UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
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 March 31, 1998
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)
150 Motor Parkway
Hauppauge, NY 11788-5108
(Address of principal executive offices)
Telephone Number (516) 232-7000
Former Address: 14 Research Way; Box 9052, E. Setauket, NY 11733-9052
---------------------------------------------------------------------
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 ______
As of May 1, 1998 there were 12,707,638 shares of the Registrant's Common Stock,
$.01 par value, outstanding.
1
<PAGE>
Curative Health Services, Inc. and Subsidiaries
INDEX
Part I Financial Information Page No.
Item 1 Condensed Consolidated Financial Statements:
Condensed Consolidated Statements of Operations
Three Months ended March 31, 1998 and 1997 3
Condensed Consolidated Balance Sheets
March 31, 1998 and December 31, 1997 4
Condensed Consolidated Statements of Cash Flows
Three Months ended March 31, 1998 and 1997 5
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 6 Exhibits and Reports on Form 8-K 9
Signatures 10
2
<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 March 31,
1998 1997
---- ----
Revenues ............................................... $24,513 $19,654
Cost and Expenses:
Cost of product sales and services ............. 13,245 10,858
Selling, general and administrative ............ 5,671 5,064
------- -------
Total costs and operating expenses ...... 18,916 15,922
------- -------
Income from operations ................................. 5,597 3,732
Interest income ........................................ 599 576
Income before income taxes ............................. 6,196 4,308
Income taxes ........................................... 2,319 643
------- -------
Net income ............................................. $ 3,877 $ 3,665
======= =======
Net income per common share, basic ..................... $ .31 $ .29
======= =======
Net income per common share, diluted ................... $ .29 $ .28
======= =======
Weighted average common shares, basic .................. 12,601 12,560
======= =======
Weighted average common shares, diluted ................ 13,152 12,945
======= =======
See accompanying notes
3
<PAGE>
Curative Health Services, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
(Unaudited)
<S> <C> <C>
Cash and cash equivalents ........................................ $ 25,727 $ 39,746
Marketable securities held-to-maturity ........................... 34,788 18,807
Accounts receivable, net ......................................... 16,721 14,211
Deferred tax assets .............................................. 1,235 1,235
Prepaids and other current assets ................................ 905 924
-------- --------
Total current assets ..................................... 79,376 74,923
Property and equipment, net ...................................... 10,362 9,268
Other assets ..................................................... 735 748
-------- --------
Total assets ............................................. $ 90,473 $ 84,939
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ................................................. $ 11,363 $ 8,846
Accrued liabilities .............................................. 1,553 3,454
Current lease obligations ........................................ 37 40
-------- --------
Total current liabilities ................................ 12,953 12,340
Capital lease obligations ........................................ -- 7
Stockholders' equity
Common stock ............................................. 126 125
Additional paid in capital ............................... 76,285 75,235
Retained earnings (deficit) .............................. 1,109 (2,768)
-------- --------
Total stockholders' equity ........................ 77,520 72,592
-------- --------
Total liabilities and stockholders' equity ............... $ 90,473 $ 84,939
======== ========
</TABLE>
See accompanying notes
4
<PAGE>
Curative Health Services, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended March 31,
1998 1997
-------- --------
OPERATING ACTIVITIES:
Net income .............................................. $ 3,877 $ 3,665
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................... 700 405
Changes in operating assets and liabilities ..... (1,875) (1,087)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES ............... 2,702 2,983
INVESTING ACTIVITIES:
Purchase of property and equipment ...................... (1,781) (740)
(Purchases) sales of marketable securities .............. (15,981) 5,624
-------- --------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES ..... (17,762) 4,884
FINANCING ACTIVITIES:
Proceeds from exercise of stock options ................. 1,051 568
Principal payments on loans and capital lease obligations (10) 1,043)
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ..... 1,041 (475)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ........ (14,019) 7,392
Cash and cash equivalents at beginning of period ........ 39,746 5,226
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .............. $ 25,727 $ 12,618
======== ========
SUPPLEMENTARY CASH FLOW INFORMATION:
Interest paid ........................................... $ 1 $ 13
======== ========
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,
1997 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 months ended March 31, 1998 are not necessarily indicative of
the results to be expected for the entire fiscal year ending December 31,
1998.
Note 2. Net Income per Common Share
In 1997, the Financial Accounting Standards Board ("FASB") issued Statement
No. 128, "Earnings Per Share". FASB 128 replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per
share. Net income per common share, basic is computed by dividing the net
income by the weighted average number of common shares outstanding. Net
income per common share, diluted is computed by dividing net income by the
weighted average number of shares outstanding plus dilutive common share
equivalents. All earnings per share amounts for the 1997 period have been
restated to conform to FASB 128 requirements. The following table sets forth
the computation of basic and diluted earnings per share:
1998 1997
------------------
Weighted average shares, basic 12,601 12,560
Effect of dilutive stock options 551 385
--- ---
Weighted average shares, diluted 13,152 12,945
====== ======
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 first quarter of fiscal year 1998
increased 25 percent to $24,513,000, compared to $19,654,000 for the first
quarter of the prior fiscal year. The revenue increase is attributable to the
operation of 151 wound care facilities at the end of the first quarter of 1998
compared to 128 at the end of the first quarter of 1997 and a 12 percent
increase in revenues at existing centers related to higher patient volumes.
Total new patients increased 19 percent from 11,373 in the first quarter of 1997
to 13,519 for the same period in 1998. The total number of new patients
receiving Procuren(R) therapy increased 3 percent from 2,019 in the first
quarter of 1997 to 2,081 in the first quarter of 1998. The percentage of
patients receiving Procuren(R) therapy decreased during the first quarter of
1998 to 15 percent from 18 percent for the same period in 1997. 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
first quarter increased from $10,858,000 in 1997 to $13,245,000 in 1998, an
increase of 22 percent. The increase is attributable to additional staffing and
operating expenses of approximately $1,368,000 associated with the operation of
23 additional wound care facilities at the end of the first quarter of 1998, as
well as increased volume at existing wound care facilities. Additionally, these
23 facilities included 16 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 expenses that these
models require. As compared with the first quarter of 1997, the higher services
components at these facilities accounted for an additional $838,000 of the
increase in product costs and services for the first quarter of 1998. As a
percentage of revenues, costs of product sales and services for the first
quarter of 1998 was 54 percent compared to 55 percent for the same period in
1997. The one percent improvement is attributed to the ability of the Company to
obtain leverage by spreading the costs of its overhead over a broader revenue
base and the improvement of margins at its free-standing Wound Care Centers(R)
in the first quarter of 1998 as compared to the same period in 1997.
Selling, General and Administrative. Selling, general and administrative
expenses for the first quarter increased from $5,064,000 in 1997 to $5,671,000
in 1998, an increase of 12 percent. 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 including clinical operations
and management information systems. As a percentage of revenues, selling,
general and administrative expenses were 26 percent in the first quarter of 1997
compared with 23 percent in the first quarter of 1998. The decrease is
attributable to the ability of the Company to obtain leverage by spreading the
costs of its overhead structure over a broader revenue base.
Net Income. Net income improved from $3,665,000 or $0.28 per share in the first
quarter of 1997 to $3,877,000 or $0.29 per share in the first quarter of 1998.
The increase in earnings of $212,000 for the three months ended March 31, 1998
as compared to March 31, 1997 is primarily attributable to an improvement in
operating margins associated with the revenue growth particularly related to
existing wound care centers and economies of scale achieved from market growth
offset by an increase in income taxes as the result of higher effective tax
rates in 1998. Effective tax rates are higher in 1998 due to the full
utilization of net operating loss carryforwards in 1997.
7
<PAGE>
Liquidity and Capital Resources. Working capital was $66.4 million at March 31,
1998 compared to $62.6 million at December 31, 1997. Total cash, cash
equivalents and marketable securities held-to-maturity as of March 31, 1998 was
$60.5 million and was invested primarily in highly liquid money market funds,
commercial paper and government securities. The ratio of current assets to
current liabilities was 6.1:1 at December 31, 1997 and March 31, 1998. The
Company's increase in working capital is primarily attributable to the net
income for the three months.
Cash flows provided by operations for the first three months of 1998 totaled
$2,702,000 primarily attributable to the net income for the period. Cash flows
used in investing activities totaled $17,762,000 primarily attributable to
purchases of marketable securities. Cash flows provided by financing activities
totaled $1,041,000 primarily attributable to proceeds from the exercise of stock
options.
For the first three months of 1998, the Company experienced a $2,510,000 net
increase in accounts receivable primarily due to the increase in revenues and an
increase in the average number of days receivables outstanding to 59 days as of
March 31, 1998 compared to 54 as of December 31, 1997. Further, the Company's
accounts payable and accrued expenses increased $616,000 as of March 31, 1998
compared to December 31, 1997.
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 and the
acquisition of software, computers and equipment related to the Company's
upgrade of management information systems. 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.
Cautionary Statements
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These statements include statements regarding
intent, belief or current expectations of the Company and its management. These
forward-looking statements are not guarantees of future performance and involve
a number of risks and uncertainties that may cause the Company's actual results
to differ materially from the results discussed in these statements. Factors
that might cause such differences include, but are not limited to, changes in
the Company's level of business with Columbia/HCA Healthcare Corporation,
changes in the government regulations relating to the Company's wound care
operations or Procuren(R), uncertainties relating to health care reform
initiatives, changes in the availability of third party reimbursements for the
Company's product and services, and the other risks and uncertainties detailed
throughout this report and from time to time in the Company's filings with the
Securities and Exchange Commission.
8
<PAGE>
Curative Health Services, Inc. and Subsidiaries
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibit 10.45 Employment Agreement dated as of November 2, 1987,
between William C. Tella and the Company.
Exhibit 10.45.1 Amendment of Employment dated December 17, 1997,
between William C. Tella and the Company.
Exhibit 27 Financial Data Schedule.
(c)No reports on Form 8-K filed during the quarter ended March 31, 1998.
9
<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: May 14, 1998
Curative Health Services, Inc.
(Registrant)
John Vakoutis
President and Chief Executive Officer
John C. Prior
Chief Financial Officer
(Principal Financial and Accounting Officer)
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: May 14, 1998
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)
10
<PAGE>
EXHIBIT 10.45
EMPLOYMENT AGREEMENT
This Agreement, made and entered into as of the Second day of November,
1987, by and between William Tella, as individual resident of Minneapolis
(hereinafter referred to as "Employee"), and CURATECH, INC., a Minnesota
corporation (hereinafter referred to as the "Company").
WITNESSETH:
WHEREAS, The Company desires to employ Employee to render services for,
and on behalf of, the Company on the terms and conditions set forth in this
Agreement, and Employee desires to be retained and employed by the Company on
such terms and conditions.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties agree as follows:
1. Employment. The Company hereby employs Employee as a Marketing
Manager and Employee hereby accepts such employment and agrees to perform
services for the Company upon the terms and conditions set forth in this
Agreement. In such capacity, Employee shall devote his full time, attention,
energy and skill to the business of the Company during such hours as are
reasonably necessary for him to perform and fulfill his obligations under this
Agreement, and he shall render such services and assume and perform the
responsibilities and duties set forth on Exhibit A attached hereto, and such
other reasonable responsibilities and duties as shall be specified from time to
time by the Company's Board of Directors.
2. Term. The term of this Agreement shall commence effective as of
November 2, 1987, and shall continue until November 2, 1988, unless earlier
terminated in accordance with Section 6 of this Agreement. The term may
thereafter be extended by mutual agreement of the parties.
3. Compensation. As compensation for Employee's services rendered under
this Agreement, the Company shall pay to Employee the following:
(a)Annual Salary. The Company shall pay Employee an annual salary of
Fifty-Seven Thousand Five Hundred Dollars ($57,500).
(b)Incentive Compensation. In addition to the annual salary paid to
Employee pursuant to Section 3 (a), the Company shall review employee's
performance and compensation under this agreement and if determined by
the Company in its sole discretion shall pay to employee a cash bonus to
reflect the success of the Company, Employee's contribution to such
success, the effects of inflation, and other similar factors.
(c)Stock Options. Within sixty (60) days after the date of this
Agreement, the Company agrees to grant Employee one Incentive Stock
Option for the purchase of 1200 of the Company's common shares at an
exercise price equal to the fair market value of such shares and upon
such other terms and conditions as are set determined by the Board of
Directors of the Company in their sole and absolute discretion.
(d)Compensation Adjustments; Withholdings.
(i) At least once each year during the term of this Agreement, the
Company shall review Employee's performance and compensation under
this Agreement, and if determined by the Company in its sole and
absolute discretion, shall adjust Employee's compensation hereunder
to reflect the success of the Company, Employee's contribution to
such success, the effects of inflation and other similar factors.
(ii) Except as otherwise provided herein, all compensation shall be
prorated according to the number of days in such year during which
this Agreement is in effect.
(iii) All compensation shall be payable in accordance with the
Company's regular payroll procedures, and shall be subject to all
required and authorized withholdings.
4. Expenses. Employee shall be reimbursed by the Company for all
reasonable out-of-pocket travel, entertainment and other business expenses which
are incurred in connection with the performance of his duties hereunder during
the term of this Agreement. Employee shall keep detailed and accurate records of
expenses incurred in connection with the performance of his duties hereunder and
reimbursement therefore shall be in accordance with policies and procedures to
be established from time to time by the Company's Board of Directors.
5. Fringe Benefits. Employee shall be entitled to all benefits and
privileges customarily accorded executive officers of the Company, including,
but not limited to, annual vacation time of two (2) weeks for the first twelve
(12) month period during the term of this Agreement and three (3) weeks for each
twelve (12) month period thereafter, holidays, sick pay, group term life
insurance, medical insurance, long-term disability income protection insurance,
and other general employee benefits and privileges in accordance with the
customs and practices established by the Company's Board of Directors as they
may change from time to time.
6. Termination. This Agreement and the rights and obligations of the
Company and Employee under this Agreement, except for the covenants set forth in
Section 7, may be terminated by either Employee or the Company upon the
occurrence of any of the following events:
(a)In the event of Employee's death; or
(b)In the event the Company gives Employee a written notice of its
desire to terminate his employment under this Agreement that specifies a
date for termination of employment that is at least ninety (90) days
from and after the date of delivery of such notice to Employee; or
(c)In the event Employee gives the Company a written notice of his
desire to terminate his employment under this Agreement that specifies a
date for termination of employment that is at least ninety (90) days
from and after the date of delivery of such notice to the Company.
7. Employee Covenants.
(a)Trade Secrets and Confidential Information. Employee agrees that he
shall, during the course of this employment and thereafter, hold
inviolate and keep secret all documents, materials, knowledge, or other
confidential business or technical information of any nature whatsoever
disclosed to or developed by him or to which he had access as a result
of his employment (hereinafter referred to as "Confidential
Information"). Such Confidential Information shall include technical and
business information, including but not limited to inventions, research
and development, engineering, products, designs, manufacture, methods,
systems, improvements, trade secrets, formulas, processes, marketing,
merchandising, selling, licensing, servicing, customer lists, records or
financial information, manuals or Company strategy concerning its
business, strategy or policies. Employee agrees that all Confidential
Information shall remain the sole and absolute property of the Company.
During the course of his employment, Employee shall not use, disclose,
disseminate, publish, reproduce or otherwise make available such
Confidential Information to any person, firm, corporation or other
entity, except for the purpose of conducting business on behalf of the
Company. Following termination of his employment with the Company,
Employee shall not use, disclose, disseminate, publish, reproduce or
otherwise make available such Confidential Information to any person,
firm, corporation or other entity. Upon termination of this employment
with the Company, Employee will leave with or deliver to the Company all
records and any compositions, articles, devices, equipment and other
items which disclose or embody Confidential Information including all
copies or specimens thereof, whether prepared by him or by others. The
foregoing restrictions on disclosure of Confidential Information shall
apply so long as the information has not properly come into the public
domain through no action of the Employee.
(b)Transfer of Inventions. Employee, for himself, his heirs and
representatives, will promptly communicate and disclose to the Company,
and upon request will, without additional compensation, execute all
papers reasonably necessary to assign to the Company or the Company's
nominees, free of encumbrance or restrictions, all inventions,
discoveries, improvements, whether patentable or not, conceived or
originated by Employee solely or jointly with others, at the Company's
expense or at Company's facilities, or at the Company's request, or in
the course of the term of this Agreement, or based on knowledge or
information obtained during the term of the Agreement. All such
assignments shall include the patent rights in this and all foreign
countries. This Section 7 (b) shall not apply to any invention for which
no equipment, supplies, facility, or trade secret information of the
Company was used and which was developed entirely on Employee's own time
and (i) which does not relate (1) directly to the business of the
Company or (2) to the Company's actual or demonstrably anticipated
research or development, or (ii) which does not result from any work
performed by Employee for the Company.
(c)Exclusivity of Employment. During the period of Employee's
employment, except as otherwise may be approved by the Board of
Directors of the Company, Employee's services shall be exclusive to the
Company during ordinary working hours or at such other times as may be
required by the Company. Employee shall not directly or indirectly
engage in any activity competitive with or adverse to the Company's
business or welfare or render a material level of services of a
business, professional or commercial nature to any other person or firm,
whether for compensation or otherwise.
(d)Covenant Not to Compete. Employee agrees to be bound and abide by
the following covenant not to compete;
(i) Term and Scope. During his employment with the Company and for a
period of one (1) year after termination of this Agreement for any
reason, Employee will not render to any Conflicting Organization,
services, directly or indirectly, anywhere in the world in connection
with any Conflicting Product.
(ii) Definitions. For purposes of this Employment Agreement, the
following terms shall have the following meanings:
"Conflicting Product: means any product, method or process,
system or service of any person or organization other than the
Company, in existence or under development at the time
Employee's employment with the Company terminates, which is the
same as or similar to or competes with a product, method or
process, system or service of or provided by the Company or any
of its affiliates or about which Employee acquires Confidential
Information.
"Conflicting Organization" means any person or organization
which is engaged in or about to become engaged in, research on
or development, production, marketing, licensing, selling or
servicing of a Conflicting Product.
(e)Judicial Action. Employee and Company agree that, if the period of
time or the scope of the restrictive covenants contained in Section 7
shall be adjudged unreasonable in any Court proceeding, then the period
of time and/or scope shall be reduced accordingly, so that such
covenants may be enforced in such scope and during such period of time
as is judged by the Court to be reasonable. In the event of a breach or
violation of the Section 7 by Employee, the parties agree that, in
addition to all other remedies, the Company shall be entitled to
equitable relief in any Court of competent jurisdiction, including the
right to obtain injunctive relief for specific performance, and Employee
hereby agrees and acknowledges that the Company has no adequate remedy
at law for the breach of the covenants contained herein.
(f)Disclosure to Prospective Employers. Employee will disclose to any
prospective employer, prior to accepting employment, the existence of
this Section 7 of this Agreement and will provide such prospective
employer with a copy of this Section 7.
8. Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the employment of Employee by the Company and
supersedes all prior agreements and understandings, whether written or oral,
between the parties relating to such employment, and this Agreement may not be
amended or changed except in a writing executed by both parties and attached to
this Agreement.
9. Assignment. None of the rights or obligations of either party to this
Agreement is assignable.
10. Governing Law. This Agreement has been entered into by the parties in
the State of New York and shall be construed and enforced in accordance with the
laws of that state.
11. Notices. Any notice required or permitted to be given under this
Agreement shall be deemed to have been delivered on the date following the day
the notice is deposited in the United States mail, certified or registered,
postage prepaid, return receipt requested, and addressed as follows:
If to Employee: William Clark Tella
235 East Viking Drive, #249
St. Paul, MN 55117
or such other address Employee elects by giving to the Company not less than
thirty (30) days advance written notice.
If to the Company: CuraTech, Inc.
300 Vanderbilt Motor Parkway; Suite 100
Hauppauge, New York 11788
or such other address as the Company elects by giving to Employee not less than
thirty (30) days advance written notice.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
-------------------------------------
-------------------------------------
CURATECH, INC.
By __________________________________
Its _________________________________
/s/ Russell B. Whitman
-------------------------------------
Russell B. Whitman
President and Chief Executive Officer
/s/ William C. Tella
-------------------------------------
William C. Tella
Marketing Manager
EXHIBIT 10.45.1
AMENDED EMPLOYMENT AGREEMENT
This amended agreement ("Agreement") is effective as of December 17,
1997 ("Effective Date") and is between Curative Health Services, Inc., a
Minnesota Corporation located a 14 Research Way, East Setauket, NY 11733
("Company") and William Tella, Vice President, Corporate Development, Curative
Health Services, Inc. ("Executive").
WHEREAS, Executive and Company entered into an employment agreement
dated as of November 2, 1987 ("Original Agreement") which Original Agreement has
been extended by mutual agreement through the Effective Date of this Agreement;
and
WHEREAS, Company seeks to amend the Original Agreement to establish
terms governing Executive's severance from Company should his employment be
terminated for any reason; and
WHEREAS, Company and Executive want the terms and conditions of
Executive's termination of employment to be governed by this Agreement;
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, intending to be legally bound, Company and Executive hereby
agree as follows:
Article I. Sections 1, 3, 4, and 5 of the Original Agreement are hereby deleted
in their entirety and replaced with the following Section 1:
1. Employment. Executive shall be employed by Company as Vice President,
Corporate Development which employment shall be governed by the policies and
standard procedures applicable to all other executives and employees of
Company including, but not limited to, those policies and standard
procedures governing compensation, stock options, expenses, and fringe
benefits, as they may be amended from time to time.
Article II. Section 2 of the Original Agreement is hereby deleted in its
entirety and replaced with the following Section 2:
2. Term. The term of this Agreement shall be one (1) year commencing on the
Effective Date unless sooner terminated pursuant to Section 3 of the
Agreement; provided, however, that it shall automatically renew for
additional one (1) year periods unless either party gives the other party
notice of non-renewal at least three (3) months prior to the end of the
first or subsequent renewal terms.
Article III. Section 6 of the Original Agreement is hereby deleted in its
entirety and replaced with the following Section 3:
3. Termination of Employment. Subject to the notice and other provisions of
this Agreement, Company shall have the right to terminate Executive's
employment and Executive shall have the right to resign at any time for any
reason or for no stated reason.
(a) Termination for Cause; Resignation.
(i) If Executive's employment is terminated by Company for Cause or
if Executive resigns from his employment, Executive shall have no
right under this Agreement to receive any compensation or other
benefits otherwise provided by this Agreement.
(ii) Termination for "Cause" shall mean termination of Executive's
employment with Company because of (A) his refusal (other
than by reason of incapacity because of physical or mental
illness) to perform his duties hereunder, (B) the commission
by Executive of a felony or the perpetration by Executive of a
dishonest act or fraud against Company or any affiliate of
Company, (C) any act or omission by Executive which is the result
of Executive's willful misconduct or gross negligence and
which, in the good faith opinion of Company, is injurious in any
material way to the financial condition, business,or reputation
of Company or its affiliates, or (D) a material breach by
Executive of this Agreement.
(b) Involuntary Termination.
(i) If, prior to the expiration of the Term, Company terminates
Executive's employment for any reason other than for Disability
or Cause ("Involuntary Termination") or Company exercises its
right not to renew this Agreement, Company shall pay to Executive
his salary prorated on a monthly basis, at the rate in effect on
the date of Involuntary Termination ("Severance Payments") for
the nine month period beginning immediately following the
date of Involuntary Termination or non-renewal
("Severance Period"). Severance Payments shall be paid in
payroll installments in accordance with the Company's payroll
practices then in effect; provided, however, that Company, in
its sole discretion, may at any time during the Severance Period
pay to Executive the then remaining portion of Severance Payments
due during the Severance Period in a cash lump sum.
(ii) In the event of Involuntary Termination, Executive shall continue
to participate on the same terms and conditions as in effect
immediately prior to the date of Involuntary Termination in
Company's health, medical, and dental plans until the last day
Company is obligated to make Severance Payments in accordance
with Section 3(b)(i) above.
(iii) In the event of Executive's death prior to the end of the
Severance Period, Severance Payments shall cease as of the date
of death.
(iv) If, following Involuntary Termination, Executive materially
breaches the provisions of Section 4 of this Agreement, Executive
shall not be eligible, as of the date of the breach, for the
payments and benefits described in Section 3 and any obligations
of Company for such payments and benefits shall thereupon cease.
(c) Termination because of Disability. In the event of Executive's
Disability, Company shall be entitled to terminate his employment. Should
Company terminate Executive's employment because of Disability, Company shall
continue to pay Executive his annual salary until the earliest to occur of (i)
the end of the nine-month period following the date of termination, (ii) the
date of Executive's death, or (iii) the first day on which Executive is entitled
to benefits under Company's long term disability plan. As used in this Section
3(c), the term "Disability" shall mean a physical or mental incapacity that
substantially prevents Executive from performing his duties hereunder, has
continued for at least 180 days, and can reasonably be expected to continue
indefinitely. Any dispute about whether or not Executive is disabled within the
meaning of this Section shall be resolved by a physician reasonably satisfactory
to Executive and Company, and the determination of such physician shall be final
and binding upon both Executive and Company.
(d) Death. No Severance Payments or other benefits shall be payable
pursuant to this Agreement following the date of Executive's death.
Article IV. Section 7 of the Original Agreement is hereby deleted in its
entirety and replaced with the following Section 4:
4. Protection of Company's Interests.
(a) No Competing Employment. For so long as Executive is employed by
Company and continuing for two years after termination of employment or
resignation ("Restricted Period"), Executive shall not, unless he receives prior
written consent from Company, directly or indirectly own an interest in, manage,
operate, join, control, lend money or render financial or other assistance to,
or participate in or be connected with as an officer, employee, partner,
stockholder, consultant or otherwise any individual, partnership, firm,
corporation or other business organization or entity that competes with Company;
provided, however, that this Section 4(a) shall not proscribe Executive's
ownership, either directly or indirectly, of less that five percent of any class
of securities which are listed on a national securities exchange or quoted on
the automated quotation system of the National Association of Securities
Dealers, Inc.
(b) No Interference. During the Restricted Period, Executive shall not,
whether for his own account or for the account of any other individual,
partnership, firm, corporation or other business organization (other than
Company), intentionally solicit, endeavor to entice away from Company, or
otherwise interfere with the relationship of Company with any person who is
employed by or otherwise engaged to perform services for Company or any person
or entity who is, or was, within the then most recent twelve-month period, a
customer, client, or supplier of Company.
(c) Secrecy. Executive recognizes that the services he will perform are
special, unique, and extraordinary because as part of his employment he may
acquire confidential information and trade secrets about the operation of
Company or its affiliates, the use or disclosure of which could cause Company
substantial loss or damage which could not be readily calculated and for which
no remedy at law would be adequate. Accordingly, Executive shall not at any
time, except in performance of his obligations to Company or with prior written
consent of Company, directly or indirectly disclose to any person any secret or
confidential information. "Confidential Information" means any information not
previously disclosed to the public by Company's management about Company's
products, facilities, business practices, trade secrets, intellectual property,
systems, procedures, manuals, confidential reports, price lists, customer lists,
financial information, and business plans, prospects, or opportunities.
(d) Exclusive Property. All Confidential Information is and shall remain
the exclusive property of Company. Upon termination of employment or upon
request of Company at any time, Executive shall promptly deliver to Company and
shall not, without consent of Company, retain copies of any written materials
not previously made available to the public or records and documents made by
Executive or coming into his possession and relating to the business of Company;
provided, however, that subsequent to any termination, Company shall provide
Executive with copies of any documents which are requested by Executive and
necessary for him to comply with any applicable law or the terms and conditions
of the Agreement.
(e) Enforcement. Should the period of time or the scope of the
restrictive covenants set forth above be adjudged unreasonable in a judicial
proceeding, then the period of time or the scope or both shall be reduced
accordingly, so that the covenants may be enforced in such scope and during such
period of time as are judged by the court to be reasonable. Should Executive
breach or violate this Agreement, in addition to all other remedies, Company
shall be entitled to equitable relief in any court of competent jurisdiction,
including the right to obtain injunctive relief for specific performance, it
being covenanted hereby that Company has no adequate remedy at law for the
breach of the covenants contained herein.
(f) Execution of Release. In consideration of and as a specific
condition for receipt of Severance Payments and other benefits pursuant to this
Agreement, Executive shall execute a release releasing Company and its
employees, officers, and directors from and against any loss, damages, causes of
action or other liability arising out of Executive's employment by Company.
Article V. Sections 8, 9, 10, and 11 of the Original Agreement are hereby
deleted in their entirety and replaced with the following Section 5:
5. General Provisions.
(a) Tax Withholding. Payments to Executive for all compensation
contemplated by this Agreement shall be subject to all applicable tax
withholding.
(b) Notices. Notice by either party shall be given in writing by
personal delivery or certified mail, return receipt requested, or if to Company
by facsimile to the applicable address set forth below:
(i) To Company: Mr. Allan L. Keysor
General Counsel
Curative Health Services, Inc.
14 Research Way
East Setauket, NY 11733
(ii) To Executive: Mr. William Tella
Vice President, Corporate Development
Curative Health Services, Inc.
14 Research Way
East Setauket, NY 11733
or to such other persons or addresses either party may specify to the other in
writing.
(c) Assignment/Amendment. This Agreement shall not be assigned by
Executive, and any attempted assignment or delegation in violation of this
provision shall be void. Subject to the preceding sentence, this Agreement shall
be binding upon the parties hereto and their respective heirs, successors, and
assigns. This Agreement may not be amended, modified, or canceled except by
written Agreement between Executive and Company.
(d) Severability. If any term or provision of this Agreement is
determined to be invalid or unenforceable in a final court or arbitration
proceeding, (i) the remaining terms and provisions shall be unimpaired and, (ii)
the invalid or unenforceable term or provision shall be deemed replaced by a
term or provision that is valid and enforceable and comes closest to expressing
the intention of the invalid or unenforceable term or provision.
(e) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to any choice
or conflicts of law provisions.
(f) Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties with respect to the matters covered hereby and
supersedes all prior agreements and understandings of the parties with respect
to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year first written above.
CURATIVE HEALTH SERVICES, INC.
By:_________________________________________
Name: John Vakoutis
Title: President and Chief Executive Officer
EXECUTIVE
--------------------------------------------
Name: William Tella
/s/ John Vakoutis
--------------------------------------------
John Vakoutis
President and Chief Executive Officer
/s/ William C. Tella
--------------------------------------------
William C. Tella
Vice President, Corporate Development
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<PERIOD-START> JAN-01-1998 JAN-01-1997
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