Document:

exv10w24

 

Exhibit 10.24

SEPARATION AGREEMENT AND GENERAL RELEASE 

     This Separation Agreement and General Release is entered into this 12th day of October, 2007,
by and between HearUSA, Inc. (the “Company”) and Kenneth Schofield (“Schofield” or “Employee”)
(collectively the “Parties”).

     WHEREAS, Company provides hearing care to patients primarily through hearing care centers
offering a complete range of hearing care products, with operations in the United States and
Ontario, Canada;

     WHEREAS, Schofield has been an employee of the Company, most recently serving as Chief
Operating Officer;

     WHEREAS, Schofield desires to resign from the Company;

     WHEREAS, the Parties and their respective representatives have engaged in substantial
negotiation and now desire to end Schofield’s employment relationship as set forth herein; and

     WHEREAS, on the terms and conditions set forth below, the Parties desire to settle and
terminate, with prejudice, any and all potential claims, demands, liability or causes of action, if
any, that do or may exist as of the date hereof between them.

     NOW, THEREFORE, for good and valuable consideration, the sufficiency of which is hereby
acknowledged, the Parties enter into this Settlement Agreement and General Release (“Agreement”)
and agree as follows:

1. No Admission Of Liability or Wrongdoing

     This Agreement and/or the Separation Amount (as defined herein) made hereunder and any other
consideration that has been or shall be received by Schofield from any Releasee (as defined herein)
are not intended to be, shall not be construed as and are not an admission or concession of any
wrongdoing or illegal or actionable acts or omissions, and each Releasee expressly denies that any
of them engaged in any wrongdoing or illegal or actionable acts or omissions. Schofield hereby
represents and agrees that he has not made and shall not make any written or oral statements,
suggestions or representations that any Releasee has made or implied any such admission or
concession. The fact that a settlement was agreed to, and the terms of this Agreement, including,
without limitation, that the Separation Amount payment is being made, shall not be offered, relied
upon, used or admitted in any action or proceeding as evidence of any violation of any law or duty
as against any Releasee.

2. Separation Amount, Other Loan Forgiveness and COBRA

     (a) The Parties hereby agree that in accordance with the terms and conditions of this
Agreement, and following Schofield’s delivery to the Company of a signed and notarized original of
this Agreement, and following the expiration of the Revocation Period described in Paragraph 4
below, the Company will cause to be paid, and Schofield will accept, on behalf of himself
individually and on behalf of his heirs, executors, administrators, successors and assigns

 

 

(collectively, “Releasor”), the sum of $301,547.50, less applicable withholdings (the
“Separation Amount”), as follows:

     (i) Upon expiration of the Revocation Period, the Company shall forgive the $50,000
loan Schofield owes to the Company evidenced by the Promissory Note executed by Schofield, a
copy of which is attached hereto as Exhibit A. In addition, upon expiration of the
Revocation Period, the Company shall forgive the $10,000 loan Schofield owes to the Company
evidenced by the Promissory Note executed by Schofield, a copy of which is attached hereto
as Exhibit B. To satisfy applicable withholding obligations, the Company will pay to
Schofield $25,000, less the sum of (x) all applicable withholdings on the $25,000 payment,
(y) all applicable withholdings on the $50,000 loan forgiveness, and (z) all applicable
withholdings on the $10,000 loan forgiveness.

     (ii) Within five days following the expiration of the Revocation Period, Releasor will
accept $31,547.50, in the form of a check by the Company made payable to Schofield, less
applicable withholdings (together with the forgiveness of the $50,000 loan and the $10,000
loan, the “Initial Payment”).

     (iii) Thereafter, on each of the following regular Company pay periods, Releasor will
accept, in the form of a check by the Company made payable to Schofield, his regular salary
installment for such pay period, less applicable withholdings (the “Separation Amount
Balance Payments”), until the $185,000 balance of the Separation Amount (less applicable
withholdings on this and any other consideration paid hereunder and not captured by the
above) is reached.

The payments made after October 12, 2007, but on or before March 15, 2008, shall each be deemed to
be a separate payment qualifying under the short-term deferral rule for purposes of Section 409A of
the Internal Revenue Code of 1986, as amended (the “Code”), and the payments made on or after April
1, 2008 shall each be deemed to be a separate payment for purposes of Section 409A of the Code.
Notwithstanding the provision of this paragraph 2(a), no payments will be made between March 15,
2008 and April 12, 2008. Any payments otherwise due during such time period shall be paid on April
12, 2008.

     (b) In the event the Company receives a complaint, charge, notice, statement of claim, demand
for arbitration, or similar document alleging that the Company is responsible for unlawful conduct
committed by Schofield, the Company shall deposit the Separation Amount Balance Payments otherwise
payable to Schofield into an interest bearing account. If following trial, arbitration,
administrative action, or other proceeding of any kind (“Action”), it is not determined that
Schofield committed unlawful conduct for which the Company is liable, Schofield will receive the
amounts deposited into the escrow account, plus the interest it will have earned. If, and only if,
it is determined in the Action that Schofield did commit unlawful conduct and such determination
mandates payment by the Company to some third party, the Company shall keep the amounts deposited
into the escrow account, plus the interest it will have earned.

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     (c) Schofield acknowledges that (i) a “qualifying event” within the meaning of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) occurred with respect
to Schofield on (October 9, 2007 [Termination Date]), as a result of which Schofield would lose
coverage under the Company’s group health plan as of October 31, 2007; (ii) Schofield has received
timely written notice of his right to elect to receive continuation coverage under said group
health plan pursuant to COBRA (“COBRA Coverage”) after (November 1, 2007 [following end of
coverage]); and (iii) Schofield has elected to receive and to pay for COBRA Coverage. In further
consideration for all terms of this Agreement, during the period commencing November 1, 2007 and
ending upon the earliest to occur of (x) October 31, 2008, (y) the effective date of any coverage
under any “group health plan” provided to or obtained by Schofield, or (y) the date that COBRA
Coverage otherwise would terminate pursuant to the provision of COBRA (“Benefits Period”), the
Company shall continue to provide COBRA Coverage to Employee at the Company’s cost (“Benefits
Coverage”). Upon the expiration of the Benefits Period, the Company shall have no obligation to
pay for the costs of COBRA Coverage, and any COBRA Coverage to which Schofield may be entitled
pursuant to COBRA shall be at Schofield’s sole cost. During the Benefits Period, Schofield shall
notify the Company, attention Director of Human Resources, in writing of the occurrence of any
event, by reason of which Schofield shall or may be eligible for coverage under any “group health
plan” within the meaning of COBRA, and of the terms of such coverage, within ten (10) days from
such event and not later than five (5) business days prior to the effective date of such coverage.

3. Exercise of Vested Stock Options

     The Company and Schofield agrees that, notwithstanding any term to the contrary in option
grant agreements, Schofield may exercise any stock options vested on the date of this Agreement for
a period equal to the shorter of (i) six months from the date of this Agreement, or (ii) the
expiration date of such option. All vesting of any unvested options shall immediately cease on the
date of this Agreement.

4. Time to Consider and Revocation Period

     By executing this Agreement, Releasor acknowledges that (a) Schofield has been advised by the
Company to consult with an attorney before executing this Agreement; (b) Schofield was provided
adequate time (i.e, twenty-one [21] days) to review it and to consider whether to sign the
Agreement; and (c) Schofield has been advised that he has seven (7) days following execution to
revoke it (“Revocation Period”). Notwithstanding anything to the contrary contained herein, this
Agreement will not be effective or enforceable until the Revocation Period has expired, and no
portion of the Separation Amount is payable and shall not be delivered or paid by the Company until
the Revocation Period has expired. Employee agrees that any revocation shall be made in writing
and he will cause such written revocation to be delivered to Stephen J. Hansbrough, President and
Chief Executive Officer, prior to the expiration of the Revocation Period.

5. Acknowledgment of Full Payment

     Schofield acknowledges and agrees that (a) the Initial Payment is adequate consideration for
all of the terms of this Agreement; (b) the Company’s agreement to pay the Separation

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Amount Balance Payments is further consideration for all terms of this Agreement; (c) the
Separation Amount does not include any benefit, monetary or otherwise, which was earned or accrued
or to which Schofield was already entitled; and (e) any monetary or other benefits which, prior to
the execution of this Agreement, Schofield may have earned or accrued or to which Schofield may
have been entitled, either have been paid, or are hereby released, waived or settled pursuant to
this Agreement.

6. Cessation of Relationship and No Hire

     Schofield acknowledges that upon the execution of this Agreement, he ceases any employment
relationship with any Releasee. Schofield hereby waives any right to, and agrees not to, knowingly
seek retention as an employee or to seek employment with any Releasee, including the Company, and,
without waiver by any Releasee of the foregoing, the existence of this Agreement shall be a valid,
legal, non-discriminatory basis for rejecting any such application or, in the event Schofield
obtains such retention or employment, to terminate such retention or employment.

7. Releasor’s Release of all Claims

     Releasor hereby irrevocably, unconditionally and generally releases the Company, its current
and former officers, directors, shareholders, employees, owners, partners, members, affiliates,
subsidiaries, divisions, related entities, agents, attorneys, and the current and former officers,
directors, shareholders, partners, affiliates, subsidiaries, agents, attorneys and employees of any
of the foregoing, and the heirs, executors, administrators, receivers, successors and assigns of
all of the foregoing (collectively, “Releasee”), from or in connection with, and hereby waives
and/or settles with prejudice, any and all actions, causes of action, suits, debts, dues, sums of
money, accounts, controversies, agreements, promises, damages, judgments, executions, or any
liability, claims or demands, known or unknown and of any nature whatsoever and which Releasor ever
had, now has or hereafter can, shall or may have for, upon, or by reason of any matter, cause or
thing whatsoever from the beginning of the world to the date of this Agreement, including, without
limitation, arising directly or indirectly pursuant to or out of any aspect of Schofield’s
relationship with or any other contact with any Releasee, the payment or nonpayment of any
compensation, the performance of services for any Releasee, the termination of such services, and
any liability for any emotional injury, pain or suffering he may have allegedly experienced in
connection with such relationship or other contact. Specifically, without limitation, this
Agreement shall release Releasee from and apply to any rights and/or claims (a) arising under any
contract or other arrangement, express or implied, written or oral; (b) for wrongful dismissal or
termination; (c) arising under any applicable federal, state, local or other statutes, orders,
laws, ordinances, regulations or the like, or case law, that relate to employment or employment
practices and/or, specifically, that prohibit discrimination based upon age, race, religion, sex,
national origin, pregnancy, disability, sexual orientation, gender identity, or any other unlawful
bases, including without limitation, the United States Constitution, the Civil Rights Act of 1964,
as amended, the Civil Rights Act of 1991, as amended, the Civil Rights Acts of 1866 and 1871, as
amended, the Americans with Disabilities Act of 1990, as amended, the Age Discrimination in
Employment Act, as amended, the Family Medical Leave Act of 1993, as amended, the Pregnancy
Discrimination Act of 1978, as amended, the Employee Retirement

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Income Security Act of 1990, as amended, the Workers Adjustment and Relocation Notice Act, as
amended, the Fair Labor Standards Act, as amended, the Vietnam Era Veterans’ Readjustment
Assistance Act, as amended, the Equal Pay Act, as amended, and any similar applicable statutes,
orders, laws, ordinances, regulations or the like, or case law, of any state in which any Releasee
is subject to jurisdiction, and/or any political subdivision thereof, and all applicable rules and
regulations promulgated pursuant to or concerning any of the foregoing statutes, orders, laws,
ordinances, regulations or the like; (d) based upon any other federal, state or local statutes,
orders, laws, ordinances, regulations or the like, or case law; (e) for tortious or harassing
conduct, infliction of mental distress, interference with contract, fraud, libel or slander; and
(f) for damages, including without limitation, punitive or compensatory damages, or for attorneys’
fees, expenses, costs, wages, injunctive or equitable relief.

8. No Attorneys’ Fees

     Schofield and his attorneys specifically acknowledge and agree that none of them are entitled
to any award of attorneys’ fees, costs or expenses, and Schofield is not a “prevailing party,”
under any federal, state, local or other statute, order, law, ordinance, regulation or the like.

9. No Access To Company Premises

     Schofield agrees not to enter, for any purpose, upon the premises of any current or future
Company corporate offices or the premises of any current or future Company owned, leased or managed
property including, but not limited to the Company’s retail business locations.

10. No Actions or Proceedings and Non-Participation

     Schofield represents and warrants that he has not filed or commenced any complaints, claims,
actions or proceedings of any kind against any Releasee with any federal, state or local court or
any administrative, regulatory or arbitration agency or body. If in fact Schofield has commenced
any complaints, claims, actions or proceedings of any kind against any Releasee, Schofield agrees
to take all steps needed to dismiss or withdraw such complaints, claims, actions or proceeding
with prejudice. Schofield agrees, to the fullest extent permitted by law, not to commence,
maintain, prosecute or participate in any action or proceeding in any court, agency, or forum
against any Releasee with respect to any act, omission, transaction or occurrence up to and
including the date of the execution of this Agreement. Schofield further agrees, to the fullest
extent permitted by law, not to instigate, encourage, assist or participate in an action or
proceeding commenced by anyone else against any Releasee, including the Company, and further
agrees, except as may be prohibited by law, that as a precondition to challenging the
enforceability of any provision of this Agreement, or in the event the release contained herein is
held to be unenforceable, in whole or in part, to repay to the Company the Separation Amount.

11. Non-Disparagement

     The Parties agree not to engage, support, or participate in any act or to make, either
directly or by or through another person, any oral or written statement or communication,

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including, but not limited to any electronic communication, e-mail or blog posting, that is
negative, disparaging or adverse of or concerning the other.

12. Confidentiality of Separation Agreement

     Except as may be required by law, Schofield shall keep confidential and shall not disclose
orally or in writing, directly or indirectly, to any person any and all information concerning any
aspect of Schofield’s relationship with any Releasee, including without limitation (i) any facts,
claims or assertions relating or referring to any conduct or practices by or on behalf of any
Releasee; (ii) any facts, claims or assertions relating or referring to any experiences of
Schofield or treatment Schofield received by or on behalf of any Releasee through the date of this
Agreement, which experiences or treatment could have provided a factual or legal basis for any
claim of any kind in any action or proceeding before any court or administrative or arbitral body;
(iii) the existence or terms of this Agreement; and (iv) the amount of any payment made hereunder.
Schofield further represents that he has not disclosed to any third party that the Company has
agreed to pay any monies to Schofield, the existence or terms of this Agreement or the amount of
any payment to be made hereunder. Notwithstanding the foregoing, in response to any inquiry
concerning any of the foregoing or otherwise, Schofield may state that any dispute with the Company
has been resolved. Nothing herein shall preclude Schofield from disclosing the terms of this
Agreement to his accountant, legal counsel, insurer or tax advisors; provided that such accountant,
legal counsel, insurer or tax advisors are advised of and agree to be bound by the provisions of
this paragraph and that Schofield acknowledges that he will be responsible for any violation of the
terms of this paragraph by any of those persons.

13. Confidential Information, Non-Solicitation

     Schofield agrees that certain obligations set forth in the Employment Agreement survive the
termination of his employment, notwithstanding the termination of the Employment Agreement.
Specifically, Schofield agrees as follows:

	 	(a)	 	Third party confidentiality. Schofield acknowledges that the Company has
disclosed that it was subject to duties to third parties to maintain information in
confidence and secrecy. Schofield agrees to continue to be bound by any such duties
owed by the Company to any third party.
	 
	 	(b)	 	Confidentiality. Schofield acknowledges that his work for the Company brought
him into close contact with various confidential business data of the Company, its
contracting parties, affiliates and customers not readily available to the public.
Accordingly, Schofield:

	 	(i)	 	covenants and agrees that on and after the date hereof, on any
basis for any reason, Schofield shall not use or disclose to anyone, whether or
not for his benefit or otherwise, any confidential matters (collectively,
“Confidential Matters”) concerning the Company or its suppliers, consultants,
agents, other contracting parties or customers, whether such customers are
deemed former, current or potential customers (collectively, the “Clients”),
including without limitation all confidential technical

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	 	 	 	information of the Company, secrets, trade secrets, proprietary software,
copyrights, client lists, lists of employees, confidential evaluations,
mailing lists, details of consultant contracts, pricing policies, sales data
and reports, margins, operational methods and processes, plans, financial
information and other confidential business affairs, learned by Schofield
concerning the Company, its clients or a third party, including without
limitation any subsidiaries, partners, affiliates, shareholders, employees,
lenders, suppliers, consultants, agents or joint venture partners of the
Company (collectively “Affiliates”); and
	 
	 	(ii)	 	covenants and agrees that (A) all confidential memoranda,
notes, lists (including, without limitation, mailing and client lists), records
and other confidential documents, whether in written, electronic or other form
(and all copies thereof) made or compiled by Schofield or made available to him
concerning the Company, its clients and any Affiliates are the sole property of
the Company, and (B) if such documents are in the possession or control of
Schofield, Schofield shall deliver them, without retaining any copies thereof,
to the Company promptly after execution of this Agreement.
	 
	 	(iii)	 	The provisions of subparagraph (b)(i) above shall not apply to
any information that: (1) is publicly available or becomes publicly available
through no act or fault of Schofield; (2) is made known to Schofield by a third
party who did not obtain it directly or indirectly from the Company; (3) is
independently developed by Schofield without use of the Company’s information
as evidence by credible written records of Schofield; or (4) is information
required to be disclosed by operation of law, governmental regulation or court
order provided that, if Schofield determines that such disclosure might be
required, Schofield will promptly notify the Company and provide the Company,
to the extent practicable, an opportunity to seek a protective order or other
appropriate remedy to prevent such disclosure.

	 	(c)	 	Non-Solicitation. Schofield agrees that for a period of one year from the date
of termination, he shall not, directly or indirectly, alone or in concert with others,
(i) solicit or encourage any employee of the Company, or an employee of any person or
entity with which the Company has an agreement through which the Company and the person
or entity are to act in concert with respect to the business of the Company, to leave
their respective employment or (ii) hire any employee of the Company.

Schofield acknowledges that the Company may cease making the Separation Amount Balance Payments if
he breaches paragraph 13 of this Agreement, and may recover any Separation Amount Balance Payments
the Company may have made to Schofield while he was in breach of this paragraph 13.

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14. Future Cooperation

     Schofield agrees to execute any other writings and/or documents consistent with this Agreement
and reasonably necessary to effectuate the terms of this Agreement. In addition, Schofield will
comply with all reasonable requests from any Releasee for assistance and/or information in
connection with any matters and/or issues relating to or encompassed within the duties and
responsibilities of Schofield’s employment, including without limitation, consulting with any of
the employees and/or attorneys of any Releasee with respect to, and/or appearing as a witness in,
any dispute, controversy, action or proceeding of any kind. Reasonable out-of-pocket expenses
actually incurred by Schofield in connection with his compliance with this paragraph will be
reimbursed to Schofield by the Company. Finally, Schofield agrees to appear in any court or other
tribunal upon ten (10) business days’ notice if such appearance is necessary to effectuate the
terms of this Agreement.

15. Employment References

     If Schofield requires a job reference from a prospective employer, and provided such
prospective employment does not violate paragraph 13 of this Agreement, Schofield shall contact the
President and Chief Executive Officer of the Company, who will advise Schofield’s prospective
employer of the dates of Schofield’s employment with the Company, Schofield’s title at the Company,
and Schofield’s annual salary during the last year of his employment with the Company.

16. Return of Company Property

     Schofield represents that he has returned to the Company all property of the Company in his
possession or over which he retained control such as keys, automobiles, cell phones, credit cards,
access cards, records, documents and files and all copies and recordings thereof. To the extent
Schofield subsequently discovers property of the Company in his possession or within his control,
he shall immediately return such property and all copies, recordings or duplicates thereof to the
Company.

17. Survival

     The covenants, representations and acknowledgments made in this Agreement shall survive the
execution of the Agreement and the delivery of the Separation Amount. In the event that Schofield
is found to have made a material misstatement in any term, condition, covenant, representation or
acknowledgment in this Agreement, or has committed or commits a breach of any term, condition or
covenant in this Agreement, Schofield shall be liable for any damages suffered or incurred by the
Company by reason of such misstatement or breach.

18. Entire Agreement and Severability

     This Agreement constitutes the sole and complete understanding and agreement between the
Parties with respect to the matters set forth herein, and there are no other agreements or
understandings, whether written or oral and whether made during the course of negotiating this
Agreement or otherwise, with respect to the matters set forth herein. The Parties acknowledge

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that, in executing this Agreement, they are not relying on any representation or statement
made to them by any person other than as set forth herein. No term, condition, covenant,
representation or acknowledgment contained in this Agreement may be amended unless in a writing
signed by the Parties. If any section of this Agreement is determined to be void, voidable or
unenforceable, it shall have no effect on the remainder of the Agreement which shall remain in full
force and effect.

19. Arbitration

     Any future dispute, controversy or claim between Releasor and any Releasee shall be submitted
to and finally determined by binding arbitration to be held in New York, New York at the American
Arbitration Association (“AAA”), before one arbitrator with each party to be responsible for its
own attorneys’ fees and costs incurred in connection therewith. Claims subject to this arbitration
provision are and shall be (a) those claims which arise out of or relate to this Agreement,
including the enforceability and/or violation of any term or provision of this Agreement; (b) any
future disputes that may arise between Releasor and Releasee; and/or (c) in the event that
paragraph 7 of this Agreement is determined or deemed to be void or unenforceable, in whole or in
part, those claims which arise out of or relate to any rights or claims, or constituting any
claims, that are described in and/or are referred to, and were intended to be waived and released,
in paragraph 7 of this Agreement. In the event that this arbitration provision is determined by a
court with appropriate jurisdiction to be unenforceable, the Parties waive their right, if any, to
a trial by jury of any claim arising out of or in connection with this Agreement, or in the event
that paragraph 7 of this Agreement is determined or deemed to be void or unenforceable, of any
claims that are described in and/or referred to, and were intended to be waived and released, in
paragraph 7 of the Agreement. Notwithstanding the foregoing, the Company may seek injunctive
relief from any court of competent jurisdiction.

20. Governing Law

     This Agreement shall in all respects be subject to, governed by and enforced and construed
pursuant to and in accordance with the laws of the State of Delaware, without regard to and
excluding its choice of law rules and except that the interpretation and enforceability of the
arbitration clause herein shall be governed by the Federal Arbitration Act.

21. Binding Agreement and Execution

     This Agreement shall be binding upon and inure to the benefit of the successors, heirs,
devisees, legatees, executors, administrators, assignees, trustees, affiliates and parent companies
of each of the Parties as provided for herein. This Agreement may be executed in one or more
counterparts. The several executed counterparts shall be considered an original and shall be
binding on the Parties.

22. Representation of Schofield

     Schofield agrees and acknowledges that (a) he has had an adequate opportunity to review this
Agreement and all of its terms and has been represented by counsel with respect to any potential
claims he may have had, and this Agreement; (b) he understands all of the terms of this

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Agreement, and such terms are fair, reasonable and are not the result of any fraud, duress,
coercion, pressure or undue influence exercised by or on behalf of any Releasee; and (c) he has
agreed to and entered into this Agreement and all of the terms hereof, knowingly, freely and
voluntarily.

23. Miscellaneous

          a. The captions in this Agreement are inserted for convenience of reference only and in no way
define, describe or limit the scope or intent of this Agreement or any of the provisions hereof.

          b. As used in this Agreement, the masculine shall include the feminine and neuter, the
singular shall include the plural and the plural shall include the singular, as the context may
require.

          c. No rules of construction against the drafter of this Agreement shall apply in any
interpretation or enforcement of this Agreement.

     IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date first above
written.

	 	 	 	 	 
	 	 	 
	Date: 10/12/07 	

/s/ Kenneth Schofield
 	 
	 	KENNETH SCHOFIELD 	 
	 	 	 
	 
	Date: 10/12/07 	HearUSA, Inc.

 	 
	 	By:  	/s/ Stephen J. Hansbrough
 	 
	 	 	Name/Title:  	Stephen J. Hansbrough 	 
	 	 	  	President and Chief Executive Officer 	 
	 

	 	 	 	 	 
	STATE OF FLORIDA

	 	 	)	 
	COUNTY OF                     

	 	 	)	 

On the                      day of                                         , 2007, before me
came Kenneth Schofield, to me known, and
known to me to be the individual described in, and who executed the foregoing Settlement Agreement
and General Release, and duly acknowledged to me that he executed same.

	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Notary Public 	 
	 	 	 
	 

10exv10w25

 

Exhibit 10.25

HEARUSA, INC.

AMENDED AND RESTATED

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 Company’s growth and success;

          WHEREAS, the Plan was originally adopted by the Board of Directors and subsequently approved
by the shareholders on June 11, 2007;

          WHEREAS, pursuant to the authority granted to it under section 9.8 hereof, on February 25,
2008, the Compensation Committee approved an amendment to this Plan to permit the Compensation
Committee to exercise its discretion with regard to establishing post-termination option exercise
periods under section 9.5;

          NOW, THEREFORE, the Company hereby sets forth this HearUSA, Inc. Amended and Restated 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 Company’s 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 Company’s 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 Company’s board of directors is replaced during
any 12-month period by directors whose appointment or election is not endorsed by a
majority of the members of the Company’s board of directors prior to the date of the
appointment or election.

2

 

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
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

3

 

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.

     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. Amended and Restated 2007 Incentive Compensation Plan.

     2.24. “Restricted Shares” means restricted Shares issued pursuant to Article 7.

4

 

     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.

     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

5

 

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.

     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 Committee’s 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

6

 

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.

               (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

7

 

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.

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

8

 

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 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 Holder’s 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

9

 

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.

     (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 Participant’s death, to the
Participant’s 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

10

 

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.

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 Participant’s 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.

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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 Optionee’s Permitted Assignee and the Company’s 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, 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 Assignee at any time within one year after
the death of the Optionee, unless earlier

13

 

terminated pursuant to its terms, provided, however, that if the term of such Option would
expire by its terms within six months after the Optionee’s death, the term of such Option shall be
extended until six months after the Optionee’s 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 Company’s 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 Optionee’s or Participant’s 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 number. In the
event of any reorganization, merger, consolidation, split-up, spin-off, or

14

 

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 or affect any
right that the Company or any subsidiary or affiliate of the Company may have

15

 

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

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