-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TlShm/Ix5RczhrW4dvE07rn9e7bnZAKXFOXJfLfSBd5tOxoDNYTRLEMl8T3g93Uw rACMvzL6Gnu0da6TyjPFlw== 0000891836-98-000720.txt : 19981210 0000891836-98-000720.hdr.sgml : 19981210 ACCESSION NUMBER: 0000891836-98-000720 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19981208 GROUP MEMBERS: KONINKLIJKE PHILIPS ELECTRONICS N.V. GROUP MEMBERS: PHILIPS BUSINESS ELECTRONICS INTERNATIONAL B.V. GROUP MEMBERS: PHILIPS ELECTRONICS N V SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FEI CO CENTRAL INDEX KEY: 0000914329 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 930621989 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-49649 FILM NUMBER: 98765872 BUSINESS ADDRESS: STREET 1: 7451 NE EVERGREEN PWY CITY: HILLSBORO STATE: OR ZIP: 97124-5830 BUSINESS PHONE: 5036901500 MAIL ADDRESS: STREET 1: 7451 NE EVERGREEN PARKWAY CITY: HILLSBORO STATE: OR ZIP: 97124 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PHILIPS ELECTRONICS N V CENTRAL INDEX KEY: 0000313216 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP) [3600] STATE OF INCORPORATION: P7 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: GROENEVOUDSEWEG 1 STREET 2: 5621 BA EINDHOVEN CITY: THE NETHERLANDS STATE: P7 BUSINESS PHONE: 0113140791 MAIL ADDRESS: STREET 1: SULLIVAN & CROMWELL 125 BROAD ST STREET 2: C/O W LOEBER LANDAU CITY: NEW YORK STATE: NY ZIP: 10004 SC 13D/A 1 AMENDMENT NO. 1 TO SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D/A Under the Securities Exchange Act of 1934 (Amendment No. 1) FEI COMPANY - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock - -------------------------------------------------------------------------------- (Title of Class of Securities) 30241L109 - -------------------------------------------------------------------------------- (CUSIP Number) Alexandra D. Korry Sullivan & Cromwell 125 Broad Street New York, New York 10004 (212) 558-4000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) December 3, 1998 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If a filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [X]. Check the following box if a fee is being paid with this statement [ ]. - -------------------------------------------------------------------------------- CUSIP NO. 30241L109 - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Koninklijke Philips Electronics N.V. (Royal Philips Electronics) - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X ] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS WC, OO - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION The Netherlands - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 0 SHARES ---------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 11,184,471 EACH ---------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 0 WITH ---------------------------------------------------- 10. SHARED DISPOSITIVE POWER 11,184,471 - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11,184,471 - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 54.7 - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- -2- - -------------------------------------------------------------------------------- CUSIP NO. 30241L109 - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Philips Business Electronics International B.V. - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X ] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS WC, OO - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION The Netherlands - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 0 SHARES ---------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 11,184,471 EACH ---------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 0 WITH ---------------------------------------------------- 10. SHARED DISPOSITIVE POWER 11,184,471 - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11,184,471 - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 54.7 - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- -3- This Amendment No. 1 to Schedule 13D relates to the Schedule 13D filed on March 1, 1997 with respect to the Common Stock of FEI Company (the "Issuer") by Koninklijke Philips Electronics N.V., a Netherlands corporation ("Philips"), and Philips Business Electronics International B.V. ("PBE"), a Netherlands corporation and a wholly owned subsidiary of Philips, formerly known as Philips Industrial Electronics International B.V. Item 2. Identity and Background. Item 2 is hereby amended and supplemented as follows: (a)-(c); (f). This Statement is being filed by PBE and Philips, which acts as the holding company of the Philips group. The Philips group is engaged primarily in the manufacture and distribution of electronic and electrical products, systems and equipment. The principal office and business address of Philips is Rembrandt Tower, Amstelplein 1, 1096 HA Amsterdam, The Netherlands. PBE is a wholly owned subsidiary of Philips which manages the Business Electronics product division of Philips through a number of operating companies or business units. The principal office and business address of PBE is Building SX-4, P.O. Box 218, 5600 MD Eindhoven, The Netherlands. Philips and PBE are sometimes referred to herein as the "Reporting Persons". Attached as Schedule I hereto and incorporated by reference herein is a list of the members of the Supervisory Board and the members of the Board of Management and the Group Management Committee of Philips, and the directors and executive officers of PBE. Schedule I sets forth each of such persons' name, business address, present principal occupation or employment and citizenship, and the name, principal business and address of the corporation or other organization in which such employment is conducted. To the best knowledge of the Reporting Persons, no such person is the beneficial owner of any shares of Common Stock of the Issuer. (d) (e). During the last five years, neither Philips nor PBE, nor, to the best knowledge of the Reporting Persons, any of the directors or executive officers of Philips or PBE has been convicted in a criminal proceeding (excluding traffic violations or similar criminal -4- misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration. Item 3 is hereby amended and supplemented as follows: On December 3, 1998, PBE entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") with the Issuer in order to provide financing, through the purchase of additional shares of the Issuer's Common Stock, for the proposed merger (the "Merger") between the Issuer and Micrion Corporation ("Micrion") pursuant to an Agreement and Plan of Merger, dated December 3, 1998 (the "Merger Agreement"), among the Issuer, Micrion and MC Acquisition Corporation, which provides that at the Effective Time of the Merger, Micrion will be merged with MC Acquisition Corporation, which is a wholly owned subsidiary of the Issuer. Pursuant to the Stock Purchase Agreement, the Issuer and PBE agreed that PBE would purchase at the Per Share Price (as defined below) such number of shares (the "Financing Shares") of the Issuer's Common Stock that is equal to (x) the sum of (i) $6.00 multiplied by the number of shares of Micrion Common Stock outstanding at the effective time of the Merger (excluding Micrion Common Stock held by The Issuer or its subsidiaries, Micrion shares held by Micrion, or Micrion shares held by stockholders dissenting to the Merger) and (ii) transactions costs of the Merger, divided by (y) the Per Share Price. The "Per Share Price" is defined as the average of the closing price of FEI Common Stock for (i) the nine full trading days immediately preceding December 3, 1998 and (ii) the six consecutive full trading days beginning December 3, 1998. In addition, the Stock Purchase Agreement provides that PBE has the right, but not the obligation, to purchase for cash at the Per Share Price on the closing date of the Stock Purchase Agreement a number of additional shares of the Issuer's Common Stock (the "Top-Up Shares"), provided that the maximum number of shares that PBE may acquire pursuant to the Stock Purchase Agreement is equal to (A) 122.23% of (i) the number of shares of the Issuer's Common Stock issued -5- in the Merger plus (ii) the number of shares of Common Stock issuable upon exercise of options to be issued to former officers or employees of Micrion as part of their Employment Agreements with the Issuer, less (B) the number of Financing Shares issued. The Stock Purchase Agreement is subject to certain conditions, including the absence of a Material Pricing Event (as defined therein) and satisfaction of the conditions precedent set forth in the Merger Agreement. If a Material Pricing Event occurs, Philips will determine at that time whether to consummate the transactions contemplated by the Stock Purchase Agreement. If Philips elects to terminate the Stock Purchase Agreement on the ground that a Material Pricing Event has occurred, Philips will thereby waive its top-up rights set forth in Section 5.17 of the Combination Agreement with respect to the shares issued in the Merger. The cash used by PBE to purchase the Financing Shares and, if applicable, the Top-Up Shares is expected to be made available to PBE from Philips out of Philips' working capital. This item 3 is qualified in its entirety by reference to the Combination Agreement, the Stock Purchase Agreement and the Merger Agreement, which are filed as Exhibits 1, 2 and 3 hereto and are incorporated herein by reference. Item 4. Purpose of the Transaction. Item 4 is hereby amended and supplemented as follows: Upon satisfaction of the conditions precedent in the Stock Purchase Agreement, the Reporting Persons plan to acquire the Financing Shares in exchange for providing financing for the cash portion of the merger consideration which Micrion shareholders will be entitled to receive at the effective time of the Merger. In addition, the Reporting Persons have the right, but not the obligation, to acquire the Top-Up Shares. The Reporting Persons' current intention, which is subject to change, is that PBE will acquire at least the number of Top-Up Shares which, after giving effect to the Merger and the purchase of the Financing Shares, would be sufficient to maintain its majority ownership of the Issuer's Common Stock. -6- As of the date of this statement, other than the purchase of the Financing Shares and the Top-Up Shares as described above none of the Reporting Persons has any plans or proposals with respect to the Issuer that relate to or could result in any of the actions specified in clauses (a) through (j) of Item 4 of Schedule 13D other than the following: 1. Pursuant to the Merger Agreement, at the Effective Time Micrion will merge with a subsidiary of the Issuer and will thereafter become a wholly owned subsidiary of the Issuer. Thus, the business conducted by the Issuer and the Issuer's corporate structure will materially change. 2. Except as described above, PBE retains all of its rights under the Combination Agreement. 3. As described in Item 6, PBE has entered into a Voting Agreement with Micrion, pursuant to which PBE has agreed to vote in favor of the proposal to amend the Issuer's Articles of Incorporation to increase the number of authorized shares of Common Stock of the Issuer to 45,000,000 and to approve the issuance of shares in the Merger. Each Reporting Person expects to evaluate on an ongoing basis the Issuer's financial condition and prospects and their interest in, and intentions with respect to, the Issuer. Accordingly, each Reporting Person reserves the right to change its plans and intentions at any time, as it deems appropriate. In particular, although each Reporting Person has no present intention to acquire any shares of Common Stock other than as described above and has no present intention to dispose of any of such shares once acquired, each Reporting Person may acquire additional shares of Common Stock or securities convertible or exchangeable for Common Stock and/or may dispose of shares of Common Stock on the Nasdaq national market, in privately negotiated transactions or otherwise. Any such transactions may be effected at any time and from time to time. To the knowledge of the Reporting Persons, each of the persons listed on Schedule I hereto may make the same evaluation and may have the same reservations. This Item 4 is qualified in its entirety by reference to the Combination Agreement, the Stock Purchase Agreement the Merger Agreement and the Voting Agreement, -7- which are filed as Exhibits 1, 2, 3, and 4 hereto and are incorporated herein by reference. Item 5. Interest in Securities of Issuer. Item 5 is hereby amended and supplemented as follows: (a) and (b). As described in the Schedule 13D filed by Philips and PBE on March 1, 1997, PBE was issued 9,728,807 at the Closing of the Combination Agreement, representing 55% of the Issuer's outstanding shares of Common Stock. Since that time, PBE has been issued 213,616 shares of the Issuer's Common Stock, and may be issued without additional consideration 1,242,048 additional shares from time to time in the future in accordance with the terms and conditions of the Combination Agreement. By virtue of the fact that PBE is a wholly owned subsidiary of Philips, Philips and PBE may be deemed to share the voting and dispositive power over the 11,184,471 shares of Common Stock beneficially owned by PBE. To the knowledge of the Reporting Persons none of the persons listed on Schedule I hereto own any shares of Common Stock. (c). To the knowledge of the Reporting Persons, none of the persons listed on Schedule I hereto has been party to any transaction in the Common Stock during the sixty-day period ending on the date of this Statement on Schedule 13D. (d). To the knowledge of the Reporting Persons, no other person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, any shares of Common Stock deemed beneficially owned by the Reporting Persons. This Item 5 is qualified in its entirety by reference to the responses to Items 3 and 4, the Combination Agreement, the Stock Purchase Agreement, the Merger Agreement and the Voting Agreement, which are filed as Exhibits 1, 2, 3 and 4 hereto and are incorporated herein by reference. -8- Item 6. Contracts, Arrangement, Understandings or Relationships with Respect to Securities of the Issuer Item 6 is hereby amended and supplemented as follows: PBE has certain rights to be issued without additional consideration, and to purchase, additional shares of Common Stock, which rights are more fully described in response to Items 4 and 5. PBE has also entered into a Voting Agreement, dated December 3, 1998, with Micrion (the "Voting Agreement") pursuant to which PBE has agreed to vote the shares it currently holds or any new shares it subsequently acquires in favor of (a) a proposal to approve and adopt an amendment to the Issuer's Articles of Incorporation to increase the number of authorized shares of the Issuer's Common Stock to allow the issuance of shares contemplated by the Merger Agreement, and (b) a proposal to approve the issuance of shares of the Issuer's Common Stock pursuant to the Merger Agreement and the Stock Purchase Agreement. The Voting Agreement also restricts PBE's ability to voluntarily transfer, sell, offer, pledge or otherwise encumber any of the shares of the Issuer's Common Stock that it currently holds or subsequently acquires, which restriction will cease upon termination of the Voting Agreement. This Item 6 is qualified in its entirety by reference to the Combination Agreement, the Stock Purchase Agreement, the Merger Agreement and the Voting Agreement which are filed as Exhibits 1, 2, 3 and 4 hereto and are incorporated herein by reference. Item 7. Material to be Filed as Exhibits Exhibit Description ------- ----------- 1 Combination Agreement, dated November 15, 1996, by and among Philips Industrial Electronics International B.V., FEI Company and, for the purposes of Sections 4.1, 4.2, 4.3, 4.6(d)(ii), 4.15, 5.8(b), 5.8(c), 5.9(a), 5.13(a), 5.13(d), 5.16, 7.2 and 9.10 only, Philips Electronics N.V. (incorporated -9- herein by reference to Exhibit 1 to the Reporting Persons' Form 8-K with respect to FEI Company filed March 1, 1997. 2 Stock Purchase Agreement, dated December 3, 1998, between Philips Business Electronics International B.V. and the Issuer. 3 Agreement and Plan of Merger, dated December 3, 1998, among the Issuer, Micrion Corporation and MC Acquisition Corporation. 4 Voting Agreement, dated December 3, 1998, between Philips Business Electronics International B.V. and Micrion Corporation. -10- SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: December 8, 1998 KONINKLIJKE PHILIPS ELECTRONICS N.V. By: /s/ Arie Westerlaken -------------------------------- Name: Arie Westerlaken Title: General Secretary SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: December 8, 1998 PHILIPS BUSINESS ELECTRONICS INTERNATIONAL B.V By /s/ Alfred B. Bok --------------------------------- Name: Alfred B. Bok Title: CEO and President By /s/ Theo Sonnemanns --------------------------------- Name: Theo Sonnemans Title: CFO and Vice President Schedule I to Schedule 13D A. MEMBERS OF THE SUPERVISORY BOARD OF KONINKLIJKE PHILIPS ELECTRONICS N.V. (ROYAL PHILIPS ELECTRONICS) Unless otherwise indicated each person listed below is not employed, other than as a member of the Supervisory board, and thus no employer, employer's address or principal place of business of employer is listed. NAME: F.A. MALJERS Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Retired Citizenship: The Netherlands NAME: A. LEYSEN Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Retired Citizenship: Belgium NAME: W. HILGER Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Retired Citizenship: Germany NAME: L.C. VAN WACHEM Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Retired Citizenship: The Netherlands I-1 NAME: C.J. OORT Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Retired Citizenship: The Netherlands NAME: L. SCHWEITZER Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Chairman and Chief Executive Officer of La regie nationale des usines Renault Employer: La regie nationale des usines Renault Employer's Address: 34 Quai du Point du Jour BP 103 92109 Boulogne Bilancourt Cedex, France Principal Business of Employer: Design, manufacture and sale of automobiles and related businesses Citizenship: Swiss NAME: SIR RICHARD GREENBURRY Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Chairman and Chief Executive of Marks & Spencer plc. Employer: Marks & Spencer plc. Employer's Address: Michael House 47 Bakerstreet London W1A 1DN United Kingdom Principal Business of Employer: Citizenship: United Kingdom NAME: IR. W. DE KLEUVER Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Retired Citizenship: The Netherlands I-2 B. BOARD OF MANAGEMENT AND GROUP MANAGEMENT COMMITTEE OF ROYAL PHILIPS ELECTRONICS Unless otherwise indicated, all of the members of the Board of Management and Group Management Committee are employed by Royal Philips Electronics at Rembrandt Tower, Amstelplein 1, 1096 HA Amsterdam, The Netherlands, whose principal business is the manufacture and distribution of electronic and electrical products, systems and equipment. NAME: C. BOONSTRA Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: President, Chairman of the Board of Management and the Group Management Committee Citizenship: The Netherlands NAME: D.G. EUSTACE Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Executive Vice President, Vice Chairman of the Board of Management and the Group Management Committee Citizenship: United Kingdom and Canada NAME: J.H.M. HOMMEN Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Executive Vice-President, Chief Financial Officer and member of the Board of Management and the Group Management Committee Citizenship: The Netherlands NAME: R. PIEPER Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Executive Vice-President, Member of the Board of Management and the Group Management Committee Citizenship: The Netherlands I-3 NAME: J. WHYBROW Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Executive Vice President, Member of the Board of Management and the Group Management Committee and Chairman of the Lighting Division Citizenship: United Kingdom NAME: A.H.A. VEENHOF Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Member of the Group Management Committee and Chairman of the Domestic Appliances and Personal Care Division Citizenship: The Netherlands NAME: Y.C. LO Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Executive Vice President, Member of the Board of Management and the Group Management Committee and Chairman of the Components Division Citizenship: Republic of China NAME: A.P.M. VAN DER POEL Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Executive Vice President, Member of the Board of Management and the Group Management Committee and Chairman of the Semiconductors Division Citizenship: The Netherlands I-4 NAME: A. BAAN Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Executive Vice President, Member of the Board of Management and the Group Management Committee and Chairman of the Business Electronics Division Citizenship: The Netherlands NAME: J.M. BARRELLA Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Member of the Group Management Committee and Chairman of the Medical Systems Division Citizenship: The Netherlands NAME: K. BULTHUIS Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Member of the Group Management Committee and Senior Managing Director of Corporate Research Citizenship: The Netherlands NAME: A. WESTERLAKEN Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Member of the Group Management Committee; General Secretary; Chief Legal Officer; Secretary to the Board of Management Citizenship: The Netherlands NAME: N.J. BRUIJEL Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Member of the Group Management Committee responsible for Corporate Human Resources Management Citizenship: I-5 NAME: A.B. BOK Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Member of the Group Management Committee; Chairman of the Business Electronics Division Citizenship: The Netherlands NAME: J.P. OOSTERVELD Business Address: Royal Philips Electronics Rembrandt Tower Amstelplein 1 1096 HA Amsterdam, The Netherlands Principal Occupation: Member of the Group Management Committee; Senior Director of Corporate Strategy Citizenship: The Netherlands C. DIRECTORS AND EXECUTIVE OFFICERS OF PHILIPS BUSINESS ELECTRONICS INTERNATIONAL B.V. Unless otherwise indicated, all of the directors and executive officers of Philips Business Electronics International B.V. are employed by Philips Business Electronics International B.V. at Building TQ III-2, P.O. Box 218, 5600 MD Eindhoven, The Netherlands, whose principal business is the managing of the Business Electronics Product division of Philips Electronics N.V. through a number of operating companies or business units. NAME: A.B. BOK Business Address: Philips Business Electronics International B.V. Building TQ III-2 P.O. Box 218 5600 MD Eindhoven, The Netherlands Principal Occupation: CEO and President of Philips Business Electronics International B.V. Citizenship: The Netherlands I-6 NAME: T.J.H. SONNEMANS Business Address: Philips Business Electronics International B.V. Building TQ III-2 P.O. Box 218 5600 MD Eindhoven, The Netherlands Principal Occupation: CFO and Vice-President of Philips Business Electronics International B.V. Citizenship: The Netherlands I-7 EX-99.1 2 STOCK PURCHASE AGREEMENT, DATED 12/3/98 ================================================================================ EXECUTION COPY STOCK PURCHASE AGREEMENT BETWEEN PHILIPS BUSINESS ELECTRONICS INTERNATIONAL B.V. AND FEI COMPANY DATED AS OF DECEMBER 3, 1998 ================================================================================ TABLE OF CONTENTS ARTICLE I DEFINITIONS AND TERMS Section 1.1 Specific Definitions.........................................1 Section 1.2 Other Terms..................................................7 Section 1.3 Other Definitional Provisions................................7 ARTICLE II PURCHASE OF COMMON STOCK AND BRIDGE FINANCING Section 2.1 Purchase and Sale of Financing Shares........................7 Section 2.2 Purchase and Sale of Top-Up Shares...........................7 Section 2.3 Notices; Closing; Delivery and Payment.......................8 ARTICLE III REPRESENTATIONS AND WARRANTIES OF FEI Section 3.1 Organization, Good Standing and Qualification................9 Section 3.2 Approval and Fairness........................................9 Section 3.3 No Adverse Consequences......................................9 Section 3.4 Capital Structure; Valid Issuance...........................10 Section 3.5 FEI Reports; Financial Statements...........................10 Section 3.6 Absence of Certain Changes..................................11 Section 3.7 Takeover Statutes...........................................12 Section 3.8 Brokers.....................................................12 Section 3.9 Merger Agreement............................................12 Section 3.10 Other Information..........................................12 Section 3.11 No Other Representations or Warranties.....................12 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PBE Section 4.1 Due Incorporation of PBE....................................13 Section 4.2 No Adverse Consequences.....................................13 Section 4.3 Financing...................................................14 Section 4.4 Securities Act..............................................14 Section 4.5 No Other Representations or Warranties......................14 ARTICLE V COVENANTS Section 5.1 Continuation of Business....................................14 Section 5.2 Information Supplied........................................15 Section 5.3 Shareholders Approval.......................................16 -i- Page ---- Section 5.4 Filings; Other Actions; Notification........................16 Section 5.5 Publicity...................................................17 Section 5.6 Expenses....................................................17 Section 5.7 Takeover Statute............................................17 Section 5.8 Right to Maintain Percentage Interest.......................18 Section 5.9 Use of Proceeds.............................................18 ARTICLE VI CONDITIONS TO THE CLOSING Section 6.1 Conditions to the Obligations of FEI and PBE................18 Section 6.2 Conditions to the Obligations of PBE........................19 Section 6.3 Conditions to the Obligations of FEI........................19 ARTICLE VII SURVIVAL; INDEMNIFICATION Section 7.1 Survival....................................................20 Section 7.2 Reciprocal Indemnification..................................20 Section 7.3 Indemnification Procedures..................................20 Section 7.4 Indemnification Net of Taxes................................22 ARTICLE VIII TERMINATION Section 8.1 Termination.................................................22 Section 8.2 Effect of Termination.......................................23 ARTICLE IX MISCELLANEOUS Section 9.1 Notices.....................................................24 Section 9.2 Amendment; Waiver...........................................25 Section 9.3 Amendment of Merger Agreement...............................25 Section 9.4 Assignment..................................................25 Section 9.5 Entire Agreement............................................25 Section 9.6 Fulfillment of Obligations..................................25 Section 9.7 Parties in Interest.........................................26 Section 9.8 Disclosure Schedules........................................26 Section 9.9 Governing Law; Mediation and Arbitration....................26 Section 9.10 Counterparts...............................................27 Section 9.11 Headings...................................................27 -ii- STOCK PURCHASE AGREEMENT, dated as of December 3, 1998, between FEI COMPANY, an Oregon corporation ("FEI") and PHILIPS BUSINESS ELECTRONICS INTERNATIONAL B.V., a Netherlands corporation ("PBE"). W I T N E S S E T H : WHEREAS, simultaneously herewith, FEI, MC Acquisition Corporation, an Oregon corporation and wholly owned subsidiary of FEI ("FEI Merger Sub"), and Micrion Corporation, a Massachusetts corporation ("Micrion") are entering into the Merger Agreement (as defined herein) and FEI desires to obtain financing for the cash portion of the acquisition of Micrion pursuant to such agreement. As used in this Agreement, the term "FEI" means FEI and its wholly owned direct or indirect subsidiaries and the term "PBE" means PBE and its wholly owned direct or indirect subsidiaries; WHEREAS, PBE desires to provide such financing in the form of a purchase of shares of the common stock of FEI (the "Common Stock"), upon the terms and subject to the conditions hereinafter set forth; and WHEREAS, PBE may desire to purchase shares of the Common Stock in addition to those obtained in connection with such financing in order to maintain its 55% interest in FEI and FEI desires to sell such additional shares to PBE. NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein, and subject to and on the terms and conditions herein set forth, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND TERMS Section 1.1 Specific Definitions. As used in this Agreement, the following terms shall have the meanings set forth or as referenced below: "Adjusted Price" shall mean the average closing price of the Common Stock for the 20 full trading days preceding the Closing Notice Date; provided, that if a Material Adverse Effect occurs or is discovered less than 20 trading days prior to the Closing Notice Date, then the Adjusted Price will be the average closing price of the Common Stock only for those full trading days following the date of such occurrence or discovery of such Material Adverse Effect and preceding the Closing Notice Date. "Affiliate" shall mean, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with, such other Person at any time during the period for which the determination of affiliation is being made; provided, however, for purposes of this agreement FEI and PBE shall not be considered "Affiliates". "Agreement" shall mean this Agreement, as the same may be amended or supplemented from time to time in accordance with the terms hereof. "Announcement Date" shall mean the first full trading day that commences following the announcement that FEI and Micrion have entered into the Merger Agreement; it being understood that such announcement will not be made while the Nasdaq National Market is open for the transaction of business. "board of directors" shall mean any board of directors or other body of persons, including all committees thereof, performing functions equivalent or similar to those performed by a board of directors of a corporation incorporated in one of the states of the United States of America. "Business Day" shall mean any day other than a Saturday or a Sunday or a day on which banks in New York City are authorized or required by law to close. "Claim" shall have the meaning set forth in Section 7.3. "Claim Notice" shall have the meaning set forth in Section 7.3. "Closing" shall have the meaning set forth in Section 2.3(b). "Closing Date" shall have the meaning set forth in Section 2.3(b). "Closing Notice" shall have the meaning set forth in Section 2.3(a). "Closing Notice Date" shall mean the date on which FEI delivers the Closing Notice to PBE. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Common Stock" shall have the meaning set forth in the recitals. "Competition Laws" shall mean statutes, rules, regulations, orders, decrees, administrative and judicial doctrines, and other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade. -2- "Contracts" shall mean (i) any mortgage, note, or other instrument or agreement relating to the borrowing of money or the incurrence of indebtedness by a party or such party's guaranty of any obligation for the borrowing of money; (ii) contracts, agreements, purchase orders, or acknowledgment forms for the purchase, sale, lease or other disposition of a party's equipment, products, materials or capital assets, or for the performance of services; (iii) contracts or agreements for the joint performance of work or services and all other joint venture agreements; (iv) contracts or agreements with agents, brokers, consignees, sales representatives or distributors relating to the sale of a party's products or services; and (v) contracts or agreements relating to the employment or compensation of a party's officers, directors or employees, including without limitation any collective bargaining agreements.. "Control" with respect to any Person shall mean ownership (directly or indirectly) of a majority of total voting power of such Person's voting securities or interests. "Disclosure Schedule" shall mean the disclosure schedule accompanying this Agreement. The Disclosure Schedule shall be deemed to include the FEI Reports filed prior to the date hereof, which are hereby incorporated therein by reference. "Dissenting Stockholders" shall have the meaning assigned thereto in the Merger Agreement. "Effective Time" shall mean the effective time of the Merger. "Encumbrances" shall mean liens (including any liens for Taxes), charges, encumbrances, security interests, options, or any other restrictions or third party rights. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "FEI" shall have the meaning set forth in the preamble. "FEI Merger Sub" shall have the meaning set forth in the recitals. "FEI Option" shall have the meaning set forth in Section 3.4. "FEI Option Plans" shall have the meaning set forth in Section 3.4. "FEI Reports" shall have the meaning set forth in Section 3.5. "FEI'sBusiness" shall mean the business of FEI as conducted or contemplated to be conducted as of the date hereof. "Financing Price" shall have the meaning set forth in Section 2.1. -3- "Financing Shares" shall mean the number of shares of the Common Stock (rounded up to the nearest share) that is equal to: ($6.00 X Micrion Shares Number) + (Transaction Costs) ----------------------------------------------------- Per Share Price "Governmental Authorizations" shall mean all licenses, permits, certificates and other authorizations and approvals required for PBE to perform its obligations under this Agreement, under the applicable laws, ordinances or regulations of any Governmental Entity. "Governmental Entity" shall mean any court, legislature, arbitral tribunal, administrative agency or other governmental or regulatory authority or agency. "Indemnified Parties" shall have the meaning set forth in Section 7.2. "Indemnifying Party" shall have the meaning set forth in Section 7.3. "Losses" shall have the meaning set forth in Section 7.2. "Material Adverse Effect" shall have the meaning set forth in the Introduction to Article III. "Material Pricing Event" shall mean that a Material Adverse Effect on FEI has occurred and that the Adjusted Price is less than 80% of the Per Share Price. "Maximum Number" shall equal (rounded down to the nearest integer) (A) 122.23% of (i) the number of shares of Common Stock issued in the Merger plus (ii) the number of shares of Common Stock issuable upon exercise of options to be issued to former officers or employees of Micrion as part of their Employment Agreements with FEI less (B) the number of Financing Shares issued. "Micrion" shall have the meaning set forth in the recitals. "Micrion Shares Number" shall mean the number of shares of Micrion common stock outstanding immediately before the Effective Time (other than (i) Micrion Shares that are owned by FEI or Merger Sub, (ii) Micrion Shares that are owned by Micrion, in each case (i) and (ii) not held on behalf of third parties, or (iii) Micrion Shares held by Dissenting Stockholders. "Merger" shall mean the merger of Micrion with and into FEI Merger Sub, as more fully set forth in the Merger Agreement. -4- "Merger Agreement" shall mean the Agreement and Plan of Merger, dated as of the date hereof, among FEI, Micrion and FEI Merger Sub. "Named Members" shall mean each of Alfred B. Bok, William E. Curran, Theo J.H.J. Sonnemans and Karel D. van der Mast. "Nasdaq" shall mean the National Association of Securities Dealers Automated Quotation System. "Needham" shall have the meaning set forth in Section 8.3. "Notice Period" shall have the meaning set forth in Section 7.3. "PBE" shall have the meaning set forth in the preamble. "PBE Information" shall have the meaning set forth in Section 5.2(b). "Per Share Price" shall have the meaning set forth in Section 2.1. "Person" shall mean an individual, a corporation, a partnership, an association, a trust or other entity or organization. "Philips" shall mean Royal Philips Electronics N.V. "Philips Group" shall mean Philips and all of its Affiliates, whether consolidated or not. "Pricing Notice" shall have the meaning set forth in Section 2.3(a). "Proxy Statement" shall have the meaning set forth in Section 5.2(a). "Purchase Price" shall mean the aggregate of the Financing Price and the Top-up Price, if any. "Purchased Shares" shall mean the Financing Shares plus, if any, the Top-Up Shares. "Representatives" of a party shall mean, collectively, its employees, agents and representatives (including any investment banker, attorney or accountant retained by it). "Required Approvals" shall have the meaning set forth in Section 6.1(b). "SEC" shall mean the Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended. -5- "Shareholders Meeting" shall have the meaning set forth in Section 5.3. "Stock Right" means any options, warrants, convertible securities or other rights to acquire shares of Common Stock, including without limitation any options issued under the Stock Option Plan other than Stock Rights held by PBE. "Subsidiary" means any entity, whether incorporated or unincorporated, of which at least a majority of the securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other persons performing similar functions is directly or indirectly owned or controlled by such party or by one or more of its respective Subsidiaries and, with respect to FEI, includes, without limitation, FEI Asia, Inc., FEI U.K., Ltd., a United Kingdom corporation, FEI Deutschland GmbH, a German limited liability company, and FEI FSC, Ltd, a United States Virgin Islands corporation. "Takeover Statute" shall have the meaning set forth in Section 3.7. "Taxes" shall mean all federal, state, local, or foreign taxes, charges, fees, levies, or other assessments, including without limitation all net income, gross income, gross receipts, premium, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, production, value added, estimated severance, stamp, occupation, property, or other taxes, fees, assessments, or charges of any kind whatsoever, together with any interest and any penalties (including penalties for failure to file in accordance with applicable information reporting requirements), and additions to tax. "Tax Returns" includes all federal, state, foreign, and other returns, reports, forms, declarations, and information returns required to be filed by a party with respect to Taxes that relate to such party's business, results of operations, financial condition, properties, or assets. "Top-Up Price" shall have the meaning set forth in Section 2.2. "Top-Up Shares" shall have the meaning set forth in Section 2.2. "To the knowledge of" a party or words of similar import shall mean the actual knowledge of any executive officer of that party who has been designated as such in that party's annual report to stockholders and any other officer who has specific managerial authority with respect to the relevant area, in each case after due inquiry. "Transaction Costs" shall mean FEI's transaction costs incurred in connection with the transaction contemplated by this Agreement and the Merger Agreement up to a maximum aggregate amount of $1,000,000. -6- "Unaffected Trading Days" shall have the meaning set forth in Section 2.1. Section 1.2 Other Terms. Other terms may be defined elsewhere in the text of this Agreement and, unless otherwise indicated, shall have such meaning throughout this Agreement. Section 1.3 Other Definitional Provisions. (a) The words "hereof", "herein", and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement. (b) The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa. (c) The terms "dollars" and "$" shall mean United States dollars. ARTICLE II PURCHASE OF COMMON STOCK AND BRIDGE FINANCING Section 2.1 Purchase and Sale of Financing Shares. On the terms and subject to the conditions set forth herein, on the Closing Date (as defined below) FEI agrees to sell to PBE, and PBE agrees to purchase from FEI, the Financing Shares at a price per share of Common Stock in cash equal to the fifteen day average of the closing prices of FEI stock for (i) the nine full trading days preceding the Announcement Date (the "Unaffected Trading Days") and (ii) the six full trading days comprised of the Announcement Date and the five full trading days immediately following the Announcement Date; provided, however, that the price for the Financing Shares shall not exceed 130% of the average of the closing prices on the Unaffected Trading Days (such price per share being the "Per Share Price," and the product of the Financing Shares and the Per Share Price being the "Financing Price"); and provided, further, that if the Pricing Notice asserts that a Material Pricing Event has occurred, the Per Share Price shall equal the Adjusted Price. Section 2.2 Purchase and Sale of Top-Up Shares. On the terms and subject to the conditions set forth herein, FEI agrees that PBE shall have the right, but not the obligation, to purchase for cash on the Closing Date such number of shares of Common Stock as PBE shall specify by written notice to FEI delivered not later than two Business Days prior to the Closing Date at the Per Share Price for each share of Common Stock so purchased (such shares being the "Top-Up Shares", and the product of the number of Top-Up Shares and the Per Share Price being the "Top-Up Price"); provided, that the number of Top-Up Shares purchased pursuant to this Section 2.2 shall not exceed the Maximum Number. -7- Section 2.3 Notices; Closing; Delivery and Payment. (a) Promptly following the determination by FEI that the conditions to the closing of the Merger Agreement and the Stock Purchase Agreement have been satisfied, FEI shall deliver to PBE notice to that effect (the "Closing Notice"). No later than three business days following the Closing Notice Date, PBE shall deliver to FEI notice indicating whether PBE asserts that a Material Pricing Event has occurred (the "Pricing Notice"). If the Closing does not take place within two business days following the delivery by PBE of the Pricing Notice, FEI will deliver another Closing Notice within two business days following delivery of the Pricing Notice. (b) The closing (the "Closing") shall take place at the offices of Stoel Rives LLP, 900 SW Fifth Avenue, Suite 2300, Portland, Oregon 97204 at 5 p.m., Pacific time, on the date that is no later than the third day following the date when the last of the conditions set forth in Article VI have been satisfied or waived (or at such other time and place as the parties hereto may mutually agree). The date on which the Closing occurs is referred herein as the "Closing Date". The Closing hereunder shall be deemed to occur simultaneously with the closing under the Merger Agreement. (c) In a simultaneous transaction on the Closing Date, PBE shall deliver to FEI the Purchase Price, in immediately available funds by wire transfer to an account of FEI at a bank designated by FEI, by notice to PBE, and FEI shall deliver to PBE of certificates representing the Purchased Shares duly issued to PBE and registered in the name of PBE or its designee. ARTICLE III REPRESENTATIONS AND WARRANTIES OF FEI For purposes of the representations and warranties contained in this Article III and Article IV hereof, "Material Adverse Effect" used in connection with a party means any event, change or effect that is materially adverse to the condition (financial or other), properties, assets, liabilities, businesses, operations or results of operations (any one of the foregoing, the "Business") of such party and its subsidiaries taken as a whole; provided, however, that an adverse event, change or effect on the Business of a party that results from any one or more of the following shall not constitute a Material Adverse Effect: (i) changes in laws, regulations or GAAP, (ii) any event, change or effect reasonably determined to have resulted from the announcement of the Merger or the execution of the Merger Agreement, (iii) any decline in the financial markets generally or the semiconductor industry in particular, (iv) in the case of FEI, any event or occurrence of which any of the PBE designees on the FEI board of directors has actual knowledge as of the date hereof or (v) any adverse effect on FEI that is directly related to a corresponding beneficial effect on Micrion. -8- FEI hereby represents and warrants to PBE as of the date hereof and as of the Closing that: Section 3.1 Organization, Good Standing and Qualification. FEI is a corporation legally existing under the laws of the State of Oregon and, except as set forth on Schedule 3.1, is in good standing as a foreign corporation in each jurisdiction where the properties owned, leased or operated, or the business conducted, by it require such qualification, except for such failure to qualify or be in such good standing which, when taken together with all other such failures, is not reasonably likely to have a Material Adverse Effect on FEI. FEI has the full corporate power and authority to enter into this Agreement and carry out its terms. Except for the approval of its stockholders, if required, FEI has taken all corporate action necessary to execute, deliver and perform this Agreement. This Agreement has been duly and validly executed and delivered by FEI and is binding upon and enforceable against FEI in accordance with its terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, reorganization, or other laws of general application relating to or affecting the rights of creditors and except as enforceability may be limited by principles of equity governing specific performance, injunctive relief, or other equitable remedies. Section 3.2 Approval and Fairness. The Board of Directors of FEI (i) has duly approved this Agreement and the transactions contemplated hereby and (ii) received on behalf of FEI the opinion of its financial advisors, Needham & Company, Inc. ("Needham"), to the effect that the Merger Consideration and PBE's purchase of the Purchased Shares are fair to the FEI stockholders (other than PBE, with respect to the purchase of the Purchased Shares) from a financial point of view. An executed copy of such opinion has been delivered to PBE. Section 3.3 No Adverse Consequences. Except as set forth on Schedule 3.3, neither the execution and delivery of this Agreement by FEI nor the consummation of the transactions contemplated by this Agreement will: (a) violate or conflict with any provision of FEI's articles of incorporation or bylaws; (b) violate any law, judgment, order, injunction, decree, rule, regulation, or ruling of any Governmental Entity applicable to FEI, except such as is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FEI; (c) either alone or with or without the giving of notice or the passage of time or both, conflict with, constitute grounds for termination or acceleration of, result in the breach of the terms, conditions, or provisions of, result in the loss of any benefit to FEI under, or constitute a default under any agreement, instrument, license or permit to which FEI is bound, except such as is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FEI; -9- (d) except for applicable requirements, if any, of the Exchange Act, the Securities Act and Blue Sky Laws and (ii) with respect to matters set forth in Schedule 3.3, require any consent, approval or authorization of, permit from, or declaration, filing or registration with, any Governmental Entity, or any other person or entity by FEI, except where the failure to obtain such consent, approval, authorization, permit or declaration or to make such filing or registration is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FEI. Section 3.4 Capital Structure; Valid Issuance. Other than as disclosed in Schedule 3.4, FEI has authorized capital stock consisting of 30,000,000 shares of Common Stock, of which 18,160,808 shares were outstanding on November 25, 1998 and 500,000 shares of preferred stock, none of which is outstanding. Options to purchase 1,493,188 shares of Common Stock were outstanding on October 31, 1998 under grants made pursuant to the 1984 Stock Incentive Plan, the 1995 Stock Incentive Plan and the 1995 Supplemental Stock Incentive Plan (the "FEI Option Plans") and options to purchase 36,100 shares of Common Stock have been granted since October 31, 1998. Schedule 3.4 sets forth a complete list of all options outstanding and the exercise prices and strike prices thereof. All of the outstanding shares of capital stock of FEI have been duly authorized and are validly issued, fully paid and nonassessable, and no shares were issued in violation of preemptive or similar rights of any stockholder or in violation of any applicable securities laws. Except as set forth above, there are no shares of capital stock of FEI authorized, issued or outstanding and, except for options granted pursuant to the FEI Option Plans, there are no preemptive rights or any outstanding subscriptions, options, warrants, rights, convertible securities or other agreements or commitments of FEI of any character relating to the issued or unissued capital stock or other securities of FEI other than rights of PBE to maintain its percentage interest in the issued and outstanding shares of FEI as provided in the Combination Agreement dated November 15, 1996, as amended. There are no outstanding obligations of FEI to repurchase, redeem, or otherwise acquire any of the Purchased Shares. Prior to the Closing Date, upon obtaining the shareholder approval contemplated by Section 5.2 hereof, the Financing Shares will be duly authorized and, when issued, will be validly issued, fully paid and non-assessable. Prior to the Closing Date, FEI will have duly authorized and reserved for issuance 45,000,000 shares of Common Stock, sufficient for the issuance of the Maximum Number of shares issuable to PBE pursuant to this Agreement. Section 3.5 FEI Reports; Financial Statements. FEI has filed with the SEC, and has made available to PBE true and complete copies of, all forms, reports, schedules, statements and other documents required to be filed by it since December 31, 1996 under the Exchange Act or the Securities Act (each of such forms, reports, schedules, statements, and other documents, to the extent filed and publicly available before the date of this Agreement or filed subsequent to the date hereof, other than preliminary filings, is referred to as an "FEI Report"). Each FEI Report, at the time filed complied and, in the case of -10- future filings, will comply in all material respects with the applicable requirements of the Exchange Act or the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder. The consolidated financial statements of FEI included in the FEI Reports comply and, in the case of future filings, will comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been and, in the case of future filings, will be prepared in accordance with U.S. generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of the unaudited statements, to normal, recurring year end audit adjustments) the consolidated financial position of FEI and its subsidiaries as at the dates thereof and the consolidated results of their operations and cash flows for the periods then ended. Section 3.6 Absence of Certain Changes. Except as disclosed in Schedule 3.6 or in any FEI Reports, since September 27, 1998 FEI has conducted its business only in, and has not engaged in any material transactions other than according to, the ordinary and usual course of such business, and there has not been: (a) Any event, occurrence or development which individually or in the aggregate could reasonably be expected to result in a Material Adverse Effect on FEI, other than with respect to market conditions in the semiconductor industry; (b) Any amendment to FEI's Articles of Incorporation or Bylaws or any entry into any material agreement, commitment, or transaction (including, without limitation, any borrowing, capital expenditure or capital financing or any amendment, modification, or termination of any existing agreement, commitment, or transaction) by FEI, except agreements, commitments, or transactions in the ordinary course of business and consistent with past practices or as expressly contemplated in this Agreement; (c) Any direct or indirect declaration, setting aside, or payment of any dividend or other distribution (whether in cash, stock, property, or any combination thereof) in respect of the common stock of FEI, or any direct or indirect repurchase, redemption, or other acquisition by FEI of any shares of its stock, or any change by FEI in its accounting principles, practices or methods; (d) Any issuance or sale of any stock of FEI (other than issuances pursuant to the exercise of options granted pursuant to the FEI Option Plans) or any issuance or granting of any option, warrant, or right to purchase any stock of FEI (other than options granted under the FEI Option Plans and the FEI Employee Share Purchase Plan) or any commitment to do any of the foregoing; -11- (e) Any material purchase or other acquisition of property by FEI, any sale, lease, or other disposition of property by FEI, or any expenditure by FEI, except in the ordinary course of business; (f) Any incurrence of any noncontract liability which, either singly or in the aggregate is material to the business, results of operations or financial condition of FEI; or (g) Any encumbrance or consent to encumbrance of any material property or assets of FEI except in the ordinary course of business. Section 3.7 Takeover Statutes. No "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation (including Sections 60.801 to 60.816 of the Oregon Business Corporation Act) (each a "Takeover Statute") or any applicable anti-takeover provision in FEI's certificate of incorporation and bylaws is, or at the Closing will be, applicable to the transactions contemplated by this Agreement. Section 3.8 Brokers. No broker, investment banker, financial advisor, or other Person, other than Needham, the fees and expenses of which will be paid by FEI, is entitled to any broker's, finder's, financial advisor's, or other similar fee or commission in connection with the transactions contemplated by this Agreement and the Merger Agreement based upon arrangements made by or on behalf of FEI. FEI has disclosed the Terms of Needham's engagement letter to PBE prior to the date hereof. Section 3.9 Merger Agreement. The Merger Agreement has been duly executed and delivered by the duly authorized officers of FEI and FEI Merger Sub, and constitutes a valid and binding obligation of each of FEI and FEI Merger Sub enforceable against FEI and Merger Sub in accordance with its terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, reorganization, or other laws of general application relating to or affecting the rights of creditors and except as enforceability may be limited by principles of equity governing specific performance, injunctive relief, or other equitable remedies. Section 3.10 Other Information. The information furnished by FEI in this Agreement, the Disclosure Schedule and in any certificate executed or delivered pursuant hereto by or on behalf of FEI is not materially false or misleading and does not contain a misstatement of a material fact or omit to state any material fact required to be stated in order to make the statements herein and therein not misleading. Section 3.11 No Other Representations or Warranties. Except for the representations and warranties contained in this Article III, neither FEI nor any other Person makes any other express or implied representation or warranty on behalf of FEI. -12- To the extent that FEI can demonstrate that PBE had actual knowledge, as of the Closing Date, of a fact that would make a representation or warranty of FEI stated herein false, and PBE proceeds to Closing, PBE shall be deemed to have relinquished and released any rights resulting therefrom or relating thereto. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PBE PBE hereby represents and warrants to FEI as of the date hereof and as of the Closing that: Section 4.1 Due Incorporation of PBE. PBE is a private limited liability company that is duly organized and validly existing under the laws of the Netherlands with full corporate power and authority, or similar power and authority, to own and operate its business and properties and to carry on its business as such business is now being conducted and is in good standing as a foreign corporation in each jurisdiction where the properties owned, leased or operated, or the business conducted, by it require such qualification, except for such failure to qualify or be in such good standing which, when taken together with all other such failures, is not reasonably likely to have a Material Adverse Effect on PBE. PBE has full corporate power and authority to enter into this Agreement and carry out its terms. PBE has taken all corporate action necessary to execute, deliver and perform this Agreement. This Agreement has been duly and validly executed and delivered by PBE and is binding and enforceable against PBE in accordance with its terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, reorganization, or other laws of general application relating to or affecting the rights of creditors and except as enforceability may be limited by principles of equity governing specific performance, injunctive relief, or other equitable remedies. Section 4.2 No Adverse Consequences. Except as set forth on Schedule 4.2, neither the execution and delivery of this Agreement by PBE nor the consummation of the transactions contemplated by this Agreement will: (a) violate or conflict with any provision of PBE's articles of incorporation or bylaws; (b) violate any law, judgment, order, injunction, decree, rule, regulation, or ruling of any Governmental Entity applicable to PBE, except such as is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on PBE; (c) either alone or with or without the giving of notice or the passage of time or both, conflict with, constitute grounds for termination or acceleration of, result in the breach of the terms, conditions, or provisions of, result in the loss of any benefit to PBE -13- under, or constitute a default under any agreement, instrument, license or permit to which PBE is bound, except such as is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on PBE; (d) except for applicable requirements, if any, of the Exchange Act, the Securities Act and Blue Sky Laws and (ii) with respect to matters set forth in Schedule 4.2, require any consent, approval or authorization of, permit from, or declaration, filing or registration with, any Governmental Entity, or any other person or entity by PBE, except where the failure to obtain such consent, approval, authorization, permit or declaration or to make such filing or registration is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on PBE. Section 4.3 Financing. PBE has or will have, as and when required, the funds necessary to consummate the transactions contemplated hereby in accordance with the terms hereof. Section 4.4 Securities Act. PBE is acquiring the Purchased Shares for its own account and not with a view to their distribution within the meaning of Section 2(11) of the Securities Act in any manner that would be in violation of the Securities Act. PBE understands each certificate representing the Purchase Shares shall bear legends in the following form: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED." Section 4.5 No Other Representations or Warranties. Except for the representations and warranties contained in this Article IV, neither PBE nor any other Person makes any other express or implied representation or warranty on behalf of PBE. ARTICLE V COVENANTS Section 5.1 Continuation of Business. Except as set forth on Schedule 5.1, without the prior written consent of PBE, from and after the execution date of this -14- Agreement until Closing, FEI will use its commercially reasonable best efforts to carry out the following: (a) operate and maintain its business in its usual manner and in the ordinary course and, to the extent consistent therewith, use its reasonably best efforts to preserve its business organization intact and maintain its existing relations with customers, suppliers, employees and business associates; (b) not declare, pay, or set aside for payment and dividend or other distribution of money or property in respect of its capital stock; (c) not acquire any assets other than assets acquired in the ordinary and usual course of its business and consistent with past practices; and (d) not amend its Articles of Organization or Incorporation or Bylaws, except to increase the number of authorized shares of Common Stock to not more than 45,000,000 shares. Section 5.2 Information Supplied. (a) FEI agrees, as to itself and its Subsidiaries that (i) none of the information, except for such information to be provided by PBE pursuant to Section 5.2(b) below or by Micrion, to be included or incorporated by reference in a Joint Proxy Statement/Prospectus (including any amendments or supplements thereto, the "Proxy Statement"), used in connection with the Shareholders Meeting will, at the time the Proxy Statement is published and mailed to FEI's Shareholders, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (ii) the Proxy Statement will not, at the date of mailing to shareholders and at the times of the Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except to the extent any such untrue statement is provided by PBE pursuant to Section 5.2(b) below or by Micrion or such omission is directly caused by PBE's breach of its covenant in Section 5.2(b) below. (b) PBE agrees to provide to FEI in writing all material information required by Law to be included in the Proxy Statement that cannot reasonably be provided by FEI or its Subsidiaries because such information is exclusively within the control and knowledge of PBE or its Affiliates (such information, the "PBE Information"). PBE agrees, as to itself and its Affiliates, that none of the PBE Information supplied by it for inclusion in the Proxy Statement will, at the time the Proxy Statement is published and mailed to FEI's shareholders, contain any untrue statement of a material fact or omit to state any material -15- fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. PBE further agrees to supply such additional PBE Information to FEI for inclusion in the Proxy Statement if, in light of circumstances occurring subsequent to the time the Proxy Statement is published and mailed, such additional PBE Information is necessary in order that the PBE Information in the Proxy Statement will not, at the time of the Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Section 5.3 Shareholders Approval. Subject to fiduciary obligations under applicable law, FEI will take, in accordance with applicable law and its Articles of Incorporation and by-laws, all action necessary to convene a meeting of holders of its Common Stock (the "Shareholders Meeting") as promptly as practicable to consider and vote upon the issuance of Purchased Shares contemplated thereby. Subject to fiduciary obligations under applicable law, FEI's board of directors shall recommend such approval and shall take all lawful action to solicit such approval. Section 5.4 Filings; Other Actions; Notification. (a) FEI shall promptly prepare and file with the SEC the Proxy Statement, shall promptly respond to any SEC comments thereon and shall, as soon as practicable thereafter, mail the Proxy Statement to the shareholders of FEI. Subsequent to mailing the Proxy Statement, FEI shall promptly amend or supplement the Proxy Statement, if the information in it is required by law to be amended or supplemented or if such an amendment or supplement is otherwise necessary, proper or advisable in light of the terms hereof. FEI shall use its reasonable efforts to obtain all necessary state securities law or "blue sky" permits and approvals required in connection with the transactions contemplated by this Agreement and the Merger Agreement and will pay all expenses incident thereto (except to the extent that Micrion shall pay such expenses pursuant to the Merger Agreement). FEI shall also use its best efforts to comply with all NASD rules applicable to the transactions contemplated hereby and shall use its best efforts to obtain the approvals necessary for the Purchased Shares to be quoted on the Nasdaq National Market. (b) FEI shall cooperate with PBE and use (and shall cause its Affiliates to use) reasonable efforts to take or cause to be taken all actions, and do or cause to be done all things, necessary, proper or advisable under this Agreement and applicable laws to consummate and make effective the transactions contemplated by this Agreement as soon as practicable, including preparing and filing as promptly as practicable all documentation to effect all necessary applications, notices, petitions, filings and other documents and to obtain as promptly as practicable all permits, consents, approvals and authorizations necessary or advisable to be obtained from any third party and/or any Governmental Entity -16- in order to consummate the transactions contemplated by this Agreement and the Merger Agreement. Subject to applicable laws relating to the exchange of information, PBE shall have the right to review in advance all the information relating to FEI and any of its Affiliates, that appear in any filing made with, or written materials submitted to, any third party and/or any Governmental Entity in connection with the transactions contemplated by this Agreement and the Merger Agreement. In exercising the foregoing right, PBE shall act reasonably and as promptly as practicable. (c) PBE shall, upon request by FEI, furnish the other with all information concerning itself and as applicable, its Affiliates, directors, officers and, shareholders and such other matters as may be reasonably necessary or advisable in connection with the Proxy Statement or any other statement, filing, notice or application made by or on behalf of FEI or any of their respective Subsidiaries to any third party and/or any Governmental Entity in connection with the transactions contemplated by this Agreement and the Merger Agreement. (d) FEI shall keep PBE apprised of the status of matters relating to completion of the transactions contemplated by this Agreement and the Merger Agreement, including promptly furnishing PBE with copies of notices or other communications received by FEI or any of its Subsidiaries, from any third party and/or any Governmental Entity with respect to the transactions contemplated by this Agreement. FEI will notify PBE promptly of any fact or occurrence between the date of this Agreement and the Closing Date of which it becomes aware which would make any of the conditions to Closing of this Agreement not capable of being satisfied and of any event, change or effect that has had or is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FEI. Section 5.5 Publicity. FEI shall not issue any press releases or otherwise make public announcements with respect to the transactions contemplated by this Agreement, nor shall FEI make any filings with any third party and/or any Governmental Entity (including any interdealer quotation service) with respect thereto unless FEI first obtains the consent of PBE, except as may be required by law or by obligations pursuant to any listing agreement with, or rules of, the Nasdaq National Market (and then, to the extent feasible, only after notice to and consultation with PBE). Section 5.6 Expenses. FEI shall pay all charges and expenses incurred by it, and PBE shall pay all charges and expenses incurred by it or its Affiliates, in connection with the transactions contemplated by this Agreement. Section 5.7 Takeover Statute. If any Takeover Statute is or may become applicable to the transactions contemplated by this Agreement, FEI and its board of directors shall grant such approvals and take such actions as are necessary so that such transactions may be consummated as promptly as practicable on the terms contemplated -17- by this Agreement and otherwise act to eliminate the effects of such statute or regulation on such transactions. Section 5.8 Right to Maintain Percentage Interest. Nothing in this Agreement shall affect the right of PBE to maintain its percentage interest in FEI in accordance with the terms of the Combination Agreement, dated as of November 15, 1996, between PBE and FEI; provided, however, that if PBE elects to terminate this Agreement pursuant to Section 8.1(h) hereof, the reduction in PBE's percentage ownership of FEI Common Stock resulting from the issuance of the shares of Common Stock in the Merger or upon the exercise of options to be issued to former officers or employees of Micrion as part of their Employment Agreements with FEI shall be considered to have occurred as a result of a sale of FEI Common Stock by PBE for purposes of Section 5.17 of the Combination Agreement. Section 5.9 Use of Proceeds. The Financing Price shall be used by FEI to pay (A) (i) the cash portion of the consideration to be paid to the stockholders of Micrion pursuant to the Merger Agreement and (ii) the Transaction Costs, and (B) the Top-Up Price, if any, shall be used by FEI for working capital. ARTICLE VI CONDITIONS TO THE CLOSING Section 6.1 Conditions to the Obligations of FEI and PBE. The obligations of the parties hereto to effect the Closing are subject to the satisfaction (or waiver) prior to the Closing of the following conditions: (a) Shareholders Approval. At the Shareholders Meeting, the shareholders of FEI shall approve the issuance of Purchased Shares contemplated hereby and by the Merger Agreement; (b) Governmental Authorizations. All filings required to be made prior to the Effect Time with, and all consents, approvals and authorizations required to be obtained prior to the Effective Time from, and Governmental Entities in order to consummate the transactions contemplated by this Agreement, will have been made or obtained, as the case may be, and the waiting period under the HSR Act and any applicable competitions laws of any jurisdiction will have expired or been terminated (collectively, the "Required Approvals"). (c) No Prohibitions. There shall not have been promulgated or issued a law, statute, rule, regulation, decree, order, injunction or ruling by any Governmental Entity that remains in effect and prohibits, restrains or enjoins the consummation of the Merger. -18- (d) Merger Conditions. Prior to the Closing, all of the conditions to the closing of the Merger Agreement shall have been satisfied (it being understood that if FEI has waived satisfaction of any of the conditions set forth in the Merger Agreement this condition shall not be deemed satisfied unless PBE shall have consented to such waiver in writing). (e) Nasdaq Listing. The Purchased Shares shall have been approved for listing on the Nasdaq National Market; and (f) Notices. FEI and PBE shall have complied with Section 2.3(a). Section 6.2 Conditions to the Obligations of PBE. The obligation of PBE to effect the Closing is subject to the satisfaction (or waiver by PBE) prior to the Closing, of the following conditions: (a) Representations and Warranties. The representations and warranties of FEI contained in the following sections of this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date (except to the extent any such representation or warranty expressly speaks of an earlier date): 3.1, 3.2, 3.3, 3.4, 3.5, 3.6(b)-(g), 3.7, 3.8, 3.9 and 3.10; provided, however, that notwithstanding anything herein to the contrary, this Section 6.2 shall be deemed to be satisfied even if such representations or warranties are not so true and correct unless the failure of such representations or warranties to be so true and correct, individually or in the aggregate, has had, or is reasonably likely to have, a Material Adverse Effect on FEI; (b) Covenants. The covenants and agreements of FEI to be performed on or prior to the Closing, shall have been duly performed in all material respects, and PBE shall have received a certificate to such effect dated the Closing Date and executed by a duly authorized officer of FEI; (c) Acquisition Documentation. PBE shall be reasonably satisfied with the Merger Agreement (such satisfaction is hereby confirmed by PBE's execution and delivery of this Agreement); (d) Legal Opinion. PBE shall have received the opinion of Stoel Rives LLP, dated as of the Closing Date, addressed to PBE substantially similar to the opinion by Stoel Rives LLP dated February 21, 1997 and delivered to Philips Industrial Electronics International B.V. in connection with the Combination Agreement, except for paragraphs (9), (10) and (11) of such opinion. -19- Section 6.3 Conditions to the Obligations of FEI. The obligation of FEI to effect the Closing is subject to the satisfaction (or waiver) prior to the Closing of the following condition: Representations and Warranties. The representations and warranties of PBE set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except to the extent any such representation or warranty expressly speaks of an earlier date); provided, however, that notwithstanding anything herein to the contrary, this Section 6.3 shall be deemed to be satisfied even if such representations or warranties are not so true and correct unless the failure of such representations or warranties to be so true and correct, individually or in the aggregate, has had, or is reasonably likely to have, a Material Adverse Effect on PBE. ARTICLE VII SURVIVAL; INDEMNIFICATION Section 7.1 Survival. All of the representations and warranties of FEI contained in this Agreement and all claims and causes of action with respect thereto shall survive the Closing until 30 calendar days after FEI files with the SEC audited financial statements covering an annual period that ends subsequent to the Closing Date. Section 7.2 Reciprocal Indemnification. Each of FEI and PBE hereby agrees that it shall indemnify, defend and hold harmless the other, the other's Affiliates and, if applicable, the other's respective directors, officers, shareholders, partners, agents and employees and their heirs, successors and assigns (each an Indemnified Party and, collectively, the "Indemnified Parties") from, against and in respect of any losses ("Losses") imposed on, sustained, incurred or suffered by or asserted against any of the Indemnified Parties, directly or indirectly relating to or arising out of (i) any breach of any representation or warranty made by it contained in this Agreement, (ii) the breach of any covenant or agreement of it contained in this Agreement and (iii) any claim, litigation, investigation or proceeding relating to this Agreement, the transactions contemplated by this Agreement, or the use of the Purchase Price. Section 7.3 Indemnification Procedures. With respect to third party claims, all claims for indemnification by any Indemnified Party hereunder shall be asserted and resolved as set forth in this Section 7.3. In the event that any claim or demand ("Claim") for which FEI or PBE (as the case may be, the "Indemnifying Party"), may be liable to any Indemnified Party hereunder is asserted against or sought to be collected from any Indemnified Party by a third party, such Indemnified Party shall promptly, but in no event more than 30 days following such Indemnified Party's receipt of written notice of such Claim, notify the Indemnifying Party in writing of such Claim and the amount or the -20- estimated amount thereof to the extent then feasible (which estimate shall not be conclusive of the final amount of such Claim) (the "Claim Notice"). The failure on the part of the Indemnified Party to give any such Claim Notice within such 30 day period shall not relieve the Indemnifying Party of any indemnification obligation hereunder unless, and only to the extent that, the Indemnifying Party is materially prejudiced thereby. The Indemnifying Party shall have 60 days from the personal delivery or mailing of the Claim Notice (the "Notice Period") to notify the Indemnified Party (a) whether or not the Indemnifying Party disputes the liability of the Indemnifying Party to the Indemnified Party hereunder with respect to such Claim and (b) whether or not it desires to defend the Indemnified Party against such Claim. Except as hereinafter provided, in the event that the Indemnifying Party notifies the Indemnified Party within the Notice Period that it desires to defend the Indemnified Party against such Claim, the Indemnifying Party shall, at its sole cost and expense, have the right to defend the Indemnified Party by appropriate proceedings and shall have the sole power to direct and control such defense; provided, that the Indemnifying Party shall not take any action which would result in the creation, and shall promptly seek the removal, of any Encumbrance on the property or assets of the Indemnified Party resulting from such Claim or the litigation thereof. If any Indemnified Party desires to participate in any such defense it may do so at its sole cost and expense. The Indemnified Party shall not settle a Claim for which it is indemnified by the Indemnifying Party without the written consent of the Indemnifying Party unless the Indemnifying Party elects not to defend the Indemnified Party against such Claim. The Indemnifying Party may, with the consent of the Indemnified Party (which consent shall not be unreasonably withheld), settle or compromise any action or consent to the entry of any judgment which (i) includes as a term thereof the delivery by the claimant or plaintiff to the Indemnified Party of a duly executed written unconditional release of the Indemnified Party from all liability in respect of such action, which release shall be reasonably satisfactory in form and substance to counsel for the Indemnified Party and (ii) would not adversely affect the right of the Indemnified Party and its Affiliates to own, hold and use their respective assets or operate businesses. Notwithstanding the foregoing, (i) the Indemnified Party shall have the sole right to defend, settle or compromise any Claim with respect to which it has waived its right to indemnification pursuant to this Agreement and (ii) the Indemnified Party, during the period the Indemnifying Party is determining whether to elect to assume the defense of a matter covered by this section, may take such reasonable actions as it deems necessary to preserve any and all rights with respect to the matter, without such actions being construed as a waiver of the Indemnified Party's rights to defense and indemnification pursuant to this Agreement. If the Indemnifying Party elects not to defend the Indemnified Party against such Claim, whether by not giving the Indemnified Party timely notice as provided above or otherwise, then the amount of any such Claim, or, if the same be contested by the Indemnified Party, then that portion thereof as to which such defense is unsuccessful (and the reasonable costs and expenses pertaining to such defense) shall be the liability of the Indemnifying Party hereunder. To the extent the Indemnifying Party shall direct, control or participate in the defense or settlement of any third party claim or demand, the Indemnified Party will give the Indemnifying Party -21- and its counsel access to, during normal business hours, the relevant business records and other documents, and shall permit them to consult with the employees and counsel of the Indemnified Party. The Indemnified Party shall use its reasonable efforts in the defense of all such claims. Section 7.4 Indemnification Net of Taxes. The amount of any Losses for which indemnification is provided pursuant to this Article VII shall be increased to take account of any net Tax costs incurred by the Indemnified Party (including the present value of any lost net operating loss carryforwards or other tax attributes) arising from the receipt of indemnity payments hereunder (taking into account the effects of such increase). In computing the amount of any such Tax cost, the Indemnified Party shall be deemed to recognize all other items of income, gain, loss, deduction or credit before recognizing any items arising from the receipt of any indemnity payment hereunder. ARTICLE VIII TERMINATION Section 8.1 Termination. This Agreement may be terminated at any time prior to the Closing: (a) by agreement of FEI and PBE; (b) by either FEI or PBE, by giving written notice of such termination to the other party, if the Merger shall not have occurred on or prior to October 31, 1999; (c) by either FEI or PBE in writing, if there shall have occurred any failure of any condition precedent to the Merger and such failure is either not capable of being cured prior to the closing of the Merger, or, if such failure is capable of being cured, is not cured within a reasonable amount of time after notice thereof; (d) by either FEI or PBE in writing, if there shall have occurred any failure of any condition precedent to the obligations of the terminating party to effect the transactions contemplated by this Agreement and such failure is either not capable of being cured prior to the Closing or, if such failure is capable of being cured, is not cured within a reasonable amount of time after notice thereof; provided, however, that neither FEI nor PBE, as the case may be, may terminate this agreement pursuant to this Section 8.1(d) if FEI or PBE, as the case may be, has failed to fully comply with its obligations hereunder in any manner that shall have proximately caused such failure to satisfy any condition precedent; -22- (e) by PBE if FEI has materially breached any representation, warranty, covenant or agreement contained in this Agreement and such breach is either not capable of being cured prior to the Closing or if such breach is capable of being cured, is not so cured within a reasonable amount of time; provided, however, that PBE may not terminate under this provision because of the failure of a representation or warranty of FEI to be true and correct unless such failure, individually or in the aggregate, has had, or is reasonably likely to have, a Material Adverse Effect on FEI; and provided, further, that termination pursuant to this Section 8.1(e) shall not relieve FEI of liability for such breach or otherwise; (f) by FEI if PBE has materially breached any representation, warranty, covenant or agreement made by it in this Agreement and such breach is either not capable of being cured prior to the Closing or if such breach is capable of being cured, is not so cured within a reasonable amount of time; provided, however, that FEI may not terminate under this provision because of the failure of a representation or warranty of PBE to be true and correct unless such failure, individually or in the aggregate, has had, or is reasonably likely to have, a Material Adverse Effect on PBE; and provided, further, that termination pursuant to this Section 8.1(f) shall not relieve PBE of liability for such breach or otherwise; (g) by PBE if FEI's Common Stock is no longer quoted on the Nasdaq National Market System; (h) by PBE if a Material Pricing Event has occurred and the Adjusted Price is less than $5.00 per share; or (i) by PBE pursuant to Section 9.3 hereof. Section 8.2 Effect of Termination. (a) Except as set forth in paragraph (b) below, in the event of the termination of this Agreement in accordance with Section 8.1 hereof, this Agreement shall thereafter become void and have no effect, and no party hereto shall have any liability to the other party hereto or its respective Affiliates, directors, officers or employees, except for the obligations of the parties hereto contained in this Section 8.2 and except that nothing herein will relieve any party from liability for any breach of this Agreement prior to such termination. (b) In the event this Agreement is terminated by PBE pursuant to Section 8.1(e) hereof, FEI shall promptly pay to PBE all of the expenses PBE incurred in connection with this Agreement and the transactions contemplated by this Agreement. -23- ARTICLE IX MISCELLANEOUS Section 9.1 Notices. All notices or other communications hereunder shall be deemed to have been duly given and made if in writing and if served by personal delivery upon the party for whom it is intended, if delivered by registered or certified mail, return receipt requested, or by a national courier service, or if sent by telecopier, provided that the telecopy is promptly confirmed by telephone confirmation thereof, to the person at the address set forth below, or such other address as may be designated in writing hereafter, in the same manner, by such person: To PBE: c/o PHILIPS INTERNATIONAL B.V. Rembrandt Tower Amstelplein 1 1096 HA Amsterdam The Netherlands Telephone: 31-20-597-7236 Telecopy: 31-20-597-7230 Attn: Guido R.C. Dierick With a copy to: SULLIVAN & CROMWELL 125 Broad Street New York, New York 10004 Telephone: 212-558-4000 Telecopy: 212-558-3358 Attn: Alexandra D. Korry To FEI: FEI COMPANY 7451 N.E. Evergreen Parkway Hillsboro, Oregon 97124-5830 Telephone: 503-640-7500 Telecopy: 503-540-7509 Attn: Chief Executive Officer -24- With a copy to: STOEL RIVES LLP 900 S.W. Fifth Avenue, Suite 2600 Portland, Oregon 97204-1268 Telephone: 503-224-3380 Telecopy: 503-220-2480 Attn: Stephen E. Babson Section 9.2 Amendment; Waiver. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by FEI and PBE, or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and, except as otherwise provided herein, shall not be exclusive of any rights or remedies provided by law. Section 9.3 Amendment of Merger Agreement. FEI and PBE hereby agree that the Merger Agreement shall not be amended without the prior written consent of PBE, which consent shall not be unreasonably withheld or delayed. In the event that the Merger Agreement is amended in contravention of the preceding sentence, PBE may terminate this Agreement without penalty three days after it has delivered to FEI written notice of its intention to do so, and PBE shall have no liability to FEI or its Affiliates, directors, officers or employees, notwithstanding any other provision of this Agreement. Section 9.4 Assignment. No party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other party hereto, but PBE may assign all or any portion of its rights and obligations pursuant to this Agreement to any other Person in the Philips Group. Section 9.5 Entire Agreement. This Agreement (including the Disclosure Schedule hereto) contains the entire agreement between the parties hereto, with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters, except that the Combination Agreement shall remain in full force and effect and shall not be amended or modified by the terms hereof. Section 9.6 Fulfillment of Obligations. Any obligation of any party to any other party under this Agreement, which obligation is performed, satisfied or fulfilled by an Affiliate of such party, shall be deemed to have been performed, satisfied or fulfilled by such party. -25- Section 9.7 Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer upon any Person other than PBE or FEI, or their successors or permitted assigns, any rights or remedies under or by reason of this Agreement. Section 9.8 Disclosure Schedules. The disclosure of any matter in the Disclosure Schedule, including any FEI Reports incorporated by reference therein, pursuant to this Agreement shall be deemed to be a disclosure for all purposes of this Agreement to which such matter could reasonably be expected to be pertinent, but shall expressly not be deemed to constitute an admission by FEI or PBE, or to otherwise imply, that any such matter is material for the purposes of this Agreement. Section 9.9 Governing Law; Mediation and Arbitration. (a) The Agreement shall be governed by the laws of the state of New York, without giving effect to principles of conflicts of laws thereof. (b) If a dispute arises out of or relates to this contract, or the breach thereof, and if that dispute cannot be settled through direct discussions, the parties agree to first endeavor to settle the dispute in an amicable manner by mediation administered by the American Arbitration Association under its Commercial Mediation Rules, before resorting to arbitration. Thereafter, any unresolved controversy or claim arising out of or relating to this contract, or breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its International Arbitration Rules and Title 9 of the U.S. Code and PBE hereby consents to the jurisdiction of such arbitration to the extent required. Judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. (c) The number of arbitrators shall be three, one of whom shall be appointed by each of PBE and FEI and the third of whom shall be selected by mutual agreement, if possible, within 30 days of the selection of the second arbitrator and thereafter by the administering authority and the place of arbitration shall be New York, New York. The language of the arbitration shall be English, but documents or testimony may be submitted in Dutch if a translation is provided. (d) The arbitrators will have no authority to award punitive damages or any other damages not measured by the prevailing party's actual damages, and may not, in any event, make any ruling, finding or award that does not conform to the terms and conditions of the Agreement. (e) Either party may make an application to the arbitrators seeking injunctive relief to maintain the status quo until such time as the arbitration award is rendered or the -26- controversy is otherwise resolved. Either party may apply to any court having jurisdiction hereof and seek injunctive relief in order to maintain the status quo until such time as the arbitration award is rendered or the controversy is otherwise resolved. Section 9.10 Counterparts. This Agreement may be executed by the parties on separate counterparts which, when taken together with counterparts signed by each of the other parties, shall constitute a single fully executed Agreement which shall be as fully binding and effective as if each party had executed a single signature page. Section 9.11 Headings. The heading references herein and the table of contents hereto are for convenience purposes only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. -27- IN WITNESS WHEREOF, the parties have executed or caused this Agreement to be executed as of the date first written above. PHILIPS BUSINESS ELECTRONICS INTERNATIONAL B.V. By: ------------------------------- Name: Title: FEI COMPANY By: ------------------------------- Name: Title: -28- EX-99.2 3 AGREEMENT AND PLAN OF MERGER, DATED 12/3/98 AGREEMENT AND PLAN OF MERGER AMONG FEI COMPANY, MICRION CORPORATION, AND MC ACQUISITION CORPORATION DECEMBER 3, 1998 TABLE OF CONTENTS ARTICLE 1. THE MERGER.........................................................1 1.1 The Merger...................................................1 1.2 Stockholders' Meeting; Proxy Statement.......................2 1.3 Effective Time...............................................3 1.4 Effect of Merger.............................................3 1.5 Articles of Organization, Bylaws, Directors and Officers.....3 1.5.1 Articles of Organization and Bylaws..................3 1.5.2 Directors............................................3 1.5.3 Officers.............................................3 1.6 Merger Consideration.........................................4 1.6.1 FEI Stock and Cash...................................4 1.6.2 All Stock............................................4 1.7 Shares of Dissenting Stockholders............................4 1.8 Withholding Tax..............................................5 1.9 Exchange of Certificates for Shares..........................5 1.9.1 Exchange Agent.......................................5 1.9.2 Exchange Procedure...................................5 1.9.3 No Further Ownership Rights in Micrion Common Stock.............................................6 1.9.4 Termination of Exchange Period; Unclaimed Stock......6 1.9.5 Lost, Stolen or Destroyed Certificates...............7 1.9.6 Micrion Stock Options and Warrants...................7 1.10 Closing......................................................7 ARTICLE 2 REPRESENTATIONS AND WARRANTIES.....................................7 2.1 Micrion's Representations and Warranties.....................8 2.1.1 Corporate Existence and Authority....................8 2.1.2 No Adverse Consequences..............................8 2.1.3 Capitalization.......................................9 2.1.4 Subsidiaries and Joint Ventures.....................10 2.1.5 SEC Reports and Financial Statements................10 2.1.6 Information Supplied................................10 2.1.7 Legal Proceedings...................................10 2.1.8 Contracts and Arrangements..........................11 2.1.9 Material Assets.....................................11 2.1.10 Compliance with Laws................................12 2.1.11 Environmental Matters...............................12 2.1.12 Tax Matters.........................................13 2.1.13 Employees and Labor Relations Matters...............14 2.1.14 Employee Benefits...................................15 i 2.1.15 Absence of Certain Changes or Events................16 2.1.16 Undisclosed Liabilities.............................17 2.1.17 Insurance...........................................17 2.1.18 Intellectual Property...............................17 2.1.19 Guaranties; Powers of Attorney......................18 2.1.20 Brokers.............................................18 2.1.21 Opinion of Financial Advisor........................19 2.1.22 Vote Required.......................................19 2.1.23 Rights Agreement....................................19 2.1.24 State Takeover Statutes and Other Takeover Provisions..........................................19 2.1.25 Deferred Compensation Obligations...................19 2.1.26 Product Warranties and Liabilities..................19 2.1.27 Inventories.........................................20 2.1.28 Receivables.........................................20 2.1.29 Year 2000 Compliance................................20 2.1.30 Indebtedness........................................21 2.1.31 No Other Representations or Warranty................21 2.2 FEI's Representations and Warranties........................21 2.2.1 Corporate Existence and Authority...................21 2.2.2 No Adverse Consequences.............................21 2.2.3 Capitalization......................................22 2.2.4 Subsidiaries and Joint Ventures.....................23 2.2.5 SEC Reports and Financial Statements................23 2.2.6 Information Supplied................................23 2.2.7 Legal Proceedings...................................23 2.2.8 Contracts and Arrangements..........................24 2.2.9 Material Assets.....................................24 2.2.10 Compliance with Laws................................24 2.2.11 Environmental Compliance............................24 2.2.12 Tax Matters.........................................25 2.2.13 Employees and Labor Relations Matters...............26 2.2.14 Employee Benefits...................................27 2.2.15 Absence of Certain Changes or Events................27 2.2.16 Undisclosed Liabilities.............................28 2.2.17 Insurance...........................................28 2.2.18 Intellectual Property...............................29 2.2.19 Guaranties; Powers of Attorney......................29 2.2.20 Brokers.............................................29 2.2.21 Opinion of Financial Advisor........................29 2.2.22 Vote Required.......................................30 2.2.23 Year 2000 Compliance................................30 2.2.24 Financing...........................................30 ii 2.2.25 Product Warranties and Liabilities..................30 2.2.26 Inventories.........................................31 2.2.27 Receivables.........................................31 2.2.28 No Other Representations or Warranties..............31 ARTICLE 3 COVENANTS.........................................................31 3.1 Continuation of Business....................................31 3.1.1 Joint Covenants.....................................31 3.1.2 Micrion Covenants...................................32 3.1.3 Closing Notice......................................34 3.2 No Solicitation.............................................34 3.3 Access......................................................35 3.4 Hart Scott Rodino...........................................36 3.5 Other Government Consents...................................36 3.6 Reasonable Best Efforts; No Inconsistent Action.............36 3.7 Changed Circumstances.......................................37 3.8 Fees and Expenses...........................................37 3.9 Rights Agreement............................................37 3.10 Options and Warrants........................................37 3.11 Press Releases..............................................37 3.12 Indemnification; Directors' and Officers' Insurance.........37 3.13 Other Agreements and Related Documents......................39 3.13.1 Stock Option Agreement..............................39 3.13.2 Employment Agreement................................39 3.13.3 Assignment of Patents and Trademarks................39 3.14 FEI Board of Directors......................................39 3.15 Golden Parachutes...........................................39 3.16 Authorized Shares...........................................39 ARTICLE 4 CONDITIONS TO THE PARTIES' OBLIGATIONS TO CONSUMMATE THE MERGER.............................................39 4.1 Mutual Conditions...........................................39 4.1.1 Governmental Authorizations.........................39 4.1.2 Stockholder Approval................................40 4.1.3 No Prohibitions.....................................40 4.1.4 No Suits............................................40 4.1.5 Nasdaq Listing......................................40 4.1.6 Form S-4............................................40 4.1.7 Regulatory Burdens..................................40 4.2 Conditions to Obligations of FEI............................41 4.2.1 Representations and Warranties; Covenants...........41 4.2.2 Dissenting Shares...................................42 4.2.3 Delivery of Exhibits and Micrion Officers' Certificates......................................42 iii 4.3 Conditions to Obligations of Micrion........................42 4.3.1 Representations and Warranties; Covenants...........42 4.3.2 Deposit of Certificates and Funds...................43 4.3.3 Delivery of Certificates by FEI.....................43 ARTICLE 5 TERMINATION .........................................43 5.1 Termination by Mutual Consent...............................43 5.2 Termination by Either Party.................................43 5.3 Termination by Micrion......................................44 5.4 Termination by FEI..........................................44 5.5 Effect of Termination.......................................45 ARTICLE 6 GENERAL PROVISIONS................................................46 6.1 Nonsurvival of Representations and Warranties...............46 6.2 Further Action..............................................46 6.3 Entire Agreement............................................46 6.4 Assignment..................................................47 6.5 Binding Effect; No Third Party Benefit......................47 6.6 Waiver......................................................47 6.7 Governing Law...............................................47 6.8 Severability................................................47 6.9 Time of Essence.............................................47 6.10 Counterparts................................................47 6.11 Amendments..................................................47 6.12 Notices.....................................................48 6.13 Voting Agreements...........................................48 6.14 Schedules...................................................48 iv EXHIBITS AND SCHEDULES EXHIBITS Exhibit A Amendment to Micrion Rights Agreement (Section 2.1.23) Exhibit B 19.9% Stock Option Agreement (Section 3.13.1) Exhibit C Form of Employment Agreement (Section 3.13.2) Exhibit D Assignments of Patents and Trademarks (Section 3.13.3) Exhibit E Voting Agreements (Section 6.13) SCHEDULES Schedule 2.1.2 Micrion Adverse Consequences; Required Consents Schedule 2.1.3 Micrion Options and Warrants Schedule 2.1.4 Micrion Subsidiaries and Joint Ventures Schedule 2.1.7 Micrion Legal Proceedings Schedule 2.1.8 Micrion Contracts and Arrangements Schedule 2.1.9 Micrion Material Assets Schedule 2.1.11 Micrion Environmental Matters Schedule 2.1.12 Micrion Tax Matters Schedule 2.1.13 Micrion Employees and Labor Matters Schedule 2.1.14 Micrion Employee Benefits Schedule 2.1.15 Micrion Changes or Events Schedule 2.1.16 Micrion Liabilities Schedule 2.1.18 Micrion Marks, Patents and Copyrights Schedule 2.1.26 Micrion Products and Warranties Schedule 2.1.28 Micrion Receivables Schedule 2.1.30 Micrion Mask Repair Products Schedule 2.2.2 FEI Adverse Consequences; Required Consents Schedule 2.2.3 FEI Options and Warrants Schedule 2.2.4 FEI Subsidiaries and Joint Ventures Schedule 2.2.7 FEI Legal Proceedings Schedule 2.2.9 FEI Material Assets Schedule 2.2.11 FEI Environmental Matters Schedule 2.2.12 FEI Tax Matters Schedule 2.2.13 FEI Employees and Labor Matters Schedule 2.2.14 FEI Employee Benefits Schedule 2.2.15 FEI Changes or Events Schedule 2.2.16 FEI Liabilities Schedule 2.2.18 FEI Marks, Patents and Copyrights Schedule 2.2.25 FEI Product Warranties Schedule 3.1.1 Business Continuation Schedule 3.1.2 Micrion Covenants Schedule 3.13.12 Micrion Key Employees v INDEX OF DEFINED TERMS The following terms are defined in this Agreement in the sections identified below: Term Definition Section "Agreement" Preamble "Articles of Merger" 1.3 "Blue Sky Laws" 2.1.2(d) "Business" Introduction to Article 2 "Cash Portion" 1.6 "Certificate of Merger" 1.3 "Certificates" 1.9.2 "Closing" and "Closing Date" 1.11 "Code" Section 1.4 "Confidentiality Agreement" 3.2(b) "Contamination" 2.1.11(a) "Contracts" 2.1.8 "Copyrights" 2.1.18(a)(iii) "Costs" 3.12(a) "Dissenting Stockholders" 1.6 "Dissenting Shares" 1.7 "DOJ" 3.4 "Effective Time" 1.3 "Environmental Law" 2.1.11(a) "Equitable Adjustment" 1.6.1 "ERISA" 2.1.14 "Exchange Act" 2.1.2(d) "Exchange Agent" 1.9.1 "FEI" Recital A "FEI Board" Recital A "FEI Expenses" 5.5.2 "FEI Stock Plans" 2.2.3 "FEI Returns" 2.2.12(a) "FEI SEC Documents" 2.2.5 "FEI Stockholders Meeting" 1.2(a) "Form S-4" 1.2(a) "FTC" 3.4 "GAAP" 2.1.5 "Governmental Entity" 2.1.2(b) "Hazardous Substance" 2.1.11(a) "HSR Act" 2.1.2(d) vi "Indebtedness" 2.1.30 "Indemnified Parties" 3.12(a) "Intellectual Property Assets" 2.1.18(a) "Licenses" 2.1.10 "Marks" 2.1.18(a)(i) "Material Adverse Effect" Introduction to Article 2 "Micrion" Recital A "Micrion Board" Recital A "Micrion Compensation and Benefit Plans"2.1.14 "Micrion Returns" 2.1.12(a) "Micrion SEC Document" 2.1.5 "Micrion Share," "Micrion Shares" 1.6 "Micrion Stock Plans" 2.1.3 "Micrion Stockholders Meeting" 1.2(a) "Merger" Recitals "Merger Consideration" 1.6.2 "MBCL" Recital B "Needham" 2.2.20 "OBCA" Recital B "Patents" 2.1.18(a)(ii) "Person" 1.9.4 "Philips" 2.2.3 "Philips Additional Shares Right" 2.2.3 "Pre-Closing Average Price" 1.6.2 "Proxy Statement" 1.2(b) "Representatives" 3.2 "Required Approvals" 4.1.1 "Right," "Rights" 1.6 "Rights Agreement" 1.6 "SEC" 1.2(b) "Securities Act" 1.2(b) "To the knowledge of" Introduction to Article 2 "Stock Option Agreement" Recital C "Stock Purchase Agreement" 2.2.28 "Sub" Preamble "Superior Proposal" 3.2 "Surviving Corporation" 1.4 "Taxes" 2.1.12(e) "Takeover Proposal" 3.2 "Termination Fee" 5.5.2 "Warrants" 2.1.3 "WDR" 2.1.20 "Year 2000 compliant" 2.1.26 vii AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER made as of December 3, 1998 (the "Agreement") is among FEI COMPANY, an Oregon corporation ("FEI"), MICRION CORPORATION, a Massachusetts corporation ("Micrion"), and MC ACQUISITION CORPORATION, an Oregon corporation and wholly-owned subsidiary of FEI ("Sub"). RECITALS A. The Boards of Directors of FEI and Micrion (respectively, the "FEI Board" and the "Micrion Board") have determined that it is advisable and in the best interests of their respective shareholders to enter into a business combination as described in this Agreement. As used in this Agreement, the term "FEI" means FEI Company and its wholly owned direct or indirect subsidiaries and the term "Micrion" means Micrion and its wholly owned direct or indirect subsidiaries. B. In furtherance of such combination it is proposed that Micrion merge with and into Sub pursuant to the applicable provisions of the Oregon Business Corporation Act (the "OBCA") and the Massachusetts Business Corporation Law (the "MBCL") and the terms and conditions of this Agreement (the "Merger"). C. To induce FEI to enter into this Agreement, Micrion will enter into a Stock Option Agreement with FEI (the "19.9% Stock Option Agreement"), pursuant to which Micrion will grant to FEI an option to purchase Micrion Shares (as hereinafter defined) pursuant to the terms and conditions set forth in the Option Agreement. AGREEMENT NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants, agreements and conditions contained in this Agreement and in the Stock Option Agreement, the parties agree as follows: ARTICLE 1 THE MERGER 1.1 THE MERGER. Pursuant to the OBCA and the MBCL and subject to and in accordance with the terms and conditions of this Agreement as soon as practicable following the satisfaction or waiver of the conditions set forth in Article 4 of this Agreement, Micrion will merged with and into Sub or, as specified in Section 1.4, Sub will be merged with and into Micrion. 1.2 STOCKHOLDERS' MEETING; PROXY STATEMENT. (a) Micrion will take, in accordance with Massachusetts law and Micrion's Articles of Organization and Bylaws, all action necessary to convene a meeting of its stockholders (the "Micrion Stockholders Meeting") as promptly as practicable after the Form S-4 (hereinafter defined) is declared effective to consider and vote upon approval of this Agreement. FEI will take, in accordance with Oregon law and its Articles of Incorporation and Bylaws, all action necessary to convene a meeting of its stockholders (the "FEI Stockholders Meeting," and either the FEI Stockholders Meeting or the Micrion Stockholders Meeting, a "Stockholders Meeting") as promptly as practicable after the Form S-4 is declared effective to consider and vote upon the approval of the issuance of FEI Common Stock to be issued in connection with the transactions contemplated hereby. Except to the extent the Micrion Board determines in good faith, after receipt of written advice from outside legal counsel experienced in such matters, that such action is incompatible with compliance by its directors with their respective fiduciary duties under applicable law, the Micrion Board shall unanimously recommend that the stockholders of Micrion approve this Agreement and thereby approve the transactions contemplated hereby, shall take all lawful action to solicit such approval and shall not withdraw or modify such recommendation, and the FEI Board shall recommend that the stockholders of FEI approve the issuance of FEI Common Stock to be issued in connection with the transactions contemplated hereby and shall take all lawful action to solicit such approval. (b) FEI and Micrion will promptly prepare and file with the Securities and Exchange Commission (the "SEC") a Joint Proxy Statement/Prospectus (including any amendments or supplements thereto, the "Proxy Statement"), and FEI shall prepare and file with the SEC a Registration Statement on Form S-4 in connection with the issuance of shares of FEI Common Stock in the Merger (including any amendments or supplements thereto, the "Form S-4") as promptly as practicable. FEI and Micrion each shall use all reasonable best efforts to have the Form S-4 declared effective under the Securities Act of 1933, as amended (the "Securities Act") as promptly as practicable after such filing, and promptly thereafter mail the Form S-4 and Proxy Statement to their respective stockholders. FEI shall also use all reasonable best efforts to obtain prior to the effective date of the Form S-4 all necessary state securities law or "blue sky" permits and approvals required in connection with the Merger and to consummate the other transactions contemplated by this Agreement and will pay all expenses incident thereto. (c) If at any time prior to the Effective Time any information relating to Micrion or FEI or any of their respective officers or directors, should be discovered by Micrion or FEI, respectively, which should be set forth in an amendment or supplement to any of the Form S-4 or the Proxy Statement, so that any of such documents would not include a misstatement of material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not 2 misleading, Micrion or FEI, as the case may be, shall promptly notify the other parties hereto and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and, to the extent required by law, disseminated to the stockholders of Micrion and FEI. 1.3 EFFECTIVE TIME. As soon as practicable following Closing of the Merger, Articles of Merger prepared in accordance with the applicable provisions of the OBCA and the MBCL (the "Articles of Merger") will be executed and filed with the State Secretary of the State of Oregon and the Commonwealth of Massachusetts. The Merger will be effective upon the later of the time when Articles of Merger are duly filed with the State Secretary of the Commonwealth of Massachusetts and the time when Articles of Merger are duly filed with the State Secretary of the State of Oregon, or at such other time as the parties may agree upon in writing pursuant to applicable law (the "Effective Time"). 1.4 EFFECT OF MERGER. At the Effective Time, Micrion will be merged with and into Sub in the manner and with the effect provided by the OBCA and the MBCL, the separate corporate existence of Micrion will cease and thereupon Sub and Micrion will be a single corporation (the "Surviving Corporation") and will be a wholly owned subsidiary of FEI governed by the laws of the State of Oregon. The parties will use reasonable efforts to cause the Merger to qualify as a reorganization under Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended (the "Code"); provided, however, that if (i) the Merger Consideration consists of FEI Common Stock and cash pursuant to Section 1.6.1 and the closing sale price per share of the FEI Common Stock on the Closing Date is not equal to or greater than 40 percent of the sum of such closing sale price plus the Cash Portion, as defined in Section 1.6 below or (ii) if the Merger Consideration consists solely of shares of FEI Common Stock pursuant to Section 1.6.2, then Sub will be merged with and into Micrion in the manner and with the effect provided by the OBCA and the MBCL, the separate corporate existence of Sub will cease and thereupon Sub and Micrion will be the Surviving Corporation and will be a wholly owned subsidiary of FEI governed by the laws of the Commonwealth of Massachusetts. 1.5 ARTICLES OF ORGANIZATION, BYLAWS, DIRECTORS AND OFFICERS. 1.5.1 ARTICLES OF ORGANIZATION AND BYLAWS. The Articles of Incorporation and Bylaws of Sub as in effect at the Effective Time will be the Articles of Incorporation and Bylaws of the Surviving Corporation. 1.5.2 DIRECTORS. The directors of Sub at the Effective Time will be the directors of the Surviving Corporation, until their successors have been duly elected or appointed and qualified or until their earlier death, resignation, or removal in accordance with the Surviving Corporation's Articles of Incorporation and Bylaws. 1.5.3 OFFICERS. The officers of Sub at the Effective Time will be the officers of the Surviving Corporation in accordance with the Bylaws of the Surviving Corporation. 3 1.6 MERGER CONSIDERATION. 1.6.1 FEI COMMON STOCK AND CASH. Each share of Micrion Common Stock, no par value, of Micrion (each a "Micrion Share" and collectively, the "Micrion Shares") and the associated stock right (each a "Right" and collectively, the "Rights") issued pursuant to the Rights Agreement dated July 30, 1997, as amended, between Micrion and BankBoston, N.A. (the "Rights Agreement") and outstanding immediately before the Effective Time (other than (i) Micrion Shares that are owned by FEI or Sub, (ii) Micrion Shares that are owned by Micrion, in each case (i) and (ii) not held on behalf of third parties, or (iii) Micrion Shares held by stockholders ("Dissenting Stockholders") exercising appraisal rights pursuant to Sections 85 to 98 of the MBCL (collectively, "Excluded Micrion Shares")) will be converted into the right to receive (A) one share of FEI Common Stock, subject to equitable adjustment in the event of a stock split, combination, stock dividend or similar reclassification of FEI Common Stock or Micrion Common Stock occurring prior to the Closing Date ("Equitable Adjustment") and (B) subject to adjustment as provided in Section 4.2.1, $6.00 in cash, without interest (the "Cash Portion"). 1.6.2 ALL STOCK. Notwithstanding the foregoing provisions of Section 1.6.1, if the Stock Purchase Agreement, as defined in Section 2.2.24, is terminated prior to Closing, each Micrion Share and the associated Rights outstanding immediately before the Effective Time, other than the Excluded Micrion Shares, will be converted into the right to receive (A) one share of FEI Common Stock plus (B) such number of shares of FEI Common Stock, which, when multiplied by the Pre-Closing Average Price, as defined below, equals $6.00, subject to Equitable Adjustment and subject to adjustment as provided in Section 4.2.1. The aggregate number of shares of FEI Common Stock to be issued to each Micrion stockholder will be rounded to the nearest whole share. The "Pre-Closing Average Price" is the average closing price of FEI Common Stock for the 20 full trading days preceding the date that FEI provides notice to Philips pursuant to the Stock Purchase Agreement, that all conditions to Closing of this Agreement specified in Article IV have been satisfied or waived; provided that if a Material Adverse Effect, as defined in the Stock Purchase Agreement, occurs or is discovered less than 20 trading days prior to the Closing Notice Date, then the Pre-Closing Average Price will be the average closing price of FEI Common Stock only for those full trading days following the date of such Material Adverse Effect, as defined in the Stock Purchase Agreement, through and including the Closing Notice Date. "Merger Consideration" means either the shares of FEI Common Stock plus the Cash Portion to be received by the Micrion stockholders pursuant to Section 1.6.1 or the shares of FEI Common Stock to be received by the Micrion stockholders pursuant to Section 1.6.2. 1.7 SHARES OF DISSENTING STOCKHOLDERS. Notwithstanding anything in this Agreement to the contrary, any issued and outstanding Micrion Shares (and associated Rights) held by any Dissenting Stockholder who has not voted such Micrion Shares in favor of or consented to the Merger and who complies with all the provisions of Sections 85 to 98 of the MBCL concerning the right of holders of Micrion Shares to dissent from the Merger and require appraisal of their 4 Micrion Shares ("Dissenting Shares") will not be converted as described in Section 1.6 but will become the right to receive such consideration as may be determined to be due to such Dissenting Stockholder pursuant to such provisions of the MBCL. If, after the Effective Time, such Dissenting Stockholder withdraws his or her demand for appraisal or fails to perfect or otherwise loses his or her right of appraisal, in any case pursuant to the MBCL, his or her Micrion Shares will be deemed to be converted as of the Effective Time into the right to receive the Merger Consideration. Micrion will give FEI (i) prompt notice of any demands received by Micrion for appraisal of Micrion Shares and (ii) the opportunity to participate in and direct all negotiations and proceedings with respect to any such demands. Micrion will not, without the prior written consent of FEI, make any payment with respect to, or settle, offer to settle, or otherwise negotiate, any such demands. 1.8 WITHHOLDING TAX. The right of any stockholder to receive the Merger Consideration will be subject to and reduced by the amount of any required tax withholding obligation. 1.9 EXCHANGE OF CERTIFICATES FOR SHARES. 1.9.1 EXCHANGE AGENT. Prior to the Effective Time, FEI shall designate an Exchange Agent selected by FEI with Micrion's prior approval, which shall not be unreasonably withheld (the "Exchange Agent"), and before the Effective Time, FEI will make available, or cause the Surviving Corporation to make available, to the Exchange Agent shares of FEI Common Stock and (if the Merger Consideration is FEI Common Stock and cash pursuant to Section 1.6.1.) funds in amounts and at the times necessary for delivery of the Merger Consideration upon surrender of certificates representing Micrion Shares as part of the Merger pursuant to Section 1.6. The Exchange Agent shall invest such funds, as directed by FEI, in (a) direct obligations of the United States of America, (b) obligations for which the full faith and credit of the United States of America is pledged to provide for the payment of principal and interest or (c) commercial paper rated, at the time of purchase, in either of the two highest categories by Moody's Investors Services, Inc. or Standard & Poor's Corporation, it being understood that any and all interest earned on funds made available to the Exchange Agent pursuant to this Agreement will be turned over to FEI. In the event the funds deposited with the Exchange Agent shall realize a loss on any such investment, FEI shall promptly thereafter deposit in such fund cash in an amount sufficient to enable such fund to satisfy all remaining obligations originally contemplated to be paid out of such fund. 1.9.2 EXCHANGE PROCEDURE. As soon as reasonably practicable after the Effective Time, the Exchange Agent will mail to each holder of record of a certificate or certificates (the "Certificates") that immediately before the Effective Time represented Micrion Shares (other than holders of record of Excluded Micrion Shares), (i) a notice (advising the holders that the Merger has become effective) and a letter of transmittal specifying that delivery will be effected, and that risk of loss and title to the Certificates will pass, only upon proper delivery of the Certificates to the Exchange Agent and (ii) instructions for exchanging the Certificates (or affidavits in lieu 5 thereof) for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by FEI, together with such letter of transmittal, properly completed and duly executed, and such other customary documents as may reasonably be required by the Exchange Agent, the holder of such Certificate will be entitled to receive in exchange therefor the Merger Consideration for each Micrion Share represented thereby, and the Certificate so surrendered will be canceled. In the event of a transfer of ownership of Micrion Shares that is not registered in the transfer records of Micrion, payment may be made to a Person (as defined in Section 1.9.4 below) other than the Person in whose name the Certificate so surrendered is registered, if such Certificate is properly endorsed or otherwise is in proper form for transfer and the Person requesting such payment pays any transfer or other taxes required by reason of the payment to a Person other than the registered holder of such Certificate or establishes to the satisfaction of FEI that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 1.9.1, each Certificate will be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration for each Micrion Share represented thereby. No interest will be paid or will accrue on any cash payable upon the surrender of any Certificate. 1.9.3 NO FURTHER OWNERSHIP RIGHTS IN MICRION COMMON STOCK. The Merger Consideration delivered upon the surrender of Certificates in accordance with the terms of Section 1.9.2 will be deemed to have been delivered in full satisfaction of all rights pertaining to the Micrion Shares theretofore represented by such Certificates. At the Effective Time, the stock transfer books of Micrion will be closed, and there will be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Micrion Shares that were outstanding immediately before the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Exchange Agent for any reason, they will be canceled and exchanged as provided in Section 1.9.2. 1.9.4 TERMINATION OF EXCHANGE PERIOD; UNCLAIMED STOCK. Any shares of FEI Common Stock and any portion of any cash, dividends or other distributions with respect to FEI Common Stock deposited by FEI with the Exchange Agent (including the proceeds of any investments thereof) that remain unclaimed by the stockholders of Micrion 270 days after the Effective Time shall be paid to FEI. Any stockholders of Micrion who have not theretofore surrendered their shares shall thereafter look only to FEI for payment of their shares of FEI Common Stock and any cash, dividends and other distributions in respect thereof issuable and/or payable pursuant to this Section 1.9 upon due surrender of (i) their Certificates (or affidavits of loss in lieu thereof) or (ii) delivery of duly executed letters of transmittal, as the case may be, in each case with respect to both clause (i) and (ii), without any interest thereon. None of FEI, Sub, Micrion or the Exchange Agent will be liable to any Person in respect of any cash delivered to a public official pursuant to any applicable abandoned property, escheat, or similar law. As used in this Agreement, the term "Person" means any individual, corporation, general partnership, limited partnership, limited liability company, joint venture, trust, cooperative or other association, Governmental Entity (as defined in Section 2.1.2(b) below), or any other organization. 6 1.9.5 LOST, STOLEN OR DESTROYED CERTIFICATES. If any Certificate has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed, Micrion will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration deliverable in respect thereof as determined in accordance with this Agreement; provided, however, that Micrion may, in its sole discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificate to give Micrion a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Micrion with respect to the certificate alleged to have been lost, stolen or destroyed. 1.9.6 MICRION STOCK OPTIONS AND WARRANTS. At the Effective Time, each then outstanding option and warrant to purchase Micrion Common Stock, whether or not then exercisable or vested in accordance with its terms (each, a "Micrion Option") which theretofore has been granted under the Micrion Stock Plans, shall be terminated. Any and all rights under any provisions of the Micrion Stock Plans or any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of Micrion shall be canceled as of the Effective Time. Prior to the Effective Time, the Board of Directors of Micrion (or, if appropriate, any committee thereof) and Micrion shall take all action necessary to terminate all Micrion Stock Plans and any other plan, program or arrangement with respect to, including any right to acquire, equity securities of Micrion and to ensure that no Person shall have any right under any of the Micrion Stock Plans (or any Micrion option, warrant or other right to acquire equity securities of Micrion granted thereunder) following the Effective Time other than the 19.9% Stock Option Agreement attached hereto as Exhibit B. 1.10 CLOSING. Unless this Agreement has been terminated and the transactions contemplated by it have been abandoned pursuant to Article 5, the closing of the Merger (the "Closing") will take place at the offices of Stoel Rives LLP, 900 SW Fifth Avenue, Suite 2600, Portland, Oregon 97204, at 5:00 p.m., Pacific time, on the date that is not later than the sixth business day following the date when the last of the conditions set forth in Article 5 hereof (other than conditions that by their terms are to occur at Closing) will have been satisfied or waived in accordance with this Agreement, or at such other time and date as FEI and Micrion may agree in writing (the "Closing Date"). ARTICLE 2 REPRESENTATIONS AND WARRANTIES For purposes of the representations and warranties contained in this Article 2, the following terms have the following meanings: "Material Adverse Effect" used in connection with a party means any event, change or effect that is materially adverse to the condition (financial or other), properties, assets, liabilities, businesses, operations or results of operations (any one of the foregoing, the "Business") of such party and 7 its subsidiaries taken as a whole; provided, however, that an adverse event, change or effect on the Business of a party that results from any one or more of the following shall not constitute a Material Adverse Effect: (i) reductions or cancellations in orders for FIB systems; (ii) delays in shipments by Micrion of products containing both an ion and electron column due to delays or interruptions in the supply of electron columns; or (iii) changes in laws, regulations or GAAP. "To the knowledge of" a party or words of similar import mean the actual knowledge of any executive officer of that party who has been designated as such in that party's annual report to stockholders (or his or her successor) and any other officer who has specific managerial authority with respect to the relevant area, in each case after due inquiry. 2.1 MICRION'S REPRESENTATIONS AND WARRANTIES. Micrion represents and warrants to FEI as follows: 2.1.1 CORPORATE EXISTENCE AND AUTHORITY. Micrion is a corporation duly organized, validly existing and in good standing under the laws of The Commonwealth of Massachusetts and is in good standing as a foreign corporation in each jurisdiction where the properties owned, leased or operated, or the business conducted, by it require such qualification, except for such failures to qualify or be in such good standing which, when taken together with all other such failures, is not reasonably likely to have a Material Adverse Effect on Micrion. Micrion has the full corporate power and authority to enter into this Agreement and carry out its terms. Except for the approval of its stockholders, Micrion has taken all corporate action necessary to execute, deliver and perform this Agreement. This Agreement has been duly and validly executed and delivered by Micrion and is binding upon and enforceable against Micrion in accordance with its terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, reorganization, or other laws of general application relating to or affecting the rights of creditors and except as enforceability may be limited by principles of equity governing specific performance, injunctive relief, or other equitable remedies. 2.1.2 NO ADVERSE CONSEQUENCES. Except as set forth on Schedule 2.1.2, neither the execution and delivery of this Agreement by Micrion nor the consummation of the transactions contemplated by this Agreement will: (a) violate or conflict with any provision of Micrion's articles of organization or bylaws; (b) violate any law, judgment, order, injunction, decree, rule, regulation, or ruling of any court, legislature, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency (a "Governmental Entity") applicable to Micrion, except such as is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Micrion; 8 (c) either alone or with the giving of notice or the passage of time or both, conflict with, constitute grounds for termination or acceleration of, result in the breach of the terms, conditions, or provisions of, result in the loss of any benefit to Micrion under, or constitute a default under any agreement, instrument, license, or permit to which Micrion is a party or by which it is bound, except such as is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Micrion; or (d) except (i) for applicable requirements, if any, of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Securities Act and state securities or "blue sky" laws ("Blue Sky Laws"), (ii) for the pre-merger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the "HSR Act"), (iii) for the filing of Articles of Merger pursuant to the OBCA and the MBCL, and (iv) with respect to matters set forth in Schedule 2.1.2, require any consent, approval or authorization of, permit from, or declaration, filing or registration with, any governmental or regulatory authority, or any other person or entity by Micrion, except where the failure to obtain such consent, approval, authorization, permit or declaration or to make such filing or registration is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Micrion. 2.1.3 CAPITALIZATION. Micrion has authorized capital stock consisting of 12,300,000 shares of Micrion Common Stock, of which 4,074,397 shares were outstanding on November 23, 1998 and 5,000,000 shares of preferred stock, no par value, none of which is outstanding. Options to purchase 870,815 shares were outstanding on October 31, 1998 under grants made pursuant to the Micrion Stock Plans and no stock options have been granted since October 31, 1998. "Micrion Stock Plans" means, collectively, Micrion's 1986 Incentive Stock Plan, 1990 Nonqualified Stock Option Plan, 1993 Common Stock Incentive Plan, 1994 Amended and Restated Omnibus Stock Option Plan, 1994 Stock Purchase Plan and 1994 Non-Employee Director Stock Option Plan, each as amended or modified. Warrants to purchase 100,000 shares were outstanding on November 23, 1998. Schedule 2.1.3 sets forth a complete list of all options and warrants outstanding and the exercise prices and strike prices thereof. All of the outstanding shares of capital stock of Micrion have been duly authorized and are validly issued, fully paid and nonassessable, and no shares were issued in violation of preemptive or similar rights of any stockholder or in violation of any applicable securities laws. Except as set forth above, other than shares reserved for issuance pursuant to the Stock Option Agreement, there are no shares of capital stock of Micrion authorized, issued or outstanding and, except for options granted pursuant to the Micrion Stock Plans and the Rights and the Warrants, there are no preemptive rights or any outstanding subscriptions, options, warrants, rights, convertible securities or other agreements or commitments of Micrion of any character relating to the issued or unissued capital stock or other securities of Micrion. There are no outstanding obligations of Micrion to repurchase, redeem, or otherwise acquire any of the Micrion Shares. 9 2.1.4 SUBSIDIARIES AND JOINT VENTURES. Except as disclosed on Schedule 2.1.4, Micrion has no subsidiaries and owns no stock or other interest in any other corporation or in any partnership or limited liability company or other venture or entity. Each subsidiary of Micrion is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation, except where the failure to do so would not have a Material Adverse Effect on Micrion. 2.1.5 SEC REPORTS AND FINANCIAL STATEMENTS. Micrion has filed with the SEC, and has made available to FEI true and complete copies of, all forms, reports, schedules, statements and other documents required to be filed by it since June 30, 1996 under the Exchange Act or the Securities Act (each of such forms, reports, schedules, statements, and other documents, to the extent filed and publicly available before the date of this Agreement or filed subsequent to the date hereof, other than preliminary filings, is referred to as a "Micrion SEC Document"). Each Micrion SEC Document at the time filed complied and, in the case of future filings, will comply in all material respects with the applicable requirements of the Exchange Act or the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder. The consolidated financial statements of Micrion included in the Micrion SEC Documents comply and, in the case of future filings, will comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been and, in the case of future filings, will be prepared in accordance with U.S. generally accepted accounting principles ("GAAP") applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of the unaudited statements, to normal, recurring year end audit adjustments) the consolidated financial position of Micrion and its subsidiaries as at the dates thereof and the consolidated results of their operations and cash flows for the periods then ended. 2.1.6 INFORMATION SUPPLIED. None of the information supplied or to be supplied by or on behalf of Micrion specifically for inclusion or incorporation by reference in the Form S-4 or the Proxy Statement contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder. 2.1.7 LEGAL PROCEEDINGS. Except as disclosed in Schedule 2.1.7, there is neither pending nor, to the knowledge of Micrion, threatened by or against Micrion any legal action, claim, arbitration, investigation, or proceeding that could (i) have a Material Adverse Effect on Micrion following the Closing; or (ii) enjoin, delay or restrict the right or ability of Micrion to perform its obligations under this Agreement and, to the knowledge of Micrion, there is no basis for any such claim, litigation, proceeding, or investigation. 10 2.1.8 CONTRACTS AND ARRANGEMENTS. (a) Schedule 2.1.8, which is organized by type of agreement, contains a complete and accurate list of all agreements of the following types to which Micrion is a party or by which it is bound and which are material to Micrion (the "Contracts"): (i) any mortgage, note or other instrument or agreement relating to the borrowing of money or the incurrence of indebtedness by Micrion or Micrion's guaranty of any obligation for the borrowing of money; (ii) contracts, agreements, purchase orders, or acknowledgment forms for the purchase, sale, lease or other disposition of Micrion's equipment, products, materials, or capital assets, or for the performance of services; (iii) contracts or agreements for the joint performance of work or services and all other joint venture agreements; (iv) contracts or agreements with agents, brokers, consignees, sales representatives, or distributors relating to the sale of Micrion's products or services; and (v) contracts or agreements relating to the employment or compensation of any Micrion Entity's officers, directors, or employees, including without limitation any collective bargaining agreements. (b) Each of the Contracts has been duly and validly executed and delivered by Micrion and is binding upon and enforceable by and against Micrion in accordance with its terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, reorganization, or other laws of general application relating to or affecting the rights of creditors and except as enforceability may be limited by principles of equity governing specific performance, injunctive relief, or other equitable remedies. 2.1.9 MATERIAL ASSETS. Except as set forth in Schedule 2.1.9, Micrion has good and marketable title to all of its material properties and assets subject to no encumbrance, lien, charge, or other restriction (including, without limitation, any restriction on transfer) of any kind or character other than (i) such imperfections or irregularities of title, encumbrances, claims, liens, charges or other conditions, restrictions or reservations as do not materially affect the use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such properties, (ii) statutory liens securing payments (including taxes) not yet due and (iii) such imperfections or irregularities of title, encumbrances, claims, liens, charges or other conditions, restrictions or reservations as do not individually or in the aggregate have a Material Adverse Effect on Micrion. 11 2.1.10 COMPLIANCE WITH LAWS. Except for those whose absence has not had and is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect, Micrion possesses all governmental and other licenses, certificates, consents, permits, and other authorizations of Governmental Entities (collectively, "Licenses") legally required to carry on its business as now conducted. No material violation exists in respect of, and no proceeding is pending or to Micrion's knowledge threatened to revoke or limit, any such License. Except as disclosed in the Micrion SEC Documents, the business of Micrion is not being conducted in violation of any laws, rules, regulations, ordinances, codes, judgments, orders, writs, or decrees applicable to its business except where such violations would not individually or in the aggregate have a Material Adverse Effect on Micrion. 2.1.11 ENVIRONMENTAL MATTERS. (a) DEFINITIONS. As used in this Agreement, "Environmental Law" means any federal, state or local statute, regulation, or ordinance pertaining to the protection of human health or the environment and any applicable orders, judgments, decrees, permits, licenses, or other authorizations, agreements or mandates under such laws. "Hazardous Substance" means any hazardous, toxic, radioactive, or infectious substance, material, or waste as defined, listed, or regulated under any Environmental Law, and includes without limitation petroleum oil and its fractions. "Contamination" means the existence (actual or reasonably suspected) in the environment of a Hazardous Substance, if the existence or suspected existence of such Hazardous Substance requires any investigatory, remedial, removal, or other response action under any Environmental Law. (b) ENVIRONMENTAL COMPLIANCE. Except as set forth in Schedule 2.1.11 and except where the contrary would not individually or the aggregate have a Material Adverse Effect on Micrion: (1) Micrion possesses all material Licenses it is required to carry under any Environmental Law for its business as now conducted. No material violation exists in respect of, and no proceeding is pending or threatened to revoke or limit, any such License. Micrion is operating its business in material compliance with all Environmental Laws. No incident regarding environmental matters has occurred in connection with the business of Micrion that was required to be reported to a Governmental Entity under any Environmental Law that was not so reported. (2) To the knowledge of Micrion, (i) no real property currently or previously owned, leased, or occupied by Micrion, including, without limitation, soil, groundwater or surface water on, under or adjacent to the properties and buildings thereon (the "Properties") is or during Micrion's ownership or occupation was used as a hazardous waste treatment, storage, or disposal facility within the meaning of Subtitle C of the Resource Conservation and Recovery Act or any 12 comparable state Environmental Law; and (ii) no real property currently owned, leased, or occupied by Micrion and no real property previously owned, leased, or occupied by Micrion is listed on the National Priority List or the Comprehensive Environmental Response, Compensation and Liability Information System list compiled by the Environmental Protection Agency or any comparable listing compiled by any state or local Governmental Entity having jurisdiction over environmental matters. (3) Micrion has not received notice from any Governmental Entity or other Person that it may be in violation of, or liable under, any Environmental Law and none of the properties of Micrion is subject to any court order, administrative order or decree arising under any Environmental Law, nor has been named as a responsible or potentially responsible party with respect to any site listed on the lists described in paragraph (2) above or that it otherwise is potentially liable for Contamination under any Environmental Law. (4) To the knowledge of Micrion, no portion of any property currently owned, leased, or occupied by Micrion is Contaminated and with respect to property previously owned, leased, or occupied by Micrion, no Contamination occurred during Micrion's ownership, lease, or occupancy. 2.1.12 TAX MATTERS. (a) RETURNS. Micrion has prepared in good faith and filed on a timely basis all federal, state, foreign, and other returns, reports, forms, declarations, and information returns required to be filed by it with respect to Taxes (as defined below) that relate to the business, results of operations, financial condition, properties, or assets of Micrion (collectively, the "Micrion Returns") and has paid on a timely basis all Taxes shown to be due on the Micrion Returns and all Taxes with respect to which no Micrion Returns are required to be filed. Except as detailed on Schedule 2.1.12, Micrion is not part of an affiliated group of corporations that files or has the privilege of filing consolidated tax returns pursuant to Section 1501 of the Code or any similar provisions of state, local, or foreign law, and Micrion is not a party to any tax-sharing or tax-allocation agreement. No extensions of time have been requested for Micrion Returns that have not been filed except as set forth on Schedule 2.1.12. Except as set forth on Schedule 2.1.12, (i) all Micrion Returns with respect to periods ending on or before the Closing Date have been examined by the Internal Revenue Service or the appropriate state, local or foreign taxing authority or the period for assessment of the Taxes in respect of which such Micrion Returns were required to be filed has expired, (ii) no issue raised by any relevant taxing authority in connection with an audit or examination of any such Micrion Returns remains unresolved, and (iii) no waivers of statutes of limitations are in effect with respect to any Taxes of any Micrion Entity. All Micrion Returns filed are complete and accurate in all material respects. Micrion has provided FEI with complete and accurate copies of Micrion 13 Returns for each of Micrion's fiscal years 1992 through 1997 and the Forms 1139 related to any loss or credit or carryback claim for those years. (b) TAXES PAID OR RESERVED. The reserves for taxes reflected in the current balance sheet most recently filed as part of a Micrion SEC Document are adequate for payment of Taxes in respect of periods ending on or before the Closing Date. All reserves for Taxes have been determined in accordance with GAAP consistently applied throughout the periods involved and prior periods. All Taxes that Micrion has been required to collect or withhold have been collected or withheld and, to the extent required, have been paid to the proper taxing authority except where the failure to do so has not had and is not reasonably likely to have a Material Adverse Effect. Micrion has not elected to be treated as a consenting corporation pursuant to Section 341(f) of the Code. (c) LOSS CARRYFORWARDS; INVESTMENT TAX CREDIT CARRYFORWARDS. Schedule 2.1.12 contains a complete and accurate list of net operating loss carryforwards and investment tax credit carryforwards available to Micrion for federal income tax purposes that originated in taxable years set forth in Schedule 2.1.12. (d) GOLDEN PARACHUTE PAYMENTS. Except as set forth on Schedule 2.1.12(d), Micrion will not be obligated as a result of the transactions contemplated by this Agreement to make a payment that would be a "parachute payment" to a "disqualified individual," as those terms are defined in Section 280G of the Code, without regard to whether such payment is reasonable compensation for personal services performed or to be performed in the future. (e) FIRPTA. Micrion is not, nor was it at any time during the five-year period ending on the Closing Date, a "United States real property holding corporation" within the meaning of Section 897(c) of the Code. (f) DEFINITION. As used in this Agreement, the term "Taxes" means all federal, state, local, or foreign taxes, charges, fees, levies, or other assessments, including without limitation all net income, gross income, gross receipts, premium, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, production, value added, estimated severance, stamp, occupation, property, or other taxes, fees, assessments, or charges of any kind whatsoever, together with any interest and any penalties (including penalties for failure to file in accordance with applicable information reporting requirements), and additions to tax. 2.1.13 EMPLOYEES AND LABOR RELATIONS MATTERS. Except as set forth on Schedule 2.1.13 or as provided in this Agreement: (a) Micrion has complied in all material respects with all applicable labor and employment laws, including provisions thereof relating to wages, hours, equal 14 opportunity, collective bargaining, and the payment of social security and other taxes, except where the failure to comply has not had and is not reasonably likely to have a Material Adverse Effect on Micrion; (b) There is no unfair labor practice charge, complaint, representation petition, grievance or other action against Micrion pending or to Micrion's knowledge threatened before the National Labor Relations Board or any other Governmental Entity and Micrion is not subject to any order to bargain by the National Labor Relations Board; (c) There is no labor strike, request for representation, slowdown, or work stoppage actually occurring, pending, or to Micrion's knowledge threatened against Micrion; (d) To Micrion's knowledge no employee of Micrion is subject to any noncompetition, nondisclosure, confidentiality, employment, consulting, or similar agreements with Persons other than Micrion relating to the present business activities of Micrion; and (e) Attached as Schedule 2.1.13(e) hereto is a list of all employee positions at Micrion that Micrion is attempting to staff. 2.1.14 EMPLOYEE BENEFITS. Schedule 2.1.14 lists all pension, retirement, profit sharing, deferred compensation, bonus, commission, incentive, stock option, life insurance, health and disability insurance, hospitalization, change of control and all other employee benefit plans or arrangements established, maintained, or contributed to by Micrion (the "Micrion Compensation and Benefit Plans"). Complete and accurate copies of each Micrion Compensation and Benefit Plan and each summary plan description, insurance contract, trust agreement or other agreement relating to such Micrion Compensation and Benefit Plans, have been provided to FEI. Each Micrion Compensation and Benefit Plan that is a "pension plan" ("Pension Plan"), within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and which is intended to qualify under Section 401(a) of the Code, has received a favorable determination letter from the Internal Revenue Service regarding its qualification, and Micrion is not aware of any circumstances which are likely to cause any Pension Plan to fail to be qualified under Section 401(a) of the Code. The present value of all accrued benefits under each Pension Plan covered by Title IV of ERISA does not exceed by more than $250,000 the fair market value of such Plan's assets. No "reportable event" (as such term is used in section 4043 of ERISA), non-exempt "prohibited transaction" (as such term is used in section 406 of ERISA or section 4975 of the Code), "nondeductible contributions" (as such term is used in section 4972 of the Code) or "accumulated funding deficiency" (as such term is used in section 412 or 4971 of the Code) has heretofore occurred with respect to any Micrion Compensation or Benefit Plan. Neither Micrion nor a controlled group of corporations of which Micrion is a member has any "potential withdrawal liability," as defined in Section 4201 of ERISA. To the knowledge of 15 Micrion, there are not and have not been any excess deferrals or excess contributions under any ERISA Plan that have not been corrected. Each Micrion Compensation or Benefit Plan is and has been operated and administered in substantial compliance with the terms of such plans and the requirements of all applicable U.S. and non-U.S. laws. Each Micrion Compensation or Benefit Plan can be terminated by Micrion under the terms of such Micrion Compensation or Benefit Plan. Any termination of, or withdrawal from, any Micrion Compensation or Benefit Plan of Micrion on or prior to Closing would not subject Micrion to any material liability under Title IV of ERISA. Micrion has no material unfunded liabilities with respect to any Pension Plan which covers non-U.S. employees (a "Non-U.S. Pension Plan"). Each Non-U.S. Pension Plan has received all necessary governmental approvals or has been registered with the appropriate governmental agency as required by local law. 2.1.15 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in Schedule 2.1.15 or in any Micrion SEC Documents or except as contemplated or permitted under Section 3.1.2, since September 30, 1998, Micrion has conducted its business only in, and has not engaged in any material transactions other than according to, the ordinary and usual course of such business, and there has not been: (a) Any event, occurrence or development which individually or in the aggregate could reasonably be expected to result in a Material Adverse Effect on Micrion; (b) Any increase in the rate of terms of compensation payable or to become payable by Micrion to its directors, officers, or key employees; any increase in the rate or terms of any bonus, insurance, pension, or other employee benefit plan, payment, or arrangement made to, for or with any such directors, officers, or key employees; any special bonus or remuneration paid; or any written employment contract executed or amended; (c) Any amendment to Micrion's Articles of Organization or Bylaws or any entry into any material agreement, commitment, or transaction (including, without limitation, any borrowing, capital expenditure or capital financing or any amendment, modification, or termination of any existing agreement, commitment, or transaction) by Micrion, except agreements, commitments, or transactions in the ordinary course of business and consistent with past practices or as expressly contemplated in this Agreement; (d) Any direct or indirect declaration, setting aside, or payment of any dividend or other distribution (whether in cash, stock, property, or any combination thereof) in respect of the common stock of Micrion, or any direct or indirect repurchase, redemption, or other acquisition by Micrion of any shares of its stock, or any change by Micrion in its accounting principles, practices or methods; 16 (e) Any issuance or sale of any stock of Micrion (other than issuances pursuant to the exercise of warrants or options outstanding on September 30, 1998) or any issuance or granting of any option, warrant, or right to purchase any stock of Micrion (other than options granted under the Micrion Stock Plans) or any commitment to do any of the foregoing; (f) Any material purchase or other acquisition of property by Micrion, any material sale, lease, or other disposition of property by Micrion, or any material expenditure by Micrion, except in the ordinary course of business; (g) Any incurrence of any noncontract liability which, either singly or in the aggregate is material to the business, results of operations or financial condition of Micrion; or (h) Any encumbrance or consent to encumbrance of any material property or assets of Micrion except in the ordinary course of business and except for the types of encumbrances listed in Section 2.1.9. 2.1.16 UNDISCLOSED LIABILITIES. Except for liabilities or obligations described in the Micrion SEC Documents, Schedule 2.1.16, or in another Schedule to this Agreement, neither Micrion nor any of its property is subject to any material liability or obligation, whether absolute or contingent, that has not been included in the financial statements contained in the Micrion SEC Documents or adequately reserved for in a financial statement of Micrion that has been provided to FEI. 2.1.17 INSURANCE. All material fire and casualty, general liability, business interruption, public liability, workers' compensation and directors' and officers' liability insurance policies are with reputable insurance carriers, provide full and adequate coverage for all normal risks incident to the business of Micrion and its properties and assets, and are in character and amount at least equivalent to that carried by companies engaged in similar businesses, except for any failures to maintain insurance policies that, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect. Copies of all such policies have been provided to FEI. 2.1.18 INTELLECTUAL PROPERTY. (a) The term "Intellectual Property Assets" means collectively: (i) all registered and unregistered trademarks, service marks, and applications (collectively, "Marks"); (ii) all patents and patent applications (collectively, "Patents"); 17 (iii) all copyrights in both published works and unpublished works that are material to Micrion's businesses (collectively, "Copyrights"); and (iv) all trade secrets used in the conduct of the businesses of Micrion. (b) Except as set forth on Schedule 2.1.18, Micrion owns or has a valid license to use and to bring actions for the misappropriation of all of the Intellectual Property Assets used in the conduct of its business without any conflict with or infringement of the rights of others, free and clear of all liens, charges, encumbrances, or other restrictions of any kind. (c) Schedule 2.1.18 contains a list and summary description of all Marks, Patents and Copyrights. (d) Schedule 2.1.18 contains a list of all agreements relating to the Intellectual Property Assets used in the conduct of its business to which Micrion is a party. (e) To Micrion's knowledge, there is no unauthorized use, infringement or misappropriation of any of the Micrion Intellectual Property Assets by any third party, including any employee or former employee of Micrion except for potential disputes between the parties hereto, as to which no representation is made. (f) Except as set forth on Schedule 2.1.18, there is no action, suit, proceeding, judgment, order, or writ pending or to Micrion's knowledge, threatened against Micrion contesting the validity, ownership, or right to use, sell, license, dispose of, or to bring actions for the misappropriation of the Intellectual Property Assets used in the conduct of its business, except for potential disputes between the parties hereto, as to which no representation is made. 2.1.19 GUARANTIES; POWERS OF ATTORNEY. Micrion is not a guarantor or otherwise liable for any material obligation (including without limitation any indebtedness) of any other Person. To Micrion's knowledge, there are no outstanding powers of attorney executed on behalf of Micrion. 2.1.20 BROKERS. No broker, investment banker, financial advisor, or other Person, other than Warburg Dillon Read LLC ("WDR"), the fees and expenses of which will be paid by Micrion, is entitled to any broker's, finder's, financial advisor's, or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Micrion. Micrion has provided FEI true and correct copies of all agreements between Micrion and WDR. 18 2.1.21 OPINION OF FINANCIAL ADVISOR. Micrion has received the written opinion of WDR, dated December 1, 1998 to the effect that the consideration to be received in the Merger by Micrion's stockholders is fair to such stockholders from a financial point of view. An executed copy of such opinion has been delivered to FEI. Micrion has been authorized by WDR, subject to prior review and consent by WDR (such consent not to be unreasonably withheld), to include such fairness opinion and reference thereto in the Form S-4 and the Proxy Statement. 2.1.22 VOTE REQUIRED. The affirmative vote of the holders of two-thirds of the outstanding shares of Micrion Common Stock entitled to vote thereon is the only vote of any class or series of Micrion's capital stock necessary to approve the Merger. The Micrion Board at a meeting duly called and held has (i) approved this Agreement, (ii) unanimously determined that the Merger is fair to and in the best interests of the holders of Micrion Common Stock, (iii) resolved to recommend this Agreement and the Merger to such holders for approval and (iv) directed that this Agreement be submitted to Micrion's stockholders. Micrion hereby agrees to the inclusion in the Form S-4 and the Proxy Statement of the recommendations of the Micrion Board described in this Section. 2.1.23 RIGHTS AGREEMENT. Micrion has provided FEI with a complete and correct copy of the Rights Agreement, including all amendments and exhibits thereto. The amendment to the Rights Agreement attached to this Agreement as Exhibit B has been duly authorized by the Micrion Board and has been duly executed and adopted by Micrion, and accordingly, the execution of this Agreement and any other related agreements between Micrion and FEI, the Merger and the other transactions contemplated by this Agreement will not cause the Rights to become exercisable or result in either FEI or Sub or any of their Affiliates, alone or together, being considered to be an "Acquiring Person" (as defined in the Rights Agreement) or the occurrence of a "Distribution Date," a "Section 13 Event" or a "Triggering Event" (as such terms are defined in the Rights Agreement). 2.1.24 STATE TAKEOVER STATUTES AND OTHER TAKEOVER PROVISIONS. The provisions of Chapter 110C and Chapter 110D of the Massachusetts Corporation-Related Laws and any other Massachusetts state takeover statute or similar statute or regulation do not apply to prevent or impose conditions on the Merger, this Agreement, the Stock Option Agreement or any of the transactions contemplated by this Agreement. 2.1.25 DEFERRED COMPENSATION OBLIGATIONS. Micrion has no deferred compensation obligations, whether vested or unvested. 2.1.26 PRODUCT WARRANTIES AND LIABILITIES. (a) Except as set forth on Schedule 2.1.26, (i) there are no material warranties, express or implied, written or oral, with respect to the products of Micrion ("Micrion Products"), (ii) as of the date hereof there are no pending or threatened material claims with respect to any such warranty, (iii) there are no statements, citations or 19 decisions by any Governmental Entity declaring any Micrion Products defective or unsafe, (iv) there are no material pending, or, to the knowledge of Micrion as of the date hereof, threatened, product liability claims against or involving Micrion or any Micrion Product and no such claims have been settled or adjudicated since December 31, 1995, and (v) to Micrion's knowledge, Micrion is in compliance with all of its purchase contracts with customers with respect to Micrion Products and is not reasonably likely to incur any material penalties or other such form of purchase price adjustment for late delivery or failure to build to specification any Micrion Product. (b) Micrion has provided FEI with a complete list of all Micrion Products for which there is a remaining purchase price balance due and with respect to which a customer of Micrion has made a complaint or assertion that has directly or indirectly been the basis for such customer's refusal to grant on-site acceptance of such Micrion Product. (c) In connection with the sale of its first 300 mm wafer technology workstation, as of the date of this agreement, no facts or circumstances exist that are reasonably likely to cause Micrion to be subject to penalties or other purchase price adjustments in excess of 10% of the purchase price thereof. 2.1.27 INVENTORIES. Micrion's inventories, whether finished goods, work in process or raw materials, shown on the balance sheet contained in the most recent Micrion SEC Document or thereafter acquired are all items of a quality usable or saleable in the ordinary and usual course of Micrion's business, except for inventory items that are obsolete or not usable or saleable in the ordinary course of business and that have been written down to an amount not in excess of realizable market value or for which adequate reserves or allowances have been provided. The values at which inventories are carried reflect an inventory valuation policy consistent with Micrion's past practice and in accordance with GAAP consistently applied. 2.1.28 RECEIVABLES. Each of the receivables of Micrion (including accounts receivable, loans receivable and advances) that is reflected in the balance sheet contained in the most recent Micrion SEC Document, and each of the receivables that has arisen since the date of such balance sheet, has arisen only from bona fide transactions in the ordinary course of Micrion's business and Micrion's reserves for doubtful accounts receivable are adequate in accordance with GAAP. Schedule 2.1.28 contains a statement of accounts receivable balance as of September 26, 1998, reconciled to such balance sheet. 2.1.29 YEAR 2000 COMPLIANCE. Micrion has a Year 2000 program in place which is adequate to cause all computer software and data processing devices (i) used in or for the manufacturing of the Micrion Products by Micrion, or (ii) used in or by any Micrion Products, including any Micrion Products sold and/or installed prior to the date hereof, to become Year 2000 compliant during 1999 except to the extent that the failure to do so, individually or in the aggregate, would not have a Material Adverse Effect on Micrion, and Micrion reasonably believes that the material costs associated with such program that are included in Micrion's fiscal 1999 20 budget are adequate and that the rate of expenditures after June 30, 1999 will not increase materially. "Year 2000 compliant" means that the product or software accurately processes and stores date/time data (including, but not limited to, calculating, comparing, displaying, recording and sequencing operations involving date/time data) during, from and into and between the twentieth and twenty-first centuries, and the years 1999 and 2000, including correct processing of leap year data. 2.1.30 INDEBTEDNESS. Micrion's Indebtedness does not exceed an aggregate of $18,518,000, consisting of the following amounts: $7,333,000 under a term loan from Fleet Bank, $10,000,000 under its Fleet Bank line of credit and $1,185,000 payable under currently existing capital lease obligations. "Indebtedness" means all indebtedness for borrowed money, including, without limitation, the long term and current portions of amounts outstanding as term debt or under a line of credit and capital lease obligations. 2.1.31 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations and warranties contained in this Article 2, Micrion makes no other express or implied representation or warranty to FEI or Sub. 2.2 FEI'S REPRESENTATIONS AND WARRANTIES. FEI represents and warrants to Micrion as follows: 2.2.1 CORPORATE EXISTENCE AND AUTHORITY. FEI is a corporation legally existing under the laws of the State of Oregon and is in good standing as a foreign corporation in each jurisdiction where the properties owned, leased or operated, or the business conducted, by it require such qualification, except for such failures to qualify or be in such good standing which, when taken together with all other such failures, is not reasonably likely to have a Material Adverse Effect on FEI. FEI has the full corporate power and authority to enter into this Agreement and carry out its terms. Except for the approval of its stockholders, FEI has taken all corporate action necessary to execute, deliver and perform this Agreement. This Agreement has been duly and validly executed and delivered by FEI and is binding upon and enforceable against FEI in accordance with its terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, reorganization, or other laws of general application relating to or affecting the rights of creditors and except as enforceability may be limited by principles of equity governing specific performance, injunctive relief, or other equitable remedies. 2.2.2 NO ADVERSE CONSEQUENCES. Except as set forth on Schedule 2.2.2, neither the execution and delivery of this Agreement by FEI nor the consummation of the transactions contemplated by this Agreement will: (a) violate or conflict with any provision of FEI's articles of incorporation or bylaws; 21 (b) violate any law, judgment, order, injunction, decree, rule, regulation, or ruling of any Governmental Entity applicable to FEI, except such as is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FEI; (c) either alone or with the giving of notice or the passage of time or both, conflict with, constitute grounds for termination or acceleration of, result in the breach of the terms, conditions, or provisions of, result in the loss of any benefit to FEI under, or constitute a default under any agreement, instrument, license, or permit to which FEI is a party or by which it is bound, except such as is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FEI; or (d) except (i) for applicable requirements, if any, of the Exchange Act, the Securities Act and Blue Sky Laws, (ii) the HSR Act, (iii) for the filing of Articles of Merger pursuant to the OBCA and the MBCL, and (iv) with respect to matters set forth in Schedule 2.2.2, require any consent, approval or authorization of, permit from, or declaration, filing or registration with, any governmental or regulatory authority, or any other person or entity by FEI, except where the failure to obtain such consent, approval, authorization, permit or declaration or to make such filing or registration is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FEI. 2.2.3 CAPITALIZATION. FEI has authorized capital stock consisting of 30,000,000 shares of FEI Common Stock, of which 18,160,808 shares were outstanding on November 25, 1998 and 500,000 shares of preferred stock, none of which is outstanding. Options to purchase 1,493,188 shares of Common Stock were outstanding on October 31, 1998 under grants made pursuant to the 1984 Stock Incentive Plan, the 1995 Stock Incentive Plan and the 1995 Supplemental Stock Incentive Plan (the "FEI Stock Plans") and options to purchase 36,100 shares of Common Stock have been granted since October 31, 1998. Schedule 2.2.3 sets forth a complete list of all options outstanding and the exercise prices and strike prices thereof. All of the outstanding shares of capital stock of FEI have been duly authorized and are validly issued, fully paid and nonassessable, and no shares were issued in violation of preemptive or similar rights of any stockholder or in violation of any applicable securities laws. Except as set forth above, there are no shares of capital stock of FEI authorized, issued or outstanding and, except for options granted pursuant to the FEI Stock Plans, there are no preemptive rights or any outstanding subscriptions, options, warrants, rights, convertible securities or other agreements or commitments of FEI of any character relating to the issued or unissued capital stock or other securities of FEI other than rights of Philips Business Electronics International B.V. ("Philips") to maintain its percentage interest in the issued and outstanding shares of FEI as provided in the Combination Agreement dated November 15, 1996, as amended (the "Philips Additional Shares Right"). There are no outstanding obligations of FEI to repurchase, redeem, or otherwise acquire any of the FEI Shares. 2.2.4 SUBSIDIARIES AND JOINT VENTURES. Except as disclosed on Schedule 2.2.4, FEI has no subsidiaries and owns no stock or other interest in any other corporation or in any 22 partnership or limited liability company or other venture or entity. Each subsidiary of FEI is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation, except where the failure to do so would not have a Material Adverse Effect on FEI. 2.2.5 SEC REPORTS AND FINANCIAL STATEMENTS. FEI has filed with the SEC, and has made available to Micrion true and complete copies of, all forms, reports, schedules, statements and other documents required to be filed by it since December 31, 1996 under the Exchange Act or the Securities Act (each of such forms, reports, schedules, statements, and other documents, to the extent filed and publicly available before the date of this Agreement or filed subsequent to the date hereof, other than preliminary filings, is referred to as a "FEI SEC Document"). Each FEI SEC Document, at the time filed complied and, in the case of future filings, will comply in all material respects with the applicable requirements of the Exchange Act or the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder. The consolidated financial statements of FEI included in the FEI SEC Documents comply and, in the case of future filings, will comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been and, in the case of future filings, will be prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of the unaudited statements, to normal, recurring year end audit adjustments) the consolidated financial position of FEI and its subsidiaries as at the dates thereof and the consolidated results of their operations and cash flows for the periods then ended. 2.2.6 INFORMATION SUPPLIED. None of the information supplied or to be supplied by or on behalf of FEI specifically for inclusion or incorporation by reference in the Form S-4 or the Proxy Statement contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by FEI with respect to statements made or incorporated by reference therein based on information supplied by Micrion in writing specifically for inclusion or incorporation by reference therein. The Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder. 2.2.7 LEGAL PROCEEDINGS. Except as disclosed in Schedule 2.2.7, there is neither pending nor, to the knowledge of FEI, threatened by or against FEI any legal action, claim, arbitration, investigation, or proceeding that could (i) have a Material Adverse Effect on FEI following the Closing; or (ii) enjoin, delay or restrict the right or ability of FEI to perform its obligations under this Agreement and, to the knowledge of FEI, there is no basis for any such claim, litigation, proceeding, or investigation. 2.2.8 CONTRACTS AND ARRANGEMENTS. Each material contract, instrument, agreement, or obligation to which FEI is a party or by which it is bound or which affects its assets or its rights has been duly and validly executed and delivered by FEI and is binding upon and 23 enforceable by and against FEI in accordance with its terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, reorganization, or other laws of general application relating to or affecting the rights of creditors and except as enforceability may be limited by principles of equity governing specific performance, injunctive relief, or other equitable remedies. Each material contract of FEI required to be filed with the FEI SEC Documents has been so filed. 2.2.9 MATERIAL ASSETS. Except as set forth on Schedule 2.2.9, FEI has good and marketable title to all of its material properties and assets subject to no encumbrance, lien, charge, or other restriction (including, without limitation, any restriction on transfer) of any kind or character other than (i) such imperfections or irregularities of title, encumbrances, claims, liens, charges or other conditions, restrictions or reservations as do not materially affect the use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such properties, (ii) statutory liens securing payments (including taxes) not yet due and (iii) such imperfections or irregularities of title, encumbrances, claims, liens, charges or other conditions, restrictions or reservations as do not individually or in the aggregate have a Material Adverse Effect on FEI. 2.2.10 COMPLIANCE WITH LAWS. Except for those whose absence has not had and is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect, FEI possesses all Licenses legally required to carry on its business as now conducted. No material violation exists in respect of, and no proceeding is pending or to FEI's knowledge threatened to revoke or limit, any such License. Except as disclosed in the FEI SEC Documents, the business of FEI is not being conducted in violation of any laws, rules, regulations, ordinances, codes, judgments, orders, writs, or decrees applicable to its business except where such violations would not individually or in the aggregate have a Material Adverse Effect on FEI. 2.2.11 ENVIRONMENTAL COMPLIANCE. Except as set forth in Schedule 2.2.11 and except where the contrary would not individually or the aggregate have a Material Adverse Effect on FEI: (a) FEI possesses all material Licenses it is required to carry under any Environmental Law for its business as now conducted. No material violation exists in respect of, and no proceeding is pending or threatened to revoke or limit, any such License. FEI is operating its business in material compliance with all Environmental Laws. No incident regarding environmental matters has occurred in connection with the business of FEI that was required to be reported to a Governmental Entity under any Environmental Law that was not so reported. (b) To the knowledge of FEI, (i) no real property currently or previously owned, leased, or occupied by FEI, including, without limitation, soil, groundwater or surface water on, under or adjacent to the properties and buildings thereon (the "FEI Properties") is or during FEI's ownership or occupation was used as a hazardous waste 24 treatment, storage, or disposal facility within the meaning of Subtitle C of the Resource Conservation and Recovery Act or any comparable state Environmental Law; and (ii) no real property currently owned, leased, or occupied by FEI and no real property previously owned, leased, or occupied by FEI is listed on the National Priority List or the Comprehensive Environmental Response, Compensation and Liability Information System list compiled by the Environmental Protection Agency or any comparable listing compiled by any state or local Governmental Entity having jurisdiction over environmental matters. (c) FEI has not received notice from any Governmental Entity or other Person that it may be in violation of, or liable under, any Environmental Law and none of the properties of FEI is subject to any court order, administrative order or decree arising under any Environmental Law, nor has been named as a responsible or potentially responsible party with respect to any site listed on the lists described in paragraph (b) above or that it otherwise is potentially liable for Contamination under any Environmental Law. (d) To the knowledge of FEI, no portion of any property currently owned, leased, or occupied by FEI is Contaminated and with respect to property previously owned, leased, or occupied by FEI, no Contamination occurred during FEI's ownership, lease, or occupancy. 2.2.12 TAX MATTERS. (a) RETURNS. FEI has prepared in good faith and filed on a timely basis all federal, state, foreign, and other returns, reports, forms, declarations, and information returns required to be filed by it with respect to Taxes that relate to the business, results of operations, financial condition, properties, or assets of FEI (collectively, the "FEI Returns") and has paid on a timely basis all Taxes shown to be due on the FEI Returns and all Taxes with respect to which no FEI Returns are required to be filed. Except as detailed on Schedule 2.2.12, FEI is not part of an affiliated group of corporations that files or has the privilege of filing consolidated tax returns pursuant to Section 1501 of the Code or any similar provisions of state, local, or foreign law, and FEI is not a party to any tax-sharing or tax-allocation agreement. No extensions of time have been requested for FEI Returns that have not been filed except as set forth on Schedule 2.2.12. Except as set forth on Schedule 2.2.12, (i) all FEI Returns with respect to periods ending on or before the Closing Date have been examined by the Internal Revenue Service or the appropriate state, local or foreign taxing authority or the period for assessment of the Taxes in respect of which such FEI Returns were required to be filed has expired, (ii) no issue raised by any relevant taxing authority in connection with an audit or examination of any such FEI Returns remains unresolved, and (iii) no waivers of statutes of limitations are in effect with respect to any Taxes of any FEI Entity. All FEI Returns filed are complete and accurate in all material respects. FEI has provided Micrion with complete and accurate copies of FEI Federal Returns for FEI's fiscal years 1995 through 1997. 25 (b) TAXES PAID OR RESERVED. The reserves for taxes reflected in the current balance sheet most recently filed as part of a FEI SEC Document are adequate for payment of Taxes in respect of periods ending on or before the Closing Date. All reserves for Taxes have been determined in accordance with GAAP consistently applied throughout the periods involved and prior periods. All Taxes that FEI has been required to collect or withhold have been collected or withheld and, to the extent required, have been paid to the proper taxing authority except where the failure to do so has not had and is not reasonably likely to have a Material Adverse Effect on FEI. FEI has not elected to be treated as a consenting corporation pursuant to Section 341(f) of the Code. 2.2.13 EMPLOYEES AND LABOR RELATIONS MATTERS. Except as set forth on Schedule 2.2.13 or as provided in this Agreement: (a) FEI has complied in all material respects with all applicable labor and employment laws, including provisions thereof relating to wages, hours, equal opportunity, collective bargaining, and the payment of social security and other taxes, except where the failure to comply has not had and is not reasonably likely to have a Material Adverse Effect on FEI; (b) There is no unfair labor practice charge, complaint, representation petition, grievance or other action against FEI pending or to FEI's knowledge threatened before the National Labor Relations Board or any other Governmental Entity and FEI is not subject to any order to bargain by the National Labor Relations Board; (c) There is no labor strike, request for representation, slowdown, or work stoppage actually occurring, pending, or to FEI's knowledge threatened against FEI; and (e) To FEI's knowledge no employee of FEI is subject to any noncompetition, nondisclosure, confidentiality, employment, consulting, or similar agreements with Persons other than FEI relating to the present business activities of FEI. 2.2.14 EMPLOYEE BENEFITS. Schedule 2.2.14 lists all pension, retirement, profit sharing, deferred compensation, bonus, commission, incentive, stock option, life insurance, health and disability insurance, hospitalization, change of control and all other employee benefit plans or arrangements established, maintained, or contributed to by FEI (the "FEI Compensation and Benefit Plans"). Complete and accurate copies of each FEI Compensation and Benefit Plan and each summary plan description, insurance contract, trust agreement or other agreement relating to such FEI Compensation and Benefit Plans, have been provided to Micrion. No "reportable event" (as such term is used in section 4043 of ERISA), "prohibited transaction" (as such term is used in section 406 of ERISA or section 4975 of the Code), "nondeductible contributions" (as such term is used in section 4972 of the Code) or "accumulated funding deficiency" (as such term is used in section 412 or 4971 of the Code) has heretofore occurred with 26 respect to any FEI Compensation or Benefit Plan. FEI does not have any "potential withdrawal liability," as defined in Section 4201 of ERISA. To the knowledge of FEI, there are not and have not been any excess deferrals or excess contributions under any ERISA Plan that have not been corrected. Each FEI Compensation or Benefit Plan is and has been operated and administered in all material respects in conformance with the requirements of such plan and applicable U.S. and foreign laws, except where such failure would not have a Material Adverse Effect on FEI. Each FEI Compensation or Benefit Plan can be terminated by FEI. Any termination of, or withdrawal from, any FEI Compensation or Benefit Plan on or prior to Closing would not subject FEI to any material liability under Title IV of ERISA. 2.2.15 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in Schedule 2.2.15 or in any FEI SEC Documents, since September 27, 1998 FEI has conducted its business only in, and has not engaged in any material transactions other than according to, the ordinary and usual course of such business, and there has not been: (a) Any event, occurrence or development which individually or in the aggregate could reasonably be expected to result in a Material Adverse Effect on FEI; (b) Any amendment to FEI's Articles of Incorporation or Bylaws or any entry into any material agreement, commitment, or transaction (including, without limitation, any borrowing, capital expenditure or capital financing or any amendment, modification, or termination of any existing agreement, commitment, or transaction) by FEI, except agreements, commitments, or transactions in the ordinary course of business and consistent with past practices or as expressly contemplated in this Agreement; (c) Any direct or indirect declaration, setting aside, or payment of any dividend or other distribution (whether in cash, stock, property, or any combination thereof) in respect of the common stock of FEI, or any direct or indirect repurchase, redemption, or other acquisition by FEI of any shares of its stock, or any change by FEI in its accounting principles, practices or methods; (d) Any issuance or sale of any stock of FEI (other than issuances pursuant to the exercise of warrants or options outstanding on September 27, 1998) or any issuance or granting of any option, warrant, or right to purchase any stock of FEI (other than options granted under the FEI Stock Plans and the FEI Employee Share Purchase Plan) or any commitment to do any of the foregoing; (e) Any material purchase or other acquisition of property by FEI, any sale, lease, or other disposition of property by FEI, or any material expenditure by FEI, except in the ordinary course of business; 27 (f) Any incurrence of any noncontract liability which, either singly or in the aggregate is material to the business, results of operations or financial condition of FEI; or (g) Any encumbrance or consent to encumbrance of any material property or assets of FEI except in the ordinary course of business and except for the types of encumbrances listed in Section 2.2.9. 2.2.16 UNDISCLOSED LIABILITIES. Except for liabilities or obligations described in the FEI SEC Documents, Schedule 2.2.16, or in another Schedule to this Agreement, neither FEI nor any of its property is subject to any material liability or obligation, whether absolute or contingent, that has not been included in the financial statements contained in the FEI SEC Documents or adequately reserved for in a FEI financial statement that has been provided to Micrion. 2.2.17 INSURANCE. All material fire and casualty, general liability, business interruption, public liability, workers' compensation and directors' and officers' liability insurance policies are with reputable insurance carriers, provide full and adequate coverage for all normal risks incident to the business of FEI and its properties and assets, and are in character and amount at least equivalent to that carried by companies engaged in similar businesses, except for any failures to maintain insurance policies that, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect. Copies of all such policies have been provided to Micrion. 2.2.18 INTELLECTUAL PROPERTY. (a) Except as set forth on Schedule 2.2.18, FEI owns or has a valid license to use and to bring actions for the misappropriation of all of the Intellectual Property Assets, used in the conduct of its business without any conflict with or infringement of the rights of others, free and clear of all liens, charges, encumbrances, or other restrictions of any kind. (b) Schedule 2.2.18 contains a list and summary description of all Marks, Patents and Copyrights owned by FEI. (c) Schedule 2.2.18 contains a list of all agreements relating to the Intellectual Property Assets used in the conduct of its business to which FEI is a party. (d) To FEI's knowledge, there is no unauthorized use, infringement or misappropriation of any of the FEI Intellectual Property Assets by any third party, including any employee or former employee of FEI, except for potential disputes between the parties hereto, as to which no representation is made. 28 (e) Except as set forth on Schedule 2.2.18, there is no action, suit, proceeding, judgment, order, or writ pending or to FEI's knowledge, threatened against FEI contesting the validity, ownership, or right to use, sell, license, dispose of, or to bring actions for the misappropriation of the Intellectual Property Assets used in the conduct of its business, except for potential disputes between the parties hereto, as to which no representation is made. 2.2.19 GUARANTIES; POWERS OF ATTORNEY. FEI is not a guarantor or otherwise liable for any material obligation (including without limitation any indebtedness) of any other Person. To FEI's knowledge, there are no outstanding powers of attorney executed on behalf of FEI. 2.2.20 BROKERS. No broker, investment banker, financial advisor, or other Person, other than Needham & Company, Inc. ("Needham"), the fees and expenses of which will be paid by FEI, is entitled to any broker's, finder's, financial advisor's, or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of FEI. 2.2.21 OPINION OF FINANCIAL ADVISOR. FEI has received the written opinion of Needham, dated December 1, 1998 to the effect that the Merger Consideration and Philips' purchase of the Financing Shares are fair to the FEI shareholders (other than Philips, with respect to the Philips financing) from a financial point of view. An executed copy of such opinion has been delivered to Micrion. FEI has been authorized by Needham, subject to prior review and consent by Needham, to include such fairness opinion and reference thereto in the Form S-4 and the Proxy Statement. 2.2.22 VOTE REQUIRED. The affirmative vote of the holders of a majority of the outstanding shares of FEI Common Stock entitled to vote thereon is the only vote of any class or series of FEI's capital stock necessary to approve the issuance of shares in connection with the transactions contemplated by this Agreement and the Stock Purchase Agreement (as defined below). The FEI Board at a meeting duly called and held has (i) approved this Agreement, (ii) unanimously determined that the Merger and the transactions contemplated by the Stock Purchase Agreement are fair to and in the best interests of the holders of FEI Common Stock, (iii) resolved to recommend the transactions contemplated by this Agreement and the Stock Purchase Agreement to such holders for approval and (iv) directed that such proposal be submitted to FEI's stockholders. FEI hereby agrees to the inclusion in the Form S-4 and the Proxy Statement of the recommendations of the FEI Board described in this Section. 2.2.23 YEAR 2000 COMPLIANCE. FEI has a Year 2000 program in place which is adequate to cause all computer software and data processing devices (i) used in or for the manufacturing of the FEI products by FEI or (ii) used in or by any FEI products, including any FEI products sold and/or installed prior to the date hereof, to become Year 2000 compliant during 1999, except where the failure to comply would not have a Material Adverse Effect on FEI, and 29 FEI reasonably believes that all material costs associated with such program are included in FEI's 1998 budget and in its budget forecasts for 1999. 2.2.24 FINANCING. Simultaneously herewith FEI and Philips are entering into a Stock Purchase Agreement (the "Stock Purchase Agreement") pursuant to which Philips has agreed to provide financing to FEI for the cash portion of the Merger Consideration, on the terms and subject to the conditions set forth therein. A form of the Stock Purchase Agreement has been provided to Micrion prior to the date hereof. 2.2.25 PRODUCT WARRANTIES AND LIABILITIES. (a) Except as set forth on Schedule 2.2.25, (i) there are no material warranties, express or implied, written or oral, with respect to the products of FEI ("FEI Products"), (ii) as of the date hereof there are no pending or threatened material claims with respect to any such warranty, (iii) there are no statements, citations or decisions by any Governmental Entity declaring any FEI Products defective or unsafe, (iv) there are no material pending, or, to the knowledge of FEI as of the date hereof, threatened, product liability claims against or involving FEI or any FEI Product and no such claims have been settled or adjudicated since December 31, 1995, and (v) to FEI's knowledge, FEI is in compliance with all of its purchase contracts with customers with respect to FEI Products and is not reasonably likely to incur any material penalties or other such form of purchase price adjustment for late delivery or failure to build to specification any FEI Product. (b) FEI has provided FEI with a complete list of all FEI Products for which there is a remaining purchase price balance due and with respect to which a customer of FEI has made a complaint or assertion that has directly or indirectly been the basis for such customer's refusal to grant on-site acceptance of such FEI Product. 2.2.26 INVENTORIES. FEI's inventories, whether finished goods, work in process or raw materials, shown on the balance sheet contained in the most recent FEI SEC Document or thereafter acquired are all items of a quality usable or saleable in the ordinary and usual course of FEI's business, except for inventory items that are obsolete or not usable or saleable in the ordinary course of business and that have been written down to an amount not in excess of realizable market value or for which adequate reserves or allowances have been provided. The values at which inventories are carried reflect an inventory valuation policy consistent with FEI's past practice and in accordance with GAAP consistently applied. 2.2.27 RECEIVABLES. Each of the receivables of FEI (including accounts receivable, loans receivable and advances) that is reflected in the balance sheet contained in the most recent FEI SEC Document, and each of the receivables that has arisen since the date of such balance sheet, has arisen only from bona fide transactions in the ordinary course of FEI's business and FEI reserves for doubtful accounts receivable are adequate in accordance with GAAP. 30 2.2.28 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations and warranties contained in this Article 2, FEI makes no other express or implied representation or warranty to Micrion. ARTICLE 3 COVENANTS 3.1 CONTINUATION OF BUSINESS. 3.1.1 JOINT COVENANTS. Except as set forth on Schedule 3.1.1, without the prior written consent of FEI or Micrion, as the case may be, which shall not be unreasonably withheld or delayed, from and after the execution date of this Agreement until Closing, Micrion and FEI will each: (a) operate and maintain its business in its usual manner and in the ordinary course and, to the extent consistent therewith, use its reasonable best efforts to preserve its business organization intact and maintain its existing relations with customers, suppliers, employees and business associates; (b) not declare, pay, or set aside for payment any dividend (whether in cash, stock or property) or other distribution of money or property in respect of its capital stock; effect any split, combination or similar reclassification of its capital stock; or purchase or redeem any shares of its capital stock, except pursuant to existing agreements set forth on Schedule 2.2.3. (c) not issue or sell any capital stock or rights to acquire capital stock, except: (1) shares of Micrion Common Stock issued upon the valid exercise of currently outstanding options under the Micrion Stock Plans; (2) shares of FEI Common Stock issued upon the valid exercise of rights under the FEI Stock Plans; (3) options to purchase shares under the FEI Stock Plans; (4) shares of FEI Common Stock or Micrion Common Stock issued under the FEI or Micrion Employee Stock Purchase Plan, as the case may be; and 31 (5) shares of FEI Common Stock issued pursuant to the Philips Additional Shares Right and the Stock Purchase Agreement; (d) not acquire any assets other than assets acquired in the ordinary and usual course of its business and consistent with past practices; (e) not amend its Articles of Organization or Incorporation or Bylaws, except for an amendment to the FEI Articles of Incorporation to increase the number of authorized shares of Common Stock; and (f) not authorize or enter into an agreement to do any of the foregoing. 3.1.2 MICRION COVENANTS. Without the prior written consent of FEI and except as contemplated hereby and as set forth on Schedule 3.1.2, from and after the execution date of this Agreement until Closing, Micrion agrees that: (a) Micrion will not increase its aggregate Indebtedness above the amount stated in Section 2.1.30 and will not encumber any of its material assets or make any material commitments related to such assets, except in the ordinary and usual course of its business and consistent with past practices; (b) Micrion will not make any tax election or permit any insurance policy naming it as a beneficiary or a loss payable payee to be canceled or terminated, except in the ordinary and usual course of business; (c) Micrion will not make any payment to discharge or satisfy any lien or encumbrance or pay any obligation or liability (fixed or contingent) other than (i) any lien or encumbrance or any obligation or liability set forth in the current financial statements contained in the Micrion SEC Documents and (ii) current liabilities incurred or maturing in the ordinary course of business since the date of the current balance sheet most recently filed as part of a Micrion SEC Document or (iii) payments under its line of credit facility with Fleet Bank, N.A. ("Fleet") made in accordance with the terms of the agreements entered into between Micrion and Fleet as of September 22, 1998 and July 31, 1997; (d) Micrion will not purchase or otherwise acquire, or agree to purchase or otherwise acquire, any debt or equity securities of any Person other than equity securities issued by a money market fund registered as an investment company under the Investment Company Act of 1940; (e) Micrion will not increase the wages, salaries, compensation, pension, or other benefits payable to any of its officers, employees, or agents, including any severance or change of control payments, other than increases in wages and salaries 32 required by employment arrangements existing on the execution date of this Agreement or otherwise in the ordinary and usual course of its business; (f) Micrion will not implement or amend any employee profit sharing, stock option, stock purchase, pension, bonus, commission, incentive, retirement, medical reimbursement, life insurance, deferred compensation, or any other employee benefit plan or arrangement; (g) Micrion will not change its accounting methods, policies or practices; (h) when the consent of any third party to the transactions contemplated by this Agreement is required under the terms of any Contract to which Micrion is a party Micrion will use its reasonable best efforts to obtain such consent on terms and conditions not materially less favorable than those in effect on the execution date of this Agreement; (i) Micrion will not settle or compromise any material claims or litigation or, except in the ordinary and usual course of business, modify, amend or terminate any of its material contracts or waive, release or assign any material rights or claims; and (j) As to negative covenants specified above, Micrion will not authorize or enter into an agreement to do any of the foregoing. 3.1.3 CLOSING NOTICE. Promptly following the determination by FEI that the conditions to Closing (other than the condition contained in this Section 3.1.3) are met, FEI shall deliver to Philips notice to that effect. 3.2 NO SOLICITATION. From and after the date hereof until the earlier of the Effective Time or termination of the Agreement, subject to the proviso in the next paragraph, Micrion agrees that neither it nor any of its officers and directors shall, and that Micrion shall direct and use its reasonable best efforts to cause its employees, agents and representatives (including any investment banker, attorney or accountant retained by it or any of its subsidiaries) (such officers, directors, employees, agents and representatives sometimes collectively referred to herein as "Representatives") not to, directly or indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries or the making of any proposal or offer with respect to a merger, reorganization, share exchange, consolidation or similar transaction involving, or any purchase of 10% or more of the assets or any class of equity securities of, it or any of its subsidiaries (any such proposal or offer being hereinafter referred to as a "Takeover Proposal"). Micrion further agrees that neither it nor its Representatives shall directly or indirectly, engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any Person relating to a Takeover Proposal, whether made before or after the date of this Agreement, or otherwise facilitate any effort or attempt to make or implement a 33 Takeover Proposal; provided, however, that nothing contained in this Agreement shall prevent Micrion or the Micrion Board from: (a) complying with Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act with regard to a Takeover Proposal; (b) providing information in response to a request therefor by a Person who has made an unsolicited bona fide written Takeover Proposal if the Micrion Board receives from the Person so requesting such information an executed confidentiality agreement on terms substantially equivalent to those contained in the Confidentiality Agreement dated March 30, 1998 between Micrion and FEI (the "Confidentiality Agreement"); (c) engaging in any negotiations or discussions with any Person who has made an unsolicited bona fide written Takeover Proposal; or (d) withdrawing or modifying the approval or recommendation by the Micrion Board of this Agreement or the Merger in connection with recommending an unsolicited bona fide written Takeover Proposal to the stockholders of Micrion or entering into any agreement with respect to an unsolicited bona fide written Takeover Proposal; if and only to the extent that, both (i) in each such case referred to in clause (b), (c) or (d) above, the Micrion Board determines in good faith after receipt of written advice from outside legal counsel experienced in such matters that such action is necessary in order for its directors to comply with their respective fiduciary duties under applicable law and (ii) in each case referred to in clause (c) or (d) above, the Micrion Board determines in good faith (after consultation with its financial advisor) that such Takeover Proposal, if accepted, is reasonably likely to be consummated, taking into account all legal, financial and regulatory aspects of the proposal and the Person making the proposal and would, if consummated, result in a transaction superior to the transaction contemplated by this Agreement, taking into account, among other things, the long term prospects and interests of Micrion and its stockholders (any such superior Takeover Proposal being referred to in this Agreement as a "Superior Proposal"). Micrion will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. Micrion agrees that it will take the necessary steps to promptly inform its Representatives of the obligations undertaken in this Section 3.2 and in the Confidentiality Agreement. Micrion will promptly notify FEI if any such inquiries, proposals or offers are received by, any such information is requested from, or any such discussions or negotiations are sought to be initiated or continued with, Micrion or any of its Representatives relating to a Takeover Proposal, indicating, in connection with such notice, the name of such Person and the material terms and conditions of any proposals or offers and thereafter shall keep FEI informed, on a current basis, on the status and terms of any such proposals or offers and the status of any such negotiations or discussions. Micrion also will promptly request each Person that has heretofore executed a confidentiality agreement in 34 connection with its consideration of a Takeover Proposal to return all confidential information heretofore furnished to such Person by or on behalf of it or any of its subsidiaries. 3.3 ACCESS. For the period up to and including the Closing Date, Micrion and FEI will provide to each other and their authorized agents access to all physical assets, facilities, financial information, production records, contracts and other corporate records and document as the other reasonably requests and will allow the other and the other's authorized agents to meet with management personnel, employees and any outside consultants, including without limitation auditors and accountants, investment and other bankers, tax and financial advisors and environmental consultants; provided that no investigation by either Micrion or FEI or any of its Representatives pursuant to this Section 3.3 will affect any representation, warranty or closing condition of the other party to this Agreement and provided, further, that the foregoing shall not require FEI or Micrion to permit any inspection, or to disclose any information, that in the reasonable judgment of the nondisclosing party, would result in a violation of applicable law or would result in the disclosure of any trade secrets of third parties or violate any of its obligations with respect to confidentiality if the nondisclosing party shall have used all best efforts to obtain the consent of such third party to such inspection or disclosure. 3.4 HART SCOTT RODINO. Each of Micrion and FEI will promptly after executing this Agreement prepare and file with the Federal Trade Commission (the "FTC") and the Department of Justice (the "DOJ") the premerger notification form required under the HSR Act and a request for early termination of the waiting period provided under the HSR Act and similar foreign pre-merger notifications. The parties will further take all reasonable steps to (i) cooperate with each other in connection with such filings, which cooperation will include, but not be limited to, furnishing the other with such information or documents as may be reasonably required in connection with such filings as permitted by applicable law; (ii) promptly file after any request by the FTC or the DOJ any appropriate information or documents so requested by the FTC or the DOJ; and (iii) notify each other of any other communications with the FTC or the DOJ that relate to the transactions contemplated by this Agreement and, to the extent appropriate, permit the other to participate in any conferences with the FTC or the DOJ. The parties will use best efforts to accelerate and obtain HSR Act clearance; provided, however, that nothing in this Section 3.4 will require, or be construed to require, Micrion or FEI to proffer to, or agree to, any concession, condition, requirement or restriction of any Governmental Entity which either the Micrion Board or the FEI Board, reasonably determines in good faith would so materially adversely impact the economic or business benefits of the transactions contemplated by this Agreement as to render inadvisable the consummation of the Merger. Each of Micrion and FEI will pay its own expenses in connection with the preparation of the premerger notification form. 3.5 OTHER GOVERNMENT CONSENTS. Promptly following the execution of this Agreement, the parties will proceed to prepare and file with the appropriate Governmental Entities any requests for approval or waiver (in addition to those specifically described above), if any, that are required from Governmental Entities in connection with the transactions contemplated by this Agreement, and the parties will diligently and expeditiously prosecute and cooperate fully in the 35 prosecution of such requests for approval or waiver and all proceedings necessary to secure such approvals and waivers; provided, however, that nothing in this Section 3.5 will require, or be construed to require, Micrion or FEI to proffer to, or agree to, any concession, condition, requirement or restriction of any Governmental Entity which either the FEI Board or the Micrion Board reasonably determines in good faith would so materially adversely impact the economic or business benefits of the transactions contemplated by this Agreement as to render inadvisable the consummation of the Merger. 3.6 REASONABLE BEST EFFORTS; NO INCONSISTENT ACTION. Except as otherwise provided in this Agreement, each party will use its reasonable best efforts to effect the transactions contemplated by this Agreement and to fulfill the conditions to the obligations of the opposing parties set forth in Article 4 of this Agreement. Except as otherwise provided in this Agreement, no party will take any action inconsistent with its obligations under this Agreement or that could hinder or delay the consummation of the transactions contemplated by this Agreement, except that nothing in this Section 3.6 will limit the rights of the parties under Article 4 of this Agreement. 3.7 CHANGED CIRCUMSTANCES. Each of Micrion and FEI will notify the other party promptly of any fact or occurrence between the date of this Agreement and the Closing Date of which it becomes aware which would make any of the conditions to Closing of the other party to this Agreement not capable of being satisfied and of any event, change or effect that has had or is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on it. 3.8 FEES AND EXPENSES. Except as provided in Section 5.5, all fees and expenses incurred in connection with the Merger, this Agreement, and the transactions contemplated by this Agreement will be paid by the party incurring such fees or expenses, whether or not the Merger is completed. 3.9 RIGHTS AGREEMENT. Except as provided in Section 2.1.23, Micrion will not redeem the Rights or amend or terminate the Rights Agreement before the earlier of Effective Time or the termination of this Agreement unless required to do so by order of a court of competent jurisdiction. 3.10 OPTIONS AND WARRANTS. Prior to the Effective Time, Micrion and FEI will take such actions as may be necessary so that at the Effective Time each Micrion option and warrant outstanding will be terminated as provided in Section 1.9.6 of this Agreement. 3.11 PRESS RELEASES. No press releases or other public announcements concerning the transactions contemplated by this Agreement may be made by any of the parties without the prior written consent of each of the other parties, which consent will not be unreasonably withheld; provided, however, that nothing in this provision will prevent a party from making such releases or announcements as are necessary for a party to satisfy its legal obligations or the requirements of the Nasdaq National Market or the SEC and then only after prior consultation with the other party. 36 3.12 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. (a) From and after the Effective Time, FEI agrees that it will indemnify and hold harmless each present and former director and officer of Micrion (when acting in such capacity) (each an "Indemnified Party" and, collectively, the "Indemnified Parties"), against any costs or expenses (including, without limitation, reasonable attorneys' fees, costs of investigation and fees of other advisers and experts), judgments, fines, losses, claims, damages or liabilities (collectively, "Costs") incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, including, without limitation, claims, actions, suits, proceedings or investigations by or on behalf of any present or former shareholder of Micrion, arising out of matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent that Micrion would have been permitted under Massachusetts Law and its Articles of Organization or Bylaws in effect on the date hereof to indemnify such Person (and FEI shall also advance expenses as incurred to the fullest extent permitted under applicable law; provided the Person to whom expenses are advanced provides a written affirmation of his or her good faith belief that the standard of conduct necessary for indemnification has been met, and an undertaking to repay such advances if it is ultimately determined that such Person is not entitled to indemnification). (b) Any Indemnified Party wishing to claim indemnification under paragraph (a) of this Section 3.12, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify FEI thereof, but the failure to so notify shall not relieve FEI of any liability it may have to such Indemnified Party if such failure does not materially prejudice the indemnifying party. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) FEI or the Surviving Corporation shall have the right to assume the defense thereof and FEI shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if FEI or the Surviving Corporation elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues which raise conflicts of interest between FEI or the Surviving Corporation and the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to them, and FEI or the Surviving Corporation shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received; provided, however, that FEI shall be obligated pursuant to this paragraph (b) to pay for only one firm of counsel for all Indemnified Parties in any jurisdiction unless the use of one counsel for such Indemnified Parties would present such counsel with a conflict of interest, (ii) the Indemnified Parties will cooperate in the defense of any such matter and (iii) FEI shall not be liable for any settlement effected without its prior written consent; and provided, further, that FEI shall not have any obligation hereunder to any Indemnified Party if and when a court of competent jurisdiction shall ultimately determine, and such determination 37 shall have become final and non-appealable, that the indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. (c) The Surviving Corporation shall maintain Micrion's existing officers' and directors' liability insurance for a period of five years after the Effective Time; provided, however, that if the existing officers' and directors' insurance expires, is terminated or canceled during such five-year period, the Surviving Corporation will obtain officers' and directors' liability insurance for the remainder of such period of at least the same coverage and amounts containing terms and conditions that are not less advantageous to the Indemnified Parties and that is issued by an insurer having a claims-paying rating at least as good as the rating of the issuer of Micrion's existing policy. (d) The provisions of this Section 3.12 are intended to be for the benefit of, and shall be enforceable by, each of the Indemnified Parties, their heirs and their representatives. 3.13 OTHER AGREEMENTS AND RELATED DOCUMENTS. 3.13.1 STOCK OPTION AGREEMENT. Contemporaneously with the execution of this Agreement, FEI and Micrion will execute and deliver the 19.9% Stock Option Agreement substantially in the form attached hereto as Exhibit B. 3.13.2 EMPLOYMENT AGREEMENT. At or prior to Closing, FEI and at least 10 of the 12 individuals listed on Schedule 3.13.2 will enter into employment agreements substantially in the form attached hereto as Exhibit C (each, an "Employment Agreement"), to be effective upon Closing; provided that Nicholas P. Economou will be one of the ten individuals who enters into such an Employment Agreement. 3.13.3 ASSIGNMENT OF PATENTS AND TRADEMARKS. At Closing, Micrion will execute assignments of its patents and trademarks to FEI substantially in the forms attached as Exhibit D-1 and D-2. 3.14 FEI BOARD OF DIRECTORS. Effective upon Closing, FEI will cause Nicholas P. Economou to be elected or appointed to the FEI Board. 3.15 GOLDEN PARACHUTES. Not later than five days before the Closing Date, Micrion shall amend the terms of any Micrion compensation or benefit plan, or any other agreement to which Micrion is a party, that is listed on Schedule 2.1.12(d) so that neither Micrion nor FEI following consummation of the Merger shall be required to make a payment that would be a "parachute payment" to a "disqualified individual," as those terms are defined in Section 280G of the Code. 38 3.16 AUTHORIZED SHARES. Prior to Closing, FEI will amend its Articles of Incorporation to increase the number of its authorized shares of Common Stock to allow the issuance of the shares of FEI Common Stock included in the Merger Consideration. ARTICLE 4 CONDITIONS TO THE PARTIES' OBLIGATIONS TO CONSUMMATE THE MERGER 4.1 MUTUAL CONDITIONS. The respective obligations of each party to consummate the Merger are subject to the following conditions: 4.1.1 GOVERNMENTAL AUTHORIZATIONS. All filings required to be made prior to the Effective Time with, and all consents, approvals and authorizations required to be obtained prior to the Effective Time from, any Governmental Entities in order to consummate the transactions contemplated by this Agreement, will have been made or obtained, as the case may be, and the waiting period (and any extension thereof) under the HSR Act and any applicable competition laws of any jurisdiction will have expired or been terminated (collectively, the "Required Approvals"). 4.1.2 STOCKHOLDER APPROVAL. At duly called and held Stockholders' Meetings, acting in accordance with applicable provisions of their respective state corporation laws and their respective organizational documents and bylaws and the rules of the Nasdaq National Market and federal securities laws, Micrion shall have obtained the approval of the Merger by the holders of at least two-thirds of the issued and outstanding shares of Micrion Common Stock entitled to vote thereon and FEI shall have obtained the approval of the holders of at least a majority of the issued and outstanding shares of FEI Common Stock entitled to vote thereon on the matters submitted to FEI shareholders in the Proxy Statement. 4.1.3 NO PROHIBITIONS. There shall not have been promulgated or issued a law, statute, rule, regulation, decree, order, injunction or ruling by any Governmental Entity that remains in effect and prohibits, restrains or enjoins the consummation of the Merger; provided, however, that each party shall use its reasonable best efforts to have any such decree or order reversed or vacated. 4.1.4 NO SUITS. No action, suit or other proceeding shall have been overtly threatened by any Governmental Entity or be pending against any party to this Agreement to prohibit, restrain or enjoin or otherwise prevent the consummation of the transactions contemplated by this Agreement. 4.1.5 NASDAQ LISTING. The shares of FEI Common Stock issuable to Micrion stockholders shall have been authorized for inclusion on the Nasdaq National Market. FEI shall use its reasonable best efforts to effect the inclusion of all such shares on the Nasdaq National Market. 39 4.1.6 FORM S-4. No stop order suspending the effectiveness of the Form S-4 shall have been issued, and no proceedings for that purpose shall have been instituted or threatened by the SEC. 4.1.7 REGULATORY BURDENS. No Regulatory Approval shall have imposed any condition, requirement or restriction which the FEI Board or the Micrion Board determines in good faith would so materially adversely impact the economic or business benefits of the transactions contemplated by this Agreement to FEI and its stockholders or Micrion and its stockholders, as the case may be, as to render inadvisable the consummation of the Merger. 4.2 CONDITIONS TO OBLIGATIONS OF FEI. The obligations of FEI and Sub to effect the Merger are also subject to the satisfaction or waiver by FEI at or prior to the Effective Time of the following conditions: 4.2.1 REPRESENTATIONS AND WARRANTIES; COVENANTS. Except with respect to the representation of Micrion regarding Indebtedness contained in Section 2.1.30, (i) the representations and warranties of Micrion set forth in this Agreement (A) to the extent qualified by Material Adverse Effect shall be true and correct and (B) to the extent not qualified by Material Adverse Effect shall be true and correct, except that this clause (B) shall be deemed satisfied so long as any failures of such representations and warranties to be true and correct, taken together, do not have a Material Adverse Effect on Micrion, in each case (A) and (B), as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties speak of an earlier date); and (ii) except with respect to the covenant of Micrion regarding Indebtedness contained in Section 3.1.2(a), Micrion shall have performed and complied in all material respects with all covenants, obligations and agreements required to be performed and complied with by it under this Agreement at or prior to the Closing Date, and FEI shall have received a certificate signed on behalf of Micrion by an executive officer of Micrion to the effect of (i) and (ii). If the representation contained in Section 2.1.30 is not true and correct as of the Closing Date or if the Micrion covenant contained in Section 3.1.2(a) has not been complied with, the following provisions shall apply: (1) CLOSING ON OR PRIOR TO MARCH 31, 1999. If the Closing occurs on or prior to March 31, 1999, if Micrion Indebtedness at Closing is greater than $17,681,000, the Cash Portion will be reduced by an amount equal to the Indebtedness in excess of $17,681,000 divided by the number of Micrion Shares for which Merger Consideration will be paid pursuant to Section 1.6.1. If Micrion Indebtedness at Closing is greater than $21,844,000, FEI will be entitled to terminate this Agreement pursuant to Section 5.4(c). (2) CLOSING AFTER MARCH 31, 1999 AND ON OR PRIOR TO JUNE 30, 1999. If the Closing occurs after March 31, 1999 and on or prior to June 30, 1999, if Micrion Indebtedness at Closing is greater than $16,844,000, the Cash Portion will be reduced by 40 an amount equal to the Indebtedness in excess of $16,844,000 divided by the number of Micrion Shares for which Merger Consideration will be paid pursuant to Section 1.6.1. If Micrion Indebtedness at Closing is greater than $21,844,000, FEI will be entitled to terminate this Agreement pursuant to Section 5.4(c). (3) CLOSING AFTER JUNE 30, 1999. If the Closing occurs after June 30, 1999, if Micrion Indebtedness at Closing is greater than $16,007,000, the Cash Portion will be reduced by an amount equal to the Indebtedness in excess of $16,007,000 divided by the number of Micrion Shares for which Merger Consideration will be paid pursuant to Section 1.6.1. If Micrion Indebtedness at Closing is greater than $23,507,000, FEI will be entitled to terminate this Agreement pursuant to Section 5.4(c). (4) ALL STOCK CONSIDERATION. If the Merger Consideration consists solely of shares of FEI Common Stock pursuant to Section 1.6.2 and Micrion Indebtedness at Closing is greater than $17,681,000, $16,844,000 or $16,007,000, for Closing at the time specified in (1), (2) or (3) above, respectively, then the number of shares of FEI Common Stock to be issued to each Micrion stockholder as Merger Consideration will be reduced by a number equal to (a) (i) the amount of the applicable excess Indebtedness pursuant to paragraph (1), (2) or (3) above, divided by (ii) the Pre-Closing Average Price, divided by (b) the number of Micrion Shares outstanding prior to such reduction. 4.2.2 DISSENTING SHARES. No more than fifteen percent (15%) of the total issued and outstanding Micrion Shares (taking into account all Micrion Shares issued or issuable pursuant to options, warrants, convertible securities or other rights to acquire Micrion Shares) shall be Dissenting Shares. 4.2.3 DELIVERY OF EXHIBITS AND MICRION OFFICERS' CERTIFICATES. FEI shall have received an Employment Agreement with at least 10 of the 12 individuals listed on Schedule 3.13.12 including an Employment Agreement with Nicholas Economou, the 19.9% Stock Option Agreement, the Patent Assignment and the Trademark Assignment, all executed by the parties thereto, and the certificate of Micrion officers referred to in Section 4.2.1. 4.3 CONDITIONS TO OBLIGATIONS OF MICRION. The obligations of Micrion to effect the merger are also subject to the satisfaction or waiver by Micrion at or prior to the Effective Time of the following conditions: 4.3.1 REPRESENTATIONS AND WARRANTIES; COVENANTS. (i) The representations and warranties of FEI set forth in this Agreement (A) to the extent qualified by Material Adverse Effect shall be true and correct and (B) to the extent not qualified by Material Adverse Effect shall be true and correct, except that this clause (B) shall be deemed satisfied so long as any failures of such representations and warranties to be true and correct, taken together, do not have a Material Adverse Effect on FEI, in each case (A) and (B), as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties speak of 41 an earlier date); and (ii) FEI shall have performed and complied in all material respects with all material obligations and agreements required to be performed and complied with by it under this Agreement at or prior to the Closing Date. Micrion shall have received a certificate signed on behalf of FEI by an executive officer of FEI to the effect of (i) and (ii). 4.3.2 DEPOSIT OF CERTIFICATES AND FUNDS. FEI shall have deposited the shares of FEI Common Stock and funds (if the Merger Consideration will be paid pursuant to Section 1.6.1) specified in Section 1.9.1 hereof. 4.3.3 DELIVERY OF CERTIFICATES BY FEI. Micrion shall have received the certificate of FEI officers referred to in Section 4.3.1. ARTICLE 5 TERMINATION 5.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the approvals by stockholders of Micrion and FEI by mutual written consent of Micrion and FEI by action of their respective Boards of Directors. 5.2 TERMINATION BY EITHER PARTY. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by action of either the FEI Board or the Micrion Board if any one of the following conditions are met: (a) the Merger shall not have been consummated by October 31, 1999, whether such date is before or after the date of approvals by the stockholders of Micrion or FEI, provided, that the right to terminate this Agreement pursuant to this clause (a) shall not be available to any party that has breached in any material respect its obligations under this Agreement in any manner that shall have proximately contributed to the occurrence of the failure of the Merger to be consummated; (b) the approval of Micrion's stockholders required by Section 4.1.2 shall not have been obtained at a meeting duly convened therefor or at any adjournment or postponement thereof; (c) the approval of FEI' shareholders as required by Section 4.1.2 shall not have been obtained at a meeting duly convened therefor or at any adjournment or postponement thereof; (d) any order permanently restraining, enjoining or otherwise prohibiting consummation of the Merger shall become final and nonappealable (whether before or after the approval by the stockholders of Micrion or FEI); or 42 (e) if the Pre-Closing Average Price is less than $3.00, subject to Equitable Adjustment. 5.3 TERMINATION BY MICRION. This Agreement may be terminated and the Merger may be abandoned by action of the Micrion Board, whether before or after the approval by stockholders of Micrion: (a) at any time prior to the Effective Time if there has been a material breach by FEI of any representation, warranty, covenant or agreement contained in this Agreement that is not curable or, if curable, is not cured within a reasonable time (but in no event more than 45 days) after written notice of such breach is given by FEI to Micrion; (b) at any time prior to the Effective Time, if all of the following conditions are met: (1) Micrion is not in material breach of any of its covenants contained in Section 3.2, 3.4, 3.5 and 3.6 of this Agreement, (2) the Micrion Board authorizes Micrion, subject to complying with the terms of this Agreement, to enter into a binding written agreement concerning a transaction that constitutes a Superior Proposal and Micrion notifies FEI in writing that it intends to enter into such an agreement, attaching a summary of the material terms thereof, (3) FEI does not make, within five business days after receipt of Micrion's written notification of its intention to enter into a binding agreement for a Superior Proposal, an offer that the Micrion Board determines, in good faith consistent with its fiduciary obligations under applicable law after consultation with its financial advisors, is at least as favorable, taking into account, among other things, the long-term prospects and interests of Micrion and its stockholders, as the Superior Proposal, and (4) Micrion promptly, but in no event later than two business days after the date of such termination, pays to FEI in immediately available funds the fees required to be paid pursuant to Section 5.5. Micrion agrees (i) that it will not enter into a binding agreement referred to in clause 5.3 (b)(2) above until at least the sixth business day after it has provided the notice to FEI required thereby and (ii) to notify FEI promptly if its intention to enter into a written agreement referred to in its notification changes at any time after giving such notification; or (c) within five business days following receipt by Micrion of written notice from FEI that the Stock Purchase Agreement has been terminated. 43 5.4 TERMINATION BY FEI. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the approval by the stockholders of FEI, by action of the FEI Board if any one of the following conditions are met: (a) Micrion enters into a binding agreement for a Superior Proposal or the Micrion Board recommends a Superior Proposal or shall have withdrawn or adversely modified its approval or recommendation of this Agreement or failed to reconfirm its recommendation of this Agreement within five business days after a written request by FEI to do so; (b) there has been a material breach by Micrion of any representation, warranty, covenant or agreement contained in this Agreement that is not curable or, if curable, is not cured within a reasonable time (but in no event more than 45 days) after written notice of such breach is given by FEI to Micrion; (c) if Micrion Indebtedness at Closing exceeds the applicable amount specified in the last sentence of either subsection 4.2.1(1), 4.2.1(2), or 4.2.1.(3); (d) if Micrion, any of its subsidiaries or any of their Representatives shall take any actions pursuant to clause (b), (c) or (d) of the proviso set forth in Section 3.2; provided that if Micrion or any of its representatives shall take any actions pursuant to clause (b) or (c) of such proviso, FEI may only terminate this Agreement no later than 30 days following the date on which Micrion provides notice to FEI that it has taken such action; or 5.5 EFFECT OF TERMINATION. 5.5.1 In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article V, this Agreement shall become void and of no effect with no liability on the part of any party hereto (or of any of its directors, officers, employees, agents, legal and financial advisors or other representatives); provided, however, no such termination shall relieve any party hereto of any liability or damages resulting from any breach of this Agreement. 5.5.2 In the event that: (i) a Takeover Proposal shall have been made to Micrion or any of its stockholders or any Person shall have publicly announced an intention (whether or not conditional) to make a Takeover Proposal with respect to Micrion and thereafter this Agreement is terminated by either FEI or Micrion pursuant to Section 5.2(b), or (ii) this Agreement is terminated (A) by Micrion pursuant to Section 5.3(b) or (B) by FEI pursuant to Section 5.4(a) or Section 5.4(d) (in the case of 5.4(d), 44 only with respect to termination by FEI because Micrion, any of its subsidiaries or any of their Representatives shall have taken any actions pursuant to clause (d) of the proviso set forth in Section 3.2) or because of a breach of Section 3.2 by Micrion, then Micrion shall promptly, but in no event later than two business days after the date of such termination or such earlier time as required by this Agreement, pay FEI a termination fee of $3.5 million (the "Termination Fee"), payable by wire transfer of same day funds. If this Agreement is terminated by FEI pursuant to Section 5.4(d) because Micrion, any of its subsidiaries or any of their Representatives shall have taken any actions pursuant to clause (b) or (c) of the proviso set forth in Section 3.2 and Micrion consummates an agreement for a Takeover Proposal within nine months after FEI's termination of this Agreement, Micrion shall promptly, but in no event later than the date of such consummation, pay to FEI the Termination Fee. 5.5.3 Micrion acknowledges that the agreements contained in Section 5.5 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, FEI and Sub would not enter into this Agreement; accordingly, if Micrion fails to promptly pay the amount due pursuant to Section 5.5.2 and, in order to obtain such payment, FEI commences a suit which results in a judgment against Micrion for the fee set forth therein, Micrion shall pay to FEI its reasonable costs and expenses (including attorneys' fees) in connection with such suit, together with interest from the date of termination of this Agreement on the amounts owed at the prime rate as announced by Key Bank of Oregon in effect from time to time during such period plus two percent. ARTICLE 6 GENERAL PROVISIONS 6.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement will survive the Effective Time. 6.2 FURTHER ACTION. Micrion, Sub, and FEI will execute any documents and take any additional action reasonably required to implement fully this Agreement. 6.3 ENTIRE AGREEMENT. This Agreement (including any exhibits hereto), the Confidentiality Agreement and the Exchange Of Information and Joint Defense Agreement constitute the entire agreement and understanding among Micrion, Sub, and FEI regarding the subject matter hereof and thereof and supersede and replace all prior or contemporaneous negotiations, representations, understandings or agreements, whether written or oral among the parties with respect to the subject matter hereof. No party to this Agreement is relying on any representations or warranties other than those that are set forth in this Agreement. 45 6.4 ASSIGNMENT. This Agreement may not be assigned by any party or by operation of law without the prior written consent of all parties. 6.5 BINDING EFFECT; NO THIRD PARTY BENEFIT. This Agreement will inure to the benefit of and be binding upon each of the parties and their respective successors and assigns, subject to the restrictions on assignment contained in Section 6.4. Nothing express or implied in this Agreement is intended or will be construed to confer upon or give to any Person other than the parties to this Agreement any rights or remedies under or by reason of this Agreement or any transaction contemplated by it, except with respect to Section 3.12. 6.6 WAIVER. Failure of any party at any time to require performance of any provision of this Agreement will not limit such party's right to enforce such provision, nor will any waiver of any breach of any provision of this Agreement constitute a waiver of any succeeding breach of such provision or a waiver of such provision itself. Any waiver of any provision of this Agreement will be effective only if set forth in writing and signed by the party to be bound. 6.7 GOVERNING LAW. This Agreement will be governed and construed in accordance with the laws of the State of Oregon. 6.8 SEVERABILITY. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any Person or circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction. 6.9 TIME OF ESSENCE. Micrion, Sub and FEI hereby acknowledge and agree that time is strictly of the essence with respect to each and every term, condition, obligation, and provision of this Agreement. 6.10 COUNTERPARTS. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which taken together will constitute one and the same instrument, binding on the parties. If this Agreement is executed in counterparts, each party will transmit by facsimile a copy of the signed counterpart upon execution and will cause an executed original counterpart to be transmitted by courier service to the other parties. 6.11 AMENDMENTS. This Agreement may not be modified or amended except by the written agreement of Micrion, Sub and FEI. This Agreement may not be terminated other than pursuant to Article 5 except by the written agreement of Micrion, Sub and FEI. A party may 46 waive one or more of its rights under this Agreement only in a written instrument signed by such party. 6.12 NOTICES. All notices or other communications required or permitted under this Agreement must be in writing and must be personally delivered, sent by registered or certified mail, postage prepaid, return receipt requested, or sent by facsimile. Any notice, if mailed, will be deemed given when received; any notice, if transmitted by facsimile, will be deemed given when transmitted and electronically confirmed. Notices will be given to the following Persons: To FEI: Mr. Vahe Sarkissian FEI Company 7451 NW Evergreen Parkway Hillsboro, Oregon 97124 Facsimile No.: (503) 640-7570 With a copy to: Stephen E. Babson Stoel Rives LLP 900 SW Fifth Avenue, Suite 2300 Portland, OR 97204 Facsimile No.: (503) 220-2480 To Micrion: Dr. Nicholas P. Economou Micrion Corporation One Corporation Way Peabody, MA 01960 Facsimile No.: (978) 531-9648 With a copy to: Ms. Roslyn G. Daum Choate, Hall & Stewart Exchange Place, 53 State Street Boston, MA 02109 Facsimile No.: (617) 248-4000 or to such other persons or addresses as may be designated in writing by a party. 6.13 VOTING AGREEMENTS. Philips has duly executed and delivered to Micrion a Voting Agreement substantially in the form of Exhibit F-1 hereto with respect to all shares of FEI Common Stock owned by Philips and all executive officers of Micrion have duly executed and delivered to FEI Voting Agreements substantially in the form of Exhibit F-2 with respect to the shares held by those individuals. 6.14 SCHEDULES. Disclosure of any fact or item in any Schedule hereto shall be deemed to have been so disclosed in any other Schedule hereto provided that disclosure of such fact or item 47 on such Schedule contains fair disclosure of the facts that would otherwise be required to be disclosed in such other Schedule. Matters reflected in the Schedules hereto are not necessarily limited to matters required by this Agreement to be disclosed herein, are not necessarily indicative of "materiality" and may be provided for information purposes only. IN WITNESS WHEREOF, the parties have executed this Agreement, effective the day and year first written above. FEI COMPANY MICRION CORPORATION By: /s/ Vahe Sarkissian By: /s/ Nicholas P. Economou ------------------------ ------------------------- (Signature) (Signature) Name: Vahe Sarkissian Name: Nicholas P. Economou Title: Chief Executive Officer Title: Chief Executive Officer MC ACQUISITION CORPORATION By: /s/ Vahe Sarkissian ------------------------ (Signature) Name: Vahe Sarkissian Title: Chief Executive Officer 48 EX-9 4 VOTING AGREEMENT, DATED 12/3/98 VOTING AGREEMENT THIS SHAREHOLDER VOTING AGREEMENT (the "Agreement") is entered into as of December 3, 1998, between Philips Business Electronics International B.V., a shareholder (the "Shareholder") of FEI Company, an Oregon corporation ("FEI"), and Micrion Corporation, a Massachusetts corporation (the "Company"). WHEREAS, contemporaneously with the execution and delivery of this Agreement, FEI, the Company and MC Acquisition Corporation are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which the Company will merge (the "Merger") with MC Acquisition Corporation, upon the terms and conditions set forth therein; and WHEREAS, the Shareholder owns a majority of the outstanding capital stock of FEI and desires that the Merger occur; NOW, THEREFORE, for good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Representations of Shareholder. The Shareholder represents that it (a) is the holder, free and clear of all liens and encumbrances, of 9,942,423 shares of the Common Stock of FEI (the Shareholder's "Shares"), (b) does not beneficially own (as such term is defined in the Securities Exchange Act of 1934, as amended (the "1934 Act")) any shares of the Common Stock of FEI other than its Shares, except for 1,242,048 shares of Common Stock of FEI that the Shareholder has a right to receive upon exercise of certain options held by holders of options to purchase shares of Common Stock of FEI and (c) has full power and authority to make, enter into and carry out the terms of this Agreement. 2. Agreement to Vote Shares. The Shareholder agrees to vote its Shares and any New Shares (as defined in Section 6 hereof), and shall cause any holder of record of its Shares or New Shares to vote in favor of (a) a proposal (the "Amendment Proposal") to approve and adopt an amendment to the Articles of Incorporation of FEI to increase the number of authorized shares of the Common Stock of FEI to allow the issuance of shares of Common Stock of FEI included in the Merger Consideration (as defined in the Merger Agreement) and (b) a proposal (the "Issuance Proposal" and, together with the Amendment Proposal, the "Proposals") to approve the issuance of shares of Common Stock of FEI pursuant to the Merger Agreement and the Stock Purchase Agreement. The Shareholder agrees to deliver to Nicholas P. Economou, President of the Company, immediately upon request therefor a proxy substantially in the form attached hereto as Exhibit A, which proxy shall be irrevocable to the extent permitted by law (except that such proxy shall be deemed automatically revoked upon a termination of this Agreement), with the total number of his Shares and any New Shares correctly indicated thereon. 3. No Voting Trusts. After the date hereof, the Shareholder agrees that it has not and will not, nor has it or will it permit any entity under its control to, deposit any of its Shares in a voting trust or subject any of its Shares to any arrangement with respect to the voting of such Shares other than agreements entered into with the Company. 4. No Proxy Solicitations. The Shareholder agrees that it will not, nor will it permit any entity under its control to, (a) solicit proxies or become a "participant" in a "solicitation" (as such terms are defined in Regulation 14A under the 1934 Act) in opposition to or competition with the Proposals or otherwise encourage or assist any party in taking or planning any action which would compete with or otherwise serve to interfere with or inhibit the timely approval of the Proposals, (b) directly or indirectly encourage, initiate or cooperate in a shareholders' vote or action by consent of FEI's shareholders in opposition to or in competition with the Proposals or (c) become a member of a "group" (as such term is used in Section 13(d) of the 1934 Act) with respect to any voting securities of FEI for the purpose of opposing or competing with the approval of the Proposals. 5. Transfer and Encumbrance. Except for gifts given without consideration where the recipient thereof agrees to execute a voting agreement in form and substance similar to this Agreement, on or after the date hereof, the Shareholder agrees not to voluntarily transfer, sell, offer, pledge or otherwise dispose of or encumber any of its Shares or New Shares prior to the termination of this Agreement in accordance with its terms. 6. Additional Purchases. The Shareholder agrees that it will not purchase or otherwise acquire beneficial ownership of any shares of the Common Stock after the execution of this Agreement ("New Shares"), nor will it voluntarily acquire the right to vote or share in the voting of any shares of the Common Stock other than the Shares, unless it agrees to deliver to the Company immediately after such purchase or acquisition a proxy substantially in the form attached hereto as Exhibit A, which shall be irrevocable to the extent permitted by law (except that such proxy shall be deemed automatically revoked upon a termination of this Agreement) with respect to such New Shares. The Shareholder also agrees that any New Shares acquired or purchased by it shall be subject to the terms of this Agreement to the same extent as if they constituted Shares. -2- 7. Specific Performance. Each party hereto severally acknowledges that it will be impossible to measure in money the damage to the other party if a party hereto fails to comply with any of the obligations imposed by this Agreement, that every such obligation is material and that, in the event of any such failure, the other party will not have an adequate remedy at law or damages. Accordingly, each party hereto severally agrees that injunctive relief or other equitable remedy, in addition to remedies at law or damages, is the appropriate remedy for any such failure and will not oppose the granting of such relief on the basis that the other party has an adequate remedy at law. Each party hereto severally agrees that it will not seek, and agrees to waive any requirement for, the securing or posting of a bond in connection with any other party's seeking or obtaining such equitable relief. 8. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and shall not be assignable without the written consent of all other parties hereto. 9. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof, and this Agreement supersedes all prior agreements, written or oral, between the parties hereto with respect to the subject matter hereof. This Agreement may not be amended, supplemented or modified, and no provisions hereof may be modified or waived, except by an instrument in writing signed by all the parties hereto. No waiver of any provisions hereof by any party shall be deemed a waiver of any other provisions hereof by any such party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such party. 10. Miscellaneous (a) This Agreement shall be deemed a contract made under, and for all purposes shall be construed in accordance with, the laws of the State of The Commonwealth of Massachusetts. (b) If any provision of this Agreement or the application of such provision to any person or circumstances shall be held invalid by a court of competent jurisdiction, the remainder of the provision held invalid and the application of such provision to persons or circumstances, other than the party as to which it is held invalid, shall not be affected. (c) This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. -3- (d) This Agreement shall terminate upon the earliest to occur of (i) the consummation of the Merger or (ii) termination of the Merger Agreement. (e) All Section headings herein are for convenience of reference only and are not part of this Agreement, and no construction or reference shall be derived therefrom. (f) The obligations of the Shareholder set forth in this Agreement shall not be effective or binding upon it until after such time as the Merger Agreement is executed and delivered by the Company, FEI and MC Acquisition Corporation. The parties agree that there is not and has not been any other agreement, arrangement or understanding between the parties hereto with respect to the matters set forth herein. [The remainder of this page is left blank intentionally.] -4- IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first written above. MICRION CORPORATION By: /s/ Nicholas P. Economou -------------------------------- Name: Nicholas P. Economou Title: Chairman, President and CEO PHILIPS BUSINESS ELECTRONICS INTERNATIONAL B.V. By: /s/ Theo Sonnemans -------------------------------- Name: Theo Sonnemans Title: CFO and Vice President -5- EXHIBIT A FORM OF PROXY The undersigned, for consideration received, hereby appoints Nicholas P. Economou, President of the Micrion Corporation ("Micrion"), and David M.. Hunter, and Vice President and Chief Financial Officer of the Micrion, its proxy, with power of substitution, to vote all shares of common stock of FEI Company, an Oregon corporation ("FEI"), owned by the undersigned at the upcoming Special Meeting of Stockholders of FEI, and at any adjournment thereof, FOR approval and adoption of (i) an amendment to the Articles of Incorporation of FEI to increase the number of authorized shares of the Common Stock of FEI to allow the issuance of shares of Common Stock of FEI included in the Merger Consideration (as defined in that certain Merger Agreement, dated as of December 1, 1998, between the FEI, Micrion and MC Acquisition Corporation) and (ii) a proposal to approve the issuance of shares of Common Stock of FEI pursuant to the Merger Agreement and the Stock Purchase Agreement, and AGAINST any proposal that would compete with or serve to interfere or inhibit the timely adoption thereof. This proxy is coupled with an interest and is irrevocable until such time as the Voting Agreement, dated as of December 3, 1998, among the undersigned and Micrion terminates in accordance with its terms. Dated , 199 --------------------- -- PHILIPS BUSINESS ELECTRONICS INTERNATIONAL B.V. ------------------------------------ Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----