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
x
Filed by a Party other than the Registrant
¨
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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x
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Definitive Proxy Statement
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¨
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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SONIC INNOVATIONS, 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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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined):
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(4)
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Proposed maximum aggregate value of transaction:
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¨
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Fee paid previously with preliminary materials.
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¨
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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Sonic Innovations, Inc.
2795 East Cottonwood Parkway, Suite 660
Salt Lake City, Utah 84121
Phone: (801) 365-2800
April 2, 2009
Dear Stockholder:
You are cordially invited to attend
the Annual Meeting of Stockholders to be held at the Flamingo Hotel & Casino located at 3555 Las Vegas Boulevard, Las Vegas, Nevada 89109 on Thursday, May 7, 2009 at 9:00 a.m. PDT.
The accompanying Proxy Statement describes the business to be transacted at the Annual Meeting. It is important that your shares be represented whether
or not you personally attend the Annual Meeting. Regardless of the number of shares you own, your vote is important to us. In order to ensure that you will be represented, we ask you to please vote by telephone or sign, date and return the enclosed
proxy card or voting instruction card promptly. This will not limit your right to vote in person or to attend the Annual Meeting.
We also
plan to review the status of our business at the Annual Meeting. We look forward to seeing you.
Sincerely,
Samuel L. Westover
Chairman and
Chief Executive Officer
Sonic Innovations, Inc.
2795 East Cottonwood Parkway, Suite 660
Salt Lake City, Utah 84121
(801) 365-2800
NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
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DATE/TIME:
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9:00 a.m. PDT on Thursday, May 7, 2009
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PLACE:
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Flamingo Hotel & Casino
3555 Las Vegas Boulevard
Las Vegas, Nevada 89109
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ITEMS OF BUSINESS:
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1. To elect two (2) directors for a three-year term;
2. To ratify the appointment of PricewaterhouseCoopers LLP
(PricewaterhouseCoopers) as our independent registered public accounting firm for the fiscal year ending December 31, 2009;
3. To approve an amendment to our Amended and Restated Certificate of Incorporation to change our name to Otix Global, Inc.;
4. To approve an amendment to our Amended and Restated Certificate of Incorporation to effect
a one-for-five reverse split of our common stock, together with a corresponding reduction in the number of authorized shares of our common stock; and
5. To take action on any other business that may properly be considered at the Annual Meeting
or any adjournments thereof.
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ADJOURNMENTS:
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Any action on the items of business described above may be considered at the Annual Meeting at the time and on the date specified above or at any time and date to which the Annual Meeting may
be properly adjourned.
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VOTING:
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If you cannot attend the Annual Meeting, you may vote your shares by telephone or by completing and promptly returning the enclosed proxy card in the envelope provided. Telephone voting
procedures are described in the Proxy Statement accompanying this notice, as well as on the enclosed proxy card.
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RECORD DATE:
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You are entitled to vote only if you were a stockholder of record as of the close of business on March 9, 2009.
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YOUR VOTE IS IMPORTANT:
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Your vote is very important. Whether or not you plan to attend the Annual Meeting, we encourage you to read this Proxy Statement and submit your proxy or voting instruction card as soon as
possible. You may submit your proxy or voting instruction card for the Annual Meeting by completing, signing, dating and returning your proxy or voting instruction card in the pre-addressed envelope provided, or, in most cases, by using the
telephone. For specific instructions on how to vote your shares, please refer to the section entitled
QUESTIONS AND ANSWERS CONCERNING THIS SOLICITATION AND VOTING AT THE ANNUAL MEETING
of the accompanying Proxy Statement and the
instructions on the proxy or voting instruction card.
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ANNUAL REPORT:
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Sonic Innovations 2008 Annual Report on Form 10-K is enclosed.
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By Order of the Board of Directors,
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Brent H. Shimada
Vice President and
Secretary
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This Notice of the Annual Meeting, Proxy Statement and accompanying proxy card were mailed on or
about April 2, 2009.
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting to be held on May 7, 2009
This year we are following a new Securities and Exchange Commission rule which requires us to make available to you on the Internet a copy of this proxy statement and our annual report to stockholders. These materials are available to you
at
www.sonici.com/2009proxy
.
SONIC INNOVATIONS, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
May 7, 2009
The Board of
Directors of Sonic Innovations, Inc. (the
Board
) is soliciting the enclosed proxy from you. The proxy will be used at our 2009 Annual Meeting of Stockholders to be held on Thursday, May 7, 2009, beginning at 9:00 a.m.
PDT at the Flamingo Hotel & Casino located at 3555 Las Vegas Boulevard, Las Vegas, Nevada 89109, and at any adjournments thereof. This Proxy Statement contains important information regarding the meeting. Specifically, it identifies the
matters upon which you are being asked to vote, provides information that you may find useful in determining how to vote and describes the voting procedures. This Proxy Statement is being mailed to stockholders on or about April 2, 2009.
We use several abbreviations in this Proxy Statement. We may refer to our company as
Sonic Innovations
or the
Company.
The term
proxy materials
includes this Proxy Statement, the enclosed proxy card and our Annual Report on Form 10-K for the year ended December 31, 2008. The term
Annual
Meeting
means our 2009 Annual Meeting of Stockholders.
QUESTIONS AND ANSWERS CONCERNING THIS SOLICITATION AND VOTING
AT THE ANNUAL MEETING
When and where
is the Annual Meeting?
The Annual Meeting will be held on Thursday, May 7, 2009, beginning at 9:00 a.m. PDT at the Flamingo
Hotel & Casino located at 3555 Las Vegas Boulevard, Las Vegas, Nevada 89109. The Annual Meeting is being held in Las Vegas during the Companys weeklong launch activities for our newest product, Touch. By combining the Annual
Meeting with our launch event, we are able to reduce the total expense of holding two separate events and we are able to take advantage of the presence of our executive officers and directors at each meeting to conduct the required business.
Why I am receiving these proxy materials?
You are receiving these proxy materials from us because you were a stockholder of record as of the close of business on March 9, 2009 (the
Record Date
). As a stockholder of record, you are invited to attend
the Annual Meeting and are entitled to and requested to vote on the items of business described in this Proxy Statement.
What is the purpose of the
Annual Meeting?
At our Annual Meeting, stockholders of record will act upon the items of business outlined in the Notice of the Annual
Meeting of Stockholders (on the cover page of this Proxy Statement), each of which is described more fully in this Proxy Statement. In addition, we plan to review the status of our business and respond to questions from stockholders.
Who is entitled to attend?
You are entitled to
attend the Annual Meeting
only
if you were a Sonic Innovations stockholder (or joint holder) of record as of the close of business on the Record Date, or if you hold a valid proxy for the Annual Meeting.
Please also note that if you are not a stockholder of record but hold shares in street name (that is, through a broker, trustee, bank or
other nominee), you will need to provide proof of beneficial ownership as of the Record Date, such as your most recent brokerage account statement prior to the Record Date, a copy of the voting
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instruction card provided by your broker, trustee, bank or other nominee, or other similar evidence of ownership. The Annual Meeting will begin promptly at
9:00 a.m. PDT. Check-in will begin at 8:45 a.m. PDT.
Who is entitled to vote?
Only stockholders who owned Sonic Innovations common stock as of the close of business on the Record Date are entitled to notice of and to vote at the
Annual Meeting and at any adjournments thereof.
How many shares are entitled to vote?
As of the Record Date, March 9, 2009, there were 27,606,045 shares of Sonic Innovations common stock outstanding. Each outstanding share of Sonic
Innovations common stock entitles the holder to one vote on each matter.
How many shares must be present or represented to conduct business (that is,
what constitutes a quorum)?
The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the outstanding
shares of Sonic Innovations common stock entitled to vote at the Annual Meeting will constitute a quorum. A quorum is required to conduct business at the Annual Meeting. The presence of the holders of Sonic Innovations common stock representing at
least 13,803,023 votes will be required to establish a quorum. Both abstentions and broker non-votes are counted for the purpose of determining the presence of a quorum.
What items of business will be voted on?
The items of business scheduled to be voted on at the
Annual Meeting are as follows:
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1.
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The election of two nominees to serve as directors on the Board for a three-year term;
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2.
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The ratification of the appointment of PricewaterhouseCoopers LLP (PricewaterhouseCoopers) as our independent registered public accounting firm for the fiscal year
ending December 31, 2009;
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3.
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The approval of an amendment to our Amended and Restated Certificate of Incorporation to change our name to Otix Global, Inc.; and
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4.
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The approval of an amendment to our Amended and Restated Certificate of Incorporation to effect a one-for-five reverse split of our common stock, together with a corresponding
reduction in the number of authorized shares of our common stock.
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These proposals are described more fully below. As of the
date of this Proxy Statement, the only business that the Board intends to present at the Annual Meeting is as set forth in this Proxy Statement. If any other matter or matters are properly brought before the Annual Meeting or any adjournment
thereof, it is the intention of the persons who hold proxies to vote the shares they represent in accordance with their best judgment.
How does the
Board of Directors recommend that I vote?
The Board recommends that you vote your shares
FOR
each of the
director nominees,
FOR
the ratification of PricewaterhouseCoopers,
FOR
the approval of the amendment to our Amended and Restated Certificate of Incorporation to change our name to Otix Global,
Inc., and
FOR
the approval of the amendment to our Amended and Restated Certificate of Incorporation to effect a one-for-five reverse stock split.
What shares can I vote?
You may vote all shares owned by you as of the Record Date, including
(1) shares held directly in your name as the stockholder of record; and (2) shares held for you as the beneficial owner through a broker, trustee, bank or other nominee.
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What is the difference between holding shares as a stockholder of record and as a beneficial owner?
Most Sonic Innovations stockholders hold their shares through a broker, trustee, bank or other nominee rather than directly in their own name.
If your shares are registered directly in your name with our transfer agent, American Stock Transfer, you are considered, with respect to those
shares, the stockholder of record, and these proxy materials are being sent directly to you by us. As the stockholder of record, you have the right to grant your voting proxy directly to the named officers of Sonic Innovations who are serving as
proxy holders or to vote in person at the Annual Meeting. We have enclosed a proxy card for you to use for this purpose.
If your shares
are held by a nominee, you are considered the beneficial owner of such shares held in street name, and these proxy materials are being forwarded to you together with a voting instruction card. As the beneficial owner, you have the right
to direct your broker, trustee, bank or other nominee how to vote and are also invited to attend the Annual Meeting. Please note that since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the Annual
Meeting unless you obtain a legal proxy from the broker, trustee, bank or other nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting. Your broker, trustee, bank or other nominee has enclosed or
provided voting instructions for you to use in directing the broker, trustee, bank or other nominee how to vote your shares.
How can I vote my shares
without attending the Annual Meeting?
Whether you hold shares directly or in street name, you may vote without attending the Annual
Meeting. If you are a stockholder of record, you may vote by granting a proxy. If you are a stockholder of record, you may vote:
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By
Telephone
you may submit the proxy by following the Vote by Telephone instructions on the proxy card. If you vote by telephone you do not
need to return your proxy card; or
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By
Mail
you may vote by mail by signing and dating the proxy card and mailing it in the envelope provided. You should sign your name exactly as it
appears on the proxy card. If you are signing in a representative capacity (for example as guardian, executor, trustee, custodian, attorney or officer of a corporation) you should indicate your name and title or capacity.
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For shares held in street name, you should follow the voting directions provided by your nominee. You may complete and
mail a voting instruction card to your nominee or, in most cases, submit voting instructions by telephone. If you provide specific voting instructions by mail or telephone, your shares will be voted by your nominee as you have directed.
Telephone voting facilities for stockholders of record will close at 12:00 noon EDT, on Wednesday, May 6, 2009.
How can I vote my shares in person?
If you are a
stockholder of record and wish to vote your shares at the Annual Meeting, you should bring the enclosed proxy card or proof of identification. You may vote shares held in street name only if you obtain a signed proxy from the record holder (broker,
trustee, bank or other nominee) giving you the right to vote the shares. Even if you plan to attend the Annual Meeting, we encourage you to vote by proxy card or telephone so your vote will be counted even if you later decide not to attend.
Can I change my vote?
You may change
your vote at any time prior to the vote at the Annual Meeting. If you are the stockholder of record, you may change your vote by:
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submitting a new, properly signed proxy bearing a later date (which automatically revokes the earlier proxy) prior to your shares being voted at the Annual Meeting;
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providing a written notice of revocation to our Secretary prior to your shares being voted at the Annual Meeting;
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voting by telephone prior to 12:00 noon EDT, on Wednesday, May 6, 2009; or
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voting in person at the Annual Meeting.
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Attendance at the Annual Meeting will not cause your previously granted proxy to be revoked, unless you specifically so request.
What is a
broker non-vote?
Under the rules that govern brokers who have record ownership of shares that are held in street name for
their clients, who are the beneficial owners of the shares, brokers have the discretion to vote such shares on routine matters (such as election of directors), but not on non-routine matters (such as stockholder proposals). A
broker non-vote occurs when a broker expressly instructs on a proxy card that it is not voting on a matter, whether routine or non-routine.
How are broker non-votes counted?
Broker non-votes will be counted for the purpose of determining the presence
or absence of a quorum for the transaction of business, but they will
not
be counted in tabulating the voting result for any particular proposal.
Who will serve as inspector of election?
Scott Lindeman, our Vice President and Corporate Controller, will tabulate the
votes and act as inspector of election at the Annual Meeting.
What vote is required to approve each item and how are votes counted?
The vote required to approve each item of business and the method for counting votes is set forth below:
Election of Directors.
The two director nominees receiving the highest number of affirmative
FOR
votes at the meeting (a
plurality of votes cast) will be elected to serve as directors. You may vote either
FOR
or
WITHHOLD
your vote for the director nominees. A properly executed proxy marked
WITHHOLD
with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for purposes of determining whether there is a quorum.
Ratification of Accounting Firm.
To be approved by our stockholders, this proposal must receive the affirmative
FOR
vote of a majority of the votes cast affirmatively or negatively on this proposal at the Annual Meeting.
Approval of Amendments to Our Amended and Restated Certificate of Incorporation.
To be approved by our stockholders, this proposal must receive the affirmative
FOR
vote of a majority of the votes cast
affirmatively or negatively on this proposal at the Annual Meeting.
All Other Items.
For each of the other items of business, the
affirmative
FOR
vote of a majority of the shares represented in person or by proxy and entitled to vote on the item will be required for approval. You may vote
FOR, AGAINST
or
ABSTAIN
for these items of business. If you
ABSTAIN,
your abstention has the same effect as a vote
AGAINST.
If you provide specific instructions with regard to certain items, your shares will be voted as you instruct on such items. If you sign your proxy card
or voting instruction card without giving specific instructions, your
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shares will be voted in accordance with the recommendations of the Board on the scheduled business items (
FOR
the two director
nominees to the Board,
FOR
ratification of the appointment of the independent auditors and
FOR
for the amendments to the Amended and Restated Certificate of Incorporation) and in the discretion of
the proxy holders on any other matters that properly come before the Annual Meeting and any adjournments thereof.
How are abstentions counted?
If you return a proxy card that indicates an abstention from voting in all matters, the shares represented will be counted for the purpose
of determining both the presence of a quorum and the total number of votes cast with respect to a proposal (other than the election of directors), but they will not be voted on any matter at the Annual Meeting. In the absence of controlling
precedent to the contrary, we intend to treat abstentions in this manner. Accordingly, abstentions will have the same effect as a vote
AGAINST
a proposal.
What happens if additional matters are presented at the Annual Meeting?
Other than the four items of
business described in this Proxy Statement, we are not aware of any other business to be acted upon at the Annual Meeting. If you grant a proxy, the persons named as proxy holders, Samuel L. Westover (our Chairman and CEO) and Michael M. Halloran
(our Vice President and CFO), will have the discretion to vote your shares on any additional matters properly presented for a vote. If for any unforeseen reason any of our nominees is not available as a candidate for director, the proxy holders will
vote your proxy for such other candidate or candidates as may be nominated by the Board.
What should I do in the event that I receive more than one set
of proxy materials?
You may receive more than one set of these proxy materials, including multiple copies of this Proxy Statement and
multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a
stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please vote each proxy card and voting instruction card that you receive to ensure that all your shares are voted.
Where can I find the voting results?
We intend to
announce preliminary voting results at the Annual Meeting and publish final results in our Quarterly Report on Form 10-Q for the second quarter 2009.
Who is soliciting my vote and who will bear the costs of this solicitation?
The Board of Directors of Sonic Innovations is
making this solicitation and Sonic Innovations will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials and soliciting votes. In addition to this solicitation by mail, the solicitation of proxies or
votes may be made in person, by telephone or by electronic communication by members of the Board, our officers and other employees, who will not receive any additional compensation for assisting in the solicitation. Upon request, we will also
reimburse brokerage houses and other custodians, nominees and fiduciaries for forwarding proxy solicitation materials to the beneficial owners of Sonic Innovations common stock.
Who can help answer my questions?
If you have any questions about the Annual Meeting or how to vote
or revoke your proxy, or if you need additional copies of this Proxy Statement or proxy materials, please contact the Companys Secretary at (801) 365-2800.
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SHARE OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information relating to the beneficial ownership of Sonic Innovations common stock as of March 9, 2009 by:
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each stockholder known by us to own beneficially more than 5% of Sonic Innovations common stock;
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each of our executive officers named in the summary compensation table (our Chief Executive Officer, our Chief Financial Officer and our three other most highly
compensated executive officers);
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each of our directors; and
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all of our directors and executive officers as a group.
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The number of shares beneficially owned by each entity, person, director and executive officer is determined in accordance with the rules of the Securities and Exchange Commission, and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares over which the person has the sole or shared voting power or investment power and any shares that the person has the
right to acquire within 60 days of March 9, 2009 through the exercise of any stock option or other right. Unless otherwise indicated, each person has sole voting and investment power (or shares such powers with his or her spouse) with respect
to the shares set forth in the following table.
The number and percentage of shares beneficially owned is computed on the basis of
27,606,045 shares of Sonic Innovations common stock outstanding as of March 9, 2009. Shares of Sonic Innovations common stock that a person has the right to acquire within 60 days of March 9, 2009 are deemed outstanding for purposes of
computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all directors and
executive officers as a group. The address for those persons for which an address is not otherwise provided is: c/o Sonic Innovations, Inc., 2795 East Cottonwood Parkway, Suite 660, Salt Lake City, Utah 84121.
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Beneficial Owner (Name and Address)
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Number of Shares
Beneficially
Owned
(1)
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Percentage of
Total Shares
Outstanding
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5% Stockholders:
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Coghill Capital Management, L.L.C.
One North Wacker Drive, Suite 4350
Chicago, IL 60606
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2,630,904
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(2)
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9.53
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%
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Morgan Stanley
1585 Broadway Avenue
New York, NY 10036
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2,552,773
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(3)
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9.25
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%
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T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD
21202
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2,191,691
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(4)
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7.94
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%
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SHARE OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (Continued)
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Beneficial Owner (Name and Address)
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Number of
Shares
Beneficially
Owned
(1)
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Number of
Shares Issuable Upon
Exercise
of
Stock
Options or Vesting of
Restricted Shares
(5)
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Percentage of
Total Shares
Outstanding
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Non-Employee Directors:
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James M. Callahan
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30,000
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24,000
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*
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Cherie M. Fuzzell
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14,167
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9,000
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*
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Craig L. McKnight
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34,000
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9,000
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*
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Robert W. Miller
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16,334
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9,000
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*
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Andrew G. Raguskus
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606,085
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339,358
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2.17
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%
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Kevin J. Ryan
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379,158
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303,158
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1.36
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%
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Lawrence C. Ward
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17,000
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15,000
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*
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Named Executive Officers:
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Samuel L. Westover
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663,541
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614,250
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2.35
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%
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Michael M. Halloran
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218,249
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150,975
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*
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Jerry L. DaBell
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229,919
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195,628
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*
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Brent M. Shimada
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170,800
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137,083
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*
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Christie R. Mitchell
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83,153
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70,751
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*
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All directors and executive officers as a group (17 persons)
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2,509,805
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1,907,412
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8.50
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%
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SHARE OWNERSHIP BY CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT FOOTNOTES
(1)
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The information provided in this table is based on our records, information supplied to us by our executive officers, directors and 5% stockholders and information contained in
Schedules 13D and 13G filed with the Securities and Exchange Commission.
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(2)
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Based on information in a Schedule 13G Report filed February 17, 2009 indicating that Coghill Capital Management, L.L.C. and its affiliates (Coghill) were the
beneficial owners of 2,630,904 shares, of which Coghill had shared voting and dispositive power.
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(3)
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Based on information in a Schedule 13G Report filed February 16, 2009 indicating that Morgan Stanley and its affiliates (Morgan Stanley) were the beneficial owners
of 2,552,773 shares, of which Morgan Stanley had sole voting power over 2,551,673 and sole dispositive power over 2,552,773 shares.
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(4)
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Based on information in a Schedule 13G Report filed February 13, 2009 indicating that T. Rowe Price and its affiliates (T. Rowe Price) were the beneficial owners of
2,191,691 shares, of which T. Rowe Price had sole voting power over 493,953 shares and sole dispositive power over 2,191,691 shares. These securities are owned by various individual and instructional investors (including T. Rowe Price Small-Cap
Value Fund, Inc., which owns 1,660,000 shares, representing 6.01% of the shares outstanding) which T. Rowe Price serves as investment adviser with power to direct investments and/or sole power to vote the securities. For purposes of the Securities
Exchange Act of 1934, T. Rowe Price is deemed to be the beneficial owner of such securities; however, T. Rowe Price expressly disclaims that it is, in fact, the beneficial owner of such securities.
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(5)
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Shares issuable upon exercise of stock options within 60 days of March 9, 2009. These shares are included in the number of shares beneficially owned column.
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7
GOVERNANCE OF THE COMPANY
Board Composition
Members of the Board on the date of this Proxy Statement, and the committees of
the Board on which they serve, are identified below.
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Name of Director
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Compensation
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Audit
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Governance
and
Nominating
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Stock
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Non-Employee Directors:
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James M. Callahan
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X
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X
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Cherie M. Fuzzell
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X
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*2
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X
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Craig L. McKnight
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X
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*
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X
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1
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Robert W. Miller
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X
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X
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*2
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Kevin J. Ryan
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X
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1
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Lawrence C. Ward
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X
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*1
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X
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Employee Directors:
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Andrew G. Raguskus
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Samuel L. Westover
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X
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*
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X
1
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Appointed committee member 5/08
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X
*1
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Committee chair until 5/08
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X
*2
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Appointed committee chair 5/08
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During 2008, the Board met eight times and each then-current director attended each meeting, except for Messers. Callahan, Miller, Ryan, and Ward, who
each missed one meeting. Members of the Board are encouraged to attend our annual meeting. All of the then-current Board members attended the 2008 annual meeting
.
Dr. Lewis Edelheit attended one Board meeting in 2008 and did not stand
for re-election, but is a paid emeritus director from May 2008 to May 2009. Dr. Edelheit was Chair of the Compensation Committee until May 7, 2008.
Mr. Andrew Raguskus was Chairman of the Board until he resigned as Chair May 7, 2008. Mr. Samuel Westover was appointed Chairman of the Board and Chief Executive Officer on May 7, 2008.
Board Independence
The Board has determined that
each of the following directors (and each of the members of the Audit Committee, the Compensation Committee and the Governance and Nominating Committee) is an independent director as such term is defined in Marketplace Rule 4200(a)(15)
of the National Association of Securities Dealers, Inc. (the
NASD
):
James M. Callahan;
Craig L. McKnight;
Lawrence C. Ward;
Kevin J. Ryan;
Cherie M. Fuzzell; and
Robert W. Miller.
The Board has also determined that no
material relationships exist between any non-employee director and the Company which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Mr. Raguskus and
Mr. Westover are not independent directors because they are employees of the Company. (Mr. Raguskus was an employee of the Company until his resignation effective February 28, 2009.)
8
Board Committee Composition
Audit Committee
Sonic Innovations has a separately-designated standing Audit Committee established
in accordance with section 3(a)(58)(A) of the Securities Exchange Act, as amended. The Audit Committee currently consists of Mr. Callahan, Mr. Miller and Mr. McKnight. Mr. Westover was Chairman of the Audit Committee until his
appointment as the Companys President and CEO in October 2005. Mr. McKnight was appointed Chairman of the Audit Committee upon his election to the Board in October 2005. The Board believes that each of these individuals is financially
literate, and that Mr. McKnight is a financial expert as defined under applicable Securities and Exchange Commission rules. In addition, the Board believes that each member of the Audit Committee is independent as defined in
Marketplace Rule 4200(a)(15) of the NASD. The Audit Committee assists the Board in fulfilling its responsibilities for general oversight of the integrity of our financial statements; our compliance with legal and regulatory requirements, including
compliance with the Sarbanes-Oxley Act of 2002; and the independent auditors qualifications, independence, engagement and performance. Among other things, the Audit Committee participates in preparing the Report of the Audit Committee for
inclusion in the Proxy Statement; annually reviews the Audit Committee charter; appoints, evaluates and determines the compensation of the independent auditors; reviews and approves (i) the scope of the annual audit, (ii) the audit and
other accounting related fees and (iii) the financial statements; reviews our disclosure controls and procedures, internal controls and corporate policies with respect to financial information; oversees the Companys
Financial
Information Integrity Policy
and investigations into complaints concerning financial matters; and reviews other risks that may have a significant impact on our financial statements. The Audit Committee works closely with management as well as
the independent auditors. The Audit Committee has the authority to obtain advice and assistance from, and receive appropriate funding from the Company for, outside legal, accounting or other advisors as the Audit Committee deems necessary to carry
out its duties. The Audit Committee met seven times in 2008 and each then-current member attended each meeting. The report of the Audit Committee is included herein. The charter for the Audit Committee is available on our website at
www.sonici.com/index.php/corporate/policies-and-charters.
Compensation Committee
The Compensation Committee currently consists of Mr. Callahan, Ms. Fuzzell, and Mr. Ryan. Mr. Westover was a member of the
Compensation Committee until his appointment as the Companys President and CEO in October 2005. The Compensation Committee approves our executive officers (i) salaries, (ii) annual cash bonus awards and (iii) stock-based
incentives and it also prepares and approves the Compensation Disclosure and Analysis section of the Proxy Statement. The Compensation Committee also administers our 1993 Stock Plan, 2000 Stock Plan and 2000 Employee Stock Purchase Plan. The
Compensation Committee met three times in 2008 and each then-current member attended each meeting. The charter for the Compensation Committee is available on our website at www.sonici.com/index.php/corporate/policies-and-charters.
Governance and Nominating Committee
The Governance and Nominating Committee currently consists of Mr. McKnight, Mr. Miller, and Mr. Ryan.
Mr. Westover was a member of the Governance and Nominating Committee until his appointment as the
Companys President and Chief Executive Officer in October 2005. The Board believes that each member of the Governance and Nominating Committee is independent as defined under Marketplace Rule 4350(d)(2) of the NASD. The Governance and
Nominating Committee assists the Board in fulfilling its responsibility with respect to corporate governance of Sonic Innovations and is responsible for developing and recommending to the Board the governance principles applicable to Sonic
Innovations; overseeing the evaluation of the Board and management of Sonic Innovations; recommending to the Board director nominees for each committee; and assisting the Board in identifying prospective director nominees and determining the
director nominees for election. Among other things, the Governance and Nominating Committee determines the criteria for qualification and selection of directors for election to the Board; oversees the organization of the Board to
9
discharge its duties and responsibilities properly and efficiently; and identifies best practices and recommends corporate governance principles, including
giving proper attention and making effective responses to stockholder concerns regarding corporate governance. Other specific duties and responsibilities of the Governance and Nominating Committee include annually assessing the size and composition
of the Board; developing membership qualifications for Board committees; defining specific criteria for director independence; monitoring compliance with Board and Board committee membership criteria; annually reviewing and recommending directors
for continued service; coordinating and assisting management and the Board in recruiting new members to the Board; reviewing and recommending proposed changes to our Certificate of Incorporation or Bylaws and Board committee charters; recommending
Board committee assignments; reviewing, approving and monitoring all service by executive officers on outside, for-profit boards of directors; reviewing and approving in advance any proposed related party transactions; and reviewing, approving and
monitoring the Companys
Code of Business Conduct and Ethics
and
Code of Ethics for Principal Executive and Senior Financial Officers
. The Governance and Nominating Committee met three times in 2008 and each then-current member
attended each meeting except Mr. Ward who missed one meeting and Mr. Ryan who missed two meetings. In addition, governance issues were discussed as part of most Board meetings. The charter for the Governance and Nominating Committee is
available on our website at www.sonici.com/index.php/corporate/policies-and-charters.
Stock Committee
The Stock Committee, which currently consists of Ms. Fuzzell, Mr. Ward, and Mr. Westover, has the authority to grant to non-officer
employees only: (i) stock options to purchase up to a maximum of 10,000 shares per non-officer employee; and (ii) restricted stock up to a maximum of 5,000 shares per non-officer employee. Stock options or restricted stock granted in this
manner are reported to the Board.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee is currently one of our officers or employees; nor has served as a member of the board of directors or
compensation committee of any entity that has one or more officers serving as a member of our Board of Directors or Compensation Committee.
Consideration of Director Nominees
Stockholder Nominees
Our Bylaws permit stockholders to nominate directors. The policy of the Governance and Nominating Committee is to consider properly submitted stockholder
nominations for candidates for membership on the Board as described under
Identifying and Evaluating Nominees for Directors
below. For a description of the process for nominating directors in accordance with our Bylaws, please
refer to the section entitled
OTHER INFORMATION
Deadline for Receipt of Stockholder Proposals and Director Nominations.
In evaluating such nominations, the Governance and Nominating Committee seeks to achieve a balance
of knowledge, experience and capability on the Board and to address the membership criteria set forth under
Director Qualifications
below. Any stockholder nominations proposed for consideration by the Governance and Nominating
Committee should include the nominees name and qualifications for Board membership and should be addressed to:
Secretary
Sonic Innovations, Inc.
2795 East Cottonwood Parkway, Suite 660
Salt Lake City, Utah 84121
10
Director Qualifications
In evaluating candidates for membership on the Board, the Governance and Nominating Committee will consider, among other things, the following:
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Each candidate should be prepared to represent the best interests of all of the Companys stockholders and not just one particular constituency.
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Each candidate should have demonstrated integrity and ethics in his/her personal and professional life and have established a record of professional accomplishment
in his/her chosen field.
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No candidate, or family member (as defined in NASD rules) or affiliate or associate (each as defined in Rule 405 under the Securities Act of 1933, as amended) of a
candidate, should have any material personal, financial or professional interest in any present or potential competitor of the Company.
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Each candidate should be prepared to participate fully in Board activities, including attendance at, and active participation in, meetings of the Board and the
committee(s) of which he/she is a member (if applicable) and not have other personal or professional commitments that would interfere with or limit his/her ability to do so.
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Identifying and Evaluating Nominees for Directors
The Governance and Nominating Committee assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. The Governance and Nominating Committee utilizes a
variety of methods for identifying and evaluating nominees for director. In evaluating such nominations, the Governance and Nominating Committee seeks to achieve a balance of knowledge, experience and capability on the Board and to address
membership criteria set forth under
Director Qualifications
above. In the event that vacancies are anticipated, or otherwise arise, the Governance and Nominating Committee considers various potential candidates for director.
Candidates may come to the attention of the Governance and Nominating Committee through current Board members, professional search firms, stockholders or other persons. In addition, from time-to-time, the Governance and Nominating Committee may
solicit recommendations for director candidates from its professional service advisors. These candidates are evaluated at regular or special meetings of the Governance and Nominating Committee, and may be considered at any point during the year. The
Governance and Nominating Committee considers properly submitted stockholder nominations for candidates for the Board following verification of the stockholder status of persons proposing candidates. If any materials are provided by a stockholder in
connection with the nomination of a director candidate, such materials are reviewed by the Governance and Nominating Committee.
In October
2005, the Board unanimously elected Craig L. McKnight, a candidate recommended by the Governance and Nominating Committee, as a director, and Mr. McKnight was nominated and re-elected to the Board at the 2008 annual meeting.
In December 2006, upon recommendation of the Governance and Nominating Committee, the Board increased the number of directors to nine members, and
elected Robert W. Miller and Cherie M. Fuzzell to the Board. Mr. Miller was nominated and re-elected to the Board at the 2007 annual meeting and Ms. Fuzzell will be nominated for re-election to the Board at the 2009 annual meeting. The
Company did not receive any nominations for director from any stockholders.
On May 8, 2008, due to Dr. Lewis Edelheit not
standing for re-election to the Board and upon recommendation of the Governance and Nominating Committee, the Board reduced the number of directors to eight members.
On February 18, 2009, as a result of Mr. Raguskus resignation effective February 28, 2009, the Governance and Nominating Committee recommended and the Board approved the reduction of the number of
directors to seven members.
11
Communications with the Board
Stockholders and employees who desire to communicate with the Board or individual directors on a confidential basis may do so by writing directly and confidentially using an envelope marked confidential to
Board of Directors, c/o Secretary, Sonic Innovations, Inc., 2795 East Cottonwood Parkway, Suite 660, Salt Lake City, Utah 84121. Such communications will be forwarded directly to the named director or, if addressed to the Board, to the Chairman of
the Audit Committee, who is an independent director.
Any non-confidential communications from stockholders and employees that are intended
for the Board will be processed as follows: (i) if the sender specifically requests that the communication be sent to the Board, the communication will be promptly relayed to the Board; and (ii) if the sender does not specifically request
that the communication be sent to the Board, the communication will be promptly relayed to the Board if management, using its best business judgment, determines that it should be relayed to the Board.
Code of Ethics
The Sonic Innovations
Code of
Ethics for Principal Executive and Senior Financial Officers,
which applies to our chief executive officer, principal financial officer and principal accounting officer, is available on our website
www.sonici.com/index.php/corporate/policies-and-charters
. We intend to post amendments to or waivers from our
Code of Ethics for Principal Executive and Senior Financial Officers
at that address. There have not been any amendments or
waivers to this code of ethics to date.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who beneficially own more than 10% of
our common stock to file initial reports of beneficial ownership and reports of changes in beneficial ownership with the SEC. Such persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms filed by such
person.
To our knowledge, based solely on our review of such forms furnished to us, during the year ended December 31, 2008, our
directors, executive officers and greater than 10% shareholders complied with all Section 16(a) filing requirements, with the exception of three Form 4s which were filed late due to a communication error.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers, certified public accountants, were engaged as our independent auditors for 2008. KPMG LLP (KPMG), certified public accountants, were engaged as our independent auditors for 2002 through 2007 fiscal year
audits.
Representatives of PricewaterhouseCoopers will be present at the Annual Meeting, will have the opportunity to make a statement if
they desire, and will be available to respond to appropriate questions.
Audit Fees
For the years ended December 31, 2008, 2007 and 2006, we have incurred fees to PricewaterhouseCoopers and KPMG. Audit fees include the annual audit,
the audit of the effectiveness of internal control over financial reporting, quarterly reviews, accounting consultation, statutory audits, and review of registration statements and consents in connection with these registration statements.
Audit-related fees include accounting consultation on proposed acquisitions. Tax fees include U.S., foreign and state income tax preparation and tax consultation.
12
There were no fees for financial information systems design and implementation in 2008, 2007 or 2006. The Audit Committee believes
PricewaterhouseCoopers and KPMGs independence has not been impaired by their non-audit services.
A summary of fees incurred to
PricewaterhouseCoopers and KPMG for 2008, 2007 and 2006 appears below:
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Fee Category
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2008
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2007
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2006
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Audit
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$
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1,057,000
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$
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965,000
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$
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879,000
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Audit-related
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5,000
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Tax
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35,000
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4,000
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Total
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$
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1,092,000
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$
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965,000
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$
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888,000
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Audit fees incurred to PricewaterhouseCoopers and KPMG during 2008 were $425,000 and $632,000,
respectively, and tax fees of $35,000 were paid to PricewaterhouseCoopers.
It is the policy of the Audit Committee to pre-approve audit,
audit-related, tax and non-audit services to be performed by the independent auditors and the related fees. The Audit Committee is authorized to delegate, within specified limits, the pre-approval of such services and fees to an individual member of
the Audit Committee, provided that such individual shall report any decisions to pre-approve such services and fees to the full Audit Committee at its next regularly scheduled meeting. During 2008, no fees were approved by the Audit Committee after
services were performed pursuant to the de minimis exception established by the SEC.
COMPENSATION DISCLOSURE
AND ANALYSIS
REPORT OF THE
COMPENSATION COMMITTEE
OF THE BOARD ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board has furnished the following report on compensation for fiscal 2008 for the executive officers named in the
Summary Compensation Table in this proxy statement.
Roles and Responsibilities
The primary purpose of the Compensation Committee is to review and evaluate the Companys executive compensation policies and practices and oversee
the Companys overall compensation structure and programs. Specifically, the Compensation Committees responsibilities include, but are not limited to, reviewing and making recommendations for the full Board of Directors regarding:
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the goals and objectives relevant to compensation of the chief executive officer and other executive officers, and evaluating the performance of the executives in
light of those goals and objectives;
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the compensation level for the chief executive officer;
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the compensation levels of all other executive officers;
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grants of equity-based compensation to executive officers;
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compensation policies for outside directors;
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equity-based incentive plans for the chief executive officer and other executive officers; and
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other benefit programs presented to the Committee by the Companys management.
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The role of the Companys management is to provide reviews and recommendations for the
Committees consideration, and to manage the Companys executive compensation programs, policies and governance. Direct responsibilities include, but are not limited to:
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providing an ongoing review of the effectiveness of the compensation programs, including considerations of competitiveness, motivation and retention and alignment
with the Companys objectives;
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recommending changes, if necessary, to ensure achievement of all program objectives; and
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recommending pay levels, payout and/or awards for the executive officers other than the chief executive officer.
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From 2003 to 2006, the Company participated in the SIRS Executive Compensation Survey for pharmaceutical, biotechnology, healthcare products and medical
device companies from ORC Worldwide. The SIRS survey data is segregated into revenue size groupings, i.e., under $250 million, $250 749 million, $750 $2,499 million and over $2,500 million. The Company compares itself against the
under $250 million revenue segment. Of the companies in this revenue segment, more than 80% of those companies have annual revenue less than $100 million. The purpose of participating in the survey is to provide independent data of compensation paid
to executive officers of similar sized companies in the industry segment in which the Company operates.
In 2007, the Board retained the
firm of Frederic W. Cook & Co., Inc. (FWC) to review the Companys current compensation programs, provide comparative compensation data to the Board and provide 2008 compensation recommendations for consideration by the
Board. The FWC study utilizes and compares compensation programs against sixteen related companies of similar size based upon revenue, operating income, market capitalization and employee base, and Radford survey data. The Board relied significantly
on the data provided by FWC in approving the compensation paid to executive officers beginning in 2008.
The Companys Executive Compensation
Program Philosophy
Overall Program Objectives
The Company strives to attract, motivate and retain highly qualified, knowledgeable and experienced executives by providing total compensation that is performance-based and competitive with the various labor markets
and industries in which the Company competes for talent. The Company provides incentives to advance the interests of shareholders and deliver levels of compensation that are commensurate with individual and organizational performance. Overall, the
Company designs its compensation program to:
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deliver performance that is critical to the Companys strategic initiatives;
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create a strong short-term and long-term performance alignment with shareholder value;
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reward individual performance that contributes to the Companys success; and
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deliver exceptional organizational results.
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The Company seeks to achieve these objectives through three key compensation elements:
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an annual performance-based incentive bonus paid in cash; and
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grants of long-term, equity-based compensation such as stock options and restricted stock which may be subject to performance-based and/or time-based vesting
requirements.
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Compensation Considerations
In making compensation decisions with respect to each element of compensation, the Committee considers the competitive market for executives, comparative data provided by FWC and the overall profitability of the
Company. The Committee recognizes that the businesses chosen for comparison may differ from one executive to the next depending on the scope and nature of the business for which the particular executive is responsible. The Committee does not attempt
to evaluate how closely each executives job responsibilities correspond with the job descriptions in the FWC data. Instead, the Committee uses the FWC data as one factor in making compensation decisions. Other factors considered when making
individual executive compensation decisions include individual contribution and performance, internal pay relationships, complexity and importance of role and responsibilities, demonstrated leadership capabilities and growth potential.
Executive Compensation Practices
The
Companys practices and considerations with respect to each of the three key compensation elements are set forth below, followed by a discussion of the specific factors impacting fiscal year 2008 compensation for the named executive officers.
Base Salary
Purpose.
The objective of base salary is to reflect job responsibilities, value to the Company and individual performance with respect to market competitiveness.
Considerations.
The salaries for named executive officers are determined by the Compensation Committee based on a variety of factors, including:
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the nature and responsibility of the position and, to the extent available, FWC compensation data noted above for persons in comparable positions;
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the expertise of the individual executive;
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the competitiveness of the market for the executives services; and
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the recommendations of the Chairman and Chief Executive Officer (except in the case of his own compensation).
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Salaries are generally reviewed annually. In setting salaries, the Committee also considers the total compensation of the named executive officers, which
includes the annual bonus, which is tied to both Company performance measures and individual performance, and long-term stock-based compensation, which is tied to Company stock performance.
Fiscal Year 2008 Decisions.
Mr. Westover, Mr. Halloran, Mr. Shimada, Mr. DaBell, and Ms. Mitchells salary increases
were based on the factors described above.
Annual Bonus Incentives for Named Executive Officers
Purpose.
The annual performance-based incentive bonus program is intended to reward and recognize individual and organizational results. The
objective of this program is to compensate individuals who achieve specific individual performance objectives and to align all executives to drive the company-wide goals intended to enhance shareholder value.
Considerations.
The annual bonus process for named executive officers is governed by the Companys Management Bonus Program and is comprised
of three segments: Company annual revenue, Company annual pre-tax income and annual individual performance objectives. Company annual revenue and annual individual performance objectives each account for 25% of the named executives annual
bonus. Company annual pre-tax
15
income accounts for 50% of the named executives annual bonus. Mr. Westovers Annual Bonus Incentive is based upon the Companys revenue
and pre-tax income. The Companys annual revenue accounts for 30% and Company annual pre-tax income accounts for 70% of Mr. Westovers bonus. Mr. Westover does not have additional individual performance objectives. The basis for
calculating the annual bonus for the named executives for each of the program segments is as follows:
Company annual revenue:
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Net Sales
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% Target
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% of Base Bonus
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>-11.1%
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<88.9%
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No Bonus
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-8.9%
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91.1%
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5.0%
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-6.7%
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93.3%
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10.0%
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-5.5%
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95.5%
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15.0%
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-2.2%
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97.8%
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20.0%
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Target
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100%
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25.0%
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1.0%
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102%
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30.0%
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2.0%
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104%
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35.0%
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3.0%
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106%
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40.0%
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4.0%
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108%
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45.0%
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5.0%
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110%
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50.0%
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No Limit
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No Limit
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Subject to 200% total bonus limit
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PRE-TAX INCOME SEGMENT BONUS
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Pre-Tax Income
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% of Base Bonus
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-$2.9M
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No Bonus
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-$2.4M
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8.3%
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-$1.9M
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16.7%
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-$1.4M
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25.0%
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-$0.9M
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33.3%
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-$0.4M
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41.7%
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Target
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50.0%
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+$0.2M
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60.0%
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+$0.4M
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70.0%
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+$0.6M
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80.0%
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+$0.8M
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90.0%
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+$1.0M
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100.0%
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No Limit
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Subject to 200% total bonus limit
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Individual annual performance objectives:
Individual annual performance objectives for each named executive (except Mr. Westover, as noted above) are established prior to the beginning of the
fiscal year and typically consist of two to five objectives. Each objective is weighted as appropriate at the discretion of the Chairman and CEO.
There are three steps to the Companys Management Bonus Program:
1.
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Setting Company performance goals
.
Prior to the beginning of each fiscal year, the Companys senior management prepares and presents an annual operating
plan to the Board. Upon approval by the Board, the Companys annual revenue and earnings per share targets are established;
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16
2.
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Setting individual performance objectives.
With input from the Chairman and CEO, the Committee recommends individual performance objectives for each named executive
officer for approval by the Board of Directors. These performance objectives support the critical strategic initiatives of the Company that are intended to drive long-term value for the shareholders. The Chairman and CEO has discretion to weight
each individual performance objective as he deems appropriate.
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3.
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Measuring performance.
After the end of the fiscal year, the Committee reviews the Company and named executive officers actual performance against each of the
performance goals established at the outset of the year.
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Fiscal Year 2008 Decisions.
The bonus awards for fiscal year
2008 were based upon Company sales at 91.6% of target. No bonus was awarded for pre-tax income results. The bonus award for the individual annual performance objective segment varied by each named executive depending upon the number and weighting of
objectives achieved by such executive. As a result of these determinations, the Committee recommended, and the Board approved, the bonus amounts set forth in the Summary Compensation Table.
Long-term Incentive Compensation
Purpose.
The long-term incentive program is intended to motivate the generation of long-term shareholder value, to recognize the executives contribution and advancement potential within the Company and to retain the Companys executives. The
level of long-term incentive compensation is determined in the context of total compensation provided to the named executive and perceived contribution to the long-term success of the Company. Generally, the higher the executives contribution
and perceived growth potential within the Company, the greater the long-term incentive compensation paid to that executive.
Restricted Stock Awards or Stock Options.
The Company has the option to award long-term
incentive compensation in the form of restricted stock or stock options. The Company generally makes the determination as to which form to award based upon the cost of such award at the date of grant, pursuant to a Black-Scholes analysis. In 2008,
the Company awarded stock options and restricted stock to the named executives. Stock options vest 25% on the first anniversary of the award and 1/48
th
per month thereafter. Restricted stock vests 25% on each of the following four anniversary dates of the award.
The
Committee will not grant stock options with exercise prices below the market price of the Companys stock on the date of grant, and will not reduce the exercise price of stock options (except in connection with adjustments to reflect
recapitalizations, stock or extraordinary dividends, stock splits, mergers, spin-offs and similar events permitted by the relevant plan) without shareholder approval.
The Committee intends to review both the annual bonus program and the long-term incentive program annually to ensure that their key elements continue to meet the objectives described above.
Fiscal Year 2008 Decisions.
In February 2008, the Committee recommended, and the Board approved, long-term compensation for named executive
officers pursuant to the program described above resulting in the awards of stock options. In addition, in November 2008, the Committee recommended, and the Board approved, a one-time acceleration of the 2009 annual equity grants for the
Companys executive staff, including the named executive officers. These grants would otherwise have been awarded in February 2009. This recommendation and approval was based primarily upon the lack of retention value of the current equity
holdings of our executive staff given the Companys then current stock price. These equity awards are identified in the Summary Compensation Table, Grants of Plan-Based Awards Table, and the Outstanding Equity Awards at Fiscal Year-End Table.
Benefits and perquisites
With
limited exceptions, the Company currently provides benefits to the named executive officers that are substantially the same as those offered to all employees of the Company.
17
Compensation for the Chairman and Chief Executive Officer
Sam Westover served as the President and Chief Executive Officer from October 2005 until he was appointed Chairman and Chief Executive Officer in May
2008. The Compensation Committee used the executive compensation practices previously described to determine Mr. Westovers compensation for the fiscal year ended December 31, 2008. In setting both the cash and equity elements of
Mr. Westovers compensation, the Committee made an overall assessment of Mr. Westovers leadership in establishing the Companys strategy and direction, building organizational capabilities and delivering results.
The Committee set Mr. Westovers annualized base salary at $490,000 effective April 1, 2008 which was coupled with an
annualized target bonus opportunity of $318,500. As previously noted, his fiscal year 2008 performance objectives were based on Company revenue and pre-tax income in order to support the Companys focus of revenue growth and profitability.
Mr. Westovers actual salary for fiscal year 2008 was $485,961 and his actual bonus amount was $19,255.
In 2008,
Mr. Westover received long-term incentive grants consisting of 100,000 stock options in February 2008 and 100,000 restricted stock in November 2008 related to the accelerated equity grant program noted previously.
Members of the Compensation Committee
Cherie M. Fuzzell
(Chair)
James M. Callahan
Kevin
J. Ryan
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee during fiscal 2008 or as of the date of this proxy statement is or has been an officer or employee of
the Company during the last three years and no executive officer of the Company served on the compensation committee or board of any company that employed any member of the Companys Compensation Committee or Board of Directors.
18
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has reviewed and discussed with management and the Board of Directors the Companys consolidated audited financial statements as
of and for the year ended December 31, 2008. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by Statement of Auditing Standards No. 114,
The Auditors
Communication With Those Charged With Governance
(which supersedes Statement on Auditing Standards No. 61) by the Auditing Standards Board of the American Institute of Certified Public Accountants.
The Audit Committee has received and reviewed the written disclosures and the communications from the independent registered public accounting firm
required by Public Company Accounting Oversight Board Rule 3526,
Communication with Audit Committees Concerning Independence
, and have discussed with the independent registered public accounting firm its independence. The Audit Committee has
considered whether the provision of non-audit services performed by the Companys independent registered public accounting firm is compatible with maintaining auditor independence.
Based on the reviews and discussions referred to above, the Audit Committee recommends to the Board of Directors that the consolidated audited financial
statements referred to above be included in the Companys Annual Report on Form 10-K for the year ended December 31, 2008.
Audit Committee:
Craig L. McKnight, Chairman
James M. Callahan
Robert W. Miller
19
STOCKHOLDER RETURN PERFORMANCE GRAPH
The graph and table below compare the cumulative total stockholder return on Sonic Innovations common stock from December 31, 2003 through
December 31, 2008 with the cumulative total return on the S&P 500 Composite Index and the S&P Healthcare Sector Index over the same period. The graph and table assume the investment of $100 in each of Sonic Innovations common
stock, the S&P 500 Composite Index and the S&P Healthcare Sector Index on December 31, 2003 and that all dividends were reinvested.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Sonic Innovations, Inc., The S&P 500 Index
And The S&P Health Care Index
* $100 Invested on 12/31/03 in stock & index-including reinvestment of dividends.
Fiscal year ending December 31.
Copyright © 2009 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.
20
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The
following table summarizes the total compensation paid or earned by each of the named executive officers for the fiscal years ended December 31, 2008, 2007, and 2006 (collectively, the
Named Executive Officers
).
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
(1)
|
|
Option
Awards
($)
(2)
|
|
Non-Equity
Incentive Plan
Compensation
Earnings
($)
|
|
Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
Samuel L. Westover,
|
|
2008
|
|
$
|
485,961
|
|
$
|
|
|
$
|
4,397
|
|
$
|
296,118
|
|
$
|
19,225
|
|
$
|
|
|
$
|
|
|
$
|
805,701
|
Chairman and Chief Executive Officer
|
|
2007
|
|
|
437,269
|
|
|
|
|
|
|
|
|
257,042
|
|
|
261,450
|
|
|
|
|
|
|
|
|
955,761
|
|
2006
|
|
|
331,116
|
|
|
|
|
|
3,000
|
|
|
175,839
|
|
|
205,246
|
|
|
|
|
|
174,127
|
|
|
889,328
|
|
|
|
|
|
|
|
|
|
|
Michael M. Halloran,
|
|
2008
|
|
|
257,227
|
|
|
|
|
|
64,624
|
|
|
78,662
|
|
|
30,638
|
|
|
|
|
|
|
|
|
431,151
|
Vice President and Chief Financial Officer
|
|
2007
|
|
|
235,958
|
|
|
|
|
|
61,833
|
|
|
36,093
|
|
|
79,301
|
|
|
|
|
|
|
|
|
413,185
|
|
2006
|
|
|
184,500
|
|
|
|
|
|
58,831
|
|
|
4,971
|
|
|
60,909
|
|
|
|
|
|
|
|
|
309,211
|
|
|
|
|
|
|
|
|
|
|
Brent H. Shimada,
|
|
2008
|
|
|
211,150
|
|
|
|
|
|
44,552
|
|
|
132,910
|
|
|
19,335
|
|
|
|
|
|
|
|
|
407,947
|
Vice President
|
|
2007
|
|
|
185,748
|
|
|
|
|
|
42,251
|
|
|
109,571
|
|
|
72,150
|
|
|
|
|
|
|
|
|
409,720
|
Administration and General Counsel
|
|
2006
|
|
|
153,869
|
|
|
|
|
|
39,749
|
|
|
63,268
|
|
|
49,422
|
|
|
|
|
|
|
|
|
306,308
|
|
|
|
|
|
|
|
|
|
|
Jerry L. DaBell,
|
|
2008
|
|
|
262,673
|
|
|
|
|
|
47,363
|
|
|
64,662
|
|
|
31,286
|
|
|
|
|
|
|
|
|
405,984
|
Vice President, Research and Development
|
|
2007
|
|
|
238,385
|
|
|
|
|
|
44,619
|
|
|
36,135
|
|
|
72,955
|
|
|
|
|
|
|
|
|
392,094
|
|
2006
|
|
|
203,538
|
|
|
|
|
|
42,118
|
|
|
5,385
|
|
|
52,374
|
|
|
|
|
|
|
|
|
303,415
|
|
|
|
|
|
|
|
|
|
|
Christie R. Mitchell
|
|
2008
|
|
|
191,027
|
|
|
|
|
|
27,988
|
|
|
95,711
|
|
|
22,920
|
|
|
|
|
|
|
|
|
337,646
|
Vice President, Manufacturing Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
For 2005, restricted shares were granted to the executive officers above on various dates in 2005 with an average closing price on the day of grant of $4.68. For 2006, restricted
shares were granted to the executive officers above on various dates in 2006 with an average closing price on the day of grant of $4.30 per share. For 2008, restricted shares were granted to the executive officers on various dates in 2008 with an
average close price of the day of grant of $1.35 per share. The restricted shares vest evenly and annually over a four-year period. The amounts reflected in the table include the dollar amounts recognized for financial statement reporting purposes
(not including the application of the forfeiture rate) for 2008, 2007 and 2006 with respect to the awards computed in accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (revised 2004),
Share-Based Payment (SFAS 123R) and assumes a zero forfeiture rate. Additional information regarding the assumptions used in determining the cost reflected in the table can be found in Note 14 to the Consolidated Financial
Statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
|
(2)
|
The amounts reflected in the table relate to option awards that were granted during the years 2003, 2004, 2005, 2007, and 2008. No option awards were granted to the named executive
officers during 2006. For 2003, we used an expected term of 5 years, a non-risk bearing interest rate of 3.1%, a zero expected dividend yield percentage, and a volatility rate of 87%. For 2004, we used an expected term of 5 years, a non-risk bearing
interest rate of 3.4%, a zero expected dividend yield percentage, and a volatility rate of 83%. For 2005, we used an expected term of 5 years, a non-risk bearing interest rate of 3.8%, a zero expected dividend yield percentage, and a volatility rate
of 74%. For 2007, we used an expected term of 4 years, a non-risk bearing interest rate of 3.7%, a zero expected dividend yield percentage, and a volatility rate of 60%. For 2008, we used an expected term of 5 years, a non-risk bearing interest rate
of 3.67%, a zero expected dividend yield percentage, and a volatility rate of 58%. The cost of these awards as reflected in the table was based on the dollar amount recognized for financial statement reporting purposes, computed in accordance with
SFAS 123R and assumes a zero forfeiture rate. Additional information can be found in Notes 2 and 14 to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
|
(3)
|
The Company paid $174,127 to relocate the Chief Executive Officer in 2006.
|
21
Grant of Plan-Based Awards
The following table shows all plan-based option awards granted to the Named Executive Officers during the fiscal year ended December 31, 2008.
Grants of Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
|
|
Estimated Future Payouts
Under
Non-Equity
Incentive Plan Awards
|
|
Estimated Future Payouts
Under Equity
Incentive Plan Awards
|
|
All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(1)
|
|
All Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
|
|
Exercise
or
Base
Price of
Option
Awards
($/Sh)
|
|
Grant
Date
Fair
Value of
Stock and
Option
Awards
($)
|
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Threshold
(#)
|
|
Thres-
Hold
(#)
|
|
Maximum
(#)
|
|
|
|
|
Samuel L. Westover
|
|
2/14/2008
|
|
$
|
|
|
$
|
318,500
|
|
$
|
637,000
|
|
|
|
|
|
|
|
|
|
100,000
|
|
4.61
|
|
$
|
246,490
|
Samuel L. Westover
|
|
11/13/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
133,000
|
Michael M. Halloran
|
|
2/14/2008
|
|
|
|
|
|
104,000
|
|
|
208,000
|
|
|
|
|
|
|
|
|
|
60,000
|
|
4.61
|
|
|
147,894
|
Michael M. Halloran
|
|
11/13/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
79,800
|
Brent H. Shimada
|
|
2/14/2008
|
|
|
|
|
|
86,000
|
|
|
172,000
|
|
|
|
|
|
|
|
|
|
50,000
|
|
4.61
|
|
|
123,245
|
Brent H. Shimada
|
|
11/13/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
66,500
|
Jerry L. DaBell
|
|
2/14/2008
|
|
|
|
|
|
106,200
|
|
|
212,400
|
|
|
|
|
|
|
|
|
|
40,000
|
|
4.61
|
|
|
98,596
|
Jerry L. DaBell
|
|
11/13/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
79,800
|
Christie R. Mitchell
|
|
2/14/2008
|
|
|
|
|
|
77,800
|
|
|
155,600
|
|
|
|
|
|
|
|
|
|
60,000
|
|
4.61
|
|
|
147,894
|
Christie R. Mitchell
|
|
11/13/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
$
|
66,500
|
(1)
|
The market value and fair value for stock awards granted to officers on November 13, 2008 was $1.33 per share.
|
22
Outstanding Equity Awards at Fiscal Year-End
The following table shows all outstanding awards held by the Named Executive Officers as of December 31, 2008:
Outstanding Equity Awards at Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number of
Shares or
Units of
Stock
That Have
Not
Vested (#)
|
|
Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested
($)
|
|
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have
Not
Vested (#)
|
|
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights
That
Have Not
Vested ($)
|
Samuel L. Westover
|
|
15,000
|
|
|
|
|
|
5.66
|
|
1/24/2012
|
|
100,000
|
|
100,000
|
|
|
|
|
|
|
6,000
|
|
|
|
|
|
6.00
|
|
5/16/2012
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
|
|
3.56
|
|
5/1/2013
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
|
|
9.54
|
|
5/6/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
19,396
|
|
|
|
4.61
|
|
2/14/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
80,604
|
|
|
|
4.61
|
|
2/14/2015
|
|
|
|
|
|
|
|
|
|
|
29,761
|
|
|
|
|
|
3.36
|
|
11/4/2015
|
|
|
|
|
|
|
|
|
|
|
59,522
|
|
|
|
|
|
3.36
|
|
11/4/2015
|
|
|
|
|
|
|
|
|
|
|
220,239
|
|
|
|
|
|
3.36
|
|
11/4/2015
|
|
|
|
|
|
|
|
|
|
|
190,478
|
|
|
|
|
|
3.36
|
|
11/4/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
32,139
|
|
|
|
7.15
|
|
2/8/2017
|
|
|
|
|
|
|
|
|
|
|
45,833
|
|
22,028
|
|
|
|
7.15
|
|
2/8/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael M. Halloran
|
|
10,415
|
|
|
|
|
|
2.85
|
|
4/6/2009
|
|
81,250
|
|
81,250
|
|
|
|
|
|
|
15,560
|
|
|
|
|
|
3.80
|
|
10/21/2009
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
7.50
|
|
12/14/2010
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
3.49
|
|
11/19/2011
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
4.55
|
|
12/12/2012
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
4.55
|
|
12/12/2012
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
2.86
|
|
2/6/2013
|
|
|
|
|
|
|
|
|
|
|
4,080
|
|
|
|
|
|
4.55
|
|
7/31/2013
|
|
|
|
|
|
|
|
|
|
|
15,920
|
|
|
|
|
|
4.55
|
|
7/31/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
29,864
|
|
|
|
4.61
|
|
2/14/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
30,136
|
|
|
|
4.61
|
|
2/14/2015
|
|
|
|
|
|
|
|
|
|
|
13,986
|
|
21,667
|
|
|
|
7.15
|
|
2/8/2017
|
|
|
|
|
|
|
|
|
|
|
4,347
|
|
|
|
|
|
7.15
|
|
2/8/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brent H. Shimada
|
|
96,213
|
|
|
|
|
|
3.94
|
|
10/27/2014
|
|
65,750
|
|
65,750
|
|
|
|
|
|
|
3,787
|
|
|
|
|
|
3.94
|
|
10/27/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
26,947
|
|
|
|
4.61
|
|
2/14/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
23,053
|
|
|
|
4.61
|
|
2/14/2015
|
|
|
|
|
|
|
|
|
|
|
2,506
|
|
21,667
|
|
|
|
7.15
|
|
2/8/2017
|
|
|
|
|
|
|
|
|
|
|
15,827
|
|
|
|
|
|
7.15
|
|
2/8/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerry L. DaBell
|
|
36,780
|
|
|
|
|
|
10.88
|
|
9/13/2010
|
|
76,250
|
|
76,250
|
|
|
|
|
|
|
38,220
|
|
|
|
|
|
10.88
|
|
9/13/2010
|
|
|
|
|
|
|
|
|
|
|
4,167
|
|
|
|
|
|
6.18
|
|
5/9/2011
|
|
|
|
|
|
|
|
|
|
|
35,833
|
|
|
|
|
|
6.18
|
|
5/9/2011
|
|
|
|
|
|
|
|
|
|
|
5,733
|
|
|
|
|
|
3.49
|
|
11/19/2011
|
|
|
|
|
|
|
|
|
|
|
5,728
|
|
|
|
|
|
3.49
|
|
11/19/2011
|
|
|
|
|
|
|
|
|
|
|
10,833
|
|
|
|
|
|
2.86
|
|
2/6/2013
|
|
|
|
|
|
|
|
|
|
|
4,167
|
|
|
|
|
|
2.86
|
|
2/6/2013
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
6.29
|
|
12/16/2013
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
6.29
|
|
12/16/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
15,969
|
|
|
|
4.61
|
|
2/14/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
24,031
|
|
|
|
4.61
|
|
2/14/2015
|
|
|
|
|
|
|
|
|
|
|
13,986
|
|
21,667
|
|
|
|
7.15
|
|
2/8/2017
|
|
|
|
|
|
|
|
|
|
|
4,347
|
|
|
|
|
|
7.15
|
|
2/8/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christie Mitchell
|
|
4,000
|
|
|
|
|
|
7.50
|
|
12/14/2010
|
|
61,000
|
|
61,000
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
5.35
|
|
3/12/2012
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
2.80
|
|
2/25/2013
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
6.13
|
|
12/22/2013
|
|
|
|
|
|
|
|
|
|
|
13,986
|
|
30,472
|
|
|
|
7.15
|
|
2/8/2017
|
|
|
|
|
|
|
|
|
|
|
13,514
|
|
2,028
|
|
|
|
7.15
|
|
2/8/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
42,500
|
|
|
|
4.61
|
|
2/14/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
17,500
|
|
|
|
4.61
|
|
2/14/2015
|
|
|
|
|
|
|
|
|
23
The market price of shares that have not vested was determined by multiplying the number of shares times
the 2008 year-end market price of $1.00.
Option Exercises and Stock Vested.
The following table shows all stock awards vested and value realized upon vesting, by the Named Executive Officers during the fiscal year ended
December 31, 2008.
Option Exercises and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number of Shares
Acquired on
Exercise
(#)
|
|
Value Realized On
Exercise
($)
|
|
Number of Shares
Acquired on Vesting
(#)
|
|
Value Realized on
Vesting
($)
|
Samuel L. Westover
|
|
|
|
|
|
|
|
$
|
|
Michael M. Halloran
|
|
|
|
|
|
13,750
|
|
|
82,500
|
Brent H. Shimada
|
|
|
|
|
|
9,500
|
|
|
57,000
|
Jerry L. DaBell
|
|
|
|
|
|
10,000
|
|
|
60,000
|
Christie R. Mitchell
|
|
|
|
|
|
6,000
|
|
|
33,930
|
Value realized on vesting equals the multiplication of the number of shares acquired at vesting
times the market value on the vest date.
DIRECTOR COMPENSATION
The Company uses a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on the Board. In
setting director compensation, the Company considers the significant amount of time that Directors expend in fulfilling their duties to the Company as well as the skill-level required by the Company of members of the Board.
Each of our non-employee directors is paid as follows: (i) $2,500 for attending a Board meeting in person or by telephone; (ii) $1,000 for
attending an Audit Committee meeting in person or by telephone; and (iii) $500 for attending a Compensation or Governance and Nominating Committee meeting in person or by telephone. In addition, the chairman of the Audit Committee is paid an
annual retainer of $7,500. Each of our directors is also reimbursed for reasonable travel expenses incurred in attending Board or Board committee meetings.
Under our 2000 Stock Plan, each new non-employee director is granted either a stock option for 15,000 shares of common stock or 5,000 restricted shares of common stock, which vest at the rate of one-third on each
annual anniversary date from the date of grant. Following each annual meeting of stockholders, each continuing non-employee director is granted either a stock option or restricted shares of common stock in an amount determined at each Board meeting
following the annual meeting of stockholders, which fully vest one year from the date of grant. Stock options have a ten-year term and an exercise price per share equal to the fair market value per share on the date of grant.
Director Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
(1)
|
|
Fees Earned or
Paid in Cash
($)
|
|
Stock Awards
($)
(2)
|
|
Option Awards
($)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
James M. Callahan
|
|
$
|
25,500
|
|
$
|
29,799
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
55,299
|
Cherie M. Fuzzell
|
|
|
21,000
|
|
|
38,381
|
|
|
|
|
|
|
|
|
|
|
|
59,381
|
Robert W. Miller
|
|
|
22,500
|
|
|
38,381
|
|
|
|
|
|
|
|
|
|
|
|
60,881
|
Craig L. McKnight
|
|
|
33,000
|
|
|
34,523
|
|
|
|
|
|
|
|
|
|
|
|
67,523
|
Andrew G. Raguskus
(3)
|
|
|
|
|
|
89,057
|
|
|
|
|
|
|
|
|
100,000
|
|
|
189,057
|
Kevin J. Ryan
|
|
|
18,500
|
|
|
29,799
|
|
|
|
|
|
|
|
|
|
|
|
48,299
|
Lawrence C. Ward
|
|
|
18,500
|
|
|
29,799
|
|
|
|
|
|
|
|
|
|
|
|
48,299
|
24
(1)
|
Samuel L. Westover is a named officer and has been omitted from the Director Compensation table.
|
(2)
|
For 2005, a total of 15,000 restricted shares were granted to directors on various dates in 2005 with an average closing price on the day of grant of $4.22. For 2006, a total of
20,000 restricted shares were granted to directors on various dates in 2006 with an average closing price on the day of grant of $5.16 per share. For 2007, a total of 14,000 restricted shares were granted to directors on May 10, 2007, with a
closing price of $9.79 per share. For 2008, a total of 63,000 restricted shares were granted to directors on May 8, 2008, with a closing price of $3.90 per share. The restricted shares vest evenly and annually over a four-year period. The
amounts reflected in the table include the dollar amount recognized for financial statement reporting purposes for 2008 with respect to the awards computed in accordance with Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 123 (revised 2004), Share-Based Payment (SFAS 123R) and assume a zero forfeiture rate. Additional information regarding the assumptions used in determining the cost reflected in the table can be found in
Note 14 (Stock-Based Compensation) of the Notes to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
|
(3)
|
Director Compensation for Mr. Raguskus included an annual salary of $100,000 as Executive Chairman, beginning January 2006, which discontinues on February 28, 2009 as a
result of his resignation. Concurrent with Mr. Raguskus resignation, the Board extended his options, all of which were vested, for the later of five years or the ten year expiration of each grant in recognition of his service with the
Company since 1996, his key contribution to enabling the Company to develop and market products, his successful completion of the Initial Public Offering in 2000 and his recognition as a leader in the hearing healthcare industry.
|
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Employment Agreements and Change of Control Arrangements
We have an employment agreement with
Mr. Westover, who was appointed President and Chief Executive Officer in October 2005 and then in May, 2008, he was appointed Chairman and Chief Executive Officer. The agreement provides for Mr. Westover to receive an annual salary of
$490,000 and an annual normal bonus opportunity of up to a maximum of 65% of his base pay, with an over-achievement bonus opportunity based on Company performance in excess of targets. If Mr. Westovers employment is terminated (i) by
us without cause or (ii) by Mr. Westover within 120 days following a constructive termination (as those two terms are defined in the employment agreement), Mr. Westover will receive a lump sum payment equal to
two years of his then-current salary and a pro-rated portion of his annual normal bonus for the year in which the termination occurs. If Mr. Westovers employment terminates within the twelve-month period following a change in
control (as defined in the employment agreement), Mr. Westover will receive a lump sum payment equal to two years of his then-current salary, the greater of his normal bonus or such bonus as is approved by the Board, and payment equal to
the cost to us of 18 months of his medical and dental coverage.
We have agreements with each of our executive officers, including each of
the Named Executive Officers (except Mr. Westover), which are intended to provide for continuity of management in the event of a change of control of the Company. The agreements provide that covered executive officers are entitled to certain
severance benefits following a change in control (as defined in the agreements). If, at any time beginning 20 days before and ending 12 months after a change in control, the covered executive officer is involuntarily terminated without cause by us
(as defined in the agreements), then the executive will receive a severance payment equal to 12 months of the executives base monthly salary), plus his/her annual normal bonus. For a period of up to one year, the covered executive officer will
receive health and dental insurance coverage substantially similar to the coverage provided prior to termination. In addition, (i) all outstanding and unvested stock options granted to the covered executive officer prior to the change in
control will become fully vested and exercisable, and (ii) the right of repurchase, if any, by the Company (or its successor) with respect to any Company stock that was purchased by the executive prior to the change in control will lapse in its
entirety as of the date of termination.
25
Under the terms of Mr. DaBell and Mr. Shimadas employment letter agreements, they will
receive a cash payment equal to six months salary in the event that their employment is terminated. We also have an employment letter agreement with Mr. Paul Wennerholm, who was appointed President and Chief Operating Officer in August
2008. Under the terms of Mr. Wennerholms letter agreement with the Company, if the Company terminates Mr. Wennerholms employment without cause, Mr. Wennerholm is entitled to receive six months severance. For
each year of service, Mr. Wennerholm will be entitled to one additional month of severance up to a maximum of twelve months severance.
Indemnification Agreements
We indemnify our directors and officers against certain costs that could be incurred if they
were made, or threatened to be made, a party to a legal proceeding in connection with their status as a director or officer. The indemnification agreements, together with our charter documents provide for indemnification to the fullest extent
permitted by Delaware law.
Stock Awards
In 2008, we granted 497,500 shares of restricted stock to our executive officers (ten people in total) and 63,000 shares of restricted stock to our non-employee directors (seven people in total). As of the May 2008 annual meeting of
stockholders, seven non-employee directors were each granted 9,000 shares of restricted stock when the common stock price was $3.90 per share. Such restricted shares were granted under the formula option grants to outside directors
provision of our 2000 Stock Plan. (Dr. Lewis Edelheit received restricted stock awards as part of his Emeritus payment.)
26
PROPOSALS TO BE VOTED ON
PROPOSAL ONE
ELECTION OF DIRECTORS
Directors and Nominees
The Board of Directors
currently consists of eight members and is divided into three classes, with each director serving a three-year term and one class being elected at each years annual meeting of stockholders. The number of directors has been reduced to seven
members at the recommendation of the Governance and Nominating Committee. Ms. Cherie M. Fuzzell, Mr. Lawrence C. Ward, and Andrew G. Raguskus are in the class of directors whose terms expire at the 2009 Annual Meeting of
Stockholders. Mr. Raguskus will not stand for re-election. Ms. Fuzzell and Mr. Ward are the two nominees for election to the Board at this Annual Meeting. Directors whose terms are continuing after this Annual Meeting include
Mr. Robert W. Miller, Mr. Kevin J. Ryan, and Mr. Samuel L. Westover, who are the class of directors whose terms expire at the 2010 annual meeting; and Mr. James Callahan and Mr. Craig L. McKnight, who are
the class of directors whose terms expire at the 2011 annual meeting. Executive officers are appointed by the Board and serve until their successors have been duly elected and qualified. There are no family relationships among any of our directors
or executive officers.
DIRECTORS
|
|
|
|
|
|
|
Name of Director
|
|
Director
Since
|
|
Term
Expires
(5)
|
|
Age
(6)
|
James M. Callahan
(1),(2)
|
|
2004
|
|
2011
|
|
67
|
Cherie M. Fuzzell
(2),(4)
|
|
2006
|
|
2009
|
|
45
|
Craig L. McKnight
(1),(3)
|
|
2005
|
|
2011
|
|
57
|
Robert W. Miller
(1),(3)
|
|
2006
|
|
2010
|
|
67
|
Andrew G. Raguskus
|
|
1996
|
|
2009
|
|
63
|
Kevin J. Ryan
(2),(3)
|
|
1999
|
|
2010
|
|
68
|
Lawrence C. Ward
(3),(4)
|
|
2001
|
|
2009
|
|
56
|
Samuel L. Westover
(4)
|
|
2002
|
|
2010
|
|
53
|
(1)
|
Member of the Audit Committee.
|
(2)
|
Member of the Compensation Committee.
|
(3)
|
Member of the Governance and Nominating Committee.
|
(4)
|
Member of the Stock Option Committee.
|
(5)
|
Term expires as of the annual meeting date in the year indicated.
|
(6)
|
As of December 31, 2008.
|
James M. Callahan
has been a Director on the Board of Sonic Innovations since October 2004. He joined Johnson & Johnsons Vistakon disposable contact lens business in 1997 and served as President of the U.S. business and subsequently President of the
Global Franchise. Prior to his retirement in January 2003, Jim was appointed to the Board of Vision Web, an optical industry e-commerce consortium. He also serves on the Board of a private company, ABB Concise Optical Group LLC, a distributor of
optical products.
Cherie M. Fuzzell
was elected to the Board in December 2006. She is CEO of FirstView, LLC. Prior to joining
FirstView she was General Counsel of Nanoventions, Inc. Prior to joining Nanoventions, Ms. Fuzzell was Chief Administrative Officer and General Counsel for NOVA Information Systems, Inc. She brings extensive mergers and acquisition experience,
having been Vice President of Mergers and Acquisitions for Magellan Health Services and a member of the international law firm of Jones Day. She holds a Bachelor of Science degree in Commerce and Business Administration from the University of
Alabama and a law degree from Vanderbilt University School of Law.
27
Craig L. McKnight
was elected to the Board in October 2005. He was Chief Financial Officer of
Centura Health from September 2004 to June 2006. From 1999 to 2004, he served as Executive Vice President and Chief Financial Officer of Hillcrest Healthcare System. From 1995 to 1999, Mr. McKnight was employed by Magellan Health Care Services
as Executive Vice President and Chief Financial Officer. He was a partner with Coopers & Lybrand from 1986 to 1995 and previously was a partner with KMG Main Hurdman. He serves as Chairman of the Principles and Practices Committee of the
Healthcare Financial Management Association and is a member of the American Institute of Certified Public Accountants Healthcare Audit and Accounting Guide Task Force. Mr. McKnight earned a bachelors degree in accounting from
Brigham Young University.
Robert W. Miller
was elected to the Sonic Innovations, Inc. Board of Directors in December 2006. He
practiced health law in Atlanta for over 30 years and retired from Atlanta-based King & Spalding in 1998. He is a past president of the American Academy of Healthcare Attorneys. He is an adjunct professor of law at Emory Universitys
School of Law, where he has taught health law, bioethics and regulation of healthcare providers. He is also Editor-in-Chief of the Journal of Health Life Sciences Law. He previously served as a director of Magellan Health Services, Inc.,
OrthAlliance, Inc. and Paracelsus Healthcare Corporation. He presently is a director of QuadraMed Corporation (NASDAQ), a hospital software company, and of Grady Memorial Hospital. Mr. Miller earned a bachelors degree in history from The
University of Georgia and a law degree from Yale Law School.
Andrew G. Raguskus
was Executive Chairman of the Board until May 2008
and currently serves as Director and Senior Technology Officer. From October 2005, when he resigned as the Companys President and Chief Executive Officer, to May 2008, he served as Executive Chairman of the Board. He has been a Board member
since 1996 and had been the Companys President and Chief Executive Officer since 1996. Prior to joining Sonic, he was Chief Operating Officer of Sonic Solutions, Inc., a maker of digital audio workstations, during 1996. Mr. Raguskus was
Senior Vice President Operations of ReSound Corporation, a hearing aid company, from 1991 to 1995. Prior to that, he held management positions at Sun Microsystems, Inc. and General Electrics Medical Systems division. He has served on the board
of the Hearing Industries Association. Mr. Raguskus earned a bachelors degree in electrical engineering from Rensselaer Polytechnic Institute.
Kevin J. Ryan
has been a director since May 2000. He served as Executive Chairman of the Board from January 2002 to December 2003 and as Chairman of the Board from January 2004 to October 2005. Mr. Ryan
was Chairman, President and Chief Executive Officer of Wesley Jessen Vision Care, Inc., a manufacturer of contact lenses, from 1995 until its acquisition by Novartis in 2001. Prior to that, Mr. Ryan was president of Biosource Technologies,
Inc., a bio-pharmaceutical company, from 1991 to 1995. Mr. Ryan earned a bachelors degree in business and marketing from Notre Dame University.
Lawrence C. Ward
was Corporate Vice President Worldwide Manufacturing Operations of Applied Materials Corporation from October 1998 to October 2001. Prior to that, Mr. Ward was President North American
Region of Walbro Corporation from February 1998 to September 1998 and Senior Vice President Operations and President Airbag and Seat Belt Division of Breed Technologies, Inc. from November 1997 to February 1998. He earned a bachelors degree in
mechanical engineering from California Polytechnic State University and a masters degree in mechanical engineering from Santa Clara University.
Samuel L. Westover
joined Sonic Innovations, Inc. as President and Chief Executive Officer in October 2005 and was appointed Chairman and CEO in May 2008. He has been a director since January 2002 and served as
Chairman of the Audit Committee and a member of the Compensation and Governance and Nominating Committees until his appointment as President and CEO. From 2002 to 2004, Mr. Westover was President and CEO of CIGNA Dental and President of CIGNA
HealthCares Small Business Segment. Mr. Westover was also CEO of two public companies and was the founding Chief Financial Officer of Wellpoint. In connection with the Salt Lake City 2002 Winter Olympics, Mr. Westover was Special
Assistant to the Governor of Utah, and established an independent economic development task force. He also received a gubernatorial appointment to serve as Chairman of the Public Education Job Enhancement Committee, providing scholarships and
financial
28
assistance to facilitate advanced education of high school teachers in math and sciences. Mr. Westover received the Los Angeles, California Entrepreneur
of the Year award in 2000 from Ernst & Young, CNN, NASDAQ and USA Today. In March, 2008, he was named CEO of the Year in Utah Business Magazine. He is a director on the board of Galorath, a private company. Mr. Westover earned a
bachelors degree in accounting from Brigham Young University.
Vote Required and Recommendation of the Board
The two nominees receiving the highest number of affirmative
FOR
votes at the Annual Meeting (a plurality of votes cast) will be
elected to serve as directors. Votes
WITHHELD
from any director nominee will be counted for purposes of determining the presence of a quorum, but have no other legal effect under Delaware law.
If you sign your proxy or voting instruction card but do not give instructions with respect to the voting of directors, your shares will be voted for the
three nominees recommended by the Board. If you wish to give specific instructions with respect to the voting of directors, you may do so by indicating your instructions on your proxy or voting instruction card. The Board expects that each nominee
will be available to serve as a director. In the event Ms. Fuzzell or Mr. Ward become unavailable, however, the proxy holders will be authorized to vote for any nominee designated by the Board, unless the Board chooses to reduce the number
of directors serving on the Board. In the event that additional persons are nominated for election as directors, the proxy holders intend to vote all proxies received by them in such a manner as to assure the election of Ms. Fuzzell and
Mr. Ward.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
FOR
THE ELECTION OF MS.
FUZZELL AND MR. WARD.
29
OTHER INFORMATION
PROPOSAL 2
RATIFICATION OF APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General
The Audit Committee has selected PricewaterhouseCoopers, an independent registered public accounting firm, to audit our consolidated financial statements
for year ending December 31, 2009. We are asking the stockholders to ratify the appointment of PricewaterhouseCoopers as our independent registered public accounting firm for the fiscal year ending December 31, 2009. PricewaterhouseCoopers
was appointed by the Audit Committee in accordance with its charter.
In the event stockholders fail to ratify the appointment, the Audit
Committee may reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent accounting firm at any time during the year if the Audit Committee
determines that such a change would be in Sonics and our stockholders best interests.
The Audit Committee has approved all
services provided by PricewaterhouseCoopers. A member of PricewaterhouseCoopers will be present at the Annual Meeting, will have the opportunity to make a statement, and will be available to respond to appropriate questions you may ask.
Board Recommendation
The Board recommends that
you vote
FOR
the ratification of appointment of PricewaterhouseCoopers as our independent registered public accounting firm for the fiscal year ending December 31, 2009.
PROPOSAL 3
AMENDMENT TO SONIC
INNOVATIONS AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO CHANGE ITS NAME TO OTIX GLOBAL, INC.
General
Subject to stockholder approval, our Board has approved an amendment to our Amended and Restated Certificate of Incorporation in the form set forth as
Annex A to this Proxy Statement that would change our name to Otix Global, Inc.
Our Board of Directors believes that the name
change would be beneficial for the following reasons:
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Through the Companys growth and expansion initiatives and forward integration activities, Sonic Innovations has become much more than a manufacturer and
provider of high quality, state-of-the-art hearing instruments. As a result, it has become necessary to create a distinction in the market between the highly regarded Sonic Innovations hearing instrument brand and the Companys other entities
and brands operating in and providing services to the global hearing healthcare industry.
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As Otix Global, Inc. restructures and becomes a holding company for Sonic Innovations and the Companys other brands, the significance of all brands will be
reinforced and will provide them an opportunity to operate independently in the marketplace.
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The creation of Otix Global, Inc. as a holding company provides strategic opportunities and flexibility to establish and nurture other brand names either as support
for or independent from the Companys existing brands.
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Customers of the Company will see no change. Customers will continue to work with the brands and entities with which they currently do business, including Sonic
Innovations.
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Otix Global, Inc. should more clearly be seen as an investment opportunity in a comprehensive hearing healthcare company rather than only a hearing instrument
company. Through its recent and continuing forward integration activities, Otix Global will continue to expand its service and product offerings and the creation of a holding company with brand independence should clearly illustrate that Otix Global
is an investment opportunity in a full service hearing healthcare company.
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Its All About The Ear
Otix is a derivative of otic which means, of or pertaining to the ear. Sonic Innovations superior digital hearing
instruments were developed based upon an advanced understanding of the human ear. The Company has now evolved into a full service hearing healthcare company singularly focused on improving life through enhanced hearing. Otix is a perfect reflection
of the Companys business and strategic focus going forward.
New Ticker Symbol: OTIX
Board Recommendation
The Board recommends that you
vote
FOR
the approval of the Company to change its name to Otix Global, Inc.
PROPOSAL 4
AMENDMENT TO SONIC INNOVATIONS AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A ONE-FOR-FIVE REVERSE STOCK SPLIT
With the exception of the anticipated post-reverse stock split share numbers and stock prices set forth in this Proposal 4, numbers set forth in
this proxy statement do not reflect the effect of the proposed reverse stock split.
General
Subject to stockholder approval, our Board has approved an amendment to our Amended and Restated Certificate of Incorporation in the form set forth as
Annex A
to this Proxy Statement that would effect a one-for-five reverse split of our common stock. The reverse stock split would not have any economic effect on Sonics stockholders, debt holders or holders of options, restricted stock
or restricted stock units, except to the extent the reverse stock split would result in fractional shares, as discussed further below.
Our
Board of Directors believes that the reverse stock split would be beneficial for the following reasons:
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Increased, more attractive share price.
The anticipated increase in our stock price resulting from the reverse stock split could return our stock price to a
level that we believe is more consistent with other major widely held companies. A higher stock price should be well-received by our customers and potential customers, who expect our stock price to be in line with those of our peers. A higher stock
price may also meet investing guidelines for certain institutional investors and investment funds that are currently prevented under their guidelines from investing in our stock at its current price levels.
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Reduced stockholder transaction costs.
Many investors pay commissions based on the number of shares traded when they buy or sell our stock. If our stock
price were higher, these investors would pay lower commissions to trade a fixed dollar amount of our stock than they would if our stock price were lower. In addition, stockholders who hold only a few shares of our stock may not have an economic way
to sell their shares. To the extent these stockholders are left with fractional shares as a result of the reverse stock split, they would receive cash for their shares without incurring transaction costs.
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Increased earnings visibility.
A decrease in our outstanding shares would result in increased visibility for our earnings per share and changes in our
earnings per share. For example, if our weighted average number of shares outstanding was 27,000,000, each $2.7 million of net income would result in $0.10 of earnings per share and additional net income of less than $135,000 would result in no
change in earnings per share, as a result of rounding. If we implement the reverse stock split and reduced the weighted average number of shares outstanding to 5,400,000, smaller changes in net income would be reflected in earnings per share,
because each $54,000 of net income would result in $0.01 of earnings per share.
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Continued listing.
Under current Nasdaq Global Market rules, if our stock price remains below $1 for thirty consecutive trading days, our common stock could
be de-listed. That would have a major impact on our stockholders ability to trade their stock. The board believes that a reverse split will result in an increase in our per share price that will remain above $1 per share.
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Certain Risks Associated with the Reverse Stock Split
If the reverse stock split is implemented, the resulting per-share price may not attract institutional investors or investment funds and may not
satisfy the investing guidelines of these investors, and consequently, the trading liquidity of our common stock may not improve.
While we believe that a higher stock price may help generate investor interest in our common stock, the reverse stock split may not result in a stock price that will attract institutional investors or investment funds or satisfy the
investing guidelines of institutional investors or investment funds. A decline in the market price of our common stock after the reverse stock split may result in a greater percentage decline than would occur in the absence of the split. If the
reverse stock split is implemented and the market price of our common stock declines, the percentage decline may be greater than would occur in the absence of the split. The market price of our common stock is also based on our performance and other
factors, which are unrelated to the number of shares of common stock outstanding.
Our total market capitalization immediately after
the proposed reverse stock split may be lower than immediately before the proposed reverse stock split.
There are numerous factors
and contingencies that could affect our stock price following the proposed reverse stock split, including the status of the market for Sonic stock at the time, our reported results of operations in future periods, and general economic, market and
industry conditions. Accordingly, the market price of our common stock may not be sustainable at the direct arithmetic result of the reverse stock split (for example, based on the closing price of our common stock on NASDAQ on the Record Date of
$0.85 per share, the direct arithmetic result of the reverse stock split would be a post-split market price for our common stock of $4.25 per share). If the market price of our common stock declines after the reverse stock split, our total market
capitalization (the aggregate value of all of our outstanding common stock at the then existing market price) after the split will be lower than before the split.
The reverse stock split may result in some stockholders owning odd lots that may be more difficult to sell or require greater transaction costs per share to sell.
The reverse stock split may result in some stockholders owning odd lots of less than 100 shares of our common stock on a post-split basis. Odd
lots may be more difficult to sell, or require greater transaction costs per share to sell, than shares in board lots of even multiples of 100 shares.
Effect on Existing Shares of Common Stock
The proposed reverse stock split would affect all of our stockholders uniformly
and would not affect any stockholders percentage ownership interest in Sonic, except to the extent that the reverse stock split results in any of our stockholders owning a fractional share, as described below. Proportionate voting rights and
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rights and preferences of the holders of our common stock would not be affected by a reverse stock split (other than as a result of the payment of cash in
lieu of fractional shares).
Effect on Authorized but Unissued Shares of Common Stock
Currently, we are authorized to issue up to a total of 70,000,000 shares of common stock, of which 27,606,045 shares were outstanding on the Record Date.
Immediately following the reverse stock split, the total authorized number of shares of common stock will be reduced to 14,000,000.
Effect on
Authorized but Unissued Shares of Preferred Stock
Currently, we are authorized to issue up to a total of 5,000,000 shares of preferred
stock, none of which are issued and outstanding or reserved for future issuance. The reverse stock split will not impact the total authorized number of shares of preferred stock.
Effect on Equity Compensation Plans
The reverse stock split would reduce the number of shares of
common stock authorized and available for issuance under our equity compensation plans. As a result of the reverse stock split, the number of shares represented by each outstanding stock option, whether vested or unvested, and each outstanding
restricted stock and restricted stock unit award would be rounded down to the nearest whole share. No payment would be made with respect to the amount that was eliminated as a result of the rounding-down. Finally, the exercise price per share for
each option would be multiplied by five.
Effect on Par Value
The amendment to Amended and Restated Certificate of Incorporation changes the par value of our common stock from $0.001 to $0.005 per share.
Effect on Registration and Stock Trading
Our common stock is currently registered under
Section 12(b) of the 1934 Act and we are subject to the periodic reporting and other requirements of the 1934 Act. The proposed reverse stock split will not affect the registration of our common stock under the 1934 Act.
If the proposed reverse stock split is implemented, our common stock will continue to be reported on NASDAQ under the symbol SNCI (although
the letter D will be added to the end of the trading symbol for a period of 20 trading days from the effective date of the reverse stock split to indicate that the reverse stock split has occurred).
Effective Date
The proposed reverse stock split
would become effective on the date of filing of a Certificate of Amendment to our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware automatically and without any action on the part of the
stockholders.
Mechanics of Reverse Stock Split
If this Proposal 4 is approved by the stockholders at the Annual Meeting, stockholders will be notified that the reverse stock split has been effected. The mechanics of the reverse stock split will differ depending upon whether shares are
held beneficially in street name or whether they are registered directly in a stockholders name.
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If a stockholders shares are held in street name, the number of shares the stockholder holds will automatically be adjusted to reflect the reverse stock split
on the effective date.
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If a stockholders shares are registered directly in the stockholders name, the stockholder will receive a transmittal letter asking the stockholder to
surrender certificates representing pre-split shares in exchange for certificates representing post-split shares. No new certificates will be issued to the stockholder until the outstanding certificate(s) together with the properly completed and
executed letter of transmittal are delivered to American Stock Transfer. Stockholders should not destroy any stock certificates and should not submit any certificates until requested to do so.
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Payment for Fractional Shares
Whether shares are
held in street name or directly, we will not issue fractional shares of common stock to our stockholders. Instead, fractional shares will be cashed out. For example, if a stockholder holds 52 shares on a pre-split basis, the stockholder would be
issued 10 shares on a post-split basis and would receive cash for 0.4 shares.
Any cash due to stockholders in exchange for fractional
shares will be paid as follows:
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If a stockholders shares are held in street name, payment for the fractional shares will be deposited directly into the stockholders account with the
organization holding the stockholders shares.
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If the stockholders shares are registered directly in the stockholders name, payment for the fractional shares will be made by check, sent to the
stockholder directly from American Stock Transfer upon receipt of the properly completed and executed transmittal letter and original stock certificates.
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The amount of cash to be paid for fractional shares will be equal to the product obtained by multiplying:
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The average closing sales price of our common stock as reported on NASDAQ for the four trading days preceding the effective date of the reverse stock split; by
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The amount of the fractional shares.
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Holders of less than five shares of our common stock would be eliminated as a result of the payment for fractional shares in lieu of any fractional share interest in connection with the reverse stock split.
Accounting Consequences
On the effective date of the
reverse stock split, the stated capital on our balance sheet attributable to the common stock would be increased to reflect the new par value per share of $0.005, and the additional paid-in capital account would be credited with the amount by which
the stated capital is reduced.
The per-share common stock net income or loss and net book value will be increased because there will be
fewer shares of our common stock outstanding. We do not anticipate that any other accounting consequences would arise as a result of the reverse stock split.
No Appraisal Rights
Under the Delaware General Corporation Law, our stockholders are not entitled to appraisal rights with
respect to the reverse stock split described in this Proposal 4, and we will not independently provide our stockholders with any such rights.
U.S.
Federal Income Tax Consequences
The following is a summary of important tax considerations of the proposed reverse stock split. It
addresses only stockholders who hold the pre-reverse stock split shares and post-reverse stock split shares as capital assets. It does not purport to be completed and does not address stockholders subject to special rules, such as financial
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institutions, tax-exempt organizations, insurance companies, dealers in securities, mutual funds, foreign stockholders, stockholders who hold the pre-reverse
stock split shares as part of a straddle, hedge or conversion transaction, stockholders who hold the pre-reverse stock split shares as qualified small business stock within the meaning of Section 1202 of the Code, stockholders who are subject
to the alternative minimum tax provisions of the Code and stockholders who acquired their pre-reverse stock split shares pursuant to the exercise of employee stock options or otherwise as compensation.
This summary is based upon current law, which may change, possibly even retroactively. It does not address tax considerations under state, local, foreign
and other laws. We have not obtained a ruling from the Internal Revenue Service or an opinion of legal or tax counsel with respect to the consequences of the reverse stock split. Each stockholder is advised to consult his or her tax advisor as to
his or her own situation. The reverse stock split is intended to constitute a reorganization within the meaning of Section 368 of the Code. Assuming the reverse stock split qualifies as a reorganization, a stockholder generally will not
recognize gain or loss in the reverse stock split, except to the extent of cash, if any, received in lieu of a fractional share interest in the post-reverse stock split shares. The aggregate tax basis of the post-split shares received will be equal
to the aggregate tax basis of the pre-split shares exchanged therefore (excluding any portion of the holders basis allocated to fractional shares), and the holding period of the post-split shares received will include the holding period of the
pre-split shares exchanged. A holder of the pre-split shares who receives cash will generally recognize gain or loss equal to the difference between the portion of the tax basis of the pre-split shares allocated to the fractional share interest and
the cash received. Such gain or loss will be a capital gain or loss and will be short term if the pre-split shares were held for one year or less and long term if held more than one year. No gain or loss will be recognized by us as a result of the
reverse stock split.
Board Recommendation
The Board recommends that you vote
FOR
the approval of the reverse stock split.
Expenses of Solicitation
Sonic Innovations will bear the costs of soliciting proxies, including the reimbursement to record holders of their expenses for
postage in forwarding proxy materials to beneficial owners. Directors, officers and employees of Sonic Innovations, without extra compensation, may solicit proxies personally or by mail, telephone, fax or e-mail.
Householding
We have adopted a procedure approved by the Securities and Exchange Commission called householding. Under this procedure, stockholders of record who have the same address and last name receive only one
copy of our proxy material unless such stockholders notify us that they would like to continue to receive individual copies. This reduces our printing costs and postage fees. If because of multiple accounts you are still receiving multiple copies of
our proxy material at a single address and wish to receive a single copy, or if you currently participate in householding but prefer to receive separate copies of future materials and your shares are registered directly through our stock transfer
agent, please contact American Stock Transfer at (718) 921-8380 or inform them in writing at 6201 15
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Avenue, Brooklyn, NY 11219. If your
shares are held through a brokerage account, please contact your broker directly.
Deadline for Receipt of Stockholder Proposals and Director
Nominations
Stockholders are entitled to present proposals for action at a forthcoming annual meeting if they comply with the
requirements of our Bylaws and the rules established by the Securities and Exchange Commission (the SEC) under the Securities and Exchange Act of 1934, as amended (the
Exchange Act).
In order for a stockholder
proposal to be considered for inclusion in Sonic Innovations proxy statement for next years annual
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meeting, the written proposal must be received by the Secretary at our offices no later than one hundred twenty (120) days prior to the date on which we
mailed this Proxy Statement to stockholders in connection with this years Annual Meeting. Assuming a mailing date of April 2, 2010, the deadline for stockholder proposals for next years annual meeting will be December 3, 2009.
In the event that the date of next years annual meeting is changed by more than thirty (30) days from the date of this years Annual Meeting, notice by the stockholder to be timely must be received no later than the close of business
on the later of one hundred twenty (120) calendar days in advance of such annual meeting or ten (10) calendar days following the date on which public announcement of the date of next years annual meeting is first made. A
stockholders notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting; (ii) the name and address, as they appear on our books, of the stockholder proposing such business; (iii) the class and number of shares of our stock which are beneficially owned by the
stockholder; (iv) any material interest of the stockholder in such business; and (v) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Exchange Act.
For any proposal that is not submitted for inclusion in next years proxy statement but instead is sought to be presented directly at next
years annual meeting, SEC rules permit management to vote proxies in their discretion if Sonic Innovations: (a) receives notice before the close of business on December 3, 2009 and advises stockholders in next years proxy
statement about the nature of the matter and how management intends to vote on the matter, or (b) does not receive notice of the proposal prior to the close of business on December 3, 2009.
All submissions to, or requests of, the Secretary should be made to our principal offices: 2795 East Cottonwood Parkway, Suite 660, Salt Lake City, Utah
84121.
Executive Officers
For
information about our executive officers, please see Part III, Item 10 Executive Officers of the Registrant of our Annual Report on Form 10-K for the year ended December 31, 2008.
Code of Ethics and Corporate Governance Guidelines
We have a Code of Business Conduct and Ethics, which pertains to all directors, executive officers and employees, and a Code of Ethics for Principal Executive and Senior Financial Officers (collectively, the
Codes
). The full text of the Codes are accessible by following the link to Corporate Governance on our website
www.sonici.com/index.php/corporate/policies-and-charters
. In the event we make any amendment
to, or grant any waiver from, a provision of the Code of Ethics for Principal Executive and Senior Financial Officers that requires disclosure under applicable SEC rules, we intend to disclose such amendment or waiver and the reasons therefore on
our website. We undertake to provide any person without charge a copy of the aforementioned Codes upon receipt of a written request. Requests should be addressed to: Secretary, Sonic Innovations, Inc., 2795 East Cottonwood Parkway, Suite 660, Salt
Lake City, Utah 84121.
Annual Report on Form 10-K
Our 2008 Annual Report on Form 10-K, containing the audited financial statements as of and for the year ended December 31, 2008, is being sent to stockholders together with this Proxy Statement.
SONIC INNOVATIONS WILL FURNISH TO STOCKHOLDERS WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, UPON RECEIPT OF WRITTEN REQUEST ADDRESSED TO: SECRETARY, SONIC INNOVATIONS, INC., 2795 EAST COTTONWOOD PARKWAY, SUITE 660, SALT LAKE CITY, UTAH 84121.
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Other
The Board of Directors knows of no other matters to be presented at the Annual Meeting. If any other business properly comes before the Annual Meeting or any adjournment thereof, the proxies will vote on that business in accordance with
their best judgment.
By Order of the Board of Directors
Brent H. Shimada
Vice President
and Secretary
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ANNUAL MEETING OF STOCKHOLDERS OF
SONIC INNOVATIONS, INC.
May 7, 2009
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PROXY VOTING INSTRUCTIONS
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TELEPHONE
- Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or
1-718-921-8500
from foreign countries from any touch-tone telephone and follow
the instructions. Have your proxy card available when you call and use the Company Number and Account Number shown on your proxy card.
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COMPANY NUMBER
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Vote online/phone until 11:59 PM EST the day before the
meeting.
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ACCOUNT NUMBER
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MAIL
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Sign, date and mail your proxy card in the envelope
provided as soon as possible.
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IN PERSON
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You may vote your shares in person by attending the
Annual Meeting.
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL
: The Notice of Meeting, proxy statement and proxy card are available at www.sonici.com/2009proxy
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Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone.
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20230303000000000000 8
050709
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND FOR PROPOSALS 2, 3 AND 4.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
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FOR
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AGAINST
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ABSTAIN
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1. Election of two directors
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2. Ratification of the appointment of PricewaterhouseCoopers, LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2009.
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FOR ALL NOMINEES
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WITHHOLD AUTHORITY
FOR ALL NOMINEES
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FOR ALL EXCEPT
(See instructions below)
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NOMINEES:
¡
Cherie M. Fuzzell
¡
Lawrence C. Ward
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3. Approval of
amendment to Sonics Amended and Restated Certificate of Incorporation to change our name to Otix Global, Inc.
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4. Approval of
amendment to Sonics Amended and Restated Certificate of Incorporation to effect a one-for-five reverse stock split of common stock.
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5. In their
discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.
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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:
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
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PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
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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.
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Signature of Stockholder
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Date:
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Signature of Stockholder
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Date:
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Note:
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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.
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SONIC INNOVATIONS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL
MEETING OF STOCKHOLDERS
TO BE HELD MAY 7, 2009
As an alternative to completing this form, you may enter your vote instruction by telephone at 1-800-PROXIES, and follow the simple instructions. Use the Company Number and Account Number shown on your proxy card.
The undersigned hereby appoints Samuel L. Westover and Michael M. Halloran, or either of them, as Proxies, with full power of substitution, to vote
all shares of common stock which the undersigned would be entitled to vote if personally present at the Annual Meeting of Stockholders to be held on May 7, 2009 at 9:00 a.m. PDT at the Flamingo Hotel and Casino located at 3555 Las Vegas
Boulevard, Las Vegas, Nevada 89109 or any adjournments thereof, and upon any and all matters which may properly be brought before the Annual Meeting or any adjournments thereof, hereby revoking all former proxies.
(Continued and to be signed on reverse side.)
ANNUAL MEETING OF STOCKHOLDERS OF
SONIC INNOVATIONS, INC.
May 7, 2009
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL
:
The Notice of Meeting, proxy statement and proxy card
are available at www.sonici.com/2009proxy
Please sign, date and mail
your proxy card
in the
envelope provided as soon
as possible.
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Please detach along
perforated line and mail in the envelope provided.
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20230303000000000000 8
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050709
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND FOR PROPOSALS 2, 3 AND 4.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
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1. Election of two directors
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2. Ratification of the appointment of PricewaterhouseCoopers, LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2009.
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FOR ALL NOMINEES
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WITHHOLD AUTHORITY
FOR ALL NOMINEES
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FOR ALL EXCEPT
(See instructions below)
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NOMINEES:
¡
Cherie M. Fuzzell
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Lawrence C. Ward
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3. Approval of
amendment to Sonics Amended and Restated Certificate of Incorporation to change our name to Otix Global, Inc.
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4. Approval of
amendment to Sonics Amended and Restated Certificate of Incorporation to effect a one-for-five reverse stocksplit of common stock.
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5. In their
discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.
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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:
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
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PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
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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.
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Signature of Stockholder
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Date:
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Signature of Stockholder
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Date:
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¢
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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.
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¢
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Sonic Innovations (NASDAQ:SNCI)
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From May 2024 to Jun 2024
Sonic Innovations (NASDAQ:SNCI)
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From Jun 2023 to Jun 2024