SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Soliciting Material Pursuant to Section 240.14a-12
CURATIVE HEALTH SERVICES, INC.
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[CURATIVE LETTERHEAD]
April 30, 2004
Dear Fellow Shareholders:
On behalf of the Board of Directors and management, I cordially invite you to
attend the Annual Meeting of Shareholders of Curative Health Services, Inc. to
be held at 10:00 a.m., Eastern Standard time on Wednesday, June 2, 2004 at the
Company's corporate offices located at 150 Motor Parkway, Hauppauge, New York.
The notice of meeting and proxy statement accompanying this letter describe the
specific matters to be considered and voted upon at the Annual Meeting.
In addition to the specific matters to be acted upon, there will be a report on
the progress of the Company and an opportunity for questions of general interest
to the shareholders.
Please give this information your careful consideration. It is important that
your shares be represented at the meeting. Whether or not you plan to attend in
person, you are requested to vote, sign, date and promptly return the enclosed
proxy in the envelope provided.
All the best,
/s/ Joseph L. Feshbach
------------------------------------
Joseph L. Feshbach
Chairman and Chief Executive Officer
CURATIVE HEALTH SERVICES, INC.
CORPORATE HEADQUARTERS
150 MOTOR PARKWAY
HAUPPAUGE, NY 11788
April 30, 2004
To Holders of the Common Stock of
CURATIVE HEALTH SERVICES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The 2004 Annual Meeting of Shareholders of Curative Health Services,
Inc. will be held on Wednesday, June 2, 2004 at 10:00 a.m., Eastern Standard
time, at the Company's corporate offices located at 150 Motor Parkway,
Hauppauge, New York 11788, for the following purposes:
(1) To nominate and elect nine (9) directors for terms expiring
at the 2005 Annual Meeting of Shareholders and until their
successors are duly elected and qualified;
(2) To ratify the appointment of Ernst & Young LLP as the
Company's independent auditors; and
(3) To transact such other business as may properly come before
the meeting.
It is important that your stock be represented at the meeting
regardless of the number of shares that you hold. Whether or not you plan to
attend the meeting in person, please complete, sign and date the enclosed proxy
and return it promptly in the accompanying postage-paid envelope.
By Order of the Board of Directors
/s/ Nancy F. Lanis
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Secretary
CURATIVE HEALTH SERVICES INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Curative Health Services, Inc. (the
"Company"), for use at the Annual Meeting of Shareholders (the "Meeting") to be
held Wednesday, June 2, 2004 at 10:00 a.m., New York time, at the Company's
corporate offices located at 150 Motor Parkway, Hauppauge, New York 11788, and
any adjournment thereof, for the purposes set forth in the Notice of Meeting.
The shares represented by proxies in the form solicited will be voted in the
manner indicated by a shareholder. In the absence of instructions, the proxies
will be voted for the election of the nominees named in this Proxy Statement and
for the ratification of the appointment of the Company's independent auditors,
and in accordance with the judgment of the persons named in the proxy as to any
other matters that properly come before the Meeting.
The mailing address of the executive office of the Company is 150 Motor
Parkway, Hauppauge, New York 11788. This Proxy Statement and the enclosed proxy
are being furnished to shareholders of the Company on or about April 30, 2004.
Returning your completed proxy will not prevent you from voting in
person at the Meeting should you be present and wish to do so. You may revoke
your proxy any time before the exercise thereof by written notice to the
Secretary of the Company, by the return of a new proxy to the Company, or by
voting in person at the Meeting. Shares voted as abstentions on any matter (or a
"withhold vote for" as to directors) will be counted as shares that are present
and entitled to vote for purposes of determining the presence of a quorum at the
Meeting and as unvoted, although present and entitled to vote, for purposes of
determining the approval of each matter as to which the shareholder has
abstained. If a broker submits a proxy which indicates that the broker does not
have discretionary authority as to certain shares to vote on one or more
matters, those shares will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum at the Meeting, but
will not be considered as present and entitled to vote with respect to such
matters.
Shareholders of record at the close of business on April 21, 2004 are
entitled to notice of and to vote at the Meeting. The issued and outstanding
capital stock of the Company entitled to vote as of April 21, 2004 consisted of
13,180,728 shares of common stock, $.01 par value per share (the "Common
Stock"). Each issued and outstanding share of Common Stock is entitled to one
vote.
A copy of the Company's Annual Report for the year ended December 31,
2003 is being furnished to each shareholder with this Proxy Statement.
PROPOSAL #1
ELECTION OF DIRECTORS
Section 3.02 of the Company's bylaws provides that the number of
members of the Board of Directors shall be six or such other number as shall be
determined from time to time by resolution of the Board of Directors or the
shareholders. The Board of Directors has by resolution set the number of
directors at nine.
The Company's bylaws provide that nominations of persons for election
as directors are to be made at a meeting of shareholders called for that
purpose, whether at the direction of the Board of
Directors or by a shareholder as provided in the bylaws. Nine directors are to
be elected at the Meeting, each to hold office until the next Annual Meeting of
Shareholders and until his successor is elected and qualified. The affirmative
vote of a majority of the shares of Common Stock present in person or by proxy
and eligible to vote at the Meeting is required to elect a nominee as director.
The persons named in the accompanying proxy will vote for the election of the
nominees described herein, unless authority to vote is withheld. The Board of
Directors has been informed that each of the nominees has consented to being
named as a nominee and is willing to serve as a director if elected; however, if
any nominee should decline or become unable to serve as a director for any
reason, the proxy may be voted for such other person as the proxies shall, in
their discretion, determine.
The following table lists the persons to be nominated for election as
directors and their offices in the Company, if any:
NAME POSITION
-------------------- -------------------------------------------------
Joseph L. Feshbach Chairman of the Board and Chief Executive Officer
Paul S. Auerbach, MD Director
Daniel E. Berce Director
Lawrence P. English Director
Timothy I. Maudlin Director
Gerard Moufflet Director
Paul F. McConnell Director, President and Chief Operating Officer
Peter M. DeComo Director
John C. Prior Director, President -- Specialty Healthcare Services
Set forth below is certain information about each nominee for director
of the Company, including each such person's name, age and principal occupations
for the last five years.
Joseph L. Feshbach, 50, is the Chairman of the Board and Chief
Executive Officer of the Company. Since February 2000, Mr. Feshbach has served
as a director of the Company and in November 2000 he was named Chairman of the
Board. In March 2001 Mr. Feshbach was named Executive Chairman. Mr. Feshbach
served as Interim Chief Executive Officer from March 2002 through July 2002. In
July 2002, Mr. Feshbach was elected Chief Executive Officer and Chairman. From
December 1998 to March 2002, Mr. Feshbach was a private investor. From 1983 to
1998, Mr. Feshbach was a co-founder and General Partner of Feshbach Brothers, a
money management and brokerage firm. During his 15 year career at Feshbach
Brothers, Mr. Feshbach was responsible for both research and capital formation.
After retiring from Feshbach Brothers in 1998, Mr. Feshbach invested his
family's capital primarily in publicly traded equities. Mr. Feshbach is a
director of QuadraMed Corporation, a publicly traded healthcare information
technology company and is Chairman of its Strategy Committee.
Paul S. Auerbach, M.D., M.S., 53, has been a director of the Company
since February 2000. Since August, 2003, Dr. Auerbach has served as Chief
Operating Officer of KAI Pharmaceuticals, Inc., a private biotechnology company.
From October 1999 to 2003, Dr. Auerbach served as a Venture Partner with Delphi
Ventures, a venture capital firm. From 1997 until 1999, Dr. Auerbach served as
Chief Operating Officer of MedAmerica, a private company, and from 1995 to 1996
as Chief Operating Officer of Sterling Healthcare Group, a publicly traded
company. Prior to that, Dr. Auerbach was Professor and Chief of Emergency
Medicine at Stanford University Medical Center and, prior to that, held the same
positions at Vanderbilt University Medical Center.
Daniel E. Berce, 50, has been a director of the Company since February
2000. Since April 2003, Mr. Berce has served as President of AmeriCredit Corp.,
a publicly traded finance company, and since
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1990 Mr. Berce has served as a director of AmeriCredit Corp. From November 1996
until April 2003, he served as Vice Chairman and Chief Financial Officer of
AmeriCredit Corp. From November 1994 until November 1996, Mr. Berce served as
Executive Vice President, Chief Financial Officer and Treasurer of AmeriCredit
Corp. and from May 1990 until November 1994, he served as Vice President, Chief
Financial Officer and Treasurer of the Company. Prior to joining AmeriCredit, he
was a partner with Coopers & Lybrand for four years and was with such firm for
fourteen years. Mr. Berce is a certified public accountant. Mr. Berce is a
director of AZZ Incorporated, a publicly held company that manufactures
specialty electronic equipment and provides galvanizing services to the steel
fabrication industry.
Lawrence P. English, 63, has been a director of the Company since May
2000. Since June 2000, Mr. English has been the Chief Executive Officer and a
director of QuadraMed Corporation, a publicly traded healthcare information
technology company. In January 2001, Mr. English was appointed Chairman of the
Board of QuadraMed. Mr. English was the Founder and Chief Executive Officer of
Lawrence P. English, Inc., a private turn-around management firm, from January
1999 to June 2000. He was the Chairman of the Board and Chief Executive Officer
of Aesthetics Medical Management, Inc., a physician practice management company
for plastic surgeons, from July 1997 to January 1999. Until he resigned in
September 2002, he served as Director of Clarent Hospital Corporation, formerly
Paracelsus Healthcare Corporation, since May 1999 and as the Non-Executive
Chairman of the Board since February 2000. From 1992 to 1996, Mr. English was
President of CIGNA HealthCare, one of the nation's largest health maintenance
organizations. Prior to 1992, Mr. English held numerous senior level positions
at CIGNA. Mr. English possesses a Bachelor of Arts degree from Rutgers
University and a Masters of Business Administration from George Washington
University, and is a graduate of Harvard Business School's Advanced Management
Program.
Timothy I. Maudlin, 53, a co-founder of the Company, has been a
director of the Company since 1984, and served as Secretary of the Company from
November 1984 to December 1990. Mr. Maudlin served as President of the Company
from October 1985 through December 1986. Mr. Maudlin has been the Managing
General Partner of Medical Innovation Partners, a venture capital firm, since
1988 and since 1982 he has been an officer of the affiliated management company
of Medical Innovation Partners. Mr. Maudlin is a certified public accountant and
has served as an advisory principal of Venturi Group LLC since October 2001.
Previously, he served as a principal of Venturi Group LLC from 1999 to October
2001 and as Chief Financial Officer of Venturi Group LLC from October 2001 into
2002.
Gerard Moufflet, 60, has been a director of the Company since November
1989. Mr. Moufflet is the Chief Executive Officer and founder of Acceleration
International Corp., a private equity firm focused on healthcare investments in
Europe and the United States. From 1989 to December 2001, Mr. Moufflet served as
Managing Director of Advent International Corporation, a venture capital firm.
Prior to joining Advent, Mr. Moufflet served as Corporate Vice President in
charge of various Baxter International European operations and spent 17 years in
marketing, financial and general management positions with that company's
European businesses. Mr. Moufflet is a director of Serologicals Corporation, a
publicly traded company and global provider of biological products and enabling
technologies, and American Dental Partners, Inc., a publicly traded company and
one of the nation's leading business partners to dental groups. Mr. Moufflet is
also the Chairman of the Board of the Board of Fellows of the Harvard Dental
School of Medicine and the Chairman of the French Library and Cultural Center of
Boston.
Paul F. McConnell, 50, a founder of Critical Care Systems in 1991, has
served as a Director and as President and Chief Operating Officer of the Company
following the acquisition of Critical Care Systems by the Company in April 2004.
It is anticipated that within 18 months, Mr. McConnell will be offered the
position of Chief Executive Officer of the Company, subject to the approval of
the board of directors of the Company. Mr. McConnell has more than 25 years of
healthcare experience, primarily in
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the home infusion industry. Previously, Mr. McConnell held management positions
with Critical Care America, including Vice President of New Market Development.
Mr. McConnell was also a founder of the national home infusion therapy company,
Chartwell Home Therapies, where he managed sales, marketing and operations.
Prior to this, he held sales management and hospital sales positions in the
pharmaceutical industry.
Peter M. DeComo, 56, has been a director of the Company since January
2004. Mr. DeComo was a co-founder of Renal Solutions, Inc. and currently serves
as its Chairman and Chief Executive Officer. Previously, Mr. DeComo was the
Chief Operating Officer of HemoTherapies Inc., the license partner to
HemoCleanse Inc. for the only U.S. Food and Drug Administration (FDA) cleared
Liver Dialysis System. Prior to this, Mr. DeComo was Senior Vice President of
the Infusion Therapy/Biotech Operating Division for Olsten Health Services, now
a part of the specialty pharmacy business of Accredo Health, a $600 million
specialty pharmacy provider. Mr. DeComo has held numerous senior level positions
in the health care industry specializing in the provision of specialized
products and services to patients in the home setting. He is affiliated with a
number of healthcare related organizations and advocacy groups.
John Prior, 50, was named President of the Company's Specialty
Healthcare Services business unit, effective March 15, 2001, and has been a
director of the Company since April 16, 2001. He has served as Executive Vice
President and General Manager from September 2000 to March 2001, and he served
as Interim Chief Executive Officer from March 2001 to September 2001. From
August 1995 until September 2000, Mr. Prior served as Senior Vice President,
Finance and Chief Financial Officer. From February 1991 to August 1995, Mr.
Prior served as Vice President of Finance and has been Secretary from October
1993 until September 2001. From July 1987 to February 1991 he served as
Controller of the Company. From 1979 to 1987, Mr. Prior held a variety of
positions in the Health Care Auditing/Consulting Group of KPMG Peat Marwick and
was promoted to Senior Manager in 1984. He is a Certified Public Accountant and
a member of the American Institute of Certified Public Accountants.
CORPORATE GOVERNANCE AND COMMITTEES OF THE BOARD OF DIRECTORS
Corporate governance encompasses the internal policies and practices by
which the Company is operated and controlled on behalf of its shareholders.
Corporate governance at the Company is designed to drive superior performance by
making the most effective use of the collective skills and experience of
directors. The Company believes that a good system of corporate governance
enables it to maintain the confidence of investors and is a source of
competitive advantage.
The Board of Directors is responsible for the control and direction of
the Company. The role of the Board of Directors is to effectively govern the
affairs of the Company for the benefit of its shareholders and, to the extent
appropriate under Minnesota law, other constituencies, such as the Company's
employees, customers, suppliers and the communities in which it does business.
The Board strives to ensure success and continuity of the Company's business
through the election of qualified management. It is also responsible for
ensuring that the Company's activities are conducted in a responsible and
ethical manner.
Shareholders who desire to communicate directly with the Board of
Directors should provide their communication to the Board in writing sent to the
Corporate Secretary at the principal executive offices of the Company at 150
Motor Parkway, Hauppauge, NY 11788. The Corporation Secretary will forward such
communication to the chair of the Governance Committee, or if principally
related to financial or accounting matters or internal controls, to the chair of
the Audit Committee.
The Board of Directors currently consists of nine directors, six of
whom are independent, non-employee directors as independence is defined in Rule
4200(a)(14) of the NASDAQ Marketplace Rules. All of the Company's directors
stand for re-election every year. At each regularly scheduled Board
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meeting, the non-employee directors meet in executive session without any
members of management present.
The Board of Directors has five standing committees: an Executive
Committee, an Audit Committee, a Compensation Committee, a Governance Committee
and a Regulatory and Compliance Committee. Each of these committees operates
under a written charter adopted by the Board of Directors. Under their
respective charters, each of the Audit Committee, the Compensation Committee,
the Governance Committee and the Regulatory and Compliance Committee is
authorized to retain and consult with external advisors, consultants and counsel
as needed to fulfill its responsibilities. Each of these committees maintains
written minutes of its meetings and regularly reports to the Board regarding its
determinations and recommendations on matters within the scope of its duties and
responsibilities.
EXECUTIVE COMMITTEE. The members of the Executive Committee are Messrs.
English (as Chairman beginning in August 2002), and Feshbach (as Chairman until
August 2002), Moufflet and Berce. The Executive Committee advises the Board
regarding strategic, operational and legal matters, as appropriate from time to
time. The Executive Committee may also exercise the authority of the Board
between Board meetings when (i) the Chairman of the Board determines that it is
not practical to defer action until a special or regular meeting of the Board,
or (ii) the Board specifically has authorized the action being taken, or (iii)
the matter being acted upon is administrative in nature, is not otherwise the
responsibility of another standing committee of the Board and does not merit
attention by the full Board. In 2003, the Executive Committee met five times.
AUDIT COMMITTEE. The members of the Audit Committee are Messrs. Berce
(as Chairman), English and Maudlin, each of whom is an "independent director" as
defined in Rule 4200(a)(14) of the NASDAQ Marketplace Rules. Messrs. Berce and
Maudlin are "financial experts" as the term is defined in the Securities and
Exchange Commission rules. A copy of the charter of the Audit Committee, as
amended in April 2004, is attached as Appendix A to this proxy statement. The
Audit Committee assists the Board of Directors in the oversight of the integrity
of the Company's financial statements; the Company's compliance with financial
reporting and other legal and regulatory reporting requirements; the
independence, qualifications and performance of the Company's internal and
external auditors; and the adequacy of the Company's internal controls. In
performing these functions, the Audit Committee meets periodically with
management and the independent auditors (including sessions without management
present). In addition, as provided in its charter, the Audit Committee selects
and engages the independent auditors for the Company, and approves in advance
any engagement of the independent auditors to provide audit or non-audit
services to the Company. In 2003, the Audit Committee met six times.
COMPENSATION COMMITTEE. In 2003, the members of the Compensation
Committee (formerly known as the Compensation and Stock Option Committee)
consisted of Messrs. Berce (as Chairman), Maudlin and Auerbach. All the members
of the Compensation Committee, are "outside directors" (as defined with respect
to Section 162(m) of the Internal Revenue Code of 1986, as amended), and are
"non-employee directors" (as defined by Rule 16b-3 under the Securities Exchange
Act of 1934, as amended). The Compensation Committee has oversight
responsibility for director and executive compensation, benefits and perquisites
policies and strategies of the Company; reviews and determines all forms of
compensation to be provided to the executive officers of the Company, including
equity compensation, benefits and perquisites; recommends to the Board of
Directors forms of compensation to be provided to the directors of the Company;
reviews and provides general guidance with respect to the bonus and equity
compensation of employees; and makes all determinations regarding the
administration of the Company's equity compensation plans and awards. In 2003,
the Compensation Committee met two times.
GOVERNANCE COMMITTEE. The members of the Governance Committee are
Messrs. Maudlin (as Chairman), Auerbach and Moufflet. All the members of the
Governance Committee are non-employee
5
directors and are independent, as defined in Rule 4200(a)(14) of the NASDAQ
Marketplace Rules. The charter of the Governance Committee, as amended in
February 2004, as well as the Company's Corporate Governance Guidelines, are
available on the Company's website at www.curative.com. The Governance Committee
establishes the evaluation procedure and minimum qualifications of the members
of the Board and its committees; identifies and recommends nominees for the
Board and its committees, oversees succession planning for the Company's Chief
Executive Officer; and develops, recommends to the Board and oversees corporate
governance principles applicable to the Company. The Governance Committee also
monitors compliance with the Company's corporate governance principles and
code(s) of ethics for the chief executive and senior financial officers, and
reviews and addresses conflicts of interest of directors, the chief executive
officer and other Board-appointed officers.
The Governance Committee, in consultation with the Chairman and CEO,
considers and makes recommendations to the Board concerning the appropriate size
and needs of the Board. The Governance Committee considers candidates to fill
new positions created by expansion and vacancies that occur from resignations or
any other reason. The Governance Committee will consider nominees for director
recommended by a director, chief executive or other officer, third party search
firm or shareholders. Candidates are selected for their character, judgment,
business experience and acumen, and high performance standards. Additional
relevant competencies include health care industry experience, demonstrated
leadership or management experience, public company board experience,
familiarity with national issues affecting the business, financial and
accounting expertise, and compatibility with the Board. In order to have
nominees considered, shareholders must provide the Governance Committee with
written notice of such proposal not later than 60 days following the end of the
fiscal year to which the next annual meeting of shareholders relates. In the
alternative, a shareholder may nominate persons for election as directors by
following the procedures set forth in the Company's bylaws. The Company engages
the services of a third party search firm to assist in the identification and
evaluation of candidates. This year, Mr. DeComo was identified as a potential
board member by an executive officer. The Governance Committee is under no
obligation to accept a nominee proposed by a shareholder, however, the
Governance Committee uses the same process for evaluating all nominees,
regardless of the source of the nomination. All nominations ultimately made by
the Governance Committee are in such committee's sole discretion. Final approval
of a candidate is determined by the full Board of Directors. In 2003, the
Governance Committee met three times.
REGULATORY AND COMPLIANCE COMMITTEE. The members of the Regulatory and
Compliance Committee are Dr. Auerbach (as Chairman), Mr. DeComo and Mr.
Feshbach. The Committee reviews and oversees the compliance by the Company, and
its agents and employees, with applicable legal requirements relating to
providers and suppliers of healthcare services and products, the Company's Code
of Business Conduct and compliance program, and any applicable corporate
integrity agreement entered into or binding on the Company. In 2003, the
Regulatory and Compliance Committee met five times.
During 2003, the Board of Directors met eleven times. Each incumbent
director attended at least 75% of all meetings of the Board and applicable
committees held during 2003. The Board and the committees also act from time to
time by written action.
COMPENSATION OF DIRECTORS
In 2003, each non-employee director was paid an annual retainer of
$15,000, $1,500 for each Board meeting attended in person or $1,000 for each
Board meeting participated in by means of conference telephone; $1,500 for each
Audit Committee meeting attended in person (other than an Audit Committee
meeting held on the same date as a Board meeting); $1,000 for each Audit
Committee meeting held on the same date as a Board meeting or participated in by
means of conference telephone; $1,250 for each non-Audit Committee meeting
attended in person (other than a non-Audit Committee
6
meeting held on the same date as a Board meeting); and $750 for each non-Audit
Committee meeting held on the same date as a Board meeting or participated in by
means of conference telephone. The chairman of the Audit Committee received an
additional annual retainer fee of $4,000 and the chairman of each non-Audit
Committee received an additional annual retainer fee of $3,000.
In 1993, the Company established a Director Share Purchase Program (the
"Program") to encourage ownership of its Common Stock by its directors. Under
the program, each non-employee director can elect to forego receipt of annual
retainer and meeting fees in cash and, in lieu thereof, receive shares of Common
Stock having a market value at the date of issuance equal to the cash payment.
In 1995, the Company established a Non-Employee Director Stock Option
Plan (the "Director Plan"). The purpose of the Plan is to promote the success of
the Company by attracting and retaining non-employee directors by supplementing
their cash compensation and providing a means for such directors to increase
their holdings of Common Stock. The Company believes it is important that the
interest of the directors be aligned with those of its shareholders and that the
Director Plan strengthens that link. The Director Plan provides for an automatic
initial grant of options to purchase 15,000 shares of Common Stock, at market
value on date of grant, to a non-employee director upon his or her initial
election as a member of the Board. The Director Plan also provides for the
automatic grant of an option to purchase 15,000 shares of Common Stock, at
market value on the date of grant, each time a non-employee director is
re-elected as a member of the Board. Further, the Director Plan provided for the
automatic one time grant of an option to purchase 45,000 shares of Common Stock,
at market value on date of grant, upon a non-employee director's election as a
member of the Board at the 2002 Annual Meeting of Shareholders. Upon their
election to the Board in May 2002, the non-employee members of the Board of
Directors were each granted options to purchase 45,000 shares of Common Stock at
$13.16 per share, vesting immediately as to one-third of such shares, vesting
after one year as to another third of such shares, and vesting after two years
with respect to the final third of such shares, subject to certain conditions.
The Director Plan also provides that for all directors who are granted the one
time option to purchase 45,000 shares as described above, there shall be no
grants under the Director Plan in connection with the Company's 2003 and 2004
Annual Meetings of Shareholders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during 2003 consisted of
Messrs. Auerbach, Berce and Maudlin. Mr. Maudlin served as President of the
Company from October 1985 through December 1986. In December 2001, the Company
loaned Mr. Maudlin $133,683. In January 2002, the Company loaned Dr. Auerbach
$77,495. Each of the loans represented 80% of the aggregate exercise price
payable to the Company by the directors in connection with an exercise of
certain Company stock options. See "Certain Transactions" for more information
about these loans.
EXECUTIVE OFFICERS
Set forth below is certain information about each current executive
officer of the Company who is not a director of the Company, including name, age
and principal occupations during the past five years. All of the executive
officers of the Company are elected by the Board of Directors to serve until the
next Annual Meeting of the Board of Directors or until their successors are
elected and qualified.
Nancy F. Lanis, 47, has served as Executive Vice President, General
Counsel and Secretary since March 2003. She served as Senior Vice President and
General Counsel from June 2001 to March 2003, and has served as Corporate
Secretary since September 2001. From March 2000 to June 2001, Ms. Lanis was Of
Counsel at Ruskin, Moscou, Evans & Faltischek, P.C. in the Corporate and Health
Law Practice Groups. From September 1991 to March 2000, Ms. Lanis held a number
of positions with the Health Services Division (subsequently known as Gentiva
Health Services, Inc., and a portion of which has since
7
been acquired by Accredo Health, Incorporated) of Olsten Corporation, ultimately
serving as its Vice President and General Counsel for Infusion and Biotech at
the time of her departure. Ms. Lanis was Corporate Counsel at W.R. Grace & Co.
from 1985 to September 1991, and was associated with the firm of Cole & Deitz
(now known as Winston & Strawn) from 1983 to 1985.
Thomas W. Axmacher, 45, has served as Executive Vice President of
Finance and Chief Financial Officer since March 2003. From April 2002 to March
2003, he served as Senior Vice President of Finance and Chief Financial Officer.
From March 2001 to April 2002, he served as Vice President of Finance and Chief
Financial Officer. From August 1997 to March 2001, Mr. Axmacher served as Vice
President and Controller. From March 1991 to August 1997, he served as
Controller of the Company. Prior to joining the Company, Mr. Axmacher spent six
years at Tempo Instrument Group, an electronics manufacturer where he served as
Vice President and Controller.
Michelle D. LeDell, 45, has served as Senior Vice President of Human
Resources since March 2003. From January 2002 to March 2003, she served as Vice
President of Human Resources. From March 1996 to January 2002, Ms. LeDell served
as Senior Director of Human Resources at Express Scripts, a pharmacy benefit
management company. From October 1995 to March 1996, Ms. LeDell worked at Dain
Bosworth, an investment banking firm, where she served as Manager of Human
Resources. From 1984 to 1995, Ms. LeDell worked at the Prudential companies, an
insurance organization, with eight of those years being spent in human
resources. From 1982 to 1984, Ms. LeDell was a financial analyst with Dun and
Bradstreet, a credit rating services company.
Anne S. Bruce, 40, has served as Senior Vice President and Chief
Information Officer/Security Officer since September 2003. She served as Vice
President of Public Affairs from February 2003 to May 2004. Prior to joining the
Company, Ms. Bruce spent 19 years in various positions in the information
technology field, starting her career as a Systems Engineer for Electronic Data
Systems (EDS) in 1984. Ms. Bruce held senior management positions at EDS from
1984 to September of 1997, at Ernst & Young LLP from September of 1997 through
September of 2000 and at eLoyalty from September 2000 into February 2003.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the cash and non-cash compensation for
each of the last three fiscal years awarded to or earned by (i) each person who
served as the Chief Executive Officer of the Company at any time during 2003,
(ii) the four executive officers of the Company (other than its chief executive
officer) most highly compensated in salary and bonus for 2003 who were also
serving as executive officers of the Company on December 31, 2003, and (iii) the
most highly compensated person in salary and bonus for 2003 who served as an
executive officer of the Company during 2003 but was not serving as an executive
officer on December 31, 2003 (the "named executive officers").
8
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------ -----------------------
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMP. AWARDS OPTIONS COMP.
(AS OF DECEMBER 31, 2003) YEAR ($) ($)(1) ($)(2) ($)(3) (#) ($)(4)
------------------------- ---- ------- ------- ------ ---------- ---------- ------
Joseph Feshbach(5) 2003 423,942 -- -- -- 75,500 808
Chief Executive Officer 2002 313,385 333,333 -- 0 350,000 969
John Prior 2003 270,000 -- -- -- 25,500 519
President, Specialty 2002 270,000 122,850 -- 0 0 1,662
Healthcare Services 2001 210,915 3,240 -- 86,800 20,000 3,400
William Tella 2003 274,656 -- -- 0 50,500 481
President, Specialty 2002 235,461 200,000 -- 0 100,000 778
Pharmaceutical Services 2001 187,000 2,244 -- 43,400 0 2,878
Nancy Lanis(6) 2003 239,483 52,516 -- -- 25,500 760
Executive Vice President, 2002 200,000 171,200 -- 0 100,000 2,086
General Counsel and 2001 96,154 15,000 -- 0 50,000 0
Secretary
Thomas Axmacher(7) 2003 210,516 48,500 -- -- 25,500 2,826
Executive Vice President 2002 168,539 130,000 -- 0 25,000 1,279
and Chief Financial Officer 2001 147,392 1,470 -- 0 10,000 3,400
--------------------
(1) Amounts shown for 2003 represent bonuses paid under the Company's
Incentive Compensation Plan. Amounts shown for 2001 and 2002 represent
discretionary bonuses paid under the Company's Incentive Compensation
Plan and, with respect to bonuses paid in 2002, bonuses awarded with
respect to particular achievements during 2002. All such awards are
actually paid in the fiscal year immediately following the year for
which the award is made.
(2) Amounts paid did not exceed the lesser of $50,000 or ten percent (10%)
of salary and bonus for any of the named individuals.
(3) The number of shares of restricted stock awarded were as follows: Mr.
Prior 10,000 shares in 2001; Mr. Tella 5,000 shares in 2001. The value
of such shares is calculated using the closing price for the Company's
Common Stock on the date of the award (i.e., $8.68 for 2001 awards). As
of December 31, 2003, an aggregate of 15,000 shares of restricted stock
were held by the named executive officers with an aggregate value of
$130,200 based on the closing price on that date. One third of the
shares covered by the 2001 restricted stock awards vest after one year
with the balance of each award vesting thereafter in eight equal
quarterly installments following the initial vesting date. The
recipients of these restricted stock awards are entitled to receive any
dividends declared with respect to the restricted shares.
(4) All amounts represent Company matching contributions to its 401(k)
plan.
(5) Mr. Feshbach was hired as Interim Chief Executive Officer of the
Company in March 2002 and was hired as Chief Executive Officer of the
Company in July 2002.
(6) Ms. Lanis was hired as an executive officer in June 2001.
9
(7) Mr. Axmacher became an executive officer in March 2001.
STOCK OPTION TABLES
The following tables summarize stock option grants and exercises during
2003 to or by the named executive officers, and the value of the options held by
such persons at the end of 2003.
OPTION GRANTS IN FISCAL 2003
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
-------------------------------------------------- ----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#)(1) YEAR ($/SH) DATE 5% ($) 10% ($)
------------ ---------- ---------- -------- ---------- --------- ---------
Mr. Feshbach 75,000(2) 8.73% 16.82 3/05/2013 794,745 2,005,785
500(3) 0.06% 14.74 6/03/2013 4,643 11,718
Mr. Prior 25,000(2) 2.91% 16.82 3/05/2013 264,915 668,595
500(3) 0.06% 14.74 6/03/2013 4,643 11,718
Mr. Tella 50,000(2) 5.82% 16.82 3/05/2013 529,830 1,470,750
500(3) 0.06% 14.74 6/03/2013 4,643 11,718
Ms. Lanis 25,000(2) 2.91% 16.82 3/05/2013 264,915 668,595
500(3) 0.06% 14.74 6/03/2013 4,643 11,718
Mr. Axmacher 25,000(2) 2.91% 16.82 3/05/2013 264,915 668,595
500(3) 0.06% 14.74 6/03/2013 4,643 11,718
--------------------------
(1) Except as otherwise noted, the options become exercisable after one
year with respect to one-third of the shares with the balance of the
shares becoming exercisable in equal installments on the last day of
each of the eight successive three-month periods following the initial
exercisability date.
(2) The basis for the grant was annual equity compensation, after
considering outside consultant recommendations in the form of a report,
which analyzed the level of executive compensation for a number of
comparable companies
(3) This grant was immediately exercisable and issued in connection with
certain amendments to the officer's employment agreement in connection
with the reorganization of the Company into a holding company
structure.
10
OPTION EXERCISES IN FISCAL 2003
AND
VALUE AT END OF FISCAL 2003
SHARES NUMBER OF SECURITIES
ACQUIRED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ON VALUE OPTIONS AT IN-THE MONEY OPTIONS AT
EXERCISE REALIZED FISCAL YEAR END (#) FISCAL YEAR END ($)
NAME (#) ($) EXERCISABLE/ UNEXERCISABLE EXERCISABLE / UNEXERCISABLE (1)
------------ -------- -------- -------------------------- -------------------------------
Mr. Feshbach - - 269,651 / 243,345 735,178 / 186,963
Mr. Prior - - 140,914 / 88,336 888,107 / 27,022
Mr. Tella - - 134,833 / 91,670 783,397 / 189,599
Ms. Lanis - - 89,657 / 80,843 318,353 / 122,897
Mr. Axmacher - - 69,040 / 37,086 290,164 / 13,511
--------------------------
(1) Calculation is based on the difference between the closing price of the
Common Stock on December 31, 2003 and the exercise price of the options
for each optionee.
The following table summarizes the Company's equity compensation plans as of
December 31, 2003:
EQUITY COMPENSATION PLAN INFORMATION
Number of Number of securities
securities to be Weighted average remaining available for
issued upon exercise exercise price of future issuance under
of outstanding outstanding equity compensation plans
options, warrants options, warrants (excluding securities
and rights and rights reflected in column (a))
Plan Category (a) (b) (c)
-------------------------------------------------- -------------------- ----------------- -------------------------
Equity compensation plans approved by security
holders 2,021,746 $12.73 780,989(i)
Equity compensation plans not approved by security
holders 1,264,703 (ii) $15.58 715,311(iii)
Total 3,286,449 $13.89 1,496,300
(i) This number includes 685,657 shares under the 2000 Stock Incentive
Plan and 95,332 shares under the 1995 Non-Employee Director Plan.
(ii) This number includes 1,020,033 securities under the 2001
Broad-Based Stock Incentive Plan (the "2001 Plan") and 244,670 securities under
the non-plan employee option agreements.
11
THE 2001 PLAN. Under the 2001 Broad-Based Stock Incentive Plan (the
"Plan"), the Company can grant options, stock appreciation rights ("SAR"),
restricted stock, restricted stock units, performance awards, other stock grants
or other stock-based awards. The total number of shares of common stock
authorized to be granted pursuant to Awards (as defined in the Plan, not
incentive stock options) granted under the Plan is 2,000,000. As of December 31,
2003, options to purchase an aggregate of 1,020,033 shares of the Company's
common stock were outstanding under the Plan. Any employee, officer, consultant,
independent contractor and non-employee directors providing services to the
Company or any of its affiliates is eligible to receive awards under the Plan.
The Plan is administered by the Compensation Committee of the Board of Directors
(the "Committee"). The Committee shall not have the authority to grant Awards to
officers and directors in an aggregate amount that equals or exceeds fifty
percent (50%) of the common stock authorized to be granted pursuant to Awards
granted under the Plan. No awards may be granted under the Plan after July 30,
2011. The exercise price per share under any stock option, the grant price of
any SAR, and the purchase price of any security which may be purchased under any
other stock-based award shall not be less than 100% of the fair market value of
the Company's common stock on the date of grant of such option, SAR or award.
The Plan provides that the Committee may grant reload options, separately or
together with another option, and may establish the terms and conditions of such
reload options. Pursuant to a reload option, the optionee would be granted a new
option to purchase the number of shares not exceeding the sum of (i) the number
of shares of common stock tendered as payment upon the exercise of the option to
which such reload option relates, and (ii) the number of shares of the Company's
common stock tendered as payment of the amount to be withheld under income tax
laws in connection with the exercise of the option to which such reload option
relates. Reload options may be granted with respect to options granted under any
stock option plan of the Company.
The holder of restricted stock may have all of the rights of a shareholder of
the Company, including the right to vote the shares subject to the restricted
stock award and to receive any dividends with respect thereto, or such rights
may be restricted as the Committee imposes. Restricted stock may not be
transferred by the holder until any restrictions established by the Committee
have lapsed. Upon termination of the holder's employment during the restriction
period, restricted stock and restricted stock units are forfeited, unless the
Committee determines otherwise.
If any dividend or other distribution, recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of shares of common stock or other
securities of the Company or other similar corporate transaction or events
affects the shares of common stock such that an adjustment is appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan or under an award, the Committee
may, in such manner as it deems equitable or appropriate in order to prevent
such dilution or enlargement of any such benefits or potential benefits, adjust
any or all of (a) the number and type of shares (or other securities or
property) which thereafter may be made the subject of awards, (b) the number and
type of shares (or other securities or property) subject to outstanding awards,
and (c) the purchase or exercise price with respect to any award.
The Board of Directors may amend, alter, suspend, discontinue or terminate the
Plan at any time, provided that no such amendment, alteration, suspension,
discontinuation or termination shall be made that would violate the rules or
regulations of the NASDAQ National Market or of any securities exchange
applicable to the Company.
THE NON-PLAN OPTION AGREEMENTS. Free-standing options granted include
options issued as an inducement for new hires and/or in connection with new
hires associated with acquisitions by the Company. These options are issued
pursuant to Non-Qualified Stock Option Agreements. These options
12
terminate 10 years after the effective date of the grant, unless earlier
terminated upon termination of employment, death or disability. Upon termination
or employment, death or disability, the employee will, in certain circumstances,
get an additional period of months following such event to exercise the options
to the extent of the full number of shares the employee was entitled to purchase
on the date of such event. The options generally become exercisable after one
year with respect to one-third of the shares with the balance of the shares
becoming exercisable in equal installments on the last day of each of the eight
successive three-month periods following the initial exercisability date, and
are not transferable or assignable by the employees that receive the grant. The
exercise price per share varies and is specified in the individual Non-Qualified
Stock Option Agreements.
In some cases, the non-plan Non-Qualified Stock Option Agreements and
agreements under the 2001 Plan may contain provisions that restrict the
activities of the employee once the term of employment is over. These
restrictions include restrictions on the former employee's ability to compete
with the Company for one year with respect to certain activities and
restrictions on the former employee's ability to hire or contract for services
with any employees for former employees of the Company.
(iii) This number reflects 715,311 shares under the 2001 Plan.
EMPLOYMENT AND OTHER AGREEMENTS
Each of Messrs. Feshbach, Tella, Axmacher and Ms. Lanis (the
"Officers") has an employment agreement with the Company (an "Employment
Agreement"). Mr. Prior has an employment agreement with the subsidiary
containing the Company's specialty healthcare business unit. Except as noted,
the Employment Agreements are on substantially identical terms. Under the
Employment Agreements, each Officer receives an annual base salary and is
entitled to participate in any incentive compensation program in effect from
time to time for executives of the Company. The annual base salary of each of
the Officers under his or her Employment Agreement as of December 31, 2003 was
Mr. Feshbach ($425,000), Mr. Tella ($280,000), Mr. Prior ($270,000), Mr.
Axmacher ($220,000) and Ms. Lanis ($250,000). In addition, Ms. Lanis received a
one-time signing bonus of $15,000 under the terms of her Employment Agreement.
The salary under the Employment Agreements is subject to annual review and
increase by the Compensation Committee. Each Employment Agreement has an initial
term of one year and renews automatically for additional one-year periods unless
notice of termination is given at least three months prior to renewal.
The Company may terminate the Employment Agreement at any time with or
without cause upon 30 days' prior written notice to the Officer, and the Officer
may terminate the Employment Agreement at any time upon 30 days' prior written
notice to the Company. In the event the Company terminates the Employment
Agreement without cause prior to a change of control (defined below) or elects
not to renew, the Officer will be entitled to receive a lump sum severance
payment equal to the Officer's then current base salary plus the arithmetic
average of payments made to the Officer pursuant to the Company's Executive
Bonus Compensation Program with respect to the three years immediately preceding
the fiscal year in which the date of termination occurs. In addition, to the
extent not otherwise required under the Company's stock option plan, any
unvested stock option awards that would have vested during the twelve-month
period following the date of termination shall vest and become immediately
exercisable in full. If the Employment Agreement is terminated (or not renewed)
by the Company without cause or by the Officer for good reason during the
twelve-month period immediately following a change in control (or is terminated
or not renewed prior to a change in control at the request or insistence of any
person in connection with a change in control), the Officer shall be entitled to
a lump sum severance payment equal to the product of two times the sum of the
then current annual base salary plus the arithmetic average of payments made to
the Officer pursuant to the Company's Executive Bonus Compensation Program with
respect to the three fiscal years immediately preceding the fiscal year in which
the date of termination
13
occurs. In addition, to the extent not otherwise required under the Company's
stock option plan any unvested stock option awards shall vest and become
immediately exercisable in full. The Employment Agreement also restricts the
Officer from competing with the Company under certain circumstances during the
Officer's employment with the Company and for a period of two years thereafter.
Mr. Tella ceased to be an executive officer upon the closing of the
acquisition of Critical Care Systems, Inc. in April 2004. Mr. Tella will
continue as an employee until May 2005, and will receive a severance package
valued at approximately $450,000 which will be paid out in monthly installments
over his remaining employment. Mr. Tella has agreed to waive payment of his
salary after the closing of the acquisition of Critical Care Systems through May
2005.
CERTAIN TRANSACTIONS
In December 2001 and January 2002, in order to encourage the executive officers
of the Company to increase their equity stake in the Company, the Board of
Directors offered to accelerate the exercisability of certain options held by
executive officers (provided that the underlying shares could not be sold until
such time, if any, as the option would have become exercisable under its
original terms) and to provide the directors and officers with loans to cover
80% of the aggregate exercise price of any options they elected to exercise.
Under this program, in December 2001. Mr. Maudlin borrowed $133,683. In 2002,
Dr. Auerbach borrowed $77,495, Mr. Prior borrowed $600,870, Mr. Tella borrowed
$489,958, Ms. Lanis borrowed $78,200 and Mr. Axmacher borrowed $103,795 to fund
80% of the exercise price of certain options. All of these loans bear interest
at an annual rate of 2.46% and mature three years from the date of origination,
provided that, to the extent that any of the shares acquired pursuant to the
exercise of the related option are sold, the proceeds of that sale must be used
to repay the principal and interest due on the loan. In 2003, Dr. Auerbach
repaid $18,292 of his $77,495 loan, leaving a balance of $59,203, and Mr. Tella
repaid $103,562 of his $489,958 loan, leaving a balance of $386,396.
14
PERFORMANCE GRAPH
The graph below compares the cumulative total return on the Company's
Common Stock during the five year period ended December 31, 2003 with the
cumulative total return of the Nasdaq Composite Index and the Nasdaq Health
Services Index (assuming the investment of $100 in each vehicle on January 1,
1999 and reinvestment of all dividends).
COMPARISON OF CUMULATIVE TOTAL RETURN
NASDAQ US STOCKS, CURATIVE COMMON & NASDAQ HEALTH SERVICES INDICES
[COMPARISON OF CUMULATIVE TOTAL RETURN GRAPH]
Curative Health NASDAQ NASDAQ
Services, Inc. U.S. Stocks Health Services
--------------- ----------- ---------------
1998 100.000 100.000 100.000
1999 22.464 253.451 70.052
2000 16.116 152.921 96.161
2001 39.130 121.318 103.967
2002 50.000 83.874 89.583
2003 40.000 125.313 136.984
15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (formerly known as the Compensation and
Stock Option Committee) of the Board of Directors (the "Committee") is
responsible for reviewing the performance of the Company's executive officers
and establishing their compensation, including base salary, bonus incentive
compensation and other benefits and perquisites, if any, as well as grants to
executive officers and other employees of long-term compensation incentives in
the form of stock options pursuant to the Company's stock incentive plans. The
Committee also makes recommendations as to compensation policies for the overall
Company. The Committee is composed of three independent, non-employee directors.
The key objectives of the Committee in administering executive compensation are
the following:
- Aligning the economic interests of executive officers
with both the short- and long-term interests of
shareholders.
- Motivating executive officers to undertake strategic
business initiatives and rewarding them for the
successful development and implementation of those
initiatives.
- Attracting and retaining key executive officers who
will contribute to the long-term success of the
Company.
At present, there are three main components of compensation for
executive officers: base salary, short-term incentive compensation in the form
of annual bonuses and long-term incentive compensation in the form of stock
options.
BASE SALARY
The Committee sets base salaries for executive officers (including the
Chief Executive Officer) with reference to the specific responsibilities of the
executive officer, his or her experience in the industry, his or her
performance, and other competitive factors. The Committee reviews each executive
officer's base salary annually and makes appropriate adjustments depending upon
industry trends in executive salaries, Company financial and operating
performance, and such individual's performance and contribution to the Company's
growth and success. The base salaries of the Company's executive officers
generally increased for the year ended December 31, 2003 by an average of
approximately 19.6 percent over their base salaries for the prior year. However,
two executives had received no increase in 2002 from their base 2001 salaries.
As part of the selection process to hire a Chief Executive Officer, the
Company engaged an independent consulting firm in 2002 to conduct an analysis of
chief executive officer compensation. In performing its analysis, the consulting
firm conducted a review of the Company's compensation policies and practices
with respect to its other executive officers and a review of chief executive
officer compensation of companies competing in the same industry as the Company,
and comparable in size and revenue to the Company. In July 2002, Mr. Feshbach
was hired as the Company's Chief Executive Officer. Under the employment
agreement executed with Mr. Feshbach, he was entitled to an annual base salary
of $400,000 for 2002, and in 2003, his salary was increased to $425,000 as based
on the consulting firm's analysis, this amount was deemed to be competitive in
comparison to the compensation paid to the chief executive officers of
comparable companies. In determining Mr. Feshbach's base salary compensation,
the Committee also considered Mr. Feshbach's experience and prior performance at
the Company.
16
BONUS INCENTIVE COMPENSATION
The executive officers of the Company (including the Chief Executive
Officer) participate in the Company's Annual Bonus Compensation Program,
pursuant to which each executive officer is eligible to earn a cash bonus for
each fiscal year of the Company equal to a predetermined percentage of such
officer's base salary, based on achievement of Company operating earnings goals,
business unit performance and individual performance milestones.
At the beginning of the fiscal year of the Company, the Committee
approves pre-determined percentages of the executive officers' base salary that
will be paid in the form of a cash bonus if the Company achieves certain
targeted earnings goals as approved by the Committee. In addition, at the
beginning of each fiscal year the Committee establishes certain operational
milestones for the Company related to patient satisfaction results, sales and
profit margin measurements, the achievement of healing outcomes of patients
treated at the wound care programs, and other meaningful corporate goals which
the Company's Specialty Pharmacy and Specialty Healthcare Services units might
expect to accomplish in such fiscal year, and individual milestones for each
officer. The Committee also establishes specified percentages of the executive
officers' base salaries that will be paid in relation to the achievement of
individual milestones. The earnings goals and the special milestones established
by the Committee will permit the executive officers, except the Chief Executive
Officer, to earn between sixty and eighty percent of their base salary,
depending on an officer's position, in the form of a cash bonus. The Chief
Executive Officer is permitted to earn up to 100% of his salary in the form of a
cash bonus for meeting such earnings goals and special milestones. The executive
officers' actual bonuses are awarded and paid in the following fiscal year once
the Company's financial results and milestone achievements for the prior fiscal
year have been finally determined.
Selected executive officers achieved up to 100 percent of the
individual milestones that were determined for the year. The executive officers
on average were awarded 7.12 percent of their base salary in the form of cash
bonus compensation related to milestone achievements for 2003. Mr. Feshbach, Mr.
Tella and Mr. Prior were not awarded any bonus for 2003.
STOCK OPTIONS AND RESTRICTED STOCK AWARDS
The Committee made grants of options to the executive officers during
2003 as follows: Mr. Feshbach (75,000), Mr. Tella (50,000), Mr. Prior (25,000),
Mr. Axmacher (25,000) and Ms. Lanis (25,000). The Committee did not award shares
of restricted stock in 2003. In addition, Messrs. Feshbach, Prior, Tella, and
Axmacher and Ms. Lanis each received a grant of 500 options in connection with
certain amendments to their respective employment agreements in connection with
the reorganization of the Company into a holding company structure.
In January 2003, the Committee engaged an independent outside
consulting firm to examine the Company's annual stock option grant process. In
February 2003, the report of this consultant was presented to the Committee. The
report analyzed the level of executive compensation for a number of comparable
companies. The Committee referred to and relied upon this report in connection
with its stock option grant decisions for 2003.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended, sets a
$1.0 million limit on the amount of deductible compensation that can be paid in
any year to an executive officer of the Company. "Qualified performance-based
compensation" (as defined under Section 162(m)) is excluded from the calculation
of this $1.0 million limit. Although the Committee does not believe that the
annual compensation for 162(m) purposes for any of the Company's executive
officers will exceed $1.0 million
17
in 2003, the Company has taken the necessary steps to allow stock options
granted under the 2000 Stock Incentive Plan to qualify as "qualified
performance-based compensation" and so be excluded from this calculation.
MEMBERS OF THE COMPENSATION COMMITTEE:
Daniel E. Berce, Chairman
Paul S. Auerbach, M.D., Member
Timothy I. Maudlin, Member
18
AUDIT COMMITTEE REPORT
The Audit Committee oversees the Company's internal controls and
financial reporting process on behalf of the Board of Directors. All of the
members of the Audit Committee are independent for purposes of the Nasdaq
listing requirements. Messrs. Berce and Maudlin are "financial experts" as the
term is defined in the Securities and Exchange Commission rules. The Audit
Committee operates under a written charter adopted by the Board of Directors.
The written charter, as amended in 2004, is attached as Appendix A to this proxy
statement. The Audit Committee recommends to the Board of Directors the
appointment of the Company's independent auditors.
Management is responsible for the Company's internal controls and the
financial reporting process. The Company's independent accountants are
responsible for performing an independent audit of the Company's consolidated
financial statements in accordance with generally accepted auditing standards
and to issue a report on the Company's financial statements. The Audit
Committee's responsibility is to monitor and oversee these processes.
In this context, the Audit Committee has met and held discussions with
management and the independent accountants. Management represented to the Audit
Committee that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Audit
Committee has reviewed and discussed the consolidated financial statements with
management and the independent accountants. The Audit Committee discussed with
the independent accountants matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit Committees). The Audit
Committee also held regular executive sessions without management present.
The Company's independent accountants also provided to the Audit
Committee the written disclosure required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the Audit
Committee discussed with the independent accountants the accounting firm's
independence. The Committee also considered whether non-audit services provided
by the independent accountants during the last fiscal year were compatible with
maintaining the independent accountants' independence.
Based upon the Audit Committee's discussion with management and the
independent accountants and the Audit Committee's review of the representations
of management and the report of the independent accountants to the Audit
Committee, the Audit Committee recommended to the Board of Directors that the
audited consolidated financial statements be included in the Company's Annual
report on Form 10-K for the fiscal year ended December 31, 2003 for filing with
the Securities and Exchange Commission.
MEMBERS OF THE AUDIT COMMITTEE:
Daniel E. Berce, Chairman
Lawrence P. English, Member
Timothy I. Maudlin, Member
19
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock
of the Company as of March 31, 2004 with respect to (1) each person who owned of
record or was known by the Company to own beneficially more than five percent of
the issued and outstanding shares of Common Stock, (2) each director, (3) each
named executive officer, and (4) all directors and current executive officers as
a group.
AMOUNT AND NATURE PERCENTAGE OF
OF BENEFICIAL COMMON STOCK
NAME AND ADDRESS OWNERSHIP OUTSTANDING
-------------------------------------------------------------------------------- ----------------- -------------
Kennedy Capital Management, Inc................................................. 1,112,602(1) 8.61%
10829 Olive Boulevard
St. Louis, MO 63141
Royce and Associates............................................................ 1,098,500(2) 8.50%
1414 Avenue of the Americas
New York, NY 10019
Paradigm Capital Management..................................................... 789,300(3) 6.11%
9 Elk Street
Albany, NY 12207
Joseph L. Feshbach.............................................................. 578,483(4)(5) 4.36%
Paul S. Auerbach, M.D........................................................... 96,625(5) *
Daniel E. Berce................................................................. 120,598(5) *
Peter M. DeComo................................................................. -- *
Lawrence P. English............................................................. 145,766(5) 1.0%
Timothy I. Maudlin.............................................................. 229,283(5)(6) 1.76%
Paul F. McConnell............................................................... -- *
Gerard Moufflet................................................................. 192,540(5) 1.48%
John C. Prior................................................................... 324,842(5) 2.49%
William C. Tella................................................................ 254,016(5) 1.94%
Nancy F. Lanis.................................................................. 127,565(5) 1.0%
Thomas W. Axmacher.............................................................. 120,100(5) *
All directors and current executive officers as
a group (13 persons)............................................................ 2,007,505(5) 14.18%
-------------------
* Ownership does not exceed 1%
20
(1) Disclosure is made in reliance upon a statement on Schedule 13G filed
with the Securities and Exchange Commission on February 13, 2004.
(2) Disclosure is made in reliance upon a statement on Schedule 13G filed
with the Securities and Exchange Commission on January 30, 2004.
(3) Disclosure is made in reliance upon a statement on Schedule 13G filed
with the Securities and Exchange Commission on February 12, 2004.
(4) Includes 244,659 shares held in trust.
(5) The number of shares shown in the table with respect to the following
persons and group, includes the indicated number of shares which are
issuable upon exercise of options exercisable within 60 days of March
31, 2004 ("currently exercisable options"): Mr. Feshbach, 333,824
shares; Dr. Auerbach, 83,625 shares; Mr. Berce, 114,598 shares; Mr.
English, 115,766 shares; Mr. Maudlin, 88,764 shares; Mr. Moufflet,
73,517 shares; Mr. Prior, 152,583 shares; Mr. Tella, 159,828 shares;
Ms. Lanis, 122,565 shares; Mr. Axmacher, 83,205 shares; and all
directors and current executive officers as a group, 1,324,605 shares.
(6) Includes 36,700 shares owned by Mr. Maudlin's spouse. Mr. Maudlin
disclaims beneficial ownership of the shares owned by his spouse.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors and executive officers and all persons who beneficially own
more than ten percent of the outstanding shares of the Company's Common Stock to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of such Common Stock. Directors, executive
officers and ten percent or more beneficial owners are also required to furnish
the Company with copies of all Section 16(a) reports filed. Based solely on a
review of the copies of such forms and certain representations, the Company
believes that all Section 16(a) filing requirements applicable to its executive
officers, directors and ten percent shareholders were in compliance, except that
(i) one Form 3, for Alan Jackson was inadvertently filed late; (ii) two Form 4
filings related to options granted on March 5, 2003 and June 3, 2003 for each of
Messrs. Feshbach, Prior, Axmacher, Tella, and Jackson, and Ms. Lanis and LeDell
were inadvertently filed late and (iii) one Form 4 relating to options granted
on June 3, 2003 for each of Dr. Auerbach and Messrs. Berce, English, Maudlin and
Moufflet were inadvertently filed late.
21
PROPOSAL #2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
APPOINTMENT OF AUDITORS
The Board of Directors has appointed Ernst & Young LLP as independent
auditors for the Company for the fiscal year ending December 31, 2004. A
proposal to ratify that appointment will be presented at the Meeting. Ernst &
Young LLP has served as the Company's independent auditors since September 1986.
Representatives of Ernst & Young LLP are expected to be present at the Meeting,
will have the opportunity to make a statement if they desire to do so and will
be available to respond to appropriate questions from shareholders.
2003 2002
FEES FEES
-------- --------
AUDIT FEES (1)
Aggregate Audit Fees $522,000 $354,000
AUDIT-RELATED FEES (2)(3)
-------- --------
Total Audit-Related Fees $ 28,000 $ 73,000
TAX FEES (2)(4)
-------- --------
Aggregate Tax Fees $266,000 $117,000
OTHER FEES (2)(5)
-------- --------
Aggregate Other Fees $ 82,000 $ 30,000
-------- --------
TOTAL FEES $898,000 $574,000
======== ========
(1) Includes fees and expenses related to the fiscal year audit of the
Company's annual consolidated financial statements, reviews of the
Company's interim condensed consolidated financial statements and
$154,000 in fees related to a contemplated debt offering in July 2003,
notwithstanding when the fees and expenses were billed or when the
services were rendered.
(2) Includes fees and expenses for services rendered from January through
December of the fiscal year, notwithstanding when the fees and expenses
were billed.
(3) Includes fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of the
Company's consolidated financial statements and are not reported under
"Audit Fees." These services include employee benefit plan audits and
accounting consultations in connection with acquisitions.
(4) Includes $206,000 in fees incurred in connection with the Company's
reorganization into a holding company structure and other fees billed
for professional services for tax compliance, tax advice and tax
planning. These services include assistance regarding federal and state
tax compliance and tax advice with respect to acquisitions.
(5) Includes fees for products and services other than the services
reported above. In 2003, the $82,000 related to independent review
organization work with respect to the the Company's Corporate Integrity
Agreement.
22
PRE-APPROVAL POLICIES
All services provided by our independent auditor, Ernst & Young LLP,
are subject to pre-approval by our Audit Committee. The Audit Committee may
authorize the Chair of the Committee or any of the Committee's individual
members to approve services by Ernst & Young LLP to ensure prompt handling of
pre-approval matters. The Chair then reports action taken at the next Audit
Committee meeting. In seeking pre-approval from the Audit Committee, the Chief
Financial Officer and the independent auditor must jointly submit to the Audit
Committee for its review and approval, in advance of the performance of the
services to be provided by the independent auditor, a schedule of audit,
audit-related, tax and all other non-audit services proposed to be provided by
the independent auditor. Such schedule must list the services to be provided and
the amount of fees proposed to be approved relating to such services. The Audit
Committee considers the overall relationship of fees for audit and non-audit
services in determining whether to approve such services. One-hundred percent
(100%) of the non-audit services performed in 2003 were approved by the Audit
Committee, except services performed by Ernst & Young LLP as the independent
review organization under the Company's Corporate Integrity Agreement, which was
entered into with the Office of Inspector General, US Department of Health and
Human Services prior to the effectiveness of the requirement that non-audit
services be approved by the Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS. If
the appointment of Ernst & Young LLP is not ratified by the shareholders, the
Board of Directors is not obligated to appoint other auditors, but the Board of
Directors will give consideration to such unfavorable vote.
OTHER ACTION
The Board of Directors of the Company is not aware at this time of any
other matters which will be presented for action at the Meeting. However, if any
matters other than those referred to above properly come before the meeting, it
is the intention of the persons named in the enclosed proxy to vote such proxy
in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 2005 Annual
Meeting of the Shareholders of the Company and included in the Proxy Statement
and form of Proxy relating to that meeting must be received by the Company no
later than December 31, 2004 in order to qualify for such inclusion. If the
Company does not receive notice before April 5, 2005 of any other shareholder
proposal intended to be presented at the 2005 Annual Meeting but not included in
the Proxy Statement and form of Proxy relating to that meeting, then the persons
named in the Proxy solicited by the Board for that meeting will be allowed to
exercise discretionary voting power to vote on that proposal.
NO INCORPORATION BY REFERENCE
The information under the headings "Performance Graph," "Compensation
Committee Report on Executive Compensation" and "Audit Committee Report" shall
not be deemed incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the Securities Act of
1933, as amended, or under the Securities Exchange Act of 1934, as amended,
except to the extent that the Company specifically incorporates the information
by reference, and shall not otherwise be deemed filed under such Acts.
23
SOLICITATION STATEMENT
The cost of this solicitation of proxies will be borne by the Company.
Solicitation will be made primarily by mail, but regular employees of the
Company may solicit proxies personally, by telephone or telegram. Brokers,
nominees, custodians and fiduciaries have been requested to forward solicitation
materials to obtain voting instructions from beneficial owners of stock
registered in their names, and the Company will reimburse such parties for their
reasonable charges and expenses in connection therewith.
Hauppauge, New York By Order of the Board of Directors
April 30, 2004
/s/ Nancy F. Lanis
----------------------------------
Secretary
24
APPENDIX A
CURATIVE HEALTH SERVICES, INC.
AUDIT COMMITTEE CHARTER
(AMENDED APRIL 13, 2004)
PURPOSE
The purpose of the Audit Committee (the "Committee") is (i) to provide
assistance to the Board of Directors (the "Board") of Curative Health Services,
Inc. (the "Company") in the oversight of (a) the accounting and financial
reporting processes of the Company and the audits of the Company's financial
statements, (b) the integrity of the Company's financial statements, (c) the
Company's compliance with financial reporting and other Securities and Exchange
Commission ("SEC") and listing exchange legal and regulatory requirements, (d)
the independence, qualifications and performance of the Company's internal and
external auditors, and (e) the adequacy of the Company's internal controls; (ii)
to prepare the report that the rules of the SEC require be included in the
Company's annual proxy statement; (iii) to resolve complaints relating to
accounting, internal accounting controls or auditing matters and (iv) to review
and approve any related party transactions.
MEMBERSHIP
The Committee shall consist of at least three directors of the Company, the
specific number of such members to be determined from time to time by the Board.
The members of the Committee shall be nominated by the Governance Committee of
the Board, and appointed by and serve at the discretion of the Board.
Except as allowed under the listing standards of the NASDAQ National Market or
other applicable laws, all members of the Committee shall be "independent"
according to the standards for audit committee members, as defined in the
listing standards of the NASDAQ National Market or such other national
securities exchange on which the Company's securities are then listed, as the
same may be amended from time to time (the "listing standards"), the rules and
regulations of the Securities and Exchange Commission (the "SEC") and any other
legal requirements applicable to the Company. Each member of the Committee shall
have a basic understanding of finance and accounting and be able to read and
understand financial statements. At least one member of the Committee shall have
accounting or related financial management expertise, in accordance with
applicable legal and regulatory requirements.
OPERATING PRINCIPLES
The Committee shall fulfill its responsibilities with the following aims in
mind: (i) to be directly responsible for the appointment, compensation,
retention and oversight of the Company's independent auditors; (ii) to
facilitate and maintain free and open means of communications among the Board,
the Committee, the independent auditors, any individual performing significant
internal audit functions and the management of the Company; (iii) to protect the
interests of the Company and its shareholders by providing independent oversight
on the Company's accounting functions and related party transactions; (iv) to
keep the Committee's policies and procedures flexible in order to react to
changing conditions; and (v) to assure the directors and shareholders that the
corporate accounting and reporting practices of the Company are in accordance
with all requirements and are of the highest quality.
DUTIES AND RESPONSIBILITIES
The Committee's role is one of oversight; the Company's management is
responsible for preparing the Company's financial statements and for their
accuracy, and the Company's independent auditors are
A-1
responsible for auditing those financial statements. In the absence of reason to
believe that such reliance is unwarranted, the Committee members may rely
without independent verification on the information provided to them and on the
representations made by the Company's management and independent auditors.
Additionally, as the Committee recognizes that the Company's management and
independent auditors have more knowledge and detailed information concerning the
Company than do Committee members, in carrying out its oversight
responsibilities the Committee is not providing any expert or special assurance
as to the Company's financial statements (including any assurance that they have
been carried out in accordance with generally accepted auditing standards), or
acting as independent auditors, or providing any professional certification as
to the work of the Company's independent auditors. Accordingly, the term
"review" as applied to the Committee in this Charter is not intended to have the
meaning given to such term in Statement of Auditing Standards No. 100, and
should not be interpreted to suggest that the Committee members can or should
follow the procedures required of auditors performing reviews of financial
statements.
The Committee is at all times authorized to have direct, independent and
confidential access to the Company's other directors, personnel, books, records
and facilities to carry out the Committee's purposes.
The Committee shall have the following duties and responsibilities, in addition
to any other duties and responsibilities prescribed by the Board from time to
time:
- Review and reassess the adequacy of this charter annually,
recommend any proposed changes to the Board for approval, and
have the charter published in accordance with the regulations
of the SEC.
- Select and engage independent auditors for the Company and
approve the scope of the independent auditors' annual
examination of the Company.
- Approve in advance or set up procedures to pre-approve any
engagement of the independent auditors to provide audit or
non-audit services to the Company. All non-audit services
permitted by law to be provided by the independent auditors
must be considered and pre-approved by the Committee (or
Committee member(s) designated by the Committee).
- Meet annually with the independent auditors and management of
the Company prior to the audit to review the scope of the
proposed audit for the current year and the audit procedures
to be utilized.
- Review with the independent auditors and financial and
accounting personnel, the adequacy, effectiveness and
integrity of the accounting and financial controls of the
corporation, and elicit any recommendations for the
improvement of such internal control procedures or particular
areas where new or more detailed controls are needed to expose
any payments, transactions, or procedures that might be deemed
illegal or otherwise improper.
- Consider and review with the Company's independent auditors
and management: (i) the adequacy and effectiveness of the
Company's disclosure controls and procedures and other
internal controls; (ii) all significant deficiencies in the
design or operation of the Company's internal controls that
could adversely affect the Company's ability to record,
process, summarize and report financial data; (iii) any fraud,
whether or not material, that
A-2
involves management or other employees who have a significant
role in the Company's internal controls; (iv) the adequacy and
effectiveness of those portions of the Company's code(s) of
ethics that relate to the integrity of the Company's financial
reporting; and (v) the related findings and recommendations of
the Company's independent auditors together with management's
responses.
- Review with management their certifications required regarding
the integrity of financial statements and information
contained in periodic reports of the Company, and the
procedures and processes constituting disclosure controls or
otherwise supporting the certification process.
- Review with management and the independent auditors the
Company's quarterly and annual releases of earnings, the
Company's quarterly and annual financial statements, and the
forms of 10Q and 10K filings (including the Management
Discussion and Analysis portions), all prior to filing or
distribution, and review whether the findings in connection
with such releases and filings are consistent. Such review
shall also include discussions with management and the
independent auditors of significant issues regarding
accounting principles, practices and judgments, any
significant changes to the Company's accounting principles,
and any items required to be communicated by or to the
independent auditors.
- Make a recommendation to the Board of Directors regarding the
inclusion of the audited financial statements in the Company's
Annual Report on Form 10-K to be filed with the SEC. Prepare
the report of the Audit Committee required by the rules of the
SEC to be included in the Company's annual proxy statement.
- Meet with the independent auditors and the Company's internal
auditor at least once each quarter without members of
management present. Among the items to be discussed in these
meetings are the independent auditors' and internal auditor's
evaluation of the Company's financial, accounting and auditing
personnel, internal controls, and the cooperation that the
independent auditors received during the course of their most
recent review or audit of the Company's financial statements.
- Review and discuss with management and the independent
auditors any material off-balance sheet transactions,
arrangements, obligations (including contingent obligations)
and other relationships of the Company with entities whose
accounts are not consolidated into the financial statements of
the Company, in any case where the Committee is made aware of
the same and which may have a material current or future
effect on the Company's financial condition, results of
operations, liquidity, capital expenditures, capital resources
or significant components of revenues or expenses.
- Review and approve in advance any agreement, transaction or
other arrangement between the Company and any related party
which would be reportable pursuant to Item 404 of Regulation
S-K.
- Review the resources allocated, activities, organization
structure, appointment, qualifications, performance and
replacement of any individual performing significant internal
audit functions.
- Review significant reports prepared by any individual
performing significant internal audit functions together with
management's response and follow-up to these reports.
A-3
- On at least an annual basis, review with the Company's counsel
any legal matters that could have a significant impact on the
Company's financial statements, the Company's compliance with
applicable laws and regulations, and any significant inquiries
received from regulators or governmental agencies.
- Provide procedures for the receipt, retention and treatment of
complaints regarding the Company's accounting practices,
internal accounting controls or auditing matters, including a
procedure for the confidential and anonymous submission to the
Audit Committee by employees of the Company of concerns
regarding questionable accounting or auditing matters.
- Investigate any matter brought to the attention of the
Committee within the scope of its duties, with the power to
consult with and retain outside legal, accounting and other
experts or advisors for this purpose if, in the judgment of
the Committee, that is appropriate.
COMMITTEE'S RELATIONSHIP WITH INDEPENDENT AUDITORS AND ANY INDIVIDUAL PERFORMING
SIGNIFICANT INTERNAL AUDIT FUNCTIONS; COMPANY FUNDING
- The Committee shall have the direct responsibility for the
appointment, retention, evaluation, compensation and oversight
of the work of the Company's independent auditors and, if
necessary or advisable in the Committee's sole discretion, for
terminating the Company's independent auditors. The
independent auditors, in their capacity as independent public
accountants, shall report directly to the Committee.
- The independent auditors shall report all relevant issues to
the Committee responsive to agreed-on Committee expectations.
In executing its oversight role, the Committee shall review
the work of the external auditors.
- The Committee shall annually review the performance
(effectiveness, objectivity and independence) of the external
auditors. The Committee shall (i) ensure the receipt of a
formal written statement from the independent auditors
delineating all relationships between the auditors and the
Company, consistent with Independence Standards Board Standard
1 or similar requirements as may be issued in the future by
authoritative accounting standards setting or regulatory
bodies; and (ii) confirm with the independent auditors that
the independent auditors are in compliance with the partner
rotation requirements established by the SEC. Additionally,
the Committee shall discuss with the independent auditors
relationships or services that may affect the auditors'
objectivity or independence, and, if applicable, consider
whether the independent auditors' provision of any permitted
non-audit services to the Company is compatible with
maintaining the objectivity and independence of the outside
auditors. If the Committee is not satisfied with the auditors'
assurances of independence, it shall take appropriate action
to ensure the independence of the Company's external auditors.
- The Committee's pre-approval shall be required in order for
the Company to solicit for employment or for a position on its
Board of Directors, or for the Company to hire, any current or
former partner or any professional employee of the Company's
outside auditor or any of its affiliated member firms, if such
partner or professional employee is or has been involved in
the performance of any audit, review, or attest service for
the Company, or any other audit-related or financial
statements or financial information related service, at any
time during the then current fiscal year of the Company up to
and including the
A-4
date of filing of its periodic annual report with the
Securities and Exchange Commission for that year, or in the 12
months preceding the date the Company filed its periodic
annual report with the Securities and Exchange Commission for
the immediately preceding fiscal year.
- If either the external auditors or an individual performing
significant internal auditing functions identify significant
issues relating to matters within the scope of the Committee's
responsibilities that have been communicated to management
but, in their judgment, have not been adequately addressed,
they should communicate these issues to the Committee
chairperson.
- The Company shall provide for appropriate funding, as
determined by the Committee, for payment of compensation to
the independent auditors for the purpose of rendering or
issuing an audit report or performing other audit, review or
attest services for the Company, and to any other experts and
advisors engaged by the Committee. The Company shall also
provide for appropriate funding, as determined by the
Committee, for any ordinary administrative expenses of this
Committee that is necessary or appropriate in carrying out its
duties.
MEETINGS
It is anticipated that the Committee will meet at least four times each year.
MINUTES
The Committee will maintain written minutes of its meetings, which minutes will
be filed with the minutes of the meetings of the Board.
REPORTS
The Committee will regularly report to the Board of the Company regarding (i)
all determinations made or actions taken pursuant to its duties and
responsibilities, as set forth above, and (ii) any recommendations of the
Committee submitted to the Board for action.
A-5
(CURATIVE HEALTH SERVICES, INC. LOGO)
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, JUNE 2, 2004
10:00 A.M.
CURATIVE HEALTH SERVICES, INC.
CORPORATE HEADQUARTERS
150 MOTOR PARKWAY
HAUPPAUGE, NY 11788
--------------------------------------------------------------------------------
(CURATIVE HEALTH SERVICES, INC. LOGO) CURATIVE HEALTH SERVICES, INC.
CORPORATE HEADQUARTERS
150 MOTOR PARKWAY
HAUPPAUGE, NY 11788 PROXY
--------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS - JUNE 2, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Nancy F. Lanis and Thomas Axmachar, and either
of them, proxies of the undersigned, with full power of substitution, to vote
all the shares of Common Stock of Curative Health Services, Inc. (the
"Company"), held of record by the undersigned on April 21, 2004 at the Annual
Meeting of the Stockholders to be held June 2, 2004, and at any adjournment
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED BY THE
UNDERSIGNED STOCKHOLDER. IF NO CHOICE IS SPECIFIED BY THE STOCKHOLDER, THIS
PROXY WILL BE VOTED 'FOR' ALL PORTIONS OF ITEMS (1) AND (2) AND IN THE PROXIES'
DISCRETION ON ANY OTHER MATTERS COMING BEFORE THE MEETING.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such stock and hereby ratifies and confirms all that
said proxies, their substitutions or any of them may lawfully do by virtue
hereof.
PLEASE PROMPTLY MARK, DATE, SIGN, AND MAIL
THIS PROXY CARD IN THE ENCLOSED ENVELOPE.
NO POSTAGE REQUIRED
See reverse for voting instructions,
- Please detach here -
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
1. Nomination 01 Paul S. Auerbauch, MD 04 Joseph L. Feshbach 07 John C. Prior [ ] Vote FOR [ ] Vote WITHHELD
and Election 02 Daniel E. Barce 05 Timothy I. Maudlin 08 Peter M. DeComo all nominees from all nominees
of Directors: 03 Lawrence P. English 06 Gerard Moulffet 09 Paul E McConnell (except as marked)
(Instructions: To withhold authority to vote for any indicated nominee, write
the number(s) of the nominee(s) in the box provided to the right.) [ ]
2. To ratify the appointment of Ernst & Young as the Company's Independent
Auditors.
3. In their discretion the Proxies are authorized to vote upon such other
matters as may come before the meeting or any adjournment thereof.
[ ] For [ ] Against [ ] Abstain
ALL AS MORE PARTICULARLY DESCRIBED IN THE COMPANY'S PROXY STATEMENT, DATED APRIL
30, 2004, RELATING TO SUCH MEETING, RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED.
Address Change? Mark Box [ ] Date ____________________________________
Indicate changes below:
_________________________________________
_________________________________________
Signature(s) in Box
Please date this Proxy Card and sign your
name exactly as it appears hereon. Where
there is more than one owner, each should
sign. When signing as an attorney,
administrator, executor, guardian, or
trustee, please add your title as such.
If executed by a corporation, this Proxy
Card should be signed by a duly
authorized officer. If executed by a
partnership, please sign in partnership
name by authorized persons.