Mettler-Toledo International DEF 14A 2008
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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METTLER-TOLEDO INTERNATIONAL INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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March 15, 2008
Dear Fellow Shareholder:
You are cordially invited to attend the 2008 Annual Meeting of Shareholders of Mettler-Toledo International Inc. to be held on Thursday, April 24, 2008, at 8:00 a.m. at the offices of Fried, Frank, Harris, Shriver & Jacobson LLP on 375 Park Avenue (between 52nd and 53rd Street), 36th Floor, New York, New York.
The Secretarys notice of the meeting and the proxy statement which appear on the following pages describe the matters to be acted upon at the meeting.
We hope you will be able to attend the meeting. In any event, please sign and return your proxy as soon as possible so that your vote will be counted. You may also vote by telephone or over the Internet by following the instructions on your proxy card.
Robert F. Spoerry
Executive Chairman of the Board
By order of the Board of Directors
James T. Bellerjeau
General Counsel and Secretary
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON APRIL 24, 2008: This proxy statement and our 2007 Annual Report are available at www.mt.com under About Us / Investor Relations / Annual Reports and Proxy Statements (http://phx.corporate-ir.net/phoenix.zhtml?c=116541&p=irol-reportsannual).
Whether or not you plan to attend this annual meeting, please complete the enclosed proxy card and promptly return it in the accompanying envelope. You may also vote by telephone or over the Internet by following the instructions on your proxy card.
This proxy statement is furnished in connection with the solicitation of proxies by Mettler-Toledo International Inc. on behalf of the Board of Directors for the 2008 Annual Meeting of Shareholders.
The purpose of the annual meeting is to provide Mettler-Toledo International Inc. shareholders with an opportunity to vote on the proposals and any other business properly brought before the meeting.
Each share of common stock outstanding as of the close of business on February 25, 2008 (the record date), is entitled to one vote at the annual meeting on each matter properly brought before the meeting. As of the record date, 35,125,563 shares of common stock were outstanding.
The following proposals will be voted on at the meeting. The board recommends that you vote your shares as indicated below. The board has not received proper notice of, and is not aware of, any additional business to be transacted at the meeting other than as indicated below.
BY PROXY You may vote your shares by proxy. If you vote your shares by proxy, you are legally designating another person to vote the stock you own in accordance with your desired vote. To vote by proxy, complete, sign and return the enclosed proxy card by mail to the address stated on your proxy card. You may also vote by telephone or over the Internet by following the instructions on your proxy card.
IN PERSON You may vote your shares by attending the meeting and voting your shares in person. The meeting is being held at the offices of Fried, Frank, Harris, Shriver & Jacobson LLP, the address of which is indicated in the foregoing Notice to Shareholders.
Even if you plan to attend the meeting, we encourage you to vote your shares by proxy. This will enable us to receive votes in advance of the meeting to ensure that a quorum (defined below) is present for the meeting.
If you vote by proxy and subsequently decide to change your vote, you may revoke your proxy at any time before the polls close at the meeting. However, you may only do this by signing another proxy with a later date, completing a written notice of revocation and returning it to the address on the proxy card before the meeting; or voting in person at the meeting.
A quorum needs to be present at the meeting in order to hold the meeting. A quorum is a majority of the companys outstanding shares of common stock as of the record date. Your shares are counted as present at the meeting if you attend the meeting and vote in person; vote by telephone or Internet; or properly return a proxy card by mail. Abstentions and broker non-votes shall also be counted in determining whether a quorum is present.
If your shares are held in the name of a brokerage firm and you have not provided your broker with voting instructions, the brokerage firm may vote your shares under certain circumstances. New York Stock Exchange rules
ABOUT THE MEETING AND VOTING
allow brokers to vote your shares without your instructions only on routine matters, such as the election of directors and ratification of the appointment of auditors (broker non-votes). On non-routine matters, such as those that change the rights of your shares, the brokerage firm may not vote your shares unless they receive voting instructions from you.
If you hold your shares directly in your own name, they will not be voted if you do not provide a proxy or vote the shares yourself. Proxies that are signed and returned but do not contain instructions will be voted FOR the items of business described in the proxy.
A majority of shares present at the meeting and entitled to vote must vote FOR the election of each director, provided that if the number of nominees exceeds the number of directors to be elected, directors shall be elected by the affirmative vote of a plurality of the votes cast. Votes cast shall include votes for or against a director. An abstention or broker non-vote shall not count as a vote cast with respect to a director.
A majority of shares present at the meeting and entitled to vote must vote FOR the appointment of PricewaterhouseCoopers LLP as the companys independent registered public accounting firm for the proposal to be ratified. A properly executed proxy card marked abstain with respect to this proposal will not be voted. Accordingly, abstentions will have the effect of a vote against this proposal.
For purposes of determining whether the affirmative vote of a majority of the votes cast at the meeting and entitled to vote has been obtained, abstentions will be included in, and broker non-votes will be excluded from, the number of shares present and entitled to vote.
In the event of certain corporate actions, such as a merger subject to shareholder approval, shareholders have the right to dissent from such action and obtain payment of the fair value of his/her shares. This is referred to as dissenters rights. The proposals in this proxy statement do not give rise to dissenters rights.
If you have received more than one proxy card, you have multiple accounts with brokers and/or our transfer agent. Please vote all of these shares. We recommend that you contact your broker and/or our transfer agent to consolidate as many accounts as possible under the same name and address. Our transfer agent is Mellon Investor Services and may be reached by phone at +1 (866) 322-7862 and on the web at www.melloninvestor.com.
At the end of the meeting, shareholders appearing at the meeting may ask questions of general interest.
The company appoints an independent inspector of election, who also tabulates the voting results. The meetings voting results will be disclosed promptly following the meeting on the companys website and in the companys Form 10-Q filed with the Securities and Exchange Commission shortly following the meeting.
BOARD OF DIRECTORS GENERAL INFORMATION
It is the responsibility of the Board of Directors to establish and monitor the companys internal governance practices and work toward the long-term success of the company. The company has adopted a code of business conduct and ethics, known as the code of conduct. All actions of the companys Board of Directors, executive officers (including the Chief Executive Officer, Chief Financial Officer and Controller) and employees are governed by the companys code of conduct. No waiver of the code of conduct by an executive officer or director was approved by the board in 2007. A copy of the code of conduct is available at www.mt.com under About Us / Investor Relations / Corporate Governance (http://phx.corporate-ir.net/phoenix.zhtml?c=116541&p=irol-govboard) and is available in print to any shareholder who requests it. Shareholders may request copies free of charge from Investor Relations, Mettler-Toledo International Inc., 1900 Polaris Parkway, Columbus, OH 43240, USA, telephone +1 614 438 4748.
The board has established corporate governance guidelines that contribute to the overall operating framework of the board and the company. These guidelines cover topics including director qualifications and the director nomination process, the responsibilities of directors, including with respect to leadership development and management succession, meetings of non-management directors, and director compensation. The guidelines are available on the companys website at www.mt.com under About Us / Investor Relations / Corporate Governance and are available in print to any shareholder who requests them at the address and phone number set forth above.
In accordance with the companys by-laws, the board consists of between five and ten directors, with the exact number currently fixed at eight. Each director holds a one-year term until the next annual meeting of shareholders.
The board has three committees:
(i) the Audit Committee;
(ii) the Compensation Committee; and
(iii) the Nominating and Corporate Governance Committee.
The board has established the position of Presiding Director, who oversees executive sessions of the non-management directors and all meetings of directors at which the Executive Chairman is not present. The Presiding Director also coordinates with the Nominating and Corporate Governance Committee relating to director nominations as described in the Nominating and Corporate Governance Committee report below. Mr. Salice is currently serving as the Presiding Director.
Members of the Board of Directors must demonstrate integrity, reliability, knowledge of corporate affairs, and an ability to work well together. Diversity in business background, area of expertise, gender and ethnicity are also considered when selecting board nominees. Additional details are contained in the companys corporate governance guidelines available at www.mt.com on the Investor Relations/Corporate Governance web page.
The board uses the following criteria in evaluating independence: (i) independence under the rules of the New York Stock Exchange; and (ii) no relationships with the company (other than as a director or shareholder) or only immaterial relationships. The independence criteria are contained in the corporate governance guidelines available
on the companys website at www.mt.com under About Us / Investor Relations / Corporate Governance. The board solicits information from directors as to any relationship the director or his immediate family member has with the company that might affect the directors independence. The board also evaluates directors independence pursuant to current New York Stock Exchange rules.
In light of these criteria, the board has determined that Messrs. Chu, Contino, Dickson, Geier, Macomber, Maerki, Milne and Salice are independent under the rules of the New York Stock Exchange and either have no relationships with the company (other than as director and shareholder) or have only immaterial relationships with the company. Mr. Spoerry, Executive Chairman of the Board, is not independent under the rules of the New York Stock Exchange, as he is an employee of the company and was previously the companys President and Chief Executive Officer.
The Board of Directors has determined that the following types of relationships are categorically immaterial:
The board schedules regular executive sessions for its non-management members, typically as part of each board meeting. The Presiding Director acts as chairman of these meetings.
The board expects that its members will attend all meetings of the board. The Board of Directors met seven times in 2007. Each director attended at least 75% of all board and committee meetings of which the director is a member.
The company expects that all directors will attend the annual meeting of shareholders. All directors attended the 2007 annual meeting of shareholders.
The board has adopted a policy that directors may not serve on more than six public company boards. The board also has a policy that directors will offer their resignation upon a change in professional position or in circumstances that might affect a directors ability to serve on the board. In such circumstances, the Nominating and Corporate Governance Committee takes the lead on determining the appropriate course of action.
BOARD OF DIRECTORS GENERAL INFORMATION
Non-employee directors are compensated by an annual cash retainer, committee member fees, and per meeting fees for board and committee meetings attended. The board and its committees sometimes forego per meeting fees at their discretion, for example for shorter or telephonic meetings. Members of the Board of Directors receive reimbursement for traveling costs and other out-of-pocket expenses incurred in attending board and committee meetings. Each director also receives an annual stock option grant and a grant of restricted stock units. The following provides an overview of the elements of 2007 director compensation:
The exact amounts paid to each non-employee director with respect to 2007 are set out in the following table.
Interested parties, including shareholders, may contact the Board of Directors, the Presiding Director individually or the non-management directors as a group via:
REGULAR MAIL Mettler-Toledo International Inc., Im Langacher, CH-8606 Greifensee, Switzerland, Attention: Presiding Director.
All communications will be reviewed by the Presiding Director.
The Board of Directors has three committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Each committee has the authority to engage advisors or consultants as it deems appropriate to carry out its responsibilities. The membership and meetings of the committees are described in the following table.
BOARD OF DIRECTORS OPERATION
Each committee of the Board of Directors has a written charter, setting forth the responsibilities of the committee in detail. The charters are reviewed annually and updated to comply with relevant regulations. The committee charters can be found on the companys website at www.mt.com under About Us / Investor Relations / Corporate Governance and are available free of charge in print to any shareholder who requests them. The primary functions of the committees are as follows:
The Audit Committee assists the board in overseeing the accounting and financial reporting processes of the company. The Audit Committee operates pursuant to a written charter, a copy of which can be found on the companys website at www.mt.com. The committee is responsible for overseeing the accounting and financial reporting processes of the company and audits of the financial statements of the company. In discharging its oversight role, the Audit Committee discussed the audited financial statements contained in the 2007 annual report separately with the companys independent registered public accounting firm and the companys management and reviewed the companys internal controls and financial reporting.
The companys independent registered public accounting firm, PricewaterhouseCoopers LLP (PwC), is responsible for auditing the companys consolidated financial statements as well as the companys internal control over financial reporting. PwC issues opinions as to (1) whether the financial statements present fairly, in all material respects, the financial position, results of operations and cash flows of the company and its subsidiaries in accordance with accounting principles generally accepted in the United States of America and (2) whether the company maintained, in all material respects, effective control over financial reporting.
In reviewing the companys audited financial statements with the independent registered public accounting firm, the Audit Committee discussed with PwC the matters required to be discussed by the Auditing Standards Board Statement on Auditing Standards No. 61, as amended, and other matters including, without limitation:
In reviewing the companys audited financial statements with the companys management, the Audit Committee discussed the same topics listed above with management, including, without limitation, the process used by management in formulating accounting estimates and the reasonableness of those estimates.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the board approved, that the audited financial statements be included in the companys Annual Report on Form 10-K for the year ended December 31, 2007.
Audit Fees Represents fees for the audit of the annual financial statements, including the Sarbanes-Oxley § 404 attestation opinion, and review of financial statements included in quarterly reports on Form 10-Q.
Audit-Related Fees Substantially all of the audit-related fees in 2007 and 2006 relate to due diligence work in connection with acquisition transactions and audits of certain of the companys employee benefit plans.
Tax Fees The 2007 and 2006 tax fees were primarily for tax compliance-related services.
Other Fees No significant other services were performed by PwC for the company in 2007 or 2006.
The Audit Committee has determined that PwCs provision of the services included in the categories Tax Fees and Other Fees is compatible with maintaining PwCs independence. All non-audit services were approved in advance by the Audit Committee pursuant to the procedures described below.
The Audit Committee approves all non-audit services provided by PwC in accordance with the following framework:
The independent registered public accounting firm ensures that all audit and non-audit services provided to the company have been approved by the Audit Committee. Each year, the companys management and the independent registered public accounting firm confirm to the Audit Committee that every non-audit service being proposed is permissible.
The Audit Committee has appointed PwC as the companys independent registered public accounting firm to audit and report on the companys consolidated financial statements for the fiscal year ending December 31, 2008 and to perform such other services as may be required of them.
Respectfully submitted by the members of the
Francis A. Contino, Chairman
Thomas P. Salice
The Compensation Committee assists the board in reviewing and monitoring the compensation of the companys executives. The Compensation Committee operates pursuant to a written charter, a copy of which can be found on the companys website at www.mt.com.
The Compensation Committee is responsible for establishing compensation arrangements that allow the company to retain, attract and motivate highly qualified employees. The Compensation Committee reviews the companys total compensation budget, and sets the annual compensation of the companys executive officers, including the Chief Executive Officer. It also evaluates and sets the compensation of the directors. In carrying out its duties, the Compensation Committee receives input and recommendations from both the Head of Human Resources and the Chief Executive Officer regarding the amount and form of executive and director compensation.
The Compensation Committee also makes periodic use of compensation consultants, who are typically engaged by the company at the direction of the Committee. In 2007, the Compensation Committee engaged the firm Pearl Meyer & Partners to assist it in establishing the compensation levels of the new Chief Executive Officer and Executive Chairman effective January 1, 2008.
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. On the basis of such review and discussions, the Compensation Committee recommended to the Board of Directors, and the board approved, that the Compensation Discussion and Analysis be included in this Proxy Statement.
Respectfully submitted by the members of the
Thomas P. Salice, Chairman
John T. Dickson
Philip H. Geier
Hans Ulrich Maerki
The Nominating and Corporate Governance Committee assists the board in identifying and recommending individuals to be nominated for election to the Board of Directors by shareholders. The Nominating and Corporate Governance Committee operates pursuant to a written charter, a copy of which can be found on the companys website at www.mt.com. The committee is responsible for advising the board on the structure and membership of committees of the board as well as developing corporate governance guidelines applicable to the operation of the company. We describe below the process established by the committee to nominate directors to the Board of Directors as well as some of the recent corporate governance activities undertaken by the committee.
When there is an actual or anticipated board vacancy, candidates for the Board of Directors may be recommended by (i) any member of the Nominating and Corporate Governance Committee, (ii) other board members, (iii) third parties engaged for that purpose by the committee, and/or (iv) the companys shareholders. The Nominating and Corporate Governance Committee will consider candidates recommended by shareholders and evaluate them in the same manner as other candidates. Shareholders interested in recommending a person to be a director of the company must make such recommendation in writing. The recommendation must be forwarded to the Secretary of the company at: Mettler-Toledo International Inc., Im Langacher, CH-8606 Greifensee, Switzerland. Shareholder recommendations must include the information and be sent within the time-frames specified in the companys by-laws, a copy of which can be obtained from the Secretary. Additional details regarding minimum qualifications for director nominees can be found in the corporate governance guidelines on the companys website at www.mt.com.
The Nominating and Corporate Governance Committee follows the following process in nominating candidates for a position on the companys Board of Directors.
With regard to the current board nominees, the Nominating and Corporate Governance Committee has evaluated the qualifications and contributions of each of the board nominees and has recommended to the board that the eight current directors be nominated for re-election.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE REPORT
The Nominating and Corporate Governance Committee led the companys corporate governance efforts by:
Respectfully submitted by the members of the
Nominating and Corporate Governance Committee:
George M. Milne, Chairman
John T. Dickson
Hans Ulrich Maerki
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Committee oversees compensation of the companys executive officers. In carrying out its duties, the Compensation Committee receives information and recommendations from the Head of Human Resources and the Chief Executive Officer, and may consult with outside compensation consultants as it deems appropriate. The Compensation Committee has historically used the firm Pearl Meyer & Partners to provide market surveys of executive compensation in technology firms in comparable industries (including scientific instrument firms), which are considered in setting compensation levels. In 2007, the Compensation Committee used this firm to assist it in establishing the compensation levels of the new Chief Executive Officer and Executive Chairman effective January 1, 2008.
The objectives of the companys executive compensation programs are as follows:
The companys compensation program consists of three main elements: base salary, an annual cash bonus and long-term incentive compensation (stock options). Although executive officers participate in certain defined contribution pension plans, the contributions do not form a substantial part of total compensation. We do not believe in providing special benefits to executives, and do not provide any significant perquisites. In sum, our goal is to ensure that the three main elements of compensation are carefully considered and fair, and that executives are motivated to further the interests of shareholders.
Each year the Compensation Committee separately reviews each of the three elements, as well as total compensation, taking into account the companys growth and performance, individual executive performance, and developments in the markets in which we compete for talent. In evaluating the competitiveness of executive compensation, the Compensation Committee periodically conducts both broad based surveys and surveys of the salaries of executives in the instruments and electronics industries, including companies in SIC Code 3826 (Laboratory Analytical Instruments). The last such surveys were provided by the firm Pearl Meyer & Partners in 2006. The Compensation Committee has also reviewed peer company executive compensation at Agilent Technologies, Applera Corp Applied Biosys, Beckman Coulter, Bio-Rad Laboratories, Fisher Scientific, Millipore, Pall, PerkinElmer, Thermo Electron (together with Fisher Scientific now ThermoFisher Scientific), Varian and Waters.
On November 1, 2007, the company announced that the Board of Directors had approved a management succession plan. On November 1, 2007, the board elected Mr. Spoerry to the position of Executive Chairman of the Board and Mr. Filliol to the positions of President and Chief Executive Officer, in each case effective on January 1, 2008. Where relevant, this compensation discussion and analysis will also address the new compensation arrangements in place for Messrs. Spoerry and Filliol. The key elements of their compensation are described below under Employment Agreements.
On November 12, 2007, the company entered into an agreement with Mr. Luethi, Head of the Laboratory Division, under which his employment with the company ended as of December 31, 2007. The agreement provided
COMPENSATION DISCUSSION AND ANALYSIS
for the company to pay Mr. Luethis salary through December 31, 2007, and to pay him the annual cash bonus earned in respect of 2007.
The companys goal is to pay average base salaries that are approximately at or somewhat below the median. Based on broad based and peer company surveys, we believe base salaries for executive officers are generally lower than those at peer companies. Although a certain base salary is necessary and appropriate, we believe the majority of executive compensation should be paid in ways that link pay with performance. We accomplish this through the annual cash bonus and long-term incentives.
We link pay with performance through our bonus plan, called POBS Plus (Performance Oriented Bonus System). The purpose of the bonus plan is to provide an incentive to key employees of the company to dedicate themselves to the financial success of the company as measured based on objective financial criteria. The bonus plan is administered by the Compensation Committee. By no later than the end of the first quarter of each year, the Compensation Committee establishes the performance targets on which each participants incentive is based. Performance targets are closely related to that fiscal years budget and business plan and may be based upon any one or more of the following financial criteria: earnings per share, cash flow, operating profit of business areas, sales of the company and/or its business areas, inventory turnover of the company and/or its business areas, and days sales outstanding of business areas. In 2007, the financial targets were earnings per share, net cash flow, inventory turnover and group sales.
In addition, between 10 and 20 percent of the bonus for each participant is based on individual objective performance targets relating to the companys annual business objectives. The CFOs targets include targets relating to the companys financial systems and controls. The Compensation Committee directly evaluates the Chief Executive Officers and Executive Chairmans performance on his individual targets, and reviews the CEOs recommendation on the individual target performance of the other executive officers. After the conclusion of each year, the Compensation Committee reviews the audited results of the companys performance against each participants performance targets and determines the incentive payment, if any, earned by each participant. The Compensation Committee has discretion to exclude certain items, both positive and negative, from their assessment of target achievement.
The bonus plan provides for payment of a cash bonus to participants calculated by reference to the performance targets. For each participant, a cash bonus will become payable following achievement of at least 90% of the target level. For each full percentage point of target achievement above 90% and up to a maximum of 120% for individual performance targets and 130% for the company performance targets, a cash bonus of from 2.5% to 7.5% of the base salary of the participant is payable, for a total maximum potential bonus of between 100% and 300% of base salary.
Within 90 days of the close of each calendar year, the percentage of base salary between 2.5% and 7.5% to be used in calculating the bonus is established for each participant by the Compensation Committee. The Chief Executive Officers and Executive Chairmans bonus is determined by taking 5% of the base salary for each 1% of target achievement over 90%, resulting in a target bonus at 100% target achievement of 50% of base salary. For the other named executive officers, the bonus consists of 4.5% of base salary for each 1% of target achievement over 90%, resulting in a target bonus at 100% target achievement of 45% of base salary. The plan provides that targets for 100% achievement should be challenging and ambitious, but also realistic and attainable such that it is possible to achieve and exceed them. Over-achievement under the bonus plan can result in above-median total cash compensation even though base salary may be below the median.
COMPENSATION DISCUSSION AND ANALYSIS
The financial targets used relate closely to our annual plan and budget, which are approved by the full Board of Directors each year. The annual plan and budget is set taking into account the economic environment, the health of the companys end-user markets, and the challenges and opportunities of the companys various businesses.
The range of actual 2007 bonuses that could be earned by the named executive officers under the POBS Plus plan is set out in the following tables. The maximum theoretical bonus that could have been earned by an executive in 2007 was $1,692,147 in Mr. Spoerrys case. The actual amount paid to each named executive officer is included in the Summary Compensation Table below in the Non-Equity Incentive Plan Compensation column.
The impact of over- or under-achieving targets on the annual bonus can be significant. The company and Board of Directors therefore approach the target setting process with care and consideration. We believe targets are set consistently with the philosophy of the POBS Plan that they be challenging and ambitious. Over the last several years, the average target achievement for executive officers has ranged from 95% to approximately 125%, resulting in bonuses of between approximately 30% to 155% of base salary.
Another method we have historically used to link pay with performance is awarding stock options, which we believe aligns managements interests with those of the companys shareholders. When the company performs well, the value of executive officers incentive compensation increases. When the company does not perform well, the value of incentive awards is reduced. Our stock options typically vest over five years, 20% per year, starting on the first anniversary of the date of grant. In 2003, we granted certain options that vested over two years. Options generally have a term of ten years, except for certain grants to Swiss residents having terms of six years and ten and a half years.
The Compensation Committee determines the size of stock option grants with reference to the other two elements of compensation, the individual executives scope of responsibility and performance, total compensation, cost to the company and competitive market data.
The Compensation Committee believes that past performance is just one factor to take into account in determining the size of future awards. In line with our philosophy of rewarding for performance, if the interests of shareholders have been and continue to be served, it is appropriate for management to continue to be awarded long-term incentives.
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Committee approves all option grants. Option grants are typically made once each year on the date of the Compensation Committee meeting at which the overall annual compensation review takes place (typically in late October or early November each year). The Compensation Committee meeting dates are set up to two years in advance, and the option grants are made on the meeting date. This is typically shortly before the announcement of the companys earnings. In the past, the Committee has also made initial grants to individual executive officers at the time they started serving as executive officers.
All options have an exercise price equal to the closing price of the companys shares on the New York Stock Exchange on the date of grant.
We encourage all executives to be direct shareholders. The Compensation Committee periodically evaluates whether to implement a stock ownership requirement or other holding requirement for directors or executive officers. To date, the Committee has not implemented such a policy, other than for Mr. Filliol, who must acquire at least 15,000 shares by the end of 2010, and must hold such shares until at least one year following his last day of employment. The Compensation Committee feels it is important for senior executives to have a significant portion of their ongoing compensation tied to the interests of shareholders. All of the directors and most of the executive officers are already direct shareholders, and all executive officers have the large majority of their company compensation tied to stock options. The Compensation Committee believes that implementing an ownership policy beyond that applicable to the CEO is not necessary under the circumstances, and would not enhance managements motivation or performance.
To help encourage executives to be direct shareholders, the board approved the Mettler-Toledo 2007 Share Purchase Plan on November 1, 2007. Under the plan, executive officers may purchase company shares using all or a portion of their bonus payable under the POBS Plus bonus plan, subject to approval of the Compensation Committee. The issue price for shares under the plan will be equal to the New York Stock Exchange closing price on the date of issuance, which is expected to be on or shortly before March 15 of each year. All shares issued pursuant to the plan will be restricted for a period of five years from the date of issuance, during which time they may not be sold, assigned, transferred or otherwise disposed of, nor may they be pledged or otherwise hypothecated, except in the case of death or disability.
The Swiss-based executive officers (each of the named executive officers except Mr. Donnelly) participate in a Swiss pension plan called Mettler-Toledo Fonds, which is a cash balance benefit (or pension) plan. Each year we contribute to the plan 22% of each participating named executive officers covered salary. The covered salary is equal to between 106% and 116% of base salary, and was capped by Swiss law at a maximum of SFr. 795,600 in 2007 and SFr. 774,000 in 2006. Individual employees may also make their own direct contributions to the plan from their own funds.
Amounts in the plan bear interest depending on the annual performance of the pension plan, but not less than the minimum rate set by Swiss law, which was 2.5% per annum in 2007 and is 2.75% in 2008. Retirement benefits are paid in the form of a lump-sum payment when the employee reaches the normal retirement age under the plan of 65.
Section 162(m) of the Internal Revenue Code prohibits the company from deducting compensation in excess of $1 million paid to certain employees, generally its CEO and its three other most highly compensated executive
COMPENSATION DISCUSSION AND ANALYSIS
officers (excluding the CFO), unless that compensation qualifies as performance-based compensation. We maintain flexibility to balance the need to fairly compensate the companys executive officers with the companys ability to deduct compensation pursuant to Section 162(m).
The company is a party to tax equalization agreements with Messrs. Spoerry, Filliol, Luethi and Widmer, who are non-U.S. citizens and non-U.S. residents and who pay income tax on their earnings in Switzerland. The individuals do not receive any cash benefit from the agreements, the principle of which is to leave the employee in exactly the same position (i.e., no better and no worse off) than if they had not become subject to incremental U.S. taxation on a portion of their income. Under the tax equalization agreements, the company has agreed to pay taxes borne by these executives in respect of incremental taxation being due in the United States by virtue of their work for the company there. Because the individuals are left no better and no worse off than had they not become subject to U.S. taxation, the Compensation Committee does not believe it is appropriate to take into account the U.S. taxes paid by the company under the tax equalization agreements when determining the employees compensation each year. In cases where the individuals Swiss taxes are lower as a result of the company having paid these U.S. tax amounts, the individual may need to make a payment to the company under the tax equalization agreement.
The Compensation Committee increased Mr. Spoerrys base salary by 3% over the prior year, taking into account a review of salaries at peer companies and reflecting Mr. Spoerrys performance.
Based on a similar review process, the Compensation Committee increased the base salaries of Messrs. Donnelly, Filliol, Luethi and Widmer by 6%, 2.1%, 2.1% and 1.6% respectively. Based on the quality of leadership of Mr. Spoerry and the management team, and the overall performance of the company, the committee believes managements compensation is appropriate.
Summary Compensation Table(1)
COMPENSATION DISCUSSION AND ANALYSIS
In connection with the management succession described above, the company entered into new employment agreements with Messrs. Filliol and Spoerry dated November 1, 2007 and effective January 1, 2008. The agreements are governed by Swiss law and replace the prior employment agreements. The agreements call for base salaries for Mr. Filliol and Mr. Spoerry of CHF 750,000 and CHF 600,000, and target bonuses of CHF 375,000 and CHF 300,000, respectively, subject to adjustment in future years. The actual bonus earned depends on target achievement, pursuant to the terms of the POBS Plus bonus plan. This is the same bonus plan Mr. Filliol and Mr. Spoerry participated in previously. The individuals are entitled to participate in the companys equity incentive plan. The company bears the cost of contributions to the Mettler-Toledo Fonds pension plan, as well as the cost of accident and disability insurance.
The agreements may be terminated by either party on 12 months notice to the end of a month. The individuals may not compete with the company for a period of 12 months after termination. If the company terminates Mr. Filliols employment within the first two years without cause, it must make an additional payment to Mr. Filliol of CHF 1.125 million (equivalent to one years current base salary plus target bonus). Mr. Filliol must own at least 15,000 MTD shares by the end of 2010, and must hold such shares until at least one year following his last day of employment. Mr. Filliol may not serve on any third party board of directors through the end of 2010, after which third party board service is conditioned on prior approval by the Board of Directors.
In establishing the compensation of Messrs. Filliol and Spoerry, the Compensation Committee received advice from the firm Pearl Meyer & Partners about compensation levels at other companies in similar situations with a newly named CEO and a Chairman with executive responsibilities similar to Mr. Spoerrys. The Committee also
COMPENSATION DISCUSSION AND ANALYSIS
took into account the broad based and peer company survey data described above. In setting the CEOs compensation, the Committee considered the prior CEOs salary, the salary levels of the other executive officers, as well as Mr. Filliols age and experience. In setting Mr. Spoerrys compensation, the Committee took into account his duties and responsibilities and expected time commitment. The Committee also considered Mr. Spoerrys compensation level relative to Mr. Filliols.
The prior employment agreements between the company and Messrs. Spoerry and Filliol provided for a base salary subject to adjustment and participation in our bonus plan and other employee benefit plans. Mr. Spoerrys agreement prohibited him from competing with the company for a period of 24 months after termination of employment, and Mr. Filliols agreement for 12 months. The agreements could be terminated without cause on six months notice for Mr. Filliol and 36 months notice for Mr. Spoerry, during which periods the executive was entitled to full compensation under the agreement, including payment of base salary, target bonus, and continuation of benefits.
The company is a party to employment agreements with each of the remaining named executive officers. These agreements provide for a base salary subject to adjustment and participation in our bonus plan and other employee benefit plans. Each agreement prohibits the executive from competing with the company for a period of 12 months after termination of employment. The agreements may be terminated without cause on six months notice for Mr. Widmer and 12 months notice for Mr. Donnelly, during which periods the executive is entitled to full compensation under the agreement, including payment of base salary, target bonus, and continuation of benefits.
The equity compensation arrangements are separately described in the sections below entitled Grants of Plan-Based Awards and Outstanding Equity Awards at Fiscal Year-End. The operation of the employment agreements in the context of a termination or a change in control is separately described below under Payments Upon Termination or Change in Control.
COMPENSATION DISCUSSION AND ANALYSIS
Outstanding Equity Awards at Fiscal Year-End(1)
COMPENSATION DISCUSSION AND ANALYSIS
Pursuant to the employment agreements described above, each of the named executive officers may be terminated after giving the requisite notice. In the event of certain terminations, the executives are entitled to receive full compensation during the notice period.
COMPENSATION DISCUSSION AND ANALYSIS
The following table reflects payments that would have been made to the named executive officers if they had been terminated on various grounds, assuming that notice of termination was given on December 31, 2007. In the case of Messrs. Filliol and Spoerry, the table shows the payments pursuant to their new employment agreements in effect as of January 1, 2008. This table does not include information about any contracts, agreements, plans or arrangements to the extent they do not discriminate in scope, terms or operation in favor of executive officers and that are available generally to all salaried employees.
Potential Payments Upon Termination or Change in Control(1)
COMPENSATION DISCUSSION AND ANALYSIS
This table shows how much of the companys common stock is owned by directors, executive officers and owners of more than 5% of the companys common stock as of the record date February 25, 2008 (December 31, 2007 in the case of 5% shareholders):
The nominees for the Board of Directors are listed below. Each nominee, if elected, will hold office until next years annual meeting of shareholders and until their successors have been duly elected and qualified. All nominees are currently directors. The Board of Directors has no reason to believe that any nominee would be unable or unwilling to serve if elected. In the event that a nominee is unable to serve, the person designated as proxyholder for the company will vote for the remaining nominees and for such other person as the Board of Directors may nominate.
Directors shall be elected by the affirmative vote of a majority of the votes cast with respect to each director, provided that if the number of nominees exceeds the number of directors to be elected, directors shall be elected by the affirmative vote of a plurality of the votes cast. Votes cast shall include votes for, against or to withhold authority for a director. An abstention or broker non-vote shall not count as a vote cast with respect to a director. If an incumbent director fails to be reelected by a majority vote when such vote is required and offers to resign, and if that resignation is not accepted by the Board of Directors, such director shall continue to serve until the next annual meeting and until his or her successor is duly elected, or his or her earlier accepted resignation or removal. If a directors resignation is accepted by the Board of Directors, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board of Directors, in its sole discretion, may fill any resulting vacancy, or may decrease the size of the Board of Directors, in each case pursuant to the provisions of Sections 1 and 2 of Article II of the companys by-laws.
Robert F. Spoerry is 52 years old and has been a director since October 1996. Mr. Spoerry was President and Chief Executive Officer of the company from 1993 to 2007. He served as Head of Industrial and Retail (Europe) of the company from 1987 to 1993. Mr. Spoerry has been Chairman of the Board of Directors since May 1998 and Executive Chairman since January 2008.
Wah-Hui Chu is 56 years old and has been a Director since January 2007 and serves on the Audit Committee. Mr. Chu has been non-executive Chairman of PepsiCo Internationals Asia Region since April 2007. From March 1998 to March 2007 he was the President of PepsiCo International China Beverages Business Unit and from November 1999 to March 2007 he was Chairman of PepsiCo (China) Investment Company Limited. Before joining PepsiCo in 1998, he held various senior management positions in several U.S. multinational companies, including Quaker Oats, HJ Heinz, Whirlpool and Monsanto. Mr. Chu is a Director of Li Ning Company Limited and Senior Advisor to Arthur D. Little China Ltd.
Francis A. Contino is 62 years old and has been a director since October 2004 and serves on the Audit Committee. Mr. Contino is Executive Vice President Strategic Planning of McCormick & Company, Inc. He is a member of the Management Committee and has been a member of the Board of Directors of McCormick since joining the company in 1998. He was Chief Financial Officer from 1998 through October 2007. Mr. Contino plans to retire from McCormick effective July 1, 2008. Prior to joining McCormick, Mr. Contino was Managing Partner of the Baltimore office of Ernst & Young.
John T. Dickson is 62 years old and has been a director since March 2000 and serves on the Compensation and Nominating and Corporate Governance Committees. Mr. Dickson was President and Chief Executive Officer of Agere Systems Inc. from August 2000 to October 2005. Previously, Mr. Dickson had been Executive Vice President and Chief Executive Officer of Lucent Technologies Microelectronics and Communications Technologies Group since October 1999. He joined AT&T Corp. in 1993 as Vice President of its Integrated Circuit business unit, moved to Lucent following its spin-off in 1996, and was named Chief Operating Officer of Lucents Microelectronics Group in 1997. Mr. Dickson is also a Director of KLA-Tencor Inc., National Semiconductor Corporation and Frontier Silicon Limited.
Philip H. Geier is 73 years old and has been a director since July 2001 and serves on the Compensation Committee. Mr. Geier was Chairman of the Board and Chief Executive Officer of the Interpublic Group of Companies, Inc. from 1980 to 2000 and was a Director of Interpublic from 1975 to 2000. Mr. Geier is also a Senior Advisor for Lazard Frères & Co. LLC and a Director of AEA Investors LLC and Fiduciary Trust Co. International.
Mr. Geiers charitable directorships include Autism Speaks, Memorial Sloan-Kettering Cancer Center, Save the Children Federation and The Whitney Museum of American Art.
Hans Ulrich Maerki is 61 years old and has been a director since September 2002 and serves on the Compensation and Nominating and Corporate Governance Committees. Mr. Maerki has been the Chairman of IBM Europe/Middle East/Africa (EMEA) since August 2001. From July 2003 to May 2005, Mr. Maerki was also the General Manager of IBM EMEA. From 1996 to July 2001, Mr. Maerki was General Manager of IBM Global Services, EMEA. Mr. Maerki has been with IBM in various positions since 1973. Mr. Maerki is also a Director of ABB Ltd., Swiss Re and Menuhin Festival Gstaad AG. He also serves on the International Advisory Boards of IMD Lausanne, IESE Madrid, Bocconi University in Milan and HEC Paris, the Board of Trustees of The Hermitage Museum in St. Petersburg, Russia, and the Foundation Board of the Schulthess Clinic.
George M. Milne, Jr., Ph.D., is 64 years old and has been a director since September 1999 and serves on the Nominating and Corporate Governance Committee. Dr. Milne is a venture partner of Radius Ventures, LLC. From 1970 to July 2002, Dr. Milne held various management positions with Pfizer Corporation, including most recently Executive Vice President, Pfizer Global Research and Development and President, Worldwide Strategic and Operations Management. Dr. Milne was also a Senior Vice President of Pfizer Inc. and a member of the Pfizer Management Council. He was President of Central Research from 1993 to July 2002 with global responsibility for Pfizers Human and Veterinary Medicine Research and Development. Dr. Milne is also a Director of Athersys Inc. and Charles River Laboratories, Inc.
Thomas P. Salice is 48 years old and has been a director since October 1996 and serves on the Audit and Compensation Committees. Mr. Salice is a co-founder and principal of SFW Capital Partners, LLC, a private equity firm. He has served as a Managing Member of SFW Capital Partners since January 2005. From June 1989 to December 2004, Mr. Salice served in a variety of capacities with AEA Investors, Inc., including Managing Director, President and Chief Executive Officer and Vice-Chairman. Mr. Salice is also a Director of Waters Corporation. He also serves on the Board of Trustees of Fordham University.
The Board of Directors recommends that you vote FOR the election of each of the directors listed above. Proxies will be voted FOR each nominee unless otherwise specified in the proxy.
You are being asked to ratify the appointment of PricewaterhouseCoopers LLP (PwC) as the companys independent registered public accounting firm. The Audit Committee has appointed PwC, independent public accountants, to audit and report on the companys consolidated financial statements for the fiscal year ending December 31, 2008 and to perform such other services as may be required of them.
Representatives of PwC are expected to be present at the annual meeting. They will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate shareholder questions.
We have no existing direct or indirect understandings or agreements with PwC that place a limit on current or future years audit fees. Please see the Audit Committee Report in this proxy statement for further details concerning the fees charged by PwC.
The Board of Directors recommends that you vote FOR ratification of the appointment of PwC as independent registered public accounting firm. Proxies will be voted FOR ratification of the appointment of PwC unless otherwise specified in the proxy.
The Compensation Committee is comprised of Messrs. Dickson, Geier, Maerki and Salice, none of whom were officers or employees of the company or its subsidiaries or had any relationship requiring disclosure by the company under Item 404 of the Securities and Exchange Commissions Regulation S-K during 2007. No interlocking relationship exists between the members of Mettler-Toledos Board of Directors or the Compensation Committee and the board of directors or compensation committee of any other company, nor has any such interlocking relationship existed in the past.
Section 16(a) of the Securities Exchange Act of 1934 requires the companys executive officers and directors, and persons who own more than ten percent of a registered class of the companys equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission (the SEC) and The New York Stock Exchange. Executive officers, directors and greater than 10% shareholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that in the last fiscal year, all filing requirements applicable to our executive officers and directors and greater than 10% shareholders were complied with.
The companys Annual Report to shareholders for the fiscal year ended December 31, 2007, including financial statements, accompanies this proxy statement. The Annual Report is not to be regarded as proxy soliciting material or as a communication by means of which any solicitation is to be made.
The Annual Report will be available on the companys website at www.mt.com under About Us / Investor Relations / Annual Report. Upon written request, the company will furnish, without charge, to each person whose proxy is being solicited a copy of the Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as filed with the SEC. Requests in writing for copies of any such materials should be directed to Investor Relations, Mettler-Toledo International Inc., 1900 Polaris Parkway, Columbus, Ohio 43240-2020, USA, telephone +1 614 438 4748.
If you wish to receive future annual reports, proxy statements and other materials and shareholder communications electronically via the Internet, please follow the directions on your proxy card for requesting such electronic delivery. An election to receive materials electronically will continue until you revoke it. You will continue to have the option to vote your shares by telephone, mail or via the Internet.
Shareholders may present proposals which may be proper subjects for inclusion in the proxy statement and for consideration at an annual meeting. To be considered, proposals must be submitted on a timely basis. We must receive proposals for next years annual meeting no later than November 15, 2008. Proposals and questions related thereto should be submitted in writing to the Secretary of the company. Proposals may be included in the proxy statement for next years annual meeting if they comply with certain rules and regulations promulgated by the Securities and Exchange Commission and in connection with certain procedures described in our by-laws, a copy of which may be obtained from the Secretary of the company. Any proposal submitted outside the processes of these rules and regulations will be considered untimely for the purposes of Rule 14a-4 and Rule 14a-5.
The cost of soliciting proxies will be borne by the company. In addition to the solicitation of proxies by use of the mail, some of our officers, directors and regular employees, none of whom will receive additional compensation therefore, may solicit proxies in person or by telephone, Internet or other means. As is customary, we will, upon request, reimburse brokerage firms, banks, trustees, nominees and other persons for their out-of-pocket expenses in forwarding proxy materials to their principals.
If you are the beneficial owner, but not the record holder, of shares of METTLER TOLEDO stock, your broker, bank or other nominee may only deliver one copy of this proxy statement and our 2007 annual report to multiple shareholders who share an address unless that nominee has received contrary instructions from one or more of the shareholders. We will deliver promptly, upon written or oral request, a separate copy of this proxy statement and our 2007 annual report to a shareholder at a shared address to which a single copy of the documents was delivered. A shareholder who wishes to receive a separate copy of the proxy statement and annual report should submit this request by writing to Investor Relations, Mettler-Toledo International Inc., 1900 Polaris Parkway, Columbus, OH 43240, USA or calling +1 614 438 4748. Shareholders sharing an address who are receiving multiple copies of proxy materials and annual reports and who wish to receive a single copy of such materials in the future should contact their broker, bank or other nominee to request that only a single copy of each document be mailed to all shareholders at the shared address in the future.
We know of no other matter to be brought before the annual meeting. If any other matter requiring a vote of the shareholders should come before the meeting, it is the intention of the persons named in the proxy to vote the proxies with respect to any such matter in accordance with their reasonable judgment.
METTLER-TOLEDO INTERNATIONAL INC.
Proxy for Annual Meeting of Shareholders
April 24, 2008
This proxy is solicited on behalf of Mettler-Toledo International Inc.s Board of Directors
The undersigned hereby appoints Robert F. Spoerry and William P. Donnelly, and each of them, proxies for the undersigned, with full power of substitution, to represent and to vote all shares of Mettler-Toledo International Inc. common stock which the undersigned may be entitled to vote at the 2008 Annual Meeting of Shareholders of Mettler-Toledo International Inc. to be held in New York, New York on Thursday, April 24, 2008 at 8:00 a.m., or at any adjournment thereof, upon the matters set forth on the reverse side and described in the accompanying proxy statement and upon such other business as may properly come before the meeting or any adjournment thereof.
Please mark this proxy as indicated on the reverse side to vote on any item. If you wish to vote in accordance with the Board of Directors recommendations, please sign the reverse side; no boxes need to be checked. IF THIS PROXY IS SIGNED BUT NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR ITEMS 1 AND 2 in their discretion, and the appointed proxies are authorized to vote upon such other business as may properly come before the meeting.
(continued and to be signed on other side)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2
ITEM NO. 1 - ELECTION OF DIRECTORS
ITEM NO. 2 - APPROVAL OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
NOTE. Please sign exactly as name appears hereon. Joint owners should each sign. When signing as an attorney, executor, administrator, trustee or guardian, please give full title as such. Corporate and partnership proxies should be signed by an authorized person indicating the persons title.
5FOLD AND DETACH HERE5
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