UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10Q
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(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For the quarterly period ended June 30, 1996
OR
Transition report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
Commission File Number: 000-19370
Curative Health Services, Inc.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1503914
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
14 Research Way, Box 9052
East Setauket, NY 11733-9052
(Address of principal executive offices)
Telephone Number (516)689-7000
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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
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As of July 1, 1996 there were 10,705,452 shares of the Registrant's Common
Stock, $.01 par value, outstanding.
<PAGE>
Curative Health Services, Inc.
INDEX
Part I Financial Information Page No.
- ------ --------------------- --------
Item 1 Condensed Consolidated Financial Statements:
Condensed Consolidated Statements of Operations 3
Three and Six Months ended June 30, 1996 and 1995
Condensed Consolidated Balance Sheets 4
June 30, 1996 and December 31, 1995
Condensed Consolidated Statements of Cash Flows 5
Six Months ended June 30, 1996 and 1995
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II Other Information Page No.
- ------------------------- --------
Item 4 Submission of Matters to a Vote of Security Holders 9
Item 6 Exhibits and Reports on Form 8-K 9
Signatures 11
<PAGE>
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Curative Health Services, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1996 1995 1996 1995
------- ------- ------- --------
Revenues $16,388 $12,922 $31,305 $24,929
Costs and operating expenses:
Cost of product sales and services 9,024 6,383 17,359 12,494
Selling, general and administrative 4,861 4,630 9,613 8,877
Research and development - 1,196 - 2,394
------- ------- ------- -------
Total costs and operating expenses 13,885 12,209 26,972 23,765
------- ------- ------- -------
Income from operations 2,503 713 4,333 1,164
Interest income 184 116 367 213
------- ------- ------- -------
Income before income taxes 2,687 829 4,700 1,377
Income taxes 244 35 384 69
------- ------- ------- -------
Net income $ 2,443 $ 794 $ 4,316 $ 1,308
======= ======= ======= =======
Net income per common share and
equivalent shares $ .21 $ .08 $ .38 $ .13
======= ======= ======= =======
Weighted average common
shares outstanding 11,382 10,391 11,306 10,256
======= ======= ======= =======
See accompanying notes
3
<PAGE>
Curative Health Services, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
1996 1995
(unaudited)
ASSETS
Cash and cash equivalents $ 5,254 $ 2,835
Marketable securities held-to-maturity 9,918 9,365
Accounts receivable, net 9,489 7,776
Prepaids and other current assets 1,036 820
-------- --------
Total current assets 25,697 20,796
Property and equipment, net 3,618 3,383
Other assets 870 851
-------- --------
Total assets $ 30,185 $ 25,030
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable $ 5,359 $ 5,066
Accrued liabilities 2,731 2,992
Current lease obligations 163 163
-------- --------
Total current liabilities 8,253 8,221
Long term debt 1,000 1,000
Capital lease obligations 120 198
Stockholders' equity
Common stock 107 104
Additional paid in capital 46,356 45,474
Deficit (25,609) (29,925)
-------- --------
20,854 15,653
Subscription receivable (42) (42)
-------- --------
Total stockholders' equity 20,812 15,611
-------- --------
Total liabilities and stockholders' equity $ 30,185 $ 25,030
======== ========
See accompanying notes
4
<PAGE>
Curative Health Services, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
1996 1995
------ ------
OPERATING ACTIVITIES:
Net income $4,316 $1,308
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation & amortization 403 469
Changes in operating assets and liabilities (1,942) (310)
------ ------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,777 1,467
INVESTING ACTIVITIES:
Sale of German subsidiary -- (166)
Purchases of property and equipment (612) (638)
(Purchases) sales of marketable securities - net (552) (1,391)
------ ------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,164) (2,195)
FINANCING ACTIVITIES:
Proceeds from loans and revolving line of credit - 140
Proceeds from exercise of stock options 885 239
Principal payments on loans, revolving line of
credit and capital lease obligations (79) (83)
------ ------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 806 296
Effect of exchange rate changes on cash and
cash equivalents -- 12
------ ------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,419 (420)
Cash and cash equivalents at beginning of period 2,835 4,459
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $5,254 $4,039
====== ======
SUPPLEMENTARY CASH FLOW INFORMATION:
Interest paid $ 20 $ 55
====== ======
See accompanying notes
5
<PAGE>
Curative Health Services, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The condensed consolidated financial statements are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements for the year ended December 31, 1995 and
notes thereto contained in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission. The results of operations for
the three and six months ended June 30, 1996 are not necessarily indicative
of the results to be expected for the entire fiscal year ending December 31,
1996.
Note 2. Income per Common Share
Income per common share is computed by dividing the net income by the
weighted average number of common shares outstanding plus dilutive common
share equivalents.
Note 3. Reclassification
The Company has reclassified the presentation of certain prior year
information to conform with the current year presentation format. This
included the reclassification of $225,000 to cost of product sales and
services for the second quarter and $433,000 for the first six months of
1995. These costs were associated with the Company's laboratory operations in
the 1995 period and were previously presented as selling, general and
administrative expenses. Additionally, the Company has classified as cost of
product sales and services $436,000 for the second quarter and $996,000 for
the first six months of 1996 those costs related to technical services
dedicated to the support of its platelet releasate technology. These costs
were classified as research and development in previous years since such
costs were related to new product development and drug discovery. In the
Company's continuing effort to focus on its wound care service business,
during the second half of 1995 the Company instituted a realignment of its
business activities which included the discontinuance of further product
research and development.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Revenues. The Company's revenues for the second quarter of fiscal year 1996
increased 27% to $16,388,000, compared to $12,922,000 for the second quarter of
the prior fiscal year. For the quarter the revenue increase is attributable to
the operation of 99 wound care facilities at the end of the second quarter of
1996 compared to 71 at the end of the second quarter of 1995 and a 12% increase
in revenues at existing centers related to higher patient volumes. Total new
patients increased 31% from 7,446 in the second quarter of 1995 to 9,721 for the
same period in 1996. The total number of new patients receiving Procuren(R)
therapy increased 14% from 1,776 in the second quarter of 1995 to 2,029 in the
second quarter of 1996. The percentage of patients receiving Procuren(R) therapy
decreased during the second quarter of 1996 to 21% from 24% for the same period
in 1995. For the first six months of 1996 revenues totalled $31,305,000, an
increase of 26% compared to $24,929,000 for the same period in 1995. The
increased revenue is attributable to the operation of 99 wound care facilities
at the end of the second quarter of 1996 compared to 71 at the end of the second
quarter of 1995 and a 12% increase in revenues at existing wound care facilities
related to higher patient volumes. Total new patients to the wound care
facilities increased 28% to 18,426 in the first six months of 1996 compared to
14,356 in the first six months of 1995. The total number of new patients
receiving Procuren(R) therapy increased 13% to 3,788 in the first six months of
1996 from 3,360 in the first six months of 1995. However, the percentage of
patients receiving Procuren(R) decreased from 23% in the first six months of
1995 to 21% during the first six months of 1996. The Company believes that this
decrease is attributable primarily to an increase in the percentage of less
severe chronic wounds being treated at the Company's Wound Care Centers(R), for
which physicians are less likely to prescribe Procuren(R), as well as a lack of
available reimbursement for Medicare patients. The Company believes that this
shift in the severity of the wounds treated at a Wound Care Center(R) occurs as
the local medical community becomes familiar with the services offered by the
Wound Care Center(R) and refers a broader range of chronic wound patients to the
Wound Care Center(R) for treatment. The Company anticipates that the percentage
of patients receiving Procuren(R) will continue to decline gradually in the
future.
Costs of product sales and services. Costs of product sales and services for the
second quarter increased from $6,383,000 in 1995 to $9,024,000 in 1996, an
increase of 41%, and for the first six months of 1996 totalled $17,359,000
compared to $12,494,000 for the same period in 1995. The second quarter of 1996
includes $436,000 of technical service costs which were reported as research and
development expenses for the same period of 1995. Excluding technical service
costs, the increase in cost of product sales and services from the second
quarter of 1995 to the second quarter of 1996 was 35%. The increase is
attributable to additional staffing and operating expenses of approximately
$1,042,000 associated with the operation of 28 additional wound care facilities
at the end of the second quarter of 1996, as well as increased volume at
existing wound care facilities. Additionally, these 28 facilities included four
freestanding Wound Care Centers(R) and six additional under arrangement Wound
Care Centers(R) at which the services component of costs is higher than at the
Company's other facilities due to the additional clinical staffing and expense
that these models require. As compared with the second quarter of 1995, the
higher services components at these facilities accounted for an additional
$417,000 of the increase in product costs and services for the second quarter of
1996. As a percentage of revenues, costs of product sales and services
(excluding technical service) for the second quarter of 1996 was 52% compared to
49% in the same period in 1995. For the first six months of 1996 costs of
product sales and services increased 39%. The first six months of 1996 includes
$996,000 of technical service costs which were reported as research and
development costs in the same period in 1995. Excluding technical service costs,
the increase in cost of product sales and services from the first six months of
1995 compared to the first six months of 1996 was 31%. The increase is
attributed to additional staffing and operating expenses of approximately
$2,100,000 associated with the operation of 28 additional wound care facilities
at the end of the second quarter of 1996 as well as increased volume of existing
wound care facilities. Additionally these 28 facilities included four free
standing Wound Care Centers(R) and six additional under arrangement Wound Care
Centers at which the services components of costs is higher than at the
7
<PAGE>
Company's other facilities due to the additional staffing and expense that these
models require. As compared with the first six months of 1995, the higher
services components at these facilities accounted for an additional $700,000 of
the increase in product costs and services for the first six months of 1996. As
a percentage of revenues, costs of product sales and services (excluding
technical service) for the six months of 1996 was 52% as compared to 50% in the
same period in 1995. The increase is attributable to new Wound Care Centers(R)
which include a higher service component.
Selling, General and Administrative. Selling, general and administrative
expenses for the second quarter increased from $4,630,000 in 1995 to $4,861,000
in 1996, an increase of 5%, and for the six months of 1996 increased to
$9,613,000 compared to $8,877,000 for the same period in 1995, an increase of
8%. For the quarter the increase is attributable to the staffing and operating
expenses associated with the growth in the wound care business particularly
related to field support departments. For the six months the increase is
primarily attributable to staffing and operating expenses of $831,000 associated
with the growth in the wound care business particularly related to field support
departments, offset by a $495,000 decrease in expenses related to European
operations which were discontinued in the second quarter of 1995. As a
percentage of revenues, selling, general and administrative, expenses were 36%
in the second quarter of 1995 compared with 30% in the second quarter of 1996,
and for the six months decreased to 31% in 1996 compared to 36% for the same
period in 1995. The decrease is attributable to the discontinuance of the
European operations as well as the ability of the Company to obtain leverage by
spreading the costs of its overhead structure over a broader revenue base.
Research and Development. Research and development was $1,196,000 for the second
quarter of 1995 and $2,394,000 for the first six months of 1995. The Company did
not incur research and development expenses in 1996 since it discontinued all
new product research and development in the second quarter of 1995. Technical
service costs associated with the support of Procuren(R) are classified as a
cost of product sales.
Net Income. Net income improved from $794,000 or $.08 per share in the second
quarter of 1995 to $2,443,000 or $.21 per share in the second quarter of 1996
and for the six months improved from $1,308,000 or $.13 per share in 1995 to
$4,316,000 or $.38 per share for the first six months of 1996. The increase in
earnings of $3,008,000 for the six months ended June 30, 1996 as compared to
June 30, 1995 is primarily attributable to savings of $1,398,000 related to the
discontinuance of new product research and development, an improvement in
operating margins associated with the revenue growth and economies of scale
achieved from market growth and the termination of European operations.
Liquidity and Capital Resources.
Working Capital was $17.4 million at June 30, 1996 compared to $12.6 million at
December 31, 1995. Total cash, cash equivalents and marketable securities
held-to-maturity as of June 30, 1996 was $15.2 million and was invested
primarily in highly liquid money market funds, commercial paper and government
securities. The ratio of current assets to current liabilities increased from
2.5:1 at December 31, 1995 to 3.1:1 at June 30, 1996. The Company's increase in
working capital and improvement in the ratio of current assets to current
liabilities was primarily attributable to the net income for the six months.
Cash flows provided by operations for the first six months of 1996 totalled
$2,777,000 primarily attributable to the net income for the period. Cash flows
used in investing activities totalled $1,164,000 primarily attributable to
capital equipment expenditures and purchases of marketable securities. Cash
flows provided by financing activities totalled $806,000 primarily attributable
to proceeds from the exercise of stock options.
For the first six months of 1996, the Company experienced a $1,713,000 net
increase in accounts receivable primarily due to the increase in revenues,
although the average number of days receivables were outstanding declined to 52
days as of June 30, 1996 compared to 53 as of December 31, 1995. Further, the
Company's accounts payable and accrued expenses increased $32,000 as of June 30,
1996 compared to December 31, 1995.
The Company's longer term cash requirements include working capital for the
further expansion of its wound care business. Other cash requirements are
anticipated for capital expenditures in the normal course of business. The
Company is currently assessing cash requirements related to accelerating the
growth of the wound care business and other strategic initiatives. The Company
expects that based on its current business plan, its existing cash equivalents
and marketable securities will be sufficient to satisfy its current working
capital needs. The effects of inflation and foreign currency translation risks
are considered immaterial.
8
<PAGE>
Curative Health Services, Inc. and Subsidiaries
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its 1996 annual meeting of stockholders on May 30, 1996.
Proxies for the meeting were solicited pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended, and there was no
solicitation in opposition to management's nominees as listed in the
proxy statement. There were present at the annual meeting in person or by
proxy the holders of 9,307,555 votes. At the meeting the stockholders
elected all six members of the Company's Board of Directors to serve for
an additional term of one year.
Elected members of Board of Directors: (Shares voted affirmative in
parenthesis)
Gerardo Canet (9,223,334) Gerard Moufflet (9,223,374)
Lawrence Hoff (9,223,697) Lawrence J. Stuesser (9,223,994)
Timothy I. Maudlin (9,223,994) John Vakoutis (9,125,674)
The stockholders also approved the following:
(a) An amendment to the Company's Articles of Incorporation to change
the name of the Company from Curative Technologies, Inc. to
Curative Health Services, Inc. Number of votes for were 9,223,994,
against 67,146 and 16,415 abstained.
(b) An amendment to the Company's 1991 Stock Option Plan which
increases the number of shares of Common Stock available for
issuance pursuant to options granted thereunder from 1,756,695 to
2,456,695 and satisfies certain IRS requirements concerning
aggregate options that may be granted to any one employee. Number
of votes for were 3,762,408, against 2,668,438, 23,648 abstained
and 2,853,061 broker no votes.
(c) The Non-Employee Director Stock Option Plan which provides a
maximum of 125,000 shares of Common Stock that may be issued
pursuant to options granted under the Plan. Number of votes for
were 4,529,075, against 2,141,729, 30,079 abstained and 2,606,672
broker no votes.
(d) The Director's Share Purchase Program which provides a maximum of
120,000 shares of Common Stock that may be received by directors
in lieu of cash payments for annual retainers and meeting fees.
Number of votes for were 6,442,011, against 583,554, 29,828
abstained and 2,252,162 broker no votes.
(e) The selection by the Board of Directors of Ernst & Young LLP as
independent auditors for the Company for the fiscal year ended
December 31, 1996. Number of votes for were 9,284,426, against
12,954 and 10,175 abstained.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10.25.1 Amendment No. 3 to Curative Health Services, Inc.
1991 Stock Option Plan
Exhibit 10.25.2 Non-Employee Director Stock Option Plan
Exhibit 10.25.3 Director's Share Purchase Program
(b) Reports on Form 8-K filed during the quarter ended June 30, 1996
(i) Form 8-K dated June 28, 1996
Item 5. Other events.
1. At the Curative Health Services, Inc. (the "Company")
Annual Meeting of
9
<PAGE>
Shareholders held May 30, 1996, the shareholders approved an
amendment to the Company's Articles of Incorporation, which
changed its name from "Curative Technologies, Inc." to
"Curative Health Services, Inc."
2. At the Company's Board of Directors meeting held on June 24,
1996, the Board of Directors adopted an amendment to the
Company's Bylaws with respect to notice requirements to the
Board of Directors of certain stockholder proposals and the
ability of stockholder to remove directors and call
meetings.
10
<PAGE>
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.
Dated: July , 1996
Curative Health Services, Inc.
(Registrant)
/s/ John Vakoutis
---------------------------------------------
John Vakoutis
President and Chief Executive Officer
/s/ John C. Prior
---------------------------------------------
John C. Prior
Chief Financial Officer
(Principal Financial and Accounting Officer)
12
Exhibit 10.25.1
AMENDMENT NO. 3
TO
CURATIVE TECHNOLOGIES, INC.
1991 STOCK OPTION PLAN
WHEREAS, pursuant to resolutions adopted by the Board of Directors
of Curative Technologies, Inc., (the "Company") at a meeting on April 24, 1996,
the Curative Technologies, Inc. 1991 Stock Option Plan (the "Option Plan") was
amended to increase the number of shares of common stock of the Company subject
to options thereunder to 2,456,695 shares; and
WHEREAS, such amendment to the Option Plan is subject to the
approval of the shareholders of the Company;
NOW, THEREFORE, subject to receipt of such approval of the
shareholders, the third sentence of Section 3 of the Option Plan is amended and
restated in its entirety to read as follows:
Subject to adjustment as provided in Section 12 hereof, the maximum
number of shares with respect to which options may be granted under
this Plan shall be 2,456,695, including options for shares under the
prior Plan outstanding on April 8, 1991, and shares issuable under
other options outstanding on April 8, 1991.
Dated as of April 24, 1996
Exhibit 10.25.2
CURATIVE TECHNOLOGIES, INC.
Non-Employee Director Stock Option Plan
1. Purpose of the Plan
The purpose of this Non-Employee Director Stock Option Plan (the "Plan")
is to promote the success of Curative Technologies, Inc. (the "Company")
by attracting and retaining non-employee directors by supplementing their
cash compensation and providing a means for such directors to increase
their holdings of common stock of the Company.
2. Definitions
As used herein, the following definitions shall apply:
2.0 The "Company" shall mean Curative Technologies, Inc., a Minnesota
corporation, and any successor corporation.
2.1 "Annual Meeting Date" means the date of the annual meeting of the
stockholders of the Company at which directors are elected.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Common Stock" means the Common Stock, par value $.01 per share,
of the Company.
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Eligible Director" means any person who is a member of the Board
and who is not an employee, full time or part time, of the Company
and/or its subsidiaries.
2.6 "Grant Date" means the date on which a person is re-elected as a
member of the Board.
2.7 "Initial Grant Date" means (x) the date on which a person is
initially elected as a member of the Board, or (y) with respect to
those persons who are Eligible Directors and who serve on the Board
at the time of adoption of this Plan by the Board and at the time of
approval of this Plan by the Company's stockholders (the "Approval
Date"), August 23, 1995.
2.8 "Option" means a stock option granted pursuant to this Plan.
<PAGE>
2.9 "Option Agreement" means the agreement between the Company and the
Optionee for the grant of an Option.
2.10 "Option Stock" means stock subject to an Option granted pursuant to
this Plan.
2.11 "Optionee" means a person who receives an Option.
2.12 "Plan" means the Company's Non-Employee Director Stock Option Plan.
2.13 "Shares" mean shares of the Common Stock.
2.14 "Subsidiary" means a "subsidiary corporation" as defined in Section
425(f) and (g) of the Code.
3. Stock Subject to the Plan
Subject to the provisions of Section 11 of this Plan, the maximum
aggregate number of Shares which may be optioned and sold under the Plan,
excluding those Shares constituting the unexercised portion of any
cancelled, terminated or expired options, is 125,000 Shares. Such Shares
shall be authorized, but unissued, Common Stock. If an Option should
expire or become unexercisable for any reason without having been
exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for
the grant of other Options under the Plan.
4. Administration of the Plan
This Plan shall be administered by the Board, which shall have authority
to adopt such rules and regulations, and to make such determinations as
are not inconsistent with the Plan and are necessary or desirable for its
implementation and administration.
5. Grants of Options
5.1 Non-discretionary Grants. On the Initial Grant Date, each Eligible
Director shall receive the grant of an Option to purchase 10,000
Shares; provided, however, each Eligible Director described in
clause (y) of Section 2.7 hereof shall receive an Option to purchase
5,000 Shares. On each Grant Date thereafter, each Eligible Director
shall receive the grant of an Option to purchase 5,000 Shares.
5.2 Adjustments. The number of Shares subject to any Option shall be
subject to adjustment from time to time in accordance with Section
11 hereof.
6. Term of Plan
This Plan shall become effective as of August 23, 1995 (the "Effective
Date")
<PAGE>
upon its adoption by the Board, and shall continue in effect until all
Options granted hereunder have expired or been exercised, unless sooner
terminated under the provisions relating thereto. No Option shall be
granted after ten (10) years from the earlier of the date of adoption of
this Plan or its approval by the stockholders as contemplated by Section
13.1.
7. Terms of Option Agreement
In connection with the grant of each Option, the Company and the Eligible
Director shall enter into an Option Agreement which shall specify the
Initial Grant Date or the Grant Date, as applicable, and the purchase
price of the Option Shares, and shall include or incorporate by reference
the substance of all of the following provisions and such other provisions
consistent with this Plan as the Board may determine.
7.1 Term. The term ("Term") of an Option shall be ten years from its
grant date, subject to earlier termination in accordance with
Section 7.6 or 7.7 hereof.
7.2 Exercise Schedule. Subject to Sections 7.6 and 7.7 hereof, an Option
shall not be exercisable until (the "Exercisability Date") (i) with
respect to Options the Initial Grant Date of which is August 23,
1995, the first anniversary of the Approval Date; (ii) with respect
to Options the Initial Grant Date of which is described in clause
(x) of Section 2.7 hereof, the first anniversary of the Initial
Grant Date; and (iii) with respect to all other Options, the first
anniversary of the Grant Date. Each Option shall be exercisable with
respect to one-third of the Shares on the Exercisability Date and
thereafter shall become exercisable with respect to the balance of
the Shares in equal installments on the last day of each of the
eight (8) successive three (3) month periods following the
Exercisability Date.
7.3 Purchase Price. The purchase price of the Shares subject to each
Option shall be the fair market value thereof on the Initial Grant
Date or the Grant Date, as applicable. For purposes of this Plan,
fair market value shall mean the closing price of such Shares on the
Nasdaq National Market ("Nasdaq/NMS") on the Initial Grant Date or
the Grant Date, as applicable, or, in the event the Initial Grant
Date or Grant Date, as applicable, is not a day on which Nasdaq/NMS
is open for trading the next day on which Nasdaq/NMS is open for
trading.
7.4 Payment of Purchase Price. The purchase price of Shares acquired
pursuant to an Option shall be paid in full at the time the Option
is exercised in cash or by delivery of any property other than cash
(including Shares or other securities of the Company, so long as
such property constitutes valid consideration for the Shares
purchased under applicable law and is surrendered in good form for
transfer, or by some
<PAGE>
combination of cash and such other property); provided, however,
that the purchase price may not be paid by the delivery of Shares
more frequently than once every six months.
7.5 Transferability. No Option shall be transferable other than by will
or the laws of descent and distribution, and an Option shall be
exercisable during the Eligible Director's lifetime only by the
Eligible Director.
7.6 Termination of Membership on the Board. Notwithstanding the
installment exercise provision set forth in Section 7.2 above and
subject to the other terms and conditions set forth herein, each
Option held by an Eligible Director shall become immediately
exercisable in full upon (i) the death or disability of such
Eligible Director, or (ii) an unsuccessful attempt by such Eligible
Director to win re-election to the Board (each of (i) and (ii), an
"Acceleration Event"). Any Option held at the time of termination of
an Eligible Director's membership on the Board as the result of an
Acceleration Event may be exercised in whole or in part at any time
within one year after the date of such termination (but in no event
after the Term of the Option expires) and shall thereafter
automatically terminate.
7.7 Change of Control. Notwithstanding the installment exercise
provision set forth in Section 7.2 above and subject to the other
terms and conditions set forth herein, each Option shall become
immediately exercisable in full on the date of a "change of control"
as hereinafter defined. A "change of control" shall mean any of the
following:
(i) A sale of all or substantially all of the assets of the
Company;
(ii) The acquisition of more than 80% of the Common Stock of the
Company (with all classes or series thereof treated as a
single class) by any person or group of persons, except a
Permitted Shareholder as hereinafter defined, acting in
Concert. A "Permitted Shareholder" means a holder, as of the
Effective Date of Common Stock;
(iii) A reorganization of the Company wherein the holders of Common
Stock of the Company receive stock in another company, a
merger of the Company with another company wherein there is an
80% or greater change in the ownership of the Common Stock of
the Company as result of such merger, or any other transaction
in which the Company (other than as the parent corporation) is
consolidated for federal income tax purposes or is eligible to
be consolidated for federal income tax purposes with another
corporation;
<PAGE>
(iv) In the event that the Common Stock is traded on an established
securities market: a public announcement that any person has
acquired or has the right to acquire beneficial ownership of
51% or more of the then outstanding Common Stock and for this
purpose the terms "person" and "beneficial ownership" shall
have the meanings provided in Section 13(d) of the Securities
and Exchange Act of 1934 or related rules promulgated by the
Securities and Exchange Commission, or the commencement of or
public announcement of an intention to make a tender offer or
exchange offer for 51% or more of the then outstanding Common
Stock; or
(v) The Board, in its sole and absolute discretion, determine that
there has been a sufficient change in the share ownership of
the Company to constitute a change of effective ownership or
control of the Company.
8. Use of Proceeds
Proceeds from the sale of Shares pursuant to this Plan shall be used by
the Company for general corporate purposes.
9. Term of Options
The term of each option granted under the Plan shall be ten (10) years
from the date of the grant thereof, subject to earlier termination as
herein provided.
10. Exercise of Options; Waiver of Option Grants
10.1 Procedures for Exercise. Any Option granted hereunder shall be
exercisable in installments as specified in Section 7.2 hereof,
under such conditions as the Board shall designate under the terms
of the Plan and of the Option Agreement. To the extent not
exercised, installments shall, unless otherwise provided in the
Option Agreement, accumulate and be exercisable, in whole or in
part, at any time after becoming exercisable, but not later than the
date the Option expires.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option
and full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Until the issuance of
the stock certificates (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights
as a stockholder shall exist with respect to option Shares
notwithstanding the exercise of the Option. No adjustment will be
made for a dividend or other rights for
<PAGE>
which the record date is prior to the date the stock certificates
are issues as provided in Section 11 hereof.
10.2 Exercise following Death. In the case of an Optionee's death,
exercise shall be by the person or persons (including his estate) to
whom his rights under such Option shall have passed by will or by
laws of descent and distribution.
10.3 Compliance with Law. The exercise of each Option shall be on the
condition that the purchases of stock thereunder shall be for
investment purposes, and not with a view to resale or distribution
unless the Shares subject to such Option are registered under the
Securities Act of 1933, as amended, or if in the opinion of counsel
for the Company such registration is not required under the
Securities Act of 1933, as amended, or any other applicable law,
regulation, or rule of any governmental agency.
10.4 Waiver of Option Grants. The grant of any Option hereunder may be
waived by an Eligible Director at any time prior to the making
thereof.
11. Adjustment Upon Changes in Capitalization
11.1 Changes in Capitalization. If the number of Shares of the Company as
a whole are increased, decreased or changed into, or exchanged for,
a different number or kind of shares or securities of the Company,
whether through merger, consolidation, reorganization,
recapitalization, reclassification, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate
structure or the like, an appropriate and proportionate adjustment
shall be made in the number and kind of shares subject to this Plan,
and in the number, kind, and per share exercise price of Shares
subject to unexercised Options or portions thereof granted prior to
any such change. Any such adjustment in an outstanding Option,
however, shall be made without a change in the total price
applicable to the unexercised portion of the Option but with a
corresponding adjustment in the price for each Shares covered by the
Option.
11.2 Dissolution or Liquidation. Upon the dissolution or liquidation of
the Company, this Plan and the Options issued thereunder shall
terminate.
12. Time of Granting Options
The grant date of an Option under this Plan shall be the Initial Grant
Date, or the Grant Date, as applicable. No option shall be granted after
expiration of the term of this Plan.
<PAGE>
13. Approval, Amendment and Termination of the Plan
13.1 Approval. The Plan shall be adopted by the Board, and shall be
presented to the stockholders of the Company for their approval by
vote of a majority of such stockholders present, or represented at a
meeting duly held, such approval to be given within twelve (12)
months before or after the date of adoption hereof. Options may be
granted prior to such approval, but such Options shall be contingent
upon such approval being obtained and may not be exercised prior to
such approval.
13.2 Amendment. The Board, without further approval of the stockholders,
may amend this Plan at any time and from time to time in such
respects as the Board may deem advisable, subject to any
stockholders or regulatory approval required by laws, and to any
conditions established by the terms of such amendment; provided that
in no event shall the Plan be amended more than once every six (6)
months; and provided, further, that no amendment that would:
(a) materially increase the number of Shares that may be issued
under the Plan;
(b) materially modify the requirements as to eligibility for
participation in the Plan;
(c) otherwise materially increase the benefits accruing to
participants under the Plan;
(d) cause Rule 16b-3 to become unavailable with respect to the
Plan; or
(e) would violate the rules or regulations of Nasdaq/NMS, any
other securities exchange or the National Association of
Securities Dealers, Inc. that are applicable to the
Company/shall be made without the approval of the Company's
stockholders.
13.3 Termination and Suspension. The Board, without further approval of
the stockholders, may at any time terminate or suspend this Plan.
Any such termination or suspension of the Plan shall not affect
Options already granted and such Options shall remain in full force
and effect as if this Plan had not been terminated or suspended. No
Option may be granted while the Plan is suspended or after it is
terminated. Rights and obligations under any Option granted while
this Plan is in effect shall not be altered or impaired by
suspension or termination of this Plan, except with the consent of
the person to whom the Option was granted.
<PAGE>
14. Conditions Upon Issuance of Shares
Shares shall not be issued with respect to any Option granted under this
Plan unless the exercise of such Option and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of
law, and the requirements of any stock exchange upon which the Shares may
then be listed or quoted, and shall be further subject to the approval of
counsel for the Company with respect to such compliance. Inability of the
Company to obtain authority from any regulatory body having jurisdictional
authority deemed by its counsel to be necessary to the lawful issuance and
sale of any Shares hereunder shall relieve the Company of any liability in
respect of the non-issuance of sale of such Shares as to which such
requisite authority shall not have been obtained.
15. Reservation of Shares
The Company, during the term of the Plan, will at all times reserve and
keep available a number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
* * *
Exhibit 10.25.3
CURATIVE TECHNOLOGIES, INC.
DIRECTOR SHARE PURCHASE PROGRAM
Purpose of the Plan
The purpose of this Director Share Purchase Program (the "Plan") is to encourage
ownership of its common stock by its directors.
1. Each director shall have the opportunity to elect to forego receipt of cash
payments of such director's annual retainer and director's fees and, in
lieu thereof, to receive shares of CTI's common stock (the "Common Stock")
equal to the quotient obtained by dividing the amount of cash payment by
the fair market value. The fair market value (as defined below) of a share
of Common Stock as of the close of business on the date (the "Determination
Date") such cash payment would otherwise have been made in accordance with
CTI's policies as then in effect. Such shares of Common Stock shall be
deemed issued on and as of the Determination Date. If such number is a
fraction, such number shall be rounded down to the nearest whole number and
the director shall receive the cash equivalent of such fraction or, if such
director so elects, such director shall pay to CTI an amount of cash equal
to the difference between such fair market value and the amount of such
cash equivalent, in which case such director, upon making such payment,
shall receive one additional share of Common Stock rather than a cash
payment for any fractional amount. "Fair market value" shall mean the
closing price of a share of Common Stock as reported for composite
transactions, if the Common Stock is then traded on a national securities
exchange, the last sale price of a share of Common Stock, if the Common
Stock is then quoted on the NASDAQ National Market System, or the average
closing representative bid and asked prices of a share of Common Stock as
reported on NASDAQ on the date as of which fair market value is being
determined.
2. Each director shall also have the opportunity to elect to receive his
entire annual retainer in Common Stock in a lump sum. If such election is
made, CTI shall make a one-time payment of such retainer in Common Stock
and shall apply such entire amount at the time the first installment of
such retainer would otherwise have been payable for purposes of determining
the number of shares of Common Stock to be issued to such director. If such
election is not made, such retainer shall be paid in semi-annual
installments (or in such other installments as CTI may determine from time
to time), in which case, such director's election to receive Common Stock
in lieu of cash shall be made with respect to each installment.
<PAGE>
3. If CTI's policies, as in effect from time to time, against trading in CTI's
shares of Common Stock, would prohibit a director's purchase of Common
Stock on the Determination Date, then the Determination Date shall be
postponed until the first date that such policies would permit such
purchase to be made. In addition, notwithstanding any election by any
director, such director shall not be entitled to receive any shares of
Common Stock hereunder on any Determination Date if such director has sold
any shares of Common Stock within the six-month period immediately
preceding such date.
4. CTI will use best efforts to register the shares of Common Stock issuable
here under on Form S-8 under the Securities Act of 1933, as amended. Unless
and until such shares are so registered , such shares may not be offered or
sold by any director unless such shares are registered under such Act or
such director furnishes CTI with an opinion of counsel acceptable to CTI
that the offer and sale of such shares are exempt from such registration.
5. CTI will furnish to each director, in advance of the payment date of the
retainer and fees in question, a form to be completed and signed by such
director with respect to the election, if any, by such director to receive
Common in lieu of cash.
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,254
<SECURITIES> 9,918
<RECEIVABLES> 9,489
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,697
<PP&E> 7,747
<DEPRECIATION> 4,129
<TOTAL-ASSETS> 30,185
<CURRENT-LIABILITIES> 8,253
<BONDS> 0
0
0
<COMMON> 107
<OTHER-SE> 20,705
<TOTAL-LIABILITY-AND-EQUITY> 30,185
<SALES> 31,305
<TOTAL-REVENUES> 31,305
<CGS> 17,359
<TOTAL-COSTS> 26,972
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,700
<INCOME-TAX> 384
<INCOME-CONTINUING> 4,316
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<NET-INCOME> 4,316
<EPS-PRIMARY> .38
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