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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________
FORM 10-K
(Mark One)
 
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                
Commission File No. 000-33043
OMNICELL, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
94-3166458
(IRS Employer
Identification No.)
590 East Middlefield Road
Mountain View, CA 94043
(Address of registrant's principal executive offices, including zip code)

(650) 251-6100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock, $0.001 par value
 
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ý     No  o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  o     No  ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ý     No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ý     No  o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ý
 
Accelerated filer   o
 
Non-accelerated filer  o
  (Do not check if a
smaller reporting company)
 
Smaller reporting company  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o     No  ý

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The aggregate market value of the registrant's common stock, $0.001 par value, held by non-affiliates of the registrant as of June 30, 2014 was $1.0 billion (based upon the closing sales price of such stock as reported on The NASDAQ Global Select Market on such date) which excludes an aggregate of 1,214,401 shares of the registrant's common stock held by officers, directors and affiliated stockholders. For purposes of determining whether a stockholder was an affiliate of the registrant at June 30, 2014 , the registrant has assumed that a stockholder was an affiliate of the registrant at June 30, 2014 if such stockholder (i) beneficially owned 10% or more of the registrant's common stock and/or (ii) was affiliated with an executive officer or director of the registrant at June 30, 2014 . Exclusion of such shares should not be construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant or that such person is controlled by or under common control with the registrant.
As of February 20, 2015 there were 36,166,305 shares of the registrant's common stock, $0.001 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement for the 2015 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K are incorporated by reference in Part III, Items 10-14 of this Form 10-K.
 


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OMNICELL, INC.
2014 Form 10-K Annual Report
TABLE OF CONTENTS
 
 
Page No.
 
 
 
 
 
 
 
 
 
OTHER

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FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS
This annual report on Form 10-K contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations.” These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
•
our expectations regarding our future product bookings, which consist of all firm orders, as evidenced by a contract and purchase order for equipment and software and, generally, by a purchase order for consumables. Equipment and software bookings are installable within 12 months and consumables are generally recorded as revenue within one month;
•
the extent and timing of future revenues, including the amounts of our current backlog, which represents firm orders that have not completed installation and therefore have not been recognized as revenue;
•
the size or growth of our market or market share;
•
the opportunity presented by new products, emerging markets and international markets;
•
our ability to align our cost structure and headcount with our current business expectations;
•
the operating margins or earnings per share goals we may set;
•
our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
•
our ability to generate cash from operations and our estimates regarding the sufficiency of our cash resources; and
•
our ability to acquire companies, businesses, products or technologies on commercially reasonable terms and integrate such acquisitions effectively.
In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "projects," "should," "will," "would" and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events, are based on assumptions and are subject to risks and uncertainties. We discuss many of these risks in this annual report in greater detail in Part II - Section 1A. “Risk Factors” below. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this annual report. You should also read this annual report and the documents that we reference in this annual report and have filed as exhibits, completely and with the understanding that our actual future results may be materially different from what we expect.  All references in this report to "Omnicell," "our," "us," "we," or the "Company" collectively refer to Omnicell, Inc., a Delaware corporation, and its subsidiaries. The term "Omnicell, Inc.," refers only to Omnicell, Inc., excluding its subsidiaries.
Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.
We own various trademarks, copyrights and trade names used in our business, including the following: Omnicell ® , the Omnicell logo, OmniRx ® , OmniCenter ® , OmniSupplier ® , OmniBuyer ® , SafetyStock ® , WorkflowRx™, OmniLinkRx™, SecureVault™, Optiflex™, SinglePointe™, AnywhereRN™, Anesthesia Workstation™ , Savvy™, MTS Medication Technologies ® , the MTS Medication Technologies logo, Medlocker ® , AccuFlex ® , Autobond ™, AutoGen ™, easyBLIST™, Pandora ® , OnDemand ® , Multi-Med™, RxMap ® , MTS-350 ™, MTS-400 ™, MTS-500 ™ and SureMed. This report also includes other trademarks, service marks and trade names of other companies. All other trademarks used in this report are trademarks of their respective holders.

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PART I
ITEM 1. BUSINESS
Overview
We are a leading provider of automation and business information solutions designed to enable healthcare systems to streamline the medication administration process and manage costly medical supplies for increased operational efficiency and enhanced patient safety.
More than 3,000 customers worldwide have utilized Omnicell Automation and Analytics solutions to help increase operational efficiency, reduce errors, deliver actionable intelligence and improve patient safety. Omnicell Medication Adherence solutions, including its MTS Medication Technologies brand, provide innovative medication adherence packaging solutions designed to help reduce costly hospital readmissions. In addition, these solutions help enable approximately 6,000 institutional and retail pharmacies worldwide to maintain high accuracy and quality standards in medication dispensing and administration while optimizing productivity and controlling costs.
The medical industry has become increasingly aware that human factors inevitably create the risk of medication administration errors in the course of patient care.
The Institute of Medicine, a non-profit, non-governmental arm of the National Academies, published a report in 2006 that estimated that 1.5 million medication errors are made each year in the United States. Acute care facilities are required to adhere to medication regulatory controls that we believe cannot be adequately supported by manual tracking systems or partially automated systems. Any nursing shortages would add an additional challenge to acute care facilities to meet regulatory controls and improve patient safety while still providing adequate patient care. Non-acute care facilities face similar safety challenges. In its 2003 "Adherence to Long-Term Therapies-Evidence for Action," the World Health Organization stated, “Across diseases, adherence is the single most important modifiable factor that compromises treatment outcome.” U.S. health system thought leaders see medication adherence as a key requirement for closing the medication loop and delivering better clinical outcomes and financial results. Medication non-adherence is described as a critical problem creating approximately $290 billion in extra costs per year resulting in approximately 125,000 deaths per year, according to the New England Healthcare Institute. In addition, the Centers for Medicare & Medicaid Services stated in 2012 that 11% of all hospital admissions were related to medication non-adherence.
We provide solutions to help healthcare systems and caregivers address these aforementioned needs. We believe our solutions align us with the long-term trends of the healthcare market to manage the health of patients across the continuum of care, and that our patient-centric medication and supply management solutions help improve workflow efficiencies and patient outcomes.
Operating Segments and Products
Our business is organized into two operating segments distinguished by products based on customer needs. In the first quarter of 2014, we modified our segment reporting structure to match our new operating structure. The two operating segments are Automation and Analytics and Medication Adherence.
Automation and Analytics
The Automation and Analytics segment is organized around the design, manufacturing, selling and servicing of medication and supply dispensing systems, pharmacy inventory management systems, and related software. Our Automation and Analytics products are designed to enable our customers to enhance and improve the effectiveness of the medication-use process, the efficiency of the medical-surgical supply chain, overall patient care and clinical and financial outcomes of medical facilities. Through modular configuration and upgrades, our systems can be tailored to specific customer needs.
Medication Adherence
The Medication Adherence segment primarily includes the manufacturing and selling of consumable medication blister cards, packaging equipment and ancillary products and services. These products are used to manage medication administration outside of the hospital setting and include medication adherence products sold under the brand name MTS Medication Technologies ("MTS"), Surgichem Limited ("Surgichem") and the Omnicell brand. MTS products consist of proprietary medication packaging systems and related products for use by institutional pharmacies servicing long-term care, and correctional facilities or retail pharmacies serving patients in their local communities. Similarly, Surgichem is a provider of medication adherence packaging systems and solutions to the U.K. community and home care markets.
Financial Information by Segment

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For information regarding our revenues, cost of revenues, gross profit and income from operations by segment, see Note 17, Segment Information, of the Notes to Consolidated Financial Statements and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in this annual report.
Business Strategy
Our key business strategies include:
•
Further penetrating existing markets through technological leadership by:
• Consistently innovating our product and service offerings; and
• Maintaining our customer-oriented product installation process.
•
Increasing penetration of new markets, such as non-acute care and international markets by:
• Launching new products and technologies that are specific to the needs of those markets;
• Building and establishing direct sales, distribution or other capabilities when and where it is appropriate;
• Partnering with companies that have sales, distribution or other capabilities that we do not possess; and
• Increasing customer awareness of safety issues in the administration of medications;
•
Expanding our product offering through acquisitions and partnerships.
Our solutions are designed to provide everything the customer requires for installation and maintenance of medication, medical and surgical supply control. Our vision of improving healthcare for everyone has led us to take certain steps in the development of our business and our long term approach to our market, such as:
•
Providing a full service, positive experience for our hospital customers in the solution sales process, the timing and implementation of our product installations and the responsiveness of our support services;
•
Delivering solutions that are designed to provide our customers with the best experience in the healthcare industry, as measured by customer input and third party surveys;
•
Innovating products to address patient safety and cost-containment pressures facing healthcare facilities while improving clinician workflow and overall operating efficiency;
•
Incorporating a broad range of clinical input into our product solution development to accommodate needs ranging from those of institutional pharmacies and stand-alone community hospitals to multi-hospital entities and integrated delivery networks ("IDNs");
•
Developing new solutions to enhance our customers' existing systems and protect our customers' investments by preserving, leveraging and upgrading their existing information systems, as well as striving to provide integration of our products with the other healthcare information systems used by our customers; and
•
Providing flexibility in our systems that can be tailored to specific customer needs through modular upgrades, thereby protecting our customers' investments.
We have developed or acquired numerous technologies that provide long-term solutions for our customers. Our own product development activities have brought a number of innovative and proprietary products to the market. Our most recently announced solutions include the fourth generation Omnicell G4 platform with the Unity database across the automated medication dispensing system. The Unity database is designed to decrease the risk of human error and save significant pharmacy time by eliminating the need for repetitive entry of drug formularies in multiple locations. The Unity G4 platform is designed to help our customers closely manage medication and supply inventory to reduce costs, comply with increasingly stringent regulatory requirements and safeguard the patient.
In addition to our own development, we have acquired products that extend patient safety controls to a wider range of applications and departments in the hospital. These include products for the central pharmacy, the operating room, the catheterization lab, the nursing areas and the patient point of care. Our most recent acquisitions include MTS Medication Technologies in 2012, which extended our product line to include solutions for Medication Adherence customers, and Surgichem in 2014, which further extends our Medication Adherence solutions in Europe. Through continued internal development and acquisitions, we intend to improve our current product offerings and expect to expand future product

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offerings to enable healthcare facility clinicians to automate and control more of the medication, and medical and surgical supply distribution processes, while providing an even greater ability to improve patient safety.
Industry Background
The delivery of healthcare in the United States still relies on a significant number of manual and paper-based processes. Most hospitals have deployed at least some automation solutions, but few have deployed them throughout the institution. The use of manual and paper-based systems in many hospital departments today results in highly complex and inefficient processes for tracking and delivering medications and supplies. In addition, many existing healthcare information systems are unable to support the modernization of healthcare delivery processes or address mandated patient safety initiatives. These factors have contributed to medical errors and unnecessary process costs across the healthcare sector.
Healthcare providers and facilities are also affected by significant economic pressures. Rising costs of labor, prescription drugs and new medical technology all contribute to increased spending. Governmental pressures surrounding healthcare reform have led to increased scrutiny of the cost and efficiency with which healthcare providers deliver their services. These factors, combined with the continuing consolidation in the healthcare industry, have significantly increased the need to improve the efficiency of healthcare professionals and to control costs.
Our Automation and Analytics products are sold worldwide to a wide variety of healthcare institutions, but most of our sales occur to acute care hospital customers in the United States. The United States acute care hospital market is comprised of approximately 6,500 hospitals and other facilities with a total capacity of approximately 950,000 acute care beds. Our customers include single location community hospitals, government hospitals and regional and national entities.
We also sell our Automation and Analytics products directly to non-acute care providers, which includes all healthcare facilities that are not hospitals, and organizations that supply non-acute care providers. We estimate there are approximately 49,000 facilities in the United States that could utilize our Automation and Analytics products and very few of them are using our solutions at this time.
Outside the United States, healthcare providers are becoming increasingly aware of the benefits of automation. Many governmental and private entities look to the progress made over the last several years in the United States and are starting to invest significantly in information technology and automation. BCC Research reports that worldwide inpatient pharmacy automation revenue growth in our industry is expected to be 8.5% between 2013 and 2018. We sell our Automation and Analytics products in a variety of countries, but to date we have focused our sales efforts on Canada, the United Kingdom, the countries of the Middle East region, and China.
Our Medication Adherence products are also sold to a variety of healthcare providers, but most of our revenue in this segment is from institutional and retail pharmacies. In the United States, where approximately 73% of our Medication Adherence business occurs, the market is comprised of approximately 4,000 institutional pharmacies operated by 1,500 companies that service over 15,000 long-term care facilities. According to IMS Healthcare, Inc. ("IMS"), an independent third party provider of information to the pharmaceutical and healthcare industry, pharmaceutical sales are expected to grow approximately 1% to 4% annually through 2016. IMS expects that certain sectors of the market, such as biotechnology and other specialty and generic pharmaceuticals, will grow faster than the overall market which suggests opportunities for the market in which we operate. In addition to medication control at long-term care facilities, our Multi-medication products provide packaging that simplifies the process for individuals providing self-care to track and administer medications.
Key Industry Events and Reports
Reports by the Institute of Medicine, the Food and Drug Administration ("FDA"), and The Joint Commission have increased awareness of the adverse impacts of medication errors. Regulatory standards and industry guidelines, such as those published by the Institute for Safe Medication Practices, as well as the desire of healthcare organizations to improve quality and avoid liability, have driven acute care facilities to prioritize investment in capital equipment, including automated medication dispensing cabinets, which are a standard of care, to improve patient safety. Such reports and regulatory standards include the following:
•
In 2012, The Joint Commission updated its medication management standards which include MM.03.01.01 requiring that medication storage is designed to assist in maintaining medication integrity, promote the availability of medications when needed, minimize the risk of medication diversion, and reduce potential dispensing errors. 
•
In 2010, the FDA updated its guidance that requires linear bar codes on most prescription drugs. Drug manufacturers, re-packagers, re-labelers and private label distributors are subject to the rule. The FDA estimated that the bar code rule, once implemented, would result in a 50% reduction in medication errors, 500,000 fewer adverse drug events over the subsequent 20 years, $93 billion in cost savings and other economic benefits.

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•
In 2002, The Joint Commission established the National Patient Safety Goals ("NPSG") program. In 2010, NPSG 03.04.01, National Patient Safety Goal on Labeling Medications, required the labeling of all medications, medication containers (syringes, medicine cups, basins, etc.) and other solutions on and off the sterile field in perioperative and other procedural settings.
Leading academic medical centers are among those customers benefiting from our technologies, and our customers include 10 of the 18 U.S. News & World Report Honor Roll of Best Hospitals 2013-2014.
Medication errors can occur in post-acute settings as well. Medication non-adherence is extremely common. According to research by Osterberg and Blaschke published in the New England Journal of Medicine in 2005, more than half of the 3.2 billion prescriptions dispensed annually in the United States are not taken as prescribed, and according to numerous studies, the same non-adherence rate exists for chronic disease medications. Poor adherence results in significant morbidity, mortality and avoidable healthcare costs. The New England Healthcare Institute estimated in 2009 that medication non-adherence was the major driver of $290 billion per year in avoidable healthcare costs, equivalent to 13% of total national health expenditures.
Medication adherence can be improved through attitudinal and behavioral changes, which pharmacists can encourage and help facilitate by providing interventional support, including adherence tools, such as blister cards, which are commonly used in post-acute settings. A 2011 study by CVS Caremark published in Health Affairs concluded that the medical cost per patient with chronic vascular disease was $13,000 to $39,000, annually, and patients who take medications as directed by physicians experienced medical savings ranging from $1,900 to $8,900, annually. The study also found that these patients experienced fewer emergency room visits and inpatient hospital stays.
Healthcare Reform
In 2009, the U.S. government passed the American Reinvestment and Recovery Act ("ARRA") which provides for, among other things, the funding of incentives for healthcare organizations to implement Electronic Healthcare Records ("EHR"). ARRA establishes minimal requirements for electronic healthcare record usage and provides incentives for electronic healthcare record adoption through 2015 and penalties for non-adoption after 2015. In 2010, the U.S. Congress passed the Patient Protection and Affordable Care Act ("PPACA"), which prescribes broad-based measures designed to provide healthcare to a greater percentage of the population. We believe that both the ARRA and the PPACA will drive the need for increased efficiency in providing healthcare without reducing healthcare standards.
We believe our products assist healthcare organizations in achieving the goals of the new laws by allowing them to reduce process steps, eliminate manual tracking and waste, enable population-level performance insights, track quality levels and reduce errors that result in unnecessary cost. Our Unity G4 platform includes an automated dispensing system that is Modular EHR stage 2 certified and works with all "hospital information system vendors," as defined by the U.S. Department of Health and Human Services Office of National Coordinator for Health Information Technology. Our Pandora Healthcare Data Analytics solution provides enterprise-level insights that can assist in monitoring hospital performance and quality of care. Our Unity platform solutions help decrease the risk of human error and save significant pharmacy time by eliminating the need for repetitive entry of drug formularies in multiple locations. Our Unity platform is designed to help hospitals closely manage medication and supply inventory to reduce costs, comply with increasingly stringent regulatory pressures and safeguard the patient.
Automation and Analytics Products and Services
Our Automation and Analytics products are designed to enable our customers to enhance and improve the effectiveness of the medication-use process, the efficiency of the medical-surgical supply chain, overall patient care and clinical and financial outcomes of medical facilities. Through modular configuration and upgrades, our systems can be tailored to specific customer needs. From the point at which a medication arrives at the hospital receiving dock until the time it is administered to the patient, our systems are capable of storing, packaging, bar coding, ordering and issuing the medication, as well as providing information and controls on its use and reorder. Our medication-use product line includes systems for medication dispensing in acute care nursing departments, central pharmacy automation, physician order management and nursing workflow automation at the bedside. Our supply product lines provide healthcare facilities with cost data that enables detailed quantification of charges for payer reimbursement, inventory management, implant monitoring and the timely reordering of supplies. These products range from industrial-grade software-driven carousels for managing large amounts of inventory in the central pharmacy to high-security closed-cabinet systems and software to open-shelf and combination solutions in the nursing unit, catheterization lab and operating room. We also provide services, including customer education and training, to help customers to optimize their use of our technology.

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Our analytics solution allows pharmacists and materials managers to more easily manage inventory flow, tracking and optimization, and aids in the identification of those engaged in narcotics diversion within the acute care facility.
Medication-Use Products
Our medication-use product line includes our OmniRx, SinglePointe, AnywhereRN, Pandora Data Analytics, Savvy Mobile Medication System, OmniLinkRx, WorkflowRx, Central Pharmacy and Satellite Pharmacy Manager, Controlled Substance Management and Anesthesia Workstation products. To provide our customers with end-to-end medication control, our product line incorporates bar code technology throughout. Our solutions incorporate advanced software technology, which we believe is the most advanced on the market today, and our G4 platform integrates disparate systems onto a single database. Each of the products in our medication-use solution suite is summarized in the table below.
Product
 
Use in Hospital
 
Description
OmniRx
 
Any nursing area in a hospital department that administers medications
 
Secure dispensing system that automates the management and dispensing of medications at the point of use
SinglePointe
 
Any nursing area in a hospital department that administers medications
 
Software product for use in conjunction with the OmniRx product that controls medications on a patient-specific basis, allowing automated control of up to 100% of the medications used in a hospital
AnywhereRN
 
Any nursing area in a hospital department that administers medications
 
Software that allows nurses to remotely operate automated dispensing cabinets from virtually any workstation in the hospital
Pandora Analytics
 
Hospital central pharmacy and general hospital management
 
Advanced reporting and data analytics tools
Savvy Mobile System
 
Any nursing area in a hospital department that administers medications
 
Mobile wireless computer and dispensing system that provides a platform for hospital information systems and a convenient and secure method for nurses to move medication and supplies
OmniLinkRx
 
Hospital central pharmacy
 
Prescription routing system that allows nurses and doctors to scan handwritten prescription orders for electronic delivery to pharmacists for approval and filling
WorkflowRx
 
Hospital central pharmacy
 
Automated pharmacy storage, retrieval and packaging systems
Central Pharmacy and Satellite Pharmacy Manager
 
Hospital central pharmacy
 
Software for managing inventory in central and satellite pharmacy locations
Controlled Substance Management
 
Hospital central pharmacy
 
Controlled substance inventory management system
Anesthesia Workstation
 
Operating room
 
Secure dispensing system for the management of anesthesia supplies and medications
Nursing Floor Solutions
The OmniRx solution is the core of our medication control solutions. The OmniRx solution is a dispensing cabinet that automates the management and dispensing of medications at the point of use. The OmniRx features biometric fingerprint identification, advanced single-dose dispensing, bar code confirmation, integrated medication label printing and a wide range of drawer modules enabling the establishment of various security levels. Software features of the OmniRx include patient profiling, notification of medications due, a variety of security features, waste management, clinical pharmacology and integration with an Internet browser for clinical reference information. OmniRx has met meaningful use criteria by obtaining modular EHR certification, as defined by the Office of the National Coordinator. OmniRx is highly configurable to allow the pharmacist the capability to tailor the usage of the system to specific regulatory controls and workflows.
The SinglePointe solution is a software extension to the OmniRx solution that allows pharmacists to automate the distribution of patient-specific medications, enabling control of up to 100% of all medications through the automated dispensing system. Controlling patient-specific medications through the OmniRx extends the benefits of automated medication distribution, including increased patient safety, consistency in tracking and inventory control, simplification of procedures and improved monitoring of controlled substances to a broader range of the medication distribution process in the hospital.
The AnywhereRN solution is a software solution that allows nurses to operate the automated dispensing cabinets from virtually any remote workstation within the hospital. This software enables enhanced workflow for nurses such that they

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are no longer limited to being directly in front of the cabinet to perform certain medication administration functions. AnywhereRN is intended to reduce nurse distractions in the medication administration process, allowing cabinet operations to be done in private or quieter areas. AnywhereRN is also intended to eliminate congestion at the cabinet by minimizing nurse queuing to withdraw medications.
The Pandora Analytics solution is comprised of reports and analytical software for medication diversion detection, customizable user options, hospital inventory management controls, point‑of‑care data analytics and financial optimization. Pandora Analytics is designed to assist hospitals in their efforts to improve patient safety, regulatory compliance and reduce costs.
The Savvy Mobile Medication solution provides a mobile workstation for nurses, equipped with locking drawers for secure transportation of medications and patient supply items. Savvy allows both tracking and physical control of medications to be extended to the patient bedside. The Savvy Mobile Medication solution is designed to provide efficient workflow support, allowing nurses to remotely access the automated dispensing cabinet using AnywhereRN, saving nursing time and minimizing the risk of interruptions to enhance patient safety. This same mobile solution can be used to access hospital applications, including electronic medical records and electronic medication administration records.
Central Pharmacy Solutions
The OmniLinkRx solution is a physician order software product that automates communication between nurses and the pharmacy. Used in the central pharmacy, the OmniLinkRx solution simplifies the communication of handwritten physician orders from remote nursing stations to the pharmacy.
The WorkflowRx solution is an automated storage, retrieval, inventory management and repackaging solution for the central pharmacy. It is designed to help pharmacists ensure that the right medications are stored in and retrieved from proper locations, both in the central pharmacy and in automated dispensing cabinets. The WorkflowRx solution is deployed on a storage and retrieval carousel, on a repackaging system, or on both. The system may also be deployed only using bar code scanners for hospitals that do not use carousels or packagers. Bar code administration through the WorkflowRx solution is designed to help ensure that medications are stocked correctly from their point of entry into the healthcare facility. Labeling medications with bar codes using a repackaging system enables bedside medication administration solutions, such as the Savvy solution, to perform bar code checking at the patient bedside.
Central Pharmacy Manager and Satellite Pharmacy Manager are integrated software systems that automate management of pharmacy inventory. Central Pharmacy Manager automates inventory management in the central pharmacy, helping to reduce inventory costs and save staff time on ordering and receiving processes. Satellite Pharmacy Manager gives pharmacists managing satellite locations visibility into inventory levels and costs at the remote sites within their health system.
The Controlled Substance Management solution provides perpetual inventory management and an automated audit trail to help the pharmacy comply with regulatory standards for controlled substances while increasing efficiency. The shared database between the pharmacy, the operating room and nursing cabinets tracks and monitors controlled substance movement throughout the hospital, providing a true closed-loop solution. The Controlled Substance Management software, coupled with our automated dispensing technology, enables healthcare facilities to track, monitor and control the movement of controlled substances from the point of initial receipt from the wholesaler throughout internal distribution. The Controlled Substance Management solution maintains a perpetual item inventory and complete audit using integrated bar code technology with both fixed and portable scanners. Bar coded forms and labels may also be generated directly from the Controlled Substance Management system.
Operating Room Solutions
The Anesthesia Workstation solution is a system for the management of anesthesia supplies and medications. The system is tailored for the workflow of the clinician working in the operating room. The Anesthesia TT solution is a fixed‑position tabletop unit designed as a medication-only system. The Anesthesia Workstation incorporates ergonomics to enhance the particular workflows inherent to the operating room and unique software to better handle case management in the procedural areas.
Medical and Surgical Supply Products
Our medical and surgical supply products provide acute care hospitals control over consumable supplies critical to providing quality healthcare. These solutions provide inventory control software that is designed to ensure that critical supplies are always stocked in the right locations. At the same time, usage tracking helps hospital administrators to ensure that money is not wasted on excessive stores of supplies and helps optimize reimbursement by improving charge capture.

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Implantable tissue and bone grafts can also be monitored and tracked for additional patient safety and regulatory compliance. The bone and tissue features are integrated with our overall medical and surgical supply chain inventory management and charge capture systems. These solutions are designed for use in the materials management department, the nursing unit and specialty areas such as the catheterization lab and the operating room. They integrate with other information management systems and use bar code technology extensively.
Our supply product line includes the Omnicell Supply Cabinet, Omnicell Open Supply Solution, Supply/Rx Combination Cabinet, Omnicell Tissue Center, OptiFlex MS, OptiFlex SS, OptiFlex CL. Each of these products is summarized in the table below.
Product
 
Use in Hospital
 
Description
Omnicell Supply Solution
 
Any nursing area in a hospital department that uses patient care supplies
 
Secure dispensing system that automates the management and dispensing of medical and surgical supplies at the point of use
Omnicell Open Supply Solution
 
Areas that require the management of high volume/low dollar inventory as well as areas where space restrictions limit the ability to install closed cabinets and other areas such as off-site clinics
 
Ability to expand inventory management capabilities by providing efficient workflow and flexibility to enable either remote inventory management from closed supply cabinets or completely open shelf inventory management from a touchscreen PC and Scanner
Supply/Rx Combination Solution
 
Any nursing area in a hospital department that uses patient care supplies and administers medications
 
Secure dispensing system that manages both supplies and medications from the same cabinets, using the same user interface screens, in medical and surgical units and specialty areas
Omnicell Tissue Center
 
Perioperative areas of the hospital
 
Manages the chain of custody for bone and tissue specimens from the donor to the patient in the operating room
OptiFlex MS

 
Any nursing area in a hospital department that administers supplies
 
System for the management of medical and surgical supplies that provides the flexibility of using bar code control in an open shelf environment
OptiFlex SS
 
Perioperative areas of the hospital
 
Specialty modules for the perioperative areas
OptiFlex CL
 
Procedure areas in the hospital including the cardiac catheterization lab
 
Specialty modules for the cardiac catheterization lab and other procedure areas
The Omnicell Supply Solution is a secure dispensing system that dispenses and tracks medical and surgical supplies at the point of use. Specialty modules are available for a variety of solutions to manage implants and medications used across the hospital as described below.
The Omnicell Open Supply Solution provides an efficient workflow solution that allows for expanded inventory management from a closed supply cabinet or completely open shelf solution from a touchscreen PC and scanner.
Supply/Rx Combination Solution is designed to manage medications and supplies in one versatile cabinet or group of cabinets. This solution allows each department to manage supplies and medications independently, while tracking transaction data, inventory, expenses and treatment costs through a single system.
Omnicell Tissue Center allows the operating room staff to manage the chain of custody for bone and tissue specimens from the donor to the patient in the operating room. This solution enables compliance with The Joint Commission requirements and Association of Operating Room Nurses guidelines regarding the handling of tissue specimens.
OptiFlex MS solution provides control over general medical and surgical supplies stored in open shelves or in automated dispensing cabinets.
OptiFlex SS manages supplies and preference cards in the perioperative areas whether the supplies are stored on open shelves or in automated dispensing cabinets. The preference-list system creates a unique bar code for each surgical case, based on physician, procedure and patient and provides information on the case for data analysis, reporting and charge capture. The Suture Module is designed to be integrated into the Omnicell Supply Solution to secure, dispense and automatically track suture usage.
OptiFlex CL manages supplies and creates cases in the cardiac catheterization lab, interventional radiology suite and other procedure areas. This solution allows real-time point-of-use data collection and accurate supply tracking regardless of

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whether supplies are stored on open shelves or in automated dispensing cabinets. It also improves cost management through automated charge capture and case profiling by the physician. The Catheter Module is designed to be integrated into the Omnicell supply cabinet and allows hospitals to secure, dispense and electronically track accurate catheter usage. The Implant Tracking Module records expiration date, lot and serial number information to help enable compliance with Joint Commission and FDA requirements regarding surgical implants in the event of a recall.
Other Automation and Analytics Products and Services
Omnicell Interface Software provides interface and integration between our medication-use products or our supply products and a healthcare facility's in-house information management systems. Interface software is designed to provide integration and communication of patient data, logistical data, inventory information, charge capture and billing information and other healthcare database information.
Services include customer education and training and maintenance and support services, provided on a time-and-material basis. We also provide fixed period service contracts to our customers for post-installation technical support with phone support, on-site service, parts and access to software upgrades. On-site service is provided by our field service team.
Medication Adherence Products and Services
We offer solutions to assist institutional and retail pharmacies in packaging medication for patient use in care environments where there is a caregiver present and for environments where the patient is caring for themselves.
For environments where a caregiver is present, institutional and retail pharmacies use our solutions for packaging medications into adherence packages that contain a 7- to 90-day supply of a specific single medication. The blister cards may be pre-packaged ahead of time and placed into inventory until needed to fill a specific patient order, or on-demand, where individual patient medication orders are packaged and labeled by an automated robotic system. Our solutions range from manual sealers to fully automated packaging machines, the software that runs these machines, and the consumable packages used in these machines. We have packaging solutions for any size pharmacy operation which are designed to increase pharmacy output and improve dispensing accuracy, enabling improved patient safety and economics.
For environments where a patient cares for themselves, institutional and retail pharmacies use our solutions for packaging medications into adherence packages that contain all the medications a single patient is prescribed into one seven-day package. These products are primarily used in community-based pharmacies to assist in organizing complex medication regimes into a simple to use solution that enhances medication adherence. Multi-medication packages are arranged so that all the medications for a single dosing period are contained in one blister, eliminating confusion for the patient and providing the caregivers increased assurance that medications are taken in the right sequence. Our solutions include automated packaging machines that package specific patients medications on-demand, the software that runs these machines and the consumable packages used in these machines.
In addition to packaging solutions, we sell specially configured versions of our OmniRx medication dispensing machines to institutional pharmacies, which they place in long-term care facilities to manage narcotics and medications needed quickly.
Single Medication Products For Use Where A Caregiver Is Present
Pharmacy Sealers for Medication Packaging
Our heat-sealed blister cards require a sealer to create an impermeable barrier. By using specially designed equipment to control heat, time and pressure, the institutional pharmacy serving the long-term care patients is able to create a quality seal on every package, providing a secure barrier to moisture and gases. Within this range of equipment is a sealing solution suited for almost any pharmacy, from a low volume manual blister card sealer to a high volume, all electric heat sealer with programmable computer logic.
•
The SureSeal is a programmable, manual sealer using heat and pressure. It is designed as a cost effective, entry level sealer for low volume sealing of medication blister cards.
•
The Autobond is a programmable, semi-automated heat and pressure sealer operating off of electricity and compressed air. Autobond provides temperature and time controls for a consistent quality sealing.
•
The AutoGen is a programmable, semi-automated heat and pressure sealer operating off of electricity only.
•
The Gemini is a compact all-electric heat and pressure sealer.

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Automated Fillers
Our semi-automated filling equipment is designed specifically for the long-term care institutional pharmacy with enough order volume to warrant pre-packaging frequently-used medications into blister packs to keep in inventory awaiting a patient order. This packaging equipment elevates pre-packaging to a higher level of efficiency, resulting in higher accuracy and increased production levels. The systems combine both automated filling and sealing capabilities into one machine.
•
The MTS-350 is a tabletop machine capable of filling a wide range of medications and features an ergonomic design and easy-to-use controls. The MTS-350 provides a semi-automated mechanism for filling blister cards and a sealer using compressed air and heat.
•
The MTS-400 is ergonomically designed for high pre-pack volume for the medium to large pharmacy. The MTS-400 provides a portable workstation with built-in compressor and storage so as not to take up valuable counter space. Fully configured, the MTS-400 allows a single operator to perform the functions of filling, inspection, sealing and labeling simultaneously.
•
The MTS-500 is designed to automate pre-packaging in the pharmacy and is capable of producing up to 960 pre-packaged blister cards per hour. It includes an integrated label applicator and conveyor to optimize output.
Pharmacy Automation Systems
Our OnDemand automated solutions are designed to meet the broad needs of pharmacies to package individual patient medication orders accurately and efficiently. These machines interface with pharmacy information systems to obtain patient-specific prescription information which enables on-demand packaging capabilities for our larger institutional pharmacy customers. Our current line of OnDemand machines includes the following products:
•
AccuFlex uses robotic technology to accurately and efficiently fill a variety of single-dose medication dispensing systems.
•
OnDemand Express II optimizes robotic technology for very high-speed and accurate fulfillment of single-dose blister cards and reclaimable packaging.
Single Medication Blister Cards
We offer a wide variety of heat seal and cold seal blister cards. Heat Seal Blister Cards come in a variety of formats that will fit various packaging requirements and require a heat sealer such as the MTS Autobond. Blister cards come in a variety of configurations, from 14- to 90-day doses. Heat seal cards provide a stronger seal than cold seal cards, helping pharmacists ensure consistency of the medication under nearly any environmental condition. Cold Seal Cards, also known as pressure sensitive cards, are both efficient and reliable and do not require heat sealing equipment to be sealed. They are ideal for emergency orders, for heat sensitive medications or when the use of a heat sealer is not practical. Cold seal blister cards come in a variety of configurations, from 14- to 90-day doses.
Pharmacy Printing and Labeling Solutions
Pharmacy labeling is an important part of the packaging process to ensure the right medication is packaged and delivered to the right facility and, ultimately, the right patient. Drug specific, bar code scannable labels are affixed on many different types of packages prior to them being dispensed. 
We provide a Windows-based computer program that uses an extensive drug image database to produce a wide variety of medication labels on multiple printers. We also provide printers and related consumables.
Multi-Medication Solutions For Use Where Patients Care For Themselves
Pharmacy Automation Systems
Our OnDemand and M-series automated solutions are designed to meet the broad needs of pharmacies to package individual patient medication orders accurately and efficiently. These machines interface with pharmacy information systems to obtain patient-specific prescription information which enables on-demand packaging capabilities for our larger institutional pharmacy customers. Our current line of automation for multi-medication includes the following products:
•
OnDemand 400 is an automation system for multi-medication adherence packaging. The OnDemand 400 receives patient prescriptions, constructs a filling map, fills multiple medication prescriptions into a single blister card from an on-line array of 40 medications stored in specially calibrated dispensing canisters, prints a label and provides an operator a sealing station.

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•
M5000 is a fully automated system designed specifically for multi-medication adherence packaging. The M5000 receives patient prescriptions, constructs a filling map, then uses robotic technology that fills, seals, labels and checks the package. The M5000 minimizes human intervention in the multi-medication packaging process.
Multi-Medication Blister Cards
We offer a wide variety of heat seal and cold seal multi-medication blister cards, including products from our acquisition of Surgichem in August 2014. Multi-medication cards allow the packaging of multiple drugs into a single blister cavity representing a specific dosing time. Multi-medication cards are sold in a variety of formats to fit the needs of pharmacists and patients, with the most common format providing four dosing times for each of seven days in one package. Multi-medication adherence packages may be assembled by pharmacists by hand, or by using our pharmacy automation systems described above.
Medication Management Solutions
Medication management systems are becoming an integral part of long-term care facilities to manage narcotics, emergency medications and medications that are needed in a short period of time. Currently, most facilities rely on manual systems that do not provide the level of security, accountability and efficiencies that are attainable with the use of automation. When automation is implemented, pharmacies benefit by helping their customer facilities meet regulatory requirements and improve the response time. Patients benefit by having access to medications immediately with minimized medication errors. We offer specialized versions of the OmniRx medication control solution that is used by institutional pharmacies to provide their customers with secure medication management of narcotics, emergency medication, and first doses.
Sales and Distribution
We sell our Automation and Analytics and Medication Adherence solutions primarily in the United States and Canada. Approximately 91% of our product revenue was generated in those markets for the year ended December 31, 2014. No single customer accounted for greater than 10% of our revenues for the years ended December 31, 2014, December 31, 2013 and December 31, 2012. Our sales force is organized by geographic region in the United States and Canada where our sales are primarily made direct to end user customers with the exception of some distribution of Medication Adherence consumables. Outside the United States and Canada, we field a direct sales force for Medication Adherence products in the United Kingdom and Germany. For other geographies where we sell Medication Adherence products, and for all Automation and Analytics products sold outside the United States and Canada, we sell through distributors and resellers. Our foreign operations are discussed in Note 17, Segment Information, of the Notes to Consolidated Financial Statements and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in this annual report. Our combined direct, corporate and international distribution sales teams consisted of approximately 206 staff members as of December 31, 2014. Nearly all of our direct sales team members have hospital capital equipment or clinical systems experience. Our sales representatives are generally organized to sell either the Automation and Analytics or Medication Adherence product lines. Our corporate sales team focuses on large IDNs, group purchasing organizations ("GPOs"), and the U.S. government.
The sales cycle for our automation systems is long and can take in excess of 24 months. This is due in part to the cost of our systems and the number of people within each 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 or other decision makers and is responsible for educating each group within the healthcare facility about the benefits of our solutions relative to competing methods of managing medications or medical and surgical supplies.
We have contracts with GPOs that enable us to sell our automation systems to GPO‑member healthcare facilities. The primary advantage to customers who buy our products pursuant to a GPO agreement is that they benefit from pre-negotiated contract terms and pricing. The benefit to the GPO is the fee earned as a percentage of sales, which is paid by us. These GPO contracts are typically for multiple years with options to renew or extend for up to two years and some of which can be terminated by either party at any time. Our current GPO contracts include Amerinet, Inc., Federal Supply Schedule, First Choice Management Services, Healthcare Purchasing Alliance, LLC, HealthTrust Purchasing Group, L.P., Magnet, MedAssets Performance Management Solutions, Novation LLC, Premier Healthcare Alliance, L.P. and Resource Optimization & Innovation, LLC. We have also contracted with the U.S. General Services Administration, allowing the Department of Veteran Affairs, the Department of Defense and other Federal Government customers to purchase or lease our products.
We offer multi-year, non-cancelable lease payment terms to assist healthcare organizations in purchasing our systems by reducing their cash flow requirements. We sell the majority of our multi-year lease receivables to third‑party leasing finance companies, but we also maintain a certain portion of our leases in-house.
Our field operations representatives support our sales force by providing operational and clinical expertise prior to the close of a sale and during installation of our automation systems. This group assists the customer with the technical

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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 our field service team and technical support group.
We offer telephone technical support through our technical support centers in Illinois and Florida. Our support centers are staffed 24 hours a day, 365 days a year. We have found that a majority of our customers' 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 offer a suite of remote monitoring features, which proactively monitors system status and alerts service personnel to potential problems before they lead to system failure.
In addition, our international sales team handles direct sales to non-acute healthcare facilities in the United Kingdom and Germany, and handles sales, installation and service to non-acute healthcare facilities through distribution partners in other parts of Europe, Asia, Australia, the Middle East, South Africa, and South America. Our international sales team handles sales, installation and service to all Automation and Analytics customers outside the U.S. and Canada through distribution partners. Our products are available in a variety of languages including Mandarin, French, Spanish and German.
We have not sold and have no future plans to sell our products either directly or indirectly to customers located in countries that are identified as state sponsors of terrorism by the U.S. Department of State, or those subject to economic sanctions and export controls.
Manufacturing and Inventory
The manufacturing process for our Automation and Analytics products allows us to configure hardware and software in unique combinations to meet a wide variety of individual customer needs. The Automation and Analytics product manufacturing process primarily consists of the final assembly of components and testing of the completed product. Many of the subassemblies and components we use are provided by third-party contract manufacturers or other suppliers. We and our partners test these subassemblies and perform inspections to assure the quality and reliability of our products. While many components of our systems are standardized and available from multiple sources, certain components or subsystems are fabricated by a sole supplier according to our specifications and schedule requirements. Our Medication Adherence product manufacturing process consists of fabrication and assembly of equipment and mechanized process manufacturing of consumables.
Our arrangements with our contract manufacturers generally set forth quality, cost and delivery requirements, as well as manufacturing process terms, such as continuity of supply, inventory management, capacity flexibility, quality and cost management, oversight of manufacturing and conditions for the use of our intellectual property.
Our manufacturing organization procures components and schedules production based on the backlog of customer orders. Installation of equipment and software typically occurs between two weeks and twelve months after the initial order is received, depending upon the customer's particular needs. We deploy a key operational strategy of operating with backlog levels that approximate the average installation cycle of our customers, which allows us to more efficiently manage our installation teams, improve production efficiencies, reduce inventory scrap and lower shipping costs. Shipment of consumables typically occurs between one and fourteen days after an order is received.
Competition
The medication management and supply chain solutions market is intensely competitive. We compete directly with a number of companies and are affected by evolving and new technologies, changes in industry standards and dynamic customer requirements.
Our current direct competitors in the medication management and supply chain solutions market include CareFusion Corporation (which includes Pyxis, Rowa, and PhACTs), which has entered into an agreement to be acquired by Becton Dickenson Corporation, Aesynt Inc. (through the acquisition of McKesson Hospital Automation, Inc. by Francisco Partners), AmerisourceBergen Corporation (through its acquisition of MedSelect, Inc. and Automed), Cerner Corporation, Talyst, Inc., Emerson Electronic Co. (through its acquisition of medDispense, L.P.), Swisslog Holding AG, which has entered into an agreement to be acquired by KUKA, WaveMark Inc., ParExcellence Systems, Inc., Vanas n.v., Lawson Software, Inc. and MACH4 Automatisierungstechnik GmbH. Our current direct competitors in the medication packaging solutions market include Drug Package, Inc., AutoMed Technologies, Inc. (a subsidiary of AmerisourceBergen Corporation), Manchac Technologies, LLC (through its Dosis product line) and RX Systems, Inc. in the United States and Jones Packaging Ltd., Synergy Medical Systems, Manrex Ltd, and WebsterCare outside the United States.
We believe our products and services compare favorably with the offerings of our competitors, particularly with respect to proprietary technological advancements, system performance, system reliability, installation, applications training, service response time and service repair quality.

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Intellectual Property and Proprietary Technology
We rely on a combination of patents, trademarks, copyright and trade secret laws, confidentiality procedures and licensing arrangements to protect our intellectual property 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. Our issued patents relate to, among other things, the use of locking and sensing lids with pharmacy drawers and the methods of restocking these drawers, and the use of guiding lights in the open matrix, locking lid and sensing lid pharmacy drawers. These patents also apply to our unit-dose mechanism and methods, the single-dose dispensing mechanism, the methods for restocking the single-dose drawers using exchange liners, certain methods for loading and unloading mobile carts, the method of use of scanners with a mobile cart, and certain methods for using radio frequency tags with storage items. Our patents expire at various times between 2015 and 2032.
All of our product system software is copyrighted and subject to the protection of applicable copyright laws. We intend to seek additional international and U.S. patents on our technology and to seek registration of our trademarks. We have obtained registration of Omnicell, the Omnicell logo, OmniRx, OmniCenter, OmniSupplier, OmniBuyer, SafetyStock, eMTS Medication Technologies, the MTS Medication Technologies logo, easy Blist, Medlocker, AccuFlex, Pandora, OnDemand, RxMap, Suremed and OnDemand400 for RxMap. Trade secrets and other confidential information are also important to our business. We protect our trade secrets through a combination of contractual restrictions and confidentiality and licensing agreements.
Research and Development
We utilize industry‑standard operating systems and databases, but generally develop our own application and interface software in our research and development facilities. New product development projects are prioritized based on customer input. Research and development takes place in Mountain View, California, Nashville, Tennessee and St. Petersburg, Florida. Research and development expenditures were $27.8 million , $29.1 million and $23.7 million for the years ended December 31, 2014, December 31, 2013 and December 31, 2012, respectively.
Employees
We had a total of 1,236 employees as of December 31, 2014. We have rebalanced our staff as needed, at times eliminating some functional positions and at other times adding new functional‑specific positions to meet the evolving needs of our marketplace while controlling costs. To our knowledge, none of our employees are represented by a collective bargaining agreement, nor have we experienced any work stoppage. We believe that our employee relations are good.
Business Under Government Contracts
A number of our U.S. government‑owned or government-run hospital customers sign five-year leases, with payment terms that are subject to one-year government budget funding cycles. Failure of any of our U.S. government customers to receive their annual funding could impair our ability to sell to these customers, or to collect payments on our existing unsold leases. For additional information regarding these leases, see the section entitled "Risk Factors" under Part I, Item 1A below.
Financing Practices Relating to Working Capital
We assist healthcare facilities in financing their cash outlay requirements for the purchase of our systems by offering multi-year, non-cancelable sales contracts. For additional information regarding these financing activities, see Note 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in this annual report.
Product Backlog
Product backlog is the dollar amount of medication and supply dispensing systems for which we have purchase orders from our customers and for which we believe we will install, bill and gain customer acceptance within one year. Due to industry practice that allows customers to change order configurations with limited advance notice prior to shipment and occasional customer changes in installation schedules, we do not believe that backlog as of any particular date is necessarily indicative of future sales. However, we do believe that backlog is an indication of a customer's willingness to install our solutions. Our backlog was $187.7 million and $180.0 million as of December 31, 2014 and December 31, 2013, respectively.
Company Information
We were incorporated in California in 1992 under the name of Omnicell Technologies, Inc. and reincorporated in Delaware in 2001 as Omnicell, Inc.

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Available Information
We file reports and other information with the Securities and Exchange Commission ("SEC") including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy or information statements. Those reports and statements as well as all amendments to those documents filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act (1) are available at the SEC's Public Reference Room at 100 F Street, N.E., Room 1580, Washington, DC 20549, (2) are available at the SEC's internet site ( www.sec.gov ), which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC and (3) are available free of charge through our website as soon as reasonably practicable after electronic filing with, or furnishing to, the SEC. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our website address is www.omnicell.com . Information on our website is not incorporated by reference nor otherwise included in this report.
Executive Officers of the Registrant
The following table sets forth certain information about our executive officers as of the date of this annual report:
Name
 
Age
 
Position
Randall A. Lipps
 
57
 
President, Chief Executive Officer, and Chairman of the Board of Directors
J. Christopher Drew
 
49
 
Executive Vice President, Sales and Marketing
Robin G. Seim
 
55
 
Executive Vice President Finance, International and Manufacturing, Chief Financial Officer
Dan S. Johnston
 
51
 
Executive Vice President and Chief Legal and Administrative Officer
Nhat H. Ngo
 
42
 
Executive Vice President, Strategy and Business Development
Jorge R. Taborga
 
55
 
Executive Vice President, Engineering
        
Randall A. Lipps was named Chief Executive Officer and President of Omnicell in October 2002. Mr. Lipps has served as Chairman of the Board and a Director of Omnicell since founding Omnicell in September 1992. Mr. Lipps received both a B.S. in economics and a B.B.A. from Southern Methodist University.
J. Christopher Drew joined Omnicell in April 1994 and was named Senior Vice President, Operations in January 2005. In January 2009, Mr. Drew was named Senior Vice President, Field Operations. In March 2012, Mr. Drew was named Executive Vice President, Field Operations. In February 2015, Mr. Drew was named Executive Vice President, Sales and Marketing. From April 1994 to January 2005, Mr. Drew served in various management positions with Omnicell, including Vice President of Branded Solutions and Director of Corporate Development. Mr. Drew received a B.A. in economics from Amherst College and an M.B.A. from the Stanford Graduate School of Business.
Robin G. Seim joined Omnicell in February 2006 as Vice President and was named Chief Financial Officer in March 2006. In January 2009, Mr. Seim was named Chief Financial Officer and Vice President Finance, Administration and Manufacturing. In March 2012, Mr. Seim was named Chief Financial Officer and Executive Vice President Finance, Administration and Manufacturing. In February 2015, Mr. Seim was named Chief Financial Officer and Executive Vice President, Finance, International and Manufacturing. Prior to joining Omnicell, Mr. Seim served as Chief Financial Officer of several technology companies, including Villa Montage Systems, Inc. from 1999 to 2001, Candera, Inc. from 2001 to 2004 and Mirra, Inc., in 2005. Prior to 1999, Mr. Seim held a number of management positions with Nortel Networks, Bay Networks, and IBM. Mr. Seim received a B.S. in accounting from California State University, Sacramento.
Dan S. Johnston joined Omnicell in November 2003 as Vice President and General Counsel. In March 2012, Mr. Johnston was named Executive Vice President and General Counsel. In February 2015, Mr. Johnston was named Executive Vice President and Chief Legal and Administrative Officer. From April 1999 to November 2003, Mr. Johnston was Vice President and General Counsel at Be, Inc., a software company. From September 1994 to March 1999, Mr. Johnston was an attorney with the law firm Cooley LLP. Mr. Johnston received a B.S. in computer information systems from Humboldt State University and a J.D. from the Santa Clara University School of Law.
Nhat H. Ngo joined Omnicell in November 2008 as Vice President of Strategy and Business Development. In March 2012, Mr. Ngo was named Executive Vice President, Strategy and Business Development. From January 2007 to October 2008, Mr. Ngo served as Vice President of Business Development and Licensing for a business unit of Covidien, a global healthcare products company. From June 1999 to April 2006, Mr. Ngo worked at BriteSmile, Inc., a direct-to-consumer aesthetic technology company and served in a variety of senior leadership positions in marketing, sales, operations, strategic planning and corporate development. From September 1997 to June 1999, Mr. Ngo practiced corporate law at Shaw Pittman, LLP.

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Mr. Ngo received a B.S. in commerce, with a concentration in finance, from the University of Virginia McIntire School of Commerce and a J.D. from the University of Virginia School of Law.
Jorge R. Taborga joined Omnicell in July 2007 as Vice President and Chief Information Officer.  In February of 2013, Mr. Taborga was named Executive Vice President, Engineering. From January 2009 to February 2013, Mr. Taborga was Vice President of Manufacturing, Quality and Information Technology. Prior to joining Omnicell, Mr. Taborga held a number of executive positions with Bay Networks and Quantum, and ran his own management consulting company. He also held executive roles in two cloud computing companies, fusionOne and Terrasping. Mr. Taborga's earlier career includes senior roles in product development with ROLM Systems and Thomas-Conrad. Mr. Taborga received B.S. and M.S. degrees in Computer Science from Texas A&M University. He is currently pursuing a Ph.D. in Organizational Systems at Saybrook University.
ITEM 1A. RISK FACTORS
We have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition or results of operations. Our business faces significant risks and the risks described below may not be the only risks we face. Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our business operations. If any of these risks occur, our business, results of operations or financial condition could suffer and the market price of our common stock could decline.
Unfavorable economic and market conditions, a decreased demand in the capital equipment market and uncertainty regarding the rollout of government legislation in the healthcare industry could adversely affect our operating results.
Customer demand for our products is significantly linked to the strength of the economy. If decreases in demand for capital equipment caused by weak economic conditions and decreased corporate and government spending, including any effects of fiscal budget balancing at the federal level, deferrals or delays of capital equipment projects, longer time frames for capital equipment purchasing decisions or generally reduced expenditures for capital solutions occurs, we will experience decreased revenues and lower revenue growth rates and our operating results could be materially and adversely affected.
Additionally, as the U.S. Federal government implements healthcare reform legislation, and as Congress, regulatory agencies and other state governing organizations continue to review and assess additional healthcare legislation and regulations, there may be an impact on our business. Healthcare facilities may decide to postpone or reduce spending until the implications of such healthcare enactments are more clearly understood, which may affect the demand for our products and harm our business.
The medication management and supply chain solutions market is highly competitive and we may be unable to compete successfully against new entrants and established companies with greater resources and/or existing business relationships with our current and potential customers.
The medication management and supply chain solutions market is intensely competitive. We expect continued and increased competition from current and future competitors, many of which have significantly greater financial, technical, marketing and other resources than we do. Our current direct competitors in the medication management and supply chain solutions market include CareFusion Corporation (which includes Pyxis, Rowa, and PhACTs), which has entered into an agreement to be acquired by Becton Dickenson Corporation, Aesynt Inc. (through the acquisition of McKesson Hospital Automation, Inc. by Francisco Partners), AmerisourceBergen Corporation (through its acquisition of MedSelect, Inc. and Automed), Cerner Corporation, Talyst, Inc., Emerson Electronic Co. (through its acquisition of medDispense, L.P.), Swisslog Holding AG, which has entered into an agreement to be acquired by KUKA, WaveMark Inc., ParExcellence Systems, Inc., Vanas n.v., Lawson Software, Inc. and MACH4 Automatisierungstechnik GmbH. Our current direct competitors in the medication packaging solutions market include Drug Package, Inc., AutoMed Technologies, Inc. (a subsidiary of AmerisourceBergen Corporation), Manchac Technologies, LLC (through its Dosis product line) and RX Systems, Inc. in the United States, Jones Packaging Ltd., Synergy Medical Systems, Manrex Ltd, and WebsterCare outside the United States.
The competitive challenges we face in the medication management and supply chain solutions market include, but are not limited to, the following:
•
certain competitors may offer or have the ability to offer a broader range of solutions in the marketplace that we are unable to match;
•
certain competitors may develop alternative solutions to the customer problems our products are designed to solve that may provide a better customer outcome or a lower cost of operation;
•
certain competitors may develop new features or capabilities for their products not previously offered that could compete directly with our products;

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•
competitive pressures could result in increased price competition for our products and services, fewer customer orders and reduced gross margins, any of which could harm our business;
•
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, such as the pending acquisition of CareFusion Corporation by Becton Dickenson Corporation, thereby increasing their ability to develop and offer a broader suite of products and services to address the needs of our prospective customers;
•
our competitive environment is currently experiencing a significant degree of consolidation which could lead to competitors developing new business models that require us to adapt how we market, sell or distribute our products;
•
other established or emerging companies may enter the medication management and supply chain solutions market with products and services that are preferred by our current and potential customers based on factors such as features, capabilities or cost;
•
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 than we do;
•
certain competitors have greater brand name recognition and a more extensive installed base of medication and supply dispensing systems or other products and services than we do, and such advantages could be used to increase their market share;
•
certain competitors may have existing business relationships with our current and potential customers, which may cause these customers to purchase medication and supply dispensing systems or automation solutions from these competitors; and
•
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.
Any reduction in the demand for or adoption of our medication and supply systems, related services, or consumables would reduce our revenues.
Our medication and supply dispensing systems represent only one approach to managing the distribution of pharmaceuticals and supplies at acute healthcare facilities and our medication packaging systems represent only one way of managing medication distribution at non-acute care facilities. A significant portion of domestic and international healthcare facilities still use traditional approaches in some form that do not include fully automated methods of medication and supply management. As a result, we must continuously educate existing and prospective customers about the advantages of our products, which requires significant sales efforts and can cause longer sales cycles. Despite our significant efforts and extensive time commitments in sales to healthcare facilities, we cannot be assured that our efforts will result in sales to these customers.
In addition, our medication and supply dispensing systems and our more complex automated packaging systems typically represent a sizable 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 medication and supply dispensing systems and related services. These budgets are often supported by cash flows that can be negatively affected by declining investment income and influenced by limited resources, increased operational and financing costs, macroeconomic conditions such as unemployment rates and conflicting spending priorities among different departments. Any decrease in expenditures by healthcare facilities or increased financing costs could decrease demand for our medication and supply dispensing systems and related services and reduce our revenues.
Changing customer requirements could decrease the demand for our products and services and our new product solutions may not achieve market acceptance.
The medication management and supply chain solutions market 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. The medication management and supply chain solutions 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 more 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, and bring such enhancements and products to market in a timely manner, demand for our products could decrease.

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We cannot provide assurance that we will be successful in marketing any new products or services that we introduce, that new products or services will compete effectively with similar products or services sold by our competitors, or that the level of market acceptance of such products or services will be sufficient to generate expected revenues and synergies with our other products or services. Deployment of new products or services often requires interoperability with other Omnicell products or services as well as with healthcare facilities' existing information management systems. If these products or services fail to satisfy these demanding technological objectives, our customers may be dissatisfied and we may be unable to generate future sales.
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. U.S. government legislation such as the American Recovery and Reinvestment Act of 2009, the Patient Protection and Affordable Care Act of 2010, the Budget Control Act of 2011, and other health reform legislation may cause customers to postpone purchases of our products due to reductions in federal healthcare program reimbursement rates and/or needed changes to their operations in order to meet the requirements of legislation. Our automation solutions often involve a significant financial commitment from our customers and, as a result, our ability to grow our business is largely dependent on our customers' capital and operating budgets. To the extent legislation promotes spending on other initiatives or healthcare providers spending declines or increases more slowly than we anticipate, demand for our products and services could decline.
Many healthcare providers have consolidated to create larger healthcare delivery organizations in order to achieve greater market power. If this consolidation continues, it would increase the size of certain target customers, which could increase the cost, effort and difficulty in selling our products to such target customers, or could cause our existing customers or potential new customers to begin utilizing our competitors' products if such customers are acquired by healthcare providers that prefer our competitors' products to ours. In addition, the resulting organizations could have greater bargaining power, which may lead to price erosion.
We may not be able to successfully integrate acquired businesses or technologies into our existing business, which could negatively impact our operating results.
As a part of our business strategy we may seek to acquire businesses, technologies or products in the future. For example, on August 22, 2014, we acquired Surgichem Limited from Bupa. We cannot provide assurance that any acquisition or any future transaction we complete will result in long-term benefits to us or our stockholders, or that our management will be able to integrate or manage the acquired business effectively. Acquisitions entail numerous risks, including difficulties associated with the integration of operations, technologies, products and personnel that, if realized, could harm our operating results. Risks related to potential acquisitions include, but are not limited to:
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difficulties in combining previously separate businesses into a single unit and the complexity of managing a more dispersed organization as sites are acquired;
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complying with international labor laws that may restrict our ability to right-size organizations and gain synergies across acquired operations;
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the substantial costs that may be incurred and the substantial diversion of management's attention from day-to-day business when evaluating and negotiating such transactions and then integrating an acquired business;
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discovery, after completion of the acquisition, of liabilities assumed from the acquired business or of assets acquired that are broader in scope and magnitude or are more difficult to manage than originally assumed;
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failure to achieve anticipated benefits such as cost savings and revenue enhancements;
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difficulties related to assimilating the products or key personnel of an acquired business;
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failure to understand and compete effectively in markets in which we have limited previous experience; and
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difficulties in integrating newly acquired products and solutions into a logical offering that our customers understand and embrace.
Successful integration of acquired operations, products and personnel into Omnicell may place a significant burden on the combined company's management and internal resources. We may also experience difficulty in effectively integrating the different cultures and practices of any acquired entity. The challenges of integrating acquired entities could disrupt the combined company's ongoing business, distract its management focus from other opportunities and challenges, and increase

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expenses and working capital requirements. The diversion of management attention and any difficulties encountered in the transition and integration process could harm our business, financial condition and operating results.
Demand for our consumable medication packages is time-sensitive and if we are not able to supply the demand from our institutional and retail pharmacy customers on schedule and with quality packaging products, they may utilize alternative means to distribute medications to their customers.
Approximately 17% of our revenue is generated from the sale of consumable medication packages, which are produced in our St. Petersburg, Florida facilities on a continuous basis and shipped to our institutional pharmacy and retail pharmacy customers shortly before they are required by those customers. The demands placed on institutional pharmacies and retail pharmacies by their customers represent real time requirements of those customers. Our customer agreements for the sale of consumable medication packages are typically short-term in nature and typically do not include any volume commitments on the part of the customer. Although our packaging may be considered the preferred method of maintaining control of medications during the medication distribution and administration process, institutional and retail pharmacies have alternative methods of distributing medications, including bulk and alternative packaging, and medication adherence packaging may be supplied by our competitors. To the extent that we are unable to supply quality packaging to our customers in a timely manner, that demand will be met via alternative distribution methods, including consumable medication packaging sold by our competitors, and our revenue will decline. Any disruption in the production capabilities of our St. Petersburg facilities will adversely affect our ability to ship our consumable medication packages and would reduce our revenue.
Our international operations may subject us to additional risks that can adversely affect our operating results.
We currently have operations outside of the United States, including sales efforts centered in Canada, Europe, the Middle East and Asia-Pacific regions and supply chain efforts in Asia. We intend to continue to expand our international operations, particularly in certain markets that we view as strategic, including China and the Middle East. Our international operations subject us to a variety of risks, including:
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our reliance on distributors for the sale and post-sale support of our automated dispensing systems outside the United States and Canada;
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the difficulty of managing an organization operating in various countries;
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political sentiment against international outsourcing of production;
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reduced protection for intellectual property rights, particularly in jurisdictions that have less developed intellectual property regimes;
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changes in foreign regulatory requirements;
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the requirement to comply with a variety of international laws and regulations, including privacy, labor, import, export, environmental standards, tax, anti-bribery and employment laws and changes in tariff rates;
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fluctuations in currency exchange rates and difficulties in repatriating funds from certain countries;
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additional investment, coordination and lead-time necessary to successfully interface our automation solutions with the existing information systems of our customers or potential customers outside of the United States; and
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political unrest, terrorism and the potential for other hostilities in areas in which we have facilities.
If we are unable to anticipate and address these risks properly, our business or operating results will be harmed.
If we experience delays in installations of our medication and supply dispensing systems or our more complex medication packaging systems, resulting in delays in our ability to recognize revenue, our competitive position, results of operations and financial condition could be harmed.
The purchase of our medication and supply dispensing systems or our more complex medication packaging systems is often part of a customer's larger initiative to re-engineer its pharmacy and their distribution and materials management systems. As a result, our sales cycles are often lengthy. The purchase of our systems often entail larger strategic purchases by customers that frequently require more complex and stringent contractual requirements and generally involve a significant commitment of management attention and resources by prospective customers. These larger and more complex transactions often require the input and approval of many decision-makers, including pharmacy directors, materials managers, nurse managers, financial managers, information systems managers, administrators, lawyers and boards of directors. For these and other reasons, the sales cycle associated with the sale of our medication and supply dispensing systems is often lengthy and subject to a number of delays over which we have little or no control. A delay in, or loss of, sales of our medication and supply dispensing systems could have an adverse effect upon our operating results and could harm our business.
In addition, and in part as a result of the complexities inherent in larger transactions, the time between the purchase and installation of our systems can range from two weeks to one year. Delays in installation can occur for reasons that are often outside of our control. We have also experienced fluctuations in our customer and transaction size mix, which makes our ability to forecast our product bookings more difficult. Because we recognize revenue for our medication and supply dispensing

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systems and our more complex medication packaging systems only upon installation at a customer's site, any delay in installation by our customers will also cause a delay in the recognition of the revenue for that system.
Government regulation of the healthcare industry could reduce demand for our products, or substantially increase the cost to produce our products.
The manufacture and sale of our current products are not regulated by the United States Food and Drug Administration, or the Drug Enforcement Administration ("DEA"). However, our current products, and any future products, may be regulated in the future by these or other federal agencies due to future legislative and regulatory initiatives or reforms. Direct regulation of our business and products by the FDA, DEA or other federal agencies could substantially increase the cost to produce our products and increase the time required to bring those products to market, reduce the demand for our products and reduce our revenues. In addition, healthcare providers and facilities that use our equipment and dispense controlled substances are subject to regulation by the DEA. The failure of these providers and facilities to comply with DEA requirements, including the Controlled Substances Act and its implementing regulations, could reduce demand for our products and harm our competitive position, results of operations and financial condition. 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 medication and supply dispensing 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 in order to be eligible for Medicaid and Medicare funds. The Joint Commission does not approve or accredit medication and supply dispensing systems; however, disapproval of our customers' medication and supply dispensing management methods and their failure to meet The Joint Commission 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 adhere to established privacy principles, use of customer information guidelines and related federal and state statutes, we cannot assure you that we will be in compliance with all federal and state healthcare information privacy and security laws that we are directly or indirectly subject to, including, without limitation, the Health Insurance Portability and Accountability Act of 1996. Among other things, this legislation required the Secretary of Health and Human Services to adopt national standards governing the conduct of certain electronic health information transactions and protecting the privacy and security of personally identifiable health information maintained or transmitted by "covered entities," which include pharmacies and other healthcare providers with which we do business.
The standards adopted to date include, among others, the "Standards for Privacy of Individually Identifiable Health Information," which restrict the use and disclosure of personally identifiable health information by covered entities, and the "Security Standards," which require covered entities to implement administrative, physical and technical safeguards to protect the integrity and security of certain electronic health information. Under HIPAA, we are considered a "business associate" in relation to many of our customers that are covered entities, and as such, most of these customers have required that we enter into written agreements governing the way we handle and safeguard certain patient health information we may encounter in providing our products and services and may impose liability on us for failure to meet our contractual obligations. Further, pursuant to changes in HIPAA under the American Recovery and Reinvestment Act of 2009 ("ARRA"), we are now also covered under HIPAA similar to other covered entities and in some cases, subject to the same civil and criminal penalties as a covered entity. A number of states have also enacted privacy and security statutes and regulations that, in some cases, are more stringent than HIPAA and may also apply directly to us. If our past or present operations are found to violate any of these laws, we may be subject to fines, penalties and other sanctions.
During November 2012, an Omnicell electronic device containing medication dispensing cabinet log files from three health system customers was stolen from an Omnicell employee's locked vehicle. The files on this device contained certain protected patient health information related to medication dispensing transactions from our medication dispensing cabinets over a one to three-week period, downloaded by the employee while troubleshooting software for the hospitals. This loss resulted in a putative class action complaint being filed against us and certain of our customers in the United States District Court for the District of New Jersey in March 2013 alleging breach of state security notification laws, violations of state consumer fraud laws, fraud, negligence and conspiracy relating to the theft of an Omnicell electronic device containing medication dispensing cabinet log files, including certain patient health information, described above and subsequent notification of this unauthorized disclosure of personal health information. In December 2013, the court issued an order dismissing the plaintiff's complaint without prejudice. The plaintiff failed to file an appeal of the court's decision by the January 27, 2014 deadline. There is no guarantee that, if we are involved in any similar litigation in the future, such an outcome will result. Any similar unauthorized disclosure of personal health information could cause us to experience contractual indemnification obligations under business associate agreements with certain customers, litigation against us, reputational harm and a reduction in demand from our

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customers. To the extent that this disclosure is deemed to be a violation of HIPAA or other privacy or security laws, we may be subject to significant fines, penalties and other sanctions. As of the date of this Form 10-K filing, the Company has not received correspondence from the Office for Civil Rights of the U.S. Department of Health & Human Services with respect to this matter.
In addition, we cannot predict the potential impact of future HIPAA standards and other federal and state privacy and security laws that may be enacted at any time on our customers or on Omnicell. These laws could restrict the ability of our customers to obtain, use or disseminate patient information, which could reduce the demand for our products or force us to redesign our products in order to meet regulatory requirements.
Covenants in our credit agreement restrict our business and operations in many ways and if we do not effectively manage our compliance with these covenants, our financial conditions and results of operations could be adversely affected.
In September 2013, we entered into a $75 million revolving credit facility pursuant to a Credit Agreement, by and among Omnicell, Wells Fargo Bank, National Association, as administrative agent, and the lenders from time to time party thereto (“Credit Agreement”). In November 2014, we amended the Credit Agreement to increase the number of shares of common stock that may be repurchased pursuant to stock repurchase programs authorized by our Board of Directors. The Credit Agreement contains various customary covenants that limit our ability and/or our subsidiaries’ ability to, among other things:    
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incur or assume liens or additional debt or provide guarantees in respect of obligations or other persons;
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issue redeemable preferred stock;
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pay dividends or distributions or redeem or repurchase capital stock;
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prepay, redeem or repurchase certain debt;
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make loans, investments, acquisitions (including acquisitions of exclusive licenses) and capital expenditures;
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enter into agreements that restrict distributions from our subsidiaries;
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sell assets and capital stock of our subsidiaries;
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enter into certain transactions with affiliates; and
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consolidate or merge with or into, or sell substantially all of our assets to, another person.
The Credit Agreement also includes, among other financial covenants, financial covenants that require us to maintain a maximum total leverage ratio and minimum fixed charge coverage ratio. Our ability to comply with these financial covenants may be affected by events beyond our control. Our failure to comply with any of the covenants could result in a default under the Credit Agreement, which could permit the administrative agent or the lenders to declare all or part of any outstanding borrowings to be immediately due and payable, or to refuse to permit additional borrowings under the revolving credit facility, which could restrict our operations, particularly our ability to respond to changes in our business or to take specified actions to take advantage of certain business opportunities that may be presented to us. In addition, if we are unable to repay those amounts, the administrative agent and the lenders under the Credit Agreement could proceed against the collateral granted to them to secure that debt, which would seriously harm our business.
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. As more of 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 can be intense and may not be successful in attracting and retaining qualified personnel. Competitors have in the past attempted, and may in the future attempt, to recruit our employees.
In addition, we have historically used stock options, restricted stock units and other forms of equity compensation as key components of our employee compensation program in order to align employees' interests with the interests of our stockholders, encourage employee retention and provide competitive compensation packages. The effect of managing share-based compensation expense and minimizing shareholder dilution from the issuance of new shares may make it less favorable for us to grant stock options, restricted stock units or other forms of equity compensation, to employees in the future. In order to continue granting equity compensation at competitive levels, we must seek stockholder approval for any increases to the number of shares reserved for issuance under our equity incentive plans, such as the share increase for which we obtained approval at our 2013 Annual Meeting of Stockholders, and we cannot assure you that we will receive such approvals in the future. Any failure to receive approval for current or future proposed increases could prevent us from granting equity

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compensation at competitive levels and make it more difficult to attract, retain and motivate employees. Further, to the extent that we expand our business or product lines through the acquisition of other businesses, any failure to receive any such approvals could prevent us from securing employment commitments from such newly acquired employees. Failure to attract and retain key personnel could harm our competitive position, results of operations and financial condition.
In the past, we have experienced substantial fluctuations in customer demand, and we cannot be sure that we will be able to respond proactively to future changes in customer demand.
Our ability to adjust to fluctuations in our revenue while still achieving or sustaining profitability is dependent upon our ability to manage costs and control expenses. If our revenue increases or decreases rapidly, we may not be able to manage these changes effectively. Future growth is dependent on the continued demand for our products, the volume of installations we are able to complete, our ability to continue to meet our customers' needs and provide a quality installation experience and our flexibility in manpower allocations among customers to complete installations on a timely basis.
Regarding our expenses, our ability to control expense is dependent on our ability to continue to develop and leverage effective and efficient human and information technology systems, our ability to gain efficiencies in our workforce through the local and worldwide labor markets and our ability to grow our outsourced vendor supply model. Our expense growth rate may equal or exceed our revenue growth rate if we are unable to streamline our operations, or fail to reduce the costs or increase the margins of our products. In addition, we may not be able to reduce our expenses to keep pace with any reduction in our revenue, which could harm our results of operations and financial position.
If we are unable to successfully interface 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 interface with their existing information systems. This may require substantial cooperation, incremental investment and coordination on the part of our customers and may require coordination with third-party suppliers of the existing information systems. There is little uniformity in the systems currently used by our customers, which complicates the interfacing process. If these systems are not successfully interfaced, our customers could choose not to use or to reduce their use of our automation solutions, which would harm our business. Also, these information systems are impacted by regulatory forces, such as the HITECH Act, Meaningful Use Stages, and HIPAA Omnibus Rules, and may evolve their interoperability functionality accordingly. We expect to comply with the mandatory standards and certifications that enable us to continuously interoperate with partner information system, but such symbiotic evolution in a changing regulatory environment can at times create an execution risk.
Additionally, our competitors may enter into agreements with providers of hospital information management systems that are designed to increase the interoperability of their respective products. To the extent our competitors are able to increase the interoperability of their products with those of the major hospital information systems providers, customers who utilize such information systems may choose not to use our products and services. In addition, hospital information systems providers may choose to develop their own solutions that could compete with ours. Furthermore, we expect the importance of interoperability to increase in the next few years. Regulations such as the HITECH Act Meaningful Use Stage 3 are expected to heavily focus on evidence and outcomes. Given our role in care delivery process, the data generated by our products may be a key input for assessing and reporting on clinical outcomes. This may elevate interoperability with information systems to a relative importance to our customers creating a business opportunity and risk.
Our failure to protect our intellectual property rights could negatively affect our ability to compete.
Our success depends in part on our ability to obtain patent protection for technology 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. We intend to continue to pursue such protection in the future. Our issued patents relate to various features of our medication and supply dispensing systems and our packaging systems. We cannot assure you that we will file any patent applications in the future, and 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. As an example, in September 2014, an action was brought against us, to, among other matters, correct the inventorship of certain patents owned by us. For additional details, see Note 13, Contingencies, in this annual report. Furthermore, we cannot assure you 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 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, which could harm our competitive position.
Our quarterly operating results may fluctuate and may cause our stock price to decline.

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Our quarterly operating results may vary in the future depending on many factors that include, but are not limited to, the following:
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our ability to successfully install our products on a timely basis and meet other contractual obligations necessary to recognize revenue;
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the size, product mix and timing of orders for our medication and supply dispensing systems, and our medication packaging systems, and their installation and integration;
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the overall demand for healthcare medication management and supply chain solutions;
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changes in pricing policies by us or our competitors;
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the number, timing and significance of product enhancements and new product announcements by us or our competitors;
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the timing and significance of any acquisition or business development transactions that we may consider or negotiate and the revenues, costs and earnings that may be associated with these transactions;
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the relative proportions of revenues we derive from products and services;
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fluctuations in the percentage of sales attributable to our international business;
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our customers' budget cycles;
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changes in our operating expenses and our ability to stabilize expenses;
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expenses incurred to remediate product quality or safety issues;
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our ability to generate cash from our accounts receivable on a timely basis;
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the performance of our products;
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changes in our business strategy;
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macroeconomic and political conditions, including fluctuations in interest rates, tax increases and availability of credit markets; and
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volatility in our stock price and its effect on equity-based compensation expense.
Due to all of these factors, our quarterly revenues and operating results are difficult to predict and may fluctuate, which in turn may cause the market price of our stock to decline.
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 to customers represented by these organizations.
A number of group purchasing organizations, including Amerinet, Inc., Federal Supply Schedule, First Choice Management Services, Healthcare Purchasing Alliance, LLC, HealthTrust Purchasing Group, L.P., Magnet, MedAssets Performance Management Solutions, Novation LLC, Premier Healthcare Alliance, L.P. and Resource Optimization & Innovation, LLC have negotiated standard contracts for our products on behalf of their member healthcare organizations. Members of these group purchasing organizations may purchase under the terms of these contracts, which obligate us to pay the group purchasing organization a fee. We have also contracted with the United States General Services Administration, allowing the Department of Veteran Affairs, the Department of Defense and other Federal Government customers to purchase our products. These contracts enable us to more readily sell our products and services to customers represented by these organizations. Some of our contracts with these organizations are terminable at the convenience of either party. The loss of any of these relationships could impact the breadth of our customer base and could impair our ability to meet our revenue targets or increase our revenues. These organizations may not renew our contracts on similar terms, if at all, and they may choose to terminate our contracts before they expire, any of which could cause our revenues to decline.
If we are unable to maintain our relationships with major institutional pharmacies, we may experience a decline in the sales of blister cards and other consumables sold to these customers.
The institutional pharmacy market consists of significant national suppliers of medications to non-acute care facilities, smaller regional suppliers, and very small local suppliers. Although none of these customers comprised more than 10% of our total revenues for the year ended December 31, 2014, they may, in some periods, comprise up to 16% of our consumables revenues. If these larger national suppliers were to purchase consumable blister card components from alternative sources, or if alternatives to blister cards were used for medication control, our revenues would decline.
Our failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could cause our stock price to decline.
Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC require annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm attesting to the effectiveness of internal control. If we fail to maintain effective internal control over financial reporting, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting.

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If the market price of our common stock continues to be highly volatile, the investment value of our common stock may decline.
Our common stock traded between $24.85 and $34.00 per share during the year ended December 31, 2014 . The market price for shares of our common stock has been and may continue to be highly volatile. In addition, our announcements or external events may have a significant impact on the market price of our common stock. These announcements or external events may include:
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changes in our operating results;
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developments in our relationships with corporate customers;
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changes in the ratings of our common stock by securities analysts;
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announcements by us or our competitors of technological innovations or new products;
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announcements by us or our competitors of acquisitions of businesses, products or technologies; or
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general economic and market conditions.
Furthermore, the stock market as a whole from time to time has experienced extreme price and volume fluctuations, which have particularly affected the market prices for technology companies. These broad market fluctuations may cause the market price of our common stock to decline irrespective of our performance. Also, sales of substantial amounts of our common stock in the public market could lower the market price of our common stock.
In addition, stockholders have initiated class action lawsuits against companies following periods of volatility in the market prices of these companies’ stock. On March 19, 2015, a putative class action lawsuit was filed against Omnicell and two of our executive officers (the “Defendants”) in the U.S. District Court for the Northern District of California. The complaint purports to assert claims on behalf of a class of purchasers of Omnicell stock between May 2, 2014 and March 2, 2015. The complaint alleges that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by purportedly making false and misleading statements regarding the existence of a “side letter” arrangement and the adequacy of internal controls that allegedly resulted in false and misleading financial statements. While we believe that the claims have no merit and will defend the lawsuit vigorously, such litigation could cause us to incur substantial costs and divert management’s attention and resources.
Circumstances may arise that could prevent the timely reporting of our financial information, which could harm our stock price and quotation on the NASDAQ Global Select Market.
On March 17, 2015, we announced that we were delaying the filing of this Annual Report on Form 10-K for the year ended December 31, 2014 beyond the automatic 15-day extension period permitted under the rules of the Securities and Exchange Commission because of the internal investigation that we commenced following receipt of a notice from an Omnicell employee on February 27, 2015 alleging, among other matters, the existence of a “side letter” arrangement with an Omnicell customer for certain discounts and Omnicell products that were to be provided at no cost, but which were not reflected in the final invoices paid by such customer.
Because we were unable to timely file this Annual Report on Form 10-K, on March 18, 2015, we received an expected written notification (the “Notice”) from the NASDAQ OMX Group, Inc. (“Nasdaq”) indicating that Omnicell was not in compliance with Nasdaq Listing Rule 5250(c)(1) for continued listing, due to the delay in filing this Annual Report on Form 10-K for the period ended December 31, 2014 beyond the extended filing due date. Under the Nasdaq continued listing rules, we had 60 calendar days from the date of the letter to either file this Annual Report on Form 10-K or submit a plan to regain compliance.
During the period between the date this Annual Report on Form 10-K was due and the date of this filing, our stock price has experienced some volatility. We have concluded the investigation causing the delay of the filing of this Annual Report on Form 10-K. Even though the results of the investigation led the Company to determine that e ffective internal control over financial reporting was maintained in all material respects and that there are no changes required to be made to the Company’s Consolidated Financial Statements, we cannot assure you that similar circumstances will not arise in the future that will cause us to delay the filing of our periodic financial reports, which could harm our stock price and, if such delay were to continue for a period of time, impact our continued listing on the NASDAQ Global Select Market.
We depend on a limited number of suppliers for our products and our business may suffer if we were required to change suppliers to obtain an adequate supply of components, equipment and raw materials on a timely basis.
Although we generally use parts and components for our products with a high degree of modularity, certain components are presently available only from a single source or limited sources. We rely on a limited number of suppliers for the raw materials that are necessary in the production of our consumable medication packages. We have generally been able to obtain adequate supplies of all components and raw materials in a timely manner from existing sources, or where necessary,

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from alternative sources of supply. We engage multiple single source third-party manufacturers to build several of our sub-assemblies. The risk associated with changing to alternative vendors, if necessary, for any of the numerous components used to manufacture our products could limit our ability to manufacture our products and harm our business. Due to our reliance on a few single source partners to build our hardware sub-assemblies and on a limited number of suppliers for the raw materials that are necessary in the production of our consumable medication packages, a reduction or interruption in supply from our partners or suppliers, or a significant increase in the price of one or more components could have an adverse impact on our business, operating results and financial condition. In certain circumstances, the failure of any of our suppliers or us to perform adequately could result in quality control issues affecting end users' acceptance of our products. These impacts could damage customer relationships and could harm our business.
The conflict minerals provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act could result in additional costs and liabilities.
In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC established new disclosure and reporting requirements for those companies that use "conflict minerals" mined from the Democratic Republic of Congo and adjoining countries, whether or not these products are manufactured by third parties. These new requirements could affect the sourcing of materials used in our products as well as the companies we use to manufacture our products. In circumstances where conflict minerals in our products are found to be sourced from the Democratic Republic of the Congo or surrounding countries, we may take actions to change materials or designs to reduce the possibility that our purchase of conflict minerals may fund armed groups in the region. These actions could add engineering and other costs to the manufacture of our products.
We expect to incur costs to design and implement a process to discover the origin of the tantalum, tin, tungsten and gold used in our products, including components we purchase from third parties, and to audit our conflict minerals disclosures. Our reputation may also suffer if we have included conflict minerals originating in the Democratic Republic of the Congo or surrounding countries in our products.
Our U.S. government lease agreements are subject to annual budget funding cycles and mandated unilateral changes, which may affect our ability to enter into such leases or to recognize revenue and sell receivables based on these leases.
U.S. government customers that lease our equipment typically sign contracts with five-year payment terms that are subject to one-year government budget funding cycles. Further, the government has in certain circumstances mandated unilateral changes in its Federal Supply Services contract that could render our lease terms with the government less attractive. In our judgment and based on our history with these accounts, we believe these receivables are collectible. However, in the future, the failure of any of our U.S. government customers to receive their annual funding, or the government mandating changes to the Federal Supply Services contract could impair our ability to sell lease equipment to these customers or to sell our U.S. government receivables to third-party leasing companies. In addition, the ability to collect payments on unsold receivables could be impaired and may result in a write-down of our unsold receivables from U.S. government customers. The balance of our unsold leases to U.S. government customers was $12.9 million as of December 31, 2014.
If we fail to manage our inventory properly, our revenue, gross margin and profitability could suffer.
Managing our inventory of components and finished products is a complex task. A number of factors, including, but not limited to, the need to maintain a significant inventory of certain components that are in short supply or that must be purchased in bulk to obtain favorable pricing, the general unpredictability of demand for specific products and customer requests for quick delivery schedules, may result in us maintaining large amounts of inventory. Other factors, including changes in market demand, customer requirements and technology, may cause our inventory to become obsolete. Any excess or obsolete inventory could result in inventory write-downs, which in turn could harm our business and results of operations.
Intellectual property claims against us could harm our competitive position, results of operations and financial condition.
We expect that developers of medication and supply dispensing systems and medication packaging 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. In the future, third parties may claim that we have infringed upon their intellectual property rights with respect to current or future products. We do not carry 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 property 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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Our software products are complex and may contain defects, which could harm our reputation, results of operations and financial condition.
We market products that contain software and products that are software only. Although we perform extensive testing prior to releasing software products, these products may contain undetected errors or bugs when first released. These may not be discovered until the product has been used by customers in different application environments. Failure to discover product deficiencies or bugs could require design modifications to previously shipped products or cause delays in the installation of our products and unfavorable publicity or negatively impact system shipments, any of which could harm our business, financial condition and results of operations.
Product liability claims against us could harm our competitive position, results of operations and financial condition.
Our products provide medication management and supply chain management solutions for the healthcare industry. 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. Moreover, failure of health-care facility employees to use our products for their intended purposes could result in product liability claims against us. Litigation with respect to product liability claims, regardless of any outcome, could result in substantial cost to us, divert management's attention from operations and decrease market acceptance of our products. We possess a variety of insurance policies that include coverage for general commercial liability and technology errors and omissions liability. We attempt to mitigate these risks through contractual terms negotiated with our customers. However, these policies and protective contractual terms 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. Also, in the event that any of our products is defective, we may be required to recall or redesign those products.
We are dependent on technologies provided by third-party vendors, the loss of which could negatively and materially affect our ability to market, sell, or distribute our products.
Some of our products incorporate technologies owned by third parties that are licensed to us for use, modification, and distribution. If we lose access to third-party technologies, or we lose the ongoing rights to modify and distribute these technologies with our products, we will have to devote resources to independently develop, maintain and support the technologies ourselves, pay increased license costs, or transition to another vendor. Any independent development, maintenance or support of these technologies by us or the transition to alternative technologies could be costly, time consuming and could delay our product releases and upgrade schedules. These factors could negatively and materially affect our ability to market, sell or distribute our products.
Complications in connection with our ongoing business information system upgrades, including those required to transition acquired entities onto information systems already utilized, and those implemented to adopt new accounting standards, may impact our results of operations, financial condition and cash flows.
We continue to upgrade our enterprise-level business information system with new capabilities and transition acquired entities onto information systems already utilized in the company. In 2014, we replaced legacy Enterprise Requirements Planning systems utilized in the acquired MTS business with systems currently in use in other parts of Omnicell. In 2015, we intend to replace the legacy enterprise Requirements Planning systems utilized in Surgichem with systems currently in use in other parts of Omnicell. Based upon the complexity of some of the upgrades, there is risk that we will not see the expected benefit from the implementation of these upgrades in accordance with their anticipated timeline and will incur costs in addition to those we have already planned for. In addition, in future years, we may need to begin efforts to comply with final converged accounting standards to be established by the Financial Accounting Standards Board ("FASB") and the International Accounting Standards Board ("IASB") for revenues, leases and other components of our financial reporting. These new standards could require us to modify our accounting policies. We further anticipate that integration of these and possibly other new standards may require a substantial amount of management's time and attention and require integration with our enterprise resource planning system. The implementation of the system and the adoption of future new standards, in isolation as well as together, could result in operating inefficiencies and financial reporting delays, and could impact our ability to record certain business transactions timely. All of these potential results could adversely impact our results of operations, financial condition and cash flows.
Outstanding employee stock options have the potential to dilute stockholder value and cause our stock price to decline.
We grant stock options to certain of our employees as incentives to join Omnicell or as an on-going reward and retention vehicle. We had options outstanding to purchase approximately 2.7 million shares of our common stock, at a weighted-average exercise price of $19.02 per share as of December 31, 2014. If some or all of these shares are sold into the public market over a short time period, the price of our common stock may decline, as the market may not be able to absorb

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those shares at the prevailing market prices. Such sales may also make it more difficult for us to sell equity securities in the future on terms that we deem acceptable.
Changes in our tax rates, the adoption of new tax legislation or exposure to additional tax liabilities could affect our future results.
We are subject to taxes in the United States and other foreign jurisdictions. Our future effective tax rates could be affected by several factors, many of which are outside of our control, including: changes in the mix of earnings with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation. We regularly assess the likelihood of adverse outcomes to determine the adequacy of our provision for taxes. We are also subject to examination of our income tax returns by the Internal Revenue Service and other tax authorities. There can be no assurance that the outcomes from these examinations will not materially adversely affect our financial condition and operating results.
Catastrophic events may disrupt our business and harm our operating results.
We rely on our network infrastructure, data centers, enterprise applications, and technology systems for the development, marketing, support and sales of our products, and for the internal operation of our business. These systems are susceptible to disruption or failure in the event of a major earthquake, fire, flood, cyber-attack, terrorist attack, telecommunications failure, or other catastrophic event. Many of these systems are housed or supported in or around our corporate headquarters located in Northern California, near major earthquake faults, and where a significant portion of our research and development activities and other critical business operations take place. Other critical systems, including our manufacturing facilities for our consumable medication packages, are housed in St. Petersburg, Florida in communities that have been subject to significant tropical storms. Disruptions to or the failure of any of these systems, and the resulting loss of critical data, which is not quickly recoverable by the effective execution of disaster recovery plans designed to reduce such disruption, could cause delays in our product development, prevent us from fulfilling our customers' orders, and could severely affect our ability to conduct normal business operations, the result of which would adversely affect our operating results.
Anti-takeover provisions in our charter documents and under Delaware law, and any stockholders' rights plan we may adopt in the future, make an acquisition of us, which may be beneficial to our stockholders, more difficult.
We are incorporated in Delaware. Certain anti-takeover provisions of Delaware law and our charter documents as currently in effect may make a change in control of our company more difficult, even if a change in control would be beneficial to the stockholders. Our anti-takeover provisions include provisions in our certificate of incorporation providing that stockholders' meetings may only be called by our Board of Directors and provisions in our bylaws providing that the stockholders may not take action by written consent and requiring that stockholders that desire to nominate any person for election to our Board of Directors or to make any proposal with respect to business to be conducted at a meeting of our stockholders be submitted in appropriate form to our Secretary within a specified period of time in advance of any such meeting. Delaware law also prohibits corporations from engaging in a business combination with any holders of 15% or more of their capital stock until the holder has held the stock for three years unless, among other possibilities, our Board of Directors approves the transaction. Our Board of Directors may use these provisions to prevent changes in the management and control of our company. Also, under applicable Delaware law, our board of directors may adopt additional anti-takeover measures in the future.
The stockholder rights plan adopted by our Board of Directors in February 2003 expired by its terms in February 2013. Our Board of Directors could adopt a similar plan in the future if it determines that such action is in the best interests of our stockholders. Such a plan may have the effect of discouraging, delaying or preventing a change in control of our company that may be beneficial to our stockholders.
ITEM 1B. UNRESOLVED STAFF COMMENTS
There are currently no unresolved issues with respect to any Commission staff’s written comments that were received at least 180 days before the end of our fiscal year to which this report relates and that relate to our periodic or current reports under the Exchange Act.
ITEM 2. PROPERTIES
Our headquarters is located in leased facilities in Mountain View, California. In addition, we maintain leased office space in California, Florida, Illinois, Tennessee, and the United Kingdom. The following is a list of our leased facilities and their primary functions.

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Site
 
Major Activity
 
Segment
 
Approximate Square Footage
St. Petersburg, Florida
 
Administration, marketing, research and development and manufacturing
 
Medication Adherence
 
132,500
Mountain View, California
 
Administration, marketing, and research and development
 
Automation and Analytics
 
100,000
Milpitas, California
 
Manufacturing
 
Automation and Analytics
 
46,000
Waukegan, Illinois
 
Technical support and training
 
Automation and Analytics
 
38,000
Nashville, Tennessee
 
Research and development and marketing
 
Automation and Analytics
 
25,000
Stockport, United Kingdom (1)
 
Administration, sales, marketing and distribution center
 
Medication Adherence
 
19,500
Leeds, United Kingdom
 
Sales, marketing and distribution center
 
Automation and Analytics
and Medication Adherence
 
16,500
_________________________________________________
(1)     Leased facilities as a result of our acquisition of Surgichem in August 2014.
We also have smaller rented offices in Strongsville, Ohio, the United Arab Emirates, the People's Republic of China, Hong Kong and the Federal Republic of Germany.
We believe that these facilities are sufficient for our current operational needs and that suitable additional space will be available on commercially reasonable terms to accommodate expansion of our operations, if necessary.
For additional information regarding our obligations pursuant to operating leases, see Note 12, Commitments, of the Notes to Consolidated Financial Statements in this annual report.
ITEM 3. LEGAL PROCEEDINGS
The information set forth under "Legal Proceedings" in Note 13, Contingencies, of the Notes to Consolidated Financial Statements in this annual report is incorporated herein by reference.
On March 19, 2015, a putative class action lawsuit was filed against the Company and two executive officers in the U.S. District Court for the Northern District of California, captioned Nelson v. Omnicell, Inc., et al., Case No. 3:15-cv-01280-HSG. The complaint purports to assert claims on behalf of a class of purchasers of the Company’s stock between May 2, 2014 and March 2, 2015. It alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by purportedly making false and misleading statements regarding the existence of a “side letter” arrangement and the adequacy of internal controls that allegedly resulted in false and misleading financial statements. The Company and the individual defendants have not yet been served with the Complaint. The Company believes that the claims have no merit and will defend the lawsuit vigorously.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for Our Common Stock
Our common stock is traded on The NASDAQ Global Select Market under the symbol "OMCL." The following table sets forth the high and low sales prices per share of our common stock for the periods indicated.
Year Ended December 31, 2014
High
 
Low
Fourth Quarter
$
34.00

 
$
26.05

Third Quarter
$
29.73

 
$
26.00

Second Quarter
$
29.49

 
$
25.00

First Quarter
$
30.33

 
$
24.85

Year Ended December 31, 2013
High
 
Low
Fourth Quarter
$
25.89

 
$
20.88

Third Quarter
$
25.22

 
$
19.29

Second Quarter
$
20.88

 
$
17.01

First Quarter
$
20.00

 
$
14.68

Stockholders
There were 124 registered stockholders of record as of December 31, 2014. A substantially greater number of stockholders are beneficial holders, whose shares of record are held by banks, brokers and other financial institutions.
Dividend Policy
We have never declared or paid any cash dividends on our common stock. We currently expect to retain any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future.
Performance Graph
The following graph compares total stockholder returns for Omnicell's common stock for the past five years to two indexes: The NASDAQ Composite Index and the NASDAQ Health Services Index. The graph assumes $100 was invested in each of the Company’s common stock, the NASDAQ Composite Index, and the NASDAQ Health Services Index as of the market close on December 31, 2009. The total return for Omnicell's common stock and for each index assumes the reinvestment of all dividends, although cash dividends have never been declared on Omnicell's common stock, and is based on the returns of the component companies weighted according to their capitalization as of the end of each annual period.
The NASDAQ Composite Index tracks the aggregate price performance of equity securities traded on The NASDAQ Stock Market. The NASDAQ Health Services Index tracks the aggregate price performance of health services equity securities. Omnicell's common stock is traded on The NASDAQ Global Select Market and is a component of both indexes. The stock price performance shown on the graph is not necessarily indicative of future price performance.

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COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN (1)  
Among Omnicell, Inc., the NASDAQ Composite Index, and the NASDAQ Health Services Index (2)  
_________________________________________________
(1)  
$100 invested on December 31, 2009 in stock or index, including reinvestment of dividends.
(2)  
This section is not deemed "soliciting material" or to be "filed" with the SEC and is not to be incorporated by reference into any filing of Omnicell, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
 
Year Ended December 31,
 
2009
 
2010
 
2011
 
2012
 
2013
 
2014
Omnicell, Inc. 
100.00

 
123.61

 
141.32

 
127.20

 
218.39

 
283.32

NASDAQ Composite
100.00

 
117.61

 
118.70

 
139.00

 
196.83

 
223.74

NASDAQ Health Services
100.00

 
100.48

 
82.48

 
93.99

 
134.74

 
161.37

Stock Repurchase Programs

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The following table presents a summary of our stock repurchase activity in the fourth quarter of 2014:
 
Total Number of Shares Purchased  (1)
 
Average Price
Paid per Share
 
Total Number of Shares Purchased Under Publicly Announced Programs (1)
 
Maximum Dollar Value of Shares That May Yet Be Purchased Under Plans or Programs (2)  
 
(In thousands, except per share data)
October 1, 2014 to October 31, 2014
163,196

 
$
27.29

 
163,196

 
$
54,947

November 1, 2014 to November 30, 2014
—

 
—

 
—

 
—

December 1, 2014 to December 31, 2014
—

 
—

 
—

 
—

Total
163,196

 
 
 
163,196

 
$
54,947

_________________________________________________
(1)  
Shares purchased under the 2012 Stock Repurchase Program.
(2)  
In August 2012, our Board of Directors authorized a program to repurchase up to $50.0 million of common stock beginning in 2012, of which approximately $45.1 million has been repurchased as of December 31, 2014 . In November 2014, our Board of Directors authorized a program to repurchase up to $50.0 million of common stock. We expect to begin repurchasing shares under the 2014 Stock Repurchase Program upon the completion of the 2012 Stock Repurchase Program. Our stock repurchase programs do not obligate us to acquire any specific number of shares, and shares may be repurchased in privately negotiated and/or open market transactions, including plans complying with Rule 10b5-1 of the Exchange Act. Our stock repurchase programs have a total of $54.9 million remaining for future repurchases as of December 31, 2014 , and neither program has an expiration date.
Refer to Note 15, Stock Repurchases , of the Notes to Consolidated Financial Statements in this annual report for information regarding our authorized Stock Repurchase Programs.
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data is derived from our Consolidated Financial Statements. This data should be read in conjunction with our Consolidated Financial Statements and related Notes included in this annual report and with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. Historical results may not be indicative of future results.
 
Year Ended December 31,
 
2014 (2)
 
2013
 
2012 (3)
 
2011
 
2010 (4)
 
(In thousands, except per share amounts)
Consolidated Statements of Operations Data:
 
 
 
 
 
 
 
 
 
Total revenue
$
440,900

 
$
380,585

 
$
314,027

 
$
245,535

 
$
222,407

Gross profit
$
233,860

 
$
203,399

 
$
170,588

 
$
135,784

 
$
117,917

Income from operations (1)
$
49,583

 
$
35,299

 
$
27,126

 
$
16,222

 
$
9,526

Net income
$
30,518

 
$
23,979

 
$
16,178

 
$
10,389

 
$
4,892

Net income per share:
 
 
 
 
 
 
 
 
 
Basic
$
0.86

 
$
0.69

 
$
0.49

 
$
0.31

 
$
0.15

Diluted
$
0.83

 
$
0.67

 
$
0.47

 
$
0.30

 
$
0.15

Shares used in per shares calculations:
 
 
 
 
 
 
 
 
 
Basic
35,650

 
34,736

 
33,307

 
33,123

 
32,651

Diluted
36,622

 
35,777

 
34,213

 
34,103

 
33,513

Cash dividends declared per share
$
—

 
$
—

 
$
—

 
$
—

 
$
—


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December 31,
 
2014 (2)
 
2013
 
2012 (3)
 
2011
 
2010 (4)
 
(In thousands)
Consolidated Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Total assets
$
560,214

 
$
492,501

 
$
441,819

 
$
363,849

 
$
343,224

Total liabilities
$
170,116

 
$
143,504

 
$
134,269

 
$
80,935

 
$
78,010

Total stockholders' equity
$
390,098

 
$
348,997

 
$
307,550

 
$
282,914

 
$
265,214

__________________________________________________
(1)     Income from operations includes the following items:
 
Year Ended December 31,
 
2014 (2)
 
2013
 
2012 (3)
 
2011
 
2010 (4)
 
(In thousands)
Share-based compensation expense
$
12,785

 
$
11,151

 
$
9,214

 
$
9,499

 
$
9,015

(2)     Includes Surgichem results as of August 2014.
(3)     Includes MTS results as of May 2012.
(4)     Includes Pandora results as of September 2010.
SUPPLEMENTARY CONSOLIDATED FINANCIAL DATA
 
Quarter Ended
 
December 31, 2014
 
September 30, 2014 (2)
 
June 30, 2014
 
March 31, 2014
 
(In thousands, except per share data)
(Unaudited)
2014 Consolidated   Statements of Operations Data:
 
 
 
 
 
 
 
Total revenue
$
121,541

 
$
112,543

 
$
105,052

 
$
101,764

Gross profit
63,779

 
59,546

 
56,040

 
54,495

Income from operations
13,474

 
13,597

 
12,558

 
9,954

Net income
$
9,235

 
$
7,300

 
$
7,789

 
$
6,194

Net income per share:
 
 
 
 
 
 
 
Basic (1)
$
0.26

 
$
0.20

 
$
0.22

 
$
0.18

Diluted (1)
$
0.25

 
$
0.20

 
$
0.21

 
$
0.17

 
Quarter Ended
 
December 31, 2013
 
September 30, 2013
 
June 30, 2013
 
March 31, 2013
 
(In thousands, except per share data)
(Unaudited)
2013 Consolidated   Statements of Operations Data:
 
 
 
 
 
 
 
Total revenue
$
105,750

 
$
94,039

 
$
93,686

 
$
87,110

Gross profit
56,624

 
52,040

 
49,368

 
45,367

Income from operations
11,055

 
10,717

 
9,359

 
4,169

Net income
$
6,823

 
$
7,755

 
$
6,016

 
$
3,385

Net income per share:
 

 
 

 
 

 
 

Basic (1)
$
0.19

 
$
0.22

 
$
0.17

 
$
0.10

Diluted (1)
$
0.19

 
$
0.21

 
$
0.17

 
$
0.10

_________________________________________________
(1)  
Quarterly net income per share figures may not total to annual net income per share, due to rounding and immaterial fluctuations in the number of options included or omitted from diluted calculations based on the stock price or option exercise prices and/or net losses recorded in quarterly periods.
(2)  
Includes Surgichem results as of August 2014.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related notes in this annual report. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under Item 1A "Risk Factors" and elsewhere in this annual report. Unless otherwise stated, references in this report to particular years or quarters refer to our fiscal year and the associated quarters of those fiscal years.
OVERVIEW
Our Business
We are a leading provider of comprehensive automation and business analytics software solutions for patient-centric medication and supply management across the entire healthcare continuum, from the acute care hospital setting to post-acute skilled nursing and long-term care facilities to the home. Our Omnicell Automation and Analytic customers worldwide utilize our medication automation, supply chain and analytics solutions to help enable them to increase operational efficiency, reduce errors, deliver actionable intelligence and improve patient safety.
Omnicell Medication Adherence solutions, including the MTS and Surgichem brands, provide innovative medication adherence packaging solutions that can help reduce costly hospital readmissions and enable institutional and retail pharmacies worldwide to maintain high accuracy and quality standards in medication dispensing and administration while optimizing productivity and controlling costs.
We sell our product and consumable solutions together with related service offerings. Revenue generated in the United States represented 89% of our total revenues in 2014 and we expect our revenues from international operations to increase in future periods as we continue to grow our international business. We have not sold in the past, and have no future plans to sell our products either directly or indirectly, to customers located in countries that are identified as state sponsors of terrorism by the U.S. Department of State, and are subject to economic sanctions and export controls.
Operating Segments
In the first quarter of 2014, we began to manage our business according to two product segments as many of our Acute Care and Non-Acute Care customers are converging to provide services across the continuum of care. These customers seek Automation and Analytics products that function across the various facilities they manage, and we find ourselves providing solutions across multiple types of care environments. These customers are also interested in obtaining higher levels of adherence to prescribed medication regimens that our blister card products can help provide. Our business has evolved to be managed more on a product basis and it has become more difficult to determine whether a customer is a hospital or a blend of hospitals and non-acute care facilities.
We modified our segment reporting structure to match our new operating structure in the first quarter of 2014. The two operating segments which are the same as our reporting segments are Automation and Analytics and Medication Adherence. As our business evolves, we will continue to assess our operating units which could result in future modifications to our current operating segments. For further description of our operating segments, Note 17, Segment Information, of the Notes to Consolidated Financial Statements in this annual report.
Strategy
The healthcare market is experiencing a period of substantive change. The adoption of electronic healthcare records, new regulatory constraints, and changes in the reimbursement structure have caused healthcare institutions to re-examine their operating structures, re-prioritize their investments, and seek efficiencies. We believe our customers’ evolving operating environment creates challenges for any supplier, but also affords opportunities for suppliers that are able to partner with customers to help them meet the changing demands. We have and intend to continue to invest in the strategies which we believe have generated and will continue to generate our revenue and earnings growth, while supporting our customers’ initiatives and needs. These strategies include:
•
Development of differentiated products. We invest in the development of products that we believe bring patient safety and workflow efficiency to our customers’ operations that they cannot get from other competing solutions. These differentiators may be as small as how a transaction operates or information provided on a report or as large as the entire automation of a workflow that would otherwise be completed manually. We intend to continue our

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focus on differentiating our products, and we carefully assess our investments regularly as we strive to ensure those investments provide the solutions most valuable to our customers.
•
Deliver our solutions to new markets . Areas of healthcare where work is done manually may benefit from our existing solutions. These areas include hospitals that continue to utilize manual operations, healthcare segments of the U.S. market outside hospitals and markets outside the United States. We weigh the cost of entering these new markets against the expected benefits and focus on the markets that we believe are most likely to adopt our products.
•
Expansion of our solutions through acquisitions and partnerships. Our acquisitions have generally been focused on automation of manual workflows or data analytics, which is the enhancement of data for our customers’ decision-making processes. We believe that expansion of our product lines through acquisition and partnerships to meet our customers changing and evolving expectations is a key component to our historical and future success.
Our investments have been consistent with the strategies outlined above. To differentiate our solutions from others available in the market, we began shipping a refresh of our product line in 2011, which we market as G4. The G4 refresh included multiple new products and an upgrade product that allowed existing customers to augment their installations to obtain the most current technology that we provide. The G4 product refresh has been a key contributor to our growth, with 61% of our automation and analytics installed base ordering upgrades to their existing systems since the announcement of G4. In addition to enhanced capabilities, we have focused on attaining the highest quality and service measurements for G4 in the industry, while marketing the solution to new and existing customers. Our research and development efforts today are designed to bring new products to market beyond the G4 product line that we believe will meet customer needs in years to come.
Consistent with our strategy to enter new markets, we have made investments in our selling, general and administrative expenses to expand our sales team and market to new customers. Our international efforts have focused primarily on four markets: the United Kingdom where we sell medication adherence products through a direct sales team and automation and analytics products through a distributor, Germany where we sell medication adherence products through a direct sales team, Middle Eastern countries of the Arabian Peninsula where new healthcare facility construction is taking place, and in China, where we launched a Mandarin version of our automated dispensing systems in 2011. In the third quarter of 2012, we purchased 15% of our United Kingdom automation and analytics products distributor’s outstanding equity for approximately $0.9 million in cash to accelerate the adoption of medication and supply automation. In connection with the investment, we have the right, under certain circumstances, to appoint a member to this company's board of directors as well as certain other voting rights and, therefore, we believe we have the ability to exert significant influence over this distributor's operations. Our proportionate equity share of the income of this distributor, recognized in interest and other income, net, was immaterial for the years ended December 31, 2014 , December 31, 2013 and December 31, 2012 . We have also expanded our sales efforts to medication adherence customers in the United States which has allowed us to sell our automated dispensing solutions and other products to this market.
Expansion of our solutions through acquisitions and partnerships include our acquisition of MTS in 2012 and our acquisition of Surgichem in August 2014. Surgichem is a provider of medication adherence products in the United Kingdom. We have also developed relationships with major providers of hospital information management systems with the goal of enhancing the interoperability of our products with their systems. We believe that enhanced interoperability will help reduce implementation costs, time, and maintenance for shared clients, while providing new clinical workflows designed to enhance efficiency and patient safety.
We believe that the success of our three leg strategy of differentiated products, expansion into new markets, and acquisition and partnership in future periods will be based on, among other factors:
•
Our expectation that the overall market demand for healthcare services will increase as the population grows, life expectancies continue to increase and the quality and availability of healthcare services increases;
•
Our expectation that the environment of increased patient safety awareness, increased regulatory control, increased demand for innovative products that improve the care experience and increased need for workflow efficiency through the adoption of technology in the healthcare industry will make our solutions a priority in the capital budgets of healthcare facilities; and
•
Our belief that healthcare customers will continue to value a consultative customer experience from their suppliers.
Among other financial measures, we utilize product bookings to assess the current success of our strategies. Product bookings consist of all firm orders, as evidenced by a contract and purchase order for equipment and software, and by a

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purchase order for consumables. Equipment and software bookings are installable within twelve months and generally recorded as revenue upon customer acceptance of the installation. Consumables are recorded as revenue upon shipment to a customer or receipt by the customer, depending upon contract terms. Consumable bookings are generally recorded as revenue within one month. Product bookings increased 11%, from $327.8 million in 2013 to $364.0 million in 2014, driven by the success of our growth strategies in differentiated products and new markets and, to a lesser extent, by the partial year of contribution from the acquisition of Surgichem.
In addition to product solution sales, we provide services to our customers. Our healthcare customers expect a high degree of partnership involvement from their technology suppliers throughout their ownership of the products. We provide extensive installation planning and consulting as part of every product sale and included in the initial price of the solution. Our customers' medication control systems are mission critical to their success and our customers require these systems to be functional at all times. To help assure the maximum availability of our systems, our customers typically purchase maintenance and support contracts in one, two or five year increments. As a result of the growth of our installed base of customers, our service revenues have also grown. We strive to provide the best service possible, as measured by third-party rating agencies and by our own surveys, to assure our customers continue to seek service maintenance from us. Our liabilities include current and long-term deferred service revenue of $45.5 million and $40.4 million as of December 31, 2014 and December 31, 2013, respectively. Our deferred service revenue will be amortized to service revenue as the service contracts are executed.
The growth in our Automation and Analytics revenue was driven primarily by our success in consistently growing the number of our customer installations for the year ended December 31, 2014. Installed customers in the United States grew from 1,806 hospitals as of December 31, 2013 to 1,935 hospitals as of December 31, 2014. To a lesser extent, but of equal importance, revenue growth was also driven by our success in upgrading installed customers to newer G4 technology, which is in line with our strategy of striving to deliver differentiated innovation in our solutions. Our larger installed base has provided growth opportunities and, as a result, our service revenues have also grown for the year ended December 31, 2014.
The growth in our Medication Adherence revenue was driven primarily by increased sales of our OnDemand medication packaging systems in the United States market and increased adoption of multi-medication adherence solutions used by patients in assisted living or home care in Europe for the year ended December 31, 2014. This growth is in line with our strategy to deliver solutions to markets outside the United States. On a geographic basis, the United States market did not contribute to, nor erode, the growth in our Medication Adherence business as the population of patients living in nursing homes in the United States has remained relatively constant over the past year.
In the future, we expect our strategies to evolve as the business environment of our customers evolves, but for our focus to remain on improving healthcare with solutions that help change the practices in ways that improve patient and provider outcomes. We expect our investment in differentiated products, new markets, and acquisitions and partnerships to continue. In 2015, we also intend to manage our business to operating profit margins similar to those achieved in 2014. Our full-time headcount of 1,236 on December 31, 2014, which is an increase of 102 from December 31, 2013, is dedicated to bringing our strategies to bear in all the markets we participate in.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial Statements, which have been prepared in accordance with United States Generally Accepted Accounting Principles ("U.S. GAAP"). The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We regularly review our estimates and assumptions, which are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions. We believe the following critical accounting policies are affected by significant judgments and estimates used in the preparation of our Consolidated Financial Statements:
Revenue recognition
We earn revenues from sales of our medication and medical and surgical supply automation systems along with consumables and related services that are sold in the healthcare industry, our principal market. Revenues related to consumable products are reported net of discounts provided to our customers. Our customer arrangements typically include one or more of the following deliverables:
Products. Software-enabled equipment that manages and regulates the storage and dispensing of pharmaceuticals, consumable blister cards and packaging equipment and other medical supplies.

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Software. Additional software applications that enable incremental functionality of our equipment.
Installation. Installation of equipment as integrated systems at customers' sites.
Post-installation technical support. Phone support, on-site service, parts and access to unspecified software upgrades and enhancements, if and when available.
Professional services. Other customer services, such as training and consulting.
We recognize revenue when the earnings process is complete, based upon our evaluation of whether the following four criteria have been met:
Persuasive evidence of an arrangement exists.  We use signed customer contracts and signed customer purchase orders as evidence of an arrangement for leases and sales. For service engagements, we use a signed services agreement and a statement of work to evidence an arrangement.
Delivery has occurred.  Equipment and embedded software product delivery is deemed to occur upon successful installation and receipt of a signed and dated customer confirmation of installation letter, providing evidence that we have delivered what a customer ordered. In instances of a customer self-installation, product delivery is deemed to have occurred upon receipt of a signed and dated customer confirmation letter. If a sale does not require installation, we recognize revenue on delivery of products to the customer, including transfer of title and risk of loss, assuming all other revenue criteria are met. For existing distributors, where installation of equipment training has been previously provided and the distributor is certified to install our equipment at the end-user customer facility, we recognize revenue from sales of products to the distributor upon shipment assuming all other revenue criteria are met, since we do not allow for rights of return or refund. For new distributors, where we have not provided installation of equipment training, revenue on the sales of products to the distributor is deferred until the distributor has completed the Distributor Training Program and has been certified to install our equipment at the end-user facility. For the sale of consumable blister cards, we recognize revenue when title and risk of loss of the products shipped have transferred to the customer, which usually occurs upon shipment from our facilities. Assuming all other revenue criteria are met, we recognize revenue for support services ratably over the related support services contract period. We recognize revenue on training and professional services as they are performed.
Fee is fixed or determinable.  We assess whether a fee is fixed or determinable at the outset of the arrangement based on the payment terms associated with the transaction. We have established a history of collecting under the original contract without providing concessions on payments, products or services.
Collection is probable.  We assess the probability of collecting from each customer at the outset of the arrangement based on a number of factors, including the customer's payment history and its current creditworthiness. If, in our judgment, collection of a fee is not probable, we defer the revenue until the uncertainty is removed, which generally means revenue is recognized upon our receipt of cash payment assuming all other revenue criteria are met. Our historical experience has been that collection from our customers is generally probable.
In arrangements with multiple deliverables, assuming all other revenue criteria are met, we recognize revenue for individual delivered items if they have value to the customer on a standalone basis. We allocate arrangement consideration at the inception of the arrangement to all deliverables using the relative selling price method. This method requires us to determine the selling price at which each deliverable could be sold if it were sold regularly on a standalone basis. When available, we use vendor-specific objective evidence ("VSOE") of the selling price. VSOE represents the price charged for a deliverable when it is sold separately, or for a deliverable not yet being sold separately, the price established by management with the relevant authority. We consider VSOE to exist when approximately 80% or more of our standalone sales of an item are priced within a reasonably narrow pricing range (plus or minus 15% of the median rates). We have established VSOE of the selling price for our post-installation technical support services and professional services. When VSOE of selling price is not available, third-party evidence ("TPE") of selling price for similar products and services is acceptable; however, our offerings and market strategy differ from those of our competitors, such that we cannot obtain sufficient comparable information about third parties' prices. If neither VSOE nor TPE are available, we use our best estimates of selling prices ("BESP"). We determine BESP considering factors such as market conditions, sales channels, internal costs and product margin objectives and pricing practices. We regularly review and update our VSOE and BESP information.
The relative selling price method allocates total arrangement consideration proportionally to each deliverable (an "Element") on the basis of its estimated selling price. In addition, the amount recognized for any delivered Elements cannot exceed that which is contingent upon delivery of any remaining Elements in the arrangement.
We also use the residual method to allocate revenue between the software products that enable incremental equipment functionality, and thus are not deemed to deliver its essential functionality, and the related post-installation technical support, as

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these products and services continue to be accounted for under software revenue recognition rules. Under the residual method, the amount allocated to the undelivered elements equals VSOE of fair value of these elements. Any remaining amounts are attributed to the delivered items and are recognized when those items are delivered.
A portion of our sales are made through multi-year lease agreements. Under sales-type leases, we recognize revenue for our hardware and software products net of lease execution costs such as post-installation product maintenance and technical support, at the net present value of the lease payment stream once our installation obligations have been met. We optimize cash flows by selling a majority of our non-U.S. government leases to third-party leasing finance companies on a non-recourse basis. We have no obligation to the leasing company once the lease has been sold. Some of our sales-type leases, mostly those relating to U.S. government hospitals, are retained in-house. Interest income on these leases is recognized as a component of product revenue using the interest method.
Accounts receivable and notes receivable (net investment in sales-type leases)
We actively manage our accounts receivable to minimize credit risk. We typically sell our products to customers for which there is a history of successful collection. New customers are subject to a credit review process, which evaluates that customer's financial position and ability to pay. We continually monitor and evaluate the collectability of our trade receivables based on a combination of factors. We record specific allowances for doubtful accounts when we become aware of a specific customer's impaired ability to meet its financial obligation to us, such as in the case of bankruptcy filings or deterioration of financial position.
Uncollectible amounts are charged off against trade receivables and the allowance for doubtful accounts when we make a final determination that there is no reasonable expectation of recovery. Estimates are used in determining our allowances for all other customers based on factors such as current trends, the length of time the receivables are past due and historical collection experience. While we believe that our allowance for doubtful accounts receivable is adequate and that the judgment applied is appropriate, such estimated amounts could differ materially from what will actually be uncollectible in the future.
The retained in-house leases discussed above are considered financing receivables. Our credit policies and evaluation of credit risk and write-off policies are applied alike to trade receivables and the net investment in sales-type leases. For both, an account is generally past due after thirty days. The financing receivables also have customer-specific reserves for accounts identified for specific impairment and a non-specific reserve applied to the remaining population, based on factors such as current trends, the length of time the receivables are past due and historical collection experience. The retained in-house leases are not stratified by portfolio or class. Financing receivables which are reserved are generally transferred to cash-basis accounting so that revenue is recognized only as cash is received. However, the cash basis accounts continue to accrue interest.
Valuation and impairment of goodwill, intangible assets and other long-lived assets
Business combination valuations. When we acquire businesses, we allocate the purchase price to tangible assets and liabilities and identifiable intangible assets acquired. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates are based on information obtained from management of the acquired companies and historical experience. These estimates can include, but are not limited to:
•
cash flows that an asset is expected to generate in the future;
•
the acquired company’s brand and competitive position, as well as assumptions about the period of time the acquired brand will continue to be used in the combined company’s product portfolio;
•
cost savings expected to be derived from acquiring an asset; and
•
discount rates.
These estimates are inherently uncertain and unpredictable, and if different estimates were used, the purchase price for the acquisition could be allocated to the acquired assets and liabilities differently from the allocation that we have made. In addition, unanticipated events and circumstances may occur which may affect the accuracy or validity of such estimates, and if such events occur we may be required to record a charge against the value ascribed to an acquired asset or an increase in the amounts recorded for assumed liabilities.
Goodwill impairment. We review goodwill for impairment on an annual basis on the first day of the fourth quarter of each year at the reporting unit level. Our reporting units are the same as our operating segments, which are Automation and Analytics and Medication Adherence. A qualitative assessment is initially made to determine whether it is necessary to perform quantitative testing. This initial assessment includes, among others, consideration of: (i) past, current and projected future

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earnings and equity; (ii) recent trends and market conditions; and (iii) valuation metrics involving similar companies that are publicly-traded and acquisitions of similar companies, if available. If this initial qualitative assessment indicates that it is more likely than not that impairment exists, or if we decide to bypass this option, we proceed to a two-step impairment test. The first step ("Step 1") involves a comparison between the estimated fair values of our reporting units with their respective carrying amounts including goodwill. The methods for estimating reporting unit values include asset and liability fair values and other valuation techniques, such as discounted cash flows and multiples of earnings or revenues. If the carrying value exceeds estimated fair value, there is an indication of potential impairment, and the second step is performed to measure the amount of impairment. The second step involves calculating an implied fair value of goodwill by measuring the excess of the estimated fair value of the reporting units over the aggregate estimated fair values of the individual assets less liabilities. If the carrying value of goodwill exceeds the implied fair value of goodwill, an impairment charge is recorded for the excess.
The process of estimating the fair value and carrying value of our reporting units’ equity requires significant judgment at many points during the analysis. Various assets and liabilities are not specifically allocated to an individual reporting unit, and therefore, we apply judgment to allocate the assets and liabilities, and this allocation affects the carrying value of the respective reporting units. Applying the income approach requires that we make a number of important estimates and assumptions. We estimate the future cash flows of each reporting unit based on historical and forecasted revenue and operating costs. This involves further estimates, such as estimates of future revenue and expense growth rates. In addition, we apply a discount rate to the estimated future cash flows for the purpose of the valuation. This discount rate is based on the estimated weighted-average cost of capital for each reporting unit and may change from year to year. Changes in these key estimates and assumptions, or in other assumptions used in this process, could materially affect our impairment analysis for a given year.
Based on a Step 1 impairment analysis performed as of October 1, 2014, we determined that it was more likely than not that the fair value of each of our reporting units exceeded the carrying value by approximately 25%, and thus no impairment in our reporting units.
Intangible assets and other long-lived assets . We assess the impairment of identifiable intangible assets and other long-lived assets whenever events or changes in circumstances indicate that an asset's carrying amount may not be recoverable. Recoverability of an asset is measured by the comparison of the carrying amount to the sum of the undiscounted estimated future cash flows the asset is expected to generate, offset by estimated future costs to dispose of the product to which the asset relates. If an asset is considered to be impaired, the amount of such impairment would be measured as the difference between the carrying amount of the asset and its fair value. Our cash flow assumptions are based on historical and forecasted future revenue, operating costs, and other relevant factors. Assumptions and estimates about the remaining useful lives of our intangible assets and other long-lived assets are subjective and are affected by changes to our business strategies. If management’s estimates of future operating results change, or if there are changes to other assumptions, the estimate of the fair value of our assets could change significantly. Such change could result in impairment charges in future periods, which could have a significant impact on our operating results and financial condition.
Inventory
Inventories are stated at the lower of cost (utilizing standard costs), applying the first-in, first-out method, or market. We routinely assess our on-hand inventory for timely identification and measurement of obsolete, slow-moving or otherwise impaired inventory. We write down inventory for estimated obsolescence, excess or unmarketable quantities equal to the difference between the cost of the inventory and its estimated market value based on assumptions about future demand and market conditions, or lower of cost or market. If actual future demand or market conditions are less favorable than we projected, additional inventory write-downs may be required.
Valuation of share-based awards
We account for share-based compensation in accordance with ASC 718, Stock Compensation ("ASC 718"). We recognize compensation expense related to stock-compensation, including the awarding of employee stock options and restricted stock units, based on the grant date estimated fair value. We amortize the fair value of the employee stock options on a straight-line basis over the requisite service period of the award, which is generally the vesting period. We estimate the fair value of stock-based compensation awards using the Black-Scholes option pricing model, which requires the following inputs: expected life, expected volatility, risk-free interest rate, expected dividend yield rate, exercise price, and closing price of our common stock on the date of grant. The expected volatility is based on a combination of historical and market-based implied volatility, and the expected life of the awards is based on our historical experience of employee stock option exercises, including forfeitures. The valuation assumptions we use in estimating the fair value of employee share-based awards may change in future periods. We calculate our pool of excess tax benefits available within additional paid-in capital in accordance with the provisions of ASC 718.
Accounting for income taxes

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We record an income tax provision for the anticipated tax consequences of the reported results of operations. In accordance with ASC 740, Income Taxes ("ASC 740"), the provision for income taxes is computed using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities, and for operating losses and tax credit carry forwards. Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the periods in which those tax assets and liabilities are expected to be realized or settled. In the event that these tax rates change, we will incur a benefit or detriment on our income tax expense in the period of change. If we were to determine that all or part of the net deferred tax assets are not realizable in the future, we will record a valuation allowance that would be charged to earnings in the period such determination is made.
In accordance with ASC 740, we recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of ASC 740 and complex tax laws. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on our financial condition and operating results.
Recently issued authoritative guidance
Refer to Note 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in this annual report for a description of recently issued accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial positions and cash flows.
RESULTS OF OPERATIONS
Total Revenues
 
 
 
Change in
 
 
 
Change in
 
 
 
2014
 
$
 
%
 
2013
 
$
 
%
 
2012
 
(Dollars in thousands)
Product revenues
$
360,344

 
$
53,155

 
17
%
 
$
307,189

 
$
59,535

 
24
%
 
$
247,654

Percentage of total revenues
82
%
 
 
 
 
 
81
%
 
 
 
 
 
79
%
Service and other revenues
80,556

 
7,160

 
10
%
 
73,396

 
7,023

 
11
%
 
66,373

Percentage of total revenues
18
%
 
 
 
 
 
19
%
 
 
 
 
 
21
%
Total revenues
$
440,900

 
$
60,315

 
16
%
 
$
380,585

 
$
66,558

 
21
%
 
$
314,027

2014 compared to 2013:
Product revenues represented 82% , 81% and 79% of total revenues for the years ended 2014, 2013 and 2012, respectively. Product revenues increased due to increased sales for both our Automation and Analytics segment of $44.0 million and Medication Adherence segment of $9.1 million . Service and other revenues represented 18% , 19% and 21% of total revenues for the years ended 2014, 2013 and 2012, respectively. Service and other revenues include revenues from service and maintenance contracts and rentals of automation systems. Service and other revenues primarily increased due to an increase from our Automation and Analytics segment of $7.1 million .
Our international sales represented 11% , 12% and 8% of total revenues for the years ended 2014, 2013 and 2012, respectively, and are expected to be affected by foreign currency exchange rates fluctuations. We are unable to predict the extent to which revenue in future periods will be impacted by changes in foreign currency exchange rates.
We anticipate our revenues will continue to increase in 2015 compared to 2014, as we fulfill our existing orders, and based on our growth in bookings in 2014, some of which will be recognized as revenue in 2015. Our ability to continue to grow revenue is dependent on our ability to continue to obtain orders from customers, our ability to produce quality consumables to fulfill customer demand, the volume of installations we are able to complete, our ability to meet customer needs by providing a quality installation experience, and our flexibility in manpower allocations among customers to complete installations on a timely basis. The timing of our product revenues for equipment is primarily dependent on when our customers’ schedules allow for installations.
2013 compared to 2012:

41

Product revenues increased due to increased sales for both Automation and Analytics segment of $35.3 million and Medication Adherence segment of $24.2 million , of which $29.2 million was from our MTS operations. Service and other revenues increased primarily as a result of an expansion in our installed base of automation systems and a resulting increase in the number of support service contracts within our Automation and Analytics segment.
Financial Information by Segment
Revenues
 
 
 
Change in
 
 
 
Change in
 
 
 
2014
 
$
 
%
 
2013
 
$
 
%
 
2012
Revenues:
(Dollars in thousands)
Automation and Analytics
$
354,095

 
$
51,178

 
17
%
 
$
302,917

 
$
42,757

 
16
%
 
$
260,160

Percentage of total revenues
80
%
 
 
 
 
 
80
%
 
 
 
 
 
83
%
Medication Adherence
86,805

 
9,137

 
12
%
 
77,668

 
23,801

 
44
%
 
53,867

Percentage of total revenues
20
%
 
 
 
 
 
20
%
 
 
 
 
 
17
%
Total revenues
$
440,900

 
$
60,315

 
16
%
 
$
380,585

 
$
66,558

 
21
%
 
$
314,027

2014 compared to 2013:
Automation and Analytics revenues increased due to an increase in product revenues of $44.0 million primarily due to the increase of $40.3 million in Medical Automation Cabinets sales and of $7.4 million in Supply Cabinets and Supply Management software sales, partially offset by a decrease of $3.7 million in revenue related to our leasing business. Service and other revenues increased by $7.1 million due to higher service renewal fees driven primarily by an increase in installed base customers and new customers.
Medication Adherence revenues increased due to an increase in product revenues of $9.1 million primarily as a result of an increase in sales of OnDemand medication packaging systems in the United States and an increase in the adoption of our multi-medication consumable products by patients in Europe, and includes $4.6 million in revenue from our Surgichem operations since its acquisition in August 2014. Service and other revenues remained relatively flat compared to the prior year.
2013 compared to 2012:
Automation and Analytics revenues increased due to an increase in product revenues of $35.3 million primarily as a result of increased customers' receptivity to our products due to product differentiation and entrance into new markets, coupled with an increase in service revenues of $7.4 million due to an increase in the number of support service contracts as a result of the expansion in our installed base customers.
Increased Medication Adherence revenues were primarily driven by an increase of $29.2 million in product revenues related to the MTS acquisition in May of 2012, partially offset by a slight decline in other product revenues. Service and other revenues remained relatively flat compared to the prior year.

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Cost of revenues and Gross profit
 
 
 
Change in
 
 
 
Change in
 
 
 
2014
 
$
 
%
 
2013
 
$
 
%
 
2012
Cost of revenues:
(Dollars in thousands)
Automation and Analytics
$
151,327

 
$
22,013

 
17
%
 
$
129,314

 
$
17,715

 
16
%
 
$
111,599

As a percentage of related revenues
43
%
 
 
 
 
 
43
%
 
 
 
 
 
43
%
Medication Adherence
55,713

 
7,841

 
16
%
 
47,872

 
16,032

 
50
%
 
31,840

As a percentage of related revenues
64
%
 
 
 
 
 
62
%
 
 
 
 
 
59
%
Total cost of revenues
$
207,040

 
$
29,854

 
17
%
 
$
177,186

 
$
33,747

 
24
%
 
$
143,439

As a percentage of total revenues
47
%
 
 
 
 
 
47
%
 
 
 
 
 
46
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
Automation and Analytics
$
202,768

 
$
29,165

 
17
%
 
$
173,603

 
$
25,042

 
17
%
 
$
148,561

Automation and Analytics gross margin
57
%
 
 
 
 
 
57
%
 
 
 
 
 
57
%
Medication Adherence
31,092

 
1,296

 
4
%
 
29,796

 
7,769

 
35
%
 
22,027

Medication Adherence gross margin
36
%
 
 
 
 
 
38
%
 
 
 
 
 
41
%
Total gross profit
$
233,860

 
$
30,461

 
15
%
 
$
203,399

 
$
32,811

 
19
%
 
$
170,588

Total gross margin
53
%
 
 
 
 
 
53
%
 
 
 
 
 
54
%
2014 compared to 2013:
Cost of revenues is primarily comprised of three general categories: (i) standard product costs which accounts for the majority of the product cost of revenues that are provided to customers, and are inclusive of purchased material, labor to build the product and overhead costs associated with production; (ii) installation costs as we install our equipment at the customer site, and include costs of the field installation personnel, including labor, travel expense, and other expenses; and (iii) other costs including variances in standard costs and overhead, scrap costs, rework, warranty, provisions for excess and obsolete inventory and amortization of software development costs.
Automation and Analytics
Cost of revenues increased due to an increase in product costs of $20.8 million as a result of an increase of $16.4 million attributed to a different mixture of customers, products and overall growth in product sales, and an increase of $2.9 million in product installation costs. Cost of service revenues increased by $1.2 million due to an increase in salaries and wages as support headcount increased, in addition to an increase in expenses related to the refurbishment of returned materials.
Gross profit increased due to an increase in product and service revenues while gross margin remained consistent as cost of sales as a percentage of revenues remained consistent with the prior year.
Medication Adherence
Cost of revenues increased due to an increase in product costs of $7.6 million primarily driven by an increase in product sales and the inclusion of costs from our Surgichem operations. Consistent with the related revenues, cost of service sales remained relatively flat compared to the prior year.
Gross profit increased due to an increase in product revenues and the inclusion of Surgichem operations, and gross margin slightly decreased as cost of sales as a percentage of revenues slightly increased driven by higher product costs.
We do not anticipate any significant fluctuations in gross profit and gross margin beyond normal fluctuations caused by changes in product mix for our Automation and Analytics and Medication Adherence segments during 2015.
2013 compared to 2012:
Automation and Analytics
Cost of revenues increased due to an increase in product costs of $17.8 million as a result of increased revenues and unfavorable changes in product mix. Cost of service sales remained relatively flat compared to the prior year.

43

Gross profit increased due to an increase in product and service revenues while gross margin remained consistent as cost of sales as a percentage of revenues remained overall consistent with the prior year.
Medication Adherence
Cost of revenues increased due to an increase in product costs of $14.9 million and service costs of $1.2 million primarily driven by an increase in product sales and the inclusion of costs from our MTS operations.
Gross profit increased due to an increase in product revenues and the inclusion of MTS operations, and gross margin slightly decreased as cost of sales as a percentage of revenues slightly increased driven primarily by higher product costs.
Operating expenses and Income from operations
 
 
 
Change in
 
 
 
Change in
 
 
 
2014
 
$
 
%
 
2013
 
$
 
%
 
2012
Operating expenses:
(Dollars in thousands)
Research and development
$
27,802

 
$
(1,303
)
 
(4
)%
 
$
29,105

 
$
5,379

 
23
 %
 
$
23,726

As a percentage of total revenues
6
%
 
 
 
 
 
8
%
 
 
 
 
 
8
%
Selling, general and administrative
156,475

 
17,480

 
13
 %
 
138,995

 
19,259

 
16
 %
 
119,736

As a percentage of total revenues
35
%
 
 
 
 
 
37
%
 
 
 
 
 
38
%
Total operating expenses
$
184,277

 
$
16,177

 
10
 %
 
$
168,100

 
$
24,638

 
17
 %
 
$
143,462

As a percentage of total revenues
42
%
 
 
 
 
 
44
%
 
 
 
 
 
46
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income from operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Automation and Analytics
$
47,612

 
$
14,096

 
42
 %
 
$
33,516

 
$
12,422

 
59
 %
 
$
21,094

Operating margin
13
%
 
 
 
 
 
11
%
 
 
 
 
 
8
%
Medication Adherence
1,971

 
188

 
11
 %
 
1,783

 
(4,249
)
 
(70
)%
 
6,032

Operating margin
2
%
 
 
 
 
 
2
%
 
 
 
 
 
11
%
Total income from operations
$
49,583

 
$
14,284

 
40
 %
 
$
35,299

 
$
8,173

 
30
 %
 
$
27,126

Total operating margin
11
%
 
 
 
 
 
9
%
 
 
 
 
 
9
%
2014 compared to 2013:
Research and development expenses decreased in our Automation and Analytics and Medication Adherence segments, primarily due to an increase of $3.2 million in the capitalization of software development costs in 2014 compared to 2013, partially offset by increased expenses of $2.7 million to further enhance our Pharmacy and Supply automation products. In our Medication Adherence segment, research and development decreased primarily due to the write-off of $1.8 million of capitalized software development costs in 2013 which did not recur in 2014, partially offset by an increase of $1.0 million in expenses to bring new medication adherence products to market, such as our M5000 packaging system.
We expect research and development expenses to increase in 2015 as we continue to invest in new products and services, and increase as a percentage of total revenues from 6% to approximately 8%. The amount of research and development expenses can fluctuate based on the amount of prototype expenses for hardware and/or the amount of capitalized software development costs.
Selling, general and administrative expenses increased due to increases from our Automation and Analytics segment of $15.6 million and Medication Adherence segment of $1.9 million . The increase from our Automation and Analytics segment was attributed to increases in salaries and wages of $4.0 million due to an increase in headcount, commission expenses of $1.5 million, facilities and infrastructure costs of $1.5 million, shipping costs of $1.5 million, GPO fees of $1.5 million and bad debt expense of $1.0 million with the remainder consisting of individually insignificant administrative expenses. The increase from our Medication Adherence segment was primarily the result of $1.0 million from the inclusion of Surgichem operations, with the remainder incurred from clinical studies and an increase in headcount specifically within our marketing and international businesses.
We anticipate selling, general and administrative expenses as a percentage of total revenues to be stable throughout 2015, however this estimate could be impacted by ongoing business development activities and external macro-economic factors.

44

Income from our Automation and Analytics operations increased due to an increase in product and service revenues while operating margin increased as a result of lower cost of sales and operating expenses compared to the overall growth of revenues.
Income from our Medication Adherence operations slightly increased due to an increase in product revenues and the inclusion of Surgichem operations, and operating margin remained consistent with the prior year as product costs increased which offset the relative growth in product sales.
2013 compared to 2012:
Research and development expenses increased primarily due to an increase from our Medication Adherence segment of $4.6 million , and includes (i) a write-off of $1.8 million related to capitalized software development costs as discussed in Note 9, Other Assets, of the Notes to Consolidated Financial Statements included in this annual report; (ii) expenses of $0.3 million related to a management reorganization within our Medication Adherence segment in the first quarter of 2013; and (iii) the inclusion of MTS headcount, consulting and other related activities for a full year in 2013 as compared to the prior year. Research and development expenses attributed to our Automation and Analytics segment were relatively flat compared to the prior year.
Selling, general and administrative expenses increased due to an increase from our Automation and Analytics segment of $11.8 million driven by headcount-related expenses including commissions of $5.0 million, facility and depreciation expenses of $2.9 million for our new corporate headquarters and manufacturing buildings occupied in late 2012, and consulting and professional fees of $1.8 million. Selling, general and administrative expenses increased by $7.4 million from our Medication Adherence segment due to the inclusion of MTS general and administrative expenses for a full year in 2013 as compared to the prior year.
Income from our Automation and Analytics operations increased due to an increase in product and service revenues while operating margin increased as a result of lower cost of sales and operating expenses compared to the overall growth of revenues.
Income from our Medication Adherence operations decreased due to higher product costs and operating expenses as evidenced by the overall decline in operating margin, which was primarily due to the inclusion of MTS operations.
Provision for income taxes
 
 
 
Change in
 
 
 
Change in
 
 
 
2014
 
$
 
%
 
2013
 
$
 
%
 
2012
 
(Dollars in thousands)
Provision for income taxes
$
17,986

 
$
6,936

 
63
%
 
$
11,050

 
$
153

 
1
%
 
$
10,897

Effective tax rate on earnings
37
%
 
 
 
 
 
32
%
 
 
 
 
 
40
%
Our effective tax rate was approximately 37% , 32% and 40% in 2014, 2013 and 2012, respectively.
2014 compared to 2013:
We recorded a provision for income taxes of $18.0 million and an effective tax rate of 37% for the year ended December 31, 2014, compared to $11.1 million and an effective tax rate of 32% for the year ended December 31, 2013. The 2014 annual effective tax rate differed from the statutory tax rate of 35%, primarily due to the unfavorable impact of state income taxes, non-deductible equity charges under ASC 740-718, and other non-deductible expenditures, including non-deductible acquisition costs, all of which were partially offset by the domestic production activities deduction and the federal research tax credit, which was reinstated in December 2014, retroactive to the beginning of the year. The increase in the annual effective tax rate as compared to 2013 was primarily due to non-deductible transaction costs incurred as a result of the Surgichem acquisition, combined with the absence of the impact of the 2013 tax rate reduction in the U.K., as well as reinstatement of the federal research credit in January 2013, retroactive to 2012.
2013 compared to 2012:
We recorded a provision for income taxes of approximately $11.1 million and an effective tax rate of 32% for the year ended December 31, 2013, compared to $10.9 million and an effective tax rate of 40% for the year ended December 31, 2012. The 2013 annual effective tax rate differed from the statutory tax rate of 35% primarily due to the favorable impact of Section 199 domestic production activity deduction, as well as the reinstatement of the federal research credit in January 2013, retroactive to 2012, which included two years of federal research credits within the 2013 results. The decrease in the annual effective tax rate as compared to 2012 was primarily due to the aforementioned reinstatement of the federal research and

45

development credit, a favorable mix in our domestic sales which decreased state apportionment factors in certain states, and the absence of non-deductible transaction costs in 2013 that were incurred in 2012 as a result of the MTS acquisition.
Refer to Note 14, Income Taxes, of the Notes to Consolidated Financial Statements included in this annual report for further discussion about the factors affecting our ability to realize deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Cash
We entered into a Credit Agreement with Wells Fargo Bank, National Association, as administrative agent, and the lenders from time to time which provides for a $75 million revolving credit facility to be used for general corporate purposes, including future acquisitions. The Credit Agreement permits us to request one or more increases in the aggregate commitment provided such increases do not exceed $25 million in the aggregate.
On November 5, 2014, we entered into Amendment Number One (the “Amendment”) to the Credit Agreement. The Amendment increases the amount of our common stock that may be repurchased by us in open market transactions authorized by our Board of Directors, together with any repurchases of our common stock from any consultants, employees, officers or directors of the Company or any of our subsidiaries following the death, disability, retirement or termination of employment of such employees, officers or directors, from $25 million to $50 million per year. The Credit Agreement contains customary affirmative and negative covenants, and financial covenants that require us to, among other things, maintain a maximum consolidated total leverage ratio and a minimum consolidated fixed charge coverage ratio, in each case, as of the last day of each quarter. For additional details, please refer to Note 18, Credit Agreement, of the Notes to Consolidated Financial Statements included in this annual report.
As of December 31, 2014 , we were in full compliance with all covenants, and there was no outstanding balance on the credit facility.
Uses of Cash
Our future uses of cash are expected to be primarily for working capital, capital expenditures and other contractual obligations. We also expect a continued use of cash for potential acquisition and acquisition assessment activities.
Our stock repurchase programs have a total of $54.9 million remaining for future repurchases as of December 31, 2014 , which may result in additional use of cash. See Note 15, Stock Repurchases, of the Notes to Consolidated Financial Statements included in this annual report. We had cash and cash equivalents of $125.9 million and $104.5 million as of December 31, 2014 and December 31, 2013 , respectively.
Based on our current business plan and revenue backlog, we believe that our existing cash and cash equivalents, our anticipated cash flows from operations, cash generated from the exercise of employee stock options and purchases under our employee stock purchase plan, along with the availability of funds under our $75 million Credit Agreement, will be sufficient to meet our cash needs for working capital, capital expenditures, potential acquisitions, and other contractual obligations for at least the next twelve months. For periods beyond the next twelve months, we also anticipate that our net operating cash flows plus existing balances of cash and cash equivalents will suffice to fund the continued growth of our business.
Cash Flows
The following table summarizes, for the periods indicated, selected items in our Consolidated Statements of Cash Flows:
 
Year Ended
 
December 31,
2014
 
December 31,
2013
 
December 31,
2012
 
(In thousands)
Net cash provided by (used in):
 
 
 
 
 
Operating activities
$
65,163

 
$
55,263

 
$
39,484

Investing activities
(43,325
)
 
(20,452
)
 
(168,711
)
Financing activities
(206
)
 
7,374

 
(232
)
Effect of exchange rate changes on cash and cash equivalents
(275
)
 
33

 
10

Net increase (decrease) in cash and cash equivalents
$
21,357

 
$
42,218

 
$
(129,449
)

46

Operating activities
We expect cash from our operating activities to fluctuate in future periods as a result of a number of factors, including the timing of our billings and collections, our operating results and the timing of other liability payments.
Net cash provided by operating activities was $65.2 million for 2014, primarily as a result of $30.5 million in net income adjusted for non-cash items, including depreciation and amortization expense of $20.3 million and share-based compensation expense of $12.8 million , an increase in deferred gross profit of $8.6 million , an increase in accrued liabilities of $5.5 million and an increase in deferred service revenue of $5.1 million . These amounts were partially offset by an increase in accounts receivable, net of $22.8 million.
Net cash provided by operating activities was $55.3 million for 2013, primarily as a result of $24.0 million in net income adjusted for non-cash items, including depreciation and amortization expense of $18.4 million and share-based compensation expense of $11.2 million .
Net cash provided by operating activities was $39.5 million for 2012, primarily as a result of $16.2 million in net income adjusted for non-cash items, including depreciation and amortization expense of $13.3 million and share-based compensation expense of $9.2 million .
Investing activities
Net cash used in investing activities was $43.3 million for 2014, primarily due to payments of $20.7 million for the acquisition of Surgichem, $11.9 million for property and equipment and $10.4 million to develop software for external use.
Net cash used in investing activities was $20.5 million for 2013 and was due to payments of $12.3 million for property and equipment and $7.8 million to develop software for external use.
Net cash used in investing activities was $168.7 million for 2012 and was primarily due to payments of $156.3 million for the acquisition of MTS Medication Technologies, Inc. and $15.1 million for property and equipment.
Financing activities
Net cash used in financing activities was $0.2 million for 2014 as a result of $24.1 million in repurchases of our common stock, partially offset by $21.8 million in net proceeds from sales of common stock through employee stock plans.
Net cash provided by financing activities was $7.4 million for 2013 as a result of $26.9 million in net proceeds from sales of common stock through employee stock plans, partially offset by $21.0 million in repurchases of our common stock.
Net cash used in financing activities was $0.2 million for 2012 as a result of $12.4 million in repurchases of our common stock, partially offset by $10.2 million in net proceeds from sales of common stock through employee stock plans.
Contractual Obligations
We had $48.0 million in contractual commitments to third parties for non-cancelable operating leases, commitments to contract manufacturers and suppliers and other purchase commitments as of December 31, 2014 as follows:
 
Payments Due by Period
 
Total
 
2015
 
2016 and 2017
 
2018 and 2019
 
2020 and Thereafter
 
(In thousands)
Operating leases (1)
$
38,638

 
$
5,637

 
$
10,463

 
$
9,547

 
$
12,991

Purchase obligations (2)
9,325

 
9,325

 
—

 
—

 
—

Total (3)
$
47,963

 
$
14,962

 
$
10,463

 
$
9,547

 
$
12,991

_________________________________________________
(1)  
Commitments under operating leases relate primarily to leasehold property and office equipment. Rent expense was $6.8 million , $6.9 million and $5.7 million for the years ended December 31, 2014 , December 31, 2013 and December 31, 2012 , respectively.
(2)  
We purchase components from a variety of suppliers and use contract manufacturers to provide manufacturing services for our products. During the normal course of business, we issue purchase orders with estimates of our requirements several months ahead of the delivery dates. These amounts are associated with agreements that are

47

enforceable and legally binding. The amounts under such contracts are included in the table above because we believe that cancellation of these contracts is unlikely and we expect to make future cash payments according to the contract terms or in similar amounts for similar materials.
(3)  
We have recorded $5.9 million for uncertain tax positions under long-term liabilities as of December 31, 2014 in accordance with the authoritative guidance summarized in the section entitled "Critical Accounting Policies and Estimates" above. As these liabilities do not reflect actual tax assessments, the timing and amount of payments we might be required to make will depend upon a number of factors. Accordingly, as the timing and amount of payment cannot be estimated, $5.9 million in uncertain tax position liabilities have not been included in the table above. See Note 14, Income Taxes, of the Notes to Consolidated Financial Statements included in this annual report.
See Note 12, Commitments, of the Notes to Consolidated Financial Statements included in this annual report.
Off-Balance Sheet Arrangements
As of December 31, 2014 , we had no off-balance sheet arrangements as defined under Regulation S-K 303(a)(4) of the Securities Exchange Act of 1934, as amended, and the instructions thereto.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks related to fluctuations in foreign currency exchange rates and interest rates.
Foreign Currency Exchange Rate Risk
We conduct business through our worldwide operations, and therefore we are exposed to foreign currency risk for transactions denominated in the Euro, British pound, Canadian dollar, Australian dollar and Chinese renminbi, which may adversely impact our financial results. Our cash flow, results of operations and certain intercompany balances that are exposed to foreign exchange rate fluctuations may differ from expectations, and we may record gains or losses due to foreign currency fluctuations.
Interest Rate Risk
We had $125.9 million  of cash and cash equivalents as of December 31, 2014 . We invest our cash in cash investments with original or remaining maturities of three months or less and whose principal is not subject to market rate fluctuations. Accordingly, interest rate declines would adversely affect our interest income but would not affect the carrying value of our cash investments. The effective weighted interest rate was less than 1% for the year ended December 31, 2014. Management considers this interest rate exposure to be immaterial.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and related disclosures included in Part IV, Item 15 of this annual report are incorporated by reference into this Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Change in Independent Registered Public Accounting Firm
In April 2014, the Audit Committee of our Board of Directors dismissed Ernst & Young LLP ("E&Y"), as our independent registered public accounting firm and engaged Deloitte & Touche LLP ("Deloitte"). E&Y’s reports on our consolidated financial statements for 2012 and 2013 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles. In connection with the audits of our financial statements for the years ended December 31, 2013 and December 31, 2012, and in the subsequent interim period through April 7, 2014, there were no disagreements with E&Y on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which if not resolved to the satisfaction of E&Y, would have caused E&Y to make reference to the subject matter in connection with its reports. There were no "reportable events" as that term is described in Item 304(a)(1)(v) of Regulation S-K issued by the SEC.
During the fiscal years ended December 31, 2013 and December 31, 2012, and the subsequent interim period through April 7, 2014, neither the Company nor anyone acting on its behalf has consulted with Deloitte with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report nor oral advice was provided to the

48
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Company that Deloitte concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue or (ii) any matter that was either the subject of a “disagreement” or “reportable event” as those terms are defined in Item 304(a)(1) of Regulation S-K.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of the end of the period covered by this annual report. These disclosure controls and procedures are designed to ensure that the information required to be disclosed by us in this annual report was (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and regulations and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
Based on such evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2014 .
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance that the objectives of the internal control system are met.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2014 using the criteria for effective internal control over financial reporting as described in "Internal Control—Integrated Framework," issued by the Committee of Sponsoring Organization of the Treadway Commission (2013 framework) (the COSO Criteria). Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2014 .
Our independent registered public accounting firm, Deloitte & Touche LLP, has issued its attestation report on our internal control over financial reporting as of December 31, 2014 , which is included in Part IV, Item 15 of this annual report.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the year ended December 31, 2014 .
ITEM 9B. OTHER INFORMATION
None.

49
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PART III
Certain information required by Part III is omitted from this annual report because the registrant will file with the U.S. Securities and Exchange Commission a definitive proxy statement pursuant to Regulation 14A in connection with the solicitation of proxies for the Company's Annual Meeting of Stockholders expected to be held in May 2015 (the "Proxy Statement") not later than 120 days after the end of the fiscal year covered by this annual report, and certain information included therein is incorporated herein by reference.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item with respect to directors and executive officers may be found under the heading "Executive Officers of the Registrant" in Part I, Item 1 of this annual report, and in the section entitled "Election of Directors" appearing in the Proxy Statement. Such information is incorporated herein by reference.
The information required by this Item with respect to our audit committee and audit committee financial expert may be found in the section entitled "Information Regarding the Board of Directors and Corporation Governance—Audit Committee" appearing in the Proxy Statement. Such information is incorporated herein by reference.
The information required by this Item with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 may be found in the sections entitled "Section 16(a) Beneficial Ownership Reporting Compliance" appearing in the Proxy Statement. Such information is incorporated herein by reference.
Our written Code of Conduct applies to all of our directors and employees, including executive officers, including without limitation our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Code of Conduct is available on our website at www.omnicell.com under the hyperlink titled "Corporate Governance." Changes to or waivers of the Code of Conduct will be disclosed on the same website. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any amendment to, or waiver of, any provision of the Code of Conduct by disclosing such information on the same website.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item with respect to director and executive officer compensation is incorporated by reference to the section of our Proxy Statement under the section entitled "Executive Compensation—Compensation Discussion and Analysis."
The information required by this Item with respect to Compensation Committee interlocks and insider participation is incorporated herein by reference to the information from the Proxy Statement under the section entitled "Information Regarding the Board of Directors and Corporate Governance—Compensation Committee Interlocks and Insider Participation."
The information required by this Item with respect to our Compensation Committee's review and discussion of the Compensation Discussion and Analysis included in the Proxy Statement is incorporated herein by reference to the information from the Proxy Statement under the section entitled "Executive Compensation—Compensation Discussion and Analysis—Compensation Committee Report."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS
The information required by this Item with respect to security ownership of certain beneficial owners and management is incorporated herein by reference to the information from the Proxy Statement under the section entitled "Security Ownership of Certain Beneficial Owners and Management."
The information required by this Item with respect to securities authorized for issuance under our equity compensation plans is incorporated herein by reference to the information from the Proxy Statement under the section entitled "Equity Compensation Plan Information."
ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this Item with respect to related party transactions is incorporated herein by reference to the information from the Proxy Statement under the section entitled "Certain Relationships and Related Transactions."

50
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The information required by this Item with respect to director independence is incorporated herein by reference to the information from the Proxy Statement under the section entitled "Information Regarding the Board of Directors and Corporate Governance—Independence of the Board of Directors."
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated herein by reference to the section from the Proxy Statement under the section entitled "Ratification of Selection of Independent Registered Public Accounting Firm—Principal Accountant Fees and Services."

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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are included as part of this annual report:
(1)
Consolidated Financial Statements:
Index to Financial Statements
 
Page Number
 
 
 
 
 
 
 
 
 
 
The foregoing additional financial statement schedule should be considered in conjunction with our Consolidated Financial Statements. All other schedules have been omitted because the required information is either not applicable or not sufficiently material to require submission of the schedule.
 
 
 
(2)
Exhibits: The information required by this item is set forth on the exhibit index which follows the signature page of this report.

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REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
To the Board of Directors and Stockholders of
Omnicell, Inc.
Mountain View, California
We have audited the accompanying consolidated balance sheet of Omnicell, Inc. and subsidiaries (the "Company") as of December 31, 2014 , and the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for the year then ended. Our audit also included the financial statement schedule for the year ended December 31, 2014 listed in the Index at Item 15. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (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 audit provides a reasonable basis for our opinion.
In our opinion, such 2014 consolidated financial statements present fairly, in all material respects, the financial position of Omnicell, Inc. and subsidiaries as of December 31, 2014 , and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule for the year ended December 31, 2014 , when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2014 , based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 30, 2015 expressed an unqualified opinion on the Company's internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
March 30, 2015
















F- 1
Table of Contents

To the Board of Directors and Stockholders of
Omnicell, Inc.
Mountain View, California
We have audited the internal control over financial reporting of Omnicell, Inc. and subsidiaries (the "Company") as of December 31, 2014 , based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014 , based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2014 of the Company and our report dated March 30, 2015 expressed an unqualified opinion on those financial statements and financial statement schedule.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
March 30, 2015








F- 2
Table of Contents

To the Board of Directors and Stockholders of Omnicell, Inc.
We have audited the accompanying consolidated balance sheets of Omnicell, Inc. as of December 31, 2013, and the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for each of the two years in the period ended December 31, 2013. Our audits also included the financial statement schedule as of December 31, 2013 and 2012 listed in the index at 15(a)(1). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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, 2013, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule as of December 31, 2013 and 2012, when considered in relation to the basic financial statements as a whole, presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
San Jose, California
March 17, 2014,
except for Note 8 and 17, as to which the date is
March 30, 2015



F- 3
Table of Contents

OMNICELL, INC.
CONSOLIDATED BALANCE SHEETS
 
December 31,
2014
 
December 31,
2013
 
(In thousands, except par value)
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
125,888

 
$
104,531

Accounts receivable, net of allowances of $1,206 and $490, respectively
82,763

 
58,597

Inventories, net
31,554

 
31,457

Prepaid expenses
23,518

 
18,883

Deferred tax assets
12,446

 
12,635

Other current assets
7,215

 
7,675

Total current assets
283,384

 
233,778

Property and equipment, net
36,178

 
35,254

Long-term net investment in sales-type leases
10,848

 
11,485

Goodwill
122,720

 
111,343

Intangible assets, net
82,667

 
81,602

Long-term deferred tax assets
1,144

 
1,102

Other long-term assets
23,273

 
17,937

Total assets
$
560,214

 
$
492,501

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
Accounts payable
$
19,432

 
$
16,471

Accrued compensation
19,874

 
19,604

Accrued liabilities
19,299

 
13,746

Deferred service revenue
25,167

 
22,626

Deferred gross profit
28,558

 
19,957

Total current liabilities
112,330

 
92,404

Long-term deferred service revenue
20,308

 
17,763

Long-term deferred tax liabilities
30,454

 
28,162

Other long-term liabilities
7,024

 
5,175

Total liabilities
170,116

 
143,504

Commitments and contingencies (Notes 12 & 13)


 


Stockholders’ equity:
 
 
 
Common stock, $0.001 par value, 100,000 shares authorized; 43,540 and 41,840 shares issued; 35,816 and 35,004 shares outstanding, respectively
43

 
41

Treasury stock at cost, 7,721 and 6,837 shares outstanding, respectively
(135,053
)
 
(110,962
)
Additional paid-in capital
457,436

 
421,232

Retained earnings
69,033

 
38,515

Accumulated other comprehensive income
(1,361
)
 
171

Total stockholders’ equity
390,098

 
348,997

Total liabilities and stockholders’ equity
$
560,214

 
$
492,501

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

F- 4
Table of Contents

OMNICELL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
Year Ended
 
December 31,
2014
 
December 31,
2013
 
December 31,
2012
 
(In thousands, except per share data)
Revenues:
 
 
 
 
 
Product
$
360,344

 
$
307,189

 
$
247,654

Services and other revenues
80,556

 
73,396

 
66,373

Total revenues
440,900

 
380,585

 
314,027

Cost of revenues:


 


 
 
Cost of product revenues
173,419

 
144,997

 
112,369

Cost of services and other revenues
33,621

 
32,189

 
31,070

Total cost of revenues
207,040

 
177,186

 
143,439

Gross profit
233,860

 
203,399

 
170,588

Operating expenses:


 


 
 
Research and development
27,802

 
29,105

 
23,726

Selling, general and administrative
156,475

 
138,995

 
119,736

Total operating expenses
184,277

 
168,100

 
143,462

Income from operations
49,583

 
35,299

 
27,126

Interest and other (expense), net
(1,079
)
 
(270
)
 
(51
)
Income before provision for income taxes
48,504

 
35,029

 
27,075

Provision for income taxes
17,986

 
11,050

 
10,897

Net income
$
30,518

 
$
23,979

 
$
16,178

Net income per share:
 
 
 
 
 
Basic
$
0.86

 
$
0.69

 
$
0.49

Diluted
$
0.83

 
$
0.67

 
$
0.47

Weighted-average shares:
 
 
 
 
 
Basic
35,650

 
34,736

 
33,307

Diluted
36,622

 
35,777

 
34,213

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

F- 5
Table of Contents

OMNICELL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
Year Ended
 
December 31,
2014
 
December 31,
2013
 
December 31,
2012
 
(In thousands)
Net income
$
30,518

 
$
23,979

 
$
16,178

Other comprehensive income (loss), net of reclassification adjustments:
 
 
 
 
 
   Unrealized losses on securities
—

 
—

 
(1
)
   Unrealized gains (losses) on foreign currency forward contracts
—

 
(65
)
 
65

   Foreign currency translation adjustments
(1,532
)
 
105

 
66

Other comprehensive income (loss), net of tax:
(1,532
)
 
40

 
130

Comprehensive income
$
28,986

 
$
24,019

 
$
16,308

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

F- 6
Table of Contents

OMNICELL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
Common Stock
 
Treasury Stock
 
Additional
Paid-In
Capital
 
Accumulated
Earnings
(Deficit)
 
Accumulated
Other
Comprehensive
Income
 
Stockholders'
Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
(In thousands)
Balances as of December 31, 2011
38,236

 
$
38

 
(5,054
)
 
$
(77,637
)
 
$
362,154

 
$
(1,642
)
 
$
1

 
$
282,914

Net income
—

 
—

 
—

 
—

 
—

 
16,178

 
—

 
16,178

Other comprehensive income
—

 
—

 
—

 
—

 
—

 
—

 
130

 
130

Stock repurchases
—

 
—

 
(898
)
 
(12,363
)
 
—

 
—

 
—

 
(12,363
)
Share-based compensation
—

 
—

 
—

 
—

 
9,214

 
—

 
—

 
9,214

Issuance of common stock under employee stock plans
1,258

 
1

 
—

 
—

 
10,190

 
—

 
—

 
10,191

Tax payments related to restricted stock units
—

 
—

 
—

 
—

 
(1,241
)
 
—

 
—

 
(1,241
)
Income tax benefits from employee stock plans
—

 
—

 
—

 
—

 
2,527

 
—

 
—

 
2,527

Balances as of December 31, 2012
39,493

 
$
39

 
(5,952
)
 
$
(90,000
)
 
$
382,844

 
$
14,536

 
$
131

 
$
307,550

Net income
—

 
—

 
—

 
—

 
—

 
23,979

 
—

 
23,979

Other comprehensive income
—

 
—

 
—

 
—

 
—

 
—

 
40

 
40

Stock repurchases
—

 
—

 
(885
)
 
(20,962
)
 
—

 
—

 
—

 
(20,962
)
Share-based compensation
—

 
—

 
—

 
—

 
11,151

 
—

 
—

 
11,151

Issuance of common stock under employee stock plans
2,349

 
2

 
—

 
—

 
26,884

 
—

 
—

 
26,886

Tax payments related to restricted stock units
—

 
—

 
—

 
—

 
(2,223
)
 
—

 
—

 
(2,223
)
Income tax benefits from employee stock plans
—

 
—

 
—

 
—

 
2,576

 
—

 
—

 
2,576

Balances as of December 31, 2013
41,842

 
$
41

 
(6,837
)
 
$
(110,962
)
 
$
421,232

 
$
38,515

 
$
171

 
$
348,997

Net income
—


—


—


—


—


30,518


—


30,518

Other comprehensive income
—


—


—


—


—


—


(1,532
)

(1,532
)
Stock repurchases
—


—


(884
)

(24,091
)

—


—


—


(24,091
)
Share-based compensation
—


—


—


—


12,785


—


—


12,785

Issuance of common stock under employee stock plans
1,695


2


—


—


21,793


—


—


21,795

Tax payments related to restricted stock units
—


—


—


—


(3,744
)

—


—


(3,744
)
Income tax benefits from employee stock plans
—


—


—


—


5,370


—


—


5,370

Balances as of December 31, 2014
43,537


$
43


(7,721
)

$
(135,053
)

$
457,436


$
69,033


$
(1,361
)

$
390,098

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

F- 7
Table of Contents

OMNICELL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Year Ended
 
December 31,
2014
 
December 31,
2013
 
December 31,
2012
 
(In thousands)
Operating Activities
 
 
 
 
 
Net income
$
30,518

 
$
23,979

 
$
16,178

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization
20,272

 
18,365

 
13,325

Loss on disposal of fixed assets
167

 
345

 
66

Impairment of software development costs and equity investments
350

 
1,759

 
—

Provision for receivable allowance
941

 
110

 
582

Share-based compensation expense
12,785

 
11,151

 
9,214

Income tax benefits from employee stock plans
5,370

 
2,576

 
2,527

Excess tax benefits from employee stock plans
(5,834
)
 
(3,673
)
 
(3,182
)
Provision for excess and obsolete inventories
542

 
856

 
394

Deferred income taxes
1,402

 
787

 
2,718

Changes in operating assets and liabilities, net of business acquisitions:
 
 
 
 
 
Accounts receivable, net
(22,799
)
 
(3,609
)
 
(9,311
)
Inventories
1,418

 
(5,410
)
 
2,536

Prepaid expenses
(4,296
)
 
(3,491
)
 
(4,897
)
Other current assets
53

 
1,566

 
(1,114
)
Net investment in sales-type leases
1,048

 
1,723

 
(4,154
)
Other assets
297

 
630

 
(3,831
)
Accounts payable
1,611

 
(1,784
)
 
1,751

Accrued compensation
270

 
7,991

 
4,285

Accrued liabilities
5,512

 
1,758

 
674

Deferred service revenue
5,086

 
82

 
2,914

Deferred gross profit
8,601

 
(815
)
 
6,562

Other long-term liabilities
1,849

 
367

 
2,247

Net cash provided by operating activities
65,163

 
55,263

 
39,484

Investing Activities
 
 
 
 
 
Maturities of short-term investments
—

 
—

 
8,122

Acquisition of intangible assets and intellectual property
(327
)
 
(356
)
 
(373
)
Software development for external use
(10,353
)
 
(7,761
)
 
(5,028
)
Purchases of property and equipment
(11,922
)
 
(12,335
)
 
(15,120
)
Business acquisition, net of cash acquired
(20,723
)
 
—

 
(156,312
)
Net cash used in investing activities
(43,325
)
 
(20,452
)
 
(168,711
)
Financing Activities
 
 
 
 
 
Proceeds from issuances under stock-based compensation plans
21,795

 
26,886

 
10,190

Employees' taxes paid related to restricted stock units
(3,744
)
 
(2,223
)
 
(1,241
)
Common stock repurchases
(24,091
)
 
(20,962
)
 
(12,363
)
Excess tax benefits from employee stock plans
5,834

 
3,673

 
3,182

Net cash provided by (used in) financing activities
(206
)
 
7,374

 
(232
)
Effect of exchange rate changes on cash and cash equivalents
(275
)
 
33

 
10


F- 8
Table of Contents

Net increase (decrease) in cash and cash equivalents
21,357

 
42,218

 
(129,449
)
Cash and cash equivalents at beginning of period
104,531

 
62,313

 
191,762

Cash and cash equivalents at end of period
$
125,888

 
$
104,531

 
$
62,313

Supplemental cash flow information
 
 
 
 
 
Cash paid for interest
$
61

 
$
122

 
$
28

Cash paid for taxes, net of refunds
$
9,161

 
$
7,062

 
$
6,676

Supplemental disclosure of non-cash investing activities
 
 
 
 
 
Purchases of property and equipment
$
273

 
$
1,696

 
$
—

 
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

F- 9
Table of Contents

OMNICELL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Business
Omnicell, Inc. was incorporated in California in 1992 under the name Omnicell Technologies, Inc. and reincorporated in Delaware in 2001 as Omnicell, Inc. Our major products are automated medication, supply control systems and medication adherence solutions which are sold in our principal market, which is the healthcare industry. Our market is primarily located in the United States and Canada. "Omnicell," "our," "us," "we," or the "Company" collectively refer to Omnicell, Inc. and its subsidiaries.
Principles of consolidation  
The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. GAAP and include all adjustments necessary for the fair presentation of the Company's consolidated financial position, results of operations and cash flows for the periods presented. The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The results of companies acquired during the year are included in the Consolidated Financial Statements from the effective date of acquisition.
Use of estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our Consolidated Financial Statements and accompanying Notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management's best knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Those policies are revenue recognition, share-based compensation, inventory valuation, valuation of goodwill, purchased intangibles and long-lived assets, and accounting for income taxes.
Segment reporting change
We modified our segment reporting structure to match our operating structure based on how our Chief Operating Decision Maker (“CODM”) views the business and allocates resources, beginning in the first quarter of 2014. The CODM function is our Chief Executive Officer. Retrospective adjustments of prior period financial information have been made to conform to the current period presentation. This change does not impact previously reported Consolidated Financial Statements of the Company. See Note 17, Segment Information, for additional information on our segment reporting change.
Foreign currency translation
We translate the assets and liabilities of our non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period. Revenue and expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from these translations are recorded as foreign currency translation adjustments and included in accumulated other comprehensive income in stockholders’ equity.
Revenue recognition
We earn revenues from sales of our medication and medical and surgical supply automation systems along with consumables and related services, which are sold in the healthcare industry, our principal market. Revenues related to consumable products are reported net of discounts provided to our customers. Our customer arrangements typically include one or more of the following deliverables:
Products. Software-enabled equipment that manages and regulates the storage and dispensing of pharmaceuticals, consumable blister cards and packaging equipment and other medical supplies.
Software. Additional software applications that enable incremental functionality of our equipment.
Installation. Installation of equipment as integrated systems at customers' sites.
Post-installation technical support. Phone support, on-site service, parts and access to unspecified software upgrades and enhancements, if and when available.

F- 10
Table of Contents

Professional services. Other customer services, such as training and consulting.
We recognize revenue when the earnings process is complete, based upon our evaluation of whether the following four criteria have been met:
Persuasive evidence of an arrangement exists.  We use signed customer contracts and signed customer purchase orders as evidence of an arrangement for leases and sales. For service engagements, we use a signed services agreement and a statement of work to evidence an arrangement.
Delivery has occurred.  Equipment and embedded software product delivery is deemed to occur upon successful installation and receipt of a signed and dated customer confirmation of installation letter, providing evidence that we have delivered what a customer ordered. In instances of a customer self-installation, product delivery is deemed to have occurred upon receipt of a signed and dated customer confirmation letter. If a sale does not require installation, we recognize revenue on delivery of products to the customer, including transfer of title and risk of loss, assuming all other revenue criteria are met. For existing distributors, where installation of equipment training has been previously provided and the distributor is certified to install our equipment at the end-user customer facility, we recognize revenue from sales of products to the distributor upon shipment assuming all other revenue criteria are met since we do not allow for rights of return or refund. For new distributors, where we have not provided installation of equipment training, revenue on the sales of products to the distributor is deferred until the distributor has completed the Distributor Training Program and has been certified to install our equipment at the end-user facility. For the sale of consumable blister cards, we recognize revenue when title and risk of loss of the products shipped have transferred to the customer, which usually occurs upon shipment from our facilities. Assuming all other revenue criteria are met, we recognize revenue for support services ratably over the related support services contract period. We recognize revenue on training and professional services as they are performed.
Fee is fixed or determinable.  We assess whether a fee is fixed or determinable at the outset of the arrangement based on the payment terms associated with the transaction. We have established a history of collecting under the original contract without providing concessions on payments, products or services.
Collection is probable.  We assess the probability of collecting from each customer at the outset of the arrangement based on a number of factors, including the customer's payment history and its current creditworthiness. If, in our judgment, collection of a fee is not probable, we defer the revenue until the uncertainty is removed, which generally means revenue is recognized upon our receipt of cash payment assuming all other revenue criteria are met. Our historical experience has been that collection from our customers is generally probable.
In arrangements with multiple deliverables, assuming all other revenue criteria are met, we recognize revenue for individual delivered items if they have value to the customer on a standalone basis. We allocate arrangement consideration at the inception of the arrangement to all deliverables using the relative selling price method. This method requires us to determine the selling price at which each deliverable could be sold if it were sold regularly on a standalone basis. When available, we use vendor-specific objective evidence ("VSOE") of the selling price. VSOE represents the price charged for a deliverable when it is sold separately, or for a deliverable not yet being sold separately, the price established by management with the relevant authority. We consider VSOE to exist when approximately 80% or more of our standalone sales of an item are priced within a reasonably narrow pricing range (plus or minus 15% of the median rates). We have established VSOE of the selling price for our post-installation technical support services and professional services. When VSOE of selling price is not available, third-party evidence ("TPE") of selling price for similar products and services is acceptable; however, our offerings and market strategy differ from those of our competitors, such that we cannot obtain sufficient comparable information about third parties' prices. If neither VSOE nor TPE are available, we use our best estimates of selling prices ("BESP"). We determine BESP considering factors such as market conditions, sales channels, internal costs and product margin objectives and pricing practices. We regularly review and update our VSOE and BESP information.
The relative selling price method allocates total arrangement consideration proportionally to each deliverable on the basis of its estimated selling price. In addition, the amount recognized for any delivered items cannot exceed that which is not contingent upon delivery of any remaining items in the arrangement.
We also use the residual method to allocate revenue between the software products that enable incremental equipment functionality, and thus are not deemed to deliver its essential functionality, and the related post-installation technical support, as these products and services continue to be accounted for under software revenue recognition rules. Under the residual method, the amount allocated to the undelivered elements equals VSOE of fair value of these elements. Any remaining amounts are attributed to the delivered items and are recognized when those items are delivered.
A portion of our sales are made through multi-year lease agreements. Under sales-type leases, we recognize revenue for our hardware and software products net of lease execution costs such as post-installation product maintenance and technical support, at the net present value of the lease payment stream once our installation obligations have been met. We optimize cash

F- 11
Table of Contents

flows by selling a majority of our non-U.S. government leases to third-party leasing finance companies on a non-recourse basis. We have no obligation to the leasing company once the lease has been sold. Some of our sales-type leases, mostly those relating to U.S. government hospitals, are retained in-house. Interest income in these leases is recognized in product revenue using the effective interest method.
Financial Instruments
For assets and liabilities measured at fair value, such amounts are based on an expected exit price representing the amount that would be received from the sale of an asset or paid to transfer a liability in a transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs used in valuation techniques are assigned a hierarchical level. The following methods were used to estimate the fair value of each class of financial instruments for which it is practical to estimate that value:
Cash equivalents. We classify investments as cash equivalents if their original or remaining contractual maturity is three months or less at the date of purchase. Cash equivalents are carried at amounts that approximate fair value due to the short period of time to maturity. Our cash equivalents are maintained in demand deposit accounts with financial institutions of high credit quality, and are invested in institutional money market funds, short-term bank time deposits and similar short duration instruments with fixed maturities. We continuously monitor the creditworthiness of the financial institutions and institutional money market funds in which we invest. We have not experienced any credit losses from our cash investments.
Marketable securities. Our marketable securities and investments are classified as available-for-sale, and unrealized gains and losses, net of tax, are included in accumulated other comprehensive income.
Equity investments. We make equity investments in privately-held companies whose businesses are complementary to our business. The investment in which we hold less than 20% of the voting stock outstanding and do not exert significant influence is accounted for under the cost method of accounting. The cost amount of this investment was $0.4 million as of December 31, 2014 and December 31, 2013 , and was no longer realizable as of December 31, 2014 and therefore considered impaired as discussed in Note 9, Other Assets. We invested $0.9 million to purchase 15% of our United Kingdom automation and analytics products distributor’s outstanding equity. We record this investment under the equity method of accounting as we have the right to appoint a member to this company's board of directors as well as certain other voting rights and, therefore, we believe we have the ability to exert significant influence over this distributor's operations. Our proportionate equity share of the income of this distributor, recognized in interest and other income, net was immaterial for the years ended December 31, 2014 , December 31, 2013 and December 31, 2012 . Our equity investments are included in other long-term assets. We assess the recoverability of these investments by reviewing various indicators for other-than-temporary impairment.
Foreign currency forward contracts. We enter into foreign currency forward contracts to protect our business from the risk that exchange rates may affect the eventual cash flows resulting from intercompany transactions between Omnicell and our foreign subsidiaries. These transactions primarily arise as a result of products manufactured in the United States and sold to foreign subsidiaries in U.S. dollars rather than the subsidiaries' functional currencies. These forward contracts are considered to be financial derivative instruments and are recorded at fair value. Changes in fair values of these financial derivative instruments are either recognized in other comprehensive income or net income depending on whether the derivative has been designated and qualifies as a hedging instrument. We had no foreign currency forward contracts which qualify for hedge accounting as of December 31, 2014 and December 31, 2013 , and had no foreign currency forward contracts as of December 31, 2014.
Debt. Our debt includes a $75 million revolving credit facility. Borrowings under our revolving credit facility would be recognized at cost plus accrued interest based upon stated interest rates. We have not yet drawn any funds under the credit facility to date.
Accounts receivable and notes receivable (net investment in sales-type leases)
We actively manage our accounts receivable to minimize credit risk. We typically sell to customers for which there is a history of successful collection. New customers are subject to a credit review process, which evaluates that customer's financial position and ability to pay. We continually monitor and evaluate the collectability of our trade receivables based on a combination of factors. We record specific allowances for doubtful accounts when we become aware of a specific customer's impaired ability to meet its financial obligation to us, such as in the case of bankruptcy filings or deterioration of financial position. There were no significant customers that accounted for more than 10% of our accounts receivable as of December 31, 2014 and December 31, 2013 .

F- 12
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Uncollectible amounts are charged off against trade receivables and the allowance for doubtful accounts when we make a final determination that there is no reasonable expectation of recovery. Estimates are used in determining our allowances for all other customers based on factors such as current trends, the length of time the receivables are past due and historical collection experience. While we believe that our allowance for doubtful accounts receivable is adequate and that the judgment applied is appropriate, such estimated amounts could differ materially from what will actually be uncollectible in the future.
The retained in-house leases discussed above are considered financing receivables. Our credit policies and evaluation of credit risk and write-off policies are applied alike to trade receivables and the net investment in sales-type leases. For both, an account is generally past due after thirty days. The financing receivables also have customer-specific reserves for accounts identified for specific impairment and a non-specific reserve applied to the remaining population, based on factors such as current trends, the length of time the receivables are past due and historical collection experience. The retained in-house leases are not stratified by portfolio or class. Financing receivables which are reserved are generally transferred to cash-basis accounting so that revenue is recognized only as cash is received. However, the cash basis accounts continue to accrue interest.
Sales of accounts receivable
We record the sale of our accounts receivables as "true sales" in accordance with accounting guidance for transfers and servicing of financial assets. We transferred non-recourse accounts receivable totaling $62.0 million , $41.3 million and $60.9 million as of December 31, 2014 , December 31, 2013 and December 31, 2012 , respectively, which approximated fair value, to leasing companies on a non-recourse basis. Accounts receivable included approximately $1.1 million , $0.1 million and $0.7 million due from third-party leasing companies for transferred non-recourse accounts receivable as of December 31, 2014 , December 31, 2013 and December 31, 2012 , respectively.
Inventory
Inventories are stated at the lower of cost (utilizing standard costs, applying the first-in, first-out method) or market. Cost elements included in inventory are direct labor and materials plus applied overhead. We routinely assess on-hand inventory for timely identification and measurement of obsolete, slow-moving or otherwise impaired inventory. We write down our inventory for estimated obsolescence, excess or unmarketable quantities equal to the difference between the cost of the inventory and its estimated market value based on assumptions about future demand and market conditions. If actual future demand or market conditions are less favorable than we projected, additional inventory write-downs may be required.
Property and equipment
Property and equipment less accumulated depreciation are stated at historical cost. Our expenditures for property and equipment are for computer equipment and software used in the administration of our business, and for leasehold improvements to our leased facilities. We also develop molds and dies used in long-term manufacturing arrangements with suppliers and for production automation equipment used in the manufacturing of consumable blister card components. Depreciation and amortization of property and equipment are provided over their estimated useful lives, using the straight-line method, as follows:
Computer equipment and related software
3 - 5 years
Leasehold and building improvements
Shorter of the lease term or the estimated useful life
Furniture and fixtures
5 - 7 years
Equipment
3 - 12 years
We capitalize costs related to computer software developed or obtained for internal use in accordance with ASC 350-40, Internal-Use Software . Software obtained for internal use has generally been enterprise-level business and finance software that we customize to meet our specific operational needs. Costs incurred in the application development phase are capitalized and amortized over their useful lives, which is generally five years. Costs recognized in the preliminary project phase and the post-implementation phase are expensed as incurred. We capitalized $3.9 million and $4.8 million of costs related to the application development of enterprise-level software that was included in property and equipment during the years ended December 31, 2014 and December 31, 2013 , respectively.
Software development costs
We capitalize software development costs in accordance with ASC 985-20, Costs of Software to Be Sold, Leased, or Marketed , under which certain software development costs incurred subsequent to the establishment of technological feasibility may be capitalized and amortized over the estimated lives of the related products. We establish feasibility when we complete a working model and amortize development costs over the estimated lives of the related products ranging from three to five

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years. We capitalized software development costs of $10.4 million and $7.8 million which are included in other assets as of December 31, 2014 and December 31, 2013 , respectively. We recorded $4.4 million , $3.2 million and $2.3 million to cost of revenues for amortization of capitalized software development costs for the years ended December 31, 2014 , December 31, 2013 and December 31, 2012 , respectively. All development costs prior to the completion of a working model are recognized as research and development expense.
Business Combinations
We use the acquisition method of accounting under the authoritative guidance on business combinations. Each acquired company’s operating results are included in our Consolidated Financial Statements starting on the date of acquisition. The purchase price is equivalent to the fair value of consideration transferred. Tangible and identifiable intangible assets acquired and liabilities assumed as of the date of acquisition are recorded at the acquisition date fair value. Goodwill is recognized for the excess of purchase price over the net fair value of assets acquired and liabilities assumed.
Amounts allocated to assets and liabilities are based upon fair values. Such valuations require management to make significant estimates and assumptions, especially with respect to the identifiable intangible assets. Management makes estimates of fair value based upon assumptions believed to be reasonable and that of a market participant. These estimates are based on historical experience and information obtained from the management of the acquired companies and the estimates are inherently uncertain. The separately identifiable intangible assets generally include customer relationships, technology, and trade names.
Goodwill and intangible assets
Goodwill. We review goodwill for impairment on an annual basis on the first day of the fourth quarter of each year at the reporting unit level. Our reporting units are the same as our operating segments, which are Automation and Analytics and Medication Adherence. A qualitative assessment is initially made to determine whether it is necessary to perform quantitative testing. This initial assessment includes, among others, consideration of: (i) past, current and projected future earnings and equity; (ii) recent trends and market conditions; and (iii) valuation metrics involving similar companies that are publicly-traded and acquisitions of similar companies, if available. If this initial qualitative assessment indicates that it is more likely than not that impairment exists, or if we decide to bypass this option, we proceed to a two-step impairment test. The first step ("Step 1") involves a comparison between the estimated fair values of our reporting units with their respective carrying amounts including goodwill. The methods for estimating reporting unit values include asset and liability fair values and other valuation techniques, such as discounted cash flows and multiples of earnings or revenues. If the carrying value exceeds estimated fair value, there is an indication of potential impairment, and the second step is performed to measure the amount of impairment. The second step involves calculating an implied fair value of goodwill by measuring the excess of the estimated fair value of the reporting units over the aggregate estimated fair values of the individual assets less liabilities. If the carrying value of goodwill exceeds the implied fair value of goodwill, an impairment charge is recorded for the excess.
To determine each reporting units’ fair value in the second step, we would use the income approach which is based on the estimated discounted future cash flows of that reporting unit. The estimated fair value of each reporting unit under the income approach is corroborated with the market approach, which measures the value of a business through an analysis of recent sales or offerings of a comparable entity. We also consider our market capitalization on the date of the analysis to ensure the reasonableness of the sum of our reporting units’ estimated fair value.
Intangible assets. In connection with our acquisitions, we generally recognize assets for customer relationships, technology and trade names. Intangible assets are carried at cost less accumulated amortization. Such amortization is provided on a straight-line basis or on an accelerated basis based on a pattern of economic benefit that is expected to be obtained over the estimated useful lives of the respective assets, generally from 1 to 30 years. Amortization for technology is recognized in cost of product revenues, and amortization for customer relationships and trade names is recognized in selling, general and administrative expenses.
We assess the impairment of identifiable intangible assets whenever events or changes in circumstances indicate that an asset's carrying amount may not be recoverable. Recoverability of an asset is measured by the comparison of the carrying amount to the sum of the undiscounted estimated future cash flows the asset is expected to generate, offset by estimated future costs to dispose of the product to which the asset relates. If an asset is considered to be impaired, the amount of such impairment would be measured as the difference between the carrying amount of the asset and its fair value. Our cash flow assumptions are based on historical and forecasted future revenue, operating costs, and other relevant factors. Assumptions and estimates about the remaining useful lives of our intangible assets are subjective and are affected by changes to our business strategies. If management’s estimates of future operating results change, or if there are changes to other assumptions, the estimate of the fair value of our assets could change significantly. Such change could result in impairment charges in future periods, which could have a significant impact on our operating results and financial condition.

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Valuation of share-based awards
We account for share-based compensation in accordance with ASC 718, Stock Compensation ("ASC 718"). We recognize compensation expense related to stock-based compensation, including the awarding of employee stock awards and restricted stock units, based on the grant date estimated fair value. We amortize the fair value of the employee stock awards on a straight-line basis over the requisite service period of the award, which is generally the vesting period. We estimate the fair value of stock-based compensation awards using the Black-Scholes option pricing model, which requires the following inputs: expected life, expected volatility, risk-free interest rate, expected dividend yield rate, exercise price, and closing price of our common stock on the date of grant. The expected volatility is based on a combination of historical and market-based implied volatility, and the expected life of the awards is based on our historical experience of employee stock option exercises, including forfeitures. The valuation assumptions we use in estimating the fair value of employee share-based awards may change in future periods. We calculate our pool of excess tax benefits available within additional paid-in capital in accordance with the provisions of ASC 718.
Accounting for income taxes
We record an income tax provision for the anticipated tax consequences of the reported results of operations. In accordance with U.S. GAAP, the provision for income taxes is computed using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities and for operating losses and tax credit carry forwards. Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the periods in which those tax assets and liabilities are expected to be realized or settled. In the event that these tax rates change, we will incur a benefit or detriment on our income tax expense in the period of change. If we were to determine that all or part of the net deferred tax assets are not realizable in the future, we will record a valuation allowance that would be charged to earnings in the period such determination is made.
In accordance with ASC 740, Income Taxes , we recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of U.S. GAAP and complex tax laws. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on our financial condition and operating results.
Deferred service revenue and deferred gross profit
Deferred service revenue and deferred gross profit arise when customers have been billed and/or have received products and/or services in advance of revenue recognition. Our deferred gross profit, classified as a current liability, consists primarily of unearned revenue on sale of equipment for which installation has not been completed, net of deferred cost of sales for such equipment and the unearned revenue for software licenses. Our deferred service revenue, separated into current and long-term liabilities, consists of the unearned portion of service contracts for which revenue is recognized over their duration.
Commissions
Sales commissions are incremental and directly related to customer sales contracts in which revenue is deferred. These commission costs are accrued and recorded in prepaid expenses upon execution of a non-cancelable customer contract and subsequently expensed in the period of revenue recognition.
Shipping costs
Outbound freight billed to customers is recorded as product revenue. The related shipping and handling costs are expensed as part of selling, general and administrative expense. Shipping and handling expenses were $7.4 million , $6.1 million and $4.1 million for the years ended December 31, 2014 , December 31, 2013 and December 31, 2012 , respectively.
Recently adopted accounting standards
In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists ("ASU 2013-11"). ASU 2013-11 requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows: to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that

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would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. We adopted the amendments in ASU 2013-11 in the first quarter of 2014. This update did not have a significant impact on our financial position, operating results or cash flows.
Recently issued authoritative guidance
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, that requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers, and will replace most existing revenue recognition guidance in U.S. GAAP. The new standard is effective for us in the first quarter of 2017, and early adoption is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that the standard will have on our Consolidated Financial Statements and related disclosures.
There was no other recently issued authoritative guidance that has a material impact on our Consolidated Financial Statements through the reporting date.
Note 2. Business Combinations
2014 Acquisition Activity
On August 22, 2014, we completed our acquisition of Surgichem, a wholly-owned subsidiary of Bupa Care Homes (CFG) Plc ("Bupa"). In exchange for all of the voting equity interests of the acquired company, we paid a total purchase price of $20.7 million in cash, net of $0.2 million of cash acquired. This acquisition will assist U.K. healthcare professionals and caregivers seeking to improve patient outcomes, reduce medication errors and lower costs by effectively managing compliance to prescribed medication regimes in their mission to extend patient health and satisfaction through convenient, effective medication adherence solutions. Surgichem is being integrated with Omnicell’s existing U.K. business, MTS, a leading supplier of medication adherence packaging solutions.
The following table presents the purchase price allocation included in our Consolidated Balance Sheets:
 
(In thousands)
Cash
$
153

Accounts receivable
2,462

Inventory
2,190

Deferred tax assets and other current assets
361

Total current assets
$
5,166

Property and equipment
164

Intangibles
5,730

Goodwill
12,112

Total assets
$
23,172

Current liabilities
1,191

Long-term deferred tax liabilities
1,104

Total purchase price
$
20,877

Acquired intangible assets . The fair value of $5.4 million for acquired customer relationships was determined based on an income approach using the discounted cash flow method. The fair value of $0.3 million for the trade name was determined using the relief-from-royalty approach. Customer relationships are amortized over their estimated useful lives of 18 years and the trade name is amortized over its estimated useful life of approximately 1 year.
Goodwill. The purchase price allocation resulted in goodwill of $12.1 million , which represents sales of future products and services and the assembled workforce of Surgichem. We believe the acquisition enhances Omnicell’s offerings and diversifies its revenue mix providing a more robust product and service solution to its current customers while expanding Omnicell’s international presence. We considered these factors as supporting the amount of goodwill recorded.
The amortization of intangible assets and goodwill is not deductible for tax purposes.

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We incurred approximately $1.1 million in acquisition-related costs related to the Surgichem acquisition, offset by a $0.5 million expense reimbursement from Bupa for the year ended December 31, 2014 . These costs are included in selling, general and administrative expenses in our Consolidated Statement of Operations.
Surgichem generated revenue of $4.6 million and losses from operations of $0.1 million since the acquisition date for the year ended December 31, 2014. The total revenues of Surgichem were $13.3 million (including $4.6 million mentioned above) and $11.9 million for the years ended December 31, 2014 and December 31, 2013, respectively. Results of operations for Surgichem have been included as a part of our Medication Adherence segment, and supplemental pro forma results of operations for the prior periods have not been presented, as the effect of the acquisition was not material to our consolidated financial results.
2012 Acquisition Activity
On May 21, 2012, we completed our acquisition of MedPak Holdings, Inc. ("MedPak") pursuant to an Agreement and Plan of Merger ("Merger Agreement") under which Mercury Acquisition Corp, a newly formed Omnicell subsidiary, was merged with and into MedPak, with MedPak surviving the merger as a wholly-owned subsidiary of Omnicell. MedPak is the parent company of MTS, a worldwide provider of medication adherence packaging systems. Pursuant to the terms of the Merger Agreement, we paid $156.3 million in cash, net of $2.0 million cash acquired.
The objective of the acquisition was to primarily align Omnicell with the long term trends of the healthcare market to manage the health of patients across the continuum of care. Omnicell and MTS bring capabilities to each other that strengthen the product lines and expand the medication management coverage of both companies.
The following table presents the purchase price allocation included in our Consolidated Balance Sheets:
 
(In thousands)
Cash
$
2,000

Accounts receivable
7,403

Inventory
11,726

Deferred tax assets and other current assets
2,894

Total current assets
$
24,023

Property and equipment
9,807

Intangible assets
83,900

Goodwill
82,800

Other long-term assets
308

Total assets
$
200,838

Current liabilities
(7,917
)
Long-term deferred tax liabilities
(33,386
)
Other long-term liabilities
(1,223
)
Total purchase price
$
158,312

Identifiable intangible assets. Acquired technology relates to MTS’ products across all of its product lines that have reached technological feasibility, primarily the OnDemand technology. Trade names are primarily related to the MTS and OnDemand brand names. Customer relationships represent existing contracted relationships with pharmacies, institutional care facilities and others. Acquired technology, customer relationships, and trade names are amortized on a straight-line basis over their estimated useful lives, which range from 12 to 30 years.
The estimated fair values of the acquired technology, trade names and customer relationships were primarily determined using either the relief-from-royalty or excess earnings methods. The interest rates utilized to discount net cash flows to their present values were determined after consideration of the overall enterprise rate of return and the relative risk and importance of the assets to the generation of future cash flows.
The historical tax bases of the acquired assets and assumed liabilities, along with the tax attributes of the MTS companies, will carry over for income tax purposes. As the transaction was a cash-for-stock transaction, there is no tax basis in the acquired intangible assets. Accordingly, the acquisition accounting includes the establishment of net deferred tax liabilities of $33.4 million , resulting from book tax basis differences related to the intangible assets acquired, as well as to the step up in the value of fixed assets and inventory to their estimated fair values at the time of acquisition.

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The following represents the details of the acquired intangible assets:
 
Intangible Assets
Acquired
 
Useful Life
(Years)
 
(In thousands, except for years)
Trade name
$
6,800

 
12
Customer relationships
50,500

 
 28 to 30
Acquired technology
26,600

 
20
Intangibles acquired
$
83,900

 
 
Goodwill . The purchase price allocation resulted in goodwill of $82.8 million . We believe the MTS acquisition enhances our offerings and diversifies our revenue mix, providing a more robust product and service solution to our current customers while expanding Omnicell’s international presence. We considered these factors as supporting the amount of goodwill recorded.
We incurred approximately $3.2 million in acquisition-related costs for the year ended December 31, 2013 . These costs are included in selling, general and administrative expenses in our Consolidated Statement of Operations.
MTS generated revenue of $47.2 million and net income of $2.9 million since the acquisition date for the year ended December 31, 2012 . Results of operations for MTS have been included as a part of our Medication Adherence segment, and supplemental pro forma results of operations for the prior periods have not been presented, as the effect of the acquisition was not material to our consolidated financial results.
Note 3. Net Income Per Share
Basic net income per share is computed by dividing net income for the period by the weighted-average number of shares outstanding during the period, less shares subject to repurchase. Diluted net income per share is computed by dividing net income for the period by the weighted-average number of shares, less shares subject to repurchase, plus, if dilutive, potential common stock outstanding during the period. Potential common stock includes the effect of outstanding dilutive stock options, restricted stock awards and restricted stock units computed using the treasury stock method. Since the impact is anti-dilutive, these shares were excluded from the calculations of diluted net income per share.
The calculation of basic and diluted net income per share is as follows:
 
Year Ended
 
December 31,
2014
 
December 31,
2013
 
December 31,
2012
 
(In thousands, except per share data)
Net income
$
30,518

 
$
23,979

 
$
16,178

Weighted-average shares outstanding — basic
35,650

 
34,736

 
33,307

Add: Dilutive effect of employee stock plans
972

 
1,041

 
906

Weighted-average shares outstanding — diluted
36,622

 
35,777

 
34,213

Net income per share — basic
$
0.86

 
$
0.69

 
$
0.49

Net income per share — diluted
$
0.83

 
$
0.67

 
$
0.47

Anti-dilutive weighted-average shares related to stock award plans
640

 
850

 
2,149

Note 4. Fair Value Measurements
For assets and liabilities measured at fair value, such amounts are based on an expected exit price representing the amount that would be received from the sale of an asset or paid to transfer a liability in a transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs used in valuation techniques are assigned a hierarchical level. The following methods were used to estimate the fair value of each class of financial instruments for which it is practical to estimate that value:

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•
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
•
Level 2: Observable inputs that reflect quoted prices for identical assets or liabilities in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the assets or liabilities, or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
•
Level 3: Unobservable inputs reflecting our own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
Assets Measured at Fair Value on a Recurring Basis
Cash equivalents. Cash equivalents consist of money market funds that are classified as Level 1, and have an original maturity of three months or less, and therefore the carrying amount is a reasonable estimate of fair value due to the short duration to maturity.
There have been no transfers between fair value measurement levels during 2014 and 2013. The following table summarizes our assets measured at fair value on a recurring basis using Level 1 inputs within the fair value hierarchy:
 
December 31,
2014
 
December 31,
2013
 
(In thousands)
Cash
$
61,311

 
$
38,823

Cash equivalents
64,577

 
65,708

Total cash and cash equivalents
$
125,888

 
$
104,531

Net investment in sales-type leases. The carrying amount of our sales-type lease receivables is a reasonable estimate of fair value as the unearned interest income is immaterial.
Assets and liabilities measured and recorded at fair value on a nonrecurring basis
See Note 2, Business Combinations, for the fair value of intangible assets acquired that were calculated using an income approach valuation technique based on Level 3 unobservable inputs.
Note 5. Inventories
Inventories consist of the following components:
 
December 31,
2014
 
December 31,
2013
 
(In thousands)
Raw materials
$
8,254

 
$
10,765

Work in process
64

 
534

Finished goods
23,236

 
20,158

Total inventories, net
$
31,554

 
$
31,457

Dependence on suppliers
We have a supply agreement with one primary supplier for construction and supply of several sub-assemblies and inventory management of sub-assemblies used in our hardware products. There are no minimum purchase requirements. The contract with our supplier may be terminated by either the supplier or by us without cause and at any time upon delivery of two months' notice. Purchases from this supplier were $34.5 million , $29.2 million and $23.8 million for the years ended December 31, 2014 , December 31, 2013 and December 31, 2012 , respectively.
Note 6. Property and Equipment

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Property and equipment consist of the following assets:
 
December 31,
2014
 
December 31,
2013
 
(In thousands)
Equipment
$
42,829

 
$
40,180

Furniture and fixtures
5,689

 
5,260

Leasehold improvements
8,701

 
7,394

Purchased software
28,920

 
20,199

Construction in progress
1,538

 
2,649

 
87,677

 
75,682

Accumulated depreciation and amortization
(51,499
)
 
(40,428
)
Total property and equipment, net
$
36,178

 
$
35,254

Depreciation and amortization of property and equipment was $11.3 million , $10.9 million and $8.0 million for the years ended December 31, 2014 , December 31, 2013 and December 31, 2012 , respectively.
Note 7. Net Investment in Sales-Type Leases
The terms of our sales-type leases are generally up to five years in length. Sales-type lease receivables are collateralized by the underlying equipment. Net investment in sales-type leases consist of the following components:
 
December 31,
2014
 
December 31,
2013
 
(In thousands)
Net minimum lease payments to be received
$
17,616

 
$
18,172

Less: unearned interest income portion
(1,131
)
 
(1,455
)
Net investment in sales-type leases
16,485

 
16,717

Less: short-term portion
(5,637
)
 
(5,232
)
Long-term net investment in sales-type leases
$
10,848

 
$
11,485

We evaluate our sales-type leases individually and collectively for impairment, and recorded a collective allowance for credit losses of $0.2 million and $0.2 million as of December 31, 2014 and December 31, 2013 , respectively.
The minimum lease payments under sales-type leases are as follows:
 
December 31,
2014
 
(In thousands)
2015
$
6,188

2016
4,832

2017
3,803

2018
2,174

2019
619

Total
$
17,616

Note 8. Goodwill and Intangible Assets
Goodwill

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The changes in the carrying amount of goodwill are as follows:
 
Automation and
Analytics
 
Medication
Adherence
 
Total
 
(In thousands)
Net balance as of December 31, 2012
$
28,543

 
$
82,864

 
$
111,407

Additions
—

 
—

 
—

Adjustments (1)
—

 
(64
)
 
(64
)
Net balance as of December 31, 2013
$
28,543

 
$
82,800

 
$
111,343

Additions (2)
—

 
12,112

 
12,112

Adjustments (3)
—

 
(735
)
 
(735
)
Net balance as of December 31, 2014
$
28,543

 
$
94,177

 
$
122,720

_________________________________________________
(1)  
Goodwill includes an immaterial adjustment related to the MTS acquisition in May 2012.
(2)  
Additions to goodwill as a result of the Surgichem acquisition in August 2014, including a $0.1 million adjustment to the purchase price in the fourth quarter of 2014.
(3)  
Adjustments reflect foreign currency exchange rate fluctuations.
Effective in the first quarter of 2014, we modified our segment reporting structure to match our new operating structure. Our reporting units for goodwill are the same as our reportable operating segments. See Note 17, Segment Information, for information regarding the changes related to segment information.
Intangible assets, net
 
December 31, 2014
 
December 31, 2013
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Useful Life
(Years)
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Useful Life
(Years)
 
(In thousands, except for years)
 
 
Customer relationships
$
60,150

 
$
(7,919
)
 
$
52,231

 
5 - 30
 
$
54,730

 
$
(5,236
)
 
$
49,494

 
5 - 30
Acquired technology
27,580

 
(4,068
)
 
23,512

 
3 - 20
 
27,580

 
(2,598
)
 
24,982

 
3 - 20
Trade names
7,110

 
(1,576
)
 
5,534

 
1 - 12
 
6,890

 
(1,003
)
 
5,887

 
3 - 12
Patents
1,655

 
(265
)
 
1,390

 
20
 
1,493

 
(254
)
 
1,239

 
20
Non-compete agreements
—

 
—

 
—

 
—
 
60

 
(60
)
 
—

 
3
Total intangibles assets, net
$
96,495

 
$
(13,828
)
 
$
82,667

 
 
 
$
90,753

 
$
(9,151
)
 
$
81,602

 
 
 
We capitalized third-party costs associated with internally-developed patents of $0.3 million , $0.4 million and $0.4 million as of December 31, 2014 , December 31, 2013 and December 31, 2012 , respectively.
Amortization expense of intangible assets was $4.6 million , $4.3 million and $2.9 million for the years ended December 31, 2014 , December 31, 2013 and December 31, 2012 , respectively.
Total future amortization expense for intangible assets is as follows:
 
December 31,
2014
 
(In thousands)
2015
$
4,679

2016
4,354

2017
4,267

2018
4,113

2019
4,063

Thereafter
61,191

Total
$
82,667


F- 21
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Note 9. Other Assets
Other assets consist of the following:
 
December 31,
2014
 
December 31,
2013
 
(In thousands)
Capitalized software development costs, net of accumulated amortization of $14,918 and $10,547, respectively, and accumulated impairment (1)
$
19,643

 
$
13,660

Technology license
1,678

 
2,350

Long-term deposits
860

 
682

Other long-term assets (2)
1,092

 
1,245

Total other long-term assets
$
23,273

 
$
17,937

_________________________________________________
(1)  
In the first quarter of 2013, we reorganized our management team as part of the continuing integration of MTS, including the software development department within the Medication Adherence segment. At this time, $1.8 million was capitalized as software development costs associated with a software solution that was intended to assist pharmacies in manual packaging of prescriptions. Our management team reassessed the viability of this project and the net realizable value of the capitalized costs in light of their decision to change the related product road map and redesign this product based on evolving market demands. As part of this redesign process, new functionality and capabilities were needed to be added to the product before commercialization. This redesign was intended to provide a more robust global platform providing larger scalability and significant functionality not contained in the then-current beta version. We determined we could no longer support the technological feasibility of this project in conjunction with our software capitalization policy. Therefore, we abandoned the project and wrote off its net book value of $1.8 million , equating to $0.03 per diluted share, net of tax, which was recorded as an expense of research and development in our Consolidated Statements of Operations.
(2)  
Other long-term assets primarily include our equity investments. In the fourth quarter of 2014, we determined our equity investment accounted for under the cost method of accounting is no longer considered realizable, and therefore wrote off its net book value of $0.4 million as a non-operating expense in our Consolidated Statements of Operations.
Note 10. Accrued Liabilities
Accrued liabilities consist of the following:
 
December 31,
2014
 
December 31,
2013
 
(In thousands)
Rebates and lease buyouts
$
6,512

 
$
1,699

Advance payments from customers
4,834

 
4,971

Group purchasing organization fees
3,475

 
2,324

Technology license purchase obligation
—

 
1,500

Taxes payable
2,181

 
1,664

Other accrued liabilities
2,297

 
1,588

Total accrued liabilities
$
19,299

 
$
13,746

Note 11. Deferred Gross Profit

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Deferred gross profit consists of the following:
 
December 31,
2014
 
December 31,
2013
 
(In thousands)
Sales of medication and supply dispensing systems including packaging equipment (1)
$
36,947

 
$
29,040

Less: cost of revenues, excluding installation costs
(8,389
)
 
(9,083
)
Total deferred gross profit
$
28,558

 
$
19,957

_________________________________________________
(1)  
Delivered and invoiced, pending installation.
Note 12. Commitments
Lease commitments
We lease our buildings under operating leases. Commitments under operating leases primarily relate to leasehold property and office equipment. Rent expense was $6.8 million , $6.9 million and $5.7 million for the years ended December 31, 2014 , December 31, 2013 and December 31, 2012 , respectively.
The minimum future payments on non-cancelable operating leases are as follows:
 
December 31,
2014
 
(In thousands)
2015
$
5,637

2016
5,590

2017
4,873

2018
4,711

2019
4,836

Thereafter
12,991

Total minimum future lease payments
$
38,638

 
Purchase obligations
We purchase components from a variety of suppliers and use contract manufacturers to provide manufacturing services for our products. During the normal course of business, we issue purchase orders with estimates of our requirements several months ahead of the delivery dates. These amounts are associated with agreements that are enforceable and legally binding. Our purchase obligations to our contract manufacturers and suppliers within the next year were $9.3 million as of December 31, 2014 .
Note 13. Contingencies
Legal Proceedings
On September 12, 2014, MV Circuit Design, Inc., an Ohio company ("MV Circuit"), brought an action to correct the inventorship of certain patents owned by Omnicell, as well as related state-law claims against Omnicell in the Northern District of Ohio (Case No. 1:14-cv-02028-DAP) regarding allegations of fraud in the filing and prosecution of U.S. Patent Nos. 8,180,485, 8,773,270, 8,812,153, PCT/US2007/003765, PCT/US2011/063597, and PCT/US2011/0635505 (the “Action”). On November 14, 2014, we filed a motion to dismiss the Action. MV Circuit Design responded to our motion to dismiss on January 29, 2015, and we replied in support of our motion to dismiss on February 17, 2015. The court has not yet ruled on the motion to dismiss. No schedule has yet been set by the court for the case. We intend to defend the matter vigorously.
As required under ASC 450, Contingencies , we accrue for contingencies when we believe that a loss is probable and that we can reasonably estimate the amount of any such loss. We have not recorded any accrual for contingent liabilities associated with the legal proceedings described above based on our belief that any potential loss, while reasonably possible, is not probable. Further, any possible range of loss in these matters cannot be reasonably estimated at this time. We believe that we have valid defenses with respect to legal proceedings pending against us. However, litigation is inherently unpredictable,

F- 23
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and it is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of this contingency or because of the diversion of management's attention and the creation of significant expenses.
Guarantees
As permitted under Delaware law and our certificate of incorporation and bylaws, we have agreed to indemnify our directors and officers against certain losses that they may suffer by reason of the fact that such persons are, were or become our directors or officers. The term of the indemnification period is for the director’s or officer’s lifetime and there is no limit on the potential amount of future payments that we could be required to make under these indemnification agreements. We have purchased a directors’ and officers’ liability insurance policy that may enable us to recover a portion of any future payments that we may be required to make under these indemnification agreements. Assuming the applicability of coverage and the willingness of the insurer to assume coverage and subject to certain retention, loss limits and other policy provisions, we believe it is unlikely that we will be required to pay any material amounts pursuant to these indemnification obligations. However, no assurances can be given that the insurers will not attempt to dispute the validity, applicability or amount of coverage without expensive and time-consuming litigation against the insurers.
Additionally, we undertake indemnification obligations in our ordinary course of business in connection with, among other things, the licensing of our products and the provision of our support services. In the ordinary course of our business, we have in the past and may in the future agree to indemnify another party, generally our business affiliates or customers, against certain losses suffered or incurred by the indemnified party in connection with various types of claims, which may include, without limitation, claims of intellectual property infringement, certain tax liabilities, our gross negligence or intentional acts in the performance of support services and violations of laws. The term of these indemnification obligations is generally perpetual. In general, we attempt to limit the maximum potential amount of future payments that we may be required to make under these indemnification obligations to the amounts paid to us by a customer, but in some cases the obligation may not be so limited. In addition, we have in the past and may in the future warrant to our customers that our products will conform to functional specifications for a limited period of time following the date of installation (generally not exceeding 30  days) or that our software media is free from material defects. Sales contracts for certain of our medication packaging systems often include limited warranties for up to six months, but the periodic activity and ending warranty balances we record have historically been immaterial.
From time to time, we may also warrant that our professional services will be performed in a good and workmanlike manner or in a professional manner consistent with industry standards. We generally seek to disclaim most warranties, including any implied or statutory warranties such as warranties of merchantability, fitness for a particular purpose, title, quality and non-infringement, as well as any liability with respect to incidental, consequential, special, exemplary, punitive or similar damages. In some states, such disclaimers may not be enforceable. If necessary, we would provide for the estimated cost of product and service warranties based on specific warranty claims and claim history. We have not been subject to any significant claims for such losses and have not incurred any material costs in defending or settling claims related to these indemnification obligations. Accordingly, we believe it is unlikely that we will be required to pay any material amounts pursuant to these indemnification obligations or potential warranty claims and, therefore, no material liabilities have been recorded for such indemnification obligations as of December 31, 2014 and December 31, 2013 .
Note 14. Income Taxes
The following is a geographical breakdown of income before the provision for income taxes:
 
Year Ended
 
December 31,
2014
 
December 31,
2013
 
December 31,
2012
 
(In thousands)
Domestic
$
48,327

 
$
34,678

 
$
25,794

Foreign
177

 
351

 
1,281

Income before provision for income taxes
$
48,504

 
$
35,029

 
$
27,075


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The provision for income taxes consists of the following:
 
Year Ended
 
December 31,
2014
 
December 31,
2013
 
December 31,
2012
 
(In thousands)
Current:
 
 
 
 
 
Federal
$
14,063

 
$
8,218

 
$
7,181

State
2,274

 
1,621

 
1,006

Foreign
192

 
447

 
154

Total current income taxes
16,529

 
10,286

 
8,341

Deferred:
 
 
 
 
 
Federal
1,603

 
1,287

 
2,169

State
84

 
(263
)
 
651

Foreign
(230
)
 
(260
)
 
(264
)
Total deferred income taxes
1,457

 
764

 
2,556

Total provision for income taxes
$
17,986

 
$
11,050

 
$
10,897

The provision for income taxes differs from the amount computed by applying the statutory federal tax rate as follows:
 
Year Ended
 
December 31,
2014
 
December 31,
2013
 
December 31,
2012
 
(In thousands)
U.S. federal tax provision at statutory rate
$
16,998

 
$
12,260

 
$
9,476

State taxes
1,533

 
883

 
1,077

Non-deductible expenses
809

 
297

 
530

Acquisition costs
229

 
—

 
431

Share-based compensation expense
461

 
407

 
403

Research tax credits
(818
)
 
(1,430
)
 
—

Domestic production deduction
(1,127
)
 
(816
)
 
(601
)
Other
(99
)
 
(551
)
 
(419
)
Total provision for income taxes
$
17,986

 
$
11,050

 
$
10,897


F- 25
Table of Contents

Significant components of our deferred tax assets (liabilities) are as follows:
 
December 31,
2014
 
December 31,
2013
 
(In thousands)
Deferred tax assets (liabilities):
 
 
 
Deferred revenue
$
12,639

 
$
11,074

Stock compensation
6,287

 
7,447

Inventory related items
2,713

 
2,947

Tax credit carry forwards
2,168

 
3,160

Reserves and accruals
327

 
—

Loss carry forwards
12

 
64

Other, net
—

 
5

Subtotal
24,146

 
24,697

Less: valuation allowance
—

 
(39
)
Total net deferred tax assets
24,146

 
24,658

 
 
 
 
Intangibles
(26,485
)
 
(26,604
)
Depreciation and amortization
(14,331
)
 
(12,077
)
Reserves and accruals
—

 
(353
)
Other, net
(194
)
 
—

Total deferred tax liabilities
(41,010
)
 
(39,034
)
 

 
 
Net deferred tax liabilities
$
(16,864
)
 
$
(14,376
)
Deferred income tax assets (liabilities) are provided for temporary differences that will result in future tax deductions or future taxable income, as well as the future benefit of tax credit carry forwards. We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax planning strategies, and results of recent operations. On the basis of this evaluation, as of December 31, 2014 , no valuation allowances have been recorded in any jurisdiction.
As of December 31, 2014 , we have an immaterial amount of state net operating loss carryforwards available for income tax purposes. For income tax purposes, we have California research tax credits carryforwards of $7.9 million . Federal research tax credit carryforwards from prior years have been utilized or have expired. California credits are available indefinitely to reduce cash taxes otherwise payable. Pursuant to the requirements of ASC 718, we do not include unrealized stock option attributes as components of our gross deferred tax assets. The tax-effected amounts of gross unrealized net operating loss and business tax credit carryforwards excluded under ASC 718 for the year ended December 31, 2014 are immaterial.
In general, it is the practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those operations. As of December 31, 2014, we have not made a provision for U.S. federal income and state income taxes on accumulated and current earnings of $0.8 million related to our foreign subsidiaries because these earnings are intended to be indefinitely reinvested in operations outside the United States. If we expect to distribute those earnings in the form of dividends or otherwise, we would be subject to U.S. and state income taxes reported as a component of income tax expense, in the amount of $0.3 million . This amount may be reduced by any foreign tax credits available at the time of repatriation.
We file income tax returns in the United States and various states and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities, including major jurisdiction as the United States, California and United Kingdom and Germany. In 2012, we concluded audits by IRS and California Franchise Tax Board for years 2008 and 2009. However, all of the net operating loss and research credit carryforwards that may be used in future years are subject to adjustment, if and when utilized. As such our federal and California tax years remain open from 1996 and 1992, respectively. In late 2014, we were contacted by the IRS for a limited scope audit for tax years 2011 and 2012. At this time, we do not believe results of this audit will have a material impact on our financial statements.

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The aggregate change in the balance of gross unrecognized tax benefits, which excludes interest and penalties, is as follows:
 
(In thousands)
Year Ended December 31, 2011
$
5,796

Increases related to tax positions taken during a prior period
43

Increases related to tax positions related to MTS
1,066

Decreases related to tax positions taken during the prior period
—

Increases related to tax positions taken during the current period
422

Decreases related to settlements
(33
)
Decreases related to expiration of statute of limitations
(379
)
Year Ended December 31, 2012
$
6,915

Increases related to tax positions taken during a prior period
406

Decreases related to tax positions taken during the prior period
(79
)
Increases related to tax positions taken during the current period
764

Decreases related to settlements
—

Decreases related to expiration of statute of limitations
(32
)
Year Ended December 31, 2013
$
7,974

Increases related to tax positions taken during a prior period
63

Decreases related to tax positions taken during the prior period
(89
)
Increases related to tax positions taken during the current period
801

Decreases related to settlements
—

Decreases related to expiration of statute of limitations
(264
)
Year Ended December 31, 2014
$
8,485

As of December 31, 2014 , the total amount of gross unrecognized tax benefits, if realized, would affect our tax expense by approximately $7.3 million . We recognize interest and/or penalties related to uncertain tax positions in operating expenses, which for 2014 was immaterial. We do not believe there will be any material changes in our unrecognized tax positions over the next twelve months.
Note 15. Stock Repurchases
The following table summarizes our stock repurchases:
 
Year Ended
 
December 31,
2014
 
December 31,
2013
 
December 31,
2012
 
(In thousands, except per share data)
Total number of shares repurchased
884

 
885

 
898

Dollar amount of shares repurchased
$
24,091

 
$
20,962

 
$
12,363

Average price paid per share
$
27.24

 
$
23.70

 
$
13.76

In August 2012, our Board of Directors authorized a program to repurchase up to $50.0 million of common stock, of which approximately $45.1 million had been repurchased as of December 31, 2014 . In November 2014, our Board of Directors authorized a program to repurchase up to $50.0 million of common stock. We expect to begin repurchasing shares under the 2014 Stock Repurchase Program upon the completion of the 2012 Stock Repurchase Program. Our stock repurchase programs have a total of $54.9 million remaining for future repurchases as of December 31, 2014 , and neither program has an expiration date.
Note 16. Employee Benefits and Share-Based Compensation
Stock purchase plan

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1997 Employee Stock Purchase Plan
We have an Employee Stock Purchase Plan ("ESPP"), under which employees can purchase shares of our common stock based on a percentage of their compensation, but not greater than 15% of their earnings; provided, however, an eligible employees' right to purchase shares of our common stock may not accrue at a rate which exceeds $25,000 of the fair market value of such shares for each calendar year in which such rights are outstanding. The purchase price per share must be equal to the lower of 85% of the fair value of the common stock at the beginning of a 24-month offering period or the end of each six-month purchasing period.
At our 2009 Annual Meeting of Stockholders ("2009 Annual Meeting"), the stockholders approved an amendment to the ESPP, which added 2.6 million shares to the reserve for future issuance. There was a total of 0.6 million shares reserved for future issuance under the ESPP as of December 31, 2014 . For the year ended December 31, 2014 , 0.5 million shares of common stock were purchased under the ESPP and an aggregate of 4.7 million shares were issued under the ESPP as of December 31, 2014 .
The unrecognized compensation cost related to the shares to be purchased under our ESPP was approximately $1.8 million , and is expected to be recognized over a weighted-average period of 0.7 years as of December 31, 2014 .
Stock award plans
2009 Equity Incentive Plan
On May 19, 2009 , at our 2009 Annual Meeting, our stockholders approved the Omnicell, Inc. 2009 Equity Incentive Plan ("2009 Plan") which authorized 2.1 million shares to be issued. The 2009 Plan provides for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other stock awards to our employees, directors and consultants.
The 2009 Plan succeeded the 1999 Equity Incentive Plan, the 2003 Equity Incentive Plan and the 2004 Equity Incentive Plan (collectively, the "Prior Plans"). No additional awards will be granted under any of the Prior Plans; however, all outstanding stock awards granted under the Prior Plans continue to be subject to the terms and conditions as set forth in the agreements evidencing such stock awards. For purposes of determining future common shares available for grant, for each share granted as a full-value award, including restricted stock awards ("RSAs"), restricted stock unit awards ("RSUs") and performance stock awards, the shares available for issuance were reduced by 1.4 shares for each share granted. Equity awards granted as options and stock appreciation rights reduce the shares available for issuance by one share.
On December 16, 2010, at a Special Meeting of Stockholders, our stockholders approved an amendment to increase the number of shares of common stock authorized for issuance under the 2009 Plan by 2.6 million shares and to provide that the number of common stock shares available for issuance under the 2009 Plan be reduced by 1.8 shares for each share granted as a full-value award granted on and after October 1, 2010. For each share granted as a full-value award granted prior to October 1, 2010, future shares available for grants under the 2009 Plan were reduced by 1.4 shares. Awards granted as stock options and stock appreciation rights continue to reduce the number of shares available for issuance under the 2009 Plan on a one -for-one basis. At our 2013 Annual Meeting of Stockholders, our stockholders approved an amendment to the 2009 Plan to increase the number of shares of common stock authorized for issuance by 2.5 million shares. There were 1.8 million shares of common stock reserved for future issuance under the 2009 Plan as of December 31, 2014 .
Options granted under the 2009 Plan generally become exercisable over periods of up to 4 years , generally with one-fourth of the shares vesting one year from the vesting commencement date with respect to initial grants, and the remaining shares vesting in 36 equal monthly installments thereafter; however our Board of Directors may impose different vesting terms at its discretion on any award. Options under the 2009 Plan generally expire 10 years from the date of grant. We also grant both restricted stock and restricted stock units to participants under the 2009 Plan. The Board of Directors determines the award amount, the vesting provisions and the expiration period (not to exceed ten years ) for each grant. Grants of restricted stock to non-employee directors are granted on the date of our annual meeting of stockholders and vest in full on the date of our next annual meeting of stockholders, provided such non-employee director remains a director on such date. The fair value of the stock on the date of issuance is amortized to expense from the date of grant to the date of vesting. RSUs granted to employees generally vest over a period of four years and are expensed ratably on a straight-line basis over the vesting period. We consider the dilutive impact of options, restricted stock and restricted stock units in our diluted net income per share calculation.
The 2009 Plan provides that our Board of Directors shall administer the 2009 Plan unless and until the Board of Directors delegates administration to a committee. Our Board of Directors has delegated administration of the 2009 Plan to the Compensation Committee of the Board and the 2009 Plan is generally administered by such committee. The Board of Directors may suspend or terminate the 2009 Plan at any time. The Board of Directors may also amend the 2009 Plan at any time or from

F- 28
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time to time. However, no amendment will be effective unless approved by our stockholders after its adoption by the Board of Directors to the extent stockholder approval is necessary to satisfy the applicable listing requirements of NASDAQ.
Performance-based restricted stock units
In 2011, we began incorporating performance-based restricted stock units ("PSUs") as an element of our executive compensation plans. In 2012, we granted 125,000 PSUs to our executive officers, of which 62,500 PSUs became eligible for vesting upon the achievement of a certain level of shareholder return for 2012. In 2013, we granted 137,500 PSUs to our executive officers all of which became eligible for vesting upon the achievement of a certain level of shareholder return for the period from January 1, 2013 through February 28, 2014. In 2014, we granted 132,500 PSUs to our executive officers, all, none or a portion of which may become eligible for vesting depending on the level of shareholder return for 2014 and eligible for further time-based vesting based on the ranking of our total shareholder return.
The fair value of a PSU award is the average of trial-specific values of the award over each of one million Monte Carlo trials. Each trial-specific value is the market value of the award at the end of the one -year performance period discounted back to the grant date. The market value of the award for each trial at the end of the performance period is the product of (a) the per share value of Omnicell stock at the end of the performance period and (b) the number of shares that vest. The number of shares that vest at the end of the performance period depends on the percentile ranking of the total shareholder return for Omnicell stock over the performance period relative to the total shareholder return of each of the other companies in the NASDAQ Healthcare Index (the "Index").
Vesting for the PSUs is based both on the percentile placement of our total stockholder return among the companies listed in the Index and time-based vesting. We calculate total stockholder return based on the one year annualized rates of return reflecting price appreciation plus reinvestment of dividends. For PSUs granted on February 4, 2014, stock price appreciation is calculated based on the trailing 20 -day average stock price from the first trading day of March 2014, compared to the trailing 20 -day average stock price from the first trading day of March 2015. For PSUs granted in 2013, stock price appreciation is calculated based on the average closing prices of the applicable company’s common stock for the 20 trading days ended on the last trading day of 2012 as compared to the average closing prices of the common stock for the 20 trading days preceding the first trading day of March 2014. For PSUs granted in 2012, stock price appreciation is calculated based on the average closing prices of the applicable company's common stock for the 20 trading days ending on the last trading day of 2011 as compared to the average closing prices for the 20 trading days ended on the last trading day of 2012.
On January 17, 2012, the Compensation Committee confirmed 76.3% as the percentile rank of our 2011 total stockholder return. This resulted in 120% of the 2011 PSUs, or 120,000 shares, becoming eligible for further time-based vesting. The eligible PSUs vest as follows: 25% of the eligible awards for the first year vested on January 17, 2012 with the remaining eligible awards vesting in equal increments, semi-annually, over the subsequent three -year period beginning on June 15th and December 15th of the year after the date of grant and each subsequent year. Vesting is contingent upon continued service. Of the 120,000 shares eligible for time-based vesting under the 2011 PSUs, 30,000 shares vested during the year ended December 31, 2014.
On January 22, 2013, the Compensation Committee confirmed 35.3% as the percentile rank of our 2012 total stockholder return. This resulted in 50% of the 2012 PSUs, or 62,500 shares, as eligible for further time-based vesting. The eligible PSUs vest as follows: 25% of the eligible shares vested immediately on January 22, 2013 with the remaining eligible awards vesting in equal increments, semi-annually, over the subsequent three -year period beginning on June 15th and December 15th of the year after the date of grant and each subsequent year. Vesting is contingent upon continued service. Of the 62,500 shares eligible for time-based vesting under the 2012 PSUs, 15,600 shares vested during the year ended December 31, 2014.
On March 20, 2014, the Compensation Committee confirmed 63.9% as the percentile rank of our 2013 total stockholder return. This resulted in 100% of the 2013 PSUs, or 137,500 shares, as eligible for further time-based vesting. The eligible performance based restricted stock unit awards will vest as follows: 25% of the eligible shares vested immediately on March 20, 2014 with the remaining eligible awards vesting in equal increments, semi-annually, over the subsequent three -year period beginning on June 15th and December 15th of the year after the date of grant and each subsequent year. Vesting is contingent upon continued service. Of the 137,500 shares eligible for time-based vesting under the 2013 PSUs, 68,750 shares vested during the year ended December 31, 2014.
On February 5, 2014, the Compensation Committee approved PSUs of 132,500 shares. If the minimum performance threshold is met as determined by the Compensation Committee in 2015, the eligible performance-based restricted stock unit awards will vest as follows: 25% of the eligible shares will vest immediately, with the remaining eligible awards vesting in equal increments, semi-annually, over the subsequent three year period beginning on June 15th and December 15th of the year after the date of grant and each subsequent year. Vesting is contingent upon continued service.

F- 29
Table of Contents

Valuation of share-based awards
The fair value of each option grant is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The fair value of shares issued under the employee stock purchase plans is estimated on the date of issuance using the Black-Scholes-Merton model.
The following assumptions were used to estimate the fair value of share-based awards:
 
Year Ended
 
December 31,
2014
 
December 31,
2013
 
December 31,
2012
Stock Option Plans
 
 
 
 
 
Risk-free interest rate (1)
1.6
%
 
1.2
%
 
0.9
%
Dividend yield
—
%
 
—
%
 
—
%
Expected volatility (2)
34.9
%
 
43.1
%
 
45.8
%
Expected life (3)
4.8 years

 
5.3 years

 
5.2 years

 
Year Ended
 
December 31,
2014
 
December 31,
2013
 
December 31,
2012
Employee Stock Purchase Plan
 
 
 
 
 
Risk-free interest rate (1)
0.2
%
 
0.2
%
 
0.2
%
Dividend yield
—
%
 
—
%
 
—
%
Expected volatility (2)
33.2
%
 
35.1
%
 
38.5
%
Expected life (3)
0.5 - 2 years

 
0.5 - 2 years

 
0.5 - 2 years

_________________________________________________
(1)  
The risk-free interest rate for both stock options and the ESPP is based on the zero-coupon U.S. Treasury rate curve in effect at the time of the option grant or at the beginning of the ESPP offering period.
(2)  
Expected volatility for both stock options and the ESPP reflects a combination of historical and market-based implied volatility consistent with ASC 718 and SEC Staff Accounting Bulletin 107. We determined that the combination of historical and market-based implied volatility provides a more accurate reflection of our market conditions and is more representative of future stock price trends than employing solely historical volatility.
(3)  
Represents the period of time that options granted are expected to be outstanding, which is derived from historical data on employee exercise and post-vesting employment termination behavior.
Share-based compensation expense
We account for share-based awards granted to employees and directors, including employee stock option awards, restricted stock, PSUs and RSUs issued pursuant to the 2009 Plan and employee stock purchases made under our ESPP using the estimate grant date fair value method of accounting in accordance with ASC 718, Stock Compensation . We value options and ESPP shares using the Black-Scholes-Merton option-pricing model. Restricted stock and time-based RSUs are valued at the grant date fair value of the underlying common shares. The PSUs are valued using the Monte Carlo simulation model.
The following table sets forth the total share-based compensation expense recognized in our Consolidated Statements of Income:
 
Year Ended
 
December 31,
2014
 
December 31,
2013
 
December 31,
2012
 
(In thousands)
Cost of product and service revenues
$
1,456

 
$
1,241

 
$
1,011

Research and development
1,655

 
1,359

 
889

Selling, general and administrative
9,674

 
8,551

 
7,314

Total share-based compensation expense
$
12,785

 
$
11,151

 
$
9,214


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We did not capitalize any share-based compensation as inventory as such amounts were not material for the years ended December 31, 2014 , December 31, 2013 and December 31, 2012 . Income tax benefits realized from share-based compensation were $4.5 million , $2.4 million and $2.6 million , for the years ended December 31, 2014 , December 31, 2013 and December 31, 2012 , respectively.
Stock options activity
A summary of the stock option activity under the 2009 Plan is presented below:
 
Number of
Shares
 
Weighted-Average
Exercise Price
 
Weighted-Average
Remaining Years
 
Aggregate
Intrinsic Value (1)
 
(In thousands, except per share data)
Outstanding at December 31, 2013
3,143

 
$
15.82

 
5.6
 
 
Granted
641

 
28.11

 
 
 
 
Exercised
(1,007
)
 
14.74

 
 
 
 
Expired
(12
)
 
19.88

 
 
 
 
Forfeited
(93
)
 
19.97

 
 
 
 
Outstanding at December 31, 2014
2,672

 
$
19.02

 
6.5
 
$
37,692

Exercisable at December 31, 2014
1,514

 
$
15.66

 
4.7
 
$
26,447

Vested and expected to vest at December 31, 2014
2,640

 
$
18.92

 
6.4
 
$
37,481

_________________________________________________
(1)  
Intrinsic value is calculated as the difference between the market value or closing price of our common stock as of the last trading day of the year as reported by the NASDAQ Global Select Market, and the exercise price of the option.
The weighted-average fair value per share of options granted during 2014 , 2013 and 2012 was $9.12 , $8.09 and $6.13 , respectively. The intrinsic value of options exercised during 2014 , 2013 and 2012 was $14.1 million , $14.0 million and $2.8 million , respectively.
As of December 31, 2014 , total unrecognized compensation cost related to unvested stock options was $8.8 million , which is expected to be recognized over a weighted-average vesting period of 2.8 years.
Restricted stock activity
A summary of the restricted stock activity under the 2009 Plan is presented below:
 
Number of
Shares
 
Weighted-Average
Grant Date Fair Value
 
Weighted-Average
Remaining Years
 
Aggregate
Intrinsic Value
 
(In thousands, except per share data)
Restricted Stock Units
 
 
 
 
 
 
 
Outstanding at December 31, 2013
362

 
$
17.15

 
2.5
 
 
Granted
238

 
28.88

 
 
 
 
Vested
(181
)
 
17.51

 
 
 
 
Forfeited
(20
)
 
16.50

 
 
 
 
Outstanding and unvested at December 31, 2014
399

 
$
24.00

 
1.5
 
$
13,190

Expected to vest at December 31, 2014
387

 
 
 
1.5
 
$
12,807

The weighted-average grant date fair value per share of RSUs granted during 2014 , 2013 and 2012 was $28.88 , $19.87 and $14.58 , respectively. The total fair value of RSUs that vested in 2014 , 2013 and 2012 was $3.2 million , $4.4 million and $2.3 million , respectively.

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As of December 31, 2014 , total unrecognized compensation cost related to RSUs was $8.7 million , which is expected to be recognized over the remaining weighted-average vesting period of 2.6 years.
 
Number of
Shares
 
Weighted-Average
Grant Date Fair Value
 
(In thousands, except per share data)
Restricted Stock Awards
 
 
 
Outstanding at December 31, 2013
52

 
$
18.43

Granted
38

 
26.42

Vested
(54
)
 
18.68

Forfeited
—

 
—

Outstanding and unvested at December 31, 2014
36

 
$
26.47

The weighted-average grant date fair value per share of RSAs granted during 2014 , 2013 and 2012 was $26.42 , $18.20 and $14.19 , respectively. The total fair value of RSAs that vested in 2014 , 2013 and 2012 was $1.0 million , $1.1 million and $1.1 million , respectively.
As of December 31, 2014 , total unrecognized compensation cost related to RSAs was $0.4 million , which is expected to be recognized over the remaining weighted-average vesting period of 0.5 years.
Performance-based restricted stock units activity
A summary of the performance-based restricted stock activity under the 2009 Plan is presented below:
 
Number of
Shares
 
Weighted-Average
Grant Date Fair Value Per Unit
 
(In thousands, except per share data)
Unvested at December 31, 2013
225

 
$
13.32

Granted
158

 
20.94

Vested
(114
)
 
13.32

Cancelled
(36
)
 
16.73

Unvested at December 31, 2014
233

 
$
17.96

The weighted-average grant date fair value per share of PSUs granted during 2014 , 2013 and 2012 was $20.94 , $14.68 and $10.94 , respectively. The total fair value of PSUs that vested in 2014 , 2013 and 2012 was $1.5 million , $0.7 million and $0.7 million , respectively.
As of December 31, 2014 , total unrecognized compensation cost related to PSUs was approximately $2.0 million , which is expected to be recognized over the remaining weighted-average period of 1.2 years.
401(k) Plan
We have established a 401(k) tax-deferred savings plan ("Omnicell Plan"), whereby eligible employees may contribute a percentage of their eligible compensation, but not greater than 75% of their earnings, up to the maximum as required by law. On January 1, 2009, we began matching 401(k) contributions, up to a maximum of 3% of employee contributions, not to exceed $1,000 for the year. In the first quarter of 2013, the MTS 401(k) tax-deferred savings plan was merged with the Omnicell Plan. On January 1, 2014, the Omnicell Plan was changed to match 50% of employee contributions up to $1,500 , with no limit to employee contributions as long as such contributions do not exceed 75% of their earnings. Effective January 1, 2015, we will begin to match 50% of employee contributions up to $2,000 , with the same limitations on employee contributions as of January 1, 2014.
Our contributions under the Omnicell Plan were $1.3 million , $1.1 million and $0.8 million in 2014 , 2013 and 2012 , respectively.
Preferred Stock

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There were 5.0 million preferred shares authorized, and no preferred shares issued or outstanding as of December 31, 2014 and December 31, 2013 .
Note 17. Segment Information
In the first quarter of 2014, we began to manage our business according to two product segments because many of our Acute Care and Non-Acute Care customers were converging to provide services across the continuum of care. We modified our segment reporting structure to match our operating structure based on how our CODM views the business and allocates resources. The two operating segments, which are the same as our reporting segments, are as follows:
Automation and Analytics
The Automation and Analytics segment is organized around the design, manufacturing, selling and servicing of medication and supply dispensing systems, pharmacy inventory management systems, and related software. Our Automation and Analytics products are designed to enable our customers to enhance and improve the effectiveness of the medication-use process, the efficiency of the medical-surgical supply chain, overall patient care and clinical and financial outcomes of medical facilities. Through modular configuration and upgrades, our systems can be tailored to specific customer needs.
Medication Adherence
The Medication Adherence segment includes primarily the manufacturing and selling of consumable medication blister cards, packaging equipment and ancillary products and services. These products are used to manage medication administration outside of the hospital setting and include medication adherence products sold under the brand name of MTS, Surgichem, and under the Omnicell brand, and dispensing systems sold under the Omnicell brand. MTS products consist of proprietary medication packaging systems and related products for use by institutional pharmacies servicing long-term care, and correctional facilities or retail pharmacies serving patients in their local communities.
The historical information presented has been retrospectively adjusted to reflect the new segment reporting. Our CODM allocates resources and evaluates the performance of our segments using information about its revenues, gross profit and income from operations. Except for goodwill, as discussed in Note 8, our assets are not discretely identified or allocated by segment.
The following table summarizes the financial performance of our reporting segments:
 
Year Ended
 
December 31, 2014
 
December 31, 2013
 
December 31, 2012
 
Automation and
Analytics
 
Medication
Adherence (1)
 
Total
 
Automation and
Analytics
 
Medication
Adherence
 
Total
 
Automation and
Analytics
 
Medication
Adherence (2)
 
Total
 
(In thousands)
Revenues
$
354,095

 
$
86,805

 
$
440,900

 
$
302,917

 
$
77,668

 
$
380,585

 
$
260,160

 
$
53,867

 
$
314,027

Cost of revenues
151,327

 
55,713

 
207,040

 
129,314

 
47,872

 
177,186

 
111,599

 
31,840

 
143,439

Gross profit
202,768

 
31,092

 
233,860

 
173,603

 
29,796

 
203,399

 
148,561

 
22,027

 
170,588

Operating expenses
155,156

 
29,121

 
184,277

 
140,087

 
28,013

 
168,100

 
127,467

 
15,995

 
143,462

Income from operations
$
47,612

 
$
1,971

 
$
49,583

 
$
33,516

 
$
1,783

 
$
35,299

 
$
21,094

 
$
6,032

 
$
27,126

_________________________________________________
(1)  
Includes Surgichem results as of August 2014.
(2)  
Includes MTS results as of May 2012.
Geographical Information
 
Year Ended
 
December 31,
2014
 
December 31,
2013
 
December 31,
2012
 
(In thousands)
United States
$
394,234

 
$
334,412

 
$
287,716

Foreign countries (1)
46,666

 
46,173

 
26,311

Total revenues
$
440,900

 
$
380,585

 
$
314,027

_________________________________________________
(1)  
No individual country represented more than 10% of the respective totals.

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Table of Contents

Significant customers
There were no significant customers that accounted for more than 10% of our total revenues in 2014, 2013 and 2012.
Note 18. Credit Agreement
In September 2013, we entered into a credit agreement (the "Credit Agreement") with Wells Fargo Bank, National Association, as administrative agent, and the lenders from time to time party thereto. The Credit Agreement provides for a $75 million revolving credit facility with a $10 million letter of credit sub-limit. Loans under the Credit Agreement mature on September 25, 2018. The Credit Agreement permits us to request one or more increases in the aggregate commitments provided that such increases do not exceed $25 million in the aggregate. We expect to use the proceeds from any revolving loans under the credit facility for general corporate purposes, including future acquisitions. Our obligations under the Credit Agreement are guaranteed by certain of our domestic subsidiaries and secured by substantially all of our and the subsidiary guarantors’ assets. We have not yet drawn any funds under the credit facility to date.
Amounts drawn under the Credit Agreement bear interest, at our election, at a Eurodollar rate plus a margin of 1.75% per annum, or an alternate base rate equal to the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50% , and (iii) LIBOR for an interest period of one month plus 1.75% . We are required to pay a commitment fee of 0.25% per annum on the aggregate undrawn amount of the commitments under the credit facility.
On November 5, 2014, we entered into Amendment Number One (“Amendment”) to the Credit Agreement. The Amendment increases the amount of our common stock that may be repurchased by us in open market transactions authorized by our Board of Directors, together with any repurchases of our common stock from any consultants, employees, officers or directors of the Company or any of our subsidiaries following the death, disability, retirement or termination of employment of such employees, officers or directors, from $25 million to $50 million per year.
The Credit Agreement contains customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, dividends and other distributions. The Credit Agreement contains financial covenants that require us to, among other things, maintain a maximum consolidated total leverage ratio and a minimum consolidated fixed charge coverage ratio, in each case, as of the last day of each quarter. We were in full compliance with all covenants as of December 31, 2014 .
Note 19. Subsequent Events
On February 26, 2015, Omnicell International, Inc., a wholly-owned subsidiary of Omnicell, Inc. entered into an agreement with Apotheka Imedisa 2001 S.A., Holger Wallat, Dirk Rolf Beils and Peter Jansen (collectively, the “Selling Shareholders”) for the purchase of the entire registered share capital of Mach 4 Automatisierungstechnik GmbH (“Mach4”) (the “Share Purchase Agreement”). Mach4 is a provider of automated medication management systems to retail and hospital pharmacy customers primarily in Europe, with additional installations in China, the Middle East and Latin America. The contemplated total aggregate consideration is $18.0 million in cash, minus existing debt and subject to certain adjustments provided for in the Share Purchase Agreement. The closing of the acquisition is subject to certain closing conditions.
On February 27, 2015, the Company received a notice from an Omnicell employee alleging, among other matters, the existence of a "side letter" arrangement with an Omnicell customer for certain discounts and Omnicell products that were to be provided at no cost, but which were not reflected in the final invoices paid by the customer. Following the receipt of this notice, the Company commenced an internal investigation into these allegations. This investigation was concluded on March 25, 2015. Based on the results of the investigation, the Company has determined that effective internal control over financial reporting was maintained in all material respects and that there are no changes required to be made to the Company’s Consolidated Financial Statements.
On March 19, 2015, a putative class action lawsuit was filed against the Company and two executive officers in the U.S. District Court for the Northern District of California, captioned Nelson v. Omnicell, Inc., et al., Case No. 3:15-cv-01280-HSG. The complaint purports to assert claims on behalf of a class of purchasers of the Company’s stock between May 2, 2014 and March 2, 2015. It alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by purportedly making false and misleading statements regarding the existence of a “side letter” arrangement and the adequacy of internal controls that allegedly resulted in false and misleading financial statements. The Company and the individual defendants have not yet been served with the Complaint. The Company believes that the claims have no merit and will defend the lawsuit vigorously.

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Table of Contents

SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
 
 
 
Additions
 
 
 
 

Balance at
Beginning of Period (1)
 
Charged to
Costs and Expenses (2)
 
Credited to
Other Accounts (3)
 
Amount
Written Off (4)
 
Balance at
End of Period (1)
 
(In thousands)
Year ended December 31, 2012
 
 
 
 
 
 
 
 
 
Accounts receivable
$
443

 
$
316

 
$
(57
)
 
$
20

 
$
722

Investment in sales-type leases
284

 
425

 
—

 
(102
)
 
607

Total allowances deducted from assets
$
727

 
$
741

 
$
(57
)
 
$
(82
)
 
$
1,329

Year ended December 31, 2013
 
 
 
 
 
 
 
 
 
Accounts receivable
$
722

 
$
195

 
$
(67
)
 
$
(360
)
 
$
490

Investment in sales-type leases
607

 
49

 
—

 
(489
)
 
167

Total allowances deducted from assets
$
1,329

 
$
244

 
$
(67
)
 
$
(849
)
 
$
657

Year ended December 31, 2014
 
 
 
 
 
 
 
 
 
Accounts receivable
$
490

 
$
941

 
$
(60
)
 
$
(165
)
 
$
1,206

Investment in sales-type leases
167

 
—

 
(5
)
 
—

 
162

Total allowances deducted from assets
$
657

 
$
941

 
$
(65
)
 
$
(165
)
 
$
1,368

__________________________________________________
(1)  
Allowance for doubtful accounts.
(2)  
Represents amounts charged to bad debt expense.
(3)  
Represents amounts credited to bad debt expense.
(4)  
Represents amounts written-off, net of recoveries.

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Table of Contents

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 30 th day of March, 2015 .
 
OMNICELL, INC.
 
By:
 
/s/ ROBIN G. SEIM
 
 
 
Robin G. Seim,
Chief Financial Officer and Executive Vice President Finance, International and Manufacturing
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the persons whose signature appears below hereby constitutes and appoints Randall A. Lipps and Robin G. Seim, each of them acting individually, as his or her attorney-in-fact, each with the full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming our signatures as they may be signed by our said attorney-in-fact and any and all amendments to this Annual Report on Form 10-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
 
Title
 
Date
/s/ RANDALL A. LIPPS
 
Chief Executive Officer, President and Chairman of the Board (Principal Executive Officer)
 
March 30, 2015
Randall A. Lipps
 
 
 
 
 
 
 
 
/s/ ROBIN G. SEIM
 
Chief Financial Officer and Executive Vice President Finance, International and Manufacturing
(Principal Accounting and Financial Officer)
 
March 30, 2015
Robin G. Seim
 
 
 
 
 
 
 
 
/s/ JOANNE B. BAUER
 
 
 
March 30, 2015
Joanne B. Bauer
 
Director
 
 
 
 
 
 
 
/s/ JAMES T. JUDSON
 
 
 
March 30, 2015
James T. Judson
 
Director
 
 
 
 
 
 
 
/s/ RANDY D. LINDHOLM
 
 
 
March 30, 2015
Randy D. Lindholm
 
Director
 
 
 
 
 
 
 
/s/ VANCE B. MOORE
 
 
 
March 30, 2015
Vance B. Moore
 
Director
 
 
 
 
 
 
 
/s/ MARK W. PARRISH
 
 
 
March 30, 2015
Mark W. Parrish
 
Director
 
 
 
 
 
 
 
/s/ GARY S. PETERSMEYER
 
 
 
March 30, 2015
Gary S. Petersmeyer
 
Director
 
 
 
 
 
 
 
/s/ BRUCE D. SMITH
 
 
 
March 30, 2015
Bruce D. Smith
 
Director
 
 
 
 
 
 
 
 
 
 
 
March 30, 2015
Sara J. White
 
Director
 
 

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Table of Contents

INDEX TO EXHIBITS
 
 
 
 
Incorporated By Reference
Exhibit Number
 
Exhibit Description
 
Form
 
File No.
 
Exhibit
 
Filing Date
 
 
 
 
 
 
 
 
 
 
 
2.1
 
Agreement for the sale and purchase of the entire issued share capital of Surgichem Limited, by and among Omnicell, Inc., BUPA Care Homes (CFG) Plc, and MTS Medication Technologies, Inc.
 
8-K
 
000-33043
 
2.1
 
12/9/2013
 
 
 
 
 
 
 
 
 
 
 
3.1
 
Amended and Restated Certificate of Incorporation of Omnicell, Inc.
 
S-1
 
333-57024
 
3.1
 
3/14/2001
 
 
 
 
 
 
 
 
 
 
 
3.2
 
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Omnicell, Inc.
 
10-Q
 
000-33043
 
3.2
 
8/9/2010
 
 
 
 
 
 
 
 
 
 
 
3.3
 
Certificate of Designation of Series A Junior Participating Preferred Stock
 
10-K
 
000-33043
 
3.2
 
3/28/2003
 
 
 
 
 
 
 
 
 
 
 
3.4
 
Bylaws of Omnicell, Inc., as amended
 
10-Q
 
000-33043
 
3.3
 
8/9/2007
 
 
 
 
 
 
 
 
 
 
 
4.1
 
Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.2
 
Form of Common Stock Certificate
 
S-1
 
333-57024
 
4.1
 
3/14/2001
 
 
 
 
 
 
 
 
 
 
 
10.1*
 
2013 Executive Officer Annual Base Salaries
 
8-K
 
000-33043
 
10.1
 
2/7/2013
 
 
 
 
 
 
 
 
 
 
 
10.2*
 
2014 Executive Officer Annual Base Salaries
 
8-K
 
000-33043
 
10.1
 
2/7/2014
 
 
 
 
 
 
 
 
 
 
 
10.3
 
Lease, effective July 1, 1999, between AMLI Commercial Properties Limited Partnership and Omnicell, Inc.
 
S-1
 
333-57024
 
10.2
 
3/14/2001
 
 
 
 
 
 
 
 
 
 
 
10.4
 
First Amendment to Lease, dated September 30, 1999, between AMLI Commercial Properties Limited Partnership and Omnicell, Inc.
 
10-K
 
000-33043
 
10.6
 
3/8/2012
 
 
 
 
 
 
 
 
 
 
 
10.5
 
Lease, dated April 14, 2010, between Point Place II, LLC and Omnicell, Inc.
 
10-K
 
000-33043
 
10.10
 
3/11/2011
 
 
 
 
 
 
 
 
 
 
 
10.6
 
Lease Agreement, dated October 20, 2011, between Middlefield Station Associates, LLC and Omnicell, Inc.
 
10-K
 
000-33043
 
10.9
 
3/8/2012
 
 
 
 
 
 
 
 
 
 
 
10.7
 
Form of Director and Officer Indemnity Agreement
 
S-1
 
333-57024
 
10.12
 
3/14/2001
 
 
 
 
 
 
 
 
 
 
 
10.8*
 
1997 Employee Stock Purchase Plan, as amended
 
10-Q
 
000-33043
 
10.2
 
8/5/2009
 
 
 
 
 
 
 
 
 
 
 
10.9*
 
2003 Equity Incentive Plan, as amended
 
10-K
 
000-33043
 
10.14
 
3/23/2007
 
 
 
 
 
 
 
 
 
 
 
10.10*
 
2009 Equity Incentive Plan, as amended
 
10-Q
 
000-33043
 
10.2
 
8/9/2013
 
 
 
 
 
 
 
 
 
 
 
10.11*
 
Form of Option Grant Notice and Form of Option Agreement for 2009 Equity Incentive Plan, as amended
 
10-K
 
000-33043
 
10.16
 
3/11/2011
 
 
 
 
 
 
 
 
 
 
 
10.12*
 
Form of Restricted Stock Unit Grant Notice and Form of Restricted Stock Unit Award Agreement for 2009 Equity Incentive Plan, as amended
 
10-K
 
000-33043
 
10.17
 
3/11/2011
 
 
 
 
 
 
 
 
 
 
 
10.13*
 
Form of Restricted Stock Bonus Grant Notice and Form of Restricted Stock Bonus Agreement for 2009 Equity Incentive Plan, as amended
 
10-K
 
000-33043
 
10.18
 
3/11/2011
 
 
 
 
 
 
 
 
 
 
 
10.14*
 
Form of Change of Control Agreement
 
10-K
 
000-33043
 
10.26
 
3/16/2006
 
 
 
 
 
 
 
 
 
 
 
10.15*
 
Addendum to Form of Change of Control Agreement dated December 30, 2010
 
10-K
 
000-33043
 
10.24
 
3/11/2011
 
 
 
 
 
 
 
 
 
 
 
10.16*
 
2010 Omnicell Quarterly Executive Bonus Plan
 
8-K
 
000-33043
 
10.1
 
3/17/2010
 
 
 
 
 
 
 
 
 
 
 
10.17*
 
Employment Agreement, dated October 31, 2003, between Omnicell and Dan S. Johnston
 
10-K
 
000-33043
 
10.26
 
3/8/2004
 
 
 
 
 
 
 
 
 
 
 

Table of Contents

 
 
 
 
Incorporated By Reference
Exhibit Number
 
Exhibit Description
 
Form
 
File No.
 
Exhibit
 
Filing Date
10.18*
 
Addendum to Offer Letter, dated December 30, 2010, between Omnicell and Dan S. Johnston
 
10-K
 
000-33043
 
10.14
 
3/11/2011
 
 
 
 
 
 
 
 
 
 
 
10.19*
 
Employment Agreement, dated November 28, 2005, between Omnicell and Robin G. Seim
 
8-K
 
000-33043
 
10.1
 
1/24/2006
 
 
 
 
 
 
 
 
 
 
 
10.20*
 
Addendum to Offer Letter, dated December 30, 2010, between Omnicell and Robin G. Seim
 
10-K
 
000-33043
 
10.21
 
3/11/2011
 
 
 
 
 
 
 
 
 
 
 
10.21*
 
Addendum to Change in Control Severance Letter between Omnicell and Robin G. Seim dated December 30, 2010
 
10-K
 
000-33043
 
10.22
 
3/11/2011
 
 
 
 
 
 
 
 
 
 
 
10.22*
 
Employment Agreement, dated October 17, 2008, between Omnicell and Nhat H. Ngo
 
10-K
 
000-33043
 
10.29
 
2/24/2009
 
 
 
 
 
 
 
 
 
 
 
10.23*
 
Addendum to Change in Control Severance Letter between Omnicell and Nhat H. Ngo dated December 30, 2010
 
10-K
 
000-33043
 
10.28
 
3/11/2011
 
 
 
 
 
 
 
 
 
 
 
10.24*
 
Employment Agreement, dated December 5, 2008, between Omnicell and Marga Ortigas-Wedekind
 
10-K
 
000-33043
 
10.31
 
2/24/2009
 
 
 
 
 
 
 
 
 
 
 
10.25*
 
Addendum to Change in Control Severance Letter between Omnicell and Marga Ortigas-Wedekind dated December 30, 2010
 
10-K
 
000-33043
 
10.30
 
3/11/2011
 
 
 
 
 
 
 
 
 
 
 
10.26
 
Lease between Omnicell, Inc. and Sycamore Drive Holdings, LLC, dated March 16, 2012
 
8-K
 
000-33043
 
10.1
 
3/20/2012
 
 
 
 
 
 
 
 
 
 
 
10.27* +
 
Omnicell, Inc. Amended and Restated Severance Benefit Plan
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.28*
 
Form of Restricted Stock Unit Award Agreement for the 2009 Equity Incentive Plan, as amended
 
10-Q
 
000-33043
 
10.4
 
8/9/2012
 
 
 
 
 
 
 
 
 
 
 
10.29*
 
Form of Performance Cash Award Grant Notice and Form of Performance Cash Award Agreement for the 2009 Equity Incentive Plan, as amended
 
10-Q
 
000-33043
 
10.5
 
8/9/2012
 
 
 
 
 
 
 
 
 
 
 
10.30
 
Lease, between Medical Technologies Systems, Inc. and Gateway Business Centre, Ltd., dated March 31, 2004
 
10-Q
 
000-33043
 
10.6
 
8/9/2012
 
 
 
 
 
 
 
 
 
 
 
10.31
 
First Lease Amendment, between Medical Technologies Systems, Inc. and Gateway Business Centre, Ltd., dated July 26, 2004
 
10-Q
 
000-33043
 
10.7
 
8/9/2012
 
 
 
 
 
 
 
 
 
 
 
10.32
 
Lease, between MTS Medication Technologies, Ltd. and SAL Pension Fund, Ltd., dated June 9, 2011
 
10-Q
 
000-33043
 
10.8
 
8/9/2012
 
 
 
 
 
 
 
 
 
 
 
10.33
 
Third Amendment to Lease, between PR Amhurst Lake LLC and Omnicell, Inc., dated July 1, 2013
 
10-Q
 
000-33043
 
10.1
 
8/9/2013
 
 
 
 
 
 
 
 
 
 
 
10.34
 
Credit Agreement between Omnicell, Inc., and lenders, dated September 25, 2013
 
8-K
 
000-33043
 
10.1
 
9/26/2013
 
 
 
 
 
 
 
 
 
 
 
10.35
 
Amendment Number One to Credit Agreement, dated November 5, 2014, by and among Omnicell, Inc., with respect to Section 12 thereof, the Subsidiary Guarantors and Wells Fargo Bank, National Association, as administrative agent
 
8-K
 
000-33043
 
10.1
 
11/7/2014
 
 
 
 
 
 
 
 
 
 
 
10.36 +
 
Second Amendment to Office Lease, dated December 17, 2014, by and between Omnicell, Inc. and Point Place, LLC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.37 +
 
Agreement for Lease relating to Two Omega Drive, River Bend Technology Centre, Iram, dated January 14, 2015, between Omega Technologies Limited and MTS Medication Technologies Limited and Omnicell, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21.1 +
 
Subsidiaries of the Registrant
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Table of Contents

 
 
 
 
Incorporated By Reference
Exhibit Number
 
Exhibit Description
 
Form
 
File No.
 
Exhibit
 
Filing Date
23.1 +
 
Consent of Independent Registered Public Accounting Firm
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23.2 +
 
Consent of Independent Registered Public Accounting Firm
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24.1 +
 
Power of Attorney (included on the signature pages hereto)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31.1 +
 
Certification of Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31.2 +
 
Certification of Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32.1 +
 
Certification of Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350) (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101.INS +
 
XBRL Instance Document (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101.SCH +
 
XBRL Taxonomy Extension Schema Document (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101.CAL +
 
XBRL Taxonomy Extension Calculation Linkbase Document (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101.DEF +
 
XBRL Taxonomy Extension Definition Linkbase Document (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101.LAB +
 
XBRL Taxonomy Extension Labels Linkbase Document (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101.PRE +
 
XBRL Taxonomy Extension Presentation Linkbase Document (2)
 
 
 
 
 
 
 
 
_________________________________________________
*
Indicates a management contract, compensation plan or arrangement.
+  
Filed herewith.
(1)  
This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.
(2)  
Pursuant to applicable securities laws and regulations, the Registrant is deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and is not subject to liability under any anti-fraud provisions of the federal securities laws as long as the Registrant has made a good faith attempt to comply with the submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files fail to comply with the submission requirements. These interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.


OMNICELL, INC.
AMENDED AND RESTATED SEVERANCE BENEFIT PLAN
SECTION 1.                        INTRODUCTION.
The Amended and Restated Omnicell, Inc. Severance Benefit Plan (the “Plan” ) was originally established effective January 3, 2007, was previously amended and restated effective May 2, 2007 and June 20, 2009, and is hereby amended and restated effective January 6, 2015 (the “Effective Date” ). The purpose of the Plan is to provide for the payment of severance benefits to certain eligible employees of Omnicell, Inc. (the “Company” ) and Company affiliates, if any, that have been designated by the Company on the attached Appendix A as eligible to participate in the Plan (each such affiliate, an “Employer” and all such affiliates collectively, the “Employers” ) whose employment with the Company or an Employer is involuntarily terminated and who meets the eligibility criteria set forth in Section 2(a) below. This Plan shall supersede any severance benefit plan, policy or practice previously maintained by the Company or any Employer. This Plan document also is the Summary Plan Description for the Plan.
SECTION 2.                        ELIGIBILITY FOR BENEFITS.
(a)            General Rules.   Subject to the requirements set forth in this Section, the Company will grant severance benefits under the Plan to Eligible Employees.
(1)            Definition of “Eligible Employee.” For purposes of this Plan, an Eligible Employee is a full-time regular hire employee of the Company or any Employer, who is notified by the Company in writing that he or she is eligible for participation in the Plan and (i) whose employment is involuntarily terminated by the Company or an Employer without Cause (as defined in Section 2(c) below); or (ii) whose employment is terminated as a result of a reduction-in-force; or (iii) who is selected by the Plan Administrator in its sole discretion to receive the benefits set forth herein. The determination of whether an employee is an Eligible Employee shall be made by the Company, in its sole discretion, and such determination shall be binding and conclusive on all persons. For purposes of this Plan, full-time regular hire employees are those employees who are regularly scheduled to work at least thirty-two (32) hours per week. Regular hire employees who are regularly scheduled to work fewer than thirty-two (32) hours per week and temporary employees are not eligible for severance benefits under the Plan.
(2)            In order to be eligible to receive any benefits under the Plan, an Eligible Employee must remain on the job until his or her date of termination as scheduled by the Company.
(3)            In order to be eligible to receive any benefits under the Plan, an Eligible Employee also must execute a general waiver and release in substantially the form attached hereto as Exhibit A, Exhibit B or Exhibit C, as appropriate, within the applicable time period set forth therein, but in no event more than sixty (60) days following the date of termination, or as may be updated by the Company from time to time, and such release must become effective in accordance with its terms. The Company, in its discretion, may modify the form of the required release to comply with applicable law and shall determine the form of the required release, which may be incorporated into a termination agreement or other agreement with the Eligible Employee.
(b)            Exceptions to Benefit Entitlement.   An employee, including an employee who otherwise is an Eligible Employee, will not receive benefits under the Plan (or will receive reduced benefits under the Plan) in the following circumstances, as determined by the Company in its sole discretion:
(1)            The employee has executed an individually negotiated employment contract or agreement with the Company or an Employer relating to severance benefits that is in effect on his or her termination date,, in which case such employee’s severance benefit, if any, shall be governed by the terms of such individually negotiated employment contract or agreement and shall be governed by this Plan only to the extent that the reduction pursuant to Section 3(c) below does not entirely eliminate benefits under this Plan.

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(2)            The employee voluntarily terminates employment with the Company or an Employer. Voluntary terminations include, but are not limited to, resignation, retirement or failure to return from a leave of absence on the scheduled date.
(3)            The employee voluntarily terminates employment with the Company or an Employer in order to accept employment with another entity that is wholly or partly owned (directly or indirectly) by the Company or an affiliate of the Company.
(4)            The employee is offered an identical or substantially equivalent or comparable position with the Company or an affiliate of the Company. For purposes of the foregoing, a “substantially equivalent or comparable position” is one that offers the employee substantially the same level of base salary and does not require a relocation of the employee’s place of employment by more than fifty (50) miles from its previous location.
(5)            The employee is offered immediate reemployment by a successor to the Company or an affiliate of the Company or by a purchaser of its assets, as the case may be, following a change in ownership of the Company or an Employer or a sale of substantially all of the assets of a division or business unit of the Company or an Employer. For purposes of the foregoing, “immediate reemployment” means that the employee’s employment with the successor to the Company or an affiliate of the Company or the purchaser of its assets, as the case may be, results in uninterrupted employment such that the employee does not incur a lapse in pay as a result of the change in ownership of the Company or an Employer or the sale of its assets.
(6)            The employee is offered immediate reemployment by a third party entity to whom the Company or an affiliate of the Company has outsourced or otherwise transferred the employee’s job responsibilities. For purposes of the foregoing, “immediate reemployment” means that the employee’s employment with the third party entity to whom the employee’s job responsibilities have been outsourced or otherwise transferred, as the case may be, results in uninterrupted employment such that the employee does not incur a lapse in pay as a result of the outsourcing or other transfer.
(7)            The employee is rehired by the Company or an affiliate of the Company prior to the date benefits under the Plan are scheduled to commence.
(8)            The employee does not confirm in writing that he or she is and shall remain subject to the Company’s Proprietary Information and Inventions Agreement.
(9)            Following notification of involuntary termination by the Company, the employee does not satisfactorily perform his or her assigned job duties until the date set by the Company or an Employer for the termination of employment.
(c)            An involuntary termination without “Cause” means an involuntary termination of an employee’s employment by the Company or an Employer other than for one of the following reasons:
(1)            an intentional action or intentional failure to act by the employee that was performed in bad faith;
(2)            an employee’s intentional refusal or intentional failure to act in accordance with any lawful and proper direction or order of his or her superiors;
(3)            an employee’s habitual neglect of the duties of employment, which may include a failure to perform her or her job duties satisfactorily;
(4)            an employee’s indictment, charge, or conviction of a felony or any crime involving moral turpitude, or participation in any act of theft or dishonesty, regardless of whether such act has had or could reasonably be expected to have a material detrimental effect on the business of the Company or an Employer; or

2
 

(5)            an employee’s violation of any material provision of the Company’s Proprietary Information and Inventions Agreement or violation of any material provision of any other written Company or Employer policy or procedure.
SECTION 3.                        AMOUNT OF BENEFIT.
(a)            Severance Benefits.   Subject to the exceptions set forth in Section 2(b), severance benefits under the Plan, if any, shall be provided to Eligible Employees described in Section 2(a) in the amount provided in Appendix B.
(b)            Additional Benefits.   Notwithstanding the foregoing, the Company may, in its sole discretion, provide benefits in addition to those benefits set forth in Section 3(a) to Eligible Employees and the provision of any such benefits to an Eligible Employee shall in no way obligate the Company to provide such benefits to any other Eligible Employee or to any other employee, even if similarly situated.
(c)            Certain Reductions.   The Company, in its sole discretion, shall have the authority to reduce an Eligible Employee’s severance benefits, in whole or in part, by any other severance benefits, pay in lieu of notice, or other similar benefits payable to the Eligible Employee by the Company or an affiliate of the Company that become payable in connection with the Eligible Employee’s termination of employment pursuant to (i) any applicable legal requirement, including, without limitation, the Worker Adjustment and Retraining Notification Act, the California Plant Closing Act, or any other similar state law, (ii) a written employment or severance agreement with the Company or an Employer of the Company, or (iii) any Company or Employer policy or practice providing for the Eligible Employee to remain on the payroll for a limited period of time after being given notice of the termination of the Eligible Employee’s employment, and the Plan Administrator shall so construe and implement the terms of the Plan; provided, however, that notwithstanding the foregoing and any other provision in the Plan to the contrary, such reduction shall in no event reduce the cash severance benefits provided under this Plan to less than one (1) week of Base Salary (as such term is defined in Appendix B). The Company’s decision to apply such reductions to the severance benefits of one Eligible Employee and the amount of such reductions shall in no way obligate the Company to apply the same reductions in the same amounts to the severance benefits of any other Eligible Employee, even if similarly situated. In the Company’s sole discretion, such reductions may be applied on a retroactive basis, with severance benefits previously paid being re-characterized as payments pursuant to the Company’s statutory obligation.
SECTION 4.                        COMPANY PROPERTY.
(a)            Return of Company Property.   Except as provided in Section 4(b) below, an Eligible Employee will not be entitled to any severance benefit under the Plan unless and until the Eligible Employee returns all Company Property. For this purpose, “Company Property” means all Company and/or Employer documents (and all copies thereof) and other Company and/or Employer property which the Eligible Employee had in his or her possession at any time, including, but not limited to, Company and/or Employer files, notes, drawings records, plans, forecasts, reports, studies, analyses, proposals, agreements, financial information, research and development information, sales and marketing information, operational and personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including, but not limited to, leased vehicles, computers, facsimile machines, mobile telephones, servers), credit cards, entry cards, identification badges and keys; and any materials of any kind which contain or embody any proprietary or confidential information of the Company and/or an Employer (and all reproductions thereof in whole or in part). As a condition to receiving benefits under the Plan, Eligible Employees must not make or retain copies, reproductions or summaries of any such Company or Employer property. In the Company’s sole discretion, the Company may determine the value of any unreturned Company property and deduct the value of such property from any severance benefits otherwise owed to the employee under this Plan.
(b)            Retention of Certain Company Equipment.   Notwithstanding the provisions of Section 4(a), the Company and an Eligible Employee may agree to allow the Eligible Employee to retain certain Company or Employer equipment (e.g., laptops, printers, facsimile machines, copiers, etc.) ( “Company Equipment” ) for his

3
 

or her personal use following the Eligible Employee’s termination of employment. As a condition to retaining any Company Equipment, the Eligible Employee must execute a general waiver and release in substantially the form attached hereto as Exhibit A, Exhibit B or Exhibit C, as appropriate, within the applicable time period set forth therein, but in no event more than sixty (60) days following the date of termination, and such release must become effective in accordance with its terms. The Eligible Employee acknowledges that the Eligible Employee will have imputed income related to the retention of any Company Equipment. The Eligible Employee will follow all Company instructions as to the return and/or deletion of any Company information contained on the Company Equipment.
SECTION 5.                        TIME OF PAYMENT AND FORM OF BENEFIT.
All cash severance benefits under the Plan shall be paid in a single lump sum as soon as administratively practicable following the Eligible Employee’s satisfaction of all of the requirements set forth in Sections 2(a) and 4(a). All payments under the Plan will be subject to applicable withholding for federal, state and local taxes. If an Eligible Employee is indebted to the Company at his or her termination date, the Company reserves the right to offset any severance payments under the Plan by the amount of such indebtedness. Additionally, if an Eligible Employee is subject to withholding for taxes related to any non-Plan benefits, including but not limited to any imputed income related to the use of Company vehicles for personal travel, or imputed income related to retention of Company Equipment, the Company may offset any severance payments under the Plan by the amount of such withholding taxes.
Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under the Plan that constitute “deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code” ) and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A” ) shall not commence in connection with an Eligible Employee’s termination of employment unless and until the Eligible Employee has also incurred a “separation from service” (as such term is defined in Treasury Regulations Section 1.409A-1(h) ( “Separation From Service” )), unless the Company reasonably determines that such amounts may be provided to the Eligible Employee without causing the Eligible Employee to incur the adverse personal tax consequences under Section 409A.
It is intended that (i) each installment of any benefits payable under the Plan to an Eligible Employee be regarded as a separate “payment” for purposes of Treasury Regulations Section 1.409A-2(b)(2)(i), (ii) all payments of any such benefits under the Plan satisfy, to the greatest extent possible, the exemptions from the application of Section 409A provided under Treasury Regulations Sections 1.409A-1(b)(4) and 1.409A-1(b)(9)(iii), and (iii) any such benefits consisting of COBRA premiums also satisfy, to the greatest extent possible, the exemption from the application of Section 409A provided under Treasury Regulations Section 1.409A-1(b)(9)(v). However, if the Company determines that any such benefits payable under the Plan constitute “deferred compensation” under Section 409A and the Eligible Employee is a “specified employee” of the Company, as such term is defined in Section 409A(a)(2)(B)(i), then, solely to the extent necessary to avoid the imposition of the adverse personal tax consequences under Section 409A, the timing of such benefit payments shall be delayed as follows: on the earlier to occur of (A) the date that is six (6) months and one (1) day after the Eligible Employee’s Separation From Service and (B) the date of the Eligible Employee’s death (such applicable date, the “Delayed Initial Payment Date” ), the Company shall (1) pay the Eligible Employee a lump sum amount equal to the sum of the benefit payments that the Eligible Employee would otherwise have received through the Delayed Initial Payment Date if the commencement of the payment of the benefits had not been delayed pursuant to this paragraph and (2) commence paying the balance, if any, of the benefits in accordance with the applicable payment schedule.
SECTION 6.                        REEMPLOYMENT.
In the event of an Eligible Employee’s reemployment by the Company or an Employer or other affiliate of the Company or by a company to whom the employee’s job responsibilities have been outsourced or otherwise transferred during the period of time in respect of which severance benefits pursuant to Sections 3(a) and 3(b) have been paid, the Company, in its sole and absolute discretion, may require such Eligible Employee to repay to the Company all or a portion of such severance benefits as a condition of reemployment.

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SECTION 7.                        RIGHT TO INTERPRET PLAN; AMENDMENT AND TERMINATION.
(a)            Exclusive Discretion.   The Plan Administrator (as defined in Section 10(a) herein) shall have the exclusive discretion and authority to establish rules, forms, and procedures for the administration of the Plan and to construe and interpret the Plan and to decide any and all questions of fact, interpretation, definition, computation or administration arising in connection with the operation of the Plan, including, but not limited to, the eligibility to participate in the Plan and amount of benefits paid under the Plan. The rules, interpretations, computations and other actions of the Plan Administrator shall be binding and conclusive on all persons.
(b)            Amendment or Termination.   The Company reserves the right to amend or terminate this Plan (including Appendix A and Appendix B) or the benefits provided hereunder at any time; provided, however, that no such amendment or termination shall adversely affect the right to any unpaid benefit of any Eligible Employee whose termination date has occurred prior to amendment or termination of the Plan. Any action amending or terminating the Plan shall be in writing and executed by the Chief Executive Officer or the Chief Financial Officer of the Company.
SECTION 8.                        NO IMPLIED EMPLOYMENT CONTRACT.
The Plan shall not be deemed (i) to give any employee or other person any right to be retained in the employ of the Company or an Employer or (ii) to interfere with the right of the Company or an Employer to discharge any employee or other person at any time, with or without cause, which right is hereby reserved.
SECTION 9.                        LEGAL CONSTRUCTION.
This Plan is intended to be governed by and shall be construed in accordance with the Employee Retirement Income Security Act of 1974 ( “ERISA” ) and, to the extent not preempted by ERISA, the laws of the State of California (without regard to principles of conflict of laws).
SECTION 10.                 CLAIMS, INQUIRIES AND APPEALS.
(a)            Applications for Benefits and Inquiries.   Any application for benefits, inquiries about the Plan or inquiries about present or future rights under the Plan must be submitted to the Plan Administrator in writing by an applicant (or his or her authorized representative). The Plan Administrator is:
Omnicell, Inc.
Attn: Vice President, Human Resources
590 E. Middlefield Road
Mountain View, CA 94043
(b)            Denial of Claims.   In the event that any application for benefits is denied in whole or in part, the Plan Administrator must provide the applicant with written or electronic notice of the denial of the application, and of the applicant’s right to review the denial. Any electronic notice will comply with the regulations of the U.S. Department of Labor. The notice of denial will be set forth in a manner designed to be understood by the applicant and will include the following:
(1)            the specific reason or reasons for the denial;
(2)            references to the specific Plan provisions upon which the denial is based;
(3)            a description of any additional information or material that the Plan Administrator needs to complete the review and an explanation of why such information or material is necessary; and

5
 

(4)            an explanation of the Plan’s review procedures and the time limits applicable to such procedures, including a statement of the applicant’s right to bring a civil action under Section 502(a) of ERISA following a denial on review of the claim, as described in Section 10(d) below.
This notice of denial will be given to the applicant within ninety (90) days after the Plan Administrator receives the application, unless special circumstances require an extension of time, in which case, the Plan Administrator has up to an additional ninety (90) days for processing the application. If an extension of time for processing is required, written notice of the extension will be furnished to the applicant before the end of the initial ninety (90) day period.
This notice of extension will describe the special circumstances necessitating the additional time and the date by which the Plan Administrator is to render its decision on the application.
(c)            Request for a Review. Any person (or that person’s authorized representative) for whom an application for benefits is denied, in whole or in part, may appeal the denial by submitting a request for a review to the Plan Administrator within sixty (60) days after the application is denied. A request for a review shall be in writing and shall be addressed to:
Omnicell, Inc.
Attn: Vice President, Human Resources
590 E. Middlefield Road
Mountain View, CA 94043
A request for review must set forth all of the grounds on which it is based, all facts in support of the request and any other matters that the applicant feels are pertinent. The applicant (or his or her representative) shall have the opportunity to submit (or the Plan Administrator may require the applicant to submit) written comments, documents, records, and other information relating to his or her claim. The applicant (or his or her representative) shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to his or her claim. The review shall take into account all comments, documents, records and other information submitted by the applicant (or his or her representative) relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
(d)            Decision on Review.   The Plan Administrator will act on each request for review within sixty (60) days after receipt of the request, unless special circumstances require an extension of time (not to exceed an additional sixty (60) days), for processing the request for a review. If an extension for review is required, written notice of the extension will be furnished to the applicant within the initial sixty (60) day period. This notice of extension will describe the special circumstances necessitating the additional time and the date by which the Plan Administrator is to render its decision on the review. The Plan Administrator will give prompt, written or electronic notice of its decision to the applicant. Any electronic notice will comply with the regulations of the U. S. Department of Labor. In the event that the Plan Administrator confirms the denial of the application for benefits in whole or in part, the notice will set forth, in a manner calculated to be understood by the applicant, the following:
(1)            the specific reason or reasons for the denial;
(2)            references to the specific Plan provisions upon which the denial is based;
(3)            a statement that the applicant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to his or her claim; and
(4)            a statement of the applicant’s right to bring a civil action under Section 502(a) of ERISA.

6
 

(e)            Rules and Procedures.   The Plan Administrator will establish rules and procedures, consistent with the Plan and with ERISA, as necessary and appropriate in carrying out its responsibilities in reviewing benefit claims. The Plan Administrator may require an applicant who wishes to submit additional information in connection with an appeal from the denial of benefits to do so at the applicant’s own expense.
(f)             Exhaustion of Remedies.   No legal action for benefits under the Plan may be brought until the applicant (i) has submitted a written application for benefits in accordance with the procedures described by Section 10(a) above, (ii) has been notified by the Plan Administrator that the application is denied, (iii) has filed a written request for a review of the application in accordance with the appeal procedure described in Section 10(c) above, and (iv) has been notified that the Plan Administrator has denied the appeal. Notwithstanding the foregoing, if the Plan Administrator does not respond to an applicant’s claim or appeal within the relevant time limits specified in this Section 10, the applicant may bring legal action for benefits under the Plan pursuant to Section 502(a) of ERISA.
SECTION 11.                 BASIS OF PAYMENTS TO AND FROM PLAN.
The Plan shall be unfunded, and all cash payments under the Plan shall be paid only from the general assets of the Company. An Eligible Employee’s right to receive payments under the Plan is no greater than that of the Company’s unsecured general creditors. Therefore, if the Company were to become insolvent, the Eligible Employee might not receive benefits under the Plan.
SECTION 12.                 OTHER PLAN INFORMATION.
(a)            Employer and Plan Identification Numbers. The Employer Identification Number assigned to the Company (which is the “Plan Sponsor” as that term is used in ERISA) by the Internal Revenue Service is 94-3166458. The Plan Number assigned to the Plan by the Plan Sponsor pursuant to the instructions of the Internal Revenue Service is 510.
(b)            Ending Date for Plan’s Fiscal Year and Type of Plan.   The date of the end of the fiscal year for the purpose of maintaining the Plan’s records is December 31. The Plan is a welfare benefit plan.
(c)            Agent for the Service of Legal Process.   The agent for the service of legal process with respect to the Plan is:
Omnicell, Inc.
Attn: Corporate Secretary
590 E. Middlefield Road
Mountain View, CA 94043
(d)            Plan Sponsor and Administrator.   The Plan Sponsor and the “Plan Administrator” of the Plan is:
Omnicell, Inc.
Attn: Vice President, Human Resources
590 E. Middlefield Road
Mountain View, CA 94043
The Plan Sponsor’s and Plan Administrator’s telephone number is (650) 251- 6100. The Plan Administrator is the named fiduciary charged with the responsibility for administering the Plan.
SECTION 13.                 STATEMENT OF ERISA RIGHTS.
Participants in this Plan are entitled to certain rights and protections under ERISA. If you are an Eligible Employee, you are considered a participant in the Plan and, under ERISA, you are entitled to:

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(a)            Receive Information About Your Plan and Benefits
(1)            Examine, without charge, at the Plan Administrator’s office and at other specified locations, such as worksites, all documents governing the Plan and a copy of the latest annual report (Form 5500 Series), if applicable, filed by the Plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration;
(2)            Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan and copies of the latest annual report (Form 5500 Series), if applicable, and an updated (as necessary) Summary Plan Description. The Administrator may make a reasonable charge for the copies; and
(3)            Receive a summary of the Plan’s annual financial report, if applicable. The Plan Administrator is required by law to furnish each participant with a copy of this summary annual report.
(b)            Prudent Actions by Plan Fiduciaries.   In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate the Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of you and other Plan participants and beneficiaries. No one, including your employer, your union or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a Plan benefit or exercising your rights under ERISA.
(c)            Enforce Your Rights.   If your claim for a Plan benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules as set forth in detail in Section 10 herein.
Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of Plan documents or the latest annual report from the Plan, if applicable, and do not receive them within 30 days, you may file suit in a Federal court and you are not required to follow the claims procedure set forth in Section 10 herein. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator.
If you have completed the claims and appeals procedure described in Section 10 and have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or Federal court.
If you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a Federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous.
(d)            Assistance with Your Questions.  If you have any questions about the Plan, you should contact the Plan Administrator. If you have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security Administration, U. S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration or accessing its website at http://www.dol.gov/ebsa/.
SECTION 14.                 GENERAL PROVISIONS.
(a)            Notices.   Any notice, demand or request required or permitted to be given by either the Company or an Eligible Employee pursuant to the terms of this Plan shall be in writing and shall be deemed given

8
 

when delivered personally or deposited in the U.S. mail, First Class with postage prepaid, and addressed to the parties, in the case of the Company, at the address set forth in Section 12(d) and, in the case of an Eligible Employee, at the address as set forth in the Company’s employment file maintained for the Eligible Employee as previously furnished by the Eligible Employee or such other address as a party may request by notifying the other in writing.
(b)            Transfer and Assignment. The rights and obligations of an Eligible Employee under this Plan may not be transferred or assigned without the prior written consent of the Company. This Plan shall be binding upon any person who is a successor by merger, acquisition, consolidation or otherwise to the business formerly carried on by the Company without regard to whether or not such person or entity actively assumes the obligations hereunder.
(c)            Waiver.   Any party’s failure to enforce any provision or provisions of this Plan shall not in any way be construed as a waiver of any such provision or provisions, nor prevent any party from thereafter enforcing each and every other provision of this Plan. The rights granted the parties herein are cumulative and shall not constitute a waiver of any party’s right to assert all other legal remedies available to it under the circumstances.
(d)            Severability.   Should any provision of this Plan be declared or determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.
(e)            Section Headings.   Section headings in this Plan are included for convenience of reference only and shall not be considered part of this Plan for any other purpose.
Omnicell, Inc. has caused its duly authorized officer to execute the amendment and restatement of this Plan effective as of January 6, 2015.
 
OMNICELL, INC.
 
 
 
   
 
By:
ees /s/ Rob Seim
 
 
 
 
Title:
  CFO and EVP, Finance, Administration and Manufacturing
 
 
 


For Employees Age 40 or Older
Individual Termination
EXHIBIT A
RELEASE AGREEMENT
I understand and agree completely to the terms set forth in the Omnicell, Inc. Severance Benefit Plan (the “Plan” ).
I understand that this Release, together with the Plan, constitutes the complete, final and exclusive embodiment of the entire agreement between the Company, affiliates of the Company and me with regard to the

9
 

subject matter hereof. I am not relying on any promise or representation by the Company or the Employer that is not expressly stated therein. Certain capitalized terms used in this Release are defined in the Plan.
I hereby confirm my obligations under my Proprietary Information and Inventions Agreement with the Company and/or the Employer.
In exchange for the Severance Benefits and other consideration provided to me by the Plan that I am not otherwise entitled to receive, and except as otherwise set forth in this Release, I hereby generally and completely release the Company, the Employers, and their current and former parents, subsidiaries, successors, predecessors and affiliates, and their current and former partners, members, directors, officers, employees, stockholders, shareholders, agents, attorneys, predecessors, insurers, affiliates and assigns, from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring at any time prior to and including the date I sign this Release. This general release includes, but is not limited to: (a) all claims arising out of or in any way related to my employment with the Company, the Employers or their affiliates, or the termination of that employment; (b) all claims related to my compensation or benefits, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company, the Employers, or their affiliates; (c) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (d) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (e) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990 (as amended), the federal Age Discrimination in Employment Act (as amended) ( “ADEA” ), the federal Employee Retirement Income Security Act of 1974 (as amended), and the California Fair Employment and Housing Act (as amended).
I am not releasing any claim that cannot be waived under applicable state or federal law or any rights I have to pursue a claim for workers’ compensation or unemployment benefits, and I am not releasing any rights that I have to be indemnified (including any right to reimbursement of expenses) arising under applicable law, the certificate of incorporation or by-laws (or similar constituent documents of the Company), any indemnification agreement between me and the Company, the Employers, or their affiliates, or any directors’ and officers’ liability insurance policy of the Company, the Employers, or their affiliates. The foregoing notwithstanding, nothing in this Release shall prevent me from filing, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission, the Department of Labor, or the California Department of Fair Employment and Housing, except that I acknowledge and agree that I shall not recover any monetary benefits in connection with any such claim, charge or proceeding with regard to any claim released herein. Nothing in this Release shall prevent me from challenging the validity of this Release in a legal or administrative proceeding.
I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA (“ADEA Waiver”), and that the consideration given under the Plan for the ADEA Waiver is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) my ADEA Waiver and release does not apply to any rights or claims that may arise after the date I sign this Release; (b) I should consult with an attorney prior to signing this Release (although I may choose voluntarily not to do so); (c) I have twenty-one (21) days to consider this Release (although I may choose voluntarily to sign this Release earlier); (d) I have seven (7) days following the date I sign this Release to revoke the Release by providing written notice to an officer of the Company within the seven (7) day period; and (e) the ADEA Waiver shall not be effective until the date upon which the revocation period has expired unexercised, which shall be the eighth day after I sign this Release. Nevertheless, my general release of claims, except for the ADEA Waiver, is effective immediately, and not revocable.
I UNDERSTAND THAT THIS RELEASE INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS. In giving the release herein, which includes claims which may be unknown to me at present, I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows:  “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially

Exhibit A-0
 

affected his settlement with the debtor.”   I hereby expressly waive and relinquish all rights and benefits under that section and any law of any other jurisdiction of similar effect with respect to my release of any unknown or unsuspected claims hereunder.
I acknowledge that to become effective, I must sign and return this Release to the Company so that it is received not later than twenty-one (21) days following the date it is provided to me.
I agree not to disparage Company (or its officers, directors or employees), in any manner likely to be harmful to it, them or their business, business reputation or personal reputation; provided that I may respond accurately and fully to any question, inquiry or request for information when required by legal process. I understand and agree that in the event that I do not comply with this non-disparagement obligation, my Severance Benefits will be forfeited and subject to return upon demand by Company.

 
EMPLOYEE
 
 
 
 
 
Name:
 
 
 
 
Date:
 
 
 
 
 


Exhibit A-1
 

For Employees Age 40 or Older
Group Termination
EXHIBIT B
RELEASE AGREEMENT
I understand and agree completely to the terms set forth in the Omnicell, Inc. Severance Benefit Plan (the “Plan” ).
I understand that this Release, together with the Plan, constitutes the complete, final and exclusive embodiment of the entire agreement between the Company, affiliates of the Company and me with regard to the subject matter hereof. I am not relying on any promise or representation by the Company or the Employer that is not expressly stated therein. Certain capitalized terms used in this Release are defined in the Plan.
I hereby confirm my obligations under my Proprietary Information and Inventions Agreement with the Company and/or the Employer.
In exchange for the Severance Benefits and other consideration provided to me by the Plan that I am not otherwise entitled to receive, and except as otherwise set forth in this Release, I hereby generally and completely release the Company, the Employers and their current and former parents, subsidiaries, successors, predecessors and affiliates, and their current and former partners, members, directors, officers, employees, stockholders, shareholders, agents, attorneys, predecessors, insurers, affiliates and assigns, from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring at any time prior to and including the date I sign this Release. This general release includes, but is not limited to: (a) all claims arising out of or in any way related to my employment with the Company, the Employers or their affiliates, or the termination of that employment; (b) all claims related to my compensation or benefits, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company, the Employers, or their affiliates; (c) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (d) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (e) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990 (as amended), the federal Age Discrimination in Employment Act (as amended) ( “ADEA” ), the federal Employee Retirement Income Security Act of 1974 (as amended), and the California Fair Employment and Housing Act (as amended).
I am not releasing any claim that cannot be waived under applicable state or federal law or any rights I have to pursue a claim for workers’ compensation or unemployment benefits, and I am not releasing any rights that I have to be indemnified (including any right to reimbursement of expenses) arising under applicable law, the certificate of incorporation or by-laws (or similar constituent documents of the Company), any indemnification agreement between me and the Company, the Employers, or their affiliates, or any directors’ and officers’ liability insurance policy of the Company, the Employers, or their affiliates. The foregoing notwithstanding, nothing in this Release shall prevent me from filing, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission, the Department of Labor, or the California Department of Fair Employment and Housing, except that I acknowledge and agree that I shall not recover any monetary benefits in connection with any such claim, charge or proceeding with regard to any claim released herein. Nothing in this Release shall prevent me from challenging the validity of this Release in a legal or administrative proceeding.
I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA (“ADEA Waiver”), and that the consideration given under the Plan for the ADEA Waiver is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) my ADEA Waiver does not apply to any rights or claims that may arise after the date I sign this Release; (b) I should consult with an attorney prior to signing this Release (although I may choose

Exhibit B-1
 

voluntarily not to do so); (c) I have forty-five (45) days to consider this Release (although I may choose voluntarily to sign this Release earlier); (d) I have seven (7) days following the date I sign this Release to revoke the Release by providing written notice to an officer of the Company within the seven (7) day period; (e) the ADEA Waiver shall not be effective until the date upon which the revocation period has expired unexercised, which shall be the eighth day after I sign this Release; and (f) I have received with this Release a detailed list of the job titles and ages of all employees who were terminated in this group termination and the ages of all employees of the Company in the same job classification or organizational unit who were not terminated. Nevertheless, my general release of claims, except for the ADEA Waiver, is effective immediately, and not revocable.
I UNDERSTAND THAT THIS RELEASE INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS. In giving the release herein, which includes claims which may be unknown to me at present, I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows:  “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that section and any law of any other jurisdiction of similar effect with respect to my release of any unknown or unsuspected claims hereunder.
I hereby represent that I have been paid all compensation owed and for all hours worked, have received all the leave and leave benefits and protections for which I am eligible, pursuant to the Family and Medical Leave Act or otherwise, and have not suffered any on-the-job injury for which I have not already filed a claim.
I agree not to disparage Company (or its officers, directors or employees), in any manner likely to be harmful to it, them or their business, business reputation or personal reputation; provided that I may respond accurately and fully to any question, inquiry or request for information when required by legal process. I understand and agree that in the event that I do not comply with this non-disparagement obligation, my Severance Benefits will be forfeited and subject to return upon demand by Company.

I acknowledge that to become effective, I must sign and return this Release to the Company so that it is received not later than forty-five (45) days following the date it is provided to me.
 
EMPLOYEE
 
 
 
 
 
Name:
 
 
 
 
Date:
 
 
 
 
 
 
 




Exhibit B-2
 

For Employees Under Age 40
Individual and Group Termination
EXHIBIT C
RELEASE AGREEMENT
I understand and agree completely to the terms set forth in the Omnicell, Inc. Severance Benefit Plan (the “Plan” ).
I understand that this Release, together with the Plan, constitutes the complete, final and exclusive embodiment of the entire agreement between the Company, affiliates of the Company and me with regard to the subject matter hereof. I am not relying on any promise or representation by the Company or the Employer that is not expressly stated therein. Certain capitalized terms used in this Release are defined in the Plan.
I hereby confirm my obligations under my Proprietary Information and Inventions Agreement with the Company and/or the Employer.
In exchange for the Severance Benefits and other consideration provided to me by the Plan that I am not otherwise entitled to receive, and except as otherwise set forth in this Release, I hereby generally and completely release the Company, the Employers and their current and former parents, subsidiaries, successors, predecessors and affiliates, and their current and former partners, members, directors, officers, employees, stockholders, shareholders, agents, attorneys, predecessors, insurers, affiliates and assigns, from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring at any time prior to and including the date I sign this Release. This general release includes, but is not limited to: (a) all claims arising out of or in any way related to my employment with the Company, the Employers or their affiliates, or the termination of that employment; (b) all claims related to my compensation or benefits, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company, the Employers, or their affiliates; (c) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (d) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (e) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990 (as amended), the federal Employee Retirement Income Security Act of 1974 (as amended), and the California Fair Employment and Housing Act (as amended).
I am not releasing any claim that cannot be waived under applicable state or federal law or any rights I have to pursue a claim for workers’ compensation or unemployment benefits, and I am not releasing any rights that I have to be indemnified (including any right to reimbursement of expenses) arising under applicable law, the certificate of incorporation or by-laws (or similar constituent documents of the Company), any indemnification agreement between me and the Company, the Employers, or their affiliates, or any directors’ and officers’ liability insurance policy of the Company, the Employers, or their affiliates. The foregoing notwithstanding, nothing in this Release shall prevent me from filing, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission, the Department of Labor, or the California Department of Fair Employment and Housing, except that I acknowledge and agree that I shall not recover any monetary benefits in connection with any such claim, charge or proceeding with regard to any claim released herein. Nothing in this Release shall prevent me from challenging the validity of this Release in a legal or administrative proceeding.
I UNDERSTAND THAT THIS RELEASE INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS. In giving the release herein, which includes claims which may be unknown to me at present, I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that section and

Exhibit C-1
 

any law of any other jurisdiction of similar effect with respect to my release of any unknown or unsuspected claims hereunder.
I hereby represent that I have been paid all compensation owed and for all hours worked, have received all the leave and leave benefits and protections for which I am eligible, pursuant to the Family and Medical Leave Act or otherwise, and have not suffered any on-the-job injury for which I have not already filed a claim.
I agree not to disparage Company (or its officers, directors or employees), in any manner likely to be harmful to it, them or their business, business reputation or personal reputation; provided that I may respond accurately and fully to any question, inquiry or request for information when required by legal process. I understand and agree that in the event that I do not comply with this non-disparagement obligation, my Severance Benefits will be forfeited and subject to return upon demand by Company.

I acknowledge that to become effective, I must sign and return this Release to the Company so that it is received not later than fourteen (14) days following the date it is provided to me.
 
EMPLOYEE
 
 
 
 
 
Name:
 
 
 
 
Date:
 
 
 
 





Exhibit C-2
 

APPENDIX A
OMNICELL, INC.
SEVERANCE BENEFIT PLAN
Affiliates of the Company whose employees are eligible to participate in the Omnicell, Inc. Severance Benefit Plan (each an “Employer” ) are as follows:
MTS Medication Technologies, Inc.
MTS Packaging Systems, Inc.
The foregoing list of Employers is subject to such change as the Company, pursuant to Section 1 of the Plan, may determine in its sole and absolute discretion. Any such change to the participating Employers shall be set forth in a revised version of this Appendix A.
 
Appendix A Adopted: January 6, 2015
 
 
 
OMNICELL, INC.
 
 
 
 
 
By:
/s/ Rob Seim
 
 
 
Title:
CFO and EVP, Finance, Administration and Manufacturing
 
 
 
 



Appendix A-1
 

APPENDIX B
OMNICELL, INC.
SEVERANCE BENEFIT PLAN
Severance benefits provided to Eligible Employees under the Omnicell, Inc. Severance Benefit Plan (the “Plan” ) are as follows, and apply to Eligible Employees up to and including the level of Senior Manager (including Systems Sales Directors, Senior Systems Sales Directors and Directors of Corporate Sales):
1.                                       Severance Benefits.   Subject to the exceptions set forth in Section 2(b) of the Plan, each Eligible Employee who meets all the requirements set forth in Sections 2(a) and 4(a) of the Plan, including, without limitation, executing a general waiver and release in substantially the form attached to the Plan as Exhibit A, Exhibit B or Exhibit C, as appropriate, within the applicable time period set forth therein, but in no event more than sixty (60) days following the date of termination, and provided that such release becomes effective in accordance with its terms, shall receive severance benefits as set forth in this Appendix B. The Company, in its sole discretion, may modify the form of the required general waiver and release to comply with applicable law, and may incorporate such waiver and release into a termination agreement or other agreement with the Eligible Employee.
(a)                                   Cash Severance Benefit.   Eligible Employees shall be entitled to receive a cash severance benefit equal to the number of months of Base Salary set forth below next to his or her Years of Service at the time of termination. Partial Years of Service are not counted.
Years of Service
 
Months of Base Salary
1
 
1 month
2
 
2 months
3
 
3 months
For each 5 Years of Service
 
1 extra month
(b)                                   Continued Group Health Plan Benefits.   If the Eligible Employee was enrolled in a group health plan (e.g., medical, dental, or vision plan) sponsored by the Company or an affiliate of the Company immediately prior to termination, the Eligible Employee may be eligible to continue coverage under such group health plan (or to convert to an individual policy), at the time of the Eligible Employee’s termination of employment, under the Consolidated Omnibus Budget Reconciliation Act of 1985 ( “COBRA” ). The Company will notify the Eligible Employee of any such right to continue such coverage at the time of termination pursuant to COBRA. No provision of this Plan will affect the continuation coverage rules under COBRA, except that the Company’s payment, if any, of applicable insurance premiums, or waiver of any cost of coverage under any self-funded group health plan, will be credited as payment by the Eligible Employee for purposes of the Eligible Employee’s payment required under COBRA.
Therefore, the period during which an Eligible Employee may elect to continue the Company’s or its affiliate’s group health plan coverage at his or her own expense under COBRA, the length of time during which COBRA coverage will be made available to the Eligible Employee, and all other rights and obligations of the Eligible Employee under COBRA (except the obligation to pay insurance premiums that the Company pays, if any, or, with respect to a self-funded plan, any obligation to pay the cost of coverage to the Company that the Company waives, if any) will be applied in the same manner that such rules would apply in the absence of this Plan.
If an Eligible Employee timely elects continued coverage under COBRA, the Company shall pay the same portion of (or, in the case of any self-funded plan, shall credit the Eligible Employee with the same portion of) the Eligible Employee’s monthly premiums for COBRA continuation

Appendix B-1
 

coverage (including coverage for the Eligible Employee’s eligible dependents) that the Company paid (or bore in the case of any self-funded plan) for the Eligible Employee’s active employee coverage under the Company’s group health plans (such paid or credited amount is the “ COBRA Premium Benefit ”) for the number of months following the Eligible Employee’s termination of employment that is equal to the number of months of the cash severance benefit described above (the “ COBRA Payment Period ”).  Notwithstanding the foregoing, no COBRA Premium Benefit shall be made or credited following the Eligible Employee’s death or the effective date of the Eligible Employee’s coverage under a group health plan of another employer. 
Notwithstanding the foregoing, if at any time the Company determines, in its sole discretion, that it cannot provide the COBRA Premium Benefit without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then in lieu of providing the COBRA Premium Benefit, the Company will instead pay the Eligible Employee on the last day of each remaining month of the COBRA Payment Period a fully taxable cash payment equal to the monthly portion of the COBRA Premium Benefit that would otherwise be provided for that month, subject to applicable tax withholding (such amount, the “ Special Severance Payment ”), such Special Severance Payment to be made without regard to the Eligible Employee’s election of COBRA coverage or payment of COBRA premiums and without regard to the Eligible Employee’s continued eligibility for COBRA coverage during the COBRA Payment Period. Such Special Severance Payment shall end upon expiration of the COBRA Payment Period.
For purposes of this Section 1(b), (i) references to COBRA shall be deemed to refer also to analogous provisions of state law, as applicable, and (ii) any applicable insurance premiums that are paid by the Company shall not include any amounts payable by the Eligible Employee under an Internal Revenue Code Section 125 health care reimbursement plan, which amounts, if any, are the sole responsibility of the Eligible Employee.
(c)                                   Outplacement Assistance.   Eligible Employees shall be entitled to outplacement assistance, the scope of which shall be determined by the Company in the Company’s sole discretion. Eligible Employees shall not be entitled to any payment in lieu of outplacement assistance.
2.                                       Definitions:   The following definitions shall apply for purposes of this Appendix B:
(a)                                   “Base Salary” shall mean the Eligible Employee’s base pay (excluding incentive pay, premium pay, commissions, overtime, bonuses and other forms of variable compensation), at the rate in effect during the last regularly scheduled payroll period immediately preceding the Eligible Employee’s termination date. For any Eligible Employees that are regular part-time employees, “Base Salary” shall mean the pro-rata equivalent of the Eligible Employee’s base pay which reflects the part-time status of the Eligible Employee.
(b)                                   “Years of Service” means a continuous complete twelve-month period commencing on an Eligible Employee’s date of hire with the Company or an Employer and anniversaries thereof, during which the Eligible Employee is employed by the Company or an Employer, and ending on the date on which the Eligible Employee is notified, in writing, pursuant to Section 2(a)(1) of the Plan that he or she is eligible for participation in the Plan. For purposes of the foregoing, an Eligible Employee will receive credit for any time on a paid leave of absence, but not for time on an unpaid leave of absence.
3.                                       Other Employee Benefits.   All other benefits (such as life insurance, disability coverage, and 401(k) plan coverage) terminate as of the Eligible Employee’s termination date (except to the extent that a conversion privilege may be available thereunder).

Appendix B-2

4.                                       Reductions Pursuant to Section 3(c) of the Plan.   The severance benefits set forth in this Appendix B are subject to certain reductions under Section 3(c) of the Plan.
The foregoing severance benefits are subject to such change as the Company, pursuant to Section 3(a) of the Plan, may determine in its sole and absolute discretion. Any such change in severance benefits shall be set forth in a revised version of this Appendix B.
 
Appendix B Adopted: January 6, 2015
 
 
 
OMNICELL, INC.
 
 
 
 
 
By:
  /s/ Rob Seim
 
 
 
Title:
  CFO and EVP, Finance, Administration and Manufacturing
 
 
 



Appendix B-3

APPENDIX B
OMNICELL, INC.
SEVERANCE BENEFIT PLAN
Severance benefits provided to Eligible Employees under the Omnicell, Inc. Severance Benefit Plan (the “Plan” ) are as follows, and apply to Eligible Employees at the levels of Director and Senior Director (excluding Systems Sales Directors, Senior Systems Sales Directors and Directors of Corporate Sales):
1.                                       Severance Benefits.   Subject to the exceptions set forth in Section 2(b) of the Plan, each Eligible Employee who meets all the requirements set forth in Sections 2(a) and 4(a) of the Plan, including, without limitation, executing a general waiver and release in substantially the form attached to the Plan as Exhibit A, Exhibit B or Exhibit C, as appropriate, within the applicable time period set forth therein, but in no event more than sixty (60) days following the date of termination, and provided that such release becomes effective in accordance with its terms, shall receive severance benefits as set forth in this Appendix B. The Company, in its sole discretion, may modify the form of the required general waiver and release to comply with applicable law, and may incorporate such waiver and release into a termination agreement or other agreement with the Eligible Employee.
(a)                                   Cash Severance Benefit.   Eligible Employees shall be entitled to receive a cash severance benefit equal to the number of months of Base Salary set forth below next to his or her Years of Service at the time of termination. Partial Years of Service are not counted.
Years of Service
 
Months of Base Salary
Not relevant
 
4 months
For each 5 Years of Service
 
1 extra month
(b)                                   Continued Group Health Plan Benefits.   If the Eligible Employee was enrolled in a group health plan (e.g., medical, dental, or vision plan) sponsored by the Company or an affiliate of the Company immediately prior to termination, the Eligible Employee may be eligible to continue coverage under such group health plan (or to convert to an individual policy), at the time of the Eligible Employee’s termination of employment, under the Consolidated Omnibus Budget Reconciliation Act of 1985 ( “COBRA” ). The Company will notify the Eligible Employee of any such right to continue such coverage at the time of termination pursuant to COBRA. No provision of this Plan will affect the continuation coverage rules under COBRA, except that the Company’s payment, if any, of applicable insurance premiums, or waiver of any cost of coverage under any self-funded group health plan, will be credited as payment by the Eligible Employee for purposes of the Eligible Employee’s payment required under COBRA.
Therefore, the period during which an Eligible Employee may elect to continue the Company’s or its affiliate’s group health plan coverage at his or her own expense under COBRA, the length of time during which COBRA coverage will be made available to the Eligible Employee, and all other rights and obligations of the Eligible Employee under COBRA (except the obligation to pay insurance premiums that the Company pays, if any, or, with respect to a self-funded plan, any obligation to pay the cost of coverage to the Company that the Company waives, if any) will be applied in the same manner that such rules would apply in the absence of this Plan.
If an Eligible Employee timely elects continued coverage under COBRA, the Company shall pay the same portion of (or, in the case of any self-funded plan, shall credit the Eligible Employee with the same portion of) the Eligible Employee’s monthly premiums for COBRA continuation coverage (including coverage for the Eligible Employee’s eligible dependents) that the Company paid (or bore in the case of any self-funded plan) for the Eligible Employee’s active employee coverage under the Company’s group health plans (such paid or credited amount is the “ COBRA

Appendix B-1
 

Premium Benefit ”) for the number of months following the Eligible Employee’s termination of employment that is equal to the number of months of the cash severance benefit described above (the “ COBRA Payment Period ”).  Notwithstanding the foregoing, no COBRA Premium Benefit shall be made or credited following the Eligible Employee’s death or the effective date of the Eligible Employee’s coverage under a group health plan of another employer. 
Notwithstanding the foregoing, if at any time the Company determines, in its sole discretion, that it cannot provide the COBRA Premium Benefit without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then in lieu of providing the COBRA Premium Benefit, the Company will instead pay the Eligible Employee on the last day of each remaining month of the COBRA Payment Period a fully taxable cash payment equal to the monthly portion of the COBRA Premium Benefit that would otherwise be provided for that month, subject to applicable tax withholding (such amount, the “ Special Severance Payment ”), such Special Severance Payment to be made without regard to the Eligible Employee’s election of COBRA coverage or payment of COBRA premiums and without regard to the Eligible Employee’s continued eligibility for COBRA coverage during the COBRA Payment Period. Such Special Severance Payment shall end upon expiration of the COBRA Payment Period.
For purposes of this Section 1(b), (i) references to COBRA shall be deemed to refer also to analogous provisions of state law, as applicable, and (ii) any applicable insurance premiums that are paid by the Company shall not include any amounts payable by the Eligible Employee under an Internal Revenue Code Section 125 health care reimbursement plan, which amounts, if any, are the sole responsibility of the Eligible Employee.
(c)                                   Outplacement Assistance.   Eligible Employees shall be entitled to outplacement assistance, the scope of which shall be determined by the Company in the Company’s sole discretion. Eligible Employees shall not be entitled to any payment in lieu of outplacement assistance.
2.                                       Definitions:   The following definitions shall apply for purposes of this Appendix B:
(a)                                   “Base Salary” shall mean the Eligible Employee’s base pay (excluding incentive pay, premium pay, commissions, overtime, bonuses and other forms of variable compensation), at the rate in effect during the last regularly scheduled payroll period immediately preceding the Eligible Employee’s termination date. For any Eligible Employees that are regular part-time employees, “Base Salary” shall mean the pro-rata equivalent of the Eligible Employee’s base pay which reflects the part-time status of the Eligible Employee.
(b)                                   “Years of Service” means a continuous complete twelve-month period commencing on an Eligible Employee’s date of hire with the Company or an Employer and anniversaries thereof, during which the Eligible Employee is employed by the Company or an Employer, and ending on the date on which the Eligible Employee is notified, in writing, pursuant to Section 2(a)(1) of the Plan that he or she is eligible for participation in the Plan. For purposes of the foregoing, an Eligible Employee will receive credit for any time on a paid leave of absence, but not for time on an unpaid leave of absence.
3.                                       Other Employee Benefits. All other benefits (such as life insurance, disability coverage, and 401(k) plan coverage) terminate as of the Eligible Employee’s termination date (except to the extent that a conversion privilege may be available thereunder).
4.                                       Reductions Pursuant to Section 3(c) of the Plan.   The severance benefits set forth in this Appendix B are subject to certain reductions under Section 3(c) of the Plan.

Appendix B-2

The foregoing severance benefits are subject to such change as the Company, pursuant to Section 3(a) of the Plan, may determine in its sole and absolute discretion. Any such change in severance benefits shall be set forth in a revised version of this Appendix B.
 
Appendix B Adopted: January 6, 2015
 
 
 
OMNICELL, INC.
 
 
 
 
 
By:
  /s/ Rob Seim
 
 
 
Title:
  CFO and EVP, Finance, Administration and Manufacturing
 
 
 
 


Appendix B-3

APPENDIX B
OMNICELL, INC.
SEVERANCE BENEFIT PLAN
Severance benefits provided to Eligible Employees under the Omnicell, Inc. Severance Benefit Plan (the “Plan” ) are as follows, and apply to Eligible Employees at the level of Vice President, where such Vice President is not reported by the Company as an officer under Section 16(b) of the Securities and Exchange Act of 1934:
1.                                       Severance Benefits.   Subject to the exceptions set forth in Section 2(b) of the Plan, each Eligible Employee who meets all the requirements set forth in Sections 2(a) and 4(a) of the Plan, including, without limitation, executing a general waiver and release in substantially the form attached to the Plan as Exhibit A, Exhibit B or Exhibit C, as appropriate, within the applicable time period set forth therein, but in no event more than sixty (60) days following the date of termination, and provided that such release becomes effective in accordance with its terms, shall receive severance benefits as set forth in this Appendix B. The Company, in its sole discretion, may modify the form of the required general waiver and release to comply with applicable law, and may incorporate such waiver and release into a termination agreement or other agreement with the Eligible Employee.
(a)                                   Cash Severance Benefit.   Eligible Employees shall be entitled to receive a cash severance benefit equal to the number of months of Base Salary set forth below next to his or her Years of Service at the time of termination. Partial Years of Service are not counted.
Years of Service
 
Months of Base Salary
Not relevant
 
6 months
For each 5 Years of Service
 
2 extra months
 
(b)                                   Continued Group Health Plan Benefits.  If the Eligible Employee was enrolled in a group health plan (e.g., medical, dental, or vision plan) sponsored by the Company or an affiliate of the Company immediately prior to termination, the Eligible Employee may be eligible to continue coverage under such group health plan (or to convert to an individual policy), at the time of the Eligible Employee’s termination of employment, under the Consolidated Omnibus Budget Reconciliation Act of 1985 ( “COBRA” ). The Company will notify the Eligible Employee of any such right to continue such coverage at the time of termination pursuant to COBRA. No provision of this Plan will affect the continuation coverage rules under COBRA, except that the Company’s payment, if any, of applicable insurance premiums, or waiver of any cost of coverage under any self-funded group health plan, will be credited as payment by the Eligible Employee for purposes of the Eligible Employee’s payment required under COBRA.
Therefore, the period during which an Eligible Employee may elect to continue the Company’s or its affiliate’s group health plan coverage at his or her own expense under COBRA, the length of time during which COBRA coverage will be made available to the Eligible Employee, and all other rights and obligations of the Eligible Employee under COBRA (except the obligation to pay insurance premiums that the Company pays, if any, or, with respect to a self-funded plan, any obligation to pay the cost of coverage to the Company that the Company waives, if any) will be applied in the same manner that such rules would apply in the absence of this Plan.
If an Eligible Employee timely elects continued coverage under COBRA, the Company shall pay the same portion of (or, in the case of any self-funded plan, shall credit the Eligible Employee with the same portion of) the Eligible Employee’s monthly premiums for COBRA continuation coverage (including coverage for the Eligible Employee’s eligible dependents) that the Company paid (or bore in the case of any self-funded plan) for the Eligible Employee’s active employee

Appendix B-1
 

coverage under the Company’s group health plans (such paid or credited amount is the “ COBRA Premium Benefit ”) for the number of months following the Eligible Employee’s termination of employment that is equal to the number of months of the cash severance benefit described above (the “ COBRA Payment Period ”).  Notwithstanding the foregoing, no COBRA Premium Benefit shall be made or credited following the Eligible Employee’s death or the effective date of the Eligible Employee’s coverage under a group health plan of another employer. 
Notwithstanding the foregoing, if at any time the Company determines, in its sole discretion, that it cannot provide the COBRA Premium Benefit without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then in lieu of providing the COBRA Premium Benefit, the Company will instead pay the Eligible Employee on the last day of each remaining month of the COBRA Payment Period a fully taxable cash payment equal to the monthly portion of the COBRA Premium Benefit that would otherwise be provided for that month, subject to applicable tax withholding (such amount, the “ Special Severance Payment ”), such Special Severance Payment to be made without regard to the Eligible Employee’s election of COBRA coverage or payment of COBRA premiums and without regard to the Eligible Employee’s continued eligibility for COBRA coverage during the COBRA Payment Period. Such Special Severance Payment shall end upon expiration of the COBRA Payment Period.
For purposes of this Section 1(b), (i) references to COBRA shall be deemed to refer also to analogous provisions of state law, as applicable, and (ii) any applicable insurance premiums that are paid by the Company shall not include any amounts payable by the Eligible Employee under an Internal Revenue Code Section 125 health care reimbursement plan, which amounts, if any, are the sole responsibility of the Eligible Employee.
(c)                                   Outplacement Assistance.   Eligible Employees shall be entitled to outplacement assistance, the scope of which shall be determined by the Company in the Company’s sole discretion. Eligible Employees shall not be entitled to any payment in lieu of outplacement assistance.
2.                                       Definitions: The following definitions shall apply for purposes of this Appendix B:
(a)                                   “Base Salary” shall mean the Eligible Employee’s base pay (excluding incentive pay, premium pay, commissions, overtime, bonuses and other forms of variable compensation), at the rate in effect during the last regularly scheduled payroll period immediately preceding the Eligible Employee’s termination date. For any Eligible Employees that are regular part-time employees, “Base Salary” shall mean the pro-rata equivalent of the Eligible Employee’s base pay which reflects the part-time status of the Eligible Employee.
(b)                                   “Years of Service” means a continuous complete twelve-month period commencing on an Eligible Employee’s date of hire with the Company or an Employer and anniversaries thereof, during which the Eligible Employee is employed by the Company or an Employer, and ending on the date on which the Eligible Employee is notified, in writing, pursuant to Section 2(a)(1) of the Plan that he or she is eligible for participation in the Plan. For purposes of the foregoing, an Eligible Employee will receive credit for any time on a paid leave of absence, but not for time on an unpaid leave of absence.
3.                                       Other Employee Benefits.   All other benefits (such as life insurance, disability coverage, and 401(k) plan coverage) terminate as of the Eligible Employee’s termination date (except to the extent that a conversion privilege may be available thereunder).
4.                                       Reductions Pursuant to Section 3(c) of the Plan.   The severance benefits set forth in this Appendix B are subject to certain reductions under Section 3(c) of the Plan.

Appendix B-2

The foregoing severance benefits are subject to such change as the Company, pursuant to Section 3(a) of the Plan, may determine in its sole and absolute discretion. Any such change in severance benefits shall be set forth in a revised version of this Appendix B.
 
Appendix B Adopted: January 6, 2015
 
 
 
OMNICELL, INC.
 
 
 
 
 
By:
  /s/ Rob Seim
 
 
 
Title:
  CFO and EVP, Finance, Administration and Manufacturing
 
 
 
 


Appendix B-3

APPENDIX B
OMNICELL, INC.
SEVERANCE BENEFIT PLAN
Severance benefits provided to Eligible Employees under the Omnicell, Inc. Severance Benefit Plan (the “Plan” ) are as follows, and apply to Eligible Employees at the level of Vice President, where such Vice President is reported by the Company as an officer under Section 16(b) of the Securities and Exchange Act of 1934, and the President:
1.                                       Severance Benefits.   Subject to the exceptions set forth in Section 2(b) of the Plan, each Eligible Employee who meets all the requirements set forth in Sections 2(a) and 4(a) of the Plan, including, without limitation, executing a general waiver and release in substantially the form attached to the Plan as Exhibit A, Exhibit B or Exhibit C, as appropriate, within the applicable time period set forth therein, but in no event more than sixty (60) days following the date of termination, and provided that such release becomes effective in accordance with its terms, shall receive severance benefits as set forth in this Appendix B. The Company, in its sole discretion, may modify the form of the required general waiver and release to comply with applicable law, and may incorporate such waiver and release into a termination agreement or other agreement with the Eligible Employee.
(a)                                   Cash Severance Benefit.   Eligible Employees shall be entitled to receive a cash severance benefit equal to the number of months of Base Salary set forth below next to his or her Years of Service at the time of termination. Partial Years of Service are not counted.
Years of Service
 
Months of Base Salary
Not relevant
 
12 months
For each 5 Years of Service
 
2 extra months
(b)                                   Continued Group Health Plan Benefits.   If the Eligible Employee was enrolled in a group health plan (e.g., medical, dental, or vision plan) sponsored by the Company or an affiliate of the Company immediately prior to termination, the Eligible Employee may be eligible to continue coverage under such group health plan (or to convert to an individual policy), at the time of the Eligible Employee’s termination of employment, under the Consolidated Omnibus Budget Reconciliation Act of 1985 ( “COBRA” ). The Company will notify the Eligible Employee of any such right to continue such coverage at the time of termination pursuant to COBRA. No provision of this Plan will affect the continuation coverage rules under COBRA, except that the Company’s payment, if any, of applicable insurance premiums, or waiver of any cost of coverage under any self-funded group health plan, will be credited as payment by the Eligible Employee for purposes of the Eligible Employee’s payment required under COBRA.
Therefore, the period during which an Eligible Employee may elect to continue the Company’s or its affiliate’s group health plan coverage at his or her own expense under COBRA, the length of time during which COBRA coverage will be made available to the Eligible Employee, and all other rights and obligations of the Eligible Employee under COBRA (except the obligation to pay insurance premiums that the Company pays, if any, or, with respect to a self-funded plan, any obligation to pay the cost of coverage to the Company that the Company waives, if any) will be applied in the same manner that such rules would apply in the absence of this Plan.
If an Eligible Employee timely elects continued coverage under COBRA, the Company shall pay the same portion of (or, in the case of any self-funded plan, shall credit the Eligible Employee with the same portion of) the Eligible Employee’s monthly premiums for COBRA continuation coverage (including coverage for the Eligible Employee’s eligible dependents) that the Company paid (or bore in the case of any self-funded plan) for the Eligible Employee’s active employee

Appendix B-1
 

coverage under the Company’s group health plans (such paid or credited amount is the “ COBRA Premium Benefit ”) for the number of months following the Eligible Employee’s termination of employment that is equal to the number of months of the cash severance benefit described above (the “ COBRA Payment Period ”).  Notwithstanding the foregoing, no COBRA Premium Benefit shall be made or credited following the Eligible Employee’s death or the effective date of the Eligible Employee’s coverage under a group health plan of another employer. 
Notwithstanding the foregoing, if at any time the Company determines, in its sole discretion, that it cannot provide the COBRA Premium Benefit without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then in lieu of providing the COBRA Premium Benefit, the Company will instead pay the Eligible Employee on the last day of each remaining month of the COBRA Payment Period a fully taxable cash payment equal to the monthly portion of the COBRA Premium Benefit that would otherwise be provided for that month, subject to applicable tax withholding (such amount, the “ Special Severance Payment ”), such Special Severance Payment to be made without regard to the Eligible Employee’s election of COBRA coverage or payment of COBRA premiums and without regard to the Eligible Employee’s continued eligibility for COBRA coverage during the COBRA Payment Period. Such Special Severance Payment shall end upon expiration of the COBRA Payment Period.
For purposes of this Section 1(b), (i) references to COBRA shall be deemed to refer also to analogous provisions of state law, as applicable, and (ii) any applicable insurance premiums that are paid by the Company shall not include any amounts payable by the Eligible Employee under an Internal Revenue Code Section 125 health care reimbursement plan, which amounts, if any, are the sole responsibility of the Eligible Employee.
(c)                                   Outplacement Assistance.   Eligible Employees shall be entitled to outplacement assistance, the scope of which shall be determined by the Company in the Company’s sole discretion. Eligible Employees shall not be entitled to any payment in lieu of outplacement assistance.
2.                                       Definitions:   The following definitions shall apply for purposes of this Appendix B:
(a)                                   “Base Salary” shall mean the Eligible Employee’s base pay (excluding incentive pay, premium pay, commissions, overtime, bonuses and other forms of variable compensation), at the rate in effect during the last regularly scheduled payroll period immediately preceding the Eligible Employee’s termination date. For any Eligible Employees that are regular part-time employees, “Base Salary” shall mean the pro-rata equivalent of the Eligible Employee’s base pay which reflects the part-time status of the Eligible Employee.
(b)                                   “Years of Service” means a continuous complete twelve-month period commencing on an Eligible Employee’s date of hire with the Company or an Employer and anniversaries thereof, during which the Eligible Employee is employed by the Company or an Employer, and ending on the date on which the Eligible Employee is notified, in writing, pursuant to Section 2(a)(1) of the Plan that he or she is eligible for participation in the Plan. For purposes of the foregoing, an Eligible Employee will receive credit for any time on a paid leave of absence, but not for time on an unpaid leave of absence.
3.                                       Other Employee Benefits.   All other benefits (such as life insurance, disability coverage, and 401(k) plan coverage) terminate as of the Eligible Employee’s termination date (except to the extent that a conversion privilege may be available thereunder).
4.                                       Reductions Pursuant to Section 3(c) of the Plan.   The severance benefits set forth in this Appendix B are subject to certain reductions under Section 3(c) of the Plan.

Appendix B-2

The foregoing severance benefits are subject to such change as the Company, pursuant to Section 3(a) of the Plan, may determine in its sole and absolute discretion. Any such change in severance benefits shall be set forth in a revised version of this Appendix B.
 
Appendix B Adopted: January 6, 2015
 
 
 
OMNICELL, INC.
 
 
 
 
 
By:
  /s/ Rob Seim
 
 
 
Title:
  CFO and EVP, Finance, Administration and Manufacturing
 
 
 
 


Appendix B-3

 

 

 

 
SP/004/006 Engrossment: 13 January 2015 CONTENTS CLAUSE 1. Interpretation ................................................................................................................. 1 2. Agreement for lease ....................................................................................................... 5 3. Timetable for engrossments .......................................................................................... 5 4. Landlord's Works .......................................................................................................... 6 5. Practical Completion ..................................................................................................... 8 6. Target Date and Long Stop Date ................................................................................... 8 7. Insurance ....................................................................................................................... 8 8. Damage after Practical Completion ............................................................................... 9 9. Conditions ..................................................................................................................... 9 10. Tenant's occupation prior to the grant of the Lease ..................................................... 10 11. Tenant's Works ............................................................................................................ 10 12. Deducing title .............................................................................................................. 14 13. Title guarantee ............................................................................................................. 14 14. Matters affecting the Property ..................................................................................... 14 15. Guarantor ..................................................................................................................... 15 16. Termination on insolvency or material non-compliance ............................................. 17 17. Consequences of termination ...................................................................................... 18 18. Completion of grant of the lease.................................................................................. 18 19. VAT ............................................................................................................................. 19 20. Entire agreement .......................................................................................................... 19 21. Joint and several liability ............................................................................................. 20 22. Notices ......................................................................................................................... 21 23. Third party rights ......................................................................................................... 22 24. Governing law ............................................................................................................. 22 25. Jurisdiction .................................................................................................................. 22 ANNEX ANNEX A. WORKS DOCUMENTS IN AGREED FORM ................................................................ 24 ANNEX B. AGREED FORM OF LEASE ...................................................................................... 25 ANNEX C. AGREED FORM OF LICENCE TO CARRY OUT WORKS ............................................. 26

 

 
SP/004/006 Engrossment: 13 January 2015 2 Building Contractor: Contract Services R & R Limited in respect of the CSSR Contract and Glazing Refurbishment Limited in respect of the GR Contract or in each case such other building contractor as may be appointed by the Landlord to carry out the Landlord's Works together with any replacement building contractor that may be appointed by the Landlord in accordance with the terms of the Building Contract. CDM Regulations: the Construction (Design and Management) Regulations 2007. Condition: any one of the Part 1 Conditions. Contract Rate: 4% per annum above the Base Rate. Event of Default: any of the events set out in clause 17.1. Energy Performance Certificate: a certificate as defined in regulation 2(1) of the Energy Performance of Buildings (England and Wales) Regulations 2012 (SI 2012/3118). Guarantor’s Lawyer: Brabners LLP, Horton House, Exchange Flags, Liverpool L2 3YL (Ref: DSM) or any other lawyer whose details may be notified in writing from time to time by the Guarantor to the Landlord. Landlord’s Contribution: £58,540.00 (FIFTY EIGHT THOUSAND FIVE HUNDRED AND FORTY POUNDS). Landlord's Conveyancer: Plainlaw LLP, 11A West Way, Oxford OX2 0JB ref: SP/004/006 or any other conveyancer whose details may be notified in writing from time to time by the Landlord to the Tenant. Landlord's Works: the works to be carried out by the Landlord at the Property before the grant of the Lease as set out in the Works Documents PROVIDED THAT where the Works Documents indicate that an item of work is to be undertaken by the Tenant rather than the Landlord that item of work shall not comprise part of the Landlord’s Works and for the avoidance of doubt items 1.3, 1.4 and 1.5 listed in the Works Documents shall not comprise part of the Landlord’s Works. Lease: a lease in the agreed form annexed to this agreement. Lease Completion Date: the day that is five working days after the Practical Completion Date. Licence to Carry out Works: a licence between the Landlord and Tenant and Guarantor in the agreed form annexed to this agreement. Licence Period: the period from and including the date of this agreement until completion of the Lease. Long Stop Date: 30 April 2015. Part 1 Conditions: part 1 of the Standard Commercial Property Conditions (Second Edition).

 
SP/004/006 Engrossment: 13 January 2015 3 Part 2 Conditions: part 2 of the Standard Commercial Property Conditions (Second Edition). Practical Completion Certificate: a written statement issued in accordance with the Building Contract certifying that the Landlord's Works are practically complete and setting out the date on which practical completion occurred. Practical Completion Date: the date stated in the Practical Completion Certificate and if there are different Practical Completion Certificates under the CSRR Contract and the GR Contract, the later of the dates which are stated in the Practical Completion Certificates. Property: the property at Two Omega Drive, River Bend Technology Centre, Irlam as more particularly defined in the Lease. Recommendation Report: a report as defined in regulation 4 of the Energy Performance of Buildings (England and Wales) Regulations 2012 (SI 2012/3118). Rectification Period: the defects liability period or rectification period for the making good of defects, shrinkages or other faults in the Landlord's Works which applies under each of the Building Contracts. Rent: the initial rent of £326,200 (THREE HUNDRED AND TWENTY SIX THOUSAND AND TWO HUNDRED POUNDS) per annum (subject to review) exclusive of VAT. Rent Commencement Date: 1 October 2015 subject to clause 6.1. Requisite Consents: any planning permissions, building regulation approvals, by- law approvals, and any other consents, licences and authorisations required from any competent authority, statutory undertaker or person for the carrying out of the Landlord's Works or, as the case may be, the Tenant's Works. Target Date: 27 February 2015 Tenant's Conveyancer: Brabners LLP, 55 King Street, Manchester M2 4LQ (Ref: PN.41903.87) or any other conveyancer whose details may be notified in writing from time to time by the Tenant to the Landlord. Tenant's Works: the fitting out works to be carried out by the Tenant for the use and enjoyment of the Property in accordance with clause 12 of this agreement. VAT: value added tax chargeable under the Value Added Tax Act 1994 and any similar replacement tax and any similar additional tax. Works Documents: all documents relating to the Landlord's Works in the agreed form annexed to this agreement including (where applicable) any variations or amendments in accordance with this agreement. 1.2 Clause, Schedule and paragraph headings shall not affect the interpretation of this agreement.

 
SP/004/006 Engrossment: 13 January 2015 4 1.3 A person includes a natural person, corporate or unincorporated body (whether or not having separate legal personality). 1.4 The Schedules form part of this agreement and shall have effect as if set out in full in the body of this agreement. Any reference to this agreement includes the Schedules. 1.5 A reference to a company shall include any company, corporation or other body corporate, wherever and however incorporated or established. 1.6 Unless the context otherwise requires, words in the singular shall include the plural and in the plural shall include the singular. 1.7 Unless the context otherwise requires, a reference to one gender shall include a reference to the other genders. 1.8 A reference to a statute or statutory provision is a reference to it as amended, extended or re-enacted from time to time. 1.9 A reference to a statute or statutory provision shall include all subordinate legislation made from time to time under that statute or statutory provision. 1.10 A reference to writing or written includes fax but not e-mail. 1.11 References to a document in agreed form are to that document in the form agreed by the parties. 1.12 A reference to this agreement or to any other agreement or document referred to in this agreement is a reference to this agreement or such other agreement or document as varied or novated (in each case, other than in breach of the provisions of this agreement) from time to time. 1.13 Unless the context otherwise requires, references to clauses, Schedules and Annexes are to the clauses, Schedules and Annexes of this agreement and references to paragraphs are to paragraphs of the relevant Schedule. 1.14 Any words following the terms including, include, in particular, for example or any similar expression shall be construed as illustrative and shall not limit the sense of the words, description, definition, phrase or term preceding those terms.

 
SP/004/006 Engrossment: 13 January 2015 5 1.15 Any obligation on a party not to do something includes an obligation not to allow that thing to be done. 1.16 Unless this agreement otherwise expressly provides, a reference to the Property or the Landlord's Works or the Tenant's Works is to the whole and any part of them. 1.17 Any reference to the Landlord’s consent or approval being required is to a consent or approval in writing which must be obtained before the relevant act is taken or event occurs. 2. AGREEMENT FOR LEASE 2.1 In consideration of the Tenant's obligations under this agreement, and at the request of the Guarantor, the Landlord shall (subject to clause 2.2) grant to the Tenant and the Tenant shall accept from the Landlord the Lease on the terms set out in this agreement. No purchase price, premium, or deposit is payable. 2.2 The Tenant cannot require the Landlord to grant the Lease to any person other than the Tenant (here meaning MTS MEDICATION TECHNOLOGIES LIMITED whose registered office is at Unit 6B, Millennium Way, Leeds LS11 5AL (company registration number 04562981), only) or to grant the Lease unless the Guarantor has duly executed the Lease in accordance with clause 16.1. 2.3 The Tenant cannot assign, sublet, charge, or otherwise share or part with the benefit of this agreement whether in relation to the whole or any part of the Property. 2.4 Conditions 1.5 and 2.2 do not apply to this agreement. 3. TIMETABLE FOR ENGROSSMENTS 3.1 The Landlord's Conveyancer shall send: (a) the engrossed counterpart Lease to the Tenant's Conveyancer within ten working days after the date of this agreement; and (b) the engrossed counterpart Licence to Carry out Works to the Tenant's Conveyancer within ten working days after the Landlord has approved the plans and specifications for the Tenant's Works in accordance with clause 12.1.

 
SP/004/006 Engrossment: 13 January 2015 6 3.2 The Tenant shall execute the counterpart Licence to Carry out Works within five working days after the engrossed counterpart Licence to Carry out Works has been submitted to the Tenant's Conveyancer. 3.3 The Guarantor shall execute the counterpart Licence to Carry out Works within fifteen working days after the engrossed counterpart Licence to Carry out Works has been submitted to the Tenant's Conveyancer. 4. LANDLORD'S WORKS 4.1 The Landlord shall use reasonable endeavours to procure that the Landlord's Works are carried out in accordance with this agreement and the Works Documents and that the Practical Completion Date is achieved by the Target Date. 4.2 The Landlord shall: (a) carry out the Landlord's Works: (i) using good quality, new materials which are fit for the purpose for which they will be used; and (ii) in a good and workmanlike manner. (b) in respect of the Landlord's Works comply with: (i) all statutory and other legal requirements; (ii) the terms of all Requisite Consents; and (iii) the requirements and recommendations of all relevant utility suppliers and the insurers of the Property; (c) take all proper steps to ensure that carrying out the Landlord's Works does not make any of the following unsafe: (i) the structure of the Property; and (ii) any plant or machinery at the Property (d) in carrying out such of the Landlord's Works as the Landlord and the Tenant agree shall be carried out after completion of the Lease (if any) cause as little disturbance and inconvenience as possible to the Tenant and its use and occupation of the Property; (e) make good at such time as the Tenant reasonably requests and whether before or after completion of the Lease (to the reasonable satisfaction of the Tenant) any damage (including decorative damage) to the Property which is caused by carrying out the Landlord's Works;

 
SP/004/006 Engrossment: 13 January 2015 7 (f) allow the Tenant and its surveyors access to the Property to inspect the progress and quality of the Landlord's Works at reasonable times and on reasonable prior notice; (g) give the Tenant such information as it reasonably requests to establish that the Landlord's Works are being and have been carried out in accordance with this agreement; and (h) give at least 5 working days' notice to the Tenant of the intention to inspect the Landlord's Works for the purpose of issuing the Practical Completion Certificate and allows the Tenant and its surveyor to attend the inspection and make representations either during the inspection or in writing immediately thereafter. 4.3 The Landlord shall not, (subject to clause 4.4), vary, alter, add to or remove anything from the Works Documents without the Tenant's consent (such consent not to be unreasonably withheld or delayed). 4.4 The Landlord may make variations to the Works Documents without the Tenant’s consent provided that: (a) the variations are insubstantial and immaterial; or (b) the variations are required by the Requisite Consents in respect of the Landlord's Works or any statutory requirements. 4.5 The Landlord shall use reasonable endeavours to enforce its rights under the Building Contracts to procure the remedy of any defects, shrinkages or faults appearing in the Landlord's Works during the Rectification Period. 4.6 During the Rectification Period, the Tenant or its surveyor may make written representations to the Landlord identifying defects, shrinkages or faults in the Landlord's Works. 4.7 Immediately after the Practical Completion Date the Tenant will instruct Colliers to prepare a draft schedule of condition and submit it to the Landlord for the Landlord's approval (such approval not to be unreasonably withheld or delayed). The final schedule of condition shall incorporate such reasonable comments and amendments as the Landlord may require to be made to the draft schedule of condition submitted to it for its approval. 4.8 Once approved, the Landlord and the Tenant will attach a copy of the final schedule of condition to the Lease and its counterpart.

 
SP/004/006 Engrossment: 13 January 2015 8 4.9 The Landlord shall use reasonable endeavours to procure that a warranty valid for 10 years is issued in favour of the Tenant in respect of any new glazing installed at the Property as part of the Landlord’s Works but for the avoidance of doubt completion of the Lease shall not be conditional upon the provision of such a warranty. 5. PRACTICAL COMPLETION 5.1 The issue of the Practical Completion Certificate shall be conclusive evidence binding on the parties that the Landlord's Works have been completed in accordance with the terms of this agreement without prejudice to the Landlord’s obligations during the Rectification Period. 6. TARGET DATE AND LONG STOP DATE 6.1 If the Practical Completion Date occurs after the Target Date then the Rent Commencement Date shall be postponed by one day for each day that elapses between the Target Date and the Practical Completion Date. 6.2 Notwithstanding clause 6.1 if the Practical Completion Date has not occurred by 4.00 pm on the Long Stop Date, either the Landlord (provided it has complied with its obligations in clause 4.1) or the Tenant may, at any time after the Long Stop Date but before the Practical Completion Date, give notice to the other that, unless the Practical Completion Date occurs within five working days of the receipt of that notice (time being of the essence), it may rescind this agreement. If the Practical Completion Date does not occur within five working days of receipt of that notice then it may, by further notice rescind this agreement with immediate effect. Such rescission shall be without prejudice to the obligations in clause 6.3 and the rights of each party in respect of any earlier breach of this agreement. 6.3 If the agreement is rescinded pursuant to clause 6.2, the Tenant shall immediately cancel all entries relating to this agreement registered against the Landlord's title. 7. INSURANCE 7.1 The Tenant agrees not to do or permit anything to be done that may render any insurance policy void or voidable. 7.2 Conditions 7.1.1, 7.1.2, 7.1.3 and 7.1.4(b) do not apply to this agreement.

 
SP/004/006 Engrossment: 13 January 2015 9 8. DAMAGE AFTER PRACTICAL COMPLETION 8.1 The Tenant shall not be entitled to refuse to complete or to delay completion of the grant of the Lease due to any event occurring that results in: (a) any damage to the Property or any part of it; or (b) any damage to the means of access to the Property; or (c) any deterioration in the Property's condition. 9. LANDLORD'S OBLIGATIONS 9.1 The obligations in clause 4 are personal and binding only on OMEGA TECHNOLOGIES LIMITED whose registered office is at One Omega Drive, River Bend Technology Centre, Northbank, Irlam, Manchester M44 5BD (company registration number 02775272). 9.2 OMEGA TECHNOLOGIES LIMITED whose registered office is at One Omega Drive, River Bend Technology Centre, Northbank, Irlam, Manchester M44 5BD (company registration number 02775272) shall be released from all liability in respect of its obligations referred to in clause 9.1 upon the expiry of the Rectification Period. 10. CONDITIONS 10.1 The Part 1 Conditions are incorporated in this agreement, in so far as they: (a) are applicable to the grant of a lease; (b) are not inconsistent with the other clauses in this agreement; and (c) have not been modified or excluded by any of the other clauses in this agreement. 10.2 The Part 2 Conditions are not incorporated in this agreement. 10.3 Condition 1.1.1(d) is amended so that "completion date" means the "Lease Completion Date" as defined in this agreement. 10.4 Condition 1.1.1(e) is amended so that reference to the contract rate in Condition 1.1.1(e) refers instead to the Contract Rate as defined in this agreement. 10.5 Condition 1.1.4(a) does not apply to this agreement.

 
SP/004/006 Engrossment: 13 January 2015 10 11. TENANT'S OCCUPATION PRIOR TO THE GRANT OF THE LEASE 11.1 During the Licence Period the Tenant is entitled to occupy the Property for the purpose only of carrying out the Tenant's Works PROVIDED THAT the Tenant shall comply with the provisions of clause 10.2. 11.2 This agreement does not operate as a demise of the Property and during the Licence Period: (a) any occupation of the Property by the Tenant is by way of licence only; (b) the Tenant does not have, and is not entitled to, any estate, right or interest in the Property; (c) the Tenant shall not open and trade from the Property nor use the Property for the purpose authorised by the Lease; (d) the parties shall observe and perform their respective obligations imposed by the covenants and conditions in the Lease and the Licence to Carry out Works (in each case to the extent that they are not inconsistent with the other provisions of this agreement) as if the Lease and the Licence to Carry out Works had each been completed on the date of this agreement; (e) the Landlord shall have the same rights and remedies in respect of any breach of the obligations imposed on the Tenant by the covenants and conditions in the Lease and the Licence to Carry out Works as if the Lease and the Licence to Carry out Works had each been completed on the date of this agreement; and (f) the Tenant shall pay to the Landlord by way of licence fees sums equal to the rents and other monies that would be payable by the Tenant under the Lease at the same times and in the same manner as if the Lease had been granted on the earlier of (i) the date that the Tenant first takes occupation under clause 11.1 (if applicable), and (ii) the Practical Completion Date. 11.3 The parties agree that any licence fees paid by the Tenant pursuant to clause 11.2(f) shall be deducted from the rents payable under the Lease for the same period following completion of the Lease. 12. TENANT'S WORKS 12.1 The Tenant shall as soon as reasonably practicable and in any event within six weeks after the date of this agreement at the Tenant's expense prepare and submit to the Landlord for approval, plans and specifications of the Tenant's Works in such detail as the Landlord shall reasonably require and the landlord shall not unreasonably withhold or delay its approval.

 
SP/004/006 Engrossment: 13 January 2015 11 12.2 The Tenant shall apply for and use reasonable endeavours to obtain all Requisite Consents required for the Tenant's Works as soon as reasonably practicable. 12.3 The Tenant shall not start the Tenant's Works until the Tenant has: (a) obtained the Landlord's approval to the Tenant's Works in accordance with clause 12.1; (b) obtained all Requisite Consents required for the Tenant's Works; (c) produced all Requisite Consents required for the Tenant's Works to the Landlord and obtained the Landlord’s confirmation that they are satisfactory to the Landlord; (d) given the Landlord two copies of the plans and specifications for the Tenant's Works; (e) notified the Landlord of the date on which it intends to start carrying out the Tenant's Works; and (f) (if applicable) complied with clause 12.5(a). 12.4 The Tenant shall: (a) carry out the Tenant's Works: (i) using good quality, new materials which are fit for the purpose for which they will be used; (ii) in a good and workmanlike manner; (iii) to the reasonable satisfaction of the Landlord; and (iv) in accordance with clause 12.13; (b) in respect of the Tenant's Works comply with: (i) all statutory and other legal requirements; (ii) the terms of all Requisite Consents; and (iii) the requirements and recommendations of all relevant utility suppliers and the insurers of the Property; (c) take all proper steps to ensure that carrying out the Tenant's Works does not make any of the following unsafe: (i) the structure of the Property; and (ii) any plant or machinery at the Property; and (iii) any neighbouring land or buildings;

 
SP/004/006 Engrossment: 13 January 2015 12 (d) in carrying out the Tenant's Works cause as little disturbance and inconvenience as possible to the Landlord and the owners and occupiers of the estate of which the Property forms part and of any neighbouring land and not infringe any of their rights nor the rights of any other person in relation to the Property; (e) immediately make good (to the reasonable satisfaction of the Landlord) any damage (including decorative damage) to any land or building or any plant and machinery (other than the Property) which is caused by carrying out the Tenant's Works; (f) allow the Landlord and its surveyors access to the Property to inspect the progress and quality of the Tenant's Works (both while the Tenant's Works are being carried out and afterwards) at reasonable times and on reasonable prior notice; (g) give the Landlord the information it reasonably requests to establish that the Tenant's Works are being and have been carried out in accordance with this agreement; (h) notify the Landlord as soon as the Tenant's Works have been completed; and (i) send the Landlord two copies of plans showing the Property as altered by the Tenant's Works as soon as reasonably practicable and in any event within one week after completion of the Tenant's Works; and (j) provide the Landlord with a copy of any Energy Performance Certificate and Recommendation Report issued as a result of the Tenant's Works within one month of such documents being issued. 12.5 If the CDM Regulations apply to the Tenant's Works, the Tenant shall: (a) make a written election that it is to be treated as the only client in respect of the Tenant's Works for the purposes of the CDM Regulations and give the Landlord a copy of such election; (b) comply with its obligations as a client for the purposes of the CDM Regulations; (c) ensure that the CDM co-ordinator and the principal contractor that it appoints in relation to the Tenant's Works comply with their respective obligations under the CDM Regulations; (d) liaise with the CDM co-ordinator to allow the CDM co-ordinator to assist the Tenant in performing the Tenant’s duties as client under the CDM Regulations; and

 
SP/004/006 Engrossment: 13 January 2015 13 (e) ensure that all relevant documents relating to the Tenant's Works are placed in the health and safety file for the Property by the CDM co-ordinator in accordance with the CDM Regulations, maintain the health and safety file for the Property in accordance with the CDM Regulations, give the health and safety file to the Landlord at the end of the Term, allow the Landlord and its surveyors to enter the Property to inspect the health and safety file and at its own cost supply the Landlord with copies of it or any of the documents in it and the Tenant must comply with its obligations in the Lease relating to the documents and the file. 12.6 To the extent that the Landlord may be a client for the purposes of the CDM Regulations in relation to the Tenant's Works, the Landlord agrees with the written election by the Tenant in accordance with clause 12.5(a). 12.7 The Landlord will only be obliged to insure the Tenant's Works if they form part of the Property and only: (a) after they have been completed in accordance with this agreement; (b) for the amount for which the Tenant has notified the Landlord that they should be insured; and (c) otherwise in accordance with the terms of the Lease. 12.8 The Tenant's Works will be at the sole risk of the Tenant until the Landlord is obliged to insure the Tenant's Works pursuant to clause 12.7. 12.9 The Tenant shall pay on demand any increase in the insurance premium and the amount of any additional insurance premium for the Property or any neighbouring land of the Landlord or the estate of which the Property forms part that arises because of the Tenant's Works. 12.10 Any effect on the rental value of the Property arising in connection with the Tenant's Works will be disregarded on any rent review under the Lease. 12.11 The Tenant shall: (a) pay all fees, rates, levies and taxes that arise by reason of the Tenant's Works (including any arising under any laws applying to the Tenant's Works) whether imposed on the Landlord or the Tenant; and (b) indemnify the Landlord from all liability in relation to such fees, rates, levies and taxes and against all costs and claims arising from any breach of the terms of this clause 12.

 
SP/004/006 Engrossment: 13 January 2015 14 12.12 Completion of the Licence to Carry out Works shall take place on the later of: (a) completion of the Lease; and (b) the Landlord approving the Tenant's Works in accordance with clause 12.1 Provided that the Landlord shall not be obliged to grant the Licence to Carry out Works unless the Guarantor has duly executed the Lease and the Licence to Carry out Works in accordance with clause 16.1 12.13 The occupation by the Tenant of the Property and the carrying out of the Tenant’s Works are subject to: (a) the Tenant causing as little disturbance and inconvenience as possible to the Landlord’s Works, the Building Contractor and any sub-contractors; (b) the Tenant complying with all reasonable regulations made by the Landlord relating to the phasing and carrying out of the Landlord’s Works; and (c) the Tenant not causing any breach of the Building Contract, causing any delay in the carrying out of the Landlord’s Works or causing any liability on any party under the Building Contract including any liability for payment of liquidated damages. 13. DEDUCING TITLE 13.1 The Landlord's freehold title to the Property has been deduced to the Tenant's Conveyancer before the date of this agreement. 13.2 The Tenant is deemed to have full knowledge of the Landlord's title and is not entitled to raise any objection, enquiry or requisition in relation to it. 13.3 Conditions 6.1, 6.2, 6.3, 6.4.2, 10.2.4, 10.2.5, and 10.3 do not apply to this agreement. 14. TITLE GUARANTEE 14.1 The Landlord shall grant the Lease with no title guarantee and with no covenants for title, whether express or implied. 14.2 Condition 6.6.2 does not apply to this agreement. 15. MATTERS AFFECTING THE PROPERTY 15.1 The Landlord shall grant the Lease to the Tenant free from encumbrances other than:

 
SP/004/006 Engrossment: 13 January 2015 15 (a) any matters, other than financial charges, contained or referred to in the entries or records made in registers maintained by HM Land Registry under title number GM756553; (b) all matters contained or referred to in the Lease; (c) any matters discoverable by inspection of the Property before the date of this agreement; (d) any matters which the Landlord does not and could not reasonably know about; (e) any matters, other than financial charges, disclosed or which would have been disclosed by the searches and enquiries that a prudent tenant would have made before entering into this agreement; (f) public requirements; and (g) any matters which are, or (where the Lease will not be registered) would be, unregistered interests which override first registration under Schedule 1 to the Land Registration Act 2002. 15.2 The Tenant is deemed to have full knowledge of the matters referred to in clause 15.1 and shall not raise any enquiry, objection, requisition or claim in respect of any of them. 15.3 Conditions 3.1.1, 3.1.2, 3.1.3, 3.2.1, 3.3 and 6.6.3 do not apply to this agreement. 16. GUARANTOR 16.1 In consideration of the Landlord having entered into this agreement at the request of the Guarantor, the Guarantor guarantees and agrees with the Landlord that: (a) the Guarantor shall duly execute the counterpart Lease and counterpart Licence to Carry out Works within fifteen working days after the engrossments have been submitted to the Tenant's Conveyancer by the President or CFO of the Guarantor; (b) the Tenant shall perform the Tenant's obligations in this agreement; (c) if the Tenant fails to perform any of its obligations under this agreement, the Guarantor shall perform them (including, if required to do so by notice in writing from the Landlord, entering into the Lease in accordance with the terms of this agreement as if the Guarantor were named in the Lease as tenant in place of the Tenant); and (d) if:

 
SP/004/006 Engrossment: 13 January 2015 16 (i) an Event of Default occurs in respect of the Tenant or this agreement is disclaimed following the insolvency of the Tenant; and (ii) within twelve months of such Event of Default or disclaimer the Landlord gives notice in writing to the Guarantor requiring the Guarantor to enter into the Lease as the tenant under the Lease in accordance with this agreement; then with effect from such notice all obligations of the Tenant under this agreement shall be deemed to have been entered into by the Guarantor as though it were named as tenant in place of the Tenant under this agreement and the Guarantor shall enter into the Lease in accordance with the terms of this agreement as tenant in place of the Tenant. 16.2 In consideration of the Landlord having entered into this agreement at the request of the Guarantor, the Guarantor agrees with the Landlord as a separate and independent primary obligation to indemnify the Landlord against any failure by the Tenant to observe or perform any of the Tenant's obligations in this agreement. 16.3 The liability of the Guarantor shall not be affected by: (a) any time or indulgence granted by the Landlord to the Tenant; (b) any delay or forbearance by the Landlord in enforcing the payment of any sums or the observance or performance of any of the Tenant's obligations in this agreement or in making any demand in respect of any of them; (c) the Landlord exercising any right or remedy against the Tenant for any failure to pay any sums due under this agreement or to observe or perform the Tenant's obligations in this agreement; (d) a release or compromise of the liability of any one of the persons who is the Guarantor, or the grant of any time or concession to any one of them; (e) any legal limitation or disability on the Tenant or any invalidity or irregularity of any of the Tenant’s obligations under this agreement or any unenforceability of any of them against the Tenant; (f) the Tenant being dissolved, or being struck off the register of companies or otherwise ceasing to exist, or, if the Tenant is an individual, by the Tenant dying or becoming incapable of managing its affairs; or (g) any other act or omission except an express written release by deed of the Guarantor by the Landlord. 16.4 The total liability of the Guarantor under the provisions of this Agreement and under the provisions of the Lease (and also under the provisions of the Licence to Carry Out

 
SP/004/006 Engrossment: 13 January 2015 17 Works) shall not in the aggregate exceed the sum of $5,000,000 (FIVE MILLION UNITED STATES OF AMERICA DOLLARS). 17. TERMINATION ON INSOLVENCY OR MATERIAL NON-COMPLIANCE 17.1 An Event of Default is any of the following: (a) the taking of any step in connection with any voluntary arrangement or any other compromise or arrangement for the benefit of any creditors of the Tenant or Guarantor; (b) the making of an application for an administration order or the making of an administration order in relation to the Tenant or Guarantor; (c) the giving of any notice of intention to appoint an administrator, or the filing at court of the prescribed documents in connection with the appointment of an administrator, or the appointment of an administrator, in any case in relation to the Tenant or the Guarantor; (d) the appointment of a receiver or manager or an administrative receiver in relation to any property or income of the Tenant or Guarantor; (e) the commencement of a voluntary winding-up in respect of the Tenant or Guarantor, except a winding-up for the purpose of amalgamation or reconstruction of a solvent company in respect of which a statutory declaration of solvency has been filed with the Registrar of Companies; (f) the making of a petition for a winding-up order or a winding-up order in respect of the Tenant or Guarantor; (g) the striking-off of the Tenant or Guarantor from the Register of Companies or the making of an application for the Tenant or the Guarantor to be struck- off; (h) the Tenant or Guarantor otherwise ceasing to exist; or (i) the presentation of a petition for a bankruptcy order or the making of a bankruptcy order against the Guarantor. An Event of Default includes any analogous proceedings or events that may be taken pursuant to the legislation of another jurisdiction in relation to a tenant or guarantor incorporated or domiciled in such relevant jurisdiction. 17.2 If an Event of Default occurs, the Landlord may, at any time prior to grant of the Lease, determine this agreement by giving written notice to the Tenant. 17.3 If at any time there is any material non-compliance by the Tenant or the Guarantor with any of its obligations under this agreement and such default is either:

 
SP/004/006 Engrossment: 13 January 2015 18 (a) not capable of being remedied; or (b) is capable of remedy but the has not been remedied within five working days (or such longer period as may be reasonable in the circumstances) after service on the Tenant by the Landlord of a notice specifying the default; the Landlord may, at any time prior to grant of the Lease, determine this agreement by giving written notice to the Tenant. 18. CONSEQUENCES OF TERMINATION If the Landlord gives notice to terminate under clause 17.2 or clause 17.3: (a) subject to clause 18(b), this agreement shall be terminated with immediate effect from the date of the Landlord's notice and none of the parties shall have any further rights or obligations under this agreement save for: (i) the rights of any party in respect of any earlier breach of this agreement; and (ii) the obligations in the clauses referred to in clause 18(b); (b) clauses 12.11, 16 and 18 shall continue in force notwithstanding the termination of this agreement under clause 18(a); (c) the Tenant shall immediately cancel all entries relating to this agreement registered against the Landlord's title; and (d) the Tenant shall immediately: (i) vacate the Property; (ii) remove all of the Tenant's chattels from the Property; (iii) (to the extent required by the Landlord) remove the Tenant's Works or any other fixtures constructed by or for the Tenant; (iv) make good all damage caused by the Tenant as a result of such removal. 19. COMPLETION OF GRANT OF THE LEASE 19.1 Completion of the grant of the Lease shall take place on the Lease Completion Date. 19.2 On completion, the Tenant shall pay to the Landlord all sums due under the Lease. 19.3 On completion the Landlord shall subject to prior provision by the Tenant of an invoice pay to the Tenant the Landlord’s Contribution PROVIDED THAT

 
SP/004/006 Engrossment: 13 January 2015 19 notwithstanding the provisions of clause 20.2, the Works Documents or any other provision of this agreement, the Landlord shall not be obliged to pay any VAT on the Landlord’s Contribution unless prior to completion the Tenant provides the Landlord with a valid VAT invoice in respect of the Landlord’s Contribution. 19.4 If completion is delayed due to the Tenant's default or the Tenant fails to pay any sum due under this agreement in full on completion, the Tenant shall pay interest in addition to damages for losses incurred by the Landlord as a result of the delayed completion. The interest shall be payable at the Contract Rate on any unpaid amount for the period from the Lease Completion Date to the date of actual payment. 19.5 On completion if the Landlord hands over to the Tenant forms EX1 and EX1A together with an edited certified copy of the Lease then the Tenant undertakes to forward these documents to Land Registry simultaneously with the Tenant's own application for registration and not to permit the Land Registry to make the unedited copy of the Lease publically available. 19.6 Condition 8.7 is amended to read: "The Tenant is to pay the money due on completion to the Landlord's Conveyancer by a method that gives immediately available funds". 19.7 Condition 9.3 does not apply to this agreement. 20. VAT 20.1 Each amount stated to be payable under or pursuant to this agreement is exclusive of VAT (if any). 20.2 If any VAT is chargeable on any supply made by one party to the other party under or pursuant to this agreement, the paying party shall pay to the other party an amount equal to that VAT. 20.3 Condition 1.4 does not apply to this agreement. 21. ENTIRE AGREEMENT 21.1 This agreement and the documents annexed to it constitute the whole agreement between the parties and supersede any previous arrangement, understanding or agreement between them relating to the subject matter of this agreement.

 
SP/004/006 Engrossment: 13 January 2015 20 21.2 The Tenant acknowledges that: (a) in entering into this agreement, the Tenant has not relied on and shall have no right or remedy in respect of, any statement, representation, assurance or warranty (whether made negligently or innocently) other than: (i) as expressly set out in this agreement or the documents annexed to it; or (ii) in any written replies which the Landlord's Conveyancer has given to any written enquiries raised by the Tenant's Conveyancer before the date of this agreement. (b) no representation or warranty is given or is to be implied by: (i) the Landlord entering into this agreement; or (ii) any step taken by or on behalf of the Landlord in connection with this agreement as to the suitability of the Property or the estate of which it forms part for the Tenant's Works; (c) nothing in this clause 21.2 shall limit or exclude any liability for fraud. 21.3 Condition 9.1.1 is varied to read "If any plan or statement in the agreement or in written replies which the Landlord's Conveyancer has given to any written enquiries raised by the Tenant's Conveyancer before the date of this agreement is or was misleading or inaccurate due to any error or omission, the remedies available are as follows." 22. JOINT AND SEVERAL LIABILITY 22.1 Where the Tenant comprises more than one person, those persons shall be jointly and severally liable for the obligations and liabilities of the Tenant arising under this agreement. The Landlord may take action against, or release or compromise the liability of, or grant time or other indulgence to, any one of those persons without affecting the liability of any other of them. 22.2 Where the Guarantor comprises more than one person, those persons shall be jointly and severally liable for the obligations and liabilities of the Guarantor arising under this agreement. The Landlord may take action against, or release or compromise the liability of, or grant time or other indulgence to, any one of those persons without affecting the liability of any other of them. 22.3 Condition 1.2 does not apply to this agreement.

 
SP/004/006 Engrossment: 13 January 2015 21 23. NOTICES 23.1 Any notice or other communication required to be given under this agreement shall be in writing and shall be delivered personally, or sent by pre-paid first class post or recorded delivery or by air mail or by commercial courier, to each party required to receive the notice or communication as set out below: (a) Landlord: The Directors, One Omega Drive, River Bend Technology Centre, Northbank, Irlam, Manchester M44 5BD with a fax copy to Company Secretary of Spectris plc (01784 470848) and a further copy to the Landlord’s Conveyancer (b) Tenant: Paul O’Hanlon at MTS Medication Technologies Limited, Clearwater House, Unit 6B Millenium Way, Leeds LS11 5AL Fax: 0113 202 5333 (with a copy to the Tenant’s Conveyancer) (c) Guarantor: General Counsel at Omnicell, Inc., 590 E.Middlefield Road, Mountain View, CA 94043-4008 Fax: 650-251-6266 (with a copy to the Guarantor’s Lawyer) or as otherwise specified by the relevant party by notice in writing to each other party. 23.2 Any notice or other communication shall be deemed to have been duly received: (a) if delivered personally, when left at the address and for the contact referred to in this clause; or (b) if sent by pre-paid first class post or recorded delivery in the United Kingdom, at 9.00 am on the second working day after posting; (c) if delivered by air mail to an address outside of the United Kingdom, at 9.00 am (in the place of receipt) on the seventh working day after posting; or (d) if delivered by commercial courier, on the date and at the time that the courier's delivery receipt is signed. 23.3 A notice or other communication required to be given under this agreement shall not be validly given if sent by e-mail. 23.4 The provisions of this clause shall not apply to the service of any proceedings or other documents in any legal action. 23.5 Condition 1.3 does not apply to this agreement.

 
SP/004/006 Engrossment: 13 January 2015 22 24. THIRD PARTY RIGHTS A person who is not a party to this agreement shall not have any rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this agreement. 25. GOVERNING LAW This agreement and any dispute or claim arising out of or in connection with it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the law of England and Wales. 26. JURISDICTION Each party irrevocably agrees that the courts of England and Wales shall have non- exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this agreement or its subject matter or formation (including non-contractual disputes or claims). This agreement has been entered into on the date stated at the beginning of it.

 

 

 
SP/004/006 Engrossment: 13 January 2015 24 Annex A. Works Documents in agreed form

 
Building Two Irlam 1 Item Description Colliers MMcA Colliers 04/12/2014 23/12/2014 & 2/1/14 30/12/2014 and 05/01/15 and 13/01/15 1 The Landlord has agreed to undertake the following works (reference Nigel Nixon email dated 28 November 2014) 1.1 Strip out remaining tenant fixtures and fittings including carpets and floor coverings. LW Agreed Agreed 1.2 Carry out repairs to suspended ceilings, including removing soiled and water damaged tiles as necessary and replace with new. LW Agreed Agreed 1.3 Prepare and paint all offices and reception area with emulsion paint. LW Agreed Agreed. Works now by Tenant subject to sum of £20,340 plus VAT being paid by Landlord to Tenant. 1.4 Prepare and paint all previously glossed surfaces within the offices. LW Agreed Agreed. Works now by Tenant subject to sum of £10,800 plus VAT being paid by Landlord to Tenant. 1.5 Supply and lay new carpets and floorcoverings throughout the ground and first floor offices (excluding ceramic tile finishes). LW Agreed Agreed. Works now by Tenant subject to sum of £27,400 plus VAT being paid by Landlord to Tenant. 1.6 Deep clean kitchen, toilets and all circulation areas, including glazing LW Agreed Agreed 1.7 Clean all elevations, including glazed curtain walling LW Agreed Agreed 1.8 Clean gutters LW Agreed Agreed 1.9 Remove lab extract equipment and gantry and make good roof LW Agreed Agreed 1.1 Clean Brickwork to service yard / ramp walls LW Agreed Agreed 1.11 Make Good Cracks in warehouse blockwork LW Agreed Agreed 1.12 Make good racking bolt locations with epoxy mortar LW Agreed Agreed 1.13 Clean down warehouse floor LW Agreed Agreed 1.14 Clean warehouse steel LW Agreed Agreed 1.15 Replacement of external pane of curtain wall triple glazed units except those glazing units to the ground floor ceiling void zone and the first floor ceiling void zone which are to be cleaned and polished externally to match in with the new replacement glass. New installation is to be covered by a 10 year warranty procured by the Landlord in favour of the Tenant. LW Agreed Agreed Schedule of Works by Landlord FINAL AGREED glazing updated 13.01.15

 
Building Two Irlam 2 Item Description Colliers MMcA Colliers 04/12/2014 23/12/2014 & 2/1/14 30/12/2014 and 05/01/15 and 13/01/15 2 The property was inspected by Colliers International and Engineering Systems Design on 02 December 2014 and the following further Landlord works identified. Where works are not considered necessary, the disrepair is to be identified in a Schedule of Condition to be appended to the Lease. 2.1 Warehouse Roof 2.1.1 Clean all roof sheets and associated eaves and verge flashings LW Verges, eaves and visible cappings cleaned (1.7) OK Agreed subject to SOC for roof sheets 2.1.2 Clean all rooflights LW Not to be done, SOC if necessary OK SOC is necessary 2.1.3 Provide test certificate for latchway mansafe installation LW Not available We will test for operability LW therefore required to test and certify. Agreed subject to LW put into operation if found not operable. 2.1.4 Replace 1nr storm damaged eaves flashing (LHS) LW Query location, review on site, SOC if necessary OK LW - agree to identify on site 2.1.5 Isolated impact damage to roof sheets (maintenance foot traffic) around roof access hatch and smoke vents SOC Agreed SOC Agreed 2.2 Office Flat Roof 2.2.1 Widespread cracking and isolated blisters in asphalt covering and evidence of internal roof leaks. Put roof in repair via application of Sika Plastics Decaflex 10 polyurethane membrane (or equal approved). Include 10 year insurance backed guarantee for materials and workmanship. LW Agree to undertake patch repairs. Agreed 2.2.2 Clean all parapet flashings LW Visible cappings cleaned (1.7) OK Agreed subject to non- visible being SOC 2.2.3 Replace corroded fixings to flashings LW SOC Agreed 2.2.4 Replace corroded external light fittings brackets LW SOC Agreed 2.2.5 Paint corroding electrical conduit serving external light fittings LW SOC Agreed 2.3 Warehouse Elevations 2.3.1 Isolated minor impact damage to cladding sheets generally (dents, scratches and scoring) SOC Agreed SOC Agreed 2.3.2 Isolated displaced flat panel cladding trims (at junction with profiled cladding sections) SOC Agreed SOC Agreed 2.3.3 Prepare and paint all fire exit and personnel doors and frames LW Agree to undertake decoration works. Agreed Schedule of Works by Landlord FINAL AGREED glazing updated 13.01.15

 
Building Two Irlam 3 Item Description Colliers MMcA Colliers 04/12/2014 23/12/2014 & 2/1/14 30/12/2014 and 05/01/15 and 13/01/15 2.3.4 Prepare and paint all tubular steel handrails to dock walls and pedestrian ramps / fire exits. LW Agree to undertake decoration works. Agreed 2.3.5 Reinstate loose brickwork to fire escape steps (RHS) LW SOC Agreed 2.3.6 Replace corroded external light fitting brackets LW SOC Agreed 2.3.7 Replace missing flat panel cladding trim adjacent loading door 6 LW SOC Agreed 2.3.8 Replace impact damaged door reveal flashings at loading door 6 LW SOC Agreed 2.3.9 Replace impact damaged door reveal flashing at loading door 5 LW SOC Agreed 2.3.10 Replace impact damaged dock shelters to loadings doors 5, 4, 3 and 2 LW SOC Agreed 2.3.11 Refix loose dock shelter side flaps to loading door 1 LW SOC Agreed 2.3.12 Prepare and paint all corroding steelwork to dock levellers LW Agree to undertake decoration works. Agreed 2.3.13 Overhaul dock levelling equipment and provide certificate of operation LW Agree to test operation at lease inception and repair where not working. We both witness, no need for certifying? Agreed subject to LL providing current certificate of operation. Agreed 2.3.14 Overhaul loading doors and provided certificate of operation LW Agree to test operation at lease inception and repair where not working. As above Agreed subject to LL providing current certificate of operation. Agreed 2.3.15 Refix detached external thermostat outside boiler room (RHS) LW Agreed. Agreed 2.3.16 Replace 1nr missing glazing gasket to high level glazing (LHS) LW SOC SOC 2.3.17 Prepare and redecorate timber louver doors to detached flammable liquid store building LW Agree to undertake decoration works. Agreed 2.3.18 Reseal openings for warehouse heating ducts at rear elevation (water ingress evident on internal face of cladding) LW To be reviewed on site. OK Agreed subject to LW being required if found to be defective following joint inspection by Landlord and Tenant representatives 2.4 Office Elevations 2.4.1 Scratches and minor impact damage to outer and inner main entrance doors SOC Agreed SOC Agreed Schedule of Works by Landlord FINAL AGREED glazing updated 13.01.15

 
Building Two Irlam 4 Item Description Colliers MMcA Colliers 04/12/2014 23/12/2014 & 2/1/14 30/12/2014 and 05/01/15 and 13/01/15 2.4.2 Main entrance doors are binding on threshold plate. Overhaul hinges and adjust door to leave fully operational LW Doors are operational but will review on site. Will review. Doors are binding and overhaul is required. LW following review capped cost of £300 2.4.3 Repoint open joints to brick plinth LW SOC Agreed 2.4.4 Replace corroded plinth flashing over brick plinth header course at main entrance doors LW SOC Agreed 2.5 External Areas 2.5.1 Clean external paving to all footpaths and around office entrance including removing vegetation to joints and jet washing paving to remove atmospheric soiling and organic growth LW Sweep clean only at end of works, weeding etc can be picked up by grounds maintenance. Agreed 2.5.2 Replace cracked and displaced feature paving tiles adjacent office main entrance LW SOC Will review on site LW. LW following review capped at £150 2.5.3 Lift, prepare sub-base and relay to level isolated areas of sunken / uneven paving to footpaths LW SOC Agreed 2.5.4 Replace cracked brickwork and associated joints to service yard ramp wall LW SOC Will review on site LW. LW following review capped at £150 2.5.5 Concrete repairs to cracked and spalling concrete threshold at loading door 1 LW SOC Will review on site LW. LW following review capped at £150 2.5.6 Epoxy repairs to cracked edges of concrete slabs to service yard and service yard access road LW SOC Agreed 2.5.7 Minor silting to service yard access road consistent with localised inadequate fall for surface water drainage SOC Agreed SOC Agreed 2.5.8 Minor cracking to concrete slabs to service yard SOC Agreed SOC Agreed 2.5.9 Isolated damaged concrete kerbs to service yard SOC Agreed SOC Agreed 2.5.10 Minor damage to concrete drainage channel to service yard SOC Agreed SOC Agreed 2.5.11 Overgrown vegetation to service yard concrete kerbs generally SOC Agreed SOC Agreed 2.5.12 Reapply thermoplastic white lining to car park LW SOC Agreed 2.5.13 Reseat 1nr flagpole (misaligned / potentially insecure) LW SOC Agreed 2.6 Warehouse Internal Schedule of Works by Landlord FINAL AGREED glazing updated 13.01.15

 
Building Two Irlam 5 Item Description Colliers MMcA Colliers 04/12/2014 23/12/2014 & 2/1/14 30/12/2014 and 05/01/15 and 13/01/15 2.6.1 Epoxy repairs to warehouse floor slab where damaged (broken arises at day joints and main slab joints) LW To be reviewed on site, with largest instances being done when bolt holes done. OK Agreed for largest instances subject to any smaller instances being recorded in SOC 2.6.2 Reapplication of mastic sealant to main slab joints LW SOC Agreed 2.6.3 Isolated cracks around portal frame bases SOC SOC Agreed 2.6.4 Minor impact damage to internal face of loading doors SOC SOC Agreed 2.6.5 Epoxy crack repairs to mezzanine concrete floor slabs LW SOC Agreed 2.6.6 Clean mezzanine concrete floor slabs LW Included in 1.13 Agreed 2.6.7 Chipped nosing to concrete stairs to mezzanine storage areas SOC SOC Agreed 2.6.8 Repaint previously painted concrete steps and risers leading to mezzanine storage areas LW SOC Agreed 2.6.9 Repaint steel handrails and associated balustrade to mezzanine stairs and edge protection LW Not in need of decoration, clean only. Agreed 2.6.10 Repairs to cracked blockwork to include main warehouse and ancillary areas off main warehouse LW Included in 1.11 Agreed 2.6.11 Make good cracked ceramic tile joints over cracked blockwork to warehouse male WC (RHS) LW Included in 1.11 Agreed 2.6.12 Prepare and repaint previously painted walls and internal joinery to warehouse and warehouse ancillary accommodation including all toilet accommodation (excluding internal walls to plant rooms) LW Agreed to walls made good. Agree to undertake decoration works but see e-mail on additional costs being incurred. LW - Tenant will have express obligation to redecorate in final year of term therefore LW to handover decorated 2.6.13 Renew vinyl floor coverings to all warehouse male, female and disabled toilets LW SOC Agreed 2.6.14 Deep clean all warehouse male, female and disabled toilets including all associated fixtures and fittings. LW Agreed Agreed 2.6.15 Replace soiled and impact damaged suspended ceiling tiles to warehouse ancillary accommodation including offices, toilets and stores where suspended ceilings are installed LW To be reviewed on site, with worst cases being undertaken. Previous comment stands LW. LW following review capped at £600 2.6.16 Reinstate displaced insulation over ceiling to canteen LW SOC Agreed 2.7 Office Internal Schedule of Works by Landlord FINAL AGREED glazing updated 13.01.15

 
Building Two Irlam 6 Item Description Colliers MMcA Colliers 04/12/2014 23/12/2014 & 2/1/14 30/12/2014 and 05/01/15 and 13/01/15 2.7.1 Reinstate lab space back to open plan office space in CAT A specification to match adjacent areas including suspended ceilings, lighting, raised access floor, floor and wall finishes. LW Works being undertaken ceilings, lighting, floor and wall finishes. No raised access floor as remainder of the offices. Agreed 2.7.2 Refix loose internal wind bracing to curtain walling at first floor level (loose bolts) LW SOC Agreed 2.7.3 Refix loose floor boxes (frame to raised access floor tile and lid to frame) LW Will be done as part of carpeting works. Agreed 2.7.4 Make good holes / scoring and scratches in office area internal doors prior to re-varnishing LW To be reviewed on site. No further comment LW. LW following review capped at £150 2.7.5 Replace 1nr internal door to warehouse office accessed off reception (holed and impact damaged) LW To be reviewed on site. No further comment LW. LW following review capped at £350 2.7.6 Provide full set of labelled keys for all internal and external doors (replace locks where keys missing to matching lock suite) LW Keys to be handed over on PC of the works. Agreed 2.7.7 Deep clean lift doors and landing architraves etc. including lift car LW Building will be cleaned at PC of the works. Agreed 2.7.8 Replace carpet tile floor covering to lift car LW Will be done as part of carpeting works. Agreed 2.7.9 Clean down steelwork to office areas including all ledges visible from first floor mezzanine LW Building will be cleaned at PC of the works. Agreed 2.7.10 Redecorate circular steel columns to main reception area (impact damaged at low level requiring full redecoration to avoid mismatching) LW Included in 1.4 Agreed 2.7.11 Replace water damaged sections of timber skirting to main reception, conference room and entrance lobby to lab space (warped from pipework leaks from vending machines or sinks) LW To be reviewed on site. No further comment LW. LW following review capped at £150 2.7.12 Deep clean internal service trench to base of all curtain glazing including base of trench and all aluminium framing and cover grating. LW Included in 1.6 Agreed 2.7.13 Deep clean aluminium staircase including steps and profiled nosing LW Included in 1.6 Agreed 2.7.14 Replace 1nr broken ceramic floor tile at main entrance doors LW SOC Agreed 2.7.15 Refix broken bottom rail / weather bar to inner entrance doors LW Agree to undertake works. Agreed Schedule of Works by Landlord FINAL AGREED glazing updated 13.01.15

 
Building Two Irlam 7 Item Description Colliers MMcA Colliers 04/12/2014 23/12/2014 & 2/1/14 30/12/2014 and 05/01/15 and 13/01/15 2.7.16 Deep clean laminate faced wall panels to entrance lobby LW Included in 1.6 Agreed 2.7.17 Replace missing door handle escutcheon plate to disable toilet door LW Agree to undertake works. Agreed 2.7.18 Internal decoration to include previously painted metal skirting level radiators LW Included in 1.6 Agreed 2.8 Mechanical and Electrical Services (schedule prepared by Engineering Services Design Ltd) 2.8.1 Re-lamping / Replacement of the faulty lights in the warehouse LW To be reviewed on site. No further comment LW. LW following review to replace where faulty. 2.8.2 Dock Leveller No. 6 inspection lamp needs replacing LW To be reviewed on site. No further comment LW. LW following review to replace where faulty. 2.8.3 A number of emergency lights are not working and need replacing LW To be reviewed on site. No further comment LW. LW following review to replace where faulty. 2.8.4 The VRV/DX installation was switched on during inspection and a number of units failed to energise with the power on. Service / repair installation and provide certificate of operation. LW Agree to test operation at lease inception and repair where not working. Those repaired will be certified. Agreed subject to also providing certificate of operation on completion of test and repairs 2.8.5 A number of lights throughout the office area are not working and need attention. LW To be reviewed on site. LW. LW following review to replace where faulty. 2.9 Mechanical and Electrical Documentation Required 2.9.1 The following documentation is required to verify the safety, statutory compliance and / or operating condition of the installed M&E services. It should be noted that on receipt and review of the documentation provided that this Schedule of Works will be updated to identify further works required by the Landlord. These have been provided. Certification at 2013 is acceptable (electrical periodic is every 5 years) wholesale re-certification is not required but we are willing to undertake a test demonstration and rectify any problems A set of expired (2013) and incomplete documents has been provided. Current documentation is required for all items below. Agreed 1. Test certification for the sprinkler system 2. Service information for the sprinkler installation 3. Electrical test certificates 4. Fire Alarm Test Certificate 5. Fire Alarm Service Report 6. Emergency Lighting Test Certificate/Annual service report. 7. Lightning Protection Test Certificate Schedule of Works by Landlord FINAL AGREED glazing updated 13.01.15

 
Building Two Irlam 8 Item Description Colliers MMcA Colliers 04/12/2014 23/12/2014 & 2/1/14 30/12/2014 and 05/01/15 and 13/01/15 8. Gas Test Certificate 9. EPC Received 10. F Gas Register 11. TM44 - Inspections of Air Conditioning Report Information is required 12. LPHW water test results/dosing level 13. L8 log book 14. Commissioning results from the warehouse heating/ventilation system 15. Commissioning information of the invertor pump on the heating VT circuit 16. Commissioning report for the comms room gas suppression system 17. Service report for the LPHW heating system 18. Service report for the gas fired warehouse heater 19. Service report of the VRV/DX systems 20. Dock Levellers service reports are required 21. Ventilation flow rate commissioning reports are required 22. The data cabling test results are required 23. Service report for the lift is required 24. Service report for the CCTV system is required Schedule of Works by Landlord FINAL AGREED glazing updated 13.01.15

 
SP/004/006 Engrossment: 13 January 2015 25 Annex B. Agreed form of Lease

 
SP/004/006 Fourth Draft: 12 January 2015 DATED 2015 ------------ LEASE relating to TWO OMEGA DRIVE, RIVER BEND TECHNOLOGY CENTRE, IRLAM between OMEGA TECHNOLOGIES LIMITED and MTS MEDICATION TECHNOLOGIES LIMITED and OMNICELL, INC.

 
SP/004/006 Fourth Draft: 12 January 2015 CONTENTS CLAUSE 1. Interpretation ................................................................................................................. 4 2. Grant ............................................................................................................................ 10 3. Ancillary rights ............................................................................................................ 11 4. Rights excepted and reserved ...................................................................................... 12 5. Third Party Rights ....................................................................................................... 14 6. The Annual Rent ......................................................................................................... 15 7. Review of the Annual Rent - Indexation ..................................................................... 15 8. Services and Service Charge ....................................................................................... 18 9. Insurance ..................................................................................................................... 22 10. Rates and taxes ............................................................................................................ 25 11. Utilities ........................................................................................................................ 25 12. Common items ............................................................................................................ 26 13. VAT ............................................................................................................................. 26 14. Default interest and interest ......................................................................................... 26 15. Costs ............................................................................................................................ 27 16. Compensation on vacating .......................................................................................... 27 17. Set-off .......................................................................................................................... 27 18. Registration of this lease ............................................................................................. 28 19. Assignments ................................................................................................................ 28 20. Underlettings ............................................................................................................... 29 21. Sharing occupation ...................................................................................................... 31 22. Charging ...................................................................................................................... 31 23. Prohibition of other dealings ....................................................................................... 31 24. Registration and notification of dealings and occupation ............................................ 31 25. Closure of the registered title of this lease................................................................... 32 26. Repairs ......................................................................................................................... 32 27. Decoration ................................................................................................................... 33 28. Alterations ................................................................................................................... 34 29. Signs ............................................................................................................................ 34 30. Returning the Property to the Landlord ....................................................................... 35 31. Use ............................................................................................................................... 35 32. Management of the Estate ........................................................................................... 37 33. Compliance with laws ................................................................................................. 37 34. Energy performance certificates .................................................................................. 38 35. Agreement on environmental liabilities ...................................................................... 39 36. Encroachments, obstructions and acquisition of rights ............................................... 39 37. Breach of repair and maintenance obligations ............................................................. 40 38. Indemnity .................................................................................................................... 40 39. Landlord’s covenant for quiet enjoyment .................................................................... 41 40. Guarantee and indemnity ............................................................................................. 41

 
SP/004/006 Fourth Draft: 12 January 2015 41. Tenant's break clause ................................................................................................... 41 42. Re-entry and forfeiture ................................................................................................ 43 43. Joint and several liability ............................................................................................. 43 44. No waiver .................................................................................................................... 44 45. Entire agreement .......................................................................................................... 44 46. Notices, consents and approvals .................................................................................. 45 47. Governing law ............................................................................................................. 46 48. Jurisdiction .................................................................................................................. 46 49. Contracts (Rights of Third Parties) Act 1999 .............................................................. 46 SCHEDULE SCHEDULE GUARANTEE AND INDEMNITY ............................................................................... 48 1. Guarantee and indemnity ............................................................................................. 48 2. Guarantor's liability ..................................................................................................... 48 3. Variations and supplemental documents ..................................................................... 50 4. Guarantor to take a new lease or make payment ......................................................... 50 5. Rent at the date of forfeiture or disclaimer .................................................................. 51 6. Payments in gross and restrictions on the Guarantor ................................................... 51 7. Other securities ............................................................................................................ 52

 
SP/004/006 Fourth Draft: 12 January 2015 1 LAND REGISTRY PRESCRIBED CLAUSES LR1. Date of lease [ ] 2015 LR2. Title number(s) LR2.1 Landlord’s title number(s) GM756553 LR2.2 Other title numbers None LR3. Parties to this lease Landlord OMEGA TECHNOLOGIES LIMITED whose registered office is at One Omega Drive, River Bend Technology Centre, Northbank, Irlam, Manchester M44 5BD (company registration number 02775272) Tenant MTS MEDICATION TECHNOLOGIES LIMITED whose registered office is at Unit 6B, Millennium Way, Leeds LS11 5AL (company registration number 04562981) Other parties Guarantor OMNICELL, INC. of 590 East Middlefield Road, Mountain View, CA 94043 United States of America (incorporated in the State of Delaware, USA – Delaware file number: 3213344). LR4. Property In the case of a conflict between this clause and the remainder of this lease then, for the purposes of registration, this clause shall prevail. See the definition of "Property" in clause 1.1 of this lease. LR5. Prescribed statements etc.

 
SP/004/006 Fourth Draft: 12 January 2015 2 LR5.1 Statements prescribed under rules 179 (dispositions in favour of a charity), 180 (dispositions by a charity) or 196 (leases under the Leasehold Reform, Housing and Urban Development Act 1993) of the Land Registration Rules 2003. None. LR5.2 This lease is made under, or by reference to, provisions of: None. LR6. Term for which the Property is leased The term as specified in this lease at clause 1.1 in the definition of "Contractual Term". LR7. Premium None. LR8. Prohibitions or restrictions on disposing of this lease This lease contains a provision that prohibits or restricts dispositions. LR9. Rights of acquisition etc. LR9.1 Tenant's contractual rights to renew this lease, to acquire the reversion or another lease of the Property, or to acquire an interest in other land None. LR9.2 Tenant's covenant to (or offer to) surrender this lease None. LR9.3 Landlord's contractual rights to acquire this lease None. LR10. Restrictive covenants given in this lease by the Landlord in respect of land other than the Property None. LR11. Easements LR11.1 Easements granted by this lease for the benefit of the Property The easements as specified in clause 3 of this lease. LR11.2 Easements granted or reserved by this lease over the Property for the benefit of other property

 
SP/004/006 Fourth Draft: 12 January 2015 3 The easements as specified in clause 4 of this lease. LR12. Estate rentcharge burdening the Property None. LR13. Application for standard form of restriction None. LR14. Declaration of trust where there is more than one person comprising the Tenant

 
SP/004/006 Fourth Draft: 12 January 2015 4 THIS LEASE is dated [DATE] PARTIES (1) OMEGA TECHNOLOGIES LIMITED whose registered office is at One Omega Drive, River Bend Technology Centre, Northbank, Irlam, Manchester M44 5BD (company registration number 02775272) (the “Landlord”). (2) MTS MEDICATION TECHNOLOGIES LIMITED whose registered office is at Unit 6B, Millennium Way, Leeds LS11 5AL (company registration number 04562981) (the “Tenant”). (3) OMNICELL, INC. of 590 East Middlefield Road, Mountain View CA94043 United States of America (incorporated in the State of Delaware, USA – Delaware file number: 3213344) (the “Guarantor”). AGREED TERMS 1. INTERPRETATION The following definitions and rules of interpretation apply in this lease. 1.1 Definitions: Act of Insolvency: (a) the taking of any step in connection with any voluntary arrangement or any other compromise or arrangement for the benefit of any creditors of the Tenant or any guarantor; (b) the making of an application for an administration order or the making of an administration order in relation to the Tenant or any guarantor; (c) the giving of any notice of intention to appoint an administrator, or the filing at court of the prescribed documents in connection with the appointment of an administrator, or the appointment of an administrator, in any case in relation to the Tenant or any guarantor; (d) the appointment of a receiver or manager or an administrative receiver in relation to any property or income of the Tenant or any guarantor; (e) the commencement of a voluntary winding-up in respect of the Tenant or any guarantor, except a winding-up for the purpose of amalgamation or reconstruction of a solvent company in respect of which a statutory declaration of solvency has been filed with the Registrar of Companies;

 
SP/004/006 Fourth Draft: 12 January 2015 5 (f) the making of a petition for a winding-up order or a winding-up order in respect of the Tenant or any guarantor; (g) the striking-off of the Tenant or any guarantor from the Register of Companies or the making of an application for the Tenant or any guarantor to be struck-off; (h) the Tenant or any guarantor otherwise ceasing to exist (but excluding where the Tenant or any guarantor dies); or (i) the presentation of a petition for a bankruptcy order or the making of a bankruptcy order against the Tenant or any guarantor. The paragraphs above shall apply in relation to a partnership or limited partnership (as defined in the Partnership Act 1890 and the Limited Partnerships Act 1907 respectively) subject to the modifications referred to in the Insolvent Partnerships Order 1994 (SI 1994/2421) (as amended), and a limited liability partnership (as defined in the Limited Liability Partnerships Act 2000) subject to the modifications referred to in the Limited Liability Partnerships Regulations 2001 (SI 2001/1090) (as amended). Act of Insolvency includes any analogous proceedings or events that may be taken pursuant to the legislation of another jurisdiction in relation to a tenant or guarantor incorporated or domiciled in such relevant jurisdiction. Agreement for Lease: the Agreement for Lease dated [ ] 2015 made between the parties. Annual Rent: rent at an initial rate of £326,200 (THREE HUNDRED AND TWENTY SIX THOUSAND AND TWO HUNDRED POUNDS) per annum and then as revised pursuant to this lease. CDM Regulations: the Construction (Design and Management) Regulations 2007 (SI 2007/320). Common Parts: the roads, paths, loading and bin areas, Service Media and other parts of the Estate other than the Property and the Lettable Units. Contaminated Land Regime: the contaminated land regime under Part 2A of the Environmental Protection Act 1990 (as amended from time to time) and any statutory instrument, circular or guidance issued under it. Contractual Term: a term of ten years beginning on, and including [the date of this lease].1 Default Interest Rate: 4% per annum above the Interest Rate. 1 Plainlaw: if Tenant takes occupation prior to grant of the lease the term commencement date will be the date of occupation

 
SP/004/006 Fourth Draft: 12 January 2015 6 Energy Assessor: an individual who is a member of an accreditation scheme approved by the Secretary of State in accordance with regulation 22 of the Energy Performance of Buildings (England and Wales) Regulations 2012 (SI 2012/3118) or regulation 30 of the Building Regulations 2010 (SI 2010/2214). Energy Performance Certificate: a certificate as defined in regulation 2(1) of the Energy Performance of Buildings (England and Wales) Regulations 2012 (SI 2012/3118). Enforcing Authority: the relevant regulator for the Property under the Contaminated Land Regime. Environment: the natural and man-made environment including all or any of the following media, namely air, water and land (including air within buildings and other natural or man-made structures above or below the ground) and any living organisms (including man) or systems supported by those media. Environmental Law: all applicable laws, statutes, secondary legislation, bye-laws, common law, directives, treaties and other measures, judgments and decisions of any court or tribunal, codes of practice and guidance notes (as amended from time to time) in so far as they relate to the protection of the Environment. Estate: each and every part of the adjoining and neighbouring property in which the Landlord has an interest known as the Riverbend Technology Centre, Irlam shown edged in blue on Plan 2 PROVIDED THAT the Landlord may from time to time and at any time acting in its absolute discretion modify the extent by reducing or enlarging the area and/or changing the location of the Estate. Hazardous Substances: any material, substance or organism which, alone or in combination with others, is capable of causing harm to the Environment or which is likely to cause an actionable nuisance. Insurance Rent: the aggregate in each year of the: (a) gross cost of the premium before any discount or commission for the insurance of: (i) the Property, other than any plate glass, for its full reinstatement cost (taking inflation of building costs into account) against loss or damage by or in consequence of the Insured Risks, including costs of demolition, site clearance, site protection and shoring-up, professionals’ and statutory fees and incidental expenses, the cost of any work which may be required under any law and VAT in respect of all those costs, fees and expenses; and (ii) loss of Annual Rent from the Property for three years (including proper allowances for increases in rent pursuant to the provisions for rent review contained in this lease);

 
SP/004/006 Fourth Draft: 12 January 2015 7 (b) a fair proportion of the gross cost of the premium before any discount or commission for the insurance of: (i) the Common Parts and the Retained Parts for their full reinstatement cost (taking inflation of building costs into account) against loss or damage by or in consequence of the Insured Risks, including costs of demolition, site clearance, site protection and shoring-up, professionals’ and statutory fees and incidental expenses, the cost of any work which may be required under any law and VAT in respect of all those costs, fees and expenses; and (ii) public liability in relation to the Common Parts and the Retained Parts; and (c) a fair and proper proportion of any brokerage fee reasonably incurred by or on behalf of the Landlord payable in connection with the above. (d) any insurance premium tax payable on the above. Insured Risks: means fire, explosion, lightning, earthquake, storm, flood, bursting and overflowing of water tanks, apparatus or pipes, impact by aircraft and articles dropped from them, impact by vehicles, riot, civil commotion and any other risks against which the Landlord decides to insure against from time to time and Insured Risk means any one of the Insured Risks. Interest Rate: the base rate from time to time of Royal Bank of Scotland Plc, or if that base rate stops being used or published then a comparable commercial rate reasonably determined by the Landlord. Lettable Unit: a building and its curtilage on the Estate, other than the Property, that is capable of being let and occupied on terms similar to those of this lease. Licence to Carry Out Works: the Licence to Carry Out Works dated [ ] 2015 made between the parties. LTA 1954: Landlord and Tenant Act 1954. Permitted Use: use as offices and research and development facilities within Use Class B1 of the Town and Country Planning (Use Classes) Order 1987 as at the date this lease is granted and associated therewith warehousing within Class B8 of that schedule and any B2 use permitted by planning permission granted pursuant to an application properly made under clause 33.4 of this lease. Plan 1: the plan attached to this lease marked "Plan 1". Plan 2: the plan attached to this lease marked "Plan 2". Property: The Premises shortly known as Two Omega Drive, River Bend Technology Centre, Northbank Industrial Park, Manchester shown edged red on Plan 1 including all additions alterations and improvements thereto which may be carried out during the Term and including all landlord’s fixtures and fittings from time to

 

 

 
SP/004/006 Fourth Draft: 12 January 2015 8 time in and about the same but excluding any Service Media in, on, under or over that unit (whether in existence at the date of this lease or installed in the future) that are used by any other part of the Estate or by that unit in common with any other part of the Estate. Recommendation Report: a report as defined in regulation 4 of the Energy Performance of Buildings (England and Wales) Regulations 2012 (SI 2012/3118). Rent Commencement Date: [1 October 2015 or alternative date calculated in accordance with the Agreement for Lease] Rent Payment Dates: 1 April, 1 July, 1 October and 1 January. Reservations: all of the rights excepted, reserved and granted to the Landlord by this lease. Retained Parts: those parts of the Estate which are from time to time retained by the Landlord and made available for use for the management, maintenance or security of the Estate (including without prejudice to the generality of the foregoing any accommodation provided by the Landlord for any personnel required to reside in the Estate) but these do not include any areas which the Landlord beneficially occupies in connection with any business which it conducts or which are constructed for or are intended to be let or sold. Review Date: [DATE] [being the fifth anniversary of the start date of the Contractual Term.] Schedule of Condition: the photographic schedule signed by the parties annexed to this lease and marked "Schedule of Condition". Service Charge: a fair and proper proportion of the Service Costs. Service Charge Year: is the annual accounting period relating to the Services and the Service Costs ending on 31 December in each year during the term. Service Costs: the costs listed in clause 8.2. Service Media: all media for the supply or removal of heat, electricity, gas, water, sewage, air-conditioning, energy, telecommunications, data and all other services and utilities and all structures, machinery and equipment ancillary to those media. Services: the services listed in clause 8.1. Third Party Rights: all rights, covenants, matters and restrictions affecting the Estate including the matters contained, mentioned or referred to in registered title number GM756553. VAT: value added tax chargeable under the VATA 1994 and any similar replacement tax and any similar additional tax. VATA 1994: Value Added Tax Act 1994.

 
SP/004/006 Fourth Draft: 12 January 2015 9 1.2 A reference to this lease, except a reference to the date of this lease or to the grant of this lease, is a reference to this deed and any deed, licence, consent, approval or other instrument supplemental to it. 1.3 A reference to the Landlord includes a reference to the person entitled to the immediate reversion to this lease. A reference to the Tenant includes a reference to its successors in title and assigns. A reference to a guarantor includes a reference to the Guarantor and to any other guarantor of the tenant covenants of this lease including a guarantor who has entered into an authorised guarantee agreement. 1.4 In relation to any payment, a reference to a fair proportion is to a fair proportion of the total amount payable, determined conclusively (except as to questions of law) by the Landlord. 1.5 The expressions landlord covenant and tenant covenant each has the meaning given to it by the Landlord and Tenant (Covenants) Act 1995. 1.6 Unless the context otherwise requires, references to the Common Parts, the Retained Parts, the Estate, a Lettable Unit and the Property are to the whole and any part of them or it. 1.7 The expression neighbouring property does not include the Estate. 1.8 A reference to the term is to the Contractual Term. 1.9 A reference to the end of the term is to the end of the term however it ends. 1.10 References to the consent of the Landlord are to the consent of the Landlord given in accordance with clause 47.5 and references to the approval of the Landlord are to the approval of the Landlord given in accordance with clause 47.6. 1.11 A working day is any day which is not a Saturday, a Sunday, a bank holiday or a public holiday in England. 1.12 A reference to laws in general is a reference to all local, national and directly applicable supra-national laws as amended, extended or re-enacted from time to time and shall include all subordinate laws made from time to time under them and all orders, notices, codes of practice and guidance made under them.

 
SP/004/006 Fourth Draft: 12 January 2015 10 1.13 Unless otherwise specified, a reference to a statute or statutory provision is a reference to it as amended, extended or re-enacted from time to time and shall include all subordinate legislation made from time to time under that statute or statutory provision and all orders, notices, codes of practice and guidance made under it. 1.14 Any obligation on the Tenant not to do something includes an obligation not to allow that thing to be done and an obligation to use best endeavours to prevent that thing being done by another person. 1.15 Unless the context otherwise requires, any words following the terms including, include, in particular, for example or any similar expression shall be construed as illustrative and shall not limit the sense of the words, description, definition, phrase or term preceding those terms. 1.16 A person includes a natural person, corporate or unincorporated body (whether or not having separate legal personality). 1.17 A reference to writing or written includes fax but not e-mail. 1.18 Unless the context otherwise requires, references to clauses and Schedules are to the clauses and Schedules of this lease and references to paragraphs are to paragraphs of the relevant Schedule. 1.19 Clause, Schedule and paragraph headings shall not affect the interpretation of this lease. 1.20 Unless the context otherwise requires, a reference to one gender shall include a reference to the other genders. 1.21 Unless the context otherwise requires, words in the singular shall include the plural and in the plural shall include the singular. 2. GRANT 2.1 At the request of the Guarantor, the Landlord lets the Property with full title guarantee to the Tenant for the Contractual Term. 2.2 The grant is made together with the ancillary rights set out in clause 3, excepting and reserving to the Landlord the rights set out in clause 4, and subject to the Third Party Rights.

 
SP/004/006 Fourth Draft: 12 January 2015 11 2.3 The grant is made with the Tenant paying the following as rent to the Landlord: (a) the Annual Rent and all VAT in respect of it; (b) the Service Charge and all VAT in respect of it; (c) the Insurance Rent; (d) all interest payable under this lease; and (e) all other sums due under this lease. 3. ANCILLARY RIGHTS 3.1 The Landlord grants the Tenant the following rights (the “Rights”): (a) The use of the Common Parts for all proper purposes; (b) The right to the full, free and uninterrupted passage and running of water, soil, gas, telephone,, electricity, telecommunications and all other services and supplies of whatsoever nature through any Service Media on the Estate but outside the Property which are not owned by a utility company and which serve or will come to serve the Property; (c) The right to place and retain a sign (of a size approved by the Landlord such approval not to be unreasonably withheld or delayed) showing the name and/or business and/or usual corporate logo and/or trading name of the Tenant from time to time anywhere on the Property or the Estate in a position approved by the Landlord (such approval not to be unreasonably withheld or delayed) and the right to enter on to the Retained Parts to construct, erect, inspect, repair and maintain the sign; (d) The right to use the part of the Estate shown coloured brown on Plan 1 for the purposes of vehicular and pedestrian access to and egress from the Property. 3.2 The Rights are granted in common with the Landlord and any other person authorised by the Landlord. 3.3 The Rights are granted subject to the Third Party Rights insofar as the Third Party Rights affect the Common Parts and the Tenant shall not do anything that may interfere with any Third Party Right. 3.4 The Tenant shall exercise the Rights only in connection with its use of the Property for the Permitted Use and in accordance with any regulations made by the Landlord as mentioned in clause 32.1.

 
SP/004/006 Fourth Draft: 12 January 2015 12 3.5 The Tenant shall comply with all laws relating to its use of the Common Parts pursuant to the Rights. 3.6 In relation to the Rights the Landlord may, on 14 days’ prior written notice to the Tenant, change the route of any means of access to or egress from the Property over the Estate and may change the area of the Estate over which any of those Rights are exercised provided that this does not materially adversely interfere with the carrying on of the Tenant’s business at the Property. 3.7 In relation to the Rights the Landlord may from time to time on 14 days’ prior written notice to the Tenant designate within the Estate the areas in respect of which the Tenant may exercise that Right provided that this does not materially adversely interfere with the carrying on of the Tenant’s business at the Property. 3.8 In relation to the Rights mentioned in clause3.1(c), the Landlord may, at its discretion, re-route or replace over the Estate any such Service Media and that Right shall then apply in relation to the Service Media as re-routed or replaced 3.9 In exercising the Rights the Tenant shall cause as little inconvenience and damage to the Common Parts and the other tenants and occupiers of the Estate as is reasonably practicable and shall promptly make good (to the satisfaction of the Landlord) any damage caused to the Common Parts by reason of the Tenant exercising that Right. 3.10 Except as mentioned in this clause 3, neither the grant of this lease nor anything in it confers any right over the Common Parts or any Lettable Unit or any neighbouring property nor is to be taken to show that the Tenant may have any right over the Common Parts or any Lettable Unit or any neighbouring property, and section 62 of the Law of Property Act 1925 does not apply to this lease. 4. RIGHTS EXCEPTED AND RESERVED 4.1 The following rights are excepted and reserved from this lease to the Landlord for the benefit of the Estate and to the extent possible for the benefit of any neighbouring or adjoining property in which the Landlord acquires an interest during the term (the “Reservations”): (a) rights of light, air, support and protection to the extent those rights are capable of being enjoyed at any time during the term; (b) the right to use and to connect into Service Media at, but not forming part of, the Property which are in existence at the date of this lease or which are installed or constructed after the commencement of the Contractual Term;

 
SP/004/006 Fourth Draft: 12 January 2015 13 the right to install and construct Service Media at the Property to serve any part of the Estate (whether or not such Service Media also serve the Property); and the right to re-route any Service Media mentioned in this clause; (c) at any time during the term, the full and free right to develop any part of the Estate (including the right to erect or consent to any person erecting a new building or to alter or consent to any person altering a new building on the Estate) and any neighbouring or adjoining property in which the Landlord acquires an interest during the term as the Landlord may think fit and notwithstanding that such development, alteration or erection may diminish the access of light and air enjoyed by the Property; (d) the right to erect scaffolding at the Property or on the Estate and attach it to any building on the Property in connection with any of the Reservations; (e) the right to build on or into any boundary wall of the Property in connection with any of the Reservations; (f) the right to re-route any means of access to or egress from the Property to change the areas over which the Rights are exercised on 30 days’ prior written notice to the Tenant provided that this does not materially adversely interfere with the carrying on of the Tenant’s business at the Property; (g) the right to re-route and replace any Service Media over which the Rights are exercised; and (h) the right to the full, free and uninterrupted passage and running of water, soil, gas, telephone,, electricity, telecommunications and all other services and supplies of whatsoever nature through any Service Media which are currently or in the future in on under or over the Property and the right of entry at all reasonable times for the purpose of inspecting, repairing, renewing, re-laying, cleansing, maintaining and connecting up to any such existing or future Service Media; (i) the right to enter and remain on the Property with all necessary tools, appliance and materials for the purpose of repairing, altering or rebuilding the adjoining or neighbouring property of the Landlord; (j) the right to deal with the adjoining or neighbouring property of the Landlord as it may think fit; (k) the right for the Landlord and those authorised by the Landlord to enter the Property on not less than 24 hours’ notice to the Tenant (save in emergency where no such notice shall be required) for the purposes and in the manner mentioned in this Lease

 
SP/004/006 Fourth Draft: 12 January 2015 14 notwithstanding that the exercise of any of the Reservations or the works carried out pursuant to them result in a reduction in the flow of light or air to the Property or loss of amenity for the Property . 4.2 The Landlord reserves the right to enter the Property: (a) to repair, maintain, install, construct, re-route or replace any Service Media or structure relating to any of the Reservations; and (b) for any other purpose mentioned in or connected with: (i) this lease; (ii) the Reservations; and (iii) the Landlord’s interest in the Property or the Estate. 4.3 The Reservations may be exercised by the Landlord and by anyone else who is or becomes entitled to exercise them, and by anyone authorised by the Landlord. 4.4 The Tenant shall allow all those entitled to exercise any right to enter the Property, to do so with their workers, contractors, agents and professional advisors, and to enter the Property at any reasonable time (whether or not during usual business hours) and, except in the case of an emergency, after having given not less than 24 hours’ notice (which need not be in writing) to the Tenant. 4.5 No party exercising any of the Reservations, nor its workers, contractors, agents and professional advisors, shall be liable to the Tenant or to any undertenant or other occupier of or person at the Property for any loss, damage, injury, nuisance or inconvenience arising by reason of its exercising any of the Reservations except for: (a) physical damage to the Property; or (b) any loss, damage, injury, nuisance or inconvenience in relation to which the law prevents the Landlord from excluding liability. 5. THIRD PARTY RIGHTS 5.1 The Tenant shall comply with all obligations on the Landlord and/or the Tenant relating to the Third Party Rights insofar as those obligations relate to the Property and shall not do anything (even if otherwise permitted by this lease) that may interfere with any Third Party Right. 5.2 The Tenant shall allow the Landlord and any other person authorised by the terms of the Third Party Right to enter the Property in accordance with its terms.

 
SP/004/006 Fourth Draft: 12 January 2015 15 6. THE ANNUAL RENT 6.1 The Tenant shall pay the Annual Rent and any VAT in respect of it by four equal instalments in advance on or before the Rent Payment Dates. The payments shall be made by banker’s standing order or by any other method that the Landlord requires at any time by giving notice to the Tenant. 6.2 The first instalment of the Annual Rent and any VAT in respect of it shall be made on the Rent Commencement Date and shall be the proportion, calculated on a daily basis, in respect of the period beginning on the Rent Commencement Date until the day before the next Rent Payment Date. 7. REVIEW OF THE ANNUAL RENT - INDEXATION 7.1 In this clause 7 the following capitalised terms shall bear the meanings ascribed to them here: Base RPI Month: the month two months before the month in which this lease is granted. Base Rent: rent of £326,200 (THREE HUNDRED AND TWENTY SIX THOUSAND AND TWO HUNDRED POUNDS) per annum. Interest Rate: the base rate from time to time of Royal Bank of Scotland plc, or if that base rate stops being used or published then at a comparable commercial rate reasonably determined by the Landlord. RPI: the Retail Prices Index or any official index replacing it. 7.2 In this clause, the President is the President for the time being of the Royal Institution of Chartered Surveyors or a person acting on his behalf (the “President”), and the Surveyor is the independent valuer appointed pursuant to clause 7.11 (the “Surveyor”). 7.3 The Annual Rent shall be reviewed on the Review Date to equal the Annual Rent payable immediately before the Review Date (or which would then be payable but for any abatement or suspension of the Annual Rent or restriction on the right to collect it) or, if greater, the indexed rent determined pursuant to this clause. 7.4 The indexed rent for the Review Date shall be determined by multiplying the Base Rent by the All Items index value of the RPI for the month two months before the month in which the Review Date falls, then dividing the product by the All Items index value of the RPI for the Base RPI Month.

 
SP/004/006 Fourth Draft: 12 January 2015 16 7.5 The Landlord shall calculate the indexed rent as soon as reasonably practicable and shall give the Tenant written notice of the indexed rent as soon as reasonably practicable following such calculation. 7.6 If the revised Annual Rent has not been calculated by the Landlord and notified to the Tenant on or before the Review Date, the Annual Rent payable from the Review Date shall continue at the rate payable immediately before that Review Date. On the date on which the revised Annual Rent is notified by the Landlord to the Tenant, the Tenant shall pay: (a) the shortfall (if any) between the amount that it has paid for the period from the Review Date until the Rent Payment Date following the date of notification of the revised Annual Rent and the amount that would have been payable had the revised Annual Rent been notified on or before that Review Date; and (b) interest at the Interest Rate on that shortfall calculated on a daily basis by reference to the Rent Payment Dates on which parts of the shortfall would have been payable if the revised Annual Rent had been notified on or before that Review Date and the date payment is received by the Landlord. 7.7 Time shall not be of the essence for the purposes of this clause. 7.8 Subject to clause 7.9, if there is any change to the methods used to compile the RPI, including any change to the items from which the All Items index of the RPI is compiled, or if the reference base used to compile the RPI changes, the calculation of the indexed rent shall be made taking into account the effect of this change. 7.9 The Landlord and the Tenant shall endeavour, within a reasonable time, to agree an alternative mechanism for setting the Annual Rent if either: (a) the Landlord or the Tenant reasonably believes that any change referred to in clause 7.8 would fundamentally alter the calculation of the indexed rent in accordance with this clause 7.9, and has given notice to the other party of this belief; or (b) it becomes impossible or impracticable to calculate the indexed rent in accordance with this clause 7.9. This alternative mechanism may (where reasonable) include, or consist of, substituting an alternative index for the RPI. In default of agreement between the Landlord and the Tenant on an alternative mechanism for setting the Annual Rent, the Surveyor shall determine an alternative mechanism.

 
SP/004/006 Fourth Draft: 12 January 2015 17 7.10 The Surveyor shall determine a question, dispute or disagreement that arises between the parties in the following circumstances: (a) where any question or dispute arises between the parties as to the amount of the Annual Rent payable or as to the interpretation, application or effect of any part of this clause 7.10; or (b) where the Landlord and the Tenant fail to reach agreement under clause 7.9. The Surveyor shall have full power to determine the question, dispute or disagreement, and shall have power to determine any issue involving the interpretation of any provision of this lease, his jurisdiction to determine the question, dispute or disagreement referred to him or his terms of reference. When determining such a question, dispute or disagreement, the Surveyor may, if he considers it appropriate, specify that an alternative mechanism for setting the Annual Rent should apply to this lease, and this includes (but is not limited to) substituting an alternative index for the RPI. 7.11 The Surveyor shall be an independent valuer who is a Member or Fellow of the Royal Institution of Chartered Surveyors. The Landlord and the Tenant may, by agreement, appoint the Surveyor at any time before either of them applies to the President for the Surveyor to be appointed. 7.12 The Surveyor shall act as an expert and not as an arbitrator. The Surveyor's decision shall be given in writing, and the Surveyor shall provide reasons for any determination. The Surveyor's written decision on the matters referred to him shall be final and binding in the absence of manifest error or fraud. 7.13 The Surveyor shall give the Landlord and the Tenant an opportunity to make written representations to the Surveyor and to make written counter-representations commenting on the representations of the other party to the Surveyor. The parties will provide (or procure that others provide) the Surveyor with such assistance and documents as the Surveyor reasonably requires for the purpose of reaching a decision. 7.14 Either the Landlord or the Tenant may apply to the President to discharge the Surveyor if the Surveyor: (a) dies; (b) becomes unwilling or incapable of acting; or (c) unreasonably delays in making any determination. Clause 7.11 shall then apply in relation to the appointment of a replacement.

 
SP/004/006 Fourth Draft: 12 January 2015 18 7.15 The fees and expenses of the Surveyor and the cost of the Surveyor's appointment and any counsel's fees, or other fees, reasonably incurred by the Surveyor shall be payable by the Landlord and the Tenant in the proportions that the Surveyor directs (or if the Surveyor makes no direction, then equally). If the Tenant does not pay its part of the Surveyor's fees and expenses within ten working days after demand by the Surveyor, the Landlord may pay that part and the amount it pays shall be a debt of the Tenant due and payable on demand to the Landlord. The Landlord and the Tenant shall otherwise each bear their own costs in connection with the rent review. 8. SERVICES AND SERVICE CHARGE 8.1 The Services are: (a) cleaning, maintaining, repairing, reinstating, renewing, replacing, decorating and rebuilding the Retained Parts the Common Parts and any Service Media; (b) lighting the Common Parts and the Retained Parts and cleaning, maintaining, repairing, reinstating, renewing, replacing and rebuilding and replacing lighting machinery and equipment on the Common Parts and the Retained Parts; (c) cleaning, maintaining, repairing, reinstating, renewing and rebuilding refuse bins on the Common Parts and the Retained Parts; (d) cleaning, maintaining, repairing, reinstating, renewing and rebuilding signage for the Common Parts and the Retained Parts; (e) providing, operating, cleaning, maintaining, repairing, reinstating, renewing, upgrading and rebuilding security machinery and equipment (including closed circuit television) on the Common Parts and the Retained Parts; (f) providing, operating, cleaning, maintaining, repairing, reinstating, renewing, upgrading and rebuilding fire prevention, detection and fighting machinery and equipment and fire alarms on the Common Parts and the Retained Parts; (g) providing, cleaning, maintaining, repairing, reinstating, renewing and rebuilding any signboard showing the names and logos of the tenants and other occupiers at the entrance to the Estate; (h) providing, maintaining and keeping properly maintained and cultivated the landscaped and grassed areas of the Common Parts and the Retained Parts including any plants, shrubs, trees or floral decorations; (i) providing, operating, cleaning, maintaining, repairing, reinstating, renewing, upgrading and rebuilding lightning protection equipment on the Common Parts and the Retained Parts;

 
SP/004/006 Fourth Draft: 12 January 2015 19 (j) (save insofar as insured under other provisions of this lease) insuring the Common Parts and the Retained Parts against the Insured Risks and insuring the Landlord against property owners’ liability, third party liability and employer’s liability in respect of the Estate and such other risks perils and contingencies as the Landlord shall from time to time reasonably deem necessary or expedient; (k) paying all sums due to Northbank Management Company Limited pursuant to a deed dated 29 May 1997 and made between (1) Northbank Management Company Limited and (2) Omega Technologies Limited excepting the payment of any interest payable pursuant to this deed (save for any incurred due to late payment of service charge by the Tenant) and any sums payable to any replacement management company and/or sums payable under any similar or replacement deed except for the payment of any interest payable to any replacement management company or under any similar or replacement deed (save for any incurred due to late payment of service charge by the Tenant); (l) cleaning, maintaining, repairing, reinstating, renewing, replacing, decorating, rebuilding, and gritting the roads and footpaths on the Estate as often as shall be necessary; and (m) any other service or amenity that the Landlord may acting in accordance with the principles of good estate management provide for the benefit of the tenants and occupiers of the Estate excluding the cost of maintaining, repairing, renewing or installing any part or whole of the fire sprinkler system at the Property which cost shall be dealt with in accordance with clause 46. 8.2 The Service Costs are the total of: (a) the whole of the costs of: (i) providing the Services; (ii) the supply and removal of electricity, gas, water, sewage and other utilities to and from the Common Parts and the Retained Parts; (iii) complying with the recommendations and requirements of the insurers of the Estate (insofar as those recommendations and requirements relate to the Common Parts and/or the Retained Parts); (iv) complying with all laws and any health and safety requirements relating to the Common Parts and the Retained Parts, their use and any works carried out at them, and/or relating to the use of all Service Media, machinery and equipment at or serving the Common Parts and/or the Retained Parts and to any materials kept at or disposed of from the Common Parts and/or the Retained Parts;

 
SP/004/006 Fourth Draft: 12 January 2015 20 (v) complying with the Third Party Rights insofar as they relate to the Common Parts and/or the Retained Parts; (vi) providing, repairing, maintaining, renewing and replacing such plant, machinery, equipment and materials as the landlord in its reasonable discretion may consider to be necessary for the proper provision or supply of the services from time to time provided or supplied by or on behalf of the Landlord; and (vii) taking any steps (including proceedings) that the Landlord considers necessary to prevent or remove any encroachment over the Common Parts and/or the Retained Parts or to prevent the acquisition of any right over the Common Parts and/or the Retained Parts (or the Estate as a whole) or to remove any obstruction to the flow of light or air to the Common Parts and/or the Retained Parts (or the Estate as a whole); (viii) taking any steps deemed desirable or expedient by the Landlord for complying with or making any representations against or otherwise contesting the incidence of the provisions of any legislation or orders or statutory requirements thereunder concerning town planning, compulsory purchase, public health, highways, streets, drainage or other matters relating to or allegedly relating to the Estate for which no tenant of the Estate is directly liable under any lease of any part of the Estate; (b) the proper and reasonable costs, fees and disbursements of: (i) managing agents employed by the Landlord for the carrying out and provision of the Services or, where managing agents are not employed, a management fee for the same; (ii) employing such staff and personnel as the Landlord shall reasonably think fit for the management of the Estate (including without prejudice to the generality of the foregoing the provision of cleaning, security and horticultural services) and so that the costs of such employment shall include not only all such direct costs incurred but also the provision of uniforms the payment of national insurance contributions and other government levies by reference to employment of personnel the provision of pensions and payment of training and industrial levies and redundancy payments and any other expenses ancillary to the employment of personnel in connection with the provision of these services; and (iii) accountants, surveyors or other professional advisers employed by the Landlord to prepare and audit or otherwise in connection with the service charge accounts;

 
SP/004/006 Fourth Draft: 12 January 2015 21 (c) all existing or future charges, assessments, outgoings (including meter charges), rates, taxes and impositions payable in respect of the Common Parts and/or the Retained Parts, their use and any works carried out on them (other than any taxes payable by the Landlord in connection with any dealing with or disposition of its reversionary interest in the Estate) including without limitation any for water, electricity, fuel, telephone and public and other statutory utilities consumed on the Common Parts or the Retained Parts or used in connection with the provision of any services by or on behalf of the Landlord; and (d) any VAT payable by the Landlord in respect of any of the items mentioned above except to the extent that the Landlord is able to recover such VAT. 8.3 Subject to the Tenant paying the Service Charge, the Landlord shall use its reasonable endeavours to repair, maintain, clean and light the roads, paths and parking areas on the Common Parts. The Landlord may, but shall not be obliged to, provide any of the other Services. The Landlord shall not be obliged to carry out any repair where the need for that repair has arisen by reason of any damage or destruction by a risk against which the Landlord is not obliged to insure. 8.4 Before, or as soon as practicable after the start of each Service Charge Year, the Landlord shall prepare and send the Tenant an estimate of the Service Costs for that Service Charge Year and a statement of the estimated Service Charge for that Service Charge Year. 8.5 (Subject to clause 8.7) the Tenant shall pay the estimated Service Charge for each Service Charge Year in four equal instalments on each of the Rent Payment Dates. 8.6 In relation to the Service Charge Year current at the date of this lease, the Tenant's obligations to pay the estimated Service Charge and the actual Service Charge shall (subject to clause 8.7) be limited to an apportioned part of those amounts, such apportioned part to be calculated on a daily basis for the period from (and including) the earlier of the date of this lease and the date on which the Tenant took occupation of the Property to the end of the Service Charge Year. The estimated Service Charge for which the Tenant is liable shall be paid in equal instalments on the date of this lease and the remaining Rent Payment Days during the period from and including the date of this lease until the end of the Service Charge Year. 8.7 If the Landlord shall incur expenditure forming part of the Service Costs which either is in respect of a matter which has not been taken into account in arriving at the provisional estimate of the Service Charge for that period or is of an amount materially greater than has been allowed in arriving at such provisional estimate the

 
SP/004/006 Fourth Draft: 12 January 2015 22 Landlord shall be entitled to recover from the Tenant the due proportion of the whole of such expenditure on the Rent Payment Day next following such expenditure being incurred by the Landlord. 8.8 As soon as reasonably practicable after the end of each Service Charge Year, the Landlord shall prepare and send to the Tenant a certificate showing the Service Costs and the Service Charge for that Service Charge Year. 8.9 If any cost is omitted from the calculation of the Service Charge in any Service Charge Year, the Landlord shall be entitled to include it in the estimate and certificate of the Service Charge in any following Service Charge Year. Otherwise, and except in the case of manifest error, the Service Charge certificate shall be conclusive as to all matters of fact to which it refers and the Tenant shall not be entitled to object to the Service Charge certificate or any item comprised in the Service Costs. 8.10 If, in respect of any Service Charge Year, the Landlord's estimate of the Service Charge is less than the Service Charge, the Tenant shall pay the difference on demand. If, in respect of any Service Charge Year, the Landlord's estimate of the Service Charge is more than the Service Charge, the Landlord shall credit the difference against the Tenant’s next instalment of the estimated Service Charge and where the difference exceeds the next instalment then the balance of the difference shall be credited against each succeeding instalment until it is fully credited. 8.11 The provisions of this clause 8 shall continue to apply notwithstanding the expiry or sooner determination of the lease in respect of any Service Charge Period then current 9. INSURANCE 9.1 Subject to clause 9.2, the Landlord shall keep the Property (other than any plate glass at the Property) insured against loss or damage by the Insured Risks for the sum which the Landlord acting reasonably considers to be its full reinstatement cost (taking inflation of building costs into account). The Landlord shall not be obliged to insure any part of the Property installed by the Tenant. 9.2 The Landlord's obligation to insure is subject to: (a) any exclusions, limitations, excesses and conditions that may be imposed by the insurers; and (b) insurance being available in the London insurance market on reasonable terms.

 
SP/004/006 Fourth Draft: 12 January 2015 23 9.3 The Tenant shall pay to the Landlord on demand: (a) the Insurance Rent; (b) any amount that is deducted or disallowed by the insurers pursuant to any excess provision in the insurance policy; and (c) any costs that the Landlord incurs in obtaining a valuation of the Property for insurance purposes and a fair proportion of any costs that the Landlord incurs in obtaining a valuation of the Estate for insurance purposes provided that such a valuation shall be limited to once during each three years of the Term. 9.4 The Tenant shall: (a) immediately inform the Landlord if any matter occurs that any insurer or underwriter may treat as material in deciding whether or on what terms to insure or to continue to insure the Property and shall give the Landlord notice of that matter; (b) not do or omit anything as a result of which any policy of insurance of the Estate or any neighbouring property may become void or voidable or otherwise prejudiced, or the payment of any policy money may be withheld, nor (unless the Tenant has previously notified the Landlord and has paid any increased or additional premium) anything as a result of which any increased or additional insurance premium may become payable; (c) comply at all times with the requirements and reasonable recommendations of the insurers relating to the Property and the use by the Tenant of the Common Parts save that the reasonable and proper cost of any works required to the Property of a capital nature pursuant to the requirements and reasonable recommendations of the insurers shall be payable by the Landlord to the extent that such works would be necessary if the Property were in the state of condition and layout of the Property as shown on the Schedule of Condition attached to this Lease excluding for the avoidance of doubt any alterations carried out to the Property by or on behalf of the Tenant or its predecessors in title; (d) carry out in accordance with the directions of the Landlord all such works as may be required by the Landlord’s insurers in respect of the Property at its own cost save that the reasonable and proper cost of any works required to the Property of a capital nature pursuant to the requirements and reasonable recommendations of the insurers shall be payable by the Landlord to the extent that such works would be necessary if the Property were in the state of condition and layout of the Property as shown on the Schedule of Condition attached to this Lease excluding for the avoidance of doubt any

 
SP/004/006 Fourth Draft: 12 January 2015 24 alterations carried out to the Property by or on behalf of the Tenant or its predecessors in title; (e) give the Landlord notice as soon as practicable after becoming aware of the occurrence of any damage or loss relating to the Property arising from an Insured Risk or of any other event that might affect any insurance policy relating to the Property; (f) not effect any insurance of the Property (except any plate glass at the Property), but if it becomes entitled to the benefit of any insurance proceeds in respect of the Property (other than in respect of plate glass) pay those proceeds or cause them to be paid to the Landlord; and (g) pay the Landlord an amount equal to any insurance money that the insurers of the Estate refuse to pay (in relation to the Estate) by reason of any act or omission of the Tenant or any undertenant, their workers, contractors or agents or any person at the Property or the Common Parts with the actual or implied authority of any of them. 9.5 The Landlord shall, subject to obtaining all necessary planning and other consents, use all insurance money received (other than for loss of rent) in connection with any damage to the Property to repair the damage for which the money has been received or (as the case may be) in rebuilding the Property. The Landlord shall not be obliged to: (a) provide accommodation or facilities identical in layout or design so long as accommodation reasonably equivalent to that previously at the Property is provided; or (b) repair or rebuild if the Tenant has failed to pay any of the Insurance Rent; or (c) repair or rebuild the Property after a notice has been served pursuant to clause 9.7. 9.6 If the Property is damaged or destroyed by an Insured Risk so as to be unfit for occupation and use so as to make the Property inaccessible or unusable then, unless the policy of insurance in relation to the Property or the Common Parts and/or the Retained Parts has been vitiated in whole or in part in consequence of any act or omission of the Tenant, any undertenant or their respective workers, contractors or agents or any other person on the Property or the Common Parts and/or Retained Parts with the actual or implied authority of any of them, payment of the Annual Rent, or a fair proportion of it according to the nature and extent of the damage, shall be suspended until the Property has been reinstated and made fit for occupation and use or the Common Parts have been reinstated so as to make the Property accessible or useable (as the case may be), or (if earlier) until the insurance effected or caused to be effected by the Landlord in respect of loss of rent shall be exhausted.

 
SP/004/006 Fourth Draft: 12 January 2015 25 9.7 If at any time following damage to or destruction of the Property, the Landlord considers that it is impossible or impractical to reinstate the Property, the Landlord may terminate this lease by giving notice to the Tenant. On giving notice this lease shall determine but this shall be without prejudice to any right or remedy of the Landlord in respect of any breach of the tenant covenants of this lease. Any proceeds of the insurance shall belong to the Landlord. 9.8 Provided that the Tenant has complied with its obligations in this clause, the Tenant may terminate this lease by giving notice to the Landlord if, following damage or destruction by an Insured Risk, the Property has not been reinstated so as to be fit for occupation and use within three years after the date of damage or destruction. On giving this notice this lease shall determine but this shall be without prejudice to any right or remedy of the Landlord in respect of any breach of the tenant covenants of this lease. Any proceeds of the insurance (other than any insurance for plate glass) shall belong to the Landlord. 10. RATES AND TAXES 10.1 The Tenant shall pay all present and future rates, taxes and other impositions and outgoings payable in respect of the Property, its use and any works carried out there, except: (a) any taxes payable by the Landlord in connection with any dealing with or disposition of the reversion to this lease; or (b) any taxes (other than VAT and insurance premium tax) payable by the Landlord by reason of the receipt of any of the rents due under this lease. 10.2 The Tenant shall not make any proposal to alter the rateable value of the Property or that value as it appears on any draft rating list, without the approval of the Landlord. 10.3 If, after the end of the term, the Landlord loses rating relief (or any similar relief or exemption) because it has been allowed to the Tenant, then the Tenant shall pay the Landlord an amount equal to the relief or exemption that the Landlord has lost. 11. UTILITIES 11.1 The Tenant shall pay all costs in connection with the supply and removal of electricity, gas, water, sewage, telecommunications, data and other services and utilities to or from the Property.

 
SP/004/006 Fourth Draft: 12 January 2015 26 11.2 The Tenant shall comply with all laws and with any recommendations of the relevant suppliers relating to the use of those services and utilities. 12. COMMON ITEMS 12.1 The Tenant shall pay the Landlord on demand a fair proportion of all costs payable by the Landlord for the maintenance, repair, lighting, cleaning and renewal of all Service Media, structures and other items not on the Property but used or capable of being used by the Property in common with other land. 12.2 The Tenant shall comply with all reasonable regulations the Landlord may make from time to time in connection with the use of any of those Service Media, structures or other items. 13. VAT 13.1 All sums payable by the Tenant are exclusive of any VAT that may be chargeable. The Tenant shall pay VAT in respect of all taxable supplies made to it in connection with this lease on the due date for making any payment or, if earlier, the date on which that supply is made for VAT purposes. 13.2 Every obligation on the Tenant, under or in connection with this lease, to pay the Landlord or any other person any sum by way of a refund or indemnity, shall include an obligation to pay an amount equal to any VAT incurred on that sum by the Landlord or other person except, to the extent that the Landlord or other person obtains credit for such VAT under the Value Added Tax Act 1994. 14. DEFAULT INTEREST AND INTEREST 14.1 If any Annual Rent has not been paid by the date it is due or any other money payable under this lease has not been paid by the date 7 days after it is due, in each case whether it has been formally demanded or not, the Tenant shall pay the Landlord interest on that amount at the Default Interest Rate (both before and after any judgment). Such interest shall accrue on a daily basis for the period beginning on the due date and ending on the date of payment. 14.2 If the Landlord does not demand or accept any Annual Rent or other money due or tendered under this lease because the Landlord reasonably believes that the Tenant is in breach of any of the tenant covenants of this lease, then the Tenant shall, when that amount is accepted by the Landlord, also pay interest at the Interest Rate on that

 
SP/004/006 Fourth Draft: 12 January 2015 27 amount for the period beginning on the date the amount (or each part of it) became due and ending on the date it is accepted by the Landlord. 15. COSTS 15.1 The Tenant shall pay the costs and expenses of the Landlord including any solicitors’ or other professionals’ costs and expenses (incurred both during and after the end of the term) in connection with or in contemplation of any of the following: (a) the enforcement of the tenant covenants of this lease; (b) serving any notice in connection with this lease under section 146 or 147 of the Law of Property Act 1925 or taking any proceedings under either of those sections, notwithstanding that forfeiture is avoided otherwise than by relief granted by the court; (c) serving any notice in connection with this lease under section 17 of the Landlord and Tenant (Covenants) Act 1995; (d) the preparation and service of a schedule of dilapidations in connection with this lease; or (e) any consent or approval applied for under this lease, whether or not it is granted (unless the consent or approval is unreasonably withheld by the Landlord in circumstances where the Landlord is not unreasonably to withhold it). 15.2 Where the Tenant is obliged to pay or indemnify the Landlord against any solicitors’ or other professionals’ costs and expenses (whether under this or any other clause of this lease) that obligation extends to those costs and expenses assessed on a full indemnity basis. 16. COMPENSATION ON VACATING Any right of the Tenant or anyone deriving title under the Tenant to claim compensation from the Landlord on leaving the Property under the LTA 1954 is excluded, except to the extent that the legislation prevents that right being excluded. 17. SET-OFF The Annual Rent and all other amounts due under this lease shall be paid by the Tenant or any guarantor (as the case may be) in full without any set-off, counterclaim, deduction or withholding (other than any deduction or withholding of tax as required by law).

 
SP/004/006 Fourth Draft: 12 January 2015 28 18. REGISTRATION OF THIS LEASE 18.1 Promptly following the grant of this lease, the Tenant shall apply to register this lease at HM Land Registry. The Tenant shall ensure that any requisitions raised by HM Land Registry in connection with that application are dealt with promptly and properly. Within one month after completion of the registration, the Tenant shall send the Landlord official copies of its title. 18.2 The Tenant shall not: (a) apply to HM Land Registry to designate this lease as an exempt information document; (b) object to an application by the Landlord to HM Land Registry to designate this lease as an exempt information document; or (c) apply for an official copy of any exempt information document version of this lease. 19. ASSIGNMENTS 19.1 The Tenant shall not assign the whole of this lease without the consent of the Landlord, such consent not to be unreasonably withheld or delayed. 19.2 The Tenant shall not assign part only of this lease. 19.3 The Landlord and the Tenant agree that for the purposes of section 19(1A) of the Landlord and Tenant Act 1927 the Landlord may give its consent to an assignment subject to all or any of the following conditions: (a) a condition that the assignor enters into an authorised guarantee agreement which: (i) is in respect of all the tenant covenants of this lease; (ii) is in respect of the period beginning with the date the assignee becomes bound by those covenants and ending on the date when the assignee is released from those covenants by virtue of section 5 of the Landlord and Tenant (Covenants) Act 1995; (iii) imposes principal debtor liability on the assignor; (iv) requires (in the event of a disclaimer of liability of this lease) the assignor to enter into a new tenancy for a term equal to the unexpired residue of the Contractual Term; and (v) is otherwise in a form reasonably required by the Landlord;

 
SP/004/006 Fourth Draft: 12 January 2015 29 (b) a condition that a person of standing acceptable to the Landlord enters into a guarantee and indemnity of the tenant covenants of this lease in the form set out in the Schedule (but with such amendments and additions as the Landlord may reasonably require). 19.4 The Landlord and the Tenant agree that for the purposes of section 19(1A) of the Landlord and Tenant Act 1927 the Landlord may refuse its consent to an assignment if any of the following circumstances exist at the date of the Tenant's application for consent to assign this lease: (a) the Annual Rent or any other money due under this lease is outstanding or there is a breach of covenant by the Tenant that has not been remedied; (b) in the Landlord's reasonable opinion the assignee is not of sufficient financial standing to enable it to comply with the Tenant's covenants and conditions contained in the lease; or (c) the assignee and the Tenant are group companies within the meaning of section 42 of the LTA 1954. 19.5 Nothing in this clause shall prevent the Landlord from giving consent subject to any other reasonable condition, nor from refusing consent to an assignment in any other circumstance where it is reasonable to do so. 20. UNDERLETTINGS 20.1 The Tenant shall not underlet the whole of the Property except in accordance with this clause nor without the consent of the Landlord, such consent not to be unreasonably withheld or delayed. 20.2 The Tenant shall not underlet part only of the Property. 20.3 The Tenant shall not underlet the Property: (a) together with any property or any right over property that is not included within this lease; (b) at a fine or premium or reverse premium; nor (c) allowing any rent free period to the undertenant that exceeds the period as is then usual in the open market in respect of such a letting. 20.4 The Tenant shall not underlet the Property unless, before the underlease is granted, the Tenant has given the Landlord:

 
SP/004/006 Fourth Draft: 12 January 2015 30 (a) a certified copy of the notice served on the undertenant, as required by section 38A(3)(a) of the LTA 1954, applying to the tenancy to be created by the underlease; and (b) a certified copy of the declaration or statutory declaration made by the undertenant in accordance with the requirements of section 38A(3)(b) of the LTA 1954. 20.5 Any underletting by the Tenant shall be by deed and shall include: (a) an agreement between the Tenant and the undertenant that the provisions of sections 24 to 28 of the LTA 1954 are excluded from applying to the tenancy created by the underlease; (b) the reservation of a rent which is not less than the full open market rental value of the Property at the date the Property is underlet and which is payable at the same times as the Annual Rent under this lease; (c) provisions for the review of rent at the same dates and on the same basis as the review of rent in this lease, unless the term of the underlease does not extend beyond the next Review Date; (d) a covenant by the undertenant, enforceable by and expressed to be enforceable by the Landlord (as superior landlord at the date of grant) and its successors in title in their own right, to observe and perform the tenant covenants in the underlease and any document that is supplemental or collateral to it and the tenant covenants in this lease, except the covenants to pay the rents reserved by this lease; and (e) provisions requiring the consent of the Landlord to be obtained in respect of any matter for which the consent of the Landlord is required under this lease, and shall otherwise be consistent with and include tenant covenants no less onerous (other than as to the Annual Rent) than those in this lease and in a form approved by the Landlord, such approval not to be unreasonably withheld. 20.6 In relation to any underlease granted by the Tenant, the Tenant shall: (a) not vary the terms of the underlease nor accept a surrender of the underlease without the consent of the Landlord, such consent not to be unreasonably withheld; (b) enforce the tenant covenants in the underlease and not waive any of them nor allow any reduction in the rent payable under the underlease; and

 
SP/004/006 Fourth Draft: 12 January 2015 31 (c) ensure that in relation to any rent review the revised rent is not agreed without the approval of the Landlord, such approval not to be unreasonably withheld. 21. SHARING OCCUPATION The Tenant may share occupation of the Property with any company that is a member of the same group (within the meaning of section 42 of the LTA 1954) as the Tenant for as long as that company remains within that group or with any other party on a strictly temporary basis with the prior written consent of the Landlord (such consent not to be unreasonably withheld or delayed) provided that no relationship of landlord and tenant is established by any arrangement referred to in this clause and provided further that the Tenant shall terminate any such sharing of occupation other than with a member of the same group (within the meaning of section 42 of the LTA 1954) as the Tenant upon receipt of written notice from the Landlord. 22. CHARGING 22.1 The Tenant shall not charge the whole of this lease without the consent of the Landlord, such consent not to be unreasonably withheld. 22.2 The Tenant shall not charge part only of this lease. 23. PROHIBITION OF OTHER DEALINGS Except as expressly permitted by this lease, the Tenant shall not assign, underlet, charge, part with or share possession or share occupation of this lease or the Property or hold the lease on trust for any person (except pending registration of a dealing permitted by this lease at HM Land Registry or by reason only of joint legal ownership). 24. REGISTRATION AND NOTIFICATION OF DEALINGS AND OCCUPATION 24.1 In this clause a Transaction is: (a) any dealing with this lease or the devolution or transmission of, or parting with possession of any interest in it; or (b) the creation of any underlease or other interest out of this lease, or out of any interest, underlease derived from it, and any dealing, devolution or transmission of, or parting with possession of any such interest or underlease; or (c) the making of any other arrangement for the occupation of the Property.

 
SP/004/006 Fourth Draft: 12 January 2015 32 24.2 In respect of every Transaction that is registrable at HM Land Registry, the Tenant shall promptly following completion of the Transaction apply to register it (or procure that the relevant person so applies). The Tenant shall (or shall procure that) any requisitions raised by HM Land Registry in connection with an application to register a Transaction are dealt with promptly and properly. Within ten days of completion of the registration, the Tenant shall send the Landlord official copies of its title (and where applicable of the undertenant’s title). 24.3 No later than one month after a Transaction the Tenant shall: (a) give the Landlord’s solicitors notice of the Transaction; and (b) deliver two certified copies of any document effecting the Transaction to the Landlord’s solicitors; and (c) pay the Landlord’s solicitors a registration fee of £50 (plus VAT). (d) deliver to the Landlord's solicitors a copy of any Energy Performance Certificate and Recommendation Report issued as a result of the Transaction. 24.4 If the Landlord so requests, the Tenant shall promptly supply the Landlord with full details of the occupiers of the Property and the terms upon which they occupy it. 25. CLOSURE OF THE REGISTERED TITLE OF THIS LEASE Within one month after the end of the term (and notwithstanding that the term has ended), the Tenant shall make an application to close the registered title of this lease and shall ensure that any requisitions raised by HM Land Registry in connection with that application are dealt with promptly and properly; the Tenant shall keep the Landlord informed of the progress and completion of its application. 26. REPAIRS 26.1 The Tenant shall put and keep the Property clean and tidy and in good repair and condition except that the Tenant shall not be required to put the Property into any better state of repair or condition than it was in at the date of this lease as evidenced by the Schedule of Condition and shall ensure that any Service Media within and exclusively serving the Property is kept in good working order. 26.2 The Tenant shall not be liable to repair the Property to the extent that any disrepair has been caused by an Insured Risk, unless and to the extent that: (a) the policy of insurance of the Property has been vitiated or any insurance proceeds withheld in consequence of any act or omission of the Tenant, any

 
SP/004/006 Fourth Draft: 12 January 2015 33 undertenant or their respective workers, contractors or agents or any person on the Property with the actual or implied authority of any of them.; or (b) the insurance cover in relation to that disrepair is excluded, limited, is unavailable or has not been extended, as mentioned in clause 9.2. 26.3 The Tenant shall keep the external areas of the Property in a clean and tidy condition and not allow any rubbish or waste to be left there and shall maintain any trees, shrubs and landscaped areas at the Property and without prejudice to the generality of the foregoing the Tenant shall by pressure washing clean the exterior of the Property and the gutters serving the Property as frequently as shall be necessary to keep these areas clean and clear of algae but not less frequently than once in every 3 year period. 26.4 The Tenant shall clean the exterior and interior of all windows at the Property not less frequently than twice per year and otherwise as often as is necessary. 27. DECORATION 27.1 The Tenant shall decorate the outside of the Property as often as is reasonably necessary but not less frequently than in every third year of the term and also in the last three months before the end of the term and the Tenant shall decorate the inside of the Property as often as is reasonably necessary but not less frequently than in every fifth year of the term and also in the last three months before the end of the term. 27.2 All decoration shall be carried out in a good and proper manner using good quality materials that are appropriate to the Property and the Permitted Use and shall include all appropriate preparatory work. 27.3 All decoration carried out in the last three months of the term shall also be carried out to the reasonable satisfaction of the Landlord and using materials, designs and colours approved by the Landlord acting reasonably. 27.4 The Tenant shall replace all the carpet and all the vinyl floor coverings to the ground and first floor office areas at the Property within the three months before the end of the term with new ones of good quality and appropriate to the Property and the Permitted Use approved in writing by the Landlord (such approval not to be unreasonably withheld or delayed).

 
SP/004/006 Fourth Draft: 12 January 2015 34 28. ALTERATIONS 28.1 The Tenant shall not make any external or structural alteration or addition to the Property and shall not make any opening in any boundary structure of the Property. 28.2 The Tenant shall not install any Service Media on the exterior of the Property nor alter the route of any Service Media at the Property without the consent of the Landlord, such consent not to be unreasonably withheld or delayed. 28.3 The Tenant shall not make any internal, non-structural alteration to the Property without the consent of the Landlord, such consent not to be unreasonably withheld or delayed PROVIDED THAT the Tenant may without the Landlord’s consent make internal non-structural alterations to the Property which do not affect the Service Media or other conduits plant and machinery within or serving the Property subject to the Tenant having provided satisfactory detailed specifications and drawings to the Landlord prior to commencing such alterations and subject also to the Tenant obtaining the Landlord’s recommendations and requirements prior to commencing the alterations and complying with such recommendations and requirements as are reasonable as far as reasonably practicable whilst carrying out such alterations. 28.4 The Tenant shall not carry out any alteration to the Property which would, or may reasonably be expected to, have a material adverse effect on the asset rating in any Energy Performance Certificate commissioned in respect of the Property. 29. SIGNS 29.1 In this clause Signs include signs, fascia, placards, boards, posters and advertisements. 29.2 The Tenant shall not attach any Signs to the exterior of the Property or display any inside the Property so as to be seen from the outside without the prior written consent of the Landlord, such consent not to be unreasonably withheld or delayed.2 29.3 Before the end of the term, the Tenant shall remove any Signs placed by it at the Property and shall make good any damage caused to the Property by that removal. 2 Plainlaw: Tenant to provide proposals for Landlord’s consideration.

 
SP/004/006 Fourth Draft: 12 January 2015 35 30. RETURNING THE PROPERTY TO THE LANDLORD 30.1 At the end of the term the Tenant shall return the Property to the Landlord in the repair and condition required by this lease. 30.2 Unless the Landlord gives the Tenant notice in writing at least three months before the end of the term, the Tenant shall remove items it has fixed to the Property, remove any alterations it has made to the Property and make good any damage caused to the Property by that removal. 30.3 At the end of the term, the Tenant shall remove from the Property all chattels belonging to or used by it. 30.4 The Tenant irrevocably appoints the Landlord to be the Tenant’s agent to store or dispose of any chattels or items it has fixed to the Property and which have been left by the Tenant on the Property for more than ten working days after the end of the term. The Landlord shall not be liable to the Tenant by reason of that storage or disposal. The Tenant shall indemnify the Landlord in respect of any claim made by a third party in relation to that storage or disposal. 30.5 If the Tenant does not comply with its obligations in this clause, then, without prejudice to any other right or remedy of the Landlord, the Tenant shall pay the Landlord an amount equal to the Annual Rent at the rate reserved immediately before the end of the term for the period that it would reasonably take to put the Property into the condition it would have been in had the Tenant performed its obligations under this clause. The amount shall be a debt due on demand from the Tenant to the Landlord. 31. USE 31.1 The Tenant shall not use the Property for any purpose other than the Permitted Use. 31.2 The Tenant shall not use the Property for any illegal or immoral purpose nor for any purpose or in a manner that would cause loss, damage, injury, nuisance or inconvenience to the Landlord, the other tenants or occupiers of the Lettable Units or any owner or occupier of neighbouring property. 31.3 The Tenant shall not use the Property for any noxious, noisy or offensive trade or business and shall not hold any sale by auction or public show nor keep any live animals or birds on the Property and not save as permitted by the insurers to allow on

 
SP/004/006 Fourth Draft: 12 January 2015 36 the Premises anything which is or may become dangerous, offensive, combustible, inflammable, radioactive or explosive. 31.4 Not to trade or display goods outside the Property nor to cause any obstruction outside the Property. 31.5 Not to use on the Property any machinery or sound reproduction or amplifying equipment which shall be noisy or cause vibration or be a nuisance, disturbance to the Landlord or the owners and/or occupiers of any adjoining or neighbouring premises. 31.6 Not to suffer or permit any person to reside or sleep on the Property. 31.7 Not to discharge anything into the Service Media serving the Property which will be corrosive or harmful or which may cause any obstruction or deposit therein. 31.8 Not to commit any waste upon the Property. 31.9 Not to use the Property as an office for a government agency or other public authority which would involve the attendance thereat of members of the public for the purpose of seeking employment or enrolling for or collecting any statutory social security, health insurance or other benefit payment or applying for or collecting any licence, passport, certificate or similar document or paying thereat any tax, imposition or other financial liability. 31.10 The Tenant shall not overload any structural part of the Property nor any machinery or equipment at the Property nor any Service Media at or serving the Property. 31.11 If the Property is continually unoccupied for more than one month the Tenant shall provide security and caretaking arrangements to afford the Property reasonable protection against vandalism, theft or unlawful occupation. 31.12 The Tenant shall keep the Property at a temperature sufficiently high to prevent freezing of water in any Service Media. 31.13 The Tenant shall not use any parking spaces within the Property otherwise than for parking cars and the Tenant shall not park cars other than within the Property.

 
SP/004/006 Fourth Draft: 12 January 2015 37 31.14 The Tenant shall not obstruct others lawfully using the Common Parts and shall use the same in a reasonable manner and in accordance with any reasonable regulations made by the Landlord from time to time. 32. MANAGEMENT OF THE ESTATE 32.1 The Tenant shall observe all regulations made by the Landlord from time to time in accordance with the principles of good estate management and notified to the Tenant relating to the use of the Common Parts and the management of the Estate. 32.2 Nothing in this lease shall impose or be deemed to impose any restriction on the use of any other Lettable Unit or any neighbouring property. 33. COMPLIANCE WITH LAWS 33.1 The Tenant shall comply with all laws relating to: (a) the Property and the occupation and use of the Property by the Tenant; (b) the use or operation of all Service Media and machinery and equipment at or serving the Property whether or not used or operated, and shall, where necessary, replace or convert such Service Media within or exclusively serving the Property so that it is capable of lawful use or operation; (c) any works carried out at the Property; and (d) all materials kept at or disposed from the Property. 33.2 Without prejudice to any obligation on the Tenant to obtain any consent or approval under this lease, the Tenant shall carry out all works that are required under any law to be carried out at the Property whether by the owner or the occupier. 33.3 Within five working days after receipt of any notice or other communication affecting the Property or the Estate (and whether or not served pursuant to any law) the Tenant shall: (a) send a copy of the relevant document to the Landlord; and (b) in so far as it relates to the Property, take all steps necessary to comply with the notice or other communication and take any other action in connection with it as the Landlord may require. 33.4 The Tenant shall not apply for any planning permission for the Property without the Landlord’s consent PROVIDED THAT the Tenant may apply at its sole cost at any time during the Term for consent for the Property to be used for uses within class B2

 
SP/004/006 Fourth Draft: 12 January 2015 38 of the Town and Country (Use Classes) Order 1987 in connection with the carrying on of the Tenant’s business proposed to be carried out at the Property in addition to the uses currently permitted as at the date of this lease and the Landlord will not object to such an application. 33.5 The Tenant shall comply with its obligations under the CDM Regulations, including all requirements in relation to the provision and maintenance of a health and safety file. The Tenant shall maintain the health and safety file for the Property in accordance with the CDM Regulations keep the health and safety file up to date including conducting any necessary assessments and shall give it to the Landlord at the end of the term. 33.6 The Tenant shall supply all information to the Landlord that the Landlord reasonably requires from time to time to comply with the Landlord’s obligations under the CDM Regulations. 33.7 As soon as the Tenant becomes aware of any defect in the Property, it shall give the Landlord notice of it. The Tenant shall indemnify the Landlord against any liability under the Defective Premises Act 1972 in relation to the Property by reason of any failure of the Tenant to comply with any of the tenant covenants in this lease. 33.8 The Tenant shall keep the Property equipped with all fire prevention, detection and fighting machinery and equipment and fire alarms which are required under all relevant laws or required by the insurers of the Property or reasonably recommended by them or reasonably required by the Landlord and shall keep that machinery, equipment and alarms properly maintained and available for inspection. 34. ENERGY PERFORMANCE CERTIFICATES 34.1 The Tenant shall: (a) cooperate with the Landlord so far as is reasonably necessary to allow the Landlord to obtain an Energy Performance Certificate and Recommendation Report for the Property including providing the Landlord with copies of any plans or other information held by the Tenant that would assist in obtaining an Energy Performance Certificate; and (b) allow such access to any Energy Assessor appointed by the Landlord as is reasonably necessary to inspect the Property for the purposes of preparing an Energy Performance Certificate and/or Recommendation Report for the Property.

 
SP/004/006 Fourth Draft: 12 January 2015 39 34.2 The Tenant shall not commission an Energy Performance Certificate for the Property without the Landlord's consent (not to be unreasonably withheld or delayed). 35. AGREEMENT ON ENVIRONMENTAL LIABILITIES Notwithstanding any other provisions in this Lease, the Landlord and Tenant agree that: 35.1 Any liability under Environmental Law (including, without limitation, any liability under the Contaminated Land Regime) arising in respect of Hazardous Substances in, on, under or emanating from the Property, that existed on or before the date of this Lease, shall be the sole responsibility of the Landlord save to the extent that any migration or emanation of such Hazardous Substances is due to deliberate, reckless or negligent act or omission by the Tenant. 35.2 This clause 35 constitutes an agreement on liabilities under the Department for Environment, Food and Rural Affairs' statutory guidance on the Contaminated Land Regime. 35.3 If the Enforcing Authority serves a notice under the Contaminated Land Regime on either Party, either Party may produce a copy of this clause 35 to any Enforcing Authority or court for the purposes of determining liability under the Contaminated Land Regime, regardless of any confidentiality agreement that may exist between the Parties relating to this Lease or any of its provisions. 35.4 Neither Party shall challenge the application of the agreement on liabilities set out in this clause. 36. ENCROACHMENTS, OBSTRUCTIONS AND ACQUISITION OF RIGHTS 36.1 The Tenant shall not grant any right or licence over the Property to any person. 36.2 If any person makes or attempts to make any encroachment over the Property or takes any action by which a right may be acquired over the Property, the Tenant shall: (a) immediately inform the Landlord and shall give the Landlord notice of that encroachment or action; and (b) take all steps (including any proceedings) the Landlord reasonably requires to prevent or license the continuation of that encroachment or action.

 
SP/004/006 Fourth Draft: 12 January 2015 40 36.3 The Tenant shall not obstruct the flow of light or air to the Property or any other part of the Estate nor obstruct any means of access to the Property or the Estate. 36.4 The Tenant shall not make any acknowledgement that the flow of light or air to the Property or any other part of the Estate or that the means of access to the Property or the Estate is enjoyed with the consent of any third party. 36.5 If any person takes or threatens to take any action to obstruct the flow of light or air to the Property or obstruct the means of access to the Property the Tenant shall: (a) immediately inform the Landlord and shall give the Landlord notice of that action; and (b) take all steps (including proceedings) the Landlord reasonably requires to prevent or secure the removal of the obstruction. 37. BREACH OF REPAIR AND MAINTENANCE OBLIGATIONS 37.1 The Landlord may enter the Property to inspect its condition and state of repair and may give the Tenant a notice of any breach of any of the tenant covenants in this lease relating to the condition or repair of the Property. 37.2 If the Tenant has not begun any works needed to remedy that breach within one month following that notice (or if works are required as a matter of emergency, then immediately) or if the Tenant is not carrying out the works with all due speed, then the Landlord may enter the Property and carry out the works needed. 37.3 The costs incurred by the Landlord in carrying out any works pursuant to this clause (and any professional fees and any VAT in respect of those costs) shall be a debt due from the Tenant to the Landlord and payable on demand. 37.4 Any action taken by the Landlord pursuant to this clause shall be without prejudice to the Landlord’s other rights, including those under clause 41. 38. INDEMNITY The Tenant shall keep the Landlord indemnified against all liabilities, expenses, costs (including but not limited to any solicitors' or other professionals' costs and expenses), claims, damages and losses (including but not limited to any diminution in the value of the Landlord’s interest in the Estate and loss of amenity of the Estate) suffered or incurred by the Landlord arising out of or in connection with any breach of any tenant covenants in this lease, or any act or omission of the Tenant, any

 
SP/004/006 Fourth Draft: 12 January 2015 41 undertenant or their respective workers, contractors or agents or any other person on the Property or the Common Parts with the actual or implied authority of any of them. 39. LANDLORD’S COVENANT FOR QUIET ENJOYMENT The Landlord covenants with the Tenant, that, so long as the Tenant pays the rents reserved by and complies with its obligations in this lease, the Tenant shall have quiet enjoyment of the Property without any interruption by the Landlord or any person claiming under the Landlord except as otherwise permitted by this lease. 40. GUARANTEE AND INDEMNITY 40.1 The provisions of the Schedule apply. 40.2 If an Act of Insolvency occurs in relation to a guarantor, or if any guarantor (being an individual) dies or becomes incapable of managing his affairs the Tenant shall, if the Landlord requests, procure that a person of standing acceptable to the Landlord, within 20 working days of that request, enters into a replacement or additional guarantee and indemnity of the tenant covenants of this lease in the same form as that entered into by the former guarantor. 40.3 The Tenant shall notify the Landlord within 28 days if any Act of Insolvency occurs. 40.4 Clause 40.2 shall not apply in the case of a person who is guarantor by reason of having entered into an authorised guarantee agreement. 40.5 For so long as any guarantor remains liable to the Landlord, the Tenant shall, if the Landlord requests, procure that that guarantor joins in any consent or approval required under this lease and consents to any variation of the tenant covenants of this lease. 40.6 Notwithstanding any other provision of this lease (or of the Agreement for Lease or of the Licence to Carry Out Works) the total liability of the Guarantor as guarantor under this clause 40 and the Schedule (and also under any of the provisions of the Agreement for Lease and the Licence to Carry Out Works) shall not in the aggregate exceed the sum of $5,000,000 (FIVE MILLION UNITED STATES OF AMERICA DOLLARS). 41. TENANT'S BREAK CLAUSE 41.1 In this clause the following definitions apply:

 
SP/004/006 Fourth Draft: 12 January 2015 42 Break Date: [end of the fifth year]. Break Notice: written notice to terminate this lease. 41.2 Subject to clause 41.3, the Tenant may terminate this lease on the Break Date by serving the Break Notice on the Landlord at least twelve months before the Break Date as stated in the Break Notice. 41.3 The Break Notice shall have no effect if: (a) at the Break Date: (i) the Tenant has not paid any part of the Annual Rent or any VAT in respect of it, which was due to have been paid; or (ii) the Tenant has not paid any sums due under this lease which the Landlord has demanded in writing not less than 28 days before the Break Date; or (iii) vacant possession of the whole of the Property is not given; (b) the Tenant does not pay to the Landlord on or before the Break Date a sum of £326,200 (THREE HUNDRED AND TWENTY SIX THOUSAND AND TWO HUNDRED POUNDS); or (c) the Break Notice does not comply with or is not served in accordance with the requirements of this clause. 41.4 For the avoidance of doubt clause 13.1 shall apply to the payment under clause 41.3(b) and the obligation to pay any VAT shall survive the termination of this lease but the Break Notice shall be effective notwithstanding non-payment of any such VAT. 41.5 The Break Notice shall be in writing and, for the purposes of this clause, writing does not include facsimile transmission or e-mail. 41.6 The Break Notice shall state the Break Date. 41.7 The Break Notice shall not purport to terminate the lease in relation to any part as opposed to the whole of the Property. 41.8 Time shall be of the essence in respect of all time periods and limits in this clause 41. 41.9 Subject to clause 41.3, following service of the Break Notice, this lease shall terminate on the Break Date specified in the Break Notice.

 
SP/004/006 Fourth Draft: 12 January 2015 43 41.10 Termination of this lease pursuant to this clause shall be without prejudice to any right or remedy of the Landlord in respect of any antecedent breach of the covenants or conditions on the part of the Tenant in this lease. 41.11 Nothing in this clause makes time of the essence in relation to any time limit in clause 7 or clause 40. 41.12 If this lease terminates in accordance with clause 41.9 then, within 28 days of the Break Date, the Landlord shall refund to the Tenant the proportion of the Annual Rent, and any VAT paid in respect of it, and the Service Charge for the period from and excluding the Break Date up to and excluding the next Rent Payment Date, calculated on a daily basis. 42. RE-ENTRY AND FORFEITURE 42.1 The Landlord may re-enter the Property (or any part of the Property in the name of the whole) at any time after any of the following occurs: (a) any rent is unpaid 14 days after becoming payable whether it has been formally demanded or not; (b) any breach of any condition of, or tenant covenant in, this lease; (c) an Act of Insolvency. 42.2 If the Landlord re-enters the Property (or any part of the Property in the name of the whole) pursuant to this clause, this lease shall immediately end, but without prejudice to any right or remedy of the Landlord in respect of any breach of covenant by the Tenant or any guarantor. 43. JOINT AND SEVERAL LIABILITY 43.1 Where the Tenant comprises more than one person, those persons shall be jointly and severally liable for the obligations and liabilities of the Tenant arising under this lease. The Landlord may take action against, or release or compromise the liability of, or grant time or other indulgence to, any one of those persons without affecting the liability of any other of them. 43.2 Where a guarantor comprises more than one person, those persons shall be jointly and severally liable for the obligations and liabilities of a guarantor arising under this lease. The Landlord may take action against, or release or compromise the liability of, or grant time or other indulgence to, any one of those persons without affecting the liability of any other of them.

 
SP/004/006 Fourth Draft: 12 January 2015 44 43.3 The obligations of the Tenant and any guarantor arising by virtue of this lease are owed to the Landlord and the obligations of the Landlord are owed to the Tenant. 43.4 The Landlord shall not be liable to the Tenant for any failure of the Landlord to perform any landlord covenant in this lease, unless and until the Tenant has given the Landlord notice of the failure and the Landlord has not remedied the failure within a reasonable time of service of that notice. 43.5 Any person undertaking an obligation under or by virtue of this lease which is a landlord covenant for the purposes of the Landlord and Tenant (Covenants) Act 1995 does so only in respect of the period of time during which the reversion immediately expectant upon the determination of the term is vested in such person and not further or otherwise. 44. NO WAIVER 44.1 No demand for or receipt or acceptance of any part of the rents hereby reserved or any payment on account thereof shall operate as a waiver by the Landlord of any right which the Landlord may have to forfeit this lease by reason of any breach of covenant by the Tenant and the Tenant shall not in any proceedings for forfeiture be entitled to rely on any such demand, receipt or acceptance as aforesaid as a defence. 44.2 The return to the Tenant of any rents or other monies paid by banker’s standing order as soon as reasonably practicable after receipt shall be treated as a refusal by the Landlord to accept the same and the Tenant shall not in any proceedings for forfeiture be entitled to rely on any such receipt as a defence. 45. ENTIRE AGREEMENT 45.1 This lease and any documents annexed to it constitute the whole agreement between the parties and supersedes all previous discussions, correspondence, negotiations, arrangements, understandings and agreements between them relating to its subject matter. 45.2 Each party acknowledges that in entering into this lease and any documents annexed to it it does not rely on, and shall have no remedies in respect of, any representation or warranty (whether made innocently or negligently). 45.3 Nothing in this lease constitutes or shall constitute a representation or warranty that the Property may lawfully be used for any purpose allowed by this lease.

 
SP/004/006 Fourth Draft: 12 January 2015 45 45.4 Nothing in this clause shall limit or exclude any liability for fraud. 46. FIRE SPRINKLER SYSTEM The Tenant shall on demand pay to the Landlord a fair and proper proportion (determined by the Landlord in its discretion) of the costs of providing, operating, cleaning, maintaining, repairing and reinstating a fire sprinkler system serving the Property but not (save where more economical than repair) renewing, upgrading of such fire sprinkler. 47. NOTICES, CONSENTS AND APPROVALS 47.1 Except where this lease specifically states that a notice need not be in writing, any notice given under or in connection with this lease shall be: (a) in writing and for the purposes of this clause an e-mail is not in writing; and (b) given: (i) by hand or (in the United Kingdom only) by pre-paid first-class post or (in the United Kingdom only) other next working day delivery service or by air mail if posted to or from a place outside the United Kingdom in each case at the party's registered office address (if the party is a company) or (in any other case) at the party's principal place of business; or (ii) by fax to the party's main fax number. 47.2 If a notice complies with the criteria in clause 47.1, whether or not this lease requires that notice to be in writing, it shall be deemed to have been received: (a) if delivered by hand, at the time the notice is left at the proper address; (b) if sent by pre-paid first-class post or other next working day delivery service in the United Kingdom, on the second working day after posting; (c) if sent by air mail, on the seventh working day after posting; or (d) if sent by fax, at 9.00 am (in the place of receipt) on the next working day after transmission. 47.3 This clause does not apply to the service of any proceedings or other documents in any legal action or, where applicable, any arbitration or other method of dispute resolution.

 
SP/004/006 Fourth Draft: 12 January 2015 46 47.4 Section 196 of the Law of Property Act 1925 shall otherwise apply to notices given under this lease. 47.5 Where the consent of the Landlord is required under this lease, a consent shall only be valid if it is given by deed, unless: (a) it is given in writing and signed by the Landlord or a person duly authorised on its behalf; and (b) it expressly states that the Landlord waives the requirement for a deed in that particular case. If a waiver is given, it shall not affect the requirement for a deed for any other consent. 47.6 Where the approval of the Landlord is required under this lease, an approval shall only be valid if it is in writing and signed by or on behalf of the Landlord, unless: (a) the approval is being given in a case of emergency; or (b) this lease expressly states that the approval need not be in writing. 47.7 If the Landlord gives a consent or approval under this lease, the giving of that consent or approval shall not imply that any consent or approval required from a third party has been obtained, nor shall it obviate the need to obtain any consent or approval from a third party. 48. GOVERNING LAW This lease and any dispute or claim arising out of or in connection with it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the law of England and Wales. 49. JURISDICTION Each party irrevocably agrees that the courts of England and Wales shall have non- exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this lease or its subject matter or formation (including non-contractual disputes or claims). 50. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999 A person who is not a party to this lease shall not have any rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this lease.

 
SP/004/006 Fourth Draft: 12 January 2015 47 This document has been executed as a deed and is delivered and takes effect on the date stated at the beginning of it.

 
SP/004/006 Fourth Draft: 12 January 2015 48 Schedule Guarantee and indemnity 1. GUARANTEE AND INDEMNITY 1.1 The Guarantor guarantees to the Landlord that the Tenant shall: (a) pay the rents reserved by this lease and observe and perform the tenant covenants of this lease and that if the Tenant fails to pay any of those rents or to observe or perform any of those tenant covenants, the Guarantor shall pay or observe and perform them; and (b) observe and perform any obligations the Tenant enters into in an authorised guarantee agreement made in respect of this lease (the Authorised Guarantee Agreement) and that if the Tenant fails to do so, the Guarantor shall observe and perform those obligations. 1.2 The Guarantor covenants with the Landlord as principal obligor and as a separate and independent obligation and liability from its obligations and liabilities under paragraph 1.1 to indemnify and keep indemnified the Landlord against any failure by the Tenant: (a) to pay any of the rents reserved by this lease or any failure to observe or perform any of the tenant covenants of this lease; or (b) to observe or perform any of the obligations the Tenant enters into in the Authorised Guarantee Agreement. 2. GUARANTOR'S LIABILITY 2.1 The liability of the Guarantor under paragraph 1.1(a) and paragraph 1.2(a) shall continue until the end of the term, or until the Tenant is released from the tenant covenants of this lease by virtue of the Landlord and Tenant (Covenants) Act 1995, if earlier. 2.2 The liability of the Guarantor shall not be reduced, discharged or otherwise adversely affected by: (a) any time or indulgence granted by the Landlord to the Tenant; or (b) any delay or forbearance by the Landlord in enforcing the payment of any of the rents or the observance or performance of any of the tenant covenants of this lease (or the Tenant's obligations under the Authorised Guarantee Agreement) or in making any demand in respect of any of them; or

 
SP/004/006 Fourth Draft: 12 January 2015 49 (c) any lawful refusal by the Landlord to accept any rent or other payment due under this lease where the Landlord reasonably believes that the acceptance of such rent or payment may prejudice its ability to re-enter the Property; or (d) the Landlord exercising any right or remedy against the Tenant for any failure to pay the rents reserved by this lease or to observe or perform the tenant covenants of this lease (or the Tenant’s obligations under the Authorised Guarantee Agreement); or (e) the Landlord taking any action or refraining from taking any action in connection with any other security held by the Landlord in respect of the Tenant's liability to pay the rents reserved by this lease or observe and perform the tenant covenants of the lease (or the Tenant’s obligations under the Authorised Guarantee Agreement) including the release of any such security; or (f) a release or compromise of the liability of any one of the persons who is the Guarantor, or the grant of any time or concession to any one of them; or (g) any legal limitation or disability on the Tenant or any invalidity or irregularity of any of the tenant covenants of the lease (or the Tenant's obligations under the Authorised Guarantee Agreement) or any unenforceability of any of them against the Tenant; or (h) the Tenant being dissolved, or being struck off the register of companies or otherwise ceasing to exist, or, if the Tenant is an individual, by the Tenant dying or becoming incapable of managing its affairs; or (i) without prejudice to paragraph 4, the disclaimer of the Tenant's liability under this lease or the forfeiture of this lease; or (j) the surrender of the lease in respect of part only of the Property, except that the Guarantor shall not be under any liability in relation to the surrendered part in respect of any period after the surrender, or by any other act or omission except an express written release by deed of the Guarantor by the Landlord. 2.3 The liability of each of the persons making up the Guarantor is joint and several. 2.4 Any sum payable by the Guarantor shall be paid without any deduction, set-off or counter-claim against the Landlord or the Tenant. 2.5 Notwithstanding any other provision of this lease (or of the Agreement for Lease or of the Licence to Carry Out Works) the total liability of the Guarantor as guarantor under clause 40 of the lease and of this Schedule (and also under any of the

 
SP/004/006 Fourth Draft: 12 January 2015 50 provisions of the Agreement for Lease and the Licence to Carry Out Works) shall not in the aggregate exceed the sum of $5,000,000 (FIVE MILLION UNITED STATES OF AMERICA DOLLARS). 3. VARIATIONS AND SUPPLEMENTAL DOCUMENTS 3.1 The Guarantor shall, at the request of the Landlord, join in and give its consent to the terms of any consent, approval, variation or other document that may be entered into by the Tenant in connection with this lease (or the Authorised Guarantee Agreement). 3.2 The Guarantor shall not be released by any variation of the rents reserved by, or the tenant covenants in, this Lease (or the Tenant's obligations under the Authorised Guarantee Agreement) whether or not: (a) the variation is material or prejudicial to the Guarantor; or (b) the variation is made in any document; or (c) the Guarantor has consented, in writing or otherwise, to the variation. 3.3 The liability of the Guarantor shall apply to the rents reserved by and the tenant covenants in this lease (and the Tenant's obligations under the Authorised Guarantee Agreement) as varied except to the extent that the liability of the Guarantor is affected by section 18 of the Landlord and Tenant (Covenants) Act 1995. 4. GUARANTOR TO TAKE A NEW LEASE OR MAKE PAYMENT 4.1 If this lease is forfeited or the liability of the Tenant under this lease is disclaimed and the Landlord gives the Guarantor notice not later than twelve months after the forfeiture or the Landlord having received notice of the disclaimer, the Guarantor shall enter into a new lease of the Property on the terms set out in paragraph 4.2. 4.2 The rights and obligations under the new lease shall take effect from the date of the forfeiture or disclaimer and the new lease shall: (a) be granted subject to the right of any person to have this lease vested in them by the court and to the terms on which any such order may be made and subject to the rights of any third party existing at the date of the grant; (b) be for a term that expires at the same date as the end of the Contractual Term of this lease had there been no forfeiture or disclaimer; (c) reserve as an initial annual rent an amount equal to the Annual Rent payable under this lease at the date of the forfeiture or disclaimer or which would be payable but for any abatement or suspension of the Annual Rent or

 
SP/004/006 Fourth Draft: 12 January 2015 51 restriction on the right to collect it (subject to paragraph 5) and which is subject to review on the same terms and dates provided by this lease; and (d) otherwise be on the same terms as this lease (as varied if there has been any variation). 4.3 The Guarantor shall pay the Landlord’s solicitors’ costs and disbursements (on a full indemnity basis) and any VAT in respect of them in relation to the new lease and shall execute and deliver to the Landlord a counterpart of the new lease within two months after service of the Landlord’s notice. 4.4 The grant of a new lease and its acceptance by the Guarantor shall be without prejudice to any other rights which the Landlord may have against the Guarantor or against any other person or in respect of any other security that the Landlord may have in connection with this lease. 4.5 The Landlord may, instead of giving the Guarantor notice pursuant to paragraph 4.1 but in the same circumstances and within the same time limit, require the Guarantor to pay an amount equal to nine months’ Annual Rent and the Guarantor shall pay that amount on demand. 5. RENT AT THE DATE OF FORFEITURE OR DISCLAIMER If at the date of the forfeiture or disclaimer there is a rent review pending under this lease, then the initial annual rent to be reserved by the new lease shall be the greater of: (a) the Annual Rent previously payable (or which would have been payable but for any abatement or suspension of the Annual Rent or restriction on the right to collect it) under the lease prior to forfeiture or disclaimer; and (b) the rent of the Property at the relevant Review Date, as determined in accordance with the terms of the lease. 6. PAYMENTS IN GROSS AND RESTRICTIONS ON THE GUARANTOR 6.1 Any payment or dividend that the Landlord receives from the Tenant (or its estate) or any other person in connection with any insolvency proceedings or arrangement involving the Tenant shall be taken and applied as a payment in gross and shall not prejudice the right of the Landlord to recover from the Guarantor to the full extent of the obligations that are the subject of this guarantee and indemnity.

 
SP/004/006 Fourth Draft: 12 January 2015 52 6.2 The Guarantor shall not claim in competition with the Landlord in any insolvency proceedings or arrangement of the Tenant in respect of any payment made by the Guarantor pursuant to this guarantee and indemnity. If it otherwise receives any money in such proceedings or arrangement, it shall hold that money on trust for the Landlord to the extent of its liability to the Landlord. 6.3 The Guarantor shall not, without the consent of the Landlord, exercise any right or remedy that it may have (whether against the Tenant or any other person) in respect of any amount paid or other obligation performed by the Guarantor under this guarantee and indemnity unless and until all the obligations of the Guarantor under this guarantee and indemnity have been fully performed. 7. OTHER SECURITIES 7.1 The Guarantor warrants that it has not taken and covenants that it shall not take any security from or over the assets of the Tenant in respect of any liability of the Tenant to the Guarantor. If it does take or hold any such security it shall hold it for the benefit of the Landlord. 7.2 This guarantee and indemnity is in addition to and independent of any other security that the Landlord may from time to time hold from the Guarantor or the Tenant or any other person in respect of the liability of the Tenant to pay the rents reserved by this lease and to observe and perform the tenant covenants of this lease. It shall not merge in or be affected by any other security. 7.3 The Guarantor shall not be entitled to claim or participate in any other security held by the Landlord in respect of the liability of the Tenant to pay the rents reserved by this lease or to observe and perform the tenant covenants of this lease.

 
SP/004/006 Fourth Draft: 12 January 2015 53 Executed as a deed by OMEGA TECHNOLOGIES LIMITED acting by , a director, in the presence of: ............................. [SIGNATURE OF WITNESS] [NAME OF WITNESS [IN BLOCK CAPITALS]] [ADDRESS OF WITNESS] [OCCUPATION OF WITNESS]3 Executed as a deed by MTS MEDICATION TECHNOLOGIES LIMITED acting by , a director, in the presence of: ............................. [SIGNATURE OF WITNESS] [NAME OF WITNESS [IN BLOCK CAPITALS]] [ADDRESS OF WITNESS] [OCCUPATION OF WITNESS]

 
SP/004/006 Fourth Draft: 12 January 2015 54 Executed by: OMNICELL, INC., a Delaware company By: Name: Title:

 
SP/004/006 Engrossment: 13 January 2015 26 Annex C. Agreed form of Licence to Carry out Works

 
SP/004/006 Third Draft: 12 January 2015 DATED 2015 ------------ DRAFT LICENCE TO CARRY OUT WORKS1 relating to TWO OMEGA DRIVE, RIVER BEND TECHNOLOGY CENTRE, IRLAM between OMEGA TECHNOLOGIES LIMITED and MTS MEDICATION TECHNOLOGIES LIMITED and OMNICELL, INC. 1 The Landlord’s consent to the works is not given until this licence is completed as a formal deed

 
SP/004/006 Third Draft: 12 January 2015 CONTENTS CLAUSE 1. Interpretation ................................................................................................................. 1 2. Consent to carry out the Works ..................................................................................... 3 3. Starting the Works ......................................................................................................... 4 4. Carrying out and completing the Works ........................................................................ 4 5. The CDM Regulations ................................................................................................... 5 6. Additional works ........................................................................................................... 6 7. Insurance of the Works .................................................................................................. 6 8. Fees, rates and taxes ...................................................................................................... 6 9. Reinstatement ................................................................................................................ 7 10. The Lease covenants and conditions ............................................................................. 7 11. No warranty by the Landlord ........................................................................................ 7 12. Costs .............................................................................................................................. 7 13. The right of re-entry in the Lease .................................................................................. 8 14. Indemnity ...................................................................................................................... 8 15. The Guarantor................................................................................................................ 8 16. Notices ........................................................................................................................... 9 17. Liability ....................................................................................................................... 10 18. Third party rights ......................................................................................................... 10 19. Governing law ............................................................................................................. 10 20. Jurisdiction .................................................................................................................. 10 SCHEDULE SCHEDULE DETAILS OF THE WORKS ...................................................................................... 11

 
1 THIS LICENCE is dated [DATE] PARTIES (1) OMEGA TECHNOLOGIES LIMITED whose registered office is at One Omega Drive, River Bend Technology Centre, Northbank, Irlam, Manchester M44 5BD (company registration number 02775272) (the “Landlord”). (2) MTS MEDICATION TECHNOLOGIES LIMITED whose registered office is at Unit 6B, Millennium Way, Leeds LS11 5AL (company registration number 04562981) (the “Tenant”). (3) OMNICELL, INC. of 590 East Middlefield Road, Mountain View CA94043 (incorporated in the State of Delaware, USA – Delaware filing number: 3213344) (the “Guarantor”). BACKGROUND (A) This licence is supplemental and collateral to the Lease. (B) The Landlord is entitled to the immediate reversion to the Lease. (C) The residue of the Term is vested in the Tenant. (D) The Tenant intends to carry out the Works and, under the terms of the Lease, requires the consent of the Landlord to do so. (E) In the Lease the Guarantor entered into guarantee and other covenants in respect of the tenant covenants of the Lease. AGREED TERMS 1. INTERPRETATION The following definitions and rules of interpretation apply in this licence. 1.1 Definitions: Agreement for Lease: the Agreement for Lease dated [ ] 2015 made between the parties in respect of the Lease. CDM Regulations: the Construction (Design and Management) Regulations 2007 (SI 2007/320).

 
2 Energy Performance Certificate: a certificate as defined in regulation 2(1) of the Energy Performance of Buildings (England and Wales) Regulations 2012 (SI 2012/3118). Lease: a lease of Two Omega Drive, River Bend Technology Centre, Irlam dated before or on the same date as this licence and made between the same parties as this licence and all documents supplemental or collateral to that lease. Property: Two Omega Drive, River Bend Technology Centre, Irlam as more particularly described in and demised by the Lease. Recommendation Report: a report as defined in regulation 4 of the Energy Performance of Buildings (England and Wales) Regulations 2012 (SI 2012/3118). Term: the term of years granted by the Lease and any agreed or statutory continuation of the Lease. Works: the works to be carried out at the Property which are referred to in the Schedule together with making good any damage to the Property caused by carrying out such works. 1.2 References to the Landlord include a reference to the person entitled for the time being to the immediate reversion to the Lease. References to the Tenant include a reference to its successors in title and assigns. 1.3 References to the end of the Term are to the end of the Term however it ends. 1.4 The expression tenant covenants has the meaning given to it by the Landlord and Tenant (Covenants) Act 1995. 1.5 Clause, Schedule and paragraph headings shall not affect the interpretation of this licence. 1.6 A person includes a natural person, corporate or unincorporated body (whether or not having separate legal personality). 1.7 The Schedules form part of this licence and shall have effect as if set out in full in the body of this licence. Any reference to this licence includes the Schedules. 1.8 Unless the context otherwise requires, words in the singular shall include the plural and in the plural shall include the singular. 1.9 Unless the context otherwise requires, a reference to one gender shall include a reference to the other genders.

 
3 1.10 Unless otherwise specified, a reference to a statute or statutory provision is a reference to it as amended, extended or re-enacted from time to time. 1.11 A reference to a statute or statutory provision shall include all subordinate legislation made from time to time under that statute or statutory provision. 1.12 A reference to writing or written includes fax but not e-mail. 1.13 A reference to this licence or to any other agreement or document referred to in this licence is a reference to this licence or such other agreement or document as varied or novated (in each case, other than in breach of the provisions of this licence) from time to time. 1.14 Unless the context otherwise requires, references to clauses and Schedules are to the clauses and Schedules of this licence and references to paragraphs are to paragraphs of the relevant Schedule. 1.15 Any words following the terms including, include, in particular, for example or any similar expression shall be construed as illustrative and shall not limit the sense of the words, description, definition, phrase or term preceding those terms. 1.16 Any obligation on a party not to do something includes an obligation not to allow that thing to be done. 2. CONSENT TO CARRY OUT THE WORKS 2.1 In consideration of the obligations on the Tenant in this licence, the Landlord consents to the Tenant carrying out the Works on the terms set out in this licence. 2.2 This consent will cease to be valid if the Works have not been started (in accordance with the terms of this licence) within six months from (and including) the date of this licence, unless the Landlord gives the Tenant notice extending the period of validity. If the Landlord does agree to an extension, then this consent will remain valid for the period stated in that notice and the time period stated in clause 4.7(a) will be extended by the same amount. If this consent ceases to be valid and the Landlord has not given notice extending its validity, all the terms of this licence except clause 2.1 will remain in force. 2.3 Nothing in this licence will place the Tenant under an obligation to the Landlord to carry out the Works, but if it does carry them out, it must do so on the terms of this licence.

 
4 2.4 This consent does not obviate the need for the consent of any person other than the Landlord that may be required to carry out the Works. 3. STARTING THE WORKS 3.1 The Tenant must not start the Works until it has complied with the requirements of this clause and of clause 5.1. 3.2 The Tenant must obtain all licences and consents that are required for the Works under all laws and by the owner or occupier of any neighbouring land or otherwise. 3.3 The Tenant must produce all such licences and consents to the Landlord and obtain the Landlord’s confirmation they are satisfactory to the Landlord such confirmation not to be unreasonably withheld or delayed. 3.4 The Tenant must give the Landlord two copies of the plans and specification for the Works. 3.5 The Tenant must notify the Landlord of the date it intends to start carrying out the Works. 4. CARRYING OUT AND COMPLETING THE WORKS 4.1 The Tenant must carry out the Works: (a) using good quality, new materials which are fit for the purpose for which they will be used; (b) in a good and workmanlike manner and in accordance with good building and other relevant practices, codes and guidance; and (c) to the reasonable satisfaction of the Landlord. 4.2 In carrying out the Works the Tenant must comply with all laws and the terms of all other licences and consents, the requirements and recommendations of all relevant utility suppliers and those of the insurers of the Property. 4.3 The Tenant must take all proper steps to ensure that carrying out the Works does not make any of the following unsafe: the structure of the Property, any plant or machinery at the Property, any neighbouring land or building. 4.4 The Tenant must cause as little disturbance and inconvenience as reasonably possible to the Landlord and the owners and occupiers of the estate of which the Property forms part and of any neighbouring land. The Tenant must not infringe any of their rights nor the rights of any other person in relation to the Property.

 
5 4.5 The Tenant must immediately make good, to the reasonable satisfaction of the Landlord, any damage (including decorative damage) to any land or building or any plant and machinery (other than the Property) which is caused by carrying out the Works. 4.6 The Tenant must allow the Landlord and its surveyors access to the Property, both while the Works are being carried out and afterwards, and will give the Landlord the information it reasonably requests to establish that the Works are being and have been carried out in accordance with this licence. 4.7 The Tenant must: (a) complete the Works within twelve months after the date of this licence; and (b) must notify the Landlord as soon as they have been completed, and send the Landlord two copies of plans showing the Property as altered by the Works. 4.8 The Tenant shall provide the Landlord with a copy of any Energy Performance Certificate and Recommendation Report issued as a result of the Works within one month of such documents being issued. 5. THE CDM REGULATIONS 5.1 Before starting the works, the Tenant must have made a written election that it is to be treated as the only client in respect of the Works for the purposes of the CDM Regulations and given the Landlord a copy of such election. 5.2 To the extent that the Landlord may be a client for the purposes of the CDM Regulations in relation to the Works, the Landlord agrees with the written election by the Tenant. 5.3 The Tenant must comply with its obligations as a client for the purposes of the CDM Regulations and must ensure that the CDM co-ordinator and the principal contractor that it appoints in relation to the Works comply with their respective obligations under the CDM Regulations. The Tenant must liaise with the CDM co-ordinator to allow the CDM co-ordinator to assist the Tenant in performing the Tenant’s duties as client under the CDM Regulations. 5.4 The Tenant must ensure that all relevant documents relating to the Tenant's Works are placed in the health and safety file for the Property by the CDM co-ordinator in accordance with the CDM Regulations, maintain the health and safety file for the Property in accordance with the CDM Regulations, give the health and safety file to the Landlord at the end of the Term, allow the Landlord and its surveyors to enter the Property to inspect the health and safety file and at its own cost supply the Landlord

 
6 with copies of it or any of the documents in it and the Tenant must comply with its obligations in the Lease relating to the documents and the file. 6. ADDITIONAL WORKS 6.1 If the terms of any planning permission, licence or consent (other than this licence) obtained for the Works, require any other works to be carried out (whether to the Property or to any other land or building) the Tenant must carry out such other works within any time limit imposed by such permission, licence or consent and in any event before the end of the Term. 6.2 The terms of this licence, other than clause 2 and clause 4.7(a) will apply to the carrying out of such other works as if they formed part of the Works. 6.3 This clause is without prejudice to any requirement on the Tenant to obtain the consent of the Landlord to such other works pursuant to the Lease and the consent of any other person that may be required for such other works. 7. INSURANCE OF THE WORKS 7.1 The Landlord will only be obliged to insure the Works if they form part of Property, and only: (a) after they have been completed in accordance with this licence; (b) for the amount for which the Tenant has notified the Landlord that they should be insured; and (c) otherwise in accordance with the terms of the Lease. 7.2 Until the Landlord is obliged to insure the Works they will be at the sole risk of the Tenant. 7.3 The Tenant must pay on demand any increase in the insurance premium and the amount of any additional insurance premium for the Property or any neighbouring land of the Landlord or the estate of which the Property forms part that arises because of the Works. 8. FEES, RATES AND TAXES The Tenant must pay all fees, rates, levies and taxes that arise by reason of the Works (including any arising under any laws applying to the Works) whether imposed on the Landlord or the Tenant and must indemnify the Landlord from all liability in relation to such fees, rates, levies and taxes.

 
7 9. REINSTATEMENT 9.1 Unless the Landlord gives the Tenant notice not less than 3 months before the end of the Term, the Tenant must remove the whole of the Works and reinstate the Property before the end of the Term. The notice given by the Landlord may require removal and reinstatement in respect of part only of the Works in which case the Tenant shall remove only that part of the Works specified in the notice and reinstate accordingly. 9.2 The removal and reinstatement must be done at the Tenant’s cost and to the reasonable satisfaction of the Landlord. 9.3 The terms of this licence, other than clause 2 and clause 4.7(a) will apply to such removal and reinstatement. 9.4 The Tenant must also make good any damage (including decorative damage) to the Property caused by the removal and reinstatement. 10. THE LEASE COVENANTS AND CONDITIONS The tenant covenants in the Lease will extend to the Works and apply to the Property as altered by the Works. 11. NO WARRANTY BY THE LANDLORD 11.1 No representation or warranty is given or is to be implied by the Landlord entering into this licence or by any step taken by or on behalf of the Landlord, in connection with it as to: (a) the suitability of the Property for the Works; or (b) whether the Works or any removal or reinstatement of them may be lawfully carried out. 11.2 The Tenant acknowledges that it does not rely on, and will have no remedies in respect of, any representation or warranty (whether made innocently or negligently) that may have been made by or on behalf of the Landlord before the date of this licence as to any of the matters mentioned in clause 11.1. 11.3 Nothing in this clause shall limit or exclude any liability for fraud. 12. COSTS 12.1 The Tenant must pay on demand any reasonable costs and disbursements of the Landlord, its solicitors and surveyors incurred in connection with the Works or any removal of them and reinstatement of the Property or in making good any damage to

 
8 any land or building, plant or machinery (other than the Property) which is caused by the carrying out of the Works or by the removal of them or the reinstatement of the Property. 12.2 The obligations in this clause extend to costs and disbursements assessed on a full indemnity basis and to any value added tax in respect of those costs and disbursements except to the extent that the Landlord is able to recover that value added tax. 13. THE RIGHT OF RE-ENTRY IN THE LEASE The right of re-entry in the Lease will be exercisable if any covenant or condition of this licence is breached, as well as if any of the events stated in the provision for re- entry in the Lease occurs. 14. INDEMNITY The Tenant shall indemnify the Landlord against all liabilities, costs, expenses, damages and losses suffered or incurred by the Landlord arising out of or in connection with any breach of the terms of this licence. 15. THE GUARANTOR 15.1 The Guarantor consents to the Tenant entering into this licence. 15.2 The consent granted by this licence is granted at the request of the Guarantor. In consideration of the consent granted by the Landlord, and subject to clause 15.4, the Guarantor agrees that its guarantee and other obligations under the Lease shall remain fully effective and: (a) to the extent that any provision of this licence varies the terms of the Lease, shall apply to the Lease as varied; and (b) subject to clause 15.2(a) shall not be released or diminished by any provision of this licence. 15.3 In further consideration of the consent granted by the Landlord, and subject to clause 15.4, the Guarantor agrees that its guarantee and other obligations under the Lease shall extend and apply to the covenants given by, and the obligations on the part of, the Tenant under this licence. 15.4 Nothing in this licence shall prevent or limit the operation of section 18 of the Landlord and Tenant (Covenants) Act 1995.

 
9 15.5 In further consideration of the Landlord having entered into this licence at the request of the Guarantor, the Guarantor guarantees and agrees with the Landlord that: (a) the Tenant shall perform the Tenant's obligations in this licence; and (b) if the Tenant fails to perform any of its obligations under this agreement, the Guarantor shall perform them. 15.6 In consideration of the Landlord having entered into this agreement at the request of the Guarantor, the Guarantor agrees with the Landlord as a separate and independent primary obligation to indemnify the Landlord against any failure by the Tenant to observe or perform any of the Tenant's obligations in this agreement. 15.7 The liability of the Guarantor shall not be affected by: (a) any time or indulgence granted by the Landlord to the Tenant; (b) any delay or forbearance by the Landlord in enforcing the payment of any sums or the observance or performance of any of the Tenant's obligations in this agreement or in making any demand in respect of any of them; (c) the Landlord exercising any right or remedy against the Tenant for any failure to pay any sums due under this agreement or to observe or perform the Tenant's obligations in this agreement; (d) a release or compromise of the liability of any one of the persons who is the Guarantor, or the grant of any time or concession to any one of them; (e) any legal limitation or disability on the Tenant or any invalidity or irregularity of any of the Tenant’s obligations under this agreement or any unenforceability of any of them against the Tenant; (f) the Tenant being dissolved, or being struck off the register of companies or otherwise ceasing to exist, or, if the Tenant is an individual, by the Tenant dying or becoming incapable of managing its affairs; or (g) any other act or omission except an express written release by deed of the Guarantor by the Landlord. 15.8 The total liability of the Guarantor under the provisions of this Agreement and under the provisions of the Lease (and also under the provisions of the Agreement for Lease) shall not in the aggregate exceed the sum of $5,000,000 (FIVE MILLION UNITED STATES OF AMERICA DOLLARS). 16. NOTICES Any notice given under or in connection with this licence must be in writing and must be delivered by hand or sent by pre-paid first class post or other next working day delivery service or by any other means permitted by the Lease. A correctly addressed

 
10 notice delivered by hand shall be deemed to have been delivered at the time the notice is left at the proper address. A correctly addressed notice sent by pre-paid first class post or other next working day delivery service in the United Kingdom will be deemed to have been delivered on the second working day after posting. A correctly addressed notice sent by air mail post outside of the United Kingdom will be deemed to have been delivered on the seventh working day after posting 17. LIABILITY 17.1 The obligations of the Tenant in this licence are owed to the Landlord and are made in consideration of the consent granted by clause 2.1. 17.2 Where the Tenant comprises more than one person, those persons shall be jointly and severally liable for the obligations and liabilities of the Tenant arising under this licence. The Landlord may take action against, or release or compromise the liability of, or grant time or other indulgence to, any one of those persons, without affecting the liability of any other of those persons. 18. THIRD PARTY RIGHTS A person who is not a party to this licence shall not have any rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this licence. 19. GOVERNING LAW This licence and any dispute or claim arising out of or in connection with it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the law of England and Wales. 20. JURISDICTION Each party irrevocably agrees that the courts of England and Wales shall have non- exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this licence or its subject matter or formation (including non-contractual disputes or claims). This document has been executed as a deed and is delivered and takes effect on the date stated at the beginning of it.

 
11 Schedule Details of the Works The Tenant’s fit out works as such works are shown on the plans and specification annexed to this licence.

 
12 Executed as a deed by OMEGA TECHNOLOGIES LIMITED acting by [ ], a director, in the presence of: ............................. [SIGNATURE OF WITNESS] [NAME OF WITNESS [IN BLOCK CAPITALS]] [ADDRESS OF WITNESS] [OCCUPATION OF WITNESS] Executed as a deed by MTS MEDICATION TECHNOLOGIES LIMITED acting by [ ], a director, in the presence of: ............................. [SIGNATURE OF WITNESS] [NAME OF WITNESS [IN BLOCK CAPITALS]] [ADDRESS OF WITNESS] [OCCUPATION OF WITNESS] Executed by OMNICELL, INC., a Delaware company By: Name: Title:

 


Exhibit 21.1
List of Subsidiaries
MedPak Holdings, Inc.
MTS Medical Technologies, Inc .
MTS Packaging Systems, Inc.
Omnicell International, Inc.








EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-67828, 333-82818, 333-104427, 333-107356, 333-116103, 333-125080, 333-132556, 333-142857, 333-149758, 333-159562, 333-176146 and 333-190930) pertaining to the 1992 Incentive Plan, 1995 Management Stock Option Plan, 1997 Employee Stock Purchase Plan (as amended), 1999 Equity Incentive Plan, 2003 Equity Incentive Plan, 2004 Equity Incentive Plan and 2009 Equity Incentive Plan of our report dated March 17, 2014, except for Note 8 and 17, as to which the date is March 30, 2015 , with respect to the consolidated financial statements and schedule of Omnicell, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2014 .
 
/s/ Ernst & Young LLP
San Jose, California
 
March 30, 2015



CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Omnicell, Inc.
Mountain View, California
We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-67828, 333-82818, 333-104427, 333-107356, 333-116103, 333-125080, 333-132556, 333-142857, 333-149758, 333-159562, 333-176146, and 333-190930) of our reports dated March 30, 2015 , relating to the consolidated financial statements and financial statement schedule of Omnicell, Inc. and subsidiaries (the “Company”) as of and for the year ended December 31, 2014, and the effectiveness of the Company's internal control over financial reporting as of December 31, 2014, appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2014.
/s/ Deloitte & Touche LLP
San Jose, California
March 30, 2015



Exhibit 31.1
 
CERTIFICATION
 
I, Randall A. Lipps, certify that:
 
1. I have reviewed this annual report on Form 10-K of Omnicell, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
March 30, 2015
 
 
/s/ Randall A. Lipps
 
Randall A. Lipps
 
President and Chief Executive Officer




Exhibit 31.2
 
CERTIFICATION
 
I, Robin G. Seim, certify that:
 
1. I have reviewed this annual report on Form 10-K of Omnicell, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
March 30, 2015
 
 
/s/ Robin G. Seim
 
Robin G. Seim
 
Chief Financial Officer and Executive Vice President Finance, International and Manufacturing




Exhibit 32.1
 
CERTIFICATION
 
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Randall A. Lipps, the President and Chief Executive Officer of Omnicell, Inc. (the “Company”) and Robin G. Seim, the Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:
1. The Company’s Annual Report on Form 10-K for the period ended December 31, 2014 , to which this Certification is attached as Exhibit 32.1 (the "Annual Report") fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and
2. The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations the Company.
In Witness Whereof, the undersigned have set their hands hereto as of the 30 th day of March, 2015 .
/s/ Randall A. Lipps
 
/s/ Robin G. Seim
Randall A. Lipps
 
Robin G. Seim
President and Chief Executive Officer
 
Chief Financial Officer and Executive Vice President Finance,
International and Manufacturing
 
"This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Omnicell, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing."