-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DdIZ/sNnkZmbY+6Kn+92YJ7WJMq47q2BR5Y9JTnbL80xfh8kBiTiGTU7q+wGCrpv JZRzlGQbi1+8gghwhGqgtA== 0000950123-99-000046.txt : 19990107 0000950123-99-000046.hdr.sgml : 19990107 ACCESSION NUMBER: 0000950123-99-000046 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19990106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METTLER TOLEDO INTERNATIONAL INC/ CENTRAL INDEX KEY: 0001037646 STANDARD INDUSTRIAL CLASSIFICATION: MISC INDUSTRIAL & COMMERCIAL MACHINERY & EQUIPMENT [3590] IRS NUMBER: 133668641 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-68123 FILM NUMBER: 99501325 BUSINESS ADDRESS: STREET 1: IM LANGACHER P O BOX MT-100 STREET 2: CH 8606 GREIFENSEE CITY: SWITZERLAND STATE: V8 BUSINESS PHONE: 2126445900 MAIL ADDRESS: STREET 1: IM LANGACHER STREET 2: P O BOX MT 100 CH 8606 GREIFENSEE CITY: SWITZERLAND STATE: V8 FORMER COMPANY: FORMER CONFORMED NAME: METTLER TOLEDO INTERNATIONAL INC DATE OF NAME CHANGE: 19971117 FORMER COMPANY: FORMER CONFORMED NAME: MT INVESTORS INC DATE OF NAME CHANGE: 19970411 S-3/A 1 AMENDMENT NO. 1 TO FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 6, 1999 REGISTRATION STATEMENT NO. 333-68123 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ METTLER-TOLEDO INTERNATIONAL INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3596 13-3668641 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number)
------------------------ IM LANGACHER WILLIAM P. DONNELLY P.O. BOX MT-100 METTLER-TOLEDO INTERNATIONAL INC. CH-8606 GREIFENSEE, SWITZERLAND 1900 POLARIS PARKWAY 011-41-1-944-22-11 COLUMBUS, OH 43240 (614) 438-4511 (Address, including zip code, and telephone number, (Name, address, including zip code, and telephone including area code, of registrant's principal number, executive offices) including area code, of agent for service)
------------------------ COPIES TO: TIMOTHY E. PETERSON, ESQ. JAMES C. SCOVILLE, ESQ. FRIED, FRANK, HARRIS, SHRIVER & JACOBSON DEBEVOISE & PLIMPTON 4 CHISWELL STREET 875 THIRD AVENUE LONDON, EC1Y 4UP, ENGLAND NEW YORK, NEW YORK 10022 (011-44-171) 972-9600 (212) 909-6000
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the Prospectus is expected to be made pursuant to Rule 434, please check the following box. [X] CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED TITLE OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(1)(2) REGISTRATION FEE(2)(3) - --------------------------------------------------------------------------------------------------------------------------------- Common Stock $.01 par value...... 6,425,050 $22.625 $145,366,757 $40,413 - --------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------
(1) Includes shares of Common Stock that may be sold pursuant to the Underwriters' over-allotment options. (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c), using the average of the high and low prices reported on the New York Stock Exchange on November 20, 1998. (3) The Company previously paid a filing fee of $40,868. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 EXPLANATORY NOTE This registration statement contains two forms of prospectus: one to be used in connection with a United States and Canadian offering of the registrant's common stock (the "U.S. Prospectus") and one to be used in connection with a concurrent international offering of the registrant's common stock (the "International Prospectus"). The International Prospectus will be identical to the U.S. Prospectus except that it will have a different front cover page, underwriting section and back cover page. The U.S. Prospectus is included herein and is followed by the alternate pages to be used in the International Prospectus. The front cover page, underwriting section and back cover page for the International Prospectus included herein have all been labeled "Alternate Page for International Prospectus." 3 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED JANUARY 6, 1999 PROSPECTUS 5,587,000 SHARES METTLER-TOLEDO INTERNATIONAL INC. COMMON STOCK ----------------------- METTLER.LOGO The selling shareholders of Mettler-Toledo International Inc. are offering and selling 5,587,000 shares of common stock. None of our directors, executive officers or employees is selling shares in this offering, and neither we nor they will receive any proceeds from the sale of the shares. The underwriters have agreed to pay certain of our expenses in connection with the offerings estimated at $ . The U.S. underwriters are offering 4,469,600 shares in the United States and Canada and the international managers are offering 1,117,400 shares outside the United States and Canada. The common stock trades on the New York Stock Exchange under the symbol "MTD." On January 5, 1999, the last sale price of the common stock as reported on the New York Stock Exchange was $27 1/4 per share. INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE "RISK FACTORS" SECTION BEGINNING ON PAGE 13 OF THIS PROSPECTUS. -----------------------
PER SHARE TOTAL --------- ----- Public Offering Price...................................... $ $ Underwriting Discount...................................... $ $ Proceeds to Selling Shareholders........................... $ $
The U.S. underwriters may also purchase up to an additional 670,440 shares from the selling shareholders at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over-allotments. The international managers may similarly purchase up to an aggregate of an additional 167,610 shares from the selling shareholders. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The shares of common stock will be ready for delivery in New York, New York on or about , 1999. ----------------------- MERRILL LYNCH & CO. BT ALEX. BROWN CREDIT SUISSE FIRST BOSTON GOLDMAN, SACHS & CO. J.P. MORGAN & CO. ----------------------- The date of this prospectus is , 1999. 4 [The middle front cover contains pictures and the following captions] METTLER TOLEDO No. 1 in weighing instruments and a leader in related measurement technologies Laboratory METTLER TOLEDO A determining factor in every lab [Photograph of a pH meter] pH Meters are used to measure acidity of solutions. [Photograph of pipettes] Liquid handling devices such as pipettes are the most widely used instruments in the rapidly growing life science market. [Photograph of a balance in use] Analytical/Precision Balances are vital to research & development and quality control in almost any industry. [Photograph of a moisture analyzer in use] Moisture Analyzers monitor reliability of production in the food and other industries. [Photograph of a titrator] Titrators provide accurate measures of concentration in various industries. [Photograph of a thermal analysis system in use] Thermal Analysis Systems facilitate consistency of material characteristics in the plastics and other industries. [Photograph of a Bohdan automator in use] Products for automated sample preparation increase productivity in the laboratory. [Photograph of a Myriad synthesizer] Automated Synthesizers facilitate the synthesis of large numbers of chemical compounds in parallel. [Photograph of an automatic lab reactor] Automatic Lab Reactors assist chemical engineers in optimizing new production processes. Industrial/Retail Leading solutions for industrial and retail measurement applications [Photograph of a truck scale in use] Truck Scale Systems are utilized in highway enforcement and also check incoming goods. [Photograph of integrated dimensioning and weighing products in use] Integrated Dimensioning and weighing products allow complete and accurate freight tariff calculation for the cargo industry. [Photograph of an industrial weighing terminal] Industrial Weighing Terminals are based on open system architecture that enables interaction with customers' enterprise software packages. [Photograph of a metal detector in use] Metal Detectors provide important product safety and quality checks in the food and pharmaceutical industries. [Photograph of a checkweigher] Checkweighers automatically weigh goods and control the packaging process in the pharmaceutical, food and other industries. [Photograph of a retail scale system in use] Retail Scale Systems are networked with scanners, cash registers and backroom equipment and provide perishable goods information to in-store computers. [Photograph of a prepacking system in use] Prepacking Systems weigh and label products and can be networked with weighing technology at the counter, check-out and the backoffice. 2 5 TABLE OF CONTENTS
PAGE ---- Summary..................................................... 5 Risk Factors................................................ 13 Use of Proceeds............................................. 19 Dividend Policy............................................. 19 Price Range of Common Stock................................. 19 Capitalization.............................................. 20 Selected Historical Financial Information................... 20 Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 23 Industry.................................................... 39 Business.................................................... 42 Management.................................................. 59 Certain Relationships and Related Transactions.............. 64 Principal and Selling Shareholders.......................... 65 Description of Credit Agreement............................. 67 Description of Capital Stock................................ 69 Shares Eligible for Future Sale............................. 72 Certain United States Federal Tax Considerations for Non-United States Holders................................. 73 Underwriting................................................ 76 Legal Matters............................................... 78 Independent Auditors........................................ 78 Where You Can Find More Information......................... 79 Incorporation of Certain Documents by Reference............. 79 Index to Consolidated Financial Statements.................. F-1
------------------------- FORWARD-LOOKING STATEMENTS This prospectus includes forward-looking statements based on our current expectations and projections about future events. These forward-looking statements are subject to a number of risks and uncertainties which could cause our actual results to differ materially from historical results or those anticipated and certain of which are beyond our control. The words "believe," "expect," "anticipate" and similar expressions identify forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. See "Risk Factors -- Forward-Looking Statements and Associated Risks" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." ------------------------- Mettler-Toledo(R), Mettler(R), Ingold(R), Garvens(R), Ohaus(R), DeltaRange(R), DigiTol(R), Mentor SC(R), PILAR(R), Safeline(R), Spider(R), TrimWeigh(R) and TRUCKMATE(R) are our registered trademarks and MonoBloc(TM), MultiRange(TM), Signature(TM) and Powerphase(TM) are our trademarks. 3 6 Unless otherwise indicated, industry data contained herein is derived from publicly available industry trade journals, government reports and other publicly available sources. We have not independently verified this data but we believe the data is reliable. Where such sources are not available, industry data is derived from our internal estimates, which we believe to be reasonable, but which cannot be independently verified. As used in this prospectus, "$" refers to U.S. dollars, "SFr" refers to Swiss francs, "L" refers to British pounds sterling and "CDN $" refers to Canadian dollars. ------------------------- You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date. 4 7 SUMMARY This summary may not contain all of the information that may be important to you. You should read the entire prospectus, including the financial data and related notes, before making an investment decision. Unless otherwise stated or where the context otherwise requires, references herein to we, our, the Company or Mettler-Toledo refer to Mettler-Toledo International Inc. and its direct and indirect subsidiaries. THE COMPANY GENERAL Mettler-Toledo is a leading global supplier of precision instruments. We are the world's largest manufacturer and marketer of weighing instruments for use in laboratory, industrial and food retailing applications. We also hold leading positions in various related precision measurement instrument technologies which we sell to the same customer base. For instance, we hold one of the top three global market positions in the following analytical instruments: titrators, thermal analysis systems, pH meters, automatic lab reactors and electrodes. In addition, we are the global market leader in metal detection equipment for use in the production and packaging of goods in industries such as food processing, pharmaceutical, cosmetics, chemicals and other industries. Weighing instruments are among the most broadly used measuring devices, and their results are often used as the basis of commercial transactions. Analytical instruments are critical to the research and development and quality control efforts of end-users, while metal detection systems provide important quality and safety checks in production and packaging. Our customers include pharmaceutical, biotechnology, chemicals, cosmetics, food and beverage, metals, electronics, logistics, transportation and food retailing businesses, as well as schools, universities and government standards laboratories. We estimate the global market [CHART SHOWING for weighing instruments to be SALES BY GEOGRAPHY] approximately $4.5 billion and the market for other measurement instruments to be approximately $1.5 billion, and we participate in these markets on a worldwide basis. In 1997, our sales were $878.4 million. In the first nine months of 1998, our sales were $669.7 million. Of this total, 45% came from Europe, 44% from North and South America and 11% from Asia and other countries. MARKET LEADERSHIP We believe that we have a leading position in each of our markets, and at least 80% of our product sales are from products that are the global leaders in their segment. We attribute our worldwide market leadership positions to the following competitive strengths: - Global Brand and Reputation. The Mettler-Toledo brand name is identified worldwide with accuracy, reliability and innovation. Customers value these characteristics because precision instruments, particularly weighing and analytical instruments, significantly impact customers' product quality, productivity, costs and regulatory compliance. A recent independent survey concluded that "Mettler-Toledo" was one of the three most recognized brand names in the laboratory. In fact, laboratory balances are often generically referred to as "Mettlers." - Technological Innovation. We focus on the high value-added segments of our markets by delivering innovation to the marketplace. We have a long and successful track record of innovation and remain at the forefront of technological development. 5 8 - Comprehensive, High Quality Product Range. We manufacture a more comprehensive range of weighing instruments than any of our competitors. Our broad range of high quality products allows us to leverage our global infrastructure. - Global Sales and Service. We have the only global sales and service organization among weighing instruments manufacturers, and we believe that this capability is a major competitive advantage. At September 30, 1998, this organization consisted of approximately 3,200 employees organized into locally-based, customer-focused groups that provide prompt service and support to our customers and distributors in virtually all major markets around the world. - Largest Installed Base. We believe that we have the largest installed base of weighing instruments in the world. From this installed base, we obtain service contracts that provide a strong, stable source of recurring service revenue. We believe that our installed base of weighing instruments represents a competitive advantage with respect to repeat purchases and purchases of related analytical instruments and metal detection systems, because customers tend to remain with their existing suppliers. - Geographical, Product and Customer Diversification. Our revenue base is diversified by geographic region, product range and customer. Our diverse revenue base reduces our exposure to regional or industry-specific economic conditions, and our presence in many different geographic markets, product markets and industries enhances our attractiveness as a supplier to multinational customers. GROWTH STRATEGIES In 1996 our managers and employees, along with AEA Investors Inc., participated in the acquisition of the Mettler-Toledo group of companies from Ciba-Geigy AG. At that time, we implemented a new strategic plan to improve our financial performance and undertook to involve all of our personnel in its implementation. We launched specific, targeted initiatives at all levels of the Company and we worked to ensure that our culture embraced the strategic plan and its underlying initiatives. The commitment of our employees has been instrumental in our success, and we believe two factors have ensured this commitment. First, we reorganized how we managed our business. This reorganization, which reflected a basic philosophical change, permitted us to break down our centralized decision-making functions and to spread responsibility and accountability more broadly throughout the organization. Second, employees took active ownership in the Company. Following the completion of our initial public offering, management, employees and Company sponsored pension funds held approximately 18% of our shares on a fully diluted basis. We believe these two factors have continued to enhance what was already a proud corporate culture with a results-oriented mindset. The successful implementation of our strategic plan to date has contributed to an improvement in Adjusted Operating Income (gross profit less research and development and selling, general and administrative expenses before amortization and non-recurring costs) from $39.5 million (4.6% of net sales) for 1995 to $81.5 million (9.3% of net sales) for 1997. Adjusted Operating Income increased from $52.6 million (8.3% of net sales) for the nine months ended September 30, 1997 to $68.8 million (10.3% of net sales) for the nine months ended September 30, 1998, an increase of 30.6%. Past success does not ensure future success. We constantly review the results of our strategies and the ever-changing demands of the market and evaluate whether the direction of our strategies is appropriate. We believe that our strategies, which are described below, are appropriate and will allow us to grow our business and achieve our performance objectives. EXPANDING OUR TECHNOLOGY LEADERSHIP As a company, we have always placed great emphasis on research and development. In the last three years, we have invested approximately $150 million in research and development. Our research and development efforts fall into two categories: 6 9 - technology advancements, which increase the value of our products. These may be in the form of enhanced functionality, new applications for our technologies, more accurate or reliable measurement, additional software capability or automation through robotics or other means - cost reductions, which reduce the manufacturing cost of our products through better overall design We believe a direct relationship exists between our ability to introduce new products and our ability to increase sales and earnings. INCREASING OUR MARKET SHARE AND CAPITALIZING ON OPPORTUNITIES IN DEVELOPED MARKETS We recognize that to be a successful company, we must not only develop excellent products, but we must market and distribute them effectively--more effectively than our competitors. We utilize what we believe are the most sophisticated marketing and sales techniques in our industry, including: - the development and utilization of marketing databases. We develop these databases to better understand the full potential of our market by customer, location, industry, instrument and related application. We then utilize this data to more efficiently direct our field resources and complement our direct and distributor sales forces with targeted mailing and telemarketing campaigns to more fully exploit our market's potential - a dual brand strategy for certain market segments to improve our overall market penetration. For example, we sell laboratory balances under the Ohaus brand name as an alternative to the Mettler-Toledo brand name in certain distribution channels for laboratory balances - global service capabilities. We believe that service capabilities are a critical success factor in our business. Our service capabilities, which provide support to our customers and distributors in virtually all major markets across the globe and include around-the-clock availability of well-trained technicians, are highly valued by our customers. We believe that no other competitor has global service capabilities CAPITALIZING ON OPPORTUNITIES IN EMERGING MARKETS While emerging markets were not a source of growth overall in 1998 due to weak economic conditions, we believe that these markets will provide growth opportunities for us in the long term. We base this belief on the following long term trends that we believe are likely to occur: - companies in emerging markets that want to export will have to move toward global quality standards and therefore need sophisticated measurement instruments - a significant number of mechanical scales now in use in emerging markets will need to be upgraded to electronics over time - our multinational customers will continue to build production facilities which use our instruments in emerging market countries We believe that to succeed in emerging markets, there are several advantages we must offer to our customer base: - to our multinational customers, we must offer the same level of service and problem-solving capabilities that we offer them in developed countries. We accomplish this through extensive training, including factory training, of our employees - to our local customers, we must offer lower cost and less complex products than are required by our customers in Japan, Europe and North America. We accomplish this through increased research and development and the manufacturing capabilities at our two Chinese production facilities - we must have a direct local presence to ensure that our combination of quality products and excellent service is effectively carried out at a local level so that we achieve the same level of brand 7 10 awareness in emerging markets that we enjoy in developed markets. We have accomplished this in part by establishing ten new sales and service operations in emerging markets since 1996 PURSUING SELECTED ACQUISITION OPPORTUNITIES We believe that the combination of our market leadership, our strong brand name and our comprehensive sales and distribution network supports an attractive platform for acquisitions. We are interested in acquiring companies that provide us with: - COMPLEMENTARY PRODUCTS that will benefit from our brand name and global distribution channels. An example is Bohdan Automation Inc., a leading supplier of laboratory automation and automated synthesis products, which we acquired in 1998 and whose products we have now added to our global distribution network. Because of its small size as a stand-alone company, Bohdan lacked a global presence and did not serve customers on a worldwide basis. We offer it the infrastructure to expand its business globally. - INTEGRATED TECHNOLOGY solutions, which we can combine with our own technologies to create an overall better solution for our customers. An example is Safeline Limited, which we acquired in 1997. We combined its metal detection equipment with our checkweighers to create one instrument, featuring integrated data management, a smaller footprint and only one man-machine interface -- a better solution for many of our customers than separate products. - CONSOLIDATION OPPORTUNITIES in fragmented markets. An example is our recent acquisition of a number of independent industrial and retail weighing distributors in the United States. - GEOGRAPHIC EXPANSION into markets where we do not have a direct presence. For example, earlier this year we established a small presence in India by acquiring a local manufacturer. RE-ENGINEERING AND COST SAVINGS We have improved our profitability in recent years partly through a series of initiatives aimed at reducing our cost structure. We plan to take similar initiatives in the future with the goal of further improving our operating margins. These initiatives include: - moving the production of certain product lines to lower cost locations and consolidating the production of others - increasing sales force productivity through telemarketing, increased training and other focused initiatives - reducing distribution costs by using existing infrastructure more efficiently and centralizing processes where economies of scale can be obtained - reducing product cost through research and development, improved manufacturing processes and reducing the purchased cost of components - continually reviewing operations to identify additional opportunities to reduce costs RECENT ACQUISITIONS We are the leading provider of automated lab reactors and reaction calorimeters to the automated drug and chemical compound discovery and development market. We believe that our customers want solutions in this market from a company like Mettler-Toledo, with a reputation for innovation and quality and with a global presence and service network. In July 1998, we extended our product offerings to the automated drug and compound discovery market with our acquisition of Bohdan Automation Inc. Bohdan is a leading supplier of laboratory automation and automated synthesis products used in research for life science applications for pharmaceutical and agricultural products and in other applications in the food and chemicals industries. 8 11 On December 7, 1998, we announced that we had acquired two technologically advanced instrument companies, Applied Systems and Myriad Synthesizer Technology. Although these businesses are not currently significant in size, we believe these acquisitions are key elements in our strategic effort to further build a leading position in the field of automated solutions for drug and chemical compound discovery and development. These acquisitions enable us to offer a strong and comprehensive array of solutions, from sample preparation to compound synthesis to process development. Applied Systems designs, assembles and markets instruments for in-process molecular analysis, which is primarily used for researching, developing and monitoring chemical processes. Applied Systems' proprietary sensors, together with its innovative Fourier transform infrared technology, enable chemists to analyze chemical reactions as they occur, which is more efficient than pulling samples. Myriad Synthesizer Technology designs, assembles and markets instruments that facilitate and automate the synthesis of large numbers of chemical compounds in parallel, which is a key step in the chemical compound discovery process. Its products can be used in all stages of synthesis in drug discovery. BACKGROUND In 1996 our managers and employees, along with AEA Investors Inc., participated in the acquisition (the "Acquisition") of the Mettler-Toledo group of companies from Ciba-Geigy AG. On May 30, 1997, we acquired Safeline Limited. Safeline is the world's largest manufacturer and marketer of metal detection systems for companies that produce and package goods in the food processing, pharmaceutical, cosmetics, chemicals and other industries. Safeline's metal detectors can also be combined with our checkweighing products for important quality and safety checks in these industries. During the fourth quarter of 1997, we completed our initial public offering of 7,666,667 shares of common stock, including the underwriters' over-allotment options, at a per share price of $14.00. Our initial public offering (the "IPO") raised net proceeds of approximately $97.3 million. Concurrently with the IPO, we refinanced (the "Refinancing") our existing credit facility by entering into a new credit facility, borrowings from which, along with the proceeds from the IPO, were used to repay substantially all of our then existing debt, including all of the 9 3/4% senior subordinated notes due 2006 of our wholly owned subsidiary, Mettler-Toledo, Inc. In July of 1998, certain selling shareholders completed a secondary offering of 11,464,400 shares of our common stock, including the underwriters' over-allotment options. Neither we nor any of our directors, executive officers or other employees sold shares or received any proceeds from the offering. The mailing address of our principal executive offices is Im Langacher, P.O. Box MT-100, CH-8606, Greifensee, Switzerland. Our telephone number is 011-41-1-944-22-11. 9 12 THE OFFERINGS Common Stock Offered by the Selling Shareholders(1): U.S. Offering.................... 4,469,600 shares International Offering........... 1,117,400 shares Total....................... 5,587,000 shares Shares Outstanding Before and After the Offerings(2)........... 38,400,363 shares Use of Proceeds.................. All of the common stock offered hereby is being sold by the selling shareholders. We will not receive any proceeds from the sale of the shares. Risk Factors..................... See "Risk Factors" and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of the common stock. NYSE Symbol...................... "MTD" - --------------- (1) Excludes 838,050 shares that are subject to the over-allotment options granted by the selling shareholders to the underwriters in connection with the offerings. (2) Excludes 4,871,842 shares that may be issued upon the exercise of outstanding options granted pursuant to our stock option plan. SUMMARY FINANCIAL INFORMATION The summary historical financial information set forth below for the years ended December 31, 1993, 1994 and 1995, for the period from January 1, 1996 to October 14, 1996, for the period from October 15, 1996 to December 31, 1996 and for the year ended December 31, 1997 is derived from our consolidated financial statements, which were audited by KPMG Fides Peat, independent auditors. The financial information for all periods prior to October 15, 1996, the date the Company was acquired from Ciba-Geigy A.G. (the "Acquisition"), is combined financial information of the Mettler-Toledo group of companies (the "Predecessor Business"). The summary historical financial information at September 30, 1998 and for the nine months ended September 30, 1997 and 1998 is derived from our unaudited interim consolidated financial statements, which, in our opinion, include all adjustments necessary for a fair presentation of the results for the unaudited periods. Operating results for the nine months ended September 30, 1998 are not necessarily indicative of the results that may be expected for the year ended December 31, 1998. The combined historical data of the Predecessor Business and our consolidated historical data are not comparable in many respects due to the Acquisition and the Safeline acquisition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and accompanying notes included elsewhere in this prospectus. The financial information presented below was prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). 10 13
PREDECESSOR BUSINESS -------------------------------------------- JANUARY 1 YEAR ENDED DECEMBER 31, TO ------------------------------ OCTOBER 14, 1993 1994 1995 1996 -------- -------- -------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Net sales.......................... $728,958 $769,136 $850,415 $662,221 Cost of sales...................... 443,534 461,629 508,089 395,239 -------- -------- -------- -------- Gross profit....................... 285,424 307,507 342,326 266,982 Research and development........... 46,438 47,994 54,542 40,244 Selling, general and administrative.................... 209,692 224,978 248,327 186,898 Amortization....................... 2,917 6,437 2,765 2,151 Purchased research and development....................... -- -- -- -- Interest expense................... 15,239 13,307 18,219 13,868 Other charges (income), net(g)..... 14,110 (7,716) (9,331) (1,332) -------- -------- -------- -------- Earnings (loss) before taxes, minority interest and extraordinary items............... (2,972) 22,507 27,804 25,153 Provision for taxes................ 3,041 8,676 8,782 10,055 Minority interest.................. 1,140 347 768 637 -------- -------- -------- -------- Earnings (loss) before extraordinary items............... (7,153) 13,484 18,254 14,461 Extraordinary items-debt extinguishments................... -- -- -- -- -------- -------- -------- -------- Net earnings (loss)................ $(7,153) $13,484 $18,254 $14,461 ======== ======== ======== ======== Diluted earnings (loss) per common share(i): Earnings (loss) per common share before extraordinary items...... Extraordinary items............... Earnings (loss) per common share........................... Weighted average number of common shares.......................... OTHER DATA: Local currency net sales growth(j)......................... 7% 6% Gross profit before non-recurring costs as a percentage of net sales(k).......................... 39.2% 40.0% 40.3% 40.3% Adjusted Operating Income(l)....... $29,294 $34,535 $39,457 $39,840 Adjusted Operating Income as a percentage of net sales(l)........ 4.0% 4.5% 4.6% 6.0% Depreciation and amortization expense........................... $29,591 $34,118 $33,363 $21,663 Capital expenditures............... 25,122 24,916 25,858 16,649 METTLER-TOLEDO INTERNATIONAL INC. ---------------------------------------------------------------------- OCTOBER 15 1996 NINE MONTHS ENDED TO PRO FORMA YEAR ENDED SEPTEMBER 30, DECEMBER 31, (A)(B)(C) DECEMBER 31, -------------------------- 1996 (D)(E) 1997 1997 1998 ------------ --------- ------------ ---------- ---------- STATEMENT OF OPERATIONS DATA: Net sales.......................... $186,912 $889,567 $878,415 $633,743 $669,747 Cost of sales...................... 136,820(b) 523,783 493,480(d) 359,080(d) 374,594 ---------- -------- ----------- ---------- ---------- Gross profit....................... 50,092 365,784 384,935 274,663 295,153 Research and development........... 9,805 50,608 47,551 34,494 33,551 Selling, general and administrative.................... 59,353 252,085 260,397 189,594 192,844 Amortization....................... 1,065 6,526 6,222 4,449 5,473 Purchased research and development....................... 114,070(c) -- 29,959(e) 29,959(e) 9,976(f) Interest expense................... 8,738 30,007 35,924 28,199 17,153 Other charges (income), net(g)..... 17,137 14,036 10,834 7,316 1,606 ---------- -------- ----------- ---------- ---------- Earnings (loss) before taxes, minority interest and extraordinary items............... (160,076) 12,522 (5,952) (19,348) 34,550 Provision for taxes................ (938) 6,956 17,489 7,296 13,552 Minority interest.................. (92) 593 468 375 233 ---------- -------- ----------- ---------- ---------- Earnings (loss) before extraordinary items............... (159,046) 4,973 (23,909) (27,019) 20,765 Extraordinary items-debt extinguishments................... -- -- (41,197)(h) (9,552)(h) -- ---------- -------- ----------- ---------- ---------- Net earnings (loss)................ $(159,046) $4,973 $(65,106) $(36,571) $20,765 ========== ======== =========== ========== ========== Diluted earnings (loss) per common share(i): Earnings (loss) per common share before extraordinary items...... $(5.18) $(0.76) $(0.88) $0.51 Extraordinary items............... -- (1.30) (0.31) -- ---------- ----------- ---------- ---------- Earnings (loss) per common share........................... $(5.18) $(2.06) $(1.19) $0.51 ========== =========== ========== ========== Weighted average number of common shares.......................... 30,686,065 31,617,071 30,686,189 40,619,050 OTHER DATA: Local currency net sales growth(j)......................... 3% 11% 8% 8% Gross profit before non-recurring costs as a percentage of net sales(k).......................... 44.0% 41.1% 44.1% 43.7% 44.1% Adjusted Operating Income(l)....... $17,912 $67,875 $81,541 $52,629 $68,758 Adjusted Operating Income as a percentage of net sales(l)........ 9.6% 7.6% 9.3% 8.3% 10.3% Depreciation and amortization expense........................... $8,990 $34,393 $31,835 $22,233 $23,495 Capital expenditures............... 11,928 29,417 22,251 13,299 17,348
SEPTEMBER 30, 1998 ------------------ BALANCE SHEET DATA: Working capital............................................. $94,496 Total assets................................................ 764,221 Long-term debt.............................................. 320,193 Other non-current liabilities (m)........................... 101,984 Shareholders' equity........................................ 42,904
- --------------- (a) Represents our unaudited pro forma consolidated statement of operations for fiscal year 1996, assuming the Acquisition, the Safeline acquisition, the IPO and the Refinancing occurred on January 1, 1996. The 1996 pro forma data includes certain adjustments to historical results to reflect: (i) an increase in interest expense resulting from acquisition-related borrowings, which expense has been partially offset by reduced borrowings following application of IPO proceeds and a lower effective interest rate following the Refinancing, (ii) an increase in amortization of goodwill and other intangible assets following the Acquisition and the Safeline acquisition, and (iii) changes to the provision for taxes to reflect our estimated effective income tax rate at a stated level of pro forma earnings before tax for the year ended December 31, (Footnotes continued on following page) 11 14 (Footnotes continued from previous page) 1996. Certain other one-time charges incurred during 1996 have not been excluded from our unaudited pro forma consolidated statement of operations for the year ended December 31, 1996. (b) In connection with the Acquisition, we allocated $32,194 of the purchase price to revalue certain inventories (principally work-in-progress and finished goods) to fair value (net realizable value). Substantially all such inventories were sold during the period October 15, 1996 to December 31, 1996. The charges associated with this revaluation have been excluded from the 1996 pro forma financial information. (c) In connection with the Acquisition, we allocated, based upon independent valuations, $114,070 of the purchase price to purchased research and development in process. This amount was recorded as an expense immediately following the Acquisition. This expense has been excluded from the 1996 pro forma financial information. (d) In connection with the Safeline acquisition, we allocated $2,054 of the purchase price to revalue certain inventories (principally work-in-progress and finished goods) to fair value (net realizable value). Substantially all such inventories were sold during the second quarter of 1997. The charges associated with this revaluation have been excluded from the 1996 pro forma financial information. (e) In connection with the Safeline acquisition, we allocated, based upon independent valuations, $29,959 of the purchase price to purchased research and development in process. This amount was recorded as an expense immediately following the Safeline acquisition. This expense has been excluded from the 1996 pro forma financial information. (f) In connection with the Bohdan acquisition, we allocated, based upon independent valuations, $9,976 of the purchase price to purchased research and development in process. This amount was recorded as an expense immediately following the Bohdan acquisition. (g) Other charges (income), net generally includes interest income, foreign currency transactions, gains and losses from sales of assets and other items. In 1993, the amount shown includes costs associated with the closure of a manufacturing facility in Cologne, Germany, the restructuring of certain manufacturing operations and an early retirement program in the United States. For the period January 1, 1996 to October 14, 1996, the amount shown includes employee severance and other exit costs associated with the closing of our Westerville, Ohio facility. For the period October 15, 1996 to December 31, 1996, the amount shown includes employee severance benefits associated with our general headcount reduction programs in Europe and North America and the realignment of the analytical and precision balance business in Switzerland. For the year ended December 31, 1997, the amount shown includes a restructuring charge of $6,300 to consolidate three facilities in North America. The amount for the nine months ended September 30, 1998 includes $650 of expenses incurred on behalf of certain selling shareholders in connection with the secondary offering completed in July 1998. See Note 14 to the audited consolidated financial statements which are included as part of this prospectus. (h) Represents charges for the write-off of capitalized debt issuance fees and related expenses associated with our previous credit facilities. The amount for the year ended December 31, 1997 also includes the prepayment premium on our senior subordinated notes which were repurchased and the write-off of the related capitalized debt issuance fees. (i) Effective December 31, 1997, we adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). Accordingly, basic and diluted loss per common share data for each period presented are determined in accordance with the provisions of SFAS 128. (j) Local currency net sales growth is adjusted for the exit from certain systems businesses. Pro forma 1996 local currency net sales growth assumes that the Safeline acquisition occurred on January 1, 1995. For 1997, local currency net sales increased 7% absent the Safeline acquisition. For the nine months ended September 30, 1997 and 1998, local currency net sales increased 6% and 5% absent the Safeline acquisition, respectively. (k) Non-recurring costs represent costs associated with selling inventories revalued to fair value in connection with the Acquisition and the Safeline acquisition. See Notes (b) and (d) above. (l) Adjusted Operating Income is defined as operating income (gross profit less research and development and selling, general and administrative expenses) before amortization and non-recurring costs. Non-recurring costs that have been excluded are the costs set forth in Note (k) above and for the period from October 15, 1996 to December 31, 1996, and in pro forma 1996, advisory fees associated with the reorganization of our structure of approximately $4,800. Non-recurring costs in 1997 include a charge of $2,500 in connection with the termination of our management services agreement with AEA Investors Inc. We believe that Adjusted Operating Income provides important financial information in measuring and comparing the operating performance of our company. Adjusted Operating Income is not intended to represent operating income under U.S. GAAP and should not be considered as an alternative to net earnings (loss) as an indicator of our operating performance. (m) Consists primarily of obligations under various pension plans and plans that provide post-retirement medical benefits. See Note 12 to the audited consolidated financial statements which are included as part of this prospectus. 12 15 RISK FACTORS You should carefully consider the risks described below before deciding to invest in our common stock. The risks and uncertainties we describe below are not the only ones that we face. Additional risks and uncertainties that we do not presently know about or that we currently believe are immaterial may also impair our business operations. If any of the possible events described below actually occurred, our business, financial condition or results of operations could be materially adversely affected. If that happened, the trading price of our common stock could decline, and you could lose all or part of your investment. EFFECT OF SUBSTANTIAL INDEBTEDNESS ON OPERATIONS AND LIQUIDITY We have a significant amount of indebtedness. At September 30, 1998, our consolidated indebtedness (excluding unused commitments) was $378.4 million, and we had additional borrowing capacity of approximately $239.2 million. Term loans under our credit agreement comprise $188.8 million of our consolidated indebtedness. We are required to make scheduled quarterly principal payments on these term loans. Our ability to comply with the terms of our credit agreement and our other debt obligations, to make cash payments with respect to our debt obligations and to refinance any of our debt obligations will depend on our future performance. Our future performance is subject to prevailing economic and competitive conditions and certain financial, business and other factors beyond our control. Having a high degree of leverage has significant consequences for us. For instance, high leverage might impair our ability to obtain additional financing for acquisitions, capital expenditures, working capital or general corporate purposes. In addition, we use a substantial portion of our cash flow from operations to pay principal and interest on our borrowings. This use of cash flows reduces the funds available to us for our operations and other purposes, including investments in research and development and capital spending. Some of our borrowings are and will continue to be at variable rates of interest, which exposes us to the risk of increased interest rates. Finally, we may be substantially more leveraged than some of our competitors. This may place us at a relative competitive disadvantage and may make us more vulnerable to a downturn in general economic conditions, a slowdown in our business or changing market conditions and regulations. Covenants in our debt obligations restrict our ability to incur additional indebtedness, dispose of certain assets and make capital expenditures. The covenants also restrict our other corporate activities. Our ability to comply with these covenants may be affected by events beyond our control, including economic, financial and industry conditions. A failure to comply with the covenants and restrictions contained in our debt obligations or any other agreements with respect to any additional financing could result in an acceleration of the amount we owe under our debt agreements. RISKS ASSOCIATED WITH CURRENCY FLUCTUATIONS Because we conduct operations in many countries, our operating income can be significantly affected by fluctuations in currency exchange rates. Swiss franc-denominated expenses represent a much greater percentage of our operating expenses than Swiss franc-denominated sales represent of our net sales. In part, this is because most of our manufacturing costs in Switzerland relate to products that are sold outside of Switzerland. Moreover, a substantial percentage of our research and development expenses and general and administrative expenses are incurred in Switzerland. Therefore, if the Swiss franc strengthens against all or most of our major trading currencies (e.g., the U.S. dollar, the Euro (beginning in January 1999), other major European currencies and the Japanese Yen) our operating profit is reduced. We also have significantly more sales in European currencies (other than the Swiss franc) than we have expenses in those currencies. Therefore, when European currencies weaken against the U.S. dollar and the Swiss franc, it also decreases our operating profits. In recent years, the Swiss franc and other European currencies have generally moved in a consistent manner versus the U.S. dollar. Therefore, because the two effects previously described have offset each other, our operating profits have not been materially affected by movements in the U.S. dollar exchange rate versus European currencies. However, there can be no 13 16 assurance that these currencies will continue to move in a consistent manner in the future. In addition to the effects of exchange rate movements on operating profits, our debt levels can fluctuate due to changes in exchange rates, particularly between the U.S. dollar and the Swiss franc. RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS; DETERIORATING CONDITIONS IN EMERGING MARKETS We do business in many countries, including emerging markets in Asia, Latin America and Eastern Europe. In addition to the currency risks discussed above, international operations pose substantial other risks and problems for us. For instance, various local jurisdictions in which we operate may revise or alter their respective legal and regulatory requirements. In addition, we may encounter one or more of the following obstacles or risks: - tariffs and trade barriers - difficulties in staffing and managing local operations - credit risks arising from financial difficulties facing local customers and distributors - difficulties in protecting intellectual property - nationalization of private enterprises - restrictions on investments and/or limitations regarding foreign ownership - adverse tax consequences, including imposition or increase of withholding and other taxes on remittances and other payments by subsidiaries - uncertain local economic, political and social conditions, including hyper-inflationary conditions We must also comply with a variety of regulations regarding the conversion and repatriation of funds earned in local currencies. For example, converting earnings from our operations in China into other currencies and repatriating such funds require governmental approvals. If we cannot comply with these or other applicable regulations, we may face increased difficulties in utilizing cash flow generated by these operations outside of China. Recently, economic conditions in emerging markets have deteriorated significantly and some emerging markets are experiencing recessionary trends, severe currency devaluations and inflationary prices. Moreover, economic problems in individual markets are increasingly spreading to other economies, adding to the adverse conditions facing nearly all emerging markets. We remain committed to emerging markets, particularly those in Asia, Latin America and Eastern Europe. However, we expect current economic conditions will affect our financial results in these markets for the foreseeable future. HIGHLY COMPETITIVE MARKETS; DIFFICULT TO MAINTAIN TECHNOLOGICAL ADVANTAGE Our markets are highly competitive. Weighing instruments markets are also fragmented both geographically and by application, particularly the industrial and food retailing market. As a result, we face numerous regional or specialized competitors, many of which are well established in their markets. In addition, some of our competitors are divisions of larger companies with potentially greater financial and other resources than our own. Taken together, the competitive forces present in our markets can impair our operating margins in certain product lines and geographic markets. We expect our competitors to continue to improve the design and performance of their products and to introduce new products with competitive prices. Although we believe that we have certain technological and other advantages over our competitors, we may not be able to realize and maintain these advantages. In any event, to remain competitive we must continue to invest in research and development, sales and marketing and customer service and support. We cannot be sure that we will have sufficient resources to continue to make these investments or that we will be successful in identifying, developing and maintaining any competitive advantages. 14 17 SIGNIFICANT SALES TO PHARMACEUTICAL AND CHEMICALS INDUSTRIES Our products are used extensively in the pharmaceutical, chemicals and food and beverage industries. Consolidation in the pharmaceutical and chemicals industries hurt our sales in prior years. A prolonged downturn or additional consolidation in any of these industries could adversely affect our operating results. RISKS RELATING TO FUTURE ACQUISITIONS We plan to pursue acquisitions of complementary product lines, technologies or businesses. Acquisitions involve numerous risks, including: - difficulties in the assimilation of the acquired operations, technologies and products - diversion of management's attention from other business concerns - potential departures of key employees of the acquired company If we successfully identify acquisitions in the future, completing such acquisitions may result in: - new issuances of our stock that may be dilutive to current owners - increases in our debt and contingent liabilities - additional amortization expenses related to goodwill and other intangible assets Any of these risks could materially adversely affect our profitability. We continue to explore potential acquisitions, but currently have no agreements with respect to any material acquisition. We may not be able to identify, successfully complete or integrate potential acquisitions in the future. However, even if we can, we cannot be sure that such acquisitions will have a positive impact on our business or operating results. RELIANCE ON KEY EMPLOYEES We have employment contracts with each of our key employees. In addition, our key employees own shares of our common stock and have options to purchase additional shares. Nonetheless, such individuals could leave the Company. If any key employees stopped working for us, our operations could be harmed. We have no key man life insurance policies with respect to any of our senior executives. ENVIRONMENTAL MATTERS AND LIABILITIES We are subject to various environmental laws and regulations, including those relating to: - air emissions - wastewater discharges - the handling and disposal of solid and hazardous wastes - the remediation of contamination associated with the use and disposal of hazardous substances We incur capital and operating expenditures in complying with environmental laws and regulations both in the United States and abroad. We are currently involved in, or have potential liability with respect to, the remediation of past contamination in facilities both in the United States and abroad. In addition, some of these facilities have or had been in operation for many decades and may have used substances or generated and disposed of wastes that are hazardous or may be considered hazardous in the future. Such sites and disposal sites owned by others to which we sent waste may in the future be identified as contaminated and require remediation. Accordingly, it is possible that we could become subject to additional environmental liabilities in the future that may harm our results of operations or financial condition. See "Business -- Environmental Matters." 15 18 POTENTIAL ADVERSE EFFECT ON MARKET PRICE DUE TO SHARES ELIGIBLE FOR FUTURE SALE The price of our common stock could be harmed by sales of a large number of shares of our common stock or the perception that such sales are possible. As of December 31, 1998, we had 38,400,363 shares of common stock outstanding. All shares of common stock are freely tradeable without restriction under the Securities Act of 1933, except to the extent such shares are subject to the agreement with the underwriters described below or are held by our "affiliates." In connection with the offerings, the Company, our executive officers and directors and the selling shareholders, who will collectively hold, after the offerings, 4,811,001 shares of common stock (assuming no exercise of the underwriters' over-allotment options) will agree, subject to certain exceptions, not to dispose of any shares of common stock for a period of 90 days from the date of this prospectus without the consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated on behalf of the underwriters. Certain other shareholders, who collectively hold a total of 3,330,863 shares, have similarly agreed not to dispose of or transfer shares without our consent until March 1, 1999. Upon expiration of these lockup periods, all shares will be eligible for sale in the public market, except shares held by our "affiliates" may only be sold by complying with the volume limitations and other restrictions of Rules 144 and 145 under the Securities Act of 1933. As of December 31, 1998, there were outstanding options to purchase a total of 4,871,842 shares of common stock held by our employees. The sale of such shares could have an adverse effect on our ability to raise equity capital in the public markets. RESTRICTIONS ON PAYMENT OF DIVIDENDS; ABSENCE OF DIVIDENDS Our credit agreement restricts our ability to pay dividends. In any event, we do not intend to pay cash dividends on our common stock in the foreseeable future. RISKS RELATING TO CERTAIN ANTI-TAKEOVER PROVISIONS Our certificate of incorporation and by-laws contain provisions that could make it more difficult for a third party to acquire Mettler-Toledo. Our certificate of incorporation authorizes the Board of Directors to issue preferred stock without shareholder approval and upon such terms as it may determine. The rights of the holders of our common stock are subject to, and may be adversely affected by, the rights of future holders of preferred stock. In addition, our by-laws require shareholders to provide advance notice to nominate candidates for election as directors and to submit proposals for consideration at shareholder meetings. Section 203 of the Delaware General Corporation Law makes it more difficult for an "interested stockholder" (generally a 15% stockholder) to effect various business combinations with a corporation for a three-year period after he becomes an "interested stockholder." In general, these provisions may discourage a third party from attempting to acquire Mettler-Toledo and therefore may inhibit a change of control of our company under circumstances that could give shareholders an opportunity to realize a premium over then-prevailing market prices. YEAR 2000 ISSUE The Year 2000 issue is the result of computer logic that was written using two digits rather than four to define the applicable year. Any computer logic or microprocessor that uses only two digits to recognize dates may recognize a date specifying "00" as the year 1900 rather than the year 2000 which could result in miscalculations or system or equipment failures. We rely on information technology systems and non-information technology systems (e.g., equipment with embedded microprocessors) in connection with manufacturing, sales and financial and human resources. Certain of our products also involve computer or non-information technology systems that could be affected by the Year 2000 issue. In addition, we rely on the proper functioning of the computer and non-information technology systems of our major suppliers. We believe that we are taking reasonable steps to identify and address those matters that could cause serious interruptions in our business and operations due to Year 2000 issues. Our efforts include detailed programs to address our internal Year 2000 readiness as well as the readiness of our key suppliers. In 16 19 addition, we have reviewed our current products, as well as products sold in recent years, to determine if they are Year 2000 compliant. However, any of the following could have a material adverse effect on our business, financial condition and results from operations: - a failure to fully identify all Year 2000 dependencies in our systems - a failure to fully identify all Year 2000 dependencies in the systems of our suppliers of components, customers and financial institutions - a failure of our suppliers of components, customers and financial institutions to adequately address their Year 2000 issues - the failure of any contingency plans developed to protect our business and operations from Year 2000-related interruptions - any material increase in warranty claims or other claims of product liability arising out of Year 2000 non-compliance - delays in the implementation of new systems resulting from Year 2000 problems RISKS FROM INTRODUCTION OF THE EUROPEAN MONETARY UNION The European Economic and Monetary Union (the "EMU") introduced a new currency, the Euro, within Europe on January 1, 1999. The new currency is in response to the EMU's policy of economic convergence to harmonize trade policy, eliminate business costs associated with currency exchange and to promote the free flow of capital, goods and services. Switzerland is not part of the EMU. On January 1, 1999, the participating countries adopted the Euro as their local currency, initially available for currency trading on currency exchanges and for noncash (banking) transactions. The existing local currencies, or legacy currencies, will remain legal tender through January 1, 2002. Beginning on January 1, 2002, Euro-denominated bills and coins will be issued for cash transactions. For a period of six months from this date, both legacy currencies and the Euro will be legal tender. On or before July 1, 2002, the participating countries will withdraw all legacy currency and use exclusively the Euro. We have committed resources to conduct risk assessments and take corrective actions, where required, to ensure that we are prepared for the introduction of the Euro. We are reviewing Euro implementation and our pricing strategy in both participating and non-participating countries where we operate. In addition, we are reviewing existing legacy accounting and business systems and other business assets for Euro compliance and assessing the risks posed by non-compliance by third parties. Despite these efforts, it is possible that we or third parties on whom we depend will not have in place in a timely manner the systems necessary to process Euro-denominated transactions. Such a failure could adversely affect our business (e.g., by causing delays in order processing and shipment). Moreover, increased price transparency or disruption of activity in the markets in which we operate resulting from the conversion to the Euro could hurt our business in those markets, resulting in lost revenues. FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS This prospectus includes forward-looking statements based on our current expectations and projections about future events, including: - strategic plans - potential growth, including penetration of developed markets and opportunities in emerging markets - planned product introductions - planned operational changes and research and development efforts - Year 2000 issues - Euro conversion issues 17 20 - future financial performance, including expected capital expenditures - research and development expenditures - estimated proceeds from and the timing of asset sales - potential acquisitions - future cash sources and requirements - potential cost savings from planned employee reductions and restructuring programs These forward-looking statements are subject to a number of risks and uncertainties, including those identified in "Risk Factors," which could cause our actual results to differ materially from historical results or those anticipated and certain of which are beyond our control. The words "believe," "expect," "anticipate" and similar expressions identify forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The risks included here are not exhaustive. Other sections of this prospectus may describe additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. 18 21 USE OF PROCEEDS All of the common stock offered hereby is being sold by the selling shareholders. We will not receive any proceeds from the sale of the common stock. DIVIDEND POLICY We have never paid any dividends on our common stock and we do not anticipate paying any cash dividends on the common stock in the foreseeable future. The current policy of our Board of Directors is to retain earnings to finance the operations and expansion of our business. Moreover, our credit agreement restricts our ability to pay dividends. Any future determination to pay dividends will depend on our results of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant by our Board of Directors. PRICE RANGE OF COMMON STOCK Our common stock began trading on the New York Stock Exchange on November 14, 1997 under the symbol "MTD." The following table sets forth on a per share basis the high and low sales prices for consolidated trading in our common stock as reported on the New York Stock Exchange Composite Tape for the quarters indicated.
COMMON STOCK PRICE RANGE ------------- HIGH LOW ---- --- 1997 Fourth Quarter (beginning November 14, 1997).............. $18 3/4 $14 1/16 1998 First Quarter............................................. 22 3/8 16 9/16 Second Quarter............................................ 22 1/4 18 Third Quarter............................................. 22 11/16 16 1/4 Fourth Quarter............................................ 28 15/16 16 3/4 1999 First Quarter (through January 5, 1999)................... 27 15/16 26 1/4
For a recent reported last sale price for the common stock, see the cover page of this prospectus. As of January 4, 1999, there were 584 holders of record of our common stock. This number excludes beneficial owners of common stock held in "street name." 19 22 CAPITALIZATION The following table sets forth our short-term debt and capitalization at September 30, 1998. The information presented below should be read in conjunction with our consolidated financial statements and the related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.
SEPTEMBER 30, 1998 ---------------------- (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) Short-term debt, including current maturities of long-term debt(a): Short-term portion of term loans under credit agreements............................................. $ 18,761 Revolving credit facility under credit agreements(b)...... 25,034 Other short-term borrowings............................... 14,406 -------- Total short-term debt.................................. $ 58,201 ======== Long-term debt(a): Term loans under credit agreements........................ $170,084 Revolving credit facility under credit agreements(b)...... 137,609 Other long-term debt...................................... 12,500 -------- Total long-term debt................................... 320,193 Shareholders' equity: Common stock, par value $0.01, authorized 125,000,000 shares; issued 38,355,926 shares (excluding 64,467 shares held in treasury)(c)............................ 384 Additional paid-in capital................................ 284,787 Accumulated deficit....................................... (203,387) Accumulated other comprehensive loss...................... (38,880) -------- Total shareholders' equity................................ 42,904 -------- Total capitalization................................... $363,097 ========
- --------------- (a) At September 30, 1998, we had total availability of $239.2 million under the revolving credit facility of our credit agreement and local working capital facilities. (b) Because we have the ability to refinance our short-term borrowings under the revolving facility for an uninterrupted period extending beyond one year, $137.6 million of our short-term borrowings at September 30, 1998 have been reclassified to long-term. (c) Excludes 4,282,718 shares of common stock at September 30, 1998 that may be issued upon exercise of options granted pursuant to our stock option plan. SELECTED HISTORICAL FINANCIAL INFORMATION The selected historical financial information set forth below at December 31, 1994, 1995, 1996 and 1997, for the years ended December 31, 1993, 1994 and 1995, for the period from January 1, 1996 to October 14, 1996, for the period from October 15, 1996 to December 31, 1996, and for the year ended December 31, 1997 is derived from our consolidated financial statements, which were audited by KPMG Fides Peat, independent auditors. The financial information for all periods prior to October 15, 1996, the date of the Acquisition, is combined financial information of the Mettler-Toledo group of companies (the "Predecessor Business"). The selected historical financial information at September 30, 1997 and 1998 and for the nine months then ended is derived from our unaudited interim consolidated financial statements, which, in our opinion, include all adjustments necessary for a fair presentation of the results for the unaudited periods. Operating results for the nine months ended September 30, 1998 are not necessarily indicative of the results that may be expected for the year ended December 31, 1998. The combined historical data of the Predecessor Business and our consolidated historical data are not comparable in many respects due to the Acquisition and the Safeline acquisition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and accompanying notes included elsewhere in this prospectus. The financial information presented below was prepared in accordance with U.S. GAAP. 20 23
PREDECESSOR BUSINESS -------------------------------------------- JANUARY 1 YEAR ENDED DECEMBER 31, TO ------------------------------ OCTOBER 14, 1993 1994 1995 1996 -------- -------- -------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Net sales.............................. $728,958 $769,136 $850,415 $662,221 Cost of sales.......................... 443,534 461,629 508,089 395,239 -------- -------- -------- -------- Gross profit........................... 285,424 307,507 342,326 266,982 Research and development............... 46,438 47,994 54,542 40,244 Selling, general and administrative.... 209,692 224,978 248,327 186,898 Amortization........................... 2,917 6,437 2,765 2,151 Purchased research and development..... -- -- -- -- Interest expense....................... 15,239 13,307 18,219 13,868 Other charges (income), net(f)......... 14,110 (7,716) (9,331) (1,332) -------- -------- -------- -------- Earnings (loss) before taxes, minority interest and extraordinary items...... (2,972) 22,507 27,804 25,153 Provision for taxes.................... 3,041 8,676 8,782 10,055 Minority interest...................... 1,140 347 768 637 -------- -------- -------- -------- Earnings (loss) before extraordinary items................................. (7,153) 13,484 18,254 14,461 Extraordinary items-debt extinguishments....................... -- -- -- -- -------- -------- -------- -------- Net earnings (loss).................... $(7,153) $13,484 $18,254 $14,461 ======== ======== ======== ======== Basic earnings (loss) per common share(h): Earnings(loss) per common share before extraordinary items................. Extraordinary items................... Earnings (loss) per common share...... Weighted average number of common shares.............................. Diluted earnings (loss) per common share(h): Earnings (loss) per common share before extraordinary items.......... Extraordinary items................... Earnings (loss) per common share...... Weighted average number of common shares.............................. BALANCE SHEET DATA (AT END OF PERIOD)(I): Cash and cash equivalents.............. $63,802 $41,402 Working capital........................ 132,586 136,911 Total assets........................... 683,198 724,094 Long-term debt......................... 862 3,621 Net borrowing from Ciba and affiliates(j)......................... 177,651 203,157 Other non-current liabilities(k)....... 83,964 84,303 Shareholders' equity (deficit) (l)..... 228,194 193,254 METTLER-TOLEDO INTERNATIONAL INC. -------------------------------------------------------- OCTOBER 15 NINE MONTHS ENDED TO YEAR ENDED SEPTEMBER 30, DECEMBER 31, DECEMBER 31, ------------------------- 1996 1997 1997 1998 ------------ ------------ ---------- ---------- STATEMENT OF OPERATIONS DATA: Net sales.............................. $186,912 $878,415 $633,743 $669,747 Cost of sales.......................... 136,820(a) 493,480(b) 359,080(b) 374,594 ---------- ---------- ---------- ---------- Gross profit........................... 50,092 384,935 274,663 295,153 Research and development............... 9,805 47,551 34,494 33,551 Selling, general and administrative.... 59,353 260,397 189,594 192,844 Amortization........................... 1,065 6,222 4,449 5,473 Purchased research and development..... 114,070(c) 29,959(d) 29,959(d) 9,976(e) Interest expense....................... 8,738 35,924 28,199 17,153 Other charges (income), net(f)......... 17,137 10,834 7,316 1,606 ---------- ---------- ---------- ---------- Earnings (loss) before taxes, minority interest and extraordinary items...... (160,076) (5,952) (19,348) 34,550 Provision for taxes.................... (938) 17,489 7,296 13,552 Minority interest...................... (92) 468 375 233 ---------- ---------- ---------- ---------- Earnings (loss) before extraordinary items................................. (159,046) (23,909) (27,019) 20,765 Extraordinary items-debt extinguishments....................... -- (41,197)(g) (9,552)(g) -- ---------- ---------- ---------- ---------- Net earnings (loss).................... $(159,046) $(65,106) $(36,571) $20,765 ========== ========== ========== ========== Basic earnings (loss) per common share(h): Earnings(loss) per common share before extraordinary items................. $(5.18) $(0.76) $(0.88) $0.54 Extraordinary items................... -- (1.30) (0.31) -- ---------- ---------- ---------- ---------- Earnings (loss) per common share...... $(5.18) $(2.06) $(1.19) $0.54 ========== ========== ========== ========== Weighted average number of common shares.............................. 30,686,065 31,617,071 30,686,189 38,342,651 Diluted earnings (loss) per common share(h): Earnings (loss) per common share before extraordinary items.......... $(5.18) $(0.76) $(0.88) $0.51 Extraordinary items................... -- (1.30) (0.31) -- ---------- ---------- ---------- ---------- Earnings (loss) per common share...... $(5.18) $(2.06) $(1.19) $0.51 ========== ========== ========== ========== Weighted average number of common shares.............................. 30,686,065 31,617,071 30,686,189 40,619,050 BALANCE SHEET DATA (AT END OF PERIOD)(I): Cash and cash equivalents.............. $60,696 $23,566 $33,158 $15,604 Working capital........................ 103,697 79,163 89,003 94,496 Total assets........................... 771,888 749,313 768,177 764,221 Long-term debt......................... 373,758 340,334 429,033 320,193 Net borrowing from Ciba and affiliates(j)......................... -- -- -- -- Other non-current liabilities(k)....... 96,810 91,011 90,307 101,984 Shareholders' equity (deficit) (l)..... 12,426 25,399 (36,261) 42,904
- --------------- (a) In connection with the Acquisition, we allocated $32,194 of the purchase price to revalue certain inventories (principally work-in-progress and finished goods) to fair value (net realizable value). Substantially all such inventories were sold during the period October 15, 1996 to December 31, 1996. (b) In connection with the Safeline acquisition, we allocated $2,054 of the purchase price to revalue certain inventories (principally work-in-progress and finished goods) to fair value (net realizable value). Substantially all such inventories were sold during the second quarter of 1997. (c) In connection with the Acquisition, we allocated, based upon independent valuations, $114,070 of the purchase price to purchased research and development in process. This amount was recorded as an expense immediately following the Acquisition. (d) In connection with the Safeline acquisition, we allocated, based upon independent valuations, $29,959 of the purchase price to purchased research and development in process. This amount was recorded as an expense immediately following the Safeline acquisition. (Footnotes continued on following page) 21 24 (Footnotes continued from previous page) (e) In connection with the Bohdan acquisition, we allocated, based upon independent valuations, $9,976 of the purchase price to purchased research and development in process. This amount was recorded as an expense immediately following the Bohdan acquisition. (f) Other charges (income), net generally includes interest income, foreign currency transactions, gains and losses from sales of assets and other items. In 1993, the amount shown includes costs associated with the closure of a manufacturing facility in Cologne, Germany, the restructuring of certain manufacturing operations and an early retirement program in the United States. For the period January 1, 1996 to October 14, 1996, the amount shown includes employee severance and other exit costs associated with the closing of our Westerville, Ohio facility. For the period October 15, 1996 to December 31, 1996, the amount shown includes employee severance benefits associated with our general head count reduction programs in Europe and North America and the realignment of the analytical and precision balance business in Switzerland. For the year ended December 31, 1997, the amount shown includes a restructuring charge of $6,300 to consolidate three facilities in North America. The amount for the nine months ended September 30, 1998 includes $650 of expenses incurred on behalf of certain selling shareholders in connection with the secondary offering completed in July 1998. See Note 14 to the audited consolidated financial statements which are included as part of this prospectus. (g) Represents charges for the write-off of capitalized debt issuance fees and related expenses associated with our previous credit facilities. The amount for the year ended December 31, 1997 also includes the prepayment premium on our senior subordinated notes which were repurchased and the write-off of the related capitalized debt issuance fees. (h) Effective December 31, 1997, we adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). Accordingly, basic and diluted loss per common share data for each period presented are determined in accordance with the provisions of SFAS 128. (i) Balance sheet information at December 31, 1993 is not available. (j) Includes notes payable and long-term debt payable to Ciba and affiliates less amounts due from Ciba and affiliates. (k) Consists primarily of obligations under various pension plans and plans that provide post-retirement medical benefits. See Note 12 to the audited consolidated financial statements which are included as part of this prospectus. (l) Shareholders' equity for the Predecessor Business consists of the combined net assets of the Mettler-Toledo group of companies. 22 25 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and the unaudited interim consolidated financial statements included as part of this prospectus. OVERVIEW Mettler-Toledo operates a global business, with net sales that are diversified by geographic region, product range and customer. The Company holds leading positions in many of its markets and attributes this leadership to several factors, including the strength of its brand name, the quality of its global sales and service network, its continued investment in product development, its pursuit of technology leadership and its focus on capitalizing on opportunities in developed and emerging markets. The Company's financial information is presented in accordance with U.S. GAAP. Financial results following the acquisition of the Company from Ciba-Geigy on October 15, 1996, the Safeline acquisition on May 30, 1997 and the initial public offering in November 1997 are not comparable in many respects to the financial results prior to those events. Financial results for the nine month period ended September 30, 1998 are not necessarily indicative of the results to be expected for the full year. Net sales in local currency increased 11% in 1997, 3% in 1996 and 6% in 1995 (adjusted for the Company's exit in 1996 and 1995 from certain systems businesses). More recently, during the nine months ended September 30, 1998, net sales in local currency increased by 8% compared to the corresponding period in 1997. The strengthening of the U.S. dollar versus the Company's major trading currencies reduced U.S. dollar reported sales growth in 1998 and 1997. U.S. dollar sales growth was 6% for the first nine months of 1998 compared to the first nine months of 1997. For the full year in 1997, net sales in U.S. dollars increased by 3% over 1996. Net sales in U.S. dollars were unchanged in 1996 and increased by 11% in 1995. During the first nine months of 1998, the Company had solid local currency sales growth in Europe of 12% and the Americas of 10%. However, economic conditions in emerging markets have deteriorated significantly and some emerging markets are experiencing recessionary trends, severe currency devaluations and inflationary prices. Moreover, economic problems in individual markets are increasingly spreading to other economies, adding to the adverse conditions facing nearly all emerging markets. The effects of these economic conditions can be seen in the 1998 nine month local currency sales decline in Asia and other markets of 8% compared to the first nine months of 1997. The Company remains committed to emerging markets, particularly those in Asia, Latin America and Eastern Europe. The Company believes emerging markets will provide opportunities for growth in the long term based upon the movement toward international quality standards, the need to upgrade mechanical scales to electronic versions and the establishment of local production facilities by the Company's multinational client base. However, the Company expects current economic conditions will affect its financial results in these markets for the foreseeable future. The Company believes that its sales growth over the next several years will come primarily from (i) the needs of its lab and industrial customers in developed markets to continue to automate their research and development and manufacturing processes, (ii) the needs of its retail customers in Europe to upgrade their scales for the implementation of the Euro, (iii) the needs of its retail customers to implement sophisticated perishable goods management systems using weighing and PC technology in a networked environment, (iv) the needs of customers in emerging markets to continue modernizing research and development and manufacturing processes through the use of increasingly sophisticated instruments, and (v) acquisition opportunities. The Company increased its gross profit margin before non-recurring acquisition costs from 40.3% in 1995 to 44.1% in 1997 and increased its Adjusted Operating Income (gross profit less research and development and selling, general and administrative expenses before amortization and non-recurring costs) 23 26 as a percentage of net sales from 4.6% in 1995 to 9.3% in 1997. During the first nine months of 1998, the Company increased its gross profit margin to 44.1% compared to 43.3% for the first nine months of 1997. In addition, the Company has continued to significantly improve its Adjusted Operating Income. As a percentage of net sales, Adjusted Operating Income increased to 10.3% for the first nine months of 1998 compared to 8.3% during the first nine months of 1997. This improved performance was achieved despite the Company's continued investments in product development and in its distribution and manufacturing infrastructure. The Company believes that a significant portion of the increases in its Adjusted Operating Income resulted from its strategy to reduce costs, re-engineer its operations and focus on the highest value-added segments of the markets in which the Company competes. RECENT ACQUISITIONS We are the leading provider of automated lab reactors and reaction calorimeters to the automated drug and chemical compound discovery and development market. We believe that our customers want solutions in this market from a company like Mettler-Toledo, with a reputation for innovation and quality and with a global presence and service network. In July 1998, we extended our product offerings to the automated drug and compound discovery market with our acquisition of Bohdan Automation Inc. Bohdan is a leading supplier of laboratory automation and automated synthesis products used in research for life science applications for pharmaceutical and agricultural products and in other applications in the food and chemicals industries. On December 7, 1998, we announced that we had acquired two technologically advanced instrument companies, Applied Systems and Myriad Synthesizer Technology. Although these businesses are not currently significant in size, we believe these acquisitions are key elements in our strategic effort to further build a leading position in the field of automated solutions for drug and chemical compound discovery and development. These acquisitions enable us to offer a strong and comprehensive array of solutions, from sample preparation to compound synthesis to process development. Applied Systems designs, assembles and markets instruments for in-process molecular analysis, which is primarily used for researching, developing and monitoring chemical processes. Applied Systems' proprietary sensors, together with its innovative Fourier transform infrared technology, enable chemists to analyze chemical reactions as they occur, which is more efficient than pulling samples. Myriad Synthesizer Technology designs, assembles and markets instruments that facilitate and automate the synthesis of large numbers of chemical compounds in parallel, which is a key step in the chemical compound discovery process. Its products can be used in all stages of synthesis in drug discovery. On May 30, 1997, the Company acquired Safeline Limited. Safeline is the world's largest manufacturer and marketer of metal detection systems for companies that produce and package goods in the food processing, pharmaceutical, cosmetics, chemicals and other industries. Safeline's metal detectors can also be combined with the Company's checkweighing products for important quality and safety checks in these industries. The financing of the Safeline acquisition is discussed in "-- Liquidity and Capital Resources" below. SECONDARY OFFERING AND IPO In July 1998, certain selling shareholders completed a secondary offering of a total of 11,464,400 shares of the Company's common stock, including the underwriters' over-allotment options. No directors, executive officers or other employees sold shares and the Company did not sell shares or receive proceeds in the offering. The Company incurred a charge of $0.7 million in connection with the offering during the second quarter of 1998. During the fourth quarter of 1997, the Company completed its initial public offering of 7,666,667 shares of common stock, including the underwriters' over-allotment options, at a per share price of $14.00 24 27 (the "IPO"). The IPO raised net proceeds, after underwriters' commission and expenses, of approximately $97.3 million. Concurrently with the IPO, the Company refinanced its existing credit facility by entering into a new credit facility, borrowings from which, along with the proceeds from the IPO, were used to repay substantially all of the Company's then-existing debt, including all of its 9 3/4% senior subordinated notes due 2006 (collectively, the "Refinancing"). In connection with the Refinancing, the Company recorded an extraordinary charge of $31.6 million, net of tax, principally for prepayment premiums on certain debt repaid and for the write-off of existing deferred financing fees. The Company also paid a one-time termination fee of $2.5 million in connection with the termination of its management consulting agreement with AEA Investors Inc. COST REDUCTION PROGRAMS In 1997, the Company recorded restructuring charges totaling approximately $6.3 million in connection with the consolidation of three facilities in North America. The charges related to severance and other related benefits and costs of exiting facilities, including lease termination costs and write-down of existing assets to their expected net realizable value. The facility consolidations are part of the Company's ongoing efforts to reduce costs through re-engineering. When complete, the facility consolidations will result in annual cost savings estimated at approximately $2.5 million. During 1998 most of these actions were completed, including the sale of two of the facilities for over $5.0 million. The Company continuously implements cost reduction programs. 25 28 RESULTS OF OPERATIONS The following table sets forth certain items from the consolidated statements of operations for the year ended December 31, 1995, for the period from January 1, 1996 to October 14, 1996, for the period from October 15, 1996 to December 31, 1996, pro forma for the year 1996, actual for the year ended December 31, 1997 and actual for the nine months ended September 30, 1997 and 1998. The pro forma 1996 information gives effect to the Acquisition, the Safeline acquisition, the IPO and the Refinancing as if such transactions had occurred on January 1, 1996, and does not purport to represent the Company's actual results if such transactions had occurred on such date. The pro forma 1996 information reflects the historical results of operations of the Predecessor Business for the period from January 1, 1996 to October 14, 1996 and the historical results of operations of the Company for the period from October 15, 1996 to December 31, 1996, together with certain pro forma adjustments as described below. The consolidated statement of operations data for the year ended December 31, 1997 include Safeline results from May 31, 1997. The pro forma 1996 information includes Safeline's historical results of operations for all of 1996. The pro forma information is presented in order to facilitate management's discussion and analysis.
PREDECESSOR BUSINESS METTLER-TOLEDO INTERNATIONAL INC. -------------------------- -------------------------------------------------------------------- JANUARY 1, OCTOBER 15, NINE MONTHS ENDED YEAR ENDED 1996 TO 1996 TO 1996 YEAR ENDED SEPTEMBER 30, DECEMBER 31, OCTOBER 14, DECEMBER 31, PRO FORMA DECEMBER 31, ----------------------- 1995 1996 1996(A)(B) (A)(B)(C)(D) 1997(A)(B) 1997(A)(B) 1998(E) ------------ ----------- ------------ ------------ ------------ ---------- ---------- (DOLLARS IN THOUSANDS) Net sales.................... $850,415 $662,221 $ 186,912 $889,567 $878,415 $633,743 $669,747 Cost of sales................ 508,089 395,239 136,820 523,783 493,480 359,080 374,594 -------- -------- --------- -------- -------- -------- -------- Gross profit................. 342,326 266,982 50,092 365,784 384,935 274,663 295,153 Research and development..... 54,542 40,244 9,805 50,608 47,551 34,494 33,551 Selling, general and administrative............. 248,327 186,898 59,353 252,085 260,397 189,594 192,844 Amortization................. 2,765 2,151 1,065 6,526 6,222 4,449 5,473 Purchased research and development................ -- -- 114,070 -- 29,959 29,959 9,976 Interest expense............. 18,219 13,868 8,738 30,007 35,924 28,199 17,153 Other charges (income), net(f)..................... (9,331) (1,332) 17,137 14,036 10,834 7,316 1,606 -------- -------- --------- -------- -------- -------- -------- Earnings (loss) before taxes, minority interest and extraordinary items........ $ 27,804 $ 25,153 $(160,076) $ 12,522 $ (5,952) $(19,348) $ 34,550 ======== ======== ========= ======== ======== ======== ======== Adjusted Operating Income(g).................. $ 39,457 $ 39,840 $ 17,912 $ 67,875 $ 81,541 $ 52,629 $ 68,758 ======== ======== ========= ======== ======== ======== ========
- --------------- (a) In connection with the Acquisition and the Safeline acquisition, the Company allocated $32,194 and $2,054, respectively, of the purchase prices to revalue certain inventories (principally work-in-progress and finished goods) to fair value (net realizable value). Substantially all such inventories revalued in connection with the Acquisition were sold during the period October 15, 1996 to December 31, 1996, and substantially all such inventories revalued in connection with the Safeline acquisition were sold in the second quarter of 1997. The charges associated with these revaluations have been excluded from the 1996 pro forma financial information. (b) In connection with the Acquisition and the Safeline acquisition, the Company allocated, based upon independent valuations, $114,070 and $29,959, respectively, of the purchase prices to purchased research and development in process. These amounts were recorded as expenses immediately following the Acquisition and the Safeline acquisition, respectively. The amounts related to the Acquisition and the Safeline acquisition have been excluded from the 1996 pro forma information. (c) Represents the unaudited pro forma consolidated statement of operations for fiscal year 1996, assuming the Acquisition, the Safeline acquisition, the IPO and the Refinancing occurred on January 1, 1996. The 1996 pro forma data includes certain adjustments to historical results to reflect: (i) an increase in interest expense resulting from acquisition-related borrowings, which expense has been partially offset by reduced borrowings following application of IPO proceeds and a lower effective interest rate following the Refinancing, (ii) an increase in amortization of goodwill and other intangible assets following the Acquisition and the Safeline acquisition, (iii) a decrease in selling, general and administrative expense to eliminate the AEA Investors Inc. annual management fee of $1,000, payment of which was discontinued upon consummation of the IPO and (iv) changes to the provision for taxes to reflect the Company's estimated effective income tax rate at a stated level of pro forma earnings before tax for the year ended December 31, 1996. Certain other one-time charges incurred during 1996 have not been excluded from the unaudited pro forma consolidated statement of operations for the year ended December 31, 1996. (Footnotes continued on following page) 26 29 (Footnotes continued from previous page) (d) Certain one-time charges incurred during 1996 have not been excluded from the 1996 pro forma information. These charges consist of certain non-recurring items for (i) advisory fees associated with the reorganization of the Company's structure of approximately $4,800 and (ii) restructuring charges of approximately $12,600. (e) In connection with the Bohdan acquisition, the Company allocated, based upon independent valuations, $9,976 of the purchase price to purchased research and development in process. This amount was recorded as an expense immediately following the Bohdan acquisition. (f) Other charges (income), net generally includes interest income, foreign currency transactions, gains and losses from sales of assets and other items. For the period January 1, 1996 to October 14, 1996, the amount shown includes employee severance and other exit costs associated with the closing of its Westerville, Ohio facility. For the period October 15, 1996 to December 31, 1996, the amount shown includes employee severance benefits associated with the Company's general headcount reduction programs in Europe and North America and the realignment of the analytical and precision balance business in Switzerland. For the year ended December 31, 1997, the amount shown includes a restructuring charge of $6,300 to consolidate three facilities in North America. The amount for the nine months ended September 30, 1998 includes $650 of expenses incurred on behalf of certain selling shareholders in connection with the secondary offering completed in July 1998. See Note 14 to the audited consolidated financial statements which are included as part of this prospectus. (g) Adjusted Operating Income is defined as operating income (gross profit less research and development and selling, general and administrative expenses) before amortization and non-recurring costs. Non-recurring costs which have been excluded are the costs set forth in Note (a) above and for the period from October 15, 1996 to December 31, 1996, and in pro forma 1996, advisory fees associated with the reorganization of the Company's structure of approximately $4,800. Non-recurring costs for the year ended December 31, 1997 include a charge of $2,500 in connection with the termination of the Company's management services agreement with AEA Investors. The Company believes that Adjusted Operating Income provides important financial information in measuring and comparing its operating performance. Adjusted Operating Income is not intended to represent operating income under U.S. GAAP and should not be considered as an alternative to net earnings (loss) as an indicator of the Company's operating performance. NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1997 Net sales were $669.7 million for the nine month period ended September 30, 1998 compared to $633.7 million for the corresponding period in the prior year. This reflected an increase of 8% in local currency (5% absent the Safeline acquisition) for the nine month period. Results during the nine month period were negatively impacted by the strengthening of the U.S. dollar against other currencies. Net sales in U.S. dollars during the nine month period increased 6%. Net sales in Europe increased 12% in local currencies during the nine month period ended September 30, 1998, versus the corresponding period in the prior year. The Company has continued to experience favorable sales trends in Europe, which began in the second half of 1997, as a result of the strengthening of the European economy. Net sales in local currencies during the nine month period in the Americas increased 10% due to improved market conditions across most product lines, offset in part by weakness in Latin America particularly in the third quarter. Net sales in local currencies in the nine month period ended September 30, 1998 in Asia and other markets decreased 8%. The sales decline in Asia during that period results in part from a decline in net sales throughout the period in Southeast Asia and Korea. In addition, during the most recent three months the Company has also experienced a decline in net sales in Japan. The Company's sales and operating results in Asia and other emerging markets have deteriorated due to poor economic conditions. These results in U.S. dollar terms have also been affected by severe currency devaluations. The Company anticipates that market conditions in Asia and other emerging markets will continue to adversely affect sales and that margins in that region will be reduced. The Company believes that its sales growth on a U.S. dollar basis was reduced by 1 to 2 percentage points for the nine months ended September 30, 1998 as a result of these poor economic conditions and devaluations. The operating results for Safeline (which were included in the Company's results from May 31, 1997) would have had the effect of increasing the Company's net sales by an additional $19.0 million for the nine month period ended September 30, 1997, if included from January 1, 1997. Additionally, Safeline's operating results during the same period would have increased the Company's Adjusted Operating Income (gross profit less research and development and selling, general and administrative expenses before amortization and non-recurring costs) by $4.4 million. 27 30 Gross profit as a percentage of net sales increased to 44.1% for the nine months ended September 30, 1998, compared to 43.3% for the nine months ended September 30, 1997. The 1997 nine month period includes a $2.1 million non-cash charge associated with the excess of fair value over historical cost for inventories acquired in the Safeline acquisition. Research and development expenses as a percentage of net sales decreased to 5.0% for the nine months ended September 30, 1998, compared to 5.4% for the corresponding period in the prior year. However, the local currency spending level remained relatively constant for the nine month period. In July 1998, the Company acquired Bohdan Automation Inc., a leading supplier of laboratory automation and automated synthesis products. The Company incurred a charge of $10.0 million immediately following the acquisition based upon an independent valuation for purchased research and development costs for products being developed that have not established technological feasibility as of the date of the acquisition which, if unsuccessful, have no alternative future use. The Company expects that the projects underlying these research and development efforts will be substantially complete over the next two years. Selling, general and administrative expenses as a percentage of net sales decreased to 28.8% for the nine months ended September 30, 1998, compared to 29.9% for the corresponding period in the prior year. This decrease primarily reflects the benefits of ongoing cost efficiency programs. Adjusted Operating Income was $68.8 million, or 10.3% of sales, for the nine months ended September 30, 1998 compared to $52.6 million, or 8.3% of sales, for the corresponding period in the prior year, an increase of 30.6%. The 1997 nine month period excludes the previously noted charge of $2.1 million for the revaluation of inventories to fair value in connection with the Safeline acquisition. Interest expense decreased to $17.2 million for the nine month period ended September 30, 1998, compared to $28.2 million for the corresponding period in the prior year. The decrease was principally due to benefits received from the IPO, the Refinancing and cash flow provided by operations. Other charges, net were $1.6 million for the nine month period ended September 30, 1998 compared to other charges, net of $7.3 million for the corresponding period in the prior year. The 1998 nine month amount includes a one-time charge of $0.7 million relating to the secondary offering during that period. The 1998 nine month amount also includes gains on asset sales offset by other charges. The 1997 period includes restructuring related charges of $3.3 million and other charges of $3.5 million ($2.9 million after tax) relating to (i) certain derivative financial instruments acquired in 1996 and closed in 1997 and (ii) foreign currency exchange losses resulting from certain unhedged bank debt denominated in foreign currencies. Such derivative financial instruments and such unhedged bank debt are no longer held pursuant to current Company policy. The provision for taxes is based upon the Company's estimated annual effective tax rate for the related period. The Company recently lowered its estimated annual effective tax rate to approximately 30% for the full year 1998, before purchased research and development costs that are non-deductible. The estimated annual effective tax rate for 1998 includes a benefit of approximately 5 percentage points based upon a change in Swiss tax law which will benefit only the 1998 period. The extraordinary loss of $9.6 million in the nine month period ended September 30, 1997 represents charges for the write-off of capitalized debt issuance fees and related expenses associated with a previous credit facility. Net earnings excluding the expenses for purchased research and development and the secondary offering were $31.4 million for the nine month period ended September 30, 1998, compared to net earnings before non-recurring items of $10.5 million for the corresponding period in the prior year. Such non-recurring items in 1997 include the previously mentioned charges for purchased research and development, the revaluation of inventories to fair value, restructuring, losses relating to derivative financial instruments and unhedged bank debt denominated in foreign currencies, and the extraordinary item - debt 28 31 extinguishment. Including these items, the net earnings for the nine month period ended September 30, 1998 were $20.8 million, compared with net losses in the comparable 1997 period of $36.6 million. YEAR ENDED DECEMBER 31, 1997 COMPARED TO PRO FORMA YEAR ENDED DECEMBER 31, 1996 Net sales were $878.4 million for 1997, compared to pro forma 1996 net sales of $889.6 million. As previously described, pro forma 1996 includes a full year of Safeline's operating results, while 1997 only includes the operating results of Safeline from May 31, 1997. Net sales in local currencies during the year increased 11% (excluding Safeline results from pro forma 1996) and 7% (excluding Safeline results from both pro forma 1996 and actual 1997). Net sales in local currencies in 1997 in Europe increased 6% as compared to net sales in local currencies in pro forma 1996 (excluding Safeline results from pro forma 1996). Net sales in local currencies during 1997 in the Americas increased 11%, principally due to improved market conditions for sales to industrial and food retailing customers. Net sales in local currencies in 1997 in Asia and other markets increased 30%, primarily as a result of the establishment of additional direct marketing and distribution in the region. During the six months ended December 31, 1997, sales trends in Europe were more favorable compared to sales trends in the first two quarters of 1997. Overall, the Company's business in Asia and other markets has remained solid. However, growth in net sales in Southeast Asia and Korea (which collectively represent approximately 3% of the Company's total net sales for 1997) slowed. The operating results for Safeline (which as previously noted were included in the Company's results from May 31, 1997) had the effect of increasing the Company's net sales by $28.5 million for 1997. Additionally, Safeline's operating results had the effect of increasing the Company's Adjusted Operating Income by $7.1 million for the same period. The Company recorded non-cash purchase accounting adjustments for purchased research and development ($30.0 million) and the sale of inventories revalued to fair value ($2.1 million) during such period. Gross profit before non-recurring acquisition costs as a percentage of net sales increased to 44.1% for 1997, compared to 41.1% for pro forma 1996. Gross profit in 1997 includes the previously noted $2.1 million non-cash charge associated with the excess of the fair value over the historic value of inventory acquired in the Safeline acquisition. The improved gross profit percentage reflects the benefits of reduced product costs arising from the Company's research and development efforts, ongoing productivity improvements and the depreciation of the Swiss franc against the Company's other principal trading currencies. Research and development expenses as a percentage of net sales decreased to 5.4% for 1997, compared to 5.7% for pro forma 1996; however, the local currency spending level remained relatively constant period to period. Selling, general and administrative expenses as a percentage of net sales increased to 29.6% for 1997, compared to 28.3% for pro forma 1996. This increase is primarily a result of establishing additional direct marketing and distribution in Asia. Adjusted Operating Income was $81.5 million, or 9.3% of net sales in 1997 compared to $67.9 million, or 7.6% of net sales in pro forma 1996, an increase of 20.1% (28.4% excluding Safeline results from both pro forma 1996 and actual 1997). The 1997 period excludes non-recurring costs of $2.1 million for the revaluation of inventories to fair value in connection with the Safeline acquisition and $2.5 million paid to terminate the management contract with AEA Investors. As previously noted, in connection with the Safeline acquisition, $30.0 million of the purchase price was attributed to purchased research and development in process. Such amount was expensed immediately following the Safeline acquisition. The technological feasibility of the products being developed had not been established as of the date of the Safeline acquisition. The Company expects that the projects underlying these research and development efforts will be substantially complete over the next two years. 29 32 Interest expense was $35.9 million for 1997, compared to $30.0 million for pro forma 1996. The difference is principally due to the fact that the pro forma 1996 information reflects a full year of the benefits of reduced borrowing costs in connection with the Company's IPO and Refinancing which occurred in November 1997. Other charges, net of $10.8 million for 1997 includes restructuring related charges of approximately $6.3 million and other charges of approximately $3.5 million relating to (i) certain financial derivative financial instruments acquired in 1996 and closed in 1997 and (ii) foreign currency exchange losses resulting from certain unhedged bank debt denominated in foreign currencies (such derivative financial instruments and such unhedged bank debt are no longer held pursuant to current Company policy). The decrease compared to other charges, net of $14.0 million for pro forma 1996 is principally a result of lower restructuring related charges in 1997 compared to pro forma 1996 ($6.3 million versus $12.6 million). The significant increase in the Company's effective tax rate in 1997 was primarily attributable to the nondeductibility of goodwill and purchased research and development charges incurred in connection with the Safeline acquisition. Net earnings before non-recurring items were $19.1 million in 1997. Such non-recurring items in 1997 include the previously mentioned charges for purchased research and development, the revaluation of inventories to fair value, the termination fee paid to AEA Investors, the restructuring of North American operations and losses relating to derivative financial instruments and unhedged bank debt denominated in foreign currencies. Including these charges of $43.0 million after taxes, the net loss before extraordinary items was $23.9 million for 1997 compared to net earnings of $5.0 million for pro forma 1996. The extraordinary loss of $41.2 million in 1997 represents charges for the early repayment premium on the senior subordinated notes and the write-off of capitalized debt issuance fees associated with the senior subordinated notes and previous credit facilities. FOR THE PERIOD FROM JANUARY 1, 1996 TO OCTOBER 14, 1996, THE PERIOD FROM OCTOBER 15, 1996 TO DECEMBER 31, 1996 AND PRO FORMA 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995 Net sales for the period from January 1, 1996 to October 14, 1996 and for the period from October 15, 1996 to December 31, 1996 were $662.2 million and $186.9 million, respectively. Pro forma 1996 net sales were $889.6 million, or $849.1 million excluding Safeline results, compared to actual net sales of $850.4 million in 1995. Net sales (pro forma excluding Safeline) in local currency increased 3%, excluding the impact of reductions of the systems business, but were offset by a strengthening of the U.S. dollar, the Company's reporting currency, relative to the local currencies of the Company's operations. The flat sales (pro forma excluding Safeline) in 1996 compared to actual 1995 resulted from slightly lower sales from products in the industrial and food retailing markets, offset by strong performance by the product lines in the laboratory market. The growth in the laboratory market was across substantially all product lines and geographical regions as sales in local currency (excluding Safeline) increased 7% compared to the previous year. In particular, new product introductions in titration, thermal and reaction calorimetry as well as new Ohaus products for the education, laboratory and light industrial market helped to increase laboratory market sales. The slight decline in industrial and food retailing sales resulted from overall weakness in the European market where the Company has been able to retain its market share. This market weakness has persisted in early 1997. Net sales (pro forma excluding Safeline) in Europe in local currency decreased 2% in 1996 compared to actual 1995 due to a weaker second half of the year in 1996 in all major markets, and especially in key countries such as Germany, France and the United Kingdom. Net sales (pro forma excluding Safeline) in the Americas in local currency increased by 5% over actual 1995 due to growth in the United States and Latin America and double digit expansion in laboratory measurement instruments other than balances and in related service. Net sales (pro forma excluding Safeline) in Asia and other markets in local currency increased by 8% over actual 1995, primarily as a result of significantly increased sales in the Shanghai operation and strong sales in Japan and Australia. 30 33 Gross profit for the period from January 1, 1996 to October 14, 1996 and for the period from October 15, 1996 to December 31, 1996 was $267.0 million and $50.1 million, respectively. Pro forma 1996 gross profit was $365.8 million or $349.3 million (excluding Safeline results). This compares to $342.3 million in actual 1995. Pro forma gross profit as a percentage of sales increased to 41.1% in 1996 from 40.3% in actual 1995. The increased gross profit margin resulted principally from operational improvements and the depreciation of the Swiss franc against the Company's other principal trading currencies. See "-- Effect of Currency on Results of Operations." Selling, general and administrative expenses and research and development expenses for the period from January 1, 1996 to October 14, 1996 and for the period from October 15, 1996 to December 31, 1996 were $227.1 million and $69.2 million, respectively. Pro forma 1996 selling, general and administrative and research and development expenses totaled $302.7 million or $296.1 million excluding Safeline. This compares to $302.9 million in actual 1995. Pro forma selling, general and administrative expenses and research and development expenses as a percentage of net sales decreased to an aggregate of 34.0% in 1996 from 35.6% in actual 1995. The cost decreases resulted primarily from the currency effect of the depreciation of the Swiss franc against the Company's other major trading currencies and the Company's cost control efforts. These cost decreases were partially offset by non-recurring legal and advisory fees of $4.8 million. In connection with the Acquisition, the Company allocated, based upon independent valuations, $114.1 million of the purchase price to purchased research and development in process. Such amount was expensed immediately following the Acquisition. Interest expense for the period from January 1, 1996 to October 14, 1996 and for the period from October 15, 1996 to December 31, 1996 was $13.9 million and $8.7 million, respectively. Pro forma interest expense increased to $30.0 million in 1996 from $18.2 million in actual 1995, principally due to a higher debt level as a result of the Acquisition and the Safeline acquisition. Interest expense since the Acquisition and the Safeline acquisition is materially different. Other income, net for the period January 1, 1996 to October 14, 1996 of $1.3 million includes interest income of $3.4 million and severance and other exit costs of $1.9 million associated with the closing of its Westerville, Ohio facility. Other charges, net for the period October 15, 1996 to December 31, 1996 of $17.1 million principally represent (i) losses on foreign currency transactions of $8.3 million of which $5.7 million were incurred in connection with the Acquisition, (ii) employee severance benefits associated with the Company's general headcount reduction programs in Europe and North America of $4.6 million which were announced during such period, and (iii) the realignment of the analytical and precision balance business in Switzerland of $6.2 million which was internally announced in December 1996. In connection with such programs the Company reduced its workforce by approximately 170 employees in 1996 and intends to further reduce its workforce by approximately 70 employees in 1997. The Company anticipates that as a result of the foregoing it will achieve cost savings consisting primarily of lower employee salary and benefit costs and fixed manufacturing costs. In addition, at the time of the Acquisition, the Company estimated it would incur additional selling, general and administrative expenses of $1.3 million annually as a result of the Acquisition. Earnings before taxes and minority interest for the period from January 1, 1996 to October 14, 1996 was $25.2 million. Loss before taxes and minority interest for the period from October 15, 1996 to December 31, 1996 was $160.1 million. This loss includes non-recurring costs of $114.1 million for the allocation of purchase price to in-process research and development projects, $32.2 million for the revaluation of inventories to fair value, $9.9 million of other charges (an additional $1.9 million of other charges was incurred by the Predecessor Business in 1996) and $4.8 million for non-recurring legal and advisory fees. Pro forma earnings before taxes and minority interest would have been $12.5 million in 1996. Pro Forma Adjusted Operating Income would have been $67.9 million in 1996, or $58.0 million (excluding Safeline), compared to $39.5 million in actual 1995. 31 34 Net earnings for the period from January 1, 1996 to October 14, 1996 were $14.5 million. The net loss for the period from October 15, 1996 to December 31, 1996 was $159.0 million. Pro forma net earnings of $5.0 million in 1996 compared to net earnings of $18.3 million in actual 1995. LIQUIDITY AND CAPITAL RESOURCES Prior to the acquisition of the Company from Ciba-Geigy, the Company's cash was used primarily for working capital requirements and to fund capital expenditures, service debt and pay dividends to Ciba-Geigy. The Company's liquidity was affected by its own acquisition from Ciba-Geigy as well as by subsequent acquisitions completed by the Company. The acquisition from Ciba-Geigy was financed principally through capital contributions of $190.0 million before related expenses from the Company, borrowings under a previous credit agreement of $307.0 million and $135.0 million from the issuance of its 9 3/4% Senior Subordinated Notes due 2006 (the "Notes"). In May 1997, additional leverage was added through the acquisition of Safeline. The purchase price for Safeline was L63.7 million (approximately $104.4 million at May 30, 1997), including a post-closing adjustment of L1.9 million which was paid in October 1997 and an earn-out of L0.8 million which was paid in June 1998. The Company continues to explore potential acquisitions. In connection with any acquisition, the Company may incur additional indebtedness. The Company's liquidity was improved as a result of its initial public offering in November 1997 and the refinancing undertaken at that time. In the refinancing, the Company entered into a new credit agreement and repurchased all of the Notes using proceeds from the IPO and borrowings under the credit agreement. At September 30, 1998, the Company's consolidated debt, net of cash, was $362.8 million. The Company had borrowings of $351.5 million under its credit agreement and $26.9 million under various other arrangements as of September 30, 1998. Of its credit agreement borrowings, approximately $188.8 million was borrowed as term loans scheduled to mature in 2004, and $162.7 million was borrowed under a multi-currency revolving credit facility. At September 30, 1998, the Company had $239.2 million of availability remaining under the revolving credit facility. At September 30, 1998, approximately $111.6 million of the borrowings under the credit agreement were denominated in U.S. dollars. The balance of the borrowings under the credit agreement and under local working capital facilities were denominated in certain of the Company's other principal trading currencies amounting to approximately $266.8 million at September 30, 1998. Changes in exchange rates between the currencies in which the Company generates cash flow and the currencies in which its borrowings are denominated affect the Company's liquidity. In addition, because the Company borrows in a variety of currencies, its debt balances fluctuate due to changes in exchange rates. Under the credit agreement, amounts outstanding under the term loans amortize in quarterly installments. In addition, the credit agreement obligates the Company to make mandatory prepayments in certain circumstances with the proceeds of asset sales or issuance of capital stock or indebtedness and with certain excess cash flow. The credit agreement imposes certain restrictions on the Company and its subsidiaries, including restrictions on the ability to pay dividends to its shareholders, incur indebtedness, make investments, grant liens, sell financial assets and engage in certain other activities. The Company must also comply with certain financial covenants. The credit agreement is secured by certain assets of the Company. Cash provided by operating activities continues to significantly exceed the Company's capital expenditure requirements. The Company's cash provided by operating activities increased to $38.5 million in the nine months ended September 30, 1998 from $30.3 million in the nine months ended September 30, 1997. The increase resulted principally from improved Adjusted Operating Income and lower interest costs resulting from the IPO and related refinancing and reduced debt levels. For the year ended December 31, 1997, cash provided by operating activities was $55.6 million as compared to $62.5 million for the period 32 35 January 1, 1996 to October 14, 1996 and $9.6 million for the period October 15, 1996 to December 31, 1996. The 1997 results reflect higher interest costs resulting from the Acquisition and the Safeline acquisition. During the nine months ended September 30, 1998, the Company spent approximately $15.0 million in cash on acquisitions. These purchases were funded from cash generated from operations and additional borrowings. The Company may be required to make additional earn-out payments relating to certain of these acquisitions in the future. Capital expenditures are a significant use of funds by the Company, and are made primarily for machinery, equipment and the purchase and expansion of facilities, including the purchase of land for, and construction of, the Company's Shanghai manufacturing facility. The Company's capital expenditures totaled $25.9 million in 1995, $29.4 million in pro forma 1996 and $22.3 million in actual 1997. During the nine months ended September 30, 1998, the Company spent $17.3 million on capital expenditures compared to $13.3 million for the first nine months of 1997. Capital expenditures for 1999 are expected to increase over 1998 levels, but should remain consistent with earlier periods. The Company currently believes that cash flow from operating activities, together with borrowings available under the credit agreement and local working capital facilities, will be sufficient to fund currently anticipated working capital needs and capital spending requirements as well as debt service requirements for at least several years, but there can be no assurance that this will be the case. EFFECT OF CURRENCY ON RESULTS OF OPERATIONS Because the Company conducts operations in many countries, its operating income can be significantly affected by fluctuations in currency exchange rates. Swiss franc-denominated expenses represent a much greater percentage of the Company's operating expenses than Swiss franc-denominated sales represent of its net sales. In part, this is because most of the Company's manufacturing costs in Switzerland relate to products that are sold outside of Switzerland. Moreover, a substantial percentage of the Company's research and development expenses and general and administrative expenses are incurred in Switzerland. Therefore, if the Swiss franc strengthens against all or most of the Company's major trading currencies (e.g., the U.S. dollar, the Euro, other major European currencies and the Japanese Yen) the Company's operating profit is reduced. The Company also has significantly more sales in European currencies (other than the Swiss franc) than the Company has expenses in those currencies. Therefore, when European currencies weaken against the U.S. dollar and the Swiss franc, it also decreases the Company's operating profits. In recent years, the Swiss franc and other European currencies have generally moved in a consistent manner versus the U.S. dollar. Therefore, because the two effects previously described have offset each other, the Company's operating profits have not been materially affected by movements in the U.S. dollar exchange rate versus European currencies. However, there can be no assurance that these currencies will continue to move in a consistent manner in the future. In addition to the effects of exchange rate movements on operating profits, the Company's debt levels can fluctuate due to changes in exchange rates, particularly between the U.S. dollar and the Swiss franc. YEAR 2000 ISSUE The Company has in place detailed programs to address Year 2000 readiness internally and with certain suppliers. The Year 2000 issue is the result of computer logic that was written using two digits rather than four to define the applicable year. Any computer logic that processes date-sensitive information may recognize dates using "00" as the year 1900 rather than the year 2000, which could result in miscalculations or system or equipment failures. Pursuant to the Company's readiness programs, all major categories of information technology systems and non-information technology systems (e.g., equipment with embedded microprocessors) in use by the Company, including manufacturing, sales, financial and human resources, are being inventoried and assessed. In addition, plans have been developed for the required systems modifications or replacements. With respect to its information technology systems, the Company has completed the entire assessment 33 36 phase and most of the remediation phase. The remediation phase has been completed for most major facilities with the exception of facilities in Spain, Sweden and certain U.S. and German facilities. With respect to its non-information technology systems, the Company has completed the assessment phase and nearly all of the remediation phase. Selected areas, both internal and external, will be tested to assure the integrity of the Company's remediation programs. The testing is expected to be completed by September 1999. The Company plans to have all internal mission-critical information technology and non-information technology systems Year 2000 compliant by September 1999. The Company has also reviewed its products, including products sold in recent years, to determine if they are Year 2000 compliant. In its current product line the Company believes that most of its products are Year 2000 compliant. For products currently in use, the Company is reviewing the risks by product item with many customers and in many instances has suggested that the customer replace the older product. The Company is also communicating with its major suppliers to assess the potential impact on the Company's operations if those parties fail to become Year 2000 compliant in a timely manner. While this process is not yet complete, based upon responses to date, it appears that many of those suppliers have only indicated that they have in place Year 2000 readiness programs, without specifically confirming that they will be Year 2000 compliant in a timely manner. Risk assessment, readiness evaluation, action plans and contingency plans related to the Company's significant suppliers are expected to be completed by September 1999. The costs incurred to date related to its Year 2000 activities have not been material to the Company, and, based upon current estimates, the Company does not believe that the total cost of its Year 2000 readiness programs will have a material adverse impact on the Company's results of operations or financial condition. The total costs are not easy to quantify since many of the steps the Company is taking relate to ongoing systems updating, a small component of which relates to Year 2000 compliance. In certain instances, the Company has accelerated such updates. As a result of our ongoing systems updating, the Company does not expect to realize a significant reduction in related expenditures once the work on Year 2000 compliance is completed. The Company's readiness programs also include the development of contingency plans to protect its business and operations from Year 2000-related interruptions. These plans should be complete by September 1999 and, by way of example, will include back-up procedures, identification of alternate suppliers, where possible, and increases in safety inventory levels. Based upon the Company's current assessment of its non-information technology systems, the Company does not believe it necessary to develop an extensive contingency plan for those systems. There can be no assurances, however, that any of the Company's contingency plans will be sufficient to handle all problems or issues which may arise. The Company believes that it is taking reasonable steps to identify and address those matters that could cause serious interruptions in its business and operations due to Year 2000 issues. However, delays in the implementation of new systems, a failure to fully identify all Year 2000 dependencies in the Company's systems and in the systems of its suppliers, a failure of such third parties to adequately address their respective Year 2000 issues, or a failure of a contingency plan could have a material adverse effect on the Company's business, financial condition and results of operations. For example, the Company would experience a material adverse impact on its business if significant suppliers of components were unable to deliver on a timely basis, if major utilities failed, such as those providing water, electricity and telephone services, causing the Company to lose production capabilities or limit other operations, if a significant portion of the Company's billing system was not functioning, causing a working capital deficit or if costs increased from warranty claims or customer claims of product liability. The statements set forth herein concerning Year 2000 issues which are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. In particular, the costs associated with the Company's Year 2000 programs and the time-frame in which the Company plans to complete Year 2000 modifications are based upon management's best estimates. These estimates were derived from internal 34 37 assessments and assumptions of future events. These estimates may be adversely affected by the continued availability of personnel and system resources, and by the failure of significant third parties to properly address Year 2000 issues. Therefore, there can be no guarantee that any estimates, or other forward- looking statements will be achieved, and actual results could differ significantly from those contemplated. EUROPEAN MONETARY UNION Within Europe, the European Economic and Monetary Union (the "EMU") introduced a new currency, the Euro, on January 1, 1999. The new currency is in response to the EMU's policy of economic convergence to harmonize trade policy, eliminate business costs associated with currency exchange and to promote the free flow of capital, goods and services. Switzerland is not part of the EMU. On January 1, 1999, the participating countries adopted the Euro as their local currency, initially available for currency trading on currency exchanges and noncash (banking) transactions. The existing local currencies, or legacy currencies, will remain legal tender through January 1, 2002. Beginning on January 1, 2002, Euro-denominated bills and coins will be issued for cash transactions. For a period of six months from this date, both legacy currencies and the Euro will be legal tender. On or before July 1, 2002, the participating countries will withdraw all legacy currency and use exclusively the Euro. The Company has recognized the introduction of the Euro as a significant event with potential implications for existing operations. Currently, the Company operates in all of the participating countries in the EMU. The Company expects nonparticipating European Union countries, such as Great Britain, where the Company also has operations, to eventually join the EMU. The Company has committed resources to conduct risk assessments and to take corrective actions, where required, to ensure the Company is prepared for the introduction of the Euro. The Company has undertaken a review of the Euro implementation and has concentrated on areas such as operations, finance, treasury, legal, information management, procurement and others, both in participating and nonparticipating European Union countries where the Company operates. Also, existing legacy accounting and business systems and other business assets have been reviewed for Euro compliance, including assessing any risks from third parties. Progress regarding Euro implementation is reported periodically to management. Because of the staggered introduction of the Euro regarding noncash and cash transactions, the Company has developed its plans to address its accounting and business systems first and its business assets second. The Company expects to be Euro compliant within its accounting and business systems by the end of 1999 and compliant within its other business assets prior to the introduction of the Euro bills and coins. Compliance in participating and nonparticipating countries will be achieved primarily through upgraded systems, which were previously planned to be upgraded. Remaining systems will be modified to achieve compliance. The Company does not currently expect to experience any significant operational disruptions or to incur any significant costs, including any currency risk, which could materially affect the Company's liquidity or capital resources. The Company is preparing plans to address issues within the transitional period when both legacy and Euro currencies may be used. The Company is reviewing its pricing strategy throughout Europe due to the increased price transparency created by the Euro and is attempting to adjust prices in some of its markets. The Company is also encouraging its suppliers, even in Switzerland, to commence transacting in Euro. The Company does not believe that the effect of these adjustments will be material. The Company has a disproportionate amount of its costs in Swiss francs relative to sales. Historically, the potential currency impact has been muted because currency fluctuations between the Swiss franc and other major European currencies have been minimal and there is greater balance between total European (including Swiss) sales and costs. However, if the introduction of the Euro results in a significant weakening of the Euro against the Swiss franc, the Company's financial performance could be harmed. The statements set forth herein concerning the introduction of the Euro which are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ 35 38 materially from those in the forward-looking statements. In particular, the costs associated with the Company's Euro programs and the time-frame in which the Company plans to complete Euro modifications are based upon management's best estimates. These estimates were derived from internal assessments and assumptions of future events. There can be no guarantee that any estimates or other forward-looking statements will be achieved, and actual results could differ significantly from those contemplated. TAXES The Company is subject to taxation in many jurisdictions throughout the world. The Company's effective tax rate and tax liability will be affected by a number of factors, such as the amount of taxable income in particular jurisdictions, the tax rates in such jurisdictions, tax treaties between jurisdictions, the extent to which the Company transfers funds between jurisdictions and repatriates income, and changes in law. Generally, the tax liability for each legal entity is determined either (i) on a non-consolidated/combined basis or (ii) on a consolidated/combined basis only with other eligible entities subject to tax in the same jurisdiction, in either case without regard to the taxable losses of non-consolidated/combined affiliated entities. As a result, the Company may pay income taxes to certain jurisdictions even though the Company on an overall basis incurs a net loss for the period. ENVIRONMENTAL MATTERS The Company is subject to various environmental laws and regulations, including those relating to: - air emissions - wastewater discharges - the handling and disposal of solid and hazardous wastes - the remediation of contamination associated with the use and disposal of hazardous substances The Company incurs capital and operating expenditures in complying with environmental laws and regulations both in the United States and abroad. The Company is currently involved in, or has potential liability with respect to, the remediation of past contamination in facilities both in the United States and abroad. In addition, some of these facilities have or had been in operation for many decades and may have used substances or generated and disposed of wastes that are hazardous or may be considered hazardous in the future. Such sites and disposal sites owned by others to which the Company sent waste may in the future be identified as contaminated and require remediation. Accordingly, it is possible that the Company could become subject to additional environmental liabilities in the future that may harm its results of operations or financial condition. However, the Company does not anticipate any material adverse effect on its results of operations or financial condition as a result of future costs of environmental compliance. INFLATION Inflation can affect the costs of goods and services used by the Company. The competitive environment in which the Company operates limits somewhat the Company's ability to recover higher costs through increased selling prices. Moreover, there may be differences in inflation rates between countries in which the Company incurs the major portion of its costs and other countries in which the Company sells its products, which may limit the Company's ability to recover increased costs. The Company remains committed to operations in China, Latin America and Eastern Europe, which have experienced inflationary conditions. To date, inflationary conditions have not had a material effect on the Company's operating results. However, if the Company's presence in China, Latin America and Eastern Europe increases, these inflationary conditions could have a greater impact on the Company's operating results. 36 39 SEASONALITY The Company's business has historically experienced a slight amount of seasonal variation, with sales in the first quarter slightly lower than, and sales in the fourth quarter slightly higher than, sales in the second and third quarters. This trend has a somewhat greater effect on income from operations than on net sales because fixed costs are spread evenly across all quarters. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS Before 1997, the Company entered into currency forward and option contracts primarily as a hedge against anticipated foreign currency exposures and not for speculative purposes. Such contracts, which are types of financial derivatives, limit the Company's exposure to both favorable and unfavorable currency fluctuations. These contracts are adjusted to reflect market values as of each balance sheet date, with the resulting unrealized gains and losses being recognized in financial income or expense, as appropriate. At September 30, 1998, all remaining derivative instruments met the requirements of hedge accounting. During 1997 and 1998, the Company entered into certain interest rate swap and cap agreements. See Note 5 to the audited consolidated financial statements included in this prospectus. NEW ACCOUNTING STANDARDS In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement will change the way public companies report information about segments of their business in annual financial statements and requires them to report selected financial information in their quarterly reports issued to shareholders. It also requires entity-wide disclosures about products and services an entity provides, the material countries in which it holds assets and reports revenues, and its major customers. The statement is effective for fiscal years beginning after December 15, 1997. The respective disclosure required by this statement will be incorporated in the Company's 1998 consolidated financial statements. In March 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This statement provides guidance on accounting for the costs of computer software developed or obtained for internal use. This statement requires entities to capitalize certain internal-use software costs once certain criteria are met, and is effective for financial statements for fiscal years beginning after December 15, 1998. Management estimates the adoption of this statement will not have an adverse effect on its consolidated financial statements. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Management has not determined the effect of the adoption of this statement. RECENT SEC ANNOUNCEMENTS On September 28, 1998, the SEC Chairman raised the concern that U.S. reporting companies were classifying an ever-growing portion of the acquisition price for acquisitions as purchased in-process research and development. The SEC Chief Accountant has also written a letter to the AICPA SEC Regulations Committee to express concerns regarding purchased in-process research and development. Among other items, the Chief Accountant's letter has provided guidance upon a stage completion approach to allocate value associated with the research and development projects between the completed portion at the date of acquisition, and the portion to be completed by the acquirer. Purchased in-process 37 40 research and development represents the value assigned in a purchase business combination to research and development projects of the acquired business that were commenced but not yet completed at the date of acquisition and which, if unsuccessful, have no alternative future use in research and development activities or otherwise. In accordance with Statement of Financial Accounting Standards No. 2, "Accounting for Research and Development Costs," as interpreted by FASB Interpretation No. 4, amounts assigned to purchased in-process research and development meeting the above criteria must be charged to expense at the date of consummation of the purchase business combination. The Company recorded a charge for purchased in-process research and development in the third quarter of 1998 relating to the acquisition of Bohdan Automation Inc. The Company believes that this charge was calculated in accordance with U.S. GAAP and recent SEC guidance. However, if the SEC were to adopt a different standard on a retroactive basis than that applied by the Company or object to the Company's application of the recent SEC guidance, the Company could be required to restate its earnings. Moreover, any adjustment could result in earnings in the future being reduced by additional goodwill amortization. The Company recorded similar charges in its 1996 and 1997 consolidated financial statements relating to prior acquisitions. These consolidated financial statements were audited by its independent accountants. FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS This prospectus includes forward-looking statements based on the Company's current expectations and projections about future events, including: - strategic plans - potential growth, including penetration of developed markets and opportunities in emerging markets - planned product introductions - planned operational changes and research and development efforts - Year 2000 issues - Euro conversion issues - future financial performance, including expected capital expenditures - research and development expenditures - estimated proceeds from and the timing of asset sales - potential acquisitions - future cash sources and requirements - potential cost savings from planned employee reductions and restructuring programs These forward-looking statements are subject to a number of risks and uncertainties, including those identified in "Risk Factors," which could cause the Company's actual results to differ materially from historical results or those anticipated and certain of which are beyond the Company's control. The words "believe," "expect," "anticipate" and similar expressions identify forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. New risk factors emerge from time to time and it is not possible for the Company to predict all such risk factors, nor can the Company assess the impact of all such risk factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. 38 41 INDUSTRY OVERVIEW Weighing instruments are among the most broadly used measuring devices, and their results are often used as the basis of commercial transactions. Analytical instruments are critical to the research and development and quality control efforts of end-users, while metal detection systems provide important quality and safety checks in production and packaging. We estimate that total 1997 sales for products and services in the global markets for weighing instruments and other measurement instruments were approximately $6.0 billion. Furthermore, the overall market is diverse, with our products finding applications in a number of different settings. Some typical uses for our products in our principal markets and an overview of the variety of customers to whom we sell are as follows: Uses LABORATORY products, including balances, analytical instruments and process control devices, are sold to a demanding customer base of researchers and quality control departments who require products of exceptional performance and reliability. INDUSTRIAL products, including a variety of weighing technologies as well as metal detection equipment, are very often sold to the same customer base as laboratory products but are used in different areas of our customers' businesses. For example, industrial products are used in raw material handling, production, packaging and transportation. These products are often an integral part of our customers' manufacturing systems, very often directly integrated into their process control and/or data processing systems. FOOD RETAILING products, including retail scales, price labeling devices and wrapping equipment, are principally sold to large super and hypermarkets in solutions that combine weighing technologies with networked software to help our customers manage their perishable goods such as meat, fruit, vegetables and cheeses. Customers PRIVATE SECTOR: pharmaceutical, biotechnology, chemicals, food and beverage, food retailing, cosmetics, metals, electronics, transportation PUBLIC SECTOR: schools, universities, government standards laboratories The market for weighing and other instruments, particularly those used in industrial and food retailing applications, has traditionally been fragmented both geographically and by type of application. Many manufacturers have a strong market position in their home countries but a much smaller presence in other markets. Similarly, manufacturers have tended to be focused on a particular application or group of applications. Customers often spend a relatively small component of their aggregate expenditures on weighing instruments. However, weighing instruments perform important functions in quality control, process control and research and can improve productivity. As a result, we believe weighing instrument customers insist on accuracy, product reliability, technical innovation, service quality and past experience with a manufacturer's products; cost seems to be a secondary consideration. Weighing instrument manufacturers also provide their customers with a significant amount of service and support, including repair, calibration, certification and preventive maintenance. This service and support generates recurring revenues for manufacturers. In addition, customers tend to be loyal once they have selected a supplier. We believe this is because customers would face additional costs for training, spare parts, service and systems integration if they switched to or added other brands of weighing equipment. This factor benefits suppliers with a large installed base. 39 42 DEMAND TRENDS In developed markets (Europe, North America and Japan), laboratory demand for instruments has been influenced by sales trends in end-user industries and demand for new products that can be integrated into an automated laboratory environment. Demand for weighing instruments in the industrial and food retailing market has been driven by the increasing use of weighing applications in the control and regulation of manufacturing and logistics processes, customers' needs to upgrade to network-ready weighing equipment and general growth in end-user industries. Demand in emerging markets, such as Asia, has been fueled by companies requiring additional and more sophisticated weighing instruments and systems. Analytical Instruments Markets. We believe that customers for laboratory analytical instruments are reluctant to switch suppliers and are more likely to buy replacement products from the manufacturer of the initial system for the following reasons. Users of laboratory analytical instruments require high levels of performance and reliability due to the use of these instruments in critical steps of research and development and quality control. However, in most cases analytical instruments constitute a small percentage of customers' aggregate expenditures. In many cases, once a manufacturer's equipment is adopted in the laboratory and test methods are established using a particular instrument, the costs and/or risks of switching to a different manufacturer of instruments can be high. We believe that there are growth opportunities in our analytical instruments markets, including: growth in end-use markets such as pharmaceuticals, food and beverage, consumer products, environmental testing and chemicals; increased research and development spending in major customer segments such as the pharmaceutical and biotech industries; and increased customer emphasis on productivity and automation. Metal Detection Equipment Markets. Users of metal detection equipment are typically companies in the food processing, pharmaceutical, cosmetics, chemicals and other industries that must ensure that their products are free from contamination by metal particles. Selling products that are contaminated by metal can have severe consequences for these companies, resulting in potential litigation and product recalls. Consequently, purchasers of metal detectors value accuracy and stability of their detectors. We believe that customers are reluctant to switch brands since they would need to retrain line operators in the use of new equipment and alter quality assurance and calibration routines. Manufacturers therefore enjoy recurring and follow-on revenues from existing customers. We believe that in developed markets, increased demand for metal detectors results from an increasing consumer and regulatory focus on product safety. Moreover, we expect that exports of food products to industrialized nations from lesser developed countries will contribute to demand for metal detectors in emerging markets. GROWTH DRIVERS Integration with Customer Management Information Systems. The markets for our precision instruments have experienced increasing customer demand for products with sophisticated data handling and storage capabilities that can be integrated into management information systems. In the laboratory market, weighing and analytical instruments are now capable of storing a large number of results, performing statistical analyses and transmitting results to computers and laboratory information management systems. Laboratory customers have also demanded instruments that improve research productivity by adding automation. For example, titrators have been increasingly paired with auto-samplers, which allow a technician to set up dozens of samples for testing automatically. The industrial and food retailing market has experienced a similar trend, as small groceries are replaced by supermarkets and hypermarkets. Retail counter-top scales (for the weighing of perishable goods) now include database and network functions. This enables the scale to download price information from the store's master price database and provide information on sales by article, which can be integrated into the store's inventory control system. The store's master ordering system is then able to calculate shrinkage and store inventory levels based on the weight of goods processed and automatically reorder perishable goods electronically when inventory levels reach a pre-set reorder point. In manufacturing, weighing instruments also have become integrated into manufacturing plants' information systems as the primary means for the tracking and control of inventory. As they have become 40 43 more integrated into the manufacturing process, weighing instruments also have been combined with dimensioning equipment as well as with multiple input/output devices: bar-code readers, printers and data-storage devices. Similarly, metal detection systems can be integrated with checkweighers to provide important safety and quality checks of consumer products and are linked to customers' management information systems to provide key process control data. Regional and Global Harmonization of Weighing and Measurement Standards. Weights and measures were historically regulated at the national level. As a result, products had to meet numerous different national regulatory requirements. More recently, certain European national requirements have been harmonized by the European Union, and many other national requirements have been harmonized by the Organisation Internationale de Metrologie Legale, which sets international weights and measures standards. Harmonization has facilitated the ability of multinational weighing instrument producers to manufacture products that meet all relevant regulatory requirements and the development of broader-based markets for their product lines. In recent years, some governments have begun to privatize the inspection of weighing instruments used in commercial transactions. ISO-certified manufacturers of weighing instruments, such as Mettler-Toledo, whose after-sales service technicians already perform similar services for customers, are well situated to take over the inspection process from governments wishing to privatize this function. Standardization of Laboratory and Marketing Processes. As laboratory and manufacturing requirements and standards become more widely adopted, customers increasingly need the ability to certify laboratory results or the conformity of manufacturer processes to specification. Consequently, the accuracy of weighing instruments, analytical instruments and metal detection systems become increasingly important to purchasers. For example, ISO 9001 standards and Good Laboratory Practices and Good Manufacturing Practices, which are voluntarily adopted by participating companies, require the development of compliance procedures that must be adhered to throughout the relevant laboratory or production process. These procedures include periodic calibration and certification of measurement instruments. Certified instruments must be utilized throughout the process, and each step in the process must be accurately recorded in accordance with specified procedures so that results can be accurately traced and reproduced. An example of this trend is the increasing adoption of ISO 9001 quality guidelines by food processors, which require all production processes to be properly monitored for contamination by metal and other foreign substances. 41 44 BUSINESS OVERVIEW Mettler-Toledo is a leading global supplier of precision instruments. We are the world's largest manufacturer and marketer of weighing instruments for use in laboratory, industrial and food retailing applications. We also hold leading positions in various related precision measurement instrument technologies which we sell to the same customer base. For instance, we hold one of the top three global market positions in the following analytical instruments: titrators, thermal analysis systems, pH meters, automatic lab reactors and electrodes. In addition, we are the global market leader in metal detection equipment for use in the production and packaging of goods in industries such as food processing, pharmaceutical, cosmetics, chemicals and other industries. Market leadership and technology leadership are critical components of our success, and we have used these advantages to build our business. For instance, using our leading position in weighing instruments as our base, we have added other products, such as analytical instruments and metal detectors, that appeal to our existing customer base. In addition, we focus on the high value-added segments of our markets by delivering innovation to the marketplace. Some examples of our innovations include more accurate forms of measurement, an increased use of automation or robotics in our products and the use of custom- designed software or open-system architectures to allow data gathered by our instruments to be more easily integrated into our customers' management information systems. We believe our ability to maintain and enhance the strength of our leadership position in high value-added segments is due in part to the strength of our brand name and the quality of our global sales and service organization. We service a worldwide customer base through our own sales and service organization and we have a global manufacturing presence in Europe, the United States and Asia. Overall, we estimate the global market for weighing instruments to be approximately $4.5 billion and the market for other measurement instruments to be approximately $1.5 billion. In 1997, our sales were $878.4 million. In the first nine months of 1998, our sales were $669.7 million. Of this total 45% came from Europe, 44% from North and South America and 11% from Asia and other countries. Despite poor economic conditions in parts of the world during 1998, our sales have remained strong. We attribute this strength to the non-cyclical nature of our two largest markets, the pharmaceutical and food and beverage industries. Moreover, the diversified nature of our customer base and product offerings provides an additional competitive strength on a global basis and limits our exposure to local economic trends. HISTORY We trace our roots to the invention of the single-pan analytical balance by Dr. Erhard Mettler and the formation of Mettler Instruments AG ("Mettler") in 1945. During the 1970s and 1980s, Mettler expanded from laboratory balances into industrial and food retailing products, and introduced the first fully electronic precision balance in 1973. The Toledo Scale Company, which we acquired in 1989, was founded in 1901 and developed a leading market position in the industrial weighing market in the United States. During the 1970s, Toledo Scale expanded into the food retailing market. When we acquired Toledo Scale, our name was changed to Mettler-Toledo to reflect the combined strengths of the two companies and to capitalize on their historic reputations for quality and innovation. During the past two decades, we have grown through additional acquisitions intended to complement our existing geographic markets and products. For instance, in 1986, we acquired the Ingold Group of companies, which manufacture electrodes, and Garvens Kontrollwaagen AG, which builds dynamic checkweighers. Toledo Scale acquired Hi-Speed Checkweigher Co., in 1981. In 1990, we acquired Ohaus Corporation, which manufactures laboratory balances. More recently, in 1997 we acquired Safeline and in 1998 we acquired Bohdan Automation. Mettler-Toledo International Inc. was incorporated in December 1991 and was recapitalized in connection with the October 15, 1996 acquisition (the "Acquisition") of the Mettler-Toledo group of companies from Ciba-Geigy AG. In the Acquisition, we paid cash consideration of approximately SFr 505.0 million (approximately $402.0 million at October 15, 1996), including dividends of 42 45 approximately SFr 109.4 million (approximately $87.1 million at October 15, 1996), paid approximately $185.0 million to settle amounts due to Ciba-Geigy and its affiliates and incurred expenses in connection with the Acquisition and related financing of approximately $29.0 million. We financed the Acquisition primarily with (i) borrowings under a credit agreement in the amount of $307.0 million, (ii) the issuance of $135.0 million of senior subordinated notes and (iii) an equity contribution of $190.0 million primarily from AEA Investors, its shareholder-investors and our executive officers and other employees. Following the completion of our IPO, management, employees and Company sponsored pension funds held approximately 18% of the Company on a fully diluted basis. On May 30, 1997, we acquired Safeline Limited for L63.7 million (approximately $104.4 million at May 30, 1997). Safeline is the world's largest manufacturer and marketer of metal detection systems for companies that produce and package goods in the food processing, pharmaceutical, cosmetics, chemicals and other industries. Safeline's metal detectors can also be combined with our checkweighing products for important quality and safety checks in these industries. During the fourth quarter of 1997, we completed our IPO of 7,666,667 shares of common stock, including the underwriters' over-allotment options, at a per share price of $14.00. The IPO raised net proceeds, after underwriters' commission and expenses, of approximately $97.3 million. Concurrently with the IPO, we refinanced our prior credit facility and used proceeds from the refinancing and the IPO to repay the senior subordinated notes of our wholly owned subsidiary, Mettler-Toledo, Inc. In July 1998, certain selling shareholders completed a secondary offering of a total of 11,464,400 shares of our common stock, including the underwriters' over-allotment options. Neither we nor any of our directors, executive officers or other employees sold shares or received any proceeds from the offering. RECENT ACQUISITIONS We are the leading provider of automated lab reactors and reaction calorimeters to the automated drug and chemical compound discovery and development market. We believe that our customers want solutions in this market from a company like Mettler-Toledo, with a reputation for innovation and quality and with a global presence and service network. We extended our product offerings to the automated drug and compound discovery market with our July 1998 acquisition of Bohdan Automation Inc. Bohdan is a leading supplier of laboratory automation and automated synthesis products used in research for life science applications for pharmaceutical and agricultural products and in other applications in the food and chemicals industries. On December 7, 1998, we announced that we had acquired two technologically advanced instrument companies, Applied Systems and Myriad Synthesizer Technology. Although these businesses are not currently significant in size, we believe these acquisitions are key elements in our strategic effort to further build a leading position in the field of automated solutions for drug and chemical compound discovery and development. These acquisitions enable us to offer a strong and comprehensive array of solutions, from sample preparation to compound synthesis to process development. Applied Systems designs, assembles and markets instruments for in-process molecular analysis, which is primarily used for researching, developing and monitoring chemical processes. Applied Systems' proprietary sensors, together with its innovative Fourier transform infrared technology, enable chemists to analyze chemical reactions as they occur, which is more efficient than pulling samples. Myriad Synthesizer Technology designs, assembles and markets instruments that facilitate and automate the synthesis of large numbers of chemical compounds in parallel, which is a key step in the chemical compound discovery process. Its products can be used in all stages of synthesis in drug discovery. MARKET LEADERSHIP We believe that we have a leading position in each of our markets, and at least 80% of our product sales are from products that are the global leaders in their segment. In the weighing instruments market, 43 46 we are the only company to offer products for laboratory, industrial and food retailing applications globally and we believe that we hold a market share more than twice that of our nearest competitor. We believe that in 1997 we had approximately 40% of the global market for laboratory balances, including the largest market share in each of Europe, the United States and Asia (excluding Japan), and the number two position in Japan. In the industrial and food retailing markets, we believe we have the largest market share in Europe and the United States. In Asia, we have a substantial industrial and food retailing business which has gained market share in recent years. This business is supported by our established manufacturing presence in China. In addition, we also have one of the top three positions in the global market for several analytical instruments including titrators, thermal analysis systems, electrodes, pH meters and automatic lab reactors. We are also working to enhance our leading position in precision instruments. For instance, in 1997 we added Safeline's market leading metal detection products, which can be used with our checkweighing instruments for important quality and safety checks in the food processing, pharmaceutical, cosmetics, chemicals and other industries. Also, we believe that Bohdan will provide robotics capabilities to our analytical instruments and will further enhance our product offerings. We attribute our worldwide market leadership positions to the following competitive strengths: - - Global Brand and Reputation. The Mettler-Toledo brand name is identified worldwide with accuracy, reliability and innovation. Customers value these characteristics because precision instruments, particularly weighing and analytical instruments, significantly impact customers' product quality, productivity, costs and regulatory compliance. Furthermore, precision instruments generally constitute a small percentage of customers' aggregate expenditures. As a result, we believe customers focus on accuracy, product reliability, technical innovation, service quality, reputation and past experience when choosing precision instruments. We also believe that our customers experience high switching costs if they attempt to change vendors. A recent independent survey concluded that "Mettler-Toledo" was one of the three most recognized brand names in the laboratory. In fact laboratory balances are often generically referred to as "Mettlers." The strength of this brand name has allowed us to successfully extend our laboratory product line to include titrators, thermal analysis systems, electrodes, pH meters and automatic lab reactors. - - Technological Innovation. We focus on the high value-added segments of our markets by delivering innovation to the marketplace. We have a long and successful track record of innovation and remain at the forefront of technological development. Recent innovations in both weighing and related instrumentation include: -- a new digital load cell -- the first personal computer interface to be certified by weights and measures regulators (the ID 20 terminal) -- significantly improved weighing sensor technology (MonoBloc) -- a new moisture determination instrument (GOBI) -- a new automatic lab reactor -- a new, enhanced sensitivity metal detector (the Safeline Zero Metal-Free Zone detector) -- new dimensioning equipment using our patented PILAR technology As with many of our recent innovations, the new MonoBloc weighing sensor technology is more accurate and significantly reduces manufacturing costs and the time and expense of design changes. These improvements resulted from a reduction in the number of parts used in prior sensors from around 100 to around 50 used in the MonoBloc sensor. We believe that we are the global leader in our industry in providing innovative instruments, in integrating our instruments into application-specific solutions for customers and in facilitating the processing of data gathered by our instruments and the transfer of this data to customers' management information systems. Our technological innovation efforts benefit from our manufacturing expertise in sensor technology, precision machining and electronics, as well as our strength in software development. 44 47 - - Comprehensive, High Quality Product Range. We manufacture a more comprehensive range of weighing instruments than any of our competitors. Our broad product line addresses a wide range of weighing applications across and within many industries and regions. Furthermore, our analytical instruments and metal detection systems complement our weighing products, enabling us to offer integrated solutions. We manufacture our products in modern facilities, most of which are ISO 9001 certified. Our broad range of high quality products and the ability to provide integrated solutions allows us to leverage our sales and service organization, product development activities and manufacturing and distribution capabilities. - - Global Sales and Service. We have the only global sales and service organization among weighing instruments manufacturers, and we believe that this capability is a major competitive advantage. At September 30, 1998, this organization consisted of approximately 3,200 employees organized into locally based, customer-focused groups that provide prompt service and support to our customers and distributors in virtually all major markets around the world. The local focus of our sales and service organization enables us to provide timely, responsive support to our customers worldwide and provides feedback for manufacturing and product development. When we survey our current and potential customers on their needs, they often name service as the most important criteria for choosing their instrument suppliers. In addition to the service capability, this global infrastructure also allows us to capitalize on growth opportunities in emerging markets. - - Largest Installed Base. We believe that we have the largest installed base of weighing instruments in the world. From this installed base, we obtain service contracts that provide a strong, stable source of recurring service revenue. Service revenue represented approximately 16% of net sales in 1997, of which approximately 9% was derived solely from service contracts and repairs with the remainder derived from the sale of spare parts. We believe that our installed base of weighing instruments represents a competitive advantage with respect to repeat purchases and purchases of related analytical instruments and metal detection systems, because customers tend to remain with their existing suppliers. In addition, switching to a new instrument supplier entails additional costs to the customer for training, spare parts, service and systems integration requirements. Close relationships and frequent contact with our broad customer base also provide us with sales leads and new product and application ideas. - - Geographical, Product and Customer Diversification. Our revenue base is diversified by geographic region, product range and customer. Many different industries, including chemicals, pharmaceuticals, food processing, food retailing and transportation utilize our broad product range. We supply customers in over 100 countries, and no one customer accounted for more than 2.6% of net sales in 1997. Our diverse revenue base reduces our exposure to regional or industry-specific economic conditions, and our presence in many different geographic markets, product markets and industries enhances our attractiveness as a supplier to multinational customers. GROWTH STRATEGIES We are implementing strategies relating to expanding our technology leadership, increasing our market share and capitalizing on opportunities in developed markets, capitalizing on opportunities in emerging markets, pursuing selected acquisition opportunities and re-engineering and cost savings. These strategies are designed to reduce our overall cost structure and enhance our position as a global market leader. The successful implementation of these strategies has contributed to an improvement in Adjusted Operating Income (gross profit less research and development and selling, general and administrative expenses before amortization and non-recurring costs) from $39.5 million (4.6% of net sales) for 1995 to $81.5 million (9.3% of net sales) for 1997. Adjusted Operating Income increased from $52.6 million (8.3% of net sales) for the nine months ended September 30, 1997 to $68.8 million (10.3% of net sales) for the nine months ended September 30, 1998, an increase of 30.6%. We are committed to improving our performance and are pursuing the following strategies: 45 48 Expanding Our Technology Leadership. We attribute a significant portion of our recent margin improvement to our research and development efforts. We intend to continue to invest in product innovation in order to provide technologically advanced products to our customers for existing and new applications. Over the last three years, we have invested approximately $150 million in research and development. Our research and development efforts fall into two categories: - technology advancements, which increase the value of our products. These may be in the form of enhanced functionality, new applications for our technologies, more accurate or reliable measurement, additional software capability or automation through robotics or other means - cost reductions, which reduce the manufacturing cost of our products through better overall design Our research and development efforts have contributed to a pipeline of innovative and new products, significant reductions in product costs and reduced time to market for new products. Examples of recent or upcoming product introductions include: - industrial and retail products that apply open-system architecture - MonoBloc, a high accuracy, low-cost weighing sensor technology which is being incorporated throughout our product lines - a higher performance titrator - an improved performance modular thermal analysis system - a new density and refractometry measurement technology - a fully integrated metal detector and checkweigher - the first Chinese-designed and manufactured laboratory balance Increasing Our Market Share and Capitalizing on Opportunities in Developed Markets. We recognize that to be a successful company, we must not only develop excellent products, but we must market and distribute them effectively--more effectively than our competitors. We utilize what we believe are the most sophisticated marketing and sales techniques in our industry. These techniques include the development and utilization of marketing databases. We develop these databases to better understand the full potential of our market by customer, location, industry, instrument and related application. We then utilize this data to more efficiently direct our field resources and complement our direct and distributor sales forces with targeted mailing and telemarketing campaigns to more fully exploit our market's potential. We also utilize a dual brand strategy for certain market segments to improve our overall market penetration. For example, we sell laboratory balances under the Ohaus brand name as an alternative to the Mettler-Toledo brand name in certain distribution channels for laboratory balances. We believe that service capabilities are a critical success factor in our business. Our service capabilities, which provide support to our customers and distributors in virtually all major markets across the globe and include around-the-clock availability of well-trained technicians, are highly valued by our customers. We believe that no other competitor has global service capabilities. The combination of our sophisticated marketing and sales techniques and service capabilities help us capitalize on growth opportunities in our developed markets. These opportunities include: - integrating information from our measurement instruments into our customers' data management software systems - automating and/or improving process control, in part by developing integrated solutions which combine measurement instruments and related technologies directly into manufacturing processes - harmonization of national weighing standards across countries - increasing standardization of manufacturing and laboratory practices programs like ISO 9001, Good Laboratory Practices and Good Manufacturing Practices 46 49 - increasing recognition by our customers of the importance of preventive maintenance in reducing down time Capitalizing on Opportunities in Emerging Markets. While emerging markets were not a source of growth in 1998 due to weak economic conditions, we believe that these markets will provide growth opportunities for us in the long term. These growth opportunities are being driven primarily by economic development and global manufacturers' utilization of additional and more sophisticated precision measurement instruments as they shift production to these markets. In addition, we believe that over the long term, the trend toward international quality standards, the need to upgrade mechanical scales to electronic versions and the establishment of local production facilities by our multinational client base will add to the opportunities in emerging markets. To date our emerging market expansion has primarily focused on Asia. In Asia (excluding Japan), we are the market leader in laboratory weighing instruments and have a substantial industrial and food retailing business that has gained market share in recent years. For instance, we have two profitable operations in China: first, a 60% owned joint venture that manufactures and sells industrial and food retailing products and, second, a wholly owned facility that manufactures and distributes laboratory products. Both of these operations serve the domestic and export markets. We have also opened direct marketing organizations in Taiwan, Korea, Hong Kong, Thailand, Malaysia and Eastern Europe. Beyond Asia, we are also expanding our sales and service presence in Latin America and other emerging markets. We believe that to succeed in emerging markets, there are several advantages we must offer to our customer base: - to our multinational customers, we must offer the same level of service and problem-solving capabilities that we offer them in developed countries. We accomplish this through extensive training, including factory training, of our employees - to our local customers, we must offer lower cost and less complex products than are required by our customers in Japan, Europe and North America. We accomplish this through the increased research and development and manufacturing capabilities at our two Chinese production facilities - we must have a direct local presence to ensure that our combination of quality products and excellent service is effectively carried out at a local level so that we achieve the same level of brand awareness in emerging markets that we enjoy in developed markets. We have accomplished this in part by establishing ten new sales and service operations in emerging markets since 1996 Pursuing Selected Acquisition Opportunities. We believe that the combination of our market leadership, our strong brand name and our comprehensive sales and distribution network supports an attractive platform for acquisitions. We are interested in acquiring companies that provide us with: - COMPLEMENTARY PRODUCTS that will benefit from our brand name and global distribution channels. An example is Bohdan Automation Inc., a leading supplier of laboratory automation and automated synthesis products, which we acquired earlier this year and whose products we have now added to our global distribution network. Because of its small size as a stand-alone company, Bohdan lacked a global presence and did not serve customers on a worldwide basis. We offer it the infrastructure to expand its business globally. - INTEGRATED TECHNOLOGY solutions, which we can combine with our own technologies to create an overall better solution for our customers. An example is Safeline Limited, which we acquired in 1997. We combined its metal detection equipment with our checkweighers to create one instrument, featuring integrated data management, a smaller footprint and only one man-machine interface -- a better solution for many of our customers than separate products. - CONSOLIDATION OPPORTUNITIES in fragmented markets. An example is our recent acquisitions of a number of independent industrial and retail weighing distributors in the United States. - GEOGRAPHIC EXPANSION into markets where we do not have a direct presence. For example, earlier this year we established a small presence in India by acquiring a local manufacturer. 47 50 Re-engineering and Cost Savings. We have improved our profitability in recent years partly through a series of initiatives aimed at reducing our cost structure. We plan to take similar initiatives in the future with the goal of further improving our operating margins. These initiatives include: - moving the production of certain product lines to lower cost locations and consolidating the production of others. For example, in 1999 we are planning to consolidate development and manufacturing of all balances using magnetic force restoration technology in Switzerland and introduce a number of products to our global distribution channel that are manufactured in China - increasing sales force productivity through telemarketing, increased training and other focused initiatives. For example, we have recently initiated an internet sales channel for certain product categories and have also significantly increased our telemarketing initiatives. We believe both of these programs will increase the productivity of our sales force - reducing distribution costs by using existing infrastructure more efficiently and centralizing processes where economies of scale can be obtained. For example, we recently consolidated most of our North American order processing and billing functions into one location - reducing product cost through research and development, improved manufacturing processes and reducing the purchased cost of components. For example, we will introduce a number of products in 1999 with lower costs than the previous generation, including a basic balance. In addition, we have recently initiated a program to reduce the cost of printed circuit boards used in many of our scales and balances - continually reviewing operations to identify additional opportunities to reduce costs We believe that these initiatives will place us in a position to build on our recent improvement in profitability. Furthermore, we believe that we can leverage our existing infrastructure, particularly our recent investments in Asia, to obtain continued sales growth without significant additions to our overall cost base. PRODUCTS LABORATORY We manufacture and market a complete range of laboratory balances, as well as other selected laboratory measurement instruments, such as titrators, thermal analysis systems, electrodes, pH meters and automatic lab reactors, for laboratory applications in research and development, quality assurance, production and education. Laboratory products accounted for approximately 38% of our net sales in 1997 (including revenues from related after-sale service). We estimate that we have approximately 40% share of the global market for laboratory balances and we are among the top three producers worldwide of titrators, thermal analysis systems, electrodes, pH meters and automatic lab reactors. We believe that we have the leading market share for laboratory balances in each of Europe, the United States and Asia (excluding Japan) and the number two position in Japan. Balances. The balance is the most common piece of equipment in the laboratory. We believe that we sell the highest performance laboratory balances available on the market, with weighing ranges from one ten-millionth of a gram up to 32 kilograms. The Company's brand name is so well recognized that laboratory balances are often generically referred to as "Mettlers." The Mettler-Toledo name is identified worldwide with accuracy, reliability and innovation. In our judgment, this reputation constitutes one of our principal competitive strengths. In order to cover a wide range of customer needs and price points, we market precision balances, semimicrobalances, microbalances and ultramicrobalances in three principal product tiers offering different levels of functionality. High-end balances provide maximum automation of calibration, application support and additional functions. Mid-level balances provide a more limited but still extensive set of automated features and software applications. Basic level balances provide simple operations and a limited feature set. We also manufacture mass comparators, which are used by weights and measures regulators as well as 48 51 laboratories to ensure the accuracy of reference weights. Due to the wide range of functions and features offered by our products, prices vary significantly. A typical mid-range precision balance is priced at approximately $2,500 and a typical microbalance is priced at approximately $14,000. We regularly introduce new features and updated models in our lines of balances. For example, our DeltaRange models permit weighing of light and heavy samples on the same balance without the need for difficult adjustments, a function particularly useful in dispensing and formula weighing. High-end balances are equipped with fully automatic calibration technology. These balances are carefully calibrated by us many times in controlled environments, with the results of the calibrations incorporated into built-in software, so that adjustments for ambient temperature and humidity can automatically be made at any time once the balances are in use by our customers. We also offer universal interfaces that offer simultaneous connection of up to five peripheral devices. The customer can then interface one balance with, for example, a computer for further processing of weighing data, a printer for automatically printing results and a bar-code reader for sample identification. In addition to Mettler-Toledo branded products, we also manufacture and sell balances under the brand name "Ohaus." Ohaus branded products include mechanical balances and electronic balances for the educational market and other markets in which customers are interested in lower cost, a more limited set of features and less comprehensive support and service. Titrators. Titrators measure the chemical composition of samples. Our high-end titrators are multi-tasking models, which can perform two determinations simultaneously. They permit high sample throughputs and have extensive expansion capability and flexibility in calculations, functions and parameters. Most models, including those in the lower-range, permit common determinations to be stored in a database for frequent use. Titrators are used heavily in the food and beverage industry. A typical titrator is priced at approximately $12,000. Thermal Analysis Systems. Thermal analysis systems measure different properties, such as weight, dimension and energy flow, at varying temperatures. Our thermal analysis products include full computer integration and a significant amount of proprietary software. Thermal analysis systems are used primarily in the plastics and polymer industries. A typical thermal analysis system is priced at approximately $50,000. pH Meters. A pH meter measures acidity in a laboratory sample and is the second most widely used measurement instrument in the laboratory, after the balance. We manufacture desktop models and portable models. Desktop models are microprocessor-based instruments, offering a wide range of features and self-diagnostic functions. Portable models are waterproof, ultrasonically welded and ergonomically designed. Data collected from a portable meter can be downloaded to a computer or printer using an interface kit and custom software. pH meters are used in a wide range of industries. A typical pH meter is priced at approximately $1,200. Automatic Lab Reactors and Reaction Calorimeters. Automatic lab reactors and reaction calorimeters simulate an entire chemical manufacturing process in the laboratory. Customers use the simulation test before proceeding to production, in order to test the safety and feasibility of new processes. Our products are fully computer-integrated, with a significant software component that we also provide. They also offer wide flexibility in the structuring of experimental processes. Automatic lab reactors and reaction calorimeters are typically used in the chemicals and pharmaceutical industries. A typical lab reactor is priced at approximately $140,000. Synthesizers. We manufacture automated parallel synthesizers for use in sophisticated chemistry environments, such as pharmaceutical laboratories. These synthesizers allow scientists to develop new compounds more efficiently to create large libraries of molecules at the same time instead of creating them one by one as is done traditionally. This is an important aspect of combinatorial chemistry. Our synthesizers use robotics and sophisticated software to automate what was previously a manual process. A synthesizer costs between $75,000 and $1,000,000, depending on its functionality. Electrodes. We manufacture electrodes for use in a variety of laboratory instruments and in-line process applications. Laboratory electrodes are used in pH meters and titrators, and may be replaced many 49 52 times during the life of the instrument. In-line process electrodes are used to monitor production processes, for example, in the beverage industry. A typical in-line process electrode is priced at approximately $160. Other Instruments. We sell density and refractometry instruments, which measure chemical concentrations in solutions. These instruments are sourced through a marketing joint venture with a third-party manufacturer, but are sold under the Mettler-Toledo brand name. In addition, we manufacture and sell moisture analyzers, which precisely determine the moisture content of a sample by utilizing an infrared dryer to evaporate moisture. INDUSTRIAL AND FOOD RETAILING Weighing instruments are among the most broadly used measurement devices in industry and food retailing. Our industrial and food retailing weighing and related products include: - bench and floor scales for standard industrial applications - truck and railcar scales for heavy industrial applications - scales for use in food retailing establishments - checkweighers (which determine the weight of goods in motion) - metal detectors - dimensioning equipment - specialized software systems for industrial and perishable goods management processes Increasingly, many of our industrial and food retailing products can integrate weighing data into process controls and information systems. Our industrial and food retailing products are also sold to original equipment manufacturers ("OEMs"), which incorporate our products into larger process solutions and comprehensive food retailing checkout systems. At the same time, our products themselves include significant software and additional functions including networking, printing and labeling capabilities. They also include other measuring technologies such as dimensioning. We work with customer segments to create specific solutions to their weighing needs. For instance, working closely with the leading manufacturer of postal meters, we developed a new generation of postal metering systems. Industrial and food retailing products accounted for approximately 62% of our net sales in 1997 (including revenues from related after-sale service). We believe that we have the largest market share in the industrial and food retailing market in each of Europe and the United States. In Asia, we have a substantial industrial and food retailing business which has gained market share in recent years. This business is supported by an established manufacturing presence in China. We believe that we are the only company with a true global presence across industrial and food retailing weighing applications. Standard Industrial Products. We offer a complete line of standard industrial scales, such as bench scales and floor scales, for weighing loads from a few grams to several thousand kilograms in applications ranging from measuring materials in chemical production to weighing mail and packages. Our product lines include the "Spider" range of scales, often used in receiving and shipping departments in counting applications; "TrimWeigh" scales, which determine whether an item falls within a specified weight range, and are used primarily in the food industry; "Mentor SC" scales, for counting parts; and precision scales for formulating and mixing ingredients. Our "MultiRange" products include standardized software which uses the weight data obtained to calculate other parameters, such as price or number of pieces. The modular design of these products facilitates the integration of our weighing equipment into a computer system performing other functions, like inventory control or batch management. Prices vary significantly with the size and functions of the scale, generally ranging from $1,000 to $20,000. Heavy Industrial Products. Our primary heavy industrial products are scales for weighing trucks or railcars (i.e., weighing bulk goods as they enter a factory or at a toll station). Our truck scales, such as the "DigiTol TRUCKMATE," generally have digital load cells, which offer significant advantages in 50 53 serviceability over analog load cells. Heavy industrial scales are capable of measuring weights up to 500 tons and permit accurate weighing under extreme environmental conditions. We also offer advanced computer software that can be used with our heavy industrial scales to permit a broad range of applications. Truck scale prices generally range from $20,000 to $50,000. Dynamic Checkweighing. We offer solutions to checkweighing requirements in the food processing, pharmaceutical, chemicals and cosmetic industries, where customers are required to accurately measure portions for packaging. We also offer checkweighing solutions to the transportation and package delivery industries, where tariffs are levied based on weight. Customizable software applications utilize the information generated by checkweighing hardware to find production flaws, packaging and labeling errors and nonuniform products, as well as to sort rejects and record the results. Our checkweighing equipment can accurately determine weight in dynamic applications at speeds of up to several hundred units per minute. Checkweighers generally range in price from $8,000 to $40,000. Metal Detection Systems. Metal detection systems control the removal of products that are identified as contaminated by metal during the manufacturing process in the food processing, pharmaceutical, cosmetics, chemicals and other industries. Metal detectors therefore provide manufacturers with vital protection against metal contamination arising from their own production processes or from using contaminated raw materials. Metal detectors are most commonly used with checkweighers as components of integrated packaging lines in the food processing, pharmaceutical and other industries. Prices for metal detection systems generally range from $5,000 to $20,000. Dimensioning Equipment. We recently introduced automated dimensioning equipment for use in the shipping industry to measure package volumes. These products employ the patented PILAR technology and are integrated with industrial scales to combine volume-based and weight-based tariff calculations. Prices for integrated dimensioning/weighing systems range from $5,000 to $20,000. Food Retailing Products. Supermarkets, hypermarkets and other food retail establishments make use of multiple weighing applications for the full handling of perishable goods. For example, perishable goods are weighed on arrival to determine payment to suppliers and some of these goods are repackaged, priced and labeled for sale to customers. Other goods are kept loose and selected by customers and either weighed at the produce or delicatessen counter or at the checkout counter. We offer stand-alone scales for basic counter weighing and pricing, price finding, and printing. In addition, we offer network scales and software, which can integrate backroom, counter, self-service and checkout functions, and can incorporate weighing data into a supermarket's overall perishable goods management system. Backroom products include dynamic weighing products, labeling and wrapping machines, perishable goods management and data processing systems. In some countries in Europe, we also sell slicing and mincing equipment. Prices for food retailing scales generally range from $800 to $5,000, but are often sold as part of comprehensive weighing solutions. Systems. Our systems business consists of software applications for drum filling in the food and chemicals industries and batching systems in the glass industry. The software systems control or modify the manufacturing process. CUSTOMERS AND DISTRIBUTION Our business is geographically diversified, with sales in the first nine months of 1998 derived 45% from Europe, 44% from North and South America and 11% from Asia and other countries. Our customer base is also diversified by industry and by individual customer. Our largest single customer accounted for no more than 2.6% of 1997 net sales. LABORATORY Principal customers for laboratory products include: chemicals manufacturers, pharmaceutical manufacturers, cosmetics manufacturers, food and beverage makers, the metals industry, the electronics industry, the plastics industry, the transportation industry, the packaging industry, the logistics industry, the 51 54 rubber industry, the jewelry and precious metals trade, educational institutions and government standards laboratories. Balances and pH meters are the most widely used laboratory measurement instruments and are found in virtually every laboratory across a wide range of industries. Other products have more specialized uses. Our laboratory products are sold in more than 100 countries through a worldwide distribution network. Our extensive direct distribution network and our dealer support activities enable us to maintain a significant degree of control over the distribution of our products. In markets where there are strong laboratory distributors, such as the United States, we use them as the primary marketing channel for lower- and mid-price products. This strategy allows us to leverage the strength of both the Mettler-Toledo brand and the laboratory distributors' market position into sales of other laboratory measurement instruments. We provide our distributors with a significant amount of technical and sales support. High-end products are handled by our own sales force. There has been recent consolidation among distributors in the United States market. While this consolidation could adversely affect our U.S. distribution, we believe our leadership position in the market gives us a competitive advantage when dealing with our U.S. distributors. We sell products in Asia primarily through distributors, and in Europe primarily through direct sales. We also sell laboratory products directly in Japan and in certain other Asian countries. European and Asian distributors are generally fragmented on a country-by-country basis. Ohaus branded products are generally positioned in alternative distribution channels to those of Mettler-Toledo branded products. This means that we can fill a greater number of distribution channels and increase penetration of our existing markets. Since acquiring Ohaus in 1990, we have expanded this brand beyond its historical U.S. focus. Ohaus branded products are sold exclusively through distributors. INDUSTRIAL AND FOOD RETAILING Our industrial products customers include chemicals companies (e.g., formulating, filling and batching applications), food companies (e.g., packaging and filling applications), electronics and metal processing companies (e.g., piece counting and logistical applications), pharmaceutical companies (e.g., formulating and filling applications), transportation companies (e.g., sorting, dimensioning and vehicle weighing applications) and auto body paint shops, which mix paint colors based on weight. Our industrial products share weighing technology, and often minor modifications to existing products can make them useful for applications in a variety of industrial processes. We also sell to OEMs which integrate our modules into larger process control applications or comprehensive packaging lines. Our products are also purchased by engineering firms, systems integrators and vertical application software companies. Customers for metal detection systems are typically food processing, pharmaceutical, cosmetics and chemicals manufacturers that must ensure that their products are free from contamination by metal particles. Undetected metal contamination can have severe consequences for these companies, including potential litigation and product recalls. Metal detection systems are most commonly utilized in conjunction with checkweighers as components of integrated packaging lines. Metal detectors provide important safety checks before food and other products are delivered to customers. Metal detection systems are also used in pipeline detectors for dairy and other liquids, gravity fall systems for grains and sugar and throat detection systems for raw material monitoring. Our food retailing products customers include supermarkets, hypermarkets and smaller food retailing establishments. The North American and European markets already include many large supermarket chains, and there is an on-going shift in most of our food retailing markets from "mom and pop" grocery stores to supermarkets and hypermarkets. While supermarkets and hypermarkets generally buy less equipment per customer, they tend to buy more advanced products that require more electronic and software content. In emerging markets, however, the highest growth is in basic scales. As with industrial products, we also sell food retailing products to OEMs for inclusion in more comprehensive checkout systems. For example, our OEMs often incorporate our checkout scales into scanner-scales, which can 52 55 weigh perishable goods and also read bar codes on other items. Scanner-scales are in turn integrated with cash registers to form a comprehensive checkout system. Our industrial products are sold in more than 100 countries and our food retailing products in 20 countries. In the industrial and food retailing market, we distribute directly to customers (including OEMs) and through distributors. In the United States, direct sales slightly exceed distribution sales in part because distributors are highly fragmented in the United States. In Europe, direct sales predominate, with distributors used in certain cases. Where we use distributors, we seek to provide them with significant support. SALES AND SERVICE MARKET ORGANIZATIONS We have over 30 geographically focused market organizations ("MOs") around the world that are responsible for all aspects of our sales and service. The MOs are local marketing and service organizations designed to maintain close relationships with our customer base. Each MO has the flexibility to adapt its marketing and service efforts to account for different cultural and economic conditions. MOs also work closely with our producing organizations (described below) by providing feedback on manufacturing and product development initiatives and relaying innovative product and application ideas. We have the only global sales and service organization among weighing instruments manufacturers. At September 30, 1998, our sales and services group consisted of approximately 3,200 employees in sales, marketing and customer service (including related administration) and after-sales technical service. This field organization has the capability to provide service and support to our customers and distributors in virtually all major markets across the globe. Sales managers and representatives interact across product lines and markets in order to serve customers that have a wide range of weighing needs, such as pharmaceutical companies that purchase both laboratory and industrial products. We classify customers according to their potential for sales and the appropriate distribution channel is selected to service the customer as efficiently as possible. Larger accounts tend to have dedicated sales representatives. Other representatives specialize by product line. Sales representatives call directly on end-users either alone or, in regions where sales are made through distributors, jointly with distributors. We utilize a variety of advertising media, including trade journals, catalogs, exhibitions and trade shows. In addition, we also sponsor seminars, product demonstrations and customer training programs. Our high market share helps us to gauge growth opportunities, target our message to appropriate customer groups and monitor competitive developments. We utilize sophisticated marketing techniques in our sales efforts. These techniques include the development and utilization of marketing databases. We develop these databases to better understand the full potential of our market by customer, location, industry, instruments and related application. We then utilize this data to more efficiently direct our field resources and complement our direct and distributor sales forces with targeted mailing and telemarketing campaigns to more fully exploit our market's potential. We also utilize a dual brand strategy for certain market segments to improve our overall market penetration. For example, we sell laboratory balances under the Ohaus brand name as an alternative to the Mettler-Toledo brand name in certain distribution channels. AFTER-SALES SERVICE We believe service capabilities are a critical success factor in our business. Through our own dedicated service technicians, we provide contract and repair services in all countries in which our products are sold. We estimate that we have the largest installed base of weighing instruments in the world, and our contract and repair services generate significant revenues. In 1997, service (representing service contracts, repairs and replacement parts) accounted for approximately 16% of our total net sales (service revenue is included in the laboratory and industrial and food retailing sales percentages given above). Beyond revenue opportunities, service is a key part of our product offering and helps significantly in generating repeat sales. The close relationships and frequent contact with our large customer base provides us with sales opportunities and innovative product and application ideas. A global service network also is an important 53 56 factor in our ability to expand in emerging markets. Moreover, the widespread adoption of quality laboratory and manufacturing standards and the privatization of weights and measures certification represent favorable trends for our service business, as they tend to increase demand for on-site calibration services. Our service contracts provide for repair services within various guaranteed response times, depending on the level of service selected. Many contracts also include periodic calibration and testing. Contracts are generally one year in length, but may be longer. If the service contract also includes products of other manufacturers, we will generally perform calibration, testing and basic repairs directly, and contract out more significant repair work. As application software becomes more complex, our service efforts increasingly include installation and customer training programs as well as product service. RESEARCH AND DEVELOPMENT; MANUFACTURING PRODUCING ORGANIZATIONS Our product development, research and manufacturing efforts are organized into a number of producing organizations ("POs"). At September 30, 1998, POs included approximately 3,800 employees worldwide. POs are product development teams comprised of personnel from our marketing, development, research, manufacturing, engineering and purchasing departments. POs often seek customer input to ensure that the products developed are tailored to market needs. We have organized our POs to reduce product development time, improve customer focus, reduce costs and maintain technological leadership. The POs work together to share ideas and best practices, and some employees are in both MOs and POs. We recently implemented a number of projects that we believe will further increase productivity and lower costs. For example, we restructured the order and product delivery process in Europe to enable us to deliver many of our products to our customers directly from the manufacturing facility within several days, which minimizes the need to store products in decentralized warehouses. In addition, we have centralized our European spare parts inventory management system allowing all spare parts for Europe to be delivered from a single, highly automated location. RESEARCH AND PRODUCT DEVELOPMENT We closely integrate research and development with marketing, manufacturing and product engineering. We have nearly 600 professionals in research and development and product engineering. Our principal product development activities involve applications improvements to provide enhanced customer solutions, systems integration and product cost reduction. However, we also conduct research in basic weighing technologies. As part of our research and development activities, we have frequent contact with university experts, industry professionals and the governmental agencies responsible for weights and measures, analytical instruments and metal detectors. In addition, our in-house development is complemented by technology and product development alliances with customers and original equipment manufacturers. Our MonoBloc weighing sensor technology, which eliminates many of the complex mechanical linkages in a weighing sensor and reduces the number of parts in a sensor from approximately 100 to approximately 50, is an excellent example of our technological innovation. The MonoBloc sensor permits more accurate weighing, and lower manufacturing costs allow us to make design changes more cheaply and quickly. MonoBloc technology is already incorporated into a number of our products, and we are extending the MonoBloc technology through much of our weighing instrument product lines. We have devoted an increasing proportion of our research and development budget to software development. Software development for weighing applications includes application-specific software, as well as software utilized in sensor mechanisms, displays, and other common components, which can be leveraged across our broad product lines. Over the last three years, we have spent approximately $150 million on research and development (excluding research and development purchased in connection with acquisitions). In 1997, we spent 54 57 approximately 5.7% of net sales on research and development (including costs associated with customer-specific engineering projects, which are included in cost of sales for financial reporting purposes). MANUFACTURING We manufacture many of our own components, including components that require specific technical competence, or for which dependable, high quality suppliers cannot be found. However, when outside manufacturing is more efficient, we contract with others for certain components and in turn use these components in our own manufacturing processes. We use a wide range of suppliers and we believe our supply arrangements to be adequate. From time to time we rely on a single supplier for all of our requirements of a particular component. Even then, adequate alternative sources are generally available if necessary. Supply arrangements for electronics are generally made globally. For mechanical components, we generally use local sources to optimize materials flow. We strive to emphasize product quality in our manufacturing operations, and most of our products require very strict tolerances and exact specifications. We use an extensive quality control system that is integrated into each step of the manufacturing process. This integration permits field service technicians to trace important information about the manufacture of a particular unit, which facilitates repair efforts and permits fine-tuning of the manufacturing process. Many of our measuring instruments are subjected to an extensive calibration process that allows the software in the unit to automatically adjust for the impact of temperature and humidity. We are a worldwide manufacturer, with eight manufacturing plants in the United States, four in Switzerland, two in Germany, one in the United Kingdom and two in China. One of our Chinese plants is a joint venture in which we own a 60% interest. Laboratory products are produced mainly in Switzerland and to a lesser extent in the United States and China, while industrial and food retailing products are produced in all five countries. We produce our metal detectors in the United Kingdom. We have manufacturing expertise in sensor technology, precision machining and electronics, as well as strength in software development. Furthermore, most of our manufacturing facilities have achieved ISO 9001 certification. We believe that our manufacturing capacity is sufficient to meet our present and currently anticipated needs. BACKLOG Manufacturing turnaround time is generally sufficiently short so as to permit us to manufacture to fill orders for most of our products, which helps to limit inventory costs. Backlog is therefore generally a function of requested customer delivery dates and is typically no longer than one to two months. EMPLOYEES As of September 30, 1998, we had approximately 7,000 employees throughout the world, including more than 3,600 in Europe, more than 2,600 in North and South America, and approximately 800 in Asia and other countries. We believe our employee relations are good, and we have not suffered any material employee work stoppage or strike during the last five years. Labor unions do not represent a meaningful number of our employees. In certain of our facilities, we have a flexible workforce environment, in which hours vary depending on the workload. This flexible working environment enhances employees' involvement, thus increasing productivity. It also improves efficient payroll management by permitting us to adjust staffing to match workload to a greater degree without changing the size of the overall workforce. INTELLECTUAL PROPERTY We hold more than 1,100 patents and trademarks, primarily in the United States, Switzerland, Germany and Japan and, to a lesser extent, in China. Our products generally incorporate a wide variety of technological innovations, many of which are protected by patents and many of which are not. Moreover, 55 58 products are generally not protected as a whole by individual patents. Accordingly, no one patent or group of related patents is material to our business. We also have numerous trademarks, including the Mettler-Toledo name and logo which are material to our business. We regularly protect against infringement of our intellectual property. REGULATION Our products are subject to various regulatory standards and approvals by weights and measures regulatory authorities. Although there are a large number of regulatory agencies across our markets, there is an increasing trend toward harmonization of standards, and weights and measures regulation is harmonized across the European Union. Our food processing and food retailing products are subject to regulation and approvals by relevant governmental agencies, such as the United States Food and Drug Administration. Products used in hazardous environments may also be subject to special requirements. All of our electrical components are subject to electrical safety standards. We believe that we are in compliance in all material respects with applicable regulations. ENVIRONMENTAL MATTERS We are subject to a variety of environmental laws and regulations in the jurisdictions in which we operate, including provisions relating to air emissions, wastewater discharges, the handling and disposal of solid and hazardous wastes and the remediation of contamination associated with the use and disposal of hazardous substances. We wholly or partly own, lease or hold a direct or indirect equity interest in a number of properties and manufacturing facilities around the world, including the United States, Europe, Canada, Mexico, Brazil, Australia and China. Like many of our competitors, we have incurred, and will continue to incur, capital and operating expenditures and other costs in complying with such laws and regulations in both the United States and abroad. We are currently involved in, or have potential liability with respect to, the remediation of past contamination in certain of our facilities in both the United States and abroad. In addition, certain of our present and former facilities have or had been in operation for many decades and, over such time, some of these facilities may have used substances or generated and disposed of wastes which are or may be considered hazardous. It is possible that such sites, as well as disposal sites owned by third parties to which we have sent wastes, may in the future be identified and become the subject of remediation. Accordingly, although we believe that we are in substantial compliance with applicable environmental requirements and to date we have not incurred material expenditures in connection with environmental matters, it is possible that we could become subject to additional environmental liabilities in the future that could result in a material adverse effect on our financial condition or results of operations. We are involved in litigation concerning remediation of hazardous substances at our operating facility in Landing, New Jersey. On or about July 1988, an affiliate of Ciba ("AGP") purchased 100% of the outstanding stock of Metramatic Corporation ("Metramatic"), a manufacturer of checkweighing equipment located in Landing, from GEI International Corporation ("GEI"). GEI agreed to indemnify and hold harmless AGP for certain pre-closing environmental conditions, including those resulting in cleanup responsibilities required by the New Jersey Department of Environmental Protection pursuant to the New Jersey Environmental Cleanup Responsibility Act ("ECRA"). ECRA is now the Industrial Site Recovery Act. Pursuant to a 1988 New Jersey Department of Environmental Protection administrative consent order naming GEI and Metramatic as respondents, GEI has spent approximately $2 million in the performance of certain investigatory and remedial work addressing groundwater contamination at the site. However, implementation of a final remedy has not yet been completed, and, therefore, future remedial costs are currently unknown. In 1992, GEI filed a suit against various parties including Hi-Speed Checkweigher Co., Inc., our wholly owned subsidiary that currently owns the facility, to recover certain costs incurred by GEI in connection with the site. Based on currently available information and our rights of indemnification from GEI, we believe that our ultimate allocation of costs associated with the past and future investigation and remediation of this site will not have a material adverse effect on our financial condition or results of operations. 56 59 We, or in some cases the former owner of Toledo Scale, have been named a potentially responsible party under CERCLA or analogous state statutes at the following third-party owned sites with respect to the alleged disposal at the sites by Toledo Scale during the period before we owned it: Granville Solvents Site, Granville, Ohio; Aqua-Tech Environmental, Inc. Site, Greer, South Carolina; Seaboard Chemical Company Site, Jamestown, North Carolina; and the Stickney and Tyler Landfills in Toledo, Ohio. Pursuant to the terms of the stock purchase agreement between us and the former owner of Toledo Scale, the former owner is obligated to indemnify us for various environmental liabilities. To date, with respect to each of the foregoing sites, the former owner has undertaken the defense and indemnification of Toledo Scale. Based on currently available information and given our contractual rights of indemnification, we believe that the costs associated with the investigation and remediation of these sites will not have a material adverse effect on our financial condition or results of operations. COMPETITION Our markets are highly competitive. Furthermore, weighing instruments markets are fragmented both geographically and by application, particularly the industrial and food retailing weighing instruments market. As a result, we face numerous regional or specialized competitors, many of which are well established in their markets. In addition, some of our competitors are divisions of larger companies with potentially greater financial and other resources than our own. Taken together, the competitive forces present in our markets can impair our operating margins in certain product lines and geographic markets. We expect our competitors to continue to improve the design and performance of their products and to introduce new products with competitive prices. Although we believe that we have certain technological and other advantages over our competitors, we may not be able to realize and maintain these advantages. In any event, to remain competitive, we must continue to invest in research and development, sales and marketing and customer service and support. We cannot be sure that we will have sufficient resources to continue to make these investments or that we will be successful in identifying, developing and maintaining any competitive advantages. We believe that the principal competitive factors in our U.S. markets for purchasing decisions are accuracy and durability, while in Europe accuracy and service are the most important factors. In emerging markets, where there is greater demand for less sophisticated products, price is a more important factor than in developed markets. Competition in the United States laboratory market is also influenced by the presence of large distributors that sell not only our products but those of our competitors as well. PROPERTIES The following table lists our principal operating facilities, indicating the location, primary use and whether the facility is owned or leased.
LOCATION PRINCIPAL USE(1) OWNED/LEASED - -------- ---------------- ------------ Europe: Greifensee/Nanikon, Switzerland.......... Production, Corporate Headquarters Owned Uznach, Switzerland...................... Production Owned Urdorf, Switzerland...................... Production Owned Schwerzenbach, Switzerland............... Production Leased Albstadt, Germany........................ Production Owned Giesen, Germany.......................... Production Owned Giessen, Germany......................... Sales and Service Owned Steinbach, Germany....................... Sales and Service Owned Viroflay, France......................... Sales and Service Owned
57 60
LOCATION PRINCIPAL USE(1) OWNED/LEASED - -------- ---------------- ------------ Beersel, Belgium......................... Sales and Service Owned Tiel, Netherlands........................ Sales and Service Owned Leicester, England....................... Sales and Service Leased Manchester, England...................... Production, Sales and Service Leased Americas: Worthington, Ohio........................ Production Owned Spartanburg, South Carolina.............. Production Owned Franksville, Wisconsin................... Production Owned Ithaca, New York......................... Production Owned Wilmington, Massachusetts................ Production Leased Florham Park, New Jersey................. Production Leased Tampa, Florida........................... Production, Sales and Service Leased Vernon Hills, Illinois................... Production, Sales and Service Leased Burlington, Canada....................... Sales and Service Leased Mexico City, Mexico...................... Sales and Service Leased Other: Shanghai, China.......................... Production Building Owned; Land Leased Changzhou, China(2)...................... Production Building Owned; Land Leased Melbourne, Australia..................... Sales and Service Leased Mumbai, India............................ Production, Sales and Service Leased Sao Paolo, Brazil........................ Production and Sales Leased
- --------------- (1) We also conduct research and development activities at certain of the listed facilities in Switzerland, Germany, the United States and, to a lesser extent, China. (2) Held by a joint venture in which we own a 60% interest. We believe our facilities are adequate for our current and reasonably anticipated future needs. LEGAL PROCEEDINGS Routine litigation is incidental to our business. Nevertheless, we are not currently involved in any legal proceeding which we believe could have a material adverse effect upon our financial condition or results of operations. See "-- Environmental Matters" for information concerning legal proceedings relating to certain environmental claims. We have received a Notice of Proposed Adjustment from the Internal Revenue Service disallowing $20.4 million of intercompany interest deductions that we took in our 1994 and 1995 tax returns when we were a subsidiary of Ciba. We are indemnified under the acquisition agreement with Ciba against any loss that may arise from the proposed adjustment. Regardless, we believe that such deductions were properly made and we intend to assist Ciba in contesting the proposed adjustment. Our products generally are sold with a limited warranty for defects. We have reviewed our products currently in use by customers or being sold and do not believe that we will have material increase in warranty or product liability claims arising out of Year 2000 non-compliance. However, any material increase in these claims could harm our results of operations. 58 61 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The directors and executive officers of the Company are set forth below. All directors hold office until the annual meeting of shareholders following their election or until their successors are duly elected and qualified. Officers are appointed by the Board of Directors and serve at the discretion thereof.
NAME AGE POSITION - ---- --- -------- Robert F. Spoerry......................... 43 President, Chief Executive Officer and Chairman of the Board of Directors William P. Donnelly....................... 37 Chief Financial Officer Karl M. Lang.............................. 51 Head, Laboratory Division Lukas Braunschweiler...................... 42 Head, Industrial and Retail (Europe) John D. Robechek.......................... 50 Head, Industrial and Retail (Americas) Peter Burker.............................. 53 Head, Human Resources Thomas Rubbe.............................. 44 Head, Logistics and Information Systems Philip Caldwell........................... 78 Director Reginald H. Jones......................... 81 Director John D. Macomber.......................... 70 Director Laurence Z. Y. Moh........................ 72 Director Thomas P. Salice.......................... 39 Director
Robert F. Spoerry has been President and Chief Executive Officer of the Company since 1993. He served as Head, Industrial and Retail (Europe) of the Company from 1987 to 1993. Mr. Spoerry has been a Director since October 1996. Mr. Spoerry has been Chairman of the Board of Directors since May 18, 1998. William P. Donnelly has been Chief Financial Officer of the Company since April 1, 1997. From 1993 until joining the Company, he held various senior financial and management positions, including most recently Group Vice President and Chief Financial Officer, with Elsag Bailey Process Automation, a global manufacturer of instrumentation and analytical products, and developer of distributed control systems. Prior to 1993, Mr. Donnelly was associated with the international accounting firm of Price Waterhouse. Karl M. Lang has been Head, Laboratory Division of the Company since 1994. From 1991 to 1994 he was based in Japan as a representative of senior management with responsibility for expansion of the Asian operations. Lukas Braunschweiler has been Head, Industrial and Retail (Europe) of the Company since 1995. From 1992 until 1995 he held various senior management positions with the Landis & Gyr Group, a manufacturer of electrical meters. Prior to August 1992 he was a Vice President in the Technology Group of Saurer Group, a manufacturer of textile machinery. John D. Robechek has been Head, Industrial and Retail (Americas) of the Company and President of Mettler-Toledo, Inc., a U.S.-based subsidiary of the Company, since 1995. From 1990 through 1994 he served as Senior Vice President and managed all of the Company's U.S. subsidiaries. Peter Burker has been Head, Human Resources of the Company since 1994. From 1992 to 1994 he was Mettler-Toledo's General Manager in Spain, and from 1989 to 1991 he headed the Company's operations in Italy. Thomas Rubbe has been Head, Logistics and Information Systems of the Company since 1995. From 1990 to 1995 he was head of Controlling, Finance and Administration with the Company's German marketing organization. 59 62 Philip Caldwell has been a Director since October 1996. Prior to May 18, 1998, Mr. Caldwell served as Chairman of the Board of Directors. Mr. Caldwell spent 32 years at Ford Motor Company, where he served as Chairman of the Board of Directors and Chief Executive Officer from 1980 to 1985 and a Director from 1973 to 1990. He served as a Director and Senior Managing Director of Lehman Brothers Inc. and its predecessor, Shearson Lehman Brothers Holdings, Inc., from 1985 to February 1998. Mr. Caldwell is also a Director of Waters Corporation, Zurich Holding Company of America, Inc., American Guarantee & Liability Insurance Company, The Mexico Fund and Russell Reynolds Associates, Inc. He has served as a Director of the Chase Manhattan Corporation, the Chase Manhattan Bank, N.A., Digital Equipment Corporation, Federated Department Stores Inc., the Kellogg Company, Shearson Lehman Brothers Holdings Inc., CasTech Aluminum Group Inc., Specialty Coatings International Inc. and Zurich Reinsurance Centre Holdings, Inc. Reginald H. Jones has been a Director since October 1996. Mr. Jones retired as Chairman of the Board of Directors of General Electric Company ("General Electric") in April 1981. At General Electric, he served as Chairman of the Board of Directors and Chief Executive Officer from December 1972 through April 1981, President from June 1972 to December 1972 and a Director from August 1971 to April 1981. John D. Macomber has been a Director since October 1996. He has been a principal of JDM Investment Group since 1992. He was Chairman and President of the Export-Import Bank of the United States (an agency of the U.S. Government) from 1989 to 1992. From 1973 to 1986 Mr. Macomber was Chairman and Chief Executive Officer of Celanese Corporation. Prior to that, Mr. Macomber was a Senior Partner of McKinsey & Company. Mr. Macomber is also a Director of Textron Inc., Bristol-Myers Squibb Company, Xerox Corporation, Lehman Brothers Holdings Inc., Pilkington plc and Brown Group, Inc. Laurence Z. Y. Moh has been a Director since October 1996. At present, he is Chairman and CEO of Plantation Timber Products Limited (CHINA), which he founded in 1996. He is Chairman Emeritus of Universal Furniture Limited, which he founded in 1959. Thomas P. Salice has been a Director since October 1996. Mr. Salice is a Managing Director of AEA Investors and has been associated with AEA Investors since June 1989. Mr. Salice is also a Director of Waters Corporation. 60 63 EXECUTIVE COMPENSATION The following table sets forth for the years ended December 31, 1997, 1996 and 1995 the compensation paid to or accrued for services performed by the Chief Executive Officer, each of the four other most highly compensated executive officers of the Company who were serving as executive officers at December 31, 1997 and one other highly compensated employee who is no longer an executive officer (collectively, the "Named Executive Officers"). SUMMARY COMPENSATION TABLE(1)
SECURITIES OTHER ANNUAL UNDERLYING ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) COMPENSATION OPTIONS(#) COMPENSATION - --------------------------- ---- -------- -------- ------------ ---------- ------------ Robert F. Spoerry............................ 1997 $386,074 $427,113 $36,212(3) 125,839 $112,816(5) President and 1996 435,135 276,521 8,857(3) 1,047,976 124,431(5) Chief Executive Officer 1995 289,343 85,871 -- 300(4) 54,346(5) William P. Donnelly(6)....................... 1997 124,095 208,464 18,614(7) 195,050 36,768(5) Chief Financial Officer 1996 -- -- -- -- -- 1995 -- -- -- -- -- Karl M. Lang................................. 1997 170,424 134,209 -- 37,751 55,319(5) Head, Laboratory 1996 212,997 88,375 -- 209,597 61,901(5) 1995 228,427 38,071 -- -- 60,321(5) Lukas Braunschweiler......................... 1997 168,218 201,676 -- 37,751 49,145(5) Head, Industrial and Retail 1996 210,893 66,162 -- 209,597 62,482(5) (Europe) 1995 228,427 25,381 -- -- 50,460(5) John D. Robechek............................. 1997 220,000 193,886 -- 37,751 7,754(8) Head, Industrial and Retail 1996 233,754 88,137 -- 209,597 6,215(8) (Americas) 1995 225,000 40,563 -- -- 6,168(8) Fred Ort..................................... 1997 164,633 177,061 -- -- 55,452(5) Corporate Controller 1996 207,221 99,325 -- 78,599 52,745(5) 1995 227,284 69,701 -- -- 70,804(5)
- --------------- (1) Amounts paid in Swiss francs (all amounts except those paid to Mr. Robechek) converted to U.S. dollars at a rate of SFr 1.182 to $1.00 for 1995, SFr 1.2355 to $1.00 for 1996 and SFr 1.4505 to $1.00 for 1997, in each case the average exchange rate during such year. (2) Does not include Ciba bonuses to Messrs. Spoerry, Braunschweiler, Lang, Robechek and Ort for services rendered to Ciba in connection with its efforts to sell the Company. (3) Represents additional compensation paid to fully offset, after payment of all taxes and social security contributions, interest charged to Mr. Spoerry on a loan to Mr. Spoerry from Mettler-Toledo GmbH, a subsidiary of the Company. See "Certain Relationships and Related Transactions." (4) Option to purchase the specified number of shares of Ciba common stock at an exercise price of SFr 750 ($665 at the date of grant) per share. The fair market value at the date of grant was SFr 764 ($678) per share. (5) Represents Company contributions to the Mettler-Toledo Fonds (a Swiss pension plan similar to a defined contribution plan under U.S. law). Fifty percent of the amount shown is a required employee contribution under the plan which the Company has contributed on behalf of the Named Executive Officers, and the other 50% is a required matching employer contribution. (6) Mr. Donnelly's employment commenced on April 1, 1997. (7) Represents allowances associated with Mr. Donnelly's status as an expatriate in Switzerland. (8) Includes: (i) the value of group life insurance over $50,000 of $1,024 for 1995, $1,071 for 1996 and $1,036 in 1997; (ii) the Company's contribution to Mr. Robechek's 401(k) plan account of $4,500 in 1995 and 1996 and $4,750 in 1997; and (iii) Mr. Robechek's profit sharing payout under the Company's Performance Dividend Plan of $644 in 1995 and 1996 and $1,968 in 1997. 61 64 STOCK OPTIONS The following table sets forth information concerning the grant of stock options under the Company's stock option plan to the individuals named in the Summary Compensation Table. OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE NUMBER OF % OF TOTAL APPRECIATION FOR SECURITIES OPTIONS/SARS OPTION/SAR UNDERLYING GRANTED TO EXERCISE/BASE TERM(1) OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION --------------------- NAME GRANTED FISCAL YEAR ($/SH) DATE 5% ($) 10% ($) - ---- ------------ ------------ ------------- ---------- --------- --------- Robert F. Spoerry.................. 125,839 12.23 15.89 2007 1,257,526 3,186,818 William P. Donnelly................ 37,751 3.67 15.89 2007 377,251 956,028 157,299 15.29 7.95 2007 786,450 1,993,018 Karl M. Lang....................... 37,751 3.67 15.89 2007 377,251 956,028 Lukas Braunschweiler............... 37,751 3.67 15.89 2007 377,251 956,028 John D. Robechek................... 37,751 3.67 15.89 2007 377,251 956,028 Fred Ort........................... -- -- -- -- -- --
- --------------- (1) The assumed annual rates of appreciation over the term of the option are set forth in accordance with rules and regulations adopted by the Securities and Exchange Commission and do not represent the Company's estimate of stock price appreciation. OPTION EXERCISE TABLE No options to purchase common stock were exercised by the Named Executive Officers in 1997. The following table sets forth information with respect to the aggregate number of unexercised options to purchase common stock granted to the Named Executive Officers and held by them as of December 31, 1997, and the value of unexercised in-the-money options (i.e., options that had a positive spread between the exercise price and the fair market value of the common stock) as of December 31, 1997.
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN- SHARES OPTIONS/SARS AT FISCAL THE-MONEY OPTIONS/SARS ACQUIRED ON VALUE YEAR-END(#) AT FISCAL YEAR-END($)(1) EXERCISE REALIZED --------------------------- --------------------------- NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---- ----------- -------- ----------- ------------- ----------- ------------- Robert F. Spoerry................... 0 0 209,595 964,220 $1,949,234 $7,968,084 William P. Donnelly................. 0 0 0 195,050 0 1,514,222 Karl M. Lang........................ 0 0 41,919 205,429 389,847 1,610,747 Lukas Braunschweiler................ 0 0 41,919 205,429 389,847 1,610,747 John D. Robechek.................... 0 0 41,919 205,429 389,847 1,610,747 Fred Ort............................ 0 0 15,719 62,880 146,187 584,784
- --------------- (1) Sets forth values for "in the money" options that represent the positive spread between the respective exercise/base prices of outstanding stock options and the closing price of $17.25 per share at December 31, 1997, as reported on the New York Stock Exchange. EMPLOYMENT AGREEMENTS Mettler-Toledo GmbH, a subsidiary of the Company, entered into an employment agreement with Robert F. Spoerry dated as of October 30, 1996. The agreement provides for annual base salary of SFr 560,000 (approximately $386,074 at December 31, 1997), which may be increased from time to time in accordance with the Company's normal business practices, and for participation in the Company's bonus 62 65 plan. In addition, the agreement provides for payment of the amount necessary, after payment of all taxes and social security contributions, to fully offset the interest charged to Mr. Spoerry on a certain loan to the Executive. See "Certain Relationships and Related Transactions" for a description of the loan. The agreement prohibits Mr. Spoerry from competing with the Company for a period of 24 months after termination of employment. The agreement may be terminated without cause, on 36 months' notice during which period Mr. Spoerry is entitled to full compensation under the agreement. Mettler-Toledo GmbH also has entered into employment agreements with Lukas Braunschweiler, William P. Donnelly and Karl Lang, and Mettler-Toledo, Inc., a subsidiary of the Company, has entered into an employment agreement with John D. Robechek. The employment agreements provide for a base salary subject to adjustment and participation in the Company's bonus plan and participation in the Company's other employee benefit plans. Each agreement prohibits the executive from competing with the Company for a period of twelve months after termination of employment. Each agreement may be terminated without cause, on twelve months' notice during which period the executive is entitled to full compensation under the agreement. DIRECTORS' COMPENSATION Members of the Board of Directors of the Company who are officers of the Company or employees of AEA Investors have not received additional compensation for being on the Board or its committees. The non-executive directors were given a one-time opportunity to purchase stock in the Company upon their election to the Board. Mr. Caldwell purchased 35,940 shares of common stock and each of Messrs. Jones, Macomber and Moh purchased 23,972 shares of common stock. Members of the Board of Directors of the Company have received reimbursement for traveling costs and other out-of-pocket expenses incurred in attending board and committee meetings. Effective May 18, 1998, members of the Board of Directors who are not employees of the Company will receive an annual fee of $17,500 (payable quarterly in advance), $1,000 for each Board meeting attended and $500 for each meeting of a committee of the Board attended, plus reimbursement for traveling costs and other out-of-pocket expenses incurred in attending such meetings. In addition, each member of the Board of Directors who is not an employee of the Company will receive a stock option grant of 1,000 shares of the Company's common stock per year. RETIREMENT PLANS Mr. Robechek is covered under two pension plans, the Mettler-Toledo Retirement Plan and the Mettler-Toledo Supplemental Retirement Income Plan. Benefits under these plans are determined by career average compensation rather than final compensation. The annual accrual for each year under both plans is the difference of 2% of annual compensation in a plan year and 0.6% of the lesser of annual compensation or covered compensation (defined under the plans as the average of the Social Security Taxable Wage Bases in effect for each calendar year during the 35-year period ending on the last day of a given plan year). The Mettler-Toledo Retirement Plan includes all compensation up to the qualified plan limitations under the Internal Revenue Code of 1986, as amended ($160,000 per year in 1997), and the Mettler-Toledo Supplemental Retirement Income Plan pays for benefits in excess of these limits. The accrued annual benefit payable to Mr. Robechek under the Mettler-Toledo Retirement Plan is $48,717 and the accrued annual benefit under the Mettler-Toledo Supplemental Plan is $14,292, for a total annual retirement benefit of $63,009. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The following directors served on the Company's Compensation Committee during the fiscal year ended December 31, 1997: Reginald H. Jones, Laurence Z. Y. Moh and Thomas P. Salice. Mr. Salice also served as an officer of the Company and certain of its subsidiaries during such fiscal year. Mr. Salice is an officer of AEA Investors, a shareholder of the Company. AEA Investors provided certain management, consulting and financial services to the Company for professional service fees and was reimbursed for out-of-pocket expenses. In the fiscal year ended December 31, 1997, payments for such management fee and reimbursement for expenses totaled approximately $1 million. Such services included, 63 66 but were not necessarily limited to, advice and assistance concerning the strategy, planning and financing of the Company, as needed from time to time. Such arrangement with AEA Investors was terminated in November 1997 and AEA Investors was paid a termination fee of $2.5 million in connection therewith. The Company receives the benefit of volume discounts for certain office services and supplies made available to various companies associated with AEA Investors pursuant to arrangements managed by a subsidiary of AEA Investors. Mr. Salice currently is a director of Mettler-Toledo and a Managing Director of AEA Investors. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS At the time of the Acquisition, AEA Investors and the Company entered into a management agreement pursuant to which AEA Investors provided management, consulting and financial services to the Company. Such services included such areas as the preparation and evaluation of strategic, operating, financial and capital plans and the development and implementation of compensation and other incentive programs. The services were provided by the executive staff of AEA Investors. In consideration of such services, AEA Investors received an annual fee of $1.0 million, plus reimbursement for certain expenses and indemnification against certain liabilities. The Company believes that the terms of these management arrangements were as favorable as could be obtained from an unaffiliated third party. The management agreement was terminated upon consummation of the IPO. In consideration of services by AEA Investors in arranging, structuring and negotiating the terms of the Acquisition, the Company paid AEA Investors a transaction fee of $5.5 million and reimbursed AEA Investors for certain related expenses. In connection with the termination of the management agreement, the Company paid AEA Investors $2.5 million and reimbursed AEA Investors for certain related expenses. Management and other employees of the Company have contributed approximately $20 million of the equity of the Company. For information regarding the number of shares owned each Named Executive Officer, see "Principal and Selling Shareholders." On October 7, 1996, in order to fund a portion of the purchase price for the shares purchased by Mr. Spoerry, Mettler-Toledo GmbH entered into a loan agreement with Mr. Spoerry, in the amount of SFr 1.0 million (approximately $689,417 at December 31, 1997). The loan bears interest at a rate of 5% and is payable upon demand, which may not be made until seven years after the date of the loan. 64 67 PRINCIPAL AND SELLING SHAREHOLDERS The following table sets forth certain information regarding the beneficial ownership of the Company's common stock immediately prior to the offerings and as adjusted to reflect the sale of the shares of common stock pursuant to the offerings, by (a) each person who is known to the Company to be the beneficial owner of more than five percent of the Company's common stock, (b) each director of the Company, (c) each of the Named Executive Officers, (d) all directors and executive officers of the Company as a group and (e) each other selling shareholder participating in the offerings. Except as otherwise indicated, the persons or entities listed below have sole voting and investment power with respect to all shares of common stock owned by them, except to the extent such power may be shared with a spouse.
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED PRIOR TO OWNED AFTER THE OFFERINGS NUMBER OF THE OFFERINGS(1) ----------------------- SHARES ----------------------- NAME OF BENEFICIAL OWNER NUMBER PERCENT(2) OFFERED(1) NUMBER PERCENT(2) - ------------------------ --------- ---------- ---------- --------- ---------- DIRECTORS: Robert F. Spoerry(3)............. 939,480 2.42% -- 939,480 2.42% Philip Caldwell(4)............... 98,901 * -- 98,901 * Reginald H. Jones................ 46,596 * -- 46,596 * John D. Macomber................. 53,740 * -- 53,740 * Laurence Z. Y. Moh............... 356,778 * -- 356,778 * Thomas P. Salice(4).............. 612,259 1.59% -- 612,259 1.59% NAMED EXECUTIVE OFFICERS: William P. Donnelly(4)(5)........ 100,545 * -- 100,545 * Karl M. Lang(6).................. 170,848 * -- 170,848 * Lukas Braunschweiler(7).......... 167,848 * -- 167,848 * John D. Robechek(4)(8)........... 156,999 * -- 156,999 * All directors and executive officers as a group (13 persons)(9)................... 3,048,309 7.76% -- 3,048,309 7.76% SELLING SHAREHOLDERS: National Union Fire Insurance Company of Pittsburgh, PA..... 1,401,261 3.65% 869,565 531,696 1.38% Finlayson Fund Investments PTE LTD........................... 926,562 2.41% 805,706 120,856 * Nassau Capital Funds L.P......... 506,638 1.32% 431,743 74,895 * Novartis AG...................... 490,935 1.28% 426,900 64,035 * 66 other selling shareholders, each of whom is selling less than 150,000 shares in the offerings or beneficially owns less than 1% of the outstanding common stock prior to the offerings.............. 4,810,959 12.53% 3,053,086 1,757,873 4.58%
- ------------------ * The percentage of shares of common stock beneficially owned does not exceed one percent of the outstanding shares of common stock. (1) Assumes no exercise of the underwriters' over-allotment options. (2) Calculations of percentage of beneficial ownership are based on 38,400,363 shares of common stock outstanding on December 31, 1998. Calculations assume the exercise by only the named shareholder of all options for the purchase of common stock held by such shareholder which are exercisable within 60 days of the date hereof. 65 68 (3) Mr. Spoerry is also a Named Executive Officer. Includes 444,358 shares of common stock issuable upon exercise of options that are exercisable within 60 days from the date hereof. (4) Includes shares held by, or in trust for, members of such individual's family for which Messrs. Caldwell, Donnelly, Salice and Robechek disclaim beneficial ownership. Does not include shares held by AEA Investors, of which Mr. Salice is an officer. (5) Includes 39,010 shares of common stock issuable upon exercise of options that are exercisable within 60 days from the date hereof. (6) Includes 91,389 shares of common stock issuable upon exercise of options that are exercisable within 60 days from the date hereof. (7) Includes 91,389 shares of common stock issuable upon exercise of options that are exercisable within 60 days from the date hereof. (8) Includes 91,389 shares of common stock issuable upon exercise of options that are exercisable within 60 days from the date hereof. (9) Includes Fred Ort, who ceased to be an executive officer on April 1, 1997. 66 69 DESCRIPTION OF CREDIT AGREEMENT We have summarized some of the important provisions of our credit agreement below. Because this is a summary, it does not contain all the information that may be important to you. You should refer to the complete credit agreement that we filed as an exhibit to our Form 10-K for the year ended December 31, 1997 as well as an amendment to the credit agreement which we filed as an exhibit to our Form 10-Q for the quarter ended September 30, 1998. BORROWERS AND AMOUNT BORROWED The following subsidiaries are the principal borrowers under the credit agreement: - Mettler-Toledo, Inc. - Mettler-Toledo Holding AG - Safeline Holding Company Several other subsidiaries may borrow under the credit agreement for limited working capital purposes. The borrowers pay interest based on an interest rate which adjusts as LIBOR changes and the interest rate they pay may also change each quarter based on our financial performance. As of September 30, 1998, the total amount of borrowings by us and our subsidiaries under the credit agreement was $351.5 million. Of this amount, $188.8 million was borrowed as term loans and $162.7 million was borrowed under revolving credit facilities. As of September 30, 1998, up to an additional $239.2 could be borrowed under the revolving credit facility. As of September 30, 1998, our subsidiaries had borrowings of $26.9 million under various other credit arrangements. TERM AND REPAYMENT OF LOANS Borrowings under the credit agreement mature in May 2004. Starting in 1998, the term loan is being repaid quarterly. The annual repayment amounts range from $15 million in 1998 to $40 million in 2003 (based on current exchange rates). We must also prepay the term loans by the following amounts (each, as set forth in more detail in the credit agreement): - the net proceeds from certain asset sales and debt issuances - a specified percentage (75% or 50%) of our annual excess cash flow - 50% of the net proceeds from equity issuances GUARANTEES AND SECURITY FOR LOANS We have guaranteed all borrowings under the credit agreement, except where a guarantee would have adverse tax consequences or is prohibited by law, and have secured this guarantee by pledging all the stock of Mettler-Toledo, Inc. Most of our subsidiaries have guaranteed or are direct borrowers of obligations under the credit agreement. In addition, these subsidiaries have pledged certain of their subsidiary stock holdings and intercompany loan receivables and granted security interests in other assets to secure their obligations under the credit agreement. In certain instances, such guarantees and security are limited by legal or tax considerations. 67 70 RESTRICTIONS ON THE COMPANY The credit agreement limits the ability of the company and its subsidiaries to: - incur liens - merge, consolidate or dispose of assets - make loans or investments - incur indebtedness - engage in transactions with affiliates - incur contingent obligations - pay dividends and make other distributions - make capital expenditures We are also required to maintain a minimum net worth and fixed charge coverage ratio and to keep the ratio of total debt to EBITDA below a specified level. The credit agreement contains certain other provisions that limit the activities of the Company and its subsidiaries. EVENTS OF DEFAULT If events of default under the credit agreement occur, the lenders may accelerate all amounts due and terminate all commitments. Depending on the type of default, the acceleration or termination may happen automatically. Events of default include (each, as set forth in more detail in the credit agreement): - non-payment of principal, interest or fees - breaches of representations or warranties by the borrowers - failure to observe covenants - defaults under other indebtedness - insolvency and bankruptcy related events - material judgments being entered against us or our subsidiaries - the loan documents, guarantees or security interests becoming invalid - the occurrence of a change of control - the occurrence of certain ERISA or environmental matters 68 71 DESCRIPTION OF CAPITAL STOCK The following statements are brief summaries of certain provisions with respect to the Company's capital stock which are contained in the Amended and Restated Certificate of Incorporation and Amended By-laws, copies of which are incorporated by reference as exhibits to the Registration Statement of which this prospectus is a part. The following description does not purport to be complete and is subject in all respects to applicable Delaware law and to the provisions of the Amended and Restated Certificate of Incorporation and Amended By-laws. The authorized capital stock of the Company consists of 125,000,000 shares of common stock, par value $.01 per share, and 10,000,000 shares of preferred stock, par value $.01 per share (the "Preferred Stock"). As of December 31, 1998, there were 38,400,363 shares of common stock outstanding, 4,871,842 shares of common stock issuable upon exercise of outstanding options and no shares of Preferred Stock outstanding. As of January 4, 1999, there were 584 holders of record of the Company's common stock. This number excludes beneficial holders of common stock held in "street name." COMMON STOCK Holders of common stock are entitled to one vote for each share held of record on all matters to be submitted to a vote of the shareholders (including the election of directors) and have no preemptive, subscription or redemption rights. Holders of common stock do not have cumulative voting rights, and therefore holders of a majority of the shares voting for the election of directors can elect all of the directors. In such event, the holders of the remaining shares will not be able to elect any directors. Subject to preferences that may be applicable to any outstanding shares of preferred stock, holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors of the Company out of funds legally available therefor. All outstanding shares of common stock are fully paid and nonassessable. In the event of any liquidation, dissolution or winding-up of the affairs of the Company, holders of common stock will be entitled to share ratably in the assets of the Company remaining after payment or provision for payment of all of the Company's debts and obligations and liquidation payments to holders of outstanding shares of Preferred Stock. PREFERRED STOCK The Board of Directors, without further shareholder authorization, is authorized to issue shares of Preferred Stock in one or more series and to determine and fix the rights, preferences and privileges of each series, including dividend rights and preferences over dividends on the common stock and one or more series of the Preferred Stock, conversion rights, voting rights (in addition to those provided by law), redemption rights and the terms of any sinking fund therefor, and rights upon liquidation, dissolution or winding up, including preferences over the common stock and one or more series of the Preferred Stock. Although the Company has no present plans to issue any shares of Preferred Stock, the issuance of shares of Preferred Stock, or the issuance of rights to purchase such shares, may have the effect of delaying, deferring or preventing a change in control of the Company or an unsolicited acquisition proposal. CERTAIN PROVISIONS OF THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AMENDED BY-LAWS AND DELAWARE LAW The Amended and Restated Certificate of Incorporation, Amended By-laws and Delaware law contain provisions that could make more difficult the acquisition of the Company by means of a tender offer, a proxy contest or otherwise. Such provisions could have the effect of discouraging open market purchases of the common stock because they may be considered disadvantageous by a shareholder who desires to participate in a business combination or elect a new director. Section 203 of Delaware Law. The Company is a Delaware corporation and is subject to Section 203 ("Section 203") of the Delaware General Corporation Law (the "DGCL"). In general, Section 203 prevents an "interested stockholder" (defined as a person who, together with affiliates and associates, 69 72 beneficially owns, or if an affiliate or associate of the corporation did beneficially own within the last three years, 15% or more of a corporation's outstanding voting stock) from engaging in a "business combination" (as defined) with a Delaware corporation for three years following the time such person became an interested stockholder unless (i) before such person became an interested stockholder, the board of directors of the corporation approved the transaction in which the interested stockholder became an interested stockholder or approved the business combination; (ii) upon consummation of the transaction that resulted in the interested stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding shares owned by persons who are both officers and directors of the corporation, and shares held by certain employee stock ownership plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer); or (iii) following the transaction in which such person became an interested stockholder, the business combination is approved by the board of directors of the corporation and authorized at a meeting of stockholders by the affirmative vote of the holders of at least two-thirds of the outstanding voting stock of the corporation not owned by the "interested stockholder." A "business combination" generally includes mergers, stock or asset sales involving 10% or more of the market value of the corporation's assets or stock, certain stock transactions and certain other transactions resulting in a financial benefit to the interested stockholder or an increase in their proportionate share of any class or series of a corporation. The existence of Section 203 of the DGCL could have the effect of discouraging an acquisition of the Company or stock purchasers in furtherance of an acquisition. Limitation on Directors' Liabilities and Indemnification. The Amended and Restated Certificate of Incorporation provides that to the fullest extent permitted by the DGCL as it currently exists, a director of the Company shall not be liable to the Company or its shareholders for monetary damages for breach of fiduciary duty as a director. Under the current DGCL, liability of a director may not be limited (i) for any breach of the director's duty of loyalty to the Company or its shareholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) in respect of certain unlawful dividend payments or stock redemptions or repurchases and (iv) for any transaction from which the director derives an improper personal benefit. The effect of this provision of the Company's Amended and Restated Certificate of Incorporation is to eliminate the rights of the Company and its shareholders (through shareholders' derivative suits on behalf of the Company) to recover monetary damages against a director for breach of the fiduciary duty of care as director (including breaches resulting from negligent or grossly negligent behavior) except in the situations described in clauses (i) through (iv) above. The provision does not exonerate the directors from liability under federal securities laws or limit or eliminate the rights of the Company or any stockholder to seek non-monetary relief such as an injunction or rescission in the event of a breach of a director's duty of care. In addition, the Amended By-laws provide that the Company shall indemnify its directors, officers, employees and agents to the fullest extent permitted by the DGCL. Advance Notice for Shareholder Nomination of Directors and Shareholder Proposals. The Amended By-laws establish an advance notice procedure with regard to the nomination, other than by or at the direction of the Board of Directors or a committee thereof, of candidates for election as directors (the "Nomination Procedure") and with regard to other matters to be brought by shareholders before an annual meeting of shareholders of the Company (the "Business Procedure"). The Nomination Procedure requires that a shareholder give prior written notice, in proper form, of a planned nomination for the Board of Directors to the Secretary of the Company. The requirements as to the form and timing of that notice are specified in the Amended By-laws. If the Chairman of the Board of Directors determines that a person was not nominated in accordance with the Nomination Procedure, such person will not be eligible for election as a director. Under the Business Procedure, a shareholder seeking to have any business conducted at an annual meeting must give prior written notice, in proper form, to the Secretary of the Company. The requirements as to the form and timing of that notice are specified in the Amended By-laws. If the Chairman of the Board of Directors determines that the other business was not 70 73 properly brought before such meeting in accordance with the Business Procedure, such business will not be conducted at such meeting. Although the Amended By-laws do not give the Board of Directors any power to approve or disapprove shareholder nominations for the election of directors or of any business desired by shareholders to be conducted at an annual meeting, the Amended By-laws (i) may have the effect of precluding a nomination for the election of directors or precluding the conduct of business at a particular annual meeting if the proper procedures are not followed or (ii) may discourage or deter a third party from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of the Company, even if the conduct of such solicitation or such attempt might be beneficial to the Company and its shareholders. REGISTRATION RIGHTS Holders of the Company's common stock that purchased shares prior to the IPO have rights to require the Company to register such shares of common stock for resale pursuant to subscription agreements pursuant to which they acquired their shares. Upon the request of persons owning at least 25% of the sum of all outstanding shares of common stock which are then "restricted securities" (as defined in the Company's registration rights agreements) and which have a value of at least $5,000,000, the Company is required to register the sale of such securities, subject to certain limitations and requirements. The Company is not required to file any registration statement within six months of the effective date of any earlier registration statement and is not required to file more than three registration statements pursuant to such requests. In addition, under certain circumstances, should the Company file a registration statement with the Securities and Exchange Commission registering shares of the common stock of the Company, the owners of restricted securities would be entitled to include their restricted securities in such registration. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the common stock is ChaseMellon Shareholder Services L.L.C. 71 74 SHARES ELIGIBLE FOR FUTURE SALE As of December 31, 1998, the Company had 38,400,363 shares of common stock outstanding. Except to the extent such shares are subject to the agreement with the underwriters described below, shares of common stock are freely tradable without restriction or further registration under the Securities Act of 1933, unless held by an "affiliate," of the Company as that term is defined in the Securities Act, which shares will be subject to the resale limitations of Rules 144 and 145 under the Securities Act of 1933. In general, under Rules 144 and 145 as currently in effect, a shareholder (or shareholders whose shares are aggregated) who is an "affiliate" of the Company is entitled to sell within any three-month period a number of shares that does not exceed the greater of one percent of the outstanding common stock or the average weekly trading volume in the common stock during the four calendar weeks preceding the date on which notice of such sale is filed pursuant to Rule 144. The holder may only sell such shares through unsolicited brokers' transactions. Sales under Rules 144 and 145 are also subject to certain provisions regarding the manner of sale, notice requirements and the availability of current public information about the Company. A shareholder (or shareholders whose shares are aggregated) who is not an affiliate of the Company for at least 90 days prior to a proposed transaction is entitled to sell such shares under Rule 144 without regard to the limitations described above. Notwithstanding the foregoing, in connection with the offerings, the Company, the Company's executive officers and directors and the selling shareholders, who will collectively hold, after the offerings, 4,811,001 shares of common stock (assuming no exercise of the underwriters' over-allotment options) will agree, subject to certain exceptions, not to directly or indirectly (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any shares of common stock or any securities convertible into or exchangeable or exercisable for common stock, or file any registration statement under the Securities Act of 1933 with respect to any of the foregoing or (ii) enter into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the common stock whether any such swap or transaction is to be settled by delivery of common stock or other securities, in cash or otherwise, without the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated on behalf of the underwriters for a period of 90 days after the date of this prospectus, other than (i) the sale to the underwriters of the shares of common stock in connection with the offerings, (ii) upon the exercise of outstanding stock options, (iii) the issuance of options pursuant to our stock option plan, or (iv) the filing of a registration statement on Form S-8 under the Securities Act of 1933 relating to common stock of the Company issued pursuant to our stock option plan. Certain other shareholders, who collectively hold a total of 3,330,863 shares, have similarly agreed not to dispose of or transfer shares without the Company's consent until March 1, 1999. The Company has filed a registration statement on Form S-8 (Reg. No. 333-52661) under the Securities Act of 1933 to register 6,368,445 shares of common stock which are reserved for issuance under its stock option plan. The Form S-8 includes, in some cases, shares for which an exemption under Rule 144 or Rule 701 under the Securities Act of 1933 would also be available, thus permitting the resale of shares issued under the Company's stock option plan by non-affiliates in the public market, without restriction under the Securities Act of 1933. Such registration statement became effective immediately upon filing whereupon shares registered thereunder became eligible for sale in the public market, subject to vesting and, in certain cases, subject to the lock-up agreements described above. At the date of this prospectus, options to purchase 4,871,842 shares of common stock are outstanding under our stock option plan. 72 75 CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS The following is a general discussion of certain U.S. federal income and estate tax consequences of the ownership and disposition of common stock applicable to Non-U.S. Holders of such common stock. A "Non-U.S. Holder" is a person other than: - any individual who is a citizen or resident of the United States, - a corporation, partnership or other entity created or organized in the United States or under the laws of the United States or of any state (other than any partnership treated as foreign under U.S. Treasury regulations), - an estate whose income is includable in gross income for United States federal income tax purposes regardless of source, or - a trust subject to the primary supervision of a court within the United States and the control of one or more U.S. persons. An individual may, subject to certain exceptions, be deemed to be a resident alien (as opposed to a non-resident alien) by virtue of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year (counting for such purposes all of the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year). Resident aliens are subject to tax as if they were U.S. citizens. This discussion does not consider specific facts and circumstances that may be relevant to a particular Non-U.S. Holder's tax position (including the fact that in the case of a Non-U.S. Holder that is a partnership, the U.S. tax consequences of holding and disposing of shares of common stock may be affected by certain determinations made at the partner level) and does not consider U.S. state and local or non-U.S. tax consequences. This discussion also does not consider the tax consequences for any person who is a shareholder, partner or beneficiary of a holder of the common stock. Further, it does not consider Non-U.S. Holders subject to special tax treatment under the federal tax laws (including but not limited to banks and insurance companies, dealers in securities, traders in securities that elect mark-to-market accounting treatment and holders of securities held as part of a "straddle," "hedge," or "conversion transaction"). The following discussion is based on provisions of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), the applicable Treasury regulations promulgated and proposed thereunder, and administrative and judicial interpretations as of the date hereof, all of which are subject to change either retroactively or prospectively. The following summary is included herein for general information. ACCORDINGLY, EACH PROSPECTIVE NON-U.S. HOLDER IS URGED TO CONSULT A TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL TAX CONSEQUENCES OF HOLDING AND DISPOSING OF COMMON STOCK, AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY U.S. STATE, LOCAL OR OTHER U.S. OR NON-U.S. TAXING JURISDICTION. DIVIDENDS In general, dividends paid to a Non-U.S. Holder of common stock will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under a relevant income tax treaty. Dividends that are effectively connected with a Non-U.S. Holder's conduct of a trade or business in the United States or, if an income tax treaty applies, attributable to a permanent establishment, or, in the case of an individual, a "fixed base," in the United States ("U.S. trade or business income") are generally subject to U.S. federal income tax on a net income basis at regular graduated rates, but are not generally subject to the 30% withholding tax if the Non-U.S. Holder files the appropriate U.S. Internal Revenue 73 76 Service ("IRS") form with the payor (which form, under U.S. Treasury regulations generally effective for payments made after December 31, 1999 (the "Final Regulations"), in certain circumstances may require the Non-U.S. Holder to provide a U.S. taxpayer identification number). Any U.S. trade or business income received by a Non-U.S. Holder that is a corporation may also, under certain circumstances, be subject to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. Under currently applicable U.S. Treasury regulations, dividends paid to an address in a foreign country are presumed (absent actual knowledge to the contrary) to be paid to a resident of such country for purposes of the withholding discussed above and for purposes of determining the applicability of a tax treaty rate. Under the Final Regulations, however, a Non-U.S. Holder of common stock who wishes to claim the benefit of an applicable treaty rate generally will be required to satisfy applicable certification and other requirements. In addition, under the Final Regulations, in the case of common stock held by a foreign partnership, (x) the certification requirement will generally be applied to the partners of the partnership and (y) the partnership will be required to provide certain information, including a United States taxpayer identification number. The Final Regulations also provide look-through rules for tiered partnerships. A Non-U.S. Holder of common stock that is eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for a refund with the IRS. DISPOSITION OF COMMON STOCK A Non-U.S. Holder generally will not be subject to U.S. federal income tax in respect of gain recognized on a disposition of common stock unless: - the gain is U.S. trade or business income (in which case, the branch profits tax described above may also apply to a corporate Non-U.S. Holder), - the Non-U.S. Holder is an individual who holds the common stock as a capital asset within the meaning of Section 1221 of the Code, is present in the United States for 183 or more days in the taxable year of the disposition and meets certain other requirements, - the Non-U.S. Holder is subject to tax pursuant to the provision of the U.S. tax law applicable to certain United States expatriates, or - the Company is or has been a "U.S. real property holding corporation" for federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition and such period that the common stock was held. The tax with respect to stock in a "U.S. real property holding corporation" does not apply to a Non-U.S. Holder whose holdings, direct and indirect, at all times during the applicable period, constitute 5% or less of the common stock, provided that the common stock is regularly traded on an established securities market. Generally, a corporation is a "U.S. real property holding corporation" if the fair market value of its "U.S. real property interests" equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. The Company is not, and does not anticipate becoming, a "U.S. real property holding corporation" for U.S. federal income tax purposes. FEDERAL ESTATE TAXES Common stock owned or treated as owned by an individual who is a Non-U.S. Holder at the time of death will be included in the individual's gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. Such individual's estate may be subject to U.S. federal estate tax on the property includable in the gross estate for U.S. federal estate tax purposes. 74 77 INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX Under U.S. Treasury Regulations, the Company may be required to report annually to the IRS and to each Non-U.S. Holder the amount of dividends paid to such holder and any tax withheld with respect to such dividends. The information reporting requirements apply regardless of whether withholding is required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the Non U.S.-Holder is a resident under the provisions of an applicable income tax treaty or agreement. Under certain circumstances, the IRS requires "information reporting" and "backup withholding" at a rate of 31% with respect to certain payments on common stock. Under currently applicable law, Non-U.S. Holders of common stock generally will be exempt from IRS reporting requirements and U.S. backup withholding with respect to dividends payable on common stock. Under the Final Regulations, however, a Non-U.S Holder of common stock that fails to certify its Non-U.S. Holder status in accordance with the requirements of the Final Regulations may be subject to U.S. backup withholding at a rate of 31% on payments of dividends. The payment of the proceeds of the disposition of common stock by a holder to or through the U.S. office of a broker or through a non-U.S. branch of a U.S. broker generally will be subject to information reporting and backup withholding at a rate of 31% unless the holder either certifies its status as a Non-U.S. Holder under penalties of perjury or otherwise establishes an exemption. The payment of the proceeds of the disposition by a Non-U.S. Holder of common stock to or through a non-U.S. office of a non-U.S. broker will not be subject to backup withholding or information reporting unless the non-U.S. broker has certain U.S. relationships. In the case of the payment of proceeds from the disposition of common stock effected by a foreign office of a broker that is a U.S. person or a "U.S. related person," existing regulations require information reporting (but currently not backup withholding) on the payment unless the broker receives a statement from the owner, signed under penalty of perjury, certifying its non-U.S. status or the broker has documentary evidence in its files as to the Non-U.S. Holder's foreign status and the broker has no actual knowledge to the contrary. For this purpose, a "U.S. related person" is: - a "controlled foreign corporation" for U.S. federal income tax purposes, or - a foreign person 50% or more of whose gross income from all sources for the three-year period ending with the close of its taxable year preceding the payment (or for such part of the period that the broker has been in existence) is derived from activities that are effectively connected with the conduct of a U.S. trade or business. Under the Final Regulations, the payment of the proceeds of the disposition by a Non-U.S. Holder of common stock to or through a broker having certain enumerated connections with the United States may be subject to information reporting and backup withholding at a rate of 31% unless certain IRS certification requirements are satisfied or an exemption is otherwise established. Prospective Non-U.S. Holders should consult with their own tax advisors regarding the application of the Final Regulations to their particular circumstances. Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder will be refunded (or credited against the holder's U.S. federal income tax liability, if any) provided that the required information is furnished to the IRS. 75 78 UNDERWRITING Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), BT Alex. Brown Incorporated, Credit Suisse First Boston Corporation, Goldman, Sachs & Co. and J.P. Morgan Securities Inc. are acting as underwriters (the "U.S. Underwriters"). Subject to the terms and conditions set forth in a U.S. purchase agreement (the "U.S. Purchase Agreement") among the Company, the selling shareholders and the U.S. Underwriters, and concurrently with the sale of 1,117,400 shares of common stock to the International Managers (as defined below), the selling shareholders have agreed to sell to the U.S. Underwriters, and each of the U.S. Underwriters severally and not jointly has agreed to purchase from the selling shareholders the number of shares of common stock set forth opposite its name below.
NUMBER OF SHARES U.S. UNDERWRITER ---------------- Merrill Lynch, Pierce, Fenner & Smith Incorporated................................... BT Alex. Brown Incorporated................................. Credit Suisse First Boston Corporation...................... Goldman, Sachs & Co......................................... J.P. Morgan Securities Inc.................................. --------- Total.......................................... 4,469,600 =========
The Company and the selling shareholders have also entered into an international purchase agreement (the "International Purchase Agreement") with certain underwriters outside the United States and Canada (the "International Managers" and, together with the U.S. Underwriters, the "Underwriters") for whom Merrill Lynch International, BT Alex. Brown International, a division of Bankers Trust International PLC, Credit Suisse First Boston (Europe) Limited, Goldman Sachs International and J.P. Morgan Securities Ltd. are acting as lead managers (the "Lead Managers"). Subject to the terms and conditions set forth in the International Purchase Agreement, and concurrently with the sale of 4,469,600 shares of common stock to the U.S. Underwriters pursuant to the U.S. Purchase Agreement, the selling shareholders have agreed to sell to the International Managers, and the International Managers severally have agreed to purchase from the selling shareholders, an aggregate of 1,117,400 shares of common stock. The initial public offering price per share and the total underwriting discount per share of common stock are identical under the U.S. Purchase Agreement and the International Purchase Agreement. In the U.S. Purchase Agreement and the International Purchase Agreement, the several U.S. Underwriters and the several International Managers, respectively, have agreed, subject to the terms and conditions set forth therein, to purchase all of the shares of common stock being sold pursuant to each such agreement if any of the shares of common stock being sold pursuant to such agreement are purchased. Under certain circumstances, under the U.S. Purchase Agreement and the International Purchase Agreement, the commitments of non-defaulting Underwriters may be increased. The closings with respect to the sale of shares of common stock to be purchased by the U.S. Underwriters and the International Managers are conditioned upon one another. The U.S. Underwriters have advised the Company and the selling shareholders that the U.S. Underwriters propose initially to offer the shares of common stock to the public at the initial public offering price set forth on the cover page of this prospectus, and to certain dealers at such price less a concession not in excess of $ per share of common stock. The U.S. Underwriters may allow, and such dealers may reallow, a discount not in excess of $ per share of common stock on sales to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed. The selling shareholders have granted options to the U.S. Underwriters, exercisable for 30 days after the date of this prospectus, to purchase up to an aggregate of 670,440 additional shares of common stock at the initial public offering price set forth on the cover page of this prospectus, less the underwriting discount. The U.S. Underwriters may exercise these options solely to cover over-allotments, if any, made 76 79 on the sale of the common stock offered hereby. To the extent that the U.S. Underwriters exercise these options, each U.S. Underwriter will be obligated, subject to certain conditions, to purchase a number of additional shares of common stock proportionate to such U.S. Underwriter's initial amount reflected in the foregoing table. The selling shareholders also have granted options to the International Managers, exercisable for 30 days after the date of this prospectus, to purchase up to an aggregate of 167,610 additional shares of common stock to cover over-allotments, if any, on terms similar to those granted to the U.S. Underwriters. The following table shows the per share and total underwriting discounts and commissions to be paid by the selling shareholders to the Underwriters. This information is presented assuming either no exercise or full exercise by the Underwriters of their over-allotment options.
PER SHARE WITHOUT OPTION WITH OPTION --------- -------------- ----------- Public Offering Price............................... $ $ $ Underwriting Discount............................... $ $ $ Proceeds to Selling Shareholders.................... $ $ $
The Underwriters have agreed to pay certain expenses of the Company incurred in connection with the offerings estimated at $ . The shares of common stock are being offered by the several Underwriters, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of certain legal matters by counsel for the Underwriters and certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. The Company, the Company's executive officers and directors and the selling shareholders, who will collectively hold, after the offerings, 4,811,001 shares of common stock (assuming no exercise of the Underwriters' over-allotment options) have agreed, subject to certain exceptions, not to directly or indirectly (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose of or transfer any shares of common stock or securities convertible into or exchangeable or exercisable for common stock or file a registration statement under the Securities Act with respect to the foregoing or (ii) enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of the common stock whether any such swap or transaction is to be settled by delivery of common stock or other securities, in cash or otherwise, without the prior written consent of Merrill Lynch on behalf of the Underwriters for a period of 90 days after the date of this prospectus. Certain other shareholders, who collectively hold a total of 3,330,863 shares, have similarly agreed not to dispose of or transfer shares without the Company's consent until March 1, 1999. See "Shares Eligible for Future Sale." The U.S. Underwriters and the International Managers have entered into an intersyndicate agreement (the "Intersyndicate Agreement") that provides for the coordination of their activities. Pursuant to the Intersyndicate Agreement, the U.S. Underwriters and the International Managers are permitted to sell shares of common stock to each other for purposes of resale at the initial public offering price, less an amount not greater than the selling concession. Under the terms of the Intersyndicate Agreement, the U.S. Underwriters and any dealer to whom they sell shares of common stock will not offer to sell or sell shares of common stock to persons who are non-U.S. or non-Canadian persons or to persons they believe intend to resell to persons who are non-U.S. or non-Canadian persons, and the International Managers and any dealer to whom they sell shares of common stock will not offer to sell or sell shares of common stock to U.S. persons or to Canadian persons or to persons they believe intend to resell to U.S. or Canadian persons, except in the case of transactions pursuant to the Intersyndicate Agreement. The Company and the selling shareholders have agreed to indemnify the U.S. Underwriters and the International Managers against certain liabilities, including certain liabilities under the Securities Act, or to contribute to payments the U.S. Underwriters and the International Managers may be required to make in respect thereof. 77 80 Until the distribution of the common stock is completed, rules of the SEC may limit the ability of the Underwriters and certain selling group members to bid for and purchase the common stock. As an exception to these rules, the U.S. Underwriters are permitted to engage in certain transactions that stabilize the price of the common stock. Such transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock. If the Underwriters create a short position in the common stock in connection with the offerings, i.e., if they sell more shares of common stock than are set forth on the cover page of this prospectus, the U.S. Underwriters may reduce that short position by purchasing common stock in the open market. The U.S. Underwriters may also elect to reduce any short position by exercising all or part of the over-allotment options described above. In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases. None of the Company, the selling shareholders nor any of the Underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, none of the Company, the selling shareholders nor any of the Underwriters makes any representation that the U.S. Underwriters will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice. The Underwriters have from time to time provided investment banking financial advisory services to the Company and AEA Investors and its affiliates, for which they have received customary compensation, and may continue to do so in the future. Merrill Lynch served as lead manager and Credit Suisse First Boston Corporation served as co-manager of the offering of senior subordinated notes of the Company in October 1996, Merrill Lynch served as the Arranger and Documentation Agent and an affiliate of Credit Suisse First Boston Corporation served as co-agent in connection with the Company's previous credit facility and the credit agreement for which they received customary compensation. An affiliate of Credit Suisse First Boston Corporation and Merrill Lynch and its affiliates were lenders under the Company's previous credit facility and are lenders under the credit agreement. Merrill Lynch, BT Alex. Brown Incorporated, Credit Suisse First Boston Corporation and Goldman, Sachs & Co. and certain of their affiliates acted as underwriters in connection with the Company's IPO and June 1998 secondary offering. LEGAL MATTERS Certain legal matters with respect to the validity of the common stock offered hereby will be passed upon for the Company by Fried, Frank, Harris, Shriver & Jacobson (a partnership including professional corporations), London, England. Certain legal matters relating to the offerings will be passed upon for the Underwriters by Debevoise & Plimpton, New York, New York. Certain partners of Fried, Frank, Harris, Shriver & Jacobson own common stock of the Company. INDEPENDENT AUDITORS The consolidated financial statements of Mettler-Toledo International Inc. and subsidiaries (as defined in Note 1 to the audited consolidated financial statements included as part of this prospectus) as of December 31, 1996 and 1997 and for the year ended December 31, 1995, for the period January 1, 1996 to October 14, 1996, for the period October 15, 1996 to December 31, 1996 and for the year ended December 31, 1997, included herein and incorporated in this prospectus by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, have been audited by KPMG Fides Peat, independent auditors, as set forth in their reports appearing elsewhere and have been so included and incorporated in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. 78 81 WHERE YOU CAN FIND MORE INFORMATION We have filed with the U.S. Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-3 with respect to the common stock offered hereby under the Securities Act. This prospectus, which constitutes part of the Registration Statement, does not contain all of the information set forth in the Registration Statement, certain items of which are omitted as permitted by the rules and regulations of the Commission. For further information pertaining to Mettler-Toledo and the common stock offered hereby, please see the Registration Statement, including the exhibits thereto and the financial statements, notes and schedules filed as a part thereof. Statements contained in this prospectus regarding the contents of any contract or other document referred to herein or therein are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement or such other document, each such statement being qualified in all respects by such reference. We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, we file reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information, as well as the Registration Statement and the exhibits and schedules thereto, may be inspected, without charge, at the public reference facility maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices located at Seven World Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may also be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such materials can also be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005 or on the Commission's site on the Internet at http://www.sec.gov. You can call the SEC at 1-800-SEC-0330 for further information on its public reference facilities. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission pursuant to the Exchange Act (File No. 0-22493) are incorporated herein by reference: (1) The Company's Annual Report on Form 10-K for the year ended December 31, 1997, as amended by Amendment No. 1 to the Company's Annual Report on Form 10K, filed December 23, 1998; (2) The Company's Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 1998, June 30, 1998 and September 30, 1998; and (3) The description of the common stock contained in the Company's Registration Statement on Form 8-A, as amended, filed with the Commission on December 16, 1997, which incorporates by reference the description of the Company's common stock contained in its Registration Statement, as amended, on Form S-1 (Reg. No. 333-35597) filed with the Commission on November 10, 1997. All other documents filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this prospectus and prior to the termination of these offerings shall be deemed to be incorporated by reference herein and to be a part hereof from the respective dates of the filing of such reports and documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus. 79 82 Upon request, we will provide without charge to any person to whom this prospectus is delivered, a copy of any and all information incorporated by reference in this prospectus, other than exhibits to such information (unless such exhibits are specifically incorporated by reference in such documents). If you wish to request information that has been incorporated by reference, please direct your request to William P. Donnelly, Mettler-Toledo International Inc., Im Langacher, P.O. Box MT-100, CH-8606 Greifensee, Switzerland (telephone 011-41-1-944-22-11). 80 83 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- AUDITED CONSOLIDATED FINANCIAL STATEMENTS Independent Auditors' Report................................ F-2 Consolidated Balance Sheets as of December 31, 1996 and 1997...................................................... F-3 Consolidated Statements of Operations for the year ended December 31, 1995 and for the period January 1, 1996 to October 14, 1996 and for the period October 15, 1996 to December 31, 1996 and for the year ended December 31, 1997...................................................... F-4 Consolidated Statements of Changes in Net Assets/ Shareholders' Equity for the year ended December 31, 1995 and for the period January 1, 1996 to October 14, 1996 and for the period October 15, 1996 to December 31, 1996 and for the year ended December 31, 1997.................. F-5 Consolidated Statements of Cash Flows for the year ended December 31, 1995 and for the period January 1, 1996 to October 14, 1996 and for the period October 15, 1996 to December 31, 1996 and for the year ended December 31, 1997...................................................... F-6 Notes to Consolidated Financial Statements.................. F-7 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS: Interim Consolidated Balance Sheets as of December 31, 1997 and September 30, 1998.................................... F-30 Interim Consolidated Statements of Operations for the nine months ended September 30, 1997 and 1998.................. F-31 Interim Consolidated Statements of Shareholders' Equity for the nine months ended September 30, 1997 and 1998......... F-32 Interim Consolidated Statements of Cash Flows for the nine months ended September 30, 1997 and 1998.................. F-33 Notes to the Interim Consolidated Financial Statements...... F-34
F-1 84 INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Mettler-Toledo International Inc. We have audited the accompanying consolidated balance sheets of Mettler-Toledo International Inc. (formerly "MT Investors Inc.") and subsidiaries (as defined in Note 1 to the consolidated financial statements) as of December 31, 1996 and 1997, and the related consolidated statements of operations, net assets/shareholders' equity and cash flows for the year ended December 31, 1995 and for the period January 1, 1996 to October 14, 1996, the Predecessor periods, and for the period October 15, 1996 to December 31, 1996, and for the year ended December 31, 1997, the Successor periods. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Mettler-Toledo International Inc. and subsidiaries as of December 31, 1996 and 1997, and the consolidated results of their operations and their cash flows for the year ended December 31, 1995 and for the period January 1, 1996 to October 14, 1996, the Predecessor periods, and for the period October 15, 1996 to December 31, 1996, and for the year ended December 31, 1997, the Successor periods, in conformity with generally accepted accounting principles in the United States of America. As more fully described in Note 1 to the consolidated financial statements, Mettler-Toledo International Inc. acquired the Mettler-Toledo Group as of October 15, 1996 in a business combination accounted for as a purchase. As a result of the acquisition, the consolidated financial statements for the Successor periods are presented on a different basis of accounting than that of the Predecessor periods, and therefore are not directly comparable. KPMG Fides Peat Zurich, Switzerland February 6, 1998 F-2 85 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA)
SUCCESSOR SUCCESSOR ------------ ------------ DECEMBER 31, DECEMBER 31, 1996 1997 ------------ ------------ ASSETS Current assets: Cash and cash equivalents................................. $ 60,696 $ 23,566 Trade accounts receivable, less allowances of $8,388 in 1996 and $7,669 in 1997................................ 151,161 153,619 Inventories............................................... 102,526 101,047 Deferred taxes............................................ 7,565 7,584 Other current assets and prepaid expenses................. 17,268 24,066 -------- -------- Total current assets................................... 339,216 309,882 Property, plant and equipment, net.......................... 255,292 235,262 Excess of cost over net assets acquired, net of accumulated amortization of $982 in 1996 and $6,427 in 1997........... 135,490 183,318 Non-current deferred taxes.................................. 3,916 5,045 Other assets................................................ 37,974 15,806 -------- -------- Total assets........................................... $771,888 $749,313 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable.................................... $ 32,797 $ 39,342 Accrued and other liabilities............................. 79,857 80,844 Accrued compensation and related items.................... 35,457 43,214 Taxes payable............................................. 17,580 33,267 Deferred taxes............................................ 9,132 10,486 Short-term borrowings and current maturities of long-term debt................................................... 80,446 56,430 -------- -------- Total current liabilities.............................. 255,269 263,583 Long-term debt.............................................. 373,758 340,334 Non-current deferred taxes.................................. 30,467 25,437 Other non-current liabilities............................... 96,810 91,011 -------- -------- Total liabilities...................................... 756,304 720,365 Minority interest........................................... 3,158 3,549 Shareholders' equity: Preferred stock, $0.01 par value per share; authorized 10,000,000 shares...................................... -- -- Common stock, $0.01 par value per share; authorized 125,000,000 shares; issued 38,336,014 (excluding 64,467 shares held in treasury) at December 31, 1997.......... -- 383 Class A, B and C common stock, $0.01 par value per share; authorized 2,775,976 shares; issued 2,438,514 at December 31, 1996...................................... 25 -- Additional paid-in capital................................ 188,084 284,630 Accumulated deficit....................................... (159,046) (224,152) Currency translation adjustment........................... (16,637) (35,462) -------- -------- Total shareholders' equity............................. 12,426 25,399 Commitments and contingencies............................... -------- -------- Total liabilities and shareholders' equity............. $771,888 $749,313 ======== ========
See the accompanying notes to the consolidated financial statements F-3 86 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
PREDECESSOR SUCCESSOR ---------------------------------- ---------------------------------- YEAR ENDED FOR THE PERIOD FOR THE PERIOD YEAR ENDED DECEMBER 31, JANUARY 1, 1996 TO OCTOBER 15, 1996 TO DECEMBER 31, 1995 OCTOBER 14, 1996 DECEMBER 31, 1996 1997 ------------ ------------------- ------------------- ------------ Net sales............................. $850,415 $662,221 $ 186,912 $878,415 Cost of sales......................... 508,089 395,239 136,820 493,480 -------- -------- ---------- ---------- Gross profit........................ 342,326 266,982 50,092 384,935 Research and development.............. 54,542 40,244 9,805 47,551 Selling, general and administrative... 248,327 186,898 59,353 260,397 Amortization.......................... 2,765 2,151 1,065 6,222 Purchased research and development.... -- -- 114,070 29,959 Interest expense...................... 18,219 13,868 8,738 35,924 Other charges (income), net........... (9,331) (1,332) 17,137 10,834 -------- -------- ---------- ---------- Earnings (loss) before taxes, minority interest and extraordinary items.............. 27,804 25,153 (160,076) (5,952) Provision for taxes................... 8,782 10,055 (938) 17,489 Minority interest..................... 768 637 (92) 468 -------- -------- ---------- ---------- Net earnings (loss) before extraordinary items.............. 18,254 14,461 (159,046) (23,909) Extraordinary items-debt extinguishments, net of tax......... -- -- -- (41,197) -------- -------- ---------- ---------- Net earnings (loss)................. $ 18,254 $ 14,461 $(159,046) $(65,106) ======== ======== ========== ========== Basic and diluted loss per common share: Loss before extraordinary items..... $ (5.18) $ (0.76) Extraordinary items................. -- (1.30) ---------- ---------- Net loss............................ $ (5.18) $ (2.06) ========== ========== Weighted average number of common shares........................... 30,686,065 31,617,071
See the accompanying notes to the consolidated financial statements F-4 87 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS/ SHAREHOLDERS' EQUITY (IN THOUSANDS, EXCEPT PER SHARE DATA)
PREDECESSOR ------------------------------------- YEAR ENDED DECEMBER 31, 1995 AND FOR THE PERIOD JANUARY 1, 1996 TO OCTOBER 14, 1996 ------------------------------------- CURRENCY CAPITAL TRANSLATION EMPLOYED ADJUSTMENT TOTAL --------- ----------- --------- Net assets at December 31, 1994............................. $218,129 $10,065 $228,194 Capital transactions with Ciba and affiliates............... (73,779) -- (73,779) Net earnings................................................ 18,254 -- 18,254 Change in currency translation adjustment................... -- 20,585 20,585 -------- ------- -------- Net assets at December 31, 1995............................. 162,604 30,650 193,254 Capital transactions with Ciba and affiliates............... (88,404) -- (88,404) Net earnings................................................ 14,461 -- 14,461 Change in currency translation adjustment................... -- (6,538) (6,538) -------- ------- -------- Net assets at October 14, 1996.............................. $ 88,661 $24,112 $112,773 ======== ======= ========
SUCCESSOR ------------------------------------------------------------------------ FOR THE PERIOD FROM OCTOBER 15, 1996 TO DECEMBER 31, 1996 AND FOR THE YEAR ENDED DECEMBER 31, 1997 ------------------------------------------------------------------------ COMMON STOCK ALL CLASSES ADDITIONAL CURRENCY ------------------- PAID-IN ACCUMULATED TRANSLATION SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT TOTAL ---------- ------ ---------- ----------- ----------- --------- Balance at October 15, 1996........................ 1,000 $ 1 $ -- $ -- $ -- $ 1 New issuance of Class A and C shares............... 2,437,514 24 188,084 -- -- 188,108 Net loss........................................... -- -- -- (159,046) -- (159,046) Change in currency translation adjustment.......... -- -- -- -- (16,637) (16,637) ---------- ---- -------- --------- -------- --------- Balance at December 31, 1996....................... 2,438,514 25 188,084 (159,046) (16,637) 12,426 New issuance of Class A and C shares............... 3,857 -- 300 -- -- 300 Purchase of Class A and C treasury stock........... (5,123) (1) (668) -- -- (669) Common stock conversion............................ 28,232,099 282 (282) -- -- -- Proceeds from stock offering....................... 7,666,667 77 97,196 -- -- 97,273 Net loss........................................... -- -- -- (65,106) -- (65,106) Change in currency translation adjustment.......... -- -- -- -- (18,825) (18,825) ---------- ---- -------- --------- -------- --------- Balance at December 31, 1997....................... 38,336,014 $383 $284,630 $(224,152) $(35,462) $ 25,399 ========== ==== ======== ========= ======== =========
See the accompanying notes to the consolidated financial statements F-5 88 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
PREDECESSOR SUCCESSOR --------------------------------- ----------------------------------- YEAR ENDED FOR THE PERIOD FOR THE PERIOD YEAR ENDED DECEMBER 31, JANUARY 1, 1996 TO OCTOBER 15, 1996 TO DECEMBER 31, 1995 OCTOBER 14, 1996 DECEMBER 31, 1996 1997 ------------ ------------------ -------------------- ------------ Cash flows from operating activities: Net earnings (loss)................................... $ 18,254 $ 14,461 $(159,046) $(65,106) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation........................................ 30,598 19,512 7,925 25,613 Amortization........................................ 2,765 2,151 1,065 6,222 Write-off of purchased research and development and cost of sales associated with revaluation of inventories....................................... -- -- 146,264 32,013 Extraordinary items................................. -- -- -- 41,197 Net loss (gain) on disposal of long-term assets..... (1,053) (768) -- 33 Deferred taxes and adjustments to goodwill.......... (551) (1,934) (4,563) (4,244) Minority interest................................... 768 637 (92) 468 Increase (decrease) in cash resulting from changes in: Trade accounts receivable, net...................... (9,979) 9,569 (10,159) (8,113) Inventories......................................... (607) 1,276 3,350 (2,740) Other current assets................................ (3,058) 14,748 (10,605) (7,177) Trade accounts payable.............................. 1,437 (3,065) 3,415 4,936 Accruals and other liabilities, net................. 13,095 5,948 32,030 32,547 -------- -------- --------- -------- Net cash provided by operating activities......... 51,669 62,535 9,584 55,649 -------- -------- --------- -------- Cash flows from investing activities: Proceeds from sale of property, plant and equipment... 4,000 1,606 736 15,913 Purchase of property, plant and equipment............. (25,858) (16,649) (11,928) (22,251) Acquisition of Mettler-Toledo from Ciba............... -- -- (314,962) -- Acquisition, net of seller financing.................. -- -- -- (80,469) Other investing activities............................ (7,484) (1,632) 4,857 (9,184) -------- -------- --------- -------- Net cash used in investing activities............. (29,342) (16,675) (321,297) (95,991) -------- -------- --------- -------- Cash flows from financing activities: Proceeds from borrowings.............................. 3,983 -- 414,170 614,245 Repayments of borrowings.............................. -- (13,464) -- (703,201) Proceeds from issuance of common stock................ -- -- 188,108 97,573 Purchase of treasury stock............................ -- -- -- (669) Ciba and affiliates borrowings (repayments)........... (15,693) (26,589) (184,666) -- Capital transactions with Ciba and affiliates......... (37,361) (7,716) (80,687) -- -------- -------- --------- -------- Net cash provided by (used in) financing activities...................................... (49,071) (47,769) 336,925 7,948 -------- -------- --------- -------- Effect of exchange rate changes on cash and cash equivalents........................................... 4,344 (3,394) (615) (4,736) -------- -------- --------- -------- Net increase (decrease) in cash and cash equivalents.... (22,400) (5,303) 24,597 (37,130) Cash and cash equivalents: Beginning of period................................... 63,802 41,402 36,099 60,696 -------- -------- --------- -------- End of period......................................... $ 41,402 $ 36,099 $ 60,696 $ 23,566 ======== ======== ========= ======== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest............................................ $ 18,927 $ 6,524 $ 17,874 $ 38,345 Taxes............................................... 9,970 9,385 2,470 6,140 Non-cash financing and investing activities: Due to Ciba for capital transactions.................. 36,418 -- -- -- Seller financing on acquisition....................... -- -- -- 22,514
See the accompanying notes to the consolidated financial statements F-6 89 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS UNLESS OTHERWISE STATED) 1. BUSINESS DESCRIPTION AND BASIS OF PRESENTATION Mettler-Toledo International Inc. ("Mettler Toledo," the "Company" or "Successor"), formerly MT Investors Inc., is a global supplier of precision instruments and is a manufacturer and marketer of weighing instruments for use in laboratory, industrial and food retailing applications. The Company also manufactures and sells certain related analytical and measurement technologies. The Company's manufacturing facilities are located in Switzerland, the United States, Germany, the United Kingdom and China. The Company's principal executive offices are located in Greifensee, Switzerland. The Company was incorporated by AEA Investors Inc. ("AEA Investors") and recapitalized to effect the acquisition (the "Acquisition") of the Mettler-Toledo Group ("Predecessor") from Ciba-Geigy AG ("Ciba") and its wholly owned subsidiary, AG fur Prazisionsinstrumente ("AGP") on October 15, 1996. The Company acquired the Mettler-Toledo Group for cash consideration of SFr. 504,996 (approximately $402,000) including dividends of SFr. 109,406 (approximately $87,100) which were paid to Ciba by the Company in conjunction with the Acquisition. In addition, the Company incurred expenses in connection with the Acquisition and related financing of approximately $29,000, including approximately $5,500 paid to AEA Investors, and paid approximately $185,000 to settle amounts due to Ciba and affiliates. The Company has accounted for the Acquisition using the purchase method of accounting. Accordingly, the costs of the Acquisition were allocated to the assets acquired and liabilities assumed based upon their respective fair values. In connection with the Acquisition, the Company allocated, based upon independent valuations, $114,070 of the purchase price to purchased research and development in process. Such amount was recorded as an expense in the period from October 15, 1996 to December 31, 1996. Additionally, the Company allocated approximately $32,200 of the purchase price to revalue certain inventories (principally work-in-process and finished goods) to fair value (net realizable value). Substantially all of such inventories were sold during the period from October 15, 1996 to December 31, 1996. The excess of the cost of the Acquisition over the fair value of the net assets acquired of approximately $137,500 is being amortized over 32 years. Because of this purchase price allocation, the accompanying financial statements of the Successor are not directly comparable to those of the Predecessor. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America and include all entities in which the Company has control, including its majority owned subsidiaries. All intercompany transactions and balances have been eliminated. Investments in which the Company has voting rights between 20% to 50% are generally accounted for using the equity method of accounting. Certain amounts in the prior period financial statements have been reclassified to conform with current year presentation. The combined financial statements of the Predecessor include the combined historical assets and liabilities and combined results of operations of the Mettler-Toledo Group. All intergroup transactions have been eliminated as part of the combination process. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. F-7 90 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS Cash and cash equivalents include highly liquid investments with original maturity dates of three months or less. INVENTORIES Inventories are valued at the lower of cost or market. Cost, which includes direct materials, labor and overhead plus indirect overhead, is determined using the first in, first out (FIFO) or weighted average cost methods and to a lesser extent the last in, first out (LIFO) method. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is charged on a straight line basis over the estimated useful lives of the assets as follows: Buildings and improvements......................... 15 to 50 years Machinery and equipment............................ 3 to 12 years Computer software.................................. 3 to 5 years Leasehold improvements............................. Shorter of useful life or lease term
Beginning January 1, 1996 the Company adopted Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 121 requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In addition, SFAS 121 requires that long-lived assets and certain identifiable intangibles to be disposed of be reported at the lower of carrying amount or fair value less cost to sell. Adoption of SFAS 121 had no material effect on the consolidated financial statements. EXCESS OF COST OVER NET ASSETS ACQUIRED The excess of purchase price over the fair value of net assets acquired is amortized on a straight-line basis over the expected period to be benefited. The Company assesses the recoverability of such amount by determining whether the amortization of the balance over its remaining life can be recovered from the undiscounted future operating cash flows of the acquired operation. The amount of impairment, if any, is measured based on projected discounted future operating cash flows using a discount rate reflecting the Company's average cost of funds. The assessment of the recoverability of the excess of cost over net assets acquired will be impacted if estimated future operating cash flows are not achieved. DEFERRED FINANCING COSTS Debt financing costs are deferred and amortized over the life of the underlying indebtedness using the interest method. TAXATION The Company files tax returns in each jurisdiction in which it operates. Prior to the Acquisition discussed in Note 1, in certain jurisdictions the Company filed its tax returns jointly with other Ciba F-8 91 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) subsidiaries. The Company had a tax sharing arrangement with Ciba in these countries to share the tax burden or benefits. Such arrangement resulted in each company's tax burden or benefit equating to that which it would have incurred or received if it had been filing a separate tax return. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in the respective jurisdictions in which the Company operates that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Generally, deferred taxes are not provided on the unremitted earnings of subsidiaries outside of the United States because it is expected that these earnings are permanently reinvested and such determination is not practicable. Such earnings may become taxable upon the sale or liquidation of these subsidiaries or upon the remittance of dividends. Deferred taxes are provided in situations where the Company's subsidiaries plan to make future dividend distributions. RESEARCH AND DEVELOPMENT Research and development costs are expensed as incurred. Research and development costs, including customer engineering (which represents research and development charged to customers and, accordingly, is included in cost of sales), amounted to approximately $62,400, $45,100, $11,100 and $50,200 for the year ended December 31, 1995, for the period from January 1, 1996 to October 14, 1996, for the period from October 15, 1996 to December 31, 1996 and for the year ended December 31, 1997, respectively. CURRENCY TRANSLATION AND TRANSACTIONS The reporting currency for the consolidated financial statements of the Company is the United States dollar (USD). The functional currency for the Company's operations is generally the applicable local currency. Accordingly, the assets and liabilities of companies whose functional currency is other than the USD are included in the consolidation by translating the assets and liabilities into the reporting currency at the exchange rates applicable at the end of the reporting year. The statements of operations and cash flows of such non-USD functional currency operations are translated at the monthly average exchange rates during the year. Translation gains or losses are accumulated as a separate component of net assets/shareholders' equity. The Company has designated certain of its Swiss franc debt as a hedge of its net investments. Any gains and losses due to changes on the debt are recorded to currency translation adjustment and offset the net investments which they hedge. DERIVATIVE FINANCIAL INSTRUMENTS The Company has only limited involvement with derivative financial instruments and does not use them for trading purposes. The Company enters into foreign currency forward contracts to hedge short-term intercompany transactions with its foreign businesses. Such contracts limit the Company's exposure to both favorable and unfavorable currency fluctuations. These contracts are adjusted to reflect market values as of each balance sheet date, with the resulting unrealized gains and losses being recognized in other charges (income), net. F-9 92 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) The Company enters into certain interest rate cap and swap agreements in order to reduce its exposure to changes in interest rates. The differential paid or received on interest rate swap agreements is recognized over the life of the agreements. Realized and unrealized gains on interest rate cap agreements are recognized as adjustments to interest expense as incurred. STOCK BASED COMPENSATION The Company applies Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" and related interpretations in accounting for its stock option plan. LOSS PER COMMON SHARE Effective December 31, 1997, the Company adopted the Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). Accordingly, basic and diluted loss per common share data for each period presented have been determined in accordance with the provisions of SFAS 128. Outstanding options to purchase shares of common stock, as described in Note 11, were not included in the computation of diluted loss per common share for the periods ended December 31, 1996 and 1997, as the effect is antidilutive. The Company retroactively adjusted its weighted average common shares for the purpose of the basic and diluted loss per common share computations for the 1996 and 1997 periods pursuant to SFAS 128 and Securities and Exchange Commission Staff Accounting Bulletin No. 98 issued in February 1998. CONCENTRATION OF CREDIT RISK The Company's revenue base is widely diversified by geographic region and by individual customer. The Company's products are utilized in many different industries, although extensively in the pharmaceutical and chemicals industries. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral from its customers. REVENUE RECOGNITION Revenue is recognized when title to a product has transferred or services have been rendered. Revenues from service contracts are recognized over the contract period. 3. BUSINESS COMBINATIONS On May 30, 1997, the Company purchased the entire issued share capital of Safeline Limited ("Safeline"), a manufacturer of metal detection systems based in Manchester in the United Kingdom, for approximately L61,000 (approximately $100,000), plus up to an additional L6,000 (approximately $10,000) for a contingent earn-out payment. In October 1997, the Company made an additional payment, representing a post-closing adjustment, of L1,900 (approximately $3,100). Such amount has been accounted for as additional purchase price. Under the terms of the agreement the Company paid approximately L47,300 (approximately $77,400) of the purchase price in cash, provided by amounts loaned under its credit agreement, with the remaining balance of approximately L13,700 (approximately $22,400) paid in the form of seller loan notes which mature May 30, 1999. In connection with the acquisition the Company incurred expenses of approximately $2,200 which have been accounted for as part of the purchase price. F-10 93 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 3. BUSINESS COMBINATIONS -- (CONTINUED) The Company has accounted for the acquisition using the purchase method of accounting. Accordingly, the costs of the acquisition were allocated to the assets acquired and liabilities assumed based upon their respective fair values. Approximately $30,000 of the purchase price was attributed to purchased research and development in process. Such amount was expensed immediately in the second quarter of 1997. The technological feasibility of the products being developed had not been established as of the date of the acquisition. The Company expects that the projects underlying these research and development efforts will be substantially complete over the next two years. In addition, the Company allocated approximately $2,100 of the purchase price to revalue certain finished goods inventories to fair value. Substantially all of such inventories were sold in the second quarter of 1997. The excess of the cost of the acquisition over the fair value of the net assets acquired of approximately $65,000 is being amortized over 30 years. The results of operations and cash flows of Safeline have been consolidated with those of the Company from the date of the acquisition. The following unaudited pro forma summary presents the consolidated results of operations of the Company as if the Acquisition (see Note 1) and Safeline acquisition had been completed as of the beginning of each of the periods presented, after giving effect to certain adjustments, including Safeline's historical results of operations prior to the acquisition date, depreciation and amortization of the assets acquired based upon their fair values, increased interest expense from the financing of the acquisitions and income tax effects. The Company allocated a portion of the purchase prices to (i) in-process research and development projects, that have economic value and (ii) the revaluation of inventories. These adjustments have not been reflected in the following pro forma summary due to their unusual and non-recurring nature. This pro forma summary does not necessarily reflect the results of operations as they would have been if the acquisitions had been completed as of the beginning of such periods and is not necessarily indicative of the results which may be obtained in the future.
PRO FORMA FINANCIAL INFORMATION (UNAUDITED) ------------------------------------------------------- PREDECESSOR SUCCESSOR ------------------ ---------------------------------- FOR THE PERIOD FOR THE PERIOD YEAR ENDED JANUARY 1, 1996 TO OCTOBER 15, 1996 TO DECEMBER 31, OCTOBER 14, 1996 DECEMBER 31, 1996 1997 ------------------ ------------------- ------------ Net sales......................................... $694,231 $195,336 $897,448 Earnings (loss) before extraordinary items........ 826 (2,128) 9,565 Net earnings (loss)............................... $ 826 $ (2,128) $(31,632) ======== ======== ======== Basic and diluted loss per common share........... $ (0.07) $ (1.00) ======== ========
F-11 94 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 4. INVENTORIES Inventories consisted of the following:
SUCCESSOR --------------------------- DECEMBER 31, DECEMBER 31, 1996 1997 ------------ ------------ Raw materials and parts..................................... $ 41,015 $ 42,435 Work-in-progress............................................ 31,534 29,746 Finished goods.............................................. 29,982 28,968 -------- -------- 102,531 101,149 LIFO reserve................................................ (5) (102) -------- -------- $102,526 $101,047 ======== ========
At December 31, 1996 and 1997, 13.2% and 12.7%, respectively, of the Company's inventories (certain U.S. companies only) were valued using the LIFO method of accounting. There were no material liquidations of LIFO inventories during the periods presented. 5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS At December 31, 1996, the Company had forward contracts maturing during 1997 to sell the equivalent of approximately $135,000 in various currencies in exchange for Swiss francs. These contracts were used to limit its exposure to currency fluctuations on anticipated future cash flows. In July 1997, the Company entered into three year interest rate cap agreements to limit the impact of increases in interest rates on its U.S. dollar based debt. These agreements "cap" the effects of an increase in three month LIBOR above 8.5%. In addition, the Company has entered into three year interest rate swap agreements which swap the interest obligation associated with $100,000 of U.S. dollar based debt from variable to fixed. The fixed rate associated with the swap is 6.09% plus the Company's normal interest margin. The swap is effective at three month LIBOR rates up to 7.00%. In August 1997, the Company entered into certain three year interest rate swap agreements that fix the interest obligation associated with SFr. 112,500 of Swiss franc based debt at rates varying between 2.17% and 2.49% plus the Company's normal interest margin. The swaps are effective at one month LIBOR rates up to 3.5%. The Company may be exposed to credit losses in the event of nonperformance by the counterparties to its derivative financial instrument contracts. Counterparties are established banks and financial institutions with high credit ratings. The Company has no reason to believe that such counterparties will not be able to fully satisfy their obligations under these contracts. At December 31, 1996 and 1997, the fair value of such financial instruments was approximately $(5,100) and $(1,064), respectively. The fair values of all derivative financial instruments are estimated based on current settlement prices of comparable contracts obtained from dealer quotes. The values represent the estimated amount the Company would pay to terminate the agreements at the reporting date, taking into account current creditworthiness of the counterparties. F-12 95 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 6. PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment, net, consisted of the following:
SUCCESSOR --------------------------- DECEMBER 31, DECEMBER 31, 1996 1997 ------------ ------------ Land........................................................ $ 63,514 $ 58,226 Buildings and leasehold improvements........................ 120,173 111,065 Machinery and equipment..................................... 75,675 93,418 Computer software........................................... 3,067 3,948 -------- -------- 262,429 266,657 Less accumulated depreciation and amortization.............. (7,137) (31,395) -------- -------- $255,292 $235,262 ======== ========
7. OTHER ASSETS Other assets include deferred financing fees of $22,015 and $4,101, net of accumulated amortization of $820 and $76 at December 31, 1996 and 1997, respectively. During 1997, the Company wrote off deferred financing costs associated with its previous credit facilities and its Senior Subordinated Notes as further discussed in Note 9. Also included in other assets are restricted bank deposits of $5,960 and $1,756 at December 31, 1996 and 1997, respectively. Other assets at December 31, 1996 and 1997 also included a loan due from the Company's Chief Executive Officer of approximately $740 and $690, respectively. Such loan bears an interest rate of 5% and is payable upon demand, which may not be made until 2003. 8. SHORT-TERM BORROWINGS AND CURRENT MATURITIES OF LONG-TERM DEBT Short-term borrowings and current maturities of long-term debt consisted of the following:
SUCCESSOR --------------------------- DECEMBER 31, DECEMBER 31, 1996 1997 ------------ ------------ Current maturities of long-term debt........................ $ 8,968 $ 14,915 Borrowings under revolving credit facility.................. 51,928 33,320 Other short-term borrowings................................. 19,550 8,195 -------- -------- $ 80,446 $ 56,430 ======== ========
F-13 96 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 9. LONG-TERM DEBT Long-term debt consisted of the following:
SUCCESSOR ---------------------------- DECEMBER 31, DECEMBER 31, 1996 1997 ------------ ------------ 9.75% Senior Subordinated Notes due October 1, 2006......... $135,000 $ -- Credit Agreement: Term A USD Loans, interest at LIBOR plus 1.125% (7.03% at December 31, 1997) payable in quarterly installments beginning March 31, 1998 due May 19, 2004.............. -- 101,573 Term A SFr. Loans, interest at LIBOR plus 1.125% (2.57% at December 31, 1997) payable in quarterly installments beginning March 31, 1998 due May 19, 2004.............. -- 58,991 Term A GBP Loans, interest at LIBOR plus 1.125% (8.71% at December 31, 1997) payable in quarterly installments beginning March 31, 1998 due May 19, 2004.............. -- 36,198 Seller Notes, interest at LIBOR plus 0.26% (7.84% at December 31, 1997) due in full May 30, 1999............ -- 22,946 Term A SFr. Loans, interest at LIBOR plus 2.5% (4.38% at December 31, 1996) payable in quarterly installments beginning March 31, 1997 due December 31, 2002......... 92,730 -- Term B USD Loans, interest at LIBOR plus 3.00% (8.53% at December 31, 1996) payable in quarterly installments beginning March 31, 1997 due December 31, 2003......... 75,000 -- Term C USD Loans, interest at LIBOR plus 3.25% (8.78% at December 31, 1996) payable in quarterly installments beginning March 31, 1997 due December 31, 2004......... 72,000 -- Revolving credit facilities............................... 51,928 160,862 Other....................................................... 27,546 16,194 -------- -------- 454,204 396,764 Less current maturities..................................... 80,446 56,430 -------- -------- $373,758 $340,334 ======== ========
To provide a portion of the financing required for the Acquisition and for working capital and for general corporate purposes thereafter, in October 1996 Mettler-Toledo Holding Inc., a wholly owned subsidiary of the Company, entered into a credit agreement with various banks. At December 31, 1996, loans under the credit agreement consisted of: (i) Term A Loans in an aggregate principal amount of SFr. 125,000 ($92,730 at December 31, 1996), (ii) Term B Loans in an aggregate principal amount of $75,000, (iii) Term C loans in an aggregate principal amount of $72,000 and (iv) a multi-currency revolving credit facility in an aggregate principal amount of $140,000, which included letter of credit and swingline subfacilities available to certain subsidiaries. On May 29, 1997, the Company refinanced its previous credit facility and entered into a new credit facility. This credit facility provided for term loan borrowings in an aggregate principal amount of approximately $133,800, SFr. 171,500 and L26,700, that were scheduled to mature between 2002 and 2004, a Canadian revolving credit facility with availability of CDN $26,300 and a multi-currency revolving credit facility with availability of $151,000. The revolving credit facilities were scheduled to mature in 2002. The F-14 97 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 9. LONG-TERM DEBT -- (CONTINUED) Company recorded an extraordinary loss of approximately $9,600 representing a charge for the write-off of capitalized debt issuance fees and related expenses associated with the Company's previous credit facility. On November 19, 1997, in connection with the initial public offering, the Company refinanced its existing credit facility by entering into a new credit facility (the "Credit Agreement") with certain financial institutions. At December 31, 1997, loans under the Credit Agreement consisted of: (i) Term A Loans in aggregate principal amount of $101,573, SFr. 85,467 ($58,991 at December 31, 1997) and L21,661 ($36,198 at December 31, 1997); (ii) a Canadian revolving credit facility with availability of CDN $26,300 and (iii) a multi-currency revolving credit facility in an aggregate principal amount of $400,000 including a $100,000 acquisition facility. Concurrent with the initial public offering and refinancing, the Company consummated a tender offer to repurchase the Senior Subordinated Notes. The aggregate purchase price in connection with the tender offer was approximately $152,500. In connection with the refinancing and the note repurchase, the Company recorded an extraordinary loss of $31,600 representing primarily the premium paid in connection with the early extinguishment of the notes of $17,900 and the write-off of capitalized debt issuance fees associated with the Senior Subordinated Notes and the Company's previous credit facility. The Company's weighted average interest rate at December 31, 1997 was approximately 6.3%. Loans under the Credit Agreement may be repaid and reborrowed and are due in full on May 19, 2004. The Company is required to pay a facility fee based upon certain financial ratios per annum on the amount of the revolving facility and letter of credit fees on the aggregate face amount of letters of credit under the revolving facility. The facility fee at December 31, 1997 was equal to 0.3%. At December 31, 1997, the Company had available approximately $220,000 of additional borrowing capacity under its Credit Agreement. The Company has the ability to refinance its short-term borrowings through its revolving facility for an uninterrupted period extending beyond one year. Accordingly, approximately $128,000 of the Company's short-term borrowings at December 31, 1997 have been reclassified to long-term. At December 31, 1997, borrowings under the Company's revolving facility carried an interest rate of LIBOR plus 0.825%. The Credit Agreement contains covenants that, among other things, limit the Company's ability to incur liens; merge, consolidate or dispose of assets; make loans and investments; incur indebtedness; engage in certain transactions with affiliates; incur certain contingent obligations; pay dividends and other distributions; or make certain capital expenditures. The Credit Agreement also requires the Company to maintain a minimum net worth and a minimum fixed charge coverage ratio, and to maintain a ratio of total debt to EBITDA below a specified maximum. The aggregate maturities of long-term obligations during each of the years 1999 through 2002 are approximately $42,748, $32,691, $34,531 and $34,531, respectively. The estimated fair value of the Company's obligations under the Credit Agreement approximate fair value due to the variable rate nature of the obligations. F-15 98 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 10. SHAREHOLDERS' EQUITY COMMON STOCK At December 31, 1996, the authorized capital stock of the Company consisted of 2,775,976 shares of common stock, $.01 par value of which 2,233,117 shares were designated as Class A common stock, 1,000 shares were designated as Class B common stock and 541,859 shares were designated as Class C common stock. All general voting power was vested in the holders of the Class B common stock. At December 31, 1996, the Company had outstanding 1,899,779 shares of Class A common stock, 1,000 shares of Class B common stock and 537,735 shares of Class C common stock. In November 1997, pursuant to a merger with its wholly owned subsidiary Mettler-Toledo Holding Inc., each share of the Company's existing Class A, Class B and Class C common stock converted into 12.58392 shares of common stock and increased the number of authorized shares to 125,000,000 shares with a par value of $0.01 per share. Concurrent therewith, the Company completed an underwritten initial public offering of 7,666,667 shares at a public offering price of $14.00 per share. The net proceeds from the offerings of approximately $97,300 were used to repay a portion of the Company's 9.75% Senior Subordinated Notes (see Note 9). As part of the offering the Company sold approximately 287,000 shares of its common stock to Company sponsored benefit plans at the public offering price. Holders of the Company's common stock are entitled to one vote per share. At December 31, 1997, 6,368,445 shares of the Company's common stock were reserved for the Company's stock option plan. PREFERRED STOCK The Board of Directors, without further shareholder authorization, is authorized to issue up to 10,000,000 shares of preferred stock, par value $0.01 per share in one or more series and to determine and fix the rights, preferences and privileges of each series, including dividend rights and preferences over dividends on the common stock and one or more series of the preferred stock, conversion rights, voting rights (in addition to those provided by law), redemption rights and the terms of any sinking fund therefor, and rights upon liquidation, dissolution or winding up, including preferences over the common stock and one or more series of the preferred stock. The issuance of shares of preferred stock, or the issuance of rights to purchase such shares, may have the effect of delaying, deferring or preventing a change in control of the Company or an unsolicited acquisition proposal. 11. STOCK OPTION PLAN Effective October 15, 1996, the Company adopted a stock option plan to provide certain key employees and/or directors of the Company additional incentive to join and/or remain in the service of the Company as well as to maintain and enhance the long-term performance and profitability of the Company. Under the terms of the plan, options granted shall be nonqualified and the exercise price shall not be less than 100% of the fair market value of the common stock on the date of grant. Options vest equally over a five year period from the date of grant. F-16 99 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 11. STOCK OPTION PLAN -- (CONTINUED) Stock option activity is shown below:
NUMBER OF WEIGHTED-AVERAGE SHARES EXERCISE PRICE --------- ---------------- Granted during the period October 15, 1996 to December 31, 1996......................................... 3,510,747 $ 7.95 Exercised................................................... -- -- Forfeited................................................... -- -- --------- ------ Outstanding at December 31, 1996............................ 3,510,747 7.95 Granted..................................................... 1,028,992 14.68 Exercised................................................... -- -- Forfeited................................................... (130,999) (7.95) --------- ------ Outstanding at December 31, 1997............................ 4,408,740 $ 9.75 ========= ====== Shares exercisable at December 31, 1997..................... 675,950 $ 7.95 ========= ======
At December 31, 1997, there were 3,537,047 and 871,693 options outstanding to purchase shares of common stock with exercise prices of $7.95 and $15.89, respectively. The weighted-average remaining contractual life of such options was 8.7 and 9.7 years, respectively. As of the date granted, the weighted-average grant-date fair value of the options granted during the period from October 15, 1996 to December 31, 1996 and for the year ended December 31, 1997 was approximately $1.99 and $3.37 per share, respectively. Such weighted-average grant-date fair value was determined using an option pricing model which incorporated the following assumptions:
SUCCESSOR ---------------------------------- FOR THE PERIOD OCTOBER 15, 1996 TO YEAR ENDED DECEMBER 31, DECEMBER 31, 1996 1997 ------------------- ------------ Risk-free interest rate..................................... 4.0% 5.4% Expected life, in years..................................... 7 4 Expected volatility......................................... -- 26% Expected dividend yield..................................... -- --
F-17 100 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 11. STOCK OPTION PLAN -- (CONTINUED) The Company applies Accounting Standards Board Opinion No. 25 and related interpretations in accounting for its plans. Had compensation cost for the Company stock option plan been determined based upon the fair value of such awards at the grant date, consistent with the methods of Statement of Financial Accounting Standards No. 123 "Accounting for Stock Based Compensation" ("SFAS 123"), the Company's net loss and basic and diluted net loss per common share for the twelve months ended December 31, 1997 would have been as follows: Net loss: As reported............................................... $(65,106) Pro forma................................................. (66,417) ======== Basic and diluted loss per common share: As reported............................................... $ (2.06) Pro forma................................................. (2.10) ========
The Company's net loss for the period October 15, 1996 to December 31, 1996 would not have been materially different had compensation cost been determined consistent with SFAS 123. 12. BENEFIT PLANS Mettler-Toledo maintains a number of retirement plans for the benefit of its employees. Certain companies sponsor defined contribution plans. Benefits are determined and funded annually based upon the terms of the plans. Contributions under these plans amounted to $9,413, $9,484, $2,496 and $8,925 in 1995, for the period January 1, 1996 to October 14, 1996, for the period October 15, 1996 to December 31, 1996 and for the year ended December 31, 1997, respectively. F-18 101 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 12. BENEFIT PLANS -- (CONTINUED) Certain companies sponsor defined benefit plans. Benefits are provided to employees primarily based upon years of service and employees' compensation for certain periods during the last years of employment. The following table sets forth the funded status and amounts recognized in the consolidated financial statements for the Company's principal defined benefit plans at December 31, 1996 and 1997:
SUCCESSOR ------------------------------------------------------------- DECEMBER 31, 1996 DECEMBER 31, 1997 ----------------------------- ----------------------------- ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED ACCUMULATED BENEFITS ACCUMULATED BENEFITS BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS ------------- ------------- ------------- ------------- Actuarial present value of accumulated benefit obligations: Vested benefits.............................. $10,211 $97,639 $11,712 $98,974 Non-vested benefits.......................... 16 2,280 20 3,574 ------- ------- ------- ------- 10,227 99,919 11,732 102,548 ------- ------- ------- ------- Projected benefit obligations.................. 12,458 108,504 13,350 111,608 Plan assets at fair value...................... 13,336 50,609 14,899 58,176 ------- ------- ------- ------- Projected benefit obligations in excess of (less than) plan assets...................... (878) 57,895 (1,549) 53,432 Unrecognized net (losses) gains................ 22 1,479 544 561 ------- ------- ------- ------- (Prepaid) accrued pension costs................ $ (856) $59,374 $(1,005) $53,993 ======= ======= ======= =======
The (prepaid) accrued pension costs are recognized in the accompanying consolidated financial statements as other long-term assets and other long term liabilities, respectively. The assumed discount rates and rates of increase in future compensation level used in calculating the projected benefit obligations vary according to the economic conditions of the country in which the retirement plans are situated. The range of rates used for the purposes of the above calculations are as follows:
1996 1997 ------------ ------------ Discount rate............................................... 6.0% to 8.5% 6.0% to 8.5% Compensation increase rate.................................. 2.0% to 6.5% 2.0% to 6.5%
The expected long term rates of return on plan assets ranged between 9.5% and 10.0% for 1995, 7.0% and 10.0% for 1996, and 6.0% and 9.5% in 1997. The assumptions used above have a significant effect on the reported amounts of projected benefit obligations and net periodic pension cost. For example, increasing the assumed discount rate would have the effect of decreasing the projected benefit obligation and increasing unrecognized net gains. Increasing the assumed compensation increase rate would increase the projected benefit obligation and decrease unrecognized net gains. Increasing the expected long-term rate of return on investments would decrease unrecognized net gains. Plan assets relate principally to the Company's U.S. companies and consist of equity investments, obligations of the U.S. Treasury or other governmental agencies, and other interest-bearing investments. F-19 102 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 12. BENEFIT PLANS -- (CONTINUED) Net periodic pension cost for all of the plans above includes the following components:
PREDECESSOR SUCCESSOR --------------------------------- -------------------------------- YEAR ENDED FOR THE PERIOD FOR THE PERIOD YEAR ENDED DECEMBER 31, JANUARY 1, 1996 TO OCTOBER 15 TO DECEMBER 31, 1995 OCTOBER 14, 1996 DECEMBER 31, 1996 1997 ------------ ------------------ ----------------- ------------ Service cost (benefits earned during the period).......................... $3,668 $3,850 $1,013 $5,655 Interest cost on projected benefit obligations.......................... 7,561 6,540 1,721 8,020 Actual gain on plan assets............. (8,653) (6,079) (1,600) (8,543) Net amortization and deferral.......... 5,137 2,485 -- 2,516 ------- ------- ------- ------- Net periodic pension expense........... $7,713 $6,796 $1,134 $7,648 ======= ======= ======= =======
The Company's U.S. operations provide postretirement medical benefits to their employees. Employee contributions for medical benefits are related to employee years of service. The following table sets forth the status of the U.S. postretirement plans and amounts:
SUCCESSOR --------------------------- DECEMBER 31, DECEMBER 31, 1996 1997 ------------ ------------ Accumulated postretirement benefit obligations: Retired................................................... $25,894 $26,702 Fully eligible............................................ 3,033 4,154 Other..................................................... 3,098 5,256 ------- ------- 32,025 36,112 Unrecognized net loss....................................... (540) (4,465) ------- ------- Accrued postretirement benefit cost......................... $31,485 $31,647 ======= =======
Net periodic postretirement benefit cost for the above plans includes the following components:
PREDECESSOR SUCCESSOR --------------------------------- ---------------------------------- YEAR ENDED FOR THE PERIOD FOR THE PERIOD YEAR ENDED DECEMBER 31, JANUARY 1, 1996 TO OCTOBER 15, 1996 TO DECEMBER 31, 1995 OCTOBER 14, 1996 DECEMBER 31, 1996 1997 ------------ ------------------ ------------------- ------------ Service cost (benefits earned during the period).......................... $ 285 $ 431 $114 $ 440 Interest cost on projected benefit obligations.......................... 2,371 1,795 472 2,296 Net amortization and deferral.......... 99 343 -- 33 ------ ------ ---- ------ Net periodic postretirement benefit cost................................. $2,755 $2,569 $586 $2,769 ====== ====== ==== ======
The accumulated postretirement benefit obligation and net periodic postretirement benefit cost were principally determined using discount rates of 7.3% in 1995, 7.6% in 1996 and 7.0% in 1997 and health care cost trend rates ranging from 9.5% to 12.25% in 1995, 1996 and 1997 decreasing to 5.0% in 2006. F-20 103 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 12. BENEFIT PLANS -- (CONTINUED) The health care cost trend rate assumption has a significant effect on the accumulated postretirement benefit obligation and net periodic postretirement benefit cost. For example, in 1997 the effect of a one-percentage-point increase in the assumed health care cost trend rate would be an increase of $3,611 on the accumulated postretirement benefit obligations and an increase of $464 on the aggregate of the service and interest cost components of the net periodic benefit cost. 13. TAXES The sources of the Company's earnings (loss) before taxes, minority interest and extraordinary items were as follows:
PREDECESSOR --------------------------------- YEAR ENDED FOR THE PERIOD DECEMBER 31, JANUARY 1, 1996 TO 1995 OCTOBER 14, 1996 ------------ ------------------ Switzerland................................................. $11,431 $21,241 Non-Switzerland............................................. 16,373 3,912 ------- ------- Earnings before taxes, minority interest and extraordinary items..................................................... $27,804 $25,153 ======= =======
SUCCESSOR ---------------------------------- FOR THE PERIOD YEAR ENDED OCTOBER 15, 1996 TO DECEMBER 31, DECEMBER 31, 1996 1997 ------------------- ------------ United States............................................... $ (37,293) $(14,178) Non-United States........................................... (122,783) 8,226 --------- -------- Loss before taxes, minority interest and extraordinary items..................................................... $(160,076) $ (5,952) ========= ========
F-21 104 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 13. TAXES -- (CONTINUED) The provision (benefit) for taxes consists of:
ADJUSTMENTS CURRENT DEFERRED TO GOODWILL TOTAL ------- -------- ----------- ------- Predecessor: Year ended December 31, 1995: Switzerland Federal................................ $ 513 $ (92) $ -- $ 421 Switzerland Canton (State) and Local............... 481 (505) -- (24) Non-Switzerland.................................... 8,339 46 -- 8,385 ------- ------- ------ ------- $ 9,333 $ (551) $ -- $ 8,782 ======= ======= ====== ======= For the period January 1, 1996 to October 14, 1996: Switzerland Federal................................ $ 2,152 $ (172) $ -- $ 1,980 Switzerland Canton (State) and Local............... 4,305 (344) -- 3,961 Non-Switzerland.................................... 5,532 (1,418) -- 4,114 ------- ------- ------ ------- $11,989 $(1,934) $ -- $10,055 ======= ======= ====== ======= Successor: For the period October 15, 1996 to December 31, 1996: United States Federal.............................. $ 475 $(1,556) $ -- $(1,081) United States State and Local...................... 696 (183) -- 513 Non-United States.................................. 2,454 (2,824) -- (370) ------- ------- ------ ------- $ 3,625 $(4,563) $ -- $ (938) ======= ======= ====== ======= Year ended December 31, 1997: United States Federal.............................. $ -- $ (351) $ -- $ (351) State and Local.................................... 466 (41) 107 532 Non-United States.................................. 12,779 2,600 1,929 17,308 ------- ------- ------ ------- $13,245 $ 2,208 $2,036 $17,489 ======= ======= ====== =======
The adjustments to goodwill during the year ending December 31, 1997 relate to tax benefits received on amounts which were included in the purchase price allocation pertaining to the Acquisition of the Company described in Note 1. F-22 105 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 13. TAXES -- (CONTINUED) The provision for tax expense for the year ended December 31, 1995 and for the period January 1, 1996 to October 14, 1996 where the Company operated as a group of businesses owned by Ciba differed from the amounts computed by applying the Switzerland federal income tax rate of 9.8% to earnings before taxes and minority interest as a result of the following:
PREDECESSOR --------------------------------- YEAR ENDED FOR THE PERIOD DECEMBER 31, JANUARY 1, 1996 TO 1995 OCTOBER 14, 1996 ------------ ------------------ Expected tax................................................ $2,725 $ 2,465 Switzerland Canton (state) and local income taxes, net of federal income tax benefit................................ (21) 3,573 Non-deductible intangible amortization...................... 248 205 Change in valuation allowance............................... 1,603 1,235 Non-Switzerland income taxes in excess of 9.8%.............. 4,968 2,291 Other, net.................................................. (741) 286 ------ ------- Total provision for taxes................................... $8,782 $10,055 ====== =======
The provision for tax expense (benefit) for the period October 15, 1996 to December 31, 1996 and for the year ended December 31, 1997, subsequent to the Acquisition described in Note 1, differed from the amounts computed by applying the United States Federal income tax rate of 35% to the loss before taxes, minority interest and extraordinary items as a result of the following:
SUCCESSOR ---------------------------------- FOR THE PERIOD YEAR ENDED OCTOBER 15, 1996 TO DECEMBER 31, DECEMBER 31, 1996 1997 ------------------- ------------ Expected tax................................................ $(56,027) $(2,083) United States state and local income taxes, net of federal income tax benefit........................................ 333 276 Non-deductible purchased research and development........... 39,925 10,486 Non-deductible intangible amortization...................... 336 2,073 Change in valuation allowance............................... 4,662 263 Non-United States income taxes at other than a 35% rate..... 10,037 5,545 Other, net.................................................. (204) 929 -------- ------- Total provision for taxes................................... $ (938) $17,489 ======== =======
F-23 106 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 13. TAXES -- (CONTINUED) The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:
SUCCESSOR --------------------------- DECEMBER 31, DECEMBER 31, 1996 1997 ------------ ------------ Deferred tax assets: Inventory................................................. $ 7,974 $ 7,552 Accrued and other liabilities............................. 7,046 9,278 Deferred loss on sale of subsidiaries..................... 7,907 7,907 Accrued postretirement benefit and pension costs.......... 19,043 19,161 Net operating loss carryforwards.......................... 15,817 27,345 Other..................................................... 408 678 ------- ------- Total deferred tax assets................................... 58,195 71,921 Less valuation allowance.................................... (46,714) (59,292) ------- ------- Total deferred tax assets less valuation allowance.......... 11,481 12,629 ------- ------- Deferred tax liabilities: Inventory................................................. 5,618 6,177 Property, plant and equipment............................. 31,123 24,081 Other..................................................... 2,858 5,665 ------- ------- Total deferred tax liabilities.............................. 39,599 35,923 ------- ------- Net deferred tax liability.................................. $28,118 $23,294 ======= =======
The Company has established valuation allowances primarily for net operating losses, deferred losses on the sale of subsidiaries as well as postretirement and pension costs as follows:
SUCCESSOR --------------------------- DECEMBER 31, DECEMBER 31, 1996 1997 ------------ ------------ Summary of valuation allowances: Cumulative net operating losses........................... $15,817 $27,345 Deferred loss on sale of subsidiaries..................... 7,907 7,907 Accrued postretirement and pension benefit costs.......... 18,122 17,104 Other..................................................... 4,868 6,936 ------- ------- Total valuation allowance................................... $46,714 $59,292 ======= =======
The total valuation allowances relating to acquired businesses amount to $38,785 and $35,524 at December 31, 1996 and 1997, respectively. Future reductions of these valuation allowances will be credited to goodwill. At December 31, 1997, the Company had net operating loss carryforwards for income tax purposes of (i) $45,939 related to U.S. Federal net operating losses of which $4,376 expires in 2011 and $41,563 expires in 2012, (ii) $51,832 related to U.S. State net operating losses which expire in varying amounts through 2012, (iii) $15,595 related to foreign net operating losses with no expiration date and (iv) $14,205 related to foreign net operating losses which expire in varying amounts through 2003. F-24 107 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 14. OTHER CHARGES (INCOME), NET Other charges (income), net consists primarily of foreign currency transactions, interest income and charges related to the Company's restructuring programs. Foreign currency transactions, net for the year ended December 31, 1995, for the period January 1, 1996 to October 14, 1996, for the period October 15, 1996 to December 31, 1996 and for the year ended December 31, 1997 were $(3,242), $(220), $8,324 and $4,235, respectively. Interest income for the year ended December 31, 1995, for the period January 1, 1996 to October 14, 1996, for the period October 15, 1996 to December 31, 1996 and for the year ended December 31, 1997 was $(5,388), $(3,424), $(1,079) and $(1,832), respectively. Severance and other exit costs for the period January 1, 1996 to October 14, 1996 of $1,872 represent employee severance of $1,545 and other exit costs of $327 associated with the closing of its Westerville, Ohio facility. Severance costs for the period October 15, 1996 to December 31, 1996 principally represent employee severance benefits associated with (i) the Company's general headcount reduction programs in Europe and North America of $4,557 which were announced during such period, and (ii) the realignment of the analytical and precision balance business in Switzerland of $6,205 which was announced in December 1996. In connection with such programs the Company reduced its workforce by 168 employees in 1996. The Company recorded further restructuring charges of $6,300 during 1997. Such charges are in connection with the closure of three facilities in North America and are comprised primarily of severance and other related benefits and costs of exiting facilities, including lease termination costs and write-down of existing assets to their expected net realizable value. In connection with the closure of these facilities, the Company expects to involuntarily terminate approximately 70 employees. The Company is undertaking these actions as part of its efforts to reduce costs through re-engineering. A rollforward of the components of the Company's accrual for restructuring activities is as follows: Balance at December 31, 1996................................ $10,762 1997 Activities: Restructuring accrual for North American operations.... 6,300 Reductions in workforce and other cash outflows........ (7,182) Non-cash write-downs of property, plant and equipment............................................. (540) Impact of foreign currency............................. (582) ------- Balance at December 31, 1997................................ $ 8,758 =======
The Company's accrual for restructuring activities of $8,758 at December 31, 1997 primarily consisted of $6,544 for severance and other related benefits with the remaining balance for lease termination and other costs of exiting facilities. Such programs are expected to be substantially complete in 1998. F-25 108 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 15. COMMITMENTS AND CONTINGENCIES OPERATING LEASES The Company leases certain of its facilities and equipment under operating leases. The future minimum lease payments under non-cancelable operating leases are as follows at December 31, 1997: 1998........................................................ $12,006 1999........................................................ 8,565 2000........................................................ 5,771 2001........................................................ 4,023 2002........................................................ 3,296 Thereafter.................................................. 1,856 ------- Total..................................................... $35,517 =======
Rent expense for operating leases amounted to $13,034, $3,430 and $16,420 for the period January 1, 1996 to October 14, 1996, for the period October 15, 1996 to December 31, 1996 and for the year ended December 31, 1997, respectively. LEGAL The Company is party to various legal proceedings, including certain environmental matters, incidental to the normal course of business. Management does not expect that any of such proceedings will have a material adverse effect on the Company's financial condition or results of operations. 16. GEOGRAPHIC SEGMENT INFORMATION The tables below show the Company's operations by geographic region. Transfers between geographic regions are priced to reflect consideration of market conditions and the regulations of the countries in which the transferring entities are located.
TRANSFERS BETWEEN TOTAL NET EARNINGS NET SALES BY NET SALES GEOGRAPHIC SALES BY (LOSS) TWELVE MONTHS ENDED DECEMBER 31, 1995 DESTINATION BY ORIGIN AREAS ORIGIN BEFORE TAXES - ------------------------------------- ------------ --------- ---------- --------- ------------ Switzerland(1)............................ $ 41,820 $102,712 $159,453 $262,165 $11,431 Germany................................... 151,974 158,393 47,379 205,772 9,626 Other Europe.............................. 247,802 228,939 799 229,738 1,780 -------- -------- -------- -------- ------- Total Europe.............................. 441,596 490,044 207,631 697,675 22,837 United States............................. 263,945 298,053 29,578 327,631 (1,353) Other Americas............................ 52,966 32,732 131 32,863 905 -------- -------- -------- -------- ------- Total Americas............................ 316,911 330,785 29,709 360,494 (448) Asia and other............................ 91,908 29,586 97 29,683 1,861 Eliminations.............................. -- -- (237,437) (237,437) 3,554 -------- -------- -------- -------- ------- Totals.................................... $850,415 $850,415 $ -- $850,415 $27,804 ======== ======== ======== ======== =======
F-26 109 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 16. GEOGRAPHIC SEGMENT INFORMATION -- (CONTINUED)
TRANSFERS BETWEEN TOTAL NET EARNINGS FOR THE PERIOD JANUARY 1, NET SALES BY NET SALES GEOGRAPHIC SALES BY (LOSS) 1996 TO OCTOBER 14, 1996 DESTINATION BY ORIGIN AREAS ORIGIN BEFORE TAXES - ------------------------- ------------ --------- ---------- --------- ------------ Switzerland(1)............................ $ 32,282 $ 74,303 $ 126,423 $200,726 $21,241 Germany................................... 104,961 114,015 35,583 149,598 8,292 Other Europe.............................. 186,823 171,061 840 171,901 591 -------- -------- --------- -------- ------- Total Europe.............................. 324,066 359,379 162,846 522,225 30,124 United States............................. 217,636 246,180 22,753 268,933 (1,577) Other Americas............................ 47,473 25,925 3 25,928 1,078 -------- -------- --------- -------- ------- Total Americas............................ 265,109 272,105 22,756 294,861 (499) Asia and other............................ 73,046 30,737 265 31,002 686 Eliminations.............................. -- -- (185,867) (185,867) (5,158) -------- -------- --------- -------- ------- Totals.................................... $662,221 $662,221 $ -- $662,221 $25,153 ======== ======== ========= ======== =======
TRANSFERS BETWEEN TOTAL NET EARNINGS FOR THE PERIOD OCTOBER 15, NET SALES BY NET SALES GEOGRAPHIC SALES BY (LOSS) TOTAL 1996 TO DECEMBER 31, 1996 DESTINATION BY ORIGIN AREAS ORIGIN BEFORE TAXES(2) ASSETS - -------------------------- ------------ --------- ---------- --------- --------------- -------- Switzerland(1)............................ $ 8,415 $ 15,892 $39,570 $ 55,462 $(108,865) $432,387 Germany................................... 29,688 29,117 10,965 40,082 (6,041) 170,845 Other Europe.............................. 58,598 59,688 485 60,173 (5,809) 126,063 -------- -------- ------- -------- --------- -------- Total Europe.............................. 96,701 104,697 51,020 155,717 (120,715) 729,295 United States............................. 56,405 64,109 6,731 70,840 (37,293) 477,762 Other Americas............................ 13,436 7,371 3 7,374 (446) 17,730 -------- -------- ------- -------- --------- -------- Total Americas............................ 69,841 71,480 6,734 78,214 (37,739) 495,492 Asia and other............................ 20,370 10,735 28 10,763 (2,267) 48,245 Eliminations.............................. -- -- (57,782) (57,782) 645 (501,144) -------- -------- ------- -------- --------- -------- Totals.................................... $186,912 $186,912 $ -- $186,912 $(160,076) $771,888 ======== ======== ======= ======== ========= ========
F-27 110 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 16. GEOGRAPHIC SEGMENT INFORMATION -- (CONTINUED)
TRANSFERS BETWEEN TOTAL NET EARNINGS NET SALES BY NET SALES GEOGRAPHIC SALES BY (LOSS) TOTAL TWELVE MONTHS ENDED DECEMBER 1, 1997 DESTINATION BY ORIGIN AREAS ORIGIN BEFORE TAXES(2) ASSETS - ------------------------------------ ------------- --------- ---------- --------- --------------- --------- Switzerland(1)................... $ 34,555 $ 69,700 $ 186,292 $255,992 $31,621 $430,436 Germany.......................... 115,665 123,382 51,502 174,884 5,519 144,660 Other Europe..................... 245,945 232,105 10,857 242,962 (16,441) 337,720 -------- -------- --------- --------- -------- --------- Total Europe..................... 396,165 425,187 248,651 673,838 20,699 912,816 United States.................... 297,688 335,630 32,009 367,639 (14,176) 589,775 Other Americas................... 71,403 37,330 165 37,495 (3,245) 32,941 -------- -------- --------- --------- -------- --------- Total Americas................... 369,091 372,960 32,174 405,134 (17,421) 622,716 Asia and other................... 113,159 80,268 1,834 82,102 1,413 63,453 Eliminations..................... -- -- (282,659) (282,659) (10,643) (849,672) -------- -------- --------- --------- -------- --------- Totals........................... $878,415 $878,415 $ -- $878,415 $(5,952) $749,313 ======== ======== ========= ========= ======== =========
- --------------- (1) Includes Corporate. (2) The effect of non-recurring Acquisition charges arising from in-process research and development projects ($114,100) and the revaluation of inventories to fair value ($32,200) by region are as follows: Europe...................................................... $108,100 Americas.................................................... 36,000 Asia/Rest of World.......................................... 2,200
F-28 111 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS UNLESS OTHERWISE STATED) 17. QUARTERLY FINANCIAL DATA (UNAUDITED) Quarterly financial data for the years 1996 and 1997 are as follows:
FIRST SECOND THIRD FOURTH QUARTER QUARTER(1) QUARTER QUARTER(2) -------- ---------- -------- ---------- 1996 Net sales......................................... $201,373 $222,429 $200,391 $224,940 Gross profit...................................... 80,394 91,204 79,013 66,463 Net income (loss)................................. 929 9,078 3,129 (157,721) ======== ======== ======== ======== 1997 Net sales......................................... $197,402 $220,412 $215,929 $244,672 Gross profit...................................... 83,282 97,016 94,365 110,272 Net income (loss) before extraordinary items...... (1,122) (25,613) (284) 3,110 Extraordinary items............................... -- (9,552) -- (31,645) -------- -------- -------- -------- Net income (loss)................................. $ (1,122) $(35,165) $ (284) $(28,535) ======== ======== ======== ======== Basic earnings (loss) per common share: Earnings (loss) before extraordinary items...... $ (0.04) $ (0.84) $ (0.01) $ 0.09 Extraordinary items............................. -- (0.31) -- (0.92) -------- -------- -------- -------- Net loss........................................ $ (0.04) $ (1.15) $ (0.01) $ (0.83) ======== ======== ======== ======== Diluted earnings (loss) per common share: Earnings (loss) before extraordinary items...... $ (0.04) $ (0.84) $ (0.01) $ 0.09 Extraordinary items............................. -- (0.31) -- (0.88) -------- -------- -------- -------- Net loss........................................ $ (0.04) $ (1.15) $ (0.01) $ (0.79) ======== ======== ======== ======== Market price per share(3): High............................................ -- -- -- $ 18 3/4 Low............................................. -- -- -- $ 14 1/16
- --------------- (1) The financial data for the second quarter of 1997 includes charges in connection with the Safeline acquisition, as discussed in Note 3, for the sale of inventories revalued to fair value of $2,054 and in-process research and development of $29,959. The second quarter also includes extraordinary charges for the write-off of capitalized debt issuance fees of $9,552 as discussed in Note 9. (2) The financial data for the fourth quarter of 1996 represents the Company's combined results of operations for the period from October 1, 1996 to October 14, 1996 and for the period from October 15, 1996 to December 31, 1996. The period from October 15, 1996 to December 31, 1996 includes charges in connection with the Acquisition, as discussed in Note 1, for the sale of inventories revalued to fair value of $32,194 and in-process research and development of $114,070. The fourth quarter 1997 data includes charges for the early extinguishment of debt and the write-off of capitalized debt issuance fees totaling $31,645 as further discussed in Note 9. (3) The Company's shares began trading on the New York Stock Exchange on November 14, 1997. F-29 112 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") INTERIM CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1997 AND SEPTEMBER 30, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, SEPTEMBER 30, 1997 1998 ------------ ------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents................................. $ 23,566 $ 15,604 Trade accounts receivable, net............................ 153,619 164,923 Inventories............................................... 101,047 109,970 Deferred taxes............................................ 7,584 8,930 Other current assets and prepaid expenses................. 24,066 21,788 -------- -------- Total current assets................................... 309,882 321,215 Property, plant and equipment, net.......................... 235,262 228,796 Excess of cost over net assets acquired, net................ 183,318 190,997 Non-current deferred taxes.................................. 5,045 5,232 Other assets................................................ 15,806 17,981 -------- -------- Total assets........................................... $749,313 $764,221 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable.................................... $ 39,342 $ 37,187 Accrued and other liabilities............................. 80,844 85,681 Accrued compensation and related items.................... 43,214 43,836 Taxes payable............................................. 33,267 33,895 Deferred taxes............................................ 10,486 10,516 Short-term borrowings and current maturities of long-term debt................................................... 56,430 58,201 -------- -------- Total current liabilities.............................. 263,583 269,316 Long-term debt.............................................. 340,334 320,193 Non-current deferred taxes.................................. 25,437 26,332 Other non-current liabilities............................... 91,011 101,984 -------- -------- Total liabilities...................................... 720,365 717,825 Minority interest........................................... 3,549 3,492 Shareholders' equity: Preferred stock, $0.01 par value per share; authorized 10,000,000 shares...................................... -- -- Common stock, $0.01 par value per share; authorized 125,000,000 shares; issued 38,355,926 shares (excluding 64,467 shares held in treasury) at September 30, 1998; and issued 38,336,014 shares (excluding 64,467 shares held in treasury) at December 31, 1997................. 383 384 Additional paid-in capital................................ 284,630 284,787 Accumulated deficit....................................... (224,152) (203,387) Accumulated other comprehensive loss...................... (35,462) (38,880) -------- -------- Total shareholders' equity............................. 25,399 42,904 Commitments and contingencies............................... -------- -------- Total liabilities and shareholders' equity............. $749,313 $764,221 ======== ========
See the accompanying notes to the interim consolidated financial statements F-30 113 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, SEPTEMBER 30, 1997 1998 ------------- ------------- (UNAUDITED) (UNAUDITED) Net sales................................................... $633,743 $669,747 Cost of sales............................................... 359,080 374,594 ----------- ----------- Gross profit.............................................. 274,663 295,153 Research and development.................................... 34,494 33,551 Selling, general and administrative......................... 189,594 192,844 Amortization................................................ 4,449 5,473 Purchased research and development.......................... 29,959 9,976 Interest expense............................................ 28,199 17,153 Other charges, net.......................................... 7,316 1,606 ----------- ----------- Earnings (loss) before taxes, minority interest and extraordinary item..................................... (19,348) 34,550 Provision for taxes......................................... 7,296 13,552 Minority interest........................................... 375 233 ----------- ----------- Earnings (loss) before extraordinary item................. (27,019) 20,765 Extraordinary item -- debt extinguishment................... (9,552) -- ----------- ----------- Net earnings (loss)....................................... $(36,571) $ 20,765 =========== =========== Basic earnings (loss) per common share: Net earnings (loss) before extraordinary item............. $ (0.88) $ 0.54 Extraordinary item........................................ (0.31) -- ----------- ----------- Net earnings (loss)....................................... $ (1.19) $ 0.54 =========== =========== Weighted average number of common shares.................. 30,686,189 38,342,651 Diluted earnings (loss) per common share: Net earnings (loss) before extraordinary item............. $ (0.88) $ 0.51 Extraordinary item........................................ (0.31) -- ----------- ----------- Net earnings (loss)....................................... $ (1.19) $ 0.51 =========== =========== Weighted average number of common shares.................. 30,686,189 40,619,050
See the accompanying notes to the interim consolidated financial statements F-31 114 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
COMMON STOCK ACCUMULATED ALL CLASSES ADDITIONAL OTHER ------------------- PAID-IN ACCUMULATED COMPREHENSIVE SHARES AMOUNT CAPITAL DEFICIT LOSS TOTAL ---------- ------ ---------- ----------- ------------- -------- Balance at December 31, 1996.... 2,438,514 $ 25 $188,084 $(159,046) $(16,637) $ 12,426 New issuance of Class A and C shares........................ 3,857 -- 300 -- -- 300 Purchase of Class A and C treasury stock................ (5,123) -- (398) -- -- (398) Comprehensive loss: Net loss...................... -- -- -- (36,571) -- (36,571) Change in currency translation adjustment................. -- -- -- -- (12,018) (12,018) -------- Comprehensive loss.............. (48,589) ---------- ---- -------- --------- -------- -------- Balance at September 30, 1997... 2,437,248 $ 25 $187,986 $(195,617) $(28,655) $(36,261) ========== ==== ======== ========= ======== ======== Balance at December 31, 1997.... 38,336,014 $383 $284,630 $(224,152) $(35,462) $ 25,399 Exercise of stock options....... 19,912 1 157 -- -- 158 Comprehensive income: Net earnings.................. -- -- -- 20,765 -- 20,765 Change in currency translation adjustment................. -- -- -- -- (3,418) (3,418) -------- Comprehensive income............ 17,347 ---------- ---- -------- --------- -------- -------- Balance at September 30, 1998... 38,355,926 $384 $284,787 $(203,387) $(38,880) $ 42,904 ========== ==== ======== ========= ======== ========
See the accompanying notes to the interim consolidated financial statements F-32 115 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998 (IN THOUSANDS)
SEPTEMBER 30, SEPTEMBER 30, 1997 1998 ------------- ------------- (UNAUDITED) (UNAUDITED) Cash flows from operating activities: Net earnings (loss)....................................... $(36,571) $20,765 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation........................................... 17,784 18,022 Amortization........................................... 4,449 5,473 Charges for purchased research and development and cost of sales associated with revaluation of inventories... 32,013 9,976 Extraordinary item-debt extinguishment................. 9,552 -- Net gain on disposal of long-term assets............... (126) (2,495) Deferred taxes......................................... (6,804) (883) Minority interest...................................... 375 233 Increase (decrease) in cash resulting from changes in: Trade accounts receivable, net......................... (920) (5,681) Inventories............................................ (4,715) (4,170) Other current assets................................... (3,404) 3,040 Trade accounts payable................................. (7,344) (3,468) Accruals and other liabilities, net.................... 25,987 (2,272) -------- ------- Net cash provided by operating activities............ 30,276 38,540 -------- ------- Cash flows from investing activities: Proceeds from sale of property, plant and equipment....... 15,913 15,938 Purchase of property, plant and equipment................. (13,299) (17,348) Acquisitions.............................................. (74,908) (14,945) Other investing activities................................ (6,679) (885) -------- ------- Net cash used in investing activities................ (78,973) (17,240) -------- ------- Cash flows from financing activities: Proceeds from borrowings.................................. 314,657 20,035 Repayments of borrowings.................................. (289,392) (49,513) New issuance of shares.................................... 300 158 Purchase of treasury stock................................ (398) -- -------- ------- Net cash provided by (used in) financing activities.......................................... 25,167 (29,320) -------- ------- Effect of exchange rate changes on cash and cash equivalents............................................... (4,008) 58 -------- ------- Net decrease in cash and cash equivalents................... (27,538) (7,962) Cash and cash equivalents: Beginning of period....................................... 60,696 23,566 -------- ------- End of period............................................. $ 33,158 $15,604 ======== =======
See the accompanying notes to the interim consolidated financial statements F-33 116 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE DATA) 1. BASIS OF PRESENTATION Mettler-Toledo International Inc. ("Mettler Toledo" or the "Company"), is a global supplier of precision instruments and is a manufacturer and marketer of weighing instruments for use in laboratory, industrial and food retailing applications. The Company also manufactures and sells certain related analytical and measurement technologies. The Company's manufacturing facilities are located in Switzerland, the United States, Germany, the United Kingdom and China. The Company's principal executive offices are located in Greifensee, Switzerland. The accompanying interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America on a basis which reflects the interim consolidated financial statements of the Company. The interim consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The interim consolidated financial statements as of September 30, 1998 and for the nine month periods ended September 30, 1997 and 1998 should be read in conjunction with the December 31, 1996 and 1997 consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. The accompanying interim consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) which, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. Operating results for the nine months ended September 30, 1998 are not necessarily indicative of the results to be expected for the full year ending December 31, 1998. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES Inventories are valued at the lower of cost or market. Cost, which includes direct materials, labor and overhead plus indirect overhead, is determined using either the first in, first out (FIFO) or weighted average cost methods and to a lesser extent the last in, first out (LIFO) method. Inventories consisted of the following at December 31, 1997 and September 30, 1998:
DECEMBER 31, SEPTEMBER 30, 1997 1998 ------------ ------------- Raw materials and parts..................................... $ 42,435 $ 42,726 Work in progress............................................ 29,746 34,940 Finished goods.............................................. 28,968 32,357 -------- -------- 101,149 110,023 LIFO reserve................................................ (102) (53) -------- -------- $101,047 $109,970 ======== ========
F-34 117 METTLER-TOLEDO INTERNATIONAL INC. (FORMERLY "MT INVESTORS INC.") NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE DATA) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) EARNINGS (LOSS) PER COMMON SHARE Effective December 31, 1997, the Company adopted the Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share." Accordingly, basic and diluted earnings (loss) per common share data for each period presented have been determined in accordance with the provisions of SFAS 128. In accordance with the treasury stock method, the Company has included 2,276,399 and 2,260,600 equivalent shares related to 4,282,718 outstanding options to purchase shares of common stock, as described in Note 11 in the Company's Annual Report on Form 10-K for the year ended December 31, 1997, in the calculation of diluted weighted average number of common shares for the nine month period ended September 30, 1998. Such common stock equivalents were not included in the computation of diluted loss per common share for the period ended September 30, 1997, as the effect is antidilutive. The Company retroactively adjusted its weighted average common shares for the purpose of the basic and diluted loss per common share computations for the 1997 period pursuant to SFAS 128 and Securities and Exchange Commission Staff Accounting Bulletin No. 98 issued in February 1998. REPORTING COMPREHENSIVE INCOME Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income." SFAS 130 requires that changes in the amounts of certain items, including foreign currency translation adjustments, be shown in the financial statements. The Company has displayed comprehensive income and its components in the Interim Consolidated Statements of Shareholders' Equity. Prior year financial statements have been restated to reflect the application of SFAS 130 as required by the standard. The adoption of SFAS 130 did not have a material effect on the Company's consolidated financial statements. 3. BUSINESS COMBINATION In July 1998, the Company acquired Bohdan Automation Inc., a leading supplier of laboratory automation and automated synthesis products. The Company incurred a charge of $10.0 million immediately following the acquisition based upon an independent valuation for purchased research and development costs for products being developed that have not established technological feasibility as of the date of acquisition which, if unsuccessful, have no alternative future use in research and development activities or otherwise. The independent valuation of the purchased research and development costs has been based upon a "stage completion" approach to allocate value associated with the research and development projects between the completed portion and the portion to be completed by the Company. This "stage completion" approach is consistent with recent guidance provided in a letter from the SEC Chief Accountant to the AICPA SEC Regulations Committee. The Company believes the independent valuation for purchased research and development costs was calculated in accordance with Statement of Financial Accounting Standards No. 2, "Accounting for Research and Development Costs," as interpreted by FASB Interpretation No. 4 and recent SEC guidance. The Company expects that the projects underlying these research and development efforts will be substantially complete over the next two years. 4. FINANCIAL INSTRUMENTS The Company has continued to designate certain of its Swiss franc debt as a hedge of its net investments. In this respect, during 1998 the Company has also entered into certain forward contracts maturing in October 1998 to sell SFr 61.4 million (approximately $44.6 million at September 30, 1998). Any changes in the fair value of the forward contracts and the debt are recorded in comprehensive income and offset changes in the translated value of the net investments which they hedge. F-35 118 [This page intentionally left blank] 119 [This page intentionally left blank] 120 [This page intentionally left blank] 121 [The inside back cover contains a picture and captions as described below] Sustained technology leadership [Photograph of a MonoBloc(TM) weighing sensor] METTLER TOLEDO'S new MonoBloc(TM) weighing sensor reduces manufacturing costs as well as the time and expense of design changes. [Mettler-Toledo logotype] 122 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 5,587,000 SHARES METTLER-TOLEDO INTERNATIONAL INC. COMMON STOCK ------------------------ PROSPECTUS ------------------------ MERRILL LYNCH & CO. BT ALEX. BROWN CREDIT SUISSE FIRST BOSTON GOLDMAN, SACHS & CO. J.P. MORGAN & CO. , 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 123 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS] SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED JANUARY 6, 1999 PROSPECTUS 5,587,000 SHARES METTLER-TOLEDO INTERNATIONAL INC. COMMON STOCK ----------------------- METTLER.LOGO The selling shareholders of Mettler-Toledo International Inc. are offering and selling 5,587,000 shares of common stock. None of our directors, executive officers or employees is selling shares in this offering, and neither we nor they will receive any proceeds from the sale of the shares. The underwriters have agreed to pay certain of our expenses in connection with the offerings estimated at $ . The international managers are offering 1,117,400 shares outside the United States and Canada and the U.S. underwriters are offering 4,469,600 shares in the United States and Canada. The common stock trades on the New York Stock Exchange under the symbol "MTD." On January 5, 1999, the last sale price of the common stock as reported on the New York Stock Exchange was $27 1/4 per share. INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE "RISK FACTORS" SECTION BEGINNING ON PAGE 13 OF THIS PROSPECTUS. -----------------------
Per Share Total --------- ----- Public Offering Price...................................... $ $ Underwriting Discount...................................... $ $ Proceeds to Selling Shareholders........................... $ $
The international managers may also purchase up to an additional 167,610 shares from the selling shareholders at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over-allotments. The U.S. underwriters may similarly purchase up to an aggregate of an additional 670,440 shares from the selling shareholders. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The shares of common stock will be ready for delivery in New York, New York on or about , 1999. ----------------------- MERRILL LYNCH INTERNATIONAL BT ALEX. BROWN INTERNATIONAL CREDIT SUISSE FIRST BOSTON GOLDMAN SACHS INTERNATIONAL J.P. MORGAN SECURITIES LTD. ----------------------- The date of this prospectus is , 1999. 124 [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS] TABLE OF CONTENTS
PAGE ---- Summary..................................................... 5 Risk Factors................................................ 13 Use of Proceeds............................................. 19 Dividend Policy............................................. 19 Price Range of Common Stock................................. 19 Capitalization.............................................. 20 Selected Historical Financial Information................... 20 Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 23 Industry.................................................... 39 Business.................................................... 42 Management.................................................. 59 Certain Relationships and Related Transactions.............. 64 Principal and Selling Shareholders.......................... 65 Description of Credit Agreement............................. 67 Description of Capital Stock................................ 69 Shares Eligible for Future Sale............................. 72 Certain United States Federal Tax Considerations for Non-United States Holders................................. 73 Underwriting................................................ 76 Legal Matters............................................... 79 Independent Auditors........................................ 79 Where You Can Find More Information......................... 79 Incorporation of Certain Documents by Reference............. 80 Index to Consolidated Financial Statements.................. F-1
------------------------- FORWARD-LOOKING STATEMENTS This prospectus includes forward-looking statements based on our current expectations and projections about future events. These forward-looking statements are subject to a number of risks and uncertainties which could cause our actual results to differ materially from historical results or those anticipated and certain of which are beyond our control. The words "believe," "expect," "anticipate" and similar expressions identify forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. See "Risk Factors -- Forward-Looking Statements and Associated Risks" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." ------------------------- Mettler-Toledo(R), Mettler(R), Ingold(R), Garvens(R), Ohaus(R), DeltaRange(R), DigiTol(R), Mentor SC(R), PILAR(R), Safeline(R), Spider(R), TrimWeigh(R) and TRUCKMATE(R) are our registered trademarks and MonoBloc(TM), MultiRange(TM), Signature(TM) and Powerphase(TM) are our trademarks. 3 125 [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS] UNDERWRITING Merrill Lynch International, BT Alex. Brown International, a division of Bankers Trust International PLC, Credit Suisse First Boston (Europe) Limited, Goldman Sachs International and J.P. Morgan Securities Ltd. are acting as the international managers (the "International Managers") for the international offering. Subject to the terms and conditions set forth in an international purchase agreement (the "International Purchase Agreement") among the Company, the selling shareholders and the International Managers, and concurrently with the sale of 4,469,600 shares of common stock to the U.S. Underwriters (as defined below), the selling shareholders have agreed to sell to the International Managers, and each of the International Managers severally and not jointly has agreed to purchase from the selling shareholders the number of shares of common stock set forth opposite its name below.
INTERNATIONAL MANAGER NUMBER OF SHARES - --------------------- ---------------- Merrill Lynch International................................. BT Alex. Brown International, a division of Bankers Trust International PLC........... Credit Suisse First Boston (Europe) Limited................. Goldman Sachs International................................. J.P. Morgan Securities Ltd.................................. --------- Total.......................................... 1,117,400 =========
The Company and the selling shareholders have also entered into a U.S. purchase agreement (the "U.S. Purchase Agreement") with Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), BT Alex. Brown Incorporated, Credit Suisse First Boston Corporation, Goldman, Sachs & Co. and J.P. Morgan Securities Inc. in the United States and Canada (the "U.S. Underwriters" and, together with the International Managers, the "Underwriters"). Subject to the terms and conditions set forth in the U.S. Purchase Agreement, and concurrently with the sale of 1,117,400 shares of common stock to the International Managers pursuant to the International Purchase Agreement, the selling shareholders have agreed to sell to the U.S. Underwriters, and the U.S. Underwriters severally have agreed to purchase from the selling shareholders, an aggregate of 4,469,600 shares of common stock. The initial public offering price per share and the total underwriting discount per share of common stock are identical under the International Purchase Agreement and the U.S. Purchase Agreement. In the International Purchase Agreement and the U.S. Purchase Agreement, the several International Managers and the several U.S. Underwriters, respectively, have agreed, subject to the terms and conditions set forth therein, to purchase all of the shares of common stock being sold pursuant to each such agreement if any of the shares of common stock being sold pursuant to such agreement are purchased. Under certain circumstances, under the International Purchase Agreement and the U.S. Purchase Agreement, the commitments of nondefaulting Underwriters may be increased. The closings with respect to the sale of shares of common stock to be purchased by the International Managers and the U.S. Underwriters are conditioned upon one another. The Lead Managers have advised the Company and the selling shareholders that the International Managers propose initially to offer the shares of common stock to the public at the initial public offering price set forth on the cover page of this prospectus, and to certain dealers at such price less a concession not in excess of $ per share of common stock. The International Managers may allow, and such dealers may reallow, a discount not in excess of $ per share of common stock on sales to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed. The selling shareholders also have granted options to the International Managers, exercisable for 30 days after the date of this prospectus, to purchase up to an aggregate of 167,610 additional shares of common stock at the initial public offering price set forth on the cover page of this prospectus, less the 76 126 [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS] underwriting discount. The International Managers may exercise these options solely to cover over-allotments, if any, made on the sale of the common stock offered hereby. To the extent that the International Managers exercise these options, each International Manager will be obligated, subject to certain conditions, to purchase a number of additional shares of common stock proportionate to such International Manager's initial amount reflected in the foregoing table. The selling shareholders also have granted options to the U.S. Underwriters, exercisable for 30 days after the date of this prospectus, to purchase up to an aggregate of 670,440 additional shares of common stock to cover over-allotments, if any, on terms similar to those granted to the International Managers. The following table shows the per share and total underwriting discounts and commissions to be paid by the selling shareholders to the Underwriters. This information is presented assuming either no exercise or full exercise by the Underwriters of their over-allotment options.
PER SHARE WITHOUT OPTION WITH OPTION --------- -------------- ----------- Public Offering Price................................. $ $ $ Underwriting Discount................................. $ $ $ Proceeds to Selling Stockholders...................... $ $ $
The Underwriters have agreed to pay certain expenses of the Company incurred in connection with the offerings estimated at $ . The shares of common stock are being offered by the several Underwriters, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of certain legal matters by counsel for the Underwriters and certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. The Company, the Company's executive officers and directors and the selling shareholders, who will collectively hold, after the offerings, 4,811,001 shares of common stock (assuming no exercise of the Underwriters' over-allotment options) will agree, subject to certain exceptions, not to directly or indirectly (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose of or transfer any shares of common stock or securities convertible into or exchangeable or exercisable for common stock or file a registration statement under the Securities Act with respect to the foregoing or (ii) enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of the common stock whether any such swap or transaction is to be settled by delivery of common stock or other securities, in cash or otherwise, without the prior written consent of Merrill Lynch on behalf of the Underwriters for a period of 90 days after the date of this prospectus. Certain other shareholders, who collectively hold a total of 3,330,863 shares, have similarly agreed not to dispose of or transfer shares without the Company's consent until March 1, 1999. See "Shares Eligible for Future Sale." The International Managers and the U.S. Underwriters have entered into an intersyndicate agreement (the "Intersyndicate Agreement") that provides for the coordination of their activities. Pursuant to the Intersyndicate Agreement, the International Managers and the U.S. Underwriters are permitted to sell shares of common stock to each other for purposes of resale at the initial public offering price, less an amount not greater than the selling concession. Under the terms of the Intersyndicate Agreement, the U.S. Underwriters and any dealer to whom they sell shares of common stock will not offer to sell or sell shares of common stock to persons who are non-U.S. or non-Canadian persons or to persons they believe intend to resell to persons who are non-U.S. or non-Canadian persons, and the International Managers and any dealer to whom they sell shares of common stock will not offer to sell or sell shares of common stock to U.S. persons or to Canadian persons or to persons they believe intend to resell to U.S. or Canadian persons, except in the case of transactions pursuant to the Intersyndicate Agreement. 77 127 [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS] The Company and the selling shareholders have agreed to indemnify the International Managers and the U.S. Underwriters against certain liabilities, including certain liabilities under the Securities Act, or to contribute to payments the U.S. Underwriters and the International Managers may be required to make in respect thereof. Until the distribution of the common stock is completed, rules of the Securities and Exchange Commission may limit the ability of the Underwriters and certain selling group members to bid for and purchase the common stock. As an exception to these rules, the U.S. Underwriters are permitted to engage in certain transactions that stabilize the price of the common stock. Such transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock. If the Underwriters create a short position in the common stock in connection with the offerings, i.e., if they sell more shares of common stock than are set forth on the cover page of this prospectus, the U.S. Underwriters may reduce that short position by purchasing common stock in the open market. The U.S. Underwriters may also elect to reduce any short position by exercising all or part of the over-allotment options described above. In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases. Neither the Company nor any of the Underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither the Company nor any of the Underwriters makes any representation that the U.S. Underwriters will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice. Each International Manager has agreed that (i) it has not offered or sold and, prior to the expiration of the period of six months from the closing date, will not offer or sell any shares of common stock to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which do not constitute an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the common stock in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issuance of common stock to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996, as amended, or is a person to whom such document may otherwise lawfully be issued or passed on. No action has been or will be taken in any jurisdiction (except in the United States) that would permit a public offering of the shares of common stock, or the possession, circulation or distribution of this prospectus or any other material relating to the Company, the selling shareholders or shares of common stock in any jurisdiction where action for that purpose is required. Accordingly, the shares of common stock may not be offered or sold, directly or indirectly, and neither this prospectus nor any other offering material or advertisements in connection with the shares of common stock may be distributed or published, in or from any country or jurisdiction except in compliance with any applicable rules and regulations of any such country or jurisdiction. Purchasers of the shares offered hereby may be required to pay stamp taxes and other charges in accordance with the laws and practices of the country of purchase in addition to the offering price set forth on the cover page hereof. The Underwriters have from time to time provided investment banking financial advisory services to the Company and AEA Investors and its affiliates, for which they have received customary compensation, and may continue to do so in the future. Merrill Lynch served as lead manager and Credit Suisse First 78 128 [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS] Boston Corporation served as co-manager of the offering of subordinated notes of the Company in October 1996, Merrill Lynch served as the Arranger and Documentation Agent and an affiliate of Credit Suisse First Boston Corporation served as co-agent in connection with the Company's previous credit facility and the credit agreement for which they received customary compensation. An affiliate of Credit Suisse First Boston Corporation and Merrill Lynch and its affiliates were lenders under the Company's previous credit facility and are lenders under the credit agreement. Merrill Lynch, BT Alex. Brown Incorporated, Credit Suisse First Boston Corporation and Goldman, Sachs & Co. and certain of their affiliates acted as underwriters in connection with the Company's IPO and June 1998 secondary offering. LEGAL MATTERS Certain legal matters with respect to the validity of the common stock offered hereby will be passed upon for the Company by Fried, Frank, Harris, Shriver & Jacobson (a partnership including professional corporations), London, England. Certain legal matters relating to the offerings will be passed upon for the Underwriters by Debevoise & Plimpton, New York, New York. Certain partners of Fried, Frank, Harris, Shriver & Jacobson own common stock of the Company. INDEPENDENT AUDITORS The consolidated financial statements of Mettler-Toledo International Inc. and subsidiaries (as defined in Note 1 to the audited consolidated financial statements included as part of this prospectus) as of December 31, 1996 and 1997 and for the year ended December 31, 1995, for the period January 1, 1996 to October 14, 1996, for the period October 15, 1996 to December 31, 1996 and for the year ended December 31, 1997, included herein and incorporated in this prospectus by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, have been audited by KPMG Fides Peat, independent auditors, as set forth in their reports appearing elsewhere and have been so included and incorporated in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION We have filed with the U.S. Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-3 with respect to the common stock offered hereby under the Securities Act. This prospectus, which constitutes part of the Registration Statement, does not contain all of the information set forth in the Registration Statement, certain items of which are omitted as permitted by the rules and regulations of the Commission. For further information pertaining to Mettler-Toledo and the common stock offered hereby, please see the Registration Statement, including the exhibits thereto and the financial statements, notes and schedules filed as a part thereof. Statements contained in this prospectus regarding the contents of any contract or other document referred to herein or therein are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement or such other document, each such statement being qualified in all respects by such reference. We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, we file reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information, as well as the Registration Statement and the exhibits and schedules thereto, may be inspected, without charge, at the public reference facility maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices located at Seven World Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may also be obtained from the Public 79 129 [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS] Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such materials can also be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005 or on the Commission's site on the Internet at http://www.sec.gov. You can call the SEC at 1-800-SEC-0330 for further information on its public reference facilities. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission pursuant to the Exchange Act (File No. 0-22493) are incorporated herein by reference: (1) The Company's Annual Report on Form 10-K for the year ended December 31, 1997, as amended by Amendment No. 1 to the Company's Annual Report on Form 10K, filed December 23, 1998; (2) The Company's Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 1998, June 30, 1998 and September 30, 1998; and (3) The description of the common stock contained in the Company's Registration Statement on Form 8-A, as amended, filed with the Commission on December 16, 1997, which incorporates by reference the description of the Company's common stock contained in its Registration Statement, as amended, on Form S-1 (Reg. No. 333-35597) filed with the Commission on November 10, 1997. All other documents filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this prospectus and prior to the termination of these offerings shall be deemed to be incorporated by reference herein and to be a part hereof from the respective dates of the filing of such reports and documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus. Upon request, we will provide without charge to any person to whom this prospectus is delivered, a copy of any and all information incorporated by reference in this prospectus, other than exhibits to such information (unless such exhibits are specifically incorporated by reference in such documents). If you wish to request information that has been incorporated by reference, please direct your request to William P. Donnelly, Mettler-Toledo International Inc., Im Langacher, P.O. Box MT-100, CH-8606 Greifensee, Switzerland (telephone 011-41-1-944-22-11). 80 130 [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 5,587,000 SHARES METTLER-TOLEDO INTERNATIONAL INC. COMMON STOCK ----------------------- PROSPECTUS ----------------------- MERRILL LYNCH INTERNATIONAL BT ALEX. BROWN INTERNATIONAL CREDIT SUISSE FIRST BOSTON GOLDMAN SACHS INTERNATIONAL J.P. MORGAN SECURITIES LTD. , 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 131 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION* The following table shows the expenses, other than underwriting discounts and commissions, to be incurred by the Company in connection with the sale and distribution of securities being registered by the Company. SEC Registration Fee........................................ $ 40,868 NASD Filing Fee............................................. 15,201 Blue Sky Fees and Expenses.................................. 5,000 Legal Fees and Expenses..................................... 300,000 Accounting Fees and Expenses................................ 50,000 Printing Expenses........................................... 200,000 Miscellaneous Expenses...................................... 213,931 -------- Total..................................................... $825,000 ========
* Except for the SEC registration fee and the NASD Filing Fee, all of the foregoing expenses have been estimated. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Company, as a Delaware corporation, is empowered by Section 145 of the Delaware General Corporation Law (DGCL), subject to the procedures and limitations stated therein, to indemnify any person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with any threatened, pending or completed action, suit or proceeding in which such person is made or threatened to be made a party by reason of his being or having been a director, officer, employee or agent of the Company or his serving at the request of the Company as a director, officer, employee or agent of another company or other entity. The statute provides that indemnification pursuant to its provisions is not exclusive of other rights of indemnification to which a person may be entitled under any by-law, agreement, vote of stockholders or disinterested directors, or otherwise. The Amended By-laws provide for indemnification by the Company of its directors and officers to the full extent authorized by the DGCL. Pursuant to Section 145 of the DGCL, the Company has purchased insurance on behalf of its present and former directors and officers against liabilities asserted against and incurred by them in such capacity or arising out of their status as such. Pursuant to specific authority granted by Section 102 of the DGCL, the Amended and Restated Certificate of Incorporation contains the following provision regarding indemnification of directors: "To the fullest extent permitted by the Delaware General Corporation Law as the same exists or may hereafter be amended, a Director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director." The Amended By-laws contain the following provision regarding indemnification of directors and officers: "The Corporation shall indemnify to the full extent authorized by law any person made or threatened to be made a party to an action, suit or proceeding, whether criminal, civil administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director, officer, employee or agent of the Corporation or is or was serving, at the request of the Corporation, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise." II-1 132 The Company has entered into agreements to provide indemnification for their directors and certain officers in addition to the indemnification provided for in the Amended and Restated Certificate of Incorporation and Amended By-laws. These agreements, among other things, indemnify the directors, to the fullest extent provided by Delaware law, for certain expenses (including attorneys' fees), losses, claims, liabilities, judgments, fines and settlement amounts incurred by such indemnitee in any action or proceeding, including any action by or in the right of the Company, on account of services as a director or officer of any affiliate of the Company, or as a director or officer of any other company or enterprise that the indemnitee provides services to at the request of the Company. The Company has agreed to indemnify employees of AEA Investors who serve as directors of the Company. ITEM 16. EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 1.1 -- Form of U.S. Purchase Agreement. 1.2 -- Form of International Purchase Agreement. 2.1 -- Stock Purchase Agreement between AEA-MT Inc., AG fur Prazisionsinstrumente and Ciba-Geigy AG, as amended (Filed as Exhibit 2.1 to the Registration Statement, as amended, on Form S-1, of the Company (Reg. No. 33-09621) and incorporated herein by reference). 2.2 -- Share Sale and Purchase Agreement relating to the acquisition of the entire issued share capital of Safeline Limited (Filed as Exhibit 2 to the Current Report on Form 8-K of Mettler-Toledo Holding Inc. dated June 3, 1997 and incorporated herein by reference). 4.3 -- Specimen Form of the Company's Common Stock Certificate Filed as Exhibit 4.3 to the Registration Statement, as amended, on Form S-1 of the Company (Reg. No. 333-35597) and incorporated herein by reference). 5.1 -- Opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel to the Company, as to the legality of the securities being registered. 23.1 -- Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5.1). 23.2 -- Consent of KPMG Fides Peat, independent auditors. 24.1** -- Powers of Attorney.
- --------------- ** Previously filed ITEM 17. UNDERTAKINGS Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of Prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of Prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. II-2 133 (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (4) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-3 134 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of New York, State of New York, on the 6th day of January, 1999. METTLER-TOLEDO INTERNATIONAL INC. By: /s/ WILLIAM P. DONNELLY ------------------------------------ William P. Donnelly Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE --------- ----- ---- * President and Chief Executive Officer January 6, 1999 - --------------------------------------- (Principal Executive Officer), Chairman of Robert F. Spoerry the Board /s/ WILLIAM P. DONNELLY Vice President and Chief Financial Officer January 6, 1999 - --------------------------------------- William P. Donnelly * Director January 6, 1999 - --------------------------------------- Philip Caldwell * Director January 6, 1999 - --------------------------------------- Reginald H. Jones * Director January 6, 1999 - --------------------------------------- John D. Macomber * Director January 6, 1999 - --------------------------------------- Laurence Z. Y. Moh * Director January 6, 1999 - --------------------------------------- Thomas P. Salice *By: /s/ WILLIAM P. DONNELLY ---------------------------------- William P. Donnelly Attorney-In-Fact
II-4 135 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 1.1 -- Form of U.S. Purchase Agreement. 1.2 -- Form of International Purchase Agreement. 2.1 -- Stock Purchase Agreement between AEA-MT Inc., AG fur Prazisionsinstrumente and Ciba-Geigy AG, as amended (Filed as Exhibit 2.1 to the Registration Statement, as amended, on Form S-1, of the Company (Reg. No. 33-09621) and incorporated herein by reference). 2.2 -- Share Sale and Purchase Agreement relating to the acquisition of the entire issued share capital of Safeline Limited (Filed as Exhibit 2 to the Current Report on Form 8-K of Meter-Toledo Holding Inc. dated June 3, 1997 and incorporated herein by reference). 4.3 -- Specimen Form of the Company's Common Stock Certificate Filed as Exhibit 4.3 to the Registration Statement, as amended, on Form S-1 of the Company (Reg. No. 333-35597) and incorporated herein by reference). 5.1 -- Opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel to the Company, as to the legality of the securities being registered. 23.1 -- Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5.1). 23.2 -- Consent of KPMG Fides Peat, independent auditors. 24.1** -- Powers of Attorney.
- --------------- ** Previously filed EX-1.1 2 FORM OF U.S. PURCHASE AGREEMENT 1 Exhibit 1.1 Draft - December 1, 1998 METTLER-TOLEDO INTERNATIONAL INC. (a Delaware corporation) ___________ Shares of Common Stock U.S. PURCHASE AGREEMENT Dated: ___________, 199_ 2 TABLE OF CONTENTS U.S. PURCHASE AGREEMENT......................................................1 SECTION 1. Representations and Warranties................................3 (a) Representations and Warranties by the Company and Mettler.........3 (i) Compliance with Registration Requirements....................4 (ii) Independent Accountants.....................................4 (iii) Financial Statements.......................................5 (iv) No Material Adverse Change in Business......................5 (v) Good Standing................................................6 (vi) Good Standing of Subsidiaries...............................6 (vii) Capitalization.............................................6 (viii) Authorization of Agreement................................7 (ix) Description of Securities...................................7 (x) Absence of Defaults and Conflicts............................7 (xi) Absence of Labor Dispute....................................8 (xii) Absence of Proceedings.....................................8 (xiii) Accuracy of Exhibits......................................8 (xiv) Possession of Intellectual Property........................8 (xv) Absence of Further Requirements.............................9 (xvi) Possession of Licenses and Permits.........................9 (xvii) Title to Property.........................................9 (xviii) Investment Company Act..................................10 (xix) Environmental Laws........................................10 (xx) Registration Rights........................................11 (xxi) Taxes.....................................................11 (xxii) Accounting Controls......................................11 (xxiii) Insurance...............................................11 (xxiv) Stabilization or Manipulation............................12 (xxv) Certain Relationships.....................................12 (xxvi) No Offering Material.....................................12 (xxvii) Suppliers...............................................12 (b) Representations and Warranties by the Selling Shareholders.......12 (c) Officer's Certificates...........................................14 SECTION 2. Sale and Delivery to U.S. Underwriters; Closing..............15 (a) Initial Securities...............................................15 (b) Option Securities................................................15 (c) Payment..........................................................16 (d) Denominations; Registration......................................16 SECTION 3. Covenants of the Company.....................................16 (a) Compliance with Securities Regulations and Commission Requests..........................................17 (b) Filing of Amendments..............................................17 (c) Delivery of Registration Statements...............................17 (d) Delivery of Prospectuses..........................................17 i 3 (e) Continued Compliance with Securities Laws.........................18 (f) Blue Sky Qualifications...........................................18 (g) Rule 158..........................................................18 (h) Restriction on Sale of Securities.................................19 (i) Reporting Requirements............................................19 SECTION 4. Payment of Expenses..........................................19 (a) Expenses..........................................................19 (b) Expenses of the Selling Shareholders..............................20 (c) Termination of Agreement..........................................20 SECTION 5. Conditions of U.S. Underwriters' Obligations.................20 (a) Effectiveness of Registration Statement...........................20 (b) Opinion of Counsel for Company....................................21 (c) Opinion of German Counsel for the Company.........................21 (d) Opinion of Swiss Counsel for the Company..........................21 (e) Opinion of Christine J. Smith, Esq................................21 (f) Opinion of Counsel for the Selling Shareholders...................21 (g) Opinion of Counsel for U.S. Underwriters..........................22 (h) Officers' Certificate.............................................22 (i) Certificate of Selling Shareholders...............................22 (j) Litigation Certificate............................................22 (k) Accountant's Comfort Letter.......................................23 (l) Bring-down Comfort Letter.........................................23 (m) Approval of Listing...............................................23 (n) No Objection......................................................23 (o) Lock-up Agreements; Registration Rights...........................23 (p) Purchase of Initial International Securities......................23 (q) Conditions to Purchase of U.S. Option Securities..................23 (i) Officers' Certificate........................................24 (ii) Certificate of Selling Shareholder..........................24 (iii) Opinion of Counsel for Company.............................24 (iv) Opinion of Christine J. Smith, Esq..........................24 (v) Opinion of Counsel for Selling Shareholders..................24 (vi) Opinion of Counsel for U.S. Underwriters....................24 (vii) Opinion of German Counsel for Company......................24 (viii) Opinion of Swiss Counsel for Company......................25 (ix) Bring-down Comfort Letter...................................25 (x) Litigation Certificate......................................25 (r) Additional Documents..............................................25 (s) Termination of Agreement..........................................25 SECTION 6. Indemnification..............................................25 (a) Indemnification of U.S. Underwriters..............................25 (b) Indemnification of Selling Shareholders by the Company and Mettler......................................27 (c) Indemnification of Company, Directors and Officers and Selling Shareholders............................27 ii 4 (d) Actions against Parties; Notification.............................28 (e) Settlement without Consent if Failure to Reimburse................28 (f) Other Agreements with Respect to Indemnification..................28 SECTION 7. Contribution.................................................28 SECTION 8. Representations, Warranties and Agreements to Survive Delivery..........................................30 SECTION 9. Termination of Agreement.....................................30 (a) Termination; General..............................................30 (b) Liabilities.......................................................31 SECTION 10. Default by One or More of the U.S. Underwriters............31 SECTION 11. Default by one or more of the Selling Shareholders.........32 SECTION 12. Notices....................................................32 SECTION 13. Parties....................................................32 SECTION 14. GOVERNING LAW AND TIME.....................................33 SECTION 15. Effect of Headings.........................................33 SCHEDULES Schedule A - List of Underwriters...............................Sch A-1 Schedule B - List of Selling Shareholders.......................Sch B-1 Schedule C - Shares of Common Stock.............................Sch C-1 Schedule D - List of persons and entities subject to lock-up....Sch D-1 Schedule E - List of Selling Shareholders Delivering Opinions...Sch E-1 EXHIBITS Exhibit A - Form of Opinion of Company's Counsel....................A-1 Exhibit B - Form of Local Counsel Opinion...........................B-1 Exhibit C - Form of Opinion of Christine J. Smith, Esq..............C-1 Exhibit D - Form of Opinion of Selling Shareholders' Counsel........D-1 Exhibit E - Form of Litigation Certificate of the Chief Financial Officer and the General Counsel of the Company...........................................E-1 Exhibit F - Form of Lock-up Letter..................................F-1 iii 5 METTLER-TOLEDO INTERNATIONAL INC. (a Delaware corporation) _____________________ Shares of Common Stock (Par Value $.01 Per Share) U.S. PURCHASE AGREEMENT ________________, 199_ MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated ____________________________ as U.S. Representatives of the several U.S. Underwriters c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 Ladies and Gentlemen: Mettler-Toledo International Inc., a Delaware corporation (the "Company"), Mettler-Toledo, Inc. ("Mettler") and the persons listed on Schedule B hereto (the "Selling Shareholders"), confirm their agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other U.S. Underwriters named in Schedule A hereto (collectively, the "U.S. Underwriters", which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Merrill Lynch and ________________________ are acting as representatives (in such capacity, the "U.S. Representatives"), with respect to (i) the sale by the Selling Shareholders, and the purchase by the U.S. Underwriters, acting severally and not jointly, of the respective numbers of shares of Common Stock, par value $.01 per share, of the Company ("Common Stock") set forth in Schedules A and B hereto, and (ii) the grant by the Selling Shareholders to the U.S. Underwriters, 6 acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of _______________ additional shares of Common Stock to cover over-allotments, if any. The aforesaid ______________ shares of Common Stock (the "Initial U.S. Securities") to be purchased by the U.S. Underwriters and all or any part of the _________________shares of Common Stock subject to the option described in Section 2(b) hereof (the "U.S. Option Securities") are hereinafter called, collectively, the "U.S. Securities". It is understood that the Company and the Selling Shareholders are concurrently entering into an agreement dated the date hereof (the "International Purchase Agreement") providing for the offering by the Selling Shareholders of an aggregate of _________ shares of Common Stock (the "Initial International Securities") through arrangements with certain underwriters outside the United States and Canada (the "International Managers") for which Merrill Lynch International and _______________________________________ are acting as lead managers (the "Lead Managers"), and the grant by the Selling Shareholders to the International Managers, acting severally and not jointly, of an option to purchase all or any part of the International Managers' pro rata portion of up to __________________ additional shares of Common Stock solely to cover overallotments, if any (the "International Option Securities" and, together with the U.S. Option Securities, the "Option Securities"). The Initial International Securities and the International Option Securities are hereinafter called the "International Securities". It is understood that the Selling Shareholders are not obligated to sell and the U.S. Underwriters are not obligated to purchase any Initial U.S. Securities unless all of the Initial International Securities are contemporaneously purchased by the International Managers. The U.S. Underwriters and the International Managers are hereinafter collectively called the "Underwriters", the Initial U.S. Securities and the Initial International Securities are hereinafter collectively called the "Initial Securities", and the U.S. Securities and the International Securities are hereinafter collectively called the "Securities". The Underwriters will concurrently enter into an Intersyndicate Agreement of even date herewith (the "Intersyndicate Agreement") providing for the coordination of certain transactions among the Underwriters under the direction of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (in such capacity, the "Global Coordinator"). The Company and the Selling Shareholders understand that the U.S. Underwriters propose to make a public offering of the U.S. Securities as soon as the U.S. Representatives deem advisable after this Agreement has been executed and delivered. The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (No.__________) covering the registration of the Securities under the Securities Act of 1933, as amended (the "1933 Act"), including the related preliminary prospectus or prospectuses. Promptly after execution and delivery of this Agreement, the Company will either (i) prepare and file a prospectus in accordance with the provisions of Rule 430A ("Rule 430A") of the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a 2 7 "Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). Two forms of prospectus are to be used in connection with the offering and sale of the Securities: one relating to the U.S. Securities (the "Form of U.S. Prospectus") and one relating to the International Securities (the "Form of International Prospectus"). The Form of International Prospectus is identical to the Form of U.S. Prospectus, except for the front cover and back cover pages and the information under the caption "Underwriting." The information included in any such prospectus or in any such Term Sheet, as the case may be, that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434 Information". Each Form of U.S. Prospectus and Form of International Prospectus used before such registration statement became effective, and any prospectus that omitted, as applicable, the Rule 430A Information or the Rule 434 Information, that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a "preliminary prospectus". Such registration statement, including the exhibits thereto and schedules thereto at the time it became effective and including the Rule 430A Information and the Rule 434 Information, as applicable, is herein called the "Registration Statement". Any registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b) Registration Statement," and after such filing the term "Registration Statement" shall include the Rule 462(b) Registration Statement. The final Form of U.S. Prospectus and the final Form of International Prospectus in the forms first furnished to the Underwriters for use in connection with the offering of the Securities are herein called the "U.S. Prospectus" and the "International Prospectus", respectively, and collectively, the "Prospectuses". If Rule 434 is relied on, the terms "U.S. Prospectus" and "International Prospectus" shall refer to the preliminary U.S. Prospectus, dated __________________, 199_ and preliminary International Prospectus, dated ________________, 199_, respectively, each together with the applicable Term Sheet and all references in this Agreement to the date of such Prospectuses shall mean the date of the applicable Term Sheet. For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the U.S. Prospectus, the International Prospectus or any Term Sheet or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). SECTION 1. Representations and Warranties. (a) Representations and Warranties by the Company and Mettler. The Company and Mettler, jointly and severally, represent and warrant to each U.S. Underwriter as of the date hereof, as of the Closing Time referred to in Section 2(c) hereof and as of each Date of Delivery (if any) referred to in Section 2(b) hereof, and agree with each U.S. Underwriter, as follows: 3 8 (i) Compliance with Registration Requirements. Each of the Registration Statement and any Rule 462(b) Registration Statement has become effective under the 1933 Act and no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with. At the respective times the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendments thereto became effective and at the Closing Time (and, if any U.S. Option Securities are purchased, at the Date of Delivery), the Registration Statement, the Rule 462(b) Registration Statement and any amendments and supplements thereto complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Neither of the Prospectuses nor any amendments or supplements thereto (including any prospectus wrapper), at the time the Prospectuses or any amendments or supplements thereto were issued and at the Closing Time (and, if any U.S. Option Securities are purchased, at the Date of Delivery), included or will include an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If Rule 434 is used, the Company will comply with the requirements of Rule 434 and the Prospectuses shall not be "materially different", as such term is used in Rule 434, from the prospectuses included in the Registration Statement at the time it became effective. The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or the U.S. Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by any Underwriter through Merrill Lynch expressly for use in the Registration Statement or the U.S. Prospectus. Each preliminary prospectus and the prospectuses filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so filed in all material respects with the 1933 Act Regulations and each preliminary prospectus and the Prospectuses delivered to the Underwriters for use in connection with this offering was identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T of the 1933 Act Regulations. (ii) Independent Accountants. The accountants who certified the financial statements and supporting schedules included in the 4 9 Registration Statement are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (iii) Financial Statements. The financial statements included in the Registration Statement and the Prospectuses, together with the related schedules and notes, present fairly the consolidated financial position of the Company and its subsidiaries and, in respect of the Predecessor Business (as defined in the Registration Statement under "Selected Historical Financial Information"), of the Company and its combined affiliated entities, as the case may be, at the dates indicated and the statement of operations, changes in net assets, stockholders' equity and cash flows of the Company and its consolidated subsidiaries and, in respect of the Predecessor Business, of the Company and its combined affiliated entities, as the case may be, for the periods specified; said financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules included in the Registration Statement present fairly in accordance with GAAP the information required to be stated therein. The selected financial data and the summary financial information included in the Prospectuses present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement. The pro forma information and the related notes thereto included in the Registration Statement and the Prospectuses present fairly the information shown therein, have been properly compiled on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. (iv) No Material Adverse Change in Business. Since the respective dates as of which information is given in the Registration Statement and the Prospectuses, except as otherwise stated therein, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and no material adverse effect on the ability of the Company or Mettler to enter into this Agreement or the International Purchase Agreement or to consummate the transactions contemplated in this Agreement or the International Purchase Agreement (any such material adverse change or effect, a "Material Adverse Effect"), (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise, and (C) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. 5 10 (v) Good Standing. The Company and Mettler have been duly organized and are validly existing as corporations in good standing under the laws of the State of Delaware and have corporate power and authority to own, lease and operate their properties and to conduct their business as described in the Prospectuses and to enter into and perform their obligations under this Agreement; and the Company and Mettler are duly qualified as foreign corporations to transact business and are in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect. (vi) Good Standing of Subsidiaries. Each "significant subsidiary" of the Company (as such term is defined in Rule 1-02 of Regulation S-X) (each a "Subsidiary" and, collectively, the "Subsidiaries") has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; except for directors' qualifying shares or as otherwise disclosed in the Registration Statement, all of the issued and outstanding capital stock of each such Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity, except for any security interest, mortgage, pledge, lien, encumbrance, claim or equity created pursuant to the Credit Agreement (as defined in the Registration Statement) or under any local working capital facilities or interest protection agreements secured under the Credit Agreement (the "Other Secured Agreements"); and none of the outstanding shares of capital stock of any Subsidiary was issued in violation of the preemptive or similar rights of any securityholder of such Subsidiary. The only subsidiaries of the Company are (a) the subsidiaries listed on Exhibit 21 to the Company's registration statement on Form S-1 (Registration No. 333-35597) and (b) certain other subsidiaries which, considered in the aggregate as a single Subsidiary, do not constitute a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X. (vii) Capitalization. The authorized, issued and outstanding capital stock of the Company shall be as set forth in the Prospectuses under the caption "Capitalization" (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to reservations, agreements or employee benefit plans referred to in the Prospectuses or pursuant to the exercise of convertible securities or options referred to in the Prospectuses). The shares of issued and outstanding capital stock of the 6 11 Company, including the Securities to be purchased by the Underwriters from the Selling Shareholders, have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock of the Company, including the Securities to be purchased by the Underwriters from the Selling Shareholders, was issued in violation of the preemptive or other similar rights of any securityholder of the Company. (viii) Authorization of Agreement. This Agreement and the International Purchase Agreement have been duly authorized, executed and delivered by the Company and Mettler. (ix) Description of Securities. The Common Stock conforms in all material respects to all statements relating thereto contained in the Prospectuses and such description conforms to the rights set forth in the instruments defining the same; no holder of the Securities will be subject to personal liability by reason of being such a holder. (x) Absence of Defaults and Conflicts. Neither the Company nor any of its subsidiaries is in violation of its charter or by-laws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any subsidiary is subject (collectively, "Agreements and Instruments"), except for (a) with respect to the Company's subsidiaries other than the Subsidiaries, such violations that would not result in a Material Adverse Effect, and (b) such defaults that would not result in a Material Adverse Effect; and the execution, delivery and performance of this Agreement and the International Purchase Agreement by the Company or Mettler, the consummation by the Company or Mettler of the transactions contemplated in this Agreement and the International Purchase Agreement and the transactions contemplated herein and in the Registration Statement (including the sale of the Securities), and compliance by the Company and Mettler with their obligations under this Agreement and the International Purchase Agreement have been duly authorized by all necessary corporate action by the Company or Mettler, as the case may be, and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any subsidiary pursuant to, the Agreements and Instruments (except for (A) such conflicts, breaches or defaults or liens, charges or encumbrances that would not result in a Material Adverse Effect or (B) such liens, charges, or encumbrances as are created in connection with the execution, delivery and performance of the Credit Agreement or the Other Secured Agreements), nor will such action result in any 7 12 violation of the provisions of the charter or by-laws of the Company or any subsidiary or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any subsidiary or any of their assets, properties or operations. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any subsidiary. (xi) Absence of Labor Dispute. No labor dispute with the employees of the Company or any subsidiary exists or, to the knowledge of the Company or Mettler, is imminent, and neither the Company nor Mettler is aware of any existing or imminent labor disturbance by the employees of any of its or any subsidiary's principal suppliers, manufacturers, customers or contractors, which, in either case, might reasonably be expected to result in a Material Adverse Effect. (xii) Absence of Proceedings. There is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company or Mettler, threatened, against or affecting the Company or any subsidiary, which is required to be disclosed in the Registration Statement (other than as disclosed therein), or which might reasonably be expected to result in a Material Adverse Effect or which might reasonably be expected to materially and adversely affect the properties or assets thereof or the consummation of the transactions contemplated in this Agreement or the International Purchase Agreement or the performance by the Company and Mettler of their obligations hereunder or under the International Purchase Agreement, and the aggregate of all pending legal or governmental proceedings to which the Company or any subsidiary is a party or of which any of their respective property or assets is the subject which are not described in the Registration Statement, including ordinary routine litigation incidental to the business, could not reasonably be expected to result in a Material Adverse Effect. (xiii) Accuracy of Exhibits. There are no contracts or documents which are required to be described in the Registration Statement or the Prospectuses or to be filed as exhibits thereto which have not been so described and filed as required. (xiv) Possession of Intellectual Property. The Company and its subsidiaries own or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, "Intellectual Property") necessary to carry on the business now operated 8 13 by them except where the failure to so own, possess or acquire, singly and in the aggregate, would not result in a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect. (xv) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by the Company or Mettler of their obligations hereunder, in connection with the offering or sale of the Securities under this Agreement and the International Purchase Agreement or the consummation of the transactions contemplated by this Agreement or the International Purchase Agreement, except such as have been already obtained or as may be required under the 1933 Act or the 1933 Act Regulations and foreign or state securities or blue sky laws. (xvi) Possession of Licenses and Permits. The Company and its subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, "Governmental Licenses") issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by them except for such Governmental Licenses the failure of which to possess would not have a Material Adverse Effect; the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has received any written notice of any judicial or administrative proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. (xvii) Title to Property. The Company and its subsidiaries have good and marketable title to all real property owned by the Company and its subsidiaries and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (a) are described in the Prospectuses or as set forth in the Credit Agreement or the Other Secured Agreements, (b) do not, singly or in the 9 14 aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its subsidiaries or (c) would not have a Material Adverse Effect; all of the leases and subleases material to the business of the Company and its subsidiaries, considered as one enterprise, and under which the Company or any of its subsidiaries holds properties described in the Prospectuses, are in full force and effect; and neither the Company nor any subsidiary has any notice of any claim of any sort that has been asserted by anyone adverse to the rights of the Company or any subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease except for such claims as would not singly or in the aggregate result in a Material Adverse Effect. (xviii) Investment Company Act. Neither the Company nor Mettler is or upon (a) the sale of the Securities as herein contemplated or (b) the consummation of the transactions contemplated by this Agreement or the International Purchase Agreement will be, an "investment company" as such term is defined in the Investment Company Act of 1940, as amended (the "1940 Act"). (xix) Environmental Laws. Except as described in the Registration Statement and except as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is in violation of any federal, state, local or foreign statute, law, regulation, ordinance, code, common law or any judicial or administrative interpretation thereof enforceable at law or in equity, including any applicable judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products subject to regulation under any environmental law (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials subject to regulation under any environmental law (collectively, "Environmental Laws"), (B) the Company and its subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or, to the knowledge of the Company or Mettler, threatened administrative, regulatory or judicial actions, suits, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its subsidiaries and (D) to the knowledge of the Company or Mettler, there are no events or circumstances that could reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against the 10 15 Company or any of its subsidiaries relating to Hazardous Materials or any Environmental Laws. (xx) Registration Rights. Except as described in the Registration Statement and the Prospectuses, no person has registration rights or other similar rights to have any securities of the Company registered by the Company under the 1933 Act. Except for persons whose shares have been included in the Registration Statement no persons who have registration rights or other similar rights relating to the Common Stock of the Company have any such rights to have Common Stock registered pursuant to the Registration Statement which have not been waived. There are no persons with registration rights or other similar rights to have any securities registered by the Company's subsidiaries under the 1933 Act. (xxi) Taxes. The Company and its subsidiaries have filed all tax returns that are required to have been filed by them pursuant to applicable law except insofar as the failure to file such returns would not result in a Material Adverse Effect, and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company and its subsidiaries, except for such taxes, if any, as are being contested in good faith by appropriate proceedings and as to which adequate reserves have been provided in accordance with GAAP, and except for the failure to pay such taxes which, individually and in the aggregate, would not have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its subsidiaries in respect of any tax liability for any years not finally determined are adequate in accordance with GAAP to meet any assessments or reassessments for additional tax for any years not finally determined, except to the extent of any inadequacy that would not result in a Material Adverse Effect. (xxii) Accounting Controls. The Company and its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management's general or specific authorization, (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets, (C) access to assets is permitted only in accordance with management's general or specific authorization and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (xxiii) Insurance. The Company and its subsidiaries carry or are entitled to the benefits of insurance, with financially sound and reputable insurers, in such amounts and covering such risks as is generally maintained by companies of established repute engaged in the same or similar business, and all policies with respect to such insurance are in full force and effect. 11 16 (xxiv) Stabilization or Manipulation. Neither the Company nor any of its subsidiaries has taken, directly or indirectly, any action designed to cause or to result in, or that has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of any such entity to facilitate the sale or resale of the Securities. (xxv) Certain Relationships. No relationship, direct or indirect, exists between or among any of the Company and any of its subsidiaries or any affiliate of any such entity, on the one hand, and any director, officer, stockholder, customer or supplier of any of them, on the other hand, which is required by the 1933 Act or by the 1933 Act Regulations to be described in the Registration Statement or the Prospectuses which is not so described or is not described as required. (xxvi) No Offering Material. The Company and its subsidiaries have not distributed and, prior to the later to occur of (i) the Closing Time and (ii) completion of the distribution of the Securities, will not distribute any offering material in connection with the offering and sale of the Securities other than the Registration Statement, any preliminary prospectus, the Prospectus or other materials, if any, permitted by the 1933 Act and approved by the U.S. Representatives. (xxvii) Suppliers. No supplier of merchandise to the Company or any of its subsidiaries has ceased shipments of merchandise thereto, which cessation would result in a Material Adverse Effect. (b) Representations and Warranties by the Selling Shareholders. Each Selling Shareholder severally and not jointly represents and warrants to each Underwriter as of the date hereof, as of the Closing Time, and, if the Selling Shareholder is selling Option Securities on a Date of Delivery, as of each such Date of Delivery, and agrees with each Underwriter, as follows: (i) Such Selling Shareholder has reviewed and is familiar with the Registration Statement and the Prospectuses and the Prospectuses do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided that the representations and warranties made in this paragraph (i) shall be only with respect to the information furnished in writing by or on behalf of Such Shareholder expressly for use in the Registration Statement (or any amendment thereto). (ii) Such Selling Shareholder has full right, power and authority to execute, deliver and perform its obligations under this Agreement, the International Purchase Agreement and the Power of Attorney and Custody Agreement, and to sell, transfer and deliver the Securities pursuant to this Agreement; and this Agreement, the International Purchase Agreement and the Power of Attorney and Custody Agreement have been duly 12 17 authorized, executed and delivered by or on behalf of such Selling Shareholder and constitutes a valid and binding agreement of such Selling Shareholder, enforceable against such Selling Shareholder in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization or other similar laws relating to or affecting enforcement of creditors' rights generally or by general principles of equity. (iii) There is no action, suit or proceeding before or by any government, governmental instrumentality or court, domestic or foreign, now pending or, to the knowledge of such Selling Shareholder, threatened, to which such Selling Shareholder is or would be a party or of which the property of such Selling Shareholder is or may be subject, that (i) seeks to restrain, enjoin, prevent the consummation of or otherwise challenge the sale of Securities by such Selling Shareholder or any of the other transactions contemplated hereby or (ii) questions the legality or validity of any such transactions or seeks to recover damages or obtain other relief in connection with any such transactions. (iv) No filing, authorization, approval, consent, license, order, registration or qualification of or with any government, governmental instrumentality or court (other than under the 1933 Act and the 1933 Act Regulations and the securities or blue sky laws of the various states in connection with the sale of the Securities), domestic or foreign, is required by reason of facts specifically pertaining to such Selling shareholder or its legal or regulatory status in connection with the due authorization, execution and delivery by such Selling Shareholder of this Agreement, the International Purchase Agreement or the Power of Attorney and Custody Agreement and the valid sale and delivery of the Securities to be sold by such Selling Shareholder hereunder and thereunder. (v) The execution, delivery and performance of this Agreement, the International Purchase Agreement and the Power of Attorney and Custody Agreement by such Selling Shareholder, the sale of the Securities by such Selling Shareholder hereunder and thereunder, the consummation by such Selling Shareholder of the transactions herein and therein contemplated and the compliance by such Selling Shareholder with all the provisions of this Agreement, the International Purchase Agreement and the Power of Attorney and Custody Agreement will not result in a violation of the charter or bylaws of such Selling Shareholders which are corporations or the partnership agreement or certificate of limited partnership, if applicable, of such Selling Shareholders which are partnerships and will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any material agreement or instrument to which such Selling Shareholder is a party or by which such Selling Shareholder is bound, nor will such action result in any violation of the provisions of any statute relating to such Selling Shareholders or its legal or regulatory status or any judgment, order, rule or regulation of any court or governmental agency or body having jurisdiction over such Selling Shareholder. 13 18 (vi) Such Selling Shareholder has, and will at the Closing Time have, and, if such Selling Shareholder is selling Option Shares on a Date of Delivery, will on the Date of Delivery have, valid and marketable title to the Securities to be sold by the Selling Shareholder pursuant to this Agreement and the International Purchase Agreement, free and clear of any pledge, lien, security interest, charge, claim, equity or encumbrance of any kind; and, at the Closing Time and, if such Selling Shareholder is selling Option Shares on a Date of Delivery, at the Date of Delivery, upon delivery of the Securities to be sold by such Selling Shareholder and payment of the purchase price therefor as contemplated in this Agreement and the International Purchase Agreement, each of the Underwriters will receive good and marketable title to the Securities purchased by it from such Selling Shareholder, free and clear of any security interest, mortgage, pledge, lien, charge, claim, equity or encumbrance of any kind. (vii) Certificates for all of the Securities to be sold by such Selling Shareholder pursuant to this Agreement and the International Purchase Agreement, in suitable form for transfer by delivery or accompanied by duly executed instruments of transfer or assignment in blank with signatures guaranteed, have been placed in custody with the Custodian for delivery to the U.S. Underwriters pursuant to this Agreement and the International Managers pursuant to the International Purchase Agreement. (viii) Such Selling Shareholder has not taken and will not take, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of the Common Stock; and such Selling Shareholder has not distributed and will not distribute any prospectus (as such term is defined in the 1933 Act and the 1933 Act Regulations) in connection with the offering and sale of the Securities other than any preliminary prospectus filed with the Commission or the Prospectuses or other material permitted by the 1933 Act or the 1933 Act Regulations. (ix) Except as described in the Registration Statement and the Prospectuses, neither such Selling Stockholder nor any of its affiliates directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, or has any other association with (within the meaning of Article I, Section 1(m) of the By-laws of the National Association of Securities Dealers, Inc.), any member firm of the National Association of Securities Dealers, Inc. (c) Officer's Certificates. Any certificate signed by any officer of the Company, Mettler or any of the Company's subsidiaries delivered to the Global Coordinator, the U.S. Representatives or to counsel for the U.S. Underwriters shall be deemed a joint and several representation and warranty by the Company and Mettler to each U.S. Underwriter as to the matters covered thereby; and any Certificate signed by or on behalf of the Selling Shareholders as such and delivered to the representatives or to counsel for Underwriters pursuant to the terms 14 19 of this Agreement shall be deemed a representation and warranty by such Selling Shareholder to the Underwriters as to the matters covered thereby. SECTION 2. Sale and Delivery to U.S. Underwriters; Closing. (a) Initial Securities. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, each Selling Shareholder, severally and not jointly, agrees to sell to each U.S. Underwriter, severally and not jointly, and each U.S. Underwriter, severally and not jointly, agrees to purchase from each Selling Shareholder, at the price per share set forth in Schedule C, that proportion of Initial U.S. Securities set forth in Schedule B opposite the name of such Selling Shareholder which the number of Initial U.S. Securities set forth in Schedule A opposite the name of such U.S. Underwriter, plus any additional number of Initial U.S. Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof bears to the total number of Initial U.S. Securities, subject, in each case, to such adjustments among the U.S. Underwriters as the U.S. Representatives in their sole discretion shall make to eliminate any sales or purchases of fractional shares. (b) Option Securities. In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Selling Shareholders, acting severally and not jointly, hereby grant an option to the U.S. Underwriters, severally and not jointly, to purchase up to an additional ______________ shares of Common Stock, as set forth in Schedule B, at the price per share set forth in Schedule C, less an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial U.S. Securities but not payable on the U.S. Option Securities. The option hereby granted will expire 30 days after the date hereof and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments which may be made in connection with the offering and distribution of the Initial U.S. Securities upon notice by the Global Coordinator to the Selling Shareholders setting forth the number of U.S. Option Securities as to which the several U.S. Underwriters are then exercising the option and the time and date of payment and delivery for such U.S. Option Securities. Any such time and date of delivery for the U.S. Option Securities (a "Date of Delivery") shall be determined by the Global Coordinator, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time, as hereinafter defined. If the option is exercised as to all or any portion of the U.S. Option Securities, each of the U.S. Underwriters, acting severally and not jointly, will purchase that proportion of the total number of U.S. Option Securities then being purchased which the number of Initial U.S. Securities set forth in Schedule A opposite the name of such U.S. Underwriter bears to the total number of Initial U.S. Securities, subject in each case to such adjustments as the Global Coordinator in its discretion shall make to eliminate any sales or purchases of fractional shares. (c) Payment. Payment of the purchase price for, and delivery of certificates for, the Initial Securities shall be made at the offices of Debevoise & Plimpton, New York, New York 15 20 10022, or at such other place as shall be agreed upon by the Global Coordinator, the Company and the Selling Shareholders, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given day) business day after the date hereof (unless postponed in accordance with the provisions of Section 10), or such other time not later than ten business days after such date as shall be agreed upon by the Global Coordinator and the Selling Shareholders (such time and date of payment and delivery being herein called "Closing Time"). In addition, in the event that any or all of the U.S. Option Securities are purchased by the U.S. Underwriters, payment of the purchase price for, and delivery of certificates for, such U.S. Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Global Coordinator, the Company and the Selling Shareholders, on each Date of Delivery as specified in the notice from the Global Coordinator to the Selling Shareholders. Payment shall be made to the Selling Shareholders by wire transfer of immediately available funds to bank accounts designated by the Custodian pursuant to each Selling Shareholders' Power of Attorney and Custody Agreement, as the case may be, against delivery to the U.S. Representatives for the respective accounts of the U.S. Underwriters of certificates for the U.S. Securities to be purchased by them. It is understood that each U.S. Underwriter has authorized the U.S. Representatives, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial U.S. Securities and the U.S. Option Securities, if any, which it has agreed to purchase. Merrill Lynch, individually and not as representative of the U.S. Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Initial U.S. Securities or the U.S. Option Securities, if any, to be purchased by any U.S. Underwriter whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such U.S. Underwriter from its obligations hereunder. (d) Denominations; Registration. Certificates for the Initial U.S. Securities and the U.S. Option Securities, if any, shall be in such denominations and registered in such names as the U.S. Representatives may request in writing at least one full business day before the Closing Time or the relevant Date of Delivery, as the case may be. The certificates for the Initial U.S. Securities and the U.S. Option Securities, if any, will be made available for examination and packaging by the U.S. Representatives in the City of New York not later than 10:00 A.M. (Eastern time) on the business day prior to the Closing Time or the relevant Date of Delivery, as the case may be. SECTION 3. Covenants of the Company. The Company covenants with each U.S. Underwriter as follows: (a) Compliance with Securities Regulations and Commission Requests. The Company, subject to Section 3(b), will comply with the requirements of Rule 430A or Rule 434, 16 21 as applicable, and will notify the Global Coordinator immediately, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective, or any supplement to the Prospectuses or any amended Prospectuses shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectuses or for additional information, and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes. The Company will promptly effect the filings necessary pursuant to Rule 424(b) and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment. (b) Filing of Amendments. The Company will give the Global Coordinator notice of its intention to file or prepare any amendment to the Registration Statement (including any filing under Rule 462(b)), any Term Sheet or any amendment, supplement or revision to either the prospectus included in the Registration Statement at the time it became effective or to the Prospectuses, will furnish the Global Coordinator with copies of any such documents a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such document to which the Global Coordinator or counsel for the U.S. Underwriters shall object. (c) Delivery of Registration Statements. The Company has furnished or will deliver to the U.S. Representatives and counsel for the U.S. Underwriters, without charge, signed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein) and signed copies of all consents and certificates of experts, and will also deliver to the U.S. Representatives, without charge, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the U.S. Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the U.S. Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (d) Delivery of Prospectuses. The Company has delivered to each U.S. Underwriter, without charge, as many copies of each preliminary prospectus as such U.S. Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act. The Company will furnish to each U.S. Underwriter, without charge, during the period when the U.S. Prospectus is required to be delivered under the 1933 Act or the Securities Exchange Act of 1934 (the "1934 Act"), such number of copies of the U.S. Prospectus (as amended or supplemented) as such U.S. Underwriter may reasonably request. The U.S. 17 22 Prospectus and any amendments or supplements thereto furnished to the U.S. Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (e) Continued Compliance with Securities Laws. The Company will comply with the 1933 Act and the 1933 Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement, the International Purchase Agreement and the Prospectuses. If at any time when a prospectus is required by the 1933 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the U.S. Underwriters or for the Company, to amend the Registration Statement or amend or supplement any Prospectus in order that the Prospectuses will not include any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the opinion of such counsel, at any such time to amend the Registration Statement or amend or supplement any Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare and file with the Commission, subject to Section 3(b), such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectuses comply with such requirements, and the Company will furnish to the U.S. Underwriters such number of copies of such amendment or supplement as the U.S. Underwriters may reasonably request; provided, however, that if the date of any such amendment or supplement is more than 270 days after the date hereof, the preparation, filing and furnishing of such amendment or supplement shall be at the expense of the Underwriters. (f) Blue Sky Qualifications. The Company will use its best efforts, in cooperation with the U.S. Underwriters, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Global Coordinator may designate and to maintain such qualifications in effect for a period of not less than one year from the later of the effective date of the Registration Statement and any Rule 462(b) Registration Statement; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. In each jurisdiction in which the Securities have been so qualified, the Company will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for a period of not less than one year from the effective date of the Registration Statement and any Rule 462(b) Registration Statement. (g) Rule 158. The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its securityholders as soon as practicable an earnings statement for the purposes of, and to provide the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act. 18 23 (h) Restriction on Sale of Securities. During a period of 90 days from the date of the Prospectuses, the Company will not, without the prior written consent of the Global Coordinator, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose or transfer any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file any registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Securities to be sold hereunder or under the International Purchase Agreement, (B) any shares of Common Stock issued by the Company upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof and referred to in the Prospectuses, (C) any shares of Common Stock issued or options to purchase Common Stock granted pursuant to existing employee benefit plans of the Company referred to in the Prospectuses, (D) any shares of Common Stock issued pursuant to any non-employee director stock plan or dividend reinvestment plan, (E) the issuance of options under the Company's stock option plan and the exercise by the Company's employees of their rights relating thereto or (F) the filing of a registration statement on Form S-8 under the 1933 Act relating to Common Stock pursuant to the Company's stock option plan. (i) Reporting Requirements. The Company, during the period when the Prospectuses are required to be delivered under the 1933 Act or the 1934 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the rules and regulations of the Commission thereunder. SECTION 4. Payment of Expenses. (a) Expenses. The Company and Mettler, jointly and severally, will pay all expenses incident to the performance of their obligations under this Agreement, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and of each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of this Agreement, any Agreement among Underwriters and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Securities, (iii) the preparation, issuance and delivery of the certificates for the Securities to the Underwriters, including any stock or other transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Securities to the Underwriters and the transfer of the Securities between the U.S. Underwriters and the International Managers, (iv) the fees and disbursements of the Company's and the Selling Shareholder's counsel, accountants and other advisors, (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(f) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto (such fees and expenses of counsel not to 19 24 exceed $5,000.00), (vi) the printing and delivery to the Underwriters of copies of each preliminary prospectus, any Term Sheets and of the Prospectuses and any amendments or supplements thereto, (vii) the preparation, printing and delivery to the Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii) the fees and expenses of any transfer agent or registrar for the Securities, (ix) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by the National Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Securities and (x) the fees and expenses incurred in connection with the listing of the Securities on the NYSE. (b) Expenses of the Selling Shareholders. Except as provided in Section 4(a) above, the Selling Shareholders, severally and not jointly, will pay all expenses incident to the performance of their respective obligations under, and the consummation of the transactions contemplated by this Agreement, including any stamp duties, capital duties and stock transfer taxes, if any, payable upon the sale of the Securities to the U.S. Underwriters, and their transfer between the Underwriters pursuant to an agreement between such Underwriters. (c) Termination of Agreement. If this Agreement is terminated by the U.S. Representatives in accordance with the provisions of Section 5(s) or Section 9(a)(i) or Section 11 hereof, the Company and Mettler shall reimburse the U.S. Underwriters for all of their reasonable out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the U.S. Underwriters. SECTION 5. Conditions of U.S. Underwriters' Obligations. The obligations of the several U.S. Underwriters hereunder are subject to the accuracy in all material respects of the representations and warranties of the Company, Mettler and the Selling Shareholders contained in Section 1 hereof or in certificates of any officer of the Company, Mettler or any subsidiary of the Company or on behalf of any Selling Shareholder delivered pursuant to the provisions hereof, to the performance by the Company and Mettler of their respective covenants and other obligations hereunder, and to the following further conditions: (a) Effectiveness of Registration Statement. The Registration Statement, including any Rule 462(b) Registration Statement, has become effective and at Closing Time no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel to the U.S. Underwriters. A prospectus containing the Rule 430A Information shall have been filed with the Commission in accordance with Rule 424(b) (or a post-effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434, a Term Sheet shall have been filed with the Commission in accordance with Rule 424(b). 20 25 (b) Opinion of Counsel for Company. At Closing Time, the U.S. Representatives shall have received the favorable opinion, dated as of Closing Time, of Fried, Frank, Harris, Shriver & Jacobson, special counsel for the Company and the Selling Shareholders, in form and substance satisfactory to counsel for the U.S. Underwriters, together with signed or reproduced copies of such letter for each of the other U.S. Underwriters to the effect set forth in Exhibit A hereto and to such further effect as counsel to the U.S. Underwriters may reasonably request. (c) Opinion of German Counsel for the Company. At Closing Time, the U.S. Representatives shall have received the favorable opinion, dated as of Closing Time, of Bruckhaus Westrick Stegemann, special German counsel for the Company, in form and substance satisfactory to counsel for the U.S. Underwriters, together with signed or reproduced copies of such letter for each of the other U.S. Underwriters to the effect set forth in Exhibit B hereto and to such further effect as counsel to the U.S. Underwriters may reasonably request, with respect to each direct or indirect subsidiary of the Company or Mettler organized under the laws of Germany. (d) Opinion of Swiss Counsel for the Company. At Closing Time, the U.S. Representatives shall have received the favorable opinion, dated as of Closing Time, of Pestalozzi Gmuer & Patry, special Swiss counsel for the Company, in form and substance satisfactory to counsel for the U.S. Underwriters, together with signed or reproduced copies of such letter for each of the other U.S. Underwriters to the effect set forth in Exhibit B hereto and to such further effect as counsel to the U.S. Underwriters may reasonably request, with respect to each direct or indirect subsidiary of the Company or Mettler organized under the laws of Switzerland. (e) Opinion of Christine J. Smith, Esq. At the Closing Time, the U.S. Representatives shall have received the favorable opinion, dated as of the Closing Time, of Christine J. Smith, Esq., in form and substance satisfactory to counsel for the U.S. Underwriters, together with signed or reproduced copies of such letter for each of the other U.S. Underwriters to the effect set forth in Exhibit C hereto and to such further effect as counsel to the U.S. Underwriters may reasonably request. (f) Opinion of Counsel for the Selling Shareholders. At Closing Time, the U.S. Representatives shall have received the favorable opinion, dated as of Closing Time, of counsel for each of the Selling Shareholders listed on Schedule E hereto, in form and substance satisfactory to counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters to the effect set forth in Exhibit D hereto and to such further effect as counsel to the Underwriters may reasonably request (g) Opinion of Counsel for U.S. Underwriters. At Closing Time, the U.S. Representatives shall have received the favorable opinion, dated as of Closing Time, of Debevoise & Plimpton, counsel for the U.S. Underwriters, together with signed or 21 26 reproduced copies of such letter for each of the other U.S. Underwriters with respect to the matters set forth in clauses (1), (2), (5), (6) through (9), inclusive, (10) (solely as to the information in the Prospectus under "Description of Capital Stock--Common Stock") and the first full paragraph of text following clause 19 of Exhibit A hereto. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York, the federal law of the United States and the General Corporation Law of the State of Delaware, upon the opinions of counsel satisfactory to the U.S. Representatives. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and its subsidiaries and certificates of public officials. (h) Officers' Certificate. At Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Prospectuses, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and the U.S. Representatives shall have received a certificate of the President or a Vice President of the Company and of the chief financial or chief accounting officer of each of the Company and Mettler, in each case dated as of Closing Time, to the effect that (i) there has been no such Material Adverse Effect, (ii) the representations and warranties in Section 1(a) hereof are true and correct in all material respects with the same force and effect as though expressly made at and as of Closing Time, (iii) each of the Company and Mettler has complied with all agreements and satisfied all conditions contained in this Agreement and the International Purchase Agreement on its part to be performed or satisfied at or prior to Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and, to the knowledge of such officer no proceedings for that purpose have been instituted or are pending or are contemplated by the Commission. (i) Certificate of Selling Shareholders. At Closing Time, the U.S. Representatives shall have received a certificate of an Attorney-in-Fact on behalf of each Selling Shareholder, dated as of Closing Time, to the effect that (i) the representations and warranties of each Selling Shareholder contained in Section 1(b) hereof are true and correct in all respects with the same force and effect as though expressly made at and as of Closing Time and (ii) each Selling Shareholder has complied in all material respects with all agreements and all conditions on its part to be performed under this Agreement at or prior to Closing Time. (j) Litigation Certificate. At Closing Time, the U.S. Representatives shall have received a certificate of the chief financial officer and the general counsel of the Company, dated as of Closing Time, in form and substance satisfactory to counsel for the U.S. Underwriters to the effect set forth in Exhibit E. (k) Accountant's Comfort Letter. At the time of the execution of this Agreement, the U.S. Representatives shall have received from KPMG Fides Peat a letter dated such date, 22 27 in form and substance satisfactory to the U.S. Representatives, together with signed or reproduced copies of such letter for each of the other U.S. Underwriters containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectuses. (l) Bring-down Comfort Letter. At Closing Time, the U.S. Representatives shall have received from KPMG Fides Peat a letter, dated as of Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (k) of this Section, except that the specified date referred to shall be a date not more than three business days prior to Closing Time. (m) Approval of Listing. At Closing Time, the Securities shall have been approved for listing on the NYSE. (n) No Objection. The NASD has confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements. (o) Lock-up Agreements; Registration Rights. At the date of this Agreement, the U.S. Representatives shall have received an agreement substantially in the form of Exhibit F hereto signed by the persons listed on Schedule D hereto. The Company shall have taken all required action so that no person (other than persons whose shares are included in the Registration Statement) who has registration rights or other similar rights relating to Common Stock of the Company to have Common Stock registered pursuant to the Registration Statement shall be permitted to exercise such rights; and no such person who has registration rights or other similar rights relating to the Common Stock of the Company to have Common Stock registered pursuant to the Registration Statement shall have exercised such rights (other than persons whose shares are included in the Registration Statement). (p) Purchase of Initial International Securities. Contemporaneously with the purchase by the U.S. Underwriters of the Initial U.S. Securities under this Agreement, the International Managers shall have purchased the Initial International Securities under the International Purchase Agreement. (q) Conditions to Purchase of U.S. Option Securities. In the event that the U.S. Underwriters exercise their option provided in Section 2(b) hereof to purchase all or any portion of the U.S. Option Securities, the representations and warranties of the Company and the Selling Shareholders contained herein and the statements in any certificates furnished by the Company, any subsidiary of the Company or the Selling Shareholders hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery, the U.S. Representatives shall have received: 23 28 (i) Officers' Certificate. A certificate, dated such Date of Delivery, of the President or a Vice President of each of the Company, Mettler and of the chief financial or chief accounting officer of each of the Company and Mettler confirming that the certificate delivered at the Closing Time pursuant to Section 5(h) hereof remains true and correct as of such Date of Delivery. (ii) Certificate of Selling Shareholder. A certificate, dated such Date of Delivery, of an Attorney-in-Fact on behalf of each Selling Shareholder confirming that the certificate delivered at Closing Time pursuant to Section 5(i) remains true and correct as of such Date of Delivery. (iii) Opinion of Counsel for Company. The favorable opinion of Fried, Frank, Harris, Shriver & Jacobson, special counsel for the Company and the Selling Shareholders, in form and substance reasonably satisfactory to counsel for the U.S. Underwriters, dated such Date of Delivery, relating to the U.S. Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(b) hereof. (iv) Opinion of Christine J. Smith, Esq. The favorable opinion of Christine J. Smith, Esq., dated such Date of Delivery, in form and substance reasonably satisfactory to counsel for the U.S. Underwriters and otherwise to the same effect as the opinion required by Section 5(e) hereof. (v) Opinion of Counsel for Selling Shareholders. The favorable opinion of counsel for each of Selling Shareholders listed on Schedule E hereto, in form and substance reasonably satisfactory to counsel for the U.S. Underwriters, dated such Date of Delivery, relating to the U.S. Option Securities to be purchased on such Date of Delivery, and otherwise to the same effect as the opinion required by Section 5(d) hereof. (vi) Opinion of Counsel for U.S. Underwriters. The favorable opinion of Debevoise & Plimpton, counsel for the U.S. Underwriters, dated such Date of Delivery, relating to the U.S. Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(f) hereof. (vii) Opinion of German Counsel for Company. The favorable opinion of Bruckhaus Westrick Stegemann, special German counsel for the Company, in form and substance reasonably satisfactory to counsel for the U.S. Underwriters, dated such Date of Delivery, relating to the U.S. Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(c) hereof. (viii) Opinion of Swiss Counsel for Company. The favorable opinion of Pestalozzi Gmuer & Patry, special Swiss counsel for the Company, in form and substance 24 29 reasonably satisfactory to counsel for the U.S. Underwriters, dated such Date of Delivery, relating to the U.S. Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(d) hereof. (ix) Bring-down Comfort Letter. A letter from KPMG Fides Peat, in form and substance satisfactory to the U.S. Representatives and dated such Date of Delivery, and substantially in the same form and substance as the letter furnished to the U.S. Representatives pursuant to Section 5(l) hereof, except that the "specified date" in the letter furnished pursuant to this paragraph shall be a date not more than five days prior to such Date of Delivery. (x) Litigation Certificate. A certificate of the chief financial officer and the general counsel of the Company, dated such Date of Delivery, in form and substance satisfactory to counsel for the U.S. Underwriters and otherwise to the same effect as the certificate required by Section 5(j) hereof. (r) Additional Documents. At Closing Time and at each Date of Delivery, counsel for the U.S. Underwriters shall have been furnished with such documents and opinions as they may reasonably request for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company and the Selling Shareholders in connection with the sale of the Securities as herein contemplated shall be satisfactory in form and substance to the U.S. Representatives and counsel for the U.S. Underwriters. (s) Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of U.S. Option Securities on a Date of Delivery which is after the Closing Time, the obligations of the several U.S. Underwriters to purchase the relevant Option Securities, may be terminated by the U.S. Representatives by notice to the Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any such termination and remain in full force and effect. SECTION 6. Indemnification. (a) Indemnification of U.S. Underwriters. Each of the Company, and Mettler, jointly and severally, agrees to indemnify and hold harmless each U.S. Underwriter and each person, if any, who controls any U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: 25 30 (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus or the Prospectuses (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 6(e) below) any such settlement is effected with the written consent of the Company; (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense (a) to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any Underwriter through Merrill Lynch expressly for use in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary prospectus or the U.S. Prospectus (or any amendment or supplement thereto) and (b) with respect to any preliminary prospectus to the extent that any such loss, liability, claim, damage or expense of such U.S. Underwriter results solely from the fact that such U.S. Underwriter sold Securities to a person as to whom the Company shall establish that there was not sent by commercially reasonable means, at or prior to the written confirmation of such sale, a copy of the U.S. Prospectus in any case where such delivery is required by the 1933 Act, if the Company has previously furnished copies thereof in sufficient quantity to such U.S. Underwriter and the loss, liability, claim, damage or expense of such U.S. Underwriter results from an untrue statement or omission of a material fact contained in the preliminary prospectus that was corrected in the U.S. Prospectus. Each Selling Shareholder agrees, severally and not jointly, to indemnify and hold harmless each U.S. Underwriter and each person, if any, who controls any U.S. Underwriter 26 31 within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, the Company, its directors, its officers who sign the Registration Statement, and any person who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as the foregoing indemnity from the Company and Mettler to each U.S. Underwriter; provided however, that with respect to each Selling Shareholder, the indemnification provision in the paragraph shall be only with respect to the information furnished in writing by or on behalf of such Selling Shareholder expressly for use in the Registration Statement (or any amendment thereto), including Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary U.S. prospectus or U.S. Prospectus (or any amendment or supplement thereto); and provided, further, that the aggregate liability of any Selling Shareholder pursuant to this paragraph shall be limited to the net proceeds recovered by such Selling Shareholder from the Securities purchased by the Underwriters from such Selling Shareholder pursuant to this Agreement and the International Purchase Agreement; and provided further, that no Selling Shareholder shall be liable for any untrue statement, omission or alleged omission of any other Selling Shareholder. (b) Indemnification of Selling Shareholders by the Company and Mettler. The Company and Mettler, jointly and severally, agree to indemnify and hold harmless each of the Selling Shareholders and each person, if any, who controls any Selling Shareholder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent that the Company and Mettler have agreed to indemnify and hold harmless each U.S. Underwriter pursuant to the preceding paragraph; provided, however, the Company and Mettler shall not be liable under this paragraph to the extent any loss, liability, claim, damage or expense described in the preceding paragraph arises out of or is based upon an untrue statement, alleged untrue statement, omission or alleged omission based upon information relating to such Selling Shareholder expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the U.S. Prospectus (or any amendment or supplement thereto). (c) Indemnification of Company, Directors and Officers and Selling Shareholders. Each U.S. Underwriter severally agrees to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and each Selling Shareholder and each person, if any, who controls any Selling Shareholder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary U.S. prospectus or the U.S. Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such U.S. Underwriter through Merrill Lynch expressly for use in the Registration 27 32 Statement (or any amendment thereto) or such preliminary prospectus or the U.S. Prospectus (or any amendment or supplement thereto). (d) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Sections 6(b) and 6(c) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (e) Settlement without Consent if Failure to Reimburse. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(iii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. (f) Other Agreements with Respect to Indemnification. The provisions of this Section shall not affect any agreement among the Company, Mettler and the Selling Shareholders with respect to indemnification. 28 33 SECTION 7. Contribution. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, Mettler and the Selling Shareholders on the one hand and the U.S. Underwriters on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, Mettler and the Selling Shareholders on the one hand and of the U.S. Underwriters on the other hand in connection with the statements or omissions, which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company, Mettler and the Selling Shareholders on the one hand and the U.S. Underwriters on the other hand in connection with the offering of the U.S. Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the U.S. Securities pursuant to this Agreement (before deducting expenses) received by the Company and the Selling Shareholders and the total underwriting discount received by the U.S. Underwriters, in each case as set forth on the cover of the U.S. Prospectus, or, if Rule 434 is used, the corresponding location on the Term Sheet, bear to the aggregate initial public offering price of the U.S. Securities as set forth on such cover. The relative fault of the Company, Mettler and the Selling Shareholders on the one hand and the U.S. Underwriters on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, Mettler and the Selling Shareholders on the one hand or by the U.S. Underwriters on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, Mettler, the Selling Shareholders and the U.S. Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the U.S. Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. 29 34 Notwithstanding the provisions of this Section 7, (i) no Selling Stockholder shall be required to contribute any amount in excess of the amount of the total net proceeds received by such Selling Stockholder from the U.S. Securities purchased from such Selling Stockholder and (ii) no U.S. Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the U.S. Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such U.S. Underwriter has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each person, if any, who controls a U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such U.S. Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company or any Selling Shareholder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company or such Selling Shareholder, as the case may be. The U.S. Underwriters' respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial U.S. Securities set forth opposite their respective names in Schedule A hereto and not joint. The provisions of this Section shall not affect any agreement among the Company, Mettler and the Selling Shareholders with respect to contribution. SECTION 8. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company, Mettler, any subsidiaries of the Company or the Selling Shareholders submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any U.S. Underwriter or controlling person, or by or on behalf of the Company, Mettler or the Selling Shareholders, and shall survive delivery of the Securities to the U.S. Underwriters. SECTION 9. Termination of Agreement. (a) Termination; General. The U.S. Representatives may terminate this Agreement, by notice to the Company and the Selling Shareholders, at any time at or prior to Closing Time (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the U.S. Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial 30 35 markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of Merrill Lynch, impracticable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the NYSE, or if trading generally on the American Stock Exchange, the NYSE or in the Nasdaq National Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other governmental authority, or (iv) if a banking moratorium has been declared by either Federal, New York or Swiss authorities. (b) Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 6 and 7 shall survive such termination and remain in full force and effect. SECTION 10. Default by One or More of the U.S. Underwriters. If one or more of the U.S. Underwriters shall fail at Closing Time or a Date of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the "Defaulted Securities"), Merrill Lynch shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting U.S. Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, Merrill Lynch shall not have completed such arrangements within such 24-hour period, then: (a) if the number of Defaulted Securities does not exceed 10% of the number of U.S. Securities to be purchased on such date, each of the non-defaulting U.S. Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting U.S. Underwriters, or (b) if the number of Defaulted Securities exceeds 10% of the number of U.S. Securities to be purchased on such date, this Agreement or, with respect to any Date of Delivery which occurs after the Closing Time, the obligation of the U.S. Underwriters to purchase and of the Company to sell the Option Securities to be purchased and sold on such Date of Delivery shall terminate without liability on the part of any non-defaulting U.S. Underwriter. No action taken pursuant to this Section shall relieve any defaulting U.S. Underwriter from liability in respect of its default. 31 36 In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a termination of the obligation of the U.S. Underwriters to purchase and the Company to sell the relevant U.S. Option Securities, as the case may be, either (i) the U.S. Representatives or (ii) any Selling Shareholder shall have the right to postpone Closing Time or the relevant Date of Delivery, as the case may be, for a period not exceeding seven days in order to effect any required changes in the Registration Statement or Prospectus or in any other documents or arrangements. As used herein, the term "U.S. Underwriter" includes any person substituted for a U.S. Underwriter under this Section 10. SECTION 11. Default by one or more of the Selling Shareholders. (a) If a Selling Shareholder shall fail at Closing Time or at a Date of Delivery to sell and deliver the number of Securities which such Selling Shareholders are obligated to sell hereunder, and the remaining Selling Shareholders do not exercise the right hereby granted to increase, pro rata or otherwise, the number of Securities to be sold by them hereunder to the total number to be sold by all Selling Shareholders as set forth in Schedule B hereto, then the U.S. Underwriters may, at option of the U.S. Representatives, by notice from the U.S. Representatives to the Company and the non-defaulting Selling Shareholders, either (i) terminate this Agreement without any liability on the fault of any non-defaulting party except that the provisions of Sections 1, 4, 6, 7 and 8 shall remain in full force and effect or (b) elect to purchase the Securities which the non-defaulting Selling Shareholders have agreed to sell hereunder. No action taken pursuant to this Section 11 shall relieve any Selling Shareholder so defaulting from liability, if any, in respect of such default. In the event of a default by any Selling Shareholder as referred to in this Section 11, each of the U.S. Representatives. the Company and the non-defaulting Selling Shareholders shall have the right to postpone Closing Time or Date of Delivery for a period not exceeding seven days in order to effect any required change in the Registration Statement or Prospectus or in any other documents or arrangements. SECTION 12. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the U.S. Underwriters shall be directed to the U.S. Representatives c/o Merrill Lynch at North Tower, World Financial Center, New York, New York 10281-1201, attention of Syndicate Operations, with a copy to Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022, Attention: James C. Scoville; notices to the Company and Mettler shall be directed to the Company at Mettler-Toledo International Inc., Im Langacher, P.O. Box MT-100, CH 8606 Greifensee, Switzerland, Attention: William P. Donnelly, with a copy to Fried, Frank, Harris, Shriver & Jacobson, 4 Chiswell Street, London, EC1Y 4UP, Attention: Timothy E. Peterson; and notices to the Selling Shareholders shall be delivered to AEA Investors Inc., 65 East 55th Street, New York, New York 10022, attention of Christine J. Smith, Esq. 32 37 SECTION 13. Parties. This Agreement shall inure to the benefit of and be binding upon the U.S. Underwriters, the Company, Mettler and the Selling Shareholders and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the U.S. Underwriters, the Company, Mettler and the Selling Shareholders and their respective successors and the controlling persons and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the U.S. Underwriters, the Company, Mettler and the Selling Shareholders and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any U.S. Underwriter shall be deemed to be a successor by reason merely of such purchase. SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. SECTION 15. Effect of Headings. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. 33 38 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company and the Attorney-in-Fact for the Selling Shareholders a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the U.S. Underwriters, the Company, Mettler and the Selling Shareholders in accordance with its terms. Very truly yours, METTLER-TOLEDO INTERNATIONAL INC. By: Name: Title: METTLER-TOLEDO, INC. By:______________________________ Name: Title: EACH OF THE SELLING SHAREHOLDERS LISTED ON SCHEDULE B HERETO By:______________________________ As Attorney-in-Fact acting on behalf of the Selling Shareholders named in Schedule B hereto 34 39 CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED _________________________________ By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By ______________________________ Authorized Signatory For themselves and as U.S. Representatives of the other U.S. Underwriters named in Schedule A hereto. 35 40 SCHEDULE A
Number of Initial U.S. Name of U.S. Underwriter Securities ------------------------ ------------ Merrill Lynch, Pierce, Fenner & Smith Incorporated.......................................... Total............................................................. ============
Sch A - 1 41 SCHEDULE B
Maximum Number Number of Initial of Option Securities to be Securities to Shareholder Name Sold be Sold ---------------- ----------------- -------------- Total
Sch B - 1 42 SCHEDULE C Shares of Common Stock (Par Value $.01 Per Share) 1. The initial public offering price per share for the Securities, determined as provided in said Section 2, shall be $______ . 2. The purchase price per share for the U.S. Securities to be paid by the several U.S. Underwriters shall be $ ______, being an amount equal to the initial public offering price set forth above less $_____ per share; provided that the purchase price per share for any U.S. Option Securities purchased upon the exercise of the over-allotment option described in Section 2(b) shall be reduced by an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial U.S. Securities but not payable on the U.S. Option Securities. Sch C - 1 43 SCHEDULE D List of persons and entities subject to lock-up Robert F. Spoerry William P. Donnelly Karl M. Lang Lukas Braunschweiler John D. Robechek Peter Burker Thomas Rubbe Philip Caldwell Reginald H. Jones John D. Macomber Laurence Z.Y. Moh Thoms P. Salice Each of the Selling Shareholders listed on Schedule B hereto. Sch D - 1 44 SCHEDULE E List of Selling Shareholders delivering opinions pursuant to Sections 5(f) and 5(q)(v) [To Come ] Sch E - 1 45 Exhibit A FORM OF OPINION OF FRIED, FRANK, HARRIS, SHRIVER & JACOBSON TO BE DELIVERED PURSUANT TO SECTION 5(b) ___________ , 199_ Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated __________________________ as U.S. Representatives of the several U.S. Underwriters c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 Merrill Lynch International __________________________ as Lead Managers of the several International Managers c/o Merrill Lynch International Ropemaker Place 25 Ropemaker Street London, England, EC2Y 9LY Ladies and Gentlemen: We are acting as special U.S. counsel to Mettler-Toledo International Inc., a Delaware corporation (the "Company"), in connection with the underwritten public offerings of _____________ shares of the Company's Common Stock (the "Shares"), pursuant to (i) a Purchase Agreement (the "U.S. Purchase Agreement"), dated as of __________, 199_, among the Company, certain shareholders of the Company listed on Schedule B to the U.S. Purchase Agreement (the "Selling, Shareholders"), Mettler-Toledo, Inc, a Delaware corporation ("Mettler"), and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, _______________ as representatives of the U.S. Underwriters, and (ii) an International Purchase Agreement (the "International Purchase Agreement," and together with the U.S. Purchase Agreement, the "Purchase Agreements"), dated as of ________________, 199_, among the Company, the Selling Shareholders, Mettler and Merrill Lynch International, ________________________, as representatives of the International Managers. This opinion is being delivered pursuant to Section 5(b) of each of the Purchase Agreements and simultaneously with the payment by A-1 46 the Underwriters to the Selling Shareholders for the Shares. Except as provided herein, all capitalized terms used herein which are defined in the Purchase Agreement have the respective meanings specified therein. With your permission, all assumptions and statements of reliance herein have been made without any independent investigation or verification on our part except to the extent otherwise expressly stated, and we express no opinion with respect to the subject matter or accuracy of such assumptions or items relied upon. In connection with this opinion, we have (i) investigated such questions of law, (ii) examined originals or certified, conformed or reproduction copies of such agreements, instruments, documents and records of the Company, its subsidiaries and the Selling Shareholders, such certificates of public officials and such other documents, and (iii) reviewed such information from officers and representatives of the Company and its subsidiaries, Selling Shareholders and others, in each case, as we have deemed necessary or appropriate for the purposes of this opinion. In all such examinations, we have assumed the legal capacity of all natural persons executing documents, the genuineness of all signatures on original or certified copies, the authenticity of all original or certified copies and the conformity to original or certified documents of all copies submitted to us as conformed or reproduction copies. As to various questions of fact relevant to the opinions expressed herein, we have relied upon, and assume the accuracy of, the statements made in the certificates of officers of the Company and its subsidiaries and the Selling Shareholders delivered to us, the representations and warranties contained in the Purchase Agreements and the Custody Agreements and certificates and oral or written statements and other information of or from public officials and officers and representatives of the Company, its subsidiaries, Selling Shareholders and others, and assume compliance on the part of all parties to the Purchase Agreements with their covenants and agreements contained therein. With respect to the opinions expressed in paragraph 3 below, we have relied solely upon a certificate or certificates of public officials of such jurisdictions, copies of which have been provided to you. With respect to the opinion expressed in paragraph 7 below regarding the effectiveness of the Registration Statement and the absence of any stop orders or proceedings for that purpose, we are relying upon the oral advice of the staff of the U.S. Securities and Exchange Commission (the "Commission"). To the extent it may be relevant to the opinions expressed herein, (i) we have assumed that the Power of Attorney and Custody Agreement of each Selling Shareholder has been duly authorized, executed and delivered by each party thereto and constitutes a valid and binding agreement of each such party other than such Selling Shareholder and (ii) we are relying upon oral advice of the staff of the Securities and Exchange Commission (the "Commission") that the Commission has issued an order declaring the Registration Statement (File No. _________) effective. Based upon the foregoing, and subject to the limitations, qualifications and assumptions set forth herein, we are of the opinion that: A-2 47 1. The Company has been duly incorporated and the Company and Mettler are validly existing as corporations in good standing under the laws of the State of Delaware. 2. Each of the Company and Mettler has the corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses and to enter into and perform its obligations under the Purchase Agreements. 3. Each of the Company and Mettler is duly qualified as a foreign corporation to transact business and is in good standing in the states listed on Schedule I to this opinion. 4. The authorized capital stock of the Company is as set forth in the Prospectuses under the caption "Capitalization." 5. All the outstanding shares of Common Stock (including the Shares to be sold by the Selling Shareholders) have been duly authorized and are validly issued, fully paid and non-assessable. 6. Each of the Purchase Agreements has been duly authorized, executed and delivered by the Company and Mettler. 7. The Registration Statement has been declared effective under the 1933 Act; any required filing of the Prospectuses pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); and, to the best of our knowledge, no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or threatened by the Commission. 8. The Registration Statement, including the Rule 430A Information and the Prospectuses as of their respective effective or issue dates (other than the financial statements, notes and schedules thereto and other financial data included therein or omitted therefrom, as to which we express no opinion) complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. 9. The form of certificate used to evidence the Common Stock complies in all material respects with all applicable requirements of the Delaware General Corporation Law, with any applicable requirements of the Amended and Restated Certificate of Incorporation and amended By-laws of the Company and the requirements of the NYSE. A-3 48 10. The information in the Prospectuses under "Description of Capital Stock," "Description of Credit Agreement "and "Certain United States Federal Tax Considerations For Non-United States Holders" and in the Registration Statement under Item 15, in each case to the extent that such information constitutes matters of law, summaries of legal matters or documents, has been reviewed by us and is correct in all material respects. 11. To our knowledge, there is not pending or threatened any action, suit, proceeding inquiry or investigation, to which the Company or Mettler is a party, or to which the property of the Company or Mettler is subject, before or brought by any New York, Delaware or federal court or New York, Delaware or federal governmental agency or body, which might reasonably be expected to result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the consummation of the transactions contemplated in the Purchase Agreements. 12. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any New York, Delaware or federal court or governmental authority or New York, Delaware or federal agency, is necessary or required in connection with the due authorization, execution and delivery of the Purchase Agreements or for the offering, sale or delivery of the Shares except such as have been obtained or as may be required under the 1933 Act or the 1933 Act Regulations and foreign or state securities or blue sky laws. 13. The execution and delivery by the Company and Mettler of, and the performance by their Company and Mettler of their obligations under, the Purchase Agreements did not and will not (i) contravene any provision of the certificates of incorporation and by-laws, in each case as amended, as the case may be, of the Company or Mettler, (ii) contravene any agreement or other instrument binding upon the Company or any of its subsidiaries that is listed as an exhibit to the Registration Statement or (iii) violate (x) any present statute, rule or regulation of any governmental agency or authority of the United States of America or the State of New York or Delaware (as it relates to the General Corporation Law of the State of Delaware) applicable to the Company or any subsidiary, or (y) any judgment or decree or order of any court or governmental agency or body of the United States of America or the State of New York or Delaware (as it relates to the General Corporation Law of the State of Delaware) known to us; provided, however, that we express no opinion with respect to any violation, breach or default arising under or based upon any cross-default provision insofar as such violation relates to a default under an agreement that is not an exhibit to the Registration Statement. A-4 49 14. The Company is not an "investment company" as such term is defined in the 1940 Act. 15. The Purchase Agreements have been duly authorized, executed and delivered by or on behalf of the Selling Shareholders. 16. The Power of Attorney and Custody Agreement of each Selling Shareholder constitutes a valid and binding agreement of such Selling Shareholder, subject to limitations imposed by federal or state securities laws or principles of public policy to enforcement of rights to indemnification and contribution. 17. The execution and delivery by or on behalf of each Selling Shareholder of, and the performance by such Selling Shareholder of its obligations under, the Purchase Agreements and the Power of Attorney and Custody Agreement of such Selling Shareholder will not contravene any provision of the laws of the State of Delaware (as it relates to the General Corporation Law of the State of Delaware), the State of New York or the federal laws of the United States applicable to each Selling Shareholder, provided that the foregoing opinion is limited to such laws which, in our experience, are normally applicable to public offerings of securities of the type contemplated by the Purchase Agreements excluding laws that are applicable to any Selling Shareholder solely because of its specific status (including regulatory status), other than its status as a selling shareholder. 18. No consent, approval, authorization or order of or qualification by the State of Delaware (as it relates to the General Corporation Law of the State of Delaware), State of New York or any federal governmental body or agency is required for the performance by such Selling Shareholder of its obligations under the Purchase Agreements or the Power of Attorney and Custody Agreement of such Selling Shareholder, except such as have been obtained under the 1933 Act or such as may be required by the securities or blue sky laws, in connection with the purchase and distribution of the Shares by the U.S. Underwriters, provided that the foregoing opinion is limited to such consents, approvals, authorizations, orders or qualifications which, in our experience, are normally applicable to public offerings of securities of the type contemplated by the Purchase Agreements excluding consents, approvals, authorizations, orders or qualifications that are applicable to any Selling Shareholder solely because of its specific status (including regulatory status), other than its status as a selling shareholder. 19. Upon (i) payment for the Shares as provided in the Purchase Agreements, (ii) registration of the transfer of the Shares to, and registration of the Shares in the name of, Cede & Co. ("Cede") or such other nominee as may be designated by the Depository Trust Company ("DTC") and (iii) the crediting of A-5 50 the Shares on the books of DTC to the securities accounts (within the meaning of Section 8-501 of the Uniform Commercial Code as currently in effect in the State of New York ("the UCC")) of the various Underwriters (assuming that each of the Underwriters lacks notice of any "adverse claim" (within the meaning of Section 8-102 of the UCC) to the Shares), (a) the Underwriters will acquire valid "security entitlements" in respect of the Shares (within the meaning of Section 8-102 of the UCC) and (b) no action based on any "adverse claim" (within the meaning of Section 8-102 of the UCC) to the Shares may be asserted against the Underwriters with respect to such security entitlements. In addition, in the course of the preparation by the Company of the Registration Statement and the Prospectuses, we participated in conferences with certain of the officers and representatives of, and the independent public accountants for, the Company, at which the Registration Statement and the Prospectuses were discussed. Between the date of effectiveness of the Registration Statement and the time of delivery of this letter, we attended additional conferences with certain of the officers and representatives of the Company, at which the contents of the Registration Statement and Prospectuses were discussed to a limited extent. Given the limitations inherent in the independent verification of factual matters and the character of determinations involved in the registration process, we are not passing upon or assuming any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectuses, except as specified in paragraph 10. Subject to the foregoing and on the basis of the information gained in the performance of the services referred to above, including information obtained from officers and other representatives of, and the independent public accountants for, the Company, no facts have come to our attention that cause us to believe that the Registration Statement, as of its effective date, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, or that the Prospectuses as of their date contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Also, subject to the foregoing, no facts have come to our attention in the course of proceedings described in the second sentence of this paragraph that cause us to believe that the Prospectuses, as of the date and time of delivery of this letter, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading. We express no view or belief, however, with respect to financial statements, notes or schedules thereto or other financial data included in or omitted from the Registration Statement or Prospectuses. The opinions set forth above are subject to the following additional qualifications and assumptions: A-6 51 (A) Our opinion is subject to (i) applicable bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance, reorganization, moratorium and other laws now or hereafter in effect affecting creditors' rights generally and (ii) general principles of equity (including, without limitation, standards of materiality, good faith, fair dealing and reasonableness), whether such principles are considered in a proceeding at law or equity. (B) Our opinion is subject to the effect of, and we express no opinion with respect to the application of or compliance with, state securities or Blue Sky laws. (C) For purposes of paragraphs 12, 13, 17 and 18 above, we have reviewed only those statutes, rules and regulations that in our experience are applicable to transactions of the type contemplated by the Purchase Agreements or for the offering, issuance, sale or delivery of the Shares. (D) For purposes of the opinion set forth in paragraph 11 above, we have endeavored, to the extent we have believed necessary, to determine from lawyers currently in our firm who have performed substantive legal services for the Company and Mettler whether such services involved substantive attention in the form of legal representation concerning pending legal proceedings of the nature referred to in such paragraph 11 and we have not made any review, search or investigation of public files or records or files or records of the Company or Mettler, or of their transactions, or any other investigation or inquiry with respect to such opinion. (E) We have assumed for purposes of the opinion set forth in paragraph 19 that (i) the registration of the transfer of the Shares to, and the registration of the Shares in the name of, Cede or another nominee designated by DTC, in each case on the Company's share transfer records, have been effected in accordance with the Company's Certificate of Incorporation and By-laws and with Delaware law, (ii) DTC is registered as a "clearing corporation" within the meaning of Section 8-102 of the UCC and (iii) DTC's "securities intermediary's jurisdiction" (within the meaning of Section 8-110(e) of the UCC) with respect to securities accounts established by DTC and any security entitlements in respect of the financial assets credited thereto is the State of New York. The opinions expressed herein are limited to the federal laws of the United States of America and the laws of the State of New York, and to the extent relevant to the opinions expressed above the General Corporation Law of the State of Delaware, as currently in effect. To the extent such opinion contains assumptions, conditions and limitations we arc incorporating such assumptions, conditions and limitations herein. We assume no obligations to supplement this letter if any applicable laws change after the date hereof or if we become aware of any facts that might change the opinions expressed herein after the date hereof. A-7 52 The opinions expressed herein are solely for your benefit and may not be relied upon in any manner or for any purpose by any other person and may not be quoted in whole or in part without our prior written consent. Very truly yours, FRIED, FRANK, HARRIS, SHRIVER & JACOBSON A-8 53 SCHEDULE I Mettler-Toldeo International Inc. None Mettler-Toldeo, Inc. [To Come] 54 Exhibit B FORM OF LOCAL COUNSEL OPINION TO BE DELIVERED PURSUANT TO SECTIONS 5(c) AND (d) i Each of [names of local subsidiaries] (collectively, the "Subsidiaries") has been duly incorporated and is validly existing as a corporation [in good standing]1 under laws of ______________, and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses; all of the issued and outstanding capital stock of each Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and, to our knowledge, is owned by ____________; to our knowledge, none of the outstanding shares of capital stock of any Subsidiary was issued in violation of the preemptive or similar rights of any securityholder of such Subsidiary arising under the laws of __________________ for the charter or by-laws of such Subsidiary. ii The execution, delivery and performance of the U.S. Purchase Agreement and the International Purchase Agreement and the consummation of the transactions contemplated in the U.S. Purchase Agreement, the International Purchase Agreement and in the Registration Statement (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described in the Prospectuses under the caption "Use Of Proceeds"), and the compliance by the Company, Holdings, and Mettler with their respective obligations under the U.S. Purchase Agreement and the International Purchase Agreement, do not and will not, whether with or without the giving of notice or lapse of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined in Section 1(a)(x) of the Purchase Agreements) under, or result in the creation or imposition of any Liens upon any property or assets of any Subsidiary pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any other agreement or instrument, known to us, to which a Subsidiary is a party or by which any of them may be bound, or to which any of the property or assets of the Subsidiaries is subject (except for Liens under the Credit Agreement and the Working Capital Facilities and such conflicts, breaches or defaults or liens, charges or encumbrances that would not have a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter or by-laws of the Subsidiaries, or any applicable law, statute, rule, regulation, judgment, order, writ or decree, known to us, of any government, government instrumentality or court of _________________ having jurisdiction over the Subsidiaries or any of their respective properties, assets or operations. - -------- 1 If concept is recognized in local jurisdiction. B-1 55 Exhibit C FORM OF OPINION OF CHRISTINE J. SMITH, ESQ. TO BE DELIVERED PURSUANT TO SECTION 5(E) (i) To my knowledge, the Company is not in violation of its Amended and Restated Certificate of Incorporation or amended By-laws. (ii) To my knowledge, there are no persons with registration rights or other similar rights arising under the Amended and Restated Certificate of Incorporation or amended By-laws of the Company or the corporation laws of the State of New York, Delaware General Corporation Law or United States federal securities laws to have any securities registered pursuant to the Registration Statement or otherwise registered by the Company under the 1933 Act, except for persons who have waived such rights or whose shares are included in the Registration Statement. (iii) The Custody Agreement and Power of Attorney of such Selling Stockholder has been duly authorized, executed and delivered by or on behalf of each Selling Stockholder. (iv) The execution, delivery and performance of the U.S. Purchase Agreement, the International Purchase Agreement and the Custody Agreement and Power of Attorney by or on behalf of such Selling Stockholder have been duly authorized by all necessary action on the part of such Selling Stockholder and, if applicable, do not and will not result in a violation of the charter or by-laws of such Selling Stockholder, and, to the best of such counsel's knowledge, without independent investment other than inquiry of such Selling Stockholder, do not and will not contravene or constitute a default under (A) any statute, rule or regulation relating to such Selling Stockholder or its legal or regulatory status, (B) any material judgment, order, decree, injunction or regulation of any court or governmental agency or body, domestic or foreign, having jurisdiction over the Selling Stockholder or (C) any material contract, agreement or other instrument to which such Selling Stockholder is a party or by which it is bound. C-1 56 Exhibit D FORM OF OPINION OF COUNSEL FOR THE SELLING SHAREHOLDER(S) TO BE DELIVERED PURSUANT TO SECTION 5(f) (Capitalized terms have the meaning given to them in the U.S. Purchase Agreement) (i) The Custody Agreement and Power of Attorney of such Selling Stockholder has been duly authorized, executed and delivered by or on behalf of each Selling Stockholder. (ii) The execution, delivery and performance of the U.S. Purchase Agreement, the International Purchase Agreement and the Custody Agreement and Power of Attorney by or on behalf of such Selling Stockholder have been duly authorized by all necessary action on the part of such Selling Stockholder and, if applicable, do not and will not result in a violation of the charter or by-laws of such Selling Stockholder, and, to the best of such counsel's knowledge, without independent investment other than inquiry of such Selling Stockholder, do not and will not contravene or constitute a default under (A) any statute, rule or regulation relating to such Selling Stockholder or its legal or regulatory status, (B) any material judgment, order, decree, injunction or regulation of any court or governmental agency or body, domestic or foreign, having jurisdiction over the Selling Stockholder or (C) any material contract, agreement or other instrument to which such Selling Stockholder is a party or by which it is bound. D-1 57 Exhibit E [Letterhead of Mettler-Toledo International Inc..] Litigation Certificate The undersigned, William P. Donnelly, hereby certifies that he is the Chief Financial Officer and James Bellerjeau, hereby certifies that he is the General Counsel of Mettler-Toledo International Inc., a Delaware corporation (the "Company"), and that, as such, we are authorized to execute and deliver this Certificate on behalf of the Company and, with reference to the Section 5(j) of the U.S. Purchase Agreement (the "U.S. Purchase Agreement"), dated _________________, among the Company, Mettler-Toledo, Inc. ("Mettler-Toledo"), a Delaware corporation, the Selling Shareholders listed in Schedule B thereto, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, _________________, as representatives of the underwriters listed in Schedule A to the U.S. Purchase Agreement, and Section 5(j) of the International Purchase Agreement (the "International Purchase Agreement" and together with the U.S. Purchase Agreement, the "Purchase Agreements"), dated ______________, 199_, among the Company, Mettler-Toledo, the Selling Shareholders listed in Schedule __ thereto, Merrill Lynch International, ____________________, as lead managers to the underwriters listed in Schedule A to the International Purchase Agreement, further certify, represent and warrant on behalf of the Company as follows (each capitalized term used herein without definition having the same meaning specified in the Purchase Agreements): (a) to the best of our knowledge, based upon certifications made by officers of the Company and its subsidiaries in the form attached hereto as Exhibit A, the undersigned have set forth in Exhibit B attached hereto all actions, suits, proceedings, inquiries or investigations before or brought by any court or governmental agency or body, domestic or foreign, pending or threatened against or affecting the Company or any of its subsidiaries, at the [Closing Time][Date of Delivery], where the maximum level of liability is equal to or greater than $250,000; (b) we further certify, represent and warrant on behalf of the Company that none of such actions, suits, proceedings, inquiries or investigations set forth in Exhibit B would reasonably be expected to have a Material Adverse Effect or would reasonably be expected to materially or adversely affect the property or assets of the Company or its subsidiaries or the consummation of the transactions contemplated in the Purchase Agreements or the performance by the Company or Mettler-Toledo of its obligations hereunder or thereunder; and E-1 58 (c) to the best of our knowledge, except as set forth on Exhibit B hereto, there are no actions, suits, proceedings, inquiries or investigations before or brought by any court or governmental agency or body, domestic or foreign, pending or threatened against or affecting the Company or its subsidiaries, at the [Closing Time][Date of Delivery], where the maximum level of liability is equal to or greater than $250,000 or that would otherwise be reasonably expected to materially or adversely affect the property or assets of the Company or its subsidiaries or the consummation of the transactions contemplated in the Purchase Agreements or the performance by the Company or Mettler-Toledo of its obligations hereunder and thereunder. E-2 59 WITNESS the signature of the undersigned this _____day of _______________,199_. _____________________________________ By: William P. Donnelly Title: Chief Financial Officer _____________________________________ By: James Bellerjeau Title: General Counsel E-3 60 Exhibit F [FORM OF LOCK-UP PURSUANT TO SECTION 5(o)] ________________, 199_ MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ___________________________ as Representatives of the several U.S. Underwriters c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 MERRILL LYNCH INTERNATIONAL ___________________________ as Representatives of the several International Underwriters c/o Merrill Lynch International Ropemaker Place 25 Ropemaker Street London, England, EC2Y 9LY Mettler-Toledo International Inc. Im Langacher P.O. Box MT-100 CH 8606, Greifensee, Switzerland Re: Proposed Public Offering Mettler-Toledo International Inc. Dear Sirs: The undersigned, a [stockholder] [and an officer and/or director] of Mettler-Toledo International Inc., a Delaware corporation (the "Company"), understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), ____________________ propose to enter into a U.S. Purchase Agreement (the "U.S. Purchase Agreement") with the Company and the Selling Shareholders, and Merrill Lynch International, ________________ propose to enter into an International Purchase Agreement (the "International Purchase Agreement") with the Company and the Selling Shareholders, each providing for the public offering (the "Offerings") of shares (the "Securities") of the Company's common stock, par value $.01 per share (the "Common Stock"). In recognition of the benefit that such an offering will confer upon the undersigned as a stockholder [and an officer and/or director] of the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with each underwriter to be named in the U.S. Purchase Agreement or the International Purchase F-1 61 Agreement that, during a period of 90 days from the date of the U.S. Purchase Agreement, the undersigned will not, without the prior written consent of Merrill Lynch, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any shares of the Company's Common Stock or any securities convertible into or exchangeable or exercisable for Common Stock (except through gifts to persons, trusts or other entities who agree in writing to be bound by the restrictions of this letter), or file any registration statement under the Securities Act of 1933, as amended, with respect to any of the foregoing, or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction is to be settled by delivery of Common Stock or other securities, in cash or otherwise; provided, however, that (i) the Company may file a registration statement on Form S-8 under the Securities Act of 1933 relating to Common Stock of the Company issued pursuant to the Company's stock option plan (the "Stock Plan"), and (ii) employees of the Company may exercise rights to acquire Common Stock pursuant to the Stock Plan. Sincerely, IF INDIVIDUAL: Print Name Signature IF CORPORATION, PARTNERSHIP OR TRUST: [print or type name of entity] By: Name: Title: F-2 EX-1.2 3 FORM OF INTERNATIONAL PURCHASE AGREEMENT 1 Exhibit 1.2 Draft - December 1, 1998 METTLER-TOLEDO INTERNATIONAL INC. (a Delaware corporation) ___________ Shares of Common Stock INTERNATIONAL PURCHASE AGREEMENT Dated: ___________, 199_ 2 TABLE OF CONTENTS U.S. PURCHASE AGREEMENT...........................................................................................1 SECTION 1. Representations and Warranties........................................................3 (a) Representations and Warranties by the Company and Mettler.............................3 (i) Compliance with Registration Requirements........................................4 (ii) Independent Accountants.........................................................4 (iii) Financial Statements...........................................................5 (iv) No Material Adverse Change in Business..........................................5 (v) Good Standing....................................................................6 (vi) Good Standing of Subsidiaries...................................................6 (vii) Capitalization.................................................................6 (viii) Authorization of Agreement....................................................7 (ix) Authorization and Description of Securities.....................................7 (x) Absence of Defaults and Conflicts................................................7 (xi) Absence of Labor Dispute........................................................8 (xii) Absence of Proceedings.........................................................8 (xiii) Accuracy of Exhibits..........................................................8 (xiv) Possession of Intellectual Property............................................8 (xv) Absence of Further Requirements.................................................9 (xvi) Possession of Licenses and Permits.............................................9 (xvii) Title to Property.............................................................9 (xviii) Investment Company Act......................................................10 (xix) Environmental Laws............................................................10 (xx) Registration Rights............................................................11 (xxi) Taxes.........................................................................11 (xxii) Accounting Controls..........................................................11 (xxiii) Insurance...................................................................11 (xxiv) Stabilization or Manipulation................................................12 (xxv) Certain Relationships.........................................................12 (xxvi) No Offering Material.........................................................12 (xxvii) Suppliers...................................................................12 (b) Representations and Warranties by the Selling Shareholders...........................12 (c) Officer's Certificates...............................................................14 SECTION 2. Sale and Delivery to International Managers; Closing.................................15 (a) Initial Securities...................................................................15 (b) Option Securities....................................................................15 (c) Payment..............................................................................16 (d) Denominations; Registration..........................................................16 SECTION 3. Covenants of the Company.............................................................16 (a) Compliance with Securities Regulations and Commission Requests.......................17 (b) Filing of Amendments.................................................................17 (c) Delivery of Registration Statements..................................................17 (d) Delivery of Prospectuses.............................................................17
I 3 (e) Continued Compliance with Securities Laws............................................18 (f) Blue Sky Qualifications..............................................................18 (g) Rule 158.............................................................................18 (h) Restriction on Sale of Securities....................................................19 (i) Reporting Requirements...............................................................19 SECTION 4. Payment of Expenses..................................................................19 (a) Expenses.............................................................................19 (b) Expenses of the Selling Shareholders.................................................20 (c) Termination of Agreement.............................................................20 SECTION 5. Conditions of International Managers' Obligations....................................20 (a) Effectiveness of Registration Statement..............................................20 (b) Opinion of Counsel for Company.......................................................21 (c) Opinion of German Counsel for the Company............................................21 (d) Opinion of Swiss Counsel for the Company.............................................21 (e) Opinion of Christine J. Smith, Esq...................................................21 (f) Opinion of Counsel for the Selling Shareholders......................................21 (g) Opinion of Counsel for International Managers........................................22 (h) Officers' Certificate................................................................22 (i) Certificate of Selling Shareholders..................................................22 (j) Litigation Certificate...............................................................22 (k) Accountant's Comfort Letter..........................................................23 (l) Bring-down Comfort Letter............................................................23 (m) Approval of Listing..................................................................23 (n) No Objection.........................................................................23 (o) Lock-up Agreements; Registration Rights..............................................23 (p) Purchase of Initial U.S. Securities..................................................23 (q) Conditions to Purchase of International Option Securities............................23 (i) Officers' Certificate...........................................................24 (ii) Certificate of Selling Shareholder.............................................24 (iii) Opinion of Counsel for Company................................................24 (iv) Opinion of Christine J. Smith, Esq.............................................24 (v) Opinion of Counsel for Selling Shareholders.....................................24 (vi) Opinion of Counsel for International Managers..................................24 (vii) Opinion of German Counsel for Company.........................................24 (viii) Opinion of Swiss Counsel for Company.........................................25 (ix) Bring-down Comfort Letter......................................................25 (x) Litigation Certificate..........................................................25 (r) Additional Documents.................................................................25 (s) Termination of Agreement.............................................................25 SECTION 6. Indemnification......................................................................25 (a) Indemnification of International Managers............................................25 (b) Indemnification of Selling Shareholders by the Company and Mettler .....................................................................................27 (c) Indemnification of Company, Directors and Officers and Selling Shareholders.........................................................................27
II 4 (d) Actions against Parties; Notification................................................28 (e) Settlement without Consent if Failure to Reimburse...................................28 (f) Other Agreements with Respect to Indemnification.....................................28 SECTION 7. Contribution.........................................................................28 SECTION 8. Representations, Warranties and Agreements to Survive Delivery.......................30 SECTION 9. Termination of Agreement.............................................................30 (a) Termination; General.................................................................30 (b) Liabilities..........................................................................31 SECTION 10. Default by One or More of the International Managers.................................31 SECTION 11. Default by one or more of the Selling Shareholders...................................32 SECTION 12. Notices..............................................................................32 SECTION 13. Parties..............................................................................32 SECTION 14. GOVERNING LAW AND TIME...............................................................33 SECTION 15. Effect of Headings...................................................................33 SCHEDULES Schedule A - List of Underwriters.........................................................Sch A-1 Schedule B - List of Selling Shareholders.................................................Sch B-1 Schedule C - Shares of Common Stock.......................................................Sch C-1 Schedule D - List of persons and entities subject to lock-up..............................Sch D-1 Schedule E - List of Selling Shareholders Delivering Opinions.............................Sch E-1 EXHIBITS Exhibit A - Form of Opinion of Company's Counsel..............................................A-1 Exhibit B - Form of Local Counsel Opinion.....................................................B-1 Exhibit C - Form of Opinion of Christine J. Smith, Esq........................................C-1 Exhibit D - Form of Opinion of Selling Shareholders' Counsel................................. D-1 Exhibit E - Form of Litigation Certificate of the Chief Financial Officer and the General Counsel of the Company.............................E-1 Exhibit F - Form of Lock-up Letter........................................................... F-1
III 5 METTLER-TOLEDO INTERNATIONAL INC. (a Delaware corporation) _____________________ Shares of Common Stock (Par Value $.01 Per Share) INTERNATIONAL PURCHASE AGREEMENT ________________, 199_ MERRILL LYNCH INTERNATIONAL ___________________________ as Lead Managers of the several International Managers c/o Merrill Lynch International Ropemaker Place 25 Ropemaker Street London EC2Y 9LY England Ladies and Gentlemen: Mettler-Toledo International Inc., a Delaware corporation (the "Company"), Mettler-Toledo, Inc. ("Mettler") and the persons listed on Schedule B hereto (the "Selling Shareholders"), confirm their agreement with Merrill Lynch International ("Merrill Lynch") and each of the other International Managers named in Schedule A hereto (collectively, the "International Managers", which term shall also include any underwriter substituted as hereinafter provided in Section 10) hereof), for whom Merrill Lynch and ________________________ are acting as representatives (in such capacity, the "Lead Managers"), with respect to (i) the sale by the Selling Shareholders, and the purchase by the International Managers, acting severally and not jointly, of the respective numbers of shares of Common Stock, par value $.01 per share, of the Company ("Common Stock") set forth in Schedules A and B hereto, and (ii) the grant by the Selling Shareholders to the International Managers, acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of _______________ additional shares of Common Stock to cover over-allotments, if any. The aforesaid ______________ shares of Common Stock (the "Initial International Securities") to be purchased by the U.S. Underwriters and all or any part of the _________________shares of Common Stock subject to the option described in Section 2(b) hereof (the "International Option Securities") are hereinafter called, collectively, the "International Securities". 6 It is understood that the Company and the Selling Shareholders are concurrently entering into an agreement dated the date hereof (the "U.S. Purchase Agreement") providing for the offering by the Selling Shareholders of an aggregate of _________ shares of Common Stock (the "Initial U.S. Securities") through arrangements with certain underwriters in the United States and Canada (the "U.S. Underwriters") for which Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and _____________________________________ are acting as representatives (the "U.S. Representatives"), and the grant by the Selling Shareholders to the U.S. Underwriters, acting severally and not jointly, of an option to purchase all or any part of the International Managers' pro rata portion of up to __________________ additional shares of Common Stock solely to cover overallotments, if any (the "U.S. Option Securities" and, together with the International Option Securities, the "Option Securities"). The Initial U.S. Securities and the U.S. Option Securities are hereinafter called the "U.S. Securities". It is understood that the Selling Shareholders are not obligated to sell and the International Managers are not obligated to purchase any Initial International Securities unless all of the Initial U.S. Securities are contemporaneously purchased by the U.S. Underwriters. The International Managers and the U.S. Underwriters are hereinafter collectively called the "Underwriters", the Initial International Securities and the Initial U.S. Securities are hereinafter collectively called the "Initial Securities", and the International Securities and the U.S. Securities are hereinafter collectively called the "Securities". The Underwriters will concurrently enter into an Intersyndicate Agreement of even date herewith (the "Intersyndicate Agreement") providing for the coordination of certain transactions among the Underwriters under the direction of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (in such capacity, the "Global Coordinator"). The Company and the Selling Shareholders understand that the International Managers propose to make a public offering of the International Securities as soon as the Lead Managers deem advisable after this Agreement has been executed and delivered. The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (No.__________) covering the registration of the Securities under the Securities Act of 1933, as amended (the "1933 Act"), including the related preliminary prospectus or prospectuses. Promptly after execution and delivery of this Agreement, the Company will either (i) prepare and file a prospectus in accordance with the provisions of Rule 430A ("Rule 430A") of the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). Two forms of prospectus are to be used in connection with the offering and sale of the Securities: one relating to the International Securities (the "Form of International Prospectus") and one 2 7 relating to the U.S. Securities (the "Form of U.S. Prospectus"). The Form of International Prospectus is identical to the Form of U.S. Prospectus, except for the front cover and back cover pages and the information under the caption "Underwriting." The information included in any such prospectus or in any such Term Sheet, as the case may be, that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434 Information". Each Form of International Prospectus and Form of U.S. Prospectus used before such registration statement became effective, and any prospectus that omitted, as applicable, the Rule 430A Information or the Rule 434 Information, that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a "preliminary prospectus". Such registration statement, including the exhibits thereto and schedules thereto at the time it became effective and including the Rule 430A Information and the Rule 434 Information, as applicable, is herein called the "Registration Statement". Any registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b) Registration Statement," and after such filing the term "Registration Statement" shall include the Rule 462(b) Registration Statement. The final Form of International Prospectus and the final Form of U.S. Prospectus in the forms first furnished to the Underwriters for use in connection with the offering of the Securities are herein called the "International Prospectus" and the "U.S. Prospectus", respectively, and collectively, the "Prospectuses". If Rule 434 is relied on, the terms "International Prospectus" and "U.S. Prospectus" shall refer to the preliminary International Prospectus, dated __________________, 199_ and preliminary U.S. Prospectus, dated ________________, 199_, respectively, each together with the applicable Term Sheet and all references in this Agreement to the date of such Prospectuses shall mean the date of the applicable Term Sheet. For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the International Prospectus, U.S. Prospectus or any Term Sheet or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). SECTION 1. Representations and Warranties. (a) Representations and Warranties by the Company and Mettler. The Company and Mettler, jointly and severally, represent and warrant to each International Manager as of the date hereof, as of the Closing Time referred to in Section 2(c) hereof and as of each Date of Delivery (if any) referred to in Section 2(b) hereof, and agree with each International Manager, as follows: (i) Compliance with Registration Requirements. Each of the Registration Statement and any Rule 462(b) Registration Statement has become effective under the 1933 Act and no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no 3 8 proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with. At the respective times the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendments thereto became effective and at the Closing Time (and, if any International Option Securities are purchased, at the Date of Delivery), the Registration Statement, the Rule 462(b) Registration Statement and any amendments and supplements thereto complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Neither of the Prospectuses nor any amendments or supplements thereto (including any prospectus wrapper), at the time the Prospectuses or any amendments or supplements thereto were issued and at the Closing Time (and, if any International Option Securities are purchased, at the Date of Delivery), included or will include an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If Rule 434 is used, the Company will comply with the requirements of Rule 434 and the Prospectuses shall not be "materially different", as such term is used in Rule 434, from the prospectuses included in the Registration Statement at the time it became effective. The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or the International Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by any Underwriter through Merrill Lynch expressly for use in the Registration Statement or the International Prospectus. Each preliminary prospectus and the prospectuses filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so filed in all material respects with the 1933 Act Regulations and each preliminary prospectus and the Prospectuses delivered to the Underwriters for use in connection with this offering was identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T of the 1933 Act Regulations. (ii) Independent Accountants. The accountants who certified the financial statements and supporting schedules included in the Registration Statement are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. 4 9 (iii) Financial Statements. The financial statements included in the Registration Statement and the Prospectuses, together with the related schedules and notes, present fairly the consolidated financial position of the Company and its subsidiaries and, in respect of the Predecessor Business (as defined in the Registration Statement under "Selected Historical Financial Information"), of the Company and its combined affiliated entities, as the case may be, at the dates indicated and the statement of operations, changes in net assets, stockholders' equity and cash flows of the Company and its consolidated subsidiaries and, in respect of the Predecessor Business, of the Company and its combined affiliated entities, as the case may be, for the periods specified; said financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules included in the Registration Statement present fairly in accordance with GAAP the information required to be stated therein. The selected financial data and the summary financial information included in the Prospectuses present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement. The pro forma information and the related notes thereto included in the Registration Statement and the Prospectuses present fairly the information shown therein, have been properly compiled on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. (iv) No Material Adverse Change in Business. Since the respective dates as of which information is given in the Registration Statement and the Prospectuses, except as otherwise stated therein, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and no material adverse effect on the ability of the Company or Mettler to enter into this Agreement or the U.S. Purchase Agreement or to consummate the transactions contemplated in this Agreement or the U.S. Purchase Agreement (any such material adverse change or effect, a "Material Adverse Effect"), (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise, and (C) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (v) Good Standing. The Company and Mettler have been duly organized and are validly existing as corporations in good standing under the laws of the State of Delaware and have corporate power and authority to own, lease and operate their properties and to conduct their business as described in the Prospectuses and to enter into and perform their obligations under this Agreement; and the Company and 5 10 Mettler are duly qualified as foreign corporations to transact business and are in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect. (vi) Good Standing of Subsidiaries. Each "significant subsidiary" of the Company (as such term is defined in Rule 1-02 of Regulation S-X) (each a "Subsidiary" and, collectively, the "Subsidiaries") has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; except for directors' qualifying shares or as otherwise disclosed in the Registration Statement, all of the issued and outstanding capital stock of each such Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity, except for any security interest, mortgage, pledge, lien, encumbrance, claim or equity created pursuant to the Credit Agreement (as defined in the Registration Statement) or under any local working capital facilities or interest protection agreements secured under the Credit Agreement (the "Other Secured Agreements"); and none of the outstanding shares of capital stock of any Subsidiary was issued in violation of the preemptive or similar rights of any securityholder of such Subsidiary. The only subsidiaries of the Company are (a) the subsidiaries listed on Exhibit 21 to the Company's registration statement on Form S-1 (Registration No. 333-35597) and (b) certain other subsidiaries which, considered in the aggregate as a single Subsidiary, do not constitute a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X. (vii) Capitalization. The authorized, issued and outstanding capital stock of the Company shall be as set forth in the Prospectuses under the caption "Capitalization" (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to reservations, agreements or employee benefit plans referred to in the Prospectuses or pursuant to the exercise of convertible securities or options referred to in the Prospectuses). The shares of issued and outstanding capital stock of the Company, including the Securities to be purchased by the Underwriters from the Selling Shareholders, have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock of the Company, including the Securities to be purchased by the Underwriters from the Selling 6 11 Shareholders, was issued in violation of the preemptive or other similar rights of any securityholder of the Company. (viii) Authorization of Agreement. This Agreement and the U.S. Purchase Agreement have been duly authorized, executed and delivered by the Company and Mettler. (ix) Description of Securities. The Common Stock conforms in all material respects to all statements relating thereto contained in the Prospectuses and such description conforms to the rights set forth in the instruments defining the same; no holder of the Securities will be subject to personal liability by reason of being such a holder. (x) Absence of Defaults and Conflicts. Neither the Company nor any of its subsidiaries is in violation of its charter or by-laws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any subsidiary is subject (collectively, "Agreements and Instruments"), except for (a) with respect to the Company's subsidiaries other than the Subsidiaries, such violations that would not result in a Material Adverse Effect, and (b) such defaults that would not result in a Material Adverse Effect; and the execution, delivery and performance of this Agreement and the U.S. Purchase Agreement by the Company or Mettler, the consummation by the Company or Mettler of the transactions contemplated in this Agreement and the U.S. Purchase Agreement and the transactions contemplated herein and in the Registration Statement (including the sale of the Securities), and compliance by the Company and Mettler with their obligations under this Agreement and the U.S. Purchase Agreement have been duly authorized by all necessary corporate action by the Company or Mettler, as the case may be, and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any subsidiary pursuant to, the Agreements and Instruments (except for (A) such conflicts, breaches or defaults or liens, charges or encumbrances that would not result in a Material Adverse Effect or (B) such liens, charges, or encumbrances as are created in connection with the execution, delivery and performance of the Credit Agreement or the Other Secured Agreements), nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any subsidiary or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any subsidiary or any of their assets, properties or 7 12 operations. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any subsidiary. (xi) Absence of Labor Dispute. No labor dispute with the employees of the Company or any subsidiary exists or, to the knowledge of the Company or Mettler, is imminent, and neither the Company nor Mettler is aware of any existing or imminent labor disturbance by the employees of any of its or any subsidiary's principal suppliers, manufacturers, customers or contractors, which, in either case, might reasonably be expected to result in a Material Adverse Effect. (xii) Absence of Proceedings. There is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company or Mettler, threatened, against or affecting the Company or any subsidiary, which is required to be disclosed in the Registration Statement (other than as disclosed therein), or which might reasonably be expected to result in a Material Adverse Effect or which might reasonably be expected to materially and adversely affect the properties or assets thereof or the consummation of the transactions contemplated in this Agreement or the U.S. Purchase Agreement or the performance by the Company and Mettler of their obligations hereunder or under the U.S. Purchase Agreement, and the aggregate of all pending legal or governmental proceedings to which the Company or any subsidiary is a party or of which any of their respective property or assets is the subject which are not described in the Registration Statement, including ordinary routine litigation incidental to the business, could not reasonably be expected to result in a Material Adverse Effect. (xiii) Accuracy of Exhibits. There are no contracts or documents which are required to be described in the Registration Statement or the Prospectuses or to be filed as exhibits thereto which have not been so described and filed as required. (xiv) Possession of Intellectual Property. The Company and its subsidiaries own or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, "Intellectual Property") necessary to carry on the business now operated by them except where the failure to so own, possess or acquire, singly and in the aggregate, would not result in a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any 8 13 Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect. (xv) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by the Company or Mettler of their obligations hereunder, in connection with the offering or sale of the Securities under this Agreement and the U.S. Purchase Agreement or the consummation of the transactions contemplated by this Agreement or the U.S. Purchase Agreement, except such as have been already obtained or as may be required under the 1933 Act or the 1933 Act Regulations and foreign or state securities or blue sky laws. (xvi) Possession of Licenses and Permits. The Company and its subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, "Governmental Licenses") issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by them except for such Governmental Licenses the failure of which to possess would not have a Material Adverse Effect; the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has received any written notice of any judicial or administrative proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. (xvii) Title to Property. The Company and its subsidiaries have good and marketable title to all real property owned by the Company and its subsidiaries and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (a) are described in the Prospectuses or as set forth in the Credit Agreement or the Other Secured Agreements, (b) do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its subsidiaries or (c) would not have a Material Adverse Effect; all of the leases and subleases material to the business of the Company and its subsidiaries, considered as 9 14 one enterprise, and under which the Company or any of its subsidiaries holds properties described in the Prospectuses, are in full force and effect; and neither the Company nor any subsidiary has any notice of any claim of any sort that has been asserted by anyone adverse to the rights of the Company or any subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease except for such claims as would not singly or in the aggregate result in a Material Adverse Effect. (xviii) Investment Company Act. Neither the Company nor Mettler is or upon (a) the sale of the Securities as herein contemplated or (b) the consummation of the transactions contemplated by this Agreement or the U.S. Purchase Agreement will be, an "investment company" as such term is defined in the Investment Company Act of 1940, as amended (the "1940 Act"). (xix) Environmental Laws. Except as described in the Registration Statement and except as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is in violation of any federal, state, local or foreign statute, law, regulation, ordinance, code, common law or any judicial or administrative interpretation thereof enforceable at law or in equity, including any applicable judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products subject to regulation under any environmental law (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials subject to regulation under any environmental law (collectively, "Environmental Laws"), (B) the Company and its subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or, to the knowledge of the Company or Mettler, threatened administrative, regulatory or judicial actions, suits, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its subsidiaries and (D) to the knowledge of the Company or Mettler, there are no events or circumstances that could reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against the Company or any of its subsidiaries relating to Hazardous Materials or any Environmental Laws. 10 15 (xx) Registration Rights. Except as described in the Registration Statement and the Prospectuses, no person has registration rights or other similar rights to have any securities of the Company registered by the Company under the 1933 Act. Except for persons whose shares have been included in the Registration Statement no persons who have registration rights or other similar rights relating to the Common Stock of the Company have any such rights to have Common Stock registered pursuant to the Registration Statement which have not been waived. There are no persons with registration rights or other similar rights to have any securities registered by the Company's subsidiaries under the 1933 Act. (xxi) Taxes. The Company and its subsidiaries have filed all tax returns that are required to have been filed by them pursuant to applicable law except insofar as the failure to file such returns would not result in a Material Adverse Effect, and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company and its subsidiaries, except for such taxes, if any, as are being contested in good faith by appropriate proceedings and as to which adequate reserves have been provided in accordance with GAAP, and except for the failure to pay such taxes which, individually and in the aggregate, would not have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its subsidiaries in respect of any tax liability for any years not finally determined are adequate in accordance with GAAP to meet any assessments or reassessments for additional tax for any years not finally determined, except to the extent of any inadequacy that would not result in a Material Adverse Effect. (xxii) Accounting Controls. The Company and its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management's general or specific authorization, (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets, (C) access to assets is permitted only in accordance with management's general or specific authorization and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (xxiii) Insurance. The Company and its subsidiaries carry or are entitled to the benefits of insurance, with financially sound and reputable insurers, in such amounts and covering such risks as is generally maintained by companies of established repute engaged in the same or similar business, and all policies with respect to such insurance are in full force and effect. (xxiv) Stabilization or Manipulation. Neither the Company nor any of its subsidiaries has taken, directly or indirectly, any action designed to cause or to result in, or that has constituted or which might reasonably be expected to constitute, the 11 16 stabilization or manipulation of the price of any security of any such entity to facilitate the sale or resale of the Securities. (xxv) Certain Relationships. No relationship, direct or indirect, exists between or among any of the Company and any of its subsidiaries or any affiliate of any such entity, on the one hand, and any director, officer, stockholder, customer or supplier of any of them, on the other hand, which is required by the 1933 Act or by the 1933 Act Regulations to be described in the Registration Statement or the Prospectuses which is not so described or is not described as required. (xxvi) No Offering Material. The Company and its subsidiaries have not distributed and, prior to the later to occur of (i) the Closing Time and (ii) completion of the distribution of the Securities, will not distribute any offering material in connection with the offering and sale of the Securities other than the Registration Statement, any preliminary prospectus, the Prospectus or other materials, if any, permitted by the 1933 Act and approved by the U.S. Representatives. (xxvii) Suppliers. No supplier of merchandise to the Company or any of its subsidiaries has ceased shipments of merchandise thereto, which cessation would result in a Material Adverse Effect. (b) Representations and Warranties by the Selling Shareholders. Each Selling Shareholder severally and not jointly represents and warrants to each Underwriter as of the date hereof, as of the Closing Time, and, if the Selling Shareholder is selling Option Securities on a Date of Delivery, as of each such Date of Delivery, and agrees with each Underwriter, as follows: (i) Such Selling Shareholder has reviewed and is familiar with the Registration Statement and the Prospectuses and the Prospectuses do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided that the representations and warranties made in this paragraph (i) shall be only with respect to the information furnished in writing by or on behalf of Such Shareholder expressly for use in the Registration Statement (or any amendment thereto). (ii) Such Selling Shareholder has full right, power and authority to execute, deliver and perform its obligations under this Agreement, the U.S. Purchase Agreement and the Power of Attorney and Custody Agreement, and to sell, transfer and deliver the Securities pursuant to this Agreement; and this Agreement, the U.S. Purchase Agreement and the Power of Attorney and Custody Agreement have been duly authorized, executed and delivered by or on behalf of such Selling Shareholder and constitutes a valid and binding agreement of such Selling Shareholder, enforceable against such Selling Shareholder in accordance with its terms, except as enforcement thereof may be limited 12 17 by bankruptcy, insolvency, reorganization or other similar laws relating to or affecting enforcement of creditors' rights generally or by general principles of equity. (iii) There is no action, suit or proceeding before or by any government, governmental instrumentality or court, domestic or foreign, now pending or, to the knowledge of such Selling Shareholder, threatened, to which such Selling Shareholder is or would be a party or of which the property of such Selling Shareholder is or may be subject, that (i) seeks to restrain, enjoin, prevent the consummation of or otherwise challenge the sale of Securities by such Selling Shareholder or any of the other transactions contemplated hereby or (ii) questions the legality or validity of any such transactions or seeks to recover damages or obtain other relief in connection with any such transactions. (iv) No filing, authorization, approval, consent, license, order, registration or qualification of or with any government, governmental instrumentality or court (other than under the 1933 Act and the 1933 Act Regulations and the securities or blue sky laws of the various states in connection with the sale of the Securities), domestic or foreign, is required by reason of facts specifically pertaining to such Selling shareholder or its legal or regulatory status in connection with the due authorization, execution and delivery by such Selling Shareholder of this Agreement, the U.S. Purchase Agreement or the Power of Attorney and Custody Agreement and the valid sale and delivery of the Securities to be sold by such Selling Shareholder hereunder and thereunder. (v) The execution, delivery and performance of this Agreement, the U.S. Purchase Agreement and the Power of Attorney and Custody Agreement by such Selling Shareholder, the sale of the Securities by such Selling Shareholder hereunder and thereunder, the consummation by such Selling Shareholder of the transactions herein and therein contemplated and the compliance by such Selling Shareholder with all the provisions of this Agreement, the U.S. Purchase Agreement and the Power of Attorney and Custody Agreement will not result in a violation of the charter or bylaws of such Selling Shareholders which are corporations or the partnership agreement or certificate of limited partnership, if applicable, of such Selling Shareholders which are partnerships and will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any material agreement or instrument to which such Selling Shareholder is a party or by which such Selling Shareholder is bound, nor will such action result in any violation of the provisions of any statute relating to such Selling Shareholders or its legal or regulatory status or any judgment, order, rule or regulation of any court or governmental agency or body having jurisdiction over such Selling Shareholder. (vi) Such Selling Shareholder has, and will at the Closing Time have, and, if such Selling Shareholder is selling Option Shares on a Date of Delivery, will on the Date of Delivery have, valid and marketable title to the Securities to be sold by the Selling 13 18 Shareholder pursuant to this Agreement and the U.S. Purchase Agreement, free and clear of any pledge, lien, security interest, charge, claim, equity or encumbrance of any kind; and, at the Closing Time and, if such Selling Shareholder is selling Option Shares on a Date of Delivery, at the Date of Delivery, upon delivery of the Securities to be sold by such Selling Shareholder and payment of the purchase price therefor as contemplated in this Agreement and the U.S. Purchase Agreement, each of the Underwriters will receive good and marketable title to the Securities purchased by it from such Selling Shareholder, free and clear of any security interest, mortgage, pledge, lien, charge, claim, equity or encumbrance of any kind. (vii) Certificates for all of the Securities to be sold by such Selling Shareholder pursuant to this Agreement and the U.S. Purchase Agreement, in suitable form for transfer by delivery or accompanied by duly executed instruments of transfer or assignment in blank with signatures guaranteed, have been placed in custody with the Custodian for delivery to the International Managers pursuant to this Agreement and the U.S. Underwriters pursuant to the U.S. Purchase Agreement. (viii) Such Selling Shareholder has not taken and will not take, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of the Common Stock; and such Selling Shareholder has not distributed and will not distribute any prospectus (as such term is defined in the 1933 Act and the 1933 Act Regulations) in connection with the offering and sale of the Securities other than any preliminary prospectus filed with the Commission or the Prospectuses or other material permitted by the 1933 Act or the 1933 Act Regulations. (ix) Except as described in the Registration Statement and the Prospectuses, neither such Selling Stockholder nor any of its affiliates directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, or has any other association with (within the meaning of Article I, Section 1(m) of the By-laws of the National Association of Securities Dealers, Inc.), any member firm of the National Association of Securities Dealers, Inc. (c) Officer's Certificates. Any certificate signed by any officer of the Company, Mettler or any of the Company's subsidiaries delivered to the Global Coordinator, the Lead Managers or to counsel for the International Managers shall be deemed a joint and several representation and warranty by the Company and Mettler to each International Manager as to the matters covered thereby; and any Certificate signed by or on behalf of the Selling Shareholders as such and delivered to the representatives or to counsel for the International Managers pursuant to the terms of this Agreement shall be deemed a representation and warranty by such Selling Shareholder to the International Managers as to the matters covered thereby. SECTION 2. Sale and Delivery to International Managers; Closing. 14 19 (a) Initial Securities. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, each Selling Shareholder, severally and not jointly, agrees to sell to each International Manager, severally and not jointly, and each International Manager, severally and not jointly, agrees to purchase from each Selling Shareholder, at the price per share set forth in Schedule C, that proportion of Initial International Securities set forth in Schedule B opposite the name of such Selling Shareholder which the number of Initial International Securities set forth in Schedule A opposite the name of such International Manager, plus any additional number of Initial International Securities which such International Manager may become obligated to purchase pursuant to the provisions of Section 10 hereof bears to the total number of Initial International Securities, subject, in each case, to such adjustments among the International Managers as the Lead Managers in their sole discretion shall make to eliminate any sales or purchases of fractional shares. (b) Option Securities. In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Selling Shareholders, acting severally and not jointly, hereby grant an option to the International Managers, severally and not jointly, to purchase up to an additional ______________ shares of Common Stock, as set forth in Schedule B, at the price per share set forth in Schedule C, less an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial International Securities but not payable on the International Option Securities. The option hereby granted will expire 30 days after the date hereof and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments which may be made in connection with the offering and distribution of the Initial International Securities upon notice by the Global Coordinator to the Selling Shareholders setting forth the number of International Option Securities as to which the several International Managers are then exercising the option and the time and date of payment and delivery for such International Option Securities. Any such time and date of delivery for the International Option Securities (a "Date of Delivery") shall be determined by the Global Coordinator, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time, as hereinafter defined. If the option is exercised as to all or any portion of the International Option Securities, each of the International Managers, acting severally and not jointly, will purchase that proportion of the total number of International Option Securities then being purchased which the number of Initial International Securities set forth in Schedule A opposite the name of such International Manager bears to the total number of Initial International Securities, subject in each case to such adjustments as the Global Coordinator in its discretion shall make to eliminate any sales or purchases of fractional shares. (c) Payment. Payment of the purchase price for, and delivery of certificates for, the Initial Securities shall be made at the offices of Debevoise & Plimpton, New York, New York 10022, or at such other place as shall be agreed upon by the Global Coordinator, the Company and the Selling Shareholders, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given day) business day after the date hereof (unless postponed in accordance with the provisions of Section 10), or such other time not later 15 20 than ten business days after such date as shall be agreed upon by the Global Coordinator and the Selling Shareholders (such time and date of payment and delivery being herein called "Closing Time"). In addition, in the event that any or all of the International Option Securities are purchased by the International Managers, payment of the purchase price for, and delivery of certificates for, such International Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Global Coordinator, the Company and the Selling Shareholders, on each Date of Delivery as specified in the notice from the Global Coordinator to the Selling Shareholders. Payment shall be made to the Selling Shareholders by wire transfer of immediately available funds to bank accounts designated by the Custodian pursuant to each Selling Shareholders' Power of Attorney and Custody Agreement, as the case may be, against delivery to the Lead Managers for the respective accounts of the International Managers of certificates for the International Securities to be purchased by them. It is understood that each International Manager has authorized the Lead managers, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial International Securities and the International Option Securities, if any, which it has agreed to purchase. Merrill Lynch, individually and not as representative of the International Managers, may (but shall not be obligated to) make payment of the purchase price for the Initial International Securities or the International Option Securities, if any, to be purchased by any International Manager whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such International Manager from its obligations hereunder. (d) Denominations; Registration. Certificates for the Initial International Securities and the International Option Securities, if any, shall be in such denominations and registered in such names as the Lead managers may request in writing at least one full business day before the Closing Time or the relevant Date of Delivery, as the case may be. The certificates for the Initial International Securities and the International Option Securities, if any, will be made available for examination and packaging by the Lead Managers in the City of New York not later than 10:00 A.M. (Eastern time) on the business day prior to the Closing Time or the relevant Date of Delivery, as the case may be. SECTION 3. Covenants of the Company. The Company covenants with each International Manager as follows: (a) Compliance with Securities Regulations and Commission Requests. The Company, subject to Section 3(b), will comply with the requirements of Rule 430A or Rule 434, as applicable, and will notify the Global Coordinator immediately, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective, or any supplement to the Prospectuses or any amended Prospectuses shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the 16 21 Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectuses or for additional information, and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes. The Company will promptly effect the filings necessary pursuant to Rule 424(b) and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment. (b) Filing of Amendments. The Company will give the Global Coordinator notice of its intention to file or prepare any amendment to the Registration Statement (including any filing under Rule 462(b)), any Term Sheet or any amendment, supplement or revision to either the prospectus included in the Registration Statement at the time it became effective or to the Prospectuses, will furnish the Global Coordinator with copies of any such documents a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such document to which the Global Coordinator or counsel for the International Managers shall object. (c) Delivery of Registration Statements. The Company has furnished or will deliver to the Lead Managers and counsel for the International Managers, without charge, signed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein) and signed copies of all consents and certificates of experts, and will also deliver to the Lead Managers, without charge, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the International Managers. The copies of the Registration Statement and each amendment thereto furnished to the International Managers will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (d) Delivery of Prospectuses. The Company has delivered to each International Manager, without charge, as many copies of each preliminary prospectus as such International Manager reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act. The Company will furnish to each International Manager, without charge, during the period when the International Prospectus is required to be delivered under the 1933 Act or the Securities Exchange Act of 1934 (the "1934 Act"), such number of copies of the International Prospectus (as amended or supplemented) as such International Manager may reasonably request. The International Prospectus and any amendments or supplements thereto furnished to the International Managers will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. 17 22 (e) Continued Compliance with Securities Laws. The Company will comply with the 1933 Act and the 1933 Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement, the U.S. Purchase Agreement and the Prospectuses. If at any time when a prospectus is required by the 1933 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the International Managers or for the Company, to amend the Registration Statement or amend or supplement any Prospectus in order that the Prospectuses will not include any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the opinion of such counsel, at any such time to amend the Registration Statement or amend or supplement any Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare and file with the Commission, subject to Section 3(b), such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectuses comply with such requirements, and the Company will furnish to the International Managers such number of copies of such amendment or supplement as the International Managers may reasonably request; provided, however, that if the date of any such amendment or supplement is more than 270 days after the date hereof, the preparation, filing and furnishing of such amendment or supplement shall be at the expense of the Underwriters. (f) Blue Sky Qualifications. The Company will use its best efforts, in cooperation with the International Managers, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Global Coordinator may designate and to maintain such qualifications in effect for a period of not less than one year from the later of the effective date of the Registration Statement and any Rule 462(b) Registration Statement; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. In each jurisdiction in which the Securities have been so qualified, the Company will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for a period of not less than one year from the effective date of the Registration Statement and any Rule 462(b) Registration Statement. (g) Rule 158. The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its securityholders as soon as practicable an earnings statement for the purposes of, and to provide the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act. (h) Restriction on Sale of Securities. During a period of 90 days from the date of the Prospectuses, the Company will not, without the prior written consent of the Global Coordinator, (i) offer, pledge, sell, contract to sell, sell any option 18 23 or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose or transfer any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file any registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Securities to be sold hereunder or under the U.S. Purchase Agreement, (B) any shares of Common Stock issued by the Company upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof and referred to in the Prospectuses, (C) any shares of Common Stock issued or options to purchase Common Stock granted pursuant to existing employee benefit plans of the Company referred to in the Prospectuses, (D) any shares of Common Stock issued pursuant to any non-employee director stock plan or dividend reinvestment plan, (E) the issuance of options under the Company's stock option plan and the exercise by the Company's employees of their rights relating thereto or (F) the filing of a registration statement on Form S-8 under the 1933 Act relating to Common Stock pursuant to the Company's stock option plan. (i) Reporting Requirements. The Company, during the period when the Prospectuses are required to be delivered under the 1933 Act or the 1934 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the rules and regulations of the Commission thereunder. SECTION 4. Payment of Expenses. (a) Expenses. The Company and Mettler, jointly and severally, will pay all expenses incident to the performance of their obligations under this Agreement, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and of each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of this Agreement, any Agreement among Underwriters and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Securities, (iii) the preparation, issuance and delivery of the certificates for the Securities to the Underwriters, including any stock or other transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Securities to the Underwriters and the transfer of the Securities between the U.S. Underwriters and the International Managers, (iv) the fees and disbursements of the Company's and the Selling Shareholder's counsel, accountants and other advisors, (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(f) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto (such fees and expenses of counsel not to exceed $5,000.00), (vi) the printing and delivery to the Underwriters of copies of each preliminary prospectus, any Term Sheets and of the Prospectuses and any amendments or supplements thereto, (vii) the preparation, printing and delivery to the Underwriters of copies of 19 24 the Blue Sky Survey and any supplement thereto, (viii) the fees and expenses of any transfer agent or registrar for the Securities, (ix) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by the National Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Securities and (x) the fees and expenses incurred in connection with the listing of the Securities on the NYSE. (b) Expenses of the Selling Shareholders. Except as provided in Section 4(a) above, the Selling Shareholders, severally and not jointly, will pay all expenses incident to the performance of their respective obligations under, and the consummation of the transactions contemplated by this Agreement, including any stamp duties, capital duties and stock transfer taxes, if any, payable upon the sale of the Securities to the International Managers, and their transfer between the Underwriters pursuant to an agreement between such Underwriters. (c) Termination of Agreement. If this Agreement is terminated by the International Managers in accordance with the provisions of Section 5(s) or Section 9(a)(i) or Section 11 hereof, the Company and Mettler shall reimburse the International Managers for all of their reasonable out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the International Managers. SECTION 5. Conditions of International Managers' Obligations. The obligations of the several International Managers hereunder are subject to the accuracy in all material respects of the representations and warranties of the Company, Mettler and the Selling Shareholders contained in Section 1 hereof or in certificates of any officer of the Company, Mettler or any subsidiary of the Company or on behalf of any Selling Shareholder delivered pursuant to the provisions hereof, to the performance by the Company and Mettler of their respective covenants and other obligations hereunder, and to the following further conditions: (a) Effectiveness of Registration Statement. The Registration Statement, including any Rule 462(b) Registration Statement, has become effective and at Closing Time no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel to the International Managers. A prospectus containing the Rule 430A Information shall have been filed with the Commission in accordance with Rule 424(b) (or a post-effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434, a Term Sheet shall have been filed with the Commission in accordance with Rule 424(b). (b) Opinion of Counsel for Company. At Closing Time, the Lead Managers shall have received the favorable opinion, dated as of Closing Time, of Fried, Frank, Harris, Shriver & Jacobson, special counsel for the Company and the Selling Shareholders, in form 20 25 and substance satisfactory to counsel for the International Managers, together with signed or reproduced copies of such letter for each of the other International Managers to the effect set forth in Exhibit A hereto and to such further effect as counsel to the International Managers may reasonably request. (c) Opinion of German Counsel for the Company. At Closing Time, the Lead Managers shall have received the favorable opinion, dated as of Closing Time, of Bruckhaus Westrick Stegemann, special German counsel for the Company, in form and substance satisfactory to counsel for the International Managers, together with signed or reproduced copies of such letter for each of the other International Managers to the effect set forth in Exhibit B hereto and to such further effect as counsel to the International Managers may reasonably request, with respect to each direct or indirect subsidiary of the Company or Mettler organized under the laws of Germany. (d) Opinion of Swiss Counsel for the Company. At Closing Time, the Lead Managers shall have received the favorable opinion, dated as of Closing Time, of Pestalozzi Gmuer & Patry, special Swiss counsel for the Company, in form and substance satisfactory to counsel for the International Managers, together with signed or reproduced copies of such letter for each of the other International Managers to the effect set forth in Exhibit B hereto and to such further effect as counsel to the International Managers may reasonably request, with respect to each direct or indirect subsidiary of the Company or Mettler organized under the laws of Switzerland. (e) Opinion of Christine J. Smith, Esq. At the Closing Time, Lead Managers shall have received the favorable opinion, dated as of the Closing Time, of Christine J. Smith, Esq., in form and substance satisfactory to counsel for the International Managers, together with signed or reproduced copies of such letter for each of the other International Managers to the effect set forth in Exhibit C hereto and to such further effect as counsel to the International Managers may reasonably request. (f) Opinion of Counsel for the Selling Shareholders. At Closing Time, the Lead Managers shall have received the favorable opinion, dated as of Closing Time, of counsel for each of the Selling Shareholders listed on Schedule E hereto, in form and substance satisfactory to counsel for the International Managers, together with signed or reproduced copies of such letter for each of the other International Managers to the effect set forth in Exhibit D hereto and to such further effect as counsel to the International Managers reasonably request (g) Opinion of Counsel for International Managers. At Closing Time, the Lead Managers shall have received the favorable opinion, dated as of Closing Time, of Debevoise & Plimpton, counsel for the International Managers, together with signed or reproduced copies of such letter for each of the other International Managers with respect to the matters set forth in clauses (1), (2), (5), (6) through (9), inclusive, (10) (solely as to the information in the Prospectus under "Description of Capital Stock--Common Stock") and the first full 21 26 paragraph of text following clause 19 of Exhibit A hereto. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York, the federal law of the United States and the General Corporation Law of the State of Delaware, upon the opinions of counsel satisfactory to the Lead Managers. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and its subsidiaries and certificates of public officials. (h) Officers' Certificate. At Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Prospectuses, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and the Lead Managers shall have received a certificate of the President or a Vice President of the Company and of the chief financial or chief accounting officer of each of the Company and Mettler, in each case dated as of Closing Time, to the effect that (i) there has been no such Material Adverse Effect, (ii) the representations and warranties in Section 1(a) hereof are true and correct in all material respects with the same force and effect as though expressly made at and as of Closing Time, (iii) each of the Company and Mettler has complied with all agreements and satisfied all conditions contained in this Agreement and the U.S. Purchase Agreement on its part to be performed or satisfied at or prior to Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and, to the knowledge of such officer no proceedings for that purpose have been instituted or are pending or are contemplated by the Commission. (i) Certificate of Selling Shareholders. At Closing Time, the Lead Managers shall have received a certificate of an Attorney-in-Fact on behalf of each Selling Shareholder, dated as of Closing Time, to the effect that (i) the representations and warranties of each Selling Shareholder contained in Section 1(b) hereof are true and correct in all respects with the same force and effect as though expressly made at and as of Closing Time and (ii) each Selling Shareholder has complied in all material respects with all agreements and all conditions on its part to be performed under this Agreement at or prior to Closing Time. (j) Litigation Certificate. At Closing Time, the Lead Managers shall have received a certificate of the chief financial officer and the general counsel of the Company, dated as of Closing Time, in form and substance satisfactory to counsel for the International Managers to the effect set forth in Exhibit E. (k) Accountant's Comfort Letter. At the time of the execution of this Agreement, the Lead Managers shall have received from KPMG Fides Peat a letter dated such date, in form and substance satisfactory to the Lead Managers, together with signed or reproduced copies of such letter for each of the other International Managers containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters 22 27 with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectuses. (l) Bring-down Comfort Letter. At Closing Time, the Lead Managers shall have received from KPMG Fides Peat a letter, dated as of Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (k) of this Section, except that the specified date referred to shall be a date not more than three business days prior to Closing Time. (m) Approval of Listing. At Closing Time, the Securities shall have been approved for listing on the NYSE. (n) No Objection. The NASD has confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements. (o) Lock-up Agreements; Registration Rights. At the date of this Agreement, the Lead Managers shall have received an agreement substantially in the form of Exhibit F hereto signed by the persons listed on Schedule D hereto. The Company shall have taken all required action so that no person (other than persons whose shares are included in the Registration Statement) who has registration rights or other similar rights relating to Common Stock of the Company to have Common Stock registered pursuant to the Registration Statement shall be permitted to exercise such rights; and no such person who has registration rights or other similar rights relating to the Common Stock of the Company to have Common Stock registered pursuant to the Registration Statement shall have exercised such rights (other than persons whose shares are included in the Registration Statement). (p) Purchase of Initial U.S. Securities. Contemporaneously with the purchase by the International Managers of the Initial International Securities under this Agreement, the U.S. Underwriters shall have purchased the Initial U.S. Securities under the U.S. Purchase Agreement. (q) Conditions to Purchase of International Option Securities. In the event that the International Managers exercise their option provided in Section 2(b) hereof to purchase all or any portion of the International Option Securities, the representations and warranties of the Company and the Selling Shareholders contained herein and the statements in any certificates furnished by the Company, any subsidiary of the Company or the Selling Shareholders hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery, the Lead Managers shall have received: (i) Officers' Certificate. A certificate, dated such Date of Delivery, of the President or a Vice President of each of the Company, Mettler and of the chief financial or chief accounting officer of each of the Company and Mettler confirming 23 28 that the certificate delivered at the Closing Time pursuant to Section 5(h) hereof remains true and correct as of such Date of Delivery. (ii) Certificate of Selling Shareholder. A certificate, dated such Date of Delivery, of an Attorney-in-Fact on behalf of each Selling Shareholder confirming that the certificate delivered at Closing Time pursuant to Section 5(i) remains true and correct as of such Date of Delivery. (iii) Opinion of Counsel for Company. The favorable opinion of Fried, Frank, Harris, Shriver & Jacobson, special counsel for the Company and the Selling Shareholders, in form and substance reasonably satisfactory to counsel for International Managers, dated such Date of Delivery, relating to the International Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(b) hereof. (iv) Opinion of Christine J. Smith, Esq. The favorable opinion of Christine J. Smith, Esq., dated such Date of Delivery, in form and substance reasonably satisfactory to counsel for the International Managers and otherwise to the same effect as the opinion required by Section 5(e) hereof. (v) Opinion of Counsel for Selling Shareholders. The favorable opinion of counsel for each of the Selling Shareholders listed on Schedule E hereto, in form and substance reasonably satisfactory to counsel for the International Managers, dated such Date of Delivery, relating to the International Option Securities to be purchased on such Date of Delivery, and otherwise to the same effect as the opinion required by Section 5(d) hereof. (vi) Opinion of Counsel for International Managers. The favorable opinion of Debevoise & Plimpton, counsel for the International Managers, dated such Date of Delivery, relating to the International Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(f) hereof. (vii) Opinion of German Counsel for Company. The favorable opinion of Bruckhaus Westrick Stegemann, special German counsel for the Company, in form and substance reasonably satisfactory to counsel for the International Managers, dated such Date of Delivery, relating to the International Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(c) hereof. (viii) Opinion of Swiss Counsel for Company. The favorable opinion of Pestalozzi Gmuer & Patry, special Swiss counsel for the Company, in form and substance reasonably satisfactory to counsel for the International Managers, dated such Date of Delivery, relating to the International Option Securities to be purchased on such Date of 24 29 Delivery and otherwise to the same effect as the opinion required by Section 5(d) hereof. (ix) Bring-down Comfort Letter. A letter from KPMG Fides Peat, in form and substance satisfactory to the Lead Managers and dated such Date of Delivery, and substantially in the same form and substance as the letter furnished to the Lead Managers pursuant to Section 5(l) hereof, except that the "specified date" in the letter furnished pursuant to this paragraph shall be a date not more than five days prior to such Date of Delivery. (x) Litigation Certificate. A certificate of the chief financial officer and the general counsel of the Company, dated such Date of Delivery, in form and substance satisfactory to counsel for the International Managers and otherwise to the same effect as the certificate required by Section 5(j) hereof. (r) Additional Documents. At Closing Time and at each Date of Delivery, counsel for the International Managers shall have been furnished with such documents and opinions as they may reasonably request for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company and the Selling Shareholders in connection with the sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Lead Managers and counsel for the International Managers. (s) Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of International Option Securities on a Date of Delivery which is after the Closing Time, the obligations of the several International Managers to purchase the relevant Option Securities, may be terminated by the Lead Managers by notice to the Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any such termination and remain in full force and effect. SECTION 6. Indemnification. (a) Indemnification of International Managers. Each of the Company, and Mettler, jointly and severally, agrees to indemnify and hold harmless each International Manager and each person, if any, who controls any International Manager within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: 25 30 (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus or the Prospectuses (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 6(e) below) any such settlement is effected with the written consent of the Company; (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense (a) to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any Underwriter through Merrill Lynch expressly for use in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary prospectus or the International Prospectus (or any amendment or supplement thereto) and (b) with respect to any preliminary prospectus to the extent that any such loss, liability, claim, damage or expense of such International Manager results solely from the fact that such International Manager sold Securities to a person as to whom the Company shall establish that there was not sent by commercially reasonable means, at or prior to the written confirmation of such sale, a copy of the International Prospectus in any case where such delivery is required by the 1933 Act, if the Company has previously furnished copies thereof in sufficient quantity to such International Manager and the loss, liability, claim, damage or expense of such International Manager results from an untrue statement or omission of a material fact contained in the preliminary prospectus that was corrected in the International Prospectus. 26 31 Each Selling Shareholder agrees, severally and not jointly, to indemnify and hold harmless each International Manager and each person, if any, who controls any International Manager within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, the Company, its directors, its officers who sign the Registration Statement, and any person who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as the foregoing indemnity from the Company and Mettler to each International Manager; provided however, that with respect to each Selling Shareholder, the indemnification provision in the paragraph shall be only with respect to the information furnished in writing by or on behalf of such Selling Shareholder expressly for use in the Registration Statement (or any amendment thereto), including Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary International prospectus or International Prospectus (or any amendment or supplement thereto); and provided, further, that the aggregate liability of any Selling Shareholder pursuant to this paragraph shall be limited to the net proceeds recovered by such Selling Shareholder from the Securities purchased by the Underwriters from such Selling Shareholder pursuant to this Agreement and the U.S. Purchase Agreement; and provided further, that no Selling Shareholder shall be liable for any untrue statement, omission or alleged omission of any other Selling Shareholder. (b) Indemnification of Selling Shareholders by the Company and Mettler. The Company and Mettler, jointly and severally, agree to indemnify and hold harmless each of the Selling Shareholders and each person, if any, who controls any Selling Shareholder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent that the Company and Mettler have agreed to indemnify and hold harmless each International Manager pursuant to the preceding paragraph; provided, however, the Company and Mettler shall not be liable under this paragraph to the extent any loss, liability, claim, damage or expense described in the preceding paragraph arises out of or is based upon an untrue statement, alleged untrue statement, omission or alleged omission based upon information relating to such Selling Shareholder expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the International Prospectus (or any amendment or supplement thereto). (c) Indemnification of Company, Directors and Officers and Selling Shareholders. Each International Manager severally agrees to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and each Selling Shareholder and each person, if any, who controls any Selling Shareholder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any 27 32 amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary International Prospectus or the International Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such International Manager through Merrill Lynch expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the International Prospectus (or any amendment or supplement thereto). (d) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Sections 6(b) and 6(c) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (e) Settlement without Consent if Failure to Reimburse. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(iii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. 28 33 (f) Other Agreements with Respect to Indemnification. The provisions of this Section shall not affect any agreement among the Company, Mettler and the Selling Shareholders with respect to indemnification. SECTION 7. Contribution. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, Mettler and the Selling Shareholders on the one hand and the International Managers on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, Mettler and the Selling Shareholders on the one hand and of the International Managers on the other hand in connection with the statements or omissions, which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company, Mettler and the Selling Shareholders on the one hand and the International Managers on the other hand in connection with the offering of the International Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the International Securities pursuant to this Agreement (before deducting expenses) received by the Company and the Selling Shareholders and the total underwriting discount received by the International Managers, in each case as set forth on the cover of the International Prospectus, or, if Rule 434 is used, the corresponding location on the Term Sheet, bear to the aggregate initial public offering price of the International Securities as set forth on such cover. The relative fault of the Company, Mettler and the Selling Shareholders on the one hand and the International Managers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, Mettler and the Selling Shareholders on the one hand or by the International Managers on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, Mettler, the Selling Shareholders and the International Managers agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the International Managers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this 29 34 Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 7, (i) no Selling Stockholder shall be required to contribute any amount in excess of the amount of the total net proceeds received by such Selling Stockholder from the International Securities purchased from such Selling Stockholder and (ii) no International Manager shall be required to contribute any amount in excess of the amount by which the total price at which the International Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such International Manager has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each person, if any, who controls an International Manager within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such International Manager, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company or any Selling Shareholder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company or such Selling Shareholder, as the case may be. The International Managers' respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial International Securities set forth opposite their respective names in Schedule A hereto and not joint. The provisions of this Section shall not affect any agreement among the Company, Mettler and the Selling Shareholders with respect to contribution. SECTION 8. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company, Mettler, any subsidiaries of the Company or the Selling Shareholders submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any International Manager or controlling person, or by or on behalf of the Company, Mettler or the Selling Shareholders, and shall survive delivery of the Securities to the International Managers. SECTION 9. Termination of Agreement. 30 35 (a) Termination; General. The Lead Managers may terminate this Agreement, by notice to the Company and the Selling Shareholders, at any time at or prior to Closing Time (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the International Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of Merrill Lynch, impracticable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the NYSE, or if trading generally on the American Stock Exchange, the NYSE or in the Nasdaq National Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other governmental authority, or (iv) if a banking moratorium has been declared by either Federal, New York or Swiss authorities. (b) Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 6 and 7 shall survive such termination and remain in full force and effect. SECTION 10. Default by One or More of the International Managers. If one or more of the International Managers shall fail at Closing Time or a Date of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the "Defaulted Securities"), Merrill Lynch shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting International Managers, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, Merrill Lynch shall not have completed such arrangements within such 24-hour period, then: (a) if the number of Defaulted Securities does not exceed 10% of the number of International Securities to be purchased on such date, each of the non-defaulting International Managers shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting International Managers, or (b) if the number of Defaulted Securities exceeds 10% of the number of International Securities to be purchased on such date, this Agreement or, with respect to any Date of Delivery which occurs after the Closing Time, the obligation of the 31 36 International Managers purchase and of the Company to sell the Option Securities to be purchased and sold on such Date of Delivery shall terminate without liability on the part of any non-defaulting International Manager. No action taken pursuant to this Section shall relieve any defaulting International Manager from liability in respect of its default. In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a termination of the obligation of the International Managers to purchase and the Company to sell the relevant International Option Securities, as the case may be, either (i) the Lead Managers or (ii) any Selling Shareholder shall have the right to postpone Closing Time or the relevant Date of Delivery, as the case may be, for a period not exceeding seven days in order to effect any required changes in the Registration Statement or Prospectus or in any other documents or arrangements. As used herein, the term "International Manager" includes any person substituted for an International Manager under this Section 10. SECTION 11. Default by one or more of the Selling Shareholders. (a) If a Selling Shareholder shall fail at Closing Time or at a Date of Delivery to sell and deliver the number of Securities which such Selling Shareholders are obligated to sell hereunder, and the remaining Selling Shareholders do not exercise the right hereby granted to increase, pro rata or otherwise, the number of Securities to be sold by them hereunder to the total number to be sold by all Selling Shareholders as set forth in Schedule B hereto, then the International Managers may, at option of the Lead Managers, by notice from the Lead Managers to the Company and the non-defaulting Selling Shareholders, either (i) terminate this Agreement without any liability on the fault of any non-defaulting party except that the provisions of Sections 1, 4, 6, 7 and 8 shall remain in full force and effect or (b) elect to purchase the Securities which the non-defaulting Selling Shareholders have agreed to sell hereunder. No action taken pursuant to this Section 11 shall relieve any Selling Shareholder so defaulting from liability, if any, in respect of such default. In the event of a default by any Selling Shareholder as referred to in this Section 11, each of the Lead Managers. the Company and the non-defaulting Selling Shareholders shall have the right to postpone Closing Time or Date of Delivery for a period not exceeding seven days in order to effect any required change in the Registration Statement or Prospectus or in any other documents or arrangements. SECTION 12. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the International Managers shall be directed to the Lead Managers c/o Merrill Lynch at North Tower, World Financial Center, New York, New York 10281-1201, attention of Syndicate Operations, with a copy to Debevoise & Plimpton, 875 Third 32 37 Avenue, New York, New York 10022, Attention: James C. Scoville; notices to the Company and Mettler shall be directed to the Company at Mettler-Toledo International Inc., Im Langacher, P.O. Box MT-100, CH 8606 Greifensee, Switzerland, Attention: William P. Donnelly, with a copy to Fried, Frank, Harris, Shriver & Jacobson, 4 Chiswell Street, London, EC1Y 4UP, Attention: Timothy E. Peterson; and notices to the Selling Shareholders shall be delivered to AEA Investors Inc., 65 East 55th Street, New York, New York 10022, attention of Christine J. Smith, Esq. SECTION 13. Parties. This Agreement shall inure to the benefit of and be binding upon the International Managers, the Company, Mettler and the Selling Shareholders and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the International Managers, the Company, Mettler and the Selling Shareholders and their respective successors and the controlling persons and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the International Managers, the Company, Mettler and the Selling Shareholders and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any International Manager shall be deemed to be a successor by reason merely of such purchase. SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. SECTION 15. Effect of Headings. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. 33 38 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company and the Attorney-in-Fact for the Selling Shareholders a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the International Managers, the Company, Mettler and the Selling Shareholders in accordance with its terms. Very truly yours, METTLER-TOLEDO INTERNATIONAL INC. By: Name: Title: METTLER-TOLEDO, INC. By:______________________________ Name: Title: EACH OF THE SELLING SHAREHOLDERS LISTED ON SCHEDULE B HERETO By:______________________________ As Attorney-in-Fact acting on behalf of the Selling Shareholders named in Schedule B hereto 34 39 CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH INTERNATIONAL __________________________________ By: MERRILL LYNCH INTERNATIONAL By _______________________________ Authorized Signatory For themselves and as Lead Managers of the other International Managers named in Schedule A hereto. 35 40 SCHEDULE A
Number of Initial International Name of International Underwriter Securities --------------------------------- -------------- Merrill Lynch International..................................... Total........................................................... ===========
Sch A - 1 41 SCHEDULE B
Maximum Number Number of Initial of Option Securities to be Securities to Shareholder Name Sold be Sold ---------------- ----------------- --------------- TOTAL
Sch B - 1 42 SCHEDULE C Shares of Common Stock (Par Value $.01 Per Share) 1. The initial public offering price per share for the Securities, determined as provided in said Section 2, shall be $______ . 2. The purchase price per share for the International Securities to be paid by the several International Managers shall be $ ______, being an amount equal to the initial public offering price set forth above less $_____ per share; provided that the purchase price per share for any U.S. Option Securities purchased upon the exercise of the over-allotment option described in Section 2(b) shall be reduced by an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial International Securities but not payable on the International Option Securities. Sch C - 1 43 SCHEDULE D List of persons and entities subject to lock-up Robert F. Spoerry William P. Donnelly Karl M. Lang Lukas Braunschweiler John D. Robechek Peter Burker Thomas Rubbe Philip Caldwell Reginald H. Jones John D. Macomber Laurence Z.Y. Moh Thoms P. Salice Each of the Selling Shareholders listed on Schedule B hereto. Sch D - 1 44 SCHEDULE E List of Selling Shareholders delivering opinions pursuant to Sections 5(f) and 5(q)(v) [To Come ] Sch E - 1 45 Exhibit A FORM OF OPINION OF FRIED, FRANK, HARRIS, SHRIVER & JACOBSON TO BE DELIVERED PURSUANT TO SECTION 5(b) ___________ , 199_ Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated ________________________________ as U.S. Representatives of the several U.S. Underwriters c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 Merrill Lynch International ________________________________ as Lead Managers of the several International Managers c/o Merrill Lynch International Ropemaker Place 25 Ropemaker Street London, England, EC2Y 9LY Ladies and Gentlemen: We are acting as special U.S. counsel to Mettler-Toledo International Inc., a Delaware corporation (the "Company"), in connection with the underwritten public offerings of _____________ shares of the Company's Common Stock (the "Shares"), pursuant to (i) a Purchase Agreement (the "U.S. Purchase Agreement"), dated as of __________, 199_, among the Company, certain shareholders of the Company listed on Schedule B to the U.S. Purchase Agreement (the "Selling, Shareholders"), Mettler-Toledo, Inc, a Delaware corporation ("Mettler"), and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, _______________ as representatives of the U.S. Underwriters, and (ii) an International Purchase Agreement (the "International Purchase Agreement," and together with the U.S. Purchase Agreement, the "Purchase Agreements"), dated as of ________________, 199_, among the Company, the Selling Shareholders, Mettler and Merrill Lynch International, ________________________, as representatives of the International Managers. This opinion is being delivered pursuant to Section 5(b) of each of the Purchase Agreements and simultaneously with the payment by A-1 46 the Underwriters to the Selling Shareholders for the Shares. Except as provided herein, all capitalized terms used herein which are defined in the Purchase Agreement have the respective meanings specified therein. With your permission, all assumptions and statements of reliance herein have been made without any independent investigation or verification on our part except to the extent otherwise expressly stated, and we express no opinion with respect to the subject matter or accuracy of such assumptions or items relied upon. In connection with this opinion, we have (i) investigated such questions of law, (ii) examined originals or certified, conformed or reproduction copies of such agreements, instruments, documents and records of the Company, its subsidiaries and the Selling Shareholders, such certificates of public officials and such other documents, and (iii) reviewed such information from officers and representatives of the Company and its subsidiaries, Selling Shareholders and others, in each case, as we have deemed necessary or appropriate for the purposes of this opinion. In all such examinations, we have assumed the legal capacity of all natural persons executing documents, the genuineness of all signatures on original or certified copies, the authenticity of all original or certified copies and the conformity to original or certified documents of all copies submitted to us as conformed or reproduction copies. As to various questions of fact relevant to the opinions expressed herein, we have relied upon, and assume the accuracy of, the statements made in the certificates of officers of the Company and its subsidiaries and the Selling Shareholders delivered to us, the representations and warranties contained in the Purchase Agreements and the Custody Agreements and certificates and oral or written statements and other information of or from public officials and officers and representatives of the Company, its subsidiaries, Selling Shareholders and others, and assume compliance on the part of all parties to the Purchase Agreements with their covenants and agreements contained therein. With respect to the opinions expressed in paragraph 3 below, we have relied solely upon a certificate or certificates of public officials of such jurisdictions, copies of which have been provided to you. With respect to the opinion expressed in paragraph 7 below regarding the effectiveness of the Registration Statement and the absence of any stop orders or proceedings for that purpose, we are relying upon the oral advice of the staff of the U.S. Securities and Exchange Commission (the "Commission"). To the extent it may be relevant to the opinions expressed herein, (i) we have assumed that the Power of Attorney and Custody Agreement of each Selling Shareholder has been duly authorized, executed and delivered by each party thereto and constitutes a valid and binding agreement of each such party other than such Selling Shareholder and (ii) we are relying upon oral advice of the staff of the Securities and Exchange Commission (the "Commission") that the Commission has issued an order declaring the Registration Statement (File No. _________) effective. Based upon the foregoing, and subject to the limitations, qualifications and assumptions set forth herein, we are of the opinion that: A-2 47 1. The Company has been duly incorporated and the Company and Mettler are validly existing as corporations in good standing under the laws of the State of Delaware. 2. Each of the Company and Mettler has the corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses and to enter into and perform its obligations under the Purchase Agreements. 3. Each of the Company and Mettler is duly qualified as a foreign corporation to transact business and is in good standing in the states listed on Schedule I to this opinion. 4. The authorized capital stock of the Company is as set forth in the Prospectuses under the caption "Capitalization." 5. All the outstanding shares of Common Stock (including the Shares to be sold by the Selling Shareholders) have been duly authorized and are validly issued, fully paid and non-assessable. 6. Each of the Purchase Agreements has been duly authorized, executed and delivered by the Company and Mettler. 7. The Registration Statement has been declared effective under the 1933 Act; any required filing of the Prospectuses pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); and, to the best of our knowledge, no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or threatened by the Commission. 8. The Registration Statement, including the Rule 430A Information and the Prospectuses as of their respective effective or issue dates (other than the financial statements, notes and schedules thereto and other financial data included therein or omitted therefrom, as to which we express no opinion) complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. 9. The form of certificate used to evidence the Common Stock complies in all material respects with all applicable requirements of the Delaware General Corporation Law, with any applicable requirements of the Amended and Restated Certificate of Incorporation and amended By-laws of the Company and the requirements of the NYSE. A-3 48 10. The information in the Prospectuses under "Description of Capital Stock," "Description of Credit Agreement "and "Certain United States Federal Tax Considerations For Non-United States Holders" and in the Registration Statement under Item 15, in each case to the extent that such information constitutes matters of law, summaries of legal matters or documents, has been reviewed by us and is correct in all material respects. 11. To our knowledge, there is not pending or threatened any action, suit, proceeding inquiry or investigation, to which the Company or Mettler is a party, or to which the property of the Company or Mettler is subject, before or brought by any New York, Delaware or federal court or New York, Delaware or federal governmental agency or body, which might reasonably be expected to result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the consummation of the transactions contemplated in the Purchase Agreements. 12. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any New York, Delaware or federal court or governmental authority or New York, Delaware or federal agency, is necessary or required in connection with the due authorization, execution and delivery of the Purchase Agreements or for the offering, sale or delivery of the Shares except such as have been obtained or as may be required under the 1933 Act or the 1933 Act Regulations and foreign or state securities or blue sky laws. 13. The execution and delivery by the Company and Mettler of, and the performance by their Company and Mettler of their obligations under, the Purchase Agreements did not and will not (i) contravene any provision of the certificates of incorporation and by-laws, in each case as amended, as the case may be, of the Company or Mettler, (ii) contravene any agreement or other instrument binding upon the Company or any of its subsidiaries that is listed as an exhibit to the Registration Statement or (iii) violate (x) any present statute, rule or regulation of any governmental agency or authority of the United States of America or the State of New York or Delaware (as it relates to the General Corporation Law of the State of Delaware) applicable to the Company or any subsidiary, or (y) any judgment or decree or order of any court or governmental agency or body of the United States of America or the State of New York or Delaware (as it relates to the General Corporation Law of the State of Delaware) known to us; provided, however, that we express no opinion with respect to any violation, breach or default arising under or based upon any cross-default provision insofar as such violation relates to a default under an agreement that is not an exhibit to the Registration Statement. A-4 49 14. The Company is not an "investment company" as such term is defined in the 1940 Act. 15. The Purchase Agreements have been duly authorized, executed and delivered by or on behalf of the Selling Shareholders. 16. The Power of Attorney and Custody Agreement of each Selling Shareholder constitutes a valid and binding agreement of such Selling Shareholder, subject to limitations imposed by federal or state securities laws or principles of public policy to enforcement of rights to indemnification and contribution. 17. The execution and delivery by or on behalf of each Selling Shareholder of, and the performance by such Selling Shareholder of its obligations under, the Purchase Agreements and the Power of Attorney and Custody Agreement of such Selling Shareholder will not contravene any provision of the laws of the State of Delaware (as it relates to the General Corporation Law of the State of Delaware), the State of New York or the federal laws of the United States applicable to each Selling Shareholder, provided that the foregoing opinion is limited to such laws which, in our experience, are normally applicable to public offerings of securities of the type contemplated by the Purchase Agreements excluding laws that are applicable to any Selling Shareholder solely because of its specific status (including regulatory status), other than its status as a selling shareholder. 18. No consent, approval, authorization or order of or qualification by the State of Delaware (as it relates to the General Corporation Law of the State of Delaware), State of New York or any federal governmental body or agency is required for the performance by such Selling Shareholder of its obligations under the Purchase Agreements or the Power of Attorney and Custody Agreement of such Selling Shareholder, except such as have been obtained under the 1933 Act or such as may be required by the securities or blue sky laws, in connection with the purchase and distribution of the Shares by the U.S. Underwriters, provided that the foregoing opinion is limited to such consents, approvals, authorizations, orders or qualifications which, in our experience, are normally applicable to public offerings of securities of the type contemplated by the Purchase Agreements excluding consents, approvals, authorizations, orders or qualifications that are applicable to any Selling Shareholder solely because of its specific status (including regulatory status), other than its status as a selling shareholder. 19. Upon (i) payment for the Shares as provided in the Purchase Agreements, (ii) registration of the transfer of the Shares to, and registration of the Shares in the name of, Cede & Co. ("Cede") or such other nominee as may be designated by the Depository Trust Company ("DTC") and (iii) the crediting of A-5 50 the Shares on the books of DTC to the securities accounts (within the meaning of Section 8-501 of the Uniform Commercial Code as currently in effect in the State of New York ("the UCC")) of the various Underwriters (assuming that each of the Underwriters lacks notice of any "adverse claim" (within the meaning of Section 8-102 of the UCC) to the Shares), (a) the Underwriters will acquire valid "security entitlements" in respect of the Shares (within the meaning of Section 8-102 of the UCC) and (b) no action based on any "adverse claim" (within the meaning of Section 8-102 of the UCC) to the Shares may be asserted against the Underwriters with respect to such security entitlements. In addition, in the course of the preparation by the Company of the Registration Statement and the Prospectuses, we participated in conferences with certain of the officers and representatives of, and the independent public accountants for, the Company, at which the Registration Statement and the Prospectuses were discussed. Between the date of effectiveness of the Registration Statement and the time of delivery of this letter, we attended additional conferences with certain of the officers and representatives of the Company, at which the contents of the Registration Statement and Prospectuses were discussed to a limited extent. Given the limitations inherent in the independent verification of factual matters and the character of determinations involved in the registration process, we are not passing upon or assuming any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectuses, except as specified in paragraph 10. Subject to the foregoing and on the basis of the information gained in the performance of the services referred to above, including information obtained from officers and other representatives of, and the independent public accountants for, the Company, no facts have come to our attention that cause us to believe that the Registration Statement, as of its effective date, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, or that the Prospectuses as of their date contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Also, subject to the foregoing, no facts have come to our attention in the course of proceedings described in the second sentence of this paragraph that cause us to believe that the Prospectuses, as of the date and time of delivery of this letter, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading. We express no view or belief, however, with respect to financial statements, notes or schedules thereto or other financial data included in or omitted from the Registration Statement or Prospectuses. The opinions set forth above are subject to the following additional qualifications and assumptions: A-6 51 (A) Our opinion is subject to (i) applicable bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance, reorganization, moratorium and other laws now or hereafter in effect affecting creditors' rights generally and (ii) general principles of equity (including, without limitation, standards of materiality, good faith, fair dealing and reasonableness), whether such principles are considered in a proceeding at law or equity. (B) Our opinion is subject to the effect of, and we express no opinion with respect to the application of or compliance with, state securities or Blue Sky laws. (C) For purposes of paragraphs 12, 13, 17 and 18 above, we have reviewed only those statutes, rules and regulations that in our experience are applicable to transactions of the type contemplated by the Purchase Agreements or for the offering, issuance, sale or delivery of the Shares. (D) For purposes of the opinion set forth in paragraph 11 above, we have endeavored, to the extent we have believed necessary, to determine from lawyers currently in our firm who have performed substantive legal services for the Company and Mettler whether such services involved substantive attention in the form of legal representation concerning pending legal proceedings of the nature referred to in such paragraph 11 and we have not made any review, search or investigation of public files or records or files or records of the Company or Mettler, or of their transactions, or any other investigation or inquiry with respect to such opinion. (E) We have assumed for purposes of the opinion set forth in paragraph 19 that (i) the registration of the transfer of the Shares to, and the registration of the Shares in the name of, Cede or another nominee designated by DTC, in each case on the Company's share transfer records, have been effected in accordance with the Company's Certificate of Incorporation and By-laws and with Delaware law, (ii) DTC is registered as a "clearing corporation" within the meaning of Section 8-102 of the UCC and (iii) DTC's "securities intermediary's jurisdiction" (within the meaning of Section 8-110(e) of the UCC) with respect to securities accounts established by DTC and any security entitlements in respect of the financial assets credited thereto is the State of New York. The opinions expressed herein are limited to the federal laws of the United States of America and the laws of the State of New York, and to the extent relevant to the opinions expressed above the General Corporation Law of the State of Delaware, as currently in effect. To the extent such opinion contains assumptions, conditions and limitations we arc incorporating such assumptions, conditions and limitations herein. We assume no obligations to supplement this letter if any applicable laws change after the date hereof or if we become aware of any facts that might change the opinions expressed herein after the date hereof. A-7 52 The opinions expressed herein are solely for your benefit and may not be relied upon in any manner or for any purpose by any other person and may not be quoted in whole or in part without our prior written consent. Very truly yours, FRIED, FRANK, HARRIS, SHRIVER & JACOBSON A-8 53 SCHEDULE I Mettler-Toldeo International Inc. None Mettler-Toldeo, Inc. [To Come] 54 Exhibit B FORM OF LOCAL COUNSEL OPINION TO BE DELIVERED PURSUANT TO SECTIONS 5(c) AND (d) i Each of [names of local subsidiaries] (collectively, the "Subsidiaries") has been duly incorporated and is validly existing as a corporation [in good standing]1 under laws of ______________, and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses; all of the issued and outstanding capital stock of each Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and, to our knowledge, is owned by ____________; to our knowledge, none of the outstanding shares of capital stock of any Subsidiary was issued in violation of the preemptive or similar rights of any securityholder of such Subsidiary arising under the laws of __________________ for the charter or by-laws of such Subsidiary. ii The execution, delivery and performance of the U.S. Purchase Agreement and the International Purchase Agreement and the consummation of the transactions contemplated in the U.S. Purchase Agreement, the International Purchase Agreement and in the Registration Statement (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described in the Prospectuses under the caption "Use Of Proceeds"), and the compliance by the Company, Holdings, and Mettler with their respective obligations under the U.S. Purchase Agreement and the International Purchase Agreement, do not and will not, whether with or without the giving of notice or lapse of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined in Section 1(a)(x) of the Purchase Agreements) under, or result in the creation or imposition of any Liens upon any property or assets of any Subsidiary pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any other agreement or instrument, known to us, to which a Subsidiary is a party or by which any of them may be bound, or to which any of the property or assets of the Subsidiaries is subject (except for Liens under the Credit Agreement and the Working Capital Facilities and such conflicts, breaches or defaults or liens, charges or encumbrances that would not have a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter or by-laws of the Subsidiaries, or any applicable law, statute, rule, regulation, judgment, order, writ or decree, known to us, of any government, government instrumentality or court of _________________ having jurisdiction over the Subsidiaries or any of their respective properties, assets or operations. - -------- 1 If concept is recognized in local jurisdiction. B-1 55 Exhibit C FORM OF OPINION OF CHRISTINE J. SMITH, ESQ. TO BE DELIVERED PURSUANT TO SECTION 5(E) (i) To my knowledge, the Company is not in violation of its Amended and Restated Certificate of Incorporation or amended By-laws. (ii) To my knowledge, there are no persons with registration rights or other similar rights arising under the Amended and Restated Certificate of Incorporation or amended By-laws of the Company or the corporation laws of the State of New York, Delaware General Corporation Law or United States federal securities laws to have any securities registered pursuant to the Registration Statement or otherwise registered by the Company under the 1933 Act, except for persons who have waived such rights or whose shares are included in the Registration Statement. (iii) The Custody Agreement and Power of Attorney of such Selling Stockholder has been duly authorized, executed and delivered by or on behalf of each Selling Stockholder. (iv) The execution, delivery and performance of the U.S. Purchase Agreement, the International Purchase Agreement and the Custody Agreement and Power of Attorney by or on behalf of such Selling Stockholder have been duly authorized by all necessary action on the part of such Selling Stockholder and, if applicable, do not and will not result in a violation of the charter or by-laws of such Selling Stockholder, and, to the best of such counsel's knowledge, without independent investment other than inquiry of such Selling Stockholder, do not and will not contravene or constitute a default under (A) any statute, rule or regulation relating to such Selling Stockholder or its legal or regulatory status, (B) any material judgment, order, decree, injunction or regulation of any court or governmental agency or body, domestic or foreign, having jurisdiction over the Selling Stockholder or (C) any material contract, agreement or other instrument to which such Selling Stockholder is a party or by which it is bound. C-1 56 Exhibit D FORM OF OPINION OF COUNSEL FOR THE SELLING SHAREHOLDER(S) TO BE DELIVERED PURSUANT TO SECTION 5(f) (Capitalized terms have the meaning given to them in the U.S. Purchase Agreement) (i) The Custody Agreement and Power of Attorney of such Selling Stockholder has been duly authorized, executed and delivered by or on behalf of each Selling Stockholder. (ii) The execution, delivery and performance of the U.S. Purchase Agreement, the International Purchase Agreement and the Custody Agreement and Power of Attorney by or on behalf of such Selling Stockholder have been duly authorized by all necessary action on the part of such Selling Stockholder and, if applicable, do not and will not result in a violation of the charter or by-laws of such Selling Stockholder, and, to the best of such counsel's knowledge, without independent investment other than inquiry of such Selling Stockholder, do not and will not contravene or constitute a default under (A) any statute, rule or regulation relating to such Selling Stockholder or its legal or regulatory status, (B) any material judgment, order, decree, injunction or regulation of any court or governmental agency or body, domestic or foreign, having jurisdiction over the Selling Stockholder or (C) any material contract, agreement or other instrument to which such Selling Stockholder is a party or by which it is bound. D-1 57 Exhibit E [Letterhead of Mettler-Toledo International Inc..] Litigation Certificate The undersigned, William P. Donnelly, hereby certifies that he is the Chief Financial Officer and James Bellerjeau, hereby certifies that he is the General Counsel of Mettler-Toledo International Inc., a Delaware corporation (the "Company"), and that, as such, we are authorized to execute and deliver this Certificate on behalf of the Company and, with reference to the Section 5(j) of the U.S. Purchase Agreement (the "U.S. Purchase Agreement"), dated _________________, among the Company, Mettler-Toledo, Inc. ("Mettler-Toledo"), a Delaware corporation, the Selling Shareholders listed in Schedule B thereto, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, _________________, as representatives of the underwriters listed in Schedule A to the U.S. Purchase Agreement, and Section 5(j) of the International Purchase Agreement (the "International Purchase Agreement" and together with the U.S. Purchase Agreement, the "Purchase Agreements"), dated ______________, 199_, among the Company, Mettler-Toledo, the Selling Shareholders listed in Schedule __ thereto, Merrill Lynch International, ____________________, as lead managers to the underwriters listed in Schedule A to the International Purchase Agreement, further certify, represent and warrant on behalf of the Company as follows (each capitalized term used herein without definition having the same meaning specified in the Purchase Agreements): (a) to the best of our knowledge, based upon certifications made by officers of the Company and its subsidiaries in the form attached hereto as Exhibit A, the undersigned have set forth in Exhibit B attached hereto all actions, suits, proceedings, inquiries or investigations before or brought by any court or governmental agency or body, domestic or foreign, pending or threatened against or affecting the Company or any of its subsidiaries, at the [Closing Time][Date of Delivery], where the maximum level of liability is equal to or greater than $250,000; (b) we further certify, represent and warrant on behalf of the Company that none of such actions, suits, proceedings, inquiries or investigations set forth in Exhibit B would reasonably be expected to have a Material Adverse Effect or would reasonably be expected to materially or adversely affect the property or assets of the Company or its subsidiaries or the consummation of the transactions contemplated in the Purchase Agreements or the performance by the Company or Mettler-Toledo of its obligations hereunder or thereunder; and E-1 58 (c) to the best of our knowledge, except as set forth on Exhibit B hereto, there are no actions, suits, proceedings, inquiries or investigations before or brought by any court or governmental agency or body, domestic or foreign, pending or threatened against or affecting the Company or its subsidiaries, at the [Closing Time][Date of Delivery], where the maximum level of liability is equal to or greater than $250,000 or that would otherwise be reasonably expected to materially or adversely affect the property or assets of the Company or its subsidiaries or the consummation of the transactions contemplated in the Purchase Agreements or the performance by the Company or Mettler-Toledo of its obligations hereunder and thereunder. E-2 59 WITNESS the signature of the undersigned this ________ day of ____________,199_. ___________________________________ By: William P. Donnelly Title: Chief Financial Officer ___________________________________ By: James Bellerjeau Title: General Counsel E-3 60 Exhibit F [FORM OF LOCK-UP PURSUANT TO SECTION 5(o)] ________________, 199_ MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED _____________________________ as Representatives of the several U.S. Underwriters c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 MERRILL LYNCH INTERNATIONAL _____________________________ as Representatives of the several International Underwriters c/o Merrill Lynch International Ropemaker Place 25 Ropemaker Street London, England, EC2Y 9LY Mettler-Toledo International Inc. Im Langacher P.O. Box MT-100 CH 8606, Greifensee, Switzerland Re: Proposed Public Offering Mettler-Toledo International Inc. Dear Sirs: The undersigned, a [stockholder] [and an officer and/or director] of Mettler-Toledo International Inc., a Delaware corporation (the "Company"), understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), ____________________ propose to enter into a U.S. Purchase Agreement (the "U.S. Purchase Agreement") with the Company and the Selling Shareholders, and Merrill Lynch International, ________________ propose to enter into an International Purchase Agreement (the "International Purchase Agreement") with the Company and the Selling Shareholders, each providing for the public offering (the "Offerings") of shares (the "Securities") of the Company's common stock, par value $.01 per share (the "Common Stock"). In recognition of the benefit that such an offering will confer upon the undersigned as a stockholder [and an officer and/or director] of the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with each underwriter to be named in the U.S. Purchase Agreement or the International Purchase F-1 61 Agreement that, during a period of 90 days from the date of the U.S. Purchase Agreement, the undersigned will not, without the prior written consent of Merrill Lynch, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any shares of the Company's Common Stock or any securities convertible into or exchangeable or exercisable for Common Stock (except through gifts to persons, trusts or other entities who agree in writing to be bound by the restrictions of this letter), or file any registration statement under the Securities Act of 1933, as amended, with respect to any of the foregoing, or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction is to be settled by delivery of Common Stock or other securities, in cash or otherwise; provided, however, that (i) the Company may file a registration statement on Form S-8 under the Securities Act of 1933 relating to Common Stock of the Company issued pursuant to the Company's stock option plan (the "Stock Plan"), and (ii) employees of the Company may exercise rights to acquire Common Stock pursuant to the Stock Plan. Sincerely, IF INDIVIDUAL: Print Name Signature IF CORPORATION, PARTNERSHIP OR TRUST: [print or type name of entity] By: Name: Title: F-2 EX-5.1 4 OPINION OF FRIED, FRANK, HARRIS SHRIVER & JACOBSON 1 Exhibit 5.1 (Letterhead of Fried, Frank, Harris, Shriver & Jacobson) January 6, 1999 Mettler-Toledo International Inc. Im Langacher P.O. Box MT-100 CH 8606 Greifensee, Switzerland Ladies and Gentlemen: We are acting as special counsel to Mettler-Toledo International Inc., a Delaware corporation (the "Company"), in connection with the preparation and filing with the U.S. Securities and Exchange Commission under the U.S. Securities Act of 1933, as amended (the "Securities Act"), of a registration statement on Form S-3 (Registration No. 333-68123) (the "Registration Statement) pertaining to the registration of a proposed offering of up to 6,425,050 shares (the "Selling Shareholder Shares") of the Company's common stock, par value $.01 per share (the "Common Stock"), which are proposed to be offered to the public by certain shareholders of the Company. With your permission, all assumptions and statements of reliance herein have been made without any independent investigation or verification on our part except to the extent otherwise expressly stated, and we express no opinion with respect to the subject matter or accuracy of such assumptions or items relied upon. For purposes of this opinion, we have examined the originals, or certified, conformed or reproduction copies, of all records, agreements, instruments and documents as we have deemed relevant or necessary as the basis for the opinions hereinafter expressed. In all such examinations, we have assumed the genuineness of all signatures on original or certified copies and the conformity to original or certified copies of all copies submitted to us as conformed or reproduction copies. As to various questions of fact relevant to such opinions, we have relied upon certificates and statements of public officials and officers or representatives of the Company and of others. Based upon the foregoing and subject to the limitations set forth herein, it is our opinion that the Common Stock has been duly authorized and the Selling Shareholder Shares have been duly and validly issued and are fully paid and nonassessable. 2 Mettler-Toledo International Inc. -2- January 6, 1999 This opinion is limited to the General Corporation Law of the State of Delaware. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm under the caption "Legal Matters" in the Prospectuses forming part of the Registration Statement to the extent that a "Legal Matters" section is included in such Prospectuses. In giving such consent, we do not hereby admit that we are in the category of such persons whose consent is required under Section 7 of the Securities Act. Very truly yours, FRIED, FRANK, HARRIS, SHRIVER & JACOBSON By: /s/ Timothy E. Peterson -------------------------------------------- Timothy E. Peterson EX-23.2 5 CONSENT OF KPMG FIDES PEAT 1 Exhibit 23.2 INDEPENDENT AUDITORS' CONSENT The Board of Directors Mettler-Toledo International Inc.: We consent to the use of our reports included and incorporated by reference therein and to the reference to our firm under the headings "Summary Financial Information," "Selected Historical Financial Information" and "Independent Auditors" in the prospectus. KPMG Fides Peat Zurich, Switzerland January 6, 1999 2 -----END PRIVACY-ENHANCED MESSAGE-----