<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------- ---------
Commission file number -0-16061
CRITICARE SYSTEMS, INC.
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 39-1501563
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
20925 Crossroads Circle, Waukesha, Wisconsin 53186
----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (414) 798-8282
--------------
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Number of shares outstanding of each class of the registrant's classes of common
stock as of February 12, 1999: Common Stock, $.04 par value, 8,701,151 shares.
<PAGE> 2
CRITICARE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, June 30,
ASSETS 1998 1998
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,532,062 $ 2,729,998
Accounts receivable 7,151,758 6,921,713
Other receivables 118,551 322,976
Inventory 8,957,330 7,682,471
Prepaid expenses 183,187 338,297
- ---------------------------------------------------------------------------
Total current assets 18,942,888 17,995,455
- ---------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT - NET 6,302,734 6,612,371
- ---------------------------------------------------------------------------
INVESTMENTS -- --
- ---------------------------------------------------------------------------
LICENSE RIGHTS AND PATENTS 109,993 118,993
- ---------------------------------------------------------------------------
TOTAL $ 25,355,615 $ 24,726,819
- ---------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,618,468 $ 2,305,721
Accrued liabilities:
Compensation and commissions 955,508 819,886
Product warranties 375,000 328,000
Other 894,341 715,603
Current maturities of long-term debt 115,194 109,354
- ---------------------------------------------------------------------------
Total current liabilities 5,958,511 4,278,564
- ---------------------------------------------------------------------------
Other Obligations 478,000 --
LONG-TERM DEBT, less current maturities 3,106,050 3,165,258
- ---------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock -- --
Common stock 334,046 334,046
Common stock repurchased (52,090 shares) (103,549) --
Additional paid-in capital 17,964,250 17,964,250
Retained earnings (accumulated deficit) (2,381,693) (1,015,299)
- ---------------------------------------------------------------------------
Total stockholders' equity 15,813,054 17,282,997
- ---------------------------------------------------------------------------
TOTAL $ 25,355,615 $ 24,726,819
- ---------------------------------------------------------------------------
</TABLE>
See condensed notes to consolidated financial statements.
Page 2 of 12
<PAGE> 3
CRITICARE SYSTEMS, INC.
CONSOLIDATED INCOME STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
NET SALES $ 14,014,480 $ 14,681,507
COST OF GOODS SOLD 7,192,945 7,903,128
- -----------------------------------------------------------------------------------------------------
GROSS PROFIT 6,821,535 6,778,379
- -----------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Marketing 4,479,724 3,877,272
Research, development and engineering 1,488,262 1,052,387
Administrative 1,220,137 840,549
Severance pay 728,000 -
- -----------------------------------------------------------------------------------------------------
Total 7,916,123 5,770,208
- -----------------------------------------------------------------------------------------------------
(LOSS) INCOME FROM OPERATIONS (1,094,588) 1,008,171
- -----------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest expense (158,251) (638,756)
Interest income 36,445 54,644
Equity in loss of investments (150,000) (120,000)
- -----------------------------------------------------------------------------------------------------
Total (271,806) (704,112)
- -----------------------------------------------------------------------------------------------------
(LOSS) INCOME BEFORE INCOME TAXES (1,366,394) 304,059
- -----------------------------------------------------------------------------------------------------
INCOME TAX PROVISION - -
- -----------------------------------------------------------------------------------------------------
NET (LOSS) INCOME $ (1,366,394) $ 304,059
- -----------------------------------------------------------------------------------------------------
(LOSS) INCOME PER COMMON SHARE:
Basic $ (0.16) $ 0.04
Diluted (0.16) 0.04
- -----------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic 8,701,151 8,107,197
Diluted 8,701,151 8,608,032
- -----------------------------------------------------------------------------------------------------
</TABLE>
See condensed notes to consolidated financial statements.
Page 3 of 12
<PAGE> 4
CRITICARE SYSTEMS, INC.
CONSOLIDATED INCOME STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
NET SALES $ 7,290,056 $ 7,137,503
COST OF GOODS SOLD 3,727,537 3,864,726
- ---------------------------------------------------------------------------------------------------
GROSS PROFIT 3,562,519 3,272,777
- ---------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Marketing 2,261,542 1,930,193
Research, development and engineering 740,702 530,995
Administrative 712,669 389,444
Severance pay 728,000 -
- ---------------------------------------------------------------------------------------------------
Total 4,442,913 2,850,684
- ---------------------------------------------------------------------------------------------------
(LOSS) INCOME FROM OPERATIONS (880,394) 422,093
- ---------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest expense (79,877) (199,839)
Interest income 13,701 29,344
Equity in loss of investments - (120,000)
Total (66,176) (290,495)
- ---------------------------------------------------------------------------------------------------
(LOSS) INCOME BEFORE INCOME TAXES (946,570) 131,598
- ---------------------------------------------------------------------------------------------------
INCOME TAX PROVISION - -
- ---------------------------------------------------------------------------------------------------
NET (LOSS) INCOME $ (946,570) $ 131,598
- ---------------------------------------------------------------------------------------------------
(LOSS) INCOME PER COMMON SHARE:
Basic $ (0.11) $ (0.04)
Diluted (0.11) (0.04)
- ---------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic 8,701,151 8,203,699
Diluted 8,701,151 8,704,534
- ---------------------------------------------------------------------------------------------------
</TABLE>
See condensed notes to consolidated financial statements.
Page 4 of 12
<PAGE> 5
CRITICARE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
(UNAUDITED)
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $(1,366,394) $ 304,059
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation 458,040 464,725
Amortization 9,000 9,000
Equity in loss of investments 150,000 120,000
Interest and discount accrued on convertible debentures - 476,476
Changes in assets and liabilities:
Accounts receivable (230,045) (828,938)
Other receivables 204,425 (141,595)
Inventories (1,042,395) 103,875
Prepaid expenses 155,110 (10,969)
Accounts payable 1,312,747 295,453)
Accrued liabilities 839,360 (120,931)
- -----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 489,848 80,249
- -----------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (380,867) (245,986)
Investment in Immtech International, Inc. (150,000) (120,000)
- -----------------------------------------------------------------------------------------------------
Net cash used in investing activities (530,867) (365,986)
- -----------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Principal payments on long-term debt (53,368) (96,509)
Repurchase of Treasury stock (103,549) -
Proceeds from the sale of common stock - 120,000
Proceeds from the exercise of stock options - 193,710
- -----------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (156,917) 217,201
- -----------------------------------------------------------------------------------------------------
NET (DECREASE) IN CASH AND
CASH EQUIVALENTS (197,936) (68,536)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,729,998 2,440,859
- -----------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,532,062 $ 2,372,323
- -----------------------------------------------------------------------------------------------------
</TABLE>
See condensed notes to consolidated financial statements.
Page 5 of 12
<PAGE> 6
CRITICARE SYSTEMS, INC.
Condensed Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by Criticare
Systems, Inc. (the "Company") pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC") and, in the opinion of the Company,
include all adjustments necessary for a fair statement of results for each
period shown. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such SEC rules and
regulations. The Company believes that the disclosures made are adequate to
prevent the financial information given from being misleading. It is suggested
that these financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's latest annual report and
previously filed Form 10-K.
2. CASH EQUIVALENTS
The Company considers all investments with purchased maturities of less than
three months to be cash equivalents.
3. INVENTORY VALUATION
Inventory is stated at the lower of cost or market, with cost determined on the
first-in, first-out method. Components of inventory consisted of the following
at December 31, 1998 and June 30, 1998, respectively:
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
--------------------------------------------------------------------
<S> <C> <C>
Component parts $3,914,295 $2,647,231
Work in process 1,425,336 1,409,187
Finished units 3,617,699 3,626,053
--------------------------------------------------------------------
Total inventories $8,957,330 $7,682,471
--------------------------------------------------------------------
</TABLE>
Page 6 of 12
<PAGE> 7
CRITICARE SYSTEMS, INC.
Condensed Notes to Consolidated Financial Statements
(Unaudited)
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
-----------------------------------------------------------------------
<S> <C> <C>
Land and building $ 4,525,000 $ 4,525,000
Machinery and equipment 2,018,979 1,796,120
Furniture and fixtures 793,919 712,428
Demonstration and loaner monitors 1,551,147 1,783,611
Production tooling 2,082,351 2,005,834
-----------------------------------------------------------------------
Property, plant and equipment - cost 10,971,396 10,822,993
Less accumulated depreciation 4,668,662 4,210,622
-----------------------------------------------------------------------
Property, plant and equipment - net $ 6,302,734 $ 6,612,371
-----------------------------------------------------------------------
</TABLE>
5. CONTINGENCIES
The Company is involved in a lawsuit that has arisen from the normal conduct of
business. This lawsuit is a result of a dispute between the Company and a former
distributor over the termination of an exclusive marketing agreement. This
proceeding is handled by outside counsel. In the opinion of management, the
ultimate resolution of this matter will not have a material effect on the
consolidated financial statements.
Page 7 of 12
<PAGE> 8
CRITICARE SYSTEMS, INC.
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Six Months Ended December 31, 1998 and 1997
RESULTS OF OPERATIONS
Net sales for the six months ended December 31, 1998 decreased 4.5% to
$14,000,000 from $14,700,000 for the same period in fiscal 1997. International
sales decreased due to the unstable economic climate in the Pacific Rim and
continued competitive pressures in other parts of the world. We expect
International sales to improve as new products are released in the third quarter
of fiscal 1999. Monitoring sales decreased slightly as the demand for our
products in hospitals decreased. OEM sales increased significantly from the
previous year, and System (MPT) sales also increased during the six months ended
December 31, 1998 when compared to the same period in fiscal 1998.
The gross profit percentage of 48.7% for the six months ended December 31, 1998
was an improvement from the 46.2% gross profit percentage reported in the same
period of the previous fiscal year. Improvements in gross profit relate to
product mix and an increase in domestic sales, which generally have higher gross
margins than international sales, as a percentage of total sales.
Operating expenses increased approximately $2,100,000. Marketing expenses
increased approximately $602,000 when compared to the same period in fiscal 1998
due primarily to increased trade show and sales promotion expenses as the
Company continues to promote MPT and the new products as they are released.
Research, development and engineering expenses increased approximately $436,000
related to additional payroll, outside contract and project expense which are
all associated with the new products under development. Administrative expenses
increased approximately $380,000 in the six months ended December 31, 1998 when
compared to the same period in fiscal 1998. This increase is due primarily to
increased litigation expense related to a lawsuit that the Company is involved.
The Company also recorded a charge of $728,000 during the six months ended
December 31, 1998. This charge relates to severance pay and other benefits
payable to the two co-founders of the Company. Both of these individuals
resigned from their positions with the Company in November 1998. The
severance accrual includes a portion of their respective salary and fringe
benefits for a period, which approximates three years.
Income from operations decreased approximately $2,103,000 for the six months
ended December 31, 1998 when compared to the same period in fiscal 1998 due to
the decreased sales volume and increased operating expenses.
Non-operating expenses were approximately $272,000 and $704,000 for the six
months ended December 31, 1998 and 1997, respectively. The decrease in 1998 was
due to the absence of interest and conversion discount costs associated with the
conversion of $1,650,000 of convertible debentures to common stock during the
six months ended December 31, 1997.
Page 8 of 12
<PAGE> 9
CRITICARE SYSTEMS, INC.
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Three Months Ended December 31, 1998 and 1997
RESULTS OF OPERATIONS
Net sales for the three months ended December 31, 1998 increased 2.1% to
$7,300,000 from $7,100,000 for the same period in fiscal 1997. OEM and System
(MPT) sales increased due to increased promotional emphasis in these
areas. International sales decreased due to the economic problems in the Pacific
Rim.
The gross profit percentage of 48.9% for the three months ended December 31,
1998 was significantly better than the 45.9% gross profit percentage reported in
the same period of the previous fiscal year. Improvements in gross profit relate
to product mix and an increase in domestic sales, which generally have higher
margins than international sales, as a percentage of total sales.
Operating expenses increased approximately $1,600,000. Marketing expenses
increased approximately $331,000 when compared to the same period in fiscal 1998
due primarily to increased trade show and sales promotion expenses as the
Company continues to promote MPT and the new products as they are released.
Research, development and engineering expenses increased approximately $210,000
related to additional payroll, outside contract and project expense which are
all associated with the new products under development. Administrative expenses
increased approximately $323,000 in the three months ended December 31, 1998
when compared to the same period in fiscal 1998. This increase is due primarily
to increased investor relation expenses and litigation expenses related to a
lawsuit that the Company is involved. The Company also recorded a charge of
$728,000 during the three months ended December 31, 1998. This charge relates
to severance pay and other benefits payable to the two co-founders of the
Company. Both of these individuals resigned from their positions with the
Company in November 1998. The severance accrual includes a portion of their
respective salary and fringe benefits for a period, which approximates three
years.
Income from operations decreased approximately $1,302,000 for the three months
ended December 31, 1998 when compared to the same period in fiscal 1998 due to
increased spending related to new products and the severance accrual recorded.
Non-operating expenses were approximately $66,000 and $290,000 for the three
months ended December 31, 1998 and 1997, respectively. The decrease in 1998 was
due to the absence of interest and conversion discount costs associated with the
conversion of $500,000 of convertible debentures to common stock in the period
ended December 31, 1997.
Page 9 of 12
<PAGE> 10
CRITICARE SYSTEMS, INC.
Management's Discussion and Analysis of
Results of Operations and Financial Condition
LIQUIDITY
During the six months ended December 31, 1998, the Company recorded a positive
cash flow from operations of approximately $257,000 and had a cash balance of
approximately $2,500,000 and no short-term borrowings. The Company believes its
marketing and research and development activities and other capital and
liquidity requirements will be satisfied by cash generated from operations and
periodic utilization of a line of credit currently in place. Approximately
$3,000,000 was available under this line of credit at December 31, 1998.
Availability is determined by the amount of "eligible receivables" recorded by
the Company, as defined in the loan agreement. The maximum availability under
the line of credit is $4,000,000.
YEAR 2000 PREPARATIONS
The Company has developed a plan to address Company-wide Year 2000 readiness.
The Year 2000 issue relates to computer hardware and software and other systems
designed to use two digits rather than four digits to define the applicable
year. As a result, the Year 2000 would be translated as two zeroes. Because the
year 1900 could also be translated as two zeroes, systems which use two digits
could read the date incorrectly for a number of date sensitive applications
resulting in the potential calculation errors or the shutdown of major systems.
The Company is in the process of updating its internal computer software, other
information technology and other operating systems for the purpose of Year 2000
compliance. The Company currently expects to complete its Year 2000 compliance
plan during fiscal 1999 and does not expect that its costs to become Year 2000
Compliant will be material to its financial condition or results of operations.
The majority of the Company's internal Year 2000 issues have been or will be
corrected through system upgrades for other business purposes or normal
maintenance contracts.
The Company's operation may also be adversely affected to the extent that
suppliers and other third parties are not Year 2000 compliant. The Company has
circulated surveys to its key third party vendors to assess the Year 2000
compliance status of the operating systems of such vendors and the potential
impact on the Company of non-compliance. The Company plans to assess the surveys
received from suppliers and other third parties during fiscal 1999 and to
evaluate the compliance status of such third parties. The Company believes that
its reasonably likely worse case scenario relating to the Year 2000
Page 10 of 12
<PAGE> 11
CRITICARE SYSTEMS, INC.
Management's Discussion and Analysis of
Results of Operations and Financial Condition
issue would involve a significant disruption or slowdown in the receipt of
products from one or more key suppliers. The Company believes that the risk of
such a disruption is reduced through the Company's use of multiple sources of
supply for key products. However, a number of risks relating to the year 2000
issue may be out of the Company's control, including reliance on outside links
for essential services such as communications and power. There can be no
assurance that a failure of systems of third parties on which the Company's
systems and operations will rely to be Year 2000 compliant will not have a
material adverse effect on the Company's business, financial condition or
operating results.
FORWARD LOOKING STATEMENTS
This report contains certain forward-looking statements. Such statements refer
to the Company's opinion, belief or expectation. Forward-looking are subject to
certain risk and uncertainties that could cause actual future results and
developments to differ materially from those currently projected. Such risks and
uncertainties include, but are not limited to, the uncertainties inherent in
litigation, the timing of new pro duct introductions, uncertainties in the
Company's assessment of the Year 2000 issue, including the timing of the
completion of the Company's compliance efforts and the consequences of
non-compliance by the Company or third parties, the adequacy of the Company's
capital resources, delays in customers delivery requirements and general
economic conditions in the Company's market segments.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ----------------------------------------------------------
The Company does not use financial instruments for trading purposes and holds no
derivative financial instruments which would expose the Company to significant
market risk. The Company did not have any outstanding borrowings during the
first six months of fiscal 1999. Accordingly, the Company does not currently
have any material exposure to market risk for changes in interest rates. The
Company is subject to foreign currency exchange rate exposure due to its
international sales. The Company does not hedge against any foreign currency
risks.
Page 11 of 12
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a) Not applicable.
(b) Not applicable.
(c) Effective November 3, 1998, the Company issued 350,000 shares of
Common Stock to TeleMed Technologies International, Inc. in exchange for certain
patent and other intellectual property rights. These shares were issued in a
private placement exempt from the registration requirements of the Securities
Act of 1933, as amended (the "Act"), pursuant to Section 4(2) of the Act.
(d) Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual meeting of stockholders of the Company was held on November
12, 1998. The matters voted upon, including the number of votes cast for,
against or withheld, as well as the number of abstentions and broker non-votes,
as to each such matter were as follows:
Proposal 1: Election of Milton Datsopoulos as a director for a term
ending at the 2001 Annual Meeting of Stockholders.
For Withheld
--- --------
6,684,635 662,340
The Company's other directors consist of Gerhard J. Von der Ruhr and
N.C. Joseph Lai (whose terms end at the 1999 annual meeting of stockholders) and
Karsten Houm (whose term ends at the 2000 annual meeting of stockholders).
Proposal 2: Amendment of Certificate of Incorporation to increase the
total number of authorized shares of Common Stock from 10,000,000 to 15,000,000.
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
6,080,738 1,219,987 46,250 ----
Proposal 3: Ratification of appointment of Deloitte & Touche LLP as
auditors of the Company for its fiscal year ending June 30, 1999.
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
6,250,963 509,840 586,172 ----
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
3.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to the Registration Statement filed on Form S-1,
Registration No. 33-13050).
3.2 By-Laws of the Company (incorporated by reference to the
Registration Statement filed on Form S-1, Registration No. 33-13050).
4.1 Specimen Common Stock certificate (incorporated by reference to
the Registration Statement filed on Form S-1, Registration No. 33-13050).
4.2 Specimen Convertible Debenture (incorporated by reference to the
Registration Statement filed on Form S-3, Registration No. 333-25153).
10.1 Assignment of Rights to Patent Applications, Patents and/or
Inventions, effective November 3, 1998, between the Company and TeleMed
Technologies International, Inc.
10.2 Registration Agreement, dated as of November 3, 1998, between
the Company and TeleMed Technologies International, Inc.
27 Financial Data Schedule.
(b) The registrant filed no reports on Form 8-K during the quarter ended
December 31, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CRITICARE SYSTEMS, INC.
(Registrant)
Date 02/12/99 BY /s/ Joseph M. Siekierski
- ------------------------ -------------------------
Joseph M. Siekierski
Vice President - Finance
(Chief Accounting Officer and
Duly Authorized Officer)
Page 12 of 12
<PAGE> 1
EXHIBIT 10.1
ASSIGNMENT OF RIGHTS TO
PATENT APPLICATIONS, PATENTS AND/OR INVENTIONS
THIS AGREEMENT, effective the last date of signature, below,
is between CRITICARE SYSTEMS, INC. ("Criticare") and TELEMED TECHNOLOGIES
INTERNATIONAL, INC. ("TTI").
RECITALS
A. TTI is the sole owner of certain intellectual properties,
including the patent applications and patents, and inventions embodied thereby,
as described more fully below.
B. TTI desires to assign all of its rights, title and interest
in these properties to Criticare, and Criticare desires to accept such
assignment.
AGREEMENTS
In consideration of the recitals and mutual agreements which
follow and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Criticare and TTI agree as follows:
1. Assignment of Patent Applications and Patents and/or
Inventions.
(a) TTI hereby assigns and transfers to
Criticare, its successors and assigns, TTI's entire rights, title and interest
in and to the patents and/or patent applications, together with the inventions
disclosed and/or claimed therein, said patents and patent applications as listed
on Schedule A, attached hereto and incorporated herein. Consistent with the
provisions of this paragraph, TTI will also execute an assignment document for
each patent and patent application, such documents provided as Exhibits A-D
respectively.
(b) TTI also hereby assigns and transfers to
Criticare, its successors and assigns, its entire rights, title, and interest in
and to any continuation, divisional, renewal, substitute or continuation-in-part
application with respect to any said patent application, in and to any patent
issued from any said patent application, and in and to any extension, reissue or
reexamination patent that may result from any said patents or patent
applications as listed on Schedule A.
(c) TTI agrees to make available to Criticare
within three months after the effective date of this Agreement any and all
know-how and technical information and support necessary or otherwise relating
to any invention disclosed and/or claimed in any said patent or patent
application, such availability to be made at a time and place mutually
convenient to the parties and as reasonably required thereafter by Criticare.
(d) The rights, title and interests assigned by
TTI in subparagraphs (a)-(b) are hereafter referred to collectively as the
"Patent Rights."
<PAGE> 2
2. Criticare Shares. Concurrent with the execution by TTI of
Exhibits A-E, Criticare will issue 350,000 shares of Criticare common stock to
TTI.
3. Warranties by TTI.
(a) TTI represents and warrants that TTI has full and
complete authority to enter into this Agreement and the right to assign the
Patent Rights as provided herein.
(b) TTI represents and warrants that it has no present
knowledge of or from which it can be reasonably inferred that the Patent Rights
or any patent claim thereunder are invalid, or that the exercise of the Patent
Rights in connection with the manufacture, sale or use of any invention or
product disclosed and/or claimed therein would violate the intellectual property
rights of any third party.
(c) TTI represents and warrants that it has taken no
action which adversely affect the rights assigned to Criticare under this
Agreement. TTI further represents and warrants that it owns all rights, title
and interest in and to the Patent Rights free and clear of any and all liens,
security interests, and/or third party encumberances.
(d) TTI warrants and represents that it will not in
any manner challenge the validity of the Patent Rights assigned to Criticare
under this Agreement. Furthermore, TTI will not intentionally act in any manner
to induce or cause a third party to challenge or question the validity of any of
the Patent Rights.
(e) TTI represents and warrants that the patents
listed in Schedule A are in force and that all required maintenance fees for
each of the patents have been paid in a timely manner prior to the effective
date of this Agreement. Likewise, TTI represents and warrants the patent
applications listed in Schedule A are pending, proceeding toward disposition and
that all filing and related examination fees have been paid and that all
prosecution actions have been taken in a timely manner.
(f) TTI represents and warrants the patents and
patent applications listed on Schedule A are all the foreign and domestic
patents and applications owned or licensed by TTI related to the field or
practice of telemedicine and/or the related to the telemedicine products,
devices, services or articles of manufacture currently offered, or manufactured
by or on behalf of TTI.
4. Assignment of Accrued Enforcement Rights. TTI assigns and
transfers to Criticare any and all claims or causes of action for infringement
of the Patent Rights accrued prior to the effective date of this Agreement.
5. Enforcement of Patent Rights. Each party shall promptly
report in writing to the other any known or suspected infringement of the Patent
Rights by any third party, and shall provide the other with any and all
available information and evidence supporting such infringement. Notwithstanding
the reporting requirement contained herein and consistent with
2
<PAGE> 3
the rights assigned herein, enforcement of the Patent Rights shall be the sole
responsibility of Criticare. In the event Criticare has not filed an action
within 30 days of notice from TTI to enforce the Patent Rights against any third
party for infringement of such rights in the context of electrocardiographic
applications, TTI shall have the right to enforce the Patent Rights as against
infringing electrocardiographic applications. In exercising its rights pursuant
to this paragraph, TTI shall have the sole and exclusive right to select counsel
and shall pay all expenses relating to such enforcement including, without
limitation, attorneys' fees and court costs. At TTI's request Criticare shall
offer reasonable assistance to TTI in connection with such enforcement at no
cost to TTI except for reimbursement of reasonable out-of-pocket expenses
incurred by Criticare, including the salaries (on a per hour of time basis) of
any Criticare personnel incurred in rendering such assistance. Any damages,
royalties, settlement fees or other consideration received by TTI as a result of
such enforcement shall be the sole property of TTI.
6. TTI Cooperation.
(a) TTI and its successors and assigns further agree
to, without further consideration, promptly provide Criticare with all pertinent
documents relating to the patents and patent applications listed on Schedule A
and will, upon Criticare's reasonable request, provide Criticare with all
pertinent facts relating to said patents and patent applications. TTI further
agrees to testify as to said facts and documents in any interference, litigation
or proceeding related thereto. Criticare agrees to reimburse TTI for all
reasonable out-of-pocket expenses incurred by TTI, including the salaries (on a
per hour of time basis) of any TTI personnel incurred in rendering such
assistance.
(b) TTI will promptly execute and deliver to Criticare
or its legal representatives, and undertake all reasonable efforts to secure the
same from its employees, agents, officers, directors, as well as any inventor of
any patent or patent application hereby assigned, at no expense and without
further consideration any and all papers, instruments, documents, affidavits or
declarations determined by Criticare in its reasonable judgment as required by
Criticare to apply for, obtain, maintain, issue or enforce any of said patents
or patent applications, any continuation, divisional, renewal, substitute or
continuation-in-part application, or any patents which may issue from said
applications, and any extension, reissue or reexamination patent that may result
from any said patent and/or patent application. Specifically and without
limitation, TTI will deliver to patent counsel for Criticare copies of all files
maintained by or on behalf of TTI relating to each patent or patent application
listed on Schedule A, such delivery to be made within 30 business days from the
effective date of this Agreement.
(c) TTI further agrees to execute and deliver to
Criticare or its legal representatives any and all papers, instruments and
documents, reasonably required by Criticare as necessary to effectuate this
Assignment.
7. License. Upon assignment of the Patent Rights and execution
of the Exhibits A-D, Criticare will grant TTI a limited, exclusive, royalty-free
license to exercise the Patent Rights solely in the context of
electrocardiographic applications, such license
3
<PAGE> 4
specifically excluding any non-electrocardiographic use, exercise or activity.
The right of TTI to sublicense the Patent Rights is contingent upon the prior
written consent of Criticare, such consent to not be unreasonably withheld. The
terms and conditions of the license granted hereunder to TTI are as provided in
the license agreement attached as Exhibit F and incorporated herein by
reference.
8. Entire Agreement. This Agreement constitutes and contains
the entire agreement between TTI and Criticare with respect to assignment of the
Patent Rights. This Agreement supersedes any and all prior understandings and
agreements between the parties with respect to the assignment and/or license of
any Intellectual Property right. Any modification of this Agreement shall be in
writing and executed in the same manner as this Agreement.
TELEMED TECHNOLOGIES INTERNATIONAL,
INC.
BY \s\ Lee B. Ehrlichman
----------------------------
Its
------------------------
Date November 3, 1998
CRITICARE SYSTEMS, INC.
BY \s\ Gerhard von der Ruhr
----------------------------
Its President
------------------------
Date November 3, 1998
4
<PAGE> 1
EXIBIT 10.2
REGISTRATION AGREEMENT
THIS AGREEMENT is made as of November 3, 1998, among CRITICARE
SYSTEMS, INC., a Delaware corporation (the "Company"), and TeleMed Technologies
International, Inc. (the "Investor").
RECITAL
The Investor is party to an Assignment Agreement of even date
herewith (the "Assignment Agreement") with the Company. In order to induce
Investor to enter into the Assignment Agreement, the Company has agreed to
provide the registration rights set forth in this Agreement. Unless otherwise
provided in this Agreement, capitalized terms used herein shall have the
meanings set forth in paragraph 8 hereof.
AGREEMENTS
The parties hereto agree as follows:
1. Demand Registrations.
(a) Request for Registration. Subject to the
terms and conditions of this Agreement, the holders of a majority of the
Registrable Securities may request registration under the Securities Act of all
or a majority of the Registrable Securities (a "Demand Registration") by
delivering a written notice to the Company if such registration may be made on
Form S-2 or S-3 or any similar short-form registration statement. A Demand
Registration shall specify the approximate number of Registrable Securities
requested to be registered and the anticipated per share price range for such
offering.
(b) Number of Demand Registrations. The holders
of Registrable Securities shall be entitled to request one Demand Registration
during the first 11 months after the date of this Agreement. A registration
shall not count as the one permitted Demand Registration until it has become
effective.
(c) Priority on Demand Registration. The
Company shall not include in any Demand Registration any securities which are
not Registrable Securities without the prior written consent of Investor. If a
Demand Registration is an underwritten offering and the managing underwriters
advise the Company in writing that in their opinion the number of Registrable
Securities and, if permitted hereunder, other securities requested to be
included in such offering exceeds the
<PAGE> 2
number of Registrable Securities and other securities, if any, which can be sold
in an orderly manner in such offering within a price range acceptable to
Investor, the Company shall include in such registration prior to the inclusion
of any securities which are not Registrable Securities the number of Registrable
Securities requested to be included which in the opinion of such underwriters
can be sold in an orderly manner within the price range of such offering. Any
Persons other than holders of Registrable Securities who participate in Demand
Registrations which are not at the Company's expense must pay their share of the
Registration Expenses as provided in paragraph 5 hereof.
(d) Restrictions on Demand Registration. The
Company shall not be obligated to effect any Demand Registration within 90 days
after the effective date of any previous "Piggyback Registration" pursuant to
Section 2 below. The Company may postpone for up to 90 days the filing or the
effectiveness of a registration statement for a Demand Registration if the
Company determines that such Demand Registration would reasonably be expected to
have a material adverse effect on any proposal or plan by the Company or any of
its Subsidiaries to engage in any acquisition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer,
reorganization or similar transaction; provided that in such event, the holders
of Registrable Securities shall be entitled to withdraw such request and, if
such request is withdrawn, such Demand Registration shall not count as the one
permitted Demand Registration hereunder and the Company shall pay all
Registration Expenses in connection with such registration. The Company may
delay a Demand Registration hereunder only once in any 12-month period.
(e) Selection of Underwriters. The holders of a
majority of the Registrable Securities included in the Demand Registration will
have the right to select the investment banker(s) and manager(s) to administer
the offering, subject to the Company's approval which will not be unreasonably
withheld.
(f) Other Registration Rights. Except as
provided in this Agreement, the Company shall not grant to any Persons the right
to request the Company to register any equity securities of the Company, or any
securities convertible or exchangeable into or exercisable for such securities,
during the 12 months following the date of this Agreement, unless the
Registrable Securities owned by Investor have been registered or unless Company
receives the prior written consent of Investor.
2. Piggyback Registrations.
(a) Right to Piggyback. During the 12 months
following the date of this Agreement, whenever the Company proposes to register
any of its
2
<PAGE> 3
securities under the Securities Act (other than pursuant to a Demand
Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
shall give prompt written notice to all holders of Registrable Securities of its
intention to effect such a registration and shall include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 20 days after the receipt of the
Company's notice (subject to paragraphs 2(c) and (d) below).
(b) Piggyback Expenses. The Registration
Expenses of the holders of Registrable Securities shall be paid by the Company
in all Piggyback Registrations as provided in paragraph 5.
(c) Priority on Primary Registrations. If a
Piggyback Registration is an underwritten primary registration on behalf of the
Company, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company shall include
in such registration (i) first, the securities the Company proposes to sell,
(ii) second, the Registrable Securities requested to be included in such
registration, and (iii) third, other securities requested to be included in such
registration.
(d) Priority on Secondary Registrations. If a
Piggyback Registration is an underwritten secondary registration on behalf of
holders of the Company's securities, and the managing underwriters advise the
Company in writing that in their opinion the number of securities requested to
be included in such registration exceeds the number which can be sold in such
offering without adversely affecting the marketability of the offering, the
Company shall include in such registration (i) first, the securities requested
to be included therein by the holders requesting such registration, (ii) second,
the Registrable Securities requested to be included in such registration, and
(iii) third, other securities requested to be included in such registration.
(e) Selection of Underwriters. The Company will
have the right to select the investment banker(s) and manager(s) to administer
any offering pursuant to a Piggyback Registration.
(f) Other Registrations. If the Company has
previously filed a registration statement with respect to Registrable Securities
pursuant to paragraph 1 or pursuant to this paragraph 2, and if such previous
registration has not been withdrawn or abandoned, the Company shall not file or
cause to be effected any other registration of any of its equity securities or
securities
3
<PAGE> 4
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities, until
a period of at least 180 days has elapsed from the effective date of such
previous registration.
3. Holdback Agreements.
(a) Each holder of Registrable Securities shall
not effect any public sale or distribution (including sales pursuant to Rule
144) of equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and the 180-day period beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration in which
Registrable Securities are included (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree.
(b) The Company shall not effect any public sale
or distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 180-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-8 or any successor form), unless the underwriters managing the
registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of
Registrable Securities have requested that any Registrable Securities be
registered pursuant to this Agreement, the Company shall use its reasonable best
efforts to effect the registration and the sale of such Registrable Securities
in accordance with the intended method of disposition thereof, and pursuant
thereto the Company shall as expeditiously as possible:
(a) prepare and file with the Securities and
Exchange Commission a registration statement with respect to such Registrable
Securities and use its reasonable best efforts to cause such registration
statement to become effective (provided that before filing a registration
statement or prospectus or any amendments or supplements thereto, the Company
shall furnish to the counsel selected by the Investor copies of all such
documents proposed to be filed);
(b) notify each holder of Registrable Securities
of the effectiveness of each registration statement filed hereunder and prepare
and file with the Securities and Exchange Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as
4
<PAGE> 5
may be necessary to keep such registration statement effective for a period of
not less than 180 days or until the earlier sale of the Registrable Securities
registered thereunder and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable
Securities such number of copies of such registration statement, each amendment
and supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as such seller
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such seller;
(d) use its reasonable best efforts to register
or qualify such Registrable Securities under such other securities or blue sky
laws of such jurisdictions as any seller reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdiction of the
Registrable Securities owned by such seller (provided that the Company shall not
be required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to general
service of process in any such jurisdiction);
(e) notify each seller of such Registrable
Securities, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the statements
therein not misleading, and, at the request of any such seller, the Company
shall prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading;
(f) enter into such customary agreements
(including underwriting agreements in customary form) and take all such other
actions as the Investor or the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Securities;
(g) make available for inspection by any seller,
any underwriter participating in any disposition pursuant to such registration
statement
5
<PAGE> 6
and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(h) otherwise use its reasonable best efforts to
comply with all applicable rules and regulations of the Securities and Exchange
Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least 12 months
beginning with the first day of the Company's first full calendar quarter after
the effective date of the registration statement, which earnings statement shall
satisfy the provision of section 11(a) of the Securities Act and Rule 158
thereunder;
(i) in the event of the issuance of any stop
order suspending the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any common stock including in such registration statement for
sale in any jurisdiction, the Company shall use its reasonable efforts promptly
to obtain the withdrawal of such order;
(j) use its reasonable best efforts to cause
such Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the sellers thereof to consummate the disposition
of such Registrable Securities.
5. Registration Expenses.
(a) All expenses incident to the Company's
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses,
fees and disbursements of custodians, and fees and disbursements of counsel for
the Company and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses"), shall be borne
as provided in this Agreement, except that the Company shall, in any event, pay
its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any annual audit or quarterly review, the expense of any liability
insurance and the expenses and fees for listing the securities to be registered
on each securities exchange on which
6
<PAGE> 7
similar securities issued by the Company are then listed or on the NASD
automated quotation system.
(b) In connection with each Demand Registration
and each Piggyback Registration, each holder of Registrable Securities shall be
solely responsible for (i) its pro rata share of the fees and disbursements of
any legal counsel retained by the holders of Registrable Securities, and (ii)
underwriting discounts and commissions.
6. Indemnification.
(a) The Company agrees to indemnify, to the
extent permitted by law, each holder of Registrable Securities, its officers and
directors and each Person who controls such holder (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and expenses
caused by any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by such holder expressly for
use therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company shall indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to indemnification of the holders of Registrable
Securities.
(b) In connection with any registration
statement in which a holder of Registrable Securities is participating, each
such holder shall furnish to the Company in writing such information and
affidavits as the Company reasonably requests for use in connection with any
such registration statement or prospectus and, to the extent permitted by law,
shall indemnify the Company, its directors and officers and each person who
controls the Company (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities and expenses resulting from any untrue or
alleged untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such
holder; provided that the obligation to indemnify shall be individual, not joint
7
<PAGE> 8
and several, for each holder and shall be limited to the net amount of proceeds
received by such holder from the sale of Registrable Securities pursuant to such
registration statement.
(c) Any Person entitled to indemnification
hereunder shall (i) give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification (provided that the failure
to give prompt notice shall not impair any Person's right to indemnification
hereunder to the extent such failure has not prejudiced the indemnifying party)
and (ii) unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties exists with respect
to such claim, permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party. If such
defense is assumed, the indemnifying party shall not be subject to any liability
for any settlement made by the indemnified party without its consent. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim shall not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest exists between such indemnified party and other of such
indemnified parties with respect to such claim.
(d) The indemnification provided for under this
Agreement shall remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director or
controlling Person of such indemnified party and shall survive the transfer of
securities. The Company also agrees to make such provisions, as are reasonably
requested by any indemnified party, for contribution to such party in the event
the Company's indemnification is unavailable for any reason.
7. Participation in Underwritten Registrations. No
Person may participate in any registration hereunder which is underwritten
unless such Person (i) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Person or Persons
entitled hereunder to approve such arrangements and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
8. Definitions.
"Holder of Registrable Securities" means any of the
Investor and any permitted transferee of any of the Registrable Securities.
8
<PAGE> 9
"Investor" means TeleMed Technologies International,
Inc.
"Person" means any corporation, association, joint
venture, partnership, limited liability company, trust, business, individual,
government or political subdivision thereof, or any governmental agency.
"Registrable Securities" means (i) any Common Stock
issued to the Investor pursuant to the Assignment Agreement and (ii) any equity
securities issued or issuable with respect to the securities referred to in
clause (i) by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Registrable Securities, such securities
shall cease to be Registrable Securities upon the first to occur of the
following: (x) they have been sold to the public pursuant to a registration or
pursuant to Rule 144 under the Securities Act (or any similar rule then in
effect), (y) they have been exchanged, substituted or replaced by securities
which have been registered under the Securities Act or (z) they have become
eligible for sale pursuant to Rule 144(k) under the Securities Act (or any
similar rule then in effect).
"Securities Act" means the Securities Act of 1933, as
amended.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company
shall not hereafter enter into any agreement with respect to its securities
which is inconsistent with or violates the rights granted to the holders of
Registrable Securities in this Agreement.
(b) Remedies. Any Person having rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically to recover damages caused by reason of any breach of any provision
of this Agreement and to exercise all other rights granted by law. The parties
hereto agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that any party may in its
sole discretion apply to any court of law or equity of competent jurisdiction
(without posting any bond or other security) for specific performance and for
other injunctive relief in order to enforce or prevent violation of the
provisions of this Agreement.
(c) Amendments and Waivers. Except as otherwise
provided herein, the provisions of this Agreement may be amended or waived only
9
<PAGE> 10
upon the prior written consent of the Company, the holders of a majority of the
Registrable Securities.
(d) Successors and Assigns. All covenants and
agreements in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not. In addition, whether or not any
express assignment has been made, the provisions of this Agreement which are for
the benefit of purchasers or holders of Registrable Securities are also for the
benefit of, and enforceable by, any subsequent holder of Registrable Securities.
(e) Severability. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
is held to be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of this Agreement.
(f) Counterparts. This Agreement may be
executed simultaneously in two or more counterparts, any one of which need not
contain the signatures of more than one party, but all such counterparts taken
together shall constitute one and the same Agreement.
(g) Descriptive Headings. The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
(h) Governing Law. Issues and questions
concerning the construction, validity, interpretation and enforcement of this
Agreement and the exhibits and schedules hereto shall be governed by, and
construed in accordance with, the laws of the State of Wisconsin, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of Wisconsin or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Wisconsin.
(i) Notices. All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and shall be deemed to have been given when
delivered personally to the recipient, sent to the recipient by reputable
overnight courier service (charges prepaid) or mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid. Such
notices, demands and other communications shall be sent to the addresses
indicated below:
10
<PAGE> 11
To the Investor:
Telemed Technologies International, Inc.
503 Braddock Avenue
Turtleneck, PA 15145
with copies to:
Doepken, Keevican & Weiss
58th Floor, USX Tower
600 Grant Street
Pittsburgh, PA 15219-2703
to the Company:
Criticare Systems, Inc.
20925 Crossroads Circle
Waukesha, WI 53186
Attn: President
with copies to:
Robert E. Bellin, Esq.
Reinhart, Boerner, Van Deuren
Norris & Rieselbach, s.c.
1000 North Water Street
Suite 2100
Milwaukee, WI 53202
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CRITICARE SYSTEMS, INC.
BY /s/ Gerhard von der Ruhr
----------------------------------------
Gerhard von der Ruhr, President
TELEMED TECHNOLOGIES INTERNATIONAL, INC.
BY /s/ Lee B. Ehrlichman
----------------------------------------
Its
------------------------------------
12
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