-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WCmnRdT4DnIPy0eVj9D2P85Xo3rEC8vkVgWloWvDpfOmqpryE4WzO5IB1QBw+Ah+ pqw2OSfP+Oj26lw6owy+ow== 0000950123-98-009909.txt : 19981116 0000950123-98-009909.hdr.sgml : 19981116 ACCESSION NUMBER: 0000950123-98-009909 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRAHAM FIELD HEALTH PRODUCTS INC CENTRAL INDEX KEY: 0000709136 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047] IRS NUMBER: 112578230 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08801 FILM NUMBER: 98748234 BUSINESS ADDRESS: STREET 1: 400 RABRO DR E CITY: HAUPPAUGE STATE: NY ZIP: 11788 BUSINESS PHONE: 5165825900 MAIL ADDRESS: STREET 1: 400 RABNO DRIVE EAST CITY: HAUPPAUGE STATE: NY ZIP: 11788 FORMER COMPANY: FORMER CONFORMED NAME: PATIENT TECHNOLOGY INC DATE OF NAME CHANGE: 19880811 10-Q 1 FORM 10-Q 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 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 - 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements CONDENSED CONSOLIDATED BALANCE SHEETS GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
September 30, December 31, ASSETS 1998 1997 ------------- ------------- (unaudited) (audited) 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 ============= =============
See notes to condensed consolidated financial statements. - 3 - 4 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES (Unaudited)
Three Months Ended Nine Months Ended September 30 September 30 ------------------------------- ------------------------------- 1998 1997 1998 1997 ------------- ------------- ------------- ------------- 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
See notes to condensed consolidated financial statements. - 4 - 5 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES (Unaudited)
Nine Months Ended September 30, ----------------------------- 1998 1997 ------------ ------------ 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) ------------ ------------
See notes to condensed consolidated financial statements. - 5 - 6 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS--Continued GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES (Unaudited)
Nine Months Ended September 30, 1998 ------------------------------- 1998 1997 ------------- ------------- 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 $ -- ============= =============
See notes to condensed consolidated financial statements. - 6 - 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 - 8 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --Continued GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES (Unaudited) 3. INVENTORIES Inventories consist of the following:
September 30, December 31, 1998 1997 -------------- ------------- 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 ============== =============
4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following:
September 30, December 31, 1998 1997 ------------ ------------ 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 ============ ============
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 - 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 - 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 - 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 - 12 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --Continued GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES (Unaudited)
Pro Forma Nine Months Ended September 30, 1997 ------------ 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
(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 - 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:
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 ----------- ----------- ----------- ----------- ----------- 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 =========== =========== =========== =========== ===========
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 - 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 - 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 - 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 - 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 - 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 - 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 - 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 - 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 - 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 - 23 Part II. Other Information Item 1. Legal Proceedings See Note 8 to the Condensed Consolidated Financial Statements. - 23 - 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 - 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 - 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. EX-10.A 2 CONSULTING AGREEMENT 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"). 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 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 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 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. 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 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. 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, 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. 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. 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 EX-10.B 3 PAUL BELLAMY AGREEMENT 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 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 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 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 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, 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, 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 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 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 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 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 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 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 ------------------------------- 14 Title: Chairman ------------------------------- /s/ Paul Bellamy -------------------------------------- PAUL BELLAMY EX-10.C 4 RICHARD S. KOLODNY AGREEMENT 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 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 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 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 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, 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, 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 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 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 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 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 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 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 ----------------------------- 14 Title: Chairman of the Board and Chief Executive Officer ----------------------------- /s/ Richard S. Kolodny ----------------------------------- RICHARD S. KOLODNY EX-10.D 5 RALPH LIGUORI AGREEMENT 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 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 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 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 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, 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, 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 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 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 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 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 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 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 ------------------------------------- 14 Title: Chairman of the Board and Chief Executive Officer ------------------------------------- /s/ Ralph Liguori -------------------------------------------- RALPH LIGUORI EX-10.E 6 PETER WINOCUR AGREEMENT 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 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 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 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 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, 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, 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 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 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 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 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 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 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 ---------------------------- 14 Title: Chairman of the Board and Chief Executive Officer --------------------------- /s/ Peter Winocur ---------------------------------- PETER WINOCUR EX-10.F 7 EMPLOYMENT AGREEMENT 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 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 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 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 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 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 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 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 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, 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 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. 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 13 EXHIBIT I NON-COMPETITION AGREEMENT 14 EXHIBIT II CHANGE IN CONTROL AGREEMENT 15 EXHIBIT III STOCK OPTION AGREEMENT 16 EXHIBIT IV BONUS PROGRAM EX-10.G 8 HARVEY DIAMOND AGREEMENT 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 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. 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 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 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 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 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 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 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 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 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 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 ----------------------------------- 13 Name: Paul Bellamy ------------------------------------- Title: President and Chief Operating Officer ------------------------------------- /s/ Harvey P. Diamond --------------------------------------- HARVEY P. DIAMOND EX-10.H 9 NON-COMPETITION AGREEMENT 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 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. 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. 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 ----------------------------- ------------------------------ EX-10.I 10 EMPLOYMENT AGREEMENT 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 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 EX-10.J 11 EMPLOYMENT AGREEMENT 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 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 EX-10.K 12 EMPLOYMENT AGREEMENT 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 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 EX-10.L 13 EMPOYMENT AGREEMENT 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 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 EX-27 14 FINANCIAL DATA SCHEDULE
5 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. 1,000 3-MOS DEC-31-1998 SEP-30-1998 3,580 0 103,555 0 67,597 206,417 38,768 0 495,746 108,148 106,756 0 31,600 800 232,254 495,476 93,831 94,516 65,075 65,075 32,505 0 3,387 (6,451) (1,287) (5,164) 0 0 0 (5,164) (.17) (.17)
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