<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 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission only (as permitted
[X] Definitive Proxy Statement by Rule 14a-6(e)(2)
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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>
December 16, 1998
To our Shareholders:
In fiscal 1998, performance in our core business of hotel supply was excellent.
Sales to lodging customers grew 23% to a record $212,181,000 with profitability
increasing at an even greater rate than revenue.
Sales to retailers and consumer products companies, however, declined by 13.6%.
This volume reduction, combined with a mix and formula change from a major
contract manufacturing client, resulted in a decline in consolidated earnings
for the year.
As we enter fiscal 1999, we have been quite successful in expanding our contract
manufacturing client base and anticipate favorable year-to-year earnings
comparisons beginning in the first quarter and continuing throughout the year.
We are working diligently to increase shareholder value and appreciate your
continued support.
We would be pleased if you could attend our annual meeting on January 21, 1999.
In any event, please sign and return the enclosed proxy card.
Sincerely,
Clifford W. Stanley
This Letter 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 downturn 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, failure to secure new business and
unforeseen inefficiencies at the Company's manufacturing facility. In addition,
difficulties in completing remediation of Year 2000 issues by the Company, its
customers or suppliers may have a material adverse effect on the Company and its
operations. Accordingly, there can be no assurances that any anticipated future
results will be achieved.
<PAGE>
GUEST SUPPLY, INC.
--------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 21, 1999
--------------
Monmouth Junction, New Jersey
December 14, 1998
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 21, 1999 at 10:00 o'clock
A.M., local time, for the following purposes, as more fully described in the
accompanying Proxy Statement:
Proposal 1. (a) To elect two Class A directors of the Company for
the next three years.
Proposal 1. (b) To elect one Class B director of the Company for the
next year.
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 October 1, 1999.
Proposal 3. To consider and take action on a shareholder proposal
concerning a spin-off of the contract manufacturing business of the Company.
Proposal 4. To transact such other business as may properly come
before the Meeting or any adjournment or adjournments thereof.
The close of business on December 2, 1998 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 16, 1998 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 21, 1999, 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 2, 1998, the record date stated
in the accompanying Notice, the Company had outstanding 6,345,288 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 proposals 2 and
3 will require the affirmative vote of a majority of the Common Stock present
and voting thereon at the Meeting. In the case of a broker non-vote, abstention
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, abstention 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
(a) ELECTION OF CLASS A DIRECTORS
-----------------------------
At the Meeting, shareholders will be asked to elect two directors,
denominated as Class A 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 A directors expiring at the
Meeting. Class B and Class C directors will be elected at the Annual Meetings
of Shareholders to be held in 2000 and 2001, respectively. If the number of
directors is increased, the increase will be apportioned among the classes so as
to make all classes as nearly equal in number as possible.
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 for Class A director listed in the table under "Certain Information
Concerning Nominees and Directors" below, unless otherwise instructed not to
vote by withholding authority under 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.
(b) ELECTION OF A CLASS B DIRECTOR
------------------------------
At the Meeting, shareholders will be asked to elect one director,
denominated as a Class B director, to serve for the remaining one-year term of
Class B directors and until a successor shall have been chosen and qualified.
Effective December 3, 1997, the Company and Barry Igdaloff entered
into a Stockholders Agreement (the "Stockholders Agreement") pursuant to which
Mr. Igdaloff agreed to vote the shares of Common Stock controlled by him for the
election of the Company's nominees for director at last year's Annual Meeting
(the "1998 Meeting") and for the election of the Company's nominees for director
at the Meeting. Pursuant to the Stockholders Agreement, Mr. Igdaloff became a
Class B director following the 1998 Meeting.
The Stockholders Agreement also provides that (i) until the Meeting,
Mr. Igdaloff will not engage in or assist in any solicitation of proxies
relating to the Company not publicly supported by a resolution of a majority of
the current members of the Board of Directors, and (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.
<PAGE>
-3-
The Company has commenced an action in the New York Supreme
Court, New York County, seeking to compel Mr. Igdaloff to perform certain of the
foregoing obligations under the Stockholders Agreement.
On January 15, 1998, the Board of Directors of the Company
approved an increase in the number of directors constituting the Company's
Board of Directors from six directors to seven directors, and the Board elected
Mr. Igdaloff as a Class B director to fill the vacancy created. As required by
New Jersey corporate law, the shareholders will be asked at the Meeting to elect
Mr. Igdaloff whose term of office as a Class B director will expire with the
terms of the Company's other Class B directors in 2000. If Mr. Igdaloff is
elected, Mr. Igdaloff will continue to serve as a Class B director until the
2000 Annual Meeting of Shareholders. If he is not elected, his term will
terminate at the Meeting.
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 nominee for Class B director listed in the table under "Certain Information
Concerning Nominees and Directors" below, unless otherwise instructed not to
vote by withholding authority under such Proxy. Such nominee is presently
serving as a director. In case the nominee 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. The Board
of Directors has no reason to believe that the nominee will be unable or will
decline to serve.
CERTAIN INFORMATION CONCERNING NOMINEES AND DIRECTORS
- -----------------------------------------------------
Certain information concerning the nominees for election as
Class A directors, the nominee for election as a Class B director 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, 1998 (1) of Class
- ------------------------ -------------------- --------
Nominees for Election as Class A Directors
- ------------------------------------------
PETER L. RICHARD (Class A director), -0- -
age 51; 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), 119,000 (2) 1.8%
age 66; President and Chief Executive
Officer, Sparta Group Ltd. (business
consultants) since 1987; President and Chief
Executive Officer, The Dial Corporation
(consumer products)
<PAGE>
-4-
from 1984 to 1987; President and Chief
Executive Officer, 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.
Nominee for Election as Class B Director
- ----------------------------------------
BARRY IGDALOFF (Class B director), 508,500 (3) 7.9%
Age 43; Principal, Rose Capital
(registered investment advisor) since
December 1995; Financial Advisor,
Prudential Securities from January 1990 to
December 1995; Director of the Company
since January 1998.
Other Directors Whose Term of Office Will
Continue After the Meeting
- -----------------------------------------
THOMAS M. HAYTHE (Class B director), 164,040 (4) 2.5%
age 59; Partner, Haythe & Curley
(attorneys) since February 1982; Director:
Novametrix Medical Systems Inc.
(manufacturer of electronic medical
instruments), Ramsay Health Care, Inc.
(provider of youth and educational
services) and Westerbeke Corporation
(manufacturer of marine engine products);
Director of the Company since June 1983.
CLIFFORD W. STANLEY (Class C director), 540,338 (5) 7.9%
age 52; 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 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.
TERI E. UNSWORTH (Class C director), 261,250 (6) 4.0%
age 47; 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,
<PAGE>
-5-
Inc. from 1979 to 1981; Director of the
Company since November 1989.
GEORGE S. ZABRYCKI (Class B director), 34,500 (7) *
age 55; 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 7,500 shares issuable upon the exercise of presently
exercisable stock options and 90,000 shares issuable pursuant to
presently exercisable warrants held by Mr. Walsh.
(3) Includes shares owned by advisory clients of Rose Capital, of which Mr.
Igdaloff is a principal.
(4) Includes 7,500 shares issuable upon the exercise of presently
exercisable stock options and 90,000 shares issuable pursuant to
presently exercisable warrants held by Mr. Haythe.
(5) Includes 225,000 shares issuable upon the exercise of presently
exercisable stock options and 165,000 shares issuable pursuant to
presently exercisable warrants held by Mr. Stanley.
(6) Includes 75,000 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 25,500 shares issuable pursuant to
presently exercisable warrants held by Mr. Zabrycki.
<PAGE>
-6-
During the past fiscal year, the Board of Directors of the Company met
five 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 Compensation
Committee, whose members are Messrs. Haythe, Igdaloff, Richard and Zabrycki; an
Audit Committee, whose members are Messrs. Igdaloff, Richard, Walsh and
Zabrycki; an Executive Committee, whose members are Messrs. Haythe, Richard,
Stanley and Zabrycki; and a Nominating Committee, whose members are Messrs.
Haythe and 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 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 Executive Committee is authorized
to act in place of the Board of Directors to the extent permitted by law on
matters which require Board action between meetings of the Board of Directors.
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 Audit Committee met once and the Compensation
Committee met twice during the fiscal year ended September 30, 1998. The Stock
Option Committee, the Nominating Committee and the Executive Committee did not
meet during such fiscal year.
The directors and officers of the Company, other than Messrs. Haythe,
Igdaloff, 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>
-7-
EXECUTIVE COMPENSATION
- ----------------------
The following table sets forth information for the fiscal years ended
September 30, 1998, 1997 and 1996 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, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
---------------------- ----------------------------
Name and Principal Fiscal Year Ended All Other
Position Sept. 30 Salary Options (#) Compensation (1)
- -------------------------- ------------------ ---------------------- ---------------------------- ----------------------
<S> <C> <C> <C> <C>
Clifford W. Stanley 1998 $242,961 - $2,112
President and Chief 1997 233,617 - 2,112
Executive Officer 1996 226,696 50,000 (3) 2,112
R. Eugene Biber (2) 1998 $173,855 - $2,473
Vice President - 1997 167,168 10,000 -
Operations 1996 - - -
Teri E. Unsworth 1998 $169,508 - $1,853
Vice President - 1997 162,989 - 1,798
Market Development 1996 158,160 30,000 (3) 1,729
and Director
Paul T. Xenis 1998 $153,939 - $1,339
Vice President - 1997 132,163 - 1,295
Finance 1996 128,110 30,000 (3) 1,245
</TABLE>
__________________________
(1) Amounts under "All Other Compensation" are contributions made by the
Company on behalf of the executive officer to the Guest Supply, Inc. 401(k)
Plan and Trust.
(2) Mr. Biber was appointed Vice President - Operations of the Company
effective in 1997.
(3) Effective March 5, 1997, these options were surrendered to the Company for
cancellation for no value.
The Company did not grant any stock options to the executive officers
named in the Summary Compensation Table during the fiscal year ended September
30, 1998.
The following table sets forth the number and value, net of exercise
price, of shares of Common Stock acquired upon exercise of options and warrants
on the date of exercise by the executive officers named in the Summary
Compensation Table during the past fiscal year, and the number and value of
options and warrants held by such executive officers at September 30, 1998.
<PAGE>
-8-
AGGREGATED OPTION/WARRANT EXERCISES IN
THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
AND FISCAL YEAR END OPTION/WARRANT VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Options/Warrants at Options/Warrants at
Sept. 30, 1998 (#) Sept. 30, 1998 ($)(1)
---------------------- ---------------------
Shares Acquired
Name on Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
- -------------------- --------------- -------------- ---------------------- ------------- --------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Clifford W. Stanley 105,000 $867,189 390,000 0 $2,697,492 $ 0
R. Eugene Biber 0 $ 0 20,000 35,000 $ 6,500 $20,375
Teri E. Unsworth 67,500 $545,157 191,250 0 $1,381,714 $ 0
Paul T. Xenis 7,050 $ 57,721 157,500 0 $1,160,309 $ 0
</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 employment
agreements with each of Clifford W. Stanley, R. Eugene Biber, Teri E. Unsworth
and Paul T. Xenis at annual salaries subject to increases at the discretion of
the Board of Directors. In January 1998, the Board of Directors increased Mr.
Xenis's salary to $160,000. In July 1998, the Board of Directors increased Mr.
Stanley's salary to $251,518, increased Mr. Biber's salary to $179,978,
increased Ms. Unsworth's salary to $175,478 and increased Mr. Xenis's salary to
$166,400. 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.
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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
- -----------------------------------------------------------
Thomas M. Haythe, a director of the Company and a member of the
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.
<PAGE>
-9-
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 Byears 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, 1998 all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten
percent shareholders were complied with.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
- ------------------------------------
The report of the Compensation Committee documents the Committee's
policies regarding executive officer compensation. The Company's philosophy and
objectives in setting compensation are:
. 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
<PAGE>
-10-
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 Compensation Committee
concerning officers' salaries, other than his own. The Compensation Committee
reviews and, with any changes it deems appropriate, approves these
recommendations. Using the same review process, the 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, 1998, 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 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 January 1998, the Board of Directors approved an increase of
approximately 16% in the base salary payable to Paul T. Xenis. In July 1998,
the Board of Directors approved an increase of approximately 4% in the base
salary payable to each of Clifford W. Stanley, R. Eugene Biber, Teri E. Unsworth
and Paul T. Xenis.
Compensation Committee
Thomas M. Haythe
Barry Igdaloff
Peter L. Richard
George S. Zabrycki
<PAGE>
-11-
PERFORMANCE GRAPH
- -----------------
The following performance graph compares the cumulative total
shareholder return on the Common Stock to the Dow Jones Industrial Average and
to the Standard and Poor's Lodging-Hotels Index for the Company's last five
fiscal years. The graph assumes that $100 was invested in each of the Common
Stock, the Dow Jones Industrial Average and the Standard and Poor's Lodging-
Hotels Index on September 30, 1993 and that all dividends were reinvested.
FIVE-YEAR CUMULATIVE TOTAL RETURN
COMPARISON GRAPH
[GRAPHIC APPEARS HERE]
Cumulative Total Return
--------------------------------------------------
9/93 9/94 9/95 9/96 9/97 9/98
GUEST SUPPLY, INC. $ 100 $187.04 $304.90 $196.30 $229.60 $175.90
DOW JONES INDUSTRIAL $ 100 $111.09 $142.22 $178.68 $245.77 $246.89
S&P LODGING-HOTELS $ 100 $ 93.30 $112.20 $135.20 $180.00 $121.10
<PAGE>
-12-
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, 1998, 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.
Shares of
Common Stock Percent
Name and Address Owned Beneficially Of Class
- ---------------- ------------------ --------
Dimensional Fund Advisors Inc............... 438,950(1) 6.8%
1299 Ocean Avenue
Santa Monica, California 90401
Investment Counselors of.................... 471,000(2) 7.4%
Maryland, Inc.
803 Cathedral Street
Baltimore, Maryland 21201
Rose Capital................................ 508,500(3) 7.9%
2480 Colts Neck Road
Blacklick, Ohio 43004
Summerset Group LLC......................... 595,900(4) 9.3%
1640 Dartmouth Lane
Deerfield, Illinois 60015
R. Eugene Biber............................. 20,628(5) *
4301 U.S. Highway One
Monmouth Junction,
New Jersey 08852
Thomas M. Haythe............................ 164,040(6) 2.5%
237 Park Avenue
New York, New York 10017
Barry Igdaloff.............................. 508,500(7) 7.9%
2480 Colts Neck Road
Blacklick, Ohio 43004
Peter L. Richard............................ -0- -
4301 U.S. Highway One
Monmouth Junction,
New Jersey 08852
<PAGE>
-13-
Clifford W. Stanley......................... 540,338(8) 7.9%
4301 U.S. Highway One
Monmouth Junction,
New Jersey 08852
Teri E. Unsworth............................ 261,250(9) 4.0%
4301 U.S. Highway One
Monmouth Junction,
New Jersey 08852
Edward J. Walsh............................. 119,000(10) 1.8%
4301 U.S. Highway One
Monmouth Junction,
New Jersey 08852
Paul T. Xenis............................... 165,050(11) 2.5%
4301 U.S. Highway One
Monmouth Junction,
New Jersey 08852
George S. Zabrycki.......................... 34,500(12) *
4301 U.S. Highway One
Monmouth Junction,
New Jersey 08852
All Directors and Officers
as a Group (nine persons).................. 1,813,306(5)(6) 24.5%
(7)(8)
(9)(10)
(11)(12)
- -------------------------
* Less than one percent.
(1) Information as to the holdings of Dimensional Fund Advisors Inc., a
registered investment advisor ("Dimensional"), is based upon a report on
Schedule 13G filed with the Securities and Exchange Commission. Such report
indicates that 438,950 shares were owned with sole dispositive power and
269,550 shares were owned with sole voting power. Such report indicates
that persons who are officers of Dimensional also serve as officers of DFA
Investment Dimensions Group Inc. (the "Fund") and The DFA Investment Trust
Company (the "Trust"), each an open-ended investment company registered
under the Investment Company Act of 1940 and in their capacity as officers
of the Fund and the Trust, such persons vote 107,600 shares owned by the
Fund and 61,800 shares owned by the Trust. Dimensional is deemed to have
beneficial ownership of 438,950 shares, all of which are held by advisory
clients of Dimensional. Dimensional, disclaims beneficial ownership of all
such shares.
(2) Information as to these holdings is based upon a report on Schedule 13G
filed with the Securities and Exchange Commission by Investment Counselors
of Maryland, Inc., a registered investment advisor, and upon information
provided to the Company by Investment Counselors of Maryland, Inc. Based
upon such information, 471,000 shares were owned with sole dispositive
power and sole voting power.
(3) 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, and upon information provided to the Company
by Mr. Barry Igdaloff, principal of Rose Capital. Based upon such
information, 508,500 shares were owned with sole dispositive power and sole
voting power.
<PAGE>
-14-
(4) Information as to these holdings is based upon a report on Schedule 13D
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 595,900 shares were owned with
sole dispositive power and sole voting power.
(5) Includes 20,000 shares issuable upon the exercise of presently exercisable
stock options held by Mr. Biber.
(6) Includes 7,500 shares issuable upon the exercise of presently exercisable
stock options and 90,000 shares issuable pursuant to presently exercisable
warrants held by Mr. Haythe.
(7) Includes shares owned by advisory clients of Rose Capital, of which Mr.
Igdaloff is a principal.
(8) Includes 225,000 shares issuable upon the exercise of presently exercisable
stock options and 165,000 shares issuable pursuant to presently exercisable
warrants held by Mr. Stanley.
(9) Includes 75,000 shares issuable upon the exercise of presently exercisable
stock options and 116,250 shares issuable pursuant to presently exercisable
warrants held by Ms. Unsworth.
(10) Includes 7,500 shares issuable upon the exercise of presently exercisable
stock options and 90,000 shares issuable pursuant to presently exercisable
warrants held by Mr. Walsh.
(11) Includes 157,500 shares issuable upon the exercise of presently exercisable
stock options held by Mr. Xenis.
(12) 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.
INFORMATION CONCERNING POSSIBLE
ADDITIONAL DIRECTOR NOMINEES
- ------------------------------
The Company has been informed that Craig M. DeCesare may be nominated
for election as a director by a shareholder at the Meeting. Craig M. DeCesare,
age 33, is currently Managing General Partner of Clarion Partners, L.P., a Rhode
Island based hedge fund. Prior thereto, Mr. DeCesare was Director of Research,
Associated Capital (investment management firm) from 1996 to 1997; Research
Analyst, Off Wall Street Consulting Group from 1994 to 1996; Principal,
Morningside Capital (investment manager) from 1992 to 1994; and Equity Analyst,
Gabelli & Company (investment company) from 1990 to 1992. The Company has been
informed that Mr. DeCesare beneficially owns 3,700 shares of Common Stock.
In addition, the Company has been informed that Philip A. Carpenter
may be nominated for election as a director by a shareholder at the Meeting.
Philip A. Carpenter, age 45, is currently Vice President - Investments of
PaineWebber, Inc. Prior thereto, Mr. Carpenter was Vice President, Kidder,
Peabody & Co. from 1985 to 1995; Manager Business Development, Industrial
Products Division, Avery International Inc. From 1981 to 1984; Senior Financial
Analyst, Avery Label Group, Avery International Inc. from 1980 to 1981; and
Senior Financial Analyst, Lincoln Mercury Division, Ford Motor Company from 1977
to 1980. The Company has been informed that Mr. Carpenter beneficially owns
11,000 shares of Common Stock.
<PAGE>
-15-
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 October 1, 1999.
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 October 1, 1999.
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. PROPOSAL THREE - SHAREHOLDER PROPOSAL
The Company has been advised that Sarah Butler, 312 Blake Drive, Fort
Wayne, Indiana 46804, who states she beneficially owns 500 shares of the
Company's Common Stock, intends to present the following proposal at the
Meeting:
RESOLVED: That it is requested that Guest Supply should divide itself
into two publicly held corporations by spinning off or otherwise initiating a
public offering of the contract manufacturing division as soon as possible.
Shareholder Statement:
Since the contract manufacturing division has performed so poorly over
the last two years that I have owned stock in Guest Supply (and the hotel
division has performed so well), I believe the time has come to separate the two
divisions into separate companies. My logic is as follows:
1) The hotel business is growing steadily at a good rate.
2) Currently, investors who want to see consistent, steady (if not
spectacular) growth will not buy Guest Supply as they don't want
the volatility of the contract manufacturing side.
3) On the other hand, there are investors that like to put money into
companies that have the chance to double or triple their earnings
within a short time, and they would be the type of investor that
would buy the contract manufacturing division if it were separate.
<PAGE>
-16-
4) This high growth type investor, willing to tolerate volatility
over the short term, would not buy Guest Supply as currently
constituted since the Company as a whole doesn't afford them
enough upside potential. So the situation exists where neither
type of investor would buy Guest Supply reducing demand for the
stock resulting in the current low stock price.
Since the Company is supposed to be run to improve the position of the
shareholders, I request that this proposition should be passed and acted on as
quickly as possible.
Company Statement:
Several months prior to receiving this shareholder's proposal, the
Board of Directors began studying the merits of a spin-off of the contract
manufacturing business of the Company as a dividend to the Company's
shareholders. The Company is currently in the process of reviewing the
accounting, financial, tax, legal and business implications of such an action.
However, the Board of Directors believes that it is premature for the Board to
endorse a spin-off in light of management's ongoing evaluation of the impact of
such a step on the Company and its shareholders, employees, customers and
suppliers. The logistics and consequences of a spin-off are complex and require
assessment of a variety of issues, including: the financial viability of and
credit availability to the resulting entities; the impact on existing
contractual relationships with customers and suppliers; the terms and conditions
of a long-term supply agreement between the Company and the newly-created
company, necessary in order to maintain a needed strategic asset for the
Company's hotel business; a division of the existing federal and state tax
obligations and benefits between the two companies; and the tax effect of a
spin-off on the shareholders of the Company. In addition, the Board of
Directors believes that, prior to approving such a step, it has the obligation
to consult with independent financial advisors to assess the viability and
desirability of a spin-off.
While the Board of Directors believes that the concept of a spin-off
of the Company's contract manufacturing business has merit and may potentially
be in the best interests of the shareholders of the Company, such an important
undertaking requires a carefully considered, measured response. The Board of
Directors does not oppose this proposal in concept, but the Board does believe
that it must make a fully-informed, reasoned decision concerning the Company's
future and that any decision concerning a spin-off is premature. To initiate an
undertaking such as a spin-off without first fully studying its ramifications is
contrary to the exercise of business judgment by the Board of Directors and,
indeed, may prove detrimental to the Company and its shareholders.
IV. 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.
<PAGE>
-17-
V. 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 printed
terms of the Proxy, unless the Proxy is properly 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 Class A
directors, FOR the nominee proposed by the Board of Directors in the election of
a Class B director and FOR the ratification of the Board of Directors' selection
of independent auditors for the Company.
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, and consultants to, the Company and its subsidiaries personally, by mail or
by telephone or facsimile, 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. In
addition, the Company has retained Corporate Investor Communications, Inc.
("CIC") to assist in its solicitation of proxies from brokers, nominees,
institutions and individuals. The Company's agreement with CIC provides for a
one-time fee of $3,500 plus $4.00 per call to shareholders and other persons, as
well as reimbursement of expenses.
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 for the fiscal year ended September 30, 1998, 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 2000 Annual
Meeting of Shareholders of the Company must be received by the Company by August
16, 1999 in order to be considered for inclusion in the Company's proxy
statement relating to such meeting. Such a proposal must also comply with the
requirements as to form and substance established by the Securities and Exchange
Commission for such proposals.
A shareholder otherwise desiring to bring matters before an annual
meeting of shareholders must, pursuant to the Company's By-Laws, submit a
proposal in writing that is received by the Secretary of the Company at the
principal executive offices of the Company not less than 60 nor more than 90
days prior to the anniversary date of the immediately preceding annual meeting.
In the event that the date of the annual meeting is called for a date that is
not within 30 days before or after such anniversary date, the By-Laws provide
that notice by a shareholder of a shareholder proposal must be received in
writing by the Secretary of the
<PAGE>
-18-
Company on the tenth day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was made. If any
shareholder proposals are presented for action at the Annual Meeting, but are
not submitted within the time periods described above, it is the intention of
the persons named in the accompanying proxy to vote the shares to which the
proxy relates in accordance with their judgment.
December 14, 1998
<PAGE>
GUEST SUPPLY, INC.
PROXY - Annual Meeting of Shareholders - January 21, 1999
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 21, 1999 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.
PLEASE SIGN The undersigned hereby instructs said proxies or their
AND DATE ON substitutes to vote as printed on the reverse on each of
THE REVERSE the following matters and in accordance with their
SIDE AND RETURN judgment on any other matters which may properly come
PROMPTLY before the Meeting:
<PAGE>
2
- ------------------------
1(a). Election of Class A Directors.
FOR all nominees [ ] WITHHOLD AUTHORITY to vote for all nominees listed [ ]
(except as
marked to the
contrary below)
Peter L. Richard and Edward J. Walsh
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR EITHER CLASS A NOMINEE WRITE
THAT NOMINEE'S NAME ON THE LINE PROVIDED BELOW.)
--------------------------------------------------------------
1(b). Election of Class B Director.
FOR the nominee [ ] WITHHOLD AUTHORITY to vote for the nominee [ ]
Barry Igdaloff
2. Ratification of appointment of KPMG Peat Marwick LLP as independent
auditors for fiscal 1999.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Shareholder proposal concerning a spin-off of the contract manufacturing
business of the Company.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
The Board of Directors Favors a Vote "FOR" Items 1(a), 1(b) and 2.
The shares represented by this Proxy will be voted as directed.
If no direction is indicated as to Items 1(a), 1(b) and 2, they will be
voted in favor of the Items 1(a), 1(b) and 2.
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
