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 April 4, 1999
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
--- ---
The number of shares of Common Stock outstanding as of May 13, 1999 was
18,261,081.
<PAGE>
INDEX TO FORM 10-Q
Page
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - April 4, 1999 (unaudited) and
December 31, 1998...................................................... 1
Condensed Consolidated Statements of Operations (unaudited) -
Thirteen Weeks Ended April 4, 1999 and March 29, 1998 ................. 2
Condensed Consolidated Statements of Comprehensive Loss (unaudited) -
Thirteen Weeks Ended April 4, 1999 and March 29, 1998 ................. 3
Condensed Consolidated Statements of Cash Flows (unaudited) -
Thirteen Weeks Ended April 4, 1999 and March 29, 1998...................4
Notes to Condensed Consolidated Financial Statements (unaudited)......... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 10
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K..................................16
Signatures.................................................................17
i
<PAGE>
PART I - Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
FEI Company and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share data)
December 31, April 4,
ASSETS 1998 1999
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 15,198 $ 26,794
Receivables 56,046 55,263
Inventories (Note 3) 43,518 43,198
Deferred income taxes 9,926 9,884
Other 1,872 2,515
------------ -----------
Total current assets 126,560 137,654
EQUIPMENT 23,845 23,754
OTHER ASSETS (Note 4) 40,733 41,305
------------ -----------
TOTAL $ 191,138 $ 202,713
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 10,607 $ 16,675
Current accounts with Philips (Note 5) 5,043 583
Accrued payroll liabilities 3,908 4,774
Accrued warranty reserves 6,186 6,934
Deferred revenue 15,744 19,236
Income taxes payable 952 2,156
Accrued restructuring costs (Note 2) 3,055 2,822
Other current liabilities 10,715 10,379
------------ -----------
Total current liabilities 56,210 63,559
LINE OF CREDIT BORROWINGS (Note 6) 7,250 390
LONG-TERM ACCOUNT WITH PHILIPS (Note 6) 19,099 30,625
DEFERRED INCOME TAXES 7,861 7,832
OTHER LIABILITIES 3,091 2,600
SHAREHOLDERS' EQUITY:
Preferred stock - 500,000 shares authorized; none issued and outstanding - -
Common stock - 30,000,000 shares authorized; 18,167,475 and 18,252,673
shares issued and outstanding at December 31, 1998 and April 4, 1999 149,635 150,087
Accumulated deficit (45,510) (44,804)
Accumulated other comprehensive loss (6,498) (7,576)
------------ -----------
Total shareholders' equity 97,627 97,707
------------ -----------
TOTAL $ 191,138 $ 202,713
============ ===========
See notes to condensed consolidated financial statements.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
FEI Company and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Thirteen Weeks Ended
--------------------
March 29, April 4,
1998 1999
<S> <C> <C>
NET SALES $ 35,954 $ 45,408
COST OF SALES 21,858 28,083
------------ -----------
Gross profit 14,096 17,325
------------ -----------
OPERATING EXPENSES:
Research and development 4,838 5,239
Selling, general and administrative 8,859 10,645
Amortization of purchased intangibles 634 629
------------ -----------
Total operating expenses 14,331 16,513
------------ -----------
OPERATING INCOME (LOSS) (235) 812
OTHER INCOME (EXPENSE), NET (216) 326
------------ -----------
INCOME (LOSS) BEFORE TAXES (451) 1,138
TAX EXPENSE (BENEFIT) (158) 432
------------ -----------
NET INCOME (LOSS) $ (293) $ 706
============ ===========
PER SHARE DATA:
Net income (loss) per share-basic $ (0.02) $ 0.04
============ ===========
Net income (loss) per share-diluted $ (0.02) $ 0.04
============ ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 18,078 18,205
============ ===========
Diluted 18,078 19,260
============ ===========
See notes to condensed consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
FEI Company and Subsidiaries
Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
Thirteen Weeks Ended
--------------------
March 29, April 4,
1998 1999
<S> <C> <C>
NET INCOME (LOSS) $ (293) $ 706
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment, zero taxes provided
in 1998 and 1999 (4) (1,078)
------------ -----------
COMPREHENSIVE LOSS $ (297) $ (372)
============ ===========
See notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
FEI Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Thirteen Weeks Ended
--------------------
March 29, April 4,
1998 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (293) $ 706
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation 1,018 1,759
Amortization 718 898
Other 1,241 (1,506)
Decrease (increase) in assets:
Receivables 5,080 783
Inventories (2,840) 320
Other assets 1,417 (643)
Increase (decrease) in liabilities:
Accounts payable (2,057) 6,068
Current accounts with Philips 3,788 (4,460)
Accrued payroll liabilities (564) 866
Accrued warranty reserves (483) 748
Deferred revenue 3,204 3,492
Accrued restructuring - 424
Other liabilities 1,169 211
------------ -----------
Net cash provided by operating activities 11,398 9,666
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment (2,547) (1,711)
Investment in software development (361) (399)
------------ -----------
Net cash used in investing activities (2,908) (2,110)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments of line of credit (5,043) (6,860)
Proceeds from exercise of stock options and employee stock purchases 2 452
Repayment of note to Philips (2,718) -
Proceeds from long-term borrowings from Philips - 11,526
------------ -----------
Net cash provided by (used in) financing activities (7,759) 5,118
------------ -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 4 (1,078)
------------ -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 735 11,596
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 16,394 15,198
------------ -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 17,129 $ 26,794
============ ===========
See notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
FEI COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business - FEI Company and its wholly owned subsidiaries (the
"Company") design, manufacture, market and service products based on focused
charged particle beam technology. The Company operates in three business
segments. The Components segment manufactures and sells components for focused
charged particle beam instruments including emitters and focusing columns. The
Company's component products are sold as replacement parts and to OEM's for use
in the manufacture of focused charged particle beam systems. The
MicroElectronics segment manufactures, sells and services focused ion-beam
systems ("FIBs") and products that incorporate an electron beam and an ion beam
into a single system ("DualBeams"). The Company's MicroElectronics products are
sold primarily to semiconductor manufacturers and to thin film head
manufacturers in the data storage industry, and are used in the design,
manufacture and testing of integrated circuits and thin film heads. The Electron
Optics segment manufactures, sells and services transmission electron microscope
systems ("TEMs") and scanning electron microscope systems ("SEMs"). The
Company's Electron Optics products are sold primarily to life science and
materials science research institutes, universities and industrial customers, as
well as to semiconductor and thin film head manufacturers. FEI also manufactures
SEMs designed for wafer scanning in the semiconductor industry ("Wafer SEMs"),
which are sold and serviced through the MicroElectronics segment.
The Company has manufacturing operations in Hillsboro, Oregon; Acht, The
Netherlands; and Brno, Czech Republic. Sales and service operations are
conducted in the United States and eight other countries, 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
Koninklijke Philips Electronics N.V. ("Philips") located in approximately 20
additional countries, and through independent representatives in certain
countries.
Basis of Presentation - On February 21, 1997, FEI Company ("Pre-Combination
FEI") acquired substantially all of the assets and liabilities of the electron
optics business of Philips Business Electronics International B.V. ("Philips
Business Electronics"), a wholly owned subsidiary of Philips in a transaction
accounted for as a reverse acquisition (the "PEO Combination"). Accordingly,
purchase accounting was applied to the assets and liabilities of Pre-Combination
FEI.
The accompanying condensed consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and Article 10 of Regulation
S-X. 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, consisting of normal
recurring accruals, considered necessary for fair presentation have been
included.
Net income (loss) per share - The difference between basic and diluted net
income (loss) per share is a result of the dilutive effect of stock options,
which are considered potential common shares.
Reclassifications - Certain reclassifications have been made to the 1998
financial statements to conform to the current year presentation.
2. RESTRUCTURING AND REORGANIZATION
On July 29, 1998 the Company announced a restructuring and reorganization
program to consolidate operations, eliminate redundant facilities, reduce
operating expenses, and provide for outsourcing of certain manufacturing
activities. The Company's plan calls for the elimination of 173 positions
worldwide, or about 16% of its work force as of July 29, 1998. The positions
affected include manufacturing, marketing, administrative, field service, sales,
and manufacturing personnel. During the third quarter of 1998, all affected
employees were informed of the planned
5
<PAGE>
terminations and the related severance benefits they would be entitled to
receive. Of the 173 positions targeted for elimination, 95 positions remain to
be eliminated as of April 4, 1999. The majority of the positions remaining at
April 4, 1999 are located in the Company's facilities in Acht, The Netherlands
where a significant number of positions are expected to be eliminated following
the outsourcing of certain manufacturing operations. The Company intends to
finalize its outsourcing arrangements during the second quarter of 1999.
The various components of restructuring and reorganization charges were as
follows:
<TABLE>
<CAPTION>
Accrued Thirteen Weeks Ended April 4, 1999 Accrued
Liability ---------------------------------- Liability
as of Charged as of
December 31, Charged to Reduction of April 4,
1998 Expense Liability (1) 1999
<S> <C> <C> <C> <C>
Severance, outplacement and related
benefits for terminated employees $ 2,701 $ - $ (177) $ 2,524
Lease abandonment costs for vacated
facilities
354 - (56) 298
--------- -------- --------- ---------
$ 3,055 $ - $ (233) $ 2,822
========= ======== ========= =========
(1) Includes cash payments and net effect of currency exchange rate
fluctuations on accrued liability.
</TABLE>
3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
December 31, April 4,
1998 1999
<S> <C> <C>
Raw materials and assembled parts $ 25,667 $ 25,055
Work in process 11,853 14,960
Finished goods 10,439 7,775
----------- -----------
Total inventories 47,959 47,790
Reserve for obsolete inventory (4,441) (4,592)
----------- -----------
Net inventories $ 43,518 $ 43,198
=========== ===========
</TABLE>
6
<PAGE>
4. OTHER ASSETS
Other assets consisted of the following:
<TABLE>
<CAPTION>
December 31, April 4,
1998 1999
<S> <C> <C>
Service inventories, noncurrent, net of obsolescence reserves
of $6,810 and $6,113, respectively $ 7,037 $ 8,550
Capitalized software development costs, net of amortization
of $478 and $744, respectively 3,469 3,602
Goodwill, net of amortization of $2,093 and $2,378, respectively 15,029 14,744
Existing technology, net of amortization of $2,519 and $2,863,
respectively
13,971 13,627
Patents, net of amortization of $39 and $45, respectively 282 276
Deposits and other 945 506
------------ -----------
Total other assets $ 40,733 $ 41,305
============ ===========
</TABLE>
Software development costs capitalized during the thirteen weeks ended March 29,
1998 and April 4, 1999 were $361 and $399, respectively. Amortization of
software development costs was $84 and $266 for the thirteen weeks ended March
29, 1998 and April 4, 1999.
In connection with the purchase accounting for the PEO Combination, the Company
identified four significant projects under development at the date of the
combination and estimated the fair value of the related purchased in-process
research and development. The development of three of those four projects was
completed in 1997 and 1998, with revenue recognized in late 1997 and during
1998. The fourth project continues to be developed. Based on current management
estimates, the fourth project is expected to generate revenue beginning in late
1999.
5. CURRENT ACCOUNTS WITH PHILIPS
Current accounts with Philips represent accounts receivable and accounts payable
between the Company and other Philips units. The current account transactions
relate to intercompany purchases of goods and services.
Current accounts with Philips consisted of the following (see Note 6):
<TABLE>
<CAPTION>
December 31, April 4,
1998 1999
------------ ----------
<S> <C> <C>
Current accounts receivable $ 5,689 $ 3,914
Current accounts payable (10,732) (4,497)
------------ ----------
Net current accounts with Philips $ (5,043) $ (583)
============ ==========
</TABLE>
6. CREDIT FACILITY BORROWINGS
At December 31, 1998, the Company maintained a $25,000 bank line of credit,
available on revolving advances at prime (8.5% at December 31, 1998) or on 30,
60, 90, or 180-day draw periods at LIBOR plus 1.65%. A total of $6,693 was
outstanding under this bank line of credit at December 31, 1998. Borrowings
under this line of credit were secured by eligible receivables, inventories, and
equipment. Under the terms of the line of credit, the Company was required to
meet certain financial covenants.
7
<PAGE>
On February 25, 1999, the Company consummated a new credit facility with Philips
and terminated its existing bank line of credit. The entire outstanding balance
under the existing bank line of credit was paid off with proceeds drawn under
the new credit facility. The new credit facility provides borrowing capacity of
up to $50,000, with advances bearing interest at LIBOR plus 0.75%. The weighted
average interest rate in effect at April 4, 1999 was 4.1%. Advances up to
$10,000 may be made on a revolving current account basis, with additional
advances made in terms of one month, three months, or six months. The credit
facility is unsecured, matures on February 26, 2002 and requires that the
Company meet certain financial covenants.
Based on management's intent, the borrowings outstanding under the credit
facility are classified as long-term. Also based on management's intent, the
amount outstanding as of December 31, 1998, under the Company's bank line of
credit, which was refinanced on February 25, 1999, was classified as long-term.
A large portion of the current account with Philips outstanding as of December
31, 1998 was also classified as long-term in anticipation of refinancing at the
initiation of the new credit facility.
The Company also maintains a $5,000 unsecured and uncommitted bank borrowing
facility in the US and certain limited facilities in selected foreign countries.
At April 4, 1999, the Company had outstanding standby letters of credit totaling
approximately $3,300 to secure customer advance deposits. These standby letters
of credit reduce the amount available to borrow under the Company's $5,000
uncommitted facility.
7. SEGMENT INFORMATION
The following table summarizes various financial amounts for each of the
Company's segments (see Note 1):
<TABLE>
<CAPTION>
Corporate
Micro- Electron and
Thirteen Weeks Ended Components electronics Optics Eliminations Total
<S> <C> <C> <C> <C> <C>
March 29, 1998:
Product sales to customers $ 3,821 $ 13,089 $ 12,585 $ - $ 29,495
Service sales to customers - 1,073 5,386 - 6,459
Inter-segment sales 1,008 - 2,225 (3,233) -
-------- ------- --------- --------- ---------
Total sales 4,829 14,162 20,196 (3,233) 35,954
Operating income (loss) 866 (472) (629) - (235)
April 4, 1999:
Product sales to customers 2,351 18,806 16,817 - 37,974
Service sales to customers - 1,213 6,221 - 7,434
Inter-segment sales 873 - 1,013 (1,886) -
-------- ------- --------- --------- ---------
Total sales
3,224 20,019 24,051 (1,886) 45,408
Operating income (loss)
364 1,128 (680) - 812
</TABLE>
Inter-segment sales are recorded at cost, with no markup for gross profit within
the selling segment. Shared corporate expenses are allocated pro-rata to the
operating segments on the basis of product sales to customers.
8
<PAGE>
8. MERGERS AND ACQUISITIONS
Micrion Corporation
On December 3, 1998, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Micrion Corporation ("Micrion"), a Massachusetts
corporation engaged in the design, manufacture, sale and service of focused
particle beam instruments. The merger is subject to regulatory approval and
approval by the shareholders of both Micrion and the Company. The Company is in
the process of complying with a request for additional information by the
Federal Trade Commission. Under terms of the Merger Agreement, Micrion would
become a wholly owned subsidiary of the Company. Holders of Micrion common stock
would receive one share of the Company's common stock and $6.00 in cash (or, in
certain circumstances an equivalent amount of shares of the Company's stock in
lieu of cash) in exchange for each share of Micrion common stock. The cash
portion (or shares in lieu thereof) may be reduced if Micrion's indebtedness at
closing of the merger exceeds certain levels set forth in the Merger Agreement.
In conjunction with the proposed merger, the Company has incurred and deferred
$1,551 of acquisition costs as of April 4, 1999.
In connection with the proposed merger, Philips Business Electronics entered
into a stock purchase agreement with the Company pursuant to which Philips
Business Electronics has agreed to finance the cash portion of the merger
consideration through the purchase from the Company of additional newly issued
shares of common stock. Philips Business Electronics also has the option to
purchase additional newly issued shares of common stock to maintain its majority
shareholder position after the issuance of shares to Micrion's stockholders.
9. COMMITMENTS AND CONTINGENCIES
The Company is a party to litigation arising in the ordinary course of business.
In the opinion of management, these actions will not have a material adverse
effect on the Company's financial position, results of operations, or liquidity.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
The following table sets forth certain unaudited financial data for the periods
indicated as a percentage of net sales.
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
March 29, April 4,
1998 1999
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 60.8 61.8
----- -----
Gross profit 39.2 38.2
Research and development costs 13.5 11.5
Selling, general and administrative costs 24.6 23.4
Amortization of intangibles 1.8 1.4
Restructuring and reorganization costs 0.0 0.0
----- -----
Operating income (loss) ( 0.7) 1.8
Other income (expense), net ( 0.6) 0.7
----- -----
Income (loss) before taxes ( 1.3) 2.5
Tax expense (benefit) ( 0.5) 1.0
----- -----
Net income (loss) ( 0.8)% 1.6%
===== =====
</TABLE>
Net sales. Net sales for the thirteen weeks ended April 4, 1999 increased $9.5
million (26%) compared to the corresponding period in 1998. Microelectronics
segment product sales increased $5.7 million (44%) and Electron Optics segment
product sales increased $4.2 million (34%) while product sales in the Components
segment decreased $1.5 million (38%) from 1998 levels. Service sales increased
by $1.0 million (15%) in the first quarter of 1999 compared with the first
quarter of 1998. Industry conditions in both the semiconductor-manufacturing
sector and the data storage sector were generally weak during 1998 but showed
some improvement in the first quarter of 1999. These industry sectors represent
the principal markets for the Company's Components and Microelectronics
segments. Electron Optics segment sales have benefited from the Company's new
product introductions in the second half of 1998. The Company believes that
Components segment sales have been weak in 1999 following record 1998 levels due
to customers' utilization of on hand inventories.
Sales increased year over year in each of the four major geographic regions the
Company sells to, with the largest increase occurring in Europe. Sales in Europe
represented 35% of sales in the first quarter of 1999 compared with 28% of sales
in the first quarter of 1998. Sales in the Asia Pacific Region represented 18%
of sales in the first quarter of 1999 compared with 20% of sales in the first
quarter of 1998. Sales in North America represented 43% of sales in the first
quarter of 1999 compared with 49% of sales in the first quarter of 1998. Sales
in other geographic regions represented 4% of sales in the first quarter of 1999
compared with 3% of sales in the first quarter of 1998.
The Company conducts its business in multiple currencies. In general, the US
Dollar was weaker in relation to these other currencies in the first quarter of
1999 compared with the first quarter of 1998. Accordingly, the translation of
sales denominated in foreign currencies resulted in slightly higher reported
sales in US Dollars in the first quarter of 1999 as compared with the first
quarter of 1998.
Gross profit. Gross profit for the thirteen weeks ended April 4, 1999 increased
$3.2 million (23%) compared to the same period in 1998. Gross profit as a
percentage of sales was 38.2% for the first quarter of 1999 compared with 39.2%
for the first quarter of 1998. The 1999 gross margin was affected by sales of
used and loaner systems, as well as sales through independent distributor
channels, each of which produced below average gross margins. The gross margin
10
<PAGE>
in the first quarter of 1999 was further reduced by higher spending levels in
the Company's service business, which included opening a new office in Texas.
Research and development costs. Research and development costs for the thirteen
weeks ended April 4, 1999 increased $0.4 million (8%) compared to the same
period in 1998. As a percentage of sales, research and development costs were
11.5% and 13.5% for the thirteen weeks ended April 4, 1999 and March 29, 1998,
respectively. The Company is continuing to invest in the development of its next
generation platform technology, as well as product upgrades, new software
systems, and products to broaden the product line offerings of our business
segments. The Company expects to increase its research and development
expenditures in 1999 compared to the expenditure levels of 1998.
Selling, general and administrative costs. Selling, general and administrative
costs for the thirteen weeks ended April 4, 1999 increased $1.8 million (20%)
compared to the same period in 1998. As a percentage of sales, selling, general
and administrative costs were 23.4% and 24.6% for the thirteen weeks ended April
4, 1999 and March 29, 1998, respectively. The first quarter of 1999 was affected
by increased legal expenses, employee relocation costs and incentive
compensation accruals. The first quarter of 1998 was not indicative of the full
calendar year 1998 expense level because of the addition of new senior
management and the implementation of incentive compensation plans subsequent to
the first quarter of 1998.
Amortization of purchased intangibles. The Company separately reports the
expense associated with amortization of intangibles arising from merger and
acquisition activities on the statement of operations. The expense associated
with the amortization of other intangibles is charged to cost of sales or other
operating expenses. Purchase accounting for the PEO Combination as of February
21, 1997 resulted in the recognition of intangible assets in the amount of $16.5
million for existing technology that is being amortized over a 12-year period,
and goodwill of $17.1 million that is being amortized over a 15-year period.
Restructuring and reorganization costs. On July 29, 1998 the Company announced a
restructuring and reorganization program to consolidate operations, eliminate
redundant facilities, reduce operating expenses, and provide for outsourcing of
certain manufacturing activities. The program is intended to eliminate
approximately 173 positions worldwide, or about 16% of the Company's work force
as of July 29, 1998. A charge of $5.3 million was recognized in the year ended
December 31, 1998 primarily representing the cost of providing severance,
outplacement assistance, and associated benefits to affected employees. Of this
charge, $2.8 million remains as a liability as of April 4, 1999. This liability
will continue to be discharged during 1999 as the Company's outsourcing plan
continues to be implemented. Of the 173 positions targeted for elimination, 95
positions remain to be eliminated as of April 4, 1999. The remaining positions
are primarily related to the Company's manufacturing operations in Acht, The
Netherlands. The Company intends to finalize its outsourcing arrangements in the
second quarter of 1999. Additional charges totaling $1.1 million are expected to
be recorded as they are incurred during 1999 for transitional costs of
consolidating operations and outsourcing certain activities.
Other income (expense), net. Other income (expense), net was income of $0.3
million in the first quarter of 1999 compared with expense of $0.2 million in
the first quarter of 1998. The 1999 period included currency transaction gains
of $0.5 million compared with currency transaction losses of $0.1 million in the
1998 period. These currency gains in the first quarter of 1999 were due to
non-recurring transactions.
Income tax expense. The effective income tax rate was 38% for the thirteen weeks
ended April 4, 1999 and 35% for the thirteen weeks ended March 29, 1998. The
Company's tax rates differ from the U.S. federal statutory tax rate primarily as
a result of state and foreign taxes, the amortization of intangible assets not
deductible for income tax purposes, and the favorable tax effect of the
Company's use of a foreign sales corporation for exports from the U.S.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At April 4, 1999, the Company had total cash and cash equivalents of $26.8
million compared to $15.2 million at December 31, 1998. Worldwide cash transfers
associated with the Company's new credit facility were finalized during the
first quarter of 1999 and resulted in a temporary increase in cash balances.
Cash provided by operating activities for the thirteen weeks ended April 4, 1999
was $11.4 million compared to $9.7 million for the thirteen weeks ended March
29, 1998. Cash provided by operating activities before the effect of working
capital changes was $1.9 million in the first quarter of 1999 and $2.7 million
in the first quarter of 1998. In February 1999 the Company consummated a new
credit facility with Philips whereby a substantial portion of the Company's
current account payable to Philips was converted to long-term borrowings (see
below).
Investing activities used cash of $2.1 million during the first quarter of 1999
compared with $2.9 million during the first quarter of 1998. The 1999 decrease
is primarily due to lower levels of capital expenditures for equipment. The
Company expects to continue to invest in plant and equipment and technology
needed for future business requirements, as well as to invest in internally
developed software for its products.
Financing activities provided cash of $5.1 million in the thirteen weeks ended
April 4, 1999 and used $7.8 million of cash in the thirteen weeks ended March
29, 1998. The 1999 financing activities are comprised of long-term borrowings
from Philips under the Company's credit facility and the repayment and
termination of the prior bank line of credit agreement. The 1998 financing
activities reflect net repayments under the prior bank line of credit agreement
as well as repayment of a $2.7 million note payable to Philips, which arose from
the PEO Combination in February 1997. In February 1999 the Company consummated a
new credit agreement and obtained commitment on a three year $50 million
revolving credit facility from Philips. The facility allows the Company, subject
to certain financial covenants, to borrow in multiple currencies for its general
corporate needs, excluding acquisitions. During the first quarter of 1999 the
Company utilized the multiple currency capability to finance its Asian working
capital needs by borrowing in Japanese yen. Borrowings under the agreement bear
interest at a variable LIBOR rate from 30 to 180 days, at the Company's
designation, plus a 0.75% incremental rate. See Note 6 of Notes to Condensed
Consolidated Financial Statements for additional information. With this new $50
million revolving line of credit, the Company refinanced and replaced its
previous $25 million revolving line of credit with an U.S. bank.
In December 1998, the Company announced that it had entered into a merger
agreement with Micrion Corporation of Peabody, Massachusetts. The merger is
subject to regulatory approval and approval by the shareholders of both Micrion
and the Company. If the merger is completed, holders of Micrion common stock
would receive one share of the Company's common stock and $6.00 in cash for each
Micrion common share outstanding. In certain conditions this consideration could
be reduced in accordance with the terms of the merger agreement. Financing
requirements for the transaction would be approximately $33 million, including
the cash consideration and estimated transaction costs as well as the issuance
of approximately 5.1 million shares of Company common stock to Micrion
shareholders. The Company has entered into a stock purchase agreement with its
majority shareholder, Philips Business Electronics, to finance its cash
requirements for the merger. Pursuant to the stock purchase agreement, the
Company would sell approximately 5.6 million common shares to Philips Business
Electronics at an expected per share price of $8.02. Proceeds from this sale of
shares in excess of the cash consideration to Micrion shareholders and
transaction costs are expected to be used to repay Micrion bank debt. In
conjunction with the proposed merger the Company has deferred $1.6 million of
merger related expenditures as of April 4, 1999.
The Company is evaluating service and distribution businesses in 20
international locations. These businesses are currently operating under a
distribution agreement between the Company and a Philips affiliate. The
agreement was entered into in February 1997 and had an initial term which ends
on January 1, 2000, unless extended. The Company is evaluating purchasing some
of these businesses or obtaining alternate distributors in some locations.
Depending on a number of variables, some of which have not been quantified, the
Company may make additional investment in its service and distribution network.
The Company's global sales activities and related service and support activities
result in complex foreign currency exposures. The Company does not have a formal
hedging program in place; however, it does enter into forward
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contracts to sell or purchase foreign currencies to hedge specific sales
transactions. As of April 4, 1999, the Company had forward purchase and sale
contracts of foreign currency totaling $5.8 million, which if settled at the
spot exchange rate as of April 4, 1999 would have resulted in a loss of $0.1
million.
The introduction of the Euro also provides the Company with an opportunity to
reduce its exposure to the foreign currency translation fluctuations of the
various European Monetary Union ("EMU") countries in which it reports results by
adopting the Euro as its reporting currency for those operations. These
countries include France, Germany, Italy and The Netherlands. The Company began
conducting the majority of its business transactions in Euros for these EMU
countries on January 1, 1999. The Company is in the process of converting its
relevant operations to use of the Euro as functional and reporting currency. The
Company's automated transaction and reporting systems are capable of reporting
in either local currency or Euros without extensive modification.
The Company's working capital is subject to fluctuation due to the timing of its
shipments. Since the Company's products typically have a large sales value per
unit, the timing of specific units in a reporting period can affect the relative
levels of inventory and accounts receivable without a corresponding change in
liabilities. The Company's restructuring and reorganization programs also
affected working capital as reflected previously. The remaining 1998
restructuring and reorganization charges, which will be settled in 1999, total
$2.8 million as of April 4, 1999.
Purchase accounting for the PEO Combination as of February 21, 1997, resulted in
the recognition of an intangible asset in the amount of $38.0 million
representing the estimated fair value of in-process research and development of
Pre-Combination FEI. The intangible asset was written off with a charge to
earnings immediately following the PEO Combination in keeping with the Company's
policy to expense research and development costs as they are incurred. In
connection with the purchase accounting for the PEO Combination, the Company
identified four significant projects under development. The development of three
of those four projects was completed in 1997 and 1998, with revenue recognized
in late 1997 and during 1998. The fourth project, the Company's next generation
platform, is still under development. Based on current management estimates, the
fourth project is expected to generate revenue beginning in late 1999. There
remains the risk that a technological hurdle may be encountered that may delay
or prevent the successful development of this product and the Company cannot
predict with certainty the market demand for this product. Although the Company
believes any hurdles could eventually be overcome, the Company's competitive
position could be harmed if a significant market for the product develops and
its competitors are successful first in developing a competing technology. While
the semiconductor manufacturing sector and the data storage sector were
generally weak during 1998, the Company's long-term expectations for those
markets and, accordingly, for this project, have not changed significantly.
The Company believes that its cash and cash equivalents, cash flows from
operating activities and existing credit facilities are adequate to meet the
Company's cash requirements over the next 12 to 18 months, and that if the
Micrion merger is completed, the proposed sale of additional shares to Philips
Business Electronics would provide adequate liquidity during the same period.
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 April 4,
1999 was approximately $49 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 orders 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.
YEAR 2000 DISCLOSURE
State of Readiness. In January 1998, the Company formed a Year 2000 Team
composed of representatives of various aspects of the Company's operations that
may be significantly affected by Year 2000 readiness issues, including hardware
and software related to the Company's manufacturing control, accounting and
other information technology systems, product software and hardware, supplier
products and post-sales support. The Year 2000 Team developed a multi-part plan
to measure and address the Company's Year 2000 readiness, consisting of: (i)
product testing using test criteria developed by SEMATECH, a semiconductor
industry trade association; (ii) testing information technologies hardware and
software for the Company's manufacturing control, accounting and other systems
and
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addressing deficiencies; (iii) identifying and assessing non-information
technologies third-party suppliers' products raising Year 2000 compliance
issues, making inquiry of such vendors concerning their state of readiness and
resolving issues; (iv) communicating with the customer base concerning Year 2000
readiness of the Company's products; and (v) evaluating the need for and, as
appropriate, developing a contingency plan. The Company has analyzed and
partially tested its information technology systems and determined that, to the
extent tested, those systems have no material Year 2000 compliance deficiencies.
Several elements of the Company's information technologies remain to be tested
and evaluated, and testing and evaluation is expected to be largely completed
before the end of the 1999 second quarter. Internal information technologies
systems tests are to be completed within that time frame. Also, with regard to
readiness, the Company has assumed that basic public utilities such as gas,
electric and telephone services will continue to be available for operations of
the Company on and after January 1, 2000 in the U.S., The Netherlands and the
Czech Republic. If this assumption proves incorrect, the operations of the
affected manufacturing location would be materially adversely affected for the
duration of the utility interruption. The Company has completed the testing of
most products and has communicated with customers concerning Year 2000 readiness
of these products and certain third party products sold with the Company's
systems. However, the Company has not determined the Year 2000 status of all
past products or the status of some of the third-party products sold with its
products. The Company's efforts to assess these products continue, with a goal
of completing this assessment by the end of the second quarter of 1999. The
Company anticipates undertaking additional communications with its customers and
to provide instructions to post-sale field service representatives on Year 2000
readiness before the end of the second quarter of 1999. Based on communications
to date, the Company does not believe a material Year 2000 deficiency by any
information technologies or non-information technologies supplier exists.
However, the Company has not yet completed its inquiry of all suppliers and
further communications may identify Year 2000 deficiencies.
Costs. At this time, the Company believes costs incurred in responding to other
parties' Year 2000 computer system deficiencies, together with the cost of any
required modifications to the Company's systems, will not have a material impact
on the Company's results of operations or financial condition. In the ordinary
course the Company has improved its Year 2000 readiness through recent systems
upgrades as part of its usual capital improvement efforts. The Company has
devoted management, sales and technical resources to address Year 2000 matters
and expects to continue to do so. To date, however, no specific expenditures
have been made as a result of the Year 2000 issue. The Company has made plans to
increase inventories of certain components prior to January 2000 but has not
made specific allocations for this increase. Overall, the Company expects to
fund any future costs through operating cash flows. Cost estimates for systems
improvements are based on the Company's estimates, which make numerous
assumptions about future events. There is no assurance that these estimates will
be correct and actual costs could differ materially from these estimates.
Most Reasonably Likely Worst Case Scenarios for the Company. Although the
Company will continue to devote resources to address its Year 2000 issues, there
is no assurance that these efforts will be effective in reducing or eliminating
risks associated with Year 2000 deficiencies. Moreover, there is no assurance
that the Company's products do not contain undetected Year 2000 problems or that
third-party products do not contain such problems. In addition, there is no
assurance that the Company's assessment of third-party suppliers and vendors
will be accurate or that the Company has made inquiry of the appropriate
vendors. Year 2000 problems could result in system failures, data corruption,
the generation of erroneous information and other significant disruptions of
business activities. Beyond risks related to product and vendor non-compliance,
it is possible that the Company will suffer supply chain disruptions and
transport problems due to hoarding and changes in buying and shipping patterns
caused by other parties' efforts to address Year 2000 problems. Furthermore, it
has been widely reported that a significant amount of litigation surrounding
business interruptions may arise out of Year 2000 issues. It is uncertain
whether, or to what extent, the Company may be affected by any such litigation.
The Company's Contingency Plan. The Company does not have a contingency plan.
FEI is in the process of evaluating the need for a contingency plan and expects
to finish the evaluation by mid-1999. As a contingency measure, however, the
Company may increase its inventory of some component parts and supplies in the
coming months.
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FORWARD-LOOKING STATEMENTS
From time to time the Company may issue forward-looking statements that are
subject to a number of risks and uncertainties. The statements in this report
concerning increased investment in plant and equipment and software development,
the portions of the Company's sales consisting of international sales, expected
capital requirements, and Year 2000 compliance by the Company and its customers
and suppliers constitute forward-looking statements that are subject to risks
and uncertainties. Factors that could materially decrease the Company's
investment in plant and equipment and software development include, but are not
limited to, downturns in the semiconductor manufacturing market, lower than
expected customer orders and changes in product sales mix. Factors that could
materially reduce the portion of the Company's sales consisting of international
sales include, but are not limited to, competitive factors, including increased
international competition, new product offerings by competitors and price
pressures, fluctuations in interest and exchange rates (including changes in
relevant foreign currency exchange rates between time of sale and time of
payment), changes in trade policies, tariff regulations and business conditions
and growth in the electronics industry and general economies, both domestic and
foreign. Factors that could materially increase the Company's capital
requirements include, but are not limited to, receipt of a significant portion
of customer orders and product shipments near the end of a quarter and the other
factors listed above.
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Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Credit Facility Agreement dated as of February 25, 1999 between the
Company, Philips Electron Optics International B.V. and Koninklijke
Philips Electronics N.V.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
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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: May 18, 1999 VAHE' A. SARKISSIAN
----------------------------------------------
Vahe' A. Sarkissian
President and
Chief Executive Officer
WILLIAM P. MOONEY
----------------------------------------------
William P. Mooney
Executive Vice President and
Chief Financial Officer
MARK V. ALLRED
-----------------------------------------------
Mark V. Allred
Corporate Controller
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Exhibit Index
Exhibit
No. Description
- ------- -----------
10.1 Credit Agreement
27.1 Financial Data Schedule
CREDIT FACILITY AGREEMENT
THIS AGREEMENT is made this February 25, 1999
between:
1. FEI Company, having its registered seat at 7451 N.W. Evergreen Parkway,
Hillsboro, Oregon, United States of America, 97124-5830,
2. Philips Electron Optics International B.V., having its registered seat at
Achtse Weg Noord 5, 5651 GG, Eindhoven, the Netherlands,
(the "Borrowers")
and
3. Koninklijke Philips Electronics N.V., having its registered seat at
Groenewoudseweg 1, 5621 BA Eindhoven, the Netherlands ("Lender")
WHEREAS
The Borrowers desire to obtain from the Lender and the Lender has agreed to
grant to the Borrowers, a credit facility of 50 million US-Dollars (or its
equivalent from time to time in Optional Currencies).
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. DEFINITIONS
Words and expressions used in this Agreement shall have the following meaning
unless the context otherwise requires:
"Agreement" means the present agreement entered into by the Borrowers and the
Lender, including the Schedule attached thereto, and any amendment thereto;
"Available Facility" means the Facility minus the Outstanding Amounts;
"Available Revolving Credit Facility" means the Revolving Credit Facility minus
the Outstanding Amounts;
"Borrowers" means either FEI or PEOI, or FEI and PEOI jointly;
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"Business Day" means a day on which banks are open for business of the nature
contemplated in this Agreement in Amsterdam and in the financial centre of the
relevant currency (the relevant financial centre for EUR is deemed to be
London);
"Current Account" means the current account (also within the Philips
organisation referred to as "Intercompany Bank Account" or "IBA") of PEOI
denominated in EUR with the Lender;
"Dollar Amount" means in relation to a Revolving Advance: (i) if the request for
a Revolving Amount is denominated in US-Dollars, the amount specified in that
request; or (ii) if such request is denominated in an Optional Currency, the
US-Dollars equivalent (at the time the Lender receives such request) of the
amount specified in the request;
"Drawdown Date" means, in respect of a Revolving Advance, the date of the making
thereof as (deemed) specified in the relevant request;
"EUR" means the lawful currency of countries participating in the third stage of
the Economic and Monetary Union;
"Event of Default" means any of the events set out in Clause 14 hereunder;
"Facility" means the US-Dollars credit facility set out in Clause 2.2 hereunder;
"FEI" means FEI Company;
"FEI Group" means FEI and its subsidiaries;
"Final Maturity Date" means the third anniversary of this Agreement (February
26, 2002);
"Interest Determination Date" means, in respect of an Interest Period, the day
which is two Business Days prior to the first day of such Interest Period;
"Interest Payment Date" means, in relation to any Revolving Advance, the last
day of an Interest Period relative thereto;
"Interest Period" means, in relation to any Revolving Advance, a period as
selected or deemed to have been selected by the Borrowers in accordance with
Clause 5.1 hereunder;
"JPY" means the lawful currency of Japan;
"Lender" means Koninklijke Philips Electronics N.V.;
"NLG" means the lawful legal tender of the Netherlands;
"Notice" means a notice of drawdown of a Revolving Advance or a notice
requesting a next Interest Period substantially in the form as set out in
Schedule A hereto;
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"Maximum Amount" means the maximum amount of the Facility as specified in Clause
2.1 hereunder and as may be amended in accordance with Clause 15.1 hereof;
"Optional Currencies" means Dutch Guilders (NLG), Euro (EUR) or Japanese Yen
(JPY);
"Outstanding Amounts" the sum of all Revolving Advances outstanding, the debit
balance on the Current Account and the interest due hereunder;
"PEOI" means Philips Electron Optics International BV;
"Required Amount" means (i) in the case of US-Dollars drawn under the Revolving
Credit Facility, a minimum of 10,000 US-Dollars and a higher whole multiple of
US-Dollars 10,000, and (ii) in case of an Optional Currency, such amount as is
agreed between the Borrowers and the Lender, or failing agreement, the
equivalent of the Required Amounts relevant to the Revolving Credit Facility for
US-Dollars;
"Revolving Advance" means any revolving advance made or to be made available by
the Lender to the Borrowers in any one currency in accordance with the
provisions of this Agreement and for the time being outstanding under the
Revolving Credit Facility;
"Revolving Credit Facility" means the credit facility as specified in Clause 2.2
hereof;
"Term" means in relation to a Revolving Advance, the period for which it is to
be borrowed, being one, three or six months, ending not later than the Final
Maturity Date;
"US-Dollar" and "USD" mean the lawful currency of the United States of America.
2. THE FACILITY
2.1 Amount
The Lender grants to the Borrowers a total credit facility of 50 million
US-Dollars (or its equivalent from time to time in Optional Currencies). This
amount may be reduced by FEI in accordance with Clause 15 hereof (partial
cancellation).
2.2 Revolving Credit Facility and Current Account
The Facility consists of a revolving credit facility for the Maximum Amount (or
its equivalent from time to time in Optional Currencies) (the "Revolving Credit
Facility") including a credit facility on the Current Account for the maximum of
10 million US-Dollars. If there is a debit balance on the Current Account, the
Available Revolving Credit Facility will be reduced accordingly. The Outstanding
Amounts will at no time exceed the Maximum Amount.
PEOI has entered into an agreement with the Lender specifying the terms and
conditions applicable to the Current Account.
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2.3 Proceeds
The proceeds of the Facility will be used for general corporate business
purposes of the FEI Group only and not for the purpose of acquisitions or
take-overs.
2.4 Commitment fee
FEI will pay to Lender a commitment fee of 0.25 per cent (25 basis points) per
annum from day to day during the period starting February 25, 1999 and ending on
the Final Maturity Date on the amount to be calculated as follows: the Maximum
Facility minus US-Dollars 10 million minus the sum of the Revolving Advances
outstanding. If the aggregate of the Revolving Advances outstanding exceeds or
equals the Maximum Amount minus 10 million US-Dollars, no commitment fee has to
be paid. The commitment fee will be paid to the bank account of the Lender at
the end of each period of six (6) months, for the first time in July 1999 (so
the first commitment fee will be paid over a period of six months less 55 days)
within 5 Business Days upon the written request of the Lender. Such request will
contain a specification of the fee to be paid.
3. CONDITIONS PRECEDENT
The several obligations of the Lender under this Facility shall be expressly
subject to the Lender having received, in form and substance satisfactory to the
Lender, not later than the date set out in Clause 4.1 on which the Borrower
gives a Notice for the drawdown hereunder, evidence of authority of those
persons authorised to execute, deliver and perform this Agreement and any
notices required hereunder on behalf of the Borrowers.
4. DRAWDOWN OF REVOLVING ADVANCES
4.1 Notice
Revolving Advances will be made by the Lender to FEI or PEOI at the request of
the Borrowers (or any one of them), if the following additional conditions are
fulfilled:
I The Lender has received from the relevant Borrower not later than 10:00
a.m. (Amsterdam time) on the third Business Day before the Drawdown Date of
the Revolving Advance, a written notice specifying:
(a) the Drawdown Date of the Revolving Advance, which must be a Business
Day ultimately one month before the Final Maturity Date;
(b) its amount, which may not result in a breach of Clause 2.2 and so that
(i) its Dollar Amount must be equal to or less than the Available
Revolving Credit Facility and (ii) if its Dollar Amount is less than
the Available Revolving Credit Facility, the amount of that Revolving
Advance must be the Required Amount;
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(c) its currency (in US-Dollars or one of the Optional currencies);
(d) its Term, which must be in accordance with clause 4.2;
(e) the name of the borrower (either FEI or PEOI);
(f) details of the bank and account to which FEI wishes the proceeds of
that Revolving Advance to be made available.
II All representations and warranties in this Agreement have been complied
with in all material respects as at the date of the request of the
Revolving Advance, and would be correct in all material respects if
repeated on the Drawdown Date of that Revolving Advance, by reference to
the circumstances then existing.
III No Event of Default has occurred on or before the Drawdown Date of that
Revolving Advance and is continuing or will occur as a result of making
that Revolving Advance.
IV The request is duly signed by an authorised person or persons as specified
in Schedule B hereto.
Borrowers shall notify the Lender in writing of any change in or withdrawal of
the authorisation of any person mentioned on Schedule B, notwithstanding their
entry in public registers, in default of which notification such change or
withdrawal cannot be invoked against the Lender.
4.2 Term
The Term of a Revolving Advance shall begin on the Drawdown Date of that
Revolving Advance and shall have a duration of one, three or six months, or a
period of less than six months ending on the Final Maturity Date, as selected by
the relevant Borrower in the notice requesting that Revolving Advance, except
that the Borrowers may not select a Term ending after the Final Maturity Date.
4.3 Substitution of balance on Current Account into Revolving Advance
Revolving Advances will be deemed requested by PEOI and deemed made by the
Lender to PEOI if the debit balance on the Current Account is exceeding the
equivalent of US-Dollars 10 million for more than 5 consecutive Business Days
under the following conditions:
I
(a) the Drawdown Date of the Revolving Advance, being a Business Day
before the Final Maturity Date, is the day on which the balance on the
Current Account is exceeding the equivalent of US-Dollars 10 million
for 5 consecutive Business Days (the "Overdrawn Date");
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(b) the amount of such Revolving Advance will be a minimum of EUR 10,000,
or such higher whole multiple of EUR 10,000 that the amount of the
Revolving Advance will not exceed the debit balance on the Current
Account on the Overdrawn Date minus the equivalent of US-Dollars 10
million,
(c) its Term will be one month;
provided that such Revolving Advance does not result in a breach of Clause
2.2;
II All representations and warranties in this Agreement have been complied
with in all material respects as at the date of the request of the
Revolving Advance, and would be correct in all material respects if
repeated on the Drawdown Date of that Revolving Advance, by reference to
the circumstances then existing.
III No Event of Default has occurred on or before the Drawdown Date of that
Revolving Advance and is continuing or will occur as a result of making
that Revolving Advance.
If a Revolving Advance is made in accordance with this Clause, the Current
Account will be credited on the Overdrawn Date for the amount of such Revolving
Advance deemed made.
5. INTEREST
5.1 Interest Periods Revolving Advances
Each Revolving Advance shall bear interest calculated by reference to the
successive Term of that Revolving Advance.
FEI shall notify its selection as to the duration of each Interest Period, in
the Notice relative to the Revolving Advance (in case of the first Interest
period of the Revolving Advance) and subsequently by Notice in writing to the
Lender to be received by it not later than 10:00 a.m. (Amsterdam time) on the
third Business Day prior to the first day of each subsequent Interest Period,
provided that if FEI fails to give notice of its selection in relation to the
duration of an Interest Period, such duration shall be of one month and further
provided that:
(a) the first Interest Period in respect of each Revolving Advance shall
commence on the Drawdown Date referred to in Clause 4.1 sub I and shall end
upon the expiry of the period selected or otherwise determined in
accordance with this sub-Clause;
(b) each subsequent Interest Period shall commence on the last day of the
preceding Interest Period;
(c) if any Interest Period would otherwise end on a day which is not a Business
Day, that Interest Period shall be extended to the next succeeding Business
Day, unless such succeeding Business Day falls in another calendar month in
which event that Interest Period shall end upon the immediately preceding
Business Day;
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(d) if an Interest Period is extended or shortened by application of the
preceding paragraph, the following Interest Period shall end on the day on
which it would have ended if the preceding Interest Period had not been so
extended or shortened;
(e) any Interest Period which commences on a day of a calendar month (whether
the last day or another day) for which there is no numerically
corresponding day in the month in which the relevant Interest Period should
end shall, subject to paragraph (f), end on the last Business Day of such
month; and
(f) no Interest Period shall extend beyond the Final Maturity Date.
5.2 Interest Revolving Advances
The rate of interest applicable to each Revolving Advance for each Interest
Period relative thereto shall be the aggregate of the rate per annum which
appears on the Interest Determination Date in London on the relevant page of the
Telerate Service designated for the display of London Interbank Offered Rate for
that Term in the currency in which the Revolving Advance to which that Term
relates is to be denominated plus 0.75% (75 basis points).
Interest in relation to a Revolving Advance shall be payable on each Interest
Payment Date relative thereto.
Interest shall accrue from day to day and shall be computed on the basis of a
year of 360 days.
5.3 Interest Current Account
The rate of debit interest applicable to the Current Account shall be the
aggregate of the rate per annum which appears on the relevant page of the
Telerate Service designated for the display of London Interbank Offered Rate for
a period of one week in the currency in which the Current Account is denominated
plus 0.75% (75 basis points).
The rate of credit interest on a day to day basis applicable to the Current
Account shall be the "LIBID" rate for a period of one week in the currency in
which the Current Account is denominated (approximately London Interbank Offered
Rate minus 0.125% (12.5 basis points).
Interest in relation to the Current Account shall be automatically debited or
credited as the case may be from or to the Current Account at the end of each
month (a month in this respect will be a month as determined by the `Philips
Concern Calendar', attached as Schedule F). On the request of the Borrowers, the
Lender will inform them timely of such periods not covered by Schedule F. The
Lender will give a specification of the interest (to be) paid.
Interest shall accrue from day to day and shall be computed on the basis of a
year of 365 days.
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5.4 Determination of Interest
Each determination of the rate of interest by the Lender hereunder shall be in
writing and shall in the absence of manifest error be conclusive and binding
upon the Borrowers.
5.5 Default interest
The rate of interest on a day to day basis applicable to a Revolving Advance not
paid when (declared) due hereunder shall be the aggregate of the interest rate
applicable to such Revolving Advance plus one percent (100 basis points). The
rate of interest on a day to day basis applicable to any other amount not paid
when (declared) due hereunder shall be the aggregate of the interest rate
specified in Clause 5.3 plus one percent (100 basis points).
6. REPAYMENT
6.1 Normal Repayment
The Facility shall be repaid in the respective currencies of the Revolving
Advances in full on the Final Maturity Date, unless it is prepaid earlier in
accordance with the provisions of this Agreement.
6.2 Prepayment
(a) The Borrowers may prepay any part of all of the outstanding Revolving
Advances in the several currencies at any one time, without premium or
penalty at any time, if they give to the Lender not less than 5 Business
Days written notice of the Revolving Advance(s) to be prepaid and the date
and amount of the prepayment. Any such prepayment must be accompanied by
accrued interest on the amount prepaid and by any other sum then due
pursuant to this Agreement.
(b) Any notice of intention to make a prepayment shall be irrevocable and shall
oblige the Borrowers to make such prepayment on the relevant Interest
Prepayment Date.
(c) As the Credit Facility is revolving, any amount prepaid before the Final
Termination Date will remain available for reborrowing on the terms and
conditions of this Agreement.
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7. PAYMENTS
All payments to be made hereunder by the Borrowers or the Lender shall be made
in the relevant currency to the relevant account on the date upon which the
relevant payment is due by credit to the account numbers as specified in
Schedule C hereto, or, as the case may be, such other accounts and/or banks as
the parties may from time to time agree upon.
8 TAXES
Subject as hereinafter provided, all payments to be made by the Borrowers
hereunder (whether of principal, interest or otherwise) shall be made free and
clear of and without any deductions or withholdings whatsoever, save and to the
extent required by applicable law.
If the Borrowers are compelled by law to make any such deduction or withholding,
they shall ensure that such deduction or withholding does not exceed the minimum
liability therefor and shall promptly pay to the Lender such additional amount
as is necessary to ensure that the net amount received and retained by the
Lender is equal to the amount payable by the Borrowers had there been no
deduction or withholding.
9. ILLEGALITY
Notwithstanding any other provision herein, if any change in law, regulation or
treaty or in the official interpretation or application thereof by any competent
authority or any competent court shall make it unlawful for the Lender to make
or to fund or continue to fund a Revolving Advance or part thereof, then the
Lender shall be entitled by written notice thereof to the Borrowers, to declare
that its participation in the relevant Revolving Advance shall be terminated
forthwith or upon expiry of any legally admissible delay, whereupon the
Borrowers shall prepay such Revolving Advance together with accrued interest
thereon, whereupon the Facility shall be reduced to the then outstanding
Revolving Advances.
Notwithstanding the provisions of the Dutch law in this respect, the Lender will
make its best efforts in the occurrence of any of the events mentioned in this
Clause 9 to secure, in agreement with the Borrowers, a satisfactory solution
which would make the reduction of the Facility unnecessary.
10. REPRESENTATIONS AND WARRANTIES
The Borrowers hereby represent and warrant to and for the benefit of the Lender
that:
10.1 FEI is a legal entity duly incorporated in the State of Oregon and validly
organised under the laws of the State of Oregon and has the corporate power
to carry on its business as it is now being conducted;
-9-
<PAGE>
10.2 PEOI is a limited liability body duly incorporated in the Netherlands and
validly existing under the laws of the Netherlands and has the corporate
power to carry on its business as it is now being conducted;
10.3 each of the Borrowers has the corporate power and authority to enter into
and perform its obligations under this Agreement and has taken all
necessary action to authorise the making of the drawdown upon the terms and
conditions of this Agreement and to authorise the execution and performance
of this Agreement in accordance with its respective terms;
10.4 this Agreement constitutes legal, valid and binding obligations of the
Borrowers fully enforceable against them in accordance with its respective
terms and the terms thereof have been (or will be where applicable)
complied with by the Borrowers in all material respects, the same will
constitute legal, valid and binding obligations of the Borrowers
enforceable in accordance with its terms subject to the laws of bankruptcy
and other laws affecting the rights of creditors generally;
10.5 the execution, delivery and performance by the Borrowers of this Agreement
do not and will not violate in any respect any provision of the articles of
incorporation of FEI and/or PEOI;
10.6 no litigation, arbitration or administrative proceedings are at present
current or pending or, to the knowledge of the Borrowers, threatened which
would have a material adverse effect on their ability to perform and comply
with their respective obligations under this Agreement;
10.7 no Event of Default and no other event which, with the giving of notice or
lapse of time or both, might constitute an Event of Default has occurred
and is continuing.
11. DEFINITIONS WITH RESPECT TO FINANCIAL RATIOS
The following expressions used in this Clause 11 and Clause 13 shall be
construed in accordance with US Generally Accepted Accounting Principles but so
that:
"Interest Expense" in relation to any fiscal year of FEI Group, means the
consolidated interest expense under US Generally Accepted Accounting Principles
as shown or determined from the Financial Statements for such fiscal year, and
in relation to the 12 month period ending at the end of each quarter means the
consolidated interest expense under US Generally Accepted Accounting Principles
as shown or determined from the Financial Statements for such period.
"Income from Operations" in relation to any fiscal year of FEI Group, means
income/(loss) Before Taxes plus or minus the sum of the amounts for such fiscal
year included in determining such income/(loss) Before Taxes of (A) consolidated
interest expense, (B) amortisation of intangibles arising from the merger of
PEOI with FEI and the acquisition of Micrion by FEI Group for that fiscal year
and (C) unusual and non-recurring items for that fiscal year including (a)
write-off of in-process research and development, (b) other non cash costs of
mergers and
-10-
<PAGE>
acquisitions activity relating to the merger of PEOI with FEI and the
acquisition of Micrion (c) restructuring and reorganisation costs (d) other
non-recurring non-cash losses/gains and charges (e) extraordinary items (f)
cumulative effects of a change in accounting principles, all as determined in
accordance with US Generally Accepted Accounting Principles, and in relation to
the 12 month period ending at the end of each quarter, means income/(loss)
Before Taxes plus or minus the sum of the amounts for the previous four quarters
included in determining such income/(loss) Before Taxes of (A) consolidated
interest expense, (B) amortisation of intangibles arising from the merger of
PEOI with FEI and the acquisition of Micrion by FEI Group for the previous four
quarters and (C) unusual and non-recurring for the previous four quarters items
including (a) write-off of in-process research and development, (b) other non
cash costs of mergers and acquisitions activity relating to the merger of PEOI
with FEI and the acquisition of Micrion (c) restructuring and reorganisation
costs (d) other non-recurring non-cash losses/gains and charges (e)
extraordinary items (f) cumulative effects of a change in accounting principles,
all as determined in accordance with US Generally Accepted Accounting
Principles, all as shown in or determined from the Financial Statements for the
relevant period.
"Stockholders' Equity" at any time means the aggregate (expressed in US-Dollars)
at such time of the total shareholders' equity as shown in or determined by the
Financial Statements for the relevant period.
"Total Capitalisation" at any time means the aggregate at such time of Total
Debt and Stockholders' Equity as shown in or determined by the Financial
Statements for the relevant period.
"Total Debt" at any time means the aggregate (expressed in US-Dollars) of: (i)
all long term liabilities expressed as being due after one or more years from
the relevant balance sheet date, excluding for this purpose all such liabilities
classified as "other liabilities (non-interest-bearing)" or "deferred income
taxes" plus (ii) all current liabilities but excluding for this purpose all such
liabilities classified as "non-interest-bearing debt"; all as shown in or
determined from the Financial Statements for the relevant period.
"Auditors' Certificate" means a certificate by the auditors of FEI as to the
amount of Interest Expense, Income from Operations, Stockholders' Equity, and
Total Debt at any date and shall be final and conclusive except for manifest
error.
"Financial Statements" mean the annual audited consolidated financial statements
of FEI Group or the quarterly unaudited consolidated financial statements of FEI
Group as filed at the SEC (form "10 Q" or "10K"), all expressed in US-Dollars
and prepared in accordance with US Generally Accepted Accounting Principles.
-11-
<PAGE>
12. COVENANTS
12.1 FEI hereby covenants and agrees, so long as any amounts remain outstanding
hereunder or, in the event that there are no such amounts outstanding, so
long as this Agreement remains in effect that:
(a) as soon as available but not later than 50 days after the end of each
quarter (beginning with the current one) and with the exception of
each fourth quarter of the year, FEI will deliver to the Lender the
Financial Statements as at the end of and for that quarter together
with copies of the related SEC report "10 Q";
(b) as soon as available but not later than 95 days after the end of each
fiscal year (beginning with the current one), FEI will deliver to the
Lender its Financial Statements (and one copy of its annual report) as
at the end of and for that financial year together with copies of the
related SEC reports "10 K" and the related auditors' report.
12.2 Borrowers hereby covenant and agree, so long as any amounts remain
outstanding hereunder or, in the event that there are no such amounts
outstanding, so long as this Agreement remains in effect that:
(a) each of the Borrowers shall duly perform and observe all its
obligations under this Agreement and promptly inform the Lender of any
circumstance having or which could have a material adverse effect on
its ability to perform its obligations hereunder;
(b) the Borrowers shall notify the Lender in writing of any Event of
Default and of the steps being taken to remedy such Event of Default
forthwith upon becoming aware of the occurrence thereof.
13. GUARANTEE AND OTHER CONDITIONS
The Borrowers acknowledge that the Lender has agreed to make the Facility
available to the Borrowers in reliance on the following guarantee and covenants:
13.1 the Borrowers hereby jointly and severally unconditionally and irrevocably
guarantee to the Lender due and punctual payment of the principal of and
interest on the Revolving Advances and the Current Account and all other
sums due under this Agreement when and as the same shall become due and
payable, whether a Revolving Advance is drawn by FEI or PEOI.
-12-
<PAGE>
13.2 FEI shall be subrogated to all rights of the Lender against PEOI in respect
of any amounts paid by FEI pursuant to the provisions of this guarantee,
provided, however, that FEI shall not be entitled to enforce or to receive
any payments arising out of, or based upon, such rights of subrogation
until all the principal of and interest on the Revolving Advances and the
Current Account shall have been paid in full or duly provided for.
13.3 the Borrowers jointly and severally undertake that, so long as any sum
remains to be payable by it under this Agreement:
(a) their payment obligations under this Agreement rank and will at all
times rank at least equally and ratable in all respects (`Pari passu')
with all their other unsecured and unsubordinated indebtedness for
borrowed money except for such indebtedness preferred only by
mandatory provisions of law.
(b) they will not create or have outstanding any security for their
indebtedness for borrowed money on or over the Borrowers' assets
except for: (i) the securities listed in Schedule D hereto (ii) any
security existing on or over assets acquired by the Borrowers from a
Subsidiary not created in contemplation of or in connection with the
acquisition of those assets by the Borrowers, (iii) to the extent that
any off-balance sheet financing of itself constitutes security over
any assets of the Borrowers, that security over such assets, (iv) to
the extent that any discounting, factoring or other disposal of any
book debts or receivables of themselves constitutes security over such
book debts or receivables, that security over such book debts or
receivables, (v) securities directly relating to advance payments,
received with a maximum of USD 3 million at any time, (vi) any other
security created or outstanding with the prior consent of the Lender,
(vii) any rights of set-off arising by operation of law only or in the
ordinary course of banking other than rights of set-off arising
pursuant to an agreement relating to indebtedness for borrowed money
having an initial maturity of more than 1 year entered into after the
date of this Agreement.
(c) FEI will with each set of the Financial Statements delivered under
Clause 12 sub 1 deliver to the Lender a Auditors' Certificate
confirming compliance with Clause 13.4 as at the end of a fiscal year
or a certificate signed by the Chief Executive Officer or Chief
Financial Officer of FEI confirming compliance with Clause 13.4. Each
such certificate will set out in reasonable detail and in a form
reasonably satisfactory to the Lender the computations necessary to
demonstrate such compliance. A draft of such certificate is attached
as Schedule E.
-13-
<PAGE>
13.4 The Borrowers will jointly and severally ensure that, based on the
Financial Statements and per the date to which they relate, as any sum
remains to be lent to or remains payable under this Agreement:
(a) the Stockholders' Equity will in the year 1999 not be less than
US-Dollars 92 million;
(b) the Stockholders' Equity will in the year 2000 and 2001 not be less
than US-Dollars 100 million;
(c) the ratio of Stockholders Equity to Total Capitalisation will be more
than 1 to 2;
(d) the ratio of Income from Operations to Interest Expense will not in
respect of any financial year of the FEI Group, or any 12 month period
ending on the last day of a quarter, be less than 4 for the first and
second quarter of 1999 and thereafter not less than 6.
If FEI Group acquires assets for an amount exceeding 25% of its
Stockholders' Equity according to its latest Financial Statements before
such acquisition, the Borrowers may request the Lender to adjust the
minimum ratios mentioned under 13.4 sub (d) to reflect such acquisition.
13.5 FEI will not dispose and will procure that none of its subsidiaries
(including PEOI) will, except with the consent of the Lender (disregarding
disposals in the ordinary course of business and any sale, lease, transfer
or other disposal of any of its revenues or its assets on an arm's length
basis for fair market value and the payment of lawful dividends) sell,
lease, transfer, lend (other than the lending of cash to any of its
subsidiaries) or otherwise dispose of, by one or more transactions or
series of transactions (whether related or not), the whole or any material
part of its respective business, revenues or assets ("material" in this
context means a sale, lease, transfer, loan or disposal of any part of its
business, assets or revenues which, by itself (in the case of a single
transaction) or which aggregated (in the case of a number of related
transactions), is more than 10 percent of the revenues or assets of the FEI
Group taken as a whole or, in any case, the disposal of which (alone or so
aggregated) would have a material adverse effect on any Borrower's ability
to perform or comply with its obligations under this Agreement).
13.6 FEI will ensure that there is no material change in the nature of the
business of the FEI Group taken as a whole (whether by a single transaction
or a number of related or unrelated transactions, whether at one time or
over a period of time and whether by disposal, acquisition or otherwise)
which has or could have a material adverse effect on any Borrowers ability
to perform and comply with its obligations under this Agreement.
-14-
<PAGE>
14. EVENTS OF DEFAULT
The following are Events of Default:
(a) Non-payment: The Borrowers do not pay in the manner provided in this
Agreement (i) any principal payable under it when due, unless the Borrowers
satisfy the Lender that non-payment is due solely to administrative error
(whether by the Borrowers or a bank involved in transferring funds to the
Lender) and payment is made within 5 Business Days after written notice of
that non-payment has been given to it by the Lender or (ii) any other sum
payable under it within 10 Business Days after written notice of that
non-payment has been given to it by the Lender.
(b) Breach of Representation or Warranty: Any representation or warranty by the
Borrowers pursuant to Clause 10 is not complied with in any material
respect or is or proves to have been incorrect, in any material respect,
when made.
(c) Breach of Other Obligation: The Borrowers do not perform or comply in any
material respect with any one or more of their other obligations under this
Agreement and, if that default is capable of remedy, it is not remedied
within 30 days after written notice of that default has been given to it by
the Lender.
(d) Cross Default: Any other indebtedness of the Borrowers in respect of
borrowed money and forming part of its Total Debt (i) is payable (whether
automatically under the provisions of any agreement relating to that
indebtedness or as a result of any declaration or the like made under any
such agreement) before its normal maturity by reason of any actual default
or event of default, however described, and is not paid on becoming so
payable or within any applicable grace period unless it is being contested
in good faith by appropriate means or (ii) is not paid by reason of the
actual default of the Borrowers when due nor within any applicable grace
period in any agreement relating to that indebtedness unless it is being
contested in good faith by appropriate means, except in any such case where
the Borrowers is prevented, directly or indirectly, by any government or
other authority from fulfilling the relevant obligation. However, no Event
of Default will occur under this Clause 14 (d) unless the amount of the
indebtedness for borrowed money in respect of which any event mentioned in
this Clause 14 (d) has occurred equals or exceeds US-Dollars 5 million or
its equivalent in other currencies (as reasonably determined by the
Lender).
(e) Insolvency: FEI or PEOI is (or is deemed by law or a court to be) insolvent
(including a faillissement (within the meaning of the Netherlands'
bankruptcy act) or unable to pay its debts or one of the Borrowers stops,
suspends or threatens to stop or suspend payment of all or a material part
of its indebtedness (including a surseance van betaling, within the meaning
of the Netherlands' bankruptcy act), begins negotiations or takes any other
step with a view to the deferral, rescheduling or other readjustment of all
of its indebtedness (or of any material part which it will or might
otherwise be unable to pay when due), proposes or makes a general
assignment or an arrangement or composition with or for the benefit of the
relevant creditors or a moratorium is agreed
-15-
<PAGE>
or declared in respect of or affecting all or a material part of the
indebtedness of the Borrowers.
(f) Winding-up: An order is made or an effective resolution is passed for the
winding-up of one of the Borrowers.
(g) Analogous Events: Any event occurs which, under the law of any relevant
jurisdiction, has an analogous or equivalent effect to any event mentioned
in Clause 14 (e).
(h) Change of control: The Lender has given written notice to FEI that it
ceases to own directly or indirectly more than 50 per cent of the issued
equity share capital of FEI. However, no Event of Default will occur under
this clause 14 (h) unless 120 days have elapsed since the Lender ceased to
own directly or indirectly more than 50 per cent of the issued equity share
capital of FEI, or since the relevant written notice, whichever is latest.
(i) Change in relationship Borrowers: FEI ceases to own directly or indirectly
100 per cent of the issued equity share capital of PEOI, unless such
reduction is approved beforehand in writing by the Lender.
If at any time and for any reason (and whether within or beyond the control of
any party to this Agreement) any Event of Default has occurred then at any time
thereafter, the Lender shall by written notice to the Borrowers declare all
Outstanding Amounts, all unpaid accrued interest or fees and any other sum then
payable under this Agreement to be immediately due and payable, whereupon they
shall become so due and payable, unless the event which constitutes the Event of
Default is remedied before the Lender has sent the aforementioned notice and the
Lender is informed of such remedy by the Borrowers in writing before the Lender
sent such notice.
However, if the Event of Default as referred to under Clause 14 (e) or 14 (g) is
capable of being cured, the Outstanding Amounts, all unpaid accrued interest or
fees and any other sum then payable under this Agreement, shall become due and
payable 5 days after the notice to declare all such amounts due and payable has
been sent by the Lender, unless the Lender explicitly mentions a different
period in such notice, and unless FEI Group did not meet the ratios mentioned in
Clause 13.4, based on latest monthly management report as FEI submits to the
Lender each month, in which case all amounts outstanding as referred to will
become due and payable immediately. If an Event of Default as referred to under
Clause 14 (e) or 14 (g) has occurred, no Revolving Advances or draw downs form
the Current Account will be possible till such Event of Default is cured, unless
approved by the Lender beforehand.
At any time after such occurrence the Lender may, by notice in writing to the
Borrowers, declare that the Facility is cancelled and that all amounts
outstanding thereunder, if any, are immediately due and payable, together with
interest thereon and any other costs, charges and expenses. Such declaration
shall be effective forthwith.
The Borrowers jointly and severally undertake to indemnify the Lender against
any reasonable direct loss or expenses which any of them may sustain or incur as
a consequence of the occurrence of any Event of Default hereunder.
-16-
<PAGE>
15. CANCELLATION BY BORROWERS
15.1 Notice of cancellation
FEI may declare on behalf of the Borrowers in writing that the Facility is
cancelled in full or in part. If the Facility is cancelled in part, such
notice shall state the new Maximum Amount (in US-Dollars). The cancellation
will be effective on the date mentioned in the notice ("Cancellation
date"). The Cancellation Date should be at least five (5) Business Days
after receipt by the Lender of such notice.
15.2 Partial cancellation
A partial cancellation will only become effective if on the Cancellation
Date the Outstanding Amounts are less than the proposed amended Maximum
Amount.
15.3 Cancellation is irrevocable
Any cancellation in accordance with this article 15 will be irrevocable.
Any reduction of the Maximum Amount made in accordance with this Clause 15,
will not be available for reborrowing.
16 MISCELLANEOUS
16.1 Expenses
The Borrowers and the Lender will pay their own costs and expenses (including
taxes thereon and legal fees) incurred in connection with the preparation,
negotiation or entry into this Agreement and/or any amendment of, supplement to
or waiver in respect of this Agreement.
Where any repayment of principal by the Borrowers is made on a day which is not
an Interest Payment Date, the Borrowers shall pay all such amounts as shall be
necessary to compensate the Lender for any direct loss or expenses incurred by
it for the remainder (if any) of the then current Interest Period(s) as a result
of such prepayment unless such prepayment is made in compliance with Clause 6.2
sub (a) and the certificate of the Lender as to such amounts shall be conclusive
and binding on the Borrowers save for manifest error.
16.2 Law and Jurisdiction
This Agreement shall be governed by and construed in all respects in
accordance with the laws of The Netherlands. The Borrowers hereby
irrevocably submit, in respect of any suit, action or proceeding arising
out of this Agreement, to the non-exclusive jurisdiction of the Courts of
the Netherlands.
-17-
<PAGE>
16.3 Remedies and other Waivers
Save as otherwise provided in this Agreement no failure to exercise nor any
delay in exercising on the part of any Lender any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise of any right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided are cumulative and not exclusive of
any rights or remedies provided by law.
16.4 Entire Agreement and Schedules
This Agreement constitutes the entire Agreement between the parties with
respect to the subject matter hereof as of the date of this Agreement and
supersedes all prior agreements, negotiations, representations and
proposals whether written or oral with respect to the credit facility
contemplated herein. The Appendices to this Agreement are incorporated in
full in this Agreement and form part thereof.
16.5 Communications
All notices (including Notices), requests, demands or other communications
to or upon the parties hereto shall be in writing and deemed to have been
duly given or made when delivered (in the case of personal delivery or
letter) and when dispatched to the party to which the same is required or
permitted to be given under this Agreement, addressed as follows:
if to the Lender:
Koninklijke Philips Electronics N.V.
as well as to: Koninklijke Philips Electronics N.V.
Corporate Treasury Department Corporate Treasury Department
Attn.: Mr. Jan Maarten Ingen Housz Attn. Mrs Laura Munisteri
Building HRT-28 Building HRT-28
Rembrandt Tower, Amstelplein 1 Rembrandt Tower, Amstelplein 1
P.O. Box 77900 P.O. Box 77900
1070 MX Amsterdam 1070 MX Amsterdam
The Netherlands The Netherlands
Tel: 31 20 59 77 350 Tel: 31 20 59 77 363
Fax: 31 20 59 77 357 Fax: 31 20 59 77 370
if to the Borrowers:
FEI Company
as well as to: FEI Company
Attn. Mr. Mark V. Allred Attn. Mr. Derek Garrett
7451 N.W. Evergreen Parkway, 7451 N.W. Evergreen Parkway,
Hillsboro, Oregon, 97124-5830, Hillsboro, Oregon, 97124-5830,
United States of America United States of America
Tel: 1 503 844 2666 Tel: 1 503 844 2699
Fax: 1 503 726 2720 Fax: 1 503 726 2720
-18-
<PAGE>
As well as to:
Philips Electron Optics International
B.V.and Philips Electron Optics
Attn. Mr. Michel G. van Woesik International B.V.
Building AAE Attn. Mr. Nico. H.W. Vrijenhoek
Achtseweg Noord 5 Philips Electron Optics
P.O. Box 218 International B.V.
5600 MD Eindhoven Achtseweg Noord 5
The Netherlands P.O. Box 218
Tel: 31 40 276 63 47 5600 MD Eindhoven
Fax: 31 40 276 61 64 The Netherlands
Tel: 31 40 276 60 34
Fax: 31 40 276 61 64
17. NOVATION
17.1 This Agreement shall benefit and bind the parties, their assignees and
their respective successors. Any reference in this Agreement to any party
shall be construed accordingly.
17.2 The Borrowers may not novate or assign its rights or obligations under this
Agreement without the prior written approval of the Lender.
17.2 The Lender may novate or assign its rights or obligations under this
Agreement to a group company of the Lender (in the sense of article 2:24b
of the Dutch Civil Code), unless such novation or assignment will have any
adverse effects with respect to (one of) the Borrowers. In the event of an
allowed novation or assignment the Borrowers will co-operate to effect such
novation or assignment.
-19-
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Agreement as per
February 17th, 1999.
FEI COMPANY
VAHE' A. SARKISSIAN MARK V. ALLRED
- ---------------------------------- ----------------------------------
Mr. V. Sarkissian Mr. Mark V. Allred
Title: Chief Executive Officer Title: Corporate Controller
Date: Date:
PHILIPS ELECTRON OPTICS INTERNATIONAL B.V.
NICO H.W. VRIJENHOEK MICHEL G. VAN WOESIK
- ---------------------------------- ----------------------------------
Mr. Nico H.W. Vrijenhoek Mr. Michel G. van Woesik
Title: General Manager Title: Corporate Treasurer
Date: Date:
Koninklijke Philips Electronics N.V.
J.M.L.M. INGEN HOUSZ
- ----------------------------------
Mr. J.M.L.M. Ingen Housz
Title: Director Philips Corporate Treasury
Date:
-20-
<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> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> APR-4-1999
<CASH> 26,794
<SECURITIES> 0
<RECEIVABLES> 57,405
<ALLOWANCES> (2,142)
<INVENTORY> 43,198
<CURRENT-ASSETS> 137,654
<PP&E> 42,043
<DEPRECIATION> (18,289)
<TOTAL-ASSETS> 202,713
<CURRENT-LIABILITIES> 63,559
<BONDS> 0
0
0
<COMMON> 150,087
<OTHER-SE> (52,380)
<TOTAL-LIABILITY-AND-EQUITY> 202,713
<SALES> 45,408
<TOTAL-REVENUES> 45,408
<CGS> 28,083
<TOTAL-COSTS> 44,596
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (308)
<INCOME-PRETAX> 1,138
<INCOME-TAX> 432
<INCOME-CONTINUING> 706
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 706
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
