Criticare's Board Reiterates Reasons Why Stockholders Should Reject Dissident Stockholder BlueLine Partners' Attempt to Gain Control of the Board and the Company

Business Wire, Oct 13, 2006

MILWAUKEE -- CRITICARE SYSTEMS, INC. (AMEX:CMD). Criticare Systems, Inc. today announced that -- following the filing, on October 11, 2006, with the SEC of its Definitive Consent Revocation Statement -- the Company's Board of Directors addressed a letter to the stockholders reiterating the reasons why stockholders should not allow dissident stockholder BlueLine Partners, a hedge fund, and its affiliates, from gaining control of the Board and the Company. The text of the letter is set forth below.

October 12, 2006

Dear Fellow Stockholder:

As you know, dissident stockholder BlueLine Partners L.L.C., a hedge fund, together with its affiliates, is carrying out a consent solicitation aimed at removing your duly-elected Board of Directors and replace it with a slate of nominees handpicked by BlueLine, including one of its principals. If elected, BlueLine's nominees would constitute at least a majority of Criticare's directors, thus allowing BlueLine to gain control of your Company.

For the reasons we describe in detail in the enclosed Consent Revocation Statement, we believe that BlueLine's sole purpose in seeking control of the Board and your Company is to extract a profit on its Criticare investment by attempting to either sell the Company at a time when the value of our current initiatives cannot be properly realized, or artificially increase the Company's profits (and possibly stock price) in the short term by indiscriminately cutting expenses, including research and development costs. In opposing BlueLine's actions, your Board firmly believes that if we continue to execute our business strategy and implement our current initiatives, the value of your Company will be substantially increased, beyond what could reasonably be expected to be obtained in a sale of the Company today or from an indiscriminate reduction of our expenses.

Don't be fooled by BlueLine's baseless accusations, all of which, we believe, are amply disproved in the enclosed Consent Revocation Statement. Here are the facts:

1. Our fiscal 2006 revenue of $31.35 million was the second highest in the Company's history, representing an increase of $4.57 million, or 17%, over fiscal 2005 revenue of $26.78 million. Our cash balance has improved and we continue to operate debt free.

2. Since October 19, 2004, the day on which BlueLine made its initial investment in Criticare, through the end of September 2006, the market value per share of our common stock has increased 65.25%, significantly more than the 19.98% return for the NASDAQ Medical Equipment Index, the 0.01% return for the Hemscott Medical Appliances and Equipment Index and the negative (1.58)% return for the Dow Jones US Medical Equipment Index, over the same period. Our stock performance over the last few months, we believe, bears no relationship to the health of our business. Our fundamentals are better today than they have ever been.

3. Despite BlueLine's constant criticism of management and the Board and continued touting of "compliance," "cost management" and "governance" as the road to the Company's success, to this date BlueLine has offered no business plan or strategy for Criticare in the event BlueLine is successful in its attempt to seize control of your Company.

4. BlueLine is a hedge fund and its obligation is to act in the best interests of BlueLine and its investors, and not in the best interests of Criticare and the other Criticare stockholders.

5. Over the last few years, under the guidance of our renewed Board, your management has launched three major product initiatives, which even BlueLine admits have "tremendous individual and combined potential," unwinding Criticare from a dying pure core business of vital signs monitoring, while also bringing our cost structure in check through the implementation of the downsizing and consolidation of many Company functions. What does BlueLine have to show for its claim that, if successful in its consent solicitation, it will know how to run your Company?

6. BlueLine's track record, although limited, reveals as one of its main investment tactics pressuring companies in which it invests into a sale as a way to accelerate returns on its own investment. We believe that if the Company is put up for sale (or managed only to cut costs and improve margins and profitability), the stockholders will forever surrender the opportunity to realize the long-term value that we believe, due to our current initiatives, underlies, but is not yet reflected in, our current stock price. We could not disagree more with BlueLine's view, expressed as early as this past April, that stockholders would "receive greater value by finding a buyer for the Company." On the contrary, we believe that a sale of the Company now, even at a premium to its current market price, would likely result in a "fire sale" rather than an opportunity to maximize shareholder value.

7. As documented on pages 10-12 of the enclosed Consent Revocation Statement, BlueLine continually flip flops on issues relating to the direction of the Company.