SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File No. 0-22780
FEI COMPANY
(Exact name of registrant as specified in its charter)
Oregon 93-0621989
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
7451 NW Evergreen Parkway
Hillsboro, Oregon 97124-5830
(Address of principal executive offices) (Zip Code)
(503) 640-7500
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 18,077,373 shares of Common
Stock were outstanding at November 11, 1997.
<PAGE>
INDEX TO FORM 10-Q
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - September 28, 1997 (unaudited) and
December 31, 1996....................................................1
Consolidated Statements of Operations - Thirteen Weeks Ended
September 30, 1996 and September 28, 1997 (unaudited) and
Thirty Nine Weeks Ended September 30, 1996 and September 28,
1997 (unaudited).....................................................2
Condensed Combined Consolidated Statements of Cash Flows -
Thirty Nine Weeks Ended September 30, 1996 and September 28,
1997 (unaudited).....................................................3
Notes to Consolidated Financial Statements (unaudited)...............4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................9
Part II - Other Information
Item 2. Changes in Securities...........................................14
Item 6. Exhibits and Reports on Form 8-K................................14
Signatures....................................................................15
<PAGE>
PART I - Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
FEI Company and Subsidiaries
Consolidated Balance Sheets
December 31, 1996 and September 28, 1997 (Unaudited)
(In thousands, except share data)
December 31, September 28,
1996 1997
----------- ------------
(PEO (Combined
Operations) Company)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 3,541
Receivables 25,349 44,471
Inventories (Note 3) 30,213 41,783
Current accounts with Philips (Note 4) 1,639 6,289
Other receivables and prepaid expenses 1,426 1,806
Deferred income taxes - 619
----------- ------------
Total current assets 58,627 98,509
EQUIPMENT 5,658 20,613
LEASE AND NOTE RECEIVABLES - 1,063
OTHER ASSETS (Note 5) 7,539 45,255
----------- ------------
TOTAL $ 71,824 $ 165,440
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit and notes payable $ - $ 8,889
Accounts payable 7,585 18,737
Accrued payroll liabilities 1,648 2,992
Prepayments received 2,145 -
Accrued expenses/deferred income 13,277 14,706
Other current liabilities 2,897 6,000
----------- ------------
Total current liabilities 27,552 51,324
LONG-TERM PROVISIONS 1,202 575
DEFERRED INCOME TAXES - 6,919
SHAREHOLDERS' EQUITY:
Preferred stock - 500,000 shares authorized; none
- -
issued and outstanding
Common stock - 30,000,000 shares authorized;
- 151,445
17,884,567 shares issued and outstanding at September 28, 1997
Retained earnings (39,551)
Division equity (Note 8) 43,070 -
Cumulative foreign currency translation adjustment - (5,272)
----------- ------------
SHAREHOLDERS' EQUITY 43,070 106,622
----------- ------------
TOTAL $ 71,824 $ 165,440
=========== ============
See notes to consolidated financial statements.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
FEI Company and Subsidiaries
Consolidated Statements of Operations
(In thousands except per share data)
(Unaudited)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
--------------------------- ---------------------------
Sept. 29, Sept. 28, Sept. 29, Sept. 28,
1996 1997 1996 1997
------------- ----------- ----------- -------------
(PEO (Combined (PEO (Combined
Operations) Company) Operations) Company)
<S> <C> <C> <C> <C>
Net sales $ 27,307 $ 39,036 $ 71,059 $ 115,061
Cost of sales 21,805 22,412 50,580 73,278
------------- ----------- ----------- -------------
Gross profit 5,502 16,624 20,479 41,783
Research and development costs 2,472 3,370 7,447 10,215
Selling, general and administrative costs 5,509 8,872 15,331 27,255
Amortization of intangibles (Note 6) - 530 - 1,467
Purchased in-process research and development
(Note 6) - - - 38,046
Restructuring and reorganization costs (Note 7) - - - 2,478
------------- ----------- ----------- -------------
Income (loss) from operations (2,479) 3,852 (2,299) (37,678)
Other income (expense) - 231 - (49)
------------- ----------- ----------- -------------
Income (loss) before income taxes (2,479) 4,083 (2,299) (37,727)
Income tax expense (benefit) (517) 1,634 (480) 1,824
------------- ----------- ----------- -------------
Net income (loss) $ (1,962) $ 2,449 $ (1,819) $ (39,551)
============= =========== =========== =============
Pro forma income (loss) per share (Note 2) $ (0.20) $ 0.13 $ (0.19) $ (2.44)
============= =========== =========== =============
Pro forma weighted average common and
common equivalent shares outstanding (Note 2) 9,729 19,586 9,729 16,177
============= =========== =========== =============
See notes to consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
FEI Company and Subsidiaries
Condensed Consolidated Statements of Cash Flow
(In thousands)
(Unaudited)
Thirty-Nine Weeks Ended
-------------------------------
September 29, September 28,
1996 1997
------------ ------------
(PEO (Combined
Operations) Company)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,819) $ (39,551)
Other items impacting operating cash flows (5,057) 50,132
-------------- ------------
Net cash provided (used) by operating activities (6,876) 10,581
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment (2,789) (9,728)
Purchase of businesses (2,703) -
Investment in software development - (1,215)
Net change in leases receivable - (278)
------------- -------------
Net cash provided (used) in investing activities (5,492) (11,221)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit - (247)
Proceeds from exercise of stock options - 1,700
Net cash received from Philips 12,368 8,000
------------- ------------
Net cash provided by financing activities 12,368 9,453
FOREIGN CURRENCY TRANSLATION ADJUSTMENT - (5,272)
------------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS - 3,541
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD - -
------------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ - $ 3,541
============= ============
SUPPLEMENTAL SCHEDULE OF CASH FLOW
INFORMATION
Cash paid during the period for interest $ - $ 571
NONCASH INVESTING AND FINANCING ACTIVITIES
Amounts due to PIE for excess working capital contributed $ - $ 2,866
See notes to consolidated financial statements.
</TABLE>
3
<PAGE>
FEI COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. NATURE OF BUSINESS
FEI Company and its wholly owned subsidiaries (the "Company") design,
manufacture and market focused ion beam ("FIB") workstations, transmission
electron microscopes ("TEMs"), scanning electron microscopes ("SEMs") and
components of these products. The Company has manufacturing operations in
Hillsboro, Oregon; Eindhoven, The Netherlands; and Brno, Czech Republic. Sales
and service operations are conducted in eight countries and the U.S.,
constituting a majority of the worldwide market for the Company's products. In
addition, the Company's products are sold through distribution agreements with
affiliates of Philips Electronics N.V. ("Philips") located in approximately 20
additional countries.
The Company's products are sold to manufacturers of semiconductors and life
science and materials science customers. The Company's FIB workstations are sold
primarily to semiconductor manufacturers. The Company's electron microscope
products are sold primarily to life science and materials science research
institutes, universities and industrial customers, as well as to a limited
number of semiconductor manufacturers.
The Company is an indirect subsidiary of Philips which owns, through one of its
subsidiaries, 55% of the outstanding stock of the Company.
2. BASIS OF PRESENTATION
On February 21, 1997, FEI Company completed a combination transaction (the
"Combination") with the electron optics business ("PEO Operations") of Philips
Industrial Electronics International B.V. ("PIE"), a wholly owned subsidiary of
Philips. Pursuant to the Combination, FEI Company acquired shares of two
Philips' subsidiaries owning substantially all of the assets and liabilities of
PEO Operations' business, and issued to PIE a number of shares of FEI Common
Stock equal, after issuance, to 55% of the outstanding shares of Common Stock of
FEI Company. The transaction was accounted for as a "reverse acquisition" for
accounting and financial reporting purposes, whereby PIE was treated as the
accounting acquiror because PIE acquired control of the Company by acquiring 55%
of the outstanding voting securities of the Company in the transaction. As a
result, the historical financial statements of the Company are the historical
financial statements of the PEO Operations for all periods prior to the date of
the Combination.
Pro forma earnings per share have been calculated assuming the shares of the
Company issued to PIE in the Combination were outstanding for the PEO Operations
and the combined company for all periods presented and assuming the shares of
the Company outstanding prior to the Combination were issued as of the closing
date of the Combination.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and Article 2 of Regulation
S-X.
4
<PAGE>
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for fair
presentation have been included. In addition to the adjustments for normal
recurring accruals, the Company recorded charges in the first quarter of 1997 of
approximately $38.0 million associated with the purchase of in-process research
and development, as a result of the Company's combination with PEO Operations.
The Company also recorded a $2.5 million restructuring and reorganization charge
primarily associated with the relocation of the Company's Wilmington,
Massachusetts manufacturing operations.
Before the Combination, the PEO Operations were operated as a business unit of
PIE. Management of Philips allocated certain costs in preparation of the
historical financial statements of the PEO Operations. No assurance is given
that these cost allocations reflect the actual costs that would have been
incurred by the PEO Operations if it had been operated as a stand-alone
business. Moreover, the preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reported
period. Actual results could differ from estimates.
The accompanying consolidated financial statements should be read in conjunction
with the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1996 as
well as the financial statements and footnotes of PEO Operations for the year
ended December 31, 1996 included in the Company's report on Form 8-K/A dated May
7, 1997.
3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, September 28,
1996 1997
----------- ------------
<S> <C> <C>
Raw materials and assembled parts $ 13,018 $ 22,186
Work in process 9,610 13,411
Finished goods 9,909 8,275
----------- ------------
32,537 43,872
Inventory reserves (2,324) (2,089)
----------- ------------
Total inventories, net $ 30,213 $ 41,783
=========== ============
</TABLE>
4. CURRENT ACCOUNTS WITH PHILIPS
Current accounts with Philips represent net accounts receivable and accounts
payable between the Company and other subsidiaries of Philips. Most of the
current account transactions relate to deliveries of goods.
Current accounts with Philips consist of the following (in thousands):
5
<PAGE>
<TABLE>
<CAPTION>
December 31, September 28,
1996 1997
----------- ------------
<S> <C> <C>
Current accounts receivable $ 2,471 $ 8,652
Current accounts payable (832) (2,363)
----------- ------------
Total current accounts with Philips $ 1,639 $ 6,289
=========== ============
</TABLE>
5. OTHER ASSETS
Other assets consist of the following (in thousands)
<TABLE>
<CAPTION>
December 31, September 28,
1996 1997
----------- ------------
<S> <C> <C>
Goodwill, net (Note 6) $ 1,525 $ 16,469
Existing technology, net (Note 6) - 15,689
Noncurrent service inventories, net of
valuation reserves of $2,661 and $4,243
respectively 6,014 7,997
Investment in Norsam Technologies, Inc.,
at cost - 3,267
Capitalized software, net - 1,215
Deposits and other - 618
----------- ------------
$ 7,539 $ 45,255
=========== ============
</TABLE>
6. THE COMBINATION
On February 21, 1997, FEI Company ("Pre-Combination FEI") acquired substantially
all of the assets and liabilities of the PEO Operations. The PEO Operations were
acquired in exchange for 9,728,807 newly issued shares of the Company's Common
Stock, which constituted, when issued to PIE, 55% of the shares of Common Stock
then outstanding. Because PIE acquired control of the Company by acquiring 55%
of the outstanding voting securities of the Pre-Combination FEI, the Combination
was treated as a "reverse acquisition" for accounting and financial reporting
purposes whereby purchase accounting was applied to the financial statements of
Pre-Combination FEI. The results of operations of Pre-Combination FEI are
included subsequent to February 21, 1997.
The Company obtained an appraisal of the fair market value of the intangible
assets acquired to serve as a basis for allocation of the purchase price to the
various classes of assets. The Company allocated the total purchase price of
$122.9 million to the assets acquired as follows (in thousands):
Current assets $ 43,893
Equipment 8,321
Leases receivable 1,341
Other assets 4,744
Existing technology intangible 16,490
In-process research and product development 38,046
Goodwill and other intangibles 17,122
Deferred income taxes (7,085)
----------
$ 122,872
6
<PAGE>
To determine the value of each of Pre-Combination FEI's product lines, projected
revenue net of provision for operating expenses, income taxes and returns on
requisite assets were discounted to a present value. This approach was applied
to existing technology as well as to research and development projects which
have not been proven technologically feasible and which had not generated
revenue at the date of the Combination. As a result of this valuation, the fair
value of existing technology and in-process technology were determined to be
$16.5 million and $38.0 million, respectively.
The amortization periods for existing technology and goodwill have been
established at 12 years and 15 years, respectively. The existing focused ion
beam technology, which is now in its third year of commercialization, is
estimated to have a 15-year life. Management will evaluate these amortization
periods from time to time. It is possible that estimates of anticipated future
gross revenues, the remaining estimated economic life of products or
technologies, or both may be reduced due to competitive pressures or other
factors.
In accordance with the applicable accounting pronouncements, a one-time charge
of $38.0 million associated with the writeoff of acquired in-process research
and product development was recorded immediately subsequent to the closing of
the Combination. Generally, it is the Company's policy to expense research and
development costs.
Unaudited pro forma combined statement of operations data, presented as if the
Combination had occurred on January 1, 1996, are as follows:
<TABLE>
<CAPTION>
Thirty Nine Weeks Ended
----------------------------
September 30, September 28,
1996 1997
------------ ------------
<S> <C> <C>
Net sales $ 93,000 $ 118,005
============ ============
Net income (loss) $ (5,809) $ (4,744)
============ ============
Pro forma earnings (loss) per share $ (0.33) $ (0.29)
============ ============
</TABLE>
7. RESTRUCTURING AND REORGANIZATION
In March 1997, the Company approved a plan to restructure its ElectroScan
operations by relocating the majority of its ElectroScan manufacturing
activities from Wilmington, Massachusetts to the Company's Netherlands
manufacturing facility. In conjunction with this plan, the Company announced its
intent to lay off 11 ElectroScan employees in manufacturing, sales and
administration and cease the majority of its manufacturing operations at the
Wilmington, Massachusetts facility. To date in 1997, nine employees have been
terminated in connection with this restructuring and two additional employees
will be terminated by March 31, 1998. The total cost of the restructuring is
estimated to be approximately $2.1 million, recorded in the period ended March
30, 1997, including the remaining goodwill of $1.7 million attributable to the
acquisition of the assets of ElectroScan Corporation and approximately $400,000
of severance and other costs.
In addition, the Company recorded a charge of approximately $400,000 associated
with costs relating to integrating the businesses of Pre-Combination FEI and the
PEO Operations.
7
<PAGE>
8. SHAREHOLDERS' EQUITY
Effective as of the closing of the Combination, division equity of the PEO
Operations was reclassified to paid-in capital of the Company.
9. NEW ACCOUNTING PRINCIPLE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings per Share,"
which requires companies to present two new measures of earnings per share,
basic and diluted. If SFAS No. 128 had been adopted for all periods presented,
basic and diluted earnings per share would not have materially differed from
reported earnings per share.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
The following table sets forth consolidated statement of operations data as a
percentage of sales for the PEO Operations (only) for the thirteen weeks and
thirty nine weeks ended September 30, 1996 and for the combined Company for the
thirteen weeks and thirty nine weeks ended September 28, 1997. Operating results
for the thirty nine weeks ended September 28, 1997 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997. The following table should be read in conjunction with the Combined
Financial Statements of the PEO Operations and the footnotes thereto included in
the Company's Form 8-K/A dated May 7, 1997 and the financial statements and
footnotes of the Pre-Combination FEI included in the Company's quarterly report
on Form 10Q for the quarter ended September 30, 1996 and its annual report on
Form 10-K for the year ended December 31, 1996.
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty Nine Weeks Ended
September 30, September 28, September 30, September 28,
---------------------------- ----------------------------
1996 1997 1996 1997
--------- --------- --------- ---------
(PEO (Combined (PEO (Combined
Operations) Company) Operations) Company)
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 79.8% 57.4% 71.2% 63.7%
--------- --------- --------- ---------
Gross profit 20.2% 42.6% 28.8% 36.3%
Research and development costs 9.1% 8.6% 10.4% 8.9%
Selling, general and administrative
costs 20.2% 22.7% 21.6% 23.7%
Amortization of intangibles (Note 6) - 1.4% - 1.3%
Purchased in-process research
and development (Note 6) - - - 33.0%
Restructuring and reorganization
costs (Note 7) - - - 2.1%
--------- --------- --------- ---------
Income (loss) from operations (9.1)% 9.9% (3.2)% (32.7)%
Other income (expense) - 0.6% - (0.1)%
--------- --------- --------- ---------
Income (loss) before income taxes (9.1)% 10.5% (3.2)% (32.8)%
Income tax expense (benefit) (1.9)% 4.2% (0.6)% 1.6%
--------- --------- --------- ---------
Net income (loss) (7.2)% 6.3% (2.6)% (34.4)%
========= ========= ========= =========
</TABLE>
9
<PAGE>
Net Sales. Net sales for the thirteen weeks ended September 28, 1997 increased
$11.7 million (43%) and for the thirty nine weeks ended September 28, 1997
increased $44.0 million (62%) compared to the corresponding periods in 1996. The
increases in sales are primarily attributable to the fact that the 1997 period
includes net sales of the combined company, and the 1996 period includes net
sales of the PEO Operations only. Pre-Combination FEI contributed approximately
$18.2 million in revenue for the thirteen weeks ended September 28, 1997 and
approximately $42.5 million in revenue for the period from the closing of the
Combination on February 21, 1997 ("Closing") to September 28, 1997. Sales of
electron microscopes and related services decreased $6.5 million for the
thirteen weeks and increased $1.5 million for the thirty nine weeks ended
September 28, 1997, respectively, compared to the respective 1996 periods. The
decline in sales during the thirteen weeks ended September 28, 1997 is due
primarily to a downturn during the period in the market for transmission
electron microscopes. Revenue from sales of FIB workstations increased due to a
higher number of sales into the semiconductor and thin film head industries and
sales of higher-priced products to customers in this market.
Sales outside the U.S. for the combined company accounted for 65% of sales for
the thirty nine weeks ended September 28, 1997 and 76% for the PEO Operations
for the thirty nine weeks ended September 30, 1996. The Company expects that
sales outside the U.S. will continue to represent a significant percentage of
its net sales.
Gross Profit. Gross profit for the thirteen weeks ended September 28, 1997
increased $11.1 million (202%) and for the thirty nine weeks ended September 28,
1997 increased $21.3 million (104%) compared to the corresponding periods in
1996. Gross profit as a percentage of sales for the thirteen weeks ended
September 28, 1997 increased to 43% from 20%, and for the thirty nine weeks
ended September 28, 1997, increased to 36% from 29% for the corresponding
periods in 1996, due to the following factors: (i) higher-margin sales,
including sales into the semiconductor market; (ii) a beneficial change in
currency exchange rates and (iii) manufacturing efficiencies associated with
higher sales levels.
Research and Development. Research and development expense increased $0.9
million (36%) for the thirteen weeks ended September 28, 1997 and $2.8 million
(37%) for the thirty nine weeks ended September 28, 1997, compared to the
corresponding periods in 1996. These increases primarily reflect the fact that
research and development costs for thet 1996 period were those of the PEO
Operations only, and the 1997 period costs are those of the combined company.
Subsequent to closing of the Combination, research and development costs of
Pre-Combination FEI were $1.7 million for the thirteen weeks ended September 28,
1997 and $3.8 million for the thirty nine weeks ended September 28, 1997.
As a percentage of sales, research and development expense was 9% for the
thirteen weeks ended September 28, 1997 and September 30, 1996, and was 9% for
the thirty nine weeks ended September 28, 1997 compared to 10% for the same
period in 1996.
10
<PAGE>
This comparative decrease as a percentage of sales during the 1997 thirty nine
week period was the result of increased sales volume, an increase in capitalized
software development which reduced research and development expense, and the
averaging effect which resulted from combining the historically lower percentage
research and development expense of Pre-Combination FEI and the historically
higher percentage research and development expense of the PEO Operations.
Capitalized software development costs were $0.3 million and zero for the
thirteen weeks ended September 28, 1997 and September 30, 1996, respectively,
and $1.2 million and zero for the thirty nine weeks ended September 28, 1997 and
September 30, 1996, respectively. Historically, the PEO Operations did not
capitalize software development costs and its practice was conformed to U.S.
generally accepted accounting practices as of February 21, 1997. While the PEO
Operations did not previously capitalize software development costs under its
accounting policies, management of the Company does not believe that
capitalization of software costs in accordance with U.S. generally accepted
accounting principles would have materially affected the net income of the PEO
Operations in prior periods. The Company is continuing to invest in internal
development of software incorporated in electron microscopes and focused ion and
electron beam products.
Selling, General and Administrative. Selling, general and administrative
expenses for the thirteen weeks ended September 28, 1997 increased $3.4 million
(61%) and for the thirty nine weeks ended September 28, 1997 increased $11.9
million (78%) compared to the same periods in 1996. This increase primarily
reflects the fact that the 1996 period selling, general and administrative
expenses were those of the PEO Operations only, and the 1997 period expenses are
those of the combined company. Selling, general and administrative expenses
incurred by Pre-Combination FEI subsequent to closing were $3.9 million for the
thirteen weeks ended September 28, 1997 and $8.6 million for the period from
closing through September 28, 1997. Selling, general and administrative expenses
as a percentage of sales were 23% and 20% for the thirteen weeks ended September
28, 1997 and September 30, 1996, respectively, and were 24% and 22% for the
thirty nine weeks ended September 28, 1997 and September 30, 1996, respectively.
The increase in these expenses as a percentage of sales compared to the prior
periods results primarily from (i) lower consolidated net sales resulting from
the post-combination elimination of intercompany sales, and (ii) approximately
$1 million of expense in the 39 weeks ended September 28, 1997 associated with
the writeoff of uncollectible accounts receivable.
Income Tax Expense. The effective income tax rate was 40% and 21% for the
thirteen weeks ended September 28, 1997 and September 30, 1996, respectively,
and 0% and 21% for the thirty nine weeks ended September 28, 1997 and September
30, 1996, respectively. The Company did not record a tax benefit for the thirty
nine weeks ended September 28, 1997, primarily because the $38.0 million of
purchased research and development costs written off immediately subsequent to
the consummation of the Combination were non-deductible. The Company's tax rates
generally vary from the U.S.
11
<PAGE>
federal statutory tax rate of 34% primarily as a result of state and foreign
taxes and the amortization of intangible assets.
Risks of International Operations. Certain risks are inherent in international
operations, including changes in demand resulting from fluctuations in interest
and exchange rates, the risk of government financed competition, changes in
trade policies, tariff regulations and difficulties in obtaining export
licenses. Changes in relevant foreign currency exchange rates between time of
sale and time of payment can also have a material effect on reported financial
results.
LIQUIDITY AND CAPITAL RESOURCES
At September 28, 1997, the Company had total cash and cash equivalents of $3.5
million compared to zero at December 31, 1996 for the PEO Operations and $17.2
million for the Company at June 29, 1997. Historically, net cash of the PEO
Operations was included in Current Accounts with Philips and, as such, recorded
in Division Equity of Philips Industrial Electronics. Cash provided by operating
activities for the thirty nine weeks ended September 28, 1997 was $10.6 million
compared to cash used of $6.9 million for the thirty nine weeks ended September
30, 1996. The primary reasons for the increase in cash from operating activities
during the 1997 thirty nine week period compared to the 1996 period were (i) an
increase in sales and related collection of accounts receivable and a
comparatively lower increase in inventory purchases, and (ii) an increase in the
Company's trade payable accounts with Philips affiliates. The lower level of
cash and cash equivalents at September 28, 1997 as compared with June 29, 1997
results primarily from the settlement of intercompany trade accounts with
Philips, offset in part by cash otherwise provided from operations.
Investing activities used $11.2 million during the thirty nine weeks ended
September 28, 1997 and $5.5 million during the thirty nine weeks ended September
30, 1996, primarily due to continued capital expenditures to provide the basis
for growth. The Company expects to continue to invest in plant and equipment
needed for future business requirements, including manufacturing capacity.
Financing activities provided $9.5 million for the thirty nine weeks ended
September 28, 1997. These cash sources were primarily $8.0 million cash of the
PEO Operations as of the Closing of the Combination and approximately $1.7
million from the exercise of employee stock options. Future uses of cash in 1997
and the first part of 1998 will include approximately $2.9 million the Company
is obligated to pay to Philips Industrial Electronics pursuant to provisions of
the Combination Agreement. These provisions require the Company to repay a
portion of Net Operating Capital of the PEO Operations, calculated as of
Closing, that exceeded the projected working capital level of NLG 78.1 million.
The repayment obligation is evidenced by two promissory notes due February 21,
1998, with interest at 7 3/8% and 4% per annum, respectively, payable from
February 21, 1997.
12
<PAGE>
The Company expects to continue to use cash to fund the growth of its
operations. The Company believes its cash and cash equivalents and borrowings
available under its $25 million line of credit will be sufficient to fund
operations during the near term.
BACKLOG
The Company's backlog consists of purchase orders it has received for products
it expects to ship within the next 12 months. The Company's backlog at October
26, 1997 was approximately $52.1 million. A substantial portion of the Company's
backlog relates to orders for a relatively small number of products. As a
result, the timing of the receipt of an order from a single customer could have
a significant impact on the Company's backlog at any date. For this and other
reasons, the amount of backlog at any date is not necessarily determinative of
revenue in future periods.
13
<PAGE>
Part II - Other Information
Item 2. Changes in Securities
On February 21, 1997 (the "Combination Closing"), the Company combined with
the electron optics business of Philips Electronics N.V. pursuant to a
Combination Agreement dated November 15, 1996. At the Combination Closing, the
Company issued 9,728,807 shares of its Common Stock to Philips Industrial
Electronics International B.V., a Netherlands corporation ("PIE") as
consideration for all of the outstanding shares of Philips Electron Optics
International B.V., a Netherlands corporation, and Philips Electron Optics,
Inc., a Delaware corporation, both wholly owned subsidiaries of PIE immediately
prior to the Combination Closing.
The Combination Agreement provides in relevant part that at the time of issuance
by the Company of any shares of Common Stock upon the exercise of a stock option
outstanding on the date of the Combination Closing, the Company is required to
issue to PIE a number of additional shares of Common Stock such that the shares
of Common Stock issued to PIE at Closing continue to represent 55% of the
Outstanding Common Stock of the Company, as defined in the Combination
Agreement. During the thirteen weeks ended September 28, 1997 the Company issued
192,214 shares of its Common Stock to PIE pursuant to this provision of the
Combination Agreement.
The shares issued were not registered under the Securities Act of 1933, and the
issuance was made in reliance on Section 4(2) of the Securities Act as a
transaction not involving a public offering. The consideration received by the
Company for the shares issued, together with the shares issued to PIE at the
Combination Closing, was the outstanding shares of Philips Electron Optics
International B.V. and Philips Electron Optics, Inc.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.17 Lease Agreement, dated October 27, 1997, between Philips
Industrial Electronics International B.V. as lessor and Philips
Electron Optics B.V., a wholly owned indirect subsidiary of FEI
Company, as lessee, including a guarantee by FEI Company of the
lessee's obligations thereunder
10.18 Employment Agreement, dated July 1, 1997, between FEI Company and
William G. Langley
10.19 Employment Agreement, dated August 1, 1997, between FEI Company
and Karel D. van der Mast
10.20 Revolving Credit Agreement, dated as of July 1, 1997, between FEI
Company and KeyBank National Association
10.21 Amendment Number One, dated as of August 31, 1997, to Revolving
Credit Agreement between FEI Company and KeyBank National
Association
27.1 Financial Data Schedule
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FEI COMPANY
Dated: November 11, 1997 FREDERICK A.M. GORDON
-----------------------------------------
Frederick A.M. Gordon
Controller
and Authorized Officer
15
<PAGE>
Exhibit Index
Exhibit
No. Description
- ------- -----------
10.17 Lease Agreement, dated October 20, 1997, between Philips Industrial
Electronics International B.V. as lessor and Philips Electron Optics
B.V., a wholly owned indirect subsidiary of FEI Company, as lessee,
including a guarantee by FEI Company of the lessee's obligations
thereunder
10.18 Employment Agreement, dated July 1, 1997, between FEI Company and
William G. Langley
10.19 Employment Agreement, dated August 1, 1997, between FEI Company and
Karel D. van der Mast
10.20 Revolving Credit Agreement, dated as of July 1, 1997, between FEI
Company and KeyBank National Association
10.21 Amendment Number One, dated as of August 31, 1997, to Revolving Credit
Agreement between FEI Company and KeyBank National Association
27.1 Financial Data Schedule
LEASE FOR OFFICE SPACE
and other business accommodation not under section 7A:1624 Dutch Civil Code
The undersigned:
1. Philips Industrial Electronics International B.V., established at
Zwaanstraat 1, Eindhoven, represented by Mr. G.R.C. Dierick, hereinafter
referred to as Lessor;
2. Philips Electron Optics B.V., established at Achtseweg, Eindhoven,
represented by Messrs W.A. Whitward and J.M. Vinkesteijn, hereinafter
referred to as Lessee,
have agreed to the following Lease:
THE LEASED PROPERTY, PURPOSE, USE
1.1 This agreement relates to 17,754 sq.m. gross office space and industrial
space, car park and green area in or belonging to:
---------------------------------------------------------------------------
BUILDING sq.m. gross floor area Total annual sum due
---------------------------------------------------------------------------
AAE 17,754 See Article 4 of this
Agreement
---------------------------------------------------------------------------
hereinafter referred to as 'the Leased Property', situate at complex
Acht-Zuid at the Achtseweg-Noord in Eindhoven and as specified according to
building and site on the addendum attached to this agreement and certified
by the parties hereto, which constitutes part of this lease.
1.2 The Leased Property may only be used as office, production and storage
space.
1.3 Without Lessor's prior written approval Lessee is not permitted to give the
Leased Property a purpose other than defined in 1.2.
1.4 Lessee undertakes not to load the used floor area in excess of what is
structurally permissible.
<PAGE>
CONDITIONS
2.1 The general conditions for leasing office space and other business
accommodation not under section 7A:1624 CC, deposited with the Clerk of the
Court in The Hague on 29 February 1996 and registered under number 34/96,
hereinafter referred to as 'the General Conditions', are an integral part
of this lease. The parties are fully acquainted with these General
Conditions. Lessee has received copy of these conditions.
2.2 The conditions referred to in Article 2.1 of this Agreement are applicable
except where this Agreement is expressly at variance with them or
applicability in relation to the Leased Property is not possible.
TERM, EXTENSION AND TERMINATION OF THE LEASE
3.1 This agreement is entered into for the period of ten (10) years, commencing
on 21 February 1997 and ending on 20 February 2006.
3.2 After expiry of the period mentioned in Article 3.1 hereof this Agreement
will be renewed for a period of five (5) years, consequently up to and
including 20 February 2011, if Lessee has not given notice of termination
of the lease at least 12 months before the end of the lease period referred
to in Article 3.1. After expiry of the second lease period the lease
agreement will be renewed again for a period of five (5) years,
consequently up to and including 20 February 2016, if Lessee has not given
notice of termination of the lease at least 12 months before the end of the
lease period referred to in Article 3.1.
3.3 This agreement will be terminated by the Lessee giving notice at the end of
a lease period subject to at least a twelve (12) months' notice period.
3.4 Notice of termination of the agreement shall be given by registered letter.
3.5 This agreement may be terminated prematurely by the parties in a
circumstance as mentioned in Article 7 of the General Conditions, in which
contrary to the provision in Article 7.2 of the General Conditions first a
notice of default is required.
PAYMENT OBLIGATIONS AND PAYMENT TERM
4.1 Lessee shall pay the following sums:
2
<PAGE>
(a) a payment for the rent in the sum of NLG 1,540,000 per year, exclusive
of value added tax (V.A.T.) (in words: one million five hundred forty
thousand Dutch guilders);
(b) a payment for specific facilities which constitute part of the Leased
Property in the sum of NLG 827,205 per year, exclusive of V.A.T. (in
words: eight hundred twenty-seven thousand two hundred five Dutch
guilders);
(c) the V.A.T. payable for (a) and (b), or a corresponding sum as referred
to in Article 5 of this Agreement, at least if parties have agreed a
rent taxed with V.A.T.
4.2 The payment for the rent as provided in Article 4.1.(a) of this Agreement
will be adjusted annually on 1 March, for the first time on 1 March 1998
and similarly for consecutive years in accordance with Article 4 of the
General Conditions. Parties agree that the payment as specified in Article
4.1(b) of this Agreement shall only be payable for the first 10 years of
the duration of this Agreement, after which Lessee will be deemed to have
paid the surplus value of the specific facilities of Leased Property
Parties agree that in the event of any adjustment of the rent after expiry
of 10 years, the availability of the specific facilities will not be taken
into consideration.
4.3 Contrary to the provision in Article 4.1 of this Agreement the total
payment due for the first year of the Agreement is $850,000 (in words:
eight hundred fifty thousand USDollars).
4.4 The payments to be made by Lessee to Lessor pursuant to Article 4.1.
respectively Article 4.3. of this Agreement shall be payable in equal
monthly instalments in a lump sum in advance, always before or on the first
day of the period to which the payment applies.
VALUE ADDED TAX
5.1 As Lessee and Lessor are part of the same tax entity, parties do not opt
for V.A.T. taxed rent. Parties agree that if Lessor at any time transfers
this Lease Agreement to a third party, not belonging to the same tax
entity, parties will at that time opt for a V.A.T. taxed rent and that
Lessor accordingly will charge V.A.T. over the total payment due. In such a
case Lessee hereby undertakes to accept the applicability of the following
terms.
5.2 Lessee shall at that time declare that he will use the Leased Property for
purposes for which a full or almost full (at least for 90%) right to
deduction of V.A.T. already paid
3
<PAGE>
exists. Lessee shall at that time declare that he is entitled to fully or
almost fully deduct the V.A.T. with regard to the instalment.
Lessee hereby declares that he will inform Lessor within 4 weeks after the
end of the financial year (of Lessee) in which Lessee has started to use
the immovable property of the use (i.e. whether the immovable property has
been used for purposes for which at least a 90% right to deduction exists).
5.3 Should Lessee, for any reason, at any time be unable to fully or almost
fully deduct the V.A.T. with regard to the instalment, Lessee shall
immediately notify Lessor in writing. Lessee shall inform Lessor of any
such change in his entitlement to deduction, if possible, always before it
produces effect. If Lessee, also after written notice, does not comply with
this obligation to inform and Lessor has as a result, in retrospect,
wrongly charged V.A.T. with regard to the instalments, Lessee shall be in
default and shall pay a sum corresponding with Lessor's financial loss at
the latter's first demand.
This loss particularly concerns the full additional
assessments/reassessments of V.A.T. payable by Lessor as well as the
relevant increases and interests, the administration cost Lessor has to
incur in that respect and all other expenses which are the result of the
termination by operation of law of the charged rent, where reasonably
attributable to Lessee. However, if Lessee shows that through Lessor's acts
or omission the option application has not been granted or not on the
agreed date or, whether or not with retroactive effect, is no longer
granted, Lessee shall not owe any payment.
5.4 Lessee undertakes in anticipation of such event vis-a-vis Lessor in the
event that he no (longer) uses the Leased Property for charged
performances, to pay to Lessor or his successors in title in addition to
and simultaneous with the rent:
(a) The V.A.T., which is no (longer) deductible as a result of the
termination of the charged rent, for the operating costs of the Leased
Property and/or investments therein.
(b) The V.A.T., which Lessor has to repay to and/or can no longer get back
from the tax authorities as a result of the termination of the charged
rent on account of recalculation as referred to in Section 15(4) of
the Wet op de omzetbelasting (VAT Act) 1968 or review as referred to
in Sections 11 up to 13 inclusive of the Uitvoeringsbeschikking
omzetbelasting (Implementation Decision) 1968.
(c) Any other loss which Lessor will incur as a result of the termination
of the charged rent, where reasonably attributable to Lessee.
4
<PAGE>
5.5 Lessor shall have to inform Lessee which amounts Lessor has to be pay to
the tax authorities and give insight in the other loss claimed by Lessor.
Lessoor shall cooperate if Lessee wants to have the statement of the
amounts checked by an independant accountant.
5.6 The above provisions shall be in full force in the event of substitution as
provided in the law.
BANK GUARANTEE
6. Parties agree that, contrary to the provision in Article 8 of the General
Conditions, Lessee will not issue a bank guarantee. In stead FEI Company
warrants as Lessee's parent company Lessee's compliance with his
obligations under this Agreement.
ADMINISTRATOR
7. Until Lessor notifies otherwise, the administrator on behalf of owners will
be:
Philips International B.V.
Mr. G.R.C. Dierick
Gebouw VP-1
P.O. Box 218
5600 MD Eindhoven
5
<PAGE>
SPECIAL CONDITIONS
8.1 Lessor shall be entitled at any time to transfer the rights and obligations
arising from this Agreement to any third party.
8.2 Lessor shall not unreasonably withhold the permission referred to in
Article 3.1 of the General Conditions.
8.3 In respect of the specific facilities in or to the Leased Property
installed by Lessee himself the latter shall be entitled to transfer these
investments after termination of the Lease to a successive lessee. In the
event that transfer does not take place Lessor shall have the right to
request Lessee to remove these specific facilities from the building and to
deliver the building clean and vacated and in a good condition.
Contrary to what is stated in Article 9.1 of the General Conditions the
maintenance, both structural and the preservation of the daily maintenance
shall be at Lessee's expense and risk. Lessee shall, putting aside what is
prescribed in the Dutch Civil Code and in Article 9.1 of the General
Conditions in respect of maintenance, keep the Leased Property in a good
state of repair at his expense and to the satisfaction of Lessor. Lessee
shall have complied with said obligation if he has executed a maintenance
plan to be determined in consultation with and with the consent of Lessor
for the duration of the lease period. In the event of a difference op
ofinion about the maintenance plan to be determined and/or about the
execution of the same, parties will submit their dispute to an independent
expert.
8.4 Contrary to what is stated in Article 15.4 of the General Conditions the
charges and taxes in respect of the enjoyment under a right in rem
including the real estate taxes, the district water board charges and the
sewerage charges shall be at Lessee's expense.
8.5 Lessor shall see to the insurance of the structures at the expense of and
in consultation with Lessee.
Thus drawn up and signed in threefold:
At Eindhoven, date _______________ At Eindhoven, date _______________
/s/ G.R.C. DIERICK /s/ W.A. WHITWARD
- ---------------------------------- -----------------------------------
authorized on behalf of Philips Electron Optics B.V.
Philips Industrial Electronics
International B.V.
6
<PAGE>
/s/ J.M. VINKESTEIJN
-----------------------------------
Philips Electron Optics B.V.
Addenda
- - the General Conditions
- - specification and drawing of the Leased Property
FEI Company, parent company of Philips Electron Optics B.V., by signature of its
authorized officer, hereby guarantees the fulfillment of the terms and
conditions herein by its subsidiary Philips Electron Optics B.V.
/s/ W.A. WHITWARD
- ----------------------------------
FEI Company
W.A. Whitward
The undersigned represents that the foregoing is a fair and accurate English
translation.
/s/ FREDERICK A.M. GORDON
-----------------------------------
Frederick A.M. Gordon
Chief Financial Officer and
Designated Officer
7
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CONDITIONS FOR LEASING OFFICE SPACE
and other business premises not under section 7A:1624 CC
- --------------------------------------------------------------------------------
According to the standard text decided upon by the Road voor Onroerenda Zoken
(Council for Real Estate deposited on 29 February 1996, under registration
number 34/1996 with the Clerk of the Court in the Hague. The Council is not
liable for any adverse consequences of the use of the standard text. The purpose
of the headings above the articles in these General Conditions is only to
improve their readability. The content and import of the clause covered by the
heading is therefore not limited to such heading.
- --------------------------------------------------------------------------------
The Leased Premises
1.1 The Leased Premises include the installations and facilities which are
present, in as much as these are not excluded in the certified description
accompanying the lease. 1.2 The Leased Premises will be made available for
occupation and accepted in the state outlined in the certified description
accompanying the lease or, in the absence of such a description, in the state at
the commencement of the lease, in a good state without faults.
Use
2.1 The Lessee will make actual and proper use of the Leased Premises himself
during the entire term of the lease, exclusively for the purpose stipulated in
the lease. He shall in doing so observe existing limited rights and requirements
which have been or may be made by government authorities or public utility
companies. He shall provide the Leased Premises with sufficient furniture and
fixtures and keep the same so provided. 2.2 The Lessee shall act in accordance
with the law and local regulations and in accordance with accepted practice as
regards leasing, with regulations issued by the authorities, public utility
companies, the insurers and, if applicable, with the regulations of the agency
responsible for the sprinkler system and the "Silchring Nederlands Instituut
voor Liftechniek" and other competent authorities to issue the necessary
certificates. The Lessee shall also observe the instructions given in writing or
by word of mouth by or on behalf of the Lessor in the interests of the proper
use of the Leased Premises and of the inside and outside areas, the
installations and fixtures in the building or complex which the Leased Premises
are part of. This shall include instructions regarding the maintenance,
appearance, noise level, public order, fire protection, parking and the correct
operation of the installations and the building or the complex which the Leased
Premises are part of. 2.3 The Lessee may not create any nuisance or cause any
inconvenience when using the Leased Premises or the building or the complex of
which the Leased Premises form a part and will ensure that any third party
present on his behalf do likewise. 2.4 The Lessor has the right and the duty to
use the common facilities and services which are or will be available in the
interest of the proper functioning of the complex which the Leased Premises are
part of.
Licenses
2.5.1 The Lessee shall obtain the licenses and/or exemptions required to carry
on the business for which the Leased Premises are intended. Refusal or
suspension of the same shall not give cause for cancelling or annulling the
lease or for undertaking any other action against the Lessor. 2.5.2 If
alterations or improvements to the Leased Premises are necessary in connection
with 2.5.1, whether or not as a result of regulations issued by authorities, it
is the Lessee's responsibility (without prejudice to the conditions in 2.6 and
2.10) to ensure that the activities to that purpose are carried out in
accordance with the requirements made or to be made by the authorities and that
any necessary licenses are obtained, while the costs of the alterations or
improvements will be met by the Lessee.
Environment
2.6.1 If upon commencement or during the term of the lease an environmental
investigation is started with respect to the Leased Premises and afterward
during the term of the lease or immediately upon termination of the lease - in a
similar investigation - the concentrations of one or more substances found on,
in, at or around the Leased Premises are higher than those of the earlier
investigation, the Lessee shall compensate the damage
-1-
<PAGE>
arising from the contamination and shall be liable to the Lessor for expenses
relating to the removal of such contamination or for the taking of actions. The
Lessee shall indemnify the Lessor against claims of third parties, including
government agencies. 2.6.2 The provision of 2.6.1 is not applicable if the
Lessee shows that the contamination has neither been caused by any fault or
negligence of himself, his personnel or persons or objects under his
supervision, nor by any circumstances which can be imputed to the Lessee. 2.6.3
The Lessor shall not indemnify the Lessee against (government) orders for
further investigation or the taking of actions.
Waste products/chemical waste
2.7 Where directives or regulations by the government or other competent
authorities are applicable to the (differentiated) presentation of waste
products, the Lessee shall continuously and carefully observe the same. In case
of non-observance or incomplete observance of this obligation the Lessee shall
be liable for any resulting financial, criminal and possibly other consequences.
Advertisements
2.8 Where the Leased Premises are part of a building or complex, the Lessor
shall have the right to make use of the roofs, outer walls, gardens and grounds
of that building or complex for (illuminated) advertisements, signs and the
like, both for his own benefit and for the benefit of the Lessee or any third
party. In exercising this right, the Lessor will take account of the Lessee's
interests.
Apartment titles (Appartementsrecht)
2.9.1 If the building, or the complex of which the Leased Premises are part, is
or is to be subdivided into apartment titles, the Lessee will be required to
observe the regulations arising from the property division agreement and rules
governing their use. The same applies if the building or complex of buildings is
or becomes the property of a cooperative. 2.9.2 Insofar as this is within his
power, the Lessor shall not assist in the formulation of regulations which are
in conflict with the lease. 2.9.3 The Lessor will ensure that the Lessee is
provided with the regulations regarding use as referred to in 2.9.1.
Prohibitions and regulations regarding Public Order
2.10.1 The Lessee is not permitted:
a. to have environmentally hazardous materials, including malodorous,
inflammable or explosive substances, in, on, attached to or in the
immediate vicinity of the Leased Premises, unless such materials are part
of the normal carrying on of a profession or business;
b. to burden floors of the Leased Premises or the building or complex of which
the Leased Premises form a part more than is technically permissible or
specified in the lease;
c. to make such use of the Leased Premises that as a result of this use the
soil or environment becomes polluted, the Leased Premises suffer damage, or
the appearance of the Leased Premises is adversely affected, which is
understood to include the use of vehicles as a result of which the floors
may be damaged;
d. to make any alterations or additions in, on or to the Leased Premises which
are in conflict with regulations of the authorities and of public utility
companies or with the conditions under which the owner of the Leased
Premises acquired ownership of the Leased Premises or with any other
limited rights, or to make alterations or additions which create a nuisance
for other Lessees or the neighbors or hinder them in their use.
2.10.2 Without the Lessor's prior written permission the Lessee shall not be
permitted:
a. to make alterations or additions in, on or to the Leased Premises, which
shall include making holes in the outer walls;
b. to affix or have in, on, or to the Leased Premises or in the immediate
vicinity, any objects, including name boards, advertisements, bill boards,
announcements, publications, buildings, wooden structures,
-2-
<PAGE>
scaffolding, packing materials, goods, vending machines, lighting, awnings,
aerials with fittings, flagpoles, etc., or to render windowpanes opaque;
c. to enter or allow others to enter the service and installation areas, roof
terraces, roofs and drains and the areas and places not reserved for
general use in the Leased Premises or the complex of which the Leased
Premises form a part, unless for work which the Lessee is required to carry
out under this agreement.
d. to park vehicles in places other than those appropriated for this purpose.
2.10.3 The Lessor shall not be liable in any way whatsoever for any alterations
or additions referred to in 2.10.2(a) and (b).
2.10.4 The Lessee shall keep fire fighting equipment and fire exits in the
Leased Premises free and clear at all times.
2.10.5 If the Leased Premises include a lift, rolling carpet, escalator
or automatic door mechanism, or if the Leased Premises can be reached by one or
more of the said facilities, the use of such facilities shall be entirely at a
person's own risk. All regulations issued or to be issued by or on behalf of the
Lessor, the installer concerned or the authorities must be carefully observed.
If and for as long as this is necessary, the Lessor may put the said facilities
out of operation without the Lessee being entitled to any damages or a reduction
in rent.
2.10.6 Where objects installed by the Lessee (including advertisements or other
signs) must be removed temporarily in connection with maintenance or repair work
to the Leased Premises, or the building or complex of which the Leased Premises
form part, the expenses or removal, possible storage and reinstallment shall be
at the Lessee's expense and risk, regardless of whether the Lessor has given
permission for the installations of the objects concerned.
Applications/permission
2.11.1 If the Lessee requires any deviation form and/or addition to any
provision of this agreement, the Lessee shall file his application for such
deviation of and/or addition in writing.
2.11.2 If and to the extent that any provision of this agreement requires the
Lessor's permission, it shall only be deemed granted if given in writing.
2.11.3 Any permission granted by the Lessor shall be for one instance only and
shall not apply to other or subsequent cases. The Lessor shall be entitled to
make his permission conditional.
Subletting
3.1 Subject to the Lessee's prior permission, the Lessee shall not be permitted
to relinquish all or part of the Leased Premises to any third party letting,
subletting or allowing the use of the same, or by transferring the rights of
lease in whole or in part to any third party or by bringing these rights into a
partnership, or legal entity.
3.2 In the event that the Lessee acts in breach of the above provision he will
forfeit to the Lessor for every calendar day that the breach continues an
immediately payable fine, equal to two times the then current daily rent payable
by the Lessee, without prejudice to the Lessor's right to demand compliance or
cancellation, as well as damages.
Rent Adjustment
4.1 Any adjustment of the rent as agreed in 4.3 of the lease will occur on the
basis of the revisions of the monthly index figure according to the consumer's
price index (CP) series CPI Employees Low (1990 = 100), as published by the
Central Bureau of Statistics (CBS). The adjusted rent will be calculated
according to the following formula: the adjusted rent is equal to the current
rent on the adjustment date, multiplied by the index figure of the calendar
month which lies four calendar months before the calendar month in which the
rent is adjusted, divided by the index figure of the calendar month which lies
sixteen calendar months before the calendar month in which the rent is adjusted.
4.2 The rent will not be adjusted if such adjustment would lead to a lower rent
than the most recent rent. In that case that most recent rent shall remain
unchanged, until at a next indexing the index figure of the calendar month,
which lies four calendar months before the calendar month in which the rent is
adjusted, is higher than the index figure of the calendar month, which lies four
calendar months before the calendar month in which the
-3-
<PAGE>
last rent adjustment occurred. At that time the index figures of the calendar
months referred to in the previous sentence shall be used in that adjustment.
4.3 The adjusted rent will come into force even if the Lessee is not informed of
this.
4.4 If the CBS discontinues publication of the said consumer index figure or if
the basis of the calculation is changed, an index figure adjusted to this or as
similar to this as possible will be used. In the event of any dispute in this
regard, the party who takes action first may request a statement from the
director of the CBS which will be binding on all parties. Each party will pay
half of any costs arising from this.
End of Lease or Use
5.1 Subject to any statutory right the Lessee shall at the end of the lease, or
on termination of the use, deliver the Leased Premises to the Lessor in the
original state, as set out in the certified description drawn up at the
commencement of the lease as referred to in 1.2 and, in the absence of such
description, in a good state, entirely vacated, free of use or rights to use and
properly cleaned and return all keys, keycards and the like to the Lessor. The
Lessee shall remove at his own expense all objects added to the Leased Premises
or acquired by him from the previous Lessee or user. The Lessor shall not be
required to pay any sum for objects that are not removed.
5.2 If the Lessee has terminated the use of the Leased Premises, whether or not
in due time, without returning the keys to the Lessor, the Lessor shall be
entitled to consider the lease to have expired, to gain access to the Leased
Premises at the Lessee's expense and to take possession of it, without the
Lessee having any right to damages or any other rights.
5.3 Any objects which the Lessee may be deemed to have abandoned by leaving them
in the Leased Premises on actually vacating the Leased Premises may be removed
at the expense of the Lessee by the Lessor, at the latter's discretion and
without any liability on his account, unless the Lessor has been informed that
the subsequent lessee has taken over the objects.
5.4 The parties shall inspect the Leased Premises together in good time before
the end of the lease or the use of it. The parties shall make a report of this
inspection, in which they shall record their findings. This report will also set
out which work in respect or repairs which appeared to be necessary at the time
of the inspection and the established outstanding maintenance for which the
Lessee is required to meet the costs, must still be carried out at the Lessee's
expense and in what way this must be done.
5.5 If the Lessee does not cooperate in the inspection and/or in the recording
of the findings and agreements in the inspection report within a reasonable
period, after having been duly given the opportunity to that effect, the Lessor
shall have the right to carry out the inspection without the Lessee being
present and to determine the report to be binding on both parties. The Lessor
shall give the Lessee a copy of the report without delay.
5.6 The Lessee shall carry out or cause the carrying out of the repairs he is
required to carry out on the basis of the inspection report within the term
specified in the report - or to be further agreed by the parties - to the
satisfaction of the Lessor. If the Lessee, after having been given notice of
default, fails completely or partly to fulfil the obligations arising from the
report, the Lessor shall have the right to have the relevant work carried out
himself and to recover the consequential costs from the Lessee.
5.7 For the period required to carry out the repairs, calculated from the date
of termination of the lease, the Lessee will be in debt to the Lessor for a sum
calculated on the basis of the most recent rent and additional supplies and
services, without prejudice to the Lessor's claim for compensation for further
damages and costs.
Damage
6.1 The Lessee shall take appropriate steps in due time to prevent and limit
damage to the Leased Premises, such as damage caused by short circuits, fire,
leakage, storms, frost and any other weather condition, the inward or outward
flow of liquids and gases. The Lessee shall inform the Lessor immediately if
such damage or an event such as referred to in 6.5 occurs or seems likely to
occur.
6.2 If the Lessee has the possibility to do so, the foregoing shall also apply
to the building or complex of which the Leased Premises form part.
6.3 The Lessee shall be responsible to the Lessor for any damage and loss to the
Leased Premises, unless the Lessee proves that he, the persons he has admitted
to the Leased Premises, his staff or the persons for whom he is responsible are
not to blame or that negligence cannot be held against him in that respect.
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6.4 The Lessee shall indemnify the Lessor against penalties which are imposed on
the Lessor for actions or negligence of the Lessee.
6.5 The Lessor shall not be liable for any damage done to the person or goods of
the Lessee or of third parties - and the Lessee shall indemnify the Lessor
against liability for claims from third parties in this respect - due to the
emergence and the consequences of visible and invisible faults in the Leased
Premises or the complex of which the Leased Premises form part, or which arise
due to the occurrence of weather conditions, impediments to the accessibility of
the Leased Premises, impediments to the supply of gas, water, electricity,
heating, ventilation or air conditioning, due to faults in the installations and
apparatuses, due to the inward and outward flow of liquids and gases, due to
fire, explosion and other occurrences, due to disruption of the benefits of
leasehold or due to disruption or faults in supplies or services, all of which
to the exception of cases of damage resulting from gross faults or serious
negligence on the part of the Lessor in respect of the state of repair of the
Leased Premises or of the building or complex of which the Leased Premises form
a part.
6.6 The Lessor shall not be responsible for the Lessee's loss in trade resulting
from the activities of other lessees or obstructions to the use of the Leased
Premises caused by third parties, except in the event of gross fault or serious
negligence of the Lessor in that respect.
Interim Termination, Default
7.1 If the Lessee
- - does not pay the sums due by him at the specified times;
- - ceases to practise his profession or carry on his business wholly or for a
large part in the Lease Premises;
- - does not comply with any other condition of the lease;
- - does not heed any condition attached to permission given by the Lessor;
- - loses power to dispose of his capital or a part of it;
- - loses his status as a legal entity, is wound up or in actual fact is
liquidated, provided that the Lessee is not a natural person;
- - is declared to be bankrupt;
- - offers a settlement in lieu of bankruptcy, or if the goods of the Lessee
are attached;
- - dies;
the Lessor shall have the right to terminate the lease prematurely. This shall
only be preceded by a notice if the law so requires.
7.2 If any specified period of payment should lapse or if any situation as
mentioned above should arise, the Lessee will be in default as a consequence.
7.3 The Lessee shall compensate the Lessor for all damage, costs and interests
as a result of a situation as mentioned in 7.1 and as a result of premature
termination of the lease, even in the event that he is granted a moratorium of
payments or is declared bankrupt. This damage shall include in any case the
rent, the expenses for additional supplies and services, including heating
costs, V.A.T. and the other amounts due, the costs of reletting the Leased
Premises as well as all costs incurred by the Lessor in actions in and out of
court, including those for legal assistance with regard to a situation as
referred to in 7.1.
7.4 The provisions of 7.1 to and including 7.3 shall not exclude the Lessor's
right to exercise his other rights, including his right to demand payment or
performance with damages.
Bank Guarantee
8.1 As security for the correct fulfilment of his obligations arising from the
lease, the Lessee shall present the Lessor with a bank guarantee at the signing
of the lease according to a specimen indicated by the Lessor, for an amount to
be specified in the lease and related to the Lessee's payment obligations to the
Lessor, increased by the applicable V.A.T. This bank guarantee shall also apply
to extensions of the lease including amendments to it and shall remain valid
until six months after the date on which the Leased Premises are actually
vacated and the lease is terminated. This bank guarantee shall in addition apply
to the Lessor's assigns.
8.2 The Lessee may not demand a settlement for any amount against the bank
guarantee.
8.3 In the event that a claim is made against the bank guarantee, the Lessee
shall at the Lessor's first request arrange for a new bank guarantee which meets
the requirement stated in 8.1 and 8.4, for the full sum.
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8.4 After an upward adjustment of the rent, of the expenses for supplies and
services or of the advance payments for these, the Lessee shall take immediate
steps to ensure that a new bank guarantee is issued for a sum adjusted to the
new payment obligations.
8.5 If the Lessee does not fulfil his obligations as set out in this clause, he
shall forfeit to the Lessor for every breach an immediately payable fine of NLG
500.00 per calendar day he remains in default after he has been informed of his
omission by registered letter.
Maintenance and Preservation
At the Lessor's expense
9.1 Unless it concerns work which may be considered to be of a limited nature
and day-to-day repairs as referred to in the law (section 7A:1619 Dutch Civil
Code) or work on objects which are not installed by or on behalf of the Lessor,
the following shall be at the expense of the Lessor:
a. maintenance, repair and renovation of structural parts of the Leased
Premises, such as foundations, pillars, beams, concrete floors, roofs,
terraces, structural walls, outer walls;
b. maintenance, repairs and renovation of staircases, stairs, sewers, drains,
gutters, outer casings of windows and doors, and the like. In respect of
sewers the condition set out in 9.2.4 shall remain in full force;
c. replacement of parts and renovation of installations such as lifts, central
heating installations and fire hydrant boosters;
d. exterior paint work.
At the Lessee's expense
9.2.1 All other maintenance, repairs and renovations such as the following shall
be at the expense of the Lessee:
a. exterior maintenance if and insofar as it concerns work which must be
considered to be of a limited nature and day-to-day maintenance in terms of
the law (section 7A:1619 Dutch Civil Code), as well as interior maintenance
which does not include maintenance as referred to in 9.1 without prejudice
to the further conditions hereof;
b. maintenance, repair and renovation of hinges and locks, plate glass, window
glass and other glass, both inside and out;
c. maintenance, repair and renovation of roller blinds, Venetian blinds,
awnings and other blinds;
d. maintenance, repair and renovation of switches, sockets, doorbell systems,
light bulbs, lighting (including fittings), carpeting, upholstery, interior
paint work, sinks, toilet facilities;
e. maintenance, repair and renovation of pipes and taps of gas, water,
electricity from the meter or main tap with all appurtenances, subject to
renovation for normal wear;
f. maintenance, repair and renovation of fences as well as maintenance of
gardens and maintenance of the grounds;
g. daily maintenance and repair (and renovation of small parts) of the
technical installations of the Leased Premises.
9.2.2 The Lessee shall pay for maintenance, repair and renovation of objects
which have been or will be installed by or on behalf of the Lessee under an
approximate estimate made available to him by the Lessor.
9.2.3 The Lessee shall furthermore pay for the care for cleaning the Leased
Premises and keeping the same clean, both inside and out, which shall include
the cleaning of windows, window frames and outer walls of the Leased Premises.
9.2.4 In addition the Lessee shall be responsible for the emptying of grease
traps, the cleaning and unblocking of cesspits, gutters and all drains/sewers of
the Leased Premises up to the municipal main sewers, the sweeping of chimneys
and the cleaning of ventilation ducts.
9.3 If the Lessee fails to carry out maintenance, repairs or renovations at his
own expense after being reminded - or if these are carried out badly or
injudiciously in the opinion of the Lessor - the Lessor shall be entitled to
carry out this work or have it carried out at the expense and risk of the
Lessee. If the work to be carried out at the expense of the Lessee can brook no
delay, the Lessor shall be entitled to carry out this work or to have it carried
out at the Lessee's expense.
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9.4 In the event of maintenance, repair and renovation work to be carried out by
the Lessor, the Lessor will consult with the Lessee in advance in which case the
latter interests may be taken into consideration where possible. Extra costs for
work to be carried out at the Lessee's request outside normal working hours,
shall be at the Lessee's expense.
9.5 The Lessee shall be responsible for the proper and competent use and
maintenance of the Leased Premises including the technical installations in the
Leased Premises. The Lessee shall at his own expense and risk conclude service
contracts. Services contracts for the installations shall be approved in advance
by the Lessor. As far as the maintenance is concerned the above conditions shall
apply except and to the extent that 12.2 is applicable.
9.6 The Lessee shall notify the Lessor immediately in writing of any faults to
the Leased Premises.
9.7 If the Lessee an the Lessor have agreed that the objects which are at the
expense of the Lessee under this clause are not carried out on the instruction
of the Lessee but of the Lessor, the costs of the same shall be passed on by the
Lessor to the Lessee. The Lessor shall in a number of cases conclude maintenance
contracts for such purpose.
Adjustments
10. If the Lessor considers it necessary to carry out maintenance, repairs,
renewals, including extra facilities and alterations, renovations or other work
in, on or to the Leased Premises or the building or complex of which the Leased
Premises form part or on the adjoining properties, or to have such work carried
out, or if such work is necessary due to (environmental) requirements or
measures by the authorities or public utility companies, the Lessee shall permit
and suffer this work and these measures and the inconvenience, if any, without
being able to claim damages, reduction of his payment obligations or
cancellation of the lease, even if all of this lasts for longer than forty days,
without prejudice to the provisions of section 7A:1589 Dutch Civil Code. In the
execution of the work the Lessor shall take account of the Lessee's interests
where possible.
Access of the Lessor
11.1 If the Lessor wants (to have) an assessment of the Leased Premises, or
wants to carry out the work as referred to in 2.6, 5, 9.3 or 10, the Lessee
shall give the Lessor, or the person who will report to the Lessee for this
purpose, access to the Leased Premises and enable the latter to carry out the
necessary work.
11.2 For the purpose of 11.1 the Lessor and all persons designated by him shall
be entitled to enter the Leased Premises after consultation with the Lessee on
working days between 7:00 a.m. and 5:30 p.m. The Lessor shall be entitled to
enter the Leased Premises in cases of emergency without consultation and where
necessary outside the specified times.
11.3 In the event of the intended sale or auction of the Leased Premises and
after termination of the lease, the Lessee shall, after prior notice by the
Lessor or his attorney, without compensation, provide an opportunity for
inspection of the Leased Premises during at least two working days every week.
He will permit the usual notices or posters "To Let" or "For Sale" on or near
the Leased Premises.
Costs of Supplies and Services
12.1 In addition to the rent, the Lessee will meet the costs incurred for the
use of water and electricity for the Leased Premises, including the costs for
concluding an agreement for the supply and for the hiring of a meter, as well as
any other costs and penalties charged by public utility companies. The Lessee
shall himself conclude the agreements for supplies with the institutions
involved, unless the Leased Premises have no separate connections and the Lessor
sees to these matters as part of the agreed supplies and services.
12.2 If the parties have agreed on additional supplies and services to be
rendered by the Lessor, the Lessor will determine the sum payable by the Lessee
on the basis of the costs arising from the supplies and services and the
accompanying administrative tasks. This also applies to technical installations
and other supplies and services. If the Leased Premises form part of a building
or a complex and the supplies or services also relate to other parts of the
same, the Lessor shall determine a reasonable sum payable by the Lessee for the
Lessee's share of the cost of such supplies and services. The Lessor need not
take account of the fact that the Lessee may not make use of one or more of
these supplies or services. If one or more sections of the building or the
complex
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<PAGE>
are not in use, the Lessor will ensure when determining the Lessee's share that
the share is not larger than it would be if the entire building or complex were
in use.
12.3 The Lessor shall render to the Lessee on an annual basis an itemized
statement of the cost of supplies and services, specifying the way in which
these have been calculated and the Lessee's share of the costs, where
applicable.
12.4 At the end of the lease a statement shall be provided for the period not
yet covered. This last statement shall be provided after expiry of a maximum of
14 months calculated from the period on which the previous statement was
provided. Neither the Lessee nor the Lessor shall claim early settlement.
12.5 If the statement on the period in question, taking account of advance
payments, shows any shortfall in payments by the Lessee or any excess receipts
by the Lessor, these will be paid or reimbursed within one month of the
statement being issued. Any disputes as to the correctness of the statement
shall provide no grounds for suspension of this obligation.
12.6 The Lessor has the right to alter or cancel the type and range of supplies
and services after consulting the Lessee.
12.7 The Lessor has the right to adjust the advance payments payable by the
Lessee of the expenses for supplies and services prematurely to the costs he
expects to incur, inter alia in an event as referred to in 12.6.
12.8 In the event that heating and/or hot water are included in the supplies and
services, the Lessor may adjust the method of determining the consumption of
these and the Lessee's share in the cost of this consumption after consultation
with the Lessee.
12.9 If the consumption of heating and/or hot water is measured using meters and
a dispute arises regarding the Lessee's share in the costs of consumption as a
result of the failure of malfunctioning of these meters, this share shall be
determined by a company specialised in measuring and determining consumed
heating and/or warm water consulted by the Lessor. This shall also apply in case
of damage, destruction of fraud in relation to meters, without prejudice to any
other claims the Lessor may have against the Lessee in such a case, such as a
claim for repairs to or replacement of the meters and compensation for damage
suffered.
12.10 Save in the event of serious negligence or gross fault, the Lessor shall
not be liable for any damage as a result of the malfunctioning or improper
supply of the supplies and services referred to herein. Nor shall the Lessee be
able to claim rent reduction in such cases.
Costs
13. In all cases in which the Lessor has a warning notice, a notice of default
or a writ served on the Lessee, or in the case of actions against the Lessee to
coerce him to act in accordance with the lease or to evict him, the Lessee shall
be required to reimburse the Lessor for all costs incurred, both in and out of
court, except for legal costs payable by the Lessor by virtue of a final
decision by the court. The costs to be incurred will be set in advance by the
parties at an amount which shall not be less than the usual rate charged by
bailiffs.
Payments
14.1 The payment of rent and all amounts payable under this lease will be made
at the latest on the due date in legal Dutch tender - without any suspension,
discount, reduction, or settlement with a claim which the Lessee has, or has in
his opinion, against the Lessor - by payment or transfer to an account specified
by the Lessor. The Lessor shall be free to alter the place or manner in which
payment is to be made by giving the Lessee written notice to this effect. The
Lessor shall be entitled to determine the outstanding amount under the lease
from which payments received from the Lessee will be deducted, unless the Lessee
specifically states otherwise upon payment. In the latter case section 6:50 of
the Dutch Civil Code shall not be applicable.
14.2 Every time when an amount owed by the Lessee by virtue of the lease is not
paid promptly on the due date, the Lessee will forfeit to the Lessor by
operation of the law as of the due date an immediately payable fine of 2 per
cent a month of the amount owing with a minimum of NLG 250.00 per calendar
month, with each month after commencement counting as a full month.
Taxes, Expenses, Levies, Premiums etc.
15.1 If it has been agreed that V.A.T. will be charged on the rent, the Lessor
shall file an application as referred to in 5.2 of the lease to the inspection
in question.
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<PAGE>
15.2 If the application is not to be granted, the Lessee shall owe the Lessor an
amount over and above the rent corresponding with the amount of V.A.T. that
would have been payable had the application been granted. If an application is
granted with effect from a later date than requested, the Lessee shall owe the
Lessor an amount over and above the rent corresponding with the amount of V.A.T.
as of the agreed commencement date up to the date of commencement of the taxed
rent.
15.3 If the Lessee shows the application was not granted or not granted on the
agreed date by the Lessor's action, the amount corresponding with the V.A.T. as
referred to in 15.2, shall not be payable.
Other taxes, expenses, levies, premiums etc.
15.4 The Lessee shall pay, even if the Lessor is assessed for the same:
a. the real estate tax and the district water board charges or polder dues
regarding the actual use of the Leased Premises and the actual joint use of
service areas, general areas and areas in common use;
b. other current or future taxes, sufferance dues, charges, levies and
utilization taxes with respect to the Leased Premises and property of the
Lessee, except for the real estate tax and the district water board charges
or polder dues in respect of the enjoyment under a right in rem and except
for the sewerage charges;
c. environmental levies including surface water purification levies and
charges for waste water purification and any other amounts on account of
environmental protection.
15.5 If the Lessor or other lessees in the building or the complex are charged a
higher premium for fire insurance for the building or the inventory of the
Leased Premises or the complex of which the Leased Premises form part, as a
consequence of the nature of performance of the profession or business of the
Lessee, the Lessee shall reimburse the amount over and above the normal premium
to the Lessor or such other lessees. The Lessor and the other lessees shall be
free to choose their insurance company, to set the value insured and to assess
the reasonableness of the premium payable. "Normal Premium" shall be understood
to mean the premium the Lessor of the Lessee may stipulate from any reputable
insurer established in the Netherlands for the insurance of the Leased Premises
or his inventory and goods, against fire risk at the time immediately preceding
the conclusion of the lease, without taking account of the nature of the
business or profession to be carried on by the Lessee in the Leased Premises, as
well as - for the duration of the lease - each adjustment of this premium, which
does not result from any change of the nature or extent of the risk insured.
Severability
16.1 If several (natural or legal) persons have committed themselves as Lessees,
they shall always be severally liable and each for the whole to the Lessor for
all commitments arising from the lease. Suspension of payments or discharge by
the Lessor to or of one of the Lessees or an offer to that effect, shall only
concern such Lessee.
16.2 The commitments arising from the lease are severable, also with respect to
the heirs and assigns of the Lessee.
Untimely Availability
17.1 If the Leased Premises are not available on the agreed commencement date of
the lease, as a result of the fact that the Leased Premises are not ready on
time - not being due to the Lessee's request - the previous user has not vacated
the Leased Premises on time or the Lessor has not yet obtained from the
authorities the licenses for which he, the Lessee, is responsible, the Lessee
shall be exempt from payment of rent or expenses for additional supplies and
services until the date on which the Leased Premises are available to him and
his other obligations and the agreed terms of the lease will be postponed
accordingly. The price index date shall remain unchanged.
17.2 The Lessor shall not be liable for damage to the Lessee resulting from the
delay, unless serious negligence or gross fault can be imputed to him in this
respect.
17.3 The Lessee may not claim cancellation, unless the overdue delivery is a
result of premeditated action or negligence on the part of the Lessor, and as a
consequence leads to such a delay that the Lessee cannot reasonably be expected
to uphold the agreement without amendments.
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Data Protection Act (Wet Persoonsregistratie)
18. If the Lessee is a natural person, the Lessee's personal data may have been
recorded by the Lessor and the administrator (if any) in a personal data file.
Domicile
19.1 From the commencement date of the lease all communications from the Lessor
to the Lessee relating to the fulfilment of this lease, shall be addressed to
the Leased Premises.
19.2 The Lessee shall immediately notify the Lessor if he no longer actually
carries on his business in the Leased Premises, stating his new domicile in the
Netherlands.
19.3 In the event that the Lessee should leave the Leased Premises without
giving the Lessor his new domicile in the Netherlands, the address of the Leased
Premises shall be the Lessee's domicile.
Complaints
20. The Lessee shall submit his complaints and requests in writing. In urgent
cases, he may do so by word of mouth. In such cases, the Lessee shall confirm
his complaint or request in writing as soon as possible.
Administrator
21. Where an administrator is or has been appointed by the Lessor, the Lessee
will consult the administrator in all matters relating to the lease.
Final Clause
22. Should any part of the lease or of these General Conditions be null or
voidable, this shall not affect the remaining parts of the lease and these
General Conditions. Instead of the annulled or null part, the agreements which
are nearest to what the parties would have agreed, had they known of the nullity
or voidance, shall be considered to be agreed.
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EMPLOYMENT AGREEMENT
AGREEMENT, effective as of July 1, 1997, by and between FEI Company,
an Oregon corporation ("Employer"), and William G. Langley, an individual
("Employee").
IN CONSIDERATION OF the mutual covenants herein contained, and other
good and valuable consideration, the parties hereto agree as follows:
1. Employment.
Employer hereby agrees to employ Employee, and Employee agrees to
serve, as Chief Financial Officer of Employer during the Period of Employment as
defined in Section 2.
2. Period of Employment.
(a) Duration Under Normal Circumstances.
The "Period of Employment" shall be the period commencing on the date
hereof and ending on June 30, 2002 .
(b) Termination Events.
Notwithstanding anything in this Section 2 to the contrary, the Period
of Employment shall terminate upon the earliest to occur of the following:
(i) the retirement of Employee under the terms of Employer's 401(k)
plan; and
(ii) the Disability (as defined in Section 8) of Employee and the
expiration of the 30-day period referred to in the definition of Disability
without the actions referred to therein being taken by Employee;
(iii) the death of Employee;
(iv) the 90th day after service of notice by Employee to Employer, in
accordance with the provisions of Section 11, that Employee elects to
terminate the
<PAGE>
Period of Employment (with or without Good Reason) (a "voluntary
termination by Employee"); and
(v) the 90th day after service of notice by Employer to Employee, in
accordance with the provisions of Section 11, that Employer elects to
terminate the Period of Employment (a "voluntary termination by Employer"),
other than a termination by Employer with Cause; and
(vi) promptly upon service of notice by Employer to Employee, in
accordance with the provisions of Section 11, that Employer elects to
terminate the Period of Employment with Cause.
3. Duties During the Period of Employment.
Employee shall devote his full business time, attention and best
efforts to the affairs of Employer and its subsidiaries during the Period of
Employment and shall have such duties, responsibilities and authority as shall
be assigned to him from time to time by the Chief Executive officer or the Board
of Directors of Employer, which duties, responsibilities and authority shall be
commensurate in all material respects with those held, exercised and assigned as
of the date of this Agreement. It is expressly acknowledged and agreed that
Employee may be requested to assume the position of president or senior officer
of any subsidiary of Employer or any position of corporate officer of Employer,
provided that the responsibilities and authority assigned to such position are
commensurate in all material respects with those assigned to, or held and
exercised by, Employee as of the date of this Agreement, and provided further
that, in the event of a transfer of Employee to the employ of a subsidiary of
Employer, such subsidiary expressly assumes all of Employer's obligations under
this Agreement, mutatis mutandis. Employee may engage in other activities, such
as activities involving charitable, educational, religious and similar types of
organizations (all of which are deemed to benefit Employer), speaking
engagements, and similar type activities, and may serve on the board of
directors of other corporations approved by the Chief Executive Officer of
Employer, in each case to the extent that such other activities do not
materially
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<PAGE>
detract from or limit the performance of his duties under this Agreement, or
inhibit or conflict in any material way with the business of Employer and its
subsidiaries.
4. Location of Employment.
During the Period of Employment, Employer may only require Employee to
be based in or within 50 miles of Hillsboro, Oregon, except that Employer may
require Employee to be based more than 50 miles from Hillsboro, Oregon in
connection with the relocation of the executive office of Employer in which
Employee is employed; provided, however, that Employer shall pay to, or
reimburse Employee for, on an after-tax basis, all reasonable expenses of
relocation of Employee and Employee's immediate family living with Employee at
the time of such relocation, incurred and substantiated by Employee in
connection with any such relocation.
5. Current Cash Compensation.
Employer will pay to Employee during the Period of Employment a base
annual salary of not less than $180,000 (or such greater amount as may have been
approved by the Board of Directors in its sole discretion), payable in
substantially equal monthly installments during each calendar year, or portion
thereof, of the Period of Employment; provided, however, that Employer agrees to
review such base annual salary annually and in light of such review may, in the
sole discretion of the Board of Directors of Employer, increase such salary,
taking into account such factors as it deems pertinent.
6. Employee Benefits.
(a) Vacation and Sick Leave.
Employee shall be entitled to four (4) weeks paid annual vacation, all
paid Employer holidays and reasonable sick leave.
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<PAGE>
(b) Regular Reimbursed Business Expenses.
Employer shall reimburse Employee for all expenses and disbursements
reasonably incurred at Employer's request or consistent with Employer's
policies, and substantiated by Employee, in the performance of his duties during
the Period of Employment.
(c) Employee Benefit Plans or Arrangements.
In addition to the cash compensation provided for in Section 5 hereof,
Employee, subject to meeting eligibility requirements and to the provisions of
this Agreement, shall be entitled to participate without discrimination or
duplication in all employee (including executive) benefit plans of Employer, as
presently in effect or as they may be modified or added to by Employer from time
to time, to the extent such plans are available to other similarly situated
executives or employees of Employer, including, without limitation, plans
providing retirement benefits, medical and other health insurance, life
insurance, disability insurance, and accidental death or dismemberment
insurance.
(d) Employer's Incentive Compensation Plans.
In addition to the cash compensation provided for in Section 5 hereof
and the employee benefits of Employer provided for in paragraph (c) of this
Section 6, Employee, subject to meeting eligibility requirements and to the
provisions of this Agreement, shall be entitled to participate in all incentive
compensation plans of Employer, as presently in effect or as they may be
modified or added to by Employer from time to time, to the extent such plans are
available to similarly situated executives or employees of Employer, including,
without limitation, the 1995 Stock Incentive Plan and the 1995 Supplemental
Stock Incentive Plan (as the same may be modified, replaced, or added to by
Employer from time to time), and other performance share plans, management
incentive plans, deferred compensation plans, and supplemental retirement plans.
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<PAGE>
7. Termination.
(a) Death, or Retirement or Disability.
If the Period of Employment terminates pursuant to paragraph (b) of
Section 2 as a result of (1) the death of Employee, (2) the retirement of
Employee under the terms of Employer's 401(k) plan or (3) the Disability of the
Employee, Employee (or Employee's estate) will be entitled to receive only:
(i) the base salary otherwise payable under Section 5 through the end
of the month in which Employee's employment is terminated, together with
salary, compensation or benefits which have been earned or become payable
as of the date of termination but which have not yet been paid to Employee;
(ii) such other awards or bonuses as the Board of Directors may in its
sole discretion determine, including, without limitation, such extension of
the period of exercise for stock options of the Employee that are
outstanding and exercisable under the Employer's stock incentive plans as
the Chief Executive Officer may recommend to the Board for its approval;
(iii) during the 12-month period following the termination of
Employee's employment as a result of the death of Employee, maintenance in
effect for the continued benefit of Employee's dependents of all insured
and self-insured employee medical and dental benefit plans in which
Employee was participating immediately prior to termination provided that
such continued participation is possible under the general terms and
conditions of such plans (and any applicable funding media) and Employee's
dependents continue to pay an amount equal to the Employee's regular
contribution for such participation; and
(iv) such other benefits, if any, as shall be determined to be
applicable in accordance with Employer's plans and practices as in effect
on the date of termination.
-5-
<PAGE>
(b) Voluntary Termination by Employee without Good Reason.
If the Period of Employment terminates pursuant to paragraph (b) of
Section 2 as a result of a voluntary termination by Employee without Good
Reason, Employee will be entitled to receive only:
(i) the base salary otherwise payable under Section 5 through the day
on which Employee's employment is terminated, together with salary,
compensation or benefits which have been earned or become payable as of the
date of termination but which have not yet been paid to Employee;
(ii) to the extent possible, the opportunity to convert group and
individual life and disability insurance policies of Employer then in
effect for Employee to individual policies of Employee upon the same terms
as similarly situated employees of Employer may apply for such conversions;
and
(iii) such other benefits, if any, as shall be determined to be
applicable in accordance with Employer's plans and practices in effect on
the date of termination.
(c) Voluntary Termination by Employee with Good Reason, or by
Employer without Cause.
If the Period of Employment terminates pursuant to paragraph (b) of
Section 2 as a result of a voluntary termination by Employee with Good Reason
(as hereinafter defined), or a voluntary termination by Employer without Cause
(as hereinafter defined), then Employee will be entitled to receive:
(i) the base salary otherwise payable under Section 5 through the end
of the month in which Employee's employment is terminated, together with
salary, compensation or benefits which have been earned or become payable
as of the date of termination but which have not yet been paid to the
Employee;
(ii) a lump-sum severance payment in an amount equal to one and
one-half times the base annual salary at the rate in effect under Section 5
on the date of termination; provided that the payment made pursuant to this
paragraph (ii) shall be
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<PAGE>
repaid by Employee in the event Employee violates in any material respect
the provisions of Section 9 hereof;
(iii) maintenance in effect for the continued benefit of Employee and
his spouse and his dependents for a period terminating on the earlier of
(A) the earlier of the Final Day of Period of Employment and the date on
which Employee retires under the terms of Employer's 401(k) plan, and (B)
the commencement of equivalent benefits from a new employer of:
(A) all insured and self-insured medical and dental benefit plan
in which Employee was participating immediately prior to termination,
provided that Employee's continued participation if possible under the
general terms and conditions of such plans (and any applicable funding
media) and Employee continues to pay an amount equal to Employee's
regular contribution for such participation; and
(B) the group and individual life and disability insurance
policies of Employer then in effect for Employee;
provided, however, that if Employer so elects, or if such continued
participation is not possible under the general terms and conditions of
such plans or under such policies, Employer shall, in lieu of the
foregoing, arrange to have issued for the benefit of Employee and
Employee's dependents individual policies of insurance providing benefits
substantially similar (on an after-tax basis) to those described in this
paragraph (iii), or, if such insurance is not available at a reasonable
cost to Employer, Employer shall otherwise provide Employee and Employee's
dependents equivalent benefits (on an after-tax basis); provided further
that, in no event shall Employee be required to pay any premiums or other
charges in an amount greater than that which Employee would have paid in
order to participate in Employer's plans and policies;
(iv) for a period terminating on the earlier of the Final Day of
Period of Employment and the date on which Employee reaches age 65,
Employer shall provide Employee with benefits equivalent to the additional
benefits Employee would have received under the employee pension and
retirement benefit plans maintained by the
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<PAGE>
Employer and supplemental or excess executive retirement plans, or
executive plans of deferred compensation whether or not qualified for
federal income tax purposes in which Employee was participating immediately
prior to termination and assuming an annual rate of Salary equal to the
rate applicable to the Employee immediately prior to termination is in
effect, as if Employee had received credit under such plans for service
with Employer during such period following Employee's termination, with
such benefits payable by Employer at the same times and in the same manner
as such benefits would have been received by Employee under such plans; and
(v) such other awards or bonuses as the Board of Directors may in its
sole discretion determine, including, without limitation, any extension of
the period of exercise for stock options of the Employee then outstanding
and exercisable under the Employer's stock incentive plans that may be
approved by the Board of Directors.
(d) Termination by Employer with Cause.
If the Period of Employment terminates pursuant to paragraph (b) of
Section 2 as a result of a termination by Employer with Cause, Employee will be
entitled to receive only:
(i) the base salary otherwise payable under Section 5 through the day
on which Employee's employment is terminated, together with salary,
compensation or benefits which have been earned or become payable as of the
date of termination but which have not yet been paid to Employee; and
(ii) such other benefits, if any, as shall be determined to be
applicable under the circumstances in accordance with Employer's plans and
practices in effect on the date of termination.
(e) Date of Payment.
Except as otherwise provided herein, all cash payments and lump-sum
awards required to be made pursuant to the provisions of paragraphs (a) through
(e) of this Section 7 shall be made no later than the thirtieth day following
the date of Employee's termination.
-8-
<PAGE>
(f) Exclusive Remedy.
Employee shall have no claim for damages or other remedies, at law, in
equity or otherwise, by reason of any breach of this Agreement by Employer, or
of termination of this Agreement by reason thereof, other than as set forth in
this Section 7.
(g) Release of Claims.
Employer shall have the right to require Employee to execute a limited
release with respect to claims that could be brought by Employee hereunder as a
condition to Employee's receipt of any payments pursuant to Section 7(c) hereof.
8. Definitions.
For purposes of this Agreement, the following capitalized terms shall
have the meanings set forth below:
"Cause" shall mean (i) the willful engaging by Employee in conduct
which is not authorized by the Board of Directors of Employer or within the
normal course of Employee's business decisions and is known by Employee to be
materially detrimental to the best interests of Employer or any of its
subsidiaries, (ii) the willful engaging by Employee in conduct which Employee
knows is, or has substantial reason to believe to be, illegal to the extent of a
felony violation, or the equivalent seriousness under laws other than those of
the United States, and which has effects on Employer or Employee materially
injurious to Employer, (iii) the engaging by Employee in any willful and
conscious act of serious dishonesty, in each case which the Board of Directors
of Employer reasonably determines affects adversely, or could in the future
affect adversely, the value, reliability or performance of Employee to Employer
in a material manner; (iv) the willful and continued failure by Employee to
perform substantially his duties to Employer under this Agreement (including any
sustained and unexcused absence of Employee from the performance of his duties
under this Agreement, which absence has not been certified in writing as due to
physical or mental illness in accordance with the procedures set forth in this
Section 8 under "Disability"), after a written demand for substantial
performance has been delivered to Employee by the Board of Directors
specifically identifying the manner in which Employee has failed to
substantially perform his
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<PAGE>
duties and after such Employee has had a reasonable opportunity to cease such
failure to perform, or (v) the sustained and unexcused absence of Employee from
the performance of his duties under this Agreement for a period of 180 days or
more within any period of 365 consecutive days, regardless of the reason for
such absence, unless Employee demonstrates that such absence is due to
Disability. For purposes of this paragraph, no act, or failure to act, on
Employee's part shall be considered "willful" unless done, or omitted to be
done, in bad faith and without reasonable belief that such action or omission
was in, or not opposed to, the best interests of Employer. Any act, or failure
to act, based upon authority given pursuant to a resolution duly adopted by the
Board of Directors of Employer or based upon the advice of counsel for Employer
shall be conclusively presumed to be done, or omitted to be done, in good faith
and in the best interests of Employer. Notwithstanding the foregoing, there
shall not be deemed to be a termination by Employer with Cause unless and until
there shall have been delivered to Employee a copy of a resolution duly adopted
by the affirmative vote of a majority of the entire membership of the Board of
Directors of Employer at a meeting of such Board held after reasonable notice to
Employee and at which Employee has an opportunity, together with his counsel, to
be heard before such Board, finding that, in the good faith opinion of such
Board, Employee was guilty of the conduct set forth above and specifying the
particulars thereof in detail.
"Disability" shall mean the absence of Employee from his duties with
Employer on a full-time basis for one hundred eighty (180) days within any
period of three hundred and sixty-five (365) consecutive days as a result of
Employee's incapacity due to physical or mental illness as certified in writing
by a physician selected by Employee and reasonably acceptable to Employer (it
being understood that such physician shall be deemed to be reasonably acceptable
to Employer if, within a period of fifteen (15) days after Employee notifies
Employer of the name of such physician, Employer does not object to the use of
such physician), unless within thirty (30) days after written notice to Employee
by Employer, in accordance with the provisions of Section 12, that Employee's
employment is being terminated by reason of such absence, Employee shall have
returned to the full performance of Employee's duties.
"Final Day of Period of Employment" shall mean the final day of the
Period of Employment under Section 2(a) as in effect on the date of termination.
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<PAGE>
Voluntary termination by Employee with "Good Reason" shall mean a
voluntary termination by Employee resulting from the Employer (i) reducing
Employee's base annual salary as in effect immediately prior to such reduction
or reducing in a material respect Employee's opportunity to earn incentive
compensation as provided in Section 6(d) of this Agreement; (ii) effecting a
change in the position of Employee which does not represent a promotion from
Employee's position provided for herein; (iii) assigning Employee duties or
responsibilities which are materially inconsistent with Employee's position
provided for herein; (iv) removing Employee from or failing to reappoint or
reelect Employee to such position, except in connection with a termination as a
result of death, Disability, voluntary termination by Employee, retirement by
Employee or termination by Employer with Cause; or (v) otherwise materially
breaching its obligations under this Agreement, in each case after notice in
writing from Employee to Employer and a period of 30 days after such notice
during which Employer fails to correct such conduct; provided, however, that it
is expressly acknowledged and agreed that a transfer of Employee (a) to the
position of another corporate officer of Employer, or to any subsidiary of
Employer in the capacity of president or senior officer of such subsidiary or
(b) from the position of president or senior officer of any subsidiary of
Employer to a position of corporate officer of Employer (in each case as
contemplated by the second sentence of Section 3 of this Agreement) shall not by
itself constitute "Good Reason" within the meaning of clauses (ii), (iii), (iv)
or (v) of this paragraph, provided that, in the case of any transfer to a
subsidiary of Employer, such subsidiary expressly assumes all of Employer's
obligations under this Agreement, mutatis mutandis.
9. Non-Competition and Non-Disclosure; Employee Cooperation.
(a) Without the consent in writing of the Board of Directors of
Employer, upon termination of Employee's employment for any reason, Employee
will not for a period of eighteen months thereafter, acting alone or in
conjunction with others, directly or indirectly (i) engage (either as owner,
partner, stockholder, employer, employee, director, consultant or agent) in any
business in which he has been directly engaged, or has supervised as an
executive, during the last two years prior to such termination and which is
directly in
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<PAGE>
competition with a business conducted by Employer or any of its subsidiaries;
(ii) induce any customers of Employer or any of its subsidiaries with whom
Employee has had contacts or relationships, directly or indirectly, during and
within the scope of his employment with Employer or any of its subsidiaries, to
curtail or cancel their business with such companies or any of them; (iii)
solicit or canvas business from any person who was a customer of Employer or any
of its subsidiaries at or during the eighteen-month period immediately preceding
termination of Employee's employment; or (iv) induce, or attempt to influence,
any Employee of Employer or any of its subsidiaries to terminate his employment;
provided, however, that the limitation of subparagraph (i) shall not apply if
Employee's employment is terminated as a result of a voluntary termination by
Employee with Good Reason or a termination by Employer without Cause. The
provisions of subparagraphs (i), (ii), (iii) and (iv) above are separate and
distinct commitments independent of each of the other subparagraphs. It is
agreed that the ownership of not more than 1/2 of 1% of the equity securities of
any company having securities listed on an exchange or regularly traded in the
over-the-counter market shall not, of itself, be deemed inconsistent with clause
(i) of this paragraph (a).
(b) Employee shall not, at any time during the Period of Employment or
following Employee's termination of employment for any reason whatsoever,
disclose, use, transfer or sell, except in the course of employment with
Employer, any confidential or proprietary information of Employer and its
subsidiaries so long as such information has not otherwise been publicly
disclosed by Employer or is not otherwise in the public domain, except as
required by law or pursuant to legal process.
(c) Employee agrees to cooperate with Employer, by making himself
available to testify on behalf of Employer or any subsidiary or affiliate of
Employer, in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, and to assist Employer, or any subsidiary or
affiliate of Employer in any such action, suit or proceeding, by providing
information and meeting and consulting with the Board of Directors of Employer
or its representatives or counsel, or representatives or counsel of Employer, or
any subsidiary or affiliate of Employer, as requested by such Board of
Directors, representatives or counsel. Employer agrees to reimburse the
Employee, on an after-tax basis, for all expenses actually incurred in
connection with his provision of testimony or assistance.
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<PAGE>
10. Governing Law; Modification and Severability; Disputes;
Arbitration.
(a) This Agreement is governed by and is to be construed and enforced
in accordance with the laws of the State of New York.
(b) If any portion of this Agreement is at any time deemed to be in
conflict with any applicable statute, rule, regulation, ordinance or principle
of law, such portion shall be deemed to be modified or altered to the extent
necessary to conform thereto or, if that is not possible, to be omitted from
this Agreement; and the invalidity of any such portion shall not affect the
force, effect and validity of the remaining portion hereof.
(c) Except as provided in this Section 10(c), any controversy or claim
arising out of or relating to this Agreement, or the breach thereof, shall be
settled by arbitration administered by the American Arbitration Association in
accordance with its Commercial Arbitration Rules, and judgment on the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
The arbitrators shall have the authority to award such remedies or
relief that a court of the State of New York could order or grant in an action
governed by New York law, including, without limitation, specific performance of
any obligation created under this Agreement, the issuance of an injunction, or
the imposition of sanctions for abuse or frustration of the arbitration process,
but shall not be empowered to award punitive damages. The arbitration
proceedings shall be conducted in Portland, Oregon or, in the event that the
executive office of Employer has been relocated, in such other major city as is
most proximate to such relocated executive office.
Notwithstanding the foregoing, any party may bring and pursue an
action in any Federal or State court in the city where the arbitration
proceedings shall be conducted pursuant to the foregoing sentence or in New
York, New York seeking provisional relief, including a temporary restraining
order or preliminary injunction, pending an arbitration proceeding. Any
provisional relief obtained shall be discontinued once the arbitrators have
assumed jurisdiction and ordered such discontinuance.
(d) Any amounts that have become payable pursuant to the terms of this
Agreement or any judgment by a court of law or a decision by arbitrators
pursuant to this
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<PAGE>
Section 10 but which are not timely paid shall bear interest at the prime rate
in effect at the time such payment first becomes payable, as quoted by the
Morgan Guaranty Trust Company of New York.
11. Notices.
All notices or other communications hereunder shall be deemed to have
been duly given and made if in writing and if served by personal delivery upon
the party for whom it is intended, if delivered by registered or certified mail,
return receipt requested, or by a national courier service, or if sent by
telecopier, provided that the telecopy is promptly confirmed by telephone
confirmation thereof, to the person at the address set forth below, or such
other address as may be designated in writing hereafter, in the same manner, by
such person:
To Employee:
William G. Langley
- ----------------------------------
7510 SW Westmoor
- ----------------------------------
Portland, OR 97225
- ----------------------------------
- ----------------------------------
Telephone: (503) 297-5979
Telecopy: (503) 297-0486
- ----------------------------------
To Employer:
FEI Company
7451 N.E. Evergreen Parkway
Hillsboro, Oregon 97124-5830
Telephone: 503-640-7500
Telecopy: 503-540-7509
Attn: Chief Executive Officer
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<PAGE>
With a copy to:
STOEL RIVES LLP
900 S.W. Fifth Avenue, Suite 2300
Portland, Oregon 97204-1268
Telephone: 503-224-3380
Telecopy: 503-220-2480
Attn: Stephen E. Babson
12. Withholding.
All payments to be made to Employee under this Agreement will be
subject to required withholding taxes and other deductions.
13. Successors; Binding Agreement.
(a) Any Successor (as hereinafter defined) to Employer shall be bound
by this Agreement. Employer will seek to have any Successor assent to the
fulfillment by Employer of its obligations under this Agreement at Employee's
request. Failure of Employer to obtain such assent within thirty (30) days after
such request shall constitute Good Reason for termination by Employee of
Employee's employment and, upon a voluntary termination by Employee pursuant to
Section 2, shall entitle Employee to the benefits provided in Section 7(c). For
purposes of this Agreement, "Successor" shall mean any person other than Philips
Electronics N.V. and its affiliates that succeeds to, or has the practical
ability to control (either immediately or with the passage of time), Employer's
business directly, by merger or consolidation, or indirectly, by purchase of the
Employer's voting securities, all or substantially all of its assets or
otherwise.
(b) For purposes of this Agreement, "Employer" shall include any
corporation or other entity which is the surviving or continuing entity in
respect of any amalgamation, merger, consolidation, dissolution, asset
acquisition or other form of business combination.
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<PAGE>
14. Miscellaneous.
(a) Except to the extent that the terms of this Agreement confer
benefits that are more favorable to Employee than are available under any other
employee benefit or executive compensation plan of Employer in which Employee is
a participant, Employee's rights under any such employee (including executive)
benefit plan or executive compensation plan shall be determined in accordance
with the terms of such plan (as it may be modified or added to by Employer from
time to time).
(b) This Agreement constitutes the entire understanding between
Employer and Employee relating to employment of Employee by Employer and its
subsidiaries and supersedes and cancels all prior agreements and understandings
with respect to the subject matter of this Agreement and such other written
agreements. Employee shall not be entitled to any payment or benefit under this
Agreement which duplicates a payment or benefit received or receivable by
Employee under such prior agreements and understandings.
(c) This Agreement may be amended but only by a subsequent written
agreement of the parties.
(d) This Agreement shall be binding upon and shall inure to the
benefit of Employee, his heirs, executors, administrators and beneficiaries, and
shall be binding upon and inure to the benefit of Employer and its successors
and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the year and day first above written.
FEI COMPANY
By: /s/ WILLIAM A. WHITWARD
-------------------------------------
(Authorized Officer)
/s/ WILLIAM G. LANGLEY
-------------------------------------
William G. Langley
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<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT, effective as of August 1, 1997, by and between FEI Company,
an Oregon corporation ("Employer"), and Karel D. van der Mast, an individual
("Employee").
IN CONSIDERATION OF the mutual covenants herein contained, and other
good and valuable consideration, the parties hereto agree as follows:
1. Employment.
Employer hereby agrees to employ Employee, and Employee agrees to
serve, as Chief Technical Officer of Employer during the Period of Employment as
defined in Section 2.
2. Period of Employment.
(a) Duration Under Normal Circumstances.
The "Period of Employment" shall be the period commencing on the date
hereof and ending on June 30, 2002 .
(b) Termination Events.
Notwithstanding anything in this Section 2 to the contrary, the Period
of Employment shall terminate upon the earliest to occur of the following:
(i) the retirement of Employee under the terms of Employer's 401(k)
plan; and
(ii) the Disability (as defined in Section 8) of Employee and the
expiration of the 30-day period referred to in the definition of Disability
without the actions referred to therein being taken by Employee;
(iii) the death of Employee;
<PAGE>
(iv) the 90th day after service of notice by Employee to Employer, in
accordance with the provisions of Section 11, that Employee elects to
terminate the Period of Employment (with or without Good Reason) (a
"voluntary termination by Employee"); and
(v) the 90th day after service of notice by Employer to Employee, in
accordance with the provisions of Section 11, that Employer elects to
terminate the Period of Employment (a "voluntary termination by Employer"),
other than a termination by Employer with Cause; and
(vi) promptly upon service of notice by Employer to Employee, in
accordance with the provisions of Section 11, that Employer elects to
terminate the Period of Employment with Cause.
3. Duties During the Period of Employment.
Employee shall devote his full business time, attention and best
efforts to the affairs of Employer and its subsidiaries during the Period of
Employment and shall have such duties, responsibilities and authority as shall
be assigned to him from time to time by the Chief Executive officer or the Board
of Directors of Employer, which duties, responsibilities and authority shall be
commensurate in all material respects with those held, exercised and assigned as
of the date of this Agreement. It is expressly acknowledged and agreed that
Employee may be requested to assume the position of president or senior officer
of any subsidiary of Employer or any position of corporate officer of Employer,
provided that the responsibilities and authority assigned to such position are
commensurate in all material respects with those assigned to, or held and
exercised by, Employee as of the date of this Agreement, and provided further
that, in the event of a transfer of Employee to the employ of a subsidiary of
Employer, such subsidiary expressly assumes all of Employer's obligations under
this Agreement, mutatis mutandis. Employee may engage in other activities, such
as activities involving charitable, educational, religious and similar types of
organizations (all of which are deemed to benefit Employer), speaking
engagements, and similar type activities, and may serve on the board of
directors of other corporations approved by the Chief Executive
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<PAGE>
Officer of Employer, in each case to the extent that such other activities do
not materially detract from or limit the performance of his duties under this
Agreement, or inhibit or conflict in any material way with the business of
Employer and its subsidiaries.
4. Location of Employment.
During the Period of Employment, Employer may only require Employee to
be based in or within 50 miles of Hillsboro, Oregon, except that Employer may
require Employee to be based more than 50 miles from Hillsboro, Oregon in
connection with the relocation of the executive office of Employer in which
Employee is employed; provided, however, that Employer shall pay to, or
reimburse Employee for, on an after-tax basis, all reasonable expenses of
relocation of Employee and Employee's immediate family living with Employee at
the time of such relocation, incurred and substantiated by Employee in
connection with any such relocation.
5. Current Cash Compensation.
Employer will pay to Employee during the Period of Employment a base
annual salary of not less than $180,000 (or such greater amount as may have been
approved by the Board of Directors in its sole discretion), payable in
substantially equal monthly installments during each calendar year, or portion
thereof, of the Period of Employment; provided, however, that Employer agrees to
review such base annual salary annually and in light of such review may, in the
sole discretion of the Board of Directors of Employer, increase such salary,
taking into account such factors as it deems pertinent.
6. Employee Benefits.
(a) Vacation and Sick Leave.
Employee shall be entitled to four (4) weeks paid annual vacation, all
paid Employer holidays and reasonable sick leave.
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<PAGE>
(b) Regular Reimbursed Business Expenses.
Employer shall reimburse Employee for all expenses and disbursements
reasonably incurred at Employer's request or consistent with Employer's
policies, and substantiated by Employee, in the performance of his duties during
the Period of Employment.
(c) Employee Benefit Plans or Arrangements.
In addition to the cash compensation provided for in Section 5 hereof,
Employee, subject to meeting eligibility requirements and to the provisions of
this Agreement, shall be entitled to participate without discrimination or
duplication in all employee (including executive) benefit plans of Employer, as
presently in effect or as they may be modified or added to by Employer from time
to time, to the extent such plans are available to other similarly situated
executives or employees of Employer, including, without limitation, plans
providing retirement benefits, medical and other health insurance, life
insurance, disability insurance, and accidental death or dismemberment
insurance.
(d) Employer's Incentive Compensation Plans.
In addition to the cash compensation provided for in Section 5 hereof
and the employee benefits of Employer provided for in paragraph (c) of this
Section 6, Employee, subject to meeting eligibility requirements and to the
provisions of this Agreement, shall be entitled to participate in all incentive
compensation plans of Employer, as presently in effect or as they may be
modified or added to by Employer from time to time, to the extent such plans are
available to similarly situated executives or employees of Employer, including,
without limitation, the 1995 Stock Incentive Plan and the 1995 Supplemental
Stock Incentive Plan (as the same may be modified, replaced, or added to by
Employer from time to time), and other performance share plans, management
incentive plans, deferred compensation plans, and supplemental retirement plans.
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<PAGE>
7. Termination.
(a) Death, or Retirement or Disability.
If the Period of Employment terminates pursuant to paragraph (b) of
Section 2 as a result of (1) the death of Employee, (2) the retirement of
Employee under the terms of Employer's 401(k) plan or (3) the Disability of the
Employee, Employee (or Employee's estate) will be entitled to receive only:
(i) the base salary otherwise payable under Section 5 through the end
of the month in which Employee's employment is terminated, together with
salary, compensation or benefits which have been earned or become payable
as of the date of termination but which have not yet been paid to Employee;
(ii) such other awards or bonuses as the Board of Directors may in its
sole discretion determine, including, without limitation, such extension of
the period of exercise for stock options of the Employee that are
outstanding and exercisable under the Employer's stock incentive plans as
the Chief Executive Officer may recommend to the Board for its approval;
(iii) during the 12-month period following the termination of
Employee's employment as a result of the death of Employee, maintenance in
effect for the continued benefit of Employee's dependents of all insured
and self-insured employee medical and dental benefit plans in which
Employee was participating immediately prior to termination provided that
such continued participation is possible under the general terms and
conditions of such plans (and any applicable funding media) and Employee's
dependents continue to pay an amount equal to the Employee's regular
contribution for such participation; and
(iv) such other benefits, if any, as shall be determined to be
applicable in accordance with Employer's plans and practices as in effect
on the date of termination.
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<PAGE>
(b) Voluntary Termination by Employee without Good Reason.
If the Period of Employment terminates pursuant to paragraph (b) of
Section 2 as a result of a voluntary termination by Employee without Good
Reason, Employee will be entitled to receive only:
(i) the base salary otherwise payable under Section 5 through the day
on which Employee's employment is terminated, together with salary,
compensation or benefits which have been earned or become payable as of the
date of termination but which have not yet been paid to Employee;
(ii) to the extent possible, the opportunity to convert group and
individual life and disability insurance policies of Employer then in
effect for Employee to individual policies of Employee upon the same terms
as similarly situated employees of Employer may apply for such conversions;
and
(iii) such other benefits, if any, as shall be determined to be
applicable in accordance with Employer's plans and practices in effect on
the date of termination.
(c) Voluntary Termination by Employee with Good Reason, or by
Employer without Cause.
If the Period of Employment terminates pursuant to paragraph (b) of
Section 2 as a result of a voluntary termination by Employee with Good Reason
(as hereinafter defined), or a voluntary termination by Employer without Cause
(as hereinafter defined), then Employee will be entitled to receive:
(i) the base salary otherwise payable under Section 5 through the end
of the month in which Employee's employment is terminated, together with
salary, compensation or benefits which have been earned or become payable
as of the date of termination but which have not yet been paid to the
Employee;
(ii) a lump-sum severance payment in an amount equal to one and
one-half times the base annual salary at the rate in effect under Section 5
on the date of termination; provided that the payment made pursuant to this
paragraph (ii) shall be
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<PAGE>
repaid by Employee in the event Employee violates in any material respect
the provisions of Section 9 hereof; and provided further that no such
payment shall be due if at the time of termination Employee exercises his
right to accept a return guarantee provided by the Dutch Philips
organisation.
(iii) maintenance in effect for the continued benefit of Employee and
his spouse and his dependents for a period terminating on the earlier of
(A) the earlier of the Final Day of Period of Employment and the date on
which Employee retires under the terms of Employer's 401(k) plan, and (B)
the commencement of equivalent benefits from a new employer of:
(A) all insured and self-insured medical and dental benefit plan
in which Employee was participating immediately prior to termination,
provided that Employee's continued participation if possible under the
general terms and conditions of such plans (and any applicable funding
media) and Employee continues to pay an amount equal to Employee's
regular contribution for such participation; and
(B) the group and individual life and disability insurance
policies of Employer then in effect for Employee;
provided, however, that if Employer so elects, or if such continued
participation is not possible under the general terms and conditions of
such plans or under such policies, Employer shall, in lieu of the
foregoing, arrange to have issued for the benefit of Employee and
Employee's dependents individual policies of insurance providing benefits
substantially similar (on an after-tax basis) to those described in this
paragraph (iii), or, if such insurance is not available at a reasonable
cost to Employer, Employer shall otherwise provide Employee and Employee's
dependents equivalent benefits (on an after-tax basis); provided further
that, in no event shall Employee be required to pay any premiums or other
charges in an amount greater than that which Employee would have paid in
order to participate in Employer's plans and policies;
(iv) for a period terminating on the earlier of the Final Day of
Period of Employment and the date on which Employee reaches age 65,
Employer shall provide Employee with benefits equivalent to the additional
benefits Employee would have received under the employee pension and
retirement benefit plans maintained by the
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<PAGE>
Employer and supplemental or excess executive retirement plans, or
executive plans of deferred compensation whether or not qualified for
federal income tax purposes in which Employee was participating immediately
prior to termination and assuming an annual rate of Salary equal to the
rate applicable to the Employee immediately prior to termination is in
effect, as if Employee had received credit under such plans for service
with Employer during such period following Employee's termination, with
such benefits payable by Employer at the same times and in the same manner
as such benefits would have been received by Employee under such plans; and
(v) such other awards or bonuses as the Board of Directors may in its
sole discretion determine, including, without limitation, any extension of
the period of exercise for stock options of the Employee then outstanding
and exercisable under the Employer's stock incentive plans that may be
approved by the Board of Directors.
(d) Termination by Employer with Cause.
If the Period of Employment terminates pursuant to paragraph (b) of
Section 2 as a result of a termination by Employer with Cause, Employee will be
entitled to receive only:
(i) the base salary otherwise payable under Section 5 through the day
on which Employee's employment is terminated, together with salary,
compensation or benefits which have been earned or become payable as of the
date of termination but which have not yet been paid to Employee; and
(ii) such other benefits, if any, as shall be determined to be
applicable under the circumstances in accordance with Employer's plans and
practices in effect on the date of termination.
(e) Date of Payment.
Except as otherwise provided herein, all cash payments and lump-sum
awards required to be made pursuant to the provisions of paragraphs (a) through
(e) of this Section 7 shall be made no later than the thirtieth day following
the date of Employee's termination.
-8-
<PAGE>
(f) Exclusive Remedy.
Employee shall have no claim for damages or other remedies, at law, in
equity or otherwise, by reason of any breach of this Agreement by Employer, or
of termination of this Agreement by reason thereof, other than as set forth in
this Section 7.
(g) Release of Claims.
Employer shall have the right to require Employee to execute a limited
release with respect to claims that could be brought by Employee hereunder as a
condition to Employee's receipt of any payments pursuant to Section 7(c) hereof.
8. Definitions.
For purposes of this Agreement, the following capitalized terms shall
have the meanings set forth below:
"Cause" shall mean (i) the willful engaging by Employee in conduct
which is not authorized by the Board of Directors of Employer or within the
normal course of Employee's business decisions and is known by Employee to be
materially detrimental to the best interests of Employer or any of its
subsidiaries, (ii) the willful engaging by Employee in conduct which Employee
knows is, or has substantial reason to believe to be, illegal to the extent of a
felony violation, or the equivalent seriousness under laws other than those of
the United States, and which has effects on Employer or Employee materially
injurious to Employer, (iii) the engaging by Employee in any willfudishonesty,
in each case which the Board of Directors of Employer reasonably determines
affects adversely, or could in the future affect adversely, the value,
reliability or performance of Employee to Employer in a material manner; (iv)
the willful and continued failure by Employee to perform substantially his
duties to Employer under this Agreement (including any sustained and unexcused
absence of Employee from the performance of his duties under this Agreement,
which absence has not been certified in writing as due to physical or mental
illness in accordance with the procedures set forth in this Section 8 under
"Disability"), after a written demand for substantial
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<PAGE>
performance has been delivered to Employee by the Board of Directors
specifically identifying the manner in which Employee has failed to
substantially perform his duties and after such Employee has had a reasonable
opportunity to cease such failure to perform, or (v) the sustained and unexcused
absence of Employee from the performance of his duties under this Agreement for
a period of 180 days or more within any period of 365 consecutive days,
regardless of the reason for such absence, unless Employee demonstrates that
such absence is due to Disability. For purposes of this paragraph, no act, or
failure to act, on Employee's part shall be considered "willful" unless done, or
omitted to be done, in bad faith and without reasonable belief that such action
or omission was in, or not opposed to, the best interests of Employer. Any act,
or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board of Directors of Employer or based upon the advice of
counsel for Employer shall be conclusively presumed to be done, or omitted to be
done, in good faith and in the best interests of Employer. Notwithstanding the
foregoing, there shall not be deemed to be a termination by Employer with Cause
unless and until there shall have been delivered to Employee a copy of a
resolution duly adopted by the affirmative vote of a majority of the entire
membership of the Board of Directors of Employer at a meeting of such Board held
after reasonable notice to Employee and at which Employee has an opportunity,
together with his counsel, to be heard before such Board, finding that, in the
good faith opinion of such Board, Employee was guilty of the conduct set forth
above and specifying the particulars thereof in detail.
"Disability" shall mean the absence of Employee from his duties with
Employer on a full-time basis for one hundred eighty (180) days within any
period of three hundred and sixty-five (365) consecutive days as a result of
Employee's incapacity due to physical or mental illness as certified in writing
by a physician selected by Employee and reasonably acceptable to Employer (it
being understood that such physician shall be deemed to be reasonably acceptable
to Employer if, within a period of fifteen (15) days after Employee notifies
Employer of the name of such physician, Employer does not object to the use of
such physician), unless within thirty (30) days after written notice to Employee
by Employer, in accordance with the
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<PAGE>
provisions of Section 12, that Employee's employment is being terminated by
reason of such absence, Employee shall have returned to the full performance of
Employee's duties.
"Final Day of Period of Employment" shall mean the final day of the
Period of Employment under Section 2(a) as in effect on the date of termination.
Voluntary termination by Employee with "Good Reason" shall mean a
voluntary termination by Employee resulting from the Employer (i) reducing
Employee's base annual salary as in effect immediately prior to such reduction
or reducing in a material respect Employee's opportunity to earn incentive
compensation as provided in Section 6(d) of this Agreement; (ii) effecting a
change in the position of Employee which does not represent a promotion from
Employee's position provided for herein; (iii) assigning Employee duties or
responsibilities which are materially inconsistent with Employee's position
provided for herein; (iv) removing Employee from or failing to reappoint or
reelect Employee to such position, except in connection with a termination as a
result of death, Disability, voluntary termination by Employee, retirement by
Employee or termination by Employer with Cause; or (v) otherwise materially
breaching its obligations under this Agreement, in each case after notice in
writing from Employee to Employer and a period of 30 days after such notice
during which Employer fails to correct such conduct; provided, however, that it
is expressly acknowledged and agreed that a transfer of Employee (a) to the
position of another corporate officer of Employer, or to any subsidiary of
Employer in the capacity of president or senior officer of such subsidiary or
(b) from the position of president or senior officer of any subsidiary of
Employer to a position of corporate officer of Employer (in each case as
contemplated by the second sentence of Section 3 of this Agreement) shall not by
itself constitute "Good Reason" within the meaning of clauses (ii), (iii), (iv)
or (v) of this paragraph, provided that, in the case of any transfer to a
subsidiary of Employer, such subsidiary expressly assumes all of Employer's
obligations under this Agreement, mutatis mutandis.
9. Non-Competition and Non-Disclosure; Employee Cooperation.
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<PAGE>
(a) Without the consent in writing of the Board of Directors of
Employer, upon termination of Employee's employment for any reason, Employee
will not for a period of eighteen months thereafter, acting alone or in
conjunction with others, directly or indirectly (i) engage (either as owner,
partner, stockholder, employer, employee, director, consultant or agent) in any
business in which he has been directly engaged, or has supervised as an
executive, during the last two years prior to such termination and which is
directly in competition with a business conducted by Employer or any of its
subsidiaries; (ii) induce any customers of Employer or any of its subsidiaries
with whom Employee has had contacts or relationships, directly or indirectly,
during and within the scope of his employment with Employer or any of its
subsidiaries, to curtail or cancel their business with such companies or any of
them; (iii) solicit or canvas business from any person who was a customer of
Employer or any of its subsidiaries at or during the eighteen-month period
immediately preceding termination of Employee's employment; or (iv) induce, or
attempt to influence, any Employee of Employer or any of its subsidiaries to
terminate his employment; provided, however, that the limitation of subparagraph
(i) shall not apply (a) if Employee's employment is terminated as a result of a
voluntary termination by Employee without Good Reason unless Employer, in its
sole discretion, elects to have this limitation apply, in which case Employer
shall be obligated to pay to Employee the lump-sum severance payment referred to
in Section 7(c)(ii) above, or (b) if Employee's employment is terminated as a
result of a voluntary termination by Employee with Good Reason or a termination
by Employer without Cause. The provisions of subparagraphs (i), (ii), (iii) and
(iv) above are separate and distinct commitments independent of each of the
other subparagraphs. It is agreed that the ownership of not more than 1/2 of 1%
of the equity securities of any company having securities listed on an exchange
or regularly traded in the over-the-counter market shall not, of itself, be
deemed inconsistent with clause (i) of this paragraph (a).
(b) Employee shall not, at any time during the Period of Employment or
following Employee's termination of employment for any reason whatsoever,
disclose, use, transfer or sell, except in the course of employment with
Employer, any confidential or proprietary information of Employer and its
subsidiaries so long as such information has not
-12-
<PAGE>
otherwise been publicly disclosed by Employer or is not otherwise in the public
domain, except as required by law or pursuant to legal process.
(c) Employee agrees to cooperate with Employer, by making himself
available to testify on behalf of Employer or any subsidiary or affiliate of
Employer, in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, and to assist Employer, or any subsidiary or
affiliate of Employer in any such action, suit or proceeding, by providing
information and meeting and consulting with the Board of Directors of Employer
or its representatives or counsel, or representatives or counsel of Employer, or
any subsidiary or affiliate of Employer, as requested by such Board of
Directors, representatives or counsel. Employer agrees to reimburse the
Employee, on an after-tax basis, for all expenses actually incurred in
connection with his provision of testimony or assistance.
10. Governing Law; Modification and Severability; Disputes;
Arbitration.
(a) This Agreement is governed by and is to be construed and enforced
in accordance with the laws of the State of New York.
(b) If any portion of this Agreement is at any time deemed to be in
conflict with any applicable statute, rule, regulation, ordinance or principle
of law, such portion shall be deemed to be modified or altered to the extent
necessary to conform thereto or, if that is not possible, to be omitted from
this Agreement; and the invalidity of any such portion shall not affect the
force, effect and validity of the remaining portion hereof.
(c) Except as provided in this Section 10(c), any controversy or claim
arising out of or relating to this Agreement, or the breach thereof, shall be
settled by arbitration administered by the American Arbitration Association in
accordance with its Commercial Arbitration Rules, and judgment on the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
The arbitrators shall have the authority to award such remedies or
relief that a court of the State of New York could order or grant in an action
governed by New York law, including, without limitation, specific performance of
any obligation created under this
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<PAGE>
Agreement, the issuance of an injunction, or the imposition of sanctions for
abuse or frustration of the arbitration process, but shall not be empowered to
award punitive damages. The arbitration proceedings shall be conducted in
Portland, Oregon or, in the event that the executive office of Employer has been
relocated, in such other major city as is most proximate to such relocated
executive office.
Notwithstanding the foregoing, any party may bring and pursue an
action in any Federal or State court in the city where the arbitration
proceedings shall be conducted pursuant to the foregoing sentence or in New
York, New York seeking provisional relief, including a temporary restraining
order or preliminary injunction, pending an arbitration proceeding. Any
provisional relief obtained shall be discontinued once the arbitrators have
assumed jurisdiction and ordered such discontinuance.
(d) Any amounts that have become payable pursuant to the terms of this
Agreement or any judgment by a court of law or a decision by arbitrators
pursuant to this Section 10 but which are not timely paid shall bear interest at
the prime rate in effect at the time such payment first becomes payable, as
quoted by the Morgan Guaranty Trust Company of New York.
11. Notices.
All notices or other communications hereunder shall be deemed to have
been duly given and made if in writing and if served by personal delivery upon
the party for whom it is intended, if delivered by registered or certified mail,
return receipt requested, or by a national courier service, or if sent by
telecopier, provided that the telecopy is promptly confirmed by telephone
confirmation thereof, to the person at the address set forth below, or such
other address as may be designated in writing hereafter, in the same manner, by
such person:
To Employee:
- ----------------------------------
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<PAGE>
- ----------------------------------
- ----------------------------------
Telephone:
Telecopy:
- ----------------------------------
To Employer:
FEI Company
7451 N.E. Evergreen Parkway
Hillsboro, Oregon 97124-5830
Telephone: 503-640-7500
Telecopy: 503-540-7509
Attn: Chief Executive Officer
With a copy to:
STOEL RIVES LLP
900 S.W. Fifth Avenue, Suite 2300
Portland, Oregon 97204-1268
Telephone: 503-224-3380
Telecopy: 503-220-2480
Attn: Stephen E. Babson
12. Withholding.
All payments to be made to Employee under this Agreement will be
subject to required withholding taxes and other deductions.
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<PAGE>
13. Successors; Binding Agreement.
(a) Any Successor (as hereinafter defined) to Employer shall be bound
by this Agreement. Employer will seek to have any Successor assent to the
fulfillment by Employer of its obligations under this Agreement at Employee's
request. Failure of Employer to obtain such assent within thirty (30) days after
such request shall constitute Good Reason for termination by Employee of
Employee's employment and, upon a voluntary termination by Employee pursuant to
Section 2, shall entitle Employee to the benefits provided in Section 7(c). For
purposes of this Agreement, "Successor" shall mean any person other than Philips
Electronics N.V. and its affiliates that succeeds to, or has the practical
ability to control (either immediately or with the passage of time), Employer's
business directly, by merger or consolidation, or indirectly, by purchase of the
Employer's voting securities, all or substantially all of its assets or
otherwise.
(b) For purposes of this Agreement, "Employer" shall include any
corporation or other entity which is the surviving or continuing entity in
respect of any amalgamation, merger, consolidation, dissolution, asset
acquisition or other form of business combination.
14. Miscellaneous.
(a) Except to the extent that the terms of this Agreement confer
benefits that are more favorable to Employee than are available under any other
employee benefit or executive compensation plan of Employer in which Employee is
a participant, Employee's rights under any such employee (including executive)
benefit plan or executive compensation plan shall be determined in accordance
with the terms of such plan (as it may be modified or added to by Employer from
time to time). (b) This Agreement constitutes the entire understanding between
Employer and Employee relating to employment of Employee by Employer and its
subsidiaries and supersedes and cancels all prior agreements and understandings
with respect to the subject matter of this Agreement and such other written
agreements. Employee shall not be entitled to any payment or benefit under this
Agreement which duplicates a payment or benefit received or receivable by
Employee under such prior agreements and understandings.
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<PAGE>
(c) This Agreement may be amended but only by a subsequent written
agreement of the parties.
(d) This Agreement shall be binding upon and shall inure to the
benefit of Employee, his heirs, executors, administrators and beneficiaries, and
shall be binding upon and inure to the benefit of Employer and its successors
and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the year and day first above written.
FEI COMPANY
By: /s/ WILLIAM A. WHITWARD
-------------------------------------
(Authorized Officer)
/s/ KAREL D. VAN DER MAST
-----------------------------------------
Karel D. van der Mast
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REVOLVING CREDIT AGREEMENT
Between
FEI COMPANY
as Borrower
and
KEYBANK NATIONAL ASSOCIATION
as Lender
Dated as of July 1, 1997
<PAGE>
REVOLVING CREDIT AGREEMENT
THIS AGREEMENT is made as of July 1, 1997, between FEI COMPANY, an Oregon
corporation, as Borrower and KEYBANK NATIONAL ASSOCIATION as Lender.
AGREEMENT
A. Borrower and Lender are parties to a revolving credit agreement dated
December 12, 1993, pursuant to which Lender agreed to make loans to Borrower up
to Ten Million Dollars (as amended, the "Original Agreement").
B. Pursuant to a Combination Agreement dated as of November 15, 1996
between Borrower, Philips Electron Optics International B.V., a Netherlands
corporation ("Philips International"), and Philips Electron Optics, Inc., a
Delaware corporation ("Philips Optics"), effective February 21, 1997, Phillips
International and Philips Optics became wholly-owned subsidiaries of Borrower.
C. Borrower has requested and Lender has agreed, upon the terms and
conditions of this Agreement, to make additional loans to Borrower.
D. This Agreement amends and replaces the Original Agreement.
I. DEFINITIONS.
Section 1.1 Certain Defined Terms. As used in this Agreement, the following
terms have the following meanings, which apply to both the singular and plural
forms of the terms defined:
"Advance" means a loan made by Lender to Borrower pursuant to ss. 2.
"Advance Period" has the meaning defined in ss. 2.4(a).
"Borrower" means FEI Company, an Oregon corporation, and any
Successor.
"Business Day" means a day on which banks are open for business in
Seattle, Washington.
"Collateral" means real or personal property in which the Security
Agreement or the Stock Pledge Agreement creates or purports to create a Lien.
"Combination" means the acquisition by Borrower of all of the
outstanding shares of stock of Phillips International and Philips Optics.
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<PAGE>
"Combination Date" means the date Borrower satisfies the conditions
set forth in ss. 3.3.
"Commitment" has the meaning defined in ss. 2.1.
"Commitment Period" means the period between the date of this
Agreement and the Maturity Date.
"Default" means an Event of Default or other event which, with notice
or lapse of time or both, would constitute an Event of Default.
"Dollar" and the sign "$" each means lawful money of the United
States.
"EBITDA" means net income, plus taxes, interest expense, depreciation
and amortization expense.
"EBITDA Ratio" means, for any applicable measurement period, the ratio
of Indebtedness of Borrower and its consolidated subsidiaries to EBITDA of
Borrower and its consolidated subsidiaries, as calculated with respect to the
period of one full fiscal quarter for the period ended June 30, 1997, two full
fiscal quarters for the period Septemer 30, 1997, three full fiscal quarters for
the period ended December 31, 1997 and four full fiscal quarters for each fiscal
quarter thereafter. Except as otherwise provided herein (a) accounting terms not
specifically defined shall be construed, and all accounting procedures shall be
performed, in accordance with generally accepted accounting procedures; and (b)
all section references shall refer to sections of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" has the meaning defined in ss. 7.1.
"Fixed Rate Advance" means an Advance bearing interest at an amount
equal to the LIBO Fixed Rate on the date of the requested Advance.
"Government Approval" means an approval, permit, license,
authorization, certificate, or consent of any Governmental Authority.
"Governmental Authority" means the government of the United States or
any State, or any foreign country or any political subdivision of any thereof or
any branch, department, agency, instrumentality, court, tribunal or regulatory
authority which constitutes a part or exercises any sovereign power of any of
the foregoing.
"Guaranty" means the Guaranty Agreement dated July 1, 1997, executed
by the Guarantors in favor of Lender.
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<PAGE>
"Guarantors" means Philips International and Philips Optics.
"Indebtedness" means for any person (i) all items of indebtedness or
liability (except capital, surplus, deferred credits and reserves, as such)
which would be included in determining total liabilities as shown on the
liability side of a balance sheet as of the date as of which indebtedness is
determined, (ii) indebtedness secured by any Lien, whether or not such
indebtedness shall have been assumed, (iii) any other indebtedness or liability
for borrowed money or for the deferred purchase price of property or services
for which such person is directly or contingently liable as obligor, guarantor,
or otherwise, or in respect of which such person otherwise assures a creditor
against loss, and (iv) any other obligations of such person under leases which
shall have been or should be recorded as capital leases.
"Lender" means KeyBank National Association, a national banking
association, and any Successor.
"LIBO Fixed Rate" means (a) for any Advance Period where the EBITDA
Ratio is greater than or equal to 1.00:1 on the first day of such Advance
Period, the LIBO Quote plus one hundred ninety basis points (1.90%) per annum;
and (b) for any Advance Period where the EBITDA Ratio is less than 1.00:1 on the
first day of such Advance Period, the LIBO Quote plus one hundred sixty-five
basis points (1.65%) per annum.
"LIBO Quote" means a rate calculated by Lender acting in good faith,
which Lender determines with reference to, but which may be different from, its
LIBOR or Eurodollar based costs of funds, on the date of the advance request for
the Advance Period selected by Borrower. The formula used by Lender in
determining the LIBO Quote is within Lender's absolute discretion and may be
changed from time to time.
"Lien" means, for any person, any security interest, pledge, mortgage,
charge, assignment, hypothecation, encumbrance, attachment, garnishment,
execution or other voluntary or involuntary lien upon or affecting the revenues
of such person or any real or personal property in which such person has or
hereafter acquires any interest, except (i) liens for Taxes which are not
delinquent or which remain payable without penalty or the validity or amount of
which is being contested in good faith by appropriate proceedings upon stay of
execution of the enforcement thereof; (ii) liens imposed by law (such as
mechanics' liens) incurred in good faith in the ordinary course of business
which are not delinquent or which remain payable without penalty or the validity
or amount of which is being contested in good faith by appropriate proceedings
upon stay of execution of the enforcement thereof; and (iii) deposits or pledges
under workmen's compensation, unemployment insurance, social security or other
similar laws or made to secure the performance of bids, tenders, contracts
(except for repayment of borrowed money), or leases, or to secure statutory
obligations or surety or appeal bonds or to secure indemnity, performance or
other similar bonds given in the ordinary course of business.
4
<PAGE>
"Loan Document" means each of this Agreement, the Note, the Security
Agreement, the Stock Pledge Agreement, and the Guaranty, as any of them shall be
from time to time modified, amended, or supplemented.
"Maturity Date" means July 31, 1997.
"New Rate" has the meaning defined in ss. 2.7.
"Note" has the meaning defined in ss. 2.5.
"Original Agreement" has the meaning defined in Recital A..
"Philips International" has the meaning defined in Recital B.
"Philips Optics" has the meaning defined in Recital B.
"Plan" means an "employee benefit pension plan" (as defined in ERISA)
which is (i) maintained by Borrower or by any other member of a controlled group
("Controlled Group") which together with Borrower are treated as a single
employer under the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) covered by Title IV of ERISA or subject to minimum funding standards under
the Code and maintained pursuant to a collective bargaining agreement or other
multi-employer arrangement under which Borrower or any other member of a
Controlled Group is making or accruing the obligation to make contributions or
has made contributions during the preceding five plan years.
"Prepayment Date" shall have the meaning defined in ss. 2.7.
"Prepayment Premium" shall have the meaning defined in ss. 2.7.
"Prime Rate" means the floating commercial loan rate announced from
time to time by Lender as its "prime rate", and is not necessarily the lowest on
any day the publicly announced prime rate charged on that day by Lender at its
principal office (which rate is not necessarily the lowest then charged by
Lender).
"Security Agreement" means the Security Agreement of even date
herewith executed by Borrower in favor of Lender.
"Senior Debt" means Indebtedness other than Indebtedness that has been
subordinated to the Advances and other amounts now or hereafter owing under this
Agreement on terms acceptable to Lender.
"Stock Pledge Agreement" means the Stock Pledge Agreement of even date
herewith executed by Borrower in favor of Lender.
5
<PAGE>
"Successor" means, for any corporation or banking association, any
successor by merger or consolidation, or by acquisition of substantially all of
the assets of the predecessor.
"Tangible Net Worth" means the excess of total assets over total
liabilities, excluding from the determination of total assets all general
intangible assets, including, but not limited to, goodwill, patents, trademarks,
copyrights, trade secrets, franchises, and research and development costs.
"Tax" means for any person any tax, assessment, duty, levy, impost or
other charge imposed by any Governmental Authority on such person or on any
property, revenue, income, or franchise of such person and any interest or
penalty with respect to any of the foregoing.
Section 2. The Credit.
2.1 Agreement to Lend. Lender agrees on the terms and conditions of
this Agreement to make loans ("Advances") to Borrower in an amount of up to (a)
during the period beginning on the date of this Agreement and ending on the
Combination Date, Twelve Million Dollars ($12,000,000); and (b) between the date
of the Combination Date and the Maturity Date, Twenty-five Million Dollars
($25,000,000) (the "Commitment"). The outstanding principal amount owing under
the Original Agreement shall constitute outstanding Advances hereunder, and any
accrued and unpaid interest, fees or other amounts owing under the Original Loan
shall constitute interest, fees or other amounts, as the case may be, owing
hereunder.
2.2 Manner of Borrowing. Borrower shall give Lender at least three
Business Days' notice by telephone (confirmed promptly in writing) or by
telephonic facsimile transmission of each borrowing. Each notice shall specify
the date of borrowing (which shall be a Business Day) and the amount of the
Advance. If Borrower wishes to make an interest rate election allowed by ss.
2.4, the notice of borrowing shall also contain the information called for by
ss. 2.4. Every notice of borrowing shall be irrevocable and shall constitute a
representation and warranty by Borrower that as of the date of the notice the
statements in ss. 4 are true and correct and no Default has occurred and is
continuing. Subject to the conditions set forth in ss. 3, Lender will disburse
the Advance by crediting the proceeds to the checking account maintained by
Borrower with Lender at KeyBank National Association Account #7120082
(Hillsboro, Oregon Branch).
2.3 Repayment of Principal. Borrower shall repay the Advances on or
before the Maturity Date.
2.4 Interest.
(a) The Advances shall bear interest at the Prime Rate, unless
Borrower elects a LIBO Fixed Rate. If Borrower elects a LIBO Fixed Rate,
Borrower shall specify in the interest rate notice the date from which and the
period for which the LIBO Fixed Rate shall apply (the "Advance Period"), and the
amount of principal which is to bear interest at the LIBO Fixed Rate for such
Advance Period. Each Fixed Rate Advance shall be for the minimum of
6
<PAGE>
Five Hundred Thousand Dollars ($500,000). Each election of a LIBO Fixed Rate
shall be irrevocable. An Advance Period may, at Borrower's option, be one, two,
three, four or six months. The right to select an Advance Period is subject to
the following restrictions: (i) no more than four Advance Periods may be in
effect at any time; (ii) no Advance Period may extend beyond the Maturity Date;
and (iii) any Advance Period that would end on a day which is not a Business Day
shall be extended to the next succeeding Business Day, unless that day falls in
the next calendar month, in which case such Advance Period shall end on the next
preceding Business Day.
(b) Upon expiration of the applicable Advance Period, Borrower
may elect to roll a Fixed Rate Advance into a new LIBO Fixed Rate, to pay the
Advance off, or have the Advance bear interest thereafter at the Prime Rate. If
Borrower fails to elect any of these options, the Advance will thereafter bear
interest at the Prime Rate until Borrower selects a new LIBO Fixed Rate.
2.5 Promissory Note. The Advances shall be evidenced by and repayable
with interest in accordance with a promissory note of Borrower payable to the
order of Lender in substantially the form of Exhibit A, dated the date of this
Agreement, and in the principal amount of the Commitment (as amended, extended
and renewed from time to time, the "Note").
2.6 Prepayment. Borrower agrees that all loan fees and other prepaid
finance charges are earned fully as of the date of the loan and will not be
subject to refund upon early payment (whether voluntary or as a result of
default), except as otherwise required by law. This Agreement evidences a
revolving line, which may be borrowed, repaid, and re-borrowed from time to time
until the Maturity Date or earlier termination. Principal payments shall first
be applied to reduce principal bearing interest at the Prime Rate, then to Fixed
Rate Advances. If Borrower prepays a Fixed Rate Advance prior to the last day of
the applicable Advance Period, Borrower shall also pay a Prepayment Premium,
calculated as set forth in ss. 2.7 below. Lender will be entitled to receive the
Prepayment Premium regardless of whether prepayment is voluntary or involuntary,
(including a demand on the Note at a time when Borrower is in default hereunder)
but not in the event of a demand by Lender prior to the stated maturity in the
absence of default under this Agreement or the Note. Borrower acknowledges that
Lender may or may not, in any particular case, match-fund a Fixed Rate Advance
and Borrower agrees that Lender will be entitled to receive the Prepayment
Premium irrespective of match-funding. Early payments will not, unless agreed to
by Lender in writing, relieve Borrower of Borrower's obligation to continue to
make payments of accrued unpaid interest. Rather, they will reduce the principal
balance due.
2.7 Prepayment Premium. If for any reason Borrower shall prepay all or
a portion of the principal amount of any Fixed Rate Advance prior to the
expiration of the applicable Advance Period, Borrower shall also pay Lender a
Prepayment Premium. The Prepayment Premium will be equal to the present value,
at the time of prepayment (the "Prepayment Date"), of the excess of (i) the
interest that would have been payable on the amount prepaid at the interest rate
applicable to the Advance(s) from the Prepayment Date to the expiration date of
the Advance Period applicable to such Advance, over (ii) the interest that would
be chargeable on a note equal to the amount prepaid at a New Rate. The "New
Rate" shall be equal to the United States Treasury
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Security yield on a security with a current remaining term to maturity the same
as the Advance at the Prepayment Date, plus the comparable interest rate spread
as the Advance had to the United States Treasury Security yield with the same
maturity. The present value shall be computed using 1/12th of the New Rate as
the monthly discount rate. If there is no U.S. Treasury Security with a
comparable maturity, Lender will determine the appropriate yield by
interpolating between maturities.
2.8 Commitment Fee. Borrower agrees to pay a commitment fee to Lender
in an amount equal to: (a) twenty basis points (.20%) per annum during any
period when the EBITDA Ratio is greater than or equal to 1.00:1; and (b) fifteen
basis points (.15%) per annum during any period when the EBITDA Ratio is less
than 1.00:1. Such commitment fee shall be due and payable quarterly in advance
on the first Business Day of each calendar quarter and shall be fully earned and
nonrefundable upon payment.
2.9 Manner of Payments.
(a) All payments and prepayments of principal and interest on the
Advances and all other amounts payable by Borrower under the Loan Documents
shall be made by paying the same in Dollars and in immediately available funds
to Lender at the address shown below, or such other address as Lender designates
in writing, not later than 10:00 a.m., PST, on the date on which such payment or
prepayment shall become due.
(b) Borrower hereby authorizes Lender, if and to the extent any
payment is not promptly made pursuant to the Loan Documents, to charge from time
to time against any or all of the accounts of Borrower with Lender or any
affiliate of Lender any amount due under the Loan Documents.
(c) All computations of interest and fees shall be made on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such interest
or fees are payable.
(d) Whenever any payment shall be stated to be due, or whenever
the last day of any Advance Period would otherwise occur, on a day other than a
Business Day, such payment shall be made and the last day of such Advance Period
shall occur on the next succeeding Business Day and such extension of time shall
in such case be included in the computation of payment of interest or commitment
fees, as the case may be, unless such extension would cause such payment to be
made or the last date of such Advance Period to occur in the next following
calendar month, in which case such payment shall be made and the last day of
such Advance Period shall occur on the next preceding Business Day.
(e) Any payment made by Borrower shall be applied, first, against
fees, expenses and indemnities due under the Loan Documents; second, against
interest due on amounts in default, if any; third, against interest due on
amounts not in default; fourth against principal due on amounts bearing interest
at the Prime Rate, and fifth against principal due on amounts bearing interest
at the LIBO Fixed Rate.
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2.10 Increased Costs. If Lender in its sole discretion shall determine
that, by reason of a change after the date of this Agreement in any law,
regulation, or order of any Governmental Authority or in the application
thereof, (a) there is a change in the basis of taxation of payments to Lender of
the principal of, or interest on, any Advance or any other amount due under this
Agreement in respect of any Advance (except for taxes imposed on the overall net
income of Lender and franchise or other taxes imposed generally on Lender by the
jurisdiction (or any political subdivision therein) in which Lender has its
principal office if such other taxes do not specifically affect the cost to
Lender of making the Advances); (b) any reserve, special deposit, capital
maintenance, or similar requirement (including without limitation any reserve
requirement under regulations of the Board of Governors of the Federal Reserve
System) against assets of, deposits with, or for the account of, or credit
extended by Lender or any capital adequacy requirement applicable to Lender is
imposed, increased, modified, or deemed applicable; or (iii) any other condition
is imposed that affects this Agreement or any Advance or (where the interest
rate is based on LIBOR) the London interbank market; and the result of any of
the foregoing is to increase the cost to Lender of making or maintaining the
Advances or to reduce the amount of any sum received or receivable by Lender
hereunder in respect thereof (and such increase or reduction shall not have been
compensated by a corresponding increase in the interest rate applicable to the
respective Advances), by an amount deemed by Lender to be material (such
increases in cost and reductions in amounts receivable being herein called
"Increased Costs"), then Borrower shall pay to Lender, upon demand, such
additional amount or amounts as will compensate Lender for those Increased Costs
(all of such as determined by Lender and notified to Borrower).
Section 3. Conditions of Lending.
3.1 The Initial Advance. The obligation of Lender to make the initial
Advance is subject to fulfillment of the following conditions.
(a) Loan Documents. Lender shall have received the Loan
Documents, each duly executed and delivered.
(b) Corporate Authority. Lender shall have received in form and
substance satisfactory to it (i) a certified copy of a resolution adopted by the
board of directors of the Borrower and each Guarantor authorizing the execution,
delivery and performance of the Loan Documents and the borrowing hereunder, (ii)
evidence of the authority and specimen signatures of the persons who have signed
this Agreement and who will sign the other Loan Documents on behalf of Borrower
and each Guarantor, and (iii) such other evidence of corporate authority as
Lender shall reasonably require.
(c) Security Interests. Lender shall have received such evidence
as it may deem necessary or advisable that the security interests created by the
Security Agreement and the Stock Pledge Agreement have been duly perfected and
that the Collateral is free and clear of any other Liens.
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3.2 Each Advance. The obligation of Lender to make any Advance is
subject to fulfillment of the following conditions.
(a) Notice of Borrowing. Lender shall have received due notice of
borrowing pursuant to ss. 2.2.
(b) Defaults, Etc. At the date of the Advance no Default shall
have occurred and be continuing or will occur as a result of the making of the
Advance and the representations of Borrower in ss. 4 shall be true on and as of
such date with the same force and effect as if made on and as of such date.
(c) Other Information. Lender shall have received such other
statements, opinions, certificates, documents and information as it may
reasonably request with respect to the matters contemplated by the Loan
Documents.
3.3 Combination Date. The obligation of Lender to increase the
Commitment from $12,000,000 to $25,000,000 on the Combination Date is subject to
Lender's receipt of evidence satisfactory to it of the fulfillment of the
following conditions:
(a) Tangible Net Worth. The Tangible Net Worth of Borrower is
equal to or greater than Eighty-Five Million Dollars ($85,000,000).
(b) Senior Debt Ratio. The ratio of Borrower's Senior Debt to
Borrower's Tangible Net Worth is not greater than 0.50:1.
(c) Current Ratio. The ratio of Borrower's current assets to
Borrower's current liabilities is equal to or greater than 2.25:1.
(d) Cash Contribution. The Philips Industrial Electronics
International B.V., or any of its affiliates, contributed Eight Million Dollars
($8,000,000) in cash to Borrower.
Section 4. Representations and Warranties. Borrower represents and warrants
to Lender as follows:
4.1 Corporate Existence and Power. Borrower is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Oregon, is qualified to do business in each other jurisdiction where the
conduct of its business or the ownership of its properties requires such
qualification, and has full corporate power, authority and legal right to carry
on its business as presently conducted, to own and operate its properties and
assets, and to execute, deliver and perform the Loan Documents. Philips Electron
Optics Int'l B.V. is organized under the laws of the Netherlands and is validly
existing and in good standing under the laws of the Netherlands. Philips
Electron Optics, Inc. is organized under the laws of the State of Delaware, and
is validly existing and in good standing under the laws of the State of
Delaware. Borrower and each Guarantor has full corporate power, authority and
legal
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right to carry on its business as presently conducted to own and operate its
properties and assets and to execute, deliver and perform each of the Loan
Documents to which it is a party.
4.2 Corporate Authorization. The execution, delivery and performance
by Borrower and each of the Guarantors of the Loan Documents and any borrowing
hereunder have been duly authorized by all necessary corporate action of
Borrower and Guarantors, do not require any shareholder approval or the approval
or consent of any trustee or the holders of any Indebtedness of Borrower or
Guarantors, do not contravene any law, regulation, rule or order binding on them
or their articles of incorporation or bylaws and do not contravene the
provisions of or constitute a default under any indenture, mortgage, contract or
other agreement or instrument to which Borrower or any Guarantor is a party or
by which Borrower, any Guarantor, or any of their respective properties may be
bound or affected.
4.3 Government Approvals, Etc. No Government Approval or filing or
registration with any Governmental Authority is required for the making and
performance by Borrower or either Guarantor of the Loan Documents to which it is
a party or in connection with any of the transactions contemplated thereby.
4.4 Binding Obligations, Etc. This Agreement has been duly executed
and delivered by Borrower and constitutes, and each of the other Loan Documents
when duly executed and delivered will constitute, the legal, valid and binding
obligation of Borrower and Guarantors enforceable against Borrower and
Guarantors in accordance with their respective terms.
4.5 Litigation. There are no actions, proceedings, investigations, or
claims against or affecting Borrower or any Guarantors now pending before any
court, arbitrator or Governmental Authority (nor to the knowledge of Borrower
has any thereof been threatened nor does any basis exist therefor) which if
determined adversely to Borrower or any Guarantors would be likely to have a
material adverse effect on the financial condition or operations of Borrower or
any Guarantors, to impair Lender's Lien on Collateral or Borrower's rights
therein, or to result in a judgment or order against Borrower or any Guarantors
(in excess of insurance coverage) for more than $1,000,000 in any one case or
$2,500,000 in the aggregate, except as reflected in the financial statements
referred to in ss. 4.6 or otherwise previously disclosed to Lender in writing.
4.6 Financial Condition. The pro forma balance sheets of Borrower for
the fiscal year ending December 31, 1996 and the fiscal quarter ending March 31,
1997, and the related statements of income and cash flows of Borrower for the
fiscal year then ended, copies of which have been furnished to Lender, fairly
present the financial condition of Borrower as of such date and the results of
operations of Borrower for the period then ended, all in accordance with
generally accepted accounting principles consistently applied. Borrower did not
have on such date any material contingent liabilities, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in that balance
sheet and in the notes to those financial statements and
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since that date there has been no material adverse change in the financial
condition or operations of Borrower.
4.7 Title and Liens. Borrower has good and marketable title to each of
the properties and assets reflected in its balance sheet referred to in ss. 4.6
except such as have been since sold or otherwise disposed of in the ordinary
course of business. No assets or revenues of Borrower are subject to any Lien
except as required or permitted by this Agreement or disclosed in the balance
sheet referred to in ss. 4.6 or otherwise previously disclosed to Lender in
writing. All properties of Borrower and Borrower's use thereof comply with
applicable zoning and use restrictions and with applicable laws and regulations
relating to the environment.
4.8 Taxes. Borrower and each Guarantor has filed all tax returns and
reports required of it, has paid all Taxes which are due and payable, and has
provided adequate reserves for payment of any Tax whose payment is being
contested. The charges, accruals and reserves on the books of Borrower or any
Guarantor in respect of Taxes for all fiscal periods to date are accurate and
there are no questions or disputes between Borrower and any Governmental
Authority with respect to any Taxes except as disclosed in the balance sheet
referred to in ss. 4.6 or otherwise previously disclosed to Lender in writing.
4.9 Other Agreements. Neither Borrower nor any Guarantor is in
material breach of or default under any agreement to which it is a party or
which is binding on it or any of its assets.
4.10 ERISA. Since the effective date of ERISA, no Plan or trust
thereunder has been terminated, has engaged in any "prohibited transactions" (as
defined in ERISA), or has incurred any "accumulated funding deficiency" (as
defined in ERISA) whether or not waived, and there has been no "reportable
event" (as defined in ERISA) with respect to any Plan.
4.11 Combination. As of the Combination Date, all necessary approvals
from all Governmental Authorities have been obtained and the Merger is fully
effective.
Section 5. Affirmative Covenants. So long as Lender shall have any
Commitment hereunder and until payment in full of the Advances and performance
of all other obligations of Borrower under the Loan Documents, Borrower agrees
to do all of the following unless Lender shall otherwise consent in writing.
5.1 Use of Proceeds. Borrower will use the proceeds of the Advances
exclusively for general corporate and working capital purposes.
5.2 Payments. Borrower will pay the principal of and interest on the
Advances in accordance with the terms of this Agreement and will pay when due
all other amounts payable by Borrower under the Loan Documents.
5.3 Preservation of Corporate Existence, Etc. Borrower will, and cause
each Guarantor to, preserve and maintain its corporate existence, rights,
franchises and privileges in
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the jurisdiction of its incorporation and qualify and remain qualified as a
foreign corporation in each jurisdiction where such qualification is necessary
or advisable in view of its business and operations or the ownership of its
properties.
5.4 Visitation Rights. Borrower will, and cause each Guarantor to,
permit Lender at any reasonable time, and from time to time, to examine and make
copies of and abstracts from the records and books of account of and to visit
the properties of Borrower and each Guarantor and to discuss the affairs,
finances and accounts of Borrower and each Guarantor with any of its officers or
directors.
5.5 Keeping of Books and Records. Borrower will, and cause each
Guarantor to, keep adequate records and books of account in which complete
entries will be made, in accordance with generally accepted accounting
principles consistently applied, reflecting all financial transactions of
Borrower and each Guarantor.
5.6 Maintenance of Property, Etc. Borrower will, and cause each
Guarantor to, maintain and preserve all of its properties in good working order
and condition, ordinary wear and tear excepted, and from time to time make all
needed repairs, renewals or replacements so that the efficiency of such
properties shall be fully maintained and preserved.
5.7 Compliance with Laws, Etc. Borrower will, and cause each Guarantor
to, comply in all material respects with all laws, regulations, rules, and
orders of Governmental Authorities applicable to Borrower or to its operations
or property, except any thereof whose validity is being contested in good faith
by appropriate proceedings upon stay of execution of the enforcement thereof.
5.8 Other Obligations. Borrower will, and cause each Guarantor to, pay
and discharge before the same shall become delinquent all Indebtedness, Taxes
and other obligations for which it is liable or to which its income or property
is subject and all claims for labor and materials or supplies which, if unpaid,
might become by law a lien upon its assets, except any thereof whose validity or
amount is being contested in good faith by Borrower or any Guarantor in
appropriate proceedings with provision having been made to the satisfaction of
Lender for the payment thereof in the event the contest is determined adversely
to Borrower or any Guarantor.
5.9 Insurance. Borrower will, and cause each Guarantor to, keep in
force upon all its properties and operations policies of insurance carried with
responsible companies in such amounts and covering all such risks as shall be
customary in the industry and satisfactory to Lender. Borrower will, and cause
each Guarantor to, on request furnish to Lender certificates of insurance or
duplicate policies evidencing such coverage.
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5.10 Financial Information. Deliver to Lender:
(a) as soon as available and in any event within 95 days after
the end of each fiscal year of Borrower, the balance sheet of Borrower as of the
end of such fiscal year and the related statements of income and cash flows of
Borrower for such year, accompanied by the audit report thereon by independent
certified public accountants selected by Borrower and approved by Lender (which
reports shall be prepared in accordance with generally accepted accounting
principles consistently applied and shall not be qualified by reason of
restricted or limited examination of any material portion of Borrower's records
and shall contain no disclaimer of opinion or adverse opinion except such as
Lender in its sole discretion determines to be immaterial), together with the
certificate of such accountants that as of the close of such fiscal year
Borrower was in compliance with the provisions of ss.ss. 5.12, 5.13, 5.14, 5.15
and 6.1 hereof;
(b) as soon as available and in any event within 50 days after
the end of each fiscal quarter of Borrower, the unaudited balance sheet and
statements of income and cash flows of Borrower as of the end of such fiscal
quarter (including the fiscal year to the end of such fiscal quarter),
accompanied by a certificate of the chief financial officer of Borrower that
such unaudited balance sheet and statements of income and cash flows have been
prepared in accordance with generally accepted accounting principles
consistently applied and present fairly the financial position and the results
of operations of Borrower as of the end of and for such fiscal quarter and that
since the fiscal year-end report referred to in clause (a) there has been no
material adverse change in the financial condition or operations of Borrower as
shown on the balance sheet as of said date;
(c) within 95 days after the close of each fiscal year and 50
days after the close of each fiscal quarter of Borrower, a certificate signed by
the chief financial officer of Borrower stating that as of the close of such
fiscal year no Default had occurred and was continuing and demonstrating
Borrower's compliance as at that date with the provisions of ss.ss. 5.12, 5.13,
5.14, 5.15 and 6.1;
(d) as soon as available, all reports sent by Borrower to its
shareholders and all quarterly and annual reports filed by Borrower with the
Securities and Exchange Commission and each other Governmental Authority having
jurisdiction over Borrower; and
(e) all other statements, reports and other information as Lender
may reasonably request concerning the financial condition and business affairs
of Borrower.
5.11 Notification. Borrower will, and cause each Guarantor to,
promptly after learning thereof, notify Lender of (a) any action, proceeding,
investigation or claim against or affecting Borrower or any Guarantor instituted
before any court, arbitrator or Governmental Authority or, to Borrower's
knowledge threatened to be instituted, which if determined adversely to Borrower
or any Guarantor would be likely to have a material adverse effect on the
financial condition or operations of Borrower or any Guarantor, or to impair
Lender's Lien on Collateral or Borrower's rights therein, or to result in a
judgment or order against Borrower or any
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Guarantor (in excess of insurance coverage) for more than $1,000,000 or, when
combined with all other pending or threatened claims, more than $1,000,000; (b)
any substantial dispute between Borrower or any Guarantor and any Governmental
Authority; (c) any labor controversy which has resulted in or, to Borrower's
knowledge, threatens to result in a strike which would materially affect the
business operations of Borrower or any Guarantor; (d) any "reportable event" (as
defined in ERISA) with respect to any Plan; and (e) the occurrence of any
Default.
5.12 Senior Debt Ratio. Borrower shall at all times cause the ratio of
Senior Debt to Borrower's Tangible Net Worth to be less than 0.50 to 1.
5.13 Current Ratio. Borrower shall at all times cause the ratio of its
current assets to current liabilities to be greater than 2.00 to 1.
5.14 Net Worth. Borrower shall at all times prior to the Combination
Date maintain a Tangible Net Worth of not less than Thirty Million Dollars
($30,000,000) and shall, at all times following the Combination Date, maintain a
Tangible Net Worth of not less than Eighty-five Million Dollars ($85,000,000).
5.15 Senior Debt to EBITDA Ratio. Borrower shall maintain the
following ratios of Senior Debt to EBITDA for the following time periods:
10:1 for the period ending June 30, 1997;
5:1 for the period ending September 30, 1997;
3.33:1 for the period ending December 31, 1997; and
2.5:1 for each fiscal quarter thereafter.
5.16 Additional Payments; Additional Acts. Borrower will from time to
time, (a) pay or reimburse Lender on request for all expenses, including legal
fees, actually incurred by Lender in connection with the preparation of the Loan
Documents and the making of the Advances or the enforcement by judicial
proceedings or otherwise of any of the rights of Lender under the Loan Documents
(including, without limitation, expenses incurred by Lender in protecting or
enforcing its rights in any bankruptcy or other insolvency proceeding); (b)
obtain and promptly furnish to Lender evidence of all such Government Approvals
as may be required to enable Borrower to comply with its obligations under the
Loan Documents; and (c) execute and deliver all such instruments (such as
Uniform Commercial Code continuation statements) and perform all such other acts
as Lender may reasonably request to carry out the transactions contemplated by
the Loan Documents and to maintain the continuous perfection and priority of
Lender's Lien on all Collateral.
Section 6. Negative Covenants. So long as Lender shall have any Commitment
hereunder and until payment in full of the Advances and performance of all other
obligations of Borrower under the Loan Documents, Borrower agrees that it will
not do any of the following unless Lender shall otherwise consent in writing.
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6.1 Dividends, Purchase of Stock, Etc. Borrower shall not, and shall
not permit any Guarantor to, declare or pay any dividend (except dividends
payable in its capital stock) on any shares of any class of its capital stock or
apply any assets to the purchase, redemption or other retirement of, or set
aside any sum for the payment of any dividends on or for the purchase,
redemption or other retirement of, or make any other distribution by reduction
of capital or otherwise in respect of, any shares of any class of capital stock
of Borrower or any Guarantor.
6.2 Liquidation, Merger, Sale of Assets. Borrower shall not, and shall
not permit any Guarantor to, liquidate, dissolve or enter into any merger,
consolidation, joint venture, partnership or other combination nor sell, lease,
or dispose of all or any substantial portion of its business or assets or of any
Collateral (excepting sales of goods in the ordinary course of business) without
the prior written consent of Lender.
6.3 Indebtedness. Borrower shall not, and shall not permit any
Guarantor to, create, incur or become liable for any Indebtedness except (a) the
Advances, (b) any existing Indebtedness reflected on the balance sheet referred
to in ss. 4.6 or otherwise previously disclosed to Lender in writing (except any
renewal or extension of such Indebtedness or any portion thereof to a date on or
before the final maturity of any Advances), (c) current accounts payable or
accrued, incurred by Borrower or Guarantors in the ordinary course of business,
(d) Indebtedness for the deferred purchase price, or for obligations under
leases, of real or personal property used by Borrower or Guarantors in their
business, but not exceeding the aggregate sum of $5,000,000 at any time, and (e)
other Indebtedness consented to in writing by Lender.
6.4 Guaranties, Etc. Except as otherwise expressly permitted
hereunder, Borrower shall not, and shall not permit any Guarantor to, assume,
guaranty, endorse or otherwise become directly or contingently liable for, nor
obligated to purchase, pay or provide funds for payment of, any obligation or
Indebtedness of any other person, except by endorsement of negotiable
instruments for deposit or collection or by similar transactions in the ordinary
course of business.
6.5 Liens. Borrower shall not, and shall not permit any Guarantor to,
create, assume or suffer to exist any Lien on any property of any of them except
(a) Liens in favor of Lender, (b) existing Liens reflected in the balance sheet
referred to in ss. 4.6 or otherwise previously disclosed to Lender in writing,
(c) involuntary Liens, and (d) Liens to secure Indebtedness permitted by ss.
6.3(d) for the deferred price of property, but only if they are limited to such
property and its proceeds and do not exceed 90% of the fair market value
thereof.
Section 7. Events of Default.
7.1 Events of Default Defined. The occurrence of any of the following
events shall constitute an "Event of Default."
(a) Payment Default. Borrower shall fail to pay for a period of
three (3) days after the date when due any amount of principal of or interest on
the Advances or any other amount payable by it under the Loan Documents; or
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(b) Breach of Warranty. Any representation or warranty made or
reasonably deemed made by Borrower under or in connection with the Loan
Documents shall prove to have been incorrect in any material respect when made;
or
(c) Breach of Certain Covenants. Borrower shall fail to have
complied with any provision of ss.ss. 5.3, 6.1 or 6.2; or
(d) Breach of Other Covenant. Borrower or any Guarantor shall
fail to perform or observe any covenant, obligation or term of any Loan Document
other than those governed by Sections 7.1(a) or 7.1(b) and such failure shall
remain unremedied for any grace period provided for therein or, if no grace
period is provided for therein, for 30 days after written notice thereof shall
have been given to Borrower or any Guarantor by Lender; or
(e) Cross-default. Borrower or any Guarantor shall fail (i) to
pay when due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) any Indebtedness (except any Advances) or any interest or
premium thereon and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such
Indebtedness, or (ii) to perform any term or covenant on its part to be
performed under any agreement or instrument relating to any such Indebtedness
and required to be performed and such failure shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such failure to perform is to accelerate or to permit the
acceleration of the maturity of such Indebtedness, or (iii) any such
Indebtedness shall be declared to be due and payable or required to be prepaid
(other than by regularly scheduled required prepayment) prior to the stated
maturity thereof; or
(f) Voluntary Bankruptcy, Etc. Borrower or any Guarantor shall:
(i) file a petition seeking relief for itself under Title 11 of the United
States Code, as now constituted or hereafter amended, or file an answer
consenting to, admitting the material allegations of or otherwise not
controverting, or fail timely to controvert a petition filed against it seeking
relief under Title 11 of the United State Code, as now constituted or hereafter
amended; or (ii) file such petition or answer with respect to relief under the
provisions of any other now existing or future applicable bankruptcy,
insolvency, or other similar law of the United States of America or any State
thereof or of any other country to jurisdiction providing for the
reorganization, winding-up or liquidation of corporations or an arrangement,
composition, extension or adjustment with creditors; or
(g) Involuntary Bankruptcy, Etc. An order for relief shall be
entered against Borrower or any Guarantor under Title 11 of the United States
Code, as now constituted or hereafter amended, which order is not stayed; or
upon the entry of an order, judgment or decree by operation of law or by a court
having jurisdiction in the premises which is not stayed adjudging it a bankrupt
or insolvent under, or ordering relief against it under, or approving as
properly filed a petition seeking relief against it under the provisions of any
other now existing or future applicable bankruptcy, insolvency or other similar
law of the United States of America or any State thereof or of any other country
or jurisdiction providing for the reorganization,
17
<PAGE>
winding-up or liquidation of corporations or any arrangement, composition,
extension or adjustment with creditors; or appointing a receiver, liquidator,
assignee, sequestrator, trustee or custodian of it or of any substantial part of
its property, or ordering the reorganization, winding-up or liquidation of its
affairs; or upon the expiration of 120 days after the filing of any involuntary
petition against it seeking any of the relief specified in ss. 7.1(f) or this
ss. 7.1(g) without the petition being dismissed prior to that time; or
(h) Insolvency, Etc. Borrower or any Guarantor shall (i) make a
general assignment for the benefit of its creditors or (ii) consent to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, or custodian of all or a substantial part of its property, or (iii)
admit its insolvency or inability to pay its debts generally as they become due,
or (iv) fail generally to pay its debts as they become due, or (v) take any
action (or suffer any action to be taken by its director or shareholders)
looking to the dissolution or liquidation of Borrower or any Guarantor; or
(i) Judgment. A final judgment or order for the payment of money
in excess of $1,000,000, or which impairs Lender's Lien on Collateral or
Borrower's rights therein, shall be rendered against Borrower or any Guarantor
and such judgment or order shall continue unsatisfied and in effect for a period
of 10 consecutive days; or
(j) Involuntary Liens. Any involuntary Lien in the sum of
$1,000,000 or more shall attach to any asset or property of Borrower or any
Guarantor which is not discharged within 60 days after such attachment or within
30 days after notice from Lender, whichever first occurs; or
(k) ERISA. A Plan or any trust thereunder shall be terminated (or
proceedings shall be instituted to terminate it) or shall engage in a
"prohibited transaction" (as defined in ERISA) or incur any "accumulated funding
deficiency" (as defined in ERISA) in excess of $1,000,000, whether or not
waived; or any Indebtedness of Borrower or any Guarantor in excess of that
amount to or with respect to a Plan shall not be paid when due.
7.2 Consequences of Default. If any Event of Default shall occur and
be continuing, then in any such case and at any time thereafter so long as any
such Event of Default shall be continuing, Lender may at its option immediately
terminate the Commitment and, if any Advances shall have been made, Lender may
at its option declare the principal of and the interest on the Advances and all
other sums payable by Borrower under the Loan Documents to be immediately due
and payable, whereupon the same shall become immediately due and payable without
protest, presentment, notice or demand, all of which Borrower expressly waives.
Lender, at its option, may also increase the interest rate on the Advances to a
floating rate equal to the Prime Rate plus 5.00% per annum.
18
<PAGE>
Section 8. Miscellaneous.
8.1 No Waiver; Remedies Cumulative. No failure by Lender to exercise,
and no delay in exercising, any right, power or remedy under any Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or remedy under any Loan Document preclude any other or further
exercise thereof or the exercise of any other right, power, or remedy. The
exercise of any right, power, or remedy shall in no event constitute a cure or
waiver of any Event of Default nor prejudice the right of Lender in the exercise
of any right hereunder or thereunder, unless in the exercise of such right, all
obligations of Borrower under the Loan Documents are paid in full. The rights
and remedies provided herein and therein are cumulative and not exclusive of any
right or remedy provided by law.
8.2 Governing Law. The Loan Documents shall be governed by and
construed in accordance with the laws of the State of Washington (excluding its
conflict of laws rules).
8.3 Consent to Jurisdiction. Borrower hereby irrevocably submits to
the jurisdiction of any state or federal court sitting in King or Pierce County,
Washington, in any action or proceeding brought to enforce or otherwise arising
out of or relating to any Loan Document and irrevocably waives to the fullest
extent permitted by law any objection which it may now or hereafter have to the
laying of venue in any such action or proceeding in any such forum, and hereby
further irrevocably waives any claim that any such forum is an inconvenient
forum. Borrower agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdiction by suit on the
judgment or in any other manner provided by law. Nothing herein shall impair the
right of Lender to bring any action or proceeding against Borrower or its
property in the courts of any other jurisdiction, and Borrower irrevocably
submits to the nonexclusive jurisdiction of the appropriate courts of the
jurisdiction in which Borrower is incorporated, sitting in any place where
property or an office of Borrower is located.
8.4 Notices. All notices and other communications provided for in the
Loan Documents shall be in writing or (unless otherwise specified) by telex,
telegram or telephonic facsimile transmission and shall be mailed (with air mail
postage prepaid) or sent by air courier (with air freight prepaid) or delivered
to each party at the address set forth under its name on the signature page
hereof, or at such other address as shall be designated by such party in a
written notice to each other party. Except as otherwise specified, all such
notices and communications if duly given or made shall be effective upon
receipt.
8.5 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective Successors and assigns, except that
Borrower may not assign or otherwise transfer all or any part of its rights or
obligations hereunder without the prior written consent of Lender, and any such
assignment or transfer purported to be made without such consent shall be
ineffective. Lender may at any time assign or otherwise transfer all or any part
of its interest under the Loan Documents (including assignments for security and
sales of participations), and to the extent of such assignment, the assignee
shall have the same rights and
19
<PAGE>
benefits against Borrower and otherwise under the Loan Documents (including the
right of setoff) as if such assignee were Lender.
8.6 Severability. Any provision of any Loan Document which is
prohibited or unenforceable in any jurisdiction shall as to such jurisdiction be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties waive any provision of law which
renders any provision hereof prohibited or unenforceable in any respect.
8.7 Conditions Not Fulfilled. If the Commitment or any portion thereof
is not borrowed owing to nonfulfillment of any condition precedent specified in
ss. 3, neither Borrower nor Lender shall be responsible to the other for any
damage or loss by reason thereof, except that Borrower shall in any event be
liable to pay the fees, Taxes, and expenses for which it is obligated hereunder.
8.8 Entire Agreement; Amendment. The Loan Documents comprise the
entire agreement of the parties and may not be amended or modified except by
written agreement of Borrower and Lender. No provision of any Loan Document may
be waived except in writing and then only in the specific instance and for the
specific purpose for which given.
8.9 Headings. The headings of the various provisions of the Loan
Documents are for convenience of reference only, do not constitute a part
hereof, and shall not affect the meaning or construction of any provision
thereof.
8.10 Construction. In the event of any conflict between the terms,
conditions and provisions of this Agreement and those of any other Loan
Document, the terms, conditions and provisions of this Agreement shall control.
8.11 Consolidated Subsidiaries. All references in ss.ss. 4.6 and 5.10
to financial statements of Borrower, refer to Borrower and its consolidated
subsidiaries on a consolidated basis.
8.12 Other Accounting Terms. Except as otherwise provided herein,
accounting terms not specifically defined shall be construed, and all accounting
procedures shall be performed, in accordance with generally accepted United
States accounting principles consistently applied.
8.13 Restated Agreement. This Agreement restates the Original
Agreement, as it may have been amended from time to time prior to the date
hereof, immediately upon the satisfaction of the conditions to the initial
Advance set forth in ss. 3.1 hereof.
20
<PAGE>
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND
CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE
NOT ENFORCEABLE UNDER WASHINGTON LAW.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS
MADE BY A BANK AFTER OCTOBER 3, 1989, CONCERNING LOANS AND
OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY
OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE
SIGNED BY THAT BANK TO BE ENFORCEABLE.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers or agents thereunto duly authorized as
of the date first above written.
LENDER: KEYBANK NATIONAL ASSOCIATION
By: KEVIN P. MCBRIDE
-------------------------------------
Its: Vice President
------------------------------------
Address:
700 Fifth Avenue, 48th Floor
P.O. Box 90
Seattle, WA 98111-0090
Attn: Kevin P. McBride
Fax No.: 206-684-6035
BORROWER: FEI COMPANY
By: WILLIAM G. LANGLEY
-------------------------------------
Its: CFO
------------------------------------
Address:
7451 N.W. Evergreen Parkway
Hillsboro, Oregon 97124-5830
Attn: Fritz A. Gordon
Fax No.: 503-640-7509
21
AMENDMENT NUMBER ONE
TO
REVOLVING CREDIT AGREEMENT
THIS AMENDMENT NUMBER ONE TO REVOLVING CREDIT AGREEMENT (this "Amendment")
is made as of this 31st day of August, 1997 by and between FEI COMPANY, an
Oregon corporation ("Borrower") and KEYBANK NATIONAL ASSOCIATION, a national
banking association ("Lender").
RECITALS
A. Borrower and Lender are parties to that certain Revolving Credit
Agreement dated as of July 1, 1997 (the "Credit Agreement").
B. Borrower and Lender now wish to amend the Credit Agreement to extend the
maturity date for the repayment of certain loans under the Credit Agreement and
to include a standby letter of credit facility, all subject to the terms and
conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
AGREEMENT
1. Definitions. Capitalized terms not otherwise defined in this Amendment
shall have the meanings given in the Credit Agreement.
2. Amendments to Credit Agreement. The Credit Agreement is hereby amended
as follows:
2.1 Amendment to Definitions.
(a) Amendment to Definition of "Loan Documents." The definition
of "Loan Documents" in Section 1.1 of the Credit Agreement is hereby deleted and
the following definition substituted in its stead:
"Loan Documents" means each of this
Agreement, the Note, the Security Agreement, the
Stock Pledge Agreement, the Guaranty, the Letters
of Credit, the Reimbursement Agreements, as any of
them shall be from time to time modified, amended
or supplemented.
(b) Amendment to Definition of "Maturity Date." The definition of
"Maturity Date" in Section 1.1 of the Credit Agreement is hereby deleted and the
following definition substituted in its stead:
"Maturity Date" means July 31, 1999.
<PAGE>
(c) Addition of Definition of "Letter of Credit." The definition
of "Letter of Credit" is hereby added to Section 1.1 of the Credit Agreement to
read in its entirety as follows:
"Letter of Credit" means a standby letter of
credit issued by Lender pursuant to the terms of
Section 2.11 hereof for the account of Borrower.
(d) Addition of Definition of "Letter of Credit Request." The
definition of "Letter of Credit Request" is hereby added to Section 1.1 of the
Credit Agreement to read in its entirety as follows:
"Letter of Credit Request" has the meaning
given in Section 2.11(b)(i).
(e) Addition of Definition of "Letter of Credit Usage." The
definition of "Letter of Credit Usage" is hereby added to Section 1.1 of the
Credit Agreement to read in its entirety as follows:
"Letter of Credit Usage" means, as of any
date of determination, the aggregate of the
undrawn portions of all outstanding Letters of
Credit.
(f) Addition of Definition of "Reimbursement Agreement." The
definition of "Reimbursement Agreement" is hereby added to Section 1.1 of the
Credit Agreement to read in its entirety as follows:
"Reimbursement Agreement" has the meaning
given in Section 2.11(b)(iii).
(g) Addition of Definition of "Total Revolving Utilization." The
definition of "Total Revolving Utilization" is hereby added to the Credit
Agreement to read in its entirety as follows:
"Total Revolving Utilization" means, as of
the date of determination, the sum of (i) the
aggregate principal amount of all Advances; plus,
(ii) the Letter of Credit Usage.
2.2 Amendment to Section 2.1. The first sentence of Section
2.1 of the Credit Agreement is hereby amended to read in its entirety as
follows:
2.1 Agreement to Lend. Lender agrees on the
terms and conditions of this Agreement to make
loans ("Advances") to Borrower in an amount of up
to (a) during the period beginning on
2
<PAGE>
the date of this Agreement and ending on the
Combination Date, Twelve Million Dollars
($12,000,000); and (b) between the date of the
Combination Date and the Maturity Date,
Twenty-five Million Dollars ($25,000,000) (the
"Commitment"); provided that, after giving effect
to any requested Advance, the Total Revolving
Utilization shall not exceed at any one time
outstanding the Commitment.
2.3 Addition of Section 2.11. A new Section 2.11 is added to the
Credit Agreement immediately after Section 2.10 of the Credit Agreement to read
in its entirety as follows:
2.11. Letters of Credit.
(a) Agreement to Issue. Borrower may
request that Lender issue Letters of Credit for
Borrower's account in accordance with the terms
and conditions of this Section 2.11.
(b) Manner of Requesting Letters of
Credit.
(i) From time to time, and prior to
the Maturity Date, Borrower may request that
Lender issue Letters of Credit for Borrower's
account or extend or renew any existing Letters of
Credit issued hereunder. Each request will be made
by delivering a written request for the issuance,
extension or renewal of such a letter of credit (a
"Letter of Credit Request") to Lender not later
than 10:00 a.m. (Seattle time) three Business Days
prior to the date a new letter of credit is to be
issued or an existing Letter of Credit is to be
extended or renewed. Each Letter of Credit Request
shall be deemed to constitute a representation and
warranty by Borrower that as of the date of such
request the statements set forth in Section 4
hereof are true and correct and that no Default or
Event of Default has occurred and is continuing.
Each Letter of Credit Request shall specify the
face amount of the requested Letter of Credit, the
proposed date of expiration, the name of the
intended beneficiary thereof, and whether such
Letter of Credit is an extension or renewal of an
existing Letter of Credit. Each Letter of Credit
Request shall include terms and conditions for
drawing which shall be reasonably acceptable to
Lender.
(ii) Borrower shall pay letter of
credit fees (a) if the term for such Letter of
Credit is less than or equal to three (3) months,
on the expiration date specified in the Letter of
Credit, or (b) if the term for such Letter of
Credit is greater than three (3) months, on the
date that is three (3) months after the issuance
date and at the end of each three month period
thereafter and on the expiration date. Such letter
of credit fees shall be calculated at (a) one
hundred ninety basis points (1.90%) per annum
where Borrower's EBITDA Ratio is
3
<PAGE>
greater than or equal to 1.00:1 on the issuance
date of the Letter of Credit, and at (b) one
hundred sixty-five basis points (1.65%) per annum
where Borrower's EBITDA Ratio is less than 1.00:1
on the issuance date of the Letter of Credit.
Borrower shall also pay to Lender from time to
time and on demand the usual issuance,
presentation and processing fees that are standard
fees charged by Lender for services relating to
Letters of Credit as from time to time in effect.
Each Letter of Credit requested hereunder shall be
in a face amount such that after issuance of such
Letter of Credit, the Letter of Credit Usage shall
not exceed Five Million Dollars ($5,000,000). In
addition to the foregoing, each Letter of Credit
requested hereunder shall have a expiration date
not later than the Maturity Date.
(iii) At the request of Lender,
Borrower shall execute a letter of credit
application and reimbursement agreement, in the
standard form used by Lender at the time any
Letter of Credit is requested hereunder (the
"Reimbursement Agreement"), in respect of each
Letter of Credit requested hereunder.
(iv) Subject to Borrower's
compliance with the terms of this Section 2.11,
Lender shall deliver its Letter of Credit to
Borrower or the designated beneficiary at such
address as Borrower may specify. New Letters of
Credit and extensions or renewals of any existing
Letters of Credit issued hereunder shall contain
terms and conditions customarily included in
Lender's Letters of Credit and shall otherwise be
in a form acceptable to Lender.
(v) In the event of any conflict
between the terms of any Reimbursement Agreement
or Letter of Credit and the terms of this
Agreement, the terms of this Agreement shall
control, unless Lender has otherwise agreed in
writing.
(c) Indemnification; Increased Costs.
Borrower shall indemnify Lender on demand for any
and all additional costs, expenses, or damages
incurred by Lender, directly or indirectly,
arising out of the issuance of any Letter of
Credit including, without limitation, any costs of
maintaining reserves in respect thereof and any
premium rates imposed by the Federal Deposit
Insurance Corporation in connection therewith. A
certificate as to such additional amounts
submitted to Borrower by Lender shall be binding,
absent a showing by Borrower of manifest error.
If at any time after the date hereof the
introduction of or any change in applicable law,
rule, or regulation or in the interpretation or
the administration thereof by any Governmental
Authority charged with the interpretation or
administration thereof, or compliance by Lender
with any requests directed by any such
Governmental Authority (whether or not having the
force of law) shall, with
4
<PAGE>
respect to any Letter of Credit subject Lender to
any Tax (other than a Tax imposed on the net
income or gross revenue of Lender), duty or other
charge or impose, modify, or deem applicable any
reserve, special deposit, or similar requirements
against assets of, deposits with or for the
account of, credit extended by Lender or shall
impose on Lender any other conditions affecting
the Letters of Credit and the result of any of the
foregoing is to increase the cost to Lender of
issuing a Letter of Credit or to reduce the amount
of any sum received or receivable by Lender
hereunder with respect to the Letters of Credit,
then, upon demand by Lender, Borrower shall pay to
Lender such additional amount or amounts as will
compensate Lender for such increased cost or
reduction. A certificate submitted to Borrower by
Lender setting forth the basis for the
determination of such additional amount or amounts
shall be binding absent a showing by Borrower of
manifest error.
Borrower shall indemnify and hold Lender
harmless from and against (a) any and all Taxes
(other than Taxes imposed on the net income or
gross revenue of Lender) and other fees payable in
connection with Letters of Credit or the
provisions of this Agreement relating thereto, and
(b) any and all actions, claims, damages, losses,
liabilities, fines, penalties, costs, and expenses
of every nature, including reasonable attorney's
fees, suffered or incurred by Lender otherwise
arising out of or relating to this Section 2.11,
or any Letter of Credit; provided, however, said
indemnification shall not apply to the extent that
any such action, claim, damage, loss, liability,
fine, penalty, cost, or expense arises out of or
is based upon Lender's gross negligence or willful
misconduct.
(d) Payment by Borrower. Any payment
made by Lender under any Letter of Credit and any
unpaid fees payable by Borrower with respect to
any Letter of Credit shall, without any further
action by either party hereto, be deemed to be a
disbursement to Borrower of an Advance pursuant to
Section 2.1 hereof and all references to
"Advances" in this Agreement shall include all
such amounts.
3. Promissory Note. All references to "Maturity Date" contained in the Note
shall mean the Maturity Date as defined in the Credit Agreement, as hereby
amended.
4. Conditions to Effectiveness. Notwithstanding anything contained herein
to the contrary, this Amendment shall not become effective until each of the
following conditions is fully and simultaneously satisfied:
4.1 Delivery of Amendment. Borrower and Lender shall have executed and
delivered counterparts of this Amendment to Lender.
4.2 Representations True; No Default. The representations of Borrower
set forth in Section 4 of the Credit Agreement shall be true on and as of the
date of this Amendment
5
<PAGE>
with the same force and effect as if made on and as of this date. No Event of
Default and no event which, with notice or lapse of time or both, would
constitute a Event of Default, shall have occurred and be continuing or will
occur as a result of the execution of this Amendment.
5. Representations and Warranties. Borrower hereby represents and warrants
to Lender that each of the representations and warranties set forth in Article 4
of the Credit Agreement is true and correct in each case as if made on and as of
the date of this Amendment and Borrower expressly agrees that it shall be an
additional Event of Default under the Credit Agreement if any representation or
warranty made hereunder shall prove to have been incorrect in any material
respect when made.
6. No Further Amendment. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
7. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
8. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same agreement.
9. Oral Agreements Not Enforceable.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR
TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE
UNDER WASHINGTON LAW.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY A
BANK AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT
EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR
SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS
CONSIDERATION AND BE SIGNED BY THAT BANK TO BE ENFORCEABLE.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment Number
One to Revolving Credit Agreement as of the date first above written.
LENDER: KEYBANK NATIONAL ASSOCIATION
By KEVIN P. MCBRIDE
--------------------------------------
Its Vice President
-------------------------------------
BORROWER: FEI COMPANY
By WILLIAM G. LANGLEY
--------------------------------------
Its CFO
-------------------------------------
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-28-1997
<CASH> 3,541
<SECURITIES> 0
<RECEIVABLES> 45,566
<ALLOWANCES> (1,095)
<INVENTORY> 41,783
<CURRENT-ASSETS> 98,509
<PP&E> 29,915
<DEPRECIATION> (9,302)
<TOTAL-ASSETS> 165,440
<CURRENT-LIABILITIES> 51,324
<BONDS> 0
151,445
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 165,440
<SALES> 115,061
<TOTAL-REVENUES> 115,061
<CGS> 73,278
<TOTAL-COSTS> 73,278
<OTHER-EXPENSES> 79,461
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49
<INCOME-PRETAX> (37,727)
<INCOME-TAX> 1,824
<INCOME-CONTINUING> (39,551)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,551)
<EPS-PRIMARY> (2.44)
<EPS-DILUTED> (2.44)
</TABLE>
