SECURITIES 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MINE SAFETY APPLIANCES COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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previously. Identify the previous filing by registration statement number,
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Notes:
[LOGO OF MSA APPEARS HERE]
MINE SAFETY APPLIANCES COMPANY . P.O. BOX 426, PITTSBURGH, PENNSYLVANIA
15230 . PHONE (412) 967-3000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Holders of Common Stock of
Mine Safety Appliances Company:
Notice is hereby given that the Annual Meeting of Shareholders of Mine
Safety Appliances Company will be held on Tuesday, May 11, 1999, at 9:00 A.M.,
local Pittsburgh time, at the Company's headquarters, 121 Gamma Drive, RIDC
Industrial Park, O'Hara Township, Pittsburgh, Pennsylvania for the purpose of
considering and acting upon the following:
(1) Election of Directors: The election of three directors for a term of
three years;
(2) Selection of Independent Accountants: The selection of independent
accountants for the year ending December 31, 1999;
and such other business as may properly come before the Annual Meeting or any
adjournment thereof.
Only the holders of Common Stock of the Company of record on the books of
the Company at the close of business on February 26, 1999 are entitled to
notice of and to vote at the meeting and any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you expect
to attend the meeting, please execute and date the accompanying form of proxy
and return it in the enclosed self-addressed, stamped envelope at your
earliest convenience. If you attend the meeting, you may, if you wish,
withdraw your proxy and vote your shares in person.
By Order of the Board of
Directors,
Donald H. Cuozzo
Secretary
March 25, 1999
March 25, 1999
MINE SAFETY APPLIANCES COMPANY
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Mine Safety Appliances Company (the "Company") of
proxies in the accompanying form to be voted at the Annual Meeting of
Shareholders of the Company to be held on Tuesday, May 11, 1999, and at any
and all adjournments thereof, for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders. If a proxy in the accompanying form
is duly executed and returned, the shares of Common Stock represented thereby
will be voted and, where a specification is made by the shareholder, will be
voted in accordance with such specification. A shareholder giving the
accompanying proxy has the power to revoke it at any time prior to its
exercise upon written notice given to the Secretary of the Company.
The mailing address of the principal executive offices of the Company is
P.O. Box 426, Pittsburgh, Pennsylvania 15230.
VOTING SECURITIES AND RECORD DATE
As of February 26, 1999, the Company had 4,926,832 shares of Common Stock
issued and outstanding. Holders of Common Stock of the Company of record on
the books of the Company at the close of business on February 26, 1999 are
entitled to notice of and to vote at the Annual Meeting and at any adjournment
thereof. Such holders are entitled to one vote for each share held and do not
have cumulative voting rights with respect to the election of directors.
Holders of outstanding shares of the Company's 4 1/2% Cumulative Preferred
Stock are not entitled to vote at the meeting.
See "Stock Ownership" for information with respect to share ownership by the
directors and executive officers of the Company and the beneficial owners of
5% or more of the Company's Common Stock.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Three directors will be elected at the Annual Meeting to serve until the
Annual Meeting in 2002 and until a successor has been elected and qualified.
The Board of Directors recommends a vote FOR the election of the three
nominees named below, each of whom has consented to be named as a nominee and
to serve if elected. Properly executed proxies timely received in the
accompanying form will be voted for the election of the nominees named below,
unless otherwise directed thereon, or for a substitute nominee designated by
the Board in the event a nominee named becomes unavailable for election.
The following table sets forth certain information about the nominees, all
of whom are currently members of the Board, and about the other directors
whose terms of office will continue after the Annual Meeting:
1
Principal Occupation and any Director Other
Name Position with the Company Age Since Directorships
- ---- ---------------------------- --- -------- -------------
Nominees for terms expiring in 2002:
Joseph L. Calihan Managing Partner of 61 1993 None
Bradford Capital Partners
(venture capital
investments and
acquisitions); Chairman of
the Board of Bradford
Schools, Inc. (post-
secondary business
schools)
L. Edward Shaw, Jr. Chief Corporate Officer, 54 1998 Covenant House, a major
North America, international child care
National Westminster Bank agency; Legal Aid Society of
Plc. New York
Thomas H. Witmer Retired (1998); Formerly 56 1997 Medrad, Inc.; also serves on
President and Chief the Boards of three private
Executive Officer of companies and several non-
Medrad, Inc. (medical profit organizations
products manufacturer)
Continuing Directors with terms expiring in 2000:
Calvin A. Campbell, Chairman, President and 64 1994 Eastman Chemical Company
Jr. Chief Executive Officer of (an SEC reporting company);
Goodman Equipment Bulley & Andrews;
Corporation (manufacturer Chairman, National
of underground mining Association of
locomotives and plastics Manufacturers; Trustee,
blow molding machinery) Illinois Institute of
Technology
G. Donald Gerlach Partner of Reed Smith Shaw 65 1989 Member, Investment
& McClay (attorneys-at- Committee, University of
law) Pittsburgh Medical Center
System; President, Matthew
B. and Mary A. Ridgway
Charitable Foundation
Thomas B. Hotopp President of the Company 57 1998 Pittsburgh Symphony Society
Continuing Directors with terms expiring in 2001:
Helen Lee Henderson Investor; President of 60 1991 Asolo Theatre Co.;
Chiron Productions, Ltd. Pittsburgh Public Theatre;
(theatrical and media Advisory Board, The York
productions) Theatre Co.
John T. Ryan III Chairman and Chief 55 1981 Chairman, Pittsburgh Branch
Executive Officer of the of the Federal Reserve Bank
Company of Cleveland; Chairman,
Industrial Safety Equipment
Association; Director,
Allegheny Conference on
Community Development
2
Mr. Hotopp became President of the Company in December 1996 and previously
served as Senior Vice President since 1991. Mr. Shaw has had various positions
with National Westminster Bank Plc. since May 1996. Previously he was
Executive Vice President and General Counsel of The Chase Manhattan
Corporation and The Chase Manhattan Bank, N.A. Mr. Shaw is the brother-in-law
of Mr. Ryan. Each other director has engaged in the principal occupation
indicated in the above table for at least the past five years. Mr. Ryan also
served as President of the Company from April 1990 to December 1996.
The Board of Directors has established an Audit Committee, a Compensation
Committee, a Nominating Committee and certain other committees.
The Audit Committee, which met two times during 1998, assists the Board in
fulfilling its responsibility to the shareholders and investment community
with regard to the quality and integrity of the financial reports of the
Company. The Committee reviews the Company's financial statements, regulatory
filings and internal controls. The Committee also reviews plans, findings and
recommendations of internal and external auditors. The Committee evaluates the
competence, effectiveness and independence of the internal and external
auditors and makes recommendations to the Board of Directors as to the
retention of independent accountants and as to their fees and performs such
other duties as the Board of Directors may assign from time to time. The
current members of the Audit Committee are directors Calihan, Campbell,
Gerlach, Henderson and Witmer, each for a term expiring at the 1999
organizational meeting of the Board of Directors.
The Compensation Committee presently consists of directors Campbell,
Gerlach, Henderson and Witmer, each for a term expiring at the 1999
organizational meeting of the Board. The Compensation Committee, which met two
times in 1998, makes recommendations to the Board with respect to the
compensation of officers of the Company. A report of the Compensation
Committee as to its policies in recommending the 1998 compensation of the
Company's executive officers appears later. The Compensation Committee also
administers the Company's 1987 and 1998 Management Share Incentive Plans (the
"MSIP").
The current members of the Nominating Committee are directors Calihan,
Gerlach, Henderson and Ryan, each for a term expiring at the 1999
organizational meeting of the Board. The Nominating Committee, which met three
times in 1998, considers potential candidates for election to the Board of
Directors and makes recommendations to the Board. Any shareholder who desires
to have an individual considered for nomination by the Nominating Committee
must submit a recommendation in writing to the Secretary of the Company not
later than November 30 preceding the annual meeting at which the election is
to be held.
The Board of Directors met six times during 1998. All directors attended at
least 75% of the combined total of the meetings of the Board and of all
committees on which they served.
Vote Required
The three candidates receiving the highest numbers of votes cast by the
holders of Common Stock voting in person or by proxy will be elected as
directors. A proxy vote indicated as withheld from a nominee will not be cast
for such nominee but will be counted in determining whether a quorum exists
for the meeting.
The Company's Restated Articles require that any shareholder intending to
nominate a candidate for election as a director must give written notice,
containing specified information, to the Secretary of the Company not later
than 90 days in advance of the meeting at which the election is to be held. No
such notices were received with respect to the 1999 Annual Meeting. Therefore,
only the nominees named above will be eligible for election at the meeting.
3
OTHER INFORMATION CONCERNING DIRECTORS AND OFFICERS
Executive Compensation
The following table sets forth information concerning the annual, long-term
and other compensation paid or accrued by the Company and its subsidiaries for
the years 1998, 1997 and 1996 for the persons who were in 1998 the chief
executive officer and the other four most highly compensated executive
officers of the Company (the "Named Officers"):
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation Awards
---------------------------------------- ---------------------------
Shares
Underlying
Other Restricted Stock
Name and Annual Stock Options All Other
Principal Position Year Salary ($) Bonus ($) Compensation ($)(1) Awards ($)(2) (# of Shares) Compensation ($)(3)
- ------------------ ---- ---------- --------- ------------------- ------------- ------------- -------------------
John T. Ryan III 1998 $420,840 $172,610 -- $242,756 7,108 $37,526
Chairman and 1997 400,000 242,760 -- -- 7,620 36,846
Chief Executive
Officer 1996 345,360 252,800 -- 214,938 8,182 32,936
Thomas B. Hotopp 1998 $264,600 $ 99,940 -- $127,076 3,366 $23,897
President 1997 250,000 127,860 -- -- 3,701 22,231
1996 208,320 91,100 -- 100,908 3,763 17,077
George R. McGee
(4) 1998 $189,996 $ 28,081 -- $ 61,320 1,620 $22,639
Vice
President/General 1997 180,000 76,620 -- -- -- 94,022
Manager-
Instrument 1996 -- -- -- -- -- --
Division
James E. Herald 1998 $160,892 $ 46,412 -- $ 56,557 1,500 $19,959
Vice President- 1997 157,200 65,270 -- -- 1,770 20,168
Finance 1996 150,000 71,400 -- 52,943 1,970 18,525
George W.
Steggles 1998 $154,200 $ 39,804 -- $ 47,826 1,270 $18,478
Senior Vice
President- 1997 152,031 62,360 -- -- 1,390 18,233
International 1996 139,320 59,100 -- 47,060 1,760 17,849
- --------
(1) For each year, the incremental cost to the Company of personal benefits
provided to any Named Officer did not exceed the lesser of $50,000 or 10%
of aggregate salary and bonus.
(2) The amounts shown in this column represent the market values on March 10,
1998 and February 27, 1996 of restricted shares awarded on those dates. At
December 31, 1998 the number and market values of restricted shares held
by the Named Officers were as follows: Mr. Ryan, 8,760 shares ($600,060);
Mr. Hotopp, 4,330 shares ($296,605); Mr. McGee, 1,010 shares ($69,185);
Mr. Herald, 2,100 shares ($143,850); and Mr. Steggles, 1,830 shares
($125,355). Holders of restricted shares receive dividends at the same
rate as paid on other shares of Common Stock.
(3) 1998 amounts include Company matching contributions to the Company's
Retirement Savings and Supplemental Savings Plans as follows: Mr. Ryan,
$19,908; Mr. Hotopp, $15,698; Mr. McGee, $7,865; Mr. Herald, $9,046; and
Mr. Steggles, $8,662. The 1998 amounts also include life insurance
premiums paid by the Company as follows: Mr. Ryan, $17,618; Mr. Hotopp,
$8,199; Mr. McGee, $14,774; Mr. Herald, $10,913; and Mr. Steggles, $9,816.
(4) Mr. McGee was first employed by the Company in January 1997.
4
Stock Option Grants in 1998
The following table sets forth information concerning stock options granted
to the Named Officers in 1998 under the MSIP:
Number of Percent of
Shares Total Options Grant
Underlying Granted to Exercise Date
Options Employees Price Expiration Present
Name Granted (#) in 1998 ($/Share) (1) Date Value (2)
- ---- ----------- ------------- ------------- ---------- ---------
John T. Ryan III 1,650 6.2% $66.61875 3/10/2003 $ 18,346
5,458 20.5% $60.5625 3/10/2008 $103,032
Thomas B. Hotopp 3,366 12.7% $60.5625 3/10/2008 $ 63,538
George R. McGee 1,620 6.1% $60.5625 3/10/2008 $ 30,660
James E. Herald 1,500 5.6% $60.5625 3/10/2008 $ 28,279
George W. Steggles 1,270 4.8% $60.5625 3/10/2008 $ 23,913
- --------
(1) The exercise price is the market value of the Common Stock on the date the
options were granted, except that in the case of the option for 1,650
shares granted to Mr. Ryan it is 110% of such value. The options became
exercisable on September 10, 1998. Except for the option for 5,458 shares
granted to Mr. Ryan and 1,716 shares of the options granted to Mr. Hotopp,
all options are intended to qualify as incentive stock options under the
Internal Revenue Code.
(2) The grant date present value of the options has been determined utilizing
the Black-Scholes option pricing model. The assumptions used to arrive at
the present values were: stock price volatility of 19%, expected dividend
yield of 2%, expected option term of five years for the option for 1,650
shares granted to Mr. Ryan and ten years for the remaining options, and a
5.5% risk-free rate of return.
Stock Option Exercises and Year-End Values
The following table sets forth information concerning stock options under
the MSIP exercised by the Named Officers during 1998 and stock options under
the MSIP held by the Named Officers at December 31, 1998.
Number of
Shares Value of
Number of Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Value Options at Options at
Name on Exercise Realized (1) 12/31/98 (2) 12/31/98 (3)
- ---- ----------- ------------ ------------ ------------
John T. Ryan III 3,420 $ 54,107 19,115 $295,767
Thomas B. Hotopp -- -- 14,550 $249,660
George R. McGee -- -- 1,620 $ 12,859
James E. Herald 1,970 $ 77,323 3,270 $ 33,368
George W. Steggles 4,370 $120,825 1,270 $ 10,081
- --------
(1) Represents the difference between the fair market value of the shares
acquired on the date of exercise and the option price.
(2) All options were exercisable at December 31, 1998.
(3) Represents the amount by which the December 31, 1998 market value of the
shares subject to unexercised options exceeded the option price of those
options.
5
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors has furnished the
following report on 1998 executive compensation:
The Compensation Committee of the Board of Directors is responsible for
recommending to the Board salaries and bonuses to be paid to the Company's
corporate officers, including its executive officers. The Compensation
Committee was also responsible in 1998 for administering the Company's
shareholder approved 1998 Management Share Incentive Plan (the "MSIP"), which
permitted the Committee to make discretionary grants of stock options and
restricted stock as incentives to executive officers and other key employees.
The Compensation Committee's policy in recommending salaries is designed to
pay executive officer salaries at competitive levels necessary to attract and
retain competent personnel while at the same time recognizing Company,
division and individual performance factors. To do this, the Company
periodically retains compensation consultants to assist in evaluating each
United States executive officer position and in determining the market level
salary range for the position based on salaries paid for executive positions
with similar duties and responsibilities by other manufacturing companies of
comparable size and sales volumes. Between these periodic evaluations, market
level salary ranges for each position are reviewed to reflect changes shown by
data provided from compensation surveys. Within the market level salary range
for each executive officer position, the salary to be paid to the individual
officer is determined based on a consideration of Company, division and
individual performance. For United States officers other than the chief
executive officer, Company performance, measured primarily by consolidated net
income for the preceding year, and compensation survey data are used to
establish the aggregate budget for salary increases. Individual salary
adjustments are then determined by allocating the aggregate budget taking into
consideration the relationship of the officer's current salary to the market
level range and an evaluation of the officer's individual performance made
initially by the chief executive officer or the officer's other immediate
supervisor. In the case of the chief executive officer, the individual
performance evaluation and the determination of the amount of the salary
adjustment are made by the Compensation Committee.
The Committee considered 1998 executive officer salaries at its meeting in
December 1997. The salary increase granted to Mr. Ryan was based on a decision
by the Committee to move Mr. Ryan's salary closer to the midpoint of the
market level salary range for the chief executive officer position. Due to
requests by Mr. Ryan to limit the amount of his salary increases in previous
years, Mr. Ryan's 1997 salary was only approximately 87% of the median market
salary for his position. The 1998 salary approved for Mr. Ryan approximated
91% of the market level midpoint.
The Company's annual bonus policy is designed to make a significant
percentage of an executive officer's total cash compensation dependent upon
corporate and individual performance. At targeted levels for United States
officers, this percentage is 50% of median market level salary for the chief
executive officer, and ranges between 40% and 30% of median market level
salary for other executive officers. For the chief executive officer, the
percentage of the targeted bonus earned is initially determined as the
percentage of achievement of a targeted level of consolidated earnings before
interest and taxes (EBIT) for the year by the Company's worldwide operations.
For other United States officers, from 25% to 50% of the initial bonus
determination is based on the percentage of achievement of the consolidated
EBIT target, and the remainder is determined based on the percentage of
achievement of EBIT targets established for the Company's United States
operations and, in the case of division managers, its operating divisions. The
initial percentage of the targeted bonus earned based on EBIT performance may
be adjusted upward or downward for each officer based upon an evaluation of
the individual officer's performance during the year, which is made initially
by the chief executive officer or the officer's other immediate supervisor or,
in the case of the chief executive officer, by the Compensation Committee.
Individual bonuses may not exceed 150% of targeted levels, and no bonus is
paid based on EBIT which is less than 50% of the targeted amount. The total
amount payable as bonuses for executive officers in any year may not exceed 3%
of consolidated EBIT.
6
The Committee considered bonuses for 1998 at its meeting in March 1999. The
amount of the bonus awarded to Mr. Ryan approximated 72.5% of the targeted
amount based on the Committee's evaluation of Company and individual
performance.
Awards under the MSIP are intended to provide executive officers with long-
term incentives in the form of stock-based compensation to remain with the
Company and to work to increase shareowner value. Under both types of awards
utilized under the MSIP, stock options and restricted stock, the value
received by the officer is a direct function of the Company's success in
achieving a long-term increase in the market value of its Common Stock. The
Committee's long-term incentive award program under the MSIP was adopted in
1996 based on recommendations resulting from a study by a compensation
consulting firm. Under the program, the targeted annualized dollar value of
MSIP awards for each executive officer position is based on the market level
annualized dollar value of long-term incentive awards for similar positions,
as determined from compensation survey data. The targeted dollar amounts for
each position may be adjusted upward or downward by the Committee based on an
evaluation of the officer's individual performance made initially by the chief
executive officer or the officer's other immediate supervisor or, in the case
of the chief executive officer, by the Committee.
On an annualized basis, 50% of the adjusted dollar value of long-term
incentive awards, as so determined, is made in the form of stock options and
50% in the form of restricted stock awards. Stock option grants are made
annually, and restricted stock awards are made every other year. The number of
shares for which stock options are granted to each executive officer is
determined by dividing 50% of the adjusted dollar value by the per share value
of the options as determined under the Black-Scholes option pricing model.
Stock options are normally granted as incentive stock options within the
limits established by the Internal Revenue Code and as nonqualified options
above those limits. The option price is equal to the fair market value of the
option shares as of the date the options are granted, except that in the case
of incentive stock options granted to Mr. Ryan, the option price is 110% of
the grant date fair market value. The options become exercisable six months
from the date of grant and have a term of ten years, except that in the case
of incentive stock options granted to Mr. Ryan the term is five years. The
options generally are exercisable only while the grantee remains an employee
of the Company or a subsidiary, except that the options may be exercised for
limited periods after a termination of employment due to death, disability or
retirement or a voluntary termination with the consent of the Company.
The number of shares awarded in the form of restricted stock is determined
by dividing 50% of the adjusted dollar value of long-term incentive awards for
each executive officer by the per share market value on the date of the award,
and then doubling this amount to reflect that restricted stock awards are made
only once every two years. Under the terms of the awards, the restricted
shares granted will vest over a term of four years, with one-half of the
shares awarded vesting on March 15 of each of the third and fourth years
following the award date. Until vesting, the restricted shares are held in
escrow by the Company, may not be sold and generally will be forfeited if the
officer's employment terminates other than by death, disability or retirement
under a Company retirement plan.
In accordance with the Committee's long-term incentive program, the
Committee granted both stock options and restricted stock under the MSIP at
its meeting in March 1998. The amounts of the awards granted to Mr. Ryan were
set at 105% of the targeted value for the chief executive officer position in
recognition of the Company's financial performance for 1997.
At current compensation levels, the Company does not anticipate that it will
be affected by the $1 million cap on deductibility of individual executive
officer compensation imposed by Section 162(m) of the Internal Revenue Code.
The foregoing report was submitted by the Compensation Committee of the
Board of Directors:
Calvin A. Campbell, Jr.,
Chairman
G. Donald Gerlach
Helen Lee Henderson
Thomas H. Witmer
7
Compensation Committee Interlocks and Insider Participation
There are no interlocking relationships, as defined in regulations of the
Securities and Exchange Commission, involving members of the Compensation
Committee.
Directors Campbell, Gerlach and Henderson served as members of the
Compensation Committee during all of 1998. Director Witmer was elected a
member of the Compensation Committee at the organizational meeting of the
Board following the 1998 Annual Meeting of Shareholders.
Mr. Gerlach is a partner in the law firm of Reed Smith Shaw & McClay, which
provides legal services to the Company as its outside counsel. Mr. Campbell is
a majority owner, a director and Chairman, President and Chief Executive
Officer of Goodman Equipment Corporation. During 1998, the Company and its
affiliates received commissions of approximately $114,128 for acting as sales
agents with respect to sales of certain mining locomotives and spare parts for
Goodman Equipment Corporation.
Retirement Plans
The following table shows the estimated annual retirement benefits payable
upon normal retirement at age 65 under the Company's Non-Contributory Pension
Plan for Employees to participating employees, including executive officers,
in selected compensation and years-of-service classifications.
5 Year Average Compensation
Years of -----------------------------------------------------
Service $100,000 $300,000 $500,000 $700,000 $900,000
-------- -------- -------- -------- -------- --------
5 $ 6,088 $ 21,588 $ 37,088 $ 52,588 $ 68,088
15 18,263 64,763 111,263 157,763 204,263
25 30,439 107,939 185,439 262,939 340,439
35 42,614 151,114 259,614 368,114 476,614
45 52,614 181,114 309,614 438,114 566,614
- --------
Notes:
1. Years of service are based upon completed months of service from date of
hire to date of retirement.
2. The benefits actually payable under the plan will be subject to the
limitations of Sections 415 and 401(a)(17) of the Internal Revenue Code.
These limitations have not been reflected in the table. However, the
Company has a supplemental plan providing for the payment by the Company to
officers on an unfunded basis of the difference between the amounts payable
under the benefit formula of the pension plan and the benefit limitations
of Sections 415 and 401(a)(17) of the Internal Revenue Code.
3. This table applies to employees born in calendar year 1939. The actual
benefits payable will vary slightly depending upon the actual year of
birth.
4. The benefits shown have been calculated using the Social Security law in
effect on January 1, 1999, with a maximum taxable wage base of $72,600
assumed until retirement.
The amounts shown in the table are straight-life annuity amounts, assuming
no election of any available survivorship option, and are not subject to any
Social Security or other offsets. Benefits under the plan are based on the
highest annual average of the participant's covered compensation for any five
consecutive years of service, with covered compensation including salary and
bonus. As of December 31, 1998, years of service under the plan for the Named
Officers were: Mr. Ryan III, 29.50 years; Mr. Hotopp, 7.42 years; Mr. McGee,
1.92 years; Mr. Herald, 11.33 years; and Mr. Steggles, 6.66 years.
The Company's Executive Insurance Program was established to assist members
of senior management approved by the Board in procuring life insurance during
their working careers and to provide them with additional flexibility and
benefits upon retirement. Under the program, the Company's group term life
insurance in excess of $50,000 is replaced with individual insurance up to an
approved amount. Premiums are paid by the
8
Company and are included under "All Other Compensation" in the above
compensation table. In lieu of insurance after retirement, the participant may
elect (i) an uninsured death benefit from the Company in the insurance amount,
which would be taxable when paid, or (ii) to have 75% of the insurance amount
paid to him by the Company in monthly installments over 15 years. If the
second uninsured alternative were selected, the annual amount payable by the
Company upon retirement would be $50,000 for Mr. Ryan III, $37,500 for
Mr. Hotopp, and $30,000 for Messrs. McGee, Herald and Steggles. If either of
the two uninsured alternatives are selected, the death benefit on the
insurance policy would be paid to the Company.
Change In Control Severance Agreements
The Company has entered into agreements with each of the named officers the
stated purpose of which is to encourage the officers' continued attention and
dedication to their duties without distraction in the event of an actual or
potential change in control of the Company. In the agreements, the officers
agree that if a potential change in control, as defined in the agreements,
occurs, the officers will remain in the employment of the Company for at least
6 months or until an actual change in control occurs, unless employment is
sooner terminated by the executive for good reason, as defined in the
agreement, or due to death, disability or retirement or by the Company. In
return, the agreements provide that if within 3 years after a change in
control, as defined in the agreement, the officer's employment is terminated
by the Company without cause, as defined in the agreement, or the officer
terminates his employment for good reason, as defined in the agreement, the
officer will be entitled to receive (a) a lump sum payment equal to three
times the sum of (i) officer's annual salary plus (ii) the average annual
bonus paid to the officer for the preceding two years, (b) continuation for 36
months of medical, dental, accident and life insurance benefits and (c) 36
months additional service credit under the Company's executive insurance and
post-retirement health care programs. In the case of Mr. Ryan, these benefits
would also be payable if he voluntarily terminated his employment for any
reason within one year after a change in control. The benefits payable under
the agreements are limited to the amount that can be paid without triggering
any excise tax or rendering any amounts non-deductible under the Internal
Revenue Code. Except in the case of Mr. Ryan, the limitation will not apply if
the reduced benefit is less than the unreduced benefit after payment of any
excise tax.
Director Compensation
Beginning in March 1998, directors who are not employees of the Company or
one of its subsidiaries were paid a retainer at the rate of $5,000 per quarter
and $1,000 for each day of a Board meeting and each meeting of a Committee of
the Board that they attended. Prior to March 1998, the quarterly retainer rate
was $4,000, and the fee for attendance at Board Committee meetings was $700.
Directors who are employees of the Company or a subsidiary do not receive
additional compensation for service as a director. Under the Retirement Plan
for Directors, directors who retire from the Board on or after attaining age
70 and completing at least 5 years of service as a director are entitled to
receive a lifetime quarterly retirement allowance equal to the quarterly
directors' retainer payable at the time of their retirement.
The 1990 Non-Employee Directors' Stock Option Plan (the "DSOP") was approved
by the shareholders at the 1991 Annual Meeting. Its purposes are to enhance
the mutuality of interests between the Board and the shareholders by
increasing the share ownership of non-employee directors and to assist the
Company in attracting and retaining able persons to serve as directors. Under
the DSOP, directors who are not employees of the Company or a subsidiary
receive annual stock option grants to purchase up to 500 shares of Common
Stock at an option price equal to the market value on the date the options are
granted. The options become exercisable six months from the date of grant and
expire ten years from the date of grant. Options which have not yet become
exercisable are forfeited if the grantee ceases to be a director for reasons
other than death or disability. Otherwise, unexpired options may generally be
exercised for two years following termination of service as a director. The
total number of shares which may be issued under the DSOP is limited to 50,000
shares of Common Stock. Pursuant to the terms of the DSOP, on May 8, 1998
options to purchase 500 shares of Common Stock at an exercise price of $71.625
per share were granted to directors Calihan, Campbell, Gerlach, Henderson and
Witmer.
9
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
Among S&P 500 Index, Russell 2000 Index and Mine Safety Appliances Company
Set forth below is a line graph and table comparing the cumulative total
returns (assuming reinvestment of dividends) for the five years ended December
31, 1998 of $100 invested on December 31, 1993 in each of the Company's Common
Stock, the Standard & Poor's 500 Composite Index and the Russell 2000 Index.
Because its competitors are principally privately held concerns or
subsidiaries or divisions of corporations engaged in multiple lines of
business, the Company does not believe it feasible to construct a peer group
comparison on an industry or line-of-business basis. The Russell 2000 Index,
while including corporations both larger and smaller than the Company in terms
of market capitalization, is composed of corporations with an average market
capitalization similar to that of the Company.
[GRAPH APPEARS HERE]
Value at December 31,
-----------------------------------------------------------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Mine Safety Appliances Company $100.00 $108.87 $118.71 $134.75 $169.07 $186.84
S&P 500 Index $100.00 $101.32 $139.40 $171.41 $228.59 $293.92
Russell 2000 Index $100.00 $ 98.19 $126.11 $147.05 $179.90 $174.86
10
STOCK OWNERSHIP
Under regulations of the Securities and Exchange Commission, a person is
considered the "beneficial owner" of a security if the person has or shares
with others the power to vote the security (voting power) or the power to
dispose of the security (investment power). In the tables which follow,
"beneficial ownership" of the Company's stock is determined in accordance with
these regulations and does not necessarily indicate that the person listed as
a "beneficial owner" has an economic interest in the shares indicated as
"beneficially owned."
Beneficial Ownership of Management
The following table sets forth information regarding the amount and nature
of beneficial ownership of the Company's Common Stock as of February 26, 1999
and 4 1/2% Cumulative Preferred Stock as of February 19, 1999 by each director
and Named Officer and by all directors and executive officers as a group.
Except as otherwise indicated in the footnotes to the table, the person named
or a member of the group has sole voting and investment power with respect to
the shares listed.
4 1/2% Cumulative
Common Stock Preferred Stock
------------------------ -------------------
Amount and Amount and
Nature of Percent Nature of Percent
Beneficial of Beneficial of
Ownership (1) Class (1) Ownership Class
------------- --------- ---------- -------
John T. Ryan III 620,229(2) 12.54% 446(2) 2.02%
Joseph L. Calihan 6,250 0.13% -- --
Calvin A. Campbell, Jr. 2,900 0.06% -- --
G. Donald Gerlach 273,563(3) 5.55% 93(3) 0.42%
Helen Lee Henderson 311,716(4) 6.32% 579(4) 2.62%
Thomas B. Hotopp 23,264(5) 0.47% -- --
L. Edward Shaw, Jr. 134,166(6) 2.72% 721(6) 3.27%
Thomas H. Witmer 500 0.01% -- --
James E. Herald 44,628(7) 0.91% -- --
George R. McGee 39,405(7) 0.80% -- --
George W. Steggles 39,391(7) 0.80% -- --
All executive officers and
directors
as a group (17 persons) 1,469,254 29.45% 1,839 8.34%
- --------
(1) The number of shares of Common Stock beneficially owned and the number of
shares of Common Stock outstanding used in calculating the percent of
class include the following shares of Common Stock which may be acquired
within 60 days upon the exercise of stock options held under the MSIP or
the DSOP: Mr. Ryan, 19,115 shares; Mr. Calihan, 2,700 shares; Mr.
Campbell, 1,500 shares; Mr. Gerlach, 3,100 shares; Ms. Henderson, 3,100
shares; Mr. Witmer, 500 shares; Mr. Hotopp, 14,550 shares; Mr. Herald,
3,270 shares; Mr. McGee, 1,620 shares; Mr. Steggles, 1,270 shares; and all
directors and executive officers as a group, 61,935 shares. The number of
shares of Common Stock beneficially owned also includes the following
restricted shares awarded under the MSIP, as to which such persons have
voting power only: Mr. Ryan, 8,760 shares; Mr. Hotopp, 4,330 shares; Mr.
Herald, 2,100 shares; Mr. McGee, 1,010 shares; Mr. Steggles, 1,830 shares;
and all directors and executive officers as a group, 25,290 shares.
(2) Does not include 113,702 shares of Common Stock held by Mr. Ryan's wife.
Includes 428,086 shares of Common Stock and 259 shares of 4 1/2%
Cumulative Preferred Stock held in trusts and an estate, as to which Mr.
Ryan shares voting and investment power with co-fiduciaries. Of such
shares, voting and investment power over 260,435 shares of Common Stock is
shared with G. Donald Gerlach, and voting and investment power over
410,586 shares of Common Stock and 259 shares of 4 1/2% Cumulative
Preferred Stock is shared with Mary Irene Ryan. See the following
discussion of the beneficial ownership of Mary Irene Ryan.
11
(3) Includes 260,435 shares of Common Stock held in trusts, as to which Mr.
Gerlach shares voting and investment power with co-trustees. Of such
shares, voting and investment power over 260,435 shares of Common Stock is
shared with John T. Ryan III, and voting and investment power over 242,935
shares of Common Stock is shared with Mary Irene Ryan. See the following
discussion of the beneficial ownership of Mary Irene Ryan.
(4) Includes 237,536 shares of Common Stock held in trusts, as to which Ms.
Henderson shares voting and investment power with co-trustees. See the
following discussion of the beneficial ownership of PNC Bank Corp. and
Helen Ruth Henderson.
(5) Includes 1,500 shares of Common Stock as to which Mr. Hotopp shares voting
and investment power with his wife.
(6) Includes 106,484 shares of Common Stock and 721 shares of Preferred Stock
held by Mr. Shaw's wife and 13,803 shares of Common Stock held as
custodian.
(7) The Company has established a Stock Compensation Trust which holds 571,690
shares of Common Stock which are available to satisfy obligations of the
Company under its stock incentive plans. Under the terms of the Trust
Agreement, the trustee, PNC Bank, must follow the directions of the
holders of stock options under the plans, excluding members of the Board
of Directors, in voting the shares held by the Trust and in determining
whether such shares should be tendered in the event of a tender or
exchange offer for the Common Stock. Each such option holder has the power
to direct the trustee with respect to a number of shares of Common Stock
equal to the shares held by the Trust divided by the number of option
holders. Included in the table are 35,731 shares of Common Stock each for
Messrs. Herald, McGee and Steggles, and 321,579 shares of Common Stock for
all directors and executive officers as a group, as to which such persons
and other executive officers of the Company have such voting and
investment power. See the following discussion of the beneficial ownership
of PNC Bank Corp.
5% BENEFICIAL OWNERS
As of February 26, 1999, to the best of the Company's knowledge, six persons
or entities beneficially owned more than 5% of the Company's Common Stock. The
beneficial ownership of John T. Ryan III, G. Donald Gerlach and Helen Lee
Henderson appears in the immediately preceding table. The following table sets
forth the beneficial ownership of the other 5% beneficial owners, based upon
information provided by such persons:
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
- ------------------- -------------------- --------
Mary Irene Ryan 609,165(1)(2)(3) 12.36%
20 West Woodland Road
Pittsburgh, Pennsylvania 15232
PNC Bank Corp. 906,110(4)(5)(6)(7) 18.39%
PNC Bank Building
Pittsburgh, Pennsylvania 15265
Helen Ruth Henderson 407,026(7)(8)(9) 8.26%
728 Fairview Road
Pittsburgh, Pennsylvania 15238
- --------
(1) Mary Irene Ryan has sole voting and investment power with respect to
198,579 and 102,579 shares, respectively, and shares voting and investment
power with respect to 410,586 and 506,586 shares, respectively.
(2) Includes 410,586 shares of Common Stock as to which Mary Irene Ryan and
John T. Ryan III share voting and investment power as co-fiduciaries. Mary
Irene Ryan is the mother of John T. Ryan III.
12
(3) Includes 242,935 shares of Common Stock as to which Mary Irene Ryan and G.
Donald Gerlach share voting and investment power as co-fiduciaries.
(4) All shares are held by subsidiary banks of PNC Bank Corp. ("PNC") in
various fiduciary capacities. The banks have sole voting and investment
power with respect to 63,044 and 5,844 shares, respectively, and share
voting and investment power with respect to 271,376 and 846,166 shares,
respectively.
(5) Includes 219,036 shares as to which PNC and Helen Lee Henderson share
voting and investment power as co-trustees. The trustees have delegated
the authority to vote these shares to Helen Lee Henderson.
(6) Includes 571,690 shares of Common Stock held by the Company's Stock
Compensation Trust, as to which investment power is shared with certain
executive officers of the Company and other holders of stock options under
Company plans. See footnote (7) to the immediately preceding table.
(7) Includes 52,340 shares as to which PNC and Helen Ruth Henderson share
voting and investment power.
(8) Helen Ruth Henderson has sole voting and investment power with respect to
290,634 shares and shares voting and investment power with respect to
116,392 and 70,840 shares, respectively. Does not include 6,240 shares of
Common Stock held by Helen Ruth Henderson's husband.
(9) Includes 18,500 shares as to which Helen Ruth Henderson and Helen Lee
Henderson share voting and investment power. Helen Ruth Henderson is the
mother of Helen Lee Henderson.
Beneficial Ownership of Ryan and Henderson Families
The preceding tables disclose in accordance with Securities and Exchange
Commission requirements only a portion of the aggregate beneficial ownership
of the Company's Common Stock by the Ryan and Henderson families. As of
February 26, 1999, members of the extended family of John T. Ryan III and Mary
Irene Ryan, including trusts for their benefit, beneficially owned to the
knowledge of the Company an aggregate of 1,672,948 shares of Common Stock,
representing 33.82% of the outstanding shares. As of the same date, members of
the extended family of Helen Lee Henderson and Helen Ruth Henderson, including
trusts for their benefit, beneficially owned to the knowledge of the Company
an aggregate of 766,387 shares of Common Stock, representing 15.55% of the
outstanding shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires that directors and officers of the Company and beneficial owners of
more than 10% of its Common Stock file reports with the Securities and
Exchange Commission with respect to changes in their beneficial ownership of
equity securities of the Company. Based solely upon a review of the copies of
such reports furnished to the Company and written representations by certain
persons that reports on Form 5 were not required, the Company believes that
all 1998 Section 16(a) filing requirements applicable to its directors,
officers and greater-than-10% beneficial owners were complied with.
PROPOSAL NO. 2
SELECTION OF INDEPENDENT ACCOUNTANTS
Because of the importance to the shareholders of having the Company's
accounts reviewed by independent accountants, it is the opinion of the Board
of Directors that the selection of independent accountants should be submitted
to the shareholders. The firm of PricewaterhouseCoopers LLP has been the
independent accountants for the Company since 1959. PricewaterhouseCoopers LLP
has advised the Company that neither the firm nor any of its partners has any
direct or material indirect financial interest in the Company or any of its
subsidiaries.
As independent accountants for the fiscal year ended December 31, 1998
PricewaterhouseCoopers LLP provided auditing services in connection with their
examination of the consolidated financial statements of the Company, the
separate financial statements of certain of its subsidiaries and certain
periodic filings made by the Company with the Securities and Exchange
Commission.
13
The Board of Directors recommends a vote for the selection of
PricewaterhouseCoopers LLP as independent accountants, and proxies received in
the accompanying form will be so voted, unless a contrary specification is
made. It is expected that one or more representatives of
PricewaterhouseCoopers LLP will be present at the Annual Meeting with the
opportunity to make a statement, if they desire to do so, and to respond to
appropriate questions. See "Election of Directors" for information concerning
the Audit Committee of the Board of Directors.
Approval of this proposal requires the affirmative vote of a majority of the
votes cast on the proposal at the Annual Meeting by the holders of Common
Stock voting in person or by proxy. Under the Pennsylvania Business
Corporation Law, an abstention is not a vote cast and will not be counted in
determining the number of votes required for approval, though it will be
counted in determining the presence of a quorum. In the event the proposal is
not approved, the Board will treat this as a recommendation to consider other
auditors for 2000.
OTHER MATTERS
The Board of Directors does not know of any matters, other than those
referred to herein, which will be presented for action at the meeting.
However, in the event of a vote on any other matter that should properly come
before the meeting, it is intended that proxies received in the accompanying
form will be voted thereon in accordance with the discretion and judgment of
the persons named in the proxies.
ANNUAL REPORT ON FORM 10-K
Upon written request to the undersigned Secretary of the Company (at the
address specified on page 1) by any shareholder whose proxy is solicited
hereby, the Company will furnish a copy of its 1998 Annual Report on Form 10-K
to the Securities and Exchange Commission, together with financial statements
and schedules thereto, without charge to the shareholder requesting same.
2000 SHAREHOLDER PROPOSALS
To be eligible for inclusion in the Company's proxy statement for the 2000
Annual Meeting, any shareholder's proposal(s) must be received by the Company
at its principal executive offices not later than November 26, 1999.
EXPENSES OF SOLICITATION
All expenses incident to the solicitation of proxies by the Board of
Directors will be paid by the Company. The Company will, upon request,
reimburse brokerage houses and other custodians, nominees and fiduciaries for
reasonable out-of-pocket expenses incurred in forwarding copies of
solicitation material to beneficial owners of Common Stock held in the names
of such persons. In addition to solicitation by mail, in a limited number of
instances, regular employees of the Company may solicit proxies in person or
by telephone. Employees will receive no additional compensation for any such
solicitation.
By Order of the Board of
Directors,
DONALD H. CUOZZO
Secretary
14
[LOGO OF MSA APPEARS HERE]
MINE SAFETY APPLIANCES COMPANY . P.O. BOX 426, PITTSBURGH, PENNSYLVANIA
15230 . PHONE (412) 967-3000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Holders of 4 1/2% Cumulative Preferred Stock of
Mine Safety Appliances Company:
Notice is hereby given that the Annual Meeting of Shareholders of Mine
Safety Appliances Company will be held on Tuesday, May 11, 1999, at 9:00 A.M.,
local Pittsburgh time, at the Company's headquarters, 121 Gamma Drive, RIDC
Industrial Park, O'Hara Township, Pittsburgh, Pennsylvania for the purpose of
considering and acting upon the following:
(1) Election of Directors: The election of three directors for a term of
three years;
(2) Selection of Independent Accountants: The selection of independent
accountants for the year ending December 31, 1999;
and such other business as may properly come before the Annual Meeting or any
adjournment thereof.
Only the holders of Common Stock of the Company of record on the books of
the Company at the close of business on February 26, 1999 are entitled to
notice of and to vote at the meeting and any adjournment thereof.
You are cordially invited to attend the meeting even though as a holder of 4
1/2% Cumulative Preferred Stock you have no voting rights.
By Order of the Board of
Directors,
Donald H. Cuozzo
Secretary
March 25, 1999
MINE SAFETY APPLIANCES COMPANY
Annual Meeting of Shareholders
Tuesday, May 11, 1999
9:00 a.m.
121 Gamma Drive
RIDC Industrial Park
Pittsburgh, PA 15238
Mine Safety Appliances Company
- -------------------------------------------------------------------------------
This proxy is solicited on behalf of the Board of Directors.
Proxy--Mine Safety Appliances Company--1999 Annual Meeting of Shareholders
The undersigned hereby appoints John T. Ryan III, Thomas B. Hotopp and
Donald H. Cuozzo, or any of them, as proxies, with power of substitution, to
vote all shares of MINE SAFETY APPLIANCES COMPANY which the undersigned is
entitled to vote at the 1999 Annual Meeting of Shareholders and any
adjournment thereof:
This proxy will be voted as directed, or, if no direction is given, FOR
items 1 and 2 below. A vote FOR item 1 includes discretionary authority to
vote for a substitute if any nominee listed becomes unable or unwilling to
serve. The proxies named are authorized to vote in their discretion upon such
other matters as may properly come before the meeting or any adjournment
thereof.
The undersigned hereby revokes all previous proxies for such Annual Meeting,
acknowledges receipt of the Notice of Annual Meeting and Proxy Statement, and
ratifies all that said proxies may do by virtue hereof.
PLEASE MARK, DATE, EXECUTE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.
. Please detach here .
The Board of Directors Recommends a Vote FOR Items 1 and 2 Below:
1. Election of three Directors for
terms expiring in 2002. Nominees: [_] Vote FOR[_] Vote WITHHELD
01 Joseph L. Calihan
02 L. Edward Shaw, Jr. all nominees from all nominees
03 Thomas H. Witmer (except as specified below)
(Instructions: To withhold authority to
vote for any nominee, write the
number(s) of the nominee(s) in the box
provided to the right.)
[_] For [_] Against[_] Abstain
2. Selection of PricewaterhouseCoopers
LLP as independent accountants.
Address Change? Mark Box [_]
Indicate changes below: Date ___________________ , 1999
Signature (s) in Box
Please sign exactly as your
name appears hereon. FOR
JOINT ACCOUNTS, EACH JOINT
OWNER SHOULD SIGN. When
signing as attorney,
executor, administrator,
trustee, etc., please give
your full title as such. If
a corporation, please sign
full corporate name by
President or other
authorized officer and give
full title. If a
partnership, please sign in
partnership name by
authorized person and give
full title.
- --
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