OSI Systems to Significantly Strengthen High Energy X-Ray Product Portfolio for Homeland Security through Acquisition of Eagle Cargo Inspection System Developer, ARACOR.

Business Editors

HAWTHORNE, Calif.--(BUSINESS WIRE)--Dec. 19, 2003

OSI Systems, Inc. (Nasdaq:OSIS):

-- ARACOR's Eagle System is Under 5-Year Bureau of Customs and

Border Protection Purchase Agreement

-- ARACOR Also Has Industrial CT Technology for Non-Destructive

Testing

OSI Systems, Inc., a worldwide leader in providing security and inspection solutions to airports, port and border customs facilities, correctional institutions, and other government and private installations, announced today that it has signed a definitive agreement to acquire Advanced Research and Applications Corporation (ARACOR), a privately held company located in Sunnyvale, California. It is estimated that upon closing, ARACOR's backlog will be approximately $8 million to $10 million to be delivered over the next 12 months. The acquisition is expected to have a neutral to slightly accretive impact on earnings per share for OSI Systems for the fiscal year ending June 30, 2004.

Consideration for the acquisition consists of an initial cash payment of approximately $19.6 million. Furthermore, during the seven years after the close, contingent consideration will be paid based on ARACOR's net revenues, providing certain requirements are met. The contingent consideration is capped at $30 million.

"ARACOR represents a significant addition to the already impressive portfolio of inspection technologies that the OSI Systems Security Group offers," said Deepak Chopra, Chairman and CEO of OSI Systems, Inc. "Our Security Group companies are held in high regard for their expertise in high energy x-ray imaging systems and we welcome ARACOR to our family."

"ARACOR's Eagle inspection system is highly regarded as a relocatable high energy x-ray system," said Ajay Mehra, OSI Systems Security group President, commenting on the transaction. "We welcome the opportunity to showcase this product to our customers worldwide."

Mehra continued, "The Eagle was developed in cooperation with U.S. Customs and Border Protection based upon years of joint effort and review. U.S. Customs and Border Protection has already placed initial orders for deployment at domestic seaports and we look forward to continuing to work with them and other agencies charged with the task of providing homeland security."

ARACOR won a five-year contract for its Eagle cargo inspection system with the U.S. Customs and Border Protection (CBP). The contract has a potential value of around $40 million. To date, two units, valued at a total of approximately $12.5 million, have already been ordered by CBP per this contract. In addition, ARACOR is pursuing a growing list of international orders and will be delivering a previously ordered Eagle system to the Port Authority of Jamaica in the second half of calendar 2004. ARACOR's Eagle cargo inspection system is a mobile, fully self-contained X-ray system providing an efficient and cost-effective capability for inspecting the contents of air and sea cargo containers, trucks, automobiles, and rail cars. In less than one minute, it can inspect a standard 12-meter (40-foot) long cargo container and the high-resolution images produced can be used to verify shipping manifests or detect contraband. The Eagle moves from one location to another within an inspection site and is easily transportable to other locations.

"Following this acquisition, OSI Systems will provide us with additional marketing and financial resources that will enable ARACOR to take better advantage of the rapidly growing market for cargo inspection systems," said Dr. R. A. Armistead, President of ARACOR. "In addition, OSI Systems offers several complementary products that, when packaged with the Eagle, should be well received by organizations seeking to address critical security requirements," he added.

Specifics about ARACOR Technology and Products

ARACOR is a leading U.S. manufacturer of high-energy X-ray imaging systems. The X-ray imaging products include digital radiography (DR), real-time radiography (RTR), and computed tomography (CT) systems, which are used for industrial nondestructive inspection (NDI), quality control, metrology and for the non-intrusive inspection (NII) of vehicles and cargo containers to detect contraband. The company also manufactures the Model 4100 Automatic Semiconductor Irradiation System used for process control and testing of electronic components.

The heart of ARACOR's high-energy X-ray imaging products is its proprietary X-ray detector system, which employs an advanced, solid-state linear-array detector technology. This technology provides significant performance advantages over film and fluorescent-screen-based systems, including higher detection efficiency, greater dynamic range, and superior rejection of scattered radiation.

In addition to the Eagle cargo inspection system, ARACOR offers a line of CT products covering a wide range of x-ray energies. ARACOR has been developing CT systems since 1979 and, in 1983, delivered the first CT system designed for industrial use. Since 1988, several of the high-energy CT systems delivered in the U.S. have been built by ARACOR. The company's CT systems provide an unmatched capability for detecting, sizing, and locating internal flaws and defects. Objects of virtually any shape or material can be inspected without harming, modifying or contacting them. Accurate measurements can also be made of internal dimensions and density variations.

ARACOR's patented Model 4100 Automatic Semiconductor Irradiation System is used to test military and aerospace electronic components at the wafer level of production, to determine if they meet specifications for survivability to total radiation exposure and transient-radiation/latch-up effects. The Model 4100 is the only instrument available that can perform these types of tests at the wafer level and in a general laboratory environment. Significant cost and throughput advantages are realized with the use of this instrument.

About ARACOR Corporation

Founded in 1977, Advanced Research and Applications Corporation (ARACOR) develops and manufactures x-ray test and inspection systems for industrial nondestructive evaluation and process control applications; manufactures cargo inspection systems; and provides research services in related areas. ARACOR is a leading manufacturer of digital radiographic (DR) and computed tomography (CT) systems. For more information please visit, www.aracor.com .

About OSI Systems Inc.

OSI Systems Inc. is a diversified global developer, manufacturer and seller of optoelectronic-based components and systems. The company has more than 30 years of optoelectronics experience, and through its family of subsidiaries, competes in four specific growth areas: OEM Manufacturing, Security, Medical and Fiber Optics. For more information on OSI Systems Inc. or any of its subsidiary companies, visit www.osi-systems.com.

Rapiscan Security Products, Inc., a wholly-owned subsidiary of OSI Systems, is a leading supplier of high quality X-ray screening and explosive detection systems. The company has delivered thousands of these detection systems to customers worldwide for use in airports, customs facilities, courthouses, government buildings, mailrooms, schools, prisons, embassies, and other locations. The OSI Systems line of security products, marketed under the Rapiscan, Ancore, Meteor, and Secure 1000 brand names, is manufactured at four global locations and offers a wide range of security screening systems with diverse technologies. For more information on Rapiscan Security Products, Inc., please visit www.rapiscan.com.

"This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include information regarding our expectations, goals or intentions about the future, including, but not limited to, statements regarding the acquisition of Advanced Research and Applications Corporation (ARACOR), ARACOR'S backlog, Dr. Robert Armistead, the relative position of ARACOR's technology in the marketplace, and ARACOR's five-year contract with the U.S. Customs and Border Protection. The actual results may differ materially from those described in or implied by any forward-looking statement. In particular, there can be no assurance that ARACOR's competitors will not effectively develop competing technologies, that demand for ARACOR's products by the marketplace will continue, or that Dr. Armistead will remain in the employ of ARACOR. In addition, although we expect the U.S. Customs and Border Protection to continue to purchase Eagle cargo inspection systems, under its contract with ARACOR it is not obligated to place any further orders. Other important factors are set forth in our Securities and Exchange Commission filings. All forward-looking statements speak only as of the date made, and we undertake no obligation to update these forward-looking statements."