def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Soliciting Material Pursuant to §240.14a-12 |
HearUSA, 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):
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HearUSA,
Inc.
1250 Northpoint Parkway
West Palm Beach, Florida 33407
NOTICE OF
ANNUAL MEETING OF
STOCKHOLDERS
To be held on June 11, 2007
The Annual Meeting of Stockholders of HearUSA, Inc. (the
Company) will be held on Monday, June 11, 2007
at 2:30 p.m. local time at the Embassy Suites PGA located
at 4380 PGA Boulevard, West Palm Beach, Florida 33410, for the
following purposes:
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1.
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To elect seven directors of the Company, each to hold office
until the next Annual Meeting of Stockholders and thereafter
until his successor is duly elected and qualified, or as
otherwise provided by law;
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2.
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To consider and approve the HearUSA 2007 Incentive Compensation
Plan; and
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To consider such other matters as may properly come before the
Annual Meeting.
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Only stockholders of record as shown on the books of the Company
at the close of business on April 13, 2007, the record date
fixed by the Board of Directors, will be entitled to vote at the
meeting and any adjournments thereof. The voting rights of the
stockholders are described in the accompanying proxy statement.
By order of the Board of Directors,
Denise Pottlitzer
Secretary & VP of Reporting & Compliance
April 30, 2007
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN,
DATE AND RETURN YOUR PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED POSTAGE-PAID ENVELOPE WHETHER OR NOT YOU EXPECT TO
ATTEND IN PERSON. YOU MAY ALSO VOTE YOUR SHARES BY
TELEPHONE OR THE INTERNET. INSTRUCTIONS FOR USING THESE
SERVICES ARE SET FORTH ON THE ENCLOSED PROXY CARD.
HearUSA,
Inc.
1250 Northpoint Parkway
West Palm Beach, Florida 33407
PROXY STATEMENT
for
ANNUAL MEETING OF
STOCKHOLDERS
To be held on June 11, 2007
This Proxy Statement with the accompanying proxy card is being
mailed or given to stockholders commencing on or about
April 30, 2007, in connection with the solicitation of
proxies by the Board of Directors of HearUSA, Inc. (the
Company) to be used at the 2007 Annual Meeting of
Stockholders of the Company to be held at the Embassy Suites
PGA, 4380 PGA Boulevard, West Palm Beach, Florida, on Monday,
June 11, 2007 at 2:30 p.m. local time and any
adjournments thereof.
The Companys principal executive offices are located at
1250 Northpoint Parkway, West Palm Beach, Florida 33407.
Voting at
Meeting
The record date for the Annual Meeting is April 13, 2007.
Holders of shares of the Companys common stock, par value
$.10 per share (Common Stock), and holders of
exchangeable shares (Exchangeable Shares) of HEARx
Canada, Inc., a subsidiary of the Company, as of the close of
business on the record date, are entitled to notice of, and to
vote at, the Annual Meeting or any adjournments thereof. Each
holder of Common Stock is entitled to one vote for each share
held on the record date, and Computershare Trust Company of
Canada (the Trustee), the holder of the
Companys Special Voting Preferred Stock, is entitled to
one vote for each Exchangeable Share outstanding as of the
record date. Votes cast with respect to the Exchangeable Shares
will be voted through the Special Voting Preferred Stock by the
Trustee as directed by the holders of Exchangeable Shares,
except votes cast with respect to Exchangeable Shares whose
holders request to vote directly in person as proxy for the
Trustee at the Annual Meeting.
As of the record date, there were issued and outstanding
37,124,047 shares of Common Stock, one share of the
Companys Special Voting Preferred Stock and 760,461
Exchangeable Shares (excluding Exchangeable Shares owned by the
Company and its subsidiaries). Each Exchangeable Share is
exchangeable at any time, at the option of the holder, for one
share of the Companys Common Stock. The holders of a
majority of the shares of Common Stock and Exchangeable Shares
entitled to vote as of the record date present in person or by
proxy will constitute a quorum at the meeting. Under the
Delaware General Corporation Law, any stockholder who submits a
proxy and abstains from voting on a particular matter described
herein will still be counted for purposes of determining a
quorum. Broker non-votes will be treated as not represented at
the meeting as to any matter for which a non-vote is indicated
on the brokers proxy.
Proxy
Procedure
Stockholders of record (stockholders who hold their shares in
their own name) can vote any one of three ways:
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By Mail: If the enclosed proxy card is properly executed and
returned prior to the meeting, the shares represented thereby
will be voted in accordance with the stockholders
directions or, if no directions are indicated, the shares will
be voted in accordance with the recommendations of the Board of
Directors as specified in this proxy statement. The Board of
Directors does not know of any other business to be brought
before the meeting, but it is intended that, as to any such
other business, a vote may be cast pursuant to the proxy in
accordance with the judgment of the person or persons acting
thereunder.
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By Telephone: Call the toll-free number on your proxy card to
vote by phone. You will need to follow the instructions on your
proxy card and the voice prompts.
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By Internet: Go to the web site listed on your proxy card to
vote through the Internet. You will need to follow the
instructions on your proxy card and the web site. If you vote
through the Internet, you may incur telephone and Internet
access charges.
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If you vote by telephone or the Internet, your electronic vote
authorizes the named proxies in the same manner as if you
signed, dated and returned your proxy card. IF YOU VOTE BY
TELEPHONE OR THE INTERNET, YOU SHOULD NOT RETURN YOUR PROXY CARD.
If your shares are held in the name of a bank, broker or other
holder of record, you will receive instructions from the holder
of record that you must follow in order for your shares to be
voted in accordance with your instructions. Telephone and
Internet voting also will be offered to stockholders owning
shares through most banks and brokers.
Any stockholder voting by written proxy by mail may revoke that
proxy at any time prior to the voting thereof either by
delivering written notice to the Secretary of the Company or by
voting in person at the meeting. If you voted by telephone or
the Internet, you may also change your vote with a timely and
valid later telephone or Internet vote, as the case may be.
Attendance at the meeting will not have the effect of revoking a
proxy unless you give proper written notice of revocation to the
Secretary before the proxy is exercised or you vote by written
ballot at the meeting.
If you hold Exchangeable Shares and you wish to direct the
Trustee to cast the votes represented by your Exchangeable
Shares attached to the Special Voting Preferred Stock on your
behalf, you should follow carefully the instructions provided by
the Trustee, which accompany this Proxy Statement. The procedure
for instructing the Trustee differs in certain respects from the
procedure for delivering a proxy, including the place for
depositing the instructions and the manner of revoking the proxy.
Proxy
Solicitation
All costs of the solicitation of proxies will be borne by the
Company. In addition to the solicitation of proxies by use of
the mails, the Company may utilize the services of some of the
officers and regular employees of the Company (who will receive
no compensation therefore in addition to their regular salaries)
to solicit proxies personally and by telephone. The Company will
request banks, brokers, custodians, nominees and fiduciaries to
forward copies of the proxy solicitation materials to beneficial
owners and to request authority for the execution of proxies.
The Company will reimburse such persons or entities for their
expenses in doing so.
Proposal No. 1
ELECTION OF DIRECTORS
Seven directors of the Company are to be elected at the meeting,
each to hold office until the next Annual Meeting of
Stockholders and until his successor is elected and qualified,
or as otherwise provided by the Companys Amended and
Restated Bylaws or by Delaware law.
The Board of Directors, upon the recommendation of the
Nominating and Corporate Governance Committee, has nominated the
seven persons named below for election as directors, all of whom
are presently serving as such after election by the
stockholders. It is intended that the shares represented by the
enclosed proxy will be voted for the election of these seven
nominees (unless such authority is withheld by a stockholder).
In the event that any of the nominees should become unable or
unwilling to serve as a director (which is not anticipated), it
is intended that the proxy will be voted for the election of
such person or persons, if any, who shall be designated by the
Board of Directors.
2
The nominees for election as directors are as follows:
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Director
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Position with
the
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Name
and Age
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Since
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Company
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Paul A. Brown (69)
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1986
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Chairman of the Board
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Stephen J. Hansbrough (60)
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1997
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Chief Executive Officer, Director
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Thomas W. Archibald (68)
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1993
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Director
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David J. McLachlan (68)
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1986
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Director
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Joseph L. Gitterman III (71)
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1997
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Director
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Michel Labadie (53)
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2002
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Director
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Bruce N. Bagni (62)
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2005
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Director
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Paul A. Brown, M.D. holds an A.B. from
Harvard College and an M.D. from Tufts University School of
Medicine. Dr. Brown founded HearUSA in 1986 and has served
as Chairman of the Board since that time and Chief Executive
Officer until July 2002. From 1970 to 1984, Dr. Brown was
Chairman of the Board and Chief Executive Officer of MetPath
Inc. (MetPath), a New Jersey-based corporation
offering a full range of clinical laboratory services to
physicians and hospitals, which he founded in 1967 while a
resident in pathology at Columbia Presbyterian Medical Center in
New York City. MetPath developed into the largest clinical
laboratory in the world with over 3,000 employees and was listed
on the American Stock Exchange prior to being sold to Corning in
1982 for $140 million. Dr. Brown is formerly Chairman
of the Board of Overseers of Tufts University School of
Medicine, an Emeritus member of the Board of Trustees of Tufts
University, a past member of the Visiting Committee of Boston
University School of Medicine and currently is a part-time
lecturer in pathology and member of the Visiting Community at
Columbia University College of Physicians and Surgeons.
Stephen J. Hansbrough, Chief Executive Officer and
Director, was formerly the Senior Vice President of Dart Drug
Corporation and was instrumental in starting their affiliated
group of companies (Crown Books and Trak Auto). These companies
along with Dart Drug Stores had over 400 retail locations,
generated approximately $550 million in annual revenues and
employed over 3,000 people. Mr. Hansbrough
subsequently became Chairman and CEO of Dart Drug Stores with
annual revenues in excess of $250 million. After leaving
Dart, Mr. Hansbrough was an independent consultant
specializing in turnaround and
start-up
operations, primarily in the retail field, until he joined
HearUSA in December 1993.
Thomas W. Archibald attended the London School of
Economics and received a B.A. degree in economics from Denison
University and a Juris Doctor degree from the Ohio State
University Law School. He retired from the Bank of New York in
1995, where he served as Executive Vice President of the
Personal Trust Sector. He held that position at Irving
Trust Company when it merged with The Bank of New York in 1988.
Mr. Archibald is a past Director of Group Health
Incorporated, the only
not-for-profit
health insurance carrier chartered to operate throughout New
York State.
David J. McLachlan is the former Executive Vice
President and Chief Financial Officer of Genzyme Corporation, a
biotechnology company, from 1989 to 1999 and a senior advisor to
Genzymes chairman and chief executive officer through June
2004. Currently he serves as a Director of Dyax Corp., a
biotechnology company and Skyworks Solutions, Inc., a
manufacturer of analog, mixed signal and digital semiconductors
for mobile communications. He is a graduate of Harvard Business
School and Harvard College.
Joseph L. Gitterman, III is the manager of
the EIP Group, an investing, trading and consulting firm that he
founded in 1994. Until 1994, he was a Senior Managing Director
of LaBranche & Co. He was a member of the New York
Stock Exchange for over thirty years and was appointed a
Governor in 1986. At the New York Stock Exchange, he served on
more than fourteen committees, serving as chairman of many of
them. He is director of Intrepid International, Custom Data
Services and the Daylight Company. He also serves on numerous
not for profit boards.
3
Michel Labadie, B.Sc., M.Sc.,
MBA. Mr. Labadie was a Director of Helix Hearing
Care of America Corp before the combination with HearUSA, Inc.
He currently is President and Chief Executive Officer of Les
Pros de la Photo (Quebec) Inc., the largest photo finishing
company in Canada, and has been since 1992. He has also spent
several years working as the head of the Venture Capital,
Portfolio Management and Mergers and Acquisition Departments of
a major financial institution. He currently serves as a director
for several public and private non-US companies.
Bruce N. Bagni, holds a Bachelor of Arts degree
from the University of Southern California, a Juris Doctor
degree from Indiana University (Indianapolis) and a Masters of
Law degree from Columbia University. Mr. Bagni retired from
Blue Cross Blue Shield of Florida at the end of 2004 where he
was Senior Vice President for Public Affairs, General Counsel
and Corporate Secretary. He was a member of the Office of the
CEO, which developed corporate strategy and provided overall
management and leadership for the enterprise. Before joining
Blue Cross Blue Shield of Florida in early 1992 he was employed
for six years by UNUM Life Insurance Company, a large national
and international disability and life insurer, serving primarily
in legal roles, including Vice President and Chief Counsel. He
is currently involved in various business ventures and
charitable activities.
There are no family relationships between or among any directors
or executive officers of the Company.
Vote
Required
The seven director nominees receiving the greatest number of
votes of the Common Stock and the Special Voting Preferred Stock
represented at the meeting (in person or by proxy) will be
elected directors assuming a quorum is present at the meeting.
All shares of Common Stock and the share of Special Voting
Preferred Stock represented by valid proxies will be voted in
accordance with the instructions contained therein. Shares of
Common Stock represented by proxies that are marked
without authority with respect to the election of
one or more nominees for director and broker non-votes will have
no effect on the outcome of the election. Votes with respect to
Exchangeable Shares represented by valid voting instructions
received by the Trustee will be cast by the Trustee through the
Special Voting Preferred Stock in accordance with those
instructions. If no instructions are received by the Trustee
from a holder of Exchangeable Shares, the votes to which such
holder is entitled will not be exercised.
THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE ELECTION OF ALL THE ABOVE NAMED NOMINEES AS
DIRECTORS OF THE COMPANY
Board of
Directors and Committees of the Board
Board of
Directors
The Board of Directors has determined that the following
directors, constituting a majority of the Board, are
independent as defined by the American Stock
Exchange listing standards: Messrs. Archibald, Bagni,
Gitterman, Labadie and McLachlan.
The standing committees of the Board of Directors are the Audit
Committee, the Compensation Committee and the Nominating and
Corporate Governance Committee. The charters for the Audit,
Compensation and Nominating and Corporate Governance Committees
are posted on the Companys web site at (select
Investors then the desired committee charter). All
committee members are appointed by the Board of Directors on the
recommendation of the Nominating and Corporate Governance
Committee. The membership and the function of each committee are
described below.
There were six meetings of the Board of Directors during the
fiscal year ended December 30, 2006. All of the directors
attended at least 75% of the aggregate number of the meetings
held by the Board of Directors and its respective committees on
which they served during the fiscal year. Directors are
encouraged, but not required to attend annual meetings of
stockholders. All of the Companys directors attended the
2006 Annual Meeting of Stockholders.
4
Stockholders may send communications directly to the Board of
Directors by mail to the attention of Presiding Director of the
Boards non-management directors, HearUSA, Inc., 1250
Northpoint Parkway, West Palm Beach, Florida 33407, or by
e-mail to
PresidingDirector@hearusa.com. Currently
Mr. McLachlan is serving as the Presiding Director.
Audit
Committee
During 2006, the Audit Committee was comprised of
Messrs. Archibald, Gitterman, Labadie, McLachlan and Bagni,
all of whom are independent as defined by the
American Stock Exchange listing standards and
Rule 10A-3
under the Securities Exchange Act of 1934, as amended.
Mr. McLachlan serves as Chairman of the Audit Committee. In
addition, the Board of Directors has determined that each member
of the Audit Committee is financially literate and
Mr. McLachlan is an audit committee financial
expert within the meaning of the rules and regulations
adopted by the Securities and Exchange Commission. The Audit
Committee met four times during fiscal 2006.
The principal functions of the Audit Committee are to oversee
the audit of the Companys financial statements provided to
the Securities and Exchange Commission, the Companys
shareholders and the general public; the Companys internal
financial accounting processes and controls; the Companys
disclosure controls and procedures; and the independent audit
process.
Compensation
Committee
During 2006, the Compensation Committee was comprised of
Messrs. Archibald, Gitterman, Labadie, McLachlan and Bagni,
all of whom are independent as defined by the
American Stock Exchange listing standards. The Compensation
Committee, chaired by Mr. Archibald, met four times during
the 2006 fiscal year. The primary function of the Compensation
Committee is to assist the Board in fulfilling its oversight
responsibilities relating to officer and director compensation.
Its primary duties and responsibilities are the overall design,
approval and implementation of the executive compensation plans,
policies and programs for directors, officers and other key
executives of the Company.
Nominating and
Corporate Governance Committee
During 2006, the Nominating and Corporate Governance Committee
was comprised of Messrs. Archibald, Gitterman, Labadie,
McLachlan and Bagni, all of whom are independent as
defined by the American Stock Exchange listing standards. The
Nominating and Corporate Governance Committee, chaired by
Mr. Bagni, met three times during fiscal year 2006. The
principal functions of the Nominating and Corporate Governance
Committee are to recommend to the Board of Directors the
director nominees for the next annual meeting of stockholders,
candidates to fill vacancies on the Board and directors to be
appointed to Board committees. In addition, the Nominating and
Governance Committee develops and recommends to the Board a set
of corporate governance guidelines applicable to the Board and
the Company and oversees the effectiveness of the Companys
corporate governance in accordance with these guidelines. This
Committee also oversees the process of evaluations of the Board,
its committees and executive management of the Company.
Director
Nominating Process
The Nominating and Corporate Governance Committee is responsible
for identifying individuals qualified to become Board members
and recommending to the Board director nominees for the next
annual meeting of shareholders and candidates to fill vacancies
on the Board.
The Nominating and Corporate Governance Committee considers
candidates for Board membership suggested by its members and
other Board members. The Committee may also use outside
consultants to identify potential directors. Additionally, in
selecting nominees for directors, the Committee will review
candidates recommended by stockholders using the same general
criteria as other candidates. Any stockholder wishing to
recommend a candidate for consideration by the committee as a
nominee for director should follow the procedures set forth
below.
5
Once the Nominating and Corporate Governance Committee has
identified a prospective nominee, the Committee makes an initial
determination as to whether to conduct a full evaluation of the
candidate. This initial determination is based on the
information provided to the Committee with the recommendation of
the prospective candidate, as well as the Committees own
knowledge of the prospective candidate, which may be
supplemented by inquiries of the person making the
recommendation or others. The preliminary determination is based
primarily on the need for additional Board members to fill
vacancies or expand the size of the Board and the likelihood
that the prospective nominee can satisfy the evaluation factors
described below. The Committee then evaluates the prospective
nominee against the standards and qualifications set out in the
Companys Corporate Governance Guidelines, which include
among others things, considerations of judgment, specific
business experience, independence (for purposes of the American
Stock Exchange and SEC rules) and skills (such as understanding
of technology, finance and marketing and healthcare), all in the
context of an assessment of the perceived needs of the Board at
the time.
Upon completion of this evaluation and interview process, the
Committee makes a recommendation to the full Board as to whether
the candidate should be nominated by the Board and the Board
determines whether to approve the nominee after considering the
recommendation and report to the Committee.
Stockholders may recommend director nominee candidates by
sending the following information to Nominating Committee
Chairman, HearUSA, Inc., 1250 Northpoint Parkway, West Palm
Beach, Florida, 33407: stockholders name, number of shares
owned, length of period held, and proof of ownership; name, age
and address of candidate; candidates detailed resume;
description of any arrangements or understandings between the
stockholder and the candidate; and signed statement from the
candidate confirming his or her willingness to serve on the
Board of Directors.
If a stockholder seeks to nominate a candidate for election at
the 2008 annual meeting of stockholders, the stockholder must
follow the procedures described under the Stockholder
Proposals below.
Compensation of
Directors
The following table provides certain information about
compensation to directors during 2006.
DIRECTOR COMPENSATION
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Fees Earned or Paid
in
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All Other
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Cash
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Compensation
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Total
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Name(1)
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($)
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($)
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($)
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Thomas W. Archibald(2)
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31,950
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31,950
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Bruce Bagni(3)
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56,950
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56,950
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Joseph L. Gitterman III(2)
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28,950
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28,950
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Michel Labadie(2)
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25,850
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25,850
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David J. McLachlan(2)
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32,300
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32,300
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Dr. Brown and Mr. Hansbrough are not compensated
separately for their service on the Board of Directors. See
Summary Compensation Table, below. |
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As of December 30, 2006, options outstanding were as
follows: Mr. Archibald 31,000;
Mr. Gitterman 29,500;
Mr. Labadie 25,000; and
Mr. McLachlan 31,000. |
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Includes $25,000 cash payment to Mr. Bagni upon his joining
the Board of Directors in 2005. |
The Company pays each non-employee director a meeting fee of
$1,300 for each in person meeting of the Board that they attend
and a fee of $650 for each telephonic Board or special committee
meeting in which they participate. For each committee meeting
the Company pays $650 ($325 if held by telephone). Each
committee chair is paid an annual amount of $3,000 except that
the Audit Committee Chairman is
6
paid an amount of $4,000. In addition, the Company pays each
non-employee director an annual retainer fee of $17,500 upon
re-election to the Board. The Company reimburses directors for
their
out-of-pocket
expenses for attendance at meetings of the Board.
Code of
Ethics
The Board of Directors has adopted a Code of Ethics applicable
to all the Companys directors, officers and employees, a
copy of which is available on the Companys website at
www.hearusa.com.
Audit Committee
Report
We have met and held discussions with the Companys
management and with the Companys independent registered
public accountants, BDO Seidman, LLP. We have reviewed and
discussed the audited consolidated financial statements of
HearUSA, Inc. for the 2006 fiscal year with the Companys
management. We discussed with BDO Seidman, LLP matters required
to be discussed by standards of the Public Company Accounting
Oversight Board (United States) (PCAOB), including standards set
forth in Statement on Auditing Standards No. 61.
BDO Seidman, LLP also provided to us the written disclosures
regarding their independence required by Independence Standards
Board Standard No. 1, and we discussed with BDO Seidman,
LLP their independence.
Based on these reviews and discussions, we recommended to the
Board of Directors that the audited consolidated financial
statements for 2006 be included in HearUSA, Inc.s Annual
Report on
Form 10-K
for the fiscal year ended December 30, 2006 filed with the
Securities and Exchange Commission.
David J. McLachlan, Chairman
Joseph L. Gitterman, III
Thomas W. Archibald
Michel Labadie
Bruce N. Bagni
Compensation
Discussion and Analysis
The Compensation Committee is comprised entirely of independent
directors and has the responsibility for reviewing and approving
changes to the Companys executive compensation programs.
The Compensation Committee approves all compensation payments to
the Chief Executive Officer and other named executive officers.
The Compensation Committee uses salary and bonus compensation to
reward current and past performance while using stock options to
provide incentives for long-term performance. To establish
compensation for 2006 for the Companys executive officers,
including the CEO, the Compensation Committee used subjective
performance evaluations, compensation statistics of similar
sized health care organizations and, with respect to executive
officers other than Mr. Hansbrough, the salary
recommendations of Mr. Hansbrough. The Compensation
Committee will continue to review the base salaries of the named
executive officers to ensure salaries continue to reflect market
practices and take into account performance, experience and
retention value.
Objectives and
Design of the Executive Compensation Programs
HearUSAs executive compensation program is designed to
attract and retain quality executive talent and to provide
meaningful incentives for such executives to enhance stockholder
value. The Committees executive compensation philosophy is
threefold: (1) all compensation should be referenced and
validated based on industry surveys for the health care
industry; (2) compensation grants and changes to
compensation should be performance based; and (3) executive
and director pay should be targeted at the mid-range of the
industry surveys.
7
The Committee reviews the executive compensation program at
least annually to ensure that its compensation goals and
objectives are being met. The Committee determines the final
compensation for our Chief Executive Officer and other named
executive officers, although with respect to the other named
executive officers, the Chief Executive Officer works closely
with the Committee to make recommendations to the Committee
regarding the named executive officers compensation. In
reviewing our executive compensation program and in making
compensation decisions, the Committee has utilized surveys such
as those generated by Equilar, and has used tally
sheets to ensure that the Committee has a comprehensive
picture of compensation paid to our named executive officers.
Elements of
Compensation
Base Salaries. The Committee typically
reviews the base salary of each executive officer on an annual
basis to make adjustments based on performance of the officer
and performance of the Company. In making base salary decisions,
the Committee has reviewed comparable salary data from Equilar,
compensation consultants. The Committee targets base salaries at
the 50th percentile of those surveyed organizations.
The Committee makes a specific decision on annual adjustments to
base salary with input from the Chief Executive Officer
regarding the performance appraisal for each officer. For 2006,
the overall compensation of each named executive officer fell
within the 50% guideline. The Chief Executive Officers
compensation is discussed more fully below under Elements
of Compensation Employment Agreements.
Short Term Incentive Awards (Cash Incentive
Awards). The Company believes that short-term
incentives should be closely tied to the performance of the
Company and the creation of shareholder value. Cash-based awards
are made dependent on achievement of performance objectives
which can be personal to the executive or can be Company
performance objectives all of which are set by the Compensation
Committee at the beginning of each year. For 2006, executives
could have earned up to fifty percent of their base salary as a
cash incentive award if certain Company performance objectives
had been met. The Committee, at its discretion, can award a
portion of this cash incentive award in the event performance
targets are not achieved. No cash incentive awards were earned
by executives in 2006 because the Company targets were not met.
Long Term Incentive Awards (Equity
Awards). In keeping with the Companys
performance based philosophy, the Company believes that long
term incentives also should be closely tied to creation of
shareholder value. The most direct way to accomplish this is
through the grant of stock options. Historically, the Committee
has granted options to the named executive officers. None were
granted in 2006 as the Committee was evaluating its equity
compensation practices. Part of that process resulted in the
adoption by the Board of the 2007 HearUSA Incentive Compensation
Plan, which is being considered by the shareholders for approval
at this annual meeting.
In making decisions regarding annual option grants for executive
officers, the Committee first reviews the comparable stock
option awards from the compensation surveys discussed above. In
addition, the Committee considers certain other factors such as
Company performance, personal performance and level of
contribution. Again, the Committee is guided by the surveys and
targets option grants in the 50% percentile of those
organizations included in the surveys.
To help reduce stock option expense, and add additional
retention elements, the Committee is evaluating the use of
performance-based restricted stock units (RSUs). The
first step in this process was the adoption of an equity
compensation plan that included possible grants of RSUs to
executive officers and directors. The 2007 Plan, adopted subject
to shareholder approval which the Board is seeking at this
Annual Meeting, permits the grant of RSUs.
Timing Related to Grants of Options and Other Long Term Equity
Incentive Awards. In the past, the Compensation Committee has
made option or other equity grants to named executive officers
and other employees, and expects these grants to continue in the
future assuming shareholder approval of the 2007
8
Equity Incentive Plan, at three different times: (1) upon
the hiring of the executive or employee (typically, the grant
date is the employees start date with the Company),
(2) on the date of the regularly scheduled quarterly Board
of Directors meetings, and (3) on some occasions, in
connection with a promotion or special recognition grant.
Historically, although most of the grants are scheduled to be
made on an annual basis at the Board of Directors meeting in
February of each year, grants are occasionally made at other
Board meetings. The regularly scheduled quarterly Board of
Directors meetings are typically one or two days prior to the
date of the Companys regular quarterly earnings press
release for the just completed quarters. Therefore, any grants
made at such regularly scheduled meetings are made at a time
just prior to the release by the Company of material non-public
information (i.e., the Companys results of operations for
the just-completed quarter). The Committee believes that the
timing of such grants is appropriate because making grants on an
approximately regular timetable, the unpredictability of both
the Companys operating results and the trading
markets reaction to those operating results does not
factor into the Committees decision.
Employment Agreements. Each of our
named executive officers has an employment agreement with the
Company. Each of the employment agreements provides that the
executive will be entitled to receive base compensation, to be
reviewed and adjusted in the discretion of the Committee
(usually on an annual basis), and performance bonuses, at the
discretion of the Compensation Committee, and to participate in
and receive benefits under the Companys welfare benefit
and similar employee benefit plans generally made available by
the Company to other key employees.
Report of the
Compensation Committee
The Compensation Committee has reviewed and discussed the
foregoing Compensation Discussion and Analysis with management.
Based on this review and discussion, the Compensation Committee
has recommended to the full Board that the Compensation
Discussion and Analysis be included in this proxy statement for
filing with the Securities and Exchange Commission.
COMPENSATION COMMITTEE:
Thomas W. Archibald, Chairman
David McLachlan
Joseph L. Gitterman, III
Michel Labadie
Bruce N. Bagni
Executive
Compensation
The following table presents summary information concerning 2006
compensation awarded or paid to, or earned by, (i) the
Companys Chief Executive Officer, (ii) the
Companys Chief Financial Officer and (iii) each of
the other executive officers whose salary and bonus exceeded
$100,000 (the Named Executive Officers) for the year
2006.
SUMMARY COMPENSATION TABLE
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
Compensation
|
|
|
Total
|
|
Name
and Principal Positions
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
($)
|
|
|
($)
|
|
|
|
|
Stephen J. Hansbrough
|
|
|
2006
|
|
|
|
385,000
|
|
|
|
|
|
|
|
|
|
385,000
|
|
Gino Chouinard
|
|
|
2006
|
|
|
|
260,000
|
|
|
|
|
|
24,000
|
(1)
|
|
|
284,000
|
|
Paul A. Brown
|
|
|
2006
|
|
|
|
240,000
|
|
|
|
|
|
|
|
|
|
240,000
|
|
Kenneth Schofield
|
|
|
2006
|
|
|
|
260,000
|
|
|
|
|
|
36,000
|
(1)
|
|
|
296,000
|
|
|
|
|
|
(1) |
|
These cash payments were made to the named executive officers in
lieu of vacation time. |
9
Employment
Agreements
The Company entered into employment agreements in 2005 with
Dr. Paul A. Brown, Chairman of the Board, Stephen J.
Hansbrough, President and Chief Executive Officer, Gino
Chouinard, Executive Vice President and Chief Financial Officer,
and Kenneth Schofield, Chief Operating Officer. The term of the
agreements for each of Dr. Brown and Mr. Hansbrough is
five years. The term of the agreements for each of
Mr. Chouinard and Mr. Schofield is three years. Each
of the employment agreements provides that the executive will be
entitled to receive base compensation, to be reviewed and
adjusted in the discretion of the Committee (usually on an
annual basis), and performance bonuses, at the discretion of the
Compensation Committee, and to participate in and receive
benefits under the Companys stock plan and welfare benefit
and similar employee benefit plans generally made available by
the Company to other key employees.
The agreements contemplate severance payments in the event of
termination without cause, non-renewal at the end of the term or
termination by the executive for good reason after a change in
control. The severance payments in the case of Dr. Brown
and Mr. Hansbrough are in an amount equal to three times
base salary and in the case of Mr. Chouinard and
Mr. Schofield in an amount equal to two times base salary.
In addition, on such termination, all outstanding and unvested
options would accelerate and the Company would be liable to
continue to provide benefits to the executives for a period of
three years for Dr. Brown and Mr. Hansbrough and for a
period of two years for Messrs. Chouinard and Schofield. If
such termination had occurred in 2006, cash severance payments
to Dr. Brown and Messrs. Hansbrough, Chouinard and
Schofield would have been $720,000, $1,155,000, $520,000 and
$520,000, respectively. Unvested options totaling
100,000 shares, 200,000 shares, 212,500 shares
and 212,500 shares would accelerate and vest for
Dr. Brown and Messrs. Hansbrough, Chouinard and
Schofield, respectively.
In the event of the executives death or termination
because of disability, all then outstanding options and similar
rights shall become fully vested and the executive or his legal
representatives may exercise such rights for a one year period
following the executives death or termination for
disability.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
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Option Awards
|
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|
|
|
|
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|
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Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
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Plan
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|
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|
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|
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|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
of Securities
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
Unexercised
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|
|
Unexercised
|
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|
Unexercised
|
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|
Option
|
|
|
|
|
|
|
Options
|
|
|
Options
|
|
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Unearned
|
|
|
Exercise
|
|
|
Option
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable(1)
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
|
|
Stephen J. Hansbrough
|
|
|
250,000
|
|
|
|
|
|
|
|
250,000
|
|
|
$
|
0.35
|
|
|
|
3/31/2013
|
|
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
400,000
|
|
|
$
|
1.33
|
|
|
|
8/25/2014
|
|
Gino Chouinard
|
|
|
21,540
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|
|
|
|
|
|
|
21,540
|
|
|
$
|
2.60
|
|
|
|
12/14/2010
|
|
|
|
|
53,055
|
|
|
|
|
|
|
|
53,055
|
|
|
$
|
2.60
|
|
|
|
11/1/2009
|
|
|
|
|
200,000
|
|
|
|
|
|
|
|
200,000
|
|
|
$
|
0.35
|
|
|
|
3/31/2013
|
|
|
|
|
175,000
|
|
|
|
175,000
|
|
|
|
350,000
|
|
|
$
|
1.33
|
|
|
|
8/25/2014
|
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|
|
|
12,500
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|
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37,500
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|
|
|
50,000
|
|
|
$
|
1.79
|
|
|
|
5/9/2015
|
|
Paul A. Brown
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|
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200,000
|
|
|
|
|
|
|
|
200,000
|
|
|
$
|
0.35
|
|
|
|
3/31/2013
|
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
200,000
|
|
|
$
|
1.33
|
|
|
|
8/25/2014
|
|
Kenneth Schofield
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|
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2,500
|
|
|
|
|
|
|
|
2,500
|
|
|
$
|
7.50
|
|
|
|
5/22/2007
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|
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|
|
2,500
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|
|
|
|
|
|
|
2,500
|
|
|
$
|
7.50
|
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|
|
5/18/2008
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|
|
10,000
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|
|
|
|
|
|
|
10,000
|
|
|
$
|
3.88
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12/13/2009
|
|
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|
|
10,000
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|
|
|
|
|
|
|
10,000
|
|
|
$
|
4.00
|
|
|
|
6/6/2010
|
|
10
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
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|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
of Securities
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
|
Options
|
|
|
Options
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Option
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable(1)
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
25,000
|
|
|
$
|
1.65
|
|
|
|
5/10/2011
|
|
|
|
|
35,000
|
|
|
|
|
|
|
|
35,000
|
|
|
$
|
0.81
|
|
|
|
11/15/2011
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
150,000
|
|
|
$
|
0.35
|
|
|
|
3/31/2013
|
|
|
|
|
175,000
|
|
|
|
175,000
|
|
|
|
350,000
|
|
|
$
|
1.33
|
|
|
|
8/25/2014
|
|
|
|
|
12,500
|
|
|
|
37,500
|
|
|
|
50,000
|
|
|
$
|
1.79
|
|
|
|
5/9/2015
|
|
|
|
Equity
Compensation Plans
The following table gives information about the Companys
common stock that may be issued upon exercise of options,
warrants and rights under the Companys equity compensation
plans as of December 30, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
to
|
|
|
Weighted-average
|
|
|
Number of
Securities
|
|
|
|
be Issued Upon
Exercise
|
|
|
Price of
Outstanding
|
|
|
Remaining Available
for
|
|
|
|
of Outstanding
Options,
|
|
|
Options, Warrants
|
|
|
Future Issuance
Under
|
|
Plan
Category
|
|
Warrants
and Rights
|
|
|
and
Rights
|
|
|
Equity
Compensation Plans
|
|
|
|
|
Equity compensation plans approved
by security holders(1)
|
|
|
5,198,423
|
|
|
$
|
1.32
|
|
|
|
132,500
|
|
Equity compensation plans not
approved by security holders
|
|
|
225,000
|
|
|
$
|
0.87
|
|
|
|
−0−
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,423,423
|
|
|
|
|
|
|
|
132,500
|
|
|
|
|
|
(1) |
|
These plans are the Companys 1987 Stock Option Plan
(expired in 1997), 1995 Flexible Stock Plan (expired in
2005) and the 2002 Flexible Stock Plan. The 132,500
remaining securities available for future issuance under the
shareholder approved plans are from the 2002 Flexible Stock Plan. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Companys directors and executive officers and
persons who own beneficially more than ten percent of any class
of equity security of the Company to file with the Securities
and Exchange Commission initial reports of such ownership and
reports of changes in such ownership. Officers, directors and
such beneficial owners are required by Securities and Exchange
Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file.
To the Companys knowledge, based solely on review of
copies of reports furnished to the Company, during the fiscal
year ended December 30, 2006, all Section 16(a) filing
requirements applicable to its executive officers and directors
were made on a timely basis.
|
|
|
(1) |
|
The vesting dates of the unexercisable options for
Mr. Hansbrough are August 25, 2007 and 2008, for
Mr. Chouinard the vesting dates are August 25, 2007
and 2008, and May 9, 2007 and 2008, for Mr. Brown the
vesting dates are August 25, 2007 and 2008 and for
Mr. Schofield the vesting dates are August 25, 2007
and 208 and May 9, 2007 and 2008. |
11
Compensation
Committee Interlocks and Insider Participation
None
Security
Ownership of Certain Beneficial Owners and Management
Security
Ownership of Certain Beneficial Owners
The following table sets forth, as of April 13, 2007 the
names of all persons known by the Company to be beneficial
owners of more than five percent of the Common Stock. As of
April 13, 2007, there were 37,124,047 shares of Common
Stock and 760,461 Exchangeable Shares issued and outstanding.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature
|
|
|
|
|
Title
of
|
|
Name
and Address of
|
|
Of
Beneficial
|
|
|
Percent
of
|
|
Class
|
|
Beneficial Owner
|
|
Ownership
|
|
|
Class
|
|
|
|
|
Common Stock
|
|
Paul A. Brown, M.D.
1250 Northpoint Parkway
West Palm Beach, Fl 33407
|
|
|
2,640,000
|
(1)
|
|
|
6.87
|
%
|
Common Stock
|
|
Michel Labadie
90, Beaubien Street West
Montreal, Quebec
Canada, H2S 1V6
|
|
|
2,404,468
|
(2)
|
|
|
6.32
|
%
|
Common Stock
|
|
Jack Silver
660 Madison Avenue
New York, NY 10021
|
|
|
3,025,177
|
(3)
|
|
|
7.94
|
%
|
|
|
|
|
(1) |
|
Includes 300,000 shares of Common Stock subject to options
and 240,000 shares of common stock subject to warrants
acquired as part of private placements which are currently
exercisable (or exercisable within 60 days). |
|
(2) |
|
Includes 1,485,540 shares of Common Stock held by Les
Partenaires de Montréal, s.e.c. Michel Labadie is a
director of Les Partenaires de Montréal Inc., general
partner for Les Partenaires de Montréal, s.e.c. Also
includes 733,928 shares plus 160,000 shares which may
be acquired upon the exercise of warrants held by Gestion
Fremican Inc. Michel Labadie is a shareholder and director of
Gestion Fremican, Inc. Also includes 25,000 shares of
Common Stock issuable to Mr. Labadie upon the exercise of
options, which are currently exercisable. |
|
(3) |
|
Includes 1,143,700 shares of Common Stock held by Sherleigh
Associates Inc. Profit Sharing Plan, a trust of which Jack
Silver is a trustee, 153,000 shares of common stock held by
Sherleigh Associates Inc. Defined Benefit Pension Plan, a trust
of which Jack Silver is a trustee and 728,477 shares of
Common Stock held by SIAR Capital LLC, an independent investment
fund of which Jack Silver is the principal investor and manager.
Also includes 200,000 warrants acquired as part of private
placements which are currently exercisable. |
12
Security
Ownership of Management
The following table sets forth, as of April 13, 2007 the
number of shares of Common Stock owned beneficially by each
director, each executive officer named in the Summary
Compensation Table and all directors and executive officers as a
group.
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature
of
|
|
|
Percent of
|
|
Name
|
|
Beneficial
Ownership
|
|
|
Class
(*)
|
|
|
|
|
Paul A. Brown, M.D.
|
|
|
2,640,000
|
(1)
|
|
|
6.87
|
%
|
Stephen J. Hansbrough
|
|
|
553,000
|
(2)
|
|
|
1.44
|
%
|
Gino Chouinard
|
|
|
478,486
|
(3)
|
|
|
1.24
|
%
|
Kenneth Schofield
|
|
|
435,000
|
(4)
|
|
|
1.14
|
%
|
David J. McLachlan
|
|
|
195,045
|
(5)
|
|
|
*
|
|
Thomas W. Archibald
|
|
|
235,600
|
(6)
|
|
|
*
|
|
Joseph L. Gitterman III
|
|
|
334,764
|
(7)
|
|
|
*
|
|
Michel Labadie
|
|
|
2,404,468
|
(8)
|
|
|
6.32
|
%
|
Bruce Bagni
|
|
|
|
|
|
|
*
|
|
All directors and executive
officers as a group (9 persons)
|
|
|
7,276,363
|
(9)
|
|
|
18.09
|
%
|
|
|
|
|
* |
|
Less than one percent of class calculated as a percentage of
issued and outstanding Common Stock and Exchangeable Shares as
of April 13, 2007. |
|
(1) |
|
Includes 300,000 shares of Common Stock subject to options
and 240,000 shares of Common Stock subject to warrants
acquired as part of private placements, which are currently
exercisable (or exercisable within 60 days). |
|
(2) |
|
Includes 450,000 employee stock options which are currently
exercisable (or exercisable within 60 days). |
|
(3) |
|
Includes 474,595 employee stock options which are currently
exercisable (or exercisable within 60 days). |
|
(4) |
|
Includes 435,000 employee stock options which are currently
exercisable (or exercisable within 60 days). |
|
(5) |
|
Includes 31,000 shares of Common Stock issuable upon the
exercise of non-qualified options, all of which are currently
exercisable. |
|
(6) |
|
Includes 31,000 shares of Common Stock issuable upon the
exercise of non-qualified options, all of which are currently
exercisable. |
|
(7) |
|
Includes 29,500 shares of Common Stock issuable upon the
exercise of non-qualified options, all of which are currently
exercisable. |
|
(8) |
|
Includes 1,485,540 shares of Common Stock held by Les
Partenaires de Montréal, s.e.c. Michel Labadie is a
director of Les Partenaires de Montréal Inc., general
partner for Les Partenaires de Montréal, s.e.c. Also
includes 733,928 shares plus 160,000 shares of which
may be acquired on the exercise of warrants held by Gestion
Fremican Inc. Michel Labadie is a shareholder and director of
Gestion Fremican, Inc. Also includes 25,000 shares of
Common Stock issuable to Mr. Labadie upon the exercise of
options which are currently exercisable. |
|
(9) |
|
Includes 2,336,095 shares of Common Stock issuable upon the
exercise of options and warrants, which are currently
exercisable (or exercisable within 60 days). |
13
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Our Audit Committee charter requires that the Audit Committee
review and approve all transactions between the Company and any
related parties.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM SERVICES AND FEES
The Board of Directors has reappointed BDO Seidman, LLP as the
independent registered public accounting firm for the Company
and its subsidiaries for the fiscal year 2007. Representatives
of BDO Seidman, LLP are expected to be present at the Annual
Meeting of Stockholders and will be allowed to make a statement
if they wish. Additionally, they will be available to respond to
appropriate questions from stockholders during the meeting.
Aggregate fees for professional services rendered for the
Company by BDO Seidman, LLP for the years ended
December 30, 2006 and December 31, 2005, were as
follows:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Audit fees
|
|
$
|
443,860
|
|
|
$
|
324,000
|
|
Audit related fees
|
|
|
19,550
|
|
|
|
50,800
|
|
Tax fees
|
|
|
58,700
|
|
|
|
60,550
|
|
All other fees
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
522,110
|
|
|
$
|
435,350
|
|
Audit fees consisted principally of professional services
rendered by BDO Seidman, LLP for the audit of our annual
financial statements for the fiscal year ended December 30,
2006 and for the reviews of the financial statements included in
our Quarterly Reports on
Form 10-Q
for that fiscal year.
Audit-related fees consisted principally of professional
services rendered for the audits of the Companys employee
benefit plans and various accounting consultations.
Tax fees consisted of services rendered in connection with the
preparation and review of federal, state, local, franchise and
other tax returns and consultations as to the tax treatment of
transactions or events and the actual
and/or
potential impact of final or proposed tax laws, rules,
regulations or interpretations by tax authorities.
The Companys Audit Committee has considered whether the
non-audit services provided by the Companys auditors in
connection with the year ended December 30, 2006 were
compatible with the auditors independence.
The Company has adopted a pre-approval policy requiring that the
Audit Committee pre-approve all audit and non-audit services
performed by the Companys independent auditors. Under the
policy, some services may be pre-approved without consideration
of specific
case-by-case
services, while others require the specific pre-approval of the
Audit Committee. Annual audit services are subject to the
specific pre-approval of the Audit Committee.
Proposal No. 2
APPROVAL OF THE
HEARUSA, INC.
2007 INCENTIVE COMPENSATION PLAN
Overview
On April 27, 2007, acting on the recommendation of the
Compensation Committee of the Board of Directors, our Board
adopted the HearUSA 2007 Incentive Compensation Plan (the
2007 Plan), subject to stockholder approval. The
2007 Plan provides for the grant of stock options, stock
appreciation rights, restricted stock and restricted stock units
to Directors, officers and employees. There are approximately
14
500 employees and five non-employee directors who are eligible
to participate in the 2007 Plan. The Companys Chief
Executive Officer, Chief Financial Officer and the other named
executive officers are eligible participants. A total of
2,500,000 shares of Common Stock will be available for
issuance under the 2007 Plan. On April 26, 2007, the
closing price of the Common Stock as reported on the American
Stock Exchange was $1.88.
The Plan will become effective only if approved by the
Companys stockholders at the Annual Meeting. The 2007 Plan
is being submitted to the stockholders for approval consistent
with the requirements of the American Stock Exchange.
Stockholder approval also will allow for performance-based cash
and equity compensation that is paid under the Plan to be
deductible by the Company for federal income tax purposes under
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the Code). Section 162(m) generally
places a $1 million annual limit on the amount of
compensation paid to each of the Companys named executive
officers that may be deducted by the Company for federal income
tax purposes, unless such compensation constitutes
qualified performance-based compensation, which is
based on the achievement of pre-established performance goals
set by a committee of the Board pursuant to an incentive plan
that has been approved by the Companys stockholders.
Stockholder approval of the performance measures set out in the
2007 Plan will constitute stockholder approval of the
performance criteria for purposes of Section 162(m). The
Board believes it is in the best interest of the Company and its
stockholders to approve the 2007 Plan.
Summary of the
HearUSA, Inc. 2007 Incentive Compensation Plan
The purpose of the 2007 Plan is to assist the Company in
attracting and retaining selected individuals to serve as
Directors, officers and employees of the Company or any of its
subsidiaries or affiliates. The 2007 Plan is intended to
encourage high levels of performance by those individuals who
are key to the success of the Company, to attract new
individuals who are highly motivated and who will contribute to
the success of the Company and to encourage those individuals to
remain as Directors, officers
and/or
employees of the Company and its subsidiaries by increasing
their proprietary interest in the Company.
Key employees and Directors of the Company or any of its
subsidiaries or affiliates will be eligible to participate in
the 2007 Plan at the discretion of the Compensation Committee.
Each award will be evidenced by an agreement or certificate
setting forth the terms and conditions of the award, including
the term of the award, which will not be greater than ten years.
The Compensation Committee will administer the 2007 Plan and
grant awards under the 2007 Plan. Unless otherwise determined by
the Board, each member of the Compensation Committee will be a
Non-Employee Director as defined for purposes of
Section 16 of the Securities Exchange Act of 1934 and an
Outside Director as defined for purposes of 162(m)
of the Code. The Compensation Committee will have the power to
interpret the 2007 Plan, to determine the terms of the
agreements or certificates, and to make all other determinations
necessary or advisable for the administration of the 2007 Plan,
consistent with its terms. Any award granted to a member of the
Committee must be on terms consistent with awards made to other
non-employee Directors who are not members of the Committee,
except where the award is approved or ratified by the full Board
(excluding persons who are also members of the Committee).
A total of 2,500,000 shares of Common Stock will be
available for issuance under the Plan. Any shares subject to an
award under the 2007 Plan which are forfeited or otherwise
surrendered without receiving any payment or other benefit may
be used again for an award under the 2007 Plan.
Types of
Awards
General. The 2007 Plan contemplates the grant
of stock options, stock appreciation rights, restricted stock
and restricted stock units.
Options. Options may be either incentive stock
options or non-qualified stock options. The exercise price of an
option may not be less than 100% of the closing price of the
Common Stock on the grant date. Options, once issued, may not be
repriced to a lower exercise price without first obtaining the
approval of
15
the stockholders. The purchase price is payable in full at the
time of exercise. The purchase price may be paid in cash or, if
the Compensation Committee so permits, through delivery or
tender to the Company of shares held, either actually or by
attestation, by the participant, or, if the Compensation
Committee so permits, a combination thereof, unless otherwise
provided in the agreement or certificate. No shares may be
tendered in exercise of an incentive stock option if such shares
were acquired by the optionee through the exercise of an
incentive stock option unless (i) such shares have been
held by the optionee for at least one year and (ii) at
least two years have elapsed since the grant date. The
Compensation Committee, in its discretion, may establish rules
and procedures for the methods and forms of payment of the
purchase price upon option exercise.
If, when an incentive stock option is granted, the participant
possesses more that 10% of the total voting power of all of the
stock of the Company and its subsidiaries, the option price for
such incentive stock option must be at least 110% of the fair
market value of the shares subject to the option on the grant
date, and such option will expire five years after the grant
date.
Stock Appreciation Rights. Stock appreciation
rights entitle a participant, subject to the terms and
conditions determined by the Compensation Committee, to all or a
portion of the excess of the fair market value of a specified
number of shares on the exercise date over a specified price,
which may not be less than 100% of the fair market value of the
shares on the grant date. A stock appreciation right may be
granted in connection with a contemporaneously granted option,
or independent of any option. If issued in connection with an
option, its exercise cancels the connected option and exercise
of the connected option cancels the stock appreciation right.
Each stock appreciation right may be exercisable in whole or in
part according to the agreement or certificate. Except as
otherwise provided in the agreement or certificate, upon
exercise of a stock appreciation right, the participant will
receive cash, stock or a combination of cash and stock (as
chosen by the participant if not otherwise specified in the
award) as promptly as practicable after such exercise. The
agreement or certificate may limit the amount or percentage of
the total appreciation on which payment may be made in the event
of the exercise of a stock appreciation right.
Restricted Stock and Restricted Stock
Units. Restricted stock may be granted in the
form of shares registered in the name of the Company as nominee
for the participant and held by the Company until the
restrictions have lapsed. Restricted stock may, in the
discretion of the Compensation Committee, provide dividends and
voting rights prior to vesting. Restricted stock units represent
the right to receive cash or shares, at the discretion of the
Committee, for the restricted stock units at the end of a
specified restricted period. The vesting of restricted stock
units may be performance based or time based (or both) and will
be set forth in a written agreement containing all of the terms
of the grant. The Compensation Committee in its discretion may
establish any employment conditions, performance conditions (as
described below), or restrictions on transferability with
respect to restricted stock and restricted stock unit grants.
The term of any award or performance period may not exceed ten
years.
Performance Targets and Conditions. Any
performance targets related to other performance-based awards,
and any performance conditions related to the lapse of
restrictions on restricted stock awards or restricted stock
units, will be determined by the Compensation Committee. To the
extent that any award is intended to qualify as
performance-based compensation under Section 162(m) of the
Code, it must have performance targets that consist of one or
any combination of two or more of the following: net earnings or
net income (before or after taxes); funds from operations;
earnings per share; net sales growth; net operating profit;
return measures (including return on assets, capital, invested
capital, equity or sales); cash flow (including operating cash
flow, free cash flow, and cash flow return on capital); earnings
before or after taxes, interest, depreciation
and/or
amortization; gross or operating margins; productivity ratios;
and share price (including growth measures and total shareholder
return).
Termination of
Employment
Except as otherwise determined by the Compensation Committee, or
as otherwise provided in the award agreement or certificate
(which may, without limitation, provide for an extension of the
exercisability of options and stock appreciation rights, but in
no event after expiration of their stated terms), the following
16
will take place in the event of termination of employment or
separation of service (in the case of a director) by a
participant:
In the case of options granted under the Plan not previously
exercised or expired, the options will be deemed canceled and
terminated on the day of such termination or separation unless
the Committee decides to extend the term of the option for a
period not to exceed three months after the date of such
termination or separation. In the case of the separation from
service of a non-employee director by reason of death,
disability or under conditions satisfactory to both the director
and the Company, any nonqualified stock option held by such
director not previously exercised or expired shall be
exercisable for up to five years after the date of separation.
In the case of the death of an optionee (who is not a
non-employee director), outstanding options held by that
optionee, to the extent exercisable on the date of death, may be
exercised by the estate of the optionee (or another permitted
holder) within one year after the death of the optionee. In the
case of termination by reason of the disability of an optionee,
the optionee (or his guardian or legal representative) may
exercise any outstanding options which the optionee could have
exercised as of the first date of the disability, at any time
within one year after such termination.
In the case of stock appreciation rights which are related to
options, the stock appreciation rights may be exercised only to
the extent that the options to which they relate may be
exercised in the event of termination of employment or
separation of service.
Restricted stock awards shall be forfeited and returned to the
Company and all rights of the participant with respect to such
restricted shares will terminate when the participant terminates
employment. The Compensation Committee may, in its sole
discretion, waive the forfeiture period and other conditions set
forth in a restricted stock award under appropriate
circumstances, which could include the death, disability or
retirement of a participant, and subject to such terms as the
Committee deems appropriate.
With respect to restricted stock units, except to the extent the
Committee specifies otherwise, any restricted stock unit which
is not earned and vested by the end of the restricted period
shall be forfeited. If the participants date of
termination, or separation of service in the case of a director,
occurs prior to the end of the restricted period, the Committee,
in its sole discretion, may determine that the participant will
be entitled to settlement of all or some portion of the
restricted stock units and may accelerate the determination of
the value and settlement of the units or make such other
adjustments as the Committee deems desirable.
Change of
Control
The Compensation Committee is authorized to make provisions in
the various awards pertaining to a change of control of the
company and to amend or modify existing awards upon such a
change. The 2007 Plan generally defines a change of
control as (a) a change in the composition of a
majority of the Board of Directors over a 12 month period
without the approval of the incumbent directors (as defined),
(b) an acquisition of more than 35% of the Companys
Common Stock or voting power by one person or a group, or
(c) the sale or disposition to any one person or group
assets of the Company 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 Company; provided, however, that in
no event will a transaction constitute a change of control
unless it also constitutes a change of control event
contemplated under the regulations under Section 409A of
the Code (discussed below).
Miscellaneous
Provisions
In the event of a dividend or similar distribution,
recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation,
split-up
spin-off, combination, repurchase or exchange of shares of
Common Stock or similar transaction, the Committee may make
adjustments to the number and type of shares that thereafter may
be made the subject of awards under the Plan, the number and
type of shares subject to outstanding awards and the grant or
exercise price with respect to any outstanding award. If
appropriate, the Committee may make provision for a cash payment
to the holder of any outstanding award
17
in such circumstances. In no event may the Committee make
adjustments that would cause an award to violate the provisions
of Section 409A of the Code (unless agreed to by the holder
of such award).
The 2007 Plan will remain in effect until its termination or the
later of the distribution of shares subject to outstanding
awards on the date of the Plans termination or expiration
of such awards. The Company may withhold from any payment under
the 2007 Plan any required withholding taxes. The Board of
Directors may amend, modify, terminate, or suspend the 2007
Plan, and the Compensation Committee may amend any agreement or
certificate, provided, in each instance, that any necessary
approval of the stockholders is obtained and no
participants rights are adversely affected unless
otherwise permitted by an agreement or a certificate or the law.
The 2007 Plan will be unfunded and will not require the
segregation of any assets.
Federal Income
Tax Consequences
The following is a summary of the United States federal income
tax consequences that generally will arise with respect to
awards granted under the Plan. This summary is based upon the
provisions of the Code, and regulations promulgated thereunder,
as in effect on the date of this proxy statement. Changes in the
law may modify this discussion, and in some cases the changes
may be retroactive. Further, this summary is not intended to be
a complete discussion of all the federal income tax consequences
associated with the 2007 Plan. Accordingly, for precise advice
as to any specific transaction or set of circumstances,
participants should consult with their own tax and legal
advisors. Participants should also consult with their own tax
and legal advisors regarding the application of any state, local
and foreign taxes and any federal gift, estate and inheritance
taxes.
Stock Options. In general, the grant of a
stock option will not be a taxable event to a recipient and it
will not result in a deduction to the Company. The tax
consequences associated with the exercise of a stock option, and
the subsequent disposition of our common stock acquired on
exercise of such an option, depend in part on whether the option
is an incentive stock option or a nonstatutory stock option.
Upon the exercise of a nonstatutory stock option, the
participant will recognize ordinary compensation income equal to
the excess of the fair market value of our common stock received
upon exercise over the exercise price. We will be able to claim
a deduction in an equivalent amount, provided federal income tax
withholding requirements are satisfied and we are not otherwise
precluded from taking a deduction because of the
Section 162(m) deduction limitations described below. The
ordinary income the participant recognizes will be subject to
applicable tax withholding. Any gain or loss upon a subsequent
sale or exchange of our common stock will be capital gain or
loss, long-term or short-term, depending on the holding period
for the common stock.
Generally, a participant will not recognize ordinary income at
the time of exercise of an incentive stock option and no
deduction will be available to us, provided the option is
exercised while the participant is an employee or, in certain
circumstances, for a limited period of time thereafter. However,
the difference between the option price and the fair market
value of the stock on the date of exercise is treated as an item
of adjustment for purposes of the alternative minimum tax. The
Code imposes an alternative minimum tax on a taxpayer whose
alternative minimum taxable income, as defined in
Section 55(b)(2) of the Code, exceeds the taxpayers
adjusted gross income. If the sale of shares acquired under an
incentive stock option does not occur within two years after the
date of grant and within one year after the date of exercise,
any gain or loss realized will be treated as a long-term capital
gain or loss.
If a disposition of shares acquired under an incentive stock
option occurs prior to the expiration of these one-year or
two-year holding periods, the participant recognizes ordinary
income at the time of disposition, and we will be entitled to a
deduction, in an amount equal to the excess of the fair market
value of the common stock at the date of exercise (or the fair
market value of the common stock on the disposition date, if
lower) over the exercise price. In addition, the participant
must recognize as short-term or long-term capital gain,
depending on whether the holding period for the shares exceeds
one year, any amount that the holder realizes upon disposition
of those shares which exceeds the fair market value of those
shares on the date the participant exercised the option. The
participant will recognize a short-term or long-term
18
capital loss, depending on whether the holding period for the
shares exceeds one year, to the extent the basis in the shares
exceeds the amount realized upon disposition of those shares.
Stock Appreciation Rights. Generally, a
participant will not recognize taxable income upon the grant of
a stock appreciation right. When a participant receives payment
with respect to a stock appreciation right granted under the
2007 Plan, the amount of cash and the fair market value of our
common stock received will be ordinary compensation income to
such participant and we will be entitled to a corresponding
deduction, subject to the Section 162(m) deduction
limitations described below. The ordinary income the participant
recognizes will be subject to applicable tax withholding. Upon
selling any common stock received by a participant in payment of
an amount due under a stock appreciation right, the participant
generally will recognize a capital gain or loss in an amount
equal to the difference between the sale price of the stock and
the participants tax basis in the stock.
Restricted Stock. A participant who receives
shares of restricted stock generally will recognize ordinary
compensation income at the time the forfeiture or
transferability restrictions lapse, based on the fair market
value of the common stock at that time. The amount recognized
will be equal to the difference between the fair market value of
the shares at such time and the original purchase price paid for
the shares, if any. Subject to the Section 162(m) deduction
limitations described below, this amount is deductible for
federal income tax purposes by us. The ordinary income
recognized by a participant with respect to restricted stock
will be subject to applicable tax withholding. Dividends paid
with respect to common stock that is subject to forfeiture and
nontransferable will be ordinary compensation income to the
participant and generally deductible by us.
Alternatively, a participant may elect, pursuant to
Section 83(b) of the Code, immediate recognition of income
at the time of receipt of restricted stock. If the election is
made within 30 days of the date of grant, the participant
will recognize the difference between the fair market value of
the restricted stock at the time of grant and the purchase price
paid for the restricted stock, if any, as income, and we will be
entitled to a corresponding deduction. Any change in the value
of the shares after the date of grant will be taxed as a capital
gain or loss only if and when the shares are disposed of by the
participant. Dividends paid with respect to these shares will
not be deductible by us.
A Section 83(b) election is irrevocable. If this tax
treatment is elected, and the restricted stock is subsequently
forfeited, the participant will not be entitled to any
offsetting tax deduction.
Section 409A. Section 409A of the
Code provides substantial penalties to persons deferring taxable
income, unless the requirements of Section 409A have been
satisfied. Certain awards provided under the Plan could be
viewed as deferring income for participants and may, therefore,
be subject to Section 409A. While it is the current intent
to prevent awards made under the Plan from failing to satisfy
the requirements of Section 409A, there can be no assurance
that awards made under the Plan which are subject to
Section 409A will satisfy the requirements of
Section 409A.
In the event that an award made under the Plan is subject to
Section 409A, but does not satisfy the requirements of
Section 409A, then the affected participant will incur an
additional 20% tax on amounts deferred, as well as full
inclusion in income for tax purposes of amounts deferred and
interest on such amounts from the date when such amounts became
vested.
Sections 280G and 4999. In the event that
certain compensation payments or other benefits received by
disqualified individuals (as defined in
Section 280G of the Code) under the Plan may cause or
result in excess parachute payments (as defined in
Section 280G of the Code) then, pursuant to
Section 280G of the Code, any amount that constitutes an
excess parachute payment is not deductible by the Company. In
addition, Section 4999 of the Code generally imposes a 20%
excise tax on the amount of any such excess parachute payment
received by such a disqualified individual, and any such excess
parachute payments will not be deductible by the Company.
19
Vote
Required
Approval of the HearUSA 2007 Incentive Compensation Plan
requires the affirmative vote of a majority of the votes of the
Common Stock and the Special Voting Preferred Stock represented
at the meeting (in person or by proxy), assuming a quorum is
present at the meeting. All shares of Common Stock and the share
of Special Voting Preferred Stock represented by valid proxies
will be voted in accordance with the instructions contained
therein. Broker non-votes will effectively be votes
against approval of the Plan. Votes with respect to
Exchangeable Shares represented by valid voting instructions
received by the Trustee will be cast by the Trustee through the
Special Voting Preferred Stock in accordance with those
instructions. If no instructions are received by the Trustee
from a holder of Exchangeable Shares, the votes to which such
holder is entitled will not be exercised.
THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPROVAL OF THE HEARUSA 2007 INCENTIVE COMPENSATION
PLAN
STOCKHOLDER
PROPOSALS
Stockholder proposals submitted pursuant to
Rule 14a-8
under the Securities Exchange Act of 1934, as amended, and
intended to be presented at the 2008 annual meeting of
stockholders must be received by us no later than
January 2, 2008 for inclusion, if appropriate, in the
Companys proxy statement and form of proxy for that
meeting.
In order for a stockholder to nominate a candidate for election
as a director at the 2008 annual meeting of stockholders, a
stockholder must provide timely notice of the nomination. Such
notice must be given not less than 90 nor more than
120 days prior to the anniversary of the 2007 annual
meeting of stockholders. The stockholder must include
information about the nominee, such as his or her name, address
and occupation, all as provided by the Companys Amended
and Restated Bylaws.
In order for a stockholder to bring any other business before
the 2008 annual meeting of stockholders, the stockholder must
provide advance notice as provided in the Amended and Restated
Bylaws in respect of such proposal. The notice must be given not
less than 90 nor more than 120 days prior to the
anniversary date of the 2007 annual meeting of stockholders.
These time limits apply in determining whether notice is timely
for purposes of rules adopted by the Securities and Exchange
Commission relating to the exercise of discretionary voting
authority by the Companys designated proxies. The notice
must contain specific information as prescribed by the
Companys Amended and Restated Bylaws. These requirements
are separate from and in addition to those requirements imposed
by the federal securities laws concerning inclusion of a
stockholder proposal in the proxy statement and form of proxy
for the meeting.
In each case, the notice must be given to the Companys
Secretary at the Companys principal offices, 1250
Northpoint Parkway, West Palm Beach, Florida 33407. Any
stockholder desiring a copy of the Companys Amended and
Restated Certificate of Incorporation or Amended and Restated
Bylaws will be furnished a copy without charge upon written
request to the Companys Secretary.
OTHER
MATTERS
As of the date hereof, the Board of Directors knows of no other
matters which are likely to be presented for consideration at
the meeting. In the event any other matters properly come before
the meeting, however, it is the intention of the persons named
in the enclosed proxy to vote said proxy in accordance with
their best judgment.
HOUSEHOLDING OF
PROXIES
The Securities and Exchange Commission has adopted rules that
permit companies and intermediaries such as brokers to satisfy
delivery requirements for annual reports and proxy statements
with
20
respect to two or more stockholders sharing the same address by
delivering a single annual report
and/or proxy
statement addressed to those stockholders. This process, which
is commonly referred to as householding, potentially
provides extra convenience for stockholders and cost savings for
companies. The Company and some brokers household annual reports
and proxy materials, delivering a single annual report
and/or proxy
statement to multiple stockholders sharing an address unless
contrary instructions have been received from the affected
stockholders.
Once you have received notice from your broker or the Company
that your broker or the Company will be householding materials
to your address, householding will continue until you are
notified otherwise or until you revoke your consent. You may
request to receive at any time a separate copy of our annual
report or proxy statement, by sending a written request to
HearUSA, Inc. 1250 Northpoint Parkway, West Palm Beach, Florida
33407, Attn: Corporate Secretary, or by telephoning
561-478-8770.
If, at any time, you no longer wish to participate in
householding and would prefer to receive a separate annual
report
and/or proxy
statement in the future, please notify your broker if your
shares are held in a brokerage account or the Company if you
hold registered shares. You can notify the Company by sending a
written request to HearUSA, Inc. 1250 Northpoint Parkway, West
Palm Beach, Florida 33407, Attn: Corporate Secretary, or by
telephoning
561-478-8770.
If, at any time, you and another stockholder sharing the same
address wish to participate in householding and prefer to
receive a single copy of the Companys annual report
and/or proxy
statement, please notify your broker if your shares are held in
a brokerage account or the Company if you hold registered
shares. You can notify the Company by sending a written request
to HearUSA, Inc. 1250 Northpoint Parkway, West Palm Beach,
Florida 33407, Attn: Corporate Secretary, or by telephoning
561-478-8770.
April 30, 2007
21
HEARUSA, INC.
2007 INCENTIVE COMPENSATION PLAN
RECITALS
WHEREAS, HearUSA, Inc. desires to encourage high levels of performance by those individuals
who are key to the success of the Company, to attract new individuals who are highly motivated and
who will contribute to the success of the Company and to encourage such individuals to remain as
Directors, officers and/or employees of the Company and its subsidiaries by increasing their
proprietary interest in the Companys growth and success:
NOW, THEREFORE, the Company hereby adopts this HearUSA, Inc 2007 Incentive Compensation Plan
to read as follows:
ARTICLE 1
PURPOSE OF THE PLAN
1.1. Purpose. The purpose of the Plan is to assist the Company in attracting and retaining
selected individuals to serve as Directors, officers and employees of the Company or any of its
subsidiaries or affiliates who will contribute to the Companys success and to achieve long-term
objectives which will inure to the benefit of all shareholders of the Company through the
additional incentive inherent in the ownership of the Companys common stock.
ARTICLE 2
DEFINITIONS
The following terms shall have the meanings indicated.
2.1. Award means Options, Stock Appreciation Rights, Restricted Stock Awards and Restricted
Stock Units.
2.2.. Board means the board of directors of the Company.
2.3. Cause means conviction of a felony involving moral turpitude or the failure to
satisfactorily perform assigned duties after notice to cure has been given.
2.4 Change of Control means a Change in the Ownership of the Company, a Change in
Effective Control of the Company, or a Change in the Ownership of a Substantial Portion of the
Assets of the Company, all as defined below. To qualify as a Change in Control, the occurrence
of the event must be objectively determinable and any requirement that any other person, such as a
plan administrator or board of directors compensation committee, certify the occurrence of a Change
in Control must be strictly ministerial and not involve any discretionary authority.
A Change in the Ownership of the Company occurs on the date that any one person, or more than one
person acting as a group acquires ownership of stock of the Company that, together with stock held
by such person or group, constitutes more than 50 percent of the total fair market value or total
voting power of the stock of the Company. However, if any one person, or more than one person
acting as a group, is considered to own more than 50 percent of the total fair market value or
total voting power of the stock of the Company, the acquisition of additional stock by the same
person or persons is not considered to cause a Change in the Ownership of the Company. An
increase in the percentage of stock owned by any one person, or persons acting as a group, as a
result of a transaction in which the Company acquires its stock in exchange for property will be
treated as an acquisition of stock for purposes of this section. This definition applies only when
there is a transfer of stock of the Company (or issuance of stock of the Company) and stock in the
Company remains outstanding after the transaction. Persons will not be considered to be acting as a
group solely because they purchase or own stock of the same corporation at the same time, or as a
result of the same public offering. However, persons will be considered to be acting as a group if
they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition
of stock, or similar business transaction with the Company. If a person, including an entity, owns
stock in both corporations that enter into a merger, consolidation, purchase or acquisition of
stock, or similar transaction, such shareholder is considered to be acting as a group with other
shareholders in a corporation prior to the transaction giving rise to the change and not with
respect to the ownership interest in the other corporation.
A Change in the Effective Control of the Company occurs only on the date that either
(1) Any one person, or more than one person acting as a group, acquires (or has
acquired during the 12-month period ending on the date of the most recent acquisition by
such person or persons) ownership of stock of the Company possessing 35 percent or more of
the total voting power of the stock of the Company; or
(2) A majority of members of the Companys 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 the Companys board of directors prior to the date of the
appointment or election.
Persons will not be considered to be acting as a group solely because they purchase or own
stock of the same corporation at the same time, or as a result of the same public offering.
However, persons will be considered to be acting as a group if they are owners of a
corporation that enters into a merger, consolidation, purchase or acquisition of stock, or
similar business transaction with the Company. If a person, including an entity, owns
stock in both corporations that enter into a merger, consolidation, purchase or acquisition
of stock, or similar transaction, such shareholder is considered to be acting as a group
with other shareholders in a corporation only with respect to the ownership in that
2
corporation prior to the transaction giving rise to the change and not with respect to the
ownership interest in the other corporation.
A Change in the Ownership of a Substantial Portion of the Assets of the Company occurs on the
date that any one person, or more than one person acting as a group, acquires (or has acquired
during the 12-month period ending on the date of the most recent acquisition by such person or
persons) assets from the Company that have a total gross fair market value equal to or more than 40
percent of the total gross fair market value of all of the assets of the Company immediately prior
to such acquisition or acquisitions. For this purpose, gross fair market value means the value of
the assets of the Company, or the value of the assets being disposed of, determined without regard
to any liabilities associated with such assets. Persons will not be considered to be acting as a
group solely because they purchase assets of the same corporation at the same time. However,
persons will be considered to be acting as a group if they are owners of a corporation that enters
into a merger, consolidation, purchase or acquisition of assets, or similar business transaction
with the corporation. If a person, including an entity shareholder, owns stock in both
corporations that enter into a merger, consolidation, purchase or acquisition of assets, or similar
transaction, such shareholder is considered to be acting as a group with other shareholders in a
corporation only to the extent of the ownership in that corporation prior to the transaction giving
rise to the change and not with respect to the ownership interest in the other corporation.
2.5. Closing Price means the closing price per Share on the American Stock Exchange or
other exchange on which Shares are traded.
2.6. Code means the Internal Revenue Code of 1986, as amended.
2.7. Committee means the compensation committee of the Board.
2.8. Company means HearUSA, Inc., a Delaware corporation.
2.9. Director means a member of the Board.
2.10. Disability means total and permanent disability within the meaning of Section 22(e)(3)
of the Code, which, as of the date hereof, means being unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for a continuous period
of no less than 12 months.
2.11. Exchange Act means the Securities Exchange Act of 1934, as amended.
2.12. Grant Limitation means the maximum number of Shares with respect to which Awards may
be granted to any Participant during any calendar year as set forth in Section 3.4.
2.13. Holder means the holder of a Stock Appreciation Right.
3
2.14. Incentive Stock Option means an Option which qualifies as an incentive stock option
under Section 422 of the Code.
2.15. Issue means all descendants, whether natural or adopted, of a Holder, an Optionee or a
Permitted Transferee.
2.16. Non Employee Director means a non-employee director within the meaning of Rule 16b-3
promulgated under the Exchange Act.
2.17. Nonqualified Stock Option means an Option which is not an Incentive Stock Option.
2.18. Option means an Incentive Stock Option and a Nonqualified Stock Option granted
pursuant to Article 5.
2.19. Optionee means the recipient of an Option.
2.20. Outside Director means an outside director within the meaning of Section 162(m) of the
Code.
2.21. Participant means a person who has received an Award or to whom an Award has been
transferred.
2.22. Permitted Assignee means (i) the spouse, parent, issue, spouse of issue, or issue of
spouse, of a Holder or an Optionee, (ii) a trust for the benefit of one or more persons described
in clause (i) or for the benefit of a Holder or Optionee, as the case may be, or (iii) an entity in
which a Holder, Optionee or a person described in clauses (i) or (ii) is a beneficial owner.
2.23. Plan means this HearUSA, Inc. 2007 Incentive Compensation Plan.
2.24. Restricted Shares means restricted Shares issued pursuant to Article 7.
2.25. Restricted Stock Agreement means a restricted stock agreement granted pursuant to
Article 7.
2.26. Restricted Stock Award means a restricted stock award granted pursuant to Article 7.
2.27. Restricted Stock Unit means a restricted stock unit granted pursuant to Article 8.
2.28. Restricted Stock Unit Agreement means a restricted stock unit agreement described in
Article 8.
4
2.29. Share means a share of common stock of the Company.
2.30. Share Limitation means the aggregate number of Shares authorized for Awards as
described in Section 3.1.
2.31. Stock Appreciation Right means a stock appreciation right granted pursuant to Article
6.
2.32. Stock Option Agreement means a stock option agreement described in Article 5.
2.33. Tax Election means a written election of a Holder or an Optionee, or a Permitted
Assignee, to have Shares withheld to satisfy withholding taxes as described in Section 10.1.
ARTICLE 3
SHARES SUBJECT TO AWARDS
3.1 Number of Shares. Subject to the adjustment provisions of Section 9.9, the Share
Limitation shall be 2,500,000 Shares. No Options to purchase fractional Shares shall be granted or
issued under the Plan. For purposes of this Section 3.1, the Shares that shall be counted toward
the Share Limitation shall include all Shares:
(1) issued or issuable pursuant to Options that have been or may be exercised;
(2) issued or issuable pursuant to Stock Appreciation Rights;
(3) issued as, or subject to issuance as Restricted Stock Awards; and
(4) issued as, or subject to issuance as Restricted Stock Units.
3.2 Shares Subject to Terminated Awards. The Shares covered by any unexercised portions of
terminated Options granted under Article 5, Shares forfeited as provided in Section 7.2(a) and
Shares subject to any Awards which are otherwise surrendered by the Participant without receiving
any payment or other benefit with respect thereto may again be subject to new Awards under the
Plan. In the event the purchase price of an Option is paid in whole or in part through the
delivery of Shares, the number of Shares issuable in connection with the exercise of the Option
shall not again be available for the grant of Awards under the Plan. Shares subject to Options, or
portions thereof, which have been surrendered in connection with the exercise of share appreciation
rights shall not again be available for the grant of Awards under the Plan.
3.3 Character of Shares. Shares delivered under the Plan may be authorized and unissued
Shares, treasury Shares acquired by the Company, or both.
5
3.4 Limitations on Grants to Individual Participant. Subject to the adjustment provisions of
Section 9.9 the Grant Limitation shall be 250,000 Shares. If an Award is canceled, the Shares with
respect to such canceled Award shall continue to be counted toward the Grant Limitation for the
year granted.
ARTICLE 4
ELIGIBILITY AND ADMINISTRATION
4.1 Awards to Employees and Directors. (a) Participants who are eligible to receive Awards
shall consist of such key employees and Directors of the Company or any of its subsidiaries or
affiliates as the Committee shall select from time to time. The Committees designation of a
Participant in any year shall not require the Committee to designate such person to receive Awards
or grants in any other year. The designation of a Participant to receive Awards or grants under
one portion of the Plan shall not require the Committee to include such Participant under other
portions of the Plan.
(b) No Option which is intended to qualify as an Incentive Stock Option may be granted to any
employee who, at the time of such grant, owns, directly or indirectly (within the meaning of
sections 422(b)(6) and 424(d) of the Code), shares possessing more than ten percent (10%) of the
total combined voting power of all classes of shares of the Company or any of its subsidiaries or
affiliates, unless at the time of such grant, (i) the option price is fixed at not less than 110%
of the Closing Price (as defined below) of the Shares subject to such Option, determined on the
date of the grant, and (ii) the exercise of such Option is prohibited by its terms after the
expiration of five (5) years from the date such Option is granted. Incentive Stock Options may only
be granted to employees of the Company or its subsidiaries.
4.2 Administration. (a) The Plan shall be administered by the Committee. Unless otherwise
determined by the Board, each member of the Committee shall be a Non-Employee Director and an
Outside Director. In no event shall the Committee consist of fewer than two Directors. The
Directors may remove from, add members to, or fill vacancies in the Committee.
Any Award to a member of the Committee shall be on terms consistent with Awards made to other
non-employee Directors who are not members of the Committee, except where the Award is approved or
ratified by the Board (excluding persons who are also members of the Committee).
(b) The Committee is authorized, subject to the provisions of the Plan, to establish such
rules and regulations as it may deem appropriate for the conduct of meetings and proper
administration of the Plan. All actions of the Committee shall be taken by majority vote of its
members. The Committee is also authorized, subject to the provisions of the Plan, to make
provisions in various Awards pertaining to a Change of Control of the Company and to amend or
modify existing Awards; provided, however, that the Committee may not, without first obtaining the
approval of the shareholders of the Company, reprice any outstanding Option then exercisable for a
price above the then current market price of the Shares to provide for a lower exercise price.
6
(c) Subject to the provisions of the Plan, the Committee shall have authority, in its sole
discretion, to interpret the provisions of the Plan and, subject to the requirements of applicable
law, including Rule 16b-3 of the Exchange Act, to prescribe, amend, and rescind rules and
regulations relating to it as it may deem necessary or advisable. All decisions made by the
Committee pursuant to the provisions of the Plan shall be final, conclusive and binding on all
persons, including the Company, its shareholders, Directors and employees, and Plan participants.
ARTICLE 5
OPTIONS
5.1 Grant of Options. The Committee shall determine, within the limitations of the Plan, the
Directors and employees of the Company and its subsidiaries and affiliates to whom Options are to
be granted under the Plan, the number of Shares that may be purchased under each such Option and
the option price, and shall designate such Options at the time of the grant as either Incentive
Stock Options or Nonqualified Stock Options. An Option is the right to purchase Shares at a
specified price.
All Options granted pursuant to this Article 5 shall be authorized by the Committee and shall
be evidenced in writing by Stock Option Agreements in such form and containing such terms and
conditions as the Committee shall determine which are not inconsistent with the provisions of the
Plan, and, with respect to any Stock Option Agreement granting Options which are intended to
qualify as Incentive Stock Options, are not inconsistent with Section 422 of the Code. Granting of
an Option pursuant to the Plan shall impose no obligation on the Optionee to exercise such option.
Any individual who is granted an Option pursuant to this Article 5 may hold more than one Option at
the same time and may hold both Incentive Stock Options and Nonqualified Stock Options at the same
time. To the extent that any Option does not qualify as an Incentive Stock Option (whether because
of its provisions, the time or manner of its exercise or otherwise) such Option or the portion
thereof which does not so qualify shall constitute a separate Nonqualified Stock Option.
5.2 Option Price. Subject to Section 4.1(b), the option price per each Share purchasable under
any Option granted pursuant to this Article 5 shall not be less than 100% of the Closing Price of
such Share on the date of the grant of such Option or, if the market was closed on the date in
question, then the closing price on the next trading day immediately following the day in question.
If the Shares are traded on more than one market or exchange, then the Closing Price shall be
determined by reference to the primary market or exchange where the Shares trade.
5.3 Other Provisions. Options granted pursuant to this Article 5 shall be made in accordance
with the terms and provision of Article 9 and any other applicable terms and provisions of the
Plan.
7
ARTICLE 6
STOCK APPRECIATION RIGHTS
6.1 Grant and Exercise. Stock Appreciation Rights may be granted in conjunction with all or
part of any Option granted under the Plan provided such rights are granted at the time of the grant
of such Option. A Stock Appreciation Right is the right to receive cash or Shares, as provided in
this Article 6. It may be the right to receive cash or Shares, in lieu of the purchase of Shares
under a related Option or it may be a free standing stock appreciation right unrelated to any
Option. A Stock Appreciation Right or applicable portion thereof shall terminate and no longer be
exercisable upon the termination or exercise of a related Option, and a Stock Appreciation Right
granted with respect to less than the full number of Shares covered by a related Option shall not
be reduced until, and then only to the extent that, the exercise or termination of the related
Option exceeds the number of Shares not covered by the share appreciation right. A Stock
Appreciation Right may be exercised by the Holder, in accordance with Section 6.2 of this Article
6, by giving written notice thereof to the Company and surrendering the applicable portion of the
related Option. Upon giving such notice and surrender, the Holder shall be entitled to receive an
amount determined in the manner prescribed in Section 6.2 of this Article 6. Options which have
been so surrendered, in whole or in part, shall no longer be exercisable to the extent the related
share appreciation rights have been exercised
6.2 Terms and Conditions. Stock Appreciation Rights shall be subject to such terms and
conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to
time by the Committee, including the following:
(a) Stock Appreciation Rights shall be exercisable only at such time or times and to
the extent that the Options to which they relate shall be exercisable in accordance with
the provisions of the Plan or, with respect to free-standing Stock Appreciation Rights,
only at such time or times as provided in the grant agreement for such Stock Appreciation
Right as determined by the Committee.
(b) Upon the exercise of a Stock Appreciation Right, a Holder shall be entitled to
receive up to, but no more than, an amount in cash or whole Shares equal to the excess of
the then Fair Market Value of one Share over the option price per Share specified in the
related Option (or the grant date value of the Stock Appreciation Right in the case of a
free-standing Stock Appreciation Right) multiplied by the number of Shares in respect of
which the Stock Appreciation Right shall have been exercised. The Holder shall specify in
his written notice of exercise, whether payment shall be made in cash or in whole Shares
unless otherwise provided in the Stock Appreciation Right grant agreement. Each share
appreciation right may be exercised only at the time and so long as a related Option, if
any, would be exercisable or as otherwise permitted by applicable law or the terms of the
grant agreement (in the case of a free-standing Stock Appreciation Right).
(c) Upon the exercise of a Stock Appreciation Right, the Option or part thereof to
which such share appreciation right is related shall be deemed to
8
have been exercised for the purpose of the limitation of the number of Shares to be
issued under the Plan, as set forth in Section 3.1.
(d) With respect to Stock Appreciation Rights granted in connection with an Option
that is intended to be an Incentive Stock Option, the following shall apply:
(i) No Stock Appreciation Right shall be transferable by a Holder otherwise
than by will or by the laws of descent and distribution, and Stock Appreciation
Rights shall be exercisable, during the Holders lifetime, only by the Holder.
(ii) Stock Appreciation Rights granted in connection with an Option may be
exercised only when the Fair Market Value of the Shares subject to the Option
exceeds the option price at which Shares can be acquired pursuant to the Option.
ARTICLE 7
RESTRICTED STOCK AWARDS
7.1 Restricted Stock Awards. (a) In General. A grant of Shares made pursuant to this Article
7 is referred to as a Restricted Stock Award. The Committee may grant to any Participant an amount
of Shares in such manner, and subject to such terms and conditions relating to vesting,
forfeitability and restrictions on delivery and transfer (whether based on performance standards,
periods of service or otherwise) as the Committee shall establish. The terms of any Restricted
Stock Award granted under the Plan shall be set forth in a written Restricted Stock Agreement which
shall contain provisions determined by the Committee and not inconsistent with the Plan. The
provisions of Restricted Stock Awards need not be the same for each Participant receiving such
Awards. Any Restricted Stock Award that is intended to qualify as performance based compensation
under Section 162(m) of the Code shall have as its performance criteria, one or more of the
criteria set forth in Section 9.10 and shall preclude discretion to increase the amount payable
upon the attainment of the performance goals.
(b) Issuance of Restricted Shares. As soon as practicable after the date of grant of a
Restricted Stock Award by the Committee, the Company shall cause to be transferred on the books of
the Company, Shares registered in the name of the Company, as nominee for the Participant,
evidencing the Restricted Shares covered by the Award, but subject to forfeiture to the Company
retroactive to the date of grant, if a Restricted Stock Agreement delivered to the Participant by
the Company with respect to the Restricted Shares covered by the Award is not duly executed by the
Participant and timely returned to the Company. All Restricted Shares covered by Awards under this
Article 7 shall be subject to the restrictions, terms and conditions contained in the Plan and the
Restricted Stock Agreement entered into by and between the Company and the Participant. Until the
lapse or release of all restrictions applicable to an Award of Restricted Shares, the share
certificates representing such Restricted Shares shall be held in custody by the Company or its
designee.
9
(c) Shareholder Rights. Beginning on the date of grant of the Restricted Stock Award and
subject to execution of the Restricted Stock Agreement as provided in Sections 7.1(a) and (b), at
the discretion of the Committee, the Participant may become a shareholder of the Company with
respect to all Shares subject to the Restricted Stock Agreement and may have all of the rights of a
shareholder, including, but not limited to, the right to vote such Shares and the right to receive
distributions made with respect to such Shares; provided, however, that any Shares distributed as a
dividend or otherwise with respect to any Restricted Shares as to which the restrictions have not
yet lapsed shall be subject to the same restrictions as such Restricted Shares and shall be
represented by book entry and held as prescribed in Section 7.1(b).
(d) Restriction on Transferability. None of the Restricted Shares may be assigned or
transferred (other than by will or the laws of descent and distribution), pledged or sold prior to
lapse or release of the restrictions applicable thereto.
(e) Delivery of Shares Upon Release of Restrictions. Upon expiration or earlier termination of
the forfeiture period without a forfeiture and the satisfaction of or release from any other
conditions prescribed by the Committee, the restrictions applicable to the Restricted Shares shall
lapse. As promptly as administratively feasible thereafter, subject to the requirements of Section
10.1, the Company shall deliver to the Participant or, in case of the Participants death, to the
Participants beneficiary, one or more stock certificates for the appropriate number of Shares,
free of all such restrictions, except for any restrictions that may be imposed by law.
7.2 Terms of Restricted Shares.
(a) Forfeiture of Restricted Shares. Subject to Section 7.2(b), all Restricted Shares shall
be forfeited and returned to the Company and all rights of the Participant with respect to such
Restricted Shares shall terminate unless the Participant continues in the service of the Company as
an employee until the expiration of the forfeiture period for such Restricted Shares and satisfies
any and all other conditions set forth in the Restricted Stock Agreement. The Committee in its
sole discretion, shall determine the forfeiture period (which may, but need not, lapse in
installments) and any other terms and conditions applicable with respect to any Restricted Stock
Award.
(b) Waiver of Forfeiture Period. Notwithstanding anything contained in this Article 7 to the
contrary, the Committee may, in its sole discretion, waive the forfeiture period and any other
conditions set forth in any Restricted Stock Agreement under appropriate circumstances (including
the death, Disability or retirement of the Participant or a material change in circumstances
arising after the date of an Award) and subject to such terms and conditions (including forfeiture
of a proportionate number of the Restricted Shares) as the Committee shall deem appropriate.
10
ARTICLE 8
RESTRICTED STOCK UNITS
8.1. Award of Restricted Stock Units. Subject to the terms of this Article 8, a Restricted
Stock Unit entitles a Participant to receive cash or one Share for each Restricted Stock Unit at
the end of a specified restricted period to the extent provided by the Award. The Committee may
Award to any Participant an amount of Restricted Stock Units in such manner, and subject to such
terms and conditions relating to vesting, forfeitability, restrictions on delivery and transfer
(whether based on performance standards, periods of service or otherwise), and such other
provisions as the Committee shall establish. The terms of an Award of a Restricted Stock Unit
under the Plan shall be set forth in a written Restricted Stock Unit Agreement which shall contain
the Restricted Period(s), the number of Restricted Stock Units granted, and such other provisions
determined by the Committee and not inconsistent with the Plan. The provisions of Restricted Stock
Units need not be the same for each Participant receiving such Awards. Any Restricted Stock Unit
award that is intended to qualify as performance based compensation under Section 162(m) of the
Code shall have as its performance criteria, one or more of the criteria set for the in Section
9.10 and shall preclude discretion to increase the amount payable upon the attainment of the
performance goals.
8.2 Termination of Employment. Except to the extent the Committee specifies otherwise, any
Restricted Stock Unit which is not earned and vested by the end of the restricted period specified
in the Award shall be forfeited. If a Participants date of termination (or, in the case of a
non-employee Director, separation from service) occurs prior to the end of such restricted period,
the Committee, in its sole discretion, may determine that the Participant will be entitled to
settlement of all or any portion of the Restricted Stock Units as to which he or she would
otherwise be eligible, and may accelerate the determination of the value and settlement of such
Restricted Stock Units or make such other adjustments as the Committee, in its sole discretion,
deems desirable.
8.3 Restricted Stock Units. Except to the extent the Plan or the Committee specifies
otherwise, Restricted Stock Units represent an unfunded and unsecured obligation of the Company.
During any period in which Restricted Stock Units are outstanding and have not been settled in
Shares, the Participant shall not have the rights of a stockholder, but, in the discretion of the
Committee, may be granted the right to receive a payment from the Company in lieu of a dividend as
set forth in the Restricted Stock Unit Agreement in an amount equal to any cash dividends that
might be paid during the restricted period specified in the Award. With respect to any grant
contemplated by the foregoing sentence, no such grant shall be made to a Participant unless it
complies with the requirements of Section 409A of the Code (unless otherwise agreed to by the
Committee and the Participant). Until a Restricted Stock Unit is settled, the number of Shares
represented by a Restricted Stock Unit shall be subject to adjustment pursuant to Section 9.9.
11
ARTICLE 9
GENERALLY APPLICABLE PROVISIONS
9.1 Option Period. Subject to Section 4.1(b), the period for which an Option is exercisable
shall not exceed ten (10) years from the date such Option is granted. After the Option is granted,
the option period may not be reduced.
9.2 Fair Market Value. If the Shares are listed or admitted to trading on a securities
exchange registered under the Exchange Act, the Fair Market Value of a Share as of a specified date
shall mean the Closing Price for the day on which Fair Market Value is being determined (or if
there was no reported sale on such date, on the next succeeding date on which any reported sale
occurred) reported on the principal securities exchange on which the Shares are listed or admitted
to trading. If the Shares are not listed or admitted to trading on any such exchange but are
traded in the over-the-counter market or are traded on any similar system then in use, the Fair
Market Value of a Share shall be the Closing Price for the day on which the Fair Market Value is
being determined (or if there was no reported sale on such date, on the next succeeding date on
which any reported sale occurred) reported on such system. If the Shares are not listed or
admitted to trading on any such exchange and are not traded in the over-the-counter market or
traded on any similar system then in use, but are quoted on the National Association of Securities
Dealers, Inc. Automated Quotations System or any similar system then in use, the Fair Market Value
of a Share shall be the closing high bid and low asked quotations on such system for the Shares on
the date in question. If the Shares are not publicly traded, Fair Market Value shall be determined
by the Committee in its sole discretion using appropriate criteria. An Option shall be considered
granted on the date the Committee acts to grant the Option or such later date as the Committee
shall specify.
9.3 Exercise of Options. Options granted under the Plan shall be exercised by the Optionee
thereof (or by his or her executors, administrators, guardian or legal representative, or by a
Permitted Assignee, as provided in Sections 9.6 and 9.7 hereof) as to all or part of the Shares
covered thereby, by the giving of written notice of exercise to the Company, specifying the number
of Shares to be purchased, accompanied by payment of the full purchase price for the Shares being
purchased. Full payment of such purchase price shall be made within five (5) business days
following the date of exercise and shall be made (i) in cash or by certified check or bank check,
(ii) with the consent of Committee, by tendering previously acquired Shares (valued at Fair Market
Value, as determined by the Committee as of the date of tender), or (iii) with the consent of the
Committee, any combination of (i) and (ii). In connection with a tender of previously acquired
Shares pursuant to clause (ii) above, the Committee, in its sole discretion, may permit the
Optionee to constructively exchange Shares already owned by the Optionee in lieu of actually
tendering such Shares to the Company, provided that adequate documentation concerning the ownership
of the Shares to be constructively tendered is furnished in form satisfactory to the Committee.
The notice of exercise, accompanied by such payment, shall be delivered to the Company at its
principal business office or such other office as the Committee may from time to time direct, and
shall be in such form, containing such further provisions consistent with the provisions of the
Plan, as the Committee may from time to time prescribe. In no event may any Option granted
hereunder be exercised for a fraction of a Share. The Company shall effect the
12
transfer of Shares purchased pursuant to an Option as soon as practicable, and, within a
reasonable time thereafter, such transfer shall be evidenced on the books of the Company. No
person exercising an Option shall have any of the rights of a holder of Shares subject to an Option
until certificates for such Shares shall have been issued following the exercise of such Option.
No adjustment shall be made for cash dividends or other rights for which the record date is prior
to the date of such issuance. To the extent permitted in a Stock Option Agreement in effect prior
to the adoption of the Plan or pursuant to a stock appreciation right an Optionee may receive a net
cash payment (in cancellation of the Option or Stock Appreciation Right), subject to the terms and
conditions set forth in such Stock Option Agreement or stock appreciation right.
9.4 Transferability. No Option that is intended to qualify as an Incentive Stock Option shall
be assignable or transferable by the Optionee, other than by will or the laws of descent and
distribution, and such Option may be exercised during the life of the Optionee only by the Optionee
or his guardian or legal representative. Nonqualified Stock Options and any Stock Appreciation
Rights granted in tandem therewith are transferable (together and not separately) by the Optionee
or Holder, as the case may be, to any Permitted Assignee; provided, however, that such Permitted
Assignee shall be bound by all of the terms and conditions of the Plan and shall execute an
agreement satisfactory to the Company evidencing such obligation; provided further, however that
any transfer by an Optionee or Holder who is not then a Director of the Company to any Permitted
Assignee shall be subject to the prior consent of the Committee; and provided further, however,
that such Optionee or Holder shall remain bound by the terms and conditions of the Plan. The
Company shall cooperate with an Optionees Permitted Assignee and the Companys transfer agent in
effectuating any transfer permitted pursuant to this Section 9.4.
9.5 Termination of Employment. In the event of the termination of employment of an Optionee
or the separation from service of a Director (who is an Optionee) for any reason (other than death
or Disability as provided below), any Option(s) held by such Optionee (or its Permitted Assignee)
under the Plan and not previously exercised or expired shall be deemed canceled and terminated on
the day of such termination or separation, unless the Committee decides, in its sole discretion, to
extend the term of the Option for a period not to exceed three months after the date of such
termination or separation, provided, however, that in no instance may the term of the Option, as so
extended, exceed the maximum term set forth in Section 4.1(b)(ii) or 9.1 above. Notwithstanding
the foregoing, in the event of the separation from service of a non-employee Director (who is an
Optionee) by reason of death, disability or under conditions satisfactory to both the Director and
the Company, any nonqualified stock options held by such Director (or its Permitted Assignee) under
the Plan and not previously exercised or expired shall be exercisable for a period not to exceed
five (5) years after the date of such separation, provided, however, that in no instance may the
term of the Option, as so extended, exceed the maximum term set forth in Sections 4.1(b)(ii) or 9.1
above.
9.6 Death. In the event an Optionee (other than a non-employee Director) dies while employed
by the Company or any of its subsidiaries or affiliates any Option(s) held by such Optionee (or its
Permitted Assignee) and not previously expired or exercised shall, to the extent exercisable on the
date of death, be exercisable by the estate of such Optionee or by any person who acquired such
Option by bequest or inheritance, or by the Permitted
13
Assignee at any time within one year after the death of the Optionee, unless earlier
terminated pursuant to its terms, provided, however, that if the term of such Option would expire
by its terms within six months after the Optionees death, the term of such Option shall be
extended until six months after the Optionees death, provided further, however, that in no
instance may the term of the Option, as so extended, exceed the maximum term set forth in Section
4.1(b)(ii) or 9.1 above.
9.7 Disability. In the event of the termination of employment of an Optionee (other than a
non-employee Director) due to Disability, the Optionee, or his guardian or legal representative, or
a Permitted Assignee shall have the unqualified right to exercise any Option(s) which have not been
previously exercised or expired and which the Optionee was eligible to exercise as of the first
date of Disability (as determined by the Committee), at any time within one (1) year after such
termination, unless earlier terminated pursuant to its terms; provided, however, that if the term
of such Option would expire by its terms within six months after such termination, the term of such
Option may be extended until six months after such termination at the discretion of the Committee;
provided further, however, that in no instance may the term of the Option, as so extended, exceed
the maximum term set forth in Section 4.1(b)(ii) or 9.1 above.
9.8 Amendment and Modification of the Plan. The Committee may, from time to time, alter,
amend, suspend or terminate the Plan as it shall deem advisable, subject to any requirement for
shareholder approval imposed by applicable law or any rule of any stock exchange or quotation
system on which Shares are listed or quoted; provided that such Committee may not amend the Plan,
without the approval of the Companys shareholders, to increase the number of Shares that may be
the subject of awards under the Plan (except for adjustments pursuant to Section 9.9 hereof). In
addition, no amendments to, or termination of, the Plan shall in any way impair the rights of an
Optionee or a Participant (or a Permitted Assignee thereof) under any Award previously granted
without such Optionees or Participants consent.
9.9 Adjustments. In the event that the Committee shall determine that any dividend, or other
similar distribution (whether in the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, or exchange of Shares or other securities, the
issuance of warrants or other rights to purchase Shares or other securities, or other similar
corporate transaction or event affects the Shares with respect to which Awards have been or may be
issued under the Plan, such that an adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits intended to be made
available under the Plan, then the Committee shall, in such manner as the Committee deems
equitable, adjust any or all of (i) the number and type of Shares that thereafter may be made the
subject of Awards, (ii) the number and type of Shares subject to outstanding Awards, and (iii) the
grant or exercise price with respect to any Award, or, if deemed appropriate, make provision for a
cash payment to the holder of any outstanding Award; provided, in each case, that with respect to
Incentive Stock Options, no such adjustment shall be authorized to the extent that such adjustment
would cause such options to violate Section 422(b) of the Code or any successor provision (unless
otherwise agreed by the Committee and the holder of such Option); and provided further, that the
number of Shares subject to any Award denominated in Shares shall always be a whole
14
number. In the event of any reorganization, merger, consolidation, split-up, spin-off, or
other business combination involving the Company, the Committee or the Board may cause any Award
outstanding as of the effective date of any such transaction to be canceled in consideration of a
cash payment or alternate Award made to the holder of such canceled Award equal in value to the
fair market value of such canceled Award. The determination of fair market value shall be made by
the Committee or the Board, as the case may be, in their sole discretion. With respect to each
adjustment contemplated by this Section 9.9, no such adjustment shall be authorized to the extent
that such adjustment would cause an Award to violate the provisions of Section 409A of the Code
(unless otherwise agreed by the Committee and the holder of such Award).
9.10. Performance Based Compensation. Unless and until the Committee proposes for shareholder
vote and the shareholders approve a change in the performance criteria set forth in this Section
9.10, the performance criteria upon which the payment under, or vesting of, an Award intended to
qualify as performance based compensation under Section 162(m) of the Code, is based shall be
limited to the following: (a) net earnings or net income (before or after taxes); (b) funds from
operations; (c) earnings per share; (d) net sales growth; (e) net operating profit; (f) return
measures (including return on assets, capital, invested capital, equity or sales); (g) cash flow
(including operating cash flow, free cash flow, and cash flow return on capital); (h) earnings
before or after taxes, interest depreciation and/or amortization; (i) gross or operating margins;
(j) productivity ratios; and (k) Share price (including growth measures and total shareholder
return). Any of the foregoing may be used to measure the performance of the Company, subsidiary
and/or affiliate as a whole or any business unit thereof.
ARTICLE 10
MISCELLANEOUS
10.1 Tax Withholding. All payments or distributions made pursuant to the Plan to an Optionee
or Participant (or a Permitted Assignee thereof) shall be net of any applicable federal, state and
local withholding taxes arising as a result of the grant of any Award, exercise of an Option or
stock appreciation rights or any other event occurring pursuant to the Plan. The Company shall
have the right to withhold from such Optionee or Participant (or a Permitted Assignee thereof) such
withholding taxes as may be required by law, or to otherwise require the Optionee or Participant
(or a Permitted Assignee thereof) to pay such withholding taxes. If the Optionee or Participant
(or a Permitted Assignee thereof) shall fail to make such tax payments as are required, the Company
or its subsidiaries or affiliates shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to such Optionee or Participant or to
take such other action as may be necessary to satisfy such withholding obligations. In
satisfaction of the requirement to pay withholding taxes, the Optionee or Participant (or Permitted
Assignee) may make a Tax Election, which may be accepted or rejected in the discretion of the
Committee.
10.2 Right of Discharge Reserved. Nothing in the Plan nor the grant of an Award hereunder
shall confer upon any employee, Director or other individual the right to continue in the
employment or service of the Company or any subsidiary or affiliate of the Company
15
or affect any right that the Company or any subsidiary or affiliate of the Company may have to
terminate the employment or service of (or to demote or to exclude from future Options under the
Plan) any such employee, Director or other individual at any time for any reason. Except as
specifically provided by the Committee, the Company shall not be liable for the loss of existing or
potential profit from an Award granted in the event of termination of an employment or other
relationship even if the termination is in violation of an obligation of the Company or any
subsidiary or affiliate of the Company to the employee or Director.
10.3 Nature of Payments. All Awards made pursuant to the Plan are in consideration of
services performed for the Company or any subsidiary or affiliate of the Company. Any income or
gain realized pursuant to Awards under the Plan and any share appreciation rights constitutes a
special incentive payment to the Optionee, Participant or Holder and shall not be taken into
account, to the extent permissible under applicable law, as compensation for purposes of any of the
employee benefit plans of the Company or any subsidiary or affiliate of the Company except as may
be determined by the Committee or by the Directors or directors of the applicable subsidiary or
affiliate of the Company.
10.4 Severability. If any provision of the Plan shall be held unlawful or otherwise invalid
or unenforceable in whole or in part, such unlawfulness, invalidity or unenforceability shall not
affect any other provision of the Plan or part thereof, each of which remain in full force and
effect. If the making of any payment or the provision of any other benefit required under the Plan
shall be held unlawful or otherwise invalid or unenforceable, such unlawfulness, invalidity or
unenforceability shall not prevent any other payment or benefit from being made or provided under
the Plan, and if the making of any payment in full or the provision of any other benefit required
under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such
unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being
made or provided in part, to the extent that it would not be unlawful, invalid or unenforceable,
and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be
made or provided under the Plan.
10.5 Gender and Number. In order to shorten and to improve the understandability of the Plan
document by eliminating the repeated usage of such phrases as his or her and any masculine
terminology herein shall also include the feminine, and the definition of any term herein in the
singular shall also include the plural except when otherwise indicated by the context.
10.6 Governing Law. The Plan and all determinations made and actions taken thereunder, shall
be governed by the laws of the State of Delaware, without regard to the principles of conflicts of
law which might otherwise apply.
10.7 Termination of Plan. The Plan shall be effective on the date of the approval of the Plan
by the holders of a majority of the shares entitled to vote thereon, provided such approval is
obtained within 12 months after the date of adoption of the Plan by the Board. Awards may be
granted under the Plan at any time and from time to time on or prior to April 27, 2017, on which
date the Plan will expire except as to Awards and related share appreciation rights then
outstanding under the Plan. Such outstanding Awards and stock appreciation rights shall remain in
effect until they have been exercised or terminated, or have expired.
16
10.8 Captions. The captions in the Plan are for convenience of reference only, and are not
intended to narrow, limit or affect the substance or interpretation of the provisions contained
herein.
17
ANNUAL MEETING OF STOCKHOLDERS OF HearUSA, Inc. June 11, 2007 Please date, sign and mail your
proxy card in the envelope provided as soon as possible. Please detach along perforated line and
mail in the envelope provided. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
DIRECTORS AND "FOR" APPROVAL OF THE HEARUSA 2007 INCENTIVE COMPENSATION PLAN. PLEASE SIGN, DATE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
: 1. The election of the following nominees as directors of the Company. 3. In their discretion,
the proxies are authorized to vote upon such other business as may properly come before the meeting
and any and all adjournments thereof. FOR ALL NOMINEES O Paul A. Brown, M.D. O Stephen J.
Hansbrough PLEASE DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED WITHHOLD AUTHORITY O
Thomas W. Archibald REPLY ENVELOPE. FOR ALL NOMINEES O David J. McLachlan O Joseph L. Gitterman III
FOR ALL EXCEPT O Michel Labadie O Bruce Bagni (See instructions below) INSTRUCTION: To withhold
authority to vote for any individual nominee(s), mark FOR ALL EXCEPT and fill in the circle next
to each nominee you wish to withhold, as shown here: 2. Approval of the HearUSA 2007 Incentive
Compensation Plan. ? For ? Against ? Abstain To change the address on your account, please check
the box at right and indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method. Signature of
Stockholder Date: Date: Signature of Stockholder Note: Please sign exactly as your name or names
appear on this Proxy. When shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full title as such. If the
signer is a corporation, please sign full corporate name by duly authorized officer, giving full
title as such. If signer is a partnership, please sign in partnership name by authorized person. |
HEARUSA, INC. PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING TO BE HELD ON June
11, 2007 The undersigned stockholder(s) of HearUSA, Inc. (Company) hereby appoint(s) Paul A.
Brown, M.D. and Stephen J. Hansbrough, and each of them, with full power of substitution in each,
proxies to vote all shares which the undersigned would be entitled to vote if personally present at
the Annual Meeting of Stockholders of the Company to be held in West Palm Beach, Florida on Monday,
June 11, 2007 at 2:30 P.M. Eastern Time, and any and all adjournments thereof, on the following
matters. THE SHARES REPRESENTED HEREBY WILL BE VOTED IN ACCORDANCE WITH THE STOCKHOLDERS
DIRECTIONS HEREIN, BUT WHERE NO DIRECTIONS ARE INDICATED, SAID SHARES WILL BE VOTED FOR THE
ELECTION AS DIRECTORS OF THE NOMINEES LISTED ON THE REVERSE SIDE, FOR THE HEARUSA 2007 INCENTIVE
COMPENSATION PLAN AND IN THE DISCRETION OF THE PROXIES, ON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING, ALL IN ACCORDANCE WITH THE COMPANYS PROXY STATEMENT, RECEIPT OF WHICH IS
HEREBY ACKNOWLEDGED. (Continued and to be signed on the reverse side) |
ANNUAL MEETING OF STOCKHOLDERS OF HearUSA, Inc. June 11, 2007 MAIL -Date, sign and mail your
proxy card in the envelope provided as soon as possible. OR TELEPHONE -Call toll-free
1-800-PROXIES (1-800- 776-9437) from any touch-tone telephone and follow COMPANY NUMBER the
instructions. Have your proxy card available when you call. OR ACCOUNT NUMBER INTERNET -Access
www.voteproxy.com and follow the on-screen instructions. Have your proxy card available when you
access the web page. You may enter your voting instructions at 1-800-PROXIES or www.voteproxy.com
up until 11:59 PM Eastern Time the day before the cut-off or meeting date. Please detach along
perforated line and mail in the envelope provided IF you are not voting via telephone or the
Internet. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF DIRECTORS AND "FOR" APPROVAL
OF THE HEARUSA 2007 INCENTIVE COMPENSATION PLAN. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE : 1. The election of
the following nominees as directors of the Company. 3. In their discretion, the proxies are
authorized to vote upon such other business as may properly come before the meeting and any and all
adjournments thereof. FOR ALL NOMINEES O Paul A. Brown, M.D. O Stephen J. Hansbrough PLEASE DATE,
SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED WITHHOLD AUTHORITY O Thomas W. Archibald REPLY
ENVELOPE. FOR ALL NOMINEES O David J. McLachlan O Joseph L. Gitterman III FOR ALL EXCEPT O Michel
Labadie (See instructions below) O Bruce Bagni INSTRUCTION: To withhold authority to vote for any
individual nominee(s), mark FOR ALL EXCEPT and fill in the circle next to each nominee you wish
to withhold, as shown here: 2. Approval of the HearUSA 2007 Incentive Compensation Plan. ? For ?
Against ? Abstain To change the address on your account, please check the box at right and indicate
your new address in the address space above. Please note that changes to the registered name(s) on
the account may not be submitted via this method. Signature of Stockholder Date: Signature of
Stockholder Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares
are held jointly, each holder should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer is a corporation, please sign
full corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person. |