<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Criticare Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
Not Applicable
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
Not Applicable
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
Not Applicable
- --------------------------------------------------------------------------------
(5) Total fee paid:
Not Applicable
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
Not Applicable
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
Not Applicable
- --------------------------------------------------------------------------------
(3) Filing Party:
Not Applicable
- --------------------------------------------------------------------------------
(4) Date Filed:
Not Applicable
- --------------------------------------------------------------------------------
<PAGE> 2
CRITICARE SYSTEMS, INC.
20925 CROSSROADS CIRCLE
WAUKESHA, WISCONSIN 53186
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Criticare Systems, Inc., will be held
at the Milwaukee Athletic Club, 758 North Broadway, Milwaukee, Wisconsin, on
Friday, November 7, 1997 at 3:30 p.m. for the following purposes:
1. To elect one (1) director.
2. To ratify the appointment of Deloitte & Touche LLP, independent
certified public accountants, as auditors of the Company for its fiscal year
ending June 30, 1998.
3. To transact any other business as may properly come before the meeting
and any adjournment or adjournments thereof.
The transfer books of the Company will not be closed for the Annual
Meeting. Stockholders of record at the close of business on September 22, 1997
are entitled to receive notice of, and to vote at, the meeting.
All stockholders are cordially invited to attend the meeting in person, if
possible. Stockholders who are unable to be present in person are requested to
execute and promptly return the accompanying proxy in the enclosed envelope. The
proxy is being solicited by the Board of Directors of the Company. Your
attendance at the meeting, whether in person or by proxy, is important to ensure
a quorum. If you return the proxy, you still may vote your shares in person by
giving written notice (by subsequent proxy or otherwise) to the Secretary of the
Company at any time prior to its vote at the Annual Meeting.
By Order of the Board of Directors
N.C. Joseph Lai, Secretary
Waukesha, Wisconsin
October 16, 1997
<PAGE> 3
CRITICARE SYSTEMS, INC.
20925 CROSSROADS CIRCLE
WAUKESHA, WISCONSIN 53186
PROXY STATEMENT FOR 1997 ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Criticare Systems, Inc. (the "Company"), to
be voted at the Annual Meeting of Stockholders to be held at the Milwaukee
Athletic Club, 758 North Broadway, Milwaukee, Wisconsin, at 3:30 p.m. on Friday,
November 7, 1997, and at any adjournments thereof, for the purposes set forth in
the accompanying Notice of Meeting. The mailing of this Proxy Statement and
accompanying form of Proxy is being made on or about October 15, 1997.
GENERAL INFORMATION
The Board of Directors knows of no business which will be presented to the
meeting other than the matters referred to in the accompanying Notice of
Meeting. However, if any other matters are properly presented to the meeting, it
is intended that the persons named in the Proxy will vote on such matters in
accordance with their judgment. If the enclosed form of proxy is executed and
returned, it nevertheless may be revoked at any time before it has been voted by
a later dated Proxy or a vote in person at the Annual Meeting. Shares
represented by properly executed proxies received on behalf of the Company will
be voted at the Annual Meeting (unless revoked prior to their vote) in the
manner specified therein. If no instructions are specified in a signed Proxy
returned to the Company, the shares represented thereby will be voted (1) in
FAVOR of the election as a director of the Company of the nominee listed in the
enclosed Proxy and (2) in FAVOR of the ratification of Deloitte & Touche LLP as
independent accountants for the 1998 fiscal year.
Only holders of the common stock of the Company (the "Common Stock") whose
names appear of record on the books of the Company at the close of business on
September 22, 1997 are entitled to vote at the Annual Meeting. On that date, the
only outstanding shares of capital stock of the Company were 8,095,486 shares of
Common Stock. Each share of Common Stock is entitled to one vote on each matter
to be presented at the meeting. THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES
OF COMMON STOCK REPRESENTED AND ENTITLED TO VOTE AT THE MEETING IS REQUIRED FOR
APPROVAL OF PROPOSAL ONE AND PROPOSAL TWO. AN ABSTENTION VOTE OR BROKER NON-VOTE
WILL BE COUNTED IN DETERMINING THE NUMBER OF SHARES REPRESENTED AT THE MEETING
AND IS, ACCORDINGLY, EQUIVALENT TO A VOTE AGAINST PROPOSAL ONE AND PROPOSAL TWO.
PROXIES THAT ARE NOT VOTED WILL BE OF NO EFFECT.
PROPOSAL NO. 1: ELECTION OF DIRECTOR
Pursuant to the authority contained in the By-Laws of the Company, the
Board of Directors has established the number of directors of the Company at
seven. The Company's By-Laws provide that the Board of Directors will be divided
into three classes as nearly equal in number as possible, with the term of one
class expiring each year. The term of one director expires at the Annual
Meeting. Accordingly, the Board of Directors has nominated for reelection as a
director Karsten Houm to serve a term of three years, until the 2000 Annual
Meeting of Stockholders. There are currently three vacancies on the Board of
Directors. The Company is not considering adding any new directors to fill such
vacancies at this time. Proxies cannot be voted for more than one candidate for
director.
As indicated below, the person nominated by the Board of Directors is an
incumbent director. The Company anticipates that the nominee will be a candidate
when the election is held. However, if for any reason the nominee is not a
candidate at that time, proxies will be voted for any substitute
<PAGE> 4
nominee designated by the incumbent directors (except where a Proxy withholds
authority with respect to the election of a director).
The Board of Directors held four meetings during the Company's fiscal year
ended June 30, 1997. All of the incumbent directors attended all four of the
meetings of the Board of Directors and all meetings of committees of the Board
of Directors upon which they serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION
OF KARSTEN HOUM AS A DIRECTOR OF THE COMPANY.
COMMITTEES
The Company has both Audit and Compensation Committees of directors. The
members of the Board's Audit Committee are Milton Datsopoulos and Karsten Houm.
The Audit Committee met one time during the fiscal year ended June 30, 1997. The
responsibilities of the Audit Committee, in addition to such other duties
specified by the Board of Directors, include the following: (1) recommendation
to the Board of Directors of independent accountants for the Company; (2) review
of the timing, scope and results of the independent accountants' audit
examination and related fees; (3) review of periodic comments and
recommendations by the independent accountants and of the Company's response
thereto; and (4) review of the scope and adequacy of internal accounting
controls and internal auditing activities.
The Board's Compensation Committee is comprised of Milton Datsopoulos and
Karsten Houm. The responsibilities of the Compensation Committee are to make
recommendations to the Board of Directors with respect to compensation for the
executive officers of the Company and to oversee the Company's stock option
plans. The Compensation Committee met three times in the fiscal year ended June
30, 1997.
NOMINEE FOR ELECTION AS DIRECTOR
Karsten Houm
Age: 51; Elected Director: 1985; Present Term Ends: 1997 Annual Meeting
Mr. Houm currently works as a management consultant. Previously, Mr. Houm served
as President of Unitor, a Norwegian shipping company, from September 1985 to
1997.
OTHER DIRECTORS
Gerhard J. Von Der Ruhr
Age: 56; Elected Director: 1984; Present Term Ends: 1999 Annual Meeting
Mr. Von der Ruhr is a founder of the Company and has served as Chairman of its
Board and President since the Company's inception in October 1984.
N.C. Joseph Lai, Ph.D.
Age: 55; Elected Director: 1984; Present Term Ends: 1999 Annual Meeting
Dr. Lai is a co-founder of the Company and served as Vice Chairman of its Board
and as an officer since the Company's inception in 1984.
2
<PAGE> 5
Milton Datsopoulos
Age: 57; Elected Director: 1986; Present Term Ends: 1998 Annual Meeting
Mr. Datsopoulos has been a partner in the law firm of Datsopoulos, MacDonald &
Lind in Missoula, Montana since 1974. Mr. Datsopoulos is a director of Montana
Naturals Int'l, Inc., a manufacturer of natural food products and nutritional
supplements.
3
<PAGE> 6
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME TITLE AGE
---- ----- ---
<S> <C> <C>
Gerhard J. Von der Ruhr.............. Chairman of the Board, President and Treasurer 56
N.C. Joseph Lai...................... Senior Vice President, Vice Chairman of the Board, 55
Secretary
Stephen D. Okland.................... Vice President -- Alternate Care 55
Richard J. Osowski................... Senior Vice President -- Finance, Assistant Secretary 60
Herschel Q. Peddicord................ Senior Vice President -- Sales, Marketing and 47
Engineering
Michael T. Larsen.................... Vice President -- Quality Control/Quality Assurance 38
Kenneth F. Wineman................... Vice President -- Latin American Sales 51
Drew M. Diaz......................... Vice President -- International Sales 34
Gloria Najera........................ Vice President -- Operations 48
</TABLE>
The terms of office and past business experiences of Mr. Von der Ruhr and
Dr. Lai are described above.
Mr. Okland served the Company as a sales consultant from January through
December 1985. In January 1986, Mr. Okland was appointed Director of Sales and
in May 1988 he was appointed Vice President.
Mr. Osowski served as Controller of the Company from October 1985 until
October 1987, as Vice President -- Finance from October 1987 until May 1995 and
as Senior Vice President -- Finance and Assistant Secretary since May 1995. From
May 1995 until October 1996, Mr. Osowski also served as Geschaeftsfuehrer (the
highest ranking officer) of Criticare International GmbH Marketing Services, a
wholly-owned subsidiary of the Company that is going through bankruptcy
proceedings under German law.
Mr. Peddicord rejoined the Company on March 30, 1995. Prior to rejoining
the Company, he was Vice President of Sales and Marketing from 1991 to 1995 for
Biotronic, Inc., a manufacturer of cardiac pacemakers. From 1989 to 1991 Mr.
Peddicord was National Sales Manager of Criticare Systems, Inc.
Mr. Larsen served as Project Engineer from August 1985 until he was
appointed Manager of Engineering in September 1987. He was most recently
promoted to Vice President -- Quality Control/Quality Assurance effective
September l, 1990.
Mr. Wineman has served the Company as Zone Manager for Latin America sales
since joining the Company in July 1991. Prior to joining the Company, Mr.
Wineman was engaged as a private consultant to medical and electronic
manufacturing companies and also served as Operations Manager of Critikon
Corporation, a manufacturer of medical monitoring equipment.
Mr. Diaz has served the Company as Regional Sales Manager for the Middle
East and Western Europe since joining the Company in January 1991. Prior to
joining the Company, Mr. Diaz was employed as a Regional Sales Manager for
Pfizer Implant Technologies from 1988 to 1991. From October 1996 until August
1997, Mr. Diaz also served as Geschaeftsfuehrer (the highest ranking officer) of
Criticare International GmbH Marketing Services, a wholly-owned subsidiary of
the Company that is going through bankruptcy proceedings under German law.
Ms. Najera rejoined the Company on March 14, 1997. Prior to rejoining the
Company she was Director of Consumer Services and Distribution from 1994 to 1997
for the Milwaukee Journal-Sentinel, a newspaper publisher. From 1988 to 1994,
Ms. Najera was Manager of Customer Services for the Company.
4
<PAGE> 7
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission on Form 3, 4, and 5.
Officers, directors and greater than 10% shareholders are required by SEC
regulation to furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that during fiscal 1997 all section 16(a) filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth information with respect to all
compensation, including stock options granted and all cash bonuses and accrued
deferred compensation, incurred by the Company during the three fiscal years
ended June 30, 1997 to or on behalf of the Chief Executive Officer and the four
most highly paid senior executive officers other than the CEO. The persons
listed below are sometimes referred to herein as the "named executive officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------
ANNUAL COMPENSATION AWARDS:
------------------------------ SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) COMPENSATION($)(1) OPTIONS/SARS(#) COMPENSATION($)
------------------ ---- --------- ------------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
Gerhard J. Von der Ruhr,...... 1997 144,000 957 -- 56,620(2)
Chairman of the Board, 1996 138,300 957 -- 53,876
President (CEO), 1995 132,600 957 -- 51,266
Treasurer
Stephen D. Okland,............ 1997 253,706 6,000 -- 3,441(3)
Vice President -- 1996 284,775 6,000 10,000 3,427
Alternate Care 1995 258,627 6,000 -- 2,724
Drew M. Diaz,................. 1997 180,717 8,223 50,000 3,226(4)
Vice President -- 1996 176,382 7,865 10,000 2,331
International Sales 1995 122,678 7,786 -- 2,171
N.C. Joseph Lai,.............. 1997 122,656 1,649 -- 27,179(5)
Senior Vice President, 1996 123,174 1,763 -- 26,299
Vice Chairman of 1995 80,000 1,763 -- 1,432
the Board, Secretary
Herschel Q. Peddicord,........ 1997 162,445 -- -- 3,381(6)
Senior Vice President -- 1996 195,274 -- -- 2,083
Sales, Marketing and 1995 8,301 -- 50,000 --
Engineering
</TABLE>
- -------------------------
(1) The amounts represent automobile allowance payments.
(2) Represents $53,620 of premiums paid by the Company on two life insurance
policies, the proceeds of which are payable to Mr. Von der Ruhr's
beneficiary, and $3,000 of Company contributions to the 401(k) plan on
behalf of Mr. Von der Ruhr.
(3) Represents $441 of premiums paid by the Company on a life insurance policy,
the proceeds of which are payable to the beneficiary of Mr. Okland, and
$3,000 of Company contributions to the 401(k) plan on behalf of Mr. Okland.
(4) Represents $3,226 of premiums paid by the Company on a health insurance
policy while Mr. Diaz was a resident of Europe.
(5) Represents $24,190 of premiums paid by the Company on a life insurance
policy, the proceeds of which are payable to the beneficiary of Mr. Lai, and
$2,989 of Company contributions to the 401(k) plan on behalf of Mr. Lai.
(6) Represents $381 of premiums paid by the Company on a life insurance policy
and $3,000 of contributions by the Company to the 401(k) plan on behalf of
Mr. Peddicord.
Mr. Von der Ruhr and Dr. Lai both have an employment agreement with the
Company for successive one-year periods ending March 31 unless prior notice of
termination is given. The
6
<PAGE> 9
agreements are terminable by the Company before expiration without further
obligation if such termination is for cause. If such termination is without
cause, the Company is obliged to pay the terminated employee 150% of his base
salary for a period of one year after the date of termination. The Company
amended Mr. Von der Ruhr's and Dr. Lai's employment agreements to provide that
if Mr. Von der Ruhr or Dr. Lai is terminated for any reason after a period of
time following a Change in Control (as defined in the employment agreements),
the Company will continue such employee's base salary and certain benefits for a
period of one year and will continue to provide group health insurance to such
employee until he reaches age 65. Mr. Osowski has an employment agreement with
the Company which provides that if he is terminated without cause (as defined in
the agreement), the Company will continue his base salary and certain benefits
for a period of one year and will continue to provide group health insurance
until he reaches age 65. The Company amended Mr. Osowski's employment agreement
to provide that if Mr. Osowski is terminated for any reason after a period of
time following a Change in Control (as defined in Mr. Osowski's employment
agreement) the Company will continue Mr. Osowski's base salary and certain
benefits for a period of one year and will continue to provide group health
insurance until he reaches age 65.
Directors of the Company are reimbursed for out-of-pocket expenses incurred
in attending meetings of the Board of Directors. In January 1994, non-employee
directors were issued options to purchase 15,000 shares of common stock at an
exercise price of $1.875 per share, market price on the grant date. The options
became exercisable on January 1, 1995 and expire on January 12, 1999. In May
1995, non-employee directors were issued options to purchase 50,000 shares of
Common Stock at an exercise price of $2.0625 per share, the market price on the
date of grant. The options become exercisable on May 15, 1996, 1997 and 1998 and
expire on May 15, 2000. In November 1996, non-employee directors were issued
options to purchase 12,500 shares of common stock at an exercise price of $2.75
per share, the market price on the grant date. The options become exercisable on
November 12, 1997 and expire on November 12, 2001. Directors receive no cash
directors' fees.
STOCK OPTIONS
On December 5, 1992 the Company adopted two new nonqualified stock option
plans, the Employee Stock Option Plan and the Non-Employee Stock Option Plan
(collectively, the "New Plans"). Pursuant to the adoption of the New Plans, no
new stock options can be granted under the stock option plans (the "Old Plans")
which existed prior to the approval of the New Plans. The New Plans provide for
the grant to key employees and outside directors and consultants of the Company
of options covering shares of Common Stock. The New Plans are administered by
the Board of Directors which has discretion to increase the number of shares
covered by the Plans, select optionees, designate the number of shares to be
covered by each option, establish vesting schedules, specify the amount and type
of consideration to be paid to the Company on exercise, and to specify certain
other terms of the options. The exercise price of options granted under the New
Plans must be at least 85% of the fair market value of the Common Stock on the
date of grant.
The Company has reserved 1,020,000 shares of Common Stock for issuance
under the Employee Stock Option Plan and 200,000 shares of Common Stock for
issuance under the Non-Employee Stock Option Plan, in each case subject to
adjustment for certain dilutive events. At the end of fiscal 1997, options to
purchase 1,004,000 shares were outstanding under the New Plans and options to
purchase 40,400 shares were outstanding under the Old Plans. During fiscal 1997,
options were granted to purchase 250,500 shares of Common Stock under the New
Plans at a weighted average per share exercise price of $2.64 (all options were
granted at the market price on the grant dates). In addition, during fiscal
1997, 80,000 shares of Common Stock at a weighted average per share exercise
price of $2.42 were canceled under the New Plans and 33,500 shares of Common
Stock at a weighted average per share exercise price of $5.65 were canceled
under the Old Plans and options to purchase 116,750 shares at a weighted average
exercise price per share of $2.46 were exercised under the New Plans and options
to purchase 45,270 shares at a weighted
7
<PAGE> 10
average exercise price per share of $2.50 were exercised under the Old Plans. A
total of 79,650 shares of Common Stock remain available for future grants under
the New Plans.
The following table shows the fiscal year-end value of unexercised options
held by the named executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS AT FISCAL YEAR OPTIONS AT FISCAL YEAR
SHARES END(#) END($)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerhard J. Von der Ruhr....... -- -- -- -- -- --
N.C. Joseph Lai............... -- -- -- -- -- --
Stephen D. Okland............. 20,000 78,750 13,500 -- 35,500 --
Drew M. Diaz.................. -- -- 8,000 58,000 21,750 145,000
Herschel Q. Peddicord......... -- -- 20,000 30,000 58,750 88,125
</TABLE>
Effective April 1, 1991, the Company adopted a 401(k) plan, which covers
substantially all employees who have completed one year of employment. Under the
plan, eligible employees can contribute up to 15% of pre-tax compensation for
investment in a trust under the plan. Company contributions to the plan are
discretionary and determined annually by the Board of Directors. Employee
contributions, within certain limitations, are considered tax deferred under the
provisions of section 401(k) of the Internal Revenue Code. Withdrawals of tax
deferred amounts may be made upon termination of employment or earlier in the
event of certain defined hardship situations. The Company's contributions for
the 1995, 1996 and 1997 fiscal years were approximately $40,000, $61,000 and
$81,000, respectively. Contributions made or accrued for named executive
officers are included under cash compensation in the Summary Compensation Table.
Other than the 401(k) plan, the Company does not maintain any pension,
profit sharing, retirement or similar plans. The Company does provide group
health, dental, long-term disability and life insurance benefits to its
full-time employees, including its named executive officers.
8
<PAGE> 11
COMPENSATION COMMITTEE REPORT
The objectives of the Company's compensation program are to attract and
retain the best available executives, to motivate these executives to achieve
the Company's business goals and to recognize individual contributions as well
as overall business results. To achieve these objectives, the Company reviews
its compensation program on a regular basis and attempts to tie a portion of
each executive's potential compensation to Company performance.
The key elements of the Company's executive compensation program consist of
fixed compensation, in the form of base salary, and variable compensation, which
is more directly tied to Company performance, in the form of annual incentive
compensation and long-term compensation through stock option awards. In
determining each element of compensation to be awarded to an executive officer,
the Compensation Committee considers the executive's overall benefit package as
well as the executive's responsibilities and experience. The Compensation
Committee also considers the competitive marketplace for executive talent,
including, to the extent possible, a comparison to compensation packages for
executives with similar levels of experience and responsibility at other
companies. In determining the compensation package for Mr. Von der Ruhr, the
Company's Chairman of the Board, President and Treasurer, the Compensation
Committee took into consideration both the compensation packages of chief
executive officers of companies the Compensation Committee deemed comparable to
the Company and the Compensation Committee's assessment of Mr. Von der Ruhr's
individual performance and the Company's overall performance.
The Compensation Committee reviewed the proposed 1997 salaries for the
executive officers at the Compensation Committee meeting on November 13, 1996.
The Compensation Committee believed the proposed salary levels were in line with
or below the salary levels of executives in comparable positions of
responsibility.
Because of his substantial stock holdings, Mr. Von der Ruhr is not eligible
to participate in the stock option plan. In fixing the stock option grants, the
Committee considered the current stock holdings of each eligible officer, their
responsibilities and historical and anticipated future contributions to the
Company's performance. The Committee believes that selective grants of stock
options promote a commonality of interest between the Company's officers and its
stockholders by giving the Company's officers added incentives to maximize the
Company's stock price.
The Compensation Committee is of the opinion that the compensation levels
for the named executive officers are reasonable when compared to similar
positions of responsibility and scope in similar industries and that an
appropriate amount of total compensation is based on the performance of the
Company, and therefore provides sufficient incentive for these individuals to
attain improved results in the future.
COMPENSATION COMMITTEE
Milton Datsopoulos
Karsten Houm
9
<PAGE> 12
STOCK PERFORMANCE
The following table tracks the value of $100 invested on July 1, 1992 in
Criticare Systems, Inc. Common Stock compared to the change in the S&P 500 Index
and the Nasdaq Index. The chart shows that $100 invested five years ago in
Criticare Systems, Inc. common stock was worth $153.85 at June 30, 1997 compared
to $216.87 for the S&P 500 and $247.10 for the Nasdaq Index:
CRITICARE SYSTEMS, INC.
STOCK PERFORMANCE COMPARED TO THE
S&P 500 AND THE NASDAQ INDEX
<TABLE>
<CAPTION>
S&P 500 NASDAQ CRITICARE
------------------------------------------------
<S> <C> <C> <C>
July 1, 1992 $100.00 $100.00 $100.00
June 30, 1993 $110.39 $120.62 $ 69.23
June 30, 1994 $108.85 $120.97 $ 59.63
June 30, 1995 $133.47 $159.95 $ 72.12
June 30, 1996 $164.31 $203.05 $103.85
June 30, 1997 $216.87 $247.10 $153.85
</TABLE>
The following graph presents, for a five-year period, the cumulative total
shareholder return of the Company, the Standard & Poor's 500 Index and the
Nasdaq Index. Cumulative total shareholder return is defined as share price
appreciation assuming reinvestment of dividends.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P 500 NASDAQ CRITICARE
(FISCAL YEAR COVERED)
<S> <C> <C> <C>
7/1/92 100.00 100.00 100.00
6/30/93 110.39 120.62 69.23
6/30/94 108.85 120.97 59.63
6/30/95 133.47 159.95 72.12
6/30/96 164.31 203.05 103.85
6/30/97 216.87 247.10 153.85
</TABLE>
10
<PAGE> 13
SECURITY OWNERSHIP
The following table sets forth information with respect to beneficial
ownership of the Common Stock of the Company by (a) each person known to the
Company to own beneficially more than 5% of the Company's Common Stock, (b) each
director of the Company, (c) each named executive officer, and (d) all directors
and executive officers as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF
BENEFICIAL OWNER(1) SHARES OWNED PERCENT
------------------- ------------ -------
<S> <C> <C>
Gerhard J. Von der Ruhr.............................. 555,075(2) 7.1%(2)
N.C. Joseph Lai...................................... 767,290(3) 9.8%(3)
Karsten Houm......................................... 74,065(4) *
Stephen D. Okland.................................... 13,500(5) *
Drew M. Diaz......................................... 8,000(6) *
Milton Datsopoulos................................... 48,000(7) *
Herschel Q. Peddicord................................ 20,000(8) *
Dimensional Fund Advisors Inc. ...................... 389,500(9) 5.0%(9)
All directors and executive officers (11 Persons).... 1,731,430(10) 21.3%(10)
</TABLE>
- -------------------------
* Less than 1%
(1) Unless otherwise indicated, the address of the beneficial owner is 20925
Crossroads Circle, Waukesha, WI 53186; the address of Mr. Houm is
Kristinelundvn. 21, 0268 Oslo, Norway; and the address of Mr. Datsopoulos
is Central Square Building, 201 West Main, Missoula, Montana 59802.
(2) Includes 410,000 shares owned of record by Ursula Von der Ruhr, Mr. Von der
Ruhr's wife, and 1,175 shares owned of record by Mark Von der Ruhr, Mr. Von
der Ruhr's son.
(3) Includes 116,000 shares owned of record by Helen Lai, Dr. Lai's wife;
184,000 shares in the aggregate owned of record by Dr. Lai's sons,
Christopher Lai and Thomas Lai; and 204,000 shares owned of record by the
Lai Family Foundation.
(4) Includes 58,000 shares which Mr. Houm has a right to acquire under
currently exercisable options.
(5) Includes 13,500 shares Mr. Okland has a right to acquire under currently
exercisable options.
(6) Includes 8,000 shares Mr. Diaz has a right to acquire under currently
exercisable options.
(7) Includes 48,000 shares which Mr. Datsopoulos has a right to acquire under
currently exercisable options.
(8) Includes 20,000 shares Mr. Peddicord has a right to acquire under currently
exercisable options.
(9) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 394,700 shares of
Criticare Systems, Inc. stock as of June 30, 1997, all of which shares are
held in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares.
(10) Includes 331,500 shares of Common Stock the members of the group have a
right to acquire under options outstanding as of June 30, 1997.
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CERTAIN TRANSACTIONS
On December 21, 1995, the Company, through its wholly-owned subsidiary
Criticare Biomedical, Inc. ("Criticare Biomedical"), purchased from Marquette
Venture Partners II, L.P. and MVP II Affiliates Fund, L.P. (collectively,
"Sellers"), two entities which are not affiliated with the Company, 1,000,000
shares of the Series A Preferred Stock and 1,200,000 shares of the Series B
Preferred Stock of Immtech International, Inc. ("Immtech") and a promissory note
payable by Immtech in the principal amount of $50,000. In consideration of the
Immtech stock and note, the Company issued to the Sellers 333,154 shares of the
Company's Common Stock and Criticare Biomedical issued a subordinated promissory
note, secured solely by the Immtech stock and note, in the principal amount of
$1,240,000. The Company also entered into a registration rights agreement with
Sellers pursuant to which the Company registered the 333,154 shares of Common
Stock issued to Sellers for sale to the public on March 1, 1996. On March 27,
1997, the Company issued 200,000 shares of restricted common stock to Sellers in
full payment of the $1,240,000 note plus accrued interest of $109,946. The
Company did not enter into a registration rights agreement with Sellers with
respect to the 200,000 shares of restricted common stock. As of September 30,
1997, the Company owned 112,500 shares of the common stock of Immtech and
2,200,000 shares of the convertible preferred stock, representing approximately
5.3% and 65% of Immtech's issued and outstanding common and preferred stock,
respectively, or approximately 30% of Immtech's common stock on a fully diluted
and as converted basis. Gerhard J. Von der Ruhr and N.C. Joseph Lai, executive
officers and directors of the Company, are directors of Immtech and respectively
own 4.5% and 3.3% of Immtech's outstanding stock on a fully diluted and as
converted basis. Immtech is involved in the research and development of products
in the fields of biochemistry and immunology. As part of its original
investment, the Company acquired exclusive rights to one of the products Immtech
is developing -- a proprietary device to remove immune complexes from a
patient's blood. However, it is unlikely that Immtech will be able to market any
of its products in the foreseeable future. The Company believes the terms of the
Immtech transaction, taken as a whole, were no more or less favorable to the
Company than would have been available from an unrelated third-party. In
addition, the Company has advanced Immtech funds to support the operations of
Immtech of $743,940 as of September 30, 1997, including $24,000 since June 30,
1996. Immtech has agreed to pay the Company interest (at the prime rate) on all
funds advanced. Immtech's ability to continue as a going concern is dependent
upon its ability to generate sufficient funds to meet its obligations as they
become due and ultimately, to obtain profitable operations. Immtech's financial
plans for the forthcoming year include the refinancing of existing debt and
continuing efforts to obtain additional debt and/or equity financing.
The Company leases automobiles from U&G Leasing, which is owned by Mr. Von
der Ruhr and his wife, and from JHL Leasing, which is owned by Dr. Lai and his
wife, and paid $34,798 and $25,649, respectively, to those entities during the
fiscal year ended June 30, 1997. The Company believes these arrangements are on
terms no less favorable to the Company than would be available from an unrelated
third party.
The Company has advanced approximately $104,000 to Herschel Peddicord, its
Senior Vice President -- Sales, Marketing and Engineering, borrowed against
future commission payments to be received by him. The draw is to be repaid as
Mr. Peddicord earns monthly commissions and does not bear interest.
PROPOSAL NO. 2: RATIFICATION OF APPOINTMENT
OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Deloitte & Touche LLP as independent
certified public accountants to examine the financial statements of the Company
and its consolidated subsidiaries for the fiscal year ending June 30, 1998.
Unless otherwise directed, the Proxy will be voted in favor of the ratification
of such appointment.
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Although this appointment is not required to be submitted to a vote of
stockholders, the Board believes it appropriate as a matter of policy to request
that the stockholders ratify the appointment. If stockholder ratification is not
received, the Board will reconsider the appointment.
Deloitte & Touche LLP has served as auditors for the Company since its
formation in 1984. A representative of Deloitte & Touche LLP is expected to be
present at the Annual Meeting and will be provided an opportunity to make a
statement if he or she desires and will be available to respond to appropriate
questions.
PROPOSALS FOR 1998 ANNUAL MEETING
Any stockholder who desires to submit a proposal for the 1998 Proxy
Statement and Annual Meeting should submit the proposal in writing to Gerhard J.
Von der Ruhr, Chairman of the Board, Criticare Systems, Inc., 20925 Crossroads
Circle, Waukesha, Wisconsin 53186. The Company must receive a proposal by June
18, 1998 in order to consider it for inclusion in the 1998 Proxy Statement.
EXPENSES OF SOLICITATION
The cost of this solicitation of Proxies will be paid by the Company. It is
anticipated that the Proxies will be solicited only by mail, except that
solicitation personally or by telephone may also be made by the Company's
regular employees who will receive no additional compensation for their services
in connection with the solicitation. Arrangements will be made with brokerage
houses and other custodians, nominees and fiduciaries for the forwarding of
solicitation materials and the annual report to beneficial owners of stock held
by such persons. The Company will reimburse such parties for their expenses in
so doing.
ANNUAL REPORT
A copy of the 1997 Annual Report of the Company accompanies this Proxy
Statement. A copy of the Company's Annual Report on Form 10-K for fiscal year
1997 will be provided without charge on written request of any stockholder whose
Proxy is being solicited by the Board of Directors. The written request should
be directed to Corporate Secretary, Criticare Systems, Inc., 20925 Crossroads
Circle, Waukesha, Wisconsin 53186.
INCORPORATION OF DOCUMENTS BY REFERENCE
This Proxy Statement incorporates by reference the financial statements,
supplemental financial information and management's discussion and analysis of
financial condition and results of operations regarding the Company included in
the Company's Annual Report for the fiscal year ended June 30, 1997, and the
Company's Annual Report on Form 10-K for the year ended June 30, 1997, copies of
which are being delivered to each stockholder with this Proxy Statement.
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Any statement contained in a document incorporated by reference in this
Proxy Statement will be deemed to be modified or superseded for purposes of this
Proxy Statement to the extent that a statement contained in this Proxy Statement
modifies or supersedes such statement. Any statement so modified or superseded
will not be deemed, except as modified or superseded, to constitute a part of
this Proxy Statement
By Order of the Board of Directors
N.C. Joseph Lai, Secretary
Waukesha, Wisconsin
October 16, 1997
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<PAGE> 17
CRITICARE SYSTEMS, INC. THIS PROXY IS SOLICITED ON BEHALF OF THE
20925 Crossroads Circle BOARD OF DIRECTORS
Waukesha, Wisconsin 53186
The undersigned hereby appoints Gerhard J.
Von der Ruhr, and Richard J. Osowski, or
either of them, as Proxies, each with full
power of substitution for himself, and hereby
authorizes them to represent and to vote, as
designated below, all of the shares of common
stock of Criticare Systems, Inc., held of
record by the undersigned on September 22,
1997, and which the undersigned is entitled
to vote at the Annual Meeting of Stockholders
to be held on November 7, 1997 and any or all
adjournments thereof, with like effect as if
the undersigned were personally present and
voting.
Properly executed Proxies received by the Company will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, this
Proxy will be voted FOR the election of Karsten Houm for director and FOR
Proposal 2. If other matters properly come before the meeting, this Proxy will
be voted in accordance with the best judgment of the Proxies appointed.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and the Proxy Statement furnished therewith dated
October 16, 1997.
DETACH BELOW AND RETURN USING THE
ENVELOPE PROVIDED
- --------------------------------------------------------------------------------
<TABLE>
<S><C>
1. ELECTION OF DIRECTOR: / / FOR the nominee listed / / WITHHOLD AUTHORITY
Karsten Houm to the left to vote for the nominee listed to the left
2. TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE, LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 1998 / / FOR / / AGAINST / / ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING.
Check appropriate box
indicate changes below: Date____________________ No. of Shares
Address Change? / / Name Change? / /
</TABLE>
<PAGE> 18
Signature(s) in Box
Please sign exactly as name appears hereon.
When shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full corporate
name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
2
