1 of 22 pages
Index to Exhibits is on Page 11
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended December 31, 1997 Commission File #1-11955
===========================================================================
===========================================================================
GUEST SUPPLY, INC.
(Exact name of registrant as specified in its charter)
State of New Jersey 22-2320483
--------------------------------- -----------------------
(State or other jurisdiction of (Identification number)
incorporation or organization)
4301 U.S. Highway One 08852-0902
--------------------------------- ----------
Monmouth Junction, New Jersey (Zip code)
(Address of principal executive offices)
Registrants telephone number and area code 609-514-9696
===========================================================================
===========================================================================
Indicate by check mark whether the registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
------ ------
The number of shares of common stock, without par value, outstanding as of
December 31, 1997 was 6,227,807 shares.
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Part 1
GUEST SUPPLY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
In Thousands
except per share amount
December 31, September 30,
1997 1997*
------------ --------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,395 $ 4,152
Accounts receivable 29,819 30,429
Inventories:
Raw materials 7,890 7,706
Finished goods 29,225 26,970
Deferred income taxes 2,201 2,067
Prepaid expenses and other current assets 2,578 1,732
- ---------------------------------------------------------------------------
Total current assets 75,108 73,056
Property and equipment 33,178 33,141
Other assets 1,268 1,312
Excess of cost over net assets acquired 5,068 5,160
- ---------------------------------------------------------------------------
$114,622 $112,669
===========================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 29,049 $ 32,493
Current maturities of long-term debt 937
- ---------------------------------------------------------------------------
Total current liabilities 29,049 33,430
===========================================================================
Long-term debt 33,117 27,617
Deferred income taxes 5,325 5,025
- ---------------------------------------------------------------------------
Total long-term liabilities 38,442 32,642
===========================================================================
Commitments and contingencies
Shareholders' equity:
Preferred stock - without par value;
authorized 1,000,000 shares,
outstanding none
Common stock - without par value; stated
value $0.10; authorized 20,000,000 shares,
issued and outstanding 6,227,807 shares
at December 31, 1997 and 6,190,307 at
September 30, 1997 550 546
Additional paid-in capital 35,452 35,336
Retained earnings 11,163 10,745
Cumulative foreign currency
translation adjustments (34) (30)
- ---------------------------------------------------------------------------
Total shareholders' equity 47,131 46,597
- ---------------------------------------------------------------------------
$114,622 $112,669
===========================================================================
* From audited financial statements
The accompanying notes are an integral part of these consolidated condensed
financial statements.
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GUEST SUPPLY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
In Thousands
except per share amount
(Unaudited)
Three Months Ended
December 31,
--------------------------------
1997 1996
-------------- --------------
Sales $ 52,765 $ 47,656
Cost of sales 42,325 36,585
- ---------------------------------------------------------------------------
Gross profit 10,440 11,071
Selling, general & administrative expenses 9,150 8,498
- ---------------------------------------------------------------------------
Operating income 1,290 2,573
Interest and other income 7 20
Interest expense 518 546
- ---------------------------------------------------------------------------
Income before income taxes 779 2,047
Income tax expense 361 828
- ---------------------------------------------------------------------------
Net income $ 418 $ 1,219
===========================================================================
Earnings per share:
Basic $ 0.07 $ 0.20
===========================================================================
Diluted $ 0.06 $ 0.16
===========================================================================
Weighted average number of common
shares outstanding:
Basic 6,219 6,163
===========================================================================
Diluted 7,335 7,454
===========================================================================
The accompanying notes are an integral part of these consolidated condensed
financial statements.
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GUEST SUPPLY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
In Thousands
except per share amount
(Unaudited)
Three Months Ended
December 31,
--------------------------------
1997 1996
-------------- --------------
Cash flows from operating activities:
Net income $ 418 $ 1,219
- ---------------------------------------------------------------------------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,106 984
Provision for losses on accounts receivable 109 62
Gain on sale of fixed assets (72)
Deferred income tax expense 166 351
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 501 (113)
Increase in inventories (2,439) (899)
Increase in prepaid expenses and other
current assets (846) (206)
Decrease in other assets 27 1
Decrease in accounts payable and
accrued expenses (3,444) (1,106)
- ---------------------------------------------------------------------------
Net cash provided by (used in)
operating activities (4,402) 221
- ---------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (1,051) (2,540)
Decrease in other assets 17
Proceeds from sale of fixed assets 82
- ---------------------------------------------------------------------------
Net cash used in investing activities (1,034) (2,458)
- ---------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from revolving credit agreement 18,676 9,560
Repayment on revolving credit agreement (28,176) (7,139)
Proceeds from issuance of senior note payable 25,000
Repayment of long-term debt (10,937) (973)
Proceeds from issuance of common stock 120 47
- ---------------------------------------------------------------------------
Net cash provided by financing activities 4,683 1,495
Foreign currency translation adjustments (4) 33
- ---------------------------------------------------------------------------
Net decrease in cash and cash equivalents (757) (709)
Cash and cash equivalents at beginning of period 4,152 2,591
- ---------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 3,395 $ 1,882
===========================================================================
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
Page 5
Note 1: Basis of Presentation
The unaudited consolidated condensed financial statements have been
prepared from the books and records of Guest Supply, Inc. and subsidiaries
(the Company) in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal and recurring
adjustments) considered necessary for a fair presentation have been
included. It is suggested that the consolidated condensed financial
statements be read in conjunction with the audited consolidated financial
statements and notes thereto for the year ended September 30, 1997 included
in the Company's annual report on Form 10-K. Interim results are not
necessarily indicative of the results that may be expected for the full
year.
Note 2: Earnings Per Common Share
At December 31, 1997, the Company adopted Statement of Financial Standards
(SFAS) No. 128 "Earnings per Share". Under the new requirements, primary
earnings per share is replaced by a new measure called basic earnings per
share which excludes common stock equivalents. All prior periods have been
restated to reflect this change. The impact of SFAS No. 128 on the
calculation of fully diluted earnings per share is not material.
Note 3: Long-Term Debt
On December 3, 1997, the Company completed a Private Placement in the
amount of $25.0 million of unsecured senior notes with fixed interest rates
ranging from 6.70% to 7.06%. These notes have maturities ranging from 2003
to 2009. Concurrently with the issuance of the notes, the Company entered
into a credit agreement with two banks for a five-year $15.0 million
unsecured revolving credit facility. Availability under the new facility
is based upon agreed levels of eligible accounts receivable and bears
interest at a rate equal to LIBOR plus .85% or the bank s prime rate, as
selected by the Company. These loans are subject to certain financial
covenants. The proceeds from the notes and credit facility were used to
repay the outstanding balance under the existing credit facility and term
notes.
<PAGE>
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GUEST SUPPLY, INC. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Dollars in Thousands
Three months ended December 31, 1997 vs. Three months ended December 31, 1996
- -----------------------------------------------------------------------------
Sales for the three months ended December 31, 1997 increased by $5,109 or
10.7% to $52,765 from $47,656 for the three months ended December 31, 1996.
Revenues generated from our hotel customers increased $8,017 or 21.8% to
$44,829. The increase in sales to hotels is the result of the addition of
new customers, the sale of additional products to existing customers and
the continued expansion of the Company s product line. New customers were
added by the direct sales force in existing sales territories and by new
salespeople and territories that were established during the past year.
Hotel customers were also added through new or expanded agreements with
hotel management companies and hotel corporations.
Sales to consumer products companies and retailers were $7,936 for the
three months ended December 31, 1997 compared to $10,844 for the three
months ended December 31, 1996. The decrease of $2,908 or 26.8% was a
result of a 21% decline in sales to an existing customer and the expiration
of a contract with another customer during the third quarter of fiscal
1997. The Company believes the reduction in business with an existing
customer is temporary. A major amount of time was devoted to the
development and scale-up of new formulas for this customer that resulted in
significantly reduced production rates. In addition, one of their product
lines historically produced by the Company was allocated to another
manufacturer, but is being replaced with higher volume from another line we
currently produce.
Gross profit for the three months ended December 31, 1997 was $10,440 or
19.8% of sales compared to $11,071 or 23.2% of sales for the three months
ended December 31, 1996. The decrease in gross profit as a percentage of
sales was due to lower sales to consumer products companies and
inefficiencies experienced from the start-up of new formulas with a major
customer as discussed above.
Selling, general and administrative expenses were $9,150 or 17.3% of sales
for the three months ended December 31, 1997 compared to $8,498 or 17.8% of
sales for the three months ended December 31, 1996. The increase of $652
or 7.7% was due primarily to increase payroll and payroll related costs and
delivery expense associated with the Company s hotel sales growth. The
decline as a percent of sales was due to increased volume and cost
containment programs.
Net interest expense was $511 for the three months ended December 31, 1997
compared to $526 for the three months ended December 31, 1996.
Income tax expense was $361 for the three months ended December 31, 1997
compared with $828 for the prior period. This decrease was primarily the
result of a decrease in pre-tax income of $1,268 for the three months ended
December 31, 1997 as compared to the prior year.
<PAGE>
Page 7
GUEST SUPPLY, INC. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
continued
Liquidity and Capital Resources at December 31, 1997
- ----------------------------------------------------
At December 31, 1997, the Company had $46,059 of working capital compared
to $39,626 at September 30, 1996. The increase of $6,433 is primarily the
result of an increase in inventory of $2,439 offset by a decrease in
accounts payable and accrued expenses of $3,444.
On December 3, 1997, the Company completed a Private Placement in the
amount of $25.0 million of unsecured senior notes with fixed interest rates
ranging from 6.70% to 7.06%. These notes have maturities ranging from 2003
to 2009. Concurrently with the issuance of the notes, the Company entered
into a credit agreement with two banks for a five-year $15.0 million
unsecured revolving credit facility. Availability under the new facility
is based upon agreed levels of eligible accounts receivable and bears
interest at a rate equal to LIBOR plus .85% or the bank s prime rate, as
selected by the Company. These loans are subject to certain financial
covenants. The proceeds from the notes and credit facility were used to
repay the outstanding balance under the existing credit facility and term
notes.
The Company believes that the amount available under its revolving credit
facility together with the cash flow from operations will be sufficient to
meet the Company's short-term working capital requirements and identifiable
long-term capital needs. The Company also believes that, if necessary,
additional financing will be available to it on commercially reasonable
terms.
Recently Issued Accounting Standards
- ------------------------------------
In June 1997, the Financial Accounting Standards Board released Statement
No. 130, "Reporting Comprehensive Income" and Statement No. 131,
"Disclosures About Segments of an Enterprise and Related Information."
Both statements become effective for fiscal years beginning after December
15, 1997 with early adoption permitted. These statements require
disclosure of certain components of changes in equity and certain
information about operating segments and geographic areas of operation.
Management believes that these statements will not have any effect on the
results of operations or financial position of the Company.
Cautionary Statement
- --------------------
This quarterly report on Form 10-Q 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 slowdown in the lodging industry or in contract manufacturing
(or both) resulting in lower demand for the Company's products, unforeseen
inefficiencies at the Company's manufacturing or distribution facilities,
an increase in price pressures or the loss of, or a decline in sales to, a
major customer. Accordingly, there can be no assurances that any
anticipated future results will be achieved.
<PAGE>
Page 8
GUEST SUPPLY, INC. AND OTHER SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
- -----------------------------------------
a) The exhibits filed as part of this report are listed on the index to
the exhibits.
b) No reports on Form 8-K have been filed during the three month period
ended December 31, 1997.
<PAGE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934. The
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GUEST SUPPLY, INC.
Dated: 2/13/98 By: /s/Clifford W. Stanley
---------------------- -------------------------------------
Clifford W. Stanley
President & Chief Executive Officer
Dated: 2/13/98 By: /s/Paul T. Xenis
---------------------- -------------------------------------
Paul T. Xenis
Vice President, Finance
<PAGE>
Page 10
INDEX TO EXHIBITS
Exhibit No. Description Page
- ------------ --------------------------------- --------
10 Stockholders Agreement 11
27 Financial Data Schedule 21
Page 11
STOCKHOLDERS AGREEMENT dated as of December 3, 1997 (this
"Agreement") among Guest Supply, Inc., a New Jersey corporation (the
"Corporation"), Barry Igdaloff (the "13D Stockholder") and the other
stockholders of the Corporation signing this Agreement (together with the
13D Stockholder, the "Stockholders").
W I T N E S E T H:
WHEREAS, each of the Stockholders is the beneficial owner of the
number of shares of common stock, without par value ("Common Stock"), of
the Corporation set forth opposite such Stockholder's name on the signature
page hereto; and
WHEREAS, the 13D Stockholder is a member of a group which has
filed a statement in respect of its holdings of the Corporation's equity
securities on Schedule 13D under the Securities Exchange Act of 1934 (the
"Exchange Act").
NOW, THEREFORE, in consideration of the mutual benefits to be
derived and the conditions and promises herein contained, and intending to
be legally bound hereby, the parties hereto agree as follows:
1. Voting Agreement. Each of the Stockholders, for the benefit of
the Corporation and as an inducement to the Corporation to enter into this
Agreement, agrees to vote or cause to be voted all of the shares of Common
Stock which such person has the right to vote and of which such person has
the right to direct the vote (a) in favor of persons nominated as directors
by a majority of the current directors of the Corporation (the "Continuing
Director Nominees") (i) for election at the 1998 annual meeting (the "1998
Meeting") of the Corporation's stockholders and (ii) unless the 13D
Stockholder shall have notified the Corporation and the Stockholders in
writing within five days after the public release of the Corporation's
financial results for fiscal 1998 that, based upon the 13D Stockholder's
participation in meetings of the Board of Directors of the Corporation, the
13D Stockholder has concluded that the Corporation's management is not
effectively addressing the business issues facing the Corporation (any such
notice, a "Dissent Notice"), for election at the 1999 annual meeting (the
"1999 Meeting") of the Corporation's stockholders and (b) against any and
all stockholder proposals relating to the Corporation made at the 1998
Meeting which are opposed by a majority of the
<PAGE>
Page 12
current members of the Board of Directors of the Corporation (each, a
"Stockholder Proposal").
2. Directors. (a) Provided that (i) none of the Stockholders shall
have breached any agreement hereunder, (ii) both Continuing Director
Nominees are elected as directors of the Corporation at the 1998 Meeting
and (iii) no Stockholder Proposal is approved by the stockholders of the
Corporation at the 1998 Meeting, then the Corporation shall use its best
efforts to cause the Board of Directors of the Corporation (1) to increase
by one the number of Class B directors of the Corporation, to elect the 13D
Stockholder as a Class B director of the Corporation as the first order of
business at the meeting of the Board of Directors to be held immediately
following the adjournment of the 1998 Meeting and to invite the 13D
Stockholder to attend such meeting and (2) to nominate the 13D Stockholder
for election as a Class B director of the Corporation at the 1999 Meeting.
(b) Provided that (i) none of the Stockholders shall have
breached any agreement hereunder, (ii) both Continuing Director Nominees
are elected as directors of the Corporation at the 1998 Meeting, (iii) no
Stockholder Proposal is approved by the stockholders of the Corporation at
the 1998 Meeting, (iv) no Dissent Notice shall have been delivered to the
Corporation or any Stockholder and (v) after the date hereof there shall
not have been any Solicitation (as hereinafter defined) relating to the
Corporation, which Solicitation is not publicly endorsed and recommended by
a resolution of a majority of the current members of the Board of Directors
of the Corporation, then the Corporation shall use its best efforts, prior
to the 1999 Meeting, to cause the Board of Directors of the Corporation to
nominate an individual (the "13D Director") mutually agreed upon by the 13D
Stockholder, the President of the Corporation and a majority of the other
members of the Board of Directors of the Corporation for election as a
Class A director or a Class B director of the Corporation at the 1999
Meeting.
(c) In no event shall any of the Stockholders nominate or vote
for (by proxy or otherwise) any individual who is not a Continuing Director
Nominee for election as a director of the Corporation at a meeting of
stockholders of the Corporation (or by written consent) if the election of
such individuals as a director of the Corporation, together with the
election of all other individuals nominated for election at such meeting
(or by written consent), would result in less than a majority of the
directors of the Corporation being Continuing Director Nominees.
<PAGE>
Page 13
(d) Attached hereto as Annex A is a form of the agreement of the
current directors of the Corporation concerning this Section 2; such form
of agreement, executed by at least a majority of the current directors of
the Corporation, is being delivered to the 13D Stockholder
contemporaneously herewith.
(e) The terms "Solicitation" and "Solicit" shall mean (i) any
solicitation (within the meaning of the Exchange Act) of a proxy (as
defined in the Exchange Act), (ii) any request for a proxy, whether or not
accompanied, preceded or followed by a proxy or included in a form of
proxy, (iii) any request or recommendation to execute or not to execute, or
to revoke or not to revoke, a proxy, (iv) the furnishing of a form of proxy
or other communication to security holders under circumstances reasonably
calculated to result in the procurement, withholding or revocation of a
proxy or (v) any public statement, favorable or unfavorable, regarding any
proposal, nominee or other matter in any proxy.
(f) Notwithstanding the foregoing, if the Stockholders shall at
any time, in the aggregate, beneficially own (within the meaning of Rule
13d-3 under the Exchange Act) in the aggregate less than 2% of the shares
of Common Stock outstanding, then the Stockholders shall have no further
rights under this Section 2 and the 13D Stockholder and the 13D Director
shall promptly resign as directors of the Corporation if requested to do so
by a majority of the current directors of the Corporation.
3. Additional Representations, Warranties and Agreements of the 13D
Stockholder. (a) The 13D Stockholder represents and warrants to the
Corporation and its directors that he will take office as a director of the
Corporation pursuant to Section 2 with the intention and expectation that
he will support the current management of the Corporation.
(b) The 13D Stockholder hereby withdraws the Stockholder
Proposal made by him for inclusion in the Corporation's proxy statement for
the 1998 Meeting and shall use his best efforts to cause to be withdrawn
any and all other Stockholder Proposals as soon as possible, and in any
event at or prior to the 1998 Meeting and, in any case, from and after the
date of mailing of the Corporation's proxy statement for the 1998 Meeting
he shall actively solicit proxies and votes against all Stockholder
Proposals for the 1998 Meeting.
<PAGE>
Page 14
(c) The 13D Stockholder shall use his best efforts to have the
holders of at least 1,000,000 shares of Common Stock, in addition to
himself, execute and deliver this Agreement prior to December 31, 1997.
4. No Solicitation.
(a) From the date hereof through the earlier of date of the 1999
Meeting and the date a Dissent Notice is received by the Corporation and
such Stockholder, no Stockholder and none of the affiliates or associates
of such Stockholder shall become, provide information to or assist a
Participant (as hereinafter defined) in any Solicitation relating to the
Corporation which Solicitation is not publicly endorsed and recommended by
a resolution of a majority of the current members of the Board of Directors
of the Corporation. The term "Participant" shall mean (i) any committee or
group which Solicits proxies, any member of such committee or group, and
any person whether or not named as a member who, acting alone or with one
or more other persons, directly or indirectly takes the initiative, or
engages, in organizing, directing or arranging for the financing of any
such committee or group; (ii) any person who finances or joins with another
to finance the Solicitation of proxies; (iii) any person who lends money or
furnishes credit or enters into any other arrangements, pursuant to any
contract or understanding with a Participant, for the purpose of financing
or otherwise inducing the purchase, sale, holding or voting of securities
of the Corporation by any Participant or other persons, in support of or in
opposition to a Participant; and (iv) any person who Solicits proxies. The
terms "affiliate" and "associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Exchange Act, as in effect
on the date hereof.
(b) This Section 4 shall not be deemed to amend or modify in any way
that certain Rights Agreement dated as of July 15, 1988, as amended,
between the Corporation and the rights agent thereunder.
5. Public Announcements. Subject to Section 4(a), each of the
Stockholders will consult with the Corporation before issuing any press
release or making any public statement with respect to this Agreement or
any of the transactions contemplated hereby.
6. Notices. Any notice or other communication under this Agreement
shall be in writing and sufficient if delivered personally, by telecopy or
sent by registered or certified mail, postage prepaid, addressed as
follows:
<PAGE>
Page 15
If to the Corporation:
4301 U.S. Highway One
Monmouth Junction, New Jersey 08852-0902
Telephone: (609) 514-9696
Telecopy: (609) 514-7377
Attention: President
with a copy to:
Haythe & Curley
237 Park Avenue
New York, New York 10017
Telephone: (212) 880-6000
Telecopy: (212) 682-0200
Attention: Bradley P. Cost, Esq.
If to any Stockholder:
To the address as set forth opposite such Stockholder's name
on the signature pages hereof.
All such notices and communications shall be deemed to have been duly given
at the time delivered by hand, if personally delivered, upon confirmation
of receipt, if sent by telecopy, or five (5) business days after being
deposited in the mail, if sent by registered or certified mail. Any party
may, upon written notice to the other parties hereto, change the address to
which notices or other communications to such party are to be delivered or
mailed.
7. Counterparts. This Agreement may be executed in any number
of counterparts (including by telecopy), each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
8. Entire Agreement. This Agreement contains the entire
agreement among the parties hereto with respect to the subject matter
hereof. All of the parties hereto agree that this Agreement may be amended
or modified or any provision hereof may be waived by a written agreement
between the 13D Stockholder and the Corporation. This Agreement supersedes
all prior understandings, negotiations and agreements relating to the
subject matter hereof.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey applicable
to agreements made and to be performed entirely within such State, without
regard to any conflict of laws
<PAGE>
Page 16
principles of such State which would apply the laws of any other
jurisdiction.
10. Jurisdiction; Waiver of Trial by Jury. THE PARTIES HERETO
HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE OR
UNITED STATES FEDERAL COURT SITTING IN THE CITY OF NEW YORK, NEW YORK, OVER
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK, NEW YORK, STATE OR
FEDERAL COURT. THE PARTIES AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION
OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW. THE PARTIES FURTHER WAIVE TRIAL BY JURY, ANY OBJECTION TO VENUE IN
SUCH STATE AND ANY OBJECTION TO ANY ACTION OR PROCEEDING IN SUCH STATE ON
THE BASIS OF FORUM NON CONVENIENS. THE PARTIES FURTHER AGREE THAT ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE
BROUGHT ONLY IN A NEW YORK STATE OR UNITED STATES FEDERAL COURT SITTING IN
NEW YORK, NEW YORK.
11. Severability. If any provision herein contained shall be
held to be illegal or unenforceable, such holding shall not affect the
validity or enforceability of the other provisions of this Agreement.
12. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Corporation and its successors and assigns and
the Stockholders who have signed this Agreement and their respective
successors, assigns, executors, administrators, legal representatives and
heirs, as applicable.
13. Specific Enforcement. Each of the parties hereto hereby
consents and agrees that, in the event of a breach or threatened breach by
any party of any provision this Agreement, the Corporation, in the case of
a breach or threatened breach by any Stockholder, or the 13D Stockholder,
in the case of a breach or threatened breach by the Corporation, shall be
entitled to an injunction or similar equitable relief restraining the party
breaching or threatening a breach from committing or continuing any such
breach or threatened breach or granting specific performance of any act
required to be performed under this Agreement by the party breaching or
threatening a breach, without the necessity of showing any actual damage or
that money damages would not afford an adequate remedy and without the
necessity of posting any bond or other security.
<PAGE>
Page 17
14. Construction. The parties hereto agree that this Agreement
is the product of negotiations among sophisticated parties, each of whom
were represented by counsel, and each of whom had an opportunity to
participate in, and did participate in, the drafting of each provision
hereof.
15. Effectiveness. The parties hereto agree that this Agreement
shall automatically become effective and be of full force and effect upon
the mailing by the Corporation of a Proxy Statement for use at the 1998
Meeting, which Proxy Statement shall be substantially in the form of the
Proxy Statement attached hereto as Annex B.
* * *
<PAGE>
Page 18
IN WITNESS WHEREOF, each of the parties hereto has executed this
Stockholders Agreement on the date first above written.
GUEST SUPPLY, INC.
By:___________________________
Name:
Title:
_________ Address: 2480 Colts Neck Road ______________________________
Shares Blacklick, Ohio 43004 Barry Igdaloff
Telephone:(614) 939-0166
Telecopy: (614) 939-0188
_________ Address: _____________________________
Shares Name:
_________ Address: ______________________________
Shares Name:
_________ Address: ______________________________
Shares Name:
_________ Address: ______________________________
Shares Name:
_________ Address: ______________________________
Shares Name:
_________ Address: ______________________________
Shares Name:
<PAGE>
Page 19
Annex A to Stockholders Agreement
As of December 3, 1997
FORM OF DIRECTORS' AGREEMENT
Reference is hereby made to that certain Stockholders Agreement
dated as of December 3, 1997 (the "Stockholders Agreement") among Guest
Supply, Inc., a New Jersey corporation (the "Corporation"), and the
stockholders of the Corporation who are a party thereto (the
"Stockholders"). All capitalized terms used herein and not otherwise
defined herein shall have the same respective meanings as in the
Stockholders Agreement. Provided that each of the conditions set forth in
clauses (i), (ii) and (iii) of Section 2(a) of the Stockholders Agreement
shall have been satisfied, then each of the undersigned hereby agrees, in
his or her capacity as a director of the Corporation, (1) to increase by
one the number of Class B directors of the Corporation, to elect Barry
Igdaloff as a Class B director of the Corporation as the first order of
business at the meeting of the Board of Directors to be held immediately
following the adjournment of the 1998 Meeting and to invite Mr. Igdaloff to
attend such meeting and (2) to nominate Mr. Igdaloff for election as a
Class B director of the Corporation at the 1999 Meeting. Provided that
each of the conditions set forth in clauses (i), (ii), (iii), (iv) and (v)
of Section 2(b) of the Stockholders Agreement shall have been satisfied,
then each of the undersigned hereby agrees, in his or her capacity as a
director of the Corporation, to nominate the 13D Director, if any, for
election as a Class A director or a Class B director of the Corporation at
the 1999 Meeting.
* * *
<PAGE>
Page 20
This Directors' Agreement may be executed in any number of
counterparts (including by telecopy), each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
- ------------------------------ ------------------------------
Thomas M. Haythe Peter L. Richard
- ------------------------------ ------------------------------
Clifford W. Stanley Teri E. Unsworth
- ------------------------------ ------------------------------
Edward J. Walsh George S. Zabrycki
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