<PAGE>
Rule 424(b)(4)
Registration No. 333-09621
PROSPECTUS [LOGO]
$135,000,000
METTLER-TOLEDO, INC.
GUARANTEED ON A SENIOR SUBORDINATED BASIS BY
METTLER-TOLEDO HOLDING INC.
9 3/4% SENIOR SUBORDINATED NOTES DUE 2006
------------------------
MT Acquisition Corp., a Delaware corporation, was organized by AEA
Investors Inc. to effect the acquisition of companies constituting the
Mettler-Toledo Group from Ciba-Geigy AG. The 9 3/4% Senior Subordinated Notes
due 2006 (the 'Notes') are being offered hereby (the 'Offering') in connection
with the Acquisition. The net proceeds from the Offering will provide a portion
of the financing for the Acquisition. The Offering will occur concurrently with,
and will be conditioned upon, the consummation of the Acquisition. The Offering
is contingent upon the assumption by Mettler-Toledo, Inc. of all liabilities
under the Securities Act of 1933, as amended, of MT Acquisition Corp., as issuer
of the Notes, which assumption will be executed simultaneously with the issuance
of the Notes. Following the issuance of the Notes, MT Acquisition Corp. will be
merged with and into Mettler-Toledo, Inc., and Mettler-Toledo, Inc. will become
the successor obligor of the Notes after such merger. As used herein, the
'Issuer' means MT Acquisition Corp. and, after giving effect to the Acquisition,
Mettler-Toledo, Inc. See 'The Acquisition.' Interest on the Notes will be
payable semiannually on April 1 and October 1 of each year, commencing April 1,
1997. The Notes will not be redeemable prior to October 1, 2001, except that at
any time on or prior to December 1, 1999, the Issuer, at its option, may redeem
up to $47.25 million of the originally issued Notes with the proceeds of one or
more Public Equity Offerings, at a cash redemption price of 109% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
redemption date; provided that after giving effect to any such redemption, at
least $87.75 million of the Notes remains outstanding. On and after October 1,
2001, the Notes may be redeemed, in whole or in part, at the option of the
Issuer at the redemption prices set forth herein plus accrued and unpaid
interest, if any, to the redemption date. Upon a Change of Control, each holder
of Notes will have the right to require the Issuer to repurchase in whole or in
part such holder's Notes at a cash purchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the repurchase
date. The Credit Agreement will limit the Issuer's ability to repurchase any
Notes, whether on a Change of Control or otherwise. Such inability may result in
a default under the Indenture and the Credit Agreement. Upon a default under any
Senior Indebtedness, the subordination provisions of the Indenture would likely
restrict payments to holders of Notes until such Senior Indebtedness is
discharged or paid in full. See 'Description of Notes.'
The Notes will be unsecured senior subordinated indebtedness of the Issuer
and, as such, will be subordinated in right of payment to all existing and
future Senior Indebtedness of the Issuer, including indebtedness under the
Credit Agreement. The Notes will rank pari passu with senior subordinated
indebtedness, if any, of the Issuer and will rank senior to subordinated
indebtedness, if any, of the Issuer. In addition, a substantial majority of the
business operations of the Company will be conducted through the subsidiaries of
the Issuer, and the Notes will also be effectively subordinated to all existing
and future liabilities of the Issuer's subsidiaries. The Notes will be fully and
unconditionally guaranteed on a senior subordinated basis (the 'Holding Note
Guarantee') by Mettler-Toledo Holding Inc. ('Holding'), a Delaware corporation,
the only asset of which is 100% of the outstanding capital stock of the Issuer.
The Holding Note Guarantee will be an unsecured obligation of Holding and will
be subordinated to all existing and future senior indebtedness of Holding,
including its obligations under its guarantee in respect of the Credit
Agreement. At June 30, 1996, on a pro forma basis after giving effect to the
Acquisition and the sale of the Notes and the application of the estimated net
proceeds therefrom, the aggregate amount of Senior Indebtedness and indebtedness
of the Issuer's subsidiaries (excluding intercompany indebtedness) that would
have effectively ranked senior to the Notes would have been approximately $310.8
million, with a weighted average interest rate of 7.3%.
Settlement of the Notes will be made in immediately available funds. The
Notes will trade in the Same-Day Funds Settlement System of The Depository Trust
Company ('DTC'), and, to the extent that secondary market trading activity in
the Notes is effected through the facilities of DTC, such trades will be settled
in immediately available funds. All payments of principal and interest will be
made by the Issuer in immediately available funds.
SEE 'RISK FACTORS' BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING AN INVESTMENT
IN THE NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
<S> <C> <C> <C>
Per Note.... 100% 3.25% 96.75%
Total....... $135,000,000 $4,387,500 $130,612,500
</TABLE>
(1) Plus accrued interest, if any, from October 15, 1996.
(2) The Company and Holding have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. See 'Underwriting.'
(3) Before deducting expenses payable by the Company estimated at $2,500,000.
------------------------
The Notes are offered by the 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. It is expected that delivery of the Notes
will be made through the book-entry facilities of DTC on or about October 15,
1996.
------------------------
MERRILL LYNCH & CO.
CS FIRST BOSTON
LEHMAN BROTHERS
SCOTIA CAPITAL MARKETS (USA) INC.
------------------------
The date of this Prospectus is October 4, 1996.
<PAGE>
Text Description of Artwork
Heading: 'METTLER TOLEDO The leader in weighing instruments.'; Three
photographs captioned 'Laboratory,' 'Industry and Retail.' Company logo.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. DURING THIS
OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING IN THE
DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE NOTES PURSUANT TO EXEMPTIONS FROM RULES 10B-6, 10B-7
AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
Mettler-Toledo(Registered), Mettler(Registered), Ingold(Registered),
Garvens(Registered), Ohaus(Registered), DeltaRange(Registered) and
DigiTOL(Registered) are registered trademarks of the Company and ID
20(Trademark), Brickstone(Trademark), Spider(Trademark), TrimWeigh(Trademark),
MentorSC(Trademark), MultiRange(Trademark) and TRUCKMATE(Trademark) are
trademarks of the Company.
<PAGE>
Heading: 'No 1 In Weighing And Related Measurement Instruments.'
Heading: 'METTLER TOLEDO The determining factor in every lab.' Background
photograph captioned 'Laboratory' with four inset photographs depicting the
Company's laboratory products in use captioned: 'Precision balances, in use at
Bayer'; 'Density- and refractometers, in use at Coca-Cola'; 'Thermal analysis
system, in use at Ciba'; and 'Titrator, in use at Procter & Gamble.'
Heading: 'METTLER TOLEDO The solution for every industrial weighing
application.' Background photograph captioned 'Industry' with four inset
photographs depicting the Company's industrial products in use captioned:
'Products weighed and labelled in process, all fully automatically. In use at
Nestl'; 'Exact dimension and weight data for freight calculation. In use at
TNT'; 'Mobile counting scales for inventory control, packaging and shipping or
receiving. In use at Philips'; and 'Goods weighed directly in vehicles, even in
motion.'
Heading: 'METTLER TOLEDO The solution for efficient management of perishable
goods.' Background photograph captioned 'Retail' with four inset photographs
depicting the Company's food retailing products in use captioned: 'Retail scales
with dialogue capability and active sales aids. In use at Tengelmann'; 'Service
counter scales support the electronic bookkeeping of all sales data. In use at
Kroger'; 'The right solution in prepackaging and price labelling, stand-alone or
networked. In use at Safeway'; and 'Check-out systems compatible with scanner,
cash register and networkable from scale to central computer. In use at Rewe.'
Heading: 'Quality for METTLER TOLEDO is more than technical precision and
premier products. It is our state of mind.' Company Logo.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the related notes, appearing elsewhere in this Prospectus. Unless the
context otherwise requires, the 'Issuer' means MT Acquisition Corp. and, after
giving effect to the transactions described in 'The Acquisition' (which are
referred to herein collectively as the 'Acquisition'), Mettler-Toledo, Inc. The
'Company' or 'Mettler-Toledo' as used in this Prospectus means the Issuer and
its subsidiaries, after giving effect on a pro forma basis to the transactions
described in 'The Acquisition'. The 'Mettler-Toledo Group' refers to the group
of companies being acquired pursuant to the Acquisition. Unless otherwise
indicated, industry data contained herein is derived from publicly available
industry trade journals, government reports and other publicly available
sources, which the Company has not independently verified but which the Company
believes to be reliable, and where such sources were not available, from Company
estimates, which the Company believes to be reasonable, but which cannot be
independently verified. As used in this Prospectus, '$' refers to U.S. dollars
and 'SFr' refers to Swiss francs.
THE COMPANY
GENERAL
Mettler-Toledo is the world's largest manufacturer and marketer of weighing
instruments for use in laboratory, industrial and food retailing applications.
The Company focuses on the high value-added segments of the weighing instruments
market by providing solutions for specific applications. The Company also
manufactures and sells certain related laboratory measurement instruments, with
one of the top three market positions worldwide in titrators, thermal analysis
systems, pH meters and lab reactors. Mettler-Toledo services a worldwide
customer base, with 1995 net sales of $850 million, which were derived 52% in
Europe, 37% in North and South America and 11% in Asia and other markets. The
Company has a global manufacturing presence, with manufacturing facilities in
Europe, the United States and Asia.
Weighing is one of the most broadly used measuring techniques, and its
results are often used as the basis of commercial transactions. The Company's
products are used in the laboratory as an integral part of the research process;
in industry for materials preparation, filling, counting and dimensioning; and
in food retailing for preparation, portioning and inventory control. Customers
include pharmaceutical, biotechnology, chemical, cosmetics, food and beverage,
postal, jewelry, metals, logistics, shipping and food retailing businesses, as
well as schools, universities and government and private standards labs.
MARKET LEADERSHIP
Mettler-Toledo is the only company to offer weighing products for
laboratory, industrial and food retailing applications throughout the world. The
Company believes that in 1995, the global market for weighing instruments for
laboratory, industrial and food retailing applications was approximately $4.5
billion and that the Company held a market share more than two times greater
than its nearest competitor. The Company believes that, in 1995, it had an
approximate 40% market share of the global market for laboratory balances,
including the largest market share in each of Europe, the United States and Asia
(excluding Japan), and one of the three leading positions in Japan. In the
industrial and food retailing market, the Company believes it has the largest
market share in Europe and in the United States. In Asia, the Company has a
substantial, rapidly growing industrial and food retailing business supported by
its established manufacturing presence in China. The Company attributes its
worldwide market leadership position to the following competitive strengths:
Brand Recognition. The Mettler-Toledo brand name is identified worldwide
with accuracy, reliability and innovation. The Company's brand name is so well
recognized that laboratory balances are often referred to as 'Mettlers.' Brand
recognition is important because weighing applications significantly impact
customers' product quality, productivity, cost and regulatory compliance. As a
result, customers tend to emphasize accuracy, product reliability, technical
innovation, reputation and past experience with a manufacturer's products when
making their purchasing decisions for weighing instruments.
Technological Innovation. Mettler-Toledo has a long and successful track
record of innovation, as demonstrated by the invention of the single-pan
analytical balance in 1945 and the introduction of the first fully electronic
precision balance in 1973. The Company has continued to be at the forefront of
weighing technology
3
<PAGE>
with several recent innovations, including its ID 20 terminal and 'Brickstone'
weighing sensor technology. The Company has particular expertise in sensor
technology, electronics and software, and in the industrial design of
measurement instruments. The Company believes it is the global leader in
providing sophisticated features, such as data-handling and storage
capabilities, integration into management information systems and improved
productivity through automation, all of which are increasingly important to
users of weighing instruments. The Company devotes substantial resources to
research and product development in order to maintain its competitive advantage
in technological innovation.
Comprehensive Product Range. Mettler-Toledo manufactures a more
comprehensive range of weighing instruments than any of its competitors. The
Company's broad product line addresses a wide range of weighing applications
across many industries and regions. Within an industry, the Company offers
multiple products to meet customers' requirements. Its broad range of products
allows the Company to leverage its manufacturing and distribution capabilities,
sales and service organization and product development activities.
Global Sales and Service. The Company has the only global sales and
service organization among weighing instruments manufacturers. At June 30, 1996,
this organization consisted of 2,700 employees organized into locally based,
customer-focused groups that provide prompt service and support to the Company's
customers and distributors in virtually all major markets across the globe. The
local focus of the Company's sales and service organization enables the Company
to adapt marketing and service efforts to different cultural and economic
conditions, and provides feedback for manufacturing and product development.
Largest Installed Base. The Company believes that it has the largest
installed base of weighing instruments in the world. Service revenues from this
installed base provide a strong, stable source of recurring revenue,
representing approximately 17% of net sales in 1995. The Company believes that
its installed base represents a competitive advantage with respect to repeat
purchases. Customers tend to remain with an existing supplier who can provide
accurate and reliable products and related services. In addition, switching to a
new instrument supplier entails additional costs to the customer for training,
spare parts, service and system integration requirements. Close relationships
and frequent contact with its broad customer base provide the Company with sales
leads and new product and application ideas.
Diversity of Revenue Base. The Company's revenue base is widely
diversified by geographic region, by type of customer and by individual
customer. The Company's broad range of product offerings is utilized in many
different industries, from chemicals and pharmaceuticals to food processing to
food retailing to transportation. The Company supplies customers in over 100
countries, and no one customer accounted for more than 2% of 1995 net sales. The
Company's diverse revenue base reduces its exposure to regional or industry-
specific economic conditions.
INDUSTRY TRENDS
The Company believes that the weighing instruments market is being
influenced by several industry trends. First, customers are demanding products
for industry-specific applications, with significant data management
capabilities designed to be integrated into business processes and to improve
productivity. Second, quality manufacturing and laboratory requirements are
becoming more standardized. For example, ISO 9001 standards require
manufacturers to utilize certified measurement instruments, and good laboratory
practices require each step in the research process to be recorded with
certified instruments so that results can be accurately traced and reproduced.
Third, increased harmonization of national weighing standards, particularly in
the European Union, has facilitated multinational manufacturers' ability to meet
local regulatory requirements and provides broader-based markets for their
product lines. Most importantly, there has been significant growth in demand in
emerging markets as these economies develop and global manufacturing customers
shift production operations to these markets. As a result, customers in these
emerging markets require additional and more sophisticated weighing instruments.
Global manufacturers operating in emerging markets often utilize the same
suppliers that service their needs in other markets. The Company believes that
its global operations position it to take advantage of these industry trends.
4
<PAGE>
BUSINESS STRATEGY
The Company's strategy is to enhance its position as global market leader
by providing the most comprehensive, innovative and reliable weighing solutions.
The Company plans to actively pursue the following initiatives to increase
revenues and profitability:
Product Innovation. The Company intends to continue to invest in product
innovation in order to provide technologically advanced products to its
customers for existing and new applications. Over the last three calendar years,
the Company invested $149 million in research and development, which has
resulted in a pipeline of new and updated products. A recent example of the
Company's extensive product development efforts is the innovative ID 20 terminal
for use in the Company's range of industrial scales. ID 20 includes the first
personal computer interface to be certified by weights and measures regulators,
combined with an ergonomically designed personal computer terminal for
industrial applications. Other recent examples include a new moisture analyzer,
a dimensioning system for logistics applications that combines volume and weight
measurements, a new generation of postal meters and a mid-range food retailing
scale. The Company is also focused on innovations that can reduce its production
costs. For example, the Company's new 'Brickstone' weighing sensor technology,
in addition to providing greater accuracy, reduces from approximately 100 to
approximately 50 the number of parts in the sensor, and thus significantly
reduces manufacturing costs and the time and expense of design changes.
Increased Penetration of Developed Markets. The Company intends to
leverage its brand name and existing infrastructure to further penetrate
selected geographic regions and product lines in Europe, the United States and
Japan. For example, in European food retailing products, the Company plans to
further expand from its strong base in German-speaking countries into other
countries. In addition, the Company plans to increase penetration with shipping
and logistics businesses by introducing a new weighing and dimensioning product.
The Company also continues to take advantage of the standardization of weights
and measures, both in the European Union and worldwide, which favors a
manufacturer with a global presence, such as the Company.
Further Expansion in Emerging Markets. The Company believes that global
recognition of the Mettler-Toledo brand name and the Company's global sales and
service organization position the Company to take advantage of continued growth
opportunities in emerging markets. In 1995, the Company had net sales of $69
million in Asia (excluding Japan) and Latin America, representing 8% of net
sales. In Asia (excluding Japan), it is the market leader in laboratory weighing
instruments and has a substantial and rapidly growing industrial and food
retailing business. The Company has been operating in China since 1987 through a
60%-owned joint venture, which owns one manufacturing facility, and the Company
plans to complete construction of a new wholly owned manufacturing facility in
Shanghai by the end of 1996. The Company believes that this manufacturing
infrastructure, as well as its sales and service organization in Asia and its
already substantial sales in Asia and Latin America, position it to take
advantage of further growth opportunities in emerging markets.
Reengineering and Cost Reductions. Over the last three years, the Company
has been successful at increasing its margins, despite negative currency
effects. These increases have been achieved through, among other things,
increased workforce flexibility, a reduction in its overall workforce, a shift
in the mix of its workforce toward higher growth, lower cost regions and the
introduction of new products with lower manufacturing costs. The Company is
currently implementing two projects which are aimed at reducing warehouse
capacity, improving inventory turnover and reducing materials handling costs.
The Company is restructuring the order and product delivery process in Europe to
enable the Company to deliver many of its products to its customers directly
from the manufacturing facility within several days. The Company is also
streamlining its European spare parts inventory management system. In addition
to continuing these cost-cutting efforts, the Company is also evaluating its
business strategy as an independent company after the Acquisition and believes
that it can support continued sales growth while further reducing its overall
cost base. In July 1996, in anticipation of the consummation of the Acquisition,
the Company announced the closure of its Westerville, Ohio facility. In
addition, the Company will implement a targeted workforce reduction by the end
of 1996. The Company expects that these two additional projects will result in
annual cost reductions of $8.3 million.
Pursue Selected Acquisition Opportunities. The Company has a proven record
of acquiring and integrating businesses into existing operations. As an
independent company, Mettler-Toledo plans to more actively pursue additional
product lines and distribution channels through acquisitions, strategic
alliances and joint ventures. The
5
<PAGE>
Company believes that by taking advantage of its brand name and global sales and
service organization it can expand distribution of acquired product lines and
operate acquired businesses more efficiently.
The mailing address of the Company's and Holding's principal executive
offices is Im Langacher, P.O. Box MT-100, CH-8606, Greifensee, Switzerland. Its
telephone number is 41-1-944-22-11.
RISK FACTORS
Prospective purchasers of the Notes should carefully consider all of the
information contained in this Prospectus before making an investment in the
Notes. In particular, prospective purchasers should carefully consider the
factors set forth herein under 'Risk Factors.' These risks include the effect of
the Company's substantial indebtedness on operations and liquidity; restrictions
on operations under the Credit Agreement and the Indenture; the risk of future
losses; subordination of the Notes and the Holding Note Guarantee; the unsecured
status of the Notes and the encumbrance of the Company's assets to secure Senior
Indebtedness; the Company's dependence on earnings of subsidiaries; lack of
subsidiary guarantees of the Notes; the absence of independent operations of
Holding; the risk of the inability to finance a repurchase of the Notes upon a
Change of Control; risks associated with currency fluctuations; risks associated
with international operations; risks associated with competition and
improvements in technology by competitors; risks due to significant sales to the
pharmaceutical and chemical industries; the Company's lack of prior operations
as an independent company; control of the Company by AEA Investors and certain
of its investor-shareholders and/or certain members of its management; certain
benefits to AEA Investors; reliance on key management; risk of liability under
environmental laws; certain regulatory approvals in connection with the
Acquisition; the risk of fraudulent transfer liability; and the absence of a
public market for the Notes and the possible price volatility of the Notes.
THE ACQUISITION
MT Acquisition Corp. and Holding were formed by AEA Investors Inc. ('AEA
Investors') to effect the Acquisition of the Mettler-Toledo Group from
Ciba-Geigy AG ('Ciba') and its wholly owned subsidiary, AG fur
Prazisionsinstrumente ('AGP'). The Acquisition of the Mettler-Toledo Group will
be accomplished through the purchase of all of the outstanding capital stock of
Mettler-Toledo, Inc. and Mettler-Toledo Holding AG ('Swiss Subholding'), which,
together with their respective subsidiaries, will constitute the entire Mettler-
Toledo Group. At the closing of the Acquisition (the 'Closing'): (i) $190.0
million will be contributed to MT Investors Inc. ('MT Investors'), the parent
company of Holding, by AEA Investors, its senior management and its
investor-shareholders, the management and certain employees of the
Mettler-Toledo Group, and Ciba (which will purchase a 5% interest); (ii) MT
Investors will contribute such funds to Holding, which will in turn contribute
such funds to MT Acquisition Corp.; (iii) MT Acquisition Corp. will borrow
$115.0 million of term loans under the Credit Agreement and will complete the
Offering of the Notes, and Holding will guarantee the Notes; (iv) MT Acquisition
Corp. will acquire the stock of Mettler-Toledo, Inc. and Swiss Subholding from
AGP; (v) Swiss Subholding will borrow $195.8 million under the Credit Agreement,
including $140.0 million of term loans and $55.8 million under a revolving
credit facility; (vi) Mettler-Toledo, Inc. and Swiss Subholding will repay
intercompany indebtedness to AGP and its affiliates (which aggregated $182.4
million at June 30, 1996); and (vii) MT Acquisition Corp. will be merged with
and into Mettler-Toledo, Inc. As a result of these transactions, Mettler-Toledo,
Inc. will succeed to MT Acquisition Corp.'s obligations under the Notes and the
Credit Agreement and will be the primary obligor of the Notes. Mettler-Toledo,
Inc. will be a wholly owned subsidiary of Holding, and Swiss Subholding will be
a wholly owned subsidiary of Mettler-Toledo, Inc. Following the Acquisition,
$109.2 million will be available for additional borrowings under the revolving
credit facility under the Credit Agreement and under local working capital
facilities. Management and certain employees of the Company are expected to own
at least 16.5% of the equity of MT Investors on a fully diluted basis, including
their investments in common stock of MT Investors and options to purchase
additional shares of such common stock to be granted in connection with the
Acquisition.
6
<PAGE>
The following table sets forth the estimated sources and uses of funds for
the Acquisition as if the Closing had occurred on June 30, 1996. (Actual amounts
at Closing will vary due to changes in currency exchange rates and changes in
certain balance sheet items subsequent to June 30, 1996.)
<TABLE>
<CAPTION>
SOURCES OF FUNDS: AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
Credit Agreement:
Term loans(1)............................................... $255,000
Revolving credit facility(2)(3)(4)(5)....................... 55,829
Gross proceeds of the Notes.................................... 135,000
Equity contribution(3)......................................... 190,000
Cash on hand to be applied in the Acquisition(3)(4)............ 40,935
--------------
Total Sources............................................... $676,764
--------------
--------------
<CAPTION>
USES OF FUNDS:
<S> <C>
Acquisition price(5)........................................... $421,691
Repayment of net indebtedness to Ciba and
affiliates(4)(6)(7)......................................... 182,448
Repayment of bank and other loans(4)(7)........................ 38,625
Fees and expenses.............................................. 34,000
--------------
Total Uses.................................................. $676,764
--------------
--------------
</TABLE>
- ------------------
(1) Will consist of (i) $100,000 of Term A Loans to be denominated in various
currencies; (ii) $75,000 of Term B Loans to be denominated in U.S. dollars;
and (iii) $80,000 of Term C Loans to be denominated in U.S. dollars. See
'Description of Credit Agreement.' In the event that cash requirements at
Closing are less than as set forth above, the Company may reduce the
principal amount of the Term C Loans.
(2) To be denominated in various currencies. See 'Description of Credit
Agreement.'
(3) Up to $7,500 of an aggregate $15,000 to be contributed by certain of the
Company's employees to MT Investors may be contributed after Closing. If
less than $7,500 is so contributed by the Company's employees by December
31, 1996, the balance will be contributed by AEA Investors and/or its
investor-shareholders. At Closing, cash on hand or additional borrowings
under the revolving credit facility under the Credit Agreement will be used
pending receipt of the proceeds from any deferred equity contributions. Ciba
will contribute $9,500 (5%) of the total $190,000 of equity contributions.
(4) Amounts at June 30, 1996. Actual amounts at Closing will vary. The Company
may determine to leave in place certain third party indebtedness following
Closing and reduce the borrowings at Closing under the revolving credit
facility.
(5) Acquisition price consists of $331,650 of purchase price and $90,041 of
pre-Closing dividends to AGP. In connection with such dividends, certain
members of the Mettler-Toledo Group will be subject to Swiss withholding
taxes in the amount of SFr 37,850, which amount will be fully refunded
following Closing. The amount of such withholding taxes will be funded
pending receipt of such refund through borrowings under the revolving credit
facility. Such temporary borrowings are not reflected in the table.
(6) Net of intercompany indebtedness due from Ciba and affiliates, payable at
Closing in Swiss francs.
(7) For information regarding interest rates, maturities and other principal
terms of indebtedness being repaid at Closing, see Notes 3 and 13 to the
audited combined financial statements of the Mettler-Toledo Group appearing
elsewhere in this Prospectus (the 'Audited Combined Financial Statements').
7
<PAGE>
The following diagram illustrates the corporate structure of MT Investors
and its subsidiaries upon completion of the Acquisition:
MT Investors Inc.
("MT Investors")
|
|
|
Mettler-Toledo Holding Inc. Issuer of senior guarantee of the Credit
("Holding") Agreement obligations and senior subordinated
| guarantee of the Notes.
|
|
Mettler-Toledo, Inc. Issuer of the Notes, borrower under the
(the "Issuer")(1) Credit Agreement and guarantor of obligations
| of Swiss Subholding under the Credit
| Agreement.
|
U.S. and certain non U.S. Mettler-Toledo Holding AG Borrower under the
Subsidiaries(2) ("Swiss Subholding") Credit Agreement.
|
|
European and certain other
non-U.S. Subsidiaries(2)
- ------------------
(1) Surviving entity of merger with MT Acquisition Corp.
(2) Substantially all of the subsidiaries will be guarantors with respect to the
obligations of Swiss Subholding and/or the Issuer under the Credit
Agreement. See 'Description of Credit Agreement.'
8
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Notes Offered................. $135,000,000 aggregate principal amount of 9 3/4%
Senior Subordinated Notes due 2006.
Note Guarantee................ Holding will fully and unconditionally guarantee
on a senior subordinated basis the performance of
all obligations of the Issuer under the Notes and
the Indenture.
Maturity Date................. October 1, 2006.
Interest Payment Dates........ April 1 and October 1 of each year, commencing
April 1, 1997.
Optional Redemption........... On and after October 1, 2001, the Notes may be
redeemed, in whole or in part, at the option of
the Issuer at the redemption prices set forth
herein plus accrued and unpaid interest, if any,
to the redemption date. In addition, at any time
on or prior to December 1, 1999, the Issuer, at
its option, may redeem up to $47.25 million of
the originally issued Notes with the proceeds of
one or more Public Equity Offerings (as defined),
at a cash redemption price of 109% of the
principal amount thereof, plus accrued and unpaid
interest, if any, to the redemption date;
provided that after giving effect to any such
redemption, at least $87.75 million of the Notes
remains outstanding. See 'Description of
Notes--Optional Redemption.'
Change of Control............. Upon a Change of Control, each holder of Notes
will have the right to require the Issuer to
repurchase in whole or in part such holder's
Notes at a cash purchase price equal to 101% of
the principal amount thereof, plus accrued and
unpaid interest, if any, to the repurchase date.
See 'Description of Notes--Certain Covenants--
Change of Control.'
Ranking....................... The Notes will be unsecured senior subordinated
obligations of the Issuer and, as such, will be
subordinated in right of payment to all existing
and future Senior Indebtedness of the Issuer,
including indebtedness under the Credit
Agreement. The Notes will rank pari passu with
senior subordinated indebtedness, if any, of the
Issuer and will rank senior to subordinated
indebtedness, if any, of the Issuer. In addition,
a substantial majority of the business operations
of the Company are conducted through the
subsidiaries of the Issuer and the Notes will
also be effectively subordinated to all existing
and future liabilities of the Issuer's
subsidiaries. The Holding Note Guarantee will be
an unsecured obligation of Holding and will be
subordinated to all existing and future senior
indebtedness of Holding, including its
obligations under its guarantee in respect of the
Credit Agreement. At June 30, 1996, on a pro
forma basis after giving effect to the
Acquisition and the sale of the Notes and the
application of the estimated net proceeds
therefrom, the aggregate amount of Senior
Indebtedness and indebtedness of the Issuer's
subsidiaries (excluding intercompany
indebtedness) that would have effectively ranked
senior to the Notes would have been approximately
$310.8 million, with a weighted average interest
rate of 7.3%.
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Restrictive Covenants......... The indenture relating to the Notes (the
'Indenture') will contain certain covenants,
including, but not limited to, covenants with
respect to the following matters: (i) limitation
on indebtedness; (ii) limitation on restricted
payments; (iii) limitation on transactions with
affiliates; (iv) limitation on certain liens; (v)
limitation on certain guarantees; (vi) certain
future note guarantors, (vii) limitation on other
senior subordinated indebtedness; (viii)
limitation on the sale or issuance of preferred
stock of subsidiaries; (ix) limitation on
dividend and other payment restrictions affecting
subsidiaries; (x) limitation on transfer of
assets to certain subsidiaries; (xi) limitation
on disposition of proceeds of certain asset
sales; (xii) change of control; and (xiii)
limitation on merger, consolidation and sale of
assets. See 'Description of Notes--Certain
Covenants' and '--Merger, Consolidation and Sale
of Assets.'
Use of Proceeds............... The net proceeds to the Company from the sale of
the Notes offered hereby are estimated to be
approximately $128.1 million (after deducting
estimated offering expenses and the Underwriters'
discount). The Company will use the net proceeds
of the Offering to provide a portion of the
financing for the Acquisition. See 'Use of
Proceeds,' 'Capitalization' and 'The
Acquisition.'
Absence of a Public Market for
the Notes................... There is no existing trading market for the Notes
and the Company does not intend to apply for
listing of the Notes on any national securities
exchange or for quotation of the Notes on any
automated dealer quotation system. The Company
has been advised by the Underwriters that they
presently intend to make a market in the Notes
after the consummation of the Offering
contemplated hereby, although they are under no
obligation to do so and may discontinue any
market-making activities at any time without any
notice. No assurance can be given as to the price
of the Notes or the liquidity of the trading
market for the Notes or that an active trading
market for the Notes will develop. If an active
trading market for the Notes does not develop,
the market price and liquidity of the Notes may
be adversely affected. If the Notes are traded,
they may trade at a discount from their initial
offering price, depending upon prevailing
interest rates, the market for similar
securities, the performance of the Company and
certain other factors. See 'Underwriting.'
</TABLE>
10
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The summary historical financial information for the years ended December
31, 1993, 1994 and 1995 is derived from the Audited Combined Financial
Statements, which have been prepared in accordance with United States generally
accepted accounting principles ('U.S. GAAP'). The summary historical financial
information at June 30, 1996 and for the six months ended June 30, 1995 and 1996
is derived from the unaudited interim combined financial statements of the
Mettler-Toledo Group (the 'Interim Financial Statements'), which, in the opinion
of management, include all adjustments necessary for a fair presentation of the
results for the unaudited periods. Operating results for the six months ended
June 30, 1996 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1996. The summary pro forma income statement and
other information gives effect to the Acquisition as if it had occurred at
January 1, 1995. The summary pro forma balance sheet information at June 30,
1996 gives effect to the Acquisition as if it had occurred at such date. The
summary pro forma financial information does not (i) purport to represent what
the Company's results of operations actually would have been if the Acquisition
had actually occurred as of such date or (ii) give effect to certain
non-recurring charges expected to result from the Acquisition. The
Mettler-Toledo Group's historical net income and cash flows as a wholly owned
operation of Ciba are not necessarily indicative of the net income and cash
flows it might have realized as an independent entity. See 'Unaudited Pro Forma
Financial Information,' 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and the financial statements and
accompanying notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
-------------------------------- --------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Net sales......................................... $728,958 $769,136 $850,415 $406,992 $423,802
Cost of sales..................................... 443,534 461,629 508,089 243,643 252,203
-------- -------- -------- -------- --------
Gross profit...................................... 285,424 307,507 342,326 163,349 171,599
Research and development expenses................. 46,438 47,994 54,542 27,005 25,054
Marketing and selling expenses.................... 141,717 152,631 167,396 80,965 81,378
General and administrative expenses............... 68,357 76,248 81,167 37,909 39,153
Amortization of goodwill.......................... 2,535 2,536 2,529 1,289 1,270
Other charges (income), net(2).................... 18,284 (2,852) (701) -- --
-------- -------- -------- -------- --------
Income from operations............................ 8,093 30,950 37,393 16,181 24,744
Interest expense.................................. 15,239 13,307 18,219 8,717 8,346
Financial income, net............................. 4,174 4,864 8,630 2,403 965
Provision for taxes............................... 3,041 8,676 8,782 3,117 6,830
Minority interest................................. 1,140 347 768 270 526
-------- -------- -------- -------- --------
Net income (loss)................................. $ (7,153) $ 13,484 $ 18,254 $ 6,480 $ 10,007
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
OTHER DATA:
EBITDA(3)......................................... $ 57,458 $ 65,068 $ 73,013 $ 31,664 $ 39,103
Net cash provided by operating activities......... 22,456 34,094 51,669 23,066 36,860
Net cash used in investing activities............. (23,857) (12,300) (29,342) (6,202) (9,582)
Net cash provided by (used in) financing
activities...................................... 7,816 (7,496) (49,071) (7,173) (20,429)
Depreciation and amortization expense............. 29,591 34,118 33,363 15,483 14,359
Capital expenditures.............................. 25,122 24,916 25,858 6,527 10,053
Gross margin...................................... 39.2% 40.0% 40.3% 40.1% 40.5%
EBITDA margin..................................... 7.9% 8.5% 8.6% 7.8% 9.2%
Ratio of earnings to fixed charges(4)............. --(5) 2.3x 2.3x 1.9x 2.7x
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
FOR THE YEAR ENDED ----------------------------------------
DECEMBER 31, 1995 1995 1996
------------------ ------------------ ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
PRO FORMA FINANCIAL DATA:
Income from operations............................ $ 40,008 $ 17,513 $ 26,057
Interest expense.................................. 38,270 19,135 19,135
Net income (loss)................................. (352) (2,994) 1,984
EBITDA(3)......................................... 79,013 34,664 42,103
Depreciation and amortization expense............. 36,748 17,151 16,046
Gross margin...................................... 40.6% %40.5 %40.8
EBITDA margin..................................... 9.3% % 8.5 % 9.9
Ratio of EBITDA to interest expense............... 2.1x x 1.8 x 2.2
Ratio of earnings to fixed charges(4)............. 1.1x(5) (5)-- x 1.3
<CAPTION>
FOR THE 12 MONTHS
ENDED JUNE 30,
1996
-----------------
<S> <C>
PRO FORMA FINANCIAL DATA:
Income from operations............................ $48,552
Interest expense.................................. 38,270
Net income (loss)................................. 4,626
EBITDA(3)......................................... 86,452
Depreciation and amortization expense............. 35,643
Gross margin...................................... 40.7%
EBITDA margin..................................... 10.0%
Ratio of EBITDA to interest expense............... 2.3x
Ratio of earnings to fixed charges(4)............. 1.3x
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------
PRO
HISTORICAL FORMA
---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 45,935 $ 5,000
Net working capital............................... 118,739 137,401
Total assets...................................... 731,920 819,823
Long term third-party debt........................ 6,015 436,829
Net borrowing from Ciba and affiliates(6)......... 182,448 --
Other long-term liabilities(7).................... 88,979 99,479
Stockholder's equity.............................. 193,362(8) 69,600(9)
</TABLE>
- ------------------
(1) Information for the years ended December 31, 1991 and 1992 is not available,
except that net sales for such years were $718,200 and $769,000,
respectively. Approximately 75% of the decrease in net sales in 1993
compared to 1992 resulted from the appreciation of the U.S. dollar against
the Company's other principal trading currencies.
(2) For 1993, consists primarily of costs associated with the closure of a
manufacturing facility in Cologne, Germany, and also includes the
restructuring of certain manufacturing operations and an early retirement
program in the United States. Other income for 1993, 1994 and 1995 relates
primarily to gains from the sale of real property and, in 1994, to a gain on
the sale of an investment. See Note 16 to the Audited Combined Financial
Statements.
(3) 'EBITDA' represents, for any period, the sum of income from operations and
depreciation and amortization expense, excluding restructuring charges of
$19,774 in 1993 and $2,257 in 1995. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to service and/or
incur indebtedness. Management believes that presentation of EBITDA is
helpful to investors, because EBITDA (subject to certain adjustments) will
be used to determine compliance with certain covenants contained in the
Indenture and the Credit Agreement. However, EBITDA should not be considered
as an alternative to net income as a measure of the Company's operating
results or to cash flows as a measure of liquidity. In addition, although
the EBITDA measure of performance is not recognized under generally accepted
accounting principles, it is widely used by industrial companies as a
general measure of a company's operating performance because it assists in
comparing performance on a relatively consistent basis across companies
without regard to depreciation and amortization, which can vary
significantly depending on accounting methods (particularly where
acquisitions are involved) or non-operating factors such as historical cost
bases. Because EBITDA is not calculated identically by all companies, the
presentation herein may not be comparable to other similarly titled measures
of other companies.
(Footnotes continued on next page)
12
<PAGE>
(Footnotes continued from previous page)
(4) In calculating the ratio of earnings to fixed charges, earnings consist of
income before taxes plus fixed charges. Fixed charges consist of interest
expense and amortization of deferred financing fees, whether capitalized or
expensed, plus one-third of rental expense under operating leases (the
portion that has been deemed by the Company to be representative of an
interest factor).
(5) For the year ended December 31, 1993, earnings were insufficient to cover
fixed charges by approximately $3,000. On a pro forma basis for the six
months ended June 30, 1995, earnings would have been insufficient to cover
fixed charges by approximately $1,329. On a pro forma basis for the year
ended December 31, 1995, if the Senior Indebtedness had had a weighted
interest rate of 8.4% or higher, earnings would have been insufficient to
cover fixed charges.
(6) Includes notes payable and long-term debt payable to Ciba and affiliates
less amounts due from Ciba and affiliates. See Notes 3 and 13 to the Audited
Combined Financial Statements.
(7) Consists primarily of obligations under various pension plans and plans that
provide post-retirement medical benefits. See Note 14 to the Audited
Combined Financial Statements.
(8) Stockholder's equity in the Historical column consists of the combined net
assets of the Mettler-Toledo Group.
(9) Upon consummation of the Acquisition, the Company will record a charge of
$120,400 to reflect the portion of the purchase price allocated to
in-process research and development projects that have economic value. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations--Effect of Acquisition on Results of Operations.'
13
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following risk factors
before purchasing the Notes offered hereby. This Prospectus contains
forward-looking statements. These statements are subject to a number of risks
and uncertainties, certain of which are beyond the Company's control. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'
EFFECT OF SUBSTANTIAL INDEBTEDNESS ON OPERATIONS AND LIQUIDITY
In connection with the Acquisition, the Company will incur a significant
amount of indebtedness. At June 30, 1996, the Company's consolidated
indebtedness (excluding unused commitments) would have been approximately $445.8
million and its stockholders' equity would have been approximately $69.6
million, in each case on a pro forma basis after giving effect to the
Acquisition and the sale of the Notes and the application of the net proceeds
therefrom. On a pro forma basis, the Company's ratio of earnings to fixed
charges for the year ended December 31, 1995 and the six months ended June 30,
1996 would have been 1.1x and 1.3x, respectively. The Indenture will permit the
Company to incur or guarantee additional indebtedness, including Senior
Indebtedness under the Credit Agreement and other Senior Indebtedness, subject
to certain limitations. The Company will have additional borrowing capacity on a
revolving credit basis under the Credit Agreement and under local working
capital facilities upon consummation of the Acquisition ($109.2 million on a pro
forma basis at June 30, 1996). The Company will be required to make semiannual
scheduled principal payments on the term loans under the Credit Agreement
commencing in March 1997. See 'Capitalization,' 'Description of Credit
Agreement' and 'Description of Notes.' The Company's ability to comply with the
terms of the Indenture and the Credit Agreement, to make cash payments with
respect to the Notes and under the Credit Agreement and to satisfy its other
debt or to refinance any of such obligations will depend on the future
performance of the Company, which, in turn, is subject to prevailing economic
and competitive conditions and certain financial, business and other factors
beyond its control. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources,'
'Description of Credit Agreement' and 'Description of Notes.'
The Company's high degree of leverage could have important consequences to
the holders of the Notes, including but not limited to the following: (i) the
Company's ability to obtain additional financing for acquisitions, capital
expenditures, working capital or general corporate purposes may be impaired in
the future; (ii) a substantial portion of the Company's cash flow from
operations must be dedicated to the payment of principal and interest on the
Notes and borrowings under the Credit Agreement and other indebtedness, thereby
reducing the funds available to the Company for its operations and other
purposes, including investments in research and development and capital
spending; (iii) certain of the Company's borrowings are and will continue to be
at variable rates of interest, which exposes the Company to the risk of
increased interest rates; (iv) the indebtedness outstanding under the Credit
Agreement will be secured by all or a portion of the capital stock and assets of
the Issuer, Swiss Subholding and certain of their subsidiaries and will mature
prior to the maturity of the Notes; and (v) the Company may be substantially
more leveraged than certain of its competitors, which may place the Company at a
relative competitive disadvantage and may make the Company more vulnerable to a
downturn in general economic conditions or its business or changing market
conditions and regulations. See 'Description of Credit Agreement' and
'Description of Notes.'
RESTRICTIONS ON OPERATIONS UNDER CREDIT AGREEMENT AND INDENTURE
The Credit Agreement and the Indenture contain a number of covenants that,
among other things, restrict the ability of the Company to incur additional
indebtedness, pay dividends and other distributions, prepay subordinated
indebtedness, dispose of certain assets, enter into sale and leaseback
transactions, create liens, make capital expenditures, issue capital stock and
make certain investments or acquisitions, engage in certain transactions with
affiliates and otherwise restrict corporate activities. In addition, under the
Credit Agreement, the Company will be required to satisfy specified financial
covenants, including the ratio of consolidated EBITDA to consolidated fixed
charges and the ratio of consolidated total debt to consolidated EBITDA. Certain
of these financial tests may be more restrictive in future years. See
'Description of Credit Agreement' and 'Description of Notes.'
The Company's ability to comply with the covenants and restrictions
contained in the Credit Agreement and the Indenture may be affected by events
beyond its control, including prevailing economic, financial and industry
conditions. A failure to comply with the covenants and restrictions contained in
the Credit Agreement, the Indenture or any agreements with respect to any
additional financing could result in an event of default under such agreements
which could permit acceleration of the related debt and acceleration of debt
under other debt
14
<PAGE>
agreements that may contain cross-acceleration or cross-default provisions, and
the commitments of the lenders to make further extensions under the Credit
Agreement could be terminated. If the Company were unable to repay its
indebtedness to the lenders under the Credit Agreement, such lenders could
proceed against the collateral securing such indebtedness as described under
'Description of Credit Agreement.'
RISK OF FUTURE LOSSES
On a pro forma basis assuming the Acquisition had occurred on January 1,
1995, the Company would have had a net loss of $0.4 million for the year ended
December 31, 1995 and net income of $2.0 million for the six months ended June
30, 1996. These pro forma results are affected by increased interest expense,
goodwill amortization and depreciation expense in connection with the
Acquisition. These pro forma results do not reflect a charge (currently
estimated to be $120.4 million) for in-process research and development that
will be recorded upon consummation of the Acquisition and a charge (currently
estimated to be $21.1 million) relating to the revaluation of inventory that
will be recorded over the period in which the inventories are sold, which is
expected to be one to two quarters following the Closing. As a result of these
charges, the Company anticipates that it will report a net loss for the period
in which the Acquisition occurs and possibly for the period thereafter. There
can be no assurance that the Company will not incur net losses in subsequent
periods. In the quarter ending September 30, 1996, the Mettler-Toledo Group
recorded a charge of $2.0 million to reflect the costs associated with the
closure of its Westerville, Ohio facility. See 'Unaudited Pro Forma Financial
Information' and 'Management's Discussion and Analysis of Financial Condition
and Results of Operations--Effect of Acquisition on Results of Operations.'
SUBORDINATION OF NOTES AND HOLDING NOTE GUARANTEE
The Notes will be unsecured, senior subordinated obligations of the Issuer
and, as such, will be subordinated in right of payment to all existing and
future Senior Indebtedness of the Issuer, including indebtedness of the Issuer
under the Credit Agreement and the guarantee by the Issuer of the indebtedness
of Swiss Subholding under the Credit Agreement. The Notes will rank pari passu
with all senior subordinated indebtedness, if any, of the Issuer and will rank
senior to all subordinated indebtedness, if any, of the Issuer. The Notes will
also be effectively subordinated to all secured indebtedness of the Company to
the extent of the value of the assets securing such indebtedness, and to all
existing and future liabilities of the Issuer's subsidiaries, including the
liabilities of Swiss Subholding under the Credit Agreement. At June 30, 1996, on
a pro forma basis after giving effect to the Acquisition and the sale of the
Notes and the application of the estimated net proceeds therefrom, the aggregate
amount of Senior Indebtedness of the Issuer and indebtedness of the Issuer's
subsidiaries (excluding intercompany indebtedness) that would have effectively
ranked senior to the Notes would have been approximately $310.8 million, with a
weighted average interest rate of 7.3%. No other senior subordinated or
subordinated indebtedness of the Issuer or the Issuer's subsidiaries is
outstanding. In addition, on such pro forma basis, under the Indenture, the
Issuer and Swiss Subholding would have been permitted to borrow $84.2 million of
additional Senior Indebtedness under the revolving credit facility under the
Credit Agreement and, provided certain tests are met, will be able to borrow
additional Senior Indebtedness. In the event of a bankruptcy, liquidation or
reorganization of the Issuer or in the event that any default in payment of, or
the acceleration of, any debt occurs, holders of Senior Indebtedness will be
entitled to payment in full from the proceeds of all assets of the Issuer prior
to any payment of such proceeds to holders of the Notes. In addition, the Issuer
may not make any principal or interest payments in respect of the Notes if any
payment default exists with respect to Senior Indebtedness and the maturity of
such indebtedness is accelerated, or in certain circumstances prior to such
acceleration for a specified period of time, unless, in any case, such default
has been cured or waived, any such acceleration has been rescinded or such
indebtedness has been repaid in full. Consequently, there can be no assurance
that the Issuer will have sufficient funds remaining after such payments to make
payments to the holders of the Notes. See 'Description of Notes--Ranking;
Subordination.'
Payments in respect of the Holding Note Guarantee will be subordinated to
the prior payment in full of all existing and future senior indebtedness of
Holding, including all of its obligations under its guarantee in respect of the
Credit Agreement. As of June 30, 1996, on a pro forma basis after giving effect
to the anticipated borrowings under the Credit Agreement and the issuance of the
Holding Note Guarantee, the aggregate amount of such senior indebtedness would
have been approximately $310.8 million. In the event of a bankruptcy,
liquidation, dissolution, reorganization or similar proceedings with respect to
Holding, its assets will be available to pay obligations under the Notes only
after such senior indebtedness has been paid in full, and there can be no
assurance that there will be sufficient assets to pay amounts due in respect of
the Holding Note Guarantee.
15
<PAGE>
UNSECURED STATUS OF NOTES; ENCUMBRANCE OF ASSETS TO SECURE SENIOR INDEBTEDNESS
The Notes will not be secured by any of the Company's assets. The
obligations of the Issuer under the Credit Agreement (including the guarantee of
the obligations of Swiss Subholding) are secured by a first priority security
interest in 65% of the capital stock of Swiss Subholding and certain other
non-U.S. subsidiaries of the Issuer and all other material assets of the Issuer
and its U.S. subsidiaries. The obligations of Swiss Subholding under the Credit
Agreement are secured, to the extent permitted by applicable law, by all the
material assets of Swiss Subholding and its subsidiaries. The Company under the
Indenture is permitted to incur additional secured indebtedness. If the Issuer
becomes insolvent or is liquidated, or if payment under the Credit Agreement or
such additional secured indebtedness is accelerated, the lenders under the
Credit Agreement and such additional secured indebtedness would be entitled to
exercise the remedies available to a secured lender under applicable law and
pursuant to instruments governing such indebtedness. Accordingly, such lenders
will have a prior claim on such of the Company's assets. In any such event,
because the Notes will not be secured by any of the Company's assets, it is
possible that there would be no assets remaining from which claims of the
holders of the Notes could be satisfied or, if any such assets remained, such
assets might be insufficient to satisfy such claims fully. The Holding Note
Guarantee is also unsecured. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources,'
'Description of Credit Agreement' and 'Description of Notes.'
DEPENDENCE ON EARNINGS OF SUBSIDIARIES; LACK OF SUBSIDIARY GUARANTEES; NO
INDEPENDENT OPERATIONS OF HOLDING
A substantial majority of the Company's assets are held by subsidiaries of
the Issuer. As a result, the Issuer's rights, and the rights of its creditors,
including the holders of the Notes, to participate in the distribution of assets
of any subsidiary upon such subsidiary's liquidation or reorganization will be
subject to the prior claims of such subsidiary's creditors, except to the extent
that the Issuer is itself recognized as a creditor of such subsidiary, in which
case the claims of the Issuer would still be subject to the claims of any
secured creditor of such subsidiary and of any holder of indebtedness of such
subsidiary senior to that held by the Issuer. Claims against Swiss Subholding
under the Credit Agreement would be senior to any claims by the Issuer as a
creditor of Swiss Subholding.
The Notes are primary obligations of the Issuer and are not currently
expected to be guaranteed by any of the Issuer's subsidiaries. A substantial
majority of the operations of the Company are currently conducted through the
subsidiaries of the Issuer. The cash flow and the consequent ability to service
debt of the Issuer, including the Notes, are dependent in significant part upon
the Issuer's ability to receive cash from its subsidiaries. The payment of
dividends and the making of loans and advances to the Issuer by its subsidiaries
may be subject to statutory and contractual restrictions, are contingent upon
the earnings of those subsidiaries and are subject to various business
considerations. Dividends and other payments to the Issuer from subsidiaries in
certain jurisdictions are subject to legal restrictions and may have adverse tax
consequences to the Issuer or such subsidiaries. In addition, all of the
Issuer's U.S. subsidiaries have guaranteed the obligations of the Issuer under
the Credit Agreement (including its guarantee of Swiss Subholding's obligations)
and all of the subsidiaries of Swiss Subholding have, to the extent permitted by
applicable law, guaranteed the obligations of Swiss Subholding under the Credit
Agreement.
Holding is a holding company with no independent operations and no assets
other than the capital stock of the Issuer. Holding, therefore, will be
dependent upon the receipt of dividends or other distributions from the Issuer
to fund any obligations that it incurs, including obligations under the Holding
Note Guarantee. The Indenture will not, however, permit distributions from the
Issuer to Holding, other than for certain specified purposes as described under
'Description of Notes--Certain Covenants--Limitation on Restricted Payments.'
The Credit Agreement will contain similar or more restrictive provisions.
Accordingly, if the Issuer should at any time be unable to pay interest or
premium, if any, on or principal of the Notes, it is unlikely that the Issuer
will be able to distribute the funds necessary to enable Holding to meet its
obligations under the Holding Note Guarantee.
RISK OF INABILITY TO FINANCE CHANGE OF CONTROL OFFER
Upon the occurrence of a Change of Control, the Issuer will be required to
make an offer to purchase all of the outstanding Notes at a price equal to 101%
of the principal amount thereof at the date of purchase plus accrued and unpaid
interest, if any, to the date of purchase. The occurrence of certain of the
events that would constitute a Change of Control would constitute a default
under the Credit Agreement and might constitute a default under other
indebtedness of the Company. In addition, the Credit Agreement will prohibit the
purchase of the Notes by the Issuer in the event of a Change in Control, unless
and until such time as the indebtedness under
16
<PAGE>
the Credit Agreement is repaid in full. The Issuer's failure to purchase the
Notes in such instance would result in a default under each of the Indenture and
the Credit Agreement. The inability to repay the indebtedness under the Credit
Agreement, if accelerated, could have materially adverse consequences to the
Issuer and to the holders of the Notes. In the event of a Change of Control,
there can be no assurance that the Issuer would have sufficient assets to
satisfy all of its obligations under the Credit Agreement and the Notes. Future
Senior Indebtedness of the Issuer may also contain prohibitions of certain
events or transactions which could constitute a Change of Control or require
such Senior Indebtedness to be repurchased upon a Change of Control. See
'Description of Credit Agreement' and 'Description of Notes--Change of Control.'
RISK OF CURRENCY FLUCTUATIONS
Swiss franc-denominated expenses represent a much greater percentage of the
Company's operating expenses than Swiss franc-denominated sales represent of
total net sales. Some of the Company's manufacturing costs in Switzerland relate
to products that are sold outside of Switzerland, including many technologically
sophisticated products requiring highly skilled personnel. Moreover, a
substantial percentage of the Company's research and development expenses and
general and administrative expenses are incurred in Switzerland. In 1995, the
Company incurred approximately 29% of its expenses included in income from
operations in Swiss francs but received only 5% of its total net sales in Swiss
francs. As a result, appreciation of the Swiss franc against the U.S. dollar or
the Company's other major trading currencies, including the principal European
currencies, has a negative impact on the Company's income from operations, and
depreciation of the Swiss franc has a positive impact. From 1993 to 1995, the
Swiss franc appreciated 20% against the U.S. dollar and 8% against the German
mark (based on the average exchange rate for 1993 and the average exchange rate
for 1995). From the first six months of 1995 to the first six months of 1996,
the Swiss franc depreciated 1.5% against the U.S. dollar and appreciated 2.3%
against the German mark (based on the average exchange rate for each such
period). Further appreciation of the Swiss franc could have a material adverse
effect on the Company's results of operations. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations--Effect of Currency
on Results of Operations.' For a discussion of the impact of changes in currency
exchange rates on the Company's liquidity, see 'Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources.'
The Company's operations are conducted by subsidiaries in many countries,
and the results of operations and the financial position of each of those
subsidiaries is reported in the relevant foreign currency and then translated
into U.S. dollars at the applicable foreign currency exchange rate for inclusion
in the Company's consolidated financial statements. As exchange rates between
these foreign currencies and the U.S. dollar fluctuate, the translation effect
of such fluctuations may have a material adverse effect on the Company's results
of operations or financial position as reported in U.S. dollars. However, the
effect of these changes on income from operations generally offsets in part the
effect on income from operations of changes in the exchange rate between the
Swiss franc and other currencies described in the preceding paragraph.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company does business in numerous countries, including emerging markets
in Asia and Latin America. In addition to currency risks discussed above, the
Company's international operations are subject to the risk of new and different
legal and regulatory requirements in local jurisdictions, tariffs and trade
barriers, potential difficulties in staffing and managing local operations,
credit risk of local customers and distributors, potential difficulties in
protecting intellectual property, risk of nationalization of private
enterprises, potential imposition of restrictions on investments, potentially
adverse tax consequences, including imposition or increase of withholding and
other taxes on remittances and other payments by subsidiaries, and local
economic, political and social conditions, including the possibility of
hyper-inflationary conditions, in certain countries. The Company plans to
increase its presence in Latin American countries and China. As a result,
inflationary conditions in these countries could have an increasingly
significant effect on the Company's operating results.
The conversion into foreign currency of funds earned in local currency
through the Company's operations in the People's Republic of China and the
repatriation of such funds require certain governmental approvals. Failure to
obtain such approvals could result in the Company being unable to convert or
repatriate earnings from its Chinese operations, which may become an
increasingly important part of the Company's international operations.
COMPETITION; IMPROVEMENTS IN TECHNOLOGY
The markets in which the Company operates are highly competitive. Weighing
markets are fragmented both geographically and by application, particularly the
industrial and food retailing market. As a result, the Company competes with
numerous regional or specialized competitors, many of which are well-established
in their
17
<PAGE>
markets. Some competitors are divisions of larger companies with potentially
greater financial and other resources than the Company. The Company has, from
time to time, experienced price pressures from competitors in certain product
lines and geographic markets.
The Company's competitors can be expected to continue to improve the design
and performance of their products and to introduce new products with competitive
price and performance characteristics. Although the Company believes that it has
certain technological and other advantages over its competitors, realizing and
maintaining these advantages will require continued investment by the Company in
research and development, sales and marketing and customer service and support.
There can be no assurance that the Company will have sufficient resources to
continue to make such investments or that the Company will be successful in
maintaining such advantages.
SIGNIFICANT SALES TO PHARMACEUTICAL AND CHEMICAL INDUSTRIES
The Company's products are used extensively in the pharmaceutical and
chemical industries. Consolidation in these industries has had an adverse impact
on the Company's sales in recent years. A prolonged downturn or any additional
consolidation in these industries could adversely affect the Company's operating
results.
NO PRIOR OPERATIONS AS AN INDEPENDENT COMPANY
Prior to the Acquisition, the business of the Company has been operated as
a group of indirect wholly owned subsidiaries of Ciba. Management of the Company
has extensive experience in operating the Company's business as an autonomous
group within Ciba, but has not operated the Company's business as a stand-alone
entity. In addition, following consummation of the Acquisition, the Company will
no longer benefit from certain credit support and limited operational support
that has in the past been provided by Ciba. Under the terms of the Acquisition
Agreement (as defined), Ciba will not provide any transitional services to the
Company after consummation of the Acquisition. See 'The Acquisition.' The
Company believes that it will incur additional expenses following the Closing of
approximately $2.3 million per year, including an annual management fee of $1
million to be paid to AEA Investors. See 'Unaudited Pro Forma Financial
Information.'
CONTROLLING STOCKHOLDERS; BENEFITS TO AEA INVESTORS
As a result of their beneficial ownership of the Company, AEA Investors and
certain of its investor-shareholders and/or certain members of its management
will have the ability to exercise control over the business and affairs of the
Company by virtue of their continuing ability to elect a majority of the Board
of Directors of MT Investors.
In connection with the Acquisition, the Company will pay AEA Investors a
transaction fee of $5.5 million and reimburse AEA Investors for certain related
expenses. Following the Acquisition, AEA Investors and the Company will be party
to an agreement pursuant to which AEA Investors will provide management,
consulting and financial services to the Company. In consideration for such
services, AEA Investors will be entitled to an annual fee in the amount of $1
million, plus reimbursement for certain expenses and indemnification against
certain liabilities. See 'Certain Relationships and Related Transactions.'
RELIANCE ON KEY MANAGEMENT
Although it is anticipated that all of the key management employees will
have employment contracts with the Company or its affiliates and that after
consummation of the Acquisition various members of management will own a portion
of the shares of nonvoting capital stock of MT Investors and will have options
to purchase additional shares of such nonvoting capital stock, there is no
assurance that such individuals will remain with the Company. If, for any
reason, such key personnel do not continue to be active in the Company's
management, operations could be adversely affected. The Company has no key man
life insurance policies with respect to any of its senior executives.
ENVIRONMENTAL MATTERS
The Company is subject to various environmental laws and regulations in the
jurisdictions in which it operates, including those 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. The Company, like many of its competitors, has 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. The Company is currently involved in, or has potential liability with
respect to, the remediation of past contamination in certain of its presently
and formerly owned and leased facilities in both the United States and abroad.
In addition, certain of the Company's 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
18
<PAGE>
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 the Company has
sent wastes, may in the future be identified and become the subject of
remediation. Accordingly, although the Company believes that it is in
substantial compliance with applicable environmental requirements, it is
possible that the Company could become subject to additional environmental
liabilities in the future that could result in a material adverse effect on the
Company's results of operations or financial condition. See
'Business--Environmental Matters.'
REGULATORY APPROVALS
The transfer of the Company's subsidiaries and its joint venture in China
from AGP to Swiss Subholding in connection with the Acquisition requires
approval by Chinese governmental authorities. The Company believes that such
approval will be obtained in due course but may not be obtained by Closing. If
not so obtained, the parties to the Acquisition Agreement have agreed therein to
negotiate to provide arrangements economically and commercially equivalent to
the transfer.
RISK OF FRAUDULENT TRANSFER LIABILITY
Management of the Company believes that the indebtedness represented by the
Notes is being incurred for proper purposes and in good faith, and that, based
on present forecasts, asset valuations and other financial information, the
Company is and, after the consummation of the Acquisition, will be, solvent,
will have sufficient capital for carrying on its business and will be able to
pay its debts as they mature. Notwithstanding management's belief, if a court of
competent jurisdiction in a suit by an unpaid creditor or a representative of
creditors (such as a trustee in bankruptcy or a debtor-in-possession) were to
find that the Company did not receive fair consideration or reasonably
equivalent value for incurring the Notes or any debt being refinanced thereby
and, at the time of the incurrence of the Notes or such indebtedness, the
Company was insolvent, was rendered insolvent by reason of such incurrence, was
engaged in a business or transaction for which its remaining assets constituted
unreasonably small capital, intended to incur, or believed that it would incur,
debts beyond its ability to pay as such debts matured, or intended to hinder,
delay or defraud its creditors, such court could avoid such indebtedness. A
likely consequence of such avoidance would be the subordination of the
indebtedness represented by the Notes to existing and possibly future
indebtedness of the Company. The measure of insolvency for purposes of the
foregoing will vary depending upon the law of the relevant jurisdiction.
Generally, however, a company would be considered insolvent for purposes of the
foregoing if the sum of the company's debts is greater than all the company's
property at a fair valuation, or if the present fair salable value of the
company's assets is less than the amount that will be required to pay its
probable liability on its existing debts as they become absolute and matured.
There can be no assurance as to what standards a court would apply to determine
whether the Issuer was solvent at the relevant time, or whether, whatever
standard was applied, the Notes would not be avoided on another of the grounds
set forth above.
ABSENCE OF A PUBLIC MARKET FOR THE NOTES; POSSIBLE VOLATILITY
There is no established trading market for the Notes and the Company does
not intend to apply for listing of the Notes on any national securities exchange
or for quotation of the Notes on any automated dealer quotation system. The
Company has been advised by the Underwriters that they presently intend to make
a market in the Notes after the consummation of the Offering contemplated
hereby, although they are under no obligation to do so and may discontinue any
market-making activities at any time without any notice. Accordingly, no
assurance can be given as to the price of the Notes or the liquidity of the
trading market for the Notes or that an active public trading market for the
Notes will develop. If an active public trading market for the Notes does not
develop, the market price and liquidity of the Notes may be adversely affected.
If the Notes are traded, they may trade at a discount from their initial
offering price, depending upon prevailing interest rates, the market for similar
securities, the performance of the Company and certain other factors. The
liquidity of, and trading markets for, the Notes may also be adversely affected
by general declines in the market for non-investment grade debt. Such declines
may adversely affect the liquidity of, and trading markets for, the Notes,
independent of the financial performance of or prospects for the Company.
Historically, the market for debt similar to the Notes has been subject to
disruptions that have caused substantial price volatility. There can be no
assurance that the market for the Notes will not be subject to similar
disruptions. Any such disruptions may have a material adverse effect on the
value of the Notes.
19
<PAGE>
THE ACQUISITION
The following is a summary of the structure of the Acquisition and certain
provisions of the Stock Purchase Agreement dated as of April 2, 1996, as amended
(the 'Acquisition Agreement'), among AGP, Ciba and AEA MT Inc. (to be renamed MT
Investors), which has been filed as an exhibit to the registration statement of
which this Prospectus is a part, and which sets forth the terms and conditions
for the Company's purchase of the Mettler-Toledo Group from AGP. This summary
does not purport to be complete and is qualified in its entirety by reference to
the Acquisition Agreement.
STRUCTURE OF THE ACQUISITION
The Acquisition of the Mettler-Toledo Group will be accomplished through
the purchase of all of the outstanding capital stock of Mettler-Toledo, Inc. and
Swiss Subholding, which, together with their respective subsidiaries, will
constitute the entire Mettler-Toledo Group. At the Closing: (i) $190.0 million
will be contributed to MT Investors, the parent company of Holding, by AEA
Investors, its senior management and its investor-shareholders, the management
and certain employees of the Mettler-Toledo Group and Ciba (which will purchase
a 5% interest); (ii) MT Investors will contribute such funds to Holding, which
will in turn contribute such funds to MT Acquisition Corp.; (iii) MT Acquisition
Corp. will borrow $115.0 million of term loans under the Credit Agreement and
will complete the Offering of the Notes, and Holding will guarantee the Notes;
(iv) MT Acquisition Corp. will purchase the stock of Mettler-Toledo, Inc. and
Swiss Subholding from AGP; (v) Swiss Subholding will borrow $195.8 million under
the Credit Agreement, including $140.0 million of term loans and $55.8 million
under a revolving credit facility; (vi) Mettler-Toledo, Inc. and Swiss
Subholding will repay intercompany indebtedness to AGP and its affiliates (which
aggregated $182.4 million at June 30, 1996); and (vii) MT Acquisition Corp. will
be merged with and into Mettler-Toledo, Inc. As a result of these transactions,
Mettler-Toledo, Inc. will succeed to MT Acquisition Corp.'s obligations under
the Notes and the Credit Agreement and will be the primary obligor of the Notes.
Mettler-Toledo, Inc. will be a wholly owned subsidiary of Holding, and Swiss
Subholding will be a wholly owned subsidiary of Mettler-Toledo, Inc. Following
the Acquisition $109.2 million will be available for additional borrowings under
the revolving credit facility under the Credit Agreement and under local working
capital facilities. Management and certain employees of the Company are expected
to own at least 16.5% of the equity of MT Investors on a fully diluted basis,
including their investments in common stock of MT Investors and options to
purchase additional shares of such common stock to be granted in connection with
the Acquisition. Actual amounts at Closing will vary due to changes in currency
exchange rates and changes in certain balance sheet items subsequent to June 30,
1996.
ACQUISITION AGREEMENT TERMS
As consideration for the Acquisition, the Company will pay to AGP SFr 512.4
million (which has been fixed at no more than $421.7 million due to the purchase
of a currency option) in cash in Swiss francs. This amount includes SFr 403.0
million of purchase price and SFr 109.4 million of pre-Closing dividends to AGP.
In addition, the Company will repay all net intercompany indebtedness owed by
the Mettler-Toledo Group to Ciba or any of Ciba's other affiliates as of the
Closing ($182.4 million as of June 30, 1996).
The Acquisition Agreement contains representations and warranties with
respect to the condition and operations of the Mettler-Toledo Group, covenants
with respect to conduct of the Mettler-Toledo Group's operations prior to the
Closing and certain closing conditions, including the continued accuracy of
representations and warranties. The Closing is conditioned on receipt of certain
regulatory approvals. No representations and warranties survive the Closing.
Thus, the Company will have no contractual recourse to Ciba for pre-Closing
liabilities of the Mettler-Toledo Group, except, under certain circumstances,
for certain pre-Closing tax matters. MT Investors will assign all of its rights
under the Acquisition Agreement to Mettler-Toledo, Inc.
The Company has agreed that it will not, in the 18-month period following
the Closing, without the prior written consent of Ciba, engage in certain
extraordinary dispositions, including certain sales of assets or equity of any
company in the Mettler-Toledo Group, mergers or similar business combinations
(excepting certain transactions within the Company and transactions the
aggregate net proceeds of which do not exceed SFr 80.0 million ($64.0 million as
of June 30, 1996) in a 12-month period).
The transfer of the Company's subsidiaries and its joint venture in China
from AGP to Swiss Subholding in connection with the Acquisition requires
approval by Chinese governmental authorities, which approval the Company
believes will be obtained in due course, but may not be obtained by Closing.
These entities own two of the Company's 14 manufacturing facilities. See
'Business--Properties.' If such consent is not so obtained, the parties to the
Acquisition Agreement have agreed therein to negotiate to provide arrangements
economically and commercially equivalent to the transfer. See 'Risk
Factors--Regulatory Approvals.'
Neither Ciba nor AGP will provide transitional services to the Company
following the Closing.
20
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Notes, after deducting expenses of
the Offering, including discounts to the Underwriters, are estimated to be
approximately $128.1 million. The Company will use the net proceeds, together
with borrowings under the Credit Agreement, equity contributions to the Company
and cash on hand in the Mettler-Toledo Group, to finance the Acquisition and pay
related fees and expenses. See 'The Acquisition.'
The following table sets forth the estimated sources and uses of funds for
the Acquisition as if the Closing had occurred on June 30, 1996. (Actual amounts
at Closing will vary due to changes in currency exchange rates and changes in
certain balance sheet items subsequent to June 30, 1996.)
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
SOURCES OF FUNDS:
Credit Agreement:
Term loans(1)........................................ $ 255,000
Revolving credit facility(2)(3)(4)(5)................ 55,829
Gross proceeds of the Notes............................ 135,000
Equity contribution(3)................................. 190,000
Cash on hand to be applied in the Acquistion(3)(4)..... 40,935
--------------
Total Sources..................................... $ 676,764
--------------
--------------
USES OF FUNDS:
Acquisition price(5)................................... $ 421,691
Repayment of net indebtedness to Ciba and
affiliates(4)(6)(7)................................... 182,448
Repayment of bank and other loans(4)(7)................ 38,625
Fees and expenses...................................... 34,000
--------------
Total Uses........................................ $ 676,764
--------------
--------------
</TABLE>
- ------------------
(1) Will consist of (i) $100,000 of Term A Loans to be denominated in various
currencies; (ii) $75,000 of Term B Loans to be denominated in U.S. dollars;
and (iii) $80,000 of Term C Loans to be denominated in U.S. dollars. See
'Description of Credit Agreement.' In the event that cash requirements at
Closing are less than as set forth above, the Company may reduce the
principal amount of the Term C Loans.
(2) To be denominated in various currencies. See 'Description of Credit
Agreement.'
(3) Up to $7,500 of an aggregate $15,000 to be contributed by certain of the
Company's employees to MT Investors may be contributed after Closing. If
less than $7,500 is so contributed by the Company's employees by December
31, 1996, the balance will be contributed by AEA Investors and/or its
investor-shareholders. At Closing, cash on hand or additional borrowings
under the revolving credit facility under the Credit Agreement will be used
pending receipt of the proceeds from any deferred equity contributions. Ciba
will contribute $9,500 (5%) of the total $190,000 of equity contributions.
(4) Amounts at June 30, 1996. Actual amounts at Closing will vary. The Company
may determine to leave in place certain third party indebtedness following
Closing and reduce the borrowings at Closing under the revolving credit
facility.
(5) Acquisition price consists of $331,650 of purchase price and $90,041 of
pre-Closing dividends to AGP. In connection with such dividends, certain
members of the Mettler-Toledo Group will be subject to Swiss withholding
taxes in the amount of SFr 37,850, which amount will be fully refunded
following Closing. The amount of such withholding taxes will be funded
pending receipt of such refund through borrowings under the revolving credit
facility. Such temporary borrowings are not reflected in the table.
(6) Net of intercompany indebtedness due from Ciba and affiliates, payable at
Closing in Swiss francs.
(7) For information regarding interest rates, maturities and other principal
terms of the indebtedness being repaid at Closing, see Notes 3 and 13 to the
Audited Combined Financial Statements.
21
<PAGE>
CAPITALIZATION
The following table sets forth the actual combined short-term debt and
capitalization of the Mettler-Toledo Group at June 30, 1996 and the pro forma
short-term debt and capitalization of the Company on such date after giving
effect to the Acquisition and the issuance of the Notes offered hereby and the
application by the Company of the estimated net proceeds therefrom. See 'Use of
Proceeds,' 'Unaudited Pro Forma Financial Information' and 'Selected Historical
Financial Information.'
<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------
HISTORICAL PRO FORMA
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt, including current maturities of
long-term debt:
Bank and other loans(1)............................ $ 32,610 $ --
Notes payable to Ciba and affiliates............... 83,242 --
Short-term portion of term loans under Credit
Agreement....................................... -- 9,000
---------- ---------
Total short-term debt........................... $ 115,852 $ 9,000
---------- ---------
---------- ---------
Long-term debt:
Payable to Ciba and affiliates..................... $ 152,231 $ --
Due to third parties(1)............................ 6,015 --
Term loans under Credit Agreement(2)............... -- 246,000
Revolving credit facility under Credit
Agreement(1)(2)(3).............................. -- 55,829
Notes offered hereby............................... -- 135,000
---------- ---------
Total long-term debt............................ 158,246 436,829
Stockholders' equity:
Net assets......................................... 193,362 --
Common stock(4).................................... -- 190,000
Accumulated deficit(5)............................. -- (120,400 )
---------- ---------
Total stockholders' equity...................... 193,362 69,600
---------- ---------
Total capitalization.......................... $ 351,608 $506,429
---------- ---------
---------- ---------
</TABLE>
- ------------------
(1) The Company may determine to leave in place certain third party indebtedness
following Closing and reduce the borrowings at Closing under the revolving
credit facility.
(2) In the event that cash requirements at Closing are less than as set forth
above, the Company may determine to reduce the principal amount of the Term
C Loans.
(3) At June 30, 1996 on a pro forma basis after giving effect to the
Acquisition, the Issuer, Swiss Subholding and other subsidiaries of the
Company would have been able to borrow an additional $109,171 under the
revolving credit facility under the Credit Agreement and local working
capital facilities. Of this amount,
SFr 37,850 will be drawn under the revolving credit facility temporarily to
fund certain withholding taxes payable in connection with the Acquisition,
which withholding taxes will be fully refunded following Closing. Such
borrowings are not reflected in the table.
(4) Up to $7,500 of an aggregate $15,000 to be contributed by certain of the
Company's employees to MT Investors may be contributed after Closing. If
less than $7,500 is so contributed by the Company's employees by December
31, 1996, the balance will be contributed by AEA Investors and/or its
investor-shareholders. At Closing, cash on hand or additional borrowings
under the revolving credit facility under the Credit Agreement will be used
pending receipt of the proceeds from any deferred equity contributions. Ciba
will contribute $9,500 (5%) of the total $190,000 of equity contributions.
(5) In accordance with U.S. GAAP, the Company will allocate a portion of the
purchase price to in-process research and development projects that have
economic value and, since U.S. GAAP does not permit the capitalization of
research and development, immediately charge this value (currently estimated
to approximate $120,400) to operations upon consummation of the Acquisition.
22
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements of the Company have
been prepared to give effect to the Acquisition, including the Offering. The
accompanying Unaudited Pro Forma Balance Sheet at June 30, 1996 has been
prepared as if the Acquisition was consummated as of that date. The accompanying
Unaudited Pro Forma Statements of Operations of the Company for the year ended
December 31, 1995 and the six months ended June 30, 1995 and 1996 give effect to
the Acquisition as if it occurred at January 1, 1995.
The pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable under the circumstances.
Pro forma adjustments are applied to the historical financial statements of the
Mettler-Toledo Group to account for the Acquisition under the purchase method of
accounting. Under purchase accounting, the estimated Acquisition cost will be
allocated to the Mettler-Toledo Group's assets and liabilities based on their
relative fair values. Allocations are subject to valuations as of the date of
the Acquisition based on appraisals and other studies which are not yet
completed. Accordingly, the final allocations may differ from the amounts
reflected herein.
The Company is evaluating its business strategy as an independent company
after the Acquisition and believes that it can support continued sales growth
while further reducing its overall cost base. In July 1996, in anticipation of
the consummation of the Acquisition, the Company announced the closure of its
Westerville, Ohio facility. In addition, the Company will implement a targeted
workforce reduction by the end of 1996. The Unaudited Pro Forma Statements of
Operations reflect a pro forma adjustment of $8.3 million per year reflecting
the cost savings the Company expects to realize from these projects. See Note
(A) to the Unaudited Pro Forma Statements of Operations. A reserve of $9.0
million is reflected on the Unaudited Pro Forma Balance Sheet to reflect the
estimated costs of implementing these projects. See Note 2(F) to the Unaudited
Pro Forma Balance Sheet. Of such reserve of $9.0 million, the costs associated
with the closure of the Westerville facility of $2.0 million were recorded as a
charge in the quarter ended September 30, 1996.
In accordance with U.S. GAAP, the Company will allocate a portion of the
estimated Acquisition cost to (i) in-process research and development projects
that have economic value (currently estimated to be $120.4 million) and (ii) the
revaluation of inventories (currently estimated to be $21.1 million). In the
case of in-process research and development, the amount allocated will be
charged to expense as of the date of the Acquisition. In the case of
inventories, the revaluation amount will be charged to cost of sales over the
period in which such inventories are sold, which is expected to be one to two
quarters following the Closing. These one-time charges have not been reflected
in the accompanying Unaudited Pro Forma Statements of Operations due to their
unusual, non-recurring nature.
The pro forma financial statements have been prepared based upon the
Audited Combined Financial Statements and the Interim Financial Statements of
the Mettler-Toledo Group, included elsewhere herein, which have been prepared in
accordance with U.S. GAAP. The pro forma financial statements should be read in
conjunction with the Audited Combined Financial Statements, the Interim
Financial Statements, 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and other financial information included
elsewhere in this Prospectus. These unaudited pro forma financial statements and
related notes are provided for informational purposes only and do not purport to
be indicative of the results which would have actually been obtained had the
Acquisition and other events been completed on the dates indicated or which may
be expected to occur in the future. The Mettler-Toledo Group's historical net
income and cash flows as a wholly owned operation of Ciba are not necessarily
indicative of the net income and cash flows it might have realized as an
independent entity. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations--Effect of Acquisition on Results of
Operations.'
23
<PAGE>
METTLER-TOLEDO, INC.
UNAUDITED PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
------------------------------------------------------
METTLER-TOLEDO
METTLER-TOLEDO PRO FORMA INC.
GROUP HISTORICAL ADJUSTMENTS PRO FORMA
---------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 45,935 $(40,935)(1) $ 5,000
Due from Ciba and affiliates................... 53,025 (53,025)(2)(A) --
Trade accounts receivable, net................. 157,212 157,212
Inventories.................................... 107,342 21,100(2)(B) 128,442
Deferred taxes................................. 5,836 5,836
Other current assets........................... 25,040 25,040
---------------- -------------- --------------
Total current assets........................ 394,390 (72,860) 321,530
Property, plant and equipment, net............... 225,885 52,500(2)(C) 278,385
Goodwill and other intangible assets, net........ 83,155 94,250(2)(D) 177,405
Long-term deferred taxes......................... 13,596 13,596
Debt issuance costs.............................. -- 14,013(2)(E) 14,013
Other assets..................................... 14,894 14,894
---------------- -------------- --------------
Total assets................................ $731,920 $ 87,903 $819,823
---------------- -------------- --------------
---------------- -------------- --------------
LIABILITIES AND STOCKHOLDER'S EQUITY/NET ASSETS
Current liabilities:
Trade accounts payable......................... $ 34,265 $ 34,265
Accrued and other liabilities.................. 101,782 $ 9,000(2)(F) 110,782
Taxes payable.................................. 16,439 16,439
Deferred taxes................................. 7,313 6,330(2)(G) 13,643
Bank and other loans........................... 32,610 (32,610)(2)(H) --
Notes payable to Ciba and affiliates........... 83,242 (83,242)(2)(A) --
Short-term portion of term loans............... -- 9,000(1) 9,000
---------------- -------------- --------------
Total current liabilities................... 275,651 (91,522) 184,129
Long-term debt payable to Ciba and affiliates.... 152,231 (152,231)(2)(A) --
Long-term debt due to third parties.............. 6,015 (6,015)(2)(H) --
Long-term deferred taxes......................... 12,827 14,104(2)(G) 26,931
Credit Agreement:
Term loans..................................... -- 246,000(1) 246,000
Revolving credit facility...................... -- 55,829(1) 55,829
Notes............................................ -- 135,000(1) 135,000
Other long-term liabilities...................... 88,979 10,500(2)(I) 99,479
---------------- -------------- --------------
Total liabilities........................... 535,703 211,665 747,368
Minority interest................................ 2,855 2,855
Stockholder's equity/net assets:
Net assets..................................... 193,362 (193,362)(2) --
Common stock................................... -- 190,000(1) 190,000
Accumulated deficit............................ -- (120,400)(2)(J) (120,400)
---------------- -------------- --------------
Total stockholder's equity/net assets....... 193,362 (123,762) 69,600
---------------- -------------- --------------
Total liabilities and stockholder's
equity/net assets......................... $731,920 $ 87,903 $819,823
---------------- -------------- --------------
---------------- -------------- --------------
</TABLE>
24
<PAGE>
METTLER-TOLEDO, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS)
(1) For a description of the sources and uses of funds for the Acquisition, see
'Use of Proceeds.' The amount of all debt due to Ciba and affiliates, net of
amounts due from Ciba and affiliates, will be settled at Closing. The Company
also expects to repay all existing bank and other loans at Closing. The
Unaudited Pro Forma Balance Sheet assumes receipt at Closing of the $7,500
equity contribution that may be made after Closing, as described under 'Use of
Proceeds.'
(2) Under purchase accounting, the total estimated Acquisition cost will be
allocated to the Company's assets and liabilities based on their relative fair
values. Allocations are subject to valuations as of the date of the Acquisition
based on appraisals and other studies which are not yet completed. Accordingly,
the final allocations may be different from the amounts reflected herein. The
amount and the components of the estimated Acquisition cost, along with the
estimate of the allocation of the purchase price to assets acquired and
liabilities assumed is as follows:
<TABLE>
<S> <C>
Estimated Acquisition price, including debt...................... $ 642,764
Acquisition and financing costs.................................. 34,000
----------
Total estimated Acquisition price, including debt........... $ 676,764
----------
----------
Historical net book value at June 30, 1996....................... $ 193,362
Repayment of net amounts owed to Ciba and affiliates:
Due from Ciba and affiliates................................... (53,025)(A)
Notes payable to Ciba and affiliates........................... 83,242(A)
Long-term debt payable to Ciba and affiliates.................. 152,231(A)
Estimated revaluation of inventories............................. 21,100(B)
Estimated revaluation of property, plant and equipment........... 52,500(C)
Goodwill and other intangible assets, net........................ 94,250(D)
Capitalized debt issuance related expenses....................... 14,013(E)
Estimated restructuring reserve.................................. (9,000)(F)
Net deferred tax effects of certain of the purchase accounting
adjustments:
Current..................................................... (6,330)(G)
Long-term................................................... (14,104)(G)
Repayment of bank and other loans................................ 32,610(H)
Long-term debt due to third parties.............................. 6,015(H)
Record pension and post-retirement obligations at projected
benefit obligation
and accumulated benefit obligation, respectively............... (10,500)(I)
Estimated in-process research and development valuation.......... 120,400(J)
----------
$ 676,764
----------
----------
</TABLE>
(A) As indicated in Note 1 above, the net amount of all debt due to Ciba
and affiliates will be settled at Closing.
(B) The Company will revalue certain inventories in connection with the
purchase price allocation. This revaluation will be charged to cost of sales in
the period in which the inventories are sold, which is expected to be one to two
quarters after Closing. This one-time charge is reflected in the Unaudited Pro
Forma Balance Sheet but not in the accompanying Unaudited Pro Forma Statements
of Operations due to its unusual, non-recurring nature.
(C) Represents the estimated revaluation of acquired real estate,
principally land holdings in Switzerland contiguous to certain of the Company's
manufacturing facilities.
25
<PAGE>
(D) Represents the excess purchase price resulting from the Acquisition,
which includes value that will ultimately be attributed to patents and other
intangible assets, other acquired assets, and goodwill once the Company's asset
appraisals and other valuation studies are completed. Such asset appraisals and
valuation studies are anticipated to be completed shortly after completion of
the Acquisition. As such asset appraisals and valuation studies have not yet
been completed, for purposes of the accompanying pro forma presentation, the
excess purchase price has been included in Goodwill and other intangible assets,
net in the Unaudited Pro Forma Balance Sheet and is being amortized over an
estimated composite amortizable life of 30 years in the Unaudited Pro Forma
Statements of Operations. The Company presently estimates that upon completion
of the asset appraisals and valuation studies, approximately $20 million of such
excess purchase price may be allocated to patents and amortized over a useful
life of five years and approximately $40 million may be allocated to trademarks
and amortized over a useful life of 12 to 13 years, while the remaining
approximately $117 million would represent goodwill and be amortized over a
useful life of 40 years. Final allocation of the excess purchase price between
intangible assets and goodwill will have no material effect on the Company's
balance sheet but may affect the estimated composite amortizable life of such
intangible assets and goodwill and, accordingly, the amount of amortization
expense.
(E) Represents expenses relating to the issuance of the loans under the
Credit Agreement and the issuance of the Notes.
(F) Represents a reserve for costs associated with the closure of the
Company's Westerville, Ohio facility, which was announced in July 1996, and a
targeted workforce reduction to be implemented by the end of 1996.
(G) Represents the net deferred tax liability (both current and long-term)
relating to certain of the purchase price adjustments for which there will be no
change in underlying tax bases of the affected assets and liabilities.
(H) At Closing, the Company expects to repay all existing bank and other
loans and long-term debt to third parties. However, the Company may determine to
leave in place certain third party indebtedness following the Closing and reduce
the borrowings at Closing under the revolving credit facility.
(I) Represents the recording of the pension liability at the projected
benefit obligation, net of plan assets (funded status) level and the
post-retirement liability at the accumulated benefit obligation level.
(J) In accordance with U.S. GAAP, the Company will allocate a portion of
the purchase price to in-process research and development projects that have
economic value and immediately write-off this value as a charge to operations
upon consummation of the Acquisition. This one-time charge is reflected in the
Unaudited Pro Forma Balance Sheet but not in the Unaudited Pro Forma Statements
of Operations due to its unusual, non-recurring nature.
26
<PAGE>
METTLER-TOLEDO, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------
METTLER-TOLEDO,
METTLER-TOLEDO PRO FORMA INC.
GROUP HISTORICAL ADJUSTMENTS PRO FORMA
---------------- -------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales.......................... $850,415 $ 850,415
Cost of sales...................... 508,089 $ (2,600)(A) 505,489
---------------- -------------- ---------------
Gross profit..................... 342,326 2,600 344,926
Research and development
expenses......................... 54,542 (1,200)(A) 53,342
Marketing and selling expenses..... 167,396 (2,500)(A) 164,896
General and administrative
expenses......................... 81,167 2,300(B) 81,467
(2,000)(A)
Amortization of goodwill and other
intangible assets................ 2,529 3,385(C) 5,914
Other charges (income), net........ (701) (701)
---------------- -------------- ---------------
Income from operations........... 37,393 2,615 40,008
Interest expense................... 18,219 17,668(D) 38,270
2,383(E)
Financial income, net.............. 8,630 (5,388)(F) 3,242
---------------- -------------- ---------------
Income before taxes and minority
interest...................... 27,804 (22,824) 4,980
Provision for taxes................ 8,782 (4,218)(G) 4,564
Minority interest.................. 768 768
---------------- -------------- ---------------
Net income (loss).................. $ 18,254 $(18,606) $ (352)
---------------- -------------- ---------------
---------------- -------------- ---------------
</TABLE>
See accompanying notes to Unaudited Pro Forma Statements of Operations.
27
<PAGE>
METTLER-TOLEDO, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1995
-----------------------------------------------------
METTLER-TOLEDO,
METTLER-TOLEDO PRO FORMA INC.
GROUP HISTORICAL ADJUSTMENTS PRO FORMA
---------------- -------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales..................... $406,992 $ 406,992
Cost of sales................. 243,643 $ (1,300)(A) 242,343
---------------- -------------- ---------------
Gross profit................ 163,349 1,300 164,649
Research and development
expenses.................... 27,005 (600)(A) 26,405
Marketing and selling
expenses.................... 80,965 (1,250)(A) 79,715
General and administrative
expenses.................... 37,909 1,150(B) 38,059
Amortization of goodwill and (1,000)(A)
other intangible assets..... 1,289 1,668(C) 2,957
---------------- -------------- ---------------
Income from operations...... 16,181 1,332 17,513
Interest expense.............. 8,717 9,226(D) 19,135
1,192(E)
Financial income, net......... 2,403 (2,110)(F) 293
---------------- -------------- ---------------
Income (loss) before taxes
and minority interest.... 9,867 (11,196) (1,329)
Provision (benefit) for
taxes....................... 3,117 (1,722)(G) 1,395
Minority interest............. 270 270
---------------- -------------- ---------------
Net income (loss)............. $ 6,480 $ (9,474) $ (2,994)
---------------- -------------- ---------------
---------------- -------------- ---------------
</TABLE>
See accompanying notes to Unaudited Pro Forma Statements of Operations.
28
<PAGE>
METTLER-TOLEDO, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1996
-----------------------------------------------------
METTLER-TOLEDO,
METTLER-TOLEDO PRO FORMA INC.
GROUP HISTORICAL ADJUSTMENTS PRO FORMA
---------------- -------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales..................... $423,802 $ 423,802
Cost of sales................. 252,203 $ (1,300)(A) 250,903
---------------- -------------- ---------------
Gross profit................ 171,599 1,300 172,899
Research and development
expenses.................... 25,054 (600)(A) 24,454
Marketing and selling
expenses.................... 81,378 (1,250)(A) 80,128
General and administrative
expenses.................... 39,153 1,150(B) 39,303
Amortization of goodwill and (1,000)(A)
other intangible assets..... 1,270 1,687(C) 2,957
---------------- -------------- ---------------
Income from operations...... 24,744 1,313 26,057
Interest expense.............. 8,346 9,597(D) 19,135
1,192(E)
Financial income (expense),
net......................... 965 (1,813)(F) (848)
---------------- -------------- ---------------
Income before taxes and
minority interest........ 17,363 (11,289) 6,074
Provision for taxes........... 6,830 (3,266)(G) 3,564
Minority interest............. 526 526
---------------- -------------- ---------------
Net income.................... $ 10,007 $ (8,023) $ 1,984
---------------- -------------- ---------------
---------------- -------------- ---------------
</TABLE>
See accompanying notes to Unaudited Pro Forma Statements of Operations.
29
<PAGE>
METTLER-TOLEDO, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
PERIODS ENDED DECEMBER 31, 1995 AND JUNE 30, 1995 AND 1996
(IN THOUSANDS)
(A) Represents the cost savings the Company expects to realize from (i) its
targeted workforce reduction program that is expected to be completed by the end
of 1996 and (ii) the closure of the Company's Westerville, Ohio facility, which
was announced in July 1996. The Company believes it can achieve such cost
savings, which result principally from elimination of (i) the Westerville
facility's fixed manufacturing costs and (ii) the affected employees' salaries
and benefits, without otherwise affecting its cost base or impairing its sales
as a result of available manufacturing capacity in its other facilities.
(B) Reflects the estimated additional general and administrative expenses
the Company anticipates it will incur principally as a result of the Acquisition
and its changed legal, tax and financing structure. These costs include
additional administrative, treasury, internal audit and certain legal services
and an annual management fee of $1,000 to be paid to AEA Investors for
consulting and financial services to be provided to the Company.
(C) Represents the amortization of goodwill and other intangible assets
arising from the Acquisition over their useful lives (five years for
approximately $20 million allocated to patents, 12 to 13 years for approximately
$40 million allocated to trademarks and 40 years for approximately $117 million
of goodwill). See Note (D) to the Unaudited Pro Forma Balance Sheet.
(D) Reflects the net change in interest expense based on the Acquisition
financing:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
YEAR ENDED ------------------
DECEMBER 31, 1995 1995 1996
----------------- ------- -------
<S> <C> <C> <C>
Elimination of historical interest
expense on
refinanced debt.................. $ (18,219) $(8,717) $(8,346)
Interest on revolving credit
facility......................... 3,350 1,675 1,675
Interest on term loans............. 19,375 9,687 9,687
Interest on Notes.................. 13,162 6,581 6,581
----------------- ------- -------
Net change....................... $ 17,668 $ 9,226 $ 9,597
----------------- ------- -------
----------------- ------- -------
</TABLE>
For each 0.25% change in the assumed average rate on the revolving credit
facility and term loans under the Credit Agreement and the Notes, interest
expense would change by approximately $1,115 for the year ended December 31,
1995 and $557 for the six months ended June 30, 1995 and 1996.
(E) Represents the amortization of debt issuance fees plus other fees to be
incurred in connection with the Credit Agreement. The amortization periods for
the fees related to the term loans under the Credit Agreement and the Notes are
approximately seven years and ten years, respectively.
(F) Represents elimination of historical interest income.
(G) Estimated income tax effects of pre-tax pro forma adjustments and
related financing structure. The increased pro forma tax rate is principally
attributable to increased non-deductible goodwill expense.
30
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
Set forth below is selected historical financial information of the
Mettler-Toledo Group as of the dates and for the periods shown. The selected
historical financial information at December 31, 1994 and 1995 and for the years
ended December 31, 1993, 1994, and 1995 is derived from the Audited Combined
Financial Statements that were audited by KPMG Fides Peat, independent auditors,
whose report appears elsewhere in this Prospectus. The selected historical
financial information at June 30, 1996 and for the six months ended June 30,
1995 and 1996 is derived from the Interim Financial Statements, which are
unaudited. In the opinion of management such unaudited information includes all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the information included therein. Operating results for the six
months ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1996. The selected historical
financial information should be read in conjunction with 'Management's
Discussion and Analysis of Financial Condition and Results of Operations,' the
Audited Combined Financial Statements and the Interim Financial Statements. The
Audited Combined Financial Statements and the Interim Financial Statements from
which the selected consolidated financial information set forth below have been
derived were prepared in accordance with U.S. GAAP.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
-------------------------------- --------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Net sales............................. $728,958 $769,136 $850,415 $406,992 $423,802
Cost of sales......................... 443,534 461,629 508,089 243,643 252,203
-------- -------- -------- -------- --------
Gross profit.......................... 285,424 307,507 342,326 163,349 171,599
Research and development expenses..... 46,438 47,994 54,542 27,005 25,054
Marketing and selling expenses........ 141,717 152,631 167,396 80,965 81,378
General and administrative expenses... 68,357 76,248 81,167 37,909 39,153
Amortization of goodwill.............. 2,535 2,536 2,529 1,289 1,270
Other charges (income), net(2)........ 18,284 (2,852) (701) -- --
-------- -------- -------- -------- --------
Income from operations................ 8,093 30,950 37,393 16,181 24,744
Interest expense...................... 15,239 13,307 18,219 8,717 8,346
Financial income, net................. 4,174 4,864 8,630 2,403 965
Provision for taxes................... 3,041 8,676 8,782 3,117 6,830
Minority interest..................... 1,140 347 768 270 526
-------- -------- -------- -------- --------
Net income (loss)..................... $ (7,153) $ 13,484 $ 18,254 $ 6,480 $ 10,007
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
BALANCE SHEET DATA(1):
Cash and cash equivalents............. $ 63,802 $ 41,402 $ 45,935
Net working capital................... 126,065 90,740 118,739
Total assets.......................... 683,198 724,094 731,920
Long-term third party debt............ 862 3,621 6,015
Net borrowing from Ciba and
affiliates(3)...................... 177,651 203,157 182,448
Other long-term liabilities(4)........ 83,964 84,303 88,979
Stockholder's equity(5)............... 228,194 193,254 193,362
OTHER DATA:
EBITDA(6)............................. $ 57,458 $ 65,068 $ 73,013 $ 31,664 $ 39,103
Net cash provided by operating
activities......................... 22,456 34,094 51,669 23,066 36,860
Net cash used in investing
activities......................... (23,857) (12,300) (29,342) (6,202) (9,582)
Net cash provided by (used in)
financing activities............... 7,816 (7,496) (49,071) (7,173) (20,429)
Depreciation and amortization
expense............................ 29,591 34,118 33,363 15,483 14,359
Capital expenditures.................. 25,122 24,916 25,858 6,527 10,053
Gross margin.......................... 39.2% 40.0% 40.3% 40.1% 40.5%
EBITDA margin......................... 7.9% 8.5% 8.6% 7.8% 9.2%
Ratio of earnings to fixed
charges(7)......................... --(8) 2.3x 2.3x 1.9x 2.7x
</TABLE>
(Footnotes on next page)
31
<PAGE>
- ------------------
(1) Balance sheet information at December 31, 1991, 1992 and 1993 is not
available. Income statement information for the years ended December 31,
1991 and 1992 is not available, except that net sales for such years were
$718,200 and $769,000. Approximately 75% of the decrease in net sales in
1993 compared to 1992 resulted from the appreciation of the U.S. dollar
against the Company's other principal trading currencies.
(2) For 1993, consists primarily of costs associated with the closure of a
manufacturing facility in Cologne, Germany, and also includes the
restructuring of certain manufacturing operations and an early retirement
program in the United States. Other income for 1993, 1994 and 1995 relates
primarily to gains from the sale of real property and, in 1994, to a gain on
the sale of an investment. See Note 16 to the Audited Combined Financial
Statements.
(3) Includes notes payable and long-term debt payable to Ciba and affiliates
less amounts due from Ciba and affiliates. See Notes 3 and 13 to the Audited
Combined Financial Statements.
(4) Consists primarily of obligations under various pension plans and plans that
provide post-retirement medical benefits. See Note 14 to the Audited
Combined Financial Statements.
(5) Stockholder's equity consists of the combined net assets of the
Mettler-Toledo Group.
(6) 'EBITDA' represents, for any period, the sum of income from operations and
depreciation and amortization expense, excluding restructuring charges of
$19,774 in 1993 and $2,257 in 1995. EBITDA is presented because it is a
widely accepted financial indication of a company's ability to service
and/or incur indebtedness. Management believes that presentation of EBITDA
is helpful to investors, because EBITDA (subject to certain adjustments)
will be used to determine compliance with certain covenants contained in the
Indenture and the Credit Agreement. However, EBITDA should not be considered
as an alternative to net income as a measure of the Company's operating
results or to cash flows as a measure of liquidity. In addition, although
the EBITDA measure of performance is not recognized under generally accepted
accounting principles, it is widely used by industrial companies as a
general measure of a company's operating performance because it assists in
comparing performance on a relatively consistent basis across companies
without regard to depreciation and amortization, which can vary
significantly depending on accounting methods (particularly where
acquisitions are involved) or non-operating factors such as historical cost
bases. Because EBITDA is not calculated identically by all companies, the
presentation herein may not be comparable to other similarly titled measures
of other companies.
(7) In calculating the ratio of earnings to fixed charges, earnings consist of
income before taxes plus fixed charges. Fixed charges consist of interest
expense and amortization of deferred financing fees, whether capitalized or
expensed, plus one-third of rental expense under operating leases (the
portion that has been deemed by the Company to be representative of an
interest factor).
(8) For the year ended December 31, 1993, earnings were insufficient to cover
fixed charges by approximately $3,000.
32
<PAGE>
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
Combined Financial Statements and the Interim Financial Statements included
elsewhere in this Prospectus.
GENERAL
The Company's results of operations reflect the combined operations of the
Mettler-Toledo Group of companies owned by Ciba which are being acquired in the
Acquisition. Financial information is presented in accordance with U.S. GAAP.
The Company operates a global business, with net sales that are widely
diversified by geographic region and by product line. The Company has achieved
its market leadership position through its continued investment in product
development, the maintenance and, in some instances, expansion, of its existing
market position in established markets and its aggressive pursuit of new
markets. The Company believes that this strategy has enabled it to increase
sales at a rate in excess of the overall market growth rate. Net sales have
increased across all major product lines in laboratory, industrial and food
retailing markets. The Company's net sales increased 4% in the first six months
of 1996, 11% in 1995 and 6% in 1994, in each case over the relevant prior
period. In local currency, net sales increased 5% in the first six months of
1996 and 5% in both 1995 and 1994. In addition to the Company's growth strategy
in its established markets, the Company has pursued an aggressive growth
strategy in emerging markets, where demand for more sophisticated weighing
products has increased as economies industrialize. The Company has made
investments to establish a distribution and manufacturing infrastructure in
certain emerging markets, particularly in Asia. Net sales in Asia (excluding
Japan) and Latin America in local currency increased 19% in the first six months
of 1996 and 20% in 1995, in each case over the relevant prior period.
During the periods presented, the Company has succeeded in increasing its
gross margins and operating margins through productivity improvements and
cost-cutting initiatives. These increases were achieved despite the appreciation
of the Swiss franc against the Company's other principal trading currencies,
which has the effect of increasing overall costs due to the Company's
significant operations in Switzerland, and despite the Company's continued
investments in product development and in its distribution and manufacturing
infrastructure. Gross margins improved from 39.2% in 1993 to 40.5% in the first
six months of 1996. Operating margins excluding the 1993 restructuring charge of
$19.8 million improved from 3.8% in 1993 to 5.8% in the first six months of 1996
(8.1% at 1993 currency exchange rates). During this period, the Company took
steps to increase workforce flexibility, reduce its overall workforce and shift
the mix of its workforce toward higher growth and lower cost regions. For
example, the Company closed a plant in Cologne, Germany in mid-1994 and is
constructing a new manufacturing facility in Shanghai, China, which is expected
to be completed by the end of 1996. The Company also focuses on product
innovations that can reduce manufacturing costs, such as the Brickstone
technology, which has just begun to have a favorable effect on manufacturing
costs as the technology is incorporated throughout the Company's product lines.
The Company is currently implementing two projects which are aimed at reducing
warehouse capacity, improving inventory turnover and reducing materials handling
costs. In addition to continuing these cost-cutting efforts, the Company is also
evaluating its business strategy as an independent company after the Acquisition
and believes that it can support continued sales growth while further reducing
its overall cost base. In July 1996, in anticipation of the consummation of the
Acquisition, the Company announced the closure of its Westerville, Ohio
facility. In addition, the Company will implement a targeted workforce reduction
by the end of 1996. The Company expects that these two additional projects will
result in annual cost reductions of $8.3 million.
EFFECT OF CURRENCY ON RESULTS OF OPERATIONS
Swiss franc-denominated expenses represent a much greater percentage of the
Company's total expenses than Swiss franc-denominated sales represent of total
sales. Most of the Company's manufacturing costs in Switzerland relate to
products sold outside of Switzerland, including many technologically
sophisticated products requiring highly skilled personnel. Moreover, a
substantial percentage of the Company's overall research and development
expenses and general and administrative expenses are incurred in Switzerland. In
1995, the Company incurred approximately 29% of its expenses included in income
from operations in Swiss francs but
33
<PAGE>
received only 5% of its net sales in Swiss francs. As a result, appreciation of
the Swiss franc against the U.S. dollar and the Company's other major trading
currencies, especially the principal European currencies, has a negative impact
on the Company's operating results, and depreciation of the Swiss franc against
the U.S. dollar and such other currencies has a positive impact. From 1993 to
1995, the Swiss franc appreciated 20% against the U.S. dollar and 8% against the
German mark (based on the average exchange rate for 1993 and the average
exchange rate for 1995). From the first six months of 1995 to the first six
months of 1996, the Swiss franc depreciated 1.5% against the U.S. dollar and
appreciated 2.3% against the German mark (based on the average exchange rate for
each such period). If the prior year's currency exchange rates had remained in
effect, income from operations would have been $10.0 million higher in 1995 and
$8.2 million higher in 1994. For information regarding the Company's currency
hedging activities, see '--Financial Instruments with Off-Balance Sheet Risks.'
Approximately 69% of net sales in 1995 were made in currencies other than
the U.S. dollar, which is the Company's reporting currency. The U.S. dollar
value of net sales, gross profit and income from operations in other currencies
can vary significantly with changes in exchange rates between these other
currencies and the U.S. dollar. The effect of these changes on income from
operations generally offsets in part the effect on income from operations of
changes in the exchange rate between the Swiss franc and other currencies
described in the preceding paragraph.
EFFECT OF ACQUISITION ON RESULTS OF OPERATIONS
Upon consummation of the Acquisition, the Company will, in accordance with
U.S. GAAP relating to purchase accounting rules, adjust to fair value the
Company's assets and liabilities which, on a pro forma basis, would have
resulted in increased amortization estimated to be $3.4 million for 1995 and
$1.7 million for the first six months of 1996. In addition, as part of the
Acquisition, the Company will incur additional debt, which would have resulted
in a net increase in interest expense, including amortization of debt issuance
costs and other fees, in the amount of $20.1 million in 1995 and $10.8 million
for the first six months of 1996, on a pro forma basis. The Company estimates
that it will incur approximately $2.3 million annually in additional general and
administrative expenses as a result of being an independent company, including
an annual management fee of $1 million to be paid to AEA Investors. The
Acquisition would have resulted in a decrease in the Company's provision for
income taxes of $4.2 million in 1995 and $3.3 million for the first six months
of 1996 on a pro forma basis. As a result of the above adjustments, on a pro
forma basis the Company would have reported net loss of $0.4 million in 1995, as
compared to its historical net income of $18.3 million and net income of $2.0
million for the first six months of 1996, as compared to its historical net
income of $10.0 million. See 'Unaudited Pro Forma Financial Information.'
In addition, in accordance with U.S. GAAP, the Company will allocate a
portion of the purchase price to in-process research and development projects
that have economic value and to inventories. Approximately $120.4 million will
be allocated to in-process research and development and will be charged to
expense in the quarter in which the Acquisition occurs. Approximately $21.1
million will be allocated to the revaluation of inventories and will be charged
to cost of sales over the period in which the inventories are sold, which is
expected to be one to two quarters following the Closing. These charges are not
reflected in the Unaudited Pro Forma Statements of Income due to their unusual,
non-recurring nature. In addition, in the quarter ending September 30, 1996 the
Company will record a charge of $2.0 million to reflect the costs associated
with the closing of its Westerville, Ohio facility. See 'Unaudited Pro Forma
Financial Information.'
RECENT RESULTS
The Company has not completed its results for the three months ended
September 30, 1996. However, the Company estimates that net sales for such three
months decreased approximately 4% compared to the corresponding period in the
prior year, net sales denominated in Swiss francs were flat and net sales in
local currency decreased approximately 2%. Results were negatively impacted in
part by the strengthening of the U.S. dollar against other currencies. All
information for the three months ended September 30, 1996 is based on
preliminary, unaudited data prepared by the Company and is subject to
adjustment.
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RESULTS OF OPERATIONS
The following table sets forth certain items in the combined statements of
operations as a percentage of net sales for the years 1993, 1994 and 1995 and
for the six months ended June 30, 1995 and 1996.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
-----------------------------------------
SIX MONTHS
YEARS ENDED DECEMBER ENDED
31, JUNE 30,
----------------------- --------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales............................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................... 60.8 60.0 59.7 59.9 59.5
----- ----- ----- ----- -----
Gross profit............................ 39.2 40.0 40.3 40.1 40.5
Research and development expenses(1).... 6.4 6.3 6.4 6.6 5.9
Marketing and selling expenses.......... 19.4 19.8 19.7 19.9 19.2
General and administrative expenses..... 9.4 10.0 9.6 9.3 9.3
Amortization of goodwill................ 0.4 0.3 0.3 0.3 0.3
Other charges (income), net............. 2.5 (0.4) (0.1) -- --
----- ----- ----- ----- -----
Income from operations.................. 1.1% 4.0% 4.4% 4.0% 5.8%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
- ------------------
(1) Total research and development expenses were 7.2% of net sales in 1993, 7.2%
in 1994, 7.3% in 1995, 7.8% for the six months ended June 30, 1995 and 6.9%
for the six months ended June 30, 1996, including costs associated with
customer-specific engineering projects, which are included in cost of sales
for financial reporting purposes.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net sales were $423.8 million for the six months ended June 30, 1996
compared to $407.0 million for the corresponding period in the prior year, an
increase of 4%. Net sales in local currency increased 5%, reflecting market
share growth in selected geographic markets and strong sales of laboratory
products, while sales of industrial and food retailing products were only
slightly higher. Net sales in Europe in local currency increased 5%, with
southern Europe contributing significantly to the increase. Net sales in the
Americas in local currency increased 3% as a result of increased sales of
laboratory products. Net sales in Asia and other markets in local currency
increased 14% as a result of continued economic growth and further penetration
in selected markets. Results in Japan and China were particularly strong.
Gross profit as a percentage of net sales increased to 40.5% for the six
months ended June 30, 1996 compared to 40.1% for the corresponding period in the
prior year. The improvement resulted in part from increased sales of higher
margin products, offset in part by higher raw materials costs.
Marketing and selling expenses, research and development expenses and
general and administrative expenses all decreased as a percentage of net sales,
as a result of increased sales and the Company's continuing efforts to control
costs. Income from operations was $24.7 million for the six months ended June
30, 1996, compared to $16.2 million for the corresponding period in the prior
year. Changes in currency exchange rates had a minimal effect on income from
operations.
Interest expense decreased slightly to $8.3 million for the six months
ended June 30, 1996 compared to $8.7 million for the corresponding period in the
prior year. Interest expense following the Acquisition will be materially
different. See '--Effect of Acquisition on Results of Operations,' '--Liquidity
and Capital Resources' and 'Unaudited Pro Forma Financial Information.' Net
financial income decreased to $1.0 million for the six months ended June 30,
1996 compared to $2.4 million for the six months ended June 30, 1995,
principally as a result of losses on foreign currency transactions.
Net income increased to $10.0 million for the six months ended June 30,
1996 compared to $6.5 million for the corresponding period in the prior year.
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YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net sales were $850.4 million in 1995 compared to $769.1 million in 1994,
an increase of 11%. Net sales in local currency increased 5%; the remaining 6%
of the increase resulted from changes in currency exchange rates. In 1994 the
Company discontinued certain items in its systems and laboratory measurement
instruments product lines. Excluding the effect of these discontinued items, net
sales in local currency would have increased 6%. Sales growth in local currency
reflected steady growth across all major product lines in laboratory, industrial
and food retailing markets as result of favorable economic conditions and market
share gains in selected geographic markets. Sales were helped by the expansion
of the Company's line of titrators and the introduction of a family of standard
industrial programmable terminals for weighing instruments.
Net sales in Europe in local currency increased 7% in 1995 over 1994,
consistent with the continuing recovery from the 1993 recession and market share
gains in selected regions and product lines. Southern Europe contributed
significantly to the increase. Net sales in the Americas in local currency
decreased 1% in 1995 from 1994. Results in the Americas reflect reduced demand
in the United States for laboratory instruments in the wake of consolidation in
the pharmaceutical and chemical industries and unusually high demand for retail
equipment in 1994 as a result of a new labeling law that caused food retailers
to buy additional retail weighing and labeling equipment. Net sales in Asia and
other markets in local currency increased 20% in 1995 over 1994, primarily as a
result of continued economic growth and the Company's increased market share in
selected markets. Sales were also helped by the recovery in China from the poor
market conditions of 1994. See '--Year Ended December 31, 1994 Compared to Year
Ended December 31, 1993.'
Gross profit as a percentage of net sales increased slightly to 40.3% in
1995 from 40.0% in 1994. These results were achieved despite the appreciation of
the Swiss franc against the Company's other principal trading currencies, which
has the effect of increasing overall manufacturing costs due to the Company's
significant manufacturing operations in Switzerland. Improved manufacturing
productivity contributed to the increase, including the favorable effects of the
Company's mid-1994 closure of its Cologne, Germany plant, partially offset by
higher raw materials costs.
Marketing and selling expenses, research and development expenses and
general and administrative expenses were all relatively constant as a percentage
of net sales. Cost increases resulting from the currency effect of the
significant appreciation of the Swiss franc against the Company's other major
trading currencies were offset by the Company's cost control efforts, as
described under '--General.' Income from operations was $37.4 million in 1995
compared to $30.9 million in 1994. If 1994 currency exchange rates had remained
in effect throughout 1995, income from operations in 1995 would have been $47.4
million.
Interest expense rose to $18.2 million in 1995 from $13.3 million in 1994,
an increase of 37%, principally due to higher interest rates from the conversion
of a loan from Ciba from short term to long term. Interest expense following the
Acquisition will be materially different. See '--Effect of Acquisition on
Results of Operations,' '--Liquidity and Capital Resources' and 'Unaudited Pro
Forma Financial Information.' Net financial income increased to $8.6 million in
1995 from $4.9 million in 1994. The higher level of financial income resulted
principally from increased gain on foreign currency transactions.
Net income increased to $18.3 million in 1995 from $13.5 million in 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Net sales were $769.1 million in 1994 compared to $729.0 million in 1993,
an increase of 6%. Net sales in local currency increased 5%, and net sales in
local currency, excluding the effect of the discontinued items described above,
increased 7%. The Company achieved steady growth across all major product lines
in laboratory, industrial and food retailing markets. Sales growth reflected
favorable economic conditions in Europe and the Americas and market share gains
in selected regions and product lines. Sales were helped by the expansion of the
Company's line of titrators and the introduction of a new food retailing network
scale.
Net sales in Europe in local currency increased 5% in 1994 over 1993, due
principally to the beginning of the recovery from the 1993 recession and market
share gains in selected regions and product lines. Net sales in the Americas in
local currency increased 5%. Results in the Americas reflect unusually high
demand for retail equipment, due to a new labeling law that went into effect in
1994 and caused food retailers to buy additional retail weighing and labeling
equipment, and improved market conditions generally, partially offset by
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<PAGE>
consolidation in the pharmaceutical and chemical industries. Net sales in Asia
and other markets in local currency increased 3% in 1994 over 1993 as a result
of strong sales increases in most regions, offset in large part by poor market
conditions in China caused by the introduction of a new value-added tax, high
inflation and a liquidity squeeze of both cash and credit.
Gross profit as a percentage of net sales improved to 40.0% in 1994
compared to 39.2% in 1993, despite the appreciation of the Swiss franc against
the Company's other principal trading currencies. The improvement was attained
through cost reductions, including the favorable effects of the Company's
mid-1994 closure of its Cologne, Germany plant, as well as improved
manufacturing productivity.
General and administrative expenses increased as a percentage of net sales,
principally as a result of the appreciation of the Swiss franc against the
Company's other principal trading currencies, partially offset by cost control
efforts, as described under '--General.' Marketing and selling expenses and
research and development expenses were relatively constant as a percentage of
net sales, despite the appreciation of the Swiss franc against the Company's
other principal trading currencies. This was achieved primarily as a result of
the Company's efforts to control costs. Income from operations was $30.9 million
in 1994 compared to $8.1 million in 1993. If 1993 currency exchange rates had
remained in effect throughout 1994, income from operations in 1994 would have
been $39.1 million.
In 1993, the Company incurred net other charges of $18.3 million,
principally relating to the closure of a factory in Cologne, Germany, the
restructuring of certain producing organizations and an early retirement program
in the United States. The closure of the Cologne facility represented the
largest portion and included expenses for significant staff reductions, asset
write-offs and expenses related to the closure of the site.
Interest expense declined to $13.3 million in 1994 from $15.2 million in
1993, a decrease of 13%, principally as a result of lower interest rates.
Interest expense following the Acquisition will be materially different. See
'--Effect of Acquisition on Results of Operations,' '--Liquidity and Capital
Resources' and 'Unaudited Pro Forma Financial Information.' Net financial income
increased to $4.9 million in 1994 from $4.2 million in 1993.
Net income was $13.5 million in 1994 compared to a net loss of $7.2 million
in 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and other liquidity has historically been used to fund
capital expenditures, working capital requirements, debt service and dividends
to Ciba. Following the Acquisition, annual interest expense of $38.3 million
associated with the borrowings of $310.8 million under the Credit Agreement and
$135.0 million under the Notes, as well as scheduled principal payments of term
loans under the Credit Agreement, will significantly increase liquidity
requirements. See '--Effect of Acquisition on Results of Operations.'
The Company's capital expenditures totaled $10.1 million for the six months
ended June 30, 1996, $25.9 million in 1995, $24.9 million in 1994 and $25.1
million in 1993. Capital expenditures are primarily for machinery, equipment and
the purchase and expansion of facilities, including, for 1994 and 1995, the
purchase of land for, and commencement of construction of, the Company's
Shanghai manufacturing facility. Capital expenditures for the balance of 1996
and for 1997, as a percentage of sales, are expected to remain relatively
constant with historical expenditures. In connection with the termination of the
Company's arrangements with its Japanese distributor, the Company will make
payments of up to SFr 8.0 million ($6.4 million at June 30, 1996), of which SFr.
$1.0 million has already been paid. See 'Business--Customers and Distribution.'
The Credit Agreement will provide for term loan borrowings in an aggregate
principal amount of approximately $255.0 million that will mature in 2002, 2003
and 2004 and a revolving credit facility with availability of $140.0 million, of
which approximately $55.8 million will be drawn down in connection with the
Acquisition. An additional $109.2 million will be available to the Company
thereafter under the revolving credit facility and local working capital
facilities. Of this amount, SFr 37.9 million will be drawn under the revolving
credit facility temporarily to fund certain withholding taxes payable in
connection with the Acquisition, which withholding taxes will be fully refunded
following Closing. See 'Use of Proceeds.' The revolving credit facility will
mature in 2002 and will include letter of credit and swingline subfacilities.
Mandatory prepayments are required to be made in certain circumstances with the
proceeds of asset sales or issuances of capital stock or indebtedness and with
Excess Cash Flow (as defined). Borrowings under the Credit Agreement will bear
interest
37
<PAGE>
at floating rates that may be based on LIBOR rates for the relevant currency for
varying fixed interest periods or on the applicable Alternate Base Rate. The
Credit Agreement will impose certain restrictions on the Issuer and its
subsidiaries, including restrictions on the ability to incur indebtedness, pay
dividends, make investments, grant liens, sell significant assets and engage in
certain other activities. The Company must also comply with certain financial
covenants, including a minimum fixed charge coverage ratio and a maximum ratio
of consolidated indebtedness to EBITDA. Indebtedness under the Credit Agreement
will be secured by a first priority security interest in 65% of the capital
stock of Swiss Subholding and certain other non-U.S. subsidiaries and all other
material assets of the Company. For a more detailed summary of the terms of the
Credit Agreement, including amortization and interest rates, see 'Description of
Credit Agreement.'
The Notes will mature in 2006. The Notes may be required to be purchased by
the Company upon a Change of Control (as defined) and in certain circumstances
with the proceeds of asset sales. The Notes are subordinated to the indebtedness
under the Credit Agreement. The Indenture governing the Notes will impose
certain restrictions on the Company and its subsidiaries, including restrictions
on the ability to incur indebtedness, pay dividends, make investments, grant
liens and engage in certain other activities. See 'Description of Notes.'
Approximately $155.0 million of the borrowings under the Credit Agreement
and all of the borrowings under the Notes are expected to be denominated in U.S.
dollars. The balance of the borrowings under the Credit Agreement and under
local working capital facilities will be denominated in certain of the Company's
other principal trading currencies. Changes in exchange rates between the
currencies in which the Company generates cash flow and the currencies in which
its borrowings are denominated will affect the Company's liquidity. The Company
will seek to denominate the non-dollar denominated borrowings under the Credit
Agreement in currencies in which it generates cash flow or conducts significant
operations, in order to lessen the effect of currency exchange rates on the
Company's liquidity.
The Company currently believes that cash flow from operating activities,
together with borrowings available under the Credit Agreement and local working
capital facilities after the Acquisition, 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 after the Acquisition, but
there can be no assurance that this will be the case.
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 income is repatriated, and future changes in law. Generally,
the tax liability for each legal entity is determined either (i) on a
non-consolidated basis or (ii) on a consolidated basis only with other entities
incorporated in the same jurisdiction, in either case without regard to the
taxable losses of non-consolidated affiliated entities. As a result, the Company
may pay income taxes in 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 in the
jurisdictions in which it operates. The Company, like many of its competitors,
has 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. The Company does not currently anticipate any material
capital expenditures for environmental control technology. Some risk of
environmental liability is inherent in the Company's business, and there can be
no assurance that material environmental costs will not arise in the future.
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. See 'Risk Factors--Environmental Matters' and
'Business--Environmental Matters.'
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
38
<PAGE>
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's growth strategy includes expansion in Latin America and
China, which have experienced inflationary conditions. To date, inflationary
conditions have not had a material effect on the Company's operating results.
However, as the Company's presence in Latin America and China increases, these
inflationary conditions could have a greater impact on the Company's operating
results.
SEASONALITY
The Company's business has historically experienced a slight amount of
seasonal variation, with sales in the first fiscal quarter slightly lower than,
and sales in the fourth fiscal quarter slightly higher than, sales in the second
and third fiscal quarters. This trend has a somewhat greater effect on income
from operations than on net sales due to the effect of fixed costs.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS
The Company enters 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.
The Company may be exposed to credit losses in the event of nonperformance
by the counterparties to its foreign currency forward and option contracts. The
Company has no reason to believe, however, that such counterparties will not be
able to fully satisfy their obligations under these contracts. At December 31,
1995, the Company had foreign currency forward and option contracts maturing
during 1996 to purchase the equivalent of approximately $23.3 million and to
sell the equivalent of approximately $27.9 million in various currencies. These
contracts were used to limit its exposure to foreign currency fluctuations on
anticipated future cash flows, primarily for the delivery and receipt of United
States dollars, German marks and Japanese yen in exchange for Swiss francs. At
December 31, 1995, the fair value of such financial instruments, which the
Company recognized as net unrealized gains, was approximately $2.4 million.
NEW ACCOUNTING STANDARDS
Beginning January 1, 1996 the Company adopted Financial Accounting
Standards Board's 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 effect on the combined financial
statements.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Prospectus contains forward-looking statements, including statements
regarding, among other items, (i) the Company's growth strategies; (ii)
anticipated trends in the Company's business; and (iii) the Company's future
liquidity requirements and capital resources. These forward-looking statements
are based largely on the Company's expectations and are subject to a number of
risks and uncertainties, certain of which are beyond the Company's control.
Actual results could differ materially from those anticipated by these
forward-looking statements, as a result of the factors described in 'Risk
Factors.' In light of these risks and uncertainties, there can be no assurance
that events anticipated by the forward-looking statements contained in this
Prospectus will in fact transpire.
39
<PAGE>
INDUSTRY
GENERAL
Weighing is one of the most broadly used measuring techniques, and its
results are often used as the basis of commercial transactions. The Company
believes that in 1995, the global market for weighing instruments for
laboratory, industrial and food retailing applications was approximately $4.5
billion. Laboratory weighing applications are an integral part of the research
and development process and include sample preparation, results determination
and quality control. Industrial and food retailing weighing applications are
often important to the user's business operations. Applications include, in
industrial applications, materials preparation, filling, formulating, counting,
checking and logistics; and, in food retailing applications, preparation,
portioning, pricing and inventory control. Application-specific products include
dynamic checkweighers that can measure the filling accuracy of hundreds of
packages per minute, heavy industrial scales for weighing trucks, trains, and
railcars, paint scales used in paint shops for blending, and postage scales for
determining freight tariffs for letters and parcels. Customers include
pharmaceutical, biotechnology, chemical, cosmetics, food and beverage, postal,
jewelry, metals, logistics, shipping and food retailing businesses, in addition
to schools, universities and government and private standards labs. The Company
does not manufacture or sell household weighing instruments, bulkweigh fillers
or continuous weighing products, and those markets are not discussed herein.
Weighing instruments often comprise a relatively small component of a
customer's aggregate capital spending but perform important functions in quality
control, process control and research and can improve productivity. As a result,
the Company believes that customers generally tend to value performance over
price. Weighing equipment manufacturers also provide a significant amount of
service and support to their customers, including repair, calibration,
certification and preventive maintenance, which generates recurring revenues.
The Company believes that customers often continue to purchase from their
existing vendor, due to the additional costs for training, spare parts, service
and systems integration associated with adding additional brands of weighing
equipment to their operations.
The market for weighing 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.
The Company believes that the developed markets (Europe, North America and
Japan) that it serves have recently experienced modest growth rates in weighing
markets. Laboratory market growth has been influenced by demand in the principal
end-user industries and customer replacement of older products with new products
designed to be integrated into an automated laboratory environment. Moreover, in
the United States, demand has been adversely affected by consolidation in the
pharmaceutical and chemical industries. See 'Risk Factors--Significant Sales to
Pharmaceutical and Chemical Industries.' In the industrial and food retailing
market, growth has depended on the increasing use of weighing applications in
the control and regulation of manufacturing and logistics processes, on
customers' needs to upgrade to network-ready weighing equipment, and on general
growth in end-user industries. Asian markets (excluding Japan) have experienced
higher growth rates than the overall market. Growth in these emerging markets
has come from the establishment and growth of industries requiring additional
and more sophisticated weighing instruments and systems.
INDUSTRY TRENDS
Over the last five years, the weighing instruments industry has experienced
customer demand for products with sophisticated data handling and storage
capabilities that can be integrated into management information systems. In the
laboratory market, balances and other measurement instruments are now capable of
storing a large number of weighing 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
40
<PAGE>
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 via electronic
data interchange when inventory levels reach a pre-set reorder point. Similarly,
weighing instruments have become integrated into manufacturing plants'
information systems as the primary means for the tracking and control of
inventory. As they have become more integrated into the manufacturing process,
weighing instruments have also been combined with multiple input/output devices:
bar-code readers, printers and data-storage devices.
As quality laboratory and manufacturing standards become more widely
adopted, the accuracy of weighing instruments and the ability to certify the
accuracy of results becomes increasingly important to purchasers of weighing
instruments. For example, ISO 9001 standards and good laboratory and
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.
Historically, weights and measures regulation has been at the national
level. As a result, products had to meet numerous different national regulatory
requirements. National requirements have been harmonized by the EU and also
worldwide by the Organization Internationale de Metrology Legale, which sets
international weights and measures standards. Harmonization has facilitated the
ability of multinational weighing instrument manufacturers 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.
41
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BUSINESS
GENERAL
Mettler-Toledo is the world's largest manufacturer and marketer of weighing
instruments for use in laboratory, industrial and food retailing applications.
The Company focuses on the high value-added segments of the weighing instruments
market by providing solutions for specific applications. The Company also
manufactures and sells certain related laboratory measurement instruments, with
one of the top three market positions worldwide in titrators, thermal analysis
systems, pH meters, and lab reactors. Mettler-Toledo services a worldwide
customer base, with 1995 net sales of $850 million, which were derived 52% in
Europe, 37% in North and South America and 11% in Asia and other markets. The
Company has a global manufacturing presence, with manufacturing facilities in
Europe, the United States and Asia.
HISTORY
The Company traces its roots to the invention of the single pan analytical
balance by Dr. Erhard Mettler and the formation of Mettler Instrumente AG
('Mettler') in 1945. During the 1970s and 1980s, Mettler expanded from
laboratory balances into industrial and food retailing products, and it
introduced the first fully electronic precision balance in 1973. The Toledo
Scale Company ('Toledo Scale') 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. In 1981, Toledo
Scale set up a joint venture in Changzhou, China, which gave it early access to
the large potential Chinese weighing market. Following the 1989 acquisition of
Toledo Scale by Mettler, the name of the Company 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 15 years,
the Company has grown through other acquisitions that complemented existing
geographic markets and product lines. In 1986, Mettler acquired the Ingold Group
of companies, manufacturers of electrodes, and Garvens Kontrollwaagen AG, a
maker of dynamic checkweighers. Toledo Scale acquired Hi-Speed Checkweigher Co.,
Inc. in 1981. In 1990, the Company acquired Ohaus Corporation, a manufacturer of
laboratory balances.
Ciba determined to sell the Mettler-Toledo Group following its decision to
dispose of certain businesses outside of its core businesses.
MARKET LEADERSHIP
Mettler-Toledo is the only company to offer weighing products for
laboratory, industrial and food retailing applications throughout the world. The
Company believes that in 1995, the global market for weighing instruments for
laboratory, industrial and food retailing applications was approximately $4.5
billion and that the Company held a market share more than two times greater
than its nearest competitor. The Company believes that, in 1995, it had an
approximate 40% market share of the global market for laboratory balances,
including the largest market share in each of Europe, the United States and Asia
(excluding Japan), and one of the three leading positions in Japan. In the
industrial and food retailing market, the Company believes it has the largest
market share in Europe and in the United States. In Asia, the Company has a
substantial, rapidly growing industrial and food retailing business supported by
its established manufacturing presence in China. The Company attributes its
worldwide market leadership position to the following competitive strengths:
Brand Recognition. The Mettler-Toledo brand name is identified worldwide
with accuracy, reliability and innovation. The Company's brand name is so well
recognized that laboratory balances are often referred to as 'Mettlers.' Brand
recognition is important because weighing applications significantly impact
customers' product quality, productivity, cost and regulatory compliance. As a
result, customers tend to emphasize accuracy, product reliability, technical
innovation, reputation and past experience with a manufacturer's products when
making their purchasing decisions for weighing instruments.
Technological Innovation. Mettler-Toledo has a long and successful track
record of innovation, as demonstrated by the invention of the single-pan
analytical balance in 1945 and the introduction of the first fully electronic
precision balance in 1973. The Company has continued to be at the forefront of
weighing technology, with several recent innovations, including its ID 20
terminal and 'Brickstone' weighing sensor technology. The
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Company has particular expertise in sensor technology, electronics and software,
and in the industrial design of measurement instruments. The Company believes it
is the global leader in providing sophisticated features, such as data-handling
and storage capabilities, integration into management information systems and
improved productivity through automation, all of which are increasingly
important to users of weighing instruments. The Company devotes substantial
resources to research and product development in order to maintain its
competitive advantage in technological innovation.
Comprehensive Product Range. Mettler-Toledo manufactures a more
comprehensive range of weighing instruments than any of its competitors. The
Company's broad product line addresses a wide range of weighing applications
across many industries and regions. Within an industry, the Company offers
multiple products to meet customers' requirements. Its broad range of products
allows the Company to leverage its manufacturing and distribution capabilities,
sales and service organization and product development activities.
Global Sales and Service. The Company has the only global sales and
service organization among weighing instruments manufacturers. At June 30, 1996,
this organization consisted of 2,700 employees organized into locally based,
customer-focused groups that provide prompt service and support to the Company's
customers and distributors in virtually all major markets across the globe. The
local focus of the Company's sales and service organization enables the Company
to adapt marketing and service efforts to different cultural and economic
conditions, and provides feedback for manufacturing and product development.
Largest Installed Base. The Company believes that it has the largest
installed base of weighing instruments in the world. Service revenues from this
installed base provide a strong, stable source of recurring revenue,
representing approximately 17% of net sales in 1995. The Company believes that
its installed base represents a competitive advantage with respect to repeat
purchases. Customers tend to remain with an existing supplier who can provide
accurate and reliable products and related services. In addition, switching to a
new instrument supplier entails additional costs to the customer for training,
spare parts, service and system integration requirements. Close relationships
and frequent contact with its broad customer base provide the Company with sales
leads and new product and application ideas.
Diversity of Revenue Base. The Company's revenue base is widely
diversified by geographic region, by type of customer and by individual
customer. The Company's broad range of product offerings is utilized in many
different industries, from chemicals and pharmaceuticals to food processing to
transportation to food retailing. The Company supplies customers in over 100
countries, and no one customer accounted for more than 2% of 1995 net sales. The
Company's diverse revenue base reduces its exposure to regional or
industry-specific economic conditions.
BUSINESS STRATEGY
The Company's strategy is to enhance its position as global market leader
by providing the most comprehensive, innovative and reliable weighing solutions.
The Company plans to actively pursue the following initiatives to increase
revenues and profitability:
Product Innovation. The Company intends to continue to invest in product
innovation in order to provide technologically advanced products to its
customers for existing and new applications. Over the last three calendar years,
the Company invested approximately $149 million in research and development,
which has resulted in a pipeline of new and updated products. A recent example
of the Company's extensive product development efforts is the innovative ID 20
terminal for use in the Company's range of industrial scales. ID 20 includes the
first personal computer interface to be certified by weights and measures
regulators, combined with an ergonomically designed personal computer terminal
for industrial applications. Other recent examples include a new moisture
analyzer, a dimensioning system for logistics applications that combines volume
and weight measurements, a new generation of postal meters and a mid-range food
retailing scale. The Company is also focused on innovations that can reduce its
production costs. For example, the Company's new 'Brickstone' weighing sensor
technology, in addition to providing greater accuracy, reduces from
approximately 100 to approximately 50 the number of parts in the sensor, and
thus significantly reduces manufacturing costs and the time and expense of
design changes.
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Increased Penetration of Developed Markets. The Company intends to
leverage its brand name and existing infrastructure to further penetrate
selected geographic regions and product lines in Europe, the United States and
Japan. For example, in European food retailing products, the Company plans to
expand from its strong base in German-speaking countries into other countries.
In addition, the Company plans to increase penetration with shipping and
logistics businesses by introducing a new weighing and dimensioning product. The
Company also continues to take advantage of the standardization of weights and
measures, both in the European Union and worldwide, which favors a manufacturer
with a global presence, such as the Company.
Further Expansion in Emerging Markets. The Company believes that global
recognition of the Mettler-Toledo brand name and the Company's global sales and
service organization position the Company to take advantage of continued growth
opportunities in emerging markets. In 1995, the Company had net sales of $69
million in Asia (excluding Japan) and Latin America, representing 8% of net
sales. In Asia (excluding Japan), it is the market leader in laboratory weighing
instruments and has a substantial and rapidly growing industrial and food
retailing business. The Company has been operating in China since 1987 through a
60%-owned joint venture, which owns one manufacturing facility, and the Company
plans to complete construction of a new wholly owned manufacturing facility in
Shanghai by the end of 1996. The Company believes that this manufacturing
infrastructure, as well as its sales and service organization in Asia and its
already substantial sales in Asia and Latin America, position it to take
advantage of further growth opportunities in emerging markets.
Reengineering and Cost Reductions. Over the last three years, the Company
has been successful at increasing its margins, despite negative currency
effects. These increases have been achieved through, among other things,
increased workforce flexibility, a reduction in its overall workforce, a shift
in the mix of its workforce toward higher growth, lower cost regions and the
introduction of new products with lower manufacturing costs. The Company is
currently implementing two projects which are aimed at reducing warehouse
capacity, improving inventory turnover and reducing materials handling costs.
The Company is restructuring the order and product delivery process in Europe to
enable the Company to deliver many of its products to its customers directly
from the manufacturing facility within several days. The Company is also
streamlining its European spare parts inventory management system. In addition
to continuing these cost-cutting efforts, the Company is also evaluating its
business strategy as an independent company after the Acquisition and believes
that it can support continued sales growth while further reducing its overall
cost base. In July 1996, in anticipation of the consummation of the Acquisition,
the Company announced the closure of its Westerville, Ohio facility. In
addition, the Company will implement a targeted workforce reduction by the end
of 1996. The Company expects that these two additional projects will result in
annual cost reductions of $8.3 million.
Pursue Selected Acquisition Opportunities. The Company has a proven record
of acquiring and integrating businesses into existing operations. As an
independent company, Mettler-Toledo plans to more actively pursue additional
product lines and distribution channels through acquisitions, strategic
alliances and joint ventures. The Company believes that by taking advantage of
its brand name and global sales and service organization it can expand
distribution of acquired product lines and operate acquired businesses more
efficiently.
PRODUCTS
Laboratory
The Company manufactures and markets a complete range of laboratory
balances, as well as other selected laboratory measurement instruments, such as
titrators, thermal analysis systems, pH meters and lab reactors, for laboratory
applications in research and development, quality assurance, production and
education. Laboratory products accounted for approximately 37% of the Company's
net sales in 1995 (including revenues from related after-sale service). The
Company believes that it has an approximate 40% share of the global market for
laboratory balances and is among the top three worldwide producers of titrators,
thermal analysis systems, pH meters and lab reactors. The Company believes it
has the leading market share for laboratory balances in Europe, the United
States and Asia (excluding Japan) and one of the three leading positions in
Japan.
Balances. The balance is the most common piece of equipment in the
laboratory. The Company believes that it sells the highest performance
laboratory balances available on the market, with weighing ranges up to 32
kilograms and down to one ten-millionth of a gram. The Mettler-Toledo name is
one of the best known names in
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laboratory instruments, with a reputation for accuracy, reliability and
innovation. This reputation, in management's judgment, constitutes one of the
Company's principal competitive strengths.
In order to cover a wide range of customer needs and price points,
Mettler-Toledo markets precision balances, analytical and 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, while basic level balances provide simple operations and
a limited feature set. The Company also manufactures mass comparators, which are
used by weights and measures regulators as well as laboratories to ensure the
accuracy of reference weights. Due to the wide range of functions and features
offered by the Company's 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.
The Company regularly introduces new features and updated models in its
lines of balances. For example, the Company's 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 many times in controlled environments,
with the results of the calibrations incorporated into built-in software, so
that adjustments to ambient temperature and humidity can automatically be made
at any time. The Company also offers 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 brand products, the Company also manufactures
and sells balances under the brand name 'Ohaus.' Ohaus brand products include
triple-beam balances, strain gauge 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 service.
Titrators. Titrators measure the chemical composition of samples. The
Company's 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. Lower-range models 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.
The Company's 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. The Company manufactures 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, and permit later downloading of data 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.
Lab Reactors and Reaction Calorimeters. Lab reactors and reaction
calorimeters are used to simulate an entire chemical manufacturing process in
the laboratory before proceeding to production, in order to ensure the safety
and feasibility of the process. The Company's products are fully
computer-integrated, with a significant software component, and offer wide
flexibility in the structuring of experimental processes. Lab reactors and
reaction calorimeters are typically used in the chemical and pharmaceutical
industries. A typical lab reactor is priced at approximately $140,000.
Electrodes. The Company manufactures electrodes for use in a variety of
laboratory instruments and in-line process applications. Laboratory electrodes
are consumable goods used in pH meters and titrators, which may be replaced many
times during the life of the instrument. In-line process electrodes are used to
monitor
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production processes, for example, in the beverage industry. A typical in-line
process electrode is priced at approximately $1,600.
Other Instruments. The Company sells 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, the
Company manufactures and sells moisture analyzers, which precisely determine the
moisture content of a sample by utilizing an infrared dryer to evaporate
moisture.
Industrial and Food Retailing
Weighing is one of the most broadly used measurement techniques in industry
and food retailing. The Company's 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,
checkweighers (which determine the weight of goods in motion), scales for use in
food retailing establishments and specialized software systems for industrial
processes. Increasingly, many of the Company's industrial and food retailing
products can integrate weighing data into process controls and information
systems. The Company's industrial and food retailing products are also sold to
original equipment manufacturers ('OEMs'), which incorporate the Company's
products into larger process solutions and comprehensive food retailing checkout
systems. At the same time, the Company's products themselves include significant
software content and additional functions including networking, printing and
labeling capabilities, and the incorporation of other measuring technologies
such as dimensioning. The Company works with customer segments to create
specific solutions to their weighing needs. The Company has also recently worked
closely with the leading manufacturer of postal meters to develop a new
generation of postal metering systems.
Industrial and food retailing products accounted for more than 60% of the
Company's net sales in 1995 (including revenues from related after-sale
service). The Company believes that it has the leading position in industrial
and food retailing sales in Europe and in the United States. In Asia, the
Company has a substantial, rapidly growing industrial and food retailing
business supported by established manufacturing capabilities in China. The
Company believes that it is the only company with a true global presence across
industrial and food retailing weighing applications.
Standard Industrial Products. The Company offers a complete line of
standard industrial scales, such as bench scales and floor scales, for weighing
loads from a few grams to loads of several thousand kilograms in applications
ranging from measuring materials in chemical production to weighing mail and
packages. 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
primarily used in the food industry; 'Mentor SC' scales, for counting parts; and
precision scales for formulating and mixing ingredients. The Company's
'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 the Company's
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. The Company's 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). The Company's truck scales, such as the
'DigiTOL TRUCKMATE,' generally have digital load cells, which offer significant
advantages in 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. The Company also offers advanced computer
software that can be used with its heavy industrial scales to permit a broad
range of applications. Truck scales' prices generally range from $25,000 to
$50,000.
Dynamic Checkweighing. The Company offers solutions to checkweighing
requirements in the food, pharmaceutical, chemical and cosmetic industries,
where accurate filling of packages is required, and in 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.
Mettler-Toledo
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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.
Food Retailing Products. Supermarkets, hypermarkets and other food retail
establishments make use of multiple weighing applications for the handling of
perishable goods from backroom to checkout counter. 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 deli
counter or at the check-out counter.
The Company offers stand-alone scales for basic counter weighing and
pricing, price finding, and printing. In addition, the Company offers 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, the Company also sells
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. The Company's systems business consists of software applications
for drum filling in the food and chemical industries and batching systems in the
glass industry. The software systems control or modify the manufacturing
process.
CUSTOMERS AND DISTRIBUTION
The Company's business is geographically diversified, with 1995 net sales
derived 52% in Europe, 37% in North and South America and 11% in Asia and other
markets. The Company's customer base is also diversified by industry and by
individual customer. The Company's largest single customer accounted for no more
than 2% of 1995 net sales.
Laboratory
Principal customers for laboratory products include chemical,
pharmaceutical and cosmetics manufacturers; food and beverage makers; the
metals, electronics, plastics, transportation, packaging, logistics and rubber
industries; the jewelry and precious metals trade; educational institutions; and
government standards labs. 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.
The Company's laboratory products are sold in more than 100 countries
through a worldwide distribution network. The Company's extensive direct
distribution network and its dealer support activities enable the Company to
maintain a significant degree of control over the distribution of its products.
In markets where there are strong laboratory distributors, such as the United
States, the Company uses them as the primary marketing channel for lower- and
mid-price point products. This strategy allows the Company to leverage the
strength of both the Mettler-Toledo brand and the laboratory distributors'
market position into sales of other laboratory measurement instruments. The
Company provides its distributors with a significant amount of technical and
sales support. High-end products are handled by the Company's own sales force.
There has been recent consolidation among distributors in the United States
market. While this consolidation could adversely affect the Company's U.S.
distribution, the Company believes its leadership position in the market gives
it a competitive advantage when dealing with its U.S. distributors. Asian
distribution is primarily through distributors, while European distribution is
primarily through direct sales. European and Asian distributors are generally
fragmented on a country-by-country basis. Effective at the end of 1996, the
Company will distribute laboratory products directly in Japan and will pay its
current distributor up to SFr 8.0 million ($6.4 million at June 30, 1996) to
terminate its existing arrangement (of which approximately SFr 1.0 million has
already been paid). Similar arrangements have been entered into with respect to
Korea and Taiwan.
Ohaus brand products are generally positioned in alternative distribution
channels to those of Mettler-Toledo brand products. In this way, the Company is
able to fill a greater number of distribution channels and increase penetration
of its existing markets. Since the acquisition of Ohaus in 1990, the Company has
expanded the Ohaus brand beyond its historical U.S. focus. Ohaus brand products
are sold exclusively through distributors.
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Industrial and Food Retailing
Customers for Mettler-Toledo industrial products include chemical companies
(e.g., formulating, filling and bagging applications), food companies (e.g.,
packaging and filling applications), electronics and metal processing companies
(e.g., piece counting and logistical applications), transportation companies
(e.g., sorting, dimensioning and vehicle weighing applications) and auto body
paint shops, which mix paint colors based on weight. The Company's products for
these industries share similar weighing technology, and often minor
modifications of existing products can make them useful for applications in a
variety of industrial processes. The Company also sells to OEMs which integrate
weighing modules into larger process control applications, or comprehensive
packaging lines. OEM applications often include software content and technical
support, as the Company's weighing module must communicate with a wide variety
of other process modules and data management functions. The Company's products
are also purchased by engineering firms, systems integrators and vertical
application software companies.
Customers for food retailing products include supermarkets, hypermarkets
and smaller food retailing establishments. The North American and European
markets include many large supermarket chains. In most of the Company's markets,
food retailing continues to shift to supermarkets and hypermarkets from 'mom and
pop' grocery stores. 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, the Company also sells
food retailing products to OEMs for inclusion in more comprehensive checkout
systems. For example, the Company's checkout scales are incorporated into
scanner-scales, which can both 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.
The Company's industrial products are sold in more than 100 countries and
its food retailing products in 20 countries. In the industrial and food
retailing market, the Company distributes directly to customers (including OEMs)
and through distributors. In the United States, distributor sales slightly
exceed direct sales. Distributors are highly fragmented in the U.S., with many
small 'scale houses' selling the Company's products. In Europe, direct sales
predominate, with distributors used in certain cases. As in its laboratory
distribution, the Company provides significant support to its distributors.
SALES AND SERVICE
Market Organizations
The Company has 31 geographically-focused market organizations ('MOs')
around the world that are responsible for all aspects of sales and service. The
MOs are local marketing and service organizations designed to maintain close
relationships with the Company's 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 the Company's producing
organizations (described below) by providing feedback on manufacturing and
product development initiatives and relaying innovative product and application
ideas.
The Company has the largest field organization in the weighing industry,
with approximately 2,700 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 the Company's
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.
The Company classifies 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 are specialized by product line. Sales
representatives call directly on end-users either alone or, in regions where
sales are made through distributors, jointly with distributors. The Company
utilizes a variety of advertising media, including trade journals, catalogs,
exhibitions and trade shows. The Company also sponsors seminars, product
demonstrations and customer training programs. An extensive database on markets
helps the Company to gauge growth opportunities, target its message to
appropriate customer groups and monitor competitive developments.
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After-Sales Service
The Company believes that it has the largest installed base of weighing
instruments in the world. To support its installed base, the Company employs
service technicians who provide contract and repair services in all countries in
which the Company's products are sold. Service (representing service contracts,
repairs and replacement parts) accounted for approximately 17% of the Company's
total net sales in 1995. (Service revenue is included in the laboratory and
industrial and food retailing sales percentages given above.) Management
believes that service is a key part of its product offering and helps
significantly in repeat sales. The close relationships and frequent contact with
its large customer base provide the Company with sales opportunities and
innovative product and application ideas. Moreover, a global service network is
an important factor in the ability to expand in emerging markets. Widespread
adoption of quality laboratory and manufacturing standards and the privatization
of weights and measures certification are both favorable trends for the
Company's service business, as they tend to increase demand for on-site
calibration services.
The Company's 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. The Company's own employees directly
provide all service on Mettler-Toledo products. If the service contract also
includes products of other manufacturers, the Company will generally perform
calibration, testing and basic repairs directly, and contract out more
significant repair work. As application software becomes more complex, the
Company's service efforts increasingly include installation and customer
training programs as well as product service.
Warranties on Mettler-Toledo products are generally one year. Based on past
experience, the Company believes its reserves for warranty claims are adequate.
RESEARCH AND PRODUCT DEVELOPMENT; MANUFACTURING
Producing Organizations
The Company is organized into a number of producing organizations ('POs'),
which are specialized centers responsible for product development, research and
manufacturing. At June 30, 1996, POs included approximately 3,900 employees
worldwide, and consist of product development teams whose members are from
marketing, customer service, development, research, manufacturing, engineering
and purchasing. POs also often seek customer input to ensure that the products
developed are tailored to market needs. The Company has organized POs in order
to reduce product development time, improve its customer focus, reduce costs and
maintain technological leadership. The POs work together to share ideas and best
practices. Some employees are in both MOs and POs. The Company is currently
implementing a number of projects that it believes will result in increased
productivity and lower costs. For example, the Company is restructuring the
order and product delivery process in Europe to enable the Company to deliver
many of its products to its customers directly from the manufacturing facility
within several days, which minimizes the need to store products in decentralized
warehouses. In addition, the Company is centralizing its European spare parts
inventory management system.
Research and Product Development
Management believes that technical innovation and the speed with which new
products are brought to market are fundamental to the Company's leading market
position. For this reason it closely integrates research and development with
marketing, manufacturing and product engineering. The Company has nearly 600
professionals in research and development and product engineering.
The Company's principal product development activities involve applications
improvements to provide enhanced customer solutions, systems integration and
product cost reduction. However, the Company also actively conducts research in
basic weighing technologies. As part of its research and development activities,
the Company has frequent contact with university experts, industry professionals
and the governmental agencies responsible for weights and measures. In addition,
the Company's in-house development is complemented by technology and product
development alliances with customers and OEMs.
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An important recent example of innovation at the Company is the
'Brickstone' technology. Created from a solid block of aluminum utilizing the
Company's proprietary design and manufacturing know-how, the Brickstone load
cell component eliminates many of the complex mechanical linkages in a weighing
sensor and reduces the number of parts in the sensor from approximately 100 to
approximately 50. The Brickstone sensor permits more accurate weighing, lower
manufacturing costs and cheaper and faster design changes. Brickstone technology
has been incorporated into certain of the Company's products, and the Company
expects to expand its use to additional product lines in the future. Another
important recent innovation is the ID 20 terminal for use in the Company's range
of industrial scales. The ID 20 includes the first personal computer interface
to be certified by weights and measures regulators, combined with an
ergonomically designed personal computer terminal for industrial applications.
The Company has also introduced the first digital load cell, which is used
primarily in the Company's truck weighing products. In addition, together with a
strategic partner, the Company is currently testing at a selected group of
customers a number of weighing and dimensioning devices, which accurately
determine volume and weight simultaneously. The Company is also testing a
household waste collection system that allows local municipalities to charge for
waste removal according to weight.
The Company has been spending an increasing proportion of its research and
development budget on 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 the Company's broad product lines. Application-specific
projects include the Company's recently developed thermal analysis system,
memory cards used in titrators to perform industry-specific processes, and
software for use in truck scales.
The Company spent $54.5 million on research and development in 1995, $48.0
million in 1994 and $46.4 million in 1993, which the Company believes was more
than any of its competitors. Including costs associated with customer-specific
engineering projects, which are included in cost of sales for financial
reporting purposes, the Company spent approximately 7.3% of net sales on
research and development in 1995.
Manufacturing
The Company's manufacturing strategy is to produce directly those
components that require its specific technical competence, or for which
dependable, high-quality suppliers cannot be found. Many of these Company-
manufactured components can be utilized across a broad range of the Company's
products. The Company contracts out the manufacture of its other component
requirements. Consequently, much of the Company's manufacturing capability
consists of assembly of components sourced from others. The Company utilizes a
wide range of suppliers and it believes its supply arrangements to be adequate.
From time to time the Company relies on one supplier for all its requirements of
a particular component, but in such cases the Company believes adequate
alternative sources would be available if necessary. Supply arrangements for
electronics are generally made globally. For mechanical components, the Company
generally uses local sources to optimize materials flow.
The Company's manufacturing operations emphasize product quality. Most of
its products require very strict tolerances and exact specifications. The
Company utilizes 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 the Company's 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. The Company
believes that product quality, which translates into accuracy and reliability,
is crucial to its brand strength, its ability to make repeat sales to existing
customers, and its ability to offer after-sales service at competitive prices.
The Company has six manufacturing plants in the U.S. (after giving effect
to the closure of the Westerville, Ohio facility), four in Switzerland, two in
Germany and two in China, of which one is a 60% owned joint venture and the
other, the Shanghai facility, is beginning to produce laboratory products and is
expected to be completed by the end of 1996. Laboratory products are produced
mainly in Switzerland and to a lesser extent in the United States, while
industrial and food retailing products are produced in all four countries. The
Company believes its manufacturing capacity is sufficient to meet its present
and currently anticipated needs.
50
<PAGE>
Backlog
Manufacturing turnaround time is generally sufficiently short so as to
permit the Company to manufacture to fill orders for most of its 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 June 30, 1996, the Company had approximately 6,400 employees
throughout the world, including more than 3,300 in Europe and more than 2,400 in
North and South America. Management believes that its relations with employees
are good. The Company has not suffered any material employee work stoppage or
strike in its worldwide operations during the last five years. Labor unions do
not represent a meaningful number of the Company's employees.
In certain of its facilities, the Company has instituted a flexible
workforce environment, in which hours vary depending on the quantity of
workload. The Company believes that this flexible working environment enhances
employees' involvement, thus increasing productivity, and improves efficient
payroll management by permitting the Company to adjust staffing to match
workload to a greater degree without changing the size of the overall workforce.
INTELLECTUAL PROPERTY
The Company holds more than 1,150 patents and trademarks, primarily in the
United States, Switzerland, Germany and Japan and, to a lesser extent, in China.
The Company's products generally incorporate a wide variety of technological
innovations, many of which are protected by patents and many of which are not.
Moreover, products are generally not protected as a whole by individual patents.
Accordingly, no one patent or group of related patents is material to the
Company's business. The Company also has numerous trademarks and considers the
Mettler-Toledo name and logo to be material to its business. The Company
regularly protects against infringement of its intellectual property.
REGULATION
The Company's products are subject to regulatory standards and approvals by
weights and measures regulatory authorities in the countries in which it sells
its products. Weights and measures regulation has been harmonized across the EU.
See 'Industry.' The Company's 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 the Company's
electrical components are subject to electrical safety standards. The Company
believes that it is in compliance in all material respects with applicable
regulations.
ENVIRONMENTAL MATTERS
The Company is subject to various environmental laws and regulations in the
jurisdictions in which it operates, including those 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. The Company wholly or partly owns, leases or holds 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. The Company, like many of its competitors,
has 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.
The Company is currently involved in, or has potential liability with
respect to, the remediation of past contamination in certain of its presently
and formerly owned and leased facilities in both the United States and abroad.
In addition, certain of the Company's 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 the Company has sent wastes, may in the future
be identified and become the subject of
51
<PAGE>
remediation. Accordingly, although the Company believes that it is in
substantial compliance with applicable environmental requirements and the
Company to date has not incurred material expenditures in connection with
environmental matters, it is possible that the Company could become subject to
additional environmental liabilities in the future that could result in a
material adverse effect on the Company's financial condition or results of
operations.
The Company is involved in litigation concerning remediation of hazardous
substances at its operating facility in Landing, New Jersey. On or about July
1988, 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 ('NJDEP') pursuant to the New Jersey Environmental
Cleanup Responsibility Act ('ECRA'). ECRA is now the Industrial Site Recovery
Act. Pursuant to a 1988 NJDEP 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, a final remedy has not yet been selected by
NJDEP, and, therefore, future remedial costs are currently unknown. In 1992, GEI
filed a suit against AGP and various other parties including Hi-Speed
Checkweigher Co., Inc., a wholly-owned subsidiary of the Company that currently
owns the facility, to recover certain costs incurred by GEI in connection with
the site. Based on currently available information and the Company's rights of
indemnification from GEI, the Company believes that its ultimate allocation of
costs associated with the past and future investigation and remediation of this
site will not have a material adverse effect on the Company's financial
condition or results of operations.
In addition, the Company is aware that Toledo Scale, the former owner of
Toledo Scale or the Company has 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
it was owned by such former owner: Granville Solvents Site, Granville, Ohio;
Aqua-Tech Environmental, Inc. Site, Greer, South Carolina; and Seaboard Chemical
Company Site, Jamestown, North Carolina. The former owner has also been named in
a lawsuit seeking contribution pursuant to CERCLA with respect to the Caldwell
Trucking Site, New Jersey ('Caldwell Site') based on the alleged disposal at the
Caldwell Site by Toledo Scale during the former owner's period of ownership.
Pursuant to the terms of the stock purchase agreement between Mettler and the
former owner of Toledo Scale, the former owner is obligated to indemnify Mettler
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. Although counsel for the former owner recently informed the
Company that it may seek recovery from the Company with respect to the Caldwell
Site, no formal demand has been received. Based on currently available
information and the Company's contractual rights of indemnification, the Company
believes that the costs associated with the investigation and remediation of
these sites will not have a material adverse effect on the Company's financial
condition or results of operations.
COMPETITION
The markets in which the Company operates are highly competitive. Because
of the fragmentation of weighing instruments markets, particularly the
industrial and food retailing market, both geographically and by application,
the Company competes with numerous regional or specialized competitors, many of
which are well-established in their markets. Some competitors are less leveraged
than the Company and/or are divisions of larger companies with potentially
greater financial and other resources than the Company. Although the Company
believes that it has certain competitive advantages over its competitors,
realizing and maintaining these advantages will require continued investment by
the Company in research and development, sales and marketing and customer
service and support. The Company has, from time to time, experienced price
pressures from competitors in certain product lines and geographic markets.
In the United States, the Company believes that the principal competitive
factors on which purchasing decisions are made 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 through which the Company and its competitors sell many of their
products.
52
<PAGE>
PROPERTIES
The following table lists the Company's principal operating facilities,
indicating the location, primary use and whether the facility is owned or
leased.
<TABLE>
<CAPTION>
LOCATION PRINCIPAL USE(1) OWNED/LEASED
- ----------------------------- ---------------------------------- ---------------
<S> <C> <C>
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
Beersel, Belgium........... Sales and Service Owned
Tiel, Netherlands.......... Sales and Service Owned
Leicester, England......... 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
Hightstown, New Jersey..... Sales and Service Owned
Burlington, Canada......... Sales and Service Owned
Mexico City, Mexico........ Sales and Service Leased
Other:
Shanghai, China(2)......... Production Leased
Building Owned;
Changzhou, China(3)........ Production Land Leased
Melbourne, Australia....... Sales and Service Leased
</TABLE>
- ------------------
(1) The Company also conducts research and development activities at certain of
the above facilities in Switzerland, Germany, the United States and, to a
lesser extent, China.
(2) Under construction. Scheduled for completion by the end of 1996.
(3) Held by a 60%-owned joint venture.
The Company believes its facilities are adequate for its current and
reasonably anticipated future needs.
LEGAL PROCEEDINGS
The Company is subject to routine litigation incidental to its business.
The Company is currently not involved in any legal proceeding that it believes
could have a material adverse effect upon its financial condition or results of
operations. See '--Environmental Matters' for information concerning legal
proceedings relating to certain environmental claims.
53
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Issuer are:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------ --- --------------------------------------------------
<S> <C> <C>
Robert F. Spoerry....... 41 President and Chief Executive Officer and Director
Fred Ort................ 54 Head, Finance and Control
Karl M. Lang............ 49 Head, Laboratory Division
Lukas Braunschweiler.... 40 Head, Industrial and Retail (Europe)
John D. Robechek........ 48 Head, Industrial and Retail (Americas)
Peter Burker............ 50 Head, Human Resources
Thomas Rubbe............ 42 Head, Logistics and Information Systems
Thomas P. Salice........ 35 Director
Alan W. Wilkinson....... 40 Director
</TABLE>
Robert F. Spoerry has been President and Chief Executive Officer since
1993. He served as Head, Industrial and Retail (Europe) from 1987 to 1993. Mr.
Spoerry has been a Director since the formation of MT Acquisition Corp. in July
1996.
Fred Ort has been Head, Finance and Control since 1973.
Karl M. Lang has been Head, Laboratory Division since 1994. From 1991 to
1994 he was based in Japan as a representative of senior management with
responsibility for expansion of the Company's Asian operations.
Lukas Braunschweiler has been Head, Industrial and Retail (Europe) 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) 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 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 since 1995.
From 1990 to 1995, he was head of Controlling, Finance and Administration with
the Company's German marketing organization.
Thomas P. Salice has been a Director since the formation of MT Acquisition
Corp. in July 1996. He is a Managing Director of AEA Investors and has been
associated with AEA Investors since June 1989. Mr. Salice is also a Director of
CasTech Aluminum Group Inc. and Waters Corporation.
Alan W. Wilkinson has been a Director since the formation of MT Acquisition
Corp. in July 1996. He has been a Managing Director of AEA Investors since
September 1989. Prior to his association with AEA Investors, Mr. Wilkinson was a
Vice President in the Merchant Banking and Mergers and Acquisitions divisions of
Lehman Brothers Inc., an investment banking firm.
Messrs. Spoerry, Salice and Wilkinson are directors of Holding. Mr. Spoerry
is President and Chief Executive Officer of Holding and Mr. Ort is Head, Finance
and Control.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to or accrued for
services performed by the Company's Chief Executive Officer and the four other
most highly compensated executives (collectively, the 'Named Executives') for
the year ended December 31, 1995.
54
<PAGE>
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) OPTIONS(#) COMPENSATION
- --------------------------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Robert F. Spoerry
President and Chief Executive Officer...... 1995 $289,343 $ 85,871 300(3) $ 54,346(4)
Fred Ort
Head, Finance and Control.................. 1995 227,284 69,701 -- 70,804(4)
Karl M. Lang
Head, Laboratory........................... 1995 228,427 38,071 -- 60,321(4)
Lukas Braunschweiler
Head, Industrial and Retail (Europe)....... 1995 228,427 25,381 -- 50,460(4)
John D. Robechek
Head, Industrial and Retail (Americas)..... 1995 225,000 40,563 -- 6,168(5)
</TABLE>
- ------------------
(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 U.S. $1.00, the average
exchange rate during the year ended December 31, 1995.
(2) Does not include bonuses paid by Ciba to the Named Executives for services
rendered to Ciba in connection with its efforts to sell the Company.
(3) 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.
(4) 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 Executives,
and the other 50% is a required matching employer contribution.
(5) Includes $1,024 for the value of group life insurance over $50,000, $4,500
for the Company's contribution to Mr. Robechek's 401(k) plan account and
$644 for Mr. Robechek's profit sharing payout under the Company's
Performance Dividend Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR OPTION/SAR
UNDERLYING GRANTED TO TERM
OPTIONS/SARS EMPLOYEES IN EXERCISE/BASE EXPIRATION -------------------------------------
NAME GRANTED (#)(1) FISCAL YEAR PRICE ($/SH) DATE 0%($) 5%($) 10%($)
- ----------------- -------------- ------------ -------------- -------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert F. Spoerry 300 100% $665(2) April 25, 2005 $3,900(3) $131,817(4) $328,067(4)
</TABLE>
- ------------------
(1) Represents number of securities underlying an option to purchase Ciba
stock. The option was granted on April 25, 1995, would have vested as
to 150 shares after two years and as to 150 shares after four years and
would have expired in ten years (on April 25, 2005). In March 1996, the
option was accelerated for a one-month period only in connection with
the announcement of the Ciba merger with Sandoz. During that time, Mr.
Spoerry exercised both this option and a second option for 300 shares
(not required to be set forth above) that was granted in 1996. Mr.
Spoerry no longer has any outstanding options.
(2) Represents the exercise price of SFr 750 at the date of grant.
(3) Represents the difference between the exercise price and the per share
fair market value at the date of grant (SFr 764, or $678), multiplied
by the number of shares underlying the option.
(Footnotes continued on next page)
55
<PAGE>
(Footnotes continued from previous page)
(4) The assumed annual rates of appreciation over the term of the option
are set forth in accordance with rules and regulations adopted by the
Securities and Exchange Commission and do not represent the Company's
estimate of stock appreciation price. However, Mr. Spoerry has now
exercised all his options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND OPTION/SAR VALUES AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FISCAL IN-THE-MONEY OPTIONS/SARS
SHARES YEAR-END AT FISCAL YEAR-END
ACQUIRED ON VALUE (#) ($)
EXERCISE REALIZED ---------------------------- ------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- ----------- -------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert F. Spoerry -- -- -- 300 -- $ 69,000(1)
</TABLE>
- ------------------
(1) This represents the difference between the exercise price of SFr 750 ($652
at December 28, 1995) and the closing price of Ciba's common stock on
December 28, 1995 (SFr 1,015, or $882), multiplied by the 300 unexercised
shares. Since December 28, 1995, Mr. Spoerry exercised all outstanding
options and no longer has any options outstanding.
EMPLOYMENT AGREEMENTS; STOCK OPTIONS; MANAGEMENT EQUITY
The Company expects to negotiate new employment agreements with its senior
management to become effective following the Acquisition. Base salary of
executive officers under these agreements in the aggregate will not be
materially different from historical practice. The agreements will also include
bonuses contingent on meeting performance objectives and initial grants of
options to purchase non-voting common stock of MT Investors in amounts and at
prices to be determined. Exercise of such options will be subject to vesting
restrictions. Additional shares of non-voting common stock of MT Investors will
be reserved for future grants of options to the Company's management. Management
and other employees of the Company will contribute up to $15 million of the
equity of MT Investors. See 'The Acquisition.'
COMPENSATION OF DIRECTORS
All members of the Board of Directors of the Company are officers of the
Company or employees of AEA Investors and will not receive additional
compensation for being on the Board or its committees.
RETIREMENT PLANS
Mr. Robechek is covered under two pensions 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
($150,000 per year in 1996) 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
$42,858.48 and the accrued annual benefit under the Mettler-Toledo Supplemental
Plan is $8,829.36, for a total annual retirement benefit of $51,687.84.
56
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Following the Acquisition, AEA Investors and the Company will be party to
an agreement pursuant to which AEA Investors will provide management, consulting
and financial services to the Company. Services will be provided in 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. Such services will be provided by the managing directors and
professional staff of AEA Investors. In consideration for such services, AEA
Investors will be entitled to an annual fee in the amount of $1 million, plus
reimbursement for certain expenses and indemnification against certain
liabilities. The agreement further provides that in the event the Company
employs any employee of AEA Investors as an officer of the Company or otherwise,
and such employment involves a substantial amount of such employee's time, the
Company will compensate such employee at a reasonable rate. The Company believes
that the terms of these management arrangements are as favorable as could be
obtained from an unaffiliated third party. In connection with the Acquisition
and in consideration of services by AEA Investors in arranging, structuring, and
negotiating the terms of the Acquisition and the related financing transactions,
the Company will pay AEA Investors a transaction fee of $5.5 million and
reimburse AEA Investors for certain related expenses. The transaction fee and
such expenses are included in the fees and expenses incurred in connection with
the Acquisition described under 'Use of Proceeds' and will be funded through the
stated sources of funds disclosed thereunder.
Ciba will contribute $9.5 million (5%) of the total equity contributions to
MT Investors.
PRINCIPAL STOCKHOLDERS
Prior to the consummation of the Acquisition, the entities comprising the
Mettler-Toledo Group were indirectly owned by Ciba. Following the consummation
of the Acquisition, all of the capital stock of the Issuer will be directly
owned by Holding, a wholly owned subsidiary of MT Investors, and all of the
voting capital stock of MT Investors will be owned by AEA Investors, certain of
its investor-shareholders and/or certain members of its management and by Ciba
(which will hold 5% of the voting stock). AEA Investors, its
investor-shareholders and members of its management will also purchase nonvoting
stock representing a substantial portion of the total equity ownership interest
in MT Investors. Ciba will also purchase 5% of the nonvoting stock of MT
Investors. In connection with the Acquisition, members of senior management of
the Company are expected to purchase nonvoting stock of MT Investors and are
expected to be granted options to purchase additional nonvoting stock, which
together will constitute at least 16.5% of the equity of MT Investors, on a
fully diluted basis. The following table sets forth, after giving effect to the
Acquisition, information with respect to the beneficial ownership of the capital
stock of MT Investors by (i) each director of the Company, (ii) the Named
Executives and (iii) all directors and executive officers of the Company as a
group:
<TABLE>
<CAPTION>
SHARES OF NON-VOTING
CAPITAL STOCK(1)
------------------------------
NAME AND ADDRESS NUMBER OF SHARES % OF CLASS
- ----------------------------------------------------------------------------------- ---------------- ----------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Robert F. Spoerry................................................................ 34,551 1.4%
Fred Ort......................................................................... 6,076 *
Karl M. Lang..................................................................... 6,076 *
Lukas Braunschweiler............................................................. 6,076 *
John D. Robechek................................................................. 5,214 *
Thomas P. Salice(2).............................................................. 38,808 1.6%
Alan W. Wilkinson(2)............................................................. 38,808 1.6%
All directors and executive officers as a group (9 persons)...................... 146,387 6.0%
</TABLE>
- ------------------
<TABLE>
<S> <C>
* Less than 1%.
(1) No director or executive officer owns any of the voting capital stock of MT Investors. AEA Investors owns
49.0% of the voting capital stock of MT Investors.
(2) Includes shares held by, or in trust for, members of such individual's family. Does not include shares held by
AEA Investors, of which Messrs. Salice and Wilkinson are officers.
</TABLE>
57
<PAGE>
DESCRIPTION OF CREDIT AGREEMENT
To provide a portion of the financing required for the Acquisition and for
working capital and for general corporate purposes thereafter, the Issuer and
Swiss Subholding intend to enter into the Credit Agreement with Merrill Lynch
Capital Corporation ('Merrill Lynch Capital'), as Arranger and Documentation
Agent, The Bank of Nova Scotia, as Administrative Agent, Lehman Commercial Paper
Inc. and Credit Suisse, as Co-Agents and the other financial institutions party
thereto. The following summary of the Credit Agreement does not purport to be
complete and is qualified in its entirety by reference to the Credit Agreement,
a form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part. AEA Investors and Merrill Lynch Capital have
entered into a commitment letter with respect to the Credit Agreement.
Loans under the Credit Agreement are expected to consist of: (i) Term A
Loans to be borrowed by Swiss Subholding in an aggregate principal amount of
$100 million, which will be available in up to two subfacilities denominated in
U.S. dollars, German marks, Swiss francs, French francs, or British pounds
sterling, (ii) Term B Loans to be borrowed by the Issuer in an aggregate
principal amount of $75 million, (iii) Term C(CH) Loans to be borrowed by Swiss
Subholding in an aggregate principal amount of $40 million, and (iv) Term C(US)
Loans to be borrowed by the Issuer in an aggregate principal amount of $40
million (the Term A Loans, the Term B Loans, the Term C(CH) Loans and the Term
C(US) Loans are referred to collectively as the 'Term Loans'), and (v) a
multi-currency revolving credit facility that may be borrowed by either the
Issuer or Swiss Subholding in an aggregate principal amount of $140 million, and
which will include letter of credit and swingline subfacilities also available
to certain subsidiaries (the 'Revolving Facility' and together with the Term
Loans, the 'Credit Facilities'). In the event that cash requirements at Closing
are less than as set forth above under 'Use of Proceeds,' the Company may reduce
the principal amount of the Term C(CH) Loans.
Loans under the Revolving Facility may be repaid and reborrowed. The Issuer
and Swiss Subholding will be required to pay a facility fee equal to 0.50% 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 at the
then Applicable Margin for LIBOR Rate Revolving Facility loans (as set forth
below under '--Interest Rates').
INTEREST RATES
Borrowings under the Credit Facilities will bear interest at a floating
rate based on either (at the borrower's option) (x) fixed interest periods of
one, two, three, six or, if available, 12 months at the applicable LIBOR Rate
(defined as the rate at which deposits in the applicable currency, in an amount
approximately equal to the amount with respect to which such rate is being
determined, are offered to major banks in the London eurocurrency market) or (y)
the Alternate Base Rate ('ABR') (defined as the higher of the published base
rate and the Federal Funds Rate plus 0.50%). Borrowings will bear interest at
either the LIBOR Rate or the ABR plus the following 'Applicable Margin': (A)
with respect to LIBOR Rate loans, (i) in the case of the Revolving Facility
Loans, 2.00%; (ii) in the case of the Term A Loans, 2.50%; (iii) in the case of
the Term B Loans, 3.00%; and (iv) in the case of the Term C(CH) and C(US) Loans,
3.25%; and (B) with respect to ABR loans, (i) in the case of the Revolving
Facility Loans, 1.00%; (ii) in the case of the Term A Loans, 1.50%; (iii) in the
case of the Term B Loans, 2.00%; and (iv) in the case of the Term C(CH) and
C(US) Loans, 2.25%. However, after such time as consolidated financial results
of the Issuer for four fiscal quarters after the Closing are available, the
Applicable Margin for the Revolving Facility and the Term A Loans may be reduced
based on the ratio of total consolidated debt of the Company to its trailing
12-month consolidated EBITDA.
MATURITY, AMORTIZATION AND MANDATORY PREPAYMENTS
The Term A Loans and the Revolving Facility mature on December 31, 2002,
the Term B Loans mature on December 31, 2003, and the Term C(CH) and C(US) Loans
mature on December 31, 2004. Amounts outstanding under the Term Loans will
amortize in quarterly installments beginning March 31, 1997.
The Term Loans will be subject to mandatory prepayments (to be applied pro
rata among the Term Loans) in an amount equal to, subject to certain exceptions,
(i) 75% of annual Excess Cash Flow (as defined in the Credit Agreement), (ii)
the net proceeds received from certain sales of assets, (iii) the net proceeds
from the issuance of debt, and (iv) 50% of the net proceeds from the issuance of
equity.
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SECURITY AND GUARANTEES
The obligations of Swiss Subholding under the Credit Agreement will be (i)
secured by a first priority security interest in all of the material assets of
Swiss Subholding, (ii) guaranteed, to the extent permitted by applicable law by
all of the direct and indirect subsidiaries of Swiss Subholding, with certain
exceptions, and each such guarantee will, to the extent permitted by applicable
law and with certain exceptions, be secured by a first priority security
interest in all of the material assets of each such guarantor, and (iii)
guaranteed by the Issuer, its direct and indirect U.S. subsidiaries and Holding,
and each such guarantee will be secured by a first priority security interest in
all of the material assets of each such guarantor, except that each such
guarantor will pledge only 65% of the stock of any non-U.S. subsidiary held by
it. The obligations of the Issuer under the Credit Agreement will be (i) secured
by a first priority security interest in all of the material assets of the
Issuer, except that the Issuer will pledge only 65% of the stock of each
non-U.S. subsidiary held by it, (ii) guaranteed by each direct and indirect U.S.
subsidiary of the Issuer, and each such guarantee will be secured by a first
priority security interest in all of the material assets of each such guarantor,
and (iii) guaranteed by Holding, and such guarantee will be secured by a first
priority security interest in all of the stock of the Issuer held by Holding.
COVENANTS AND EVENTS OF DEFAULT
The Credit Agreement will contain covenants that, among other things, limit
the Issuer's and its subsidiaries' 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; prepay the Notes; or make capital
expenditures. The Credit Agreement will also require 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 Credit Agreement will contain customary events of default, including,
without limitation, nonpayment of principal, interest, fees or other amounts
when due; violation of covenants; breach of any representation or warranty;
cross-default and cross-acceleration; Change in Control (as defined in the
Credit Agreement); bankruptcy events; material judgments; certain ERISA matters;
and invalidity of loan documents or security interests.
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DESCRIPTION OF NOTES
The Notes will be issued under the Indenture, to be dated as of the Issue
Date, among MT Acquisition Corp., as issuer, Holding, as guarantor, and United
States Trust Company of New York, as trustee (the 'Trustee'). Upon consummation
of the Merger of MT Acquisition Corp. with Mettler-Toledo, Inc., Mettler-Toledo,
Inc. will assume by supplemental indenture all of the obligations of MT
Acquisition Corp. under the Indenture and the Notes. A copy of the form of the
Indenture is filed as an exhibit to the Registration Statement of which this
Prospectus is part. The following summary of certain provisions of the Indenture
and the Notes summarizes the material terms thereof but does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all provisions of the Indenture, including the definitions of certain terms
contained therein and those terms made part of the Indenture by reference to the
TIA. The term 'Issuer' and other capitalized terms used herein and not otherwise
defined have the meanings set forth under '--Certain Definitions' below.
GENERAL
The Notes will be unsecured senior subordinated obligations of the Issuer,
limited to $135 million aggregate principal amount. The Notes will be issued
only in registered form without coupons, in denominations of $1,000 and integral
multiples thereof. Principal of, and premium, if any, and interest on, the Notes
will be payable, and the Notes will be transferable, at the corporate trust
office or agency of the Trustee in The City of New York maintained for such
purposes at 770 Broadway, New York, New York 10003. No service charge will be
made for any transfer, exchange or redemption of Notes, except in certain
circumstances for any tax or other governmental charge that may be imposed in
connection therewith. Upon issuance, the Notes will be represented by one or
more global notes (the 'Global Notes') that will be deposited with, or on behalf
of, The Depository Trust Company, as depositary (the 'Depositary'), and
registered in the name of a nominee of the Depositary. Payments in respect of
the Global Notes will be made by the Issuer to the Depositary in immediately
available funds. See '--Book-Entry; Delivery and Form.'
MATURITY, INTEREST AND PRINCIPAL PAYMENTS
The Notes will mature on October 1, 2006. Each Note will bear interest at
the applicable rate set forth on the cover page of this Prospectus from October
15, 1996, or from the most recent date to which interest has been paid, payable
in cash semiannually in arrears to Holders of record at the close of business on
the March 15 or September 15 immediately preceding the interest payment date on
April 1 and October 1 of each year, commencing April 1, 1997. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
SINKING FUND
The Notes will not be entitled to the benefit of any sinking fund.
OPTIONAL REDEMPTION
Optional Redemption. The Notes will be redeemable at the option of the
Issuer, in whole or in part, at any time on or after October 1, 2001, and prior
to maturity, at the following redemption prices (expressed as percentages of
principal amount), plus accrued interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during
the 12-month period beginning on October 1 of the years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ----------------------- ----------------
<S> <C>
2001................... 104.875%
2002................... 103.250%
2003................... 101.625%
2004 and thereafter.... 100.000%
</TABLE>
In addition, at any time and from time to time on or prior to December 1,
1999, the Issuer may redeem in the aggregate up to $47.25 million of the
original principal amount of the Notes with the proceeds of one or more Public
Equity Offerings, in each case which yields gross proceeds to the Issuer (before
discounts, commissions and expenses) of at least $65 million and following which
there is a Public Market, at a redemption price (expressed as a percentage of
the principal amount thereof) of 109%, plus accrued interest, if any, to the
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redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date),
provided that at least $87.75 million in aggregate principal amount of the Notes
must remain outstanding after such redemption. Such redemption must be made
within 60 days of the date of the closing of any such Public Equity Offering.
Selection and Notice. In the case of any partial redemption, selection of
Notes for redemption will be made by the Trustee on a pro rata basis, by lot or
by such other method as the Trustee shall deem fair and appropriate, although no
Note of $1,000 in original principal amount or less will be redeemed in part.
Notice of redemption shall be mailed by first-class mail at least 30 but not
more than 60 days before the redemption date to each Holder of Notes to be
redeemed at its registered address. On and after the redemption date, interest
will cease to accrue on Notes or portions thereof called for redemption and
accepted for payment.
NOTE GUARANTEES
Holding will, and certain future subsidiaries of the Issuer as described
below may, as primary obligors and not merely as sureties, fully, irrevocably
and unconditionally guarantee (each, a 'Note Guarantee'), on an unsecured,
senior subordinated basis to the same extent as the Notes are subordinated to
Senior Indebtedness, the performance and punctual payment when due, whether at
Stated Maturity, by acceleration or otherwise, of all obligations of the Issuer
under the Indenture and the Notes, whether for payment of principal of or
premium, if any, or interest on the Notes, expenses, indemnification or
otherwise. Such Note Guarantors will agree to pay, in addition to the amount
stated above, any and all expenses (including reasonable counsel fees and
expenses) incurred by the Trustee or the Holders in enforcing any rights under
any Note Guarantee. Each Note Guarantee will be limited to an amount not to
exceed the maximum amount that can be Guaranteed by the applicable Note
Guarantor without rendering such Note Guarantee, as it relates to such Note
Guarantor, voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors generally.
After the Issue Date the Issuer will cause (x) certain U.S. Restricted
Subsidiaries, as provided in the covenant described in 'Certain
Covenants--Restriction on Transfer of Assets to Subsidiaries,' and (y) each U.S.
Restricted Subsidiary that Incurs Indebtedness (other than Specified U.S.
Subsidiary Indebtedness), to execute and deliver to the Trustee a supplemental
indenture pursuant to which such Restricted Subsidiary will Guarantee payment of
the Notes. See '--Certain Covenants--Certain Future Note Guarantors' and
'--Restriction on Transfer of Assets to Subsidiaries' below.
Each Note Guarantee is a continuing guarantee and shall (a) remain in full
force and effect until payment in full of all the obligations of the Issuer
under the Notes and the Indenture, (b) be binding upon each Note Guarantor and
(c) inure to the benefit of and be enforceable by the Trustee, the Noteholders
and their successors, transferees and assigns.
RANKING; SUBORDINATION
The indebtedness evidenced by the Notes will be unsecured Senior
Subordinated Indebtedness of the Issuer, will be subordinated in right of
payment, as set forth in the Indenture, to all existing and future Senior
Indebtedness of the Issuer, will rank pari passu in right of payment with all
Senior Subordinated Indebtedness, if any, of the Issuer and will be senior in
right of payment to all Subordinated Indebtedness, if any, of the Issuer. The
Notes will also be effectively subordinated to any Secured Indebtedness of the
Issuer to the extent of the value of the assets securing such Indebtedness, and
to all Indebtedness of the Issuer's Subsidiaries.
At June 30, 1996, on a pro forma basis after giving effect to the
consummation of the Acquisition, including the issuance and sale of the Notes,
the aggregate amount of outstanding Senior Indebtedness of the Issuer and
outstanding Indebtedness of the Issuer's Subsidiaries that would have
effectively ranked senior to the Notes would have been $310.8 million. Although
the Indenture contains limitations on the amount of additional Indebtedness that
the Issuer and its Subsidiaries may Incur, under certain circumstances the
amount of such Indebtedness could be substantial and, in any case, such
Indebtedness may be Senior Indebtedness or Secured Indebtedness. See '--Certain
Covenants--Limitation on Indebtedness.'
The Indenture will provide that in the event of any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relating to the
Issuer or any Note Guarantor (individually an 'Obligor' and, collectively, the
'Obligors') or its assets, or any liquidation, dissolution or other winding-up
of any Obligor, whether voluntary or involuntary, or any
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assignment for the benefit of creditors or other marshalling of assets or
liabilities of any Obligor, all Senior Indebtedness or Guarantor Senior
Indebtedness, as applicable, of such Obligor must be paid in full in cash or
cash equivalents, or such payment duly provided for to the satisfaction of
holders of Senior Indebtedness or Guarantor Senior Indebtedness, before any
payment or distribution, whether in cash, property or securities (excluding
certain permitted equity or junior debt securities of an Obligor), is made,
directly or indirectly on account of the Senior Subordinated Note Obligations or
for the acquisition of any of the Notes.
During the continuance of any default in the payment when due (whether at
stated maturity, by acceleration or otherwise) of principal, premium, if any, or
interest on, or of unreimbursed amounts under drawn letters of credit or fees
relating to letters of credit constituting, any Senior Indebtedness or Guarantor
Senior Indebtedness, as applicable, of an Obligor (in either case, a 'Payment
Default'), no direct or indirect payment by or on behalf of such Obligor of any
kind or character shall be made on account of the Senior Subordinated Note
Obligations of such Obligor or for the acquisition of any of the Notes unless
and until such default has been cured or waived or has ceased to exist or such
Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, has been
discharged or paid in full in cash or cash equivalents.
In addition, during the continuance of any other default with respect to
any Designated Senior Indebtedness of an Obligor pursuant to which the maturity
thereof may be accelerated (a 'Non-payment Default'), after receipt by the
Trustee and the Issuer from an agent or other representative of holders of such
Designated Senior Indebtedness of a written notice of such Non-payment Default
specifying, among other things, the applicable Designated Senior Indebtedness
and Obligor to which such Non-payment Default relates, no direct or indirect
payment of any kind or character may be made by such Obligor on account of the
Senior Subordinated Note Obligations or for the acquisition of any of the Notes
for the period specified below (the 'Payment Blockage Period').
The Payment Blockage Period shall commence upon the receipt of notice of a
Non-payment Default by the Trustee and the Issuer from an agent or other
representative of holders of Designated Senior Indebtedness stating that such
notice is a payment blockage notice pursuant to the Indenture and shall end on
the earliest to occur of the following events: (i) 179 days shall have elapsed
since the receipt of such notice; (ii) the date on which such default is cured
or waived or ceases to exist (provided that no other Payment Default or
Non-payment Default has occurred or is then continuing after giving effect to
such cure or waiver); (iii) the date on which such Designated Senior
Indebtedness is discharged or paid in full in cash or cash equivalents; or (iv)
the date on which such Payment Blockage Period shall have been terminated by
express written notice to the Issuer and/or the applicable Note Guarantors, as
the case may be, or the Trustee from the agent or other representative of
holders of Designated Senior Indebtedness initiating such Payment Blockage
Period, after which the Issuer and the Note Guarantors, subject to the existence
of any Payment Default, shall promptly resume making any and all required
payments in respect of the Notes and the Note Guarantees, as applicable,
including any missed payments. Only one Payment Blockage Period, whether with
respect to the Notes, any Note Guarantee or the Notes and Note Guarantees
collectively, may be commenced within any 360 consecutive day period. No
Non-payment Default with respect to Designated Senior Indebtedness that existed
or was continuing on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Indebtedness initiating such Payment
Blockage Period (other than any such Non-payment Default which was not and could
not reasonably be expected to have been known by the holders or the agent or
other representative of such Designated Senior Indebtedness) will be, or can be,
made the basis for the commencement of a second Payment Blockage Period, whether
or not within a period of 360 consecutive days, unless such default has been
cured or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such Payment
Blockage Period, that, in either case, would give rise to a Non-payment Default
pursuant to any provision under which a Non-payment Default previously existed
or was continuing shall constitute a new Non-payment Default for this purpose;
provided that, in the case of a breach of a particular financial covenant, the
applicable Obligor shall have been in compliance for at least one full period
commencing after the date of commencement of such Payment Blockage Period). In
no event will a Payment Blockage Period extend beyond 179 days from the date of
the receipt by the Trustee of the notice and there must be a 181 consecutive day
period in any 360 day period during which no Payment Blockage Period is in
effect.
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If the Issuer fails to make any payment on the Notes when due or within any
applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of Default
under the Indenture and would enable the holders of the Notes to accelerate the
maturity thereof. See '--Defaults.'
If any Obligor shall make any payment to the Trustee on account of the
principal of, or premium, if any, or interest on, the Notes, or any other Senior
Subordinated Note Obligations, or the holders of the Notes shall receive from
any source any payment on account of the principal of, or premium, if any, or
interest on, the Notes or any other Senior Subordinated Note Obligations, at a
time when such payment is prohibited by the subordination provisions of the
Indenture, the Trustee or such holders shall hold such payment in trust for the
benefit of, and shall pay over and deliver to, the holders of Senior
Indebtedness or Guarantor Senior Indebtedness, as applicable (pro rata as to
each of such holders on the basis of the respective amounts of such Senior
Indebtedness or Guarantor Senior Indebtedness, as applicable, held by them), or
their representative or the trustee under the indenture or other agreement (if
any) pursuant to which such Senior Indebtedness or Guarantor Senior
Indebtedness, as applicable, may have been issued, as their respective interests
may appear, for application to the payment of all outstanding Senior
Indebtedness or Guarantor Senior Indebtedness, as applicable, until all such
Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, has been
paid in full in cash, after giving effect to all other payments or distributions
to, or provisions made for, the holders of Senior Indebtedness or Guarantor
Senior Indebtedness, as applicable.
By reason of such subordination, in the event of liquidation, receivership,
reorganization or insolvency, creditors of an Obligor who are holders of Senior
Indebtedness or Guarantor Senior Indebtedness may recover more, ratably, than
the holders of the Notes, and funds which would be otherwise payable to the
holders of the Notes will be paid to the holders of the Senior Indebtedness to
the extent necessary to pay the Senior Indebtedness in full, and the Issuer may
be unable to meet its obligations in full with respect to the Notes. In
addition, as described above, the Senior Subordinated Note Obligations will be
effectively subordinate to the claims of creditors of the Issuer's subsidiaries
(other than subsidiaries that are or hereafter become Note Guarantors).
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Noteholder will have the
right to require the Issuer to purchase all or any part of such Holder's Notes
at a purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase pursuant to the
offer described below and the other procedures set forth in the Indenture. See
'--Certain Covenants--Change of Control.'
The occurrence of certain of the events that would constitute a Change of
Control would constitute a default under the Credit Agreement and might
constitute a default under other Indebtedness of the Issuer and its
Subsidiaries. In addition, the exercise by the Holders of their right to require
the Issuer to repurchase the Notes could cause a default under the Credit
Agreement or such Indebtedness even if the Change of Control itself does not,
due to the financial effect of such repurchase on the Issuer. Finally, the
Issuer's ability to pay cash to the Holders upon a repurchase may be limited by
the Issuer's then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases.
CERTAIN COVENANTS
The Indenture will contain the following covenants, among others:
Limitation on Indebtedness. (a) The Issuer will not, and will not permit
any Restricted Subsidiary to, Incur any Indebtedness (including Acquired
Indebtedness), unless such Incurrence is by the Issuer, and on the date of such
Incurrence the Consolidated Coverage Ratio would be greater than 2.0:1.0, if
such Indebtedness is Incurred on or prior to December 31, 1998 and 2.25:1.0 if
such Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Issuer and, to the
extent specifically set forth below, its Restricted Subsidiaries may Incur the
following Indebtedness:
(i) Indebtedness of the Issuer or Swiss Subholding under the Credit
Agreement in an aggregate principal amount at any time outstanding not to
exceed (x) an amount of term loan borrowings thereunder equal to (1) the
aggregate principal amount of term loan borrowings by the Issuer or Swiss
Subholding outstanding under the Credit Agreement on the Issue Date minus
(2) the aggregate amount of all scheduled
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repayments and mandatory repayments of term loan borrowings thereunder,
whether or not actually made (unless any such repayment is waived or the
relevant provision requiring any such repayment is amended by the lenders
thereunder in accordance therewith), and all other repayments of term loan
borrowings actually made thereunder (other than to the extent refinanced by
an equal principal amount of Indebtedness Incurred under this clause (i))
plus (3) if such term loan borrowings are refinanced pursuant to this
clause (i), an amount of Refinancing Costs paid in connection with such
refinancing, plus (y) $140 million of revolving credit borrowings
thereunder (minus the aggregate amount of Indebtedness of Non-U.S.
Restricted Subsidiaries Incurred pursuant to clause (xvii) of this
paragraph (b)), provided that
(A) the aggregate principal amount of term loan borrowings by Swiss
Subholding outstanding under the Credit Agreement at any time
outstanding shall not exceed an amount equal to (x) the aggregate
principal amount of term loan borrowings by Swiss Subholding
outstanding under the Credit Agreement on the Issue Date plus (y)
if such term loan borrowings are refinanced pursuant to this
clause (i), an amount of Refinancing Costs paid in connection with
such refinancing,
(B) any Indebtedness Incurred by Swiss Subholding to renew, extend,
substitute for, refinance or replace (each, for purposes of this
clause (i), to 'refinance') any Indebtedness under the Credit
Agreement shall be Incurred only in a transaction exempt from
registration requirements under United States securities laws, and
not pursuant to a public offering in the United States, and shall
not be so registered for resale in a public offering in the United
States, and
(C) for purposes of determining the outstanding principal amount of
term loan Indebtedness under this clause (i), the aggregate
principal amount of term loan Indebtedness that is Incurred (x) to
refinance term loan Indebtedness under the Credit Agreement and
(y) in a different currency from the Indebtedness being
refinanced, shall be calculated based on the relevant currency
exchange rate in effect on the date of such refinancing;
(ii) Indebtedness of the Issuer pursuant to the Notes, Indebtedness of
any Note Guarantor pursuant to its Note Guarantee, and Indebtedness of any
other Restricted Subsidiary with respect to the Notes arising by reason of
any Lien granted by such Subsidiary to secure the Notes;
(iii) Indebtedness of the Issuer or any Restricted Subsidiary
outstanding on the Issue Date and set forth on a schedule to the Indenture
(other than Indebtedness under or in respect of the Credit Agreement);
(iv) Indebtedness of the Issuer owing to and held by any Restricted
Subsidiary or Indebtedness of a Restricted Subsidiary owing to and held by
the Issuer or any Restricted Subsidiary; provided, however, that (x) any
such Indebtedness is made pursuant to an intercompany note, (y) any such
Indebtedness of the Issuer or any Note Guarantor is Subordinated
Indebtedness that is subordinated to the Notes or to the applicable Note
Guarantee as provided in such intercompany note, and in any event at least
to the same extent as the Notes are subordinated to Senior Indebtedness,
and (z) any subsequent transfer of any such Indebtedness (except to the
Issuer or a Restricted Subsidiary) will be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the issuer thereof;
(v) Acquisition Indebtedness of any Non-U.S. Restricted Subsidiary
Incurred after the Issue Date (and not for the purpose of financing the
Acquisition), provided that (x) at the time of such Incurrence and after
giving effect thereto on a pro forma basis, (A) no Default or Event of
Default will have occurred and be continuing or would result therefrom and
(B) the Issuer could Incur $1.00 of additional Indebtedness pursuant to
paragraph (a) above and (y) such Indebtedness (unless Incurred by a Note
Guarantor) shall be Incurred only in a transaction exempt from registration
requirements under United States securities laws, and not pursuant to a
public offering in the United States, and shall not be so registered for
resale in a public offering in the United States;
(vi) Acquired Indebtedness of any Restricted Subsidiary, provided that
at the time of such Incurrence and after giving effect thereto on a pro
forma basis, (x) no Default or Event of Default will have occurred and be
continuing or would result therefrom and (y) the Issuer could Incur $1.00
of additional Indebtedness pursuant to paragraph (a) above;
(vii) Indebtedness of any Restricted Subsidiary that is a Note
Guarantor, provided that at the time of such Incurrence and after giving
effect thereto on a pro forma basis, (x) no Default or Event of Default
will have occurred and be continuing or would result therefrom and (y) the
Issuer could Incur $1.00 of additional Indebtedness pursuant to paragraph
(a) above;
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(viii) obligations of the Issuer or any Restricted Subsidiary entered
into in the ordinary course of business (A) under Interest Rate Agreements
designed to protect such Person against fluctuations in interest rates in
respect of Indebtedness of such Person permitted to be incurred under the
Indenture, which obligations do not exceed the aggregate principal amount
of such Indebtedness, and (B) under Currency Agreements designed to protect
such Person against fluctuations in foreign currency exchange rates in
respect of foreign exchange exposures incurred by such person;
(ix) obligations of the Issuer or any Restricted Subsidiary in respect
of (A) judgment, performance, surety and other bonds provided by such
Person with respect to obligations of such Person in the ordinary course of
business, and (B)(x) letters of credit securing obligations incurred in the
ordinary course of business or (y) other letters of credit in an amount not
to exceed $5 million in the aggregate outstanding at any time;
(x) Indebtedness of the Issuer or any Restricted Subsidiary arising
from the honoring of a check, draft or similar instrument of such Person
drawn against insufficient funds, provided that such Indebtedness is
extinguished within five Business Days of its incurrence;
(xi) (A) Indebtedness of the Issuer or any Restricted Subsidiary
consisting of Capitalized Lease Obligations, Purchase Money Obligations or
Capital Expenditure Indebtedness (including refinancings thereof), in an
aggregate principal amount outstanding at any time for all such
Indebtedness not exceeding 5% of Consolidated Assets, and (B) other Capital
Expenditure Indebtedness of any Non-U.S. Restricted Subsidiary so long as
at the time of Incurrence thereof and after giving effect thereto on a pro
forma basis, (x) no Default or Event of Default will have occurred and be
continuing or would result therefrom and (y) the Issuer could Incur $1.00
of additional Indebtedness pursuant to paragraph (a) above; provided that
any Indebtedness described in this clause (xi) Incurred by a Restricted
Subsidiary (other than a Note Guarantor) shall be Incurred only in a
transaction exempt from registration requirements under United States
securities laws, and not pursuant to a public offering in the United
States, and shall not be so registered for resale in a public offering in
the United States;
(xii) Indebtedness of the Issuer or any Restricted Subsidiary that is
a Note Guarantor (other than Indebtedness permitted to be Incurred pursuant
to paragraph (a) above or any other clause of this paragraph (b)) not to
exceed $10 million in aggregate principal amount outstanding at any given
time for all such Indebtedness;
(xiii) Indebtedness of any Non-U.S. Restricted Subsidiary (other than
Indebtedness permitted to be Incurred pursuant to any other clause of this
paragraph (b)) not to exceed $25 million in aggregate principal amount
outstanding at any given time for all such Indebtedness;
(xiv) Indebtedness of the Issuer or any Restricted Subsidiary
consisting of guarantees, indemnities or obligations in respect of purchase
price adjustments, in connection with the disposition of assets permitted
under the Indenture, in a principal amount not to exceed the gross proceeds
actually received by the Issuer or any Restricted Subsidiary in connection
with such disposition;
(xv) (1) Guarantees of the Issuer or any Restricted Subsidiary of
Specified Senior Indebtedness that is otherwise permitted to be Incurred in
accordance with this covenant, (2) Permitted Guarantees and (3) Guarantees
of the Issuer or any Restricted Subsidiary (x) of Specified Indebtedness
that is otherwise permitted to be Incurred in accordance with this covenant
and (y) that are permitted to be Incurred in accordance with the covenant
described in '--Limitation on Certain Guarantees';
(xvi) Indebtedness of the Issuer or any Restricted Subsidiary (A) with
respect to any Specified Senior Indebtedness that is otherwise permitted to
be Incurred in accordance with this covenant, to the extent arising by
reason of any Lien granted by such Person to secure such Specified Senior
Indebtedness, (B) with respect to any Pari Passu Indebtedness that is
otherwise permitted to be Incurred in accordance with this covenant, to the
extent arising by reason of any Permitted Lien granted by such Person to
secure such Pari Passu Indebtedness, or (C) with respect to any Specified
Indebtedness that is otherwise permitted to be Incurred in accordance with
this covenant, to the extent arising by reason of any Lien granted by such
Person to secure such Specified Indebtedness in accordance with the
covenant described in '--Limitation on Certain Liens';
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(xvii) Indebtedness of any Non-U.S. Restricted Subsidiary to the
extent that the amount of such Indebtedness would be permitted as revolving
credit borrowing under the Credit Agreement, provided that the aggregate
amount of such Indebtedness shall reduce the amount of revolving credit
borrowings permitted to be Incurred under the Credit Agreement for purposes
of clause (i)(y) of this paragraph (b); and
(xviii) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause (xviii), a 'refinancing')
of any Indebtedness described in paragraph (a) or clause (ii), (iii), (v),
(vi), (vii) or (xi)(B) of this paragraph (b), including any successive
refinancings, so long as (A) any such new Indebtedness shall be in
principal amount that does not exceed the principal amount (or, if such
Indebtedness being refinanced provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination)
so refinanced plus the lesser of (I) the stated amount of any premium or
other payment required to be paid in connection with such a refinancing
pursuant to the terms of the Indebtedness being refinanced and (II) the
amount of premium or other payment actually paid at such time to refinance
the Indebtedness, plus, in either case, the amount of expenses of the
Issuer or a Restricted Subsidiary incurred in connection with such
refinancing; (B) in the case of any refinancing of Pari Passu Indebtedness
or Subordinated Indebtedness, such new Indebtedness is made pari passu with
or subordinate in right of payment to the Notes and the Note Guarantees, as
applicable, at least to the same extent as the Indebtedness being
refinanced; (C) such new Indebtedness has an Average Life equal to or
longer than the Average Life of the Indebtedness being refinanced and a
final Stated Maturity the same as or later than the final Stated Maturity
of the Indebtedness being refinanced; and (D) in the case of any
refinancing of Indebtedness described in clause (v), (vi) or (xi)(B) of
this paragraph (b), such new Indebtedness shall be Incurred (other than by
a Note Guarantor) only in a transaction exempt from registration
requirements under United States securities laws, and not pursuant to a
public offering in the United States, and shall not be so registered for
resale in a public offering in the United States, provided, that this
clause (D) shall not apply in respect of clause (vi) to the extent that the
Acquired Indebtedness being refinanced was Incurred in such a registered
transaction or public offering so long as the obligor in respect of such
Indebtedness does not change as a result of such refinancing.
(c) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this covenant, (i) Indebtedness Incurred pursuant to the Credit
Agreement on the Issue Date shall be treated as Incurred pursuant to clause (i)
of the foregoing paragraph (b), (ii) any other obligation of the obligor on such
Indebtedness arising under any Guarantee, Lien or letter of credit supporting
such Indebtedness shall be disregarded to the extent that such Guarantee, Lien
or letter of credit secures the principal amount of such Indebtedness; (iii) in
the event that Indebtedness meets the criteria of more than one of the types of
Indebtedness described in paragraph (b), subject to clause (i) of this paragraph
(c), the Issuer, in its sole discretion, shall classify such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses; and (iv) the amount of Indebtedness issued
at a price that is less than the principal amount thereof shall be equal to the
amount of the liability in respect thereof determined in accordance with GAAP.
(d) For purposes of determining compliance with any Dollar-denominated
restriction on the Incurrence of Non-Dollar Indebtedness under clause
(ix)(B)(y), (xi)(A), (xii) or (xiii) of paragraph (b) above, the Dollar-
equivalent principal amount of such Indebtedness Incurred pursuant thereto shall
be calculated based on the relevant currency exchange rate in effect on the date
that such Indebtedness was Incurred, in the case of term debt, or first
committed, in the case of revolving credit debt, provided that (x) the
Dollar-equivalent principal amount of any such Indebtedness outstanding on the
Issue Date shall be calculated based on the relevant currency exchange rate in
effect on the Issue Date and (y) if such Indebtedness is Incurred to refinance
Non-Dollar Indebtedness previously Incurred pursuant to clause (ix)(B)(y),
(xi)(A), (xii) or (xiii) of paragraph (b) above, and such refinancing would
cause the Dollar-denominated restriction under such respective clause to be
exceeded if calculated at the relevant currency exchange rate in effect on the
date of such refinancing, such Dollar-denominated restriction shall be deemed
not to have been exceeded so long as the principal amount of such refinancing
Indebtedness does not exceed the principal amount of such Indebtedness being
refinanced, but the ability to make subsequent Incurrences of Indebtedness
subject to the Dollar-denominated restriction under such respective clause shall
be determined as if the relevant currency exchange rate applied to any such
previous refinancing was the rate in effect on the date of such refinancing. The
principal amount of any such refinancing
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Indebtedness, if Incurred in a different currency from the Indebtedness being
refinanced, shall be calculated based on the currency exchange rate applicable
to the currencies in which such respective Indebtedness is denominated that is
in effect on the date of such refinancing.
Limitation on Restricted Payments. (a) The Issuer will not, and will not
permit any Restricted Subsidiary to, directly or indirectly,:
(i) declare or pay any dividend or make any other distribution or payment
on or in respect of Capital Stock of the Issuer (including any payment in
connection with any merger or consolidation involving the Issuer or any
Restricted Subsidiary), or any other payment to the direct or indirect holders
of Capital Stock of the Issuer in their capacity as such, except dividends or
distributions payable solely in Capital Stock of the Issuer (other than
Redeemable Capital Stock);
(ii) declare or pay any dividend or make any other distribution or payment
on or in respect of Capital Stock of any Restricted Subsidiary (including any
payment in connection with any merger or consolidation involving the Issuer or
any Restricted Subsidiary), or any other payment to the direct or indirect
holders of Capital Stock of any Restricted Subsidiary in their capacity as such,
except dividends or distributions payable (x) on a pro rata basis to all such
holders of such Capital Stock, whether in Capital Stock of such Restricted
Subsidiary or otherwise, or (y) to the Issuer or any Restricted Subsidiary;
(iii) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock of the Issuer or any Restricted Subsidiary held by Persons
other than the Issuer or a Restricted Subsidiary, except from all holders of
such Capital Stock of a Restricted Subsidiary on a pro rata basis;
(iv) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other Stated
Maturity, any Subordinated Indebtedness of the Issuer or any Note Guarantor
(other than in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
such acquisition or retirement); or
(v) make any Investment (other than any Permitted Investment) in any
Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Investment being herein referred to
as a 'Restricted Payment') if at the time of and after giving effect to such
Restricted Payment on a pro forma basis, (1) a Default or Event of Default will
have occurred and be continuing or would result therefrom; (2) the Issuer could
not Incur at least $1.00 of additional Indebtedness under paragraph (a) of the
covenant described in '--Limitation on Indebtedness'; or (3) the aggregate
amount of such Restricted Payment and all other Restricted Payments declared or
made from and after the Issue Date would exceed, without duplication, the sum
of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from October 1, 1996 to the end of the
most recent fiscal quarter ending prior to the date of such Restricted
Payment for which consolidated financial statements of the Issuer are
available (or, if such Consolidated Net Income for such period will be a
deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Issuer either (x)
as capital contributions in the form of common equity to the Issuer after
the Issue Date or (y) from the issuance or sale of Capital Stock (other
than Redeemable Capital Stock) of the Issuer after the Issue Date, other
than to a Subsidiary of the Issuer;
(C) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (i) payments of dividends,
repayments of the principal of loans or advances or other transfers of
assets to the Issuer or any Restricted Subsidiary from any Unrestricted
Subsidiary or (ii) the redesignation of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in the definition
of 'Investment'), not to exceed in the case of any such Unrestricted
Subsidiary the aggregate amount of Investments (other than Permitted
Investments) made by the Issuer or any Restricted Subsidiary in such
Unrestricted Subsidiary after the Issue Date;
(D) in the case of disposition or repayment of any Investment
constituting a Restricted Payment made after the Issue Date, an amount
equal to the lesser of the return of capital with respect to such
Investment
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and the initial amount of such Investment, in either case, less the cost of
the disposition of such Investment; and
(E) the aggregate net cash proceeds received after the Issue Date by
the Issuer or any Restricted Subsidiary from the issuance or sale (other
than to any Restricted Subsidiary) of debt securities or Redeemable Capital
Stock that have been converted into or exchanged for Capital Stock of the
Issuer (other than Redeemable Capital Stock) to the extent such debt
securities or Redeemable Capital Stock were originally sold for cash,
together with the aggregate net cash proceeds received by the Issuer or any
Restricted Subsidiary from such conversion or exchange at the time thereof.
(b) The provisions of the foregoing paragraph (a) will not prohibit:
(i) the payment of any dividend within 60 days after the date of its
declaration, if at the date of declaration such payment would be permitted by
the foregoing paragraph (a), provided, however, that such dividend will be
included in the calculation of the amount of Restricted Payments;
(ii) the redemption, repurchase or other acquisition or retirement of any
shares of any class of Capital Stock of the Issuer or any Restricted Subsidiary
in exchange for (including any such exchange pursuant to the exercise of a
conversion right or privilege in connection with which cash is paid in lieu of
the issuance of fractional shares), or out of the Net Cash Proceeds received by
the Issuer of, a substantially concurrent issue and sale of other shares of
Capital Stock (other than Redeemable Capital Stock, in the case of any such
redemption, repurchase or other acquisition or retirement of Capital Stock that
is not Redeemable Capital Stock) of MT Investors, Holding or the Issuer to any
Person (other than to a Subsidiary of the Issuer), provided that (x) such Net
Cash Proceeds will be excluded from clause (3) of the foregoing paragraph (a)
and (y) such redemption, repurchase or other acquisition or retirement will be
excluded in the calculation of the amount of Restricted Payments;
(iii) any redemption, repurchase or other acquisition or retirement of
Subordinated Indebtedness of the Issuer or any Note Guarantor in exchange for,
or out of the Net Cash Proceeds received by the Issuer of, a substantially
concurrent issue and sale of (x) Capital Stock (other than Redeemable Capital
Stock) of MT Investors, Holding or the Issuer to any Person (other than to a
Subsidiary of the Issuer), provided that such Net Cash Proceeds will be excluded
from clause (3) of the foregoing paragraph (a), or (y) Indebtedness of the
Issuer or any Note Guarantor so long as such Indebtedness complies with
subclauses (B) and (C) of clause (xviii) of paragraph (b) of the covenant
described in '--Limitation on Indebtedness'; provided, however, that such
redemption, repurchase or other acquisition or retirement will be excluded in
the calculation of the amount of Restricted Payments;
(iv) (A) loans, advances, dividends or distributions by the Issuer to
Holding or MT Investors (x) not to exceed $1 million in any fiscal year to
permit Holding or MT Investors to pay the operational expenses (including
professional fees and expenses) incurred by Holding or MT Investors in the
ordinary course of business to the extent related to Holding's investment in the
Issuer or MT Investors' investment in Holding, respectively, or (y) not to
exceed an amount necessary to permit Holding or MT Investors to pay its expenses
incurred in connection with any public offering of equity securities or of
Indebtedness permitted by the Indenture that has been terminated by the board of
directors of the Issuer, Holding or MT Investors, as applicable, in each case,
the net proceeds of which were specifically intended to be contributed or loaned
to the Issuer, and (B) loans or advances by the Issuer to Holding or MT
Investors not to exceed an amount necessary to permit each of Holding and MT
Investors to pay its interim expenses incurred in connection with any public
offering of equity securities or Indebtedness permitted by the Indenture, the
net proceeds of which are specifically intended to be contributed or loaned to
the Issuer, which loans or advances, unless such offering shall have been
terminated by the board of directors of the Issuer, Holding or MT Investors, as
applicable, shall be repaid to the Issuer promptly out of the proceeds of such
offering; provided, however, that such amounts will be excluded in the
calculation of the amount of Restricted Payments;
(v) loans, advances, dividends or distributions by the Issuer to Holding
or MT Investors to permit Holding or MT Investors, as the case may be, to
repurchase or otherwise acquire its common stock or options or other rights in
respect thereof, or payments by the Issuer to repurchase or otherwise acquire
such common stock or options or other rights in respect thereof, in connection
with the repurchase provisions under employee stock
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option agreements or employee stock purchase agreements, such payments, loans,
advances, dividends or distributions not to exceed $2 million in any fiscal year
and $5 million in the aggregate; provided, however, that such amounts will be
included in the calculation of the amount of Restricted Payments;
(vi) loans or advances to officers or employees of MT Investors, Holding,
the Issuer or any Restricted Subsidiary in the ordinary course of business not
to exceed $2 million in the aggregate outstanding at any time, provided,
however, that such amounts will be excluded in the calculation of the amount of
Restricted Payments;
(vii) payments pursuant to the Tax Sharing Agreement, provided, however,
that such payments will be excluded in the calculation of the amount of
Restricted Payments;
(viii) payments by the Issuer to Holding or MT Investors not to exceed an
amount necessary to permit Holding or MT Investors to make payments in respect
of its indemnification obligations owing to its directors or officers under
Holding's or MT Investors' charter, by-laws or indemnification agreements, to
the extent such payments relate to the Issuer or any of its Restricted
Subsidiaries or to Holding's or MT Investors's investment therein, provided,
however, that such payments will be excluded in the calculation of the amount of
Restricted Payments;
(ix) the payment by the Issuer of, or loans, advances, dividends or
distributions by the Issuer to Holding or MT Investors to pay, dividends on the
common stock of the Issuer, Holding or MT Investors, as applicable, following an
initial public offering of such common stock, in an amount not to exceed in any
fiscal year 6% of the net proceeds received by the Issuer, in or from such
public offering; provided, however, that such payments, loans, advances,
dividends or distributions will be included in the calculation of the amount of
Restricted Payments;
(x) payments by the Issuer, or payments by the Issuer to Holding or MT
Investors to enable Holding or MT Investors, as applicable, to make payments, to
holders of the common stock of the Issuer, Holding or MT Investors, as
applicable, in lieu of issuance of fractional shares of such common stock, in
connection with any recapitalization of the Issuer, Holding or MT Investors, as
applicable, such payments not to exceed $100,000 in the aggregate; provided,
however, that such payments will be included in the calculation of the amount of
Restricted Payments; or
(xi) any purchase or repayment of Subordinated Indebtedness upon a Change
of Control or an Asset Sale to the extent required by the agreement governing
such Subordinated Indebtedness but only if (x) in the case of a Change of
Control, the Issuer shall have complied with all of its obligations under the
covenant described in '--Change of Control' and purchased all Notes tendered
pursuant to the offer to repurchase all the Notes required thereby prior to
purchasing or repaying such Subordinated Indebtedness or (y) in the case of an
Asset Sale, the Issuer shall have applied the Net Cash Proceeds from such Asset
Sale in accordance with the covenant described in '--Limitation on Disposition
of Proceeds of Asset Sales,' shall have made an Excess Proceeds Offer pursuant
to such covenant, and shall have purchased all Notes tendered pursuant to such
Excess Proceeds Offer prior to purchasing or repaying such Subordinated
Indebtedness, provided that (1) in either case the purchase price (stated as a
percentage of principal amount or issue price plus accrued original issue
discount, if less) of such Subordinated Indebtedness shall not be greater than
the price (stated as a percentage of principal amount) of the Notes pursuant to
any such offer to repurchase the Notes in the event of a Change of Control or
Excess Proceeds Offer, respectively, (2) in the case of such Asset Sale, the
aggregate principal amount of such Subordinated Indebtedness that the Issuer may
so purchase or repay may not exceed the amount of the Excess Proceeds, if any,
available for such Excess Proceeds Offer and remaining after the Issuer shall
have purchased all Notes tendered pursuant to such Excess Proceeds Offer, and
(3) in either case, any such purchase or repayment will be included in the
calculation of the amount of Restricted Payments.
Limitation on Transactions with Affiliates. (a) The Issuer will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, conduct
any business, enter into or suffer to exist any transaction or series of related
transactions (including the purchase, sale, conveyance, disposition, lease or
exchange of any property, the rendering of any service or the making of any loan
or advance) with, or for the benefit of, any Affiliate of the Issuer (an
'Affiliate Transaction') unless (i) such Affiliate Transaction is on terms no
less favorable to the Issuer or such Restricted Subsidiary than those that could
be obtained at the time of such Affiliate Transaction in a comparable arm's
length transaction with a Person who is not an Affiliate of the Issuer, and (ii)
in the event
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such an Affiliate Transaction involves aggregate payments or value of $5 million
or greater, (x) a majority of the Board of Directors of the Issuer, including a
majority of the Disinterested Directors, have determined in good faith that the
criteria set forth in clause (i) are satisfied and have approved the relevant
Affiliate Transaction, such approval to be evidenced by a Board Resolution, or
(y) in the event there are no Disinterested Directors, the Issuer has obtained a
written opinion of an investment banking firm or an independent appraiser or
accounting firm, in either case that is nationally recognized in the United
States, stating that the terms of such Affiliate Transaction are fair to the
Issuer and its Restricted Subsidiaries from a financial point of view (a
'Fairness Opinion'), and (iii) in the event that such Affiliate Transaction
involves aggregate payments or value of $15 million or greater, the Issuer has
obtained a Fairness Opinion with respect to such Affiliate Transaction and (iv)
in the event that such Affiliate Transaction involves aggregate payments or
value of $5 million or greater, the Issuer has delivered to the Trustee an
Officers' Certificate certifying that such Affiliate Transaction complies with
the foregoing clause (i), and that, if required by the foregoing clause (ii) or
(iii), such Affiliate Transaction has been approved by the Board of Directors
(including a majority of the Disinterested Directors) or the Issuer has obtained
a Fairness Opinion with respect thereto, together with copies of the relevant
Board Resolution or Fairness Opinion.
(b) The foregoing paragraph (a) will not apply to: (i) any transaction
permitted as a Restricted Payment pursuant to the covenant described in
'--Limitation on Restricted Payments,' (ii) the payment of reasonable and
customary regular fees to directors of the Issuer and its Restricted
Subsidiaries who are not employees of the Issuer or its Subsidiaries, (iii) any
transaction between the Issuer and a Restricted Subsidiary or between Restricted
Subsidiaries, (iv) any transaction with an officer or member of the board of
directors of the Issuer or any Restricted Subsidiary in the ordinary course of
business involving compensation, indemnity or employee benefit arrangements; (v)
loans or advances to officers of the Issuer or any Restricted Subsidiary in the
ordinary course of business not exceeding $2 million in the aggregate
outstanding at any time; (vi) payments pursuant to the Tax Sharing Agreement;
(vii) any agreement as in existence on the Issue Date, as the same may be
amended from time to time in any manner not adverse to the Holders; and (viii)
payment to AEA of fees in an aggregate amount not to exceed $1 million in any
fiscal year and the reimbursement of reasonable out-of-pocket expenses incurred
by AEA, in each case in connection with its performance of services pursuant to
the Management Services Agreement; (ix) the Acquisition and all transactions
related thereto (including but not limited to the financing thereof); and (x)
any transaction in the ordinary course of business or approved by a majority of
the Disinterested Directors, between the Issuer or any Restricted Subsidiary and
any Affiliate of the Issuer controlled by the Issuer that is a joint venture or
similar entity primarily engaged in a Related Business.
Limitation on Certain Liens. (a) The Issuer will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien (other than any Permitted Lien) on or with respect to
any of its property or assets (including any Capital Stock), whether held on the
Issue Date or thereafter acquired, or any income, profits or proceeds therefrom,
securing any Specified Indebtedness, unless (x) effective provision is made
contemporaneously therewith to secure the Notes and the Note Guarantees, as
applicable, (i) in the case of a Lien securing Subordinated Indebtedness, by a
perfected Lien on such property, assets, income, profits or proceeds that is
senior in priority to such Lien securing such Indebtedness, or (ii) in the case
of a Lien securing any other Specified Indebtedness, equally and ratably with
(or prior to) such Lien securing such Indebtedness and (y) any such Restricted
Subsidiary is a Note Guarantor.
(b) Notwithstanding the foregoing, any Lien created for the benefit of the
Notes and the Note Guarantees, as applicable, pursuant to the foregoing
paragraph (a) shall provide by its terms that such Lien shall be automatically
and unconditionally released and discharged upon (i) any sale, exchange or
transfer to any Person not an Affiliate of the Issuer of all of the Capital
Stock held by the Issuer or any Restricted Subsidiary in, or all or
substantially all the assets of, any Restricted Subsidiary creating such Lien
(which sale, exchange or transfer is not prohibited by the Indenture) or (ii)
the release and discharge of such Lien, which release and discharge occurs at a
time when (A) no other Specified Indebtedness remains secured by such property
or assets of the Issuer or such Restricted Subsidiary, as the case may be, or
(B) the holders of all such other Specified Indebtedness that is secured by such
property or assets of the Issuer or such Restricted Subsidiary also release
their security interest in such property or assets.
Limitation on Certain Guarantees. (a) The Issuer will not permit any
Restricted Subsidiary, directly or indirectly, to Guarantee any Specified
Indebtedness (other than any Permitted Guarantee) unless such Restricted
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Subsidiary simultaneously executes and delivers a supplemental indenture to the
Indenture providing for a Note Guarantee by such Restricted Subsidiary, provided
that if such Specified Indebtedness is Subordinated Indebtedness, such
Restricted Subsidiary's Guarantee with respect to such Specified Indebtedness
shall be subordinated in right of payment to such Restricted Subsidiary's Note
Guarantee substantially to the same extent as such Specified Indebtedness is
subordinated to the Notes or any Note Guarantee, as the case may be, or (if not
so subordinated) to any other Indebtedness of such Restricted Subsidiary.
(b) Notwithstanding the foregoing, any Note Guarantee by a Restricted
Subsidiary of the Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon (i) any sale,
exchange or transfer to any Person not an Affiliate of the Issuer of all of the
Capital Stock held by the Issuer or any Restricted Subsidiary in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by the Indenture) or (ii) the release and
discharge of the Guarantee that resulted in the creation of such Note Guarantee,
except a discharge or release by or as a result of payment under such Guarantee,
which release and discharge occurs at a time when (A) no other Specified
Indebtedness remains Guaranteed by such Restricted Subsidiary (other than
pursuant to Permitted Guarantees) or (B) the holders of all such other
Indebtedness that is Guaranteed by such Restricted Subsidiary (other than
pursuant to Permitted Guarantees) also release their Guarantee by such
Restricted Subsidiary, except a release as a result of payment pursuant to such
Guarantee by such Restricted Subsidiary.
Certain Future Note Guarantors. (a) The Issuer will cause (x) certain U.S.
Restricted Subsidiaries, as provided in the covenant described in '--Restriction
on Transfer of Assets to Subsidiaries,' and (y) each U.S. Restricted Subsidiary
that Incurs Indebtedness (other than Specified U.S. Subsidiary Indebtedness), to
execute and deliver to the Trustee a supplemental indenture pursuant to which
such Subsidiary will Guarantee payment of the Notes. The Issuer also will have
the right to cause any Restricted Subsidiary to execute and deliver to the
Trustee a supplemental indenture pursuant to which such Restricted Subsidiary
will Guarantee payment of the Notes. Each Note Guarantee will be limited to an
amount not to exceed the maximum amount that can be Guaranteed by that
Subsidiary without rendering the Note Guarantee, as it relates to such
Subsidiary, voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors generally.
For purposes of clause (x) of this paragraph (a), the Issuer shall have the
right to designate the U.S. Restricted Subsidiary or U.S. Restricted
Subsidiaries that constitute a U.S. Significant Subsidiary or U.S. Significant
Subsidiaries, as the case may be, required to provide a Note Guarantee or Note
Guarantees thereunder, provided that, after giving effect to such Note Guarantee
or Note Guarantees, there shall not be in existence any U.S. Restricted
Subsidiary that is a U.S. Significant Subsidiary.
(b) Notwithstanding the foregoing, any Note Guarantee by a Restricted
Subsidiary shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer
to any Person not an Affiliate of the Issuer of all of the Capital Stock held by
the Issuer in, or all or substantially all the assets of, such Restricted
Subsidiary (which sale, exchange or transfer is not prohibited by the Indenture)
or (ii) in the case of any such Guarantee given by reason of clause (y) of the
first sentence of the foregoing paragraph (a), the repayment in full of the
Indebtedness that caused such Restricted Subsidiary to provide such Note
Guarantee, which repayment occurs at a time when such Restricted Subsidiary has
no obligation in respect of any other Indebtedness (other than Specified U.S.
Subsidiary Indebtedness) and would not otherwise be required to Guarantee the
Notes under any provision of the Indenture.
Limitation on Other Senior Subordinated Indebtedness. The Issuer will not,
and will not permit any Restricted Subsidiary that is a Note Guarantor to,
directly or indirectly, Incur any Indebtedness that is subordinate or junior in
right of payment in any respect to any other Indebtedness, unless such
Indebtedness is expressly subordinate in right of payment to, or ranks pari
passu with, the Notes, in the case of the Issuer, or the Note Guarantees, in the
case of a Note Guarantor; provided that the foregoing restriction shall not
apply to distinctions between categories of Senior Indebtedness or Guarantor
Senior Indebtedness that exist solely by reason of Liens or Guarantees arising
or created in respect of some but not all such Senior Indebtedness or Guarantor
Senior Indebtedness, as the case may be.
Limitation on the Sale or Issuance of Preferred Stock of Restricted
Subsidiaries. The Issuer will not sell, and will not permit any Restricted
Subsidiary to, directly or indirectly, issue or sell, any shares of Preferred
Stock of any Restricted Subsidiary except (i) to the Issuer or a Restricted
Subsidiary, or to directors as director's
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qualifying shares to the extent required by applicable law, or (ii) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary. The proceeds of
any sale of such Preferred Stock permitted by the preceding clause (ii) will be
treated as Net Cash Proceeds from an Asset Sale and must be applied in
accordance with the terms of the covenant described under '--Limitation on
Disposition of Proceeds of Asset Sales.'
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. (a) The Issuer will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or otherwise cause
or suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (i) pay, directly or indirectly,
dividends, in cash or otherwise, or make any other distribution on or in respect
of its Capital Stock or any other interest or participation in, or measured by,
its profits, (ii) pay any Indebtedness owed to the Issuer or any other
Restricted Subsidiary, (iii) make loans or advances to the Issuer or any other
Restricted Subsidiary, (iv) transfer any of its properties or assets to the
Issuer or any other Restricted Subsidiary (other than any customary restriction
on transfers of property subject to a Lien permitted under the Indenture that
would not adversely affect the Issuer's ability to satisfy its obligations
hereunder) or (v) Guarantee any Indebtedness of the Issuer or any other
Restricted Subsidiary, except for such encumbrances or restrictions existing
under or by reason of (a) applicable law, (b) customary non-assignment
provisions of any lease, license or other contract, (c) any agreement or other
instrument of a Person acquired by the Issuer or any Restricted Subsidiary in
existence at the time of such acquisition (but not created in contemplation
thereof), which encumbrance or restriction is not applicable to any Person, or
the properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, (d) any existing agreement as in effect on
the Issue Date (to the extent of any encumbrances or restrictions in existence
thereunder on the Issue Date), including the Credit Agreement as in effect on
the Issue Date, (e) any encumbrance or restriction with respect to a Non-U.S.
Restricted Subsidiary pursuant to an agreement relating to Indebtedness of such
Non-U.S. Restricted Subsidiary permitted to be Incurred pursuant to clause (v),
(vi), (vii), (viii), (ix), (xi), (xii) or (xiii) of paragraph (b) of the
covenant described in '--Limitation on Indebtedness' above, (f) arising or
agreed to in the ordinary course of business and that do not, individually or in
the aggregate, detract from the value of property or assets of the Issuer or any
Restricted Subsidiary, in each case in any manner material to the Issuer or such
Restricted Subsidiary, (g) any restriction with respect to a Restricted
Subsidiary imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of such
Restricted Subsidiary pending the closing of such sale or disposition, (h) any
restriction contained in security agreement or mortgage securing Indebtedness of
any Restricted Subsidiary to the extent such restriction restricts the transfer
of the property subject to such security agreement or mortgage, (i)
subordination provisions contained in any intercompany note representing
Indebtedness of the Issuer owing to and held by any Restricted Subsidiary or
Indebtedness of a Note Guarantor owing to and held by the Issuer or any
Restricted Subsidiary, as contemplated by clause (iv)(y) of paragraph (b) of the
covenant described in '--Limitation on Indebtedness,' and (j) any agreement that
extends, refinances, renews or replaces any agreement or other instrument
described in clause (c), (d) or (e) above, which is not more restrictive or less
favorable to the Noteholders than those existing under the agreement being
extended, refinanced, renewed or replaced.
(b) Without limiting the foregoing, the Issuer will not permit Swiss
Subholding to, directly or indirectly, create, incur, assume or otherwise cause
or suffer to exist or become effective any encumbrance or restriction on the
ability of Swiss Subholding to pay dividends or make distributions, loans,
advances or other payments to the Issuer to enable the Issuer to pay principal
of the Notes at their final scheduled maturity (as in effect on the Issue Date)
and scheduled interest on the Notes, pursuant to the terms of the Credit
Agreement or any other agreement or instrument, except for such encumbrances or
restrictions permitted pursuant to clause (a), (c), (g), (i) or (j) of the
foregoing paragraph (a) (it being understood that the Credit Agreement will be
permitted to prohibit any redemption, repayment or acquisition of the Notes
prior to final scheduled maturity).
Restriction on Transfer of Assets to Subsidiaries. The Issuer will not,
and will not permit any Restricted Subsidiary that is a Note Guarantor to, sell,
convey, transfer or otherwise dispose of its assets or property to any U.S.
Restricted Subsidiary, except for any disposition (a) made in the ordinary
course of business (including intercompany loans and cash equity contributions),
(b) that, after giving effect thereto, does not cause the existence of a U.S.
Significant Subsidiary or (c) made to such U.S. Restricted Subsidiary if such
U.S. Restricted Subsidiary prior to or simultaneously with such disposition
executes and delivers a supplemental indenture to the
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Indenture providing for a Note Guarantee by such Restricted Subsidiary, which
Note Guarantee shall be subordinated to any Guarantee of such Restricted
Subsidiary of Senior Indebtedness of the Issuer and shall be subordinated to any
other Indebtedness of such Restricted Subsidiary (that is not subordinated or
junior in right of payment to any other Indebtedness of such Restricted
Subsidiary), in each case to the same extent as the Notes are subordinated to
the Senior Indebtedness of the Issuer under the Indenture.
Limitation on Disposition of Proceeds of Asset Sales. (a) The Issuer will
not, and will not permit any Restricted Subsidiary to, engage in any Asset Sale
unless (i) such Asset Sale is for not less than the Fair Market Value of the
assets sold (as determined, to the extent such Asset Sale involves a Fair Market
Value greater than $5 million, in good faith by the Board of Directors whose
determination will be conclusive and evidenced by a Board Resolution) and (ii)
at least 75% of the consideration thereof received by the Issuer or such
Restricted Subsidiary is in the form of cash or Cash Equivalents (with
Indebtedness of the Issuer or any Restricted Subsidiary being counted as cash
for such purpose if the Issuer and each Restricted Subsidiary, as the case may
be, is unconditionally released from liability therefor). Net Cash Proceeds of
any Asset Sale may be applied to repay Specified Senior Indebtedness (but only
if the related loan commitments (if any) or amounts available to be reborrowed
(if any) under such Specified Senior Indebtedness are permanently reduced by the
amount of such payment). To the extent that such Net Cash Proceeds are not
applied as provided in the preceding sentence, the Issuer or a Restricted
Subsidiary, as the case may be, may apply the Net Cash Proceeds from such Asset
Sale, within 360 days of such Asset Sale, to an investment in properties and
assets to replace the properties and assets that were the subject of such Asset
Sale or in properties and assets that will be used in the businesses of the
Issuer or its Restricted Subsidiaries, as the case may be, existing on the Issue
Date or in businesses reasonably related thereto. Any Net Cash Proceeds from any
Asset Sale not applied as provided in the preceding two sentences, within 360
days of such Asset Sale, constitute 'Excess Proceeds' subject to disposition as
provided below.
(b) When the aggregate amount of Excess Proceeds exceeds $15 million, the
Issuer shall, within 15 Business Days, make an offer to purchase (an 'Excess
Proceeds Offer') from all Noteholders of the Notes and, to the extent required
by the terms thereof, from the holders of Pari Passu Indebtedness of the Issuer,
an aggregate principal amount of Notes and any such Pari Passu Indebtedness
equal to such Excess Proceeds, at a purchase price in cash equal to 100% of the
outstanding principal amount thereof (or accreted value, as applicable) plus
accrued and unpaid interest, if any, to the purchase date in respect of the
Excess Proceeds Offer in accordance with the procedures set forth in the
Indenture or the agreements governing any such Pari Passu Indebtedness. To the
extent that the aggregate principal amount of Notes and any such Pari Passu
Indebtedness tendered pursuant to an Excess Proceeds Offer is less than the
Excess Proceeds, the Issuer may use such deficiency for general corporate
purposes. If the aggregate principal amount of Notes and any such Pari Passu
Indebtedness validly tendered and not withdrawn exceeds the Excess Proceeds, the
portion of the Excess Proceeds (x) payable in respect of the Notes shall be an
amount (the 'Note Amount') equal to the Excess Proceeds multiplied by a
fraction, the numerator of which is the outstanding principal amount of the
Notes, and the denominator of which is the sum of the outstanding principal
amount of the Notes and the outstanding principal amount (or accreted value, as
applicable) of any such Pari Passu Indebtedness (less the amount, if any, by
which such product exceeds the principal amount of Notes validly tendered and
not withdrawn) and (y) payable in respect of any such Pari Passu Indebtedness
shall be an amount equal to the excess of the Excess Proceeds over the Note
Amount. Upon completion of such Excess Proceeds Offer, the amount of Excess
Proceeds shall be reset to zero.
(c) The Issuer will comply, to the extent applicable, with the requirements
of Section 14(e) under the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Issuer will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this paragraph by virtue thereof.
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Change of Control. (a) Upon the occurrence of a Change of Control, each
Noteholder will have the right to require the Issuer to repurchase all or any
part of such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the relevant interest payment date), in
accordance with the terms contemplated in this covenant.
(b) A 'Change of Control' means the occurrence of any of the following
events:
(i) prior to an initial Public Equity Offering, the Permitted Holder
ceases to be the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of Voting Stock of each of the Issuer and
Holding representing more than 50% of the total voting power of the Voting Stock
of each of the Issuer and Holding (as a result of the acquisition or issuance of
securities, by merger or otherwise);
(ii) at any time after an initial Public Equity Offering, any 'person' or
'group' (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act), other than the Permitted Holder, is or becomes (as the result of the
acquisition or issuance of securities, by merger or otherwise) the Beneficial
Owner, directly or indirectly, of (A) more than 50% of the common stock of the
Issuer or Holding or (B) more than 50% of the total voting power of the Voting
Stock of the Issuer or Holding;
(iii) the merger or consolidation of the Issuer or Holding with or into
another Person, or of another Person with or into the Issuer or Holding, or the
sale, assignment, conveyance, transfer, lease or other disposition of all or
substantially all the assets of the Issuer or Holding to another Person, and, in
the case of any such merger or consolidation, the securities of the Issuer or
Holding, as the case may be, that are outstanding immediately prior to such
transaction and that represent 100% of the aggregate voting power of the Voting
Stock of the Issuer or Holding, as the case may be, are changed into or
exchanged for cash, securities or property, unless (x) pursuant to such
transaction such securities are changed into or exchanged for (A) Voting Stock
(other than Redeemable Capital Stock) of the surviving or transferee corporation
or (B) cash, securities and other property in an amount that could be paid by
the Issuer as a Restricted Payment under the Indenture, and (y) immediately
after giving effect to such transaction, no 'person' or 'group' (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act), other than the
Permitted Holder, is or becomes (as the result of the acquisition or issuance of
securities, by merger or otherwise) the Beneficial Owner, directly or
indirectly, of more than 50% of the total voting power of the Voting Stock of
the surviving or transferee corporation;
(iv) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Issuer or
Holding (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the Issuer or
Holding, as the case may be, was approved by a vote of 66 2/3% of the directors
then still in office who were either directors at the beginning of such period
or whose election as directors or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Issuer or Holding, as the case may be, then in office; or
(v) the approval by stockholders of the Issuer of any plan or proposal for
the liquidation or dissolution of the Issuer, or any final order, judgment or
decree of a court of competent jurisdiction shall be entered against the Issuer
decreeing the dissolution or liquidation of the Issuer.
(c) Prior to the mailing of the notice to Holders provided for in paragraph
(d) below, the Issuer shall have (x) terminated all commitments and repaid in
full all Indebtedness under the Credit Agreement and all other Credit Agreement
Obligations then due and owing, or (y) obtained the requisite consents under the
Credit Agreement to permit the purchase of the Notes as provided for under this
covenant. If a notice has been mailed when such condition precedent has not been
satisfied, the Issuer shall have no obligation to (and shall not) effect the
purchase of Notes until such time as such condition precedent is satisfied.
Failure to mail the notice on the date specified below or to have satisfied the
foregoing condition precedent by the date that the notice is required to be
mailed shall in any event constitute a covenant default under clause (iv) of
'--Defaults' herein.
(d) Within 30 days following any Change of Control (or at the Issuer's
option, prior to such Change of Control, in anticipation of such Change of
Control), the Issuer shall mail a notice to each Holder at its registered
address with a copy to the Trustee stating: (1) that a Change of Control has
occurred (or will occur) and that such Holder has the right to require the
Issuer to purchase such Holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
date of repurchase (subject to
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the right of Holders of record on the record date to receive interest on the
relevant interest payment date); (2) the circumstances and relevant facts and
financial information regarding such Change of Control; (3) the repurchase date
(which shall be no earlier than 30 days nor later than 60 days from the date
such notice is mailed); (4) the instructions determined by the Issuer,
consistent with this covenant, that a Holder must follow in order to have its
Notes purchased; and (5) that, if such offer is made prior to such Change of
Control, payment is conditioned on the occurrence of such Change of Control.
(e) The Issuer will comply, to the extent applicable, with the requirements
of Section 14(e) under the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Issuer will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this paragraph by virtue thereof.
Reporting Requirements. Notwithstanding that the Issuer may not be
required to remain subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, to the extent permitted by the Exchange Act or the
interpretations of the SEC in respect thereof, the Issuer will file with the SEC
and provide, within five days after the Issuer is required to file the same with
the SEC, the Trustee with the annual reports and the information, documents and
other reports that are specified in Sections 13 and 15(d) of the Exchange Act.
In the event that the Issuer is not permitted to file such reports, documents
and information with the SEC, the Issuer will provide substantially similar
information to the Trustee, Noteholders and prospective Noteholders (upon
reasonable request) as if the Issuer were subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act. The Issuer also will comply with the
other provisions of TIA Section 314(a).
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Issuer will not, in any transaction or series of related transactions,
merge or consolidate with or into, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets to,
any Person or Persons, and the Issuer will not permit any Restricted Subsidiary
to enter into any such transaction or series of transactions if such transaction
or series of transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Issuer or of the Issuer and its Subsidiaries on
a consolidated basis to any other Person or Persons, unless at the time of and
immediately after giving effect thereto (i) either (A) if the transaction or
transactions is a merger or consolidation, the Issuer shall be the surviving
Person of such merger or consolidation, or (B) the Person formed by such
consolidation or into which the Issuer or such Restricted Subsidiary is merged
or to which the properties and assets of the Issuer or such Restricted
Subsidiary, as the case may be, substantially as an entirety, are sold,
assigned, transferred, leased or otherwise disposed of (any such surviving
Person or transferee Person being the 'Surviving Entity') shall be a corporation
organized and existing under the laws of the United States of America, any State
thereof or the District of Columbia and shall expressly assume by a supplemental
indenture executed and delivered to the Trustee, in form and substance
satisfactory to the Trustee, all the obligations of the Issuer under the Notes
and the Indenture, and in each case, the Indenture shall remain in full force
and effect; and (ii) immediately after giving effect to such transaction or
series of related transactions on a pro forma basis (including, without
limitation, any Indebtedness Incurred or anticipated to be Incurred in
connection with or in respect of such transaction or series of transactions),
(x) no Default or Event of Default shall have occurred and be continuing and (y)
the Issuer or the Surviving Entity, as the case may be, could Incur $1.00 of
additional Indebtedness pursuant to paragraph (a) of the covenant described in
'--Certain Covenants--Limitation on Indebtedness.'
In connection with any consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposition contemplated hereby, the Issuer shall
deliver, or cause to be delivered, to the Trustee, in form and substance
satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposition and the supplemental indenture in respect
thereof comply with the requirements under the Indenture. In addition, each Note
Guarantor, unless it is the other party to the transaction or unless its Note
Guarantee will be released and discharged in accordance with its terms as a
result of the transaction, will be required to confirm, by supplemental
indenture, that its Note Guarantee will apply to the obligations of the Issuer
or the Surviving Entity under the Indenture.
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Upon any consolidation or merger or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the assets of the
Issuer in accordance with the foregoing in which the Issuer is not the
continuing obligor under the Indenture, the Surviving Entity shall succeed to,
and be substituted for, and may exercise every right and power of, the Issuer
under the Indenture with the same effect as if such successor had been named as
the Issuer therein, and thereafter the predecessor Person shall be relieved of
all obligations under the Indenture and the Notes, except that the predecessor
Person in the case of a transfer by lease will not be released from the
obligation to pay the principal of, premium, if any, and interest on the Notes.
The Indenture will provide that for all purposes of the Indenture and the
Notes (including the provision of this covenant and the covenants described in
'--Certain Covenants--Limitations on Indebtedness,' '--Certain
Covenants--Limitation on Restricted Payments' and '--Certain
Covenants--Limitation on Certain Liens'), Subsidiaries of any Surviving Entity
will, upon such transaction or series of related transactions, become Restricted
Subsidiaries or Unrestricted Subsidiaries as provided pursuant to the definition
of 'Unrestricted Subsidiary' described in '--Certain Definitions,' and all
Indebtedness, and all Liens on property or assets, of the Surviving Entity and
its Subsidiaries (other than Indebtedness, and Liens on property or assets, of
the Issuer and its Restricted Subsidiaries outstanding immediately prior to such
transaction or series of related transactions) will be deemed to have been
Incurred upon such transaction or series of related transactions.
DEFAULTS
The following will be 'Events of Default' under the Indenture:
(i) default in the payment of principal of, or premium, if any, when
due and payable, on any of the Notes (at its Stated Maturity, upon optional
redemption, required repurchase, or otherwise); or
(ii) default in any payment of an installment of interest on any of
the Notes when due and payable, for 30 days; or
(iii) failure to perform or comply with any provision described in
'--Merger, Consolidation and Sale of Assets'; failure to offer to
repurchase or to repurchase the Notes in the Event of a Change of Control
in accordance with the provisions described in '--Certain Covenants--Change
of Control'; or
(iv) the Issuer or any Note Guarantor shall fail to perform or observe
any other term, covenant or agreement contained in the Notes, any Note
Guarantee or the Indenture (other than a Default specified in clause (i),
(ii) or (iii) above) for a period of 30 days after written notice of such
failure requiring the Issuer to remedy the same shall have been given (x)
to the Issuer by the Trustee or (y) to the Issuer and the Trustee by the
Holders of at least 25% in aggregate principal amount of the Notes then
outstanding; or
(v) default or defaults under one or more mortgages, bonds, debentures
or other evidences of Indebtedness under which the Issuer or any Restricted
Subsidiary then has outstanding Indebtedness in excess of $15 million,
individually or in the aggregate, and either (a) such a principal amount of
such Indebtedness is already due and payable in full or (b) such default or
defaults have resulted in the acceleration of the maturity of such
Indebtedness; or
(vi) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $15 million, either individually or in the
aggregate, shall be entered against the Issuer, any Note Guarantor or any
Significant Restricted Subsidiary or any of their respective properties and
shall not be discharged or fully bonded and either (a) any creditor shall
have commenced an enforcement proceeding upon such judgment, order or
decree or (b) there shall have been a period of 60 days after the date on
which any period for appeal has expired and during which a stay of
enforcement of such judgment, order or decree shall not be in effect; or
(vii) (A) any holder of at least $15 million in aggregate principal
amount of Indebtedness of the Issuer or any Restricted Subsidiary as to
which a default has occurred and is continuing shall commence judicial
proceedings (which proceedings shall remain unstayed for 5 Business Days)
to foreclose upon assets of the Issuer or any Restricted Subsidiary having
an aggregate Fair Market Value, individually or in the aggregate, in excess
of $15 million or shall have exercised any right under applicable law or
applicable security documents to take ownership of any such assets in lieu
of foreclosure or (B) any action described in the
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foregoing clause (A) shall result in any court of competent jurisdiction
issuing any order for the seizure of such assets; or
(viii) any Note Guarantee of a Significant Note Guarantor ceases to be
in full force and effect or is declared null and void or any Note Guarantor
denies that it has any further liability under any Note Guarantee, or gives
notice to such effect (other than by reason of the termination of the
Indenture or the release of any such Note Guarantee in accordance with the
Indenture); or
(ix) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Issuer, any Significant Note Guarantor
or any Significant Restricted Subsidiary of the Issuer.
If an Event of Default (other than as specified in clause (ix) above with
respect to the Issuer) occurs and is continuing, the Trustee, by notice to the
Issuer, or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by notice to the Trustee and the Issuer, may declare the
principal of, premium, if any, and accrued interest on all the Notes due and
payable immediately, upon which declaration all amounts payable in respect of
the Notes shall immediately be due and payable; provided that so long as the
Credit Agreement shall be in full force and effect, if an Event of Default shall
have occurred and be continuing (other than as specified in clause (ix) above
with respect to the Issuer), any such acceleration shall not be effective until
the earlier to occur of (x) five business days following delivery of a written
notice of such acceleration of the Notes to the agent under the Credit Agreement
and (y) the acceleration of any Indebtedness under the Credit Agreement. If an
Event of Default specified in clause (ix) above with respect to the Issuer
occurs and is continuing, then the principal of, premium, if any, and interest
on all the Notes shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustees or any Holder.
Notwithstanding the foregoing, in the event of a declaration of
acceleration in respect of the Notes because (x) an Event of Default specified
in clause (v) above shall have occurred and be continuing, such declaration of
acceleration of the Notes and such Event of Default shall be automatically
annulled and rescinded and be of no further effect if the Indebtedness that is
the subject of such Event of Default has been discharged or paid in full or such
Event of Default shall have been cured or waived by the holders of such
Indebtedness and if such Indebtedness has been accelerated, then the holders
thereof have rescinded their declaration of acceleration in respect of such
Indebtedness or (y) an Event of Default specified in clause (vii) above shall
have occurred and be continuing, such declaration of acceleration of the Notes
and such Event of Default shall be automatically annulled and rescinded and be
of no further effect if the proceedings or enforcement action with respect to
the Indebtedness that is the subject of such Event of Default is terminated or
rescinded, or such Indebtedness is paid in full and only so long as any holder
of such Indebtedness shall not have applied any assets referenced in such clause
(vii) above in satisfaction of such Indebtedness and, in the case of both (x)
and (y) above, written notice of such discharge, cure or waiver and rescission,
as the case may be, shall have been given to the Trustee within 60 days after
such declaration of acceleration in respect of the Notes by the Issuer or by the
requisite holders of such Indebtedness or a trustee, fiduciary or agent for such
holders or other evidence satisfactory to the Trustee of such events is provided
to the Trustee and no other Event of Default shall have occurred which has not
been cured or waived during such 60-day period.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of money due has been obtained by the Trustee,
the Holders of a majority in aggregate principal amount of the outstanding
Notes, by written notice to the Issuer and the Trustee, may rescind such
declaration if: (a) the Issuer has paid or deposited with the Trustee a sum
sufficient to pay (i) all sums paid or advanced by the Trustee under the
Indenture and the reasonable compensation, expenses, disbursements, and advances
of the Trustee, its agents and counsel, (ii) all overdue interest on all Notes,
(iii) the principal of, and premium, if any, on any Notes which have become due
otherwise than by such declaration of acceleration and interest thereon at the
rate borne by the Notes and (iv) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne by the Notes which has
become due otherwise than by such declaration of acceleration; (b) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction; and (c) all Events of Default, other than the
non-payment of principal of, premium, if any, and interest on the Notes that has
become due solely by such declaration of acceleration, have been cured or
waived.
The Holders of not less than a majority in aggregate principal amount of
the outstanding Notes may on behalf of the Holders of all the Notes waive any
past defaults under the Indenture, except a default in the payment
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of the principal of, premium, if any, or interest on any Note, or in respect of
a covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding.
No Holder of any of the Notes has any right to institute any proceeding
with respect to the Indenture or any remedy thereunder, unless the Holders of at
least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee under the Notes and the Indenture, the Trustee has
failed to institute such proceeding within 30 days after receipt of such notice
and the Trustee, within such 30-day period, has not received directions
inconsistent with such written request by Holders of a majority in aggregate
principal amount of the outstanding Notes. Such limitations do not apply,
however, to a suit instituted by a Holder of a Note for the enforcement of the
payment of the principal of, premium, if any, or interest on, such Note on or
after the respective due dates expressed in such Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, whether or not an Event of Default shall occur and be continuing, the
Trustee under the Indenture is not under any obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
Holders of the Notes unless such Holders shall have offered to the Trustee
reasonable security or indemnity. Subject to certain provisions concerning the
rights of the Trustee, the Holders of a majority in aggregate principal amount
of the outstanding Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee under the Indenture.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee shall mail to each Holder of the Notes notice of the
Default or Event of Default within 30 days after the occurrence thereof. Except
in the case of a Default or an Event of Default in payment of principal of,
premium, if any, or interest on any Notes, the Trustee may withhold the notice
to the Holders of such Notes if a committee of its Trust Officers in good faith
determines that withholding the notice is in the interest of the Holders.
The Issuer is required to furnish to the Trustee annual statements as to
the performance by the Issuer and the Note Guarantors of their respective
obligations under the Indenture and as to any default in such performance. The
Issuer is also required to notify the Trustee within 30 days of any Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Issuer may, at its option and at any time, elect to terminate the
obligations of the Issuer and any Note Guarantor with respect to the outstanding
Notes ('defeasance'). Such defeasance means that the Issuer shall be deemed to
have paid and discharged the entire indebtedness represented by the outstanding
Notes, except for (i) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due, (ii) the Issuer's obligations to issue
temporary Notes, register the transfer or exchange of any Notes, replace
mutilated, destroyed, lost or stolen Notes and maintain an office or agency for
receipt of payments in respect of the Notes, (iii) the rights, powers, trusts,
duties, indemnities and immunities of the Trustee, (iv) the defeasance
provisions of the Indenture and (v) the Note Guarantees to the extent they
relate to the foregoing. In addition, the Issuer may, at its option and at any
time, elect to terminate the obligations of the Issuer and any Note Guarantor
with respect to the covenants described in '-- Certain Covenants' ('covenant
defeasance'), and thereafter any omission to comply with such obligations shall
not constitute a Default or an Event of Default with respect to the Notes. In
the event covenant defeasance occurs, the Events of Default specified in clauses
(v), (vi) and (vii) of the first paragraph in '--Defaults' will no longer
constitute Events of Default with respect to the Notes.
In order to exercise either defeasance or covenant defeasance, (i) the
Issuer must irrevocably deposit with the Trustee, in trust for the benefit of
Noteholders, cash in Dollars, U.S. Government Obligations, or a combination
thereof, in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal of,
premium, if any, and interest on the outstanding Notes on the Stated Maturity of
such principal or installment of interest; (ii) the Issuer shall have delivered
to the Trustee an Opinion of Counsel stating that the Noteholders will not
recognize income, gain or loss for federal income tax
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purposes as a result of such defeasance or covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance or covenant defeasance
had not occurred (in the case of defeasance, such opinion must refer to and be
based upon a ruling published by the Internal Revenue Service or a change in
applicable federal income tax laws, in either case after the Issue Date); (iii)
no Default or Event of Default shall have occurred and be continuing on the date
of such deposit or insofar as Events of Default described in clause (ix) of the
first paragraph in '--Defaults', at any time during the period ending on the
91st day after the date of deposit; (iv) such defeasance or covenant defeasance
shall not cause the Trustee to have a conflicting interest with respect to any
securities of the Issuer or any Note Guarantor; (v) such defeasance or covenant
defeasance shall not result in a breach or violation of, or constitute a default
under the Indenture, or any other agreement or instrument to which the Issuer or
any Note Guarantor is a party or by which it is bound; (vi) the Issuer shall
have delivered to the Trustee an Opinion of Counsel stating that (A) the trust
funds will not be subject to any rights of holders of Senior Indebtedness,
including under the subordination provisions of the Indenture, and (B) after the
91st day following the deposit or after the date such Opinion of Counsel is
delivered, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; and (vii) the Issuer shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel satisfactory to the Trustee,
each stating that all conditions precedent under the Indenture to either
defeasance or covenant defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid) have
been delivered to the Trustee for cancellation or (b) all Notes not theretofore
delivered to the Trustee for cancellation (x) have become due and payable, (y)
will become due and payable at their Stated Maturity within one year or (z) are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption by the Trustee in the name,
and at the expense, of the Issuer, (ii) the Issuer has irrevocably deposited or
caused to be deposited with the Trustee, in trust for the benefit of
Noteholders, cash in Dollars, U.S. Government Obligations, or a combination
thereof, in an amount sufficient to pay and discharge the entire indebtedness on
the Notes (except lost, stolen or destroyed Notes which have been replaced or
paid) not theretofore delivered to the Trustee for cancellation, including
principal, premium, if any, and interest at such Stated Maturity or redemption
date, together with irrevocable instructions from the Issuer directing the
Trustee to apply such funds to the payment thereof at such Stated Maturity or
redemption date, as the case may be; (iii) the Issuer has paid all other sums
payable under the Indenture by the Issuer; and (iv) the Issuer has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent under the Indenture relating to the satisfaction
and discharge of the Indenture have been complied with.
AMENDMENTS AND WAIVERS
The Issuer, the Note Guarantors and the Trustee may amend the Indenture or
Notes without notice to any Noteholder but with the written consent of the
Holders of at least a majority in principal amount of the Notes; provided,
however, that, without the consent of the Holder of each outstanding Note
affected thereby, an amendment or waiver may not (i) reduce the principal amount
of, extend the Stated Maturity of or alter the redemption provisions of, the
Notes; (ii) change the currency in which the Notes or any premium or the
interest thereon is payable; (iii) reduce the percentage in principal amount of
Notes that must consent to an amendment, supplement or waiver or consent to take
any action under the Indenture, the Notes or any Note Guarantee; (iv) modify any
of the provisions described under '--Certain Covenants--Limitation on Other
Senior Subordinated Indebtedness' above or the subordination provisions of the
Indenture in respect of the Notes or any Note Guarantee in a manner adverse to
the Holders; (v) impair the right of any Holder to receive payment of principal
of, premium, if any, and interest on such Holder's Notes on or after the due
dates therefor or to institute suit for the enforcement of any payment on or
with respect to such Notes; (vi) waive a default in payment with respect to the
Notes or any Note Guarantee (except for any waiver of a default in payment to
the extent resulting from a declaration of acceleration under the Indenture,
which declaration has been rescinded by the Holders as
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contemplated by the fourth full paragraph under '--Defaults'); (vii) following
the occurrence of a Change of Control or an Asset Sale, amend, change or modify
the obligation of the Issuer to offer to repurchase and to repurchase the Notes
in the event of a Change of Control or make and consummate the Excess Proceeds
Offer with respect to any Asset Sale, including by modifying any of the
provisions or definitions with respect thereto; (viii) reduce or change the rate
or time for payment of interest on the Notes; or (ix) release any Significant
Note Guarantor from any of its obligations under its Note Guarantee or the
Indenture other than in compliance with the terms of the Indenture.
Without the consent of any Noteholder, the Issuer, the Note Guarantors and
the Trustee may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Issuer under the Indenture, to add Guarantees with respect to
the Notes, to secure the Notes, to add to the covenants of the Issuer for the
benefit of the Noteholders, to surrender any right or power conferred upon the
Issuer or any Note Guarantor, to make any change that does not adversely affect
the rights of any Noteholder or to comply with any requirement of the SEC in
connection with the qualification of the Indenture under the TIA.
The consent of the Noteholders is not necessary under the Indenture to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment. After an amendment
under the Indenture becomes effective, the Issuer is required to mail to
Noteholders a notice briefly describing such amendment. However, the failure to
give such notice to all such Noteholders, or any defect therein, will not impair
or affect the validity of the amendment.
No amendment to the subordination provisions of the Indenture or the Notes
described under '--Ranking; Subordination,' including by modifying any of the
definitions relating thereto, may be made that adversely affects the rights of
any Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent in writing to such amendment.
NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS
No director, officer, employee, incorporator or stockholder, as such, of
the Issuer, Holding, any Note Guarantor or any Subsidiary of the foregoing shall
have any personal liability in respect of the obligations of the Issuer,
Holding, any Note Guarantor or any Subsidiary of the foregoing, as the case may
be, under the Notes, any Note Guarantee or the Indenture by reason of his or its
status as such.
THE TRUSTEE
United States Trust Company of New York is to be the Trustee under the
Indenture and has been appointed by the Issuer as Registrar and Paying Agent
with respect to the Notes.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are set forth specifically
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such of the rights and powers vested in it under the Indenture and use
the same degree of care and skill in its exercise as a prudent Person would
exercise under the circumstances in the conduct of such Person's own affairs.
GOVERNING LAW
The Indenture and the Notes will be governed by the laws of the State of
New York, without regard to the principles of conflicts of laws thereof.
BOOK-ENTRY; DELIVERY AND FORM
Upon issuance, the Notes will be represented by the Global Notes that will
be deposited with, or on behalf of, the Depositary and registered in the name of
a nominee of the Depositary. Except under the circumstances described below, the
Global Notes will not be exchangeable for definitive Notes and Notes will not
otherwise be issuable in definitive form.
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Beneficial interests in the Global Notes will be shown on, and transfers
thereof will be effected only through, records maintained in book-entry form by
the Depositary (with respect to its Participants' interests) and its
Participants.
Upon issuance of the Global Notes, the Depositary will credit, on its
internal system, the respective principal amount of the individual beneficial
interests in the Global Notes to persons who have accounts with the Depositary
('Participants'). Such accounts initially will be designated by or on behalf of
the Underwriters. Ownership of beneficial interests in the Global Notes will be
shown on, and the transfer of such beneficial interests will be effected only
through, records maintained by the Depositary or its nominee (with respect to
interests of Participants) and the records of Participants (with respect to
interests of persons other than Participants).
So long as the Depositary or its nominee is the registered owner of the
Global Notes, the Depositary or such nominee, as the case may be, will be
considered the sole owner and Holder of the Notes represented by the Global
Notes for all purposes under the Indenture and the Notes. Accordingly,
beneficial owners of an interest in the Global Notes must rely on the procedures
of the Depositary, and if such person is not a Participant, on the procedures of
the Participant through which such person owns its interest, to exercise any
rights and fulfill any obligations of a Holder under the Indenture. No
beneficial owner of an interest in the Global Notes will be able to transfer
that interest except in accordance with the Depositary's applicable procedures,
in addition to those provided for in the Indenture. In addition, the ability of
a Person having a beneficial interest in Notes represented by a Global Note to
pledge such interest to Persons or entities that do not participate in the
Depositary's system, or to otherwise take actions with respect to such
beneficial interest, may be affected by the lack of a physical certificate
evidencing such interest.
Payments of the principal of, premium, if any, and interest on, the Global
Notes will be made to the Depositary or its nominee, as the case may be, as the
registered owner thereof. None of the Issuer, the Trustee or any Paying Agent
will have any responsibility or liability for any aspect of the records relating
to, or payments made on account of, beneficial interests in the Global Notes or
for maintaining, supervising or reviewing any records relating to such
beneficial interests.
The Issuer expects that the Depositary or its nominee, upon receipt of any
payment of principal, premium or interest in respect of the Global Notes, will
credit Participants' accounts with payments in amounts proportionate to such
Participants' respective beneficial interests in the principal amount of such
Global Notes, as shown on the records of the Depositary or its nominee. The
Issuer also expects that payments by Participants to owners of beneficial
interests in the Global Notes held through such Participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
Participants.
The Depositary will take any action permitted to be taken by a Holder of
Notes (including the presentation of Notes for exchange as described below) only
at the direction of one or more Participants to whose accounts interests in the
Global Notes are credited and only in respect of such portion of the aggregate
principal amount of Notes as to which such Participant or Participants has or
have given such direction.
The Depositary is a limited purpose trust company organized under the laws
of the State of New York, a 'banking organization' within the meaning of New
York Banking Law, a member of the Federal Reserve System, a 'clearing
corporation' within the meaning of the Uniform Commercial Code and a 'clearing
agency' registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary was created to hold securities for its Participants and
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of
certificates. Indirect access to the Depositary's system is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant ('Indirect Participants').
Although the Depositary and its Participants are expected to follow the
foregoing procedures in order to facilitate transfers of interests in the Global
Notes among Participants, they are under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
None of the Issuer,
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the Trustee nor any Paying Agent will have any responsibility for the
performance by the Depositary, Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Issuer
believes to be reliable, but the Issuer takes no responsibility for the accuracy
thereof.
Owners of beneficial interests in the Global Notes will be entitled to
receive certificated Notes, if the Depositary is at any time unwilling or unable
to continue as, or ceases to be, a 'clearing agency' registered under Section
17A of the Exchange Act, and a successor to the Depositary registered as a
'clearing agency' under Section 17A of the Exchange Act is not appointed by the
Issuer within 90 days. In addition to the foregoing, on or after the occurrence
of an Event of Default under the Indenture, owners of beneficial interests in
the Global Notes will be entitled to request and receive certificated Notes.
Any certificated Notes issued in exchange for beneficial interests in the
Global Notes will be registered in such name or names as the Depositary shall
instruct the Trustee. It is expected that such instructions will be based upon
directions received by the Depositary from Participants with respect to
ownership of beneficial interests in the Global Notes.
CERTAIN DEFINITIONS
'Acquired Indebtedness' means (x) Indebtedness of a Person existing at the
time such Person was acquired by the Issuer or (y) Indebtedness of a Person
assumed by the Issuer or a Restricted Subsidiary in connection with its
acquisition of assets from such Person, in each case other than Indebtedness
Incurred in connection with, or in contemplation of the transaction or series of
related transactions pursuant to which such Person became a Subsidiary or such
assets were so acquired by the Issuer or a Restricted Subsidiary.
'Acquisition' means the acquisition pursuant to the Stock Purchase
Agreement, dated as of April 2, 1996, between AEA MT Inc., AG fur
Prazisioninstrumente Greifensee, Switzerland and Ciba-Geigy AG, as amended to
the Issue Date.
'Acquisition Indebtedness' means Indebtedness of a Restricted Subsidiary
(x) Incurred solely for the purpose of financing the acquisition of the Capital
Stock of a Person that after giving effect to such acquisition will be a
Restricted Subsidiary, or assets constituting substantially all of a separate
division or separate business unit of a Person, and (y) the proceeds of which
(net of fees and expenses (including fees and expenses of legal counsel and
investment banks) directly related to such Incurrence) are used to pay the
purchase price for such Capital Stock or assets.
'AEA' means AEA Investors Inc., a Delaware corporation, or any legal
successor thereto as a result of a reorganization thereof that does not involve
any change in control thereof.
'Affiliate' of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
'control' when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
'controlling' and 'controlled' have meanings correlative to the foregoing. For
purposes of the provisions described in '--Certain Covenants--Limitation on
Transactions with Affiliates' only, 'Affiliate' shall also mean any Beneficial
Owner of shares representing 10% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of the Issuer, and any Person who would be an
Affiliate of any such Beneficial Owner pursuant to the first sentence hereof.
'Asset Sale' means any sale, issuance, conveyance, transfer, lease or other
disposition (including by merger, consolidation or otherwise) by the Issuer or
any Restricted Subsidiary, in one or a series of related transactions, of: (a)
any Capital Stock of any Subsidiary of the Issuer; (b) all or substantially all
of the properties and assets of any division or line of business of the Issuer
or any Restricted Subsidiary; or (c) other than in the ordinary course of
business, any properties or assets of the Issuer or a Restricted Subsidiary. For
the purposes of this definition, the term 'Asset Sale' shall not include any
sale, issuance, conveyance, transfer, lease or other disposition of properties
or assets (i) to the Issuer or any Restricted Subsidiary, (ii) that is governed
by the
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provisions described in '--Merger, Consolidation and Sale of Assets', (iii) in
one transaction or a series of related transactions, involving assets with a
Fair Market Value not in excess of $2.5 million or (iv) involving assets with a
Fair Market Value not in excess of $5 million for all such dispositions in the
aggregate in any fiscal year.
'Attributable Debt' in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
assumed in making calculations in accordance with FAS 13) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
'Average Life' means, with respect to any Indebtedness, as at any date of
determination, the quotient obtained by dividing (a) the sum of the products of
(i) the number of years from such date to the date or dates of each successive
scheduled principal payment (including, without limitation, any sinking fund
requirements) of such Indebtedness multiplied by (ii) the amount of each such
principal payment by (b) the sum of all such principal payments.
'Beneficial Owner' means a 'beneficial owner' as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a Person shall be deemed to be a
'beneficial owner' of all securities that such Person has the right to acquire,
whether that right is exercisable immediately or only after the passage of time.
'Board of Directors' means the Board of Directors of the Issuer or a
designated committee thereof.
'Board Resolution' means a copy of a resolution certified by the Secretary
of the Issuer to have been duly adopted by the Board of Directors (or a
designated committee thereof) and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
'Business Day' means a day other than a Saturday, Sunday or any other day
on which banking institutions in New York State are authorized or required by
law to close.
'Capital Expenditure Indebtedness' means any Indebtedness of the Issuer or
any Restricted Subsidiary (whether consisting of Capitalized Lease Obligations,
Purchase Money Obligations or otherwise) Incurred (x) for the purpose of
financing all or any part of the purchase price, cost of construction or
improvement of any fixed or capital assets used in a Related Business and (y) no
later than 180 days after the date of such acquisition or the date of completion
of such construction or improvement.
'Capital Stock' of any Person means any and all shares of, rights to
purchase, warrants or options for, or participations or other interests in
(however designated) equity of such Person, including Preferred Stock, but
excluding any debt securities convertible into such equity.
'Capitalized Lease Obligations' means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease.
'Cash Equivalents' means (i) any security, maturing not more than one year
after the date of acquisition, issued by the United States of America, or an
instrumentality or agency thereof and guaranteed fully as to principal, premium,
if any, and interest by the United States of America; (ii) any certificate of
deposit, time deposit or bankers' acceptance (or, with respect to non-U.S.
banking institutions, similar instruments), maturing not more than one year
after the day of acquisition, issued by any commercial banking institution that
is a member of the Federal Reserve System or a commercial banking institution
organized and located in a country recognized by the United States of America,
in each case, having combined capital and surplus and undivided profits of not
less than $500,000,000 (or the foreign currency equivalent thereof), whose
short-term debt has a rating, at the time as of which any investment therein is
made, of 'P-1' (or higher) according to Moody's or 'A-1' (or higher) according
to S&P; (iii) commercial paper maturing not more than one year after the date of
acquisition issued by a corporation (other than an Affiliate or Subsidiary of
the Issuer) with a rating, at the time as of which any investment therein is
made, of 'P-1' (or higher) according to Moody's or 'A-1' (or higher) according
to S&P; (iv) any money market deposit accounts issued or offered by a commercial
banking institution that is a member of the Federal Reserve System or a
commercial banking institution organized and located in a
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country recognized by the United States of America, in each case, having
combined capital and surplus and undivided profits in excess of $500,000,000 (or
the foreign currency equivalent thereof); and (v) other short-term investments
utilized by Non-U.S. Restricted Subsidiaries in accordance with normal
investment practices for cash management not exceeding $5 million in aggregate
principal amount outstanding at any time.
'Commodities Agreements' means one or more of the following agreements
entered into by a Person and one or more financial institutions: commodity
future contracts, forward contracts, options or other similar agreements or
arrangements designed to protect against fluctuations in the price of, or the
shortage of supply of, commodities from time to time.
'Consolidated Assets' means the total assets of the Issuer and its
Restricted Subsidiaries shown on the Consolidated balance sheet of the Issuer
and its Restricted Subsidiaries prepared in accordance with GAAP as of the last
day of the immediately preceding fiscal quarter.
'Consolidated Coverage Ratio' as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending prior to the date of such determination
for which consolidated financial statements of the Issuer are available to (ii)
Consolidated Interest Expense for such four fiscal quarters, provided, however,
that:
(1) if the Issuer or any Restricted Subsidiary (x) has Incurred any
Indebtedness since the beginning of such period that remains outstanding on
such date of determination or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness,
EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such Indebtedness
and the application of the proceeds thereof as if such Indebtedness had
been Incurred on the first day of such period or (y) has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of the period that is no longer outstanding on such date of
determination, or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio involves a discharge of Indebtedness,
EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect to such discharge of such Indebtedness,
including with the proceeds of such new Indebtedness, as if such discharge
had occurred on the first day of such period (except that, in making such
computation, the amount of Indebtedness under any revolving credit facility
shall be computed based upon the average daily balance of such Indebtedness
during such four-quarter period);
(2) if since the beginning of such period the Issuer or any Restricted
Subsidiary shall have disposed of any company or any business or any group
of assets constituting an operating unit (a 'Disposal'), (x) EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such Disposal
for such period or increased by an amount equal to the EBITDA (if negative)
directly attributable thereto for such period and (y) Consolidated Interest
Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of
the Issuer or any Restricted Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to the Issuer and its continuing
Restricted Subsidiaries in connection with such Disposal for such period
(and, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Issuer and its
continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale);
(3) if since the beginning of such period the Issuer or any Restricted
Subsidiary (by merger or otherwise) shall have acquired any company or any
business or any group of assets constituting an operating unit (an
'Acquisition'), EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Acquisition had occurred on the
first day of such period; and
(4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Issuer or any Restricted Subsidiary since the beginning of such period)
shall have made any Disposal or Acquisition that would have required an
adjustment pursuant to clause (2) or (3) above if made by the Issuer or a
Restricted Subsidiary during such period, EBITDA and Consolidated
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Interest Expense for such period shall be calculated after giving pro forma
effect thereto as if such Disposal or Acquisition occurred on the first day
of such period.
If any Indebtedness bears a floating rate of interest and is being given
pro forma effect, the interest expense on such Indebtedness shall be calculated
as if the rate in effect on the date of determination had been the applicable
rate for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term as at the date of determination in excess of 12 months). If any
Indebtedness bears, at the option of the Issuer or a Restricted Subsidiary, a
fixed or floating rate of interest and is being given pro forma effect, the
interest expense on such Indebtedness shall be computed by applying, at the
option of the Issuer, either a fixed or floating rate. If any Indebtedness which
is being given pro forma effect was Incurred under a revolving credit facility,
the interest expense on such Indebtedness shall be computed based upon the
average daily balance of such Indebtedness during the applicable period. In
making any calculation of the Consolidated Coverage Ratio for any period prior
to the date of the closing of the Acquisition, the Acquisition shall be deemed
to have taken place on the first day of such period.
'Consolidated Income Tax Expense' means for any period, as applied to any
Person, the provision for federal, state, local and foreign income taxes and
capital taxes of such Person and its Consolidated Subsidiaries for such period
as recorded under 'provision for taxes' on the statement of operations as
determined in accordance with GAAP.
'Consolidated Interest Expense' means, for any period, the total interest
expense of the Issuer and its Consolidated Subsidiaries, as determined in
accordance with GAAP, plus, to the extent Incurred by the Issuer and its
Restricted Subsidiaries in such period but not included in such interest
expense, (i) amortization of debt discount (including amortization of fees),
(ii) the interest portion of any deferred payment obligation which in accordance
with GAAP is required to be reflected on an income statement, (iii) net costs
(including amortization of discounts and fees) associated with Interest Rate
Agreements or Currency Agreements (other than Currency Agreements permitted by
clause (viii) (B) of paragraph (b) of the covenant described in '--Certain
Covenants--Limitation on Indebtedness'), (iv) interest accruing on any
Indebtedness of any other Person that is Guaranteed by the Issuer or any
Restricted Subsidiary, (v) all commissions, discounts and other fees and charges
with respect to letters of credit and bankers' acceptance financing, (vi) all
accrued interest, (vii) the aggregate dividends paid or accrued on Preferred
Stock held by Persons other than the Issuer or a Wholly Owned Subsidiary, (viii)
the interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid by the Issuer and the Restricted Subsidiaries during such
period as determined on a consolidated basis in accordance with GAAP, and (ix)
the cash contributions to any employee stock ownership plan or similar trust to
the extent such contributions are used by such plan or trust to pay interest or
fees to any Person (other than the Issuer) in connection with Indebtedness
Incurred by such plan or trust.
'Consolidated Net Income' means, for any period, the net income (loss) of
the Issuer and its Consolidated Subsidiaries, as determined in accordance with
GAAP; provided, however, that there shall not be included in such Consolidated
Net Income: (i) any net income of any Person that is not the Issuer or a
Restricted Subsidiary, except that, subject to limitations contained in clause
(iv) below, the Issuer's equity in the net income of any such Person for such
period shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Person during such period to the
Issuer or a Restricted Subsidiary as a dividend or other distribution (subject,
in the case of a dividend or other distribution to a Restricted Subsidiary, to
the limitations contained in clause (iii) below); (ii) any net income or loss of
any Person acquired by the Issuer or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition; (iii) any net
income of any Restricted Subsidiary if such Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the making
of distributions by such Restricted Subsidiary, directly or indirectly, to the
Issuer, except that, subject to the limitations contained in (iv) below, the
Issuer's equity in the net income of any such Restricted Subsidiary for such
period shall be included in such Consolidated Net Income up to the aggregate
amount of cash that could have been distributed by such Restricted Subsidiary
during such period to the Issuer or another Restricted Subsidiary as a dividend
(subject, in the case of a dividend that could have been made to another
Restricted Subsidiary, to the limitation contained in this clause); (iv) any
gain or loss realized upon any Asset Sale and any gain or loss realized upon the
sale or other disposition of any Capital Stock of any Person; (v) any
extraordinary gain or loss as recorded on the statement of operations in
accordance with GAAP; (vi) the cumulative effect of a change in accounting
principles as recorded on the statement of operations in accordance
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with GAAP; (vii) all deferred financing costs written off in connection with the
early extinguishment of indebtedness under the Credit Agreement or the Notes as
recorded on the statement of operations in accordance with GAAP; (viii) any
charge relating to the closure of the Westerville, Ohio facility as recorded on
the statement of operations in accordance with GAAP; (ix) nonrecurring charges
related to the Acquisition and any other acquisition by the Issuer or any
Restricted Subsidiary occurring after the Issue Date as recorded on the
statement of operations in accordance with GAAP; (x) non-cash, nonrecurring
charges as recorded on the statement of operations in accordance with GAAP; (xi)
unrealized gains or losses in respect of Currency Agreements permitted by clause
(viii)(B) of paragraph (b) of the covenant described in '--Certain
Covenants--Limitation on Indebtedness' as recorded on the statement of
operations in accordance with GAAP; (xii) unrealized foreign currency
transaction gains or losses in respect of Indebtedness of any Person denominated
in a currency other than the functional currency of such Person and permitted to
be Incurred under the covenant described in '--Certain Covenants--Limitation on
Indebtedness' as recorded on the statement of operations in accordance with
GAAP; and (xiii) any expense relating to bonuses paid by Ciba-Geigy AG or its
Affiliates (other than an Affiliate that will be an Affiliate of the Issuer
following consummation of the Acquisition) to employees of the Issuer or any
Restricted Subsidiary pursuant to agreements entered into in connection with the
disposition of the Mettler-Toledo Group by Ciba-Geigy AG, as recorded on the
statement of operations in accordance with GAAP; provided that in the case of
any amount or charge specified in clause (vii), (viii), (ix), (x), (xi), (xii)
or (xiii), such amount or charge shall be net of any tax or tax benefit to the
Company or any of its Consolidated Subsidiaries resulting therefrom.
'Consolidated Non-Cash Charges' of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges of such Person
and its Consolidated Subsidiaries for such period, on a Consolidated basis, as
determined in accordance with GAAP (excluding any non-cash charge that requires
an accrual or reserve for cash charges for any future period).
'Consolidation' means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of the Issuer in accordance with GAAP
consistently applied; provided, however, that 'Consolidation' will not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Issuer or any Restricted Subsidiary in an Unrestricted Subsidiary will be
accounted for as an investment. The term 'Consolidated' has a correlative
meaning.
'Credit Agreement' means the Credit Agreement dated as of the Issue Date,
among the Issuer and Swiss Subholding, as borrowers, Merrill Lynch Capital
Corporation, as agent and arranger, The Bank of Nova Scotia, as administrative
agent, Credit Suisse and Lehman Commercial Paper Inc. as co-agents and the other
financial institutions which are to become parties from time to time thereto, as
such agreement may be amended, modified, supplemented, renewed, refunded,
replaced, increased or refinanced (in whole or in part) from time to time by one
or more instruments or agreements with the same or other, or any combination of
the same and other, lenders and, in each case, including, without limitation,
any related notes, letters of credit and applications therefor, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, in each case as amended, modified, supplemented, renewed, refunded,
replaced, increased or refinanced (in whole or in part) from time to time by one
or more instruments or agreements. Without limiting the generality of the
foregoing, the term 'Credit Agreement' shall, subject to the covenants of the
Indenture, include any agreement (i) changing the maturity of any Indebtedness
incurred thereunder or contemplated thereby, (ii) adding Subsidiaries of the
Issuer as additional borrowers or guarantors thereunder, (iii) increasing the
amount of Indebtedness incurred thereunder or available to be borrowed
thereunder or (iv) otherwise altering the terms and conditions thereof.
'Credit Agreement Obligations' means all monetary obligations of every
nature of the Issuer or a Restricted Subsidiary, including, without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, expenses and indemnities, from time to time owed to the
lenders or any agent under or in respect of the Credit Agreement.
'Currency Agreement' means in respect of any Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
'Default' means any event that is, or after notice or passage of time, or
both, would be, an Event of Default.
'Designated Senior Indebtedness' means (i) all Senior Indebtedness and
Guarantor Senior Indebtedness under the Credit Agreement Obligations and (ii) if
no Senior Indebtedness or Guarantor Senior Indebtedness is
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outstanding under the Credit Agreement Obligations or if the lenders under the
Credit Agreement shall have consented thereto, any other Senior Indebtedness (or
for certain purposes more fully described in the Indenture, Guarantor Senior
Indebtedness) which (a) at the time of incurrence exceeds $25 million in
aggregate principal amount and (b) is specifically designated by the Issuer (or,
in the case of Guarantor Senior Indebtedness, by the relevant Note Guarantor) in
the instrument evidencing such Senior Indebtedness or Guarantor Senior
Indebtedness as 'Designated Senior Indebtedness.'
'Disinterested Director' means a member of the Board of Directors who does
not have any material direct or indirect financial interest in or with respect
to any transaction or series of transactions.
'Dollar' or '$' means the lawful money of the United States of America.
'EBITDA' for any period means the sum of Consolidated Net Income,
Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated
Non-Cash Charges deducted in computing Consolidated Net Income, without
duplication, in each case for such period, of such Person and its Consolidated
Subsidiaries on a Consolidated basis, all determined in accordance with GAAP.
'Event of Default' has the meaning set forth under '--Defaults' herein.
'Exchange Act' means the Securities Exchange Act of 1934, as amended.
'Fair Market Value' means, with respect to any asset or property, the price
that could be negotiated in an arm's-length free market transaction, for cash,
between an informed and willing seller and an informed and willing buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction.
'GAAP' means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board. All ratios and computations based on
GAAP contained in the Indenture shall be computed in conformity with GAAP.
'Guarantee' means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreement to keep well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part), provided, however, that the term
'Guarantee' shall not include endorsements for collection or deposit in the
ordinary course of business. The term 'Guarantee' used as a verb has a
corresponding meaning.
'Guarantor Senior Indebtedness' means, with respect to any Note Guarantor,
the principal of, premium, if any, and interest (including interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable state, federal or foreign law) on and other
amounts due on or in connection with (including any fees, premiums, expenses,
including costs of collection, and indemnities) any Indebtedness of such Note
Guarantor, whether outstanding on the Issue Date or thereafter created, incurred
or assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Note Guarantee of such Note Guarantor. Without limiting the
generality of the foregoing, 'Guarantor Senior Indebtedness' shall also include
the principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable state, federal or foreign law) on, and all other
amounts owing in respect of, (i) all Credit Agreement Obligations of such Note
Guarantor and (ii) all Related Currency and Interest Rate Protection
Obligations, if any, of such Note Guarantor, in each case whether outstanding on
the Issue Date or thereafter created, incurred or assumed and including in
respect of claims under guarantees, claims for indemnity, claims in relation to
Related Currency and Interest Rate Protection Obligations,
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expense reimbursement and fees. Notwithstanding the foregoing, 'Guarantor Senior
Indebtedness' shall not include (a) Indebtedness evidenced by the Note Guarantee
of such Note Guarantor, (b) Indebtedness that is pari passu with or expressly
subordinated or junior in right to payment to any Guarantor Senior Indebtedness
of such Note Guarantor, (c) Indebtedness which, when incurred and without
respect to any election under Section 1111(b) of Title 11, United States Code,
is by its terms without recourse to such Note Guarantor, (d) any repurchase,
redemption or other obligation in respect of Redeemable Capital Stock of such
Note Guarantor, (e) to the extent it might constitute Indebtedness, amounts
owing for goods, materials or services purchased in the ordinary course of
business or consisting of trade payables or other current liabilities (other
than any current liabilities owing under the Credit Agreement Obligations or the
current portion of any long-term Indebtedness which would constitute Guarantor
Senior Indebtedness but for the operation of this clause (e)), (f) to the extent
it might constitute Indebtedness, amounts owed by such Note Guarantor for
compensation to employees or for services rendered to such Note Guarantor, (g)
to the extent it might constitute Indebtedness, any liability for federal,
state, local, foreign or other taxes owed or owing by such Note Guarantor, (h)
Indebtedness of such Note Guarantor to a Subsidiary of the Issuer and (i) that
portion of any Indebtedness of such Note Guarantor which at the time of
Incurrence is Incurred in violation of the Indenture; provided, however, that
such Indebtedness shall be deemed not to have been Incurred in violation of the
Indenture for purposes of this clause (i) if (x) the holder(s) of such
Indebtedness or their representative or such Note Guarantor shall have furnished
to the Trustee an opinion of recognized independent legal counsel, unqualified
in all material respects, addressed to the Trustee (which legal counsel may, as
to matters of fact, rely upon an Officers' Certificate of such Note Guarantor)
to the effect that the Incurrence of such Indebtedness does not violate the
provisions of the Indenture or (y) such Indebtedness consists of Credit
Agreement Obligations, and the holder(s) of such Indebtedness or their agent or
representative (1) had no actual knowledge at the time of Incurrence that the
Incurrence of such Indebtedness violated the Indenture and (2) shall have
received a certificate from an Officer of such Note Guarantor to the effect that
the Incurrence of such Indebtedness does not violate the provisions of the
Indenture.
'Holder' or 'Noteholder' means the Person in whose name a Note is
registered on the Registrar's books.
'Holding' means Mettler-Toledo Holding Inc., a Delaware corporation, and
any successor thereto.
'Incur' means issue, assume, Guarantee, incur or otherwise become liable
for, provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Person at the time it becomes a Subsidiary.
'Indebtedness' means, with respect to any Person, without duplication, (a)
all liabilities of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade accounts payable and other
accrued current liabilities incurred in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of such
Person in connection with any letters of credit, banker's acceptance or other
similar credit transaction, or in connection with any agreement to purchase,
redeem, exchange, convert or otherwise acquire for value any Capital Stock of
such Person, or any warrants, rights or options to acquire such Capital Stock,
now or hereafter outstanding, (b) all obligations of such Person evidenced by
bonds, notes, debentures or other similar instruments, (c) all indebtedness of
such Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), but
excluding trade accounts payable arising in the ordinary course of business, (d)
all Capitalized Lease Obligations and all Attributable Debt of such Person, (e)
all Indebtedness referred to in the preceding clauses of other Persons and all
dividends of other Persons, the payment of which is secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon property (including, without limitation, accounts
and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (f) all Guarantees of such
Person in respect of Indebtedness of another Person of any of the types referred
to in this definition, (g) all Redeemable Capital Stock of such Person valued at
the greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued dividends, (h) all Currency Agreements, Interest Rate Agreements and
Commodities Agreements of such Person and (i) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of such
Person of any of the
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types referred to in clauses (a) through (h) above. Notwithstanding the
foregoing, Indebtedness shall not include any Guarantee by the Issuer of the
obligations of Ciba-Geigy AG or its Affiliates under its Guarantee to the
Pension Benefit Guaranty Corporation with respect to any unfunded liabilities of
any employee benefit plan of the Issuer.
For purposes hereof, (x) the 'maximum fixed repurchase price' of any
Redeemable Capital Stock that does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock and (y) Indebtedness is
deemed to be incurred pursuant to a revolving credit facility each time an
advance is made thereunder. When any Person becomes a Restricted Subsidiary
there shall be deemed to have been an Incurrence by such Restricted Subsidiary
of all Indebtedness for which it is liable at the time it becomes a Restricted
Subsidiary. If the Issuer or any Restricted Subsidiary, directly or indirectly,
Guarantees Indebtedness of another Person, there shall be deemed to be an
Incurrence of such Guaranteed Indebtedness as if the Issuer or such Restricted
Subsidiary had directly incurred or otherwise assumed such Guaranteed
Indebtedness.
'Interest Rate Agreements' means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
'Investment' in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
'Unrestricted Subsidiary' and the covenant described in '--Certain
Covenants--Limitation on Restricted Payments', (i) 'Investment' shall include
the portion (proportionate to the Issuer's equity interest in such Subsidiary)
of the Fair Market Value of the net assets of any Subsidiary of the Issuer at
the time that such Subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Issuer shall be deemed to continue to have a permanent
'Investment' in an Unrestricted Subsidiary in an amount (if positive) equal to
(x) the Issuer's 'Investment' in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Issuer's direct or
indirect equity interest in such Subsidiary) of the Fair Market Value of the net
assets of such Subsidiary at the time of such redesignation; and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its Fair Market Value at the time of such transfer, in each case, as determined
in good faith by the Board of Directors.
'Issue Date' means the date on which the Notes are originally issued.
'Issuer' means MT Acquisition Corp., a Delaware corporation, and upon
consummation of the Merger, means Mettler-Toledo, Inc., a Delaware corporation,
the survivor of the Merger, until a successor Person shall have become such
pursuant to the applicable provisions of the Indenture, and thereafter 'Issuer'
shall mean such successor Person.
'Lien' means any mortgage, pledge, security interest, hypothecation,
assignment, conveyance, preference, priority, encumbrance, lien (statutory or
other) or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
'Management Services Agreement' means the Management Services Agreement
dated as of the Issue Date, between AEA and the Issuer, as in effect on the
Issue Date and as the same may be amended from time to time in any manner not
adverse to the Holders or in accordance with the procedures set forth in the
Indenture.
'Merger' means the merger of MT Acquisition Corp. with and into
Mettler-Toledo, Inc. immediately upon consummation of the Acquisition.
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'Moody's' means Moody's Investors Service, Inc. or any successor rating
agency.
'MT Investors' means MT Investors Inc., a Delaware corporation, and any
successor thereto.
'Net Cash Proceeds' means, (a) with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents, including payments in respect
of deferred payment obligations when received in the form of, or stock or other
assets when disposed for, cash or Cash Equivalents (except to the extent that
such obligations are financed or sold, but only to the extent they continue to
be, with recourse to the Issuer or any Restricted Subsidiary), net of (i)
brokerage commissions and other reasonable fees and expenses (including fees and
expenses of legal counsel and investment banks) actually incurred and related to
such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset
Sale, (iii) amounts required to be paid to any Person (other than the Issuer or
any Restricted Subsidiary) owning a beneficial interest in the assets subject to
the Asset Sale and (iv) appropriate amounts to be provided by the Issuer or any
Restricted Subsidiary, as the case may be, as a reserve required in accordance
with GAAP against any liabilities associated with such Asset Sale and retained
by the Issuer or any Restricted Subsidiary, as the case may be, after such Asset
Sale, and (b) with respect to any issuance or sale of Capital Stock, means the
proceeds of such issuance or sale in the form of cash or Cash Equivalents,
including payments in respect of deferred payment obligations when received in
the form of, or stock or other assets when disposed for, cash or Cash
Equivalents (except to the extent that such obligations are financed or sold,
but only to the extent they continue to be, with recourse to the Issuer or any
Restricted Subsidiary), net of (i) brokerage commissions and other reasonable
fees and expenses (including fees of legal counsel and investment banks)
actually incurred and related to such issuance or sale and (ii) provisions for
all taxes payable as a result of such issuance or sale; in each case, as
reflected in an Officers' Certificate delivered to the Trustee.
'Non-Dollar Indebtedness' means Indebtedness denominated in any currency
other than Dollars.
'Non-U.S. Restricted Subsidiary' means any Restricted Subsidiary of the
Issuer other than a U.S. Restricted Subsidiary.
'Note Guarantee' means the Guarantee of the Notes by Holding, and any
Guarantee of the Notes that may from time to time be executed and delivered
pursuant to the terms of the Indenture. Each such Note Guarantee shall be in the
form prescribed in the Indenture.
'Note Guarantor' means any Person that has issued a Note Guarantee.
'Officer' means the Chairman of the Board, Chief Executive Officer, Chief
Financial Officer, the President, any Vice President, the Treasurer or the
Secretary of the Issuer.
'Officers' Certificate' means a certificate signed by two Officers.
'Opinion of Counsel' means a written opinion in form and substance
reasonably satisfactory to the Trustee from legal counsel who is reasonably
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Issuer or the Trustee.
'Pari Passu Indebtedness' means any Indebtedness of the Issuer or any Note
Guarantor ranking pari passu with the Notes or the applicable Note Guarantee,
respectively.
'Permitted Guarantee' means (i) any Guarantee of Acquired Indebtedness
given by any Restricted Subsidiary prior to (and not in contemplation of) the
Incurrence of such Acquired Indebtedness by the Issuer or a Restricted
Subsidiary, which Guarantee and Acquired Indebtedness are Incurred pursuant to
clause (vi) of paragraph (b) (or, in the case of Acquired Indebtedness of the
Issuer, paragraph (a)) of the covenant described in '--Certain
Covenants--Limitation on Indebtedness' or (ii) any Guarantee by the Issuer of
the obligations of Ciba-Geigy AG or its Affiliates under its Guarantee to the
Pension Benefit Guaranty Corporation with respect to any unfunded liabilities of
any employee benefit plan of the Issuer.
'Permitted Holder' means AEA and its current, former and future employees,
stockholders, directors and officers and the Issuer's officers, and (i) trusts
for the benefit of such Persons or the spouses, issue, parents or other
relatives of such Persons, (ii) entities controlling or controlled by such
Persons and (iii) in the event of the death of any such individual Person, heirs
or testamentary legatees of such Person.
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'Permitted Investment' means any of the following: (i) Investments in Cash
Equivalents, (ii) Investments in the Issuer or in any Restricted Subsidiary
(including any Person that thereby becomes a Restricted Subsidiary), (iii)
Investments in existence on the Issue Date, (iv) receivables owing to the Issuer
or any Restricted Subsidiary, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms,
(v) Interest Rate Agreements designed to protect the Issuer or any Restricted
Subsidiary against fluctuations in interest rates in respect of Indebtedness of
the Issuer or any Restricted Subsidiary, and Currency Agreements designed to
protect the Issuer or any Restricted Subsidiary against fluctuations in foreign
currency exchange rates in respect of foreign exchange exposures incurred by the
Issuer or any Restricted Subsidiary in the ordinary course of business, in each
case, permitted by the covenant described in '--Certain Covenants--Limitation on
Indebtedness,' (vi) Investments in the Notes, (vii) Investments in a joint
venture or similar entity that is not a Restricted Subsidiary and is primarily
engaged in a Related Business, not to exceed $20 million at any time, (viii)
Investments in securities of any Person received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
Person, (ix) Investments received by the Issuer or its Restricted Subsidiaries
as consideration for Asset Sales effected in compliance with the covenant
described in '--Certain Covenants--Limitation on Disposition of Proceeds of
Asset Sales,' (x) Investments in an amount not exceeding $5 million in the
aggregate outstanding at any time, and (xi) any Investment in Ciba-Geigy AG or
any Affiliate thereof resulting from the advancement of amounts not exceeding
SFr 38 million equal to withholding taxes payable in connection with dividends
paid to Ciba-Geigy AG or any Affiliate thereof in connection with the
Acquisition, pending receipt of refund of such withholding taxes.
'Permitted Lien' means (i) any Lien as existing on the Issue Date and
listed on a schedule to the Indenture; (ii) any Lien on any property or assets
of a Restricted Subsidiary granted in favor of the Issuer or any Restricted
Subsidiary; (iii) any Lien securing the Notes or any Note Guarantee; (iv) any
Lien securing Acquired Indebtedness Incurred pursuant to clause (vi) of
paragraph (b) of the covenant described in '--Certain Covenants--Limitation on
Indebtedness', which Lien (x) is created prior to (and not in connection with or
in contemplation of) the Incurrence of such Acquired Indebtedness by the Issuer
or any Restricted Subsidiary, and (y) does not extend to any property or assets
of the Issuer or any Restricted Subsidiary other than the assets acquired in
connection with the Incurrence of such Acquired Indebtedness; (v) any Lien
securing any Indebtedness Incurred pursuant to clause (xi) of paragraph (b) of
the covenant described in '--Certain Covenants--Limitation on Indebtedness',
provided, however, that such Lien may not extend to any other property owned by
the Issuer or any Restricted Subsidiary at the time such Lien is Incurred; (vi)
any Lien in favor of the Trustee under the Indenture; and (vii) any extension,
renewal or replacement in whole or in part, of any Lien described in the
foregoing clauses (i) through (vi), provided, that any such extension, renewal
or replacement shall be no more restrictive in any material respect than the
Lien so extended, renewed or replaced and shall not extend to any additional
property or assets.
'Person' means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof, or any
other entity.
'Preferred Stock', as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) that is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
'Public Equity Offering' means an underwritten public offering of newly
issued shares of common stock of MT Investors, Holding or the Issuer pursuant to
an effective registration statement under the Securities Act, on a primary basis
(whether alone or in conjunction with any secondary public offering).
'Public Market' means an established public trading market existing after a
Public Equity Offering has been consummated.
'Purchase Money Obligation' means any Indebtedness secured by a Lien on
real or personal property related to the business of the Issuer or any
Restricted Subsidiary that is purchased by the Issuer or any Restricted
Subsidiary after the Issue Date; provided that (i) any security agreement or
conditional sales or other title retention contract pursuant to which the Lien
on such property is created shall be entered into within 180 days after the
purchase of such property and shall at all times be confined solely to such
property, (ii) at no time shall
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<PAGE>
the aggregate principal amount of the Indebtedness secured by such property be
increased and (iii)(A) the Indebtedness secured thereby shall not exceed the
purchase price of such property or (B) the Indebtedness secured thereby shall be
with recourse solely to such property.
'Redeemable Capital Stock' means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is, or upon the happening of an
event or passage of time would be, required to be redeemed, or matures, on or
prior to the 91st day after any Stated Maturity of the Notes, or is redeemable
at the option of the holder thereof at any time on or prior to the 91st day
after any Stated Maturity of the Notes, or, at the option of the holder thereof,
is convertible into or exchangeable for Indebtedness or Redeemable Capital Stock
at any time on or prior to the 91st day after any Stated Maturity of the Notes.
'Refinancing Costs' means, with respect to any refinancing of term loan
borrowings under the Credit Agreement, an amount equal to (x) the lesser of (I)
the stated amount of any premium or other payment required to be paid in
connection with such refinancing pursuant to the Credit Agreement and (II) the
amount of premium or other payment actually paid by the Issuer, Swiss Subholding
or any Restricted Subsidiary at such time to refinance such borrowings, plus (y)
the amount of expenses of the Issuer, Swiss Subholding or any Restricted
Subsidiary incurred in connection with such refinancing.
'Related Business' means the businesses of the Issuer and the Restricted
Subsidiaries as conducted on the Issue Date, and any businesses related,
ancillary or complementary to such businesses.
'Related Currency and Interest Rate Protection Obligations' means all
monetary obligations of every nature of the Issuer or a Note Guarantor under or
in respect of any Currency Agreement or Interest Rate Agreement of the Issuer or
such Note Guarantor either (a) to the extent such monetary obligations relate to
Credit Agreement Obligations or (b) to the extent such monetary obligations are
secured by collateral securing Credit Agreement Obligations.
'Restricted Subsidiary' means any Subsidiary of the Issuer other than an
Unrestricted Subsidiary.
'Sale/Leaseback Transaction' means an arrangement relating to property now
owned or hereafter acquired by the Issuer or a Restricted Subsidiary, whereby
the Issuer or a Restricted Subsidiary transfers such property to a Person and
the Issuer or a Restricted Subsidiary leases it from such Person.
'S&P' means Standard & Poor's Rating Group (a division of McGraw Hill Inc.)
or any successor rating agency.
'SEC' means the Securities and Exchange Commission.
'Secured Indebtedness' means any Indebtedness of the Issuer or any
Subsidiary of the Issuer secured by a Lien.
'Securities Act' means the Securities Act of 1933, as amended.
'Senior Indebtedness' means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable state, federal
or foreign law) on and other amounts due on or in connection with (including any
fees, premiums, expenses, including costs of collection, and indemnities) any
Indebtedness of the Issuer, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, 'Senior Indebtedness' shall also include the principal of,
premium, if any, and interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable state, federal or foreign law) on, and all other amounts owing in
respect of, (i) all Credit Agreement Obligations of the Issuer and (ii) all
Related Currency and Interest Rate Protection Obligations of the Issuer, in each
case whether outstanding on the Issue Date or thereafter created, incurred or
assumed and including in respect of claims under guarantees, claims for
indemnity, claims in relation to Related Currency and Interest Rate Protection
Obligations, expense reimbursement and fees.
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Notwithstanding the foregoing, 'Senior Indebtedness' shall not include (a)
Indebtedness evidenced by the Notes, (b) Indebtedness that is pari passu with or
expressly subordinated or junior in right of payment to any Senior Indebtedness
of the Issuer, (c) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is by its terms
without recourse to the Issuer, (d) any repurchase, redemption or other
obligation in respect of Redeemable Capital Stock of the Issuer, (e) to the
extent it might constitute Indebtedness, amounts owing for goods, materials or
services purchased in the ordinary course of business or consisting of trade
payables or other current liabilities (other than any current liabilities owing
under the Credit Agreement Obligations or the current portion of any long-term
Indebtedness which would constitute Senior Indebtedness but for the operation of
this clause (e)), (f) to the extent it might constitute Indebtedness, amounts
owed by the Issuer for compensation to employees or for services rendered to the
Issuer, (g) to the extent it might constitute Indebtedness, any liability for
federal, state, local, foreign or other taxes owed or owing by the Issuer, (h)
Indebtedness of the Issuer to a Subsidiary of the Issuer and (i) that portion of
any Indebtedness of the Issuer which at the time of Incurrence is Incurred in
violation of the Indenture; provided, however, that such Indebtedness shall be
deemed not to have been Incurred in violation of the Indenture for purposes of
this clause (i) if (x) the holder(s) of such Indebtedness or their
representative or the Issuer shall have furnished to the Trustee an opinion of
recognized independent legal counsel, unqualified in all material respects,
addressed to the Trustee (which legal counsel may, as to matters of fact, rely
upon an Officers' Certificate of the Issuer) to the effect that the Incurrence
of such Indebtedness does not violate the provisions of the Indenture or (y)
such Indebtedness consists of Credit Agreement Obligations, and the holder(s) of
such Indebtedness or their agent or representative (1) had no actual knowledge
at the time of Incurrence that the Incurrence of such Indebtedness violated the
Indenture and (2) shall have received a certificate from an Officer of the
Company to the effect that the Incurrence of such Indebtedness does not violate
the provisions of the Indenture.
'Senior Subordinated Indebtedness' means the Notes and any other
Indebtedness of the Issuer that specifically provides that such Indebtedness is
to rank pari passu with the Notes and is not subordinated by its terms to any
Indebtedness or other obligation of the Issuer that is not Senior Indebtedness.
'Senior Subordinated Note Obligations' means (i) any principal of, premium,
if any, and interest on, and any other amounts owing in respect of, the Notes
payable pursuant to the terms of the Notes or the Indenture or upon acceleration
of the Notes, including, without limitation, amounts received upon the exercise
of rights of rescission or other rights of action (including claims for damages)
or otherwise, to the extent relating to the purchase price of the Notes or
amounts corresponding to such principal of, premium, if any, interest, or other
amounts owing with respect to, the Notes and (ii) in the case of any Note
Guarantor, any obligations with respect to the foregoing or otherwise under its
Note Guarantee.
'Significant Note Guarantor' means (x) Holding or (y) any other Note
Guarantor that would be a 'significant subsidiary' of the Issuer as defined in
Rule 1-02 of Regulation S-X under the Securities Act and the Exchange Act, as
such Rule is in effect on the Issue Date, provided that for purposes of this
definition, all references in such Rule 1-02 to '10 percent' shall be deemed to
be '5 percent'.
'Significant Restricted Subsidiary' means any Restricted Subsidiary of the
Issuer that would be a 'significant subsidiary' of the Issuer as defined in Rule
1-02 of Regulation S-X under the Securities Act and the Exchange Act, as such
Rule is in effect on the Issue Date.
'Specified Indebtedness' means (i) any Indebtedness of the Issuer or any
Note Guarantor that is Pari Passu Indebtedness or Subordinated Indebtedness or
(ii) any Indebtedness of any Restricted Subsidiary that is Subordinated
Indebtedness, provided, however, that Specified Indebtedness shall never include
any Credit Agreement Obligation otherwise constituting Guarantor Senior
Indebtedness or Senior Indebtedness.
'Specified Senior Indebtedness' means any Senior Indebtedness, Guarantor
Senior Indebtedness, or Indebtedness of any Restricted Subsidiary (other than a
Note Guarantor) that is not Subordinated Indebtedness.
'Specified U.S. Subsidiary Indebtedness' means Indebtedness of any U.S.
Restricted Subsidiary (a) owing to and held by the Issuer or any U.S. Restricted
Subsidiary Incurred pursuant to clause (iv) of paragraph (b) of the covenant
described in '--Certain Covenants--Limitation on Indebtedness,' (b) Incurred
pursuant to clause (vi), (viii), (ix), (x), (xiv), (xv)(1), (xv)(2), (xvi)(A) or
(xvi)(B) of such paragraph (b) or (c) Incurred pursuant to clause
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(xviii) of such paragraph (b) to refinance Indebtedness previously Incurred
pursuant to clause (vi) of such paragraph (b).
'Stated Maturity' means, when used with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the purchase of
such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
'Subordinated Indebtedness' means (i) any Indebtedness of the Issuer or any
Note Guarantor (whether outstanding on the Issue Date or thereafter Incurred)
that is subordinated or junior in right of payment to the Notes or any Note
Guarantee or (ii) Indebtedness of any Restricted Subsidiary (other than a Note
Guarantor) that is subordinated or junior in right of payment to any other
Indebtedness of such Restricted Subsidiary.
'Subsidiary' of any Person means any corporation, association, partnership,
limited liability company or other business entity of which more than 50% of the
total voting power of shares of Capital Stock (including partnership or other
equity interests) generally entitled (without the incurrence of any contingency)
to vote in the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by (i) such Person or (ii) one
or more Subsidiaries of such Person.
'Swiss Subholding' means Mettler-Toledo Holding AG, a Swiss corporation.
'Tax Sharing Agreement' means the Tax Sharing Agreement dated as of the
Issue Date, between the Issuer and MT Investors, as in effect on the Issue Date
and as the same may be amended from time to time in any manner not adverse to
the Holders.
'TIA' means the Trust Indenture Act of 1939 as in effect on the date of the
Indenture, provided, however, that in the event the Trust Indenture Act of 1939
is amended after such date, 'TIA' means to the extent required by such
amendment, the Trust Indenture Act of 1939 as so amended.
'Trust Officer' means the Chairman of the Board, the President or any other
officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
'Trustee' means the party named as such in the Indenture until a successor
replaces it and, thereafter, means the successor.
'Unrestricted Subsidiary' means (i) any Subsidiary of the Issuer that at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors as provided below) and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate (a 'Designation')
any Subsidiary of the Issuer (other than a Subsidiary that is a Note Guarantor
or owns any Capital Stock of, or owns, or holds any Lien on, any property of the
Issuer or any other Subsidiary of the Issuer that is not a Subsidiary of the
Subsidiary to be so designated) to be an Unrestricted Subsidiary if: (a) no
Default shall have occurred and be continuing at the time of or after giving
effect to such Designation; (b) the Issuer could make an Investment at the time
of such Designation (assuming the effectiveness thereof) in an amount (the
'Designation Amount') equal to the Fair Market Value of the Capital Stock of
such Subsidiary on such date; and (c) the Issuer could incur $1.00 of additional
Indebtedness under paragraph (a) of the covenant described under '--Certain
Covenants--Limitation on Indebtedness' at the time of such Designation (assuming
the effectiveness thereof). In the event of any such Designation, the Issuer
shall be deemed to have made an Investment constituting a Restricted Payment
pursuant to the covenant described under '--Certain Covenants--Limitation on
Restricted Payments' for all purposes of the Indenture in the Designation
Amount. The Board of Directors may revoke (a 'Revocation') any Designation of a
Subsidiary as an Unrestricted Subsidiary if: (a) no Default shall have occurred
and be continuing at the time of and after giving effect to such Revocation; (b)
the Issuer could Incur $1.00 of additional Indebtedness under paragraph (a) of
the covenant described under '--Certain Covenants--Limitation on Indebtedness'
at the time of such Revocation (assuming the effectiveness thereof); and (c) all
Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately
following such Revocation would, if Incurred at such time, have been permitted
to be Incurred under the Indenture. Any Designation or Revocation must be
evidenced by a Board Resolution certifying compliance with the foregoing
provisions.
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The Issuer shall not, and shall not permit any Restricted Subsidiary to, at
any time (i) provide a Guarantee of any Indebtedness of any Unrestricted
Subsidiary, (ii) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary or (iii) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the occurrence
of a default with respect to any Indebtedness of any Unrestricted Subsidiary
(including any right to take enforcement action against such Unrestricted
Subsidiary), except in the case of clause (i) or (ii) to the extent permitted
under the covenant described under '--Certain Covenants--Limitation on
Restricted Payments.' No Unrestricted Subsidiary shall at any time Guarantee any
obligation of the Issuer or any Restricted Subsidiary.
'U.S. Government Obligations' means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
'U.S. Restricted Subsidiary' means any Restricted Subsidiary of the Issuer
(a) organized under the laws of the United States of America, any state thereof
or the District of Columbia or (b) a majority of the assets (excluding equity
investments in other Persons) of which are located in the United States of
America based on the Fair Market Value of such assets (as determined in good
faith by the Board of Directors).
'U.S. Significant Subsidiary' means any U.S. Restricted Subsidiary (other
than any Note Guarantor) that individually is, or taken together with other U.S.
Restricted Subsidiaries (other than any Note Guarantor) would be, a Significant
Restricted Subsidiary.
'Voting Stock' means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers,
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
'Wholly Owned Non-U.S. Subsidiary' means a Non-U.S. Restricted Subsidiary
of the Issuer all the Capital Stock of which (other than nominal directors'
qualifying shares) is owned by the Issuer or another Wholly Owned Non-U.S.
Subsidiary.
'Wholly Owned Subsidiary' means a Restricted Subsidiary of the Issuer all
the Capital Stock of which (other than nominal directors' qualifying shares) is
owned by the Issuer or another Wholly Owned Subsidiary.
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UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
'Purchase Agreement') among the Company and each of Merrill Lynch, Pierce,
Fenner & Smith Incorporated ('Merrill Lynch'), CS First Boston Corporation,
Lehman Brothers Inc. and Scotia Capital Markets (USA) Inc. (collectively, the
'Underwriters'), the Company has agreed to sell to each of the Underwriters and
each of the Underwriters has agreed to purchase from the Company the aggregate
principal amount of the Notes set forth opposite its name below. The Purchase
Agreement provides that the obligations of the Underwriters are subject to
certain conditions precedent and that the Underwriters will be obligated to
purchase all of the Notes if any are purchased.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................... $ 84,672,000
CS First Boston Corporation.................. 23,625,000
Lehman Brothers Inc.......................... 23,625,000
Scotia Capital Markets (USA) Inc............. 3,078,000
------------
Total........................... $135,000,000
------------
------------
</TABLE>
The Underwriters propose to offer the Notes to the public at the 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 .25% of the principal
amount of the Notes. The Underwriters may allow, and such dealers may reallow, a
discount not in excess of .125% of the principal amount of the Notes to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
There is no public trading market for the Notes and the Company does not
intend to apply for listing of the Notes on any national securities exchange or
for quotation of the Notes on any automated dealer quotation system. The Company
has been advised by the Underwriters that they presently intend to make a market
in the Notes after the consummation of the Offering contemplated hereby,
although they are under no obligation to do so and may discontinue any
market-making activities at any time without any notice. No assurance can be
given as to the liquidity of the trading market for the Notes or that an active
public market for the Notes will develop. If an active public trading market for
the Notes does not develop, the market price and liquidity of the Notes may be
adversely affected. If the Notes are traded, they may trade at a discount from
their initial offering price, depending on prevailing interest rates, the market
for similar securities, the performance of the Company and certain other
factors.
Holding and the Company have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act, and
contribute to payments that the Underwriters may be required to make in respect
thereof.
Holding and the Company have agreed that they will not, without the prior
consent of Merrill Lynch, for a period of 180 days after the date of this
Prospectus, directly or indirectly, issue, sell or offer to sell, grant any
option for the sale of, or otherwise dispose of, or register for sale by others,
any debt securities, other than the initial sale of Notes, and indebtedness
under the Credit Agreement.
The Offering is contingent upon the assumption by Mettler-Toledo, Inc. of
all liabilities under the Securities Act of 1933, as amended, of MT Acquisition
Corp., as issuer of the Notes, which assumption will be executed simultaneously
with the issuance of the Notes.
Merrill Lynch is an affiliate of Merrill Lynch Capital, which is sole and
exclusive arranger and documentation agent to the Company for, and will be a
lender to the Company under, the Credit Agreement. Merrill Lynch Capital will
receive customary fees in connection with the Credit Agreement. In addition,
Merrill Lynch Capital has committed to provide a bridge loan to the Company in
connection with the financing of the Acquisition if the Offering of the Notes is
not completed and will receive customary fees in connection therewith. CS First
Boston Corporation is an affiliate of Credit Suisse, which will be a co-agent
and a lender to the Company under the Credit Agreement. Credit Suisse will
receive customary fees in connection with the Credit Agreement. CS First Boston
Corporation is also an affiliate of CS First Boston Limited, which has acted as
financial adviser to Ciba in connection with the Acquisition, for which it will
receive customary fees. In addition,
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<PAGE>
CS First Boston Corporation, or its affiliates, renders investment banking and
financial advisory services to Ciba and its affiliates from time to time. Lehman
Brothers Inc. is an affiliate of Lehman Commercial Paper Inc., which will be a
co-agent and a lender to the Company under the Credit Agreement. Lehman
Commercial Paper Inc. will receive customary fees in connection with the Credit
Agreement. Scotia Capital Markets (USA) Inc. is an affiliate of The Bank of Nova
Scotia, which will be administrative agent and a lender to the Company under the
Credit Agreement. The Bank of Nova Scotia will receive customary fees in
connection with the Credit Agreement.
The Underwriters have informed the Company that they do not expect
discretionary sales by the Underwriters to exceed 5.0% of the principal amount
being offered hereby.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company by Fried, Frank, Harris, Shriver & Jacobson (a partnership including
professional corporations), New York, New York. Certain legal matters relating
to the Notes offered hereby will be passed upon for the Underwriters by
Debevoise & Plimpton, New York, New York.
INDEPENDENT AUDITORS
The combined financial statements of the Mettler-Toledo Group as of
December 31, 1994 and 1995 and for each of the years in the three-year period
ended December 31, 1995 and the balance sheet of MT Acquisition Corp. as of July
16, 1996 and consolidated balance sheet of Mettler-Toledo Holding Inc. as of
July 16, 1996, included in this Prospectus, have been audited by KPMG Fides
Peat, independent auditors, as set forth in their reports appearing elsewhere
herein and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
Holding and the Issuer have filed with the Securities and Exchange
Commission (the 'Commission') a Registration Statement (which term shall
encompass any amendment thereto) on Form S-1 under the Securities Act with
respect to the Notes being offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement and the exhibits and
schedules thereto, to which reference is hereby made. Statements made in this
Prospectus as to the contents of any documents filed as exhibits to the
Registration Statement are necessarily summaries of such documents, and each
such statement is qualified in its entirety by reference to the copy of the
applicable document filed as an exhibit to the Registration Statement. The
Registration Statement and the exhibits and schedules thereto filed by Holding
and the Issuer with the Commission may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the regional
offices of the Commission located at 7 World Trade Center, 13th Floor, New York,
New York 10048 and Suite 1400, Northwestern Atrium Center, 14th Floor, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material can also be
obtained at prescribed rates by writing to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants, such as
Holding and the Issuer, that file electronically with the Commission.
The Indenture provides that, notwithstanding that the Issuer may not be
required to remain subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), to the
extent permitted by the Exchange Act or the interpretations of the Commission in
respect thereof, the Issuer will file with the Commission and provide the
Trustee with the annual reports and the information, documents and other reports
that are specified in Sections 13 and 15(d) of the Exchange Act. In the event
that the Issuer is not permitted to file such reports, documents and information
with the Commission, the Issuer will provide substantially similar information
to the Trustee and holders and prospective holders of the Notes (upon request)
as if the Issuer were subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act.
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
METTLER-TOLEDO GROUP
Audited Combined Financial Statements:
Independent Auditors' Report....................................... F-2
Combined Statements of Net Assets as of December 31, 1994 and
1995.............................................................. F-3
Combined Statements of Operations for the years ended December 31,
1993, 1994 and 1995............................................... F-4
Combined Statements of Changes in Net Assets for the years ended
December 31, 1993, 1994 and 1995.................................. F-5
Combined Statements of Cash Flows for the years ended December 31,
1993, 1994 and 1995............................................... F-6
Notes to Combined Financial Statements for the years ended December
31, 1993, 1994 and 1995........................................... F-7
Unaudited Interim Combined Financial Statements:
Interim Combined Statements of Net Assets as of December 31, 1995
and June 30, 1996................................................. F-22
Interim Combined Statements of Operations for the six months ended
June 30, 1995 and 1996............................................ F-23
Interim Combined Statements of Changes in Net Assets for the six
months ended June 30, 1995 and 1996............................... F-24
Interim Combined Statements of Cash Flows for the six months ended
June 30, 1995 and 1996............................................ F-25
Notes to the Interim Combined Financial Statements for the six
months ended June 30, 1995 and 1996............................... F-26
MT ACQUISITION CORP.
Independent Auditors' Report.......................................... F-27
Balance Sheet as of July 16, 1996..................................... F-28
Notes to Balance Sheet as of July 16, 1996............................ F-29
METTLER-TOLEDO HOLDING INC.
Independent Auditors' Report.......................................... F-30
Consolidated Balance Sheet as of July 16, 1996........................ F-31
Notes to Consolidated Balance Sheet as of July 16, 1996............... F-32
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Ciba-Geigy AG
We have audited the accompanying combined statements of net assets of the
Mettler-Toledo Group (as defined in Note 1) as of December 31, 1994 and 1995,
and the related combined statements of operations, changes in net assets and
cash flows for each of the years in the three-year period ended December 31,
1995. These combined financial statements are the responsibility of the Group's
management. Our responsibility is to express an opinion on these combined
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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Mettler-Toledo Group as of December 31, 1994 and 1995, and the combined results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995 in conformity with generally accepted accounting
principles in the United States of America.
KPMG FIDES PEAT
Zurich, Switzerland
February 5, 1996
F-2
<PAGE>
METTLER-TOLEDO GROUP
COMBINED STATEMENTS OF NET ASSETS
AS OF DECEMBER 31, 1994 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 63,802 $ 41,402
Due from Ciba and affiliates (Note 3)................ 18,688 33,072
Trade accounts receivable, net (Note 4).............. 139,315 159,218
Inventories (Note 5)................................. 105,001 110,986
Deferred taxes (Note 15)............................. 6,830 6,180
Other current assets (Note 7)........................ 17,755 21,469
-------- --------
Total current assets.............................. 351,391 372,327
Property, plant and equipment, net (Note 8)............ 230,033 241,018
Goodwill, net (Note 9)................................. 86,833 84,425
Long-term deferred taxes (Note 15)..................... 10,882 14,312
Other assets (Notes 10, 14)............................ 4,059 12,012
-------- --------
Total assets...................................... $683,198 $724,094
-------- --------
-------- --------
LIABILITIES AND NET ASSETS
Current liabilities:
Trade accounts payable............................... $ 31,126 $ 34,389
Accrued and other liabilities (Note 12).............. 86,672 107,118
Taxes payable........................................ 10,596 11,737
Deferred taxes (Note 15)............................. 7,921 7,698
Bank and other loans (Note 11)....................... 24,947 29,513
Notes payable to Ciba and affiliates (Note 13)....... 64,064 91,132
-------- --------
Total current liabilities......................... 225,326 281,587
Long-term debt payable to Ciba and affiliates
(Note 13)............................................ 132,275 145,097
Long-term debt due to third parties (Note 13).......... 862 3,621
Long-term deferred taxes (Note 15)..................... 10,222 13,502
Other long-term liabilities (Note 14).................. 83,964 84,303
-------- --------
Total liabilities................................. 452,649 528,110
Minority interest...................................... 2,355 2,730
Net assets:
Capital employed..................................... 218,129 162,604
Currency translation adjustment...................... 10,065 30,650
-------- --------
Total net assets.................................. 228,194 193,254
-------- --------
Commitments and contingencies (Note 18)
Total liabilities and net assets.................. $683,198 $724,094
-------- --------
-------- --------
</TABLE>
See the accompanying notes to the combined financial statements
F-3
<PAGE>
METTLER-TOLEDO GROUP
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Net sales.................................... $ 728,958 $ 769,136 $ 850,415
Cost of sales................................ 443,534 461,629 508,089
--------- --------- ---------
Gross profit............................... 285,424 307,507 342,326
Research and development expenses............ 46,438 47,994 54,542
Marketing and selling expenses............... 141,717 152,631 167,396
General and administrative expenses.......... 68,357 76,248 81,167
Amortization of goodwill..................... 2,535 2,536 2,529
Other charges (income), net (Note 16)........ 18,284 (2,852) (701)
--------- --------- ---------
Income from operations..................... 8,093 30,950 37,393
Interest expense (Note 13)................... 15,239 13,307 18,219
Financial income, net (Note 17).............. 4,174 4,864 8,630
--------- --------- ---------
Income (loss) before taxes and minority
interest................................ (2,972) 22,507 27,804
Provision for taxes (Note 15)................ 3,041 8,676 8,782
Minority interest............................ 1,140 347 768
--------- --------- ---------
Net income (loss).......................... $ (7,153) $ 13,484 $ 18,254
--------- --------- ---------
--------- --------- ---------
</TABLE>
See the accompanying notes to the combined financial statements
F-4
<PAGE>
METTLER-TOLEDO GROUP
COMBINED STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
CURRENCY
CAPITAL TRANSLATION
EMPLOYED ADJUSTMENT TOTAL
-------- ---------- --------
<S> <C> <C> <C>
Net assets at January 1, 1993................ $216,256 $ 36 $216,292
Capital transactions with Ciba and
affiliates................................. (6,460) -- (6,460)
Net loss..................................... (7,153) -- (7,153)
Change in currency translation adjustment.... -- (9,158) (9,158)
-------- ---------- --------
Net assets at December 31, 1993.............. 202,643 (9,122) 193,521
Capital transactions with Ciba and
affiliates................................. 2,002 -- 2,002
Net income................................... 13,484 -- 13,484
Change in currency translation adjustment.... -- 19,187 19,187
-------- ---------- --------
Net assets at December 31, 1994.............. 218,129 10,065 228,194
Capital transactions with Ciba and
affiliates................................. (73,779) -- (73,779)
Net income................................... 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
-------- ---------- --------
-------- ---------- --------
</TABLE>
See the accompanying notes to the combined financial statements
F-5
<PAGE>
METTLER-TOLEDO GROUP
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ (7,153) $ 13,484 $ 18,254
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation......................................... 26,674 27,681 30,598
Amortization of goodwill............................. 2,535 2,536 2,529
Amortization and write-down of other intangibles..... 382 3,901 236
Net gain on disposal of long-term assets............. (305) (1,396) (1,053)
Deferred taxes....................................... (2,881) 740 (551)
Minority interest.................................... 1,140 347 768
Increase (decrease) in cash resulting from changes
in:
Trade accounts receivable, net.................... (4,765) (7,410) (9,979)
Inventories....................................... 1,218 (574) (607)
Other current assets.............................. (1,596) 1,636 (3,058)
Trade accounts payable............................ (1,728) (1,123) 1,437
Accruals and other liabilities, net............... 8,935 (5,728) 13,095
-------- -------- --------
Net cash provided by operating activities....... 22,456 34,094 51,669
-------- -------- --------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment....... 3,799 12,454 4,000
Purchase of property, plant and equipment................. (25,122) (24,916) (25,858)
Investments in other long term assets, net................ (2,534) 162 (7,484)
-------- -------- --------
Net cash used in investing activities........... (23,857) (12,300) (29,342)
-------- -------- --------
Cash flows from financing activities:
Borrowings (repayments) of third party debt............... (2,384) (311) 3,983
Ciba and affiliates borrowings (repayments)............... 16,660 (9,187) (15,693)
Capital transactions with Ciba and affiliates............. (6,460) 2,002 (37,361)
-------- -------- --------
Net cash provided by (used in) financing
activities................................... 7,816 (7,496) (49,071)
-------- -------- --------
Effect of exchange rate changes on cash and cash
equivalents............................................... 2,275 10,040 4,344
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 8,690 24,338 (22,400)
Cash and cash equivalents:
Beginning of year......................................... 30,774 39,464 63,802
-------- -------- --------
End of year............................................... $ 39,464 $ 63,802 $ 41,402
-------- -------- --------
-------- -------- --------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest............................................... $ 13,867 $ 13,225 $ 18,927
Taxes.................................................. 6,147 9,370 9,970
Non-cash financing and investing activities:
Due to Ciba for capital transactions (Note 13)............ $ 36,418
</TABLE>
See the accompanying notes to the combined financial statements
F-6
<PAGE>
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
1. BASIS OF PRESENTATION
The accompanying combined financial statements have been prepared in
accordance with United States generally accepted accounting principles ('U.S.
GAAP') on a basis which reflects the combined assets and liabilities ('net
assets') and sales, costs of sales and other income and expenses ('operations')
and cash flows of the companies constituting the Mettler-Toledo Group
('Mettler-Toledo' or the 'Group'). The Group represents the following entities
(including their respective subsidiaries) owned by Ciba-Geigy AG ('Ciba')
assuming that the Group was organized as a separate legal entity for all periods
presented (Ciba ownership percentage is 100% unless otherwise indicated):
<TABLE>
<CAPTION>
JURISDICTION
ENTITY OF ORGANIZATION
- ----------------------------------------------------- -------------------------
<S> <C>
Mettler-Toledo (Holding) Deutschland GmbH............ Germany
MARKET ORGANIZATIONS--EUROPE
Mettler-Toledo GmbH.................................. Germany
Mettler-Toledo Sp. z.o.o........................... Poland
Getmore Gesellschaft fur Marketing & Media Service
GmbH............................................ Germany
Ohaus Waagen Vertriebsgesellschaft mbH............. Germany
Mettler-Toledo SA.................................... France
Ohaus S.a.r.l...................................... France
Mettler-Toledo Ltd................................... United Kingdom
Ohaus Europe, Branch of Ohaus US..................... United Kingdom
Mettler-Toledo (Schweiz) AG.......................... Switzerland
N.V. Mettler-Toledo SA............................... Belgium
Mettler-Toledo BV.................................... Netherlands
Mettler-Toledo S.p.A. (including Grandi Impianti
Mettler-Toledo S.r.l.--52% ownership by Ciba)...... Italy
Mettler-Toledo S.A.E................................. Spain
Mettler-Toledo AB.................................... Sweden
Mettler-Toledo A/S................................. Norway
Mettler-Toledo A/S................................. Denmark
Mettler-Toledo Gesellschaft mbH...................... Austria
Mettler-Toledo spol. s.r.o......................... Slovakia
Mettler-Toledo Service s.r.o....................... Slovakia
Mettler-Toledo spol, s.r.o......................... Czech Republic
Mettler-Toledo Kereskedelmi Kft.................... Hungary
Mettler-Toledo d.o.o............................... Slovenia
Mettler-Toledo d.o.o............................... Croatia
Mettler-Toledo Analyse Industrielle S.ar.l........... France
PRODUCING ORGANIZATIONS--EUROPE
Mettler-Toledo AG.................................... Switzerland
Mettler-Toledo (Albstadt) GmbH....................... Germany
Garvens Automation GmbH.............................. Germany
</TABLE>
F-7
<PAGE>
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
1. BASIS OF PRESENTATION--(CONTINUED)
<TABLE>
<CAPTION>
JURISDICTION
ENTITY OF ORGANIZATION
- ----------------------------------------------------- -------------------------
<S> <C>
AMERICAN COMPANIES
Mettler-Toledo, Inc.................................. United States
Mettler-Toledo Inc................................... Canada
Hi-Speed Checkweigher Co., Inc....................... United States
Mettler-Toledo S.A. de C.V........................... Mexico
Mettler-Toledo Process Analytical Inc................ United States
Ohaus Corporation.................................... United States
Ohaus de Mexico S.A. de C.V.......................... Mexico
Mettler-Toledo Industria e Comercio Ltda.(1)......... Brazil
ASIAN AND PACIFIC COMPANIES
Mettler-Toledo Ltd.(2)............................... Australia
Toledo Scale (HK) Ltd................................ Hong Kong
Mettler-Toledo Instruments (Shanghai) Ltd............ Peoples Republic of China
Mettler-Toledo International Trading (Shanghai)
Corp............................................ Peoples Republic of China
Changzhou Toledo Electronic Scale Ltd. (60% ownership
by Ciba)........................................... Peoples Republic of China
Mettler-Toledo (S.E.A.) Pte. Ltd..................... Singapore
Mettler-Toledo K.K................................... Japan
Mettler-Toledo (M) Sdn. Bhd.......................... Malaysia
Mettler-Toledo (Thailand)(3)......................... Thailand
OTHER COMPANIES
Mettler-Toledo Pac Rim AG............................ Switzerland
Microwa Prazisionswaagen AG.......................... Switzerland
</TABLE>
- ------------------
(1) Subsidiary of Mettler-Toledo AG.
(2) Subsidiary of Mettler-Toledo, Inc.
(3) Division of Ciba as of December 31, 1995. A separate legal entity formed in
1996.
- ------------------
In the opinion of management of the Group, the accompanying combined
financial statements include all material expenses that the Mettler-Toledo Group
would have incurred had it been operating as an independent entity for all
periods presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
The Mettler-Toledo Group is a manufacturer and marketer of weighing
instruments for use in laboratory, industrial and food retailing applications.
The Group also manufacturers and sells certain related laboratory
F-8
<PAGE>
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
measurement instruments. The Group's manufacturing facilities are located in
Switzerland, the United States, Germany and China. The Group's principal
executive offices are located in Greifensee, Switzerland.
Principles of Combination
The combined financial statements include the entities listed in Note 1.
All transactions and balances between the Companies listed in Note 1 have been
eliminated.
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:
<TABLE>
<S> <C>
Buildings and improvements.... 15 to 50 years
Machinery and equipment....... 3 to 12 years
Computer software............. 3 years
Leasehold improvements........ Shorter of useful life or lease term
</TABLE>
Beginning January 1, 1996 the Group adopted Financial Accounting Standards
Board's 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 effect on the combined financial
statements.
Goodwill
Goodwill, which represents the excess of purchase price over the fair value
of net assets acquired, is amortized on a straight-line basis over 40 years
being the expected period to be benefited. The Group assesses the recoverability
of goodwill by determining whether the amortization of the goodwill balance over
its remaining life can be recovered from the undiscounted future operating cash
flows of the acquired operation. The amount of goodwill impairment, if any, is
measured based on projected discounted future operating cash flows using a
discount rate commensurate with the risks involved. The assessment of the
recoverability of goodwill will be impacted if estimated future operating cash
flows are not achieved.
F-9
<PAGE>
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Taxation
The Group files its own tax returns in each jurisdiction in which it
operates, except in certain jurisdictions where it files jointly with other Ciba
subsidiaries. The Group has a tax sharing arrangement with Ciba in these
countries to share the tax burden or benefits. Such arrangement results 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.
Taxes are accounted for under the asset and liability method. 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
Group operates that are expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred income tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Generally, deferred taxes are not provided on the unremitted earnings of
subsidiaries outside of Switzerland because it is expected that these earnings
are permanently reinvested. 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 Group'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 funded by customers and, accordingly, is included in cost of sales),
amounted to approximately $52,600, $55,600 and $62,400 during 1993, 1994 and
1995, respectively.
Currency Translation and Transactions
The reporting currency for the combined financial statements of the Group
is the United States dollar (USD). The functional currency for the Group'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 combination 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. Currency transaction gains or losses arising from transactions of
Group companies in currencies other than the functional currency are included in
operations at each reporting period.
Derivative Financial Instruments
The Group has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Derivative financial
instruments in the form of currency forward and option contracts are entered
into by the Group primarily as a hedge against anticipated currency exposures.
Such contracts limit the Group'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.
F-10
<PAGE>
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable,
other current assets and current liabilities approximates fair market value
because of the short term maturity of these financial instruments. It is not
practical to determine the fair value of balances with Ciba due to the related
party nature of these financial instruments. Other financial instruments are not
significant to the combined financial statements.
Concentration of Credit Risk
The Group's revenue base is widely diversified by geographic region and by
individual customer. The Group's products are utilized in many different
industries, although extensively in the pharmaceutical and chemical industries.
The Group 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 on a
straight-line basis over the contract period.
Use of Estimates
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.
3. DUE FROM CIBA AND AFFILIATES, NET
The amount due from Ciba, net is comprised of the following:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Cash pool deposits..................................... $18,688 $22,239
Due from AG fur Prazisionsinstrumente ('AGP'), a
subsidiary of Ciba, 6.5%, revolving repayment
terms................................................ -- 10,833
------- -------
$18,688 $33,072
------- -------
------- -------
</TABLE>
Certain Group operating units participate in an arrangement with Ciba
whereby excess cash is pooled into an account maintained by Ciba. The net
deposit with Ciba in connection with this arrangement bears interest at the
short-term money market rates available to Ciba.
Ciba performs certain limited administrative services on behalf of the
Group. The cost of such services, which has not been charged to the Group nor
included in the combined financial statements, would not be significant.
F-11
<PAGE>
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
4. TRADE ACCOUNTS RECEIVABLE, NET
Trade accounts receivable, net, consisted of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Trade accounts receivable............... $146,726 $168,510
Allowance for doubtful accounts......... (7,411) (9,292)
-------- --------
$139,315 $159,218
-------- --------
-------- --------
</TABLE>
5. INVENTORIES
Inventories consisted of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Raw materials and parts................. $ 46,305 $ 45,523
Work in progress........................ 30,689 38,191
Finished goods.......................... 30,564 30,149
-------- --------
107,558 113,863
LIFO reserve............................ (2,557) (2,877)
-------- --------
$105,001 $110,986
-------- --------
-------- --------
</TABLE>
At December 31, 1994 and 1995, 9.2% and 8.8%, 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.
6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS
The Group may be exposed to credit losses in the event of nonperformance by
the counterparties to its currency forward and option contracts. The Group has
no reason to believe, however, that such counterparties will not be able to
fully satisfy their obligations under these contracts.
At December 31, 1994, the Group had contracts maturing during 1995 to
purchase the equivalent of approximately $130 and to sell the equivalent of
approximately $25,700 in various currencies. At December 31, 1995, the Group had
currency forward and option contracts maturing during 1996 to purchase the
equivalent of approximately $23,300 and to sell the equivalent of approximately
$27,900 in various currencies. These contracts were used to limit its exposure
to currency fluctuations on anticipated future cash flows, primarily for the
delivery and receipt of United States dollars, German marks, and Japanese yen in
exchange for Swiss francs.
At December 31, 1994 and 1995, the fair value of such financial
instruments, which the Group recognized as net unrealized gains, was
approximately $590 and $2,400, respectively.
7. OTHER CURRENT ASSETS
Other current assets consisted of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Prepaid expenses....................................... $ 4,273 $ 4,703
Other (including net gains on derivative financial
instruments)......................................... 13,482 16,766
------- -------
$17,755 $21,469
------- -------
------- -------
</TABLE>
F-12
<PAGE>
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
8. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net, consisted of the following at
December 31:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Land.............................................. $ 28,488 $ 31,535
Buildings and leasehold improvements.............. 166,281 186,608
Machinery and equipment........................... 218,824 237,457
Computer software................................. 4,114 5,373
-------- --------
417,707 460,973
Less accumulated depreciation and amortization.... (187,674) (219,955)
-------- --------
$230,033 $241,018
-------- --------
-------- --------
</TABLE>
9. GOODWILL, NET
Goodwill, net, consists of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Cost.......................... $101,572 $101,693
Accumulated amortization...... (14,739) (17,268)
-------- --------
$ 86,833 $ 84,425
-------- --------
-------- --------
</TABLE>
10. OTHER ASSETS
Other assets consisted of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
------ -------
<S> <C> <C>
Bank deposits--restricted cash.......... $1,145 $ 4,697
Secured loans........................... 1,165 2,911
Other................................... 1,749 4,404
------ -------
$4,059 $12,012
------ -------
------ -------
</TABLE>
Bank deposits--restricted cash at December 31, 1994 and 1995 represented
amounts restricted as to use under Switzerland tax law and, in 1995, deposits
collateralizing a letter of credit given by a financial institution in
connection with one of the Company's subsidiaries in the Peoples Republic of
China.
11. BANK AND OTHER LOANS
Bank and other loans consisted of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Bank overdraft liability................ $15,005 $16,977
Borrowings under line of credit......... 9,161 10,105
Other................................... 781 2,431
------- -------
$24,947 $29,513
------- -------
------- -------
</TABLE>
The weighted average interest rate on the borrowings under line of credit
was approximately 6.6% and 8.0% at December 31, 1994 and 1995, respectively. The
Group had available unused bank lines of credit for short-term financing of
approximately $72,000 at December 31, 1995.
F-13
<PAGE>
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
12. ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities consisted of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
------- --------
<S> <C> <C>
Accrued payroll and vacation................. $22,620 $ 26,400
Social benefits and payroll taxes............ 8,830 9,563
Other taxes payable.......................... 4,318 8,190
Warranty..................................... 5,633 6,420
Other liabilities............................ 45,271 56,545
------- --------
$86,672 $107,118
------- --------
------- --------
</TABLE>
Warranties on Mettler-Toledo products are generally for one year. The Group
provides for warranty costs, which have not been significant, based on
historical experience.
13. DEBT
The Group's debt obligations consist of the following at December 31:
Short-term notes payable to Ciba and affiliates:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Unsecured notes payable:
AGP, 4.25%, due February 29,1996 (renewable)......... $ -- $26,517
Ciba, 7.56%, due December 20, 1995................... 20,000 --
Due to Ciba for capital transactions................... -- 36,418
Due to AGP, 6.5%, revolving repayment terms............ 28,603 --
Other unsecured short-term debt to Ciba, varying
interest rates and maturities........................ 15,461 28,197
------- -------
$64,064 $91,132
------- -------
------- -------
</TABLE>
Long-term debt payable to Ciba and affiliates:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Unsecured notes payable:
AGP, 8.4%, due December 20, 1999..................... $ -- $122,000
AGP, 6%, due December 20, 1999....................... -- 20,000
Ciba, 8.4%, due December 20, 1999
(refinanced during 1995).......................... 122,000 --
Other unsecured long-term debt to Ciba, varying
interest rates and maturities........................ 10,275 3,097
-------- --------
$132,275 $145,097
-------- --------
-------- --------
</TABLE>
Long-term debt payable to third parties at December 31, 1994 and 1995 was
$862 and $3,621, respectively.
Interest expense consists of the following for the years ended December 31:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Ciba........... $13,402 $10,506 $15,693
Third-party.... 1,837 2,801 2,526
------- ------- -------
$15,239 $13,307 $18,219
------- ------- -------
------- ------- -------
</TABLE>
F-14
<PAGE>
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
14. BENEFIT PLANS
Mettler-Toledo maintains a number of retirement plans for the benefit of
its employees.
Certain group companies sponsor defined contribution plans. Benefits are
determined and funded annually based upon the terms of the plans. Contributions
under these plans amounted to $8,455, $9,042, and $9,413, in 1993, 1994 and
1995, respectively.
Certain group companies sponsor defined benefit plans. Benefits are also
provided to employees under defined benefit plans 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 combined financial statements for the Group's principal defined benefit
plans at December 31, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
------------------------------- -------------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS EXCEED ACCUMULATED BENEFITS EXCEED
BENEFITS ASSETS BENEFITS ASSETS
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Actuarial present value of accumulated
benefit obligations:
Vested benefits....................... $(8,247) $ (73,144) $ (8,582) $ (90,698)
Non-vested benefits................... (229) (4,279) (90) (3,122)
------------- --------------- ------------- ---------------
(8,476) (77,423) (8,672) (93,820)
------------- --------------- ------------- ---------------
Projected benefit obligations........... (9,166) (90,028) (10,737) (100,820)
Plan assets at fair value............... 10,135 28,414 10,546 40,091
------------- --------------- ------------- ---------------
Plan assets in excess of (less than)
projected benefit obligations......... 969 (61,614) (191) (60,729)
Unrecognized prior service cost
(benefit)............................. 502 1,103 183 (252)
Unrecognized net losses................. 66 1,265 188 247
Unrecognized transition obligations..... -- 3,835 -- 3,851
------------- --------------- ------------- ---------------
Prepaid (accrued) pension costs......... $ 1,537 $ (55,411) $ 180 $ (56,883)
------------- --------------- ------------- ---------------
------------- --------------- ------------- ---------------
</TABLE>
The prepaid (accrued) pension costs are recognized in the accompanying
combined 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:
<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
Discount rates................ 6.5% to 9.0% 6.5% to 8.0%
Compensation increase rates... 2.5% to 7.0% 2.5% to 6.0%
</TABLE>
The expected long term rates of return on plan assets ranged between 9.0%
and 9.3% for 1993, 9.5% and 11.0% in 1994, and 9.5% and 10.0% for 1995.
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.
F-15
<PAGE>
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
14. BENEFIT PLANS--(CONTINUED)
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 Group's U.S. companies and consist of
equity investments, obligations of the U.S. Treasury or other governmental
agencies, and other interest-bearing investments.
Net periodic pension cost for all of the plans above includes the following
components:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------- -------
<S> <C> <C> <C>
Service cost (benefits earned during the
period).................................... $3,722 $ 3,833 $ 3,668
Interest cost on projected benefit
obligations................................ 6,055 6,426 7,561
Actual return on plan assets................. (3,609) (2,725) (8,653)
Net amortization and deferral................ 1,012 (170) 5,137
------ ------- -------
Net periodic pension expense................. $7,180 $ 7,364 $ 7,713
------ ------- -------
------ ------- -------
</TABLE>
The Group'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 recognized in the Group's combined financial statements at December
31, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligations:
Retired...................................... $(27,837) $(27,682)
Fully eligible............................... (1,252) (1,196)
Other........................................ (2,547) (2,361)
-------- --------
(31,636) (31,239)
Unrecognized net loss.......................... 5,714 6,261
Unrecognized prior service benefit............. -- (692)
Unrecognized transition obligation............. 1,471 1,389
-------- --------
Accrued postretirement benefit cost............ $(24,451) $(24,281)
-------- --------
-------- --------
</TABLE>
Net periodic postretirement benefit cost for the above plans includes the
following components:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------ ------
<S> <C> <C> <C>
Service cost (benefits earned during the
period)......................................... $ 296 $ 333 $ 285
Interest cost on accumulated postretirement
benefit obligations............................. 2,053 2,193 2,371
Net amortization and deferral..................... 82 82 99
------- ------ ------
Net periodic postretirement benefit cost.......... $ 2,431 $2,608 $2,755
------- ------ ------
------- ------ ------
</TABLE>
The accumulated postretirement benefit obligation and net periodic
postretirement benefit cost were determined using discount rates of 8.5% in 1993
and 7.3% in 1994 and 1995, and health care cost trend rates ranging from 10.75%
to 12.25% in 1993, 1994 and 1995, decreasing to 5.5% in 2005.
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 1995 the effect of a one-percentage-point increase
in the assumed health care cost trend rate would be an increase of $2,875 on the
accumulated
F-16
<PAGE>
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
14. BENEFIT PLANS--(CONTINUED)
postretirement benefit obligations and an increase of $251 on the aggregate of
the service and interest cost components of the net periodic benefit cost.
15. TAXES
The sources of the Group's income (loss) before taxes and minority interest
were as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Switzerland.................................. $ (5) $ 9,855 $11,431
Non-Switzerland.............................. (2,967) 12,652 16,373
------- ------- -------
$(2,972) $22,507 $27,804
------- ------- -------
------- ------- -------
</TABLE>
The provision (benefit) for taxes consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- ------
<S> <C> <C> <C>
Year ended December 31, 1993:
Switzerland Federal........................ $ 464 $ (308) $ 156
Switzerland Canton (State) and Local....... 130 (509) (379)
Non-Switzerland............................ 5,328 (2,064) 3,264
------- -------- ------
$5,922 $ (2,881) $3,041
------- -------- ------
------- -------- ------
Year ended December 31, 1994:
Switzerland Federal........................ $1,182 $ (32) $1,150
Switzerland Canton (State) and Local....... 1,215 (53) 1,162
Non-Switzerland............................ 5,538 826 6,364
------- -------- ------
$7,935 $ 741 $8,676
------- -------- ------
------- -------- ------
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
------- -------- ------
------- -------- ------
</TABLE>
The provision for tax expense (benefit) for the years ended December 31,
1993, 1994 and 1995 differed from the amounts computed by applying the
Switzerland federal income tax rate of 9.8% to income (loss) before taxes and
minority interest as a result of the following:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Expected tax................................. $ (291) $2,206 $2,725
Switzerland Canton (state) and local income
taxes, net of federal income tax benefit... (342) 1,048 (21)
Non-deductible goodwill...................... 248 249 248
Change in valuation allowance................ 4,601 (716) 1,603
Non-Switzerland income taxes in excess of
(less than) 9.8%........................... (1,295) 5,591 4,968
Other, net................................... 120 298 (741)
------ ------ ------
$3,041 $8,676 $8,782
------ ------ ------
------ ------ ------
</TABLE>
F-17
<PAGE>
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
15. TAXES--(CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1994 and 1995 are presented below:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Inventory.............................................. $ 8,788 $ 9,706
Accrued and other liabilities.......................... 4,826 6,129
Deferred loss on sale of subsidiaries.................. 6,227 6,725
Accrued postretirement benefit costs................... 9,291 9,227
Accrued pension costs.................................. 5,684 6,276
Non-Switzerland foreign net operating loss
carryforwards........................................ 10,523 10,140
Other.................................................. 5,168 4,082
-------- --------
Total gross deferred tax assets........................ 50,507 52,285
Less valuation allowance............................... (19,563) (21,166)
-------- --------
Gross deferred tax assets less valuation allowance..... 30,944 31,119
-------- --------
Deferred tax liabilities:
Inventory.............................................. 5,946 5,952
Property, plant and equipment.......................... 21,352 21,675
Other.................................................. 4,077 4,200
-------- --------
Total gross deferred tax liabilities................... 31,375 31,827
-------- --------
Net deferred tax liability............................. $ (431) $ (708)
-------- --------
-------- --------
</TABLE>
The net change in the total valuation allowance, including changes
resulting from translation of such amounts from the local functional currencies
to the reporting currency, for the years ended December 31, 1993, 1994 and 1995
was an increase of $4,601 and $1,603 in 1993 and 1995, respectively, and a
decrease of $716 in 1994.
The Group has established valuation allowances primarily for net operating
losses and deferred losses on the sale of subsidiaries as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Net operating losses:
Nordic Region........................................ $ 2,511 $ 2,680
Belgium.............................................. 1,537 1,937
Spain................................................ 2,379 1,551
Australia............................................ 1,189 1,415
Others............................................... 2,907 2,557
------- -------
Total net operating losses............................. 10,523 10,140
Deferred losses on sale of subsidiaries................ 6,227 6,725
Other.................................................. 2,813 4,301
------- -------
Total valuation allowance.............................. $19,563 $21,166
------- -------
------- -------
</TABLE>
At December 31, 1995, the Group had federal net operating loss
carryforwards in various countries other than Switzerland for income tax
purposes of $28,017. Of this amount, $19,363 had no expiration date, relating to
subsidiaries in Sweden, Belgium, Australia, United Kingdom, and Singapore.
Additionally, there were operating
F-18
<PAGE>
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
15. TAXES--(CONTINUED)
losses at that date in various other countries in the amount of $8,654 which
expire in varying amounts through 2001.
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. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment.
16. OTHER CHARGES (INCOME), NET
In June, 1993, Mettler-Toledo management approved a plan of reorganization
designed to reduce the Group's production capacity in Europe. In connection with
the reorganization, the Group recorded in 1993 charges of $19,774, including
approximately $3,800 for non-cash asset writedowns and approximately $16,000 for
severance and other costs. During 1994 the reorganization was substantially
completed.
Other income in 1993, 1994 and 1995 primarily relates to gains from sales
of property, and in 1994 to a gain on sale of a cost basis investment.
17. FINANCIAL INCOME, NET
Financial income (expense) consists of the following for the years ended
December 31:
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Interest income......................... $ 4,590 $ 4,386 $ 5,388
Foreign currency transactions, net...... (416) 478 3,242
-------- -------- --------
$ 4,174 $ 4,864 $ 8,630
-------- -------- --------
-------- -------- --------
</TABLE>
18. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Group leases certain of its facilities in the U.S. and U.K. under
operating leases. The future minimum future lease payments under non-cancelable
operating leases are as follows at December 31, 1995:
<TABLE>
<S> <C>
1996.......... $ 8,497
1997.......... 5,878
1998.......... 3,731
1999.......... 1,802
2000.......... 1,145
Thereafter.... 6,407
-------
Total......... $27,460
-------
-------
</TABLE>
Rent expense for operating leases amounted to $9,077, $10,508 and $11,480
in 1993, 1994 and 1995, respectively.
F-19
<PAGE>
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
18. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
LEGAL
The Group 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 Group's financial condition or results of operations.
19. GEOGRAPHIC SEGMENT INFORMATION
The tables below shows the Group'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.
<TABLE>
<CAPTION>
NET SALES BY NET SALES TRANSFERS BETWEEN TOTAL NET SALES INCOME (LOSS)
1993 DESTINATION BY ORIGIN GEOGRAPHIC AREAS BY ORIGIN FROM OPERATIONS
- ------------------ ------------ --------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Switzerland(1).... $ 29,927 $ 83,904 $ 116,281 $ 200,185 $(2,394)
Germany........... 123,464 132,012 34,403 166,415 115
Other Europe...... 193,919 172,527 679 173,206 (2,317)
------------ --------- ----------------- --------------- ---------------
Total Europe...... 347,310 388,443 151,363 539,806 (4,596)
United States..... 258,968 283,615 27,638 311,253 7,319
Other Americas.... 54,713 32,834 62 32,896 1,497
------------ --------- ----------------- --------------- ---------------
Total Americas.... 313,681 316,449 27,700 344,149 8,816
Asia and other.... 67,967 24,066 84 24,150 2,738
Eliminations...... -- -- (179,147) (179,147) 1,135
------------ --------- ----------------- --------------- ---------------
Totals............ $728,958 $ 728,958 $ -- $ 728,958 $ 8,093
------------ --------- ----------------- --------------- ---------------
------------ --------- ----------------- --------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
NET SALES BY NET SALES TRANSFERS BETWEEN TOTAL NET SALES INCOME (LOSS) TOTAL
1994 DESTINATION BY ORIGIN GEOGRAPHIC AREAS BY ORIGIN FROM OPERATIONS ASSETS
- ------------------ ------------ --------- ----------------- --------------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Switzerland(1).... $ 31,992 $ 89,495 $ 133,583 $ 223,078 $10,516 $ 369,868
Germany........... 126,527 133,772 37,056 170,828 10,034 127,071
Other Europe...... 215,230 192,557 776 193,333 1,665 108,692
------------ --------- ----------------- --------------- --------------- ---------
Total Europe...... 373,749 415,824 171,415 587,239 22,215 605,631
United States..... 269,034 300,244 29,877 330,121 10,111 265,440
Other Americas.... 56,628 33,204 64 33,268 939 13,728
------------ --------- ----------------- --------------- --------------- ---------
Total Americas.... 325,662 333,448 29,941 363,389 11,050 279,168
Asia and other.... 69,725 19,864 75 19,939 238 21,601
Eliminations...... -- -- (201,431) (201,431) (2,553) (223,202)
------------ --------- ----------------- --------------- --------------- ---------
Totals............ $769,136 $ 769,136 $ -- $ 769,136 $30,950 $ 683,198
------------ --------- ----------------- --------------- --------------- ---------
------------ --------- ----------------- --------------- --------------- ---------
</TABLE>
F-20
<PAGE>
METTLER-TOLEDO GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS UNLESS OTHERWISE STATED)
19. GEOGRAPHIC SEGMENT INFORMATION--(CONTINUED)
<TABLE>
<CAPTION>
NET SALES BY NET SALES TRANSFERS BETWEEN TOTAL NET SALES INCOME (LOSS) TOTAL
1995 DESTINATION BY ORIGIN GEOGRAPHIC AREAS BY ORIGIN FROM OPERATIONS ASSETS
- ------------------ ------------ --------- ----------------- --------------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Switzerland(1).... $ 41,820 $ 102,712 $ 159,453 $ 262,165 $ 6,316 $ 593,955
Germany........... 151,974 158,393 47,379 205,772 14,799 196,460
Other Europe...... 247,802 228,939 799 229,738 2,080 123,431
------------ --------- ----------------- --------------- --------------- ---------
Total Europe...... 441,596 490,044 207,631 697,675 23,195 913,846
United States..... 263,945 298,053 29,578 327,631 7,363 257,956
Other Americas.... 52,966 32,732 131 32,863 950 14,474
------------ --------- ----------------- --------------- --------------- ---------
Total Americas.... 316,911 330,785 29,709 360,494 8,313 272,430
Asia and other.... 91,908 29,586 97 29,683 2,331 31,777
Eliminations...... -- -- (237,437) (237,437) 3,554 (493,959)
------------ --------- ----------------- --------------- --------------- ---------
Totals............ $850,415 $ 850,415 $ -- $ 850,415 $37,393 $ 724,094
------------ --------- ----------------- --------------- --------------- ---------
------------ --------- ----------------- --------------- --------------- ---------
</TABLE>
- ------------------
(1) Includes Corporate.
20. SUBSEQUENT EVENT (UNAUDITED)
Pursuant to the terms of a Stock Purchase Agreement (as amended, the
'Agreement') dated April 2, 1996, between AEA MT Inc., AGP, and Ciba, Ciba
agreed to sell to AEA MT Inc. and AEA MT Inc. agreed to purchase from Ciba all
of the capital stock and other equity instruments in the entities listed in Note
1. Consummation of the transaction contemplated by the Agreement is subject to
various terms and conditions.
F-21
<PAGE>
METTLER-TOLEDO GROUP
INTERIM COMBINED STATEMENTS OF NET ASSETS
DECEMBER 31, 1995 AND JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............. $ 41,402 $ 45,935
Due from Ciba and affiliates.......... 33,072 53,025
Trade accounts receivable, net........ 159,218 157,212
Inventories........................... 110,986 107,342
Deferred taxes........................ 6,180 5,836
Other current assets.................. 21,469 25,040
----------------- -------------
Total current assets.................. 372,327 394,390
Property, plant and equipment, net...... 241,018 225,885
Goodwill, net........................... 84,425 83,155
Long-term deferred taxes................ 14,312 13,596
Other assets............................ 12,012 14,894
----------------- -------------
Total assets....................... $ 724,094 $ 731,920
----------------- -------------
----------------- -------------
LIABILITIES AND NET ASSETS
Current liabilities
Trade accounts payable................ $ 34,389 $ 34,265
Accrued and other liabilities......... 107,118 101,782
Taxes payable......................... 11,737 16,439
Deferred taxes........................ 7,698 7,313
Bank and other loans.................. 29,513 32,610
Notes payable to Ciba and
affiliates......................... 91,132 83,242
----------------- -------------
Total current liabilities.......... 281,587 275,651
Long-term debt payable to Ciba and
affiliates............................ 145,097 152,231
Long-term debt due to third parties..... 3,621 6,015
Long-term deferred taxes................ 13,502 12,827
Other long-term liabilities............. 84,303 88,979
----------------- -------------
Total liabilities.................. 528,110 535,703
Minority interest....................... 2,730 2,855
Net assets:
Capital employed...................... 162,604 173,964
Currency translation adjustment....... 30,650 19,398
----------------- -------------
Total net assets................... 193,254 193,362
----------------- -------------
Total liabilities and net assets... $ 724,094 $ 731,920
----------------- -------------
----------------- -------------
</TABLE>
See the accompanying notes to the interim combined financial statements
F-22
<PAGE>
METTLER-TOLEDO GROUP
INTERIM COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
----------------------
1995 1996
--------- ---------
(UNAUDITED)
<S> <C> <C>
Net sales.................................... $ 406,992 $ 423,802
Cost of sales................................ 243,643 252,203
--------- ---------
Gross profit............................ 163,349 171,599
Research and development expenses............ 27,005 25,054
Marketing and selling expenses............... 80,965 81,378
General and administrative expenses.......... 37,909 39,153
Amortization of goodwill..................... 1,289 1,270
--------- ---------
Income from operations.................. 16,181 24,744
Interest expense............................. 8,717 8,346
Financial income, net........................ 2,403 965
--------- ---------
Income before taxes and minority
interest............................... 9,867 17,363
Provision for taxes.......................... 3,117 6,830
Minority interest............................ 270 526
--------- ---------
Net income.............................. $ 6,480 $ 10,007
--------- ---------
--------- ---------
</TABLE>
See the accompanying notes to the interim combined financial statements
F-23
<PAGE>
METTLER-TOLEDO GROUP
INTERIM COMBINED STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
CURRENCY
CAPITAL TRANSLATION
EMPLOYED ADJUSTMENT TOTAL
-------- ---------- --------
(UNAUDITED)
<S> <C> <C> <C>
Net assets at January 1, 1995...... $218,129 $ 10,065 $228,194
Capital transactions with Ciba and
affiliates....................... (18,644) -- (18,644)
Net income......................... 6,480 -- 6,480
Change in currency translation
adjustment....................... -- 28,823 28,823
-------- ---------- --------
Net assets at June 30, 1995........ $205,965 $ 38,888 $244,853
-------- ---------- --------
-------- ---------- --------
Net assets at January 1, 1996...... $162,604 $ 30,650 $193,254
Capital transactions with Ciba and
affiliates....................... 1,353 -- 1,353
Net income......................... 10,007 -- 10,007
Change in currency translation
adjustment....................... -- (11,252) (11,252)
-------- ---------- --------
Net assets at June 30, 1996........ $173,964 $ 19,398 $193,362
-------- ---------- --------
-------- ---------- --------
</TABLE>
See the accompanying notes to the interim combined financial statements
F-24
<PAGE>
METTLER TOLEDO GROUP
INTERIM COMBINED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
--------------------------
1995 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 6,480 $ 10,007
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................... 13,880 12,942
Amortization of goodwill....................... 1,289 1,270
Amortization and write-down of other
intangibles................................... 314 147
Net (gain) loss on disposal of long-term
assets........................................ 290 (131)
Deferred taxes................................. 367 (191)
Minority interest.............................. 270 526
Increase (decrease) in cash resulting from
changes in:
Trade accounts receivable, net............... (3,822) (4,666)
Inventories.................................. (1,162) 279
Other current assets......................... (7,306) (352)
Trade accounts payable....................... 597 932
Accruals and other liabilities, net.......... 11,869 16,097
----------- -----------
Net cash provided by operating
activities.............................. 23,066 36,860
----------- -----------
Cash flows from investing activities:
Proceeds from sale of property, plant and
equipment...................................... 1,046 508
Purchase of property, plant and equipment......... (6,527) (10,053)
Investments in other long term assets, net........ (721) (37)
----------- -----------
Net cash used in investing activities..... (6,202) (9,582)
----------- -----------
Cash flows from financing activities:
Repayment of third party debt..................... (2,779) (1,078)
Ciba and affiliates borrowings (repayments)....... 5,291 (16,368)
Capital transactions with Ciba and affiliates..... (9,685) (2,983)
----------- -----------
Net cash used in financing activities..... (7,173) (20,429)
----------- -----------
Effect of exchange rate changes on cash and cash
equivalents.................................... 5,569 (2,316)
----------- -----------
Net increase in cash and cash
equivalents............................. 15,260 4,533
Cash and cash equivalents:........................
Beginning of year.............................. 63,802 41,402
----------- -----------
End of six month period........................ $ 79,062 $ 45,935
----------- -----------
----------- -----------
</TABLE>
See the accompanying notes to the interim combined financial statements
F-25
<PAGE>
METTLER-TOLEDO GROUP
NOTES TO THE INTERIM COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS UNLESS OTHERWISE STATED)
1. BASIS OF PRESENTATION
The accompanying interim combined financial statements have been prepared
in accordance with United States generally accepted accounting principles on a
basis which reflects the interim combined financial statements of the companies
constituting the Mettler-Toledo Group ('Mettler-Toledo' or the 'Group') assuming
that the Group, currently a business unit of Ciba-Geigy AG ('Ciba'), was
organized for all periods presented as a separate legal entity. Pursuant to the
terms of the Stock Purchase Agreement dated April 2, 1996 between AEA MT Inc.,
AG fur Prazisionsinstrumente, and Ciba, Ciba agreed to sell to AEA MT Inc. and
AEA MT Inc. agreed to purchase from Ciba all of the capital stock and other
equity instruments in the entities representing the Group.
The accompanying interim combined financial statements as of June 30, 1996
and for the six month periods ended June 30, 1995 and 1996 should be read in
conjunction with the December 31, 1994 and 1995 combined financial statements
and the notes thereto contained elsewhere in this Prospectus.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
The Mettler-Toledo Group is a manufacturer and marketer of weighing
instruments for use in laboratory, industrial and food retailing applications.
The Group also manufacturers and sells certain related laboratory measurement
instruments. The Group's manufacturing facilities are located in Switzerland,
the United States, Germany and China.
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.
Inventories consisted of the following at December 31, 1995 and June 30,
1996:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ --------
<S> <C> <C>
Raw materials and parts....... $ 45,523 $ 43,227
Work in progress.............. 38,191 36,810
Finished goods................ 30,149 29,765
------------ --------
113,863 109,802
LIFO reserve.................. (2,877) (2,460)
------------ --------
$110,986 $107,342
------------ --------
------------ --------
</TABLE>
MANAGEMENT REPRESENTATION
The accompanying unaudited interim combined financial statements have been
prepared by Group management pursuant to the rules and regulations of the
Securities and Exchange Commission and 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 six month period ended June 30, 1996 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1996.
F-26
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholder
MT Acquisition Corp.
We have audited the accompanying balance sheet of MT Acquisition Corp. as of
July 16, 1996. This balance sheet is the responsibility of the Company's
management. Our responsibility is to express an opinion on this balance sheet
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of MT Acquisition Corp. as of July 16,
1996, in conformity with generally accepted accounting principles.
KPMG FIDES PEAT
Zurich, Switzerland
July 19, 1996
F-27
<PAGE>
MT ACQUISITION CORP.
BALANCE SHEET
JULY 16, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash................................................................. $1,000
------
Total assets.................................................... $1,000
------
------
STOCKHOLDER'S EQUITY
Common Stock, $1.00 par value; 1,000 shares authorized, issued and
outstanding........................................................ $1,000
------
Total stockholder's equity...................................... $1,000
------
------
</TABLE>
See accompanying notes to balance sheet
F-28
<PAGE>
MT ACQUISITION CORP.
NOTES TO BALANCE SHEET
JULY 16, 1996
1. ORGANIZATION AND ACCOUNTING POLICIES
MT Acquisition Corp. was incorporated under the laws of the State of
Delaware on July 16, 1996 for the purpose of effecting the acquisition of the
Mettler-Toledo Group from Ciba-Geigy AG ('Ciba'). MT Acquisition Corp. is a
wholly-owned subsidiary of Mettler-Toledo Holding Inc. ('Holding') which is a
wholly owned subsidiary of MT Investors Inc. As of July 16, 1996, MT Acquisition
Corp. has not conducted any operations.
2. ACQUISITION
On April 2, 1996, MT Investors Inc. entered into a Stock Purchase Agreement
(as amended, 'Acquisition Agreement') to acquire the business of the
Mettler-Toledo Group from Ciba and its wholly-owned subsidiary, AG fur
Prazisionsinstrumente ('AGP'). The acquisition of the Mettler-Toledo Group will
be accomplished through the purchase of all of the outstanding capital stock of
Mettler-Toledo, Inc. and Mettler-Toledo Holding AG ('Swiss Subholding'), which,
together with their respective subsidiaries, will constitute the entire Mettler-
Toledo Group.
The Acquisition Agreement provides that AGP will sell all the shares and
equity interests owned by AGP which form the combined Mettler-Toledo Group for
consideration consisting of (i) SFr 512.4 million ($421.7 million) in cash and
(ii) the repayment of all intercompany indebtedness owed by the Mettler Toledo
Group to Ciba or AGP as of the Closing Date.
The acquisition will be effected as follows: (i) AEA Investors Inc., its
senior management and its investor-shareholders, together with the management
and certain employees of the Mettler-Toledo Group and Ciba (which will purchase
a 5% interest), will contribute approximately $190.0 million in cash to MT
Investors Inc.; (ii) MT Investors Inc. will contribute such funds to Holding,
which in turn will contribute such funds to MT Acquisition Corp.; (iii) MT
Acquisition Corp. will borrow $115.0 million of term loans under a credit
agreement with various lenders (the 'Credit Agreement') and will issue $135.0
million of senior subordinated notes due 2006 (the 'Notes'); (iv) MT Acquisition
Corp. will purchase the stock of Mettler-Toledo, Inc. and Swiss Subholding from
AGP; (v) Swiss Subholding will borrow $195.8 million under the Credit Agreement;
(vi) Mettler-Toledo, Inc. and Swiss Subholding will repay intercompany
indebtedness to AGP and its affiliates (which aggregated $182.4 million at June
30, 1996); and (vii) MT Acquisition Corp. will be merged into Mettler-Toledo,
Inc. As a result of these transactions, Mettler-Toledo, Inc. will be the issuer
of the Notes and the Swiss Subholding will be a wholly owned subsidiary of
Mettler-Toledo, Inc. Actual amounts at the closing of the acquisition will vary.
F-29
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholder
Mettler-Toledo Holding Inc.
We have audited the accompanying consolidated balance sheet of Mettler-Toledo
Holding Inc. as of July 16, 1996. This balance sheet is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the consolidated financial position of
Mettler-Toledo Holding Inc. as of July 16, 1996, in conformity with generally
accepted accounting principles.
KPMG FIDES PEAT
Zurich, Switzerland
July 19, 1996
F-30
<PAGE>
METTLER-TOLEDO HOLDING INC.
CONSOLIDATED BALANCE SHEET
JULY 16, 1996
<TABLE>
<S> <C>
ASSETS
Cash...................................................... $1,000
------
Total assets............................................ $1,000
------
------
STOCKHOLDER'S EQUITY
Common Stock, $1.00 par value;
1,000 shares authorized, issued and outstanding......... $1,000
------
Total stockholder's equity.............................. $1,000
------
------
</TABLE>
See accompanying notes to consolidated balance sheet
F-31
<PAGE>
METTLER-TOLEDO HOLDING INC.
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 16, 1996
1. ORGANIZATION AND ACCOUNTING POLICIES
Mettler-Toledo Holding Inc. ('Holding') was incorporated under the laws of
the State of Delaware on July 16, 1996 for the purpose of effecting the
acquisition of the Mettler-Toledo Group from Ciba-Geigy AG ('Ciba'). Holding is
a wholly-owned subsidiary of MT Investors Inc.
The consolidated balance sheet includes the accounts of Holding and its
wholly owned subsidiary, MT Acquisition Corp. All intercompany balances and
transactions have been eliminated.
As of July 16, 1996, Holding and MT Acquisition Corp. have not conducted
any operations.
2. ACQUISITION
On April 2, 1996, MT Investors Inc. entered into a Stock Purchase Agreement
(as amended, 'Acquisition Agreement') to acquire the business of the
Mettler-Toledo Group from Ciba and its wholly-owned subsidiary, AG fur
Prazisionsinstrumente ('AGP'). The acquisition of the Mettler-Toledo Group will
be accomplished through the purchase of all of the outstanding capital stock of
Mettler-Toledo, Inc. and Mettler-Toledo Holding AG ('Swiss Subholding'), which,
together with their respective subsidiaries, will constitute the entire Mettler-
Toledo Group.
The Acquisition Agreement provides that AGP will sell all the shares and
equity interests owned by AGP which form the combined Mettler-Toledo Group for
consideration consisting of (i) SFr 512.4 million ($421.7 million) in cash and
(ii) the repayment of all intercompany indebtedness owed by the Mettler Toledo
Group to Ciba or AGP as of the Closing Date.
The acquisition will be effected as follows: (i) AEA Investors Inc., its
senior management and its investor-shareholders, together with the management
and certain employees of the Mettler-Toledo Group and Ciba (which will purchase
a 5% interest), will contribute approximately $190.0 million in cash to MT
Investors Inc.; (ii) MT Investors Inc. will contribute such funds to Holding,
which in turn will contribute such funds to MT Acquisition Corp.; (iii) MT
Acquisition Corp. will borrow $115.0 million of term loans under a credit
agreement with various lenders (the 'Credit Agreement') and will issue $135.0
million of senior subordinated notes due 2006 (the 'Notes'); (iv) MT Acquisition
Corp. will purchase the stock of Mettler-Toledo, Inc. and Swiss Subholding from
AGP; (v) Swiss Subholding will borrow $195.8 million under the Credit Agreement;
(vi) Mettler-Toledo, Inc. and Swiss Subholding will repay intercompany
indebtedness to AGP and its affiliates (which aggregated $182.4 million at June
30, 1996); and (vii) MT Acquisition Corp. will be merged into Mettler-Toledo,
Inc. As a result of these transactions, Mettler-Toledo, Inc. will be the issuer
of the Notes and the Swiss Subholding will be a wholly owned subsidiary of
Mettler-Toledo, Inc. Actual amounts at the closing of the acquisition will vary.
3. GUARANTEES
The obligations under the Credit Agreement will be guaranteed by Holding
and such guarantee will be secured by a first priority security interest in all
stock of Mettler-Toledo, Inc. held by Holding. In addition, Holding will
unconditionally guarantee on a senior subordinated basis all obligations related
to the Notes (the 'Note Guarantee'). The Note Guarantee will be an unsecured
obligation of Holding and will be subordinated to all existing and future senior
indebtedness of Holding, including its obligations related to its guarantee with
respect to the Credit Agreement.
F-32
<PAGE>
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE NOTES IN
ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 14
The Acquisition............................................. 20
Use of Proceeds............................................. 21
Capitalization.............................................. 22
Unaudited Pro Forma Financial Information................... 23
Selected Historical Financial Information................... 31
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 33
Industry.................................................... 40
Business.................................................... 42
Management.................................................. 54
Certain Relationships and Related Transactions.............. 57
Principal Stockholders...................................... 57
Description of Credit Agreement............................. 58
Description of Notes........................................ 60
Underwriting................................................ 96
Legal Matters............................................... 97
Independent Auditors........................................ 97
Available Information....................................... 97
Index to Financial Statements............................... F-1
</TABLE>
UNTIL JANUARY 2, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE NOTES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
$135,000,000
[LOGO]
METTLER-TOLEDO, INC.
GUARANTEED ON A SENIOR
SUBORDINATED BASIS BY
METTLER-TOLEDO HOLDING INC.
9 3/4% SENIOR SUBORDINATED
NOTES DUE 2006
---------------------------
P R O S P E C T U S
---------------------------
MERRILL LYNCH & CO.
CS FIRST BOSTON
LEHMAN BROTHERS
SCOTIA CAPITAL MARKETS
(USA) INC.
OCTOBER 4, 1996
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