-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ADdk0a7CvY161cakdpCbKKkCQ34o2KmRX0tUMCxx6q3hmufS7wbukuq1IsYE4KVR a5twUS8qgKBzaTT0kGAhiw== 0000355948-96-000032.txt : 19961219 0000355948-96-000032.hdr.sgml : 19961219 ACCESSION NUMBER: 0000355948-96-000032 CONFORMED SUBMISSION TYPE: SC 13E4 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19961218 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: RICHARDSON ELECTRONICS LTD/DE CENTRAL INDEX KEY: 0000355948 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 362096643 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: SC 13E4 SEC ACT: 1934 Act SEC FILE NUMBER: 005-36031 FILM NUMBER: 96682558 BUSINESS ADDRESS: STREET 1: 40W267 KESLINGER RD CITY: LAFOX STATE: IL ZIP: 60147 BUSINESS PHONE: 7082082200 MAIL ADDRESS: STREET 1: 40W267 KESLINGER ROAD CITY: LAFOX STATE: IL ZIP: 60147 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: RICHARDSON ELECTRONICS LTD/DE CENTRAL INDEX KEY: 0000355948 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 362096643 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: SC 13E4 BUSINESS ADDRESS: STREET 1: 40W267 KESLINGER RD CITY: LAFOX STATE: IL ZIP: 60147 BUSINESS PHONE: 7082082200 MAIL ADDRESS: STREET 1: 40W267 KESLINGER ROAD CITY: LAFOX STATE: IL ZIP: 60147 SC 13E4 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13E-4 Issuer Tender Offer Statement (Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934) RICHARDSON ELECTRONICS, LTD. (Name of Issuer) RICHARDSON ELECTRONICS, LTD. (Name of Person(s) Filing Statement) 7-1/4% Convertible Subordinated Debentures Due December 15, 2006 (Title of Class of Securities) 763165AB3 (CUSIP Number of Class of Securities) William G. Seils Richardson Electronics, Ltd. 40W267 Keslinger Road LaFox, IL 60147 (630) 208-2370 with copies to Scott Hodes Jay R. Schifferli Ross & Hardies Kelley Drye & Warren LLP 150 N. Michigan Avenue Two Stamford Plaza Chicago, IL 60601-7567 281 Tresser Blvd. (312) 750-2750 Stamford, CT 06901-3229 (203) 351-8023 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Person(s) Filing Statement) December 18, 1996 (Date Tender Offer First Published, Sent or Given to Security Holders) Calculation of Filing Fee Transaction Valuation: *$34,800,000 Amount of Filing Fee: $6,960 _______________ *For purposes of calculating the filing fee pursuant to Rule 0-11 of the Securities Exchange Act of 1934, as amended, the market value of the 7-1/4% Convertible Subordinated Debentures due December 15, 2006 proposed to be acquired was established by multiplying 87%, the average of the high and low prices of such Debentures as reported on December 16, 1996 expressed as a percentage of principal amount, by $40,000,000, the maximum principal amount proposed to be accepted for exchange. [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: Filing Party: Form or Registration No.: Date Filed: TENDER OFFER STATEMENT Item 1. Security and Issuer. (a) The name of the issuer is Richardson Electronics, Ltd., a Delaware corporation ("Richardson Electronics" or the "Company") and its principal executive office is located at 40W267 Keslinger Road, LaFox, Illinois 60147 (b) The securities being sought are Richardson Electronics 7-1/4% Convertible Subordinated Debentures due December 15, 2006 (the "Old Debentures") of which $70,825,000 in aggregate principal amount are outstanding and held by persons other than Richardson Electronics as of December 5, 1996. Richardson Electronics is offering to exchange $1,000 principal amount of its 8-1/4% Convertible Senior Subordinated Debentures due June 15, 2006 (the "New Debentures") for each $1,000 principal amount of Old Debentures for not less than $25,000,000 and not more than $40,000,000 in aggregate principal amount of Old Debentures, subject to the Company's right, in its sole discretion, to accept a lesser or greater aggregate principal amount of Old Debentures for exchange (the "Exchange Offer"). Exchange offers will be made and exchanges will be accepted from any officer, director or affiliate of Richardson Electronics who owns Old Debentures and elects to exchange them under the same terms and conditions applicable to all Old Debenture holders under the offer. (c) The Old Debentures are traded in the over-the-counter market. The trading volume of the Old Debentures has been very limited. The following table sets forth the quarterly high and low average prices for the Old Debentures (expressed as a percentage of principal amount) for the indicated periods, as supplied by Forum Capital Markets L.P. The prices below do not necessarily reflect actual transactions and do not take into account all trading activities in the Old Debentures. On December 16, 1996 the Old Debentures were quoted in the over-the-counter market at 86 bid and 88 asked (expressed as a percentage of the principal amount). Debentureholders are strongly urged to obtain current market quotations for their Old Debentures. High Low Fiscal Year Ended May 31, 1996 First Quarter 83 74 Second Quarter 91 78 Third Quarter 88 85 Fourth Quarter 88 83 Fiscal Year Ending May 31, 1997 First Quarter 87 84 Second Quarter 88 84 Third Quarter (through December 16, 1996) 88 86 (d) Not applicable. Item 2. Source and Amount of Funds Or Other Consideration. (a) The Company is offering to exchange $1,000 principal amount of its 8-1/4% Convertible Senior Subordinated Debentures due June 15, 2006 (the "New Debentures") for each $1,000 principal amount of Old Debentures for not less than $25,000,000 and not more than $40,000,000 in aggregate principal amount of Old Debentures, subject to the Company's right, in its sole discretion, to accept a lesser or greater aggregate principal amount of Old Debentures for exchange (the "Exchange Offer"). No funds are being borrowed for the purpose of such Exchange Offer. (b) Not applicable. Item 3. Purpose of the Tender Offer and Plans or Proposals of the Issuer or Affiliate. See "Purpose and Effects of the Tender Portion of the Exchange Offer and The Proposed Amendments" on page 15 of the Offering Circular and Consent Solicitation dated December 18, 1996 attached hereto as Exhibit (a)(1) (the "Offering Circular"), which information is specifically incorporated herein by reference. Tendered Old Debentures accepted by Richardson Electronics in the exchange offer will be used to satisfy mandatory redemption requirements with respect to the Old Debentures in order of scheduled maturity or other redemption payments, if required. Tendered Old Debentures not so used, if any, will be delivered for cancellation to the Trustee under the Indenture pursuant to which the Old Debentures were issued. (a) Although the Company has no current intention to do so, it reserves the right in its sole discretion to purchase or make offers for any Old Debentures that remain outstanding subsequent to the Expiration Date or, as set forth under "Conditions of the Exchange Offer," to terminate the Exchange Offer and, to the extent permitted by applicable law, purchase Old Debentures in the open market, in privately negotiated transactions or otherwise. Following consummation of the Exchange Offer, the terms of any such purchases or offers could differ from the terms of the Exchange Offer. (b) Not applicable. (c) Not applicable. (d) Not applicable. (e) Not applicable. (f) Not applicable. (g) Not applicable. (h) Not applicable. (i) Not applicable. (j) Not applicable. Item 4. Interested Securities of the Issuer. Richardson Electronics has not effected and is not aware of any executive officer or director of Richardson Electronics, any person controlling Richardson Electronics or any executive officer or director of any corporation ultimately in control of Richardson Electronics having effected during the past 40 business days any transaction in the Old Debentures. Item 5. Contracts, Arrangements, Understandings or Relationships With Respect to the Issuer's Securities. See "The Exchange Offer - Financial Advisor" on page 24 of the Offering Circular, which information is specifically incorporated herein by reference. Item 6. Persons Retained, Employed or To Be Compensated No persons have been or will be employed, retained or compensated by Richardson Electronics or by any person on behalf of Richardson Electronics to make solicitations or recommendations in connection with the Exchange Offer, except that regular employees of Richardson Electronics who will not receive additional compensation therefor, may solicit tenders and consents. Item 7. Financial Information (a)(1) The audited consolidated financial statements for the two fiscal years required to be filed with the Company's most recent annual report on Form 10-K are set forth on pages 14 through 23 on the Annual Report to Shareholders for the Company's fiscal year ended May 31, 1996 which was previously filed as part of the Company's Form 10-K for such year which is attached hereto as Exhibit (a)(1) and which are incorporated herein by reference. (a)(2) Unaudited balance sheets and condensed consolidated income statements and condensed consolidated statements of cash flows and related earnings per share amounts required to be included in the Company's most recent Quarterly Report on Form 10-Q are set forth on pages 3 through 6 on the Form 10-Q for the Company's quarterly period ending August 31, 1996, which was previously filed and is attached hereto as Exhibit (a)(1), which is incorporated herein by reference. (a)(3) See the ratio of earnings to fixed charges for the two most recent fiscal years and the interim periods ending August 31, 1995 and 1996 which are respectively are set forth on page 11 of the Offering Circular. (a)(4) Book value per share of the Company as of the most recent fiscal year end on May 31, 1996 was $5.32 and as of its latest interim balance sheet, provided in response to Item 7(a)(2) above, on August 31, 1996 was $5.45. (b) Not applicable. Item 8. Additional Information. (a) None other than those reflected in the Company's Annual Report on Form 10-K for the period ending May 31, 1996 and its Proxy Statement for its Annual Meeting of stockholders held on October 1, 1996, both of which have been previously filed and are incorporated herein by reference and the Employment Agreement with Bruce K. Johnson which is filed herewith as Exhibit (c)(2) hereto. (b) None, except for compliance with the Securities Exchange Act of 1934 and Rule 13e-4 promulgated thereunder and compliance with applicable requirements of state securities or "blue sky" laws and compliance with the Trust Indenture Act of 1939. (c) Not applicable. (d) None relating to the Exchange Offer. For information regarding other material litigation involving the Company see "Litigation" on page 12 of the Offering Circular, which is incorporated herein by reference. (e) The Offering Circular should be read in its entirely and is incorporated herein by reference. Item 9. Material to be Filed as Exhibits. (a)(1) Offering Circular and Consent Solicitation dated December 18, 1996. (a)(2) Consent and Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (b) Not applicable. (c)(1) Indenture dated as of December 15, 1996 and Form of Debenture. (c)(2) Exchange Agreement dated as of December 16, 1996 between Richardson Electronics, Ltd. and American National Bank and Trust Company of Chicago as Exchange Agent. (c)(3) Letter agreement dated as of December 3, 1996 between Richardson Electronics, Ltd. and Forum Capital Markets L.P. (c)(4) Employment Agreement dated as of November 7, 1996 between Richardson Electronics, Ltd. and Bruce W. Johnson. (d) Not applicable. (e) Not applicable. (f) None. 23. Consent of independent auditors. 25. Form T-1 For Statements of Eligibility and Qualification Under The Trust Indenture Act of 1939 of Corporations Designated to Act as Trustees, American National Bank and Trust Company of Chicago as Trustee. Signature After due inquiry and to the best of my knowledge and belief I certify that the information set forth in this statement is true, complete and correct. December 18 , 1996 Date Signature /s/ Edward J. Richardson Edward J. Richardson, Chairman, and Chief Executive Officer (Name and Title) EX-1 2 Item 9 (a)(1) OFFERING CIRCULAR AND CONSENT SOLICITATION RICHARDSON ELECTRONICS, LTD. Offer to Exchange Its 8 1/4% Convertible Senior Subordinated Debentures due June 15, 2006 (between $25,000,000 and $40,000,000 aggregate principal amount) for Its 7 1/4% Convertible Subordinated Debentures due December 15, 2006 ($70,825,000 principal amount outstanding) and Solicitation of Consents (collectively the "Exchange Offer") THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON JANUARY 31, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD DEBENTURES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN, AND CONSENTS GRANTED PURSUANT TO THE EXCHANGE OFFER MAY BE REVOKED, AT ANY TIME PRIOR TO 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THE EXPIRATION DATE. Richardson Electronics, Ltd. ("Richardson" or the "Company") hereby offers, upon the terms and subject to the conditions set forth in this Offering Circular and Consent Solicitation (the "Offering Circular") and in the accompanying Consent and Letter of Transmittal, the terms of which are incorporated by reference, to exchange $1,000 principal amount of its 8-1/4% Convertible Senior Subordinated Debentures due June 15, 2006 (the "New Debentures") for each $1,000 of its 7-1/4% Subordinated Convertible Debentures due December 15, 2006 (the "Old Debentures") (the "Tender Portion" of the Exchange Offer). The Tender Portion of the Exchange Offer is for not less than $25,000,000 and not more than $40,000,000 aggregate principal amount of Old Debentures, subject to the Company's right, in its sole discretion, to accept a lesser or greater aggregate principal amount of Old Debentures for exchange. There are currently $70,825,000 aggregate principal amount of Old Debentures outstanding and held by persons other than the Company. The Company is also soliciting (the "Solicitation" portion of the Exchange Offer) consents ("Consents") from holders of the Old Debentures (the "Debentureholders") representing at least a majority in aggregate principal amount of the outstanding Old Debentures (the "Requisite Consents") to certain amendments described herein (the "Proposed Amendments") to the indenture under which the Old Debentures were issued (the "Old Indenture"). While the Tender Portion of the Exchange Offer is not conditioned upon the Company receiving the Requisite Consents, the Proposed Amendments will not become effective on the remaining Old Debentures unless the current majority of the Old Debentures give such Consents. Unless otherwise specified, the term "Exchange Offer" includes the Tender Portion and the Solicitation. The date of this Offering Circular and Consent Solicitation is December 18, 1996. The New Debentures will be senior in right of payment to, and will mature prior to, the Old Debentures, and will be subordinated in right of payment to all Senior Indebtedness (as defined) of the Company. As of December 16, 1996, the aggregate amount of Senior Indebtedness was $31,000,000. As with the Old Debentures, the Indenture for the New Debentures (the "New Indenture") does not limit or prohibit the incurrence of additional Senior Indebtedness. The New Debentures will be convertible at any time prior to maturity (unless previously redeemed) into shares of common stock of the Company, par value $.05 per share (the "Common Stock"), at a conversion price of $18.00 per share. The Old Debentures are convertible into Common Stock at a conversion price of $21.14 per share. The conversion prices are subject to adjustment under certain circumstances. On December 16, 1996 the closing price of the Common Stock on the Nasdaq National Market was $9.00 per share. The New Debentures will bear interest at the rate of 8-1/4% from the date of exchange payable semiannually in cash on each June 15 and December 15 (each such date an "Interest Payment Date") commencing June 15, 1997. Holders of Old Debentures accepted for exchange in the Exchange Offer will receive accrued interest on such Old Debentures from December 15, 1996 to the date of exchange at the stated 7-1/4% interest rate. As with the Old Debentures currently outstanding, the Company has the option to redeem the New Debentures at any time, in whole or in part, at 100% of the principal amount of the New Debentures, plus accrued interest to the redemption date. If the Proposed Amendments become effective, each nonexchanging Debentureholder will be bound by such amendments, whether or not such Debentureholder consented to the Proposed Amendments. Consummation of the Exchange Offer and adoption of the Proposed Amendments may have adverse consequences for Debentureholders who elect not to tender in the Exchange Offer or, although tendering, do not receive New Debentures in exchange for their Old Debentures because fewer than all of the Old Debentures are accepted for exchange by the Company. See "Certain Considerations For Nonexchanging Debentureholders." The principal purpose of the Exchange Offer is to improve the Company's future liquidity and capital position through the Tender Portion of the Exchange Offer by substantially eliminating the sinking fund payments of $6,225,000 annually under the Old Debentures. The Company believes this will enable it to redeploy such funds into new and/or existing business areas. As a result of open market purchases of Old Debentures, the Company has substantially satisfied its sinking fund obligations until December 15, 1998. To a lesser extent, while the Company has no present intentions of significantly altering its current dividend or stock repurchase policies, the Proposed Amendments will allow the Company more flexibility in its ability to pay future dividends on, or make future repurchases of, shares of its Common Stock. As such, management believes that the overall Exchange Offer will (i) increase the Company's ability to obtain additional equity financing, and (ii) enhance the Company's ability to take advantage of certain possible future acquisitions and/or future stock repurchases should market conditions permit. At the date of exchange the Company will increase such availability as of August 31, 1996 from $13,100,000 to $21,900,000. On December 16, 1996 the Old Debentures were quoted in the over-the-counter market at 86 bid and 88 asked (expressed as a percentage of the principal amount). Debentureholders are urged to obtain current market quotations for their Old Debentures. There is no assurance that an active market in the New Debentures will develop or that a market will continue for Old Debentures and no assurance as to the prices at which the New Debentures or Old Debentures may be traded in the future. THE EXCHANGE OFFER IS BEING MADE BY THE COMPANY IN RELIANCE ON THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AFFORDED BY SECTION 3(A)(9) THEREOF. THE COMPANY, THEREFORE, WILL NOT PAY ANY COMMISSION OR OTHER REMUNERATION TO ANY BROKER, DEALER, SALESMAN OR OTHER PERSON FOR SOLICITING TENDERS OF THE OLD DEBENTURES OR CONSENTS TO THE PROPOSED AMENDMENTS. REGULAR EMPLOYEES OF THE COMPANY, WHO WILL NOT RECEIVE ADDITIONAL COMPENSATION THEREFOR, MAY SOLICIT TENDERS AND CONSENTS FROM DEBENTUREHOLDERS. NEITHER THIS TRANSACTION NOR THE SECURITIES OFFERED HEREBY HAVE BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THIS TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The Company has no arrangement or understanding with any broker, dealer, salesman or other person to solicit tenders of Old Debentures or Consents. No person has been authorized to give any information or to make any representations in connection with the Exchange Offer other than those contained or incorporated by reference in this Offering Circular and, if given or made, such other information or representations should not be relied upon as having been authorized by the Company. This Offering Circular does not constitute an offer to any person in any jurisdiction in which that offer would be unlawful, and the Company will not accept tenders from Debentureholders in any jurisdiction in which such acceptance would not be in compliance with the securities or Blue Sky laws of such jurisdiction. Neither the delivery of this Offering Circular nor the exchange of New Debentures for Old Debentures pursuant to the Exchange Offer shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof or that the information herein is correct as of any time subsequent to the date hereof. Forum Capital Markets L.P. ("Forum Capital") is acting as Financial Advisor to the Company in connection with the Exchange Offer, and will be compensated therefor. For information regarding (i) the relationship of Forum Capital and certain of its principals to the Company; and (ii) the fees to be paid to, and indemnification provided for Forum Capital as part of the Exchange Offer, see "The Exchange Offer - Financial Advisor". Old Debentures held by officers or directors of the Company who elect to tender them will be exchanged under the terms of the Exchange Offer on the same terms and basis as all other Debentureholders. American National Bank and Trust Company of Chicago (the "Exchange Agent") has agreed to provide services as Exchange Agent for the Exchange Offer. If Debentureholders or their agents require assistance with the Exchange Offer or additional copies of this Offering Circular and/or the Consent and Letter of Transmittal, please contact the Exchange Agent as set forth at the end of this Offering Circular by calling Anjali Gottreich or Elizabeth Nelson at phone number (312) 661-6055 or via fax at (312) 661-6491. Questions regarding the Exchange Offer generally, as well as requests for additional copies of the Offering Circular and other information, may also be directed to William G. Seils, Senior Vice President, General Counsel and Secretary of the Company, at Richardson Electronics, Ltd., 40W267 Keslinger Road, LaFox, Illinois 60147, telephone (630) 208-2370. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files periodic reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information filed with the Commission can be inspected and copied (at prescribed rates) at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the following regional offices of the Commission: 13th Floor, Seven World Trade Center, New York, New York 10048 and Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. Copies of such material can also be obtained by mail from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, at prescribed prices. Such reports, proxy statements and other information may also be obtained from the Company, upon oral or written request of any Debentureholder, at Richardson Electronics, Ltd., 40W267 Keslinger Road, LaFox, Illinois 60147, telephone (630) 208-2370, Attention: Secretary. The Offering Circular has been included as an exhibit to the Company's Issuer Tender Offer Statement on Schedule 13E-4 which has been filed with the Commission pursuant to the Exchange Act. The Company has also filed with the Commission an application on Form T-1 under the Trust Indenture Act of 1939, as amended (the "TIA"), which contains additional information about the New Indenture. Such documents and any amendments thereto may be examined, and copies may be obtained from the Commission in the manner set forth above. Copies of the New Indenture and the Old Indenture may also be obtained from the Company upon request to the Company at its principal executive offices. The Commission maintains a Web site that contains reports, proxy statements and other information regarding registrants that file electronically with the Commission. The address of the Commission's Web site is http://www.sec.gov. FORM 10-K, 10-Q AND PROXY STATEMENT The Company's Annual Report on Form 10-K for its Fiscal Year ended May 31, 1996 (other than exhibits), its Form 10-Q for the quarter ended August 31, 1996 (other than exhibits) and its Proxy Statement for its Annual Meeting of Stockholders held on October 1, 1996 which accompany this Offering Circular and are hereby incorporated herein by reference thereto provide recent information about the Company, its business, financial condition and results of operations, its stock, the Old Debentures, its officers, directors and affiliates, and litigation in which it is involved. DEBENTUREHOLDERS ARE URGED TO READ SUCH ACCOMPANYING DOCUMENTS CAREFULLY, AS IT MAY BE HELPFUL IN DECIDING WHETHER OR NOT TO EXCHANGE OLD DEBENTURES ON THE TERMS OFFERED HEREIN OR TO CONSENT TO THE PROPOSED AMENDMENTS. EXHIBITS TO THE COMPANY'S FORMS 10-K AND 10-Q ARE NOT INCLUDED. THE COMPANY WILL FURNISH TO ANY DEBENTUREHOLDER A COPY OF ANY OF SUCH EXHIBITS UPON REQUEST MADE TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES AT THE ADDRESS SET FORTH UNDER "AVAILABLE INFORMATION." All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Offering Circular and prior to the Expiration Date shall be deemed to be incorporated herein by reference and to be a part hereof from the respective dates of filing of such documents. Any statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Offering Circular to the extent that a statement contained herein, or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein, modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Offering Circular. SUMMARY The following summary is qualified in its entirety by the more detailed information contained elsewhere in this Offering Circular and the accompanying financial statements. The Company Richardson is a Delaware corporation, which along with its predecessors has been in business since 1947. The Company operates in one industry as a specialized, international, value-added distributor of electronic components, including vacuum tubes, power semiconductors, related electronic components and components for security systems. These devices are primarily used to control, switch or amplify electrical power or signals, or as display devices in a variety of industrial, communication, scientific and other applications. The Company offers a wide range of value-added services, including among others, labeling, testing, kitting and repackaging. The Company manufactures certain of the electron tubes and other components it distributes. The Company's worldwide customer base of more than 80,000 is served by 60 sales offices, including 23 outside North America. Richardson's customers include: industrial users, original equipment manufacturers, repair service organizations and other distributors. Richardson's principal executive offices are located at 40W267 Keslinger Road, LaFox, IL 60147 and its telephone number is (630) 208-2200. Purpose and Effects of The Exchange Offer The principal purpose of the Exchange Offer is to improve the Company's future liquidity and capital position through the Tender Portion of the Exchange Offer by substantially eliminating the sinking fund payments of $6,225,000 annually under the Old Debentures. The Company believes this will enable it to redeploy such funds into new and/or existing business areas. As a result of open market purchases of Old Debentures, the Company has substantially satisfied its sinking fund obligations until December 15, 1998. To a lesser extent, while the Company has no present intentions of significantly altering its current dividend or stock repurchase policies, the Proposed Amendments will allow the Company more flexibility in its ability to pay future dividends on, or make future repurchases of shares of its Common Stock. As such, management believes that the overall Exchange Offer will (i) increase the Company's ability to obtain additional equity financing and (ii) enhance the Company's ability to take advantage of certain possible future acquisitions and/or future stock repurchases should market conditions permit. At the date of exchange the Company will increase such availability as of August 31, 1996 from $13,100,000 to $21,900,000. Registered holders of Old Debentures who validly tender in the Exchange Offer and receive New Debentures will be consenting to the Proposed Amendments, and will benefit from certain provisions of the New Debentures, including (1) an increase in the interest rate to 8-1/4% from 7-1/4% per annum, and (2) a reduction in the conversion price from $21.14 per share to $18.00 per share. In addition, the New Debentures will rank senior in right of payment to, and will mature prior to, the Old Debentures. See "Purpose and Effects of the Tender Portion of the Exchange Offer and the Proposed Amendments." For a summary of the consequences to the holders of Old Debentures who do not exchange their Old Debentures in the Exchange Offer, see "Summary - Certain Consequences to Non-Exchanging Holders." Market for the New Debentures Prior to the Exchange Offer, there has been no public market for the New Debentures and the New Debentures will not be listed on any national securities exchange. The Company has been advised by Forum Capital that it intends to make a market in both the New Debentures and the Old Debentures; however, there can be no assurance as to the extent to which a trading market, if any, will develop for the New Debentures and/or continue for the Old Debentures. The Exchange Offer The Tender Portion For each $1,000 principal amount of Old Debentures properly tendered and accepted for exchange, the exchanging holder will receive $1,000 principal amount of New Debentures. The Consents Registered holders of Old Debentures who tender in the Exchange Offer and such holders who separately execute the Consent are consenting to an amendment to the Old Indenture which would (i) modify the covenant limiting distributions and dividends by increasing the amount available to the Company for such purpose as of August 31, 1996 from $13,100,000 to $21,900,000, and (ii) modify the covenant providing for an Event of Default if a default occurs under other Indebtedness by increasing the amount of such other Indebtedness in default which would be a cause for an Event of Default under the Old Debentures from $1,000,000 to $5,000,000. If a majority or more in principal amount of the outstanding Old Debentures are accepted for exchange in the Exchange Offer or Consent to the Proposed Amendments, the Proposed Amendments will become effective. Expiration Date The Exchange Offer expires at 12:00 Midnight, New York City time, on January 31, 1997, unless extended by the Company. The date of such expiration, as such may be extended pursuant to the procedures described herein and is referred to herein as the "Expiration Date." Holders Entitled to Participate Debentureholders who wish to tender Old Debentures for exchange must deliver certificates for the Old Debentures and thus there is no record date. Any Debentureholder wishing only to consent to the Proposed Amendments may do so by executing and delivering a Consent and that Debentureholder or any subsequent holder of those Old Debentures may withdraw the Consent at any time prior to the Company certifying to the Trustee that the Requisite Consents have been received. See "The Exchange Offer." Withdrawal Rights Old Debentures tendered in the Exchange Offer may be withdrawn at any time prior to the Expiration Date, and unless previously accepted for exchange by the Company pursuant to the Exchange Offer, also may be withdrawn at any time after February 28, 1997. Consents may be revoked at any time prior to the date the Company certifies to the Trustee that the Requisite Consents have been received. Conditions of the Tender Portion The Company's obligation to complete the Tender Portion of the Exchange Offer is subject to: (i) Old Debentures representing not less than $25,000,000 in aggregate outstanding principal amount of the Old Debentures being validly tendered and not withdrawn prior to the Expiration Date (the "Minimum Condition"), and (ii) certain other customary conditions. Any of the foregoing conditions may be waived by the Company. Conditions to the Consents Consents to the adoption of the Proposed Amendments are required to be received from a majority in principal amount of the outstanding Old Debentures to permit the Company to effect the Proposed Amendments. If such Consents are received the Company will proceed with the Proposed Amendments whether or not the conditions to the Tender Portion of the Exchange Offer are satisfied or it is completed. Procedures for Tendering Old Debentures and Consenting Debentureholders electing to accept the Exchange Offer or to Consent to the Proposed Amendments must complete, sign, date and deliver the accompanying Consent and Letter of Transmittal (the "Letter of Transmittal") to the Exchange Agent in accordance with the instructions contained therein. Debentureholders who accept the Exchange Offer must Consent to the adoption of the Proposed Amendments. If the Consent portion of the Letter of Transmittal is not completed but the Letter of Transmittal is otherwise completed, signed and dated, the tendering Debentureholder will be deemed to have consented to the Proposed Amendments as of the Expiration Date. Debentureholders who do not accept the Exchange Offer may Consent to the Proposed Amendments. Tenders of Old Debentures with respect to the Exchange Offer will be accepted only in principal amounts of $1,000 and integral multiples thereof. Only registered holders of Old Debentures can effectively Consent to the Proposed Amendments. HOLDERS OF OLD DEBENTURES REGISTERED IN THE NAME OF A BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE ARE URGED TO CONTACT SUCH REGISTERED HOLDER PROMPTLY IF SUCH HOLDER DESIRES TO TENDER OLD DEBENTURES. Certain financial institutions may also effect tenders by book-entry delivery. LETTERS OF TRANSMITTAL AND OLD DEBENTURES SHOULD NOT BE SENT TO THE COMPANY. Delivery of New Debentures Upon satisfaction or waiver of the conditions to the Exchange Offer, the Company will accept all Old Debentures up to an aggregate of $40,000,000 in principal amount (or such additional amount, if any, which the Company determines, in its sole discretion, to accept) properly tendered and will issue the New Debentures promptly following acceptance for exchange of the Old Debentures. If fewer than all of the Old Debentures tendered for exchange are to be accepted by the Company, the Company will accept the Old Debentures tendered up to the amount to be accepted on a pro-rata basis. Certain Tax Considerations The Company believes that the exchange of Old Debentures for New Debentures will not be a taxable transaction for federal income tax purposes. However, if the New Debentures are issued with original issue discount, a holder of New Debentures will have gross income in the amount of original issue discount accrued thereon. Holders of Old Debentures should read carefully "Certain Federal Income Tax Considerations" and are urged to consult their own tax advisors. Certain Consequences to Non-Exchanging Holders The completion of the Exchange Offer will have significant adverse consequences for non- exchanging holders of the Old Debentures. The interest rate on the Old Debentures is 1% less than on the New Debentures, the conversion price is $21.14 per share compared to $18.00 per share for the New Debentures and the New Debentures mature prior to the Old Debentures. The New Debentures will also rank senior in right of payment to the Old Debentures. Accordingly, holders of New Debentures will have claims in bankruptcy or liquidation of the Company prior to those of the holders of unexchanged Old Debentures, which would in all likelihood reduce the amounts realizable on Old Debentureholders' claims in the event of bankruptcy. Along with the aforementioned factors, the reduced amount of outstanding Old Debentures as a result of consummation of the Exchange Offer may adversely affect the trading market, liquidity and market price of the Old Debentures. In addition, application of Old Debentures accepted for exchange to fulfill sinking fund obligations will extend the average life of the unexchanged Old Debentures. Accordingly, if the Exchange Offer is consummated for in excess of $50,075,000 aggregate principal amount of Old Debentures, the Company would not be obligated to make any sinking fund payments on the Old Debentures prior to their final maturity in 2006. Interest The New Debentures will bear interest at the rate of 8-1/4% from the date of exchange. Holders of Old Debentures accepted for exchange in the Exchange Offer will receive accrued interest on such Old Debentures from December 15, 1996 to the date of exchange at the stated 7-1/4% interest rate. See "The Exchange Offer - Acceptance of Old Debentures for Exchange; Delivery of New Debentures." Future Purchases of Old Debentures Although the Company has no current plan or intention to do so, it reserves the right in its sole discretion to purchase or make offers for any Old Debentures that remain outstanding subsequent to the Expiration Date, or as set forth under "The Exchange Offer - Conditions of the Exchange Offer," to terminate the Exchange Offer and, to the extent permitted by applicable law, purchase Old Debentures in the open market, in privately negotiated transactions or otherwise. Exchange Agent American National Bank and Trust Company of Chicago is serving as Exchange Agent in connection with the Exchange Offer. For additional copies of the offering circular or letter of transmittal please contact the exchange agent at American National Bank and Trust Company of Chicago, 33 North LaSalle Street, 13th Floor, Chicago, Illinois 60690, Attn: Anjali Gottreich or Elizabeth Nelson or by telephone at (312) 661-6055. Further Information For further information, contact the Company at (630) 208-2370, Attention: William G. Seils. The New Debentures Interest Payments; Accrued Interest Cash interest on the New Debentures will accrue from the date of exchange at the rate of 8-1/4% per annum, and will be payable semi-annually on each June 15 and December 15, commencing June 15, 1997. Holders of Old Debentures accepted for exchange in the Exchange Offer will receive accrued interest on such Old Debentures from December 15, 1996 to the date of exchange at the stated 7-1/4% interest rate. Mandatory Sinking Fund None. Optional Redemption The Company has the option to redeem the New Debentures, in whole or in part, at any time at 100% of principal amount, plus accrued interest to the date of redemption. Subordination The New Debentures are subordinated in right of payment to all existing and future Senior Indebtedness (as defined in the New Indenture). The New Indentures will rank senior in right of payment to the Old Debentures. Conversion Convertible into Common Stock at $18.00 per share at any time prior to maturity or earlier redemption, subject to adjustment under certain conditions. Common Stock The Common Stock is traded on the Nasdaq National Market under the symbol "RELL." Comparison of New Debentures and Old Debentures The following table compares the principal features of the New Debentures and the Old Debentures. Such comparison is a summary which does not purport to be complete and is qualified in its entirety by reference to the New Debentures, the New Indenture, the Old Debentures and the Old Indenture. For further details, see "Description of the New Debentures" and "Description of the Old Debentures." Terms not otherwise defined herein have the meaning set forth in the applicable indenture. NEW DEBENTURES OLD DEBENTURES Aggregate Principal Amount $25,000,000 to $70,825,000 (other than $40,000,000. those held by Company). Maturity June 15, 2006. December 15, 2006. Interest Rate 8-1/4% per annum, 7-1/4% per annum. retroactive to the date of exchange. Trustee American National First Trust of Illinois, Bank and Trust National Association. Company of Chicago. Conversion Price $18.00 per share, $21.14 per share, subject to certain subject to certain adjustments after adjustments. issuance. Interest Payment Dates June 15, December 15. June 15, December 15. Optional Redemption At any time at 100% At any time at 100% of of principal amount principal amount plus plus accrued interest. accrued interest. Sinking Fund Provisions None. On each December 15 commencing December 15, 1996 through and including December 15, 2005, the Company must deposit with the Trustee cash or Old Debentures equal in amount to $6,225,000. SEE "CERTAIN CONSEQUENCES TO NON-EXCHANGING HOLDERS OF OLD DEBENTURES." Sinking Fund Timing N/A Based upon open market purchases of Old Debentures, the Company has substantially satisfied its sinking fund obligations until December 15, 1998. Ranking The New Debentures The Old Debentures are will be unsecured unsecured obligations obligations of the of the Company, Company, subordinated subordinated to all Senior to all Senior indebtedness (as defined Indebtedness (as in the Old Indenture, defined in the New including, without Indenture) of the limitation, the New Company. The New Debentures) of the Company. Debentures will rank As of December 16, 1996 senior in right of the aggregate amount of payment to the Old such Senior Indebtedness Debentures. As of was $31,000,000. If the December 16, 1996 Exchange Offer is the aggregate amount consummated, Senior of Senior Indebtedness Indebtedness will was $31,000,000. increase by the aggregate principal amount of New Debentures issued in exchange for Old Debentures. Limitations on Future Indebtedness None. None. Dividend and Stock Purchase Restrictions May not exceed the May not exceed the sum sum of (a) cumulative of (a) cumulative net net income earned after income earned after May 31, 1996, (b) net May 31, 1986, (b) net proceeds of the sale proceeds of the sale or or issuance of stock issuance of stock of the of the Company after Company after May 31, May 31, 1996, plus (c) 1986, plus (c) $20,000,000. As of the $5,000,000. At August date of exchange the 31, 1996 the Company amount available as of had $13,100,000 August 31, 1996 will available under such increase to $21,900,000 test. THE PROPOSED from $13,100,000. AMENDMENTS WOULD MODIFY THIS RESTRICTION TO BE THE SAME AS THE NEW DEBENTURES. Events of Default Non-payment of Non-payment of principal principal when due, when due, certain voluntary certain voluntary acts acts in connection with in connection with bankruptcy, and after the bankruptcy, and after passage of time or notice the passage of time or both upon the occurrence or notice or both upon of certain other events, the occurrence of including, without certain other events, limitation, non-payment including, without of interest, non- limitation, non- compliance with Company's payment of interest, other obligations under non-compliance with the New Debentures or New Company's other Indenture, certain obligations under involuntary acts in the New Debentures connection with bankruptcy, or New Indenture, and default on other certain involuntary Indebtedness in excess acts in connection of $1,000,000. THE with bankruptcy, and PROPOSED AMENDMENTS default on other WOULD MODIFY THIS Indebtedness in RESTRICTION TO BE THE excess of $5,000,000. SAME AS THE NEW DEBENTURES. SELECTED CONSOLIDATED FINANCIAL DATA The selected historical consolidated financial data for the Company presented below under the captions "Statement of Operations Data" and "Balance Sheet Data" for and as of the end of each of the three years ended May 31, 1996 are derived from the audited consolidated financial statements of the Company. The data that is presented for and as of the end of each of the three months ended August 31, 1996 and 1995 is unaudited; however, in the opinion of management, such data includes all adjustments (which were of a normal recurring nature) necessary for a fair presentation of the information set forth therein. This data should be read in conjunction with the Company's consolidated financial statements and the related notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations, which are set forth in the Company's Forms 10-K and 10-Q, each of which accompany this Offering Circular. Except for the historical information contained therein and herein, the matters discussed therein are forward- looking statements relating to future events which involve certain risks and uncertainties, including those identified therein and herein. THREE MONTHS ENDED AUGUST 31 YEARS ENDED MAY 31 1996 1995 1996 1995 1994 Statement of Operations Data: Net sales $57,544 $57,201 $239,667 $208,118 $172,094 Income before extraordinary item $ 1,293 $ 1,730 $ 8,111 $ 2,481 $(19,809) Extraordinary gain on bonds, net of tax -- -- -- 527 -- _______ _______ ________ ________ _________ Net income $ 1,293 $ 1,730 $ 8,111 $ 3,008 $(19,809) ======= ======= ======== ======== ========= Net income per share: Income before extraordinary item $ .11 $ .15 $ .68 $ .21 $ (1.75) Extraordinary gain on bonds, net of tax -- -- -- .05 -- _______ _______ ________ ________ _________ Net income $ .11 $ .15 $ .68 $ .26 $ (1.75) ======= ======= ======== ======== ========= Average shares outstanding 12,209 11,710 12,002 11,566 11,299 ======= ======= ======== ======== =========
Note: 1995 results include an after tax charge of $2.3 million, or $.20 per share, for settlement of a claim related to a 1989 contract. 1994 results include a provision of $19.5 million, after tax, or $1.73 per share, for the phase down of the Company's manufacturing operations. OTHER FINANCIAL DATA The ratio of earnings to fixed charges for the three months ended August 31, 1996 and 1995, and the years ended May 31, 1996 and 1995 and as adjusted to give effect to the exchange of Old Debentures for New Debentures in the Exchange Offer (assuming the maximum amount of the Old Debentures are tendered as of the beginning of each of the periods presented), are set forth below: THREE MONTHS ENDED AUGUST 31 YEARS ENDED MAY 31 1996 1995 1996 1995 1994 Ratio of earnings to fixed charges Historical 2.07 2.77 2.81 1.41 N.A. Proforma 1.96 2.60 2.65 1.32 N.A. "Ratio of earnings to fixed charges" is based on income before interest expense, taxes and extraordinary item divided by interest expense. Proforma calculations assume $40.0 million of the 7.25% convertible debentures were exchanged for the 8.25% convertible debentures in each of the respective periods presented. CURRENT DEVELOPMENTS On November 7, 1996 the Company engaged Bruce W. Johnson, age 55, as its President and Chief Operating Officer and elected him as an additional member of the Board of Directors. Before joining the Company, Mr. Johnson was President of Premier Industrial Corporation, a New York Stock Exchange listed company, which is a full service, business to business supplier of electronic components for industrial and consumer products, essential maintenance and repair products for industrial, commercial and institutional applications, and manufacturer of high-performance fire-fighting equipment, and also served as Chief Operating Officer of its Electronics Group, holding those positions from January 1992 through January 1996, and for more than five years prior thereto was Executive Vice President of Premier Industrial Corporation. Premier was acquired by Farnell Ltd. in April 1996. Pursuant to an employment agreement entered into as of November 7, 1996 Mr. Johnson will be receiving a base salary of $300,000 per annum with an opportunity for bonus of 50% of his base compensation, if the corporation meets its goal earnings per share for the year with a pro-rata portion of such amount paid for earnings per share between the prior year's earnings per share and the current year's goal and no bonus if earnings per share are less than the prior years earnings per share. Should earnings per share exceed the goal, Mr. Johnson will receive additional bonus compensation on a pro-rata basis without any limit as to the total amount of bonus that could be earned. The agreement also provides that in the event of termination by the Company, other than for cause, or by Mr. Johnson for cause or within 6 months after a change in control of the Company, Mr. Johnson will be entitled to receive compensation, including bonus for a period of one year after termination. Mr. Johnson was also granted a stock option under the Employees 1996 Incentive Compensation Plan for 50,000 shares at an exercise price of $7 per share which will vest at the rate of 20% per year over the next 5 years and in the event there is a termination of his agreement in connection with a change of control during that 5 year period will become 100% vested. Mr. Johnson has no other shares of Common Stock or Class B Common Stock of the corporation. LITIGATION No material developments have occurred in the matter of Panache Broadcasting of Pennsylvania, Inc. et al., Plaintiff, v. Richardson Electronics, Ltd., and Varian Associates, Inc., in their own rights and as successors in interest to Varian Supply Co., a joint venture, Defendants, Case No. 90C6400 (United States District Court, Northern District of Illinois) originally served on the Company on June 18, 1990. The complaint purports to be a class action on behalf of all persons and businesses in the United States "who purchased electron power tubes from one or more of the defendant corporations at any time during the period from February 26, 1986 to the present," i.e., since the formation of the VASCO joint venture with Varian Associates, Inc. The complaint alleged restraints of trade in violation of Sherman Act Sec. 1, efforts to monopolize the alleged market for electron power tubes in violation of Sherman Act Sec. 2, and acquisitions the effect of which is to substantially lessen competition in violation of Clayton Act Sec. 7. The complaint sought treble damages, injunctive relief, and attorneys fees. The Company filed an answer denying the material allegations. The case is now pending before U.S. District Judge John A. Nordberg and Magistrate Judge Rebecca R. Pallmeyer and remains primarily in the preliminary discovery stage. Magistrate Pallmeyer submitted a Report and Recommendation to Judge Nordberg on September 27, 1995 recommending that the Judge grant in part, and deny in part, plaintiff's motion for class certification. Objections to the report were filed and Judge Nordberg has not yet ruled on class certification. In May, 1995, the Company reached an agreement with the U.S. Department of Justice (DOJ) regarding a claim that the Company was civilly liable for damages and penalties under the False Claims Act and the Lanham Act in connection with a 1989 Department of Defense contract for night-vision tubes. The Company paid $4,700,000 to the Government in return for a release from the Government of all civil and criminal claims in connection with the contract. 1995 financial results include an after tax charge of $2.3 million, or $.20 per share, with respect to this settlement. The Government has not sought any administrative remedies in connection with such matter and the Company cannot predict whether or not further action will be taken or the financial impact, if any, of any such action. CERTAIN CONSIDERATIONS FOR NONEXCHANGING DEBENTUREHOLDERS The consummation of the Exchange Offer and the adoption of the Proposed Amendments may have certain adverse consequences to nonexchanging Debentureholders which should be considered carefully. If the Proposed Amendments become effective, each nonexchanging Debentureholder will be bound by such amendments, whether or not such Debentureholder consented to the Proposed Amendments. Exchanged Old Debentures will be used to satisfy future mandatory redemption requirements, in order of scheduled maturity. Therefore, to the extent Old Debentures are tendered and accepted in the Exchange Offer the Company's obligation to satisfy future sinking fund payments by redeeming or repurchasing Old Debentures for cash will be met with such exchanged Old Debentures. This will lengthen the average life of the Old Debentures that are not exchanged; and, if $50,075,000 principal amount or more of outstanding Old Debentures are tendered and accepted in the Exchange Offer, the Company's sinking fund obligation will be eliminated entirely and the Old Debentures that are not exchanged will not be payable until December 15, 2006. The Old Debentures will not receive the higher rate of interest that the New Debentures will bear and will not receive the benefits of the shorter maturity of the New Debentures. The Company will continue to pay interest on any Old Debentures not tendered and accepted for exchange in the Exchange Offer at the 7-1/4% interest rate. The Old Debentures will not receive the benefit of being convertible into Common Stock of the Company at the reduced conversion price provided in the New Debentures. Depending upon the amount of Old Debentures tendered and accepted by the Company in the Exchange Offer, trading volume in the Old Debentures may be significantly reduced which may adversely affect the liquidity and future market value of the Old Debentures. The New Debentures will rank senior in right of payment to the Old Debentures. Accordingly, holders of New Debentures will have claims in bankruptcy or liquidation of the Company prior to those of the holders of unexchanged Old Debentures. This situation could have an adverse impact on the market price of Old Debentures and would in all likelihood reduce the amounts realizable on such holders' claims in the event of bankruptcy. See "Purpose and Effects of the Tender Portion of the Exchange Offer and the Proposed Amendments." PRICE RANGES OF THE OLD DEBENTURES AND THE COMMON STOCK Old Debentures The Old Debentures are traded in the over-the-counter market. The trading volume of the Old Debentures has been very limited. The following table sets forth the quarterly high and low average prices for the Old Debentures (expressed as a percentage of principal amount) for the indicated periods, as supplied by Forum Capital. The prices below do not necessarily reflect actual transactions and do not take into account all trading activities in the Old Debentures. On December 16, 1996 the Old Debentures were quoted in the over-the-counter market at 86 bid and 88 asked (expressed as a percentage of the principal amount). Debentureholders are strongly urged to obtain current market quotations for their Old Debentures. High Low Fiscal Year Ended May 31, 1996 First Quarter 83 74 Second Quarter 91 78 Third Quarter 88 85 Fourth Quarter 88 83 Fiscal Year Ending May 31, 1997 First Quarter 87 84 Second Quarter 88 84 Third Quarter (through December 16, 1996) 88 86 Common Stock The Company's stock is traded on the Nasdaq National Market under the symbol RELL. The number of registered stockholders of Common Stock and Class B Common Stock at May 31, 1996 was 707 and 37, respectively. The quarterly market price ranges of the Company's Common Stock were as follows: High Low Fiscal Year Ended May 31, 1996 First Quarter 9 7 Second Quarter 11-3/4 6-7/8 Third Quarter 11-1/4 9 Fourth Quarter 11-7/8 9-3/4 Fiscal Year Ending May 31, 1997 First Quarter 10-1/2 8-1/8 Second Quarter 10 7 Third Quarter (through December 16, 1996) 9-3/4 8-1/2 On December 16, 1996 the last sale price of the Common Stock was $9.00 per share. Debentureholders of the Company are strongly urged to obtain a current market quotation for the Common Stock. The Company has paid a dividend on its Common Stock of $.04 per share and on its Class B Common Stock of $.036 per share for the last 34 consecutive quarters. Annual dividend payments approximate $1,800,000. The policy regarding payment of dividends is reviewed periodically by the Board of Directors in light of the Company's operating needs and capital structure. Any determination as to the payment of dividends will depend upon future earnings, results of operations, capital requirements, the financial condition of the Company and such other factors as the Board of Directors of the Company may consider. In addition, the Old Indenture contains, and the New Indenture will contain, a covenant restricting payments of dividends by the Company. As of August 31, 1996, the latest calculation date, the Company had $13,100,000 available for dividends under such formula. See "Description of the New Debentures - Limitations on Dividends and Stock Purchases"; "Description of the Old Debentures - Limitations on Dividends and Stock Purchases"; and "Proposed Amendments to the Old Indenture." PURPOSE AND EFFECTS OF THE TENDER PORTION OF THE EXCHANGE OFFER AND THE PROPOSED AMENDMENTS The principal purposes of the Exchange Offer are to (i) enhance the ability of the Company to finance its operations, including its expansion through future acquisition opportunities as well as providing increased working capital for current operations, and (ii) increase the Company's ability to obtain additional financing. To a lesser extent, while the Company has no present intentions of significantly altering its current dividend or stock repurchase policies, the Proposed Amendments will allow the Company more flexibility in its ability to pay future dividends on, or make future repurchases of shares of its Common Stock. As such, management believes that the overall Exchange Offer will (i) increase the Company's ability to obtain additional equity financing and (ii) enhance the Company's ability to take advantage of certain possible future acquisitions and/or future stock repurchases should market conditions permit. At the date of exchange the Company will increase such availability as of August 31, 1996, from $13,100,000 to $21,900,000. The Tender Portion The Old Indenture provides that the Company will deposit with the Trustee, prior to December 15 in each year, commencing in the year 1996 and ending with the year 2005, cash or Old Debentures sufficient to redeem 7.5% of the aggregate principal amount of the Old Debentures originally issued (which amounts to $6,225,000), plus interest accrued to the date of redemption. Old Debentures accepted for exchange pursuant to the Exchange Offer will be utilized to fulfill sinking fund obligations under the Old Indenture, which, assuming $40,000,000 of Old Debentures are exchanged, will extend the average life of the unexchanged Old Debentures. Accordingly, if the Exchange Offer is consummated and assuming $40,000,000 of Old Debentures are exchanged, the Company would not be obligated to make any material sinking fund payments on the Old Debentures prior to December 15, 2004. This will provide increased working capital to the Company during such period. Further, the Company believes that this would also increase its ability to obtain additional financing. Registered holders of Old Debentures who validly tender in the Exchange Offer and receive New Debentures will be consenting to the Proposed Amendments and will benefit from an increase in the interest rate to 8-1/4% from 7-1/4% per annum and a reduction in the conversion price from $21.14 per share to $18.00 per share. In addition, the New Debentures will rank senior in right of payment to, and will mature prior to, the Old Debentures. If the Proposed Amendments are adopted, the Company will have a larger amount available to pay dividends on, or repurchase or redeem, shares of its capital stock, which the Company believes will also increase its ability to obtain additional equity financing. For a statement of certain of the consequences to the holders of Old Debentures who do not exchange their Old Debentures in the Exchange Offer, see "Summary - Certain Consequences to Non-Exchanging Holders of Old Debentures" and "Certain Considerations for Nonexchanging Debentureholders." See "Proposed Amendments to the Old Indenture" below. Proposed Amendments to the Old Indenture The discussion below is qualified in its entirety by reference to the Old Indenture and the New Indenture. Capitalized terms used and not otherwise defined herein have the meanings given them in the Old Indenture. The Company will furnish to any Debentureholder a copy of any of the Old Indenture, the New Indenture or the Amendment to the Old Indenture pursuant to which the Proposed Amendments will be effected upon request made to the Company at its principal executive offices at the address set forth under "Available Information." The Proposed Amendments to the Old Indenture would: 1. Amend the Limitation on Dividends and Stock Purchases covenant to increase the amount available for the payment of dividends, distributions, purchases, redemption, or other acquisition or retirements, of or on its capital stock or to its shareholders to the sum of (a) cumulative net income earned after May 31, 1996, (b) net proceeds of the sale or issuance of stock of the Company after May 31, 1996, plus (c) $20,000,000. At the date of exchange this would increase the amount available as of August 31, 1996 from $13,100,000 to $21,900,000. 2. Amend the Events of Default to provide for an event of default under Indebtedness (as defined in the Old Debenture) in excess of $5,000,000 rather than $1,000,000 (as presently provided) to be a cause for declaration of an Event of Default under the Old Indenture. THE EXCHANGE OFFER Terms of the Exchange Offer Upon the terms and subject to the conditions of the Exchange Offer (including, if the Exchange Offer is amended or extended, the terms and conditions of any extension or amendment), the Company will accept for exchange, and will issue New Debentures in exchange for, Old Debentures of not less than $25,000,000 and not more than $40,000,000 in aggregate principal amount (such amounts being subject to increase or reduction at the discretion of the Company) properly tendered under the Exchange Offer prior to the Expiration Date (and not properly withdrawn) promptly after the later to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the conditions set forth under "Conditions of the Exchange Offer." Subject to applicable rules of the Commission, the Company expressly reserves the right, in its discretion, to delay acceptance for exchange of, or exchange for, Old Debentures pending receipt of any regulatory approvals specified under "Conditions of the Exchange Offer." For purposes of the Exchange Offer, the Company shall be deemed to have accepted properly tendered Old Debentures when, as and if the Company has given oral or written notice to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders of Old Debentures for the purpose of receiving the New Debentures from the Company and transmitting the New Debentures to each exchanging holder of Old Debentures. The Exchange Offer is conditioned upon, among other things, satisfaction of the Minimum Condition. The Exchange Offer is also subject to certain other conditions set forth below under "Conditions of the Exchange Offer." If these or any of the other conditions referred to as "Conditions of the Exchange Offer" are not satisfied, or any events specified in "Conditions of the Exchange Offer" have occurred or are determined by the Company to have occurred prior to the Expiration Date, the Company reserves the right (but is not obligated) to (i) decline to exchange any of the Old Debentures tendered in the Exchange Offer and terminate the Exchange Offer, and return all tendered Old Debentures to the tendering holders, or (ii) waive or amend any or all conditions to the Exchange Offer, to the extent permitted by applicable law, and, subject to complying with applicable rules and regulations of the Commission, exchange Old Debentures validly tendered subject to any remaining, amended or new terms and limitations of the Exchange Offer. If the Company makes a material change in the terms of the Exchange Offer or the information concerning the Exchange Offer, or if it waives a material condition of the Exchange Offer, the Company will extend the Exchange Offer to the extent required by Rules 13e-4(e)(2), 13e-4(f)(1)(ii) and 14e-1 under the Exchange Act. Holders of Old Debentures who desire to tender their Old Debentures will be required to Consent to the Proposed Amendments. REVOCATIONS OF CONSENTS TO THE PROPOSED AMENDMENTS BY HOLDERS WHO HAVE TENDERED THEIR OLD DEBENTURES FOR EXCHANGE MAY ONLY BE EFFECTED BY SUCH HOLDERS BY A PROPER REVOCATION OF CONSENT AND WITHDRAWAL OF THE OLD DEBENTURES TO WHICH SUCH REVOCATIONS PERTAIN AS DESCRIBED BELOW IN "WITHDRAWAL RIGHTS AND REVOCATION OF CONSENTS." SUCH WITHDRAWAL WILL EXCLUDE THE WITHDRAWN OLD DEBENTURES FROM THE EXCHANGE OFFER. ONLY REGISTERED HOLDERS OF OLD DEBENTURES CAN EFFECTIVELY CONSENT TO THE PROPOSED AMENDMENTS. HOLDERS OF OLD DEBENTURES REGISTERED IN THE NAME OF A BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE ARE URGED TO CONTACT SUCH REGISTERED HOLDER PROMPTLY IF SUCH HOLDER DESIRES TO TENDER OLD DEBENTURES. As of December 16, 1996, $70,825,000 aggregate principal amount of the Old Debentures was outstanding (excluding $12,175,000 principal amount of Old Debentures acquired by the Company and held in treasury) and there were approximately 23 registered holders. This Offering Circular, together with the Letter of Transmittal, is being sent to all such registered holders as of December 18, 1996. Although the Company has no current intention to do so, it reserves the right in its sole discretion to purchase or make offers for any Old Debentures that remain outstanding subsequent to the Expiration Date or, as set forth under "Conditions of the Exchange Offer," to terminate the Exchange Offer and, to the extent permitted by applicable law, purchase Old Debentures in the open market, in privately negotiated transactions or otherwise. Following consummation of the Exchange Offer, the terms of any such purchases or offers could differ from the terms of the Exchange Offer. Tendering holders of Old Debentures will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Old Debentures pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than certain applicable taxes, in connection with the Exchange Offer. See "Payment of Expenses" below. Expiration Date; Extensions; Termination; Amendments The Exchange Offer will expire at 12:00 Midnight, New York City time, on January 31, 1997, subject to extension by the Company by notice to the Exchange Agent, as herein provided. The Company reserves the right to so extend the Exchange Offer at its sole discretion, in which event the term "Expiration Date" shall mean the time and date on which the Exchange Offer as so extended shall expire. The Company shall notify the Exchange Agent of any extension by oral or written notice and shall make a public announcement thereof, each prior to 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date. The Company expressly reserves the right, in its sole discretion, at any time and from time to time, to extend for any reason the period of time during which the Exchange Offer is open, including the occurrence of any of the events specified under "Conditions of the Exchange Offer," by giving oral or written notice of such extension to the Exchange Agent. During any such extensions, all Old Debentures previously tendered and not withdrawn will remain subject to the Exchange Offer, subject to the rights of a tendering holder to withdraw its Old Debentures. Subject to the applicable regulations of the Commission, the Company also expressly reserves the right, in its sole discretion, at any time and from time to time, by giving oral or written notice thereof of such amendment to the Exchange Agent and by making a public announcement thereof, to (i) delay acceptance for exchange of or exchange for (regardless of whether such Old Debentures were previously accepted for exchange), any Old Debentures pending receipt of any regulatory approval described in this Offering Circular or to comply with any other applicable law; (ii) terminate the Exchange Offer and refuse to accept for exchange any Old Debentures and return all tendered Old Debentures to tendering holders thereof, if any of the events set forth below under "Conditions of the Exchange Offer" shall have occurred and shall not have been validly waived by the Company, (iii) extend the Exchange Offer and retain all tendered Old Debentures until the Expiration Date, subject, however, to all withdrawal rights of the holders, see "Withdrawal Rights and Revocation of Consents," (iv) waive or modify certain unsatisfied conditions with respect to the Exchange Offer (other than the receipt of an order of the Commission pursuant to the TIA, which cannot be waived) and accept all properly tendered Old Debentures; or (v) amend the terms of the Exchange Offer in any respect, including, without limitation, the removal of the Minimum Condition or to increase the maximum amount of Old Debentures which will be accepted for exchange. The Company acknowledges that (i) Rule 13e-4(f)(5) under the Exchange Act requires the Company to pay the consideration offered or return the Old Debentures tendered promptly after the termination or withdrawal of the Exchange Offer, and (ii) the Company may not delay acceptance for exchange of, or exchange for (except as provided in clause (i) of the first sentence of the preceding paragraph) any Old Debentures upon the occurrence of any of the conditions specified under "Conditions of the Exchange Offer" without extending the period of time during which the Exchange Offer is open. Any such extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof, with such announcement in the case of an extension to be made no later than 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date. Subject to applicable law (including Rules 13e-4(e)(2), 13e-4(f)(1)(ii) and 14e-1 under the Exchange Act, which require that material changes be promptly disseminated to holders in a manner reasonably designed to inform them of such changes) and without limiting the manner in which the Company may choose to make any public announcement, the Company shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service. Solicitation of Consents; Consent Procedure Holders of Old Debentures who wish to tender under the Exchange Offer must Consent to the adoption of the Proposed Amendments to the Old Indenture. Debentureholders who elect to Consent to such Proposed Amendments, whether or not they tender Old Debentures pursuant to the Exchange Offer, should so indicate by marking the appropriate box on, and signing and dating the Consent portion of, the Letter of Transmittal and mailing or delivering the same to the Exchange Agent in accordance with the instructions contained therein. If the Consent portion of the Letter of Transmittal is not appropriately checked but the Letter of Transmittal is otherwise completed, signed and dated, the tendering holder will be deemed to have consented to the Proposed Amendments. Only a registered holder of Old Debentures (or such holder's legal representative or attorney-in-fact) may execute a Letter of Transmittal. However, pursuant to the terms of the Old Indenture, the transfer of Old Debentures will not have the effect of revoking any Consent theretofore given by the holder of such Old Debentures and such Consent will remain valid unless revoked prior to delivery to the Trustee by the Company of certification that Consents duly executed by holders of a majority in aggregate principal amount of the outstanding Old Debentures have been received. Alternatively, such Letter of Transmittal or Notice of Guaranteed Delivery must be accompanied by an appropriate power of attorney, in a form satisfactory to the Company, in its sole discretion, duly executed by the registered holder with the signature guaranteed by an Eligible Institution (as defined below) confirming the transfer of the Old Debentures or the right of the present holder to execute the form of Consent. Upon receipt of the Requisite Consents from Debentureholders, the Company will certify in writing to the Trustee that holders of a majority in aggregate principal amount of the outstanding Old Debentures have consented to the adoption of the Proposed Amendments. Upon receipt of such certification, all Consents to the Proposed Amendments theretofore received will be irrevocable. Except as set forth under "Guaranteed Delivery Procedures" below, Consents from tendering holders of Old Debentures will not be counted towards determining whether the Company has received the Requisite Consents unless the Company is prepared to accept the tender of the Old Debentures to which such Consents relate. In addition, Consents with respect to any Old Debentures will not be counted if the tender of such holders' Old Debentures is defective, unless the Company waives such defect. Immediately prior to acceptance of Old Debentures pursuant to the Exchange Offer, and after receipt by the Trustee of, among other things, certification by the Company that the Requisite Consents have been received, the Trustee and the Company will execute a supplemental indenture to evidence the adoption of the Proposed Amendments. The Company will not be obligated to issue the New Debentures pursuant to the Exchange Offer unless, among other things, the Requisite Consents to the adoption of the Proposed Amendments have been received. See "Conditions of the Exchange Offer." The Exchange Agent, as soon as practicable, will transmit a copy of such approved amendments to all registered holders of Old Debentures which remain outstanding. Procedures for Tendering A tender of Old Debentures pursuant to one of the procedures set forth below will constitute the tendering Debentureholder's acceptance of the terms and conditions of the Exchange Offer set forth herein and in the Letter of Transmittal. The Company's acceptance for exchange of Old Debentures tendered pursuant to the Exchange Offer will constitute a binding agreement between the tendering Debentureholder and the Company upon the terms and subject to the conditions of the Exchange Offer. Tenders of Old Debentures for exchange will be accepted only in principal amount of $1,000 and integral multiples thereof. To the extent more than $40,000,000 in aggregate principal amount of Old Debentures are properly tendered and not properly withdrawn prior to the expiration of the Exchange Offer, the Company will accept up to $40,000,000 of Old Debentures on a pro-rata basis. To be tendered effectively, a properly completed Letter of Transmittal (or facsimile thereof), duly executed by the registered holder thereof, with any required signature guarantees, or an Agent's Message (as defined below) in connection with a book-entry delivery of the Old Debentures, and any other documents required by the Letter of Transmittal, must be received by the Exchange Agent at the address set forth below at the end of the Offering Circular prior to 12:00 Midnight, New York City time, on the Expiration Date, and either (i) the Old Debentures must be received by the Exchange Agent at such address or the Old Debentures must be tendered pursuant to the procedure for book-entry transfer described below and confirmation of a book-entry transfer (a "Book-Entry Confirmation") must be received by the Exchange Agent, in such case prior to the Expiration Date, or (ii) the tendering registered holder must comply with the guaranteed delivery procedures described below. If the certificate for an Old Debenture is lost or mutilated, please contact the Trustee, First Trust of Illinois, at 400 North Michigan Avenue, Chicago, Illinois 60611, telephone (312) 836-6746 to obtain information on obtaining a replacement certificate which will be required to tender. LETTERS OF TRANSMITTAL AND OLD DEBENTURES SHOULD NOT BE SENT TO THE COMPANY OR TO THE TRUSTEE. Signatures on a Letter of Transmittal, a notice of withdrawal or a revocation of Consent, as the case may be, must be guaranteed by an Eligible Institution, as defined below, unless the Old Debentures tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal, a notice of withdrawal or a revocation of Consent, as the case may be, are required to be guaranteed, such guarantee must be by a firm that is a member of the Medallion Signature Guarantee Program or by any other "eligible guarantor institution" as defined in Rule 17Ad-15 under the Exchange Act (an "Eligible Institution"). THE METHOD OF DELIVERY OF OLD DEBENTURES AND OTHER DOCUMENTS TO THE EXCHANGE AGENT, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER ENTITY (AS DEFINED BELOW), IS AT THE ELECTION AND RISK OF THE HOLDER AND WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL IT IS SUGGESTED THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE. The Exchange Agent will make a request to establish accounts with respect to the Old Debentures at The Depository Trust Company ("DTC"), the Midwest Securities Transfer Company ("MSTC") and the Philadelphia Depository Company ("PHILADEP," and together with DTC and MSTC, collectively referred to as the "Book Entry Transfer Facilities") for the purpose of the Exchange Offer promptly after the date of this Offering Circular, and any financial institution that is a participant in any of the Book Entry Transfer Facilities' systems may make book entry delivery of the Old Debentures by causing a Book Entry Transfer Facility to transfer such Old Debentures into the Exchange Agent's account in accordance with such Book Entry Transfer Facility's procedure for such transfer. Although delivery of Old Debentures may be effected through book entry transfer in the Exchange Agent's account at a Book Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or an Agent's Message and any other required documents, must, in any case, be transmitted to and received or confirmed by the Exchange Agent at one of its addresses set forth below prior to 12:00 Midnight, New York City time, on the Expiration Date or the tendering holder must comply with the guaranteed delivery procedures described below. DELIVERY OF DOCUMENTS TO A BOOK ENTRY TRANSFER FACILITY IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Exchange Agent forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Old Debentures, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Company may enforce such agreement against such participant. If the Letter of Transmittal or Notice of Guaranteed Delivery or any Old Debentures is signed by a person other than the registered holder of any certificate(s) listed therein, such certificate(s) must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered holder or holders appear on the certificate(s). If the Letter of Transmittal or Notice of Guaranteed delivery or any Old Debentures or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. By executing a Letter of Transmittal as set forth above, or providing an Agent's Message in connection with a book-entry transfer, a tendering registered holder Consents to the Proposed Amendments. Such Consent may not be revoked except by a proper withdrawal of the Old Debentures tendered in the Exchange Offer to which such revocation pertains and in compliance with the additional terms set forth below in "Withdrawal Rights and Revocation of Consents." If any tendered Old Debentures are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein, the withdrawal of tendered Old Debentures under circumstances, as described herein, permitting such withdrawal or otherwise, or if Old Debentures are submitted for a greater principal amount than the registered holder thereof desires to exchange, any such unaccepted or non-exchanged Old Debentures will be returned, without expense, to the tendering registered holder thereof (or, in the case of the Old Debentures tendered by book-entry transfer, to an account maintained at such Book-Entry Transfer Facility), as promptly as practicable after the expiration or termination of the Exchange Offer. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of Old Debentures tendered for exchange will be determined by the Company in its sole discretion, whose determination will be final and binding. The Company reserves the absolute right to reject any or all tenders that are not in proper form or the acceptance of which would, in the opinion of the Company or counsel for the Company, be unlawful. The Company also reserves the right to waive certain of the conditions to the Exchange Offer or any irregularities or defects in the tender of Old Debentures. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any irregularities in connection with tenders of Old Debentures must be cured within such time as the Company shall determine. Neither the Company, the Exchange Agent, nor any other person shall be under any duty to give notification of defects or irregularities in such tenders or shall incur any liability for failure to give such notification. Tenders of Old Debentures will not be deemed to have been made until such defects or irregularities have been cured or waived. Guaranteed Delivery Procedure If a holder of the Old Debentures desires to tender such Old Debentures, and the Old Debentures are not immediately available, or time will not permit such holder's Old Debentures or any other required documents to reach the Exchange Agent before 12:00 Midnight, New York City time, on the Expiration Date or the procedure for book-entry transfer cannot be completed on a timely basis, a tender for exchange may be effected if: (a) the tender for exchange is made by or through an Eligible Institution; (b) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Company herewith, is received by the Exchange Agent as provided below prior to the Expiration date; and (c) all tendered Old Debentures, or a Book-Entry Confirmation, together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with any required signature guarantee (or in the case of book-entry transfer, an Agent's Message) and any other documents required by such Letter of Transmittal, are received by the Exchange Agent within three Nasdaq trading days after the date of execution of the Notice of Guaranteed Delivery. Any notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Exchange Agent and must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, acceptance of tendered Old Debentures pursuant to the Exchange Offer will, in all cases, be made only after timely receipt by the Exchange Agent of (i) the Old Debentures, or a Book-Entry Confirmation of the delivery of such Old Debentures, if available, (ii) a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) or, in the case of book-entry transfer, an Agent's Message and (iii) any other documents required by the Letter of Transmittal. ISSUANCE OF NEW DEBENTURES IN EXCHANGE FOR OLD DEBENTURES WILL BE MADE ONLY AGAINST RECEIPT OF THE TENDERED OLD DEBENTURES BY THE COMPANY. Conditions of the Exchange Offer Notwithstanding any other provisions of the Exchange Offer, and in addition to (and not in limitation of) the Company's rights to extend and amend the Exchange Offer at any time in its sole discretion, the Company shall not be required to accept for exchange of or, subject to any applicable rules and regulations of the Commission, including Rule 13e-4(f)(5) under the Exchange Act (relating to the Company's obligation to pay for or return tendered Old Debentures promptly after termination or withdrawal of the Exchange Offer), exchange for, and may delay the acceptance for exchange of or, subject to the restriction referred to above, the exchange for, any tendered Old Debentures, and may terminate the Exchange Offer as to any Old Debentures not then exchanged for, if (i) the Commission shall not have issued an order declaring the New Indenture qualified under the TIA, (ii) the Minimum Condition has not been satisfied, or (iii) at any time on or after December 18, 1996 and before the time of issuance of the New Debentures, any of the following events shall occur or shall be determined by the Company to have occurred: (a) any action or proceeding is instituted or threatened in any court or by or before any governmental authority or other regulatory or administrative agency, domestic or foreign, with respect to the Exchange Offer which, in the sole judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or have a material adverse effect on the contemplated benefits of the Exchange Offer to the Company, or there shall have occurred any material adverse developments in any existing action or proceeding with respect to the Company or any of its subsidiaries; (b) there shall have been proposed (including any proposed or pending legislation in existence as of the date hereof), adopted, or enacted into law any legislation, rule or regulation, or any action shall have been taken or proposed (i) limiting the deductibility of interest on indebtedness attributable, directly or indirectly, to the Exchange Offer, (ii) that would materially increase the after- tax cost of the Exchange Offer, or the transactions contemplated hereby or (iii) might, in the sole judgment of the Company, have any of the effects set forth in (a) above; (c) there shall have occurred or be likely to occur any change, or development involving a prospective change, in or affecting the business or financial affairs of the Company or any of its subsidiaries which, in the sole judgment of the Company, would or might prohibit, restrict or delay consummation of the Exchange Offer or materially impair the contemplated benefits of the Exchange Offer to the Company; (d) there shall have been proposed, adopted or enacted any law, statute, rule or regulation which, in the sole judgment of the Company, might materially prohibit, restrict or delay consummation of the Exchange Offer or materially impair the contemplated benefits of the Exchange Offer to the Company; or (e) there shall have occurred (i) any general suspension of, shortening of hours for, or limitation on prices for, trading in securities listed on the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market, or in the over-the-counter market (whether or not mandatory); (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks or savings and loan associations by federal or state authorities in the United States (whether or not mandatory); (iii) a commencement of a war, armed hostilities or other international or national crisis directly or indirectly involving the United States; (iv) any limitation (whether or not mandatory) by any governmental authority on, or other event having a reasonable likelihood of affecting, the extension of credit by banks or other lending institutions in the United States; (v) any significant change in the United States currency exchange rates or a suspension of, or limitation on, the markets therefor (whether or not mandatory); (vi) any significant change in the United States securities or financial markets generally; or (vii) in the case of any of the foregoing existing at the time of the commencement of the Exchange Offer, a material acceleration or worsening thereof. If any of the foregoing events shall have occurred, the Company may (i) delay acceptance for exchange of or exchange for (regardless of whether such Old Debentures were previously accepted for exchange), any Old Debentures pending receipt of any regulatory approval described above or to comply with any other applicable law; (ii) terminate the Exchange Offer and refuse to accept for exchange any Old Debentures and return all tendered Old Debentures to tendering holders thereof; (iii) extend the Exchange Offer and retain all tendered Old Debentures until the Expiration Date, subject, however, to all withdrawal rights of the holders, see "Withdrawal Rights and Revocation of Consents," (iv) waive or modify certain of the unsatisfied conditions with respect to the Exchange Offer (other than the receipt of an order of the Commission pursuant to the TIA, which cannot be waived) and accept all properly tendered Old Debentures subject to the terms and limitations of the Exchange Offer; or (v) amend the terms of the Exchange Offer in any respect. Although the Company has no present intention of waiving or modifying any of the conditions of the Exchange Offer, the Company expressly reserves the right to waive or modify, to the extent permitted by law, any of such conditions to which the Company and/or the holders of Old Debentures may be exposed or any additional risks which cannot now be predicted or evaluated. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances giving rise to such conditions or may be waived by the Company in whole or in part at any time and from time to time in its sole discretion, except that the Company may not waive the condition that the Commission declare the New Indenture qualified under the TIA. Any determination made by the Company concerning an event, development or circumstance described or referred to above will be final and binding on all parties. If the Company waives any material condition of the Exchange Offer, the Company will promptly disclose such waiver and extend the Exchange Offer to the extent required by Rules 13e-4(e)(2), 13e-4(f)(1)(ii) and 14e-1 under the Exchange Act. The minimum period during which the Exchange Offer must remain open following material changes in the terms of the Exchange Offer or the information concerning the Exchange Offer depends upon the facts and circumstances, including the relative materiality of such terms or information. See "Expiration Date; Extensions; Termination; Amendments." If, prior to the Expiration Date, the Company increases the consideration to be offered per Old Debenture pursuant to the Exchange Offer, the Company will pay such increased consideration for all such Old Debentures tendered pursuant to the Exchange Offer, whether or not such Old Debentures were tendered prior to such increase in consideration. Acceptance of Old Debentures for Exchange; Delivery of New Debentures Tenders will be accepted only in principal amounts of $1,000 and integral multiples thereof. Unless waived or increased by the Company, only $40,000,000 in aggregate principal amount of Old Debentures properly tendered and not withdrawn will be accepted for exchange. If more than such amount (or such increased amount the Company elects to accept) are properly tendered for exchange and not withdrawn, the Company will accept Old Debentures that are properly tendered and not properly withdrawn, up to the amount to be accepted on a pro-rata basis. Upon the terms and subject to the conditions of the Exchange Offer, the acceptance of Old Debentures properly tendered under the Exchange Offer and not properly withdrawn, and delivery of the New Debentures will be made promptly after the Expiration Date. Holders of Old Debentures accepted for exchange in the Exchange Offer will receive accrued interest on such Old Debentures from December 15, 1996 to the date of exchange at the stated 7-1/4% interest rate. For purposes of the Exchange Offer, the Company shall be deemed to have accepted properly tendered Old Debentures when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders of Old Debentures for the purpose of receiving the New Debentures from the Company. If any tendered Old Debentures are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, certificates for any such unaccepted Old Debentures will be returned, without expense, to the tendering holder thereof (or, in the case of the Old Debentures tendered by book entry transfer, to an account maintained at such Book Entry Transfer Facility) as promptly as practicable after the expiration or termination of the Exchange Offer. Withdrawal Rights and Revocation of Consents Tenders of Old Debentures made in accordance with the Exchange Offer are irrevocable, except that any holder of Old Debentures who has tendered Old Debentures may withdraw the tender at any time prior to 12:00 Midnight, New York City time, on the Expiration Date and, unless such tender has been previously accepted, at any time after 12:00 Midnight, New York City time, February 28, 1997, by delivery of written notice of withdrawal, to the Exchange Agent. If the Company extends the Exchange Offer, is delayed in its acceptance for exchange or is unable to accept Old Debentures for exchange pursuant to the Exchange Offer for any reason, then, without prejudice to the Company's rights under the Exchange Offer, the Exchange Agent may, nevertheless, on behalf of the Company, retain tendered Old Debentures, and such Old Debentures may not be withdrawn except to the extent that tendering registered holders are entitled to withdrawal rights as described herein. To be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Exchange Agent at the address set forth below, must have a guaranteed signature included thereon (unless not required by the terms set forth above under "Procedures for Tendering") and must specify the name of the person having tendered the Old Debentures to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Old Debentures, and the aggregate principal amount of Old Debentures to be withdrawn. If Old Debentures have been delivered or otherwise identified to the Exchange Agent, the name of the registered holder and the serial numbers of the particular certificate(s) evidencing the Old Debentures withdrawn must also be so furnished to the Exchange Agent as aforesaid prior to the physical release of the certificate(s) for the withdrawn Old Debentures. If Old Debentures have been tendered pursuant to the procedures for book entry tender as set forth herein, any notice of withdrawal must also specify the name and number of the account at the appropriate Book Entry Transfer Facility to be credited with the withdrawn Old Debentures. Withdrawals of tenders of Old Debentures may not be rescinded, and any Old Debentures withdrawn will thereafter be deemed not validly tendered for purposes of the Exchange Offer; provided, however, that withdrawn Old Debentures may be retendered by again following one of the procedures described herein at any time prior to 12:00 Midnight, New York City time, on the Expiration Date. The withdrawal of Old Debentures will not constitute a revocation of the Consent to the Proposed Amendments with respect to the withdrawn Old Debentures, unless the procedures for revocation of Consents described below are followed. Any holder of Old Debentures who has consented to (or whose predecessor in interest with respect to such Old Debentures has consented to) the adoption of the Proposed Amendments may revoke such Consent by delivering written notice of such revocation to the Exchange Agent at any time prior to the delivery to the Trustee by the Company of certification that the Requisite Consents have been received. If such holder has tendered his Old Debentures for exchange he must also properly withdraw his tender of such Old Debentures for exchange in accordance with the procedures specified above. Failure to withdraw the tendered Old Debentures properly shall render the withdrawal of Consent ineffective. The Exchange Agent shall promptly deliver any such valid notice of revocation of Consent to the Trustee. Any such notice of revocation should indicate the certificate number or numbers of the Old Debentures to which it relates and the aggregate principal amount represented by such Old Debentures and must be signed by the holder in the same manner as the original Consent or be accompanied by evidence satisfactory to the Company that the holder revoking such Consent succeeded to ownership of such Old Debentures or otherwise has the power to revoke such Consent. The revocation of a Consent shall be effective with respect to the Old Debentures to which it relates, unless otherwise specified in the notice of revocation. All questions as to the validity (including time of receipt) of notices of withdrawal or revocation of any Consent will be determined by the Company, whose determination will be final and binding. Neither the Company, the Exchange Agent nor any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or revocation or incur any liability for failure to give any such notification. Exchange Agent American National Bank and Trust Company of Chicago has been appointed as Exchange Agent for the Exchange Offer. The Company has agreed to indemnify the Exchange Agent against certain liabilities and expenses. All correspondence in connection with the Exchange Offer and requests for information or additional copies of this Offering Circular or the Letter of Transmittal should be addressed to the Exchange Agent, in the manner and at the address specified at the end of this Offering Circular. Financial Advisor The Company has retained Forum Capital, an investment banking firm, to advise it with respect to the Exchange Offer, including the appropriate terms, from the Company's perspective, of the securities to be offered to holders of Old Debentures. Forum Capital has not been retained to render an opinion as to the fairness of the Exchange Offer or to solicit tenders or Consents in connection with the Exchange Offer. For the services of Forum Capital as financial advisor in connection with the Exchange Offer, the Company has agreed to pay Forum Capital fees aggregating $200,000. In addition, the Company will reimburse Forum Capital for its reasonable expenses, including the reasonable fees and expenses of its counsel. The Company has also agreed to indemnify Forum Capital against certain liabilities and expenses, including liabilities under Federal securities laws. Forum Capital makes a market in certain securities of the Company, including the Old Debentures. As of December 16, 1996 Forum Capital did not hold any Old Debentures. Forum Capital has also performed brokerage and financial advisory services for the Company for which it has received customary compensation. In addition Mr. Harold L. Purkey, a principal of Forum Capital, serves as a Director of the Company and has and will continue to receive compensation from the Company for such service. See "Election of Directors - Information Relating to Directors, Nominees and Executive Officers" and "Election of Directors - Directors Compensation" in the Company's Proxy Statement for its Annual Meeting of Stockholders held October 1, 1996. Payment of Expenses The Company has not retained any dealer-manager or similar agent in connection with the Exchange Offer and will not make any payments to brokers, dealers or others soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The Company will also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this Offering Circular and related documents to the beneficial owners of the Old Debentures and in handling or forwarding tenders for their customers. The cash expenses to be incurred in connection with the Exchange Offer, including the fees and expenses of the Exchange Agent and printing, accounting and legal fees, will be paid by the Company and, other than the fees and expenses of Forum Capital, are estimated at $45,000. The Company will pay all transfer taxes, if any, applicable to the transfer and sale of Old Debentures to it or its order pursuant to the Exchange Offer. If, however, New Debentures or substitute Old Debentures for principal amounts not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Debentures tendered, or if tendered certificates are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the transfer and sale of Old Debentures to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder of Old Debentures. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder of Old Debentures. DESCRIPTION OF THE NEW DEBENTURES The New Debentures will be issued pursuant to an indenture, dated as of December 16, 1996 (the "New Indenture"), between the Company and American National Bank and Trust Company of Chicago, as trustee (the "New Trustee"). The terms of the New Debentures include those stated in the New Indenture and those made part of the New Indenture by reference to the TIA as in effect on the date of the New Indenture. The New Debentures are subject to all such terms, and holders of the New Debentures are referred to the New Indenture and the TIA for a statement thereof. The following summary of certain provisions of the New Indenture does not purport to be complete and is qualified in its entirety by reference to the New Indenture, including definitions therein of certain terms used below. General The New Debentures will bear interest from the date of exchange at a rate of 8-1/4% per annum, payable on June 15 and December 15 in each year to holders of record at the close of business on the June 1 and December 1 next preceding the interest payment date. The New Debentures will be due on June 15, 2006 and will be issued in denominations of $1,000 and integral multiples thereof. The New Debentures will be general unsecured obligations of the Company limited to an aggregate principal amount of $40,000,000 (subject to increase to a maximum of $70,825,000 if the Company elects to increase the amount of Old Debentures it will accept for exchange). They will be subordinated in right of payment to Senior Indebtedness of the Company, as described under "Subordination." The New Indenture does not limit the incurrence of Senior Indebtedness or any other debt, secured or unsecured, of the Company or any subsidiary (as defined in the New Indenture). As of December 16, 1996 the outstanding amount of such Senior Indebtedness of the Company was $31,000,000. The New Debentures rank senior to, and will mature prior to, the Old Debentures. Conversion The holder of any New Debenture will have the right, exercisable at any time up to and including June 15, 2006, except in the case of New Debentures called for redemption, to convert such New Debentures at the principal amount thereof (or any portion thereof that is an integral multiple of $1,000) into shares of Common Stock of the Company at the conversion price of $18.00 per share, subject to adjustment as described below. In the case of New Debentures called for redemption, conversion rights will expire at the close of business on the redemption date. Notice of redemption must be mailed not less than 30 and not more than 60 days prior to the redemption date. No payment or adjustment for interest accrued on the New Debentures is to be made on conversion. No fractional shares will be issued upon conversion and, if the conversion results in a fractional interest, an amount will be paid in cash equal to the value of such fractional interest based on the market price of the Company's Common Stock on the last trading date prior to the date of conversion. The conversion price is subject to adjustment upon the occurrence of certain events, including (i) the payment of a dividend in shares of Common Stock to holders of Common Stock or a dividend to holders of the Company's Common Stock payable in shares of the Company's capital stock other than Common Stock; (ii) the subdivision, combination or reclassification of outstanding shares of Common Stock; (iii) the issuance to all holders of Common Stock of the Company of rights or warrants entitling them to purchase shares of Common Stock (or securities convertible into Common Stock) at a price per share (or having a conversion price per share) less than the then current per share market price for such Common Stock; (iv) the distribution to holders of Common Stock of evidences of indebtedness or assets (excluding cash dividends) or rights or warrants (other than those referred to above); and (v) certain mergers, consolidations or sales of assets. No adjustment of the conversion price will be made until cumulative adjustments amount to at least $.10. There will be no adjustment of the conversion price in the event of cash distributions or cash dividends paid out of Consolidated Net Income (as defined below) or retained earnings plus $20,000,000. Conversion price adjustments, or the omission to make such adjustments, may in certain circumstances result in constructive distributions that could be taxable as dividends, to holders of New Debentures or Common Stock issuable on conversion thereof. Redemption The New Debentures will be redeemable at any time at the option of the Company, as a whole or from time to time in part, at 100% of the principal amount thereof together with interest accrued to the redemption date. Selection of New Debentures for any redemption will be made by the New Trustee on either a pro rata basis or by lot. New Debentures in denominations larger than $1,000 may be redeemed in part. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of New Debentures to be redeemed at his registered address. On and after the redemption date, interest ceases to accrue on New Debentures or portions thereof called for redemption. Subordination The indebtedness evidenced by the New Debentures is subordinate to the prior payment when due of the principal of, premium, if any, and interest on all Senior Indebtedness. Upon maturity of any Senior Indebtedness, payment in full must be made on such Senior Indebtedness before any payment is made on or in respect of the New Debentures. During the continuance of any default in payment of principal of, premium, if any, or interest on Senior Indebtedness, no payment may be made by the Company on or in respect of the New Debentures. Upon any distribution of assets of the Company in any dissolution, winding-up, liquidation or reorganization of the Company, payment of the principal of, and interest on, the New Debentures will be subordinated, to the extent and in the manner set forth in the New Indenture, to the prior payment in full of all Senior Indebtedness. Such subordination will not prevent the occurrence of any Event of Default (as defined). "Senior Indebtedness" means Indebtedness of the Company outstanding at any time other than Indebtedness of the Company to a subsidiary for money borrowed or advanced from any such subsidiary and Indebtedness which by its terms is not superior in right of payment to the New Debentures. "Indebtedness" means (1) any debt of the Company (i) for borrowed money, capitalized leases and purchase money obligations or (ii) evidenced by a note, debenture, letter of credit or similar instrument given in connection with the acquisition, other than in the ordinary course of business, of any property or assets; (2) any debt of others described in the preceding clause which the Company has guaranteed or for which it is otherwise liable; and (3) any amendment, renewal, extension or refunding of any such debt. By reason of such subordination, in the event of insolvency, holders of the New Debentures may recover less ratably than the general creditors of the Company. New Debentures are by their terms superior in right of payment to the Old Debentures. Defaults and Remedies The term "Event of Default" when used in the New Indenture means any one of the following: (i) failure of the Company to pay interest for 30 days or principal when due (whether or not prohibited by the subordination provisions); (ii) failure to perform any other covenant for 30 days after notice; (iii) acceleration of the maturity of any Indebtedness of the Company or any subsidiary in any one case or in the aggregate in excess of $5,000,000, if such acceleration is not rescinded, annulled or otherwise cured within 30 days after notice to the Company; and (iv) certain events of bankruptcy, insolvency or reorganization of the Company or any subsidiary. The New Indenture provides that the New Trustee will, within 90 days after the occurrence of a default, give the Debentureholders notice of all uncured defaults known to it (the term "default" to include the events specified above, without grace or notice), provided that, except in the case of default in the payment of principal or, premium, if any, or interest on any of the New Debentures, the New Trustee shall be protected in withholding such notice if it in good faith determines that the withholding of such notice is in the interest of the Debentureholders. In case an Event of Default occurs and is continuing, the New Trustee or the holders of not less than 25% in aggregate principal amount of the New Debentures then outstanding, by notice in writing to the Company (and to the New Trustee if given by the holders of the New Debentures), may declare the principal of and all accrued interest on all the New Debentures to be due and payable immediately. Such declaration may be rescinded by holders of a majority in principal amount of the New Debentures if all existing Events of Default have been cured and waived (except nonpayment of principal or interest that has become due solely because of the acceleration) and if the rescission would not conflict with any judgment or decree. Defaults (except, unless therefore cured, a default in payment of principal of, premium, if any, or interest on the New Debentures or a default with respect to a provision which cannot be modified under the terms of the New Indenture without the consent of each holder of New Debentures affected) may be waived by the holders of a majority in principal amount of the outstanding New Debentures upon the conditions provided in the New Indenture. The New Indenture requires the Company to file periodic reports with the New Trustee as to the absence of defaults. Limitation on Dividends and Stock Purchases The Company may not declare or pay any dividend or make any distribution on its capital stock or to its shareholders (other than dividends or distributions payable in its capital stock) or purchase, redeem or otherwise acquire or retire for value, or permit any subsidiary to purchase or otherwise acquire for value, any capital stock of the Company (i) if at the time of such action an Event of Default shall have occurred and be continuing or occurs as a result thereof, or (ii) if, upon giving effect to such dividend, distribution, purchase, redemption, other acquisition or retirement, the aggregate amount expended for all such purposes (the amount expended for such purposes, if other than in cash, to be determined by the Board of Directors, whose determination shall be conclusive evidence and evidenced by a resolution of the Board filed with the New Trustee) subsequent to May 31, 1996, shall exceed the sum of: (a) the aggregate Consolidated Net Income (or net loss) of the Company earned on a cumulative basis subsequent to May 31, 1996; (b) the aggregate net proceeds including the fair market value of property other than cash (as determined by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board filed with the New Trustee), received by the Company from the issue or sale after May 31, 1996 of capital stock of the Company, including capital stock issued upon the conversion of, or exchange for, indebtedness (including the New Debentures); plus (c) $20,000,000. "Consolidated Net Income," for any period, means the aggregate of the Net Income of the Company and its subsidiaries for such period, on a consolidated basis, determined in accordance with generally accepted accounting principles provided that (i) the Net Income of any person in which the Company or any subsidiary has a joint interest with a third party shall be included only to the extent of the amount of dividends or distributions paid to the Company or a subsidiary, and (ii) the Net Income of any person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded. "Net Income" of any person means the net income (loss) of such person, determined in accordance with generally accepted accounting principles; excluding, however, from the determination of Net Income any gain (but not loss) realized upon the sale or other disposition (including, without limitation, dispositions pursuant to leaseback transactions) of any real property or equipment of such person, which is not sold or otherwise disposed of in the ordinary course of business, or of any capital stock of the Company or a subsidiary owned by such person. Consolidation, Merger, Conveyance, Transfer or Assumption The Company may not consolidate with, merge into, or transfer all or substantially all of its assets to, any other person unless such (i) other person is a corporation organized and existing under the laws of the United States or a State thereof which expressly assumes all obligations of the Company under the New Indenture and the New Debentures, (ii) such corporation has a Consolidated Tangible Net Worth (after giving effect to such transaction) at least equal to the Consolidated Tangible Net Worth of the Company immediately prior thereto, and (iii) immediately after the transaction no default exists. Thereafter all such obligations of the Company terminate. Modification of the New Indenture The New Indenture contains provisions permitting the Company and the New Trustee without the consent of any holder of New Debentures to supplement or amend the New Indenture to cure any ambiguity, omission, defect or inconsistency, to provide for the assumption of the Company's obligations by a successor, to provide for uncertificated New Debentures in addition to certificated New Debentures or to make any change that does not materially adversely affect the rights of any holder of New Debentures. Otherwise, the rights and obligations of the Company and the rights of holders of New Debentures may be modified by the Company and the New Trustee only with the consent of the holders of not less than a majority in principal amount of New Debentures then outstanding. No waiver of a default in the payment of the principal of or interest on a New Debenture or reduction in the principal of or the premium or the interest rate on the New Debentures or a change in the percentage of holders required for modification of the New Indenture and no extension of the maturity of any New Debenture or in the time of payment of interest and no change that materially and adversely affects the right to convert a New Debenture will be effective against any holder of New Debentures without such holder's consent. Satisfaction and Discharge of the New Indenture The New Indenture will be discharged and canceled if all the New Debentures have been delivered to the New Trustee for cancellation or upon deposit with the New Trustee, within not more than six months prior to the maturity or redemption of all the New Debentures, of funds sufficient for such payment or redemption. The New Trustee American National Bank and Trust Company of Chicago will be the trustee under the New Indenture. Such Bank is the Company's principal banking facility at which the Company has maintained bank accounts and conducted normal banking transactions for a number of years. The Company has obtained loans from the Bank in the past and the Bank has extended a $35,000,000 line of credit to the Company pursuant to an Amended and Restated Senior Revolving Note dated as of August 20, 1996, of which $31,000,000 was in use as of December 16, 1996. The holders of a majority in principal amount of all outstanding New Debentures have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the New Trustee, providing that such direction would not conflict with any rule of law or with the New Indenture, would not be unduly prejudicial to the right of another holder of and would not subject the New Trustee to personal liability. The New Indenture provides that in case an Event of Default should occur and be known to the New Trustee (and not be cured), the New Trustee will be required to use the degree of care of a prudent man in the conduct of his own affairs in the exercise of its rights and powers. Subject to such provisions, the New Trustee will be under no obligation to exercise any of its rights or powers under the New Indenture at the request of any of the holders of New Debentures unless they shall have offered to the Trustee security and indemnity satisfactory to it. DESCRIPTION OF THE OLD DEBENTURES The Old Debentures were issued pursuant to the Old Indenture. The terms of the Old Debentures include those stated in the Old Indenture and those made part of the Old Indenture by reference to the TIA as in effect on the date of the Old Indenture. The Debentures are subject to all such terms, and holders of the Old Debentures are referred to the Old Indenture and the TIA for a statement thereof. The following summary of certain provisions of the Old Indenture does not purport to be complete and is qualified in its entirety by reference to the Old Indenture, including definitions therein of certain terms used below. General The Old Debentures are issued in fully registered form under an Indenture dated as of December 15, 1986 (the "Old Indenture"), between the Company and First Trust of Illinois, a National Association, as successor to Continental Illinois National Bank and Trust Company of Chicago, as Trustee (the "Trustee"). The Debentures bear interest from December 15, 1986 at a rate of 7-1/4%, payable on June 15 and December 15 in each year to holders of record at the close of business on the June 1 and December 1 next preceding the interest payment date. The Old Debentures are due on December 15, 2006 and were issued in denominations of $1,000 and integral multiples thereof. The Old Debentures are general unsecured obligations of the Company limited to an aggregate principal amount of $83,000,000. They are subordinated in right of payment to Senior Indebtedness of the Company, as described under "Subordination." The Old Indenture does not limit the incurrence of Senior Indebtedness or any other debt, secured or unsecured, of the Company or any subsidiary (as defined in the Old Indenture). As of December 16, 1996 the outstanding amount of such Senior Indebtedness of the Company was $31,000,000. The Old Debentures will be subordinated in right of payment to the New Debentures. Conversion The holder of any Old Debenture has the right, exercisable at any time up to and including December 15, 2006, except in the case of Old Debentures called for redemption, to convert such Old Debentures at the principal amount thereof (or any portion thereof that is an integral multiple of $1,000) into shares of Common Stock of the Company at the conversion price which is currently $21.14 per share, subject to further adjustment as described below. In the case of Old Debentures called for redemption, conversion rights will expire at the close of business on the 10th business day next preceding the redemption date. Notice of an optional redemption must be mailed not less than 30 and not more than 60 days prior to the redemption date. No payment or adjustment for interest accrued on the Old Debentures is to be made on conversion. No fractional shares will be issued upon conversion and, if the conversion results in a fractional interest, an amount will be paid in cash equal to the value of such fractional interest based on the market price of the Company's Common Stock on the last trading date prior to the date of conversion. The conversion price is subject to adjustment upon the occurrence of certain events, including (i) the payment of a dividend in shares of Common Stock to holders of Common Stock or a dividend to holders of the Company's Common Stock payable in shares of the Company's capital stock other than Common Stock; (ii) the subdivision, combination or reclassification of outstanding shares of Common Stock; (iii) the issuance to all holders of Common Stock of the Company of rights or warrants entitling them to purchase shares of Common Stock (or securities convertible into Common Stock) at a price per share (or having a conversion price per share) less than the then current per share market price for such Common Stock; (iv) the distribution to holders of Common Stock of evidences of indebtedness or assets (excluding cash dividends) or rights or warrants (other than those referred to above); and (v) certain mergers, consolidations or sales of assets. No adjustment of the conversion price is made until cumulative adjustments amount to at least $.10. There will be no adjustment of the conversion price in the event of cash distributions or cash dividends paid out of Consolidated Net Income (as defined below) or retained earnings plus $5,000,000, which at August 31, 1996 aggregated $13,100,000. The Proposed Amendments will modify this provision. See "Proposed Amendments to the Old Indenture." Conversion price adjustments, or the omission to make such adjustments, may in certain circumstances result in constructive distributions that could be taxable as dividends, to holders of Old Debentures or Common Stock issuable on conversion thereof. Optional Redemption The Old Debentures are redeemable at any time at the option of the Company, as a whole or from time to time in part, at 100% of the principal amount thereof together with interest accrued to the redemption date. Sinking Fund The Old Indenture requires the Company to provide for the retirement, through the operation of a sinking fund, of an amount equal to 7.5% of the principal amount of Old Debentures on December 15, 1996 and on each December 15 thereafter to and including December 15, 2005 at a redemption price equal to the principal amount of the Old Debentures so retired, plus accrued interest to the redemption date. The Company may, at its option, receive credit against sinking fund payments for the principal amount of (a) Old Debentures acquired by the Company and surrendered for cancellation (including converted or exchanged Old Debentures), (b) Old Debentures redeemed or called for redemption otherwise than through the operation of the sinking fund, and (c) Old Debentures purchased by the Company in the open market. As of December 16, 1996 the Company has purchased $12,175,000 in principal amount of Old Debentures in the open market which will meet substantially its sinking fund requirements until December 15, 1998. The amount of any sinking fund payment required for any year ending December 15 shall automatically be reduced by an amount equal to the aggregate principal amount of any Old Debentures called for redemption through operation of the sinking fund and converted into Common Stock on or before the sinking fund redemption date. Selection of Old Debentures for any redemption will be made by the Trustee on either a pro rata basis or by lot. Old Debentures in denominations larger than $1,000 may be redeemed in part. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of Old Debentures to be redeemed at his registered address. On and after the redemption date, interest ceases to accrue on Debentures or portions thereof called for redemption. Subordination The indebtedness evidenced by the Old Debentures is subordinate to the prior payment when due of the principal of, premium, if any, and interest on all Senior Indebtedness. Upon maturity of any Senior Indebtedness, payment in full must be made on such Senior Indebtedness before any payment is made on or in respect of the Old Debentures. During the continuance of any default in payment of principal of, premium, if any, or interest on Senior Indebtedness, no payment may be made by the Company on or in respect of the Old Debentures. Upon any distribution of assets of the Company in any dissolution, winding-up, liquidation or reorganization of the Company, payment of the principal of, and interest on, the Old Debentures will be subordinated, to the extent and in the manner set forth in the Old Indenture, to the prior payment in full of all Senior Indebtedness. Such subordination will not prevent the occurrence of any Event of Default (as defined). "Senior Indebtedness" means Indebtedness of the Company outstanding at any time other than Indebtedness of the Company to a subsidiary for money borrowed or advanced from any such subsidiary and Indebtedness which by its terms is not superior in right of payment to the Old Debentures. Senior Indebtedness will include the New Debentures. "Indebtedness" means (1) any debt of the Company (i) for borrowed money, capitalized leases and purchase money obligations or (ii) evidenced by a note, debenture, letter of credit or similar instrument given in connection with the acquisition, other than in the ordinary course of business, of any property or assets; (2) any debt of others described in the preceding clause which the Company has guaranteed or for which it is otherwise liable; and (3) any amendment, renewal, extension or refunding of any such debt. By reason of such subordination, in the event of insolvency, holders of the Old Debentures may recover less ratably than the general creditors of the Company and holders of the New Debentures. Defaults and Remedies The term "Event of Default" when used in the Old Indenture means any one of the following: (i) failure of the Company to pay interest for 30 days or principal or any sinking fund installment when due (whether or not prohibited by the subordination provisions); (ii) failure to perform any other covenant for 30 days after notice; (iii) acceleration of the maturity of any Indebtedness of the Company or any subsidiary in any one case or in the aggregate in excess of $1,000,000 (this is being increased to $5,000,000 by the proposed amendments), if such acceleration is not rescinded, annulled or otherwise cured within 30 days after notice to the Company; and (iv) certain events of bankruptcy, insolvency or reorganization of the Company or any subsidiary. The Old Indenture provides that the Trustee will, within 90 days after the occurrence of a default, give the Debentureholders notice of all uncured defaults known to it (the term "default" to include the events specified above, without grace or notice), provided that, except in the case of default in the payment of principal or, premium, if any, or interest on any of the Old Debentures, or any Sinking Fund payment, the Trustee shall be protected in withholding such notice if it in good faith determines that the withholding of such notice is in the interest of the Debentureholders. In case an Event of Default occurs and is continuing, the Trustee or the holders of not less than 25% in aggregate principal amount of the Old Debentures then outstanding, by notice in writing to the Company (and to the Trustee if given by the Debentureholders), may declare the principal of and all accrued interest on all the Old Debentures to be due and payable immediately. Such declaration may be rescinded by holders of a majority in principal amount of the Old Debentures if all existing Events of Default have been cured and waived (except nonpayment of principal or interest that has become due solely because of the acceleration) and if the rescission would not conflict with any judgment or decree. Defaults (except, unless therefore cured, a default in payment of principal of, premium, if any, or interest on the Old Debentures or failure to make any Sinking Fund payment or a default with respect to a provision which cannot be modified under the terms of the Old Indenture without the consent of each Debentureholder affected) may be waived by the holders of a majority in principal amount of the outstanding Old Debentures upon the conditions provided in the Indenture. The Old Indenture requires the Company to file periodic reports with the Trustee as to the absence of defaults. Limitation on Dividends and Stock Purchases The Company may not declare or pay any dividend or make any distribution on its capital stock or to it shareholders (other than dividends or distributions payable in its capital stock) or purchase, redeem or otherwise acquire or retire for value, or permit any subsidiary to purchase or otherwise acquire for value, any capital stock of the Company (i) if at the time of such action an Event of Default shall have occurred and be continuing or occurs as a result thereof, or (ii) if, upon giving effect to such dividend, distribution, purchase, redemption, other acquisition or retirement, the aggregate amount expended for all such purposes (the amount expended for such purposes, if other than in cash, to be determined by the Board of Directors, whose determination shall be conclusive evidence and evidenced by a resolution of the Board filed with the Trustee) subsequent to May 31, 1986, shall exceed the sum of: (a) the aggregate Consolidated Net Income (or net loss) of the Company earned on a cumulative basis subsequent to May 31, 1986; (b) the aggregate net proceeds including the fair market value of property other than cash (as determined by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board filed with the Trustee), received by the Company from the issue or sale after May 31, 1986 of capital stock of the Company, including capital stock issued upon the conversion of, or exchange for, indebtedness (including the Debentures); and (c) $5,000,000. The Proposed Amendments would amend this covenant to change the May 31, 1986 dates to May 31, 1996 and the $5,000,000 amount to $20,000,000 to make it consistent with the comparable covenant in the New Indenture. As of August 31, 1996 $13,100,000 was available for such purposes and upon adoption of the Proposed Amendments approximately $21,900,000 will be so available. As such the Company would be increasing the basket by $8,800,000. "Consolidated Net Income," for any period, means the aggregate of the Net Income of the Company and its subsidiaries for such period, on a consolidated basis, determined in accordance with generally accepted accounting principles provided that (i) the Net Income of any person in which the Company or any subsidiary has a joint interest with a third party shall be included only to the extent of the amount of dividends or distributions paid to the Company or a subsidiary, and (ii) the Net Income of any person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded. "Net Income" of any person means the net income (loss) of such person, determined in accordance with generally accepted accounting principles; excluding, however, from the determination of Net Income any gain (but not loss) realized upon the sale or other disposition (including, without limitation, dispositions pursuant to leaseback transactions) of any real property or equipment of such person, which is not sold or otherwise disposed of in the ordinary course of business, or of any capital stock of the Company or a subsidiary owned by such person. Consolidation, Merger, Conveyance, Transfer or Assumption The Company may not consolidate with, merge into, or transfer all or substantially all of its assets to, any other person unless such other person is a corporation organized and existing under the laws of the United States or a State thereof which expressly assumes all obligations of the Company under the Old Indenture and the Old Debentures, such corporation has a Consolidated Tangible Net Worth (after giving effect to such transaction) at least equal to the Consolidated Tangible Net Worth of the Company immediately prior thereto, and immediately after the transaction no default exists. Thereafter all such obligations of the Company terminate. Modification of the Old Indenture The Old Indenture contains provisions permitting the Company and the Trustee without the consent of any Debentureholder to supplement or amend the Indenture to cure any ambiguity, omission, defect or inconsistency, to provide for the assumption of the Company's obligations by a successor, to provide for uncertificated Old Debentures in addition to certificated Old Debentures or to make any change that does not materially adversely affect the rights of any Debentureholder. Otherwise, the rights and obligations of the Company and the rights of Debentureholders may be modified by the Company and the Trustee only with the consent of the holders of not less than a majority in principal amount of Old Debentures then outstanding. No waiver of a default in the payment of the principal of or interest on an Old Debenture or reduction in the principal of or the premium or the interest rate on the Old Debentures or change in the Sinking Fund requirements or in the percentage of holders required for modification of the Old Indenture and no extension of the maturity of any Old Debenture or in the time of payment of interest and no change that materially and adversely affects the right to convert an Old Debenture will be effective against any Debentureholder without his consent. Satisfaction and Discharge of the Old Indenture The Old Indenture will be discharged and canceled if all the Old Debentures have been delivered to the Trustee for cancellation or upon deposit with the Trustee, within not more than six months prior to the maturity or redemption of all the Old Debentures, of funds sufficient for such payment or redemption. The Trustee First Trust of Illinois, a National Association as successor to Continental Illinois National Bank and Trust Company of Chicago is the trustee under the Old Indenture. The holders of a majority in principal amount of all outstanding Old Debentures have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, providing that such direction would not conflict with any rule of law or with the Old Indenture, would not be unduly prejudicial to the right of another Debentureholder and would not subject the Trustee to personal liability. The Old Indenture provides that in case an Event of Default should occur and be known to the Trustee (and not be cured), the Trustee will be required to use the degree of care of a prudent man in the conduct of his own affairs in the exercise of its rights and powers. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Old Indenture at the request of any of the Debentureholders unless they shall have offered to the Trustee security and indemnity satisfactory to it. Concerning the Trustee The Old Indenture and the New Indenture contain provisions which permit the Trustee and the New Trustee to engage in other transactions with the Company; including, without limitation, as a creditor, as if it were not the Trustee. DESCRIPTION OF CAPITAL STOCK The Company is presently authorized to issue 30 million shares of Common Stock, par value $.05 per share, 10 million shares of Class B Common Stock, par value $.05 per share, and 5 million shares of Preferred Stock, par value $1.00 per share. The Preferred Stock may be issued in series at the election of the Board of Directors which may fix the terms of each such series without further shareholder action. No Preferred Stock is presently outstanding. Shares of Class B Common Stock are subject to conversion into shares of Common Stock on a share for share basis as described below. See "Terms of Common Stock and Class B Common Stock - Conversion," below. The statements relating to the Common Stock and Class B Common Stock are summaries and do not purport to be complete. Such summaries use terms defined in and are qualified in their entirety by express reference to Article Fourth of the Restated Certificate of Incorporation of the Company. Copies of the Restated Certificate of Incorporation of the Company are available from the Company at 40W267 Keslinger Road, LaFox, Illinois 60147, Attn: William G. Seils. The transfer agent and registrar of the Company's Common Stock is Harris Trust and Savings Bank, 111 West Monroe Street, Chicago, Illinois 60690. Terms of Common Stock and Class B Common Stock The Common Stock and Class B Common Stock have the following rights, powers, limitations and restrictions: Voting Rights. Except as otherwise described below, and except for voting by class in instances required by law, holders of Common Stock and Class B Common Stock vote with holders of the Preferred Stock (if any are issued with voting rights) as a single class on all matters including the election of directors, with each share of Common Stock having one vote and each share of Class B Common Stock having ten votes. There is no cumulative voting in the election of directors and shareholders voting a majority of the votes (including Edward J. Richardson, who presently owns shares having approximately 84.39% of the voting power) at any annual meeting will be able to elect all the directors to be elected, and the minority will not be able to elect any. Class Voting. Under the Delaware General Corporation Law, the holders of Common Stock and Class B Common Stock are entitled to vote separately as a class upon any proposed amendment to the Company's Restated Certificate of Incorporation which would (i) increase or decrease the aggregate number of authorized shares of the class in question or par value of such shares or (ii) alter or change the powers, preferences or special rights of shares of such class so as to affect the holders thereof adversely. In addition, except for shares issued pursuant to options granted prior to December 10, 1986 under the Company's stock purchase or option plans or in connection with stock splits, dividends, reclassifications and other subdivisions, additional shares of Class B Common Stock may only be issued upon the approval of holders of a majority of the outstanding shares of Common Stock and Class B Common Stock, each voting separately as a class. Dividends, Stock Splits, Combinations, and Property Distributions. Subject to the terms and preferences of the Preferred Stock if issued from time to time and the limitations on cash dividends in the Old and New Indenture relating to the Old and New Debentures (see "Description of Old Debentures - Limitation on Dividends and Stock Purchases" and see "Description of New Debentures - Limitation on Dividends and Stock Purchases"), a cash dividend may be declared on either the Common Stock or Class B Common Stock, but only if a cash dividend is paid simultaneously on the other class; provided, however, that the cash dividend on Class B Common Stock shall be 90% of the cash dividend declared on the Common Stock. Dividends on the Common Stock and Class B Common Stock are not cumulative. No other distribution, including upon liquidation, of assets, property, rights to subscribe or evidence of indebtedness may be paid on either the Common Stock or the Class B Common Stock unless a distribution in like kind and equal per-share amount is paid simultaneously on the other class. If the Board of Directors determines to pay a stock dividend on either the Common Stock or the Class B Common Stock (which stock dividend may only be paid in shares of the same class), or in the event of a stock split or a combination of shares of either class, a proportionate stock dividend, stock split or combination of shares must be paid or made in respect to the shares of the other class. Transferability and Registration. The Common Stock is freely transferable and shares of Common Stock may be registered as requested by the holder thereof. Shares of Class B Common Stock may only be registered in the name of the beneficial owner thereof and not in a "street" or "nominee" name. The "beneficial owner" of shares of Class B Common Stock is defined as the person or persons who, or the entity or entities which, possess the power to direct the voting or the disposition of such shares. Shares of Class B Common Stock (or any interest therein) are not freely transferable. A record holder of shares of Class B Common Stock may transfer such shares (whether by sale, assignment, gift, bequest, appointment or otherwise) only to a "Permitted Transferee" (as defined below). Accordingly no trading market will develop in the Class B Common Stock. A transfer of Class B Common Stock to any person or entity other than a "Permitted Transferee" will result in the automatic conversion of such Class B Common Stock into shares of Common Stock on a share-for-share basis. The "Permitted Transferees" of an individual holder of shares of Class B Common Stock are generally described as follows: (i) such shareholder's spouse; (ii) any lineal descendant of a grandparent of such shareholder, including adopted children, and any spouse of such lineal descendant (said descendants and their spouses, together with such shareholders and their spouses, being hereinafter referred to as "such Class B Stockholder's family members"); (iii) a trust for the sole benefit of such Class B Stockholder's family members and certain charitable organizations; (iv) certain charitable organizations established by such Class B Stockholder's family members; (v) a partnership or corporation all of the beneficial ownership of which is owned (and continues to be owned) by such shareholder and/or one or more of his or her Permitted Transferees; (vi) the estate of such shareholder; and (vii) an employee stock ownership plan of the Company. Shares of Class B Common Stock held by a partnership or corporation may be transferred to a person who had transferred such shares to such partnership or corporation (and to such person's Permitted Transferees) or, if record and beneficial ownership of such shares of Class B Common Stock were acquired by such partnership or corporation on or prior to December 10, 1986, to the partners or stockholders as of such date, and to the Permitted Transferees of such partners or stockholders. Shares held by trusts which are irrevocable on December 10, 1986 may be transferred to any person to whom or for whose benefit the principal of the trust may be distributed under the terms of the trust and such person's Permitted Transferees. Shares held by all other trusts (whether or not in existence as of December 10, 1986) may be transferred to the person who transferred such Class B Common Stock to such trust and such person's Permitted Transferees. Shares held by the estate of a holder of Class B Common Stock may be transferred to Permitted Transferees of such holder of Class B Common Stock. Shares held in any employee benefit plan of the Company may be transferred to the participant for whose account the shares were held or his Permitted Transferee. The Company may require the furnishing of such affidavits or other proof as it, in its sole discretion, deems necessary to establish that any person is the beneficial owner of Class B Common Stock or is a Permitted Transferee. Conversion. Shares of Class B Common Stock are convertible into Common Stock on a share-for-share basis at all times at the option of the holder without cost to the holder (except to the extent of any stamp or similar tax payable where the converting holder of Class B Common Stock desires that the certificate representing the resulting Common Stock be issued in a name other than that of the converted Class B Common Stock). In general, such conversion will be effective as of the date the Class B Common Stock is surrendered to the Company for conversion. Any transfer, pledge or other disposition of shares of Class B Common Stock other than to a Permitted Transferee will result in an automatic conversion to Common Stock, on a share-for-share basis. If at any time the number of issued and outstanding shares of Class B Common Stock falls below 10% of the aggregate number of issued and outstanding shares of Common Stock, Class B Common Stock and Preferred Stock, all the outstanding shares of Class B Common Stock immediately and automatically shall be converted into shares of Common Stock. In the event of such a conversion, certificates formerly representing outstanding shares of Class B Common Stock will thereafter be deemed to represent a like number of shares of Common Stock. All Shares of Class B Common Stock received by the Company upon conversion thereof into Common Stock will be returned to the status of authorized but unissued. Shares of Common Stock are not convertible into shares of Class B Common Stock. Future Issuance. Additional shares of Common Stock may be issued or sold by the Company for any lawful purpose. The Company will not issue any additional shares of Class B Common Stock, except pursuant to exercise of options already granted prior to December 10, 1986 under the Company's stock purchase or option plans or in connection with stock splits, stock dividends, reclassifications or other subdivisions, unless such issuance is authorized by the vote of holders of a majority of the outstanding shares of Common Stock and Class B Common Stock voting separately as a class. The Board of Directors possesses the power to issue shares of authorized but unissued Common Stock and Preferred Stock without further shareholder action. In addition, all 5,000,000 shares of authorized Preferred Stock are available for future issuance. If the Board of Directors would determine to issue Preferred Stock which was convertible, such shares would only be convertible into shares of Common Stock. Other Terms. Shareholders of the Company do not have preemptive or other rights to subscribe for additional shares of either Common Stock or Class B Common Stock. Upon liquidation, dissolution or winding-up of the affairs of the Company, the holders of the Common Stock and the Class B Common Stock as a single class are entitled to share ratably in the net assets to be distributed with respect to both the Common Stock and the Class B Common Stock. Neither the Common Stock nor the Class B Common Stock is callable or subject to optional or mandatory redemption, except that shares of Class B Common Stock are subject to automatic conversion into shares of Common Stock as described above under "Conversion." The shares of Common Stock and Class B Common Stock now outstanding are validly issued, fully paid and nonassessable. CERTAIN FEDERAL INCOME TAX CONSEQUENCES This summary is based upon laws, regulations, rulings and judicial decisions now in effect and upon proposed regulations, all of which are subject to change (possibly with retroactive effect) by legislation, administrative action or judicial decision. Moreover, substantial uncertainties, resulting from the lack of definitive judicial or administrative authority and interpretation, apply to various tax aspects of an exchange pursuant to the Exchange Offer. The summary does not discuss all aspects of Federal income taxation that may be relevant to a particular investor in light of his personal investment circumstances or to certain types of investors subject to special treatment under the Federal income tax laws (for example, life insurance companies, tax-exempt organizations, foreign taxpayers and taxpayers who may be subject to the alternate minimum tax) and it does not discuss any aspects of state, local or foreign tax laws. The discussion of the tax consequences to exchanging Debentureholders is limited to such holders who hold an Old Debenture as a "capital asset" on the date of the exchange and who will hold the New Debentures as a "capital asset" within the meaning of section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). The following summary is a general discussion of certain of the Federal income tax consequences of the Exchange Offer and is included herein for general information only. It is not intended as a substitute for careful tax planning. Each holder of Old Debentures should consult his tax advisor with respect to the specific tax consequences to him of the Exchange Offer, including the consequences of any state, local, foreign and other tax consequences of the Exchange Offer. Tax Consequences to Exchanging Holders of Old Debentures Tendering Holders of Old Debentures. The federal income tax consequences of the exchange of Old Debentures for New Debentures pursuant to the Exchange Offer (the "Exchange") depend on whether the Exchange is a "Recapitalization" and on whether the Old Debentures and New Debentures are "securities" for federal income tax purposes. An exchange of securities for securities, of like principal amount, in a recapitalization is not taxable. The Company believes that the Exchange is a "recapitalization," and that the Old Debentures and New Debentures are "securities" for federal income tax purposes. Thus, a holder who participates in the Exchange Offer should not recognize gain or loss. Because such determinations are, in substantial part, fact specific, there can be no assurance that the Internal Revenue Service will respect such characterizations. If the Internal Revenue Service successfully establishes that the Exchange is not a "recapitalization" or that the Old Debentures and New Debentures are not "securities," then the Exchange would be a taxable transaction and the holders of the Old Debentures would recognize gain equal to the difference between the fair market value of the New Debentures and the adjusted tax basis of the Old Debentures. Assuming the transaction is non- taxable, a holder's initial tax basis in New Debentures would be equal to the holder's adjusted tax basis in the Old Debentures exchanged therefor, and the holding period of each New Debenture would include the holding period of the Old Debentures exchanged therefor. Market Discount on Old Debentures. In general, upon the disposition of a "market discount" bond, any gain recognized by a holder is treated as ordinary income to the extent of accrued market discount thereon. Market discount is defined generally as the excess of (i) the stated redemption price at maturity ("SRPM") of a debt obligation less any unamortized original issue discount ("OID") over (ii) the tax basis of the debt obligation in the hands of the holder immediately after its acquisition. The market discount rules apply only to Old Debentures acquired after April 30, 1993. Old Debentures held by the original holders do not bear market discount or OID. In addition, under a de minimis exception, there would be no market discount if the excess of the SRPM of the obligation over the holder's tax basis is less than 0.25% of the SRPM multiplied by the number of complete years to the maturity of the obligation. Based on legislative history, regulations of the United States Department of the Treasury ("Treasury Regulations") are expected to be issued that would provide that exchanges of market discount bonds that do not result in full recognition of gain to the holder (such as due to "recapitalization" treatment) would not cause recognition of accrued market discount. If such regulations are promulgated and are applicable to the Exchange, any accrued market discount on Old Debentures would not be treated as ordinary income at the time of the Exchange, but would carry over to the New Debentures issued in exchange therefor. Federal Income Tax Consequences Associated With New Debentures Interest and Original Issue Discount. A holder of New Debentures will be required to include in gross income for federal income tax purposes the stated interest on such debentures in accordance with the holder's method of tax accounting. In addition, if New Debentures are issued with OID, a holder of New Debentures will be required to include in gross income the amount of OID accrued thereon, determined using the New Debenture's yield to maturity (a holder may elect another permissible method to include amounts in gross income). New Debentures will be treated as issued with OID if (i) their stated principal amount exceeds (ii) their "issue price" (subject to the de minimis exception). The "issue price" will equal the fair market value of the New Debentures on the date the New Debentures are issued, if the New Debentures are publicly traded. If the New Debentures are not publicly traded the "issue price" will equal the fair market value of the Old Debentures on the date the New Debentures are issued. Under the de minimis exception, there will be no OID if the OID with respect to the New Debentures is less than 0.25% of the SRPM multiplied by the number of full years from the issue date to the maturity date. Thus if the issue price of the New Debentures is greater than $977.50, there will be no OID. A holder of New Debentures must include the accrued OID thereon in gross income in advance of the receipt of cash in respect of such income. The Company believes that the optional redemption provisions and convertibility features applicable to New Debentures will not affect the calculation of OID on such debentures. However, there can be no assurance that the Internal Revenue Service will not take a contrary position, in which case a holder may be required to include OID in income or include greater amounts of OID in income than anticipated. Acquisition Premium. The amount of OID, if any, required to be included in gross income by a holder of the New Debentures is reduced if such holder's adjusted tax basis in such New Debentures immediately after the acquisition exceeds their "adjusted issue price" (i.e., generally the issue price of such New Debentures). If a holder's adjusted tax basis in such New Debentures immediately after the acquisition of such debentures exceeds their stated principal amount, then such holder would not be required to include any OID in income (any excess premium over their stated principal amount would be governed by the "bond premium" provisions of the Code, as discussed below). Tax Basis. Generally, a holder's tax basis in New Debentures will be increased in the future by the amount of OID, if any, that is included in the holder's income through the day preceding the date of disposition and will be decreased by the amount of any principal payments received. Sale or Redemption. The sale, exchange, redemption or other disposition of a New Debenture generally will be a taxable event for federal income tax purposes. A holder generally will recognize gain or loss equal to the difference between (i) the amount of cash plus the fair market value of any property received upon such sale, exchange, redemption or other taxable disposition of a New Debenture (other than in respect of accrued interest thereon) and (ii) the holder's adjusted tax basis in such debt instrument. Subject to the rules relating to market discount discussed below, such gain or loss will be capital gain or loss and would be long-term capital gain or loss if New Debentures were held by the holder for the applicable holding period (currently more than one year) at the time of such sale or other disposition. The holding period of each New Debenture would include the holding period of the Old Debentures exchanged therefor. If the Company intended at the time of the original issuance of New Debentures to call such debentures prior to maturity, any gain on the sale, exchange, or redemption or other taxable disposition of New Debentures would be considered ordinary income to the extent that the entire amount of OID with respect to New Debentures exceeded the amount of OID previously includable in the income of any holder. The Company does not have a present intention to call New Debentures before their maturity. Market Discount. Generally, gain recognized on the disposition of New Debentures will be treated as ordinary income, and not capital gain, to the extent of any accrued market discount, if any, carried over from Old Debentures. The amount of market discount on New Debentures will be determined in the same manner as described above under "Market Discount on Old Debentures." A holder of New Debentures having accrued market discount may elect to include the market discount in income as it accrues. This election would apply to all market discount obligations acquired by the electing holder on or after the first day of the first taxable year to which the election applies and could be revoked only with the consent of the Internal Revenue Service. If a holder of New Debentures elects to include market discount in income, the above- discussed rules with respect to ordinary income recognition resulting from sale and certain other disposition transactions and to deferral of interest deductions would not apply. A holder of New Debentures having accrued market discount may be required to defer the deduction of all or a portion of any interest expense on any indebtedness previously incurred or maintained to purchase the Old Debentures or to carry such debentures. Bond Premium. If the initial tax basis of a holder in New Debentures (as discussed above, this amount is generally a carry-over basis from the Old Debentures) exceeds the "amount payable on maturity" (such excess being the "Bond Premium"), the holder may elect to amortize the Bond Premium over the period from such debenture's acquisition date to its maturity date and, except as Treasury Regulations may otherwise provide, reduce the amount of interest included in income in respect of such New Debentures by such amount. A holder who elects to amortize Bond Premium must reduce his adjusted basis in such New Debentures by the amount of such allowable amortization. An election to amortize Bond Premium would apply to amortizable Bond Premium on all taxable bonds held at or acquired after the beginning of the holder's taxable year as to which the election is made, and may be revoked subsequently only with the consent of the Service. Conversion Feature. The New Debentures are subject to adjustments in their conversion price in certain events. See "Description of the New Debentures - Conversion Rights." Under Section 305 of the Code, changes in the conversion price of a security can in certain circumstances result in deemed taxable dividends to the securities holders. However, under Treasury Regulations, a change in the conversion price of convertible securities pursuant to a bona fide reasonable adjustment formula (other than merely to compensate for payment of cash or property dividends to shareholders) which has the effect of preventing dilution of the interest of such security holders will not be considered to result in a deemed distribution with respect to such securities. It is anticipated that any adjustment to the conversion price would be made solely for such reasonable anti-dilutive protection to the securities holders, and therefore should not result in any taxable income if such change occurs, except in the case of a change in the conversion price that is attributable to a distribution of assets other than Common Stock, rights or warrants. Backup Withholding. Unless the exchanging holder or other payee provides his correct taxpayer identification number (employer identification number or social security number) to the Company (as payor) and certifies that such number is correct, generally under the federal income tax backup withholding rules, 31% of the issue price of the New Debentures must be withheld and remitted to the United States Department of the Treasury. Therefore, each exchanging holder should complete and sign the Substitute Form W-9 included so as to provide the information and certification necessary to avoid backup withholding. However, certain exchanging holders (including, among others, certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt foreign recipient, that exchanging holder must submit a statement, signed under penalties of perjury, attesting to that individual's exempt foreign status. Such statements can be obtained from American National Bank and Trust Company of Chicago. For further information concerning backup withholding and instructions for completing the Substitute Form W-9 (including how to obtain a taxpayer identification number if you do not have one and how to complete the Substitute Form W-9 if the Old Debentures are held in more than one name), contact United States Trust Company of New York. Withholding is not an additional federal income tax. Rather, the federal income tax liability of a person subject to withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. Federal Income Tax Consequences To The Company The Company will be required to recognize cancellation of indebtedness income to the extent that the principal amount of the Old Debentures cancelled in the exchange exceeds the adjusted issue price of the New Debentures issued in exchange therefor. The Company believes that its net operating loss carryforwards are sufficient so that the recognition of cancellation of indebtedness income will not result in payment of any income tax. The New Debentures will have OID in an amount equal to the cancellation of indebtedness income recognized by the Company. The Company will be entitled to deduct this OID over the term of the New Debentures on a yield to maturity basis. The Company will not be entitled to deduct unamortized OID if the New Debentures are converted into Common Stock of the Company. THE FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER ARE COMPLEX. THE FOREGOING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY. EACH DEBENTUREHOLDER OF OLD DEBENTURES SHOULD CONSULT SUCH HOLDER'S TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE EXCHANGE OFFER, INCLUDING THE APPLICATION OF AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS. STATE AND LOCAL TAXES; FOREIGN PERSONS Holders of Old Debentures should consult their tax advisors concerning the tax implications of the Exchange Offer under applicable state, local and foreign income and other tax laws. Foreign investors should also consult their tax advisors regarding the tax consequences of the Exchange Offer. THE EXCHANGE AGENT By Registered or Certified Mail: By Facsimile: By Hand Delivery American National Bank and Trust (312) 661-6491 American National Bank Company of Chicago and Trust Company of Chicago 13th Floor 13th Floor 33 North LaSalle Street 33 North LaSalle Street Chicago, IL 60690 Chicago, IL 60690 Attn. Anjali Gottreich or Attn. Anjali Gottreich or Elizabeth Nelson Elizabeth Nelson By Overnight Courier: American National Bank and Trust Company of Chicago 13th Floor 33 North LaSalle Street Chicago, IL 60690 Attn. Anjali Gottreich or Elizabeth Nelson Confirm by Telephone: Anjali Gottreich or Elizabeth Nelson (312) 666-6055 ADDITIONAL COPIES Requests for additional copies of this Offering Circular and Letter of Transmittal should be directed to the Exchange Agent or the Company. Table of Contents AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . .4 FORM 10-K, 10-Q AND PROXY STATEMENT. . . . . . . . . . . . . . .4 SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 The Company . . . . . . . . . . . . . . . . . . . . . . . .5 Purpose and Effects of The Exchange Offer . . . . . . . . .5 Market for the New Debentures . . . . . . . . . . . . . . .5 The New Debentures. . . . . . . . . . . . . . . . . . . . .8 Comparison of New Debentures and Old Debentures . . . . . .9 SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . 11 CURRENT DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . 12 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . 12 CERTAIN CONSIDERATIONS FOR NONEXCHANGING DEBENTUREHOLDERS. . . 13 PRICE RANGES OF THE OLD DEBENTURES AND THE COMMON STOCK. . . . 13 Old Debentures. . . . . . . . . . . . . . . . . . . . . . 13 Common Stock. . . . . . . . . . . . . . . . . . . . . . . 14 PURPOSE AND EFFECTS OF THE TENDER PORTION OF THE EXCHANGE OFFER AND THE PROPOSED AMENDMENTS15 The Tender Portion. . . . . . . . . . . . . . . . . . . . 15 Proposed Amendments to the Old Indenture. . . . . . . . . 16 THE EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . . 16 Terms of the Exchange Offer . . . . . . . . . . . . . . . 16 Expiration Date; Extensions; Termination; Amendments. . . 17 Solicitation of Consents; Consent Procedure . . . . . . . 18 Procedures for Tendering. . . . . . . . . . . . . . . . . 19 Guaranteed Delivery Procedure . . . . . . . . . . . . . . 21 Conditions of the Exchange Offer. . . . . . . . . . . . . 21 Acceptance of Old Debentures for Exchange; Delivery of New Debentures . . . . . . . . . . . . . . . . . . . . . 23 Withdrawal Rights and Revocation of Consents. . . . . . . 23 Exchange Agent. . . . . . . . . . . . . . . . . . . . . . 24 Financial Advisor . . . . . . . . . . . . . . . . . . . . 25 Payment of Expenses . . . . . . . . . . . . . . . . . . . 25 DESCRIPTION OF THE NEW DEBENTURES . . . . . . . . . . . . . . 26 General . . . . . . . . . . . . . . . . . . . . . . . . . 26 Conversion. . . . . . . . . . . . . . . . . . . . . . . . 26 Redemption. . . . . . . . . . . . . . . . . . . . . . . . 27 Subordination . . . . . . . . . . . . . . . . . . . . . . 27 Defaults and Remedies . . . . . . . . . . . . . . . . . . 27 Limitation on Dividends and Stock Purchases . . . . . . . 28 Consolidation, Merger, Conveyance, Transfer or Assumption 28 Modification of the New Indenture . . . . . . . . . . . . 29 Satisfaction and Discharge of the New Indenture . . . . . 29 The New Trustee . . . . . . . . . . . . . . . . . . . . . 29 DESCRIPTION OF THE OLD DEBENTURES. . . . . . . . . . . . . . . 29 General . . . . . . . . . . . . . . . . . . . . . . . . . 30 Conversion. . . . . . . . . . . . . . . . . . . . . . . . 30 Optional Redemption . . . . . . . . . . . . . . . . . . . 30 Sinking Fund. . . . . . . . . . . . . . . . . . . . . . . 31 Subordination . . . . . . . . . . . . . . . . . . . . . . 31 Defaults and Remedies . . . . . . . . . . . . . . . . . . 31 Limitation on Dividends and Stock Purchases . . . . . . . 32 Consolidation, Merger, Conveyance, Transfer or Assumption 33 Modification of the Old Indenture . . . . . . . . . . . . 33 Satisfaction and Discharge of the Old Indenture . . . . . 33 The Trustee . . . . . . . . . . . . . . . . . . . . . . . 33 Concerning the Trustee. . . . . . . . . . . . . . . . . . 33 DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . 34 Terms of Common Stock and Class B Common Stock. . . . . . 34 CERTAIN FEDERAL INCOME TAX CONSEQUENCES. . . . . . . . . . . . 36 Tax Consequences to Exchanging Holders of Old Debentures. 37 Federal Income Tax Consequences Associated With New Debentures . . . . . . . . . . . . . . . . . . . . . . . 37 Federal Income Tax Consequences To The Company. . . . . . 39 STATE AND LOCAL TAXES; FOREIGN PERSONS . . . . . . . . . . . . 40 THE EXCHANGE AGENT . . . . . . . . . . . . . . . . . . . . . . 40 ADDITIONAL COPIES. . . . . . . . . . . . . . . . . . . . . . . 40 EX-2 3 Item 9 (a)(2) RICHARDSON ELECTRONICS, LTD. CONSENT AND LETTER OF TRANSMITTAL Offer to Exchange Its 8 1/4% Convertible Senior Subordinated Debentures due June 15, 2006 (between $25,000,000 and $40,000,000 aggregate principal amount) for Its 7 1/4% Convertible Subordinated Debentures due December 15, 2006 ($70,825,000 principal amount outstanding) and Solicitation of Consents (collectively the "Exchange Offer") THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME ON JANUARY 31, 1997, UNLESS EXTENDED To: American National Bank and Trust Company of Chicago (312) 661-6055 Anjali Gottreich or Elizabeth Nelson Facsimile Transmission Telephone Number (312) 661-6491 By Mail: By Hand: American National Bank and Trust American National Bank and Trust Company of Chicago Company of Chicago Corporate Trust Department, 13th Floor Corporate Trust Department, 13th Floor 33 North LaSalle Street 33 North LaSalle Street Chicago, IL 60690 Chicago, IL 60690 Attn: Anjali Gottreich or Attn: Anjali Gottreich or Elizabeth Nelson Elizabeth Nelson ____________________ SIGN THE YELLOW PAGE Delivery of this Consent and Letter of Transmittal to an address other than as set forth above or Transmission of Instructions via facsimile number will not constitute a valid delivery. The undersigned acknowledges that receipt of the Offering Circular and Consent Solicitation dated December 18, 1996 (the "Offering Circular") of Richardson Electronics, Ltd. (the "Company") and this Consent and Letter of Transmittal (the "Consent and Letter of Transmittal"), which together constitute the Company's offer (the "Offer") to exchange $1,000 principal amount of its 8-1/4% Convertible Senior Subordinated Debentures due June 15, 2006 (the "New Debentures") for each $1,000 of its 7-1/4% Subordinated Convertible Debentures due December 15, 2006 (the "Old Debentures") (the "Tender Portion" of the Exchange Offer). The Tender Portion of the Exchange Offer is for not less than $25,000,000 and not more than $40,000,000 aggregate principal amount of Old Debentures, subject to the Company's right, in its sole discretion, to accept a lesser or greater aggregate principal amount of Old Debentures for exchange. There are currently $70,825,000 aggregate principal amount of Old Debentures outstanding and held by persons other than the Company. The Company is also soliciting (the "Solicitation" portion of the Exchange Offer) consents ("Consents") from holders of the Old Debentures (the "Debentureholders") representing at least a majority in aggregate principal amount of the outstanding Old Debentures (the "Requisite Consents") to certain amendments described on page 15 of the Offering Circular (the "Proposed Amendments") to the indenture under which the Old Debentures were issued (the "Old Indenture"). While the Tender Portion of the Exchange Offer is not conditioned upon the Company receiving the Requisite Consents, the Proposed Amendments will not become effective on the remaining Old Debentures unless the current majority of the Old Debentures give such Consents. Unless otherwise specified, the term "Exchange Offer" includes the Tender Portion and the Solicitation. Debentureholders who exchange all or part of their Old Debentures hereby are referred to as "Exchanging Holders." Unless otherwise indicated, defined terms used in this Consent and Letter of Transmittal have the same meanings as in the Offering Circular. IMPORTANT: THIS CONSENT AND LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD DEBENTURES OR CONFIRMATION OF BOOK-ENTRY TRANSFER OR A NOTICE OF GUARANTEED DELIVERY AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED PRIOR TO 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THE EXPIRATION DATE. PLEASE READ THE ENTIRE CONSENT AND LETTER OF TRANSMITTAL CAREFULLY BEFORE CHECKING ANY BOX BELOW The Consent and Letter of Transmittal may be used either if certificates for Old Debentures are to be forwarded herewith or if tenders are to be made by book-entry transfer to the account maintained by the Exchange Agent at DTC, MSTC or PHILADEP. Delivery of documents to DTC, MSTC or PHILADEP does not constitute delivery to the Exchange Agent. Your bank or broker can assist you in completing this form. The Instructions included with this Consent and Letter of Transmittal must be followed. Questions and requests for assistance or for additional copies of the Offering Circular and this Consent and Letter of Transmittal may be directed to Anjali Gottreich or Elizabeth Nelson at the Exchange Agent, American National Bank and Trust Company, (312) 661-6055 or the Company. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the principal amount of Old Debentures indicated below. Subject to, and effective upon, the acceptance for exchange of the Old Debentures tendered herewith, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Old Debentures as are being tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that said Exchange Agent also acts as the agent of the Company) with respect to such Old Debentures with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to: (a) deliver such Old Debentures or transfer ownership of such Old Debentures on the account books maintained by The Depository Trust Company ("DTC"), the Midwest Securities Trust Company ("MSTC") or the Philadelphia Securities Depository Trust Company ("PHILADEP") and deliver, in any such case, all accompanying evidences of transfer and authenticity to or upon the order of the Company upon receipt by the Exchange Agent, as the undersigned's agent, of the New Debentures to which the undersigned is entitled upon the acceptance by the Company of such Old Debentures under the Exchange Offer; and (b) receive all benefits and otherwise exercise all rights of beneficial ownership of such Old Debentures, all in accordance with the terms of the Exchange Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Old Debentures tendered hereby and that the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Company. The undersigned will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the sale, assignment and transfer of the Old Debentures tendered hereby. All authority conferred or agreed to be conferred in this Consent and Letter of Transmittal and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in the instructions contained in this Consent and Letter of Transmittal. Unless otherwise indicated herein under "Special Issuance and Delivery Instructions" below, please deliver New Debentures (and, if applicable, substitute Old Debentures for any principal amount of Old Debentures not tendered or accepted for exchange) in the name of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions" below, please send New Debentures (and, if applicable, substitute Old Debentures for any principal amount of Old Debentures not tendered or accepted for exchange) to the undersigned at the address shown below the signature of the undersigned. The undersigned understands that Debentureholders who deliver Old Debentures by book-entry transfer ("Book-Entry Debentureholders") may request that any Old Debentures not tendered or accepted be returned by crediting the account maintained by DTC, MSTC or PHILADEP as such Book-Entry Debentureholder may designate by making an appropriate entry under "Special Issuance and Delivery Instructions." The undersigned recognizes the Company has no obligation pursuant to the "Special Issuance and Delivery Instructions" to transfer any Old Debentures from the name of the registered holder thereof if the Company does not accept for exchange any of the principal amount of such Old Debentures. THE UNDERSIGNED, BY COMPLETING THE BOX BELOW AND/OR SIGNING THIS CONSENT AND LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE TENDERED THE OLD DEBENTURES AS SET FORTH IN THE BOX BELOW AND TO HAVE CONSENTED TO THE PROPOSED AMENDMENTS. SIGNATURE BOX PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING AND/OR CONSENTING DEBENTUREHOLDERS) (See Instructions 1 and 3) X ______________________________ _____________________ X ______________________________ _____________________ Signature(s) of Owner(s) Date Area Code and Tel. No.:_________________________________ Must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for Old Debentures or on a security position listing or by person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3. Name(s): _________________________________________________ __________________________________________________________ (Please Print) Capacity: ________________________________________________ Address: ________________________________________________ __________________________________________________________ (Include Zip Code) SIGNATURE GUARANTEE Signature(s) Guaranteed by an Eligible Institution: ________________ (If required by Instruction 3) (Authorized Signature) ________________________________________________ (Title) ________________________________________________ (Name of Firm) Dated: ________________________________, 199__ TENDER AND CONSENT This Consent is being solicited by the Company. Holders of the Old Debentures who wish to tender Old Debentures must consent to the adoption of the Proposed Amendments. Box 1 I HEREBY TENDER the Old Debentures described below pursuant to the terms of the Exchange Offer, and CONSENT to the adoption of the Proposed Amendments. Box 2 I DO NOT DESIRE TO TENDER any Old Debentures at this time, BUT I HEREBY CONSENT to the adoption of the Proposed Amendments. Box 3 I DO NOT DESIRE TO TENDER any Old Debentures at this time, AND hereby WITHHOLD CONSENT to the adoption of the Proposed Amendments. NOTE: Holders of Old Debentures who wish to tender Old Debentures pursuant to the Exchange Offer should: (a) check box 1; (b) complete the "Description of Old Debentures" box below; (c) complete, sign, date and mail or deliver this Consent and Letter of Transmittal to the Exchange Agent, at the appropriate address set forth above; and (d) tender their Old Debentures in accordance with one of the procedures for tendering described in the Instructions included in this Consent and Letter of Transmittal. See Instruction 1. Holders of Old Debentures who do not desire to tender any Old Debentures but wish to consent or withhold consent to the adoption of the Proposed Amendments should: (a) check Box 2 or Box 3, as appropriate; (b) complete the "Description of Old Debentures" below; and (c) complete, sign, date and mail or deliver this Consent and Letter of Transmittal to the Exchange Agent, at the appropriate address set forth above. If no box is checked above but this Consent and Letter of Transmittal is otherwise completed, signed and dated, the undersigned will be deemed to have consented to the adoption of the Proposed Amendments. DESCRIPTION OF OLD DEBENTURES Name(s) and Addresses(s) of PRINCIPAL AMOUNT Registered Holder(s) Principal Amount TENDERED** (Please fill in, Certificate Represented by (Must be an integral if blank) Number(s)* Certificate(s)* multiple of $1,000) Total * Need not be completed by Book-Entry Debentureholders (see below). ** Unless otherwise indicated in this column, a holder will be deemed to have tendered the entire principal amount represented by the Old Debentures indicated in the third column. See Instruction 3. CHECK HERE IF TENDERED OLD DEBENTURES ARE ENCLOSED HEREWITH. CHECK HERE IF TENDERED OLD DEBENTURES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A TRUST COMPANY SPECIFIED BELOW AND COMPLETE THE FOLLOWING: Name of Tendering Institution: _____________________________ DTC MSTC PHILADEP (check one) Account Number: __________ Transaction Code Number: ___________________________________ CHECK HERE IF TENDERED OLD DEBENTURES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING (See Instruction 1): Name of Registered Owner(s): _______________________________ Date of Execution of Notice of Guaranteed Delivery: ________ Name of Institution which guaranteed delivery: _____________ DTC MSTC PHILADEP (check one if applicable) Account Number (if delivered by book-entry transfer: __________ SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS (See Instructions 3 and 4) To be completed ONLY if certificates for any principal amount of Old Debentures not tendered or accepted and/or New Debentures are to be registered in the name of and sent to someone other than the person whose signature appears in the Signature Box of this Consent and Letter of Transmittal or if Old Debentures delivered by book-entry transfer which are not tendered or accepted are to be returned by credit to an account maintained by DTC, MSTC or PHILADEP. Issue and mail: (check appropriate box(es)): New Debentures to: Old Debentures to: Credit untendered or unaccepted Old Debentures delivered by book-entry transfer to the DTC, MSTC or PHILADEP (check one) account set forth below: Name(s) _________________________ (Please print) _________________________________ (Please print) Address:_________________________ _________________________________ Zip Code _________________________________ (DTC, MSTC, or PHILADEP Account Number) _________________________________ Employer Identification or Social Security No. SPECIAL DELIVERY INSTRUCTIONS (See Instructions 3 and 4) To be completed ONLY if certificates for any principal amount of Old Debentures not tendered or accepted and/or New Debentures registered in the name of the person whose signature appears in the Signature Box of this Consent and Letter of Transmittal are to be sent to someone other than such person or to such person at an address other than that shown in the box entitled "Description of Old Debentures" on the face of this Consent and Letter of Transmittal. Mail or deliver: (check appropriate box(es)): New Debentures to: Old Debentures to: Name(s) __________________________ (Please print) __________________________________ (Please print) Address: _________________________ __________________________________ Zip Code __________________________________ Employer Identification or Social Security No. TO BE COMPLETED BY ALL TENDERING DEBENTUREHOLDERS (See Instruction 5) PAYOR'S NAME: RICHARDSON ELECTRONICS, LTD. SUBSTITUTE Form W-9 Department of the Treasury Internal Revenue Service Payor's Request for Taxpayer Identification Number (TIN) Part 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. Social Security Number OR Employer Identification Number Part 2 - Awaiting TIN CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT (1) the number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), (2) I am not subject to backup withholding either because I have not been notified that I am subject to backup withholding as a result of failure to report all interest or dividends, or the Internal revenue Service has notified me that I am no longer subject to backup withholding and (3) any other information provided on this form is true and correct. Signature: ___________________________ Date: __________________________ ___________________________________________________________________________ You must cross out Item (2) above if you have been notified by the Internal Revenue Service that you are subject to backup withholding because of underreporting interest or dividends on your tax return and you have not been advised by the Internal Revenue Service that such withholding has been terminated. INSTRUCTIONS Forming Part of the Terms and Conditions of the Exchange Offer 1. Delivery of the Consent and Letter of Transmittal and Certificates. Certificates for Old Debentures, or any book-entry transfer into the Exchange Agent's account at DTC of tendered Old Debentures, as well as properly completed and duly executed copies of this Consent and Letter of Transmittal (or facsimile thereof) and Substitute Form W-9 and any other documents required by this Consent and Letter of Transmittal, must be received by the Exchange Agent at its address set forth herein or, in the case of tenders by book-entry transfer, confirmed to the Exchange Agent on or prior to the Expiration Date (as defined in the Offering Circular). THE METHOD OF DELIVERY OF THIS TRANSMITTAL, THE OLD DEBENTURES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE EXCHANGING HOLDER, BUT, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF OLD DEBENTURES ARE DELIVERED BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, BE USED. Any questions as to validity, form, eligibility and acceptance of any exchange hereunder will be determined by the Company (which may delegate such power in whole or in part to the Exchange Agent) and such determination shall be final and binding. All Exchanging Holders, by execution of this Consent and Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of their tendered Old Debentures for exchange. 2. Partial Exchanges; Withdrawals. Exchanges of Old Debentures will be accepted only in units (multiples of $1,000). If less than the entire principal amount of any Old Debentures evidenced by a submitted certificate is to be exchanged, the Exchanging Holder should fill in the principal amount of Old Debentures which are to be exchanged in the boxes entitled "Principal Amount Tendered." A certificate for the principal amount of Old Debentures not so exchanged will be sent to such Exchanging Holder, unless otherwise provided in this Consent and Letter of Transmittal, as soon as practicable following the Expiration Date. The entire principal amount of all Old Debentures delivered to the Agent will be exchanged unless otherwise indicated or unless more than the principal amount of Old Debentures to be accepted by the Company have been offered for exchange under the Exchange Offer, in which case there shall be a pro rata allocation of the Old Debentures to be exchanged. If less than the minimum amount of Old Debentures to be accepted by the Company have been offered for exchange they shall be returned to the Exchanging Holder unless the Company determines to accept such lesser amount. Tenders of Old Debentures made in accordance with the Exchange Offer are irrevocable, except that any holder of Old Debentures who has tendered Old Debentures may withdraw the tender at any time prior to 12:00 Midnight, New York City time, on the Expiration Date and, unless such tender has been previously accepted, at any time after 12:00 Midnight, New York City time, February 28, 1997, by delivery of written notice of withdrawal, to the Exchange Agent. If the Company extends the Exchange Offer, is delayed in its acceptance for exchange or is unable to accept Old Debentures for exchange pursuant to the Exchange Offer for any reason, then, without prejudice to the Company's rights under the Exchange Offer, the Exchange Agent may, nevertheless, on behalf of the Company, retain tendered Old Debentures, and such Old Debentures may not be withdrawn except to the extent that tendering registered holders are entitled to withdrawal rights as described herein. To be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Exchange Agent at the address set forth above, must have a guaranteed signature included thereon (unless not required by the terms set forth under "Procedures for Tendering" in the Offering Circular) and must specify the name of the person having tendered the Old Debentures to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Old Debentures, and the aggregate principal amount of Old Debentures to be withdrawn. If Old Debentures have been delivered or otherwise identified to the Exchange Agent, the name of the registered holder and the serial numbers of the particular certificate(s) evidencing the Old Debentures withdrawn must also be so furnished to the Exchange Agent as aforesaid prior to the physical release of the certificate(s) for the withdrawn Old Debentures. If Old Debentures have been tendered pursuant to the procedures for book entry tender as set forth herein, any notice of withdrawal must also specify the name and number of the account at the appropriate Book Entry Transfer Facility to be credited with the withdrawn Old Debentures. Withdrawals of tenders of Old Debentures may not be rescinded, and any Old Debentures withdrawn will thereafter be deemed not validly tendered for purposes of the Exchange Offer; provided, however, that withdrawn Old Debentures may be retendered by again following one of the procedures described herein at any time prior to 12:00 Midnight, New York City time, on the Expiration Date. The withdrawal of Old Debentures will not constitute a revocation of the Consent to the Proposed Amendments with respect to the withdrawn Old Debentures, unless the procedures for revocation of Consents described below are followed. Any holder of Old Debentures who has consented to (or whose predecessor in interest with respect to such Old Debentures has consented to) the adoption of the Proposed Amendments may revoke such Consent by delivering written notice of such revocation to the Exchange Agent at any time prior to the delivery to the Trustee by the Company of certification that the Requisite Consents have been received. If such holder has tendered his Old Debentures for exchange he must also properly withdraw his tender of such Old Debentures for exchange in accordance with the procedures specified above. Failure to withdraw the tendered Old Debentures properly shall render the withdrawal of Consent ineffective. The Exchange Agent shall promptly deliver any such valid notice of revocation of Consent to the Trustee. Any such notice of revocation should indicate the certificate number or numbers of the Old Debentures to which it relates and the aggregate principal amount represented by such Old Debentures and must be signed by the holder in the same manner as the original Consent or be accompanied by evidence satisfactory to the Company that the holder revoking such Consent succeeded to ownership of such Old Debentures or otherwise has the power to revoke such Consent. The revocation of a Consent shall be effective with respect to the Old Debentures to which it relates, unless otherwise specified in the notice of revocation. All questions as to the validity (including time of receipt) of notices of withdrawal or revocation of any Consent will be determined by the Company, whose determination will be final and binding. Neither the Company, the Exchange Agent nor any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or revocation or incur any liability for failure to give any such notification. 3. Signatures on this Consent and Letter of Transmittal; Bond Powers and Endorsements; Guarantee of Signature. If this Consent and Letter of Transmittal is signed by the registered holder(s) of the Old Debentures exchanged hereby, the signature must correspond with the name(s) as written on the face of the certificate without alteration, enlargement or any change whatsoever. If any of the Old Debentures exchanged hereby are owned of record by two or more joint owners, all such owners must sign this Consent and Letter of Transmittal. If any exchanged Old Debentures are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Consent and Letter of Transmittal and any necessary accompanying documents as there are different registrations of certificates. When this Consent and Letter of Transmittal is signed by the registered holder or holders of Old Debentures listed and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, certificates for the New Debentures are to be issued, or certificates for Old Debentures for principal amounts not exchanged are to be reissued, to a person other than the registered holder, then endorsements of any certificates transmitted hereby or separate bond powers are required with signatures guaranteed by an Eligible Institution. If this Consent and Letter of Transmittal is signed by a person other than the registered holder or holders of any certificate(s) listed, such certificate(s) must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered holder or holders appear on the certificate(s), with signatures guaranteed by an Eligible Institution sufficient to establish a chain of assignments to the Exchanging Holder. Exchanging Holders who are not holders of record should (a) obtain a properly completed Consent and Letter of Transmittal from the record holder, (b) obtain and include with the Consent and Letter of Transmittal a properly completed bond power from the record holder with signatures guaranteed by an Eligible Institution, or (c) effect a record transfer of their Old Debentures prior to the Expiration Date. Any Old Debentures properly tendered prior to the Expiration Date accompanied by a properly completed Consent and Letter of Transmittal will be transferred of record on the Expiration Date of accepted for exchange. If this Consent and Letter of Transmittal or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority so to act must be submitted. ENDORSEMENTS ON CERTIFICATES FOR OLD DEBENTURES OR SIGNATURES ON BOND POWERS REQUIRED BY THIS INSTRUCTION 3 OR SIGNATURES OF THOSE REGISTERED HOLDERS WHO HAVE COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY INSTRUCTIONS" ON THIS CONSENT AND LETTER OF TRANSMITTAL MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION. SIGNATURES ON THIS CONSENT AND LETTER OF TRANSMITTAL NEED NOT BE GUARANTEED BY AN ELIGIBLE INSTITUTION, PROVIDED THE OLD DEBENTURES ARE TENDERED: (i) BY A REGISTERED HOLDER OF SUCH OLD DEBENTURES (WHICH TERM, FOR PURPOSES OF THIS LETTER, SHALL INCLUDE ANY PARTICIPANT IN DTC WHOSE NAME APPEARS ON A SECURITY POSITION LISTING AS THE OWNER OF OLD DEBENTURES) WHO HAS NOT COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY INSTRUCTIONS" ON THIS CONSENT AND LETTER OF TRANSMITTAL; OR (ii) FOR THE ACCOUNT OF AN ELIGIBLE INSTITUTION. 4. Special Issuance, Payment and Delivery Instructions. Exchanging Holders should indicate in the applicable box the name and address to which the New Debentures and/or substitute Old Debentures for principal amounts not exchanged are to be issued or sent, if different from the name and address of the person signing this Consent and Letter of Transmittal. 5. Tax Identification Number. Federal income tax law requires that an Exchanging Holder must provide the payer with his correct taxpayer identification number ("TIN"), which, in the case of an individual, is his social security number. If the payer is not provided with the correct TIN, the Exchanging Holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payment for any interest with respect to the New Debentures may be subject to backup withholding in an amount equal to 20% of any such payment made to a holder of the New Debentures. Certain Exchanging Holders (including, amount others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. To prevent backup withholding, each tendering Debentureholder must provide his correct TIN by completing the "Substitute Form W-9" set forth herein, certifying that the TIN provided is correct (or that such Debentureholder is awaiting a TIN) and that (i) the Debentureholder has not been notified by the Internal Revenue Service that he is subject to backup withholding as a result of failure to report all interest or dividends or (ii) the Internal Revenue Service has notified the Debentureholder that he is no longer subject to backup withholding. In order to satisfy the Exchange Agent that a foreign individual qualifies as an exempt recipient, such Debentureholders must submit a statement signed under penalty of perjury attesting to such exempt status. Such statements may be obtained from the Exchange Agent. If the Old Debentures are in more than one name or are not in the name of the actual owner, consult the enclosed guidelines for information on which TIN to report. If you do not have a TIN, consult the enclosed guidelines for instructions on applying for a TIN, check the box in Part 2 of the Substitute Form W-9, and write "applied for" in lieu of your TIN. If you do not provide your TIN to the payor within 60 days, backup withholding will begin and continue until you furnish your TIN to the payor. 6. Transfer Taxes. The Company will pay all transfer taxes, if any, applicable to the transfer and sale of Old Debentures to it or its order pursuant to the Exchange Offer. If however, New Debentures and/or substitute Old Debentures for principal amounts not tendered are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Debentures tendered hereby, or if tendered Old Debentures are registered in the name of any person other than the person signing this Consent and Letter of Transmittal, or if a transfer tax is imposed for any reason other than the transfer and sale of Old Debentures to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering Debentureholder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering Debentureholder. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the certificate(s) listed in this Consent and Letter of Transmittal. 7. Waiver of Conditions. The Company reserves the absolute right to waive satisfaction of any of the conditions enumerated in the Offering Circular. 8. No Conditional Offers. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering Debentureholders, by execution of this Consent and Letter of Transmittal (or a facsimile thereof), shall waive any right to receive notice of the acceptance of their Old Debentures for exchange. The Company, Exchange Agent or any other person is not obligated to give notice of defects or irregularities in any tender, nor shall any of them incur any liability for failure to give any such notice. 9. Mutilated, Lost, Stolen or Destroyed Old Debentures. Any Debentureholder whose Old Debentures have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 10. Requests for Assistance or Additional Copies. Questions relating to the procedure for tendering, as well as requests for additional copies of the Offering Circular and this Consent and Letter of Transmittal, may be directed to Anjali Gottreich or Elizabeth Nelson at the Exchange Agent at (312) 661-6055. In addition, all questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Offering Circular and this Consent and Letter of Transmittal, may be directed to William G. Seils, Senior Vice President, General Counsel and Secretary of the Company, at Richardson Electronics, Ltd., 40W267 Keslinger Road, LaFox, Illinois 60147, telephone (630) 208-2370. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Guidelines for Determining the Proper Identification Number to Give the Payor. - Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer. For this type of account: Give the SOCIAL SECURITY number of - 1. An individual's The individual (1) account 2. Two or more The actual owner of the individuals (joint account or, if combined account) funds, any one of the individuals (1) 3. Husband and wife The actual owner of the (joint account) account or, if joint funds, either person (1) 4. Custodian account of The minor (2) a minor (Uniform Gift to Minors Act) 5. Adult and minor The adult or, if the minor is (joint account) the ony contributor, the minor (1) 6. Account in the name of The ward, minor, or guardian or committee for a incompetent person (3) designated ward, minor, or incompetent person 7. a. The usual revocable The grantor-trustee (1) savings trust account (grantor is also trustee) b. So-called trust The actual owner (1) account that is not a legal or valid trust under State law. 8. Sole proprietorship The owner (4) account 9. A valid trust, The legal entity (Do not estate, or pension furnish the identifying trust number of the personal representative or trustee unless the legal entity itself is not designated in the account title.) (5) 10. Corporate account The corporation 11. Religious, charitable, The organization or educational organization account 12. Partnership account The partnership held in the name of the business 13. Association, club, The organization or other tax-exempt organization 14. A broker or The broker or nominee registered nominee 15. Account with the The public entity Department of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments 1. List first and circle the name of the person whose number you furnish. 2. Circle the minor's name and furnish the minor's social security number 3. Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. 4. Show the name of the owner. 5. List first and circle the name of the legal trust, estate, or pension trust. Note: If no name is circled when there is more than one name the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Page 2 Obtaining a Number If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. Payees Exempt from Backup Withholding Payees specifically exempted from backup withholding on ALL payments include the following: A corporation. A financial institution. An organization exempt from tax under section 501(a), or an individual retirement plan. The United States or any agency or instrumentality thereof. A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. An international organization or any agency, or instrumentality thereof. A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. A real estate investment trust. A common trust fund operated by a bank under section 584(a). An exempt charitable remainder trust, or a non- exempt trust described in section 4947(a)(1). An entity registered at all times under the Investment Company Act of 1940. A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: Payments to nonresident aliens subject to withholding under section 1441. Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. Payments of patronage dividends where the amount received is not paid in money. Payments made by certain foreign organizations. Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. Payments of tax-exempt interest (including exempt-interest dividends under section 852). Payments described in section 6049(b)(5) to nonresident aliens. Payments on tax-free covenant bonds under section 1451. Payments made by certain foreign organizations. Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. Privacy Act Notice. - Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Beginning January 1, 1984, payers must generally withhold 20% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. Penalties (1) Penalty for Failure to Furnish Taxpayer Identification Number.- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) Failure to Report Certain Dividend and Interest Payments. - - If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an under-payment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) Civil Penalty for False Information with Respect to Withholding.- If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) Criminal Penalty for Falsifyin Information.- Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-3 4 Item 9 (a)(3) FORM OF NOTICE OF GUARANTEED DELIVERY FOR RICHARDSON ELECTRONICS, LTD. This form or one substantially equivalent hereto must be used to accept the Exchange Offer and Consent Solicitation of Richardson Electronics, Ltd. made pursuant to the Offering Circular and Consent Solicitation dated December 18, 1996 (the "Offering Circular") of Richardson Electronics, Ltd. if certificates for 7-1/4% Convertible Subordinated Debentures due December 15, 2006 of Richardson Electronics, Ltd. (the "Old Debentures") are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Exchange Agent on or prior to the Expiration Date of the Exchange Offer. Such form may be delivered by hand or transmitted by telegram, telex, facsimile transmission or letter to the Exchange Agent. To: American National Bank and Trust Company of Chicago (312) 661-6055 Anjali Gottreich or Elizabeth Nelson Facsimile Transmission Telephone Number (312) 661-6491 By Mail: By Hand: American National Bank and Trust American National Bank and Trust Company of Chicago Company of Chicago Corporate Trust Department, 13th Floor Corporate Trust Department, 13th Floor 33 North LaSalle Street 33 North LaSalle Street Chicago, IL 60690 Chicago, IL 60690 Attn: Anjali Gottreich or Attn: Anjali Gottreich or Elizabeth Nelson Elizabeth Nelson Delivery of this instrument to an address other than as set forth above does not constitute a valid delivery. Gentlemen: The undersigned hereby tenders to Richardson Electronics, Ltd. upon the terms and conditions set forth in the Offering Circular and the Consent and Letter of Transmittal, receipt of which is hereby acknowledged, the principal amount of Old Debentures set forth below, pursuant to the guaranteed delivery procedure described in the Offering Circular. Signature(s): Address Name(s): Zip Code Area Code and Tel. No.(s) Principal Amount of Old Debentures Tendered $ CHECK IF OLD DEBENTURES WILL BE TENDERED BY BOOK-ENTRY TRANSFER The Depository Trust Company Midwest Securities Trust Company Philadelphia Securities Depository Trust Company Certificate Nos. (if available) Account Number Total Principal Amount Represented by Old Debenture Certificate $ GUARANTEE The undersigned, a member of a registered national securities exchange, or a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States, hereby guarantees (i) that either the certificate(s) representing the principal amount of Old Debentures tendered hereby are in proper form for transfer, or confirmation of the book-entry of such principal amount of Old Debentures into the Exchange Agent's account at The Depository Trust Company, the Midwest Securities Trust Company or the Philadelphia Securities Depository Trust Company, in each case together with any documents required by the Consent and Letter of Transmittal, will be received by the Exchange Agent at one of its addresses set forth above, no later than five NASDAQ trading days after the Expiration Date (as defined in the Offering Circular) hereof, (ii) that such tender of Old Debentures complies with Rule 10b-4 under the Securities Exchange Act of 1934 and (iii) that the holder on whose behalf this tender is being made is deemed to own the Old Debentures being tendered within the meaning of such Rule 10b-4. Name of Firm Authorized Signature Address Title Name Zip Code Please Type or Print Area Code and Tel. No. Dated EX-4 5 Item 9 (c)(1) RICHARDSON ELECTRONICS, LTD. $70,825,000 8-1/4% Convertible Senior Subordinated Debentures due June 15, 2006 INDENTURE Dated as of December 16, 1996 American National Bank and Trust Company of Chicago Trustee TABLE OF CONTENTS ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE . . . . .1 SECTION 1.01. Definitions.. . . . . . . . . . . . . .1 SECTION 1.02. Other Definitions.. . . . . . . . . . .3 SECTION 1.03. Incorporation by Reference of Trust Indenture Act. . . . . . . . . . . . . . . . . . . . .3 SECTION 1.04. Rules of Construction . . . . . . . . .3 ARTICLE TWO THE SECURITIES . . . . . . . . . . . . . . . . . . .4 SECTION 2.01. Form and Dating.. . . . . . . . . . . .4 SECTION 2.02. Execution and Authentication. . . . . .4 SECTION 2.03. Registrar, Paying Agent and Conversion Agent. . . . . . . . . . . . . . . . . . . . . . . . .4 SECTION 2.04. Paying Agent to Hold Money in Trust.. .5 SECTION 2.05. Securityholder Lists. . . . . . . . . .5 SECTION 2.06. Transfer and Exchange.. . . . . . . . .5 SECTION 2.07. Replacement Securities. . . . . . . . .5 SECTION 2.08. Outstanding Securities. . . . . . . . .5 SECTION 2.09. Temporary Securities. . . . . . . . . .6 SECTION 2.10. Cancellation. . . . . . . . . . . . . .6 SECTION 2.11. Defaulted Interest. . . . . . . . . . .6 ARTICLE THREE REDEMPTION . . . . . . . . . . . . . . . . . . . .6 SECTION 3.01. Notices to Trustee. . . . . . . . . . .6 SECTION 3.02. Selection of Securities to be Redeemed.7 SECTION 3.03. Notice of Redemption. . . . . . . . . .7 SECTION 3.04. Effect of Notice of Redemption. . . . .8 SECTION 3.05. Deposit of Redemption Price.. . . . . .8 SECTION 3.06. Securities Redeemed in Part.. . . . . .8 ARTICLE FOUR COVENANTS . . . . . . . . . . . . . . . . . . . . .8 SECTION 4.01. Payment of Securities.. . . . . . . . .8 SECTION 4.02. Limitation on Dividends and Stock Purchases. . . . . . . . . . . . . . . . . . . . . . .8 SECTION 4.03. SEC Reports.. . . . . . . . . . . . . .9 SECTION 4.04. Compliance Certificate. . . . . . . . .9 ARTICLE FIVE SUCCESSOR CORPORATION . . . . . . . . . . . . . . .9 SECTION 5.01. When Company May Merge, etc.. . . . . .9 ARTICLE SIX DEFAULTS AND REMEDIES. . . . . . . . . . . . . . . 10 SECTION 6.01. Events of Default.. . . . . . . . . . 10 SECTION 6.02. Acceleration. . . . . . . . . . . . . 11 SECTION 6.03. Other Remedies. . . . . . . . . . . . 11 SECTION 6.04. Waiver of Past Defaults.. . . . . . . 11 SECTION 6.05. Control by Majority.. . . . . . . . . 12 SECTION 6.06. Limitation on Suits.. . . . . . . . . 12 SECTION 6.07. Rights of Holders to Receive Payment. 12 SECTION 6.08. Collection Suit by Trustee. . . . . . 13 SECTION 6.09. Trustee May File Proofs of Claim. . . 13 SECTION 6.10. Priorities. . . . . . . . . . . . . . 13 SECTION 6.11. Undertaking for Costs.. . . . . . . . 13 ARTICLE SEVEN TRUSTEE. . . . . . . . . . . . . . . . . . . . . 14 SECTION 7.01. Duties of Trustee.. . . . . . . . . . 14 SECTION 7.02. Rights of Trustee.. . . . . . . . . . 15 SECTION 7.03. Individual Rights of Trustee. . . . . 15 SECTION 7.04. Trustee's Disclaimer. . . . . . . . . 15 SECTION 7.05. Notice of Defaults. . . . . . . . . . 15 SECTION 7.06. Reports by Trustee to Holders.. . . . 15 SECTION 7.07. Compensation and Indemnity. . . . . . 16 SECTION 7.08. Replacement of Trustee. . . . . . . . 16 SECTION 7.09. Successor Trustee by Merger, etc. . . 17 SECTION 7.10. Eligibility; Disqualification.. . . . 17 SECTION 7.11. Preferential Collection of Claims Against Company. . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE EIGHT DISCHARGE OF INDENTURE . . . . . . . . . . . . . 17 SECTION 8.01. Termination of Company's Obligations. 17 SECTION 8.02. Application of Trust Money. . . . . . 18 SECTION 8.03. Repayment to Company. . . . . . . . . 18 ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS . . . . . . . 18 SECTION 9.01. Without Consent of Holders. . . . . . 18 SECTION 9.02. With Consent of Holders.. . . . . . . 18 SECTION 9.03. Compliance with Trust Indenture Act.. 19 SECTION 9.04. Revocation and Effect of Consents.. . 19 SECTION 9.05. Notation on or Exchange of Securities.19 SECTION 9.06. Trustee to Sign Amendments, etc.. . . 20 ARTICLE TEN CONVERSION . . . . . . . . . . . . . . . . . . . . 20 SECTION 10.01. Conversion Privilege.. . . . . . . . 20 SECTION 10.02. Conversion Procedure.. . . . . . . . 20 SECTION 10.03. Fractional Shares. . . . . . . . . . 21 SECTION 10.04. Taxes on Conversion. . . . . . . . . 21 SECTION 10.05. Company to Provide Stock.. . . . . . 21 SECTION 10.06. Adjustment for Change in Capital Stock.21 SECTION 10.07. Adjustment for Rights Issue. . . . . 22 SECTION 10.08. Adjustment for Other Distributions.. 23 SECTION 10.09. Voluntary Adjustment.. . . . . . . . 23 SECTION 10.10. Current Market Price.. . . . . . . . 23 SECTION 10.11. When Adjustment May Be Deferred. . . 24 SECTION 10.12. When Adjustment Is Not Required. . . 24 SECTION 10.13. Notice of Adjustment.. . . . . . . . 24 SECTION 10.14. Notice of Certain Transactions.. . . 24 SECTION 10.15. Consolidation, Merger or Sale of the Company. . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 10.16. Company Determination Final. . . . . 25 SECTION 10.17. Trustee's Disclaimer.. . . . . . . . 25 ARTICLE ELEVEN SUBORDINATION . . . . . . . . . . . . . . . . . 25 SECTION 11.01. Securities Subordinated to Senior Indebtedness.. . . . . . . . . . . . . . . . . . . . 25 SECTION 11.02. Company Not to Make Payments with Respect to Securities in Certain Circumstances.. . . . . . . 26 SECTION 11.03. Securities Subordinated to Prior Payment of All Senior Indebtedness on Dissolution, Liquidation or Reorganization of the Company. . . . . . . . . . . . 27 SECTION 11.04. Securityholders to be Subrogated to Rights of Holders of Senior Indebtedness.. . . . . . 28 SECTION 11.05. Obligation of the Company Unconditional.28 SECTION 11.06. Knowledge of Trustee.. . . . . . . . 29 SECTION 11.07. Application by Trustee of Monies Deposited With It. . . . . . . . . . . . . . . . . . 29 SECTION 11.08. Subordination Rights Not Impaired by Acts or Omissions of Company or Holders of Senior Indebtedness.. . . . . . . . . . . . . . . . . . . . 29 SECTION 11.09. Securityholders Authorize Trustee to Effectuate Subordination of Securities.. . . . . . . 29 SECTION 11.10. Right of Trustee to Hold Senior Indebtedness.. . . . . . . . . . . . . . . . . . . . 30 SECTION 11.11. Article Eleven Not to Prevent Events of Default. . . . . . . . . . . . . . . . . . . . . . . 30 ARTICLE TWELVE MISCELLANEOUS . . . . . . . . . . . . . . . . . 30 SECTION 12.01. Trust Indenture Act Controls.. . . . 30 SECTION 12.02. Notices. . . . . . . . . . . . . . . 30 SECTION 12.03. Communication by Holders with Other Holders. . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 12.04. Certificate and Opinion as to Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . 31 SECTION 12.05. Statements Required in Certificate or Opinion. . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 12.06. When Treasury Securities Disregarded.32 SECTION 12.07. Rules by Trustee and Agents. . . . . 32 SECTION 12.08. Legal Holidays.. . . . . . . . . . . 32 SECTION 12.09. Governing Law. . . . . . . . . . . . 32 SECTION 12.10. No Adverse Interpretation of Other Agreements.. . . . . . . . . . . . . . . . . . . . . 32 SECTION 12.11. No Recourse Against Others.. . . . . 32 SECTION 12.12. Successors.. . . . . . . . . . . . . 32 SECTION 12.13. Duplicate Originals. . . . . . . . . 33 INDENTURE, dated as of December 16, 1996, between RICHARDSON ELECTRONICS, LTD., a Delaware corporation (the "Company"), and AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a National Banking Association (the "Trustee"). Intending to be legally bound hereby, each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's 8-1/4% Convertible Senior Subordinated Debentures due June 15, 2006 (the "Securities"); ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. "Agent" means any Registrar, Paying Agent co-Registrar or Conversion Agent. See Section 2.03. "Board of Directors" means the Board of Directors of the Company or any duly authorized committee of that Board. "Common Shares" means the Common Stock, par value of $.05 per share, of the Company as it exists on the date of this Indenture or as it may be constituted from time to time. "Company" means the party named as such in this Indenture until a successor replaces it and thereafter means the successor. "Consolidated Net Income", for any period, means the aggregate of the Net Income of the Company and its Subsidiaries for such period, on a consolidated basis, determined in accordance with generally accepted accounting principles, provided that (i) the Net Income of any person in which the Company or any Subsidiary has a joint interest with a third party shall be included only to the extent of the amount of dividends or distributions paid to the Company or a Subsidiary, and (ii) the Net Income or any person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded. "Consolidated Tangible Net Worth", as applied to any person, means the total stockholders' equity of such person and its consolidated subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles, except that there shall be deducted therefrom all intangible assets (determined in accordance with generally accepted accounting principles) including, without limitation, organization costs, patents, trademarks, copyrights, franchises, research and development expenses, and any amount reflected as treasury stock; provided, however, that the following, whether existing on the date hereof or arising hereafter, shall not be deducted from total consolidated stockholders' equity: (i) goodwill arising from acquisitions and (ii) unamortized debt expense. "Conversion Agent" means the office or agency where Securities may be presented for conversion and any additional Conversion Agents. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Holder" or "Securityholder" means the person in whose name a Security is registered on the Registrar's books. "Indenture" means this Indenture as amended or supplemented from time to time. "Net Income" of any person means the net income (loss) of such person, determined in accordance with generally accepted accounting principles; excluding, however, from the determination of Net Income any gain (but not loss) realized upon the sale or other disposition (including, without limitation, dispositions pursuant to leaseback transactions) of any real property or equipment of such person, which is not sold or otherwise disposed of in the ordinary course of business, or of any capital stock of the Company or a Subsidiary owned by such person. "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers or by an Officer and an Assistant Treasurer or an Assistant Secretary of the Company. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Responsible Officer" when used with respect to the Trustee means the Chairman or Vice Chairman of its board of directors, the President, the Secretary, any Assistant Secretary, or the Treasurer, or any Vice President, Trust Officer, or any other officer of the Trustee customarily performing functions similar to those performed by any of the above-designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "SEC" means the Securities and Exchange Commission. "Securities" means the Securities described above and issued under the Indenture. "Subsidiary" means a corporation, a majority of whose voting stock is owned by the Company or a Subsidiary. Voting stock is capital stock having voting power under ordinary circumstances to elect directors. "TIA" means the Trust Indenture Act of 1939 (15. U.S. Code Sections 77aaa-77bbbb) as in effect on the date of this Indenture. "Trustee" means the party named as such in this Indenture until a successor replaces it and thereafter means the successor. "United States" means the United States of America. SECTION 1.02. Other Definitions. Term Defined in Section "Bankruptcy Law" 6.01 "Custodian" 6.01 "Event of Default" 6.01 "Indebtedness" 11.01 "Legal Holiday" 12.08 "Paying Agent" 2.03 "Registrar" 2.03 "Senior Indebtedness" 11.01 SECTION 1.03. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them. SECTION 1.04. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles: (3) "or" is not exclusive; and (4) words in the singular include the plural, and in the plural include the singular. ARTICLE TWO THE SECURITIES SECTION 2.01. Form and Dating. The Securities and the Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit A. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage. The Company shall approve the form of the Securities and any notation, legend or endorsement on them. Each Security shall be dated the date of its authentication. SECTION 2.02. Execution and Authentication. Two Officers shall execute the Securities for the Company by facsimile signature. The Company's seal shall be reproduced on the Securities. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate Securities for original issue in the aggregate principal amount of up to $70,825,000 upon a written order of the Company signed by two Officers or by an Officer and an Assistant Treasurer of the Company. The aggregate principal amount of the Securities outstanding at any time may not exceed that amount except as provided in Sections 2.07 and 2.08. SECTION 2.03. Registrar, Paying Agent and Conversion Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange ("Registrar"), an office or agency where Securities may be presented for payment ("Paying Agent") and an office or agency where Securities may be presented for conversion ("Conversion Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-Registrars, one or more additional paying agents and one or more additional conversion agents. The term "Paying Agent" includes any additional paying agent and the term "Conversion Agent" includes any additional conversion agent. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar, Paying Agent or Conversion Agent, the Trustee shall act as such. The Company initially appoints the Trustee Registrar, Paying Agent and Conversion Agent. SECTION 2.04. Paying Agent to Hold Money in Trust. Each Paying Agent shall hold in trust for the benefit of the Securityholders or the Trustee all moneys held by the Paying Agent for the payment of principal of or interest on the Securities, and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon doing so the Paying Agent shall have no further liability for the money. SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each semiannual interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require, of the names and addresses of Securityholders. SECTION 2.06. Transfer and Exchange. Where a Security is presented to the Registrar or a co-Registrar with a request to register a transfer, the Registrar shall register the transfer as requested if its requirements for such transactions are met. Where Securities are presented to the Registrar or a co-Registrar with a request to exchange them for an equal principal amount of Securities of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit transfers and exchanges, the Trustee shall authenticate Securities at the Registrar's request. Any exchange or transfer shall be without charge, except that the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. SECTION 2.07. Replacement Securities. If the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the Trustee's requirements are met. An indemnity bond must be sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Security is replaced. The Company may charge for its expenses in replacing a Security. Every replacement Security is an additional obligation of the Company. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, and those described in this Section. A Security does not cease to be outstanding because the Company or one of its Subsidiaries holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. If the Paying Agent holds on a redemption date or maturity date money sufficient to pay Securities payable on that date, then on and after that date such Securities shall be deemed to be no longer outstanding and interest on them shall cease to accrue. SECTION 2.09. Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities in exchange for temporary Securities. SECTION 2.10. Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar, Paying Agent and Conversion Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange, payment or conversion. The Trustee and no one else shall cancel and destroy all Securities surrendered for transfer, exchange, payment, conversion or cancellation and deliver a certificate of such destruction to the Company unless the Company instructs the Trustee in writing to deliver the Securities to the Company. The Company may not issue new Securities to replace Securities that it has paid or delivered to the Trustee for cancellation or which have been converted. SECTION 2.11. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, it shall pay the defaulted interest to the persons who are Securityholders on a subsequent special record date. The Company shall fix the record date and payment date. At least 15 days before the record date, the Company shall mail to each Securityholder a notice that states the record date, the payment date and the amount of defaulted interest to be paid. The Company may pay defaulted interest in any other lawful manner. ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee. If the Company wants to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee of the redemption date and the principal amount of Securities to be redeemed. In the case of any such redemption, the Company shall deliver to the Trustee an Officers' Certificate stating that such redemption will comply with the condition contained in paragraph 5 of the Securities. If the Company wants to reduce the principal amount of Securities to be redeemed pursuant to paragraph 6 of the Securities, it shall notify the Trustee of the amount of the reduction and the basis for it. If the Company wants to credit against any such redemption Securities not previously delivered to the Trustee for cancellation, it shall deliver the Securities with the notice The Company shall give each notice provided for in this Section at least 60 days before the redemption date or such lesser amount of time as consented to by the Trustee. SECTION 3.02. Selection of Securities to be Redeemed. If less than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed, if the Securities are listed on a national securities exchange, in accordance with rules of such exchange or if the Securities are not so listed on either a pro rata basis or by lot. The Trustee shall make the selection from Securities outstanding and not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger $1,000. Securities and portions of them it selects shall be in amounts of $1,000 or integral multiples of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a redemption date, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (1) the redemption date; (2) the redemption price; (3) the then current conversion price; (4) the name and address of the Paying Agent and the Conversion Agent; (5) that the right to convert Securities called for redemption shall terminate at the close of business on the tenth business day prior to the redemption date; (6) that Holders who want to convert Securities must satisfy the requirements of paragraph 7 of the Securities; (7) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (8) that interest on Securities called for redemption ceases to accrue on and after the redemption date; and (9) the paragraph of the Securities pursuant to which the Securities are to be redeemed. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price, plus accrued interest to the redemption date. SECTION 3.05. Deposit of Redemption Price. Before the redemption date, the Company shall deposit with the Paying Agent money sufficient to pay the redemption price of, and accrued interest on, all Securities to be redeemed on that date. The Paying Agent shall return to the Company any money not required for that purpose because of conversion of Securities. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Trustee shall authenticate for the Holder a new Security equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Securities. The Company shall pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities. The Company shall pay interest on overdue principal at the rate borne by the Securities; it shall pay interest on overdue installments of interest at the same rate to the extent lawful. SECTION 4.02. Limitation on Dividends and Stock Purchases. The Company may not declare or pay any dividend or make any distribution on its capital stock or to its shareholders (other than dividends or distributions payable in its capital stock) or purchase, redeem or otherwise acquire or retire for value, or permit any Subsidiary to purchase or otherwise acquire for value, any capital stock of the Company (i) if at the time of such action an Event of Default shall have occurred and be continuing, or occur as a consequence of any such action, or (ii) if, upon giving effect to such dividend, distribution, purchase, redemption, or other acquisition or retirement, the aggregate amount expended for all such purposes (the amount expended for such purposes, if other than in cash, to be determined by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors filed with the Trustee) subsequent to May 31, 1996, shall exceed the sum of (a) the aggregate Consolidated Net Income (or, in case such aggregate Consolidated Net Income shall be a deficit, minus such deficit) of the Company earned on a cumulative basis subsequent to May 31, 1996, (b) the aggregate net proceeds, including the fair market value of property other than cash (as determined by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors filed with the Trustee), received by the Company from the issue or sale, other than to a subsidiary, after May 31, 1996 of capital stock of the Company, (c) the aggregate net proceeds received by the Company from the issue or sale, other than to a subsidiary, of any indebtedness (including the Securities) of the Company issued subsequent to May 31, 1996 which has been converted into capital stock of the Company, and (d) $30,000,000; provided, however, that such Provisions will not prevent (i) the payment of any dividend within 60 days after the date of declaration if the payment complied with the foregoing provisions on the date of declaration, (ii) the retirement of any shares of the Company's capital stock by exchange for, or out of the proceeds of, the substantially concurrent sale of other shares of its capital stock, including without limitation, the conversion of the Company's Class B Common Stock, $.05 par value, ("Class B Common Stock"), or (iii) the call for redemption of any convertible preferred stock of the Company under an agreement with a responsible underwriter designed to insure that all such stock is converted rather than redeemed. SECTION 4.03. SEC Reports. Within 15 days after the Company files with the SEC copies of its annual reports and other information, documents and reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which it is required to file with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company shall file the same with the Trustee. The Company also shall comply with the other provisions of TIA 314(a). SECTION 4.04. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company (which on the date hereof is May 31) an Officers' Certificate stating whether or not the signers know of any Default by the Company in performing any of its obligations under this Indenture. If they do know of such a Default, the certificate shall describe the Default. The first certificate shall be delivered to the Trustee by September 28, 1997. ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. When Company May Merge, etc. The Company shall not consolidate with or merge into, or transfer, all or substantially all of its assets to, any other person unless (i) such other person is a corporation organized and existing under the laws of the United States or a State thereof which expressly assumes by supplemental indenture all the obligations of the Company under the Securities and this Indenture and (ii) such other person has a Consolidated Tangible Net Worth immediately after such transaction equal to or greater than the Consolidated Tangible Net Worth of the Company and (iii) immediately after the transaction no Default exists. Thereafter all such obligations of a predecessor corporation shall terminate. ARTICLE SIX DEFAULTS AND REMEDIES SECTION 6.01. Events of Default. An "Event of Default" occurs if: (1) the Company defaults in the payment of interest on any Security when the same becomes due and payable and the default continues for a period of 30 days whether or not such payment shall be prohibited by the provisions of Article Eleven; (2) the Company defaults in the payment of principal of any Security when the same becomes due and payable at maturity, upon redemption (including payment pursuant to paragraph 5 or paragraph 6 of the Securities) or otherwise whether or not such payment shall be prohibited by the provisions of Article Eleven: (3) the Company fails to comply with any of its other agreements in the Securities or this Indenture and the default continues for the period and after the notice specified below; (4) the happening of an event of default as defined in any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Company or any Subsidiary, whether such Indebtedness now exists or shall hereafter be created, which event of default shall have caused in any one case or in the aggregate in excess of $5,000,000 aggregate principal amount of such Indebtedness to become due and payable prior to the date on which it would otherwise have become due and payable, without such acceleration being rescinded, annulled or otherwise cured within the period and after the notice specified below; (5) The Company or any Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, or (D) makes a general assignment for the benefit of its creditors; or (6) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Subsidiary in an involuntary case, (B) appoints a Custodian of the Company or any Subsidiary or for all or substantially all of its property, or (C) orders the liquidation of the Company or any Subsidiary, and the order or decree remains unstayed and in effect for 90 days. The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal or State law for the relief of debtors. The term "Custodian" mean; any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. A default under clause (3) or (4) is not an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities notify the Company of the default and the Company does not cure the default within 30 days after receipt of the notice. The notice must specify the default, demand that it be remedied and state that the notice is a "Notice of Default". If the Holders of 25% in principal amount of the outstanding Securities request the Trustee to give such notice on their behalf, the Trustee shall do so. SECTION 6.02. Acceleration. If an Event of Default occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the outstanding Securities by notice to the Company and the Trustee, may declare the principal of and all accrued interest on all the Securities to be due and payable immediately. Upon such declaration such principal and interest shall be due and payable immediately. The Holders of a majority in principal amount of the outstanding Securities by notice to the Trustee may rescind an acceleration and its consequences if all existing Events of Default have been cured or waived, except nonpayment of principal or interest that has become due solely because of the acceleration, and if the rescission would not conflict with any judgment or decree. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. Subject to Section 9.02, the Holders of a majority in principal amount of the outstanding Securities by notice to the Trustee may waive a past Default and its consequences. When a default is waived, it is cured. SECTION 6.05. Control by Majority. The Holders of a majority in principal amount of outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee: provided, however: (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the rights of any Holder not taking part in such direction, and (3) the Trustee shall have the right to decline to follow any such direction if the Trustee, being advised by counsel, determines that the action so directed may not lawfully be taken or if the Trustee in good faith shall, by a Responsible Officer, determines that the proceedings so directed would involve it in personal liability or be unduly prejudicial to the Holders not taking part in such direction, and (4) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 6.06. Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee written notice of continuing Event of Default; (2) the Holders of at least 25% in principal amount of the outstanding Securities make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (5) during such 60-day period the Holders of a majority in principal amount of the Securities do not give the trustee a direction inconsistent with such request. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07. Rights of Holders to Receive Payment. Subject to Article Eleven and notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of principal of, premium, if any, and interest on the Security, on or after the respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default in payment of interest or principal specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal and interest remaining unpaid. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, its creditors or its property. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceedings. SECTION 6.10. Priorities. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee for amounts due under Section 7.07; Second: to holders of Senior Indebtedness to the extent required by Article Eleven; Third: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and Fourth: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the outstanding Securities. ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) Except during the continuance of an Event of Default: (1) The Trustee need perform only those duties that are specifically set forth in this Indenture and no others. (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. The Trustee, however, shall examine the certificates and opinions submitted in accordance with Section 12.04 to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section. (2) the Trustee shall not be liable for any error of judgment made in good, faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree with the Company. (g) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the certificate or opinion. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. The Trustee, however, must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities; it shall not be accountable for the Company's use of the proceeds from the Securities; and it shall not be responsible for any statement in the Securities other than its certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default within 90 days after it occurs. Except in the case of a Default in payment of principal of, premium, if any, or interest on any Security, the Trustee may withhold the notice if and so long as the board of directors of the Trustee, the executive or any trust committee of such board and/or responsible officers of the Trustee in good faith determine(s) that withholding the notice is in the interests of Securityholders. SECTION 7.06. Reports by Trustee to Holders. Within 60 days after each May 15 beginning with May 15, 1997, the Trustee shall mail to each Securityholder a brief report dated as of such May 15 that complies with TIA Sec. 313(a). The Trustee also shall comply with TIA Sec. 313(b)(2) and TIA Sec. 313(d). A copy of each report at the time of its mailing to Securityholders shall be filed by the Company with the SEC and each stock exchange on which the Securities are listed. The Company shall notify the Trustee when the Securities are listed on any stock exchange. SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services. The Trustee's compensation hereunder shall not be limited by any law on compensation relating to the trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred by it. Such expenses shall include the reasonable compensation and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any loss of liability incurred by it in connection with the administration of this trust and its duties hereunder. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay principal of or interest on particular Securities. When the Trustee incurs expenses or renders services after an Event of Default specified in Sections 6.01(5) or (6) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 7.08. Replacement of Trustee. A resignation or removal of the Trustee and the appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount of the outstanding Securities may remove the Trustee by so notifying the Trustee and the Company and may appoint a successor Trustee with the Company's consent. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee (subject to the lien provided for in Section 7.07), the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in principal amount of the outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. SECTION 7.09. Successor Trustee by Merger, etc. If the Trustee consolidates with, merges or converts into or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10. Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirements of TIA Sec. 310(a)(1) and (2). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Sec. 310(b), including the optional provision permitted by the second sentence of TIA Sec. 310(b)(9). SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Sec. 311(a) and (b), excluding any creditor relationship arising as provided in TIA Sec. 311(b). A Trustee who has resigned or been removed shall be subject to TIA Sec. 311(a) to the extent indicated. ARTICLE EIGHT DISCHARGE OF INDENTURE SECTION 8.01. Termination of Company's Obligations. The Company may terminate all of its obligations under the Securities and this Indenture if all Securities previously authenticated and delivered (other than destroyed, lost or stolen Securities which have been replaced or paid) have been delivered to the Trustee for cancellation or if: (1) the Securities mature within six months or all of them are to be called for redemption within six months under arrangements satisfactory to the Trustee or giving the notice of redemption; and (2) the Company irrevocably deposits in trust with the Trustee money sufficient to pay principal of, premium, if any, and interest on the outstanding Securities to maturity or redemption, as the case may be. The Company may make the deposit only if Article Eleven permits it. Immediately after making the deposit, the Company shall give notice of such event and the proposed date of payment to each Securityholder. The Company's obligations in paragraph 12 of the Securities and in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 4.01, 7.07 and 7.08 and in Article Ten, however, shall survive until the Securities are no longer outstanding. Thereafter, the Company's obligations in such paragraph 12 and in Section 7.07 shall survive. After a deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Securities and this Indenture except for those surviving obligations specified above. SECTION 8.02. Application of Trust Money. The Trustee shall hold in trust money deposited with it pursuant to Section 8.01. It shall apply the deposited money through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. Money so held in trust is not subject to the subordination provisions of Article Eleven. SECTION 8.03. Repayment to Company. The Trustee and the Paying Agent shall promptly pay to the Company upon request any excess money or securities held by them at any time. The trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years. After payment to the Company, Securityholders entitled to the money must look to the Company for payment as general creditors unless applicable abandoned property law designates another person. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders. The Company with the consent of the Trustee may amend or supplement this Indenture or the Securities without notice to or consent of any Securityholders: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Sections 5.01 and 10.15; (3) to provide for uncertificated Securities in addition to certificated Securities; or (4) to make any change that does not materially and adversely affect the rights of any Securityholder. SECTION 9.02. With Consent of Holders. The Company, with the consent of the Trustee, may amend or supplement this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities. The Holders of a majority in principal amount of the outstanding Securities may waive compliance by the Company with any provision of this Indenture or the Securities without notice to any Securityholder. Without the consent of each Securityholder affected, however, an amendment, supplement or waiver, including a waiver pursuant to Section 6.04, may not: (1) reduce the amount of Securities whose Holders must consent to an amendment, supplement or waiver: (2) reduce the rate of or extend the time for payment of interest on any Security (3) reduce the principal of or extend the fixed maturity of any Security; (4) waive a default in the payment of the principal of, premium, if any, or interest on any Security; or (5) adversely affect the right to convert any Security into Common Shares. After an amendment under this Section becomes effective, the Company shall mail to the Holders a notice briefly describing the amendment. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed supplement, but it shall be sufficient if such consent approves the substance thereof. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to or supplement of this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to an amendment, supplement or waiver by a Holder of a Security is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. Any such Holder or subsequent Holder, however, may revoke the consent as to his Security or portion of a Security. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder unless it makes a change described in any of clauses (1) through (5) of Section 9.02. In that case the amendment, supplement or waiver shall bind each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security. SECTION 9.05. Notation on or Exchange of Securities. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. SECTION 9.06. Trustee to Sign Amendments, etc. The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article if the amendment, supplement or waiver does not adversely affect the rights of the Trustee. If it does, the Trustee may but need not sign it. The Company may not sign an amendment or supplement until the Board of Directors approves it. ARTICLE TEN CONVERSION SECTION 10.01. Conversion Privilege. A Holder of a Security may convert it into Common Shares at any time, subject to the prior redemption provisions of paragraph 5 of the Securities. The number of Common Shares issuable upon conversion of a Security is determined as follows: Divide the principal amount converted by the conversion price in effect on the conversion date and round the result to the nearest l/100th of a share. The initial conversion price is stated in paragraph 7 of the Securities. The conversion price is subject to adjustment. See Sections 10.06 through 10.12. A Holder may convert a portion of a Security if the portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of it. SECTION 10.02. Conversion Procedure. To convert a Security a Holder must satisfy the requirements in paragraph 7 of the Securities. The date on which the Holder satisfies all those requirements is the conversion date. As soon as practicable after the conversion date, the Company shall deliver to the Holder through the Conversion Agent a certificate for the number of Common Shares issuable upon the conversion and a check for any fractional share. The person in whose name the certificate is registered becomes a stockholder of record on the conversion date. No payment or adjustment will be made for accrued interest on a converted Security. If a Holder converts more than one Security at the same time, the number of full shares issuable upon the conversion shall be based on the total principal amount of the Securities converted. Upon surrender of a Security that is converted in part, the Trustee shall authenticate for the Holder a new Security equal in principal amount to the unconverted portion of the Security surrendered. If the last day on which a Security may be converted is a Legal Holiday in a place where a Conversion Agent is located, the Security may be surrendered to that Conversion Agent on the next succeeding day that is not a Legal Holiday. SECTION 10.03. Fractional Shares. The Company will not issue a fractional Common Share upon conversion of a Security. Instead, the Company will deliver its check for the current market value of a fractional share. The current market value of a fraction of a share is determined as follows: Multiply the current market price of a full share by the fraction and round the result to the nearest cent. The current market price of a Common Share for the purpose of Section 10.03 is the closing bid price as reported by the National Association of Securities Dealers Automated Quotation National Market System, or if the Common Shares are listed on an exchange, the last reported sale price on the principal exchange on which the Common Shares are listed, on the last trading day prior to the conversion date. In the absence of one or more such quotations, the Board of Directors shall determine the current market price on the basis of such quotation as it considers appropriate. SECTION 10.04. Taxes on Conversion. If a Holder of a Security converts it, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of Common Shares upon the conversion. The Holder, however, shall pay any such tax which is due because the shares are issued in a name other than his. SECTION 10.05. Company to Provide Stock. The Company shall reserve out of its authorized but unissued Common Shares or its Common Shares held in treasury enough Common Shares to permit the conversion of the Securities. All Common Shares which may be issued upon conversion of the Securities shall be validly issued, fully paid and nonassessable. In order that the Company may issue Common Shares upon conversion of the Securities, the Company will endeavor to comply with all applicable Federal and State securities laws and will endeavor to list such Shares on each national securities exchange on which the Common Shares are listed. SECTION 10.06. Adjustment for Change in Capital Stock. If the Company: (1) pays a dividend in Common Shares to holders of such Shares; (2) subdivides its outstanding Common Shares into a greater number of Shares; (3) combines its outstanding Common Shares into a smaller number of Shares; (4) makes a distribution on its Common Shares in shares of its capital stock other than Common Shares: or (5) issues by reclassification of its Common Shares any shares of its capital stock. then the conversion privilege and the conversion price in effect immediately prior to such action shall be adjusted so that the Holder of any Security thereafter converted may receive the number of shares of capital stock of the Company which such Holder would have owned immediately following such action if such Holder had converted the security immediately prior to such action. For a dividend or distribution, the adjustment shall become effective immediately after the record date for the dividend or distribution. For a subdivision, combination or reclassification, the adjustment shall become effective immediately after the effective date of the subdivision, combination or reclassification. If after an adjustment a Holder of a Security upon conversion of it may receive shares of two or more classes of capital stock of the Company, the Board of Directors shall determine the allocation of the adjusted conversion price between or among the classes of capital stock. After such allocation, the conversion prices of the classes of capital stock shall thereafter be subject to adjustment on terms comparable to those applicable to Common Shares in this Indenture. SECTION 10.07. Adjustment for Rights Issue. If the Company issues any rights or warrants to all holders of its Common Shares entitling them for a period expiring within 45 days after the record date mentioned below to purchase Common Shares (or securities convertible into Common Shares) at a price per share (or having a conversion price per share) less than the current market price per share on that record date, the conversion price shall. be adjusted in accordance with the formula: O + (N x P) ------ C' = C x M ------------ O + N where C' = the adjusted conversion price. C = the then current conversion price O = the number of Common Shares outstanding on the record date. N = the number of additional Common Shares offered. P = the offering or conversion price per share of the additional shares. M = the current market price per Common Share on the record date. See Section 10.10. The adjustment shall be made successively whenever any such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights or warrants. SECTION 10.08. Adjustment for Other Distributions. If the Company distributes to all holders of its Common Shares any assets or debt securities or any rights or warrants to purchase securities, the conversion price shall be adjusted in accordance with the formula: C' = C x (O x M) - F ---------- O x M where C' = the adjusted conversion price. C = the then current conversion price. O = the number of Common Shares outstanding on the record date mentioned below. M = the current market price per Common Share on the record date mentioned below. See Section 10.10. F = the fair market value on the record date of the assets, securities, rights or warrants distributed. The Board of Directors shall determine the fair market value. The adjustment shall be made successively whenever any such distribution is made, and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution. This Section does not apply to cash dividends or cash distributions paid out of Consolidated Net Income or retained earnings as shown on the books of the Company maintained for reporting in accordance with generally accepted accounting principles. Also, this Section does not apply to rights or warrants referred to in Section 10.07. SECTION 10.09. Voluntary Adjustment. The Company at any time may reduce the conversion price by any amount but in no event shall such conversion price be less than the par value of the Common Shares at the time such reduction is made. SECTION 10.10. Current Market Price. In Sections 10.07 and 10.08 the current market price per Common Share on any date is the average of the highest reported bid and the lowest reported asked prices at the close of business as reported by the National Association of Securities Dealers Automated Quotation National Market System, or if the Common Shares are listed on an exchange, the closing sale prices, on the principal exchange on which the Common Shares are listed, for 30 consecutive trading days commencing 45 trading days before the date in question. In the absence of one or more such quotations, the Board of Directors shall determine the current market price on the basis of such quotation as it considers appropriate. SECTION 10.11. When Adjustment May Be Deferred. No adjustment in the conversion price need be made unless the adjustment would require an increase or decrease of at least $.10 in the conversion price. Any adjustments which are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article shall be made to the nearest cent or to the nearest l/100th of a share, as the case may be. SECTION 10.12. When Adjustment Is Not Required. Unless this Article provides otherwise, no adjustment in the conversion price shall be made because the Company issues, in exchange for cash, property or services, Common Shares, or any securities convertible into or exchangeable for Common Shares, or securities carrying the right to purchase shares of Common Shares or such convertible or exchangeable securities. Furthermore, no adjustment in the conversion price need be made under this Article for (i) sale of Common Shares pursuant to a Company plan providing for reinvestment of dividends or interest or in the event the par value of the Common Shares is changed; or (ii) conversion of Class B Common Stock. SECTION 10.13. Notice of Adjustment. Whenever the conversion price is adjusted, the Company shall promptly mail to Securityholders a notice of the adjustment and file with the Trustee an Officers' Certificate briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence that the adjustment is correct. SECTION 10.14. Notice of Certain Transactions. If: (1) the Company takes any action which would require an adjustment in the conversion price: (2) the Company consolidates or merges with, or transfers all or substantially all of its assets to, another corporation, and stockholders of the Company must approve the transaction; or (3) there is a dissolution or liquidation of the Company, a Holder of a Security may want to convert it into Common Shares prior to the record date for or the effective date of the transaction so that he may receive the rights, warrants, securities or assets which a holder of Common Shares on that date may receive. Therefore, the Company shall mail to Securityholders and the Trustee a notice stating the proposed record or effective date, as the case may be. The Company shall mail the notice at least 10 days before such date. Failure to mail the notice or any defect in it shall not affect the validity of any transaction referred to in clause (1), (2) or (3) of this Section. SECTION 10.15. Consolidation, Merger or Sale of the Company. If the Company is a party to (x) a transaction described in Section 5.01 or (y) a merger which reclassifies or changes its outstanding Common Shares, the successor corporation (or corporation controlling the successor corporation or the Company, as the case may be) shall enter into a supplemental indenture. The supplemental indenture shall provide that the Holder of a Security may convert it into the kind and amount of securities or cash or other assets which he would have owned immediately after the consolidation, merger or transfer if he had converted the Security immediately before the effective date of such transaction. The supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Article. The successor corporation shall mail to each Securityholder a notice describing the supplemental indenture. If this Section applies, Sections 10.06, 10.07 and 10.08 shall not apply. SECTION 10.16. Company Determination Final. Any determination which the Board of Directors must make pursuant to Sections 10.03, 10.06, 10.08 or 10.10 is conclusive. SECTION 10.17. Trustee's Disclaimer. The Trustee has no duty to determine when an adjustment under this Article should be made, how it should be made or what it should be. The Trustee has no duty to determine whether any provisions of a supplemental indenture under Section 10.15 are correct. The Trustee makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities. The Trustee shall not be responsible for the Company's failure to comply with this Article. ARTICLE ELEVEN SUBORDINATION SECTION 11.01. Securities Subordinated to Senior Indebtedness. The Company agrees, and each holder of the Securities by his or her acceptance thereof likewise agrees, that the payment of the principal of, premium, if any, and interest on the Securities is subordinated, to the extent and in the manner provided in this Article, to the prior payment in full of all Senior Indebtedness. "Senior Indebtedness" means the principal of and interest on Indebtedness of the Company outstanding at any time created other than Indebtedness of the Company to a Subsidiary for money borrowed or advanced from any such Subsidiary and Indebtedness which by its terms is not superior in right of payment to the Securities and other than the Company's 7-1/4% Subordinated Debentures due December 15, 2006 issued pursuant to an Indenture dated as of December 15, 1986, between the Company and Continental Illinois National Bank and Trust Company of Chicago, as Trustee, to which debentures the Securities shall be superior in right of payment. "Indebtedness" means: (1) any debt of the Company (i) for borrowed money, capitalized lease obligations or purchase money obligation or (ii) evidenced by a note, debenture, letter of credit or similar instrument given in connection with the acquisition, other than in the ordinary course of business, of any property or assets; (2) any debt of others described in the preceding clause which the Company has guaranteed or for which it is otherwise liable; and (3) any amendment, renewal, extension or refunding of any such debt. This Article shall constitute a continuing offer to all persons who, in reliance upon such provisions, become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness, and such holders are made obligees hereunder and they and/or each of them may enforce such provisions. SECTION 11.02. Company Not to Make Payments with Respect to Securities in Certain Circumstances. (a) Upon the maturity of any Senior Indebtedness by lapse of time, acceleration or otherwise, all principal thereof, premium, if any, thereon, and interest thereon shall first be paid in full, or such payment duly provided for in cash or in a manner satisfactory to the holders of such Senior Indebtedness, before any payment is made on account of the principal of, premium, if any, or interest on the Securities or to acquire any of the Securities. (b) Upon the happening of any default in payment of the principal of, premium, if any, or interest on any Senior Indebtedness, then, unless and until such default shall have been cured or waived or shall have ceased to exist, no payment shall be made by the Company with respect to the principal of, premium, if any, or interest on the Securities nor shall any payment be made by the Company to acquire any of the Securities. Nothing in this Article, however, shall relieve the holders of such Senior Indebtedness or their representative from any notice requirements set forth in the instrument evidencing such Senior Indebtedness. (c) In the event that notwithstanding the provisions of this Section 11.02 the Company shall make any payment to the Trustee on account of the principal of or interest on the Securities, after the happening of a default in payment of the principal of or interest on Senior Indebtedness, then, unless and until such default shall have been cured or waived or shall have ceased to exist, such payment (subject to the provisions of Sections 11.06 and 11.07) shall be held by the Trustee, in trust for the benefit of, and shall be paid forthwith over and delivered to, the holders of Senior Indebtedness (pro rata as to each of such holders on the basis of the respective amounts of Senior Indebtedness held by them) or their representative or the trustee under the indenture or other agreement (if any) pursuant to which Senior Indebtedness may have been issued, as their respective interest may appear, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. The Company shall give prompt written notice to the Trustee of any default in the payment of principal of or interest on any Senior Indebtedness. SECTION 11.03. Securities Subordinated to Prior Payment of All Senior Indebtedness on Dissolution, Liquidation or Reorganization of the Company. Upon any distribution of assets of the Company in any dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or otherwise): (a) the holders of all Senior Indebtedness shall first be entitled to receive payment in full of the principal thereof, premium, if any, and interest due thereon before the Holders of the Securities are entitled to receive any payment on account of the principal of or interest on the Securities; (b) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee on behalf of the Holders of the Securities would be entitled except for the provisions of this Article Eleven, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other Indebtedness of the Company being subordinated to the payment of the Securities, shall be paid by the liquidating trustee or agent or other person making such payment or distribution directly to the holders of the Senior Indebtedness or their representative, or to the trustee under any indenture under which Senior Indebtedness may have been issued (pro rata as to each such holder, representative or trustee on the basis of the respective amounts of unpaid Senior Indebtedness held or represented by each), to the extent necessary to make payment in full of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Senior Indebtedness, except that Holders of the Securities would be entitled to receive securities that are subordinated to Senior Indebtedness to at least the same extent as the Securities; and (c) in the event that notwithstanding the foregoing provisions of this Section 11.03, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other Indebtedness of the Company being subordinated to the payment of the Securities, shall be received by the Trustee or the Holders of the Securities on account of principal of, premium, if any, or interest on the Securities before all Senior Indebtedness is paid in full, or effective provision made for its payment, such payment or distribution (subject to the provisions of Sections 11.06 and 11.07) shall be received and held in trust for and shall be paid over to the holders of the Senior Indebtedness remaining unpaid or unprovided for or their representative, or to the Trustee under any indenture under which such Senior Indebtedness may have been issued (pro rata as provided in subsection (b) above), for application to the payment of such Senior Indebtedness until all such Senior Indebtedness shall have been paid in full, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Senior Indebtedness, except that Holders of the Securities would be entitled to receive securities that are subordinated to Senior Indebtedness to at least the same extent as the Securities. The Company shall give prompt written notice to the Trustee of any dissolution, winding up, liquidation or reorganization of the Company. SECTION 11.04. Securityholders to be Subrogated to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness, the Holders of the Securities shall be subrogated equally and ratably to the rights of the holders of the Senior Indebtedness to receive payments or distributions of assets of the Company applicable to the Senior Indebtedness until all amounts owing on the Securities shall be paid in full, and for the purpose of such subrogation no payments or distributions to the holders of the Senior Indebtedness by or on behalf of the Company or by or on behalf of the Holders of the Securities by virtue of this Article which otherwise would have been made to the Holders of the Securities shall, as between the Company, its creditors other than holders of the Senior Indebtedness and the holder of the Securities, be deemed to be payment by the Company to or on account of the Senior Indebtedness, it being understood that the provisions of this Article Eleven are intended solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of the Senior Indebtedness, on the other hand. SECTION 11.05. Obligation of the Company Unconditional. Nothing contained in this Article Eleven or elsewhere in this Indenture or in any Security is intended to or shall impair, as between the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of, premium, if any, and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Securities and creditors of the Company other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article Eleven of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any distribution of assets of the Company referred to in this Article Eleven, the Trustee, subject to the provisions of Section 7.01 and 7.02, and the Holders of the Securities shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending, or a certificate of the liquidating trustee or agent or other person making any distribution to the Trustee or the Holders of the Securities, for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Eleven. Nothing contained in this Article Eleven or elsewhere in this Indenture or in any Security is intended to or shall affect the obligation of the Company to make, or prevent the Company from making, at any time except during the pendency of any dissolution, winding up, liquidation or reorganization proceeding, and except during the continuance of any default specified in Section ll.02 (not cured or waived), payments at any time of the principal of or interest on the Securities. SECTION 11.06. Knowledge of Trustee. Notwithstanding any provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment of moneys to or by the Trustee, or the taking of any other action by the Trustee, until two business days after the Trustee shall have received written notice thereof from the Company, any Securityholder, any Paying or Conversion Agent or the holder or representative of any class of Senior Indebtedness. SECTION 11.07. Application by Trustee of Monies Deposited With It. If prior to the date on which by the terms of this Indenture any monies deposited with the Trustee or any Paying Agent may become payable for any purpose (including, without limitation, the payment of either the principal of, premium, if any, or the interest on any Security) the Trustee shall not have received with respect to such monies the notice provided for in Section 11.06, then the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary which may be received by it on or after such date. This section shall be construed solely for the benefit of the Trustee and Paying Agent and shall not otherwise affect the rights of holders of such Indebtedness. SECTION 11.08. Subordination Rights Not Impaired by Acts or Omissions of Company or Holders of Senior Indebtedness. No right of any present or future holders of any Senior Indebtedness to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms of this Indenture, regardless of any knowledge thereof which any such holder may have or be otherwise charged with. SECTION 11.09. Securityholders Authorize Trustee to Effectuate Subordination of Securities. Each Holder of the Securities by his or her acceptance thereof authorizes and expressly directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article Eleven and appoints the Trustee his attorney-in-fact for such purpose, including, in the event of any dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or otherwise) tending towards liquidation of the business and assets of the Company, the immediate filing of a claim for the unpaid balance of its or his or her Securities in the form required in said proceedings and cause said claim to be approved. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of Senior Indebtedness are hereby authorized to have the right to file and are hereby authorized to file an appropriate claim for and on behalf of the Holders of said Securities. SECTION 11.10. Right of Trustee to Hold Senior Indebtedness. The Trustee shall be entitled to all of the rights set forth in this Article Eleven in respect of any Senior Indebtedness at any time held by it to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall be construed to deprive the Trustee of any of its rights as such holder. SECTION 11.11. Article Eleven Not to Prevent Events of Default. The failure to make a payment on account of principal or interest by reason of any provision in this Article Eleven shall not be construed as preventing the occurrence of an Event of Default under Section 6.01. ARTICLE TWELVE MISCELLANEOUS SECTION 12.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 12.02. Notices. Any notice or communication shall be sufficiently given if in writing and delivered in person or mailed by first-class mail addressed as follows: if to the Company: Richardson Electronics, Ltd. 40W267 Keslinger Road LaFox, Illinois 60147 Attention: Chairman of the Board if to the Trustee: American National Bank and Trust Company of Chicago 33 North LaSalle Street Chicago, Illinois 60690 Attention: Division 501 with a copy to Neal, Gerber & Eisenberg Two North LaSalle Street, Suite 200 Chicago, Illinois 60602 Attention: Joel M. Hurwitz The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to such Securityholder at the address which appears on the registration books of the Registrar and shall be sufficiently given to such Securityholder if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Securityholders it shall mail a copy of such notice to the Trustee and each Agent at the same time. All other notices or communication shall be in writing. SECTION 12.03. Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA Sec. 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Sec. 312(c). SECTION 12.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. In rendering such opinion, Counsel may rely upon certificates of appropriate officers of the Company. SECTION 12.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement: as to whether cr not, in the opinion of such person, such condition or covenant has been complied with. SECTION 12.06. When Treasury Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. SECTION 12.07. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by, or at a meeting of, Securityholders. The Registrar, Paying Agent or Conversion Agent may make reasonable rules for its functions. SECTION 12.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the city in which the Trustee administers its corporate trust business. If a payment date is a Legal Holiday at a place of payment, payment may be made at the place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. SECTION 12.09. Governing Law. The laws of the State of Illinois, without regards to the principles of conflicts of law, shall govern this Indenture and the Securities. SECTION 12.10. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.11. No Recourse Against Others. Liabilities of directors, officers, employees and stockholders, as such, of the Company is waived and released as provided in paragraph 16 of the Securities. SECTION 12.12. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 12.13. Duplicate Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SIGNATURES RICHARDSON ELECTRONICS, LTD. /s/ Edward J. Richardson By: _____________________________ Title: Chairman Attest: /s/ William G. Seils, Secretary _____________________________ (Corporate Seal) AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, As Trustee /s/ Elizabeth Nelson By: ______________________________ Title: Assistant Vice President Attest: ___________________________ (Corporate Seal) $ (FACE OF SECURITY) RICHARDSON ELECTRONICS, LTD. 8-1/4% CONVERTIBLE SENIOR SUBORDINATED DEBENTURE DUE June 15, 2006 Promises to pay to CUSIP 763165AB3 or registered assigns the principal sum of Dollars on June 15, 2006. The provisions on the back of this INTEREST certificate are incorporated as if set Payment Dates: June 15 and forth on the face of the certificate December 15 Record Dates: June 1 and December 1 DATED: Authenticated to be one of the (Seal) Debentures described in the Indenture referred to herein. AMERICAN NATIONAL BANK AND TRUST RICHARDSON ELECTRONICS, LTD. COMPANY OF CHICAGO as Trustee By: ____________________________________ By: _____________________________ Authorized Officer By: _____________________________ (REVERSE OF SECURITY) RICHARDSON ELECTRONICS, LTD. 8-1/4% CONVERTIBLE SENIOR SUBORDINATED DEBENTURE DUE JUNE 15, 2006 1. Interest. Richardson Electronics, Ltd., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Debenture at the rate per annum shown above. The Company will pay interest semiannually on June 15 and December 15 of each year, beginning June 15, 1997. Interest on the Debentures will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date on which these Debentures are first issued in exchange for the Company's 7-1/4% Convertible Subordinated Debentures due December 15, 2006 pursuant to the Exchange Offer set forth in the Company's Offering Circular dated December 18, 1996. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company will pay interest on the Debentures (except defaulted interest) to the persons who are registered holders of Debentures at the close of business on the June 1 or December 1 preceding the interest payment date. Holders must surrender Debentures to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company may, however, pay principal and interest by its check payable in such money. It may mail an interest check to a holder's registered address. 3. Paying Agent, Registrar and Conversion Agent. Initially, American National Bank and Trust Company of Chicago (the "Trustee") will act as Paying Agent, Registrar and Conversion Agent. The Company may change any Paying Agent, Registrar, Conversion Agent or co-Registrar without notice. The Company or any of its Subsidiaries may act as Paying Agent, Registrar, Conversion Agent or co-Registrar. 4. Indenture. The Company issued the Debentures under an Indenture dated as of December 16, 1996 (the "Indenture") between the Company and the Trustee. The terms of the Debentures include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sec. 77aaa-77bbbb) as in effect on the date of the Indenture. The Debentures are subject to all such terms, and Debentureholders are referred to the Indenture and the Act for a statement of them. The Debentures are general unsecured obligations of the Company limited to the aggregate principal amount of $70,825,000. The Indenture does not limit other debt, secured or unsecured. 5. Optional Redemption. The Company may optionally redeem the Debentures at any time. Upon an optional redemption, the Company may redeem the Debentures as a whole, or from time to time in part, on not less than 30 nor more than 60 days' mailed notice at 100 percent of the principal amount, plus accrued interest to the redemption date. 6. Selection and Notice of Redemption. Selection of Debentures for any redemption will be made by the Trustee on either a pro rata basis or by lot. Debentures in denominations larger than $1,000 may be redeemed in part. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of Debentures to be redeemed at his registered address. On and after the redemption date, interest ceases to accrue on Debentures or portions thereof called for redemption. 7. Conversion. The holder of any Debenture has the right, exercisable at any time up to and including June 15, 2006, except in the case of Debentures called for redemption, to convert such Debenture at the principal amount thereof (or any portion thereof that is an integral multiple of $1,000) into Common Stock of the Company at the conversion price of $18.00 per share, subject to adjustment as described below. In the case of Debentures called for redemption, conversion rights will expire at the close of business on the redemption date. Notice of an optional redemption must be mailed not less than 30 and not more than 60 days prior to the redemption date. No payment or adjustment for interest accrued on the Debentures is to be made on conversion. No fractional shares will be issued upon conversion and, if the conversion results in a fractional interest, an amount will be paid in cash equal to the value of such fractional interest based on the market price of the Company's Common Stock on the last trading date prior to the date of conversion. The conversion price is subject to adjustment upon the occurrence of certain events, including (i) the payment of a dividend in Common Stock to holders of Common Stock or a dividend to holders of the Company's Common Stock payable in shares of the Company's capital stock other than Common Stock; (ii) the subdivision, combination or certain reclassifications of outstanding Common Stock; (iii) issuance to all holders of Common Stock of the Company of rights or warrants entitling them for a period of not more than 45 days to purchase Common Stock (or securities convertible into Common Stock) at a price per share (or having a conversion price per share) less than the then current per share market price for such Common Stock; (iv) the distribution to holders of Common Stock of evidences of indebtedness or assets (excluding cash dividends) or rights or warrants (other than those referred to above); and (v) certain mergers, consolidations or sales of assets. No adjustment of the conversion price will be made until cumulative adjustments amount to at least $.10. No adjustment of the conversion price will be made for cash distributions or cash dividends paid out of Consolidated Net Income (as defined in the Indenture) or retained earnings. To convert a Debenture a holder must (1) complete and sign the conversion notice on the back of the Debenture, (2) surrender the Debenture to a Conversion Agent, (3) furnish appropriate endorsements or transfer documents if required by the Registrar or Conversion Agent and (4) pay any transfer or similar tax if required. A holder may convert a portion of a Debenture if the portion is $1,000 or an integral multiple of $1,000. 8. Subordination. The indebtedness evidenced by the Debentures is subordinate to the prior payment when due of the principal of, premium if any, and interest on all Senior Indebtedness. Upon maturity of any Senior Indebtedness, payment in full must be made on such Senior Indebtedness before any payment is made on or in respect of the Debentures. During the continuance of any default in payment of principal of, premium, if any, or interest on Senior Indebtedness, no payment may be made by the Company on or in respect of the Debentures. Upon any distribution of assets of the Company in any dissolution, winding-up, liquidation or reorganization of the Company, payment of the principal of and interest on the Debentures will be subordinated, to the extent and in the manner set forth in the Indenture, to the prior payment in full of all Senior Indebtedness. Such subordination will not prevent the occurrence of any event of default (as defined). "Senior Indebtedness" means the principal or and interest on Indebtedness of the Company outstanding at any time created, other than Indebtedness of the Company to a Subsidiary for money borrowed or advanced from any such Subsidiary and Indebtedness which by its terms is not superior in right of payment to the Debentures and other than the Company's 7-1/4% Subordinated Debentures due December 15, 2006 issued pursuant to an Indenture dated as of December 15, 1986 between the Company and the Continental Illinois National Bank and Trust Company of Chicago, as Trustee, to which debentures the Debentures shall be superior in right of payment. "Indebtedness" means (1) any debt of the Company (i) for borrowed money, capitalized lease obligations or purchase money obligations or (ii) evidenced by a note, debenture or similar instrument given in connection with the acquisition, other than in the ordinary course of business, of any property or assets; (2) any debt of others described in the preceding clause which the Company has guaranteed or for which it is otherwise liable; and (3) any amendment, renewal, extension or refunding or any such debt. 9. Denominations, Transfer, Exchange. The Debentures are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. A holder may transfer or exchange Debentures in accordance with the Indenture. The Registrar may require a holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not transfer or exchange any Debenture or portion of a Debenture selected for redemption, or transfer or exchange any Debentures for a period of 15 days before a selection of Debentures to be redeemed. 10. Persons Deemed Owners. The registered holder of a Debenture may be treated as the owner of it for all purposes. 11. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent will pay the money back to the Company at its request. After that, holders entitled to the money must look to the Company for payment as general creditors unless an "abandoned property" law designates another person. 12. Amendment, Supplement, Waiver. Subject to certain exceptions, the Indenture or the Debentures may be amended or supplemented with the consent of the holders of at least a majority in principal amount of the outstanding Debentures, and any past default or compliance with any provision may be waived with the consent of the holders of a majority in principal amount of the outstanding Debentures. Without the consent of any Debentureholder, the Company may amend or supplement the Indenture or the Debentures to cure any ambiguity, omission, defect or inconsistency or to provide for uncertificated Debentures in addition to certificated Debentures or to make any change that does not materially adversely affect the rights of any Debentureholder. 13. Successor Corporation. When a successor corporation assumes all the obligations of its predecessor under the Debentures and the Indenture and immediately thereafter no default exists, the predecessor corporation will be released from those obligations. 15. Defaults and Remedies. An Event of Default is: (i) failure of the Company to pay interest for 30 days or principal or any sinking fund installment when due (whether or not prohibited by the subordination provisions); (ii) failure to perform any other covenant for 30 days after notice; (iii) acceleration of the maturity of any Indebtedness of the Company or any Subsidiary in any one case or in the aggregate in excess of $5,000,000, if such acceleration is not rescinded, annulled or otherwise cured within 30 days after notice to the Company; and (iv) certain events of bankruptcy, insolvency or reorganization of the Company or any Subsidiary. The Indenture provides that the Trustee will, within 90 days after the occurrence of a default, give the Debentureholders notice of all uncured defaults known to it (the term "default" to include the events specified above, without grace or notice), provided that, except in the case of default in the payment of principal of or interest on any of the Debentures, or any sinking fund payment, the Trustee shall be protected in withholding such notice if it in good faith determines that the withholding of such notice is in the interest of the Debentureholders. In case an Event of Default occurs and is continuing, the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding, by notice in writing to the Company (and to the Trustee if given by the Debentureholders), may declare the principal of and all accrued interest on all the Debentures to be due and payable immediately. Such declaration may be rescinded by holders of a majority in principal amount of the Debentures if all existing Events of Default have been cured or waived (except nonpayment of principal or interest that has become due solely because of the acceleration) and if the rescission would not conflict with any judgment or decree. Defaults (except, unless theretofore cured, a default in payment of principal of or interest on the Debentures or a default with respect to a provision which cannot be modified under the terms of the Indenture without the consent of each Debentureholder affected) may be waived by the holders of a majority in principal amount of the outstanding Debentures upon the conditions provided in the Indenture. The Indenture requires the Company to file periodic reports with the Trustee as to the absence of defaults. 15. Trustee Dealings with Company. American National Bank and Trust Company of Chicago, the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its affiliates, and may otherwise deal with the Company or its affiliates, as if it were not Trustee. 16. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Debentures or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Debentureholder by accepting a Debenture waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Debentures. 17. Authentication. This Debenture shall not be valid until the Trustee signs the certificate of authentication on the other side of this Debenture. 18. Abbreviations. Customary abbreviations may be used in the name of a Debentureholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entities), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gifts to Minors Act). The Company will furnish to any Debentureholder upon written request and without charge a copy of the Indenture. Requests may be made to: Investor Relations Department, Richardson Electronics, Ltd., 40W267 Keslinger Road, LaFox, Illinois 60147. EX-5 6 Item 9 (c)(2) EXCHANGE AGENT AGREEMENT Between RICHARDSON ELECTRONICS, LTD. and AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Exchange Agent Dated as of December 16, 1996 Richardson Electronics, Ltd. $70,825,000 81/4% Convertible Senior Subordinated Debentures due June 15, 2006 EXCHANGE AGENT AGREEMENT THIS EXCHANGE AGENT AGREEMENT (this "Agreement") dated as of December 16, 1996 made and entered into by and between AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Exchange Agent (the "Agent"), a national banking association, and RICHARDSON ELECTRONICS, LTD. (the "Company"), a Delaware corporation; WITNESSETH RECITALS WHEREAS, pursuant to an Offering Circular and Consent Solicitation (the "Offering Circular") the Company is offering to exchange $1,000 principal amount of its 8-1/4% Convertible Senior Subordinated Debentures due June 15, 2006 (the "New Debentures") for each $1,000 of its 7-1/4% Subordinated Convertible Debentures due December 15, 2006 (the "Old Debentures") and also soliciting consents ("Consents") from holders of the Old Debentures (the "Debentureholders") representing at least a majority in aggregate principal amount of the outstanding Old Debentures (the "Requisite Consents") to certain amendments to the indenture under which the Old Debentures were issued (the "Old Indenture") (collectively, the offer to exchange and solicitation of Consents are referred to herein as the "Exchange Offer"); and WHEREAS, in connection with the Exchange Offer, Debentureholders will be delivering their Old Debentures to the Agent and requesting delivery of New Debentures and Consents to the proposed amendments, and WHEREAS, the Company has delivered or will deliver to the Agent (i) a copy of the Consent and Letter of Transmittal (the "Letter of Transmittal") to be sent to the Debentureholders, in the form attached hereto as Exhibit A, (ii) copies of all other documents or materials to be forwarded to the Debentureholders; and (iii) a list showing the names and addresses of all Debentureholders as of the close of business on December 17, 1996, and the number of Old Debentures held by each Debentureholder as of the close of business on such date (the "List"), and WHEREAS, the New Debentures will be issued under an Indenture dated as of December 16, 1996 (the "New Indenture") between the Company and American National Bank and Trust Company of Chicago, as trustee (the "Trustee"); and WHEREAS, the Indenture will be signed by the Trustee and the Company on or about December 17, 1996 (the "Closing Date"); and WHEREAS, this Agreement will confirm the appointment of American National Bank and Trust Company of Chicago as exchange agent, and, in that capacity, authorization to act as agent for the Debentureholders for the purpose of receiving from the Company the New Debentures to be issued in exchange for the Old Debentures and transmitting same to the Debentureholders upon satisfaction of conditions set forth herein. NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS, UNDERTAKINGS AND PROMISES HEREINAFTER SET FORTH AND FOR OTHER GOOD AND VALUABLE CONSIDERATION AND THE ACCEPTANCE OF THE SUM OF TEN DOLLARS ($10.00) DULY PAID BY EACH OF THE PARTIES TO THE OTHER UPON THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE RECEIPT AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED AND CONFESSED, THE PARTIES HERETO AGREE AS FOLLOWS: 1. Duties of Agent. The Agent will examine Letters of Transmittal, Debentures and other documents delivered or mailed to the agent by or for the Debentureholders, in order to ascertain, to the extent reasonably determined by the Agent, whether: a) the Letters of Transmittal appear to be duly executed and properly completed in accordance with the instructions set forth therein; b) the Old Debentures appear to be properly surrendered and, if appropriate, endorsed for transfer; c) the other documents, if any, used in the exchange appear to be duly executed and properly completed and in the proper form; and d) the Old Debentures are free of restrictions on transfer or stop orders except as set forth on the List. In the event the Agent ascertains that any Letter of Transmittal or other document has been improperly completed or executed, that any of the Old Debentures are not in proper form or some other irregularity exists, the Agent shall attempt to resolve promptly the irregularity and may use its best efforts to contact the appropriate Debentureholder by whatever means of communication it deems most expedient in order to correct the irregularity and, upon consultation with the Company, shall endeavor to take such other reasonable action as may be necessary to cause such irregularity to be corrected; and the determination of any questions referred to the Company or its counsel by the Agent as to the validity, form and eligibility, as well as the proper completion or execution of the Letters of Transmittal and other documents, shall be final and binding and the Agent may rely thereon as provided in Section 8 hereof. Any costs of contacting Debentureholders for the purpose of correcting irregularities shall be charged to the Company. 2. Exchange of Debentures. As soon as practicable after the Expiration Date and notification from the Company of the satisfaction or waiver of the conditions to the Exchange Offer as set forth in the Offering Circular and the principal amounts of Old Debentures it is accepting for exchange and after surrender to the Agent of all Old Debentures registered to a particular Debentureholder and the return of a properly completed Letter of Transmittal relating thereto, the Agent shall cause to be issued and distributed to the Debentureholder in whose name such certificates were registered New Debentures in the same principal amount as the Old Debentures registered in the name of such Debentureholder; provided, however, that if fewer than all of the Old Debentures properly tendered for exchange are accepted by the Company, properly tendered Old Debentures will be accepted and New Debentures will be issued on a pro rata basis. Any Old Debentures not accepted for exchange will be returned to the Debentureholder. If any New Debentures are to be issued in a name other than that in which the Old Debentures surrendered in exchange therefor is registered, it shall be a condition of the issuance thereof that the Old Debenture so surrendered shall be properly endorsed and otherwise in proper form for transfer and that the person requesting such exchange shall pay to the Agent any transfer or other taxes required, or shall establish to the Agent's satisfaction that such tax has been paid or is not payable. New Debentures and returned Old Debentures to be delivered by mail shall be forwarded by first class mail under the Agent's blanket surety bond, which the Company understand protects the Company and the Agent from loss or liability arising by virtue of the non-receipt or non-delivery of such New Debentures. It is understood that the face value of New Debentures in any one shipment sent by first class mail under this procedure will not be in excess of $500,000. In the event the face value shall exceed $500,000 the New Debentures shall be mailed by registered mail and shall be insured separately for the replacement value of its contents at the time of mailing. 3. Lost, Stolen or Destroyed Debentures. In the event that any Debentureholder claims that any Debenture registered in their name is lost, stolen or destroyed, the Agent shall mail to such Debentureholder an affidavit of loss and an indemnity bond. The Agent shall make the distribution of New Debentures only upon receipt of a properly completed affidavit of loss and an indemnity bond. 4. Reports. The Agent shall furnish, until otherwise notified, weekly reports to the Company showing the number of Old Debentures surrendered for exchange, the number of New Debentures issued in exchange therefor and the Consents received. 5. Copies of Documents. The Agent shall take such action at the Company's expense as may from time to time be reasonably requested by the Company to furnish copies of the Letters of Transmittal to persons designated by the Company. 6. Maintenance of Records. The Agent will keep and maintain complete and accurate records showing all Old Debentures exchanged by the Agent. The Agent is authorized to cooperate with and furnish information to any organization or its legal representatives designated from time to time by the Company in any manner reasonably requested by any of them in connection with the Exchange Offer. Letters of Transmittal and telegrams, telexes, facsimile transmissions and other materials submitted to the Agent shall be preserved by the Agent until delivered to or otherwise disposed of in accordance with the Company's instructions at or prior to the termination hereof. 7. Delivery of Surrendered Debentures. All Old Debentures surrendered to the Agent shall be retained by the Agent, and following the exchange of such Old Debentures, shall be forwarded to the Company or elsewhere as directed by the Company. Consents shall be forwarded to the Company or elsewhere as directed by the Company. 8. The Exchange Agent's Duties and Obligations. The Agent, in its capacity as Exchange Agent under this Agreement: a) will have no duties or obligations other than those specifically set forth herein, or as may subsequently be agreed to in writing by the Agent and the Company; b) will be regarded as making no representations or warranties and having no responsibilities regarding the validity, sufficiency, value or genuineness of any Old Debentures surrendered to the Agent or the New Debentures delivered by the Agent; will not be required or requested to make any representations as to the validity, value or genuineness of such Debentures; and will not be responsible in any manner whatsoever for the correctness of the statements made herein or in the Indenture or in any document furnished to the Agent by the Company; c) will not be obligated to institute or defend any action, suit or legal proceeding in connection with the Exchange Offer or the Agent's duties hereunder, or take any other action which might, in the Agent's judgment involve, or result in, expense or liability to the Agent, unless the Company shall first furnish the Agent an indemnity satisfactory to the Agent; d) may rely on, and shall be protected in acting upon, any certificate, instrument, opinion, representation, notice, letter, telegram or other document delivered to the Agent and believed by the Agent to be genuine and to have been signed by the proper party or parties; e) may rely on, and shall be protected in acting upon, written or oral instructions given by any officer of, or any party authorized by the Company with respect to any matter relating to the Agent's actions under this Agreement; f) may consult with counsel satisfactory to the Agent (including counsel for the Company or the Agent) and the advice or opinion of such counsel shall be full and complete authorization and, protection in respect of any action taken, suffered or omitted by the Agent hereunder in good faith and in accordance with such advice or opinion of such counsel; and g) may retain an agent or agents of the Agent's choice to assist the Agent in performing its duties and obligations hereunder. 9. Termination of Exchange Agent's Duties and Obligations. This Agreement shall terminate when all New Debentures have been issued and delivered. The Agent will make any final exchanges of Debentures within a reasonable time following the expiration of the Exchange Offer on January 31, 1996. 10. Indemnification of Exchange Agent. The Company hereby covenants and agrees to reimburse, indemnify and hold the Agent harmless from and against any and all claims, actions, judgments, damages, losses, liabilities, costs, transfer or other taxes, and expenses (including without limitation reasonable attorney's fees and expenses) which, without gross negligence or willful misconduct by the Agent, may be paid, incurred or suffered by the Agent, or to which the Agent may become subject, arising out of or incident to this Agreement or the administration of its duties hereunder, or arising out of or incident to its compliance with the instructions set forth herein or with any instructions delivered to the Agent pursuant hereto, or as a result of defending itself against any claim or liability resulting from its actions as Agent, including any claim against the Agent by any Debentureholder, which covenant agreement shall survive the termination hereof. The Agent hereby represents that it will notify the Company by telephone, confirmed in writing, of any receipt by the Agent of a written assertion of a claim against the Agent, or any action commenced against the Agent, within ten (10) business days after its receipt of written notice of such assertion or its having been served with the summons or other first legal process giving information as to the nature and basis of any such action. However, the Agent's failure to so notify the Company shall not operate in any manner whatsoever to relieve the Company from any liability it may have on account of this Section 10 if no prejudice occurs. At its election, the Company will assume the conduct of the Agent's defense in any such action or claim at its sole cost and expense. In the event that the Company elects to assume the defense of any such action or claim and confirms to the Agent in writing that the indemnity provided for in this Section 10 applies to such action or claim, the Company shall not be liable for the fees and expenses of any counsel thereafter retained by the Agent; the foregoing notwithstanding, if the Escrow Agent shall reasonably believe that separate counsel is necessary to protect its, interests, it shall be entitled to retain its own counsel and the reasonable fees and expenses of such counsel shall be payable by the Company. 11. Modification. Except as otherwise provided in Section 14 hereof, (i) the instructions contained herein may be modified or supplemented only by an authorized representative of Company and (ii) any inconsistency between this Agreement and the Indenture shall be resolved in favor of the Indenture. 12. Fees and Expenses. The Agent shall be entitled to receive the fees and expenses set forth in the letter from the Agent dated December 10, 1996 and accepted and agreed to by the Company. 13. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given when placed in the hands of a carrier for delivery, charges pre-paid: (a) If to the Company, to: Richardson Electronics, Ltd. 40W267 Keslinger Road LaFox, Illinois 60147 Attention: William G. Seils Telephone: (630) 208-2200 (630) 208-2950 (b) If to the Agent, to: American National Bank and Trust Company of Chicago 33 North LaSalle Street Chicago, Illinois 60690 Attn: Corporate Trust Division Telephone: (312) 661-6055 Fax: (312) 661-6491 or to such other address or addresses as the Company or the Agent may communicate in writing to each of the other parties. 14. Entire Agreement. This Agreement, the Indenture and the other documents referred to herein contain all terms and conditions agreed upon by the parties hereto, and no other agreements, oral or otherwise, regarding the subject matter hereof shall be deemed to exist or bind the parties hereto unless in writing and executed by the Agent and the Company. 15. Benefit of the Agreement and Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the parties hereto and any successors and assigns. The Company hereby acknowledges to any such successor and assign of the Agent that the Company shall perform as to such successor and assign all duties and obligations under this Agreement just as if such successor or assign of the Agent had been originally named as a party hereto and such successor and assign shall be a third party beneficiary of this Agreement. The Company can assign and transfer its rights under this Agreement with the consent of the Agent, and such consent shall not be unreasonably withheld by the Agent. 16. Governing Law and Severability. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois. The invalidity or unenforceability of any provision of this Agreement shall not affect or impair the validity, operation or enforceability of any other provision of this Agreement. 17 Resolution of Inconsistent Provisions. In the event any of the provisions of this Agreement and the Indenture are inconsistent in any respect and cannot be reconciled, the provisions of the Indenture shall control over the provisions of this Agreement. 18. Execution and Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. 19. Headings. Section headings used in this Agreement are for convenience of reference only and are not intended to be a part of the provisions of this Agreement nor to control or affect the meanings, construction or effect of the same. 20. Definition of Terms. For all purposes of this Agreement, except as otherwise herein expressly provided or unless the context otherwise requires, the terms and expressions used in this Agreement shall have the same meaning as the corresponding terms and expressions used in the Indenture and in the Offering Circular. 21. Attachment; Compliance with Legal Orders. In the event that any information or securities held hereunder shall be attached, garnished, or levied upon by any court order, or the delivery thereof shall be stayed or enjoined by an order of a court, or any order, judgment or decree shall be made or entered by any court order affecting the property deposited under this Agreement, or any part thereof, the Exchange Agent is hereby expressly authorized, in its sole direction, to obey and comply with all writs, orders or decrees so entered or issued, which it is advised by legal counsel of its own choosing is binding upon it, whether with or without jurisdiction, and in the event that the Exchange Agent obeys or complies with any such writ, order or decree it shall not be liable to the Company or to any other person, firm or corporation, by reason of such compliance notwithstanding such writ, order or decree be subsequently reversed, modified, annulled, set aside or vacated. 22. Conflicting Demands. In the event that conflicting demands are made upon the Exchange Agent for any situation not addressed in this Agreement, the Exchange Agent may withhold performance of the terms of this Agreement until such time as said conflicting demands shall have been withdrawn or the rights of the respective parties shall have been settled by court adjudication, arbitration, joint order or otherwise. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Exchange Agent By: /s/ Elizabeth Nelson Its: Assistant Vice President RICHARDSON ELECTRONICS, LTD. By: /s/ Edward J. Richardson Its: Chairman EX-6 7 Item 9 (c)(3) December 3, 1996 Richardson Electronics, Ltd. 40W267 Keslinger Road LaFox, Illinois 60147 Attention: Mr. Edward J. Richardson Chief Executive Officer Dear Mr. Richardson: This letter (this "Agreement") will confirm the agreement between Richardson Electronics, Ltd. (the "Company") and Forum Capital Markets L.P. ("Forum"), pursuant to which the Company has agreed to retain Forum to render financial advisory and other investment banking services to the Company in connection with an Exchange Offer (as defined below) involving the Company's existing 7 1/4% Convertible Subordinated Debentures due December 15, 2006 (the "Existing Securities"), in each case on the terms and subject to the conditions set forth herein. 1. Engagement. The Company hereby agrees to retain Forum, and Forum agrees to act, as exclusive financial advisor to the Company in connection with the Exchange Offer, all on the terms and conditions set forth herein. The services to be performed by Forum with respect to the Exchange Offer will include (1) performing financial analyses, (2) advising the Company with respect to the terms of the new debt and the new capital structure of the Company and (3) assisting the Company in the preparation of the Exchange Offer Documents (as defined below). It is anticipated that the Exchange Offer will be structured to qualify for exemption from registration under the Securities Act of 1933, as amended, pursuant to Section 3(a)(9) thereof, and Forum will not be required to take any action which could jeopardize the availability of such exemption. Forum will not take any action other than those described in clauses (1), (2) or (3) above without the prior written consent of the Company. 2. Certain Definitions. For purposes of this Agreement: (i) The term "Exchange Offer" means each offer (including any amendment thereto or modification thereof) by the Company or any subsidiary or affiliate of the Company (a "Related Entity") to holders of the Existing Securities (collectively, the "Holders") to purchase or acquire in one or more transactions (whether by tender offer, exchange offer, open market purchase, private purchase or otherwise) Existing Securities and/or any solicitation (including any amendment to or modification of any solicitation) by the Company or any Related Entity with respect to any Existing Securities, including each offer or solicitation involving the issuance of new securities and/or the complete or partial restructuring of the Company's capitalization and/or the payment of other consideration (including cash) to Holders. (ii) The term "Exchange Offer Documents" means each offering circular, consent solicitation document and, if any, each registration statement filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, as the case may be, including, as applicable, each related letter of transmittal, and each related letter to Holders pertaining to the Exchange Offer and each amendment or supplement to any of the foregoing. 3. Compensation. In full payment for services rendered and to be rendered hereunder by Forum, the Company agrees to pay Forum a cash fee of $200,000, payable upon the earlier of (a) the date of mailing of the Exchange Offer Documents or (b) March 1, 1997. 4. Expenses. In addition to any fees that may be payable to Forum hereunder, the Company hereby agrees to pay, to or on behalf of Forum, promptly upon request from time to time, reasonable travel and other out-of-pocket expenses incurred by Forum, including, without limitation, the reasonable fees and expenses of Forum's counsel; provided, however, that reimbursement for expenses shall not exceed $35,000 unless expenses in excess of such amount are approved by the Company. 5. Information. The Company shall furnish, or cause to be furnished, to Forum all information requested by Forum for the purpose of rendering services hereunder, including the Exchange Offer Documents (collectively the "Information"). The Company recognizes and confirms that Forum: (a) will use and rely on the Information and on information available from generally recognized public sources in performing the services contemplated by this Agreement without having independently verified the same; (b) does not assume responsibility for the accuracy or completeness of the Information and such other information (except for that portion of the Information provided by Forum, which consists only of the pricing information with respect to the Existing Securities); and (c) will not make any appraisals in connection with any Exchange Offer (including, but not limited to, appraisals of the Company, any Related Entity or any securities or assets thereof). 6. Confidential Nature of Advice. All advice (written or oral) given by Forum to the Company or any Related Entity in connection with Forum's engagement hereunder is intended solely for the use and benefit of the Company (including its management, directors and counsel) and shall be treated as confidential. The Company agrees that no such opinion or advice shall be otherwise used or disclosed, in any manner or for any purpose, nor shall any public references to Forum be made by the Company (or such persons), without the prior consent of Forum. 7. Indemnification. (a) The Company will indemnify Forum for and hold Forum harmless, to the extent lawful, from any and all losses, claims, damages or liabilities, as incurred, (i) arising out of any untrue statement of a material fact in any offering material (including, without limitation, the Exchange Offer Documents) provided by the Company or any omission 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, or (ii) resulting from any breach of the terms of this Agreement by the Company, or (iii) to which Forum may otherwise become subject in connection with its rendering of services hereunder; provided, however, that such indemnity will not apply to losses, claims, damages or liabilities (x) arising out of gross negligence or willful misconduct of Forum, (y) arising out of the breach by Forum of its obligations hereunder or (z) which result from any compromise or settlement not approved by the Company in writing. The Company will promptly reimburse Forum for any and all reasonable legal or other expenses, as incurred, by Forum in connection with investigating, preparing for or defending any such claims or any actions related thereto. This indemnity will also extend on the same terms and conditions as set forth herein to the directors, officers, employees, agents, counsel and controlling persons of Forum (each such person, including Forum, an "Indemnified Person"). If any claim, action or proceeding is brought or asserted against an Indemnified Person in respect of which indemnity may be sought from the Company, such Indemnified Person will promptly notify the Company in writing of such claim, action or proceeding; provided, however, that the failure to notify the Company shall not relieve the Company from any liability or obligation that it may have under this Section 7 or otherwise to such Indemnified Person (except to the extent that such failure prejudices the Company's ability to defend such action, claim, complaint or proceeding). (b) In case any such investigation, litigation, proceeding or other action within the scope of this Section 7 shall be brought against any Indemnified Person, the Company shall be entitled to participate in such investigation, litigation, proceeding or other action and, after written notice from the Company to such Indemnified Person, to assume the defense of such investigation, litigation, proceeding or other action with counsel of its choice at the Company's expense; provided, however, that such counsel shall be reasonably satisfactory to such Indemnified Person. Notwithstanding the election of the Company to assume the defense of such investigation, litigation, proceeding or action, such Indemnified Person shall have the right to employ separate counsel and to participate in the defense of such investigation, litigation, proceeding or action, and the Company shall bear the fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the Company to represent such Indemnified Person would present such counsel with a conflict of interest; (ii) the defendants in, or targets of, any such investigation, litigation, proceeding or action include both an Indemnified Person and the Company, and such Indemnified Person shall have reasonably concluded that there may be legal defenses available to it which are different from or additional to those available to the Company; (iii) the Company shall not have employed counsel satisfactory to such Indemnified Person in the exercise of such Indemnified Person's reasonable judgment; or (iv) the Company shall have notified the Indemnified Person that it may employ separate counsel at the expense of the Company. In each such case the Company shall not have the right to direct the defense of such investigation, litigation, proceeding or action on behalf of such Indemnified Person. In addition, the Indemnified Person shall have the right to participate in any such investigation, litigation, proceeding or action, and to employ separate counsel in connection therewith, at any time at the Indemnified Person's own cost and expense. (c) In the event that the indemnity provided in this Section 7 is unavailable or insufficient to hold harmless any Indemnified Person, then the Company shall contribute to amounts paid or payable by such Indemnified Person in respect of such Indemnified Person's losses, claims, damages and liabilities as to which such indemnity is unavailable or insufficient (i) in such proportion as appropriately reflects the relative benefits received by the Company, on the one hand, and Forum, on the other hand, in connection with the matters as to which such losses, claims, damages or liabilities relate, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as appropriately reflects not only the relative benefits referred to in clause (i) above, but also the relative fault of the Company, on the one hand, and Forum, on the other hand, as well as any other equitable considerations. The amounts paid or payable by a party in respect of losses, claims, damages and liabilities referred to above shall be deemed to include any legal or other fees and expenses incurred in any investigation of and in defending any litigation, proceeding or other action or claim. Notwithstanding the foregoing, the Indemnified Persons' aggregate share of the liability hereunder shall not be in excess of the amount of fees actually received by Forum under this Agreement (excluding any amounts received as reimbursement of expenses incurred by Forum). (d) This Section 7 shall remain in full force and effect whether or not any of the transactions contemplated by this Agreement are consummated, shall survive the expiration or termination of this Agreement and shall be in addition to any liability that the Company might otherwise have to any Indemnified Person under this Agreement or otherwise. 8. Use of Name. The Company agrees that any reference to Forum or any affiliate of Forum in any Exchange Offer Document, or any other release or communication, is subject to Forum's prior approval. Except as required by law or regulations, if Forum resigns prior to the dissemination of any Exchange Offer Document or any other release or communication, no reference shall be made therein to Forum. 9. Termination or Resignation. The term of Forum's engagement hereunder commences on the date hereof and expires six months from the date hereof. In addition, Forum shall have the right to resign, and the Company shall have the right to discharge Forum, at any time for any reason, by giving prior written notice. If this Agreement is terminated prior to the mailing of the Exchange Offer Documents to the Holders, Forum shall not be entitled to receive the amounts provided in Section 3 hereof. If this Agreement is terminated or expires after mailing of the Exchange Offer Documents to the Holders, Forum shall be entitled to receive all of the amounts provided in Section 3 hereof. Regardless of whether this Agreement is terminated before or after the mailing of the Exchange Offer Documents to the Holders, Forum and its counsel shall be entitled to receive all of the amounts provided in Section 4 hereof up to and including the effective date of such termination. 10. Notice. Notice given pursuant to any of the provisions of this Agreement shall be in writing and shall be mailed or delivered (a) to the Company, at its offices at 40W267 Keslinger Road, LaFox, Illinois 60147, Attention: Mr. Edward J. Richardson, Chief Executive Officer; and (b) to Forum at 53 Forest Avenue, Old Greenwich, Connecticut 06870, Attention: Mr. Michael F. McNulty, Managing Director. 11. Entire Agreement and Governing Law. This Agreement incorporates the entire understanding of the parties and supersedes all previous agreements between Forum and the Company with respect to the subject matter hereof, and this Agreement shall be governed by, and construed in accordance with, the laws of the State of Connecticut without regard to principles of conflicts of law. 12. Survival of Certain Provisions. Notwithstanding anything to the contrary contained herein, the provisions hereof concerning confidentiality, indemnity and the obligations of the Company to pay accrued fees and reimburse expenses (including, without limitation, those contained in Sections 3, 4, 6, 7 and 9 hereof) shall survive the termination or expiration of this Agreement. 13. No Third Party Beneficiaries. This Agreement has been and is made solely for the benefit of the Company, Forum and the other indemnified persons referred to in Section 7 hereof and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. Please confirm that the foregoing is in accordance with your understanding of our agreement by signing and returning to Forum the duplicate of this letter enclosed herewith. Very truly yours, FORUM CAPITAL MARKETS L.P. By: /s/ Michael F. McNulty Michael F. McNulty Managing Director Agreed to and accepted as of the date first written above: RICHARDSON ELECTRONICS, LTD. By: /s/ Edward J. Richardson Edward J. Richardson Chief Executive Officer EX-7 8 Item 9 (c)(4) EMPLOYMENT AND BONUS AGREEMENT EMPLOYMENT AND BONUS AGREEMENT ("Agreement") made and entered into as of this 7th day of November, 1996 by and between RICHARDSON ELECTRONICS, LTD., a corporation with its principal place of business located at 40 W 267 Keslinger Road, LaFox, IL 60147 (the "Employer"), and BRUCE W. JOHNSON, an individual whose current residence is located at 5838 Teal Lane, Long Grove, IL 60047 ("Employee"). RECITALS WHEREAS, the Employer desires to employ Employee as its President and Chief Operating Officer upon the terms and conditions stated herein; and WHEREAS, Employee desires to be so employed by the Employer at the salary and benefits provided for herein; and WHEREAS, Employee acknowledges and understands that during the course of his employment, Employee will become familiar with certain confidential information of the Employer which is exceptionally valuable to the Employer and vital to the success of the Employer's business; and WHEREAS, the Employer and Employee desire to protect such confidential information from disclosure to third parties or its use to the detriment of the Employer; and WHEREAS, the Employee acknowledges that the likelihood of disclosure of such confidential information would be substantially reduced, and that legitimate business interests of the Employer would be protected, if Employee refrains from competing with the Employer and from soliciting its customers and employees during and following the term of the Agreement, and Employee is willing to covenant that he will refrain from such actions. NOW THEREFORE, in consideration of the promises and of the mutual covenants and agreements hereinafter set forth, the parties hereto acknowledge and agree as follows: ARTICLE ONE NATURE AND TERM OF EMPLOYMENT 1.01 Employment. The Employer hereby agrees to employ Employee and Employee hereby accepts employment as the Employer's President and Chief Operating Officer. 1.02 Term of Employment. Employee's employment pursuant to this Agreement shall commence on November 12, 1996, or such earlier date as may be agreed upon by Employee and the Employer and, subject to the provisions of Article Four, the term of such employment (the "Employment Term") shall continue indefinitely from such commencement date on an "at will" basis. 1.03 Duties. The duties of Employee shall be as determined by the Employer's Board of Directors (the "Board") consistent with his position as President and Chief Operating Officer and Employee will adhere to the policies and procedures of the Employer, including, without limitation, its Code of Conduct, and will follow the supervision and direction of the Chairman of the Board of the Employer in the performance of such duties. Employee agrees to devote his full working time, attention and energies to the diligent and satisfactory performance of his duties hereunder. Employee will not, during the Employment Term or during any period during which Employee is receiving payments pursuant to Article 2 and/or Sections 5.04 or 5.05 or any other provision of this Agreement, engage in any activity, other than on behalf of Employer or any of its subsidiaries, which is intended or would reasonably be expected to have a material adverse affect on the Employer's reputation, goodwill or business relationships or which is intended or would reasonably be expected to result in material economic harm to the Employer. ARTICLE TWO COMPENSATION AND BENEFITS For all services to be rendered by him in any capacity hereunder (including as an officer, director, committee member or otherwise of the Employer or any parent or subsidiary thereof or any division of any thereof) on behalf of the Employer, the Employer agrees to pay Employee so long as he is employed hereunder, and the Employee agrees to accept, the compensation set forth in Sections 2.01 and 2.02. 2.01 Base Salary. During the term of Employee's employment hereunder, the Employer shall pay to Employee an annual base salary ("Base Salary") of Three Hundred Thousand and 00/100 Dollars ($300,000), payable in installments as are customary under the Employer's payroll practices from time to time. The Employer at its sole discretion may, but is not required to, review and adjust the Employee's Base Salary from year to year; provided, however, that, except as may be expressly consented otherwise in writing by Employee, (i) Employer may not decrease Employee's Base Salary, and (ii) whenever Employer increases base salaries of all or substantially all of its senior executive employees, Employer shall increase Employee's Base Salary by a percentage amount no less than the percentage amount of the average increase in base salary of Employer's other senior executive employees. No additional compensation shall be payable to Employee by reason of the number of hours worked or by reason of hours worked on Saturdays, Sundays, holidays or otherwise. 2.02 Management Incentive Plan. During the term of the Employee's employment hereunder, the Employee shall be a participant in the Bonus Plan, a copy of which is attached hereto as Exhibit A, as modified from time to time with the written consent of Employee (the "Annual Incentive Plan"). The Employee's "target bonus percentage" for purposes of the Annual Incentive Plan shall be fifty percent (50%) of his Base Salary. Except as otherwise provided in this Agreement, (i) bonuses under the Annual Incentive Plan shall be paid strictly in accordance with the Annual Incentive Plan, and (ii) for any partial fiscal year the bonus shall be computed and paid only for the portion of the fiscal year Employee is employed hereunder. 2.03 Stock Options. To induce Employee to accept the employment offered hereunder, on the date of commencement of employment hereunder the Employer shall grant Employee options under the Richardson Electronics, Ltd. Employee's 1996 Incentive Compensation Plan to purchase an aggregate of 50,000 shares of Employer's Common Stock, vesting 10,000 shares per year beginning on the anniversary date of the grant, at an exercise price equal to the fair market value (as defined in the Plan) of Employer's Common Stock on the grant date. The Employer at its sole discretion may, but is not required to, grant Employee additional options. Upon the occurrence of a "material change" as defined in Section 5.06, all options held by Employee shall be and become fully vested. 2.04 Vacation. Employee shall be entitled to paid vacation each year during the term of this Agreement in accordance with the Employer's vacation policy for senior executive officers as in effect from time to time, which vacations shall be scheduled for such times as Employee and the Chairman of the Board of Employer shall mutually agree. 2.05 Other Benefits. Employer will provide to Employee such benefits (other than bonus, severance and incentive compensation benefits) as are generally provided by the Employer to its other senior executive employees, including but not limited to, automobile allowance, health/major medical insurance, dental insurance, disability insurance, life insurance, sick days and other employee benefits (collectively "Other Benefits"), all in accordance with the terms and conditions of the applicable Other Benefits plans. Nothing in this Agreement shall require the Employer to maintain any benefit plan nor prohibit the Employer from modifying any such plan as it sees fit from time to time. It is only intended that Employee shall be entitled to participate in any such plan offered for which he may qualify under the terms of any such plan as it may from time to time exist, in accordance with the terms thereof. 2.06 Withholding. All salary, bonus and other payments described in this Agreement shall be subject to withholding for federal, state or local taxes, amounts required to be withheld under applicable benefit policies or programs, and any other amounts that may be required to be withheld by law, judicial order or otherwise. ARTICLE THREE CONFIDENTIAL INFORMATION 3.01 Definition of Confidential Information. For the purposes of this Agreement, the term "Confidential Information" shall mean, but shall not be limited to, any technical or non-technical data, formulae, compilations, programs, devices, methods, techniques, procedures, manuals, financial data, business plans, lists of actual or potential customers or suppliers, lists of employees, and any information regarding the Employer's products, marketing or database, or that of any subsidiary of Employer, (whether or not reduced to writing) which is not generally known to the public. The Employer and Employee acknowledge and agree that such Confidential Information is extremely valuable to the Employer and may constitute trade secret information under applicable law. In the event that any part of the Confidential Information becomes generally known to the public through legitimate origins (e.g., other than by the breach of this Agreement by Employee or by other misappropriation of the Confidential Information), that part of the Confidential Information shall no longer be deemed Confidential Information for the purposes of this Agreement, but Employee shall continue to be bound by the terms of this Agreement as to all other Confidential Information. 3.02 Ownership of Confidential Information. Employee agrees that the Confidential Information (including, without limitation, that which was or is developed, created or prepared by or for Employee) is and at all times shall remain the sole and exclusive property of the Employer. All records relating to the Employer's or any subsidiary's operations, investigations, and business, and any notes with respect to such records, made or received by Employee in connection with his services hereunder, and all copies of such records or notes made by, for, or with the consent of Employee, are and shall be the Employer's property exclusively, and shall surrender the same to the Employer at the Employer's request but, in any event, no later than at the termination of his employment with the Employer as provided in Section 3.04 below. 3.03 Non-Disclosure of Confidential Information. Except in the course of the performance of Employee's duties with Employer (or as required by law), Employee will not during, or after termination of, Employee's employment by the Employer, in any form or manner, directly or indirectly, knowingly divulge, disseminate, disclose or communicate to any person, entity, firm, corporation or any other third party, or knowingly utilize for Employee's personal benefit or for the benefit of any competitor of the Employer, any Confidential Information, and shall use his reasonable endeavors to prevent the improper use, dissemination, publication, or disclosure of, any Confidential Information. 3.04 Delivery Upon Termination. Upon termination of Employee's employment with the Employer for any reason, Employee shall promptly deliver to the Employer all correspondence, files, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, and any other documents or data concerning the Employer's customers, suppliers, database, business plans, marketing or manufacturing strategies, or processes and/or which contains Confidential Information, together will all other property of the Employer or any affiliate in Employee's possession, custody or control. ARTICLE FOUR NON-COMPETE AND NON-SOLICITATION COVENANTS 4.01 Covenant Not To Compete. During the Employment Term and for a period of two years after termination of Employee's employment for any reason, Employee will not, on behalf of himself or on behalf of another person, corporation, partnership or entity, canvas, call upon, solicit, entice, persuade, or induce any individual or entity which was or is a customer or supplier of the Employer during the last twelve (12) months of Employee's employment and with whom Employee dealt on behalf of the Employer, for the following: (a) except on behalf of the Employer or any of its subsidiaries, to purchase (with respect to customers) Competing Products, or (b) except on behalf of the Employer or any of its subsidiaries, to request or advise any such customer or supplier to withdraw, curtail or cancel its business with the Employer, and In addition, during the Employment Term and for a period of two years after termination of Employee's employment for any reason, Employee shall not approach, respond to, or otherwise deal with any such customer or supplier for such purpose or authorize or knowingly cooperate with the taking of any such actions by any other person, corporation, partnership or entity, other than on behalf of Employer or any of its subsidiaries, nor will Employee otherwise attempt to interfere (to the Employer's detriment) in the relationship between the Employer and any such customer or supplier, other than on behalf of Employer or any of its subsidiaries. "Competing Products" as used in this Article means products or services which are similar to, compete with, or can be used for the same purposes as products or services sold or offered for sale by Employer or which were in active development by Employer within the last twelve (12) months of Employee's employment. 4.02 Covenant Not to Solicit Employees. During the Employment Term and for a period of two years after termination of Employee's employment for any reason, Employee will not, for any reason, employ, solicit or endeavor to entice away from the Employer (whether for his own benefit or on behalf of another person or entity) any employees of the Employer who have had access to Confidential Information to work for any competitor of the Employer, nor will Employee otherwise attempt to interfere (to the Employer's detriment) in the relationship between the Employer and any of its employees, other than on behalf of Employer or any of its subsidiaries. 4.03 Independent Obligations. Each obligation of each section, subparagraph and provision of this Article shall be independent of any obligation under any other section, subparagraph or provision hereof, except that Employee's obligations are contingent upon the Employer's performance of its obligations under Articles Two and Five and Section 7.11 and shall be suspended at any time that Employer is in breach of Article Two or Article Five or Section 7.11. ARTICLE FIVE TERMINATION 5.01 Termination of Employee for Cause. The Employer shall have the right to terminate Employee's employment at any time for "cause." Prior to such termination, the Employer shall provide Employee with written notification of any and all allegations constituting "cause" and the Employee shall be given five (5) working days after receipt of such written notification to respond to those allegations in writing. Upon receipt of the Employee's response, the Employer shall meet with the Employee (accompanied, if desired by Employee, by his legal counsel) to discuss the allegations. Employer may require that Employee not report to work during such period. For purposes hereof, "cause" shall mean (i) an act or acts of personal dishonesty taken by the Employee and intended to result in personal enrichment of the Employee, (ii) material violations by the Employee of the Employee's obligations or duties under, or any terms of, this Agreement, which are not remedied in a reasonable period (not to exceed ten (10) days) after receipt of written notice thereof from the Employer, or (iii) Employee being indicted or convicted (by trial, guilty or no contest plea or otherwise) of (a) a felony, (b) any other crime involving moral turpitude, or (c) any violation of law which would impair the ability of the Employer or any affiliate to obtain any license deemed necessary or desirable for the conduct of its actual or proposed business. 5.02 Termination of Employee Because of Employee's Disability, Injury or Illness. Either Employee or the Employer shall have the right to terminate Employee's employment if Employee is unable to perform the duties assigned to him by the Employer because of Employee's disability, injury or illness, provided however, such inability must have existed for a total of sixty (60) days in any consecutive four (4) month period before such termination can be made effective. 5.03 Termination as a Result of Employee's Death. The Employee's employment shall automatically terminate upon Employee's death. 5.04 Termination of Employee for any Other Reason. The Employer shall have the right to terminate Employee's employment at any time at will for any reason other than the reasons set forth in Sections 5.01, 5.02 or 5.03 upon notice to Employee. 5.05 Termination by Employee for Good Reason. Employee shall have the right to terminate his employment at any time for "good reason". Prior to such termination, Employee shall provide Employer with written notification of any and all allegations constituting "good reason" and Employer shall be given five (5) working days after receipt of such written allegations to respond. Upon receipt of the Employer's response, Employee (accompanied, if desired by Employee, by his legal counsel) shall meet with the Employer (accompanied, if desired by Employer, by its legal counsel) to discuss the allegations. Employee shall not be required to report to work during such period. For purposes hereof, "good reason" means material violation by the Employer of the Employer's obligations or duties under, or any terms of, this Agreement, which are not remedied in a reasonable period (not to exceed ten (10) days) after receipt of written notice thereof from Employee. 5.06 Termination by Employee after Material Change. Employee shall have the right to terminate his employment at any time within a period of 180 days after any "material change". For purposes hereof, "material change" means (i) any sale or other transfer of all or substantially all of the Employer's assets, (ii) any merger, consolidation, share exchange, tender offer, or other similar transaction involving the Employer, unless the surviving entity is under control by the same person(s) or entity(ies) as the Employer was prior to the transaction, (iii) any change in control of the Employer as a result of a tender offer, proxy contest or otherwise, or (iv) any plan is approved to liquidate or dissolve the Employer. 5.07 Termination by Employee for any Other Reason. Employee shall have the right to terminate his employment at any time for any reason other than the reasons set forth in Sections 5.05 and 5 06. 5.08 Payments, etc. after Termination. Upon the termination of Employee's employment, the Employer shall have the following obligations, in addition to any obligations imposed by law and any obligations under the terms and provisions of any plan or program in which Employee is a participant; (a) The Employer shall be obligated to pay Employee his Base Salary, bonus under the Annual Incentive Plan, and Other Benefits earned or accrued through the date of termination. (b) In addition to the amounts payable under Section 5.08(a), if Employee's employment is terminated as a result of Employee's disability, injury or illness pursuant to Section 5.02 or Employee's death pursuant to Section 5.03, the Employer shall be obligated to pay Employee his bonus under the Annual Incentive Plan for the full quarter in which his employment terminates. (c) In addition to the amounts payable under Section 5.08(a), if Employee's employment is terminated by the Employer other than for "cause" pursuant to Section 5.01 or as a result of Employee's disability, injury or illness pursuant to Section 5.02 or if Employee's employment is terminated by Employee for "good reason" pursuant to Section 5.05 or following a "material change" pursuant to Section 5.06 or if Employee's employment is terminated pursuant to Section 7.02 (except as provided otherwise in Section 7.02), the Employer shall continue to pay to Employee (i) his then current Base Salary for a period of one year following the termination of his employment, plus (i) an amount, on the 90th, 180th, 270th and 360th day after the date of termination, equal to his bonus under the Annual Incentive Plan for the last full quarter preceding the date of termination. In addition, for a period of one year following the termination of his employment, Employee shall continue to receive the same Other Benefits (provided the Other Benefits plans so permit, or, if the Other Benefits plans do not so permit, a substantially equivalent benefit shall be provided to Employee) and options granted to Employee shall vest as if Employee had remained in the employ of Employer for such one year period and for purposes of exercising the options he shall be deemed to have terminated with the consent of Employer as of the end of such one year period, and any deferred compensation, incentive compensation, and any other compensation awarded to Employee shall become fully and absolutely vested as of the date of termination. (d) Employer may suspend any or all payments and other obligations to Employee under this Article Five at any time that Employee is in material breach of Articles Three or Four or Section 7.11. ARTICLE SIX REMEDIES 6.01 Injunction. Employee acknowledges that the restrictions contained in this Agreement will not prevent him from obtaining such other gainful employment he may desire to obtain or cause him any undue hardship and are reasonable and necessary in order to protect the legitimate interests of the Employer and that violation thereof would result in irreparable injury to the Employer. Employee therefor acknowledges and agrees that in the event of a breach or threatened breach by Employee of the provisions of Articles Three or Four or Section 7.11, the Employer shall be entitled to an injunction restraining Employee from such breach or threatened breach. Nothing herein shall be construed as prohibiting or limiting the Employer from pursuing any other remedies available to the Employer for such breach or threatened breach, the rights hereinabove mentioned being in addition to and not in substitution of such other rights and remedies, all of which may be exercised concurrently. The period of restriction specified in Article Four shall abate during the time of any violation thereof, and the portion of such period remaining at the commencement of the violation shall not begin to run until the violation is cured. 6.02 Survival. The provisions of this Article Six and of Articles Three and Four and Section 7.11 shall survive the termination or expiration of this Agreement. ARTICLE SEVEN MISCELLANEOUS 7.01 Assignment. Employee and Employer acknowledge and agree that the covenants, terms and provisions contained in this Agreement constitute a personal employment contract and the rights and obligations of the parties thereunder cannot be transferred, sold, assigned, pledged or hypothecated, excepting that the rights and obligations of the Employer under this Agreement may be assigned or transferred pursuant to a sale of the business, merger, consolidation, share exchange, sale of substantially all of the Employer's assets, or other reorganization described in Section 368 of the Code, or through liquidation, dissolution or otherwise, whether or not the Employer is the continuing entity, provided that the assignee, or transferee is the successor to all or substantially all of the assets of the Employer and such assignee or transferee assumes the rights and duties of the Employer, if any, as contained in this Agreement, either contractually or as a matter of law. 7.02 Litigation with Prior Employer. In the event that Employee shall be permanently enjoined by a court of competent jurisdiction from being employed by Employer based on his prior employment relationship, or in the event that Employer shall be enjoined from employing Employee, Employee's employment shall terminate on the effective date of such injunction and the Employer shall have the obligations described in Section 5.08(a) and 5.08(c) if such injunction is granted because of Employee's breach of his confidentiality or non-compete obligations to his former employer or its parent or their respective successors or assigns by reason of any action or inaction of (i) Employee taken with the direction of the Chairman of Employer given with knowledge that it may be a breach of such obligations, or (ii) the Company that is not taken at the direction of Employee, in all other events Employer's obligation shall be to pay to Employee his then current Base Salary and Other Benefits accrued up to and including the date on which Employee's employment is so terminated as described in Section 5.08(a). Whether or not any such injunction is issued, Employer shall also defend Employee against any and all claims, and indemnify and hold harmless Employee with respect to any and all attorneys' fees and other defense costs, judgments and expenses that Employee may incur in connection with litigation with Employee's previous employer (or its successor) arising out of or relating to Employee's employment with the Employer and any actions and things that Employee may take or do at the request or with the approval of Employer. 7.03 Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and may not be modified except in writing by the parties hereto. Furthermore, the parties hereto specifically agree that all prior agreements, whether written or oral, relating to Employee's employment by the Employer shall be of no further force or effect from and after the date hereof. 7.04 Severability. If any phrase clause or provision of this Agreement is declared invalid or unenforceable by a court of competent jurisdiction, such phrase, clause or provision shall be deemed severed from this Agreement, but will not affect any other provisions of this Agreement, which shall otherwise remain in full force and effect. If any restriction or limitation in this Agreement is deemed to be unreasonable, onerous and unduly restrictive by a court of competent jurisdiction, it shall not be stricken, in its entirety and held totally void and unenforceable, but shall be deemed rewritten and shall remain effective to the maximum extent permissible within reasonable bounds. 7.05 Notices. Any notice, request or other communication required to be given pursuant to the provisions hereof shall be in writing and shall be deemed to have been given when delivered in person or five (5) days after being deposited in the United States mail, certified or registered, postage prepaid, return receipt requested and addressed to the party at its or his last known addresses. The address of any party may be changed by notice in writing to the other parties duly served in accordance herewith. 7.06 Waiver. The waiver by the Employer or Employee of any breach of any term or condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition hereof. 7.07 Attorneys Fees and For Future. In the event that Employee has been found to have violated in any material respect any of the terms of Articles Three or Four or Section 7.11 of this Agreement either after a preliminary injunction hearing or a trial on the merits, Employee shall pay to the Employer the Employer's costs and expenses, including attorneys fees, in enforcing the terms of Articles Three or Four of this Agreement. In addition, in the event of a material breach by Employee of Articles Three or Four or Section 7.11, Employee shall lose all rights to receive any future payments under the Annual Incentive Plan set forth in Section 2.02 above and any payments pursuant to Article Five, except as may be required by law not to be waivable or forfeitable. 7.09 Continuing Obligation. The obligations, duties and liabilities of Employee pursuant to Articles Three and Four and Section 7.11 of this Agreement are continuing, absolute and unconditional and shall remain in full force and effect as provided herein. 7.10 No Conflicting Obligations or Use. Employee represents and warrants to Employer that his execution of this Agreement and the performance of the terms and conditions contained herein does not constitute a breach of any agreement to which he is a party that has not been disclosed to the Employer (it being understood that Employee makes no representation or warranty with respect to the severance agreement dated May 30, 1996 between Employee and Premier Farnell Corp.). In addition, Employee agrees not to knowingly use in connection with his employment hereunder, or to knowingly disclose to Employer, or knowingly induce the Employer to use, any confidential or proprietary information or material belonging to any previous employer or other person or entity. The foregoing restriction shall not apply with respect to information and material which is generally publicly available without restraint and thus is not confidential or proprietary or any information which is used or disclosed at the request or with the approval of the Employer. 7.11 The Employer's Good Name. Employee will at no time engage in conduct or make any statements which falsely and materially demean, defame, libel, slander, destroy or diminish in any way the reputation or goodwill of the Employer, its parents or subsidiaries, or their respective shareholders, directors, officers, employees, or agents or the products sold by the Employer or any of its parents or subsidiaries. The Employer, its parents or subsidiaries, and their respective shareholders, directors, officers, employees, and agents will at no time engage in conduct or make any statements which falsely and materially demean, defame, libel, slander, destroy or diminish in any way the reputation of Employee. These obligations shall survive the termination of this Agreement. 7.12 Good Faith. Employee and the Employer (and the Employee's officers and directors) shall at all times act fairly, reasonably and in good faith in relation to this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. EMPLOYEE EMPLOYER /s/ Bruce W. Johnson /s/ Edward J. Richardson __________________________ By: _______________________________________ Chairman Title: ____________________________________ EXHIBIT A Bonus Plan For purposes hereof the following terms shall have the following meaning: "Company" shall mean Richardson Electronics, Ltd. "Executive" shall mean the particular employee of the Company participating in this Plan. "Actual Earnings Per Share" for any fiscal year quarter shall be that earnings per share as reported by the Company in its quarterly report to its shareholders for such quarter with final adjustment on its year end audited financial statement for such year. "Base Earning Per Share" for any fiscal year shall be that earnings per share of the Company for its prior fiscal year as reported to its shareholders on its year end audited financial statement for such year and with respect to any fiscal quarter in such year shall be equal to one fourth of the total for the year. "Goal Earnings Per Share" for any fiscal year shall be that earnings per share established by the Company as such in its budget for such year and with respect to any fiscal quarter in such year shall be equal to one fourth of the total for the year. Should the Company fail to establish a Goal Earnings Per Share for a fiscal year in its budget then Goal Earnings Per Share for such year shall be equal to Actual Earnings Per Share for the prior fiscal year increased by 25%. The Goal Earnings Per Share for Executive shall never exceed the Goal Earnings Per Share for any other senior executive employee for the purpose of any bonus plan. "Target Bonus Percentage" shall mean the percentage of Executive's Base Salary which he will receive as a bonus as established in his employment agreement. Executive shall receive a bonus equal to the Target Bonus Percentage of his Base Salary (as defined in his employment agreement) paid to him for the period for which the bonus is calculated if the Actual Earnings Per Share is equal to Goal Earnings Per Share and zero if Actual Earnings Per Share is equal to or less than Base Earnings Per Share. If Actual Earnings Per Share is greater than Base Earnings Per Share but more or less than Goal Earnings Per Share, the bonus shall be a pro rata amount with no maximum, computed on a scale with Base Earnings Per Share equal to zero and Goal Earnings Per Share equal to 100% of Target Bonus Percentage. For example, assume Salary for a fiscal year at $300,000, Target Bonus Percentage for such period at 50%, Base Earnings Per Share for such period at $0.68 and Goal Earnings Per Share at $0.84. The Bonus would be calculated as follows: Bonus Potential for performance equal to Goal Earnings Per Share $300,000 (Salary For Period) x .50 (Target Bonus Percentage) $150,000 (Bonus Potential for Goal Performance) Bonus Potential for each $.01 of Earnings Per Share in excess of Base Earnings Per Share $0.84 (Goal Earnings Per Share) - 0.68 (Base Earnings Per Share) $ 16 (Cents Difference between Base and Goal) $150,000.00 (Bonus Potential for Goal Performance see calculation above) divided by 16 (Cents Difference between Base and Goal see calculation above) $ 9,375.00 (Bonus Amount for each $.01 of Earnings Per Share in excess of Base) (a) Then assume Actual Earnings Per Share for period of $0.90 $0.90 (Actual Earnings Per Share) $0.68 (Base Earnings Per Share) 22 (Cents Earnings Per Share in excess of Base) x $9,375.00 (Bonus Amount for each $.01 of Earnings Per Share in excess of Base) $206,250.00 (Bonus Amount for $0.90 Earnings Per Share performance) (b) Then assume Actual Earnings Per Share for period of $0.80 $0.80 (Actual Earnings Per Share) $0.68 (Base Earnings Per Share) 12 (Cents Earnings Per Share in excess of Base) x $9,375.00 (Bonus Amount for each $.01 of Earnings Per Share in excess of Base) $112,500.00 (Bonus Amount for $0.80 Earnings Per Share performance) Bonus will be calculated and paid on a quarterly basis. Base Earnings Per Share and Goal Earnings Per Share for the Company's fiscal year ending May 31, 1997 are $0.68 and $0.84, respectively. EX-23 9 EXHIBIT 23 Consent of Independent Auditors We consent to the incorporation by reference, in the Offering Circular and Consent Solicitation of Richardson Electronics, Ltd. for the Offer to Exchange its 8-1/4% Convertible Senior Subordinated Debentures due June 15, 2006 for its 7-1/4% Convertible Subordinated Debentures due December 15, 2006, of our report dated July 10, 1996, with respect to the consolidated financial statements and schedules of Richardson Electronics, Ltd. included in the Annual Report on Form 10-K for the year ended May 31, 1996. Ernst & Young LLP Chicago, Illinois December 16, 1996 EX-25 10 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 FOR STATEMENTS OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939 OF CORPORATIONS DESIGNATED TO ACT AS TRUSTEES AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO (Name of Trustee) 36-0727623 (I.R.S. employer identification No.) 33 NORTH LASALLE STREET, CHICAGO, ILLINOIS (Address of principal executive offices) 60690 (zip code) RICHARDSON ELECTRONICS, LTD. (Name of obligor) DELAWARE 36-2096643 (State or other jurisdiction of (I.R.S. employer identification No.) incorporation or organization) 40W267 Keslinger Road LaFox, Illinois 60147 (Address of principal executive offices) (zip code) 8 1/4% CONVERTIBLE SENIOR SUBORDINATED DEBENTURES DUE JUNE 15, 2006 (Title of Indenture Securities) GENERAL 1. General information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of the Currency, Washington, D.C. Director of Financial Institutions, State of Illinois, Springfield, Illinois (as to Trust Department only). Chicago Clearing House Association, 164 West Jackson Boulevard, Chicago, Illinois. Federal Deposit Insurance Corporation, Washington, D.C. The Board of Governors of the Federal Reserve System, Washington, D.C. (b) Whether it is authorized to execute corporate trust powers. The trustee is authorized to execute corporate trust powers. 2. Affiliations with obligor and underwriters. If the obligor or any underwriter for the obligor is an affiliate of the trustee, describe each affiliation. No such affiliation exists. See Note, page 4 hereof. 12. Indebtedness of the Obligor to the Trustee. As of December 10, 1996: Nature of Indebtedness Amount Outstanding Date Due Line of Credit* $20,558,300.00 11/30/98 Standby Letter of Credit* $ 336,350.00 11/30/98 Loan Guaranty* $ 250,000.00 11/30/98 Loan Guaranty* $ 5,550,000.00 11/30/98 Foreign Exchange Exposure* $ .00 11/30/98 Corporate Visa $ .00 11/30/97 *Unsecured 13. Defaults by the Obligor. None. 15. Foreign Trustee. Not applicable. 16. List of Exhibits. Exhibit 1 A copy of the existing Articles of Association of the trustee. (Filed herewith). Exhibit 1(a) A copy of Certificate of Change of Name.* Exhibit 2 A copy of the Certificate of Authority to commence business.* Exhibit 3 A copy of the authorization to exercise corporate trust powers.* Exhibit 4 A copy of existing by-laws of the trustee. (Filed herewith). Exhibit 5 None. Exhibit 6 The Consent of the trustee required by Section 321(b) of the Act. (Filed herewith). Exhibit 7 A copy of the latest report of condition of the trustee published pursuant to law or requirements of its supervising authority. (Filed herewith). * These Exhibits are hereby incorporated by reference to Exhibits bearing identical Exhibit numbers submitted by this trustee in its statement of eligibility and qualification filed with Securities and Exchange Commission with respect to the Indianapolis Power & Light Company First Mortgage Bonds, 51/8% Series due July 1996, Securities and Exchange Commission Registration No. 2-24581. NOTE The answer to item 2 is based on incomplete information. To the best of our knowledge and belief, however, there is no person, firm or corporation ordinarily engaged in underwriting securities of the obligor: (1) which is an affiliate of the trustee; (2) of which any director or executive officer of the trustee is a director, officer, partner, employee, appointee or representative; (3) which individually owns, beneficially, more that 1% of the outstanding Common Stock of the trustee or First Chicago NBD Corporation; (4) whose securities are owned beneficially by the trustee as collateral security for obligations in default. This statement may therefore be considered as correct unless amended contemporaneously with the filing by the obligor of the Amendment or Supplement to its Registration Statement disclosing underwriters for the Indenture securities. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a corporation organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility and Qualification to be signed on its behalf by the undersigned thereunto duly authorized, all in the City of Chicago, State of Illinois, on the 10th day of December, 1996. AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO By: s/Elizabeth Nelson Its: Assistant Vice President State of Illinois ) County of Cook ) The Undersigned, Elizabeth Nelson, hereby certifies that she is a duly appointed and qualified Assistant Vice President of American National Bank and Trust Company of Chicago, a corporation duly organized and existing as a national banking association under the laws of the United States of America, and has authority to execute this Certificate. She further certifies that attached to this certificate are true and correct copies of Amended Articles of Association and the By-Laws of said Association, that said Articles and By-Laws were duly adopted by the Board of Directors of said Association, and that said Amended Articles and By-Laws have never been repealed and are still in full force and effect. She further certifies that the Seal affixed to this certificate is the corporate seal of said Association. In witness whereof, the undersigned has set her hand and has affixed the corporate seal of said association, this 10th day of December, 1996. By: s/Elizabeth Nelson Its: Assistant Vice President (Seal) EXHIBIT 1 _____________________________________________________________________________ _____________________________________________________________________________ Amended Articles of Association of American National Bank and Trust Company of Chicago (As Amended and Restated February 2, 1996) Charter No. 13216 _______________________________________________________________________________ _______________________________________________________________________________ Amended Articles of Association of American National Bank and Trust Company of Chicago Charter No. 13216 First. The title of this Association, which shall carry on the business of banking under the laws of the United States, shall be "American National Bank and Trust Company of Chicago." Second. The place where the main banking house or office of this Association shall be located, its operations of discount and deposit carried on, and its general business conducted, shall be Chicago, County of Cook, State of Illinois. Third. The Board of Directors of this Association shall consist of such number of its shareholders, not less than five nor more than twenty-five, as from time to time shall be determined by a majority of the votes to which all of its shareholders are at the time entitled. By vote of a majority of the full Board of Directors, the Board may increase such number, within such maximum limit, by not more than two and appoint a person or persons to fill the resulting vacancy or vacancies between meetings of the shareholders. A majority of the Board of Directors shall be necessary to constitute a quorum for the transaction of business. Fourth. The regular annual meeting of the shareholders of this Association shall be held at its main banking hours, or such other convenient place as shall be duly authorized by the Board of Directors, on such day of each year as is specified therefor in the By-Laws of the Association, at which meeting a Board of Directors shall be elected; but, if no such election shall be held on that day, it may be held on any subsequent day, in accordance with the provisions of the banking laws of the United States. Fifth. The amount of capital stock of this Association shall be divided into 2,000,000 shares of common stock of the par value of Ten Dollars ($10) each; but said capital stock may be increased or decreased from time to time, in accordance with the provisions of the laws of the United States. If the capital stock is increased by the sale of additional shares thereof, each shareholder shall be entitled to subscribe for such additional shares in proportion to the number of shares of said capital stock owned by him at the time the increase is authorized by the shareholders, unless another time subsequent to the date of the shareholders' meeting is specified in a resolution adopted by the shareholders at the time the increase is authorized. The Board of Directors shall have the power to prescribe a reasonable period of time within which the pre-emptive rights to subscribe to the new shares of capital stock must be exercised. If the capital stock is increased by a stock dividend, each shareholder shall be entitled to his proportionate amount of such increase in accordance with the number of shares of capital stock owned by him at the time the increase is authorized by the shareholders, unless another time subsequent to the date of the shareholders' meeting is specified in a resolution adopted by the shareholders at the time the increase is authorized. Sixth. The Board of Directors shall appoint one of its members President of this Association, who shall be Chairman of the Board; but the Board of Directors may appoint a Director, in lieu of the President, to be Chairman of the Board, who shall perform such duties as may be designated by the Board of Directors. The Board of Directors shall have the power to appoint one or more Vice-Presidents, at least one of whom shall also be a member of the Board of Directors, and who shall be authorized, in the absence of the President, to perform all acts and duties pertinent to the office of President, except such as the President only is authorized by law to perform; to appoint a Cashier and such other officers as may be required to transact the business of this Association; to fix the salaries to be paid to all officers of this Association; and to dismiss such officers, or any of them. The Board of Directors shall have the power to define the duties of officers and employees of this Association, to require bonds from them, and to fix the penalty thereof; to regulate the manner in which Directors shall be elected or appointed, and to appoint judges of the election; to make all by- laws that it may be lawful for them to make for the general regulation of the business of this Association and the management of its affairs; and generally to do and perform all acts that it may be lawful for a Board of Directors to do and perform. Any person made a party to any action, suit or other proceeding, civil or criminal, by reason of the fact that he is or was a director, officer, or employee of the Association shall be indemnified by the Association against judgments, fines, amounts paid in settlement and reasonable expenses, including attorney's fees, actually and necessarily incurred by him in connection with the defense of such proceeding, or in connection with any appeal therein, except in relation to (i) any matter as to which it shall be adjudged in such proceeding that he is liable for negligence or misconduct in the performance of his duties to the Association, provided that in the case of a criminal action, suit, or proceeding, a conviction or judgment shall not be deemed in adjudication that the director, officer, or employee is liable for negligence or misconduct in the performance of his duties to the Association if it shall be determined that he was acting in good faith in what he considered to be the best interests of the Association and without reasonable cause to know that his acts were illegal; or (ii) any matter settled or compromised unless it shall be determined that there is not reasonable ground for such person being adjudged liable for negligence or misconduct in the performance of his duties to the Association. All such determinations hereunder shall be made by a majority of those members of the Board of Directors who were not parties to such proceeding, or by one or more disinterested persons to whom the question shall be referred by the Board of Directors. Such right of indemnification shall not be deemed exclusive of any other rights to which such director, officer, or employee may be entitled apart from this provision. Seventh. This Association shall have succession from the date of its organization certificate until such time as it be dissolved by the act of its shareholders in accordance with the provisions of the banking laws of the United States, or until its franchise becomes forfeited by reason of violation of law, or until terminated by either a general or a special act of Congress, or until its affairs be placed in the hands of a receiver and finally wound up by him. Eighth. The Board of Directors of this Association, or any three or more shareholders owning, in the aggregate, not less than ten per centum of the stock of this Association, may call a special meeting of shareholders at any time: Provided, however, that, unless otherwise provided by law, not less than ten days prior to the date fixed for any such meeting, a notice of the time, place, and purpose of the meeting shall be given by first-class mail, postage prepaid, to all shareholders of record of this Association at their respective addresses as shown upon the books of the Association. These Articles of Association may be amended at any regular or special meeting of the shareholders by the affirmative vote of the shareholders owning at least a majority of the stock of this Association, subject to the provisions of the banking laws of the United States. The notice of any shareholders' meeting, at which an amendment to the Articles of Association of this Association is to be considered, shall be given as hereinabove set forth. * * * Certified to be a true copy of the Articles of Association of American National Bank and Trust Company of Chicago, as amended, now in force and effect. Date: December 10, 1996 (Seal) EXHIBIT 4 _______________________________________________________________________________ _______________________________________________________________________________ By-Laws of American National Bank and Trust Company of Chicago (As Amended and Restated February 2, 1996) Charter No. 13216 _______________________________________________________________________________ _______________________________________________________________________________ February, 1996 TABLE OF CONTENTS Page Article I Meetings of Shareholders 1 Article II Directors 2 Article III Officers 4 Article IV Transfers of Real Estate 5 Article V Contracts and Voting 5 Article VI Authority to Sell Stocks, Bonds, etc. 6 Article VII Stock Certificates & the Transfer Thereof 6 Article VIII Increase of Stock 7 Article IX Banking Hours 7 Article X Seal 8 Article XI Trust Department 8 Article XII Amendments of By-Laws 9 BY-LAWS of AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO (As Amended and Restated February 2, 1996) Charter No. 13216 ARTICLE I MEETINGS OF SHAREHOLDERS SECTION 1. ANNUAL MEETINGS. The annual meeting of shareholders shall be held on the first Friday of February each year or at such other date as is from time to time designated by the Board of Directors (the "Board"), for the purpose of electing directors and the transaction of such other business as may come before the meeting. If the election of directors shall not be held on the day designated for the annual meeting, or at any adjournment thereof, the Board shall cause the election to be held at a meeting of the shareholders as soon thereafter as possible. SECTION 2. SPECIAL MEETINGS. The Board, or shareholders owning in the aggregate not less than 10 percent of the stock of the Bank, may call a special meeting of shareholders at any time for the purpose or purposes stated in the call of the meeting. SECTION 3. PLACE OF MEETINGS. Shareholder meetings shall be held at the main banking office of the Bank or at such other convenient place established by the Board. SECTION 4. NOTICE OF MEETINGS. The Chairman of the Board or the Secretary shall give written notice stating the place, day and hour of each meeting of shareholders and, in case of a special meeting, the purpose or purposes for which the meeting is called. Such notice shall be delivered not less than ten, nor more than forty days before the date of the meeting, either personally or by mail to each shareholder of record entitled to vote at such meeting. If mailed, such notices shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the records of the Bank with postage thereon prepaid. Such notice may be waived in writing. SECTION 5. PRESIDING OFFICER. The Chairman of the Board, if present, shall preside at all shareholder meetings. In the Chairman's absence, the President, if present, shall preside. In the absence of the Chairman and President, the shareholders may elect a Chairman pro tem to preside at the meeting. SECTION 6. QUORUM; MAJORITY VOTE. A majority of the outstanding shares of stock, represented in person or by proxy, shall constitute a quorum at any meeting of the shareholders, provided that if less than a majority of the outstanding shares of stock are represented at said meeting, a majority of the shares of stock so represented may adjourn the meeting from time to time without further notice. If a quorum is present, the affirmative vote of the majority of shares represented at the meeting shall be the act of the shareholders. SECTION 7. PROXIES. Proxies may be secured for annual and special meetings, shall be dated, and shall be filed with the Secretary of the Bank before or at the time of the meeting. At all meetings of the shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his attorney-in-fact. No proxy shall be valid eleven months from the date of its execution, unless otherwise provided in the proxy. No officer or employee of the Bank may act as proxy. SECTION 8. VOTING RIGHTS. Each outstanding share shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. SECTION 9. CONSENT OF SHAREHOLDERS IN LIEU OF ANNUAL OR SPECIAL MEETING. Unless otherwise restricted by the Articles of Association or by law, any action which may be taken at any annual or special shareholder meeting may be taken without a meeting, without prior notice and without a vote, if written consent setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those shareholders who did not give written consent. ARTICLE II DIRECTORS SECTION 1. AUTHORITY. The property and business of the Bank shall be managed by the Board, which shall have all of the powers conferred by law, the Articles of Association and these by-laws. SECTION 2. NUMBER. The Board shall at all times consist of not less than five nor more than twenty-five individuals. The exact number within such minimum and maximum limits shall be fixed and determined from time to time by resolution of a majority of the full Board or by resolution of the shareholders at any meeting thereof; provided, however, that the Board may not increase the number of directors to a number which: (i) exceeds by more than two the number of directors last elected by shareholders where such number was fifteen or less; or (ii) exceeds by more than four the number of directors last elected by shareholders where such number was sixteen or more, but in no event shall the number of directors exceed twenty-five. SECTION 3. TERM OF OFFICE. Each director shall hold office from the date of his election or appointment until the next annual shareholder meeting. Any director ceasing to be the owner of the amount of stock required by law or in any other manner becoming disqualified, shall thereby vacate his office as director. A director who is an officer of the Bank or one of its affiliates shall not stand for re-election to the Board at the annual meeting coincident with or next following the date of his retirement or other termination of employment from the Bank or such affiliate. A director who is not an officer of the Bank or any such affiliate shall not stand for re-election to the Board at the annual meeting of the Bank held in the third year following the year in which he retired from his principal occupation; provided, however, that no director shall be eligible for re- election at the annual meeting of the Bank next following his 73rd birthday. The Board may fill any vacancy which occurs in the Board at any regular meeting of the Board or at a special meeting called for that purpose. SECTION 4. COMPENSATION. By resolution, the Board may provide that a reasonable fee be paid to any of its members or to the members of any duly authorized committee for services rendered. No such payment shall preclude any director from serving the Bank in any other capacity and receiving compensation therefor. SECTION 5. REGULAR MEETINGS. Regular meetings of the Board shall be held on such dates, times and locations as determined by the Chairman of the Board and communicated to the directors in writing by the beginning of each calendar year for that calendar year. SECTION 6. SPECIAL MEETINGS. Special meetings of the Board may be held at any time and at any place upon the call of the Chairman of the Board or upon the call of at least three directors. Notice of special meetings shall state the meeting's purpose, and shall be given to each director in person, by facsimile transmission, by telephone, by overnight delivery service, or by U.S. first class mail addressed to his usual place of business or to his residence. Personal notice or notice by facsimile transmission or telephone shall be given not later than the second day before the meeting. A director's attendance at a special meeting shall constitute a waiver of notice of such meeting, except when the director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. SECTION 7. QUORUM; MAJORITY VOTE. A quorum of directors shall be required to transact business at any regular or special meeting of the Board. A majority of the directors shall constitute a quorum. Each director shall be entitled to one vote. A vote by a majority of the directors present at any regular or special meeting of the Board at which a quorum is present shall be required to approve any matter or proposal at any such meeting. SECTION 8. PRESIDING OFFICER. The Chairman of the Board, if present, shall preside at all meetings of the Board. The President, if present, shall preside at meetings of the Board in the Chairman's absence. In the absence of both the Chairman and the President, the Board shall designate another one of their members to so preside. SECTION 9. MINUTES OF MEETING. The Board shall appoint a Secretary, who need not be a member of the Board, to take minutes at any regular or special meeting of the Board. If the Secretary is not present at any such meeting, the Chairman of the Board may designate a secretary pro tem to take minutes at the meeting. The Secretary or secretary pro tem shall record the actions and proceedings at each regular or special meeting of the Board as minutes of the meeting and shall maintain such minutes in a minute book of proceedings of such meetings of the Board. Minutes of each such meeting shall be signed by the presiding officer and secretary of each meeting. SECTION 10. PARTICIPATION IN MEETINGS BY TELEPHONE. Unless otherwise restricted by the Articles of Association or by law, members of the Board or any committee designated by the Board may participate in a meeting of the Board or committee by means of conference telephone or similar communications equipment which allows each person participating in the meeting to hear each other. Participation in such a meeting shall constitute presence in person at such meeting. SECTION 11. CONSENT OF DIRECTORS IN LIEU OF MEETING. Unless otherwise provided in the Articles of Association or by law, any action required to be taken at a meeting of the Board or any action which may be taken at a regular or special meeting of the Board or a committee thereof, may be taken without a meeting, without prior notice and without a vote, if written consent setting forth the action so taken is signed by all of the directors that would be necessary to authorize or take such action at a regular or special meeting of the board. SECTION 12. COMMITTEES. The Board may, from time to time, establish such committees as it deems appropriate and as required by law. Any such committee shall be comprised of such members, shall have such authority and shall conduct its activities in such manner as is provided in the resolution establishing the committee. The members of any such committee who are not officers of the Bank shall receive such compensation as the Board determines from time to time. The Chairman of the Board shall be an ex-officio member of all committees of the Board. ARTICLE III OFFICERS SECTION 1. OFFICER TITLES. The titles of the officers of the Bank may include the Chairman of the Board, one or more Vice Chairmen of the Board, a President, one or more Executive Vice Presidents, one or more Senior Vice Presidents, a Chief Credit Officer, a Chief Trust Officer, a Chief Financial Officer, a General Auditor, a General Counsel, one or more Vice Presidents, a Cashier, a Secretary, one or more Assistant Secretaries, one or more Trust Officers, and such other officers as may be appropriate for the prompt and orderly transaction of the business of the Bank. Individuals appointed as Chairman and Vice Chairman of the Board and President must be members of the Board. The same person may hold any two or more offices. The Chairman of the Board and the President shall have the authority to establish all officer titles below the level of Senior Vice President. SECTION 2. ELECTION OF OFFICERS. The Chairman of the Board and the President shall be elected by the Board for the current year for which such Board was elected and each shall hold his office for such year unless he shall resign, become disqualified or be removed. Officers at the level of Senior Vice President and above shall be elected by the Board. The Chairman of the Board and the President shall have the authority to appoint all other officers, and to further delegate such authority to other officers of the Bank. SECTION 3. AUTHORITY AND RESPONSIBILITY. The authorities and responsibilities of all officers, in addition to those specifically prescribed herein, shall be those usually pertaining to their respective offices, or as may be designated by the Board or by the Chairman of the Board or by the President, or by any officer of the Bank designated by one of the foregoing. SECTION 4. MISCELLANEOUS. All officers and employees of the Bank who shall be responsible for any moneys, funds or valuables of the Bank shall give bond, or be covered by a blanket bond, in such penal sum and with such security as shall be approved by the Board, conditioned for the faithful and honest discharge of their duties as such officers or employees and that they will faithfully apply and account for all such moneys, funds and valuables and deliver the same on proper demand to the order of the Board of this Bank, or to the person or persons authorized to receive the same. SECTION 5. TERM OF OFFICE. Officers shall be appointed for an indefinite term, and their employment may be terminated and/or they may be removed from office at any time. The Bank's holding company, First Chicago NBD Corporation, may terminate and/or remove the Chairman of the Board, the President and the Chief Executive Officer. The Chairman of the Board, the President, and their designates have the authority to terminate and/or remove all other officers. The salary of any officer whose employment terminates shall cease as of the date of his termination, and he shall cease to be an officer as of the date of termination. ARTICLE IV TRANSFERS OF REAL ESTATE The Chairman of the Board, the President and any Vice President or above of the Bank shall have authority (without an order of the Board) to execute and deliver on behalf of and in the name of the Bank, deeds or contracts for deeds conveying any real estate owned by the Bank in its own right or in which the Bank has an interest either with or without covenants of warranty, and the same shall be attested to by any of such officers of the Bank other than the officers so executing said instruments; provided, however, that deeds, contracts or leases with respect to any real estate used by the Bank as its banking quarters, must be executed by an executive vice president or above, or an officer designated by an executive vice president or above. All releases of mortgages or trust deeds shall be executed in the same manner as provided in the preceding sentence in respect of transfers and conveyances of real estate in which this Bank has an interest. ARTICLE V CONTRACTS AND VOTING SECTION 1. EXECUTION OF INSTRUMENTS ON BEHALF OF BANK. Any officer of the Bank and such other persons as may be authorized by the Chairman of the Board or the President from time to time are severally and respectively authorized to execute documents and take action(s) in the Bank's name in connection with transactions conducted in the ordinary course of business including, without limitation, to guarantee signatures, certify resolutions and/or agreements, endorse checks, drafts and notes, sign orders for the deposit of securities and for the withdrawal of securities deposited with the bank correspondents of this Bank. Notwithstanding the foregoing, (i) all notes evidencing obligations of the Bank must be executed and delivered by a Vice President of the Bank or above, or the Cashier, (ii) letters of credit must be signed and issued by two designated officers or by a designated officer and any employee who shall be authorized to do so by the Chairman of the Board or the President. SECTION 2. VOTING. The vote of this Bank as stockholder in any corporation in which it may hold stock or upon any securities carrying voting rights which it shall have the right to vote in its individual capacity as a Bank, shall be cast at any stockholders' meeting by any Vice President or above, or the Cashier, in person, or by some person or persons authorized by written proxy signed by one of said officers. In all cases where shares of stock or other securities carrying voting rights and owned by this Bank shall be held in the name of a nominee of the Bank, any Vice President or above, or the Cashier may authorize such nominee to vote such stock or other securities in person, either unconditionally or upon such terms, limitations, or conditions as such officer may direct, or any such officer may authorize such nominee to execute a proxy to vote such shares of stock or other securities carrying voting rights, either unconditionally or upon such terms, limitations or conditions as such officer shall approve. ARTICLE VI AUTHORITY TO SELL STOCKS, BONDS, ETC. Any two officers from the group consisting of Vice Presidents and above and the Cashier or such officers as authorized from time to time by the Board, may at any time jointly: (1) Sell, assign, and transfer any and all United States registered bonds now standing, or which may hereafter stand in the name of the Bank; (2) Sell, assign, and transfer any and all notes, bonds, certificates of indebtedness or obligations of any corporation, firm or individual, which notes, bonds, certificates of indebtedness or obligations are now registered or may hereafter be registered in the name of this Bank, or are payable or endorsed to this Bank; or (3) Sell, assign, and transfer to any assignee or transferee, for and on behalf of this Bank and in its name, any and all shares of capital stock of any corporation or corporations held by this Bank. ARTICLE VII STOCK CERTIFICATES AND THE TRANSFER THEREOF SECTION 1. TRANSFERABILITY OF SHARES. Shares of stock of this Bank shall be transferable only upon the books of the Bank, subject to the provisions of the National Bank Act. The Bank shall maintain a transfer book in which all transfers of such stock shall be recorded. Transfers of stock may be suspended preparatory to any election or payment of any dividends. SECTION 2. RECORD DATE. The Board shall have power to fix a date of record of stock holdings for purposes of notices of shareholders' meetings, voting rights at such meetings, the payment of dividends, or any other proper purpose. SECTION 3. MISCELLANEOUS. All stock certificates shall be signed with a manual or facsimile signature by any Vice President or above, and by another of such officers or the Secretary or Cashier, and the seal of the Bank shall be impressed thereon or a facsimile thereof printed thereon. Each certificate shall also be signed manually by the Chief Financial Officer or General Auditor, on behalf of the Bank as registrar, and by a duly authorized officer or employee of the trust department as transfer agent. Each certificate shall recite on its face that the stock represented thereby is transferable only upon the books of the Bank by the holder thereof, or the holder's attorney, upon surrender of the certificate, and when stock is transferred, the certificates thereof shall be returned to the Bank, canceled, preserved, and new certificates issued. In case of loss of any certificates a new one executed in the manner above provided, shall be issued in lieu thereof upon proof satisfactory to the Chairman of the Board, the President, any Executive Vice President, or the Chief Trust Officer of such loss and upon appropriate indemnity if required by such officer. ARTICLE VIII INCREASE OF STOCK In the event of any increase in the capital stock of this Bank, the preemptive rights of the shareholders, if any, in respect of any such increased stock shall be set forth in the Articles of Association. Any warrants or certificates issuable to shareholders in connection with any increase of the capital stock of this Bank shall be delivered to the respective shareholders entitled thereto, either by hand or by mail, first-class postage prepaid, addressed to their respective addresses as shown on the books of the Bank. If, in the event of sale of additional shares, any subscription rights shall not have been exercised at the expiration of the specified subscription period, such unsubscribed new shares may be issued and sold at such price, not less than the par value thereof, to such persons and on such terms as the Directors may determine. ARTICLE IX BANKING HOURS The Bank shall be open for business during such days of the year and during such hours of the day as the Chairman of the Board or the President or their designate shall determine. ARTICLE X SEAL The seal of the Bank shall be circular in form and the words AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO-CORPORATE SEAL thereon. Such seal or a facsimile thereof may be affixed to or printed on any instrument requiring the same and attested by the Chief Financial Officer, the Cashier, the Secretary, any Assistant Secretary, any Trust Officer, or any other officer thereunto designated by the Board. ARTICLE XI TRUST DEPARTMENT SECTION 1. EXERCISE OF FIDUCIARY POWERS. All fiduciary powers of the Bank shall be exercised through the trust department, subject to all applicable laws and governmental regulations. The Bank shall maintain separate books and records for the trust department that are distinct from the other books and records of the Bank. SECTION 2. CHIEF TRUST OFFICER. All operations and fiduciary activities of the trust department shall be the responsibility of the Chief Trust Officer, subject to the powers and duties of the Board, the Committees appointed by the Board, the Chairman of the Board, the President, and any Executive Vice President. The Board may appoint one or more Vice Presidents and/or Trust Officers in addition to the Chief Trust Officer to administer said trust department, who shall have such powers and perform such duties as may be prescribed by these By-laws or as may be delegated to them by the Chief Trust Officer, the Board, the Chairman of the Board, the President, or any Executive Vice President. SECTION 3. EXECUTION OF INSTRUMENTS. Any Trust Officer or above, the Secretary, any Assistant Secretary, the Cashier, the Chief Financial Officer, or any other officer or person appointed by the Chairman of the Board or the President or their designate, for that purpose, or for the purpose of appointing vault custodians may sign, execute, acknowledge, deliver and accept on behalf of the Bank all checks against any trust department account or accounts and all agreements, indentures, mortgages, deeds, conveyances, releases, transfers, assignments, certificates, declarations, receipts, discharges, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings and other instruments or documents in connection with the exercise of any of the fiduciary powers of the Bank in the ordinary course of business of the trust department. SECTION 4. AUTHENTICATION OF INSTRUMENTS. All authentication or certificates by the Bank as trustee under any mortgage, deed of trust or other instrument securing bonds, notes, debentures or other obligations of any person or corporation, and all certificates as registrar or transfer agent, and all certificates of deposit for stocks, bonds, or other securities, and interim and trust certificates may be signed or countersigned on behalf of the Bank by any of the officers designated in the preceding Section hereof or by any other person appointed by the Chairman of the Board or the President or their designate and when so signed shall be binding on the Bank as the valid act of the Bank. SECTION 5. VOTING. The vote of this Bank as stockholder in any corporation in which it may hold capital stocks trustee or other fiduciary capacity may be cast at the stockholders' meetings of such corporation by any Trust Officer or above, the Secretary, any Assistant Secretary, in person or by some person authorized by written proxy signed by one of said officers; provided, however, that such proxy if given to any person not an officer or director of this Bank shall be limited to a single meeting and shall either be limited to voting for trustees or directors or shall direct how such proxy holder shall vote. The above provision, however, shall not apply to stock held by this Bank under a written agreement which expressly provides for the giving of proxies. Whenever this Bank has been or may be appointed attorney in fact with power of substitution in and about the transfer of shares of capital stock of any corporation, any Second Vice President or above may substitute by proper written instrument an attorney in fact to act in the place and stead of this Bank in and about such transfer. ARTICLE XII AMENDMENTS OF BY-LAWS The Board may amend these By-laws in any respect to the extent permitted at law at any regular or special meeting of the Board or shareholders duly called for that purpose, by a vote of a majority of the Board or a majority of the shareholders. EXHIBIT 6 CONSENT OF TRUST UNDER SECTION 321(b) OF THE TRUST INDENTURE ACT OF 1939 The American National Bank and Trust Company of Chicago hereby consents that reports of examination of said bank by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Such reports shall be used for the purposes and subject to the limitations and conditions set forth in Section 321(b) of the Trust Indenture Act of 1939. Dated: December 10, 1996 AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO By: s/Elizabeth Nelson Its: Assistant Vice President -----END PRIVACY-ENHANCED MESSAGE-----