EMPLOYMENT AGREEMENT


     THIS  EMPLOYMENT AGREEMENT (the "Agreement") is made as of June 1, 1999, by
and between CRITICARE SYSTEMS, INC., a Delaware corporation (the "Company"), and
DREW  DIAZ  ("Employee").

                                    RECITALS

     A.     Employee  is currently employed by the Company as its Vice President
of  International  Sales,  with primary emphasis on developing and supervising a
distribution  network  consisting of dealers and independent representatives for
the sale of the Company's products in markets located outside the United States.

     B.     The  Company  desires  to  make  certain agreements with Employee in
order to induce Employee to remain in such employ and in exchange for Employee's
covenants  herein.

     C.     The  parties  desire  to evidence their agreement as to the terms of
the  Company's  employment  of  Employee.

                                    AGREEMENT

     In  consideration  of the foregoing recitals and mutual covenants contained
herein,  the  parties  hereby  agree  as  follows:

     1.     Employment.  The Company hereby continues its employment of Employee
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as  the  Company's  Vice  President  of International Sales, and Employee hereby
accepts  such  employment  subject  to  the  provisions  of  this  Agreement.

     2.     Duties and Authority.  Employee shall have such duties and authority
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as  are  customary  for  the  Vice  President  of  International  Sales  of  a
publicly-held  corporation  but  focusing  on  the  development,  management and
supervision  of a distribution network for the markets outside the United States
but including without limitation, such specific additional management duties and
authority  as  the Company's Board of Directors may from time to time reasonably
assign  Employee  consistent with the foregoing and the other provisions of this
Agreement.  Employee  agrees  to  devote  his  entire  business time, energy and
skills to such employment.  However, it is understood that Employee shall not be
required  to devote more than the usual and customary hours per calendar week to
such  employment  as  are  generally  expected of similarly situated officers of
publicly-held  companies.  At  all  times,  Employee  shall  be  subject  to the
direction  of  the  Company's  Board  of  Directors  and  its  President.

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     3.     Compensation  and  Benefits.  Employee  shall  be  entitled  to  the
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following  compensation  and  benefits  for  services  rendered  to the Company:

          (a)     Compensation.  Employee  shall continue to receive his current
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compensation  (i.e.,  base  salary plus commissions) payable in installments not
less  frequently  than  monthly.  Employee's  compensation  shall  be  reviewed
annually  within  30  days  prior  to  the  end  of  each  fiscal year (but such
compensation  shall  not  be  reduced  to  less than the prior year's salary and
commission  rate  without  Employee's  written  consent).

          (b)     Expense  Reimbursements.  The Company shall reimburse Employee
                  -----------------------
for  actual out-of-pocket costs incurred for reasonable business expenses, other
than  automobile expenses (which are covered in Section 3(c)) in accordance with
the  policies  and  procedures  of  the  Company  in  effect from time to time).

          (c)     Automobile Allowance.  Employee shall receive a Company car or
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car  allowance  subject  to  Company  policies  in effect from time to time with
respect  to  reimbursement  for  personal  use.

          (d)     Vacations.  Employee  shall  be  entitled to paid vacations of
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not  more  than  four weeks each calendar year, which may be taken in Employee's
discretion;  provided,  however,  that  such  vacation  shall  not  unreasonably
interfere  with  the  Company's  needs at such time.  Unused vacation time for a
calendar  year  shall  not  be  carried  over  from  one  year  to  the  next.

          (e)     Health Insurance.  Employee shall be entitled to family health
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insurance  coverage  under  the  Company's group plan on a premium-sharing basis
then  in  effect.

          (f)     Disability  Insurance.  Employee  shall  be  entitled  to
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participate  in  the  Company's group life insurance and disability insurance in
effect  from  time  to  time.

          (g)     Severance  Pay.
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               (i)     This  Agreement  may  be terminated by the Company at any
time  for  Cause  (hereinafter defined), and in such event Employee shall not be
entitled  to  receive any further compensation.  For purposes of this Agreement,
the  term  "Cause"  shall  mean  acts of fraud, repeated material misconduct, or
intentional  dishonesty  by Employee in the course of Employee's employment with
the  Company,  or  the  commission  of  a  felony.

               (ii)     In  the  event  that  Employee  voluntarily  terminates
Employee's  employment by the Company, Employee shall not be entitled to receive
any  further compensation; provided, however, that if such voluntary termination
occurs  at  any time after Employee has completed three (3) months of employment
by  the  Company  after  the  occurrence  of a Change in Control (as hereinafter
defined),  Employee shall be entitled to receive severance benefits for a period
of  12  months  after  the  date  of  termination  or until Employee secures new
employment,  whichever  is  shorter,  consisting  of  the  following:

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<PAGE>
                    A.     Employee's  then  current  compensation  (i.e.,  base
salary  plus  commission),

                    B.     The  amount  which  the Company pays for group health
insurance  benefits  with  respect  to  such  Employee  and  his  family and the
continuation  of  Employee's  Company  provided  life  insurance  or  equivalent
coverage,

                    C.     Continuation  of  use  of  the  company  car  or  an
equivalent  car  allowance.

               (iii)     Notwithstanding  anything  to  the  contrary  herein,
Employee's  employment  hereunder may be terminated by the Company without Cause
at  any  time  either  prior  to  or after a "Change in Control" (as hereinafter
defined),  however, in such event, Company shall pay Employee for a period of 12
months  after  the  date  of termination as severance benefits consisting of the
following:

                    A.     Employee's  then  current  compensation  (i.e.,  base
salary  plus  commission),

                    B.     The  amount  which  the Company pays for group health
insurance  benefits  with  respect  to  such  Employee  and  his  family and the
continuation  of  Employee's  Company  life  insurance  or  equivalent coverage,

                    C.     Continuation  of  use  of  the  company  car  or  an
equivalent  car  allowance.

A termination without cause shall be deemed to have occurred if Company, without
Employee's  consent,  materially  reduces  Employee's  responsibilities, reduces
Employee's salary or requires Employee to relocate or transfer to a site further
than  30  miles  from  Employee's  current  place  of  employment.

          The term "Change in Control" shall mean a sale, assignment or exchange
of  more than 51% of the voting stock outstanding immediately after such sale or
the  sale,  assignment  or  exchange  of  substantially all of the assets of the
Company.  The  date  of  the  Change in Control shall mean the date upon which a
sale  is  closed, or in a series of transactions, the date upon which beneficial
ownership  of  the  voting  stock  or  assets  is  transferred.

          All  amounts payable to Employee under this Section 3 shall be paid in
normal  payroll  installments  on  normal  payroll  dates  less  all  applicable
withholding.  Except  as  otherwise  provided  in  this  Section  3,  as  of the
effective  date  of  termination, all obligations of the Company to pay Employee
compensation shall terminate and the Company shall have no further obligation to
Employee  after  the  date  of  termination.

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<PAGE>
          Upon  termination  of employment for any reason, Employee will deliver
to  the Company all data, records and information, including without limitation,
all  documents,  correspondence,  files,  notebooks, reports, computer programs,
software,  manuals,  customer  information,  samples and all other materials and
copies  thereof relating to the Company's business which Employee may possess or
which  are  under  his  control.

     4.     Options.  In  the  event  Employee is terminated without Cause or in
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the  event  of  a Change in Control of the Company as those terms are defined in
the  Agreement,  stock  options  held  by  Employee  shall  become  immediately
exercisable  without  regard  to vesting and/or applicable benchmarks unless the
agreement  governing  the exercise of such options contains provisions expressly
to  the  contrary.  In  the  event  of  a  sale  or  exchange of assets or stock
anticipated  to constitute a Change in Control, the Company agrees that it shall
make provisions for the conversion or exchange of shares to be received upon the
exercise of such options for the consideration to be received by stockholders of
the  Company  generally;  provided,  however,  that  Employee may be required to
provide  to the Company an irrevocable notice of exercise a reasonable period of
time  prior  to  the  actual  closing  date  to  facilitate  such  exchange.

     5.     Confidentiality.  Employee covenants that he shall at all times keep
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confidential the Company's financial statements and other financial information,
except  to the extent (a) disclosure of financial information (but not financial
statements)  is incidental to the performance of his duties for the Company, (b)
disclosure  is  required  by  applicable  law,  or  (c)  the  Company's Board of
Directors  authorizes  disclosure.

     6.     Other  Company  Employees.  For  a  period of one year form the date
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Employee's  employment by the Company terminates, Employee shall not (a) solicit
another Company employee to leave the Company's employ and work for the Employee
or another person or entity, or (b) participate in the hiring of another Company
employee  by  another  person  or  entity  away  from  the  Company.

     7.     Restrictive  Covenant.
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          (a)     As  used  in  this Section 7, the following definitions apply:

               "Products"  mean  vital  signs  medical  monitoring  equipment
primarily  marketed  for  use in hospital and alternate care medical facilities.

               "Protected  Territory"  means all countries outside of the United
States  of  America.

          (b)     The  Employee  expressly  acknowledges  that:

               (i)     Important  and essential assets of the Company's business
are  the  identity  of the Company's customers for its Products in the Protected
Territory  and the identity of relationships in its distribution network for its
Products  in  the  Protected  Territory  and  their  goodwill

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<PAGE>
toward the Company relating to the marketing  and  distribution of the Company's
Products in the Protected  Territory,  and

               (ii)     The  Company  through  Employee has expended substantial
time,  money  and effort in acquiring its customers and distribution network for
its Products in the Protected Territory, and the business and goodwill which the
Company  enjoys are dependent to a high degree upon their personal relationships
with  Employee;

               (iii)     Selling  and  servicing  the  Company's Products in the
Protected  Territory  requires  special  skills and knowledge which are valuable
assets  of  the  Company.

          (c)     Employee  expressly  agrees  that  during  the  term  of  this
Agreement and for the period of 12 months after Employee's voluntary termination
of  employment or for the period of 12 months after the Company's termination of
Employee's  employment without Cause (the running of said 12 month periods being
tolled  during  any  breach  of  the  provisions  of  this  section):

               (i)     The Employee will not, either directly or indirectly, for
himself  or  on  behalf  of  or  in  conjunction  with  any  other person, firm,
partnership,  corporation, association or other entity, contact in the Protected
Territory  any  customer  of the Company to whom the Company has sold any of its
Products  within  the 18 months immediately preceding his termination or to whom
the Company or any member of its distribution network has made a proposal in the
Protected Territory for  the  sale  of the Company's Products within the six (6)
months  preceding  his termination or to whom Employee or Company's distribution
network  called  upon  in  the  Protected Territory during the periods described
above  for  the  primary  purpose  of  soliciting such customer in the Protected
Territory  with  respect  to  purchasing  or  obtaining services with respect to
Products  for  use  in  the  Protected  Territory  which  compete  with Products
manufactured  and  sold  by  the  Company,  and

               (ii)     Employee  will  not  directly  or  indirectly solicit or
communicate  with members of the Company's distribution network in the Protected
Territory  at  the time Employee's employment is terminated (or who were members
of  such  distribution  network  in  the  Protected Territory within twelve (12)
months  immediately  preceding  such  termination  date  (y)  for the purpose of
encouraging  such  persons  to  leave  or  terminate their relationship with the
Company, or (z) for the primary purpose of encouraging such members to represent
any  other  person,  firm, partnership, corporation, association or other entity
with  respect  to  the  sale,  lease  or  servicing of Products in the Protected
Territory  which compete with Products manufactured and sold by the Company; and

          (d)     Employee  further  expressly agrees that at no time during the
term  of  this  Agreement  will he engage in or have a financial interest in any
business  which  is  offering,  selling,  supplying, manufacturing, or servicing
Products  which  are  competitive with any Products offered, sold or supplied by
the  Company  to  any  person,  firm, partnership, corporation, or other entity.

          (e)     Employee  further agrees that the remedy at law for any breach
for  any  of  the  provisions  of  this  section will be inadequate and that the
Company,  its  successors  or  assigns

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<PAGE>
shall be entitled to injunctive relief  in  addition  to  any  other  rights  or
remedies which the Company may have for any such breach.

     8.     Arbitration.  Any  controversy  or claims arising out of or relating
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to  this  Agreement shall be submitted to binding arbitration in accordance with
the  Commercial  Arbitration  Rules  of  the American Arbitration Association in
Waukesha  County,  Wisconsin,  and  judgment  upon  the  award  rendered  by the
arbitrator  may  be  entered  in  any court having jurisdiction thereof.  If the
parties  cannot  agree on the choice of a single arbitrator within 15 days after
receipt  of  a  notice  of  arbitration,  then  the  parties  shall  contact the
chairperson  of the Alternative Dispute Resolution section of the Wisconsin Bar,
who shall select an independent arbitrator, and the arbitration shall be decided
by  such independent arbitrator.  Each of the parties reserves the right to file
with  a  court  of  competent  jurisdiction  an  application  for  temporary  or
preliminary  injunctive  relief  or  a temporary protective order on the grounds
that  the  arbitration  award  to  which  the  applicant  may be entitled may be
rendered  effective  in the absence of such relief.  The arbitration award shall
be in writing, and shall specify the factual and legal bases for the award.  The
losing  party  shall  pay  all  costs  and  expenses  of  the  arbitrator.

     9.     Notices.  Any notice, request, approval, consent, demand, permission
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or  other  communication  required  or  permitted  by  this  Agreement  shall be
effective  only  if it is in a writing signed by the party giving same and shall
be deemed to have been sent, given and received only either  (a) when personally
received  by  the  intended recipient, or (b) three days after depositing in the
United States Mail, registered or certified mail, return receipt requested, with
first-class  postage  prepaid,  addressed  as  follows:

          If  the  Employee:

          Drew  Diaz
          2560  Buckingham  Place
          Brookfield,  WI  53045

          If  to  the  Company:

          Criticare  Systems,  Inc.
          20925  Crossroads  Circle
          Waukesha,  WI  53186
          Attn:  President

or  to  such  other  address  as  the  intended  recipient  may have theretofore
specified  by  notice  given  to  the  sender  as  provided  in  this  section.

     10.     Assignability.  This  Agreement  requires  the personal services of
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Employee,  and Employee's rights or obligations hereunder may not be assigned or
delegated  except as set forth in this Agreement.  In the event of a sale of the
stock  of  the  Company,  or consolidation or merger of the Company with or into
another  company  or  entity,  or the sale of all or any substantial part of the
assets  of the Company to another corporation, entity or individual, the Company
may assign this

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<PAGE>
Agreement to any successor in interest and upon such assignment,  Company  shall
have no further liability hereunder and  the  successor  in  interest  shall  be
subject to all obligations and be entitled to enforce all rights of the  Company
under  this  Agreement.  Subject to the foregoing, this Agreement shall bind and
inure to the benefit of the parties and their respective successors and assigns.

     11.     Other  Agreements.  This  Agreement  contains  the entire agreement
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between  the Company and Employee with respect to the subject matter hereof, and
merges  and  supersedes  all  prior  agreements,  understandings or negotiations
whatsoever  with  respect  to  the  subject  matter  hereof.

     12.     Amendments  and  Waivers.  No  amendment  to  this Agreement or any
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waiver  of any of its provisions shall be effective unless expressly stated in a
writing  signed  by  both  parties.  No delay or omission in the exercise of any
right,  power  or  remedy  under  or for this Agreement shall impair such right,
power  or  remedy  or  be  construed as a waiver of any breach.  Any waiver of a
breach  of  any  provision of this Agreement shall not be treated as a waiver of
any other provision of this Agreement or of any subsequent breach of the same or
any  other  provision  of  this  Agreement.

     13.     Severability.  If  any  provision  of  this Agreement shall be held
             ------------
illegal, invalid or otherwise unenforceable under controlling law, the remaining
provisions of this Agreement shall not be affected thereby but shall continue in
effect.

     14.     Governing  Law.  This  Agreement shall be governed by and construed
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and  enforced  in  accordance  with  the  laws  of  the  State  of  Wisconsin.

                                   CRITICARE  SYSTEMS,  INC.


                                   BY  /s/  Karsten  Houm
                                       ------------------
                                          Its

                                   EMPLOYEE:

                                   /s/  Drew  Diaz
                                   ---------------
                                   Drew  Diaz

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