<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
GUEST SUPPLY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
- --------------------------------------------------------------------------------
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined:
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
- --------------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
3) Filing party:
- --------------------------------------------------------------------------------
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
GUEST SUPPLY, INC.
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 15, 1998
---------------
Monmouth Junction, New Jersey
December 11, 1997
To the Holders of Common Stock
of GUEST SUPPLY, INC.:
The Annual Meeting of Shareholders (the "Meeting") of GUEST SUPPLY,
INC. (the "Company") will be held at the Novotel Hotel at 100 Independence
Avenue in Princeton, New Jersey on Thursday, January 15, 1998 at 10:00 o'clock
A.M., local time, for the following purposes, as more fully described in the
accompanying Proxy Statement:
Proposal 1. To elect two Class C directors of the Company for the
three ensuing years.
Proposal 2. To consider and take action upon a proposal to ratify the
Board of Directors' selection of KPMG Peat Marwick LLP to serve as the Company's
independent auditors for the Company's fiscal year ending September 30, 1998.
Proposal 3. To transact such other business as may properly come
before the Meeting or any adjournment or adjournments thereof.
The close of business on December 3, 1997 has been fixed by the Board
of Directors as the record date for the determination of shareholders entitled
to notice of, and to vote at, the Meeting.
By Order of the Board of Directors,
Paul T. Xenis, Secretary
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. IF YOU DO
NOT EXPECT TO BE PRESENT, PLEASE MARK, SIGN AND DATE THE ENCLOSED FORM OF PROXY
AND MAIL IT IN THE ENCLOSED RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES, SO THAT YOUR VOTE CAN BE RECORDED.
<PAGE>
PROXY STATEMENT
This Proxy Statement, which will be mailed commencing on or about
December 11, 1997 to the persons entitled to receive the accompanying Notice of
Annual Meeting of Shareholders, is provided in connection with the solicitation
of Proxies on behalf of the Board of Directors of Guest Supply, Inc. (the
"Company") for use at the Annual Meeting of Shareholders (the "Meeting") to be
held on January 15, 1998, and at any adjournment or adjournments thereof, for
the purposes set forth in such Notice. The Company's executive office is
located at 4301 U.S. Highway One, Monmouth Junction, New Jersey 08852.
Any Proxy may be revoked at any time before it is exercised by written
notice to the Secretary of the Meeting. The delivery of a subsequently dated
Proxy will have the effect of revoking an earlier Proxy. The casting of a
ballot at the Meeting by a shareholder who may theretofore have given a Proxy
will not have the effect of revoking the same unless the shareholder so notifies
the Secretary of the Meeting in writing at any time prior to the voting of the
shares represented by the Proxy.
At the close of business on December 3, 1997, the record date stated
in the accompanying Notice, the Company had outstanding 6,227,807 shares of
common stock, without par value (the "Common Stock"), each of which is entitled
to one vote with respect to each matter to be voted on at the Meeting. The
Company has no class or series of stock outstanding other than the Common Stock.
A majority of the issued and outstanding shares of Common Stock
present in person or by proxy will constitute a quorum for the transaction of
business at the Meeting. Abstentions and broker non-votes (as hereinafter
defined) will be counted as present for the purpose of determining the presence
of a quorum.
Directors are elected by plurality vote. Adoption of proposal 2 will
require the affirmative vote of a majority of the Common Stock present and
voting thereon at the Meeting. For the purpose of determining the vote required
for approval of matters to be voted on at the Meeting, shares held by
shareholders who abstain from voting will be treated as "present" and "entitled
to vote" on the matter and, thus, an abstention has the same legal effect as a
vote against the matter. However, in the case of a broker non-vote or where a
shareholder withholds authority from his proxy to vote the proxy as to a
particular matter, such shares will not be treated as "present" and "entitled to
vote" on the matter and, thus, a broker non-vote or the withholding of a proxy's
authority will have no effect on the outcome of the vote on the matter. A
"broker non-vote" refers to shares of Common Stock represented at the Meeting in
person or by proxy by a broker or nominee where such broker or nominee (i) has
not received voting instructions on a particular matter from the beneficial
owners or persons entitled to vote and (ii) the broker or nominee does not have
discretionary voting power on such matter.
<PAGE>
-2-
I. PROPOSAL ONE - ELECTION OF DIRECTORS
At the Meeting, shareholders will elect two directors, denominated as
Class C directors, to serve for a term of three years and until a successor
shall have been chosen and qualified. This is in accord with the Company's
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") which provides for the division of the Board of Directors into
three classes with the term of office of the Class C directors expiring at the
Meeting. Class A and Class B directors will be elected at the Annual Meetings
of Shareholders to be held in 1999 and 2000, respectively.
On November 5, 1997, in order to make all classes of the Board of
Directors as nearly equal in number as possible, the Board of Directors
decreased the number of Class A directors from three to two and increased the
number of Class C directors from one to two. Accordingly, Teri E. Unsworth
resigned her position as a Class A director and the Board of Directors elected
Ms. Unsworth as a Class C director to fill the vacancy in that class.
It is the intention of each of the persons named in the accompanying
form of Proxy to vote the shares represented thereby in favor of the two
nominees listed in the table under "Certain Information Concerning Nominees and
Directors" below, unless otherwise instructed in such Proxy. Such nominees are
presently serving as directors. In case either of the nominees is unable or
declines to serve, such persons reserve the right to vote the shares represented
by such Proxy for another person duly nominated by the Board of Directors in his
stead or, if no other person is so nominated, to vote such shares only for the
remaining nominee. The Board of Directors has no reason to believe that either
of the nominees will be unable or will decline to serve.
CERTAIN INFORMATION CONCERNING NOMINEES AND DIRECTORS
- -----------------------------------------------------
Certain information concerning the nominees for election as Class C
directors and the other directors of the Company is set forth below. Such
information was furnished by them to the Company.
Shares of Common
Stock Owned Bene-
Name and Certain ficially as of Percent
Biographical Information November 1, 1997 (1) of Class
- ------------------------ -------------------- ---------
Nominees for Election
- ---------------------
CLIFFORD W. STANLEY (Class C director), 510,338 (2) 7.6%
age 51; President and Chief Executive
Officer of the Company since January
1988; Executive Vice President, Chief
Financial Officer, Secretary and
Treasurer of the Company from April
1986 to January 1988; Vice President -
Finance of the Company from August
1985 to April
<PAGE>
-3-
1986; Vice President and Chief Operating
Officer, Transfer Print Foils, Inc. (hot
stamping foils) from 1984 to August 1985;
Vice President of Finance, Permacel
Division, Avery International from 1982
to 1984; Vice President, Johnson & Johnson
from 1979 to 1982; Director of the Company
since January 1987; Chairman of the Board
of Directors since August 1997.
TERI E. UNSWORTH (Class C director), 253,750 (3) 3.9%
age 46; Vice President - Market Development
of the Company since May 1985; Group Product
Director of Vidal Sassoon, Inc. from 1983
to 1985; Product Director of Vidal Sassoon,
Inc. from 1981 to 1983; Director of Sales
of Vidal Sassoon, Inc. from 1979 to 1981;
Director of the Company since November 1989.
Other Directors Whose Term of Office Will
Continue After the Meeting
- -----------------------------------------
THOMAS M. HAYTHE (Class B director), 164,040 (4) 2.6%
age 58; Partner, Haythe & Curley (attorneys)
since February 1982; Director: Novametrix
Medical Systems Inc. (manufacturer of
electronic medical instruments), Ramsay
Health Care, Inc. (provider of behavioral
health care services) and Westerbeke
Corporation (manufacturer of marine engine
products); Director of the Company since
June 1983.
PETER L. RICHARD (Class A director), -0- -
age 50; Managing Director, Quasar Corp.
(investment consultants) since May 1988;
Private investor from December 1987 to
May 1988; Senior Vice President, Moseley
Securities Corporation (formerly Moseley,
Hallgarten, Estabrook & Weeden Inc.)
(investment bankers) prior to December 1987;
Director: New Paraho Corp. (oil shale
technology); Director of the Company since
August 1983.
EDWARD J. WALSH (Class A director), 129,000 (5) 2.0%
age 65; President and Chief Executive
Officer, Sparta Group Ltd. (business
consultants) since 1987; President and
Chief Executive Officer, The Dial Corporation
(consumer products) from 1984 to 1987;
President and Chief Executive Officer,
<PAGE>
-4-
Armour International (consumer products)
prior to 1984; Director: The WD-40 Company
and Nortrust of Arizona Holding Corporation;
Director of the Company since November 1987.
GEORGE S. ZABRYCKI (Class B director), 34,500 (6) *
age 54; President, Milwaukee Seasonings
(manufacturer of food ingredients) since May
1992; Vice President-Business Planning,
Best Foods Affiliate Group, a Division of CPC
International, Inc., from November 1991 to
May 1992; Consultant, Aqua-Fab Industries, Inc.
from March 1991 to November 1991; President and
Chief Executive Officer, Heldor Industries,
Inc. (manufacturer of swimming pools) from
March 1990 to March 1991; Director of Strategic
Development, Specialty Chemicals Division, Union
Carbide Corporation from August 1989 to February
1990; President, Amerchol Corporation
(manufacturer of specialty chemicals) from
April 1981 to August 1989; Director of the
Company since November 1990.
- -------------------
* Less than one percent.
(1) Each of the nominees and the other directors of the Company has sole voting
and investment power with respect to all shares shown in the table as
beneficially owned by such person.
(2) Includes 195,000 shares issuable upon the exercise of presently exercisable
stock options and 270,000 shares issuable pursuant to presently exercisable
warrants held by Mr. Stanley.
(3) Includes 135,000 shares issuable upon the exercise of presently exercisable
stock options and 116,250 shares issuable pursuant to presently exercisable
warrants held by Ms. Unsworth.
(4) Includes 7,500 shares issuable upon the exercise of presently exercisable
stock options and 127,500 shares issuable pursuant to presently exercisable
warrants held by Mr. Haythe.
(5) Includes 7,500 shares issuable upon the exercise of presently exercisable
stock options and 120,000 shares issuable pursuant to presently exercisable
warrants held by Mr. Walsh.
(6) Includes 7,500 shares issuable upon the exercise of presently exercisable
stock options and 25,500 shares issuable pursuant to presently exercisable
warrants held by Mr. Zabrycki.
<PAGE>
-5-
During the past fiscal year, the Board of Directors of the Company met
eight times. Each of the persons named in the table above attended at least 75%
of the meetings of the Board of Directors and meetings of any committees of the
Board on which such person served which were held during the time that such
person served.
The committees of the Board of Directors include a Stock Option Committee,
whose members are Messrs. Richard, Walsh and Zabrycki; a Personnel and
Compensation Committee, whose members are Messrs. Haythe, Richard, Walsh and
Zabrycki; an Audit Committee, whose members are Messrs. Haythe, Richard, Walsh
and Zabrycki; and a Nominating Committee, whose members are Mr. Stanley and Ms.
Unsworth. The Stock Option Committee administers the Company's 1983 Stock
Option Plan, the 1993 Stock Option Plan and the 1996 Long Term Incentive Plan
and determines the persons who are eligible to receive awards thereunder, the
number of shares to be subject to each award and the other terms and conditions
upon which awards under such plans are granted and made exercisable. The Stock
Option Committee also administers the Company's 1983 Employee Stock Purchase
Plan and the 1993 Employee Stock Purchase Plan. The Personnel and Compensation
Committee administers the formulation and submission to the Board of Directors
of recommendations on all matters related to the salaries, bonuses, fringe
benefits or compensation of any kind of the executives of the Company. The
Audit Committee is authorized to meet and discuss with the representatives of
any firm of certified public accountants retained by the Company the scope of
the audit of such firm and question such representatives with respect thereto,
and to meet with and question employees of the Company with respect to financial
matters pertaining to the Company. The Audit Committee is authorized to make
periodic reports to the Board of Directors of the Company of its actions and
findings. The Nominating Committee is authorized to nominate individuals to
serve as directors of the Company. The Nominating Committee will not consider
nominees recommended by shareholders. The Stock Option Committee and the
Personnel and Compensation Committee each met twice during the fiscal year ended
September 30, 1997. The Audit Committee met once during the fiscal year ended
September 30, 1997. The Nominating Committee did not meet during such fiscal
year.
The directors and officers of the Company, other than Messrs. Haythe,
Richard, Walsh and Zabrycki, are active in its business on a day-to-day basis.
No family relationships exist between any of the directors and officers of the
Company.
The Company's Certificate of Incorporation contains a provision,
authorized by New Jersey law, which eliminates the personal liability of a
director of the Company to the Company or to any of its shareholders for
monetary damages for a breach of his fiduciary duty as a director, except in the
case where the director breached his duty of loyalty, failed to act in good
faith or knowingly violated a law, or obtained an improper personal benefit.
<PAGE>
-6-
STOCKHOLDERS AGREEMENT
- -----------------------
Upon the mailing of this Proxy Statement, the Company and Barry Igdaloff
will become parties to a Stockholders Agreement (the "Stockholders Agreement")
pursuant to which Mr. Igdaloff agrees to vote the shares of Common Stock
controlled by him for the election of the Company's nominees for director at the
Meeting. Additionally, unless Mr. Igdaloff gives a notice to the Company (the
"Notice") under certain circumstances, he agrees to vote the shares of Common
Stock controlled by him for the election of the Company's nominees for director
at the Annual Meeting of Shareholders held following the end of the Company's
1998 fiscal year (the "1999 Meeting").
The Stockholders Agreement also provides that if the Company's nominees
are elected as directors at the Meeting, the Company and the Board of Directors
will elect Mr. Igdaloff as a new Class B director promptly following the Meeting
and will nominate him for reelection as a Class B director at the 1999 Meeting.
In addition, if the Company's nominees are elected as directors at the Meeting,
no Notice is given and there shall not have been any solicitation of proxies
relating to the Company after the date of the Stockholders Agreement not
publicly supported by a resolution of a majority of the current members of the
Board of Directors (a "Solicitation"), the Company and the Board of Directors
will nominate for election as a director at the 1999 Meeting an individual
mutually agreed upon by the President of the Company, a majority of the other
members of the Board of Directors and Mr. Igdaloff.
The Stockholders Agreement also provides that (i) until the earlier to
occur of the 1999 Meeting or the giving of a Notice, Mr. Igdaloff will not
engage in or assist in any Solicitation, (ii) Mr. Igdaloff will not, in any
event, nominate any individual for election as a director of the Company or vote
for any individual as a director of the Company who is not nominated by a
majority of the current members of the Company's Board of Directors (a
"Continuing Director Nominee") if the election of such individual (and all other
individuals who are not Continuing Director Nominees) would result in less than
a majority of the directors of the Company being Continuing Director Nominees
and (iii) Mr. Igdaloff will use his best efforts to have other holders of Common
Stock execute and deliver the Stockholders Agreement and thereby agree to the
provisions thereof applicable to him (other than election as a director of the
Company).
Mr. Igdaloff, age 42, has been the principal of Rose Capital, a registered
investment advisor, since December 1995. From January 1990 to December 1995,
Mr. Igdaloff was a financial advisor with Prudential Securities. As of November
1, 1997, Mr. Igdaloff beneficially owned 536,637 shares of Common Stock, which
number includes shares of Common Stock owned by advisory clients of Rose
Capital. See "Information Concerning Certain Shareholders" below.
<PAGE>
-7-
EXECUTIVE COMPENSATION
- ----------------------
The following table sets forth information for the fiscal years ended
September 30, 1997, 1996 and 1995 concerning the compensation paid or awarded to
the Chief Executive Officer and the executive officers of the Company whose
total annual salary and bonus exceeded $100,000 during the fiscal year ended
September 30, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term
Fiscal ------------------- Compensation
Year Awards
Name and Principal Ended ---------------- All Other
Position Sept. 30 Salary Bonus Options (#) Compensation (1)
- ----------------------- ----------- --------- -------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Clifford W. Stanley 1997 $233,617 - - $2,112
President and Chief 1996 226,696 - 50,000(3) 2,112
Executive Officer 1995 217,977 $67,080 - 2,112
R. Eugene Biber(2) 1997 $167,168 - 10,000 -
Vice President - 1996 - - - -
Operations 1995 - - - -
Teri E. Unsworth 1997 $162,989 - - $1,798
Vice President - 1996 158,160 - 30,000(3) 1,729
Market Development 1995 152,077 $46,800 - 2,156
Paul T. Xenis 1997 $132,163 - - $1,295
Vice President - 1996 128,110 - 30,000(3) 1,245
Finance 1995 123,182 $37,908 - 1,467
</TABLE>
__________________________
(1) Amounts under "All Other Compensation" are contributions made by the
Company on behalf of the executive officer to the Guest Supply, Inc. 401(k)
Plan and Trust.
(2) Mr. Biber was appointed Vice President-Operations of the Company effective
in 1997.
(3) Effective March 5, 1997, these options were surrendered to the Company for
cancellation for no value.
<PAGE>
-8-
The following table sets forth the grants of stock options to the
executive officers named in the Summary Compensation Table during the fiscal
year ended September 30, 1997. The amounts shown for such named executive
officer as potential realizable values are based on arbitrarily assumed
annualized rates of stock price appreciation of five percent and ten percent
over the exercise price of the options during the full terms of the options,
which would result in stock prices of approximately $15.88 and $25.29,
respectively. The amounts shown as potential realizable values for all
shareholders represent the corresponding increases in the market value of
6,190,307 outstanding shares of the Common Stock held by all shareholders as of
September 30, 1997, which would total approximately $37,946,582 and $96,197,371,
respectively. No gain to the optionees is possible without an increase in stock
price which will benefit all shareholders proportionately. These potential
realizable values are based solely on arbitrarily assumed rates of appreciation
required by applicable Securities and Exchange Commission regulations. Actual
gains, if any, on option exercises and holdings of Common Stock are dependent on
the future performance of the Common Stock and overall stock market conditions.
There can be no assurance that the potential realizable values shown in this
table will be achieved.
STOCK OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
Potential Realizable Value
at May 14, 2007 at Assumed Annual
Rates of
Stock Price Appreciation
for Option Term
-----------------------------------
If Stock At If Stock At
Individual Grants $15.88 $25.29
------------------------------------------------------------ ----------- -----------
% of Total
Options
Granted to Exercise
Options Employees or
Granted in Fiscal Base Price
Name (#) Year ($/Sh) Expiration Date 5%($) 10%($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
All Shareholders' N/A N/A N/A N/A $37,946,582 $96,197,371
Stock Appreciation
R. Eugene Biber 10,000(1) 20.8% $9.75 May 14, 2007 $ 61,317 $ 155,386
</TABLE>
(1) These options become exercisable in cumulative annual installments of 20%
commencing on May 14, 1998.
Effective March 5, 1997, the directors and executive officers of the
Company surrendered for cancellation for no value an aggregate of 150,000 stock
options. Such options had been granted in May 1996.
<PAGE>
-9-
The following table sets forth the number and value of options and
warrants held at September 30, 1997 by the executive officers named in the
Summary Compensation Table. During the fiscal year ended September 30, 1997,
none of such executive officers exercised any options or warrants to purchase
shares of Common Stock.
OPTION/WARRANT VALUES AT SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Options/Warrants at Options/Warrants at
Sept. 30, 1997 (#) Sept. 30, 1997 ($)(1)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Clifford W. Stanley 465,000 30,000 $5,106,250 $325,000
R. Eugene Biber 9,000 46,000 $ 13,500 $111,500
Teri E. Unsworth 251,250 7,500 $2,830,000 $ 81,250
Paul T. Xenis 160,050 4,500 $1,770,625 $ 48,750
</TABLE>
__________
(1) In-the-money options or warrants are those where the fair market value of
the underlying Common Stock exceeds the exercise price of such option or
warrant. The value of in-the-money options and warrants is determined in
accordance with regulations of the Securities and Exchange Commission by
subtracting the aggregate exercise price of such option or warrant from the
aggregate year-end value of the underlying Common Stock.
EMPLOYMENT AGREEMENTS
- ---------------------
Effective August 1, 1997, the Company entered into new employment
agreements with each of Clifford W. Stanley, R. Eugene Biber, Teri E. Unsworth
and Paul T. Xenis, at an annual salary of $241,845, $173,056, $168,729 and
$137,903, respectively, subject to increases at the discretion of the Board of
Directors. The term of each employment agreement is for a three-year period
with automatic yearly extensions. Mr. Stanley is President, Chief Executive
Officer and Chairman of the Board of Directors of the Company, Mr. Biber is Vice
President-Operations, Ms. Unsworth is Vice President-Market Development and a
director of the Company and Mr. Xenis is Vice President-Finance and Secretary.
Each agreement also provides for a cash payment of up to three years' annual
salary upon termination by the Company of the employee's employment other than
for cause and upon the employee's voluntary termination within one year
following certain change of control events involving the Company.
<PAGE>
-10-
COMPENSATION OF DIRECTORS
- -------------------------
The Company pays its directors an annual fee of $10,000 and $1,000 for
attending each meeting of the Board of Directors of the Company.
PERSONNEL AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
- -------------------------------------------------------------------------
Thomas M. Haythe, a director of the Company and a member of the
Personnel and Compensation Committee, is a partner of the law firm of Haythe &
Curley, which firm acted as legal counsel to the Company during the past fiscal
year. It is expected that Haythe & Curley will continue to render legal
services to the Company in the future.
In addition, pursuant to an agreement dated August 6, 1997 between the
Company and Thomas M. Haythe (the "Agreement"), Mr. Haythe was appointed general
counsel for the Company. The Agreement provides, among other things, for the
payment of a monthly retainer of $7,500 (credited on a current basis against
fees of Haythe & Curley for services rendered to the Company) and the payment of
up to three years of such retainer upon the termination of the Agreement in the
case of certain change of control events involving the Company. The term of the
Agreement is for a three-year period with automatic yearly extensions.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
- -----------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common
Stock. Officers, directors and greater than ten percent shareholders are
required by Securities and Exchange Commission regulations to furnish the
Company with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and representations that no other reports
were required, during the fiscal year ended September 30, 1997 all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten
percent shareholders were complied with, except for R. Eugene Biber, who filed
late his initial report of ownership on Form 3.
PERSONNEL AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
- ------------------------------------
The report of the Personnel and Compensation Committee documents the
Committee's policies regarding executive officer compensation. The Company's
philosophy and objectives in setting compensation are:
<PAGE>
-11-
. to offer levels of compensation which are competitive with those
offered by other companies in similar businesses;
. to compensate executives based on each executive's level of
responsibility and contribution to the Company's business goals;
. to link compensation with the Company's financial performance;
and
. to align the interests of the Company's executives with the
interests of the Company's shareholders.
There are three components to executive compensation at the Company:
base salary, bonus and stock options.
Base Salary
-----------
Base salary is determined by level of responsibility, individual
performance and Company performance, as well as by the need to provide a
competitive package that allows the Company to retain key executives. After
reviewing individual and Company performance and market studies on salaries at
other companies of similar size, the Chief Executive Officer makes
recommendations to the Personnel and Compensation Committee concerning officers'
salaries, other than his own. The Personnel and Compensation Committee reviews
and, with any changes it deems appropriate, approves these recommendations.
Using the same review process, the Personnel and Compensation Committee makes
decisions pertaining to the Chief Executive Officer's salary.
Executive Bonus Plan
--------------------
The Executive Bonus Plan provides the opportunity for participating
executive officers to earn additional compensation by achieving specific net
income goals. Under the Executive Bonus Plan, the Company will pay a percentage
of each participant's annual base salary as an annual bonus, provided the
Company achieves specific net income objectives. These objectives are
established by the Board of Directors at the beginning of each fiscal year based
on recommendations from the Chief Executive Officer. For the fiscal year ended
September 30, 1997, no bonuses were paid.
Stock Options
-------------
The Company periodically grants stock options to its executive
officers and other key employees. The primary purpose of stock option grants is
to align the interests of the Company's executive officers more closely with the
interests of the Company's shareholders by offering the executives an
opportunity to benefit from increases in the market price of the Common Stock.
Stock options provide long-term incentives that have enabled the Company to
attract and retain key employees by encouraging their ownership of Common
<PAGE>
-12-
Stock. The stock option plans are administered by the Stock Option Committee of
the Board of Directors, which determines the persons who are to receive options
and the number of shares to be subject to each option. In selecting individuals
for options and determining the terms thereof, the Stock Option Committee may
take into consideration any factors it deems relevant, including present and
potential contributions to the success of the Company.
Compensation of Executive Officers
----------------------------------
The Company has employment agreements with each of Clifford W.
Stanley, President and Chief Executive Officer, R. Eugene Biber, Vice President
- - Operations, Teri E. Unsworth, Vice President - Market Development, and Paul T.
Xenis, Vice President - Finance. Pursuant to these agreements, the annual base
salary of each executive is subject to increases at the discretion of the Board
of Directors based upon performance of the Company and performance of the
executive. In August 1997, the Board of Directors approved an increase ranging
from approximately 4% to 4.9% in the base salary payable to each of Clifford W.
Stanley, R. Eugene Biber, Teri E. Unsworth and Paul T. Xenis.
Personnel and Compensation Committee
Thomas M. Haythe
Peter L. Richard
Edward J. Walsh
George S. Zabrycki
<PAGE>
-13-
PERFORMANCE GRAPH
- -----------------
The following performance graph compares the cumulative total
shareholder return on the Common Stock to the Dow Jones Industrial Average, to
the NASDAQ Stock Market-US Index and to the Standard and Poor's Lodging-Hotels
Index for the Company's last five fiscal years. Effective August 1996, the
Common Stock was listed on the New York Stock Exchange and, accordingly, the
Company has selected the Dow Jones Industrial Average as an appropriate index
for this graph. The graph assumes that $100 was invested in each of the Common
Stock, the Dow Jones Industrial Average, the NASDAQ Stock Market-US Index and
the Standard and Poor's Lodging-Hotels Index on September 30, 1992 and that all
dividends were reinvested.
FIVE YEAR CUMULATIVE TOTAL RETURN
COMPARISON GRAPH
Cumulative Total Return
----------------------------------------
9/92 9/93 9/94 9/95 9/96 9/97
GUEST SUPPLY, INC. $ 100 $ 184 $ 344 $ 561 $ 361 $ 423
DOW JONES INDUSTRIAL $ 100 $ 109 $ 117 $ 146 $ 180 $ 243
AVERAGE
NASDAQ STOCK MARKET - US $ 100 $ 131 $ 132 $ 182 $ 216 $ 297
S&P LODGING-HOTELS $ 100 $ 203 $ 190 $ 228 $ 275 $ 366
<PAGE>
-14-
INFORMATION CONCERNING CERTAIN SHAREHOLDERS
- -------------------------------------------
The shareholders (including any "group" as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934) who, to the knowledge
of the Board of Directors of the Company, owned beneficially more than five
percent of any class of the outstanding voting securities of the Company as of
November 1, 1997, each director and each executive officer named in the Summary
Compensation Table of the Company who owned beneficially shares of Common Stock
and all directors and executive officers of the Company as a group, and their
respective shareholdings as of such date (according to information furnished by
them to the Company), are set forth in the following table. Except as indicated
in the footnotes to the table, all of such shares are owned with sole voting and
investment power.
<TABLE>
<CAPTION>
Shares of
Common Stock Percent
Name and Address Owned Beneficially of Class
- ----------------------------- ------------------- ---------
<S> <C> <C>
Rose Capital................. 536,637 (1) 8.6%
2480 Colts Neck Road
Blacklick, Ohio 43004
Summerset Group LLC.......... 491,900 (2) 7.9%
1640 Dartmouth Lane
Deerfield, Illinois 60015
R. Eugene Biber.............. 9,222 (3) *
4301 U.S. Highway One
Monmouth Junction,
New Jersey 08852
Thomas M. Haythe............. 164,040 (4) 2.6%
237 Park Avenue
New York, New York 10017
Peter L. Richard............. - 0 - -
4301 U.S. Highway One
Monmouth Junction,
New Jersey 08852
Clifford W. Stanley.......... 510,338 (5) 7.6%
4301 U.S. Highway One
Monmouth Junction,
New Jersey 08852
Teri E. Unsworth............. 253,750 (6) 3.9%
4301 U.S. Highway One
Monmouth Junction,
New Jersey 08852
</TABLE>
<PAGE>
-15-
<TABLE>
<S> <C> <C>
Edward J. Walsh.............. 129,000 (7) 2.0%
4301 U.S. Highway One
Monmouth Junction,
New Jersey 08852
Paul T. Xenis................ 160,550 (8) 2.5%
4301 U.S. Highway One
Monmouth Junction,
New Jersey 08852
George S. Zabrycki........... 34,500 (9) *
4301 U.S. Highway One
Monmouth Junction,
New Jersey 08852
All Directors and Officers
as a Group (eight persons).. 1,261,400 (3) 17.0%
(4)(5)
(6)(7)
(8)(9)
</TABLE>
- -------------------------
* Less than one percent.
(1) Information as to these holdings is based upon a report on Schedule 13D
filed with the Securities and Exchange Commission by Rose Capital, a
registered investment advisor. This report indicates that 536,637 shares
were owned with sole dispositive power and sole voting power.
(2) Information as to these holdings is based upon a report on Schedule 13D
dated November 21, 1997, as amended, filed with the Securities and Exchange
Commission by Summerset Group LLC, a limited liability company, whose
principal business is to invest in and hold securities. This report
indicates that 491,900 shares were owned with sole dispositive power and
sole voting power.
(3) Includes 9,000 shares issuable upon the exercise of presently exercisable
stock options held by Mr. Biber.
(4) Includes 7,500 shares issuable upon the exercise of presently exercisable
stock options and 127,500 shares issuable pursuant to presently exercisable
warrants held by Mr. Haythe.
(5) Includes 195,000 shares issuable upon the exercise of presently exercisable
stock options and 270,000 shares issuable pursuant to presently exercisable
warrants held by Mr. Stanley.
(6) Includes 135,000 shares issuable upon the exercise of presently exercisable
stock options and 116,250 shares issuable pursuant to presently exercisable
warrants held by Ms. Unsworth.
(7) Includes 7,500 shares issuable upon the exercise of presently exercisable
stock options and 120,000 shares issuable pursuant to presently exercisable
warrants held by Mr. Walsh.
(8) Includes 160,050 shares issuable upon the exercise of presently exercisable
stock options held by Mr. Xenis.
<PAGE>
-16-
(9) Includes 7,500 shares issuable upon the exercise of presently exercisable
stock options and 25,500 shares issuable pursuant to presently exercisable
warrants held by Mr. Zabrycki.
II. PROPOSAL TWO - RATIFICATION OF SELECTION
OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP to serve as
independent auditors for the Company for the fiscal year ending September 30,
1998. The Board of Directors considers KPMG Peat Marwick LLP to be eminently
qualified.
Although it is not required to do so, the Board of Directors is
submitting its selection of the Company's auditors for ratification at the
Meeting, in order to ascertain the views of shareholders regarding such
selection. If the selection is not ratified, the Board of Directors will
reconsider its selection.
The Board of Directors recommends that shareholders vote FOR
ratification of the selection of KPMG Peat Marwick LLP to examine the financial
statements of the Company for the Company's fiscal year ending September 30,
1998. It is the intention of the persons named in the accompanying form of
Proxy to vote the shares represented thereby in favor of such ratification
unless otherwise instructed therein.
A representative of KPMG Peat Marwick LLP will be present at the
Meeting with the opportunity to make a statement if such representative desires
to do so and will be available to respond to appropriate questions.
III. OTHER MATTERS
The Board of Directors of the Company does not know of any other
matters which may be brought before the Meeting. However, if any other matters
are properly presented for action, it is the intention of the persons named in
the accompanying form of Proxy to vote the shares represented thereby in
accordance with their judgment on such matters.
IV. MISCELLANEOUS
If the accompanying form of Proxy is executed and returned, the shares
of Common Stock represented thereby will be voted in accordance with the terms
of the Proxy, unless the Proxy is revoked. If no directions are indicated in
such Proxy, the shares represented thereby will be voted FOR the nominees
proposed by the Board of Directors in the election of directors and FOR the
ratification of the Board of Directors' selection of independent auditors for
the Company.
<PAGE>
-17-
All costs relating to the solicitation of Proxies will be borne by the
Company. Proxies may be solicited by officers, directors and regular employees
of the Company and its subsidiaries personally, by mail or by telephone or
telegraph, and the Company may pay brokers and other persons holding shares of
stock in their names or those of their nominees for their reasonable expenses in
sending soliciting material to their principals.
It is important that Proxies be returned promptly. Shareholders who
do not expect to attend the Meeting in person are urged to mark, sign and date
the accompanying form of Proxy and mail it in the enclosed return envelope,
which requires no postage if mailed in the United States, so that their votes
can be recorded.
ANNUAL REPORT ON FORM 10-K
- --------------------------
A copy of the Company's Annual Report on Form 10-K, including the
financial statements and financial statement schedule for the fiscal year ended
September 30, 1997, which is required to be filed with the Securities and
Exchange Commission, will be sent without charge to shareholders to whom this
Proxy Statement is mailed, upon written request to the Secretary, Guest Supply,
Inc., 4301 U.S. Highway One, Monmouth Junction, New Jersey 08852.
SHAREHOLDER PROPOSALS
- ---------------------
Shareholder proposals intended to be presented at the 1999 Annual
Meeting of Shareholders of the Company must be received by the Company by August
12, 1998 in order to be considered for inclusion in the Company's proxy
statement relating to such meeting.
December 11, 1997
<PAGE>
GUEST SUPPLY, INC.
PROXY - Annual Meeting of Shareholders - January 15, 1998
The undersigned, a shareholder of GUEST SUPPLY, INC., does hereby appoint
CLIFFORD W. STANLEY and THOMAS M. HAYTHE, or either of them, with full power of
substitution, his proxies, to appear and vote all shares of Common Stock of the
Company which the undersigned is entitled to vote at the Annual Meeting of
Shareholders to be held on Thursday, January 15, 1998 at 10:00 A.M., local time,
or at any adjournments thereof, upon such matters as may properly come before
the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby instructs said proxies or their substitutes
PLEASE to vote as specified below on each of the following matters and in
SIGN AND accordance with their judgment on any other matters which may
DATE properly come before the Meeting:
ON THE
REVERSE
SIDE
AND
RETURN
PROMPTLY
<PAGE>
- --------------------------------------------------------------------------------
1. Election of Directors. FOR all nominees listed below [_]
(except as marked to the contrary below)
WITHHOLD AUTHORITY to vote [_]
for all nominees listed below
Clifford W. Stanley and Teri E. Unsworth
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. Ratification of appointment of KPMG Peat Marwick LLP
as independent auditors for fiscal 1998.
FOR [_] AGAINST [_] ABSTAIN [_]
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" EACH ITEM.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS INDICATED AS TO ITEMS 1 OR 2 THEY WILL BE VOTED IN FAVOR OF
THE ITEM(S) FOR WHICH NO DIRECTION IS INDICATED.
IMPORTANT: Before returning this Proxy, please
sign your name or names on the line(s) below
exactly as shown hereon. Executors,
administrators, trustees, guardians or
corporate officers should indicate their full
titles when signing. Where shares are
registered in the name of joint tenants or
trustees, each joint tenant or trustee should
sign.
Dated:______________________
____________________________(L.S.)
____________________________(L.S.)
Shareholder(s) Sign Here
