<PAGE> 1
FORM 10-Q
Securities and Exchange Commission
Washington, D.C. 20549
(MARK ONE)
[x] Quarterly Report Pursuant to Section 13 or 15(d) the Securities Exchange
Act of 1934
For the Quarterly Period Ended September 30, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Transition Period From __________ to __________
Commission file number 1-8801
GRAHAM-FIELD HEALTH PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2578230
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Rabro Drive East, Hauppauge, New York 11788
(Address of principal executive offices)
(Zip Code)
(516) 582-5900
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court. Yes ___ No ___
Applicable Only to Corporate Issuers:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common Stock, $.025 Par Value --- 31,311,265 shares as of November 9, 1998
<PAGE> 2
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
I N D E X
Part I. Financial Information: Page
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets -
September 30, 1998 (Unaudited) and December 31, 1997
(Audited) 3
Condensed Consolidated Statements of Operations for
the three and nine months ended September 30, 1998
and 1997 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows for
the nine months ended September 30, 1998 and 1997
(Unaudited) 5-6
Notes to Condensed Consolidated Financial Statements
(Unaudited) 7-16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17-22
Part II. Other Information:
Item 1. Legal Proceedings 23
Item 6. Exhibits and Reports on Form 8-K 24
- 2 -
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1998 1997
------------- -------------
(unaudited) (audited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,580,000 $ 4,430,000
Accounts receivable - less allowances
of $8,890,000 and $13,199,000, respectively 103,555,000 91,451,000
Inventories 67,597,000 73,532,000
Other current assets 16,135,000 8,103,000
Recoverable and prepaid income taxes 5,224,000 4,422,000
Deferred tax assets 10,326,000 10,695,000
Asset held for sale -- 61,706,000
------------- -------------
TOTAL CURRENT ASSETS 206,417,000 254,339,000
PROPERTY, PLANT AND EQUIPMENT - net 38,768,000 35,955,000
EXCESS OF COST OVER NET ASSETS ACQUIRED
net of accumulated amortization of $17,535,000 and
$11,512,000, respectively 231,958,000 240,071,000
DEFERRED TAX ASSETS 5,292,000 3,044,000
OTHER ASSETS 13,041,000 13,709,000
------------- -------------
TOTAL ASSETS $ 495,476,000 $ 547,118,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Credit facility $ 40,022,000 $ 65,883,000
Current maturities of long-term debt 1,601,000 2,619,000
Accounts payable 27,476,000 33,888,000
Accrued expenses 39,049,000 54,331,000
------------- -------------
TOTAL CURRENT LIABILITIES 108,148,000 156,721,000
Long-term debt and Senior Subordinated Notes 106,756,000 107,733,000
Other long-term liabilities 15,918,000 13,816,000
------------- -------------
TOTAL LIABILITIES 230,822,000 278,270,000
------------- -------------
STOCKHOLDERS' EQUITY:
Series A preferred stock -- --
Series B preferred stock 28,200,000 28,200,000
Series C preferred stock 3,400,000 3,400,000
Common stock 800,000 764,000
Additional paid-in capital 284,495,000 279,341,000
(Deficit) (51,657,000) (42,953,000)
Cumulative translation adjustment (584,000) 96,000
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 264,654,000 268,848,000
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 495,476,000 $ 547,118,000
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
- 3 -
<PAGE> 4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------- -------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET REVENUES:
Medical equipment and supplies $ 93,831,000 $ 70,745,000 $ 288,494,000 $ 189,515,000
Interest and other income 685,000 363,000 1,620,000 759,000
------------- ------------- ------------- -------------
94,516,000 71,108,000 290,114,000 190,274,000
------------- ------------- ------------- -------------
COSTS AND EXPENSES:
Cost of revenues 65,075,000 47,159,000 199,207,000 128,100,000
Selling, general and administrative 29,157,000 16,018,000 87,606,000 43,976,000
Separation charges 3,348,000 -- 3,348,000 --
Interest expense 3,387,000 2,394,000 9,145,000 4,557,000
------------- ------------- ------------- -------------
100,967,000 65,571,000 299,306,000 176,633,000
------------- ------------- ------------- -------------
(LOSS) INCOME BEFORE INCOME
TAXES (6,451,000) 5,537,000 (9,192,000) 13,641,000
INCOME TAX (BENEFIT)
PROVISION (1,287,000) 2,187,000 (1,287,000) 5,395,000
------------- ------------- ------------- -------------
NET (LOSS) INCOME (5,164,000) 3,350,000 (7,905,000) 8,246,000
PREFERRED STOCK DIVIDENDS 266,000 -- 799,000 --
------------- ------------- ------------- -------------
NET (LOSS) INCOME AVAILABLE
TO COMMON SHAREHOLDERS $ (5,430,000) $ 3,350,000 $ (8,704,000) $ 8,246,000
============= ============= ============= =============
PER SHARE DATA:
Common shares outstanding - basic 31,244,000 21,078,000 31,079,000 20,363,000
Convertible preferred stock -- 4,435,000 -- 4,435,000
Common equivalent shares outstanding -- 1,226,000 -- 1,090,000
------------- ------------- ------------- -------------
Common shares outstanding - diluted 31,244,000 26,739,000 31,079,000 25,888,000
------------- ------------- ------------- -------------
Basic (loss) earnings per share $ (.17) $ .16 $ (.28) $ .40
Diluted (loss) earnings per share $ (.17) $ .13 $ (.28) $ .32
</TABLE>
See notes to condensed consolidated financial statements.
- 4 -
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (7,905,000) $ 8,246,000
Adjustments to reconcile net (loss) income
to net cash used in operating activities:
Depreciation and amortization 11,306,000 4,700,000
Deferred income taxes (1,287,000) 935,000
Provisions for losses on accounts receivable 1,816,000 1,538,000
Loss on disposal of property, plant and equipment 77,000 --
Non cash separation charges 3,187,000 --
Gain on sale of marketable securities -- (41,000)
Changes in operating assets and liabilities:
Accounts receivable (13,798,000) (24,519,000)
Inventories 5,519,000 (6,732,000)
Other current assets and
recoverable and prepaid income taxes (8,121,000) (4,672,000)
Accounts payable, accrued expenses and other liabilities (22,894,000) (8,468.000)
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (32,100,000) (29,013,000)
------------ ------------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (8,060,000) (3,637,000)
Proceeds from sale of asset held for sale 60,167,000 --
Purchases of marketable securities -- (97,216,000)
Proceeds from sale of marketable securities -- 84,497,000
Acquisitions, net of cash acquired (419,000) (10,006,000)
Decrease in excess of cost over net assets acquired 2,338,000 --
Net decrease (increase) in other assets 5,000 (1,657,000)
------------ ------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES $ 54,031,000 $(28,019,000)
------------ ------------
</TABLE>
See notes to condensed consolidated financial statements.
- 5 -
<PAGE> 6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS--Continued
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1998
-------------------------------
1998 1997
------------- -------------
<S> <C> <C>
FINANCING ACTIVITIES:
Proceeds from credit facility and long-term debt $ 279,523,000 $ 147,138,000
Principal payments on credit facility and long-term debt (307,026,000) (162,352,000)
Proceeds on exercise of stock options 4,722,000 1,052,000
Proceeds from issuance of Senior Subordinated Notes 100,000,000
Payments on acceptances payable, net (19,800,000)
Payments for note issue costs (4,565,000)
------------- -------------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (22,781,000) 61,473,000
------------- -------------
(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS $ (850,000) $ 4,441,000
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD $ 4,430,000 $ 1,241,000
------------- -------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 3,580,000 $ 5,682,000
============= =============
SUPPLEMENTARY CASH FLOW INFORMATION:
Interest paid $ 11,692,000 $ 427,000
============= =============
Income taxes paid $ 135,000 $ 1,804,000
============= =============
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Investment in preferred stock received as
partial proceeds from sale of asset $ 1,539,000 $ --
============= =============
Increase in excess of cost over net assets acquired
offset by adjustments to property, plant and
equipment, inventory, prepaid and deferred taxes,
accrued expense and debt $ 375,000 $ --
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
- 6 -
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
(Unaudited)
1. GENERAL
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial position
as of September 30, 1998 (unaudited), the results of operations for the three
months and the nine months ended September 30, 1998 and 1997 (unaudited) and the
statements of cash flows for the nine months ended September 30, 1998 and 1997
(unaudited).
Additionally, it should be noted that the accompanying financial
statements and notes thereto do not purport to be complete disclosures in
conformity with generally accepted accounting principles. While the Company
believes that the disclosures presented are adequate to make the information
contained herein not misleading, it is suggested that these financial statements
be read in conjunction with the financial statements and the notes included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1997.
Inventories at September 30, 1998 have been valued at standard cost for
manufactured goods and at average cost for other inventories based primarily on
perpetual records or the gross profit method.
On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes new rules for the reporting and display of comprehensive
income and its components, however, the adoption of this Statement had no impact
on the Company's net loss or shareholders' equity. SFAS No. 130 requires foreign
translation adjustments, net of tax, which prior to adoption were reported
separately in shareholders' equity, to be included in other comprehensive
income.
During the three and nine months ended September 30, 1998 and 1997,
total comprehensive (loss) income amounted to $(5,496,000) and $(8,306,000),
respectively, as compared with $3,351,000 and $8,289,000 for the same periods in
1997.
The results of operations for the three and nine months ended September
30, 1998 and 1997 are not necessarily indicative of results for the full year.
Certain amounts in the 1997 financial statements have been reclassified
to conform to the 1998 presentation.
2. EARNINGS PER SHARE
Earnings per share amounts are calculated in accordance with SFAS No.
128 "Earnings per Share." Diluted earnings per share is calculated for the three
and nine months ended September 30, 1997 assuming the conversion of the Series B
and Series C Cumulative Convertible Preferred Stock and elimination of the
related dividends and conversion of dilutive common equivalent shares
outstanding using the treasury stock method. Conversion of the preferred stock
and common stock equivalent shares was not assumed for the three and nine months
ended September 30, 1998 since the result would have been antidilutive.
- 7 -
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --Continued
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
(Unaudited)
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------------- -------------
<S> <C> <C>
Raw materials $ 14,935,000 $ 16,553,000
Work-in-process 5,859,000 6,735,000
Finished goods 46,803,000 50,244,000
-------------- -------------
$ 67,597,000 $ 73,532,000
============== =============
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Land and buildings $ 18,067,000 $ 16,358,000
Equipment 32,054,000 29,831,000
Furniture and fixtures 2,602,000 1,297,000
Leasehold improvements 3,706,000 3,089,000
Construction in progress 2,433,000 2,191,000
------------ ------------
58,862,000 52,766,000
Accumulated depreciation
and amortization (20,094,000) (16,811,000)
------------ ------------
$ 38,768,000 $ 35,955,000
============ ============
</TABLE>
5. INCOME TAXES
At September 30, 1998, the Company has net deferred tax assets of
approximately $15,618,000, which consist principally of net operating loss
carryforwards and reserves and restructuring charges not currently deductible
for tax return purposes. A valuation allowance of approximately $14,500,000 has
been provided against certain gross deferred tax assets of the Company, of which
approximately $13,300,000 is attributable to the acquired net operating loss
carryforwards and other deferred tax assets of Everest & Jennings International
Ltd. ("Everest & Jennings"). When realized, the tax benefit for those items will
be recorded as a reduction of the excess of cost over net assets acquired. The
remainder represents an allowance against a portion of remaining gross deferred
tax assets as a result of recent acquisitions. For the quarter and nine month
periods ended September 30, 1998, the Company recorded an income tax benefit in
the amount of $1,287,000 representing an effective rate of 14% on the year to
date loss. The effective tax rate differs from the Federal statutory rate due to
the effect of nondeductible goodwill and state and local taxes.
Realization of the future tax benefits related to the deferred tax
assets is dependent upon many factors, including the Company's ability to
generate taxable income within the net operating loss carryforward period.
Management has considered these factors in reaching its conclusion as to the
valuation allowance for financial reporting purposes. The amount of the net
deferred tax asset considered realizable could be reduced in the near term if
estimates of future taxable income are reduced.
- 8 -
<PAGE> 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --Continued
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
(Unaudited)
The effective tax rate for 1997 approximates the statutory rate after
adjustment for state taxes and nondeductible goodwill amortization expense.
6. ACQUISITION OF BUSINESSES
On December 30, 1997, the Company acquired Fuqua Enterprises, Inc.
(currently, Lumex/Basic American Holdings, Inc.) ("Fuqua") pursuant to an
Agreement and Plan of Merger (the "Fuqua Merger Agreement"), dated as of
September 5, 1997 and amended as of September 29, 1997, by and among Fuqua, GFHP
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the
Company ("Sub"), and the Company. Under the terms of the Fuqua Merger Agreement,
Sub was merged with and into Fuqua with Fuqua continuing as the surviving
corporation wholly-owned by the Company (the "Fuqua Merger"). In the Fuqua
Merger, each share of Fuqua's common stock, par value $2.50 per share (the
"Fuqua Common Stock"), other than shares of Fuqua Common Stock canceled pursuant
to the Fuqua Merger Agreement, was converted into the right to receive 2.1
shares of common stock, par value $.025 per share of the Company (the "Company
Common Stock"). There were 4,482,709 shares of Fuqua Common Stock outstanding on
December 30, 1997, which converted into 9,413,689 shares of the Company Common
Stock.
In accordance with the terms of the Fuqua Merger Agreement, each Fuqua
stock option was assumed by Graham-Field and was converted into the right to
purchase shares of the Company Common Stock. As of the effective date of the
Fuqua Merger, there were Fuqua stock options outstanding representing the right
to purchase 421,500 shares of Fuqua Common Stock. The equivalent number of
shares of the Company Common Stock to be issued, after giving effect to the
exercise price of the Fuqua stock options as adjusted for the exchange ratio of
2.1, is approximately 364,319 shares of the Company Common Stock. For purposes
of calculating the purchase price, the Company Common Stock was valued at $16.69
per share, which represents the average closing market price of the Company
Common Stock for the period three business days immediately prior to and three
business days immediately after the announcement on September 8, 1997 of the
execution of the Fuqua Merger Agreement.
The acquisition of Fuqua has been accounted for under the purchase
method of accounting and, accordingly, the operating results of Fuqua have been
included in the Company's consolidated financial statements from the date of
acquisition. The Company allocated $3,300,000 of the purchase price to purchased
in-process research and development projects which have not reached
technological feasibility and have no probable alternative future uses. The
Company expensed the purchased in-process and research and development projects
at the date of acquisition. The excess of the aggregate purchase price over the
estimated fair market value of the net assets acquired was approximately
$132,250,000, as adjusted, which is being amortized on a straight line basis
over 30 years. The purchase price allocations have been made on a preliminary
basis, subject to adjustments which will be finalized by December 31, 1998.
In connection with the Fuqua Merger, the Company acquired the leather
operations of Fuqua ("Leather Operations"). It was the Company's intention to
dispose of the Leather Operations as soon as reasonably practicable following
the consummation of the Fuqua Merger. Accordingly, the net assets of the Leather
Operations have been reflected as "Assets held for sale" in the accompanying
consolidated balance sheet as of December 31, 1997. The net asset value of the
Leather Operations includes the value of the proceeds that were realized from
the sale of the Leather Operations. The Company did not record any earnings or
losses for the Leather Operations for the period December 30, 1997 to January
27, 1998 (date of disposal).
On January 27, 1998, Fuqua disposed of the Leather Operations (the
"Leather Sale Transaction") through the sale of all of the capital stock of
Irving Tanning Company ("ITC"), Hancock Ellsworth
- 9 -
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --Continued
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
(Unaudited)
Tanners, Inc., Kroy Tanning Company, Incorporated and Seagrave Leather
Corporation (collectively, the "Leather Companies"), to the management of ITC
pursuant to a (i) Stock Purchase Agreement dated as of January 27, 1998, by and
among IT Acquisition Corporation ("ITAC"), the Company and Fuqua, and (ii) Stock
Purchase Agreement dated as of January 27, 1998, by and among HEKS Corporation,
the Company and Fuqua. The aggregate selling price for the Leather Companies
consisted of (a) $60,167,400 in cash, (b) an aggregate of 5,000 shares of Series
A Preferred Stock of ITAC with a stated value of $4,250,000 (which has been
valued at $1,539,000), and (c) the assumption of debt of $2,341,250. In
addition, as the holder of the ITAC Preferred Stock, the Company is entitled to
appoint one director to the Board of Directors of ITAC.
On August 28, 1997, the Company acquired all of the issued and
outstanding shares of the capital stock of Medical Supplies of America, Inc., a
Florida corporation ("Medapex"), pursuant to an Agreement and Plan of
Reorganization (the "Reorganization Agreement") dated August 28, 1997, by and
among the Company, S.E. (Gene) Davis and Vicki Ray (collectively the "Medapex
Selling Stockholders"). In accordance with the terms of the Reorganization
Agreement, Medapex became a wholly-owned subsidiary of the Company and the
Medapex Selling Stockholders received in the aggregate 960,000 shares of Company
Common Stock in exchange for all of the issued and outstanding shares of the
capital stock of Medapex. Pursuant to a Real Estate Sales Agreement dated as of
August 28, 1997 (the "Real Estate Sales Agreement"), by and between the Company
and BBD&M, a Georgia limited partnership and an affiliate of Medapex, the
Company acquired Medapex's principal corporate headquarters and distribution
facility in Atlanta, Georgia for a purchase price consisting of (i) $622,335
payable (a) by the issuance of 23,156 shares of the Company Common Stock and (b)
cash in the amount of $311,167, and (ii) the assumption of debt in the amount of
$477,664. Each of the Medapex Selling Stockholders entered into a two-year
employment agreement and non-competition agreement with the Company. The Medapex
transaction was accounted for as a pooling of interests and the Company's
historical financial statements have been restated to reflect this transaction.
On August 17, 1997, the Company acquired substantially all of the
assets and certain liabilities of Medi-Source, Inc. ("Medi-Source"), a
privately-owned distributor of medical supplies, for $4.5 million in cash. The
Company also entered into a five (5) year non-competition agreement with the
previous owner in the aggregate amount of $301,000 payable over the five (5)
year period. The acquisition was accounted for as a purchase, and accordingly,
assets and liabilities were recorded at fair value at the date of acquisition
and the results of operations are included subsequent to that date. The excess
of the purchase price over net assets acquired was approximately $3.7 million.
On June 25, 1997, the Company acquired all of the capital stock of
LaBac Systems, Inc., a Colorado corporation ("LaBac"), in a merger transaction
pursuant to an Agreement and Plan of Merger dated June 25, 1997, by and among
the Company, LaBac Acquisition Corp., a wholly-owned subsidiary of the Company,
LaBac, Gregory A. Peek and Michael L. Peek (collectively, the "LaBac Selling
Stockholders"). In connection with the acquisition, LaBac became a wholly-owned
subsidiary of the Company, and the LaBac Selling Stockholders received in the
aggregate 772,557 shares of Company Common Stock valued at $11.77 per share in
exchange for all of the issued and outstanding shares of the capital stock of
LaBac. The Company also entered into a three (3) year consulting agreement with
the LaBac Selling Stockholders and an entity controlled by the LaBac Selling
Stockholders, and non-competition agreements with each of the LaBac Selling
Stockholders. The acquisition was accounted for as a purchase and accordingly,
assets and liabilities were recorded at fair value at the date of acquisition
and the results of operations are included subsequent to that date. The excess
of cost over net assets acquired amounted to approximately $7.3 million.
On March 7, 1997, Everest & Jennings, Inc., a wholly-owned subsidiary
of the Company, acquired Kuschall of America, Inc. ("Kuschall"), a manufacturer
of pediatric wheelchairs, high-
- 10 -
<PAGE> 11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --Continued
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
(Unaudited)
performance adult wheelchairs and other rehabilitation products, for a purchase
price of $1.51 million representing the net book value of Kuschall. The purchase
price was paid by the issuance of 116,154 shares of Company Common Stock valued
at $13.00 per share, of which 23,230 shares were delivered into escrow. The
escrow shares will be released on March 7, 1999, subject to any purchase price
adjustments in favor of the Company and claims for indemnification. The
acquisition was accounted for as a purchase and accordingly, assets and
liabilities were recorded at fair value at the date of acquisition and the
results of operations are included subsequent to that date.
On February 28, 1997, Everest & Jennings Canadian Limited ("Everest &
Jennings Canada"), a wholly-owned subsidiary of the Company, acquired
substantially all of the assets and certain liabilities of Motion 2000 Inc. and
its wholly-owned subsidiary, Motion 2000 Quebec Inc., for a purchase price equal
to Cdn. $2.9 million (Canadian Dollars) (approximately U.S. $2.15 million). The
purchase price was paid by the issuance of 187,733 shares of the Company Common
Stock valued at $11.437 per share. The acquisition was accounted for as a
purchase and accordingly, assets and liabilities were recorded at fair value at
the date of acquisition and the results of operations are included subsequent to
that date. The excess of cost over the net assets acquired amounted to
approximately $2.5 million.
The following summary presents unaudited pro forma consolidated results
of operations for the nine months ended September 30, 1997 as if the
acquisitions described above occurred at the beginning of 1997. This information
gives effect to the adjustment of interest expense, income tax provisions, and
to the assumed amortization of fair value adjustments, including the excess of
cost over net assets acquired. The pro forma information does not include the
write-off of certain purchased in-process research and development costs of $3.3
million, and merger, restructuring and other related charges of $31,202,000
associated with the Company's strategic restructuring initiatives recorded in
the fourth quarter ended December 31, 1997.
- 11 -
<PAGE> 12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --Continued
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
Nine Months Ended
September 30, 1997
------------
<S> <C>
Net Revenues $280,855,000
============
Income Before Income Taxes $ 15,411,000
Income Taxes 7,162,000
------------
Net Income $ 8,249,000
============
Net income per common share:
Net income $ 8,249,000
Preferred stock dividends -- (a)
------------
Net income available to common
shareholders $ 8,249,000
============
Common shares outstanding - basic 30,333,000
------------
Convertible preferred stock 4,435,000
Incremental shares using treasury stock
method 1,378,000
------------
Common shares outstanding - diluted 36,146,000
============
Basic earnings per share $ .27
Diluted earnings per share $ .23
</TABLE>
(a) Assumes conversion of the preferred stock and elimination of any
dividends relating to such preferred stock.
7. ACQUISITION INTEGRATION AND RESTRUCTURING PLAN
In connection with the acquisition of Fuqua on December 30, 1997, the
Company adopted a plan to implement certain strategic restructuring initiatives
(the "Restructuring Plan") and recorded restructuring reserves of approximately
$23,470,000. The plan consists of a broad range of efforts, including the
consolidation of the Company's Temco manufacturing operations in New Jersey into
Fuqua's Lumex manufacturing facility in New York and relocation of the Company's
corporate headquarters to the Lumex facility. In addition, the Company plans to
consolidate distribution facilities and other operations in an effort to improve
manufacturing, distribution and operating efficiencies.
Throughout 1998, the Company will continue to evaluate its
Restructuring Plan and additional restructuring charges may be necessary.
- 12 -
<PAGE> 13
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --Continued
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
(Unaudited)
The following summarizes the activity in the restructuring reserves for the nine
months ended September 30, 1998:
<TABLE>
<CAPTION>
Merger and
Restructuring Reserve Reserve
charges Write-offs and Balances Write-offs and Balances
recorded in cash payments December 31, cash payments September 30,
1997 in 1997 1997 in 1998 1998
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Exit costs $18,237,000 $(1,294,000) $16,943,000 $ (958,000) $15,985,000
Severance 650,000 -- 650,000 (246,000) 404,000
Merger related 4,583,000 (1,788,000) 2,795,000 (2,245,000) 550,000
----------- ----------- ----------- ----------- -----------
Total reserves $23,470,000 $(3,082,000) $20,388,000 $(3,449,000) $16,939,000
=========== =========== =========== =========== ===========
</TABLE>
8. LEGAL PROCEEDINGS
Following the Company's public announcement on March 23, 1998 of its
financial results for the fourth quarter and year ended December 31, 1997, the
Company and certain of its directors and officers were named as defendants in at
least thirteen putative class action lawsuits filed primarily in the United
States District Court for the Eastern District of New York on behalf of all
purchasers of common stock of the Company (including former Fuqua shareholders
who received shares of the Company Common Stock when the Company acquired Fuqua
in December 1997) during various periods within the time period May 1997 to
March 1998. The complaints assert claims against the Company and the other
defendants for violations of Sections 11, 12(2) and 15 of the Securities Act of
1933, as amended, and Sections 10(b) and 20(a) of the Securities Exchange Act of
1934, as amended, and Rule 10b-5 promulgated thereunder with respect to alleged
material misrepresentations and omissions in public filings made with the
Securities and Exchange Commission and certain press releases and other public
statements made by the Company and certain of its officers relating to the
Company's business, results of operations, financial condition and future
prospects, as a result of which, it is alleged, the market price of the Company
Common Stock was artificially inflated during the putative class periods.
Several of the complaints focus on statements made concerning the Company's
integration of its various recent acquisitions. The plaintiffs seek unspecified
compensatory damages and costs (including attorneys and expert fees), expenses
and other unspecified relief on behalf of the putative classes. The Company
believes that it has complied with all of its obligations under the Federal
securities laws, considers the plaintiffs' allegations to be without merit and
intends to defend these suits vigorously.
On March 27, 1998, agents of the U.S. Customs Service and the Food and
Drug Administration arrived at the Company's principal headquarters and one
other Company location and retrieved several documents pursuant to search
warrants. The Company has subsequently been advised by an Assistant United
States Attorney for the Southern District of Florida that the Company is a
target of an ongoing grand jury investigation involving alleged fraud by one or
more of the Company's suppliers relating to the unauthorized diversion of
medical products intended for sale outside of the United States into United
States markets. The Company has also been advised that similar search warrants
were obtained with respect to approximately 14 other participants in the
distribution of medical products. The Company is
- 13 -
<PAGE> 14
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --Continued
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
(Unaudited)
presently investigating these matters. The Company does not know when the grand
jury investigation will conclude or what action, if any, may be taken by the
government against the Company or any of its employees, so it cannot yet assess
the impact of this investigation on the Company. The Company intends to
cooperate fully with the government in its investigation.
In March 1994, the Suffolk County Authorities initiated an
investigation to determine whether regulated substances had been discharged in
excess of permitted levels from Fuqua's Lumex division (the "Lumex Division")
located in Bayshore, New York. An environmental consulting firm was engaged by
the Lumex Division to conduct a more comprehensive site investigation, develop a
remediation work plan and provide a remediation cost estimate. These activities
were performed to determine the nature and extent of contaminants present on the
site and to evaluate their potential off-site extent.
In connection with Fuqua's April 1996 acquisition of the Lumex
Division, Fuqua assumed the obligations associated with this environmental
matter. In late 1996, Fuqua conducted surficial soil remediation at the Bayshore
facilities and reported the results to the Suffolk County Authorities in March
1997. A ground water work plan was submitted concurrently with the soil
remediation report and Fuqua is waiting for the necessary approvals from the
Suffolk County Authorities before proceeding with execution of the ground water
work plan. Management is not currently able to determine when any required
remediation and monitoring efforts with respect to the ground water
contamination will be completed. In May 1997, the Suffolk County Authorities
approved the soil remediation conducted by Fuqua and provided comments on the
ground water work plan.
In November 1997, the Lumex Division received the results of additional
ground water testing that had been performed in August and September 1997. The
results revealed significantly lower concentrations of contaminants than were
known at the time the "Ground Water Work Plan" was prepared in March 1997. Due
to the relatively low levels of contaminants detected, the Lumex Division
proposed sampling the groundwater on a quarterly basis for two years to ensure
that the groundwater was not significantly affected. In January, April and July
1998, additional confirmatory samples were taken and analyzed. These analytic
results provide further support that the groundwater is not significantly
contaminated. The Lumex Division will continue to monitor the quality of the
groundwater to confirm that it remains acceptable. If after the two year period
expires, the quality of the groundwater remains acceptable, the Lumex Division
will seek to withdraw its groundwater work plan.
At September 30, 1998, the Lumex Division had reserves for remediation
costs and additional investigation costs which will be required. Reserves are
established when it is probable that a liability has been incurred and such
costs can be reasonably estimated. The Lumex Division's estimates of these costs
were based upon currently enacted laws and regulations and the professional
judgment of independent consultants and counsel. Where available information was
sufficient to estimate the amount of liability, that estimate has been used.
Where information was only sufficient to establish a range of probable liability
and no point within the range is more likely than another, the lower end of the
range has been used. The Lumex Division has not assumed that any such costs
would be recoverable from third parties nor has the Lumex Division discounted
any of its estimated costs, although a portion of the remediation work plan will
be performed over a period of years.
The amount of environmental liabilities are difficult to estimate due
to such factors as the extent to which remedial actions may be required, laws
and regulations change or the actual costs of remediation differ when the final
work plan is performed.
On April 3, 1996, Fuqua acquired the Lumex Division from Cybex
International, Inc. (formerly Lumex, Inc.) The purchase price for the Lumex
Division was $40.7 million, subject to a final purchase price adjustment in the
asset sale agreement. The final purchase price adjustment was disputed and,
pursuant to the asset sale agreement was resolved through arbitration. On
February 13, 1998, the arbitrator accepted $3,179,685 in claims by Fuqua, with
interest of $350,690, yielding a net award to Fuqua of $2,384,606.
- 14 -
<PAGE> 15
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --Continued
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
(Unaudited)
Such amount was recorded as a reduction of the excess of cost over net assets
acquired at September 30, 1998. On July 30, 1998, the Company received a
payment of $2,468,358 from Cybex. The Company believes, however that this
payment does not adequately or completely satisfy the New York judgment and
intends to file a motion to resettle the New York judgment.
In March 1997, Fuqua gave notice to the seller to preserve Fuqua's
indemnification rights provided in the asset sale agreement.
In February 1998, Fuqua filed in the State Court of Fulton County a
lawsuit against the seller and certain former officers and it states claims for
fraud, breach of warranty, negligent misrepresentation, Georgia RICO, and
attorney's fees. Defendants filed an answer and counterclaim on April 7, 1998,
denying liability and asserting fifteen defenses. Defendant Cybex has asserted
four counterclaims, seeking $1,284,288 in damages, plus attorneys' fees and
costs. Fuqua believes that the counterclaims lack merit for several reasons,
including, among others, that the punitive claim for $1,284,288, was decided
adversely to Cybex in the arbitration. On July 31, 1998, Cybex and the
defendants filed a motion to dismiss. The individual defendants have moved to
dismiss based on an alleged lack of personal jurisdiction, and Cybex moved to
dismiss on substantive grounds as to certain counts. By an order dated October
19, 1998, the court granted the motion to dismiss the causes of action involving
the alleged violation of Georgia's RICO statute. The court denied that part of
the motion which sought to dismiss the action against the individual defendants
and the causes of action for fraud and negligent misrepresentation. On October
19, 1998, the court certified appellate review of the order. The Company
believes that any appeal from the order lacks merit and will oppose any appeal
vigorously.
On August 3, 1998, the Company and another defendant were served with a
lawsuit initiated by JOFRA Enterprises, Inc. ("JOFRA") in New York State Supreme
Court, Westchester County. The complaint seeking damages of $25,000,000 alleges
that the Company's hiring of a certain officer and employees of JOFRA
constituted, among other things, unfair competition and wrongful appropriation
of business opportunities. The Company considers the plaintiff's allegations to
be without merit and intends to defend this lawsuit vigorously.
On November 3, 1998, the Company and certain of its directors were
named as defendants in a derivative suit commenced in the Court of Chancery of
the State of Delaware, New Castle County. The lawsuit seeks to rescind a
separation agreement dated as of July 29, 1998 (the "Separation Agreement"),
pursuant to which Irwin Selinger, the former Chairman of the Board and Chief
Executive Officer, resigned as Chairman of the Board, Chief Executive Officer
and President of the Company. The lawsuit also seeks unspecified damages as well
as the recovery of all sums paid to Mr. Selinger pursuant to the Separation
Agreement. The plaintiff alleges that by approving the terms of the Separation
Agreement, the defendants breached their fiduciary duties of loyalty and care to
the Company by obligating the Company to pay Mr. Selinger substantially more
than his former employment agreement had required. The Company considers the
plaintiff's allegations to be without merit and intends to defend this lawsuit
vigorously.
The Company and its subsidiaries are parties to lawsuits and other
proceedings arising out of the conduct of its ordinary course of business,
including those relating to product liability and the sale and distribution of
its products. While the results of such lawsuits and other proceedings cannot be
predicted with certainty, management does not expect that the ultimate
liabilities, if any, will have a material adverse effect on the consolidated
financial position or results of operations of the Company.
- 15 -
<PAGE> 16
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --Continued
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
(Unaudited)
9. SELINGER SEPARATION AGREEMENT
On July 29, 1998, Irwin Selinger resigned as Chairman of the Board,
Chief Executive Officer and President of the Company, and entered into the
Separation Agreement with the Company. The Separation Agreement provides for (i)
the continuation of Mr. Selinger's (a) base salary of $550,000 through July 31,
1999, (b) healthcare and insurance benefits through July 8, 2001, and (c)
automobile lease payments and associated automobile expenses through July 8,
2001, (ii) the forgiveness of Mr. Selinger's $2.2 million loan in consideration
of Mr. Selinger's repayment of $500,000 on June 30, 1999, (iii) a three (3) year
non-competition agreement, (iv) the continuation of Mr. Selinger's split dollar
life insurance policy in accordance with the terms of Mr. Selinger's divorce
judgment, (v) a non-disparagement agreement, (vi) mutual releases, and (vii) the
continuation of the Company's indemnification provisions for Mr. Selinger. The
Company has recorded a charge of $3,348,000 in the quarter ended September 30,
1998, to reflect the financial effects of the Separation Agreement.
- 16 -
<PAGE> 17
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --Continued
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking Statements
This report on Form 10-Q contains forward-looking statements as defined
by the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include plans and objectives of management for future operations,
including plans and objectives relating to the future economic performance and
financial results of the Company. The forward-looking statements relate to (i)
the expansion of the Company's market share, (ii) the Company's growth into new
markets, (iii) the development of new products and product lines to appeal to
the needs of the Company's customers, (iv) the opening of new distribution and
warehouse facilities, (v) obtaining regulatory and governmental approvals, (vi)
the upgrading of the Company's technological resources and systems and (vii) the
retention of the Company's earnings for use in the operation and expansion of
the Company's business.
Important factors and risks that could cause actual results to differ
materially from those referred to in the forward-looking statements include, but
are not limited to, the effect of economic and market conditions, the impact of
the consolidation of healthcare practitioners, the impact of healthcare reform,
the Company's ability to effectively integrate acquired companies, the
termination of the Company's Exclusive Wheelchair Supply Agreement with P.T.
Dharma Polimetal ("P.T. Dharma"), an Indonesian company, the ability of the
Company to maintain its gross profit margins, the ability to obtain additional
financing to expand the Company's business, the failure of the Company to
successfully compete with the Company's competitors that have greater financial
resources, the loss of key management personnel or the inability of the Company
to attract and retain qualified personnel, adverse litigation results, the
acceptance and quality of new software and hardware products which will enable
the Company to expand its business, the acceptance and ability to manage the
Company's operations in foreign markets, possible disruptions in the Company's
computer systems or distribution technology systems, possible increases in
shipping rates or interruptions in shipping service, the level and volatility of
interest rates and currency values, the impact of current or pending legislation
and regulation, as well as the risks described from time to time in the
Company's filings with the Securities and Exchange Commission, which include
this report on Form 10-Q, the Company's annual report on Form 10-K for the year
ended December 31, 1997, and the section entitled "Risk Factors" in the
Company's Registration Statement on Form S-4 dated as of December 19, 1997.
The forward-looking statements are based on current expectations and
involve a number of known and unknown risks and uncertainties that could cause
the actual results, performance and/or achievements of the Company to differ
materially from any future results, performance or achievements, express or
implied, by the forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements, and that in light of the
significant uncertainties inherent in forward-looking statements, the inclusion
of such statements should not be regarded as a representation by the Company or
any other person that the objectives or plans of the Company will be achieved.
Operating Revenues
Operating revenues for the quarter and nine month period ended
September 30, 1998 were $93,831,000 and $288,494,000, respectively, representing
an increase of approximately 33% and 52% over the same periods in the prior
year. The increase in operating revenues was primarily attributable to the six
acquisitions completed in 1997, the growth of the Company's "Graham-Field
Express" program and expansion of the Company's Consolidation Advantage Program
("CAP"). On a pro forma
- 17 -
<PAGE> 18
basis (as if all acquisition completed in 1997 were recorded as of January 1,
1997), the Company's revenues declined by approximately 4% for the quarter and
increased by approximately 3% for the nine month period ended September 30,
1998. Management believes that intense competition within the healthcare
industry will continue in 1998.
In March 1996, Graham-Field Express was introduced to offer "same-day"
and "next-day" service to home healthcare dealers of certain strategic home
healthcare products, including Lumex and Temco patient aids, adult incontinence
products, Everest & Jennings wheelchairs, Smith & Davis homecare beds,
nutritional supplements and other freight and time sensitive products. As of
September 30, 1998, the Company was operating seven (7) Graham-Field Express
facilities located in the Bronx, New York; San Juan, Puerto Rico; Dallas, Texas;
Baltimore, Maryland; Cleveland, Ohio, Louisville, Kentucky; and Boston,
Massachusetts. The Graham-Field Express facilities in Louisville, Kentucky and
Boston, Massachusetts were opened in the second quarter of 1998. Management
intends to moderate the growth of the Graham-Field Express program in 1998.
Interest and Other Income
Interest and other income for the three and nine month periods ended
September 30, 1998 was $685,000 and $1,620,000, respectively, as compared to
$363,000 and $759,000 for the same periods in the prior year. The increase is
primarily due to interest earned on the advance to P.T. Dharma (see Liquidity
and Capital Resources) in the amount of $90,000 and $220,000 for the three and
nine month periods ended September 30, 1998; dividends earned on preferred
stock acquired in connection with the sale of the Leather Operations in the
amount of $62,500 and $187,500 for the three and nine month periods ended
September 30, 1998; and net sublease income attributable to certain Fuqua
properties in the amount of approximately $82,000 and $227,000 for the three
and nine month periods ended September 30, 1998.
Cost of Revenues
Cost of revenues as a percentage of operating revenues was 69.4% and
69.1% for the three and nine month periods ended September 30, 1998, as
compared to 66.7% and 67.6% recorded in the same periods in the prior year. The
Fuqua entities and LaBac contributed higher gross profit margins, offset in
large part by a higher mix of redistributed product, primarily through the
expansion of the GF Express program, which historically operates at lower gross
profit margins and by operating inefficiencies incurred during the integration
of acquired companies.
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of
operating revenues for the three and nine month periods ended September 30,
1998, were 31.1% and 30.4%, as compared to 22.6% and 23.2% recorded in the same
periods in the prior year. The increase is primarily attributable to higher
corporate office and administrative overhead to integrate the acquisitions
completed in 1997, and the contribution of revenue by the Fuqua entities and
LaBac at a higher percentage of selling, general and administrative expenses.
The Company incurred separation charges of $3,348,000 pursuant to the
Separation Agreement, which are included in the three and nine months periods
ended September 30, 1998 (see Note 9 to the Condensed Consolidated Financial
Statements). No such amounts were incurred in the same periods in the prior
year.
Interest Expense
Interest expense for the three and nine month periods ended September
30, 1998 increased to $3,387,000 and $9,145,000, as compared to $2,394,000 and
$4,557,000 for the same
- 18 -
<PAGE> 19
periods in the prior year. The increase is primarily due to increased borrowings
attributable to the Company's growth, expansion of the Graham-Field Express
Program, and the sale of the Company's $100 million Senior Subordinated Notes
(the "Senior Subordinated Notes") in August 1997.
Year 2000
The following disclosure is intended to be a "Year 2000 Readiness
Disclosure" within the meaning of the Year 2000 Readiness Disclosure Act.
Graham-Field has developed, and is in the process of implementing, a
Year 2000 remediation plan, which relates to the upgrade and standardization of
all business units for Year 2000 application software. Graham-Field has three
major application environments: distribution, manufacturing and warehouse
automation. Management has selected application packages for distribution and
manufacturing functions, and believes, subject to completion of its review of
the Year 2000 compliance of its critical business partners (as discussed below),
that the current warehouse automation system is Year 2000 compliant.
The distribution package includes the corporate general ledger,
accounts payable, accounts receivable, purchasing, inventory control and order
entry functions. General ledger, accounts payable and accounts receivable
upgrades were completed in 1997. Purchasing and inventory control functions have
been upgraded, and order entry is anticipated to be upgraded in early 1999. The
manufacturing system upgrade is in process, and one of the five manufacturing
sites has been completed. The remaining manufacturing sites are currently in the
remediation phase with all remediation and testing scheduled to be completed by
the middle of 1999. Contingency plans are currently being constructed in the
event the manufacturing system upgrade or order entry upgrade is not Year 2000
compliant by January 1, 2000.
The Company is in the process of reviewing its external interfaces of
its critical business partners, including such areas as payroll, electronic
banking, EDI links and freight systems to determine their Year 2000 compliance
status. Although the Company anticipates completing the Year 2000 testing phase
and conversion activities of the external interfaces of its business partners by
the middle of 1999, the inability of the Company's business partners to remedy
Year 2000 issues could have a significant impact on the business, financial
position and results of operations of the Company.
The Company is in the process of analyzing its products to determine if
there are any material issues associated with Year 2000 compliance. Testing and
implementation phases are scheduled to be completed by the middle of 1999.
A Year 2000 project manager has been assigned to manage the computer
system upgrades, and ensure compliance for all external interfaces. Capital
expenditures on all information system technology amounted to approximately
$100,000 during the nine month period ended September 30, 1998, which was
primarily related to management and verification of Year 2000 remediation
efforts. While the total cost to become Year 2000 compliant is not known at this
time, management does not believe that such costs will have a material effect on
the business, financial position and results of operations of the Company.
Net Income
The Company had a loss before income taxes of $6,451,000 and
$9,192,000, respectively, for the three and nine month periods ended September
30, 1998, as compared to income before income taxes of $5,537,000 and
$13,641,000 for the same periods in the prior year.
The decrease is primarily due to reduced margins, increased selling,
general and administrative expenses as a percentage of operating revenue, the
increase in interest expense, and separation charges incurred in connection with
the Separation Agreement.
The Company had a net loss for the three and nine month periods ended
September 30, 1998 of $5,164,000 and $7,905,000, respectively, as compared to
net income of $3,350,000 and $8,246,000, for
- 19 -
<PAGE> 20
the same periods last year. For the quarter and nine month periods ended
September 30, 1998 the Company recorded an income tax benefit in the amount of
$1,287,000 after reflecting the impact of nondeductible goodwill amortization.
The Company recorded income tax provisions of $2,187,000 and $5,395,000 for the
same periods last year. Deferred taxes have not been provided on the
undistributed earnings of the foreign entities as it is management's intention
to invest such earnings in the entities indefinitely.
The Company's business has not been materially affected by inflation.
Liquidity and Capital Resources
The Company had net working capital of $98,269,000 at September 30,
1998, as compared to $97,618,000 at December 31, 1997.
Cash used in operations for the nine months ended September 30, 1998
was $32,100,000 as compared to $29,013,000 in the same period in the prior year.
The principle reasons for the increase in cash used in operations was a
$8,580,000 decrease in net income (as adjusted for the change in depreciation
and amortization, deferred taxes and non cash separation charges) and a decrease
in accrued expenses of approximately $14,400,000 primarily relating to payments
against restructuring reserves and acquisition accruals (see Note 7 to the
Condensed Consolidated Financial Statements), offset by a decrease in inventory
balances and an increase in accounts receivable balances for the period.
Management anticipates utilizing approximately $2,100,000 in cash
during the remainder of 1998 related the restructuring and merger accruals
recorded in 1997.
The increase in other assets included an advance in February 1998 of
$3.5 million to P.T. Dharma, the Company's supplier of commodity wheelchairs, in
consideration of the grant of an option to purchase the wheelchair assets of
P.T. Dharma for a price to be determined. During the option period which expires
on January 31, 1999, the Company is paid interest on the advance at an annual
interest rate of 10.3 percent. The advance is collateralized by shares of the
capital stock of P.T. Dharma, and is to be applied against the purchase price if
a purchase transaction is ultimately consummated. In the event the Company and
P.T. Dharma are unable to agree upon the terms of the transaction, the advance
is to be returned to the Company. In addition, other assets increased in the
third quarter due to the reclassification of certain trade receivable balances,
totalling approximately $3,900,000, which have been converted into notes
receivable.
As at December 31, 1997, the allowance for doubtful accounts receivable
was increased $5,000,000 to reflect increased credit risk due to the anticipated
impact of state medicare reimbursement and procurement policies for certain
product lines and the extended payment terms being taken by the Company's
customers. During the nine months ended September 30, 1998, $5,782,000 of fully
reserved accounts receivable was written off against the related reserve for
doubtful accounts.
The Company periodically evaluates recoverability of its tangible and
intangible assets in accordance with SFAS No. 121. In addition, based on
projected results for the remainder of 1998, the Company believes that it will
be in compliance with the financial covenants contained in its Senior Secured
Revolving Credit Facility, as amended (the "Credit Facility"), arranged by IBJ
Schroder Business Credit Corporation ("IBJ Schroder"). The Company anticipates
that its cash flow from operations, together with its current cash balance, and
the proceeds from its Credit Facility will be sufficient to meet its working
capital requirements. However, actual results and performance could differ.
The Credit Facility. As of September 30, 1998, the Company was in
compliance with the financial covenants contained in the Credit Facility. At
September 30, 1998, the Company had availability to borrow up to approximately
$57 million under the Credit Facility, of which approximately $40 million was
utilized. Effective as of August 18, 1998, borrowings bear interest at IBJ
Schroder prime rate (8.25% at September 30, 1998) plus 1%. Prior to August 18,
1998, borrowings bore interest at Graham-Field's option, at IBJ Schroders prime
rate or 2.25% above LIBOR, or 1.5% above IBJ Schroder's bankers acceptance rate.
The Credit Facility is secured by all of the assets of Graham-Field and the
capital stock of certain of its subsidiaries.
- 20 -
<PAGE> 21
The Credit Facility contains certain customary terms and provisions,
including limitations with respect to the repayment or prepayment of principal
on subordinated debt, including the Senior Subordinated Notes, the incurrence of
additional debt, liens, transactions with affiliates and certain consolidations,
mergers and acquisitions and sales of assets. In addition, Graham-Field is
prohibited from declaring or paying any dividend or making any distribution on
any shares of common stock or preferred stock of Graham-Field (other than
dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or applying any of its funds, property or assets
to the purchase, redemption or other retirement of any such shares, or of any
options to purchase or acquire any such shares. Notwithstanding the foregoing
restrictions, Graham-Field is permitted to pay cash dividends in any fiscal year
in an amount not to exceed the greater of (i) the amount of dividends due BIL
under the terms of the Series B and Series C Preferred Stock in any fiscal year,
or (ii) 12.5% of the net income of Graham-Field on a consolidated basis,
provided that no event of default under the Credit Facility shall have occurred
and be continuing or would exist after giving effect to the payment of the
dividends. The Credit Facility contains certain financial covenants, including a
cash flow coverage and leverage ratio, and an earnings before interest, taxes,
depreciation and amortization covenant, as well as the requirement that
Graham-Field reduce outstanding borrowings with the net cash proceeds of certain
asset sales.
The Senior Subordinated Notes. On August 4, 1997, Graham-Field issued
the Senior Subordinated Notes under Rule 144A of the Securities Act of 1933, as
amended (the "Securities Act"). On February 9, 1998, Graham-Field completed its
exchange offer to exchange the outstanding Senior Subordinated Notes for an
equal amount of the new Senior Subordinated Notes, which have been registered
under the Securities Act. The new Senior Subordinated Notes are identical in all
material respects to the previously outstanding Senior Subordinated Notes. The
Senior Subordinated Notes bear interest at the rate of 9.75% per annum and
mature on August 15, 2007. The Senior Subordinated Notes are general unsecured
obligations of Graham-Field, subordinated in right of payment to all existing
and future senior debt of Graham-Field, including indebtedness under the Credit
Facility. The Senior Subordinated Notes are guaranteed (the "Subsidiary
Guarantees"), jointly and severally, on a senior subordinated basis by all
existing and future restricted subsidiaries of Graham-Field (the "Guaranteeing
Subsidiaries"). The Subsidiary Guarantees are subordinated in right of payment
to all existing and future senior debt of the Guaranteeing Subsidiaries,
including any guarantees by the Guaranteeing Subsidiaries of Graham-Field's
obligations under the Credit Facility.
The net proceeds from the offering of the Senior Subordinated Notes
were used to repay $60.3 million of indebtedness under the Credit Facility and
$5 million of indebtedness due to BIL. The balance of the proceeds were used for
general corporate purposes.
Under the terms of the Indenture, the Senior Subordinated Notes are not
redeemable at Graham-Field's option prior to August 15, 2002. Thereafter, the
Senior Subordinated Notes are redeemable, in whole or in part, at the option of
Graham-Field, at certain redemption prices plus accrued and unpaid interest to
the date of redemption. In addition, prior to August 15, 2000, Graham-Field may,
at its option, redeem up to 25% of the aggregate principal amount of Senior
Subordinated Notes originally issued with the net proceeds from one or more
public offerings of common stock at a redemption price of 109.75% of the
principal amount, plus accrued and unpaid interest to the date of redemption;
provided that at least 75% of the aggregate principal amount of Senior
Subordinated Notes originally issued remain outstanding after giving effect to
any such redemption.
The Indenture contains customary covenants including, but not limited
to, covenants relating to limitations on the incurrence of additional
indebtedness, the creation of liens, restricted payments, the sales of assets,
mergers and consolidations, payment restrictions affecting subsidiaries and
transactions with affiliates. In addition, in the event of a change of control
of Graham-Field as defined in the Indenture, each holder of the Senior
Subordinated Notes will have the right to require Graham-Field to repurchase
such holder's Senior Subordinated Notes, in whole or in part, at a purchase
price of 101% of the principal amount thereof plus accrued and unpaid interest
to the date of repurchase. In addition, Graham-Field will be required in certain
circumstances to make an offer to purchase Senior Subordinated Notes at a
purchase price equal to 100% of the principal amount thereof plus accrued and
unpaid interest to the date of purchase, with the net cash proceeds of certain
asset sales. The Credit Facility, however,
- 21 -
<PAGE> 22
prohibits Graham-Field from purchasing the Senior Subordinated Notes without the
consent of the lenders thereunder.
In addition, the Indenture prohibits the Company from declaring or
paying any dividend or making any distribution or restricted payment as defined
in the Indenture (collectively, the "Restricted Payments") (other than dividends
or distributions payable in capital stock of the Company), unless, at the time
of such payment (i) no default or event of default shall have occurred and be
continuing or would occur as a consequence thereof; (ii) the Company would be
able to incur at least $1.00 of additional indebtedness under the fixed charge
coverage ratio contained in the Indenture; and (iii) such Restricted Payment,
together with the aggregate of all Restricted Payments made by the Company after
the date of the Indenture is less than the sum of (a) 50% of the consolidated
net income of the Company for the period (taken as one accounting period)
beginning on April 1, 1997 to the end of the Company's most recently ended
fiscal quarter for which internal financial statements are available at the time
of such Restricted Payment (or, if such consolidated net income for such period
is a deficit, minus 100% of such deficit), plus (b) 100% of the aggregate net
cash proceeds received by the Company from contributions of capital or the issue
or sale since the date of the Indenture of capital stock of the Company or of
debt securities of the Company that have been converted into capital stock of
the Company.
- 22 -
<PAGE> 23
Part II. Other Information
Item 1. Legal Proceedings
See Note 8 to the Condensed Consolidated Financial Statements.
- 23 -
<PAGE> 24
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
10(a) Consulting Agreement dated as of September 17, 1998, by and between
Andrew A. Giordano and the Company.
10(b) Agreement dated as of September 15, 1998, by and between Paul Bellamy
and the Company.
10(c) Agreement dated as of September 15, 1998, by and between Richard S.
Kolodny and the Company.
10(d) Agreement dated as of September 15, 1998, by and between Ralph Liguori
and the Company.
10(e) Agreement dated as of September 15, 1998, by and between Peter Winocur
and the Company.
10(f) Employment Agreement dated November 2, 1998, by and between Harvey P.
Diamond and the Company.
10(g) Agreement dated as of November 2, 1998, by and between Harvey P.
Diamond and the Company.
10(h) Non-Competition Agreement dated as of November 2, 1998, by and between
Harvey P. Diamond and the Company.
10(i) Amendment No. 1 to Employment Agreement dated as of September 15, 1998,
by and between Paul Bellamy and the Company.
10(j) Amendment No. 1 to Employment Agreement dated as of September 15, 1998,
by and between Richard S. Kolodny and the Company.
10(k) Amendment No. 1 to Employment Agreement dated as of September 15, 1998,
by and between Ralph Liguori and the Company.
10(l) Amendment No. 1 to Employment Agreement dated as of September 15, 1998,
by and between Peter Winocur and the Company.
Reports on Form 8-K:
The Company's Current Report on Form 8-K dated as of August 11, 1998 (Date of
Event: July 29, 1998)
- 24 -
<PAGE> 25
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
(Registrant)
Date: November 12, 1998 /s/ Rodney F. Price
----------------------------------------
Rodney F. Price
Chairman of the Board and
Chief Executive Officer
Date: November 12, 1998 /s/ Paul Bellamy
----------------------------------------
Paul Bellamy
President and
Chief Financial Officer
- 25 -
<PAGE> 26
Exhibit List on Form 10-Q for Third Quarter
Consulting Agreement dated as of September 17, 1998, by and
between Andrew A. Giordano and the Company.
Agreement dated as of September 15, 1998, by and between Paul
Bellamy and the Company.
Agreement dated as of November 2, 1998, by and between Harvey P.
Diamond and the Company.
Agreement dated as of September 15, 1998, by and between Richard
S. Kolodny and the Company.
Agreement dated as of September 15, 1998, by and between Ralph
Liguori and the Company.
Agreement dated as of September 15, 1998, by and between Peter
Winocur and the Company.
Employment Agreement dated November 2, 1998, by and between Harvey
P. Diamond and the Company.
Amendment No. 1 to Employment Agreement dated as of September 15,
1998, by and between Paul Bellamy and the Company.
Amendment No. 1 to Employment Agreement dated as of September 15,
1998, by and between Richard S. Kolodny and the Company.
Amendment No. 1 to Employment Agreement dated as of September 15,
1998, by and between Ralph Liguori and the Company.
Amendment No. 1 to Employment Agreement dated as of September 15,
1998, by and between Peter Winocur and the Company.
Non-Competition Agreement dated as of November 2, 1998, by and
between Harvey P. Diamond and the Company.
<PAGE> 1
AGREEMENT
AGREEMENT made this 17th day of September 1998, by and between
GRAHAM-FIELD HEALTH PRODUCTS, INC., a Delaware corporation (the "Company"; the
Company and its "affiliates" (as hereinafter defined) are collectively referred
to hereinafter as the "Company"), with offices at 400 Rabro Drive East,
Hauppauge, New York 11788, ANDREW A. GIORDANO who resides at 1811 South 24th
Street, Arlington, Virginia 22202-1534 (the "Consultant"), and The Giordano
Group, Ltd. (the "Giordano Group").
W I T N E S S E T H:
WHEREAS, the Consultant was formerly employed as the President
and Chief Operating Officer of the Company pursuant to an employment agreement
dated as of April 17, 1998 (the "Employment Agreement");
WHEREAS, the Consultant and the Company entered into an
agreement dated as of February 2, 1998, relating to certain termination benefits
in the event of a change of control of the Company (the "Change of Control
Agreement");
WHEREAS, a dispute arose in connection with the termination of
employment of the Consultant under the terms and provisions of the Employment
Agreement;
WHEREAS, the parties desire to resolve such dispute upon
the terms and conditions contained herein;
WHEREAS, the Company and the Giordano Group desire that the
Giordano Group provide certain consulting services to the Company upon the terms
and conditions contained herein;
WHEREAS, all consulting services provided by the Giordano
Group will be provided exclusively by the Consultant;
WHEREAS, the term "affiliate" shall have the meaning ascribed
to such term in Rule 405 of the Securities Act of 1933, as amended, and shall
include, but not be limited to, the Company and each of its direct and indirect
subsidiaries.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as
follows:
1. AGREEMENT TO TERMINATE. The Consultant and the Company
hereby confirm and agree that the Consultant's former positions as President and
Chief Operating Officer of the Company, and all former directorships with the
Company were hereby terminated as of June 12, 1998 (the "Termination Date").
<PAGE> 2
2. TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL AGREEMENT.
The Company and the Consultant hereby confirm and agree that the Employment
Agreement and the Change of Control Agreement were terminated effective as of
the Termination Date, and the Consultant shall not be entitled to receive any
payments or benefits payable under the Employment Agreement and the Change of
Control Agreement.
3. STOCK OPTIONS. All stock options granted to the Consultant
prior to the date hereof pursuant to the Corporation's Incentive Program, as
amended (the "Incentive Program"), will expire in accordance with their terms as
set forth on Exhibit I attached hereto without any modification to the terms and
provisions of the related stock option agreements (the "Stock Option
Agreements").
4. TERM OF CONSULTANCY. Subject to the terms and provisions
contained herein, the Giordano Group hereby agrees to provide consulting
services (the "Consultancy") to the Company as provided herein for a period of
four (4) years (the "Term") commencing on September 17, 1998 (the "Effective
Date"), unless terminated earlier pursuant to Section 7 of this Agreement. All
consulting services provided by the Giordano Group will be provided exclusively
by the Consultant.
5. COMPENSATION. For all services rendered by the Consultant
hereunder, the Giordano Group shall receive the following:
(a) During the Term, the Company shall pay a
consulting fee of $75,000 per year (each, a "Consulting Fee"
and, collectively, the "Consulting Fees"), with the first
payment of $75,000 (the "Initial Payment") to be paid upon
execution of the Agreement. Thereafter, on each of the three
(3) anniversary dates following the Effective Date, the
Giordano Group will be paid a Consulting Fee of $75,000.
(b) During the Term, the Company shall reimburse the
Giordano Group against receipts for reasonable business
expenses incurred by him in connection with the Consultancy,
subject to the submission of reasonable documentation in
accordance with the Company's standard practice to
substantiate expenses.
6. DUTIES. During the Term, the Giordano Group shall cause the
Consultant to act as a consultant to the Company's Corporate Governance
Committee. The Giordano Group will cause the Consultant to provide such
consulting services as reasonably requested by the Chief Executive Officer or
President of the Company from time to time upon reasonable prior notice;
provided, however, in no event shall the Consultant be required to spend more
than ten (10) calendar days (the "Consulting Days") per month during the Term
for the performance of the duties and assignments
<PAGE> 3
as described herein. As used herein, a Consulting Day shall be defined as seven
(7) hours. If the Consultant spends more than ten (10) Consulting Days in any
month during the Term in connection with the performance of the duties and
assignments as described herein, the additional time in excess of the ten (10)
Consulting Days per month shall be billed to the Company at the rate of $175 per
hour. Any unused Consulting Days in any month during the Term shall be forfeited
by the Company. Any consulting performed at any location other than the
Consultant's residence shall include reasonable travel time to and from each
location. Any time spent in connection with any litigation relating to the
Company, which time is spent at the request of the Company, shall be treated as
time provided pursuant to Section 6 of this Agreement and deemed part of a
Consulting Day. Consulting services shall be performed either at the
Consultant's offices in Arlington, Virginia, the Company's corporate offices, or
such other facilities as mutually agreed upon between the parties. Such duties
and assignments shall include, but not be limited to, assisting in the
monitoring of the Company's cost reduction and profit improvement programs,
reviewing and commenting on the Company's MIS systems, accounting and internal
controls, and business strategies and strategic direction of the Company.
7. TERMINATION OF CONSULTANCY.
(a) The Consultancy hereunder may be terminated
under the following circumstances:
(i) In the event of the death of or
adjudicated incompetency or adjudicated insanity of
the Consultant during the Term, the Consultancy and
all benefits and fees payable hereunder shall
terminate on the date of death or adjudication of
incompetency or adjudicated insanity of the
Consultant.
(ii) The Company may terminate the
Consultancy at any time for Cause. For purposes of
this Agreement, the term "Cause" shall mean: (A)
gross negligence of the Consultant or the Giordano
Group in the performance of its duties, (B) willful
neglect of the duties of the Giordano Group or the
Consultant which continues after written notice to
the Giordano Group and the Consultant by the Company,
(C) the commission of any felony by the Giordano
Group or the Consultant involving violence, drugs,
dishonesty or a breach of trust, (D) any
misappropriation by the Giordano Group or the
Consultant of any property to the Company (whether or
not a felony or misdemeanor), or any embezzlement of
the Company's property, (E) the material breach by
the Giordano Group or the Consultant of any of the
terms, provisions and covenants contained in this
Agreement which remains
<PAGE> 4
uncured ten (10) days after written notice of such
breach to the Giordano Group and the Consultant by
the Company.
(iii) In the event the Company is sold or
merged with and into another company (the "Sale
Transaction") during the Term, the Consultancy shall
terminate effective as of the closing date of
the Sale Transaction.
(b) Upon any termination of the Consultancy under
Sections 7(a)(i) or 7(a)(ii), the Giordano Group shall be
entitled to receive solely all amounts and benefits to be paid
or provided by the Company under Section 6 of this Agreement
to the date of such termination.
(c) Upon any termination of the Consultancy under
Section 7(a)(iii), the Giordano Group shall be paid the
balance of the Consulting Fees under the Term, discounted at a
rate of six (6) percent per year within 30 days following the
closing of the Sale Transaction. For purposes of the preceding
sentence, the discounting of the Consulting Fees shall
commence from the date each of the Consulting Fees would have
been due to the date payment is made.
8. CONSULTANT COVENANTS.
8.1 CONFIDENTIAL INFORMATION. Each of the Giordano
Group and the Consultant expressly covenants and agrees that it will not at any
time, directly or indirectly, use or permit the use of any trade secrets,
confidential information, or proprietary information (including, without
limitation, customer lists, costing information, technical information, software
techniques, business plans, marketing data, financial information or similar
items) of, or relating to, the Company (collectively, the "Confidential
Information"), in connection with any activity or business, whether for its own
account or otherwise (except solely the business of the Company, if and to the
extent that the Giordano Group or the Consultant is then a consultant with the
Company) and will not divulge such Confidential Information to any person, firm,
corporation or other entity whatsoever. In the event the Consultant or the
Giordano Group is requested pursuant to, or required by, applicable law or
regulation or regulatory authority or by legal process to disclose any of the
Confidential Information, the Consultant or the Giordano Group, as the case may
be, hereby agrees to provide the Company with prompt written notice of such
request or requirement in order to enable the Company to seek an appropriate
protective order or other remedy, to consult with the Company with respect to
taking steps to resist or narrow the scope of such request or legal process, or
to waive compliance, in whole or in part, with the terms of this Agreement. If
in the absence of a protective order the Consultant or the Giordano Group, as
the case may be, is compelled to disclose Confidential
<PAGE> 5
Information, the Consultant or the Giordano Group, as the case may be, may make
such disclosure hereunder, provided that the Consultant or the Giordano Group,
as the case may be, gives the Company written notice of the information to be
disclosed as far in advance of its disclosure as is practicable. In any such
event, the Consultant or the Giordano Group, as the case may be, will use its
reasonable efforts to ensure that all Confidential Information that is so
disclosed will be accorded confidential treatment. Any information which becomes
known to the public without breach by the Consultant or the Giordano Group, as
the case may be, of any of the terms hereof or of Consultant's or the Giordano
Group's common law duties shall not be deemed to be Confidential Information.
8.2 OWNERSHIP BY COMPANY. Each of the Giordano Group and the
Consultant acknowledges and agrees that all of its work product created,
produced or conceived in response to specific projects assigned to it by the
Company in writing shall be deemed work for hire and shall be deemed owned
exclusively by the Company. Without limiting the generality of the foregoing,
each of the Giordano Group and the Consultant agrees that the Company shall have
and possess all proprietary rights, patent rights, copyright rights and trade
secret rights as may exist in such work product or as which are inherent therein
or appurtenant thereto. Each of the Giordano Group and the Consultant agrees to
execute and deliver all documents required by the Company to document or perfect
the Company's proprietary rights in and to such work product.
8.3 REMEDIES. In the event of the breach by the Giordano Group
or the Consultant of any of the terms and conditions of Section 8 of this
Agreement, then the Company shall be entitled, if it so elects, to institute and
prosecute any proceedings in any court of competent jurisdiction, either in law
or equity, for such relief as it deems appropriate, including, without limiting
the generality of the foregoing, any proceedings to obtain provable damages for
any breach of this Agreement, to enforce the specific performance thereof by the
Giordano Group and/or the Consultant, as the case may be, or to obtain an
injunction against the commission, threatened commission or continuance of any
such breach or threatened breach without the necessity of proving actual damages
or that damages would be inadequate or of posting a bond. In any such action, if
the Company is successful, in whole or in part, the Giordano Group and/or the
Consultant, as the case may be, shall further, as an element of the Company's
damages, be liable for the reasonable attorney's fees and expenses of the
Company in the prosecution of such action or proceeding.
8.4 COVENANTS NON-EXCLUSIVE. Each of the Giordano Group, the
Consultant and the Company acknowledges and agrees that the covenants contained
in this Section 8 shall not be deemed exclusive of any common law rights of such
parties in connection with the relationships contemplated hereby; and that each
of the Company, the Giordano Group and the Consultant shall have any and all
rights as may be provided by law in connection with the relationships
contemplated hereby.
<PAGE> 6
9. NON-DISPARAGEMENT; PUBLICITY.
Neither the Consultant, the Giordano Group, nor the
Company will at any time make any oral or written statement concerning the other
to any person, company or agency which is disparaging or damaging to the
personal or professional reputation of the Consultant or the Giordano Group, on
the one hand, or the Company and/or any of its subsidiaries or affiliates (and
their respective directors and officers), on the other, provided that the
foregoing will not restrict any statement or revelation required by applicable
law, regulation or judicial process (after advising and consulting with the
other party about its intention to make, and the proposed content of such
disclosure).
10. RELEASES.
10.1 For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Giordano Group and the
Consultant, to the extent permitted by applicable law, each of the Giordano
Group and the Consultant knowingly, voluntarily and unconditionally hereby
forever waives, releases and discharges, and covenants never to sue on, any and
all claims, liabilities, causes of actions, judgments, orders, assessments,
penalties, fines, expenses and costs (including without limitation attorneys'
fees) and/or suits of any kind arising out of any actions, events or
circumstances occurring before the date of this Agreement ("Claims") which the
Consultant or the Giordano Group has, ever had or may have, or which the
Consultant's heirs, executors, administrators and assigns, or any of them
hereafter can, shall or may have, against the Company and/or any of its
subsidiaries, shareholders, officers, directors, agents, affiliates, employee
benefit plan fiduciaries, trustees and administrators, and employees, past or
present, and their respective heirs, successors and assigns (collectively, the
"Releasees"), including, without limitation, any Claims arising in whole or in
part from any services provided by the Giordano Group, the Consultant's
employment with the Company and/or any of its subsidiaries or affiliates under
the Employment Agreement, the Change of Control Agreement, the Stock Option
Agreements or the termination of the Consultant's employment with the Company or
the manner of such termination; provided, however, that this Section 10 shall
not apply to any of the obligations of the Company specifically provided for in
or pursuant to this Agreement. This Agreement is intended as a full and final
settlement and compromise of each, every and all Claims of every kind and
nature, whether known or unknown, which have been or could be asserted against
any of the Releasees, including, without limitation:
(a) any Claims arising out of any employment agreement or other
contract (including, without limitation, the Employment
Agreement, the Change of Control Agreement or the Stock Option
Agreements), side-letter, resolution, promise or understanding
of any kind, whether written or oral or express or implied;
and
<PAGE> 7
(b) any Claims arising under any federal, state or local civil
rights, human rights, anti-discrimination, labor, employment,
contract or tort law, rule, regulation, order or decision,
including, without limitation, the Family and Medical Leave
Act, the Employee Retirement Income Security Act of 1974, the
Americans with Disabilities Act of 1990, 42 U.S.C.
Sections 12101 et seq., and Title VII of the Civil
Rights Act of 1964, 42 U.S.C. Sections 2000 et seq.,
and as each of these laws have been or will be amended.
10.2 For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Company, to the extent
permitted by applicable law, the Company on behalf of itself and its
subsidiaries and affiliates knowingly, voluntarily and unconditionally hereby
forever waives, releases and discharges, and covenants never to sue on, any and
all Claims arising out of any actions, events or circumstances occurring before
the date of this Agreement which the Company, its subsidiaries or affiliates
has, ever had or may have, including, without limitation, any Claims arising in
whole or in part from the Giordano Group's services to the Company, the
Consultant's employment with, or acting as a director of, the Company and/or any
of its subsidiaries or affiliates or the termination of the Consultant's
employment with the Company or the manner of said termination; provided,
however, that this Section 10.2 shall not apply to any of the obligations of the
Giordano Group and the Consultant specifically provided for in or pursuant to
this Agreement. This Agreement is intended as a full and final settlement and
compromise of each, every and all Claims of every kind and nature, whether known
or unknown, which have been or could be asserted against the Giordano Group and
the Consultant and his respective heirs, successors and assigns.
10.3 Each of the Giordano Group and the Consultant
acknowledges that the Consultant and the Giordano Group have carefully read and
fully understands all of the terms of this Agreement, including without
limitation the releases contained herein. Each of the Giordano Group and the
Consultant further acknowledges that the Consultant and the Giordano Group have
entered into this Agreement willingly, freely, without duress or coercion and
after having had explained to it by counsel of its choice, its rights under all
laws referred to in this Agreement and the terms and consequences of this
Agreement. The Consultant also acknowledges that he has been given the
opportunity to take at least twenty-one (21) days to consider and accept or
reject this Agreement and has chosen to execute, deliver and agree to this
Agreement as of the date of this Agreement. The Consultant agrees that the
Consultant has been given a fair, reasonable and sufficient time to fully
consider all of the terms of this Agreement. The Consultant may revoke the
portion of this Agreement that relates to the release of any claim the
Consultant may have under the Age Discrimination in Employment Act of 1967
(including, without limitation, the Older Workers Benefit Protection Act) at any
time within seven (7) days after the date of execution of this Agreement by
notifying the Company of such revocation in writing.
<PAGE> 8
Notwithstanding the foregoing, no such revocation shall affect or alter any
other term or provision of this Agreement or any other release granted
hereunder, all of which shall survive any such revocation in accordance with
their terms.
10.4 Except as specifically provided for in or pursuant to
this Agreement, the Giordano Group and the Consultant shall not be entitled to
any compensation, remuneration or other payments from the Company and/or the
Company's subsidiaries or affiliates and the Company (and its subsidiaries and
affiliates) shall have no further obligations to the Giordano Group and the
Consultant, including without limitation under any contract, plan, agreement,
understanding or resolution. Without limiting the foregoing, except as expressly
provided for in or pursuant to this Agreement, the Giordano Group and the
Consultant shall have no further rights and shall be entitled to no further
benefits under the Employment Agreement or the Change of Control Agreement,
which the Giordano Group and the Consultant agrees are superseded in all
respects by this Agreement and shall be of no further force or effect on and as
of the date hereof.
11. LITIGATION COOPERATION.
The Consultant hereby agrees to cooperate with the Company in
all reasonable respects with all litigations and other actions relating to the
Company.
12. GENERAL.
12.1 APPLICABLE LAW. This Agreement shall, in all respects, be
governed by the laws of the State of New York without giving effect to conflicts
of law principles.
12.2 SURVIVAL. In the event the Consultancy is terminated for
any reason (including, but not limited to, the expiration of the Term or the
Sale Transaction), the parties hereto agree that all other terms, provisions,
covenants and agreements contained in this Agreement shall survive any
termination of the Consultancy (including, but not limited to, Sections 8, 9,
10, 11, and 12 of this Agreement).
12.3 INDEPENDENT REPRESENTATION. Each of the Giordano Group
and the Consultant acknowledges that it has had the opportunity to seek
independent counsel and tax advice in connection with the execution of this
Agreement, and the Consultant represents and warrants to the Company (a) that it
has sought such counsel and advice as it has deemed appropriate in connection
with the execution hereof and the transactions contemplated hereby; and (b) that
it has not relied on any representation of the Company as to tax matters or as
to the consequences of the execution hereof.
12.4 INDEMNIFICATION. The Company hereby agrees to indemnify
and hold the Consultant and the Giordano Group harmless from and against any and
all costs, expenses, liabilities, losses,
<PAGE> 9
damages, fines, penalties, judgments and amounts paid in settlement ("Losses"),
that are incurred or suffered by or brought against or involve the Consultant
and the Giordano Group and which are related to or arise from the Consultant's
and the Giordano Group's services to the Company or services performed at the
request of the Company. Notwithstanding the foregoing, the Company shall not be
required to indemnify the Consultant or the Giordano Group in respect of Losses
arising from the negligence or willful misconduct of the Giordano Group or the
Consultant.
12.5 NOTICES. Any and all notices required or desired to be
given hereunder by any party shall be in writing and shall be validly given or
made to another party if delivered either personally, by facsimile transmission,
same day delivery service, overnight expedited delivery service, or if deposited
in the United States Mail, certified or registered, postage prepaid, return
receipt requested. If notice is served personally, notice shall be deemed
effective upon receipt. If notice is served by facsimile transmission, notice
shall be deemed effective upon transmission, provided that such notice is
confirmed in writing by the sender within one day after transmission. If notice
is served by same day delivery service or overnight expedited delivery service,
notice shall be deemed effective the day after it is sent, and if notice is
given by United States mail, notice shall be deemed effective five days after it
is sent. In all instances, notice shall be sent to the parties at the following
addresses:
If to the Company:
Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Attention: Chairman of the Board and
Chief Executive Officer
If to the Consultant:
Mr. Andrew A. Giordano
1811 South 24th Street
P.O. Box 2383
Arlington, VA 22202-1534
If to the Giordano Group:
The Giordano Group, Ltd.
1811 South 24th Street
P.O. Box 2383
Arlington, VA 22202-1534
Any party may change its address for the purpose of receiving
notices by a written notice given to the other party.
<PAGE> 10
12.6 MODIFICATIONS OR AMENDMENTS. No amendment, change or
modification of this document shall be valid unless in writing and signed by all
of the parties hereto.
12.7 WAIVER. No reliance upon or waiver of one or more
provisions of this Agreement shall constitute a waiver of any other provisions
hereof.
12.8 SUCCESSORS AND ASSIGNS. All of the terms and provisions
contained herein shall inure to the benefit of and shall be binding upon the
parties hereto and their respective heirs, personal representatives, successors
and assigns. However, no party shall voluntarily assign any rights hereunder, or
delegate any duties hereunder, except upon the prior written consent of the
other.
12.9 SEPARATE COUNTERPARTS. This document may be executed in
one or more separate counterparts, each of which, when so executed, shall be
deemed to be an original. Such counterparts shall, together, constitute and
shall be one and the same instrument.
12.10 HEADINGS. The captions appearing at the commencement of
the sections hereof are descriptive only and are for convenience of reference.
Should there be any conflict between any such caption and the section at the
head of which it appears, the substantive provisions of such section and not
such caption shall control and govern in the construction of this document.
12.11 FURTHER ASSURANCES. Each of the parties hereto shall
execute and deliver any and all additional papers, documents and other
assurances, and shall do any and all acts and things reasonably necessary in
connection with the performance of their obligations hereunder and to carry out
the intent of the parties hereto.
12.12 SET-OFFS AND COUNTERCLAIMS. All payments due to the
Giordano Group under the Consultancy shall be paid without any right of set-off
or counterclaim by the Company, except in the event of any breach by the
Giordano Group or the Consultant of any of the terms, provisions, covenants or
agreements contained in this Agreement.
12.13 ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement of the parties with respect to the subject matter of
this Agreement, and any and all prior agreements, understandings or
representations are hereby terminated and canceled in their entirety.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
<PAGE> 11
GRAHAM-FIELD HEALTH THE GIORDANO GROUP LTD.
PRODUCTS, INC.
By: /s/ Paul Bellamy By: /s/ Andrew A. Giordano
------------------------------ ---------------------------
Name: Paul Bellamy Name: Andrew A. Giordano
--------------------------- -------------------------
Title: President Title: Principal
--------------------------- -------------------------
/s/ Andrew A. Giordano
-------------------------------
ANDREW A. GIORDANO
<PAGE> 1
AGREEMENT
THIS AGREEMENT dated as of September 15, 1998 (this
"Agreement"), is made by and between Graham-Field Health Products, Inc., a
Delaware corporation having its principal offices at 400 Rabro Drive East,
Hauppauge, New York 11788 (the "Company"), and Paul Bellamy, President and Chief
Operating Officer (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its shareholders to foster the continued employment of key
executive management personnel; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined in Section 1.4 below) of the
Company exists from time to time and that such possibility, and the uncertainty,
instability and questions which it may raise for and among key executive
management personnel, may result in the premature departure or significant
distraction of such management personnel to the material detriment of the
Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce, focus and encourage the continued attention and
dedication of key members of the executive management of the Company and its
subsidiaries, including (without limitation) the Executive, to their assigned
duties without distraction in the face of potentially disturbing or unsettling
circumstances arising from the possibility of a Change in Control of the
Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings set forth below:
1.1 "ANNUAL BASE SALARY" shall mean the Executive's rate of
regular basic annual compensation prior to any reduction under a salary
reduction agreement pursuant to section 401(k) or section 125 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code"), and shall not
include (without limitation) cost of living allowances, fees, retainers,
reimbursements, bonuses, incentive awards, prizes or similar payments.
1.2 "BIL" shall mean collectively, Brierley Investments Ltd.,
BIL (Far East Holdings) Limited, BIL Securities (Offshore) Ltd. and any Person
or group of Persons which is directly affiliated with or is wholly or partly
controlled by one or more of such entities.
1.3 "CAUSE" for termination by the Company or any
subsidiary of the Executive's employment, after any Change in
<PAGE> 2
Control, shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company, or a subsidiary
of the Company, as such duties may reasonably be defined from time to time by
the Board (or a duly designated and authorized committee thereof), or to abide
by the reasonable written policies of the Company or of the Executive's primary
employer (other than any such failure resulting from the Executive's incapacity
due to physical or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination by the Executive for Good Reason
pursuant to Section 4.1) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand specifically identifies
the manner in which the Board believes that the Executive has not substantially
performed the Executive's duties or has not abided by any reasonable written
policies, or (ii) the continued and willful engaging by the Executive in conduct
which is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of
this definition, no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive in bad
faith and without reasonable belief that the Executive's act, or failure to act,
was in the best interests of the Company or its subsidiaries.
1.4 "CHANGE IN CONTROL" shall mean and be deemed to have
occurred if:
(i) any Person is or becomes the Beneficial Owner (as
that term is defined in Rule 13d-3 under the Securities Exchange Act of
1934 (the "Exchange Act")), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company) representing
twenty-five percent (25%) or more of the combined voting power of the
Company's then outstanding securities, or there occurs any transaction
which the Company is required to disclose pursuant to Item 1(a) of Form
8-K (as filed pursuant to Rule 13a-11 or Rule 15d-11 of the Exchange
Act), other than BIL which may purchase securities of the Company
provided that, immediately after giving effect to such purchase, BIL
does not own in the aggregate outstanding voting securities
representing more than 49% of the voting power of all outstanding
voting securities of the Company; or
(ii) during any period of twenty-four (24)
consecutive months (not including any period prior to September 15,
1998), individuals who at the beginning of such period constitute the
Board and any new director (other than a director designated by a
Person who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an
<PAGE> 3
actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a
majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all
of the individuals and entities who were Beneficial Owners, immediately
prior to such reorganization, merger or consolidation, of the combined
voting power of the Company's then outstanding securities beneficially
own, directly or indirectly, immediately after such reorganization,
merger or consolidation, more than seventy-five percent (75%) of the
combined voting power of the securities of the corporation resulting
from such reorganization, merger or consolidation; or
(iv) the shareholders of the Company approve (a) the
sale or disposition by the Company (other than to a subsidiary of the
Company) of all or substantially all of the assets of the Company, or
(b) a complete liquidation or dissolution of the Company.
1.5 "COMPANY" shall mean Graham-Field Health Products, Inc.
and any successor to its business and/or assets which assumes (either expressly,
by operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Company has occurred in connection
with such succession).
1.6 "DISABILITY" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, the Executive
shall have been absent from the full-time performance of the Executive's duties
for a period of three (3) consecutive months.
1.7 "GOOD REASON" for termination by the Executive of the
Executive's employment in connection with or as a result of any Change in
Control shall mean the occurrence (without the Executive's prior express written
consent) of any one of the following acts, or failures to act, unless, in the
case of any act or failure to act described in clauses (i), (iv), (v) or (vi)
below, such act or failure to act is corrected by the Company or
<PAGE> 4
any subsidiary prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with the Executive's most significant
position(s) (including without limitation status, offices, titles and
reporting responsibilities/rights) as an executive officer of the
Company and/or a subsidiary held during the one hundred eighty (180)
day period immediately preceding any related Potential Change in
Control, or a substantial adverse alteration of the Executive's
position or title(s) with the Company or any subsidiary or in the
nature of such status, offices, titles and reporting
responsibilities/rights;
(ii) a reduction in the Executive's Annual Base
Salary as in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal
executive offices to a location more than thirty (30) miles from its
location on the date of this Agreement (or, if different, more than
thirty (30) miles from where such offices are located immediately prior
to any Potential Change of Control) or the Company's requiring the
Executive to be based anywhere other than the location where the
Executive is performing his duties immediately prior to any Potential
Change in Control, except for required travel on the Company's business
to an extent substantially consistent with the Executive's business
travel obligations as of the date of the Potential Change in Control;
(iv) any failure by the Company to comply with any of
the provisions of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given
by the Executive;
(v) the failure by the Company or a subsidiary to
continue in effect any pension benefit or incentive or deferred
compensation plan in which the Executive participates immediately prior
to any Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made
with respect to such plan, or the failure by the Company or a
subsidiary to continue the Executive's participation therein (or in
such substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the
<PAGE> 5
amount of benefits provided and the level of the Executive's
participation relative to other participants, as existed at the time of
the Potential Change in Control;
(vi) the failure by the Company or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of
the Company's or a subsidiary's retirement, life insurance, medical,
health and accident, or disability or similar plans in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Company or a subsidiary which
would directly or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit enjoyed by the
Executive at the time of the Potential Change in Control, or the
failure by the Company or a subsidiary to provide the Executive with
the number of paid vacation days to which the Executive is entitled in
accordance with the Company or a subsidiary's normal vacation policy in
effect at the time of the Potential Change in Control;
(vii) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 4.1; and/or
(viii) a termination by the Executive of his
employment for any reason during the thirty (30) day period immediately
following the first (1st) anniversary after the date of any Change in
Control.
1.8 "PERSON" shall have the meaning ascribed thereto in
Section 3(a)(9) of the Exchange Act, as modified, applied and used in Sections
13(d) and 14(d) thereof; provided, however, a Person shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries (in its capacity as such), (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation or
other entity owned, directly or indirectly, by the stockholders of the Company
in substantially the same character and proportions as their ownership of stock
of the Company.
1.9 "POTENTIAL CHANGE IN CONTROL" shall mean and be deemed to
have occurred if:
(i) the Company enters into an agreement the
consummation of which would result in the occurrence of a Change in
Control; and/or
(ii) any Person becomes, after September 15,
<PAGE> 6
1998, the Beneficial Owner, directly or indirectly, of securities of
the Company representing ten percent (10%) or more of the combined
voting power of the Company's then outstanding securities, or any
Person increases such Person's beneficial ownership of such securities
by five (5) percentage points or more over the percentage so owned by
such Person on September 15, 1998.
1.10 "WINDOW PERIOD" shall mean the thirteen (13) month period
following a Change in Control.
2. TERM OF THIS AGREEMENT. This Agreement shall commence on the
date hereof and shall continue in effect as long as the Executive is employed by
the Company, provided, however, that if (i) a Change in Control shall have
occurred during the Executive's employment with the Company, this Agreement
shall continue in effect until the termination of the applicable Window Period,
or (ii) if a Potential Change in Control shall have occurred during the
Executive's employment with the Company, this Agreement shall continue in effect
until one (1) year after the Executive's termination of employment with the
Company (the "Term").
3. SEVERANCE PAYMENTS.
3.1 SEVERANCE. The Company shall pay the Executive the
payments described in Section 3.1.1 and 3.1.2 (the "Severance Payments") upon
the termination of the Executive's employment with the Company during the Window
Period (including, but not limited to, the Executive's termination of employment
for Good Reason, death or Disability), unless such termination is (i) by the
Company for Cause, or (ii) by the Executive without Good Reason. In addition,
the Executive's employment shall be deemed to have been terminated immediately
following a Change in Control by the Company without Cause or by the Executive
for Good Reason if (a) the Executive reasonably demonstrates that the
Executive's employment was terminated prior to a Change in Control without Cause
(1) at the request of a Person who has entered into an agreement with the
Company the consummation of which will constitute a Change in Control (or who
has taken other steps reasonably calculated to effect a Change in Control) or
(2) otherwise in connection with, as a result of or in anticipation of a Change
in Control, (b) the Executive terminates his employment for Good Reason prior to
a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control, or (c) the Executive dies or is
terminated due to Disability, in each case, after the occurrence of a Potential
Change in Control and related Change in Control actually occurs within one (1)
year after the Date of Termination or the date of death, as the case may be. The
Executive's right to terminate the Executive's employment for Good Reason shall
not be affected by the Executive's incapacity due to physical or mental illness.
The Executive's continued employment shall not constitute consent to,
<PAGE> 7
or a waiver of rights with respect to, any act or failure to act constituting
Good Reason hereunder.
3.1.1 In lieu of any further salary and bonus
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive (i) a lump sum
severance payment in cash (or at the Executive's sole and exclusive
option receive such amounts as salary continuation during the
applicable periods set forth below), equal to (x) three (3) times the
highest Annual Base Salary paid or payable to the Executive during the
thirty-six (36) month period immediately preceding the month in which
the Change in Control occurs, and (y) the aggregate of the maximum
bonuses (as defined in the Annual Incentive Plan (a copy of which is
attached hereto as Exhibit A)) which could have been earned, vested or
otherwise paid for the year in which the Change in Control occurs (for
purposes herein, the maximum bonuses shall automatically vest and be
deemed earned in their entirety as if the Executive was employed for
the entire applicable year period in which the Change in Control occurs
and shall be deemed payable to the Executive in full as of the Date of
Termination), and (ii) all unpaid accrued vacation through the Date of
Termination in accordance with the Company's plans and practices in
effect immediately prior to the Change in Control, provided that such
unpaid vacation has been accrued on the books and records of the
Company prior to the Date of Termination.
3.1.2 After the Date of Termination, the Company
shall continue to provide the Executive and/or the Executive's
dependents, as the case may be, with (i) life, disability, accident and
health insurance benefits ("Benefits Coverage") substantially similar
to those which the Executive and/or the Executive's dependents is
receiving immediately prior to any related Potential Change in Control
or the receipt of the Notice of Termination (without giving effect to
any reduction in such benefits subsequent to a Change in Control which
reduction constitutes Good Reason), whichever is greater, until the
earlier to occur of such time as the Executive is provided with
substantially comparable Benefits Coverage with a new employer or
thirty six (36) months; (ii) the automobile allowance, gas and other
automobile benefits the Executive was receiving immediately prior to
any related Potential Change in Control or the receipt of the Notice of
Termination (without giving effect to any reduction in such benefits
subsequent to a Change in Control which reduction constitutes Good
Reason), whichever is greater, for a period of twelve (12) months; and
(iii) outplacement services, the scope and provider of which shall be
selected by the Executive with the cost of such services and related
expenses borne by the
<PAGE> 8
Company, subject to the submission of reasonable documentation in
accordance with the Company's standard practice to substantiate
expenses.
3.2 SPECIAL REIMBURSEMENT. In the event that the Executive
becomes entitled to the Severance Payments, if any payment or benefit paid or
payable, or received or to be received, by or on behalf of the Executive in
connection with a Change in Control or the termination of the Executive's
employment, whether any such payments or benefits are pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Company, any
of its subsidiaries, any Person, or otherwise (the "Total Payments"), will or
would be subject to the excise tax imposed under section 4999 of the Code (the
"Excise Tax"), the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and any Excise Tax imposed upon or attributable to
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Total Payments.
3.2.1 For purposes of determining whether any of the
Total Payments will be subject of the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel (delivered to the Executive) selected by the
Company and reasonably acceptable to the Executive such Total
Payments (in whole or in part) (a) do not constitute parachute
payments, including (without limitation) by reason of section
280G(b)(4)(A) of the Code, (b) such excess parachute payments (in whole
or in part) represent reasonable compensation for services actually
rendered, within the meaning of section 280G(b)(4)(B) of the Code, or
(c) are otherwise not subject to the Excise Tax, and (ii) the value of
any non-cash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance with the
principles of sections 280G(d)(3) and (4) of the code.
3.2.2 In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder at the time of termination of the Executive's employment, the
Executive shall repay to the Company, at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the
amount of such repayment at the rate provided in section 1274(b)(2)(B)
of the Code. In the
<PAGE> 9
event that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest, penalties or additions payable by the
Executive with respect to such excess) at the time that the amount of
such excess is finally determined. The Executive and the Company shall
each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect to
the Severance Payments.
3.3 DATE OF PAYMENT. The payment provided for in Section 3.1.1
and Section 3.2 hereof shall be made not later than the fifteenth (15th) day
following the Date of Termination; provided, however, that if the amounts of
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments to which the Executive is
likely to be entitled to and shall pay the remainder of such payments (together
with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth (5th) business day after demand by the Company (together with interest
at the rate provided in section 1274(b)(2)(B) of the Code). At the time that
payments are made under this Section 3.3, the Company shall provide the
Executive with a detailed written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received from
outside counsel, auditors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
3.4 LEGAL COSTS. The Company shall also reimburse the
Executive for all legal fees and expenses incurred in good faith by the
Executive as a result of any dispute with any party (including, but not limited
to, the Company and/or any affiliate of the Company) regarding the payment of
any benefit provided for in this Agreement (including, but not limited to, all
such fees and expenses incurred in disputing any termination or in seeking in
good faith to obtain or enforce any benefit or right provided by this Agreement
or in connection with any tax audit or proceeding to the extent attributable to
the application of Section 4999 of the Code), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in section
7872(f)(2)(A) of the Code. Such payments shall be made within five (5) business
<PAGE> 10
days after delivery of the Executive's written requests for payment accompanied
by such evidence of fees and expenses incurred as the Company reasonably may
require.
3.5 EMPLOYMENT AGREEMENT. The payment to the Executive of the
Severance Payments provided for in Section 3.1 shall be in lieu of any severance
payable to the Executive under the terms of any other employment agreement in
effect on the Date of Termination. Except as provided in the preceding sentence,
this Agreement is not intended to and shall not modify or supersede any such
employment agreement or other contract or arrangement between the Executive and
the Company in effect from time to time.
4. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
4.1 NOTICE OF TERMINATION. Any purported termination of the
Executive's employment with the Company (other than by reason of death) during
the Window Period shall be communicated by written Notice of Termination from
one party hereto to the other party hereto in accordance with Section 7 hereof.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment with
the Company under the provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board in the form and in the manner specified in Section 1.3 of this
Agreement. For purposes of this Agreement, any purported termination not
effected in accordance with the Section 4.1 shall not be considered effective.
4.2 DATE OF TERMINATION. "Date of Termination," with respect
to any purported termination of the Executive's employment during the Window
Period, shall mean (i) if the Executive's employment is terminated for
Disability, fifteen (15) days after Notice of Termination is given, and (ii) if
the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive, shall
not be less than fifteen (15) days nor more than thirty (30) days, respectively,
after the date on which such Notice of Termination is given).
4.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 4.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of a court of
<PAGE> 11
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice of
dispute only if the basis for such notice is reasonable, such notice is given in
good faith and the party giving such notice pursues the resolution of such
dispute with reasonable diligence.
4.4 COMPENSATION DURING DISPUTE. If a purported termination
occurs during the Window Period, and such termination is disputed in accordance
with Section 4.3 above, the Company shall continue to pay the Executive the full
compensation (including without limitation Annual Base Salary and Target Bonus)
in effect at the time of any related Potential Change in Control or when the
notice giving rise to the dispute was given (whichever is greater) and continue
the Executive as a participant in all compensation, incentive, pension and
welfare benefit and insurance plans in which the Executive was participating at
the time of any Potential Change in Control or when the notice giving rise to
the dispute was given, whichever is greater, until the dispute is finally
resolved in accordance with Section 4.3 hereof. Amounts paid under this Section
4.4 are in addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts due under this Agreement or any
other plan, agreement or arrangement.
5. NO MITIGATION. The Company agrees that, if the Executive's
employment is terminated during the Window Period, the Executive is not required
to seek other employment or to attempt in any way to reduce any amounts payable
to the Executive by the Company pursuant to Section 3 or Section 4.4. Further,
the amount of any payment or benefit provided for in Section 3 or Section 4.4
shall not be reduced by any compensation earned by the Executive as a result of
employment by another employer, by retirement benefits, or offset against any
amount claimed to be owed by the Executive to the Company or any of its
subsidiaries, or otherwise.
6. SUCCESSORS; BINDING AGREEMENT.
6.1 SUCCESSORS. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason during the Window Period, except that, for purposes
of implementing the foregoing, the date on which any
<PAGE> 12
such succession becomes effective shall be deemed the Date of Termination.
6.2 BINDING AGREEMENT. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the term of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
7. NOTICES. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual receipt:
To the Company:
Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Attention: Chairman of the Board and
Chief Executive Officer
With a copy to:
Robert S. Reder, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
To the Executive:
Paul Bellamy
21 Indian Head Road
Greenwich, Connecticut 06878
8. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or
<PAGE> 13
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Delaware without regard to the principles of
conflict of laws thereof. All references to sections of the Exchange Act or the
Code shall be deemed also to refer to and include any successor provisions to
such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law and any
additional withholding to which the Executive has agreed. The rights and
obligations of the Company and the Executive under this Agreement shall survive
the expiration of the Term.
9. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. NO LIMITATION. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Company or any of its affiliated companies. Amounts which are
vested benefits or which the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first written above.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By: /s/ Rodney Price
-------------------------------
Name: Rodney F. Price
-------------------------------
<PAGE> 14
Title: Chairman
-------------------------------
/s/ Paul Bellamy
--------------------------------------
PAUL BELLAMY
<PAGE> 1
AGREEMENT
THIS AGREEMENT dated as of September 15, 1998 (this
"Agreement"), is made by and between Graham-Field Health Products, Inc., a
Delaware corporation having its principal offices at 400 Rabro Drive East,
Hauppauge, New York 11788 (the "Company"), and Richard S. Kolodny, Vice
President and General Counsel (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its shareholders to foster the continued employment of key
executive management personnel; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined in Section 1.4 below) of the
Company exists from time to time and that such possibility, and the uncertainty,
instability and questions which it may raise for and among key executive
management personnel, may result in the premature departure or significant
distraction of such management personnel to the material detriment of the
Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce, focus and encourage the continued attention and
dedication of key members of the executive management of the Company and its
subsidiaries, including (without limitation) the Executive, to their assigned
duties without distraction in the face of potentially disturbing or unsettling
circumstances arising from the possibility of a Change in Control of the
Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings set forth below:
1.1 "ANNUAL BASE SALARY" shall mean the Executive's rate of
regular basic annual compensation prior to any reduction under a salary
reduction agreement pursuant to section 401(k) or section 125 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code"), and shall not
include (without limitation) cost of living allowances, fees, retainers,
reimbursements, bonuses, incentive awards, prizes or similar payments.
1.2 "BIL" shall mean collectively, Brierley Investments Ltd.,
BIL (Far East Holdings) Limited, BIL Securities (Offshore) Ltd. and any Person
or group of Persons which is directly affiliated with or is wholly or partly
controlled by one or more of such entities.
1.3 "CAUSE" for termination by the Company or any
subsidiary of the Executive's employment, after any Change in
<PAGE> 2
Control, shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company, or a subsidiary
of the Company, as such duties may reasonably be defined from time to time by
the Board (or a duly designated and authorized committee thereof), or to abide
by the reasonable written policies of the Company or of the Executive's primary
employer (other than any such failure resulting from the Executive's incapacity
due to physical or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination by the Executive for Good Reason
pursuant to Section 4.1) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand specifically identifies
the manner in which the Board believes that the Executive has not substantially
performed the Executive's duties or has not abided by any reasonable written
policies, or (ii) the continued and willful engaging by the Executive in conduct
which is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of
this definition, no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive in bad
faith and without reasonable belief that the Executive's act, or failure to act,
was in the best interests of the Company or its subsidiaries.
1.4 "CHANGE IN CONTROL" shall mean and be deemed to have
occurred if:
(i) any Person is or becomes the Beneficial Owner (as
that term is defined in Rule 13d-3 under the Securities Exchange Act of
1934 (the "Exchange Act")), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company) representing
twenty-five percent (25%) or more of the combined voting power of the
Company's then outstanding securities, or there occurs any transaction
which the Company is required to disclose pursuant to Item 1(a) of Form
8-K (as filed pursuant to Rule 13a-11 or Rule 15d-11 of the Exchange
Act), other than BIL which may purchase securities of the Company
provided that, immediately after giving effect to such purchase, BIL
does not own in the aggregate outstanding voting securities
representing more than 49% of the voting power of all outstanding
voting securities of the Company; or
(ii) during any period of twenty-four (24)
consecutive months (not including any period prior to September 15,
1998), individuals who at the beginning of such period constitute the
Board and any new director (other than a director designated by a
Person who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an
<PAGE> 3
actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a
majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all
of the individuals and entities who were Beneficial Owners, immediately
prior to such reorganization, merger or consolidation, of the combined
voting power of the Company's then outstanding securities beneficially
own, directly or indirectly, immediately after such reorganization,
merger or consolidation, more than seventy-five percent (75%) of the
combined voting power of the securities of the corporation resulting
from such reorganization, merger or consolidation; or
(iv) the shareholders of the Company approve (a) the
sale or disposition by the Company (other than to a subsidiary of the
Company) of all or substantially all of the assets of the Company, or
(b) a complete liquidation or dissolution of the Company.
1.5 "COMPANY" shall mean Graham-Field Health Products, Inc.
and any successor to its business and/or assets which assumes (either expressly,
by operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Company has occurred in connection
with such succession).
1.6 "DISABILITY" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, the Executive
shall have been absent from the full-time performance of the Executive's duties
for a period of three (3) consecutive months.
1.7 "GOOD REASON" for termination by the Executive of the
Executive's employment in connection with or as a result of any Change in
Control shall mean the occurrence (without the Executive's prior express written
consent) of any one of the following acts, or failures to act, unless, in the
case of any act or failure to act described in clauses (i), (iv), (v) or (vi)
below, such act or failure to act is corrected by the Company or
<PAGE> 4
any subsidiary prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with the Executive's most significant
position(s) (including without limitation status, offices, titles and
reporting responsibilities/rights) as an executive officer of the
Company and/or a subsidiary held during the one hundred eighty (180)
day period immediately preceding any related Potential Change in
Control, or a substantial adverse alteration of the Executive's
position or title(s) with the Company or any subsidiary or in the
nature of such status, offices, titles and reporting
responsibilities/rights;
(ii) a reduction in the Executive's Annual Base
Salary as in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal
executive offices to a location more than thirty (30) miles from its
location on the date of this Agreement (or, if different, more than
thirty (30) miles from where such offices are located immediately prior
to any Potential Change of Control) or the Company's requiring the
Executive to be based anywhere other than the location where the
Executive is performing his duties immediately prior to any Potential
Change in Control, except for required travel on the Company's business
to an extent substantially consistent with the Executive's business
travel obligations as of the date of the Potential Change in Control;
(iv) any failure by the Company to comply with any of
the provisions of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given
by the Executive;
(v) the failure by the Company or a subsidiary to
continue in effect any pension benefit or incentive or deferred
compensation plan in which the Executive participates immediately prior
to any Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made
with respect to such plan, or the failure by the Company or a
subsidiary to continue the Executive's participation therein (or in
such substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the
<PAGE> 5
amount of benefits provided and the level of the Executive's
participation relative to other participants, as existed at the time of
the Potential Change in Control;
(vi) the failure by the Company or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of
the Company's or a subsidiary's retirement, life insurance, medical,
health and accident, or disability or similar plans in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Company or a subsidiary which
would directly or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit enjoyed by the
Executive at the time of the Potential Change in Control, or the
failure by the Company or a subsidiary to provide the Executive with
the number of paid vacation days to which the Executive is entitled in
accordance with the Company or a subsidiary's normal vacation policy in
effect at the time of the Potential Change in Control;
(vii) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 4.1; and/or
(viii) a termination by the Executive of his
employment for any reason during the thirty (30) day period immediately
following the first (1st) anniversary after the date of any Change in
Control.
1.8 "PERSON" shall have the meaning ascribed thereto in
Section 3(a)(9) of the Exchange Act, as modified, applied and used in Sections
13(d) and 14(d) thereof; provided, however, a Person shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries (in its capacity as such), (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation or
other entity owned, directly or indirectly, by the stockholders of the Company
in substantially the same character and proportions as their ownership of stock
of the Company.
1.9 "POTENTIAL CHANGE IN CONTROL" shall mean and be deemed to
have occurred if:
(i) the Company enters into an agreement the
consummation of which would result in the occurrence of a Change in
Control; and/or
(ii) any Person becomes, after September 15,
<PAGE> 6
1998, the Beneficial Owner, directly or indirectly, of securities of
the Company representing ten percent (10%) or more of the combined
voting power of the Company's then outstanding securities, or any
Person increases such Person's beneficial ownership of such securities
by five (5) percentage points or more over the percentage so owned by
such Person on September 15, 1998.
1.10 "WINDOW PERIOD" shall mean the thirteen (13) month period
following a Change in Control.
2. TERM OF THIS AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect as long as the Executive is employed by the
Company, provided, however, that if (i) a Change in Control shall have occurred
during the Executive's employment with the Company, this Agreement shall
continue in effect until the termination of the applicable Window Period, or
(ii) if a Potential Change in Control shall have occurred during the Executive's
employment with the Company, this Agreement shall continue in effect until one
(1) year after the Executive's termination of employment with the Company (the
"Term").
3. SEVERANCE PAYMENTS.
3.1 SEVERANCE. The Company shall pay the Executive the
payments described in Section 3.1.1 and 3.1.2 (the "Severance Payments") upon
the termination of the Executive's employment with the Company during the Window
Period (including, but not limited to, the Executive's termination of employment
for Good Reason, death or Disability), unless such termination is (i) by the
Company for Cause, or (ii) by the Executive without Good Reason. In addition,
the Executive's employment shall be deemed to have been terminated immediately
following a Change in Control by the Company without Cause or by the Executive
for Good Reason if (a) the Executive reasonably demonstrates that the
Executive's employment was terminated prior to a Change in Control without Cause
(1) at the request of a Person who has entered into an agreement with the
Company the consummation of which will constitute a Change in Control (or who
has taken other steps reasonably calculated to effect a Change in Control) or
(2) otherwise in connection with, as a result of or in anticipation of a Change
in Control, (b) the Executive terminates his employment for Good Reason prior to
a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control, or (c) the Executive dies or is
terminated due to Disability, in each case, after the occurrence of a Potential
Change in Control and related Change in Control actually occurs within one (1)
year after the Date of Termination or the date of death, as the case may be. The
Executive's right to terminate the Executive's employment for Good Reason shall
not be affected by the Executive's incapacity due to physical or mental illness.
The Executive's continued employment shall not constitute consent to,
<PAGE> 7
or a waiver of rights with respect to, any act or failure to act constituting
Good Reason hereunder.
3.1.1 In lieu of any further salary and bonus
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive (i) a lump sum
severance payment in cash (or at the Executive's sole and exclusive
option receive such amounts as salary continuation during the
applicable periods set forth below), equal to (x) three (3) times the
highest Annual Base Salary paid or payable to the Executive during the
thirty-six (36) month period immediately preceding the month in which
the Change in Control occurs, and (y) the aggregate of the maximum
bonuses (as defined in the Annual Incentive Plan (a copy of which is
attached hereto as Exhibit A)) which could have been earned, vested or
otherwise paid for the year in which the Change in Control occurs (for
purposes herein, the maximum bonuses shall automatically vest and be
deemed earned in their entirety as if the Executive was employed for
the entire applicable year period in which the Change in Control occurs
and shall be deemed payable to the Executive in full as of the Date of
Termination), and (ii) all unpaid accrued vacation through the Date of
Termination in accordance with the Company's plans and practices in
effect immediately prior to the Change in Control, provided that such
unpaid vacation has been accrued on the books and records of the
Company prior to the Date of Termination.
3.1.2 After the Date of Termination, the Company
shall continue to provide the Executive and/or the Executive's
dependents, as the case may be, with (i) life, disability, accident and
health insurance benefits ("Benefits Coverage") substantially similar
to those which the Executive and/or the Executive's dependents is
receiving immediately prior to any related Potential Change in Control
or the receipt of the Notice of Termination (without giving effect to
any reduction in such benefits subsequent to a Change in Control which
reduction constitutes Good Reason), whichever is greater, until the
earlier to occur of such time as the Executive is provided with
substantially comparable Benefits Coverage with a new employer or
thirty six (36) months; (ii) the automobile allowance, gas and other
automobile benefits the Executive was receiving immediately prior to
any related Potential Change in Control or the receipt of the Notice of
Termination (without giving effect to any reduction in such benefits
subsequent to a Change in Control which reduction constitutes Good
Reason), whichever is greater, for a period of twelve (12) months; and
(iii) outplacement services, the scope and provider of which shall be
selected by the Executive with the cost of such services and related
expenses borne by the
<PAGE> 8
Company, subject to the submission of reasonable documentation in
accordance with the Company's standard practice to substantiate
expenses.
3.2 SPECIAL REIMBURSEMENT. In the event that the Executive
becomes entitled to the Severance Payments, if any payment or benefit paid or
payable, or received or to be received, by or on behalf of the Executive in
connection with a Change in Control or the termination of the Executive's
employment, whether any such payments or benefits are pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Company, any
of its subsidiaries, any Person, or otherwise (the "Total Payments"), will or
would be subject to the excise tax imposed under section 4999 of the Code (the
"Excise Tax"), the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and any Excise Tax imposed upon or attributable to
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Total Payments.
3.2.1 For purposes of determining whether any of the
Total Payments will be subject of the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel (delivered to the Executive) selected by the
Company and reasonably acceptable to the Executive such Total Payments
(in whole or in part) (a) do not constitute parachute payments,
including (without limitation) by reason of section 280G(b)(4)(A) of
the Code, (b) such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered,
within the meaning of section 280G(b)(4)(B) of the Code, or (c) are
otherwise not subject to the Excise Tax, and (ii) the value of any
non-cash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance with the
principles of sections 280G(d)(3) and (4) of the code.
3.2.2 In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder at the time of termination of the Executive's employment, the
Executive shall repay to the Company, at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the
amount of such repayment at the rate provided in section 1274(b)(2)(B)
of the Code. In the
<PAGE> 9
event that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest, penalties or additions payable by the
Executive with respect to such excess) at the time that the amount of
such excess is finally determined. The Executive and the Company shall
each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect to
the Severance Payments.
3.3 DATE OF PAYMENT. The payment provided for in Section 3.1.1
and Section 3.2 hereof shall be made not later than the fifteenth (15th) day
following the Date of Termination; provided, however, that if the amounts of
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments to which the Executive is
likely to be entitled to and shall pay the remainder of such payments (together
with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth (5th) business day after demand by the Company (together with interest
at the rate provided in section 1274(b)(2)(B) of the Code). At the time that
payments are made under this Section 3.3, the Company shall provide the
Executive with a detailed written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received from
outside counsel, auditors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
3.4 LEGAL COSTS. The Company shall also reimburse the
Executive for all legal fees and expenses incurred in good faith by the
Executive as a result of any dispute with any party (including, but not limited
to, the Company and/or any affiliate of the Company) regarding the payment of
any benefit provided for in this Agreement (including, but not limited to, all
such fees and expenses incurred in disputing any termination or in seeking in
good faith to obtain or enforce any benefit or right provided by this Agreement
or in connection with any tax audit or proceeding to the extent attributable to
the application of Section 4999 of the Code), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in section
7872(f)(2)(A) of the Code. Such payments shall be made within five (5) business
<PAGE> 10
days after delivery of the Executive's written requests for payment accompanied
by such evidence of fees and expenses incurred as the Company reasonably may
require.
3.5 EMPLOYMENT AGREEMENT. The payment to the Executive of the
Severance Payments provided for in Section 3.1 shall be in lieu of any severance
payable to the Executive under the terms of any other employment agreement in
effect on the Date of Termination. Except as provided in the preceding sentence,
this Agreement is not intended to and shall not modify or supersede any such
employment agreement or other contract or arrangement between the Executive and
the Company in effect from time to time.
4. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
4.1 NOTICE OF TERMINATION. Any purported termination of the
Executive's employment with the Company (other than by reason of death) during
the Window Period shall be communicated by written Notice of Termination from
one party hereto to the other party hereto in accordance with Section 7 hereof.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment with
the Company under the provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board in the form and in the manner specified in Section 1.3 of this
Agreement. For purposes of this Agreement, any purported termination not
effected in accordance with the Section 4.1 shall not be considered effective.
4.2 DATE OF TERMINATION. "Date of Termination," with respect
to any purported termination of the Executive's employment during the Window
Period, shall mean (i) if the Executive's employment is terminated for
Disability, fifteen (15) days after Notice of Termination is given, and (ii) if
the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive, shall
not be less than fifteen (15) days nor more than thirty (30) days, respectively,
after the date on which such Notice of Termination is given).
4.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 4.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of a court of
<PAGE> 11
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice of
dispute only if the basis for such notice is reasonable, such notice is given in
good faith and the party giving such notice pursues the resolution of such
dispute with reasonable diligence.
4.4 COMPENSATION DURING DISPUTE. If a purported termination
occurs during the Window Period, and such termination is disputed in accordance
with Section 4.3 above, the Company shall continue to pay the Executive the full
compensation (including without limitation Annual Base Salary and Target Bonus)
in effect at the time of any related Potential Change in Control or when the
notice giving rise to the dispute was given (whichever is greater) and continue
the Executive as a participant in all compensation, incentive, pension and
welfare benefit and insurance plans in which the Executive was participating at
the time of any Potential Change in Control or when the notice giving rise to
the dispute was given, whichever is greater, until the dispute is finally
resolved in accordance with Section 4.3 hereof. Amounts paid under this Section
4.4 are in addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts due under this Agreement or any
other plan, agreement or arrangement.
5. NO MITIGATION. The Company agrees that, if the Executive's
employment is terminated during the Window Period, the Executive is not required
to seek other employment or to attempt in any way to reduce any amounts payable
to the Executive by the Company pursuant to Section 3 or Section 4.4. Further,
the amount of any payment or benefit provided for in Section 3 or Section 4.4
shall not be reduced by any compensation earned by the Executive as a result of
employment by another employer, by retirement benefits, or offset against any
amount claimed to be owed by the Executive to the Company or any of its
subsidiaries, or otherwise.
6. SUCCESSORS; BINDING AGREEMENT.
6.1 SUCCESSORS. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason during the Window Period, except that, for purposes
of implementing the foregoing, the date on which any
<PAGE> 12
such succession becomes effective shall be deemed the Date of Termination.
6.2 BINDING AGREEMENT. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the term of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
7. NOTICES. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual receipt:
To the Company:
Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Attention: Chairman of the Board and
Chief Executive Officer
With a copy to:
Robert S. Reder, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
To the Executive:
Richard S. Kolodny
44 Spring Court
Muttontown, New York 11791
8. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or
<PAGE> 13
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Delaware without regard to the principles of
conflict of laws thereof. All references to sections of the Exchange Act or the
Code shall be deemed also to refer to and include any successor provisions to
such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law and any
additional withholding to which the Executive has agreed. The rights and
obligations of the Company and the Executive under this Agreement shall survive
the expiration of the Term.
9. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. NO LIMITATION. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Company or any of its affiliated companies. Amounts which are
vested benefits or which the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first written above.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By: /s/ Rodney F. Price
--------------------------------
Name: Rodney F. Price
-----------------------------
<PAGE> 14
Title: Chairman of the Board and
Chief Executive Officer
-----------------------------
/s/ Richard S. Kolodny
-----------------------------------
RICHARD S. KOLODNY
<PAGE> 1
AGREEMENT
THIS AGREEMENT dated as of September 15, 1998 (this
"Agreement"), is made by and between Graham-Field Health Products, Inc., a
Delaware corporation having its principal offices at 400 Rabro Drive East,
Hauppauge, New York 11788 (the "Company"), and Ralph Liguori, Executive Vice
President of Operations (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its shareholders to foster the continued employment of key
executive management personnel; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined in Section 1.4 below) of the
Company exists from time to time and that such possibility, and the uncertainty,
instability and questions which it may raise for and among key executive
management personnel, may result in the premature departure or significant
distraction of such management personnel to the material detriment of the
Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce, focus and encourage the continued attention and
dedication of key members of the executive management of the Company and its
subsidiaries, including (without limitation) the Executive, to their assigned
duties without distraction in the face of potentially disturbing or unsettling
circumstances arising from the possibility of a Change in Control of the
Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings set forth below:
1.1 "ANNUAL BASE SALARY" shall mean the Executive's rate of
regular basic annual compensation prior to any reduction under a salary
reduction agreement pursuant to section 401(k) or section 125 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code"), and shall not
include (without limitation) cost of living allowances, fees, retainers,
reimbursements, bonuses, incentive awards, prizes or similar payments.
1.2 "BIL" shall mean collectively, Brierley Investments Ltd.,
BIL (Far East Holdings) Limited, BIL Securities (Offshore) Ltd. and any Person
or group of Persons which is directly affiliated with or is wholly or partly
controlled by one or more of such entities.
1.3 "CAUSE" for termination by the Company or any subsidiary
of the Executive's employment, after any Change in
<PAGE> 2
Control, shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company, or a subsidiary
of the Company, as such duties may reasonably be defined from time to time by
the Board (or a duly designated and authorized committee thereof), or to abide
by the reasonable written policies of the Company or of the Executive's primary
employer (other than any such failure resulting from the Executive's incapacity
due to physical or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination by the Executive for Good Reason
pursuant to Section 4.1) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand specifically identifies
the manner in which the Board believes that the Executive has not substantially
performed the Executive's duties or has not abided by any reasonable written
policies, or (ii) the continued and willful engaging by the Executive in conduct
which is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of
this definition, no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive in bad
faith and without reasonable belief that the Executive's act, or failure to act,
was in the best interests of the Company or its subsidiaries.
1.4 "CHANGE IN CONTROL" shall mean and be deemed to have
occurred if:
(i) any Person is or becomes the Beneficial Owner (as
that term is defined in Rule 13d-3 under the Securities Exchange Act of
1934 (the "Exchange Act")), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company) representing
twenty-five percent (25%) or more of the combined voting power of the
Company's then outstanding securities, or there occurs any transaction
which the Company is required to disclose pursuant to Item 1(a) of Form
8-K (as filed pursuant to Rule 13a-11 or Rule 15d-11 of the Exchange
Act), other than BIL which may purchase securities of the Company
provided that, immediately after giving effect to such purchase, BIL
does not own in the aggregate outstanding voting securities
representing more than 49% of the voting power of all outstanding
voting securities of the Company; or
(ii) during any period of twenty-four (24)
consecutive months (not including any period prior to September 15,
1998), individuals who at the beginning of such period constitute the
Board and any new director (other than a director designated by a
Person who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an
<PAGE> 3
actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a
majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all
of the individuals and entities who were Beneficial Owners, immediately
prior to such reorganization, merger or consolidation, of the combined
voting power of the Company's then outstanding securities beneficially
own, directly or indirectly, immediately after such reorganization,
merger or consolidation, more than seventy-five percent (75%) of the
combined voting power of the securities of the corporation resulting
from such reorganization, merger or consolidation; or
(iv) the shareholders of the Company approve (a) the
sale or disposition by the Company (other than to a subsidiary of the
Company) of all or substantially all of the assets of the Company, or
(b) a complete liquidation or dissolution of the Company.
1.5 "COMPANY" shall mean Graham-Field Health Products, Inc.
and any successor to its business and/or assets which assumes (either expressly,
by operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Company has occurred in connection
with such succession).
1.6 "DISABILITY" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, the Executive
shall have been absent from the full-time performance of the Executive's duties
for a period of three (3) consecutive months.
1.7 "GOOD REASON" for termination by the Executive of the
Executive's employment in connection with or as a result of any Change in
Control shall mean the occurrence (without the Executive's prior express written
consent) of any one of the following acts, or failures to act, unless, in the
case of any act or failure to act described in clauses (i), (iv), (v) or (vi)
below, such act or failure to act is corrected by the Company or
<PAGE> 4
any subsidiary prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with the Executive's most significant
position(s) (including without limitation status, offices, titles and
reporting responsibilities/rights) as an executive officer of the
Company and/or a subsidiary held during the one hundred eighty (180)
day period immediately preceding any related Potential Change in
Control, or a substantial adverse alteration of the Executive's
position or title(s) with the Company or any subsidiary or in the
nature of such status, offices, titles and reporting
responsibilities/rights;
(ii) a reduction in the Executive's Annual Base
Salary as in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal
executive offices to a location more than thirty (30) miles from its
location on the date of this Agreement (or, if different, more than
thirty (30) miles from where such offices are located immediately prior
to any Potential Change of Control) or the Company's requiring the
Executive to be based anywhere other than the location where the
Executive is performing his duties immediately prior to any Potential
Change in Control, except for required travel on the Company's business
to an extent substantially consistent with the Executive's business
travel obligations as of the date of the Potential Change in Control;
(iv) any failure by the Company to comply with any of
the provisions of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given
by the Executive;
(v) the failure by the Company or a subsidiary to
continue in effect any pension benefit or incentive or deferred
compensation plan in which the Executive participates immediately prior
to any Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made
with respect to such plan, or the failure by the Company or a
subsidiary to continue the Executive's participation therein (or in
such substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the
<PAGE> 5
amount of benefits provided and the level of the Executive's
participation relative to other participants, as existed at the time of
the Potential Change in Control;
(vi) the failure by the Company or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of
the Company's or a subsidiary's retirement, life insurance, medical,
health and accident, or disability or similar plans in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Company or a subsidiary which
would directly or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit enjoyed by the
Executive at the time of the Potential Change in Control, or the
failure by the Company or a subsidiary to provide the Executive with
the number of paid vacation days to which the Executive is entitled in
accordance with the Company or a subsidiary's normal vacation policy in
effect at the time of the Potential Change in Control;
(vii) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 4.1; and/or
(viii) a termination by the Executive of his
employment for any reason during the thirty (30) day period immediately
following the first (1st) anniversary after the date of any Change in
Control.
1.8 "PERSON" shall have the meaning ascribed thereto in
Section 3(a)(9) of the Exchange Act, as modified, applied and used in Sections
13(d) and 14(d) thereof; provided, however, a Person shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries (in its capacity as such), (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation or
other entity owned, directly or indirectly, by the stockholders of the Company
in substantially the same character and proportions as their ownership of stock
of the Company.
1.9 "POTENTIAL CHANGE IN CONTROL" shall mean and be deemed to
have occurred if:
(i) the Company enters into an agreement the
consummation of which would result in the occurrence of a Change in
Control; and/or
(ii) any Person becomes, after September 15,
<PAGE> 6
1998, the Beneficial Owner, directly or indirectly, of securities of
the Company representing ten percent (10%) or more of the combined
voting power of the Company's then outstanding securities, or any
Person increases such Person's beneficial ownership of such securities
by five (5) percentage points or more over the percentage so owned by
such Person on September 15, 1998.
1.10 "WINDOW PERIOD" shall mean the thirteen (13) month period
following a Change in Control.
2. TERM OF THIS AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect as long as the Executive is employed by the
Company, provided, however, that if (i) a Change in Control shall have occurred
during the Executive's employment with the Company, this Agreement shall
continue in effect until the termination of the applicable Window Period, or
(ii) if a Potential Change in Control shall have occurred during the Executive's
employment with the Company, this Agreement shall continue in effect until one
(1) year after the Executive's termination of employment with the Company (the
"Term").
3. SEVERANCE PAYMENTS.
3.1 SEVERANCE. The Company shall pay the Executive the
payments described in Section 3.1.1 and 3.1.2 (the "Severance Payments") upon
the termination of the Executive's employment with the Company during the Window
Period (including, but not limited to, the Executive's termination of employment
for Good Reason, death or Disability), unless such termination is (i) by the
Company for Cause, or (ii) by the Executive without Good Reason. In addition,
the Executive's employment shall be deemed to have been terminated immediately
following a Change in Control by the Company without Cause or by the Executive
for Good Reason if (a) the Executive reasonably demonstrates that the
Executive's employment was terminated prior to a Change in Control without Cause
(1) at the request of a Person who has entered into an agreement with the
Company the consummation of which will constitute a Change in Control (or who
has taken other steps reasonably calculated to effect a Change in Control) or
(2) otherwise in connection with, as a result of or in anticipation of a Change
in Control, (b) the Executive terminates his employment for Good Reason prior to
a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control, or (c) the Executive dies or is
terminated due to Disability, in each case, after the occurrence of a Potential
Change in Control and related Change in Control actually occurs within one (1)
year after the Date of Termination or the date of death, as the case may be. The
Executive's right to terminate the Executive's employment for Good Reason shall
not be affected by the Executive's incapacity due to physical or mental illness.
The Executive's continued employment shall not constitute consent to,
<PAGE> 7
or a waiver of rights with respect to, any act or failure to act constituting
Good Reason hereunder.
3.1.1 In lieu of any further salary and bonus
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive (i) a lump sum
severance payment in cash (or at the Executive's sole and exclusive
option receive such amounts as salary continuation during the
applicable periods set forth below), equal to (x) three (3) times the
highest Annual Base Salary paid or payable to the Executive during the
thirty-six (36) month period immediately preceding the month in which
the Change in Control occurs, and (y) the aggregate of the maximum
bonuses (as defined in the Annual Incentive Plan (a copy of which is
attached hereto as Exhibit A)) which could have been earned, vested or
otherwise paid for the year in which the Change in Control occurs (for
purposes herein, the maximum bonuses shall automatically vest and be
deemed earned in their entirety as if the Executive was employed for
the entire applicable year period in which the Change in Control occurs
and shall be deemed payable to the Executive in full as of the Date of
Termination), and (ii) all unpaid accrued vacation through the Date of
Termination in accordance with the Company's plans and practices in
effect immediately prior to the Change in Control, provided that such
unpaid vacation has been accrued on the books and records of the
Company prior to the Date of Termination.
3.1.2 After the Date of Termination, the Company
shall continue to provide the Executive and/or the Executive's
dependents, as the case may be, with (i) life, disability, accident and
health insurance benefits ("Benefits Coverage") substantially similar
to those which the Executive and/or the Executive's dependents is
receiving immediately prior to any related Potential Change in Control
or the receipt of the Notice of Termination (without giving effect to
any reduction in such benefits subsequent to a Change in Control which
reduction constitutes Good Reason), whichever is greater, until the
earlier to occur of such time as the Executive is provided with
substantially comparable Benefits Coverage with a new employer or
thirty six (36) months; (ii) the automobile allowance, gas and other
automobile benefits the Executive was receiving immediately prior to
any related Potential Change in Control or the receipt of the Notice of
Termination (without giving effect to any reduction in such benefits
subsequent to a Change in Control which reduction constitutes Good
Reason), whichever is greater, for a period of twelve (12) months; and
(iii) outplacement services, the scope and provider of which shall be
selected by the Executive with the cost of such services and related
expenses borne by the
<PAGE> 8
Company, subject to the submission of reasonable documentation in
accordance with the Company's standard practice to substantiate
expenses.
3.2 SPECIAL REIMBURSEMENT. In the event that the Executive
becomes entitled to the Severance Payments, if any payment or benefit paid or
payable, or received or to be received, by or on behalf of the Executive in
connection with a Change in Control or the termination of the Executive's
employment, whether any such payments or benefits are pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Company, any
of its subsidiaries, any Person, or otherwise (the "Total Payments"), will or
would be subject to the excise tax imposed under section 4999 of the Code (the
"Excise Tax"), the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and any Excise Tax imposed upon or attributable to
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Total Payments.
3.2.1 For purposes of determining whether any of the
Total Payments will be subject of the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel (delivered to the Executive) selected by the
Company and reasonably acceptable to the Executive such Total
Payments (in whole or in part) (a) do not constitute parachute
payments, including (without limitation) by reason of section
280G(b)(4)(A) of the Code, (b) such excess parachute payments (in whole
or in part) represent reasonable compensation for services actually
rendered, within the meaning of section 280G(b)(4)(B) of the Code, or
(c) are otherwise not subject to the Excise Tax, and (ii) the value of
any non-cash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance with the
principles of sections 280G(d)(3) and (4) of the code.
3.2.2 In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder at the time of termination of the Executive's employment, the
Executive shall repay to the Company, at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the
amount of such repayment at the rate provided in section 1274(b)(2)(B)
of the Code. In the
<PAGE> 9
event that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest, penalties or additions payable by the
Executive with respect to such excess) at the time that the amount of
such excess is finally determined. The Executive and the Company shall
each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect to
the Severance Payments.
3.3 DATE OF PAYMENT. The payment provided for in Section 3.1.1
and Section 3.2 hereof shall be made not later than the fifteenth (15th) day
following the Date of Termination; provided, however, that if the amounts of
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments to which the Executive is
likely to be entitled to and shall pay the remainder of such payments (together
with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth (5th) business day after demand by the Company (together with interest
at the rate provided in section 1274(b)(2)(B) of the Code). At the time that
payments are made under this Section 3.3, the Company shall provide the
Executive with a detailed written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received from
outside counsel, auditors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
3.4 LEGAL COSTS. The Company shall also reimburse the
Executive for all legal fees and expenses incurred in good faith by the
Executive as a result of any dispute with any party (including, but not limited
to, the Company and/or any affiliate of the Company) regarding the payment of
any benefit provided for in this Agreement (including, but not limited to, all
such fees and expenses incurred in disputing any termination or in seeking in
good faith to obtain or enforce any benefit or right provided by this Agreement
or in connection with any tax audit or proceeding to the extent attributable to
the application of Section 4999 of the Code), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in section
7872(f)(2)(A) of the Code. Such payments shall be made within five (5) business
<PAGE> 10
days after delivery of the Executive's written requests for payment accompanied
by such evidence of fees and expenses incurred as the Company reasonably may
require.
3.5 EMPLOYMENT AGREEMENT. The payment to the Executive of the
Severance Payments provided for in Section 3.1 shall be in lieu of any severance
payable to the Executive under the terms of any other employment agreement in
effect on the Date of Termination. Except as provided in the preceding sentence,
this Agreement is not intended to and shall not modify or supersede any such
employment agreement or other contract or arrangement between the Executive and
the Company in effect from time to time.
4. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
4.1 NOTICE OF TERMINATION. Any purported termination of the
Executive's employment with the Company (other than by reason of death) during
the Window Period shall be communicated by written Notice of Termination from
one party hereto to the other party hereto in accordance with Section 7 hereof.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment with
the Company under the provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board in the form and in the manner specified in Section 1.3 of this
Agreement. For purposes of this Agreement, any purported termination not
effected in accordance with the Section 4.1 shall not be considered effective.
4.2 DATE OF TERMINATION. "Date of Termination," with respect
to any purported termination of the Executive's employment during the Window
Period, shall mean (i) if the Executive's employment is terminated for
Disability, fifteen (15) days after Notice of Termination is given, and (ii) if
the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive, shall
not be less than fifteen (15) days nor more than thirty (30) days, respectively,
after the date on which such Notice of Termination is given).
4.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 4.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of a court of
<PAGE> 11
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice of
dispute only if the basis for such notice is reasonable, such notice is given in
good faith and the party giving such notice pursues the resolution of such
dispute with reasonable diligence.
4.4 COMPENSATION DURING DISPUTE. If a purported termination
occurs during the Window Period, and such termination is disputed in accordance
with Section 4.3 above, the Company shall continue to pay the Executive the full
compensation (including without limitation Annual Base Salary and Target Bonus)
in effect at the time of any related Potential Change in Control or when the
notice giving rise to the dispute was given (whichever is greater) and continue
the Executive as a participant in all compensation, incentive, pension and
welfare benefit and insurance plans in which the Executive was participating at
the time of any Potential Change in Control or when the notice giving rise to
the dispute was given, whichever is greater, until the dispute is finally
resolved in accordance with Section 4.3 hereof. Amounts paid under this Section
4.4 are in addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts due under this Agreement or any
other plan, agreement or arrangement.
5. NO MITIGATION. The Company agrees that, if the Executive's
employment is terminated during the Window Period, the Executive is not required
to seek other employment or to attempt in any way to reduce any amounts payable
to the Executive by the Company pursuant to Section 3 or Section 4.4. Further,
the amount of any payment or benefit provided for in Section 3 or Section 4.4
shall not be reduced by any compensation earned by the Executive as a result of
employment by another employer, by retirement benefits, or offset against any
amount claimed to be owed by the Executive to the Company or any of its
subsidiaries, or otherwise.
6. SUCCESSORS; BINDING AGREEMENT.
6.1 SUCCESSORS. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason during the Window Period, except that, for purposes
of implementing the foregoing, the date on which any
<PAGE> 12
such succession becomes effective shall be deemed the Date of Termination.
6.2 BINDING AGREEMENT. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the term of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
7. NOTICES. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual receipt:
To the Company:
Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Attention: Chairman of the Board and
Chief Executive Officer
With a copy to:
Robert S. Reder, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
To the Executive:
Ralph Liguori
699 Tower Mews
Oakdale, New York 11769
8. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
<PAGE> 13
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Delaware without regard to the principles of
conflict of laws thereof. All references to sections of the Exchange Act or the
Code shall be deemed also to refer to and include any successor provisions to
such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law and any
additional withholding to which the Executive has agreed. The rights and
obligations of the Company and the Executive under this Agreement shall survive
the expiration of the Term.
9. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. NO LIMITATION. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Company or any of its affiliated companies. Amounts which are
vested benefits or which the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first written above.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By: /s/ Rodney F. Price
----------------------------------------
Name: Rodney F. Price
-------------------------------------
<PAGE> 14
Title: Chairman of the Board
and Chief Executive Officer
-------------------------------------
/s/ Ralph Liguori
--------------------------------------------
RALPH LIGUORI
<PAGE> 1
AGREEMENT
THIS AGREEMENT dated as of September 15, 1998 (this
"Agreement"), is made by and between Graham-Field Health Products, Inc., a
Delaware corporation having its principal offices at 400 Rabro Drive East,
Hauppauge, New York 11788 (the "Company"), and Peter Winocur, Executive Vice
President of Sales and Marketing (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its shareholders to foster the continued employment of key
executive management personnel; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined in Section 1.4 below) of the
Company exists from time to time and that such possibility, and the uncertainty,
instability and questions which it may raise for and among key executive
management personnel, may result in the premature departure or significant
distraction of such management personnel to the material detriment of the
Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce, focus and encourage the continued attention and
dedication of key members of the executive management of the Company and its
subsidiaries, including (without limitation) the Executive, to their assigned
duties without distraction in the face of potentially disturbing or unsettling
circumstances arising from the possibility of a Change in Control of the
Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, the following
terms have the meanings set forth below:
1.1 "ANNUAL BASE SALARY" shall mean the Executive's rate of
regular basic annual compensation prior to any reduction under a salary
reduction agreement pursuant to section 401(k) or section 125 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code"), and shall not
include (without limitation) cost of living allowances, fees, retainers,
reimbursements, bonuses, incentive awards, prizes or similar payments.
1.2 "BIL" shall mean collectively, Brierley Investments Ltd.,
BIL (Far East Holdings) Limited, BIL Securities (Offshore) Ltd. and any Person
or group of Persons which is directly affiliated with or is wholly or partly
controlled by one or more of such entities.
1.3 "CAUSE" for termination by the Company or any subsidiary
of the Executive's employment, after any Change in
<PAGE> 2
Control, shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company, or a subsidiary
of the Company, as such duties may reasonably be defined from time to time by
the Board (or a duly designated and authorized committee thereof), or to abide
by the reasonable written policies of the Company or of the Executive's primary
employer (other than any such failure resulting from the Executive's incapacity
due to physical or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination by the Executive for Good Reason
pursuant to Section 4.1) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand specifically identifies
the manner in which the Board believes that the Executive has not substantially
performed the Executive's duties or has not abided by any reasonable written
policies, or (ii) the continued and willful engaging by the Executive in conduct
which is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of
this definition, no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive in bad
faith and without reasonable belief that the Executive's act, or failure to act,
was in the best interests of the Company or its subsidiaries.
1.4 "CHANGE IN CONTROL" shall mean and be deemed to have
occurred if:
(i) any Person is or becomes the Beneficial Owner (as
that term is defined in Rule 13d-3 under the Securities Exchange Act of
1934 (the "Exchange Act")), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company) representing
twenty-five percent (25%) or more of the combined voting power of the
Company's then outstanding securities, or there occurs any transaction
which the Company is required to disclose pursuant to Item 1(a) of Form
8-K (as filed pursuant to Rule 13a-11 or Rule 15d-11 of the Exchange
Act), other than BIL which may purchase securities of the Company
provided that, immediately after giving effect to such purchase, BIL
does not own in the aggregate outstanding voting securities
representing more than 49% of the voting power of all outstanding
voting securities of the Company; or
(ii) during any period of twenty-four (24)
consecutive months (not including any period prior to September 15,
1998), individuals who at the beginning of such period constitute the
Board and any new director (other than a director designated by a
Person who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an
<PAGE> 3
actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a
majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all
of the individuals and entities who were Beneficial Owners, immediately
prior to such reorganization, merger or consolidation, of the combined
voting power of the Company's then outstanding securities beneficially
own, directly or indirectly, immediately after such reorganization,
merger or consolidation, more than seventy-five percent (75%) of the
combined voting power of the securities of the corporation resulting
from such reorganization, merger or consolidation; or
(iv) the shareholders of the Company approve (a) the
sale or disposition by the Company (other than to a subsidiary of the
Company) of all or substantially all of the assets of the Company, or
(b) a complete liquidation or dissolution of the Company.
1.5 "COMPANY" shall mean Graham-Field Health Products, Inc.
and any successor to its business and/or assets which assumes (either expressly,
by operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Company has occurred in connection
with such succession).
1.6 "DISABILITY" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, the Executive
shall have been absent from the full-time performance of the Executive's duties
for a period of three (3) consecutive months.
1.7 "GOOD REASON" for termination by the Executive of the
Executive's employment in connection with or as a result of any Change in
Control shall mean the occurrence (without the Executive's prior express written
consent) of any one of the following acts, or failures to act, unless, in the
case of any act or failure to act described in clauses (i), (iv), (v) or (vi)
below, such act or failure to act is corrected by the Company or
<PAGE> 4
any subsidiary prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with the Executive's most significant
position(s) (including without limitation status, offices, titles and
reporting responsibilities/rights) as an executive officer of the
Company and/or a subsidiary held during the one hundred eighty (180)
day period immediately preceding any related Potential Change in
Control, or a substantial adverse alteration of the Executive's
position or title(s) with the Company or any subsidiary or in the
nature of such status, offices, titles and reporting
responsibilities/rights;
(ii) a reduction in the Executive's Annual Base
Salary as in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal
executive offices to a location more than thirty (30) miles from its
location on the date of this Agreement (or, if different, more than
thirty (30) miles from where such offices are located immediately prior
to any Potential Change of Control) or the Company's requiring the
Executive to be based anywhere other than the location where the
Executive is performing his duties immediately prior to any Potential
Change in Control, except for required travel on the Company's business
to an extent substantially consistent with the Executive's business
travel obligations as of the date of the Potential Change in Control;
(iv) any failure by the Company to comply with any of
the provisions of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given
by the Executive;
(v) the failure by the Company or a subsidiary to
continue in effect any pension benefit or incentive or deferred
compensation plan in which the Executive participates immediately prior
to any Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made
with respect to such plan, or the failure by the Company or a
subsidiary to continue the Executive's participation therein (or in
such substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the
<PAGE> 5
amount of benefits provided and the level of the Executive's
participation relative to other participants, as existed at the time of
the Potential Change in Control;
(vi) the failure by the Company or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of
the Company's or a subsidiary's retirement, life insurance, medical,
health and accident, or disability or similar plans in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Company or a subsidiary which
would directly or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit enjoyed by the
Executive at the time of the Potential Change in Control, or the
failure by the Company or a subsidiary to provide the Executive with
the number of paid vacation days to which the Executive is entitled in
accordance with the Company or a subsidiary's normal vacation policy in
effect at the time of the Potential Change in Control;
(vii) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 4.1; and/or
(viii) a termination by the Executive of his
employment for any reason during the thirty (30) day period immediately
following the first (1st) anniversary after the date of any Change in
Control.
1.8 "PERSON" shall have the meaning ascribed thereto in
Section 3(a)(9) of the Exchange Act, as modified, applied and used in Sections
13(d) and 14(d) thereof; provided, however, a Person shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries (in its capacity as such), (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation or
other entity owned, directly or indirectly, by the stockholders of the Company
in substantially the same character and proportions as their ownership of stock
of the Company.
1.9 "POTENTIAL CHANGE IN CONTROL" shall mean and be deemed to
have occurred if:
(i) the Company enters into an agreement the
consummation of which would result in the occurrence of a Change in
Control; and/or
(ii) any Person becomes, after September 15,
<PAGE> 6
1998, the Beneficial Owner, directly or indirectly, of securities of
the Company representing ten percent (10%) or more of the combined
voting power of the Company's then outstanding securities, or any
Person increases such Person's beneficial ownership of such securities
by five (5) percentage points or more over the percentage so owned by
such Person on September 15, 1998.
1.10 "WINDOW PERIOD" shall mean the thirteen (13) month period
following a Change in Control.
2. TERM OF THIS AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect as long as the Executive is employed by the
Company, provided, however, that if (i) a Change in Control shall have occurred
during the Executive's employment with the Company, this Agreement shall
continue in effect until the termination of the applicable Window Period, or
(ii) if a Potential Change in Control shall have occurred during the Executive's
employment with the Company, this Agreement shall continue in effect until one
(1) year after the Executive's termination of employment with the Company (the
"Term").
3. SEVERANCE PAYMENTS.
3.1 SEVERANCE. The Company shall pay the Executive the
payments described in Section 3.1.1 and 3.1.2 (the "Severance Payments") upon
the termination of the Executive's employment with the Company during the Window
Period (including, but not limited to, the Executive's termination of employment
for Good Reason, death or Disability), unless such termination is (i) by the
Company for Cause, or (ii) by the Executive without Good Reason. In addition,
the Executive's employment shall be deemed to have been terminated immediately
following a Change in Control by the Company without Cause or by the Executive
for Good Reason if (a) the Executive reasonably demonstrates that the
Executive's employment was terminated prior to a Change in Control without Cause
(1) at the request of a Person who has entered into an agreement with the
Company the consummation of which will constitute a Change in Control (or who
has taken other steps reasonably calculated to effect a Change in Control) or
(2) otherwise in connection with, as a result of or in anticipation of a Change
in Control, (b) the Executive terminates his employment for Good Reason prior to
a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control, or (c) the Executive dies or is
terminated due to Disability, in each case, after the occurrence of a Potential
Change in Control and related Change in Control actually occurs within one (1)
year after the Date of Termination or the date of death, as the case may be. The
Executive's right to terminate the Executive's employment for Good Reason shall
not be affected by the Executive's incapacity due to physical or mental illness.
The Executive's continued employment shall not constitute consent to,
<PAGE> 7
or a waiver of rights with respect to, any act or failure to act constituting
Good Reason hereunder.
3.1.1 In lieu of any further salary and bonus
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive (i) a lump sum
severance payment in cash (or at the Executive's sole and exclusive
option receive such amounts as salary continuation during the
applicable periods set forth below), equal to (x) three (3) times the
highest Annual Base Salary paid or payable to the Executive during the
thirty-six (36) month period immediately preceding the month in which
the Change in Control occurs, and (y) the aggregate of the maximum
bonuses (as defined in the Annual Incentive Plan (a copy of which is
attached hereto as Exhibit A)) which could have been earned, vested or
otherwise paid for the year in which the Change in Control occurs (for
purposes herein, the maximum bonuses shall automatically vest and be
deemed earned in their entirety as if the Executive was employed for
the entire applicable year period in which the Change in Control occurs
and shall be deemed payable to the Executive in full as of the Date of
Termination), and (ii) all unpaid accrued vacation through the Date of
Termination in accordance with the Company's plans and practices in
effect immediately prior to the Change in Control, provided that such
unpaid vacation has been accrued on the books and records of the
Company prior to the Date of Termination.
3.1.2 After the Date of Termination, the Company
shall continue to provide the Executive and/or the Executive's
dependents, as the case may be, with (i) life, disability, accident and
health insurance benefits ("Benefits Coverage") substantially similar
to those which the Executive and/or the Executive's dependents is
receiving immediately prior to any related Potential Change in Control
or the receipt of the Notice of Termination (without giving effect to
any reduction in such benefits subsequent to a Change in Control which
reduction constitutes Good Reason), whichever is greater, until the
earlier to occur of such time as the Executive is provided with
substantially comparable Benefits Coverage with a new employer or
thirty six (36) months; (ii) the automobile allowance, gas and other
automobile benefits the Executive was receiving immediately prior to
any related Potential Change in Control or the receipt of the Notice of
Termination (without giving effect to any reduction in such benefits
subsequent to a Change in Control which reduction constitutes Good
Reason), whichever is greater, for a period of twelve (12) months; and
(iii) outplacement services, the scope and provider of which shall be
selected by the Executive with the cost of such services and related
expenses borne by the
<PAGE> 8
Company, subject to the submission of reasonable documentation in
accordance with the Company's standard practice to substantiate
expenses.
3.2 SPECIAL REIMBURSEMENT. In the event that the Executive
becomes entitled to the Severance Payments, if any payment or benefit paid or
payable, or received or to be received, by or on behalf of the Executive in
connection with a Change in Control or the termination of the Executive's
employment, whether any such payments or benefits are pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Company, any
of its subsidiaries, any Person, or otherwise (the "Total Payments"), will or
would be subject to the excise tax imposed under section 4999 of the Code (the
"Excise Tax"), the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and any Excise Tax imposed upon or attributable to
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Total Payments.
3.2.1 For purposes of determining whether any of the
Total Payments will be subject of the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel (delivered to the Executive) selected by the
Company and reasonably acceptable to the Executive such Total Payments
(in whole or in part) (a) do not constitute parachute payments,
including (without limitation) by reason of section 280G(b)(4)(A) of
the Code, (b) such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered,
within the meaning of section 280G(b)(4)(B) of the Code, or (c) are
otherwise not subject to the Excise Tax, and (ii) the value of any
non-cash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance with the
principles of sections 280G(d)(3) and (4) of the code.
3.2.2 In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder at the time of termination of the Executive's employment, the
Executive shall repay to the Company, at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the
amount of such repayment at the rate provided in section 1274(b)(2)(B)
of the Code. In the
<PAGE> 9
event that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest, penalties or additions payable by the
Executive with respect to such excess) at the time that the amount of
such excess is finally determined. The Executive and the Company shall
each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect to
the Severance Payments.
3.3 DATE OF PAYMENT. The payment provided for in Section 3.1.1
and Section 3.2 hereof shall be made not later than the fifteenth (15th) day
following the Date of Termination; provided, however, that if the amounts of
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments to which the Executive is
likely to be entitled to and shall pay the remainder of such payments (together
with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth (5th) business day after demand by the Company (together with interest
at the rate provided in section 1274(b)(2)(B) of the Code). At the time that
payments are made under this Section 3.3, the Company shall provide the
Executive with a detailed written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received from
outside counsel, auditors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
3.4 LEGAL COSTS. The Company shall also reimburse the
Executive for all legal fees and expenses incurred in good faith by the
Executive as a result of any dispute with any party (including, but not limited
to, the Company and/or any affiliate of the Company) regarding the payment of
any benefit provided for in this Agreement (including, but not limited to, all
such fees and expenses incurred in disputing any termination or in seeking in
good faith to obtain or enforce any benefit or right provided by this Agreement
or in connection with any tax audit or proceeding to the extent attributable to
the application of Section 4999 of the Code), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in section
7872(f)(2)(A) of the Code. Such payments shall be made within five (5) business
<PAGE> 10
days after delivery of the Executive's written requests for payment accompanied
by such evidence of fees and expenses incurred as the Company reasonably may
require.
3.5 EMPLOYMENT AGREEMENT. The payment to the Executive of the
Severance Payments provided for in Section 3.1 shall be in lieu of any severance
payable to the Executive under the terms of any other employment agreement in
effect on the Date of Termination. Except as provided in the preceding sentence,
this Agreement is not intended to and shall not modify or supersede any such
employment agreement or other contract or arrangement between the Executive and
the Company in effect from time to time.
4. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
4.1 NOTICE OF TERMINATION. Any purported termination of the
Executive's employment with the Company (other than by reason of death) during
the Window Period shall be communicated by written Notice of Termination from
one party hereto to the other party hereto in accordance with Section 7 hereof.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment with
the Company under the provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board in the form and in the manner specified in Section 1.3 of this
Agreement. For purposes of this Agreement, any purported termination not
effected in accordance with the Section 4.1 shall not be considered effective.
4.2 DATE OF TERMINATION. "Date of Termination," with respect
to any purported termination of the Executive's employment during the Window
Period, shall mean (i) if the Executive's employment is terminated for
Disability, fifteen (15) days after Notice of Termination is given, and (ii) if
the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive, shall
not be less than fifteen (15) days nor more than thirty (30) days, respectively,
after the date on which such Notice of Termination is given).
4.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 4.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of a court of
<PAGE> 11
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice of
dispute only if the basis for such notice is reasonable, such notice is given in
good faith and the party giving such notice pursues the resolution of such
dispute with reasonable diligence.
4.4 COMPENSATION DURING DISPUTE. If a purported termination
occurs during the Window Period, and such termination is disputed in accordance
with Section 4.3 above, the Company shall continue to pay the Executive the full
compensation (including without limitation Annual Base Salary and Target Bonus)
in effect at the time of any related Potential Change in Control or when the
notice giving rise to the dispute was given (whichever is greater) and continue
the Executive as a participant in all compensation, incentive, pension and
welfare benefit and insurance plans in which the Executive was participating at
the time of any Potential Change in Control or when the notice giving rise to
the dispute was given, whichever is greater, until the dispute is finally
resolved in accordance with Section 4.3 hereof. Amounts paid under this Section
4.4 are in addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts due under this Agreement or any
other plan, agreement or arrangement.
5. NO MITIGATION. The Company agrees that, if the Executive's
employment is terminated during the Window Period, the Executive is not required
to seek other employment or to attempt in any way to reduce any amounts payable
to the Executive by the Company pursuant to Section 3 or Section 4.4. Further,
the amount of any payment or benefit provided for in Section 3 or Section 4.4
shall not be reduced by any compensation earned by the Executive as a result of
employment by another employer, by retirement benefits, or offset against any
amount claimed to be owed by the Executive to the Company or any of its
subsidiaries, or otherwise.
6. SUCCESSORS; BINDING AGREEMENT.
6.1 SUCCESSORS. In addition to any obligations imposed by
law upon any successor to the Company, the Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle the Executive to compensation from the Company
in the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment for Good
Reason during the Window Period, except that, for purposes of implementing the
foregoing, the date on which any
<PAGE> 12
such succession becomes effective shall be deemed the Date of Termination.
6.2 BINDING AGREEMENT. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the term of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
7. NOTICES. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual receipt:
To the Company:
Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Attention: Chairman of the Board and
Chief Executive Officer
With a copy to:
Robert S. Reder, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
To the Executive:
Peter Winocur
14 Woodlee Road
Cold Spring Harbor, New York 11724
8. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
<PAGE> 13
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Delaware without regard to the principles of
conflict of laws thereof. All references to sections of the Exchange Act or the
Code shall be deemed also to refer to and include any successor provisions to
such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law and any
additional withholding to which the Executive has agreed. The rights and
obligations of the Company and the Executive under this Agreement shall survive
the expiration of the Term.
9. VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. NO LIMITATION. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any other contract
or agreement with the Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement with
the Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first written above.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By: /s/ Rodney F. Price
------------------------------
Name: Rodney F. Price
----------------------------
<PAGE> 14
Title: Chairman of the Board
and Chief Executive Officer
---------------------------
/s/ Peter Winocur
----------------------------------
PETER WINOCUR
<PAGE> 1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, made as of November 2, 1998, by and between
GRAHAM-FIELD HEALTH PRODUCTS, INC., a Delaware corporation having its principal
place of business at 400 Rabro Drive East, Hauppauge, New York 11788 (the
"Company"), and HARVEY P. DIAMOND, residing at 19 Clubhouse Lane, Scarsdale, New
York 10583 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to retain the Executive as its Executive
Vice President of the Home Healthcare Business Unit of the Company to advance
the business and interests of the Company on the terms and conditions set forth
herein;
WHEREAS, the Executive desires to provide his services to the Company
in such capacities, on and subject to the terms and conditions hereof; and
WHEREAS, as an inducement for the Company to enter into this Agreement,
the Company and the Executive have entered into a certain Non-Competition
Agreement (the "Non-Competition Agreement"), in the form attached hereto as
Exhibit I;
WHEREAS, the Company and the Executive have entered into a certain
Change in Control Agreement of even date herewith (the "Change in Control
Agreement"), in the form attached hereto as Exhibit II;
WHEREAS, the Company and the Executive have entered into certain Stock
Option Agreement of even date herewith (the "Stock
<PAGE> 2
Option Agreement"), in the form attached hereto as Exhibit III;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. EMPLOYMENT. Subject to all of the terms and conditions hereof, the
Company does hereby employ the Executive, effective as of November 2, 1998 (the
"Effective Date") for a term commencing on the date hereof and ending on the
date which is three (3) years after the date hereof (subject to early
termination as provided herein) (the "Term") as its Executive Vice President of
the Home Healthcare Business Unit of the Company, and the Executive does hereby
accept such employment.
2. DUTIES OF EXECUTIVE. The Executive shall, during the Term, perform
such executive and administrative duties and functions as may from time to time
be appropriate to and consistent with his position as Executive Vice President
of the Home Healthcare Business Unit of the Company, subject at all times to the
control and direction of the Board of Directors, President and Chief Executive
Officer of the Company. The Executive agrees to devote substantially all of his
business time to the business and affairs of the Company. The Executive agrees
to perform his duties hereunder faithfully, diligently and to the best of his
abilities and to refrain from engaging in any other business activity that does,
will or could be deemed to interfere with the performance of his duties
hereunder or does, will or could reasonably be deemed to conflict with the best
interests of the Company. The Executive agrees to accept the payments to be made
to him under this Agreement and the benefits to be derived from the Stock Option
Agreement and Change in Control Agreement as full and complete
<PAGE> 3
compensation for the services required to be performed by, and the covenants of,
the Executive under this Agreement and the Non-Competition Agreement.
3. COMPENSATION.
3.1 BASE SALARY. The Company agrees to pay the Executive an
annual base salary at the rate of Two Hundred Fifty Thousand Dollars ($250,000)
per annum (the "Base Salary") payable in substantially equal installments every
week or in such other manner as the Company may generally pay its employees.
Nothing contained herein shall be deemed to obligate the Company to increase the
Base Salary at any time.
3.2 BONUS PROGRAM. In order to provide performance-based
incentive compensation to the Executive, the Executive shall be eligible to
participate in the Company's bonus program attached hereto as Exhibit IV,
pursuant to which the Executive will be eligible to earn, subject to the
achievement of certain financial goals and targets contained therein, up to 100%
of the Base Salary on an annual basis.
3.3 REGULAR BENEFITS. The Executive shall be entitled to
participate in any health insurance, accident insurance, hospitalization
insurance, life insurance, pension, or any other similar plan or benefit
afforded by the Company to its executive officers generally, if and to the
extent that the Executive is eligible to participate in accordance with the
provisions of any such insurance, plan or benefit generally.
3.4 AUTOMOBILE ALLOWANCE. The Company recognizes that the
Executive will require the use of an automobile for business
<PAGE> 4
purposes. Therefore, the Company will provide the Executive with an automobile
allowance of $500 per month. In addition, the Company will reimburse the
Executive for gas expenses for the operation of the automobile for business
purposes.
4. REIMBURSEMENT OF BUSINESS EXPENSES. The Company shall reimburse the
Executive for reasonable travel and business expenses incurred on behalf of the
Company, subject to the approval and substantiation requirements and other
procedures from time to time established by the Company. The Executive may
reasonably incur such expenses in the manner permitted by the executive officers
of the Company.
5. TERMINATION AND SEVERANCE ARRANGEMENTS.
(a) The Executive's employment hereunder may be terminated under the
following circumstances:
(i) The Executive may terminate his employment hereunder at any
time on not less than sixty (60) days prior written notice to the Company.
(ii) During the Term, the Company may terminate the Executive's
employment hereunder without Cause by providing written notice of termination on
not less than three (3) months prior written notice to the Executive.
(iii) In the event of the death of or adjudicated incompetency of
the Executive during the Term, this Agreement and all benefits payable hereunder
shall terminate on the date of death or adjudication of incompetency of the
Executive.
(iv) If the Executive, because of illness, injury or other
incapacitating condition, is unable to perform the services required to be
performed by him under this Agreement for a period
<PAGE> 5
or periods aggregating more than forty-five (45) days in any twelve (12)
consecutive months or a period of thirty (30) consecutive days during any twelve
(12) month period, then the Company, in its sole discretion, may terminate this
Agreement by giving notice thereof to the Executive, and this Agreement and all
benefits payable hereunder shall terminate upon the date of such notice.
(v) The Company may terminate the Executive's employment at any
time for Cause. For purposes of this Agreement, the term "Cause" shall mean: (A)
gross negligence of the Executive in the performance of his duties, (B) willful
neglect of his duties, (C) the Executive's conviction of any felony, (D) the
Executive's conviction of any misdemeanor involving theft or fraud, (E) any
embezzlement of the Company's or its subsidiaries' property or any
misappropriation of any property material to the Company or any of its
subsidiaries (whether or not a felony or misdemeanor), (F) the willful
engagement by the Executive in conduct which is injurious to the Company or any
of its subsidiaries, (G) the persistent and willful disobedience or material
breach by the Executive of any of the Company's written rules, instructions or
orders, or (H) the Executive's persistent and willful and material breach of the
covenants contained herein.
b. Upon any termination of the Executive's employment under Section
5(a)(i), (iii), (iv) or (v) of this Agreement, the Executive shall be entitled
to receive solely all amounts and benefits to be paid or provided by the Company
under Sections 3.1, 3.3, and 4 to the date of such termination.
c. Upon any termination of the Executive's employment under Section
5(a)(ii) of this Agreement, the Executive shall be
<PAGE> 6
entitled to receive solely (i) all amounts and benefits to be paid or provided
by the Company under Sections 3.1, 3.3, 3.4, and 4 to the date of such
termination, (ii) the greater of (x) a lump sum payment equal to the aggregate
amount of Base Salary that would have been paid to the Executive from the date
of such termination through the end of the Term but for such early termination,
or (y) a lump sum payment equal to two (2) times the Base Salary, and (iii) all
amounts and benefits to be paid or provided by the Company under Sections 3.3
and 3.4 shall be continued to be paid or provided to the Executive from the date
of termination through the end of the Term but for such early termination.
6. EXECUTIVE COVENANTS.
6.1 CONFIDENTIAL INFORMATION. The Executive expressly covenants and
agrees that he will not at any time, whether during or after his employment by
the Company, directly or indirectly, use or permit the use of any trade secrets,
confidential information, or proprietary information (including, without
limitation, customer lists, costing information, technical information, software
techniques, business plans, marketing data, financial information or similar
items) of, or relating to, the Company, or any affiliate of the Company, in
connection with any activity or business, whether for his own account or
otherwise (except solely the business of the Company, if and to the extent that
the Executive is then an employee of the Company) and will not divulge such
trade secrets, confidential information or proprietary information to any
person, firm, corporation or other entity whatsoever. Any information which
becomes known to the public without breach by the Executive of any of the terms
hereof or of Executive's common law
<PAGE> 7
duties shall not be deemed to be a trade secret or confidential or proprietary
information of the Company.
6.2 OWNERSHIP BY COMPANY. The Executive acknowledges and agrees that
all of his work product created, produced or conceived in connection with his
association with the Company shall be deemed work for hire and shall be deemed
owned exclusively by the Company. Without limiting the generality of the
foregoing, the Executive agrees that the Company shall have and possess all
proprietary rights, patent rights, copyright rights and trade secret rights as
may exist in such work product or as which are inherent therein or appurtenant
thereto. The Executive agrees to execute and deliver all documents required by
the Company to document or perfect the Company's proprietary rights in and to
the Executive's work product.
6.3 REMEDIES. It is expressly understood and agreed that the services
to be rendered hereunder by the Executive are special, unique, and of
extraordinary character, and in the event of the breach by the Executive of any
of the terms and conditions of this Agreement on his part to be performed
hereunder, or in the event of the breach or threatened breach by the Executive
of the terms and provisions of this Section 6 of this Agreement, then the
Company shall be entitled, if it so elects, to institute and prosecute any
proceedings in any court of competent jurisdiction, either in law or equity, for
such relief as it deems appropriate.
6.4 COVENANTS NON-EXCLUSIVE. The Executive acknowledges and agrees that
the covenants contained in this Section 6 shall not be deemed exclusive of any
common law rights of the Company in connection with the relationships
contemplated hereby; and that the
<PAGE> 8
Company shall have any and all rights as may be provided by law in connection
with the relationships contemplated hereby.
7. GENERAL.
7.1 APPLICABLE LAW AND EXPENSES. This document shall, in all
respects, be governed by the laws of the State of New York. With regard to such
choice of law, the parties acknowledge that substantially all of the
negotiations relating to this Agreement were conducted in New York State and
that this Agreement has been executed by both parties in New York State.
7.2 VENUE; PROCESS. The parties to this Agreement agree that
jurisdiction and venue shall properly lie in the Supreme Court of the State of
New York, New York County, or in the United States District Court for the
Southern District of New York, with respect to any legal proceedings arising
from this Agreement. Such jurisdiction and venue are merely permissive;
jurisdiction and venue shall also continue to lie in any court where
jurisdiction and venue would otherwise be proper. The parties agree that they
will not object that any action commenced in the foregoing jurisdictions is
commenced in a forum non conveniens. Notwithstanding the foregoing, however,
nothing contained in this Section 7.2 shall be deemed to limit or waive any
right of the parties to remove any dispute to federal court which might
otherwise properly be removed to such court.
7.3 SURVIVAL. The parties hereto agree that the covenants contained
in Section 6 hereof shall survive for a period of two (2) years following any
termination of employment by the Executive and any termination of this
Agreement.
7.4 INDEPENDENT REPRESENTATION. The Executive
<PAGE> 9
acknowledges that he has had the opportunity to seek independent counsel and tax
advice in connection with the execution of this Agreement, and the Executive
represents and warrants to the Company (a) that he has sought such counsel and
advice as he has deemed appropriate in connection with the execution hereof and
the transactions contemplated hereby; and (b) that he has not relied on any
representation of the Company as to tax matters or as to the consequences of the
execution hereof.
7.5 NOTICES. Any and all notices required or desired to be given
hereunder by any party shall be in writing and shall be validly given or made to
another party if delivered either personally, by telex, facsimile transmission,
same day delivery service, overnight expedited delivery service, or if deposited
in the United States mail, certified or registered, postage prepaid, return
receipt requested. If notice is served personally, notice shall be deemed
effective upon receipt. If notice is served by telex or by facsimile
transmission, notice shall be deemed effective upon transmission, provided that
such notice is confirmed in writing by the sender within one day after
transmission. If notice is served by same day delivery service or overnight
expedited delivery service, notice shall be deemed effective the day after it is
sent, and if notice is given by United States mail, notice shall be deemed
effective five days after it is sent. In all instances, notice shall be sent to
the parties at the following addresses:
If to the Company:
Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Attention: Chairman of the Board,
<PAGE> 10
Chief Executive Officer
If to the Executive:
Harvey P. Diamond
19 Clubhouse Lane
Scarsdale, New York 10583
Telephone: (914) 478-7325
With a copy to:
Robert Bernstein, Esq.
Bernstein & Seidman
21 Scarsdale Road
Tuckahoe, New York 10707
Telephone No.: (914) 961-0488
Telecopier No.: (914) 961-0754
Any party may change its address for the purpose of receiving notices
by a written notice given to the other party.
7.6 MODIFICATIONS OR AMENDMENTS. No amendment, change or
modification of this document shall be valid unless in writing and signed by all
of the parties hereto.
7.7 WAIVER. No reliance upon or waiver of one or more provisions of
this Agreement shall constitute a waiver of any other provisions hereof.
7.8 SUCCESSORS AND ASSIGNS. All of the terms and provisions
contained herein shall inure to the benefit of and shall be binding upon the
parties hereto and their respective heirs, personal representatives, successors
and assigns. However, no party shall voluntarily assign any rights hereunder, or
delegate any duties hereunder, except upon the prior written consent of the
other.
7.9 SEPARATE COUNTERPARTS. This document may be executed in one or
more separate counterparts, each of which, when so executed, shall be deemed to
be an original. Such counterparts shall, together, constitute and shall be one
and the same
<PAGE> 11
instrument.
7.10 HEADINGS. The captions appearing at the commencement of the
sections hereof are descriptive only and are for convenience of reference.
Should there be any conflict between any such caption and the section at the
head of which it appears, the substantive provisions of such section and not
such caption shall control and govern in the construction of this document.
7.11 FURTHER ASSURANCES. Each of the parties hereto shall execute
and deliver any and all additional papers, documents and other assurances, and
shall do any and all acts and things reasonably necessary in connection with the
performance of their obligations hereunder and to carry out the intent of the
parties hereto.
7.12 ENTIRE AGREEMENT. Except for the Change in Control Agreement
relating to payments to be made to the Executive in the event of the termination
of the Executive's employment with the Company following a Change in Control (as
defined therein), this Agreement and the exhibits attached hereto constitute the
entire understanding and agreement of the parties with respect to the subject
matter of this Agreement, and any and all prior agreements, understandings or
representations are hereby terminated and cancelled in their entirety; provided
that notwithstanding anything to the contrary contained in this Agreement, in
the event the Executive's employment is terminated following a Change in Control
as provided in the Change in Control Agreement, the Executive shall be entitled
solely to the amounts and benefits payable under the Change in Control
Agreement, which shall be in lieu of any and all amounts payable under this
Agreement.
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By: /s/ Paul Bellamy
--------------------------
Name: Paul Bellamy
Title: President and Chief
Operating Officer
/s/ Harvey P. Diamond
-----------------------------
HARVEY P. DIAMOND
<PAGE> 13
EXHIBIT I
NON-COMPETITION AGREEMENT
<PAGE> 14
EXHIBIT II
CHANGE IN CONTROL AGREEMENT
<PAGE> 15
EXHIBIT III
STOCK OPTION AGREEMENT
<PAGE> 16
EXHIBIT IV
BONUS PROGRAM
<PAGE> 1
AGREEMENT
THIS AGREEMENT dated as of November 2, 1998 (this
"Agreement"), is made by and between Graham-Field Health Products, Inc., a
Delaware corporation having its principal offices at 400 Rabro Drive East,
Hauppauge, New York 11788 (the "Company"), and Harvey P. Diamond, Executive Vice
President (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its shareholders to foster the continued employment of key
executive management personnel; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined in Section 1.4 below) of the
Company exists from time to time and that such possibility, and the uncertainty,
instability and questions which it may raise for and among key executive
management personnel, may result in the premature departure or significant
distraction of such management personnel to the material detriment of the
Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce, focus and encourage the continued attention and
dedication of key members of the executive management of the Company and its
subsidiaries, including (without limitation) the Executive, to their assigned
duties without distraction in the face of potentially disturbing or unsettling
circumstances arising from the possibility of a Change in Control of the
Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
have the meanings set forth below:
1.1 "ANNUAL BASE SALARY" shall mean the Executive's rate of
regular basic annual compensation prior to any reduction under a salary
reduction agreement pursuant to section 401(k) or section 125 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code"), and shall not
include (without limitation) cost of living allowances, fees, retainers,
reimbursements, bonuses, incentive awards, prizes or similar payments.
1.2 "BIL" shall mean collectively, Brierley Investments Ltd.,
BIL (Far East Holdings) Limited, BIL Securities (Offshore) Ltd. and any Person
or group of Persons which is directly affiliated with or is wholly or partly
controlled by one or more of such entities.
1.3 "CAUSE" for termination by the Company or any subsidiary
of the Executive's employment, after any Change in
<PAGE> 2
Control, shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company, or a subsidiary
of the Company, as such duties may reasonably be defined from time to time by
the Board (or a duly designated and authorized committee thereof), or to abide
by the reasonable written policies of the Company or of the Executive's primary
employer (other than any such failure resulting from the Executive's incapacity
due to physical or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination by the Executive for Good Reason
pursuant to Section 4.1) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand specifically identifies
the manner in which the Board believes that the Executive has not substantially
performed the Executive's duties or has not abided by any reasonable written
policies, or (ii) the continued and willful engaging by the Executive in conduct
which is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of
this definition, no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive in bad
faith and without reasonable belief that the Executive's act, or failure to act,
was in the best interests of the Company or its subsidiaries.
1.4 "CHANGE IN CONTROL" shall mean and be deemed to have
occurred if:
(i) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all
of the individuals and entities who were Beneficial Owners, immediately
prior to such reorganization, merger or consolidation, of the combined
voting power of the Company's then outstanding securities beneficially
own, directly or indirectly, immediately after such reorganization,
merger or consolidation, more than seventy-five percent (75%) of the
combined voting power of the securities of the corporation resulting
from such reorganization, merger or consolidation; or
(ii) the shareholders of the Company approve (a) the
sale or disposition by the Company (other than to a subsidiary of the
Company) of all or substantially all of the assets of the Company, or
(b) a complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, (x) a "going-private"
transaction under Rule 13(e)-3 of the Securities Exchange Act of 1934 (the
"Exchange Act") or (y) any similar corporate transaction, sponsored by
management of the Company, including, but not limited,to any recapitalization or
reclassification of the securities of the Company shall not constitute a Change
in Control.
<PAGE> 3
1.5 "COMPANY" shall mean Graham-Field Health Products, Inc.
and any successor to its business and/or assets which assumes (either expressly,
by operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Company has occurred in connection
with such succession).
1.6 "DISABILITY" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, the Executive
shall have been absent from the full-time performance of the Executive's duties
for a period of three (3) consecutive months.
1.7 "GOOD REASON" for termination by the Executive of the
Executive's employment in connection with or as a result of any Change in
Control shall mean the occurrence (without the Executive's prior express written
consent) of any one of the following acts, or failures to act, unless, in the
case of any act or failure to act described in clauses (i), (iv), (v) or (vi)
below, such act or failure to act is corrected by the Company or any subsidiary
prior to the Date of Termination specified in the Notice of Termination given in
respect thereof:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with the Executive's most significant
position(s) (including without limitation status, offices, titles and
reporting responsibilities/rights) as an executive officer of the
Company and/or a subsidiary held during the one hundred eighty (180)
day period immediately preceding any related Potential Change in
Control, or a substantial adverse alteration of the Executive's
position or title(s) with the Company or any subsidiary or in the
nature of such status, offices, titles and reporting
responsibilities/rights;
(ii) a reduction in the Executive's Annual Base
Salary as in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal
executive offices to a location more than thirty (30) miles from its
location on the date of this Agreement (or, if different, more than
thirty (30) miles from where such offices are located immediately prior
to any Potential Change of Control) or the Company's requiring the
Executive to be based anywhere other than the location where the
Executive is performing his duties immediately prior to any Potential
Change in Control, except for required travel on the Company's business
to an extent substantially consistent with the Executive's
<PAGE> 4
business travel obligations as of the date of the Potential Change in
Control;
(iv) any failure by the Company to comply with any of
the provisions of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given
by the Executive;
(v) the failure by the Company or a subsidiary to
continue in effect any pension benefit or incentive or deferred
compensation plan in which the Executive participates immediately prior
to any Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made
with respect to such plan, or the failure by the Company or a
subsidiary to continue the Executive's participation therein (or in
such substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Potential Change in
Control;
(vi) the failure by the Company or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of
the Company's or a subsidiary's retirement, life insurance, medical,
health and accident, or disability or similar plans in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Company or a subsidiary which
would directly or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit enjoyed by the
Executive at the time of the Potential Change in Control, or the
failure by the Company or a subsidiary to provide the Executive with
the number of paid vacation days to which the Executive is entitled in
accordance with the Company or a subsidiary's normal vacation policy in
effect at the time of the Potential Change in Control;
(vii) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 4.1; and/or
(viii) a termination by the Executive of his
employment for any reason during the thirty (30) day
<PAGE> 5
period immediately following the first (1st) anniversary after the date
of any Change in Control.
1.8 "PERSON" shall have the meaning ascribed thereto in
Section 3(a)(9) of the Exchange Act, as modified, applied and used in Sections
13(d) and 14(d) thereof; provided, however, a Person shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries (in its capacity as such), (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation or
other entity owned, directly or indirectly, by the stockholders of the Company
in substantially the same character and proportions as their ownership of stock
of the Company.
1.9 "POTENTIAL CHANGE IN CONTROL" shall mean and be deemed to
have occurred if the Company enters into an agreement the consummation of which
would result in the occurrence of a Change in Control.
1.10 "WINDOW PERIOD" shall mean the thirteen (13) month period
following a Change in Control.
2. TERM OF THIS AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect as long as the Executive is employed by the
Company, provided, however, that if (i) a Change in Control shall have occurred
during the Executive's employment with the Company, this Agreement shall
continue in effect until the termination of the applicable Window Period, or
(ii) if a Potential Change in Control shall have occurred during the Executive's
employment with the Company, this Agreement shall continue in effect until one
(1) year after the Executive's termination of employment with the Company (the
"Term").
3. SEVERANCE PAYMENTS.
3.1 SEVERANCE. The Company shall pay the Executive the
payments described in Section 3.1.1 and 3.1.2 (the "Severance Payments") upon
the termination of the Executive's employment with the Company during the Window
Period (including, but not limited to, the Executive's termination of employment
for Good Reason, death or Disability), unless such termination is (i) by the
Company for Cause, or (ii) by the Executive without Good Reason. In addition,
the Executive's employment shall be deemed to have been terminated immediately
following a Change in Control by the Company without Cause or by the Executive
for Good Reason if (a) the Executive reasonably demonstrates that the
Executive's employment was terminated prior to a Change in Control without Cause
(1) at the request of a Person who has entered into an agreement with the
Company the consummation of which will constitute a Change in Control (or who
has taken other steps reasonably calculated to effect a Change in Control) or
(2) otherwise in connection with, as a result of or in anticipation of a Change
in Control, (b) the
<PAGE> 6
Executive terminates his employment for Good Reason prior to a Change in Control
and the Executive reasonably demonstrates that the circumstance(s) or event(s)
which constitute such Good Reason occurred (1) at the request of such Person or
(2) otherwise in connection with, as a result of or in anticipation of a Change
in Control, or (c) the Executive dies or is terminated due to Disability, in
each case, after the occurrence of a Potential Change in Control and related
Change in Control actually occurs within one (1) year after the Date of
Termination or the date of death, as the case may be. The Executive's right to
terminate the Executive's employment for Good Reason shall not be affected by
the Executive's incapacity due to physical or mental illness. The Executive's
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good Reason hereunder.
3.1.1 In lieu of any further salary and bonus
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive (i) a lump sum
severance payment in cash (or at the Executive's sole and exclusive
option receive such amounts as salary continuation during the
applicable periods set forth below), equal to 2.99 times the highest
Annual Base Salary paid or payable to the Executive during the
thirty-six (36) month period immediately preceding the month in which
the Change in Control occurs, and (ii) all unpaid accrued vacation
through the Date of Termination in accordance with the Company's plans
and practices in effect immediately prior to the Change in Control,
provided that such unpaid vacation has been accrued on the books and
records of the Company prior to the Date of Termination.
3.1.2 After the Date of Termination, the Company
shall continue to provide the Executive and/or the Executive's
dependents, as the case may be, with (i) life, disability, accident and
health insurance benefits ("Benefits Coverage") substantially similar
to those which the Executive and/or the Executive's dependents is
receiving immediately prior to any related Potential Change in Control
or the receipt of the Notice of Termination (without giving effect to
any reduction in such benefits subsequent to a Change in Control which
reduction constitutes Good Reason), whichever is greater, until the
earlier to occur of such time as the Executive is provided with
substantially comparable Benefits Coverage with a new employer or
thirty six (36) months; (ii) the automobile allowance, gas and other
automobile benefits the Executive was receiving immediately prior to
any related Potential Change in Control or the receipt of the Notice of
Termination (without giving effect to any reduction in such benefits
subsequent to a Change in Control which reduction constitutes Good
Reason), for a period of twelve (12) months; and (iii) outplacement
<PAGE> 7
services, the scope and provider of which shall be selected by the
Executive with the cost of such services and related expenses borne by
the Company, subject to the submission of reasonable documentation in
accordance with the Company's standard practice to substantiate
expenses.
3.2 SPECIAL REIMBURSEMENT. In the event that the Executive
becomes entitled to the Severance Payments, if any payment or benefit paid or
payable, or received or to be received, by or on behalf of the Executive in
connection with a Change in Control or the termination of the Executive's
employment, whether any such payments or benefits are pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Company, any
of its subsidiaries, any Person, or otherwise (the "Total Payments"), will or
would be subject to the excise tax imposed under section 4999 of the Code (the
"Excise Tax"), the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and any Excise Tax imposed upon or attributable to
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Total Payments.
3.2.1 For purposes of determining whether any of the
Total Payments will be subject of the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel (delivered to the Executive) selected by the
Company and reasonably acceptable to the Executive such Total Payments
(in whole or in part) (a) do not constitute parachute payments,
including (without limitation) by reason of section 280G(b)(4)(A) of
the Code, (b) such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered,
within the meaning of section 280G(b)(4)(B) of the Code, or (c) are
otherwise not subject to the Excise Tax, and (ii) the value of any
non-cash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance with the
principles of sections 280G(d)(3) and (4) of the code.
3.2.2 In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder at the time of termination of the Executive's employment, the
Executive shall repay to the Company, at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus
<PAGE> 8
interest on the amount of such repayment at the rate provided in
section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the
time of the termination of the Executive's employment (including by
reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall make
an additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Executive with respect
to such excess) at the time that the amount of such excess is finally
determined. The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of any such
subsequent liability for Excise Tax with respect to the Severance
Payments.
3.3 DATE OF PAYMENT. The payment provided for in Section
3.1.1 and Section 3.2 hereof shall be made not later than the fifteenth (15th)
day following the Date of Termination; provided, however, that if the amounts of
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments to which the Executive is
likely to be entitled to and shall pay the remainder of such payments (together
with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth (5th) business day after demand by the Company (together with interest
at the rate provided in section 1274(b)(2)(B) of the Code). At the time that
payments are made under this Section 3.3, the Company shall provide the
Executive with a detailed written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received from
outside counsel, auditors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
3.4 LEGAL COSTS. The Company shall also reimburse the
Executive for all legal fees and expenses incurred in good faith by the
Executive as a result of any dispute with any party (including, but not limited
to, the Company and/or any affiliate of the Company) regarding the payment of
any benefit provided for in this Agreement (including, but not limited to, all
such fees and expenses incurred in disputing any termination or in seeking in
good faith to obtain or enforce any benefit or right provided by this Agreement
or in connection with any tax audit or proceeding to the extent attributable to
the application of Section 4999 of the Code), plus in each case interest on any
delayed payment at the
<PAGE> 9
applicable Federal rate provided for in section 7872(f)(2)(A) of the Code. Such
payments shall be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied by such evidence of fees
and expenses incurred as the Company reasonably may require.
3.5 EMPLOYMENT AGREEMENT. The payment to the Executive of the
Severance Payments provided for in Section 3.1 shall be in lieu of any severance
payable to the Executive under the terms of any other employment agreement in
effect on the Date of Termination. Except as provided in the preceding sentence,
this Agreement is not intended to and shall not modify or supersede any such
employment agreement or other contract or arrangement between the Executive and
the Company in effect from time to time.
4. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
4.1 NOTICE OF TERMINATION. Any purported termination of the
Executive's employment with the Company (other than by reason of death) during
the Window Period shall be communicated by written Notice of Termination from
one party hereto to the other party hereto in accordance with Section 7 hereof.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment with
the Company under the provision so indicated. Further, a Notice of Termination
for Cause is required in the form and in the manner specified in Section 1.3 of
this Agreement. For purposes of this Agreement, any purported termination not
effected in accordance with the Section 4.1 shall not be considered effective.
4.2 DATE OF TERMINATION. "Date of Termination," with respect
to any purported termination of the Executive's employment during the Window
Period, shall mean (i) if the Executive's employment is terminated for
Disability, fifteen (15) days after Notice of Termination is given, and (ii) if
the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive, shall
not be less than fifteen (15) days nor more than thirty (30) days, respectively,
after the date on which such Notice of Termination is given).
4.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 4.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of
<PAGE> 10
the parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided,
however, that the Date of Termination shall be extended by a notice of dispute
only if the basis for such notice is reasonable, such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence.
4.4 COMPENSATION DURING DISPUTE. If a purported termination
occurs during the Window Period, and such termination is disputed in accordance
with Section 4.3 above, the Company shall continue to pay the Executive the full
compensation (including without limitation Annual Base Salary and Target Bonus)
in effect at the time of any related Potential Change in Control or when the
notice giving rise to the dispute was given (whichever is greater) and continue
the Executive as a participant in all compensation, incentive, pension and
welfare benefit and insurance plans in which the Executive was participating at
the time of any Potential Change in Control or when the notice giving rise to
the dispute was given, whichever is greater, until the dispute is finally
resolved in accordance with Section 4.3 hereof. Amounts paid under this Section
4.4 are in addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts due under this Agreement or any
other plan, agreement or arrangement.
5. NO MITIGATION. The Company agrees that, if the Executive's
employment is terminated during the Window Period, the Executive is not required
to seek other employment or to attempt in any way to reduce any amounts payable
to the Executive by the Company pursuant to Section 3 or Section 4.4. Further,
the amount of any payment or benefit provided for in Section 3 or Section 4.4
shall not be reduced by any compensation earned by the Executive as a result of
employment by another employer, by retirement benefits, or offset against any
amount claimed to be owed by the Executive to the Company or any of its
subsidiaries, or otherwise.
6. SUCCESSORS; BINDING AGREEMENT.
6.1 SUCCESSORS. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive were to terminate the Executive's
<PAGE> 11
employment for Good Reason during the Window Period, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
6.2 BINDING AGREEMENT. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the term of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
7. NOTICES. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual receipt:
To the Company:
Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Attention: Chairman of the Board and
Chief Executive Officer
With a copy to:
Robert S. Reder, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
To the Executive:
Harvey P. Diamond
19 Clubhouse Lane
Scarsdale, New York 10583
8. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer as may be
specifically designated by the Board. No
<PAGE> 12
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Delaware without regard to the principles of conflict of laws
thereof. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to and include any successor provisions to such sections.
Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law and any additional
withholding to which the Executive has agreed. The rights and obligations of the
Company and the Executive under this Agreement shall survive the expiration of
the Term.
9. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. NO LIMITATION. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Company or any of its affiliated companies. Amounts which are
vested benefits or which the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first written above.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By: /s/ Paul Bellamy
-----------------------------------
<PAGE> 13
Name: Paul Bellamy
-------------------------------------
Title: President and Chief Operating Officer
-------------------------------------
/s/ Harvey P. Diamond
---------------------------------------
HARVEY P. DIAMOND
<PAGE> 1
NON-COMPETITION AGREEMENT
AGREEMENT ("Agreement"), dated November 2, 1998, between
GRAHAM-FIELD HEALTH PRODUCTS, INC., a Delaware corporation (the "Corporation"),
and HARVEY P. DIAMOND (the "Executive").
RECITALS
WHEREAS, the Executive and the Corporation have entered into a
certain employment agreement (the "Employment Agreement") and change in control
agreement (the "Change in Control Agreement") dated as of the date hereof;
WHEREAS, the Executive and the Corporation have entered into a
certain stock option agreement (the "Stock Option Agreement") dated as of the
date hereof;
WHEREAS, the Executive and the Corporation are parties to a
certain Non-Competition Agreement (the "Initial Non-Competition Agreement")
dated as of May 28, 1992;
WHEREAS, the parties desire to terminate the Initial Non-
Competition Agreement as of the date hereof;
WHEREAS, in consideration of the benefits to be derived by the
Executive pursuant to the terms and provisions of the Employment Agreement,
Change in Control Agreement and Stock Option Agreement, the Executive has agreed
to enter into this Agreement;
1. COVENANTS OF EXECUTIVE.
(a) The Executive expressly covenants and agrees that,
during the period commencing on the date hereof and ending on the two (2) year
anniversary of the Termination Date (as hereinafter defined), he will not
directly or indirectly, own, manage, operate, join, control or participate in or
be connected with as an officer, employee, consultant, partner, stockholder,
lender, or otherwise, any Competitor, as defined below, or any subsidiary or
affiliate thereof. For purposes hereof, a "Competitor" shall be deemed to mean
any business, individual, partnership, firm, corporation or organization (other
than a parent of the Corporation or a subsidiary or affiliate of such parent)
which at any time exports, imports, manufactures, markets, distributes, sells
and/or in any way other whatsoever deals with medical, surgical and/or health
care products or devices, or any matter, item or thing related thereto in any
domestic or foreign jurisdiction in which the Corporation or any subsidiary or
affiliate of the Corporation engages in such activities.
(b) Nothing in this Agreement is intended, or shall be
construed, to prevent the Executive during the term hereof or thereafter from
investing in the stock or other securities listed on a national securities
exchange or traded in the over-the-counter
<PAGE> 2
market of any corporation which is at the time a Competitor provided that the
Executive and members of his immediate family shall not, directly or indirectly,
hold, beneficially or otherwise, in the aggregate, more than five percent (5%)
of any issue of such stock or other securities of any one (1) such corporation.
(c) During the period commencing on the date hereof and
ending on the two (2) year anniversary of the Termination Date, the Executive
agrees that he will not, directly or indirectly, interfere with or solicit any
of the business or accounts of the Corporation or any of its subsidiaries or
affiliates which existed as of the Termination Date; and during the period
commencing on the date hereof and ending on the two (2) year anniversary of the
Termination Date, the Executive agrees that he will not, directly or indirectly,
solicit the employment of or hire any officer, consultant, or employee of the
Corporation or any of its subsidiaries or affiliates who was so employed on the
Termination Date. From and after the date hereof, the Executive agrees not to
disclose (unless compelled by judicial or administrative process) or use any
confidential or secret information relating to the Corporation or any of its
subsidiaries or affiliates or any of their respective clients, customers or
suppliers.
(d) It is expressly understood and agreed that the
covenants and agreements contained herein are necessary to induce the
Corporation to enter into the Employment Agreement, Change in Control Agreement
and Stock Option Agreement; and in the event of the breach by the Executive of
any of the terms and conditions of this Agreement on his part to be performed
hereunder, or in the event of the breach or threatened breach by the Executive
of the terms and provisions of subparagraphs (a), (b) or (c) of this Section 1,
then the Corporation shall be entitled, if it so elects, to institute and
prosecute any proceedings in any court of competent jurisdiction, either in law
or equity, for such relief as it deems appropriate, including, without limiting
the generality of the foregoing, any proceedings to obtain provable damages for
any breach of this Agreement, to enforce the specific performance thereof by the
Executive or to obtain an injunction against the commission, threatened
commission or continuance of any such breach or threatened breach without the
necessity of proving actual damages or that damages would be inadequate or of
posting a bond. In any such action, if the Corporation is successful, in whole
or in part, the Executive shall further, as an element of the Corporation's
damages, be liable for the reasonable attorney's fees and expenses of the
Corporation in the prosecution of such action or proceeding. If the Executive
violates the provisions of paragraphs (a), (b) or (c) of this Section 1, the
time period set forth therein shall be extended until after the date of entry of
final judgment enforcing such provision and the time allowed for appeal has
lapsed (the "Judgment Date") by a period equal to the time elapsed between the
commencement of the breach or threatened breach and the Judgment Date.
<PAGE> 3
(e) The Executive expressly acknowledges that the covenants
contained in this Section 1 shall not be deemed exclusive of any common law
rights of the Corporation in connection with any of the matters prohibited under
this Section 1, and that the Corporation shall have any and all rights as may be
provided by law in connection with the matters referred to in this Section 1.
(f) As used herein, "Termination Date" means the first date
as of which the Executive ceases to be engaged by the Corporation, or any of its
subsidiaries or affiliates, in any capacity whatsoever, whether as an employee,
consultant, independent contractor, agent or otherwise, and whether pursuant to
a formal or informal, oral or written, agreement, contract, understanding or
otherwise.
2. NOTICES.
Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered mail or
certified, (i) to 19 Clubhouse Lane, Scarsdale, New York 10583 (or to such other
address as may be designated by the Executive from time to time) in the case of
the Executive or (ii) to its principal office in the case of the Corporation,
and shall be deemed given when deposited in the United States mails, postage
prepaid.
3. TERMINATION OF INITIAL NON-COMPETITION AGREEMENT. Effective
as of the date hereof, the Executive and the Corporation hereby agree that the
Initial Non-Competition Agreement shall be terminated in its entirety and shall
be of no further force and effect.
4. ENTIRE AGREEMENT.
This Agreement embodies the entire agreement of the parties
with respect to the subject matter hereof. It may not be changed except by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.
5. WAIVERS.
The waiver by the Corporation of a breach of any provision
of this Agreement by the Executive shall not operate or be construed as a waiver
of any other or subsequent breach by the Executive.
<PAGE> 4
6. GOVERNING LAW.
This Agreement shall be subject to, and be governed by, the
laws of the State of New York without regard to its conflict of laws provisions.
7. BINDING EFFECT.
The rights and obligations of the Corporation under this
Agreement shall inure to the benefit of and shall be binding upon any successor
to the Corporation or to the business of the Corporation. Neither this Agreement
nor any rights or obligations of the Executive hereunder shall be transferable
or assignable by the Executive.
8. PROVISIONS OVERLY BROAD.
If any term or provision of this Agreement, or any part or
aspect thereof, shall be deemed by a court of competent jurisdiction to be
overly broad in scope, the court considering the same shall have the power and
hereby is authorized and directed to modify such term or provision to limit such
scope so that such term or provision is no linger overly broad and to enforce
the same as so limited. Subject to the foregoing sentence, in the event any
provision of this Agreement shall be held to be invalid or unenforceable for any
reason such invalidity or unenforceability shall attach only to such provision
and shall not affect or render invalid or unenforceable any other provision of
this Agreement. Subject further to the foregoing, if a court of any one or more
jurisdictions holds any term or provision of this Agreement, or any part or
aspect thereof, unenforceable by reason of the breadth of such scope or
otherwise, then such determination will not affect or render invalid or
unenforceable such term or provision in any other jurisdiction; such terms and
provisions as they relate to each such jurisdiction being, for this purpose,
severable into diverse and independent covenants.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
GRAHAM-FIELD HEALTH PRODUCTS, INC. EXECUTIVE
By: /s/ Paul Bellamy /s/ Harvey P. Diamond
----------------------------- ------------------------------
<PAGE> 1
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT, dated as of September 15, 1998
("Amendment No. 1"), to the Employment Agreement dated as of March 2, 1998 (the
"Employment Agreement"), by and between GRAHAM-FIELD HEALTH PRODUCTS, INC., a
Delaware corporation having its principal place of business at 400 Rabro Drive
East, Hauppauge, New York 11788 (the "Company"), and PAUL BELLAMY, an individual
residing at 21 Indian Head Road, Greenwich, CT 06878 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive are parties to the Employment
Agreement and a certain Change in Control Agreement dated as of March 2, 1998
(the "Initial Change in Control Agreement");
WHEREAS, the Company and the Executive desire to terminate the Initial
Change in Control Agreement in its entirety effective as of the date hereof and
enter into a new Change in Control Agreement effective as of the date hereof
(the "New Change in Control Agreement");
WHEREAS, the Company and the Executive desire to amend the Employment
Agreement to reflect the termination of the Initial Change in Control Agreement,
the execution of the New Change in Control Agreement and the modification of
certain terms and provisions of the Employment Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. TERMINATION OF INITIAL CHANGE IN CONTROL AGREEMENT. Effective as of
the date hereof, the Company and the Executive hereby agree that the Initial
Change in Control Agreement shall be terminated in its entirety and shall be of
no further force and effect.
2. THE NEW CHANGE IN CONTROL AGREEMENT. Effective as of the date
hereof, the Company and the Executive hereby agree that the New Change in
Control Agreement shall be in full force and effect.
3. AMENDMENT TO SECTION 8.13 OF THE EMPLOYMENT AGREEMENT. Section 8.13
of the Employment Agreement shall be amended in its entirety to provide as
follows:
"Except for the Change in Control Agreement dated as of September 15,
1998, between the Executive and the Company (the "Change in Control
Agreement") relating to payments to be made to the Executive in the
event of the
<PAGE> 2
termination of the Executive's employment with the Company following a
Change in Control (as defined therein), this Agreement constitutes the
entire understanding and agreement of the parties with respect to the
subject matter of this Agreement, and any and all prior agreements
(other than the Change in Control Agreement), understandings or
representations are hereby terminated and cancelled in their entirety;
provided that notwithstanding anything to the contrary contained in
this Agreement, in the event the Executive's employment is terminated
following a Change in Control, the Executive shall be entitled solely
to the amounts and benefits payable under the Change in Control
Agreement, which shall be in lieu of any and all amounts payable under
this Agreement."
4. FULL FORCE AND EFFECT OF EMPLOYMENT AGREEMENT. Except as provided
herein, the Employment Agreement shall remain in full force and effect in all
respects.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to be duly executed as of the date first above written.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By: /s/ Rodney F. Price
------------------------------
Name: Rodney F. Price
Title: Chairman of the Board and
Chief Executive Officer
/s/ Paul Bellamy
----------------------------------
PAUL BELLAMY
<PAGE> 1
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT, dated as of September
15, 1998 ("Amendment No. 1"), to the Employment Agreement dated as of April 17,
1998 (the "Employment Agreement"), by and between GRAHAM-FIELD HEALTH PRODUCTS,
INC., a Delaware corporation having its principal place of business at 400 Rabro
Drive East, Hauppauge, New York 11788 (the "Company"), and RICHARD S. KOLODNY,
an individual residing at 44 Spring Court, Muttontown, New York 11791 (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive are parties to the
Employment Agreement and a certain Change in Control Agreement dated as of
August 16, 1993 (the "Initial Change in Control Agreement");
WHEREAS, the Company and the Executive desire to terminate the
Initial Change in Control Agreement in its entirety effective as of the date
hereof and enter into a new Change in Control Agreement effective as of the date
hereof (the "New Change in Control Agreement");
WHEREAS, the Company and the Executive desire to amend the
Employment Agreement to reflect the termination of the Initial Change in Control
Agreement, the execution of the New Change in Control Agreement and the
modification of certain terms and provisions of the Employment Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. TERMINATION OF INITIAL CHANGE IN CONTROL AGREEMENT.
Effective as of the date hereof, the Company and the Executive hereby agree that
the Initial Change in Control Agreement shall be terminated in its entirety and
shall be of no further force and effect.
2. THE NEW CHANGE IN CONTROL AGREEMENT. Effective as of the
date hereof, the Company and the Executive hereby agree that the New Change in
Control Agreement shall be in full force and effect.
3. AMENDMENT TO SECTION 7.12 OF THE EMPLOYMENT AGREEMENT.
Section 7.12 of the Employment Agreement shall be amended in its entirety to
provide as follows:
"Except for the Change in Control Agreement dated as of
September 15, 1998, between the Executive and the Company (the
"Change in Control Agreement") relating to payments to be made
to the Executive in the event of the
<PAGE> 2
termination of the Executive's employment with the Company
following a Change in Control (as defined therein), this
Agreement constitutes the entire understanding and agreement
of the parties with respect to the subject matter of this
Agreement, and any and all prior agreements (other than the
Change in Control Agreement), understandings or
representations are hereby terminated and cancelled in their
entirety; provided that notwithstanding anything to the
contrary contained in this Agreement, in the event the
Executive's employment is terminated following a Change in
Control, the Executive shall be entitled solely to the amounts
and benefits payable under the Change in Control Agreement,
which shall be in lieu of any and all amounts payable under
this Agreement."
4. FULL FORCE AND EFFECT OF EMPLOYMENT AGREEMENT. Except as
provided herein, the Employment Agreement shall remain in full force and effect
in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed as of the date first above written.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By: /s/ Rodney F. Price
----------------------------------
Name: Rodney F. Price
Title: Chairman of the Board and
Chief Executive Officer
/s/ Richard S. Kolodny
--------------------------------------
RICHARD S. KOLODNY
<PAGE> 1
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT, dated as of September
15, 1998 ("Amendment No. 1"), to the Employment Agreement dated as of April 17,
1998 (the "Employment Agreement"), by and between GRAHAM-FIELD HEALTH PRODUCTS,
INC., a Delaware corporation having its principal place of business at 400 Rabro
Drive East, Hauppauge, New York 11788 (the "Company"), and RALPH LIGUORI, an
individual residing at 699 Tower Mews, Oakdale, New York 11769 (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive are parties to the
Employment Agreement and a certain Change in Control Agreement dated as of
January 1, 1997 (the "Initial Change in Control Agreement");
WHEREAS, the Company and the Executive desire to terminate the
Initial Change in Control Agreement in its entirety effective as of the date
hereof and enter into a new Change in Control Agreement effective as of the date
hereof (the "New Change in Control Agreement");
WHEREAS, the Company and the Executive desire to amend the
Employment Agreement to reflect the termination of the Initial Change in Control
Agreement, the execution of the New Change in Control Agreement and the
modification of certain terms and provisions of the Employment Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. TERMINATION OF INITIAL CHANGE IN CONTROL AGREEMENT.
Effective as of the date hereof, the Company and the Executive hereby agree that
the Initial Change in Control Agreement shall be terminated in its entirety and
shall be of no further force and effect.
2. THE NEW CHANGE IN CONTROL AGREEMENT. Effective as of the
date hereof, the Company and the Executive hereby agree that the New Change in
Control Agreement shall be in full force and effect.
3. AMENDMENT TO SECTION 7.12 OF THE EMPLOYMENT AGREEMENT.
Section 7.12 of the Employment Agreement shall be amended in its entirety to
provide as follows:
"Except for the Change in Control Agreement dated as of
September 15, 1998, between the Executive and the Company (the
"Change in Control Agreement") relating to payments to be made
to the Executive in the event of the
<PAGE> 2
termination of the Executive's employment with the Company
following a Change in Control (as defined therein), this
Agreement constitutes the entire understanding and agreement
of the parties with respect to the subject matter of this
Agreement, and any and all prior agreements (other than the
Change in Control Agreement), understandings or
representations are hereby terminated and cancelled in their
entirety; provided that notwithstanding anything to the
contrary contained in this Agreement, in the event the
Executive's employment is terminated following a Change in
Control, the Executive shall be entitled solely to the amounts
and benefits payable under the Change in Control Agreement,
which shall be in lieu of any and all amounts payable under
this Agreement."
4. FULL FORCE AND EFFECT OF EMPLOYMENT AGREEMENT. Except as
provided herein, the Employment Agreement shall remain in full force and effect
in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed as of the date first above written.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By: /s/ Rodney F. Price
--------------------------------
Name: Rodney F. Price
Title: Chairman of the Board
and Chief Executive Officer
/s/ Ralph Liguori
----------------------------------
RALPH LIGUORI
<PAGE> 1
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT, dated as of September
15, 1998 ("Amendment No. 1"), to the Employment Agreement dated as of April 17,
1998 (the "Employment Agreement"), by and between GRAHAM-FIELD HEALTH PRODUCTS,
INC., a Delaware corporation having its principal place of business at 400 Rabro
Drive East, Hauppauge, New York 11788 (the "Company"), and PETER WINOCUR, an
individual residing at 14 Woodlee Road, Cold Spring Harbor, New York 11724 (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive are parties to the
Employment Agreement and a certain Change in Control Agreement dated as of
October 31, 1995 (the "Initial Change in Control Agreement");
WHEREAS, the Company and the Executive desire to terminate the
Initial Change in Control Agreement in its entirety effective as of the date
hereof and enter into a new Change in Control Agreement effective as of the date
hereof (the "New Change in Control Agreement");
WHEREAS, the Company and the Executive desire to amend the
Employment Agreement to reflect the termination of the Initial Change in Control
Agreement, the execution of the New Change in Control Agreement and the
modification of certain terms and provisions of the Employment Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. TERMINATION OF INITIAL CHANGE IN CONTROL AGREEMENT.
Effective as of the date hereof, the Company and the Executive hereby agree that
the Initial Change in Control Agreement shall be terminated in its entirety and
shall be of no further force and effect.
2. THE NEW CHANGE IN CONTROL AGREEMENT. Effective as of the
date hereof, the Company and the Executive hereby agree that the New Change in
Control Agreement shall be in full force and effect.
3. AMENDMENT TO SECTION 7.12 OF THE EMPLOYMENT AGREEMENT.
Section 7.12 of the Employment Agreement shall be amended in its entirety to
provide as follows:
"Except for the Change in Control Agreement dated as of
September 15, 1998, between the Executive and the Company (the
"Change in Control Agreement") relating to payments to be made
to the Executive in the event of the
<PAGE> 2
termination of the Executive's employment with the Company
following a Change in Control (as defined therein), this
Agreement constitutes the entire understanding and agreement
of the parties with respect to the subject matter of this
Agreement, and any and all prior agreements (other than the
Change in Control Agreement), understandings or
representations are hereby terminated and cancelled in their
entirety; provided that notwithstanding anything to the
contrary contained in this Agreement, in the event the
Executive's employment is terminated following a Change in
Control, the Executive shall be entitled solely to the amounts
and benefits payable under the Change in Control Agreement,
which shall be in lieu of any and all amounts payable under
this Agreement."
4. FULL FORCE AND EFFECT OF EMPLOYMENT AGREEMENT. Except as
provided herein, the Employment Agreement shall remain in full force and effect
in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed as of the date first above written.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By: /s/ Rodney F. Price
------------------------------
Name: Rodney F. Price
Title: Chairman of the Board and
Chief Executive Officer
/s/ Peter Winocur
----------------------------------
PETER WINOCUR
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1998 AND THE
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1998 AS INCLUDED IN THE FORM 10Q FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,580
<SECURITIES> 0
<RECEIVABLES> 103,555
<ALLOWANCES> 0
<INVENTORY> 67,597
<CURRENT-ASSETS> 206,417
<PP&E> 38,768
<DEPRECIATION> 0
<TOTAL-ASSETS> 495,746
<CURRENT-LIABILITIES> 108,148
<BONDS> 106,756
0
31,600
<COMMON> 800
<OTHER-SE> 232,254
<TOTAL-LIABILITY-AND-EQUITY> 495,476
<SALES> 93,831
<TOTAL-REVENUES> 94,516
<CGS> 65,075
<TOTAL-COSTS> 65,075
<OTHER-EXPENSES> 32,505
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,387
<INCOME-PRETAX> (6,451)
<INCOME-TAX> (1,287)
<INCOME-CONTINUING> (5,164)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,164)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
