THIS
EMPLOYMENT AGREEMENT (the “Agreement”) is made and
entered into as of September 22, 2008 (“Effective
Date”) by and between OSI Systems, Inc., a California
corporation (the “Company”), and Alan Edrick
(“Executive”).
1.
ENGAGEMENT AND DUTIES .
1.1
Commencing upon the Effective Date, and upon the terms and subject
to the conditions set forth in this Agreement, the Company hereby
engages and employs Executive with the title and designation of
Executive Vice President and Chief Financial Officer of the
Company. Executive shall report to the Company’s Chief
Executive Officer.
1.2
Executive agrees to devote his primary business time, energies,
skills, efforts and attention to his duties hereunder and will not,
without the prior consent of the Company, which consent will not be
unreasonably withheld, render any material services to any other
business concern. Reasonable bases for the Company to withhold
consent include, without limitation, unreasonable interference
with, or other incompatibility with, Executive’s duties to
the Company, so long as such bases are stated in writing by the
Company.
1.3
Except for routine travel incident to the business of the Company
or the performance of his duties, Executive shall perform services
hereunder primarily at the Company’s offices in Hawthorne,
California, or at such other place as Executive and the Company may
from time to time agree.
2.
TERM . This Agreement shall commence as of the
Effective Date and, unless sooner terminated pursuant to
Section 4 of this Agreement, shall end upon the later of
(i) the third anniversary of the Effective Date or
(ii) one (1) year following the date that the Company
notifies the Executive in writing that the Company elects to end
the term of Executive’s employment. The “Term” of
this Agreement shall be the period from the Effective Date until
the date on which this Agreement concludes, whether by action of
the parties as described in Section 4 herein, or by expiration
of any renewal period in which notice of non-renewal is provided by
either party. For purposes of this Agreement, the “Completion
Date” shall be defined as the final date of the
Term.
3.1
Base Salary . The Base Salary shall be payable at
such times and in such manner as the Company customarily pays other
similarly situated executives but in no event less frequently than
twice per month. Executive’s Base Salary shall be reviewed
annually, and shall be subject to upward adjustment on the basis of
such review but shall not in any event be reduced.
3.2
Equity Participation .
3.2.1
To the extent that the Company or its Affiliates maintain one or
more equity participation plans, Executive shall be eligible to
participate in such plans; provided, however, that
Executive’s participation in such equity participation plans,
and the extent of any such participation, shall be at the
Company’s sole discretion.
3.2.2
Notwithstanding anything to the contrary herein, all stock options
and equity awards granted to Executive by the Company shall become
fully vested and nonforfeitable upon a Change in Control (as
defined herein).
3.3
Bonuses . Executive shall participate in the
Company’s bonus pool and Executive’s bonus (if any)
shall be determined and paid on the same or similar basis as the
bonuses of other similarly-situated executives. Each bonus payment
shall be made no later than September 30 of the calendar year
that contains the last day of the fiscal year or performance year
to which the bonus payment is attributable.
3.4
Fringe Benefits . Executive shall be entitled to
participate in and receive benefits under any plan of the Company
made available from time to time to any other similarly situated
executive, provided he is otherwise eligible to participate. Such
benefits may include, without limitation, life insurance,
disability insurance, medical/dental/vision insurance, and
retirement benefits, including participation in the Company’s
deferred compensation plan.
3.5
Business Expenses . Company shall advance to or
reimburse Executive for all reasonable, ordinary and necessary
business expenses incurred by Executive as a result of
Executive’s services hereunder, in accordance with Company
policy as established from time to time.
3.6
Vacation and PTO . Executive shall be entitled to
vacation and paid time off in accordance with the Company’s
policy applying to other similarly-situated executives, but in no
event less than three weeks vacation and one week paid time off in
each year during the Term.
3.7
Relocation Package . In the event of relocation,
during the Term, of Executive’s principal office location
more than 25 miles from its location as of the Effective Date, and,
as a result thereof, Executive relocates his principal residence,
the Company shall offer Executive a reasonable relocation
package.
4.
TERMINATION OF EMPLOYMENT .
4.1
By the Company For Cause . The Company may terminate
Executive’s employment under this Agreement “for
cause” at any time upon notice to Executive.
“Cause” is defined as: (a) Executive’s admission
or conviction of, or entering of a plea of nolo contendere
as to any felony, or any lesser crime involving fraud, embezzlement
or theft; (b) Executive’s failure to substantially
perform his duties, which failure cannot be cured or is not cured
within ten (10) business days after written notice from the
Company, as long as Executive is not prevented from performing or
curing by actions outside his control; or
(c) Executive’s material breach of any provision of this
Agreement, which breach cannot be cured or is not cured within
thirty (30) business days after written notice from the Company, as
long as Executive is not prevented from performing or curing by
actions outside his control.
4.2
By the Company Other Than For Cause . The Company may
terminate this Agreement at any time other than for cause, for the
following additional reasons:
4.2.1
Death . In the event of Executive’s death, this
Agreement shall automatically terminate and all rights of Executive
and his heirs, executors and administrators to compensation and
other benefits under this Agreement shall cease; provided, however,
that Executive’s participation in the Company’s
employee benefit plans or programs shall cease in accordance with
the terms of such plans or programs as then in effect.
4.2.2
Disability . The Company may, at its option,
terminate this Agreement upon written notice to Executive if
Executive, because of physical or mental incapacity or disability,
fails to perform the essential functions of his position required
of him hereunder for an aggregate period of 60 days within any
six-month period. Upon such termination, all obligations of the
Company hereunder shall cease; provided, however, that
Executive’s participation in the
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Company’s employee
benefit plans or programs shall cease in accordance with the terms
of such plans or programs as then in effect.
4.2.3
Without Cause . The Company may terminate
Executive’s employment without cause upon 30 days’
written notice (“Notice Period”) to Executive. The
Company may elect whether or not Executive shall perform duties
under this Agreement during all or a portion of the Notice Period
but shall be required to pay Executive all wages and other
compensation as provided for in Section 3 until the end
of the Notice Period (“Notice Period
Compensation”).
4.3
Termination By Executive. Executive may terminate
this Agreement at any time upon 30 calendar days’ notice
(“Executive Notice Period”) to the Company, whether or
not such termination is for Good Reason as described below. The
Company may elect whether or not Executive shall perform duties
under this Agreement during all or a portion of the Executive
Notice Period but shall be required to pay Executive all wages and
other compensation as provided for in Section 3 until
the end of the Executive Notice Period.
4.3.1
Good Reason . Executive may terminate this Agreement
for “Good Reason,” which shall mean the occurrence of
any of the following events unless the Executive specifically
agrees in writing that such event is not Good Reason provided that
(x) Executive terminates this Agreement within 6 months
following the initial existence of one or more of the following
events that occur without Executive’s consent and
(y) Executive provides written notice to the Company of the
existence of one or more of the following events within
90 days of the initial existence of such event or events and
the Company fails to remedy such event or events within
30 days of receiving such notice:
(a)
Substantial Reduction in Duties . Any substantial
reduction in duties whereby Executive’s job responsibilities
are markedly and significantly reduced in scope, complexity, and/or
importance to overall Company operations;
(b)
Relocation . Following a Change in Control, the
relocation of Executive’s principal office location more than
25 miles from its location as of the Effective Date;
(c)
Reduction in Salary . Executive’s Base Salary
is reduced from any prior year;
(d)
Material Breach . Any material breach of the
Agreement by the Company that is not cured within 10 business days
after written notice from Executive;
(e)
Change in Title . Any change in Executive’s
titles such that Executive no longer holds the titles (and duties
and privileges commensurate with such titles) set forth in
Section 1.1 and instead is given a title with duties and
privileges of less importance and stature;
(f)
Change in Reporting Relationship . Any change in the
reporting relationship, such that Executive no longer reports to
the Company’s Chief Executive Officer; and
(g)
Change in Role . In the event that, for whatever
reason, the Company is no longer the parent entity in its
organizational framework, such that Executive is no longer the
Executive Vice President and Chief Financial Officer of the parent
entity.
4.3.2
Without Good Reason . Executive may terminate this
Agreement without Good Reason as defined herein.
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4.4
Payments Upon Termination . Upon expiration or
termination of this Agreement for any reason by either party as
described in this Section 4, Executive shall be entitled to
receive payment of (a) Base Salary through the Completion
Date; (b) any unused vacation and paid time off accrued
through the Completion Date; and (c) applicable employee
benefits to which Executive is entitled upon the cessation of
employment with the Company, in accordance with the terms of the
plans or programs of the Company then in effect. In addition to the
above, and subject to Executive’s execution of a customary
and reasonable release of liabilities in favor of the Company, the
following shall apply:
4.4.1
In the event of termination of Executive’s employment by the
Company without cause pursuant to Section 4.2.3 or by
Executive for Good Reason pursuant to Section 4.3.1 ,
subject to the provisions of Section 4.4.2 below, Executive
shall also be entitled to the following in addition to the payments
described in Section 4.4 above: (a) an amount
equal to 18 months’ salary at Executive’s
then-current Base Salary; (b) an amount equal to 1.5 times the
average of bonuses paid by the Company to Executive in the three
years preceding such termination; and (c) acceleration of
vesting of all stock options and equity grants from the Company to
Executive, and an extension of time to exercise such stock options
such that Executive’s right to exercise such stock options
shall continue until the first anniversary of the Completion Date,
but in no event later than the Expiration Date of the options, as
defined under the stock option agreement covering such
options.
4.4.2
Within 90 days prior to or 12 months after a Change of
Control, if there is either (A) a termination of this
Agreement by the Company without cause pursuant to
Section 4.2.3 , or (B) a termination of this
Agreement by Executive for Good Reason pursuant to
Section 4.3.1 , then:
(a) Equity
and stock options granted by the Company to Executive shall, to the
extent unvested, immediately vest, and such stock options shall
remain exercisable by Executive for no less than 12 months
after the date of such termination.
(b) In
addition to the provisions of Section 4.4 above, and in lieu
of the payments described in Sections 4.4.1(a) and 4.4.1(b)
above, Executive shall be entitled to (a) an amount equal to
24 months’ salary at Executive’s then-current Base
Salary; and (b) an amount equal to twice the average of
bonuses paid by the Company to Executive in the three years
preceding such termination.
(c) If
a termination of this Agreement covered by this
Section 4.4.2 is contingent upon a change in ownership
or effective control of Company or a change in the ownership of a
substantial portion of the assets of the Company (within the
meaning of Section 280G(b)(2)(i) of the Internal Revenue Code
of 1986, as amended (the “Code”), and the regulations
thereunder (collectively, a “280G Event”)), then
Executive, at his option, may elect to receive the compensation and
benefits otherwise payable under Sections 4.4.2(a) and
(b) , or the Alternative Payment (as defined below) in lieu of
the compensation and benefits otherwise payable under
Sections 4.4.2(a) and (b) . In order to elect the
Alternative Payment, Executive must give written notice to Company
of such election: (i) within fifteen (15) days after his
resignation with good reason; or (ii) within fifteen
(15) days after he is terminated by Company without cause
(each, a “Alternative Payment Notice”). For purposes of
this Agreement, “Alternative Payment” means a lump sum
payment made by Company to Executive in immediately available funds
in an amount equal to the product of 2.99 (or, if Code
Section 280G(b)(2)(A)(ii) is amended providing for a multiple
other than 3, then the multiple as amended, less 0.01)
multiplied by Executive’s “base amount”
(as defined in Code Section 280G(b)(3)); provided, however,
that in the case of a 280G Event, the amount of the
Alternative
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Payment shall be reduced
by the value of acceleration (as determined under Code
Section 280G and the regulations thereunde
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