<PAGE> 1
As filed with the Securities and Exchange Commission on April 14, 1997.
Registration No. _______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CRITICARE SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 3693
(State or Other (Primary Standard 39-150563
Jurisdiction of Industrial (I.R.S. Employer
Incorporation or Classification Identification No.)
Organization) Code Number )
20925 Crossroads Circle
Waukesha, Wisconsin 53186
(414) 798-8282
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Gerhard J. Von der Ruhr, Chairman of the Board,
President and Treasurer
20925 Crossroads Circle
Waukesha, Wisconsin 53186
(414) 798-8282
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copies to:
Reinhart, Boerner, Van Deuren,
Norris & Rieselbach, s.c.
1000 North Water Street, Suite 2100
Milwaukee, WI 53202
Attn: Robert E. Bellin, Esq.
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
<PAGE> 2
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Amount Aggregate Aggregate Amount of
Title of Shares to be Price Offering Registration
to be Registered Registered Per Share (1) Price (1) Fee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.04 Par Value 1,055,000 $5.125 $5,406,875 $1,639
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated in accordance with Rule 457(c) based on the average of the high
and low sales prices of the Common Stock as reported on the Nasdaq National
Market on April 10, 1997 solely for the purpose of calculating the amount of the
registration fee.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 3
PROSPECTUS DATED APRIL __, 1997
1,055,000 Shares
CRITICARE SYSTEMS, INC.
COMMON STOCK
The shares offered hereby (the "Shares") consist of up to 1,055,000
shares of common stock, $.04 par value per share (the "Common Stock") of
Criticare Systems, Inc., a Wisconsin corporation ("Criticare Systems" or the
"Company") which may be issuable by the Company to the selling shareholder
listed herein under "Selling Shareholder" (the "Selling Shareholder") upon
conversion of the $2,500,000 Convertible Debentures (defined below) issued to
the Selling Shareholder by the Company. The number of shares registered for sale
by this Prospectus equals approximately 175% of the number of shares into which
the Convertible Debentures are convertible on April 14, 1997, assuming the
Convertible Debentures were fully convertible on such date. The $2,500,000
Convertible Debentures were issued by the Company to the Selling Shareholder on
January 31, 1997 (the "Convertible Debentures") pursuant to the terms of a
certain Convertible Debenture Purchase Agreement by and between the Selling
Shareholder and the Company as of such date (the "Purchase Agreement"). The
Convertible Debentures are convertible into shares of the Company's Common Stock
based on the "Conversion Price" at the time of conversion. The "Conversion
Price" varies based on the date when the Convertible Debentures are converted.
For the period from April 5, 1997 (61 days after the closing date of the sale of
the Convertible Debentures) through May 4, 1997 (90 days after the closing date
of the sale of the Convertible Debentures), the Conversion Price is an amount
equal to 80% of the average closing bid price of the Company's Common Stock on
the Nasdaq National Market for the previous five trading days ending on the day
before the conversion date. For the period beginning May 5, 1997 (91 days after
the closing date of the sale of the Convertible Debentures), the Conversion
Price is an amount equal to 75% of the average closing bid price of the
Company's Common Stock on the Nasdaq National Market for the previous five
trading days ending on the day before the conversion date. Up to 50% of the
Convertible Debentures are convertible at any time during the period from April
5, 1997 through May 4, 1997 (the 61st through 90th day after the closing). After
May 4, 1997 (the 90th day after the closing), 100% of the Convertible Debentures
are convertible. For a further description of the terms of the Convertible
Debentures see "Plan of Distribution." This Prospectus covers the sale of the
Shares from time to time by the Selling Shareholder. The issuance of the Shares
of Common Stock upon exercise of the Convertible Debentures is not covered by
this Prospectus, but rather only the resale of such Shares.
The Shares may be offered from time to time by the Selling Shareholder.
All expenses of the registration incurred in connection herewith are being borne
by the Company, but any brokers' or underwriters' fees or commissions will be
borne by the Selling Shareholder. The Company will not receive any proceeds from
the sale of the Shares by the Selling Shareholder.
The Selling Shareholder has not advised the Company of any specific
plans for the distribution of the Shares covered by this Prospectus, but it is
anticipated that the Shares will be sold from time to time primarily in
transactions (which may include block transactions) on the Nasdaq National
Market at the market price then prevailing, although sales may also be made in
negotiated transactions or otherwise. The Selling Shareholder and the brokers
and dealers through whom sale of the Shares may be made may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and their commissions or discounts and other compensation may
be regarded as underwriters' compensation. See "Plan of Distribution."
The Common Stock is currently listed on the Nasdaq National Market
under the symbol "CXIM." On April 10, 1997, the last reported sale price of the
Common Stock on the Nasdaq National Market was $5.1875 per share.
THERE ARE CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED BEFORE PURCHASING
SHARES IN THIS OFFERING. SEE "RISK FACTORS."
-----------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is April ___, 1997.
<PAGE> 4
AVAILABLE INFORMATION
This Prospectus, which constitutes a part of a Registration Statement
on Form S-3 (the "Registration Statement") filed by the Company with the
Securities and Exchange Commission (the "Commission") under the Securities Act,
omits certain of the information set forth in the Registration Statement.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Company and the securities
offered hereby. Copies of the Registration Statement and the exhibits thereto
are on file at the offices of the Commission and may be obtained upon payment of
the prescribed fee or may be examined without charge at the public reference
facilities of the Commission described below.
Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information can be
inspected and copied at the Public Reference Section of the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following
regional offices of the Commission: Midwest Regional Office, Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, IL 60661-2511, and Northeast
Regional Office, 7 World Trade Center, Suite 1300, New York, NY 10048. Copies of
such material can also be obtained at prescribed rates by writing to the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. Such reports and other information filed with the Commission may also be
available at the Commission's site on the World Wide Web at http:www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of a document filed by the Company
with the Commission (File No. 0-16061) are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996.
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
September 30 and December 31, 1996.
(c) The description of the Company's Common Stock which is contained in
the Company's Registration Statement on Form 8-A filed on July 23, 1987 under
the Exchange Act, including all amendments and reports filed for the purpose of
updating such description.
All reports and other documents filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the filing of a
post-effective amendment which indicates that all securities offered hereby have
been sold or which deregisters all securities remaining unsold, shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
the filing of such reports and documents. Any statement contained in a document,
all or a portion of which is incorporated by reference herein, shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained or incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered a copy of any or all of such documents which are
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into the documents that
this Prospectus incorporates). Written or oral request for copies should be
directed to Richard J. Osowski, Senior Vice President Finance and Assistant
Secretary, Criticare Systems, Inc., 20925 Crossroads Circle, Waukesha, Wisconsin
53186, (414) 798-8282.
2
<PAGE> 5
THE COMPANY
Criticare designs, manufactures and markets vital signs and gas
monitoring instruments and related noninvasive sensors used to monitor patients
in many healthcare settings. Since a patient's oxygen, anesthetic gas and carbon
dioxide levels can change dramatically within minutes, causing severe side
effects or death, continuous monitoring of these parameters is increasing. The
Company's monitoring equipment improves patient safety by delivering accurate,
comprehensive and instantaneous patient information to the clinician. The
Company's products also allow hospitals to contain costs primarily by
substituting cost-effective reusable pulse oximetry sensors for disposable
sensors, controlling the use of costly anesthetics and increasing personnel
productivity.
To meet the needs of end-users in a wide variety of patient settings,
the Company has developed a broad line of patient monitors which combine one or
more of its patented or other proprietary technologies, for monitoring oxygen
saturation, carbon dioxide and anesthetic agents, with standard monitoring
technologies that provide electrocardiogram ("ECG"), invasive and noninvasive
blood pressures, temperature, heart rate and respiration rate. In addition, the
Company's VitalView telemetry system allows one nurse to monitor up to eight
patients simultaneously from a convenient central location. This allows
hospitals to move out of the intensive care unit ("ICU") those patients that
require continuous monitoring, but do not need all of an ICU's extensive and
costly personnel and equipment resources. The Company's MPT monitor recently
received FDA approval and is in beta site testing. MPT is an ambulatory
monitoring system that transmits the patient's ECG, blood pressure, oxygen
level, heart rate and respiration rate to a central station.
The Company was incorporated under the laws of the State of Delaware in
October 1984.
The Company's principal executive offices are located at 20925
Crossroads Circle, Waukesha, Wisconsin 53186, and its telephone number is (414)
798-8282.
3
<PAGE> 6
RISK FACTORS
Prospective investors should carefully consider the risk factors set
forth below as well as the other information contained in this Prospectus.
COMPETITION
The markets for the Company's products are highly competitive. Many of
the Company's competitors have greater engineering, research and development,
manufacturing, financial and marketing resources, as well as a more established
market presence and reputation. The Company has historically experienced
substantial price competition for its products and such price competition is
likely to continue.
DEPENDENCE ON PATENTS AND PROPRIETARY TECHNOLOGY
The Company believes one of its principal competitive advantages is
provided by its patented and other proprietary technology including its sensor
technology, infrared specific anesthetic gas monitoring technology, UltraSync
signal processing software and disposable respiratory secretion filter system.
Although none of the Company's United States patents expire before 2004, to the
extent competitors develop equivalent or superior non-infringing technology in
these areas, or to the extent that the Company is unable to enforce its patents,
the Company's ability to market and sell its products could be materially
adversely affected.
DEPENDENCE ON KEY PERSONNEL
The Company relies to a substantial degree on its founder and principal
executive officer, Gerhard J. Von der Ruhr, as well as key divisional sales
officers and technical managers. The loss of any of these individuals could
materially adversely affect the Company.
INTERNATIONAL SALES
Since fiscal 1990, the Company's international sales have grown faster
than its sales to any other market, and accounted for 46.2% of the Company's
total net sales for the 1996 fiscal year. The Company expects that international
sales will continue to constitute a significant portion of its business.
Although the Company sells its products in United States dollars and is not
subject to significant currency risks, an increase in the value of the United
States dollar relative to foreign currencies in the Company's international
markets could make the Company's products less price competitive in such
markets.
GOVERNMENT REGULATION
The Company's products are subject to regulation by the United States
Food and Drug Administration (the "FDA") and comparable foreign governmental
authorities. These regulations can be burdensome and may substantially delay or
prevent the introduction of new products, materially increase the costs of any
such product introductions, interfere with or require cessation of product
manufacturing and marketing or result in product recalls. Additionally, adoption
of new regulations or modifications to applicable regulations could adversely
affect the Company.
COST CONTAINMENT PROGRAMS
The cost of a significant portion of medical care in the United States
is funded by government or other insurance programs. Additional limits imposed
by such programs on health care cost reimbursements may further impair the
ability of hospitals and other health care providers to purchase equipment such
as the Company's products and could adversely affect the Company's domestic
sales.
PRODUCT LIABILITY EXPOSURE
As a manufacturer of medical diagnostic equipment, the Company could
face product liability claims. Criticare has had no product liability claims to
date and maintains product liability insurance in an aggregate amount of $5
million. There can be no assurance that such coverage will be adequate to cover
any product liability claims which arise in the future or that it will continue
to be available at reasonable prices.
4
<PAGE> 7
SINGLE SOURCES OF SUPPLY
Certain of Criticare's products incorporate components currently
purchased from single sources. While the Company believes these components are
available from alternate sources on reasonable terms, an interruption in the
delivery of these components could have an adverse effect on the Company.
POSSIBLE VOLATILITY OF STOCK PRICE; FLUCTUATIONS IN QUARTERLY RESULTS
Market prices of securities of medical technology companies, including
the Company's Common Stock, have experienced significant volatility from time to
time. There may be volatility in the market price of the Common Stock due to
factors that may or may not relate to the Company's performance. Various factors
and events, such as announcements by the Company or its competitors concerning
new product developments, governmental approvals, regulations or actions,
developments or disputes relating to patent or proprietary rights and public
concern over product liability may have a significant impact on the market price
of the Common Stock. In addition, Criticare's quarterly results have
historically fluctuated.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
by the Selling Shareholder.
SELLING SHAREHOLDER
The 1,055,000 shares of the Company's Common Stock described
in this Prospectus equal approximately 175% of the number of shares which would
be issuable upon conversion of the Convertible Debentures if the entire
principal amount of the Convertible Debentures was converted on the date of this
Prospectus. Except for the ownership of the Convertible Debentures and any
Shares on conversion thereof, the Selling Shareholder has not had any material
relationship within the past three years with the Company. The Shares are being
registered to permit public secondary trading of the Shares, and the Selling
Shareholder may offer the Shares for resale from time to time. See "Plan of
Distribution."
The Shares being offered by the Selling Shareholder hereby are
issuable by the Company to the Selling Shareholder upon conversion of the
Convertible Debentures. The Convertible Debentures were issued by the Company to
the Selling Shareholder pursuant to a certain Convertible Debenture Purchase
Agreement by and among the Company and the Selling Shareholder dated January 31,
1997. Pursuant to terms of the Convertible Debentures, the Selling Shareholder
is entitled to convert up to 50% of the principal amount of the Convertible
Debentures at any time and from time to time during the period from April 5,
1997 through May 4, 1997 (the 61st through 90th day after the closing of the
sale of the Convertible Debentures) and up to 100% of the principal amount at
any time and from time to time after May 4, 1997 (the 90th day after the closing
date). The Convertible Debentures bear interest at 8% per annum, payable in
Common Stock of the Company at the time of each conversion. The conversion price
at which the Convertible Debentures are convertible into shares of the Company's
Common Stock varies based on the date when the Convertible Debentures are
converted. For the period from April 5, 1997 (61 days after the closing date of
the sale of the Convertible Debentures) through May 4, 1997 (90 days after the
closing date of the sale of the Convertible Debentures), the conversion price is
an amount equal to 80% of the average closing bid price of the Company's Common
Stock on the Nasdaq National Market for the previous five trading days ending on
the day before the conversion date. For the period beginning May 5, 1997 (91
days after the closing date of the sale of the Convertible Debentures), the
Conversion Price is an amount equal to 75% of the average closing bid price of
the Company's Common Stock on the Nasdaq National Market for the previous five
trading days ending on the day before the conversion date.
If not previously converted, the entire outstanding principal
and interest on the Convertible Debentures will be automatically converted to
Common Stock on February 3, 1999 (the second anniversary of the closing.
Notwithstanding the foregoing, the Selling Shareholder shall be prohibited from
(a) converting any portion of the Convertible Debentures which would result in
the Selling Shareholder being deemed the beneficial owner, in accordance with
the provisions of Rule 13d-3 of the Securities Exchange Act of 1934, as amended,
of 4.99% or more of the then issued and outstanding Common Stock of the Company,
or (b) converting any portion of the Shares which will result in the Selling
Shareholder being issued more than 1,425,647 shares of Common Stock of the
Company in the aggregate pursuant to the Convertible Debentures. In the event
that upon conversion, the
5
<PAGE> 8
Selling Shareholder would be entitled to have been issued an aggregate of more
than 1,425,647 shares of Common Stock of the Company, then the Selling
Shareholder shall receive cash in an amount equal to 125% of the face amount of
the remaining Convertible Debentures and interest.
As required by the Convertible Debenture Purchase Agreement
and a related Registration Rights Agreement, in recognition of the fact that
Selling Shareholder may wish to be legally permitted to sell any Shares acquired
upon conversion of the Convertible Debentures when it deems appropriate, the
Company has filed with the Commission under the Act, a Registration Statement on
Form S-3, of which this Prospectus forms a part, with respect to the resale of
the Shares by the Selling Shareholder from time to time on the Nasdaq National
Market or in privately-negotiated transactions.
<TABLE>
<CAPTION>
Number of Shares Number of Shares Number of Shares
Name of Beneficially Owned Being Offered Beneficially Owned
Selling Shareholder Prior to Offering Hereby After Offering
------------------- ----------------- ------ --------------
<S> <C> <C> <C>
Paresco, Inc. 1,055,000 1,055,000 0
</TABLE>
----------------------
*Represents approximately 175% of the aggregate number of shares of
the Company's Common Stock which the Selling Shareholder would be
entitled to acquire upon conversion of the Convertible Debentures
assuming the entire principal and interest on the Convertible
Debentures was converted on the date of this Prospectus. The Selling
Shareholder does not currently own any shares and the actual number of
shares which will be beneficially owned by the Selling Shareholder
after conversion of the Convertible Debentures will depend on the
conversion price on the date the debentures are converted.
PLAN OF DISTRIBUTION
The Shares being offered by the Selling Shareholder will be
sold in one or more transactions (which may involve block transactions) on the
Nasdaq National Market or in privately-negotiated transactions. The sale price
to the public may be the market price prevailing at the time of sale, a price
related to such prevailing market price or such other price as the Selling
Shareholder determines from time to time. The Selling Shareholder shall have the
sole and absolute discretion not to accept any purchase offer or make any sale
of Shares if it deems the purchase price to be unsatisfactory at any particular
time.
The Selling Shareholder may also sell the Shares of Common
Stock directly to market makers acting as principals and/or to broker-dealers
acting as agents for themselves or their customers. Brokers acting as agents for
the Selling Shareholder will receive usual and customary commissions for
brokerage transactions, and market makers and block purchasers purchasing the
Shares will do so for their own account and at their own risk. It is possible
that the Selling Shareholder will attempt to sell Shares of Common Stock in
block transactions to market makers or other purchasers at a price per share
which may be below the then market price. There can be no assurance that all or
any of the Shares offered hereby will be issued to, or sold by, the Selling
Shareholder. The Selling Shareholder and any brokers, dealers or agents, upon
effecting the sale of any of the Shares offered hereby, may be deemed
"underwriters" as that term is defined in the Securities Act.
The Selling Shareholder has agreed that it will not pay more
than the normal brokerage compensation and that it will not enter into
arrangements for special selling efforts without first advising the Company and
cooperating in the disclosure of the same in a revised or supplemental
prospectus.
The Selling Shareholder, alternatively, may sell all or any
part of the Shares offered hereby through an underwriter. The Selling
Shareholder has not entered into any agreement with a prospective underwriter
and there is no assurance that any such agreement will be entered into. If the
Selling Shareholder enters into such an agreement or agreements, the relevant
details will be set forth in a supplement or revisions to this Prospectus.
6
<PAGE> 9
EXPERTS
The consolidated financial statements and the related
consolidated financial statement schedule incorporated in this prospectus by
reference from the Company's Annual Report on From 10-K for the year ended June
30, 1996 have been audited by Deloitte & Touche LLP, independent auditors, as
set forth in their reports, which are incorporated herein by reference, and have
been so incorporated in reliance upon such reports of such firm given upon their
authority as experts in accounting and auditing.
LEGAL MATTERS
The legality of the Shares of Common Stock offered hereby will
be passed upon for the Company by Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, s.c., 1000 North Water Street, Suite 2100, Milwaukee, Wisconsin
53202.
<PAGE> 10
No person is authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offer
contained herein, and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company. This Prospectus
does not constitute an offer to sell or the solicitation of an offer to buy any
security other than the shares of Common Stock offered by this Prospectus, nor
does it constitute an offer to sell or a solicitation of an offer to buy shares
of Common Stock in any jurisdiction where such offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor any sales made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof.
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
Available Information........................... 2
Incorporation of Certain
Documents by Reference......................... 2
The Company..................................... 3
Risk Factors.................................... 4
Use of Proceeds................................. 5
Selling Shareholder............................. 5
Plan of Distribution............................ 6
Experts......................................... 7
Legal Matters................................... 7
</TABLE>
1,055,000 Shares
CRITICARE SYSTEMS, INC.
COMMON STOCK
PROSPECTUS
April __, 1997
8
<PAGE> 11
II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses relating to the registration of the Shares of Common Stock
being offered hereby, other than underwriting discounts and commissions, will be
borne by the Company. Such expenses are estimated to be as follows:
<TABLE>
<CAPTION>
Item Amount
---- ------
<S> <C>
Securities and Exchange Commission
Registration Fee $1,639
Legal Fees and Expenses 2,500
Accounting Fees and Expenses 500
Miscellaneous Expenses 500
------
Total $5,139
======
</TABLE>
Item 15. Indemnification of Directors and Officers
The Company's By-Laws provide that the Company shall, to the fullest
extent permitted by the Delaware Corporation Law and other applicable laws, as
in effect from time to time, indemnify any person who was or is a party or is
threatened to be made a party to any formal or informal threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, including, without limitation, any action brought under federal
or state securities laws, rules or regulations (collectively, "Actions"), other
than in certain limited circumstances, because he is or was a director or
officer of the Company, or because he is or was a director or officer of the
Company and is or was serving at the request of the Company as a director,
officer, employee, consultant or agent of another corporation or other
enterprise or is or was serving at the request of the Company as a fiduciary of
an employee benefit plan or as an employee or agent of the Company; provided,
however, that no director or officer shall be entitled to indemnification
unless, with respect to the conduct that is the subject of the Action, he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interest of the Company and, with respect to any criminal action or
proceeding, he had no reasonable cause to believe his conduct was unlawful. This
indemnification obligation mirrors the permissive indemnification provided under
section 145 of the Delaware Corporation Law. The determination of whether
indemnification is proper under the circumstances, unless made by a court, shall
be made (a) by arbitration; (b) by the Board of Directors by a majority vote of
a quorum consisting of directors who are not parties to the subject Action; (c)
if such quorum is not obtainable or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion; or (d) by the affirmative vote of a majority of the shares entitled to
vote thereon.
Article VI, section 6.01 of the Company's Restated By-Laws provides
that a director or officer is not liable to the Company for damages arising out
of any action taken or omitted to be taken by such person if he exercised and
used the same degree of care and skill as a prudent man would have exercised or
used under the circumstances in the conduct of his own affairs or took or
omitted to take such action in reliance on the advice of the Company's counsel
or statements made or information furnished by officers or employees of the
Company which he had reasonable grounds to believe were true.
In April 1987, the Company entered into indemnity agreements with
Messrs. Von der Ruhr, Lai, Osowski, Houm and Datsopoulos. These agreements
provide that the Company will indemnify those persons, to the extent permitted
under Delaware law, against certain liabilities and expenses, including
liabilities and expenses arising under the Securities Act, to which they may
become subject as a result of serving as officers and/or directors of the
Company. The agreements also provide for the advancement of litigation expenses
by the
9
<PAGE> 12
Company to these individuals. The Company is not required to provide
indemnification (and shall be reimbursed for any advances) in the event the
claim arose out of the individual's misconduct, as defined under the agreements.
The agreements also contain a provision which requires that no stockholder
derivative action may be brought against any of these individuals after the
expiration of two years after his termination as an officer or director.
The indemnification provided as set forth above is not exclusive of any
other rights to which a director or an officer of the Company may be entitled.
The general effect of the foregoing provisions is to reduce the
circumstances in which an officer or director may be required to bear the
economic burdens of the foregoing liabilities and expenses.
Item 16. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
5 Opinion of Counsel.
23.1 Consent of Deloitte & Touche LLP, Independent Auditors.
23.2 Consent of Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c. (included in
Exhibit 5).
24 Power of Attorney (incorporated by reference to the signature page of this
Registration Statement).
99.1 Convertible Debenture Purchase Agreement.
99.2 Registration Rights Agreement
99.3 Convertible Debenture Escrow Agreement
99.4 Form of Convertible Debenture
</TABLE>
Item 17. Undertakings
The undersigned Registrant undertakes as follows:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(b) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement; and
(c) To include any material information with respect to
the plan of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration Statement;
provided, however, that paragraphs 1(a) and (b) will not apply if the
information required to be included in a post effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
section 13 or 15(d) of the Exchange Act and which are incorporated by reference
in this Registration Statement.
10
<PAGE> 13
2. That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
4. That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan annual report pursuant to section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
5. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Milwaukee, State of Wisconsin, on the 27th day of
March, 1997.
CRITICARE SYSTEMS, INC.
BY /s/ Gerhard J. Von der Ruhr
----------------------------------------
Gerhard J. Von der Ruhr, Chairman
of the Board and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Registrant, in the capacities indicated below. Each person whose
signature appears below hereby appoints Gerhard J. Von der Ruhr and Richard J.
Osowski and each of them individually, his true and lawful attorney-in-fact,
with power to act with or without the other and with full power of substitution
and resubstitution, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to the Registration Statement and 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 agents 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 might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitutes, may lawfully cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Gerhard J. Von der Ruhr Chairman of the Board, Chief March 27, 1997
- ------------------------------------
Gerhard J. Von der Ruhr Executive Officer, Treasurer and
Director
/s/ N.C. Joseph Lai Vice Chairman of the Board, March 27, 1997
- ------------------------------------- Senior Vice President, Secretary
N.C. Joseph Lai and Director
/s/ Richard J. Osowski Senior Vice President-Finance March 27, 1997
- ------------------------------------ and Assistant Secretary
Richard J. Osowski (Principal Accounting Officer
and Principal Financial Officer)
/s/ Karsten Houm Director March 27, 1997
- ------------------------------------
Karsten Houm
/s/ Milton Datsopoulos Director March 31, 1997
- ------------------------------------
Milton Datsopoulos
</TABLE>
12
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
------ ----------- ------
<S> <C> <C>
5 Opinion of Counsel
23.1 Consent of Deloitte & Touche LLP,
Independent Auditors
23.2 Consent of Reinhart, Boerner,
Van Deuren, Norris & Rieselbach, s.c.
(included in Exhibit 5)
24 Power of Attorney
(included on the signature page hereto)
99.1 Convertible Debenture Purchase Agreement
99.2 Registration Rights Agreement
99.3 Convertible Debenture Escrow Agreement
99.4 Form of Convertible Debenture
</TABLE>
13
<PAGE> 1
EXHIBIT 5
<PAGE> 2
[REINHART/BOERNER/VAN DEUREN
NORRIS & RIESELBACH, S.C. LETTERHEAD]
April 14, 1997
Criticare Systems, Inc.
20925 Crossroads Circle
Waukesha, Wisconsin 53186
Gentlemen: Re: Registration Statement on Form S-3
We have acted as counsel for Criticare Systems, Inc., a Delaware
corporation (the "Company"), in connection with the Company's registration of
1,055,000 shares (the "Shares") of its $.04 par value common stock at the
request of Paresco, Inc. ("Paresco"). The Shares equal approximately 175% of the
number of shares issuable to Paresco upon its conversion of certain Convertible
Debentures issued to it by the Company on January 31, 1997, assuming all of the
principal and interest on the Convertible Debentures were converted on the date
hereof.
In such capacity we have examined, among other documents, the Restated
Certificate of Incorporation of the Company, as amended, a certificate of good
standing issued by the Secretary of State of the State of Delaware and the
Registration Statement on Form S-3 to be filed by the Company with the
Securities and Exchange Commission on or shortly after the date of this letter
covering the sale by Paresco of the Shares. Based on the foregoing and such
additional investigation as we have deemed necessary, it is our opinion that:
1. The Company is a corporation existing in good standing under the
laws of the State of Delaware.
2. The shares issued upon valid conversion of the Convertible
Debentures will be legally issued, fully-paid and nonassessable, except as set
forth in Wisconsin Statutes section 180.0622(2)(b) as interpreted.
We consent to the filing of a copy of this opinion as an exhibit to the
Registration Statement on Form S-3.
REINHART, BOERNER, VAN DEUREN,
NORRIS & RIESELBACH, s.c.
BY /s/ Albert S. Orr
----------------------------
Albert S. Orr
<PAGE> 1
EXHIBIT 23.1
<PAGE> 2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Criticare Systems, Inc. on Form S-3 of our reports dated August 2, 1996,
appearing and incorporated by reference in the Annual Report on Form 10-K of
Criticare Systems, Inc. for the year ended June 30, 1996, and to the reference
to us under the heading "Experts" in the Prospectus, which is part of such
Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Milwaukee, Wisconsin
April 14, 1997
<PAGE> 1
EXHIBIT 99.1
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS SUBSCRIPTION AGREEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
CRITICARE SYSTEMS, INC.
THIS AGREEMENT is made this 31st day of January 1997, between
CRITICARE SYSTEMS, INC., Nasdaq Symbol "CXIM" (the "Company"), a Delaware
corporation, with its principal office at 20925 Crossroads Circle, Waukesha, WI
53186 and PARESCO, INC. (the "Purchaser"), with its principal office at 101
Hudson Street, Jersey City, NJ 07302.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and the Purchaser agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement:
"Closing Date" means the date of the delivery of the Debenture
to the Purchaser against a wire transfer of the funds to the Company.
"Closing" means the completion of the purchase and sale of the
Debenture on the Closing Date.
"Common Stock" means the Common Stock of the Company $.04 par
value.
"Conversion Date" means the date on which the Purchaser has
telecopied the Notice of Conversion to the Company.
"Conversion Shares" means the Common Stock issued upon the
conversion of the Convertible Debenture.
"Convertible Debenture" means the Debenture of the Company
convertible into common stock of the Company as hereinafter provided.
"Conversion Price" means, for a period beginning sixty-one
(61) days after the Closing Date, at which time $1,250,000 face amount of
Convertible Debentures may be converted, an amount equal to a twenty (20%)
percent discount from the average closing bid price of the Common Stock as
reported by Nasdaq or on other securities exchanges or markets on which the
Common Stock is listed, for the previous five (5) trading days ending on the day
before the Conversion Date. From the period beginning ninety-one (91) days after
the Closing Date, at which time all or any part of the Convertible Debentures
may be converted, Conversion Price shall mean an amount equal to a twenty-five
(25%) percent discount from the average closing bid price of the Common Stock as
reported by Nasdaq or on other securities exchanges or markets on which the
Common Stock is listed for the previous five (5) trading days ending on the day
before the Conversion Date.
"Debenture" or "Debentures" means the Convertible
Debenture or Convertible Debentures, as appropriate.
<PAGE> 2
Section 2. Authorization and Sale of Debenture.
2.1 Authorization. Subject to the terms and conditions of this
Agreement, the Company has authorized the execution and delivery of one or more
Convertible Debentures in an aggregate principal amount of Two Million, Five
Hundred Thousand ($2,500,000) Dollars (the "Principal"), with a maturity date of
5:00 PM Eastern Standard Time on February 2, 1999 (the "Maturity Date"). The
Company promises to pay to the Purchaser the Principal, if any remains
unconverted, with interest at eight (8%) percent per annum, in shares of Common
Stock on the Maturity Date. Except as otherwise provided in the Debenture, the
Principal and interest on this Debenture are payable only in shares of Common
Stock (form of Debenture annexed hereto as Exhibit A).
2.2 Agreement to Execute and Deliver the Debenture Agreement
and the Debenture. The Company will borrow $2,500,000 from the Purchaser in
reliance upon the representations and warranties of the Company contained in
this Agreement. The Purchaser will lend such sum to the Company, upon the terms
and conditions hereinafter set forth. The Debenture shall pay eight (8%) percent
interest per annum, payable in common stock at the time of each Conversion Date.
Such loan shall occur on the Closing Date and shall accrue interest from the
Closing Date.
2.3 Time and Place of Closing. The Closing shall be held at
the offices of Sheldon E. Goldstein, P.C. ("Escrow Agent"), 65 Broadway, 10th
Fl., New York, NY 10006, on the Closing Date.
2.4 Payment and Delivery. At or prior to the Closing, the
following shall occur:
(a) Purchaser shall remit by wire transfer the Purchase
Price to Escrow Agent as per the separate Escrow Agreement, which shall be
executed and delivered by the parties contemporaneously with this Agreement, as
payment in full for the Debenture.
(b) Company shall deliver or cause to be delivered to
Escrow Agent a Debenture, substantially in the form set forth in Exhibit A
hereto, bearing the original signatures of an authorized officer of the Company.
(c) Wire instructions for Sheldon E. Goldstein, P.C., as
follows:
Chase Manhattan Bank, N.A.
ABA #021000021
For the Account of
United States Trust Company of New York
Account #920-1-073195
In Favor of
Sheldon E. Goldstein, P.C. Attorney Trust Account
Account #59-02347
Section 2.5. Closing. At the closing, the following shall
occur:
(a) The Escrow Agent shall deliver the Purchase Price and
the Debenture in accordance with the terms of the Escrow Agreement.
(b) The Company shall cause the legal opinion required
pursuant to the terms of Section 3.16 hereof to be executed and delivered to the
Purchaser.
(c) The Company and Purchaser shall execute and deliver
the Registration Rights Agreement in the form of Exhibit C attached hereto.
Section 3. General Representations and Warranties of the
Company. The Company hereby
2
<PAGE> 3
represents and warrants to, and covenants with, the Purchaser that the following
are true and correct as of the date hereof.
3.1 Organization; Qualification. The Company is a corporation
duly organized and validly existing under the laws of Delaware and is in good
standing under such laws. The Company has all requisite corporate power and
authority to own, lease and operate its properties and assets, and to carry on
its business as presently conducted. The Company is qualified to do business as
a foreign corporation in each jurisdiction in which the ownership of its
property or the nature of its business requires such qualification, except where
failure to so qualify would not have a material adverse effect on the Company.
3.2 Capitalization and Conversion. The authorized capital
stock of the Company consists of 10,000,000 Shares of Common Stock, $.04 par
value, of which 7,128,272 Shares have been issued and 500,000 shares of
preferred stock, $.04 par value, of which none have been issued. All issued and
outstanding Shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable (except as set forth in Wisconsin Statutes
Section 180.0622(2)(b)). As of the Closing Date, the Company had reserved from
its authorized but unissued shares of Common Stock a sufficient number of shares
of Common Stock for issuance upon conversion of the Debenture, which is
convertible pursuant to the conversion table below, at Purchaser's option, at
the Conversion Price, which will be automatically converted on the second
anniversary of closing, at the Conversion Price, if not previously converted.
Each such conversion shall reduce the principal amount owing on the Debenture by
the amount stated in the Notice of Conversion (Exhibit B) and will be reflected
in a Convertible Debenture Principal Reduction Schedule signed by an authorized
officer of the Company.
Conversion will be permitted as follows:
0-60 days from Closing Date - None
61-90 days from Closing Date - Up to 50% of initial investment
After 90 days from Closing Date - 100% of initial investment
3.3 Authorization. The Company has all requisite corporate
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. All corporate action on the
part of the Company, its directors and shareholders necessary for the
authorization, execution, delivery and performance of this Agreement and the
Debenture by the Company, the authorization, sale, issuance and delivery of the
Conversion Shares and the performance of the Company's obligations hereunder has
been taken. This Agreement has been duly executed and delivered by the Company
and constitutes a legal, valid and binding obligation of the Company enforceable
in accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and to
limitations of public policy as they may apply to the indemnification provisions
set forth in Section 7.2 of this Agreement. Upon their issuance and delivery
pursuant to this Agreement, the Conversion Shares will be validly issued, fully
paid and nonassessable (except as set forth in Wisconsin Statutes Section
180.0622(2)(b)) and will be free of any liens or encumbrances except for those
imposed by or on behalf of the Purchaser, its creditors or agents.
3.4 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Certificate of Incorporation, and any amendments thereto,
Bylaws and any amendments thereto of the Company or any material mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree statute, law, ordinance, rule or
regulation applicable to the Company, its properties or assets.
3.5 Accuracy of Reports and Information. The Company is in
compliance, to the extent applicable, with all reporting obligations under
either Section 12(b), 12 (g) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Action"). The Company has registered its Common Stock
pursuant to Section 12 of the Exchange Act and the Common Stock is listed and
trades on the Nasdaq National Market.
3
<PAGE> 4
The Company has filed all material required to be filed
pursuant to all reporting obligations, under either Section 13(a) or 15(d) of
the Exchange Act for a period of at least twelve (12) months immediately
preceding the offer and sale of the Debenture (or for such shorter period that
the Company has been required to file such material).
3.6 SEC Filings/Full Disclosure. For a period of at least
twelve (12) months immediately preceding this offer and sale (i) none of the
Company's filings with the Securities and Exchange Commission contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances under which they were made, not misleading, and (ii) the Company
has timely filed all requisite forms, reports and exhibits thereto with the
Securities and Exchange Commission.
Except as shown on Schedule 1 hereto, there is no fact known
to the Company (other than general economic conditions known to the public
generally) that has not been publicly disclosed by the Company or disclosed in
writing to the Purchaser which (i) could reasonably be expected to have a
material adverse effect on the condition (financial or otherwise) or on
earnings, business affairs, properties or assets of the Company, or (ii) could
reasonably be expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to this Agreement.
3.7 Absence of Undisclosed Liabilities. Except as shown on
Schedule 1 hereto, the Company has no material liabilities or obligations,
absolute or contingent (individually or in the aggregate), except as set forth
in the Reports (as hereinafter defined) or as incurred in the ordinary course of
business after the date of the Reports.
3.8 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Debenture, or the consummation of any other transaction contemplated hereby,
except the filing with the SEC of a registration statement on Form S-3 for the
purpose of registering the Common Stock underlying the Debenture.
3.9 Intellectual Property Rights. Except as disclosed in the
Form 10-Ks, Form 10-Qs and Form 8-Ks filed by the Company for a period of at
least twelve (12) months immediately preceding this offer (the "Reports"), the
Company has sufficient trademarks, trade names, patent rights, copyrights and
licenses to conduct its business as presently conducted. To the Company's
knowledge, neither the Company nor its products is infringing or will infringe
any trademark, trade name, patent right, copyright, license, trade secret or
other similar right of others currently in existence; and there is no claim
being made against the Company regarding any trademark, trade name, patent,
copyright, license, trade secret or other intellectual property right which
could have a material adverse effect on the condition (financial or otherwise),
business, results of operations or prospects of the Company.
3.10 Material Contracts. Except as set forth in the Reports,
the material agreements to which the Company is a party described in the Reports
are valid agreements, in full force and effect, the Company is not in material
breach or material default (with or without notice or lapse of time, or both)
under any of such agreements, and, to the Company's knowledge, the other
contracting party or parties thereto are not in material breach or material
default (with or without notice or lapse of time, or both) under any of such
agreements.
4
<PAGE> 5
3.11 Litigation. Except as disclosed on Schedule 1 or in the
Reports, there is no action, proceeding or investigation pending, or to the
Company's knowledge threatened, against the Company which might result, either
individually or in the aggregate, in any material adverse change in the
business, prospects, conditions, affairs or operations of the Company. The
Company is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company currently intends to initiate
which will materially effect the Company.
3.12 Title to Assets. Except as is required to be set forth in
the Reports, the Company has good and marketable title to all properties and
material assets described in the Reports as owned by it, free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest other
than such as are not material to the business of the Company.
3.13 Subsidiaries. Except as disclosed in the Reports and the
financial statements, the Company does not presently own or control, directly or
indirectly, any interest in any other corporation, partnership, association or
other business entity, except for CSI Trading Inc., a Wisconsin corporation.
3.14 Required Governmental Permits. The Company is in
possession of and operating in material compliance with all authorizations,
licenses, certificates, consents, orders and permits from state, federal and
other regulatory authorities which are material to the conduct of its business,
all of which are valid and in full force and effect.
3.15 Listing. The Company will maintain the listing of its
Common Stock on the Nasdaq National Market or other organized United States
Markets or Quotron System.
3.16 Other Outstanding Securities. Except as disclosed in the
Reports, there are no other material outstanding debt or equity securities
presently convertible into Common Stock.
3.17 Financing; Restrictions. The Company cannot, without the
prior approval in writing from Subscriber, obtain convertible debt or equity
financing for a period of ninety (90) days following the effective date of this
Agreement.
3.18 Legal Opinion. Purchaser shall, upon the purchase of the
Debenture, receive an opinion letter from counsel to the Company, and the
Company represents that it will immediately obtain such an opinion from counsel
in the form attached to this Agreement as Exhibit E:
Section 4. Representations, Warranties and Covenants of the
Purchaser. The Purchaser represents and warrants to, and covenants with, the
Company that the following are true and correct as of the date hereof and as of
the Closing Date.
4.1 Authority. The Purchaser's signatory has all right, power,
authority and capacity to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser and will constitute the legal, valid and binding
obligations of the Purchaser, enforceable in accordance with its terms, subject
to laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 7.2 of this Agreement.
4.2 Investment Experience. Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Purchaser is aware
of the Company's business affairs and financial condition and has had access to
and has acquired sufficient information about the Company, including the
Reports, to reach an informed and knowledgeable decision to acquire the
Debenture. Purchaser has such business and financial experience as is required
to give it the capacity to protect its own interests in connection with the
purchase of the Debenture.
5
<PAGE> 6
4.3 Investment Intent. Without limiting its ability to resell
the underlying Common Stock pursuant to an effective registration statement,
Purchaser represents that it is purchasing the Debenture for its own account as
principal for investment purposes, and not with a view to a distribution.
Purchaser understands that its acquisition of the Debenture has not been
registered under the Securities Act or registered or qualified under any state
securities law in reliance on specific exemptions therefrom, which exemptions
may depend upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein. Purchaser will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchaser or otherwise acquire or take a pledge of) any of
the Debenture or the underlying Common Stock, except in compliance with the
Securities Act and any applicable state securities laws, and the rules and
regulations promulgated thereunder.
4.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the Debenture or the Conversion Shares may not
be resold or otherwise transferred except in a transaction registered under the
Securities Act and any applicable state securities laws or unless an exemption
from such registration is available. Purchaser understands that the Debenture
and, if converted, the Conversion Shares will be imprinted with a legend that
prohibits the transfer of such securities unless (i) it is registered or such
registration is not required, and (ii) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the Securities Act and, if
the Company shall so request in writing, an opinion of counsel reasonably
satisfactory to the Company is obtained to the effect that the transaction is so
exempt.
4.5 No Legal, Tax or Investment Advice. Purchaser understands
that nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the Debenture constitutes legal, tax or
investment advice. Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchaser of the Debenture.
4.6 Purchaser Review. Purchaser hereby represents and warrants
that the Purchaser has carefully examined the Reports, and the financial
statements contained therein. The Purchaser acknowledges that the Company has
made available to the Purchaser all documents and information that it has
requested relating to the Company and has provided answers to all of its
questions concerning the Company and the Debenture. Nothing stated in the
previous two sentences, however, shall be deemed to affect the representations
and warranties of the Company contained in this Agreement.
4.7 Legend. The certificate or certificates representing the
Debenture and, upon conversion, the Underlying Common Stock shall be subject to
a legend restricting transfer under the Securities Act of 1933, such legend to
be substantially as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH,
EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO RULE 144 UNDER SAID ACT,
IS CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE COMPANY."
Such securities shall also include any legends required by any applicable state
securities laws.
With respect to the Conversion Shares, the legend(s) shall be
removed and the Company shall issue a replacement certificate without such
legend to the holder of such certificate if such holder provides to the Company
an opinion of counsel reasonably acceptable to the Company, to the effect that a
public sale, transfer or assignment of such stock may be made without
registration.
4.8 Restrictions on Conversion of Debenture. The Purchaser or
any subsequent holder of the Debenture (the "Holder") shall be prohibited from
(i) converting any portion of the Debenture which would result in the Purchaser
or the Holder being deemed the beneficial owner, in accordance with the
provisions of Rule 13d-3 of the Securities Exchange Act of 1934, as amended, of
4.99% or more of the then issued and outstanding
6
<PAGE> 7
Common Stock of the Company, or (ii) converting any portion of the shares which
would result in the Purchaser or the Holder being issued more than 1,425,647
shares of Common Stock of the Company in the aggregate pursuant to the
Debenture. In the event that upon conversion the Holders would be entitled to
have been issued an aggregate of more than 1,425,647 shares of Common Stock of
the Company, then such Holders shall receive cash in the amount equal to 125% of
the face amount of the remaining Debentures and interest.
4.9 Certain Risks. The Purchaser recognizes that the purchase
of the Debentures and the Conversion Shares involves a high degree of risk in
that:
(i) an investment in the Company is highly
speculative and only investors who can afford the loss of their
entire investment should consider investing in the Company and the
Debenture;
(ii) a purchaser may not be able to liquidate its
investment;
(iii) transferability of the Debenture is extremely
limited;
(iv) in the event of disposition, Purchaser could
sustain the loss of its entire investment;
(v) the Debentures represent non-voting securities,
which have the right to convert into and purchase shares of voting
equity securities in a corporate entity;
(vi) no return on investment, whether through
distributions, appreciation, transferability or otherwise, and no
performance by, through or of the Company, has been promised,
assured, represented or warranted by the Company, or by any
director, officer, employee, agent or representative thereof;
(vii) while the Common Stock is presently quoted and
traded on the Nasdaq National Market and while the Purchasers are
beneficiaries of certain registration rights provided herein, the
Debenture and the Conversion Shares:
(a) are not registered under applicable federal or
state securities laws, and thus may not be sold,
conveyed, assigned or transferred unless registered
under such laws or unless an exemption from
registration is available under such laws, as more
fully described below; and
(b) are not quoted, traded or listed for trading or
quotation on the Nasdaq National Market, or any other
organized market or quotation system, and there is
therefore no present public or other market for such
Debenture, nor can there be any assurance that the
Common Stock will continue to be quoted, traded or
listed for trading or quotation on the Nasdaq
National Market or on any other organized market or
quotation system.
4.10 No Registration, Review or Approval. The Purchaser
acknowledges and understand that the limited private offering and sale of the
Debenture and the Underlying Shares pursuant to this Agreement has not been
reviewed or approved by the SEC or by any state securities commission, authority
or agency, and is not registered under the Act or under the securities or "blue
sky" laws, rules or regulations of any state. The Purchaser acknowledges,
understands and agrees that the Debenture and the Underlying Shares are being
offered and sold hereunder pursuant to (i) a private placement exemption to the
registration provisions of the Act pursuant to Section 3(b) or Section 4(2) of
such Act and Regulation D promulgated under such Act, and (ii) a similar
exemption to the registration provisions of applicable state securities laws.
Section 5. Conditions to the Purchaser's Obligation to
Purchase. The Company understands that the Purchaser's obligation to purchase
the Debenture is conditioned upon:
(a) Acceptance by Purchaser of this Debenture Purchase
Agreement for the purchase of the Debenture, as evidenced by the execution of
this Agreement by its authorized officers;
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(b) Delivery of the Debenture into Escrow;
(c) Delivery of legal opinion as required by this
Agreement;
(d) Execution and delivery by the Company of the
Registration Rights Agreement in the form of Exhibit C.
Section 6. Conditions to Company's Obligation to Sell.
Purchaser understands that the Company's obligation to sell the Debenture is
conditioned upon:
(a) The receipt and acceptance by the Company of this
Debenture Purchase Agreement for the Debenture as evidenced by execution of this
Subscription Agreement by the President or any Vice President of the Purchaser;
and
(b) Delivery into escrow by Purchaser of good funds as
payment in full for the purchase of the Debenture.
Section 7. Compliance with the Securities Act.
7.1 Underwriter. The Company understands that the Purchaser
disclaims being an "underwriter" (as such term is defined under the Securities
Act and the rules and regulations promulgated thereunder (an "Underwriter")),
but Purchaser being deemed an Underwriter shall not relieve the Company of any
obligation it has hereunder.
7.2 Indemnification. Each of the Company and the Purchaser
agrees to indemnify the other and to hold the other harmless from and against
any and all losses, damages, liabilities, costs and expenses (including
reasonable attorneys' fees) which the other may sustain or incur in connection
with the breach by the indemnifying party of any representation, warranty or
covenant made by it in this Agreement.
7.3 Information Available. So long as any registration
statement is effective covering the resale of the Common Stock underlying the
Debenture, the Company will furnish to Purchaser:
(a) as soon as possible after available (but in the case
of the Company's Annual Report to Stockholders, within 150 days after the end of
each fiscal year of the Company), one copy of (i) its Annual Report to
Stockholders (which Annual report shall contain financial statements audited in
accordance with generally accepted accounting principles in the United States of
America by a national firm of certified public accountants); (ii) each of its
Quarterly Reports to Stockholders, and its Quarterly Reports on Form 10-Q; and
(iii) a full copy of the registration statement covering the Conversion Shares
(the foregoing, in each case, including exhibits); and
(b) upon the reasonable request of Purchaser, such other
information that is generally available to the public.
7.4 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Underlying Shares to the public without registration, the
Company agrees to use its best efforts to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date on which the Company becomes subject to the
reporting requirements of the Securities Act or the Exchange Act;
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act;
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<PAGE> 9
(c) to furnish to Purchaser forthwith upon request a
written statement by the Company as to its compliance with the reporting
requirements of said Rule 144, and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents of the Company and other information in the
possession of or reasonably obtainable by the Company as Purchaser may
reasonably request in availing itself of any rule or regulation of the SEC
allowing Purchaser to sell any of the Underlying Shares without registration.
7.5 Temporary Cessation of Offers and Sales by Purchaser. The
Purchaser acknowledges that there may occasionally be times when the Company may
be required to suspend the use of the prospectus forming part of the
Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the
Commission, until the prospectus is supplemented or amended to comply with the
Securities Act, or until such time as the Company has filed an appropriate
report with the Commission pursuant to the Exchange Act. The Company agrees to
file any necessary amendments, supplements and reports as soon as practicable
under the circumstances. Purchaser hereby covenants that it will not sell any
Common Stock pursuant to said prospectus during a period of not more than 20
days commencing at the time at which the Company gives the Purchaser notice of
the suspension of the use of said prospectus and ending at the time the Company
gives the Purchaser notice that the Purchaser may thereafter effect sales
pursuant to said prospectus, as the same may have been supplemented or amended.
7.6 Transfer of Common Stock After Registration. Purchaser
hereby covenants with the Company not to make any sale of the Common Stock
except either (i) in accordance with the Registration Statement, in which case
Purchaser covenants to comply with the requirement of delivering a current
prospectus, or (ii) in accordance with Rule 144, in which case Purchaser
covenants to comply with Rule 144.
7.7 Termination of Obligations. The obligations of the Company
pursuant to Sections 7.2, 7.3 and 7.6 hereof shall cease and terminate upon the
earlier to occur of (i) such time as all of the Common Stock have been re-sold,
or (ii) such time as all of the Common Stock may be re-sold in any three-month
period pursuant to Rule 144 under the Securities Act.
Section 8. Legal Fees and Expenses. Each of the parties shall
pay its own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with this Agreement
and the transactions contemplated hereby.
Section 9. Conversion of the Debenture. Conversion of the
Debenture to Common Stock may be made pursuant to the timetable set forth in
Section 3.2. The Debenture may be held by Purchaser for up to two (2) years from
the Closing Date. If any Debenture remain outstanding on the second anniversary
of the Closing Date, subject to the provisions of Section 4.8 hereof, all
remaining portions of the Debenture will be converted on that date at the
conversion price as defined herein. This two year period shall be extended for
each day after sixty (60) days from the date of exercise of the Demand
Registration Right, that the Registration Statement is not effective.
9.1 Notice of Conversion. Conversion of the Debenture to
Common Stock may be exercised in whole or in part by Purchasers telecopying an
executed and completed Notice of Conversion (in the form annexed hereto as
Exhibit B) to the Company and delivering the original Notice of Conversion and
the certificate representing the Debenture to the Company by express courier
within three (3) business days of exercise. Each date on which a Notice of
Conversion is telecopied to and received by the Company in accordance with the
provisions hereof shall be deemed a Conversion Date. The Company will transmit
the certificates representing the Common Stock issuable upon conversion of all
or any part of the Debenture (together with the certificates representing
portions of the Debenture not so converted) to the Purchaser via express courier
within five (5) business days after the Company has received the original Notice
of Conversion and Debenture certificate being so converted. In addition to any
other remedies which may be available to the Purchaser, in the event that the
Company fails for any reason to effect delivery of such shares of Common Stock
within such five (5) business day period, the Purchaser will be entitled to
revoke the relevant Notice of Conversion by delivering by telecopier with an
original by overnight courier a notice to such effect to the Company whereupon
the Company and the Purchaser
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shall each be restored to their respective positions immediately prior to the
delivery of the Notice of Conversion. Upon receipt of such Notice the Company
shall return by overnight courier the original certificate representing the
Debenture. The Notice of Conversion and certificate representing the portion of
the Debenture converted shall be delivered as follows:
To the Company:
Criticare Systems, Inc.
20925 Crossroads Circle
Waukesha, WI 53186
Attn: Gerhard J. Von der Ruhr
(fax) (414) 798-8290
or to such other person at such other place as the Company shall designate to
the Purchaser in writing.
In the event that the Common Stock issuable upon conversion of
the Debenture is not delivered within five (5) business days of receipt by the
Company of a valid Conversion Notice and the Debenture to be converted (such
date of receipt referred to as the "Conversion Date"), the Company shall pay to
the Purchaser, by wire transfer, as liquidated damages for such failure and not
as a penalty, for each $100,000 of Debenture sought to be converted, $100 for
each of the first two (2) days, $200 for each of the next two days, $300 for
each of the next two days, $400 for each of the next two days and $500 per day
thereafter that the Conversion Shares are not delivered, which penalty shall run
from the sixth business day after the Conversion Date.
Section 10. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first class
registered or certified airmail, postage prepaid, and shall be deemed given when
so mailed:
(a) if to the Company, to
Criticare Systems, Inc.
20925 Crossroad Circle
Waukesha, WI 53186
Attn: Gerhard J. Von der Ruhr
(fax) (414) 798-8290
copy to:
Robert E. Bellin, Esq.
Reinhart Boerner VanDeuren Norris & Rieselbach
1000 North Water Street, Suite 2100
Milwaukee, WI 53202
or to such other person at such other place as the Company shall designate to
the Purchaser in writing;
(b) if to the Purchaser, to
Paresco, Inc.
101 Hudson Street
Jersey City, NJ 07302
copy to:
Sheldon E. Goldstein, P.C.
65 Broadway, 10th Fl.
New York, NY 10006
Attn: Sheldon E. Goldstein, Esq.
or at such other address or addresses as may have been furnished to the Company
in writing; or
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(c) if to any transferee or transferees of a Purchaser, at
such address or addresses as shall have been furnished to the Company at the
time of the transfer or transfers, or at such other address or addresses as may
have been furnished by such transferee or transferees to the Company in writing.
Section 11. Miscellaneous.
11.1 Listing. The Company will use its best efforts to
maintain the listing of its Common Stock on the Nasdaq National Market.
11.2 Entire Agreement. This Agreement, including Exhibit A
(Form of Convertible Debenture), Exhibit B (Form of Notice of Conversion),
Exhibit C (Form of Registration Rights Agreement) and Exhibit D (Form of
Convertible Debenture Escrow Agreement), embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and understandings
relating to the subject matter hereof. No statement, representation, warranty,
covenant or agreement or any kind not expressly set forth in this Agreement
shall affect, or be used to interpret, change or restrict, the express terms and
provisions of this Agreement.
11.3 Amendments. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and by
Purchaser.
11.4 Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
11.5 Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
11.6 Governing Law/Jurisdiction. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the 1933 Act, without reference to
principles of conflicts of law. Each of the parties consents to the jurisdiction
of the federal district court for the Southern District of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. Each party hereby agrees that if either party to this Agreement
obtains a judgment against it in such a proceeding, the party which obtained
such judgment may enforce same by summary judgment in the courts of any country
having jurisdiction over the party against whom such judgment was obtained, and
each party hereby waives any defenses available to it under local law and agrees
to the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law.
11.7 Recovery of Attorney's Fees. Should any party bring an
action to enforce the terms of this Agreement then, if Purchaser prevails in
such action it should be entitled to recovery of its attorney's fees from the
Company, and if the Company prevails in such action it shall be entitled to
recovery of its attorney's fees from the Purchasers.
11.8 Fees. The Company acknowledges that Purchaser shall have
no responsibility for the payment of any of its fees in connection with this
offering. The Company agrees to pay to Sheldon E. Goldstein, P.C., the sum of
Fifteen Thousand ($15,000) Dollars for legal services rendered and
disbursements.
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11.9 Counterparts/Facsimile. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.
11.10 Publicity. The Purchaser shall not issue any press
releases or otherwise make any public statement with respect to the transactions
contemplated by this Agreement without the prior written consent of the Company,
except as may be required by applicable law or regulation.
11.11 Survival. The representations and warranties in this
Agreement shall survive Closing.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
CRITICARE SYSTEMS, INC.
By /s/ Gerhard J. Von der Ruhr
------------------------------
Officer - President
PURCHASER:
PARESCO, INC.
By /s/ George T. Hartigan
------------------------------
Officer - Director of Operations
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SCHEDULE 1
The Company's German subsidiary is subject to a court judgment
in Germany in the amount of approximately $185,000 related to an employment
termination dispute. The subsidiary and the Company vigorously object to the
court's ruling and the subsidiary intends to appeal this judgment. If that
judgment stands, the Company's consolidated income statement is likely to be
required to reflect that judgment.
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EXHIBIT 99.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated the 31st of January,
1997, between the person and/or entity whose name and address appears on the
signature page attached hereto (individually a "Holder" or collectively with the
holders of the other Securities issued pursuant to a Debenture Purchase
Agreement of even date herewith, as defined below, the "Holders") and CRITICARE
SYSTEMS, INC., a Delaware corporation having its principal place of business at
20925 Crossroads Circle, Waukesha, WI 53186.
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Holders are purchasing from the Company, pursuant to a
Convertible Debenture Purchase Agreement dated the date hereof (the
"Subscription Agreement"), an aggregate of up to Two Million, Five Hundred
Thousand ($2,500,000) Dollars principal amount of Debentures (singularly the
"Debenture" and collectively the "Debentures"); and
WHEREAS, the Debenture is convertible into shares (the
"Conversion Shares") of the Company's Common Stock, par value $.04 per share
(the "Common Stock"); and
WHEREAS, the Company desires to grant to the Holders the
registration rights set forth herein with respect to the Conversion Shares.
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term
"Registrable Security" means each of the Conversion Shares; provided, however,
that with respect to any particular Registrable Security, such security shall
cease to be a Registrable Security when, as of the date of determination, (i) it
has been effectively registered under the Securities Act of 1933, as amended
(the "Securities Act") and disposed of pursuant thereto, (ii) registration under
the Securities Act is no longer required for the immediate public distribution
of such security as a result of the provisions of Rule 144, or (iii) it has
ceased to be outstanding. The term "Registrable Securities" means any and/or all
of the securities falling within the foregoing definition of a "Registrable
Security." In the event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting the Common
Stock, such adjustment shall be made in the definition of "Registrable Security"
as is appropriate in order to prevent any dilution or enlargement of the rights
granted pursuant to this Section 1.
Section 2. Restrictions on Transfer. The Holder acknowledges
and understands that prior to the registration of the Conversion Shares as
provided herein, the Debenture and the Conversion Shares are "restricted
securities" as defined in Rule 144 promulgated under the Act. The Holder
understands that no disposition or transfer of the Debenture or Conversion
Shares may be made by Holder in the absence of (i) an opinion of counsel
reasonably satisfactory to the Company that such transfer may be made or (ii) a
registration statement under the Securities Act is then in effect with respect
thereto.
Section 3. Registration Rights.
(a) At any time commencing after the date hereof a Holder of
the Conversion Shares (whether or not the Debentures have been converted) shall
have the right, exercisable by written notice to the Company (the "Demand
Registration Request"), to have the Company prepare and file with the Securities
and Exchange Commission ("SEC"), on one occasion, at the sole expense of the
Company (except as provided in Section 3(c) hereof), in respect of all holders
of Registrable Securities, so as to permit a non-underwritten public offering
and sale of the Registrable Securities under the Act. The number of Conversion
Shares to be registered shall be one hundred fifty (150%) percent of the number
of such shares that would be required, if all of the Debentures were converted
on the effective date of the Registration Statement.
<PAGE> 2
(b) The Company will maintain any Registration Statement or
post-effective amendment filed under this Section 3 hereof current under the
Securities Act until the earlier of (i) the date that all of the Registrable
Securities have been sold pursuant to the Registration Statement, (ii) the date
the holders thereof receive an opinion of counsel that the Registrable
Securities may be sold under the provisions of Rule 144 or (iii) the second
anniversary of the effective date of the Registration Statement.
(c) All fees, disbursements and out-of-pocket expenses and
costs incurred by the Company in connection with the preparation and filing of
any Registration Statement under subparagraph 3(a) and in complying with
applicable securities and Blue Sky laws (including, without limitation, all
attorneys' fees) shall be borne by the Company. The Holder shall bear the cost
of underwriting discounts and commissions, if any, applicable to the Registrable
Securities being registered and the fees and expenses of its counsel. The
Company shall use its best efforts to qualify any of the securities for sale in
such states as such Holder reasonably designates and shall furnish
indemnification in the manner provided in Section 6 hereof. However, the Company
shall not be required to qualify in any state which will require an escrow or
other restriction relating to the Company and/or the sellers. The Company at its
expense will supply the Holder with copies of such Registration Statement and
the prospectus or offering circular included therein and other related documents
in such quantities as may be reasonably requested by the Holder.
(d) The Company shall not be required by this Section 3 to
include a Holder's Registrable Securities in any Registration Statement which is
to be filed if, in the opinion of counsel for both the Holder and the Company
(or, should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holder and the Company) the
proposed offering or other transfer as to which such registration is requested
is exempt from applicable federal and state securities laws and would result in
all purchasers or transferees obtaining securities which are not "restricted
securities", as defined in Rule 144 under the Securities Act.
(e) In the event the Registration Statement to be filed by the
Company pursuant to Section 3(a) above is not declared effective by the SEC
within sixty (60) days of the receipt by the Company of the Demand Registration
Request, because of the Company's acts solely and not due to Securities and
Exchange Commission delay in response, then the Company will pay Holder, as
liquidated damages for such failure and not as a penalty, two (2%) percent of
the principal amount of this Debenture for the first month and two (2%) percent
of the principal amount of the Debenture for each month thereafter until the
Company procures registration of the Common Stock underlying the Debenture (the
"Conversion Shares"). If the Company does not remit the damages to the Purchaser
as set forth above, the Company will pay the Purchaser reasonable costs of
collection, including attorneys fees, in addition to the liquidated damages.
Such payment shall be made to the Purchaser immediately if the registration of
the Conversion Shares are not effected; provided, however, that the payment of
such liquidated damages shall not relieve the Company from its obligations to
register the Conversion Shares pursuant to this Section. The registration of the
Conversion Shares pursuant to this provision shall not affect or limit
Purchaser's other rights or remedies as set forth in this Agreement. Any payment
pursuant to this Section 3(e) shall be made either in cash or paid in additional
shares of Common Stock in an amount equal to the total amount of the payment due
hereunder divided by the average closing bid price of the Common Stock as
reported by Nasdaq for the three (3) business days ending on the 120th day after
the Company's receipt of the Demand Registration Agreement.
(f) No provision contained herein shall preclude the Company
from selling securities pursuant to any Registration Statement in which it is
required to include Registrable Securities pursuant to this Section 3.
Section 4. Cooperation with Company. Holders will cooperate
with the Company in all respects in connection with this Agreement, including,
timely supplying all information reasonably requested by the Company and
executing and returning all documents reasonably requested in connection with
the registration and sale of the Registrable Securities.
Section 5. Registration Procedures. If and whenever the
Company is required by any of the provisions of this Agreement to effect the
registration of any of the Registrable Securities under the Act, the Company
shall (except as otherwise provided in this Agreement), as expeditiously as
possible:
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(a) prepare and file with the Commission such amendments and
supplements to such registration statement and the Prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Act with respect to the sale or other
disposition of all securities covered by such registration statement whenever
the Holder or Holders of such securities shall desire to sell or otherwise
dispose of the same (including prospectus supplements with respect to the sales
of securities from time to time in connection with a registration statement
pursuant to Rule 415 of the Commission);
(b) furnish to each Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the Act, and such other documents, as such Holder may reasonably request in
order to facilitate the public sale or other disposition of the securities owned
by such Holder;
(c) use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as the Holder, shall reasonably request, and
do any and all other acts and things which may be necessary or advisable to
enable each Holder to consummate the public sale or other disposition in such
jurisdiction of the securities owned by such Holder, except that the Company
shall not for any such purpose be required to qualify to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified or to
file therein any general consent to service of process;
(d) use its best efforts to list such securities on Nasdaq or
any securities exchange on which any securities of the Company is then listed,
if the listing of such securities is then permitted under the rules of such
exchange or Nasdaq;
(e) enter into and perform its obligations under an
underwriting agreement, if the offering is an underwritten offering, in usual
and customary form, with the managing underwriter or underwriters of such
underwritten offering;
(f) notify each Holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto
covered by such registration statement is required to be delivered under the
Act, of the happening of any event of which it has knowledge as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing.
Section 6. Indemnification.
(a) In the event of the filing of any Registration Statement
with respect to Registrable Securities pursuant to Section 3 hereof, the Company
agrees to indemnify and hold harmless the Holder and each person, if any, who
controls the Holder within the meaning of the Securities Act ("Distributing
Holders") against any losses, claims, damages or liabilities, joint or several
(which shall, for all purposes of this Agreement, include, but not be limited
to, all costs of defense and investigation and all attorneys' fees), to which
the Distributing Holders may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any such Registration
Statement, or any related preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement, preliminary prospectus,
final prospectus, offering circular, notification or amendment or supplement
thereto in reliance upon, and in conformity with, written information furnished
to the Company by the Distributing Holders, specifically for
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<PAGE> 4
use in the preparation thereof. This indemnity agreement will be in addition to
any liability which the Company may otherwise have.
(b) Each Distributing Holder agrees that it will indemnify and
hold harmless the Company, and each officer, director of the Company or person,
if any, who controls the Company within the meaning of the Securities Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees) to which the Company or any such
officer, director or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses claims, damages or liabilities (or
actions in respect thereof; arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in a Registration
Statement requested by such Distributing Holder, or any related preliminary
prospectus, final prospectus, offering circular, notification or amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but in each case
only to the extent that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such Registration Statement,
preliminary prospectus, final prospectus, offering circular, notification or
amendment or supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by such Distributing Holder,
specifically for use in the preparation thereof and, provided further, that the
indemnity agreement contained in this Section 6(b) shall not inure to the
benefit of the Company with respect to any person asserting such loss, claim,
damage or liability who purchased the Registrable Securities which are the
subject thereof if the Company failed to send or give (in violation of the
Securities Act or the rules and regulations promulgated thereunder) a copy of
the prospectus contained in such Registration Statement to such person at or
prior to the written confirmation to such person of the sale of such Registrable
Securities, where the Company was obligated to do so under the Securities Act or
the rules and regulations promulgated thereunder. This indemnity agreement will
be in addition to any liability which the Distributing Holders may otherwise
have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified party
otherwise than as to the particular item as to which indemnification is then
being sought solely pursuant to this Section 6. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, assume the defense thereof, subject to the provisions
herein stated and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party under this Section 6 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation, unless
the indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
the Distributing Holder, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both the
Distributing Holder and the indemnifying party and the Distributing Holder shall
have been advised by such counsel that there may be one or more legal defenses
available to the indemnifying party different from or in conflict with any legal
defenses which may be available to the Distributing Holder (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Distributing Holder, it being understood, however, that the
indemnifying party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing Holder,
which firm shall be designated in writing by the Distributing Holder). No
settlement of any action against an indemnified party shall be made without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld.
4
<PAGE> 5
Section 7. Contribution. In order to provide for just and
equitable contribution under the Securities Act in any case in which (i) the
Distributing Holder makes a claim for indemnification pursuant to Section 6
hereof but is judicially determined (by the entry of a final judgment or decree
by a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express provisions of
Section 6 hereof provide for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any Distributing Holder,
then the Company and the applicable Distributing Holder shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(which shall, for all purposes of this Agreement, include, but not be limited
to, all costs of defense and investigation and all attorneys' fees), in either
such case (after contribution from others) on the basis of relative fault as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the applicable Distributing Holder, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Distributing Holder
agree that it would not be just and equitable if contribution pursuant to this
Section 7 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 7. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 7 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
Section 8. Notices. Any notice pursuant to this Agreement by
the Company or by the Holder shall be in writing and shall be deemed to have
been duly given if delivered by (i) hand, (ii) by facsimile and followed by mail
delivery or (iii) if mailed by certified mail, return receipt requested, postage
prepaid, addressed as follows:
(a) If to the Holder, to its, his or her address set forth on
the signature page of this Agreement, with a copy to the person designated in
the Subscription Agreement.
(b) If to the Company, at Criticare Systems, Inc., 20925
Crossroads Circle, Waukesha, WI 53186, Attn: Gerhard J. Von de Ruhr, (phone)
(414) 798-8282, (fax) (414) 798-8290, and a copy to Sheldon E. Goldstein, P.C.,
65 Broadway, 10th Fl., New York, NY 10006, Attn: Sheldon E. Goldstein, Esq., or
to such other address as any such party may designate by notice to the other
party. Notices shall be deemed given at the time they are delivered personally
or five (5) days after they are mailed in the manner set forth above. If notice
is delivered by facsimile to the Company and followed by mail, delivery shall be
deemed given two (2) days after such facsimile is sent.
Section 9. Assignment. This Agreement is binding upon and
inures to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns. This Agreement cannot be assigned, amended or
modified by the parties hereto, except by written agreement executed by the
parties. If requested by the Company, the Holder shall have furnished to the
Company an opinion of counsel reasonably satisfactory to the Company to such
effect.
Section 10. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11. Headings. The headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 12. Governing Law, Venue. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely
5
<PAGE> 6
within such State, without regard to its principles of conflicts of laws. Each
of the parties hereto agrees that in the event of any dispute arising hereunder
venue shall be New York, New York and each party hereby submits to the
jurisdiction of the United States Federal Court in the Southern District of New
York.
Section 13. Severability. If any provision of this Agreement
shall for any reason be held invalid or unenforceable, such invalidity or
unenforceablity shall not affect any other provision hereof and this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained herein.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, on the day and year first above written.
CRITICARE SYSTEMS, INC.
By: /s/ Gerhard J. Von der Ruhr
----------------------------------
Name: Gerhard J. Von der Ruhr
Title: President
PURCHASER:
PARESCO, INC.
By: /s/ George T. Hartigan
----------------------------------
Officer - Director of Operations
6
<PAGE> 1
EXHIBIT 99.3
CONVERTIBLE DEBENTURE ESCROW AGREEMENT
THIS AGREEMENT is made as of the 31st day of January, 1997 by
and between CRITICARE SYSTEMS, INC., with its principal office at 20925
Crossroads circle, Waukesha, WI 53186 (hereinafter the "Company"), PARESCO,
INC., with its principal office at 101 Hudson Street, Jersey City, NJ 07302
(hereinafter the "Purchaser") and SHELDON E. GOLDSTEIN, P.C., 65 Broadway, 10th
Fl., New York, NY 10006 (hereinafter the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Purchaser will be purchasing Debentures (the
"Securities") from the Company at a purchase price as set forth in a Convertible
Debenture Purchase Agreement (the "Subscription Agreement") signed by the
Company and Purchaser; and
WHEREAS, it is intended that the purchase of Securities be
consummated in accordance with the requirements set forth by Regulation D
promulgated under the Securities Act of 1933, as amended; and
WHEREAS, the Company has requested that the Escrow Agent hold
the funds of Purchaser in escrow until the Escrow Agent has received the
Securities. The Escrow Agent will then immediately wire transfer or otherwise
deliver at the Company's discretion immediately available funds to the Company's
account and arrange for delivery of the Securities to Purchaser as per the
Purchaser's instructions.
NOW, THEREFORE, in consideration of the covenants and mutual
promises contained herein and other good and valuable consideration, the receipt
and legal sufficiency of which are hereby acknowledged and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE 1
TERMS OF THE ESCROW
1.1 The parties hereby agree to establish an escrow account
with the Escrow Agent whereby the Escrow Agent shall hold the funds for the
purchase of the Securities.
1.2 Upon Escrow Agent's receipt of funds into its attorney
trustee account, it shall notify the Company, or the Company's designated
attorney or agent, of the amount of funds it has received into its account.
1.3 The Company, upon receipt of said notice and acceptance of
Convertible Debenture Purchase Agreement, as evidenced by the Company's
execution thereof, shall deliver to the Escrow Agent the Securities being
purchased. Escrow Agent shall then communicate with the Company to confirm the
validity of its issuance.
1.4 Once Escrow Agent confirms the validity of the issuance of
the Securities, he shall immediately wire that amount of funds necessary to
purchase the Securities per the written instructions of the Company. The Company
will furnish Escrow Agent with a "Net Letter" to Escrow Agent directing payment
of legal fees and fees of placement agent, with the balance payable to the
Company. Once the funds have been received per the Company's instructions, the
Escrow Agent shall then arrange to have the Securities delivered as per
instructions from the Purchaser.
1.5 This Agreement may be altered or amended only with the
consent of all of the parties hereto. Should the Company or Purchaser attempt to
change this Agreement in a manner which, in the Escrow Agent's discretion, shall
be undesirable, the Escrow Agent may resign as Escrow Agent by notifying the
Company
<PAGE> 2
and the Purchaser in writing. In the case of the Escrow Agent's resignation or
removal pursuant to the foregoing, its only duty, until receipt of notice from
the Company and the Purchaser or its agent that a successor escrow agent shall
have been appointed, shall be to hold and preserve the funds. Upon receipt by
the Escrow Agent of said notice from the Company and the Purchaser of the
appointment of a successor escrow agent, the name of a successor escrow account
and a direction to transfer the funds, the Escrow Agent shall promptly
thereafter transfer all of the funds held in escrow to said successor escrow
agent. Immediately after said transfer, the Escrow Agent shall furnish the
Company and the Purchaser with proof of such transfer. The Escrow Agent is
authorized to disregard any notices, requests, instructions or demands received
by it from the Company or the Purchaser after notice of resignation or removal
shall have been given, unless the same shall be the aforementioned notice from
the Company and the Purchaser to transfer the funds to a successor escrow agent
or to return same to the respective parties.
1.6 The Escrow Agent shall be reimbursed by the Company and
the Purchaser for any reasonable expenses incurred in the event there is a
conflict between the parties and the Escrow Agent shall deem it necessary to
retain counsel.
1.7 The Escrow Agent shall not be liable for any action taken
or omitted by it in good faith in accordance with the advice of the Escrow
Agent's counsel; and in no event shall the Escrow Agent be liable or responsible
except for the Escrow Agent's own gross negligence or willful misconduct.
1.8 The Company and the Purchaser warrant to and agree with
the Escrow Agent that, unless otherwise expressly set forth in this Agreement:
(i) there is no security interest in the Securities
or any part thereof;
(ii) no financing statement under the Uniform
Commercial Code is on file in any jurisdiction
claiming a security interest or in describing
(whether specifically or generally) the Securities or
any part thereof; and
(iii) the Escrow Agent shall have no responsibility
at any time to ascertain whether or not any security
interest exists in the Securities or any part thereof
or to file any financing statement under the Uniform
Commercial Code with respect to the Securities or any
part thereof.
1.9 The Escrow Agent has no liability hereunder to either
party other than to hold the funds and to deliver them under the terms hereof.
Each party hereto agrees to indemnify and hold harmless the Escrow Agent from
and with respect to any suits, claims, actions or liabilities arising in any way
out of this transaction including the obligation to defend any legal action
brought which in any way arises out of or is related to this Escrow.
ARTICLE 2
MISCELLANEOUS
2.1 No waiver or any breach of any covenant or provision
herein contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed any extension of
the time for performance of any other obligation or act.
2.2 All notices or other communications required or permitted
hereunder shall be in writing, and shall be sent by fax, overnight courier,
registered or certified mail, postage prepaid, return receipt requested, and
shall be deemed received upon receipt thereof, as follows:
2
<PAGE> 3
(i) Criticare Systems, Inc.
20925 Crossroads Circle
Waukosha, WI 53186
Attn: Gerhard J. Von Der Ruhr
(fax) (414) 998-8290
copy to:
Robert E. Bellin, Esq.
Reinhart Boerner VanDeuren Norris & Rieselbach, S.C.
1000 North Water Street, Suite 2100
Milwaukee, WI 53202
or to such other person at such other place as the Company shall designate to
the Purchaser in writing;
(b) if to the Purchaser, to
Paresco, Inc.
101 Hudson Street
Jersey City, NY 07302
copy to:
Sheldon E. Goldstein, P.C.
65 Broadway, 10th Fl.
New York, NY 10006
Attn: Sheldon E. Goldstein, Esq.
2.3 This Agreement shall be binding upon and shall inure to
the benefit of the permitted successors and assigns of the parties hereto.
2.4 This Agreement is the final expression of, and contains
the entire Agreement between, the parties with respect to the subject matter
hereof and supersedes all prior understandings with respect thereto. This
Agreement may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by its agent duly authorized in writing or as otherwise
expressly permitted herein.
2.5 Whenever required by the context of this Agreement, the
singular shall include the plural and masculine shall include the feminine. This
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Agreement.
2.6 The Company acknowledges and confirms that it is not being
represented in a legal capacity by Sheldon E. Goldstein, P.C. and it has had the
opportunity to consult with its own legal advisors prior to the signing of this
Agreement.
2.7 The parties hereto expressly agree that this Agreement
shall be governed by, interpreted under and construed and enforced in accordance
with the laws of the State of New York. Any action to enforce, existing out of,
or relating in any way to, any provisions of this Agreement shall be brought
through the American Arbitration Association at the designated locale of New
York, New York.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 31st day of January, 1997.
3
CRITICARE SYSTEMS, INC.
By /s/ Gerhard J. Von der Ruhr
-----------------------------
Officer - President
PURCHASER:
PARESCO, INC.
By /s/ George T. Hartigan
-----------------------------
Officer - Director of Operations
SHELDON E. GOLDSTEIN, P.C.,
ESCROW AGENT
By /s/ Sheldon E. Goldstein
-----------------------------
Sheldon E. Goldstein
<PAGE> 1
EXHIBIT 99.4
No. __ $_________ USD
CRITICARE SYSTEMS, INC.
$2,500,000 8% Convertible Debenture
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT WHICH, EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO
RULE 144 UNDER SAID ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE
COMPANY.
THIS DEBENTURE is one of a duly authorized issue of Debentures of CRITICARE
SYSTEMS, INC., a corporation duly organized and existing under the laws of the
State of Delaware (the "ISSUER") issued February 3, 1997, designated as its
Eight (8%) Percent Convertible Debenture due February 2, 1999, in an aggregate
face amount not exceeding Two Million, Five Hundred Thousand (USD$2,500,000)
Dollars, issuable in One Hundred Thousand ($100,000) Dollars par value face
amounts.
FOR VALUE RECEIVED, the ISSUER promises to pay to
the registered holder hereof and its successors and assigns (the "HOLDER"), the
principal sum of:
United States Dollars,
on February 2, 1999 (the "Maturity Date"), and to pay interest, as outlined
below, at the rate of 8% per annum, on the principal sum outstanding from time
to time for the term of the Debenture or until the Debenture is completely
converted. Accrual of Interest shall commence on the first business day to occur
after the date hereof and shall continue until payment in full of the principal
sum has been made or duly provided for. The interest so payable will be paid to
the person in whose name this Debenture (or one or more predecessor Debentures)
is registered on the records of the Issuer regarding registration and transfers
of the Debenture (the "Debenture Register"), provided, however, that the
ISSUER'S obligation to a transferee of this Debenture arises only if such
transfer, sale or other disposition is made in accordance with the terms and
conditions of the Convertible Debenture Purchase Agreement dated as of January
31, 1997 between the ISSUER and HOLDER (the "Subscription Agreement"). Except
upon an event of default, the principal of, and interest on, this Debenture are
payable only in shares of Common Stock of the Company (the "Conversion Shares"),
at the address last appearing on the Debenture register of the ISSUER as
designated in writing by the Holder hereof from time to time. The ISSUER will
pay the principal of and all accrued and unpaid interest due upon this Debenture
on the Maturity Date in Conversion Shares at the Conversion Price, less any
amounts required by law to be deducted or withheld, to the Holder at the last
address on the Debenture Register. Such payment shall constitute a payment of
principal and interest hereunder and shall satisfy and discharge the liability
for principal and interest on the Debenture to the extent of the sum represented
by such check plus any amounts so deducted.
The Debenture is subject to the following additional provisions:
1. The Debenture is exchangeable for like Debentures in equal
aggregate principal amount of authorized denominations, as requested by the
HOLDERS surrendering the same. No service charge will be
<PAGE> 2
made for such registration or transfer or exchange.
2. The ISSUER shall be entitled to withhold from all payments
of principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States Income Tax or
other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment
representations of the original HOLDER hereof and may be transferred or
exchanged in the US only in compliance with Securities Act of 1933, as amended
(the "Act") and applicable state securities laws. Prior to the due presentment
for such transfer of this Debenture, the ISSUER and any agent of the ISSUER may
treat the person in whose name this Debenture is duly registered on the ISSUER'S
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and all other purposes, whether or not this debenture is
overdue, and neither the ISSUER nor any such agent shall be affected by notice
to the contrary. The transferee shall be bound, as the original HOLDER by the
same representations and terms described herein and under the Subscription
Agreement.
4. The Holder is entitled, at its option, commencing at any
time on or after the effective date of registration to convert up to One Hundred
(100%) percent of the original principal amount of Debentures into shares of
Common Stock of the Company (the "Shares") at a conversion price which shall be
the lesser of:
(i) The Purchase Date Price (as defined below); or
(ii) Eighty (80%) percent of the Market Price for
conversions made 61 to 90 days from the Closing
Date and seventy-five (75%) percent of the
Market Price as for conversions made after 91
days from the Closing Date (as defined below).
For purposes of this Section 4, "Purchase Date Price" shall be
the closing bid price of the Common Stock as reported on the National
Association of Securities Dealers automated Quotation System ("Nasdaq") for the
Closing Date.
For purposes of this Section 4, "Market Price" shall be the
average of the closing bid prices of the Common Stock as reported by NASDAQ for
the five (5) trading days prior to the date of conversion of the 8% Convertible
Debenture, as adjusted to reflect any stock dividend on, or stock split, or
stock combination of, the Common Stock since the Closing Date.
If any Debentures remain outstanding on the second anniversary
of the Closing Date, all remaining portions of the Debentures will be converted
on that date at the Conversion Price as set forth in Section 4 herein. This
period shall be extended for each day after sixty (60) days from the date of
exercise of the Demand Registration Right, that the registration is not
effective.
No fractional shares or scrip representing fractions of shares
will be issued on conversion, but the number of shares issuable shall be rounded
to the nearest whole share, with the fraction paid in cash at the discretion of
the ISSUER. For purposes of this Debenture, the "Conversion Date" on which
notice of conversion is given by the HOLDER shall be deemed to be the day Notice
is sent by facsimile, provided thereafter Debenture is sent by overnight courier
within three (3) business days, subject to the Conversion Dates aforesaid and,
with the conversion notice duly executed, to the Transfer Agent via recognized
overnight courier.
Conversion will be permitted as follows:
<TABLE>
<CAPTION>
<S> <C>
0-60 days from Closing Date - None
61-90 days from Closing Date - Up to 50% of initial investment
After 91 days from Closing Date - 100% of initial investment
</TABLE>
2
<PAGE> 3
5. No provision of this Debenture shall alter or impair the
obligation of the ISSUER, which is absolute and unconditional, upon an Event of
Default (as defined below), to pay the principal of, and interest on this
Debenture at the place, time, and rate, and in the coin or currency herein
prescribed.
6. The ISSUER hereby expressly waives demand and presentment
for payment, notice on nonpayment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in
taking any action to collect amounts called for hereunder and shall be directly
and primarily liable for the payment of all sums owing and to be owing hereon,
regardless of and without any notice, diligence, act or omission as or with
respect to the collection of any amount called for hereunder.
7. The ISSUER agrees to pay all costs and expenses, including
reasonable attorneys' fees, which may be incurred by the Holder in collecting
any amount due or exercising the conversion rights under this Debenture.
If one or more of the following described "Events of Default"
shall occur,
a. Any of the representations or warranties made by the
ISSUER herein, or in the Subscription Agreement shall have
been incorrect when made in any material respect; or
b. The ISSUER shall fail to perform or observe any other
covenant, term, provision, condition, agreement or
obligation of the ISSUER under this Debenture and such
failure shall continued uncured for a period of seven (7)
days after notice from the Holder of such failure; or
c. A trustee, liquidator or receiver shall be appointed
for the ISSUER or for a substantial part of its property
or business without its consent and shall not be
discharged within thirty (30) days after such appointment;
or
d. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency
shall assume custody or control of the whole or any
substantial portion of the properties or assets of the
ISSUER and shall not be dismissed within thirty (30)
calendar days thereafter; or
e. Bankruptcy reorganization, Insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief or debtors shall
be instituted by or against the ISSUER, and if instituted
against the ISSUER, ISSUER shall by any action or answer
approve of, consent to or acquiesce in any such
proceedings or admit the material allegations of, or
default in answering a petition filed in any such
proceeding; or
f. The ISSUER'S Common Stock is delisted from trading on
NASDAQ National Market unless it is thereupon admitted to
trading on the NASDAQ National Small Cap Market or a
national stock exchange.
Then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been waived in writing by the
HOLDER (which waiver shall not be deemed to be a waiver of any
subsequent default) at the option of the HOLDER and in the HOLDER'S
sole discretion, the HOLDER may consider this Debenture immediately due
and payable, without presentment, demand protest or notice of any kind,
all of which are hereby expressly waived, anything herein or in any
note or other instruments contained to the contrary notwithstanding,
and HOLDER may immediately, and without expiration of any period of
grace, enforce any and all of the HOLDER'S rights and remedies provided
herein or any other rights or remedies afforded by law.
8. In case any provision of this Debenture is held by a court of
competent jurisdiction to be
3
<PAGE> 4
excessive in scope or otherwise invalid or unenforceable, such provision shall
be adjusted rather than voided, if possible, so that it is enforceable to the
maximum extent possible, and the validity and enforceability of the remaining
provisions of this Debenture will not in any way be affected or impaired
thereby.
9. This Debenture and the Agreement referred to in this
Debenture constitute the full and entire understanding and agreement between the
ISSUER and HOLDER with respect hereof. Neither this Debenture nor any terms
hereof may be amended, waived, discharged or terminated other than by a written
instrument signed by the ISSUER and the HOLDER.
10. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York.
11. Notwithstanding anything to the contrary herein contained,
Holder shall be prohibited from (i) converting any portion of the Debenture
which would result in the Holder being deemed the beneficial owner, in
accordance with the provisions of Rule 13d-3 of the Securities Exchange Act of
1934, as amended, of 4.99% or more of the then issued and outstanding Common
Stock of the Company, or (ii) converting any portion of the Shares which would
result in the Holder being issued more than 1,425,647 shares of Common Stock of
the company in the aggregate pursuant to the Debenture. In the event that upon
conversion the Holders would be entitled to have been issued an aggregate of
more than 1,425,647 shares of Common Stock of the Company, then such Holders
shall receive cash in the amount equal to 125% of the face amount of the
remaining Debenture and interest.
IN WITNESS WHEREOF, the ISSUER has caused this instrument to
be duly executed by an officer thereunto duly authorized.
CRITICARE SYSTEMS, INC.
By
------------------------
Name:
Title:
Date:
4
<PAGE> 5
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
8% Convertible Debenture)
The undersigned hereby irrevocably elects to convert the below applicable
portion of Debenture No. ____ into shares of common stock of CRITICARE SYSTEMS,
INC. (the "Company") according to the conditions hereof, as of the date written
below.
The undersigned represents and warrants that
(i) All offers and sales by the undersigned of the shares of
Common Stock issuable to the undersigned upon conversion
of the Debenture shall be made pursuant to an exemption
from registration under the Act, or pursuant to
registration of the Common Stock under the Securities Act
of 1933, as amended (the "Securities Act"), subject to any
restrictions on sale or transfer set forth in the
Convertible Debenture Purchase Agreement between the
Company and the original holder of the Certificate
submitted herewith for conversion.
(ii) Upon conversion pursuant to this Notice of Conversion, the
undersigned will not own or deemed to beneficially own
(within the meaning of the Securities Exchange Act of
1934) 4.9% or more of the then issued and outstanding
shares of the company.
- ------------------------------ --------------------------------------------
Date of Conversion Applicable Conversion Price
- ------------------------------ --------------------------------------------
Number of Common Shares upon $ Amount of Conversion Conversion
- ------------------------------ --------------------------------------------
Signature Name
Address: Delivery of Shares to:
------------------------------
5
