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 September 30, 1999 Commission File No. 0-2504
MINE SAFETY APPLIANCES COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0668780
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
121 Gamma Drive
RIDC Industrial Park
O'Hara Township
Pittsburgh, Pennsylvania 15238
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 412/967-3000
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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
As of October 31, 1999, there were outstanding 4,871,907 shares of common stock
without par value, including 567,630 shares held by the Mine Safety Appliances
Company Stock Compensation Trust.
PART I FINANCIAL INFORMATION
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED BALANCE SHEET
(Thousands of dollars, except share data)
(Unaudited)
September 30 December 31
1999 1998
ASSETS
Current assets
Cash $ 7,269 $ 10,084
Temporary investments, at cost plus accrued interest 11,725 13,936
Accounts receivable, less allowance (1999 - $2,812;
1998 - $3,004) 93,388 94,850
Inventories:
Finished products 42,863 36,956
Work in process 15,743 12,445
Raw materials and supplies 35,240 36,090
-------- --------
Total inventories 93,846 85,491
-------- --------
Other current assets 23,445 24,848
-------- --------
Total current assets 229,673 229,209
-------- --------
Property, plant and equipment 378,360 371,687
Accumulated depreciation (213,486) (207,126)
-------- --------
Net property 164,874 164,561
-------- --------
Prepaid pension cost 56,256 46,162
Other assets 19,464 16,784
-------- --------
TOTALS $ 470,267 $ 456,716
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes and accounts payable $ 78,870 $ 68,416
Federal, foreign, state and local income taxes 6,010 991
Other current liabilities 45,618 40,599
-------- --------
Total current liabilities 130,498 110,006
-------- --------
Long-term debt 11,893 11,919
Pensions and other employee benefits 59,339 60,550
Noncurrent liabilities and deferred credits 31,091 31,395
Shareholders' equity
Preferred stock, 4-1/2% cumulative - authorized
100,000 shares of $50 par value; issued 71,373
shares, callable at $52.50 per share 3,569 3,569
Second cumulative preferred voting stock - authorized
1,000,000 shares of $10 par value; none issued
Common stock - authorized 20,000,000 shares of no par
value; issued 6,779,231 and 6,779,231 (outstanding
4,311,783 and 4,378,874) 12,616 12,591
Common stock compensation trust - 569,600 and 571,690 (26,771) (26,869)
shares
Less treasury shares, at cost:
Preferred - 49,397 and 49,313 shares (1,598) (1,595)
Common - 1,897,848 and 1,828,667 shares (93,815) (89,521)
Deferred stock compensation (632) (951)
Accumulated other comprehensive loss (14,980) (10,240)
Retained earnings 359,057 355,862
-------- --------
Total shareholders' equity 237,446 242,846
-------- --------
TOTALS $ 470,267 $ 456,716
======== ========
See notes to consolidated condensed financial statements
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Thousands of dollars, except earnings per share)
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
Net sales $ 118,004 $ 116,060 $ 357,646 $ 364,918
Other income 515 960 1,992 5,143
---------- ---------- ---------- ----------
118,519 117,020 359,638 370,061
---------- ---------- ---------- ----------
Costs and expenses
Cost of products sold 76,774 72,158 228,931 231,462
Selling, general and administrative 32,453 32,731 97,816 101,210
Depreciation and amortization 6,004 5,454 17,253 16,732
Interest 891 1,006 2,655 2,416
Currency exchange (gains)/losses (215) 119 (569) 287
Special pension credits (5,925) (1,317) (3,993)
Facilities consolidation & 1,465 349 2,327 642
restructuring charges ---------- ---------- ---------- ----------
111,447 111,817 347,096 348,756
---------- ---------- ---------- ----------
Income before income taxes 7,072 5,203 12,542 21,305
Provision for income taxes 2,731 2,130 4,894 7,942
---------- ---------- ---------- ----------
Net income $ 4,341 $ 3,073 $ 7,648 $ 13,363
========== ========== ========== ==========
Basic earnings per common share $ 1.01 $ 0.69 $ 1.76 $ 3.00
========== ========== ========== ==========
Diluted earnings per common share $ 1.00 $ 0.69 $ 1.75 $ 2.99
========== ========== ========== ==========
See notes to consolidated condensed financial statements
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
Nine Months Ended
September 30
1999 1998
OPERATING ACTIVITIES
Net income $ 7,648 $ 13,363
Depreciation and amortization 17,253 16,732
Deferred taxes,pensions, and other non-cash
charges/(credits) (11,062) (9,873)
Gain on divestitures (2,238)
Changes in operating assets and liabilities 4,729 (4,018)
Other - principally currency exchange adjustments (3,928) (2,661)
--------- ---------
Cash flow from operating activities 14,640 11,305
--------- ---------
INVESTING ACTIVITIES
Property additions (19,766) (22,838)
Property disposals, net 573 700
Net proceeds from divestitures 22,865
Other investing (6,368) (3,589)
--------- ---------
Cash flow from investing activities (25,561) (2,862)
--------- ---------
FINANCING ACTIVITIES
Additions to long-term debt 362 110
Reductions of long-term debt (295) (693)
Changes in notes payable and short term debt 15,508 9,353
Cash dividends (4,453) (4,446)
Company stock purchases and sales, net (4,174) (4,507)
--------- ---------
Cash flow from financing activities 6,948 (183)
--------- ---------
Effect of exchange rate changes on cash (1,053) (2,494)
--------- ---------
Net(decrease)/increase in cash and cash equivalents (5,026) 5,766
Beginning cash and cash equivalents 24,020 19,921
--------- ---------
Ending cash and cash equivalents $ 18,994 $ 25,687
========= =========
See notes to consolidated condensed financial statements
MINE SAFETY APPLIANCES COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(1) The Management's Discussion and Analysis of Financial Condition and Results
of Operations which follows these notes contains additional information on
the results of operations and the financial position of the company. Those
comments should be read in conjunction with these notes. The company's
Annual Report on Form 10-K for the year ended December 31, 1998 includes
additional information about the company, its operations, and its financial
position, and should be read in conjunction with this quarterly report on
Form 10-Q.
(2) The results for the interim periods are not necessarily indicative of the
results to be expected for the full year.
(3) Certain prior year amounts have been reclassified to conform with the
current year presentation.
(4) In the opinion of management, all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of these interim
periods have been included.
(5) A pre-tax gain of $5.9 million ($3.6 million after-tax) was recognized in
the third quarter of 1999 related to lump sum settlements of pension
benefits for participants in a voluntary retirement incentive program
(VRIP) for non-production employees in the U.S. Year-to-date 1999 results
reflect a net VRIP-related gain of $1.3 million ($800,000 after-tax) which
includes the third quarter settlement gain, partially offset by second
quarter termination benefit charges of $4.6 million ($2.8 million
after-tax).
(6) Basic earnings per share is computed on the weighted average number of
shares outstanding during the period. Diluted earnings per share includes
the effect of the weighted average stock options outstanding during the
period,using the treasury stock method. Antidilutive options are not
considered in computing earnings per share.
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
( In thousands) ( In thousands)
Net income $ 4,341 $ 3,073 $ 7,648 $ 13,363
Preferred stock dividends
declared 12 37 37
----- ----- ----- -----
Income available to common
shareholders 4,341 3,061 7,611 13,326
----- ----- ----- -----
Basic shares outstanding 4,315 4,432 4,333 4,445
Stock options 14 21 11 17
----- ----- ----- -----
Diluted shares outstanding 4,329 4,453 4,344 4,462
----- ----- ----- -----
Antidilutive stock options 7 7
----- ----- ----- -----
(7) Comprehensive income was $4,390,000 and $2,908,000 for the three and nine
months ended September 30, 1999, respectively, and $1,869,000 and
$8,272,000 for the three and nine months ended September 30, 1998,
respectively. Comprehensive income includes net income and changes in
accumulated other comprehensive income, primarily cumulative translation
adjustments, for the period.
(8) The company is organized into three geographic operating segments (U.S.,
Europe, and Other non-U.S.), each of which includes a number of operating
companies. There have not been any changes in the basis of segmentation
and measurement of segment profit and loss.
Reportable segment information is presented in the following table:
(In Thousands)
Other Recon- Consol.
U.S. Europe non-U.S. ciling totals
Three Months Ended September 30, 1999
Sales to external customers $64,744 $28,131 $25,141 ($12) $118,004
Intercompany sales 9,459 4,227 287 (13,973)
Net income(loss) 4,649 (783) 1,113 (638) 4,341
Nine Months Ended September 30, 1999
Sales to external customers 206,186 84,109 67,747 (396) 357,646
Intercompany sales 25,094 13,360 1,130 (39,584)
Net income(loss) 6,924 (1,081) 2,425 (620) 7,648
Three Months Ended September 30, 1998
Sales to external customers 65,811 28,041 21,463 745 116,060
Intercompany sales 8,056 3,614 524 (12,194)
Net income(loss) 2,147 (26) 155 797 3,073
Nine Months Ended September 30, 1998
Sales to external customers 213,994 85,643 63,854 1,427 364,918
Intercompany sales 25,118 10,538 1,308 (36,964)
Net income(loss) 12,798 (812) 1,143 234 13,363
Reconciling items consist primarily of intercompany eliminations and items
reported at the corporate level.
MINE SAFETY APPLIANCES COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
Forward-looking statements
- --------------------------
This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements may include, without limitation, statements regarding expectations
for future product introductions, cost reduction and restructuring plans,
liquidity, sales and earnings, Year 2000 readiness, and market risk. Actual
results may differ from expectations contained in such forward-looking
statements and can be affected by any number of factors, many of which are
outside of management's direct control. Among the factors that could cause
such differences are the effects of cost reduction efforts, new product
introductions, market and operating conditions affecting major specialty
chemical customers, availability of critical materials and components, Year
2000 readiness of critical third parties, the economic environment, and
interest and currency exchange rates.
Results of operations
- ---------------------
Organizational initiatives
- --------------------------
During the third quarter of 1999 the company recorded a pre-tax gain of $5.9
million ($3.6 million after-tax, or 83 cents per basic share) relating to
lump-sum settlements of pension benefits for participants in a voluntary
retirement incentive program (VRIP) for non-production employees in the U.S.
Termination benefit charges of $4.6 million pre-tax ($2.8 million after-tax,
or 65 cents per basic share) were recognized in the second quarter of 1999.
The net effect of the VRIP on year-to-date 1999 results was a pre-tax gain of
$1.3 million ($800,000 after-tax, or 18 cents per basic share). The company
expects to recognize an additional VRIP-related pension settlement gain in the
fourth quarter of 1999. All VRIP participants had retired by July 31, 1999.
Staff reductions resulting from the VRIP are expected to lower pre-tax annual
operating costs by approximately $4.0 million.
The company is also actively pursuing opportunities to consolidate office
facilities in the Pittsburgh area as a means of reducing operating costs and
improving communications and productivity.
In Europe, a new management team is implementing organizational changes which
are expected to reduce operating costs and establish a more integrated
approach to business in that area. Workforce reductions made in Europe during
1999 are expected to lower pre-tax operating costs by approximately $2.0
million annually.
During the third quarter of 1999 the company incurred pre-tax restructuring
charges, primarily in Europe, of $1.5 million ($810,000 after-tax, or 19 cents
per basic share). Year-to-date results include pre-tax restructuring charges
in the U.S. and Europe totalling $2.3 million ($1.3 million after-tax, or 29
cents per basic share).
During the fourth quarter of 1999, the company expects to record additional
restructuring charges related to further workforce reductions in Europe.
Three months ended September 30, 1999 and 1998
- ----------------------------------------------
Sales for the third quarter of 1999 were $118.0 million, an increase of $1.9
million, or 2%, from $116.1 million in the third quarter of last year.
Third quarter 1999 sales for U.S. operations were even with the third quarter
of last year. Improvements in U.S. sales of safety products were largely
offset by lower instrument and specialty chemical sales. Shipments of
self-contained breathing apparatus and thermal imaging cameras to the fire
service market continued to be strong in the quarter. Activity was slow in
most other U.S. safety markets during the summer. MSA has seen some recovery
in September, which is expected to continue. MSA and its distributors in the
U.S and other areas were affected by the serious fall in oil prices that
affects this key customer group and related industries. Oil prices have
recovered in the past quarter and the company looks forward to more purchasing
activities and projects in these important areas. Delays in new product
introductions continued to depress instrument product sales for much of the
quarter. The company began shipping its improved Passport FiveStar Alarm
multigas detector late in the third quarter of 1999 and priority efforts are
being placed on other new instrument product introductions. Third quarter 1999
sales of specialty chemical were significantly lower than the same period last
year. Specialty chemical products are sold to a limited number of large
pharmaceutical and chemical companies. Sales levels for specialty chemicals
are largely dependent on the performance of these customers' products in their
respective markets. The decline in the third quarter was almost entirely due
to various special situations with individual customer's production and
marketing activity. The company believes that lower specialty chemical sales
in the third quarter of 1999 were the result of an accumulation of mostly
temporary factors and expects that sales will recover in the fourth quarter
and continue to grow next year. Overall, incoming commercial orders for safety
products in the U.S. exceeded shipments in the third quarter. U.S. Government
incoming orders for safety products have also been good, even without major
gas mask projects, and government backlog increased somewhat in the third
quarter.
European sales for third quarter 1999 were also even with the prior year third
quarter. Fire service sales in Germany continued to be strong. These gains
were largely offset by seasonal expectations, poor economic conditions in
Russia, and currency exchange effects when stated in U.S. dollars. Sales in the
company's other international operations were substantially higher than the
prior year, which was depressed by the well-publicized economic problems that
particularly affected the Asian and South American markets. Sales and
profitability of MSA Africa continued to be boosted by the second quarter 1999
acquisition of Campbell Gardwel, making the company the largest safety
products supplier on the African continent. Currency exchange effects on sales
of other international operations during the quarter were minor.
Gross profit for the third quarter of 1999 was $41.2 million, a decrease of
$2.7 million, or 6%, from $43.9 million in 1998. The ratio of gross profit to
sales was 34.9% in the third quarter of 1999 compared to 37.8% in the
corresponding quarter last year. The lower gross profit percentage reflects
changes in sales mix and a general narrowing of margins in Europe resulting
from the introduction of the Euro-currency.
Selling, general and administration costs in the third quarter of 1999 were
slightly lower than the prior year third quarter.
Higher depreciation and amortization expense in the quarter was primarily
related to mid-year production equipment and information technology additions
in Europe.
Income before income taxes was $7.1 million for third quarter 1999 compared to
$5.2 million last year. Third quarter 1999 results included the previously-
discussed $5.9 million credit related to the VRIP and restructuring charges of
$1.5 million. Third quarter 1998 results included restructuring charges of
$350,000. Third quarter income before taxes adjusted for the effects of these
special items in both years declined 53%. The decrease is primarily due to the
lower sales of specialty chemicals discussed above.
The effective income tax rate for the third quarter of 1999 was 38.6% compared
to 40.9% in 1998. The lower third quarter 1999 effective rate reflected the
proportionately higher income in the U.S. and tax benefits associated with
losses in Europe.
Net income in the third quarter of 1999 was $4.3 million, or $1.01 per basic
share, compared to $3.1 million, or 69 cents per basic share last year.
Excluding the after-tax effects of the special pension credits and
restructuring charges in both years, net income was down 51%.
Nine months ended September 30, 1999 and 1998
- ---------------------------------------------
Sales for the nine months ended September 30, 1999 were $357.6 million, a
decrease of $7.3 million, or 2%, from $364.9 million last year. Sales in the
prior year included the HAZCO Services, Inc. and Baseline Industries, Inc.
business units until they were divested on June 30, 1998. Excluding these
units, year-to-date sales of ongoing businesses increased 2% compared to last
year.
Total sales of ongoing U.S. operations for the nine months ended September 30,
1999 were 3% higher than last year. The improvement continued to reflect
strength in self-contained breathing apparatus and thermal imaging camera
sales to the fire service market and safety products sales in government
markets. Instrument product sales year-to-year were relatively flat. Specialty
chemical sales for the nine months were somewhat lower than the prior year,
reflecting the previously-discussed decrease in the third quarter of 1999.
Year-to-date 1999 sales in Europe were flat compared to 1998. Currency
exchange effects on sales in Europe when stated in U.S. dollars were minimal
for the nine months. Sales of other international operations improved in most
markets, although these gains were partially offset by unfavorable exchange
rate movements when stated in U.S. dollars.
Gross profit for the nine months ended September 30, 1999 was $128.7 million,
a decrease of $4.8 million, or 4%, from $133.5 million in 1998. The 1999
ratio of gross profit to sales was 36.0% compared to 36.6% last year.
The decrease in selling and administrative costs reflects the absence of the
HAZCO and Baseline operations in 1999, partially offset by higher operating
costs associated with the new enterprise-wide computer system. As discussed
previously, specific cost improvement efforts have been completed in 1999 and
additional initiatives are in progress.
Slightly higher depreciation and amortization expense in 1999 primarily
reflects higher depreciation associated with information systems which were
placed in service in mid-1998, largely offset by the divestitures of the HAZCO
and Baseline business units at the end of second quarter 1998.
Income before income taxes was $12.5 million for the nine months ended
September 30, 1999 compared to $21.3 million in 1998. The 1999 results included
the net VRIP gain of $1.3 million and restructuring charges of $2.3 million.
The 1998 results included the $3.0 million gain on the divestitures of the
HAZCO and Baseline business units, a $4.0 million pension settlement gain, and
$640,000 in restructuring charges. The 1998 pension gain resulted from
settling remaining pension liabilities to former employees from the Esmond,
Rhode Island plant which was closed in 1997. Year-to-date income before taxes
adjusted for the effects of these special items in both years declined 9%.
The effective income tax rate for the nine months ended September 30, 1999 was
39.0% compared with 37.3% last year. The lower 1998 rate reflects recognition
of tax benefits associated with the divestiture of the Baseline business unit.
Net income for the nine months ended September 30, 1999 was $7.6 million,
$1.76 per basic share, compared to $13.4 million or $3.00 per basic share last
year. Excluding the after-tax effects of the special pension credits and
restructuring charges in both years and the gain on sales of business units in
1998, net income was down 10%.
Liquidity and Financial Condition
- ---------------------------------
Cash and cash equivalents decreased $5.0 million during the first nine months
of 1999 compared with an increase of $5.8 million last year, which included net
proceeds from divestitures of nearly $23.0 million.
Cash provided by operating activities totaled $14.6 million for the first nine
months of 1999 compared to $11.3 million last year. The improvement was
primarily related to favorable changes in operating assets and liabilities.
Investing activities used cash of $25.6 million in the nine months ended
September 30, 1999 compared with cash outflows of $2.9 million in 1998. Lower
cash used for investing activities in 1998 reflected the proceeds from the
divestitures of the HAZCO and Baseline business units.
Financing activities provided $6.9 million in the first nine months of 1999,
mainly from increased short-term borrowings, compared to a minor use of cash
in 1998.
Available credit facilities and internal cash resources are considered
adequate to provide for ensuing capital requirements.
Year 2000 Readiness
- -------------------
The company is continuing Year 2000 readiness action plans which focus on
computerized and automated systems and processes that are critical to
operations, key vendors and service providers, and MSA products.
State of readiness - In 1996, to provide the information infrastructure for
MSA's evolving global management strategy, the company began a project to
replace significant information technology (IT) systems world-wide with a
fully-integrated Enterprise Wide System (EWS) using SAP R/3. Because SAP R/3
is Year 2000 compliant, implementation of EWS at various MSA companies has
been timed to reduce the Year 2000 impact on IT systems. EWS is currently
operating at all MSA locations in the U.S. and at international affiliates in
Britain, Germany, Sweden, and Mexico. Operations which have implemented EWS
account for approximately 75% of sales and 90% of manufacturing activity. IT
systems at all international operations that are not on EWS are Year 2000
compliant except for two. Readiness efforts are ongoing at these two
companies, neither of which is material to the consolidated results, and are
expected to be completed before the end of 1999.
MSA continues to address Year 2000 compliance in a number of other areas,
including: non-IT systems and processes (such as physical plant and
manufacturing systems), key vendors and service providers, EDI systems, and
MSA products. The following chart provides estimated percentages of completion
for the inventory of systems and processes that may be affected by the Year
2000, the analysis performed to determine the Year 2000 impact on inventoried
systems and processes, and the Year 2000 readiness of the inventoried systems
and processes.
Percent Completed
---------------------------------
Y2K Y2K Impact Y2K
As of October 31, 1999 Inventory Assessment Readiness
--------- --------- ---------
Information technology 100% 100% 98%
Non-information technology 98% 95% 95%
Costs of Year 2000 remediation - Costs associated with Year 2000 remediation,
which exclude costs associated with the EWS project, are estimated to total
less than $5 million. These costs, which are funded from operating cash flow,
are expensed as incurred each year.
Risks and contingency plans - Failure to identify and correct significant Year
2000 issues could result in interruption of normal business operations. The
company believes that the efforts described above should reasonably identify
and address the impact of the Year 2000 issue and its effect on operations and
should reduce the possibility of significant interruptions. However, due to the
uncertainties inherent in the Year 2000 problem, including the readiness of
third party vendors and service providers and customers, the most likely worst
case Year 2000 scenario would be temporary disruption of business in certain
locations in the event of noncompliance by the company or third parties.
Disruptions could include temporary production stoppages and delays in
delivery of product.
Year 2000 contingency plans have been developed by each major operating
location and functional area. Contingency plans may include stockpiling raw
materials and finished goods inventories, developing emergency recovery
procedures, identifying alternate suppliers, replacing electronic applications
with manual processes, and other appropriate measures. Year 2000 contingency
planning is an ongoing process which will continue through the remainder of
this year as new information becomes available.
Financial Instrument Market Risk
- --------------------------------
There have been no material changes in the company's financial instrument
market risk during the third quarter of 1999. For additional information,
refer to page 14 of the company's Annual Report to Shareholders for the year
ended December 31, 1998.
PART II OTHER INFORMATION
MINE SAFETY APPLIANCES COMPANY
Item 1. Legal Proceedings
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10) (n) MSA Supplemental Savings Plan
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1999.
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.
MINE SAFETY APPLIANCES COMPANY
Date: November 10, 1999 By S/James E. Herald
James E. Herald
Vice President - Finance;
Principal Financial and
Accounting Officer
5
9-MOS
DEC-31-1999
SEP-30-1999
7,269
11,725
96,200
(2,812)
93,846
23,445
378,360
(213,486)
470,267
130,498
11,893
0
3,569
12,616
221,261
470,267
357,646
359,638
228,931
246,184
(569)
0
2,655
12,542
4,894
7,648
0
0
0
7,648
1.76
1.75
EXHIBIT 10 (n)
MSA SUPPLEMENTAL SAVINGS PLAN
As Amended and Restated
Effective December 1, 1999
MSA SUPPLEMENTAL SAVINGS PLAN
TABLE OF CONTENTS
Article Page
Preamble
ARTICLE I Definitions............................. 1
ARTICLE II Participation........................... 9
ARTICLE III The Supplemental Account............... 10
ARTICLE IV Participant-Direction of Investment.... 15
ARTICLE V Vesting................................ 19
ARTICLE VI Distribution of Benefits............... 20
ARTICLE VII General Provisions..................... 22
MSA SUPPLEMENTAL SAVINGS PLAN
Preamble
Mine Safety Appliances Company (the "Company") has established
and maintains the MSA Retirement Savings Plan (the "Retirement Savings Plan"),
a retirement plan qualified under Sections 401(a) and 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Retirement Savings Plan
permits eligible employees to elect to defer a percentage of their
Compensation, but not more than 10% thereof, contributing the same to the
Retirement Savings Plan (subject to certain limitations). The Company presently
matches, on a 50% basis, each dollar contributed by a Participant, up to 8% of
Compensation.
As a result of the limitations imposed upon the aggregate
amount of contributions which could be made to the Retirement Savings Plan by
Section 415 of the Code, the Company previously adopted a non-qualified,
unfunded Supplemental Savings Plan, an "excess benefit plan" as described in
Section 3(36) of the Employee Retirement Income Security Act ("ERISA"), to
allow those Participants whose benefits under the Retirement Savings Plan would
otherwise be significantly restricted to continue to make elective pre-tax
deferrals and to provide the Company contribution relating to such deferrals.
However, as a result of further changes in the Code, additional
limitations were placed upon the amount of compensation which could be
considered for purposes of the Retirement Savings Plan, and the benefits of
certain highly compensated employees were further limited. As a result, the
Company amended and restated the Supplemental Savings Plan, effective January
1, 1997, in order to restore the benefits of certain executive employees which
would otherwise be lost as a result of such limitations. As so amended, the
Plan is designed to be an unfunded plan for the benefit of a select group of
management or highly compensated employees, but not an "excess benefit plan"
under ERISA.
The Company has now decided to amend and restate the Plan in
order to permit a participant to determine the earnings on his Plan account by
choosing among a number of investment funds in which the amounts in his Plan
account will be deemed to be invested, to provide certain Change-in-Control
protection with respect to Plan benefits and to expressly state within the Plan
certain provisions which were previously incorporated by reference to the
Company's Retirement Savings Plan.
ii
ARTICLE I
DEFINITIONS
Unless otherwise specifically defined in this Article I or
where a term first appears in this Plan, all capitalized terms used in this
Plan shall have the same meanings as are ascribed to them under the Company's
Retirement Savings Plan.
1.1 "ADMINISTRATOR" means the Retirement Savings Plan Committee, as
appointed by the Board from time to time, unless the Board shall
expressly appoint another Administrator. The Administrator shall
also be the "named fiduciary" (within the meaning of section 402(a)
(2) of ERISA) and may serve in more than one fiduciary capacity with
respect to the Plan. The Administrator may, by written notice of
appointment delivered to any other person or persons (whether legal
or natural), designate and allocate any fiduciary responsibility
(other than that of named fiduciary) to such other person or persons,
who may also serve in more than one fiduciary capacity with respect
to the Plan.
1.2 "AMENDMENT EFFECTIVE DATE" means the effective date of the 1999
amendment and restatement of the Plan.
1.3 "BENEFICIARY" means the person or persons designated by a Participant
(in accordance with procedures established by the Administrator) to
receive the value of his Supplemental Account in the event of his
death prior to receipt of all benefits due hereunder, or, if no such
person is designated by a Participant, Beneficiary means the person
or persons designated by the Participant
under the provisions of the Retirement Savings Plan to receive the
value of his account thereunder in the event of his death prior to
receipt of all benefits due thereunder.
1.4 "BOARD" means the Board of Directors of Mine Safety Appliances
Company, or any successor thereto.
1.5 "CHANGE IN CONTROL" of the Company shall be deemed to have occurred
if the event set forth in any one of the following paragraphs shall
have occurred:
(I) any Person (as defined in this Section 1.5) is or becomes the Beneficial
Owner (as defined in this Section 1.5), directly or indirectly, of securities
of the Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or its Affiliates
(which term shall have the meaning set forth in Rule 12b-2 promulgated under
Section 12 of the Exchange Act, as defined in this Section 1.5)) representing
thirty percent (30%) or more of the combined voting power of the Company's
then outstanding securities, excluding any Person who becomes such a
Beneficial Owner in connection with a transaction described in clause (I) of
paragraph (III) below; or
2
(II) the following individuals cease for any reason to constitute a majority of
the number of directors then serving: individuals who, on May 5, 1998,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of directors of the Company) whose appointment or election by the
Board or nomination for election by the Company's shareholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors on May 5, 1998 or whose appointment,
election or nomination for election was previously so approved or recommended;
or
(III) there is consummated a merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with any other corporation, other
than (i) a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other
3
fiduciary holding securities under an employee benefit plan of the Company or
any subsidiary of the Company, at least fifty-one percent (51%) of the combined
voting power of the securities of the Company or such surviving entity or any
parent thereof outstanding immediately after such merger or consolidation, or
(ii) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company
representing thirty percent (30%) or more of the combined voting power of the
Company's then outstanding securities; or
(IV) the shareholders of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an agreement for the sale
or disposition by the Company of all or substantially all of the Company's
assets, other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at least fifty-one
percent (51%) of the combined voting power of the voting securities of which
are owned by shareholders of the Company in substantially the same proportions
as their ownership of the Company immediately prior to such sale.
4
Notwithstanding the foregoing, a Change in Control shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.
"BENEFICIAL OWNER" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934, as amended
from time to time.
"PERSON" shall have the meaning given in Section 3(a)(9) of the Exchange Act,
as modified and used in Sections 13(d) and 14(d) thereof, except that such
term shall not include (i) the Company or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
or (v) any individual or entity [including the trustees (in such capacity) of
any such entity which is a trust] which is, directly or
5
indirectly, the Beneficial Owner of securities of the Company representing five
percent (5%) or more of the combined voting power of the Company's then
outstanding securities immediately before the Amendment Effective Date or any
Affiliate of any such individual or entity, including, for purposes of this
Plan, any of the following: (A) any trust (including the trustees thereof in
such capacity) established by or for the benefit of any such individual; (B)
any charitable foundation (whether a trust or a corporation, including the
trustees or directors thereof in such capacity) established by any such
individual; (C) any spouse of any such individual; (D) the ancestors (and
spouses) and lineal descendants (and spouses) of such individual and such
spouse; (E) the brothers and sisters (whether by the whole or half blood or by
adoption) of either such individual or such spouse; or (F) the lineal
descendants (and their spouses) of such brothers and sisters.
1.6 "CLAIMANT" has the meaning given it in Section 7.2 hereof.
1.7 "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
1.8 "CODE LIMITATIONS" means the limitations of either Section 401(a)(17)
or Section 415(c)(2) of the Code, restricting the contributions of a
Participant or the Company under the provisions of the Retirement
Savings Plan, but not Section 402(g) of the Code, limiting the
dollar amount of a Participant's tax-deferred contributions.
6
1.9 "COMPANY" means Mine Safety Appliances Company, a Pennsylvania
corporation, and, except in determining under Section 1.5 hereof
whether or not any Change in Control of the Company has occurred,
any successor thereto. For purposes of this Plan (except in
determining under Section 1.5 hereof whether or not any Change in
Control of the Company has occurred), any subsidiary or affiliate of
Mine Safety Appliances Company whose employees participate in the
Retirement Savings Plan shall be included within the definition of
"Company."
1.10 "COMPENSATION" means the compensation of a Participant as defined in
the Retirement Savings Plan for purposes of calculating Employee
Contributions, but without regard to the limit on such compensation
otherwise required by Code Section 401(a)(17).
1.11 "DEFERRAL ELECTION" means a "salary reduction agreement" between an
Eligible Employee and the Company, as described in Sections 3.1 and
3.2 hereof.
1.12 "ELIGIBLE EMPLOYEE" means an Employee who participates in the
Retirement Savings Plan and whose Employee Contributions, and/or any
Company Matching Contributions with respect thereto, are restricted
by the application of a Code Limitation.
1.13 "INVESTMENT FUNDS" means the separate investment vehicles designated
by the Administrator in which the amounts in a Participant's
7
Supplemental Account can be deemed invested at the election of the
Participant in accordance with Article IV hereof.
1.14 "PARTICIPANT" means an individual who, as an Eligible Employee,
participated in the Plan prior to the Amendment Effective Date
and/or files a Deferral Election with respect to Compensation in
accordance with Section 3.1 or 3.2 hereof. An individual who becomes
a Participant continues to be a Participant until the entire amount
of his benefit hereunder has been distributed.
1.15 "PLAN" means this MSA Supplemental Savings Plan as in effect from
time to time.
1.16 "RETIREMENT SAVINGS PLAN" means the MSA Retirement Savings Plan as in
effect from time to time.
1.17 "SUPPLEMENTAL ACCOUNT" means the unfunded bookkeeping account
established and maintained in accordance with Article III hereof to
record the contributions deemed to be made by the Participant and
the Company, as well as the earnings, gains and losses thereon,
expenses allocable thereto, distributions therefrom and other
reductions in value thereof. The Supplemental Account shall be
comprised of two bookkeeping sub-accounts, the Supplemental Employee
Contributions Account and the Supplemental Company Matching
Contributions Account, as described in Article III hereof.
1.18 "VALUATION DATE" means every business day.
8
ARTICLE II
PARTICIPATION
2.1 An Eligible Employee who is a Participant in this Plan immediately
prior to the Amendment Effective Date shall continue to be a
Participant as of the Amendment Effective Date. Any other Eligible
Employee who files a Deferral Election in accordance with Section 3.1
or 3.2 hereof shall become a Participant in this Plan as of the date
provided in such Deferral Election (unless already a Participant
herein).
9
ARTICLE III
THE SUPPLEMENTAL ACCOUNT
3.1 Deferral Election and Supplemental Employee Contributions. An
Eligible Employee may elect to execute a "salary reduction
agreement" with the Company (a "Deferral Election") to reduce his
Compensation during a stated deferral period by a specified
percentage not exceeding eight percent (8%) (hereafter in this
Article III, the "Elected Percentage"), such reduction to be offset
by Employee Contributions made on behalf of the Eligible Employee to
the Retirement Savings Plan with respect to such deferral period, and
to credit such net reduction as Supplemental Employee Contributions
to the Supplemental Employee Contributions Account portion of the
Supplemental Account of the Eligible Employee (who thus becomes a
Participant hereunder). The Deferral Election must be filed with the
Administrator before the beginning of the relevant deferral period.
The timely-filed Deferral Election shall become effective on the
first day of the deferral period set forth in such Deferral
Election, which deferral period (except as provided in Section 3.2
hereof) shall be a complete calendar year. Such Deferral Election
shall be effective to defer Compensation relating to the
Participant's services performed in such calendar year. A Deferral
Election with respect to Compensation during a calendar year cannot
be altered or revoked during that calendar year and shall also remain
in effect with respect to services in each succeeding calendar year
(if the
10
individual is an Eligible Employee on December 31st of the relevant
calendar year to which the Deferral Election shall have already been
applied), until and unless a new Deferral Election (which may
include, without limitation, an agreement that no deferrals shall be
made in such succeeding calendar year) becomes effective. Such a new
Deferral Election will be effective as of the first day of the next
following calendar year after its filing with the Administrator and
will apply only to Compensation payable with respect to services
rendered on and after such first day of the following year. Amounts
credited to the Participant's Supplemental Employee Contributions
Account prior to the effective date of any new Deferral Election will
not be affected.
3.2 Some Mid-Year Elections Permitted. In the first calendar year in
which an Employee becomes an Eligible Employee (or (i) in the
calendar year in which a former Employee who has returned to the
Company's employ becomes an Eligible Employee (whether or not he was
an Eligible Employee during a previous period of employment) or (ii)
in the calendar year in which a former Eligible Employee who
continued as an Employee (but ceased to be an Eligible Employee and
no longer has a Deferral Election in effect) again becomes an
Eligible Employee), he may make and file a Deferral Election within
thirty days after he becomes an Eligible Employee as to Compensation
for services performed during such calendar year subsequent to
filing the Deferral Election. Further, in 1998, the
11
deferral arrangements in effect immediately prior to the Amendment
Effective Date of individuals who are Participants immediately prior
to the Amendment Effective Date shall continue in effect through
December 31, 1998.
3.3 Supplemental Company Matching Contributions. The Employer shall
credit as Supplemental Company Matching Contributions to the
Supplemental Company Matching Contributions Account portion of the
Supplemental Account of each Participant who has Supplemental
Employee Contributions credited to his Supplemental Account with
respect to any calendar year Supplemental Company Matching
Contributions with respect to such calendar year equal to fifty
percent (50%) of the result of subtracting the aggregate amount of
Company Matching Contributions credited to the Participant's account
under the Retirement Savings Plan with respect to such calendar year
from the lesser of the Elected Percentage of Compensation or eight
percent (8%) of Compensation.
3.4 Earnings and Expenses for a Supplemental Account. All Supplemental
Employee Contributions and Supplemental Company Matching
Contributions credited to a Participant's Supplemental Account shall
be treated as though invested and reinvested only in Investment
Funds selected (or deemed selected) by such Participant pursuant to
Article IV hereof. A pro-rata portion of all dividends, interest
gains and distributions of any nature earned in a given period in
respect of an Investment Fund in which the Supplemental Account is
treated as
12
investing shall be credited to the Supplemental Account, such credit
to be calculated by multiplying all such dividends, interest gains
and distributions by a fraction, the numerator of which is equal to
the portion of the Supplemental Account of each Participant that is
deemed invested in the particular Investment Fund and the denominator
of which is equal to the aggregate of all amounts invested in the
same Investment Fund. All investment income deemed received from an
Investment Fund shall be deemed reinvested in the same Investment
Fund. Expenses attributable to the acquisition of investments shall
be charged to the Supplemental Account (and respective sub-accounts
thereof) of the Participant for which such investment is deemed made.
3.5 Recordkeeping. The dollar amounts of any such Employee Contributions
and Company Matching Contributions for a Participant for each
payroll period shall be credited promptly upon the completion of
such payroll period to the appropriate sub-account of the
Participant's Supplemental Account (an unfunded bookkeeping account).
The sum of the balance of a Participant's Supplemental Employee
Contributions Account and the vested balance of a Participant's
Supplemental Company Matching Contribution Account, as such sum
varies from time to time, shall be recorded on the financial books
and records of the Company as a liability owed to the Participant.
The Administrator or its delegate shall maintain such bookkeeping
accounts as it deems necessary to administer this Plan and shall
13
calculate, or direct the calculation of, amounts in the Participants'
Supplemental Accounts. The Administrator's determination of the
value of Participants' Supplemental Accounts shall be final and
binding upon all Participants and on the Company. Participants will
be furnished statements of their Supplemental Account values at least
quarter-annually.
14
ARTICLE IV
PARTICIPANT-DIRECTION OF INVESTMENT
4.1 Participant-Directed Investment. Subject to Section 4.5 hereof, a
Participant may make elections as to the deemed investment of his
Supplemental Account in accordance with such procedures as are
established and uniformly applied by the Administrator or its
delegate. The Administrator or its delegate shall provide each
Participant with a description of the Investment Funds available for
selection from time to time and such other relevant information about
the Investment Funds as it receives from time to time. The
Participant's investment election shall remain in force until revised
by means of a subsequent investment election becoming effective
pursuant to Section 4.2 hereof. During any period in which the
Participant does not have an investment election in force, the
Participant shall be deemed to have elected an investment in the
Retirement Government Money Market Portfolio (or any substantially
similar approved Investment Fund which has been substituted
therefor) until another investment election subsequently becomes
effective pursuant to Section 4.2 hereof.
4.2 Changes in Investment Direction and Transfers. Subject to Section
4.5 hereof, on any business day a Participant may elect to change
his deemed investment election as to subsequent contributions or to
transfer amounts among one or more of the Investment Funds then
available by following notice procedures
15
established and uniformly applied by the Administrator or its
delegate. The Participant's notice of change or transfer shall be
effective as soon as reasonably practicable (as determined by the
Administrator in its sole discretion) after the Administrator or its
delegate has received such notice.
4.3 Responsibility for Investment Elections. The selection of investment
choices among the Investment Funds available from time to time shall
be the sole responsibility of each Participant. The deemed
investment return (or loss) with respect to a Participant's
Supplemental Account shall be determined solely by the Participant's
investment elections made in accordance with this Supplemental Plan
and the procedures established and uniformly applied by the
Administrator or its delegate. The availability of an Investment
Fund to a Participant shall not be construed as a recommendation for
investment therein. Further, neither the Company, any Participating
Affiliate, the Administrator or its delegate, any Employee nor the
trustee of any trust which may be established by the Company in
accordance with Section 7.3 hereof is authorized to make any
recommendation to any Participant with respect to the selection of
investments among the Investment Funds.
4.4 Participant's Risk. Each Participant assumes all risk connected with
any decrease in the market value of any of his Supplemental
Account's deemed investments. The value of the Participant's
Supplemental Account and the payment of
16
any amount which may be or become due therefrom are not guaranteed
by any one or any entity.
4.5 Investment Restrictions, Temporary Suspensions of Plan Activities
and Investment Fund Transfers by Administrator. The provisions of
this Section 4.5 shall apply notwithstanding any other provision of
any other Section of this Plan to the contrary. In accordance with
its established and uniformly applied procedures, the Administrator
or its delegate may place certain restrictions or limitations on the
dollar amounts, percentages or types of investment elections,
transfers and/or allocations which are deemed made under the Plan.
If the Administrator changes the Plan's recordkeeper, the
Administrator may temporarily suspend certain Plan activities
(including without limitation, distributions, contribution
percentage changes and investment allocations) in order to facilitate
the recordkeeping change. If an Investment Fund is eliminated by
the Administrator or its delegate, then the Administrator or its
delegate may direct that amounts deemed invested in the Investment
Fund which was eliminated shall be automatically transferred to
another Investment Fund with similar investment goals. After any
such transfer by the Administrator or its delegate, further
investment changes may be made by the Participant in accordance with
Section 4.2 hereof. Notwithstanding the foregoing provisions of
this Section 4.5, no power given the Administrator or its delegate
in this Section 4.5 can be used after a Change in Control to reduce
or
17
adversely affect in any way any benefit payable to, or accrued by, a
Participant (or his Beneficiary) hereunder.
18
ARTICLE V
VESTING
5.1 Vesting in Supplemental Employee Contributions Account. A
Participant's interest in his Supplemental Employee Contributions
Account shall be 100% vested at all times.
5.2 Vesting in Supplemental Company Contributions Account. A
Participant's interest in his Supplemental Company Matching
Contributions Account shall become 100% vested upon the earliest of
the following to occur:
(i) Participant's completion of five (5) years of Continuous
Service;
(ii) Death of the Participant while employed by the Company;
(iii)Attainment of the Participant's 65th birthday while employed
by the Company; or
(iv) Occurrence of a Change in Control while the Participant is
employed by the Company.
5.3 Forfeitures. If a Participant terminates his employment, any portion
of his Supplemental Account (including any amounts credited after
his termination of employment) which is not payable to him under
Article VI hereof shall be forfeited by him upon such termination.
19
ARTICLE VI
DISTRIBUTION OF BENEFITS
6.1 Time of Distribution. The vested amount held in a Participant's
Supplemental Account hereunder shall become payable to him as of the
date of his termination of employment unless the Participant has,
not later than December 31st of the calendar year prior to the
otherwise applicable payment date, filed an election in writing with
the Administrator to defer the commencement of benefits to a later
date. Under no circumstance, however, may the commencement of
benefits be delayed beyond the first day of April of the year
following the calendar year in which the Participant attains age
70-1/2.
6.2 Form of Distribution. If the value of the Participant's vested
Supplemental Account is less than $25,000, cash payment shall be made
in a single lump sum. If the value of the Participant's vested
Supplemental Account is $25,000 or more, cash payment will be made
in five (5) approximately equal annual installments, each installment
calculated by dividing the then-current value of the Participant's
vested Supplemental Account by the number of remaining installment
payments. Alternatively, a Participant may elect, not later than
during the calendar year preceding the calendar year which includes
the otherwise applicable payment date, to receive the entire vested
balance of his Supplemental Account in a single cash payment.
Notwithstanding the foregoing provisions of this Section 6.2, if the
20
employment of a Participant shall be terminated within the three-
year period immediately following a Change in Control (other than by
the Participant's death), the entire balance of his Supplemental
Account shall be paid to him in a single cash payment, not later
than the fifth (5th) business day following such termination.
6.3 Distribution on Death. In the event of a Participant's death
hereunder, the then current value of his Supplemental Account shall
be paid to his Beneficiary in a lump sum cash payment.
6.4 Valuation of Supplemental Account. A Participant's Account shall be
valued for distribution purposes as of the date of distribution.
21
ARTICLE VII
GENERAL PROVISIONS
7.1 Administration: The responsibility to administer this Plan and to
interpret and carry out its provisions is hereby delegated to the
Administrator. The Administrator is hereby authorized to delegate
any part or all of its duties to such other administrators as it may
appoint. The Administrator (or its delegate) shall have the same
rights, powers, duties and fiduciary obligations, and operate with
the same standard of care, with respect to this Plan and its
Participants as the Retirement Savings Plan Committee has and does
with respect to the Retirement Savings Plan and its participants.
7.2 Benefit Review Procedure. The Administrator shall initially make all
determinations of eligibility for and the amount of benefits payable
to a Participant or his Beneficiary (hereafter referred to as the
"Claimant"). If the Administrator makes a decision which is adverse
to the interests of any Claimant, the Administrator shall furnish
notice of the adverse decision to the Claimant specifying the reason
therefor. The Claimant shall have the right to request a
redetermination of such decision by the Administrator within sixty
(60) days of receipt of the written notice of claim denial. The
Employee Benefit Plan Committee appointed by the Board shall promptly
review the request for redetermination, and within sixty (60) days
submit its final decision to the Claimant in writing.
22
7.3 No Right to Assets. Any Participant (or Participant's beneficiary)
who may have or claim any interest in or right to any compensation,
payment or benefit payable hereunder shall rely solely upon the
unsecured promise of the Company as set forth herein for the payment
thereof and shall have the status of a general unsecured creditor of
the Company. The Plan constitutes a mere promise by the Company to
make certain benefit payments in the future. The right of any
Participant or beneficiary to benefits hereunder is strictly
contractual. Notwithstanding the foregoing provisions of this
Article VII, Mine Safety Appliances Company may, in its discretion,
establish a trust to pay amounts becoming payable by the Company
pursuant to this Plan, which trust shall be subject to the claims of
the general creditors of Mine Safety Appliances Company in the event
of its bankruptcy or insolvency. Notwithstanding any establishment
of such a trust, the Company shall remain responsible for the
payment of any amounts so payable which are not so paid by such
trust. If any such trust is established, the trustee will not be
required to invest trust assets in accordance with the directions of
Participants given in accordance with this Plan, although the
trustee, in its discretion, may so invest the trust assets.
Notwithstanding any provision of this Plan, all "investment powers"
given to any Participant over his Supplemental Account are actually
powers to direct a deemed investment of such Supplemental Account,
thus determining the investment return on the contributions deemed
made to such Supplemental Account and the amount of the
23
benefit the Company must pay the Participant with respect to such
Supplemental Account. It is intended that this Plan shall be unfunded
for Federal income tax purposes and for purposes of Title I of ERISA.
It is intended that any trust established in accordance with this
Section 7.3 shall be treated as a grantor trust under the Code and
that the establishment of such a trust shall not cause Participants
to realize current income on amounts contributed thereto.
7.4 No Contract of Employment. This Plan shall not be construed to
establish a guarantee of future or continued employment by the
Company of any Participant.
7.5 Non-Alienation. Benefits payable under this Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment or garnishment, whether
voluntary or involuntary, and any attempt to anticipate, alienate,
sell, transfer, assign, pledge, encumber, attach or garnish the same
shall be void; nor shall any such distribution or payment be in any
way liable for or subject to the debts, contracts, liabilities,
engagements or torts of any person entitled to such distribution or
payment. If any Participant or Beneficiary is adjudicated bankrupt
or purports to anticipate, alienate, sell, transfer, assign, pledge,
encumber, attach or garnish any such distribution or payment
voluntarily or involuntarily, the Administrator, in its discretion,
may hold or cause to be held or
24
applied such distribution or payment or any part thereof to or for
the benefit of such Participant or Beneficiary in such manner as the
Administrator shall direct.
7.6 Payments to Minors or Incompetents. If the Administrator determines
that any person entitled to payments under the Plan is an infant or
incompetent by reason of physical or mental disability, it may cause
all payments thereafter becoming due to such person to be made to any
other person for his benefit, without responsibility to follow the
application of amounts so paid. Payments made pursuant to this
provision shall completely discharge the Company, the Plan, and the
Administrator.
7.7 Construction: Choice of Laws. The provisions of the Plan shall be
construed, administered and governed under the laws of the
Commonwealth of Pennsylvania to the extent such laws are not
preempted by ERISA or any other federal laws which may from time to
time be applicable. Whenever any words are used herein in the
masculine gender, they shall be construed as though they were also
used in the feminine gender in all cases where they would so apply,
and whenever any words are used herein in the singular form, they
shall be construed as though they were also used in the plural form
in all cases where they would so apply. Titles of Articles and
Sections hereof are for convenience of reference only and are not to
be taken into account in construing the provisions of this Plan.
25
7.8 Invalidity of Provisions. If any provision of the Plan shall be held
illegal or invalid for any reason, said illegality or invalidity
shall not affect the remaining parts of the Plan, but the Plan shall
be construed and enforced as if said illegal and invalid provision
had never been inserted herein.
7.9 Amendment and Termination. The Company expects to continue the Plan
indefinitely, but specifically reserves the right, in the sole and
unfettered discretion of its Board, at any time, to amend, in whole
or in part, any or all of the provisions of the Plan and to terminate
the Plan in whole or in part, provided, however, that no such
amendment or termination shall (i) reduce or adversely affect the
benefits payable under the Plan to a Participant (or his
Beneficiary) if the Participant's termination of employment with the
Company has occurred prior to such termination or amendment of the
Plan, or (ii) reduce or adversely affect the benefit to be paid with
respect to the Participant on the date of such termination or
amendment, as compared with the benefit that would have been payable
with respect to the Participant if his employment had terminated on
the day before the Plan was so terminated or amended. Upon a
termination of the Plan, no further Supplemental Employee
Contributions or Supplemental Company Matching Contributions shall be
made under the Plan, but the Supplemental Accounts maintained under
the Plan at the time of such Plan Termination shall continue to be
governed by the terms of the Plan until paid out in accordance with
such terms.
26
