<PAGE>
SCHEDULE 14A INFORMATION
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
OSI SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
<PAGE>
[LOGO OF OSI SYSTEMS]
12525 CHADRON AVENUE
HAWTHORNE, CALIFORNIA 90250
October 16, 1998
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"Annual Meeting") of OSI Systems, Inc. (the "Company"), which will be held at
10:00 a.m., local time, on November 18, 1998, at the executive offices at the
Company, 12525 Chadron Avenue, Hawthorne, California 90250. All holders of the
Company's outstanding common stock as of the close of business on October 12,
1998, are entitled to vote at the Annual Meeting. Enclosed is a copy of the
Notice of Annual Meeting of Stockholders, Proxy Statement and Proxy.
We hope you will be able to attend the Annual Meeting. Whether or not you
expect to attend, it is important that you complete, sign, date and return the
Proxy in the enclosed envelope in order to make certain that your shares will
be represented at the Annual Meeting.
Sincerely,
/s/ Ajay Mehra
Ajay Mehra
Secretary
<PAGE>
[LOGO OF OSI SYSTEMS]
12525 CHADRON AVENUE
HAWTHORNE, CALIFORNIA 90250
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 18, 1998
----------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of OSI Systems, Inc., a California corporation (the "Company"), will
be held at 10:00 a.m., local time, on November 18, 1998, at the executive
offices at the Company, 12525 Chadron Avenue, Hawthorne, California 90250, for
the following purposes:
1. To elect five (5) directors to hold office for a one-year term and
until their respective successors are elected and qualified.
2. To approve and adopt the OSI Systems, Inc. Employee Stock Purchase
Plan.
3. To ratify the selection of Deloitte & Touche L.L.P as the Company's
independent accountants for the fiscal year ending June 30, 1999.
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on October 12, 1998,
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting and all adjourned meetings thereof.
By Order of the Board of Directors
/s/ Ajay Mehra
Ajay Mehra
Secretary
Dated: October 16, 1998
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE RETURN
ENVELOPE FURNISHED FOR THAT PURPOSE AS PROMPTLY AS POSSIBLE, WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. IF YOU LATER DESIRE TO REVOKE
YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE
ATTACHED PROXY STATEMENT.
<PAGE>
OSI SYSTEMS, INC.
12525 CHADRON AVENUE
HAWTHORNE, CALIFORNIA 90250
----------------
PROXY STATEMENT
----------------
GENERAL INFORMATION
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of OSI Systems, Inc. (the "Company") for
use at the Annual Meeting of Stockholders (the "Annual Meeting"), to be held
at 10:00 a.m., local time, on November 18, 1998, at the executive offices at
the Company, 12525 Chadron Avenue, Hawthorne, California 90250, and at any
adjournment thereof. When such proxy is properly executed and returned, the
shares it represents will be voted in accordance with any directions noted
thereon. Any stockholder giving a proxy has the power to revoke it at any time
before it is voted by written notice to the Secretary of the Company or by
issuance of a subsequent proxy. In addition, a stockholder attending the
Annual Meeting may revoke his or her proxy and vote in person if he or she
desires to do so, but attendance at the Annual Meeting will not of itself
revoke the proxy.
At the close of business on October 12, 1998, the record date for
determining stockholders entitled to notice of and to vote at the Annual
Meeting, the Company had issued and outstanding 9,694,165 shares of Common
Stock, without par value ("Common Stock"). Each share of Common Stock entitles
the holder of record thereof to one vote on any matter coming before the
Annual Meeting. In voting for directors, however, if any stockholder gives
notice at the Annual Meeting prior to voting of an intention to cumulate
votes, then each stockholder has the right to cumulate votes and to give any
one or more of the nominees whose names have been placed in nomination prior
to voting a number of votes equal to the number of directors to be elected
(i.e., five) multiplied by the number of shares which the stockholder is
entitled to vote. Unless the proxy holders are otherwise instructed,
stockholders, by means of the accompanying proxy, will grant the proxy holders
discretionary authority to cumulate votes. Only stockholders of record at the
close of business on October 12, 1998 are entitled to notice of and to vote at
the Annual Meeting or any adjournment thereof.
The enclosed Proxy, when properly signed, also confers discretionary
authority with respect to amendments or variations to the matters identified
in the Notice of Annual Meeting and with respect to other matters which may be
properly brought before the Annual Meeting. At the time of printing this Proxy
Statement, management of the Company was not aware of any other matters to be
presented for action at the Annual Meeting. If, however, other matters which
are not now known to management should properly come before the Annual
Meeting, the proxies hereby solicited will be exercised on such matters in
accordance with the best judgment of the proxyholders.
Shares represented by executed and unrevoked proxies will be voted in
accordance with the instructions contained therein or in the absence of such
instructions, in accordance with the recommendations of the Board of
Directors. Neither abstentions nor broker non-votes will be counted for the
purposes of determining whether any of the proposals has been approved by the
stockholders of the Company, although they will be counted for purposes of
determining the presence of a quorum.
The election of directors requires a plurality of the votes cast by the
holders of the Company's Common Stock. A "plurality" means that the
individuals who receive the largest number of affirmative votes cast are
elected as directors up to the maximum number of directors to be chosen at the
Annual Meeting. The approval and adoption of the Company's Employee Stock
Purchase Plan requires the affirmative vote of a majority of the votes cast on
such proposal, provided that the votes cast on such proposal represent over
50% in interest of the Common Stock entitled to vote on such proposal.
<PAGE>
The Company will pay the expenses of soliciting proxies for the Annual
Meeting, including the cost of preparing, assembling and mailing the proxy
solicitation materials. Proxies may be solicited personally, by mail, by telex
or by telephone, by directors, officers and regular employees of the Company
who will not be additionally compensated therefor. It is anticipated that this
Proxy Statement and accompanying Proxy will be mailed on or about October 16,
1998 to all stockholders entitled to vote at the Annual Meeting.
The matters to be considered and acted upon at the Annual Meeting are
referred to in the preceding notice and are more fully discussed below.
ELECTION OF DIRECTORS
(ITEM I OF THE PROXY CARD)
The Company has a Board of Directors consisting of five members. At each
annual meeting of stockholders, directors are elected for a term of one year
to succeed those directors whose terms expire on the annual meeting dates.
Management's nominees for election as directors at the Annual Meeting are
Deepak Chopra, Ajay Mehra, Steven C. Good, Meyer Luskin and Madan G. Syal. The
enclosed Proxy will be voted in favor of these individuals unless other
instructions are given. If elected, the nominees will serve as directors until
the Company's Annual Meeting of Stockholders in 1999, and until their
successors are elected and qualified. If any nominee declines to serve or
becomes unavailable for any reason, or if a vacancy occurs before the election
(although management knows of no reason to anticipate that this will occur),
the proxies may be voted for such substitute nominees as management may
designate.
If a quorum is present and voting, the five nominees for directors receiving
the highest number of votes will be elected as directors. Abstentions and
shares held by brokers that are present, but not voted because the brokers
were prohibited from exercising discretionary authority, i.e., broker non-
votes, will be counted as present for purposes of determining if a quorum is
present.
The table below sets forth for the current directors, including the nominees
to be elected at this meeting, certain information with respect to age and
background.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- --------
<C> <C> <S> <C>
Deepak Chopra.................. 46 Chairman of the Board, Chief 1987
Executive Officer and
President
Ajay Mehra..................... 36 Vice President, Chief 1996
Financial Officer, Secretary
and Director
Steven C. Good(1).............. 56 Director 1987
Meyer Luskin(1)................ 72 Director 1990
Madan G. Syal(2)............... 72 Director 1987
</TABLE>
- --------
(1) Member of Audit Committee and Compensation Committee
(2) Member of Audit Committee
2
<PAGE>
Deepak Chopra is the founder of the Company and has served as President,
Chief Executive Officer and a Director since the Company's inception in May
1987. He has served as the Company's Chairman of the Board since February
1992. Mr. Chopra also serves as the President and Chief Executive Officer of
the Company's major subsidiaries, including UDT Sensors, Inc., a California
corporation ("UDT Sensors"), Rapiscan Security Products (U.S.A.), Inc., a
California corporation ("Rapiscan U.S.A."), Rapiscan Security Products Limited
("Rapiscan U.K."), Opto Sensors (Singapore) Pte Ltd. ("OSI Singapore"), Opto
Sensors (Malaysia) Sdn. Bhd. ("OSI Malaysia") and Ferson Optics, Inc., a
California corporation ("Ferson Optics"). From 1976 to 1979 and from 1980 to
1987, Mr. Chopra held various positions with ILC Technology, Inc. ("ILC"), a
publicly-held manufacturer of lighting products, including serving as Chairman
of the Board, Chief Executive Officer, President and Chief Operating Officer
of its United Detector Technology division. In 1990, the Company acquired
certain assets of ILC's United Detector Technology division. Mr. Chopra has
held various positions with Intel Corporation, TRW Semiconductors and RCA
Semiconductors. Mr. Chopra holds a Bachelor of Science degree in Electronics
and a Master of Science degree in Semiconductor Electronics.
Ajay Mehra joined the Company as Controller in 1989, has served as Vice
President and Chief Financial Officer since November 1992, and became
Secretary and a Director in March 1996. Mr. Mehra also serves as Vice
President and Chief Financial Officer of the Company's major subsidiaries,
including UDT Sensors, Rapiscan U.S.A., Rapiscan U.K., OSI Singapore, OSI
Malaysia and Ferson Optics. Prior to joining the Company, Mr. Mehra held
various financial positions with Thermador/Waste King, a household appliance
company, Presto Food Products, Inc. and United Detector Technology. Mr. Mehra
holds a Bachelor of Arts degree from the School of Business of the University
of Massachusetts, Amherst, and a Master of Business Administration degree from
Pepperdine University.
Steven C. Good has served as a Director of the Company since September 1987.
He is a Senior Partner in the accounting firm of Good Swartz & Berns, which he
founded in 1974, and has been active in consulting and advisory services for
businesses in various sectors including the manufacturing, garment, medical
services and real estate development industries. Mr. Good is the founder and
has served as Chairman of California United Bancorp, and was elected in 1997
as a Director of Arden Realty Group, Inc., a publicly-held Real Estate
Investment Trust listed on the New York Stock Exchange. Mr. Good holds a
Bachelor of Science degree in Business Administration from the University of
California, Los Angeles.
Meyer Luskin has served as a Director of the Company since February 1990.
Since 1961, Mr. Luskin has served as the President, Chief Executive Officer
and Chairman of the Board of Scope Industries, a publicly-held company listed
on the American Stock Exchange, which is engaged in the business of recycling
and processing food waste products into animal food. Mr. Luskin has also
served as a Director of Scope Industries since 1958 and currently serves as a
Director of Stamet, Inc., an industrial solid pump manufacturer, and
Chromagen, Inc., a biotechnology company. Mr. Luskin holds a Bachelor of Arts
degree from the University of California, Los Angeles, and a Master of
Business Administration degree from Stanford University.
Madan G. Syal has served as a Director of the Company since the Company's
inception in May 1987. From May 1987 until February 1992, he served as
Secretary of the Company. Mr. Syal is the sole proprietor of Pro Printers, a
printing service business he founded in October 1984. Prior to 1984, Mr. Syal
held various positions with Shell Oil Company, Exxon Corporation, Burmah Oil
Company, C.F. Braun and Bechtel Group, Incorporated. Mr. Syal holds a Bachelor
of Science degree from the American College in Lahore (now Pakistan) and a
B.S.E. in Electrical and Mechanical Engineering from London University.
3
<PAGE>
Executive Officers
Andreas F. Kotowski has served as the President of U.S. Operations, General
Manager and a Director of the Company's subsidiary, Rapiscan U.S.A., since
January 1993. As General Manager of Rapiscan U.S.A., Mr. Kotowski is also
responsible for the operations of Rapiscan U.K., the subsidiary of Rapiscan
U.S.A. From September 1989 to January 1993, Mr. Kotowski was self-employed as
an Engineering Consultant, providing technical and management consulting
services to businesses in the explosive detection and medical imaging
industries. In 1992, Mr. Kotowski was a director of Dextra Medical, Inc., a
company that filed for bankruptcy in July of that year. From 1979 to 1989, Mr.
Kotowski held various positions with EG&G Astrophysics, including Vice
President of Engineering and Chief Engineer, in which he was responsible for
product planning, design, development and management. Prior to 1979, he worked
as an Engineer at National Semiconductor Corporation and the Jet Propulsion
Laboratory. Mr. Kotowski holds a Bachelor of Science degree in Electrical
Engineering and a Bachelor of Science degree in Physics from California State
Polytechnic University, Pomona, and a Master of Science degree in Electrical
Engineering from Stanford University.
Manoocher Mansouri-Aliabadi served as Vice President of Corporate Marketing
for the Company's UDT Sensors subsidiary from March 1994 thru June 1998 and
since July 1998 he has served as Vice President of New Product Development.
From March 1992 to November 1993, Mr. Mansouri served as Director of Sales and
Marketing for UDT Sensors, and from 1990 to 1992 he was a Division Director of
the Aerospace and Defense Division of UDT Sensors. Mr. Mansouri joined United
Detector Technology, the predecessor of UDT Sensors, in 1982 as an Engineer.
Mr. Mansouri holds a Bachelor of Science degree in Electrical Engineering from
the University of California, Los Angeles.
Anthony S. Crane has served as Managing Director of Rapiscan U.K., a
subsidiary of the Company, since March 1996. From March 1995 to March 1996, he
served as Sales and Marketing Director for Rapiscan U.K., and from February
1993 to March 1995, he served as Sales Director--Middle East for Rapiscan U.K.
From November 1980 to January 1993, Mr. Crane held various positions at
Rapiscan U.K. before it was acquired by the Company, including Exports
Business Manager, Sales Manager and Service Engineer. From May 1974 to
November 1980, Mr. Crane served as Production Coordinator and Electrical and
Electronic Inspector for Redifon Flight Simulation, where he was responsible
for production and customer relations.
Thomas K. Hickman has served as Managing Director of OSI Singapore and OSI
Malaysia, subsidiaries of the Company, since July 1995, and as the Managing
Director of Rapiscan Consortium (M) Sdn. Bhd. since its formation in October
1996. From July 1993 to July 1995, Mr. Hickman served as Vice President of
Operations and Director of Operations for Rapiscan U.S.A. and Rapiscan U.K.,
respectively. From November 1992 to July 1993, Mr. Hickman served as Director
of Materials for UDT Sensors and, from July through November 1992, provided
service as an independent consultant to UDT Sensors. From 1985 through 1992,
Mr. Hickman held various positions at Mouse Systems Corporation, a
manufacturer of computer optical mouse systems, including that of Director of
OEM Operations, Purchasing Manager and Representative Director of a joint
venture. Prior to 1985, Mr. Hickman was the Director of Materials for Measurex
Corporation, the Representative Director for Hitachi-Singer Corp. and a
Product Line Manager for Singer Business Machines. Mr. Hickman holds a
Bachelor of Arts degree from Stetson University and a Master of Business
Administration degree from the University of San Francisco.
There are no arrangements or understandings known to the Company between any
of the directors or nominees for director of the Company and any other person
pursuant to which any such person was or is to be elected a director.
4
<PAGE>
Ajay Mehra and Madan G. Syal are the first cousin and father-in-law,
respectively, of Deepak Chopra. Other than these relationships, there are no
family relationships among the directors and executive officers of the
Company.
THE BOARD RECOMMENDS A VOTE FOR DEEPAK CHOPRA, AJAY MEHRA, STEVEN C. GOOD,
MEYER LUSKIN AND MADAN G. SYAL, AS DIRECTORS.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
There were six meetings of the Board of Directors and the Board of Directors
took action by unanimous written consent without a meeting once during the
fiscal year ended June 30, 1998. The Board of Directors has established an
Audit Committee and a Compensation Committee. The members of each committee
are nominated by the majority vote of the Board of Directors. There is no
nominating committee.
Audit Committee
The Audit Committee makes recommendations for selection of the Company's
independent public accountants, reviews with the independent public
accountants the plans and results of the audit engagement, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range of
audit and any non-audit fees, and reviews the financial statements of the
Company and the adequacy of the Company's internal accounting controls and
financial management practices. The Audit Committee consists of Messrs. Good,
Luskin and Syal. There were two meetings of the Audit Committee during the
fiscal year ended June 30, 1998.
Compensation Committee
The Compensation Committee is responsible for determining compensation for
the Company's executive officers, reviewing and approving executive
compensation policies and practices, and providing advice and input to the
Board of Directors in the administration of the Company's stock option plans.
The Compensation Committee presently consists of Messrs. Good and Luskin. Mr.
Syal served on the Compensation Committee until October 15, 1997. There was
one meeting of the Compensation Committee during the fiscal year ended June
30, 1998. See "Report of Compensation Committee on Executive Compensation."
DIRECTOR COMPENSATION
For the fiscal year ended June 30, 1999, each non-employee Director will
receive a fee of $7,500 per year plus $1,500 for each Board or Committee
meeting attended. During the fiscal year ended June 30, 1998, each non-
employee Director received a fee of $1,250 per Board meeting attended and an
additional $1,250 per committee meeting attended if such committee meeting was
held on a day different from that of the Board meeting. During the fiscal year
ended June 30, 1998, each non-employee Director, Messrs. Good, Luskin and
Syal, received, as additional director compensation, options to purchase 5,000
shares of Common Stock at an exercise price of 110% of the fair market value
of the Common Stock on the date of grant, which was June 23, 1998. The
Directors are reimbursed for expenses incurred in connection with the
performance of their services as Directors.
5
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1998, all of the outside Directors,
Steven C. Good, Meyer Luskin and Madan G. Syal, served on the Compensation
Committee, although Mr. Syal resigned from the Compensation Committee on
October 15, 1997. Certain transactions between the Company and the members of
the Compensation Committee include the following. Mr. Good is a senior partner
of Good Swartz & Berns, an accounting firm that provided services to the
Company. Mr. Syal owns Pro Printers, a printing service company that provides
printing services to the Company. Mr. Syal is the father-in-law of Deepak
Chopra, Chairman of the Board, Chief Executive Officer and the President of
the Company. See "Certain Relationships and Related Transactions."
The Company believes that each of the foregoing transactions was on terms at
least as favorable to the Company as those that could have been obtained from
nonaffiliated third parties. The Company currently intends that any future
transactions with affiliates of the Company will be on terms at least as
favorable to the Company as those that can be obtained from nonaffiliated
third parties.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth the compensation for the Chief Executive
Officer and each of the four most highly compensated executive officers whose
individual remuneration exceeded $100,000 for the fiscal year ended June 30,
1998 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
--------------- ------------
SECURITIES
UNDERLYING ALL OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#)(2) ($)(3)
--------------------------- ---- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Deepak Chopra(1)................ 1998 450,000 158,600 0 222,750
Chief Executive Officer 1997 370,843 175,000 137,500 --
Ajay Mehra...................... 1998 200,000 65,300 0 178,200
Chief Financial Officer 1997 172,216 58,040 73,750 --
Andreas F. Kotowski............. 1998 140,000 30,000 5,000 --
President of U.S. Operation,
Rapiscan U.S.A. 1997 124,452 10,000 57,029 --
Manoocher Mansouri-Aliabadi..... 1998 120,000 10,000 2,500 --
Vice President--Corporate
Marketing, UDT Sensors 1997 110,019 28,000 15,000 --
Thomas K. Hickman............... 1998 124,936 50,000 2,500 --
Managing Director, OSI
Malaysia and OSI Singapore 1997 124,220 12,500 10,125 --
</TABLE>
- --------
(1) The Company paid aggregate insurance premiums of approximately $38,000 and
$38,000 for three universal life insurance policies of Mr. Chopra in 1998
and 1997, respectively. Mr. Chopra or his estate is obligated to repay to
the Company all amounts paid by it on behalf of Mr. Chopra upon the death
or termination of employment of Mr. Chopra. The value of such benefit is
not susceptible to precise determination.
(2) For additional information see "Option Grants."
(3) Consists of gain on exercise of non-qualified stock options.
6
<PAGE>
The Company has entered into an employment agreement with Deepak Chopra,
with a term of five years commencing on April 1, 1997, pursuant to which he
serves as Chairman of the Board, Chief Executive Officer and President of the
Company. The employment agreement provides for a base salary of $450,000 per
year, with annual raises to be determined by the Compensation Committee. The
Compensation Committee increased Mr. Chopra's annual base salary to $500,000
effective April 1, 1998. Pursuant to the employment agreement, Mr. Chopra is
also entitled to receive at least one-third of the amount of the aggregate
bonus pool established by the Company for its officers and employees, which
amount he received for fiscal 1998. Mr. Chopra is eligible to participate in
certain incentive compensation and other employee benefit plans established by
the Company from time to time. Mr. Chopra's employment agreement contains
confidentiality provisions and provides that he shall assign and the Company
shall be entitled to any inventions or other proprietary rights developed by
him under certain circumstances during his employment.
The Company has also entered into a three-year employment agreement with
Ajay Mehra and a two-year employment agreement with Manoocher Mansouri-
Aliabadi, each of which became effective on April 1, 1997. The employment
agreements provide for base salaries of $200,000 and $120,000 per year, for
Messrs. Mehra and Mansouri, respectively, with annual raises to be determined
by management. The Compensation Committee increased Mr. Mehra's annual base
salary to $230,000 effective April 1, 1998 and management increased
Mr. Mansouri's annual base salary to $130,000 effective April 13, 1998.
Pursuant to these employment agreements, Messrs. Mehra and Mansouri are also
eligible to receive discretionary bonus payments from the bonus pool
established by the Company for its officers and employees and to participate
in incentive compensation and other employee benefit plans established by the
Company from time to time. Each of the employment agreements contains
confidentiality provisions and provides that the employee shall assign and the
Company shall be entitled to any inventions or other proprietary rights
developed by the employee under certain circumstances during his employment.
Andreas F. Kotowski is currently employed by the Company pursuant to an
employment agreement that is terminable by either party thereto at any time
for any reason. Mr. Kotowski's current annual salary is $165,000, which was
increased from $140,000 effective April 16, 1998. Pursuant to an incentive
compensation agreement entered into in December 1996 by the Company and Mr.
Kotowski, he is entitled to receive as additional incentive compensation, 10%
of the consolidated pre-tax earnings of Rapiscan U.S.A. and Rapiscan U.K. in
excess of certain pre-determined amounts. Such incentive compensation may not
exceed $150,000 for any fiscal year and is based on earnings of Rapiscan
U.S.A. and Rapiscan U.K. for the 1997, 1998 and 1999 fiscal years. Mr.
Kotowski was not entitled to receive such additional incentive compensation
for the 1998 fiscal year.
Thomas K. Hickman is currently employed by the Company pursuant to an
employment agreement that may be terminated by either the Company or by Mr.
Hickman upon six months prior notice. Under the employment agreement, Mr.
Hickman's annual salary is $125,000. Effective July 1, 1998, his salary was
increased to $137,500. In addition to the salary, the Company has agreed to
pay certain expenses related to Mr. Hickman's service in Singapore. Mr.
Hickman's employment agreement contains confidentiality provisions and
provides that he shall assign and the Company shall be entitled to any
inventions or other proprietary rights developed by him under certain
circumstances during his employment.
Management of the Company allocates bonuses to officers and employees of the
Company under a bonus plan that has been in effect since the Company's
inception. The amount of bonus for each officer or employee is determined by
comparing the profits of the subsidiary or division in which such person
performed services against the budget profit goals for such subsidiary or
division as determined before the start of the fiscal year. Bonuses were
distributed to approximately 115 officers and employees in July and September,
1998, based on their performances during the fiscal year ended June 30, 1998.
7
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 23, 1997, the Board of Directors authorized the Company to loan
to Deepak Chopra and Ajay Mehra the sum of $90,000 and $70,000 respectively,
at an interest rate of six percent per annum, to be repaid within 48 months of
such date.
The Company, Mr. Chopra and Mr. Mehra, each currently owns a 36.0%, 10.5%
and 4.5% interest, respectively, in ECIL-Rapiscan Security Products Limited
("ECIL Rapiscan"). The remaining 49.0% interest in ECIL Rapiscan is owned by
Electronics Corporation of India Limited ("ECIL"), an unaffiliated Indian
company. The Company sells security and inspection kits to ECIL at a price no
less favorable to the Company than the price the Company charges unaffiliated
third parties for such products. To date, the Company's portion of the
earnings of ECIL Rapiscan have been insignificant.
From time to time the Company contracts for automobile rental and messenger
services from a business that is owned by Deepak Chopra and his wife. The
Company paid the business approximately $99,000 for such services during
fiscal 1998. The Company also contracts for printing services from a business
owned by Madan G. Syal, a Director of the Company. The Company paid the
business approximately $186,000 for such services during fiscal 1998.
The Company believes that each of the foregoing transactions was on terms at
least as favorable to the Company as those that could have been obtained from
nonaffiliated third parties. The Company currently intends that any future
transactions with affiliates of the Company will be on terms at least as
favorable to the Company as those that can be obtained from nonaffiliated
third parties.
OPTION GRANTS
The following table sets forth certain information concerning grants of
options to the Named Executive Officers during the year ended June 30, 1998:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE OF
ASSUMED
ANNUAL RATES
OF STOCK
% OF TOTAL PRICE
NUMBER OF OPTIONS APPRECIATION
SECURITIES GRANTED TO FOR OPTION
UNDERLYING EMPLOYEES EXERCISE TERM(1)
OPTIONS IN FISCAL PRICE EXPIRATION -------------
NAME GRANTED(#) YEAR ($/SHARE) DATE 5%($) 10%($)
- ---- ---------- ---------- --------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Deepak Chopra........... 0 -- -- -- -- --
Ajay Mehra.............. 0 -- -- -- -- --
Andreas F. Kotowski..... 5,000 3.0 10.00 6/23/03 13,814 30,526
Manoocher Mansouri-
Aliabadi............... 2,500 1.5 10.00 6/23/03 6,907 15,263
Thomas K. Hickman....... 2,500 1.5 10.00 6/23/03 6,907 15,263
</TABLE>
- --------
(1) Sets forth potential option gains based on assumed annualized rates of
stock price appreciation from the exercise price at the date of grant of
5% and 10% (compounded annually) over the full term of the grant with
appreciation determined as of the expiration date. The 5% and 10% assumed
rates of appreciation are mandated by the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of future Common Stock prices.
8
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information regarding option
exercises by the Named Executive Officers during the fiscal year 1998 and held
by them on June 30, 1998:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END(#) FISCAL YEAR END($)(1)
ACQUIRED ON VALUE ----------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- -------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Deepak Chopra........... 37,500 250,000 25,000 75,000 0 0
Ajay Mehra.............. 75,000 552,000 10,938 32,812 0 0
Andreas F. Kotowski..... 0 -- 19,882 42,147 53,750 0
Manoocher Mansouri-
Aliabadi............... 3,750 30,500 12,375 8,125 77,750 0
Thomas K. Hickman....... 0 -- 21,844 11,031 153,250 28,125
</TABLE>
- --------
(1) Amounts are shown as the positive spread between the exercise price and
fair market value (based on the fair market price at fiscal year end of
$10.00 per share).
STOCK OPTION PLANS
1987 Incentive Stock Option Plan. In May 1987, the Board of Directors
adopted the Incentive Stock Option Plan (the "1987 Plan"). The 1987 Plan
provides for the grant of options to directors, officers and other key
employees of the Company to purchase up to an aggregate of 1,050,000 shares of
Common Stock. The purpose of the 1987 Plan is to provide participants with
incentives which will encourage them to acquire a proprietary interest in, and
continue to provide services to, the Company. The 1987 Plan is administered by
the Board of Directors, which has discretion to select optionees and to
establish the terms and conditions of each option, subject to the provisions
of the 1987 Plan. Pursuant to the 1987 Plan, the Company has from time to time
granted its directors, officers and employees options to purchase shares of
the Company's Common Stock at exercise prices determined by the Board of
Directors. The stock options generally expire either on the fifth or tenth
anniversary of the date of grant of the option. All stock options are
nontransferable by the grantee and may be exercised only by the optionee
during his service to the Company as a director, officer or employee. The
aggregate number of options issuable under the 1987 Plan, number of options
outstanding and the exercise price thereof are subject to adjustment in the
case of certain transactions such as mergers, recapitalizations, stock splits
or stock dividends. As of June 30, 1998, 597,074 shares had been issued upon
the exercise of stock options under the 1987 Plan, stock options to purchase
an aggregate of 386,176 shares were outstanding under the 1987 Plan at
exercise prices ranging from $2.00 to $11.10 per share, and 66,750 shares
remained available for grant. As of such date, stock options to purchase
205,988 shares of Common Stock were exercisable. No stock options may be
granted under the 1987 Plan after December 31, 1998.
On June 23, 1998, the Board of Directors of the Company granted options to
purchase an aggregate of 153,000 shares of Common Stock available for issuance
under the 1987 Plan to certain officers and employees of the Company. These
options are exercisable at a price equal to the fair market value of the
Common Stock on June 23, 1998. The options generally will be subject to
vesting and will become exercisable over a period of three years from the date
of grant, subject to the optionee's continuing employment with the Company.
Also on June 23, 1998, the Board of Directors of the Company granted options
to purchase 5,000 shares of Common Stock to each of the Company's non-employee
Directors, Messrs. Good, Luskin and Syal, at an exercise price of 110% of the
fair market value of the Common Stock on such date.
9
<PAGE>
1997 Stock Option Plan. In May 1997, the Board of Directors adopted the
Company's 1997 Stock Option Plan (the "1997 Plan"). The 1997 Plan, which was
approved by the Company's stockholders in June 1997, provides for the grant of
options to directors, officers, other employees and consultants of the Company
to purchase up to an aggregate of 850,000 shares of Common Stock. No eligible
person may be granted options during any 12-month period covering more than
425,000 shares of Common Stock. The purpose of the 1997 Plan is to provide
participants with incentives which will encourage them to acquire a
proprietary interest in, and continue to provide services to, the Company. The
1997 Plan is administered by the Board of Directors, or a committee of the
Board, which has discretion to select optionees and to establish the terms and
conditions of each option, subject to the provisions of the 1997 Plan. Options
granted under the 1997 Plan may be "incentive stock options" as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
nonqualified options.
The exercise price of incentive stock options may not be less than 100% of
the fair market value of Common Stock as of the date of grant (110% of the
fair market value if the grant is to an employee who owns more than 10% of the
total combined voting power of all classes of capital stock of the Company).
The Code currently limits to $100,000 the aggregate value of Common Stock that
may be acquired in any one year pursuant to incentive stock options under the
1997 Plan or any other option plan adopted by the Company. Nonqualified
options may be granted under the 1997 Plan at an exercise price of not less
than 85% of the fair market value of the Common Stock on the date of grant.
Nonqualified options may be granted without regard to any restriction on the
amount of Common Stock that may be acquired pursuant to such options in any
one year. Options may not be exercised more than ten years after the date of
grant (five years after the date of grant if the grant is an incentive stock
option to an employee who owns more than 10% of the total combined voting
power of all classes of capital stock of the Company). Options granted under
the 1997 Plan generally are nontransferable, but transfers may be permitted
under certain circumstances in the discretion of the administrator. Shares
subject to options that expire unexercised under the 1997 Plan will once again
become available for future grant under the 1997 Plan. The number of options
outstanding and the exercise price thereof are subject to adjustment in the
case of certain transactions such as mergers, recapitalizations, stock splits
or stock dividends. As of June 30, 1998, there were no exercises of stock
options under the 1997 Plan, stock options to purchase an aggregate of 434,486
shares were outstanding under the 1997 Plan at exercise prices ranging from
$11.50 to $13.00 per share, and 415,514 shares remained available for grant.
As of such date, stock options to purchase 108,622 shares of Common Stock were
exercisable. The 1997 Plan is effective for ten years, unless sooner
terminated or suspended.
In general, upon termination of employment of an optionee, all options
granted to such person which were not exercisable on the date of such
termination will immediately terminate, and any options that are exercisable
will terminate not more than three months (six months in the case of
termination by reason of death or disability) following termination of
employment.
To the extent nonqualified options are granted under the 1987 Plan and the
1997 Plan, the Company intends to issue such options with an exercise price of
not less than the market price of the Common Stock on the date of grant.
10
<PAGE>
EMPLOYEE BENEFIT PLAN, PENSION PLANS
In 1991, the Company established a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering all of its employees. Pursuant to
the 401(k) Plan, employees may elect to reduce their current compensation by
up to the annual limit prescribed by statute ($9,500 in 1997) and contribute
the amount of such reduction to the 401(k) Plan. The 401(k) Plan allows for
matching contributions to the 401(k) Plan by the Company, such matching and
the amount of such matching to be determined at the sole discretion of the
Board of Directors. To date, no such matching contributions have been made
with respect to the 401(k) Plan. The trustee under the 401(k) Plan, at the
direction of each participant, invests the assets of the 401(k) Plan in
numerous investment options. The 401(k) Plan is intended to qualify under
Section 401 of the Code so that contributions by employees to the 401(k) Plan,
and income earned on plan contributions, are not taxable until withdrawn, and
so that the contributions by employees will be deductible by the Company when
made.
Rapiscan U.K. and Advanced Micro Electronics AS, subsidiaries of the
Company, each has a pension plan in effect for certain of their employees. As
of the date hereof, approximately 50 employees are covered by these plans.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
This Compensation Committee Report discusses the components of the Company's
executive officer compensation policies and programs and describes the bases
upon which compensation is determined by the Compensation Committee with
respect to the executive officers of the Company, including the Named
Executive Officers.
The Compensation Committee reviews and approves salaries, benefits and other
compensation for executive officers and reviews bonus pool allocations for key
employees of the Company. The Compensation Committee is composed of two non-
employee directors.
Compensation Philosophy. The Compensation Committee endeavors to ensure that
the compensation programs for the executive officers of the Company and its
subsidiaries are effective in attracting and retaining key executives
responsible for the success of the Company and are administered with the long-
term interests of the Company and its stockholders in mind. The Compensation
Committee seeks to align total compensation for senior management with
corporate performance by linking directly executive compensation to individual
and team contributions, continuous improvements in corporate performance and
stockholder value.
The Compensation Committee takes into account various qualitative and
quantitative indicators of corporate and individual performance in determining
the level and composition of compensation for the executive officers. The
Compensation Committee considers such corporate performance measures as net
income, earnings per share and cash flow, and may vary its quantitative
measurements from employee to employee and from year to year. The Compensation
Committee also appreciates the importance of achievements that may be
difficult to quantify, and accordingly recognizes qualitative factors, such as
superior individual performance, new responsibilities or positions within the
Company, leadership ability and overall contributions to the Company.
In order to attract and retain highly qualified executives in the areas in
which the Company does business and in recognition of the overall
competitiveness of the market for highly qualified executive talent, the
Compensation Committee also evaluates the total compensation of the executive
officers in light of information regarding the compensation practices and
corporate financial performance of other companies in its industry.
11
<PAGE>
In implementing its compensation program for executive officers, the
Compensation Committee seeks to achieve a balance between compensation and the
Company's annual and long-term budgets and business objectives, encourage
executive performance in furtherance of stated Company goals, provide variable
compensation based on the performance of the Company, create a stake in the
executive officer's efforts by encouraging stock ownership in the Company, and
align executive remuneration with the interests of the Company's stockholders.
Compensation Program Components. The Compensation Committee regularly
reviews the Company's compensation program to ensure that pay levels and
incentive opportunities are competitive with the market and reflect the
performance of the Company. The particular elements of the compensation
program for executive officers consist of the following:
Base Salary. Base salaries for executive officers are established at levels
considered appropriate in light of the duties and scope of responsibilities of
each executive officer's position, and the experience the individual brings to
the position. Salaries are reviewed periodically and adjusted as warranted to
reflect sustained individual performance. Base salaries are kept within a
competitive range for each position, reflecting both job performance and
market forces.
Annual Bonus. Management of the Company allocates bonuses to officers and
key employees of the Company under a bonus plan that has been in effect since
the Company's inception. The amount of bonus for each officer is determined by
comparing the profits of the subsidiary or division in which such person
performed services against the budget profit goals for such subsidiary or
division as determined before the start of the fiscal year.
Long-Term Incentive Compensation. The Company's long-term incentive program
consists of periodic grants of stock options, which are made at the discretion
of the Board of Directors with the advice and input of the Compensation
Committee. Decisions made regarding the amount of the grant and other
discretionary aspects of the grant take into consideration Company
performance, individual performance and experience, competitive forces to
attract and retain senior management, and the nature and terms of grants made
in prior years.
Chief Executive Officer's Compensation. The Company has entered into an
employment agreement with Deepak Chopra, with a term of five years commencing
on April 1, 1997, pursuant to which he serves as Chairman of the Board, Chief
Executive Officer and President of the Company. The employment agreement
provides for a base salary of $450,000 per year, with annual raises to be
determined by the Compensation Committee. The Compensation Committee increased
Mr. Chopra's annual base salary to $500,000 effective April 1, 1998. Pursuant
to the employment agreement, Mr. Chopra is also entitled to receive at least
one-third of the amount of the aggregate bonus pool established by the Company
for its officers and employees, which amount he received for fiscal 1998. Mr.
Chopra is eligible to participate in certain incentive compensation and other
employee benefit plans established by the Company from time to time.
Summary. The Compensation Committee believes that the total compensation
program for executive officers of the Company is focused on increasing value
for the Company's stockholders, by attracting and retaining the best qualified
people as senior management and enhancing corporate performance. Furthermore,
the Compensation Committee believes that executive compensation levels of the
Company are competitive with the compensation programs provided by other
corporations with which the Company is competitive. The foregoing report has
been approved by all the members of the Compensation Committee.
COMPENSATION COMMITTEE
Steven C. Good
Meyer Luskin
12
<PAGE>
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return since the Company's Common Stock became publicly traded on October 2,
1997, with the Nasdaq Market Index and a peer group comprised of companies in
the optoelectronic and security products businesses with which the Company
generally competes. The peer group is comprised of the following companies:
Barringer Technologies, Inc. (Nasdaq Symbol: BARR); EG&G, Inc. (ASE Symbol:
EGG); InVision Technologies, Inc. (Nasdaq Symbol: INVN); Optek Technology, Inc.
(Nasdaq Symbol: OPTT); and Vivid Technologies, Inc. (Nasdaq Symbol: VVID). The
graph assumes that $100.00 was invested on October 2, 1997 in the Company's
Common Stock, at the closing price of $15.125 per share (on which date the
initial public offering price was $13.50 per share), and in each of the indexes
mentioned above, and that all dividends were reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
OSI SYSTEMS, INC., NASDAQ MARKET INDEX AND PEER GROUP INDEX
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
10/02/97 10/31/97 11/28/97 12/31/97 1/30/98 2/27/98 3/31/98 4/30/98 5/29/98 6/30/98
-------- -------- -------- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OSI Systems, Inc........ 100.00 85.95 85.95 80.99 99.17 100.83 76.86 76.03 66.12 66.12
Nasdaq Market Index..... 100.00 94.98 95.38 93.80 96.74 105.98 109.05 111.46 105.72 112.82
Peer Group.............. 100.00 95.06 91.32 96.94 108.81 120.00 125.63 127.93 129.13 122.32
</TABLE>
13
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the amount of shares of the Company
beneficially owned as of June 30, 1998 by each director of the Company, each
Named Executive Officer, each person known by the Company to own beneficially
more than 5% of the outstanding shares of the Company's outstanding Common
Stock, and all directors and executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
BENEFICIAL CLASS OF
OWNERSHIP OF COMMON
NAME OF BENEFICIAL OWNER COMMON STOCK(1) STOCK
------------------------ --------------- ----------
<S> <C> <C>
Deepak Chopra(2)(3)............................. 1,399,319 14.4%
Ajay Mehra(2)(4)................................ 176,902 1.8%
Andreas F. Kotowski(2)(5)....................... 124,671 1.3%
Manoocher Mansouri-Aliabadi(2)(6)............... 63,019 *
Thomas K. Hickman(2)(7)......................... 30,581 *
Steven C. Good(2)(8)............................ 6,875 *
Madan G. Syal(2)(9)............................. 203,557 2.1%
Meyer Luskin(10)................................ 19,242 *
Scope Industries(11)(12)........................ 1,647,903 17.0%
Sally F. Chamberlain(13)........................ 1,062,767 11.0%
All directors and executive officers as a group
(9 persons).................................... 2,038,349 20.8%
</TABLE>
- --------
* Less than 1.0%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options currently exercisable, or exercisable within 60 days
of June 30, 1998, are deemed outstanding for computing the percentage of
the person holding such options but are not deemed outstanding for
computing the percentage of any other person. Except as indicated by
footnote and subject to community property laws where applicable, the
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by
them.
(2) The address of such stockholder is c/o OSI Systems, Inc., 12525 Chadron
Avenue, Hawthorne, California 90250.
(3) Includes 254,951 shares and 254,951 shares owned by The Deepika Chopra
Trust UDT dated July 17, 1987 and The Chandini Chopra Trust UDT dated
July 17, 1987, respectively. Deepak Chopra is the co-trustee of both
irrevocable trusts. Also includes 10,179 shares and 10,179 shares owned
by Deepika Chopra and Chandini Chopra, respectively who are the daughters
of Mr. Chopra. Of the balance of such shares, 832,434 shares are held
jointly by Mr. Chopra and his wife, Nandini Chopra, and 11,625 shares are
held individually by Mr. Chopra. Includes 25,000 shares issuable pursuant
to options exercisable within 60 days of June 30, 1998. Mr. Chopra is the
Chairman of the Board, Chief Executive Officer and President of the
Company.
(4) Includes 10,938 shares issuable pursuant to options exercisable within 60
days of June 30, 1998. Mr. Mehra is the Vice President, Chief Financial
Officer, Secretary and a Director of the Company.
(5) Includes 19,882 shares issuable pursuant to options exercisable within 60
days of June 30, 1998. Mr. Kotowski is the President of U.S. Operations
of Rapiscan U.S.A.
(6) Includes 12,375 shares issuable pursuant to options exercisable within 60
days of June 30, 1998. During fiscal 1998, Mr. Mansouri was Vice
President-Corporate Marketing of UDT Sensors.
14
<PAGE>
(7) Includes 21,844 shares issuable pursuant to options exercisable within 60
days of June 30, 1998. Mr. Hickman is the Managing Director of OSI
Singapore and OSI Malaysia.
(8) Includes 6,875 shares issuable pursuant to options exercisable within 60
days of June 30, 1998. Does not include 50,528 shares beneficially owned
by the Good Swartz & Berns Pension & Profit Sharing Plan, of which Mr.
Good is a co-trustee and in which he participates. Mr. Good is a Director
of the Company. The address of Mr. Good is 11755 Wilshire Boulevard, 17th
Floor, Los Angeles, California 90025.
(9) Includes 6,875 shares issuable pursuant to options exercisable within 60
days of June 30, 1998. Includes 196,682 shares held by Mr. Syal and his
wife, Mohini Syal as trustees for the Syal Trust. Mr. Syal is a Director
of the Company.
(10) Includes 6,742 shares held by the Meyer and Doreen Luskin Family Trust.
Includes 12,500 shares issuable pursuant to options exercisable within 60
days of June 30, 1998. Does not include 1,647,903 shares beneficially
owned by Scope Industries. Mr. Luskin is the President, Chief Executive
Officer, Chairman of the Board and a principal stockholder of Scope
Industries. The address of Mr. Luskin is c/o Scope Industries, 233
Wilshire Boulevard, Suite 310, Santa Monica, California 90401.
(11) The address of Scope Industries is 233 Wilshire Boulevard, Suite 310,
Santa Monica, California 90401.
(12) Does not include shares beneficially owned by Meyer Luskin. Mr. Luskin is
the President, Chief Executive Officer, Chairman of the Board and a
principal stockholder of Scope Industries.
(13) Based solely upon a review of filings made by such stockholder pursuant
to Section 16(a) of the Exchange Act. Such shares are held by Sally F.
Chamberlain as Trustee of the Edward P. Fleischer and Sally F. Fleischer
Family Trust dated June 3, 1991. The address of Mrs. Chamberlain is c/o
Hecht, Solberg, Robinson & Goldberg, LLP, 600 West Broadway, 8th Floor,
San Diego, CA 92101.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors and persons who beneficially own more than 10% of a registered
class of the Company's Common Stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission.
Such officers, directors and stockholders are required by Securities and
Exchange Commission regulations to furnish the Company with copies of all such
reports that they file. Based solely upon the Company's review of such forms
furnished to the Company during the fiscal year ended June 30, 1998, and
written representations from certain reporting persons, the Company believes
that all filing requirements applicable to the Company's executive officers,
directors and more than 10% stockholders have been complied with, except that
each of Messrs. Chopra, Mehra, Luskin, Crane, Hickman and Kotowski made one
late filing; each of Messrs. Syal and Aliabadi, Mrs. Chamberlain and Scope
Industries made two late filings; and Mr. Good made three late filings.
EMPLOYEE STOCK PURCHASE PLAN
(ITEM 2 OF THE PROXY CARD)
The following summary is not intended to be complete and reference should be
made to the proposed Employee Stock Purchase Plan itself for a complete
understanding of its terms and provisions. A copy of the proposed Employee
Stock Purchase Plan is set forth as Exhibit "A" to this Proxy Statement.
On August 6, 1998, the Company's Board of Directors unanimously adopted the
Company's Employee Stock Purchase Plan (the "1998 Plan"), which provides
persons who have been regular employees of the Company or its U.S.
subsidiaries for at least six months, and who meet certain other criteria, the
opportunity to purchase through regular payroll deductions up to an aggregate
of 200,000 shares of Common Stock. The 1998 Plan is to be administered by the
Board of Directors, or a committee of the Board. The 1998 Plan is intended to
qualify as an "employee stock purchase plan" as defined in Section 423 of the
Code.
15
<PAGE>
To participate, eligible employees shall submit a form to the Company's
payroll office authorizing payroll deductions in an amount between 1% and 10%
of the employee's regular annual pay. At the end of each offering period,
initially set at six months duration, the aggregate amount deducted from each
participating employee's paycheck will be applied to the purchase of a whole
number of shares of Common Stock, with any sums remaining being returned to
the employee. No interest will accrue on payroll deductions. The purchase
price of the Common Stock shall be 85% of the lesser of the fair market value
of the Common Stock (as determined by the Board of Directors) on the first day
or the last day of the offering period. If the aggregate number of shares of
Common Stock which all participants elect to purchase during any offering
period is greater than the number of shares remaining available for issuance
under the 1998 Plan, the remaining shares will be allocated pro-rata among
participants. Notwithstanding any of the foregoing, no employee may purchase
Common Stock under the 1998 plan if (i) after any such purchase, the employee
would own 5% or more of the total combined voting power or value of all
classes of the Company's stock on a consolidated basis or (ii) the rights to
purchase Common Stock under the 1998 Plan and all other qualified employee
stock purchase plans of the Company or any of its subsidiaries granted to that
employee would exceed $25,000 per calendar year.
A participant may elect to withdraw from the 1998 Plan at any time up to the
last day of an offering period by filing a form to such effect. Upon
withdrawal, the amount contributed to the employee will be refunded in cash,
without interest. Any person withdrawing may not participate again in the 1998
Plan until the end of one complete offering period. Termination of a
participant's employment for any reason shall be treated as a withdrawal.
The Board of Directors believes that the proposed Stock Purchase Plan will
provide the Company with greater flexibility in the administration of its
employee benefits program and is appropriate in light of the growth of the
Company and the addition of new employees.
THE BOARD RECOMMENDS A VOTE FOR ADOPTION OF THE PROPOSED EMPLOYEE STOCK
PURCHASE PLAN.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
(ITEM 3 OF THE PROXY CARD)
The Board of Directors has selected Deloitte & Touche L.L.P. ("Deloitte &
Touche") as the Company's independent accountants for the fiscal year ending
June 30, 1999, and has further directed that management submit the selection
of independent accountants for ratification by the stockholders at the Annual
Meeting. Deloitte & Touche has no financial interest in the Company and
neither it nor any member or employee of the firm has had any connection with
the Company in the capacity of promoter, underwriter, voting trustee,
director, officer or employee. A representative of Deloitte & Touche is not
expected to be present at the Annual Meeting.
In the event the stockholders fail to ratify the selection of Deloitte &
Touche, the Audit Committee will reconsider whether or not to retain the firm.
Even if the selection is ratified, the Audit Committee and the Board of
Directors in their discretion may direct the appointment of a different
independent accounting firm at any time during the year if they determine that
such a change would be in the best interests of the Company and its
stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF RATIFICATION OF THE
SELECTION OF THE INDEPENDENT ACCOUNTANTS.
16
<PAGE>
OTHER BUSINESS
The Company does not know of any other business to be presented to the
Annual Meeting and does not intend to bring any other matters before such
meeting. If any other matters properly do come before the Annual Meeting,
however, the persons named in the accompanying Proxy are empowered, in the
absence of contrary instructions, to vote according to their best judgment.
STOCKHOLDER PROPOSALS
Any proposals of security holders which are intended to be presented at next
year's annual meeting must be received by the Company at its principal
executive offices on or before June 15, 1999, in order to be considered for
inclusion in the Company's proxy materials relating to that meeting.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission is available upon written request and
without charge to stockholders by writing to Ajay Mehra, Secretary, OSI
Systems, Inc., 12525 Chadron Avenue, Hawthorne, California 90250.
By Order of the Board of Directors
/s/ Ajay Mehra
Ajay Mehra
Secretary
Hawthorne, California
October 16, 1998
PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED REPLY ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
17
<PAGE>
EXHIBIT A
OSI SYSTEMS, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. Establishment of the Plan; Purpose. This Employee Stock Purchase Plan
(the "Plan") was established to provide Eligible Employees with an opportunity
through regular payroll deductions to purchase Common Stock of OSI Systems,
Inc., a California corporation, so that they may increase their proprietary
interest in OSI Systems, Inc. The Plan was adopted by the Board of Directors
of OSI Systems, Inc. on August 6, 1998. The Plan is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code
("qualified employee stock purchase plan").
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board of Directors" means the Committee if one has been appointed, or
the Board of Directors of OSI Systems, Inc. if no Committee has been
appointed.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the committee appointed by the Board of Directors of
OSI Systems, Inc. to administer the Plan in accordance with Section 3 below,
if one is appointed.
(d) "Company" means (i) OSI Systems, Inc., (ii) each of the existing
Subsidiaries, as defined in Section 425 of the Code, of OSI Systems, Inc. that
are incorporated in the United States, and (iii) any such other or future
Subsidiaries as the Board of Directors of OSI Systems, Inc. shall from time to
time designate. Until the Board of Directors of OSI System, Inc. determines
otherwise, the term "Company" shall not refer to or include any Subsidiary
incorporated outside of the United States.
(e) "Compensation" means the annual base rate of pay of a Participant as of
the first day of an Offering Period, determined in accordance with
nondiscriminatory rules adopted by the Board of Directors, including
commissions, but excluding bonuses, income with respect to stock options or
other stock purchases, moving expense reimbursements, shift differentials or
any pay for work outside the regular work schedule.
(f) "Eligible Employee" means any regular employee of the Company whose date
of hire was at least six (6) months prior to the commencement of an Offering
Period, who is customarily employed for at least 20 hours per week and more
than five (5) months in any calendar year.
(g) "Fair Market Value" of a share of Stock means the value of a share as
determined by the Board of Directors.
(h) "Offering Date" means the first day of each Offering Period.
(i) "Offering Period" means, in the absence of a specific determination to
the contrary by the Board of Directors or the Committee, the six (6) month
period beginning on January 1 and July 1 of each year, but in no event shall
an Offering Period exceed twenty-four (24) months.
(j) "Option" means the right of a Participant to purchase Stock during the
applicable Offering Period.
(k) "Participant" mean an Eligible Employee who elects to participate in the
Plan.
(l) "Plan Account" means the account established for each Participant
pursuant to the Plan.
(m) "Purchase Price" means the price at which Participants may purchase
Stock as determined pursuant to the Plan.
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(n) "Stock" means the Common Stock of OSI Systems, Inc.
(o) "Subsidiary" means a corporation a majority of whose voting shares are
owned by OSI Systems, Inc.
3. Administration. The Plan shall be administered by the Board of Directors
and/or by a duly appointed Committee consisting of not less than three
persons, at least one of which shall be a member of the Board of Directors,
and having such powers as shall be specified by the Board. The Board of
Directors may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee shall be filled by the Board of
Directors. The Committee shall select one of its members as Chairman, and
shall hold meetings at such times and places as it may determine. The
interpretation and construction by the Board of Directors or the Committee of
any provision of the Plan or of any right to purchase Stock shall be
conclusive and binding on all persons.
4. Number of Shares to be Offered. The aggregate number of shares reserved
for issuance under the Plan shall be 200,000 shares of Stock, subject to
adjustment as provided in Section 8 hereof. In the event that any Option
granted under the Plan expires or is terminated for any reason, such shares
allocable to the unexercised portion of such Option shall again be subject to
an Option under the Plan.
5. Eligibility and Participation.
(a) Initial Participation. An Eligible Employee shall become a Participant
on the Offering Date after satisfying the eligibility requirements by
delivering to the Company's payroll office an enrollment form authorizing
payroll deductions not less than ten (10) business days prior to such Offering
Date. An Eligible Employee who did not enroll in the Plan prior to the
Offering Date, or a person who becomes an Eligible Employee after an Offering
Date, may enroll in the Plan for the next Offering Period as of the beginning
of the next Offering Period by completing and filing an enrollment form prior
to the commencement date of such Offering Period.
(b) Continued Participation. A Participant shall automatically participate
in each successive Offering Period until such time as such Participant
withdraws from the Plan as set forth below. A Participant is not required to
file any additional enrollment forms for subsequent Offering Periods in order
to continue participation in the Plan.
(c) Payroll Deduction Rate. The Participant shall designate on the
enrollment form the percentage of Compensation which he or she elects to have
withheld for the purchase of Stock, which may be any whole percentage from 1%
to 10% of the Participant's Compensation. A Participant may reduce (but not
increase) the rate of payroll withholding during an Offering Period by filing
an amended enrollment form with the Committee at any time prior to the last
day of any Offering Period (for which such change is to be effective), but not
more than three (3) changes may be made in any Offering Period (or such other
number of changes as may be approved by the Board or the Committee). A
Participant may increase or decrease the rate of payroll deduction for any
subsequent Offering Period by filing with the Company a new authorization for
payroll deductions not less than ten (10) days prior to the Offering Date for
such subsequent Offering Period.
By enrolling in the Plan, a Participant shall be deemed to have elected to
purchase the maximum number of whole shares of Stock which can be purchased
with the amount of the Participant's Compensation which is withheld during the
Offering Period; provided, however, that with respect to any Offering Period
no Participant may purchase shares of Stock in excess of the amount permitted
under Section 9.
(d) Preconditions to Options. Any Options granted pursuant to the Plan shall
be subject to the Company obtaining all necessary governmental approvals
and/or qualifications of the sale and/or issuance of Options and/or Stock.
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(e) Purchase Price. The Purchase Price for, each share of Stock to be
purchased under the Plan shall be eighty-five percent (85%) of the Fair Market
Value of such share on either (i) the Offering Date or (ii) the last day of
each Offering Period, whichever is less.
(f) Contributions. The Purchase Price of the Stock shall be accumulated by
payroll deductions throughout the Offering Period, which shall be applied
automatically to purchase Stock at the end of each Offering Period. In the
absence of a contrary determination prior to the commencement of an Offering
Period, each Offering Period shall have a six-month duration. At the end of
each Offering Period, accrued payroll deductions will be automatically applied
to the purchase of Stock at the Purchase Price as hereinabove defined. Payroll
deductions shall commence on the first payday following the Offering Date and
shall continue to the end of the Offering Period unless sooner altered or
terminated as provided in the Plan.
(g) Effect of Leave of Absence. During a leave of absence approved by the
Company, a Participant may, for such period as the Committee shall deem
reasonable, continue contributions to the Plan by making cash payments to the
Company on his normal paydays in an amount equal to the difference between the
amount of his regular payroll deductions taken while such employee was
participating under the Plan and the amount of his payroll deductions taken
while on such leave of absence. Failure to pay any installment within ten (10)
days after the payday on which it is due shall be treated as a withdrawal from
the Plan.
(h) Purchase of Stock. The Company will maintain a Plan Account on its books
in the name of each Participant. On each payday the amount deducted from the
Participant's Compensation will be credited to the Participant's Plan Account.
No interest shall accrue on any such payroll deductions. As of the last day of
each Offering Period the amount then in the Participant's Plan Account will
be, divided by the Purchase Price and the amount in the Participant's Plan
Account shall be used to purchase the number of whole shares of Stock which
result. Stock certificates representing the number of shares of Stock so
purchased shall be issued and delivered to the Participant as soon as
reasonably practicable after the close of each Offering Period. Any amount
remaining in the Participant's Plan Account at the end of an Offering Period
after deducting the amount of the Purchase Price for the number of whole
Shares issued to the Participant shall be refunded to the Participant, without
interest.
(i) Withdrawal. A Participant may elect to withdraw from participation in
the Plan at any time up to the last day of an Offering Period by filing the
prescribed, form with the Committee. At the time of withdrawal the amount
credited to the Participant's Plan Account will be refunded in cash, without
interest. Upon withdrawal from the Plan, the accumulated payroll deductions
shall be returned to the withdrawn Participant and the withdrawn Participant's
interest in the Plan shall terminate. In the event a Participant voluntarily
elects to withdraw from the Plan, such Participant may not resume
participation in the Plan until after the expiration of one complete Offering
Period; re-enrollment shall be made in the same manner as set forth above for
initial participation in the Plan.
(j) Pro Rata Allocation. In the event that the aggregate number of shares
which all Participants elect to purchase during an Offering Period shall
exceed the number of shares remaining available for issuance under the Plan,
the number of shares to which each Participant shall become entitled shall be
determined by multiplying the number of shares available for issuance, by a
fraction, the numerator of which is the sum of the number of shares the
Participant has elected to purchase and the denominator of which is the sum of
the number of shares which all Participants have elected to purchase.
6. Effect of Termination of Employment. Termination of a Participant's
employment for any reason, including retirement or death, or the failure of a
Participant to remain an Eligible Employee shall be treated as a withdrawal
under the Plan. In the event of the Participant's death, a refund of the
Participant's Plan Account shall be paid, without interest, to the
representative of the Participant's estate.
7. Rights Not Transferable. The rights or interests of any Participant in
the Plan, in any Option granted under the Plan, or in any Stock or moneys to
which he or she may be entitled under the Plan, shall not be
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transferable by voluntary or involuntary assignment or by operation of law, or
by any other manner otherwise than by will or the applicable laws of descent
and distribution. During Participant's lifetime, any Option of such
Participant may be exercised only by him or her. If the Participant shall in
any manner attempt to transfer, assign or otherwise encumber his or her rights
or interests under the Plan, other than by will, such act shall be treated as
a withdrawal from the Plan.
8. Recapitalization, Etc. Subject to any required action by the shareholders
of the Company, the number of shares of Stock covered by each Option under the
Plan which has not yet been exercised and the number of shares of Stock which
have been authorized for issuance under the Plan but have not yet been placed
under an option (collectively, the "Reserves"), as well as the price per share
of Stock covered by each option under the Plan which has not yet been
exercised, shall be proportionately adjusted for any increase or decrease in
the number of issued shares of stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of Stock, or any
other increase or decrease in the number of shares of Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
effected without receipt of consideration. Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of capital stock of any class shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Stock
subject to an Option.
In the event of a proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each Option under the
Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation, unless the Board determines, in the exercise of its
sole discretion and in lieu of such assumption or substitution, that the
Participant shall have the right to exercise the Option as to all of the
optioned Stock, including shares as to which the option would not otherwise be
exercisable. If the Board makes an option fully exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Board shall notify the Participant that the Option shall be fully exercisable
for a period of thirty (30) days from the date of such notice, and the Option
will terminate upon the expiration of such period.
The Board may also, if it so determines in the exercise of its sole
discretion, make provision for adjusting the Reserves, as well as the price
per share of Stock covered by each outstanding Option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Stock,
and in the event of the Company being consolidated with or merged into any
other corporation.
9. Limitation on Stock Ownership. Notwithstanding any provision herein to
the contrary, no Participant shall be granted a right to purchase Stock
pursuant to Section 5 if such Participant, immediately after electing to
purchase such Stock, would own Stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of OSI
Systems, Inc. or any parent or Subsidiary of OSI Systems, Inc., or (ii) if
under the terms of the Plan the rights of the employee to purchase Stock under
this and all other qualified employee stock purchase plans of OSI Systems,
Inc. or its Subsidiaries would accrue at a rate that exceeds $25,000 of fair
market value of such Stock (determined at the time such right is granted) for
each calendar year for which such right is outstanding at any time. For
purposes of this Section 9, ownership of Stock shall be determined by the
attribution rules of Section 424(d) of the Code and Participants shall be
considered to own any Stock which they have a right or option to purchase
under this or any other plan.
10. Rights as an Employee. Nothing in the Plan shall be construed to give
any Participant the right to remain in the employ of the Company or a
Subsidiary or to affect the right of the Company and its Subsidiaries or the
Participant to terminate such employment at any time with or without cause.
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11. Rights as a Shareholder. A Participant shall have no rights as a
shareholder with respect to any shares of Stock he or she may have a right to
purchase under the Plan until the date of issuance of a stock certificate to
such Participant for shares issued pursuant to the Plan. The Company shall
provide its financial statements to each Participant at least annually.
12. Amendment or Termination of the Plan. The Board of Directors shall have
the right to amend, modify or terminate the Plan at any time without notice,
provided that no Participant's existing rights are adversely affected thereby,
and provided further that no amendment to the Plan shall be effective until
such amendment is approved by a vote of the holders of at least a majority of
the outstanding shares of Common Stock of the Company within twelve month
before or after the date upon which such action is taken by the Board of
Directors, if such amendment would:
(a) Increase the aggregate number of shares of Stock to be issued under the
Plan (except as provided in Section 8 hereof);
(b) Materially modify the requirements for eligibility to participate in the
Plan;
(c) Increase the maximum number of shares of Stock which a Participant may
purchase in any Offering Period;
(d) Extend the term of the Plan;
(e) Alter the Purchase Price formula so as to reduce the price for shares of
Stock to be purchased under the Plan;
(f) otherwise materially increase the benefits accruing. to Participants
under the Plan; or
(g) Cause the Plan to fail to meet the requirements of an "employee stock
purchase plan" under Section 423 of the Code.
The Plan shall terminate on the date prior to the tenth anniversary of its
adoption, if it has not been earlier terminated pursuant to this Section 13,
but the Plan shall remain in full force and effect until the end of the
Offering Period then in effect.
13. Shareholder Approval. Continuance of the Plan and the effectiveness of
any Option granted hereunder shall be subject to approval of the Plan by the
affirmative vote or written consent of the holders of a majority of the
outstanding shares of Stock of the Company present or represented and entitled
to vote thereon, within 12 months after the date of adoption of this Plan by
the Board of Directors.
14. Governing Law. To the extent not governed by federal law, all legal
questions pertaining to the Plan shall be determined in accordance with the
laws of the State of California.
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PROXY OSI SYSTEMS, INC. PROXY
12525 CHADRON AVENUE, HAWTHORNE, CA 90250
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the Annual Meeting of Stockholders and the Proxy Statement and
appoints Deepak Chopra and Ajay Mehra and each of them, the Proxy of the
undersigned, with full power of substitution, to vote all shares of Common
Stock of OSI Systems, Inc. (the "Company") held of record by the undersigned as
of the close of business on October 12, 1998, either on his or her own behalf
or on behalf of any entity or entities, at the Annual Meeting of Stockholders
of the Company to be held November 18, 1998, and at any adjournment or
postponement thereof, with the same force and effect as the undersigned might
or could do if personally present thereat. The shares represented by this Proxy
shall be voted in the manner set forth below.
1. To elect the following directors to serve until the 1999 annual meeting of
stockholders or until their respective successors are elected and
qualified:
[_] FOR ALL [_] WITHHOLD AUTHORITY FOR ALL
Deepak Chopra, Ajay Mehra, Steven C. Good, Meyer Luskin, Madan G. Syal
To withhold authority to vote for any individual nominee, write the
nominee's name in the space provided below:
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2. To approve the adoption of the OSI Systems, Inc. Employee Stock Purchase
Plan
[_] FOR [_] AGAINST [_] ABSTAIN
3. To ratify the Board of Director's selection of Deloitte & Touche LLP to
serve as the Company's independent accountants for the fiscal year ending
June 30, 1999.
[_] FOR [_] AGAINST [_] ABSTAIN
4. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
(PLEASE DATE AND SIGN ON REVERSE SIDE)
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This Proxy, when properly executed, will be voted in the manner directed
herein. THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS LISTED AND
FOR THE OTHER PROPOSALS IF NO SPECIFICATION IS MADE.
Please sign exactly as your name(s) is (are) shown on the stock certificate to
which the Proxy applies. When shares are held by joint tenants, both should
sign. When signing as an attorney, executor, administrator, trustee or
guardian, please give full title, as such. If a corporation, please sign in
full corporate name by the President or other authorized officer. If a
partnership, please sign in the partnership's name by an authorized person.
Dated: __________________, 1998
_________________________________________
Signature
_________________________________________
Signature if held jointly
Please mark, sign date and return the
proxy card promptly using the enclosed
envelope.
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