive (i) the Closing and the sale of the Purchased Assets to the Buyer; (ii) any sale or other disposition of any or all of the Purchased Assets by the Buyer, provided, however, that such representations and warranties shall not survive the sale or

30.


other disposition of all or substantially all of the Purchased Assets by the Buyer unless the Purchase Note shall have been paid in full; and (iii) the dissolution of any party to this Agreement. The representations, warranties, covenants and obligations of the Seller and the rights and remedies that may be exercised by the Buyer, shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by or any knowledge of, the Buyer or any of its Representatives to the extent that such knowledge was shared with the Seller.

(b) The representations and warranties set forth in Article 3 and Article 4 shall expire on the second anniversary of the Closing; provided, however, that if a Claim Notice relating to any such representation, warranty or rights set forth in Article 3 or Article 4 is given to the party from which indemnification is sought (the "Indemnifying Party") on or prior to the date such representation or warranty would otherwise expire, then, notwithstanding anything to the contrary contained in this Section 11.1(b), the indemnification obligations of the Indemnifying Party arising pursuant to such representation, warranty or rights shall not so expire with respect to matters relating to the subject matter described in such Claim Notice, but rather shall remain in full force and effect until such time as the liability of the Indemnifying Party with respect to matters relating to the subject matter described in such Claim Notice has been fully and finally resolved, either by means of a written settlement agreement executed on behalf of the Indemnifying Party and the party seeking indemnification, or by means of a final, non-appealable judgment issued by a court of competent jurisdiction.

(c) For purposes of this Agreement, a "Claim Notice" relating to a particular representation or warranty shall be deemed to have been given if the party seeking indemnification, acting in good faith, delivers to the Indemnifying Party a written notice stating that the party seeking indemnification believes that there is or has been a breach of such representation or warranty and containing a brief description of the circumstances supporting the such party's belief that there is or has been such a breach.

11.2 Indemnification by the Seller. Subject to Section 11.3, the Seller shall indemnify and hold the Buyer harmless from and against the entirety of any Adverse Consequences the Buyer may suffer, sustain or become subject to ("Buyer Indemnifiable Losses"), resulting from, arising out of or, relating to (i) any breach or inaccuracy of the representations and warranties of the Seller set forth in this Agreement other than the representation and warranties contained in Section 3.11; (ii) any nonfulfillment or breach of any covenant or agreement on the part of the Seller in this Agreement; (iii) any Liability relating to the Business on or prior to the Closing Date that is not an Assumed Liability; (iv) any claim made by any person who was an employee of Seller prior to Closing which arose out of facts or circumstances occurring or existing prior to Closing; and (v) any liability imposed under WARN with respect to Remaining Employees.

11.3 Limits on the Seller's Indemnification Obligation. The obligation of the Seller to indemnify the Buyer under Sections 11.2(i) and (ii) above shall be subject to the following limitations:

31.


(a) The aggregate liability of the Seller hereunder with respect to all Buyer Indemnifiable Losses under Sections 11.2(i) and (ii), other than in connection with its obligations under Sections 5.9 and 9.4, shall not exceed $7,000,000

(b) The Seller will not have any obligation to indemnify the Buyer with respect to any Buyer Indemnifiable Losses under Sections 11.2(i) and (ii) other than in connection with its obligations under Sections 5.9 and 9.4 until the Buyer shall first have suffered such aggregate Buyer Indemnifiable Losses in excess of $300,000 (at which point the Seller will be obligated to indemnify the Buyer only for Buyer Indemnifiable Losses exceeding such amount).

(c) Buyer Indemnifiable Losses shall be calculated net of any reserves set forth on the Closing Balance Sheet.

11.4 Indemnification by Buyer. Buyer shall indemnify and hold the Seller harmless from and against the entirety of any Adverse Consequences the Seller may suffer, sustain or become subject to ("Seller Indemnifiable Losses"), resulting from, arising out of or relating to (i) the Assumed Liabilities and any Liability relating to the Business after the Closing Date, (ii) any breach or inaccuracy of the representations and warranties of the Buyer set forth in this Agreement; (iii) any nonfulfillment or breach of any covenant or agreement on the part of Buyer in this Agreement; and (iv) any liability imposed under WARN with respect to Transferred Employees.

11.5 Limits on Buyer's Indemnification Obligations. The obligation of Buyer to indemnify the Seller under Sections 11.4(ii) and (iii) above shall be subject to the following limitations:

(a) The aggregate liability of the Buyer hereunder with respect to all Seller Indemnifiable Losses under Sections 11.4(ii) and (iii), other than in connection with its obligations under Section 5.9 shall not exceed $7,000,000.

(b) The Buyer will not have any obligation to indemnify the Seller with respect to any Seller Indemnifiable Losses under Sections 11.4(ii) and
(iii) other than in connection with its obligations under Section 5.9 until the Seller shall first have suffered such aggregate Seller Indemnifiable Losses in excess of $300,000 (at which point the Buyer will be obligated to indemnify the Seller only for Seller Indemnifiable Losses exceeding such amount).

11.6 Matters Involving Third Parties.

(a) If any third party shall notify any party to this Agreement (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against any other party to this Agreement under this Article 11, then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; and the failure to give such timely notice shall relieve the Indemnifying Party of its indemnification obligations under this Article 11 only to the extent such delay or failure materially and adversely affects the defense of such claim.

32.


(b) The Indemnifying Party will have the right, upon notification to the Indemnified Party at any time within fifteen (15) days after the Indemnified Party has given notice of the Third Party Claim, to assume the defense of the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party; provided that the Indemnified Party may retain separate co- counsel at its own cost and expense and participate in the defense of the Third Party Claim, provided further, that if the Indemnified Party reasonably determines that (i) a conflict of interest between it and the Indemnifying Party will exist with respect to the Third Party Claim, or (ii) that the Third Party Claim will adversely affect it other than as a result of monetary damages for which it would be entitled to indemnification, it may, by notice to the Indemnifying Party, assume the exclusive right to defend such Third Party Claim. If the Indemnifying Party does not give such notice within 15 days, the Indemnified Party may proceed with the defense of such claim or proceeding on its own. If the Indemnified Party proceeds with the defense of such claim or proceeding on its own, the Indemnifying Party shall make available to the Indemnified Party any documents and materials in its control or possession that may be necessary to the defense of such claim.

(c) In connection with any Third Party Claim (i) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be unreasonably withheld, conditioned or delayed) unless the judgment or proposed settlement involves only the payment of money damages which will be paid by the Indemnifying Party and contains a release of the Indemnified Party from all Liability with respect to the matter and does not impose an injunction or other equitable relief upon the Indemnified Party and
(ii) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (provided that, if the Indemnifying Party has not assumed and is not actively and diligently conducting the defense of such Third Party Claim, then such consent shall not be unreasonably withheld, conditioned or delayed).

11.7 Additional Limitations.

(a) In any case where an Indemnified Party recovers from third Persons any amount which in the aggregate equals or exceeds such Indemnified Party's Indemnifiable Losses in respect of a matter with respect to which an Indemnifying Party has indemnified it pursuant to this Article 11 such Indemnified Party shall promptly pay over to the Indemnifying Party the amount so recovered (after deducting therefrom the full amount of the expenses incurred by it in procuring such recovery), but not in excess of the sum of (i) any amount previously so paid by the Indemnifying Party to or on behalf of the Indemnified Party in respect of such matter and (ii) any amount expended by the Indemnifying Party in pursuing or defending any claim arising out of such matter.

(b) Except for remedies that cannot be waived as a matter of law and injunctive and provisional relief, if the Closing occurs, this Article 11 shall be the exclusive remedy for breaches of this Agreement (including any covenant, obligation, representation or warranty contained herein) or otherwise in respect of the sale of the Purchased Assets contemplated hereby. In furtherance of the foregoing, Buyer hereby waives, to the fullest extent permitted by law, any and all rights, claims and causes of action it may have against Seller or its

33.


Affiliates arising under or based upon any law (including any such rights, claims or causes of action arising under or based upon common law or otherwise); provided, however, nothing contained in this Agreement shall preclude the assertion by Buyer or its Affiliates of any cause of action that may exist, not based upon breach of contract, for fraud.

(c) Notwithstanding anything contained herein to the contrary, no party shall have any liability hereunder for any lost profits or any special, indirect, consequential, incidental, exemplary or punitive damages, each of which is hereby excluded by agreement of the parties regardless of whether or not any party has been advised of the possibility of such damages.

ARTICLE 12

MISCELLANEOUS PROVISIONS

12.1 Certain Definitions. Unless the context otherwise requires, capitalized terms used in this Agreement and not otherwise defined herein shall have the following meanings for all purposes of this Agreement:

"Adverse Consequences" means all charges, complaints, actions, suits, proceedings, hearings, investigations, claims, demands, judgments, orders, decrees, stipulations, injunctions, damages (but not consequential or incidental damages), dues, penalties, fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and fees, including reasonable attorneys, consultants and experts fees and court costs.

"Affiliate" means, with respect to any particular Person, any Person controlling, controlled by or under common control with such Person.

"Agreement" shall have the meaning set forth in the Recitals.

"Arbitrating Accountants" has the meaning set forth in Section 2.2(b).

"Assigned Contracts" shall have the meaning set forth in Section 1.1(e).

"Assumed Liabilities" shall have the meaning set forth in Section 2.3(a).

"Assumption Agreements" shall have the meaning set forth in Section 2.3(a).

"Bill of Sale" shall have the meaning set forth in Section 1.1.

"Business" shall have the meaning set forth in the Recitals.

"Business Employees" shall have the meaning set forth in Section 3.14(a).

"Business Records" shall have the meaning set forth in Section 1.1(g).

"Buyer" shall have the meaning set forth in the Introduction.

"Buyer's Accountants" shall have the meaning set forth in Section 2.2(a).

34.


"Buyer Balance Sheet" shall have the meaning set forth in Section 4.4.

"Buyer's Closing Certificate" shall have the meaning set forth in Section 9.3(g).

"Buyer Confidential Information" shall have the meaning set forth in
Section 5.5.

"Buyer Financial Statements" shall have the meaning set forth in Section 4.4.

"Buyer Indemnifiable Losses" shall have the meaning set forth in Section 11.2.

"Carve-out Financial Statements" shall have the meaning set forth in
Section 6.9.

"Closing" shall have the meaning set forth in Section 9.1.

"Closing Balance Sheet" shall have the meaning set forth in Section 2.2(b).

"Closing Date" shall have the meaning set forth in Section 9.1.

"Code" means the Internal Revenue Code of 1986, as amended.

"Contracts" shall have the meaning set forth in Section 1.1(e).

"Credit Amount" shall have the meaning set forth in Section 9.4.

"Draft Closing Balance Sheet" shall have the meaning set forth in Section 2.2(a).

"Distribution Agreement" shall have the meaning set forth in Section 9.4.

"Distribution Payable" shall have the meaning set forth in Section 9.4.

"Equipment" shall have the meaning set forth in Section 1.1(a).

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

"Excluded Assets" shall have the meaning set forth in Section 1.2.

"Excluded Contract" shall have the meaning set forth in Section 1.1(e).

"Excluded Leases" shall have the meaning set forth in Section 1.2(c).

"Foreign Customer Contracts" shall have the meaning set forth in Section 1.2(g).

"GAAP" means United States generally accepted accounting principles as in effect from time to time, applied consistently with the principles used in preparing the Financial Statements for the Most Recent Fiscal Year End.

"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules promulgated thereunder.

35.


"Intellectual Property" means all of the following which is owned by, licensed by, licensed to, used or held for use by the Seller primarily in connection with the Business (including, without limitation, all intellectual property and proprietary rights listed in Part 3.9 of the Seller Disclosure Schedule): (i) all registered and unregistered trademarks, trade dress, service marks, logos and trade names (including the name "SureMed") and all applications to register the same (the "Trademarks"); (ii) all issued U.S. and foreign jurisdiction patents and pending patent applications, patent disclosures and improvements thereto (the "Patents"); (iii) all registered and unregistered copyrights and all applications to register the same (the "Copyrights"); (iv) all computer software and databases owned or used by the Seller (the "Software"); (v) all licenses and agreements pursuant to which the Seller has acquired rights in or to the Trademarks, Patents, Copyrights or Software (excluding software and databases licensed to the Seller under nonexclusive software licenses granted to end-user customers by third parties in the ordinary course of such third parties' business) ("Licenses-In"); and (vi) trade secrets, know-how, inventions (whether or not patentable and whether or not reduced to practice), processes, procedures, drawings, specifications, designs, plans, proposals, technical data and other, copyrightable works and proprietary information.

"Indemnified Party" shall have the meaning set forth in Section 11.6.

"Indemnifying Party" shall have the meaning set forth in Section 11.1(b).

"Intangible Assets" shall have the meaning set forth in Section 1.1(d).

"Intangible Asset Value of the Business" shall have the meaning set forth in Section 2.1(b)(iv).

"Inventory" shall have the meaning set forth in Section 1.1(b).

"Latest Balance Sheet" shall have the meaning set forth in Section 3.5.

"Licenses-In" shall have the meaning set forth in Section 3.9(a).

"Liabilities Not Assumed" shall have the meaning set forth in Section 2.3(b).

"Liability" means any liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated, and whether due or to become due) or indebtedness, including any liability for Taxes.

"Loan Agreement" shall have the meaning set forth in Section 2.1.

"Material Adverse Effect" means a material adverse effect or impact upon the assets, business, financial condition or results of operations of the Business, other than changes (a) relating to generally applicable economic conditions or the industry of the Business in general, (b) resulting from the announcement by Seller of its intention to sell the Purchased Assets or (c) resulting from the execution of this Agreement or the consummation of the transactions contemplated hereby..

"Most Recent Fiscal Year End" shall have the meaning set forth in Section 4.4.

36.


"Net Tangible Asset Value" shall have the meaning set forth in Section 2.1(b)(ii).

"Ordinary Course of Business" means the ordinary course of the day to day operations of the Business consistent with past custom and practice of the Business, and shall not include matters that must be specifically authorized by Seller's I.V. Systems Division.

"Permits" shall have the meaning set forth in Section 3.15.

"Person" means any individual, trust, corporation, partnership, limited liability company or other business association or entity, court, governmental body or governmental agency.

"Plans" shall have the meaning set forth in Section 5.9(d).

"Preliminary Purchase Price" shall have the meaning set forth in Section 2.1(a).

"Purchase Note" shall have the meaning set forth in Section 2.1(a).

"Purchase Price" shall have the meaning set forth in Section 2.2(c).

"Purchased Assets" shall have the meaning set forth in Section 1.1.

"Security Interest" means any mortgage, pledge, priority, security interest, charge, lien or other encumbrance, right or restriction of any kind, nature and description, of any third party.

"Seller" shall have the meaning set forth in the Introduction.

"Seller Closing Certificate" shall have the meaning set forth in Section 9.2(f).

"Seller Confidential Information" shall have the meaning set forth in
Section 5.4.

"Seller Disclosure Schedule" shall have the meaning set forth in Article 3.

"Seller Indemnifiable Losses" shall have the meaning set forth in Section 11.4.

"Seller's Accountants" shall have the meaning set forth in Section 2.2(a).

"Service and Installation Agreement" shall have the meaning set forth in
Section 5.10.

"Setoff Amount" shall have the meaning set forth in Section 9.4.

"Severance Pay Policies" shall have the meaning set forth in Section 5.9(a).

"Specified Intangible Assets" shall have the meaning set forth in Section 2.1(b)(iii).

"Subsidiary" means any corporation, limited liability company, or partnership with respect to which another specified Person has the power to vote or direct the voting of sufficient securities or interests to elect a majority of the directors or management committee or similar governing body.

37.


"Tax" or "Taxes" means any United States Federal, state, local, or foreign income, gross receipts, sales, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Section 59A of the Code), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real or immovable property, personal or movable property, sales, use, transfer, value added, alternative or add-on minimum, goods and services, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.

"Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

"Third Party Claim" shall have the meaning set forth in Section 11.6(a).

"Transferred Employees" shall have the meaning set forth in Section 5.9(a).

"Transition Services Agreement" shall have the meaning set forth in Section 9.2(g).

"Value of the Business" shall have the meaning set forth in Section 2.1(b)(i).

"WARN" shall have the meaning set forth in Section 5.9(b).

12.2 Notices. All notices, requests, demands or other communications hereunder (including notices of all asserted claims or liabilities) to be effective shall be in writing and shall be either delivered personally, sent by messenger service, sent by guaranteed over night delivery service, charges prepaid sent by fax (with hard copy to follow) or mailed by U.S. mail, certified or registered, with appropriate first class postage prepaid, to the addressees and/or fax numbers herein designated or such other address as may be designated in writing by notice given in the manner provided herein. Notices hereunder shall be effective upon (a) personal delivery thereof, if delivered personally or by messenger service, (b) one (1) business day after deposit for delivery by the overnight delivery service, if delivered by overnight delivery service, (c) when receipt is electronically confirmed, if sent by fax, or (d) three (3) business days following deposit in the mail, if sent by mail as aforesaid, whether or not delivery is accepted.

If to the Buyer:    OmniCell Technologies, Inc.
                    1101 E. Meadow Dr.
                    Palo Alto, California 94303
                    Attn:  Chief Financial Officer
                    Facsimile: 650-843-6277

with a copy to:     Cooley Godward LLP
                    Five Palo Alto Square
                    Palo Alto, CA
                    94306-2155
                    Attn:  Robert J. Brigham, Esq.
                    Facsimile: 650-857-0663

                       38.

If to Seller:       Baxter Healthcare Corporation
                    One Baxter Parkway
                    Deerfield, Illinois 60015
                    Attn:  General Counsel
                    Facsimile: 847-948-2025

With a copy to:     Sidley & Austin
                    One First National Plaza
                    Suite 2900
                    Chicago, Illinois 60603
                    Attn:  John M. O'Hare, Esq.
                    Facsimile: 312-853-7036

12.3 Assignability; Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties and their respective permitted assigns.

12.4 Governing Law; Venue. This Agreement shall be construed and governed in accordance with the internal laws (and not the law of conflicts) of the State of Illinois. The Buyer and the Seller hereby consent to service of process and to the jurisdiction of any appropriate Federal or State court located in Cook or Lake Counties, Illinois in any action to enforce the provisions of this Agreement, and hereby waive any objections they may have as to proper venue or forum non conveniens or similar claims with respect to the jurisdiction and venue of such courts.

12.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement.

12.6 Entire Agreement. Except as otherwise specifically provided herein, this Agreement, including the Exhibits and Schedules hereto, the Seller Disclosure Schedule and the Buyer Disclosure Schedule constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior communications, writings and other documents with regard thereto. No modification, amendment or waiver of any provision hereof shall be binding upon any party hereto unless it is in writing and executed by all of the parties hereto or, in the case of a waiver, by the party waiving compliance.

12.7 Confidentiality. Prior to Closing, the terms and conditions of this Agreement and the transactions contemplated herein shall remain confidential shall and not be disclosed by any party except (a) to the extent that a party is advised by counsel that disclosure is required by law ("Legally Required Disclosure"), and (b) for disclosure to employees and agents of a party to the extent necessary to perform due diligence and perform such party's obligations hereunder (provided such employees and agents are made aware of and agree to comply with this provision and that each party is responsible for the violation of such party's employees and agents).

12.8 Number/Gender. All words and personal pronouns relating thereto shall be read and construed as the number and gender of the party or parties referred to in each case requires and the verb shall be construed as agreeing with the required word and/or pronoun.

39.


12.9 Captions. The division of this Agreement into articles, sections, subsections, Schedules and Exhibits is for convenience of reference only and shall not affect the interpretation or construction of this Agreement.

12.10 Allocation of Fees and Expenses. Except as otherwise expressly provided in this Agreement, Buyer and the Seller shall each be responsible for their own respective legal and accounting fees and other charges incurred in connection with the purchase and sale of the Purchased Assets, the completion of the transactions contemplated herein and any post-closing matters in connection with the transactions contemplated herein, except for any fees for filings related to the HSR Act which shall be borne by the Buyer.

12.11 Severability. In the event that one or more of the provisions, warranties, representations or covenants or any portion of them contained in this Agreement are unenforceable or are declared invalid for any reason whatsoever, such unenforceability or invalidity shall not affect the enforceability or the validity of the remaining terms or portions of this Agreement, and each such unenforceable or invalid provision, warranty, representation or covenant or portion thereof shall be severed from the remainder of this Agreement.

12.12 Construction. The parties hereto acknowledge that Buyer and the Seller and their counsel each have reviewed and revised this Agreement and that the rule of construction to the effect that any ambiguities are to be resolved against the drafting party, shall not be employed in the interpretation of this Agreement or any documents executed in connection herewith.

12.13 No Public Announcement. Neither Buyer nor Seller shall without the approval of the other, make any press release or other public announcement concerning the transactions contemplated by this Agreement, except as and to the extent that any such party shall be so obligated by law, in which case the other party shall be advised and the parties shall use their best efforts to cause a mutually agreeable release or announcement to be issued; provided however, that the foregoing shall not preclude communications or disclosures necessary to implement the provisions of this Agreement or to comply with the accounting and SEC disclosure obligations or the rules of any stock exchange.

* * * *

40.


In Witness Whereof, the parties hereto have executed this Agreement as of the date first above written.

Baxter Healthcare Corporation

By: /s/ Jack McGinley
   ----------------------------------
Its:
    ---------------------------------
OmniCell Technologies Inc.

By: /s/ Randall Lipps
   ----------------------------------
Its: Chairman
    ---------------------------------

41.


EXHIBIT A

BILL OF SALE AND ASSIGNMENT

Pursuant to the Asset Purchase Agreement dated as of December 18, 1998 (the "Purchase Agreement") between Baxter Healthcare Corporation, a Delaware corporation ("Seller") and OmniCell Technologies Inc., a California corporation ("Buyer"), for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller does hereby sell, assign, transfer, convey and deliver unto Buyer, its successors and assigns, each and all of the Purchased Assets (as such term is defined in the Purchase Agreement), intending hereby to convey all of the right, title and interest of Seller therein; PROVIDED, HOWEVER as to any lease, contract, agreement, permit or other authorization included in the Purchased Assets which cannot be sold, transferred, assigned, conveyed or delivered effectively without the consent of a third party, which consent has not been obtained, this Bill of Sale and Assignment shall be of no force or effect with respect thereto until such requisite consent is obtained, whereupon this Bill of Sale and Assignment shall become of full force and effect with respect thereto.

This Bill of Sale and Assignment shall be binding upon the successors and assigns of Seller and shall inure to the benefit of the successors and assigns of Buyer.

EXCEPT AS TO THOSE MATTERS EXPRESSLY COVERED BY THE PURCHASE AGREEMENT, SELLER IS SELLING THE PURCHASED ASSETS ON AN "AS IS, WHERE IS" BASIS AND SELLER DISCLAIMS ALL OTHER WARRANTIES, REPRESENTATIONS AND GUARANTIES WHETHER EXPRESS OR IMPLIED. SELLER MAKES NO REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE AND NO IMPLIED WARRANTIES WHATSOEVER.

IN WITNESS WHEREOF, Seller has caused this Bill of Sale and Assignment to be executed as of the ___ day of _________________, 1999 by its officer thereunto duly authorized.

BAXTER HEALTHCARE CORPORATION

By:

Name:


Title:

1.


Exhibit B

LOAN AND SECURITY AGREEMENT

DATED AS OF JANUARY 29, 1999

BETWEEN

BAXTER HEALTHCARE CORPORATION

AND

OMNICELL TECHNOLOGIES INC.


TABLE OF CONTENTS

                                                                                                               PAGE
                                                                                                               ----
1.       DEFINITIONS AND TERMS....................................................................................1

         1.1      Definitions.....................................................................................1

         1.2      Accounting Terms................................................................................7

         1.3      Other Terms.....................................................................................7

         1.4      Computation of Time Periods.....................................................................7

2.       LOAN: GENERAL TERMS......................................................................................7

         2.1      The Loan........................................................................................7

         2.2      Interest Rate...................................................................................8

         2.3      Default Rate....................................................................................8

         2.4      Interest Payments...............................................................................8

         2.5      Computation of Interest.........................................................................8

         2.6      Maturity Date; Payment..........................................................................8

         2.7      Voluntary Prepayment Prior to Maturity Date.....................................................8

         2.8      Mandatory Principal Payments....................................................................8

         2.9      Method of Payment...............................................................................9

         2.10     Application of Payments and Collections.........................................................9

3.       COLLATERAL..............................................................................................10

         3.1      Grant of Security Interest; Agreement to Allow for Use of OmniCell Intellectual
                  Property.......................................................................................10

         3.2      Priority of Liens..............................................................................11

         3.3      Inspection of Collateral; Audit of Records.....................................................11

         3.4      Maintain Perfection; Supplemental Documentation................................................11

         3.5      Perfected Security Interest; Location of Collateral............................................12

         3.6      Payment of Claims..............................................................................12

4.       REPRESENTATIONS' WARRANTIES AND COVENANTS RELATING TO COLLATERAL........................................12

         4.1      Representations, Warranties and Covenants Relating to Inventory................................12

         4.2      Sale of Inventory by OmniCell..................................................................13

         4.3      Maintenance of Equipment.......................................................................13

         4.4      Liens on and Sale of Equipment.................................................................13

         4.5      Schedule of Equipment..........................................................................14

                                      i.

                                                                                                               PAGE
                                                                                                               ----
         4.6      Title to Equipment.............................................................................14

5.       GENERAL WARRANTIES, REPRESENTATIONS AND COVENANTS.......................................................14

         5.1      General Representations, Warranties and Covenants..............................................14

         5.2      Survival of Warranties and Representations.....................................................17

6.       COVENANTS AND CONTINUING AGREEMENTS.....................................................................17

         6.1      Affirmative Covenants..........................................................................17

         6.2      Negative Covenants.............................................................................19

         6.3      Required Notices...............................................................................21

7.       DEFAULT.................................................................................................22

         7.1      Events of Default..............................................................................22

         7.2      Acceleration...................................................................................23

         7.3      Remedies.......................................................................................23

         7.4      Assemble Collateral............................................................................24

         7.5      Notice of Sale.................................................................................24

         7.6      Postponement of Sale...........................................................................24

         7.7      Waiver of Bond.................................................................................24

         7.8      Appointment of Baxter As Attorney-In-Fact After Default........................................24

         7.9      Consent Does Not Create Custom.................................................................25

8.       CONDITIONS TO LOAN......................................................................................25

9.       GENERAL.................................................................................................25

         9.1      Attorneys' Fees and Expenses; Baxter's Expenses................................................25

         9.2      Modification...................................................................................25

         9.3      Strict Compliance..............................................................................25

         9.4      Severability...................................................................................26

         9.5      Successors and Assigns.........................................................................26

         9.6      Loan Agreement Controls........................................................................26

         9.7      Liability Prior to Termination.................................................................26

         9.8      Waiver.........................................................................................26

         9.9      Indemnification................................................................................27

         9.10     Notice.........................................................................................27

                                      ii.

                                                                                                               PAGE
                                                                                                               ----
         9.11     Section Titles, etc............................................................................28

         9.12     Waiver by OmniCell.............................................................................28

         9.13     Governing Law..................................................................................29

         9.14     Representation by Counsel......................................................................29

         9.15     Waiver of Trial by Jury........................................................................29

         9.16     Intercreditor Agreement........................................................................30

iii.


LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT"), dated as of January 29, 1999 by and between Baxter Healthcare Corporation, a Delaware corporation ("BAXTER"), with its principal place of business at One Baxter Parkway, Deerfield, Illinois 60015, and OmniCell Technologies Inc., a California corporation ("OMNICELL"), with its principal place of business at 1101 East Meadow Drive, Palo Alto, California 94303.

RECITALS:

A. OmniCell has entered into an Asset Purchase Agreement, dated as of December 18, 1998, as amended on January 25, 1999, between Baxter and OmniCell (the "ASSET PURCHASE AGREEMENT") pursuant to which OmniCell will purchase certain property of Baxter, comprising substantially all of the assets of the SureMed System product line of the Productivity Systems business unit of Baxter's I.V. Systems Division (the "SUREMED BUSINESS").

B. Pursuant to the Asset Purchase Agreement, OmniCell is hereby executing and delivering to Baxter a promissory note pursuant to the terms and provisions of this Agreement and in the form attached as EXHIBIT A hereto, in the original principal amount of $17,386,000 (the "NOTE").

C. This Agreement, together with the Note, sets forth the agreement of the parties with respect to the loan evidenced by the Note.

NOW THEREFORE, in consideration of the transactions contemplated by the Asset Purchase Agreement, and in consideration of the foregoing recitals, which are hereby incorporated herein, and of the mutual promises set forth herein, the parties hereto agree as follows:

1. DEFINITIONS AND TERMS

1.1 DEFINITIONS. Capitalized terms used herein and not otherwise defined herein have the meaning given them in the Asset Purchase Agreement. As used herein:

"ACCOUNT DEBTOR" means the account debtor on any Account.

"ACCOUNTS" means all of OmniCell's now owned or hereafter acquired or arising accounts, contract rights, and any other rights to payment for the sale or lease of goods or rendition of services, whether or not they have been earned by performance.

"AFFILIATE" means any Person which directly or indirectly through one or more intermediaries controls or is controlled by, or is under common control with OmniCell. For purposes of this definition, "CONTROL" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of stock, by contract or otherwise.

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"APPLICABLE RATE" has the meaning specified in SECTION 2.2.

"BANKRUPTCY CODE" means Title 11 of the United States Code (11 U.S.C. Section 101 ET SEQ.).

"BUSINESS DAY" means any day, other than a Saturday, Sunday, or any other day on which lending institutions located in Chicago, Illinois are authorized or required by law or other governmental action to close.

"CAPITAL EXPENDITURE" means, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities and including capitalized leases and purchase money indebtedness) by OmniCell that are required under generally accepted accounting principles to be included or reflected in the property, plant, equipment, or similar fixed asset accounts reflected in the balance sheet of the Borrower.

"CHANGE OF CONTROL" means any of the following: (i) any Person or group of Persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934) who are not as of the date hereof stockholders of OmniCell shall acquire at any time beneficial ownership of more than 35% of the fully diluted common stock of OmniCell (other than as a result of a registered underwritten public offering by OmniCell for cash); (ii) individuals who as of the date hereof constitute OmniCell's Board of Directors (together with any new director whose election by OmniCell's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved), for any reason, cease to constitute a majority of the directors at any time then in office; or (iii) any two of the following individuals cease to hold their current positions with OmniCell: Shelly Asher, chief executive officer; Randy Lipps, chairman; Earl Fry, chief financial officer.

"CHARGES" means all national, federal, state, county, city, municipal and/or other governmental (or any instrumentality, division, agency, body or department thereof, including without limitation the Pension Benefit Guaranty Corporation) taxes, levies, assessments or charges.

"CLOSING DATE" means the Closing Date under and as defined in the Asset Purchase Agreement.

"COLLATERAL" has the meaning specified in SECTION 3.1.

"DEBT SERVICE RATIO" means, with respect to any period, the ratio of
(i) OmniCell's earnings before interest, taxes, depreciation and amortization minus capital expenditures (net of increases in long term debt to finance such capital expenditures) for such period, calculated in accordance with GAAP, to (ii) the sum of all scheduled principal and interest payable on Indebtedness during such period, plus all taxes and dividends to shareholders payable or paid during such period.

"DEFAULT" means any event or condition which, with the passage of time or the giving of notice or both, would constitute an Event of Default.

"DEFAULT RATE" means a rate of three percent (3%) per annum PLUS the Applicable Rate.

2.


"EQUIPMENT" means all of OmniCell's now owned and hereafter acquired machinery, equipment, furniture, furnishings, fixtures, and other tangible personal property (except Inventory), including, without limitation, motor vehicles, aircraft, dies, tools, jigs, and office equipment as well as all of such types of property leased by OmniCell and all of OmniCell's rights and interests with respect thereto under such leases (including, without limitation, options to purchase); together with all present and future additions and accessions thereto, replacements therefor, component and auxiliary parts and supplies used or to be used in connection therewith, and all substitutes for any of the foregoing, and all manuals, drawings, instructions, warranties and rights with respect thereto; wherever any of the foregoing is located.

"EVENT OF DEFAULT" has the meaning specified in SECTION 7.1.

"FINANCIALS" means those financial statements of OmniCell delivered by or on behalf of OmniCell to Baxter pursuant to SECTION 6.1(b).

"GAAP" means generally accepted accounting principles, consistently applied.

"GENERAL INTANGIBLES" means all of OmniCell's now owned or hereafter acquired general intangibles, choses in action and causes of action and all other intangible personal property of OmniCell of every kind and nature (other than Accounts), including, without limitation, all Intellectual Property Rights, corporate or other business records, inventions, designs, blueprints, plans, specifications, trade secrets, goodwill, computer software, customer lists, registrations, licenses, franchises, tax refund claims, any funds which may become due to OmniCell in connection with the termination of any employee benefit plan or any rights thereto and any other amounts payable to OmniCell from any employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, property, casualty or any similar type of insurance and any proceeds thereof, proceeds of insurance covering the lives of key employees on which OmniCell is beneficiary, and any letter of credit, guarantee, claim, security interest or other security held by or granted to OmniCell to secure payment by an account debtor of any of the Accounts.

"INDEBTEDNESS" means with respect to any Person, (i) indebtedness for borrowed money or for the deferred purchase price of property or services in respect of which such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise or any commitment by which such Person assures a creditor against loss, (ii) obligations under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases in respect of which obligations such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person assures a creditor against loss, (iii) all obligations and liabilities with respect to unfunded vested benefits under any "EMPLOYEE BENEFIT PLAN" or with respect to withdrawal liabilities incurred under ERISA by OmniCell or any ERISA affiliate of OmniCell to a "MULTIEMPLOYER PLAN," as such terms are defined under the ERISA, and (iv) any and all accounts payable, accruals and other items characterized as Indebtedness in accordance with GAAP.

"INTELLECTUAL PROPERTY RIGHTS" means all United States and foreign patents, trademarks, tradenames, service marks, copyrights, applications, any of the foregoing, now or hereafter owned and or used by OmniCell, including, without limitation the Specified Rights, and all

3.


licenses that allow for the use any patents, trademarks, tradenames, service marks, copyrights, or applications of others.

"INVENTORY" means all of OmniCell's now owned and hereafter acquired inventory, goods, and merchandise, wherever located, to be furnished under any contract of service or held for sale or lease, all returned goods, raw materials, other materials and supplies of any kind, nature or description which are or might be consumed in OmniCell's business or used in connection with the packing, shipping, advertising, selling or finishing of such goods, merchandise and such other personal property, and all documents of title or other documents representing them.

"LIEN" means: (a) any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute, or contract, and including without limitation, a security interest, charge, claim, or lien arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, agreement, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes; and (b) to the extent not included under clause (a), any reservation, exception, encroachment, easement, right-of-way, covenant, condition, restriction, lease or other title exception or encumbrance affecting property.

"LOAN DOCUMENTS" means this Agreement and the Other Agreements.

"MATURITY DATE" means December 31, 2003 or such earlier date as all Obligations shall be due and payable by acceleration or otherwise.

"OBLIGATIONS" means all obligations and liabilities of OmniCell to Baxter (including, without limitation, all debts, claims and indebtedness) whether primary, secondary, direct, contingent, fixed or otherwise, now and from time to time hereafter owing, due or payable, however evidenced, created, incurred, acquired or owing as arising under this Agreement or the Other Agreements, including without limitation, all principal and interest payable with respect to the Note.

"OMNICELL INTELLECTUAL PROPERTY RIGHTS" means all Intellectual Property Rights other than the SureMed Intellectual Property Rights.

"OTHER AGREEMENTS" means all agreements, instruments and documents, including, without limitation, pledges, powers of attorney, consents, assignments, contracts, notices, leases, financing statements and all other written matter now or from time to time hereafter executed by or on behalf of OmniCell and delivered to Baxter in connection herewith, including, without limitation, the Note, but excluding the Asset Purchase Agreement and any documents executed in connection therewith.

"NET EQUITY" means as of any date, the consolidated stockholders' equity of OmniCell and its Subsidiaries as of such date determined in accordance with GAAP.

"NOTE" has the meaning specified in the Recitals.

"PERMITTED LIENS" means:

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(A) Liens for taxes not yet payable or statutory Liens for taxes in an amount not to exceed $250,000 provided that the payment of such taxes which are due and payable is being contested in good faith and by proper proceedings diligently pursued, and that reserves or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor and that a stay of enforcement of any such Lien is in effect;

(B) Liens in favor of Baxter;

(C) Liens upon Equipment granted in connection with the acquisition of such Equipment by OmniCell after the Closing Date (including, without limitation, pursuant to capital leases), PROVIDED that (i) the cost of each such acquisition constitutes a capital expenditure permitted by this Agreement and (ii) each such Lien attaches only to the Equipment acquired with the Indebtedness secured thereby;

(D) The interest or title of a lessor in property subject to an operating lease entered into by OmniCell as lessee with such lessor in the ordinary course of business;

(E) deposits under worker's compensation, unemployment insurance, social security and other similar laws, or to secure the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure indemnity, performance or other similar bonds for the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure statutory obligations (other than liens arising under ERISA or under Environmental laws) or surety or appeal bonds, or to secure indemnity, performance or other similar bonds in the ordinary course of business;

(F) Liens which arise by operation of law under Article 2 of the UCC in favor of unpaid sellers of goods or prepaying buyers of goods, or liens in items of any accompanying documents or proceeds of either arising by operation of law under Article 4 of the UCC in favor of a collecting bank;

(G) Liens securing the claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons, PROVIDED that if any such Lien arises from the nonpayment of such claims or demands when due, such claims or demands do not exceed $100,000 in the aggregate;

(H) Reservations, exceptions, encroachments, easements, rights of way, covenants running with the land, and other similar title exceptions or encumbrances affecting any real estate of OmniCell; PROVIDED that they do not in the aggregate materially detract from the value of the real estate or materially interfere with its use in the ordinary conduct of OmniCell's business; and

(I) Judgment Liens to the extent that the attachment or enforcement of such liens would not result in an Event of Default hereunder; and

(J) Liens in existence on the Closing Date and reflected on
SCHEDULE 3.2.

"PERMITTED SENIOR DEBT" means the Indebtedness of OmniCell in an aggregate principal amount of not more than $10,000,000 outstanding at any time pursuant to an agreement and

5.


terms reasonably acceptable to Baxter between OmniCell and a bank or other financial institution; PROVIDED, that such bank or other financial institution has entered into an intercreditor agreement with Baxter reasonably acceptable to Baxter. Baxter agrees that the terms of the proposed financing of OmniCell by Silicon Valley Bank ("SVB") set forth in the Letter of Interest dated January 11, 1999, a copy of which is attached hereto as EXHIBIT D, would be acceptable to Baxter provided that the representations, warranties, covenants and defaults set forth in the definitive credit agreement between SVB and OmniCell and any other documents executed in connection therewith shall in no way impede or restrict OmniCell's ability to perform and pay the Obligations required under this Agreement.

"PERMITTED SENIOR LIENS" means liens on assets of OmniCell securing any Permitted Senior Debt; provided, however, that any liens on SureMed Assets securing Permitted Senior Debt shall be junior in priority to Baxter's first priority perfected security interest in such SureMed Assets.

"PERSON" means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, institution, entity, party or government (whether national, federal, state, county, city, municipal or otherwise, including without limitation any instrumentality, division, agency, body or department thereof).

"PRELIMINARY PURCHASE PRICE" has the meaning specified in the Asset Purchase Agreement.

"PURCHASED ASSETS" has the meaning specified in the Asset Purchase Agreement.

"RECORDS" has the meaning specified in SECTION 3.1(g).

"REPLACEMENT EQUIPMENT" means any Equipment which (i) is purchased with the proceeds from a sale or disposition of existing Equipment, (ii) replaces such sold or disposed of Equipment, and (iii) is used primarily by the same business division as used such sold or disposed of Equipment.

"REPORT" means any financial statement or report delivered to Baxter in accordance with SECTION 6.1.

"SPECIFIED RIGHTS" has the meaning set forth in SECTION 5.l(g).

"SUBSIDIARY" means any Person at least a majority of whose issued and outstanding stock or other ownership interests now or at any time hereafter is owned by OmniCell and/or one or more Subsidiaries.

"SUPPLEMENTAL DOCUMENTATION" means any and all financing statements, notices, disclosures, agreements, instruments, documents or other written matter, which Baxter may from time to time deem necessary or desirable to maintain or create a valid and perfected security interest in the Collateral.

"SUREMED ASSETS" means (a) all of the Purchased Assets and all proceeds and products thereof, (b) all Accounts and/or General Intangibles created by the sale or lease of any SureMed

6.


Product, (c) all Inventory consisting of SureMed Products or raw materials, work in process or materials used or consumed in the production of SureMed Products, and (d) all Equipment and General Intangibles and all other properties and assets used primarily in connection with the manufacture, distribution and sale of SureMed Products, but only to the extent used therewith.

"SUREMED BUSINESS" has the meaning specified in the Recitals.

"SUREMED INTELLECTUAL PROPERTY RIGHTS" means all Intellectual Property Rights which are part of the SureMed Assets.

"SUREMED PRODUCTS" means those products consisting of the SureMed System product line as it exists on the date hereof and any extensions of such product line.

"UCC" means the Uniform Commercial Code (or any successor statute) of the State of Illinois or of any other state the laws of which are required by Section 9-103 thereof to be applied in connection with the issue of perfection of security interests.

1.2 ACCOUNTING TERMS. Any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given in accordance with GAAP, and all financial computations hereunder shall be computed, unless otherwise specifically provided herein, in accordance with GAAP as consistently applied and using the same method for inventory valuation as used in the preparation of the Financial Statements for the period ended December 31, 1997.

1.3 OTHER TERMS. All other undefined terms contained in this Agreement shall, unless the context indicates otherwise, have the meanings provided for by the UCC to the extent the same are used or defined therein. Any references herein to exhibits, schedules, sections or articles are references to exhibits, schedules, sections or articles of this Agreement, unless otherwise specified. Wherever appropriate in the context, terms used herein in the singular also include the plural, and vice versa, and each masculine, feminine, or neuter pronoun shall also include the other genders.

1.4 COMPUTATION OF TIME PERIODS. In this Agreement, in the computation of periods of time from a specified date to a later specified date, the word "from" shall mean "from and including" and the words "to" and "until" shall each mean "to but excluding". Periods of days referred to in this Agreement shall be counted in calendar days unless Business Days are expressly prescribed and references in this Agreement to months and years shall be to calendar months and calendar years unless otherwise specified.

2. LOAN: GENERAL TERMS

2.1 THE LOAN. Subject to the satisfaction of the conditions precedent set forth in ARTICLE VIII, on the Closing Date, Baxter shall loan to OmniCell and OmniCell shall accept from Baxter a loan in the amount of $17,386,000 (the Preliminary Purchase Price MINUS $2,000,000) (the "LOAN") under the terms and conditions of this Agreement. To further evidence the Loan, OmniCell shall execute and deliver the Note to Baxter on the Closing Date. The principal amount of the Loan shall be adjusted upon determination of the Purchase Price in accordance with Section 2.2 of the Asset Purchase Agreement. Upon such adjustment of the principal

7.


amount of the Loan, if any, the interest due under the Note shall be proportionately adjusted retroactively to the Closing Date based on the final Purchase Price. Promptly following the determination of the Purchase Price pursuant to Section 2.2 of the Asset Purchase Agreement, Baxter and OmniCell shall execute and deliver an amendment to this Agreement, amending SECTIONS 2.6 hereof, if applicable, and OmniCell shall deliver to Baxter, in exchange for return of the original Note, an amended and restated Note reflecting such increase or reduction, as the case may be.

2.2 INTEREST RATE. The unpaid principal balance of the Loan shall bear interest the fixed rate of eight percent (8%) per annum from the Closing Date through and including January 31, 2001 and thereafter at the fixed rate of thirteen percent (13%) per annum until the Loan has been paid in full (such rate as in effect from time to time being referred to herein as the "APPLICABLE RATE").

2.3 DEFAULT RATE. After the earlier of (i) the Maturity Date, whether by acceleration or otherwise, or (ii) the occurrence of an Event of Default, the Obligations shall bear interest at the Default Rate.

2.4 INTEREST PAYMENTS. OmniCell shall make payments of interest quarterly in arrears, on the last day each of March, June September and December of each year, beginning on March 31, 1999, until such time as no amounts are outstanding under this Agreement.

2.5 COMPUTATION OF INTEREST. Interest shall be computed on the basis of a 360 day year and charged for the actual number of days elapsed.

2.6 MATURITY DATE; PAYMENT.

Subject to the provisions relating to adjustment of the Note set forth in SECTION 2.1, the principal balance of the Loan shall be payable in twelve equal installments equal to one-twelfth of the original principal amount of the Note, beginning on the last day of March, 2001 and on the last day of each June, September, December and March thereafter. The unpaid principal balance plus all accrued but unpaid interest, fees, charges and costs shall be due and payable on the Maturity Date or on such earlier date on which said amount shall become due and payable on account of acceleration by Baxter.

2.7 VOLUNTARY PREPAYMENT PRIOR TO MATURITY DATE. The Loan may be prepaid in whole or in part, without premium or penalty.

2.8 MANDATORY PRINCIPAL PAYMENTS. Upon the occurrence of any of the following OmniCell shall repay to Baxter, to the extent required below, the outstanding principal amount of the Loan along with any accrued and unpaid interest or other amounts then due and owing in respect of the Loan (a "MANDATORY PREPAYMENT"):

(A) Upon the issuance or sale by OmniCell or any subsidiary of OmniCell of any shares of capital stock or other equity securities of OmniCell, or any obligations convertible into or exchangeable therefor, or giving any Person a right, option or warrant to acquire such securities or convertible or exchangeable obligations, including, without limitation, an initial public offering or private placement of the capital stock (an "EQUITY ISSUANCE"), OnmiCell shall

8.


make a Mandatory Prepayment to the extent of fifty percent (50%) of the net proceeds of such Equity Issuance on the day of the closing of any such Equity Issuance; PROVIDED that (x) sales or issuances of common stock or options, which common stock and options, in the aggregate, shall not exceed two million (2,000,000) shares, to employees, officers, directors or consultants under OmniCell's employee stock option plan and stock purchase plans, or as otherwise approved by OmniCell's Board of Directors or (y) private placements in any single year of equity securities in an amount not exceeding 10% of OmniCell's outstanding paid-in capital as of its most recently completed fiscal year, shall not require any Mandatory Prepayment under this SECTION 2.8;

(B) Upon (i) the sale of all or substantially all of the assets of OmniCell in any single or series of related transactions; (ii) the sale of all or substantially all of the assets comprising the SureMed Business in any single or series of related transactions; or (iii) the occurrence of any Change in Control, the entire principal balance plus all accrued interest on the Note and other Obligations shall become immediately due and payable; or

(C) OmniCell, pursuant to SECTION 4.4, shall make a Mandatory Prepayment of 100% of any proceeds of a sale or other disposition of Equipment unless such proceeds are used to acquire Replacement Equipment; PROVIDED, HOWEVER, that OmniCell shall not be required to make a Mandatory Prepayment as a result of any sale of Equipment consisting of non-SureMed Assets unless the Permitted Senior Lender, if any, consents to such prepayment.

2.9 METHOD OF PAYMENT. All payments to Baxter hereunder and under the Other Agreements shall be payable in lawful money of the United States of America in same day funds at Baxter's principal place of business specified at the beginning of this Agreement or at such other place or places as Baxter may designate in writing to OmniCell.

2.10 APPLICATION OF PAYMENTS AND COLLECTIONS.

(A) Prior to an Event of Default, Baxter shall allocate any and all payments received from OmniCell or any other Person with respect to the Obligations, as follows: (i) to the payment of any costs and expenses reasonably incurred by Baxter to enforce any rights hereunder or under the Other Agreements or to preserve or protect the Collateral; (ii) to accrued but unpaid interest, fees and expenses, including, but not limited to, legal fees and expenses; and (iii) to principal. Upon the occurrence of an Event of Default and during the continuation thereof, Baxter may apply any and all payments received from OmniCell or any other Person with respect to the Obligations in such order or priority to the Obligations as Baxter shall elect, in its sole and exclusive discretion and OmniCell (y) irrevocably waives the right to direct the application of payments and collections received by Baxter from or on behalf of OmniCell, and (z) agrees that Baxter shall have the continuing exclusive right to apply and reapply any and all such payments and collections against the Obligations then due and payable in such manner as Baxter may deem appropriate, notwithstanding any entry by Baxter upon any of its books and records.

(B) To the extent that Baxter receives any payment on account of the Obligations or any proceeds of Collateral are applied on account of the Obligations, and any such payment(s) and/or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, subordinated and/or required to be repaid to a trustee,

9.


receiver or any other Person under any bankruptcy act, state or federal law, common law or equitable cause, then, to the extent of such payment(s) or proceeds received, the Obligations or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment(s) and/or proceeds had not been received by Baxter and applied on account of the Obligations.

3. COLLATERAL

3.1 GRANT OF SECURITY INTEREST; AGREEMENT TO ALLOW FOR USE OF OMNICELL INTELLECTUAL PROPERTY. (i) To secure the prompt payment and performance to Baxter of all Obligations, OmniCell hereby grants to Baxter a security interest in and rights of set-off against, and hereby mortgages, conveys, transfers, assigns and pledges to Baxter, all of OmniCell's now existing and hereafter arising or acquired interest in and to the following:

(A) Accounts;

(B) General Intangibles, other than the OmniCell Intellectual Property Rights;

(C) Inventory;

(D) Equipment;

(E) all chattel paper, instruments, notes, documents, documents of title and investment property;

(F) all moneys, investment property, securities and other property of any kind of OmniCell in the possession or under the control of Baxter, any assignee of or participant in the Obligations, or a bailee of any such party or such party's affiliates;

(G) all books, records, computer records, ledger cards, programs and other computer materials, customer and supplier lists, invoices, orders and other property evidencing or relating to any of the foregoing items ("RECORDS");

(H) all accessions to any of the foregoing items and all substitutions, renewals, improvements and replacements of and additions thereto; and

(I) all products and proceeds of the foregoing.

All of the foregoing is referred to herein individually and collectively as the "COLLATERAL." It is the intent of the parties that the Collateral shall include all of the property of OmniCell, real, personal or intangible, whether now existing or hereafter acquired or arising, whether specifically enumerated herein or not, and that the broadest possible interpretation should be given to the term Collateral, to the fullest extent permitted by applicable law; provided, however, that in no event shall the Collateral include any OmniCell Intellectual Property Rights.

(II) For the purpose of enabling Baxter to exercise rights and remedies under the Loan Documents (including, without limiting the terms and conditions set forth herein, in order to take possession of, hold, preserve, process, assemble, prepare for sale, market for sale,

10.


sell or otherwise dispose of Inventory) at such time as Baxter shall be entitled to exercise such rights and remedies, OmniCell shall enter into on the date hereof a license agreement, substantially in the form of EXHIBIT F; such license agreement to grant to Baxter an irrevocable, non-exclusive, and fully paid-up license (exercisable without payment of royalty or other compensation to OmniCell) to use, license or sublicense any OmniCell Intellectual Property Rights wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof; provided, however, that each customer for the Inventory is made subject to a written agreement that is consistent with and no less protective of the OmniCell Intellectual Property Rights than the terms of OmniCell's standard forms of Master Purchase Agreement and Master Rental Agreement.

3.2 PRIORITY OF LIENS. OmniCell hereby covenants and agrees that the Liens granted pursuant to SECTION 3.1 are and shall hereafter at all times be
(a) with respect to those items of Collateral consisting of SureMed Assets, perfected, first priority liens and security interests, subject only to Permitted Liens set forth on SCHEDULE 3.2, if any, and (b) with respect to those items of Collateral that do not consist of SureMed Assets, perfected liens and security interests, subject only to (i) Permitted Senior Liens, if any, with respect to which Baxter agrees that its Liens against non-SureMed Assets shall be second in priority, and (ii) Permitted Liens, if any. Baxter hereby acknowledges that OmniCell may grant Permitted Senior Liens against SureMed Assets so long as such Permitted Senior Liens are junior in priority to Baxter's liens and security interests in SureMed Assets.

3.3 INSPECTION OF COLLATERAL; AUDIT OF RECORDS.

(A) Baxter (by any of its officers, accountants, employees and/or agents) shall have the right, at any time or times during OmniCell's usual business hours, after not less than two Business Days prior notice during normal business hours (unless a Default or Event of Default then exists, in which event no notice shall be required) to inspect the Collateral (and the premises upon which it is located) and all related Records and to verify the amount and condition of or any other matter relating to the Collateral.

(B) In addition to the right to inspect set forth herein, Baxter (by any of its officers, accountants, employees and/or agents) shall have the right to audit the books and Records of OmniCell. All reasonable costs, fees and expenses incurred by Baxter, or for which Baxter becomes obligated, in connection with such inspection, verification or audit shall constitute part of the Obligations, payable by OmniCell to Baxter within five
(5) Business Days after demand therefor; PROVIDED, HOWEVER, that unless an Event of Default is outstanding, OmniCell's annual responsibility for such costs, fees and expenses shall be limited to the cost of no more than round-trip coach class airline tickets and one (1) night's accommodations for no more than two (2) auditors sent by Baxter on an inspection, verification and audit.

3.4 MAINTAIN PERFECTION; SUPPLEMENTAL DOCUMENTATION. OmniCell shall perform all the acts requested by Baxter which are necessary or desirable to maintain a valid, perfected security interest in the Collateral, including but not limited to, executing and/or delivering to Baxter, at any time and from time to time hereafter, any and all Supplemental Documentation that Baxter may request, in form and substance reasonably acceptable to Baxter, to perfect and

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maintain perfected Baxter's security interest, lien and/or encumbrance in and/or assignment and pledge of the Collateral, and to consummate the transactions contemplated in or by this Agreement and/or the Other Agreements. OmniCell agrees that Baxter, to the extent permitted by then prevailing applicable law, may execute, on behalf and in the name of OmniCell, any supplemental documentation covering all or any of the Collateral and file the same in each and every appropriate jurisdiction. To the extent permitted by applicable law, Baxter may file, without OmniCell's signature, one or more financing statements disclosing Baxter's Liens, including, limitation, by electronic means with or without a signature as permitted or required by applicable law or filing procedures. OmniCell agrees that a carbon, photographic, photostatic, or other reproduction of this Agreement or of a financing statement is sufficient as a financing statement.

3.5 PERFECTED SECURITY INTEREST; LOCATION OF COLLATERAL. OmniCell hereby warrants and represents to and covenants with Baxter that: (a) Baxter's security interest in the Collateral is now and at all times hereafter shall be perfected and, except as set forth in SECTION 3.2, shall have a first priority; (b) the offices and/or locations where OmniCell keeps the Collateral and the Records are at the locations specified on SCHEDULE
3.5. OmniCell has no other offices or locations and OmniCell shall not remove such Records and/or the Collateral therefrom and shall not keep any such Records and/or the Collateral at any other office or location unless OmniCell gives Baxter notice thereof at least thirty (30) days prior thereto and the same is within the continental United States of America. OmniCell, by written notice delivered to Baxter at least thirty (30) days prior thereto, shall advise Baxter of OmniCell's opening or acquisition of any new office, place of business or place where any of the Collateral is to be stored or kept, or its closing of any then existing office, place of business or place where any of the Collateral is to be stored or kept and any new office or place of business shall be within the continental United States of America.

3.6 PAYMENT OF CLAIMS. Baxter, in its sole and absolute discretion, without waiving or releasing any of the Obligations or any Event of Default, may at any time or times hereafter, but shall be under no obligation to, pay, acquire and/or accept an assignment of any security interest, lien, encumbrance or claim asserted by any Person against the Collateral. All sums paid by Baxter in respect thereof and all reasonable costs, fees and expenses, including reasonable attorneys' fees, court costs, expenses and other charges relating thereto incurred by Baxter or for which Baxter becomes obligated on account thereof shall be part of the Obligations payable by OmniCell to Baxter on demand.

4. REPRESENTATIONS' WARRANTIES AND COVENANTS RELATING TO COLLATERAL

4.1 REPRESENTATIONS, WARRANTIES AND COVENANTS RELATING TO INVENTORY. OmniCell hereby represents, and warrants and covenants as follows:

(A) OmniCell shall keep correct and accurate Records itemizing and describing the kind, type, quality and quantity of Inventory, OmniCell's cost therefor and selling price thereof and the withdrawals therefrom and additions thereto, all of which Records shall be available (during OmniCell's usual business hours), upon notice in accordance with the terms of SECTION 3.3, to any of Baxter's officers, employees or agents for inspection and copying thereof.

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(B) Inventory shall be kept only at the locations set forth on SCHEDULE 4.l(b). Except as disclosed on SCHEDULE 4.l(b), Inventory is not now and shall not at any time or times hereafter be stored with a prospective purchaser, bailee, warehouseman or similar party without Baxter's prior written consent. In the event any Inventory is so stored with a bailee, warehouseman or similar party, OmniCell will concurrently therewith cause the prospective purchaser, warehouseman, bailee or similar party to acknowledge in writing OmniCell's ownership of and Baxter's security interest in such Inventory and to cause its records to reflect such security interest, and, in the case of a bailee, warehouseman or similar party, which issues warehouse receipts covering bailed goods shall cause any such bailee, warehouseman or similar party to issue and deliver non-negotiable warehouse receipts or non-negotiable bills of lading in OmniCell's name, and in the case of a prospective purchaser or a bailee or other third party other than a warehouseman, shall cause such prospective purchaser, bailee or other third party to execute a UCC-1 financing statement in favor of OmniCell, with such financing statement assigned to Baxter.

(C) Inventory is not now and shall not be at any time or times hereafter be consigned to third parties, without Baxter's prior written consent and, in any such event, OmniCell will cause such consignment to be properly perfected to ensure the priority of Baxter's security interest in such Inventory and will cause the consignee to issue and deliver, in form and substance satisfactory to Baxter, a written agreement recognizing Baxter's prior rights in the Inventory. All reasonable out of pocket costs, fees and expenses incurred by Baxter in connection therewith (or which Baxter becomes obligated to pay) shall be part of the Obligations, payable by OmniCell to Baxter on demand.

4.2 SALE OF INVENTORY BY OMNICELL. OmniCell may sell Inventory only in the ordinary course of its business (which does not include a transfer in partial or total satisfaction of Indebtedness, sales in bulk, sales on consignment, sales on approval or sale on a return basis, except system validation and approval arrangements with potential customers in the ordinary course of business). Sales in the ordinary course do include sales of Inventory consisting of system validations and demonstration materials for less than cost.

4.3 MAINTENANCE OF EQUIPMENT. OmniCell shall keep and maintain the Equipment in good operating condition and repair in all material respects and shall make all necessary replacements thereof and renewals thereto so that the value and operating efficiency thereof shall at all times be maintained and preserved in all material respects. OmniCell shall not permit any such items to become a fixture to real estate or an accession to other personal property.

4.4 LIENS ON AND SALE OF EQUIPMENT. OmniCell shall not grant or permit to exist a security interest in or other Lien upon the Equipment (other than a Permitted Lien or, in the case of Equipment not consisting of SureMed Assets, at any time that any Permitted Senior Debt is outstanding, the Permitted Senior Lien). OmniCell will not sell, lease or otherwise dispose of the Equipment or any part thereof to any Person, without Baxter's prior written consent, which may be withheld in the sole discretion of Baxter; PROVIDED THAT OmniCell may sell Equipment (i) reasonably determined by OmniCell not to be necessary for the efficient and effective conduct of its business in arms-length transactions for the fair market value thereof in an amount not to exceed $50,000 in any single fiscal year or (ii) so long as the proceeds of such sale are (a) used to purchase Replacement Equipment, (b) used to prepay the Loan or (c) if such assets are non-

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SureMed Assets, used for such purposes as are permitted under the Permitted Senior Debt. In the event any Equipment is sold, transferred or otherwise disposed of as permitted in this SECTION 4.4, OmniCell shall notify Baxter of such fact and deliver all of the cash proceeds of such sale, transfer or disposition that are not used in accordance with clause (a) or (c) above to Baxter, which proceeds shall be applied to the repayment of the Obligations in accordance with SECTION 2.8.

4.5 SCHEDULE OF EQUIPMENT. SCHEDULE 4.5 sets forth all material Equipment owned by OmniCell as of the date hereof, including the location of each item of Equipment listed thereon. For purposes of this SECTION 4.5 only, material Equipment shall mean any single piece of Equipment (including all component parts thereof) having a fair market value in excess of $50,000. OmniCell shall deliver notice to Baxter amending SCHEDULE 4.5 on a quarterly basis.

4.6 TITLE TO EQUIPMENT. OmniCell, subject to Baxter's representations and warranties in Section 3.8 (b) of the Asset Purchase Agreement, represents and warrants to Baxter that OmniCell has good, indefeasible, and merchantable title, free and clear of all liens, claims and encumbrances (other than the Permitted Liens and Permitted Senior Liens, provided that such Permitted Senior Liens are junior in priority to any lien and security interest granted to Baxter hereunder), to and ownership of the Equipment described and/or listed on SCHEDULE 4.5 and that all Equipment is and shall be kept only at the locations set forth on SCHEDULE 3.5. OmniCell, immediately on demand by Baxter, shall deliver to Baxter any and all evidence of ownership of, including without limitation, certificates of title and any applications for title to, any Equipment.

5. GENERAL WARRANTIES, REPRESENTATIONS AND COVENANTS

5.1 GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS. OmniCell warrants and represents to and covenants with Baxter as follows:

(A) OmniCell is and at all times hereafter shall be a corporation duly organized and existing and in good standing under the laws of the State of California and is qualified or licensed to do business and in good standing in all states in which the failure to be so qualified or licensed would have a material adverse effect upon OmniCell or its ability to perform and pay its Obligations under this Agreement and the Other Agreements.

(B) OmniCell has the right, power and capacity and is duly authorized and empowered to enter into, execute, deliver and perform this Agreement and the Other Agreements.

(C) Each of the names, if any, used by OmniCell in the United States during the five (5) year period preceding the date of this Agreement are set forth on SCHEDULE 5.1(C) attached hereto and none of such names are registered tradenames with the U.S. Patent and Trademark Office except as disclosed on SCHEDULE 5.1(C).

(D) The execution, delivery and/or performance by OmniCell of this Agreement and the Other Agreements shall not, by the lapse of time, the giving of notice or otherwise, constitute a violation of any applicable law or a breach of any provision contained in OmniCell's Articles of Incorporation or By-Laws, or contained in any agreement, instrument or document to which OmniCell is now or hereafter a party or by which it or any of its assets are or

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may become bound, or result in or require the creation of any lien, security interest, charge or other encumbrance upon or with respect to any now-owned or hereafter arising or acquired properties of OmniCell, except for the liens contemplated by this Agreement and/or created hereby.

(E) This Agreement and the Other Agreements are and will be the legal, valid and binding agreements of OmniCell enforceable in accordance with the their terms, except as enforcement thereof may be subject to the effect of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, and to general principles of equity (regardless of whether such enforcement is sought in a proceeding in equity or at law).

(F) OmniCell has and at all times hereafter shall have good and valid title to and ownership of the Collateral, free and clear of all liens, claims, security interests and encumbrances, except as, and to the extent contemplated by SECTION 3.2.

(G) Attached hereto as SCHEDULE 5.1(G) is a true, accurate and complete list of all United States and foreign patents, registered trademarks, tradenames and service marks, registered copyrights and applications therefor owned or used by OmniCell as of the Closing Date (the "SPECIFIED RIGHTS"). Except as set forth on SCHEDULE 5.1(G), the Specified Rights are (or after the Closing Date) will be owned by OmniCell or OmniCell will own or possess the licenses or other rights to use all Specified Rights. To the best of OmniCell's knowledge, none of the products or processes of OmniCell conflicts with or infringes or has infringed upon any United States patents, registered trademarks, trade names or service marks or registered copyrights of any other person or entity; and to the best of OmniCell's knowledge, OmniCell has the full right to conduct its business as heretofore conducted by OmniCell, as applicable, without incurring license fees or royalty or other payment obligations to any person or entity in respect of the Specified Rights, except as may be set forth in the agreement(s) pursuant to which OmniCell has obtained its rights to such Specified Rights. This paragraph shall not apply with respect to the SureMed Assets acquired by OmniCell pursuant to the Asset Purchase Agreement as of the date hereof, but will apply with respect to the effect of any changes arising out of the conduct of the SureMed Business by OmniCell.

(H) OmniCell is now, and at all times hereafter shall be, solvent and generally able to pay its debts as they mature; OmniCell now owns, and shall at all times hereafter own, property which, at a fair valuation, is greater than the sum of its debts; and OmniCell now has, and shall have at all times hereafter, capital sufficient to carry on its business and transactions and all businesses and transactions in which it is about to engage.

(I) Except as disclosed on SCHEDULE 5.l(I), there are no actions or proceedings which are pending or threatened against OmniCell which might result in any material adverse change in its financial condition or materially affect OmniCell's assets or the Collateral or OmniCell's ability to fully perform the Obligations.

(J) OmniCell has obtained and is in good standing with respect to all material governmental permits, certificates, consents and franchises necessary to continue to conduct its

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business as previously conducted prior to the date hereof and to own or lease and operate its properties as now owned or leased by it.

(K) No authorization, approval or other action by, and no notice to or filing with, any governmental authority is or will be necessary
(a) for the grant by OmniCell of the security interest in the Collateral hereunder or for the execution, delivery or performance of this Agreement by OmniCell; (b) to ensure the validity, perfection or priority of the security interest in the Collateral granted hereunder, or (c) for the exercise by Baxter of any of its rights or remedies hereunder, except for the filing of financing statements and continuation statements in the jurisdictions set forth in SCHEDULE 5.1(K) pursuant to the UCC as in effect in such jurisdictions.

(L) OmniCell is not a party to any contract or agreement or subject to any charge, restriction, judgment, decree or order materially and adversely affecting its business, property, assets, operations or condition, financial or otherwise.

(M) OmniCell is not in violation of any applicable statute, regulation or ordinance of the United States of America, of any state, city, town, municipality, county or of any other jurisdiction, or of any agency thereof (including, but not limited to any environmental law) in any respect which might materially and adversely affect its business, property, assets, operations or condition, financial or otherwise.

(N) OmniCell has filed or caused to be filed all tax returns which are required to be filed; and OmniCell has paid all Charges shown to be due and payable on said returns or on any assessments made against it or any of its property, and all other Charges imposed on it or any of its properties by any governmental authority; PROVIDED, HOWEVER, that OmniCell need not if it is contesting the foregoing in good faith and by proper proceedings diligently pursued and that reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made therefor, and any Lien asserted in connection with such charges is a Permitted Lien.

(O) Except as set forth on SCHEDULE 5.1(O), OmniCell has no Indebtedness (except for trade payables arising in the ordinary course of its business since September 30, 1998), has not guaranteed (other than as a result of the endorsement of any instrument or items of payment for deposit or collection in the ordinary course of business or as otherwise expressly permitted pursuant to the terms hereof) the obligations of any Person, and there are no actions or proceedings which are pending or, to OmniCell's knowledge, threatened against OmniCell which, in any of the foregoing cases, are reasonably likely to result in any material adverse change in its financial condition or materially adversely affect its assets or the Collateral or its ability to fully perform and satisfy the Obligations hereunder.

(P) OmniCell is not in default with respect to any indenture, loan agreement, mortgage, deed or other similar agreement relating to the borrowing of money to which it is a party, by which it or any of its property is bound.

(Q) The audited financial statements of OmniCell as of December 31, 1997 and for the fiscal year then ended, fairly and accurately present the assets, liabilities and financial conditions and results of operations of OmniCell as of and for the periods ending on such dates

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set forth therein and have been prepared in accordance with GAAP, applied on a basis consistently followed in all material respects throughout the periods involved.

(R) There has been no material adverse change in the assets, liabilities or financial condition of OmniCell since September 30, 1998, other than changes resulting from the consummation of the transactions contemplated hereby and by the Asset Purchase Agreement.

(S) Attached hereto as SCHEDULE 5.l(S) is a true, accurate and complete schedule of all Subsidiaries and Affiliates of OmniCell.

5.2 SURVIVAL OF WARRANTIES AND REPRESENTATIONS. OmniCell covenants, warrants and represents to Baxter that all representations and warranties of OmniCell contained in this Agreement and the Other Agreements shall be true at the time of date hereof, and shall survive the execution, delivery and acceptance hereof and thereof by the parties thereto and the closing of the transactions described herein and therein or related hereto or thereto.

6. COVENANTS AND CONTINUING AGREEMENTS.

6.1 AFFIRMATIVE COVENANTS. OmniCell shall, unless Baxter otherwise consents thereto in writing, do all of the following during the term hereof:

(A) INSURANCE. OmniCell will at all times maintain or cause to be maintained insurance in such amounts, on such terms and conditions and insuring against such risks as are ordinarily insured against by other Persons in similar businesses similarly situated and in any event, including property casualty insurance, comprehensive commercial general liability insurance (including products liability coverage), worker's compensation insurance and business interruption insurance.

All policies of insurance on the Collateral or otherwise required hereunder shall be in form, amount and terms, and shall be issued by companies reasonably satisfactory to Baxter. OmniCell shall deliver to Baxter a certificate of insurance and evidence of payment of all premiums therefor and shall deliver renewals of all such policies to Baxter at least thirty
(30) days prior to their expiration dates. Such policies of insurance shall contain an endorsement, in form and substance reasonably acceptable to Baxter, showing all losses payable to Baxter or, in Baxter's reasonable discretion, OmniCell shall execute a separate assignment thereof, in form and substance reasonably acceptable to Baxter. Baxter shall be named as loss payee, mortgagee and secured party in all policies of property insurance and as an additional insured in all policies of liability insurance. Such endorsement shall provide that the insurance companies will give Baxter at least thirty (30) days' prior notice before any such policy shall be materially modified or canceled and that no act or default of OmniCell or any other Person (other than Baxter) shall affect the right of Baxter to recover under such policy in case of loss or damage. OmniCell hereby directs all insurers under such policies to pay all proceeds payable thereunder directly to Baxter. During such times that an Event of Default has occurred and is continuing, OmniCell irrevocably makes, constitutes and appoints Baxter (and all officers, employees or agents designated by Baxter) as OmniCell's true and lawful attorney and agent-in-fact for the purpose of making, settling and adjusting claims under such policies, endorsing the name of OmniCell in writing or by stamp on any check, draft, instrument or other item of payment for the proceeds of

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such policies and for making all determinations and decisions with respect to such policies, in each such case.

(B) FINANCIAL REPORTS. OmniCell shall keep books of account and prepare financial statements and furnish to Baxter the following (all of the foregoing and following to be kept and prepared in accordance with GAAP, in each case consistent with the audited financial statements for the fiscal year ended December 31, 1997 previously delivered by OmniCell to Baxter, unless OmniCell's independent certified public accountants concur in any changes therein and such changes are disclosed in writing to Baxter):

(I) ANNUAL. As soon as available, but not later than ninety
(90) days after the close of each fiscal year of OmniCell, financial statements of OmniCell (including a balance sheet, statement of cash flow and statement of changes in financial position, with supporting footnotes) as at the end of such year and for the year then ended all in form and detail as reasonably required by Baxter, prepared by a firm of independent certified public accountants selected by OmniCell and reasonably acceptable to Baxter and containing the unqualified opinion of such independent certified public accountants with respect to the financial statements and accompanied by a statement by such accountant that, as of the date thereof, there are no Events of Default under this Agreement.

(II) QUARTERLY REPORT. As soon as practicable, but in no event later than forty-five (45) days after the end of each fiscal quarter, financial statements of OmniCell (including a statement of cash flow, a balance sheet and profit and loss statement with supporting footnotes) as at the end of such quarter and for the prior quarters in such fiscal year, all in form and detail as reasonably required by Baxter, prepared by the chief financial officer of OmniCell.

(III) OTHER INFORMATION. Such other data and information (financial and otherwise) as Baxter, from time to time, may reasonably request bearing upon or related to the Collateral, OmniCell's financial condition and/or result of operations.

(C) CERTIFICATE WITH ANNUAL AND QUARTERLY REPORT. Concurrently with the delivery of the financial statements described in SECTION 6.1(B), a certificate of the president or chief financial officer of OmniCell certifying to Baxter that: (i) such officer is not aware of the occurrence or existence of any Default or Event of Default or, if such officer is aware thereof, the nature thereof and the steps OmniCell has proposed to cure the same; and (ii) OmniCell is in compliance with the covenants set forth in
SECTION 6.1 and setting forth the detail required to determine OmniCell's compliance with said covenants, in such form and detail as Baxter shall reasonably require.

(D) WAREHOUSE AGREEMENTS. OmniCell shall deliver to Baxter copies of all agreements between OmniCell and any warehouse or other third party location at which any Inventory may, from time to time, be kept and all similar agreements between OmniCell and any Person relating thereto promptly after entering into the same and shall take such actions as are necessary, in Baxter's reasonable discretion, to insure the continuous perfection of Baxter's security interest in Collateral stored in such warehouses.

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(E) RECORDS. OmniCell shall keep accurate and complete records relating to the Collateral and the operation of OmniCell's business which records shall be made available to Baxter in accordance with SECTION 3.3 for Baxter's inspection, copying, verification or otherwise. Upon the request of Baxter, OmniCell shall furnish with respect to any Account identified on any schedule, certificate or report provided pursuant to this Agreement (i) a true and correct copy of the invoice evidencing such Account and (ii) evidence of shipment or performance. OmniCell shall also deliver to Baxter, upon demand, a copy of all documents, including, without limitation, repayment histories, present status reports and shipment reports, relating to the Accounts and such other matters and information relating to the status of then existing Accounts as Baxter shall reasonably request.

(F) PAY DEBTS. OmniCell shall pay or discharge or otherwise satisfy all Indebtedness at or before maturity or before the same becomes delinquent, PROVIDED THAT OmniCell shall not be required to pay any Indebtedness which is unsecured while the same is being contested by it in good faith and by appropriate proceedings so long as OmniCell shall have set aside on its books reserves in accordance with GAAP with respect thereto.

(G) PAYMENT OF CHARGES. OmniCell shall pay promptly when due all of the Charges. Notwithstanding the foregoing, OmniCell may dispute, without prior payment thereof, the Charges; PROVIDED that (A) OmniCell, in good faith, shall be contesting the same in an appropriate proceeding, (B) enforcement thereof against any assets of OmniCell shall be stayed and (C) appropriate reserves therefor shall have been established on the Records of OmniCell in accordance with GAAP. In the event OmniCell, at any time or times hereafter, shall fail to pay the Charges required herein, OmniCell shall so advise Baxter thereof in writing; Baxter may, without waiving or releasing any of OmniCell's Obligations or any Event of Default hereunder, in its sole and absolute discretion, at any time or times thereafter, make such payment, or any part thereof, and take any other action with respect thereto which Baxter deems advisable. All sums so paid by Baxter and any expenses, including reasonable attorneys' fees, court costs, expenses and other charges relating thereto, shall be part of the Obligations, payable by OmniCell to Baxter on demand.

(H) COMPLIANCE WITH LAWS. OmniCell shall comply in all material respects with all laws, rules, regulations and governmental orders (federal, state and local), including all environmental laws, having applicability to it or to the business or businesses at any time conducted by it.

6.2 NEGATIVE COVENANTS. OmniCell shall not do any of the following:

(A) ATTACHMENT. Permit or suffer any levy, attachment or restraint to be made affecting any of its assets or the Collateral.

(B) SUBSIDIARIES. Create or acquire any subsidiaries unless (i) such subsidiary shall have executed and filed UCC financing statements or amendments, substantially in the form of EXHIBIT E, granting Baxter a first priority (except as otherwise provided under SECTION 3.2) perfected security interest in the Collateral, and (ii) such subsidiary shall have guaranteed, in a manner reasonably acceptable to Baxter, the repayment of all of the Obligations hereunder.

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(C) RECEIVERS. Permit or suffer any receiver, trustee or assignee for the benefit of creditors, or any other custodian to be appointed to take possession of all or any of OmniCell's assets or any of the Collateral.

(D) ADVERSE TRANSACTIONS. Enter into any transaction not in the ordinary course of business which materially and adversely affects OmniCell's ability to repay the Obligations, or materially and adversely affects the Collateral.

(E) GUARANTY DEBT. Guaranty or otherwise, in any way, become liable with respect to the obligations or liabilities of any other Person, including, without limitation, by any agreement to (i) maintain net worth or working capital, other than pursuant to any Permitted Senior Debt, (ii) purchase the obligations or property of any such Person, or to furnish funds to any such Person, directly or indirectly, through the purchase of goods, supplies or services, in any such case with the intent to provide such a guaranty or otherwise become so liable, other than the making of loans to employees, so long as the aggregate amount of such loans does not exceed $100,000 per employee or $500,000 in the aggregate outstanding at any time, or (iii) obtain upon its credit the issuance of any letter or letters of credit for the obligations of any such Person; PROVIDED THAT the foregoing limitations shall not apply to (x) endorsement of instruments or items of payment for deposit or collection in the ordinary course of business or (y) guaranties outside the ordinary course of business in an aggregate amount not to exceed $2,000,000 outstanding at any time MINUS the amount of Indebtedness outstanding under SECTION 6.2(G)(VI) at such time.

(F) TRANSACTIONS WITH AFFILIATES. Enter into any transactions with any Affiliate, except a transaction which is in the ordinary course of business, is otherwise permitted by this Agreement and is upon fair and reasonable terms, consistent with prior practices, no less favorable than would be obtained in a comparable arms-length transaction with a Person not an Affiliate.

(G) INCUR INDEBTEDNESS. Incur or become liable in respect of any Indebtedness, other than (i) the Obligations; (ii) Permitted Senior Debt;
(iii) obligations or liabilities created or arising under trade payables arising in the ordinary course of business; (iv) obligations as a lessee under operating leases; (v) Indebtedness to fund Capital Expenditures so long as such Capital Expenditures do not exceed $5,000,000 in the aggregate in any calendar year, and (vi) other Indebtedness in the aggregate principal amount outstanding at any time not to exceed $2,000,000 MINUS the dollar amount of any obligation guaranteed outside the ordinary course pursuant to clause (y) of the proviso set forth in SECTION 6.2(E).

(H) SALE OF ASSETS. Sell, lease or otherwise dispose of or transfer, whether by sale, merger, consolidation or otherwise, any of OmniCell's assets or the Collateral, except (i) sales or leases of inventory in the ordinary course of business; (ii) sale or disposal of unused or obsolete assets in the ordinary course of business pursuant to SECTION 4.4.

(I) DIVIDENDS; PAYMENT OF FEES, ETC. Any time during the term hereof
(i) make any distributions or pay any dividends or make any distributions of property or assets with respect to its capital stock, (ii) redeem or repurchase any of its capital stock, other than redemptions of (x) Series J Preferred Stock according to the terms of such Series J Preferred

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Stock in existence on December 16, 1998 and (y) the stock of terminated employees pursuant to the terms of the agreements under which such stock was issued, and (iii) pay any director's fees or any salaries to any director or shareholder unless such shareholder or director is directly and actively employed by OmniCell, and (iv) make any loans, advances and/or extensions of credit to any Affiliate, except as permitted in SECTION 6.2(E) or (F).

(J) ENCUMBRANCES. Create or suffer to exist any lien, mortgage or encumbrance or security interest to exist with respect to any of the Collateral, except (i) Permitted Liens, (ii) second priority Permitted Senior Liens on Collateral consisting of SureMed Assets and first priority Permitted Senior Liens on Collateral consisting of non-SureMed Assets, and (iii) liens securing purchase money Indebtedness.

(K) ACQUISITIONS. Purchase any assets outside of the ordinary course of business, or acquire any business (whether by purchase of stock, merger or purchase of assets or otherwise) unless (i) no Indebtedness shall be assumed in connection therewith which would not be permitted by SECTION 6.2(G); (ii) no Default or Event of Default shall have occurred and be continuing or shall result from such acquisition; (iii) OmniCell shall have first delivered to Baxter a PRO FORMA compliance certificate dated as of the last day of the most recent fiscal quarter for which Baxter has delivered to the Agent the Financial Statements pursuant to Section 6.1, demonstrating that if such acquisition had occurred on the last day of such fiscal quarter, no Default or Event of Default would have resulted therefrom; and (iv) in connection with the acquisition of a future subsidiary, OmniCell has complied with
SECTION 6.2(B).

6.3 REQUIRED NOTICES. In addition to those notices required elsewhere in this Agreement, OmniCell shall notify Baxter promptly after obtaining knowledge of:

(A) except as otherwise previously disclosed, any event or occurrence which OmniCell has determined has caused a material loss or decline in value of the Collateral due to casualty or any other adverse occurrence and the estimated (or actual, if available) amount of such loss or decline;

(B) the institution of any suit or administrative proceeding which, if determined adversely to OmniCell, could reasonably be expected to materially and adversely affect the operations, financial condition or business of OmniCell or which is reasonably likely to materially and adversely affect Baxter's security interest in the Collateral;

(C) OmniCell's becoming subject to any Charge, restriction, judgment, decree or order which materially and adversely affects its business operations, property, assets or financial condition;

(D) the commencement of any lockout, strike or walkout relating to any labor contract to which OmniCell is a party;

(E) any material default under any material lease or other contract or the occurrence of any event which constitutes or, with the giving of notice of the passage of time, or both, would constitute an event of default under the terms of any such lease or other contract; and

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(F) the occurrence of a Default or Event of Default, such notice to include the written statement of the chief financial officer of OmniCell setting forth the details of such event and the action which OmniCell proposes to take with respect thereto.

7. DEFAULT

7.1 EVENTS OF DEFAULT. The occurrence of any one of the following events shall constitute a default ("EVENT OF DEFAULT") under this Agreement:

(A) if OmniCell fails to pay the Obligations, or any part thereof, on the due date thereof.

(B) OmniCell breaches any of the covenants set forth in SECTIONS 6.1(F) through 6.1(H), inclusive, or 6.2.

(C) OmniCell shall default in the performance or observance of any other of OmniCell's covenants or agreements in this Agreement or any of the Other Agreements and such default shall continue unremedied for a period of thirty (30) days after the first to occur of (i) Baxter having delivered written notice of such default to OmniCell; or (ii) OmniCell obtaining actual knowledge of such default.

(D) any representation or warranty on the part of OmniCell contained in this Agreement or any of the Other Agreements shall have been incorrect in any material respect when made or deemed made.

(E) all of the Collateral, or a material portion thereof, is attached, seized, subjected to a writ of distress, warrant, or is levied upon, or comes within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors.

(F) a petition under the Bankruptcy Code, or any similar law or regulation shall be filed by OmniCell or OmniCell shall make an assignment for the benefit of its creditors, or any case or proceeding is filed by OmniCell for its dissolution or liquidation, or OmniCell shall take any corporate action to authorize or effect any of the foregoing.

(G) OmniCell is enjoined, restrained or in any way prevented by court order from conducting all or any material part of its business affairs, or a petition under the Bankruptcy Code, or any similar law or regulation is filed against OmniCell, or any case or proceeding is filed against OmniCell for its dissolution or liquidation, and such injunction, restraint or petition is not dismissed or stayed within sixty (60) days after the entry or filing thereof, or an order for relief is entered in any case commenced against OmniCell under the Bankruptcy Code or any similar law.

(H) a proceeding is commenced for the appointment of a receiver, trustee, or custodian for any material portion of OmniCell's assets and such proceeding is not dismissed or stayed within sixty (60) days after its commencement.

(I) one or more judgments or decrees shall be entered against OmniCell, involving, individually, or in the aggregate, a liability of $250,000 or more and either (i)

22.


enforcement action shall have been commenced by any creditor upon any such judgment or decree, or (ii) such judgment or decree shall not have been vacated, discharged or stayed pending appeal within thirty (30) days after the entry thereof.

(J) this Agreement or any of the Other Agreements shall cease for any reason to be in full force and effect (other than by reason of the payment in full of all of the Obligations or voluntary release by Baxter of any Other Agreement) or OmniCell or any other Person (other than Baxter) shall disavow its obligations thereunder, or shall contest the validity or enforceability of any thereof.

(K) Baxter's lien or security interest in any Collateral, the value of which exceeds $250,000 in the aggregate shall for any reason cease to be a legal, valid, perfected or enforceable lien on and security interest in such Collateral, in the respective priorities contemplated by this Agreement (other than by reason of the payment in full of all of the Obligations or voluntary release by Baxter of such Collateral).

(L) OmniCell is in default in the payment of any Indebtedness for borrowed money in an aggregate principal amount outstanding in excess of $250,000 (other than the Obligations), or is in breach of any agreement evidencing such Indebtedness (other than any Loan Document), and the effect of such default or breach, as the case may be, is to enable the holder thereof then to accelerate the maturity of such Indebtedness, unless the same is waived or otherwise ceases to exist.

7.2 ACCELERATION. Upon an Event of Default, Baxter may declare all of the Obligations be immediately due and payable; PROVIDED, HOWEVER, that upon the occurrence of an Event of Default described in SECTIONS 7.1(F) or
7.l(G), all Obligations shall automatically become due and payable, without notice or demand of any kind.

7.3 REMEDIES. Upon the occurrence of an Event of Default and the continuation thereof, Baxter, in its sole and absolute discretion may:

(A) exercise any one or more of the rights and remedies of a secured party under the UCC of the relevant state or states and any other applicable law upon default by a debtor;

(B) enter, with or without process of law and without breach of the peace, any premises where the Collateral is or may be located, and without charge or liability to Baxter therefor seize and remove the Collateral from said premises and/or remain upon said premises and use the same for the purpose of collecting, preparing and disposing of the Collateral;

(C) sell or otherwise dispose of the Collateral at public or private sale for cash or credit, PROVIDED, HOWEVER, that OmniCell shall be credited with the net proceeds of such sale only when such proceeds are actually received by Baxter; and

(D) exercise any or all rights or remedies under any of the Other Agreements.

All of Baxter's rights and remedies under this Agreement and the Other Agreements are cumulative and non-exclusive.

23.


7.4 ASSEMBLE COLLATERAL. Upon the occurrence of an Event of Default and the continuation thereof, OmniCell, immediately upon demand by Baxter, shall assemble the Collateral and make it available to Baxter at a place or places to be designated by Baxter which are reasonably convenient to Baxter and OmniCell.

7.5 NOTICE OF SALE. Any notice required to be given by Baxter of a sale, lease, other disposition of the Collateral or any other intended action by Baxter, deposited in the United States mail, postage prepaid and duly addressed to OmniCell at its principal place of business specified in SECTION 8.10 not less than ten (10) days prior to such proposed action, shall constitute commercially reasonable and fair notice to OmniCell thereof.

7.6 POSTPONEMENT OF SALE. Upon the occurrence of an Event of Default and the continuation thereof, OmniCell agrees that Baxter may, if Baxter deems it reasonable, postpone or adjourn any such sale of the Collateral from time to time by an announcement at the time and place of sale or by announcement at the time and place of such postponed or adjourned sale, without being required to give a new notice of sale. OmniCell agrees that Baxter has no obligation to preserve rights against prior parties to the Collateral. Further, OmniCell waives and releases any cause of action and claim against Baxter as a result of Baxter's possession, collection or sale of the Collateral, any liability or penalty for failure of Baxter to comply with any requirement imposed on Baxter relating to notice of sale, holding of sale or reporting of sale of the Collateral, and, to the extent permitted by law, any right of redemption from such sale.

7.7 WAIVER OF BOND. In the event Baxter seeks possession of the Collateral through replevin or other court process, OmniCell hereby irrevocably waives (a) any bond, surety or security required as an incident to such possession, and (b) any demand for possession of the Collateral prior to commencement of any suit or action to recover possession thereof.

7.8 APPOINTMENT OF BAXTER AS ATTORNEY-IN-FACT AFTER DEFAULT. OmniCell, hereby irrevocably designates, makes, constitutes and appoints Baxter (and all Persons designated by Baxter) as OmniCell's true and lawful agent and attorney-in-fact from and after an Event of Default and during the continuation thereof, with power, without notice to OmniCell and at such time or times hereafter as Baxter, in its sole and absolute discretion, may determine, in OmniCell's or Baxter's name: (a) to demand payment of the Accounts; (b) to enforce payment of the Accounts by legal proceedings or otherwise; (c) to exercise all of OmniCell's rights and remedies with respect to the collection of the Accounts; (d) to settle, adjust, compromise, extend or renew the Accounts; (e) to settle, adjust or compromise any legal proceedings brought to collect the Accounts; (f) to sell or assign the Accounts upon such terms, for such amounts and at such time or times as Baxter deems advisable; (g) to discharge and release the Accounts; (h) to take control, in any manner, of any item of payment related to or proceeds of, any Account; (i) to prepare, file and sign OmniCell's name on any notice of lien, assignment or satisfaction of lien or similar document in connection with the Accounts; (j) to prepare, file and sign OmniCell's name on any proof of claim in bankruptcy or similar document against any account debtor; (k) to do all acts and things necessary, in Baxter's sole discretion, to fulfill OmniCell's Obligations under this Agreement; and (I) to prepare, file and sign OmniCell's name on any notice of lien, assignment or satisfaction of lien or similar document in connection with the Accounts.

24.


7.9 CONSENT DOES NOT CREATE CUSTOM. No authorization given by Baxter pursuant to this Agreement or the Other Agreements to sell any specified portion of Collateral or any items thereof, and no waiver by Baxter in connection therewith shall establish a custom or constitute a waiver of the prohibition contained in this Agreement against such sales, with respect to any portion of the Collateral or any item thereof not covered by said authorization.

8. CONDITIONS TO LOAN

The obligation of Baxter to make the Loan hereunder shall be subject to the satisfaction of the following conditions precedent:

(A) The conditions precedent to the Closing under the Asset Purchase Agreement shall have been satisfied and Closing under the Asset Purchase Agreement shall have taken place, or the shall take place simultaneously with the making of the Loan; and

(B) Baxter shall have received all items on the List of Closing Documents attached hereto as EXHIBIT B, such items to be in form and substance satisfactory to Baxter and to be executed by all parties thereto when the nature of the item so requires.

9. GENERAL

9.1 ATTORNEYS' FEES AND EXPENSES; BAXTER'S EXPENSES. OmniCell hereby agrees that it shall reimburse Baxter, as part of the Obligations, for any and all costs and expenses (including, without limitation, the reasonable fees and expenses of any counsel, accountants, appraisers or other professionals) reasonably incurred by Baxter at any time, in connection with:
(a) the preparation, negotiation and execution of any amendment of or modification of this Agreement or the Other Agreements; (b) any intercreditor agreement with a Permitted Senior Lender, other than the initial intercreditor agreement to be negotiated between Baxter, OmniCell and the initial Permitted Senior Lender, and any litigation, contest, dispute, suit, proceeding or action (whether instituted by Baxter, OmniCell or any other Person) in any way relating to the Collateral, this Agreement, or the Other Agreements; (c) any attempt to enforce any rights of Baxter against OmniCell or any other Person which may be obligated to Baxter by virtue of this Agreement or the Other Agreements, including, without limitation, the Account Debtors; (d) subject to the terms of SECTION 3.3(b), any inspection, verification or audit of any of the Collateral in accordance with this Agreement; (e) any action to protect, collect, sell, liquidate or otherwise dispose of the Collateral; and (f) performing any of the obligations relating to or payment of the Obligations hereunder in accordance with the terms hereof.

9.2 MODIFICATION. This Agreement and the Other Agreements may not be modified, altered or amended except by an agreement in writing signed by OmniCell and Baxter.

9.3 STRICT COMPLIANCE. Baxter's failure at any time or times hereafter to require strict performance by OmniCell of any provision of this Agreement shall not waive, affect or diminish any right of Baxter thereafter to demand strict compliance and performance therewith. Any suspension or waiver by Baxter of a Default or Event of Default under this Agreement or the Other Agreements shall not suspend, waive or affect any other Default or Event of Default under this Agreement or the Other Agreements, whether the same is prior or subsequent thereto and whether of the same or of a different type. None of the undertakings, agreements, warranties,

25.


covenants and representations of OmniCell contained in this Agreement or the Other Agreements and no Default or Event of Default by under this Agreement or the Other Agreements shall be deemed to have been suspended or waived by Baxter unless such suspension or waiver is by an instrument in writing signed by an officer of Baxter and directed to OmniCell specifying such suspension or waiver.

9.4 SEVERABILITY. If any provision of this Agreement or the Other Agreements or the application thereof to any Person or circumstance is held invalid or unenforceable, the remainder of this Agreement and the Other Agreements and the application of such provision to other Persons or circumstances will not be affected thereby and the provisions of this Agreement and the Other Agreements shall be severable in any such instance.

9.5 SUCCESSORS AND ASSIGNS. This Agreement and the Other Agreements shall be binding upon and inure to the benefit of the successors and assigns of OmniCell and Baxter; PROVIDED that this Agreement and any interest or right hereunder may not be assigned by OmniCell without prior written consent which may be withheld in Baxter's sole and exclusive discretion. OmniCell hereby consents to the flee and unrestricted sale, assignment, transfer or other disposition by Baxter, at any time and from time to time hereafter, of this Agreement or the Other Agreements, or of any portion thereof, including, without limitation, Baxter's rights, titles, interests, remedies, powers and/or duties thereunder and hereunder; PROVIDED, HOWEVER, that Baxter shall not sell, assign, transfer or dispose of its rights, titles, interests, remedies, powers and/or duties hereunder to any Person engaged in the same line of business as OmniCell's business.

9.6 LOAN AGREEMENT CONTROLS. The provisions of the Other Agreements are incorporated in this Agreement by this reference thereto. Except as otherwise provided in this Agreement and except as otherwise provided in the Other Agreements by specific reference to the applicable provision of this Agreement, if any provision contained in this Agreement is in conflict with, or inconsistent with, any provision in the Other Agreements, the provision contained in this Agreement shall govern and control.

9.7 LIABILITY PRIOR TO TERMINATION. Except to the extent provided to the contrary in this Agreement and in the Other Agreements, no termination or cancellation (regardless of cause or procedure) of this Agreement or any of the Other Agreements shall in any way affect or impair the powers, obligations, duties, rights and liabilities of OnmiCell or Baxter in any way or respect relating to any transaction or event occurring prior to such termination or cancellation with respect to Collateral and/or any of the undertakings, agreements, covenants, warranties and representations of OmniCell or Baxter contained in this Agreement or any of the Other Agreements.

9.8 WAIVER.

(A) OmniCell, for itself and for its successors, transferees and assigns hereby irrevocably (i) waives diligence, presentment and demand for payment, protest, notice, notice of protest and nonpayment, dishonor and notice of dishonor and all other demands or notices of any and every kind whatsoever; (ii) agrees that this Agreement and the Note and any or all payments coming due hereunder or under any of the Other Agreements may be extended from time to time

26.


in the sole discretion of Baxter without in any way affecting or diminishing OmniCell's liability hereunder; and (iii) waives any rights, remedies or defenses arising at law or in equity relating to guarantees or suretyships.

(B) No extension of the time for any payment due hereunder or under any of the Other Agreements made by agreement with any Person now or hereafter liable for payment hereunder or under the Note or any of the Other Agreements shall operate to release, discharge, modify, change or affect the original liability under this Loan or the Note or any Other Agreement, either in whole or in part.

(C) No delay in the exercise of any right or remedy hereunder by Baxter shall be deemed to be a waiver of such right or remedy, nor shall the exercise of any right or remedy hereunder by Baxter be deemed an election of remedies or a waiver of any other right or remedy. Without limiting the generality of the foregoing, the failure of Baxter promptly after the occurrence of any default hereunder to exercise its right to declare the indebtedness remaining unmatured hereunder to be immediately due and payable shall not constitute a waiver of such right while such default continues nor a waiver of such right in connection with any future default.

(D) No waiver or limitation of any right or remedy hereunder by Baxter shall be effective unless (and any such waiver or limitation shall be effective only to the extent) expressly set forth in a writing, signed and delivered by Baxter to OmniCell. No notice to or demand on OmniCell in any case shall entitle OmniCell to any other notice or demand in similar or other circumstances, nor shall such notice or demand constitute a waiver of any rights or remedy of Baxter to any other or further actions. In its sole discretion, Baxter may, at any time and from time to time, waive any one or more of the rights or remedies contained herein, but such waiver in any instance or under any particular circumstance shall not be deemed to be a waiver of such rights or remedies in any other instance or under any other circumstance.

9.9 INDEMNIFICATION. OmniCell shall indemnify, defend, and hold Baxter harmless from and against any and all losses, costs, liabilities, damages, and expenses (including legal and other expenses incident thereto) of every kind, nature and description, other than those caused by Baxter's gross negligence or willful misconduct, that result from or arise out of (a) the breach of any representation or warranty of OmniCell set forth in this Agreement or in any certificate, schedule, or other instrument by OmniCell pursuant hereto, (b) the breach of any of the covenants of OmniCell contained in or arising out of this Agreement or the transactions contemplated hereby, or (c) any third party claims relating to Baxter's capacity as a lender under this Agreement.

9.10 NOTICE. Any and all notices given in connection with this Agreement shall be deemed adequately given only if in writing and addressed to the party for whom such notices are intended at the address set forth below. All notices shall be sent by personal delivery, Federal Express or other overnight messenger service, or by telecopy. A written notice shall be deemed to have been given to the recipient party on the earlier of (a) the date it shall be delivered to the address required by this Agreement; (b) the date delivery shall have been refused at the address required by this Agreement; or (c) with respect to notices sent by mail, the date as of which the

27.


postal service shall have indicated such notice to be undeliverable at the address required by this Agreement. Any and all notices referred to in this Agreement, or which either party desires to give to the other, shall be addressed as follows:

(A) If to Baxter, at:

                          Baxter Healthcare Corporation
                          One Baxter Parkway
                          Deerfield, Illinois 60015
                          Attn: General Counsel and Treasurer
                          Facsimile: 847/948-2025

       with a copy to:    Sidley & Austin
                          One First National Plaza
                          Chicago, Illinois 60603
                          Attn: John M. O'Hare
                          Facsimile: 312/853-7036

(B) If to OmniCell, at:

                          OmniCell Technologies, Inc.
                          1101 East Meadow Drive
                          Palo Alto, California 94303
                          Attn: Chief Financial Officer
                          Facsimile: 650/843-6277

        with a copy to:   Cooley Godward LLP
                          Five Palo Alto Square
                          Palo Alto, California 94306-2155
                          Attn: Robert J. Brigham, Esq.
                          Facsimile: 650/857-0663

The above addresses may be changed by notice of such change, mailed as provided herein, to the last address designated.

9.11 SECTION TITLES, ETC. The Section titles and table of contents, if any, contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto.

9.12 WAIVER BY OMNICELL. EXCEPT AS OTHERWISE PROVIDED FOR IN THIS AGREEMENT OR REQUIRED BY LAW, OMNICELL WAIVES (a) PRESENTMENT, DEMAND AND PROTEST, NOTICE OF PROTEST, NOTICE OF PRESENTMENT, DEFAULT, NON-PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY BAXTER ON WHICH OMNICELL MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER BAXTER MAY DO IN THIS REGARD; (b) ALL RIGHTS TO NOTICE AND A HEARING PRIOR TO

28.


BAXTER'S TAKING POSSESSION OR CONTROL OF, OR TO BAXTER'S REPLEVY, ATTACHMENT OR LEVY UPON THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING BAXTER TO EXERCISE ANY OF BAXTER'S REMEDIES; AND (c) THE BENEFIT OF ALL VALUATION, APPRAISEMENT, EXTENSION AND EXEMPTION LAWS.

9.13 GOVERNING LAW. THIS AGREEMENT HAS BEEN DELIVERED FOR ACCEPTANCE BY BAXTER IN CHICAGO, ILLINOIS AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ILLINOIS. OMNICELL HEREBY (a) IRREVOCABLY SUBMITS, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS, OVER ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS AGREEMENT; (b) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT OMNICELL MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT; (c) AGREES THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW; AND (d) TO THE EXTENT PERMITTED BY APPLICABLE LAW, AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST BAXTER OR ANY OF BAXTER'S DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT OTHER THAN ONE LOCATED IN COOK COUNTY, ILLINOIS. NOTHING IN THIS SECTION SHALL AFFECT OR IMPAIR BAXTER'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR BAXTER'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST OMNICELL OR OMNICELL'S PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.

9.14 REPRESENTATION BY COUNSEL. OmniCell hereby represents that it has been represented by competent counsel of its choice in the negotiation and execution of this Agreement and the Other Agreements; that it has read and fully understood the terms hereof, OmniCell and its counsel have been afforded an opportunity to review, negotiate and modify, the terms of this Agreement, and that it intends to be bound hereby. In accordance with the foregoing, the general rule of construction to the effect that any ambiguities in a contract are to be resolved against the party drafting the contract shall not be employed in the construction and interpretation of this Agreement.

9.15 WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY LAW, OMNICELL AND BAXTER EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER PARTY IN CONNECTION HEREWITH. OMNICELL HEREBY

29.


EXPRESSLY ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR BAXTER TO MAKE THE LOAN.

9.16 INTERCREDITOR AGREEMENT. Baxter hereby agrees that it shall act reasonably and cooperate with OmniCell and the Person who proposes to extend Permitted Senior Debt to negotiate and enter into an intercreditor agreement on terms reasonably satisfactory to Baxter and such Person.

* * * * * * * *

30.


IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year specified at the beginning hereof.

OMNICELL TECHNOLOGIES INC.

By:

Name:


Title:

BAXTER HEALTHCARE CORPORATION

By:      /s/ John F. Gaither, Jr.
   ------------------------------------
Name:    John F. Gaither, Jr.
Title:   Vice President

31.


OMNICELL TECHNOLOGIES INC. PROMISSORY NOTE

$17,386,000 Dated: January 29, 1999 Chicago, Illinois

FOR VALUE RECEIVED, OMNICELL TECHNOLOGIES INC., a California corporation ("BORROWER"), hereby promises to pay to the order of BAXTER HEALTHCARE CORPORATION, a Delaware corporation ("PAYEE"), the principal sum of SEVENTEEN MILLION, THREE-HUNDRED EIGHTY-SIX THOUSAND DOLLARS ($17,386,000) in installments on the dates set forth below, together with interest on the unpaid principal balance hereof at the rates set forth below.

This Note is the "Note" referred to in and was executed and delivered pursuant to that certain Loan and Security Agreement dated as of January 29, 1999 (as amended from time to time, the "LOAN AGREEMENT") between the Borrower and the Payee, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby is made and is to be repaid. The Loan Agreement, among other things, contains certain provisions for acceleration of the maturity hereof, the prepayment of the principal balance hereof, and for changes in the interest rates hereof upon the terms and conditions specified therein. Capitalized terms used herein and otherwise undefined shall have the meanings given them in the Loan Agreement.

The Borrower shall the amount hereof in twelve (12) quarterly installments. Each repay principal installment shall be in an amount equal to $___________ and shall be payable on the last day of each March, June, September and December, commencing on March 31, 2001 and ending on December 31, 2003.

All amounts evidenced hereby shall bear interest at a rate of eight percent (8.00%) per annum from the date hereof through and including January 31, 2001, and thereafter at a rate of thirteen percent (13.00%) per annum; PROVIDED, HOWEVER, if any amounts evidenced hereby are not paid when due (whether by acceleration or otherwise), or after the occurrence of an Event of Default, then all amounts evidenced hereby shall bear interest at the Default Rate applicable thereto until so paid. Interest shall be calculated on the basis of a year of 360 days and actual days elapsed. Interest shall be payable quarterly in arrears on the last day of each March, June, September and December, commencing on March 31, 1999.

All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds as set forth in Section 2.9 of the Loan Agreement. Until notified in writing of the transfer or assignment of this Note in accordance with the terms of the Loan Agreement, Borrower shall be entitled to deem Payee or any subsequent assignee of this Note as the owners and holder of this Note. Payee and any subsequent assignee of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; PROVIDED HOWEVER, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect

32.


the obligations of Borrower hereunder with respect to payments of principal or interest on this Note.

Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note.

THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

This Note is assignable by the Payee as provided in Section 9.5 of the Loan Agreement.

Borrower promises to pay all reasonable costs and expenses, including reasonable attorneys' fees, incurred in the collection and enforcement of this Note. Borrower and any endorser of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder.

The payment of this Note is secured as described in the Loan Agreement.

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above.

OMNICELL TECHNOLOGIES INC.

By:

Title:

33.


LICENSE AGREEMENT

This LICENSE AGREEMENT is made as of ________________, 19__, between OmniCell Technologies Inc., a California corporation ("OmniCell") and Baxter Healthcare Corporation, a Delaware corporation ("Baxter").

WHEREAS, the parties have entered into that certain Loan and Security Agreement dated ___________, 1998 (the "Loan Agreement") and certain other related documents (collectively, the "Loan Documents");

WHEREAS, OmniCell is the sole and exclusive owner or licensee of the OmniCell Intellectual Property Rights, as defined in the Loan Agreement; and

WHEREAS, Baxter desires to obtain from OmniCell, and OmniCell desires to grant to Baxter, a right and license to use the OmniCell Intellectual Property Rights as contemplated by the Loan Documents.

NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions contained herein and in the Loan Agreement, and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1. LICENSE GRANT.

OmniCell hereby grants to Baxter, for the Term of this Agreement, an irrevocable (except as terminated in accordance with Section 2), non-exclusive, and fully paid-up right and license or sublicense to use the OmniCell Intellectual Property Rights, including all associated good will, solely for the purpose of perfecting Baxter's ability to exercise its rights and remedies under the Loan Documents, including, without limitation, Baxter's right to take possession of, hold, preserve, process, assemble, prepare for sale, market for sale, sell or otherwise dispose of Inventory (as defined in the Loan Agreement). The foregoing right and license shall include access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof.

2. TERM AND TERMINATION.

2.1 TERM AND TERMINATION. The term of this Agreement shall commence upon the mutual execution of this Agreement and shall continue thereafter until the earlier of: (i) payment in full of the Loan (as defined in the Loan Agreement), including all accrued and unpaid interest or other amounts due and owing in respect of the Loan; or (ii) Baxter's final disposition of the Inventory acquired by Baxter pursuant to the Loan Agreement in the event of OmniCell's default thereunder.

2.2 RIGHTS AND DUTIES UPON TERMINATION. Upon termination of this Agreement for any reason: (i) the license granted in Paragraph 2 herein shall immediately cease and all rights granted to Baxter hereunder shall forthwith revert to OmniCell; and (ii) Baxter

1.


shall immediately cease and refrain from further use of the OmniCell Intellectual Property Rights or any further reference to it, either directly or indirectly.

3. QUALITY CONTROL. Baxter acknowledges the high standards of quality and excellence established by OmniCell with respect to the OmniCell Intellectual Property Rights. Baxter agrees that its use of the OmniCell Intellectual Property Rights in connection with Inventory shall be of such quality, style and appearance so as to maintain such high standards and to reflect well upon OmniCell.

4. OMNICELL'S RIGHTS.

4.1 OWNERSHIP RIGHTS. It is acknowledged and agreed that, as between the parties, OmniCell is the sole and exclusive owner of all right, title and interest in and to, or has the right to use, the OmniCell Intellectual Property Rights. Nothing contained herein shall create, nor shall be construed as an assignment of, any right, title or interest in or to the OmniCell Intellectual Property Rights to Baxter, other than the grant in Paragraph 2 herein; it being acknowledged and agreed that all other right, title and interest in and to the OmniCell Intellectual Property Rights is expressly reserved by OmniCell. Baxter agrees that it will not attack or otherwise challenge the title, validity or any other rights of OmniCell in and to the OmniCell Intellectual Property Rights.

4.2 GOOD WILL. Baxter recognizes the value of the good will associated with the OmniCell Intellectual Property Rights. Baxter agrees that its use of the OmniCell Intellectual Property Rights and any good will arising therefor, shall inure to the benefit of OmniCell.

5. REPRESENTATIONS AND WARRANTIES.

5.1 BY OMNICELL. OmniCell represents and warrants that OmniCell:

(a) is the owner or valid licensee of the OmniCell Intellectual Property Rights; and

(b) has the unencumbered right and authority to execute and perform this Agreement and to grant the rights set forth herein.

5.2 BY BAXTER. Baxter represents and warrants that Baxter has the unencumbered right and authority to execute and perform this Agreement;

6. MISCELLANEOUS.

6.1 ASSIGNABILITY AND SUB-LICENSING. The license granted hereunder is personal to each of the parties and none of the rights granted hereunder may be assigned, sold, or otherwise transferred by either party or by any operation of law without the prior written consent of the other party. Subject to the provisions of Paragraph 2 herein, Baxter shall have no right to grant any sublicenses to any entity without OmniCell's prior express written approval. Any attempt to assign or transfer any of the rights, duties or obligations under this Agreement in contravention of this Paragraph is void.

2.


6.2 NOTICES. [TO BE CONFORMED TO FINAL LOAN AGREEMENT.]

6.3 NON-WAIVER. [TO BE CONFORMED TO FINAL LOAN AGREEMENT.

SECTION 9.8(d)]

6.4 SEVERABILITY. [TO BE CONFORMED TO FINAL LOAN AGREEMENT.]

6.5 GOVERNING LAW. [TO BE CONFORMED TO FINAL LOAN AGREEMENT.]

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers, effective as of the date first above written.

OMNICELL TECHNOLOGIES INC.               BAXTER HEALTHCARE CORPORATION
By:                                      By:
   -------------------------------          -----------------------------------
Title:                                   Title:
      ----------------------------             --------------------------------
Date:                                    Date:
     -----------------------------            ---------------------------------

3.


EXHIBIT C

ASSUMPTION AGREEMENT

Assumption Agreement dated as of _______________, 1999 ("Assumption Agreement") by and between Baxter Healthcare Corporation, a Delaware corporation ("Seller") and OmniCell Technologies Inc., a California corporation ("Buyer").

WHEREAS, pursuant to the Asset Purchase Agreement dated as of December 18, 1998 (the "Purchase Agreement") by and between Seller and Buyer, Seller is selling to Buyer certain assets defined in the Purchase Agreement as the Purchased Assets; and

WHEREAS, in partial consideration for such sale, the Purchase Agreement requires Buyer to assume and agree to discharge certain obligations and liabilities of Seller;

NOW, THEREFORE, pursuant to the Purchase Agreement and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer does hereby assume and undertake and agree to discharge in accordance with the terms of the Purchase Agreement each of the Assumed Liabilities (as such term is defined in the Purchase Agreement).

Notwithstanding anything to the contrary contained herein: (a) the Buyer is not assuming any liabilities other than the Assumed Liabilities;
(b) nothing contained in this Assumption Agreement is intended to provide any rights to the Seller (beyond those rights expressly provided to the Seller in the Purchase Agreement); and (c) nothing contained in this Assumption Agreement is intended to impose any obligations or liabilities on the Buyer (beyond those obligations or liabilities expressly imposed upon the Buyer in the Purchase Agreement) and nothing contained in this Assumption Agreement is intended to limit any of the rights or remedies available to the Buyer under the Purchase Agreement.

This Assumption Agreement shall be binding upon the successors and assigns of Buyer and shall inure to the benefit of the successors and assigns of Seller.

1.


IN WITNESS WHEREOF, Seller and Buyer have caused this Assumption Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

BAXTER HEALTHCARE CORPORATION

By:

Name:


Title:

OMNICELL TECHNOLOGIES INC.

By:

Name:


Title:

2.


EXHIBIT D

LEGAL OPINION OF SELLER'S COUNSEL
[Opinion of Seller's General Counsel]

OmniCell Technologies Inc.
1101 East Meadow Drive
Palo Alto, California 94303

Ladies and Gentlemen:

I refer to the Asset Purchase Agreement dated as of December 18, 1998 (the "Agreement") between OmniCell Technologies Inc., a California corporation ("Buyer"), and Baxter Healthcare Corporation, a Delaware corporation ("Seller"). I have acted as general counsel to Seller in connection with the Agreement and the transactions contemplated thereby.

Pursuant to the requirement of Section 6.5 of the Agreement, this will advise you that in the opinion of the undersigned:

1. Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, is in good standing and qualified to do business under the laws of the State of Illinois and has full corporate power and authority to own or lease, as the case may be, and to operate and use its properties and assets and to carry on its business as now conducted.

2. Seller has full corporate power and authority to execute, deliver and perform its obligations under the Agreement and the Service and Installation Agreement and the Transition Services Agreement delivered on this date by Seller to you pursuant to the Agreement (the "Ancillary Documents"). The execution, delivery and performance by Seller of the Agreement have been duly authorized by all necessary action on the part of Seller, its stockholders and its Board of Directors. The Agreement and the Ancillary Documents have been duly executed and delivered by Seller.

3. Except as disclosed in the Agreement, the execution and delivery of the Agreement and the Ancillary Documents by Seller do not, and the consummation of the transactions contemplated thereby by Seller will not, (a) require the consent, approval or authorization of, or declaration, filing or registration with, any governmental or regulatory authority or any third party, except where the failure to obtain any such consent or approval would not have a material adverse effect, (b) to my knowledge, result in the breach of any term or provision of, or constitute a default under, or result in the acceleration of or entitle any party to accelerate (whether after the giving of notice or the lapse of time or both) any obligation under, or result in the creation or imposition of any lien, charge, pledge, security interest or other encumbrance upon any part of the property of Seller pursuant to any provision of any order, judgment, arbitration award, injunction, or decree or material indenture, mortgage, lease, license, lien, or other material agreement or instrument to which Seller is a party or by which it is bound, or (c) violate or conflict with any provision of the by-laws or certificate of incorporation of Seller as amended to the date of the Agreement.

1.


4. Except as set forth in the Seller Disclosure Schedule and except for any consents which may need to be obtained in connection with the assignment of the Assigned Contracts to Buyer and other consents and approvals contemplated by the Agreement (including obtaining clearance under the Harts-Scott-Rodino Antitrust Improvements Act of 1976 and the rules promulgated thereunder), no authorization, consent or approval of any government, governmental agency or court or any other Person is required to be made or obtained in order for the parties to the Agreement to consummate the transactions contemplated hereby, except where the failure to obtain any such consent or approval would not have a Material Adverse Effect.

5. Except as set forth in the Seller Disclosure Schedule, to the best of my knowledge, (i) there is no action, proceeding or investigation pending before any court or administrative agency and there is no action, proceeding or investigation overtly threatened by any Person which challenges the execution and delivery of the Agreement or the Ancillary Documents or the performance of any of the transactions contemplated thereby and (ii) Seller is not, in connection with the Business, (a) subject to any unsatisfied judgment, order, decree, stipulation, injunction, or charge or (b) a party or threatened to be made a party to, any charge, complaint, action, suit, proceeding, hearing or investigation.

For the purposes of this opinion letter, I have examined originals, or copies of originals certified to my satisfaction, of such agreements, documents, certificates and other statements of governmental officials and other instruments, have examined such questions of law and have satisfied myself as to such matters of fact as I have deemed relevant and necessary as a basis for this opinion letter. I have assumed the authenticity of all documents submitted to me as originals, the genuineness of all signatures (other than persons signing on behalf of Seller), the legal capacity of all natural persons and the conformity with the original documents of any copies thereof submitted to me for my examination. I have assumed that the Agreement and the Ancillary Documents are the legal, valid and binding obligations of each party thereto (other than Seller), enforceable against such party in accordance with their respective terms.

Except as expressly stated in this letter, I have not conducted any investigation or performed any other examination or review with respect to any such opinion or statement. Furthermore, I assume no obligation to update or supplement this letter to reflect any facts or circumstances which may hereafter come to my attention with respect to the opinions and statements expressed above, including any changes in applicable law which may hereafter occur.

This opinion letter is limited to the General Corporation Law of the State of Delaware, the federal laws of the United States of America and the laws of the State of Illinois.

This opinion letter is being delivered solely for the benefit of the persons to whom it is addressed; accordingly, it may not be quoted, filed with any governmental authority or other regulatory agency or otherwise circulated or utilized for any other purpose without my prior written consent.

Very truly yours,

2.


[Opinion of Seller's special counsel Sidley & Austin]

OmniCell Technologies Inc.
1101 East Meadow Drive
Palo Alto, California 94303

Ladies and Gentlemen:

We refer to the Asset Purchase Agreement dated as of December 18, 1998 (the "Agreement") between OmniCell Technologies Inc., a California corporation ("Buyer"), and Baxter Healthcare Corporation, a Delaware corporation ("Seller"). We have acted as special counsel to Seller in connection with the Agreement and the transactions contemplated thereby.

Pursuant to the requirement of Section 6.5 of the Agreement, this will advise you that in the opinion of the undersigned:

1. Assuming the due authorization, execution and delivery by Buyer of the Agreement and the Ancillary Documents to which Buyer is a party, the Agreement and the Ancillary Documents constitute the legal, valid and binding agreements of Seller enforceable against Seller in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and by the effect of general principles of equity, regardless of whether enforcement is considered in a proceeding in equity or at law. We express no opinion on the enforceability of
Section 10.5 of the Agreement.

For the purposes of this opinion letter, we have relied, as to various questions of fact material to the foregoing, upon the representations made by Seller in the Agreement and upon certificates of officers of Seller. We also have examined originals, or copies of originals certified to our satisfaction, of such agreements, documents, certificates and other statements of governmental officials and other instruments, have examined such questions of law and have satisfied ourselves as to such matters of fact as we deemed relevant and necessary as a basis for this opinion letter. We have assumed the authenticity of all documents submitted to us as originals, the genuineness of all signatures, the legal capacity of all natural persons and the conformity with the original documents of any copies thereof submitted to us for our examination. We have relied exclusively, with your consent, upon the opinion letter of Thomas Sabatino, General Counsel of Seller, subject to the assumptions, exceptions, qualifications and limitations therein expressed, delivered pursuant to Section 6.5 of the Purchase Agreement insofar as the subject matter of such opinion letter bears upon the opinion expressed herein.

Any opinion or statement herein which is expressed to be "to our knowledge" or is otherwise qualified by words of like import means that the attorneys currently practicing law with this Firm who have had an active involvement in negotiating the Agreement and the Ancillary Documents have no current conscious awareness of any facts or information contrary to such opinion or statement. Except as expressly stated in this letter, we have not conducted any

3.


investigation or performed any other examination or review with respect to any such opinion or statement.

We assume no obligation to update or supplement this letter to reflect any facts or circumstances which may hereafter come to our attention with respect to the opinions and statements expressed above, including any changes in applicable law which may hereafter occur.

This opinion letter is limited to the General Corporation Law of the State of Delaware, the federal laws of the United States of America and the laws of the State of Illinois.

This opinion letter is being delivered solely for the benefit of the persons to whom it is addressed; accordingly, it may not be quoted, filed with any governmental authority or other regulatory agency or otherwise circulated or utilized for any other purpose without our prior written consent.

Very truly yours,

4.


EXHIBIT E

LEGAL OPINION OF BUYER'S COUNSEL

[Cooley Godward LLP Letterhead]

January ___, 1999

Baxter Healthcare Corporation
One Baxter Parkway
Deerfield, IL 60015

Ladies and Gentlemen:

We have acted as counsel for OmniCell Technologies, Inc., a California corporation (the "Company"), in connection with the purchase by the Company of substantially all of the assets relating to the SureMed System of Baxter Healthcare Corporation, a Delaware corporation ("Baxter"), pursuant to an Asset Purchase Agreement dated as of December 18, 1998 (the "Agreement") among Baxter and the Company. We are rendering this opinion pursuant to Section 7.7 of the Agreement. Except as otherwise defined herein, capitalized terms used but not defined herein have the respective meanings given to them in the Agreement.

In connection with this opinion, we have examined and relied upon the representations and warranties as to factual matters contained in and made pursuant to the Agreement by the various parties, the Assumption Agreement, the Transition Services Agreement, the Service and Installation Agreement, the Loan Agreement and the Purchase Note (collectively, the "Ancillary Documents"), and originals or copies certified to our satisfaction, of such records, documents, certificates, opinions, memoranda and other instruments as in our judgment are necessary or appropriate to enable us to render the opinion expressed below. Where we render an opinion "to the best of our knowledge" or concerning an item "known to us" or our opinion otherwise refers to our knowledge, it is based solely upon (i) an inquiry of attorneys within this firm who perform legal services for the Company, (ii) receipt of a certificate executed by an officer of the Company covering such matters, and (iii) such other investigation, if any, that we specifically set forth herein.

In rendering this opinion, we have assumed: the genuineness and authenticity of all signatures on original documents; the authenticity of all documents submitted to us as originals; the conformity to originals of all documents submitted to us as copies; the accuracy, completeness and authenticity of certificates of public officials; and the due authorization, execution and delivery of all documents (except the due authorization, execution and delivery by the Company of the Agreement and the Ancillary Documents), where authorization, execution and delivery are prerequisites to the effectiveness of such documents. We have also assumed: that all individuals executing and delivering documents had the legal capacity to so execute and deliver; that you have received all documents you were to receive under the Agreement; that the Agreement is an obligation binding upon you; and that there are no extrinsic agreements or understandings among the parties to the Agreement that would modify or interpret the terms of the Agreement or the respective rights or obligations of the parties thereunder.

1.


Our opinion is expressed only with respect to the federal laws of the United States of America and the laws of the State of California. We note that the parties to the Agreement have designated the laws of the State of Illinois as the laws governing the Agreement. Our opinion in paragraph 3 below as to the validity, binding effect and enforceability of the Agreement is premised upon the result that would obtain if a California court were to apply the internal laws of the State of California (notwithstanding the designation of the laws of the State of Illinois) to the interpretation and enforcement of the Agreement. We express no opinion as to whether the laws of any particular jurisdiction apply, and no opinion to the extent that the laws of any jurisdiction other than those identified above are applicable to the subject matter hereof. With respect to our opinion in paragraph 3, we advise you that, under Section 23304.1 of the California Revenue and Taxation Code (the "Code") the Agreement and Ancillary Documents are voidable at the option of the Company if you have failed to file a tax return under the Code or failed to pay any other amount owing to the California Franchise Tax Board under the Code or to file any statement or return under the Code, except to the extent that you have complied with Section 23305.1 of the Code. With respect to our opinion in paragraph 4 regarding Material Contracts, we have relied solely on a certificate from an officer of the Company that the agreements and other documents listed on Schedule A attached hereto comprise all of the Material Contracts and our review of those Material Contracts.

On the basis of the foregoing, in reliance thereon and with the foregoing qualifications, we are of the opinion that:

1. The Company has been duly incorporated and is a validly existing corporation in good standing under the laws of the State of California.

2. The Company has the requisite corporate power and authority to own or lease, as the case may be, and to operate and use its properties and assets and to conduct its business as it is currently being conducted.

3. The Company has the requisite corporate power and authority to execute, deliver and perform its obligations under the Agreement and the Ancillary Documents and the Agreement and the Ancillary Documents have been duly and validly authorized, executed and delivered by the Company and constitute valid and binding agreements of the Company enforceable against the Company in accordance with their terms, except as rights to indemnity under Section 11.4 of the Agreement with respect to liabilities resulting from negligent or intentional acts of the Indemnitee may be limited by applicable laws and except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws affecting creditors' rights, and subject to general equity principles and to limitations on availability of equitable relief, including specific performance.

4. The execution and delivery of the Agreement and the Ancillary Documents by the Company do not, and the consummation of the transactions contemplated thereby will not, (a) violate any provision of the Company's Articles of Incorporation or Bylaws, (b) to our knowledge, conflict with, result in a breach of, constitute a default under (with or without notice or lapse of time, or both), result in the acceleration of, create in any party the right to terminate, modify or cancel, or require any notice or consent under (i) any

2.


contract, agreement, lease, sublease, license, sublicense, franchise, permit, or other arrangement to which the Company is a party or by which any of its property or assets are subject and which is material to the Company's business or (ii) any indenture, agreement for borrowed money, instrument of indebtedness or Security Interest ((i) and (ii) collectively, the "Material Contracts"), except as to which consent or waivers have been obtained or notices given prior to the date hereof, and (c) violate or contravene any governmental statute, rule or regulation applicable to the Company.

This opinion is intended solely for your benefit and is not to be made available to or be relied upon by any other person, firm, or entity without our prior written consent.

Very truly yours,

Cooley Godward LLP

By:

Robert J. Brigham

RJB:trr

3.


EXHIBIT F

TRANSITION SERVICES AGREEMENT

TRANSITION SERVICES AGREEMENT, dated as of January 29, 1999 (this "Agreement"), by and between Baxter Healthcare Corporation, a Delaware corporation, ("Baxter"), and OmniCell Technologies Inc., a California corporation, (the "Purchaser").

WHEREAS, Baxter and the Purchaser have entered into an Asset Purchase Agreement, dated as of December 18, 1998, as amended January 25, 1999 (the "Purchase Agreement"; all capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Purchase Agreement), pursuant to which Baxter agreed to sell and the Purchaser agreed to purchase certain assets of Baxter relating to the Business (as defined in the Purchase Agreement), all as more particularly set forth in the Purchase Agreement;

WHEREAS, it is contemplated under the Purchase Agreement that following the Closing Date, Baxter will provide, or will cause to be provided, to the Purchaser, certain services set forth on Schedule A attached hereto which are currently provided by Baxter in connection with the operation of the Business; and

WHEREAS, Baxter is willing to provide, or cause to be provided, such services to the Purchaser, upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants set forth herein and in the Purchase Agreement, Baxter and the Purchaser hereby agree as follows:

1. PROVISION OF SERVICES; REIMBURSEMENT OF EXPENSES. (a) Baxter agrees to provide, or cause to be provided, to the Purchaser the services set forth on Schedule A hereto (the "Services"), for the period of time following the Closing set forth on Schedule A hereto with respect to each such Service (the "Term").

(B) Baxter shall cause the Services to be provided pursuant to this Agreement in a manner generally consistent with the manner and level of care with which such services were previously provided by Baxter in connection with the operation of the Business. Baxter shall use all reasonable efforts to assist the Purchaser in the transfer of responsibility for Services to the Purchaser.

(C) The Purchaser, shall promptly upon written request, pay to Baxter the fees for the Services set forth in Schedule A. Any payments pursuant to this Agreement shall be made in U.S. Dollars within thirty business days after the date of receipt by the Purchaser of Baxter's invoice. Baxter reserves the right to suspend performance under this Agreement upon failure of the Purchaser to make any payment pursuant to this Agreement when due except to the extent that such payment is being disposed of in good faith. Any payment required to be made under this Agreement that is not paid when due shall bear interest at an interest rate equal to the London Interbank Offered Rate for three-month Eurodollar deposits plus 5%.

(D) The Purchaser agrees to indemnify Baxter and its officers, directors, shareholders, employees, agents or other representatives, successors assigns and for and hold them harmless from any and all liabilities, losses, damages, costs and expenses (including


attorney's fees) incurred by them arising out of the provision by or on behalf of Baxter of the Services (except for any such liabilities, losses, damages, costs and expenses arising out of their gross negligence or willful misconduct in the performance of the Services).

2. FORCE MAJEURE. The obligations of Baxter to perform Services shall be suspended during the period and to the extent that Baxter or any of its Affiliates is prevented or hindered from complying therewith by any Requirements of Law or Court Order or by any cause beyond its control, including, without limitation, acts of God, strikes, lock outs and other labor and industrial disputes and disturbances, civil disturbances, accidents, acts of war or conditions arising out of or attributable to war (whether declared or undeclared), shortage of necessary equipment, materials or labor, or restrictions thereon or limitations upon the use thereof, and delays in transportation. In such event, Baxter shall give notice of suspension as soon as reasonably practicable to the Purchaser stating the date and extent of such suspension and the cause thereof, and Baxter shall resume the performance of such obligations as soon as reasonably practicable after the removal of the cause.

3. CONFIDENTIALITY. During the term of this Agreement and for one (1) year following termination each of Baxter and the Purchaser agrees to keep confidential the information which is disclosed to it by the other party hereto. The confidentiality obligations of this Agreement shall not apply to information which: (a) at the time of disclosure is reasonably available to the public; (b) becomes reasonably available to the public through no fault of the party required to keep information confidential; (c) is possessed by the party required to keep information confidential, as evidenced by written or other tangible evidence, prior to receipt of the information from the party providing information; or (d) becomes known to the party required to keep information confidential from a third party who has no obligation of confidentiality to the party providing information.

4. LIMITATION ON LIABILITY, ETC. Baxter shall not have any duties or responsibilities hereunder other than those specifically set forth herein and no implied obligations shall be read into this Agreement. Neither Baxter nor any of its Affiliates nor any of their respective officers, directors, shareholders, employees, agents or other representatives, successors or assigns shall be liable for any action taken or omitted to be taken by Baxter under or in connection with this Agreement, except for losses incurred by the Purchaser arising out of the gross negligence or willful misconduct of Baxter in the performance of the Services.

5. NOTICES. All notices, requests, demands, claims and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by courier service, by telecopy or by registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

(A) if to Baxter:

Baxter Healthcare Corporation 1 Baxter Parkway Deerfield, Illinois 60015-4633 Attention: General Counsel


Telecopy: 847-948-2450

with copy to:

Sidley & Austin One First National Plaza Chicago, Illinois 60603 Attention: John M. O'Hare, Esq.

Telecopy: 312-853-7036

(B) if to the Purchaser:

OmniCell Technologies Inc. 1101 E. Meadow Dr.

Palo Alto, California 94303
Attention: Chief Financial Officer
Telecopy: 650-843-6277

with a copy to:

Cooley Godward LLP
Five Palo Alto Square
Palo Alto, California 94306-2155
Attention: Robert J. Brigham, Esq.
Telecopy: 650-857-0663

6. HEADINGS. The headings contained in this Agreement are for reference purposes and shall not affect in any way the meaning of interpretation of this Agreement.

7. SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

8. ENTIRE AGREEMENT. This Agreement and the Purchase Agreement constitute the entire agreement of the parties hereto with respect to the subject matter hereof and supersede all prior agreements and undertakings, both written and oral, with respect to the subject matter hereof.

9. ASSIGNMENT. This Agreement shall not be assigned without the express written consent of Baxter and the Purchaser (which consent may be granted or withheld in the sole discretion of Baxter and the Purchaser).


10. AMENDMENT. This Agreement may not be amended or modified except by an instrument in writing signed by Baxter and the Purchaser.

11. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement shall be construed and governed in accordance with the internal laws (and not the law of conflicts) of the State of Illinois. Baxter and Purchaser hereby consent to service of process and to the jurisdiction of any appropriate Federal or State court located in Cook or Lake Counties, Illinois in any action to enforce the provisions of this Agreement, and hereby waive any objections they may have as to proper venue or forum non conveniens or similar claims with respect to the jurisdiction and venue of such courts.

12. COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.


IN WITNESS WHEREOF, Baxter and the Purchaser have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

BAXTER HEALTHCARE CORPORATION

By:      /s/ John F. Gaither, Jr.
   -------------------------------
         John F. Gaither, Jr.
         Vice President

OMNICELL TECHNOLOGIES INC.

By:      /s/ Earl E. Fry
   -------------------------------
         Name:    Earl E. Fry
         Title:   VP & CFO


SCHEDULE A

SERVICES

DESCRIPTION OF SERVICES

1. Facilities and facilities management
2. Telephones and telephone services (excluding 800 and long distance service)
3. Computer
4. LAN access
5. Internet access
6. Postal service (excluding federal express and courier services)
7. Cafeteria access
8. Facsimile
9. Office supplies (excluding supplies exceeding $500 per item)
10. Copy machines and service
11. 800 telephone service
12. Long distance telephone service
13. Federal express and other courier services
14. Office supplies exceeding $500 per item
15. Batch/large volume copy services

In addition, Baxter will provide Purchaser such other corporate support services as may be requested by Purchaser (at Baxter's internally allocated costs), provided that Baxter is able and willing to perform such services at the time of the applicable request.

COSTS

Baxter shall be reimbursed for all of the above-referenced Services in accordance with the following:

1. With respect to the Services described in numbers 1 through 10 above, Baxter shall be reimbursed by Purchaser $32,500 per month, plus (if and to the extent there are more than 50 Transferred Employees) an amount equal to $650 per each Transferred Employee (over 50 Transferred Employees) per month.

2. With respect to Services described in numbers 11 through 15 above, Baxter shall be reimbursed by Purchaser Baxter's out-of-pocket expenses associated with providing such Services.

TERM

This Agreement shall commence on the date hereof and shall remain in full force and effect for a period of 90 days. This Agreement may be extended by Purchaser for up to 3 additional consecutive 30 day periods upon 30 days prior written notice to Baxter.


EXHIBIT G

SERVICE AND INSTALLATION AGREEMENT

THIS SERVICE AND INSTALLATION AGREEMENT (this "Agreement"), made and entered into as of January 29, 1999, is by and between Baxter Healthcare Corporation, a Delaware corporation ("Baxter"), and OmniCell Technologies Inc., a California corporation ("OmniCell").

WHEREAS, concurrently with the execution of this Agreement, Baxter and OmniCell have entered into an Asset Purchase Agreement, dated as of December 18, 1998, as amended on January 25, 1999 (the "Purchase Agreement"), pursuant to which Baxter agreed to sell to OmniCell and OmniCell agreed to purchase from Baxter certain of the assets of Baxter associated with the Business, together with certain liabilities related thereto, all as more particularly set forth in the Purchase Agreement; all capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Purchase Agreement; and

WHEREAS, pursuant to the terms of the Purchase Agreement, Baxter has agreed to retain, among other things, (a) the leases between Baxter, or an Affiliate (as hereinafter defined) of Baxter, and a customer of the Business covering one or more products of the Business (the "Product Leases") and (b) all amounts billable or collectible under customer Contracts with respect to Products (as hereinafter defined) shipped but not invoiced as of the Closing Date (the "Shipped but Unbilled Accounts"); and

WHEREAS, as an inducement for Baxter to enter into the Purchase Agreement, OmniCell has agreed to enter into this Agreement to provide, or cause to be provided, certain services set forth on Exhibit A attached hereto with respect to the Product Leases and the Shipped but Unbilled Accounts, all on the terms and subject to the conditions contained herein;

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Baxter and OmniCell hereby agree as follows:

ARTICLE I

ENGAGEMENT

SECTION 1.1 GENERAL. OmniCell agrees to Service (as defined in
SECTION 3.1) the products, equipment, apparatus and instruments subject to the Product Leases or the Shipped but Unbilled Accounts ("Products") and all accessories for all Products, and Baxter agrees to retain OmniCell to Provide Service, or cause Service to be provided, with respect to the Products. OmniCell agrees to use commercially reasonable efforts in the performance of its service obligations and agrees to do so with the same degree of care, skill and prudence customarily exercised when engaged in similar activities for itself, its Affiliates and its other customers. In performing its obligations under this Agreement, OmniCell will accord Baxter the same priority under comparable circumstances as it provides itself and its Affiliates. Without limiting the generality of the foregoing, OmniCell will not discriminate against Baxter. Baxter and OmniCell will cooperate in planning the scope and timing of services provided hereunder in order to minimize or eliminate interference with the conduct of OmniCell's business activities.

1.


Notwithstanding any contrary indication herein, if such interference is unavoidable, OmniCell will apportion the available services in a fair and reasonable manner.

SECTION 1.2 "AFFILIATE" DEFINED. As used in this Agreement, the term "Affiliate" means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization or governmental authority which directly or indirectly controls, is controlled by or is under common control with a party. OmniCell agrees that its affiliates will, and that it will cause its affiliates to, observe, perform and refrain from taking action where the nonobservance, failure to perform or action, if by OmniCell, would result in a breach hereunder.

ARTICLE II

TRAINING

SECTION 2.1 OMNICELL TRAINING. OmniCell will be responsible for training its employees and any third party with whom OmniCell subcontracts or otherwise delegates any obligation of performance hereunder on how to service, repair, refurbish and conduct preventive maintenance on all Products, on all other matters and skills needed or appropriate for OmniCell to fulfill its obligations hereunder. OmniCell will maintain, or cause to -be maintained, records of such training sufficient for compliance with applicable laws and governmental regulations.

ARTICLE III

SERVICE TO BE PROVIDED

SECTION 3.1 "SERVICE" DEFINED. As used in this Agreement, the term "Service," when used in connection with the Products, means OmniCell's duty to Baxter to perform such in-warranty and out-of-warranty repair work with respect to the Products requested by a customer as Baxter may have agreed to provide, or cause to be provided, to a customer, such installation work as may be required by the complex nature of the Products, as listed on Exhibit B attached hereto, including but not limited to installing the Products listed in Part 3.18(a) of the Seller Disclosure Schedule by December 31, 1999, such preventive maintenance work as Baxter or any of its affiliates may have agreed to provide, or cause to be provided, to a customer and such refurbishment work as Baxter may request on a Product for its own account.

SECTION 3.2 SERVICE LOCATIONS. OmniCell will provide refurbishment work at a repair depot specified by Baxter. All other work will typically be provided at the site of the Product. In some cases it may be necessary to return a Product to OmniCell for Service.

SECTION 3.3 SERVICE LEVELS. OmniCell will provide Service in accordance with the service levels provided on Exhibit A attached hereto.

SECTION 3.4 BAXTER WARRANTIES TO CUSTOMERS. Baxter has provided the following information concerning such warranties including, without limitation, (a) the name, address and telephone number of each customer with a Product under warranty, showing as to each such customer the identity of each such Product and as to each such warranty the expiration date therefor and (b) a copy of each such warranty identified to each such Product.

2.


SECTION 3.5 BAXTER SERVICE AGREEMENTS WITH CUSTOMERS. Baxter has provided the following information concerning such service agreements including, without limitation, the name, address and telephone number of each customer with a Product for which Baxter or any of its affiliates has agreed to provide, or cause to be provided, out-of-warranty repair or preventive maintenance work, showing as to each such customer the identity of each such Product and a complete description or copy of each such agreement including, without limitation, the term and duration thereof and the nature and scope of the work to be provided; provided, however, that such description and such copy need not show the amount, if any, to be paid by such customer to Baxter for such work.

SECTION 3.6 TERM OF PRODUCT LEASES AND SERVICE AGREEMENTS. Baxter hereby agrees not to extend or renew the term of any of the Product Leases or service agreements covered by this Agreement (or allow for any extension or renewal thereof).

ARTICLE IV

PAYMENT FOR SERVICES

SECTION 4.1 PAYMENT RATES. OmniCell agrees to provide the Services performed hereunder for no charge, it being recognized that OmniCell is undertaking its obligations hereunder in consideration of the transaction contemplated by the Purchase Agreement.

ARTICLE V

MISCELLANEOUS PROVISIONS

SECTION 5.1 RETROFITS. The parties agree that changes, upgrades, retrofits, exchanges, recalls and similar events with respect to any Product are beyond the scope of this Agreement. Nonetheless, OmniCell agrees to advise Baxter, by notice, of each such matter and provide Baxter with full particulars and information with such advice.

SECTION 5.2 PARTS. OmniCell agrees to supply for the benefit of Baxter all parts necessary to ensure the commercially reasonable operation of any Product.

SECTION 5.3 EXHIBITS. Attached and incorporated herein by this reference are Exhibits A & B hereto which specify matters concerning (a) Products, (b) Services including, without limitation, additional services, if any, (c) Service Levels and (d) Utilized Parts.

SECTION 5.4 FAILURE TO PROVIDE SERVICE. In the event that OmniCell fails to provide Service to Baxter in accordance with the terms and conditions contained in this Agreement for any reason (other than an event of Force Majeure as described in Section 7.3 of this Agreement) , OmniCell shall reimburse Baxter the cost of obtaining substitute services from an alternative source, as described below:

(I) Baxter shall take all commercially reasonable steps to obtain services with respect to the Product from an alternative service provider at the lowest price available during any period in which OmniCell is unable to provide Service.

3.


(II) Along with any request for reimbursement by Baxter pursuant to this Section 5.5, Baxter will supply OmniCell with the invoice relating to services obtained pursuant to clause (i) above. OmniCell shall reimburse Baxter for the cost of obtaining alternate services within thirty (30) days of the date of receiving a copy of the invoice for services.

Nothing contained in this Section 5.5 shall preclude Baxter from enforcing its rights under this Agreement in a court of law or equity.

SECTION 5.5 INDEMNIFICATION. Each party agrees to protect, defend, hold harmless and indemnify the other party from and against any and all damages, claims, losses, liabilities ("Losses") , and to reimburse the other party for all expenses (including, without limitation, all fees and expenses of counsel, travel costs and other out-of-pocket costs) to the extent such Losses or expenses result from or are caused by any fault or negligence of the indemnifying party or any breach by such party hereunder.

SECTION 5.6 LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY, THE OTHER PARTY'S CUSTOMERS, OR ANY OTHER ENTITY CLAIMING THROUGH OR UNDER THE OTHER PARTY FOR ANY LOSS OF PROFITS, LOSS OF DATA OR FOR ANY OTHER CONSEQUENTIAL, INCIDENTAL, SPECIAL, PUNITIVE OR INDIRECT DAMAGES INCURRED BY SUCH PARTY (WHETHER IN AN ACTION IN CONTRACT OR TORT OR BASED ON A WARRANTY, OR UNDER ANY OTHER THEORY OF LIABILITY), EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT. The foregoing limitations on liability for damages shall apply notwithstanding any failure of essential purpose of any limited remedy.

SECTION 5.7 BASIS OF BARGAIN. The foregoing limitations on liability and limited remedies set forth in this Agreement, along with the execution of the Purchase Agreement form the essential part of the bargain between the parties, without which OmniCell would not enter into this Agreement.

ARTICLE VI

TERM, TERMINATION, WIND-UP, PRODUCT DELETION

SECTION 6.1 TERM . Except as otherwise provided herein, the term of this Agreement shall commence on the date hereof and, unless sooner terminated as provided herein, shall continue until November 30, 2004.

SECTION 6.2 BREACH. In the event either party materially breaches this Agreement and fails to cure such breach within ninety (90) days after notice thereof, the other party may, at any time within ninety (90) days thereafter, terminate this Agreement upon at least thirty (30) days prior written notice.

SECTION 6.3 INACCURATE REPRESENTATION. Either party may terminate this Agreement at any time upon at least thirty (30) days prior notice to the other party if a representation or warranty of the other party is or becomes materially inaccurate, false or misleading.

4.


SECTION 6.4 INSOLVENCY, ETC.. Either party may terminate this Agreement immediately upon notice to the other party (a) if the other party ceases to do business or otherwise terminates its business operations; (b) if the other party becomes insolvent or seeks protection under any insolvency, bankruptcy, receivership, creditors arrangement or reorganization, composition or comparable proceeding; or (c) if any such proceeding is instituted against the other party and is not dismissed or withdrawn within sixty (60) days.

ARTICLE VII

GENERAL PROVISIONS

SECTION 7.1 EFFECT OF TERMINATION. The termination of this Agreement shall not relieve the parties hereto of any rights or obligations respectively accrued by or vested in them hereunder prior to such termination, or as expressly provided herein.

SECTION 7.2 EXPENSES. The parties have considered the possibility that one or both of them will incur expenses in preparing for performance of this Agreement and that one or both of them will incur expenses and suffer losses as a result of termination, and the parties have nevertheless agreed that neither party shall be liable for any damages by reason of the termination of this Agreement pursuant to its terms.

SECTION 7.3 FORCE MAJEURE. Neither party shall be liable to the other party for failure or delay in the performance of any obligation under this Agreement during the time and to the extent such failure or delay is caused by reason of acts of God or other cause beyond its reasonable control, including but not limited to, acts of government, riots, war, interruption of transportation, strikes or other labor trouble, shortages of labor, fire, storm, flood, earthquake, inability to obtain suitable raw materials, products, parts, components, fuel or power or extraordinary price increases. The performance of obligations hereunder shall be suspended during the existence of such cause, and upon cessation of such cause, shall again be required.

SECTION 7.4 NONWAIVER. The failure of any party hereto to enforce at any time any provision of this Agreement, in case of breach by the other party of any provision of this Agreement, shall not constitute a waiver of any other provision of this Agreement nor of any subsequent breach of the same provision.

SECTION 7.5 ASSIGNMENT. This Agreement shall not be assigned by either of the parties to any third party without the prior written consent of the other party; provided, however, that OmniCell may subcontract or otherwise delegate to any third party any obligation or performance hereunder, in which case OmniCell shall remain primarily responsible hereunder for any such obligation or performance; provided further that Baxter may assign its rights hereunder to any party to which it assigns all or substantially all of the Product Leases.

SECTION 7.6 NOTICES. All notices, requests, demands or other communications hereunder (including notices of all asserted claims or liabilities) to be effective shall be in writing and shall be either delivered personally, sent by messenger service, sent by guaranteed overnight delivery service, charges prepaid, sent by fax (with hard copy to follow) or mailed by U.S. mail, certified or registered, with appropriate first class postage prepaid, to the addresses and/or fax

5.


numbers herein designated or such other address as may be designated in writing by notice given in the manner provided herein. Notices hereunder shall be effective upon (a) personal delivery thereof, if delivered personally or by messenger service, (b) one (1) business day after deposit for delivery by the overnight delivery service, if delivered by overnight delivery service, (c) when receipt is electronically confirmed, if sent by fax, or (d) three (3) business days following deposit in the mail, if sent by mail as aforesaid, whether or not delivery is accepted.

If to the Buyer:                OmniCell Technologies Inc.
                                1101 E. Meadow Drive
                                Palo Alto, California 94303
                                Attn: Chief Financial Officer
                                Facsimile: 650-843-6277

with a copy to:                 Cooley Godward LLP
                                Five Palo Alto Square
                                Palo Alto, California 94306-2155
                                Attn:  Robert J. Brigham, Esq.
                                Facsimile:  650-857-0663

If to Baxter:                   Baxter Healthcare Corporation
                                One Baxter Parkway
                                Deerfield, Illinois 60015-4633
                                Attn: General Counsel
                                Facsimile:  847-948-2450

with a copy to:                 Sidley & Austin
                                One First National Plaza
                                Chicago, IL 60603
                                Attn: John M. O'Hare, Esq.
                                Facsimile: 312-853-7036

SECTION 7.7 ENTIRE AGREEMENT. This Agreement, including the Exhibits hereto, and the Purchase Agreement constitute the entire understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior communications, writings or other documents between the parties hereto, and neither party shall be bound by any condition, definition, warranty or representation otherwise than as expressly provided for in this Agreement or the Purchase Agreement.

SECTION 7.8 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws (as opposed to the conflicts of law provisions) of the State of Illinois.

SECTION 7.9 AMENDMENT. This Agreement shall not be amended, modified or supplemented except by a written instrument signed by an authorized representative of each of the parties hereto.

SECTION 7.10 SEVERABILITY. In the event that one or more provisions contained in this Agreement are unenforceable or are declared invalid for any reason whatsoever, such

6.


unenforceability or invalidity shall not affect the enforceability or the validity of the remaining terms or portions of this Agreement, and each such unenforceable or invalid provision shall be severed from the remainder of this Agreement.

SECTION 7.11 CONSTRUCTION. The parties hereto acknowledge that OmniCell and Baxter and their counsel have reviewed and revised this Agreement, and that the rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any documents executed in connection herewith.

SECTION 7.12 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement.

SECTION 7.13 CONFIDENTIALITY. During the term of this Agreement and for one (1) year following termination OmniCell agrees to keep confidential the information which is disclosed to it by Baxter pursuant to this Agreement and Baxter agrees to keep confidential information contained in reports provided by OmniCell to Baxter pursuant to this Agreement. OmniCell's use of Baxter's confidential information will be solely for the purpose of performing its obligations under this Agreement. The confidentiality obligations of this Agreement shall not apply to information which: (a) at the time of disclosure is reasonably available to the public; (b) becomes reasonably available to the public through no fault of the party required to keep information confidential; (c) is possessed by the party required to keep information confidential, as evidenced by written or other tangible evidence, prior to receipt of the information from the party providing information; or
(d) becomes known to the party required to keep information confidential from a third party who has no obligation of confidentiality to the party providing information. Each of OmniCell and Baxter hereby agrees to keep confidential the terms and conditions of this Agreement.

7.


IN WITNESS WHEREOF, the parties hereto have, by their duly authorized representatives, executed and delivered this Agreement as of the date first above written.

Baxter Healthcare Corporation OmniCell Technologies Inc.

By:      /s/ John F. Gaither, Jr.                  By:
    ------------------------------                     -----------------------
         John F. Gaither, Jr.                      Name:
         Vice President                            Title:

                                      8.


IN WITNESS WHEREOF, the parties hereto have, by their duly authorized representatives, executed and delivered this Agreement as of the date first above written.

Baxter Healthcare Corporation OmniCell Technologies Inc. IV Systems Division

By:                                                  By:      /s/ Earl E. Fry
    ------------------------------                     -----------------------
                                                     Name:    Earl E. Fry
                                                     Title:   VP & CFP

9.


EXHIBIT A

PRODUCTS

The Products are limited to the products, equipment, apparatus and instruments that are subject to the Product Leases and the Shipped but Unbilled Accounts.

TERRITORY

The Territory is the 50 states of the United States and the District of Columbia.

SERVICES

In addition to Product Service, OmniCell will provide a number of services at no additional charge to Baxter. A listing of these services is as follows.

- Call management center for the receiving of service requests and dispatching to Field Service Representatives
- Accumulation of mutually agreed upon failure data
- Generation of service bulletins, where and when appropriate
- Issuance of service repair bulletins within 45 days of issuance by Baxter
- Customer technical assistance hot lines
- Performance of any activities per part 820 of 21 CFR and the IV Systems Quality Manual
- Customer technical training (requested by customer)
- Parts order entry for purchasing customers
- Customer satisfaction surveying in coordination with Baxter, annual review of results and methods
- Marketing liaison
- Monthly listing of all significant component shortages and estimated dates to eliminate back orders
- Maintain inventory management to enhance customer satisfaction
- Maintain inventory segregation and control as required by GMPs
- Management of self-service customers
- Provide access to same level of information as exists prior to date of contract execution
- Provide customers with upgrades for the software and other systems related to the Products consistent with OmniCell's provision of such upgrades to itself, its Affiliates and its other customers pursuant to its obligations under the Purchase Agreement to continue Baxter's program for attaining year 2000 compliance

1.


OmniCell agrees to provide additional special services on an as needed basis for which Baxter agrees to pay a mutually agreed upon fee. Examples of these special services are listed below.

- Installations as requested by Baxter
- Inventory rework, inspection or reprocessing
- Out-of-box failure and PAL analysis/evaluation
- Off-site storage
- Product upgrades, only as requested
- Baxter-requested customer training
- Trade show or product evaluation set-up/take down
- Special projects outside the scope of this agreement

2.


LEVEL OF SERVICE/SERVICE COMMITMENT

PRODUCTIVITY SYSTEMS

Telephone response by the FSR within 2 hours.
On-site by the FSR within 6 hours ("All calls) or 12 hours ("B" calls). Repair completed within 24 hours.

If OmniCell should fail to meet these service commitments, Baxter will be reimbursed according to the following schedule.

------------------------------- ---------------------------- ---------------------------- ----------------------------
      Telephone Response             On-site Response             Repair Completion            Quarterly Penalty
------------------------------- ---------------------------- ---------------------------- ----------------------------
       98.00 - 100.00%                95.00 - 100.00%              95.00 - 100.00%                   $     0
------------------------------- ---------------------------- ---------------------------- ----------------------------
        97.50 - 97.99%                94.50 - 94.99%               94.50 - 94.99%                     $  500
------------------------------- ---------------------------- ---------------------------- ----------------------------
        97.00 - 97.49%                94.00 - 94.49%               94.00 - 94.49%                     $1,000
------------------------------- ---------------------------- ---------------------------- ----------------------------
        96.50 - 96.99%                93.50 - 93.99%               93.50 - 93.99%                     $1,500
------------------------------- ---------------------------- ---------------------------- ----------------------------
        96.00 - 9.49%                 93.00 - 93.49%               93.00 - 93.49%                     $2,000
------------------------------- ---------------------------- ---------------------------- ----------------------------
        95.50 - 95.99%                92.50 - 92.99%               93.50 - 92.99%                     $2,500
------------------------------- ---------------------------- ---------------------------- ----------------------------
    Each additional -0.5%          Each additional -0.5%        Each additional -0.5%                 $  250
------------------------------- ---------------------------- ---------------------------- ----------------------------

PAYMENT FOR SERVICES

None

FREIGHT

Baxter shall be responsible for all transportation costs related to returning a repaired product from an OmniCell repair facility to the customer except in those instances where OmniCell has failed to meet the six (6) calendar day turnaround commitment. In those instances OmniCell will be responsible for return transportation costs.

PRICING

FLAT RATE LABOR CHARGE PER MONTH

Any service calls that are the result of problems generated by the customer's computer network will be billed to Baxter at an hourly rate and parts at cost plus 10%. Parts prices are firm for year 1 of the contract and will be reviewed in November of each year for the upcoming year.

3.


EXHIBIT B

See attached.

1.


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Index Description

PRODUCTIVITY SYSTEMS INSTALLATION PROCEDURE FOR SURE-MED-Registered Trademark-

                                  CURRENT ISSUE
-------------------------------------------------------------------------------
DOCUMENT LIST
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                  N/A
-------------------------------------------------------------------------------
EFFECTIVE DATE
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                             DESCRIPTION OF CHANGE
--------------------------------------- ---------------------------------------
FROM                                    TO
--------------------------------------- ---------------------------------------
                                         NEW DOCUMENT
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                              REASON FOR CHANGE
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New Document.

-------------------------------------------------------------------------------
INITIATOR NO.              FIRST OF CODE           PQA FILE NO.
---------------------------------------------------------------
N/A                        YES                     N/A
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                           APPROVALS ON FILE IN IVS
-------------------------------------------------------------------------------
TECH APPR                  REQ                     IVS
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G. Young                   C. Buhner               T. Werenski
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                              CHANGE HISTORY
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   CHANGE                          INITIATION
   NUMBER        ISSUE DATE          NUMBER                 REASON RO CHANGE
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-------------------------------------------------------------------------------
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1.0 PURPOSE

To establish the process to be followed by Productivity Systems business of the IV Systems Division of Baxter Healthcare, in the installation and implementation of the Sure-Med-Registered Trademark- product.

2.0 SCOPE AND APPLICABILITY

This procedure applies to all employees or consultants contracted by Productivity Systems who are involved in the implementation process of the Sure-Med-Registered Trademark- product. This document is the standard procedure for a new installation of the Sure-Med-Registered Trademark- System, therefore some sections of this document may not apply to an add on of additional Sure-Med-Registered Trademark- equipment to an existing Sure-Med-Registered Trademark- account.

3.0 APPLICABLE DOCUMENTS

3.1 ?????? Sure-Med-Registered Trademark- Pre-Implementation Manual

For Use Only By Affiliates of Baxter Healthcare Corporation
THIS DOCUMENT CONTAINS PROPRIETARY INFORMATION-IT MUST NOT BE REPRODUCED
OR DISCLOSED TO OTHERS WITHOUT PRIOR WRITTEN APPROVAL

THE USER IS RESPONSIBLE FOR CHECKING THE CURRENT ISSUE DATE
BEFORE USING THIS DOCUMENT

SPECFORM/N Rev A


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3.2 ?????? Sure-Med-Registered Trademark- Field Service manual

3.3 PHG-133 Sure-Med-Registered Trademark- PA Process

3.4 07-19-03-525 Sure-Med-Registered Trademark- Version 5.2.1 Install/Upgrade Manual

4.0 ATTACHMENTS

4.1 Sure-Med-Registered Trademark- Account Information Sheet

4.2 Sure-Med-Registered Trademark- System Order/Return Form

4.3 Productivity Systems Training Form

4.4 Sure-Med-Registered Trademark- Security Configuration Form

4.5 Clinical Request Form (CRF)

4.6 FACE Document

4.7 Sure-Med-Registered Trademark- Dispenser Location Grid Form

4.8 Sure-Med-Registered Trademark- Inservice Information Form

4.9 Sure-Med-Registered Trademark- Equipment Checklists:


Unit Dose/Expansion Cabinet Stack
Dispensing Center Cabinet
Supply Center Cabinet
Supply Cabinet
Refrigerated Supply Cabinet
Expansion Cabinet
Pharmacy Workstation (Host)

4.10 Sure-Med-Registered Trademark- Exit Interview Form

4.11 Sure-Med-Registered Trademark- Installation Report

4.12 Sure-Med-Registered Trademark- Account Installation Report

5.0 DEFINITIONS:

5.1 Chicago Trainees: Sure-Med-Registered Trademark- Customers attending off site training session in Chicago.


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5.2 Pre-Implementation: A process that occurs prior to installation of the Sure-Med-Registered Trademark- equipment.

5.3 Consultant: A Productivity Systems business unit employee or consultant contracted by Productivity Systems who leads the implementation and installation process of the Sure-Med-Registered Trademark- product for each account.

5.4 Field Application Engineer (FAE) : A Productivity Systems business unit employee or consultant contracted by Productivity Systems who is responsible for all technical aspects of the installation process for the Sure-Med-Registered Trademark- product.

5.5 Nurse Consultant: A Productivity Systems business unit employee who supports the Consultant during the installation and implementation process as related to nursing, resolves nursing issues, develops nursing procedures, the training of account nursing staff and management of Network nurses.

5.6 Project Leader: A project leader is a account designated employee who has the ultimate responsibility for organizing and overseeing the implementation process and continued eternal maintenance support of the Sure-Med-Registered Trademark- system.

5.7 Information systems (IS) : A department within the account that is responsible for the accounts computer system(s).

5.8 Field Interface Engineer (FIE): A Productivity Systems business unit employee who supports the Consultant with field interface issues relating to each specific account.

5.9 Interface: An interface is a communication link between two or more computer systems.

5.10 Security Configuration Form: A form that the Consultant will complete as described in this document and utilize to identify and program levels of users end allowable functions with the Sure-Med-Registered Trademark- System.

5.11 Clinical Request Form (CRF): A form that the Consultant will complete as described in this document and is utilized to request nurse training support from the Nursing Network.

5.12 Host: A Sure-Med-Registered Trademark- Computer Pharmacy Workstation that is a key component to the Sure-Med-Registered Trademark- system.

5.13 Equipment: All hardware provided by Productivity System that makes up the Sure-Med-Registered Trademark- system.


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5.14 DID line: Dedicated Direct Inward Dial phone line used for incoming calls to the modem that is connected to the Sure-Med-Registered Trademark- host. This DID line is used for technical support to the Sure-Med-Registered Trademark- system.

5.15 Resource Nurse: Account users who with additional training provided by Baxter will in turn support and or train other account staff.

5.16 Users: Any account personnel who are permitted access to the Sure-Med-Registered Trademark- system.

5.17 FACE Document: Information complied by the FIE to summarize the interface installation and implementation for each specific account.

5.18 Drug List: A compiled list of all items to be stocked within the Sure-Med-Registered Trademark- system.

5.19 Dispenser Grid Form: A physical layout of the unit dose compartment that the Consultant will utilize to define locations of dispensers and cassettes.

5.20 Backorder: An ordered item from Customer Operations that is out of stock and can not be filled at the time of order placement.

5.21 Cabinet Communication Lines: A point to point communication line from Host to cabinet.

5.22 Interface Communication Lines: A communication line utilized to connect communications from the Sure-Med-Registered Trademark- host to the account computer system(s).

5.23 Network Nurse: A trainer contracted by Productivity Systems supplied by Nursing Network to institute training of users at the account.

5.24 Nursing Network: A Baxter group that manages network nurses.

5.25 In-Service Information Form: A document that is to be completed by the Consultant as described in this document and used to communicate customer account training information to the assigned network nurse(s).

5.26 Installation Team: A Productivity Systems business unit, employee(s) or consultant(s) contracted by Productivity Systems assembled to complete the on site installation process and meet the needs of the account.

5.27 Cabinet: A Sure-Med-Registered Trademark- cabinet is a computer-controlled storage unit.


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5.28 System: All hardware and software that bring together the Sure-Med-Registered Trademark- Distribution System.

5.29 Account Sales Specialist: Productivity Systems employee who completes sales process per account. They are account manager once completion of installation has occurred.

6.0 PROCEDURE

6.1 Phase I-Planning: The first and one of the more critical phases of the implementation process of the Sure-Med-Registered Trademark- product is the planning phase. This phase begins upon approved purchase order of Sure-Med-Registered Trademark- During this planning phase the Consultant is assigned to the account and information that is critical to the installation begins to be gathered. Phase II may not begin until all planning is complete.

                  6.1.1    Customer operations receives the approved sales
                           documentation from marketing. Customer Operations
                           will then generate a Sure-Med-Registered Trademark-
                           System Order/Return Form with the approved equipment
                           identified on order. This will be sent to the
                           appropriate Consultant Regional Manager and will
                           serve as notification of equipment to be installed.

                  6.1.2    During this same time period of an approved sale, the
                           Account Sales Specialist generates an Account
                           Information sheet that `is also sent to the
                           appropriate Consultant Regional Manager.

                  6.1.3    Once the Consultant Regional Manager receives both
                           documents, they are then sent to the, assigned
                           Consultant. The Consultant now becomes the project
                           leader of that installation.

                  6.1.4    The Consultant will contact the Account Sales
                           Specialist to acknowledge receipt of account
                           documents. This is to be done within the first 2-3
                           weeks.

                  6.1.5    The Consultant will contact the account within the
                           same 2-3 weeks to introduce themself, and discuss the
                           implementation process of the
                           Sure-Med-Registered Trademark- System. This
                           conversation will include setting realistic
                           expectations, and answering any questions the account
                           might have.

                  6.1.6    At this time the Consultant will determine the type
                           of installation to occur (pre-assembly or
                           traditional).

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If pre-assembly is chosen refer to document PHG-133 Sure-Med-Registered Trademark- Pre-Assembly Process. Sure-Med-Registered Trademark- order submitted by Account Sales Specialist may have been identified as Pre-Assembly upon placement of order.

                  6.1.7    After initial contact with the account the Consultant
                           will then document conversation(s) in a follow up
                           letter. This letter will be sent to the account with
                           copies to the Consultant's Regional Manager and
                           Account Sales Specialist.

                  6.1.8    The Consultant will notify the Interface Group of the
                           account and will check Field Interface Engineer (FIE)
                           availability to attend the pre-implementation meeting

                  6.1.9    The Consultant will contact the account to schedule
                           the pre-implementation meeting, tentative
                           installation date(s), the Round Lake training date
                           and identify the Chicago trainees. Once the
                           Consultant receives this information (s)he will
                           complete and submit the Productivity Systems Training
                           form to the Training Center.

                  6.1.10   The Consultant will order Pre-Implementation Manuals
                           and Nurse Training Kits from Customer Operations.
                           These are to he sent to the account prior to the
                           preimplementation meeting.

                           6.1.10.1     If Unit Dose
                                        Sure-Med-Registered Trademark-
                                        cabinet(s) are a part of the
                                        installation the Consultant will also
                                        order a drug list to be sent to the
                                        account.

                  6.1.11   The Consultant is to notify the Sales Specialist,
                           Nurse Consultant and FIE of the scheduled
                           pre-implementation meeting and tentative installation
                           date(s).

                  6.1.12   These dates are to be reflected on the Consultant's
                           personal calendar and submitted to his/her Regional
                           Manager. The Consultant Regional Manager will in turn
                           submit a regional calendar to the National Manager
                           Field Engineer for addition to National Field
                           Calendar. This calendar will be sent to all
                           appropriate Productivity System employees. National
                           Manager Field Engineer will assign the Field
                           Application Engineer (FAB) to the installation.

                  6.1.13   At the Consultants discretion a host and or other
                           equipment may be ordered from Customer Operations for
                           availability at the pre-implementation meeting.

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6.2 Phase II: Pre-implementation Meeting: This meeting will occur at the account facility with the account project leaders and Productivity Systems representatives. All attendees will have received the Pre-Implementation manual prior to the scheduled meeting so as to review the installation process. This manual will serve as the account's reference for the Sure-Med-Registered Trademark- installation.

The purpose of this meeting is to discuss the roles of both the account and Productivity Systems as they pertain to the implementation process. An installation timetable will be agreed upon and project goals will be established. Expectations will be defined for the installation process, interface functionality, and customization capabilities.

                  6.2.1    The Consultant will gather the necessary information
                           to complete the Security Configuration Form. The
                           installation team will utilize this form to configure
                           the Sure-Med-Registered Trademark- System to account
                           specifics.

                  6.2.2    The Consultant will gather nursing information
                           necessary to complete both the Clinical Request Form
                           (CRF) and the In- service form. The CRF will be used
                           to request nursing support from the Nursing Network.
                           Account resource nurses and/or nurse educators will
                           be also be identified along with what type of nurse
                           training process to implement i.e., classroom or
                           nursing unit.

                  6.2.3    Discussion will occur to identify and address any
                           expected changes in current practices to both
                           Pharmacy and Nursing. The Consultant will also
                           discuss the importance of developing Pharmacy and
                           Nursing Policies & Procedures for
                           Sure-Med-Registered Trademark-.

                  6.2.4    The Consultant will review the completed drug list
                           with the account, if available.

                  6.2.5    The FIE will review the Sure-Med-Registered
                           Trademark- specifications with the account
                           representatives which will include the following:

                           -        DID line
                           -        Cabinet communication lines
                           -        Interface
                           -        Electrical power

                  6.2.6    The installation team will review any accounts
                           external specifications. Note: To date there have
                           been no known account's with external specifications.

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                  6.2.1    At the conclusion of the Pre-Implementation meeting a
                           walk through of the facility will occur to identify
                           locations for equipment, assembly area and nurse
                           training.

                  6.2.8    At the Consultant's discretion, and if the equipment
                           is on site, set up of the host and any other
                           equipment may occur. If any equipment is set up it
                           will be necessary to train selected users of its
                           functionality.

6.3 Phase III: Pre-Installation: At the Pre-Implementation meeting a timetable of critical steps which must be completed prior to the actual installation were identified along with the responsible personnel. All steps should be completed and on schedule for if any are omitted or delayed the installation date may also be delayed. Rescheduling the installation could result in a further delay of two or three months. The Consultant is responsible for maintaining contact with all concerned and determine that the project is on schedule.

                  6.3.1    The Consultant will document a recap of the
                           pre-implementation meeting and send copies to the
                           account, regional manager, sales specialist and other
                           attendees.

                  6.3.2    The Consultant will send the completed CRF to the
                           Nurse Consultant who will review and submit to the
                           Nursing Network for assignment

                  6.3.3    The FIE will follow up any interface issues from the
                           pre-implementation meeting and produce the FACE
                           document.

                  6.3.4    Upon receipt of the completed drug list from the
                           account, the Consultant will develop a dispenser grid
                           form (Unit Doze cabinets only).

                  6.3.5    The Consultant will submit the completed
                           Sure-Med-Registered Trademark- System Order/Return
                           form(s) to Customer Operations at least 1 week
                           prior to installation. Customer Operations will
                           then notify the Consultant of any and all
                           backorders. Once all orders have been shipped by
                           Customer Operations the Consultant will verify
                           with the account receipt of the equipment

                  6.3.6    Two weeks prior to installation the Consultant will
                           verify with pharmacy, nursing, IS and engineering
                           that all pre-installation task(s) have been
                           completed, i.e., DID line, cabinet communication
                           lines, interface lines etc. These tasks were
                           identified and documented to account in follow-up
                           Pre-Implementation letter.

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                  6.3.7    The Consultant will coordinate travel arrangements
                           with the installation team and provide pertinent
                           documents as needed to the team.

                  6.3.8    Nursing Network will inform the Consultant of
                           assigned nurse(s) trainers. The Consultant will in
                           turn contact the assigned network nurse(s) and also
                           provide to nurses(s) the completed Inservice
                           Information packet which will provide all necessary
                           training information specific to that account.

                  6.3.9    Once Chicago training of the account has occurred the
                           Training Center will complete and forward to the
                           Consultant a synopsis of training.

                  6.3.10   One week prior to installation the Consultant will
                           follow up with the account project leader to confirm
                           availability of inventory, pulling of stock, and
                           appropriate resources have been allocated.

         6.4      Phase IV: Installation- The Consultant having determined

that all pre-installation steps have been completed approves the installation phase to begin for all Sure-Med-Registered Trademark- equipment. The installation team will then arrive at account site. The Consultant as the Baxter project leader authorizes the commencement of the installation and determines when the project is completed.

                  6.4.1    Upon arrival at the account site the Consultant will
                           establish with the account a time for daily update
                           meetings as well as date and time for an exit
                           meeting.

                  6.4.2    The Consultant will identify and address any
                           deficiencies anticipating the affect an the
                           installation process. This will be documented for
                           future reference with copies sent to Sales Specialist
                           and Regional Manager. These identified issues will be
                           discussed with the account project leader for
                           resolution.

                  6.4.3    The installation team will verify that all equipment
                           and supplies are present. If any discrepancies occur
                           in the received equipment the Consultant will contact
                           Customer Operations for resolution.

                  6.4.4    All equipment will be inspected for damage. If any
                           has occurred the Consultant will notify Customer
                           operations for replacement. Upon receipt of
                           replacement item the Consultant will complete a
                           return report for the damaged equipment received. A
                           copy of this will be sent to Customer Operations as
                           well as attached to the damaged item for return.
                           Customer Operation will complete any follow up
                           required.

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6.4.5 The installation team will complete all tasks as per the appropriate equipment checklists.

6.4.6 The FAE will refer to the Field Service Manual and

                           Sure-Med-Registered Trademark- version 5.2.1
                           installation/upgrade manual as needed.

                  6.4.6    If any equipment fails during the installation i.e.,
                           laptop, motherboard, dispenser's etc. replacements
                           will be ordered from Customer Operations. Upon
                           receipt of replacement item the accompanied document
                           will be completed by the installation team sighting
                           that item was detective. This document will be
                           attached to the item and returned to Round Lake

                  6.4.7    The installation team will establish and verify
                           communications between the host and the cabinet(s).
                           They will then download the medication and user files
                           to the cabinet(s). The Host will be re-located to its
                           permanent location and all connections will be
                           established.

                  6.4.8    The Consultant will identify and prepare cabinet(s)
                           specified for nurse training.

                  6.4.9    The installation team along with the account will
                           verify the viability of the interface(s).

                  6.4.10   The account project leader is to review and modify
                           the Sure-Med-Registered Trademark- System as needed.

                  6.4.11   The Consultant will review the entire
                           Sure-Med-Registered Trademark- System with the
                           Chicago trainee(s) and support the trainee(s) in any
                           additional system training.

                  6.4.12   The installation team will complete all
                           Sure-Med-Registered Trademark- System testing as
                           required per equipment checklists.

                  6.4.13   Nurse training will follow the developed pre-agreed
                           schedule.

                  6.4.14   Go live of the Sure-Med-Registered Trademark- System
                           will follow the pre-agreed schedule.

                  6.4.15   The installation team will prepare and notify
                           Customer Operations of any supplies to be returned.
                           The returns will include any appropriately labeled
                           damaged or failed equipment and a list of returned
                           inventory. A copy of the returns will be sent to
                           Customer Operation for follow up.

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                  6.4.16   The Consultant, along with the account, will complete
                           the Exit Interview document. This document will be
                           filed with the account folder and copies sent to
                           Account Sales Specialist and Regional Manager.

         6.5.     Phase V: Post Installation: with the completion of the

installation the Consultant continues to maintain interim contact with the account. The purpose is to determine any previously unidentified post installation issues and answer any questions that may have arisen.

                  6.5.1    The Consultant will send a thank you letter to the
                           account that will include a statement regarding any
                           outstanding issues. A copy will be sent to the
                           Account Sales Specialist and Regional Manager.

                  6.5.2    The Consultant will contact the account periodically
                           during first month.

                           6.5.2.1      Once the installation team has completed
                                        the installation and has left the
                                        account site all technical support will
                                        come from Technical Assistance Center
                                        (TAC)

                  6.5.3    Once all outstanding issues related to the
                           installation process have been resolved the Account
                           Sales Specialist will then become account manager
                           with Consultant support if required.

                  6.5.4    The FAE will complete the Installation Report and
                           submit it to Customer operations.

                  6.5.5    The Consultant will complete the Installation
                           overview Report and submit to Customer Operations
                           with copies to Regional Manager and Vice President
                           Field Operations.

7.0      TRAINING

7.1 Training of these procedures for all Field Implementation employees will occur within 90 days by written acknowledgment of reviewing this procedure. Upon receipt of written acknowledgment of the completed training, it will be recorded on the Training Roster.


December 23, 1999

Mr. Art Mollenhauer
Vice President Finance
I.V. Systems & Medical Products
Baxter Healthcare Corporation
One Baxter Parkway
Deerfield, Illinois 60015

Dear Art:

Once countersigned by you, this letter constitutes a final and binding agreement between OmniCell Technologies, Inc. ("OmniCell") and Baxter Healthcare Corporation ("Baxter") resolving certain issues which have arisen between OmniCell and Baxter concerning the Asset Purchase Agreement of December 18, 1998, as amended by the Letter Agreement dated as of January 25, 1999 ("APA"), and the Loan and Security Agreement between Baxter and OmniCell of January 29, 1999 ("LSA"). To the extent our agreement herein requires modification, amendment or waiver of any provision of either of those agreements, this letter agreement is a written modification of those other agreements pursuant to
Section 12 of the APA and Section 9.2 of the LSA. Our agreement herein, and any modification, amendment and/or waiver with respect to the APA and the LSA, applies only to those items specifically discussed below. All rights, remedies and obligations of the parties, including, but not limited to, the survival of certain representations and warranties under the APA, remain in effect and without modification except as specifically discussed below. All capitalized terms in this letter agreement are used as defined in the APA and/or LSA.

We have agreed as follows:

1. PURCHASE PRICE - The "Purchase Price" shall be $14,754,000, including the $2,000,000 of cash paid at Closing and $4,840,000 which has been paid by offsetting amounts collected by Baxter on OmniCell's behalf.

2. TERMINATION, MODIFICATION AND RELEASE - Sections 2.1, 2.2, 3.5, 3.11, 3.18, 5.9(b), 9.4 (except for the first and last sentences thereof) and 10.4 of the APA and Paragraphs (1), (2) and (5) of the Letter Agreement dated as of January 25, 1999 referred to above) are hereby terminated effective upon receipt by OmniCell of the amounts due from Baxter pursuant to Paragraph 3 below (the "Effective Time").

As of the Effective Time, Baxter and OmniCell hereby release each other and their respective employees, agents, shareholders, directors, officers, attorneys, affiliates and successors, from any and all claims, actions, causes of action, damages, demands of any nature whatsoever that have arisen or may arise in law or in equity based upon or arising under the foregoing provisions of the APA, including the Letter Agreement dated as of January 25, 1999.

In lieu of Section 3.18 of the APA, Baxter represents and warrants that the equipment described in the installation schedule referred to in Paragraph 12 below will be capable of being installed using commercially reasonable efforts by the dates indicated in the installation schedule.


Mr. Art Mollenhauer
Baxter Healthcare Corporation
December 23, 1999
Page 2.

OmniCell represents and warrants that it is not currently aware of any basis for any claim by it that Baxter has breached any of its representations and warranties or any of its other obligations under the APA as amended by this letter agreement.

3. RECONCILIATION PAYMENT - Baxter agrees to pay OmniCell no later than December 31, 1999), the amount of $1,195,968.

4. RESTATED PROMISSORY NOTE - The Promissory Note dated January 29, 1999 shall be restated in the form attached hereto as Exhibit A, with a revised principal amount of $7,914,000. OmniCell shall deliver the original Promissory Note to Baxter in exchange for the Restated Promissory Note. Baxter and OmniCell acknowledge that interest on the Promissory Note has been fully paid and satisfied through December 31, 1999. Simultaneously with the execution hereof, Baxter is signing and delivering to Silicon Valley Bank an amendment to the Intercreditor Agreement between Baxter and Silicon Valley Bank in the form attached hereto as Exhibit B. Baxter hereby releases OmniCell and its employees, agents, shareholders, directors, officers, attorneys, affiliates and successors, from any and all claims, actions, causes of action, damages, demands of any nature whatsoever that have arisen in law or in equity based upon or arising under the Promissory Note with respect to the nonpayment of interest with respect to any period through December 31, 1999.

5. BAXTER/OMNICELL e-COMMERCE RELATIONSHIP - Baxter agrees to introduce OmniCell to Baxter's e-commerce representatives and to give good faith consideration to Baxter becoming a supplier to OmniCell, including but not limited to having its products listed and available for sale on a non-exclusive basis through OmniBuyer, OmniCell's e-commerce system.

6. PRIVATE PLACEMENT - Baxter agrees that the limit on private placements of equity securities before a Mandatory Prepayment is required under
Section 2.8 of the LSA shall be modified to permit OmniCell to complete the private placement of up to $30,000,000 (total) of equity securities in one or more transactions or rounds of financing to be completed no later than December 31, 2000 without triggering a Mandatory Prepayment so long as OmniCell shall apply at least 50% of the proceeds of such private placement to redeem the Series J Preferred Stock of OmniCell.. The existing exceptions to the prepayment obligation OmniCell contained in the proviso to Section 2.8(a) of the LSA, will remain in effect, except that the exception for sales of equity securities not exceeding 10% of the outstanding equity securities of OmniCell contained in clause (y) shall not be available for the year 2000.

7. PWC CONSENT - Baxter agrees to cooperate with PricewaterhouseCoopers ("PWC") and promptly provide any assistance reasonably requested to enable PWC to issue its consent to inclusion of its opinion on the Sure-Med financial statements in the S-1 registration statement to be filed in connection with OmniCell's anticipated public offering.

8. ACCOUNTS RECEIVABLE - Baxter and OmniCell agree that the items set forth in Exhibits C1 and C2 all constitute assets transferred to OmniCell pursuant to the Bill of Sale and Assignment dated January 29, 1999 from Baxter. Upon written request of OmniCell, Baxter agrees provide notice in writing to all customers listed on Exhibit C2 in a form reasonably


Mr. Art Mollenhauer
Baxter Healthcare Corporation
December 23, 1999
Page 3.

satisfactory to OmniCell, that OmniCell is the party entitled to receive payments under all such accounts, and the party to whom payments by those customers should be made. The amounts shown on Exhibit C1 have been either collected by Baxter from the customers indicated on Exhibit C1 or have been converted to leases between Baxter and such customer. Baxter shall be entitled to retain all such amounts so collected or to be collected under such leases, and OmniCell waives and releases in favor of Baxter all claims to such amounts and such leases.

9. SEVERANCE ADJUSTMENTS - Baxter shall be responsible for all obligations to pay severance benefits with respect to all Remaining Employees, and OmniCell shall be responsible for all obligations to pay severance benefits with respect to all Transferred Employees. As described in Paragraph 2 above,
Section 5.9(b) of the APA is being terminated and there will be no further adjustment as between Baxter and OmniCell with respect to such severance obligations.

10. CANADIAN ISSUES - Baxter agrees to deliver to OmniCell at Palo Alto, California or such other place within the continental United States as OmniCell shall direct in writing the Canadian inventory described in Exhibit D hereto. All shipping and other costs of such delivery shall be the responsibility of Baxter.

11. WESTERN EUROPEAN DISTRIBUTION SERVICES - Baxter hereby waives and releases any and all claims against OmniCell and its subsidiaries and its affiliates with respect to distribution of Sure-Med products by Baxter in Western Europe during 1999.

12. INSTALLATION SCHEDULE - Baxter and OmniCell agree that they will work together over the next 30 days to develop a schedule, prioritized by Baxter, for installation of remaining uninstalled Sure-Med units relating to outstanding Baxter receivables.

13. OMNICELL EUROPE - Baxter agrees to waive any claim or right under
Section 6.2 of the LSA in connection with the establishment and maintenance by OmniCell of subsidiaries or operating branches in Europe for the purpose of manufacturing, marketing or distributing OmniCell products in Europe so long as the aggregate book value of the assets of such subsidiaries and branches calculated in accordance with generally accepted accounting principles consistently applied shall not at any time exceed USS 1,000,000.

14. CANADIAN AND EUROPEAN INVENTORY - Baxter acknowledges to OmniCell that the inventory described in Exhibit D and the inventory located in Europe that was included in the audited balance sheet for the Sure-Med business that was previously delivered to OmniCell are owned by OmniCell and Baxter hereby waives and releases any and all rights or claims thereto.

15. CONFIDENTIALITY - Baxter and OmniCell shall not disclose the existence or terms of this letter agreement without the prior written consent of the other party, except as required by law (including any disclosures required by Federal or state securities laws) and except that either party may make such disclosures as may be reasonably required to its respective independent accountants.


Mr. Art Mollenhauer
Baxter Healthcare Corporation
December 23, 1999
Page 4.

16. GOVERNING LAW - This letter agreement shall in all respects be governed by, and construed and enforced in accordance with, the laws of the State of Illinois.

As discussed above, this letter agreement sets forth the complete agreement between Baxter and OmniCell with respect to the subjects specifically identified and discussed in this letter. All other terms and conditions of the APA and LSA remain in effect. This letter agreement is final immediately upon its execution by both parties.

Sincerely,

/s/ Earl E. Fry
Earl E. Fry
Vice President and Chief Financial Officer
OmniCell Technologies, Inc.


Mr. Art Mollenhauer
Baxter Healthcare Corporation
December 23, 1999
Page 5.

ON BEHALF OF BAXTER HEALTHCARE CORPORATION, I HAVE EXECUTED AND AGREE

TO ALL OF THE FOREGOING.

By:    /s/ Arthur Mollenhauer
       Art Mollenhauer
       Vice President Finance
       I.V. Systems & Medical Products
       Baxter Healthcare Corporation


AMENDMENT NO. 2

TO

LOAN AND SECURITY AGREEMENT

This AMENDMENT NO. 2 to LOAN AND SECURITY AGREEMENT, dated as of June 20, 2001 (the "Amendment"), is entered into by and between Baxter Healthcare Corporation, a Delaware corporation (the "Lender") and Omnicell.com, formerly known as OmniCell Technologies Inc., a California corporation (the "Borrower"). Any capitalized term used herein and not otherwise defined herein shall have the meaning given to it in the "Credit Agreement" described below.

WITNESSETH

WHEREAS, the Borrower and the Lender are parties to a Loan and Security Agreement dated as of January 29, 1999 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement");

WHEREAS, the Borrower has notified the Lender that the Borrower, on October 14, 1999, changed its legal name to Omnicell.com;

WHEREAS, the Borrower, under the terms of the Credit Agreement, covenants that it shall perform all acts necessary to maintain the Lender's perfected security interest in the Collateral;

WHEREAS, the Borrower has requested that the Lender waive any Event of Default arising from Borrower's failure to notify Lender of its change of legal name, and wishes to cure any Event of Default arising from its failure to notify Lender of such change to Borrower's legal name, including, without limitation, amending those financing statements executed pursuant to the terms of the Credit Agreement to reflect the Borrower's current legal name;

WHEREAS, the Borrower, in connection with its financing arrangements with Silicon Valley Bank, has requested the Lender to release its liens upon and security interests in those Accounts arising from or originated in connection with the SureMed Business; and

WHEREAS, the Lender is willing to waive such Events of Default and release its liens upon and security interests in the Accounts arising from and originated in connection with the SureMed Business upon the terms and conditions set forth in this Amendment.

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and the Lender have entered into this Amendment.


1. AMENDMENT. Effective as of the date first above written and subject to the satisfaction of the conditions precedent set forth in SECTION 3 below, the Credit Agreement shall be and hereby is amended as follows:

(A) CREDIT AGREEMENT GENERALLY. Each reference to "OmniCell Technologies Inc." set forth in the Credit Agreement is hereby deleted therefrom and the phrase "Omnicell.com, formerly known as OmniCell Technologies Inc." is hereby substituted therefor.

(B) The definition of "SUREMED ASSETS" set forth in SECTION 1.1 of the Credit Agreement is hereby amended to delete therefrom the phrase "all Accounts and/or".

(C) SECTION 2.2 of the Credit Agreement is hereby amended in its entirety as follows:

2.2. INTEREST RATE. The unpaid principal balance of the Loan shall bear interest at the fixed rate of (a) eight percent (8.0%) per annum from the Closing Date through and including December 31, 2001,
(b) nine percent (9.0%) per annum from January 1, 2002 through and including December 31, 2002, and (c) thereafter, until the Loan has been paid in full, at the fixed rate of ten percent (10.0%) per annum (such rate as in effect from time to time being referred to herein as the "APPLICABLE RATE").

(D) SECTION 3.1(a) of the Credit Agreement is hereby amended in its entirety as follows: "Accounts, other than any Account arising from or originated in connection with the SureMed Business;".

(E) SECTION 3.5 of the Credit Agreement is hereby amended to insert at the end thereof the following: "OmniCell further warrants, represents and covenants that its exact legal name is Omnicell.com and that it is a corporation duly organized, validly existing, and in good standing under the laws of the state of California. OmniCell's organizational identification number is 1825856. An Event of Default shall occur under SECTION 7.1(b) if Omnicell amends or modifies its exact legal name or changes its jurisdiction of organization without giving thirty days' prior written notice thereof to Baxter.

(F) SECTION 7.1(b) of the Credit Agreement is hereby amended to delete therefrom the period at the end thereof and to substitute therefor the following: ", or OmniCell fails to notify Baxter, pursuant to the terms of SECTION 3.5, of any change to OmniCell's exact legal name and/or jurisdiction of organization, and, if applicable, its organizational identification number."

2. WAIVER. The Lender, upon the effectiveness of this Amendment, waives any Event of Default arising from the Borrower's failure to notify the Lender of the change in the Borrower's legal name to Omnicell.com.

3. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective and be deemed effective as of the date hereof, if, and only if, (i) the Lender shall have received two duly executed originals of this Amendment from the Borrower, (ii) the Lender shall have received an

2

executed copy of the Second Amended and Restated Omnicell.com Promissory Note attached hereto as EXHIBIT A, (iii) the Lender shall have received executed copies of the UCC financing statement amendments attached hereto as EXHIBIT B, and (iv) the Lender shall have received originally executed copies of the amendments to certain intellectual property security agreements attached hereto as EXHIBIT C.

4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower hereby represents and warrants as follows:

(a) The Credit Agreement as amended by this Amendment constitutes the legal, valid and binding obligation of the Borrower and is enforceable against the Borrower in accordance with its terms.

(b) Upon the effectiveness of this Amendment, the Borrower hereby agrees that all covenants, representations and warranties made by it in the Credit Agreement shall be made by it as of the effective date of this Amendment.

5. EFFECT ON THE CREDIT AGREEMENT.

(a) Upon the effectiveness of this Amendment, on and after the date hereof, each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import shall mean and be a reference to the Credit Agreement, as amended previously and as amended hereby.

(b) Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect, and are hereby ratified and confirmed.

(c) The execution, delivery and effectiveness of this Amendment shall neither, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Lender, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith.

6. GOVERNING LAW. This Amendment shall be governed by and construed in accordance with the internal laws (including 735 ILCS Section 105/5-1 et seq., but otherwise without regard to the conflict of law provisions) of the State of Illinois.

7. HEADINGS. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

8. COUNTERPARTS. This Amendment may be executed by one or more of the parties to the Amendment on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

9. NO STRICT CONSTRUCTION. The parties hereto have participated jointly in the negotiation and drafting of this Amendment. In the event an ambiguity or question of intent or interpretation arises, this Amendment shall be construed as if drafted jointly by the parties hereto

3

and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Amendment.

10. COSTS AND EXPENSES. The Borrower agrees to pay the Lender's costs, fees and out-of-pocket expenses (including attorneys' fees) incurred in connection with the preparation, negotiation and execution of this Amendment.

The remainder of this page is intentionally blank.

4

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

OMNICELL.COM, formerly known as OmniCell Technologies, Inc.

By: /s/ Robert Y. Newell
   -------------------------------------
         Name: Robert Y. Newell
         Title: Chief Financial Officer

BAXTER HEALTHCARE CORPORATION

By: /s/ Arthur G. Mollenhauer
   -------------------------------------
         Name: Arthur G. Mollenhauer
         Title: Vice President, Finance


EXHIBIT A

SECOND AMENDED AND RESTATED
OMNICELL.COM
PROMISSORY NOTE

Attached


SECOND AMENDED AND RESTATED

OMNICEL.COM PROMISSORY NOTE

$7,914,000 Dated: June 20, 2001 Chicago, Illinois

FOR VALUE RECEIVED, OMNICELL.COM, FORMERLY KNOWN AS OMNICELL TECHNOLOGIES INC., a California corporation ("BORROWER"), hereby promises to pay to the order of BAXTER HEALTHCARE CORPORATION, a Delaware corporation ("PAYEE"), the principal sum of SEVEN MILLION NINE-HUNDRED FOURTEEN THOUSAND DOLLARS ($7,914,000) in installments on the dates set forth below, together with interest on the unpaid principal balance hereof at the rates set forth below.

This Second Amended and Restated OmniCell.com Promissory Note re-evidences the indebtedness heretofore evidenced by, and amends and restates in its entirety, that certain Amended and Restated OmniCell Technologies Inc. Promissory Note dated January 1, 2001, in the principal amount of $7,914,000 made by the Borrower in favor of the Payee (the "Previous Note"). This Second Amended and Restated OmniCell.com Promissory Note is not in payment or satisfaction of the Previous Note, nor is this Second Amended and Restated OmniCell.com Promissory Note in any way intended to constitute a novation of the Previous Note.

This Second Amended and Restated OmniCell Technologies Inc. Promissory Note is the "Note" referred to in and was executed and delivered pursuant to that certain Loan and Security Agreement dated as of January 29, 1999 (as amended from time to time, the "LOAN AGREEMENT") between the Borrower and the Payee, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loan evidenced hereby is made and is to be repaid. The Loan Agreement, among other things, contains certain provisions for acceleration of the maturity hereof, the prepayment of the principal balance hereof, and for changes in the interest rates hereof upon the terms and conditions specified therein. Capitalized terms used herein and otherwise undefined shall have the meanings given them in the Loan Agreement.

The Borrower shall repay the principal amount hereof in eight (8) quarterly installments. Each installment shall be in an amount equal to $989,250.00 and shall be payable on the last day of each March, June, September and December, commencing on March 31, 2002 and ending on December 31, 2003.

All amounts evidenced hereby shall bear interest at (a) at the rate of
(a) eight percent (8.0%) per annum from the date hereof through and including December 31, 2001, (b) at the rate of nine percent (9.0%) per annum from January 1, 2002 through and including December 31, 2002, and (c) thereafter, until the Loan has been paid in full, at the rate of ten percent (10.0%) per annum; PROVIDED, HOWEVER, if any amounts evidenced hereby are not paid when due (whether by acceleration or otherwise), or after the occurrence of an Event of Default, then all amounts evidenced hereby shall bear interest at the Default Rate applicable thereto until so paid. Interest shall be calculated on the basis of a year of 360 days and actual days elapsed. Interest shall be


payable quarterly in arrears on the last day of each March, June, September and December, commencing on March 31, 1999.

All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds as set forth in Section 2.9 of the Loan Agreement. Until notified in writing of the transfer or assignment of this Note in accordance with the terms of the Loan Agreement, Borrower shall be entitled to deem Payee or any subsequent assignee of this Note as the owners and holder of this Note. Payee and any subsequent assignee of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; PROVIDED, HOWEVER, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Borrower hereunder with respect to payments of principal or interest on this Note.

Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note.

THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

This Note is assignable by the Payee as provided in Section 9.5 of the Loan Agreement.

Borrower promises to pay all reasonable costs and expenses, including reasonable attorneys' fees, incurred in the collection and enforcement of this Note. Borrower and any endorser of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder.

The payment of this Note is secured as described in the Loan Agreement.

8

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above.

OMNICELL.COM, FORMERLY KNOWN AS
OMNICELL TECHNOLOGIES INC.

By: /s/ Robert Newell
   -------------------------------------

Title: Chief Financial Officer


EXHIBIT B

UCC FINANCING STATEMENT AMENDMENTS

Attached


EXHIBIT C

AMENDMENTS TO INTELLECTUAL PROPERTY SECURITY AGREEMENTS

Attached


AMENDMENT NO. 1 TO TRADEMARK SECURITY AGREEMENT

June 20, 2001

Reference is hereby made to the Trademark Security Agreement, dated as of January 29, 1999 (as amended, restated, supplemented or otherwise modified from time to time, the "Trademark Security Agreement"), between Baxter Healthcare Corporation, a Delaware corporation (the "Lender") and Omnicell.com, formerly known as OmniCell Technologies Inc., a California corporation (the "Borrower"). Capitalized terms used herein shall have the meanings assigned to such terms in the Trademark Security Agreement.

The Borrower and the Lender by their execution hereof agree that, effective as of the date hereof, the Trademark Security Agreement is hereby amended to delete therefrom each reference to the phrase "OmniCell Technologies Inc." and to substitute therefor the phrase "Omnicell.com".

This amendment shall not operate as a waiver of any right, power or remedy of the Lender, or constitute a waiver of, any provision of the Trademark Security Agreement, the Credit Agreement, or any agreement, document or instrument delivered in connection therewith.

This amendment shall be governed by and construed in accordance with the laws of the State of Illinois. This amendment may be executed by either of the parties hereto on any number of separate counterparts, each of which shall be deemed an original and all of which, taken together, shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of this amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof.

Borrower acknowledges and agrees that Lender may record this Amendment No. 1 with any governmental entity necessary to continue its lien upon and security interest in the Trademarks and Licenses.

IN WITNESS WHEREOF, this amendment has been duly executed and delivered as of the day and year first written above.

OMNICELL.COM, formerly known as                BAXTER HEALTHCARE CORPORATION
OmniCell Technologies Inc.

By: /s/ Robert Y. Newell                       By: /s/ Arthur G. Mollenhauer
   -----------------------------                  ------------------------------
Name:  Robert Y. Newell                        Name:  Arthur G. Mollenhauer
Title: Chief Financial Officer                 Title: Vice President, Finance


AMENDMENT NO. 1 TO PATENT SECURITY AGREEMENT

June 20, 2001

Reference is hereby made to the Patent Security Agreement, dated as of January 29, 1999 (as amended, restated, supplemented or otherwise modified from time to time, the "Patent Security Agreement"), between Baxter Healthcare Corporation, a Delaware corporation (the "Lender") and Omnicell.com, formerly known as OmniCell Technologies Inc., a California corporation (the "Borrower"). Capitalized terms used herein shall have the meanings assigned to such terms in the Patent Security Agreement.

The Borrower and the Lender by their execution hereof agree that effective as of the date hereof, the Patent Security Agreement is hereby amended to delete therefrom each reference to the phrase "OmniCell Technologies Inc." and to substitute therefor the phrase "Omnicell.com".

This amendment shall not operate as a waiver of any right, power or remedy of the Lender, or constitute a waiver of, any provision of the Patent Security Agreement, the Credit Agreement, or any agreement, document or instrument delivered in connection therewith.

This amendment shall be governed by and construed in accordance with the laws of the State of Illinois. This amendment may be executed by either of the parties hereto on any number of separate counterparts, each of which shall be deemed an original and all of which, taken together, shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of this amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof.

Borrower acknowledges and agrees that Lender may record this Amendment No. 1 with any governmental entity necessary to continue its lien upon and security interest in the Patents and Licenses.

IN WITNESS WHEREOF, this amendment has been duly executed and delivered as of the day and year first written above.

OMNICELL.COM, formerly known as                BAXTER HEALTHCARE CORPORATION
OmniCell Technologies Inc.

By: /s/ Robert Y. Newell                       By: /s/ Arthur G. Mollenhauer
   -----------------------------                  ------------------------------
Name:  Robert Y. Newell                        Name:  Arthur G. Mollenhauer

Title: Chief Financial Officer                 Title: Vice President, Finance


Standby Facility Agreement

January 27, 2000

Omnicell.com
1101 E. Meadow Drive
Palo Alto, California 94303

Gentlemen:

Reference is made to the Loan and Security between you ("Borrower") and us ("Silicon") dated January 27, 2000 (the "Loan Agreement'). (This letter agreement, the Loan Agreement, and all other written documents and agreements between us are referred to herein collectively as the "Loan Documents". Capitalized terms used but not defined in this agreement, shall have the meanings set forth in the Loan Agreement.)

You have advised us that you do not anticipate borrowing under the Loan Agreement, for a period of time, and you have requested that certain of the provisions of the Loan Agreement not apply during this period.

Accordingly, this will confirm our agreement that, from and after the date hereof (the "Standby Period") no Loans will be made under the Loan Agreement. During the Standby Period, provided no Event of Default has occurred and is continuing, you will not be required to provide us with daily reporting of transactions, daily schedules and assignments of Receivables or schedules of collections (as called for by Section 4.3 of the Loan Agreement), and you will not be required to deliver to us the proceeds of Receivables (as called for by Sections 4.4 of the Loan Agreement).

You may, at your option, terminate the Standby Period, so that you can thereafter request Loans under the Loan Agreement, by giving us written notice at least 30 days before the Standby Period is to terminate, together with such information relating to the Receivables and other Collateral as we shall specify.

Upon termination of the Standby Period, you will, then and thereafter, provide us with the daily reporting of transactions and daily schedules and assignments of Receivables and schedules of collections, as called for by
Section 4.3 of the Loan Agreement, and deliver all proceeds of Receivables to us, as called for by Sections 4.4 of the Loan Agreement.

This letter agreement, the Loan Agreement, and the other Loan Documents set forth in full all of the representations and agreements of the parties with respect to the subject matter hereof and supersede all prior discussions, oral representations, oral agreements and oral understandings between the parties with respect to the subject hereof. Except as herein expressly amended, all of the terms and provisions of the Loan Agreement, and all other Loan Documents shall continue in full force and effect and the same are hereby ratified and confirmed.


If foregoing correctly sets forth our agreement, please sign the enclosed copy of this Agreement and return it to us.

Sincerely yours,

Silicon Valley Bank

                                                   By: /s/ Christopher Hill
                                                   Title: Senior Vice President

Accepted and agreed:

Borrower:

Omnicell.com

By: /s/ Robert Y. Newell
      President or Vice President


SILICON VALLEY BANK

LOAN AND SECURITY AGREEMENT

BORROWER:    OMNICELL.COM
ADDRESS:     1101 E. MEADOW DRIVE
             PALO ALTO, CALIFORNIA 94303


DATE:        JANUARY 27, 2000

THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between SILICON VALLEY BANK, COMMERCIAL FINANCE DIVISION ("Silicon"), whose address is 3003 Tasman Drive, Santa Clara, California 95054 and the borrower(s) names above (jointly and severally, the "Borrower"), whose chief executive office is located at the above address
("Borrower's Address"). The Schedule of this Agreement (the "Schedule")
shall for all purposes be deemed to be apart of this Agreement, and the same is an integral part of this Agreement. (Definitions of certain terms used in this Agreement are set forth in Section 8 below).

1. LOANS

1.1 LOANS. Silicon will make loans to Borrower (the "Loans"), in amounts determined by Silicon in its * up to the amounts (the "Credit Limit") shown on the Schedule, provided no Default or Event of Default has occurred and is continuing, and subject to deduction of any Reserves for accrued interest and such other Reserves as Silicon deems proper from time to time.

*GOOD FAITH BUSINESS JUDGMENT

1.2 INTEREST. All Loans and all other monetary Obligations shall bear interest at the rate shown on the Schedule, except where expressly set forth to the contrary in this Agreement. Interest shall be payable monthly, on the last day of the month. Interest may, in Silicon's discretion, be charged to Borrower's loan account, and the same shall thereafter bear interest at the same rate as the other Loans. Silicon may, in its discretion, charge interest to Borrower's Deposit Accounts maintained with Silicon.

1.3 OVERADVANCES. If at any time or for any reason the total of all outstanding Loans and all other Obligations exceeds the Credit Limit (an "Overadvance"), Borrower shall immediately pay the amount of the excess to Silicon, without notice or demand*. Without limiting Borrower's obligation to repay to Silicon on demand the amount of any Overadvance, Borrower agrees to pay Silicon interest on the outstanding amount of any Overadvance, on demand, at a rate equal to the interest rate which would otherwise be applicable to the Overadvance, plus an additional 2% per annum.

*PROVIDED THAT IF THE OVERADVANCE RESULTS FROM A CHANGE BY SILICON IN THE ADVANCE RATE WITH RESPECT TO ELIGIBLE RECEIVABLES, THEN SUCH OVERADVANCE SHALL BE DUE FROM THE BORROWER TO SILICON ON DEMAND.

1.4 FEES. Borrower shall pay Silicon the fee(s) shown on the Schedule, which are in addition to all interest and other sums payable to Silicon and are not refundable.

1.5 LETTERS OF CREDIT. At the request of Borrower, Silicon may, in its * issue or arrange for the issuance of letters of credit for the account of Borrower, in each case in form and substance satisfactory to Silicon in its sole discretion (collectively, "Letters of Credit"). The aggregate face amount of all outstanding Letters of Credit from time to time shall not exceed the amount shown on the Schedule (the " Letter of Credit Sublimit"), and shall be reserved against Loans which would otherwise be available hereunder. Borrower shall pay all bank charges (including charges of Silicon) for the issuance of Letters of Credit, together with such additional fee as Silicon's letter of credit department shall charge in connection with the issuance of the Letters of Credit. Any payment by Silicon under or in connection with a Letter of Credit shall constitute a Loan hereunder on the date such payment is made. Each Letter of Credit shall have an expiry date no later than thirty days prior to the Maturity Date. Borrower hereby agrees to indemnify, save, and hold Silicon harmless from any loss,


cost, expense, or liability, including payments made by Silicon, expenses, and reasonable attorneys' fees incurred by Silicon arising out of or in connection with any Letters of Credit**. Borrower agrees to be bound by the regulations and interpretations of the issuer of any Letters of Credit guarantied by Silicon and opened for Borrower's account or by Silicon's interpretations of any Letter of Credit issued by Silicon for Borrower's account, and Borrower understands and agrees that Silicon shall not be liable for any error, negligence, or mistake, whether of omission or commission, in following Borrower's instructions or those contained in the Letters of Credit or any modifications, amendments, or supplements thereto. Borrower understands that Letters of Credit may require Silicon to indemnify the issuing bank for certain costs or liabilities arising out of claims by Borrower against such issuing bank. Borrower hereby agrees to indemnify and hold Silicon harmless with respect to any loss, cost, expense, or liability incurred by Silicon under any Letter of Credit as a result of Silicon's indemnification of any such issuing bank. The provisions of this Loan Agreement, as it pertains to Letters of Credit, and any other present or future documents or agreements between Borrower and Silicon relating to Letters of Credit are cumulative.

*GOOD FAITH BUSINESS JUDGMENT

**EXCEPT FOR ANY SUCH LOSS, COST, EXPENSE OR LIABILITY DIRECTLY CAUSED BY SILICON'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT

2. SECURITY INTEREST.

2.1 SECURITY INTEREST. TO secure the payment and performance of all of the Obligations when due, Borrower hereby grants to Silicon a security interest in all of Borrower's interest in the following, whether now owned or hereafter acquired, and wherever located: All Inventory, Equipment, Receivables, and General Intangibles, including, without limitation, all of Borrower's Deposit Accounts, and all money, and all property now or at any time in the future in Silicon's possession (including claims and credit balances), and all proceeds (including proceeds of any insurance policies, proceeds of proceeds and claims against third parties), all products and all books and records related to any of the foregoing (all of the foregoing, together with all other property in which Silicon may now or in the future be granted a lien or security interest, is referred to herein, collectively, as the "Collateral").

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.

In order to induce Silicon to enter into this Agreement and to make Loans, Borrower represents and warrants to Silicon as follows, and Borrower covenants that the following representations will continue to be true, and that Borrower will at all times comply with all of the following covenants:

3.1 CORPORATE EXISTENCE AND AUTHORITY Borrower, if a corporation, is and will continue to be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Borrower is and will continue to be qualified and licensed to do business in all jurisdictions in which any failure to do so would have a material adverse effect on Borrower. The execution, delivery and performance by Borrower of this Agreement, and all other documents contemplated hereby (i) have been duly and validly authorized, (ii) are enforceable against Borrower in accordance with their terms (except as enforcement may be limited by equitable principles and by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to creditors' rights generally), and (iii) do not violate Borrower's articles or certificate of incorporation, or Borrower's by-laws, or any law or any material agreement or instrument which is binding upon Borrower or its property, and (iv) do not constitute grounds for acceleration of any material indebtedness or obligation under any material agreement or instrument which is binding upon Borrower or its property.

3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the heading to this Agreement is its correct name. Listed on the Schedule are all prior names of Borrower and all of Borrower's present and prior trade names. Borrower shall give Silicon 30 days' prior written notice before changing its name or doing business under any other name. Borrower has complied, and will in the future comply, with all laws relating to the conduct of business under a fictitious business name*.

*EXCEPT WHERE THE FAILURE TO SO COMPLY COULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT

3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in the heading to this Agreement is Borrower's chief executive office. In addition, Borrower has places of business and Collateral is located only at the locations set forth on the Schedule. Borrower will give Silicon at least 30 days prior written notice before opening any additional place of business, changing its chief executive office, or moving any of the Collateral to a location other than Borrower's Address or one of the locations set forth on the Schedule.

3.4 TITLE TO COLLATERAL, PERMITTED LIENS. Borrower is now, and will at all times in the future be, the sole owner of all the Collateral, except for items of Equipment which are leased by Borrower. The Collateral now is and will remain free and clear of any and all liens, charges, security interests, encumbrances and adverse claims, except for Permitted Liens. Silicon now has, and will continue to have, a first-priority perfected and enforceable security interest in all of the Collateral, subject only to the Permitted Liens, and Borrower will at all times defend Silicon and the Collateral against all claims of others. None of the Collateral now is or will be affixed to any real property in such a manner, or with such intent, as to become a fixture. Borrower is not and will not become a lessee under any real property lease pursuant to which the lessor may obtain any rights in any of the Collateral and no such lease now prohibits, restrains, impairs or will prohibit, restrain or impair Borrower's right to remove any


Collateral from the leased premises. Whenever any Collateral is located upon premises in which any third party has an interest (whether. as owner, mortgagee, beneficiary under a deed of trust, lien or otherwise), Borrower shall, whenever requested by Silicon, use its best efforts to cause such third party to execute and deliver to Silicon, in form acceptable to Silicon, such waivers and subordinations as Silicon shall specify, so as to ensure that Silicon's rights in the Collateral are, and will continue to be, superior to the rights of any such third party. Borrower will keep in full force and effect, and will comply * with the terms of, any lease of real property where any of the Collateral now or in the future may be located.

*IN ALL MATERIAL RESPECTS

3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in good working condition, and Borrower will not use the Collateral for any unlawful purpose. Borrower will immediately advise Silicon in writing of any material loss or damage to the Collateral.

3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at Borrower's Address complete and accurate books and records, comprising an accounting system in accordance with generally accepted accounting principles.

3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. ALL financial statements now or in the future delivered to Silicon have been, and will be, prepared in conformity with generally 'accepted accounting principles and now and in the future will * the financial condition of Borrower, at the times and for the periods therein stated. Between the last date covered by any such statement provided to Silicon and the date hereof, there has been no material adverse change in the financial condition or business of Borrower. Borrower is now and will continue to be solvent.

*FAIRLY PRESENT

3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely filed, and will timely file, all tax returns and reports required by foreign, federal, state and local law, and Borrower has timely paid, and will timely pay, all foreign, federal, state and local taxes, assessments, deposits and contributions now or in the future owed by Borrower. Borrower may, however, defer payment of any contested taxes, provided that Borrower (i) in good faith contests Borrower's obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (ii) notifies Silicon in writing of the commencement of, and any material development in, the proceedings, and (iii) posts bonds or takes any other steps required to keep the contested taxes from becoming a lien upon any of the Collateral. Borrower is unaware of any claims or adjustments proposed for any of Borrower's prior tax years which could result in additional taxes becoming due and payable by Borrower. Borrower has paid, and shall continue to pay all amounts necessary to fund all present and future pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not and will not withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any such plan which could result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency. Borrower shall, at all times, utilize the services of an outside payroll service providing for the automatic deposit of all payroll taxes payable by Borrower.

3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all material respects, with all provisions of all foreign, federal, state and local laws and regulations relating to Borrower, including, but not limited to, those relating to Borrower's ownership of real or personal property, the conduct and licensing of Borrower's business, and all environmental matters*.

3.10 LITIGATION. Except as disclosed in the Schedule, there is no claim, suit, litigation, proceeding or investigation pending or (to best of Borrower's knowledge) threatened by or against or affecting Borrower in any court or before any governmental agency (or any basis therefor known to Borrower) which * result, either separately or in the aggregate, in ** Borrower will promptly inform Silicon in writing of any claim, proceeding, litigation or investigation in the future threatened or instituted by or against Borrower involving any single claim of $50,000 or more, or involving $ 100,000 or more in the aggregate.

*COULD REASONABLY BE EXPECTED TO

**A MATERIAL ADVERSE EFFECT

3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for lawful business purposes. Borrower is not purchasing or carrying any "margin stock" (as defined in Regulation U of the Board of Governors of the Federal Reserve System) and no part of the proceeds of any Loan will be used to purchase or carry any "margin stock" or to extend credit to others for the purpose of purchasing or carrying any "margin stock."

4. RECEIVABLES.

4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and warrants to Silicon as follows: Each Receivable with respect to which Loans are requested by Borrower shall, on the date each Loan is requested and made, (i) represent an undisputed bona fide existing unconditional obligation of the Account Debtor created by the sale, delivery, and acceptance


of goods or the rendition of services in the ordinary course of Borrower's business, and (ii) meet the Minimum Eligibility Requirements set forth in
Section 8 below.

4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower represents and warrants to Silicon as follows: All statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing the Receivables are and shall be true and correct and all such invoices, instruments and other documents and all of Borrower's books and records are and shall be genuine and in all respects what they purport to be, and all signatories and endorsers have the capacity to contract. All sales and other transactions underlying or giving rise to each Receivable shall * with all applicable laws and governmental rules and regulations. All signatures and endorsements on all documents, instruments, and agreements relating to all Receivables are and shall be genuine, and all such documents, instruments and agreements are and shall be legally enforceable in accordance with their terms**".

*IN ALL MATERIAL RESPECTS

**EXCEPT AS ENFORCEABILITY MAY BE LIMITED BY EQUITABLE PRINCIPLES OR BY BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM OR SIMILAR LAWS RELATING TO CREDITORS' RIGHTS GENERALLY

4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall deliver to Silicon transaction reports and loan requests, schedules and assignments of all Receivables, and schedules of collections, all on Silicon's standard forms; provided, however, that Borrower's failure to execute and deliver the same shall not affect or limit Silicon's security interest and other rights in all of Borrower's Receivables, nor shall Silicon's failure to advance or lend against a specific Receivable affect or limit Silicon's security interest and other rights therein. Loan requests received after 12:00 Noon will not be considered by Silicon until the next Business Day. Together with each such schedule and assignment, or later if requested by Silicon, Borrower shall furnish Silicon with copies (or, at Silicon's request, originals) of all contracts, orders, invoices, and other similar documents, and all original shipping instructions, delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or disposition of which gave rise to such Receivables, and Borrower warrants the genuineness of all of the foregoing. Borrower shall also furnish to Silicon an aged accounts receivable trial balance in such form and at such intervals as Silicon shall request. In addition, * Borrower shall deliver to Silicon the originals of all instruments, chattel paper, security agreements, guarantees and other documents and property evidencing or securing any Receivables, ** receipt thereof and in the same form as received, with all necessary endorsements, all of which shall be with recourse. Borrower shall also provide Silicon with copies of all credit memos within two days after the date issued.

*ON REQUEST BY SILICON

**WITHIN ONE BUSINESS DAY AFTER

4.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to collect all Receivables, unless and until a Default or an Event of Default has occurred*. Borrower shall hold all payments on, and proceeds of, Receivables in trust for Silicon, and Borrower shall immediately deliver all such payments and proceeds to Silicon in their original form, duly endorsed in blank, to be applied to the Obligations in such order as Silicon shall determine. Silicon may, in its discretion, require that all proceeds of Collateral be deposited by Borrower into a lockbox account, or such other "blocked account" as Silicon may specify, pursuant to a blocked account agreement in such form as Silicon may specify. Silicon or its designee may, at any time, notify Account Debtors that the Receivables have been assigned to Silicon.

*AND IS CONTINUING

4.5 REMITTANCE OF PROCEEDS. All proceeds arising from the disposition of any Collateral shall be delivered, in kind, by Borrower to Silicon in the original form in which received by Borrower not later than the following Business Day after receipt by Borrower, to be applied to the Obligations in such order as Silicon shall determine; provided that, if no Default or Event of Default has occurred*, Borrower shall not be obligated to remit to Silicon the proceeds of the sale of worn out or obsolete equipment disposed of by Borrower in good faith in an arm's length transaction for an aggregate purchase price of $25,000 or less (for all such transactions in any fiscal year). Borrower agrees that it will not commingle proceeds of Collateral with any of Borrower's other funds or property, but will hold such proceeds separate and apart from such other funds and property and in an express trust for Silicon. Nothing in this
Section limits tile restrictions on disposition of Collateral set forth elsewhere in this Agreement.

*AND IS CONTINUING

4.6 DISPUTES. Borrower shall notify Silicon promptly of all disputes or claims relating to Receivables. Borrower shall not forgive (completely or partially), compromise or settle any Receivable for less than payment in full, or agree to do any of the foregoing, except that Borrower may do so, provided that: (i) Borrower does so in good faith, in a commercially reasonable manner, in the ordinary course of business, and in arm's length transactions, which are reported to Silicon on the regular reports provided to Silicon; (ii) no Default or Event of Default has occurred and is continuing; and (iii) taking into account all such discounts settlements and forgiveness, the total outstanding Loans will not exceed the Credit Limit. Silicon may, at any time after the occurrence * of an Event of Default, settle or adjust disputes or claims directly with Account Debtors for amounts and upon terms which Silicon considers advisable in its reasonable credit judgment and, in all cases, Silicon shall credit Borrower's Loan account with only the net amounts received by Silicon in payment of any Receivables.

*AND DURING THE CONTINUANCE


4.7 RETURNS. Provided no Event of Default has occurred and is continuing, if any Account Debtor returns any Inventory to Borrower in the ordinary course of its business, Borrower shall promptly determine the reason for such return and promptly issue a credit memorandum to the Account Debtor in the appropriate amount (sending a copy to Silicon). In the event any attempted return occurs after the occurrence * of any Event of Default, Borrower shall (i) hold the returned Inventory in trust for Silicon, (ii) segregate all returned Inventory from all of Borrower's other property, (iii) conspicuously label the returned Inventory as Silicon's property, and (iv) immediately notify Silicon of the return of any Inventory, specifying the reason for such return, the location and condition of the returned Inventory, and on Silicon's request deliver such returned Inventory to Silicon.

*AND DURING THE CONTINUANCE

4.8 VERIFICATION Silicon may, from time to time, verify directly with the respective Account Debtors the validity, amount and other matters relating to the Receivables, by means of mail, telephone or otherwise, either in the name of Borrower or Silicon or such other name as Silicon may choose.

4.9 NO LIABILITY. Silicon shall not under any circumstances be responsible or liable for any shortage or discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of which gives rise to a Receivable, or for any error, act, omission, or delay of any kind occurring in the settlement, failure to settle, collection or failure to collect any Receivable, or for settling any Receivable in good faith for less than the full amount thereof, nor shall Silicon be deemed to be responsible for any of Borrower's obligations under any contract or agreement giving rise to a Receivable. Nothing herein shall, however, relieve Silicon from liability for its own gross negligence or willful misconduct.

5. ADDITIONAL DUTIES OF THE BORROWER.

5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply with the financial and other covenants set forth in the Schedule.

5.2 INSURANCE. Borrower shall, at all times insure all of the tangible personal property Collateral and carry such other business insurance, with insurers reasonably acceptable to Silicon, in such form and amounts as *, and Borrower shall provide evidence of such insurance to Silicon, so that Silicon is satisfied that such insurance is, at all times, in full force and effect. All such insurance policies shall name Silicon as an additional loss payee, and shall contain a lenders loss payee endorsement in form reasonably acceptable to Silicon. Upon receipt of the proceeds of any such insurance, Silicon shall apply such proceeds in reduction of the Obligations as Silicon shall determine in its sole discretion, except that, provided no Default or Event of Default has occurred and is continuing, Silicon shall release to Borrower insurance proceeds with respect to Equipment totaling less than $100,000, which shall be utilized by Borrower I for the replacement of the Equipment with respect to which the insurance proceeds were paid. Silicon may require reasonable assurance that the insurance proceeds so released will be so used. If Borrower fails to provide or pay for any insurance, Silicon may, but is not obligated to, obtain the same at Borrower's expense. Borrower shall promptly deliver to Silicon copies of all reports made to insurance companies.

* ARE CUSTOMARY IN BORROWER'S INDUSTRY IN BORROWER'S LOCATION

5.3 REPORTS. Borrower, at its expense, shall provide Silicon with the written reports set forth in the Schedule, and such other written reports with respect to Borrower (including budgets, sales projections, operating plans and other financial documentation), as Silicon shall from time to time reasonably specify.

5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on one Business Day's notice, Silicon, or its agents, shall have the right to inspect the Collateral, and the right to audit and copy Borrower's books and records. Silicon shall take reasonable steps to keep confidential all information obtained in any such inspection or audit, but Silicon shall have the right to disclose any such information to its auditors, regulatory agencies, and attorneys, and pursuant to any subpoena or other legal process. The foregoing inspections and audits shall be at Borrower's expense and the charge therefor shall be $600 per person per day (or such higher amount as shall represent Silicon's then current standard charge for the same), plus reasonable out of pocket expenses. Borrower will not enter into any agreement with any accounting firm, service bureau or third party to store Borrower's books or records at any location other than Borrower's Address, without first obtaining Silicon's written consent, which may be conditioned upon such accounting firm, service bureau or other third party agreeing to give Silicon the same rights with respect to access to books and records and related rights as Silicon has under this Loan Agreement. Borrower waives the benefit of any accountant-client privilege or other evidentiary privilege precluding or limiting the disclosure, divulgence or delivery of any of its books and records (except that Borrower does not waive any attorney-client privilege).

5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule, Borrower shall not, without Silicon's prior written consent*, do any of the following: (i) merge or consolidate with another corporation or entity**; (ii) acquire any assets, except in the ordinary course of business (iii) enter into any other transaction outside the ordinary course of business; (iv) sell or transfer any Collateral, except for the sale of finished Inventory in the ordinary course of Borrower's


business, and except for the sale of obsolete or unneeded Equipment in the ordinary course of business***; (v) store any Inventory or other Collateral with any warehouseman or other third party; (vi) sell any Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent basis;. (vii) make any loans of any money or other assets**; (viii) incur any debts, outside the ordinary course of business, which would have a material, adverse effect on Borrower or on the prospect of repayment of the Obligations; (ix) guarantee or other-wise become liable with respect to the obligations of another party or entity; (x) pay or declare any dividends on Borrower's stock (except for dividends payable solely in stock of Borrower); (xi) redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Borrower's stock****; (xii) make any change in Borrower's capital structure which would have a material adverse effect on Borrower or on the prospect of repayment of the Obligations; or (xiii); or (xiv) dissolve or elect to dissolve. Transactions permitted by the foregoing provisions of this Section are only permitted if no Default or Event of Default would occur as a result of such transaction.

*(WHICH SHALL BE A MATTER OF ITS GOOD-FAITH BUSINESS JUDGMENT)

**EXCEPT FOR MERGERS OF ANY OF BORROWER'S FUTURE SUBSIDIARIES INTO BORROWER

***AND EXCEPT FOR NON-EXCLUSIVE LICENSING OF INTELLECTUAL PROPERTY IN THE ORDINARY COURSE OF BUSINESS, AND EXCEPT FOR THE LEASING OF BORROWER'S INVENTORY IN THE ORDINARY COURSE OF BUSINESS AND THE SALE BY BORROWER OF ITS INTEREST AS LESSOR IN SUCH LEASES IN THE ORDINARY COURSE OF BUSINESS

****EXCEPT THAT BORROWER MAY REDEEM OR REPURCHASE ITS SECURITIES IN AN AGGREGATE AMOUNT NOT EXCEEDING $100,000 IN ANY FISCAL YEAR FROM AN OFFICER, DIRECTOR OR EMPLOYEE, IN CONNECTION WITH THE TERMINATION OF SUCH PERSON'S EMPLOYMENT OR SERVICES, PROVIDED NO EVENT OF DEFAULT OR EVENT WHICH WITH NOTICE OR LAPSE OF TIME WOULD CONSTITUTE AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING

-EXCEPT FOR THE FOLLOWING, IN AN AGGREGATE AMOUNT FOR ALL SUCH LOANS NOT TO EXCEED $200,000 AT ANY TIME OUTSTANDING: TRAVEL ADVANCES, EMPLOYEE RELOCATION LOANS AND OTHER EMPLOYEE LOANS AND ADVANCES IN THE ORDINARY COURSE OF BUSINESS, LOANS TO EMPLOYEES, OFFICERS AND DIRECTORS THE PROCEEDS OF WHICH ARE USED CONCURRENTLY TO PURCHASE EQUITY SECURITIES OF BORROWER, AND OTHER LOANS TO OFFICERS AND EMPLOYEES APPROVED BY BORROWER'S BOARD OF DIRECTORS

5.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be instituted by or against Silicon with respect to any Collateral or in any manner relating to Borrower, Borrower shall, without expense to Silicon, make available Borrower and its officers, employees and agents and Borrower's books and records, to the extent that Silicon may deem them reasonably necessary in order to prosecute or defend any such suit or proceeding.

5.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by Silicon, to execute all documents and take all actions, as Silicon, may deem reasonably necessary or useful in order to perfect and maintain Silicon's perfected security interest in the Collateral, and in order to fully consummate the transactions contemplated by this Agreement.

6. TERM.

6.1 MATURITY DATE. This Agreement shall continue in effect until the maturity date set forth on the Schedule (the "Maturity Date"), subject to
Section 6.3 below.

6.2 EARLY TERMINATION. This Agreement may be terminated prior to the Maturity Date as follows: (i) by Borrower, effective three Business Days after written notice of termination is given to Silicon; or (ii) by Silicon at any time after the occurrence * of an Event of Default, without notice, effective immediately. If this Agreement is terminated by Borrower or by Silicon under this Section 6.2, Borrower shall pay to Silicon a termination fee in an amount equal to *, provided that no termination fee shall be charged if the credit facility hereunder is replaced with a new facility from another division of Silicon Valley Bank. The termination fee shall be due and payable on the effective date of termination and thereafter shall bear interest at a rate equal to the highest rate applicable to any of the Obligations.

*AND DURING THE CONTINUANCE

**$100,000

6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier effective date of termination, Borrower shall pay and perform in full all Obligations, whether evidenced by installment notes or otherwise, and whether or not all or any part of such Obligations are otherwise then due and payable. Without limiting the generality of the foregoing, if on the Maturity Date, or on any earlier effective date of termination, there are any outstanding Letters of Credit issued by Silicon or issued by another institution based upon an application, guarantee, indemnity or similar agreement on the part of Silicon, then on such date Borrower shall provide to Silicon cash collateral in an amount equal to the face amount of all such Letters of Credit plus all interest, fees and cost due or to become due in connection therewith, to secure all of the Obligations relating to said Letters of Credit, pursuant to Silicon's then standard form cash pledge agreement. Notwithstanding any termination of this Agreement, all of Silicon's security interests in all of the Collateral and all of the terms and provisions of this Agreement shall continue in full force and effect until all Obligations have been paid and performed in full; provided that, without limiting the fact that Loans are subject to the discretion of Silicon, Silicon may, in


its sole discretion, refuse to make any further Loans after termination. No termination shall in any way affect or impair any right or remedy of Silicon, nor shall any such termination relieve Borrower of any Obligation to Silicon, until all of the Obligations have been paid and performed in full. Upon payment and performance in full of all the Obligations and termination of this Agreement, Silicon shall promptly deliver to Borrower termination statements, requests for reconveyances and such other documents as may be required to fully terminate Silicon's security interests.

7. EVENTS OF DEFAULT AND REMEDIES.

7.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall constitute an "Event of Default" under this Agreement, and Borrower shall give Silicon immediate written notice thereof: (a) Any warranty representation, statement, report or certificate made or delivered to Silicon by Borrower or any of Borrower's officers, employees or agents, now or in the future, shall be untrue or misleading in a material respect *; or (b) Borrower shall fail to pay when due any Loan or any interest thereon or any other monetary Obligation **; or (c) the total Loans and other Obligations outstanding at any time shall exceed the Credit Limit ***; or (d) Borrower shall fail to comply with any of the financial covenants set forth in the Schedule or shall fail to perform any other non-monetary Obligation which by its nature cannot be cured; or (e) Borrower shall fail to perform any other non-monetary Obligation, which failure is not cured within **** Business Days after the date ***** or (f) any levy, assessment, attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made on all or any part of the Collateral ****** which is not cured within 10 days after the occurrence of the same; or (g) any default or event of default occurs under any obligation secured by a Permitted Lien, which is not cured within any applicable cure period or waived in writing by the holder of the Permitted Lien; or (h) Borrower breaches any material contract or obligation, which has or may reasonably be expected to have a material adverse effect on Borrower's business or financial condition; or (i) Dissolution, termination of existence, insolvency or business failure of Borrower; or appointment of a receiver, trustee or custodian, for all or any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding by Borrower under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect; or (j) the commencement of any proceeding against Borrower or any guarantor of any of the Obligations under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, which is not cured by the dismissal thereof within 30 days after the date commenced; or (k) revocation or termination of, or limitation or denial of liability upon, any guaranty of the Obligations or any attempt to do any of the foregoing, or commencement of proceedings by any guarantor of any of the Obligations under any bankruptcy or insolvency law; or (1) revocation or termination of, or limitation or denial of liability upon, any pledge of any certificate of deposit, securities or other property or asset of any kind pledged by any third party to secure any or all of the Obligations, or any attempt to do any of the foregoing, or commencement of proceedings by or against any such third party under any bankruptcy or insolvency law; or (m) Borrower makes any payment on account of any indebtedness or obligation which has been subordinated to the Obligations other than as permitted in the applicable subordination agreement, or if any Person who has subordinated such indebtedness or obligations terminates or in any way limits his subordination agreement; or (n) there shall be a change in the record or beneficial ownership of an aggregate of more than 20% of the outstanding shares of stock of Borrower, in one or more transactions, compared to the ownership of outstanding shares of stock of Borrower in effect on the date hereof*******, without the prior written consent of Silicon; or (o) Borrower shall generally not pay its debts as they become due, or Borrower shall conceal, remove or transfer any part of its property, with intent to hinder, delay or defraud its creditors, or make or suffer any transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or (p) there shall be a material adverse change in Borrower's business or financial condition; or (q) Silicon may cease making any Loans hereunder during any of the above cure periods, and thereafter if an Event of Default has occurred********.

*WHEN MADE

** ,PROVIDED THAT BORROWER SHALL HAVE 30 DAYS TO CURE ANY EVENT OF DEFAULT ARISING FROM THE FAILURE TO PAY WHEN DUE ANY MONETARY OBLIGATION OTHER THAN THE PAYMENT OF ANY LOAN OR INTEREST THEREON, SUCH 30 DAYS TO BEGIN UPON THE OCCURRENCE OF SUCH EVENT OF DEFAULT

***, SUBJECT TO THE PROVISIONS OF SECTION 1.3 ABOVE

**** 3

***** SILICON GIVES WRITTEN NOTICE TO BORROWER OF SUCH EVENT OF DEFAULT

****** HAVING AN AGGREGATE VALUE IN EXCESS OF $25,000

******* OTHER THAN IN CONNECTION WITH AN INITIAL PUBLIC OFFERING OF

BORROWER'S STOCK

******** AND IS CONTINUING

7.2 REMEDIES. Upon the occurrence of any Event of Default, and at any time thereafter*, Silicon, at its option, and without notice or demand of any kind (all of which are hereby expressly waived by Borrower-, may do any one or more of the following: (a) Cease making Loans or otherwise extending credit to Borrower under this Agreement or any other document or agreement; (b) Accelerate and declare all or any part of the Obligations to be immediately due, payable, and performable, notwithstanding any deferred or installment payments allowed by any instrument evidencing or relating to any Obligation; (c) Take possession of any or all of the Collateral wherever it may be found, and for that purpose


Borrower hereby authorizes Silicon without judicial process to enter onto any of Borrower's premises without interference to search for, take possession of, keep, store, or remove any of the Collateral, and remain on the premises or cause a custodian to remain on the premises in exclusive control thereof, without charge ** for so long as Silicon deems it reasonably necessary in order to complete the enforcement of its rights under this Agreement or any other agreement; provided, however, that should Silicon seek to take possession of any of the Collateral by Court process, Borrower hereby irrevocably waives: (i) any bond and any surety or security relating thereto required by any statute, court rule or otherwise as an incident to such possession; (ii) any demand for possession prior to the commencement of any suit or action to recover possession thereof-, and (iii) any requirement that Silicon retain possession of, and not dispose of, any such Collateral until after trial or final judgment; (d) Require Borrower to assemble any or all of the Collateral and make it available to Silicon at places designated by Silicon which are reasonably convenient to Silicon and Borrower, and to remove the Collateral to such locations as Silicon may deem advisable; (e) Complete the processing, manufacturing or repair of any Collateral prior to a disposition thereof and, for such purpose and for the purpose of removal, Silicon shall have the right to use Borrower's premises, vehicles, hoists, lifts, cranes, equipment and all other property without charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its condition at the time Silicon obtains possession of it or after further manufacturing, processing or repair, at one or more public and/or private sales, in lots or in bulk, for cash, exchange or other property, or on credit, and to adjourn any such sale from time to time without notice other than oral announcement at the time scheduled for sale. Silicon shall have the right to conduct such disposition on Borrower's premises without charge**", for such time or times as Silicon deems reasonable, or on Silicon's premises, or elsewhere and the Collateral need not be located at the place of disposition. Silicon may directly or through any affiliated company purchase or lease any Collateral at any such public disposition, and if permissible under applicable law, at any private disposition. Any sale or other disposition of Collateral shall not relieve Borrower of any liability Borrower may have if any Collateral is defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Receivables and General Intangibles comprising Collateral and, in connection therewith, Borrower irrevocably authorizes Silicon to endorse or sign Borrower's name on all collections, receipts, instruments and other documents, to take possession of and open mail addressed to Borrower and remove therefrom payments made with respect to any item of the Collateral or proceeds thereof, and, in Silicon's sole discretion, to grant extensions of time to pay, compromise claims and settle Receivables and the like for less than face value; (h) Offset against any sums in any of Borrower's general, special or other Deposit Accounts with Silicon; and (i) Demand and receive possession of any of Borrower's federal and state income tax returns and the books and records utilized in the preparation thereof or refer-ring thereto. All reasonable attorneys' fees, expenses, costs, liabilities and obligations incurred by Silicon with respect to the foregoing shall be added to and become part of the Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. Without limiting any of Silicon's rights and remedies, from and after the occurrence of any Event of Default*, the interest rate applicable to the Obligations shall be increased by an additional four percent per annum.

*DURING THE CONTINUANCE OF SUCH EVENT OF DEFAULT

**BY BORROWER

-(EXCEPT THAT SILICON SHALL GIVE BORROWER ONE GENERAL NOTICE, CONCURRENTLY WITH OR PRIOR TO EXERCISING ANY OF' THE FOLLOWING REMEDIES, WHICH NOTICE MAY BE GIVEN VIA FACSIMILE (WHICH WILL BE DEEMED TO HAVE BEEN GIVEN THE DAY OF ELECTRONIC CONFIRMATION OF DELIVERY VIA FACSIMILE, OR IF THAT DAY IS NOT A BUSINESS DAY, THEN THE NEXT BUSINESS DAY AFTER ELECTRONIC CONFIRMATION OF DELIVERY VIA FACSIMILE), STATING, IN GENERAL TERMS, THAT "SILICON IS PROCEEDING TO EXERCISE ITS RIGHTS AND REMEDIES" OR WORDS OF SIMILAR EFFECT (BUT NO SUCH NOTICE SHALL BE REQUIRED IF EXIGENT CIRCUMSTANCES MAKE IT UNDULY DIFFICULT OR IMPRACTICAL TO GIVE ANY SUCH NOTICE)), SILICON

7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and Silicon agree that a sale or other disposition (collectively, "sale") of any Collateral which complies with the following standards will conclusively be deemed to The commercially reasonable: (i) Notice of the sale is given to Borrower at least seven days prior to the sale, and, in the case of a public sale, notice of the sale is published at least seven days before the sale in a newspaper of general circulation in the county where the sale is to be conducted; (ii) Notice of the sale describes the collateral in general, nonspecific terms; (iii) The sale is conducted at a place designated by Silicon, with or without the Collateral being present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in cash or by cashier's check or wire transfer is required; (vi) With respect to any sale of any of the Collateral, Silicon may (but is not obligated to) direct any prospective purchaser to ascertain directly from Borrower any and all information concerning the same. Silicon shall be free to employ other methods of noticing and selling the Collateral, in its discretion, if they are commercially reasonable.

7.4 POWER OF ATTORNEY. Upon the occurrence * of any Event of Default, without limiting Silicon's other rights and remedies, Borrower grants to Silicon an irrevocable power of attorney coupled with an interest, authorizing and permitting Silicon (acting through any of its employees, attorneys or agents) at any time, at its option, but without obligation, with or without notice to Borrower, and at Borrower's expense, to do any or all of the following, in Borrower's name or otherwise, but Silicon agrees to exercise the following powers


in a commercially reasonable manner: (a) Execute on behalf of Borrower any documents that Silicon may, in its sole discretion, deem advisable in order to perfect and maintain Silicon's security interest in the Collateral, or in order to exercise a right of Borrower or Silicon, or in order to fully consummate all the transactions contemplated under this Agreement, and all other present and future agreements; (b) Execute on behalf of Borrower any document exercising, transferring or assigning any option to purchase, sell or otherwise dispose of or to lease (as lessor or lessee) any real or personal property which is part of Silicon's Collateral or in which Silicon has an interest; (c) Execute on behalf of Borrower, any invoices relating to any Receivable, any draft against any Account Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or other lien, or assignment or satisfaction of mechanic's, materialman's or other lien;
(d) Take control in any manner of any cash or non-cash items of payment or proceeds of Collateral; endorse the name of Borrower upon any instruments, or documents, evidence of payment or Collateral that may come into Silicon's possession; (e) Endorse all checks and other forms of remittances received by Silicon; (f) Pay, contest or settle any lien, charge, encumbrance, security interest and adverse claim in or to any of the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; (g) Grant extensions of time to pay, compromise claims and settle Receivables and General Intangibles for less than face value and execute all releases and other documents in connection therewith; (h) Pay any sums required on account of Borrower's taxes or to secure the release of any liens therefor, or both; (i) Settle and adjust, and give releases of, any insurance claim that relates to any of the Collateral and obtain payment therefor; (j) Instruct any third party having custody or control of any books or records belonging to, or relating to, Borrower to give Silicon the same rights of access and other rights with respect thereto as Silicon has under this Agreement; and (k) Take any action or pay any sum required of Borrower pursuant to this Agreement and any other present or future agreements. Any and all reasonable sums paid and any and all reasonable costs, expenses, liabilities, obligations and attorneys' fees incurred by Silicon with respect to the foregoing shall be added to and become part of the Obligations, shall be payable on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. In no event shall Silicon's rights under the foregoing power of attorney or any of Silicon's other rights under this Agreement be deemed to indicate that Silicon is in control of the business, management or properties of Borrower.

*AND DURING THE CONTINUANCE

7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any sale of the Collateral shall be applied by Silicon first to the reasonable costs, expenses, LIABILITIES, obligations and attorneys' fees incurred by Silicon in the exercise of its rights under this Agreement, second to the interest due upon any of the Obligations, and third to the principal of the Obligations, in such order as Silicon shall determine in its sole discretion. Any surplus shall be paid to Borrower or other persons legally entitled thereto; Borrower shall remain liable to Silicon for any deficiency. If, Silicon, in its sole discretion, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Silicon shall have the option, exercisable at any time, in its sole discretion, of either reducing the Obligations by the principal amount of purchase price or deferring the reduction of the Obligations until the actual receipt by Silicon of the cash therefor.

7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth in this Agreement, Silicon shall have all the other rights and remedies accorded a secured party under the California Uniform Commercial Code and under all other applicable laws, and under any other instrument or agreement now or in the future entered into between Silicon and Borrower, and all of such rights and remedies are cumulative and none is exclusive. Exercise or partial exercise by Silicon of one or more of its rights or remedies shall not be deemed an election, nor bar Silicon from subsequent exercise or partial exercise of any other rights or remedies. The failure or delay of Silicon to exercise any rights or remedies shall not operate as a waiver thereof, but all rights and remedies shall continue in full force and effect until all of the Obligations have been fully paid and performed.

8. DEFINITIONS. As used in this Agreement, the following terms have the following meanings:

"ACCOUNT DEBTOR" means the obligor on a Receivable.

"AFFILIATE" means, with respect to any Person, a relative, partner, shareholder, director, officer, or employee of such Person, or any parent or subsidiary of such Person, or any Person controlling, controlled by or under common control with such Person.

"BUSINESS DAY" means a day on which Silicon is open for business.

"CODE" means the Uniform Commercial Code as adopted and in effect in the State of California from time to time.

"COLLATERAL" has the meaning set forth in Section 2.1 above.

"DEFAULT" means any event which with notice or passage of time or both, would constitute an Event of Default.

"DEPOSIT ACCOUNT" has the meaning set forth in Section 9105 of the Code.

"ELIGIBLE INVENTORY" [NOT APPLICABLE].


"ELIGIBLE RECEIVABLES" means Receivables arising in the ordinary course of Borrower's business from the sale of goods or rendition of services, which Silicon, in its * judgment, shall deem eligible for borrowing, based on such considerations as Silicon may from time to time deem appropriate. Without limiting the fact that the determination of which Receivables are eligible for borrowing is a matter of Silicon's discretion, the following (the "MINIMUM ELIGIBILITY REQUIREMENTS") are the minimum requirements for a Receivable to be an Eligible Receivable: (i) the Receivable must not be out