UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                -----------------

                                    FORM 10-K

                                -----------------


(Mark One)


    X       Annual Report Pursuant to Section 13 or 15(d) of the Securities
---------   Exchange Act of 1934


                   For the fiscal year ended December 31, 2000

                                       or

            Transition  Report  Pursuant to Section 13 or 15(d) of the
---------   Securities  Exchange Act of 1934

            [No Fee Required]

            For the Transition Period From        to


Commission File Number:  000-19370

                         Curative Health Services, Inc.
             (Exact name of registrant as specified in its charter)


                MINNESOTA                            41-1503914
               (State or other jurisdiction of       (I.R.S. Employer
               incorporation or organization)        Identification Number)

                 150 Motor Parkway
               Hauppauge, New York                   11788
        (Address of principal executive offices)     (Zip Code)

       Registrant's telephone number, including area code: (631) 232-7000

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, par value $.01 per share
                                (Title of Class)


    Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months ( or such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days:

                                 Yes X    No
                                    ----    ----

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

    As of March 15, 2001, 7,060,099 shares of Common Stock of Curative Health
Services, Inc. were outstanding and the aggregate market value of such Common
Stock held by nonaffiliates (based upon its closing transaction price on such
date) was approximately $39 million.

                       DOCUMENTS INCORPORATED BY REFERENCE
    Portions of Registrant's Proxy Statement for its 2000 Annual Meeting of
Stockholders, which the Registrant intends to file not later than 120 days
following December 31, 2000, are incorporated by reference to Part III of this
Form 10-K Report.

<PAGE>

                                     PART I


Item 1  Business

General

      Curative Health Services, Inc. is a leading disease management company in
the chronic wound care market. Currently, the Company manages, on behalf of
hospital clients, a nationwide network of Wound Care Centers(R) that offers a
comprehensive range of services which enable the Company to provide customized
wound care. The Company's Wound Management Program consists of diagnostic and
therapeutic treatment regimens which are designed to meet each patient's
specific wound care needs on a cost effective basis. The Company's treatment
regimens are based on critical pathways designed for wound healing. The Company
has a proprietary database of patient outcomes that the Company has collected
since 1988 containing approximately 325,000 patient records which indicate an
overall healing rate of approximately 80% for patients completing therapy. The
Company's Wound Care Center(R) network consists of 126 outpatient clinics
located on or near campuses of acute care hospitals in 33 states. The Company is
developing new service models for other health care delivery settings including
inpatient acute care and long term care facilities.

      The Company believes that the high degree of specialization and expertise
offered by the Wound Care Centers(R) provide benefits: (i) to patients through
superior wound care, thus enhancing their quality of life, in many cases,
allowing them to avoid amputation; (ii) to affiliated hospitals by enabling them
to differentiate themselves from their competitors through better wound care
treatment outcomes, to reduce costs by decreasing inpatient lengths of stay and
to increase revenue through the introduction of new patients; (iii) to
affiliated physicians by providing greater access to patients; and (iv) to
insurers and managed care providers by offering a cost effective alternative to
traditional wound care.

Recent Developments

      On October 12, 2000, the Company announced the sale of the assets of its
Procuren business for approximately $3.8 million to Cytomedix, Inc. Under the
agreement Cytomedix will be the exclusive manufacturer of Procuren and Curative
will be the exclusive distributor of Procuren solution in the United States.
Curative will also receive royalties based on the sales of products that are
developed from the associated patents. The sale closed on January 2, 2001.

      On March 20, 2001, the Company announced it had signed a definitive
agreement to purchase all of the outstanding shares of Millennium Health, Inc.
for $32.3 million and the assumption and repayment of approximately $5 million
in debt, for a total of $37.3 million in cash. Millennium is a privately held
specialty pharmaceutical company engaged in the distribution of
biopharmaceuticals.

Industry

      Market Overview. Chronic wounds are common in patients with diabetes and
venous stasis disease, as well as in patients who are immobilized and afflicted
with pressure sores. A chronic wound generally is a wound which shows no signs
of significant healing in four weeks or has not healed in eight weeks. The
healing of a wound is dependent upon adequate blood flow to stimulate new cell
growth and combat infection. When adequate blood flow does not occur, the
healing process is retarded, often resulting in a chronic wound that can last
for months or years. Without effective treatment, a chronic wound may lead to
more severe medical conditions, such as infection, gangrene and amputation,
which are costly to payors and impede the quality of life for the patient.

      According to Chronic Wound Care: U.S. Markets for Wound Management
Products (Medical Data International, 1997), it is estimated that at least six
million people suffer from chronic wounds in the United States. Of the six
million people with chronic wounds, an estimated three million have pressure
sores, over two million have diabetic ulcers, and over one million suffer from
venous stasis ulcers. Diabetic ulcers are responsible for 60,000 limb
amputations each year, accounting for more than half of all such procedures not
related to trauma. Venous stasis disease and pressure sores often afflict the
elderly, who constitute the most rapidly growing segment of the U.S. population
and account for a disproportionately large share of total U.S. health care
expenditures. It is estimated that the wound care segment of the U.S. health
care industry generated $5 billion in expenditures in 1997. It is also
anticipated that the wound care market will continue to grow due to the aging
population and the increasing incidence of health disorders, such as diabetes,
which may lead to chronic wounds.

                                       2
<PAGE>

      Traditional Approach to Chronic Wound Care. Traditional chronic wound care
treatment, which is typically administered by a primary care physician, relies
principally on cleansing and debriding the wound, controlling infection with
antibiotics and protecting the wound. For example, topical or oral antibiotics
are administered to decrease the bacterial count in the wound, protective
dressings are used to decrease tissue trauma and augment repair and various
topical agents are applied that chemically cleanse the wound and remove wound
exudate. These passive treatments do not directly stimulate the underlying wound
healing process. In many cases, the patient may have to see a number of health
care professionals before effective treatment is received. In addition, under
this traditional care model, patients must manage their own care, which often
leads to non-compliance and treatment failure which may lead to infection,
gangrene and amputation. Although wound care programs have begun to evolve to
more specialized and aggressive treatment regimens, the Company believes that a
significant medical need and market opportunity exists for products and services
that improve and accelerate the wound healing process.

The Curative Approach to Chronic Wound Care

      The Company's Wound Management Program is a comprehensive array of
diagnostic and therapeutic treatment regimens with all the components of care
necessary to treat chronic wounds. The Company's Wound Management Program is
administered primarily through the Company's nationwide network of Wound Care
Centers. The Company believes the Wound Management Program provides a better
approach to chronic wound management than the traditional approach, which the
Company believes lacks comprehensive wound programs, effective technology,
positive outcomes and cost efficiency. Each Wound Management Program offers its
patients an inter-disciplinary team of health care professionals, including a
medical director, surgeon, nurse, case manager, nutritionist and
endocrinologist.

      In most cases, patients arriving at the Company's Wound Care Centers have
been treated with traditional wound healing techniques, but continue to suffer
from chronic wounds. In some cases, patients come to a Wound Care Center after
they have received an opinion from their primary physician that limb amputation
is required. Upon the commencement of treatment under the Company's Wound
Management Program, medical personnel conduct a systematic diagnostic assessment
of the patient. Specialized treatment protocols are then established for the
patient, based on the underlying cause of the wound and the unique status of the
patient. After the assessment phase, the course of treatment in the Wound
Management Program may include revascularization, infection control, wound
debridement, growth factor therapy, skin grafting, nutrition, protection
devices, patient education, referrals, and effective management of care through
patient/provider communications.

      To measure the effectiveness of the Company's Wound Management Program,
the Company has developed a functional assessment scoring system to measure the
healing of a wound. Under this system, a chronic wound is considered healed when
(i) it is completely covered by epithelium (i.e., a membranous cellular tissue
that covers and protects a wound as it heals), (ii) maturing skin is present in
the wound, (iii) there is minimal drainage from the wound, (iv) the wound
requires only a protective dressing and (v) the limb involved is functional. The
Company has a proprietary database of patient outcomes that the Company has
collected since 1988 containing approximately 325,000 patient records which
indicate an overall healing rate of approximately 80% for patients completing
therapy.

      One aspect of the Company's Wound Management Program is the use of
Procuren(R), a wound healing agent which is used to treat approximately 6% of
patients. Procuren(R) is a naturally occurring complex mixture of several growth
factors. Growth factors have been shown to promote the growth of skin, soft
tissue and blood vessels. Procuren, as part of a comprehensive treatment
algorithm, has been used to treat over 60,000 patients to date. The Company
believes that Procuren stimulates a normal wound healing response in patients
with chronic wounds in much the same way as the body naturally initiates
healing. On January 2, 2001, the Company sold its Procuren operations to
Cytomedix, Inc. Under the terms of the agreement, Cytomedix acquired the assets
associated with the Procuren operations and becomes the exclusive manufacturer
of Procuren while Curative retains exclusive distribution rights for Procuren in
the United States.

                                       3
<PAGE>

Strategy

      The Company's objective is to enhance its position as a leading disease
management company in the chronic wound care market. The Company's growth
strategy is to continue to improve and refine the Wound Management Program while
broadening its delivery models to cover the entire continuum of care for wound
management. Key elements of this strategy include:

      Expand Into Other Disease Management Areas. Longer term, the Company is
considering capitalizing on its disease management expertise by expanding its
services into other disease management areas to meet the growing continuum of
health care needs of patients and providers. The Company believes that there is
a significant market potential for the delivery of other disease management
services through its existing network of Wound Care Centers. The possibilities
for expansion of the Company's disease management services include the treatment
of chronic wound related diseases such as diabetes, as well as non-chronic wound
related diseases such as cardiovascular disorders. In February 2001, the Company
signed an agreement forming a strategic alliance with E2M Health Services, a
privately held company. Under the agreement the Company will provide to select
hospitals a diabetes management model owned by E2M. The program is in the early
stages of implementation and there can be no assurances that the program will be
successful. On March 20, 2001, the Company announced it had signed a definitive
agreement to purchase all of the outstanding shares of Millennium Health, Inc.
for $32.3 million and the assumption and repayment of approximately $5 million
in debt, for a total of $37.3 million in cash. Millennium is a privately held
specialty pharmaceutical company engaged in the distribution of
biopharmaceuticals.

      Continue to Develop the Company's Nationwide Network of Outpatient Wound
Care Centers. The Company intends to continue to establish additional outpatient
Wound Care Centers on or near the campuses of acute care hospitals. The Company
had 126 outpatient centers as of the end of 2000, and the Company believes the
opportunity for further growth remains substantial. The Company has identified
over 300 additional markets in the United States which the Company believes have
the population necessary to support a dedicated wound care program. The Company
believes hospitals are continually seeking low cost, high quality solutions to
wound management such as those provided by the Company. In addition, the Company
believes it enables its hospital clients to differentiate themselves from their
competitors through better wound care treatment outcomes, reduced costs due to
decreased inpatient lengths of stay and increased revenue through the
introduction of new patients. As a result, the Company believes there is a
significant opportunity for the Company to continue to expand its Wound Care
Center operations through affiliation with acute care hospitals. Additionally in
response to the needs of acute care hospitals in smaller rural markets the
Company developed a wound care program which effectively makes the Company's
value added services available in components. Through this program, hospitals in
smaller markets can purchase components of the Wound Management Program through
a licensing agreement which enables these hospitals to manage wound care
patients. As of December 31, 2000, the Company has established three of the
rural hospital wound care programs.

      Develop New Service Models to Enhance Market Penetration. The Company is
actively developing new service models in new health care delivery settings such
as inpatient programs for acute care hospitals and long term care facilities
(e.g., nursing homes and long term acute care hospitals). These new service
models are being operated as a service from the Company's existing hospital
outpatient Wound Care Centers. Pressure sores, the most common form of chronic
wound, usually occur among nursing home, acute care and home patients due to the
sedentary lifestyle associated with those care settings. As the Company further
develops its inpatient service models, the Company believes it will become more
capable of penetrating the large pressure sore market.

      Provide a Comprehensive Managed Care Product. In addition to providing new
revenue opportunities, the Company believes its ability to provide its services
as a comprehensive managed care product in a number of settings will increase
its attractiveness to managed care payors seeking to provide a continuum of care
while reducing risk. With its Wound Management Program and increasing presence
in multiple health care delivery settings, the Company can offer managed care
payors a shared risk relationship which the Company believes will provide better
patient healing outcomes and more cost-effective services for subscribers.
Further, in 1998 the Company entered into a development and license agreement
with Accordant Health Services, Inc., a private disease management company. As a
strategic partner, Accordant has been licensed by the Company to develop and
market a wound care disease management program to the managed care market. The
Company has not generated any revenue from this business. Additionally, the
Company has made a $4 million equity investment in Accordant.

                                       4
<PAGE>

      Enhance the Company's Wound Management Program. The Company currently
offers a unique Wound Management Program which includes assessment, vascular
studies, revascularization, infection control, wound debridement, growth factor
therapy, skin grafting, nutrition, protection devices, patient education,
referrals and effective management of care through patient/provider
communications. In addition, the Company is continually exploring and seeking
advances in wound care management services and products which could enhance its
current Wound Management Program. The Company is actively pursuing such advances
through the continuous development of its current services, and the
consideration of acquisition opportunities and co-marketing arrangements with
other providers of wound care products and services. Current product offerings
include furnishing hyperbaric oxygen services to interested hospital partners,
alliance with companies marketing new wound care technologies and developing
clinical research capabilities for the wound care center network.

Wound Care Operations

      The Company's wound care operations offer health care providers the
opportunity to create specialty wound care departments designed to meet the
needs of chronic wound patients. The initial focus of the Company's wound care
operations has been hospital outpatient Wound Care Centers. The Company is
currently expanding its programmatic approach to wound care to inpatient
settings such as acute care hospitals and long term care facilities. In these
settings the Company is establishing a wound care program with existing hospital
Wound Care Centers to offer an inter-disciplinary approach to the treatment of
chronic wounds in the inpatient settings.

      Hospital Outpatient Wound Care Centers. Outpatient Wound Care Centers,
located on or near the campuses of acute care hospitals, represent the Company's
core business. A typical hospital outpatient Wound Care Center consists of 2,500
square feet of space comprising four to eight exam rooms, a nursing station, and
physician and administrative offices. These Wound Care Centers are designed to
deliver all necessary outpatient services for the treatment of chronic wounds,
with the hospital providing any inpatient care, such as revascularization or
surgical debridement.

      The Company currently offers its hospital clients two outpatient Wound
Care Center models: a management model and an "under arrangement" model, with a
primary focus on developing management models. The differences between these two
models relate primarily to the employment of the clinical staff at the Wound
Care Center and the basis for the management fees paid to the Company. In the
management model, generally the only employee of the Company at the Wound Care
Center is the Wound Care Center's Program Director, and the Company generally
receives a fixed monthly management fee and a variable case management fee. In
the "under arrangement" model, the Company employs all of the clinical and
administrative staff (other than physicians) at the Wound Care Center and the
Company generally receives fees based on the services provided to each patient.
In all other material respects the two models are identical. In both models,
physicians remain independent and the Company recruits and trains the physicians
and staff associated with the Wound Care Center. The physicians providing
services at a Wound Care Center are recruited by the Company primarily from
among the doctors who work at the hospital and practice in related areas. In
addition, in both models the Company develops, manages and provides Procuren for
the Wound Care Center, and the Company's field support departments provide the
staff at each Wound Care Center with clinical oversight, quality assurance,
reimbursement consulting, sales and marketing and general administrative support
services. The terms of the Company's contract with each hospital are negotiated
individually. Generally, in addition to the management fees described above, the
contracts provide for development fees and Procuren fees charged to the hospital
based on utilization. In both models, the hospital and the physician bill the
patient for the services provided and are responsible for seeking reimbursement
from insurers or other third party payors.

      The first Wound Care Center opened in 1988 and there are currently 126
hospital outpatient Wound Care Centers in operation in 33 states. The Company
has entered into contracts or letters of intent with 3 hospitals to open
additional Wound Care Centers. The Company's hospital client base ranges from
medium-sized community-based hospitals to large hospitals affiliated with
national chains and not-for-profit hospitals in local markets. The Company
selects hospital clients based on a number of criteria. A suitable hospital
client typically can accommodate at least 200 inpatient beds, offers services
which complement the Wound Management Program, including physician specialists
in the areas of general, plastic and vascular surgery, endocrinology and
diabetes, is financially stable and has a solid reputation in the community it
serves. Of the Company's 126 current hospital outpatient Wound Care Centers, 94
are management model centers and 32 are "under arrangement" model centers. The
Company anticipates that many of the existing under arrangement models will be
converted to management models in 2001.

                                       5
<PAGE>

      In expanding its product offering, the Company furnishes hyperbaric oxygen
therapy (HBO) services to interested hospital partners operating outpatient
wound care centers. These services generally include furnishing HBO chambers and
managing the program. As of December 31, 2000 the Company managed 19 HBO
programs at existing hospital outpatient Wound Care Centers which accounted for
approximately 3% of the Company's revenue.

      At December 31, 2000, the Company had management contracts with 11 acute
care hospitals directly or indirectly owned by HCA - The Health Care Company
("HCA") formerly known as Columbia/HCA. These hospitals collectively accounted
for approximately 11% of the consolidated revenues of the Company for the year
ended December 31, 2000. In 2000 there were 14 HCA hospital contracts that
terminated and closed. The Company expects that the HCA hospitals collectively
will account for less than 10% of future revenues.

      Inpatient Wound Care Programs. The Company is addressing the needs of the
inpatient wound care market through the development of new inpatient programs.
These patients often have pressure sores resulting from inactivity. While not
typically as severe as diabetic or venous stasis ulcers, pressure sores
represent the largest segment of the chronic wound market. The Company has
developed an inpatient program for its affiliated acute care hospitals with
outpatient wound care centers that is directed at assisting those hospitals in
identifying and managing inpatients in the acute care hospital that are at risk
or who suffer from chronic wounds. The program is primarily directed at reducing
the length of stay of those patients in the acute care setting. The Company has
also developed a Wound Outreach Programsm, whereby a nurse practitioner or
physician assistant from an affiliated outpatient wound care center provides
wound related services to long term care facilities in surrounding cachement
areas. As of December 31, 2000, the Company has contracts to manage 10 such
inpatient programs at existing acute-care hospital customers. Further, the
Company has contracts to manage 11 programs that provide outreach wound care
services to local long-term care facilities. Both programs are in the early
stages of development and implementation. There can be no assurance that these
programs will be successful in the future.

Contract Terms and Renewals

      Substantially all of the revenues of the Company are derived from
management contracts with acute care hospitals. The contracts generally have
initial terms of three to five years and many have automatic renewal terms
unless specifically terminated. During the year ending December 31, 2001, the
contract terms of 52 of the Company's management contracts will expire,
including 40 contracts which provide for automatic one-year renewals. The
contracts often provide for early termination either by the client hospital if
specified performance criteria are not satisfied, or by the Company under
various other circumstances. Historically, some contracts have expired without
renewal and others have been terminated by the Company or the client hospital
for various reasons prior to their scheduled expiration. During 2000, 9 hospital
contracts expired without renewal and an additional 31 hospital contracts were
terminated prior to their scheduled expiration by the client hospital and in
some cases by the Company. Generally, the Company elects to negotiate a mutual
termination of a management contract if a client hospital desires to terminate
the contract prior to its stated term. The continued success of the Company is
subject to its ability to renew or extend existing management contracts and
obtain new management contracts. Hospitals choose to terminate or not to renew
contracts based on decisions to terminate their programs or to convert their
programs from independently managed programs to programs operated internally.
There can be no assurance that any hospital will continue to do business with
the Company following expiration of its management contract or earlier, if such
management contract is terminable prior to expiration. In addition, any changes
in the Medicare program or third party reimbursement levels which generally have
the effect of limiting or reducing reimbursement levels for health services
provided by programs managed by the Company could result in the early
termination of existing management contracts and would adversely affect the
ability of the Company to renew or extend existing management contracts and to
obtain new management contracts. In connection with the sale of its Procuren
operations to Cytomedix, Inc. in January 2001, the Company will be required to
modify its contracts with its hospital customers relative to the provision of
Procuren. Under its existing contracts, the Company has the responsibility to
provide the hospital with access to Procuren. The Company will be required to
modify the contract language to make a good faith effort to provide the hospital
access to Procuren. There can be no assurance that the Company will be able to
modify the contract or that hospitals will not terminate the contracts. The
termination or non-renewal of a material number of management contracts could
result in a significant decrease in the Company's net revenues and could have a
material adverse effect on the Company's business, financial condition and
results of operations.

                                       6
<PAGE>

Managed Care Operations

      The Company's managed care strategy is currently focused on marketing
Wound Care Center services to local managed care organizations ("MCOs") in
concert with its hospital clients' efforts to promote all hospital-based
services to such MCOs. In those instances where hospital clients are unable to
establish contractual relations with a large local MCO or in those markets where
the Company operates freestanding Wound Care Centers where it would otherwise be
appropriate, the Company seeks to establish relations directly with MCOs. The
Company's contractual arrangements with MCOs, which will vary based upon the
needs of the particular MCO, are expected to provide for the Company to receive
compensation on a fee-for-service, fixed case rate or at-risk capitation basis.
While the Company anticipates that initially most of its managed care contracts
will be fee-for-service or case rate contracts, it expects that at-risk
capitation could become a contracting method.

      The Company's longer term managed care strategy is to establish a wound
care carve-out product with selected MCOs. The Company has begun to develop
tools to help MCOs assess their current wound care experiences (both clinical
outcomes and costs) against the Company's Wound Management Program in order to
demonstrate that a wound care carve-out product can provide added value. In
order to make itself more attractive to MCOs by offering a broader disease
management program, the Company intends, where appropriate, to align itself with
other disease management companies focused on case management or complementary
diseases such as cardiac care venous, stasis management and diabetes. The
Company expects that contracts for a carve-out product will provide at-risk
arrangements with MCOs (i.e., fixed case rates or capitation).

      In 1998, the Company entered into a development and license agreement with
Accordant Health Services, Inc. a private disease management company. As a
strategic partner, Accordant has been licensed by the Company to develop and
market a wound care disease management program to the managed care market
including, Health Maintenance Organizations (HMO's), Preferred Provider
Organization (PPO's) and insurance companies. The wound care disease management
program being developed will include impact models, assessment/intervention
tools and outcome reporting. The model is expected to be a "carve in" approach
whereby registered nurses will monitor health plan subscribers identified as
chronic wound patients through care management programs. The case management
software supports and prompts collection of disease specific data points
utilized by the registered nurses to assist patients in caring for the chronic
condition, identify and monitor patients at risk and educate patients in
preventative measures. The nurses conduct proactive patient monitoring that
assesses patient compliance, complications, functional and clinical health
status and patient satisfaction. The respective health plans are then provided
reports. The program was launched early in 2000 and has not generated any
revenues. There can be no assurances that the program will be successful in the
future. Additionally, the Company has made a $4 million equity investment in
Accordant.

      To date, the Company's managed care operations have been limited. Although
the Company or its hospital clients have been reimbursed for wound treatment by
a number of MCOs on a case-by-case basis, the Company currently has no contracts
that require or incentivize subscribers to use the Company's wound care
services. There can be no assurance that the Company will be able to
successfully expand its managed care operations.

Community Education and Marketing

      The Company's community education and marketing strategy consists of a
two-fold approach involving the development of new wound care programs as well
as growth in operating Wound Care Centers. In 2000, the Company realigned its
organizational structure to improve operating effectiveness and efficiency. To
accomplish this, the Company has divided the United States into two operating
divisions each headed by a Divisional Vice President with the support of
Regional Directors. The professional community education component is locally
managed and conducted by the Wound Care Center Program Directors under the
supervision of the Regional Directors. The primary community education efforts
are directed at physicians and other healthcare professionals to expand
community awareness of the Wound Care Centers.

                                       7
<PAGE>

      In addition, community education marketing plans are developed each year
at each Wound Care Center. The development and execution of the plan is the
responsibility of the Program Director at the Wound Care Center along with the
Corporate Marketing Department. The plan details the anticipated marketing for
the year including radio, print and television advertising as well as
professional symposiums and other community education. The Company markets the
Wound Care Center concept to hospitals as a therapeutic "Center of Excellence."
The Company believes that having a Wound Care Center can differentiate a
hospital from its competitors and can increase the hospital's revenues through
the introduction of new patients, which leads to an increase in ambulatory
surgeries, X-rays, laboratory tests and inpatient surgeries, such as
debridements, vascular surgeries and plastic surgeries. The Company has
demonstrated that Wound Care Centers provide significant incremental revenues to
participating hospitals, and therefore provide an attractive economic
opportunity for hospitals at the same time being more cost effective in terms of
total healthcare dollars expanded. Potential benefits to treating physicians
include the healing of difficult-to-heal wounds and an expansion of the
physician's practice.

      The Company's efforts to develop new wound management programs at
acute-care hospitals is headed by a Senior Director of Development. The Senior
Director of Development is responsible for the activities of the Directors of
Development and Business Development Managers. The primary role of the Directors
of Development and Business Development Managers is the development of new wound
care programs. As of December 31, 2000, the Company had two Directors of
Development and six Business Development Managers.

Proprietary Rights

      The Company's success depends in part on its ability to enforce patents,
maintain trade secret protection and operate without infringing on or violating
the proprietary rights of third parties. The Company also relies, in part, on
proprietary know-how and technological advances which it seeks to protect by
measures such as confidentiality agreements with its employees, consultants and
other parties with whom it does business. There can be no assurance that these
agreements will not be breached, that the Company would have adequate remedies
for any breach, or that the Company's trade secrets and proprietary know-how
will not otherwise become known, be independently discovered by others or found
to be unprotected.

      The Company has registered the name "Wound Care Center" as a trademark in
the United States for use in connection with the Company's wound care
operations.

Government Regulation

      The Company's Wound Care Centers and the production and marketing of its
products and services are subject to extensive regulation by numerous
governmental authorities in the United States, both federal and state. Although
the Company believes that it is currently in substantial compliance with
applicable laws, regulations and rules, the Company received a Warning Letter
from FDA in March 1998 admonishing the Company for several alleged deviations
from good manufacturing practices at one of the Company's Wound Care Centers.
The Company has responded to the Warning Letter and believes that it has
adequately addressed FDA's concerns. However, there can be no assurance that
FDA, another governmental agency or a third party will not contend that certain
aspects of the Company's operations or procedures are subject to or are not in
compliance with such laws, regulations or rules or that the state or federal
regulatory agencies or courts would interpret such laws, regulations and rules
in the Company's favor. The sanctions for failure to comply with such laws,
regulations or rules could include denial of the right to conduct business,
significant fines and criminal penalties. Additionally, an increase in the
complexity or substantive requirements of such laws, regulations or rules could
have a material adverse effect on the business, financial position and results
of operations of the Company.

      The FDA regulates drugs and biologics that move in interstate commerce and
requires that such products receive pre-marketing approval based on evidence of
safety and efficacy. Since Procuren was produced at one of the Company's blood
processing facilities in the state where the Wound Care Center which will
dispense the Procuren is located and so is not intended to be shipped across
state lines, the Company believes, based on the advice of its counsel, that
under current law and regulations, FDA approval is not required for the Company
to distribute and sell Procuren through the Wound Care Centers on an intrastate
basis. The FDA is currently reassessing its regulation of other autologous and
somatic cell products and has publicly stated that it believes that if any
component of a drug or biological or if any patient receiving such substance
moves in interstate commerce, a sufficient nexus with interstate commerce exists
for FDA to require pre-marketing approval and licensure. The FDA has indicated
to the Company that the status of Procuren would be addressed by the FDA in a
future Federal Register publication, possibly as a part of the FDA's overall
regulation of other autologous and somatic cell products. While the production
of Procuren includes components that are shipped in interstate commerce, to date
the FDA has not determined that Procuren, as currently prepared, is subject to
licensure or pre-market approval. However, in the March 1998 FDA Warning Letter,
FDA objected to the Company providing Procuren to patients who reside in a state
other than the one in which the Wound Care Center is located. The Company ceased
providing Procuren to out-of-state patients.

                                       8
<PAGE>

      Because FDA approval has not been required for Procuren, and state
approvals are generally limited to licensing of facilities, there has been no
independent determination of its efficacy by any governmental entity. If the FDA
were to require submission of a biologics license application ("BLA") as a
condition for the continued distribution and sale of Procuren, the Company might
have to demonstrate the safety, purity, potency and effectiveness of the product
through extensive clinical trials. Neither the Company nor any third party has
conducted the controlled clinical trials required to establish Procuren's
efficacy. Compliance with the requirements for a BLA is time-consuming and
involves the expenditure of substantial resources. There can be no assurance
that the Company would undertake to establish efficacy or to obtain or maintain
the necessary FDA approvals to distribute Procuren. Any change in current
regulatory interpretations by or positions of state officials where the Wound
Care Center's are located could adversely affect the Company's distribution of
Procuren within those states.

      Various state and federal laws regulate the relationships between
providers of health care services and physicians and other clinicians, including
employment or service contracts, investment relationships and referrals for
certain designated health services. These laws include the fraud and abuse
provisions and referral restrictions of the Medicare and Medicaid statutes,
which prohibit the solicitation, payment, receipt or offering of any direct or
indirect remunerations for the referral of Medicare and Medicaid patients or for
the ordering or providing of Medicare or Medicaid covered services, items or
equipment. Violations of these provisions may result in civil or criminal
penalties for individuals or entities including exclusion from participation in
the Medicare or Medicaid programs. Several states have adopted similar laws that
cover patients in private programs as well as government programs. Because the
anti-fraud and abuse laws have been broadly interpreted, they limit the manner
in which the Company can operate its business and market its services to, and
contract for services with, other health care providers.

      Additionally, federal and some state laws impose restrictions on
physician's referrals for certain designated health services to entities with
which the physician has a financial relationship, but there is considerable
uncertainty about some facets of these laws, especially the federal law since
there are no final rules interpreting the law. The Company believes its
operations do not violate these restrictions to the extent applicable.
Periodically there are efforts to expand the scope of these referral
restrictions from its application to government health care programs to all
payors, and to additional health services. Certain states are considering
adopting similar restrictions or expanding the scope of existing restrictions.
There can be no assurance that the federal government or other states in which
the Company operates will not enact similar or more restrictive legislation or
restrictions or interpret existing laws and regulations in a manner that could
under certain circumstances limit the manner in which the Company can operate
its business and have a negative impact on the Company's business, financial
condition and results of operations.

      The Company has been informed of two separate complaints filed under the
Federal Civil False Claims Acts alleging that the Company's relationship with
its hospital customers violated certain Medicare regulations (See Item 3 Legal
Proceedings for a further discussion on these matters). The Company disagrees
with these characterizations of its contractual arrangements, its services, and
the fees it charges for those services. If the government were to conclude that
the Company engaged in any misconduct, it could result in affecting the
Company's relationship with all its hospital customers, substantial monetary
fines and penalties, and exclusion from governmental healthcare programs which
could have a material adverse effect on the business, financial position and
results of operations of the Company.

      The laws of many states prohibit physicians from sharing professional fees
with non-physicians and prohibit non-physician entities, such as the Company,
from practicing medicine and from employing physicians to practice medicine. The
laws in most states regarding the corporate practice of medicine have been
subjected to limited judicial and regulatory interpretation. The Company
believes its current and planned activities do not constitute prohibited fee
splitting or violate any prohibition against the corporate practice of medicine.
There can be no assurance, however, that future interpretations of such laws
will not require structural or organizational modifications of the Company's
existing business or have a negative impact on the Company's business, financial
addition and results of operations.

      Pursuant to the federal Occupational Safety and Health Act, employers have
a general duty to provide a work place for their employees that is safe from
hazard. The U.S. Occupational Safety and Health Administration ("OSHA") has
issued rules relevant to certain hazards that were found in the Company's blood
processing facilities. In addition, OSHA issued a standard in 1992 applicable to
protection of workers from blood-borne pathogens. Failure to comply with this
standard relating to blood-borne pathogens, other applicable OSHA rules or with
the general duty to provide a safe work place could subject the Company to
substantial fines and penalties.

                                       9
<PAGE>

Third Party Reimbursement

      The Company, through its wound care operations, provides contractual
management services for fees and sells Procuren to acute care hospitals and
other health care providers. These providers, in turn, seek reimbursement from
third party payors, such as Medicare, Medicaid, health maintenance organizations
and private insurers, including Blue Cross/Blue Shield plans. The availability
of reimbursement from such payors has been a significant factor in the Company's
ability to increase its revenue streams and will be important for future growth.

      Each third party payor formulates its own coverage and reimbursements
policies. In 1992, the Health Care Financing Administration ("HCFA"), the agency
that administers the Medicare program nationally, published a national coverage
decision denying coverage for Procuren based on its determination that the
safety and efficacy of Procuren had not been established and so the use of
Procuren was not "reasonable and necessary" within the meaning of applicable
law. Although the Company has not, and the Company believes that its clients
have not, in general experienced difficulty in securing third party
reimbursement for Wound Care Center services and the use of Procuren from
private insurers, some hospitals have experienced denials, delays and
difficulties in obtaining such reimbursement. In some cases where Procuren
reimbursement has been denied by a payor, the hospitals have ceased providing
Procuren to patients whose only means of payment is through such payor. To the
Company's knowledge, no widespread denials have been received by hospitals
regarding reimbursement for other Wound Care Center services or reimbursement of
management fees charged by the Company to its hospital clients. The Company
discusses coverage and reimbursement issues with its hospital clients and third
party payors on a regular basis. Such discussions will continue as the Company
seeks to assure sufficient payments from third party payors to the Company's
hospital customers for services managed by the Company and for Procuren so that
the Company's hospital customers and potential customers find it financially
feasible to renew contracts or enter into contracts with the Company. Although
no individual coverage and reimbursement decision is material to the Company, a
widespread denial of reimbursement coverage for Procuren or other services would
have a material adverse effect on the Company's business, financial position and
results of operations.

      Medicare regulations limit reimbursement for health care charges paid to
related parties. A party is considered "related" to a provider if there is
significant common ownership or common control by the provider. On occasion,
fiscal intermediaries under contract to HCFA to audit hospital Medicare claims
have asserted that one test for determining control for this purpose is whether
the percentage of the total revenues of the party received from services
rendered to the provider is so high that it effectively constitutes control.
Although the Company believes it does not currently receive sufficient revenues
from any customer, including HCA, that would make it a related party, it is
possible that such regulations could limit the number of management contracts
that the Company could have with HCA or any other client.

      As a result of the Balanced Budget Act of 1997, HCFA implemented the
Outpatient Prospective Payment System ("OPPS") for all hospital outpatient
department services furnished to Medicare patients beginning August 2000. Under
the system, a predetermined rate is paid to hospitals for clinic services
rendered, regardless of the hospitals cost. The new payment system does not
provide comparable reimbursement for previously reimbursed services and the
payment rates for many services are insufficient for many of the Company's
hospital customers, resulting in revenue and income shortfalls for the wound
care center operations managed by the Company on behalf of the hospitals. As a
result, the Company has renegotiated and modified most of its management
contracts which has resulted in reduced revenue and income to the Company from
the modified contracts and in numerous cases contract termination. The Company
expects that contract renegotiation and modification with many of its hospital
customers will continue which could result in further reduced revenues and
income to the Company from those contracts and even contract terminations. The
results could have a material effect on the Company's business, financial
condition and results of operations.

                                       10
<PAGE>

      The Wound Care Centers managed by the Company on behalf of acute care
hospitals are treated as "provider based entities" for Medicare reimbursement
purposes. This designation is required for the hospital based program to be
covered under the Medicare outpatient reimbursement system. With OPPS, HCFA
published criteria for determining when programs may be designated "provider
based entities". The interpretation and application of these criteria are not
entirely clear and there is a risk that some of the programs managed by the
Company could be found not to be "provider based entities". Although the Company
believes that the programs it manages meet the current criteria to be designated
"provider based entities", a widespread denial on such designation would have a
material adverse effect on the Company's business, financial position and
results of operations.

      Political, economic and regulatory influences are subjecting the health
care industry in the United States to fundamental change. Although Congress has
failed to pass comprehensive health care reform legislation thus far, the
Company anticipates that Congress and state legislatures will continue to review
and assess alternative health care delivery and payment systems and may in the
future propose and adopt legislation effecting fundamental changes in the health
care delivery system. It is possible that future legislation enacted by Congress
or state legislatures will contain provisions which may materially adversely
affect the business, financial position and results of operations of the Company
or may change the operating environment for the Company's targeted customers
(including hospitals and managed care organizations). Health care industry
participants may react to such legislation or the uncertainty surrounding
related proposals by curtailing or deferring expenditures and initiatives,
including those relating to the Company's programs and services. It is also
possible that future legislation either could result in modifications to the
nation's public and private health care insurance systems, which could affect
reimbursement policies in a manner adverse to the Company, or could encourage
integration or reorganization of the health care delivery system in a manner
that could materially affect the Company's ability to compete or to continue its
operations without substantial changes. The Company cannot predict which other
legislation relating to its business or to the health care industry may be
enacted, including legislation relating to third party reimbursement, or what
effect any such legislation may have on its business, financial position and
results of operations.

Competition

      The Company's principal competition in the chronic wound care market
consists of specialty clinics that have been established by some hospitals or
physicians. Additionally, there are a number of private companies which provide
wound care services through a HBO program format. In the market for disease
management products and services, the Company faces competition from other
disease management facilities, general health care facilities and service
providers, pharmaceutical companies, biopharmaceutical companies and other
competitors. Many of these companies have substantially greater capital
resources and marketing staffs, and greater experience in commercializing
products and services, than the Company. In addition, recently developed
technologies, or technologies that may be developed in the future, are or may be
the basis for products which compete with the Company's chronic wound care
products and which may be in direct competition with Procuren. There can be no
assurance that the Company will be able to enter into co-marketing arrangements
with respect to these products, or that the Company will be able to compete
effectively against such companies in the future.

Employees

      As of December 31, 2000, the Company employed 480 full-time employees, of
which 401 employees were in the wound care operations, 34 employees were in
Procuren production, 14 employees were in technical support and 31 employees
were in general administration and finance. The Company expects to add
additional personnel to its wound care operations in the next year. The Company
believes that its relations with its employees are good.

Item 2  Properties

      The Company's headquarters and technical support facility is located in
Hauppauge, Long Island, New York. The Company leases this 30,000 square foot
facility under a lease through 2005. The Company believes that its facilities
are adequate and suitable for its operation. The Company also leases 27
production facilities totaling 53,175 square feet. In January 2001, the Company
sold its Procuren operations and transferred the leased facilities to the buyer,
Cytomedix, Inc. In most leases, the Company continues to be named a party to the
lease. The Company's facilities at the hospital outpatient Wound Care Centers
are owned or leased by the hospitals.

                                       11
<PAGE>

Item 3  Legal Proceedings

      In April 1999, the Company learned through a press release from the United
States Department of Justice that a complaint was filed by a "whistleblower"
relator under the Federal Civil False Claims Act alleging that the Company made
improper charges to Columbia/HCA hospitals as well as other hospitals. The case,
filed as United States ex. rel. Joseph "Mickey" Parslow v. Columbia/HCA
Healthcare Corporation and Curative Health Services, Inc. in the Federal
District Court for the Middle District of Florida, Tampa Division, has been
transferred to the United States District Court for the District of Columbia.

      Under the False Claims Act, the whistleblower relator could be entitled to
approximately 15% of any amounts obtained from the defendants. This potential
bounty under the False Claims Act was intended by Congress to motivate private
persons to bring actions of this nature.

      In February 2001, the Office of the U.S. Attorney for the Middle District
of Florida informed the Company, through its outside legal counsel, that it was
the subject of a criminal investigation concerning its business relationships
with the former Columbia/HCA.

      In February 2001, the DOJ initiated settlement discussions with the
Company and the Company expects that this process will continue. On March 15,
2001, the government filed its amended complaint in the Parslow case. The
amended complaint alleges that, pursuant to the Company's management services
contracts with various Columbia/HCA hospitals, Company personnel provided
services which the government characterizes as marketing and advertising
services. The complaint further alleges that these services are not reimbursable
under the Federal Medicare Program and that the hospitals submitted false claims
to the Medicare Program by including the Company management fees on cost reports
submitted by the hospitals to Medicare. The complaint contends that the Company,
by providing these alleged marketing and advertising services and by charging a
management fee for its services, caused the submission of false claims by the
hospitals. Further, the complaint alleges that the Company, through its
employees, recommended the services of Wound Care Centers and Columbia/HCA
hospitals to patients and physicians. The complaint alleges that the Company
arranged for patients to receive medical services from Columbia/HCA hospitals.
The government contends that the management fees the Company received from the
Columbia/HCA hospitals were illegal payments in exchange for patient referrals
to Columbia/HCA hospitals. The hospitals filed these cost reports claiming
reimbursement of the management fees. The government alleges that the hospital
cost reports were false claims because the Company's management fees were
improper under the Federal Medicare-Medicaid anti-kickback statute.

      On March 28, 2001, the Company entered into an agreement with the
Department of Justice  in which the government agreed to refrain from
taking any action seeking to enjoin or prevent the closing of the Millennium
acquisition. On its part, while settlement discussions continue, Curative agreed
to secure a letter of credit for $8 million in favor of the government which
could be accessed in the case of a final, non-appealable judgment or settlement.
Curative also agreed to suspend its stock repurchase program and to provide the
government with prior notice of material, non-ordinary course of business
transactions. The amount of the anticipated letter of credit does not reflect an
evaluation or estimate of Curative's ultimate or likely liability in connection
with the ongoing government investigations.

      The Company has a formal compliance program and management believes that
the Company is in material compliance with applicable laws and ethical business
practices. In the conduct of its business, the Company has relied on the advice
and guidance of nationally recognized law firms in structuring its business
relationships with its hospitals. In this pending litigation, the Company
intends to defend itself vigorously. An adverse result in this qui tam action
could have a material adverse effect on the Company's business, financial
condition and/or results of operations.

     In January  2000,  the  Company  disclosed  that a qui tam action was filed
under seal in the United States District Court for the Southern  District of New
York in 1998.  Pursuant to a court  order,  the seal under which this action was
filed was modified to,  among other  things,  permit the Company to disclose the
allegations  in the complaint in its periodic  filings with the  Securities  and
Exchange Commission and as required to fulfill its disclosure  obligations under
federal and state securities laws. The complaint was filed by a  "whistleblower"
relator  under the  Federal  Civil  False  Claims Act and names the  Company and
hospitals with which it does business as defendants.  The portion of the qui tam
action  related to  Columbia/HCA  hospitals has been  transferred  to the United
States District Court for the District of Columbia.

                                       12
<PAGE>

      The complaint alleges, among other things, that the defendants violated
the "anti-kickback" statute in part because a portion of the Company's fee was
based upon the number of new patients seen in the wound care centers managed by
the Company; engaged in prohibited self-referral transactions; improperly billed
Medicare for costs and services not covered by Medicare; double billed Medicare
for professional services; and submitted false claims to Medicare. Certain of
the allegations are similar to the allegations made in the United States ex.
rel. Joseph "Mickey" Parslow v. Columbia/HCA Healthcare Corporation and Curative
Health Services, Inc. qui tam action. The complaint in the Southern District of
New York action asserts that as a result of the allegedly wrongful conduct, the
United States suffered damages and that the defendants are liable to the United
States for three times the amount of the alleged damages plus civil penalties of
up to $10,000 per false claim.

      The United States has not yet decided whether to intervene in the portion
of the New York qui tam action that remains in the jurisdiction of the New York
Court. If it does not, then the plaintiff relator may pursue the claims on
his/her own or may withdraw the complaint. On March 15, 2001, however, the
government declined to intervene against the Company in that portion of the qui
tam action related to the Company's business with Columbia/HCA that was
transferred to the U.S. District Court for the District of Columbia.

      The Company disagrees with the characterizations in that complaint of its
contractual arrangements, its services, and the fees it charges for those
services, and intends to defend itself vigorously in this action. An adverse
result in this qui tam action could have a material adverse effect on the
Company's business, financial condition and/or results of operations.

      Further, if the government were to conclude that the Company engaged in
any misconduct, it could result in affecting the Company's relationship with all
of its hospital customers, substantial monetary fines and penalties, and even
exclusion from the governmental healthcare programs which could have a material
adverse effect on the business, financial position and results of operations of
the Company.

      Subsequent to the disclosure of the Parslow "whistleblower" lawsuit and
Department of Justice action, the Company and , in some cases, certain of its
officers were named in four shareholder lawsuits, namely:

            Ernest Hack versus Curative Health Services, Inc et. al.

            Scott Thompson versus Curative Health Services, Inc. et al.

            Tirdad Thompson versus Curative Health Services, Inc. et al.

            William Nolan versus Curative Health Services, Inc. et al.

      All suits were filed in the United States District Court for the Eastern
District of New York. The four shareholder lawsuits have been consolidated into
one class-action lawsuit. The lawsuits allege generally that the Company and its
officers violated federal securities laws by disseminating materially false and
misleading statements and failing to disclose material information relating to
the contractual relationships with Columbia/HCA Healthcare Corporation and other
hospitals, and certain purported misrepresentations in connection therewith. The
suit seeks to recover unspecified damages from defendants. The Company denies
the allegations and intends to vigorously defend the suits. The Court denied
defendant's motion to dismiss and discovery is currently ongoing. An adverse
result in this lawsuit could have a material adverse effect on the Company's
business, financial condition and/or results of operations.

      Notwithstanding its belief that it has complied with the law and its
intention to defend itself vigorously, if it is determined to be in the best
interests of the Company, it is possible that the Company will eventually choose
to enter into a settlement with the government related to the qui tam actions
and/or the plaintiffs in the securities litigation lawsuit that could have a
material adverse effect on the Company's business, financial condition and/or
results of operations.

      In addition, the Company, in the ordinary course of business, is the
subject of or party to various lawsuits, the outcome of which, in the opinion of
management, will not have a material adverse effect on its financial position or
results of operations.

                                       13
<PAGE>

Item 4  Submission of Matters to a Vote of Security Holders

      None.

                                       14
<PAGE>

                                     PART II


Item 5 Market for the Registrant's Common Equity and Related Stockholder Matters

      The Company's common stock is traded on The Nasdaq Stock Market under the
symbol "CURE". As of March 15, 2001, there were approximately 205 holders of
record and approximately 3,650 beneficial shareholders of the Company's common
stock. The Company has not paid any cash dividends since its inception. The
Company currently does not intend to pay cash dividends in the foreseeable
future but intends to retain all earnings, if any, for use in its business
operations.

      The following table sets forth, for the fiscal periods indicated, the
range of high and low sales prices of the common stock as quoted on The Nasdaq
National Market System:

                                                  High        Low

                  2000
                  Fourth Quarter..........     $  6.00     $  5.375
                  Third Quarter...........        6.594       5.063
                  Second Quarter..........        6.188       5.188
                  First Quarter...........        8.063       5.50

                  1999
                  Fourth Quarter..........     $  8 7/8    $  4 3/4
                  Third Quarter...........        6 1/16      4 1/2
                  Second Quarter..........       12 1/8       3 3/4
                  First Quarter...........       30 3/4       9 7/8


                                       15
<PAGE>

Item 6  Selected Consolidated Financial Data

      Five year selected consolidated financial data and other operating
information of Curative Health Services, Inc., and subsidiaries follow:
<TABLE>
<CAPTION>

                                                                 Year Ended December 31,
                                                                 ----------------------
                                                 2000         1999        1998       1997          1996
                                                 ------------------------------------------------------
                                                   (In thousands, except per share and operating data)
Statement of Operations Data:
<S>                                          <C>         <C>         <C>         <C>            <C>
Revenues ................................    $ 77,691    $ 101,209   $ 103,987   $ 87,906       $ 67,395
Costs and operating expenses:
   Costs of products sales and services .      51,073       59,945      56,035     48,200         37,828
   Selling, general and administrative ..      29,441       26,273      23,358     22,617         19,208
                                             --------    ---------   ---------    -------       --------

Total costs and operating expenses ......      80,514       86,218      79,393     70,817         57,036
                                             --------    ---------   ---------    -------       --------
(Loss) income from operations
   before interest income ...............      (2,823)      14,991      24,594     17,089         10,359
Interest income .........................       2,609        2,037       2,660      2,666          1,344
                                             --------    ---------   ---------    -------       --------
(Loss) income before income taxes .......        (214)      17,028      27,254     19,755         11,703
Income taxes ............................         (86)       6,566      10,217      3,293          1,008
                                             --------    ---------   ---------    -------       --------
Net (loss) income .......................   $    (128)   $  10,462   $  17,037   $ 16,462      $  10,695
                                            =========    =========   =========   ========      =========
Net (loss) income per common share, basic   $    (.01)   $     .99   $    1.34   $   1.33      $    0.95
                                            =========    =========   =========   ========      =========
Denominator for basic earnings per share,
   weighted average common shares .......       8,780       10,559      12,704     12,404         11,212


Operating Data:
Wound care centers at end of period .....         126          158         154        132            105
Number of new patients ..................      59,384       61,539      58,510     48,722         38,699

Balance Sheet Data:
Working capital .........................   $  44,394    $  55,456   $  76,419   $ 62,583      $  45,760
Total assets ............................      75,166       87,910     109,121     84,939         61,959
Long-term debts
   (including capital lease obligation) .           -            -           -          7          1,044
Retained earnings (deficit)..............      24,603       24,731      14,269     (2,768)       (19,230)
Stockholders' equity ....................      55,570       71,600      93,396     72,592         50,270
</TABLE>

                                       16
<PAGE>


Item 7  Management's Discussion and Analysis of Financial Condition and Results
        of Operations

Overview

      The Company's principal business is the delivery of chronic wound care
services through its nationwide network of Wound Care Centers located in or near
acute care hospitals. Substantially all of the Company's revenues are currently
generated under its contracts with acute care hospitals for the management of
chronic wound care programs and the production of Procuren. The Company
currently operates two types of Wound Care Center contracts with hospitals: a
management model and an "under arrangement" model.

      In the management model, the Company provides management and support
services for a chronic wound care facility owned or leased by the hospital and
staffed by employees of the hospital, and generally receives a fixed monthly
management fee and a variable case management fee. In the "under arrangement"
model, the Company provides management and support services, as well as the
clinical and administrative staff, for a chronic wound care facility owned or
leased by the hospital, and generally receives fees based on the services
provided to each patient. In both models, physicians remain independent, and the
Company recruits and trains the physicians and staff associated with the Wound
Care Center. In addition, in both models, the Company receives fees for the sale
of Procuren.

      Of the 126 hospital outpatient Wound Care Centers in operation as of
December 31, 2000, 94 were management model Wound Care Centers, and 32 were
"under arrangement" model Wound Care Centers. The Company's fees under its
management contracts with acute care hospitals are paid by the hospitals
directly. See "Business--Third Party Reimbursement."

Results of Operations

     Fiscal Year 1999 vs.  Fiscal Year 2000.  The Company's  revenues  decreased
from  $101.2  million in 1999 to $77.7  million  in 2000,  a 23%  decrease.  The
Company  ended the year with 126  hospital  based Wound Care  Centers  operating
compared with 158 at the end of 1999. The decrease in revenue is attributable to
the termination of 40 programs during 2000,  renegotiation of existing contracts
which  resulted in reduced  revenue to the Company,  the  conversion of 11 under
arrangement  model  programs to  management  models which have lower revenue and
expenses,  and a  reduction  of  Procuren  revenues  as a result of a decline in
Procuren  patients.  Revenue at existing  centers declined 16% in 2000 primarily
due to such renegotiations,  conversions and declining Procuren revenues. At any
time  during  the  year,  10%  to  20%  of the  Company's  contracts  are  being
renegotiated  with the client  hospital  for a variety of  contractual  terms or
issues.  Historically,  some contracts have expired  without  renewal and others
have been  terminated by the Company or the client  hospital for various reasons
prior to their scheduled  expiration.  Hospitals are currently  facing financial
challenges associated with lower occupancy rates and reduced revenue streams due
to pricing  pressures from third party payors.  Program  terminations  by client
hospitals  have  been  effected  for  such  reasons  as  reduced  reimbursement,
financial  restructuring,  layoffs,  bankruptcies  or  even  hospital  closings.
Further, the Medicare program implemented a new reimbursement system during 2000
for  hospital  outpatient  services  which has  reduced  reimbursement  rates to
hospitals. The termination, non-renewal or renegotiation of a material number of
management  contracts  could  result in a  continued  decline  in the  Company's
revenue.  As the result of the recent legal action against the Company,  further
unanticipated  terminations or non-renewals  may take place.  Additionally,  new
business  development has been slower than normal given the legal  uncertainties
facing the  Company.  Any  inability  of the  Company to develop  new Wound Care
Centers could continue the revenue decline.  The Company has and expects that it
will  continue  to modify its  management  contracts  with many of its  hospital
customers  which could result in reduced revenue to the Company or even contract
terminations.  The Company has a number of initiatives to counter the decline in
revenue,  although  there  can be no  assurance  that  the  initiatives  will be
successful.  Total new  patients  to the wound care  centers  decreased  3% from
61,539 in 1999 to  59,384  in 2000.  The  total  number  of  patients  receiving
Procuren  therapy  decreased  40% from  5,797  in 1999 to  3,470  in  2000.  The
percentage of patients  receiving  Procuren  decreased  from 9% in 1999 to 6% in
2000. The Company  believes that this decrease is attributable to an increase in
the  percentage  of less severe  chronic  wounds being  treated at the Company's
Wound  Care  Centers(R),  for which  physicians  are less  likely  to  prescribe
Procuren(R),  a lack of  available  reimbursement  for  Medicare  patients,  the
inability of hospitals to assume  collection risks due to financial  constraints
and  increased  competition  from other  wound  healing  products.  The  Company
anticipates that the percentage of patients receiving  Procuren(R) will continue
to decline in the future.

                                       17
<PAGE>

      Costs of product sales and services decreased from $59.9 million in 1999
to $51.1 million in 2000, a 15% decrease. The decrease is attributable to
reduced staffing and operating expenses of approximately $4.2 million related to
the operation of 126 programs operating at the end of 2000 as compared to 158
programs operating at the end of 1999 and reduced expenses of approximately $1.4
million related to Procuren production. Additionally there were 16 fewer
under-arrangement programs in operation at the end of 2000 as compared to the
same period for 1999 at which the services component of costs is higher than at
the Company's other centers due to the additional clinical staffing and expenses
that these models require. For 2000 this reduction in the number of
under-arrangement programs accounted for approximately $2.0 million of the
decrease in product costs and services. During 2000, the Company eliminated 58
sales positions which resulted in charges of $550,000 for severances and related
equipment write offs. Additionally, the Company recorded charges of $601,000
related to processing facilities not sold as part of the sale of its Procuren
operations to Cytomedix (see Note B) and severance and equipment write offs
related to closed Wound Care Centers. As a percentage of revenues, costs of
product sales and services for 2000 was 66% compared to 59% for 1999. The 7%
increase is attributed to the lower revenue and negative same store sales growth
which decreased margins and created an inability to leverage expenses over a
broader revenue base.

      Selling, general and administrative expenses increased from $26.3 million
in 1999 to $29.4 million in 2000, a 12% increase. Selling, general and
administrative expenses for 2000 include charges of $4.2 million including $2.0
million of severance expense associated with a reduction in workforce, $.6
million in costs related to the closing of the Company's Dallas field office,
$1.0 million in reserves related to the Cytomedix purchase of the Company's
Procuren operations, and equipment and lease space write offs related to the
reduction in work force. Additionally legal and other costs associated with the
Department of Justice actions and shareholder class action lawsuits were
approximately $.6 million higher in 2000 as compared with 1999. The Company
expects to continue to incur significant legal and other related costs until the
aforementioned actions are resolved. The increase in selling, general and
administrative expense for 2000 as compared with 1999 was partially offset by a
reduction of $1.5 million in bad debt expense and reductions in corporate
support department expenditures related to the reduced number of programs in
operation. As a percentage of revenues, selling, general and administrative
expenses were 38% in 2000 compared to 26% in 1999. The increase is due to the
restructuring costs, higher legal expense and decreased revenue in 2000.

      Interest income was $2.6 million in 2000 compared to $2.0 million in 1999.
The increase is primarily attributable to higher average cash balances during
2000.

      Net income decreased from $10.5 million or $.97 (diluted) per share in
1999 to a net loss of $.1 million or $(.01) (diluted) per share in 2000. The
decrease in earnings of $10.6 million is attributable to a reduced revenue base
which impacted wound care center margins, restructuring costs and higher legal
expense.

     Fiscal Year 1998 vs.  Fiscal Year 1999.  The Company's  revenues  decreased
from  $104.0  million in 1998 to $101.2  million  in 1999,  a 3%  decrease.  The
Company  ended the year with 158  hospital  based Wound Care  Centers  operating
compared with 154 at the end of 1998. The decrease in revenue is attributable to
the termination of 20 programs during 1999,  renegotiation of existing contracts
including 24 with Columbia/HCA Healthcare Corporation, which resulted in reduced
revenue to the Company,  and a reduction  of Procuren  revenues as a result of a
decline in Procuren  patients.  Revenue at existing  centers declined 2% in 1999
primarily due to such  renegotiations and declining  Procuren  revenues.  At any
time  during  the  year,  10%  to  20%  of the  Company's  contracts  are  being
renegotiated  with the client  hospital  for a variety of  contractual  terms or
issues.  Historically,  some contracts have expired  without  renewal and others
have been  terminated by the Company or the client  hospital for various reasons
prior to their scheduled  expiration.  Hospitals are currently  facing financial
challenges associated with lower occupancy rates and reduced revenue streams due
to pricing  pressures from third party payors.  Program  terminations  by client
hospitals  have been  effected  for such  reasons  as  financial  restructuring,
layoffs, bankruptcies or even hospital closings. The termination, non-renewal or
renegotiation  of a material  number of management  contracts  could result in a
continued  decline in the Company's  revenue.  As the result of the recent legal
action against the Company,  further unanticipated  terminations or non-renewals
may take place.  Additionally,  new  business  development  has been slower than
normal given the legal  uncertainties  facing the Company.  Any inability of the
Company to develop new Wound Care Centers  could  continue the revenue  decline.
Further, the Medicare program will be implementing a new reimbursement system in
year 2000 for  hospital  outpatient  services.  The  Company  believes  that the
reimbursement  rates to  hospitals  will be  insufficient  resulting  in reduced
revenues to the hospitals.  The Company  expects that it will need to modify its
management  contracts with many of its hospital  customers which could result in
reduced revenue to the Company or even contract terminations.  The Company has a
number of initiatives  to counter the decline in revenue,  although there can be
no assurance that the initiatives will be successful.  Total new patients to the
wound care centers increased 5% from 58,510 in 1998 to 61,539 in 1999. The total
number of patients  receiving  Procuren therapy decreased 29% from 8,164 in 1998
to 5,797 in 1999. The percentage of patients  receiving  Procuren decreased from
14%  in  1998  to 9% in  1999.  The  Company  believes  that  this  decrease  is
attributable  to an increase in the  percentage  of less severe  chronic  wounds
being treated at the Company's Wound Care  Centers(R),  for which physicians are
less likely to  prescribe  Procuren(R),  a lack of available  reimbursement  for
Medicare patients,  the inability of hospitals to assume collection risks due to
financial  constraints  and  increased  competition  from  other  wound  healing
products.  The Company  anticipates  that the  percentage of patients  receiving
Procuren(R) will continue to decline in the future.

                                       18
<PAGE>


      Costs of product sales and services increased from $56.0 million in 1998
to $59.9 million in 1999, a 7% increase. The increase is attributable to
additional staffing and operating expenses associated with the operation of 12
additional under arrangement Wound Care Centers at which the services component
of costs is higher than at the Company's other centers due to the additional
clinical staffing and expenses that these models require. As compared with 1998,
the higher services components at these centers along with existing under
arrangement centers accounted for $3.2 million of the increase in product costs
and services for 1999. As a percentage of revenues, costs of product sales and
services for 1999 was 59% compared to 54% for 1998. The 5% increase is
attributed to the lower revenue and negative same store sales growth which
decreased margins and created an inability to leverage expenses over a broader
revenue base.

      Selling, general and administrative expenses increased from $23.4 million
in 1998 to $26.3 million in 1999, a 12% increase. The increase is primarily
attributable to legal and other costs of approximately $1.7 million in 1999,
related to the Department of Justice action, the Office of Inspector General's
document subpoena and shareholder class action lawsuits. The Company expects to
continue to incur significant legal and other related costs until the
aforementioned actions are resolved. As a percentage of revenues, selling,
general and administrative expenses were 26% in 1999 compared to 22% in 1998.
The increase is due to the higher legal expense and decreased revenue in 1999.

      Interest income was $2.0 million in 1999 compared to $2.7 million in 1998.
The decline is primarily attributable to the lower cash balances resulting from
the repurchase of Company stock.

      Net income decreased from $17.0 million or $1.34 (basic) per share in 1998
to $10.5 million or $.99 (basic) per share in 1999. The decrease in earnings of
$6.5 million is attributable to a reduced revenue base which impacted wound care
center margins, lower interest income, and the additional unanticipated legal
and other costs.

Liquidity and Capital Resources

      Working capital was $44.4 million at December 31, 2000 compared to $55.4
million at December 31, 1999. Total cash, cash equivalents and marketable
securities held-to-maturity as of December 31, 2000 was $46.0 million and was
invested primarily in highly liquid money market funds, commercial paper and
government securities. The ratio of current assets to current liabilities
decreased from 4.4:1 at December 31, 1999 to 3.3:1 at December 31, 2000. The
Company's decrease in working capital and current ratio is primarily
attributable to a reduction in accounts receivable and the Company's $17.4
million repurchase of stock.

      Cash flows provided by operations for 2000 totaled $17.9 million primarily
attributable to a decrease in accounts receivable, $4.3 million in depreciation
and amortization expense and an increase in accounts payable and accrued
expenses of $3.3 million. Cash flows provided by investing activities for 2000
totaled approximately $2.1 million primarily attributable to the excess of sales
of marketable securities over purchases and asset sales. Cash flows used in
financing activities totaled $17.2 million for 2000 which was attributable to
the repurchase of shares.

      During 2000, the Company experienced a $10.8 million decrease in net
accounts receivable and a decrease in the average number of days receivables
outstanding to 61 days as of December 31, 2000 compared to 76 as of December 31,
1999. Further, compared to December 31, 1999, the Company's accounts payable and
accrued expenses increased $3.3 million as of December 31, 2000.

      The Company's longer term cash requirements include acquisition costs and
working capital for the expansion of its wound care business. On March 20, 2001,
the Company signed a definitive agreement to purchase all of the outstanding
shares of Millennium Health, Inc. for $32.3 million and the assumption and
repayment of $5 million in debt. Other cash requirements are anticipated for
capital expenditures in the normal course of business, the acquisition of
software, computers and equipment related to the Company's management
information systems, and the repurchase of Company stock. Additionally the
Company expects to incur significant legal costs related to the Department of
Justice actions and shareholder class action lawsuits filed against the Company
during April 1999 (See Legal Proceedings, Part I Item 3). The Company expects
that based on its current business plan, its existing cash, cash equivalents and
marketable securities will be sufficient to satisfy its current working capital
needs. The Company anticipates obtaining a revolving line of credit to
supplement its working capital needs as the result of the Millennium Health
acquisition. The effect of inflation risk is considered immaterial.

                                       19
<PAGE>

Health Insurance Portability and Protection Act

      During 2000 final regulations regarding the protection of the privacy of
personal health information, promulgated by the Department of Health and Human
Services, were published in the Federal Register. These regulations set the
standards for securing patient records and generally prohibit covered entities
from using or disclosing protected health information. As a result of these
regulations, the Company anticipates expenditures in ensuring patient data kept
on computer networks maintained at the Wound Care Centers and corporate offices
are in compliance with these regulations. While the Company believes that it
will be in compliance by the February 2003 deadline, there can be no assurances
that the cost of reaching compliance will not have a material impact on the
financial condition of the Company.

Cautionary Statement

      This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements include statements
regarding intent, belief or current expectations of the Company and its
management. These forward-looking statements are not guarantees of future
performance and involve a number of risks and uncertainties that may cause the
Company's actual results to differ materially from the results discussed in
these statements. Factors that might cause such differences include, but are not
limited to, changes in the Company's level of business with Columbia/HCA
Healthcare Corporation, terminations or non-renewal of a material number of
contracts or inability to obtain new contracts, changes in the government
regulations relating to the Company's wound care operations or Procuren,
uncertainties relating to health care reform initiatives, changes in the
availability of third party reimbursements for the Company's products and
services, and the other risks and uncertainties detailed throughout this report
and from time to time in the Company's filings with the Securities and Exchange
Commission.

                                       20
<PAGE>

Item 7a  Quantitative and Qualitative Disclosures About Market Risk

      The primary objective of our investment activities is to preserve
principal while at the same time maximizing the income we receive from our
investments without significantly increasing risk. Some of the securities that
we invest in may have market risk. This means that a change in prevailing
interest rates may cause the fair market value of the principal amount of the
investment to fluctuate. For example, if we hold a security that was issued with
a fixed interest rate at the then-prevailing rate and the prevailing interest
rate later rises, the fair value of the principal amount of our investment will
probably decline. To minimize this risk we maintain our portfolio of cash
equivalents and short-term investments in a variety of securities, including
commercial paper, money market funds, government and non-government debt
securities. The average duration of all of our investments has generally been
less than one year. Due to the short-term nature of these investments, we
believe we have no material exposure to interest rate risk arising from our
investments.

Item 8  Consolidated Financial Statements and Supplementary Data

The information required by this item is incorporated herein by reference to the
Consolidated  Financial  Statements  listed  in  Item  14(a)  of Part IV of this
Report.

The  following  table sets forth the  financial  results of the  Company for the
eight quarters ended December 31, 2000 (in thousands, except per share data):
<TABLE>
<CAPTION>

                                            Net (Loss)   Income Per           Income Per
 Quarter Ended    Revenues    Gross Profit  Income       Common Share Basic   Common Share Diluted
 -------------------------------------------------------------------------------------------------
 <S>              <C>         <C>           <C>          <C>                  <C>
 2000:
  December 31     $  14,982   $ (5,096)     $ (2,661)    $   (.34)            $  (.34)
  September 30       18,919       (183)          309          .04                 .04
  June 30            21,590        775           835          .09                 .09
  March 31           22,200      1,681         1,389          .14                 .14

 1999:
  December 31     $  24,367   $  9,702      $  2,130     $    .21             $   .21
  September 30       25,979     10,262         2,201          .22                 .22
  June 30            25,620     10,131         2,319          .23                 .23
  March 31           24,243     11,169         3,812          .32                 .31
</TABLE>


Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

      None.


                                       21
<PAGE>

                                    PART III


      This information required by Part III of this Form 10-K is omitted from
this Report in that the Registrant will file a definitive proxy statement
pursuant to Regulation 14(a) for its 2001 Annual Meeting of Stockholders (the
"Proxy Statement") not later than 120 days after the end of the fiscal year
covered by this Report, and certain information included therein is incorporated
herein by reference.

Item 10  Directors and Executive Officers of the Registrant

      The information required by this Item is incorporated by reference to the
sections "Election of Directors" and "Executive Officers" of the Company's Proxy
Statement.

Item 11  Executive Compensation

      The information required by this Item is incorporated by reference to the
section "Executive Compensation" of the Company's Proxy Statement.

Item 12  Security Ownership of Certain Beneficial Owners and Management

      The information required by this Item is incorporated by reference to the
section "Stock Ownership of Certain Beneficial Owners and Management" of the
Company's Proxy Statement.

Item 13  Certain Relationships and Related Transactions

      The information required by this Item is incorporated by reference to the
sections "Election of Directors", "Executive Officers" and "Executive Committee"
of the Company's Proxy Statement.

                                       22
<PAGE>

                                     PART IV


Item 14  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)   1.    Index to Financial Statements.

     The  following   consolidated   financial  statements  of  Curative  Health
Services, Inc. are included herein:

                                                                            Page
                                                                          Number
                                                                          ------
      Report of Independent Auditors....................                     F-1

      Consolidated Balance Sheets at December 31, 2000 and 1999              F-2

      Consolidated Statements of Income for the years ended
        December 31, 2000, 1999 and 1998................                     F-3

      Consolidated Statements of Stockholders' Equity for the
        years ended December 31, 2000, 1999 and 1998....                     F-4

      Consolidated Statements of Cash Flows for the years ended
        December 31, 2000, 1999 and 1998................                     F-5

      Notes to Consolidated Financial Statements........                     F-6

   2. Financial Statement  Schedules. The following financial statement schedule
      of Curative Health Services, Inc. is included herein:

      Schedule                                                              Page
      --------                                                              ----
      II   Valuation and Qualifying Accounts............                     S-1

      All other schedules are omitted because they are not applicable, or not
      required, or because the required information is included in the
      consolidated financial statements or notes thereto.

   3. Exhibits. The  exhibits  listed  in the  accompanying  Index  to  Exhibits
     immediately following the financial statement schedules are filed with this
     report.

(b)   Reports on Form 8-K. No reports were filed on Form 8-K by the Company
      during the fiscal quarter ended December 31, 2000.

(c)   Exhibits - The response to this portion of Item 14 is submitted as a
      separate section of this report.

                                       23
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                                CURATIVE  HEALTH SERVICES, INC.
                                                By: /s/  John C. Prior
                                                    ------------------
                                                    John C. Prior
                                                    President
Dated:  March 30, 2001
                                POWER OF ATTORNEY

      KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John C. Prior and Thomas Axmacher,
jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Report on Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Signature                   Title                             Date
Title
Date
/s/ John C. Prior           President                         March 30, 2001
-----------------          (Principal Executive Officer)
John C. Prior               Secretary


/s/ Thomas Axmacher         VP Finance and CFO                March 30, 2001
-------------------        (Principal Financial and
Thomas Axmacher             Accounting Officer)

/s/ Joseph Feshbach         Chairman of the Board and         March 30, 2001
-------------------         Director
Joseph Feshbach

/s/ Paul S. Auerbach        Director                          March 30, 2001
--------------------
Paul S. Auerbach

/s/ Daniel E. Berce         Director                          March 30, 2001
-------------------
Daniel E. Berce

/s/ Lawrence English        Director                          March 30, 2001
--------------------
Lawrence English

/s/ Joel Kurtzman           Director                          March 30, 2001
-----------------
Joel Kurtzman

/s/ Daniel A. Gregorie      Director                          March 30, 2001
----------------------
Daniel A. Gregorie

/s/ Gerard Moufflet         Director                          March 30, 2001
-------------------
Gerard Moufflet

/s/ Timothy I. Maudlin      Director                          March 30, 2001
----------------------
Timothy I. Maudlin

<PAGE>

                    Report of Independent Auditors


Board of Directors and Stockholders
Curative Health Services, Inc.

      We have audited the accompanying consolidated balance sheets of Curative
Health Services, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2000. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Curative Health
Services, Inc. and subsidiaries at December 31, 2000 and 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

                                          /s/ Ernst & Young LLP
Melville, New York
March 20, 2001

                                      F-1
<PAGE>

              CURATIVE HEALTH SERVICES, INC., AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                      December 31,
                                                                     2000      1999
                                                                     ----      ----
<S>                                                               <C>       <C>
ASSETS
   Cash and cash equivalents ..................................   $19,016   $16,215
   Marketable securities held-to-maturity .....................    26,978    30,807
   Accounts receivable (less allowance of $2,046 and $2,276
      at December 31, 2000 and 1999, respectively)  ...........     9,843    20,653
   Deferred tax assets ........................................     2,806     2,271
   Assets available for sale ..................................     3,683         -
   Prepaid and other current assets ...........................     1,664     1,820
                                                                  -------   -------
      Total current assets ....................................    63,990    71,766
   Property and equipment, net ................................     7,065    12,010
   Other assets ...............................................     4,111     4,134
                                                                  -------   -------
      Total assets ............................................   $75,166   $87,910
                                                                  =======   =======

LIABILITIES & STOCKHOLDERS' EQUITY
   Accounts payable ...........................................   $ 7,308   $ 7,831
   Accrued expenses ...........................................    12,288     8,479
                                                                  -------   -------
      Total current liabilities ...............................    19,596    16,310

   Commitments and contingencies Stockholders' equity:
      Preferred stock, $.01 par value per share; 10,000,000
        shares authorized, none issued ........................         -         -
      Preferred stock, Series A Junior Participating, par value
       $.01 per share, 500,000 shares authorized, none issued .         -         -
      Common stock, $.01 par value per share; 50,000,000
        shares authorized 7,196,439 shares issued and
        outstanding (10,090,110 shares in 1999) ...............        71       100
      Additional paid in capital ..............................    30,896    46,769
      Retained earnings .......................................    24,603    24,731
                                                                  -------   -------
   Total stockholders' equity .................................    55,570    71,600
                                                                  -------   -------
   Total liabilities and stockholders' equity .................   $75,166   $87,910
                                                                  =======   =======
</TABLE>

                 See notes to consolidated financial statements
                                      F-2

<PAGE>

               CURATIVE HEALTH SERVICES, INC., AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                               -----------------------------
                                                                 2000        1999       1998
                                                                 ----        ----       ----
<S>                                                          <C>         <C>        <C>
Revenues .................................................   $ 77,691    $101,209   $103,987
Costs and operating expenses:
   Costs of product sales and services ...................     51,073      59,945     56,035
   Selling, general and administrative ...................     29,441      26,273     23,358
                                                             --------    --------   --------
      Total costs and operating expenses .................     80,514      86,218     79,393
                                                             --------    --------   --------
(Loss) income from operations ............................     (2,823)     14,991     24,594
Interest income ..........................................      2,609       2,037      2,660
                                                             --------    --------   --------
(Loss) income before income taxes ........................       (214)     17,028     27,254
Income tax (benefit) provision ...........................        (86)      6,566     10,217
                                                             --------    --------   --------
Net (loss) income ........................................   $   (128)   $ 10,462   $ 17,037
                                                             ========    ========   ========
Net (loss) income per common share, basic ................   $   (.01)   $    .99   $   1.34
                                                             ========    ========   ========
Net (loss) income per common share, diluted ..............   $   (.01)   $    .97   $   1.30
                                                             ========    ========   ========
Denominator for basic earnings per share, weighted average
   common shares .........................................      8,780      10,559     12,704
                                                             ========    ========   ========
Denominator for diluted earnings per share, weighted
   average common shares assuming conversions ............      8,780      10,756     13,071
                                                             ========    ========   ========
</TABLE>

                       See notes to consolidated financial statements
                                      F-3


<PAGE>

                     CURATIVE HEALTH SERVICES, INC., AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                          (In thousands, except shares)
<TABLE>
<CAPTION>

                                                                     Additional Retained          Total
                                                                     Paid-in    Earnings  Stockholders'
                                                   Common Stock      Capital    (Deficit)        Equity
                                               Shares        Amount
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
<S>                                            <C>           <C>     <C>            <C>         <C>
Balance, December 31, 1997                     12,561,342   $125     $75,235        $(2,768)    $72,592
   Exercise of options                            196,940      2      1,916              -        1,918
   Tax benefit from stock option
           exercises                                    -      -      1,849              -        1,849
-------------------------------------------------------------------------------------------------------
   Net income for 1998                                  -      -          -         17,037       17,037
-------------------------------------------------------------------------------------------------------
Balance, December 31, 1998                     12,758,282    127     79,000         14,269       93,396
   Exercise of options                              6,828      -         33              -           33
   Shares repurchased and retired              (2,675,000)   (27)   (32,293)             -      (32,320)
   Tax benefit from stock option
           exercises                                    -      -         29              -           29
-------------------------------------------------------------------------------------------------------
   Net income for 1999                                  -      -          -         10,462       10,462
-------------------------------------------------------------------------------------------------------
Balance, December 31, 1999                     10,090,110    100     46,769         24,731       71,600
   Exercise of options                             27,654      -        125              -          125
   Shares repurchased and retired              (2,921,325)   (29)   (17,333)             -      (17,362)
   Increased equity in Accordant Health
     Services, Inc                                      -      -      1,335              -        1,335
   Net loss for 2000                                    -      -          -           (128)        (128)
-------------------------------------------------------------------------------------------------------
Balance, December 31, 2000                      7,196,439    $71    $30,896        $24,603      $55,570
=======================================================================================================
</TABLE>


                       See notes to consolidated financial statements
                                      F-4


<PAGE>

               CURATIVE HEALTH SERVICES, INC., AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                                    ----------------------------
                                                                    2000        1999        1998
                                                                    ----------------------------
<S>                                                             <C>         <C>         <C>
OPERATING ACTIVITIES:
Net (loss) income ...........................................   $   (128)   $ 10,462    $ 17,037
Adjustments to reconcile net (loss) income to net cash provided by
  operating activities:
  Depreciation & amortization ...............................      4,294       3,983       2,794
  Provision for doubtful accounts ...........................      2,189       3,668       1,957
  Equity in operations of investee ..........................        431         496          85
  Deferred income taxes .....................................       (535)     (1,229)        193
  Tax benefit from stock option exercises ...................          -          29       1,849
Change in operating assets and liabilities:
  Decrease (increase) in accounts receivable ................      8,621      (4,450)     (7,617)
  Increase in prepaid and other current assets ..............       (294)       (641)       (255)
  Increase in accounts payable and accrued expenses .........      3,320         592       3,418
                                                                 -------     -------     -------
NET CASH PROVIDED BY OPERATING ACTIVITIES ...................     17,898      12,910      19,461
INVESTING ACTIVITIES:
Investment in Accordant Health Services, Inc. and other .....          -      (1,071)     (3,000)
Purchases of property and equipment .........................     (1,689)     (2,575)     (6,840)
Purchases of marketable securities held-to-maturity .........    (30,359)    (35,854)    (49,942)
Sales of marketable securities held-to-maturity .............     34,188      50,877      22,919
                                                                 -------     -------     -------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES .........      2,140      11,377     (36,863)
FINANCING ACTIVITIES:
Stock repurchases ...........................................    (17,362)    (32,320)          -
Proceeds from exercise of stock options, warrants
  and subscription receivable ...............................        125          33       1,918
Principal payments on capital lease obligations and revolving
  line of credit ............................................          -          (7)       (40)
                                                                 --------    --------    -------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES .........    (17,237)    (32,294)      1,878
                                                                 --------    --------    -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............      2,801      (8,007)    (15,524)
Cash and cash equivalents at beginning of year ..............     16,215      24,222      39,746
                                                                --------     -------     -------
CASH AND CASH EQUIVALENTS AT END OF YEAR ....................   $ 19,016    $ 16,215    $ 24,222
                                                                ========    ========    ========
SUPPLEMENTARY CASH FLOW INFORMATION:
  Interest paid .............................................   $      -    $      2    $     31
                                                                ========    ========    ========
   Income taxes paid ........................................   $  1,374    $  6,315    $  5,330
                                                                ========    ========    ========
</TABLE>

SUPPLEMENTAL INFORMATION PERTAINING TO NON-CASH INVESTING AND FINANCING
ACTIVITIES: During 2000, the Company recorded an increase of $1,335,000 to its
investment in Accordant Health Services, Inc. and a corresponding increase to
paid-in capital related to an increase in the value of the Company's equity
interest in Accordant resulting from an equity offering done by Accordant.

                 See notes to consolidated financial statements
                                     F - 5

<PAGE>


               CURATIVE HEALTH SERVICES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              December 31, 2000


NOTE A -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

      Organization: The Company was organized under the laws of the State of
Minnesota in October 1984. It is a disease management company in the chronic
wound care business. The Company, operating in one business segment, manages a
nationwide network of Wound Care Centers that offers patients a
multi-disciplinary comprehensive wound treatment program. The Company's
management agreements with hospitals and other health care providers generally
have terms of three to five years.

      Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. Significant
intercompany balances and transactions have been eliminated in consolidation.

      Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

      Net Income (Loss) Per Share:  Basic and diluted  income (loss) per share
is  calculated  in  accordance  with  Financial   Accounting  Standards  Board
("FASB")  Statement No. 128.

      Property and Equipment: Property and equipment are recorded at cost.
Depreciation of property and equipment is provided using the straight-line
method over the estimated useful lives (generally 4 to 7 years). Leased
equipment capitalized and leasehold improvements are amortized over the life of
the lease or the useful life of the related asset, whichever is shorter.

      Other Assets: As of December 31, 1999 and 2000, other assets totaled
$4,134,000 and $4,111,000 respectively. As of December 31, 1999, other assets
consist of costs of filing patents and trademarks of $644,000, the net
investment of $3,419,000 in Accordant Health Services, Inc. (See Note C) and a
note receivable of $71,000. As of December 31, 2000, other assets consist
primarily of the net investment of $3,931,000 in Accordant Health Services, Inc.
and notes receivable of $180,000.

      Long-Lived Assets: The Company periodically reviews the carrying value of
its long-lived assets in determining the ultimate recoverability of their
unamortized values using future undiscounted cash flows analyses. Such review
has been performed by management and does not indicate an impairment of such
assets, except for the impairment of assets available for sales (See Note B).

      Cash and Cash Equivalents: Cash and cash equivalents consist of demand
deposits with banks, certificates of deposit with maturities of less than three
months at the time of purchase and highly liquid money market fund investments.

      Marketable Securities Held-to-Maturity: Held-to-maturity marketable
securities represent highly liquid money market instruments with maturities of
greater than three months at time of purchase. These securities, consisting
principally of securities of municipalities, commercial paper and U.S.
Government agencies maturing at various dates through November 2001, are valued
at amortized cost which approximates market.


                                      F-6
<PAGE>

               CURATIVE HEALTH SERVICES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              December 31, 2000



NOTE A-- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

      The Company's investment policy gives primary consideration to safety of
principal, liquidity and return. The Company invests its funds with institutions
that have high credit ratings and to date has not experienced any losses on its
investments. The Company classifies its investments in such securities as
held-to-maturity as the Company has the intent and ability to hold these
securities to maturity. As of December 31, 1999 and 2000, the Company had
approximately $115,000 of unrealized losses and $16,000 of unrealized gains on
marketable securities, respectively.

      Concentration of Credit Risk: Substantially all of the Company's revenues
have been generated from Wound Care Centers which the Company has established as
cooperative ventures with acute care hospitals in the United States to provide a
multi-disciplinary treatment protocol for chronic wounds. The Company provides
contractual management services for fees and sells Procuren to acute care
hospitals and other health care providers. Credit is extended based on an
evaluation of the hospital's financial condition and collateral is generally not
required.

      Revenues: Revenues are recognized when products are dispensed or as
contractual management services are rendered.

      Advertising: The Company expenses advertising and community education
costs when incurred. Advertising and community education expense was
approximately $10,166,000, $8,056,000, and $6,037,000 for 1998, 1999 and 2000,
respectively.

      Income  Taxes:  Income  taxes  have been  provided  using the  liability
method in accordance with  FASB No. 109, "Accounting for Income Taxes."

      Stock Based Compensation Plans: The Company grants options for a fixed
number of shares to employees with exercise price equal to the fair value of the
shares at the date of grant. The Company accounts for stock option grants in
accordance with APB Opinion No. 25, "Accounting for Stock Issued Employees" and
related Interpretations because the Company believes the alternate fair value
accounting provided for under FASB No. 123, "Accounting for Stock Based
Compensation", requires the use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recorded.

NOTE B -- SALE OF PROCUREN BUSINESS

      On January 2, 2001, the Company sold the assets of its Procuren business
for approximately $3.8 million to Cytomedix, Inc. ("Cytomedix"). Under the
agreement, Cytomedix will be the exclusive manufacturer of Procuren and Curative
will be the exclusive distributor of Procuren solution in the United States.
Curative will also receive royalties based on the sales of products that are
developed from the associated patents on sales outside the United States. The
consideration received by the Company was $2.1 million in cash, $1.7 million in
a convertible secured promissory note, and a warrant certificate to purchase
600,846 shares of Cytomedix common stock at purchase price of the lesser of $.50
per share or a price per share equal to the average of the three lowest intraday
sales prices as reported by a reliable reporting service during the 20 trading
days preceding the date on which the warrant is exercised. Assets related to
this sale are shown as assets available for sale in the accompanying
consolidated balance sheet and are carried at fair value. The Company recorded
a $.2 million impairment charge on the assets available for sale at December 31,
2000, based on the net realizable value of the assets. The $.2 million charge
has been


                                      F-7
<PAGE>

               CURATIVE HEALTH SERVICES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              December 31, 2000


NOTE B-- SALE OF PROCUREN BUSINESS (continued)

included in selling, general and administrative expense in the accompanying
financial statements. The Company recorded reserves totaling $.8 million at
December 31, 2000, related to leases assigned to Cytomedix under which the
Company remains as a guarantor.

NOTE C -- EQUITY INVESTMENT

      On June 4, 1998, the Company signed an agreement with Accordant Health
Services, Inc. ("Accordant") in which the Company agreed to invest $4 million in
Accordant preferred stock. The Company currently has an 8.6 percent interest in
Accordant and is accounted for using the equity method of accounting as the
Company has the option to convert the Accordant preferred stock into common
stock. In addition, the Company has significant influence over the operations of
Accordant. The Company's share of Accordant's 1998, 1999 and 2000 net loss was
approximately $85,000, $496,000 and $431,000, respectively. During 2000, the
Company recorded an increase of $1,335,000 to its investment in Accordant Health
Services, Inc. and a corresponding increase to paid in capital related to an
increase in the value of the Company's equity interest in Accordant as the
result of an equity financing done by Accordant in 2000. The financing diluted
the Company's ownership interest to 8.6% from 11%, but increased the value of
its share of the underlying equity. The Company's investment in Accordant is not
material to the Company's consolidated financial statements.  At December 31,
1999 and 2000, the Company's investment in Accordant exceeded its underlying
equity in such investment by $3.4 million and $3.0 million, respectively.

NOTE D -- PROPERTY AND EQUIPMENT
      A summary of property and equipment and related accumulated depreciation
and amortization follows:
                                                         December 31,
                                                         -----------
                                                       2000        1999
                                                       ----------------
                                                        (In thousands)
  Property and equipment.......................     $15,829     $18,394
  Leased equipment capitalized.................       1,371       1,371
  Leasehold improvements.......................       2,556       5,766
                                                      -----       -----
                                                     19,756      25,531
  Less accumulated depreciation and amortization     12,691      13,521
                                                     ------      ------
                                                    $ 7,065     $12,010
                                                    =======     =======

NOTE  E -- ACCRUED EXPENSES Accrued expenses are as follows:

                                                         December 31,
                                                         -----------
                                                       2000         1999
                                                       -----------------
                                                        (In thousands)
            Incentive compensation and benefits.    $  1,817    $  2,616
            Deferred compensation ..............       1,251         874
            Marketing and community education ..         560         691
            Salaries ...........................       1,246       1,431
            Health benefits ....................         990         996
            Severance pay ......................       2,102           -
            Reserves for leases assigned........         800           -
            Other ..............................       3,522       1,871
                                                       -----       -----
                                                    $ 12,288    $  8,479
                                                    ========       =====

                                       F-8
<PAGE>

               CURATIVE HEALTH SERVICES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              December 31, 2000



NOTE F -- LEASES
      The Company has entered into several noncancellable operating leases for
the rental of certain office space expiring in various years through 2005. The
principal lease for office space provides for monthly rent of approximately
$60,000. The following is a schedule of future lease payments, by year and in
the aggregate, under noncancellable operating leases with initial or remaining
terms of one year or more at December 31, 2000:

                                                            Operating Leases
                                                            -----------------
                                                             (In thousands)

      2001 ....................................                $  1,362
      2002 ....................................                   1,127
      2003.....................................                     979
      2004.....................................                     857
      2005.....................................                     393
                                                                  -----
      Total....................................                $  4,718
                                                                  =====

      Rent expense for all operating leases was approximately $2,113,000,
$2,130,000 and $1,534,000 for the years ended December 31, 1998, 1999 and 2000,
respectively.

NOTE G -- STOCKHOLDERS' EQUITY

      Director Share Purchase Program: The Company maintains 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 cash payments for director's annual retainer and meeting fees and, in
lieu thereof, receive shares of common stock at market value equal to the cash
payment. The Program authorized the issuance of up to 120,000 shares of the
Company's common stock at market value. At December 31, 2000 and 1999, 118,406
shares of common stock were reserved for future issuance under the Program.

     Stock  Repurchase  Plans:  Since  February  1999, the Company has announced
stock  repurchase  plans  authorizing  repurchases of 7.5 million shares.  As of
December 31, 2000, a total of 5,596,325 shares had been repurchased at a cost of
$49,682,000, including 2,921,325 purchased in 2000 at a cost of $17,362,000.

      Restricted Stock Awards Plan:  During 1999, the Company implemented a
Restricted Stock Award Plan (the "Plan") for certain key executives.  The total
shares to be granted under the Plan are 73,000 shares at a price of $5.41 per
share.  The shares vest over a three-year period.  During 2000, 17,222 shares
were exercised under the Plan.

      Rights Plan: On October 25, 1995, the Board of Directors of the Company
declared a dividend of one preferred share purchase right per share for each
outstanding share of common stock of the Company. The dividend was paid on
November 6, 1995 to shareholders of record on that date. Under certain
circumstances each right may be exercised to purchase one-one hundredth of a
share of Series A Junior Participating Preferred Stock, par value $.01, of the
Company for $65. The rights, which are redeemable by the Company at $.01 per
right, expire in November 2005. The purchase right issued under the Company's
Rights Agreement dated October 22, 1995 provides the holder in the event of (i)
the acquisition of 15% or more of the Company's outstanding common stock by an
Acquiring Person (as defined in the Rights Agreement), (ii) the commencement of
a tender offer or exchange offer which results in a person or group owning 15%
or more of the Company's common stock, to exercise each right (other than rights
held by an Acquiring Person) to purchase common stock of the Company or a
successor company with a market value of twice the $65 exercise price.

                                      F-9
<PAGE>

               CURATIVE HEALTH SERVICES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              December 31, 2000


NOTE H -- STOCK BASED COMPENSATION PLANS

      The Company has stock option plans which provide for the granting of
non-qualified or incentive options to employees, directors, consultants and
advisors. The plans authorize granting of up to 5,406,695 shares of the
Company's common stock at the market value at the date of such grants. All
options are exercisable at times as determined by the Board of Directors, not to
exceed ten years after the grant date.

      Pro forma information regarding net income (loss) and net income (loss)
per share is required by FASB No. 123, and has been determined as if the Company
has accounted for its stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions at December 31, 2000, 1999 and 1998 respectively: risk-free interest
rate of 5.43%, 5.75% and 4.84%; no dividend yields; volatility factor of the
expected market price of the Company's common stock of 70.2%, 74.1% and 55.7%;
and a weighted-average expected life of the options of 4 years.

      The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options. The Company's pro forma
information is as follows:

                           (In thousands, except per share data)

                                              2000           1999         1998
                                              --------------------------------

         Net (loss) income:    As reported  $ (128)      $10,462      $17,037
                               Pro forma    (2,465)        8,403       14,622

                Basic EPS:     As reported  $ (.01)      $   .99      $  1.34
                               Pro forma      (.28)          .80         1.15

                Diluted EPS:   As reported  $ (.01       $   .97      $  1.30
                               Pro forma      (.28)          .78         1.12


                                       F-10
<PAGE>

               CURATIVE HEALTH SERVICES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              December 31, 2000

NOTE H-- STOCK BASED COMPENSATION PLANS - (CONTINUED)


      A  summary  of  the   Company's   stock  option   activity  and  related
information for the years ended is  as follows:

<TABLE>
<CAPTION>
                                         2000                         1999                      1998
                                         -----------------------------------------------------------------------------
                                         Weighted Avg                 Weighted Avg              Weighted Avg
                                         Options Exercise Price       Options Exercise Price    Options Exercise Price

<S>                                      <C>        <C>                <C>           <C>         <C>          <C>
Outstanding at beginning of year         1,678,548  $ 24.58            1,367,434     $  25.81    1,353,614    $  22.92

Granted.................                 2,387,311     5.56              450,550         7.55      250,000       28.14

Exercised...............                   (10,432)    3.67               (6,828)        4.88     (196,940)       9.74

Cancelled...............                  (595,207)   10.44             (132,608)       19.13      (39,240)      21.59
                                         ---------                     ---------                 ---------
Outstanding at end of year               3,460,220    17.57            1,678,548        24.58    1,367,434       25.81
                                         =========                     =========                 =========
Exercisable at end of year               1,144,934    13.76              710,762        18.58      499,413       16.95
                                         =========                     =========                 =========
Weighted average fair value of
   options granted......                            $  3.16                          $   4.47                 $  13.85
                                                       ====                              ====                    =====
</TABLE>


The following table summarizes information about stock options outstanding at
December 31, 2000:

<TABLE>
<CAPTION>
                     Options  Outstanding                           Options Exercisable
                              Weighted Average
                     Options  Remaining            Weighted Average                  Weighted
 Exercise prices Outstanding  Contractual Life     Exercise Price     Shares         Average
                              (In Years)                                             Exercise Price
 ==================================================================================================
  <S>             <C>               <C>            <C>             <C>                <C>
  $ 1.55 - $4.75     88,201         3.63           $ 3.88             88,201          $ 3.88

    4.813 - 7.00  2,332,933         6.81             5.63            466,874            5.81

    8.50 - 11.50    180,882         6.21            10.92            158,544           10.84

   13.25 - 20.00     94,459         5.27            17.84             94,459           17.84

   20.25 - 33.06    763,745         6.75            29.37            336,856           27.59
                    -------         ----                             -------
                  3,460,220         5.73                           1,144,934
                  =========         ====                           =========
</TABLE>

At December 31, 2000, 596,452 shares of common stock were reserved for future
issuance, excluding shares reserved for options outstanding.


                                      F-11
<PAGE>

               CURATIVE HEALTH SERVICES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              December 31, 2000


NOTE I -- INCOME TAXES
      Significant components of the Company's deferred tax assets as of December
31, 2000 and 1999 are as follows:
                                                         2000        1999

       Bad debt reserve                              $    640    $    856
       Affiliate net operating loss carryforward          642         591
       Other reserves and accruals                      1,004         576
       Book over tax depreciation                         520         248
                                                          ---         ---
       Deferred tax assets                           $  2,806    $  2,271
                                                        =====       =====

Significant components of the (benefit) provision for income taxes are as
follows:

                                          2000        1999         1998
                                          -----------------------------
   Current:
     Federal                             $ 378     $ 6,651      $ 8,434
     State                                  71       1,144        1,590
   Deferred                               (535)     (1,229)         193
                                          ----      ------        -----
   Total income tax (benefit) provision  $(86)     $ 6,566      $10,217
                                         =====     =======      =======

A reconciliation of income tax computed at the U.S. Federal statutory tax rate
to income tax (benefit) expense is as follows:

                                           2000         1999     1998
                                           --------------------------

             Federal statutory tax rate   (35.0%)       35.0%    35.0%
               State income taxes net
                  of Federal tax benefit   (4.0%)        4.4%     3.8%
               Other                       (1.2%)        (.8%)   (1.3%)
                                           -----        -----   ------
               Effective tax rate         (40.2%)       38.6%    37.5%
                                          =======       =====    =====


                                       F-12
<PAGE>


               CURATIVE HEALTH SERVICES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              December 31, 2000


NOTE J -- MAJOR CUSTOMERS

      In 1998, 1999 and 2000, the Company derived 25%, 13%, and 11% of its
consolidated revenues from one customer, respectively.

NOTE K -- LEGAL PROCEEDINGS

      In April 1999, the Company learned through a press release from the United
States Department of Justice ("DOJ") that a complaint was filed by a
"whistleblower" relator under the Federal Civil False Claims Act alleging that
the Company made improper charges to Columbia/HCA hospitals as well as other
hospitals. The case, filed as United States ex. rel. Joseph "Mickey" Parslow v.
Columbia/HCA Healthcare Corporation and Curative Health Services, Inc. in the
Federal District Court for the Middle District of Florida, Tampa Division, has
been transferred to the United States District Court for the District of
Columbia.

      Under the False Claims Act, the whistleblower relator could be entitled to
approximately 15% of any amounts obtained from the defendants. This potential
bounty under the False Claims Act was intended by Congress to motivate private
persons to bring actions of this nature.

      In February 2001, the Office of the U.S. Attorney for the Middle District
of Florida informed the Company, through its outside legal counsel, that it was
the subject of a criminal investigation concerning its business relationships
with the former Columbia/HCA.

      In February 2001, the DOJ initiated settlement discussions with the
Company and the Company expects that this process will continue. On March 15,
2001, the government filed its amended complaint in the Parslow case. The
amended complaint alleges that pursuant to the Company's management services
contracts with various Columbia/HCA hospitals, Company personnel provided
services which the government characterizes as marketing and advertising
services. The complaint further alleges that these services are not reimbursable
under the Federal Medicare Program and that the hospitals submitted false claims
to the Medicare Program by including the Company management fees on cost reports
submitted by the hospitals to Medicare. The complaint contends that the Company,
by providing these alleged marketing and advertising services and by charging a
management fee for its services, caused the submission of false claims by the
hospitals. Further, the complaint alleges that the Company, through its
employees, recommended the services of Wound Care Centers and Columbia/HCA
hospitals to patients and physicians. The complaint alleges that the Company
arranged for patients to receive medical services from Columbia/HCA hospitals.
The government contends that the management fees the Company received
from the Columbia/HCA hospitals were illegal payments in exchange for patient
referrals to Columbia/HCA hospitals. The hospitals filed these cost reports
claiming reimbursement of the management fees. The government alleges that the
hospital cost reports were false claims because the Company's management fees
were improper under the Federal Medicare-Medicaid anti-kickback statute.

      The Company has a formal compliance program and management believes that
the Company is in material compliance with applicable laws and ethical business
practices. In the conduct of its business, the Company has relied on the advice
and guidance of nationally recognized law firms in structuring its business
relationships with its hospitals. In this pending litigation, the Company
intends to defend itself vigorously. An adverse result in this qui tam action
could have a material adverse effect on the Company's business, financial
condition and/or results of operations.

In January 2000, the Company disclosed that a qui tam action was filed under
seal in the United States District Court for the Southern District of New York
in 1998. Pursuant to a court order, the seal under which this action was filed
was modified to, among other things, permit the Company to disclose the
allegations in the complaint in its periodic filings with the Securities and
Exchange Commission and as required to fulfill its disclosure obligations under
federal and state securities laws. The complaint was filed by a "whistleblower"
relator under the Federal Civil False Claims Act and names the Company and
hospitals with which it does business as defendants.

                                       F-13
<PAGE>

               CURATIVE HEALTH SERVICES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              December 31, 2000


NOTE K -- LEGAL PROCEEDINGS (continued)

The portion of the qui tam action related to Columbia/HCA hospitals has been
transferred to the United States District Court for the District of Columbia.

      The complaint alleges, among other things, that the defendants violated
the "anti-kickback" statute in part because a portion of the Company's fee was
based upon the number of new patients seen in the wound care centers managed by
the Company; engaged in prohibited self-referral transactions; improperly billed
Medicare for costs and services not covered by Medicare; double billed Medicare
for professional services; and submitted false claims to Medicare. Certain of
the allegations are similar to the allegations made in the United States ex.
rel. Joseph "Mickey" Parslow v. Columbia/HCA Healthcare Corporation and Curative
Health Services, Inc. qui tam action. The complaint in the Southern District of
New York action asserts that as a result of the allegedly wrongful conduct, the
United States suffered damages and that the defendants are liable to the United
States for three times the amount of the alleged damages plus civil penalties of
up to $10,000 per false claim.

      The United States has not yet decided whether to intervene in the portion
of the New York qui tam action that remains in the jurisdiction of the New York
Court. If it does not, then the plaintiff relator may pursue the claims on
his/her own or may withdraw the complaint. On March 15, 2001, however, the
government declined to intervene against the Company in that portion of the qui
tam action related to the Company's business with Columbia/HCA that was
transferred to the U.S. District Court for the District of Columbia.

      The Company disagrees with the characterizations in that complaint of its
contractual arrangements, its services, and the fees it charges for those
services, and intends to defend itself vigorously in this action. An adverse
result in this qui tam action could have a material adverse effect on the
Company's business, financial condition and/or results of operations.

      Further, if the government were to conclude that the Company engaged in
any misconduct, it could result in affecting the Company's relationship with all
of its hospital customers, substantial monetary fines and penalties, and even
exclusion from the governmental healthcare programs which could have a material
adverse effect on the business, financial position and results of operations of
the Company.

      Subsequent to the disclosure of the Parslow "whistleblower" lawsuit and
Department of Justice action, the Company and , in some cases, certain of its
officers were named in four shareholder lawsuits, namely:

            Ernest Hack versus Curative Health Services, Inc et. al.

            Scott Thompson versus Curative Health Services, Inc. et al.

            Tirdad Thompson versus Curative Health Services, Inc. et al.

            William Nolan versus Curative Health Services, Inc. et al.

      All suits were filed in the United States District Court for the Eastern
District of New York. The four shareholder lawsuits have been consolidated into
one class-action lawsuit. The lawsuits allege generally that the Company and its
officers violated federal securities laws by disseminating materially false and
misleading statements and failing to disclose material information relating to
the contractual relationships with Columbia/HCA Healthcare Corporation and other
hospitals, and certain purported misrepresentations in connection therewith. The
suit seeks to recover unspecified damages from defendants. The Company denies
the allegations and intends to vigorously defend the suits. The Court denied
defendant's motion to dismiss and discovery is currently ongoing. An adverse
result in this lawsuit could have a material adverse effect on the Company's
business, financial condition and/or results of operations.


                                       F-14
<PAGE>

               CURATIVE HEALTH SERVICES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              December 31, 2000


NOTE K -- LEGAL PROCEEDINGS (continued)

      Notwithstanding its belief that it has complied with the law and its
intention to defend itself vigorously, if it is determined to be in the best
interests of the Company, it is possible that the Company will eventually choose
to enter into a settlement with the government related to the qui tam actions
and/or the plaintiffs in the securities litigation lawsuit that could have a
material adverse effect on the Company's business, financial condition and/or
results of operations.

      In addition, the Company, in the ordinary course of business, is the
subject of or party to various lawsuits, the outcome of which, in the opinion of
management, will not have a material adverse effect on its financial position or
results of operations.


NOTE L -- EARNINGS PER SHARE

      The following table sets forth the computation of basic and diluted
earnings per share:
                                                     2000       1999        1998
                                                     ---------------------------
                                                            (In thousands)
      Denominator:
          Denominator for basic earnings per
          share, weighted average shares            8,780     10,559      12,704

      Effect of dilutive employee stock options (a)    -         197         367
                                                     ---         ---         ---
      Denominator for diluted earnings per share,
          adjusted weighted average shares and
          assumed conversions                       8,780     10,756      13,071
                                                    =====     ======      ======

(a)  Potentially dilutive employee and director stock options that have been
     excluded from this amount because they are anti-dilutive amounted to
     425,000, 1,198,000, and 1,578,000 in 1998, 1999, and 2000, respectively.

      The numerator for basic and diluted earnings per share for the years ended
December 31, 2000, 1999 and 1998 is the net income for the period.


NOTE M -- EMPLOYEE BENEFITS

            The Company maintains a qualified Employee Savings Plan (the "Plan")
for eligible employees under Section 401(k) of the Internal Revenue Code. The
Plan provides for voluntary employee contributions through salary reductions and
employer contributions at the discretion of the Company. The Company currently
has authorized employer contributions of 50% of employees' contribution up to 2%
of the employees' compensation. The Company's contribution expense was $480,000,
$552,000 and $524,000 in 1998, 1999 and 2000, respectively.

     Since  1999,  the  Company  also   maintained  a   non-qualified   Deferred
Compensation  Plan for certain  executives and directors.  The Company's expense
for this Deferred  Compensation Plan was $145,000 and $116,000 in 1999 and 2000,
respectively. This plan was terminated effective January 1, 2001.


                                       F-15
<PAGE>

               CURATIVE HEALTH SERVICES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              December 31, 2000


NOTE N -- SUBSEQUENT EVENTS

            On March 20, 2001, the Company announced it had signed a definitive
agreement to purchase all of the outstanding shares of Millennium Health, Inc.
for $32.3 million and the assumption and repayment of approximately $5 million
in debt, for a total of $37.3 million in cash. Millennium is a privately held
specialty pharmaceutical company engaged in the distribution of
biopharmaceuticals.


                                      F-16
<PAGE>

                                                                    Schedule II



                      CURATIVE HEALTH SERVICES, INC. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
                          YEAR ENDED DECEMBER 31, 2000
<TABLE>
<CAPTION>


 COL. A                             COL.B                 COL. C                        COL. D        COL. E
--------------------------------------------------------------------------------------------------------------
                                                          ADDITIONS

                                    Balance at            Charged to    Charged to                   Balance at
                                    Beginning             Costs and     Other Account   Deductions   End
 DESCRIPTION                        of Period             Expenses      Describe        Describe     of Period
---------------------------------------------------------------------------------------------------------------
<S>                                 <C>                   <C>           <C>        <C>               <C>
Year ended December 31, 2000:
Allowance for doubtful accounts     $ 2,276,000           $ 2,189,000   $      -   $ 2,419,000(1)    $ 2,046,000
                                    ===========           ===========      =====   =============     ===========
Year ended December 31, 1999
Allowance for doubtful accounts     $ 1,679,000           $ 3,668,000   $      -   $ 3,071,000(1)    $  2,276,000
                                    ===========           ===========      =====   =============     ============
Year ended December 31, 1998:
Allowance for doubtful accounts     $ 2,492,000           $ 1,957,000   $      -   $ 2,770,000(1)    $  1,679,000
                                    ===========           ===========      =====   =============     ============
</TABLE>


(1)   Accounts written off


                                       S-1
<PAGE>


                              INDEX TO EXHIBITS

Exhibit No. Description                                                 Page No.
-------------------------------------------------------------------------------

   3.1      Articles of Incorporation of the Company                         (1)

   3.2      Bylaws of the Company                                            (1)

   4.0      Rights Agreement, dated as of October 25, 1995 between
            Curative Technologies, Inc. and Bank Minnesota,
            National Association, as Rights Agent                            (7)

   4.1      Stock Purchase Agreement, dated July 6, 1989, among
            the Company and certain investors named therein          (1)(Ex.4.2)

  10.1      Technology Transfer Agreement, dated September 21, 1990,
            between Curative Technologies GmbH and the Company      (1)(Ex.10.8)

  10.2      Contractual Agreement for Wound Healing Product effective as of
            January 1, 1988, between the Company and the University of
            Minnesota Hospital and Clinic                          (1)(Ex.10.17)

  10.3      Form of Wound Care Center(R)Contract                            (12)

  10.4      Lease Agreement dated June 30, 1997, and amended Lease
            Agreement dated November 13, 1997, between New York Life
            Insurance Company and the Company                               (12)

  10.5      Employment Agreement, dated as of September 1, 1997 between
            John C. Prior and the Company                                  (9)**

  10.6      1991 Stock Option Plan                               (1)(Ex.10.27)**

  10.7      Amendment No. 4 to the 1991 Stock Option Plan                 (12)**

  10.9      Curative Health Services, Inc., Director Share
            Purchase Program                                               (3)**

  10.10     Employment Agreement, dated as of October 21, 1993, between
            Howard Jones and the Company                                   (4)**

  10.11     Curative Health Services, Inc. Employee 401(k)
            Savings Plan, as amended and restated                          (5)**

  10.12     Settlement Agreement by and between the University of California,
            David R. Knighton and the Company dated September 1, 1993        (6)

  10.13     Settlement Agreement by and among the United States
            of America and UltraMed, Inc., Robert Baurys,
            Susan Hrim, Cy Corgan,  Chris Rosenski and the Company
            dated October 18, 1994 and related agreements                    (6)
<PAGE>

                        INDEX TO EXHIBITS (continued)

Exhibit No. Description                                                 Page No.
-------------------------------------------------------------------------------

  10.14     Amendment of Employment Agreement, dated September 1, 1997
            between John Vakoutis and the Company                          (9)**

10.14.1     Transition Agreement between Curative Health Services, Inc. and
            John Vakoutis                                                     *

  10.15     Employment Agreement dated as of September 1, 1997, between
            Carol Gleber and the Company                                   (9)**

10.15.1     Transition Agreement between Curative Health Services, Inc. and
            Carol Gleber                                                    (13)

  10.16     Employment Agreement dated as of June 17, 1987, between
            Gary Jensen and the Company                                    (6)**

  10.19    Curative Technologies, Inc. Non-Employee Director
           Stock Option Plan                                                 (8)

10.19.1    Amendment No. 1 to Curative Technologies, Inc. Non
           Employee Director Stock Option Plan                    (10)(Ex.10.19)

10.19.2    Amendment to the Non-Employee Director Stock Option Plan         (14)

10.20      Employment Agreement dated as of October 21, 1998 between
           Robert Heisler and the Company                                 (12)**

10.21      Amended Employment Agreement dated December 17, 1997 between
           William Tella and the Company                                  (11)**

10.22      Development and Licensing Agreement dated May 19, 1998 between
           Accordant Health Services, Inc. and the Company                  (12)

10.23      Stock Purchase Agreement dated May 1998, among Accordant Health
           Services, Inc, the Company and certain investor named herein.    (12)


10.24      Curative Health Services, Inc. 2000 Stock Option Plan              *

10.25      Asset Purchase Agreement among Cytomedix, Inc., Cytomedix, N.V.,
           CHS Services, Inc. and Curative Health Services, Inc. dated as of
           October 12, 2000.                                                (13)

10.26      Employment Agreement dated as of September 18, 2000, between Roy
           McKinley and the Company.                                          *

10.27      Employment Agreement dated as of September 18, 2000, between Jule
           Crider and the Company.                                            *

10.28      Form of Restricted Stock Award Agreement                         (15)

10.29      Non-Employee Director Severance Plan                             (16)

<PAGE>

                        INDEX TO EXHIBITS (continued)

Exhibit No. Description                                                 Page No.
--------------------------------------------------------------------------------

  21        Subsidiaries of the Registrant                                    *

  23        Consent of Ernst & Young LLP                                      *

  24        Power of Attorney (included signature page)


*  Filed herewith
** Required to be filed pursuant to Item 601(b) (10) (ii) (A) or (iii) of
Regulation S-K.

(1)  Incorporated  by reference to similarly  numbered  exhibit to the Company's
     current report on Form 8-K dated May 30, 1996.
(2)  Incorporated  by  reference  to  the  similarly  numbered  exhibit  (unless
     otherwise  indicated) to the Company's  Registration  Statement on Form S-1
     (No. 33-39880).
(3)  Incorporated by reference to the Company's  Registration  Statement on Form
     S-8 (filed July 7, 1993, No. 33-65710).
(4)  Incorporated  by reference to Exhibit 10.32 to the Company's  Annual Report
     on Form 10-K filed for the year ended December 31, 1993.
(5)  Incorporated by reference to the Company's  Registration  Statement on Form
     S-8 (filed October 13, 1994, No. 33-85188).
(6)  Incorporated  by  reference  to  the  similarly  numbered  exhibit  to  the
     Company's  Annual Report on Form 10-K filed for the year ended December 31,
     1994.
(7)  Incorporated  by reference to similarly  numbered  exhibit to the Company's
     Current Report on Form 8-K dated November 6, 1995.
(8)  Incorporated  by reference to Exhibit  10.25.2 to the  Company's  Quarterly
     Report on Form 10-Q filed for the year ended June 30, 1996.
(9)  Incorporated  by  reference  to  the  similarly  numbered  exhibit  to  the
     Company's  Annual  Report and Form 10-K filed the year ended  December  31,
     1997.
(10) Incorporated  by  reference  to  the  similarly  numbered  exhibit  (unless
     otherwise indicated) to the Company's Quarterly Report on Form 10-Q for the
     quarter ended June 30, 1998.
(11) Incorporated  by reference to Exhibit  10.45.1 to the  Company's  Quarterly
     Report on Form 10Q for the quarter ended March 3, 1998.
(12) Incorporated  by reference to similarly  numbered  exhibit to the Company's
     Annual Report on From 10K filed for the year ended December 31, 1998.
(13) Incorporated  by reference to similarly  numbered  exhibit to the Company's
     Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
(14) Incorporated  by reference to similarly  numbered  exhibit to the Company's
     Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.
(15) Incorporated  by  reference  to Exhibit  10.25 to the  Company's  Quarterly
     Report on Form 10-Q for the quarter ended June 30, 2000.
(16) Incorporated  by  reference  to Exhibit  10.26 to the  Company's  Quarterly
     Report on Form 10-Q for the quarter ended June 30, 2000.

<PAGE>

                                                                Exhibit 10.14.1


                            TRANSITION AGREEMENT

      THIS TRANSITION AGREEMENT effective as of November 2, 2000 (the
"Agreement") is made by and between CURATIVE HEALTH SERVICES, INC., a Minnesota
corporation (the "Company"), and JOHN VAKOUTIS, an individual residing in the
State of New York (the "Executive").

      WHEREAS, pursuant to an Amended and Restated Employment Agreement
effective as of September 1, 1997 between the Company and Executive, a copy of
which is annexed hereto as Exhibit A (the "Employment Agreement"), Executive has
been serving as the Company's President and Chief Executive Officer;

      WHEREAS, the parties have agreed that Executive will resign immediately as
a director of the Company and will resign effective as of the close of business
on December 1, 2000 from his current position as an executive officer of the
Company (the effective date of such resignation as an executive officer, the
"Transition Date"); and

      WHEREAS, in light of Executive's history with the Company and his
extensive knowledge of the Company's business, the Company desires to reward
Executive for his past contributions to the success of the Company on the terms
and subject to the conditions set forth herein, which will not interfere with or
jeopardize Executive's future employment.

      NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

1.  Resignation.  Executive  shall and does  hereby  resign as a director of the
Company.  Effective as of the Transition  Date,  Executive shall and does hereby
resign as an executive officer of the Company. Accordingly, subject to Section 5
below, the Employment Agreement shall be terminated as of the Transition Date.

2.  Benefits.  It is the  intention of the Company to provide to  Executive,  as
compensation  upon his  resignation  as an  executive  officer  of the  Company,
benefits equal to or better than the benefits he would have received pursuant to
Section 4.5(a) of the Employment  Agreement as if the Company had terminated the
Employment  Agreement  without Cause (as such term is defined in the  Employment
Agreement). Accordingly, the Company agrees, subject to the terms and conditions
of  this  Agreement,  to  provide  to  Executive  (i) for  the  36-month  period
commencing on the Transition Date (the "Benefit  Period"),  the welfare benefits
described  in  Section  3.2 of  the  Employment  Agreement  that  Executive  was
receiving  immediately  prior to the  Transition  Date  (it  being  agreed  that
Executive's COBRA rights shall not begin until after the Benefit Period); (ii) a
lump sum severance payment of $1,108,654.24, on January 2, 2001, but in no event
earlier than the date this Agreement  becomes  effective  pursuant to Section 10
below;  and (iii) $1,220 as a payment for  Executive's  unused vacation pay. The
Company

<PAGE>


shall pay to Executive on January 2, 2001, the then current balance of his
account in the Company's Deferred Compensation Plan, which balance as of
September 30, 2000, was $416,426.25.

3. Expenses. The Company shall reimburse Executive up to $15,000 upon
presentation of paid invoices for legal expenses and outplacement counseling
fees and expenses actually paid by him in connection with his resignation
pursuant to this Agreement. The Company agrees to reimburse Executive for
expenses incurred prior to the Transition Date pursuant to Section 3.3 of the
Employment Agreement upon submission of customary reimbursement forms by
Executive, which expenses shall be paid promptly. The Company agrees that,
subject to the terms and conditions of this Agreement, Executive shall be
entitled to reimbursement of expenses consistent with past practice and the use
of the automobile currently furnished to him by the Company pursuant to Section
3.4 of the Employment Agreement until May 1, 2003. Executive shall return such
automobile to the Company on or before May 1, 2003.

4.  Retention of Computers.  Executive  shall be entitled to retain the two Dell
desktop computers that are currently in his possession.

5. Stock Options. A schedule of all unexpired options to purchase shares of
Common Stock, $.01 par value per share, of the Company ("Options") and the
restricted grant of such shares made on August 11, 1999 ("Restricted Stock
Grant") held by Executive as of the Transition Date is set forth on Exhibit B
hereto. The parties hereto hereby agree that, as set forth on Exhibit B, all
Options which will vest pursuant to the terms of their respective grants at any
time on or before December 1, 2002, shall instead vest and become exercisable by
Executive on the Transition Date and shall remain exercisable until December 1,
2002. In addition, as set forth on Exhibit B, as of the Transition Date,
Executive shall be vested in that number of shares of the Restricted Stock Grant
set forth on Exhibit B. The shares of the Restricted Stock Grant and the shares
issuable upon exercise of the Options shall continue to be available for sale
under the Company's registration statement on Form S-8.

6.  Restrictive  Covenants.  Notwithstanding  the  termination of the Employment
Agreement,  Section 5 of the Employment  Agreement will survive according to its
terms,  and  Executive  hereby  agrees to be bound and abide by the  restrictive
covenants set forth therein.

7.    Release of Claims.

(a) As a material inducement to the Company to enter into this Agreement and in
consideration for the payments to be provided by the Company to Executive as
contained herein, Executive hereby irrevocably and unconditionally releases,
acquits and forever discharges the Company, and each of its current and former
owners, principals, stockholders, predecessors, successors, assigns, agents,
directors, officers, employees, representatives, attorneys, divisions,
subsidiaries, whether wholly or partially owned, and affiliates (and current and
former agents, directors, officers, employees, representatives and attorneys of
such divisions, subsidiaries and affiliates), and all persons acting by,
through, under or in concert with any of them (collectively, the "Company
Releasees") from any and all charges, complaints, claims, liabilities,
obligations, promises, agreements, controversies, damages, actions, causes of
action, suits, rights, demands, costs, losses, debts and expenses (including
attorneys' fees and costs actually incurred), of any nature whatsoever, known or
unknown, which Executive now has, owns or holds, or claims to have, own or hold,
or which Executive at any time heretofore had, owned or held, or claimed to
have, own or held against each or any of the Company Releasees relating to or
arising from his employment by the Company or the change in title and
responsibility to be effective on the Transition Date ("Executive Claim" or
"Executive Claims"). The Executive Claims shall include, without implication of
limitation, any claims made or which could have been made based upon the
Employment Agreement, all claims for wrongful termination of employment whether
in contract, tort or otherwise; all claims for constructive discharge; all
claims for defamation or damage to reputation; all claims for breach of express
or implied contract; all claims for intentional, reckless or negligent
infliction of emotional distress; all claims for breach of any express or
implied covenant of employment, including the covenant of good faith and fair
dealing; all claims for interference with contractual or advantageous relations,
whether prospective or existing; all claims for deceit or misrepresentation; all
claims relating to the Executive's employment with the Company, including claims
relating to his hire and change in position as President and Chief Executive
Officer; all claims for discrimination under state or federal law, including,
without limitation, claims under Title VII of the Civil Rights Act of 1964, as
amended, the Age Discrimination in Employment Act, as amended, the Americans
with Disabilities Act, as amended, the Rehabilitation Act of 1973, as amended,
and under any applicable state fair employment practices law or statute; all
claims for reinstatement; all claims for punitive damages; all claims for wages,
bonuses, severance, back or front pay or other forms of compensation; and all
claims for attorneys' fees and costs. The foregoing notwithstanding, this
release and the Executive Claims shall not include: (i) all claims which arise
from the Company's obligations under this Agreement; (ii) all claims in respect
of Executive's rights under the Company's 401(k) Plan; (ii) all claims in
respect of Executive's COBRA rights after the Transition Date or (iv) all claims
in respect of Executive's rights to indemnification as an employee and officer
of the Company pursuant to applicable law or the Company's organizational
documents.
<PAGE>

      Executive agrees that he will not hereafter pursue any Executive Claim
against any Company Releasee by filing a lawsuit in any local, state or federal
court, and he shall not seek damages of any nature, attorney's fees, or costs
from the Company or any of the other Company Releasees in connection therewith.

(b) As a material inducement to Executive to enter into this Agreement and in
consideration for Executive's agreements contained herein, the Company hereby
irrevocably and unconditionally releases, acquits and forever discharges
Executive, and each of his heirs, predecessors, successors, assigns, agents,
representatives and attorneys, and all persons acting by, through, under or in
concert with any of them (collectively, the "Executive Releasees") from any and
all charges, complaints, claims, liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits, rights, demands,
costs, losses, debts and expenses (including attorneys' fees and costs actually
incurred), of any nature whatsoever, known or unknown, which the Company now
has, owns or holds, or claims to have, own or hold, or which the Company at any
time heretofore had, owned or held, or claimed to have, own or held against each
or any of the Executive Releasees relating to or arising from Executive's
employment by the Company ("Company Claim" or "Company Claims"). The Company
Claims shall include, without implication of limitation, any claims made or
which could have been made based upon the Employment Agreement; all claims for
breach of express or implied contract; all claims for breach of any express or
implied covenant of employment, including the covenant of good faith and fair
dealing; all claims for interference with contractual or advantageous relations,
whether prospective or existing; all claims for deceit or misrepresentation; all
claims relating to the Executive's employment with the Company, and all claims
for attorneys' fees and costs. The foregoing notwithstanding, this release and
the Company Claims shall not include all claims which arise from Executive's
obligations under this Agreement.

      The Company agrees that it will not hereafter pursue any Company Claim
against any Executive Releasee by filing a lawsuit in any local, state or
federal court, and it shall not seek damages of any nature, attorney's fees, or
costs from Executive or any of the other Executive Releasees in connection
therewith.

8. Transition; Litigation and Regulatory Cooperation. Executive agrees to exert
his best efforts through December 31, 2000 to provide such assistance as the
Company may reasonably request in connection with the transition of Executive's
duties and responsibilities to such other Company personnel as the Chief
Executive Officer of the Company may reasonably request. In addition, from and
after the Transition Date, Executive agrees to reasonably cooperate with the
Company, at the Company's cost and expense, in the defense or prosecution of any
claims, actions or investigations which already have been brought or which may
be brought in the future against or on behalf of the Company which relate to
events or occurrences that transpired during Executive's employment with the
Company. Executive's reasonable cooperation in connection with such claims or
actions shall include, without implication of limitation, being available to
meet with counsel or prepare for discovery or trial and to testify truthfully as
a witness when reasonably requested by the Company at reasonable times
designated by the Company. The Company shall promptly reimburse Executive for
his expenses, including, but not limited to, all directly related long distance
calls, travel, lodging, food, reasonable cost of legal representation, and any
other expenses which are reasonably required for Executive to reasonably
cooperate with the obligations of this Section 8. Provided, however, that with
respect to travel, lodging and food, if Executive provides reasonable notice to
the Company of the amount and sources of the expenses, at Executive's request,
the Company will either pay the expenses directly or advance the cost of those
expenses to Executive. Executive further agrees that, unless required by law, he
will not voluntarily disclose to any person or party any information that is
adverse to the Company, that he will maintain the confidences and privileges of
the Company and that he will testify truthfully regarding any information that
he is obligated to disclose. Nothing herein shall be deemed to prevent Executive
from complying to the full extent required by law, including, but not limited
to, any court order or other legal process that may be issued to him. Provided,
however, that nothing contained in this Section 8 shall unreasonably interfere
with Executive seeking and maintaining future employment. The Company and its
legal representatives will use their best efforts to coordinate reasonable
requests under this Section 8, which will not jeopardize Executive's future
on-going employment.
<PAGE>

9.    Nondisparagement.

(a) Executive will not, directly or indirectly, for his own account or for or on
behalf of any other person or entity, whether as an officer, director, employee,
partner, principal, joint venturer, consultant, investor, shareholder,
independent contractor or otherwise speak or act in any manner that is intended
to be or is derogatory of the Company or the Company Releasees, unless required
by law or legal process to truthfully provide information which would otherwise
violate this Section 9. Specifically, and without implication of limitation,
Executive agrees not to take any action or make any statement, written or oral,
which disparages or criticizes the Company, its management, or its business
practices, or which disrupts or impairs the Company's normal operations, unless
required by law or legal process to truthfully provide information which would
otherwise violate this Section 9.

(b) The Company agrees that the Company and its officers and directors will not,
directly or indirectly, for its own account or for or on behalf of any other
person or entity, whether as partner, principal, joint venturer, investor,
shareholder, independent contractor or otherwise speak or act in any manner that
is intended to be or is derogatory of Executive. Specifically, and without
implication of limitation, the Company agrees not to take any action or make any
statement, written or oral, which will directly or indirectly disparage or
criticize Executive.

10. Right to Consider Agreement. Executive acknowledges that he has been given
the opportunity, if he so desired, to consider this Agreement for twenty-one
(21) days before executing it. If not signed by Executive and returned to Robert
J. Dwyer, Esq., counsel to the Company, so that it is received by the close of
business on the twenty-second (22nd) day after Executive's receipt of the
Agreement, this Agreement will not be valid. In addition, if Executive breaches
any of the conditions of the Agreement within the twenty-one (21) day period,
the offer of this Agreement will be withdrawn and his execution of the Agreement
will not be valid. In the event that Executive has executed this Agreement
within less than twenty-one (21) days of the date of its delivery to his,
Executive acknowledges that such decision was entirely voluntary and that he had
the opportunity to consider this Agreement for the entire twenty-one (21) day
period. The Company acknowledges that for a period of seven (7) days from the
date of the execution of this Agreement, Executive shall retain the right to
revoke this Agreement by written notice that is received by Robert J. Dwyer,
Esq. before the end of such period, and that this Agreement shall not become
effective or enforceable until the expiration of such revocation period.

11. Advice of Counsel. Executive represents and agrees that the Company hereby
advises him to discuss all aspects of this Agreement with his attorney before
signing the Agreement; that he has carefully read and fully understands all of
the provisions of this Agreement and that he is voluntarily entering into this
Agreement.

12. Confidentiality. Each of Executive and the Company and their respective
counsel agree to hold the terms and conditions of this Agreement in strict
confidence, except as may be required by law. If either party or such party's
counsel is required by law to reveal information required by this paragraph to
be kept confidential, such party will notify the other party before the
information is revealed of the information that he or it will reveal, the reason
therefore, and the identity of the entity seeking the information.

13. No Admission of Fault. Executive agrees that the Company's willingness to
enter into this Agreement does not constitute and should not be construed as,
any admission of liability or fault on the part of the Company or its officers,
directors, employees and agents.

14. Written Statement; Letter of Recommendation. Notwithstanding the
confidentiality provisions contained herein, the parties agree that (i) the
press release that is annexed as Exhibit C may be distributed by Executive or
the Company to anyone following the Transition Date, and (ii) the Chief
Executive Officer of the Company shall furnish to Executive a letter of
recommendation consistent with Exhibit C and otherwise mutually acceptable to
the Chief Executive Officer and Executive.
<PAGE>

15. Entire Agreement. This Agreement supersedes any and all other prior or
contemporaneous agreements, either oral or in writing, between the parties
hereto with respect to the subject matter hereof, including, without limitation,
the Employment Agreement, and this Agreement contains all of the covenants and
agreements between the parties with respect to the termination of Executive's
employment and the severance and other benefits he shall receive in connection
therewith; provided, however, that all Options which will vest pursuant to their
terms after the Benefit Period shall lapse and be forfeited as of the Transition
Date and the unvested portion of the Restricted Stock Grant as set forth on
Exhibit B shall be forfeited.

16. Law  Governing  This  Agreement.  This  Agreement  shall be  governed by and
construed in accordance  with the laws of the State of New York,  without regard
to conflicts of laws principles.

17. Waivers. No waiver at any time of any term or provision of this Agreement
shall be construed as a waiver of any other term or provision of this Agreement
and that a waiver at any time of any term or provision of this Agreement shall
not be construed as a waiver at any subsequent time of the same term or
provision.

18.  Amendment.  No amendment or  modification of this Agreement shall be deemed
effective unless and until executed in writing by each party hereto.

19. Severability and Limitation. All agreements and covenants contained herein
are severable and in the event any of them shall be held to be invalid by any
competent court, this Agreement shall be interpreted as if such invalid
agreements or covenants were not contained herein. Should any court or other
legally constituted authority determine that for any such agreement or covenant
to be effective that it must be modified to limit its duration or scope, the
parties hereto shall consider such agreement or covenant to be amended or
modified with respect to duration and/or scope so as to comply with the orders
of any such court or other legally constituted authority, and as to all other
portions of such agreement or covenants they shall remain in full force and
effect as originally written.

20.  Headings.  All  headings  set  forth in this  Agreement  are  intended  for
convenience  only and shall not control or affect the meaning,  construction  or
effect of this Agreement or of any of the provisions hereof.

21. Assignment. The Company shall have the right to assign this Agreement and to
delegate all of its rights, duties and obligations hereunder to any entity which
controls the Company, which the Company controls or which may be the result of
the merger, consolidation, acquisition or reorganization of the Company and
another entity. In the event of any permitted assignment, the Company shall
nonetheless remain obligated hereunder. Executive agrees that this Agreement is
personal to him and his rights and interests hereunder may not be assigned, nor
may his obligations and duties hereunder be delegated, and that any attempted
assignment or delegation in violation of this provision shall be void. Provided,
however, that upon Executive's death, his rights under this Agreement shall
inure to the benefit of his estate, successors and assigns.

22.  Counterparts.  This  Agreement may be executed via  facsimile  transmission
signature and counterparts,  each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.

                                  [signature page follows]


<PAGE>


      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set above.

                                          CURATIVE HEALTH SERVICES, INC.
                                          (the "Company")


                                          By:   /s/ John C. Prior
                                                --------------------------
                                                Name: John C. Prior
                                                Title: COO


                                         ("Executive")


                                               /s/ John Vakoutis
                                               ---------------------------
                                               JOHN VAKOUTIS

<PAGE>

                                                                   Exhibit 10.24

                        CURATIVE HEALTH SERVICES, INC.
                          2000 STOCK INCENTIVE PLAN


Section 1.  Purpose of Plan; Effect on Prior Plan.
-------------------------------------------------

      (a) Purpose. The purpose of the Plan (as defined below) is to promote the
interests of Curative Health Services, Inc., a Minnesota corporation, and its
shareholders by aiding the Company in attracting and retaining employees,
officers, consultants, independent contractors and non-employee directors
capable of assuring the future success of the Company, to offer such persons
incentives to put forth maximum efforts for the success of the Company's
business and to afford such persons an opportunity to acquire a proprietary
interest in the Company.

      (b) Effect on Prior Plan. From and after the Effective Date, no stock
options or other awards shall be granted under the Company's 1991 Stock Option
Plan, as amended (the "Prior Plan"). All stock options granted and outstanding
thereunder prior to the Effective Date shall remain outstanding in accordance
with the terms of the Prior Plan.

      Section 2.  Definitions.
      -----------------------

      As used in the Plan, the following terms shall have the meanings set forth
below:

            (a) "Affiliate" shall mean (i) any entity that, directly or
indirectly through one or more intermediaries, is controlled by the Company and
(ii) any entity in which the Company has a significant equity interest, in each
case as determined by the Committee.

            (b) "Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Performance Award, Other Stock Grant or
Other Stock-Based Award granted under the Plan.

            (c) "Award Agreement" shall mean any written agreement, contract or
other instrument or document evidencing any Award granted under the Plan.

            (d)   "Board" shall mean the Board of Directors of the Company.

            (e) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any regulations promulgated thereunder.

            (f) "Committee" shall mean a committee of Directors designated by
the Board to administer the Plan. The Committee shall be comprised of not less
than such number of Directors as shall be required to permit Awards granted
under the Plan to qualify under Rule 16b-3, and each member of the Committee
shall be a "Non-Employee Director" within the meaning of Rule 16b-3 and an
"outside director" within the meaning of Section 162(m) of the Code. The Company
expects to have the Plan administered in accordance with the requirements for
the award of "qualified performance-based compensation" within the meaning of
Section 162(m) of the Code.

            (g)   "Company"  shall mean  Curative  Health  Services,  Inc.,  a
Minnesota corporation, and any successor corporation.

            (h)   "Director" shall mean a member of the Board.

            (i)   "Effective  Date" shall mean the date given in Section 10 of
                  the Plan.

            (j) "Eligible Person" shall mean any employee, officer, consultant,
independent contractor or Director providing services to the Company or any
Affiliate whom the Committee determines to be an Eligible Person.

            (k) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair market
value of such property determined by such methods or procedures as shall be
reasonably established in good faith from time to time by the Committee.

            (l) "Incentive Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is intended to meet the requirements of Section
422 of the Code or any successor provision.

            (m) "Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.

            (n) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option, and shall include Reload Options.

            (o) "Other Stock Grant" shall mean any right granted under Section
6(e) of the Plan.
<PAGE>

            (p) "Other Stock-Based Award" shall mean any right granted under
Section 6(f) of the Plan.

            (q) "Participant" shall mean an Eligible Person designated to be
granted an Award under the Plan.

            (r)   "Performance  Award"  shall  mean any  right  granted  under
Section 6(d) of the Plan.

            (s)   "Person"   shall   mean   any    individual,    corporation,
partnership, association or trust.

            (t)   "Plan" shall mean the Curative  Health  Services,  Inc. 2000
Stock  Incentive  Plan, as amended from time to time,  the provisions of which
are set forth herein.

            (u)   "Reload   Option"  shall  mean  any  Option   granted  under
Section 6(a)(iv) of the Plan.

            (v)   "Restricted  Stock"  shall  mean any  Shares  granted  under
Section 6(c) of the Plan.

            (w) "Restricted Stock Unit" shall mean any unit granted under
Section 6(c) of the Plan evidencing the right to receive a Share (or a cash
payment equal to the Fair Market Value of a Share) at some future date.

            (x) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended,
or any successor rule or regulation.

            (y) "Shares" shall mean shares of Common Stock, $.01 par value per
share, of the Company or such other securities or property as may become subject
to Awards pursuant to an adjustment made under Section 4(c) of the Plan.

            (z) "Stock Appreciation Right" shall mean any right granted under
Section 6(b) of the Plan.

            Section 3.  Administration.
            --------------------------

            (a) Power and Authority of the Committee. The Plan shall be
administered by the Committee. Subject to the express provisions of the Plan and
to applicable law, the Committee shall have full power and authority to: (i)
designate Participants; (ii) determine the type or types of Awards to be granted
to each Participant under the Plan; (iii) determine the number of Shares to be
covered by (or with respect to which payments, rights or other matters are to be
calculated in connection with) each Award; (iv) determine the terms and
conditions of any Award or Award Agreement; (v) amend the terms and conditions
of any Award or Award Agreement and accelerate the exercisability of Options or
the lapse of restrictions relating to Restricted Stock, Restricted Stock Units
or other Awards; (vi) determine whether, to what extent and under what
circumstances Awards may be exercised in cash, Shares, other securities, other
Awards or other property, or canceled, forfeited or suspended; (vii) determine
whether, to what extent and under what circumstances cash, Shares, promissory
notes, other securities, other Awards, other property and other amounts payable
with respect to an Award under the Plan shall be deferred either automatically
or at the election of the holder thereof or the Committee; (viii) interpret and
administer the Plan and any instrument or agreement, including an Award
Agreement, relating to the Plan; (ix) establish, amend, suspend or waive such
rules and regulations and appoint such agents as it shall deem appropriate for
the proper administration of the Plan; and (x) make any other determination and
take any other action that the Committee deems necessary or desirable for the
administration of the Plan, subject to the exclusive authority of the Board
under Section 7(a) herein to amend or terminate this Plan. Unless otherwise
expressly provided in the Plan or unless otherwise disapproved by the Board, all
designations, determinations, interpretations and other decisions under or with
respect to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive and binding
upon any Participant, any holder or beneficiary of any Award and any employee of
the Company or any Affiliate.

            (b) Delegation. The Committee may delegate its powers and duties
under the Plan to one or more officers of the Company or any Affiliate or a
committee of such officers, subject to such terms, conditions and limitations as
the Committee may establish in its sole discretion, provided, however, that the
Committee shall not delegate its powers and duties under the Plan (i) with
regard to officers or directors of the Company or any Affiliate who are subject
to Section 16 of the Securities Exchange Act of 1934, as amended or (ii) in such
a manner as would cause the Plan not to comply with the requirements of Section
162(m) of the Code.

            (c) Power and Authority of the Board of Directors. Notwithstanding
anything to the contrary contained herein, the Board may, at any time and from
time to time, without any further action of the Committee, exercise the powers
and duties of the Committee under the Plan.
<PAGE>

            Section 4.  Shares Available for Awards.
            ---------------------------------------

            (a) Shares Available. Subject to adjustment as provided in Section
4(c) of the Plan, the aggregate number of Shares that may be issued under all
Awards under the Plan shall be 1,750,000. Shares to be issued under the Plan may
be either authorized but unissued Shares or Shares acquired in the open market
or otherwise. Any Shares that are used by a Participant as full or partial
payment to the Company of the purchase price relating to an Award, or in
connection with the satisfaction of tax obligations relating to an Award, shall
again be available for granting Awards (other than Incentive Stock Options)
under the Plan. In addition, if any Shares covered by an Award or to which an
Award relates are not purchased or are forfeited, or if an Award otherwise
terminates without delivery of any Shares, then the number of Shares counted
against the aggregate number of Shares available under the Plan with respect to
such Award, to the extent of any such forfeiture or termination, shall again be
available for granting Awards under the Plan. Notwithstanding the foregoing, the
number of Shares available for granting Incentive Stock Options under the Plan
shall not exceed 1,750,000, subject to adjustment as provided in the Plan and
subject to the provisions of Section 422 or 424 of the Code or any successor
provision.

            (b) Accounting for Awards. For purposes of this Section 4, if an
Award entitles the holder thereof to receive or purchase Shares, the number of
Shares covered by such Award or to which such Award relates shall be counted on
the date of grant of such Award against the aggregate number of Shares available
for granting Awards under the Plan.

            (c) Adjustments. In the event that the Committee shall determine
that any dividend or other distribution (whether in the form of cash, Shares,
other securities or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and type of Shares (or other securities or other property) that
thereafter may be made the subject of Awards, (ii) the number and type of Shares
(or other securities or other property) subject to outstanding Awards and (iii)
the purchase or exercise price with respect to any Award; provided, however,
that the number of Shares covered by any Award or to which such Award relates
shall always be a whole number.

            (d) Award Limitations Under the Plan. No Eligible Person may be
granted any Award or Awards under the Plan, the value of which Award or Awards
is based solely on an increase in the value of the Shares after the date of
grant of such Award or Awards, for more than 500,000 Shares (subject to
adjustment as provided for in Section 4(c) of the Plan), in the aggregate in any
calendar year. The foregoing annual limitation specifically includes the grant
of any Award or Awards representing "qualified performance-based compensation"
within the meaning of Section 162(m) of the Code.

Section 5.  Eligibility.
-----------------------

      Any Eligible Person shall be eligible to be designated a Participant. In
determining which Eligible Persons shall receive an Award and the terms of any
Award, the Committee may take into account the nature of the services rendered
by the respective Eligible Persons, their present and potential contributions to
the success of the Company or such other factors as the Committee, in its
discretion, shall deem relevant. Notwithstanding the foregoing, an Incentive
Stock Option may only be granted to full or part-time employees (which term as
used herein includes, without limitation, officers and Directors who are also
employees), and an Incentive Stock Option shall not be granted to an employee of
an Affiliate unless such Affiliate is also a "subsidiary corporation" of the
Company within the meaning of Section 424(f) of the Code or any successor
provision.

Section 6.  Awards.
------------------

            (a) Options. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
                  (i) Exercise Price. The purchase price per Share purchasable
under an Option shall be determined by the Committee; provided, however, that
such purchase price shall not be less than 100% of the Fair Market Value of a
Share on the date of grant of such Option.
<PAGE>

                   (ii) Option  Term.  The term of each Option  shall be fixed
                        ------------
by the Committee.

                  (iii) Time and Method of Exercise. The Committee shall
determine the time or times at which an Option may be exercised in whole or in
part and the method or methods by which, and the form or forms (including,
without limitation, cash, Shares, promissory notes, other securities, other
Awards or other property, or any combination thereof, having a Fair Market Value
on the exercise date equal to the relevant exercise price) in which, payment of
the exercise price with respect thereto may be made or deemed to have been made.

                  (iv) Reload Options. The Committee may grant Reload Options,
separately or together with another Option, pursuant to which, subject to the
terms and conditions established by the Committee, the Participant would be
granted a new Option when the payment of the exercise price of a previously
granted option is made by the delivery of Shares owned by the Participant
pursuant to Section 6(a)(iii) of the Plan or the relevant provisions of another
plan of the Company, and/or when Shares are tendered or withheld as payment of
the amount to be withheld under applicable income tax laws in connection with
the exercise of an Option, which new Option would be an Option to purchase the
number of Shares not exceeding the sum of (A) the number of Shares so provided
as consideration upon the exercise of the previously granted option to which
such Reload Option relates and (B) the number of Shares, if any, tendered or
withheld as payment of the amount to be withheld under applicable tax laws in
connection with the exercise of the option to which such Reload Option relates
pursuant to the relevant provisions of the plan or agreement relating to such
option. Reload Options may be granted with respect to Options previously granted
under the Plan or any other stock option plan of the Company or may be granted
in connection with any Option granted under the Plan or any other stock option
plan of the Company at the time of such grant. Such Reload Options shall have a
per share exercise price equal to the Fair Market Value of one Share as of the
date of grant of the new Option. Any Reload Option shall be subject to
availability of sufficient Shares for grant under the Plan.

                  (v) With respect to Incentive Stock Options granted under the
Plan, to the extent that the aggregate Fair Market Value (determined at the time
the Incentive Stock Option is granted) of the Shares with respect to which all
Incentive Stock Options are exercisable for the first time by an employee during
any calendar year exceeds $100,000, in accordance with Section 422A(d) of the
Code, such Options shall be treated as Non-Qualified Stock Options.


            (b) Stock Appreciation Rights. The Committee is hereby authorized to
grant Stock Appreciation Rights to Participants subject to the terms of the Plan
and any applicable Award Agreement. A Stock Appreciation Right granted under the
Plan shall confer on the holder thereof a right to receive upon exercise thereof
the excess of (i) the Fair Market Value of one Share on the date of exercise
(or, if the Committee shall so determine, at any time during a specified period
before or after the date of exercise) over (ii) the grant price of the Stock
Appreciation Right as specified by the Committee, which price shall not be less
than 100% of the Fair Market Value of one Share on the date of grant of the
Stock Appreciation Right. Subject to the terms of the Plan and any applicable
Award Agreement, the grant price, term, methods of exercise, dates of exercise,
methods of settlement and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee. The Committee may
impose such conditions or restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate.

            (c) Restricted Stock and Restricted Stock Units. The Committee is
hereby authorized to grant Restricted Stock and Restricted Stock Units to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:

                   (i) Restrictions. Shares of Restricted Stock and Restricted
Stock Units shall be subject to such restrictions as the Committee may impose
(including, without limitation, a waiver by the Participant of the right to vote
or to receive any dividend or other right or property with respect thereto),
which restrictions may lapse separately or in combination at such time or times,
in such installments or otherwise as the Committee may deem appropriate.
<PAGE>

                  (ii) Stock Certificates. Any Restricted Stock granted under
the Plan shall be registered in the name of the Participant and shall bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Stock. In the case of Restricted Stock Units, no
Shares shall be issued at the time such Awards are granted.

                   (iii) Forfeiture. Except as otherwise determined by the
Committee, upon termination of employment (as determined under criteria
established by the Committee) during the applicable restriction period, all
Shares of Restricted Stock and all Restricted Stock Units at such time subject
to restriction shall be forfeited and reacquired by the Company; provided,
however, that the Committee may, when it finds that a waiver would be in the
best interest of the Company, waive in whole or in part any or all remaining
restrictions with respect to Shares of Restricted Stock or Restricted Stock
Units. Upon the lapse or waiver of restrictions and the restricted period
relating to Restricted Stock Units evidencing the right to receive Shares, such
Shares shall be issued and delivered to the holders of the Restricted Stock
Units.

            (d) Performance Awards. The Committee is hereby authorized to grant
Performance Awards to Participants subject to the terms of the Plan and any
applicable Award Agreement. A Performance Award granted under the Plan (i) may
be denominated or payable in cash, Shares (including, without limitation,
Restricted Stock and Restricted Stock Units), other securities, other Awards or
other property and (ii) shall confer on the holder thereof the right to receive
payments, in whole or in part, upon the achievement of such performance goals
during such performance periods as the Committee shall establish. Subject to the
terms of the Plan and any applicable Award Agreement, the performance goals to
be achieved during any performance period, the length of any performance period,
the amount of any Performance Award granted, the amount of any payment or
transfer to be made pursuant to any Performance Award and any other terms and
conditions of any Performance Award shall be determined by the Committee.

            (e) Other Stock Grants. The Committee is hereby authorized, subject
to the terms of the Plan and any applicable Award Agreement, to grant to
Participants Shares without restrictions thereon as are deemed by the Committee
to be consistent with the purpose of the Plan.

            (f) Other Stock-Based Awards. The Committee is hereby authorized to
grant to Participants subject to the terms of the Plan and any applicable Award
Agreement, such other Awards that are denominated or payable in, valued in whole
or in part by reference to, or otherwise based on or related to, Shares
(including, without limitation, securities convertible into Shares), as are
deemed by the Committee to be consistent with the purpose of the Plan. Shares or
other securities delivered pursuant to a purchase right granted under this
Section 6(f) shall be purchased for such consideration, which may be paid by
such method or methods and in such form or forms (including, without limitation,
cash, Shares, promissory notes, other securities, other Awards or other property
or any combination thereof), as the Committee shall determine, the value of
which consideration, as established by the Committee, shall not be less than
100% of the Fair Market Value of such Shares or other securities as of the date
such purchase right is granted.
<PAGE>

            (g)   General.
                  -------

                  (i)   No Cash  Consideration  for  Awards.  Awards  shall be
                        -----------------------------------
granted for no cash  consideration  or for such minimal cash  consideration as
may be required by applicable law.

                  (ii) Awards May Be Granted Separately or Together. Awards may,
in the discretion of the Committee, be granted either alone or in addition to,
in tandem with or in substitution for any other Award or any award granted under
any plan of the Company or any Affiliate other than the Plan. Awards granted in
addition to or in tandem with other Awards or in addition to or in tandem with
awards granted under any such other plan of the Company or any Affiliate may be
granted either at the same time as or at a different time from the grant of such
other Awards or awards.

                  (iii) Forms of Payment under Awards. Subject to the terms of
the Plan and of any applicable Award Agreement, payments or transfers to be made
by the Company or an Affiliate upon the grant, exercise or payment of an Award
may be made in such form or forms as the Committee shall determine (including,
without limitation, cash, Shares, promissory notes, other securities, other
Awards or other property or any combination thereof), and may be made in a
single payment or transfer, in installments or on a deferred basis, in each case
in accordance with rules and procedures established by the Committee. Such rules
and procedures may include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred payments or the
grant or crediting of dividend equivalents with respect to installment or
deferred payments.

                   (iv) Limits on Transfer of Awards. No Award (other than Other
Stock Grants) and no right under any such Award shall be transferable by a
Participant otherwise than by will or by the laws of descent and distribution;
provided, however, that, if so determined by the Committee, a Participant may,
in the manner established by the Committee, transfer Options (other than
Incentive Stock Options) or designate a beneficiary or beneficiaries to exercise
the rights of the Participant and receive any property distributable with
respect to any Award upon the death of the Participant. Each Award or right
under any Award shall be exercisable during the Participant's lifetime only by
the Participant or, if permissible under applicable law, by the Participant's
guardian or legal representative. No Award or right under any such Award may be
pledged, alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate.

                   (v)  Term of Awards.  The term of each  Award  shall be for
                        --------------
such period as may be determined by the Committee.

                  (vi) Restrictions; Securities Exchange Listing. All Shares or
other securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such restrictions as the Committee may deem
advisable under the Plan, applicable federal or state securities laws and
regulatory requirements, and the Committee may cause appropriate entries to be
made or legends to be affixed to reflect such restrictions. If any securities of
the Company are traded on a securities exchange, the Company shall not be
required to deliver any Shares or other securities covered by an Award unless
and until such Shares or other securities have been admitted for trading on such
securities exchange.

                  Section 7.  Amendment and Termination; Adjustments.
                  --------------------------------------------------

            (a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue or terminate the Plan at any time; provided, however, that,
notwithstanding any other provision of the Plan or any Award Agreement, without
the approval of the shareholders of the Company, no such amendment, alteration,
suspension, discontinuation or termination shall be made that, absent such
approval:

                  (i)   would violate the rules or  regulations  of the Nasdaq
National  Market System or any securities  exchange that are applicable to the
Company; or

                  (ii) would cause the Company to be unable, under the Code, to
grant Incentive Stock Options under the Plan.

            (b) Amendments to Awards. The Committee may waive any conditions of
or rights of the Company under any outstanding Award, prospectively or
retroactively. Except as otherwise provided herein or in the Award Agreement,
the Committee may not amend, alter, suspend, discontinue or terminate any
outstanding Award, prospectively or retroactively, if such action would
adversely affect the rights of the holder of such Award, without the consent of
the Participant or holder or beneficiary thereof.
<PAGE>

            (c) Correction of Defects, Omissions and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to carry the Plan into effect.

Section 8.  Income Tax Withholding; Tax Bonuses.
-----------------------------------------------

            (a) Withholding. In order to comply with all applicable federal or
state income tax laws or regulations, the Company may take such action as it
deems appropriate to ensure that all applicable federal or state payroll,
withholding, income or other taxes, which are the sole and absolute
responsibility of a Participant, are withheld or collected from such
Participant. In order to assist a Participant in paying all or a portion of the
federal and state taxes to be withheld or collected upon exercise or receipt of
(or the lapse of restrictions relating to) an Award, the Committee, in its
discretion and subject to such additional terms and conditions as it may adopt,
may permit the Participant to satisfy such tax obligation by (i) electing to
have the Company withhold a portion of the Shares otherwise to be delivered upon
exercise or receipt of (or the lapse of restrictions relating to) such Award
with a Fair Market Value equal to the amount of such taxes or (ii) delivering to
the Company Shares other than Shares issuable upon exercise or receipt of (or
the lapse of restrictions relating to) such Award with a Fair Market Value equal
to the amount of such taxes. The election, if any, must be made on or before the
date that the amount of tax to be withheld is determined.

            (b) Tax Bonuses. The Committee, in its discretion, shall have the
authority, at the time of grant of any Award under this Plan or at any time
thereafter, to approve cash bonuses to designated Participants to be paid upon
their exercise or receipt of (or the lapse of restrictions relating to) Awards
in order to provide funds to pay all or a portion of federal and state taxes due
as a result of such exercise or receipt (or the lapse of such restrictions). The
Committee shall have full authority in its discretion to determine the amount of
any such tax bonus.

Section 9.  General Provisions.
------------------------------

            (a) No Rights to Awards. No Eligible Person, Participant or other
Person shall have any claim to be granted any Award under the Plan, and there is
no obligation for uniformity of treatment of Eligible Persons, Participants or
holders or beneficiaries of Awards under the Plan. The terms and conditions of
Awards need not be the same with respect to any Participant or with respect to
different Participants.

            (b) Award Agreements. No Participant will have rights under an Award
granted to such Participant unless and until an Award Agreement shall have been
duly executed on behalf of the Company and, if requested by the Company, signed
by the Participant.

            (c) No Limit on Other Compensation Arrangements. Nothing contained
in the Plan shall prevent the Company or any Affiliate from adopting or
continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.

            (d) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate, nor will it affect in any way the right of the Company
or an Affiliate to terminate such employment at any time, with or without cause.
In addition, the Company or an Affiliate may at any time dismiss a Participant
from employment free from any liability or any claim under the Plan or any
Award, unless otherwise expressly provided in the Plan or in any Award
Agreement.

            (e)   Governing  Law.  The  validity,  construction  and effect of
                  --------------
the Plan or any Award,  and any rules and regulations  relating to the Plan or
any Award,  shall be determined  in  accordance  with the laws of the State of
Minnesota.

            (f) Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction
or would disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the purpose or intent of
the Plan or the Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or any such Award shall remain in full
force and effect.
<PAGE>

            (g) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.

            (h) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash shall be paid in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.

            (i) Headings. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.

Section 10.  Effective Date of the Plan.
---------------------------------------

      The Plan shall be effective as of the date on which the approval of the
shareholders of the Company is obtained (the "Effective Date").

Section 11.  Term of the Plan.
-----------------------------

      No Award shall be granted under the Plan after the tenth anniversary of
the Effective Date or any earlier date of discontinuation or termination
established pursuant to Section 7(a) of the Plan. However, unless otherwise
expressly provided in the Plan or in an applicable Award Agreement, any Award
theretofore granted may extend beyond such date.

<PAGE>




                                                                   Exhibit 10.25

                  AMENDED AND RESTATED EMPLOYMENT AGREEMENT


            THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is
made effective as of September 18, 2000 (the "Effective Date"), between CURATIVE
HEALTH SERVICES, INC., a Minnesota corporation (the "Company"), and W. LEROY
MCKINLEY ("Executive").

            WHEREAS, the Executive has been in the employ of the Company
pursuant to that certain Employment Agreement (the "Original Agreement") dated
as of August 15, 1998, as amended, on the terms and conditions set forth
therein;

            WHEREAS, the Company recognizes that Executive's contribution to the
growth and success of the Company has been substantial and therefore desires to
assure the Company of Executive's continued employment; and

            WHEREAS, based on the foregoing, the Company and Executive now wish
to amend and restate the terms of the Original Agreement.

            NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements herein contained, the Company and Executive hereby
agree that the Original Agreement shall be and is hereby amended and restated in
its entirety to read as follows:

1.    Employment

      1.1 Employment and Duties. The Company hereby agrees to employ Executive
for the Term (as hereinafter defined) as Senior Vice President, subject to the
direction of the President, and in connection therewith, to perform such duties
as he shall reasonably be directed by the President to perform. Executive hereby
accepts such employment and agrees to render such services. Executive shall
perform his duties and carry out his responsibilities hereunder in a diligent
manner, shall devote his exclusive and full working time, attention and effort
to the affairs of the Company, shall use his best efforts to promote the
interests of the Company and shall be just and faithful in the performance of
his duties and in carrying out his responsibilities.

      1.2 Location. The principal location for performance of Executive's
services hereunder shall be at the Company's executive offices, which are
currently located in Hauppauge, New York, subject to reasonable travel
requirements during the course of such performance.


2.    Employment Term

      The term of Executive's employment hereunder (the "Term") shall be deemed
to commence on the Effective Date and shall end on the first anniversary of the
Effective Date, unless sooner terminated as hereinafter provided; provided,
however, that the Term shall be automatically renewed and extended for an
additional period of one (1) year on each anniversary thereafter unless either
party gives a Notice of Termination (as defined below) to the other party at
least three (3) months prior to such anniversary.

3.     Compensation and Benefits

      3.1    Cash Compensation.
             -----------------

            (a)   Base Salary. The Company shall pay Executive an annual salary
                  of $187,200 payable in bi-weekly installments, in arrears (the
                  "Base Salary"). The Base Salary shall be reviewed annually by
                  the Company's Board of Directors and may be increased, but not
                  decreased (unless mutually agreed upon by Executive and the
                  Company).

            (b)   Bonus Plan.  Executive shall be entitled to participate in
                  ----------
                  the Company's Executive Bonus Compensation Program, in
                  accordance with and subject to the terms and provisions
                  thereof.

<PAGE>

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

      3.3 Expenses. The Company will pay or reimburse Executive for all
reasonable and necessary out-of-pocket expenses incurred by him in the
performance of his duties under this Agreement. Executive shall keep detailed
and accurate records of expenses incurred in connection with the performance of
his duties hereunder and reimbursement therefor shall be in accordance with
policies and procedures to be established from time to time by the Board.

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

4.    Termination of Employment

      4.1   Definitions

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

            (b)   "Cause" shall mean any of the following:
                   ------

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

                  (ii)  the commission by Executive of a felony;

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

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



<PAGE>


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

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

            (c)   A "Change of Control" shall mean any of the following:
                     ------------------

                  (i)   a sale of all or substantially all of the assets of
the Company;

                  (ii) the acquisition of more than eighty percent (80%) of the
Common Stock of the Company (with all classes or series thereof treated as a
single class) by any person or group of persons, except a Permitted Shareholder
(as hereinafter defined), acting in concert. A "Permitted Shareholder" means a
holder, as of the date of the Plan was adopted by the Company, of Common Stock;

                  (iii) a reorganization of the Company wherein the holders of
Common Stock of the Company receive stock in another company, a merger of the
Company with another company wherein there is an eighty percent (80%) or greater
change in the ownership of the Common Stock of the Company as a result of such
merger, or any other transaction in which the Company (other than as the parent
corporation) is consolidated for federal income tax purposes or is eligible to
be consolidated for federal income tax purposes with another corporation;

                  (iv) in the event that the Common Stock is traded on an
established securities market, a public announcement that any person has
acquired or has the right to acquire beneficial ownership of fifty-one percent
(51%) or more of the then-outstanding Common Stock and for this purpose the
terms "person" and "beneficial ownership" shall have the meanings provided in
Section 13(d) of the Securities and Exchange Act of 1934 or related rules
promulgated by the Securities and Exchange Commission, or the commencement of or
public announcement of an intention to make a tender offer or exchange offer for
fifty-one percent (51%) or more of the then outstanding Common Stock;

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



<PAGE>


                  (vi) the Board of Directors of the Company, in its sole and
absolute discretion, determines that there has been a sufficient change in the
share ownership of the Company to constitute a change of effective ownership or
control of the Company.

            (d) "Good Reason" shall mean, within the twelve (12) month period
immediately following a Change of Control, the occurrence of any one or more of
the following events:

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

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

                  (iii) the Company's requiring Executive to be based at a
location in excess of fifty (50) miles from the location of Executive's
principal office immediately prior to the Change of Control;

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

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

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



<PAGE>


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

            (f) "Notice of Termination" shall mean a written notice either from
the Company to Executive, or Executive to the Company, that indicates Section 2
or the specific provision of Section 4 of this Agreement relied upon as the
reason for such termination or nonrenewal, the Date of Termination, and, in
reasonable detail, the facts and circumstances claimed to provide a basis for
termination or nonrenewal pursuant to Section 2 or this Section 4 of this
Agreement.

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

      4.3 Company's and Executive's Right to Terminate-Prior to Change of
Control. Prior to a Change of Control, this Agreement and Executive's employment
hereunder may be terminated at any time by the Company, with or without Cause,
upon thirty (30) days prior written notice to Executive, and by Executive, at
any time, upon thirty (30) days prior written notice to the Company. Any
termination of Executive's employment by the Company without Cause prior to a
Change of Control that occurs at the request or insistence of any person (other
than the Company) relating to such Change of Control shall be deemed to have
occurred after the Change of Control for the purposes of this Agreement.



<PAGE>


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

      4.5   Compensation Upon Termination.
            -----------------------------

            (a) Termination Prior to Change of Control. In the event the Company
terminates (or elects not to renew) this Agreement without Cause, and such
termination (or nonrenewal) without Cause occurs prior to any Change of Control,
Executive shall be entitled to receive his Base Salary through the Date of
Termination, the welfare benefits described in Section 3.2 for the Benefit
Period, and not later than thirty (30) days after the Date of Termination, a
lump sum severance payment equal to the sum of Executive's then Current Base
Salary plus the arithmetic average of payments made to Executive pursuant to the
Company's Executive Bonus Compensation Program with respect to the three (3)
fiscal years immediately preceding the fiscal year in which the Date of
Termination occurs. In addition, to the extent not otherwise required under the
Company's Stock Option Plan or any award agreement with Executive, any unvested
stock option awards theretofore awarded to Executive which would otherwise vest
and become exercisable during the twelve (12) month period commencing on the
Date of Termination shall vest and become exercisable on the Date of
Termination. In the event this Agreement is terminated (or not renewed) for any
reason other than by the Company without Cause, and such termination (or
nonrenewal) occurs prior to a Change of Control, Executive shall not be entitled
to the continuation of any compensation, bonuses or benefits provided hereunder,
or any other payments following the Date of Termination, other than Base Salary
earned through such Date of Termination.



<PAGE>


            (b) Termination Following Change of Control. If this Agreement is
terminated (or not renewed) (i) by the Company without Cause, or (ii) by
Executive for Good Reason during the twelve (12) month period immediately
following a Change of Control, and such termination (or nonrenewal) occurs
following a Change of Control, Executive shall be entitled to receive his full
Base Salary through the Date of Termination, the welfare benefits described in
Section 3.2 for the Benefit Period and, not later than thirty (30) days after
the Date of Termination, a lump sum severance payment equal to the product of
two (2) times the sum of Executive's then current Base Salary plus the
arithmetic average of payments made to Executive pursuant to the Company's
Executive Bonus Compensation Program with respect to the three (3) fiscal years
immediately preceding the fiscal year in which the Date of Termination occurs.
In addition, to the extent not otherwise required under the Company's Stock
Option Plan or any award agreement with Executive, any unvested stock option
awards theretofore awarded to Executive shall vest and become immediately
exercisable in full. In the event this Agreement is terminated (or not renewed)
for any reason other than (i) by the Company without Cause, or (ii) by Executive
for Good Reason, and such termination (or nonrenewal) occurs following a Change
of Control, Executive shall not be entitled to the continuation of any
compensation, bonuses or benefits provided hereunder, or any other payments
following the Date of Termination, other than Base Salary earned through the
Date of Termination.

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

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



<PAGE>


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

5.    Employment Covenants

      5.1 Trade Secrets and Confidential Information. Executive agrees that he
shall, during the course of his employment and thereafter, hold inviolate and
keep secret all documents, materials, knowledge or other confidential business
or technical information of any nature whatsoever disclosed to or developed by
him or to which he had access as a result of his employment (hereinafter
referred to as "Confidential Information"). Such Confidential Information shall
include technical and business information, including, but not limited to,
inventions, research and development, engineering, products, designs,
manufacture, methods, systems, improvements, trade secrets, formulas, processes,
marketing, merchandising, selling, licensing, servicing, customer lists, records
or financial information, manuals or Company strategy concerning its business,
strategy or policies. Executive agrees that all Confidential Information shall
remain the sole and absolute property of the Company. During the course of his
employment, Executive shall not use, disclose, disseminate, publish, reproduce
or otherwise make available such Confidential Information to any person, firm,
corporation or other entity, except for the purpose of conducting business on
behalf of the Company. Following the Term, Executive shall not use, disclose,
disseminate, publish, reproduce or otherwise make available such Confidential
Information to any person, firm, corporation or other entity. Upon termination
of his employment with the Company, Executive will leave with or deliver to the
Company all records and any compositions, articles, devices, equipment and other
items which disclose or embody Confidential Information including all copies or
specimens thereof, whether prepared by him or by others. The foregoing
restrictions on disclosure of Confidential Information shall apply so long as
the information has not properly come into the public domain through no action
of Executive.



<PAGE>


      5.2 Transfer of Inventions. Executive, for himself and his heirs and
representatives, will promptly communicate and disclose to the Company, and upon
request will, without additional compensation, execute all papers reasonably
necessary to assign to the Company or the Company's nominees, free of
encumbrance or restrictions, all inventions, discoveries, improvements, whether
patentable or not, conceived or originated by Executive solely or jointly with
others, at the Company's expense or at the Company's facilities, or at the
Company's request, or in the course of his employment, or based on knowledge or
information obtained during the Term. All such assignments shall include the
patent rights in this and all foreign countries. Notwithstanding the foregoing,
this Section 5.2 shall not apply to any invention for which no equipment,
supplies, facilities or trade secret information of the Company was used and
which was developed entirely on Executive's own time and (a) that does not
relate (1) directly to the business of the Company or (2) to the Company's
actual or demonstrably anticipated research or development, or (b) that does not
result from any work performed by Executive for the Company.

      5.3 Exclusivity of Employment. During the Term, Executive shall not
directly or indirectly engage in any activity competitive with or adverse to the
Company's business or welfare or render a material level of services of a
business, professional or commercial nature to any other person or firm, whether
for compensation or otherwise.

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

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



<PAGE>


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

            (c)   Definitions.  For purposes of this Agreement, the following
                  -----------
terms shall have the following meanings:

            "Conflicting Product" means any product, method or process, system
            or service of any person or organization other than the Company, in
            existence or under development at the time Executive's employment
            with the Company terminates, that is the same as or similar to or
            competes with a product, method or process, system or service of or
            provided by the Company or any of its affiliates or about which
            Executive acquires Confidential Information.

            "Conflicting Organization" means any person or organization which is
            engaged in or about to become engaged in, research on or
            development, production, marketing, licensing, selling or servicing
            of a Conflicting Product.

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

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

6.    Miscellaneous

      6.1 Notices. Any notice required or permitted to be delivered hereunder
shall be in writing and shall be deemed to be delivered on the earlier of (i)
the date received, or (ii) the date of delivery, refusal or non-delivery
indicated on the return receipt, if deposited in a United States Postal Service
depository, postage prepaid, sent registered or certified mail, return receipt
requested, addressed to the party to receive the same at the address of such
party set forth below, or at such other address as may be designated in a notice
delivered or mailed as herein provided.

<PAGE>


      To Company:       Curative Health Services, Inc.
                        150 Motor Parkway, 4th Flr.
                        Hauppauge, NY  11788

      Executive:        W. Leroy McKinley
                        4730 Twin Brook Circle
                        Doylestown, PA 18901

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

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

      6.4 Entire Agreement. This Agreement contains the entire agreement of the
parties with respect to the subject matter hereof and supersedes all other
agreements, oral or written, heretofore made with respect thereto, including,
without limitation, the Original Agreement.

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

      6.6   Controlling Law.  This Agreement has been entered into by the
            ---------------
parties in the State of New York and shall be continued and enforced in
accordance with the laws of that State.



<PAGE>


      6.7 Assignments. The Company shall have the right to assign this Agreement
and to delegate all rights, duties and obligations hereunder to any entity that
controls the Company, that the Company controls or that may be the result of the
merger, consolidation, acquisition or reorganization of the Company and another
entity. Executive agrees that this Agreement is personal to him and his rights
and interest hereunder may not be assigned, nor may his obligations and duties
hereunder be delegated (except as to delegation in the normal course of
operation of the Company), and any attempted assignment or delegation in
violation of this provision shall be void.

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



            IN WITNESS WHEREOF, the parties have executed this Agreement as of
the Effective Date.

                                          CURATIVE HEALTH SERVICES, INC.


                                          By:

                                          Its:  President





                                          Executive


<PAGE>


                                                                   Exhibit 10.26

                  AMENDED AND RESTATED EMPLOYMENT AGREEMENT


            THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is
made effective as of September 18, 2000 (the "Effective Date"), between CURATIVE
HEALTH SERVICES, INC., a Minnesota corporation (the "Company"), and JULE CAHILL
CRIDER ("Executive").

            WHEREAS, the Executive has been in the employ of the Company
pursuant to that certain Employment Agreement (the "Original Agreement") dated
as of December 12, 1995, as amended, on the terms and conditions set forth
therein;

            WHEREAS, the Company recognizes that Executive's contribution to the
growth and success of the Company has been substantial and therefore desires to
assure the Company of Executive's continued employment; and

            WHEREAS, based on the foregoing, the Company and Executive now wish
to amend and restate the terms of the Original Agreement.

            NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements herein contained, the Company and Executive hereby
agree that the Original Agreement shall be and is hereby amended and restated in
its entirety to read as follows:

1.    Employment

      1.1 Employment and Duties. The Company hereby agrees to employ Executive
for the Term (as hereinafter defined) as Senior Vice President, subject to the
direction of the President, and in connection therewith, to perform such duties
as she shall reasonably be directed by the President to perform. Executive
hereby accepts such employment and agrees to render such services. Executive
shall perform her duties and carry out her responsibilities hereunder in a
diligent manner, shall devote her exclusive and full working time, attention and
effort to the affairs of the Company, shall use her best efforts to promote the
interests of the Company and shall be just and faithful in the performance of
her duties and in carrying out her responsibilities.

      1.2 Location. The principal location for performance of Executive's
services hereunder shall be at the Company's executive offices, which are
currently located in Hauppauge, New York, subject to reasonable travel
requirements during the course of such performance.


2.    Employment Term

      The term of Executive's employment hereunder (the "Term") shall be deemed
to commence on the Effective Date and shall end on the first anniversary of the
Effective Date, unless sooner terminated as hereinafter provided; provided,
however, that the Term shall be automatically renewed and extended for an
additional period of one (1) year on each anniversary thereafter unless either
party gives a Notice of Termination (as defined below) to the other party at
least three (3) months prior to such anniversary.

3.     Compensation and Benefits

      3.1    Cash Compensation.
             -----------------

            (a)   Base Salary. The Company shall pay Executive an annual salary
                  of $180,000 payable in bi-weekly installments, in arrears (the
                  "Base Salary"). The Base Salary shall be reviewed annually by
                  the Company's Board of Directors and may be increased, but not
                  decreased (unless mutually agreed upon by Executive and the
                  Company).

            (b)   Bonus Plan.  Executive shall be entitled to participate in
                  ----------
                  the Company's Executive Bonus Compensation Program, in
                  accordance with and subject to the terms and provisions
                  thereof.



<PAGE>


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

      3.3 Expenses. The Company will pay or reimburse Executive for all
reasonable and necessary out-of-pocket expenses incurred by her in the
performance of her duties under this Agreement. Executive shall keep detailed
and accurate records of expenses incurred in connection with the performance of
her duties hereunder and reimbursement therefor shall be in accordance with
policies and procedures to be established from time to time by the Board.

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

4.    Termination of Employment

      4.1   Definitions

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

            (b)   "Cause" shall mean any of the following:
                   ------

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

                  (ii)  the commission by Executive of a felony;

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

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



<PAGE>


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

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

            (c)   A "Change of Control" shall mean any of the following:
                     ------------------

                  (i)   a sale of all or substantially all of the assets of
the Company;

                  (ii) the acquisition of more than eighty percent (80%) of the
Common Stock of the Company (with all classes or series thereof treated as a
single class) by any person or group of persons, except a Permitted Shareholder
(as hereinafter defined), acting in concert. A "Permitted Shareholder" means a
holder, as of the date of the Plan was adopted by the Company, of Common Stock;

                  (iii) a reorganization of the Company wherein the holders of
Common Stock of the Company receive stock in another company, a merger of the
Company with another company wherein there is an eighty percent (80%) or greater
change in the ownership of the Common Stock of the Company as a result of such
merger, or any other transaction in which the Company (other than as the parent
corporation) is consolidated for federal income tax purposes or is eligible to
be consolidated for federal income tax purposes with another corporation;

                  (iv) in the event that the Common Stock is traded on an
established securities market, a public announcement that any person has
acquired or has the right to acquire beneficial ownership of fifty-one percent
(51%) or more of the then-outstanding Common Stock and for this purpose the
terms "person" and "beneficial ownership" shall have the meanings provided in
Section 13(d) of the Securities and Exchange Act of 1934 or related rules
promulgated by the Securities and Exchange Commission, or the commencement of or
public announcement of an intention to make a tender offer or exchange offer for
fifty-one percent (51%) or more of the then outstanding Common Stock;

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



<PAGE>


                  (vi) the Board of Directors of the Company, in its sole and
absolute discretion, determines that there has been a sufficient change in the
share ownership of the Company to constitute a change of effective ownership or
control of the Company.

            (d) "Good Reason" shall mean, within the twelve (12) month period
immediately following a Change of Control, the occurrence of any one or more of
the following events:

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

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

                  (iii) the Company's requiring Executive to be based at a
location in excess of fifty (50) miles from the location of Executive's
principal office immediately prior to the Change of Control;

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

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

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



<PAGE>


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

            (f) "Notice of Termination" shall mean a written notice either from
the Company to Executive, or Executive to the Company, that indicates Section 2
or the specific provision of Section 4 of this Agreement relied upon as the
reason for such termination or nonrenewal, the Date of Termination, and, in
reasonable detail, the facts and circumstances claimed to provide a basis for
termination or nonrenewal pursuant to Section 2 or this Section 4 of this
Agreement.

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

      4.3 Company's and Executive's Right to Terminate-Prior to Change of
Control. Prior to a Change of Control, this Agreement and Executive's employment
hereunder may be terminated at any time by the Company, with or without Cause,
upon thirty (30) days prior written notice to Executive, and by Executive, at
any time, upon thirty (30) days prior written notice to the Company. Any
termination of Executive's employment by the Company without Cause prior to a
Change of Control that occurs at the request or insistence of any person (other
than the Company) relating to such Change of Control shall be deemed to have
occurred after the Change of Control for the purposes of this Agreement.



<PAGE>


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

      4.5   Compensation Upon Termination.
            -----------------------------

            (a) Termination Prior to Change of Control. In the event the Company
terminates (or elects not to renew) this Agreement without Cause, and such
termination (or nonrenewal) without Cause occurs prior to any Change of Control,
Executive shall be entitled to receive her Base Salary through the Date of
Termination, the welfare benefits described in Section 3.2 for the Benefit
Period, and not later than thirty (30) days after the Date of Termination, a
lump sum severance payment equal to the sum of Executive's then Current Base
Salary plus the arithmetic average of payments made to Executive pursuant to the
Company's Executive Bonus Compensation Program with respect to the three (3)
fiscal years immediately preceding the fiscal year in which the Date of
Termination occurs. In addition, to the extent not otherwise required under the
Company's Stock Option Plan or any award agreement with Executive, any unvested
stock option awards theretofore awarded to Executive which would otherwise vest
and become exercisable during the twelve (12) month period commencing on the
Date of Termination shall vest and become exercisable on the Date of
Termination. In the event this Agreement is terminated (or not renewed) for any
reason other than by the Company without Cause, and such termination (or
nonrenewal) occurs prior to a Change of Control, Executive shall not be entitled
to the continuation of any compensation, bonuses or benefits provided hereunder,
or any other payments following the Date of Termination, other than Base Salary
earned through such Date of Termination.



<PAGE>


            (b) Termination Following Change of Control. If this Agreement is
terminated (or not renewed) (i) by the Company without Cause, or (ii) by
Executive for Good Reason during the twelve (12) month period immediately
following a Change of Control, and such termination (or nonrenewal) occurs
following a Change of Control, Executive shall be entitled to receive her full
Base Salary through the Date of Termination, the welfare benefits described in
Section 3.2 for the Benefit Period and, not later than thirty (30) days after
the Date of Termination, a lump sum severance payment equal to the product of
two (2) times the sum of Executive's then current Base Salary plus the
arithmetic average of payments made to Executive pursuant to the Company's
Executive Bonus Compensation Program with respect to the three (3) fiscal years
immediately preceding the fiscal year in which the Date of Termination occurs.
In addition, to the extent not otherwise required under the Company's Stock
Option Plan or any award agreement with Executive, any unvested stock option
awards theretofore awarded to Executive shall vest and become immediately
exercisable in full. In the event this Agreement is terminated (or not renewed)
for any reason other than (i) by the Company without Cause, or (ii) by Executive
for Good Reason, and such termination (or nonrenewal) occurs following a Change
of Control, Executive shall not be entitled to the continuation of any
compensation, bonuses or benefits provided hereunder, or any other payments
following the Date of Termination, other than Base Salary earned through the
Date of Termination.

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

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



<PAGE>


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

5.    Employment Covenants

      5.1 Trade Secrets and Confidential Information. Executive agrees that she
shall, during the course of her employment and thereafter, hold inviolate and
keep secret all documents, materials, knowledge or other confidential business
or technical information of any nature whatsoever disclosed to or developed by
her or to which she had access as a result of her employment (hereinafter
referred to as "Confidential Information"). Such Confidential Information shall
include technical and business information, including, but not limited to,
inventions, research and development, engineering, products, designs,
manufacture, methods, systems, improvements, trade secrets, formulas, processes,
marketing, merchandising, selling, licensing, servicing, customer lists, records
or financial information, manuals or Company strategy concerning its business,
strategy or policies. Executive agrees that all Confidential Information shall
remain the sole and absolute property of the Company. During the course of her
employment, Executive shall not use, disclose, disseminate, publish, reproduce
or otherwise make available such Confidential Information to any person, firm,
corporation or other entity, except for the purpose of conducting business on
behalf of the Company. Following the Term, Executive shall not use, disclose,
disseminate, publish, reproduce or otherwise make available such Confidential
Information to any person, firm, corporation or other entity. Upon termination
of her employment with the Company, Executive will leave with or deliver to the
Company all records and any compositions, articles, devices, equipment and other
items which disclose or embody Confidential Information including all copies or
specimens thereof, whether prepared by her or by others. The foregoing
restrictions on disclosure of Confidential Information shall apply so long as
the information has not properly come into the public domain through no action
of Executive.



<PAGE>


      5.2 Transfer of Inventions. Executive, for himself and her heirs and
representatives, will promptly communicate and disclose to the Company, and upon
request will, without additional compensation, execute all papers reasonably
necessary to assign to the Company or the Company's nominees, free of
encumbrance or restrictions, all inventions, discoveries, improvements, whether
patentable or not, conceived or originated by Executive solely or jointly with
others, at the Company's expense or at the Company's facilities, or at the
Company's request, or in the course of her employment, or based on knowledge or
information obtained during the Term. All such assignments shall include the
patent rights in this and all foreign countries. Notwithstanding the foregoing,
this Section 5.2 shall not apply to any invention for which no equipment,
supplies, facilities or trade secret information of the Company was used and
which was developed entirely on Executive's own time and (a) that does not
relate (1) directly to the business of the Company or (2) to the Company's
actual or demonstrably anticipated research or development, or (b) that does not
result from any work performed by Executive for the Company.

      5.3 Exclusivity of Employment. During the Term, Executive shall not
directly or indirectly engage in any activity competitive with or adverse to the
Company's business or welfare or render a material level of services of a
business, professional or commercial nature to any other person or firm, whether
for compensation or otherwise.

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

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



<PAGE>


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

            (c)   Definitions.  For purposes of this Agreement, the following
                  -----------
terms shall have the following meanings:

            "Conflicting Product" means any product, method or process, system
            or service of any person or organization other than the Company, in
            existence or under development at the time Executive's employment
            with the Company terminates, that is the same as or similar to or
            competes with a product, method or process, system or service of or
            provided by the Company or any of its affiliates or about which
            Executive acquires Confidential Information.

            "Conflicting Organization" means any person or organization which is
            engaged in or about to become engaged in, research on or
            development, production, marketing, licensing, selling or servicing
            of a Conflicting Product.

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

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

6.    Miscellaneous

      6.1 Notices. Any notice required or permitted to be delivered hereunder
shall be in writing and shall be deemed to be delivered on the earlier of (i)
the date received, or (ii) the date of delivery, refusal or non-delivery
indicated on the return receipt, if deposited in a United States Postal Service
depository, postage prepaid, sent registered or certified mail, return receipt
requested, addressed to the party to receive the same at the address of such
party set forth below, or at such other address as may be designated in a notice
delivered or mailed as herein provided.

<PAGE>


      To Company:       Curative Health Services, Inc.
                        150 Motor Parkway, 4th Flr.
                        Hauppauge, NY  11788

      Executive:        Jule Cahill Crider
                        4109 Glenrose Street
                        Kensington, MD 20895

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

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

      6.4 Entire Agreement. This Agreement contains the entire agreement of the
parties with respect to the subject matter hereof and supersedes all other
agreements, oral or written, heretofore made with respect thereto, including,
without limitation, the Original Agreement.

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

      6.6   Controlling Law.  This Agreement has been entered into by the
            ---------------
parties in the State of New York and shall be continued and enforced in
accordance with the laws of that State.



<PAGE>



      6.7 Assignments. The Company shall have the right to assign this Agreement
and to delegate all rights, duties and obligations hereunder to any entity that
controls the Company, that the Company controls or that may be the result of the
merger, consolidation, acquisition or reorganization of the Company and another
entity. Executive agrees that this Agreement is personal to her and her rights
and interest hereunder may not be assigned, nor may her obligations and duties
hereunder be delegated (except as to delegation in the normal course of
operation of the Company), and any attempted assignment or delegation in
violation of this provision shall be void.

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


            IN WITNESS WHEREOF, the parties have executed this Agreement as of
the Effective Date.

                                          CURATIVE HEALTH SERVICES, INC.


                                          By:

                                          Its:  President





                                          Executive


<PAGE>


                                                                      Exhibit 21


SUBSIDIARIES OF THE REGISTRANT

The following is a list of all of the subsidiaries of the registrant:
1.    CHS Services, Inc., organized under the laws of Delaware.





<PAGE>


                                                                      Exhibit 23

                       CONSENT OF INDEPENDENT AUDITORS

We consent to the  incorporation  by reference in the  Registration  Statement
(Form S-8 No. 333-65751) pertaining to the Curative Health Services,  Inc. and
subsidiaries  1991  Stock  Option  Plan,  as  amended,   in  the  Registration
Statement (Form S-8 No.  333-65753)  pertaining to Curative  Health  Services,
Inc.  Non-Employee Director Stock Option Plan, as amended, in the Registration
Statement (Form S-8 No. 33-19370)  pertaining to the Curative Health Services,
Inc. and subsidiaries  Director Share Purchase Program and in the Registration
Statement (Form S-8 No. 33-85188)  pertaining to the Curative Health Services,
Inc. and  subsidiaries  Employee 401(k) Savings Plan of our report dated March
20, 2001, with respect to the consolidated  financial  statements and schedule
of Curative  Health  Services,  Inc. and  subsidiaries  included in the Annual
Report (Form 10-K) for the year ended December 31, 2000.


                                                /s/  Ernst & Young LLP
Melville, New York
March 30, 2001