EXHIBIT 10.20
OSI S YSTEMS ,
I NC .
N ONQUALIFIED D EFINED B ENEFIT P LAN
E FFECTIVE O CTOBER 10, 2008
OSI Systems, Inc. Nonqualified Defined Benefit
Plan
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A RTICLE I
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Establishment and Purpose
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1
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A RTICLE II
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Definitions
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1
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A RTICLE III
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Eligibility and Participation
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5
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A RTICLE IV
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Vesting
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5
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A RTICLE V
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Benefits
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5
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A RTICLE VI
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Administration
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7
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A RTICLE VII
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Amendment and Termination
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8
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A RTICLE VIII
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Informal Funding
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9
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A RTICLE IX
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Claims
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9
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A RTICLE X
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General Provisions
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14
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OSI Systems, Inc. Nonqualified Defined Benefit
Plan
A RTICLE I
Establishment and
Purpose
OSI Systems, Inc. (the
“Company”) hereby adopts the OSI Systems, Inc.
Nonqualified Defined Benefit Plan (the “Plan”),
effective October 10, 2008.
The purpose of the Plan is to
attract and retain key employees by providing Participants with a
nonqualified defined benefit plan in addition to the
Company’s tax-qualified retirement plans. The Plan is not
intended to meet the qualification requirements of Code
Section 401(a), but is intended to meet the requirements of
Code Section 409A, and shall be operated and interpreted
consistent with that intent.
The Plan constitutes an unsecured
promise by a Participating Employer to pay benefits in the future.
Participants in the Plan shall have the status of general unsecured
creditors of the Company or the Adopting Employer, as applicable.
Each Participating Employer shall be solely responsible for payment
of the benefits of its employees and their beneficiaries. The Plan
is unfunded for Federal tax purposes and is intended to be an
unfunded arrangement for eligible employees who are part of a
select group of management or highly compensated employees of the
Employer within the meaning of Sections 201(2), 301(a)(3) and
401(a)(1) of ERISA. Any amounts set aside to defray the liabilities
assumed by the Company or an Adopting Employer will remain the
general assets of the Company or the Adopting Employer and shall
remain subject to the claims of the Company’s or the Adopting
Employer’s creditors until such amounts are distributed to
the Participants.
A RTICLE II
Definitions
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2.1
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Accrued
Benefit. Accrued Benefit
means the portion of the Normal Retirement Benefit earned by the
Participant, determined under the accrual rate specified in the
Participant’s award. The Committee may specify different
accrual rates for individual Participants and may accelerate
accruals in its sole discretion.
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2.2
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Adopting
Employer. Adopting
Employer means an Affiliate who, with the consent of the Company,
has adopted the Plan for the benefit of its eligible
employees.
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2.3
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Affiliate. Affiliate means a corporation, trade or business
that, together with the Company, is treated as a single employer
under Code Section 414(b) or (c).
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2.4
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Average
Annual Compensation. Average Annual Compensation means a
Participant’s highest average salary earned over a five
consecutive calendar year period occurring within the ten calendar
years preceding the earlier of (i) the Participant’s
Normal Retirement Date or (ii) the date the Participant is no
longer an Eligible Employee (including Separation from Service).
For purposes of determining consecutive calendar years, if a
Participant loses his or her status as an Eligible Employee and
later regains such status prior to his or her Normal Retirement
Date, the calendar years during which he or she was ineligible will
be disregarded if such Participant remains continuously employed as
an Employee during such years.
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Page 1 of 16
OSI Systems, Inc. Nonqualified Defined Benefit
Plan
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2.5
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Beneficiary. Beneficiary means a natural person, estate, or
trust designated by a Participant to receive payments to which a
Beneficiary is entitled in accordance with provisions of the Plan.
The Participant’s spouse, if living, otherwise the
Participant’s estate, shall be the Beneficiary if:
(i) the Participant has failed to properly designate a
Beneficiary; or (ii) all designated Beneficiaries have
predeceased the Participant.
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A former spouse shall have no
interest under the Plan, as Beneficiary or otherwise, unless the
Participant designates such person as a Beneficiary after
dissolution of the marriage, except to the extent provided under
the terms of a domestic relations order as described in Code
Section 414(p)(1)(B).
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2.6
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Business
Day. Business Day means
each day on which the New York Stock Exchange is open for
business.
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2.7
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Change in
Control. Change in
Control means, with respect to a Participating Employer that is
organized as a corporation, any of the following events: (i) a
change in the ownership of the Participating Employer; (ii) a
change in the effective control of the Participating Employer; or
(iii) a change in the ownership of a substantial portion of
the assets of the Participating Employer.
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For purposes of this Section, a
change in the ownership of the Participating Employer occurs on the
date on which any one person, or more than one person acting as a
group, acquires ownership of stock of the Participating Employer
that, together with stock held by such person or group constitutes
more than 50% of the total fair market value or total voting power
of the stock of the Participating Employer. A change in the
effective control of the Participating Employer occurs on the date
on which either: (i) a person, or more than one person acting
as a group, acquires ownership of stock of the Participating
Employer possessing 30% or more of the total voting power of the
stock of the Participating Employer, taking into account all such
stock acquired during the 12-month period ending on the date of the
most recent acquisition; or (ii) a majority of the members of
the Participating Employer’s Board of Directors is replaced
during any 12-month period by directors whose appointment or
election is not endorsed by a majority of the members of such Board
of Directors prior to the date of the appointment or election, but
only if no other corporation is a majority shareholder of the
Participating Employer . A change in the ownership of a substantial
portion of assets occurs on the date on which any one person, or
more than one person acting as a group, other than a person or
group of persons that is related to the Participating Employer,
acquires assets from the Participating Employer that have a total
gross fair market value equal to or more than 40% of the total
gross fair market value of all of the assets of the Participating
Employer immediately prior to such acquisition or acquisitions,
taking into account all such assets acquired during the 12-month
period ending on the date of the most recent
acquisition.
Page 2 of 16
OSI Systems, Inc. Nonqualified Defined Benefit
Plan
An event constitutes a Change in
Control with respect to a Participant only if the Participant
performs services for the Participating Employer that has
experienced the Change in Control, or the Participant’s
relationship to the affected Participating Employer otherwise
satisfies the requirements of Treasury Regulation
Section 1.409A-3(i)(5)(ii).
Notwithstanding anything to the
contrary herein, with respect to a Participating Employer that is a
partnership, Change in Control means only a change in the ownership
of the partnership or a change in the ownership of a substantial
portion of the assets of the partnership, and the provisions set
forth above respecting such changes relative to a corporation shall
be applied by analogy.
The determination as to the
occurrence of a Change in Control shall be based on objective facts
and in accordance with the requirements of Code
Section 409A.
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2.8
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Claimant. Claimant means a Participant or Beneficiary
filing a claim under Article IX of this Plan.
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2.9
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Code. Code means the Internal Revenue Code of 1986, as
amended from time to time.
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2.10
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Code
Section 409A. Code
Section 409A means section 409A of the Code, and regulations
and other guidance issued by the Treasury Department and Internal
Revenue Service thereunder.
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2.11
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Committee. Committee means the committee appointed by the
Board of Directors of the Company (or the appropriate committee of
such board) to administer the Plan. If no designation is made, the
Chief Executive Officer of the Company or his delegate shall have
and exercise the powers of the Committee.
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2.12
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Company. Company means OSI Systems, Inc.
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2.13
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Death
Benefit. Death Benefit
means the benefit payable under the Plan to a Participant’s
Beneficiary(ies) upon the Participant’s death as provided in
Section 5.1(b) of the Plan.
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2.14
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Effective
Date. Effective Date
means October 10, 2008.
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2.15
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Eligible
Employee. Eligible
Employee means a member of a “select group of management or
highly compensated employees” of a Participating Employer
within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of
ERISA, as determined by the Committee from time to time in its sole
discretion.
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2.16
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Employee. Employee means a common-law employee of an
Employer.
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2.17
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Employer. Employer means, with respect to Employees it
employs, the Company and each Affiliate.
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Page 3 of 16
OSI Systems, Inc. Nonqualified Defined Benefit
Plan
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2.18
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ERISA. ERISA means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
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2.19
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Normal
Retirement Date. Normal
Retirement Date means the first day of the month following the age
specified by the Committee in its award of a Retirement Benefit to
a Participant.
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2.20
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Participant. Participant means an Eligible Employee who has
received notification of his or her eligibility to defer
Compensation under the Plan under Section 3.1 and any other
person with an Accrued Benefit greater than zero, regardless of
whether such individual continues to be an Eligible Employee. A
Participant’s continued participation in the Plan shall be
governed by Section 3.2 of the Plan.
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2.21
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Participating Employer. Participating Employer means the Company and
each Adopting Employer.
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2.22
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Plan. Generally, the term Plan means the “OSI
Systems, Inc. Nonqualified Defined Benefit Plan” as
documented herein and as may be amended from time to time
hereafter. However, to the extent permitted or required under Code
Section 409A, the term Plan may in the appropriate context
also mean the Plan and any other nonqualified defined benefit plan
or portion thereof that is treated as a single plan under such
section.
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2.23
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Plan
Year. Plan Year means
January 1 through December 31. The period from the
Effective Date through December 31, 2008 will constitute a
“short” Plan Year.
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2.24
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Retirement
Benefit. Retirement
Benefit means the benefit payable to a Participant under the Plan
following the Participant’s Normal Retirement
Date.
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2.25
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Separation
from Service. An Employee
incurs a Separation from Service upon termination of employment
with the Employer. Whether a Separation from Service has occurred
shall be determined by the Committee in accordance with Code
Section 409A.
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Except in the case of an Employee on
a bona fide leave of absence as provided below, an Employee is
deemed to have incurred a Separation from Service if the Employer
and the Employee reasonably anticipated that the level of services
to be performed by the Employee after a date certain would be
reduced to 20% or less of the average services rendered by the
Employee during the immediately preceding 36-month period (or the
total period of employment, if less than 36 months), disregarding
periods during which the Employee was on a bona fide leave of
absence.
An Employee who is
absent from work due to military leave, sick leave, or other bona
fide leave of absence shall incur a Separation from Service on the
first date immediately following the later of: (i) the six
month anniversary of the commencement of the leave; or
(ii) the expiration of the Employee’s right, if any, to
reemployment under statute or contract. Notwithstanding the
preceding, however, an Employee who is absent from work due to a
physical or mental impairment that is expected to result in death
or last for a continuous period of at least six months and that
prevents the Employee from performing the duties of his position of
employment or a similar position shall incur a Separation from
Service on the first date immediately following the 29
th
month anniversary of
the commencement of the leave.
Page 4 of 16
OSI Systems, Inc. Nonqualified Defined Benefit
Plan
For purposes of determining whether
a Separation from Service has occurred, the Employer means the
Employer as defined in Section 2.17 of the Plan, except that
for purposes of determining whether another organization is an
Affiliate of the Company, common ownership of at least 50% shall be
determinative.
The Committee specifically reserves
the right to determine whether a sale or other disposition of
substantial assets to an unrelated party constitutes a Separation
from Service with respect to a Participant providing services to
the seller immediately prior to the transaction and providing
services to the buyer after the transaction. Such determination
shall be made in accordance with the requirements of Code
Section 409A.
A RTICLE III
Eligibility and
Participation
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3.1
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Eligibility
and Participation. An
Eligible Employee becomes a Participant upon receipt of an award of
a Retirement Benefit by the Committee.
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3.2
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Duration. A Participant with a vested Accrued Benefit
remains a Participant, regardless of any change in employment
status, until such benefit has been paid in full.
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A RTICLE IV
Vesting
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4.1
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Vesting. Accrued Benefits vest in accordance with the
vesting schedule set forth in the Committee’s award of a
Retirement Benefit to the Participant. All awards shall become 100%
vested upon the occurrence of the earliest of: (i) the death
of the Participant while actively employed; (ii) the
disability of the Participant; (iii) the Participant’s
Normal Retirement Date; or (iv) a Change in Control. The
Participating Employer may, at any time, in its sole discretion,
increase a Participant’s vested interest. The portion of a
Participant’s Accrued Benefit that remains unvested upon his
or her termination of employment after the application of the terms
of this Section 4.1 shall be forfeited.
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A RTICLE V
Benefits
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5.1
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Benefits,
Generally. A Participant
shall be entitled to the following benefits under the
Plan:
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(a)
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Retirement
Benefit. A Participant
will commence receiving his or her Accrued Benefit on the first day
of the month following his or her Normal Retirement Date. The
Retirement Benefit is payable at such time, regardless of the
Participant’s employment status.
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Page 5 of 16
OSI Systems, Inc. Nonqualified Defined Benefit
Plan
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(b)
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Death
Benefit. In the event of
the Participant’s death, his or her designated
Beneficiary(ies) shall be entitled to a Death Benefit. If the
Participant was receiving his Retirement Benefit at the time of his
or her death, the Death Benefit shall be any remaining payments
under the specified period certain for the normal form of benefit
described in Section 5.2(a). If the Participant’s death
occurs prior to his or her Normal Retirement Date, his or
Beneficiary will receive the Participant’s Retirement
Benefit, payable in the normal form under Section 5.2(a),
commencing on the first day of the month following the month the
Participant would have attained his or her Normal Retirement
Date.
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(a)
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Retirement
Benefit. Unless an
optional annuity payment is selected under 5.2(b), a Participant
who is entitled to receive a Retirement Benefit shall receive
payment in the form of a ten year period certain (the “normal
form of payment”).
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(b)
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Death
Benefit. A designated
Beneficiary who is entitled to receive a Death Benefit shall
receive any remaining payments under the period certain for the
normal form of benefit.
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(c)
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Change in
Control. A Participant
will receive the actuarial equivalent of his or her Retirement
Benefit in a single lump sum payment equal to the unpaid balance of
all of his or her Accrued Benefit if Separation from Service occurs
within 24 months following a Change in Control.
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A Participant or Beneficiary
receiving payments when a Change in Control occurs, will receive
the actuarial equivalent of the remaining payments in a single lump
sum within 90 days following the Change in Control.
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5.3
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Acceleration
of or Delay in Payments. The Committee, in its sole and absolute
discretion, may elect to accelerate the time or form of payment of
a benefit owed to the Participant hereunder, provided such
acceleration is permitted under Treas. Reg.
Section 1.409A-3(j)(4). The Committee may also, in its sole
and absolute discretion, delay the time for payment of a benefit
owed to the Participant hereunder, to the extent permitted under
Treas. Reg. Section 1.409A-2(b)(7). If the Plan receives a
domestic relations order (within the meaning of Code
Section 414(p)(1)(B)) directing that all or a portion of a
Participant’s Accrued Benefit be paid to an “alternate
payee,” any amounts to be paid to the alternate payee(s)
shall be paid in a single lump sum.
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Page 6 of 16
OSI Systems, Inc. Nonqualified Defined Benefit
Plan
A RTICLE VI
Administration
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6.1
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Plan
Administration. This Plan
shall be administered by the Committee which shall have
discretionary authority to make, amend, interpret and enforce all
appropriate rules and regulations for the administration of this
Plan and to utilize its discretion to decide or resolve any and all
questions, including but not limited to eligibility for benefits
and interpretations of this Plan and its terms, as may arise in
connection with the Plan. Claims for benefits shall be filed with
the Committee and resolved in accordance with the claims procedures
in Article IX.
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6.2
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Administration Upon Change in
Control. Upon a Change in
Control, the Committee, as constituted immediately prior to such
Change in Control, shall continue to act as the Committee. The
individual who was the Chief Executive Officer of the Company (or
if such person is unabl
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