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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR QUARTER ENDED MARCH 31, 1998 Commission File Number 0-8640
SYNCOR INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 85-0229124
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6464 Canoga Avenue, Woodland Hills, California 91367
(Address of principal executive offices) (Zip Code)
(818) 737-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
___ ___
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. As of March
31, 1998, 10,447,147 shares of $.05 par value common stock were
outstanding.
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<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
INDEX
_____
Page
____
Part I. Financial Information
Item 1. Consolidated Condensed Financial Statements
Balance Sheets as of
March 31, 1998 and December 31, 1997 . . . . . . . . . . . . . . . 3
Statements of Income for Three Months
Ended March 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . 4
Statements of Cash Flows for Three Months
Ended March 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Condensed Financial Statements . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition . . 8
Part II. Other Information . . . . . . . . . . . . . . . . . . . . . . 10
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(in thousands, except per share data)
March 31, December 31,
1998 1997
_____________________________
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 25,954 $ 25,538
Short-term investments 2,581 2,583
Accounts receivable, net 62,467 54,972
Inventory 5,992 5,574
Prepaids and other current assets 9,143 9,288
____________________________
Total current assets 106,137 97,955
Marketable investment securities 1,189 1,180
Property and equipment, net 34,307 28,870
Excess of purchase price over net assets
acquired, net 40,359 14,319
Other assets 22,829 22,239
____________________________
$204,821 $164,563
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 41,110 $ 34,755
Accrued liabilities 6,843 4,353
Accrued wages and related costs 11,856 13,680
Federal and state taxes payable 3,115 1,129
Current maturities of long-term debt 5,662 3,978
____________________________
Total current liabilities 68,586 57,895
Long-term debt, net of current maturities 37,536 17,332
Deferred compensation 1,969 1,969
Stockholders' equity:
Common stock, $.05 par value 590 572
Additional paid-in capital 60,491 55,061
Employee stock ownership loan guarantee (6,319) (6,741)
Accumulated other comprehensive income (195) (330)
Retained earnings 54,687 51,329
Treasury stock, at cost; 1,356 shares at
March 31, 1998 and at December 31, 1997 (12,524) (12,524)
____________________________
Net stockholders' equity 96,730 87,367
____________________________
$204,821 $164,563
============================
See notes to consolidated condensed financial statements.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Income
(in thousands, except per share data)
Three Months Ended March 31,
____________________________
1998 1997
______ ______
(Unaudited)
Net sales $102,724 $93,084
Cost of sales 75,569 72,968
____________________________
Gross profit 27,155 20,116
Operating, selling and administrative expenses 21,668 17,270
____________________________
Operating income 5,487 2,846
Other income, net 406 2,731
____________________________
Income before taxes 5,893 5,577
Provision for income taxes 2,535 2,231
____________________________
Net income $ 3,358 $ 3,346
============================
Net income per share - Basic $ .33 $ .33
============================
Weighted average shares outstanding - Basic 10,304 10,168
============================
Net income per share - Diluted $ .31 $ .32
============================
Weighted average shares outstanding - Diluted 10,786 10,359
============================
See notes to consolidated condensed financial statements.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(in thousands)
Three Months Ended March 31,
____________________________
1998 1997
------ ------
(Unaudited)
Cash flows from operating activities:
Net income $ 3,358 $3,346
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,066 2,195
Amortization of ESSOP loan guarantee 422 261
Decrease (increase) in:
Accounts receivables, net (5,487) (5,909)
Inventory (417) 1,888
Net assets of discontinued operations - 1,198
Other current assets 515 (2,350)
Other assets (1,006) -
_________________________
Increase (decrease) in:
Accounts payable 5,009 9,389
Accrued liabilities 463 1,269
Accrued wages and related costs (1,824) (2,137)
Federal and state taxes payable 2,091 1,262
Net cash provided by operating activities 6,190 10,412
_________________________
Cash flows from investing activities:
Purchase of property and equipment, net (2,269) (1,448)
Acquisitions of businesses, net of cash acquired (14,000) -
Net decrease (increase) in short-term investments 3 (1,255)
Net increase in long-term investments (9) (307)
Unrealized gain on investments 9 2
_________________________
Net cash used in financing activities (16,266) (3,008)
_________________________
Cash flow from financing activities:
Proceeds from long-term debt 11,618 241
Repayment of long-term debt (1,456) (299)
Issuance of common stock 345 15
Reacquisition of common stock for treasury - (2,627)
_________________________
Net cash provided by (used in) financing activities 10,507 (2,670)
_________________________
Net increase in cash and cash equivalents 431 4,734
Effect of exchange rate on cash (15) (5)
Cash and cash equivalents at beginning of period 25,538 25,214
_________________________
Cash and cash equivalents at end of period $25,954 $29,943
=========================
See notes to consolidated condensed financial statements.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
1. GENERAL. The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. The results of the
three months ended March 31, 1998, are not necessarily indicative of the
results to be expected for the full year. For further information,
refer to the consolidated financial statements and footnotes thereto
included in the Company's Annual Report and Form 10-K for the period
ended December 31, 1997. Certain line items in the prior year's
consolidated condensed financial statements have been reclassified to
conform to the current year's presentation.
2. NEW ACCOUNTING STANDARDS: In 1997, the Financial Accounting and Standards
Board issued SFAS 130, "Reporting Comprehensive Income," which became
effective for fiscal years beginning after December 31, 1997. SFAS 130
requires that the components of comprehensive income be disclosed. Such
amounts are as follows:
<TABLE>
<CAPTION>
March 31, 1998 March 31, 1997
_________________________________ _________________________________
Tax Tax
Before-tax (expense) Net of Tax Before-Tax (expense) Net-of-Tax
Amount or benefit Amount Amount or Benefit Amount
______________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Foreign currency translation
Adjustments 126 - 126 328 - 328
______________________________________________________________________
Unrealized gains/(losses) on
investments:
Unrealized holding gains/(losses)
arising during period 15 (6) 9 3 (1) 2
______________________________________________________________________
Net unrealized holding gains 15 (6) 9 3 (1) 2
Other comprehensive income 141 (6) 135 331 (1) 330
======================================================================
</TABLE>
In June 1997, SFAS No. 131 - "Disclosure about Segments of an
Enterprise and Related Information" was issued and became
effective for periods beginning after December 15, 1997. SFAS
No. 131 establishes standards for reporting financial and
descriptive information regarding an enterprise's operating
segments. In February 1998, SFAS No. 132 - "Employers'
Disclosure about Pensions and Other Post Retirement Benefits"
was issued and became effective for periods beginning after
December 31, 1997. These standards increase disclosure in the
financial statements, and will have no impact on the Company's
financial position or results of operations.
3. ACQUISITIONS: In January 1998, the Company acquired a
medical imaging business from National Diagnostic Services, Inc.
and an affiliate ("NDS"). The purchase price for the
acquisition was $12 million, including the assumption of $4.8
million in debt. This acquired business included nine medical
imaging centers owned or managed by NDS. This transaction has
been accounted for as a purchase for the quarter ended March 31,
1998.
Also in January 1998, a subsidiary of Syncor merged with and
into TME, Inc. a company based in Houston, Texas, pursuant to
which TME, Inc. became a wholly owned subsidiary of Syncor. TME
owns, operates and/or manages freestanding medical imaging
centers through joint ventures and partnerships. It has 20
facilities in its network, with five additional facilities in
development. As consideration for the merger, Syncor paid $14.5
million in cash to TME's stockholders. This transaction was
accounted for as a purchase for the quarter ended March 31,
1998.
In January 1998, Syncor announced the proposed acquisition of
the medical imaging business of International Magnetic Imaging,
Inc. a subsidiary of Consolidated Technology Group Ltd. The
business acquired includes ten outpatient medical imaging
centers and an imaging referral network operating in 35 states.
The purchase price of the acquisition was $20.5 million, plus
the assumption of approximately $21 million in liabilities and
trade payables. The acquisition will be accounted for as a
purchase and closed on April 2, 1998.
4. NET INCOME PER SHARE: In 1997, the Financial Accounting
Standard Board issued SFAS No. 128, "earnings Per Share" (EPS).
SFAS No. 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per
share excludes any diluted effect of options. Diluted earnings
per share is very similar to the previously reported primary
earnings per share. All earnings per share amounts for all
periods have been restated to conform to SFAS No. 128
requirements.
The reconciliation of the numerator and denominators of the basic
and diluted earnings per share computations are as follows for
the three months ended March 31, 1998 and 1997:
<TABLE>
<CAPTION>
March 31, 1998 March 31, 1997
_________________________________________________________ ______________________________________
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
___________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Net income $3,358 $3,346
Basic EPS $3,358 10,304 $.33 $3,346 10,168 $.33
____ ____
Effect of Dilutive
Stock Options 482 191
___ ___
Diluted EPS $3,358 10,786 $.31 $3,346 10,359 $.32
____ ____
</TABLE>
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NET SALES
Consolidated net sales for the three months ended March 31, 1998
increased 10.4 percent or $9.6 million to $102.7 million versus $93.1
million for the first quarter of 1997.
The primary driving force behind the sales growth for the three months
ended March 31, 1998 is the continued expansion in the Company's core
radiopharmaceutical business within the cardiology market. Sales of
Cardiolite, a proprietary heart imaging agent to which the Company has
preferential distribution rights, increased approximately 28 percent
for the first quarter of 1998. However, the growth in the technetium-
based heart agent Cardiolite(R) has been partially offset with a
decrease in sales of two other generic cardiology agents, thallium and
I.V. Persantine(R). Thallium sales in particular have declined due to
a combination of competitive pressures and customers switching to
technetium-based heart agents. A competing radiopharmaceutical
manufacturer/distributor is also currently marketing a rival product
to Cardiolite(R), which is also a technetium based heart agent. This
competing product negatively impacted the Company's
radiopharmaceutical sales during the first quarter of 1998 and
continues to gain market share, currently estimated at 12 percent of
the total profusion market. Cardiology sales for the three months
ended March 31, 1998 were approximately 64 percent of the Company's
total radiopharmaceutical sales.
The Company continues to forecast additional lost sales within the
radiopharmaceutical segment associated with the 1997 loss, through the
process of competitive bidding, of a contract to supply products to
a large hospital buying group. For 1998, the Company estimates this
loss to be $17 million in net sales.
Despite the noted lost sales, the Company anticipates sales growth
during the current year in the base radiopharmacy business to be above
the 1997 levels.
The Company completed the acquisition of two medical imaging
businesses during the three months ended March 31, 1998. Sales from
these newly acquired businesses and the "open" MRI business
contributed $2.6 million in sales for the first quarter of 1998. The
Company anticipates the medical imaging business segment to contribute
approximately $45 million in net sales for 1998.
GROSS PROFIT
Gross profit for the three months ended March 31, 1998 increased $7.0
million to $27.2 million, and as a percentage of net sales to 26.4
percent, compared to 21.6 percent of net sales or $20.1 million for
the comparable quarter in 1997.
The substantial improvement in gross margin over the comparable
quarter is two fold. First, the medical imaging businesses
contributed $2.1 million to gross profit. Secondly, gross profit from
the Company's radiopharmaceutical business increased mainly from the
result of a reduction in certain material acquisition costs. In 1997,
the Company completed contract re-negotiations with one of its major
suppliers and received significant material savings beginning in the
second quarter of 1997. Although some of these price concessions were
due to expire in early 1998, the Company has been successful in
extending terms and in some cases negotiating additional savings into
1998.
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Operating, selling and administrative expenses increased by 25.5
percent for the three months ended March 31, 1998 or $4.4 million to
$21.7 million, and as a percentage of sales increased to 21.1 percent
from 18.6 percent for the same period in 1997.
A significant portion of the increase in operating, selling and
administrative expenses for the three months ended March 31, 1998 is
the result of the medical imaging business. Included in the total
increase of $4.4 million are approximately $2.4 million in expenses
associated with the medical imaging business. Other additional
expenses associated with the increase are: increased amortization of
costs associated with from the 1997 acquisition of a manufacturing
business, increased depreciation from hardware and software
acquisitions associated with system conversions and upgrades,
increased depreciation associated with the relocation to a new
corporate headquarters, and increased consulting costs for employee
incentive plans and recruiting.
The Company expects the increased level of expenditures in these areas
to continue as the medical imaging business is expanded, new systems
are implemented as a result of a re-engineering effort, field systems
are upgraded and continued expansion in the international marketplace
continues.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash, cash equivalents and investments of $29.7
million at March 31, 1998, compared with $29.3 million at December 31,
1997. The Company's total debt position of $43.2 million at March 31,
1998, reflects an increase of $8.4 million when compared to the debt
position at December 31, 1997 of $21.3 million. The primary increase
in debt for the quarter ended March 31, 1998 is the result of
financing the two acquisitions in the medical imaging business.
Working capital decreased by $2.5 million to $37.6 million at March
31, 1998, compared to $40.1 million at December 31, 1997.
The Company believes sufficient internal and external sources exist
to fund operations and future expansion programs. On January 5, 1998,
a new credit line facility became effective in the amount of $75
million to fund working capital and acquisitions. At March 31, 1998,
the Company had an unused line of credit of $62.1 million.
SAFE HARBOR STATEMENT
Statements which are not historical facts, including statements about
our confidence, strategies and expectations, opportunities, industry
and market growth, demand and acceptance of new and existing products
and return on investments are forward looking statements that involve
risks and uncertainties, including without limitation, the effect of
general economic and market conditions, supply and demand for the
Company's products, competitor pricing, maintenance of the Company's
current market position and other factors. Given these uncertainties,
undue reliance should not be placed on such forward looking
statements.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10. Material Contracts
10.1 Executive Long-Term Performance Equity Plan, effective as
of January 1, 1998.
10.2 Amended and Restated Employment Agreement of Monty Fu,
dated as of January 1, 1997 and amended and restated as of
December 31, 1997.
10.3 Amended and Restated Employment Agreement of Robert G.
Funari, dated as of January 1, 1997 and amended and
restated as of December 31, 1997.
(b) A report on Form 8-K, dated January 30, 1998, was filed
disclosing the acquisition of TME, Inc. through a forward subsidiary
merger, and the acquisition of medical imaging businesses of National
Diagnostic Services, Inc. (through an asset acquisition) and its
affiliate James Francis Mitchell & Co., Inc. (through a reverse
subsidiary merger). No financial statements were filed with the Form
8-K.
11. Statement re: Computation of Per Share Earnings
Computation can be clearly determined from the material contained
in Part I of this Form 10-Q.
27. Financial Data Schedule (filed electronically)
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SYNCOR INTERNATIONAL CORPORATION
May 15, 1998 By: /s/ Michael E. Mikity
_______________________
Michael E. Mikity
Senior Vice President and
Chief Financial Officer
(Principal Financial /
Accounting Officer)
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10. Material Contracts
10.1 Executive Long-Term Performance Equity Plan, effective as of
January 1, 1998.
10.2 Amended and Restated Employment Agreement of Monty Fu, dated
as of January 1, 1997 and amended and restated as of
December 31, 1997.
10.3 Amended and Restated Employment Agreement of Robert G.
Funari, dated as of January 1, 1997, and amended and
restated as of December 31, 1997.
(b) A report on Form 8-K, dated January 30, 1998, was filed disclosing the
acquisition of TME, Inc. through a forward subsidiary merger, and the
acquisition of medical imaging businesses of National Diagnostic Services,
Inc.(through an asset acquisition) and its affiliate James Francis
Mitchell & Co., Inc.(through a reverse subsidiary merger). No
financial statements were filed with the Form 8-K.
<PAGE>
EXHIBIT 10.1
Syncor International Corporation
Performance Equity Plan
Plan Establishment:
Syncor International Corporation, a Delaware corporation (hereafter referred to
as the Company), hereby establishes an Executive Long Term Performance Equity
Plan (hereafter referred to as the Plan), as set forth in this document. The
Plan permits the grant of non-qualified stock options, cash, and stock.
This plan becomes effective on January 1, 1998, and shall remain in effect
subject to the right of the Board of Directors to amend or terminate the Plan,
at any time, pursuant to authority established under the administration section
of this Plan or until all allocated shares and cash subject to the Plan, with
the exception of non-qualified stock options, shall have been purchased or
acquired according to the Plan's provisions. However, in no event may an
award be granted under the plan on or after June 30, 2002.
Stock options granted under this Plan shall vest regardless of Plan performance
in 9 years, 6 months from the effective date of this Plan.
Plan Objectives
The objectives of the Plan are to optimize the profitability and growth of the
Company through actions that:
Promote the creation of shareholder value by conditioning the vesting of shares
to actual increases in Syncor's common stock price and relative total
shareholder return.
Attain an optimal mix of long-term incentive awards as a percent of total
compensation.
Encourage teamwork and a common focus among executive officers and certain other
officers by including a cash component that, if awarded, will pay taxes,
allowing the retention of vested stock.
Meet or exceed EPS targets in four (4) year plan as set by Executive Management
and the Board of Directors.
Eligibility
Eligibility will be limited to senior executive officers of the corporation and
certain other key executives as proposed by the Chief Executive Officer with
approval from the Board of Directors.
Actual participation will be subject to the provisions of the plan and plan
Participants identified and approved by the Compensation Committee of the Board
of Directors.
Administration
The Committee. The Plan shall be administered by the Board, or the Compensation
Committee of the Board, or by any other Committee appointed by the Board. The
members of the Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board of Directors.
Authority of the Committee. Except as limited by law or by the Certificate of
Incorporation or Bylaws of the Company, and subject to the provisions herein,
the Committee shall have full power to select Executives who shall
participate in the Plan; determine the sizes and types of Awards; determine
the terms and conditions of Awards in a manner consistent with the Plan;
construe and interpret the Plan and any agreement or instrument entered into
under the Plan as they apply to Participants; establish, amend, or waive
rules and regulations for the Plans administration as they apply to
Participants; and amend the terms and conditions of any outstanding Award to
the extent such terms and conditions are within the discretion of the
Committee as provided in the Plan. Further, the Committee shall make all
other determinations which may be necessary or advisable for the
administration of the Plan, as the Plan applies to Participants. As permitted
by law, the Committee may delegate its authority as identified herein.
Decisions Binding. All determinations and decisions made by the Committee
pursuant to the provisions of the Plan and all related orders and resolutions of
the Board shall be final, conclusive and binding on all persons, including the
Company, its stockholders, Employee, Participants, and their estates and
beneficiaries.
Definitions
Whenever used in the Plan, the following terms shall have the meanings set forth
in the following:
Allocated Stock shall mean shares of the Company's common stock set aside from
the 1990 Master Stock Incentive Plan (as amended) for purposes under this Plan.
Award means, individually or collectively, a grant under this Plan of
Nonqualified Stock Options(1), stock or cash.
[FN]
1 Nonqualified stock options are subject to accelerated vesting under this
Plan; however all stock options granted under this Plan will vest (provided
that a participant is still employed by Syncor) 9 years, 6 months from
Effective Date.
</FN>
Board or Board of Directors means the Board of Directors of the Company.
Code means the Internal Revenue Code of 1986, as amended from time to time.
Committee means the Compensation Committee of the Board, as specified herein, or
such other Committee appointed by the Board to administer the Plan with respect
to grants of Awards.
Company or Syncor means Syncor International Corporation , a Delaware
corporation, including any and all Subsidiaries, and any successor thereto as
provided in this document.
Director means any individual who is a member of the Board of Directors of the
Company.
Effective Date shall mean January 1, 1998.
Executive means any active senior executive officer or key executive of the
Company as proposed by the Chief Executive Officer and approved by the Board of
Directors. Directors who are not employed by the Company shall not be considered
Executives under this Plan.
Exchange Act means the Securities Exchange Act of 1934, as amended from time to
time, or any successor act thereto.
Fair Market Value shall be determined on the basis of the closing sale price on
the principal securities exchange on which the Shares are traded or, it there is
no such sale on the relevant date, then on the last previous day on which a sale
was reported.
Nonqualified Stock Option or NQSO means an option to purchase Shares granted
herein and which is not intended to meet the requirements of Code Section 422.
Option means a nonqualified stock option.
Option Price means the price at which a Share may be purchased by a Participant
pursuant to an Option.
Participant means an Executive who has outstanding an Award granted under the
Plan. The term Participant shall not include Nonemployee Directors.
Performance-Based Exception means the performance-based exception from the tax
deductibility limitations of Code Section 162(m).
Plan shall mean this performance equity plan as described in this document.
Shares mean the shares of common stock of the Company.
Subsidiary means any corporation in which the Company owns directly, or
indirectly through subsidiaries, at least fifty percent (50%) of the total
combined voting power of all classes of stock, or any other entity (including,
but not limited to, partnerships and joint ventures) in which the Company owns
at least fifty percent (50%) of the combined equity thereof.
Types of Awards
Upon attainment of each of four (4) common stock price targets, each participant
in this plan will receive a long-term incentive award comprised of the
following:
One-third (1/3) cash.
One-third (1/3) Allocated Stock at Fair Market Value at time of grant.
One-third (1/3) Options subject to immediate vesting upon attainment of the
price target. The entire option component of this Plan will be granted as of
the Plan effective date (front loaded) and the Fair Market Value of the option
component shares will be determined by utilization of the Black-Scholes
valuation model based on the sixty day rolling average of stock prices prior to
January 1, 1998.
The actual amount of stock and cash delivered will be subject to modification by
the Total Shareholder Return section of this Plan.
Length of Plan (Plan Terms)
The plan is designed to deliver all its incentive compensation in four (4 2)
calendar years commencing from the Effective Date and ending on June 30, 2002.
Nonqualified stock options are subject to accelerated vesting under this Plan;
however all stock options granted under this Plan will vest (provided that a
participant is still employed by Syncor) 9 years, 6 months from effective date.
Plan Elements
The actual value of incentive awards under this program will be based on two (2)
primary criteria: (1) Syncor's common stock price performance over a four (4)
year period; (2) relative total shareholder return as measured against the S&P
Health Care Composite Index.
1. Stock Price
Stock price targets will be established for each of the four (4) years.
Assuming a $15.80 common stock price at plan effective date, price targets will
be set at $20.00 by June 30, 1999, $25.00 by June 30, 2000, $34.00 by June 30,
2001 and $43.00 by June 30, 2002 per share, respectively. The final target
($43.00) represents a 250% growth in price value to the shareholders.
Each target price must be maintained for ten (10) trading days in any
period of twenty (20) consecutive trading days in order to trigger the
Award.
Each stock price target will have a window period of a total of 18 months from
January of each successive year in which to initiate.
If, after 18 months, a performance target is not attained, and if relative total
shareholder return targets are not met, the cash Award and Allocated Stock award
will not vest for that target period.
There is no limitation on how early or how many equity awards vest, provided
that the stock price targets and TSR requirements are met.
2. Total Shareholder Return (TSR)
In order to fairly treat stock market fluctuations (up or down) and to
insure true performance against peers a "relative total shareholder return"
(TSR) modifier has been established as the second performance criteria of
this plan.
The TSR measure will take the form of a scale in which improvement in TSR
relative to the S & P Health Care Composite Index will modify the amount of
performance Awards delivered under this Plan.
The TSR measure will be comprised of a ratio of Syncor's stock price to the
rolling twelve (12) month average of the S&P Health Care Index.
The performance modifier will be the result of taking the square root of the
ratio of stock price (see above) and subtracting 1.0. (see following
illustration)
A TSR ratio of .74 or less would not receive an award payout.
If price targets are overachieved, the Option component of the Award (the part
over target) would be paid in cash.
If stock price targets are not met, allocated stock and cash will not be awarded
and stock options will not vest until option vesting term (9.5 years).
Relative TSR Adjustment
Scale
TSR Ratio Performance Modifier
1.4 18.3%
1.3 14.0
1.2 9.5
1.1 4.9
.90 (5.1)
.80 (11.0)
.75 (13.4)
.74 - 0 -
Example: Syncor stock increases from $15.75 at plan effective date to $20.00 on
June 15, 1998, breaking the first target threshold ($20.00) for the first time
(the $20.00 stock price was maintained for ten trading days in a period of 20
consecutive trading days). This is an increase of 40%. The S&P Healthcare
Stock Index increases from 145 to 165 (12 mo. rolling average) during that
same period for an increase of 14%.
Therefore;
TSR ratio = 1.4/1.14 = 1.23
The square root of 1.23 is 1.11
1.11 - 1.0 = 11% which is the TSR adjustment modifier
If your total award is equal to $200,000.00 for the first target, then;
Total award equals $200,000.00 plus 11% or
Actual award value = $222,000.00
Awards will be calculated based on long term incentive targets. The Committee
has the discretion to adjust targets for inflation or other factors.
3. Terminations
(Same as 1990 Master Stock Incentive Plan document)
4. Change in Control
(Same as 1990 Master Stock Incentive Plan document)
Upon a change in control, all unvested Awards held by Participants of this Plan
will vest immediately regardless of share price. If the acceleration of vesting
results in an excess parachute payment pursuant to Code Section 280G, the amount
deemed paid upon a Change in Control shall be the maximum amount that may be
deemed paid by the Participant without triggering an excess parachute payment
under Code Section 280G; the balance of the Award would vest in accordance with
its terms.
5. 1990 Master Stock Incentive Plan (as amended)
This Plan is intended to operate with regard to equity, under the authority and
limits as set forth in the 1990 Master Stock Incentive Plan (as amended). In the
event of a conflict between this Plan and the 1990 Master Stock Incentive Plan,
terms of the 1990 Master Stock Incentive Plan shall govern. The cash Award will
be governed by the same principles as the stock Award.
6. Tax Qualification
Based on the structure and nature of this plan, Syncor believes that awards,
other than the cash awards, received by officers in this Plan constitute a
Performance-Based Exception and are not subject to the $1,000,000.00 limit on
tax deductibility of Code 162(m).
7. Value of Award to Each Participant
Assuming that all four targets are met within the requisite time period and
there are no TSR adjustments, the value of the Award granted to a Participant
shall be equal to the base salary of that Executive as of the Effective Date,
multiplied by four, multiplied by the individual's percentage factor as
determined by the Board. The committee has discretion, however, to adjust the
value of each Award upwards to take into account salary increases, inflation
and other factors after the Effective Date.
8. Governing Law
This Plan shall be governed by Delaware law.<PAGE>
EXHIBIT 10.2
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), made and entered into as of the
1st day of January, 1997, by and between Syncor International Corporation, a
Delaware corporation (the "Company"), and Monty Fu ("Employee"), is hereby
amended and restated as of this 31st day of December, 1997.
1. Employment. The Company agrees to employ Employee, and Employee
agrees to be employed by the Company, during the Employment Period (as
hereinafter defined) to perform his duties as Chairman of the Board of the
Company or such other or additional duties as determined from time to time
by the Board of Directors of the Company or its designee. If Employee is
elected or appointed to an office with any of the Company's other
subsidiaries or affiliates during the Employment Period, Employee shall serve
in such capacity or capacities without additional compensation. Employee
agrees to perform such duties faithfully and to the best of his ability, to
devote his full working time and efforts to the performance of such duties
and not to accept any other gainful employment without the prior written
consent of the Board of Directors.
2. Employment Period; Extension. The "Employment Period," as used
herein, means the period beginning on January 1, 1997 (the "Commencement
Date") and ending on December 31, 1999 (the "Expiration Date"). On or after
June 1, 1999, the Company will negotiate with Employee regarding an extension
of the Employment Period beyond the Expiration Date. Such negotiations shall
conclude on or before October 1, 1999. Any extension of this Agreement
beyond the Expiration Date shall be subject to the mutual written agreement
of Employee and the Company with respect to the terms thereof. Neither the
Company nor Employee shall have any obligation to extend the Employment
Period.
2.1 If Employee and the Company do not execute a written
agreement extending the Employment Period beyond the Expiration Dated:
(a) and if Employee performs the same duties following the
Expiration Date as he had before the Expiration Date, such employment shall be
at-will, subject to termination by either party, with or without cause, upon 90
days written notice (the "90-Day Notice") to the other party; otherwise
(b) Employee shall not be entitled to earn incentive
compensation and no stock options shall vest after the Expiration date and
Company's sole liability to Employee following the Expiration Date shall be (1)
payment of Employees base salary, in bi-weekly installments, (2) to provide same
medical benefits; (3) not to trigger termination event for the purposes of
vested options, ESSOP and deferral plan(s) if any; all through June 30, 2000
(the "Additional Compensation") provided, however, that in order for Employee to
receive any portion of the Additional Compensation, Employee must perform his
duties hereunder through December 31, 1999.
3. Annual Salary and Benefits.
3.1 Base Salary and Incentive Compensation. For all services
rendered by Employee during the Employment Period, the Employee shall be
entitled to be paid by the Company a base salary in the annual amount of
$240,000 for the one year period from January 1, 1997 through December 31,
1997, $275,000 for the one year period from January 1, 1998 through December
31, 1998, and for the one year period from January 1, 1999 through December
31, 1999, an amount to be agreed upon by the parties on or before December
31, 1998(each, the "Annual Base Salary") and to receive such fringe benefits
as may be made available by the Company to Employee, including participation
in the 1995 Management Incentive Plan (the "1995 MIP"), the 1996 Management
Incentive Plan (the "1996 MIP"), the 1997 Management Incentive Plan (the
"1997 MIP"), the Senior Management Stock Purchase Plan (the "Stock Purchase
Plan"), and any other incentive plan(s) that may be prepared and approved by
the Board of Directors which are applicable generally to the Company's
executives of comparable rank to Employee.
Employee also shall be eligible to receive such additional
compensation, contingent or otherwise, as determined solely in the discretion of
the Board of Directors (or a committee of the Board of Directors to which such
discretion is delegated). The Annual Base Salary shall be payable in biweekly
installments, subject to all applicable withholding and deductions.
3.2 Stock Options. From time to time, at the Board of Directors
meetings, the appropriate Board committee shall consider the adequacy of
Employee's then existing stock options. If in the Board of Directors' sole
discretion, additional options are warranted, they shall be granted with terms
and conditions which the Board deems appropriate and at all times consistent
with the Company's then existing stock option plans. At any time that
Employee wants to exercise any of his vested stock options, upon Employee's
request, the Company may loan to him the amount necessary to exercise such
options; provided, however, that any such loan shall not include any amount
for Employee's withholding taxes, unless such exercise is in connection with
a Termination Without Cause following a Change in Control, as such terms are
defined in Section 7.3 below. The terms and conditions of any such loan
shall be determined by the Board of Directors.
4. Employee Handbook. The Company maintains an Employee Handbook,
which the Company may revise as the Company deems necessary. Employee's
employment hereunder is and will be subject to the provisions of any such
Handbook maintained by the Company; however, the express provisions of this
Agreement will control in the event they conflict or are inconsistent with the
provisions of the Handbook.
5. Execution of Documents and Other Agreements. Employee (a)
shall execute an Invention, Secrecy and Other Matters Agreement substantially in
the form attached hereto as Exhibit A, (b) shall execute a Benefits Agreement
substantially in the form attached hereto as Exhibit B; provided however, the
express provisions of this Agreement will control in the event they conflict or
are inconsistent with the provision of such Benefits Agreement, (c) shall
deliver to the Company the Form I-9 prescribed by the Immigration and
Naturalization Service together with the original documentation required
therewith, and (d) shall execute and deliver to the Company all such
documents as the Company may from time to time deem necessary or desirable to
evidence, protect, enforce or defend its right, title and interest in or to
any Proprietary Information, as defined in the Invention, Secrecy & Other
Matters Agreement.
6. Termination.
6.1 This Agreement and Employee's employment hereunder will
automatically terminate upon the first to occur of the following circumstances
(any such termination and any termination pursuant to Section 6.2 being referred
to herein as a "Termination of Employment"):
(a) the failure of the parties prior to the third anniversary
of the Commencement Date to extend the Employment Period pursuant to Section 2
hereof, or the expiration of any such extended Employment Period; or
(b) Employee's death.
6.2 This Agreement and Employee's employment hereunder may be
terminated by the Company or Employee, as the case may be, by notice to the
other under the following circumstances:
(a) by the Company at any time for "cause" consisting of,
as determined in the sole discretion of the Board of Directors, (i) Employee's
willful misconduct which has or could reasonably be expected to have a material
adverse effect on the financial condition, results of operations, business,
assets, operations, performance or prospects of the Company (a "Material
Adverse Effect"), (ii) Employee's willful violation of specific written
directions from the Board of Directors of the Company, which directions are
lawful and are consistent with the provisions of this Agreement, or
Employee's material neglect of his duties hereunder, (iii) the commission by
Employee of an act constituting common law fraud or embezzlement or a felony
or criminal act (other than traffic violations), (iv) Employee's abuse of
alcohol or other drugs or controlled substances or conviction of a crime
involving moral turpitude, in each case which has or could be reasonably
expected to have a Material Adverse Effect or impairs Employee's ability to
perform his duties hereunder, (v) Employee's material breach of this
Agreement, or (vi) Employee's adjudication as a bankrupt;
(b) by the Company in the event that Employee has been unable
to perform substantially all of his employment duties under this Agreement for
a continuous period of 90 days, or can reasonably be expected to be unable to do
so for such period, as the result of Employee's incapacity due to physical or
mental impairment; or
(c) by Employee at any time by voluntarily resigning or
retiring.
6.3 This Agreement and Employee's employment hereunder may be
terminated by the Company by notice to the Employee at any time and for any
reason, or for no reason, without "cause" (any such termination being referred
to herein as a "Termination Without Cause").
7. Effect of Termination of Employment or Termination Without Cause.
7.1 Termination of Employment. Upon a Termination of Employment
pursuant to Section 6.1 or 6.2 hereof, neither Employee nor Employee's
beneficiaries or estate shall have any further rights under this Agreement or
any claims against the Company arising out of this Agreement, except the right
to receive, within 30 days of the Termination of Employment,(a)that portion of
the Annual Base Salary earned but unpaid through the date of the Termination of
Employment, and (b) the right to receive certain prorated amounts due under any
incentive plan as described below. Employee shall have the right to exercise
any vested stock option shares for a period of 90 days following the date of the
Termination of Employment, in accordance with the terms of the applicable stock
option agreement. With respect to any incentive plan described below, the
Company shall have no obligation to pay any amount to Employee unless and until
the Board of Directors of the Company shall have approved generally the funding
of payout to all employees pursuant to any such incentive plan.
7.1.1 With respect to the 1995 MIP, in the event of a Termination
of Employment pursuant to Section 6.1 or 6.2 hereof, the Company shall pay
Employee any Long Term Incentive (as defined in the 1995 MIP) earned but
deferred from any year prior to the year in the Termination of Employment
occurs in addition to the prorata portion of such Long Term Incentive earned
during the year of such Termination of Employment. However, the Company
shall have no obligation to pay any portion of the Company Match element (as
defined in the 1995 MIP) of the Long Term Incentive.
7.1.2 With respect to the 1996 MIP, in the event of a Termination
of Employment pursuant to Section 6.1 or 6.2 hereof, the Company shall pay
Employee (a) the EPS Incentive (as defined in the 1996 MIP) prorated through the
date of the Termination of Employment, and (b) any Long Term Incentive (as
defined in the 1996 MIP) earned but deferred from any year prior to the year in
the Termination of Employment occurs in addition to the prorata portion of such
Long Term Incentive earned during the year of such Termination of Employment.
However, the Company shall have no obligation to pay any portion of the Company
Match element (as defined in the 1996 MIP) of the Long Term Incentive.
7.1.3 With respect to the 1997 MIP, in the event of a Termination
of Employment pursuant to Section 6.1 or 6.2 hereof, the Company shall pay
Employee (a) the EPS Incentive (as defined in the 1997 MIP) prorated through the
date of the Termination of Employment, and (b) any Long Term Incentive (as
defined in the 1997 MIP) earned but deferred from any year prior to the year in
the Termination of Employment occurs in addition to the prorata portion of such
Long Term Incentive earned during the year of such Termination of Employment.
However, the Company shall have no obligation to pay any portion of the Company
Match element (as defined in the 1997 MIP) of the Long Term Incentive.
7.1.4 With respect to any other incentive plan(s) that may be
approved by the Board of Directors during the Employment Period ("New Plans"),
in the event of a Termination of Employment pursuant to Section 6.1, the
Company's obligation to pay Employee any portion of such New Plans shall be
consistent with the Company's obligations under the preceding Sections 7.1.1,
7.1.2 and 7.1.3. However, with respect to a Termination of Employment pursuant
to Section 6.2, the Company shall have no obligation to pay any incentive
compensation to Employee pursuant to any New Plans.
7.2 Termination Without Cause. Subject to Section 7.3 below, upon a
Termination Without Cause (as defined in Section 6.3 above), neither Employee
nor Employee's beneficiaries or estate shall have any further rights under this
Agreement or any claims against the Company arising out of this Agreement,
except (a) the right to receive the amounts described in Section 7.1, which
amounts shall be calculated through the end of the Employment Period and (b)
subject to and so long as Employee is in compliance with the terms of
Sections 8, 9 and 10 hereof following the Termination Without Cause, the
severance compensation shall be equal to the prorated portion of the Annual
Base Salary at the time of Termination Without Cause, as provided for in
Section 3 for the remaining term of the Employment Period. All payments
under this Section 7.2 shall be payable in biweekly installments as provided
in Section 3 above. Employee shall have the right to exercise any vested
stock option shares for a period of 90 days following the date of the
Termination Without Cause, in accordance with the terms of the applicable
stock option agreement.
7.3 Termination Without Cause Following a Change in Control.
7.3.1 Upon a Termination Without Cause following a "Change in
Control" as defined below, the Employment Period shall be extended to include
the two-year period following such Termination Without Cause.
7.3.2 A "Change in Control" shall be defined to include either
(I) acquisition of 20% or more of the outstanding common stock of the Company
by a person, or group of related persons (as defined by Securities and Exchange
Commission Rule 13d-3), that is not affiliated with the Company as of the date
hereof, or (ii) the sale by the Company of more than 50% of the Company's assets
not in the ordinary course of business, or (iii) the failure by the Board of
Directors to determine a "Qualified Offer" as that term is defined in Section 1
(a) of that certain Rights Agreement dated as of September 8, 1989 between the
Company and the American Stock Transfer & Trust Company.
7.3.3 All payments under this Section 7.3 shall be payable in
biweekly installments as provided in Section 3 above; provided, however, that
Employee shall have the option to receive such payments due under this Section
7.3 in a lump sum.
7.3.4 In the event of a Change in Control, Employee's vesting
in all grants of stock option shares, all incentive plans and all other benefits
as provided in the Benefits Agreement shall be accelerated and shall be fully
vested to the date of such Change in Control. If a Change in Control results in
the involuntary or voluntary termination of Employee, (a) such vested options
shall be exercisable by Employee at any time during the Employment Period and
for 90 days thereafter and (b) Company shall pay to Employee all amounts due
under any and all components of any incentive plan applicable to Employee,
including the EPS Incentive, Long Term Incentive and Company Match
components, without any proration, through the end of the Employment Period.
At any time that Employee wants to exercise any of his vested stock options
in connection with a Termination Without Cause following a Change in Control,
upon Employee's request, the Company shall loan to him the amount necessary
to exercise such options, including an amount equal to Employee's withholding
taxes payable in connection with such exercise. Such loan shall be for a
period of three years with interest charged at the prime rate as determined
by the First National Bank of Chicago at the time of such loan.
Notwithstanding the foregoing, in the event of any difference or conflict
between the terms and provisions contained herein relating to Employee's
rights in the event of a Change in Control and any similar terms and
provisions contained in any other agreement to which Employee and Company are
parties, including without limitation, the Benefits Agreement and the Stock
Purchase Plan, those terms and provisions most favorable to Employee shall
control.
7.4 Employee's obligations under Sections 8, 9 and 10 of this
Agreement shall survive the expiration or termination hereof; provided, however,
that in the event of a Change in Control, Employee has no obligation to comply
with such sections following the date of such Change in Control.
8. Agreement Not to Solicit Employees. Employee agrees that, prior to a
Termination of Employment and during the Noncompetition Period referred to in
Section 10.1 below, Employee shall not solicit or otherwise attempt, directly
or indirectly, to entice the Company's other employees to leave the Company or
its affiliates or breach any agreement they have with the Company or its
affiliates.
9. Proprietary Information. Employee hereby agrees to be bound by the
terms of the Invention, Secrecy & Other Matters Agreement to be executed by
Employee substantially in the form attached hereto as Exhibit A, specifically
including the obligations contained in Section 3 thereof regarding the
nondisclosure of proprietary information.
10. Noncompetition.
10.1 Employee agrees that, prior to a Termination of Employment and
for the one-year period following Termination of Employment (the
"Noncompetition Period"), Employee shall not engage or participate in any
state of the United States, directly or indirectly, either as an owner,
partner, director, trustee, officer, employee, consultant, advisor or in any
other individual or representative capacity, in any activity which is the
same as, similar to or competitive in any manner whatsoever with the business
of the Company, its subsidiaries or affiliates (herein, a "Competing
Activity") and will not have any investment in a business which is engaged in
a Competing Activity other than an ownership interest of less than five
percent (5%) of any company whose securities are listed on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market.
Employee agrees that, in the event the Employment Period is extended by the
Company as permitted in Section 7.2, the Noncompetition Period shall
thereupon automatically be extended to coincide with the extended Employment
Period.
10.2 Employee acknowledges and agrees that the breadth of the
territorial restriction in Section 10.1 is reasonable and necessary to protect
the Company, its subsidiaries and affiliates because, among other things, the
Company, its subsidiaries and affiliates conduct or propose to conduct business
throughout the United States, such business could be located in any jurisdiction
in the United States and any lesser restriction would unfairly infringe upon the
conduct of such business.
10.3 Employee understands that the foregoing restrictions may limit
his ability to earn a livelihood in a business similar to the respective
business of the Company, its subsidiaries and affiliates, but he nevertheless
believes that he has received and will receive sufficient consideration
hereunder and otherwise as an employee of the Company to justify such
restrictions which, in any event, given his education, abilities and skills,
Employee does not believe would prevent him from earning a living.
11. Assignment. This Agreement shall inure to the benefit of and shall
be binding upon the Company, its successors and assigns. The obligations and
duties of Employee hereunder are personal and not assignable, whether
voluntarily or involuntarily or by operation of law or otherwise.
12. Entire Agreement. This Agreement, as amended and restated, contains
the entire agreement of the Company and Employee relating to the subject matter
hereof, and it replaces and supersedes any and all prior agreements between the
parties relating to the same subject matter, including without limitation, any
prior employment agreement between Employee and the Company. In connection
therewith, by execution of this Agreement, Employee hereby terminates in its
entirety as of the Commencement Date any such prior agreement which shall
thereafter cease to have any force or effect.
13. Waiver; Amendment. No provision hereof may be waived except by a
written agreement signed by the waiving party. The waiver of any term or
condition of this Agreement shall not be deemed to constitute a waiver of any
other term or condition hereof. This Agreement may be amended only by a
subsequent writing signed by the party or parties to be bound thereby.
14. Remedies. All remedies hereunder are cumulative, are in addition to
any other remedies provided for by law and may, to the extent permitted by law,
be exercised concurrently or separately, and the exercise of any one remedy
shall not be deemed to be an election of such remedy or to preclude the
exercise of any other remedy. Employee acknowledges that in the event of any
breach of Employee's covenants contained in Section 8, 9 or 10, the Company
shall be entitled to immediate relief enjoining such violations in any court
or before any judicial body having jurisdiction over such claim.
15. Severability. In the event that any provision of this Agreement
would be held in any jurisdiction to be invalid, prohibited or unenforceable
for any reason, such provision, as to such jurisdiction, shall be
ineffective, without invalidating the remaining provisions of this Agreement
in such jurisdiction or any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to
such jurisdiction, be so narrowly drawn, without affecting the validity or
enforceability of such provision in any other jurisdiction.
16. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which, taken together, shall
constitute one and the same instrument.
17. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
18. Attorneys' Fees. In the event that any party hereto brings an
action or proceeding for a declaration of the rights of the parties under this
Agreement, for injunctive relief, for an alleged breach or default of, or any
other action arising out of this Agreement or the transactions contemplated
hereby, or in the event any party is in default of its obligations pursuant
hereto, the prevailing party in any such action or proceeding shall be entitled
to reasonable attorneys' fees, in addition to any costs incurred and in addition
to any other damages or relief awarded.
19. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of California applicable
to agreements made and to be wholly performed within such state.
20. Arbitration. In the event (a) Employee disagrees with a Company
decision involving Employee's compensation, position or other personal
employment condition or (b) there is a dispute arising out of the separation
of Employee from employment by the Company, then Employee and the Company
shall first try to resolve such disagreement or dispute pursuant to the
problem solving procedure in the Employee Handbook. If such disagreement or
dispute is not resolved by such procedure, then it shall be resolved by
binding arbitration, at the request of either party, in accordance with the
rules of the American Arbitration Association. The arbitrator shall have the
power to award only actual direct compensatory damages which excludes
punitive damages and the parties waive the right to recover punitive damages.
The arbitrator shall prepare in writing and provide to the parties an award
including factual findings and the reasons on which the decision is based.
The arbitrator shall not have the power to commit errors of law or legal
reasoning, and the award may be vacated or corrected by judicial review for
any such error.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement,
as amended and restated, to be executed as of the day and year first above
written.
SYNCOR INTERNATIONAL CORPORATION,
a Delaware corporation
/s/ Haig Bagerdjian
By:___________________________________
HAIG BAGERDJIAN
Senior Vice President, Business Development
and General Counsel
EMPLOYEE
/s/ Monty Fu
________________________
MONTY FU
<PAGE>
EXHIBIT 10.3
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), made and entered into as
of the 1st day of January, 1997, by and between Syncor International
Corporation, a Delaware corporation (the "Company"), and Robert G. Funari
("Employee"), is hereby amended and restated as of this 31st day of December,
1997.
1. Employment. The Company agrees to employ Employee, and Employee
agrees to be employed by the Company, during the Employment Period (as
hereinafter defined) to perform his duties as President and Chief Executive
Officer of the Company or such other or additional duties as determined from
time to time by the Board of Directors of the Company or its designee. If
Employee is elected or appointed to an office with any of the Company's other
subsidiaries or affiliates during the Employment Period, Employee shall serve
in such capacity or capacities without additional compensation. Employee
agrees to perform such duties faithfully and to the best of his ability, to
devote his full working time and efforts to the performance of such duties
and not to accept any other gainful employment without the prior written
consent of the Board of Directors.
2. Employment Period; Extension. The "Employment Period," as used
herein, means the period beginning on January 1, 1997 (the "Commencement Date")
and ending on December 31, 1999 (the "Expiration Date"). On or after June 1,
1999, the Company will negotiate with Employee regarding an extension of the
Employment Period beyond the Expiration Date. Such negotiations shall conclude
on or before October 1, 1999. Any extension of this Agreement beyond the
Expiration Date shall be subject to the mutual written agreement of Employee and
the Company with respect to the terms thereof. Neither the Company nor
Employee shall have any obligation to extend the Employment Period.
2.1 If Employee and the Company do not execute a written agreement
extending the Employment Period beyond the Expiration Date:
(a) and if Employee performs the same duties following the
Expiration Date as he had before the Expiration Date such employment shall be
at-will, subject to termination by either party, with or without cause, upon 90
days written notice (the "90-Day Notice") to the other party; otherwise
(b) Employee shall not be entitled to earn incentive
compensation and no stock options shall vest after the Expiration date and
Company's sole liability to Employee following the Expiration Date shall be (1)
payment of Employees base salary, in bi-weekly installments, (2) to provide same
medical benefits; (3) not to trigger termination event for the purposes of
vested options, ESSOP and deferral plan(s) if any; all through June 30, 2000
(the "Additional Compensation"); provided, however, that in order for
Employee to receive any portion of the Additional Compensation, Employee must
perform his duties hereunder through December 31, 1999.
3. Annual Salary and Benefits.
3.1 Base Salary and Incentive Compensation. For all services
rendered by Employee during the Employment Period, the Employee shall be
entitled to be paid by the Company a base salary in the annual amount of
$240,000 for the one year period from January 1, 1997 through December 31,
1997, $325,000 for the one year period from January 1, 1998 through December
31, 1998, and for the one year period from January 1, 1999 through December
31, 1999, an amount to be agreed upon by the parties on or before December
31, 1998 (each, the "Annual Base Salary") and to receive such fringe benefits
as may be made available by the Company to Employee, including participation
in the 1995 Management Incentive Plan (the "1995 MIP"), the 1996 Management
Incentive Plan (the "1996 MIP"), the 1997 Management Incentive Plan (the
"1997 MIP"), the Senior Management Stock Purchase Plan (the "Stock Purchase
Plan"), and any other incentive plan(s) that may be prepared and approved by
the Board of Directors which are applicable generally to the Company's
executives of comparable rank to Employee. Employee also shall be eligible
to receive such additional compensation, contingent or otherwise, as
determined solely in the discretion of the Board of Directors (or
a committee of the Board of Directors to which such discretion is delegated).
The Annual Base Salary shall be payable in biweekly installments, subject to all
applicable withholding and deductions.
3.2 Stock Options. From time to time, at the Board of Directors meetings,
the appropriate Board committee shall consider the adequacy of Employee's then
existing stock options. If in the Board of Directors' sole discretion,
additional options are warranted, they shall be granted with terms and
conditions which the Board deems appropriate and at all times consistent
with the Company's then existing stock option plans. At any time that
Employee wants to exercise any of his vested stock options, upon Employee's
request, the Company may loan to him the amount necessary to exercise such
options; provided, however, that any such loan shall not include any amount
for Employee's withholding taxes, unless such exercise is in connection with
a Termination Without Cause following a Change in Control, as such terms are
defined in Section 7.3 below. The terms and conditions of any such loan
shall be determined by the Board of Directors.
4. Employee Handbook. The Company maintains an Employee Handbook, which
the Company may revise as the Company deems necessary. Employee's employment
hereunder is and will be subject to the provisions of any such Handbook
maintained by the Company; however, the express provisions of this Agreement
will control in the event they conflict or are inconsistent with the
provisions of the Handbook.
5. Execution of Documents and Other Agreements. Employee (a) shall
execute an Invention, Secrecy and Other Matters Agreement substantially in the
form attached hereto as Exhibit A, (b) shall execute a Benefits Agreement
substantially in the form attached hereto as Exhibit B; provided however, the
express provisions of this Agreement will control in the event they conflict or
are inconsistent with the provision of such Benefits Agreement, (c) shall
deliver to the Company the Form I-9 prescribed by the Immigration and
Naturalization Service together with the original documentation required
therewith, and (d) shall execute and deliver to the Company all such
documents as the Company may from time to time deem necessary or desirable to
evidence, protect, enforce or defend its right, title and interest in or to
any Proprietary Information, as defined in the Invention, Secrecy & Other
Matters Agreement.
6. Termination.
6.1 This Agreement and Employee's employment hereunder will auto-
matically terminate upon the first to occur of the following circumstances (any
such termination and any termination pursuant to Section 6.2 being referred to
herein as a "Termination of Employment"):
(a) the failure of the parties prior to the third anniversary of
the Commencement Date to extend the Employment Period pursuant to Section 2
hereof, or the expiration of any such extended Employment Period; or
(b) Employee's death.
6.2 This Agreement and Employee's employment hereunder may be
terminated by the Company or Employee, as the case may be, by notice to the
other under the following circumstances:
(a) by the Company at any time for "cause" consisting of, as
determined in the sole discretion of the Board of Directors, (i) Employee's
willful misconduct which has or could reasonably be expected to have a material
adverse effect on the financial condition, results of operations, business,
assets, operations, performance or prospects of the Company (a "Material Adverse
Effect"), (ii) Employee's willful violation of specific written directions from
the Board of Directors of the Company, which directions are lawful and are
consistent with the provisions of this Agreement, or Employee's material neglect
of his duties hereunder, (iii) the commission by Employee of an act constituting
common law fraud or embezzlement or a felony or criminal act (other than traffic
violations), (iv) Employee's abuse of alcohol or other drugs or controlled
substances or conviction of a crime involving moral turpitude, in each case
which has or could be reasonably expected to have a Material Adverse Effect
or impairs Employee's ability to perform his duties hereunder, (v) Employee's
material breach of this Agreement, or (vi) Employee's adjudication as a
bankrupt;
(b) by the Company in the event that Employee has been unable to
perform substantially all of his employment duties under this Agreement for a
continuous period of 90 days, or can reasonably be expected to be unable to do
so for such period, as the result of Employee's incapacity due to physical or
mental impairment; or
(c) by Employee at any time by voluntarily resigning or
retiring.
6.3 This Agreement and Employee's employment hereunder may be
terminated by the Company by notice to the Employee at any time and for any
reason, or for no reason, without "cause" (any such termination being referred
to herein as a "Termination Without Cause").
7. Effect of Termination of Employment or Termination Without Cause.
7.1 Termination of Employment. Upon a Termination of Employment
pursuant to Section 6.1 or 6.2 hereof, neither Employee nor Employee's
beneficiaries or estate shall have any further rights under this Agreement or
any claims against the Company arising out of this Agreement, except the
right to receive, within 30 days of the Termination of Employment, (a) that
portion of the Annual Base Salary earned but unpaid through the date of the
Termination of Employment, and (b) the right to receive certain prorated
amounts due under any incentive plan as described below. Employee shall have
the right to exercise any vested stock option shares for a period of 90 days
following the date of the Termination of Employment, in accordance with the
terms of the applicable stock option agreement. With respect to any
incentive plan described below, the Company shall have no obligation to pay
any amount to Employee unless and until the Board of Directors of the Company
shall have approved generally the funding of payout to all employees pursuant
to any such incentive plan.
7.1.1 With respect to the 1995 MIP, in the event of a
Termination of Employment pursuant to Section 6.1 or 6.2 hereof, the Company
shall pay Employee any Long Term Incentive (as defined in the 1995 MIP)
earned but deferred from any year prior to the year in the Termination of
Employment occurs in addition to the prorata portion of such Long Term
Incentive earned during the year of such Termination of Employment. However,
the Company shall have no obligation to pay any portion of the Company Match
element (as defined in the 1995 MIP) of the Long Term Incentive.
7.1.2 With respect to the 1996 MIP, in the event of a
Termination of Employment pursuant to Section 6.1 or 6.2 hereof, the Company
shall pay Employee (a) the EPS Incentive (as defined in the 1996 MIP)
prorated through the date of the Termination of Employment, and (b) any Long
Term Incentive (as defined in the 1996 MIP) earned but deferred from any year
prior to the year in the Termination of Employment occurs in addition to the
prorata portion of such Long Term Incentive earned during the year of such
Termination of Employment. However, the Company shall have no obligation to
pay any portion of the Company Match element (as defined in the 1996 MIP) of
the Long Term Incentive.
7.1.3 With respect to the 1997 MIP, in the event of a
Termination of Employment pursuant to Section 6.1 or 6.2 hereof, the Company
shall pay Employee (a) the EPS Incentive (as defined in the 1997 MIP)
prorated through the date of the Termination of Employment, and (b) any Long
Term Incentive (as defined in the 1997 MIP) earned but deferred from any year
prior to the year in the Termination of Employment occurs in addition to the
prorata portion of such Long Term Incentive earned during the year of such
Termination of Employment. However, the Company shall have no obligation to
pay any portion of the Company Match element (as defined in the 1997 MIP) of
the Long Term Incentive.
7.1.4 With respect to any other incentive plan(s) that may be
approved by the Board of Directors during the Employment Period ("New Plans"),
in the event of a Termination of Employment pursuant to Section 6.1, the
Company's obligation to pay Employee any portion of such New Plans shall be
consistent with the Company's obligations under the preceding Sections 7.1.1,
7.1.2 and 7.1.3. However, with respect to a Termination of Employment pursuant
to Section 6.2, the Company shall have no obligation to pay any incentive
compensation to Employee pursuant to any New Plans.
7.2 Termination Without Cause. Subject to Section 7.3 below, upon a
Termination Without Cause (as defined in Section 6.3 above), neither Employee
nor Employee's beneficiaries or estate shall have any further rights under this
Agreement or any claims against the Company arising out of this Agreement,
except (a) the right to receive the amounts described in Section 7.1, which
amounts shall be calculated through the end of the Employment Period and (b)
subject to and so long as Employee is in compliance with the terms of
Sections 8, 9 and 10 hereof following the Termination Without Cause, the
severance compensation shall be equal to the prorated portion of the Annual
Base Salary at the time of Termination Without Cause, as provided for in
Section 3 for the remaining term of the Employment Period. All payments
under this Section 7.2 shall be payable in biweekly installments as provided
in Section 3 above. Employee shall have the right to exercise any vested
stock option shares for a period of 90 days following the date of the
Termination Without Cause, in accordance with the terms of the applicable
stock option agreement.
7.3 Termination Without Cause Following a Change in Control.
7.3.1 Upon a Termination Without Cause following a "Change in
Control" as defined below, the Employment Period shall be extended to include
the two-year period following such Termination Without Cause.
7.3.2 A "Change in Control shall be defined to include either
(I) acquisition of 20% or more of the outstanding common stock of the Company by
a person, or group of related persons (as defined by Securities and Exchange
Commission Rule 13d-3), that is not affiliated with the Company as of the date
hereof, or (ii) the sale by the Company of more than 50% of the Company's assets
not in the ordinary course of business, or (iii) the failure by the Board of
Directors to determine a "Qualified Offer" as that term is defined in Section 1
(a) of that certain Rights Agreement dated as of September 8, 1989 between the
Company and the American Stock Transfer & Trust Company.
7.3.3 All payments under this Section 7.3 shall be payable in
biweekly installments as provided in Section 3 above; provided, however, that
Employee shall have the option to receive such payments due under this Section
7.3 in a lump sum.
7.3.4 In the event of a Change in Control, Employee's vesting
in all grants of stock option shares, all incentive plans and all other benefits
as provided in the Benefits Agreement shall be accelerated and shall be fully
vested to the date of such Change in Control. If a Change in Control results in
the involuntary or voluntary termination of Employee, (a) such vested options
shall be exercisable by Employee at any time during the Employment Period and
for 90 days thereafter and (b) Company shall pay to Employee all amounts due
under any and all components of any incentive plan applicable to Employee,
including the EPS Incentive, Long Term Incentive and Company Match
components, without any proration, through the end of the Employment Period.
At any time that Employee wants to exercise any of his vested stock options
in connection with a Termination Without Cause following a Change in Control,
upon Employee's request, the Company shall loan to him the amount necessary
to exercise such options, including an amount equal to Employee's
withholding taxes payable in connection with such exercise. Such loan shall
be for a period of three years with interest charged at the prime rate as
determined by the First National Bank of Chicago at the time of such loan.
Notwithstanding the foregoing, in the event of any difference or conflict
between the terms and provisions contained herein relating to Employee's
rights in the event of a Change in Control and any similar terms and
provisions contained in any other agreement to which Employee and Company
are parties, including without limitation, the Benefits Agreement and the Stock
Purchase Plan, those terms and provisions most favorable to Employee shall
control.
7.4 Employee's obligations under Sections 8, 9 and 10 of this
Agreement shall survive the expiration or termination hereof; provided, however,
that in the event of a Change in Control, Employee has no obligation to comply
with such sections following the date of such Change in Control.
8. Agreement Not to Solicit Employees. Employee agrees that, prior to a
Termination of Employment and during the Noncompetition Period referred to in
Section 10.1 below, Employee shall not solicit or otherwise attempt, directly or
indirectly, to entice the Company's other employees to leave the Company or its
affiliates or breach any agreement they have with the Company or its affiliates.
9. Proprietary Information. Employee hereby agrees to be bound by the
terms of the Invention, Secrecy & Other Matters Agreement to be executed by
Employee substantially in the form attached hereto as Exhibit A, specifically
including the obligations contained in Section 3 thereof regarding the
nondisclosure of proprietary information.
10. Noncompetition.
10.1 Employee agrees that, prior to a Termination of Employment and
for the one-year period following Termination of Employment (the "Noncompetition
Period"), Employee shall not engage or participate in any state of the United
States, directly or indirectly, either as an owner, partner, director, trustee,
officer, employee, consultant, advisor or in any other individual or
representative capacity, in any activity which is the same as, similar to or
competitive in any manner whatsoever with the business of the Company, its
subsidiaries or affiliates (herein, a "Competing Activity") and will not have
any investment in a business which is engaged in a Competing Activity other
than an ownership interest of less than five percent (5%) of any company
whose securities are listed on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market. Employee agrees that, in the
event the Employment Period is extended by the Company as permitted in
Section 7.2, the Noncompetition Period shall thereupon automatically be
extended to coincide with the extended Employment Period.
10.2 Employee acknowledges and agrees that the breadth of the
territorial restriction in Section 10.1 is reasonable and necessary to protect
the Company, its subsidiaries and affiliates because, among other things, the
Company, its subsidiaries and affiliates conduct or propose to conduct business
throughout the United States, such business could be located in any jurisdiction
in the United States and any lesser restriction would unfairly infringe upon the
conduct of such business.
10.3 Employee understands that the foregoing restrictions may limit
his ability to earn a livelihood in a business similar to the respective
business of the Company, its subsidiaries and affiliates, but he nevertheless
believes that he has received and will receive sufficient consideration
hereunder and otherwise as an employee of the Company to justify such
restrictions which, in any event, given his education, abilities and skills,
Employee does not believe would prevent him from earning a living.
11. Assignment. This Agreement shall inure to the benefit of and
shall be binding upon the Company, its successors and assigns. The
obligations and duties of Employee hereunder are personal and not assignable,
whether voluntarily or involuntarily or by operation of law or otherwise.
12. Entire Agreement. This Agreement, as amended and restated,
contains the entire agreement of the Company and Employee relating to the
subject matter hereof, and it replaces and supersedes any and all prior agree-
ments between the parties relating to the same subject matter, including without
limitation, any prior employment agreement between Employee and the Company. In
connection therewith, by execution of this Agreement, Employee hereby terminates
in its entirety as of the Commencement Date any such prior agreement which shall
thereafter cease to have any force or effect.
13. Waiver; Amendment. No provision hereof may be waived except by a
written agreement signed by the waiving party. The waiver of any term or
condition of this Agreement shall not be deemed to constitute a waiver of any
other term or condition hereof. This Agreement may be amended only by a
subsequent writing signed by the party or parties to be bound thereby.
14. Remedies. All remedies hereunder are cumulative, are in addition
to any other remedies provided for by law and may, to the extent permitted by
law, be exercised concurrently or separately, and the exercise of any one remedy
shall not be deemed to be an election of such remedy or to preclude the exercise
of any other remedy. Employee acknowledges that in the event of any breach of
Employee's covenants contained in Section 8, 9 or 10, the Company shall be
entitled to immediate relief enjoining such violations in any court or before
any judicial body having jurisdiction over such claim.
15. Severability. In the event that any provision of this Agreement
would be held in any jurisdiction to be invalid, prohibited or unenforceable for
any reason, such provision, as to such jurisdiction, shall be ineffective,
without invalidating the remaining provisions of this Agreement in such
jurisdiction or any other jurisdiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without affecting the validity or enforceability of such
provision in any other jurisdiction.
16. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original and all of which, taken together,
shall constitute one and the same instrument.
17. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
a part of this Agreement.
18. Attorneys' Fees. In the event that any party hereto brings an
action or proceeding for a declaration of the rights of the parties under this
Agreement, for injunctive relief, for an alleged breach or default of, or any
other action arising out of this Agreement or the transactions contemplated
hereby, or in the event any party is in default of its obligations pursuant
hereto, the prevailing party in any such action or proceeding shall be entitled
to reasonable attorneys' fees, in addition to any costs incurred and in addition
to any other damages or relief awarded.
19. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of California applicable
to agreements made and to be wholly performed within such state.
20. Arbitration. In the event (a) Employee disagrees with a Company
decision involving Employee's compensation, position or other personal
employment condition or (b) there is a dispute arising out of the separation
of Employee from employment by the Company, then Employee and the Company
shall first try to resolve such disagreement or dispute pursuant to the
problem solving procedure in the Employee Handbook. If such disagreement or
dispute is not resolved by such procedure, then it shall be resolved by
binding arbitration, at the request of either party, in accordance with the
rules of the American Arbitration Association. The arbitrator shall have the
power to award only actual direct compensatory damages which excludes
punitive damages and the parties waive the right to recover punitive damages.
The arbitrator shall prepare in writing and provide to the parties an award
including factual findings and the reasons on which the decision is based.
The arbitrator shall not have the power to commit errors of law or legal
reasoning, and the award may be vacated or corrected by judicial review for
any such error.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement, as
amended and restated, to be executed as of the day and year first above written.
SYNCOR INTERNATIONAL CORPORATION,
a Delaware corporation
/S/ Haig Bagerdjian
By:_____________________________________
HAIG BAGERDJIAN
Senior Vice President, Business Development
and General Counsel
EMPLOYEE
/s/ Robert G. Funari
________________________
ROBERT G. FUNARI
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
1,000
<S> <C>
Period type 3 mos
Fiscal year end 12/31/98
Period start 01/01/98
Period end 03/31/98
CasH 25,954
Securities 2,581
Receivables 63,518
Allowances (1,051)
Inventory 5,992
Current assets 106,137
PP&E 78,775
Depreciation (44,468)
Total assets 204,821
Current liabilities 68,586
Bonds 0
Preferred mandatory 0
Preferred 0
Common 590
Other SE 96,140
Total Liability and Equity 204,821
Sales 102,724
Total Revenue 102,724
CGS 75,569
Total costs 75,569
Other expenses 21,668
Loss provision 0
Interest expense (505)
Income pre tax 5,893
Income tax 2,535
Income continuing 3,358
Discontinued 0
Extraordinary 0
Changes 0
Net income 3,358
EPS basic .33
EPS diluted .31
</TABLE>
