EX-10.1 2 a04-5319_1ex10d1.htm EX-10.1

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) dated as of April 23, 2004 (the “Closing Date”), is made and entered into between CURATIVE HEALTH SERVICES, INC., a Minnesota corporation (the “Company”), and Paul McConnell, an individual resident of the Commonwealth of Massachusetts (“Executive”).

 

WHEREAS, the Company has agreed to purchase all of the issued and outstanding shares of capital stock of Critical Care Systems, Inc. (“CCS”) (the “Acquisition”) pursuant to an agreement made and entered into between the Company, CCS, Executive and all of the other shareholders of CCS listed on Schedule 1 to the Stock Purchase Agreement dated as of February 24, 2004 (the “Purchase Agreement”); and

 

WHEREAS, according to the terms of the Purchase Agreement and by virtue of Executive’s current relationship with CCS, consummation of the Acquisition will result in significant economic benefit to Executive;

 

WHEREAS, Executive has acquired and possesses substantial and valuable knowledge about the industry in which CCS operates, which knowledge will result in a significant economic benefit to the Company;

 

WHEREAS, because of the importance of the employment, noncompetition, nonsolicitation, confidentiality, and invention assignment provisions of this Agreement, the Company has conditioned its obligation to consummate the transactions contemplated by the Purchase Agreement, in part, on the execution and delivery of this Agreement by Executive;

 

WHEREAS, all parties agree that, if the Acquisition is not consummated by the parties, this Agreement shall be null and void; and

 

WHEREAS, the Company desires to employ Executive subsequent to the consummation of the Acquisition, and Executive desires to be employed by the Company, subject to the terms of the employment, noncompetition, nonsolicitation, confidentiality, and invention assignment provisions of this Agreement and the provisions of the Acquisition Agreement.

 

NOW THEREFORE, in consideration of the mutual obligations incurred and benefits obtained hereunder, the sufficiency of which is admitted, as an inducement to consummate the Acquisition, and contingent upon the consummation of the Acquisition, the Company and Executive agree as follows:

 

1.             Employment

 

1.1           Employment and Duties.  The Company hereby agrees to employ Executive for the Term (as hereinafter defined) as President and Chief Operating Officer, subject to the direction of the Chief Executive Officer, and in connection therewith, to perform such duties as

 

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he shall reasonably be directed by the Chief Executive Officer to perform.  Executive hereby accepts such employment and agrees to render such services.  Executive shall perform his duties and carry out his responsibilities hereunder in a diligent manner, shall devote his exclusive and full working time, attention and effort to the affairs of the Company, shall use his best efforts to promote the interests of the Company and shall be just and faithful in the performance of his duties and in carrying out his responsibilities.  Subject to good performance by Executive and approval by the Company’s Board of Directors, in its sole discretion, Executive will be offered the position of Chief Executive Officer within eighteen (18) months of the Closing Date.

 

1.2           Location.  The principal location for performance of Executive’s services hereunder shall be at the Company’s office located in Nashua, New Hampshire, subject to reasonable travel requirements during the course of such performance.

 

2.             Employment Term

 

The term of Executive’s employment hereunder (the “Term”) shall be deemed to commence on the Closing Date and shall end on the third anniversary of the Closing Date, unless sooner terminated as hereinafter provided; provided, however, that the Term shall be automatically renewed and extended for an additional period of one (1) year on each anniversary thereafter unless either party gives a Notice of Termination (as defined below) in accordance with Section 4.3 or Section 4.4.

 

3.             Compensation and Benefits

 

3.1           Compensation.

 

(a)           Base Salary.  The Company shall pay Executive an annual salary of $400,000 payable in bi-weekly installments, in arrears (the “Base Salary”).  The Base Salary shall be reviewed annually by the Company’s Board of Directors and may be increased, but not decreased (unless mutually agreed upon by Executive and the Company).

 

(b)           Bonus Plan.  Executive shall be entitled to participate in the Company’s Executive Bonus Compensation Program, in accordance with and subject to the terms and provisions thereof.  Notwithstanding any provision of the Executive Bonus Compensation Program, the Company will pay and Executive will receive a guaranteed bonus of 100% with respect to his first year of employment with the Company, provided that he remains employed by the Company continuously from the Closing Date through the first anniversary of the Closing Date.

 

(c)           Restricted Stock Units.  The Company shall issue and Executive shall receive a grant of Restricted Stock Units in the total amount of $2 million, to be determined based upon the valuation of the Common Stock of the Company as of the close of trading on the Closing Date.  The terms and conditions of said Restricted Stock Units shall be set forth in and governed entirely by the a Restricted Stock Unit Agreement in the form attached hereto as Exhibit A hereto (the “Restricted Stock Unit Agreement”),

 

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which Executive shall sign as a condition of receiving said Restricted Stock Units, and nothing contained in this Agreement is intended to alter the provisions of such Restricted Stock Unit Agreement.  Except as otherwise provided in the Restricted Stock Unit Agreement, the Restricted Stock Units granted to Executive will vest in their entirety on the third anniversary of the Closing Date, and not before, provided that Executive remains employed by the Company continuously from the Closing Date through the third anniversary of the Closing Date.

 

(d)           Stay Bonus:  The Company shall pay and Executive shall receive a cash payment in the amount of $1.5 million on the third anniversary of the Closing Date, provided that Executive remains employed by the Company continuously from the Closing Date through the third anniversary of the Closing Date.

 

(e)           Usage of Corporate Flex Jet:  Executive shall be entitled to personal use of the Company’s corporate aircraft available to the Company pursuant to its agreement with Bombardier Aerospace Corporation, for up to the lesser of (a) 10 hours per year for personal use, and (b) the difference between (x) the amount of time the Company is permitted to use the aircraft pursuant to the Flexjet agreement and (y) the amount of time the respective aircraft is actually utilized or needed to be utilized by the Company for business purposes, or is reserved for other purposes previously approved by the Board of Directors of the Company; provided that such personal use shall be treated by the Company as compensation to Executive in the amount of variable costs incurred by the Company solely in connection with such personal use.

 

3.2           Participation in Benefit Plans.  Executive shall be entitled to participate in all employee benefit plans or programs of the Company (including, to the extent applicable, any retirement plan or plans) to the extent that his position, title, tenure, salary, active employment status and other qualifications make him eligible to participate.  The Company does not guarantee the continuance of any particular employee benefit plan or program during the Term, and Executive’s participation in any such plan or program shall be subject to all terms, provisions, rules and regulations applicable thereto.  Executive will be entitled to twenty (20) days of vacation per year, to be used in accordance with the Company’s vacation policy for senior executives as it may change from time to time.  For the Benefit Period, if any, (as hereinafter defined), the Company will arrange to provide Executive with welfare benefits (including life and health insurance benefits) of substantially similar design and cost to Executive as the welfare benefits and other employee benefits available to Executive prior to Executive’s or the Company’s, as the case may be, receipt of a Notice of Termination (as hereinafter defined).  In the event that Executive shall obtain full-time employment providing any welfare benefit or benefits during the Benefit Period, such benefit(s) as otherwise receivable hereunder by Executive shall be discontinued.

 

3.3           Expenses.  The Company will pay or reimburse Executive for all reasonable and necessary out-of-pocket expenses incurred by him in the performance of his duties under this

 

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Agreement, including the cost of first class air travel.  Executive 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 Board.

 

3.4           Automobile Expenses.  During the Term and in accordance with the Company’s Executive Automobile Policy, Executive shall be repaid by the Company for the monthly lease expense for an automobile leased in the name of the Executive and for all normal automobile operating expenses incurred by the Executive in the performance of his duties under this Agreement.

 

3.5           Stock Purchase and Restrictions:  Executive agrees to purchase on the open market, subject to availability, with his own personal funds and within 30 days following the Closing Date, shares of the Common Stock of the Company having a total purchase price of $2 million  (the “Designated Shares”) provided that such 30-day period will be suspended for any portion thereof during which Executive may not purchase Designated Shares in compliance with applicable federal and/or state laws and regulations (“Laws”) and/or Company policies governing trading in Company securities by Company executives (“Company Trading Policies”).  Executive agrees that the Designated Shares will be subject to the following lockup agreement:  Executive will be prohibited from selling, transferring or otherwise disposing of half of the Designated Shares until the date that is 30 days after the first anniversary of the Closing Date, and he will be prohibited from selling, transferring or otherwise disposing of the other half of the Designated Shares until the date that is 30 days after the second anniversary of the Closing Date (each such period, as applicable, the “Lockup Period”).  Notwithstanding the foregoing, Executive may sell or otherwise transfer the Designated Shares, in whole or in part, during the Lock-up Period (a) to the Executive’s Immediate Family (as defined below) or to any trust or other entity for the direct or indirect benefit of the Executive and/or his Immediate Family, provided that in all such cases, the transferee agrees in writing that the transferee is receiving and will hold the transferred Designated Shares subject to the lockup provisions of this Section 3.5 and there will be no further transfer of such Designated Shares except in accordance with such provisions and/or (b) upon the occurrence of a Change of Control (as defined below) and/or (c) upon the Company terminating this Agreement without Cause (as defined below) and/or (d) upon Executive terminating this Agreement for Good Reason (as defined below).  For purposes hereof, “Immediate Family” means any relationship by blood, marriage or adoption not more remote than first cousin.  Executive’s purchase of Designated Shares as required herein shall be in compliance with all Company Trading Policies and in compliance with all Laws.

 

4.             Termination of Employment

 

4.1           Definitions

 

(a)           Benefit Period” shall mean (i) the twelve (12) month period commencing on the Date of Termination which occurs in connection with a termination of employment described in the first sentence of Section 4.5(a), or (ii) the twenty-four (24) month period commencing on the Date of Termination which occurs in connection with a termination of employment described in the first sentence of Section 4.5(b).

 

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(b)           Cause” shall mean any of the following:

 

(i)            any act or failure to act (or series or combination thereof) by Executive done with the intent to harm in any material respect the interests of the Company;

 

(ii)           the commission by Executive of a felony;

 

(iii)          the perpetration by Executive of a dishonest act or common law fraud against the Company or any subsidiary thereof;

 

(iv)          a grossly negligent act or failure to act (or series or combination thereof) by Executive detrimental in any material respect to the interests of the Company;

 

(v)           the material breach by Executive of his agreements or obligations under this Agreement; or

 

(vi)          the continued refusal to follow the directives of the Chief Executive Officer or Board of Directors that are consistent with Executive’s duties and responsibilities identified in Section 1.1 hereof.

 

(c)           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 fifty percent (50%) 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 Closing 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 a fifty percent (50%) or greater change in the ownership of the Common Stock of the Company as a 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;

 

(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 more than fifty percent (50%) 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 more than fifty percent (50%) of the then outstanding Common Stock;

 

(v)           a majority of the Board of Directors is not comprised of Continuing Directors.  A “Continuing Director” means a director recommended by the Board of Directors of the Company for election as a director of the Company by the stockholders; or

 

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(vi)          the Board of Directors of the Company, in its sole and absolute discretion, determines 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.

 

(d)           Good Reason” shall mean, at any time the Company’s requiring Executive to be based at a location in excess of fifty (50) miles from Executive’s current principal residence in Boston, Massachusetts, or within the twelve (12) month period immediately following a Change of Control, the occurrence of any one or more of the following events:

 

(i)            the assignment to Executive of any duties inconsistent in any respect with Executive’s position (including status, offices, title, and reporting requirements), authority, duties or other responsibilities as in effect immediately prior to the Change of Control or any other action of the Company that results in a diminishment in such position, authority, duties or responsibilities, other than an insubstantial and inadvertent action that is remedied by the Company promptly after receipt of notice thereof given by Executive;

 

(ii)           a reduction by the Company in Executive’s Base Salary as in effect on the date hereof and as the same shall be increased from time to time hereafter;

 

(iii)          the Company’s requiring Executive to be based at a location in excess of fifty (50) miles from the Executive’s current principal residence in Boston, Massachusetts;

 

(iv)          the failure by the Company to (a) continue in effect any material compensation or benefit plan, program, policy or practice in which Executive was participating at the time of the Change of Control or (b) provide Executive with compensation and benefits at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each employee benefit plan, program, policy and practice as in effect immediately prior to the Change of Control (or as in effect following the Change of Control, if greater);

 

(v)           the failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement; and

 

(vi)          any purported termination by the Company of Executive’s employment that is not effected pursuant to a Notice of Termination (as defined below).

 

(e)           Date of Termination” shall mean the date specified in the Notice of Termination (as hereinafter defined) (except in the case of Executive’s death, in which case Date of Termination shall be the date of death); provided, however, that if Executive’s employment is terminated by the Company other than for Cause, the date specified in the Notice of Termination shall be at least thirty (30) days from the date the Notice of Termination is given to Executive and if Executive’s employment is terminated by Executive for Good Reason, the date specified in the Notice of Termination shall not be more than sixty (60) days from the date the Notice of Termination is given to the Company.

 

(f)            Notice of Termination” shall mean a written notice either from the Company to Executive, or Executive to the Company, that indicates Section 2 or the specific provision of Section 4 of this Agreement relied upon as the reason for such termination or

 

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nonrenewal, the Date of Termination, and, in reasonable detail, the facts and circumstances claimed to provide a basis for termination or nonrenewal pursuant to Section 2 or this Section 4 of this Agreement.

 

4.2           Termination Upon Death or Disability.  This Agreement, and Executive’s employment hereunder, shall terminate automatically and without the necessity of any action on the part of the Company upon the death of Executive.  In addition, if at any time during the Term Executive shall become physically or mentally disabled, whether totally or partially, so that he is unable substantially to perform his duties and services hereunder for (i) a period of six (6) consecutive months, or (ii) for shorter periods aggregating six (6) months during any twelve (12) month period, the Company may at any time after the last day of the sixth consecutive month of disability or the day on which the shorter periods of disability shall have equaled an aggregate of six (6) months, by written notice to Executive (but before Executive has recovered from such disability), terminate this Agreement and Executive’s employment hereunder.

 

4.3           Company’s and Executive’s Right to Terminate-Prior to Change of Control.  Prior to a Change of Control, this Agreement and Executive’s employment hereunder may be terminated at any time by the Company, with or without Cause, upon thirty (30) days prior written notice to Executive, and by Executive, at any time with or without Good Reason, upon thirty (30) days prior written notice to the Company.  Any termination of Executive’s employment by the Company without Cause prior to a Change of Control that occurs at the request or insistence of any person (other than the Company) relating to such Change of Control shall be deemed to have occurred after the Change of Control for the purposes of this Agreement. Executive’s right to terminate his employment pursuant to this Section 4.3 shall not be affected by incapacity due to physical or mental illness.

 

4.4           Company’s and Executive’s Right to Terminate-Following a Change of Control.  Following a Change of Control, this Agreement and Executive’s employment hereunder may be terminated at any time (i) by the Company, with or without Cause, upon thirty (30) days prior written notice to Executive, and (ii) by Executive with or without Good Reason upon thirty (30) days prior written notice to the Company.  Executive’s right to terminate his employment pursuant to this Section 4.4 shall not be affected by incapacity due to physical or mental illness.  Executive’s continued employment following a Change of Control shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.

 

4.5           Compensation Upon Termination.

 

(a)           Termination Prior to Change of Control.  In the event the Company terminates (or elects not to renew) this Agreement without Cause, and such termination (or nonrenewal) without Cause occurs prior to any Change of Control, Executive shall be entitled to receive his Base Salary through the Date of Termination, the welfare benefits described in Section 3.2 for the Benefit Period, and not later than thirty (30) days after the Date of Termination, a lump sum severance payment equal to the sum of Executive’s then Current Base Salary plus the arithmetic average of the bonus payments made to Executive pursuant to the Company’s Executive Bonus Compensation Program with respect to the three (3) fiscal years immediately preceding the fiscal year in which the Date of Termination occurs, provided; however, that (i) if the Executive’s Date of Termination is prior to the first anniversary of the

 

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Closing Date, the bonus payment to Executive shall be Four Hundred Thousand Dollars ($400,000), or (ii) if the Executive’s Date of Termination is after the first anniversary of the Closing Date but prior to the third anniversary of the Closing Date, the bonus payment to Executive shall be the arithmetic average of the annual bonus payments made to Executive for the fiscal year(s) in which Executive was employed as President and Chief Operating Officer by the Company.  In addition, to the extent not otherwise required under the Company’s Stock Option Plan or any award agreement with Executive, any unvested Restricted Stock Units and/or stock option awards theretofore awarded to Executive which would otherwise vest and become exercisable during the twelve (12) month period commencing on the Date of Termination shall vest and become exercisable on the Date of Termination.  In the event this Agreement is terminated (or not renewed) for any reason other than by the Company without Cause, and such termination (or nonrenewal) occurs prior to a Change of Control, Executive shall not be entitled to the continuation of any compensation, bonuses or benefits provided hereunder, or any other payments following the Date of Termination, other than Base Salary earned through such Date of Termination.

 

(b)           Termination Following Change of Control.  If this Agreement is terminated (or not renewed) (i) by the Company without Cause, or (ii) by Executive for Good Reason during the twelve (12) month period immediately following a Change of Control, and such termination (or nonrenewal) occurs following a Change of Control, Executive shall be entitled to receive his full Base Salary through the Date of Termination, the welfare benefits described in Section 3.2 for the Benefit Period and, not later than thirty (30) days after the Date of Termination, the Stay Bonus specified in Section 3.1(d) above and a lump sum severance payment equal to the product of two (2) times the sum of Executive’s then current Base Salary plus the arithmetic average of payments made to Executive pursuant to the Company’s Executive Bonus Compensation Program with respect to the three (3) fiscal years immediately preceding the fiscal year in which the Date of Termination occurs, provided; however, that (i) if the Executive’s Date of Termination is prior to the first anniversary of the Closing Date, the bonus payment to Executive in connection with the severance payment shall be Four Hundred Thousand Dollars ($400,000), or (ii) if the Executive’s Date of Termination is after the first anniversary of the Closing Date but prior to the third anniversary of the Closing Date, the bonus payment to Executive in connection with the severance payment shall be the arithmetic average of the annual bonus payments made to Executive for the fiscal year(s) in which Executive was employed as President and Chief Operating Officer by the Company.  In addition, to the extent not otherwise required under the Company’s Stock Option Plan or any award agreement with Executive, any unvested stock Restricted Stock Units and/or option awards theretofore awarded to Executive shall vest and become immediately exercisable in full.  In the event this Agreement is terminated (or not renewed) for any reason other than (i) by the Company without Cause, or (ii) by Executive for Good Reason, and such termination (or nonrenewal) occurs following a Change of Control, Executive shall not be entitled to the continuation of any compensation, bonuses or benefits provided hereunder, or any other payments following the Date of Termination, other than Base Salary earned through the Date of Termination.

 

(c)           At Executive’s option to be exercised by written notice to the Company, the severance benefits payable under this Section 4.5 shall be paid in accordance with the Company’s normal payroll procedures over the twelve (12) or twenty-four (24) month period, as the case may be, corresponding to the amount of the payments instead of in a lump sum.

 

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(d)           Anything to the contrary contained herein notwithstanding, as a condition to Executive receiving severance benefits to be paid pursuant to this Section 4.5, Executive shall execute and deliver to the Company a general release in form and substance reasonably satisfactory to the Company releasing the Company and its officers, directors, employees and agents from all liabilities, claims and obligations of any nature whatsoever, excepting only the Company’s obligations under this Agreement, under the Restricted Stock Unit Agreement and any Stock Option Award Agreements, and under any other employee benefit plans or programs in which Executive participates under Section 3.2 hereof, subject to all terms and conditions of such plans or programs and this Agreement.

 

(e)           Anything to the contrary contained herein notwithstanding, in the event that any payment or benefit received or to be received by Executive in connection with a Change in Control of the Company or termination of Executive’s employment (whether payable pursuant to the terms of this Agreement or any other plan, contract, agreement or arrangement with the Company, with any person whose actions result in a Change in Control of the Company or with any person constituting a member of an “affiliated group” as defined in Section 280G(d)(5) of the Internal Revenue Code of 1986, as amended (the “Code”), with the Company or with any person whose actions result in a Change in Control of the Company (collectively, the “Total Payments”) would not be deductible (in whole or in part) by the Company or such other person making such payment or providing such benefit solely as a result of Section 280G of the Code, the amount payable to Executive pursuant to this Section 4.5 shall be reduced until no portion of the Total Payments is not deductible solely as a result of Section 280G of the Code or such amount payable to Executive pursuant to Section 4.5 is reduced to zero.  For purposes of this limitation, (a) no portion of the Total Payments the receipt or enjoyment of which Executive shall have effectively waived in writing prior to the date of payment of the amount pursuant to Section 4.5 shall be taken into account; (b) no portion of the Total Payments shall be taken into account which in the opinion of tax counsel selected by the Company and reasonably acceptable to Executive does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code; (c) the payment pursuant to Section 4.5 shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in the immediately preceding clause (b)) in their entirety constitute reasonable compensation within the meaning of Section 280G(b)(4)(B) of the Code, in the opinion of the tax counsel referred to in the immediately preceding clause (b); and (d) the value of any other noncash benefit or of any deferred cash payment included in the Total Payments shall be determined by the Company’s independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

 

5.             Employment Covenants

 

5.1           Trade Secrets and Confidential Information.  Executive agrees that he shall, during the course of his 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,

 

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licensing, servicing, customer lists, records or financial information, manuals or Company strategy concerning its business, strategy or policies.  Executive agrees that all Confidential Information shall remain the sole and absolute property of the Company.  During the course of his employment, Executive 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 the Term, Executive 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 his employment with the Company, Executive 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 Executive.

 

5.2           Transfer of Inventions.  Executive, for himself and 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 Executive solely or jointly with others, at the Company’s expense or at the Company’s facilities, or at the Company’s request, or in the course of his employment, or based on knowledge or information obtained during the Term.  All such assignments shall include the patent rights in the United States and all foreign countries.  Notwithstanding the foregoing, this Section 5.2 shall not apply to any invention for which no equipment, supplies, facilities or trade secret information of the Company was used and which was developed entirely on Executive’s own time and (a) that 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 (b) that does not result from any work performed by Executive for the Company.

 

5.3           Exclusivity of Employment.  During the Term, Executive 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.

 

5.4           Covenant Not to Compete.  Executive agrees to be bound and abide by the following covenant not to compete:

 

(a)           Term and Scope.  During his employment with the Company and for a period of two (2) years after the Term, Executive will not render to any Conflicting Organization (as hereinafter defined), services, directly or indirectly, anywhere in the world in connection with any Conflicting Product, except that Executive may accept employment with a large Conflicting Organization whose business is diversified (and which has separate and distinct divisions) if Executive first certifies to the Board of Directors in writing that he has provided a copy of Section 5 of this Agreement to such prospective employer, that such prospective employer is a separate and distinct division of the Conflicting Organization and that Executive will not render services directly or indirectly in respect of any Conflicting Product (as hereinafter defined).

 

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Such two-year time period shall be tolled during any period that Executive is engaged in activity in violation of this covenant.

 

(b)           Judicial Action.  Executive and the Company agree that, if the period of time or the scope of the restrictive covenant not to compete contained in this Section 5.4 shall be adjudged unreasonable in any court proceeding, then the period of time and/or scope shall be reduced accordingly, so that this covenant 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 this Section 5.4 by Executive, the parties agree than in addition to all other remedies, the Company shall be entitled to equitable relief for specific performance, and Executive hereby agrees and acknowledges that the Company has no adequate remedy at law for the breach of the covenants contained herein.

 

(c)           Definitions.  For purposes of this 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 Executive’s employment with the Company terminates, that 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 Executive acquires Confidential Information (including without limitation, with respect to disease management, specialty pharmaceutical or specialty infusion services).

 

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.

 

5.5           Disclosure to Prospective Employers.  Executive will disclose to any prospective employer, prior to accepting employment, the existence of Section 5 of this Agreement.  The obligation imposed by this Section 5.5 shall terminate two (2) years after termination of Executive’s employment with the Company; provided, however, the running of such two-year period shall be tolled to the extent the covenant not to compete contained in Section 5.4(a) hereof is tolled.

 

5.6           Nonsolicitation.  For one (1) year after termination of employment with the Company for any reason, the Executive shall not directly or indirectly solicit or hire, or assist any other person in soliciting or hiring, any employee of the Company (as of the date of termination) or any person who, as of the date of termination, was in the process of being recruited by the Company or induce any such employee to terminate his or her employment with the Company.

 

6.             Miscellaneous

 

6.1           Notices.  Any notice required or permitted to be delivered hereunder shall be in writing and shall be deemed to be delivered on the earlier of (i) the date received, or (ii) the date of delivery, refusal or nondelivery indicated on the return receipt, if deposited in a United States Postal Service depository, postage prepaid, sent registered or certified mail, return receipt

 

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requested, addressed to the party to receive the same at the address of such party set forth below, or at such other address as may be designated in a notice delivered or mailed as herein provided.

 

To Company:

 

Curative Health Services, Inc.

 

 

150 Motor Parkway, 4th Floor

 

 

Hauppauge, NY  11788

 

 

Attention:  Joseph L. Feshbach

 

 

Title:  Chief Executive Officer

 

 

 

With Copy to:

 

Curative Health Services, Inc.

 

 

150 Motor Parkway, 4th Floor

 

 

Hauppauge, NY  11788

 

 

Attention:  Nancy F. Lanis

 

 

Title:

Executive Vice President, General Counsel

 

 

 

and Secretary

 

 

 

Executive:

 

Paul McConnell

 

 

110 Marlborough Street

 

 

Boston, MA  02116

 

6.2                                 Headings.  The headings of the articles and sections of this Agreement are inserted for convenience only and shall not be deemed a part of or affect the construction or interpretation of any provision hereof.

 

6.3           Modifications; Waiver.  No modification of any provision of this Agreement or waiver of any right or remedy herein provided shall be effective for any purpose unless specifically set forth in a writing signed by the party to be bound thereby.  No waiver of any right or remedy in respect of any occurrence or event on one occasion shall be deemed a waiver of such right or remedy in respect of such occurrence or event on any other occasion.

 

6.4           Entire Agreement.  This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and supersedes all other agreements, oral or written, heretofore made with respect thereto.

 

6.5           Severability.  Any provision of this Agreement prohibited by or unlawful or unenforceable under any applicable law of any jurisdiction shall as to such jurisdiction be ineffective without affecting any other provision hereof.  To the full extent, however, that the provisions of such applicable law may be waived, they are hereby waived, to the end that this Employment Agreement be deemed to be a valid and binding agreement enforceable in accordance with its terms.

 

6.6           Controlling 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 (excluding the conflicts of laws provisions thereof).

 

6.7           Assignments.  The Company shall have the right to assign this Agreement and to delegate all rights, duties and obligations hereunder to any entity that controls the Company, that the Company controls or that may be the result of the merger, consolidation, acquisition or

 

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reorganization of the Company and another entity.  Executive agrees that this Agreement is personal to him and his rights and interest hereunder may not be assigned, nor may his obligations and duties hereunder be delegated (except as to delegation in the normal course of operation of the Company), and any attempted assignment or delegation in violation of this provision shall be void.

 

6.8           Attorney Fees.  In the event of litigation between the parties, to enforce their respective rights under this Agreement, the prevailing party shall be entitled to receive from the nonprevailing party reimbursement of the prevailing party’s reasonable attorney’s fees and costs at all levels of trial and appeal.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of April 23, 2004.

 

 

 

CURATIVE HEALTH SERVICES, INC.

 

 

 

 

 

 

 

By:

/s/ Joseph L. Feshbach

 

 

  Name:  Joseph L. Feshbach

 

 

  Title:  Chairman and Chief
Executive Officer

 

 

 

 

 

 

 

/s/ Paul McConnell

 

Executive:  Paul McConnell

 

 

[Signature Page to Employment Agreement]

 

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EX-10.2 3 a04-5319_1ex10d2.htm EX-10.2

Exhibit 10.2

 

[EXECUTION COPY]

 

NONCOMPETITION AGREEMENT

 

THIS NONCOMPETITION AGREEMENT (this “Agreement”) dated as of April 23_, 2004, between Paul McConnell, a resident of the Commonwealth of Massachusetts (“Seller”), and Curative Health Services, Inc., a Minnesota corporation (“Buyer”).

 

WHEREAS, Seller is a shareholder of Critical Care Systems, Inc., a Delaware corporation (the “Company”); and

 

WHEREAS, Buyer has entered into an agreement with Seller and certain other persons, dated February 24, 2004 (the “Purchase Agreement”), pursuant to which Buyer will acquire all of the issued and outstanding shares of capital stock of the Company (the “Shares”) from Seller and the other shareholders of the Company listed on Schedule 1 to the Purchase Agreement ; and

 

WHEREAS, the Buyer is unwilling to proceed with the purchase of the Shares unless Seller agrees to refrain from engaging in any activities that are in competition with the activities being carried on by the Buyer, and it is a condition to the consummation of the transactions contemplated by the Purchase Agreement that the Buyer receive this Agreement from Seller.

 

NOW, THEREFORE, in consideration of the premises, the agreement of the Buyer to consummate the purchase of all Shares owned by Seller, the mutual agreements herein set forth and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:

 

1.             Noncompetition Commitment.

 

(a)           Agreement Not to Compete.  Seller agrees that for a period of four (4) years commencing on the date of this Agreement (the “Restricted Period”), Seller shall not, directly or indirectly, through an Affiliate or otherwise, either for Seller’s own benefit or for the benefit of any other person, firm, corporation, governmental or private entity, or any other entity of any kind, without the prior written consent of the Buyer, which consent may be withheld by the Buyer in its sole discretion, compete in any manner or capacity (e.g., through any form of ownership or as an advisor, principal, agent, partner, officer, director, employee, employer, consultant, member of any association or otherwise) with the business of the Company as conducted prior to the date hereof, including without limitation (i) any business directly or indirectly engaged in the provision of drugs and/or biopharmaceuticals for delivery to or use in the home or physician offices, of infusible or injectable therapy products and services, including without limitation, anti-infectives, TPN (Total Parenteral Nutrition) therapy, hemophilia clotting factor products, IVIG (Immune Globulin) therapy, Oncolytics/Chemotherapy medications, products and/or supplies or other disease management programs relating thereto for the treatment of chronic and other conditions, including, but not limited to, autoimmune and immune deficiency conditions, hemophilia and blood diseases, hepatitis C, rheumatoid arthritis, Cancer and HIV (collectively, “Specialty Pharmacy Operations”), and (ii) clinical services, reimbursement services, delivery services and date supply services in connection with Specialty Pharmacy Operations (collectively, “Competitive Activities”).  Notwithstanding the foregoing, the provision of services as an employee of the Company, Buyer or their Affiliates shall not be considered a Competitive Activity.  For the purpose of this Agreement, “Affiliate” of a person or entity means any person or entity controlled by, controlling or under common control with such

 



 

person or entity, or any member of the immediate family, including parents, spouse, children or siblings, of a person, provided, however, that Seller and the Company shall not be considered an Affiliate of each other.

 

(b)           Geographic Extent of Covenant.  The obligations of Seller under Section 1(a) shall apply in any state in which the Company is located, operates, provides or intents to provide products or services or does business in on the date hereof.  Seller hereby acknowledges that the geographic boundaries, scope of prohibited activities and the time duration of the provisions of this Section 1 are reasonable and are no broader than are necessary to protect the legitimate business interests of the Buyer including, without limitation, the ability of the Buyer to realize the benefit of its bargain and enjoy the goodwill of the Company.

 

(c)           Limitation on Covenant.  Ownership by Seller, as a passive investment, of less than 3% of the outstanding shares of capital stock of any corporation listed on a national securities exchange or publicly traded on any nationally recognized over-the-counter market shall not constitute a breach of this Section 1.

 

(d)           Indirect Competition.  Seller further agrees that during the term of this Agreement Seller will not, directly or indirectly, assist or encourage any other person in carrying out, directly or indirectly, any activity that would be prohibited by the foregoing provisions of this Section 1 if such activity were carried out by Seller, either directly or indirectly.  In particular, Seller agrees that Seller will not, directly or indirectly, induce any employee of the Buyer, its Affiliates or the Company to carry out, directly or indirectly, any such activity.

 

(e)           Noncompete Period Under the Employment Agreement.  The Buyer and Seller have entered into a certain Employment Agreement (the “Employment Agreement”), dated April 23, 2004, which Employment Agreement contains separate noncompete provisions.  The parties hereto agree that, should the noncompete provisions of this Agreement and of the Employment Agreement ever be simultaneously applicable to Seller, the period during which Seller shall be restricted from competing with the Buyer, its Affiliates and the Company shall be the later to expire of (i) the Restricted Period or (ii) the period during which Seller is restricted from competing under the Employment Agreement.

 

2.             Nonsolicitation.  During the Restricted Period, Seller shall not, directly or indirectly, through an Affiliate or otherwise, either for Seller’s own benefit or for the benefit of any other person, firm, corporation, governmental or private entity, or any other entity of any kind, without the prior written consent of the Buyer, which consent may be withheld by the Buyer in its sole discretion, (i) solicit, or attempt to solicit any officer, director, employee, consultant, contractor, agent, lessor, lessee, licensor, licensee, supplier of the Buyer, its Affiliates or the Company, to terminate, alter or lessen that party’s affiliation with the Buyer, its Affiliates or the Company, or to violate the terms of any agreement or understanding between such employee, consultant, contractor or other person and the Buyer, its Affiliates or the Company, or (ii) employ any person who as of the date of this Agreement is, or during the Restricted Period is or was (other than any person who shall have responded to an advertisement or other general solicitation during the Restricted Period), an employee of the Buyer, its Affiliates or the Company or (iii) solicit, divert, appropriate or induce or attempt to solicit, divert, appropriate or induce, directly or indirectly, any customer, supplier, distributor, licensee or other business relation of the Buyer, its Affiliates or the Company to cease doing business with the Buyer, its

 

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Affiliates or the Company, or in any way interfere with the relationship between any such customer, supplier, distributor, licensee or business relation and the Buyer, its Affiliates or the Company.

 

3.             Nondisparagement.  For a period of four (4) years, from the date of this Agreement, neither Seller nor any officers or directors of the Buyer shall say, publish or cause to be published or do anything that casts any other party hereto in an unfavorable light, or disparage or injure any other party’s goodwill, business reputation or relationship with existing or potential suppliers, vendors, customers, employees, contractors, investors or the financial community in general, or the goodwill or business reputation of such party, unless the furnishing of such information is required by law, in which case each party may make such disclosure only to the extent necessary, in the opinion of counsel for such party, to comply with such legal requirement.  In the event that a party is required by law to disclose any information pursuant to such legal requirement, such party will, as promptly as possible and in any event prior to the making of such disclosure, notify the other party of any such requirement and will cooperate with such other party in seeking a protective order or other means of protecting the confidentiality of any such information.  Nothing in this Section 3 shall be deemed to prohibit the other party from pursuing claims for a breach of this Agreement, the Purchase Agreement or any related document.

 

4.             Nondisclosure.  For the purpose of this Agreement, “Trade Secrets” means information or data of or about the Buyer, its Affiliates or the Company, including but not limited to technical or non-technical data, formulas, patterns, compilations, programs, devices, methods, business forms, techniques, drawings, processes, pricing information, financial data, financial plans, products plans, or lists of actual or potential customers, clients, distributees or licensees, referral sources, information of the Buyer, its Affiliates or the Company concerning finances, services, staff, contemplated acquisitions, marketing investigations and surveys that are not generally known to, or are not readily ascertainable by proper means by, other persons.  For the purpose of this Agreement, “Non-Public Information” means any confidential, proprietary business information or data belonging to or pertaining to the Buyer, its Affiliates or the Company that does not constitute a Trade Secret and that is not generally known by or available through legal means to the public, including, but not limited to, information regarding the Buyer’s, any of its Affiliate’s or the Company’s customers or prospective customers, acquisition targets, suppliers, manufacturers and distributors gained by Seller as a result of his or her employment with the Buyer, its Affiliates or the Company.  Seller hereby agrees that with regard to each item constituting all or any portion of the Trade Secrets and Non-Public Information, at all times during which such item continues to constitute a Trade Secret or Non-Public Information, respectively:

 

(a)           Seller shall hold in confidence all Trade Secrets and all Non-Public Information and will not, either directly or indirectly, use, sell, lend, lease, distribute, license, give, transfer, assign, show, disclose, disseminate, reproduce, copy, appropriate or otherwise communicate any Trade Secrets or Non-Public Information, without the prior written consent of the Buyer, unless the furnishing of such information is required by law, in which case Seller may make such disclosure only to the extent necessary, in the opinion of counsel for Seller, to comply with such legal requirement.  In the event that Seller is required by law to disclose any Trade Secret or Non-Public Information, Seller will, as promptly as possible and in any event prior to the making

 

3



 

of such disclosure, notify the Buyer of any such requirement and will cooperate with the Buyer in seeking a protective order or other means of protecting the confidentiality of any such Trade Secret or Non-Public Information; and

 

(b)           Seller shall immediately notify the Buyer of any unauthorized disclosure or use of any Trade Secrets or Non-Public Information of which the Seller becomes aware.  Seller shall assist the Buyer, to the extent necessary, in the procurement or any protection of the Buyer’s, any of its Affiliate’s or the Company’s rights to or in any of the Trade Secrets or Non-Public Information.

 

5.             Miscellaneous.

 

(a)           Severability and Blue Pencil Doctrine.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law. However, if the duration or geographical extent of, or business activities covered by, this Agreement are in excess of what is valid and enforceable under applicable law, then such provision shall be construed to cover only that duration, geographical extent or activities that are valid and enforceable.  Seller acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement is to be given the construction that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law.  Further, if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

(b)           Remedies.  Seller acknowledges that it would be difficult to fully compensate the Buyer for damages resulting from any breach by Seller of the provisions of this Agreement.  Accordingly, in the event of any actual or threatened breach of such provisions, the Buyer shall (in addition to any other remedies which it may have) be entitled to temporary and permanent injunctive relief to enforce such provisions, and such relief may be granted without the necessity of proving actual damages or the posting of a bond in connection therewith.  Seller further acknowledges that this Agreement constitutes a material inducement to the Buyer to complete the purchase of the all of the Shares owned by Seller and the Buyer will be relying on the enforceability of this Agreement in completing such acquisition.

 

(c)           Entire Agreement.  This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes any prior understandings, agreements or representations, written or oral, relating to the subject matter hereof.

 

(d)           Counterparts.  This Agreement may be executed in separate counterparts, each of which will be an original and all of which taken together shall constitute one and the same agreement, and any party hereto may execute this Agreement by signing any such counterpart.

 

(e)           Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives and, to the extent permitted by subsection (f) of this Section 5, successors and assigns.

 

4



 

(f)            Assignment.  Seller may not assign this Agreement.  The rights of the Buyer under this Agreement may be assigned to any Affiliate of the Buyer or to any third party that purchases all of the outstanding equity of the Company or substantially all of the assets of the Company from the Buyer.

 

(g)           Modification, Amendment, Waiver or Termination.  No provision of this Agreement may be modified, amended, waived or terminated except by an instrument in writing signed by the parties to this Agreement.  No course of dealing between the parties will modify, amend, waive or terminate any provision of this Agreement or any rights or obligations of any party under or by reason of this Agreement.  No delay on the part of the Buyer in exercising any right hereunder shall operate as a waiver of such right.  No waiver, express or implied, by the Buyer of any right of the Buyer, or of any breach by Seller, shall constitute a waiver of any other right or the Buyer or of any other breach by Seller.

 

(h)           Notices.  All notices and other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given (a) when personally delivered, (b) when receipt is acknowledged, if sent by facsimile, telecopy or other electronic transmission device; provided, however, that if receipt is acknowledged after normal business hours of the recipient, notice shall be deemed to have been given on the next business day, (c) one day after deposit with a nationally recognized overnight courier, specifying next day delivery or (d) three days after being sent by registered or certified mail, postage prepaid, return receipt requested.  Notices, demands and communications to parties will, unless another address is specified in writing, be sent to the address indicated:

 

if to the Buyer:

 

Curative Health Services, Inc.

150 Motor Parkway

Hauppauge, New York 11788

Phone:    (631) 232-7016

Fax:         (631) 233-8107

Attention:  Nancy Lanis

Title:  Executive Vice President, General Counsel & Secretary

 

if to the Seller:

 

Paul McConnell

110 Marlborough Street

Boston, Massachusetts 02116

 

(i)            Headings.  The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

 

(j)            Governing LawALL MATTERS RELATING TO THE INTERPRETATION, CONSTRUCTION, VALIDITY AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW PROVISIONS THEREOF.

 

5



 

(k)           Third-Party Benefit.  Nothing in this Agreement, express or implied, is intended to confer upon any other person any rights, remedies, obligations or liabilities of any nature whatsoever.

 

(l)            Jurisdiction and VenueEACH PARTY (i) CONSENTS TO SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF ANY FEDERAL COURT LOCATED IN THE STATE OF NEW YORK, OR ANY NEW YORK STATE COURT LOCATED IN SUFFOLK COUNTY, IF ANY DISPUTE ARISES OUT OF THIS AGREEMENT, (ii) AGREES THAT IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT AND (iii) AGREES THAT IT WILL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT IN ANY COURT OTHER THAN SUCH A FEDERAL OR STATE COURT SITTING IN THE STATE OF NEW YORK OR IN SUFFOLK COUNTY.

 

(m)          Waiver of Jury TrialEACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 5(m).

 

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth in the first paragraph.

 

 

 

CURATIVE HEALTH SERVICES, INC.

 

 

 

 

 

By:

  /s/ Joseph Feshbach

 

 

Name: Joseph Feshbach

 

Title: Chief Executive Officer

 

 

 

 

 

/s/ Paul McConnell

 

 

Paul McConnell

 

 

[Signature Page to Noncompetition Agreement]

 



 EX-10.3 4 a04-5319_1ex10d3.htm EX-10.3

Exhibit 10.3

 

RESTRICTED STOCK UNIT AWARD AGREEMENT

 

THIS AGREEMENT, dated as of April 23, 2004, is between CURATIVE HEALTH SERVICES, INC., a Minnesota corporation (together with any of its subsidiaries, the “Company”), and Paul McConnell, an individual resident of the Commonwealth of Massachusetts (“Employee”).

 

RECITALS

 

A.            The Company wishes to grant to Employee, effective as of the date of this Agreement, an award of restricted stock units of the Company’s common stock, par value $.01 per share (the “Common Stock”), on the terms and subject to the conditions set forth in this Agreement.

 

B.            Employee desires to accept such grant.

 

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto hereby agree as follows:

 

1.             Definitions.  As used in this Agreement, the following terms have the meanings set forth below:

 

“Award” has the meaning ascribed to such term in Section 2 hereof.

 

“Board” means the Board of Directors of the Company.

 

“Cause” has the meaning ascribed to such term in the Employment Agreement.

 

“Change In Control” has the meaning ascribed to such term in the Employment Agreement.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Common Stock” has the meaning specified in Recital A hereof.

 

“Employment Agreement” means the Employment Agreement, dated April 23, 2004, between the Company and Employee.

 

“Fair Market Value” of a share of Common Stock on any date shall be the closing price of the Common Stock on the date of calculation (or on the last preceding trading date if Common Stock was not traded on such date) if the Common Stock is readily tradable on a national securities exchange or other market system, and, if the Common Stock is not so readily tradable, Fair Market Value shall mean the amount determined in good faith by the Board as the Fair Market Value of the Common Stock.

 

“Month” shall mean the period from the 23rd of each calendar month to the 22nd of the next calendar month.

 



 

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

 

“Restricted Stock Units” means the right to receive Vested Shares upon their vesting in accordance with Section 3 below.

 

“Shares” means, collectively, the shares of Common Stock subject to the Award, whether or not such shares are Vested Shares.

 

“Vested Shares” means the Shares with respect to which the Restricted Stock Units have vested at any particular time.

 

2.             Award.  The Company, effective as of the date of this Agreement, hereby grants to Employee a restricted stock unit award for the number of shares of Restricted Stock Units equal to $2,000,000 divided by the Fair Market Value of one share of Common Stock on the date of this Agreement (the “Award”), subject to the terms and conditions set forth herein. The Restricted Stock Units granted hereunder will be recorded on the books and records of the Company until issued and delivered in accordance with this Agreement. The Company further covenants that it will file a registration statement on Form S-8 to register the issuance of the Restricted Stock Units and upon vesting, the Vested Shares, within 30 days of the date of this Agreement and shall maintain the effectiveness of such registration statement until the third anniversary of the date of this Agreement.

 

3.             Vesting.

 

(a)           Subject to the terms and conditions of this Agreement, all of the Restricted Stock Units awarded hereunder to Employee shall vest and become the right to receive Common Stock, in their entirety, on the third anniversary of this Agreement, if Employee remains continuously employed by the Company until such date. If the Employee is terminated, whether voluntarily or involuntarily, prior to vesting of any Restricted Stock Units, any units remaining unvested as of the date of termination will be forfeited and the Employee will retain no rights with respect to the forfeited units.

 

(b)           Notwithstanding the vesting provisions contained in Section 3(a) above, but subject to the other terms and conditions set forth herein, if Employee has been continuously employed by the Company until the date of a Change In Control of the Company, all of the Restricted Stock Units shall immediately vest on the date of such Change In Control.

 

(c)           In the event of the disability (as described in Section 4.2 of the Employment Agreement), termination without Cause or death of Employee, if Employee has been continuously employed by the Company until the date of such disability, termination or death, Employee or his estate shall become immediately vested, as of the date of such disability, termination or death, in a pro rata portion of the Restricted Stock Units determined by multiplying (i) the total number of Restricted Stock Units by (ii) a fraction of which (A) the numerator shall be the number of full Months during which Employee was an employee after the date hereof and (B) the denominator shall be thirty six (36).

 

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(d)           Except as provided in Section 3(c), if Employee ceases to be an employee for any reason prior to the vesting of the Restricted Stock Units pursuant to Sections 3(a) and 3(b) hereof, Employee’s rights to all of the Restricted Stock Units (the underlying right to receive Common Stock) not vested on the date that Employee ceases to be an employee shall be immediately and irrevocably forfeited.

 

4.             Additional Restriction on Transfer of Restricted Stock Units.

 

The Restricted Stock Units cannot be sold, assigned, transferred, gifted, pledged, hypothecated, or in any manner encumbered or disposed of at any time prior to delivery of the Common Stock underlying the Restricted Stock Units after the Restricted Stock Units have been vested pursuant to Section 3 above.

 

5.             Issuance and Custody of Certificate; Representations of Employee.

 

(a)           Employee hereby represents and warrants to the Company that the Restricted Stock Units and the underlying Shares are being acquired for investment purposes only and not with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended.  No certificate representing Vested Shares shall be delivered to Employee unless and until the Company and/or Employee shall have complied with all applicable federal or state registration, listing and/or qualification requirements and all other requirements of law or of any regulatory agencies having jurisdiction.

 

(b)           Subject to the restrictions in this Section 5, upon vesting of the Restricted Stock Units, the Company shall promptly cause to be issued and delivered to Employee a certificate or certificates evidencing such Vested Shares, free of any restrictive legends, and shall cause such certificate or certificates to be delivered to Employee or Employee’s legal representatives, beneficiaries or heirs.

 

(c)           The issuance of any Common Stock in accordance with this Restricted Stock Unit award shall only be effective at such time that the sale or issuance of Common Stock pursuant to this Agreement will not violate any state or federal securities or other laws.

 

(d)           At any time after the vesting of the Restricted Stock Units and prior to the issuance of the Vested Shares, if the issuance of the Vested Shares to the Employee is prohibited due to limitations under this Section 5, the Company shall use its commercial best efforts to remove such limitations, unless such limitations relate solely to Employee’s personal situation. If such limitations relate solely to Employee’s personal situation, the Company will use its commercial best efforts to cooperate with the Employee in resolving such limitation.

 

6.             Rights as Shareholder.  Prior to the Restricted Stock Units vesting and Employee receiving his shares of Common Stock underlying the Restricted Stock Units pursuant to Section 5 above, Employee shall not have ownership or rights of ownership of any Common Stock underlying the Restricted Stock Units awarded hereunder.  However, Employee shall be entitled to receive dividend equivalents on the Restricted Stock Units awarded, whether vested or unvested, when and if dividends are declared by the Board on the Common Stock, in an amount of cash per share equal to and on the same payment dates as dividends paid to other common stockholders of the Company. Dividend equivalents paid before delivery of the Vested Shares

 

3



 

will be treated as compensation income for tax purposes and will be subject to income and payroll tax withholding by the Company.

 

7.             Distributions and Adjustments.

 

(a)           If all or any portion of the Restricted Stock Units vest in Employee subsequent to any change in the number or character of the shares of Common Stock (through merger, consolidation, reorganization, recapitalization, stock dividend or otherwise), Employee shall then receive upon such vesting the number and type of securities or other consideration which Employee would have received if the Restricted Stock Units had vested and the Vested Shares had been delivered prior to the event changing the number or character of outstanding shares of Common Stock.

 

8.             Taxes.  In order to provide the Company with the opportunity to claim the benefit of any income tax deduction which may be available to it in connection with this restricted stock unit award, and in order to comply with all applicable federal or state tax laws or regulations, the Company may take such action as it deems appropriate to insure that, if necessary, all applicable federal or state income and social security taxes are withheld or collected from Employee.

 

9.             Employee’s Employment.  Nothing in this Agreement shall confer upon Employee any right to continue in the employ of the Company or any of its subsidiaries or interfere with the right of the Company or its subsidiaries, as the case may be, to terminate Employee’s employment or to increase or decrease Employee’s compensation at any time.

 

10.           Notices.  All notices, claims, certificates, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given and delivered if personally delivered or if sent by nationally recognized overnight courier, by facsimile or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows:

 

(a)           If to the Company, to it at:

 

Curative Health Services, Inc.

150 Motor Parkway, 4th Floor

Hauppauge, NY  11788

Attention:        Joseph L. Feshbach

Chief Executive Officer

Facsimile:        (650) 364-7430

 

Copy to:

 

Curative Health Services, Inc.

150 Motor Parkway, 4th Floor

Hauppauge, NY  11788

Attention:        Nancy L. Lanis

Executive Vice President, General Counsel

and Secretary

Facsimile:        (631) 233-8106

 

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(b)           If to Employee, to him at such Employee’s address as most recently supplied to the Company and set forth in the Company’s records; or

 

(c)           to such other address as the party to whom notice is to be given may have furnished to the other party in writing in accordance herewith.

 

Any such notice or communication shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery (or if such date is not a business day, on the next business day), (ii) in the case of nationally-recognized overnight courier, on the next business day after the date sent, (iii) in the case of facsimile transmission, when received (or if not sent on a business day, on the next business day after the date sent), and (iv) in the case of mailing, on the third business day following the date on which the piece of mail containing such communication is posted.

 

11.           Waiver of Breach. The waiver by either party of a breach of any provision of this Agreement must be in writing and shall not operate or be construed as a waiver of any other or subsequent breach.

 

12.           Undertaking.  Both parties hereby agree to take whatever additional actions and execute whatever additional documents either party may in their reasonable judgment deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on the other party under the provisions of this Agreement.

 

13.           Amendment.  This Agreement may not be amended, terminated, suspended, or otherwise modified except in a written instrument executed by both parties.

 

14.           Remedies.  Both parties shall be entitled to enforce their rights under this Agreement specifically, to recover damages and costs by reason of any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties agree and acknowledge that money damages would not be an adequate remedy for certain breaches of the provisions of this Agreement and that the either party may, in its sole discretion, and without affecting any other rights it may have at law, apply to any court of competent jurisdiction for specific performance and/or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement.

 

15.           Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York (without giving effect to principles of conflicts of laws).

 

16.           Counterparts.  This Agreement may be executed in one or more counterparts, and each such counterpart shall be deemed to be an original, but all such counterparts together shall constitute but one agreement.

 

17.           Entire Agreement.  This Agreement (and the other writings incorporated by reference herein, including the Employment Agreement) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior or

 

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contemporaneous written or oral negotiations, commitments, representations, and agreements with respect thereto.

 

18.           Severability.  In the event any one or more of the provisions of this Agreement should be held invalid, illegal or unenforceable in any respect in any jurisdiction, such provision or provisions shall be automatically deemed amended, but only to the extent necessary to render such provision or provisions valid, legal and enforceable in such jurisdiction, and the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day and year first above written.

 

 

 

CURATIVE HEALTH SERVICES, INC,

 

 

 

 

 

 

 

By:

/s/ Joseph Feshbach

 

 

Name:  Joseph Feshbach

 

 

Title:  Chief Executive Officer

 

 

 

 

 

 

 

 

  /s/ Paul F. McConnell

 

 

 

Paul F. McConnell

 

 

 

EMPLOYEE

 

 

 

 

 

 

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EXHIBIT A
Restricted Stock Unit
Award Agreement

 

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