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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1996
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 0-12567
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GUEST SUPPLY, INC.
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(Exact name of registrant as specified in its charter)
New Jersey 22-2320483
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4301 U.S. Highway One
Monmouth Junction, New Jersey 08852-0902
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (609) 514-9696
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, without par value New York Stock
Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
NONE
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(Title of class)
Indicate by a 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 as 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_______
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Indicate by check mark if disclosure of delinquent filers, pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
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State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
Aggregate market value as of December 19,
1996 . . . . . . . . . . . . . . . . $101,505,084
Indicate the number of shares outstanding of each of the issuer's classes
of capital stock, as of the latest practicable date.
Common Stock, without par value, as of
December 19, 1996 . . . . . . . . . . . 6,156,075
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the documents, all or portions of which are incorporated by
reference herein and the Part of the Form 10-K into which the document is
incorporated: Part III incorporates information by reference from portions of
the Registrant's Proxy Statement for the 1997 Annual Meeting of Shareholders to
be held on March 5, 1997.
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PART I
ITEM 1. BUSINESS.
General
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The Company operates principally as a manufacturer, packager and
distributor of personal care guest amenities, housekeeping supplies, room
accessories and textiles to the lodging industry. The Company also manufactures
and packages personal care products for major consumer products and retail
companies. Personal care guest amenity items include shampoo, hair conditioner,
soap, bath gel, hand and body lotion, mouthwash, shoe care and sewing kits,
shower caps, soap dishes and decorative containers and trays. The Company makes
available more than 30 amenity items in a variety of brands in Company-designed
packaging options. Housekeeping supplies for the lodging industry consist
primarily of paper products, cleaning chemicals and cleaning implements. Room
accessories include such items as wastebaskets, glassware, stationery, laundry
bags, pens, shower curtains and signs. The Company distributes more than 100
different housekeeping products and room accessories. Textiles include sheets,
towels and bedding. The products manufactured and packaged for its consumer
products and retail customers include health and beauty aid items such as
shampoo, hair conditioner, hand and body lotions, liquid soaps and bath
additives.
The Company has pursued a strategy designed to enhance its leadership
position in the lodging supply industry by becoming a full service company with
a nationwide network of Company-operated distribution centers which provide
prompt delivery to hotel properties. Each center consists of a warehouse and
sales office and is staffed by sales personnel who call on customers to obtain
orders and provide customer service.
The Company's housekeeping and room accessory product line consists of
over 100 different disposable products which are generally available to the
Company from several different manufacturers and distributors of these products.
The Company's amenity product lines consist of customized amenity
programs designed by the Company for hotel chains ("customized corporate amenity
programs") or for individual lodging establishments ("customized individual
amenity programs") and uncustomized amenities and accessories.
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Customized corporate amenity programs consist of one or more items
which are presented in Company-designed packaging. This packaging displays the
corporate name or logo of the hotel chain or lodging establishment for which the
program is designed.
Customized corporate amenity programs are designed for hotel chains,
such as Choice International, The Four Seasons, Holiday Inns, Howard Johnson,
Hyatt Hotels, Marriott Corporation, Ramada and Wyndham Hotels and may consist of
up to 20 amenity and accessory items. In some cases, purchasing decisions for
these programs are made by the central buying organization for the chain, and in
other cases, such decisions are made by individual members or franchisees of the
chain.
Customized individual amenity programs typically consist of six to 12
amenity and accessory items. Individual programs generally involve more
elaborate designing and packaging, in an attempt to accent the guest room decor
and the marketing image of the particular lodging establishment. The Company has
designed individual amenity programs for such lodging establishments as
Scottsdale Princess in Scottsdale, Arizona, Boston Harbor Hotel in Boston,
Massachusetts, Nikko Hotels International in New York, New York and The Registry
Hotels in Dallas, Texas and for cruiseship lines such as Holland America and
Royal Caribbean.
The Company sells amenities in uncustomized color coordinated packaging
under such brand names as Finesse(R), Jhirmack(R) and Jergens(R). Some of these
brand name products are also sold as part of customized amenity programs. In
addition, the Company markets its own lines of guest amenity lines under the
"Heritage Collection(TM)" "Botanicals(TM)" and "Nautic(TM)" labels.
The Company's lodging industry customers consist of hotel chains
(including supply divisions), individual members or franchisees of hotel chains,
independent hotel properties, management companies and cruise ship lines. The
Company distributes its products to approximately 11,000 customers worldwide.
The Company has supply agreements with each of the 10 largest lodging chains in
the United States.
The Company's strategy is to increase its penetration of the lodging
industry at all levels and to become a "one-stop shopping" supplier to lodging
establishments. In order to increase operating efficiencies and responsiveness
to customer needs, the Company has become a more vertically integrated supplier
of customized and
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uncustomized amenity programs by enhancing its design capability, expanding its
distribution network and increasing its manufacturing capabilities. In addition,
the Company sells disposable housekeeping products, room accessories and
textiles in order to provide a complete range of products to the lodging
industry.
As part of this strategy, the Company, through its manufacturing
subsidiary Guest Packaging, Inc., manufactures and packages substantially all of
its liquid products such as shampoos, hair conditioners, hand and body lotions
and bath gels, as well as a portion of its bar soap requirements. The Company's
manufacturing operations allow the Company to provide both the service and wide
variety of products required by the lodging industry. In fiscal 1994, the
Company began a program to expand its manufacturing facility and to increase its
production capability and capacity. In fiscal 1996, the manufacturing facility
expansion project was essentially completed. See "Manufacturing, Packaging and
Shipping" below.
The Company's Breckenridge-Remy Co. ("Breckenridge") subsidiary (doing
business as Guest Distribution) also contributes to the Company's strategy of
vertical integration through an improved and expanded product line and national
distribution capability. In addition to personal care products and room
accessories, Breckenridge markets a line of paper products, cleaning chemicals,
glassware, housekeeping items and textiles. Breckenridge's business includes a
direct sales force and a network of 12 distribution centers. This distribution
network provides the Company with the ability to warehouse products in close
proximity to the lodging properties served by the Company. In addition, each
distribution center is staffed with a direct sales force who call on customers
to obtain sales orders and provide direct customer service. Breckenridge
currently has approximately 100 sales consultants. Management believes that the
Company's product line and distribution capability has provided improved service
to all of its customer groups.
Products
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The Company markets and sells a broad range of personal care,
housekeeping and disposable products for use in lodging establishments. The
Company's amenity product line consists of more than 30 different products,
including shampoo, hair conditioner, soap, bath gel, hand and body lotion,
mouthwash, showercaps, soap dishes, shoe shine and sewing kits and decorative
containers and trays. Six amenity products account for a substantial majority of
the
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Company's sales of customized and uncustomized packaging options. The Company's
housekeeping and room accessory product line consists of over 100 products
including paper products, cleaning chemicals, cleaning implements, textiles
(such as sheets, towels and other bed linens) and other housekeeping items and
accessories such as wastebaskets, glassware, stationery, laundry bags, pens,
shower curtains and signs. The Company believes that its range of products for
the lodging industry is one of the most extensive available from a single source
in the United States.
Customized amenity programs consist of one or more items which are
packaged and presented in Company designed bottles, boxes, tubes and wrappings.
The packaging and wrappings display the corporate name or logo of the hotel
chain or lodging establishment for which the program is designed. Customized
corporate amenity programs are designed for hotel chains. Customized individual
amenity programs typically consist of six to 12 amenity and accessory items.
These programs generally involve more elaborate design and packaging, in an
attempt to accent the guest room decor and the marketing image of the particular
lodging establishment.
The sales price per room stay for an amenity program varies with the
number of items selected by the customer. A customized individual amenity
program typically contains several items and is priced from $1.50 and up per
room stay. Because customized corporate amenity programs and uncustomized
amenity programs also vary widely in number of items, the cost of such programs
also vary widely.
The Company sells national brand name products, as well as generic and
the Company's own private label products and accessories. During the fiscal year
ended September 30, 1996, less than 10% of the Company's sales were attributable
to sales of national brand name products which include Bath and Body Works(R),
Finesse(R), Jhirmack(R) and Jergens(R).
Guest Supply also markets guest amenity programs under the "Institute
Swiss(R)" label and under Guest Supply's "Botanicals(TM)," "Nautic(TM),"
"Heritage Jefferson Floral(TM)," "Heritage American Country(TM)" and "Heritage
Yankee Stripes(TM)". These programs were designed by the Company as an
alternative to customized amenity programs with inventory available for
immediate delivery.
The Company has entered into arrangements with certain manufacturers of
national brand name products pursuant to which the Company has been granted the
exclusive right to market certain products to the lodging industry in
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the United States. Certain of these manufacturers have reserved the right to
approve the design of the packaging of their products and to monitor quality
control with respect to the manufacturing and packaging processes. None of such
exclusivity arrangements obligates the Company to purchase products from any one
supplier or to market any brand exclusively.
The Company believes that there are adequate alternative sources of
supply available for all products it currently distributes. Moreover, the
Company believes that its competitive success is dependent more on the quality
of the Company's services, design capability and the selection and availability
of products, than on the availability of any one particular brand name product
or group of products.
Design, Marketing and Sales
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In the view of the Company, an important aspect of its marketing
approach and competitive position is the capability of its professional design
staff to assist customers in designing customized packaging and in the
coordination and presentation of their amenity programs. In addition, the
Company believes that its position in the industry is in part attributable to
the Company's ability, on a single source basis, to design, manufacture, package
and distribute complete customized amenity programs for its customers which meet
the customers' corporate image, product and budgetary requirements and which
include brand name products with a reputation for high quality and wide-spread
consumer acceptance.
The design of amenity programs takes into account five essential
elements: packaging components (size, shape and type of container), packaging
graphics (colors and logos), brand identity (use of national or generic brands),
product mix (which amenity items to present) and presentation method (tray,
placemat, wicker basket or decorative tin). The Company's design personnel, who
include graphic, industrial and mechanical artists and packaging engineers, are
responsible for creating packages, selecting colors and applying graphic designs
to accent guest room decor and for the production of finished engineering
drawings and materials specifications. The Company's design personnel consult
directly with the Company's customers on all aspects of the design of guest room
amenities, at times leading to unique and proprietary packaging and
presentations of amenity programs. The Company's design process can vary in
length, depending on the customer's needs and complexity of the program. Once a
design is accepted by the customer and a purchase order is
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received, the initial shipment is typically made within ten to 14 weeks and the
balance of the shipment is generally delivered over the next 12 to 24 months.
The Company employs direct sales personnel who consult regularly with
the Company's existing customers and solicit new customers. In addition, the
Company employs in-house sales persons responsible for telemarketing sales and
customer service. Further, the senior management of the Company devotes a
substantial amount of time to sales activities, as well as to the overall
coordination of customers' amenity programs and the development of new concepts
to enhance the effectiveness of the programs. The Company believes that prompt,
professional and responsive customer service is an important element in
attracting new customers and satisfying existing ones.
In addition, the Company maintains regional distribution centers
throughout the United States. This distribution network consists of 12 regional
warehouses and a central facility and several small warehouses in North
Brunswick, New Jersey. These distribution centers provide the Company with the
ability to deliver manufactured and purchased products to the lodging properties
served by the Company throughout the United States. In addition, each regional
distribution center is staffed with route salespersons who call on customers to
obtain sales orders and provide direct customer service. In December 1996, the
Company occupied a new, leased 226,000 square foot distribution and warehouse
facility in Sayreville, New Jersey. This new facility will consolidate all of
the Company's current New Jersey warehousing facilities. The Company expects
this new facility to be fully operational by April 1, 1997. See "Item 2.
Properties".
The Company engages in direct mail solicitations. In addition, the
Company attends most major trade conventions and exhibits its product lines at
such events.
During the fiscal year ended September 30, 1996, sales to one customer
accounted for 11.1% of the Company's revenues. At September 30, 1996, such
customer accounted for 22.2% of the Company's total accounts receivable. During
the fiscal year ended September 30, 1995, sales to two customers accounted for
11.3% and 10.8%, respectively, of the Company's revenues.
The Company's consolidated sales included approximately $7,750,000,
$4,882,000 and $4,480,000, respectively, by foreign subsidiaries for the fiscal
years ended September 30, 1996, September 30, 1995 and
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September 30, 1994. The Company currently has subsidiaries located in England,
New Zealand and Canada.
At September 30, 1996 and September 30, 1995, the Company had unfilled
orders for its products which aggregated approximately $12,500,000 and
$14,000,000, respectively. Most of the amount for fiscal 1996 is expected to be
shipped by September 30, 1997. Unfilled orders are not necessarily an important
indicator of total future sales, since a substantial portion of the Company's
revenues are attributable to sales of disposable house keeping products and
accessories, uncustomized amenity products and corporate amenity programs which
are ordered for delivery on a current basis and for which no significant
unfilled orders exist. In addition, certain orders are subject to further
confirmation.
Substantially all of the Company's sales are to customers to whom the
Company extends credit. The Company's credit policy generally requires payment
in full within 30 days and allows discounts in certain cases for early payment.
Manufacturing, Packaging and Shipping
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Most of the amenity products marketed and distributed by the Company
are sold in packaging and wrappings designed to customer specifications by the
Company and are customized with the name of the particular hotel, in the case of
customized individual amenity programs, or the corporate logo of the lodging
chain in the case of customized corporate amenity programs, and also display the
brand name of the product, where appropriate. In some cases, the shapes of the
containers are also designed specifically to the customer's requirements.
Packaging components include bottles, boxes, bags, packets, tubes and various
other containers that come in a wide range of sizes and shapes.
The Company's manufacturing facility is located in Rahway, New Jersey.
This facility has approximately 68,000 square feet of production space. The
plant has 21 filling lines including 10 highly automated lines which the Company
believes incorporate the most efficient technology presently available. Each
line is equipped to apply front, back, and full wrap labels, and video jets for
batch and date coding of each container. A variety of reactors or compounding
vessels with capacities ranging from 100 to 6,000 gallons are located at this
facility as well as 249,000 gallons of liquid bulk storage vessels. The facility
also includes an analytical and development laboratory.
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In fiscal 1994, the Company began a program to expand its manufacturing
facility and to increase its production capability and capacity. As part of this
expansion project, 18,000 square feet of manufacturing space was added to the
Company's facility in Rahway, New Jersey. Additional mixing and storage tanks
were installed increasing compounding capacity by more than 350%. The Company
installed four new high-speed filling lines which are highly automated and
provide the Company with the capacity and capability to manufacture retail size
health and beauty aid products in high volume.
During fiscal 1996 the expansion project was essentially completed,
however, the Company's manufacturing operations continue to operate below
planned profitability levels. As a result of the growth the Company has
experienced in its manufacturing operations, the Company currently has five
temporary materials warehouses which supply its manufacturing facility.
Difficulties inherent in receiving and stocking component materials and shipping
these materials to the Company's manufacturing facility from these temporary
multiple warehouse locations are creating manufacturing inefficiencies. In
December 1996, the Company occupied a new, leased 226,000 square foot warehouse
facility in Sayreville, New Jersey which will consolidate all of the Company's
current New Jersey warehousing facilities. The Company expects the new facility
to be fully operational by April 1, 1997. The Company believes this new
warehouse, in conjunction with improved planning systems, will resolve material
flow problems and improve manufacturing efficiency. The Company believes that
with the new equipment and systems, it will be in a position to improve
efficiency in the production of high-quality health and beauty aids and
pharmaceutical products thereby providing the Company with what it believes will
be a competitive advantage. See "Item 2. Properties" below and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" below.
Currently, the Company compounds and fills substantially all of its
liquid products. Compounding involves the batch mixing of components such as
detergents, conditioners, dyes and fragrances in accordance with proprietary
formulas. Filling entails the transfer of finished products from bulk to the
unit of use containers in which they are distributed. Sales of liquid products
constituted approximately 40% of the Company's amenity sales for the fiscal year
ended September 30, 1996.
In addition, the Company utilizes its manufacturing facility to
compound, fill and package a
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variety of products used by consumer product companies and retailers. These are
principally health and beauty aid items such as shampoo, hair conditioner, hand
and body lotions, liquid soaps and bath additives. In some instances the Company
also formulates products for its customers. The Company believes that these
services, among others, are attractive to these companies since most lack
production expertise or the costs of providing these functions in-house could be
prohibitive.
The Company's other products such as soaps, shower caps, soap dishes,
shoe shine and sewing kits, toothpaste, toothbrushes, razors, shaving creams,
paper products, cleaning chemicals, cleaning implements, glassware and other
accessories are produced by independent manufacturers. Soaps are manufactured in
accordance with the Company's specifications, including colors and fragrances,
from materials furnished by suppliers selected by the Company. Additionally,
the Company manufactures a portion of its bar soap requirements, which it sells
to the lodging industry, at its facility in Rahway, New Jersey.
The bottles and other packaging components for the Company's products
are manufactured by independent suppliers in accordance with the Company's or
the Company's customers' specifications. In certain instances, these independent
suppliers utilize equipment and molds owned by the Company. In certain
instances, the Company also utilizes the services of companies which decorate
the bottles and other packaging components prior to delivery to the Company or
to its contract packagers.
The Company usually orders the component materials for its products in
bulk quantities directly from the manufacturers of such products for delivery to
its manufacturing facilities or to the facilities of the Company's contract
packagers. This procedure permits the Company to assure adequate supplies of
product components and to benefit from quantity discounts and other economies of
scale.
Substantially all of the Company's finished products are shipped to the
Company's warehouse facilities for later shipment to its customers. See "Item 2.
Properties" below. In the view of the Company, an important aspect of its
marketing approach and competitive position is its capacity for localized
distribution. The ability to store and distribute both manufactured and
purchased products in close proximity to the lodging properties served by the
Company is a service which the Company believes will
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assist in providing improved service to its existing customer groups and in
attracting new customers.
Quality Control
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The Company believes that maintaining the highest standards of quality
in all aspects of its operations is an important aspect of its ability to
generate customer confidence and to maintain its competitive position. To that
end, the Company carries and markets only products that have a reputation for
quality and that meet the Company's own quality standards.
The Company sends its representatives from time to time to the
facilities of its suppliers to inspect and approve the manufacturing and
packaging of all products prior to acceptance by the Company for delivery to
customers. In addition, certain suppliers of materials to the Company also
approve the Company's manufacturing procedures and inspect the packaged products
to insure compliance with their own quality standards.
The Company has adopted strict quality assurance systems and procedures
which it regularly reviews and revises with a view to maintaining the
consistency of the quality of its products. The Company adheres to all
applicable filling and packaging regulations of the U.S. Food and Drug
Administration, as well as others which are not technically applicable to the
Company's operations.
Proprietary Rights
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Although the Company follows a policy of protecting its proprietary
rights to its products and designs to the full extent legally permissible, it
does not believe that its business as a whole is materially dependent upon such
protection. Such protection has significance primarily in the Company's
marketing efforts. The Company has received protection under federal trademark
and copyright laws for certain names used in its business, including Guest
Supply(R), L'avenie(R), Guest Design(R), Whispermint(TM), Alliance(TM),
Evergreen(TM), Botanicals(TM), Nautic(TM) and the Heritage Collection(TM). The
Company, from time to time, applies for copyright and design patent protection
for the designs of certain bottles and other packaging components designed by
the Company .
In addition, pursuant to arrangements with the producers of its
packaging components, the Company has obtained title to the molds which it has
developed for the production of certain bottles and other packaging
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components. Many of these arrangements restrict these companies from using
the Company's molds for anyone other than the Company's customers without
the Company's consent. The aggregate net book value of all molds owned by
the Company at September 30, 1996 was approximately $1,209,000.
Competition
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The business of supplying disposable products, amenities and
accessories to the lodging industry is highly competitive. Important
competitive factors include price, product range, distribution capability
and product quality and design. The Company competes with companies which
offer customized amenity programs and broad lines of customized and
uncustomized amenity and personal care products, as well as large
distributors of housekeeping and related products. Some of these
competitors are large diversified multinational companies with extensive
production facilities and sales and marketing staffs and substantially
greater financial resources than the Company.
The Company believes that it can compete effectively with these
companies in view of the variety and quality of products it offers, the
scope and efficiency of customer services, its distribution capability and
price. In addition, the Company believes that its ability to offer
professional and sophisticated design assistance in formulating customized
amenity programs and products for customers enhances its competitive
position and distinguishes the Company from most of its competitors.
Personnel
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As of September 30, 1996, the Company had approximately 980
employees. None of the Company's employees is covered by a collective
bargaining agreement, and the Company considers its relationship with its
employees to be excellent.
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Executive Officers
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The current executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Age at
Name Position with the Company September 30, 1996
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<S> <C> <C>
Clifford W. Stanley President, Chief Executive 50
Officer and Director
James H. Riesenberg Vice President - Operations 61
Teri E. Unsworth Vice President - Market 45
Development and
Director
Paul T. Xenis Vice President - Finance 36
and Secretary
</TABLE>
Clifford W. Stanley has been President and Chief Executive
Officer of the Company since January 1988 and a director of the Company
since January 1987. From April 1986 to January 1988, he was Executive Vice
President and Chief Financial Officer of the Company. Mr. Stanley joined
the Company in August 1985 as Vice President - Finance. From 1984 until
joining the Company, Mr. Stanley was Vice President and Chief Operating
Officer for Transfer Print Foils, Inc. (hot stamping foils). During the
period from 1982 to 1984, he was Vice President of Finance for the Permacel
Division of Avery International. From 1979 through 1982, Mr. Stanley was a
Vice President of Johnson & Johnson.
James H. Riesenberg has been Vice President - Operations of the
Company since September 1985. Mr. Riesenberg was Vice President -Operations
of Almay Cosmetics, Inc., a division of Playtex Corporation, from March
1984 until joining the Company. During the period from 1981 through 1984,
Mr. Riesenberg was Vice President - Operations of Max Factor, Inc., another
division of Playtex Corporation.
Teri E. Unsworth has been Vice President - Market Development
since joining the Company in May 1985 and a director of the Company since
November 1989. Prior thereto, Ms. Unsworth was employed by Vidal Sassoon,
Inc. as Director of Sales from 1979 to 1981, as Product Director from 1981
to 1983 and as Group Product Director from 1983 to 1985.
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Paul T. Xenis has been Vice President - Finance since May 1994.
From April 1984 to May 1994, he was Corporate Controller of the Company.
Prior to joining the Company, Mr. Xenis was a senior accountant with KMG
Main Hurdman (now part of KPMG Peat Marwick LLP) from 1981 to 1984. Mr.
Xenis also serves as Secretary of the Company.
ITEM 2. PROPERTIES.
The Company's executive offices and principal operating
facilities are located in Monmouth Junction, New Jersey, where the Company
leases approximately 21,900 square feet of space in an office building. The
lease expires on December 15, 2006 and provides for three five-year renewal
options.
The Company also leases a 113,000 square foot warehouse and
distribution facility in North Brunswick, New Jersey. The lease for this
facility expired in November 1996. The Company is renting this facility on
a month-to-month basis and expects to vacate this facility by March 31,
1997.
In connection with its manufacturing and packaging operations,
the Company currently leases a manufacturing facility in Rahway, New Jersey
and a warehouse facility in Avenel, New Jersey. The manufacturing facility
consists of approximately 68,000 square feet of space. The lease for this
facility expires in 2010. See "Item 1. Business -Manufacturing, Packaging
and Shipping" above. This lease may be cancelled by the Company on 90 days'
notice. The Avenel warehouse facility (comprised of three separate
warehouses) is approximately 120,000 square feet of space. The lease
expired in November 1996. The Company is renting this facility on a month-
to-month basis and expects to vacate this facility by March 31, 1997.
Additionally, the Company leases two temporary materials warehouses on
a month-to-month basis in New Jersey.
During fiscal 1996, the Company had a 226,000 square foot
distribution and warehouse facility built to its specifications in
Sayreville, New Jersey. This new facility will consolidate all of the
Company's current New Jersey warehousing facilities. The lease for the
facility expires in November 2006. The Company occupied this facility in
December 1996 and expects it to be fully operational by April 1, 1997.
As part of its regional distribution strategy, the Company
currently also leases 12 regional warehouses. The
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warehouses range in size from 12,000 square feet to 60,000 square feet and
are located in Ohio (three), Michigan, Indiana, Texas, Florida, Illinois,
Maryland, California, Georgia and North Carolina. The leases for these
warehouses have expiration dates through 1999.
ITEM 3. LEGAL PROCEEDINGS.
In August 1994, the Company was served with a summons and
complaint in an action commenced by Valley Products Co., Inc. ("Valley") in
the United States District Court for the Western District of Tennessee
against Hospitality Franchise Systems, Inc. ("HFS") and certain of its
subsidiaries (including those that franchise Days Inn, Howard Johnson,
Ramada, Super 8 and Park Inn hotels and motels), and against the Company
and Marietta Corporation ("Marietta").
The complaints arose from HFS's decision to terminate Valley's
authority to sell guest room amenities to HFS franchises, and to enter into
"preferred vendor agreements" with the Company and Marietta for such guest
room amenities. The complaints alleged claims under federal and state
antitrust laws for tying, exclusive dealing and monopolization, and related
common law and federal trademark law claims. Valley sought injunctive
relief and damages, including treble damages, in unspecified amounts "not
less than $10 million."
On December 22, 1994, the District Court entered an order
dismissing the action. Valley has appealed that order to the United States
Court of Appeals for the Sixth Circuit. The Company is awaiting a decision
on the appeal.
From time to time, the Company is party to certain other claims,
suits and complaints which arise in the ordinary course of business.
Currently, there are no such claims, suits or complains which, in the
opinion of management, would have a material adverse effect on the
Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock has been traded on the New York Stock
Exchange, Inc. ("NYSE") under the symbol GSY since August 6, 1996. Prior to
being listed on the NYSE, the Company's common stock was traded on the
NASDAQ National Market System under the symbol GEST. The table below sets
forth the high and low closing prices during each of the last two fiscal
years on the NYSE and the NASDAQ National Market System, as applicable. The
approximate number of holders of the Company's common stock at September
30, 1996 was 480. No cash dividends have been declared on the common stock
since the Company was organized.
On October 24, 1995, the Company effected a three-for-two split
of its common stock in the form of a stock dividend. All per share market
price information set forth herein has been adjusted for this stock split.
Market Price Range
------------------
Year Ended September 30, 1996
-----------------------------
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
First Quarter $23.13 $18.00
Second Quarter 23.25 11.25
Third Quarter 17.25 11.88
Fourth Quarter 16.75 12.38
</TABLE>
Year Ended September 30, 1995
-----------------------------
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
First Quarter 12.83 10.25
Second Quarter 14.75 11.58
Third Quarter 17.67 13.58
Fourth Quarter 23.17 16.75
</TABLE>
On December 19, 1996, the closing sales price for the Company's
common stock was $16.75 per share.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
Years Ended September 30,
In thousands except per share amounts
-------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Sales $179,042 $159,450 $116,325 $97,851 $86,047
Gross Profit 37,998 37,365 30,751 26,804 22,531
Selling, General and
Administrative Expenses 30,919 28,409 24,858 22,865 20,437
Operating Income 7,079 8,956 5,893 3,939 2,094
Income Before
Extraordinary Item/1/ 3,151 5,090 4,117 1,412 400
Net Income 3,151 5,090 4,117 2,243 840
Working Capital 35,223 27,475 22,689 21,810 21,002
Total Assets 102,888 95,607 72,967 55,621 54,383
Total Long-term
Liabilities 28,292 22,866 16,778 13,793 15,488
Total Liabilities 60,485 56,498 39,722 26,960 28,063
Total Equity 42,403 39,109 33,245 28,661 26,320
Common Share Data
-----------------
Weighted Average Shares
and Share Equivalents
Outstanding 7,074 7,293 7,041 6,470 6,410
Earnings Per Share
Before Extraordinary
Item/1/ $ 0.45 $ 0.70 $ 0.58 $ 0.22 $ 0.06
Earnings Per Share $ 0.45 $ 0.70 $ 0.58 $ 0.35 $ 0.13
Book Value Per Share $ 6.89 $ 6.36 $ 5.50 $ 4.82 $ 4.49
</TABLE>
/1/ Extraordinary item results from the utilization of net operating loss
carryforwards.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
FISCAL 1996 COMPARED TO FISCAL 1995 Sales for the year ended September 30, 1996
increased by 12.3% or $19.6 million to $179.0 million from $159.4 million for
the year ended September 30, 1995. Revenues from hotel customers increased $16.7
million or 12.2% to $153.0 million. This increase is the result of sales of
additional products to existing customers, the addition of new customers, an
increase in the sales of textiles and the continued introduction of new items to
the Company's product line.
Sales to consumer product companies and retailers were $26.0 million compared
to $23.1 million for the year ended September 30, 1995. The increase of $2.9
million or 12.7% was due to increased sales to existing customers. The Company
attributes this increase to the service and capabilities it provides to its
customers.
Gross profit for the year ended September 30, 1996 was $38.0 million or 21.2%
of sales compared to $37.4 million or 23.4% for the year ended September 30,
1995. The decrease in gross profit as a percentage of sales was due to a number
of factors. In the Company's second fiscal quarter, a major retail customer
temporarily reduced its orders with the Company. Both the temporary nature and
timing of this decrease in orders limited the Company's ability to reduce
operating costs or seek replacement business. Gross profit as a percentage of
sales was also reduced by a pricing concession to a customer which the Company
believes was necessary to gain incremental volume in the future. In the fourth
fiscal quarter, the Company experienced higher than anticipated waste factors
over standard, and as a result recorded an inventory adjustment of approximately
$0.6 million. Manufacturing inefficiencies also contributed to the decline in
gross profit rate as a result of the Company's expansion of its manufacturing
facility which is now essentially completed. The increase in textiles product
sales also contributed to a decline in gross profit as a percentage of sales as
a result of a lower gross profit rate associated with textiles when compared
with the Company's other products.
Selling, general and administrative expenses were $30.9 million or 17.3% of
sales for the year ended September 30, 1996 compared to $28.4 million or 17.8%
for the prior year. The increase of $2.5 million was due primarily to increased
payroll and payroll related costs. The decrease in selling, general and
administrative costs as a percentage of sales was the result of increased sales
volume combined with the Company's cost containment program.
The effective tax rate increased to 41.3% in fiscal 1996 from 35.2% in fiscal
1995. The increase in tax rate is the result of a reduction in the utilization
of net operating loss carryforwards.
FISCAL 1995 COMPARED TO FISCAL 1994 Sales for the year ended September 30, 1995
increased by 37.1% or $43.1 million to $159.4 million from $116.3 million for
the year ended September 30, 1994. Revenues generated from hotel customers
increased $32.5 million or 31.3% to $136.4 million. This gain is the result of
selling additional products to existing customers, the addition of new
customers, an increase in the sales of textiles and the introduction of new
items to the Company's product line. The increase in sales attributable to new
products and the addition of new customers is a result of the Company's
continuing efforts to expand its product line and to emphasize its sales and
marketing efforts to increase sales to current customers and sell products to
new customers. In addition, according to statistics published by trade
publications, room demand increased in 1995, which Management believes further
contributed to the Company's sales increase.
Sales to consumer product companies and retailers were $23.1 million compared
to $12.5 million for the year ended September 30, 1994. The increase of $10.6
million or 84.6% was primarily due to increased sales to existing customers. The
Company attributes this increase to the service and capabilities it provides to
its customers.
Gross profit for the year ended September 30, 1995 was $37.4 million or 23.4%
of sales compared to $30.8 million or 26.4% for the year ended September 30,
1994. The decrease in gross profit as a percentage of sales was due primarily to
inefficiencies experienced at the Company's manufacturing facility. These
inefficiencies were a result of delays in completing the Company's plant
expansion project and subsequent materials flow problems. The increase in
textiles product sales also contributed to the decrease in gross profit as a
result of the lower gross profit associated with textiles when compared with the
Company's other products. During 1995, the cost of pulp, cotton, tallow and
plastic resins increased. This resulted in the Company experiencing cost
increases in cartons, bottles, textiles and soap base. Although most of these
cost increases were passed through to the Company's customers, gross margin
declined slightly as a result of these cost increases.
Selling, general and administrative expenses were $28.4 million or 17.8% of
sales for the year ended September 30, 1995 compared to $24.9 million or 21.4%
for the prior year. The increase of $3.5 million was primarily due to increased
payroll and payroll related costs. The decrease in selling, general and
administrative costs as a percentage of sales was the result of increased sales
volume combined with the effects of the Company's cost containment program.
The effective tax rate increased to 35.2% in fiscal 1995 from 15.8% in fiscal
1994. The increase is the result of a reduction in the utilization of net
operating loss carryforwards.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES The Company had $35.2 million of working capital
at September 30, 1996 as compared to $27.5 million at September 30, 1995. This
increase was due primarily to higher inventory levels financed through bank
borrowings.
At September 30, 1996, the Company had a two-year $22.0 million revolving
credit facility with two banks expiring in October 1997. This credit facility
bears interest at a rate equal to LIBOR plus 1.0%, the bank's prime rate or a
fixed rate, as selected by the Company. In addition, the Company had outstanding
term loans in the amount of $14.7 million payable in equal monthly installments
and maturing from February 1999 through November 2002. At September 30, 1996,
the Company had outstanding $14.0 million under its revolving credit facility at
an interest rate ranging from 6.56% to 7.38% and had an unused amount available
of $6.2 million. On December 30, 1996, the Company amended its revolving credit
agreement with the banks to modify certain financial covenants.
All of the Company's loans with the banks are secured by substantially all of
its assets and are subject to certain financial covenants.
The Company has excellent relationships with its banks and expects to extend
its revolving credit facility prior to its maturity. The Company believes that
the amount available under its revolving credit facility together with the cash
flow from operations will be sufficient to meet the Company's short-term working
capital requirements and upon extension, its identifiable long-term capital
needs. The Company also believes that, if necessary, additional financing will
be available to it on commercially reasonable terms.
RECENTLY ISSUED ACCOUNTING STANDARDS The Financial Accounting Standards Board
issued Statement No. 123, Accounting for Stock-Based Compensation (SFAS No.
123). Under this new standard, a new fair value based method of accounting for
stock-based compensation arrangements with employees is established. Entities
may continue to use the Opinion 25 method or adopt the SFAS No. 123 fair value
based method. If the Company continues to use the Opinion 25 method, SFAS No.
123 requires footnote disclosure of proforma net income and earnings per share
information as if the fair value based method had been adopted. The Company has
not yet determined which method it will use. This Statement is effective for
financial statements for fiscal years beginning after December 15, 1995, or for
the fiscal year for which the Statement is initially adopted for recognizing
compensation expense, whichever comes first.
The Financial Accounting Standards Board issued Statement No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
(SFAS No. 121). This new standard requires the assessment of the recoverability
of long-lived assets and certain intangibles and related goodwill and
recognition of any impairment losses. The Company does not believe the adoption
of SFAS No. 121 will have a material effect on the Company's consolidated
financial statements. This Statement is effective for fiscal years beginning
after December 15, 1995.
CAUTIONARY STATEMENT This Annual Report on Form 10-K may contain forward-looking
information about the Company. The Company is hereby setting forth statements
identifying important factors that may cause the Company's actual results to
differ materially from those set forth in any forward-looking statements made by
the Company. Some of the most significant factors include an unanticipated down-
turn in the lodging industry resulting in lower demand for the Company's
products, the unanticipated loss of, or decline in sales to, a major customer,
and unforeseen inefficiencies at the Company's manufacturing facility or arising
out of the transition to the Company's new warehouse facility. Accordingly,
there can be no assurances that any anticipated future results will be achieved.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
GUEST SUPPLY, INC. AND SUBSIDIARIES
__________
Consolidated Financial Statements
September 30, 1996, 1995 and 1994
<PAGE>
Index to Financial Statements
-----------------------------
<TABLE>
<CAPTION>
Page
Number
-------
<S> <C>
1. Financial Statements:
Independent Auditors' Report........................... 23
Consolidated Balance Sheets -- September 30, 1996 and
1995................................................... 24
Consolidated Statements of Operations --
Years Ended September 30, 1996, 1995
and 1994............................................... 25
Consolidated Statements of Cash Flows
-- Years Ended September 30, 1996, 1995
and 1994............................................... 26
Consolidated Statements of Shareholders'
Equity -- Years Ended September 30,
1996, 1995 and 1994.................................... 28
Notes to Consolidated Financial
Statements............................................. 29
2. Financial Statement Schedule:
II - Valuation and Qualifying Accounts 36
</TABLE>
All other schedules have been omitted because they are inapplicable or the
information is provided in the financial statements, including the notes
thereto.
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors and Shareholders
Guest Supply, Inc.:
We have audited the consolidated financial statements of Guest
Supply, Inc. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we
also have audited the financial statement schedule listed in the
accompanying index. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Guest Supply, Inc. and subsidiaries as of September 30, 1996 and 1995, and
the results of their operations and their cash flows for each of the years
in the three-year period ended September 30, 1996 in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG Peat Marwick LLP
Short Hills, New Jersey
November 18, 1996
<PAGE>
CONSOLIDATED BALANCE SHEETS
Guest Supply, Inc. and Subsidiaries
<TABLE>
<CAPTION>
September 30,
Dollars In Thousands except per share amounts 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,591 $ 1,825
Accounts receivable, net of allowance for doubtful accounts of $898
- 1996 and $692 - 1995 28,084 28,663
Inventories 33,362 28,269
Deferred income taxes 1,557 1,434
Prepaid expenses and other current assets 1,822 916
- -----------------------------------------------------------------------------------------------------------
Total current assets 67,416 61,107
Equipment and leasehold improvements, net of accumulated
depreciation and amortization 29,810 28,507
Other assets 134 97
Excess of cost over net assets acquired, net of accumulated
amortization of $3,889 - 1996 and $3,521 - 1995 5,528 5,896
- -----------------------------------------------------------------------------------------------------------
$102,888 $ 95,607
===========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 28,320 $ 31,226
Current maturities of long-term debt 3,873 2,406
- -----------------------------------------------------------------------------------------------------------
Total current liabilities 32,193 33,632
- -----------------------------------------------------------------------------------------------------------
Long-term debt 24,972 20,990
Deferred income taxes 3,320 1,876
- -----------------------------------------------------------------------------------------------------------
Total long-term liabilities 28,292 22,866
- -----------------------------------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity:
Preferred stock - without par value; authorized 1,000,000 shares,
outstanding none
Common stock - without par value; stated value $0.10; authorized
20,000,000 shares, issued and outstanding 6,156,075 shares -
1996 and 6,146,335 shares - 1995 543 542
Additional paid-in capital 35,042 34,922
Retained earnings 6,929 3,778
Cumulative foreign currency translation adjustments (111) (133)
- -----------------------------------------------------------------------------------------------------------
Total shareholders' equity 42,403 39,109
- -----------------------------------------------------------------------------------------------------------
$102,888 $ 95,607
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Guest Supply, Inc. and Subsidiaries
<TABLE>
<CAPTION>
===========================================================================================================
Years Ended September 30,
Dollars In Thousands except per share amounts 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $179,042 $159,450 $116,325
Cost of sales 141,044 122,085 85,574
- -----------------------------------------------------------------------------------------------------------
Gross profit 37,998 37,365 30,751
Selling, general and administrative expenses 30,919 28,409 24,858
- -----------------------------------------------------------------------------------------------------------
Operating income 7,079 8,956 5,893
Interest and other income 53 10 62
Interest expense (1,764) (1,109) (1,063)
- -----------------------------------------------------------------------------------------------------------
Income before income taxes 5,368 7,857 4,892
Income tax expense 2,217 2,767 775
- -----------------------------------------------------------------------------------------------------------
Net income $ 3,151 $ 5,090 $ 4,117
===========================================================================================================
Earnings per common share:
Primary $ .45 $ 0.70 $ 0.58
===========================================================================================================
Fully diluted $ 0.45 $ 0.68 $ 0.58
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Guest Supply, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Years Ended September 30,
Dollars in Thousands 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,151 $ 5,090 $ 4,117
- -----------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash (used
in) provided by operating activities:
Depreciation and amortization 3,345 2,800 2,417
Provision for losses on accounts receivable 316 223 419
Gain on sale of fixed assets (53)
Deferred income tax expense 1,321 442
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 263 (9,636) (4,555)
Increase in inventories (5,093) (6,137) (3,860)
Increase in prepaid expenses and other
current assets (906) (183) (249)
(Increase) decrease in other assets (37) (13) 9
(Decrease) increase in accounts payable and
accrued expenses (2,906) 10,315 8,416
Foreign currency translation adjustments 22 (59) 100
- -----------------------------------------------------------------------------------------------------------
(3,675) (2,248) (2,644)
- -----------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating
activities (524) 2,842 6,761
- -----------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of fixed assets 75
Capital expenditures (4,280) (9,953) (9,322)
- -----------------------------------------------------------------------------------------------------------
Net cash used in investing activities (4,280) (9,953) (9,247)
- -----------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net (payments) borrowings on revolving credit
agreements (1,396) 8,755 (5,877)
Proceeds from issuance of long-term debt 10,500 10,000
Repayment of long-term debt (3,655) (1,909) (1,329)
Proceeds from issuance of common stock 121 308 367
- -----------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 5,570 7,154 3,161
- -----------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 766 43 675
Cash and cash equivalents at beginning of year 1,825 1,782 1,107
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 2,591 $ 1,825 $ 1,782
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Guest Supply, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Years Ended September 30,
Dollars in Thousands 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest, net of capitalized interest $1,674 $1,082 $1,130
Income taxes, net of refunds $1,739 $1,909 $ 234
Supplemental schedule of non-cash financing and investing activities:
</TABLE>
The Company received an income tax benefit on the exercise of certain of
its stock options in the amount of $125 in 1995 which benefit was credited
to additional paid-in capital.
In June, 1995, the $400 convertible subordinate note was converted into
25,806 shares of the Company's common stock.
Excess of cost over net assets acquired and income taxes payable were
reduced by $184 in 1994 resulting from the utilization of acquired net
operating loss carryforwards of a subsidiary.
================================================================================
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Guest Supply, Inc. and Subsidiaries
Dollars in Thousands
<TABLE>
<CAPTION>
Cumulative
Retained Foreign
Common Stock Additional Earnings Currency
-----------------------------
Number of Paid-in (Accumulated Translation
Shares Amount Capital Deficit) Adjustments
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1993 3,961,474 $ 323 $ 33,941 $ (5,429) $ (174)
Net Income 4,117
Sales through employee stock
option and purchase plans 26,293 3 165
Common stock warrants exercised 42,000 4 195
Equity adjustments from foreign
currency translation 100
- ----------------------------------------------------------------------------------------------------------------
Balance, September 30, 1994 4,029,767 330 34,301 (1,312) (74)
Net Income 5,090
Sales through employee stock
option and purchase plans 27,023 3 189
Common stock warrants exercised 15,000 1 115
Conversion of convertible debt 25,806 3 397
Three-for-two stock split 2,048,739 205 (205)
Tax benefits associated with exercise
of stock options 125
Equity adjustments from foreign
currency translation (59)
- ----------------------------------------------------------------------------------------------------------------
Balance, September 30, 1995 6,146,335 542 34,922 3,778 (133)
Net income 3,151
Sales through employee stock option and
purchase plans 9,740 1 120
Equity adjustments from foreign
currency translation 22
- ----------------------------------------------------------------------------------------------------------------
Balance, September 30, 1996 6,156,075 $543 $35,042 $6,929 $(111)
================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Guest Supply, Inc. and Subsidiaries
Dollars in Thousands except per share amounts
BUSINESS DESCRIPTION The Company operates principally as a manufacturer,
packager and distributor of personal care guest amenities, housekeeping
supplies, room accessories and textiles to the lodging industry. The Company
also manufactures and packages products for major consumer products and retail
companies.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation - The
consolidated financial statements include the accounts of Guest Supply, Inc. and
all of its subsidiaries ("the Company"), each of which is wholly owned. All
significant intercompany transactions and balances are eliminated in
consolidation.
Risks and uncertainties - The Company's revenues are dependent on the
continued operation of its manufacturing facility and its various distribution
centers. The operation of these facilities involves many risks, including the
breakdown, failure or substandard performance of equipment, natural disasters
and the need to comply with directives of governmental agencies. The occurrence
of material operational problems, including but not limited to the above events,
may have a material adverse effect on the productivity and profitability of a
particular facility or with respect to certain facilities, the Company as a
whole, during the period of such operational difficulty.
Foreign currency translation - Foreign currency transactions and financial
statements are translated into US dollars at current exchange rates except
revenues, costs and expenses which are translated at average exchange rates
during each reporting period. Exchange gains and losses resulting from foreign
currency transactions are included in the Consolidated Statements of Operations
currently, whereas, adjustments resulting from translations of financial
statements are reflected as a separate component of shareholders' equity.
Use of estimates - In conformity with generally accepted accounting
principles, the preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Inventories - Inventories are stated at the lower of cost or market. Cost is
determined using the weighted-average and first-in, first-out methods.
Equipment and leasehold improvements - Equipment and leasehold improvements
are carried at cost. Depreciation and amortization is computed using the
straight-line method over the life of the related asset or, for improvements,
over the life of the related lease, if shorter. When assets are retired or
otherwise disposed of, the cost and accumulated depreciation are removed from
the accounts and any resulting gain or loss is recognized in income for the
period. The cost of maintenance and repairs is charged to income as incurred;
significant renewals and betterments are capitalized.
Excess of cost over net assets acquired - Excess of cost over net assets
acquired is being amortized using the straight-line method over 25 years. The
Company continually evaluates the amortization period of its intangible assets.
Estimates of useful lives are revised when circumstances or events indicate that
the original estimate is no longer appropriate.
Revenue - Revenues are recognized at the time goods are shipped and title has
passed. Credit is generally extended to customers within these industries on an
uncollateralized basis.
Concentration of credit risk - Concentration of credit risk consists
principally of accounts receivable. At September 30, 1996, one customer with
sales totaling 11.1% of the Company's total sales accounted for 22.2% of the
Company's total accounts receivable. For the year ended September 30, 1995,
sales to two customers totaled 11.3% and 10.8% of the Company's total sales and
accounted for approximately 36% of the Company's total accounts receivable. No
single customer accounted for 10% or greater of the Company's total sales for
the year ended September 30, 1994.
Income taxes - The provision for income taxes is based on earnings reported in
the financial statements under the asset and liability approach in accordance
with SFAS No. 109 "Accounting for Income Taxes". Deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amount of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.
Statements of Cash Flows - For purposes of reporting cash flows, cash and cash
equivalents include cash on hand and certificates of deposit with a maturity at
time of purchase of three months or less.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Guest Supply, Inc. and Subsidiaries
INVENTORIES
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $ 22,921 $ 19,508
Work in progress 10,441 8,761
- -------------------------------------------------------------------------------------------------------------------
$ 33,362 $ 28,269
===================================================================================================================
</TABLE>
Costs included in inventories are comprised of raw materials, direct labor and
overhead related to the manufacturing process.
<TABLE>
<CAPTION>
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
1996 1995 Useful Lives
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computers $ 2,032 $ 1,832 3 to 10 years
Furniture and fixtures 1,580 1,590 3 to 8 years
Machinery and equipment 34,682 28,599 3 to 15 years
Molds 4,488 4,092 5 to 7 years
Automobiles 139 133 2 to 5 years
Leasehold improvements 3,608 2,630 Life of lease
Construction in progress 1,774 5,318
- -------------------------------------------------------------------------------------------------------------------
48,303 44,194
Less accumulated depreciation and amortization 18,493 15,687
- -------------------------------------------------------------------------------------------------------------------
$ 29,810 $ 28,507
===================================================================================================================
</TABLE>
Depreciation and amortization of equipment and leasehold improvements charged
to income was $2,977, $2,432 and $2,031 for the years ended September 30, 1996,
1995 and 1994, respectively.
INCOME TAXES
Income tax expense is comprised of the following:
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal - Current $ 828 $ 1,981 $ 533
- Deferred 960 356
- -------------------------------------------------------------------------------------------------------------------
Total Federal income taxes 1,788 2,337 533
- -------------------------------------------------------------------------------------------------------------------
State - Current 245 344 242
- Deferred 184 86
- -------------------------------------------------------------------------------------------------------------------
Total State Income taxes 429 430 242
- -------------------------------------------------------------------------------------------------------------------
Total income tax provision $ 2,217 $ 2,767 $ 775
===================================================================================================================
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Guest Supply, Inc. and Subsidiaries
The following is a reconciliation of Federal income tax expense computed using
the statutory rate of 34% to the Company's effective income tax expense:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computed "expected" income tax expense $ 1,825 $ 2,671
Increase (reduction) in tax expense resulting from:
State income taxes, net of Federal income tax benefit 283 284
Amortization of goodwill 125 125
Utilization of net operating loss carryforwards (293)
Other, net (16) (20)
- -------------------------------------------------------------------------------------------------------------------
$ 2,217 $ 2,767
===================================================================================================================
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities at September 30, 1996 and 1995 are
as follows:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 350 $ 259
Inventory obsolescence reserve and uniform capitalization 1,040 868
Net operating loss carryforwards 137 150
Alternative minimum tax credit carryforwards 500 792
Other 167 157
- -------------------------------------------------------------------------------------------------------------------
Net deferred tax asset 2,194 2,226
Deferred tax liability - principally excess of tax over financial
statement depreciation (3,957) (2,668)
- -------------------------------------------------------------------------------------------------------------------
Net deferred taxes $(1,763) $ (442)
===================================================================================================================
</TABLE>
At September 30, 1996, the Company has net operating loss carryforwards for
state income tax purposes of approximately $2,282 which are available to reduce
future state income taxes, if any, through the year 2003. In addition, the
Company has alternative minimum tax credit carryforwards of approximately $500
which are available to reduce future Federal regular income taxes, if any, over
an indefinite period.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Guest Supply, Inc. and Subsidiaries
LONG-TERM DEBT
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revolving credit facility $ 14,034 $ 15,430
$5,000 five-year term note payable, due in equal monthly
payments of $83 through February 1999, interest at 6.45% 2,417 3,416
$5,000 four-year term note payable, due in equal monthly
payments of $104 through February 1999, interest at 8.25% 3,021 4,271
$10,500 seven-year term note payable, due in equal monthly 9,250
payments of $125 through November 2002, interest at 7.0%
Capital lease obligations 123 279
- -------------------------------------------------------------------------------------------------------------------
28,845 23,396
Less: Current maturities 3,873 2,406
- -------------------------------------------------------------------------------------------------------------------
$ 24,972 $ 20,990
===================================================================================================================
</TABLE>
On October 31, 1995, the Company entered into a credit facility with two banks
for a seven-year $10,500 term loan and a two-year $22,000 revolving credit
facility. The term loan is payable in equal monthly installments of $125 which
commenced in December, 1995, and bears interest at a rate equal to 7.0% per
annum. The revolving credit loan under the credit facility bears interest at a
rate equal to LIBOR plus 1.0%, the bank's prime rate or a fixed rate, as
selected by the Company. The proceeds under this credit facility were used to
repay the outstanding balance under the existing revolving credit facility and
are for future working capital needs. The Company also has two term loans
payable of $5,438 at September 30, 1996 under a previous credit agreement with
one of the banks. At September 30, 1996, the revolving credit facility carried
an interest rate ranging from 6.56% to 7.38%. The unused amount available to
the Company at September 30, 1996 was $6,250.
All of the Company's loans with the banks are secured by substantially all of
its assets and are subject to certain financial covenants, as amended.
<TABLE>
Long-term debt at September 30, 1996 matures as follows:
<S> <C>
1997 $3,873
1998 17,785
1999 2,437
2000 1,500
Thereafter 3,250
===================================================================================================================
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Guest Supply, Inc. and Subsidiaries
LEASES The Company leases its office, warehouse facilities and vehicles under
long-term lease agreements. These leases are classified as operating leases and
expire in various years through 2006. In addition, certain equipment is leased
under capital lease agreements. The leases generally provide that the Company
pay the insurance and maintenance expenses related to the leased assets.
An analysis of assets under capital lease is as follows:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computers $ 235 $ 235
Equipment 607 607
- -------------------------------------------------------------------------------------------------------------------
842 842
Less: Accumulated amortization 396 302
- -------------------------------------------------------------------------------------------------------------------
$ 446 $ 540
===================================================================================================================
</TABLE>
Future minimum lease payments under non-cancelable operating leases and future
capital lease payments as of September 30, 1996 are:
<TABLE>
<CAPTION>
Capital Operating
September 30, Leases Leases
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1997 $ 129 $ 3,112
1998 2,520
1999 1,851
2000 1,412
2001 1,142
Thereafter 5,450
- -------------------------------------------------------------------------------------------------------------------
Total minimum lease payments 129 $ 15,487
Less amount representing interest 6
- -------------------------------------------------------------------------------------------------------------------
Present value of minimum capital lease payments $123
===================================================================================================================
</TABLE>
Rent expense under operating leases was $3,888, $3,421 and $2,826 for the years
ended September 30, 1996, 1995 and 1994, respectively.
LITIGATION From time to time, the Company is a party to legal actions arising
in the ordinary course of business. Management believes that such litigation
and claims will be resolved without material effect on the Company's financial
position.
EARNINGS PER COMMON SHARE Primary and fully diluted earnings per common share
are based on the weighted average number of common and common share equivalents
outstanding during each year. When stock options and warrants are dilutive,
they are included as share equivalents using the modified treasury stock
method. Where the effect of the assumed exercise on net income would be anti-
dilutive, primary and fully diluted earnings per common share are stated the
same. On September 18, 1995, the Board of Directors of the Company declared a
three-for-two stock split to be paid in the form of a 50% stock dividend. The
additional 2,048,739 shares of common stock were issued on October 24, 1995 to
the shareholders of record on October 3, 1995. Distribution of fractional
shares was paid in cash based on the closing price of the stock on the record
date. The par value of the new shares issued totaled $205 which was transferred
from additional paid-in capital to common stock. Weighted average shares for
computing primary earnings per share were 7,074,000 , 7,293,000 and 7,041,000
for the years ended September 30, 1996, 1995 and 1994, respectively. Weighted
average shares for computing fully diluted earnings per share were 7,074,000,
7,433,000 and 7,160,000 for the years ended September 30, 1996, 1995 and 1994,
respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Guest Supply, Inc. and Subsidiaries
EMPLOYEE STOCK OPTION AND PURCHASE PLANS Under the stock option plans approved
by the Company's stockholders, key employees may be granted options to purchase
shares of common stock exercisable at prices not less than fair market value at
the date of grant. Options generally become exercisable 20% one year from the
date of grant, with an additional 20% exercisable each succeeding year. The
options expire ten years from the date of grant.
Transactions relating to these stock option plans are summarized as follows:
<TABLE>
<CAPTION>
Number of
Options Price Range
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, September 30, 1993 754,800 $2.67 - $6.17
Granted 241,500 $9.83
Exercised (28,875) $2.67 - $6.17
- -------------------------------------------------------------------------------------------------------------------
Outstanding, September 30, 1994 967,425 $2.67 - $9.83
Exercised (32,625) $2.67 - $5.92
- -------------------------------------------------------------------------------------------------------------------
Outstanding, September 30, 1995 934,800 $2.67 - $9.83
Granted 78,000 $11.50 - $16.25
Exercised (1,500) $2.67
- -------------------------------------------------------------------------------------------------------------------
Outstanding, September 30, 1996 1,011,300 $2.67 - $16.25
- -------------------------------------------------------------------------------------------------------------------
Exercisable, September 30, 1996 742,380 $2.67 - $9.83
===================================================================================================================
</TABLE>
The Company maintains an Employee Stock Purchase Plan in which eligible
employees may purchase a limited amount of shares over successive six-month
offering periods at 85% of fair market value on either the first or last day of
each six-month period, whichever is less. During the years ended September 30,
1996, 1995 and 1994, there were 8,240; 7,910 and 10,565 shares purchased under
this plan, respectively. At September 30, 1996, 92,024 shares are reserved for
future issuance under this plan.
LONG-TERM INCENTIVE PLAN In March, 1996, the shareholders of the Company
adopted the 1996 Long-Term Incentive Plan. Under the plan, 400,000 shares of
common stock will be available for issuance of awards. The Stock Option
Committee is authorized to grant a wide range of awards, including options,
stock appreciation rights, restricted stock, performance awards and other
stock-based awards to any employee or director.
During 1996, the Company issued 163,000 ten-year options under the plan at
$15.25 per share. No options were exercised during the year and 3,000 options
were canceled. At September 30, 1996, 160,000 options are outstanding and
240,000 shares are available for issuance. No options were exercisable under
the plan at September 30, 1996.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Guest Supply, Inc. and Subsidiaries
COMMON STOCK WARRANTS The Board of Directors may grant common stock warrants to
directors and officers of the Company at exercise prices not less than market
value at the date of grant. All outstanding warrants expire during the fiscal
years 1998 through 2000.
Transactions relating to common stock warrants are summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF
WARRANTS PRICE RANGE
- -------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, September 30, 1993 828,750 $2.67 - $5.17
Exercised (63,000) $3.17
- -------------------------------------------------------------------------------
Outstanding, September 30, 1994 765,750 $2.67 - $5.17
Exercised (22,500) $5.17
- -------------------------------------------------------------------------------
Outstanding, September 30, 1995 743,250 $2.67 - $5.17
- -------------------------------------------------------------------------------
Outstanding, September 30, 1996 743,250 $2.67 - $5.17
===============================================================================
Exercisable, September 30, 1996 743,250 $2.67 - $5.17
===============================================================================
</TABLE>
EMPLOYEE BENEFIT PLAN The Company has a 401(k) Savings Plan under which the
Company annually matches a portion of the amount of contributions made by the
employee. All domestic employees with one year of continuous service are
eligible for the plan. Company matching contributions are 100% vested, as are
any contributions made by the employee. The Company may also make, in its sole
discretion, annual discretionary contributions which vest over a six-year
period. The Company has not made any discretionary contributions.
Employer contributions relating to these plans were $138, $130 and $153 for
the years ended September 30, 1996, 1995 and 1994, respectively.
SHAREHOLDERS' PREFERRED PURCHASE RIGHTS On July 14, 1988, the Board of
Directors of the Company declared a dividend of one preferred share purchase
right for each outstanding share of common stock of the Company. The dividend
was payable on July 26, 1988 to the shareholders of record on that date. Each
right entitles the registered holder to purchase from the Company one one-
hundredth of a Preferred Share at a price of $20.00, subject to adjustment.
The rights agreement provides that, until the earlier to occur of (i) 10 days
following a public announcement that a person or group of affiliated or
associated persons has acquired beneficial ownership of 20% or more of the
outstanding common stock, or (ii) 10 days following the commencement of, or
announcement of an intention to make a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 20% or more of such outstanding common stock, the rights will be
transferred with and only with the common stock.
The rights are not exercisable until the earlier of such date described above
and will expire on July 15, 1998, unless the final expiration date is extended
or the rights are earlier redeemed by the Company at $.01 per right.
QUARTERLY FINANCIAL DATA The following table sets forth certain unaudited
quarterly financial information.
<TABLE>
<CAPTION>
First Second Third Fourth
Year ended September 30, 1996 Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $41,714 $37,281 $47,863 $52,184
Gross profit 9,495 6,634 10,752 11,117
Net income (loss) 944 (824) 1,440 1,591
Earnings (loss) per common share $ 0.13 ($0.13) $ 0.20 $ 0.22
Year ended September 30, 1995
- -------------------------------------------------------------------------------------
Sales $32,763 $34,193 $44,062 $48,432
Gross profit 7,840 7,963 10,313 11,249
Net income 802 706 1,359 2,223
Earnings per common share $ 0.11 $ 0.10 $ 0.19 $ 0.30
</TABLE>
<PAGE>
GUEST SUPPLY, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- --------------------------------- ------------ ---------------------- ---------- ----------
<S> <C> <C> <C> <C>
Additions
-----------
Balance at Charged to Charged to Balance at
Beginning of Costs and Other End of
Description Period Expenses Accounts Deductions Period
- --------------------------------- ------------ ---------- ---------- ---------- ----------
Reserve and allowances deducted
from asset accounts:
Allowance for uncollectible
accounts
Year Ended September 30, 1996 $ 692,000 $316,000 $0 $110,000 $898,000
========== ======== ========== ======== ========
Year Ended September 30, 1995 $ 852,000 $223,000 $0 $383,000 $692,000
========== ======== ========== ======== ========
Year Ended September 30, 1994 $1,051,000 $419,000 $0 $618,000 $852,000
========== ======== ========== ======== ========
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
For information concerning this item, see "Item 1. - Business -
Executive Officers" and the table and text under the caption "Certain
Information Concerning Nominees and Directors" and "Compliance with Section
16(a) of the Securities Exchange Act of 1934" of the Proxy Statement to be filed
with respect to the 1997 Annual Meeting of Shareholders to be held on March 5,
1997 (the "Proxy Statement"), which information is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
For information concerning this item, see the table and text under the
captions "Executive Compensation," "Compensation of Directors," "Personnel and
Compensation Committee Interlocks and Insider Participation" and "Employment
Agreements" of the Proxy Statement, which information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
For information concerning this item, see the table and text under the
caption "Information Concerning Certain Shareholders" of the Proxy Statement,
which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
For information concerning this item, see the text under the caption
"Personnel and Compensation Committee Interlocks and Insider Participation" of
the Proxy Statement, which information is incorporated herein by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements:
Included in Part II of this report:
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Independent Auditors' Report.............................................. 23
Consolidated Balance Sheets -- September 30 1996 and 1995................. 24
Consolidated Statements of Operations --Years Ended September 30, 1996,
1995 and 1994............................................................. 25
Consolidated Statements of Cash Flows-- Years Ended September 30, 1996,
1995 and 1994............................................................. 26
Consolidated Statements of Shareholders' Equity -- Years Ended
September 30, 1996, 1995 and 1994......................................... 28
Notes to Consolidated Financial Statements................................ 29
</TABLE>
2. Financial Statement Schedule:
Included in Part II of this report:
II - Valuation and Qualifying Accounts................................ 36
All other schedules have been omitted because they are inapplicable or the
information is provided in the financial statements, including the notes
thereto.
<PAGE>
3. Exhibits:
The exhibits required to be filed as part of this Annual Report on Form
10-K are listed in the attached Index to Exhibits.
(b) Current Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter ended
September 30, 1996.
<PAGE>
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby
appoint Clifford W. Stanley and Thomas M. Haythe as attorneys-in-fact with full
power of substitution, severally, to execute in the name and on behalf of the
registrant and each such person, individually and in each capacity stated below,
one or more amendments to the annual report which amendments may make such
changes in the report as the attorney-in-fact acting in the premises deems
appropriate and to file any such amendment to the report with the Securities and
Exchange Commission.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: December 27, 1996
GUEST SUPPLY, INC.
By /s/ Clifford W. Stanley
------------------------------
Clifford W. Stanley
President
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Dated: December 27, 1996 By /s/ Clifford W. Stanley
-----------------------------
Clifford W. Stanley
President, Principal
Executive Officer and
Director
Dated: December 27, 1996 By /s/ Thomas M. Haythe
-----------------------------
Thomas M. Haythe
Director
<PAGE>
Dated: December 27, 1996 By /s/ Peter L. Richard
-----------------------------
Peter L. Richard
Director
Dated: December 27, 1996 By /s/ Teri E. Unsworth
-----------------------------
Teri E. Unsworth
Vice President -
Market Development and
Director
Dated: December 27, 1996 By /s/ Edward J. Walsh
-----------------------------
Edward J. Walsh
Director
Dated: December 27, 1996 By /s/ George S. Zabrycki
-----------------------------
George S. Zabrycki
Director
Dated: December 27, 1996 By /s/ Paul T. Xenis
----------------------------
Paul T. Xenis
Vice President -
Finance and Principal Financial
and Accounting Officer
<PAGE>
Index to Exhibits
-----------------
Page
----
3(a) Amended and Restated Certificate of
Incorporation of the Company (incorporated by
reference to Exhibit 3 to the Company's
Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996). --
3(b) Certificate of Amendment of the Amended and
Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3
to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1996). --
3(c) Certificate of Amendment of the Amended and
Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3
to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1996). --
3(d) Certificate of Amendment of the Amended and
Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3
to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1996). --
3(e) Certificate of Correction to the Certificate of
Amendment of the Amended and Restated
Certificate of Incorporation of the Company,
(incorporated by reference to Exhibit 3(d) to
the Company's Annual Report on Form 10-K for
the year ended September 30, 1993). --
3(f) Certificate of Merger of Miraflores Designs,
Inc. into the Company (incorporated by
reference to Exhibit 3(e) to the Company's
Annual Report on Form 10-K for the year ended
September 30, 1993). --
<PAGE>
3(g) Amended and Restated By-Laws of the
Company(incorporated by references to Exhibit
3(f) to the Company's Annual Report on Form 10-
K for the year ended September 30, 1994). --
4(a) Article THIRD of Certificate of Incorporation
of the Company (incorporated by reference to
Exhibit 3(a) to Registration Statement on Form
S-1 No. 33-7246). --
4(b) Form of Series W Warrant Certificate to
purchase Common Stock of the Company
(incorporated by reference to Exhibit 4(b) to
the Company's Annual Report on Form 10-K for
the year ended September 30, 1994). --
4(c) Form of Series A Warrant Certificate to
purchase Common Stock of the Company
(incorporated by reference to Exhibit 4(c) to
the Company's Annual Report on Form 10-K for
the year ended September 30, 1994). --
4(d) Form of Series B Warrant Certificate to
purchase Common Stock of the Company
(incorporated by reference to Exhibit 4(d) to
the Company's Annual Report on Form 10-K for
the year ended September 30, 1994). --
4(e) Rights Agreement dated as of July 15, 1988
between the Company and First Fidelity Bank
(incorporated by reference to Exhibit 4(e) to
the Company's Annual Report on Form 10-K for
the year ended September 30, 1993). --
10(a) 1983 Stock Option Plan of the Company, as
amended (incorporated by reference to Exhibit
10(a) to Company's Annual Report on Form 10-K
for the year ended September 30, 1993). --
10(b) 1993 Employee Stock Purchase Plan (incorporated
by reference to Exhibit 4.4 to Registration
Statement on Form S-8 No. 33-63352). --
<PAGE>
10(c) 1993 Stock Option Plan of the Company
(incorporated by reference to Exhibit 4.1 to
Registration Statement on Form S-8 No. 33-
63352). --
10(d) Lease dated February 28, 1985 between the
Company and The Benenson Capital Company
(incorporated by reference to Exhibit 10(l) to
Registration Statement on Form S-1 No. 2-
98274). --
10(e) Lease dated October 28, 1985 between the
Company and Shore Point Distributors
(incorporated by reference to Exhibit 10(y) to
Registration Statement on Form S-1 No.
33-7246). --
10(f) Employment Agreement dated as of January 11,
1988 between the Company and Clifford W.
Stanley (incorporated by reference to Exhibit
10(g) to the Company's Annual Report on Form 10-
K for the year ended September 30, 1994). --
10(g) Employment Agreement dated as of January 11,
1988 between the Company and James H.
Riesenberg (incorporated by reference to
Exhibit 10(h) to the Company's Annual Report on
Form 10-K for the year ended September 30,
1994). --
10(h) Employment Agreement dated as of January 11,
1988 between the Company and Teri E. Unsworth
(incorporated by reference to Exhibit 10(i) to
the Company's Annual Report on Form 10-K for
the year ended September 30, 1994). --
10(i) Guest Supply, Inc. 401(k)
Plan & Trust . . . . . . . . . . . . . . . . . . . . . . . . .
10(j) Guest Supply, Inc. 1996 Long Term
Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . .
10(k) Revolving Credit and Term Loan Agreement dated
October 31, 1995 among Guest Supply, Inc.,
Guest Packaging, Inc. and Breckenridge-Remy
Co., as the Borrower, and PNC Bank, National
Association and First Fidelity Bank, N.A., as
Lenders, and PNC Bank, National Association, as
Agent
<PAGE>
(incorporated by reference to Exhibit 10(k) to
the Company's Annual Report on Form 10-K for the
year ended September 30, 1995). --
10(l) Term Note dated October 31, 1995 in the
principal amount of $3,749,996 executed by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co. payable to PNC Bank,
National Association (incorporated by reference
to Exhibit 10(l) to the Company's Annual Report
on Form 10-K for the year ended September 30, 1995). --
10(m) Term Note dated October 31, 1995 in the
principal amount of $6,750,000 executed by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co. payable to First Fidelity
Bank, N.A. (incorporated by reference to
Exhibit 10(m) to the Company's Annual Report on
Form 10-K for the year ended September 30,
1995). --
10(n) Revolving Credit Note dated October 31, 1995 in
the principal amount of $13,750,000 executed by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co. payable to PNC Bank,
National Association (incorporated by reference
to Exhibit 10(n) to the Company's Annual Report
on Form 10-K for the year ended September 30,
1995). --
10(o) Revolving Credit Note dated October 31, 1995 in
the principal amount of $8,250,000 executed by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co. payable to First Fidelity
Bank, N.A. (incorporated by reference to
Exhibit 10(o) to the Company's Annual Report on
Form 10-K for the year ended September 30,
1995). --
10(p) Existing Loan Note dated October 31, 1995 in
the principal amount of $3,333,340 executed by
Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co. payable to PNC Bank,
National Association
<PAGE>
(incorporated by reference to Exhibit 10(p) to
the Company's Annual Report on Form 10-K for
the year ended September 30, 1995). --
10(q) Existing New Term Loan Note dated October 31,
1995 in the principal amount of $4,166,664
executed by Guest Supply, Inc., Guest
Packaging, Inc. and Breckenridge-Remy Co.
payable to PNC Bank, National Association
(incorporated by reference to Exhibit 10(q) to
the Company's Annual Report on Form 10-K for
the year ended September 30, 1995). --
10(r) Security Agreement dated October 31, 1995 made
by Guest Supply, Inc. in favor of PNC Bank,
National Association, as Agent for the benefit
of the Lenders (incorporated by reference to
Exhibit 10(r) to the Company's Annual Report on
Form 10-K for the year ended September 30,
1995). --
10(s) Security Agreement dated October 31, 1995 made
by Guest Packaging, Inc. in favor of PNC Bank,
National Association, as Agent for the benefit
of the Lenders (incorporated by reference to
Exhibit 10(s) to the Company's Annual Report on
Form 10-K for the year ended September 30,
1995). --
10(t) Security Agreement dated October 31, 1995 made
by Breckenridge-Remy Co. in favor of PNC Bank,
National Association, as Agent for the benefit
of the Lenders (incorporated by reference to
Exhibit 10(t) to the Company's Annual Report on
Form 10-K for the year ended September 30,
1995). --
10(u) Employment Agreement dated as of July 29, 1988
between the Company and Paul T. Xenis
(incorporated by reference to Exhibit 10(a) to
the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994). --
10(v) Amendment No. 1 dated as of May 18, 1994 to the
Employment Agreement dated
<PAGE>
as of July 29, 1988 between Company and Paul T.
Xenis (incorporated by reference to Exhibit
10(b) to the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1994). --
10(w) Lease dated March 16, 1995 between the Company
and The Morris Company (incorporated by
reference to Exhibit 10(b) to the Company's
Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995). --
10(X) Amendment No. 1 to Revolving Credit and Term
Loan Agreement (incorporated by reference to
Exhibit 10 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996). --
10(y) Amendment No. 2 to Revolving Credit and
Term Loan Agreement . . . . . . . . . . . . . . . . . . . .
21 Subsidiaries of the Registrant . . . . . . . . . . . . . . . .
23 Consent of KPMG Peat Marwick LLP . . . . . . . . . . . . . . .
24 Power of Attorney (see "Power of
Attorney"in Form 10-K) . . . . . . . . . . . . . . . . . . . .
27 Financial Data Schedule . . . . . . . . . . . . . . . . . . .
Copies of the exhibits filed with this Annual Report on Form 10-K or
incorporated by reference herein do not accompany copies hereof for distribution
to shareholders of the Company. The Company will furnish a copy of any of such
exhibits to any shareholder requesting the same.
<PAGE>
EXHIBIT 10(I)
401(K) SALARY REDUCTION
- --------------------------------------------------------------------------------
NON - STANDARDIZED
- --------------------------------------------------------------------------------
ADOPTION AGREEMENT
- --------------------------------------------------------------------------------
IRS SERIAL #D359971A
APPROVED APRIL 30, 1992
LINCOLN NATIONAL
LIFE INSURANCE CO.
------------------
A PART OF LINCOLN NATIONAL CORPORATION
1300 SOUTH CLINTON STREET FORT WAYNE, IN 46801
1
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NON-STANDARDIZED
401(K) SALARY REDUCTION PLAN AND TRUST PROTOTYPE PLAN
ADOPTION AGREEMENT
PLAN #007
IRS SERIAL #D359971A DATE APRIL 30, 1992
The Guest Supply, Inc.
-----------------------------------------------------------------------------
(Exact legal name of Employer)
(hereinafter referred to as the Employer), having its principal place of
business in Monmouth Junction N.J.
---------------------------------------------------------------------
(City) (State)
hereby adopts the Lincoln National Life Insurance Company Non-Standardized
401(k) Salary Reduction Plan and Trust Prototype Plan, and further appoints as:
Trustee(s), Clifford W. Stanley, Paul T. Xenis, Robert Reese
------------------------------------------------------------------
and Teri E. Unsworth ;
-----------------------------------------------------------------
Named Fiduciary*, Same ;
-------------------------------------------------------------
Plan Administrator*, Clifford W. Stanley, Teri E. Unsworth, Paul T. Xenis ; and
-----------------------------------------------------
And Robert Reese (ID 22-2959476)
Agent for Legal Service of Process*, Same .
-------------------------------------------
* If same as Employer, write 'Same'.
The Employer's Tax Year begins October 1 and ends September 30 .
----------- -----------------
Employer Telephone Number (609) 514-9696 .
---------------------
Business Code Number (same as shown on 1120) 7398 .
--------------
Date Business Commenced October 1979 .
----------------------
In connection herewith, the Employer makes the following statements and
selections:
This Plan shall be known as Guest Supply, Inc.
------------------------------------------------
__________________________________ 401(k) Salary Reduction Plan and
Trust which shall be identified by Employer I.D. # 22-2320483
-----------------
And Plan Serial # 001 (001, 002, etc. - assign sequentially).
--------
2
<PAGE>
The employer maintains, or has maintained, the following qualified plans: (List
all plans, including this Plan, ever maintained by the Employer starting with
Plan Serial #001.)
<TABLE>
<CAPTION>
Plan Status
--------
Serial # Type of Plan In Force Terminated
- --------- ------------ -------- ----------
<S> <C> <C> <C>
001 401 (k) [X] [_]
- --------- ------------------
002 [_] [_]
- --------- ------------------
003 [_] [_]
- --------- ------------------
004 [_] [_]
- --------- ------------------
005 [_] [_]
- --------- ------------------
</TABLE>
This Employer is: _____ Sole Proprietor
_____ Partnership
X Corporation
-----
_____ S Corporation
_____ Professional Corporation
_____ Non Profit Corporation
[X] Yes [_] No Is the Employer a member of a Controlled Group of
Corporations, a group of businesses under common control,
or an Affiliated Service Group as defined below. THIS
QUESTION MUST BE ANSWERED "YES" OR "NO". If yes, complete
the rest of this section.
In the case of a group of employers which constitutes a Controlled Group of
Corporations, or an Affiliated Service Group [as defined in Sections 414(b) and
414(m), respectively, of the Internal Revenue Code], of which constitutes one or
more trades or businesses whether or not incorporated which are under common
control [as defined in Section 414(c)], all such employers shall be considered a
single employer for purposes of determining plan qualifications, minimum
participation, benefit accrual, vesting standards, and limitations on benefits
and contributions. The employers listed below are required to be aggregated
with the adopting employer under Code Sections 414(b), (c), (m) or (o), and
shall participate in this Plan to the extent indicated as evidenced by written
resolution adopting this Plan. (If there are no affiliated employers, indicate
None.)
- ----
<TABLE>
<CAPTION>
Employer Employer Participating Participation
Name I.D.# Employer Effective Date
-------- --------- ------------- --------------
<S> <C> <C> <C>
Breckenridge-Remy 34-1184534 [X] Yes [_] No 1-1-94
- ---------------------- ---------- --------------
[_] Yes [_] No
- ---------------------- ---------- --------------
[_] Yes [_] No
- ---------------------- ---------- --------------
[_] Yes [_] No
- ---------------------- ---------- --------------
[_] Yes [_] No
- ---------------------- ---------- --------------
</TABLE>
If this Plan and Trust is adopted by more than one member of the aggregation
group, this Plan
[X] (a) shall be administered as one plan (i.e., contributions, and forfeitures
shall not be separated for each participating Employer).
[_] (b) shall be administered as a single employer plan for each participating
Employer [i.e., contributions shall be made by each Employer only for
those Participants employed by such employer and forfeitures shall be
used to reduce the contribution made by the applicable Employer -each
asset pool shall be considered a separate plan which must
independently satisfy Code Section 401(a) (26)].
[_] (c) N/A
3
<PAGE>
Any Employee of a participating employer must receive credit for service while
employed by any member of the aggregation group (including non-participating
employers) for purposes of vesting and eligibility under this Plan from the date
such Employer became a member of the aggregation group.
A-1.22 The adoption of this Plan constitutes: (check appropriate statement
and provide information)
[_] (a) The initial adoption of this Plan and Trust by the Employer.
The Effective Date of this Plan is _________________________
(month/day/year)
[x] (b) An [X] amendment and restatement, or [X] merger of the
following Plan(s) known as Guest Supply, Inc. 401(k)
----------------------------------
Plan and Trust and Breckenridge-Remy company Employee
------------------------------------------------------------
Savings Plan
------------------------------------------------------------
(name of Plans and Trust)
with the original effective date(s) of
January 1, 1981
------------------------------------------------------------
(month/day/year)
The effective date of this amendment and restatement is
January 1, 1994
------------------------------------------------------------
(month/day/year)
I. DEFINITIONS
A-1.38 Hours of Service: Hours of Service shall be determined on the basis of
the method selected below. The method selected shall be applied to all
Employees. If the elapsed Time Method is selected in A-1.74, Hours of
Service as designated below shall be applicable for eligibility
purposed only. (Select one)
[x] (a) On the basis of actual hours for which an Employee is paid
or entitled to payment.
[_] (b) On the basis of days worked. An Employee shall be credited
with ten (10) Hours of Service if, under Section 1.38 of
the Plan, such Employee would be credited with at least
one (1) Hour of Service during such day.
[_] (c) On the basis of weeks worked. An Employee shall be
credited with 45 Hours of Service if, under Section 1.38
of the Plan, such Employee would be credited with at least
one (1) Hour of Service during such week.
4
<PAGE>
[_] (d) On the basis of semi-monthly payroll periods. An Employee
shall be credited with 95 Hours of Service if, under
Section 1.38 of the Plan, such Employee would be credited
with at least one (1) Hour of Service during such semi-
monthly period.
[_] (e) On the basis of months worked. An Employee shall be
credited with 190 Hours of Service if under Section 1.38
of the Plan such Employee would be credited with at least
one (1) Hour of Service during such month.
A-1.54 Plan Year: (select one and complete)
[X] (a) Shall be the consecutive 12 month period for which records
for this Plan shall be maintained beginning each January 1
---------
and ending each December 31.
-----------
[_] (b) There shall be a short Plan Year beginning ___________ and
ending ____________. (The Plan must retain its qualified
status during this period).
All subsequent Plan Years shall begin each ________ and end each
____________.
The previous Plan Year prior to this amendment began ___________
And ended each _______________.
Adjustments for eligibility and vesting shall be made as
required by Section 11.04 if the Plan Year is changed.
A-1.55 For purposes of establishing Present Value to compute the Top-Heavy
Ratio, any benefit (under a Defined Benefit plan) shall be discounted
for mortality and interest based on the following: (If the Employer
maintains a Defined Benefit plan, this section must be completed.)
Interest Rate _______% Mortality Table _______
[x] N/A The Employer has no defined Benefit plan.
A-1.64 Years of Service with a predecessor employer:
Years of Service with Breckenridge, for whom this Employer does not
------------
maintain a predecessor plan shall be considered under the Plan for
purposes of: (select as desired)
[x] (a) Vesting
[x] (b) Eligibility
[_] (c) None of the above
5
<PAGE>
A-1.71 For purposes of computing the Top-Heavy Ratio, the Valuation Date
shall be _ December 31 of each year.
------------
A-1.73 Vesting Years of Service: Years of Service credited for vesting shall
exclude the years checked below subject to Section 11.03: (select as
desired)
[_] (a) Years of Service before the Employee's ____(Cannot exceed
18) birthday. (If Regular Method is used, the Plan Year in
which the Employee attains age 18 shall not be excluded.
[_] (b) Years of Service prior ___________. to the original
Effective Date of this Plan or a predecessor plan.
[_] (c) Years of Service prior to____________. (Date selected may
not be later than the original effective date of this Plan
of a predecessor plan.)
[_] (d) Years of Service during a period for which the Employee
declined to contribute to a plan requiring Employee
Contributions. In the case of a plan using the elapsed time
method, the Service which shall be disregarded is the
period with respect to which the mandatory contribution
is not made.
[x] (e) No exclusions.
Note: In general, a predecessor plan is a plan which terminates within
the five (5) year period immediately preceding or following the
establishment of this Plan.
A-1.74 Years of Service shall be computed under the following method:
(select one)
[x] (a) Regular method--based on Hours of Service credited under
the method selected in A-1.38.
[_] (b) Elapsed Time Method--based on total time an Employee is
employed without regard to actual hours credited as
explained in Section 1.74 of this Plan.
II. ELIGIBILITY
A-2.01 (a) For purposes of plan coverage and benefits, employees of
affiliated employers required to be aggregated with the Employer
under section 414(b), (c), (m) or (o) of the Code shall not be
treated as Employees of the Employer unless such affiliated
employers are identified as Participating Employers on page 2 of
this Adoption Agreement.
For purposes of plan coverage and benefits, the term "Employee"
[x] (1) shall include
[_] (2) shall not include
[_] (3) N/A (Employer has no "leased employees.")
"leased employees" who are required to be considered employees
of the Employer under Code Section 414(n) or (o).
6
<PAGE>
(b) the following classes of Employees of the Employer shall be
eligible to participate in the Plan:
[x] (1) All Employees
[_] (2) Hourly paid Employees
[_] (3) Salaried Employees
[_] (4) All Employees except Employees included in a unit of
Employees covered by a collective bargaining
agreement between the Employer and Employee
representatives, if retirement benefits were the
subject of good faith bargaining and if two percent
or less of the Employees of the Employer who are
covered pursuant to that agreement are professionals
as defined in Section 1.410(b)-9(g) of the
Regulations. For this purpose, the term "employee
representatives" does not include any organization
more than half of whose members are Employees who are
owners, officers, or executives of the Employer.
[_] (5) Other _______________________________________________
The above classes of Employees
[_] (6) shall
[x] (7) shall not
Include Employees who are non-resident aliens [within the
meaning of Section 7701(b)(1)(B)] and who receive no earned
income [within the meaning of Section 911(d)(2)] from the
Employer which constitutes income from sources within the United
States [within the meaning of Section 861(a)(3)].
(c) Minimum age and service requirements: (select one)
[x] (1) an Employee shall become a Participant on the Entry
Date coincident with or next following Age 21 (cannot
--
exceed 21) and the completion of 1 (cannot exceed 1
---
year) Eligibility Year of Service. MUST HAVE AT
LEAST 2 ENTRY DATES, I.E., CANNOT ELECT (e)(1) BELOW.
If the Eligibility Year of Service includes a
fractional year, an Employee shall not be required to
complete any specified number of Hours of Service to
receive credit for such fractional year.
[_] (2) an Employee shall become a Participant on the Entry
Date coincident with or next following Age _______
cannot exceed 20 1/2) and the completion of _______
[Cannot exceed 1/2 year (6 months)] Eligibility Year
of Service. USE THIS PROVISION ONLY WHEN (e)(1) (ONE
ENTRY DATE) IS ELECTED BELOW.
7
<PAGE>
(d) If the Eligibility Year of Service includes a
fractional year, an Employee shall not be required to
complete any specified number of Hours of Service to
receive credit for such fractional year.
The preceding election in A-2.01(C) notwithstanding, Employees
who are actively employed on _____________ Shall be deemed to
have satisfied the
[_] (1) Age requiremtment as of the Effictive Date.
[_] (2) Service requiremtnt as of the Effective Date.
[_] (3) Age and service requirements as of the Effective
Date.
[_] (4) N/A (Age and Service requirements in A-2.01(C) apply
to all Employees.)
(e) Entry date:Shall mean: (select one)
[_] (1) First day of Plan Year,
[X] (2) first day of Plan Year and the date 6 months after
the first day of the Plan Year.
[_] (3) The first day of Plan Year and the dates which are
3, 6 and 9 months after the first day if the Plan
Year. (Not recommended.)
[_] (4) First day of each month. (Not recommended.)
III. PROFIT SHARING CONTRIBUTIONS AND ALLOCATIONS
A-3.01 Contributions
(a) The Employer shall contribute [select (1), (2) or (3)]
[x] (1) out of current or accumulated profits.
[_] (2) without regard to current of accumulated profits.
[_] (3) N/A [A-3.01(a)(6) is elected]
The amount of such contribution shall be: [select (4),(5) or(6)]
(4) As determined by the Board of Directors each year.
(5) Other -------------------------------------------------
_________________________________________________
(6) The employer will make no contribution under this Section
A-3.01(a). [Do not complete Sections A-3.01(b), (d) and
(e). Section A-3.01(C) must still be completed.]
8
<PAGE>
(b) Allocation of contributions under A-3.01(a), above, shall be
made for all Participants who are credited with at least
[select (1), (2) or (3)]
[x] (1) 1,000 Hours of Service
[_] (2) 500 Hours of Service
[_] (3) one Hour of Service
During the Plan Year and [select (4) or (5)]
[_] (4) regardless of employment on the last day of the Plan
Year
[x] (5) who is employed with the Employer on the last day if
the Plan Year
The preceding notwithstanding, for Plan Years beginning after
December 31, 1989, if the Plan would otherwise fail to
satisfy the requirements of Code Sections 401(a)(26) or
410(b) because the Employer contributions have not been
allocated to a sufficient number of percentage of Participants
for a Plan Year, then the following riles shall apply:
(6) The group of Participants eligible to share in the
Employer's contribution shall be expanded to
include all Participants who are employed on the
last day if the Plan Year and who are credited with
at least 500 Hours of Service.
(7) If after the application of paragraph (6) above, the
applicable test is still not satisfied, then the
group of Participants eligible to share in the
Employer's contribution shall be further expanded
to include all Participants who are credited with at
least 500 Hours of Service regardless of employment
on the last day of the Plan Year.
Note: Employer includes all employers which are required to be
aggregated with the Employer under Code Sections 414(b),
(c), (m) or (o).
(c) If a Participant dies, retires, or becomes disabled during the
Plan Year and does not complete the hours requirement for a
contribution, an allocation
[_] (1) shall not be made on such Participant's behalf for
such Plan Year
[X] (2) shall be made on such Participant's behalf for such
Plan Year regardless of any last day requirement
elected under A-3.01(b)(5).
Note: the above election applies to Profit Sharing
Contributions under Section a-3.01(a), Matching
Contributions under A-4.02 and Qualified Non-elective
Contributions under A-4.03.
9
<PAGE>
(d) Employer contributions under this Section and forfeitures, if
applicable, shall be allocated to Participant's Accounts as
follows:
[x] NON-INTEGRATED FORMULA
On a pro-rata basis to all Participant's Compensation
bears to the total of all Participant's Compensation.
[_] INTEGRATED FORMULA (INTEGRATED WITH SOCIAL SECURITY)
Note: This plan may not provide for permitted disparity
(integration with Social Security) if the Employer
maintains any other plan that provides for permitted
disparity and benefits any of the same Participants.
STEP ONE: In any Plan Year the Plan is Top-Heavy
--------
contributions and forfeitures (if applicable) shall be
allocated to all Participants in the ratio that each
Participant's Compensation bears to all Participant's
Compensation, but not in excess of 3% of such
Compensation. (If the Plan is top-heavy, proceed to step
two.)
STEP TWO: Any contributions and forfeitures not
--------
allocated in STEP ONE shall be allocated to each
Participant's Account in the ratio that the sum of each
Participant's total Compensation plus Compensation in
excess of the integration level bears to the sum of all
Participants total Compensation plus Compensation in
excess of the integration level, but not in excess of
the maximum disparity rate.
STEP THREE: Any remaining Employer contributions or
----------
forfeitures shall be allocated to each Participants
Account in the ratio that each Participant's total
Compensation for the Plan Year bears to all
Participant's total Compensation for that year.
For the purpose of this Section, compensation shall mean
Compensation as defined in Section 1.13 of the Plan.
The integration level shall be:
[_] (I) The Taxable Wage Base [The maximum amount of
earnings which may be considered wages for a
year under Section 3121(a)(1) of the Code in
effect as of the first day of the Plan Year.]
[_] (ii) $_______(Must be less than the
Taxable Wage Base.)
10
<PAGE>
The maximum profit sharing disparity rate is equal
to the lesser of:
(a) 5.7%, or
(b) The applicable percentage determined in
accordance with the table below:
If the integration level:
Is more But not more The applicable
than than percentage is
------- ------------ --------------
$0.00 $X* 5.7%
X* 80% of TWB*** 4.3%
80% of TWB*** Y** 5.4%
* X = the greater of $10,000 or 20% of the TWB
** Y = any amount more than 80% of the TWB but
less than 100% of the TWB
*** TWB = Taxable Wage Base at the beginning of
the Plan Year. The TWB for 1989 is $48,000.
The TWB for 1990 is $51,300.
(e) If any Employee who is eligible to participate under this Plan
covered by any other plan [including plans of non-
participating employers required to be aggregated under
Section 414(b), (c), (m) or (o) of the Code] which is
integrated with Social Security?
[x] (1) No
[_] (2) Yes [may not elect A-3.01(d)(2)]
A-3.03 (a) Rollover contributions:
[_] (1) shall not be permitted under this Plan
[x] (2) shall be permitted under this Plan
(b) Rollover contributions shall be accepted from:
[x] (1) Participants only
[_] (2) Participants and non-Participants (otherwise eligible
Employees who have not yet satisfied the age and/or
service requirements for participation)
A-3.07 ALLOCATION OF EARNINGS shall be based on the Account balance as of the
beginning of the allocation period plus 1/2 of the contribution
allocated at the end of the allocation period, less all withdrawals,
plus investment transfers in, and less investment transfers out,
unless otherwise specified.
This plan will discontinue the above earnings formula and utilize
-----------------------------------------------------------------
Daily Accounting during the 1994 Plan Year and thereafter at a date to
----------------------------------------------------------------------
be determined by the Trustees to facilitate the Participant Directed
---------------------------------------------------------------------
Accounts.
--------
11
<PAGE>
A-3.08 ALL FORFEITURES occurring at the end of Plan Year: (select one)
[_] (a) shall be used to reduce the Employer's contribution for
the current Plan Year. If the Employer does not make a
contribution for a Plan Year, any available forfeitures
shall be treated as Employer Contributions.
[x] (b) shall be allocated in the same manner as Employer
contributions under Section 3.01 for the current Plan
Year. However, forfeitures shall not be allocated to
Participants who are not employed on the last day of the
Plan Year unless such allocation is required to satisfy
the requirements of Code Sections 401(a)(26) and/or
410(b). (Do not elect if no Profit Sharing contribution
is specified in A-3.01.)
IV. CASH OR DEFERRED ARRANGEMENT (CODA)
A-4.01 ELECTIVE DEFERRALS
(a) An eligible Employee may elect to have his or her annual
Compensation reduced by
[x] (1) from 0 % to 15 %
------- -------
[_] (2) ______________________________________________
(Specify)
Such election shall be in writing and in a form and manner specified
by the Plan Administrator.
(b) A Participant may elect to commence, or to modify the amount
of, Elective Deferrals as of:
[_] (1) the first day of each Plan Year
[_] (2) the first day of each Plan Year and the date 6
months after the first day of each Plan Year
[x] (3) the first day of each Plan Year quarter
The Plan administrator may permit an additional election in the
event an Actual Deferral Percentage Test, performed during the
Plan Year, permits of requires an adjustment in the deferral
percentages.
A-4.02 MATCHING CONTRIBUTIONS
(a) The Employer [select (1) or (2)]
[x] (1) shall
[_] (2) shall not
Make Matching Contributions to the Plan on behalf of all
Participants who elect to have Elective Deferrals made under
the Plan and who are credited with at least [select (3), (4)
or (5)]
12
<PAGE>
[x] (3) 1,000 Hours of Service
[_] (4) 500 Hours of Service
[_] (5) one Hour of Service
During the Plan Year and [select (6) or (7)]
[x] (6) regardless of employment on the last day of the
Plan Year
[_] (7) who is employed with the Employer on the last day of
the Plan Year
The preceding notwithstanding, for Plan Years beginning after
December 31, 1989, if the Plan would otherwise fail to satisfy
the requirements of Code Sections 401(a)(26) or 410(b) because
the Employer contributions have not been allocated to a
sufficient number of percentage of Participants for a Plan
Year, then the following shall apply:
(1) The group of Participants eligible to share in the
Employer's contribution shall be expanded to include all
Participants who are employed on the last day of the
Plan Year and who are credited with at least 500 Hours
of Service
(2) If after the application of paragraph (1) above, the
applicable test is still not satisfied, then the group
of Participants eligible to share in the Employer's
contribution shall be further expanded to include all
Participants who are credited with at least 500 Hours of
Service regardless if employment on the last day of the
Plan Year
Note: Employer includes all employers which are required to
be aggregated with the Employer under Code Sections
414(b), (c), (m) or (o).
(b) The Employer shall contribute and allocate to each
Participant's Matching Contribution Account:
[x] (1) an amount equal to 25 percent of the Participant's
----
Elective Deferrals
[_] (2) a discretionary matching contribution equal to a
percentage (to be determined each year by the
employer) of each Participant's elective Deferrals
(c) The employer shall not match Elective Deferrals in excess of
10 percent of a Participant's
[_] (1) compensation per pay period
[x] (2) annual compensation
(d) [_] (1) $__________
[x] (2) N/A
13
<PAGE>
(e) Matching Contributions shall be vested in accordance with
the following schedule:
[x] (1) 100% vested at all times
[_] (2) The vesting schedule as elected in A-11.02 of the
adoption Agreement
(f) Matching contributions shall be made
[_] (1) only from current of accumulated profits
[x] (2) without regard to current or accumulated profits
A-4.03 (a) Qualified Non-elective Contributions shall be allocated to
the accounts of Non-highly Compensated Participants who are
credited with at least [select (1), (2) or (3)]
[x] (1) 1,000 Hours of Service
[_] (2) 500 Hours of Service
[_] (3) one Hour of Service
During the Plan Year and [select (4) or (5)]
[_] (4) regardless of employment on the last day of the
Plan Year
[x] (5) who is employed with the Employer on the last day
of the Plan Year
The preceding notwithstanding, for Plan Years beginning after
December 31, 1989, if the Plan would otherwise fail to satisfy
the requirements of Code Sections 401(a)(26) or 410(b) because
the Employer contributions have not been allocated to a
sufficient number or percentage of Participants for a Plan
Year, then the following shall aply:
(1) The group of Participants eligible to share in the
Employer's contribution shall be expanded to include
all Participants who are employed on the last day of
the Plan Year and who are credited with at least 500
Hours of Service
(2) If after the application of paragraph (1) above, the
applicable test is still not satisfied, then the
group of Participants eligible to share in the
Employer's contribution shall be further expanded to
include all Participants who are credited with at
least 500 Hours of Service regardless of employment
on the last day of the Plan Year
Note:employer includes all employers required to be
aggregated with the Employer under Code Sections
414(b), (c), (m) or (o).
14
<PAGE>
A-4.13 Pre-retirement distributions of a Participant's entire Account
balance, including balance, including Elective Deferrals and Qualified
Contributions, upon attainment of age 59 1/2 (may not be less than 59
------
1/2)
[X] (a) shall
[_] (b) shall not
be permitted provided the Participant is 100% vested, and the balance
in the Participant's Account has accumulated for at least two (2)
years or the Participant has completed five (5) years of participation
in the Plan.
A-4.14 Distributions on account of financial hardship
[x] (a) shall
[_] (b) shall not
be permitted to the extent provided in Section 4.14, and subject to
applicable regulations.
Distributions on account of financial hardship shall be made only
from:
[x] (c) Elective Deferrals (and any earnings credited to a
Participants's Elective Deferral account as of the end of
the last Plan Year ending before July 1, 1989.) The amount
available for distribution shall include the amount
credited to the Participant's Qualified Matching
Contribution and Qualified Non-elective Contribution
accounts as of the end of the last Plan Year ending before
July 1, 1989.
[_] (d) Account balances which are not subject to the withdrawal
restrictions of Section 4.13 provided the Participant is
100% vested, and the funds have accumulated for at least
two (2) years or the Participant has completed five (5)
years of participation in the Plan.
Note: Hardship withdrawal provisions for funds described in (d) above,
are protected benefits under Code Section 411 (d) (6). If the
conditions described in Section 4.14 are more restrictive than
those in effect immediately prior to the adoption of this Plan,
the prior conditions shall continue to apply to all such funds
including those which have accrued after the date this Plan is
adopted, and the Employer should attach to this Adoption
Agreement a hardship withdrawal policy statement fully
describing the objective and nondiscriminatory conditions
applicable to such withdrawals.
15
<PAGE>
V. LIMITATIONS ON ALLOCATIONS
If the Employer maintains or ever maintained another qualified plan in which any
Participant in the Plan is (or was) a Participant or could become a Participant,
the Employer must complete this Section. The Employer must also complete this
Section if it maintains a welfare benefit fund, as defined in Section 419(e) of
the Code, or an individual medical account, as defined in Section 415 (2) (2) of
the Code, under which amounts are treated as Annual Additions with respect to
any Participant in this Plan.
A-5.11 If the Participant is covered under another qualified Defined
Contribution plan maintained by the Employer, other than a Master or
Prototype plan:
[_] (a) The provisions Sections 5.05 through 5.10 of Article V shall
apply as if the other plan were a Master or Prototype
plan. of
[_] (b) Provide the method under which the plans shall limit total
Annual Additions to the Maximum Permissible Amount, and
shall properly reduce any excess amounts, in a manner that
precludes Employer discretion.
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
[X] (c) N/A The Employer maintains no other plan which provides an
Annual Addition as defined under Section 5.13 (a).
A-5.12 If the participant is or has ever been a participant in a Defined
Benefit plan maintained by the Employer:
[_] (a) The Annual Additions which may be credited to the
Participant's Account under this Plan shall not be limited
by other than the Maximum Permissible Amount as defined in
Section 5.13(k). If the sum of the Defined Benefit Fraction
and the Defined Contribution Fraction would otherwise exceed
1.0, such sum shall be reduced to not exceed 1.0 by
adjusting the Participant's Projected Annual Benefit under
the Defined Benefit plan.
[_] (b) Provide language which shall satisfy the 1.0 limitation of
Section 415(e) of the Code. Such language must preclude
Employer discretion.
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
[x] (c) N/A The Employer does not and has never maintained a Defined
Benefit plan.
16
<PAGE>
VI. INVESTMENT OF CONTRIBUTIONS
A-6.02 Life Insurance: The Trustee may, at the direction of the Participant
and subject to the requirements of Section 6.02, use a portion of each
contribution to purchase life insurance.
[_] (a) Yes, subject to the guidelines outline below, if any.
____________________________________________________________
____________________________________________________________
____________________________________________________________
[x] (b) No
A-6.03 Participants may direct the Trustee as to the investment of their
individual Account balances which are attributable to: (check all
which apply)
[_] (a) Elective Deferrals
[_] (b) Employer Matching Contributions
[_] (c) Rollovers
[x] (d) All contributions regardless of source
` [_] (e) None of the above--Participants may not direct the
investment of their accounts.
A-6.05 Participant Loans
[x] (a) shall be permitted in accordance with the Employer's written
loan policy.
[_] (b) shall not be permitted.
VIII. BENEFITS
A-8.01 Normal Retirement Date: (select one)
[x] (a) The later of the first day of the month (select one)
[_] nearest
[x] on or following
a Participant's 65th (cannot be less than 55) birthday or
the first day of the month on or following the N/A (1st-7th
or N/A) first anniversary in which (select one)
[_] participation commenced
[_] the Employee first performed an Hour of Service
but in no event later than the first day of the month on or
following a Participant's N/A birthday.
---
17
<PAGE>
[_] (b) The later of the first day of the Plan nearest a
Participant's _________ (cannot be less than 55) birth, or
the first day of the Plan Year nearest the __________ (1st-
7th or Year N/A) anniversary in which (select one)
[_] participation commenced
[_] the Employee first performed an Hour of Service
but in no event later than the first day of the Plan Year
nearest a Participant's ___________ birthday.
A-8.02 (a) Early Retirement Date: Shall mean: (select one)
[_] (1) None--no Early Retirement Date
[x] (2) First day of any [X] month [_] Plan Year on or
following a Participant's 60th (cannot be less than
----
55) birthday or after 6 (1-7 or N/A) [X] Vesting Years
-
of Service [_] years of participation in the Plan,
whichever date is later.
(b) Early Retirement Benefit: Upon satisfaction of the age and
service requirements for Early Retirement, a Participant shall:
(select one)
[x] (1) automatically become 100% vested in the Account.
[_] (2) be entitled to the vested Account based on the vesting
schedule designated in the Adoption Agreement.
A-8.04 Disability Retirement Benefit:
(a) In the event of total and permanent disability, a Participant
shall: (select one)
[x] (1) automatically become 100% Vested in the Account.
[_] (2) be entitled to the vested Account based on the vesting
schedule designated in the Adoption Agreement.
(b) Disability shall mean a physical or mental impairment which is
expected to result in death or blindness or which can be expected
to last for a continuous period of not less than 12 months
resulting in: (select one)
[_] (1) an inability to engage in any substantial gainful
activity for which the Participant is reasonably
suited by reason of training, education and experience
as determined by the Plan Administrator. The Plan
Administrator may require that the Participant be
examined by physician(s) selected by the Plan
Administrator.
[_] (2) The participant being entitled to Social Security
Disability Benefits. In the event a Participant has
applied for Social Security Disability Benefits, the
disability benefits provided by this Plan shall
commence upon qualifying for Social Security
Disability Benefits.
18
<PAGE>
<TABLE>
<S> <C> <C> <C>
[x] (3) an inability to perform the normal duties for the Employer as
determined by the Plan Administrator. The Plan Administrator may require
that the Participant be examined by physician(s) selected by the Plan
Administrator.
A-8.09 Benefits shall be distributed:
[_] (a) only in the form of a single lump-sum payment. (May not elect if other
forms were available immediately preceding the adoption of this Plan.)
[x] (b) in accordance with the provisions of Section 8.08.
</TABLE>
XI. TERMINATION OF SERVICE
A-11.02 The vesting schedule for benefits (derived from the Employer's
contributions pursuant to Article III) upon termination of employment
shall be determined according to the selection based on Vesting Years
of Service as credited in accordance with A-1.73: (select one)
<TABLE>
<S> <C> <C> <C>
[_] (a) 100% vested at all times
[_] (b) 100% vested after _____(not to exceed 5) years of service.
[x] (c) 20% vested after 2 years of service
40% vested after 3 years of service
60% vested after 4 years of service
80% vested after 5 years of service
100% vested after 6 years of service
[_] (d) 20% vested after 3 years of service
40% vested after 4 years of service
60% vested after 5 years of service
80% vested after 6 years of service
100% vested after 7 years of service
[_] (e) Specify: (Must in all years be as favorable as the schedule in (b) above,
or as favorable as the schedule in (d) above.)
____% vested after ____ years of service
____% vested after ____ years of service
____% vested after ____ years of service
NOTE: If this is a restated plan and the vesting schedule has been amended, enter the pre-amended
schedule below:
Prior to merger [x] (f) 100% vested after 3 years of service
---- ---
1-1-94 for Breckenridge _____ vested after ___ years of service
_____ vested after ___ years of service
For Guest [x] (g) Vesting schedule has not been amended.
</TABLE>
19
<PAGE>
A-11.05 Distributions upon termination of Service shall be made as soon as
administratively feasible following:
<TABLE>
<S> <C> <C> <C>
[x] (a) Termination of employment
[_] (b) The end of the Plan Year following termination of employment.
[_] (c) The end of the Plan Year during which a One-Year Break in
Service occurs.
[_] (d) Early or Normal Retirement Date, Death, or Disability.
Note: May not be more restrictive than the provision in effect immediately
preceding the adoption of this Plan.
A-11.09 Benefits which are no longer immediately distributable
[x] (a) shall not be distributed without the consent of the Participant and/or
Beneficiary prior to the time required by Article X.
[_] (b) shall, subject to the requirements of Article IX, be distributed as
soon as administratively feasible following the date on which they cease
to be immediately distributable.
Note: An Account balance is immediately distributable if any part of the Account
balance could be distributed to the Participant (or Surviving Spouse) before the
Participant attains (or would have attained if not deceased) the later of Normal
Retirement Age or age 62.
XV. TOP-HEAVY
</TABLE>
Before completing this Section of the Adoption Agreement, the Employer should
carefully read Article XV of the Basic Plan Document paying particular attention
to Sections 15.03 thru 15.05.
<TABLE>
<S> <C>
A-15.02 Minimum Top-heavy Allocations: The purpose of this Section A-15.02 is to coordinate Top-Heavy minimum
contributions or benefits when two or more plans of the Employer are involved. If the Employer
maintains only this plan, and has never maintained a Defined Benefit plan, the Employer is required to
complete only Section (d). If the Employer maintains (or has maintained) a Defined Benefit plan, this
Section should be completed only with the advice of that plan's actuary. If the Employer maintains two
Defined Contribution plans, and has never maintained a defined Benefit plan, the Employer is required
to complete only Sections (C) or (d).
(a) If the Employer maintains a Defined Benefit plan, this Section or Section (d) below must be
---------------------------
completed.
If a non-key Employee participates in both a Defined Benefit plan and a Defined Contribution
plan which are part of a Required Aggregation Group or a Permissive Aggregation Group and the
Top-Heavy Ration exceeds 60% (but does not exceed 90%), Top-Heavy minimum benefits shall be
provided as follows:
</TABLE>
20
<PAGE>
<TABLE>
<S> <C> <C> <C>
[_] (1) In the Defined Contribution Plan, with a minimum allocation of:
[_] (I) 5% of total compensation (Defined Benefit and Defined Contribution Fractions
computed using 100% of the dollar limitation)
[_] (ii) 7.5% of total compensation (Defined Benefit and Defined Contribution Fractions
computed using 125% of the dollar limitation)
[_] (2) In the Defined Benefit Plan, with a minimum annual accrual of:
[_] (I) 2% of the highest 5 consecutive year average compensation (Defined Benefit and
Defined Contribution fractions computed using 100% of the dollar limitation)
[_] (ii) 3% of the highest 5 consecutive year average compensation (Defined Benefit and
Defined Contribution fractions computed using 125% of the dollar limitation)
If the Top-Heavy Ratio exceeds 90%, the minimum benefit shall be provided in:
[_] (3) the Defined Contribution plan with a minimum allocation of 5% of total compensation
[_] (4) the Defined Benefit plan with a minimum accrual of 2% of the highest 5 consecutive year
average compensation
Note: When the Top-Heavy Ratio exceeds 90%, the Defined Benefit and Defined Contribution
Fractions shall be computed using 100% of dollar limitation.
(b) If the Employer maintains (or has maintained) a Defined Benefit plan, this Section or Section (d) below
--------- ----------------- -----------------
must be completed.
If the Employer maintains both a Defined Benefit plan and a Defined Contribution plan which are part of
a Required Aggregation Group or a Permissive Aggregation Group and the Top-Heavy Ratio exceeds 60% (but
does not exceed 90%), a non-key employee who participates only in the Defined Contribution plan shall
receive a minimum allocation of:
[_] (1) 3% of total compensation (Defined Benefit and Defined Contribution Fractions
computed using 100% of the dollar limitation)
[_] (2) 4% of total compensation (Defined Benefit and Defined Contribution Fractions
computed using 125% of the dollar limitation)
If the Top-Heavy Ratio exceeds 90% each non-key Employee who participates only in the Defined
Contribution plan shall receive a minimum allocation of 3% of total compensation.
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C>
(c) If the Employer maintains two Defined Contribution plans, this Section or Section (d) below must be
----------------------------------
completed.
If a non-key Employee participates in two Defined Contribution plans maintained by the Employer, the
Defined Contribution minimum allocation requirement shall be met
[_] (1) in this plan
[_] (2) in the other plan ____________________________________________
(Name of Plan)
(d) Complete this Section only if (a), (b) and/or (C) have not been completed.
--------------------------------------------------------------------------
[_] (1) Specify how the plans shall provide Top-Heavy minimum benefits for non-key
Employees precluding Employer discretion and avoiding inadvertent omissions.
_________________________________________________________________________________
_________________________________________________________________________________
_________________________________________________________________________________
[X] (2) The Employer maintains only this Plan and has never maintained a Defined Benefit
Plan.
A-15.06 TOP HEAVY VESTING... If this Plan becomes a Top-Heavy Plan, the following vesting schedule for such
Plan and each succeeding Plan Year, whether or not Top-Heavy, shall be effective and shall be treated
as a Plan amendment pursuant to this Agreement.
[_] (a) 100% vested after___________________(Not to exceed 3) years of service
[_] (b) 20% vested after 2 years of service
40% vested after 3 years of service
60% vested after 4 years of service
80% vested after 5 years of service
100% vested after 6 years of service
[_] (c) Specify: (Must in all years be as favorable as the schedule in (a) above, or as
favorable as the schedule in (b) above.)
________% vested after __________________years of service
________% vested after __________________years of service
________% vested after __________________years of service
________% vested after __________________years of service
________% vested after __________________years of service
________% vested after __________________years of service
[x] (d) N/A, Vesting schedule in A-11.02 is equal to or more favorable than (a) or (b)
above.
However, this Section does not apply to the Account balances of any Participant who does not have an
Hour of Service after the Plan has initially become Top-Heavy. Such Participant's Account balance
attributable to Employer contributions and forfeitures shall be determined without regard to this
Section .
</TABLE>
22
<PAGE>
The adopting Employer may not rely on an Opinion Letter issued by the National
Office of the Internal Revenue Service as evidence that the Plan is qualified
under Section 401 of the Internal Revenue Code. In order to obtain reliance with
respect to plan qualification, the Employer must apply to the appropriate key
district office for a Determination Letter.
This adoption agreement may be used only in conjunction with basic plan document
#01.
Provided the adoption of this Plan is properly registered with the Prototype
Sponsor, the Prototype Sponsor shall inform the adopting Employer of any
amendments made to the Plan or of the discontinuance unless the attached
registration form along with the applicable registration fee is returned to:
Lincoln National Life Insurance Company
1300 South Clinton Street
P.O. Box #2248
Ft. Wayne, IN 46801-2248
Inquiries by adopting Employers regarding the adoption of this Plan, the
intended meaning of any Plan provisions, or the effect of the Opinion Letter may
be directed to the Prototype Sponsor at the above address or phone (219) 455-
4940.
23
<PAGE>
Use of this Plan Document without proper registration and payment of the
applicable registration fee constitutes an unauthorized use.
The Employer represents that it has consulted with its attorney with respect to
its adoption of this Plan, and agrees to the provisions of the Plan and Trust.
IN WITNESS HEREOF, the Employer has caused this Agreement to be signed by its
duly authorized Officer and the Trustee(s) have accepted the appointment and
signed this agreement.
Guest Supply
------------------------------------
(Legal Name of Employer)
By:
S/ Paul T. Xenis
------------------------------------
(Signature of Officer)
Paul T. Xenis, Comptroller
1/27/94
- -------------------------- ____________________________________
(Date) (Typed or Printed Name
and Title of Officer)
__________________________ Accepted By: S/ Clifford W. Stanley
-----------------------------------
Clifford W. Stanley
1/27/94 S/ Teri E. Unsworth
- -------------------------- ------------------------------------
(Date) (Signature of Trustee)
Teri E. Unsworth
1/27/94 S/ Paul T. Xenis
- -------------------------- -------------------------------------
(Date) (Signature of Trustee)
Paul T. Xenis
1/27/94 S/ Robert Reese
- ------------------------- --------------------------------------
(Date) (Signature of Trustee)
Robert Reese
Participating Employer Authorized Signature Date
- ---------------------- -------------------- ----
Breckenridge - Remy S/ Robert Reese 1/27/94
- ------------------------------ ----------------------------------- -------
______________________________ ___________________________________ _______
______________________________ ___________________________________ _______
______________________________ ___________________________________ _______
Failure to properly complete this Adoption Agreement may result in
disqualification of the Plan.
24
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Adopts
AMENDMENT NO. I
Attached to and made part of Defined Contribution Prototype Plan Basic Plan #01
used in conjunction with the following Adoption Agreements:
<TABLE>
<CAPTION>
Plan Type IRS Serial # Form #
--------- ------------ ------
<S> <C> <C>
Non-Standardized Money Purchase D359967a 27365NS-MP
Standardized Money Purchase D259968a 27365S-MP
Non-Standardized Profit Sharing D359969a 27365NS-PS
Standardized Profit Sharing D259970a 27365S-PC
Non-Standardized Target Benefit D360949a 27365NS-TB
Standardized Target Benefit D260948a 27365S-TB
Non-Standardized 401(k) Salary Reduction D359971a 27365NS401K
Standardized 401(k) Salary Reduction D259972a 27365S401K
</TABLE>
Pursuant to the authority reserved by Section 12.01 of Article XII of The
Lincoln National Life Insurance Company Defined Contribution Prototype {Plan
Basic Plan #01 (the "Prototype Plan"), the Prototype Plan (and each individual
Plan maintained in the form of the Prototype Plan) is hereby amended, effective
January 1, 1993, as follows:
Article XII is amended by the addition of the following paragraph.
"12.08 This Article applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan contrary Distributee's
election under this Article, a that would otherwise limit a Distributee may
elect, at the time and in the manner prescribed by the Plan Administrator,
to have any portion of an Eligible Rollover Distribution paid directly to
an Eligible Retirement Plan specified by the Distributee in a Direct
Rollover.
DEFINITIONS:
(a) Eligible Rollover Distribution: An eligible Rollover Distribution is
any distribution of all or any portion of the balance to the credit of
the Distributee, except that an Eligible Rollover Distribution does
not include: any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually) made for
the life (or life expectance) of the Distributee of the joint lives
(or joint life expectancies) of the Distributee and the Distributee's
designated beneficiary, or for a specified period of ten years or
more; any distribution to the extent such distribution is required
under Section 401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross income (determined
without regard to the exclusion for net unrealized appreciation with
respect to employer securities).
(b) Eligible Retirement Plan: An Eligible Retirement Plan is an individual
retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the Code,
an annuity plan described in section 403(a) of the Code, or a
qualified trust described in section 401(a) of the Code, that accepts
the Distributee's Eligible Rollover distribution. However, in the case
of
25
<PAGE>
of an Eligible Rollover distribution to the surviving spouse, an
Eligible Retirement Plan is an individual retirement account or
individual retirement annuity.
(c) Distributee: A Distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's Surviving Spouse and
the Employee's of former Employee's Spouse or former Spouse who is the
alternate payee under a qualified domestic relations order, as defined
in section 414(p) of the Code, are Distributees with regard to the
interest of the Spouse or former Spouse.
(d) Direct Rollover: A Direct Rollover is a payment by the plan to the
Eligible Retirement plan specified by the Distributee."
26
<PAGE>
EXHIBIT 10(j)
GUEST SUPPLY, INC.
1996 LONG TERM INCENTIVE PLAN
SECTION 1. Purpose. The purposes of this Guest Supply, Inc. 1996
Long Term Incentive Plan (the "Plan") are to encourage selected employees,
officers, directors and consultants of, and other individuals providing services
to, Guest Supply, Inc. (together with any successor thereto, the "Company") and
its Affiliates (as defined below) to acquire a proprietary interest in the
growth and performance of the Company, to generate an increased incentive to
contribute to the Company's future success and prosperity thus enhancing the
value of the Company for the benefit of its shareholders, and to enhance the
ability of the Company and its Affiliates to attract and retain exceptionally
qualified individuals upon whom, in large measure, the sustained progress,
growth and profitability of the Company depend.
SECTION 2. Definitions. As used in the Plan, the following terms
shall have the meanings set forth below:
"Affiliate" shall mean (i) any entity that, directly or through one or
more intermediaries, is controlled by the Company and (ii) any entity in which
the Company has a significant equity interest, as determined by the Committee.
"Award" shall mean any Option, Stock Appreciation Right, Restricted
Security, Performance Award, or Other Stock-Based Award granted under the Plan.
"Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan.
"Board" shall mean the Board of Directors of the Company.
"Cause", as used in connection with the termination of a Participant's
employment, shall mean (i) with respect to any Participant employed under a
written employment agreement with the Company or an Affiliate of the Company
which agreement includes a definition of "cause," "cause" as defined in such
agreement or, if such agreement contains no such definition, a material breach
by the Participant of such agreement, or (ii) with respect to any other
Participant, the failure to perform adequately in carrying out such
Participant's employment responsibilities, including any directives from the
Board, or engaging in such behavior in his personal or business life as to lead
the Committee in its reasonable judgment to determine that it is in the best
interests of the Company to terminate his employment.
"Common Stock" shall mean the common stock of the Company, without par
value.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated thereunder.
"Committee" shall mean the Stock Option Committee or any other
committee of the Board designated by the Board to administer the Plan and
composed of not less than three outside directors, as described in Section
162(m) of the Code, each of whom, to the extent necessary to comply with Rule
16b-3 only, is a "disinterested person" within the meaning of Rule 16b-3 as in
effect at April 30, 1991.
"Common Shares" shall mean any or all, as applicable, of the Common
Stock and such other securities or property as may become the subject of Awards,
or become subject to Awards,
<PAGE>
2
pursuant to an adjustment made under Section 4(b) of the Plan and any other
securities of the Company or any Affiliate or any successor that may be so
designated by the Committee.
"Employee" shall mean any employee of the Company or of any Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean (A) with respect to any property other
than the Common Shares, the fair market value of such property determined by
such methods or procedures as shall be established from time to time by the
Committee; and (B) with respect to the Common Shares, the last sale price
regular way on the date of reference, or, in case no sale takes place on such
date, the average of the high bid and low asked prices, in either case on the
principal national securities exchange on which the Common Shares are listed or
admitted to trading, or if the Common Shares are not listed or admitted to
trading on any national securities exchange, the last sale price reported on the
National Market System of the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") on such date, or the average of the
closing high bid and low asked prices in the over-the-counter market reported on
NASDAQ on such date, whichever is applicable, or if there are no such prices
reported on NASDAQ on such date, as furnished to the Committee by any New York
Stock Exchange member selected from time to time by the Committee for such
purpose. If there is no bid or asked price reported on any such date, the Fair
Market Value shall be determined by the Committee in accordance with the
regulations promulgated under Section 2031 of the Code, or by any other
appropriate method selected by the Committee.
"Good Reason", as used in connection with the termination of a
Participant's employment, shall mean (i) with respect to any Participant
employed under a written employment agreement with the Company or an Affiliate
of the Company, "good reason" as defined in such written agreement or, if such
agreement contains no such definition, a material breach by the Company of such
agreement, or (ii) with respect to any other Participant, a failure by the
Company to pay such Participant any amount otherwise vested and due and a
continuation of such failure for 30 business days following notice to the
Company thereof.
"Incentive Stock Option" shall mean an option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422 of the
Code or any successor provision thereto.
"Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
Any stock option granted by the Committee which is not designated an Incentive
Stock Option shall be deemed a Non-Qualified Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
"Other Stock-Based Award" shall mean any right granted under Section
6(e) of the Plan.
"Participant" shall mean any individual granted an Award under the
Plan.
"Performance Award" shall mean any right granted under Section 6(d) of
the Plan.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, or
government or political subdivision thereof.
<PAGE>
3
"Released Securities" shall mean securities that were Restricted
Securities but with respect to which all applicable restrictions have expired,
lapsed or been waived in accordance with the terms of the Plan or the applicable
Award Agreement.
"Restricted Securities" shall mean any Common Shares granted under
Section 6(c) of the Plan, any right granted under Section 6(c) of the Plan that
is denominated in Common Shares or any other Award under which issued and
outstanding Common Shares are held subject to certain restrictions.
"Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act, or any successor rule or regulation
thereto as in effect from time to time.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stock Appreciation Right" shall mean any right granted under Section
6(b) of the Plan.
SECTION 3. Administration. The Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, and in addition
to other express powers and authorizations conferred on the Committee by the
Plan, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to an
eligible Employee or other individual under the Plan; (iii) determine the number
and classification of Common Shares to be covered by (or with respect to which
payments, rights or other matters are to be calculated in connection with)
Awards; (iv) determine the terms and conditions of any Award; (v) determine
whether, to what extent, and under what circumstances Awards may be settled or
exercised in cash, Common Shares, other securities, other Awards or other
property, or canceled, forfeited or suspended, and the method or methods by
which Awards may be settled, exercised, canceled, forfeited or suspended; (vi)
determine requirements for the vesting of Awards or performance criteria to be
achieved in order for Awards to vest; (vii) determine whether, to what extent
and under what circumstances cash, Common Shares, other securities, other
Awards, other property and other amounts payable with respect to an Award under
the Plan shall be deferred either automatically or at the election of the holder
thereof or of the Committee; (viii) interpret and administer the Plan and any
instrument or agreement relating to, or Award made under, the Plan; (ix)
establish, amend, suspend or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
and (x) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to the
Plan or any Award shall be within the sole discretion of the Committee, may be
made at any time and shall be final, conclusive and binding upon all Persons,
including the Company, any Affiliate, any Participant, any holder or beneficiary
of any Award, any shareholder and any Employee. Notwithstanding the foregoing,
the maximum number of Awards which may be granted to any one Participant under
this Plan in any two-year period shall not exceed 100,000 Common Shares, subject
to the adjustments provided in Section 4(b) hereof and no Awards under this Plan
shall be granted after December 31, 2005.
<PAGE>
4
SECTION 4. Common Shares Available for Awards.
(a) Common Shares Available. Subject to adjustment as provided in
Section 4(b):
(i) Calculation of Number of Common Shares Available. The
number of Common Shares available for granting Awards under the Plan shall
be 400,000, any or all of which may be or may be based on Common Stock, any
other security which becomes the subject of Awards, or any combination
thereof. Initially 400,000 shares of Common Stock shall be reserved for
Awards hereunder. Further, if, after the effective date of the Plan, any
Common Shares covered by an Award granted under the Plan or to which such
an Award relates, are forfeited, or if an Award otherwise terminates or is
canceled without the delivery of Shares or of other consideration, then the
Common Shares covered by such Award or to which such Award relates, or the
number of Common Shares otherwise counted against the aggregate number of
Common Shares available under the Plan with respect to such Award, to the
extent of any such forfeiture, termination or cancellation, shall again be,
or shall become, available for granting Awards under the Plan.
(ii) Accounting for Awards. For purposes of this Section 4,
(A) if an Award is denominated in or based upon Common Shares,
the number of Common Shares covered by such Award or to which such
Award relates shall be counted on the date of grant of such Award
against the aggregate number of Common Shares available for granting
Awards under the Plan and against the maximum number of Awards
available to any Participant; and
(B) Awards not denominated in Common Shares may be counted
against the aggregate number of Common Shares available for granting
Awards under the Plan and against the maximum number of Awards
available to any participant in such amount and at such time as the
Committee shall determine under procedures adopted by the Committee
consistent with the purposes of the Plan;
provided, however, that Awards that operate in tandem with (whether granted
simultaneously with or at a different time from), or that are substituted
for, other Awards may be counted or not counted under procedures adopted by
the Committee in order to avoid double counting. Any Common Shares that are
delivered by the Company, and any Awards that are granted by, or become
obligations of, the Company, through the assumption by the Company or an
Affiliate of, or in substitution for, outstanding awards previously granted
by an acquired company shall, in the case of Awards granted to Participants
who are officers or directors of the Company for purposes of Section 16 of
the Exchange Act, be counted against the Common Shares available for
granting Awards under the Plan.
(iii) Sources of Common Shares Deliverable Under Awards. Any
Common Shares delivered pursuant to an Award may consist, in whole or in
part, of authorized and unissued Common Shares or of treasury Common
Shares.
(b) Adjustments. In the event that the Committee shall determine
that any dividend or other distribution (whether in the form of cash, Common
Shares, other securities or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Common Shares or other securities of the
<PAGE>
5
Company, issuance of warrants or other rights to purchase Common Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Common Shares such that an adjustment is determined by the Committee
to be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of Common Shares (or other securities or property) which
thereafter may be made the subject of Awards, (ii) the number and kind of Common
Shares (or other securities or property) subject to outstanding Awards, and
(iii) the grant or exercise price with respect to any Award or, if deemed
appropriate, make provision for a cash payment to the holder of an outstanding
Award; provided, however, that the number of Common Shares subject to any Award
denominated in Common Shares shall always be a whole number.
In connection with any merger or consolidation in which the Company is
not the surviving corporation and which results in the holders of the
outstanding voting securities of the Company (determined immediately prior to
such merger or consolidation) owning less than a majority of the outstanding
voting securities of the surviving corporation (determined immediately following
such merger or consolidation), or any sale or transfer by the Company of all or
substantially all its assets or any tender offer or exchange offer for or the
acquisition, directly or indirectly, by any person or group of all or a majority
of the then outstanding voting securities of the Company, all outstanding
Options under the Plan shall become exercisable in full, notwithstanding any
other provision of the Plan or of any outstanding Options granted thereunder, on
and after (i) the fifteenth day prior to the effective date of such merger,
consolidation, sale, transfer or acquisition or (ii) the date of commencement of
such tender offer or exchange offer, as the case may be. The provisions of the
foregoing sentence shall apply to any outstanding Options which are Incentive
Stock Options to the extent permitted by Section 422(d) of the Code and such
outstanding Options in excess thereof shall, immediately upon the occurrence of
the event described in clause (i) or (ii) of the foregoing sentence, be treated
for all purposes of the Plan as Non-Qualified Stock Options and shall be
immediately exercisable as such as provided in the foregoing sentence.
SECTION 5. Eligibility. Any Employee, including any officer or
employee-director of the Company or of any Affiliate, and any consultant of, or
other individual providing services to, the Company or any Affiliate shall be
eligible to be designated a Participant. A non-employee director shall be
eligible to receive Non-Qualified Stock Options under the Plan.
SECTION 6. Awards.
(a) Options. The Committee is hereby authorized to grant to
eligible individuals options to purchase Common Shares (each, an "Option") which
shall contain the following terms and conditions and with such additional terms
and conditions, in either case not inconsistent with the provisions of the Plan,
as the Committee shall determine:
(i) Exercise Price. The purchase price per Common Share
purchasable under an Option shall be determined by the Committee; provided,
however, that such purchase price shall not be less than one hundred
percent (100%) of the Fair Market Value of a Common Share on the date of
grant of such Option, or such other price as required under Subsection
6(a)(iv) hereof.
(ii) Time and Method of Exercise. Subject to the terms of
Section 6(a)(iii), the Committee shall determine the time or times at which
an Option may be exercised in whole or in part, and the method or methods
by which, and the form or forms (including,
<PAGE>
6
without limitation, cash, Common Shares, outstanding Awards, or other
property, or any combination thereof, having a Fair Market Value on the
exercise date equal to the relevant exercise price) in which, payment of
the exercise price with respect thereto may be made or deemed to have been
made.
(iii) Exercisability Upon Death, Retirement and Termination of
Employment. Subject to the condition that no Option may be exercised in
whole or in part after the expiration of the Option period specified in the
applicable Award Agreement:
(A) Subject to the terms of paragraph (D) below, upon the death
of a Participant while employed or within 3 months of retirement or
disability as defined in paragraph (B) below, the Person or Persons to
whom such Participant's rights with respect to any Option held by such
Participant are transferred by will or the laws of descent and
distribution may, prior to the expiration of the earlier of: (1) the
outside exercise date determined by the Committee at the time of
granting the Option, or (2) nine months after such Participant's
death, purchase any or all of the Common Shares with respect to which
such Participant was entitled to exercise such Option immediately
prior to such Participant's death, and any Options not so exercisable
will lapse on the date of such Participant's death;
(B) Subject to the terms of paragraph (D) below, upon
termination of a Participant's employment with the Company (x) as a
result of retirement pursuant to a retirement plan of the Company or
an Affiliate or disability (as determined by the Committee) of such
Participant, (y) by the Company other than for Cause, or (z) by the
Participant with Good Reason, such Participant may, prior to the
expiration of the earlier of: (1) the outside exercise date determined
by the Committee at the time of granting the Option, or (2) three
months after the date of such termination, purchase any or all of the
Common Shares with respect to which such Participant was entitled to
exercise any Options immediately prior to such termination, and any
Options not so exercisable will lapse on such date of termination;
(C) Subject to the terms of paragraph (D) below, upon
termination of a Participant's employment with the Company under any
circumstances not described in paragraphs (A) or (B) above, such
Participant's Options shall be canceled to the extent not theretofore
exercised;
(D) Upon (i) the death of the Participant, or (ii) termination
of the Participant's employment with the Company (x) by the Company
other than for Cause (y) by the Participant with Good Reason or (z) as
a result of retirement or disability as defined in paragraph (B)
above, the Company shall have the right to cancel all of the Options
such Participant was entitled to exercise at the time of such death or
termination (subject to the terms of paragraphs (A) or (B) above) for
a payment in cash equal to the excess, if any, of the Fair Market
Value of one Common Share on the date of death or termination over the
exercise price of such Option for one Common Share times the number of
Common Shares subject to the Option and exercisable at the time of
such death or termination; and
(E) Upon expiration of the respective periods set forth in each
of paragraphs (A) through (C) above, the Options of a Participant who
has died or whose
<PAGE>
7
employment has been terminated shall be canceled to the extent not
theretofore canceled or exercised.
(F) For purposes of paragraphs (A) through (D) above, the
period of service of an individual as a director or consultant of the
Company or an Affiliate shall be deemed the period of employment.
(iv) Incentive Stock Options. The following provisions shall
apply only to Incentive Stock Options granted under the Plan:
(A) No Incentive Stock Option shall be granted to any eligible
Employee who, at the time such Option is granted, owns securities
possessing more than ten percent (10%) of the total combined voting
power of all classes of securities of the Company or of any Affiliate,
except that such an Option may be granted to such an Employee if at
the time the Option is granted the option price is at least one
hundred ten percent (110%) of the Fair Market Value of the Common
Shares (determined in accordance with Section 2) subject to the
Option, and the Option by its terms is not exercisable after the
expiration of five (5) years from the date the Option is granted; and
(B) To the extent that the aggregate Fair Market Value of the
Common Shares with respect to which Incentive Stock Options (without
regard to this subsection) are exercisable for the first time by any
individual during any calendar year (under all plans of the Company
and its Affiliates) exceeds $100,000, such Options shall be treated as
Non-Qualified Stock Options. This subsection shall be applied by
taking Options into account in the order in which they were granted.
If some but not all Options granted on any one day are subject to this
subsection, then such Options shall be apportioned between Incentive
Stock Option and Non-Qualified Stock Option treatment in such manner
as the Committee shall determine. For purposes of this subsection, the
Fair Market Value of any Common Shares shall be determined, in
accordance with Section 2, as of the date the Option with respect to
such Common Shares is granted.
(v) Terms and Conditions of Options Granted to Directors.
Notwithstanding any provision contained in the Plan to the contrary, during
any period when any member of the Committee shall not be a "disinterested
person" as defined in Rule 16b-3, as such Rule was in effect at April 30,
1991, then, the terms and conditions of Options granted under the Plan to
any director of the Company during such period shall be as follows:
(A) The price at which each Common Share subject to an option
may be purchased shall, subject to any adjustments which may be made
pursuant to Section 4, in no event be less than the Fair Market Value
of a Common Share on the date of grant, and provided further that in
the event the option is intended to be an Incentive Stock Option and
the optionee owns on the date of grant securities possessing more than
ten percent (10%) of the total combined voting power of all classes of
securities of the Company or of any Affiliate, the price per share
shall not be less than one hundred ten percent (110%) of the Fair
Market Value per Common Share on the date of grant.
<PAGE>
8
(B) The Option may be exercised to purchase Common Shares
covered by the Option not sooner than six (6) months following the
date of grant. The Option shall terminate and no Common Shares may be
purchased thereunder more than ten (10) years after the date of grant,
provided that if the Option is intended to be an Incentive Stock
Option and the Optionee owns on the date of grant securities
possessing more than ten percent (10%) of the total combined voting
power of all classes of securities of the Company or of any Affiliate,
the Option shall terminate and no Common Shares may be purchased
thereunder more than five (5) years after the date of grant.
(C) The maximum number of Common Shares which may be subject to
options granted to all directors pursuant to this Section 6(a)(v)
shall be 300,000 shares in the aggregate. The maximum number of Common
Shares which may be subject to options granted to any director of the
Company who is an Employee shall be 100,000 shares and the maximum
number of Common Shares which may be subject to options granted to any
director of the Company who is not an Employee shall be 20,000 shares.
(b) Stock Appreciation Rights. The Committee is hereby authorized
to grant to eligible Employees "Stock Appreciation Rights." Each Stock
Appreciation Right shall consist of a right to receive the excess of (i) the
Fair Market Value of one Common Share on the date of exercise or, if the
Committee shall so determine in the case of any such right other than one
related to any Incentive Stock Option, at any time during a specified period
before or after the date of exercise over (ii) the grant price of the right as
specified by the Committee, which shall not be less than one hundred percent
(100%) of the Fair Market Value of one Common Share on the date of grant of the
Stock Appreciation Right (or, if the Committee so determines, in the case of any
Stock Appreciation Right retroactively granted in tandem with or in substitution
for another Award, on the date of grant of such other Award). Subject to the
terms of the Plan and any applicable Award Agreement, the grant price, term,
methods of exercise, methods of settlement, and any other terms and conditions
of any Stock Appreciation Right granted under the Plan shall be as determined by
the Committee. The Committee may impose such conditions or restrictions on the
exercise of any Stock Appreciation Right as it may deem appropriate.
(c) Restricted Securities.
(i) Issuance. The Committee is hereby authorized to grant to
eligible Employees "Restricted Securities" which shall consist of the right
to receive, by purchase or otherwise, Common Shares which are subject to
such restrictions as the Committee may impose (including, without
limitation, any limitation on the right to vote such Common Shares or the
right to receive any dividend or other right or property), which
restrictions may lapse separately or in combination at such time or times,
in such installments or otherwise, as the Committee may deem appropriate.
(ii) Registration. Restricted Securities granted under the
Plan may be evidenced in such manner as the Committee may deem appropriate,
including, without limitation, book-entry registration or issuance of a
stock certificates or certificates. In the event any stock certificate is
issued in respect of Restricted Securities granted under the Plan, such
certificate shall be registered in the name of the Participant and shall
bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Restricted Securities.
<PAGE>
9
(iii) Forfeiture. Except as otherwise determined by the
Committee, upon termination of a Participant's employment for any reason
during the applicable restriction period, all of such Participant's
Restricted Securities which had not become Released Securities by the date
of termination of employment shall be forfeited and reacquired by the
Company; provided, however, that the Committee may, when it finds that a
waiver would be in the best interests of the Company, waive in whole or in
part any or all remaining restrictions with respect to such Participant's
Restricted Securities. Unrestricted Common Shares, evidenced in such manner
as the Committee shall deem appropriate, shall be issued to the holder of
Restricted Securities promptly after such Restricted Securities become
Released Securities.
(d) Performance Awards. The Committee is hereby authorized to
grant to eligible Employees "Performance Awards." Each Performance Award shall
consist of a right, (i) denominated or payable in cash, Common Shares, other
securities or other property (including, without limitation, Restricted
Securities), and (ii) which shall confer on the holder thereof rights valued as
determined by the Committee and payable to, or exercisable by, the holder of the
Performance Award, in whole or in part, upon the achievement of such performance
goals during such performance periods as the Committee shall establish. Subject
to the terms of the Plan and any applicable Award Agreement, the performance
goals to be achieved during any performance period, the length of any
performance period, the amount of any Performance Award granted, the termination
of a Participant's employment and the amount of any payment or transfer to be
made pursuant to any Performance Award shall be determined by the Committee and
by the other terms and conditions of any Performance Award. The Committee shall
issue performance goals prior to the commencement of the performance period to
which such performance goals pertain.
(e) Other Stock-Based Awards. The Committee is hereby authorized
to grant to eligible Employees "Other Stock-Based Awards." Each Other Stock-
Based Award shall consist of a right (i) which is other than an Award or right
described in Section 6(a), (b), (c) or (d) above and (ii) which is denominated
or payable in, valued in whole or in part by reference to, or otherwise based on
or related to, Common Shares (including, without limitation, securities
convertible into Common Shares) as are deemed by the Committee to be consistent
with the purposes of the Plan; provided, however, that such right shall comply,
to the extent deemed desirable by the Committee, with Rule 16b-3 and applicable
law. Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the terms and conditions of Other Stock-Based Awards.
Common Shares or other securities delivered pursuant to a purchase right granted
under this Section 6(e) shall be purchased for such consideration, which may be
paid by such method or methods and in such form or forms, including, without
limitation, cash, Common Shares, other securities, other Awards, other property,
or any combination thereof, as the Committee shall determine.
(f) General.
(i) No Cash Consideration for Awards. Awards may be granted
for no cash consideration or for such minimal cash consideration as may be
required by applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may,
in the discretion of the Committee, be granted either alone or in addition
to, in tandem with, or in substitution for any other Award, except that in
no event shall an Incentive Stock Option be granted together with a Non-
Qualified Stock Option in such a manner that the exercise of one Option
affects the right to exercise the other. Awards granted in addition to or
in tandem with
<PAGE>
10
other Awards may be granted either at the same time as or at a different
time from the grant of such other awards.
(iii) Forms of Payment Under Awards. Subject to the terms of
the Plan and of any applicable Award Agreement, payments or transfers to be
made by the Company or an Affiliate upon the grant, exercise or payment of
an Award may be made in such form or forms as the Committee shall
determine, including, without limitation, cash, Common Shares, other
securities, other Awards, or other property, or any combination thereof,
and may be made in a single payment or transfer, in installments, or on a
deferred basis, in each case in accordance with rules and procedures
established by the Committee. Such rules and procedures may include,
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments. In accordance with the above,
the Committee may elect (i) to pay a Participant (or such Participant's
permitted transferee) upon the exercise of an Option in whole or in part,
in lieu of the exercise thereof and the delivery of Common Shares
thereunder, an amount of cash equal to the excess, if any, of the Fair
Market Value of one Common Share on the date of such exercise over the
exercise price of such Option for one Common Share times the number of
Common Shares subject to the Option or portion thereof so exercised or (ii)
to settle other stock denominated Awards in cash.
(iv) Limits on Transfer of Awards.
(A) No award (other than Released Securities), and no right
under any such Award, may be assigned, alienated, pledged, attached,
sold or otherwise transferred or encumbered by a Participant otherwise
than by will or by the laws of descent and distribution (or, in the
case of Restricted Securities, to the Company) and any such purported
assignment, alienation, pledge, attachment, sale or other transfer or
encumbrance shall be void and unenforceable against the Company or any
Affiliate.
(B) Each award, and each right under any Award, shall be
exercisable, during the Participant's lifetime only by the Participant
or if permissible under applicable law, by the Participant's guardian
or legal representative.
(v) Terms of Awards. The term of each Award shall be for such
period as may be determined by the Committee; provided, however, that in no
event shall the term of any Option exceed a period of ten years from the
date of its grant.
(vi) Rule 16b-3 Six-Month Limitations. To the extent required
in order to maintain the exemption provided under Rule 16b-3 only, any
equity security offered pursuant to the Plan must be held for at least six
months after the date of grant, and with respect to any derivative security
issued pursuant to the Plan, at least six months must elapse from the date
of acquisition of such derivative security to the date of disposition of
the derivative security (other than upon exercise or conversion) or its
underlying equity security. Terms used in the preceding sentence shall, for
the purposes of such sentence only, have the meanings, if any, assigned or
attributed to them under Rule 16b-3.
(vii) Common Share Certificates. All certificates for Common
Shares delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the
rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Common Shares are then
listed, and any applicable
<PAGE>
11
Federal or state securities laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to
such restrictions.
(viii) Delivery of Common Shares or Other Securities and Payment
by Participant of Consideration. No Common Shares or other securities shall
be delivered pursuant to any Award until payment in full of any amount
required to be paid pursuant to the Plan or the applicable Award Agreement
is received by the Company. Such payment may be made by such method or
methods and in such form or forms as the Committee shall determine,
including, without limitation, cash, Common Shares, other securities, other
Awards or other property, or any combination thereof; provided that the
combined value, as determined by the Committee, of all cash and cash
equivalents and the Fair Market Value of any such Common Shares or other
property so tendered to the Company, as of the date of such tender, is at
least equal to the full amount required to be paid pursuant to the Plan or
the applicable Award Agreement to the Company.
SECTION 7. Amendments; Adjustments and Termination. Except to the
extent prohibited by applicable law and unless otherwise expressly provided in
an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of any shareholder,
Participant, other holder or beneficiary of an Award, or other Person; provided,
however, that, subject to the Company's rights to adjust Awards under Sections
7(c) and (d), any amendment, alteration, suspension, discontinuation, or
termination that would impair the rights of any Participant, or any other holder
or beneficiary of any Award theretofore granted, shall not to that extent be
effective without the consent of such Participant, other holder or beneficiary
of an Award, as the case may be; and provided further, however, that
notwithstanding any other provision of the Plan or any Award Agreement, without
the approval of the shareholders of the Company no such amendment, alteration,
suspension, discontinuation, or termination shall be made that would:
(i) increase the total number of Common Shares available for
Awards under the Plan, except as provided in Section 4 hereof; or
(ii) otherwise cause the Plan to cease to comply with any tax
or regulatory requirement, including for these purposes any approval or
other requirement which is or would be a prerequisite for exemptive relief
from Section 16(b) of the Exchange Act.
(b) Amendments to Awards. The Committee may waive any conditions
or rights under, amend any terms of, or alter, suspend, discontinue, cancel or
terminate, any Award theretofore granted, prospectively or retroactively;
provided, however, that, subject to the Company's rights to adjust Awards under
Sections 7(c) and (d), any amendment, alteration, suspension, discontinuation,
cancellation or termination that would impair the rights of any Participant or
holder or beneficiary of any Award theretofore granted, shall not to that extent
be effective without the consent of such Participant or holder or beneficiary of
an Award, as the case may be.
(c) Adjustment of Awards Upon Certain Acquisitions. In the event
the Company or any Affiliate shall assume outstanding employee awards or the
right or obligation to make future such awards in connection with the
acquisition of another business or another corporation or business entity, the
Committee may make such adjustments, not inconsistent with the terms of the
Plan, in the terms of Awards as it shall deem appropriate in order to achieve
reasonable comparability or other
<PAGE>
12
equitable relationship between the assumed awards and the Awards granted under
the Plan as so adjusted.
(d) Adjustments of Awards Upon the Occurrence of Certain Unusual or
Non-recurring Events. The Committee is hereby authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards in recognition
of unusual or non-recurring events (including, without limitation, the events
described in Section 4(b) hereof) affecting the Company, any Affiliate, or the
financial statements of the Company or any Affiliate, or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.
SECTION 8. General Provisions.
(a) No Right to Awards. No Employee or other Person shall have any
claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Employees, or holders or beneficiaries of Awards
under the Plan. The terms and conditions of Awards need not be the same with
respect to each recipient.
(b) Delegation. Subject to the terms of the Plan and applicable
law, the Committee may delegate to one or more officers or managers of the
Company or any Affiliate, or to a committee of such officers or managers, the
authority, subject to such terms and limitations as the Committee shall
determine, to grant Awards to, or to cancel, modify, waive rights with respect
to, alter, discontinue, suspend, or terminate Awards; provided, however, that,
no such delegation shall be permitted with respect to Awards held by Employees
who are officers or directors of the Company for purposes of Section 16 of the
Exchange Act, or any successor section thereto or who are otherwise subject to
such Section.
(c) Correction of Defects, Omissions, and Inconsistencies. The
Committee may correct any defect, supply any omission, or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to carry the Plan into effect.
(d) Withholding. The Company or any Affiliate shall be authorized
to withhold from any Award granted, from any payment due or transfer made under
any Award or under the Plan or from any compensation or other amount owing to a
Participant the amount (in cash, Common Shares, other securities, other Awards,
or other property) of withholding taxes due in respect of an Award, its
exercise, or any payment or transfer under such Award or under the Plan and to
take such other action as may be necessary in the opinion of the Company or
Affiliate to satisfy all obligations for the payment of such taxes.
(e) No Limit on Other Compensation Arrangements. Nothing contained
in the Plan shall prevent the Company or any Affiliate from adopting or
continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.
(f) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate. Further, the Company or an Affiliate may at any time
dismiss a Participant from employment, free from any liability, or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
<PAGE>
13
(g) Governing Law. The validity, construction, and effect of the
Plan and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of New Jersey and applicable Federal law.
(h) Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction
or as to any Person or Award under any law deemed applicable by the Committee,
such provision shall be construed or deemed amended to conform to applicable
laws, or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Plan or
the Award, such provision shall be stricken as to such jurisdiction, Person or
Award and the remainder of the Plan and any such Award shall remain in full
force and effect.
(i) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(j) No Fractional Common Shares. No fractional Common Shares shall
be issued or delivered pursuant to the Plan or any Award, and the Committee
shall determine whether cash, other securities, or other property shall be paid
or transferred in lieu of any fractional Common Shares or whether such
fractional Common Shares or any rights thereto shall be canceled, terminated, or
otherwise eliminated.
(k) Headings. Headings are given to the Sections and subsections
of the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
SECTION 9. Adoption, Approval and Effective Date of the Plan. The
Plan shall be considered adopted and shall become effective on the date the Plan
is approved by the Board; provided, however, that the Plan and any Awards
granted under the Plan shall be void, if the shareholders of the Company shall
not have approved the adoption of the Plan within twelve (12) months after the
effective date, by a majority of votes cast thereon at a meeting of shareholders
duly called and held for such purpose.
<PAGE>
Exhibit 10(y)
AMENDMENT NO. 2
---------------
AMENDMENT NO. 2 dated as of December 30, 1996 to Revolving Credit and
Term Loan Agreement dated as of October 31, 1995 (as the same was heretofore
amended by an Amendment No. 1 dated as of April 30, 1996, the "Credit
Agreement") by and among Guest Supply, Inc., Guest Packaging, Inc. and
Breckenridge-Remy Co. (collectively, the "Borrower") and PNC Bank, National
Association and First Union National Bank, formerly known as First Fidelity
Bank, N.A. (each a "Lender" and collectively the "Lenders") and PNC Bank,
National Association as agent for the Lenders (in such capacity, the "Agent").
Capitalized terms used herein and not defined herein are used herein as defined
in the Credit Agreement.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower has requested that the Lenders amend the Credit
Agreement in order to amend a certain financial covenant contained therein; and
WHEREAS, the Lenders are willing to amend the Credit Agreement to
reflect such change and make such other revisions as the Lenders deem
appropriate and desirable.
NOW, THEREFORE, in consideration of the premises and the agreements
hereinafter contained, the parties hereto agree as follows:
1. All references to this "Agreement" shall refer to the Credit
Agreement, as amended by Amendment No. 1 and this Amendment No. 2, and as the
same may hereafter be amended, supplemented or otherwise modified from time to
time.
2. As of the effective date hereof:
(a) Section 6.14 is hereby amended in its entirety as follows:
"6.14 Cash Flow Test. Permit the Cash Flow Test Ratio,
--------------
applicable to each quarter of GSI independently (and not in
relation to four consecutive quarters as had previously been the
case) to be less than 1.00 at the quarter ending June 30, 1996;
less than 1.40 at the quarter ending September 30, 1996, less
than 1.50 at each quarter ending December 31, 1996
<PAGE>
and March 31, 1997; thereafter, from the quarter ending June 30,
1997 through the Maturity Date, not permit the Cash Flow Ratio
Test to be less than 1.50 at the end of any period of four
consecutive fiscal quarters of GSI; provided however, that the
----------------
Cash Flow Ratio Test shall not be applied at all to GSI's quarter
ending March 31, 1996."
3. In consideration of the Lenders' agreeing to enter into this
Amendment No. 2, on or before the effective date hereof Borrower shall pay to
the Agent for the benefit of and disbursement to the Lenders, an amendment fee
of $3,500 of which $2,187.50 is payable to PNC and $1,312.50 is payable to First
Union.
4. In order to induce the Lenders to enter into this Amendment No.
2, the Borrower makes the following representations and warranties which shall
survive the execution and delivery hereof:
(a) All of the representations made by or on behalf of the
Borrower in the Credit Agreement are true on and as of the date
hereof;
(b) This Amendment No. 2 has been duly authorized, executed and
delivered by the Borrower;
(c) Neither the execution and delivery of this Amendment No. 2
by the Borrower, nor consummation by the Borrower of the
transactions herein contemplated, nor compliance by the Borrower
with the terms, conditions and provisions hereof will conflict
with or result in a breach of any of the terms, conditions or
provisions of (i) the Borrower's Certificate of Incorporation or
By-Laws, (ii) any agreement or instrument to which the Borrower
is now a party or by which the Borrower, or to which the property
of the Borrower, is, or may be, bound, or constitute a default
thereunder, or result thereunder in the creation or imposition of
any security interest, mortgage, lien, charge or encumbrance or
any nature whatsoever upon any of the properties or assets of the
Borrower, or (iii) any judgment or order, writ, injunction or
decree of any court; and
<PAGE>
(d) No action of, or filing with, any governmental or public
body or authority is required to authorize, or is otherwise
required in connection with, the execution, delivery and
performance of this Amendment No. 2 by the Borrower.
5. This Amendment No. 2 shall become effective upon receipt by the
Agent on behalf of the Lenders of a fully executed original hereof.
6. Except as expressly amended by this Amendment No. 2 all terms and
provisions of the Credit Agreement, and all rights of the Lenders and all
obligations of the Borrower thereunder shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
No. 2 as of the 30th day of December, 1996.
BORROWERS:
---------
QUEST SUPPLY, INC.
By: ____________________
Name: P. Xenis
Title: Vice President
of Finance
GUEST PACKAGING, INC.
By: ____________________
Name: P. Xenis
Title: Vice President
of Finance
BRECKENRIDGE-REMY CO.
By: ____________________
Name: P. Xenis
Title: Vice President
of Finance
LENDERS:
-------
PNC BANK, NATIONAL ASSOCIATION
By: ____________________
Name: Kevin D. Drew
Title: Vice President
FIRST UNION NATIONAL BANK FORMERLY KNOWN
AS FIRST FIDELITY BANK, N.A.
By: ____________________
Name: James T. King
Title: Vice President
<PAGE>
AGENT:
-----
PNC BANK, NATIONAL ASSOCIATION
By: ____________________
Name: Kevin D. Drew
Title: Vice President
<PAGE>
Exhibit 21
Subsidiaries of Guest Supply, Inc.
----------------------------------
Guest Supply, Inc. has the following subsidiaries:
1. Guest International, Ltd., an English corporation.
2. Guest Packaging, Inc., a New Jersey corporation.
3. Breckenridge-Remy Co., a Delaware corporation.
4. Guest International (Canada) Ltd., a Canadian corporation.
5. Guest International New Zealand Limited, a New Zealand corporation.
<PAGE>
Exhibit 23
Independent Auditors' Consent
-----------------------------
The Board of Directors
Guest Supply, Inc.:
We consent to incorporation by reference in the Registration
Statements (File Nos. 2-89233, 2-89234, 33-22872 and 33-63352) on Form S-8 of
Guest Supply, Inc. of our report dated November 18, 1996 relating to the
consolidated balance sheets of Guest Supply, Inc. and subsidiaries as of
September 30, 1996 and 1995, and the related consolidated statements of
operations, cash flows, and shareholders' equity and related schedule for each
of the years in the three-year period ended September 30, 1996, which report
appears in the September 30, 1996 annual report on Form 10-K of Guest Supply,
Inc.
KPMG Peat Marwick LLP
Short Hills, New Jersey
December 27, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GUEST
SUPPLY'S 1995 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 2,591,000
<SECURITIES> 0
<RECEIVABLES> 28,982,000
<ALLOWANCES> 898,000
<INVENTORY> 33,362,000
<CURRENT-ASSETS> 67,416,000
<PP&E> 29,810,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 102,888,000
<CURRENT-LIABILITIES> 32,193,000
<BONDS> 0
0
0
<COMMON> 543,000
<OTHER-SE> 41,860,000
<TOTAL-LIABILITY-AND-EQUITY> 102,888,000
<SALES> 0
<TOTAL-REVENUES> 179,042,000
<CGS> 0
<TOTAL-COSTS> 141,044,000
<OTHER-EXPENSES> 30,919,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,711,000
<INCOME-PRETAX> 5,368,000
<INCOME-TAX> 2,217,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,151,000
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
