Deepak Chopra is probably best known for his emphasis on mind and spirit in health — whether he’s a wise influence in holistic medicine or a fuzzy-thinking New Age marketer is a matter of interpretation, but there’s no doubt that he’s created a sprawling empire through his books, speeches and the like.
As far as we can tell, that empire doesn’t extend to airport X-ray machines or medical devices, though for a moment we were confused when reading the 8-K that OSI Systems (OSIS) put out on Friday. That’s because OSI Systems, which does make those gizmos, is run by a man who shares the good doctor’s name: Deepak Chopra, chairman and chief executive.
The two men share more in common than their names, however: Like the inspirational physician, Chopra the CEO stands to make a lot of money before he retires. In the CEO’s case, it’s a minimum of $12.5 million if he hangs in for eight years or so.
A new employment contract filed with the 8-K specifies a “Scheduled Retirement Date” for Chopra as “the first day of January following the year in which the Executive attains age sixty-eight”; he was 60 as of the proxy OSI filed in October. The agreement continues:
“In the event of the Executive continued employment until the Scheduled Retirement Date, Executive shall be entitled to the greater of (A) twelve million, five hundred thousand dollars ($12,500,000), or (B) a lump sum stay bonus equal to two (2) times the average of Executive’s highest two (2) years out of the prior (5) years of total annual compensation, including: (a) Base Salary, (b) bonuses and incentive compensation excluding Special Bonus Programs, (c) the fair value of any stock, options or other equity grants whether or not vested, and (d) the annualized value of all benefits and perquisites, including without limitation those provided under Sections 3.4 and 3.5…”
Just to show you the attention to detail here, those Sections 3.4 and 3.5 specify reimbursement for an automobile “befitting his duties and title as Chief Executive Officer” and a minimum of four weeks’ paid time off. Yes, this means his stay bonus will factor in the value of his company car and his vacation pay.
The company has some good reasons to keep him around that long. One of them is the fact that it could prove expensive to get rid of him, assuming he doesn’t do anything unbecoming of a chief executive. If he’s terminated without cause, he gets three times his pay, counting salary, bonus and equity, as well as the value of perquisites — using the highest two years out of the last five, a particularly generous formula these days; in addition, his equity will vest immediately.
Using his recent pay as a guideline — he was paid $1 million salary, $1.3 million bonus, $2 million in stock awards and $104,526 in perks and other compensation in the last fiscal year — the total severance could come out to roughly $13 million, plus accelerated equity. Considering that the company’s shares are trading at about $59, and Chopra has accumulated some 149,756 options, with strike prices between $12.52 and $26.81, that could amount to another $6.4 million or so.
Although Chopra’s contract officially has only a three-year term, it renews automatically for a new three-year term, until that retirement date. Moreover, if the company decides not to renew it for any reason, it would be treated as termination without cause — and Chopra would get that $19 million in severance.
We don’t know what position Deepak Chopra, the CEO, takes on the mind-body connection in health-care. But with a retirement cushion like that to look forward to, he’ll have plenty of opportunity to explore it to his heart’s content.
Image source: Illustration of a person meditating via Shutterstock.com
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