**EXHIBIT
      10.16**





AMENDMENT
      TO EMPLOYMENT AGREEMENT





This
      Amendment to Em ployment
      Agreement is entered into as of September 28, 2006 between CRITICARE SYSTEMS,
      INC., a Delaware corporation (the "Company"), and JOSEPH LESTER (the
      "Employee").





RECITALS





A.  The
      Employee and the Company are parties to an Employment Agreement dated as of
      May
      18, 2000 (the "Original Agreement"). Terms
      used and not otherwise defined herein shall take the meanings given them in
      the
      Original Agreement.





B.  The
      Employee and the Company desire to amend the Original Agreement in the manner
      set forth below with respect to the definition of Change in
      Control.





AGREEMENTS





In
      consideration of the foregoing and the mutual covenants and agreements contained
      herein and in the Original Agreement, and intending to be legally bound hereby,
      the Employee and the Company hereby agree as follows:





1.  Amendment
      to the definition of Change in Control .
      The
      paragraph under Section 3(h) of the Original Agreement that begins with
      "The term "Change in Control" shall mean" is hereby amended to read in its
      entirety as follows:





The
      term
      "Change in Control" shall mean:





(a)  The
      acquisition by any individual, entity or group (within the meaning of Section
      13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
      "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of
      Rule 13d 3 promulgated under the Exchange Act) of 50% or more of either (I)
      the
      then outstanding shares of common stock of the Company (the "Outstanding Company
      Common Stock") or (ii) the combined voting power of the then outstanding voting
      securities of the Company entitled to vote generally in the election of
      directors (the "Outstanding Company Voting Securities"); provided, however,
      that
      the following acquisitions shall not constitute a Change in Control: (I) any
      acquisition directly from the Company, (ii) any acquisition by the Company,
      or
      (iii) any acquisition by any employee benefit plan (or related trust) sponsored
      or maintained by the Company or any entity controlled by the Company;
      or





(b)  Individuals
      who, as of the date hereof, constitute the Board of Directors of the Company
      (the "Incumbent Board") cease for any reason to constitute at least a majority
      of the Board of Directors of the Company; provided, however, that any individual
      becoming a director subsequent to the date hereof whose election, or nomination
      for election by the Company's stockholders, was approved by a vote of at least
      a
      majority of the directors then comprising the Incumbent Board shall be
      considered as though such individual were a member of the Incumbent Board,
      but
      excluding, for this purpose, any such individual whose initial assumption of
      office occurs as a result of an actual or threatened election contest with
      respect to the election or removal of directors or other actual or threatened
      solicitation of proxies or consents by or on behalf of a Person other than
      the
      Board of Directors; or





(c)  The
      consummation of a reorganization, merger or consolidation (a "Business
      Combination"), in each case, unless, following such Business Combination, (i)
      all or substantially all of the individuals and entities who were the beneficial
      owners, respectively, of the Outstanding Company Common Stock or Outstanding
      Company Voting Securities immediately prior to such Business Combination
      beneficially own, directly or indirectly, more than a majority of, respectively,
      the then outstanding shares of common stock (or equivalent thereof) or the
      combined voting power of the then outstanding voting securities entitled to
      vote
      generally in the election of directors (or equivalent thereof), as the case
      may
      be, of the entity resulting from such Business Combination (including, without
      limitation, an entity which as a result of such transaction owns the Company
      through one or more subsidiaries) in substantially the same proportions as
      their
      ownership, immediately prior to such Business Combination of the Outstanding
      Company Common Stock or Outstanding Company Voting Securities, as the case
      may
      be, (ii) no Person (excluding any employee benefit plan (or related trust)
      of
      the Company or such entity resulting from such Business Combination)
      beneficially owns, directly or indirectly, 50% or more of, respectively, the
      then outstanding shares of common stock (or equivalent thereof) of the entity
      resulting from such Business Combination or the combined voting power of the
      then outstanding voting securities of such entity except to the extent that
      such
      ownership existed prior to the Business Combination and (iii) at least a
      majority of the members of the board of directors (or equivalent thereof) of
      the
      entity resulting from such Business Combination were members of the Incumbent
      Board at the time of the execution of the initial agreement, or of the action
      of
      the Board, providing for such Business Combination; or


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(d)  The
      consummation of a sale or other disposition of all or substantially all of
      the
      assets of the Company, other than to an entity, with respect to which following
      such sale or other disposition, (i) more than a majority of, respectively,
      the
      then outstanding shares of common stock (or equivalent thereof) of such entity
      or the combined voting power of the then outstanding voting securities of such
      entity entitled to vote generally in the election of directors (or equivalent
      thereof) is then beneficially owned, directly or indirectly, by all or
      substantially all of the individuals and entities who were the beneficial
      owners, respectively, of the Outstanding Company Common Stock and outstanding
      Company Voting Securities immediately prior to such sale or other disposition
      in
      substantially the same proportion as their ownership, immediately prior to
      such
      sale or other disposition, of the Outstanding Company Common Stock or
      Outstanding Company Voting Securities, as the case may be, (ii) less than 50%
      of, respectively, the then outstanding shares of common stock (or equivalent
      thereof) of such entity and the combined voting power of the then outstanding
      voting securities of such entity entitled to vote generally in the election
      of
      directors (or equivalent thereof) is then beneficially owned, directly or
      indirectly, by any Person (excluding any employee benefit plan (or related
      trust) of the Company or such entity), except to the extent that such Person
      owned 50% or more of the Outstanding Company Common Stock or Outstanding Company
      Voting Securities prior to the sale or disposition, as the case may be, and
      (iii) at least a majority of the members of the board of directors (or
      equivalent thereof) of such entity were members of the Incumbent Board at the
      time of the execution of the initial agreement, or of the action of the Board,
      providing for such sale or other disposition of assets of the Company or were
      elected, appointed or nominated by the Board.





2.  All
      remaining provisions of the Original Agreement remain unchanged and in full
      force and effect.





*[Remainder
      of page intentionally left blank. Signature page to follow.]*







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IN
      WITNESS WHEREOF, the Employee and the Company have caused this Amendment to
      be
      duly executed as of the date first written above.








CRITICARE
      SYSTEMS, INC.











By: 
      /s/ Emil H.
      Soika


Emil
      H. Soika, President and CEO







EMPLOYEE:






/s/ Joseph
      Lester


Joseph
      Lester








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