Document:

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                                                                   EXHIBIT 10.10

                              EMPLOYMENT AGREEMENT

         EMPLOYMENT AGREEMENT, dated as of September 1, 2002, by and among
ACCREDO HEALTH, INCORPORATED, a Delaware corporation (the "Company"), and KYLE
J. CALLAHAN (the "Executive").

                              W I T N E S S E T H:

         WHEREAS, the Company desires to employ the Executive for the period
provided in this Agreement, and the Executive is willing to accept such
employment with the Company on a full-time basis, all in accordance with the
terms and conditions set forth below;

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

         1.       Employment.

                  (a)      The Company hereby employs the Executive, and the
                           Executive hereby accepts such employment with the
                           Company, for the period set forth in Section 2
                           hereof, all upon the terms and conditions hereinafter
                           set forth.

                  (b)      The Executive affirms and represents that he is under
                           no other obligation to any former employer or other
                           party which is in any way inconsistent with, or which
                           imposes any restriction upon, the Executive's
                           acceptance of employment hereunder with the Company,
                           the employment of the Executive by the Company, or
                           the Executive's undertakings under this Agreement.

         2.       Term of Employment.  Unless earlier terminated as hereinafter
provided, the term of the Executive's employment under this Agreement shall
initially be for a period beginning on the date hereof and ending August 31,
2005; provided that on September 1, 2005 and on each September 1 thereafter, the
term of the Executive's employment hereunder shall automatically be extended for
an additional one-year period unless, prior to such September 1, the Company
shall have given the Executive, or the Executive shall have given the Company,
written notice that the Employment Term shall not be so extended. The period
commencing on the date hereof and ending on the earlier of (i) the termination
of Executive's employment hereunder, and (ii) the later of August 31, 2005 or
the expiration of all one-year extensions described in the preceding sentence,
is referred to herein as the Employment Term.

                  If the Executive continues in the full-time employ of the
Company after the end of the Employment Term (it being expressly understood and
agreed that the Company does not now, nor hereafter shall have, any obligation
to continue the Executive in its employ whether or not on a full-time basis,
after said Employment Term ends), then, unless otherwise expressly agreed to by
the Executive and the Company in writing, the Executive's continued employment
by the Company after the Employment Term shall, notwithstanding anything to the
contrary expressed or implied herein, be terminable by the Company at will, with
or without cause and with or without notice, but shall in all other respects be
subject to the terms and conditions of this Agreement.
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         3.       Duties. The Executive shall be employed as Vice President of
the Company and President of Hemophilia Health Services, Inc. ("HHS"), shall,
subject to the direction of the Board of Directors of the Company (the "Board"),
faithfully and competently perform such duties as inhere in such position and
shall also perform and discharge such other executive employment duties and
responsibilities consistent with his position as Vice President of the Company
and President of HHS as the Board of Directors of the Company may from time to
time reasonably prescribe, including serving as Vice President of the Company
and President of HHS, of one or more of the Company's subsidiaries or
affiliates. The Executive's primary workplace will be located in Memphis,
Tennessee. Except as set out herein or as may otherwise be approved in advance
by the Board, and except during vacation periods and reasonable periods of
absence due to sickness, personal injury or other disability, personal affairs
or non-profit public service activities, the Executive shall devote his full
time during normal business hours throughout the Employment Term to the services
required of him hereunder. The Executive shall render his business services
exclusively to the Companies (as defined in Section 6(a)) during the Employment
Term and shall use his best efforts, judgment and energy to improve and advance
the business and interest of the Companies in a manner consistent with the
duties of his position.

         4.       Salary and Bonus.

                  (a)      Salary.  As compensation for the performance by
                           the Executive of the services to be performed by the
                           Executive hereunder during the Employment Term, the
                           Company shall pay the Executive a base salary at the
                           annual rate of Two Hundred Thirty-Four Thousand
                           Three Hundred ($234,300.00) Dollars (said amount
                           being hereinafter referred to as "Salary"). Any
                           Slary payable hereunder shall be paid in regular
                           intervals (but in no event less frequently than
                           monthly) in accordance with the Company's payroll
                           practices from time to time in effect. The Salary
                           payable to the Executive pursuant to this Section
                           4(a) shall be increased annually, as of September 1,
                           2003 and each September 1 thereafter for the
                           twelve-month period then commencing, by an amount
                           equal to (i) the annual percentage increase in the
                           Consumer Price Index for Urban Consumers, All Items,
                           Memphis, Tennessee Area, for the most recent
                           twelve-month period for which such figures are then
                           available as reported in the Monthly Labor Review
                           published by the Bureau of Labor Statistics of the
                           U.S. Department of Labor or (ii) such higher
                           amount as may be determined from time to time by the
                           Board in its sole discretion. Any increase in
                           salary shall be reflected in minutes of the Board or
                           the Compensation Committee of the Board and this
                           Agreement shall automatically be amended to reflect
                           such salary increase without the necessity of a
                           formal amendment executed by the parties.

                  (b)      Bonus.  The Executive will be entitled to receive
                           bonus compensation from the Company in respect of
                           each fiscal year (or portion thereof) occurring
                           during the Employment Term beginning with the year
                           which starts on July 1, 2002 provided that Executive
                           is employed by Company on the last day of said
                           fiscal year. The amount of such bonus compensation
                           is based on the extent to which the Company's
                           planned earnings established by the Board for the
                           corresponding period (the "Plan EPS") and the
                           Company's revenue target ("Revenue Target") or such
                           other targets as shall be set by the Board have been
                           achieved, as set out on Exhibit A. Exhibit A may be
                           amended each fiscal year to reflect the Plan EPS,
                           Revenue Target and other targets established by the
                           Board for the then current fiscal year. Exhibit A
                           will be replaced with the revised Exhibit A approved
                           by

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                           the Board when and as amended without the
                           necessity of said amendment being executed by the
                           parties hereto.

                  (c)      Withholding, Etc.  The payment of any Salary and
                           bonus hereunder shall be subject to applicable
                           withholding and payroll taxes, and such other\
                           deductions as may be required by law or the
                           Company's employee benefit plans.

         5.       Other Benefits.  During the Employment Term, the Executive
shall:

                           (i)      be eligible to participate in employee
                                    fringe benefits and pension and/or profit
                                    sharing plans that may be provided by the
                                    Company for its senior executive employees
                                    in accordance with the provisions of any
                                    such plans, as the same may be in effect
                                    from time to time;

                           (ii)     be eligible to participate in any medical
                                    and health plans or other employee welfare
                                    benefit plans that may be provided by the
                                    Company for its senior executive employees
                                    in accordance with the provisions of any
                                    such plans, as the same may be in effect
                                    from time to time;

                           (iii)    be entitled to twenty-five paid vacation
                                    days in each calendar year beginning January
                                    1, 2002, as well as all paid holidays given
                                    by the Company to its senior executive
                                    officers;

                           (iv)     be entitled to personal time off, sick
                                    leave, sick pay and disability benefits in
                                    accordance with any Company policy that may
                                    be applicable to senior executive employees
                                    from time to time; and

                           (v)      be entitled to reimbursement for all
                                    reasonable and necessary out-of-pocket
                                    business expenses incurred by the Executive
                                    in the performance of his duties hereunder
                                    in accordance with the Company's policies
                                    applicable thereto.

                  In addition, from the date hereof until the expiration of the
         Employment Term, the Company shall maintain term insurance coverage on
         the life of the Executive (excluding any such coverage provided for
         pursuant to the foregoing provisions of this Section 5) in the
         aggregate amount of $500,000, payable to that Executive's named
         beneficiaries in accordance with standard policy terms and conditions.
         For purposes of determining eligibility, vesting and benefit accrual
         under each of the benefit plans and arrangements referred to in this
         Section 5, the Executive shall be credited with service for all years
         and partial years of service with NFI, Southern Health Systems, Inc.
         ("SHS"), or any of their affiliates prior to the date hereof.

         6.       Confidential Information.  The Executive hereby covenants,
agrees and acknowledges as follows:

                  (a)      The Executive has and will have access to and will
                           participate in the development of or be acquainted
                           with confidential or proprietary information and
                           trade secrets related to the business of the Company
                           and any other present or future subsidiaries or
                           affiliates of the Company (collectively, with the
                           Company, the "Companies"), including but not limited
                           to (i) customer and physician lists; patient
                           histories, patient identities and related records
                           and compilations of

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                           information; the identify, lists or descriptions
                           of any new customers or physicians, referral sources
                           or organizations; financial statements; cost reports
                           or other financial information; contract proposals
                           or bidding information; business plans; training and
                           operations methods and manuals; personnel records;
                           software programs; reports and correspondence;
                           premium structures; and management systems, policies
                           or procedures, including related forms and manuals;
                           (ii) information pertaining to future developments
                           such as future marketing or acquisition plans or
                           ideas, and potential new business locations and new
                           suppliers and (iii) all other tangible and
                           intangible property, which are used in the business
                           and operations of the Companies but not made public.
                           The information and trade secrets relating to the
                           business of the Companies and described hereinabove
                           in this paragraph (a) are hereinafter referred to
                           collectively as the "Confidential Information",
                           provided that the term Confidential Information
                           shall not include any information (x) that is or
                           become generally publicly available (other than as a
                           result of violation of this Agreement by the
                           Executive) or (y) that the Executive receives on a
                           nonconfidential basis from a source (other than the
                           Companies or their representatives) that is not
                           known by him to be bound by an obligation of secrecy
                           or confidentiality to any of the Companies.

                  (b)      The Executive shall not disclose, use or make
                           known for his or another's benefit any Confidential
                           Information or use such Confidential Information in
                           any way except as is in the best interests of the
                           Companies in the performance of the Executive's
                           duties under this Agreement. The Executive may
                           disclose Confidential Information when required by a
                           third party and applicable law or judicial process,
                           but only after providing (I) notice to the Company
                           of any third party's request for such information,
                           which notice shall include the Executive's intent
                           with respect to such request, and (ii) sufficient
                           opportunity for the Company to challenge or limit
                           the scope of the disclosure on behalf of the
                           Companies, the Executive or both.

                  (c)      The Executive acknowledges and agrees that a remedy
                           at law for any breach or threatened breach of the
                           provisions of this Section 6 would be inadequate and,
                           therefore, agrees that the Companies shall be
                           entitled to injunctive relief in addition to any
                           other available rights and remedies in case of any
                           such breach or threatened breach; provided, however,
                           that nothing contained herein shall be construed as
                           prohibiting the Companies from pursuing any other
                           rights and remedies available for any such breach or
                           threatened breach.

                  (d)      The Executive agrees that upon termination of his
                           employment with the Company for any reason, the
                           Executive shall forthwith return to the Company all
                           Confidential Information in whatever form maintained
                           (including, without limitation, computer discs and
                           other electronic media).

                  (e)      The obligations of the Executive under this Section 6
                           shall, except as otherwise provided herein, survive
                           the termination of the Employment Term and the
                           expiration or termination of this Agreement.

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                  (f)      Without limiting the generality of Section 10 hereof,
                           the Executive hereby expressly agrees that the
                           foregoing provisions of this Section 6 shall be
                           binding upon the Executive's heirs, successors and
                           legal representatives.

         7.       Termination.

                  (a)      The Executive's employment hereunder shall be
                           terminated upon the occurrence of any of the
                           following:

                           (i)      death of the Executive;

                           (ii)     The Executive's inability to perform his
                                    duties on account of disability or
                                    incapacity for a period of one hundred eight
                                    (180) or more days, whether or not
                                    consecutive, within any period of twelve
                                    (12) consecutive months;

                           (iii)    the Company giving written notice, at any
                                    time, to the Executive that the Executive's
                                    employment is being terminated "for cause"
                                    (as defined below);

                           (iv)     the Company giving written notice, at any
                                    time, to the Executive that the Executive's
                                    employment is being terminated other than
                                    pursuant to clause (i), (ii) or (iii) above;
                                    or

                           (v)      the Executive giving written notice, at any
                                    time, to the Company that the Executive is
                                    terminating his employment for "good reason"
                                    (as defined below).

                  The following actions, failures and events by or affecting the
Executive shall constitute "cause" for termination within the meaning of clause
(iii) above: (A) an indictment for or conviction of the Executive of, or the
entering of a plea of nolo contendere by the Executive with respect to, having
committed a felony, (B) acts of fraud or criminal conduct by the Executive that
are detrimental to the financial condition or business reputation of one or more
of the Companies, (C) acts or omissions by the Executive that the Executive knew
were likely to damage the business of one or more of the Companies, (D) willful
failure by the Executive to perform, or willful disregard by the Executive of,
his obligations hereunder or otherwise relating to his employment, or (E)
willful failure by the Executive to obey the reasonable and lawful policies or
orders of the Board that are consistent with the provisions of this Agreement.
For purposes of this Agreement, the Executive shall not be deemed to have been
terminated for cause unless and until there shall have been delivered to the
Executive a copy of a resolution, duly adopted by the Board, stating that, in
the good faith opinion of the Board, the Executive is guilty of an action or
omission that constitutes cause and specifying the particulars thereof in
reasonable detail. Before adopting any such resolution, the Board shall offer
the Executive, upon reasonable written notice (which need not exceed two days),
an opportunity for him together with his counsel, to be heard by the Board.

                  The following circumstances shall constitute "good reason" for
termination within the meaning of clause (v) above: (I) the assignment to the
Executive of duties that are materially inconsistent with the Executive's
position or with his authority, duties or responsibilities as contemplated by
Section 3

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of this Agreement, or any other action by the Company or their successors which
results in a material diminution or material adverse change in the Executive's
title, position, authority, duties or responsibilities, (II) any material breach
by the Company or their successors of any provision of this Agreement, (III) a
relocation of the Executive's primary workplace without his written consent to
any location other than the one described in Section 3 hereof, or (IV) the
Company fails to continue in effect any cash or stock-based incentive or bonus
plan, retirement plan, welfare benefit plan or other benefit plan, unless the
aggregate value of all such compensation, retirement and benefit plans provided
to the Executive after the changes is not less than the aggregate value of the
plans as of the date before such plans are changed.

                   (b)     In the event that (A) the Executive's employment is
                           terminated pursuant to clause (iv) or (v) of Section
                           7(a) above, whether during the Employment Term or
                           during any continuation of employment pursuant to
                           Section 2 above, or (B) Executive shall resign his
                           employment within twelve (12) months following a
                           Change in Control, the Company shall pay to the
                           Executive, as severance pay or liquidated damages or
                           both, bi-monthly payments at the rate per annum of
                           his Salary at the time of such termination or
                           resignation for a period from the date of such
                           termination to the first anniversary of such
                           termination or resignation. The Executive shall
                           continue to participate in the medical, dental,
                           life, accident and disability benefit plans and
                           arrangements of the Company as provided in Section 5
                           and on the same basis and at the same cost to
                           Executive as on the date of termination until the
                           earlier of (x) the first anniversary of such
                           termination or resignation, or (y) the date the
                           Executive becomes covered by a plan that provides
                           coverage or benefits at least equal to the Company's
                           plan. In addition, to the extent that Executive is
                           not then 100% vested in any employer matching
                           contribution and earnings thereon allocated to his
                           account in the Company's 401(k) Plan, and said
                           non-vested amount is forfeited, the Company will pay
                           Executive a lump sum amount on the date of such
                           forfeiture equal to the non-vested forfeited amount.

                  (c)      For purposes of this Agreement, "Change in
                           Control" means and includes each of the following:

                                    (1)  The acquisition by any individual,
                           entity or group (within the meaning of Section
                           13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of
                           beneficial ownership (within the meaning of Rule
                           13d-3 promulgated under the 1934 Act) of 50% or more
                           of the combined voting power of the then outstanding
                           voting securities of the Company entitled to vote
                           generally in the election of directors (the
                           "Outstanding Corporation Voting Securities");
                           provided, however, that for purposes of this
                           subsection (1), the following acquisitions shall not
                           constitute a Change of Control: (i) any acquisition
                           directly from the Company, (ii) any acquisition by
                           the Company, (iii) any acquisition by any employee
                           benefit plan (or related trust) sponsored or
                           maintained by the Company or any corporation
                           controlled by the Company, or (iv) any acquisition by
                           any corporation pursuant to a transaction which
                           complies with clauses (i), (ii) and (iii) of
                           subsection (3) of this definition; or

                                    (2)  Individuals who, as of the date of this
                           Agreement, constitute the Board (the "Incumbent
                           Board") cease for any reason to constitute at least a

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                           majority of the Board; provided, however, that any
                           individual becoming a director subsequent to the
                           Effective Date whose election, or nomination for
                           election by the Company's stockholders, was approved
                           by a vote of at least a majority of the directors
                           then comprising the Incumbent Board shall be
                           considered as though such individual were a member of
                           the Incumbent Board, but excluding, for this purpose,
                           any such individual whose initial assumption of
                           office occurs as a result of an actual or threatened
                           election contest with respect to the election or
                           removal of directors or other actual or threatened
                           solicitation of proxies or consents by or on behalf
                           of a Person other than the Board; or

                                    (3)  Consummation of a reorganization,
                           merger or consolidation or sale or other disposition
                           of all or substantially all of the assets of the
                           Company (a "Business Combination"), in each case,
                           unless, following such Business Combination, (i) all
                           or substantially all of the individuals and entities
                           who were the beneficial owners of the Outstanding
                           Corporation Voting Securities immediately prior to
                           such Business Combination beneficially own, directly
                           or indirectly, more than 50% of the combined voting
                           power of the then outstanding voting securities
                           entitled to vote generally in the election of
                           directors of the Company resulting from such Business
                           Combination (including, without limitation, a
                           corporation which as a result of such transaction
                           owns the Company or all or substantially all of the
                           Company's assets either directly or through one or
                           more subsidiaries) in substantially the same
                           proportions as their ownership, immediately prior to
                           such Business Combination of the Outstanding
                           Corporation Voting Securities, and (ii) no Person
                           (excluding any corporation resulting from such
                           Business Combination or any employee benefit plan (or
                           related trust) of the Company or such corporation
                           resulting from such Business Combination)
                           beneficially owns, directly or indirectly, 50% or
                           more of the combined voting power of the then
                           outstanding voting securities of such corporation
                           except to the extent that such ownership existed
                           prior to the Business Combination, and (iii) at least
                           a majority of the members of the board of directors
                           of the corporation resulting from such Business
                           Combination were members of the Incumbent Board at
                           the time of the execution of the initial agreement,
                           or of the action of the Board, providing for such
                           Business Combination; or

                                    (4)     Approval by the stockholders of the
                           Company of a complete liquidation or dissolution of
                           the Company.

                  (d)      Notwithstanding anything to the contrary expressed
                           or implied herein, except as required by applicable
                           law and except as set forth in Section 7(b) above,
                           the Company (and its affiliates) shall not be
                           obligated to make any payments to the Executive or
                           on his behalf of whatever kind or nature by reason
                           of the Executive's cessation of employment
                           (including, without limitation, by reason of
                           termination of the Executive's employment by the
                           Company for "cause"), other than (i) such amounts,
                           if any, of his Salary as shall have accrued and
                           remained unpaid as of the date of said cessation,
                           (ii) such other amounts, if any, which may be then
                           otherwise payable to the Executive pursuant to
                           clause (v) of Section 5 above, and (iii) any amounts
                           owed or obligations to the Executive pursuant to the
                           terms of any option or other stock-based award
                           granted to him by the Company.

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                  (e)      No interest shall accrue on or be paid with respect
                           to any portion of any payments timely made
                           hereunder.

         8.       Non-Assignability.

                  (a)      Neither this Agreement nor any right or interest
                           hereunder shall be assignable by the Executive or
                           his beneficiaries or legal representatives without
                           the Company's prior written consent; provided,
                           however, that nothing in this Section 8(a) shall
                           preclude the Executive from designating a
                           beneficiary to receive any benefit payable hereunder
                           upon his death or incapacity. Neither this
                           Agreement nor any right or interest hereunder shall
                           be assignable by the Company; provided, however,
                           that notwithstanding the foregoing, this Agreement
                           and the Company's rights and interests hereunder may
                           be assigned by the Company pursuant to a merger or
                           consolidation in which the Company is not the
                           continuing entity, or the sale or liquidation of all
                           or substantially all of the assets of the Company,
                           provided that (i) the assignee or transferee is the
                           successor to all or substantially all of the assets
                           of the Company and (ii) such assignee or transferee
                           assumes the liabilities, obligations and duties of
                           the Company, as contained in this Agreement, either
                           contractually or as a matter of law.

                  (b)      Except as required by law, no right to receive
                           payments under this Agreement shall be subject to
                           anticipation, commutation, alienation, sale,
                           assignment, encumbrance, charge, pledge, or
                           hypothecation or to exclusion, attachment, levy or
                           similar process or to assignment by operation of law,
                           and any attempt, voluntary or involuntary, to effect
                           any such action shall be null, void and of no effect.

         9.       Restrictive Covenants

                  (a)      Competition.  During the Employment Term, during any
                           continuation of employment pursuant to Section 2
                           above and during the twelve (12) month period
                           following termination of the Executive's employment
                           with the Company for any reason, provided that
                           payments, if any, required pursuant to Section 7(b)
                           hereof are made in full and in a timely fashion, the
                           Executive will not directly or indirectly (as a
                           director, officer, executive employee, manager,
                           consultant, independent contractor, advisory or
                           otherwise) engage in competition with, or own any
                           interest in, perform any services for, participate
                           in or be connected with any business or organization
                           which engages in competition with any of the
                           Companies within the meaning of Section 9(d),
                           provided, however, that the provisions of this
                           Section (a) shall not be deemed to prohibit the
                           Executive's ownership of not more than two percent
                           (2%) of the total shares of all classes of stock
                           outstanding of any publicly held company, or
                           ownership, whether through direct or indirect
                           stockholding or otherwise, of one percent (1%) or
                           more of any other business.

                  (b)      Non-Solicitation.  During the Employment Term,
                           during any continuation of employment pursuant to
                           Section 2 above and during the twelve (12) month
                           period following termination of the Executive's
                           employment with the Company for any reason, provided
                           that payments, if any, required pursuant to Section
                           7(b)

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                           hereof are made in full and in a timely fashion, the
                           Executive will not knowingly directly or indirectly
                           induce or attempt to induce any employee of any of
                           the Companies to leave the employ of any of the
                           Companies or of their subsidiaries or affiliates, or
                           in any way interfere with the relationship between
                           any of the Companies and any employee thereof.

                  (c)      Non-Interference.  During the twelve (12) month
                           period following termination of the Executive's
                           employment with the Company for any reason, provided
                           that payments, if any, required pursuant to Section
                           7(b) hereof are made in full and in a timely fashion,
                           the Executive will not directly or indirectly hire,
                           engage, send any work to, place orders with, or in
                           any manner be associated with any business entity
                           which, during the period of twelve months preceding
                           or following such termination of employment, was
                           among the five largest suppliers of the Company by
                           dollar volume.

                  (d)      Certain Definitions.  For purposes of this
                           Section 9, a person or entity (including without
                           limitation, the Executive) shall be deemed to be a
                           competitor of one or more of the Companies, or a
                           person or entity (including, without limitation, the
                           Executive) shall be deemed to be engaging in
                           competition with one or more of the Companies, if,
                           at the time of determination, such person or entity
                           (A) engages in any business engaged in or proposed
                           to be engaged in by any of the Companies, or (B) in
                           any way conducts, operates, carries out or engages
                           in the business of managing any entity engaged in
                           any business described in clause (A), in each case,
                           in any state of the United States of America,
                           excluding, however, during any period following the
                           termination of the Executive's employment with the
                           Company, (x) any business or any state in which none
                           of the Companies was engaged or had proposed to be
                           engaged at the time of termination of the
                           Executive's employment with the Company, and (y)
                           after termination of the Executive's employment, any
                           business which was not, prior to such termination,
                           directly or indirectly supervised by the Executive.

                  (e)      Certain Representations of the Executive.  In
                           connection with the foregoing provisions of this
                           Section 9, the Executive represents that his
                           experience, capabilities and circumstances are such
                           that such provisions will not prevent him from
                           earning a livelihood. The Executive further agrees
                           that the limitations set forth in this Section 9
                           (including, without limitation, time and territorial
                           limitations) are reasonable and properly required
                           for the adequate protection of the current and
                           future businesses of the Companies. It is
                           understood and agreed that the covenants made by the
                           Executive in this Section 9 shall survive the
                           expiration or termination of this Agreement.

                  (f)      Injunctive Relief.  The Executive acknowledges and
                           agrees that a remedy at law for any breach or
                           threatened breach of the provisions of Section 9
                           hereof would be inadequate and, therefore, agrees
                           that the Company and any of its subsidiaries or
                           affiliates shall be entitled to injunctive relief in
                           addition to any other available rights and remedies
                           in cases of any such breach or threatened breach;
                           provided, however, that nothing contained herein
                           shall be construed as prohibiting the Company or any
                           of its affiliates from pursuing any other rights and
                           remedies available for any such breach or threatened
                           breach.

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         10.      Indemnity.  To the maximum extent permitted by applicable law
and the charter and by-laws of the Company, the Company shall indemnify the
Executive and hold him harmless; for any acts or decisions made by him in good
faith while performing services for the Company or any of its subsidiaries or
affiliates. Company will use reasonable best efforts to maintain, and after
termination to continue, coverage for Executive under director's and officer's
liability coverage to the same extent as other current or former officers and
directors of the Company and its subsidiaries or affiliates. The Company will,
to the extent provided by its charter and by-laws and applicable law, advance or
pay all expenses, including attorney's fees actually and necessarily incurred by
the Executive in connection with the defense of any action, suit or proceeding
arising out of Executive's service for the Company and in connection with any
appeal thereon, including the cost of court settlements.

         11.      No Mitigation.  In the event of Executive's resignation or
termination of the Executive's employment under Section 7, the Executive shall
be under no obligation to seek other employment and there shall be no offset
against any amounts due the Executive under this Agreement on account of any
remuneration attributable to any subsequent employment that the Executive may
obtain.

         12.      Binding Effect.  Without limiting or diminishing the
effect of Section 8 hereof, this Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs,
successors, legal representatives and assigns.

         13.      Notices.  All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and (i) delivered personally,
(ii) mailed by certified or registered mail, return receipt requested and
postage prepaid, (iii) sent via a nationally recognized overnight courier or
(iv) sent via facsimile confirmed in writing to the recipient, if to the Company
at the Company's principal place of business, and if to the Executive, at his
home address most recently filed with the Company, or to such other address or
addresses as either party shall have designated in writing to the other party
hereto.

         14.      Enforcement.  Any dispute arising under this Agreement shall,
at the election of either party, be resolved by final and binding arbitration to
be held in Memphis, Tennessee in accordance with the rules and procedures of the
American Arbitration Association. Judgment upon the award entered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.

         15.      Law Governing.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Tennessee.

         16.      Severability.  The Executive agrees that in the event that any
court of competent jurisdiction shall finally hold that any provision of Section
6 or 9 hereof is void or constitutes an unreasonable restriction against the
Executive, the provisions of such Section 6 or 9 shall not be rendered void but
shall apply with respect to such extent as such court may judicially determine
constitutes a reasonable restriction under the circumstances. If any part of
this Agreement other than Section 6 or 9 is held by a court or competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part by reason of any rule of law or public policy, such part shall be deemed
to be severed from the remainder of this Agreement for the purpose only of the
particular legal proceedings in question and all other covenants and provisions
of this Agreement shall in every other respect continue in full force and effect
and no covenant or provision shall be deemed dependent upon any other covenant
or provision.

                                       10
<PAGE>
         17.      Waiver.  Failure to insist upon strict compliance with any of
the terms, covenants or conditions hereof shall not be deemed a waiver of such
term, covenant or condition, nor shall any waiver or relinquishment of any right
or power hereunder at any one or more times be deemed a waiver or relinquishment
of such right or power at any other time or times.

         18.      Entire Agreement; Modifications.  This Agreement constitutes
the entire and final expression of the agreement of the parties with respect to
the subject matter hereof and supersedes all prior agreements, oral and written,
between the parties hereto with respect to the subject matter hereof. This
Agreement may be modified or amended only by an instrument in writing signed by
both parties hereto.

         19.      Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

         IN WITNESS WHEREOF, the Company and the Executive have duly executed
and delivered this Agreement as of the date and year first above written.

                                         ACCREDO HEALTH, INCORPORATED

                                         By: /s/ David D. Stevens
                                            -------------------------
                                            David D. Stevens
                                            Chief Executive Officer

                                             /s/ Kyle J. Callahan
                                            -------------------------
                                            KYLE J. CALLAHAN

                                       11<PAGE>

                                                                 EXECUTION COPY

                 AGREEMENT AND PLAN OF REORGANIZATION AND MERGER

         This AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (this "Agreement")
is made effective the 15th day of August, 2002 by and between CAPITAL BANK, a
North Carolina bank ("Capital") and HIGH STREET BANKING COMPANY, a North
Carolina bank ("High Street").

                              W I T N E S S E T H:

         WHEREAS, Capital Bank Corporation ("CBC") is the holding company of
Capital and High Street Corporation ("HSC") is the holding company of High
Street,

         WHEREAS, CBC and HSC are parties to that certain Merger Agreement dated
May 1, 2002 (the "Holding Company Merger Agreement"), pursuant to which it is
contemplated that HSC shall merge with and into CBC (the "Holding Company
Merger");

         WHEREAS, the Holding Company Merger is scheduled to close on or before
December 1, 2002;

         WHEREAS, upon consummation of the Holding Company Merger, Capital and
High Street will be wholly-owned subsidiaries of CBC; and

         WHEREAS, the parties desire to merge High Street with and into Capital
after, and subject to, the consummation of the Holding Company Merger.

         NOW, THEREFORE, in consideration of the foregoing and the provisions
set forth below, the parties hereto agree as follows:

         1. Subject to Section 2 hereof, High Street shall merge into Capital
(the "Merger").

         2. The Merger is subject to the consummation of the Holding Company
Merger by the filing of articles of merger related thereto with the office of
the North Carolina Secretary of State, as well as the parties' obtaining all
required regulatory and other approvals required to effect the Merger. In the
event the Holding Company Merger has not been effected by December 31, 2002, the
Merger shall be deemed abandoned and this Agreement and Plan of Reorganization
and Merger shall terminate and have no further force or effect. Upon the
termination of the Holding Company Merger Agreement, the Merger shall be deemed
abandoned and this Agreement and Plan of Reorganization and Merger shall
terminate and have no further force or effect.

         3. After the Merger, Capital shall be the surviving corporation and
shall continue to have the name "Capital Bank."

<PAGE>

         4. The Merger shall be effected pursuant to the terms and conditions of
this Agreement. Upon the Merger's becoming effective, upon the filing of
articles of merger with the North Carolina Secretary of State, the corporate
existence of High Street shall cease, and the corporate existence of Capital
shall continue. The time when the Merger shall become effective is referred to
in this Agreement as the "Effective Time."

         5. At the Effective Time, the outstanding shares of the corporations
participating in the Merger shall be converted and exchanged as follows:

                  A. Capital: The outstanding shares of Capital shall not be
         converted, exchanged or altered in any manner as a result of the Merger
         and shall remain outstanding as shares of Capital.

                  B. High Street: Each outstanding share of High Street shall be
         canceled as a result of the Merger.

         6. The Articles of Incorporation of Capital are not amended under this
Agreement.

         7. After approval of this Agreement by the Board of Directors of
Capital, and at any time before the Effective Time, the Board of Directors of
Capital may, in its discretion, abandon the Merger.

         8. This Agreement shall be governed by the laws of the State of North
Carolina.

                                       2

<PAGE>

       [Signature Page to Agreement and Plan of Reorganization and Merger]

         IN WITNESS WHEREOF, this Agreement has been executed and sealed by the
parties hereto, all as of the date first written above.

                                  CAPITAL BANK

ATTEST:                             BY: /S/ JAMES A. BECK
                                        -----------------------------------
                                        JAMES A. BECK
                                        PRESIDENT AND CHIEF EXECUTIVE OFFICER

/S/ ALLEN T. NELSON, JR
---------------------------
ALLEN T. NELSON, JR.
SECRETARY

[CORPORATE SEAL]

                                  HIGH STREET BANKING COMPANY

ATTEST:                             BY: /S/ J. EDGAR MCFARLAND
                                        -----------------------------------
                                        J. EDGAR MCFARLAND
                                        PRESIDENT AND CHIEF EXECUTIVE OFFICER

/S/ ANNE D. MARTIN
---------------------------
ANNE D. MARTIN
SECRETARY

[CORPORATE SEAL]

                                       3

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