CRITICARE SYSTEMS, INC.
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made as of October 17, 2000
(the "Agreement Date"), by and between Criticare Systems, Inc., a Delaware
corporation (the "Company") with its principal office at 20925 Crossroads
Circle, Waukesha, WI 53186, and the purchasers set forth on Exhibit A hereto
(individually a "Purchaser" and collectively the "Purchasers").
Section 1.
Purchase and Sale of Common Stock
---------------------------------
1.1 Purchase and Sale of Common Stock. Each Purchaser, severally and
-----------------------------------
not jointly, agrees to purchase from the Company, and the Company agrees to
issue and sell to such Purchaser, the number of shares (the "Shares") of Common
Stock, $0.04 par value (the "Common Stock") of the Company set forth on opposite
such Purchaser's name on Exhibit A hereto. The purchase price for one Share of
Common Stock (the "Purchase Price") pursuant to this Agreement shall be $2.25.
Section 2.
Closing Date; Delivery
----------------------
2.1 Closing Date. The completion of the purchase and sale of the
-------------
Shares will be held at such place and time agreed upon by the Company and the
Purchasers (the "Closing). The date of the Closing is hereinafter referred to
as the "Closing Date."
2.2 Delivery. At the Closing, the Company will deliver to each
--------
Purchaser the certificates evidencing the Shares purchased by such Purchaser as
shown on Exhibit A and an opinion of Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, S.C., counsel to the Company, in the form of Exhibit B. Such
delivery shall be against payment of the Purchase Price for the Shares by wire
transfer of immediately available funds to the Company's bank account (in
accordance with instructions furnished by the Company).
Section 3.
Representations and Warranties of the Company
---------------------------------------------
The Company represents and warrants to the Purchasers as follows:
3.1 Organization and Standing. The Company is a corporation duly
---------------------------
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing as a domestic corporation under the laws of
said state, and has the requisite corporate power and authority to own its
properties and to carry on its business as now being conducted. Other than as
disclosed in the SEC Documents (as defined below), the Company has no
subsidiaries or direct or indirect ownership in any firm, corporation or
business which either, individually or in the aggregate, is material to the
business of the Company. The Company is qualified to do business and is in good
standing as a foreign corporation in every jurisdiction in which its ownership
of property or conduct of business requires it so to be qualified and in which
the failure to so qualify would have a material adverse effect on the financial
condition or business of the Company and its subsidiaries considered as a whole.
<PAGE>
3.2 Corporate Power: Authorization. The Company has all requisite
--------------------------------
legal and corporate power and authority and has taken all requisite corporate
action to duly authorize, execute and deliver this Agreement, to sell and issue
the Shares and to carry out and perform all of its obligations under and
contemplated by this Agreement. No action of the stockholders of the Company is
required to authorize the consummation of the transactions contemplated by this
Agreement. This Agreement has been duly executed and delivered by an authorized
officer of the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization or similar laws relating to or
affecting the enforcement of creditors' rights generally and as limited by
equitable principles generally.
3.3 Issuance and Delivery. The Shares have been duly authorized, and,
----------------------
when issued and delivered in compliance with this Agreement, will be duly and
validly issued and delivered and will be outstanding, fully paid, nonassessable,
except as set forth in Wisconsin Statutes Section 180.0622(b), as interpreted,
and free and clear of all pledges, liens, encumbrances and will conform to the
description thereof contained in the Registration Statement (or incorporated by
reference therein). No preemptive rights, or other rights to subscribe for or
purchase, exist with respect to the issuance and sale of the Shares by the
Company pursuant to this Agreement. No stockholder of the Company has any right
(which has not been waived or has not expired by reason of lapse of time
following notification of the Company's intent to file the Registration
Statement) to require the Company to register the sale of any securities owned
by such holder under the Securities Act of 1933, as amended (the "Securities
Act"), in the Registration Statement. No further approval or authority of the
stockholders or the Board of Directors of the Company will be required for the
issuance and sale of the Shares to be sold by the Company as contemplated
herein.
3.4 SEC Documents Financial Statements; Subsequent Events. Except as
-------------------------------------------------------
set forth on Schedule 3.4 hereto, the Company has filed in a timely manner all
documents that the Company was required to file with the Securities and Exchange
Commission ("SEC") under Sections 13, 14(a) and 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), during the twelve (12) months
preceding the date of this Agreement and all rules and regulations thereunder.
Except as set forth on Schedule 3.4 hereto, as of their respective filing dates,
all documents filed by the Company with the SEC (the "SEC Documents") complied
in all material respects with the requirements of the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act"), as applicable and all
rules and regulations thereunder. Except as set forth on Schedule 3.4 hereto,
none of the SEC Documents contained, as of their respective dates, any untrue
statement of material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, and such SEC
Documents, when read as a whole, do not contain any untrue statements of a
material fact and do not omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents (the "Financial Statements") comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto. The Financial Statements have been prepared in
accordance with United States generally accepted accounting principles
consistently applied and fairly present the financial position of the Company
and any subsidiaries at the dates thereof and the results of the Company's
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal adjustments).
3.5 Governmental Consents. No consent, approval, order or
----------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, or local governmental authority on the part of
the Company is required in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement.
2
<PAGE>
3.6 Exempt Transactions. Subject to the accuracy of the Purchasers'
--------------------
representations and warranties in Section 4 of this Agreement, the offer, sale
and issuance of the Shares in conformity with the terms of this Agreement
constitute transactions exempt from the registration requirements of Section 5
of the Securities Act and from the registration or qualification requirements of
the laws of any applicable state or United States jurisdiction.
3.7 No Material Adverse Change. Except as otherwise disclosed herein,
---------------------------
since June 30, 2000, there have not been any changes in the assets, liabilities,
financial condition, business or operations of the Company from that reflected
in the Financial Statements except changes in the ordinary course of business
which have not been, either individually or in the aggregate, materially
adverse.
3.8 Intellectual Property. The Company to its knowledge owns or
----------------------
possesses adequate rights to use all patents, patent rights, inventions,
trademarks, trade names, copyrights, licenses, governmental authorizations,
trade secrets and know-how that are used or necessary for the conduct of its
business as described in the SEC Documents; except as described in the SEC
Documents, neither the Company nor any of its subsidiaries has received any
notice of, or has any knowledge of, any infringement of or conflict with
asserted rights of others with respect to any patent, patent right, invention,
trademarks, trade names, copyrights, licenses, governmental authorizations,
trade secret or knowhow that, individually or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would have a material adverse
effect on the condition (financial or otherwise), earnings, operations or
business of the Company and its subsidiaries considered as a whole.
3.9 Authorized Capital Stock. The authorized capital stock of the
--------------------------
Company conforms, as of the dates for which such information is given, in all
material respects to the statements relating thereto contained in the SEC
Documents. The issued and outstanding shares of capital stock of the Company
have been duly authorized, validly issued and are fully paid and nonassessable;
except as set forth or referred to in the SEC Documents, no warrants, options or
other rights to purchase, agreements or other obligations to issue, or
agreements or other rights to convert any obligation into, any shares of capital
stock of the Company have been granted or entered into by the Company. All of
the above securities of the Company were issued in compliance with all
applicable federal and state securities laws and were not issued in violation of
or subject to any preemptive rights or other rights to subscribe for or purchase
securities. No holder of any security of the Company is entitled to any
preemptive or similar rights to purchase any securities of the Company.
3.10 Litigation. There are no actions, suits, proceedings or
----------
investigations pending or, to the best of the Company's knowledge, threatened
against the Company or any of its properties before or by any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable likelihood (in the judgment of the Company) of an adverse decision
that (a) would have a material adverse effect on the Company's properties or
assets or the business of the Company as presently conducted or proposed to be
conducted or (b) would impair the ability of the Company to perform in any
material respect its obligations under this Agreement. The Company is not in
default with respect to any judgment, order or decree of any court or
governmental agency or instrumentality which, individually or in the aggregate,
would have a material adverse effect on the assets, properties or business of
the Company.
3.11 Preemptive and Registration Rights. There are no preemptive
-------------------------------------
rights, rights of first refusal, repurchase rights or any other right of the
Company or any third party as to the Shares which have not been satisfied or
waived, and except as provided in this Agreement, the Company has not granted or
agreed to grant any registration rights that would be applicable to the
registration for resale of the Shares pursuant to the Registration Statement, as
defined in and contemplated by Section 7.1 hereof, to any person or entity which
have not been satisfied or waived.
3
<PAGE>
3.12 Compliance With Other Instruments. The business and operations of
---------------------------------
the Company have been and are being conducted in accordance with all applicable
laws, rules and regulations of all governmental authorities, except for such
violations of applicable laws, rules and regulations which would not,
individually or in the aggregate, have a material adverse effect on the assets,
properties, financial condition or business of the Company. Neither the
execution and delivery of, nor the performance or compliance with, this
Agreement and the transactions contemplated hereby, will, with or without the
giving of notice or the passage of time, (i) result in any breach of, or
constitute a default under, or result in the imposition of any lien or
encumbrance upon any asset or property of the Company pursuant to, any agreement
or other instrument to which the Company is a party or by which it or any of its
properties, assets or rights is bound or effected, except for such breach or
default or the imposition of any such lien or encumbrance which, either
individually or in the aggregate, would not have a material adverse effect on
the assets, properties, financial condition or business of the Company or (ii)
violate the Certificate of Incorporation or Bylaws of the Company, or any law,
rule regulation, judgment, order or decree. The Company is not in violation of
its Certificate of Incorporation or Bylaws nor in violation of, or in default
under, any lien, indenture, mortgage, lease, agreement, instrument, commitment
or arrangement, except for such defaults which would not, individually or in the
aggregate, have a material adverse effect on the assets, properties, financial
condition or business of the Company, or subject to any restriction which would
prohibit the Company from entering into or performing its obligations under the
Agreement.
3.13 Brokers or Finders. No person, firm or corporation has or will
--------------------
have, as a result of any act or omission of the Company, any right, interest or
valid claim against the Purchasers for any commission, fee or other compensation
as a finder or broker in connection with the transactions contemplated by this
Agreement.
3.14 Compliance with Environmental Laws. Except as disclosed in the
-------------------------------------
SEC Documents, the Company is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety which
would, individually or in the aggregate, have a material adverse effect on the
assets, properties, financial condition or business of the Company and its
subsidiaries considered as a whole, and, to the best of the Company's knowledge,
no material expenditures are or will be required in order to comply with any
such existing statute, law or regulation. To the best of the Company's
knowledge, the Company does not have any material liability to any governmental
authority or other third party arising under or as a result of any such past or
existing statute, law or regulation.
3.15 No Implied Representations. All of the Company's representations
---------------------------
and warranties are contained in this Agreement and no other representations or
warranties by the Company shall be implied.
3.16 Contracts. The contracts so described in the SEC Documents or
---------
incorporated by reference therein are in full force and effect on the date
hereof, except for contracts the termination or expiration of which would,
individually or in the aggregate, not have a material adverse effect on the
business, properties or assets of the Company and its subsidiaries considered as
a whole, and neither the Company nor any of its subsidiaries, nor to the
Company's knowledge, any other party is in breach of or default under any of
such contracts.
3.17 Properties. The Company has good and marketable title to all the
----------
properties and assets reflected as owned in the financial statements included in
the SEC Documents, subject to no lien, mortgage, pledge, charge or encumbrance
of any kind except (i) those, if any, reflected in such financial statements, or
(ii) those which are not material in amount and do not adversely affect the use
made and promised to be made of such property by the- Company and its
subsidiaries. The Company and any applicable subsidiary holds its leased
properties under valid and binding leases, with such exceptions as are not
materially significant in relation to the business of the Company and the
subsidiaries considered as
4
<PAGE>
a whole. Except as disclosed in the SEC Documents, the Company owns or leases
all such properties as are necessary to its operations as now conducted or as
proposed to be conducted.
3.18 Compliance. The Company has not been advised, and has no reason
----------
to believe, that either it or any of its subsidiaries is not conducting business
in compliance with all applicable laws, rules and regulations of the
jurisdictions in which it is conducting business; except where failure to be so
in compliance would not materially adversely affect the condition (financial or
otherwise), business, results of operations or prospects of the Company and its
subsidiaries considered as a whole.
3.19 Taxes. The Company and its subsidiaries have filed all necessary
-----
federal, state and foreign income and franchise tax returns and have paid or
accrued all taxes shown as due thereon, and the Company has no knowledge of any
tax deficiency which has been or might be asserted or threatened against the
Company or its subsidiaries which could have a material adverse effect on the
business, operations or properties of the Company and its subsidiaries
considered as a whole.
3.20 Transfer Taxes. On the Closing Date, all stock transfer or other
---------------
taxes (other than income taxes) which are required to be paid in connection with
the sale and transfer of the Shares to be sold to the Purchasers hereunder will
be, or will have been, fully paid or provided for by the Company and all laws
imposing such taxes will be or will have been complied with fully.
3.21 Investment Company. The Company is not an "investment company"
-------------------
within the meaning of the Investment Company Act of 1940, as amended.
3.22 Insurance. Each of the Company and its subsidiaries maintains
---------
insurance of the types and in the amounts generally deemed adequate for its
business, including, but not limited to, insurance covering all real and
personal property owned or leased by the Company and its subsidiaries against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect.
3.23 Contributions. Neither the Company nor any of its subsidiaries
-------------
has, directly or indirectly, at any time during the last five years (i) made any
unlawful contribution to any candidate for public office, or failed to disclose
fully any contribution in violation of law, or (ii) made any payment to any
federal or state governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or permitted
by the laws of the United States or any jurisdiction thereof.
3.24 Nasdaq Listing. The Company's Common Stock is listed on the
---------------
Nasdaq National Market.
3.25 Preferred Share Purchase Right. The consummation of the
---------------------------------
transactions contemplated by this Agreement will not cause the preferred stock
purchase right made as a dividend to the Company's stockholders on April 24,
1997, or any similar arrangement or right, to become exercisable by the holders
of such rights or in any way effect the exercisability of such rights.
5
<PAGE>
Section 4.
Representations, Warranties and Covenants of the Purchasers
-----------------------------------------------------------
Each Purchaser, severally and for itself only, hereby represents and
warrants to the Company as follows:
4.1 Authorization. (i) The Purchaser has all requisite legal and
-------------
corporate or other power and capacity and has taken all requisite corporate or
other action to execute and deliver this Agreement, to purchase the Shares to be
purchased by it and to carry out and perform all of its obligations under this
Agreement; and (ii) this Agreement constitutes the legal, valid and binding
obligation of the Purchaser, enforceable in accordance with its terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization, or similar
laws relating to or affecting the enforcement of creditors' rights generally and
(b) as limited by equitable principles generally.
4.2 Investment Experience. The Purchaser is an "accredited investor"
----------------------
as defined in Rule 501 (a) under the Securities Act. The Purchaser is aware of
the Company's business affairs and financial condition and has had access to and
has acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Shares. The Purchaser has such business
and financial experience as is required to give it the capacity to protect its
own interests in connection with the purchase of the Shares.
4.3 Investment Intent. The Purchaser is purchasing the Shares for its
------------------
own account as principal, for investment purposes only, and not with a present
view to, or for, resale, distribution or fractionalization thereof, in whole or
in part, within the meaning of the Securities Act. The Purchaser understands
that its acquisition of the Shares has not been registered under the Securities
Act or registered or qualified under any state securities law in reliance on
specific exemptions therefrom, which exemptions may depend upon, among other
things, the bona fide nature of the Purchaser's investment intent as expressed
herein. The Purchaser has completed or caused to be completed the Purchaser
Questionnaire attached hereto as Appendix I for use in preparation of the
-----------
Registration Statement (as defined below), and the responses provided therein
shall be true and correct as of the Closing Date and will be true and correct as
of the effective date of the Registration Statement. The Purchaser will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the Shares, except in compliance with the Securities Act, and the
rules and regulations promulgated thereunder.
4.4 Registration or Exemption Requirements. The Purchaser further
-----------------------------------------
acknowledges and understands that the Shares may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or
unless an exemption from such registration is available. The Purchaser
understands that the certificate(s) evidencing the Shares will be imprinted with
a legend in substantially the form set forth in Section 8.2.
4.5 Restriction on Short Sales. The Purchaser represents and warrants
---------------------------
to and covenants with the Company that the Purchaser has not engaged and will
not engage in any short sales of the Company's Common Stock prior to the
effectiveness of the Registration Statement, except to the extent that any such
short sale is fully covered by shares of Common Stock of the Company owned by
such Purchaser other than the Shares.
4.6 No Current Ownership. Immediately following the Closing the
----------------------
Purchasers shall not beneficially own (within the meaning of Rule 13d-3
promulgated under the Exchange Act) any shares of capital stock of the Company,
other than the Shares acquired pursuant to and in accordance with the terms of
this Agreement.
6
<PAGE>
Section 5.
Conditions to Closing of Purchasers
-----------------------------------
The obligation of each Purchaser to purchase the Shares at the Closing is
subject to the fulfillment as of the Closing Date of the following conditions.
5.1 Representations and Warranties. The representations and warranties
------------------------------
made by the Company in Section 3 hereof shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date.
5.2 Covenants. All covenants, agreements and conditions contained in
---------
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
5.3 Compliance Certificate. The President or Chief Financial Officer
-----------------------
of the Company shall have delivered to the Purchasers a certificate, dated as of
the Closing Date, certifying that the conditions specified in Sections 5.1 and
5.2 have been fulfilled and stating that since June 30, 2000, there shall have
been no material adverse change in the assets, liabilities, financial condition,
business or operations of the Company from that reflected in the Financial
Statements except changes in the ordinary course of business which have not
been, either individually or in the aggregate, materially adverse.
5.4 Legal Opinion of Company Counsel. Reinhart, Boerner, Van Deuren,
----------------------------------
Norris & Rieselbach, S.C., counsel to the Company, shall have delivered a legal
opinion, addressed to the Purchaser, in the form attached as Exhibit B hereto.
5.5 Closing Date. The Closing shall have occurred on or prior to
-------------
November 18, 2000.
5.6 Secretary's Certificate. The Secretary of the Company shall have
------------------------
delivered to the Purchasers a certificate, dated as of the Closing Date,
certifying as to (i) the authenticity and continuing validity of the Company's
Certificate of Incorporation and Bylaws; (ii) the authenticity of the
resolutions authorizing the transactions contemplated by this Agreement; (iii)
the legal existence and good standing of the Company in Delaware and in each
other jurisdiction in which its failure to be qualified as a foreign corporation
would have a material adverse effect on the financial condition or business of
the Company and its subsidiaries considered as a whole; and (iv) the incumbency
of the officers of the Company.
5.7 Board Composition. Immediately prior to the Closing, the Board of
------------------
Directors of the Company shall consist of four directors, with the following
persons being duly elected as directors: Karsten Houm (Chairman), Emil H. Soika,
Milton Datsopoulos, and N.C. Joseph Lai. As of Closing, the Board of Directors
of the Company shall be expanded to five directors, with Jeffrey T. Barnes being
elected to fill the vacancy.
Section 6.
Conditions to Closing of Company
--------------------------------
The Company's obligation to sell and issue the Shares at the Closing to a
Purchaser is subject to the fulfillment or waiver of the following conditions:
7
<PAGE>
6.1 Representations and Warranties. The representations and warranties
------------------------------
made by such Purchaser in Section 4 hereof shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of such date.
6.2 Covenants. All covenants, agreements and conditions contained in
---------
this Agreement to be performed by such Purchaser on or prior to the Closing Date
shall have been performed or complied with in all material respects.
6.3 Payment of Purchase Price. The Purchasers shall have tendered the
--------------------------
Purchase Price at the Closing.
Section 7.
Affirmative Covenants of the Company
------------------------------------
The Company hereby covenants and agrees as follows:
7.1 Registration Requirements.
--------------------------
(a) The Company shall, subject to receipt of necessary information
from the Purchasers, prepare and file a registration statement with the SEC
under the Securities Act as soon as reasonably practicable after the Closing,
but in any event within 45 days of the Closing, to register the resale of the
Shares by the Purchasers, and the Company shall use its best efforts to secure
the effectiveness of such registration statement as soon as reasonably
practicable thereafter. For purposes hereof, the term "Registration Statement"
shall refer to any and all registration statements filed for the purpose of
registering the Shares, including any prospectus(es) constituting a part thereof
and together with any amendments and supplements thereto.
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and the Purchaser shall pay all Selling Expenses (as defined below)
and other expenses that are not Registration Expenses relating to the Shares
resold by the Purchasers. "Registration Expenses" shall mean all expenses,
except for Selling Expenses, incurred by the Company in complying with the
registration provisions herein described, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses
and the expense of any special audits incident to or required by any such
registration. "Selling Expenses" shall mean all selling commissions,
underwriting fees and stock transfer taxes, if any, applicable to the Shares.
(c) In the case of the registration effected by the Company
pursuant to these registration provisions, the Company will use its best efforts
to: (i) keep such registration effective until the earlier of (A) the fourth
anniversary of the Closing Date, (B) such date as all of the Shares have been
resold or (C) such time as all of the Shares held by the Purchasers can be sold
within a given three-month period without compliance with the registration
requirements of the Securities Act pursuant to Rule 144(k) (or any similar rule
then in effect); (ii) prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for the applicable period specified in
this Section 7.1(c); (iii) cause the related prospectus to be supplemented by
any required prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 (or any similar provisions then in force) under the Securities Act;
(iv) comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of
8
<PAGE>
disposition by the sellers thereof set forth in the Registration Statement as so
amended or such prospectus as so supplemented; (v) furnish such number of
prospectuses and other documents incident thereto, including any amendment of or
supplement to the prospectus, as a Purchaser from time to time may reasonably
request, and the Company hereby consents to the use of such prospectus or each
amendment and supplement thereto by each of the selling holders of the Shares
and the underwriters, if any, in connection with the offering and sale of the
Shares covered by such prospectus or any amendment or supplement thereto; (vi)
cause the Shares to be listed on each securities exchange and quoted on each
quotation service on which similar securities issued by the Company are then
listed or quoted and maintain the listing of the Shares; (vii) provide a
transfer agent and registrar for all the Shares registered pursuant to the
Registration Statement and a CUSIP number for all such Shares; (viii) otherwise
use its best efforts to comply with all applicable rules and regulations of the
SEC; and (ix) file the documents required of the Company and otherwise use its
best efforts to maintain requisite blue sky clearance in (A) all jurisdictions
in which any of the Shares are originally sold and (B) all other states
specified in writing by a Purchaser, provided as to clause (B), however, that
the Company shall not be required to qualify to do business or consent to
service of process in any state in which it is not now so qualified or has not
so consented.
(d) The Company shall furnish to each Purchaser upon request a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary in order to facilitate the public sale or other
disposition of all or any of the Shares held by such Purchaser.
(e) With a view to making available to the Purchasers the benefits
of Rule 144 promulgated under the Securities Act ("Rule 144") and any other rule
or regulation of the SEC that may at any time permit a Purchaser to sell the
Shares to the public without registration or pursuant to a registration on Form
S-3, the Company covenants and agrees to: (i) make and keep public information
available, as those terms are understood and defined in Rule 144, until the
earlier of (A) the fourth anniversary of the effective date of the Registration
Statement, (B) such date as all of the Shares shall have been resold or (C) such
time as all of the Shares held by the Purchasers can be sold within a given
three-month period without compliance with the registration requirements of the
Securities Act pursuant to Rule 144(k) (or any similar rule then in effect);
(ii) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and Exchange Act; and (iii)
furnish to each Purchaser upon request, as long as such Purchaser owns any
Shares, (A) a written statement by the Company that it has complied with the
reporting requirements of the Securities Act and the Exchange Act, (B) a copy of
the most recent annual or quarterly report of the Company, and (C) such other
information as may be reasonably requested in order to avail a Purchaser of any
rule or regulation of the SEC that permits the selling of any such Shares
without registration or pursuant to such Form S-3.
(f) The Company shall notify each Purchaser, if such Purchaser has
registered Shares in a Registration Statement which remain unsold, and (if
requested by such Purchaser) confirm such notice in writing, (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and, with respect to the Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the SEC or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to the
Registration Statement or related prospectus or for additional information
relating to the Registration Statement, (iii) of the issuance by the SEC or any
other federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of any
event which makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect
9
<PAGE>
or which requires the making of any changes in the Registration Statement or
prospectus so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, and (vi) of the Company's reasonable determination that a
post-effective amendment to the Registration Statement would be appropriate.
(g) The Company may, upon written notice to the Purchasers of (i)
the happening of any event of the kind described in Section 7.1(f)(ii),
7.1(f)(iii), 7.1(f)(iv), 7.1(f)(v) or 7.1(f)(vi) hereof or (ii) that, in the
judgment of the Company's Board of Directors, it is advisable to suspend use of
the prospectus for a discrete period of time due to pending corporate
developments, public filings with the SEC or similar events, discontinue
disposition of Shares covered by the Registration Statement or prospectus until
copies of the supplemented or amended prospectus contemplated by Section 7.1(i)
hereof are distributed to the Purchasers, or until the Purchasers are advised in
writing by the Company that the use of the applicable prospectus may be resumed,
and the Purchasers have received copies of any additional or supplemental
filings that are incorporated or deemed incorporated by reference in such
prospectus. The Company shall not suspend use of a prospectus or Registration
Statement under this Section 7.1 (g) for more than 45 days at a time and more
than twice in any 12-month period. Any period for which use of a prospectus or
Registration Statement is suspended under this Section 7.1 (g) shall be added to
the time for which the Company is required to maintain the effectiveness of such
Registration Statement, including the prospectus constituting a part thereof,
under Section 7.1(c).
(h) The Company shall use every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the Registration
Statement, or the lifting of any suspension of the qualification (or exemption
from qualification) of any of the Shares for sale in any jurisdiction, at the
earliest possible moment.
(i) The Company shall, upon the occurrence of any event
contemplated by Section 7.1(f)(v) or 7.1(f)(vi) above, prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
the Shares being sold thereunder, such prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
7.2 Indemnification and Contribution.
----------------------------------
(a) The Company agrees to indemnify and hold harmless the
Purchasers from and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which the Purchasers may become
subject (under the Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon, any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any prospectus
(preliminary or final), as amended on the applicable date thereof, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or arise out of any failure by the Company to fulfill
any undertaking included in the Registration Statement or any prospectus
(preliminary or final), as amended on the applicable date thereof, and the
Company will, as incurred, reimburse the Purchasers for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided, however, that the Company shall
not be liable in any such
10
<PAGE>
case to the extent that such loss, claim, damage or liability arises out of, or
is based upon (i) an untrue statement or an omission made in such Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Purchaser specifically for use in
preparation of the Registration Statement, or (ii) any untrue statement or the
omission of a material fact in any prospectus that is corrected in any
subsequent prospectus that was delivered to a Purchaser prior to the pertinent
sale or sales by such Purchaser.
(b) Each Purchaser, severally and not jointly, agrees to indemnify
and hold harmless the Company from and against any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) to which the Company
may become subject (under the Securities Act or otherwise) insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon (i) an untrue statement or an alleged
untrue statement of a material fact made in such Registration Statement or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Purchaser specifically for use in preparation of
the Registration Statement, provided, however, that a Purchaser shall not be
liable in any such case for any untrue statement or alleged untrue statement or
the omission or alleged omission that has been corrected, in writing, by such
Purchaser, delivered to the Company before the sale from which such loss
occurred, or (ii) any untrue statement or alleged untrue statement or the
omission or alleged omission in any prospectus that is corrected in any
subsequent prospectus that was delivered to a Purchaser prior to the pertinent
sale or sales by such Purchaser, and such Purchaser, severally and not jointly,
will, as incurred, reimburse the Company for ally legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim; provided, however, that each Purchaser's
indemnification obligation shall be limited to the net proceeds received from
its sale of the Shares.
(c) Promptly after receipt by any indemnified person of a notice
of a claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 7.2, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume the defense thereof, the indemnifying person shall not be
liable to such indemnified person for any legal expenses subsequently incurred
by such indemnified person in connection with the defense thereof; provided,
however, that if there exists or shall exist a conflict of interest that would
make it inappropriate in the reasonable judgment of the indemnified person for
the same counsel to represent both the indemnified person and such indemnifying
person or any affiliate or associate thereof, the indemnified person shall be
entitled to retain its own counsel at the expense of such indemnifying person.
(d) If the indemnification provided for in this Section 7.2 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as the result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Purchasers
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of
11
<PAGE>
a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or a Purchaser on
the other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Purchasers agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages, or
liabilities (or actions in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d), a
Purchaser shall not be required to contribute any amount in excess of the amount
by which the net amount received by such Purchaser from the sale of the Shares
to which such loss relates exceeds the amount of any damages which such
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11 (f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Each Purchaser's obligations in this subsection
(d) to contribute is several in proportion to its sale of Shares to which such
loss relates and not joint.
(e) The obligations of the Company and the Purchasers under this
Section 7.2 shall be in addition to any liability which the Company and the
Purchasers may otherwise have and shall extend, upon the same terms and
conditions, to directors, officers, employees and agents of the Company and the
Purchasers and to each person, if any, who controls the Company or any Purchaser
within the meaning of the Act.
Section 8.
Restrictions on Transferability of Shares; Compliance with Securities Act
-------------------------------------------------------------------------
8.1 Restrictions on Transferability. The Shares shall not be
---------------------------------
transferable in the absence of a registration under the Securities Act or an
exemption therefrom or in the absence of compliance with any term of this
Agreement.
8.2 Restrictive Legend. Each certificate representing the Shares shall
------------------
bear substantially the following legends (in addition to any legends required
under applicable securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES
ONLY AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAW. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY IS OBTAINED TO THE EFECT THAT SUCH REGISTRATION IS
NOT REQUIRED.
ADDITIONALLY, THE TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS SUBJECT TO
CERTAIN RESTRICTIONS SPECIFIED IN THE PURCHASE AGREEMENT DATED OCTOBER 17, 2000
BETWEEN THE COMPANY AND THE ORIGINAL PURCHASER, AND NO TRANSFER OF THE
SECURITIES SHALL BE VALID OR EFFECTIVE ABSENT COMPLIANCE WITH SUCH RESTRICTIONS.
ALL SUBSEQUENT HOLDERS OF THESE SECURITIES WILL HAVE AGREED TO BE BOUND BY
CERTAIN OF THE TERMS OF THE AGREEMENT, INCLUDING SECTIONS 7.1 AND 8.3 THEREOF.
COPIES OF THE
12
<PAGE>
PURCHASE AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
REGISTERED HOLDER OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY.
8.3 Transfer of Shares After Registration. Each Purchaser hereby
-----------------------------------------
covenants with the Company not to make any sale of the Shares except either (i)
in accordance with the Registration Statement, in which case such Purchaser
covenants to comply with the requirement of delivering a current prospectus, or
(ii) in accordance with Rule 144, in which case Purchaser covenants to comply
with Rule 144, or (iii) in accordance with another exemption from the
registration requirements of the Securities Act. The legend set forth in Section
8.2 will be removed from a certificate representing the Shares following and in
connection with any sale of the Shares pursuant to subsection (i) or (ii)
hereof, but not in connection with any sale of Shares pursuant to subsection
(iii) hereof, and also will be removed at such time that the Shares may be sold
under Rule 144 without restriction as to volume and manner of sale.
8.4 Purchaser Information. Each Purchaser covenants that it will
----------------------
promptly notify the Company of any changes in the information set forth in the
Registration Statement regarding such Purchaser, under the heading "Selling
Security Holders" or elsewhere, or such Purchaser's "Plan of Distribution."
Section 9.
Miscellaneous
-------------
9.1 Waivers and Amendments. Neither this Agreement nor any provisions
-----------------------
hereof shall be waived, modified, changed or discharged or terminated except by
an instrument in writing signed by the party against whom any waiver,
modification, change, discharge or termination is sought.
9.2 Broker's Fee. Each of the parties hereto hereby represents that,
-------------
on the basis of any actions and agreements by it, there are no other brokers or
finders entitled to compensation in connection with the sale of the Shares to
the Purchasers.
9.3 Governing Law. This Agreement shall be governed in all respects by
-------------
and construed in accordance with the laws of the State of Delaware without any
regard to conflicts of laws principles.
9.4 Survival. The representations, warranties, covenants and
--------
agreements made in this Agreement shall survive any investigation made by the
Company or the Purchasers and the Closing.
9.5 Successors and Assigns. The provisions hereof shall inure to the
------------------------
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement.
9.6 Entire Agreement. This Agreement, including all exhibits,
-----------------
schedules and appendices hereto constitutes the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof.
9.7 Notices, etc. All notices and other communications required or
-------------
permitted under this Agreement shall be effective upon receipt and shall be in
writing and may be delivered in person, by telecopy, overnight delivery service
or registered or certified United States mail, addressed to the Company or the
Purchaser, as the case may be, at their respective addresses set forth at the
beginning of this Agreement or on Exhibit A, or at such other address as the
Company or the Purchaser shall have furnished to the other party in writing. All
notices and other communications shall be effective upon the earlier of actual
receipt thereof by the person to whom notice is directed or (i) in the case of
notices and
13
<PAGE>
communications sent by personal delivery or telecopy, one business day after
such notice or communication arrives at the applicable address or was
successfully sent to the applicable telecopy number, (ii) in the case of notices
and communications sent by overnight delivery service, at noon (local time) on
the second business day following the day such notice or communication was sent,
and (iii) in the case of notices and communications sent by United States mail,
seven days after such notice or communication shall have been deposited in the
United States mail.
9.8 Severability of this Agreement. If any provision of this Agreement
------------------------------
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
9.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9.10 Further Assurances. Each party to this Agreement shall do and
-------------------
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
9.11 Expenses. The Company and each the Purchaser shall bear its own
--------
expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby.
9.12 Currency. All references to "dollars" or "$" in this Agreement
--------
shall be deemed to refer to United States dollars.
(Remainder of page intentionally left blank)
14
<PAGE>
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
CRITICARE SYSTEMS, INC. a Delaware corporation
By: /s/ Emil H. Soika
--------------------
President and CEO
"PURCHASERS"
OXFORD BIOSCIENCE PARTNERS III L.P.
By: OBP Management III L.P.
By: /s/ Jeffrey T. Barnes
------------------------
General Partner
OXFORD BIOSCIENCE PARTNERS (BERMUDA) III
LIMITED PARTNERSHIP
By: OBP Management III (Bermuda) Limited
Partnership
By: /s/ Jeffrey T. Barnes
------------------------
General partner
mRNA FUND L.P.
By: mRNA Partners L.P.
By: /s/ Jonathan J. Fleming
--------------------------
General Partner
15
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
NO. OF SHARES OF
NAME AND ADDRESS COMMON STOCK PURCHASE PRICE
---------------------------------------- ---------------- ---------------
<S> <C> <C>
OXFORD BIOSCIENCE PARTNERS III L.P.
31 St. James Ave., Ste. 905
Boston, MA 02116 . . . . . . . . . . . . 1,547,529 $ 3,481,940.25
OXFORD BIOSCIENCE PARTNERS (BERMUDA) III
LIMITED PARTNERSHIP
31 St. James Ave., Ste. 905
Boston, MA 02116 . . . . . . . . . . . . 220,555 $ 496,248.75
MRNA FUND L.P.
31 St. James Ave., Ste. 905
Boston, MA 02116 . . . . . . . . . . . . 18,189 $ 40,925.25
</TABLE>
