<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 1, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 014699
-------------
MARIETTA CORPORATION
(Exact name of Registrant as specified in its Charter)
New York 16-1074992
_______________________________ ____________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
37 Huntington Street, Cortland, New York 13045
________________________________________ __________
(Address of Principal Executive Offices) (Zip Code)
(607) 753-6746
________________________________________________
(Registrant's Telephone Number, including area code)
Not Applicable
________________________________________________
(Former name, former address, and former fiscal year
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO________
-------
As of April 28, 1995 there were outstanding 3,596,049 shares of the
registrant's Common Stock, par value $.01 per share.
<PAGE>
MARIETTA CORPORATION
--------------------
FORM 10-Q
INDEX
-----
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Statements of Operations
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Marietta Corporation
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 1, April 2, April 1, April 2,
1995 1994 1995 1994
------------------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
Net sales $17,574,474 $16,989,879 $30,683,430 $31,424,307
Cost of sales 13,783,437 12,264,697 23,187,702 22,988,083
----------- ----------- ----------- -----------
Gross profit 3,791,037 4,725,182 7,495,728 8,436,224
Selling, general, and
administrative expenses 3,889,985 3,824,134 7,303,629 7,255,540
----------- ----------- ----------- -----------
Operating income (loss) (98,948) 901,048 192,099 1,180,684
Other income (expense), net 95,163 43,857 142,586 181,330
----------- ----------- ----------- -----------
Income (loss) before income taxes and
cumulative effect of a change
in accounting principle (3,785) 944,905 334,685 1,362,014
Income tax provision 11,146 374,050 162,605 558,723
----------- ----------- ----------- -----------
Income (loss) before cumulative effect
of a change in accounting principle
(14,931) 570,855 172,080 803,291
Cumulative effect of a change in - - - 336,596
accounting for income taxes ----------- ----------- ----------- -----------
Net income (loss) $ (14,931) $ 570,855 $ 172,080 $ 1,139,887
=========== =========== =========== ===========
Earnings per share:
Earnings before cumulative effect of
a change in accounting principle $ 0.00 $ 0.16 $ .05 $ 0.23
Cumulative effect of a change in
accounting for income taxes - - - .09
----------- ----------- ----------- -----------
Earnings per share $ 0.00 $ 0.16 $ .05 $ 0.32
=========== =========== =========== ===========
Weighted average shares and common
shares equivalents 3,608,564 3,584,162 3,604,659 3,579,086
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed, consolidated financial statements.
3
<PAGE>
Marietta Corporation
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets April 1, 1995 October 1, 1994
- ------ ------------- ---------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,187,207 $ 7,476,101
Accounts receivable, net 10,250,619 10,074,495
Inventories 15,160,483 11,926,566
Refundable income taxes 619,879 341,735
Other current assets 630,759 770,475
Deferred tax asset 453,628 467,083
----------- -----------
Total current assets 31,302,575 31,056,455
Property, plant and equipment, net 23,065,795 22,187,484
Restricted cash 2,500,000 2,300,000
Marketable securities 2,401,690 2,219,823
Excess of cost over net assets 3,258,537 3,327,901
acquired, net
Other assets 616,992 744,773
----------- -----------
Total assets $63,145,589 $61,836,436
=========== ===========
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 4,759,076 $ 2,754,613
Accrued payroll 1,423,513 1,512,467
Accrued rebates 327,300 445,226
Accrued expenses 484,318 818,880
Current maturities of long-term debt 378,001 361,894
Income taxes payable 12,865 21,602
----------- -----------
Total current liabilities 7,385,073 5,914,682
Long-term debt, less current maturities 6,567,741 6,851,034
Convertible subordinated note 275,880 273,720
Deferred tax liability 2,509,851 2,522,406
----------- -----------
Total liabilities 16,738,545 15,561,842
----------- -----------
Shareholders' equity:
Preferred stock, $0.01 par value,
authorized 1,000,000 shares
Common stock, $0.01 par value,
authorized 10,000,000 shares,
issued 4,005,717 shares 40,057 40,057
Additional paid-in capital 36,727,062 36,768,483
Common stock notes receivable (607,500) (607,500)
Treasury stock, at cost (3,877,333) (3,923,993)
Retained earnings 14,981,574 14,750,930
Equity adjustment from foreign currency (1,012,622) (753,383)
translation
Marketable securities net unrealized 155,806 -
holding gain ----------- -----------
Total shareholders' equity 46,407,044 46,274,594
----------- -----------
Total liabilities and $63,145,589 $61,836,436
shareholders'equity =========== ===========
</TABLE>
See accompanying notes to condensed, consolidated financial statements.
4
<PAGE>
Marietta Corporation
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
April 1, April 2,
1995 1994
----------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 172,080 $ 1,139,887
Adjustments to reconcile net income to
net cash provided by operating
activities:
Cumulative effect of a change in
accounting for income taxes - (336,596)
Depreciation and amortization 1,667,774 1,707,105
Provision for loss on accounts 117,603 118,412
receivable
Provision for inventory obsolescence 321,603 322,412
Deferred compensation - 97,140
Deferred income taxes 900 (437,041)
Loss on sale of equipment 16,302 -
Restricted cash (200,000) (200,000)
Other assets (19,796) (90,756)
Stock bonuses 61,040 74,610
Changes in working capital:
Accounts receivable (350,601) (632,464)
Inventories (3,572,478) (673,441)
Other current assets 137,011 488,301
Accounts payable and accrued expenses 1,474,204 (1,001,283)
Income taxes (286,065) (4,044)
----------- -----------
Net cash provided by (used in)
operating activities (460,423) 572,242
----------- -----------
Cash flows from investing activities:
Capital expenditures (2,402,894) (1,194,832)
Sales (purchases) of marketable (26,061) 75,188
securities ----------- -----------
Net cash used in investing activities (2,428,955) (1,119,644)
----------- -----------
Cash flows from financing activities:
Payments on long-term debt (267,187) ( 295,645)
Purchase of treasury stock (55,800) -
Payment of common stock note receivable - 279,450
----------- -----------
Net cash used in financing activities (322,987) (16,195)
----------- -----------
Effect of foreign currency translation (76,529) 24,147
----------- -----------
Net decrease in cash and cash (3,288,894) ( 539,450)
equivalents
Cash and cash equivalents, beginning of 7,476,101 8,844,276
period ----------- -----------
Cash and cash equivalents, end of period $ 4,187,207 $ 8,304,826
=========== ===========
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest $ 229,075 $ 204,415
Income taxes 466,168 690,722
</TABLE>
See accompanying notes to condensed, consolidated financial statements.
5
<PAGE>
MARIETTA CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The statements for the periods ended April 1, 1995 and April 2, 1994 are
unaudited. In the opinion of the Company the statements include all adjustments
necessary for a fair presentation of the results for the periods. The results
of operations for the period ended April 1, 1995 are not necessarily indicative
of the results of operations to be expected for the year ending September 30,
1995.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these financial statements be read in
conjunction with the audited financial statements and notes thereto for the year
ended October 1, 1994 included in the Company's Annual Report.
Note 2. Inventories
Inventories are stated at lower of cost or market. Cost is determined on the
first-in, first-out method. Inventories consisted of the following:
<TABLE>
<CAPTION>
April 1, 1995 October 1, 1994
------------- ----------------
<S> <C> <C>
Raw materials and $ 5,575,246 $ 4,082,839
supplies
Finished goods 9,585,237 7,843,727
----------- -----------
$15,160,483 $11,926,566
=========== ===========
</TABLE>
Note 3. Legal Proceedings
As previously reported, as a result of an embezzlement of funds by a former
financial officer and of other financial irregularities in Marietta's financial
statements discovered by the Company during 1991, the Securities and Exchange
Commission and the United States Attorney were each conducting independent
investigations. The investigation by the United States Attorney is concluded;
however, the investigation by the Securities and Exchange Commission is
continuing.
As previously reported, an action has been commenced by a former owner of
Marietta American, Inc. (formerly American Soap Company, Inc.), and by
California Soap, Inc. and two of its shareholders. This complaint alleges,
among other things, misrepresentations and omissions in connection with the
Company's acquisition of Marietta American, Inc., misrepresentations in and
omissions from various financial and other statements made by the Company,
breaches of contract and other violations of federal and state laws. This
action seeks an unspecified amount of damages. No assurance can be given as to
the outcome of this action, which could have a material adverse effect on the
Company.
6
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
- ---------------------
Quarter ended April 1, 1995 compared with the quarter ended April 2, 1994
- -------------------------------------------------------------------------
Net sales increased in the quarter ended April 1, 1995 by 3.4% to $17,574,000
from $16,990,000 in the prior year's second quarter. The increase of $584,000
was attributed to an increase of approximately $843,000 in guest amenity sales
partially offset by a decrease of approximately $259,000 in custom packaging
sales. Custom packaging sales continued to be affected by delays in receiving
customer-supplied materials which in turn caused delays in shipment of finished
products by Marietta.
For the second quarter of fiscal 1995 the Company's gross profit decreased to
21.6% of sales from 27.8% during the same period of fiscal 1994. Higher
material costs and changes in product mix negatively impacted gross margin. In
addition, during the second quarter of fiscal 1995 the Company experienced a
mechanical breakdown of certain of its soap manufacturing equipment which caused
an interruption in its ability to manufacture soap. This necessitated the
purchase of soap chips (the raw materials used in making soap bars) on the open
market at higher costs to the Company.
Selling, general and administrative expenses, as a percentage of sales,
decreased slightly to 22.1% in the current quarter from 22.5% in the second
quarter of fiscal 1994. During the second quarter of 1995 the Company paid
$250,000 to Goldman, Sachs & Co. in connection with its retention as the
Company's financial advisor and the Company reversed $310,000 of legal expenses
which previously had been accrued in connection with defense costs incurred by
the Company's former Chief Executive Officer. In addition, legal charges
increased $148,000 over the prior year's quarter, primarily in connection with
the matters relating to the unsolicited proposal made by Dickstein Partners to
acquire the Company, which proposal was rejected as inadequate.
Other income (expense), net represents the netting of interest expense,
investment income and other miscellaneous income and expense. For the second
quarter of fiscal 1995 interest and other miscellaneous expense was $154,000
compared to $96,000 in the second quarter of fiscal 1994. This increase was due
to slightly higher interest rates and to an increase in miscellaneous expenses.
Investment income was $209,000 in the second quarter of fiscal 1995 as compared
to $123,000 in 1994. This increase was due to higher rates of return on both
restricted cash and Canadian deposits combined with larger invested balances in
these areas. Other miscellaneous income, which is primarily profit on the sale
of inventory components was approximately $40,000 in 1995 compared to $17,000 in
the second quarter of 1994.
Taxes are provided in the second quarter of fiscal 1995 even though a pre-tax
loss of approximately $4,000 was incurred. This provision results from the
imposition of state and provincial francise/equity taxes. These taxes are based
primarily on the equity of the Company and are incurred despite the loss. The
effective tax rate for federal, state and foreign income taxes was 39.6% in the
second quarter of fiscal 1994.
Six months ended April 1, 1995 compared with the six months ended April 2, 1994
- -------------------------------------------------------------------------------
Net sales for the six months ended April 2, 1995 decreased by 2.4% to
$30,683,000 from $31,424,000 in the prior year. The decrease of $741,000 was
attributable to a decreasae in custom packaging sales of $1,950,000 partially
offset by an increase in guest amenity sales of $1,209,000. Custom packaging
sales continue to be affected by delays in receiving customer-supplied materials
which in turn caused a delay in shipment of finished products by Marietta.
In the first six months of fiscal 1995 the Company's gross profit decreased to
24.4% of sales from 26.8% during the same period of fiscal 1994. Higher
material costs and changes in product mix negatively impacted gross margin. In
addition, the interuption in the soap making process described above also
contributed to the decrease in the gross
7
<PAGE>
margin.
Selling, general and administrative expense, as a percent of sales, increased to
23.8% of sales in the first six months of 1995 from 23.1% in the same period
during 1994. During 1995 the Company paid $250,000 to Goldman, Sachs & Co. in
connection with its retention as the Company's financial advisor and the Company
reversed $310,000 of legal expenses which previously had been accrued in
connection with defense costs incurred by the Company's former Chief Executive
Officer. In addition, legal charges increased $229,000 over the prior year.
This increase was attributable primarily to the matters relating to the above
referenced proposal made by Dickstein Partners and to continuing costs incurred
relating to an action by a former owner of Marietta American, Inc.
For the first six months of 1995 interest and other expense was $315,000
compared to $204,000 in the same period last year. This increase is due to an
increase in rates over last year. Investment income was $335,000 in the first
six months of fiscal 1995 as compared to $257,000 in 1994. This increase is due
to higher rates of return on both restricted cash and Canadian Funds combined
with larger invested balances in these areas. Other miscellaneous income of
approximately $122,000 in the first six months of fiscal 1995 was comparable to
miscellaneous income of approximately $129,000 in the same period during 1994.
Marietta's effective tax rate for federal, state and foreign income taxes was
48.6% in the first six months of 1995 compared to 41.0% for 1994. Both
provisions were impacted by state and provincial francise/equity taxes. This
impact had a greater effect on the 1995 rate, due to a lower pre-tax income.
Liquidity and Capital Resources
- -------------------------------
The Company's working capital decreased to $23,918,000 at April 1, 1995 from
$25,142,000 at October 1, 1994. Cash used by operating activities for the first
six months of 1995 was $460,000 compared to $572,000 being provided by operating
activities for the first six months of 1994. The increase of cash used in
investing activities in 1995 as compared to 1994 was caused primarily by an
increase in capital expenditures.
The Company has a $12,000,000 Revolving Credit Facility, all of which was
available as of April 1, 1995. The revolving credit portion of the facility
expires in October 1996, and thereafter the outstanding balance is payable in
equal quarterly installments over a four year period. Borrowings under the
facility bear interest at the prime rate or, if elected by the Company, at an
interest rate 1.1% above the LIBOR rate.
Management believes that the Company is in sound financial condition as
evidenced by its total shareholders' equity of $46,407,000 versus its long-term
debt of $7,222,000. Management believes that its current assets plus funds
provided by operations and the Company's existing line of credit and debt
capacity will be adequate to meet its anticipated capital and short-term needs.
Management also believes that inflation has not had a material effect on its
business.
Shareholders' equity was affected by a reduction in the Canadian exchange rate
and an increase in the fair value of certain long-term securities. The Company
experienced a decline in the equity adjustment from foreign currency translation
of $259,000 as a result of a reduction in the Canadian exchange rate from 74.49%
at October 1, 1994 to 71.47% at April 1, 1995, partially offset by an increase
in shareholders' equity of $155,000 due to the increase in the fair value of
certain long-term marketable securities. During the second quarter the fair
value of these securities increased $321,000, offsetting a decline of $166,000
recorded in the first quarter ended December 31, 1994.
In fiscal 1995 the Company anticipates making expenditures for capital
improvements aggregating approximately $6,000,000. To date, during fiscal 1995
the Company has authorized expenditures of approximately $4,700,000.
The Company is unable to determine the impact upon the Company's financial
condition
8
<PAGE>
of an adverse determination, if any, in any action, proceeding or investigation
arising out of the events discussed in Note 3 of the Notes to Financial
Statements.
Seasonality
- -----------
The Company's guest amenity business is subject to some fluctuation in results
reflecting the seasonal nature of the travel and lodging industry. As a
consequence the revenues from the Company's guest amenity business in its third
and fourth fiscal quarters tend to be slightly higher than during the rest of
the year.
9
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibit No.
<S> <C>
4.1 Second Amendment effective as of March 1, 1994, to 1986
Employee Stock Purchase Plan
10.1 Non-negotiable Promissory Note, dated as of February 9, 1995,
in the principal amount of One Hundred Twenty-One Thousand Five
Hundred ($121,500) Dollars, of Chesterfield F. Seibert Sr. to
Registrant
10.2 Stock Option Agreement, dated as of April 5, 1995 between
Registrant and Thomas M. Fairhurst
27 Financial Data Schedule
(b) None
</TABLE>
10
<PAGE>
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.
MARIETTA CORPORATION
Date: May 12, 1995
By: /s/ Stephen D. Tannen
-----------------
Stephen D. Tannen
President and Chief Executive Officer
By: /s/ Philip A. Shager
----------------
Philip A. Shager
Chief Accounting Officer and Treasurer
11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Filed
Exhibit Herewith
No. Description Page No.
- ------- ----------- --------
<S> <C> <C>
4.1 Second Amendment effective as of March 1, 1994, 13
to 1986 Employee Stock Purchase Plan
10.1 Non-negotiable Promissory Note, dated as of 15
February 9, 1995, in the principal amount of
One Hundred Twenty-One Thousand Five Hundred
($121,500) Dollars, of Chesterfield F. Seibert
Sr. to Registrant
10.2 Stock Option Agreement, dated as of April 5, 18
1995 between Registrant and Thomas M. Fairhurst
27 Financial Data Schedule 23
</TABLE>
12
<PAGE>
EXHIBIT 4.1
Second Amendment to the
Marietta Corporation
1986 Employee Stock Purchase Plan
WHEREAS, Marietta Corporation (the "Corporation") established the Marietta
-----------
Corporation 1986 Employee Stock Purchase Plan effective March 26, 1986, as
amended and clarified by the Board of Directors effective in part March 1, 1990
and in part April 1, 1990 (the "Plan"), and vested in the Board of Directors of
----
the Corporation the responsibility of administering the Plan;
WHEREAS, the Plan authorizes the Board of Directors of the Corporation, among
other things, to amend and interpret the Plan;
WHEREAS, at a duly convened meeting of the Board of Directors of the
Corporation, the Board has further amended and clarified the Plan.
NOW, THEREFORE, in consideration of the premises, the Plan is hereby amended
as follows:
1. This Amendment shall be effective on and as of March 1, 1994.
2. Article 4 of the Plan is hereby amended by deleting it in its entirety and
inserting in its place a new Article 4 as follows:
"4. Eligibility
-----------
(a) Subject to the provisions of this Article 4, individuals who have been
continuously in the employment of the Corporation or any subsidiary of the
Corporation (as the term "subsidiary" is defined in Section 425(f) of the
Code and hereinafter called a "Subsidiary") since January 2 of the year next
preceding the year in which each Offering Date (as defined in Article 5
below) occurs, are eligible to participate in the offering of Shares made by
the Corporation on such Offering Date, except:
(i) employees whose customary employment is 20 hours or less per week;
and
(ii) employees whose customary employment is for not more than five
months in the calendar year during which said Offering Date occurs or in
the calendar year immediately preceding such year.
All employees granted options under this Plan shall have the same rights
and privileges, except as set forth herein.
(b) No employee shall be granted an option hereunder if such employee,
immediately after the option is granted, owns stock (including stock which
the employee may purchase under outstanding options) possessing 5% or more
of the total combined voting power or value of all classes of stock of the
Corporation or of any Subsidiary computed in accordance with Section
423(b)(3) of the Code.
(c) No employee shall be granted an option hereunder which permits his
rights to purchase Shares or stock under all employee stock purchase plans
of the Corporation or any Subsidiary to accrue at a rate which exceeds
$25,000 (or such other maximum as may be prescribed from time to time by the
Code) of fair market value of such Shares or stock (determined at the time
such option is granted) for each calendar year in which such option is
outstanding at any time in accordance with the provisions of Section
423(b)(8) of the Code."
13
<PAGE>
3. The Plan shall remain in full force and effect in all respects, except as
expressly amended hereby.
14
<PAGE>
EXHIBIT 10.1
NON-NEGOTIABLE PROMISSORY NOTE
$121,500 February 9, 1995
FOR VALUE RECEIVED, the undersigned, Chesterfield F. Seibert Sr.
("Maker"), hereby promises to pay to Marietta Corporation, a corporation
- -------
organized under the laws of the State of New York (the "Corporation"), the
-----------
principal sum of One Hundred Twenty-one Thousand Five Hundred ($121,500) Dollars
on August 9, 1996 (the "Maturity Date"). This Note shall bear interest on the
-------------
unpaid principal amount hereof at a rate per annum equal to 1.35% above the
three-month London Interbank Offered Rate in effect on the first day of each
calendar quarter, such interest rate changing on the first day of each calendar
quarter. Such interest shall be due and payable on each February 9 and August
9, commencing on August 9, 1995 through and including the Maturity Date. In the
event of the death or disability of Maker, the entire unpaid principal amount of
this Note, together with all accrued and unpaid interest through the date of
payment, shall be due and payable six months from the date of death or
disability.
This Note is delivered to the Corporation in exchange for the Non-
Negotiable Promissory Note, dated February 9, 1994, of Maker to the Corporation,
in the principal amount of One Hundred Twenty-one Thousand Five Hundred
($121,500) Dollars.
In the event that Maker shall sell any of the shares purchased
pursuant to the Stock Purchase Agreement, dated as of February 9, 1989, between
Maker and the Corporation, the portion of the principal amount of this Note,
together with accrued interest, corresponding to the percentage that the number
of such shares sold bears to the total number of shares purchased pursuant to
such agreement, shall, to the extent not previously paid, immediately be due and
payable.
To the extent permitted by law, overdue principal of and interest on
this Note shall continue to bear interest at the rate of 18% per annum, or at
the highest rate allowed by law if lower, until paid in full.
Maker may prepay the principal outstanding hereunder, in whole or in
part, without premium or penalty at any time, with accrued interest to the date
of such prepayment. Payment of principal and interest shall be made in lawful
money of the United States of America, to Marietta Corporation, 37 Huntington
Street, Cortland, New
15
<PAGE>
York 13045, or at such other place as may be designated in writing by the
Corporation.
Failure of the Corporation to assert any right hereunder shall not be
deemed to be a waiver thereof. Maker waives notice of all action by the
Corporation. No course of dealing by the Corporation and no failure or delay by
the Corporation in exercising any right, remedy or power shall preclude any
other or further exercise thereof or exercise of any other right or remedy.
Maker hereby waives presentment, demand for payment, diligence, protest, notice
of protest or non-payment, dishonor or acceleration, and all other demands and
notices in connection with the delivery, acceptance, performance, default or
enforcement of or under this Note. Maker assents to any extension or
postponement of the time for payment or any other indulgence, and to the
addition, substitution or release of any other party or person primarily or
secondarily liable, and agrees to pay, to the extent permitted by law, all costs
and expenses, including, without limitation, reasonable attorneys' fees and
expenses, incurred or paid by the Corporation in enforcing this Note, whether or
not litigation is commenced. Such costs shall be added to the balance of
principal and interest then due under this Note. The Corporation may not
assign, transfer or pledge this Note.
Upon a failure by Maker to make payment when due and payable of any
principal of this Note, or upon a failure by Maker to make payment of interest
on this Note for more than five days after receipt of written notice from the
Corporation with respect to his failure to make payment of such interest when
due and payable, the Corporation may, at its option, declare the entire unpaid
principal amount of this Note together with all interest due and payable through
the date of such declaration and all other amounts payable under this Note, to
be forthwith due and payable.
Moreover, upon
(i) commencement of any voluntary proceeding by Maker under any
provision of Title 11 of the United States Code, as now or hereafter amended, or
of any other proceeding, under any law, now or hereafter in force, relating to
bankruptcy, insolvency, reorganization, liquidation or otherwise to the relief
of debtors or the readjustment of indebtedness;
(ii) the making by Maker of an assignment for the benefit of
creditors or a composition or similar arrangement with creditors;
16
<PAGE>
(iii) appointment by or for Maker of a receiver, trustee or similar
judicial officer or agent to take charge of or liquidate substantially all of
Maker's property or assets; or
(iv) commencement against Maker of any involuntary proceeding of the
kind described in this paragraph, unless Maker is diligently contesting the same
by appropriate action, or if, despite such contest, such proceeding is not
dismissed within a period of 60 days;
this Note shall become immediately due and payable, together with all accrued
and unpaid interest thereon and together with all other amounts payable under
this Note, without presentment, demand, payment or notice of any kind.
This Note shall be governed by, enforced, determined and construed in
accordance with the laws of the State of New York applicable to contracts,
transactions and obligations entered into and wholly to be performed in the
State of New York, without reference to conflict of laws principles. This Note
may not be modified or terminated except by a writing executed by the
Corporation and Maker. This Note shall be binding upon Maker and Maker's heirs,
legal representatives, successors and assigns.
______________________________
Chesterfield F. Seibert Sr.
17
<PAGE>
EXHIBIT 10.2
MARIETTA CORPORATION
STOCK OPTION AGREEMENT
AGREEMENT made as of April 5, 1995, by and between MARIETTA
CORPORATION, a New York corporation having offices at 37 Huntington Street,
Cortland, New York 13045 (the "Company"), and THOMAS M. FAIRHURST, residing at
-------
53 Onondaga Street, Skaneateles, New York 13152 (the "Executive").
---------
W I T N E S S E T H:
-------------------
WHEREAS, the Company considers it desirable and in its best interests
that the Executive be encouraged to acquire an ownership interest in the
Company, and thereby have an added incentive to advance the interests of the
Company, by the grant of an option to purchase shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), in accordance with
------------
Company's 1986 Stock Option Plan (the "Plan") adopted by the Board of Directors
----
of the Company (the "Board") and approved by the Company's shareholders.
-----
NOW, THEREFORE, it is agreed as follows:
I. Grant of Option. The Company hereby grants to the Executive the
---------------
right, privilege and option (the "Option") to purchase 5,000 shares of the
------
Company's Common Stock (the "Shares") at the purchase price of $10.82 per share
------
(the "Purchase Price"), in the manner and subject to the conditions hereinafter
--------------
provided and contained in the Plan. In the event of any inconsistencies between
the Plan and this Agreement, the Plan shall govern.
II. Time of Exercise of Option. Subject to this Agreement and the
--------------------------
Plan, on April 4, 1996, the Option shall be exercisable as to 1,667 of the
shares covered by the Option; on April 4, 1997, the Option shall be exercisable
as to an additional 1,667 of the shares covered by the Option; and on April 4,
1998, the Option shall be exercisable as to the balance of the shares covered by
the Option; provided, however, that upon a Change in Control (as hereinafter
-------- -------
defined) of the Company, the Option shall be immediately exercisable by the
Executive.
As used herein, a "Change in Control" shall be deemed to have occurred
-----------------
if (x) following either (i) the acquisition of 30% of the voting securities of
the Company by any person or persons (together with all affiliates (as defined
in the Securities Exchange Act of 1934, as amended) of such person or persons),
whether by tender or exchange offer or otherwise, (ii) a proxy contest for the
election of directors of the Company, or (iii) a merger, consolidation or other
disposition of all or substantially all of the business or assets of the
Company, the persons constituting the Board immediately prior to the initiation
of such event cease to constitute a majority of the Board upon the occurrence of
such event or within eighteen months after such event and such change in the
persons constituting the Board shall not have been approved by the persons
constituting the Board immediately prior to the initiation of such event, or (y)
a sale, transfer or other disposition of all or substantially all of the
business or assets of the Company to a person or entity not controlled by or
under common control with the Company shall have been consummated.
III. Method of Exercise; Compliance with Securities Laws. The Option
---------------------------------------------------
shall be exercised by written notice directed to the Company, at the Company's
address set forth above, specifying the number of shares being purchased and
accompanied by either (i) cash or certified or personal check payable to the
order of the Company in full payment of the Purchase Price for the number of
Shares being purchased, or (ii) certificate(s), duly endorsed for transfer to
the Company with signature guaranteed, for that number of previously acquired
Shares having an aggregate fair market value as determined in accordance with
the Plan ("Fair Market Value"), on the date of exercise equal to the full
-----------------
Purchase Price for the number of Shares being purchased, or (iii)
18
<PAGE>
certificate(s), duly endorsed for transfer to the Company with signature
guaranteed, for that number of previously acquired Shares having an aggregate
Fair Market Value on the date of exercise equal to a portion of the Purchase
Price for the number of shares being purchased, and cash or certified or
personal check payable to the order of the Company for the balance of the
Purchase Price for the number of Shares being purchased.
The Option shall not be exercisable at any time in an amount less than
100 Shares (or the remaining Shares then covered by and purchasable under the
Option if less than 100 Shares) and shall not be exercisable in respect of a
fraction of a Share.
The Option shall not be exercisable while there is outstanding (within
the meaning of Section 422A(c)(7) of the Internal Revenue Code of 1954 as in
effect on the date of adoption of the Plan) any incentive stock option (within
the meaning of Section 422(b) of the Internal Revenue Code of 1986, as amended
(the "Code")) previously granted to the Executive to purchase stock of the
----
Company or of any corporation which (as of the date hereof) is a parent of the
Company or Subsidiary (as defined in the Plan) of the Company or of a
predecessor corporation of any such corporation. (For purposes of this
paragraph, any such previously granted option not having been exercised in full
shall be deemed to remain outstanding until the expiration of the period during
which under its initial term it could have been exercised.)
Except as provided in Paragraph below, (i) the Executive must be an
employee of the Company at the time of exercise and (ii) only the Executive may
exercise the option herein granted.
The Executive, at time of exercise, shall represent in writing that
all Shares being purchased are for investment only and not with a view to or for
sale in connection with a distribution thereof and shall agree that he will not
resell, offer or distribute any of such Shares so acquired except in a manner
which would not be in violation of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated thereunder.
---
Termination of Option; Exercise after Termination; Forfeiture of Shares.
- -----------------------------------------------------------------------
A. The Option, to the extent not theretofore exercised, shall
terminate on the tenth anniversary of the date hereof, subject to earlier
termination as herein provided.
B. If the Executive's employment with the Company is
terminated:
(i) for any reason other than death or permanent and total disability
(as permanent and total disability is defined in Section 22(e)(3) of the Code),
the Option, to the extent theretofore unexercised, shall terminate immediately;
(ii) by reason of permanent and total disability (as defined in
Section 22(e)(3) of the Code), the Option may be exercised by the Executive, to
the extent that the Executive was entitled to do so at the time of such
termination, at any time within six months after such termination but not
thereafter, and in no event after the date on which, except for such
termination, the Option would otherwise expire; or
(iii) by reason of the Executive's death, the Option may be exercised
to the extent that the Executive was entitled to do so at the time of the
Executive's death, by the legatee(s) of the Option under the Executive's last
will, or by the Executive's personal representative(s) or distributee(s), at any
time within one year after the death of the Executive, but in no event after the
date on which, except for such death, the Option would otherwise expire.
Adjustment in and Changes in Common Stock.
- -----------------------------------------
C. Subject to the Plan, in the event of changes in the Common
Stock by reason of any stock dividend, stock split-up, stock combination,
exchange of shares, recapitalization, merger, consolidation, reorganization or
the like, the Board may make appropriate adjustment in the number of shares of
the Common Stock subject to the Option. The determination of the Board shall be
binding on all persons concerned.
19
<PAGE>
D. Subject to the Plan, in the event of: (1) a dissolution or
liquidation of the Company; (2) a merger or consolidation in which the Company
is not the surviving corporation; or (3) other capital reorganization in which
more than 50% of the shares of the Company's Common Stock entitled to vote are
exchanged, the Option shall terminate except: (a) when another corporation
shall assume the Option or substitute a new option therefor, and (b) the Board
shall have the discretion and power in any such event to determine, and to make
effective provisions therefor, that the Executive may exercise his Option for
such number of Shares, not exceeding the total number specified by the Option,
as the Board may determine and/or that the Option shall continue in full force
and effect.
Rights Prior to Exercise of Option. The Option is non-transferable by the
- ----------------------------------
Executive, except in the event of the Executive's death as provided in Paragraph
above, and during the Executive's lifetime is exercisable only by the Executive.
The Executive shall have no rights as a shareholder with respect to the Shares
that may be purchased pursuant to the Option until payment of the Purchase Price
and delivery to the Executive of such Shares as herein provided.
Compliance with Applicable Law.
- ------------------------------
A. Notwithstanding anything herein to the contrary, the Option
shall not be exercisable and the Company shall not be obligated to cause to be
issued or delivered any certificates evidencing Shares to be delivered pursuant
to the exercise of the Option unless and until the Company is advised by its
counsel that the exercise of the Option and the issuance and delivery of such
certificates is in compliance with all applicable laws and regulations of
governmental authority.
B. The Executive hereby acknowledges that as of the date hereof
the Shares to be issued upon exercise of the Option have not been registered
under the Act and the rules and regulations promulgated thereunder. In the
event that the Shares are not registered under the Act at the time the Option is
exercised, in whole or in part, any certificates evidencing the Shares shall
bear the following legend:
"The shares represented hereby have not been registered under the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder and may not be sold, offered for sale or
otherwise disposed of except pursuant to an effective registration
statement under such Act or an exemption therefrom."
E. Nothing contained in subparagraph . above shall be deemed to
require the Company to register the Shares under the Act.
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
- -------------
YORK APPLICABLE TO CONTRACTS TO BE MADE AND PERFORMED ENTIRELY THEREIN WITHOUT
REFERENCE TO CONFLICT OF LAWS PRINCIPLES.
Effect on Other Rights. This Agreement shall in no way affect the Executive's
- ----------------------
participation in or benefits under any other plan or benefit program maintained
or provided by the Company. Nothing in this Agreement shall be construed to
give the Executive any right to any additional options other than in the sole
discretion of the Board or to confer on the Executive any right to continue in
the employ of the Company or any subsidiary thereof or to be evidence of any
agreement or understanding, express or implied, that the Company will employ the
Executive in any particular position or at any particular rate of remuneration,
or for any particular period of time or to interfere in any way with the right
of the Company or a subsidiary thereof (or the right of the Executive) to
terminate the employment of the Executive at any time, with or without cause,
notwithstanding the possibility that the Option may thereby be terminated
entirely.
Headings. The headings contained in this Agreement are for convenience of
- --------
reference only and in no way define, limit or describe the scope or intent of
this Agreement or in any way affect this Agreement.
20
<PAGE>
Binding Effect. This Agreement shall inure to the benefit of and be binding
- --------------
upon the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the day and year first above written.
MARIETTA CORPORATION
By: /s/Stephen D. Tannen
---------------------------
Stephen D. Tannen,
President and Chief
Executive Officer
EXECUTIVE:
/s/ Thomas M. Fairhurst
------------------------------
Thomas M. Fairhurst
21
<PAGE>
EXHIBIT 1
TO STOCK OPTION AGREEMENT
Date:_________________________
MARIETTA CORPORATION
37 Huntington Street
Cortland, New York 13045
Re: Stock Option
------------
Ladies and Gentlemen:
I hereby elect to purchase shares of the Common Stock, par value $.01
per share, of Marietta Corporation (the "Company") under the option granted
-------
to me on April 5, 1995 under the Company's 1986 Stock Option Plan.
Enclosed is [cash] [a personal (certified) check] in the amount of $
in payment of the shares being purchased ($10.82 per share x shares).
I represent that all shares being purchased are for investment only
and not with a view to or for sale in connection with a distribution thereof,
and I agree I will not resell, offer or distribute any of such shares so
acquired except in a manner which would not be in violation of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
Please deliver certificates representing the shares being purchased to
me at:
_____________________________
_____________________________
_____________________________
Very truly yours,
Thomas M. Fairhurst
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1995 SEP-30-1995
<PERIOD-START> JAN-01-1995 OCT-02-1994
<PERIOD-END> APR-01-1995 APR-01-1995
<CASH> 4187207 4187207
<SECURITIES> 0 0
<RECEIVABLES> 10250619 10250619
<ALLOWANCES> 0 0
<INVENTORY> 15160483 15160483
<CURRENT-ASSETS> 31302575 31302575
<PP&E> 23065795 23065795
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 63145589 63145589
<CURRENT-LIABILITIES> 7385073 7385073
<BONDS> 6843621 6843621
<COMMON> 40057 40057
0 0
0 0
<OTHER-SE> 46366987 46366987
<TOTAL-LIABILITY-AND-EQUITY> 63145589 63145589
<SALES> 17574474 30683430
<TOTAL-REVENUES> 17574474 30683430
<CGS> 13783437 23187702
<TOTAL-COSTS> 13783437 23187702
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 17219 76121
<INTEREST-EXPENSE> 125086 248823
<INCOME-PRETAX> (3785) 334685
<INCOME-TAX> 11146 162605
<INCOME-CONTINUING> (14931) 172080
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (14931) 172080
<EPS-PRIMARY> .00 .05
<EPS-DILUTED> .00 .05
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