<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
Graham-Field Health Products, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Irwin Selinger
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) 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):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] 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.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
<PAGE> 2
GRAHAM-FIELD HEALTH PRODUCTS, INC.
400 RABRO DRIVE EAST
HAUPPAUGE, NEW YORK 11788
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 18, 1998
The Annual Meeting of Stockholders of Graham-Field Health Products, Inc.
(the "Company") will be held in the Media Room on the lower level of 395 North
Service Road, Melville, New York 11747 on Thursday, June 18, 1998 at 11:00 A.M.
to:
(1) elect two Class II Directors of the Company to serve for a term of
three years;
(2) consider and act upon a proposal to ratify the appointment of Ernst &
Young LLP as the Company's independent auditors for the current fiscal
year; and
(3) transact such other business as may properly come before the Annual
Meeting.
Only stockholders of record at the close of business on April 30, 1998 are
entitled to notice of and to vote at the Annual Meeting. The Annual Meeting for
which this notice is given may be adjourned from time to time without further
notice other than announcement at the meeting or any adjournment thereof. Any
business for which notice is hereby given may be transacted at such adjourned
meeting.
Your attention is directed to the accompanying proxy statement.
RICHARD S. KOLODNY
Vice President, General
Counsel and Secretary
Hauppauge, New York
May 12, 1998
STOCKHOLDERS UNABLE TO ATTEND THE ANNUAL MEETING IN PERSON ARE URGED TO
DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED ADDRESSED
ENVELOPE, WHICH DOES NOT REQUIRE ANY UNITED STATES POSTAGE.
<PAGE> 3
GRAHAM-FIELD HEALTH PRODUCTS, INC.
400 RABRO DRIVE EAST
HAUPPAUGE, NEW YORK 11788
-------------------------------
PROXY STATEMENT
-------------------------------
Proxies in the form enclosed are solicited by the Board of Directors of
Graham-Field Health Products, Inc. (the "Company") for use at the 1998 Annual
Meeting of Stockholders scheduled to be held on June 18, 1998 in the Media Room
on the lower level of 395 North Service Road, Melville, New York 11747 (the
"Annual Meeting"). All properly executed proxies received prior to or at the
Annual Meeting will be voted. If a proxy specifies how it is to be voted, it
will be so voted. If no specification is made, it will be voted (1) for the
election of the Board's nominees as directors, (2) for ratification of the
appointment of Ernst & Young LLP as the Company's independent auditors for the
current fiscal year, and (3) if other matters properly come before the Annual
Meeting, in the discretion of either of the persons named in the enclosed proxy
card. Any stockholder giving a proxy has the right to revoke it at any time
before the proxy is voted by giving written notice of revocation to the
Secretary of the Company (at the address set forth above), by submitting a
properly-executed subsequently dated proxy or by voting in person at the Annual
Meeting.
Holders of record of the common stock, par value $.025 per share, of the
Company (the "Common Stock"), the Company's Series B Cumulative Convertible
Preferred Stock (the "Series B Preferred Stock") and the Company's Series C
Cumulative Convertible Preferred Stock (the "Series C Preferred Stock") as of
the close of business on the record date of April 30, 1998 (the "Record Date")
are entitled to notice of and to vote at the Annual Meeting. As of the Record
Date, there were 31,161,430 shares of Common Stock issued and outstanding, 6,100
shares of the Series B Preferred Stock issued and outstanding, and 1,000 shares
of the Series C Preferred Stock issued and outstanding. Each share of Common
Stock is entitled to one vote. The shares of the Series B Preferred Stock and
the shares of the Series C Preferred Stock are entitled to 3,935,483 and 500,000
votes, respectively. The shares of the Series B Preferred Stock and the Series C
Preferred Stock vote as a single class with the Common Stock, and are
beneficially owned by BIL (Far East Holdings) Limited ("BIL Far East") and its
affiliate, BIL Securities (Offshore) Limited ("BIL Securities"; BIL Securities
and BIL Far East are collectively referred to hereinafter as "BIL"). BIL's
ownership of Common Stock, Series B Preferred Stock and Series C Preferred Stock
represents 24% of the total number of votes entitled to be cast at the Annual
Meeting. Pursuant to the Amended and Restated Stockholder Agreement dated as of
September 3, 1996, as amended (the "BIL Stockholder Agreement"), by and among
the Company, BIL and Irwin Selinger, BIL has agreed to vote its shares of Common
Stock, Series B Preferred Stock, and Series C Preferred Stock in accordance with
the direction of the Company's Board of Directors for any nominees recommended
by the Board of Directors and on all proposals presented by any other
stockholder of the Company. Pursuant to an agreement dated as of April 17, 1998
(the "Fuqua Agreement"), by and among the Company, J.B. Fuqua, J. Rex Fuqua and
certain trusts and entities controlled by the Fuqua family (collectively, the
"Fuqua Family"), the Fuqua Family has agreed to vote its shares of Common Stock
at the Annual Meeting in accordance with the direction of the Company's Board of
Directors for any nominees recommended by the Board of Directors and on all
proposals presented by any other stockholder of the Company. This proxy
statement, the proxy card and the Annual Report of the Company for its fiscal
year ended December 31, 1997 are being mailed on or about May 12, 1998 to all
holders of Common Stock, the Series B Preferred Stock and the Series C Preferred
Stock as of the Record Date.
As required under Section 231 of the Delaware General Corporation Law (the
"DGCL"), the Company will, in advance of the Annual Meeting, appoint one or more
Inspectors of Election to conduct the vote at the Annual Meeting. The Company
may designate one or more persons as alternate Inspectors of Election to replace
any Inspector of Election who fails to act. If no Inspector or alternate
Inspector is able to act at the Annual Meeting, the person presiding at the
Annual Meeting will appoint one or more Inspectors of Election. Each Inspector
of Election before entering the discharge of his duties shall take and sign an
oath faithfully to execute the duties of inspector with strict impartiality. The
Inspectors of Election will (i) ascertain the
<PAGE> 4
number of shares of Common Stock, the Series B Preferred Stock and the Series C
Preferred Stock outstanding as of the record date, (ii) determine the voting
power of the shares of Common Stock, the Series B Preferred Stock and the Series
C Preferred Stock present or represented by proxy at the Annual Meeting and the
validity of the proxies and ballots, (iii) count all votes and ballots, and (iv)
certify the determination of the number of shares of Common Stock, the Series B
Preferred Stock and Series C Preferred Stock present in person or represented by
proxy at the Annual Meeting and the count of all votes and ballots.
The holders of shares of Common Stock, Series B Preferred Stock and Series
C Preferred Stock representing a majority of the total number of votes entitled
to be cast by the holders of all outstanding shares of Common Stock, Series B
Preferred Stock and Series C Preferred Stock must be present in person or
represented by proxy at the Annual Meeting in order for a quorum to be present.
Under Section 216 of the DGCL, any stockholder who abstains from voting on any
particular matter described herein will be counted for purposes of determining a
quorum. For purposes of voting on the matters described herein, the affirmative
vote of (i) the holders of shares of Common Stock, Series B Preferred Stock and
Series C Preferred Stock, representing a plurality of the total votes cast (not
including abstentions) by the holders of shares of Common Stock, Series B
Preferred Stock and Series C Preferred Stock present or represented at the
Annual Meeting is required to elect directors, and (ii) the holders of shares of
Common Stock, Series B Preferred Stock and Series C Preferred Stock,
representing a majority of the total votes cast (including abstentions) by the
holders of shares of Common Stock, Series B Preferred Stock and Series C
Preferred Stock present or represented at the Annual Meeting is required to
ratify the selection by the Board of Directors of Ernst & Young LLP as
independent auditors of the Company for the fiscal year ending December 31,
1998. Abstentions have no legal effect with respect to the election of directors
and the same legal effect as a vote against the ratification of the selection of
Ernst & Young LLP as independent auditors of the Company for the fiscal year
ending December 31, 1998. Any shares as to which a broker or nominee does not
have discretionary voting authority with respect to a particular matter
presented at the Annual Meeting under applicable New York Stock Exchange rules
will be counted for purposes of determining a quorum but will be considered as
shares not entitled to vote on such matter and will therefore not be considered
in the tabulation of the votes on such matter.
No compensation will be paid by the Company to any person in connection
with the solicitation of proxies. Brokers, banks and other nominees will be
reimbursed by the Company for out-of-pocket and other reasonable clerical
expenses incurred in obtaining instructions from beneficial owners of the Common
Stock. In addition to the solicitation by mail, solicitation of proxies may, in
certain instances, be made personally or by telephone by directors, officers and
a few regular employees of the Company. It is expected that the expense of such
special solicitation will be nominal. All expenses incurred in connection with
this solicitation will be borne by the Company.
2
<PAGE> 5
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The following table sets forth certain information regarding the beneficial
ownership of Common Stock, Series B Preferred Stock and Series C Preferred Stock
with respect to each person who, to the knowledge of the management of the
Company, owns beneficially more than five percent of each class of stock as of
April 30, 1998. Beneficial ownership has been determined for purposes of the
following table in accordance with Rule 13d-3 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), under which a person is deemed to be the
beneficial owner of securities if he or she has or shares voting power or
investment power in respect of such securities or has the right to acquire
beneficial ownership within 60 days.
<TABLE>
<CAPTION>
SHARES OF SERIES B SHARES OF SERIES C
SHARES OF COMMON PREFERRED STOCK PREFERRED STOCK
STOCK BENEFICIALLY BENEFICIALLY BENEFICIALLY
OWNED(1) OWNED(1)(2) OWNED(1)(3)
-------------------- -------------------- --------------------
NAME AND ADDRESS NUMBER NUMBER NUMBER
OF BENEFICIAL OWNER OF SHARES PERCENT OF SHARES PERCENT OF SHARES PERCENT
------------------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
BIL(4)........................... 4,061,578 13% 6,100 100% 1,000 100%
c/o Brierley Investments Ltd.
4th Floor, Stratton House
Stratton Street
London W1X 6BN
United Kingdom
J.B. Fuqua(5).................... 2,372,190 7.6% -0- -0- -0- -0-
c/o Fuqua Capital, Inc.
1201 West Peachtree Street,
N.E.
Atlanta, Georgia 30309
J. Rex Fuqua(6).................. 1,566,263 5% -0- -0- -0- -0-
c/o Fuqua Capital, Inc.
1201 West Peachtree Street,
N.E.
Atlanta, Georgia 30309
</TABLE>
- ---------------
(1) All shares are beneficially owned and the sole voting and investment power
is held by the person or entities named, except as otherwise specified
herein.
(2) The Series B Preferred Stock is beneficially owned by BIL and convertible
into shares of Common Stock (x) at the option of BIL, at a conversion price
of $20 per share (or, in the case of certain dividend payment defaults, at a
conversion price of $15.50 per share), (y) at the option of the Company, at
a conversion price equal to current trading prices (subject to a minimum
conversion price of $15.50 and a maximum conversion price of $20 per share)
and (z) automatically on November 27, 2001 at a conversion price of $15.50
per share. The conversion prices are subject to customary antidilution
adjustments. The shares of the Series B Preferred Stock are entitled to
3,935,483 votes, and vote as a single class with the Common Stock and the
Series C Preferred Stock.
(3) The Series C Preferred Stock is beneficially owned by BIL and subject to
redemption as a whole at the option of the Company on the fifth anniversary
of the date of issuance at a stated value plus accrued and unpaid dividends
and, if not redeemed will be convertible into shares of the Common Stock
automatically at a conversion price of $20 per share, subject to customary
antidilution adjustments. The shares of the Series C Preferred Stock are
entitled to 500,000 votes, and vote as a single class with the Common Stock
and the Series B Preferred Stock.
(4) Does not include 6,100 shares of the Series B Preferred Stock and 1,000
shares of the Series C Preferred Stock owned by BIL (see Notes (2) and (3)
above). The shares of Common Stock, Series B Preferred Stock and Series C
Preferred Stock beneficially owned by BIL represent in the aggregate 24% of
the voting power of the Company's outstanding capital stock as of April 30,
1998. (For a description of BIL's voting arrangements, see the description
of the BIL Stockholder Agreement on page 1 of this proxy statement.)
3
<PAGE> 6
(5) According to information contained in a Joint Schedule 13D filing dated as
of January 8, 1998 (the "Fuqua 13D Filing"), the shares of Common Stock
beneficially owned by J.B. Fuqua include 675,538 shares held by two trusts
for the benefit of the grandchildren of J.B. Fuqua, of which Mr. Fuqua is
the trustee, and 146,365 shares held by The J.B. Fuqua Foundation, Inc. (the
"Fuqua Foundation"), of which Mr. Fuqua is a director and officer. Mr. Fuqua
shares voting and investment power with J. Rex Fuqua with respect to shares
held by the Fuqua Foundation. J.B. Fuqua also shares voting and investment
power with J. Rex Fuqua with respect to 768,600 shares held by Fuqua
Holdings I, L.P. (the "Fuqua Partnership") as a result of J.B. Fuqua's
status as an officer and director of Fuqua Holdings, Inc. ("Holdings"), the
general partner of the Fuqua Partnership. (For a description of the Fuqua
Family's voting arrangements, see the description of the Fuqua Agreement on
page 1 of this proxy statement.)
(6) According to information contained in the Fuqua 13D Filing, J. Rex Fuqua
shares voting and investment power with J.B. Fuqua with respect to 768,600
shares held by the Fuqua Partnership as a result of J. Rex Fuqua's status as
an officer and director of Holdings, the general partner of the Fuqua
Partnership. In addition, J. Rex Fuqua shares voting and investment power
with J.B. Fuqua with respect to 146,365 shares held by the Fuqua Foundation,
of which J. Rex Fuqua is a director and officer. (For a description of the
Fuqua Family's voting arrangements, see the description of the Fuqua
Agreement on page 1 of this proxy statement.)
4
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock, Series B Preferred Stock and Series C Preferred Stock
with respect to the Company's directors, the Company's "named executive
officers" (the "Named Executive Officers") within the meaning of Item 402(a)(3)
of Regulation S-K, and by all of the Company's directors and executive officers
as a group, as reported to the Company as of April 30, 1998. Beneficial
ownership has been determined for purposes of the following table in accordance
with Rule 13d-3 of the Exchange Act, under which a person is deemed to be the
beneficial owner of securities if he or she has or shares voting power or
investment power in respect of such securities or has the right to acquire
beneficial ownership within 60 days.
<TABLE>
<CAPTION>
SHARES OF SERIES B SHARES OF SERIES C
SHARES OF COMMON PREFERRED STOCK PREFERRED STOCK
STOCK BENEFICIALLY BENEFICIALLY BENEFICIALLY
OWNED(1) OWNED(1)(2) OWNED(1)(3)
-------------------- -------------------- --------------------
NAME AND ADDRESS NUMBER NUMBER NUMBER
OF BENEFICIAL OWNER OF SHARES PERCENT OF SHARES PERCENT OF SHARES PERCENT
------------------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
DIRECTORS:
Irwin Selinger(4)................ 1,187,384 3.8% -0- -0- -0- -0-
c/o Graham-Field Health
Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Louis A. Lubrano(5).............. 66,200 * -0- -0- -0- -0-
c/o Herzog, Heine, Geduld, Inc.
26 Broadway
New York, NY 10004
Andrew A. Giordano(6)............ 33,500 * -0- -0- -0- -0-
c/o Graham-Field Health
Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
David P. Delaney, Jr.(7)......... 25,666 * -0- -0- -0- -0-
c/o Lancer Financial Group,
Inc.
370 West Park Avenue
Long Beach, New York 11561
Steven D. Levkoff(8)............. 17,666 * -0- -0- -0- -0-
c/o Standard Folding Cartons,
Inc.
85th & 24th Avenue
Jackson Heights, New York 11370
Rodney F. Price(9)............... 4,064,911 13% 6,100 100% 1,000 100%
c/o Brierley Investments Ltd.
4th Floor, Stratton House
Stratton Street
London W1X 6BN
United Kingdom
NAMED EXECUTIVE OFFICERS:
Irwin Selinger(4)................ 1,187,384 3.8% -0- -0- -0- -0-
c/o Graham-Field Health
Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
SHARES OF SERIES B SHARES OF SERIES C
SHARES OF COMMON PREFERRED STOCK PREFERRED STOCK
STOCK BENEFICIALLY BENEFICIALLY BENEFICIALLY
OWNED(1) OWNED(1)(2) OWNED(1)(3)
-------------------- -------------------- --------------------
NAME AND ADDRESS NUMBER NUMBER NUMBER
OF BENEFICIAL OWNER OF SHARES PERCENT OF SHARES PERCENT OF SHARES PERCENT
------------------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Peter Winocur(10)................ 119,800 * -0- -0- -0- -0-
c/o Graham-Field Health
Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Richard S. Kolodny(11)........... 95,250 * -0- -0- -0- -0-
c/o Graham-Field Health
Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Ralph Liguori(12)................ 68,500 * -0- -0- -0- -0-
c/o Graham-Field Health
Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Jeffrey Schwartz(13)............. 32,000 * -0- -0- -0- -0-
c/o Graham-Field Health
Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
All directors and executive
officers as
a group (13 persons)(14)....... 5,772,054 18.2% 6,100 100% 1,000 100%
</TABLE>
- ---------------
* Less than 1%.
(1) All shares are beneficially owned and the sole voting power and investment
power is held by the persons named, except as otherwise specified herein.
(2) The Series B Preferred Stock is beneficially owned by BIL and convertible
into shares of the Common Stock (x) at the option of BIL, at a conversion
price of $20 per share (or, in the case of certain dividend payment
defaults, at a conversion price of $15.50 per share), (y) at the option of
the Company, at a conversion price equal to current trading prices (subject
to a minimum conversion price of $15.50 and a maximum conversion price of
$20 per share) and (z) automatically on November 27, 2001 at a conversion
price of $15.50 per share. The conversion prices are subject to customary
antidilution adjustments. The shares of the Series B Preferred Stock are
entitled to 3,935,483 votes, and vote as a single class with the Common
Stock and the Series C Preferred Stock.
(3) The Series C Preferred Stock is beneficially owned by BIL and subject to
redemption as a whole at the option of the Company on the fifth anniversary
of the date of issuance at a stated value plus accrued and unpaid dividends
and, if not redeemed will be convertible into shares of Common Stock
automatically at a conversion price of $20 per share, subject to customary
antidilution adjustments. The shares of the Series C Preferred Stock are
entitled to 500,000 votes, and vote as a single class with the Common Stock
and the Series B Preferred Stock.
(4) The amount set forth above includes 189,944 shares currently issuable upon
the exercise of stock options issued pursuant to the Company's Incentive
Program, 50,000 shares underlying stock options which are exercisable
within 60 days of April 30, 1998, and 5,500 shares owned by Mr. Selinger's
wife as to which shares Mr. Selinger disclaims any beneficial interest.
6
<PAGE> 9
(5) The amount set forth above includes 200 shares owned by the Virginia
Lubrano Trust, and 60,000 shares currently issuable upon the exercise of
directors' stock options issued pursuant to the Company's Incentive
Program.
(6) The amount set forth above includes 30,000 shares currently issuable upon
the exercise of directors' stock options issued pursuant to the Company's
Incentive Program.
(7) The amount set forth above includes 16,666 shares currently issuable upon
the exercise of directors' stock options issued pursuant to the Company's
Incentive Program.
(8) The amount set forth above includes 1,000 shares owned by Mr. Levkoff's
daughter and 16,666 shares currently issuable upon the exercise of
director's stock options issued pursuant to the Company's Incentive
Program.
(9) Consists of shares of Common Stock owned by BIL, which Mr. Price may be
deemed to own beneficially as a director of BIL. Does not include up to
3,935,438 shares of Common Stock issuable upon the conversion of the shares
of the Series B Preferred Stock and up to 500,000 shares of Common Stock
issuable upon the conversion of the shares of the Series C Preferred Stock
owned by BIL. The amount set forth above includes 3,333 shares currently
issuable upon the exercise of directors' stock options issued pursuant to
the Company's Incentive Program (see Notes 2 and 3 above).
(10) The amount set forth above includes 60,594 shares currently issuable upon
the exercise of stock options issued pursuant to the Company's Incentive
Program, and 23,750 shares underlying stock options which are exercisable
within 60 days of April 30, 1998.
(11) The amount set forth above includes 27,517 shares currently issuable upon
the exercise of stock options issued pursuant to the Company's Incentive
Program, and 16,250 shares underlying stock options which are exercisable
within 60 days of April 30, 1998.
(12) The amount set forth above includes 20,631 shares currently issuable upon
the exercise of stock options issued pursuant to the Company's Incentive
Program, and 15,000 shares underlying stock options which are exercisable
within 60 days of April 30, 1998.
(13) The amount set forth above includes 19,500 shares currently issuable upon
the exercise of stock options issued pursuant to the Company's Incentive
Program, and 12,500 shares underlying stock options which are exercisable
within 60 days of April 30, 1998.
(14) The amount set forth above includes 465,317 shares currently issuable upon
the exercise of stock options issued pursuant to the Company's Incentive
Program, and 142,500 shares underlying stock options which are exercisable
within 60 days of April 30, 1998.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of the Common Stock of the
Company to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC") and the exchange on which the Common
Stock is listed for trading. Officers, directors and more than ten percent
stockholders are required by regulations promulgated under the Exchange Act to
furnish the Company with copies of all Section 16(a) reports filed.
Based solely on the Company's review of copies of the Section 16(a) reports
filed for the year ended December 31, 1997, and written representations from
certain reporting persons that no Forms 5 were required for such persons for the
year ended December 31, 1997, the Company believes that all reporting
requirements applicable to its officers, directors, and more than ten percent
stockholders were complied with for the year ended December 31, 1997.
7
<PAGE> 10
ELECTION OF DIRECTORS
At the Annual Meeting, two Class II directors are to be elected for
three-year terms expiring in 2001. Effective as of April 17, 1998, the Board of
Directors was reduced to six (6) members. Unless authority to do so is withheld,
the Board of Directors intends to vote the enclosed proxy at the Annual Meeting
for the election of the nominees named below. If any nominee for any reason
should become unavailable for election, it is intended that discretionary
authority will be exercised by either of the persons named in the enclosed proxy
card in respect of the election of such other person as the Board of Directors
shall nominate or the number of directors may be reduced accordingly by the
Board of Directors. The Board of Directors is not aware of any circumstances
likely to cause any nominee to become unavailable for election.
Set forth in the following table is certain information with respect to
each nominee nominated to serve as a Class II director whose term will expire in
2001.
NOMINEES
CLASS II: TERM EXPIRING IN 2001
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY DIRECTOR SINCE
---- --- ---------------------- --------------
<S> <C> <C> <C>
Andrew A. Giordano.............................. 65 President and Chief 1994
Operating Officer,
Director and Member
of the Executive and
Nominating
Committees
David P. Delaney, Jr............................ 45 Director and Member of 1995
the Audit,
Compensation and
Nominating
Committees
</TABLE>
DIRECTORS CONTINUING IN OFFICE
The following directors are continuing in office for the respective periods
indicated and until their successors are elected and qualified.
CLASS III: TERM EXPIRING IN 1999
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY DIRECTOR SINCE
---- --- ---------------------- --------------
<S> <C> <C> <C>
Rodney F. Price................................. 54 Director and Member of 1996
the Executive and
Compensation
Committees
Steven D. Levkoff............................... 49 Director and Member of 1995
the Audit and
Compensation
Committees
Louis A. Lubrano................................ 64 Director 1984
</TABLE>
8
<PAGE> 11
CLASS I: TERM EXPIRING IN 2000
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY DIRECTOR SINCE
---- --- ---------------------- --------------
<S> <C> <C> <C>
Irwin Selinger.................................. 57 Chairman of the Board 1981
and Chief Executive
Officer; Member of
Executive Committee
</TABLE>
Mr. Giordano has been the President and Chief Operating Officer of the
Company since February 2, 1998, and a director of the Company since 1994. Prior
to such time, Mr. Giordano was a principal of The Giordano Group, Limited, a
diversified consulting firm, since its founding in February 1993. From May 1987
to February 1993, Mr. Giordano was Executive Vice President of Lamonts Apparel,
Inc. Mr. Giordano also currently serves as a director of Cherry & Webb Inc., a
ladies specialty apparel company, Joseph A. Bank Clothiers, Inc., a manufacturer
and retailer of men's clothing, and Nomos Corporation, a conformal radiation
therapy provider. In 1984, Mr. Giordano retired from his position as CEO, Naval
Supply Systems Command and Chief of the Supply Corps., with the rank of Rear
Admiral.
Mr. Delaney has been the President and Chief Executive Officer of Lancer
Financial Group and its principal operating subsidiary, Lancer Insurance
Company, since 1985. Mr. Delaney founded the Lancer Financial Group, which
currently provides insurance coverage and specialized services to the United
States passenger transportation industry. In addition, Mr. Delaney has served as
the Chairman of the Long Island Chapter of the Young President's Organization,
and serves as the Chairperson of the Community Campaign at Mercy Medical Center
and is a member of the Advisory Board of the Alliance of American Insurers.
Mr. Price was the Chairman of the Board of Everest & Jennings from May 23,
1994 to November 27, 1996. Mr. Price has been a Director of Brierley Investments
Limited, a New Zealand investment holding company and an affiliate of BIL, since
1993. From 1990 to 1993, Mr. Price was the Managing Director and Chief Executive
Officer of Pioneer International Ltd., a producer of building construction
materials. Prior to such time, Mr. Price was a Managing Director and the Chief
Executive Officer of Industrial Equity Limited (IEL) from 1986 to 1989. Pursuant
to the BIL Stockholder Agreement, Mr. Price has been nominated by BIL to serve
on the Company's Board of Directors.
Mr. Levkoff has been the Chief Executive Officer and President of Standard
Folding Cartons, Inc., a manufacturer of paperboard packaging for the private
label, over-the-counter and food industries, since 1982. Mr. Levkoff is also a
member of the national industry association, the Paperboard Packaging Council.
Mr. Lubrano has been an investment banker with Herzog, Heine, Geduld, Inc.,
a member New York Stock Exchange firm, since December 1996. From March 1, 1991
to December 1996, Mr. Lubrano was a managing director of Stires & Company, Inc.,
an investment banking firm. From March 1990 to February 1991, Mr. Lubrano was a
director of the Nasdaq Forum. Prior to such time, Mr. Lubrano was a managing
director of Home Group Capital Markets, Inc., an investment banking firm. From
April 1986 to March 1989, he was President of Gabelli & Company, Inc., an
investment banking firm. He is also a director of Andersen Group, Inc., a
diversified manufacturing company.
Mr. Selinger, a founder of the Company, has been the Chairman of the Board
and Chief Executive Officer of the Company since April 1981. Mr. Selinger was a
founder and the Chief Executive Officer of Surgicot, Inc., a manufacturer of
sterilization indicators, and its predecessor from 1968 to April 1980. In 1979,
Surgicot, Inc. was acquired by E.R. Squibb & Sons, Inc., a subsidiary of Squibb
Corporation. From April 1980 to June 1984, Mr. Selinger was a consultant to E.R.
Squibb & Sons, Inc.
Each of the persons listed is now serving as a director, and was previously
elected as a director by the stockholders, except for David P. Delaney, Jr.,
Steven D. Levkoff, and Rodney F. Price, who were elected at meetings of the
Board of Directors held on August 9, 1995, October 26, 1995 and January 16,
1998, respectively. No director is related to any other director or executive
officer.
9
<PAGE> 12
MEETINGS OF THE BOARD: COMMITTEES
The Board of Directors held seven meetings during 1997. No director
attended fewer than 90% of the meetings of the Board of Directors and the
Committees of the Board of Directors on which he served during 1997.
The Board has an Executive Committee, currently consisting of Irwin
Selinger, Andrew A. Giordano, and Rodney F. Price. The Executive Committee has
all the authority which, under the DGCL, may be delegated to such Committee. The
Executive Committee held one meeting during 1997.
The Compensation Committee currently consists of Steven D. Levkoff, Rodney
F. Price and David P. Delaney, Jr. The Compensation Committee reviews and
approves the salary and bonus levels for the Company's executive officers, and
awards stock options under the Company's Incentive Program. The Compensation
Committee held five meetings during 1997.
The Audit Committee currently consists of David P. Delaney, Jr. and Steven
D. Levkoff. The Audit Committee serves as a focal point for communications with
respect to financial accounting, reporting and controls, and recommends the
appointment of independent auditors and reviews the audit fees. The Audit
Committee met once during 1997.
The Board has a Nominating Committee, which currently consists of Andrew A.
Giordano and David P. Delaney, Jr. The Nominating Committee is responsible for
recommending qualified candidates to the Board for election as directors of the
Company, including the slate of directors that the Board proposes for election
by stockholders at the Annual Meeting.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Steven D. Levkoff, Rodney
F. Price and David P. Delaney, Jr. No member of the Company's Compensation
Committee is a current or former officer or employee of the Company or any of
its subsidiaries. In addition, there are no other compensation committee
interlocks between the Company and other entities involving any of the executive
officers of the Company who serve as executive officers of such other entities.
COMPENSATION OF DIRECTORS
The directors' cash compensation program provides for the payment of
directors' fees to outside directors of $1,000 for the attendance at each Board
meeting and $500 for each Committee meeting, provided each Committee meeting is
held on a date other than a Board meeting. In addition, no directors' fees are
provided for telephonic Board or Committee meetings which are less than two (2)
hours in duration.
Under the Company's Incentive Program, Directors' Options are granted
automatically as of January 2nd of each year that the Program is in effect to
each director who is neither an employee nor officer of the Company or any of
its subsidiaries. Each Director's Option entitles the qualifying director to
whom it is granted to purchase 10,000 shares of the Common Stock at an option
price equal to the fair market value of the Common Stock on the date of grant.
Directors' Options vest and are exercisable at the rate of one-third ( 1/3) of
each grant annually. Directors' Options are exercisable in full for a period of
ninety days following (i) the death or permanent disability of a director or
(ii) a change in control of the Company. Directors' Options terminate ten years
from the date of grant or two years after a director's termination, if other
than for cause. If a director is terminated for cause, the Directors' Options
terminate immediately.
During 1997, Andrew A. Giordano, a director of the Company, performed
certain consulting services for the Company. For such services, Mr. Giordano was
paid $121,500. Effective as of February 2, 1998, Mr. Giordano became the
President and Chief Operating Officer of the Company.
10
<PAGE> 13
EXECUTIVE COMPENSATION
The following summary compensation table sets forth certain information
concerning the compensation of the Company's Named Executive Officers for each
of the three years during the period ended December 31, 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
-----------------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
--------------------------------------- RESTRICTED OPTIONS TO
OTHER ANNUAL STOCK PURCHASE ALL OTHER
SALARY BONUS COMPENSATION(1) AWARDS SHARES(2) COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)
--------------------------- ---- ------- --------- --------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Irwin Selinger................ 1997 446,156 1,000,000 -- -- 139,944 33,790(4)
Chairman of the Board and 1996 250,000 100,000 180,000(3) -- 245,517 31,098(4)
Chief Executive Officer 1995 200,000 50,000 -- -- -- 30,740(4)
Peter Winocur(5).............. 1997 200,000 177,089(7) 27,089(8) -- 18,500 --
Executive Vice President 1996 150,000 75,000 -- -- 110,000 --
of Sales and Marketing 1995 53,000 -- 72,234 -- 15,000 --
Richard S. Kolodny............ 1997 175,000 152,089(7) 27,089(8) -- 17,767 --
Vice President, 1996 150,000 75,000 -- -- 35,000 --
General Counsel 1995 120,000 25,000 -- -- 20,000 --
and Secretary
Ralph Liguori(6).............. 1997 200,000 107,089(7) 27,089(8) -- 16,000 --
Executive Vice President 1996 175,000 50,000 -- -- 35,000 --
of Operations 1995 77,403 -- -- -- 25,000 --
Jeffrey Schwartz(9)........... 1997 177,885 100,000 -- -- 10,000 --
President of GF Express 1996 91,731 75,000 -- -- 35,000 --
1995 -- -- -- -- -- --
</TABLE>
- ---------------
(1) Except as set forth in note (8) below, the aggregate amount of Other Annual
Compensation for each of the Named Executive Officers did not equal or
exceed the lesser of either $50,000 or 10% of the total of such individual's
base salary and bonus, as reported herein for the last fiscal year, and is
not reflected in the table.
(2) Stock options are granted under the terms and provisions of the Company's
Incentive Program. For a description of the stock options, see "Executive
Compensation -- Option Grants in Last Fiscal Year."
(3) On November 27, 1996, the Company forgave indebtedness in the amount of
$180,000 (inclusive of accrued interest), under a secured loan provided to
Mr. Selinger on April 1, 1996. The loan was used by Mr. Selinger to purchase
50,000 shares of Common Stock on the open market.
(4) In June 1992, the Company entered into a split-dollar life insurance
arrangement for the benefit of Irwin Selinger. During the fiscal years ended
December 31, 1997, 1996 and 1995, the Company paid the premiums on the life
insurance policy owned by a trust for the benefit of Irwin Selinger's
children on a split-dollar basis. With respect to the payment of such
premiums by the Company, the benefit to Mr. Selinger for the years ended
December 31, 1997, 1996 and 1995, projected on an actuarial basis was
$33,790, $31,098 and $30,740, respectively, which is included in the table
above.
(5) Mr. Winocur became the Executive Vice President of Sales and Marketing of
the Company on January 1, 1996. During 1994 and through July 1, 1995, Mr.
Winocur was an exclusive sales representative for the Company. From July 1,
1995 through December 31, 1995, Mr. Winocur was the Vice President of Sales
and Marketing.
(6) On July 17, 1995, Mr. Liguori joined the Company as the Executive Vice
President of Operations.
(7) Includes the forgiveness of indebtedness in the amount of $27,089 (inclusive
of accrued interest) under secured loans (the "Secured Loans") provided to
Mr. Winocur, Mr. Kolodny and Mr. Liguori on February 26, 1996. The Secured
Loans were used by Mr. Winocur, Mr. Kolodny and Mr. Liguori to purchase
6,000 shares of common stock on the open market in 1996.
11
<PAGE> 14
(8) Each of Mr. Winocur, Mr. Kolodny and Mr. Liguori were reimbursed for all
applicable Federal, state and local income taxes relating to the forgiveness
of indebtedness under the Secured Loans.
(9) On May 14, 1996, Mr. Schwartz joined the Company as the Vice President of GF
Express. Mr. Schwartz became an executive officer of the Company in June
1997.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain summary information concerning the
number of stock options granted and the potential realizable value of the stock
options granted to the Company's Named Executive Officers during the fiscal year
ended December 31, 1997:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK PRICE
UNDERLYING OPTIONS APPRECIATION
OPTIONS GRANTED TO EXERCISE OR FOR OPTION TERM(2)
GRANTED IN EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME 1997(1) FISCAL YEAR ($/SH) DATE 5% 10%
- ---- ---------- ------------ ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Irwin Selinger.............. 84,512 17.0% 10.75 04/03/02 $251,003 $554,651
Chairman of the Board and 50,000 10.1% 12.375 06/18/02 170,949 377,753
Chief Executive Officer 5,432 1.1% 15.19 09/18/02 22,797 50,374
Peter Winocur............... 6,000 1.2% 11.625 05/13/02 $ 19,271 $ 42,583
Executive Vice President
of 12,500 2.5% 12.375 06/18/02 42,737 94,438
Sales & Marketing
Richard S. Kolodny.......... 12,500 2.5% 12.375 06/18/02 $ 42,737 $ 94,438
Vice President, General 5,267 1.1% 15.19 09/18/02 22,104 48,844
Counsel and Secretary
Ralph Liguori............... 10,000 2.0% 12.375 06/18/02 $ 34,190 $ 75,551
Executive Vice President
of 6,000 1.2% 15.19 09/18/02 25,180 55,642
Operations
Jeffrey Schwartz............ 10,000 2.0% 12.375 06/18/02 $ 34,190 $ 75,551
President of GF Express
</TABLE>
- ---------------
(1) During the fiscal year ended December 31, 1997, stock options were granted
under the Company's Incentive Program at an exercise price equal to the fair
market value of the Common Stock on the date of grant. The stock options
have a term of five years, subject to earlier termination in the event of
termination of employment for cause. The stock options are non-transferable,
other than by will or the laws of descent and distribution, and vest and are
exercisable at the rate of 50% per year, subject to certain exceptions
including a change of control of the Company and the death of an optionee.
The stock options may be exercised by payment of cash, shares of Common
Stock or other consideration. The Company's Incentive Program is
administered by the Compensation Committee of the Board of Directors, which
is granted the authority to amend and modify the terms and provisions of
stock options granted under the Company's Incentive Program.
(2) Represents gain that would be realized assuming the stock options were held
for the entire five-year period and the stock price increased at compounded
rates of 5% and 10%, respectively, from the exercise prices set forth in the
table. These amounts represent assumed rates of appreciation only. Actual
gains, if any, on stock option exercises will be dependent on overall market
conditions and on the future performance of the Company. There can be no
assurance that the amounts reflected in the table will be achieved.
12
<PAGE> 15
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table provides certain summary information concerning stock
option exercises during the fiscal year ended December 31, 1997 by the Company's
Named Executive Officers and the value of unexercised stock options held by the
Company's Named Executive Officers as of December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED "IN THE MONEY"
NUMBER OF OPTIONS AT FISCAL OPTIONS AT FISCAL
SHARES ACQUIRED VALUE YEAR END(3) YEAR END(4)
UPON REALIZED --------------------------- ---------------------------
NAME EXERCISE ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Irwin Selinger(2)........ 186,928 $1,119,517 164,944 150,000 $1,217,737 $1,234,375
Chairman of the
Board and Chief
Executive Officer
Peter Winocur(2)......... 10,000 $ 46,250 81,000 67,500 $ 807,875 $ 573,281
Executive Vice
President of Sales
and Marketing
Richard S. Kolodny(2).... 20,000 $ 223,800 57,767 30,000 $ 609,919 $ 217,500
Vice President,
General Counsel
and Secretary
Ralph Liguori(2)......... 22,785 $ 254,964 25,715 27,500 $ 200,681 $ 206,719
Executive Vice
President of
Operations
Jeffrey Schwartz......... 8,000...... $ 92,000 9,500 27,500 $ 93,281 $ 233,906
President of GF
Express
</TABLE>
- ---------------
(1) Values were calculated by multiplying the closing market price of the Common
Stock as reported on the New York Stock Exchange, Inc. on the date of
exercise, by the respective number of shares and subtracting the exercise
price per share.
(2) The shares of Common Stock received upon exercise of the stock options were
not disposed of by the Named Executive Officers.
(3) Represents the aggregate number of stock options held as of December 31,
1997.
(4) Values were calculated by multiplying the closing market price of the Common
Stock as reported on the New York Stock Exchange, Inc. on December 31, 1997
by the respective number of shares and subtracting the exercise price per
share, without any adjustment for any termination or vesting contingencies.
EMPLOYMENT, TERMINATION AND CHANGE-IN-CONTROL ARRANGEMENTS AND OTHER
ARRANGEMENTS
In July 1981, Mr. Selinger entered into a ten-year employment agreement
with the Company, which, in June 1991, was amended and extended for an
additional five-year period ending July 8, 1996. As of May 3, 1996, Mr.
Selinger's employment agreement was extended for an additional five-year period
ending July 8, 2001. Effective as of July 1, 1997, Mr. Selinger's annual base
salary was established at $550,000. During the term of the employment agreement
between Mr. Selinger and the Company, and for a period of one year following
termination of the employment agreement, if termination occurs as a result of a
breach of the employment agreement by Mr. Selinger, Mr. Selinger has agreed that
he will not directly or indirectly engage in any business or invest in any
privately held company or own more than one percent of the outstanding
securities of any publicly owned corporation which competes with any business of
the Company.
13
<PAGE> 16
Mr. Selinger's employment agreement also provides that if his employment is
terminated by the Company for any reason other than dishonesty or disability,
the Company shall pay Mr. Selinger his annual salary through the end of the term
of his employment agreement.
On December 3, 1997, the Company loaned $2.5 million to Mr. Selinger (the
"Selinger Loan"). The Selinger Loan is evidenced by a seven (7) year secured
note with principal and interest payable in a balloon payment in seven (7)
years, and customary terms and provisions relating to repayment upon the death
and/or termination of employment of Mr. Selinger. The Selinger Loan is secured
by common stock of the Company in the amount of 120% of the outstanding balance
of the Selinger Loan, as adjusted from year to year. Under the terms of the
Selinger Loan, a percentage, as determined from time-to-time by the Compensation
Committee, of future cash bonuses awarded to Mr. Selinger will be used to repay
interest and principal under the loan until such time as the Selinger Loan is
paid in full. In 1998, Mr. Selinger repaid $300,000 of the Selinger Loan. The
Selinger Loan bears interest at the Company's borrowing rate under its senior
secured revolving credit facility.
Effective as of March 15, 1996, Mr. Schwartz entered into a five (5) year
employment agreement with the Company. Under the terms of Mr. Schwartz's
employment agreement, Mr. Schwartz receives an annual base salary of $200,000
and participates in the Company's bonus program. The employment agreement
provides that the Company may terminate his employment only for cause (as
defined in the employment agreement), death or extended illness or disability.
On March 2, 1998, Paul Bellamy, the Vice President of Finance and Chief
Financial Officer, entered into a three (3) year employment agreement with the
Company, which provides for an initial annual base salary of $250,000 per year.
Mr. Bellamy's employment agreement provides for participation in the Company's
bonus program. Under the terms of Mr. Bellamy's employment agreement, the
Company may terminate his employment agreement only for cause, death or extended
illness or disability.
On April 17, 1998, Mr. Giordano, Mr. Winocur, Mr. Kolodny, and Mr. Liguori
entered into three (3) year employment agreements with the Company. The
employment agreements provide for initial annual base salaries of $350,000,
$230,000, $200,000 and $220,000, respectively. Under the terms of the employment
agreements, each of the executives participates in the Company's bonus program.
The terms of the employment agreements provide that the Company may terminate
the executive's employment only for cause (as defined in the employment
agreements), death or extended illness or disability.
As part of Mr. Giordano's employment agreement, the Company loaned $400,000
to Mr. Giordano on April 23, 1998 (the "Giordano Loan"). The Giordano Loan is
evidenced by a seven (7) year secured note with principal and interest payable
in a balloon payment in seven (7) years, and customary terms and provisions
relating to repayment upon the death and/or termination of employment of Mr.
Giordano. The Giordano Loan is secured by a first mortgage on Mr. Giordano's
residence. Under the terms of the Giordano Loan, a percentage, as determined
from time-to-time by the Compensation Committee, of future cash bonuses awarded
to Mr. Giordano will be used to repay interest and principal under the loan
until such time as the Giordano Loan is paid in full. The Giordano Loan bears
interest at the Company's borrowing rate under the senior secured revolving
credit facility.
Each of the Company's Named Executive Officers, Mr. Giordano, and Mr.
Bellamy has entered into an agreement with the Company providing for the payment
of certain benefits if within two years following the occurrence of a "change in
control" (as defined in each such agreement), the executive officer is
terminated other than by reason of death, disability, retirement, or for cause,
or if such executive officer terminates his or her employment for good reason
(each, a "Triggering Event"). Under the terms of each agreement, each of the
executive officers is entitled upon the occurrence of a Triggering Event to
receive his or her base salary and incentive compensation, if any, through the
date of termination, plus a lump sum severance payment equal to one times the
executive officer's base salary (as defined in each such agreement), provided
that in no event shall the total payments exceed 2.99 times the executive
officer's "base amount" as such term is defined in Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"). In addition, the terms of each
agreement provide that in the event that an executive officer's employment is
terminated within two (2) years following the occurrence of a change of control
by reason of death or disability, the executive officer
14
<PAGE> 17
shall be entitled to death or long-term disability benefits, as the case may be,
on terms no less favorable than the most favorable benefits to which he would
have been entitled had the death or termination for disability occurred at any
time during the period commencing one year prior to the initiation of actions
resulting in a change of control of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 1, 1996, the Company entered into a three (3) year lease
arrangement with HIP Realty, Inc. ("HIP") for the Company's facility located in
Mount Vernon, New York. Under the terms of the lease, the Company has an option
to renew the lease for an additional three (3) year period at a fixed annual
rent of $180,000. The principal stockholders of HIP are Harvey P. Diamond, a
former director and former President of the Company, and Peter Winocur, the
Company's Executive Vice President of Sales and Marketing. The lease with HIP
Realty provides for the payment by the Company of fixed annual rents of $162,000
for the first year escalating to $180,000 for years two and three, and the
payment of incremental real estate taxes over a base year. The Company believes
that the terms of the lease are at least as favorable to it as those it would
have received from an unrelated third party.
The Company, through its wholly-owned subsidiary, Lumex/Basic American
Holdings, Inc. (formerly, Fuqua Enterprises, Inc.) ("Fuqua"), subleases certain
office space located in Atlanta, Georgia to Fuqua Capital Corporation
("Capital"), an entity controlled by the Fuqua Family. The sublease has a
remaining term of two years and provides that if Fuqua moves out of the space it
shares with Capital, or there is a change in control of Fuqua, Capital has the
option of taking over the office space now occupied by Fuqua upon terms
favorable to Capital. Pursuant to the terms of the sublease, Fuqua makes annual
lease payments (net of sublease payments by Capital) to the landlord of
approximately $244,000 (subject to adjustment for operating costs).
15
<PAGE> 18
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return of the Common Stock of the Company for the last five years with the
cumulative total return of the Standard & Poor's 500 Stock Index ("S&P 500
Index"') and the Standard & Poor's Medical Products and Supplies Index over the
same period assuming the investment of $100 on December 31, 1992 in the Common
Stock of the Company, the Standard & Poor's 500 Stock Index and the Standard &
Poor's Medical Products and Supplies Index ("S&P Health Care Index") (assuming
the reinvestment of all dividends).
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG GRAHAM-FIELD HEALTH PRODUCTS, INC.,
THE STANDARD & POOR'S 500 STOCK INDEX AND
THE STANDARD & POOR'S MEDICAL PRODUCTS AND SUPPLIES INDEX
<TABLE>
<CAPTION>
GRAHAM-
FIELD HEALTH
Measurement Period S&P HEALTH PRODUCTS,
(Fiscal Year Covered) S&P 500 INDEX CARE INDEX INC.
<S> <C> <C> <C>
Dec-92 100 100 100
Dec-93 110 76 81
Dec-94 112 90 64
Dec-95 153 153 57
Dec-96 189 175 147
Dec-97 252 219 284
</TABLE>
- ---------------
* Assumes $100 invested on December 31, 1992 in stock or index, including
reinvestment of dividends.
REPORT OF COMPENSATION COMMITTEE
OVERALL POLICY
The Company's executive officer compensation program is administered to be
closely linked to corporate performance and the total return to stockholders
over the long-term. The overall objectives of the executive officer compensation
program are to attract and retain the best possible executive talent, to
motivate these executives to achieve the goals inherent in the Company's
business strategy, to link executive and stockholder interests through
participation in the Company's Incentive Program and finally to provide a
compensation package that recognizes individual contributions as well as overall
business results.
The key elements of the Company's executive officer compensation consist of
base salary, an annual bonus pursuant to the Company's bonus program, and the
grant of stock options under the Company's Incentive Program. The Compensation
Committee reviews and approves the compensation package for the
16
<PAGE> 19
executive officers of the Company. In addition, while the elements of
compensation described below are considered separately, the Compensation
Committee takes into account the full compensation package afforded by the
Company to the individual.
BASE SALARIES
Base salaries for executive officers (officers with principal
decision-making authority) are initially determined by evaluating the
responsibilities of the position held and the experience of the individual.
Annual salary adjustments and increases are determined by evaluating the
performance of the Company and of each executive officer, and also take into
account new responsibilities. The Chairman of the Board makes salary
recommendations, which are based upon the subjective assessment of the nature of
the position and the contribution, experience and tenure of the executive
officer. The recommendations are reviewed and approved by the Compensation
Committee.
For 1997, Mr. Selinger received a base salary of $446,156. Effective as of
July 1, 1997, the Compensation Committee set Mr. Selinger's annual base salary
at $550,000.
ANNUAL BONUS
Cash bonuses are granted on a discretionary basis primarily to reward
individual contribution, following years in which the Company achieved projected
earnings and revenue growth. The Chairman of the Board makes bonus
recommendations, which are based upon the subjective evaluation of each
executive officer's direct contribution to Company performance. The
recommendations are reviewed and approved by the Compensation Committee. Based
on Mr. Selinger's significant role in the Company's six (6) strategic
acquisitions completed in 1997, including the acquisition of Fuqua Enterprises,
Inc. on December 30, 1997, Mr. Selinger was granted a cash bonus of $1,000,000.
STOCK OPTIONS
Under the Company's Incentive Program, which was approved by the Company's
stockholders, stock options exercisable for Common Stock are granted to the
Company's employees, including executive officers. The Compensation Committee
approves the grant of stock options awards. In the event of poor corporate
performance, the Compensation Committee can elect not to approve the grant of
stock options.
Stock options are designed to align the interests of executives with those
of the stockholders. Stock options are granted with an exercise price equal to
the market price of the Common Stock on the date of grant and generally vest and
are exercisable at the rate of 50 percent per year. This approach is designed to
incentivize the creation of stockholder value over the long term since the full
benefit of a compensation package cannot be realized unless stock price
appreciation occurs over a number of years.
In 1997, Mr. Selinger was awarded stock options to purchase in the
aggregate 50,000 shares, and restored stock options to purchase 89,944 shares,
which was granted in connection with his exercise of certain stock options.
17
<PAGE> 20
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Code generally disallows a tax deduction to public
companies for compensation over $1 million paid to a company's chief executive
officer and the other four most highly compensated individuals who are executive
officers as of the end of the year. Although maintaining tax deductibility is
one consideration among many, the Committee reserves the right to determine from
time to time that compensation arrangements are in the best interest of the
Company and its stockholders despite the fact that such arrangements might not
qualify for tax deductibility. The Company's bonus program is designed so that
individual bonuses are not dependent solely on objective or numerical criteria,
which enables the Committee to apply its independent judgment to reflect
performance against qualitative strategic objectives.
1997 Compensation Committee
Andrew A. Giordano
Donald Press
David P. Delaney, Jr.
18
<PAGE> 21
RATIFICATION OF APPOINTMENT
OF
THE COMPANY'S INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee of the Board of Directors,
the firm of Ernst & Young LLP has been appointed independent auditors for 1998,
subject to ratification of such appointment by the stockholders. Ernst & Young
LLP has acted as the Company's independent auditors since 1986. If the
stockholders do not ratify such appointment, the Audit Committee will recommend
another accounting firm for selection by the Board of Directors. A
representative of Ernst & Young LLP is expected to be present at the Annual
Meeting and will have an opportunity to make a statement and will be available
to answer proper questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
PROCEDURE FOR SUBMITTING STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present
proper proposals for inclusion in the Company's proxy statement and for
consideration at the next annual meeting of its stockholders by submitting their
proposals to the Company in a timely manner. In order to be included in the
Company's proxy statement and proxy relating to the 1999 Annual Meeting,
stockholder proposals must be received by the Company no later than January 12,
1999, and must otherwise comply with the requirements of Rule 14a-8.
Pursuant to the Company's By-Laws, as amended, any stockholder entitled to
vote at an annual meeting of stockholders of the Company may nominate persons
for election as directors or submit a proposal to be voted on by stockholders
(other than proposals to be included in the Company's proxy materials as
provided in the preceding paragraph) at such annual meeting only if written
notice of such stockholder's intent to make such nomination or proposal is given
either by personal delivery or by the United States mail, postage prepaid, to
the Secretary of the Company not later than one hundred twenty (120) days in
advance of such annual meeting of stockholders.
All notices of proposals by stockholders, whether or not to be included in
the Company's proxy materials, should be sent to the attention of the Secretary
of the Company at 400 Rabro Drive East, Hauppauge, New York 11788.
OTHER BUSINESS
The Board of Directors does not intend to present to the meeting any
business other than the matters stated in the accompanying Notice of the Annual
Meeting of Stockholders and, at the time the proxy statement was printed, was
not aware of any other business that properly might be presented. If any other
business not described herein should properly come before the meeting for action
by the stockholders, or if any procedural matters requiring a vote of
stockholders should arise at the meeting, the persons named as proxies on the
enclosed card or their substitutes will vote the shares represented by them in
accordance with their best judgment.
By Order of the Board of Directors
RICHARD S. KOLODNY
Vice President, General
Counsel and Secretary
Dated: May 12, 1998
19
<PAGE> 22
GRAHAM-FIELD HEALTH PRODUCTS, INC.
400 RABRO DRIVE EAST, HAUPPAUGE, NEW YORK 11788
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints IRWIN SELINGER and RICHARD S. KOLODNY as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of Common
Stock of Graham-Field Health Products, Inc., held of record by the undersigned
on April 30, 1998, at the Annual Meeting of Stockholders to be held on June 18,
1998, or any adjournment thereof.
1. Election of Directors.
Class II Nominees: Andrew A. Giordano
David P. Delaney, Jr.
<TABLE>
<S> <C>
FOR all nominees (except as marked WITHHOLD AUTHORITY to vote
to the contrary above) [ ] for all nominees [ ]
</TABLE>
(INSTRUCTION: To withhold vote for any individual nominee, strike a line
through that nominee's name in the list provided above)
2. Ratification of appointment of Ernst & Young LLP as independent auditors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion upon any other matters which may properly come before
such meeting.
(continued on reverse side)
<PAGE> 23
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF MANAGEMENT'S NOMINEES FOR DIRECTORS, AND FOR PROPOSAL 2.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Dated , 1998
--------------------------------
Signature
--------------------------------
(Signature if held jointly)
Please sign exactly as your name
appears hereon. When shares are
held by joint tenants, both
should sign. When signing as
attorney, as executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
