Exhibit 4.3


 


Execution
Copy


 


FEI COMPANY

(an Oregon corporation)


 


$100,000,000

2.875% Convertible Subordinated Notes due 2013


 


PURCHASE AGREEMENT


 


May 16, 2006


 


Merrill Lynch & Co.


Merrill Lynch, Pierce, Fenner & Smith

Incorporated


4 World Financial Center

New York, New York 10080


as Representative of the
several Initial Purchasers


 


Ladies
and Gentlemen:


 


FEI Company, an Oregon
corporation (the ”Company”),
confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated (“Merrill Lynch”),
and each of the other initial purchasers named in Schedule I hereto
(collectively, the ”Initial Purchasers,”
which term shall also include any initial purchaser substituted as provided in
Section 11 hereof), for whom Merrill Lynch is acting as representative (in
such capacity, the “Representative”),
with respect to the issue and sale by the Company and the purchase by the
Initial Purchasers, acting severally and not jointly, of the respective
principal amounts set forth in said Schedule I of $100,000,000
aggregate principal amount of the Company’s 2.875% Convertible Subordinated
Notes due 2013 (the ”Firm Notes”),
and with respect to the grant by the Company to the Initial Purchasers, acting
severally and not jointly, of the option described in Section 2(b) hereof
(the ”Option”) to purchase all or any
part of an additional $15,000,000 principal
amount of the Company’s 2.875% Convertible Subordinated Notes due 2013
(the ”Optional Notes” and, together with
the Firm Notes, the ”Notes”).


 


The Notes will be
convertible into fully paid, nonassessable shares of common stock of the
Company, no par value per share (the ”Common Stock”),
on the terms, and subject to the conditions, set forth in the Indenture (as
defined below). As used herein, “Conversion Shares”
means the shares of Common Stock into which the Notes are convertible, and each
Conversion Share will have attached thereto the right to purchase one
one-thousandth (0.001) of a share of the Series A Participating Preferred
Stock of the Company (each, a ”Right”),
issuable by the Company pursuant to the Preferred Stock Rights Agreement by and between the Company and Mellon
Investor Services LLC, as rights agent, dated as of July 21, 2005. The Notes will be issued pursuant to an
indenture (the ”Indenture”) to
be dated as of the First Delivery Date (as defined in Section 2(a)),
between the Company and The Bank of New York Trust Company, a California state
chartered banking corporation (the ”Trustee”).


 


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The Company understands that
the Initial Purchasers propose to make an offering of the Notes on the terms
and in the manner set forth herein and agrees that the Initial Purchasers may
resell, subject to the conditions set forth herein, all or a portion of the
Notes to purchasers (the ”Subsequent Purchasers”)
at any time after this agreement (the ”Agreement”)
has been executed and delivered. The Notes are to be sold to the Initial
Purchasers and subsequently offered and sold by the Initial Purchasers without
being registered under the Securities Act of 1933, as amended (the ”1933 Act”), in reliance upon exemptions therefrom. Pursuant
to the terms of the Notes and the Indenture, investors that acquire the Notes
may only resell or otherwise transfer such Notes if such Notes are hereafter
registered under the 1933 Act or if an exemption from the registration
requirements of the 1933 Act is available (including the exemption afforded by
Rule 144A (“Rule 144A”) of the rules and regulations promulgated under the 1933 Act
by the Securities and Exchange Commission (the ”Commission”)).


 


The Company (a) has prepared and delivered to each
Initial Purchaser an electronic copy of a preliminary offering memorandum dated
May 15, 2006, and a pricing term sheet attached hereto as Schedule II,
which includes the pricing terms and other information with respect to the
Notes and other matters not included in the Final Offering Memorandum (the “Pricing Term Sheet”) setting forth the terms of the Notes
omitted in the preliminary offering memorandum and (b) has prepared and will
deliver to each Initial Purchaser, no later than the second day after the date
hereof, copies of a final offering memorandum dated May 16, 2006 (the ”Final Offering Memorandum”), each for use by such Initial Purchaser
in connection with its solicitation of purchases of, or offering of, the Notes.
As used herein, the term “Offering Memorandum”
means, with respect to any date or time referred to in this Agreement, the most
recent offering memorandum (whether the Preliminary Offering Memorandum or the
Final Offering Memorandum, or any amendment or supplement to either such
document), including annexes and exhibits thereto and any documents
incorporated therein by reference, which in each case has been prepared and delivered
by the Company to the Initial Purchasers in connection with their solicitation
of purchases of, or offering of, the Notes.


 


All references in this
Agreement to financial statements and schedules and other information which is “contained,” “included” or “stated” in the Offering Memorandum (or other references of
like import) shall be deemed to include all such financial statements and
schedules and other information which are incorporated by reference in the
Offering Memorandum; and all references in this Agreement to amendments or
supplements to the Offering Memorandum shall be deemed to mean and include the
filing of any document under the Securities Exchange Act of 1934 (the ”1934 Act”) which is incorporated by reference in the
Offering Memorandum.


 


Holders of the Notes
(including the Initial Purchasers and their direct and indirect transferees)
will be entitled to the benefits of a Registration Rights Agreement, to be
dated as of the First Delivery Date and to be entered into by and between the Company
and the Initial Purchasers (the ”Registration Rights
Agreement”), pursuant to which the Company will agree to file with
the Commission a shelf registration statement (the ”Registration
Statement”) covering the resale of the Notes and the Conversion Shares
under the 1933 Act, and to use its commercially reasonable efforts to cause the
Registration Statement to be declared effective.


 


The preliminary offering
memorandum dated May 15, 2006, as amended and supplemented immediately prior to
the Applicable Time (as defined below), including any documents filed under the
1934 Act prior to the Applicable Time and incorporated by reference therein, is
referred to herein as the “Preliminary Offering
Memorandum,” and the Preliminary


 


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Offering Memorandum together with the Pricing Term Sheet and any of the
documents listed on Schedule III hereto are collectively referred to herein as
the “Disclosure Package.”  “Applicable Time”
means 7:00 a.m. (Eastern time) on May 16, 2006 or such other time as agreed by
the Company and the Initial Purchasers.


 


This Agreement, the
Indenture, the Notes and the Registration Rights Agreement are referred to
herein collectively as the “Operative Documents.”


 


1.             Representations,
Warranties and Agreements of the Company. The Company represents and warrants
to each Initial Purchaser as of the date hereof and as of each Delivery Date
(as defined in Section 2(b)), and agrees with each Initial Purchaser, as
follows:


 


(a)           Disclosure Package and Final
Offering Memorandum. At the
Applicable Time, the Disclosure Package did not, and at any Deliver Date (as
defined below), the Disclosure Package and the Final Offering Memorandum will
not, include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided
that this representation, warranty and agreement shall not apply to statements
in or omissions from the Disclosure Package and the Final Offering Memorandum
made in reliance upon and in conformity with written information furnished to
the Company by any Initial Purchaser for use in the Offering Memorandum.


 


(b)           Incorporated Documents. The Offering Memorandum as delivered from
time to time shall incorporate by reference the most recent Annual Report of
the Company on Form 10-K filed with the Commission and each Quarterly Report of
the Company on Form 10-Q and each Current Report of the Company on Form 8-K
filed with the Commission since the end of the fiscal year to which such Annual
Report relates. The documents incorporated or deemed to be incorporated by
reference in the Offering Memorandum at the time they were or hereafter are
filed with the Commission complied and will comply in all material respects
with the requirements of the 1934 Act and the rules and regulations of the
Commission thereunder (the ”1934 Act Regulations”),
and, when read together with the other information in the Disclosure Package at
the Applicable Time, and the Disclosure Package and the Final Offering
Memorandum at the Closing Time, did not and will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.


 


(c)           Independent Accountants. Deloitte & Touche LLP, who certified
the financial statements and supporting schedules, if any, included or
incorporated by reference in the Disclosure Package and the Final Offering Memorandum
are independent public accountants with respect to the Company and its
subsidiaries within the meaning of Regulation S-X promulgated under the 1933
Act.


 


(d)           Financial Statements. The financial statements, together with the
related schedules and notes, included, or incorporated by reference, in the
Disclosure Package and the Final Offering Memorandum present fairly the
financial position of the Company and its consolidated subsidiaries at the
dates indicated and the statement of operations, stockholders’ equity and cash
flows of the Company and its consolidated subsidiaries for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles (“GAAP”) applied
on a consistent basis throughout the periods involved. The supporting
schedules, if any, included, or incorporated by reference, in the Disclosure
Package


 


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and
the Final Offering Memorandum present fairly in accordance with GAAP the information
required to be stated therein. The summary consolidated financial information
included in the Disclosure Package and the Final Offering Memorandum present
fairly the information shown therein and have been compiled on a basis
consistent with that of the audited financial statements included in the
Disclosure Package and the Final Offering Memorandum. All disclosures included
or incorporated by reference in the Disclosure Package and the Final Offering
Memorandum regarding “non-GAAP financial measures” (as such term is defined by
the rules and regulations of the Commission) comply in all material respects
with Regulation G of the 1934 Act and Item 10 of Regulation S-K under the 1933
Act, to the extent applicable. There are no material weaknesses or significant
deficiencies in the Company’s process for recording and reporting bookings and
backlog of orders, and disclosure related to the Company’s bookings and backlog
of orders included or incorporated by reference in the Disclosure Package and
the Final Offering Memorandum is true, correct and complete in all material
respects.


 


(e)           Material Adverse Change. Since the respective dates as of which
information is given in the Disclosure Package and the Final Offering
Memorandum, except as otherwise stated therein, (i) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the ordinary
course of business (a ”Material Adverse Effect”),
(ii) there have been no transactions entered into by the Company or any of
its subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered as one
enterprise, (iii) there has not been any change in the capital stock or
long-term debt of the Company or any of its “significant subsidiaries” (as
defined in Rule 1-02(w) of Regulation S-X of the 1933 Act) (each, a ”Significant Subsidiary”) and (iv) there has been no
dividend or distribution of any kind declared, paid or made by the Company on
any class of its capital stock.


 


(f)            Good Standing of the Company. The Company has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Oregon and has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Disclosure Package
and the Final Offering Memorandum and to enter into and perform its obligations
under this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing under the laws of the
State of California, which is the only other jurisdiction in which it owns or
leases properties or conducts any business so as to require such qualification,
other than such jurisdictions in which the failure so to qualify or be in good
standing would not result in a Material Adverse Effect.


 


(g)           Good Standing of Significant Subsidiaries. Each Significant Subsidiary of the Company
has been duly organized and is validly existing in good standing under the laws
of the jurisdiction of its organization, has all requisite power and authority
to own, lease and operate its properties and to conduct its business as
described in the Disclosure Package and the Final Offering Memorandum and is
duly qualified to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the ownership
or leasing of property or the conduct of business, except where the failure so
to qualify or to be in good standing would not result in a Material Adverse
Effect; all of the issued and outstanding shares of capital stock of each
Significant Subsidiary have been duly authorized and validly issued, are fully
paid and non-assessable and are owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity; none


 


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of
the outstanding shares of capital stock of the Significant Subsidiaries were
issued in violation of any preemptive or similar rights of any securityholder
of such Significant Subsidiary. The subsidiaries of the Company other than the
Significant Subsidiaries, considered in the aggregate as a single subsidiary,
do not constitute a ”significant subsidiary” as defined in Rule 1-02
of Regulation S-X.


 


(h)           Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Disclosure Package and the Final
Offering Memorandum in the column entitled ”Actual” under the caption “Capitalization”
(except for subsequent issuances, if any, pursuant to this Agreement, pursuant
to reservations, agreements, employee benefit plans referred to in the
Disclosure Package and the Final Offering Memorandum or pursuant to the
exercise of options referred to in the Disclosure Package and the Final
Offering Memorandum). The shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable; none of the holders of outstanding shares of capital stock of
the Company and no other person has or will have any preemptive or other rights
to purchase, subscribe for or otherwise acquire (i) the Conversion Shares or
any rights to such shares, or any Rights attached thereto, (other than those
granted by the holders of the Notes) or (ii) as a result of or in connection
with the transactions contemplated by the Operative Documents, any other
capital stock of the Company or rights thereto; the capital stock of the
Company conforms to the description thereof contained in the Disclosure Package
and the Final Offering Memorandum and such description conforms to the rights
set forth in the instruments defining the same; the Conversion Shares have been
duly authorized and reserved for issuance upon conversion of the Notes by all
necessary corporate action of the Company; all Conversion Shares, when so
issued in accordance with the Third Amended and Restated Articles of
Incorporation of the Company and delivered upon such conversion in accordance
with the terms of the Indenture and the Notes, will be duly authorized and
validly issued, fully paid and nonassessable and free and clear of all liens,
encumbrances, equities or claims and will conform to the description of the
Common Stock contained in the Disclosure Package and the Final Offering
Memorandum.


 


(i)            Certain Disclosure Package and
the Final Offering Memorandum Statements. The statements set forth in
the Disclosure Package and the Final Offering Memorandum under the captions “Description
of the Notes” and “Description of Capital Stock”, insofar as they purport to
constitute summaries of the terms of the Notes and the Common Stock,
respectively, and under the caption “Certain United States Federal Income Tax
Consequences,” insofar as it purports to describe the provisions of the laws
and documents referred to therein, fairly and accurately present the matters
described therein in all material respects.


 


(j)            Authorization of the Operative
Documents. The Company has
all requisite corporate right, power and authority to enter into this
Agreement, the Indenture and the Registration Rights Agreement and to perform
its obligations hereunder and thereunder and the transactions contemplated
hereby and thereby have been duly authorized by the Company. This Agreement has
been and, as of the First Delivery Date, the Indenture and the Registration
Rights Agreement will have been, duly authorized, executed and delivered by the
Company and upon such execution by the Company (assuming the due authorization,
execution and delivery of such agreements by the other parties thereto) this
Agreement, the Indenture and the Registration Rights Agreement will constitute
valid and binding agreements of the Company, enforceable against the Company in
accordance with their terms, except as the enforcement thereof may be limited
by


 


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bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting enforcement of
creditors’ rights generally and except as enforcement thereof is subject to
general principles of equity, including specific performance (regardless of
whether enforcement is considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing, and subject to the limitations
on rights to indemnification and contribution under applicable law or equitable
principles; and the Indenture and Registration Rights Agreement conform in all
material respects to the descriptions thereof contained in the Disclosure
Package and the Final Offering Memorandum.


 


(k)           Authorization of the Notes. The Company has all necessary corporate
right, power and authority to execute, issue and deliver the Notes and perform
its obligations thereunder; the Notes have been duly authorized by the Company
and, when authenticated, issued and delivered in the manner provided for in the
Indenture and delivered against payment of the Purchase Price therefor as
provided in this Agreement (assuming due authentication of the Notes by the
Trustee), will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors’ rights generally
and except as enforcement thereof is subject to general principles of equity,
including specific performance (regardless of whether enforcement is considered
in a proceeding in equity or at law) and an implied covenant of good faith and
fair dealing, and subject to the limitations on rights to indemnification and
contribution under applicable law or equitable principles, and will be in the
form contemplated by, and entitled to the benefits of, the Indenture; and the
Notes conform in all material respects to the description of the Common Stock
contained in the Disclosure Package and the Final Offering Memorandum.


 


(l)            Defaults and Conflicts. Neither the Company nor any of its
subsidiaries is in violation of its charter or bylaws or in default in the
performance or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which any of them may be bound, or to
which any of the property or assets of the Company or any of its subsidiaries
is subject (collectively, ”Agreements and Instruments”),
except for such defaults that would not result in a Material Adverse Effect;
and the execution, delivery and performance of the Operative Documents by the
Company and the issuance of the Notes and Conversion Shares and the
consummation of the transactions contemplated herein and in the Disclosure
Package and the Final Offering Memorandum (including the issuance and sale of
the Notes and the use of the proceeds from the sale of the Notes as described
in the Disclosure Package and the Final Offering Memorandum under the
caption ”Use of Proceeds”) and compliance by the Company with its
obligations hereunder have been duly authorized by all necessary corporate
action and do not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or default or
Repayment Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of its subsidiaries pursuant to, the Agreements and
Instruments except for such conflicts, breaches or defaults or Repayment Events
or liens, charges or encumbrances that, singly or in the aggregate, would not
result in a Material Adverse Effect, nor will such action result in any violation
of the provisions of the charter or bylaws of the Company or any of its
subsidiaries or any applicable law, statute, rule, regulation, judgment, order,
writ or decree of any government, government


 


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instrumentality
or court, domestic or foreign, having jurisdiction over the Company or any of
its subsidiaries or any of their assets, properties or operations. As used
herein, a ”Repayment Event” means any event
or condition which gives the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder’s behalf) the right to
require the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any of its subsidiaries.


 


(m)          Labor Disputes. No material labor dispute with the
employees of the Company or any of its subsidiaries exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any of its
subsidiaries’ principal suppliers, manufacturers, customers or contractors,
which, in either case, would result in a Material Adverse Effect.


 


(n)           Legal Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental agency
or body, domestic or foreign, now pending, or, to the knowledge of the Company,
threatened, against or affecting the Company or any of its subsidiaries which
might result in a Material Adverse Effect, or which might materially and
adversely affect the properties or assets of the Company or any of its
subsidiaries or the consummation of the transactions contemplated by this
Agreement or the performance by the Company of its obligations hereunder. The
aggregate of all pending legal or governmental proceedings to which the Company
or any of its subsidiaries is a party or of which any of their respective
property or assets is the subject which are not described in the Disclosure
Package and the Final Offering Memorandum, including ordinary routine
litigation incidental to the business, would not reasonably be expected to
result in a Material Adverse Effect.


 


(o)           Stabilization or Manipulation. Neither the Company nor any affiliate, as
such term is defined in Rule 501(b) under the 1933 Act (each, an ”Affiliate”), of the Company has taken, directly or
indirectly, any action which is designed to or which has constituted or which
would be reasonably expected to cause or result in unlawful stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Notes.


 


(p)           Intellectual Property. Except where such failure to own or possess
would not reasonably be expected to have a Material Adverse Effect, to the
Company’s knowledge after due inquiry, the Company and its subsidiaries own or
possess, or can acquire on reasonable terms, adequate patents, patent rights,
licenses, inventions, copyrights, know-how (including, without limitation,
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks,
trade names, URLs or other intellectual property (collectively, ”Intellectual Property”) necessary to carry
on the business now operated by them. No current or former shareholder,
officer, director or employee of the Company or its subsidiaries has any claim,
right (whether or not exercisable) or interest in any Intellectual Property of
the Company or its subsidiaries. The Company and its subsidiaries have taken
all reasonable steps in accordance with normal industry practice to protect
their rights in confidential and proprietary information. Neither the Company
nor any of its subsidiaries has received any notice or is otherwise aware of
any currently unresolved infringement of or conflict with asserted rights of
others with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its subsidiaries
therein, and which infringement or conflict (if


 


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the
subject of any unfavorable decision, ruling or finding) or invalidity or
inadequacy, singly or in the aggregate, would result in a Material Adverse
Effect.


 


(q)           Licenses and Permits. The Company and its subsidiaries possess
such permits, licenses, approvals, consents and other authorizations
(collectively, ”Governmental Licenses”)
issued by the appropriate federal, state, local or foreign regulatory agencies
or bodies necessary to conduct the business now operated by them, except where
the failure so to possess would not, singly or in the aggregate, result in a
Material Adverse Effect; the Company and its subsidiaries are in compliance
with the terms and conditions of all such Governmental Licenses, except where
the failure so to comply would not, singly or in the aggregate, result in a
Material Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except where the invalidity of such Governmental Licenses or
the failure of such Governmental Licenses to be in full force and effect would
not, singly or in the aggregate, result in a Material Adverse Effect; and
neither the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such Governmental
Licenses which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a Material Adverse Effect.


 


(r)            Real Property. The Company and its subsidiaries have good
and marketable title to all real property owned by the Company and its
subsidiaries and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as do not,
singly or in the aggregate, materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company or any of its subsidiaries; and all of the leases and subleases
material to the business of the Company and its subsidiaries, considered as one
enterprise, and under which the Company or any of its subsidiaries holds
properties described in the Disclosure Package and the Final Offering
Memorandum, are in full force and effect, and neither the Company nor any of
its subsidiaries has any notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of the Company or any of its
subsidiaries under any of the leases or subleases mentioned above, or affecting
or questioning the rights of the Company or any subsidiary thereof to the
continued possession of the leased or subleased premises under any such lease
or sublease.


 


(s)           Environmental Laws. Except as described in the Disclosure
Package and the Final Offering Memorandum and except for such matters as would
not, singly or in the aggregate, result in a Material Adverse Effect, (i)
neither the Company nor any of its subsidiaries is in violation of any federal,
state, local or foreign statute, law, rule, regulation, ordinance, code, policy
or rule of common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or judgment,
relating to pollution or protection of human health, the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or wildlife, including, without limitation, laws
and regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products, asbestos-containing materials or mold
(collectively, ”Hazardous Materials”)
or to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively, ”Environmental Laws”), (ii) the Company and its
subsidiaries have all permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(iii) there are no


 


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pending
or threatened administrative, regulatory or judicial actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against the
Company or any of its subsidiaries and (iv) there are no events or
circumstances that would reasonably be expected to form the basis of an order
for clean-up or remediation, or an action, suit or proceeding by any private
party or governmental body or agency, against or affecting the Company or any
of its subsidiaries relating to Hazardous Materials or Environmental Laws.


 


(t)            Investment Company Act. The Company is not, and upon the issuance
and sale of the Notes as herein contemplated and the application of the net
proceeds therefrom as described in the Disclosure Package and the Final
Offering Memorandum will not be, an “investment company” or an entity “controlled”
by an “investment company” as such terms are defined in the Investment Company
Act of 1940, as amended.


 


(u)           Offering Integration. Within the preceding six months, neither
the Company nor any other person acting on behalf of the Company has offered or
sold to any person any Notes, or any securities of the same class as the Notes,
other than (i) shares of stock offered or sold to directors, consultants or
employees or upon redemption or exchange of special shares of the Company’s
subsidiaries, which, in each case would not be integrated with the offering
contemplated hereby and (ii) Notes offered or sold to the Initial Purchasers
hereunder.


 


(v)           Federal Reserve System
Regulations. None of the
transactions contemplated by this Agreement (including, without limitation, the
use of the proceeds from the, sale of the Notes) will violate or result in a
violation of Section 7 of the 1934 Act, or any regulation promulgated
thereunder, including, without limitation, Regulations T, U, and X of the Board
of Governors of the Federal Reserve System.


 


(w)          Rule 144A Eligibility. The Notes are eligible for resale pursuant
to Rule 144A and, when they are issued and delivered pursuant to this
Agreement, will not be, of the same class (within the meaning of Rule 144A
under the 1933 Act) as securities listed on a national securities exchange
registered under Section 6 of the 1934 Act, or quoted in a U.S. automated
interdealer quotation system.


 


(x)            General Solicitation. None of the Company, its Affiliates or any
person acting on its or any of their behalf (other than the Initial Purchasers,
as to whom the Company makes no representation) has, directly or through an
agent, engaged or will engage, in connection with the offering of the offered
Notes, in any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the 1933 Act.


 


(y)           1933 Act Registration. Subject to compliance by the Initial
Purchasers with the representations and warranties set forth in Section 2
and the procedures set forth in Section 6 hereof, it is not necessary in
connection with the offer, sale and delivery of the Notes to the Initial
Purchasers and the offer, initial resale and delivery of the Notes by the
Initial Purchasers in the manner contemplated by this Agreement, the Indenture,
the Registration Rights Agreement and the Disclosure Package and the Final
Offering Memorandum, to register the Notes or the Conversion Shares under the
1933 Act (except as may be required under the 1933 Act and the rules and
regulations promulgated thereunder in connection with the registration of the
Notes and the Conversion Shares pursuant to the Registration Rights Agreement)
or to qualify the Indenture


 


9

















 


under
the Trust Indenture Act of 1939, as amended (except as may be required in
connection with the registration of the Notes pursuant to the Registration
Rights Agreement).


 


(z)            1934 Act Reporting. The Company is subject to the reporting
requirements of Section 13 or Section 15(d) of the 1934 Act. The
Company has timely and properly filed with the Commission all reports and other
documents required to have been filed by it with the Commission pursuant to the
1934 Act and the 1934 Act Regulations (together, the “1934 Act
Reports”).


 


(aa)         Employee Retirement Income
Security Act. Except as such
matters would not, singly or in the aggregate, result in a Material Adverse
Effect, the Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder (“ERISA”); no “reportable event” (as
defined in ERISA) has occurred with respect to any “pension plan” (as defined in
ERISA) for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any “pension plan” or
(ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as
amended, including the regulations and published interpretations thereunder
(the ”Code”); and each “pension plan”
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects
and nothing has occurred, whether by action or by failure to act, which would
cause the loss of such qualification.


 


(bb)         Insurance. The Company and its subsidiaries carry or
are entitled to the benefits of insurance, with financially sound and reputable
insurers, in such amounts and covering such risks as is generally maintained by
companies of established repute engaged in the same or similar business, and
all such insurance is in full force and effect. Neither of the Company nor any
subsidiary has been denied any insurance coverage which it has sought or for
which it has applied.


 


(cc)         Tax Matters. All United States federal income tax
returns of the Company and its subsidiaries required by law to be filed have
been filed, except insofar as the failure to file such returns would not result
in a Material Adverse Effect, and all taxes shown by such returns or otherwise
assessed, which are due and payable, have been paid, except assessments against
which appeals have been or will be promptly taken and as to which adequate
reserves have been provided. The Company and its subsidiaries have filed all
other tax returns that are required to have been filed by them pursuant to
applicable foreign, state, local or other law except insofar as the failure to
file such returns would not result in a Material Adverse Effect, and has paid
all taxes due pursuant to such returns or pursuant to any assessment received
by the Company and its subsidiaries, except for such taxes, if any, as are
being contested in good faith and as to which adequate reserves have been
provided. The charges, accruals and reserves on the books of the Company in
respect of any income and corporation tax liability for any years not finally
determined are adequate to meet any assessments or re-assessments for
additional income tax for any years not finally determined, except to the
extent of any inadequacy that would not result in a Material Adverse Effect.


 


(dd)         Accounting Controls and
Disclosure Controls and Procedures. The Company and each of its subsidiaries maintain a system of
disclosure controls and procedures (as defined in


 


10

















 


Rule
13a-15(e) and 15d-15(e) of the 1934 Act) sufficient to provide reasonable
assurances that information required to be disclosed in reports that the
Company files or submits under the 1934 Act is recorded, processed, summarized
and reported within the time periods specified in the Commissions rules,
regulations and forms. Except as described in the Disclosure Package and the
Final Offering Memorandum, since the end of the Company’s most recent audited
fiscal year, there has been (i) no material weakness in the Company’s internal
control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of
the 1934 Act) (whether or not remediated) and (ii) no change in the Company’s
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.


 


(ee)         Preemptive Rights. There are no contracts, agreements or
understandings between the Company and any person granting such person the
right (other than rights which have been waived or satisfied) to require the
Company to file a registration statement under the 1933 Act with respect to any
securities of the Company owned or to be owned by such person or to require the
Company to include such securities in any securities being registered pursuant
to any registration statement filed by the Company under the 1933 Act.


 


(ff)           Foreign Transactions Reporting
Act. The operations of the
Company are and have been conducted at all times in compliance with applicable
financial recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the money laundering statutes
of all jurisdictions, the rules and regulations thereunder and any related or
similar rules, regulations or guidelines, issued, administered or enforced by
any governmental agency (collectively, the “Money
Laundering Laws”) and no action, suit or proceeding by or before any
court or governmental agency, authority or body or any arbitrator involving the
Company with respect to the Money Laundering Laws is pending or, to the best
knowledge of the Company, threatened.


 


(gg)         Foreign Corrupt Practices Act. Neither the Company nor, to the knowledge
of the Company, any director, officer, agent, employee, affiliate or other
person acting on behalf of the Company or any of its subsidiaries is aware of
or has taken any action, directly or indirectly, that would result in a
violation by such persons of the Foreign Corrupt Practices Act of 1977, as
amended, and the rules and regulations thereunder (the ”FCPA”), including, without limitation, making use of the
mails or any means or instrumentality of interstate commerce corruptly in
furtherance of an offer, payment, promise to pay or authorization of the
payment of any money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any “foreign official” (as
such term is defined in the FCPA) or any foreign political party or official
thereof or any candidate for foreign political office, in contravention of the
FCPA and the Company and, to the knowledge of the Company, its affiliates have
conducted their businesses in compliance with the FCPA and have instituted and
maintain policies and procedures designed to ensure, and which are reasonably
expected to continue to ensure, continued compliance therewith.


 


(hh)         Sarbanes-Oxley Act. There is and has been no failure on the
part of the Company or any of the Company’s directors or officers, in their
capacities as such, to comply in all material respects with any provision of
the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in
connection therewith (the ”Sarbanes-Oxley Act”),
including Section 402 related to loans and Sections 302 and 906 related to
certifications.


 


11

















 


(ii)           Foreign Assets Control. Neither the Company nor, to the knowledge
of the Company, any director, officer, agent, employee, affiliate or person
acting on behalf of the Company is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S. Treasury
Department (the ”OFAC”); and the
Company will not directly or indirectly use the proceeds of the offering, or
lend, contribute or otherwise make available such proceeds to any subsidiary,
joint venture partner or other person or entity, for the purpose of financing
the activities of any person currently subject to any U.S. sanctions
administered by OFAC.


 


Any certificate signed by
any officer of the Company or any of its subsidiaries delivered to the
Representative or to counsel for the Initial Purchasers shall be deemed a
representation and warranty by the Company to each Initial Purchaser as to the
matters covered thereby.


 


2.             Purchase, Sale and Delivery of Notes.


 


(a)           Subject to the terms and conditions, and in
reliance upon the representations and warranties, herein set forth, the Company
agrees to sell to each Initial Purchaser, severally and not jointly, and each
Initial Purchaser agrees, severally and not jointly, to purchase from the
Company, at a purchase price of 97.5% of the principal amount thereof
(the ”Purchase Price”), the principal
amount of Firm Notes set forth opposite such Initial Purchaser’s name in Schedule I
hereto (or such number increased as set forth in Section 11). Payment of
the Purchase Price and delivery of certificates for the Firm Notes shall be
made at the office of Latham & Watkins LLP, 505 Montgomery Street,
Suite 2000, San Francisco, California, or at such other place as shall be
agreed upon by the Representative and the Company, at 10:00 a.m. (Eastern
time) on May 19, 2006, or such later date as the Representative shall
designate, which date and time may be postponed by agreement between the
Representative and the Company or as provided in Section 11 (such date and
time of delivery and payment for the Firm Notes being herein called the ”First Delivery Date”). Delivery of the Firm Notes shall be
made to the Initial Purchasers against payment of the Purchase Price by the
Initial Purchasers. Payment for the Firm Notes shall be effected either by wire
transfer of immediately available funds to a bank account, the account number
and the ABA number for such bank to be provided by the Company to the
Representative at least two business days in advance of the First Delivery
Date, or by such other manner of payment as may be agreed in writing by the
Company and the Representative. It is understood that each Initial Purchaser
has authorized the Representative, for its account, to accept delivery of,
issue a receipt for, and make payment of the Purchase Price for, the Firm Notes
that it has agreed to purchase. Merrill Lynch, individually and not as
representative of the Initial Purchasers, may (but shall not be obligated to)
make payment of the Purchase Price for the Firm Notes to be purchased by any
Initial Purchaser whose funds have not been received by the First Delivery
Date, but such payment shall not relieve such Initial Purchaser from its
obligations hereunder.


 


(b)           Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
hereby grants the Option to the Initial Purchasers to purchase, severally and
not jointly, the Optional Notes at the same price as the Initial Purchasers
shall pay for the Firm Notes and the principal amount of the Optional Notes to be
sold to each Initial Purchaser shall be that principal amount which bears the
same ratio to the aggregate principal amount of Optional Notes being purchased
as the principal amount of Firm Notes set forth opposite the name of such
Initial Purchaser in Schedule I hereto (or such number increased as
set forth in Section 11). The Option may be exercised only to cover
over-allotments in the sale


 


12

















 


of
the Firm Notes by the Initial Purchasers. The Option may be exercised once in
whole or in part at any time not more than 30 days subsequent to the date
of this Agreement upon notice in writing or by facsimile by the Representative
to the Company setting forth the amount (which shall be an integral multiple of
$1,000) of Optional Notes as to which the Initial Purchasers are exercising the
Option.


 


The date for payment of the Purchase Price for, and
delivery of certificates for the Optional Notes, being herein referred to as
an ”Optional Delivery Date,” which may be the
First Delivery Date (the First Delivery Date and the Optional Delivery Date, if
any, being sometimes referred to as a ”Delivery
Date”), shall be determined by the Representative but shall not be
later than five full business days after written notice of election to purchase
Optional Notes is given. Delivery of the Optional Notes shall be made to the
Initial Purchasers against payment of the Purchase Price by the Initial
Purchasers. Payment for the Optional Notes shall be effected either by wire
transfer of immediately available funds to a bank account, the account number
and the ABA number for such bank to be provided by the Company to the
Representative at least two business days in advance of the Optional Delivery
Date, or by such other manner of payment as may be agreed in writing by the
Company and the Representative. It is understood that each Initial Purchaser
has authorized the Representative, for its account, to accept delivery of,
issue a receipt for, and make payment of the Purchase Price for, the Optional
Notes that it has agreed to purchase. Merrill Lynch, individually and not as
representative of the Initial Purchasers, may (but shall not be obligated to)
make payment of the Purchase Price for the Optional Notes to be purchased by
any Initial Purchaser whose funds have not been received by the Optional
Delivery Date, but such payment shall not relieve such Initial Purchaser from
its obligations hereunder.


 


(c)           The Company will deliver against payment of
the Purchase Price the Notes initially sold to qualified institutional buyers (“QIBs”), as defined in Rule 144A under the 1933 Act (“Rule 144A”) in the form of one or more permanent global
certificates (the ”Global Notes”),
registered in the name of Cede & Co., as nominee for The Depository
Trust Company (“DTC”). Beneficial interests in the
Notes initially sold to QIBs will be shown on, and transfers thereof will be
effected only through, records maintained in book-entry form by DTC and its
participants.


 


3.             Further
Agreements of the Company. The Company further agrees with each Initial
Purchaser as follows:


 


(a)           Prior to the earlier of nine months from the
date of this Agreement or the completion of the distribution of the Notes by
the Initial Purchasers, the Company, as promptly as possible, will furnish to
each Initial Purchaser and to Latham & Watkins LLP, counsel to the
Initial Purchasers, without charge, such number of copies of the Final Offering
Memorandum and any amendments and supplements thereto and documents
incorporated by reference therein in each case as soon as available and in such
quantities as such Initial Purchaser may reasonably request. The Company will
pay the expenses of printing and distributing to the Initial Purchasers all
such documents.


 


(b)           The Company will immediately notify each
Initial Purchaser, and confirm such notice in writing, of (i) any filing
made by the Company of information relating to the offering of the Notes with
any securities exchange or any other regulatory body in the United States or
any other jurisdiction, and (ii) prior to the completion of the placement
of the Notes by the Initial Purchasers as evidenced promptly by a notice in
writing from the Representative to the Company,


 


13

















 


any
material changes in or affecting the condition, financial or otherwise, or the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise which (A) make any statement in
the Disclosure Package and the Final Offering Memorandum false or misleading or
(B) are not disclosed in the Offering Memorandum. In such event or if
during such time any event shall occur or condition exist as a result of which
it is necessary, in the reasonable opinion of any of the Company, its counsel,
the Initial Purchasers or counsel for the Initial Purchasers, to amend or
supplement the Offering Memorandum in order that the Offering Memorandum not
include any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading in the
light of the circumstances then existing, the Company will forthwith amend or
supplement the Offering Memorandum by preparing and furnishing to each Initial
Purchaser an amendment or amendments of, or a supplement or supplements to, the
Offering Memorandum (in form and substance satisfactory in the reasonable
opinion of counsel for the Initial Purchasers) so that, as so amended or
supplemented, the Offering Memorandum will not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time it
is delivered to a Subsequent Purchaser, not misleading.


 


(c)           Prior to the completion of the distribution
of the Notes, the Company will advise each Initial Purchaser promptly of any
proposal to amend or supplement the Final Offering Memorandum and will not
effect such amendment or supplement without the consent of the Representative,
which consent shall not be unreasonably withheld. Neither the consent of the
Initial Purchasers, nor the Initial Purchasers’ delivery of any such amendment
or supplement, shall constitute a waiver of any of the conditions set forth in
Section 5 hereof. If at any time prior to the completion of the placement
of the Notes by the Initial Purchaser, the Company has issued or shall have
issued any written communication, which would be deemed an “issuer free writing
prospectus” as defined in Rule 433 of the 1933 Act Regulations if the placement
of the Notes contemplated by this Agreement were conducted as a public offering
made pursuant to a registration statement filed with the Commission under the
1933 Act (a “Supplemental Offering Document”),
and there occurred or occurs an event or development as a result of which such
Supplemental Offering Document conflicted or would conflict with the
information contained in the Disclosure Package or the Final Offering
Memorandum or included or would include an untrue statement of a material fact
or omitted or would omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances prevailing at that
subsequent time, not misleading, the Company will promptly notify the Initial
Purchasers and will promptly amend or supplement, at its own expense, such
Supplemental Offering Document to eliminate or correct such conflict, untrue
statement or omission.


 


(d)           The Company will arrange, if necessary, to
qualify the Notes and the Conversion Shares for offering and sale by the
Initial Purchasers under the applicable securities laws of such states and
other jurisdictions as the Initial Purchasers may designate and will maintain
such qualifications in effect as long as required for the sale of the Notes and
the Conversion Shares; provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign corporation or
as a dealer in securities in any jurisdiction in which it is not so qualified
or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject.


 


14

















 


(e)           The Company will cooperate with the Initial
Purchasers and use its commercially reasonable efforts to permit the offered
Notes to be eligible for clearance and settlement through the facilities of
DTC.


 


(f)            The Company will use the net proceeds
received by it from the sale of the Notes in the manner specified in the
Disclosure Package and the Final Offering Memorandum under “Use of Proceeds.”


 


(g)           During a period of 75 days from the date
of the Final Offering Memorandum (the ”Lockup
Period”), the Company will not, without the prior written consent of
the Representative, (i) directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option right or warrant to purchase or lend or
otherwise transfer or dispose of any Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock
(collectively, the ”Restricted Securities”)
or (except as contemplated by the Registration Rights Agreement) file any
registration statement under the 1933 Act with respect to any Restricted
Securities, or (ii) enter into any swap or any other derivative
transaction (other than the Operative Documents) that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of any
Restricted Securities, whether any such swap or transaction described in
clause (i) or (ii) above is to be settled by delivery of Restricted
Securities, in cash or otherwise. The foregoing sentence shall not apply to
(A) the Notes to be sold hereunder or the Conversion Shares to be
delivered upon conversion thereof, (B) the issuance of shares of Common
Stock upon conversion or exchange of convertible or exchangeable securities of
the Company outstanding as of the date hereof, (C) the resale registration
statement to be filed by the Company pursuant to the Registration Rights
Agreement relating to the resale of the Notes and the Conversion Shares, or
(D) the issuance of shares of Common Stock or options or rights to
purchase shares of Common Stock pursuant to the Company’s employee benefit plans
in effect on the date of this Agreement or the Company’s stockholder rights
plan or the issuance of rights thereunder.


 


Notwithstanding the foregoing, if (1) during the
last 17 days of the 75-day restricted period the Company issues an earnings
release or material news or a material event relating to the Company occurs or
(2) prior to the expiration of the 75-day restricted period, the Company
announces that it will release earnings results or becomes aware that material
news or a material event will occur during the 16-day period beginning on the
last day of the 75-day restricted period, the restrictions imposed in this
clause (g) shall continue to apply until the expiration of the 18-day period
beginning on the issuance of the earnings release or the occurrence of the
material news or material event.


 


(h)           The Company will use its commercially
reasonable efforts to assist the Initial Purchasers in arranging to permit the
Notes to be designated PORTAL securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc. (“NASD”) relating to trading in the PORTAL Market.


 


(i)            The Company will execute and deliver the
Registration Rights Agreement in form and substance reasonably satisfactory to
the Initial Purchasers and the Company.


 


15

















 


(j)            The Company will use its commercially
reasonable efforts to have the Conversion Shares approved by The Nasdaq
National Market (“Nasdaq”) for
inclusion prior to the effectiveness of the Registration Statement.


 


(k)           Until the completion of the distribution of
the Notes, the Company will file all documents required to be filed with the
Commission pursuant to the 1934 Act and the 1934 Act Regulations within the
time periods required thereby.


 


(l)            The Company will reserve and keep available
at all times, free of preemptive rights, shares of Common Stock for the purpose
of enabling the Company to satisfy any obligations to issue Conversion Shares
upon the conversion of the Notes.


 


(m)          The Company agrees that it will not, and will
use its commercially reasonable efforts to cause its Affiliates not to,
directly or indirectly, solicit any offer to buy, sell or make any offer or
sale of, or otherwise negotiate in respect of, securities of the Company of any
class if, as a result of the doctrine of ”integration” referred to in
Rule 502 under the 1933 Act, such offer or sale would render invalid (for
the purpose of (i) the sale of the Notes by the Company to the Initial
Purchasers, (ii) the resale of the Notes by the Initial Purchasers to
subsequent purchasers or (iii) the resale of the Notes or Conversion
Shares by such Subsequent Purchasers to others) the exemption from the
registration requirements of the 1933 Act provided by Section 4(2) thereof
or by Rule 144A or otherwise.


 


(n)           Until the expiration of two years after the
original issuance of the Notes, the Company will not, and will use its
commercially reasonable efforts to cause its Affiliates not to, resell any
Notes or Conversion Shares which are “restricted securities” (as such term is
defined under Rule 144(a)(3) under the 1933 Act), whether as beneficial
owner or otherwise (except as agent acting as a securities broker on behalf of
and for the account of customers in the ordinary course of business in
unsolicited broker’s transactions).


 


(o)           Each of the Notes will bear, to the extent
applicable, the legend contained in “Transfer Restrictions” in the Disclosure
Package and the Final Offering Memorandum for the time period and upon the
other terms stated therein, except after the Notes are resold pursuant to a
registration statement effective under the 1933 Act.


 


(p)           The Company will not, and will use its
commercially reasonable efforts to cause its Affiliates not to, take, directly
or indirectly, any action which is designed to unlawfully stabilize or
manipulate, or which constitutes or which might reasonably be expected to cause
or result in unlawful stabilization or manipulation, of the price of any
security of the Company in connection with the offering of the Notes.


 


(q)           The Company acknowledges and agrees that
(i) the purchase and sale of the Notes pursuant to this Agreement is an
arm’s-length commercial transaction between the Company, on the one hand, and
the several Initial Purchasers, on the other hand, (ii) in connection with
the offering contemplated hereby and the process leading to such transaction
each Initial Purchaser is and has been acting solely as a principal and is not
the agent or fiduciary of the Company, or its stockholders, creditors,
employees or any other party, (iii) no Initial Purchaser has assumed or
will assume an advisory or fiduciary responsibility in favor of the Company
with respect to the offering contemplated hereby or the process leading thereto


 


16

















 


(irrespective
of whether such Initial Purchaser has advised or is currently advising the
Company on other matters) and no Initial Purchaser has any obligation to the
Company with respect to the offering contemplated hereby except the obligations
expressly set forth in this Agreement, (iv) the Initial Purchasers and
their respective affiliates may be engaged in a broad range of transactions
that involve interests that differ from those of the Company and (v) the Initial
Purchasers have not provided any legal, accounting, regulatory or tax advice
with respect to the offering contemplated hereby and the Company has consulted
its own legal, accounting, regulatory and tax advisors to the extent it deemed
appropriate.


 


(r)            The Company represents and agrees that,
unless it obtains the prior consent of the Initial Purchasers, and the Initial
Purchasers represent and agree that, unless they obtain the prior consent of
the Company, it has not made and will not make any offer relating to the Notes
that, if the placement of the Notes contemplated by this Agreement were
conducted as a public offering pursuant to a registration statement filed with
the Commission, would constitute an “issuer free writing prospectus,” as
defined in Rule 433, or that would otherwise constitute a “free writing
prospectus,” as defined in Rule 405, required to be filed with the Commission. Any
such free writing prospectus consented to by the Company and the Initial
Purchasers is hereinafter referred to as a “Permitted
Supplemental Offering Document.”


 


4.             Expenses.


 


(a)           The Company will pay all expenses incident to
the performance of its obligations under this Agreement, including (i) the
preparation, printing, delivery to the Initial Purchasers and any filing of the
Disclosure Package or any Offering Memorandum (including financial statements
and any schedules or exhibits and any document incorporated therein by
reference) and of each amendment or supplement thereto or of any Supplemental
Offering Document, (ii) the preparation, printing and delivery to the
Initial Purchasers of the Operative Documents and such other documents as may
be required in connection with the offering, purchase, sale, issuance or
delivery of the Notes, (iii) the preparation, issuance and delivery of the
certificates for the Notes to the Initial Purchasers, including any transfer
taxes, any stamp or other duties payable upon the sale, issuance and delivery
of the Notes to the Initial Purchasers and any charges of DTC in connection
therewith, (iv) the fees and disbursements of the Company’s counsel,
accountants and other advisors, (v) the qualification of the Notes and
Conversion Shares under securities laws in accordance with the provisions of
Section 3(d) hereof, (vi) the fees and expenses of the Trustee,
including the fees and disbursements of counsel for the Trustee in connection
with the Indenture and the Notes, and the costs and charges of any registrar,
transfer agent, paying agent or conversion agent, (vii) the costs and expenses
of the Company relating to investor presentations on any “road show” undertaken
in connection with the marketing of the Notes including, without limitation,
expenses associated with the production of road show slides and graphics, fees
and expenses of any consultants engaged in connection with the road show
presentations, (viii) any fees payable in connection with the rating of
the Notes, (ix) any fees and expenses payable in connection with the
initial and continued designation of the Notes as PORTAL securities under the
PORTAL Market Rules pursuant to NASD Rule 5322 and the inclusion of the
Conversion Shares on Nasdaq, (x) any fees and expenses payable in
connection with the initial and continued listing of the Notes on any non-U.S.
securities exchange and (xi) all other costs and expenses incident to the
performance of the obligations of the Company under this Agreement; provided that, except as provided in this Agreement, the
Initial Purchasers shall pay their own costs and expenses, including the costs
and expenses of their counsel.


 


17

















 


(b)           If this Agreement is terminated by the
Representative in accordance with the provisions of Section 5 or
Section 10(a)(i) hereof, the Company shall reimburse the Initial
Purchasers for all of their reasonable out-of-pocket expenses, including the
reasonable fees and disbursements of counsel for the Initial Purchasers.


 


5.             Conditions
of the Initial Purchasers’ Obligations. The obligations of the several
Initial Purchasers hereunder are subject to the accuracy, when made and on each
Delivery Date, of the representations and warranties of the Company contained
in Section 1 hereof or in certificates of any officer of the Company or any of
its subsidiaries delivered pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder, and to each of the
following additional terms and conditions:


 


(a)           no Initial Purchaser shall have discovered
and disclosed to the Company prior to or on such Delivery Date that the
Offering Memorandum or any amendment or supplement thereto contains any untrue
statement of a fact which, in the reasonable opinion of counsel to the Initial
Purchasers, is material or omits to state any fact which is material and necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading;


 


(b)           on each Delivery Date, Wilson Sonsini
Goodrich & Rosati, Professional Corporation, shall have furnished to the
Initial Purchasers their written opinion, as counsel to the Company, addressed
to the Initial Purchasers and dated such Delivery Date, substantially in the
form of Annex 1 attached hereto;


 


(c)           on each Delivery Date, Stoel Rives LLP shall
have furnished to the Initial Purchasers their written opinion, as special
Oregon counsel to the Company, addressed to the Initial Purchasers and dated
such Delivery Date, substantially in the form of Annex 2 attached
hereto;


 


(d)           on each Delivery Date, Michael O. Scheinberg,
special patent counsel to the Company, shall have furnished to the Initial
Purchasers their written opinion, addressed to the Initial Purchasers and dated
such Delivery Date, substantially in the form of Annex 3 attached
hereto;


 


(e)           on each Delivery Date, AKD Prinsen van Wijmen
N.V., special Netherlands counsel to the Company, shall have furnished to the
Initial Purchasers their written opinion, addressed to the Initial Purchasers
and dated such Delivery Date, substantially in the form of Annex 4
attached hereto;


 


(f)            Latham & Watkins LLP, shall have
furnished to the Initial Purchasers their written opinion, as counsel to the
Initial Purchasers, addressed to the Initial Purchasers and dated such Delivery
Date, in form and substance satisfactory to the Initial Purchasers;


 


(g)           at the Delivery Date, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Disclosure Package or the Final Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the
Applicable Time), any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, and the Representative 


 


18

















 


shall
have received a certificate of the Chief Executive Officer and President of the
Company and of the Executive Vice President and Chief Financial Officer of the
Company, dated as of the Delivery Date, to the effect that (i) there has
been no such material adverse change, (ii) the representations and
warranties in Section 1 hereof are true and correct with the same force
and effect as though expressly made at and as of the Delivery Date, and
(iii) the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the Delivery
Date;


 


(h)           at the time of the execution of this
Agreement, the Representative shall have received from Deloitte & Touche
LLP a letter dated such date, in form and substance satisfactory to the
Representative, together with signed or reproduced copies of such letter for
each of the other Initial Purchasers containing statements and information of
the type ordinarily included in accountants’ “comfort letters” to Initial
Purchasers with respect to the financial statements and certain financial
information contained in the Offering Memorandum;


 


(i)            at the Delivery Date, the Representative
shall have received from Deloitte & Touche LLP a letter, dated as of the
Delivery Date, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (g) of this Section, except that
the specified date referred to shall be a date not more than three business
days prior to the Delivery Date;


 


(j)            the Indenture shall have been duly executed
and delivered by the Company and the Trustee and the Notes shall have been duly
executed and delivered by the Company and duly authenticated by the Trustee;


 


(k)           the Company and the Representative shall have
executed and delivered the Registration Rights Agreement (in form and substance
reasonably satisfactory to the Initial Purchasers) and the Registration Rights
Agreement shall be in full force and effect;


 


(l)            at the First Delivery Date, the Notes shall
have been approved for designation as a PORTAL security;


 


(m)          subsequent to the date of this Agreement,
there shall not have occurred a downgrading in the rating assigned to the
Notes, if any, by any “nationally recognized statistical rating organization,”
as that term is defined by the Commission for purposes of Rule 436(g)(2)
under the 1933 Act, and no such organization shall have publicly announced that
it has under surveillance or review, with possible negative implications, its
rating of the Notes;


 


(n)           on or prior to the date of this Agreement,
the Representative shall have received an agreement substantially in the form
of Exhibit A attached hereto signed by the persons listed in Schedule IV
attached hereto, and shall have received an agreement substantially in the form
of Exhibit B attached hereto signed by Philips Business Electronics
International B.V.; and


 


(o)           at the Delivery Date, counsel for the Initial
Purchasers shall have been furnished with such documents and opinions as they
may reasonably require for the purpose of enabling them to pass upon the
issuance and sale of the Notes as herein contemplated, or in order to evidence
the accuracy of any of the representations or warranties, or the fulfillment of
any of the conditions, herein contained; and all proceedings taken by the
Company in connection with the


 


19

















 


issuance
and sale of the Notes as herein contemplated shall be reasonably satisfactory
in form and substance to the Representative and counsel for the Initial
Purchasers.


 


If any condition specified
in this Section 5 shall not have been fulfilled when and as required to be
fulfilled, this Agreement may be terminated by the Representative by notice to
the Company at any time at or prior to the applicable Delivery Date, and such
termination shall be without liability of any party to any other party except
as provided in Section 4 and except that Sections 1, 7, 8 and 9 shall
survive any such termination and remain in full force and effect.


 


6.             Subsequent Offers and Resales of the Notes.


 


(a)           Each
of the Initial Purchasers and the Company hereby establish and agree to observe
the following procedures in connection with the offer and sale of the Notes:


 


i.      Offers and Sales. Offers and sales of the Notes shall be
made to such persons and in such manner as is contemplated by the Offering
Memorandum.


 


ii.     Rule 144A Compliance. The Notes have not been and will not be
offered or sold by the Initial Purchasers or their Affiliates acting on their
behalf, except in accordance and in compliance with Rule 144A under the Act and
the Initial Purchasers will effect such offers and sales only in compliance
with all applicable securities laws in any jurisdiction in which the Initial
Purchasers effect such offers or sales.


 


iii.    General Solicitation. No general solicitation or general
advertising (within the meaning of Rule 502(c) under the 1933 Act) will be
used in the United States in connection with the offering or sale of the Notes.


 


iv.    Non-Bank Fiduciaries. In the case of a non-bank Subsequent
Purchaser of a Note acting as a fiduciary for one or more third parties, each
third party shall, in the judgment of the applicable Initial Purchaser, be an
institutional accredited investor within the meaning of Rule 501(a) under
the 1933 Act (an ”Accredited Investor”)
or a “qualified institutional buyer” within the meaning of Rule 144A under
the 1933 Act (a ”Qualified Institutional
Buyer”) or a non-U.S. person outside the United States.


 


v.     Subsequent Purchaser Notification. Each Initial Purchaser will take reasonable
steps to inform, and use its commercially reasonable efforts to cause each of
its U.S. Affiliates to take reasonable steps to inform, persons acquiring Notes
from such Initial Purchaser or affiliate, as the case may be, in the United
States that the Notes (A) have not been and will not be registered under
the 1933 Act, (B) are being sold to them without registration under the
1933 Act in reliance on Rule 144A or in accordance with another exemption
from registration under the 1933 Act, as the case may be, and (C) may not
be offered, sold or otherwise transferred except (1) to the Company,
(2) outside the United States in accordance with Regulation S, or
(3) inside the United States in accordance with (x) Rule 144A to
a person


 


20

















 


whom the seller reasonably
believes is a Qualified Institutional Buyer that is purchasing such Notes for
its own account or for the account of a Qualified Institutional Buyer to whom
notice is given that the offer, sale or transfer is being made in reliance on
Rule 144A or (y) pursuant to another available exemption from
registration under the 1933 Act.


 


vi.    Minimum Principal Amount. No sale of the Notes to any one Subsequent
Purchaser will be for less than U.S. $1,000 principal amount and no Security
will be issued in a smaller principal amount. If the Subsequent Purchaser is a
non-bank fiduciary acting on behalf of others, each person for whom it is
acting must purchase at least U.S. $1,000 principal amount of the Notes.


 


(b)           Each Initial Purchaser severally and not
jointly represents and warrants to, and agrees with, the Company that (i) it is
a Qualified Institutional Buyer and an Accredited Investor, and (ii) it has not
taken any action, directly or indirectly, designed to cause or result in, or
which has constituted or which might reasonably be expected to constitute,
unlawful stabilization or manipulation of the price of any security of the
Company in connection with the offering of the Notes.


 


7.             Indemnification.


 


(a)           Indemnification of Initial
Purchasers. The Company
agrees to indemnify and hold harmless each Initial Purchaser, its Affiliates,
its selling agents and each person, if any, who controls any Initial Purchaser
within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act as follows:


 


i.      against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in any preliminary
offering memorandum, any Supplemental Offering Document, the Disclosure Package
or the Final Offering Memorandum (or any amendment or supplement thereto), or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading;


 


ii.     against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to
Section 7(d) below) any such settlement is effected with the written
consent of the Company; and


 


iii.    against any and all expense whatsoever, as
incurred (including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending against
any litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any such


 


21

















 


untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under (i) or (ii) above;


 


provided, however, that
this indemnity agreement shall not apply to any loss, liability, claim, damage
or expense to the extent arising out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any
Initial Purchaser through Merrill Lynch expressly for use in any preliminary
offering memorandum, any Supplemental Offering Document, the Disclosure Package
or the Final Offering Memorandum (or any amendment or supplement thereto).


 


(b)           Indemnification of the Company. Each Initial Purchaser severally agrees to
indemnify and hold harmless the Company, its Affiliates, and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, as incurred, but only with respect to
untrue statements or omissions, or alleged untrue statements or omissions, made
in any preliminary offering memorandum, any Supplemental Offering Document, the
Disclosure Package or the Final Offering Memorandum in reliance upon and in
conformity with written information furnished to the Company by such Initial
Purchaser through Merrill Lynch expressly for use therein.


 


(c)           Actions against Parties; Notice. Each indemnified party shall give notice as
promptly as reasonably practicable to each indemnifying party of any action
commenced against it in respect of which indemnity may be sought hereunder, but
failure to so notify an indemnifying party shall not relieve such indemnifying
party from any liability hereunder to the extent it is not materially
prejudiced as a result thereof and in any event shall not relieve it from any
liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 7(a)
above, counsel to the indemnified parties shall be selected by Merrill Lynch,
and, in the case of parties indemnified pursuant to Section 7(b) above,
counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any
such action; provided, however,
that counsel to the indemnifying party shall not (except with the consent of
the indemnified party) also be counsel to the indemnified party. In no event
shall the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. No indemnifying party shall, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section or Section 8 hereof
(whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.


 


22

















 


(d)           Settlement without Consent if
Failure to Reimburse. If at
any time an indemnified party shall have requested in writing an indemnifying
party to reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 7(a)(ii) effected without its written
consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement
at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified
party in accordance with such request prior to the date of such settlement.


 


8.             Contribution.
If the indemnification provided for in Section 7 hereof is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (a) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the Initial
Purchasers on the other hand from the offering of the Notes pursuant to this
Agreement or (b) if the allocation provided by clause (i) is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand and of the Initial Purchasers
on the other hand in connection with the statements or omissions which resulted
in such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.


 


The relative benefits
received by the Company on the one hand and the Initial Purchasers on the other
hand in connection with the offering of the Notes pursuant to this Agreement
shall be deemed to be in the same respective proportions as the total net
proceeds from the offering of the Notes pursuant to this Agreement (before
deducting expenses) received by the Company and the total underwriting discount
received by the Initial Purchasers, bear to the aggregate initial offering
price of the Notes.


 


The relative fault of the
Company on the one hand and the Initial Purchasers on the other hand shall be
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or by the
Initial Purchasers and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.


 


The Company and the Initial
Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section were determined by pro rata allocation (even if the
Initial Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this Section. The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged
untrue statement or omission or alleged omission.


 


Notwithstanding the
provisions of this Section 8, no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total price at which
the Notes


 


23

















 


purchased and sold by it hereunder exceeds the amount of any damages
which such Initial Purchaser has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.


 


No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
1933 Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.


 


For purposes of this Section
8, each person, if any, who controls an Initial Purchaser within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act and each
Initial Purchaser’s Affiliates and selling agents shall have the same rights to
contribution as such Initial Purchaser, and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act and each of the Company’s Affiliates shall have
the same rights to contribution as the Company. The Initial Purchasers’
respective obligations to contribute pursuant to this Section are several in
proportion to the principal amount of Notes set forth opposite their respective
names in Schedule I hereto and not joint.


 


9.             Representations,
Warranties and Agreements to Survive. All representations, warranties and
agreements contained in this Agreement or in certificates of officers of the
Company or any of its subsidiaries submitted pursuant hereto shall remain
operative and in full force and effect, regardless of (a) any investigation
made by or on behalf of any Initial Purchaser or its Affiliates or selling agents,
any person controlling any Initial Purchaser, its officers or directors or any
person controlling the Company and (b) delivery of and payment for the Notes.


 


10.           Termination.


 


(a)           Termination; General. The Representative may terminate this
Agreement, by notice to the Company, at any time at or prior to the applicable
Delivery Date if (i) there has been, since the time of execution of this
Agreement or since the respective dates as of which information is given in the
Disclosure Package or the Final Offering Memorandum (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement),
any material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, (ii) there has occurred any material adverse
change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the
Representative, impracticable or inadvisable to market the Notes or to enforce
contracts for the sale of the Notes, (iii) trading in any securities of
the Company has been suspended or materially limited by the Commission or the
NASDAQ System, or if trading generally on the American Stock Exchange or the
New York Stock Exchange or in the NASDAQ System has been suspended or
materially limited, or minimum or maximum prices for trading have been fixed,
or maximum ranges for prices have been required, by any of said exchanges or by
such system or by order of the Commission, the National Association of
Securities Dealers, Inc. or any other governmental authority, (iv) a material
disruption has occurred in commercial banking or securities settlement or
clearance services in the United States or (v) a banking moratorium has
been declared by either Federal or New York authorities.


 


24

















 


(b)           Liabilities. If this Agreement is terminated pursuant to
this Section, such termination shall be without liability of any party to any
other party except as provided in Section 4 hereof; and provided further that Sections 1, 7, 8 and 9 shall
survive such termination and remain in full force and effect.


 


11.           Default
by One or More of the Initial Purchasers. If one or more of the Initial
Purchasers shall fail on any Delivery Date to purchase the Notes which it or
they are obligated to purchase under this Agreement (the ”Defaulted Notes”), the Representative shall have the right,
within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Initial Purchasers, or any other initial purchasers, to purchase
all, but not less than all, of the Defaulted Notes in such amounts as may be agreed
upon and upon the terms herein set forth; if, however, the Representative shall
not have completed such arrangements within such 24-hour period, then:


 


(a)           if the number of Defaulted Notes does not
exceed 10% of the aggregate principal amount of the Notes to be purchased
hereunder, each of the non-defaulting Initial Purchasers shall be obligated,
severally and not jointly, to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder bear to
the underwriting obligations of all non-defaulting Initial Purchasers; or


 


(b)           if the number of Defaulted Notes exceeds 10%
of the aggregate principal amount of the Notes to be purchased hereunder, this
Agreement shall terminate without liability on the part of any non-defaulting
Initial Purchaser.


 


No action taken pursuant to
this Section shall relieve any defaulting Initial Purchaser from liability in
respect of its default. In the event of any such default which does not result
in a termination of this Agreement, either the Representative or the Company
shall have the right to postpone Delivery Date for a period not exceeding seven
days in order to effect any required changes in the Offering Memorandum or in
any other documents or arrangements. As used herein, the term “Initial
Purchaser” includes any person substituted for an Initial Purchaser under this
Section.


 


12.           Notices,
etc. All notices and other communications hereunder shall be in writing,
and:


 


(a)           if to the Initial Purchasers, shall be
delivered or sent by any standard form of telecommunication to the
Representative at 4 World Financial Center, New York, New York 10080,
Attention: Syndicate Department; and


 


(b)           if to the Company, shall be delivered or sent
by mail, telex or facsimile transmission to: FEI Company, 5350 NE Dawson Creek
Drive, Hillsboro, Oregon, 97124, Attention: General Counsel;


 


provided, however, that any notice to an Initial Purchaser pursuant to
Section 7(c) shall be delivered or sent by mail, telex or facsimile
transmission to each such Initial Purchaser, which address will be supplied to
any other party hereto by Merrill Lynch upon request. Any such statements,
requests, notices or agreements shall take effect at the time of receipt
thereof. The Company shall be entitled to act and rely upon any request,
consent, notice or agreement given or made on behalf of the Initial Purchasers
by Merrill Lynch.


 


25

















 


13.           No Advisory or Fiduciary Relationship. The Company acknowledges and agrees that
(a) the purchase and sale of the Notes pursuant to this Agreement, including
the determination of the public offering price of the Notes and any related
discounts and commissions, is an arm’s-length commercial transaction between
the Company, on the one hand, and the Initial Purchasers, on the other hand,
(b) in connection with the offering contemplated hereby and the process leading
to such transaction each of the Initial Purchasers is and has been acting
solely as a principal and is not the agent or fiduciary of the Company, or its
shareholders, creditors, employees or any other party, (c)the Initial
Purchasers have not assumed or will not assume advisory or fiduciary
responsibilities in favor of the Company with respect to the offering
contemplated hereby or the process leading thereto (irrespective of whether any
Initial Purchaser has advised or is currently advising the Company on other
matters) and the Initial Purchasers do not have any obligation to the Company
with respect to the offering contemplated hereby except the obligations
expressly set forth in this Agreement, (d) the Initial Purchasers and their
affiliates may be engaged in a broad range of transactions that involve
interests that differ from those of the Company, and (e) the Initial Purchasers
have not provided any legal, accounting, regulatory or tax advice with respect
to the offering contemplated hereby and the Company has consulted its own
legal, accounting, regulatory and tax advisors to the extent it deemed
appropriate.


 


14.           Parties.
This Agreement shall inure to the benefit of and be binding upon the Initial
Purchasers and the Company and their respective successors. Nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the Initial Purchasers and the Company
and their respective successors and the controlling persons and officers and
directors referred to in Sections 7 and 8 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Initial Purchasers and the Company and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Notes from any Initial Purchaser
shall be deemed to be a successor by reason merely of such purchase.


 


15.           GOVERNING
LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.


 


16.           TIME.
TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET FORTH
HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK TIME.


 


17.           Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts shall together
constitute one and the same Agreement.


 


18.           Effect
of Headings. The Section headings herein are for convenience only and shall
not affect the construction hereof.


 


19.           Definition
of the Terms “Business Day” and “Subsidiary”. For purposes of this
Agreement, except as otherwise provided in this Agreement, the term (a) ”business day” means any day on which the New York Stock
Exchange, Inc. is open for trading, and (b) the term “subsidiary”
has the meaning set forth in Rule 405 of the rules and regulations
promulgated under the 1933 Act.


 


26

















 


[Intentionally
Left Blank]


 


27

















 


If the foregoing is in
accordance with your understanding of our agreement, please sign and return to
the Company a counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement between the Initial Purchasers
and the Company in accordance with its terms.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  FEI COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bradley J. Thies

  	
   

  
	
   

  	
   

  	
  Name: Bradley J. Thies

  
	
   

  	
   

  	
  Title:  Vice President, General Counsel and

  
	
   

  	
   

  	
  Secretary

  



 


 


Accepted and agreed by:


 


MERRILL
LYNCH & CO.


MERRILL
LYNCH, PIERCE, FENNER & SMITH


INCORPORATED


 


 


	
  By:

  	
   /s/ Chet Bozdog

  	
   

  
	
  Authorized
  Signatory

  



 


 


For
itself and as Representative of the


other
Initial Purchasers named in Schedule I hereto.


 


28

















SCHEDULE I


 


	
  Initial Purchasers

  	
   

  	
  Principal Amount

  of Firm Notes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Merrill Lynch,
  Pierce, Fenner & Smith Incorporated

  	
   

  	
  $

  	
  75,000,000

  	
   

  
	
  Needham &
  Company, LLC

  	
   

  	
  7,500,000

  	
   

  
	
  Thomas Weisel
  Partners LLC

  	
   

  	
  7,500,000

  	
   

  
	
  D.A. Davidson
  & Co.

  	
   

  	
  5,000,000

  	
   

  
	
  Merriman Curhan
  Ford & Co.

  	
   

  	
  5,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  100,000,000

  	
   

  



 

















 


SCHEDULE II


 





 


Pricing Term Sheet


 


$100,000,000

2.875% Convertible Subordinated Notes Due 2013


 


1.             The
initial public offering price of the notes shall be 100% of the principal
amount thereof, plus accrued interest, if any, from the date of issuance.


 


2.             The net
proceeds to the Company shall be $97.2 million, after the Initial Purchasers’
discount and estimated offering expenses of $2.8 million.


 


3.             The
interest rate on the notes shall be 2.875% per annum.


 


4.             The
notes shall be convertible as described in the Preliminary Offering Memorandum
into shares of Common Stock, no par value, of the Company at an initial
conversion rate of 34.0730 shares per $1,000 principal amount of notes
(equivalent to a conversion price of $29.35 per share).


 


5.             The
following language revises the corresponding language that was included as the
last paragraph under the caption “Description of The Notes — Conversion Rights”:


 


Notwithstanding the
foregoing, in no event shall the conversion rate as adjusted in accordance with
the foregoing exceed 45.1467 per $1,000 principal amount of the notes, other
than on account of the proportional adjustments to the conversion rate in the
manner set forth in clauses (1) through (4) above.


 


6.             The
following table and the language following the table revise the corresponding
preliminary information that was included in the Preliminary Offering
Memorandum under the caption “Description of The Notes — Make Whole Premium
Upon a Fundamental Change”:


 


Make Whole
Premium Upon a Fundamental Change (Number of Additional Shares)


 


	
   

  	
   

  	
  Effective Date

  	
   

  
	
  Stock Price

  	
   

  	
  May 19,

  2006

  	
   

  	
  June 1,

  2007

  	
   

  	
  June 1,

  2008

  	
   

  	
  June 1,

  2009

  	
   

  	
  June 1,

  2010

  	
   

  	
  June 1,

  2011

  	
   

  	
  June 1,

  2012

  	
   

  	
  June 1,

  2013

  	
   

  
	
  $22.15

  	
   

  	
  11.0

  	
   

  	
  11.0

  	
   

  	
  11.0

  	
   

  	
  11.0

  	
   

  	
  11.0

  	
   

  	
  11.0

  	
   

  	
  11.0

  	
   

  	
  11.0

  	
   

  
	
  25.00

  	
   

  	
  9.0

  	
   

  	
  8.7

  	
   

  	
  8.4

  	
   

  	
  8.0

  	
   

  	
  7.6

  	
   

  	
  7.0

  	
   

  	
  6.4

  	
   

  	
  5.9

  	
   

  
	
  28.00

  	
   

  	
  7.5

  	
   

  	
  7.2

  	
   

  	
  6.8

  	
   

  	
  6.3

  	
   

  	
  5.7

  	
   

  	
  5.0

  	
   

  	
  3.9

  	
   

  	
  1.6

  	
   

  
	
  31.00

  	
   

  	
  6.5

  	
   

  	
  6.0

  	
   

  	
  5.6

  	
   

  	
  5.1

  	
   

  	
  4.4

  	
   

  	
  3.6

  	
   

  	
  2.5

  	
   

  	
  —

  	
   

  
	
  35.00

  	
   

  	
  5.3

  	
   

  	
  4.9

  	
   

  	
  4.5

  	
   

  	
  4.0

  	
   

  	
  3.3

  	
   

  	
  2.5

  	
   

  	
  1.4

  	
   

  	
  —

  	
   

  
	
  40.00

  	
   

  	
  4.4

  	
   

  	
  4.0

  	
   

  	
  3.6

  	
   

  	
  3.1

  	
   

  	
  2.5

  	
   

  	
  1.8

  	
   

  	
  0.9

  	
   

  	
  —

  	
   

  
	
  45.00

  	
   

  	
  3.7

  	
   

  	
  3.4

  	
   

  	
  3.0

  	
   

  	
  2.5

  	
   

  	
  2.0

  	
   

  	
  1.3

  	
   

  	
  0.6

  	
   

  	
  —

  	
   

  
	
  55.00

  	
   

  	
  2.9

  	
   

  	
  2.6

  	
   

  	
  2.2

  	
   

  	
  1.8

  	
   

  	
  1.4

  	
   

  	
  0.9

  	
   

  	
  0.4

  	
   

  	
  —

  	
   

  



 

















 


The actual stock price and effective date may not be
set forth on the table, in which case:


 


•    if the actual stock price on the effective
date is between two stock prices on the table or the actual effective date is
between two effective dates on the table, the make whole premium will be
determined by a straight-line interpolation between the make whole premiums set
forth for the two stock prices and the two effective dates on the table based
on a 365-day year, as applicable.


 


•    if the stock price on the effective date
exceeds $55.00 per share, subject to adjustment as described below, no make
whole premium will be paid.


 


•    if the stock price on the effective date is
less than $22.15 per share, subject to adjustment as described below, no make whole
premium will be paid.


 


7.             The
following language revises the corresponding language that was included as the
sixth paragraph under the caption “Description of The Notes — Make Whole
Premium Upon a Fundamental Change”:


 


Notwithstanding the
foregoing, in no event shall the conversion rate exceed 45.1467 per $1,000
principal amount of the notes, subject to adjustments in the same manner as the
conversion rate..


 


8.             All
other terms of the notes shall be those set forth in the Preliminary Offering
Memorandum.


 

















 


SCHEDULE III


 


Other Documents Comprising the Disclosure Package


 


[None]


 

















 


SCHEDULE IV


 


	
  NAME

  	
   

  	
  TITLE

  
	
  Raymond
  A. Link

  	
   

  	
  Interim Chief Executive Officer, Executive Vice
  President and Chief Financial Officer

  
	
  Dr.
  Michael J. Attardo

  	
   

  	
  Director

  
	
  Lawrence
  A. Bock

  	
   

  	
  Director

  
	
  Wilfred
  J. Corrigan

  	
   

  	
  Director

  
	
  Thomas
  F. Kelly

  	
   

  	
  Director

  
	
  Dr.
  William W. Lattin

  	
   

  	
  Director

  
	
  Jan
  C. Lobbezoo

  	
   

  	
  Director

  
	
  Dr.
  Gerhard Parker

  	
   

  	
  Director

  
	
  James
  T. Richardson

  	
   

  	
  Director

  
	
  Donald
  R. VanLuvanee

  	
   

  	
  Director

  
	
  Steven
  D. Berger

  	
   

  	
  Senior
  Vice President

  
	
  John
  A. Doherty

  	
   

  	
  Senior
  Vice President, Worldwide Sales

  
	
  Rob
  H. J. Fastenau

  	
   

  	
  Senior
  Vice President and General Manager, Electron Optics Products Division

  
	
  Peter
  Frasso

  	
   

  	
  Executive
  Vice President and Chief Operating Officer

  
	
  Robert
  S. Gregg

  	
   

  	
  Executive
  Vice President of Worldwide Sales and Service

  
	
  Jim
  D. Higgs

  	
   

  	
  Senior
  Vice President, Human Resources

  
	
  Stephen
  F. Loughlin

  	
   

  	
  Vice
  President, Corporate Finance

  
	
  Bradley
  J. Thies

  	
   

  	
  Vice
  President, General Counsel and Secretary

  



 

















 


Exhibit A


 


May 11, 2006


 


MERRILL LYNCH & CO.


MERRILL LYNCH, PIERCE,
FENNER & SMITH


INCORPORATED


as Representative of the
several


Initial Purchasers named
in the


within-mentioned Purchase
Agreement


4 World Financial Center


New York, New York 10080


 


Re:  Proposed Offering by FEI Company


 


Ladies and Gentlemen:


 


The undersigned
understands that you, as Representative of the several Initial Purchasers,
propose to enter into a Purchase Agreement (the “Purchase Agreement”) with FEI
Company, an Oregon corporation (the “Company”), providing for the offering (the
“Offering”), pursuant to Rule 144A under the Securities Act of 1933 (the “Securities
Act”), by the several Initial Purchasers named in Schedule A to the Purchase
Agreement (the “Initial Purchasers”) of the Company’s Convertible Subordinated
Notes due 2013.


 


In recognition of the
benefit that such an offering will confer upon the undersigned, and for other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the undersigned hereby agrees that, without the prior written
consent of the Representative on behalf of the Initial Purchasers, the
undersigned will not, during the period commencing the date of the final
offering memorandum relating to the Offering and ending 75 days from the date
of the Offering Memorandum relating to the Offering, (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant for the sale of, or
lend or otherwise dispose of or transfer any shares of the Company’s common
stock, no par value (the “Common Stock”), or any securities convertible into or
exercisable or exchangeable for or repayable with Common Stock (including,
without limitation, Common Stock that may be deemed to be beneficially owned by
the undersigned in accordance with the rules and regulations of the Securities
and Exchange Commission and securities that may be issued upon exercise of a
stock option or warrant), whether now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has or thereafter acquires
the power of disposition (collectively, the “Undersigned’s Shares”), or (2)
enter into any swap or other derivative transaction that transfers to another,
in whole or in part, directly or indirectly, the economic consequence of
ownership of the Common Stock or such other securities, whether any such
transaction or swap described in clause (1) or (2) above is to be settled by
delivery of Common Stock or other securities, in cash or otherwise. The
foregoing sentence shall not apply to transfers of the Undersigned’s Shares (A)
as a bona fide gift, provided that each donee
thereof agrees to be bound in writing by the restrictions set forth herein, or
(B) to any trust or other entity formed for the direct or indirect benefit of
the undersigned or the immediate family of the undersigned, provided that the
trustee of the trust or authorized representative of such other entity, as
applicable, agrees to be bound in writing by the restrictions set


 


EXA-1

















 


forth herein. In addition, beginning 45 days after the date of the
Offering Memorandum, the undersigned, together with the other individuals
listed on Schedule A hereto, may offer, sell or contract to sell in the
open market up to 250,000 shares of Common Stock; provided
that the Company shall determine in its reasonable discretion the number of
such shares of Common Stock to be disposed by each individual listed on Schedule
A hereto and shall inform the undersigned accordingly. [For Jim D. Higgs only: 
Notwithstanding the terms of this Lock-Up Letter Agreement, the
undersigned may also offer, sell or contract to sell in the open market up to
3,000 additional shares of Common Stock at any time.]  [For  Stephen F. Loughlin only: 
Notwithstanding the terms of this Lock-Up Letter Agreement, the
undersigned may also offer, sell or contract to sell in the open market up to
5,000 additional shares of Common Stock at any time.]


 


The undersigned agrees
that, without the prior written consent of the Representative on behalf of the
Initial Purchasers, it will not, during the period commencing the date hereof
and ending 75 days from the date of the Offering Memorandum, make any demand
for or exercise any right with respect to, the registration of any shares of
Common Stock or any security convertible into or exercisable or exchangeable
for or repayable with Common Stock.


 


Notwithstanding the
foregoing, if:


 


(1)           during
the last 17 days of the 75-day lock-up period, the Company issues an earnings
release or material news or a material event relating to the Company occurs; or


 


(2)           prior
to the expiration of the 75-day lock-up period, the Company announces that it
will release earnings results or becomes aware that material news or a material
event will occur during the 16-day period beginning on the last day of the
75-day lock-up period,


 


the restrictions imposed
by this Lock-Up Letter Agreement shall continue to apply until the expiration
of the 18-day period beginning on the issuance of the earnings release or the
occurrence of the material news or material event, as applicable, unless the
Representative waives, in writing, such extension.


 


The undersigned hereby
acknowledges and agrees that written notice of any extension of the 75-day
lock-up period pursuant to the previous paragraph will be delivered by the
Representative to the Company (in accordance with notice provisions set forth
in the Purchase Agreement) and that any such notice properly delivered will be
deemed to have been given to, and received by, the undersigned. The undersigned
further agrees that, prior to engaging in any transaction or taking any other
action that is subject to the terms of this Lock-Up Letter Agreement during the
period from the date of this Lock-Up Letter Agreement to and including


 


EXA-2

















 


the 34th day following the expiration of the initial 75-day lock-up
period, he will give notice thereof to the Company and will not consummate such
transaction or take any such action unless he has received written confirmation
from the Company that the 75-day lock-up period (as may have been extended
pursuant to the previous paragraph) has expired.


 


In furtherance of the
foregoing, the Company, and any duly appointed transfer agent for the
registration or transfer of the securities described herein, is hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this Lock-Up Letter Agreement.


 


The undersigned hereby
represents and warrants that the undersigned has full power and authority to
enter into this Lock-Up Letter Agreement. All authority herein conferred or
agreed to be conferred and any obligations of the undersigned shall be binding
upon the successors, assigns, heirs or personal representatives of the
undersigned.


 


The undersigned
understands that, if the Purchase Agreement does not become


 


effective within 60 days
of the date hereof, or if the Purchase Agreement (other than the provisions
thereof which survive termination) shall terminate or be terminated prior to
payment for and delivery of the Securities to be sold thereunder, the
undersigned shall be released from all obligations under this Lock-Up Letter
Agreement.


 


The undersigned
understands that this Lock-Up Letter Agreement is irrevocable and that the
Company and the Initial Purchasers are entering into the Purchase Agreement and
proceeding with the Offering in reliance upon this agreement.


 


[signature
page follows]


 


EXA-3

















 


This Lock-Up Letter
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  Signature: 

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name: 

  	
   

  	
   

  
					



 


EXA-4

















 


Exhibit B


 


May 11, 2006


 


MERRILL LYNCH & CO.


MERRILL LYNCH, PIERCE,
FENNER & SMITH


INCORPORATED


as Representative of the
several


Initial Purchasers named
in the


within-mentioned Purchase
Agreement


4 World Financial Center


New York, New York 10080


 


Re:  Proposed Offering by FEI Company


 


Ladies and Gentlemen:


 


The undersigned
understands that you, as Representative of the several Initial Purchasers,
propose to enter into a Purchase Agreement (the “Purchase Agreement”) with FEI
Company, an Oregon corporation (the “Company”), providing for the offering (the
“Offering”), pursuant to Rule 144A under the Securities Act of 1933 (the “Securities
Act”), by the several Initial Purchasers named in Schedule A to the Purchase
Agreement (the “Initial Purchasers”) of the Company’s Convertible Subordinated
Notes due 2013.


 


In recognition of the
benefit that such an offering will confer upon the undersigned, and for other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the undersigned hereby agrees that, without the prior written
consent of the Representative on behalf of the Initial Purchasers, the
undersigned will not, during the period commencing the date of the final
offering memorandum relating to the Offering and ending 60 days from the date
of the Offering Memorandum relating to the Offering, (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant for the sale of, or
lend or otherwise dispose of or transfer any shares of the Company’s common
stock, no par value (the “Common Stock”), or any securities convertible into or
exercisable or exchangeable for or repayable with Common Stock (including,
without limitation, Common Stock that may be deemed to be beneficially owned by
the undersigned in accordance with the rules and regulations of the Securities
and Exchange Commission and securities that may be issued upon exercise of a
stock option or warrant), whether now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has or thereafter acquires
the power of disposition (collectively, the “Undersigned’s Shares”), or (2)
enter into any swap or other derivative transaction that transfers to another,
in whole or in part, directly or indirectly, the economic consequence of
ownership of the Common Stock or such other securities, whether any such
transaction or swap described in clause (1) or (2) above is to be settled by
delivery of Common Stock or other securities, in cash or otherwise. The
foregoing sentence shall


 


EXB-1

















 


not apply to transfers of the Undersigned’s Shares by the undersigned
or any Affiliate (as defined in Rule 405 under the Securities Act of 1933, as
amended) of Koninklijke Philips Electronics N.V. (“Royal Philips”) to Royal
Philips or any of its Affiliates; provided,
however, that such transferee agrees to be bound in writing by the terms of this
Agreement.


 


The undersigned agrees
that, without the prior written consent of the Representative on behalf of the
Initial Purchasers, it will not, during the period commencing the date hereof
and ending 60 days from the date of the Offering Memorandum, make any demand
for or exercise any right with respect to, the registration of any shares of
Common Stock or any security convertible into or exercisable or exchangeable
for or repayable with Common Stock.


 


In furtherance of the
foregoing, the Company, and any duly appointed transfer agent for the
registration or transfer of the securities described herein, is hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this Lock-Up Letter Agreement.


 


The undersigned hereby
represents and warrants that the undersigned has full power and authority to
enter into this Lock-Up Letter Agreement. All authority herein conferred or
agreed to be conferred and any obligations of the undersigned shall be binding
upon the successors, assigns, heirs or personal representatives of the
undersigned.


 


The undersigned
understands that, if the Purchase Agreement does not become


 


effective by or on June
1, 2006, or if the Purchase Agreement (other than the provisions thereof which
survive termination) shall terminate or be terminated prior to payment for and
delivery of the Securities to be sold thereunder, the undersigned shall be
released from all obligations under this Lock-Up Letter Agreement.


 


The undersigned understands
that this Lock-Up Letter Agreement is irrevocable and that the Company and the
Initial Purchasers are entering into the Purchase Agreement and proceeding with
the Offering in reliance upon this agreement.


 


[signature
page follows]


 


EXB-2

















 


This Lock-Up Letter
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
						



 


EXB-3

















 


Annex 1


 


Form of Opinion of


Wilson Sonsini Goodrich & Rosati,


Professional Corporation


 


[Final Opinion to be Inserted]


 


1

















 


Annex 2


 


Form of Opinion of


Stoel Rives, LLP


 


[Final Opinion to be Inserted]


 


2

















 


Annex 3


 


Form of Opinion of


Michael O. Scheinberg


 


[Final Opinion to be Inserted]


 


3

















 


Annex 4


 


Form of Opinion of


AKD Prinsen van Wijmen N.V.


 


[Final
Opinion to be Inserted]


 


4