-----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, Bk1thPDd/7lqD6ETfyVlpiZ8k6JcZKaopY1W7R9b+t57x97n7whapc+H3OiIgHh+ RHHrZXAhnxWnWjIzxS/JaA== /in/edgar/work/20000829/0000355948-00-500002/0000355948-00-500002.txt : 20000922 0000355948-00-500002.hdr.sgml : 20000922 ACCESSION NUMBER: 0000355948-00-500002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20000531 FILED AS OF DATE: 20000829 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RICHARDSON ELECTRONICS LTD/DE CENTRAL INDEX KEY: 0000355948 STANDARD INDUSTRIAL CLASSIFICATION: [5065 ] IRS NUMBER: 362096643 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-12906 FILM NUMBER: 712395 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 10-K 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended May 31, 2000 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to Commission File No. 0-12906 RICHARDSON ELECTRONICS, LTD. (Exact name of registrant as specified in its charter) Delaware 36-2096643 (State of incorporation or organization) (I.R.S. Employer Identification No.) 40W267 Keslinger Road, P.O. Box 393, LaFox, Illinois 60147-0393 (Address of principal executive offices) Registrant's telephone number including area code: (630) 208-2200 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.05 par value (Cover page continued) (1) Portions of the 2000 Annual Report to Stockholders of registrant for fiscal year ended May 31, 2000 are incorporated in Parts I, II, and IV of this Report. Portions of the registrant's Proxy Statement dated September 5, 2000 for the Annual Meeting of Stockholders scheduled to be held October 3, 2000, which will be filed pursuant to Regulation 14(A), are incorporated by reference in Part III of this Report. Except as specifically incorporated herein by reference, the above mentioned Annual Report to Stockholders and Proxy Statement are not deemed filed as part of this report. The exhibit index is located at pages 17 through 24. (2) PART I Item 1. Business Introduction and Business Strategy Richardson Electronics, Ltd. is a specialized global distributor serving the RF and wireless communications, industrial power conversion, medical imaging, security and display systems markets. The Company provides "engineered solutions" to its customers through product manufacturing, systems integration, prototype design and assembly, testing and logistics. The Company's products include radio frequency ("RF") and microwave components, power semiconductors, electron tubes, microwave generators, data display monitors and electronic security products and systems. These products are used to control, switch or amplify electrical power or signals, or as display, recording or alarm devices in a variety of industrial, communication, security and medical imaging applications. The Company's objective is to be the preeminent international supplier of niche electronic components to industrial and commercial users. To fulfill this objective, the Company employs the following basic strategies: Capitalize on Engineering and Manufacturing Expertise. Richardson believes that its success is largely attributable to its core engineering and manufacturing competency and skill in identifying cost competitive solutions for its customers. Historically, the Company's primary business was the distribution and manufacture of electron tubes and it continues to be a major supplier of these products. Today, the Company out-sources manufacturing requirements for products sold in volume, but retains its engineering and manufacturing expertise. Richardson uses this expertise to identify engineered solutions for customers' applications, not only in electron tube technology but also in each product area in which it specializes. Approximately 45% of the Company's sales are derived from products the Company electronically or physically modifies or sells under its own brand names. Specialize in Selected Niche Markets. The Company specializes in selected niche markets that demand technical service and where price is not the primary competitive factor. Richardson seldom competes against commodity distributors. In many parts of its business, the Company's principal competitors are not other distributors but rather original equipment manufacturers ("OEMs"). The Company offers engineered solutions to its customers including the design, prototype manufacturing and/or electrical or mechanical modification and distribution of approximately 80,000 products ranging in price from $1 to $100,000 each. The Company estimates that over 60% of its sales are attributable to products intended for replacement and repair applications, in contrast to use as components in new original equipment. Leverage Customer Base. The Company strives to grow by offering new products to its existing customer base. The Company has followed the migration of its customers from electron tubes to newer technologies, primarily semiconductors. Sales of products other than electron tubes represented 76.4% of sales in the year ended May 31, 2000, compared to 50.0% five years ago. (3) Maintain Superior Customer Service. The Company maintains more than 300,000 part numbers in its inventory database. More than 80% of all orders received by 6:00 p.m. are shipped complete the same day. Provide Global Service. Richardson has kept pace with the globalization of the electronics industry and addresses the growing demands in lesser developed countries for modern business and industrial equipment, related parts, service and technical assistance. Today, the Company's operations are worldwide in scope through 70 sales offices, including 41 located outside of the United States. In fiscal 2000, 47.8% of sales were to customers based outside of the United States. Maintain State-of-the-Art Information Systems. Through a global information systems network, all offices have real-time access to the Company's database including customer information, product cross-referencing, market analysis, stock availability and quotation activity. Customers have on-line access to product information and purchasing capability via Richardson's web site. The Company offers electronic data interchange to those customers requiring this service. Growth Strategy Richardson's long range plan for growth and profit maximization is defined in three broad categories, discussed in the following paragraphs: Internal Growth. The Company believes that, in most circumstances, internal growth provides the best means of expanding its business. Both geographic and product line expansion have and will continue to be employed. In many instances, Richardson's original product line, electron tubes, provides the foundation for establishing new customer relationships, particularly in developing countries where older technologies are still predominately employed. From that base, the Company can identify and capitalize on new market opportunities for its other products. Over the last five years the Company has tripled the number of sales offices to 70 to support its new business development efforts. Expansion of the Company's product offerings is an on-going program. Of particular note, the following areas have recently generated significant sales gains: amplifiers, transmitters and pallets for wireless communication: microwave generators; medical imaging components; flat panel displays and monitors; and CCTV security systems. Continuous Operational Improvement. During the last five years, the Company embarked on a vigorous program to improve operating efficiencies and asset utilization. Incentive programs were revised to heighten Richardson managers' commitment to these goals. As a result, selling, general and administrative expenses as a percent of sales were reduced from 23.4% in fiscal 1995 to 20.0% in 2000. Inventory turns improved from 1.7 to 2.9 over the same period. Additional programs are ongoing, including a significant investment in a full suite of enterprise resource planning modules scheduled for installation over the next two years. The Company believes European logistics and stocking levels may offer additional opportunities for cost savings. Acquisitions. The Company has a successful record of acquiring and integrating businesses. Since 1980, the Company has acquired 31 companies or significant product lines. The Company evaluates acquisition opportunities on an ongoing (4) basis. The Company's acquisition criteria require that a target provide either (i) product line growth opportunities permitting Richardson to leverage its existing customer base or (ii) additional geographic coverage of Richardson's existing product offerings. In the last five years, the Company's acquisition pace has accelerated with the purchases of 14 businesses including, most significantly, Tubemaster (medical imaging - Medical), Compucon (interconnect devices for RF applications - Wireless), TRL Engineering (amplifier pallet design and engineering - Wireless), Pixelink and Eternal Graphics (dispay systems integration - Display) and Burtek, Security Service International and Adler Video (security systems - Security). Strategic Business Units The marketing, sales, product management and purchasing functions of Richardson are organized in individual strategic business units with specific financial targets. Over the past several years, the Company has been transitioning the organization to a market-focused strategy from a product- driven approach. By the end of fiscal 2000, this transition was complete and the strategic business units were renamed to be consistent with the market served: RF & Wireless Communication Group ("Wireless"), Industrial Power Group ("Industrial"), Medical Systems Group ("Medical"), Display Systems Group ("Display"), and Security Systems Division ("Security"). Common logistics, information systems, finance, legal, human resources and general administrative functions support the entire organization. The Company's support organization is highly centralized with most corporate functions located at its administrative headquarters and principal stocking facility in LaFox, Illinois. RF & Wireless Communications Group The RF & Wireless Communications Group serves the rapidly expanding global RF and wireless communications market and the radio and television broadcast industry. Our product and sales team of RF and wireless engineers assists our customers in designing circuits, selecting cost effective components, planning reliable and timely supply, prototype testing and assembly. Growth in wireless applications is accelerating as the demand for all types of wireless communication gains in popularity. In addition to voice communication, the demand for high-speed data transmission will require major investments in both system upgrades and new systems to handle broader bandwidth. Richardson supports these growth opportunities by partnering with many of the key RF and wireless component manufacturers. A key to our success in relationships with our vendors is the visibility we give them to worldwide demand for their current products and products in development. Richardson's global information system includes programs that our sales force use to forecast product demand by potential design opportunity based on dialog with our customers. This information is shared with our product suppliers to assist them in predicting near and long-term demand and product life cycles. Richardson has global distribution agreements with such leading semiconductor suppliers as Anadigics, Ericsson, M/A-COM, Motorola and Stanford Microdevices. In addition, Richardson has partnerships with many niche RF and wireless suppliers to form the most comprehensive RF and wireless resource in the industry. (5) The following is a description of Wireless's major product groups: RF and Microwave Devices - a wide variety of components, such as mixers, switches, amplifiers, oscillators and RF diodes, which are used in telecommunications and other related markets, such as broadcast, cable TV, cellular and PCS, satellite, wireless LANs and various other wireless applications. Interconnect Devices - passive components used to connect all types of electronic equipment including those employing RF technology. Broadcast Equipment - video products, camera tubes, klystrons, transmitters and accessories used for radio and television broadcasting. Richardson participates in RF and wireless applications and markets throughout the world. In the past year, we increased our market share in RF and wireless applications used in industrial, broadcast, avionics and cellular markets. In particular, in cellular applications, the infrastructure has lagged the 35 percent growth rate of the subscriber market. We expect to benefit as the infrastructure is built out to meet subscriber demand. We are also expanding in the broadband and fiber optic markets as they continue to gain popularity. The rollout of new third generation networks will also require significant investment over the next three years. Richardson's RF and Wireless Communication Group is in an excellent position to participate in each of these growing markets. Industrial Power Group Richardson serves a broad range of customers including the steel, automotive, textile, plastics, semiconductor, marine and avionics industries. Our engineering skill and products are used in countless applications, such as motor speed controls, industrial heating, laser technology, semiconductor manufacturing equipment, radar and welding. Historically, two separate sales teams focused on different product lines: vacuum tubes or solid state. The recent reorganization to a market focus combined the two sales teams into one. The realignment has been extremely well received; not only by our industrial customers, but also our vendors who value the dedication we are placing on the industrial market. We are committed to a specialized strategy of providing engineered solutions for our customers. With our technical expertise and value-added capabilities, we offer the customer design services, lower-cost product alternatives, complementary products, system integration, component modification and assembly. This broad array of services supports both OEM's and end-users. In the past several years, we have expanded our offerings in power conversion technology to include designing new systems. Today, Richardson is a leading systems integrator and supplier of components and assemblies for microwave equipment used to make semiconductors. Designing our products into new OEM applications also increases the probability of our participation in after- market sales. (6) In fiscal 2000, we succeeded in expanding existing franchise agreements as well as attracting new vendors. APT, CPI, Jennings and Westcode expanded our territories and Altec, Bussmann, Ferraz, Illinois Capacitor, Nissei- Arcotronics, and Ohmite were added to our line card. We also represent Burle, Hitachi, Powerex, Toshiba, Triton and Varian. Collectively, this group represents the key manufacturers of industrial electronic components in the world. The following is a description of Industrial's major product groups: Power Semiconductors - solid-state, high-frequency power amplifiers used in broadcast, cellular, aircraft and satellite communications and in many types of electronic instrumentation. In many circumstances, the customer prefers to acquire the complete assembly as opposed to the discrete transistor. Accordingly, the Company expanded its product offering to include design and prototype assembly of amplifiers and pallets incorporating RF power transistors. Silicon Controlled Rectifiers ("SCRs"), Heat Sink Assemblies and Power Semiconductor Modules - components used in many industrial control applications because of their ability to switch large amounts of power at high speeds. These silicon power devices are capable of operating at up to 4,000 volts at 2,000 amperes. High Voltage and Power Capacitors - devices used in industrial, avionics, medical and broadcast applications for filtering, high-current by-pass, feed- through capacitance for harmonic attenuation, pulse shaping, grid and plate blocking, tuning of tank circuits, antenna coupling and energy discharge. Power Amplifier / Oscillator Tubes - vacuum or gas-filled tubes used in applications where current or voltage amplification and/or oscillation is required. Applications include induction heating, diathermy equipment, communications and radar systems and power supplies for voltage regulation or amplification. Microwave Generators - devices that incorporate magnetrons, which are high vacuum oscillator tubes used to generate energy at microwave frequencies. The pulsed magnetron is predominantly used to generate high-energy microwave signals for radar applications. Magnetrons are also used in vulcanizing rubber, food processing, packaging, wood / glue drying, in the manufacture of wafers for the semiconductor industry and other industrial heating applications such as microwave ovens and by the medical industry for sterilization and cancer therapy. Hydrogen Thyratrons - electron tubes capable of high speed and high voltage switching. They are used to control the power in laser and radar equipment and in linear accelerators for cancer treatment. Thyratrons and Rectifiers - vacuum or gas-filled tubes used to control the flow of electrical current. Thyratrons are used to control ignitrons, electric motor speed controls, theatrical lighting and machinery such as printing presses and various types of medical equipment. Rectifiers are used to restrict electric current flow to one direction in power supply applications. (7) Ignitrons - mercury pool tubes used to control the flow of large amounts of electrical current. Their primary applications are in welding equipment, power conversion, fusion research and power rectification equipment. Geographically, our vacuum tube revenue base is spread broadly over the world, while solid state sales are concentrated in North America. This imbalance represents a significant opportunity. With the reorganization, a major initiative is to capitalize on our existing worldwide customer relationships and grow the solid state segment of the business outside North America. Medical Systems Group Richardson's serves the medical imaging market, providing system upgrades and integration services in addition to a wide range of diagnostic imaging components. Our team of medical imaging specialists and display product professionals support medical service dealers and hospital maintenance professionals throughout the world. The Company's broad range of products cover applications for conventional, angiographic, cardiac catherizations and computed tomography X-ray systems, as well as magnetic resonance imaging and ultrasound systems. Glassware products include X-ray tubes, medical imaging intensifiers and camera tubes. Other products include high-resolution color and monochrome displays, X-ray generators, cable assemblies and test equipment. We support the customers' requirements for imaging products from such well-known sources as Comet, Dunlee, InfiMed, Thomson and Toshiba and, for display products, Barco, Clinton, Dome Imaging, Image Systems, NEC, and Philips-FIMI and Siemens. The following is a description of Medical's major product groups: CT and X-Ray Tubes - glass and glass/metal vacuum tubes which generate high- frequency radiation for use in medical diagnostic imaging including fluoroscopy and computer-aided tomography ("CAT-scan"). Image Intensifiers - glass/metal vacuum tube that converts x-ray level radiation into light-level energy used in fluoroscopy, angio, and digital imaging applications. High Resolution Displays - an integral component of Picture and Archiving Communications Systems (PACS), displays are used in diagnostic and non- diagnostic imaging to display the digital image generated from CT, MRI, radiography and other digital modalities. The Medical Systems Group reloads X-ray tubes and image intensifiers in Dallas, Texas, Richmond, Virginia and Amsterdam, Holland. Our Richmond facility also provides engineering expertise to customize medical imaging upgrades and to integrate various imaging components into packaged "sub- systems." Our reloaded X-ray tubes include Dunlee, GE, Philips, Shimatzu, Siemens and Toshiba. Remanufactured or upgraded image intensifier systems include GE, Philips, Picker and Siemens equipment. All reloaded or remanufactured products meet or exceed manufacturers' specifications at a substantial cost savings to the customer. (8) Among Richardson's newest offerings is RELLmed, an integrated imaging solution that facilitates 100 percent compatibility between imaging hardware. RELLmed bundles fully configured computers, video controller cards and high- resolution display monitors into a single operating system that can be custom-designed to meet specific requirements. Display Systems Group Richardson provides system integration and custom product solutions for the public information display, financial, point-of-sale and general data display markets. The customer base includes organizations from virtually all areas of business, including, stock exchanges, airlines, and fast food franchises, in addition to all types of industrial users of data display devices. The Display Systems Group's historical growth and success can be attributed to addressing a niche market as the unique source for Cathode Ray Tube ("CRT") replacement products. The Company has developed an extensive cross reference capability, enabling Richardson to identify replacement tubes for more than 200,000 original manufacturers' model or part numbers and to source and inventory replacement tubes. While CRT's are still an important part of the business, future growth will be in the custom design and integration of flat panel displays and monitors. Our technical sales team assists customers in developing solutions for data display issues such as, space limitations, special mounting, glare, ruggedness, touch screen requirements and many others. This business grew by more than 100 percent in fiscal 2000. Richardson has long-standing relationships with key manufacturers including Clinton, Fujitsu, NEC/Mitsubishi, Panasonic, Philips-FIMI, Siemens and Sony, among others. The Company has design and assembly operations in Chicago, Illinois and Boston, Massachusetts and stocking locations in Chicago and Lincoln, England. The following is a description of Display's major product groups: Cathode Ray Tubes - vacuum tubes that convert an electrical signal into a visual image to display information on computer terminals or televisions. CRTs are used in various environments, including hospitals, financial institutions, airports and numerous other applications wherever large user groups share electronic data visually. The product line includes both monochrome and color tubes. Data Display Monitors - peripheral components incorporating a color or monochrome CRT capable of displaying an analog or digitally generated video signal. Flat Panel Displays - display monitors incorporating a liquid crystal display or plasma panel, rather than a CRT, typically a few inches in depth and ranging from 10" to 42" measured diagonally. Security Systems Division Richardson is a full-line distributor of closed circuit television ("CCTV"), fire, burglary, access control, sound and communication products and accessories. We specialize in CCTV design-in support and have particular (9) expertise in the industry's fastest growth area - applications employing digital technology. Security Systems has 24 stocking locations in the world with 17 in North America, 4 in Europe and 3 in Latin America. Richardson supports its worldwide customer base with products from more than 100 manufacturers including such well-known names as Aiphone, Mitsubishi, Panasonic, Paradox, Pelco, Sanyo, and Sony. In addition, the Company carries its own private label brand, National Electronics. The Company serves its customers through a 100 person direct sales force averaging more than eight years of experience, a 150 page catalog and a web site, www.cctvnet.com. The following is a description of SSD's major product groups: CCTV Products - including cameras, lenses, monitors, scanners, time lapse recorders and associated accessories, are used in surveillance applications and for monitoring hazardous environments in the workplace. Burglar and Fire Detection Systems - devices used to detect unauthorized access to an area or the presence of smoke or fire. Commercial Sound Systems - sound reproduction components used in background music, paging and telephonic interconnect systems. The security systems industry is moving to wireless technology and digital imaging. Richardson is at the forefront of this transition, developing new products under the National brand, including state-of-the-art equipment such as hard disk recording, Internet based transmission, covert applications, speed dome applications and telephone-control-based CCTV systems. Distribution and Marketing The Company purchases RF and power semiconductors, vacuum tubes, monitors and flat panel displays, and electronic security products and systems from various sources, including Advanced Power Technology, Ad-Tech Industries, ANADIGICS, Clinton Electronics, Communication and Power Industries ("CPI"), Covimag, Dunlee, Ericsson, FIMI, Fujitsu, Gasser & Sons, General Electric, Hi Sharp, Huber & Suhner, Jennings, KDI Electronics, Litton, M/A-COM, Marconi, Motorola, MPD, New Japan Radio, Orion/Daewoo, NEC Tecnologies, Panasonic, Paradox, Pelco, Philips, Powerex, QMI, RF Prime, Samsung, Samtell, Sanyo, SCT Societe des Ceramiques, Semtech, Sensormatic, Sony, Stanford Microdevices, Stellex Microwave Systems, Teletube, THOMSON, Toshiba, Triton Services, United Monolithic Semiconductor, Varian Associates and Watkins Johnson. In 1991, the Company settled an antitrust suit with the U.S. Department of Justice related to its participation in the electron tube manufacturing industry. As a consequence, certain of its manufacturing activities became uneconomic and were divested or discontinued, including the sale of the Company's former Brive, France manufacturing operation to local management. Formal transfer of ownership occurred in January 1995. Under an evergreen agreement, the Company and Covimag negotiate a purchase commitment on an annual basis. Covimag is managed by the same individuals previously employed by the Company at this facility. Covimag is highly dependent on Richardson, which is its primary customer. Settlement of purchases under the contract is at standard terms. Except for the supply contract, Richardson has no other financial commitment to or from Covimag. Relationships under the supply contract are believed by the Company to be satisfactory. (10) In addition to the agreement with Covimag, the Company has marketing distribution agreements with various manufacturers in the electron tube, semiconductor and CCTV industries. The most significant distributor agreement is with CPI under which the Company is the exclusive distributor of power grid tubes throughout the world, with the exception of the United States and certain Eastern European countries. In these areas, however, the Company remains the only CPI stocking distributor. Customer orders are taken by the regional sales offices and generally directed to one of Richardson's principal distribution facilities in LaFox, Illinois; Houston, Texas; Vancouver, British Columbia; or Lincoln, England. There are 33 additional stocking locations throughout the world. The Company utilizes a sophisticated data processing network that provides on-line, real- time interconnection of all sales offices and central distribution operations, 24 hours per day, seven days per week. Information on stock availability, cross-reference information, customers and market analyses are instantly obtainable throughout the entire distribution network. Manufacturing The Company distributes its proprietary products principally under the trade names "National," "Cetron," "RF Gain", 'Amperex." and "MONORAY". Approximately 23% of the Company's sales are from products it manufactures or modifies through value-added services. The Company also sells products under these brand names made by independent manufacturers to the Company's specifications. The products currently manufactured by the Company, or subcontracted on a proprietary basis for the Company, include RF amplifiers, transmitters and pallet assemblies thyratrons and rectifiers, power tubes, ignitrons, microwave generators, electronic display tubes, phototubes, SCR assemblies and spark gap tubes. Richardson reloads and remanufactures medical x-ray tubes. The materials used in the manufacturing process consist of glass bulbs and tubing, nickel, stainless steel and other metals, plastic and metal bases, ceramics and a wide variety of fabricated metal components. These materials generally are readily available, but some components may require long lead times for production and some materials are subject to shortages or price fluctuations based on supply and demand. Employees As of May 31, 2000, the Company employed 990 individuals on a full-time basis. Of these, 583 are located in the United States, including 73 employed in administrative and clerical positions, 411 in sales and distribution and 99 in (11) value-added and product manufacturing. The Company's international subsidiaries employ 407 individuals engaged in administration, sales, distribution, manufacturing and value-added operations. All of Richardson's employees are non-union. The Company's relationship with its employees is considered to be good. Competition Richardson believes that, on a global basis, it is a significant distributor of RF and power semiconductors and subassemblies, electron tubes, CRTs and security systems. For many of its product offerings, the Company competes against the OEM for sales of replacement parts and system upgrades to service existing installed equipment. In addition, the Company competes worldwide with other general line distributors and other distributors of electronic components. Patents and Trademarks The Company holds or licenses certain manufacturing patents and trademark rights, including the trademarks "National," "Cetron" and "Amperex." The Company believes that although its patents and trademarks have value, they will not determine the Company's success, which depends principally upon its core engineering capability, marketing technical support, product delivery and the quality and economic value of its products. Item 2. Properties The Company's corporate facility and largest distribution center is owned by the Company and is located on approximately 300 acres in LaFox, Illinois, consisting of approximately 255,000 square feet of manufacturing, warehouse and office space. Richardson also owns a building containing approximately 45,000 square feet of warehouse space on 1.5 acres in Geneva, Illinois. Owned facilities outside of the United States are located in England, Spain and Italy. The Company also maintains leased branch sales offices in or near major cities throughout the world, including 41 locations in North America, 14 in Europe, 11 in the Far East / Pacific Rim and 4 in Latin America. The Company leases production facilities in Texas, Virginia and the Netherlands for its medical tube reloading operations. Item 3. Legal Proceedings The Company is a defendant in Panache Broadcasting of Pennsylvania v. Richardson Electronics, Ltd., et. al., in United States District Court, Northern District of Illinois, filed in 1990. The complaint is a class action for purposes of liability determination on behalf of all persons and businesses in the United States who purchased electron power tubes encompassed by the VASCO joint venture of the defendants from one or more of the defendant corporations at any time between February 26, 1986 and May 13, 1999. The complaint alleges antitrust violations and seeks treble damages, injunctive relief and attorneys fees. The Company has denied the material allegations. The case remains primarily in the preliminary discovery stage. From time to time the Company is involved in other litigation arising in the normal course of its business which is not expected to have a material adverse effect on the Company. (12) Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of stockholders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year ended May 31, 2000. (13) PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters Incorporated herein by reference to pages 18 (for dividend payments) and 30 (for market data) of the Company's 2000 Annual Report for the fiscal year ended May 31, 2000 (Annual Report). Item 6. Selected Financial Data Incorporated herein by reference to page 12 of the Annual Report. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Incorporated herein by reference to pages 13 to 16 of the Annual Report. Item 7A. Quantitative and Qualitative Disclosures about Market Risk Investors should consider carefully the following risk factors, in addition to the other information included and incorporated by reference in this annual report on Form 10-K. All statements other than statements of historical facts included in this report are statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. The words "expect," "estimate," "anticipate," "predict," "believe" and similar expressions and variations thereof are intended to identify forward-looking statements. Such statements appear in a number of places in this report and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things: (i) trends affecting the Company's financial condition or results of operations; (ii) the Company's financing plans; (iii) the Company's business and growth strategies, including potential acquisitions; and (iv) other plans and objectives for future operations. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those predicted in the forward-looking statements or which may be anticipated from historical results or trends. In addition to the information contained in the Company's other filings with the Securities and Exchange Commission, factors which could affect future performance include, among others, the following: * Competitive pressures may increase or change through industry consolidation, entry of new competitors, marketing changes or otherwise. There can be no assurance that the Company will be able to continue to compete effectively with existing or potential competitors. (14) * Technological changes may affect the marketability of inventory on hand. * General economic or business conditions, domestic and foreign, may be less favorable than expected, resulting in lower sales or lower profit margins than expected. * Changes in relationships with customers or vendors, the ability to develop new relationships or the business failure of several customers or vendors may affect sales or profitability. * Political, legislative or regulatory changes may adversely affect the businesses in which the Company operates. * Changes in securities markets, interest rates or foreign exchange rates may adversely affect the Company's performance or stock price. * The failure to obtain or retain key executive or technical personnel could affect future performance. * The Company's growth strategy includes expansion through acquisitions. There can be no assurance that the Company will be able to successfully complete further acquisitions or that past or future acquisitions will not have an adverse impact on the Company's operations. * The potential future sale of Common Stock shares, possible anti-takeover measures available to the Company, dividend policies, as well as voting control of the Company by Edward J. Richardson, Chairman of the Board and Chief Executive Officer may affect the stock price. * The continued availability of financing on favorable terms can not be assured. Item 8. Financial Statements and Supplementary Data Incorporated herein by reference to pages 17 through 28 of the Annual Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. No event has occurred within the 24 month period prior to the date of the Company's most recent financial statements, which would require disclosure under Item 9 of this Report. (15) PART III Item 10. Directors and Executive Officers of the Registrant Information concerning Directors and Executive Officers of the Company is contained in the Company's Proxy Statement to be used in connection with its Annual Meeting of Stockholders scheduled to be held October 3, 2000, under the captions "ELECTION OF DIRECTORS - Information Relating to Directors, Nominees and Executive Officers", "ELECTION OF DIRECTORS - Affiliations" and "SECTION 16 FILINGS", which information is incorporated herein by reference. Item 11. Executive Compensation Incorporated herein by reference is information concerning executive compensation contained in the Company's Proxy Statement to be used in connection with its Annual Meeting of Stockholders scheduled to be held October 3, 2000, under the captions "ELECTION OF DIRECTORS - Directors Compensation" and "EXECUTIVE COMPENSATION", except for captions "REPORT ON EXECUTIVE COMPENSATION" and "PERFORMANCE GRAPH". Item 12. Security Ownership of Certain Beneficial Owners and Management Information concerning security ownership of certain beneficial owners and management is contained in the Company's Proxy Statement to be used in connection with its Annual Meeting of Stockholders scheduled to be held October 3, 2000, under the caption "ELECTION OF DIRECTORS - Information Relating to Directors, Nominees and Executive Officers" and "PRINCIPAL STOCKHOLDERS", which information is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Information concerning certain relationships and related transactions is contained in the Company's Proxy Statement to be used in connection with its Annual Meeting of Stockholders scheduled to be held October 3, 2000, under the caption "EXECUTIVE COMPENSATION - Compensation Committee Interlocks and Insider Participation", which information is incorporated herein by reference. (16) PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) The following consolidated financial statements of the registrant and its subsidiaries included on pages 17 through 28 of the Annual Report are incorporated herein by reference: Filing Method Report of Independent Accountants E 1. FINANCIAL STATEMENTS: Consolidated Balance Sheets - May 31, 2000 and 1999 E Consolidated Statements of Operations - Years ended May 31, 2000, 1999 and 1998 E Consolidated Statements of Cash Flows - Years ended May 31, 2000, 1999 and 1998 E Consolidated Statements of Stockholders' Equity - Years ended May 31, 2000, 1999 and 1998 E Notes to Consolidated Financial Statements E The following consolidated financial information for the fiscal years 2000, 1999 and 1998 is submitted herewith: 2. FINANCIAL STATEMENT SCHEDULE: II. Valuation and Qualifying Accounts E All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore, have been omitted. (b) REPORTS ON FORM 8-K. None. (17) (c)EXHIBITS Filing Method 3(b) By-laws of the Company, as amended, incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1997. NA 4(a) Restated Certificate of Incorporation of the Company, incorporated by reference to Appendix B to the Proxy Statement / Prospectus dated November 13, 1986, incorporated by reference to the Company's Registration Statement on Form S-4, Commission File No. 33-8696. NA 4(b) Specimen forms of Common Stock and Class B Common Stock certificates of the Company incorporated by reference to Exhibit 4(a) to the Company's Registration Statement on Form S-1, Commission File No. 33-10834. NA 4(c) Indenture between the Company and Continental Illinois National Bank and Trust Company of Chicago (including form of 71/4% Convertible Subordinated Debentures due December 15, 2006) incorporated by reference to Exhibit 4(b) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1987. NA 4(c)(1)First Amendment to the Indenture between the Company and First Trust of Illinois, a National Association, as successor to Continental Illinois National Bank and Trust Company of Chicago, dated February 18, 1997, incorporated by reference to Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997. NA 4(d) Indenture between the Company and American National Bank and Trust Company, as Trustee, for 8 1/4% Convertible Senior Subordinated Debentures due June 15, 2006 (including form of 8 1/4% Convertible Senior Subordinated Debentures due June 15, 2006) incorporated by reference to Exhibit 10 of the Company's Schedule 13E-4, filed February 18, 1997. NA 10(a) Loan Agreement dated as of March 1, 1998 among Richardson Electronics, Ltd., various lending institutions and American National Bank and Trust Company of Chicago as Agent, establishing a $50,000,000 Credit Facility, incorporated by reference to Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998. NA (18) 10(a)(1)Amendment dated February 4, 2000 to the loan agreement referred to in 10(a) above. E 10(b) Amended and Restated Credit Agreement made as of March 1, 1998 between Burtek Systems, Inc. as Borrower and First Chicago NBD Bank, Canada as Lender Richardson Electronics, Ltd. as Guarantor, incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998. NA 10(c) The Corporate Plan for Retirement The Profit Sharing / 401(k) Plan Fidelity Basic Plan Document No. 07 dated June 1, 1996, incorporated by reference to Exhibit 10(d) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1996. NA 10(d) The Company's Amended and Restated Incentive Stock Option Plan effective April 8, 1987 incorporated by reference to Exhibit 10(m) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1987. NA 10(d)(1)First Amendment to the Company's Amended and Restated Incentive Stock Option Plan effective April 11, 1989 incorporated by reference to Exhibit 10(l)(1) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1989. NA 10(d)(2)Second Amendment to the Company's Amended and Restated Incentive Stock Option Plan effective April 11, 1989 incorporated by reference to Exhibit 10(l)(2) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1991. NA 10(d)(3)Third Amendment to the Company's Amended and Restated Incentive Stock Option Plan effective April 11, 1989 dated August 15, 1996, incorporated by reference to the Company's Proxy Statement used in connection with its Annual Meeting of Stockholders held October 1, 1996. NA 10(e) Richardson Electronics, Ltd. Employees 1996 Stock Purchase Plan incorporated by reference to Appendix A of the Company's Proxy Statement dated September 3, 1996 for its Annual Meeting of Stockholders held on October 1, 1996. NA 10(f) Employees Stock Ownership Plan and Trust Agreement, (19) effective as of June 1, 1987, dated July 14, 1994, incorporated by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1994. NA 10(f)(1)First Amendment to Employees Stock Ownership Plan and Trust Agreement, dated July 12, 1995, incorporated by reference to Exhibit 10(g)(1) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1995. NA 10(f)(2)Second Amendment to Employees Stock Ownership Plan and Trust Agreement, dated July 12, 1995, dated April 10, 1996, incorporated by reference to the Company's Proxy Statement used in connection with its Annual Meeting of Stockholders held October 1, 1996. NA 10(f)(3)Third Amendment to Employees Stock Ownership Plan and Trust Agreement, dated July 12, 1995, dated April 9,1997 incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1998. NA 10(g) Richardson Electronics, Ltd. Employees 1999 Stock Purchase Plan, incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1999. NA 10(h) Stock Option Plan for Non-Employee Directors incorporated by reference to Appendix A to the Company's Proxy Statement dated August 30, 1989 for its Annual Meeting of Stockholders held on October 18, 1989. NA 10(i) Richardson Electronics, Ltd. 1996 Stock Option Plan for Non-Employee Directors, incorporated by reference to Appendix C of the Company's Proxy Statement dated September 3, 1996 for its Annual Meeting of Stockholders held on October 1, 1996. NA 10(j) The Company's Employees' Incentive Compensation Plan incorporated by reference to Appendix A to the Company's Proxy Statement dated August 31, 1990 for its Annual Meeting of Stockholders held on October 9, 1990. NA 10(j)(1)First Amendment to Employees Incentive Compensation Plan incorporated by reference to Exhibit 10(p)(1) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1991. NA 10(j)(2)Second Amendment to Employees Incentive Compensation (20) Plan dated August 15, 1996, incorporated by reference to the Company's Proxy Statement used in connection with its Annual Meeting of Stockholders held October 1, 1996. NA 10(k) Richardson Electronics, Ltd. Employees' 1994 Incentive Compensation Plan incorporated by reference to Exhibit A to the Company's Proxy Statement dated August 31, 1994 for its Annual Meeting of Stockholders held on October 11, 1994. NA 10(k)(1)First Amendment to the Richardson Electronics, Ltd. Employees' 1994 Incentive Compensation Plan dated August 15, 1996, incorporated by reference to the Company's Proxy Statement used in connection with its Annual Meeting of Stockholders held October 1, 1996. NA 10(l) Richardson Electronics, Ltd. 1996 Incentive Compensation Plan incorporated by reference to Appendix B of the Company's Proxy Statement dated September 3, 1996 for its Annual Meeting of Stockholders held on October 1, 1996. NA 10(m) Richardson Electronics, Ltd. 1998 Incentive Compensation Plan incorporated by reference to Appendix A of the Company's Proxy Statement dated September 3, 1998 for its Annual Meeting of Stockholders held on October 6, 1998. NA 10(n) Correspondence outlining Agreement between the Company and Arnold R. Allen with respect to Mr. Allen's employment by the Company, incorporated by reference to Exhibit 10(v) to the Company's Annual Report on Form 10-K, for the fiscal year ended May 31, 1985. NA 10(n)(1)Letter dated February 3, 1992 between the Company and Arnold R. Allen outlining Mr. Allen's engagement as a consultant by the Company, incorporated by reference to Exhibit 10 (r)(1) to the Company's Annual Report on Form 10-K, for the fiscal year ended May 31, 1992. NA 10(n)(2)Letter dated April 1, 1993 between the Company and Arnold R. Allen regarding Mr. Allen's engagement as consultant by the Company, incorporated by reference to Exhibit 10(i)(2) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1994. NA 10(o) Letter dated January 14, 1992 between the Company and Jacques Bouyer setting forth the terms of Mr. Bouyer's engagement as a management consultant by the Company (21) for Europe, incorporated by reference to Exhibit 10(t)(1) to the Company's Annual Report on Form 10-K for the fiscal year ended on May 31, 1992. NA 10(o)(1)Letter dated January 15, 1992 between the Company and Jacques Bouyer setting forth the terms of Mr. Bouyer's engagement as a management consultant by the Company for the United States, incorporated by reference to Exhibit 10(t)(1) to the Company's Annual Report on Form 10-K for the fiscal year ended on May 31, 1992. NA 10(p) Letter dated January 13, 1994 between the Company and Samuel Rubinovitz setting forth the terms of Mr. Rubinovitz' engagement as management consultant by the Company incorporated by reference to Exhibit 10(m) to the Company's Annual Report on Form 10-K for the fiscal year ended on May 31, 1994. NA 10(q) Letter dated May 20, 1994 between the Company and William J. Garry setting forth the terms of Mr. Garry's employment by the Company, incorporated by reference to Exhibit 10(p) to the Company's Annual Report on Form 10-K for the fiscal year ended on May 31, 1994. NA 10(r) Employment, Nondisclosure and Non-Compete Agreement dated June 1, 1998 between the Company and Flint Cooper setting forth the terms of Mr. Cooper's employment by the Company, incorporated by reference to Exhibit 10(p) to the Company's Annual Report on Form 10-K for the fiscal year ended on May 31, 1998. NA 10(s) Agreement dated January 16, 1997 between the Company and Dennis Gandy setting forth the terms of Mr. Gandy's employment by the Company, incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997. NA 10(t) Agreement dated March 21, 1997 between the Company and David Gilden setting forth the terms of Mr. Gilden's employment by the Company, incorporated by reference to Exhibit 10(c) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997. NA 10(u) Employment agreement dated as of November 7, 1996 between the Company and Bruce W. Johnson incorporated by reference to Exhibit (c)(4) of the Company's Schedule 13 E-4, filed December 18, 1996. NA (22) 10(v) Employment agreement dated as of May 10, 1993 as amended March 23, 1998 between the Company and Pierluigi Calderone incorporated by reference to Exhibit 10(d) of the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998. NA 10(w) Employment agreement dated as of September 26, 1999 between the Company and Murray Kennedy. E 10(x) Employment agreement dated as of November 22, 1999 between the Company and Gregory Peloquin. E 10(y) Employment agreement dated as of December 7, 1999 between the Company and Kevin Oakley. E 10(z) Employment agreement dated as of May 30, 2000 between the Company and Robert Heise. E 10(aa) The Company's Directors and Officers Liability Insurance Policy issued by Chubb Group of Insurance Companies Policy Number 8125-64-60A, incorporated by reference to Exhibit 10(t) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1991. NA 10(bb)(1)The Company's Directors and Officers Executive Liability and Indemnification Insurance Policy renewal issued by Chubb Group of Insurance Companies - Policy Number 8125-64-60F, incorporated by reference to Exhibit 10(z)(1) of the Company's Annual Report on Form 10-K for the year ended May 31, 1999. NA 10(bb)(2)The Company's Excess Directors and Officers Liability and Corporate Indemnification Policy issued by St. Paul Mercury Insurance Company - Policy Number 900DX0414, incorporated by reference to Exhibit 10(z)(2) of the Company's Annual Report on Form 10-K for the year ended May 31, 1999. NA 10(bb)(3)The Company's Directors and Officers Liability Insurance Policy issued by CNA Insurance Companies - Policy Number DOX600028634, incorporated by reference to Exhibit 10(z)(3) of the Company's Annual Report on Form 10-K for the year ended May 31, 1999. NA 10(cc) Distributor Agreement, executed August 8, 1991, between Registrant and Varian Associates, Inc., incorporated by reference to Exhibit 10(d) of the Company's Current Report on Form 8-K for September 30, 1991. NA (23) 10(cc)(1)Amendment, dated as of September 30, 1991, between Registrant and Varian Associates, Inc., incorporated by reference to Exhibit 10(e) of the Company's Current Report on Form 8-K for September 30, 1991. NA 10(cc)(2)First Amendment to Distributor Agreement between Varian Associates, Inc. and the Company as of April 10, 1992, incorporated by reference to Exhibit 10(v)(5) of the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992. NA 10(cc)(3)Consent to Assignment and Assignment dated August 4, 1995 between Registrant and Varian Associates Inc., incorporated by reference to Exhibit 10(s)(4) of the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1995. NA 10(cc)(4)Final Judgment, dated April 1, 1992, in the matter of United States of America v. Richardson Electronics, Ltd., filed in the United States District Court for the Northern District of Illinois, Eastern Division, as Docket No. 91 C 6211 incorporated by reference to Exhibit 10(v)(7) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992. NA 10(dd) Trade Mark License Agreement dated as of May 1, 1991 between North American Philips Corporation and the Company incorporated by reference to Exhibit 10(w)(3) of the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1991. NA 10(ee) Agreement among Richardson Electronics, Ltd., Richardson Electronique S.A., Covelec S.A. (now known as Covimag S.A.), and Messrs. Denis Dumont and Patrick Pertzborn, delivered February 23, 1995, translated from French, incorporated by reference to Exhibit 10(b) to the Company's Report on Form 8-K dated February 23, 1995. NA 10(ff) Settlement Agreement by and between the United States of America and Richardson Electronics, Ltd. Dated May 31, 1995 incorporated by reference to Exhibit 10(a) to the Company's Report on Form 8-K dated May 31, 1995. NA 13 Annual Report to Stockholders for fiscal year ending May 31, 2000 (except for the pages and information thereof expressly incorporated by reference in this Form 10-K, the Annual Report to Stockholders is provided solely for the information of the Securities and Exchange Commission and is not deemed "filed" as part of this Form 10-K). E (24) 21 Subsidiaries of the Company. E 23 Consent of Independent Auditors. E 27 Financial Data Schedule. E (25) SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. RICHARDSON ELECTRONICS, LTD. By:/s/ By:/s/ Edward J. Richardson, Bruce W. Johnson, Chairman of the Board and President and Chief Operating Chief Executive Officer Officer By:/s/ William J. Garry Senior Vice President and Date: August 28, 2000 Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ /s/ Edward J. Richardson, Chairman Bruce W. Johnson, President, of the Board, Chief Executive Chief Operating Officer, and Director Officer (principal executive officer) August 28, 2000 and Director August 28, 2000 /s/ /s/ William J. Garry, Senior Vice Arnold R. Allen, Director President and Chief Financial August 28, 2000 Officer (principal financial and accounting officer) and Director August 28, 2000 /s/ /s/ Jacques Bouyer, Director Scott Hodes, Director August 28, 2000 August 28, 2000 /s/ /s/ Ad Ketelaars, Director John Peterson, Director August 28, 2000 August 28, 2000 /s/ /s/ Harold L. Purkey, Director Samuel Rubinovitz, Director August 28, 2000 August 28, 2000 (26) EX-10 2 0002.txt Exhibit 10(a)1 FIRST AMENDMENT TO CREDIT AGREEMENT DATED AS OF MARCH 1, 1998 (AS AMENDED FROM TIME TO TIME, THE "AGREEMENT"), BY AND BETWEEN RICHARDSON ELECTRONICS, LTD., A DELAWARE CORPORATION (THE "BORROWER"), AND AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, HARRIS TRUST AND SAVINGS BANK AND MELLON BANK, AS LENDERS (THE "LENDERS"), AND AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, AS AGENT (THE "AGENT") This First Amendment to the Agreement ("First Amendment") is entered as of February 4, 2000 by and among the Borrower, the Lenders and the Agent. All capitalized terms stated in this First Amendment and not defined herein shall have the same meaning as set forth in the Agreement. WHEREAS, the Lenders have made Loans to the Borrower pursuant to the Agreement; and WHEREAS, the Borrower has asked the Lenders and the Lenders have agreed to extend the last possible Facility Termination Date from March 1, 2001 to June 1, 2001 and otherwise amend the terms of the Agreement as set forth herein. Now, therefore, in consideration of the fulfillment of each of the terms and conditions set forth herein, the parties hereto agree as follows: Section 1. Amendments to Agreement. 1. The definition of Facility Termination Date in the Agreement is amended by deleting the date "March 1, 2001" therefrom and substituting therefor the date "June 1, 2001". Section 2. Representations and Warranties. The Borrower represents and warrants that: a. The representations and warranties contained in the Agreement are true and correct in all material respects on and as of the date hereof as if such representations and warranties had been made on and as of the date hereof; and b. The Borrower is in compliance with all the terms and provisions set forth in the Agreement and no Event of Default or, Default has occurred and is continuing. Section 3. Conditions to Effectiveness. This First Amendment is subject to the satisfaction in full of the following conditions precedent: a. The Agent shall have received executed originals of this First Amendment; and b. The Agent shall have received board resolutions from the Borrower authorizing the execution of this First Amendment and other documents executed in connection herewith; and c. The Agent shall have received payment of the expenses stated in Section 7 hereof; and d. All legal matters incident to this First Amendment shall be reasonably satisfactory to Neal, Gerber & Eisenberg, counsel for the Agent. Section 4. Full Force and Effect. Except as expressly provided herein, the Agreement shall continue in full force and effect in accordance with the provisions thereof on the date hereof. As used in the Agreement, the terms "Agreement", "this Agreement", "herein", "hereafter", "hereto", "hereof", and words of similar import, shall, unless the context otherwise requires, mean the Agreement as amended by this First Amendment. Section 5. APPLICABLE LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. Section 6. Counterparts. This First Amendment may be executed in two or more counterparts, each of which shall constitute an original, but all of which when taken together shall constitute one instrument. Section 7. Expenses. The Borrower agrees to pay all out-of- pocket expenses incurred by the Agent in connection with the preparation, execution and delivery of this First Amendment and the other documents incident hereto, including, but not limited to, the reasonable fees and disbursements of Neal, Gerber & Eisenberg, counsel for the Agent. Section 8. Headings. The headings of this First Amendment are for the purposes of reference only and shall not affect the construction of this First Amendment. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed by their duly authorized officers, all as of the date and year first above written. Borrower: RICHARDSON ELECTRONICS, LTD., a Delaware Corporation By: /s/ William J. Garry Its: Senior VP and CFO Lenders: AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO By: /s/ Gregory Teegen Its: Vice President HARRIS TRUST AND SAVINGS BANK By: /s/ Raymond Whitaker Its: Managing Director MELLON BANK By: Dwayne Feeney Its: Vice President Agent: AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO By: Gregory Teegen Its: Vice President EX-10 3 0003.txt Exhibit 10(w) EMPLOYMENT, NONDISCLOSURE AND NON-COMPETE AGREEMENT EMPLOYMENT, NONDISCLOSURE AND NON-COMIPETE AGREEMENT ("Agreement") made and entered into as of this 26th day of September, 1999 by and between RICHARDSON ELECTRONICS, LTD., a Delaware corporation with its principal place of business located at 40W267 Keslinger Road, LaFox, IL 60147 (the "Employer"), and Murray Kennedy, an individual whose current residence is located at 1412 Ronzheimer, St. Charles, IL 60174 (Employee"). RECITALS WHEREAS, the Employer desires to employ Employee as its Vice President and General Manager Industrial Power Products Division 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 has and will become familiar with certain confidential information of the Employer which provides Employer with a competitive advantage in the marketplace in which it competes, is exceptionally valuable to the Employer, and is 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 Vice President and General Manager, Industrial Power Products Division. 1.02 Term of Employment. Employee's employment pursuant to this Agreement shall commence on March 23, 1994 or such earlier date as may be agreed upon by Employee and the Employer and, subject to the other provisions of this Agreement, the term of such employment (the "Employment Term") shall continue indefinitely on an "at will" basis. 1.03 Duties. Employee shall perform such managerial duties and responsibilities in connection with the Company's Industrial Power Products Division or its successor, and such other duties and responsibilities as may be assigned by the President/COO, or such other person as the Employer may designate from time to time 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 Employer's President/COO or such other person as the Employer may designate from time to time 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 and to developing and improving the business and best interests of the Company. Employee will use all reasonable efforts to promote and protect the good name of the Company and will comply with all of his obligations, undertakings, promises, covenants and agreements as set forth in this Agreement. Employee will not, during the Employment Term or during any period during which Employee is receiving payments pursuant to Article 2 and/or Section 5.04, engage in any activity which would have, or reasonably be expected to have, an adverse affect on the Employer's reputation, goodwill or business relationships or which would result, or reasonably be expected to result, in economic harm to the Employer. ARTICLE TWO COMPENSATION AND BENEFITS For all services to be rendered by Employee 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 below. 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 One Hundred Thirty Thousand and 00/100 Dollars ($130,000.00), 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, Employer may not decrease Employee's Base Salary. 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 Incentive Plan . During the term of the Employee's employment hereunder, the Employee shall be a participant in the SBU Incentive Plan, as modified from time to time (the "Annual Incentive Plan"). The Employee's "target bonus percentage" for purposes of the Annual Incentive Plan shall be fifty percent (50%) for calendar year 1999 (as if paid for a full year). Such bonus shall be paid strictly in accordance with the Annual Incentive Plan. For calendar year 2000 and thereafter, Employee's bonus shall be determined and paid strictly in accordance with the Annual Incentive Plan as modified or reduced by Employer at its discretion, and 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 Other Benefits. Employer will provide Employee such benefits (other than bonus, severance and incentive compensation benefits) as are generally provided by the Employer to its other employees, including but not limited to, 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 Plan. 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. 2.04 Disability. Any compensation Employee receives under any disability benefit plan provided by Employer during any period of disability, injury or illness shall be in lieu of the compensation which Employee would otherwise receive under Article Two during such period of disability, injury or sickness. 2.05 Withholding. All salary, bonus and other payments described in this Agreement shall be subject to withholding for federal, state or local taxes, amounts 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 RECORDS REPUTATION 3.01 Definition of Confidential Information. For purposes of this Agreement, the term "Confidential Information" shall mean all of the following materials and information (whether or not reduced to writing and whether or not patentable) to which Employee receives or has received access or develops or has developed in whole or in part as a direct or indirect result of his employment with Employer or through the use of any of Employer's facilities or resources: (1) Marketing techniques, practices, methods, plans, systems, processes, purchasing information, price lists, pricing policies, quoting procedures, financial information, customer names, contacts and requirements, customer information and data, product information, supplier names, contacts and capabilities, supplier information and data, and other materials or information relating to the manner in which Employer, its customers and/or suppliers do business; (2) Discoveries, concepts and ideas, whether patentable or not, or copyrightable or not, including without limitation the nature and results of research and development activities, processes, formulas, techniques, "know-how," designs, drawings and specifications; (3) Any other materials or information related to the business or activities of Employer which are not generally known to others engaged in similar businesses or activities or which could not be gathered or obtained without significant expenditure of time, effort and money; and (4) All inventions and ideas which are derived from or relate to Employee's access to or knowledge of any of the above enumerated materials and information. The Confidential Information shall not include any materials or information of the types specified above to the extent that such materials or information are publicly known or generally utilized by others engaged in the same business or activities in the course of which Employer utilized, developed or otherwise acquired such information or materials and which Employee has gathered or obtained (other than on behalf of the Employer) after termination of his employment with the Employer from such other public sources by his own expenditure of significant time, effort and money after termination of his employment with the Employer. Failure to mark any of the Confidential Information as confidential shall not affect its status as part of the Confidential Information under the terms of this Agreement. 3.02 Ownership of Confidential Information. Employee agrees that the Confidential Information is and shall at all times remain the sole and exclusive property of Employer. Employee agrees immediately to disclose to Employer all Confidential Information developed in whole or part by him during the term of his employment with Employer and to assign to Employer any right, title or interest he or she may have in such Confidential Information. Without limiting the generality of the foregoing, every invention, improvement, product, process, apparatus, or design which Employee may take, make, devise or conceive, individually or jointly with others, during the period of his employment by the Employer, whether during business hours or otherwise, which relates in any manner to the business of the Employer either now or at any time during the period of his employment), or which may be useful to the Employer in connection with its business (hereinafter collectively referred to as "Invention") shall belong to and be the exclusive property of the Employer and Employee will make full and prompt disclosure to the Employer of every Invention. Employee will assign to the Employer, or its nominee, every Invention and Employee will execute all assignments and other instruments or documents and do all other things necessary and proper to confirm the Employer's right and title in and to every Invention; and Employee will perform all proper acts within his power necessary or desired by the Employer to obtain letters patent in the name of the Employer (at the Employer's expense) for every Invention in whatever countries the Employer may desire, without payment by the Employer to Employee of any royalty, license fee, price or additional compensation. 3.03. Non Disclosure of Confidential Information. Except as required in the faithful performance of Employee's duties hereunder (or as required by law), during the term of his employment with Employer and for a period after the termination of such employment until the Confidential Information no longer meets the definition set forth above of Confidential Information with respect to Employee, Employee agrees not to directly or indirectly reveal, report, publish, disseminate, disclose or transfer any of the Confidential Information to any person or entity, or utilize for himself or any other person or entity any of the Confidential Information for any purpose (including, without limitation, in the solicitation of existing Employer customers or suppliers), except in the course of performing duties assigned to him by Employer. Employee further agrees to use his best endeavors to prevent the use for himself or others, or dissemination, publication, revealing, reporting or disclosure of, any Confidential Information. 3.04 Protection of Reputation. Employee agrees that he or she will at no time, either during his employment with the Employer or at any time after termination of such employment, engage in conduct which injures, harms, corrupts, demeans, defames, disparages, libels, slanders, destroys or diminishes in any way the reputation or goodwill of the Employer, its subsidiaries, or their respective shareholders, directors, officers, employees, or agents, or the services provided by the Employer or the products sold by the Employer, or its other properties or assets, including, without limitation, its computer systems hardware and software and its data or the integrity and accuracy thereof. 3.05 Records and Use of Employer Facilities. All notes, data, reference materials, memoranda and records, including, without limitation, data on the Employer's computer system, computer reports, products, customers and suppliers lists and copies of invoices, in any way relating to any of the Confidential Information or Employer's business shall belong exclusively to Employer, and Employee agrees to maintain them in a manner so as to secure their confidentiality and to turn over to Employer all copies of such materials (in whole or in part) in his possession or control at the request of Employer or, in the absence of such a request, upon the termination of Employee's employment with Employer. Upon termination of Employee's employment with Employer, Employee shall immediately refrain from seeking access to Employer's (a) telephonic voice mail, E-mail or message systems, (b) computer system and (c) computer data bases and software. The foregoing shall not prohibit Employee from using Employer's public Internet (not intranet) site. ARTICLE FOUR NON-COMPETE AND NON-SOLICITATION COVENANTS 4.01 Non-Competition and Non-Solicitation. Employee acknowledges that it may be very difficult for him to avoid using or disclosing the Confidential Information in violation of Article Three above in the event that he or she is employed by any person or entity other than the Employer in a capacity similar or related to the capacity in which he or she is employed by the Employer. Accordingly, Employee agrees that he or she will not, during the term of employment with Employer and for a period of one (1) year after the termination of such employment, irrespective of the time, manner or cause of such termination, directly or indirectly (whether or not for compensation or profit): (1) Engage in any business or enterprise the nature of which is directly competitive with that of the Employer (a "Prohibited Business"); or (2) Participate as an officer, director, creditor, promoter, proprietor, associate, agent, employee, partner, consultant, sales representative or otherwise, or promote or assist, financially or other wise, or directly or indirectly own any interest in any person or entity involved in any Prohibited Business; or (3) Canvas, call upon, solicit, entice, persuade, induce, respond to, or otherwise deal with, directly or indirectly, any individual or entity which, during Employee's term of employment with the Employer, was or is a customer or supplier, or proposed customer or supplier, of the Employer whom Employee called upon or dealt with, or whose account Employee supervised, for the following: (a) to purchase (with respect to customers) or sell (with respect to suppliers) products of the types or kinds sold by the Employer or which could be substituted for (including, but not limited to, rebuilt products), or which serve the same purpose or function as, products sold by the Employer (all of which products are herein sometimes referred to, jointly and severally, as "Prohibited Products"), or (b) to request or advise any such customer or supplier to withdraw, curtail or cancel its business with the Employer; or (4) For himself or for or through any other individual or entity call upon, solicit, entice, persuade, induce or offer any individual who, during Employee's term of employment with the Employer, was an employee or sales representative or distributor of the Employer, employment by, or representation as sales agent or distributor for, any one other than the Employer, or request or advise any such employee or sales agent or distributor to cease employment with or representation of the Employer, and Employee shall not approach, respond to, or otherwise deal with any such employee or sales representative or distributor of Employer for any such purpose, or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity. 4.02 Obligation independent Each obligation of each subparagraph and provision of Section 4.01 shall be independent of any obligation under any other subparagraph or provision hereof or thereof. 4.03 Public Stock Nothing in Section 4.01, however, shall prohibit Employee from owning (directly or indirectly through a parent, spouse, child or other relative or person living in the same household with Employee or any of the foregoing), as a passive investment, up to I % of the issued and outstanding shares of any class of stock of any publicly traded company. 4.04 Business Limitation If, at the termination of Employee's employment and for the entire period of twelve (12) months prior thereto his duties and responsibilities are limited by the Employer so that he or she is specifically assigned to, or responsible for, one or more divisions, subsidiaries or business units of the Employer, then subparagraphs (1) through (3) of Section 4.01 shall apply only to any business which competes with the business of such divisions, subsidiaries or business units. 4.05 Area Limitation If at the termination of Employee's employment and for the entire period of twelve (12) months prior thereto he or she has responsibility for only a designated geographic area, then subparagraphs (1) through (3) of Section 4.01 shall apply only within such area. 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 to discuss the allegations. 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, (iii) any violation by the Employee of any of the provisions of Articles Three, or Four, or (iv) 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 or authority to do any business deemed necessary or desirable for the conduct of its actual or proposed business. 5.02 Termination of Employee Because of Employee's Disabili1y. Injury or Illness. 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 one hundred eighty (180) consecutive days before such termination can be made effective. Any compensation Employee receives under any disability benefit plan provided by Employer during any period of disability, injury or illness shall be in lieu of the compensation which Employee would otherwise receive under Article Two during such period of disability, injury or sickness. 5.03 Termination as a Result of Employee's Death. The obligations of the Employer to Employee pursuant to this Agreement 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 upon ten (10) days prior written notice to Employee. If Employee's employment is terminated by the Employer during the Employment Term for any reason other than the reason set forth in Sections 5.01, 5.02 or 5.03 above, the Employer shall continue to pay to Employee for a period of twelve (12) months, an amount equal to one hundred percent (100%) of his then current Base Salary and one hundred percent (100%) of the Bonus earned and paid during the 12 months prior to the date of termination (if employed for less than 12 months prior to termination the Bonus earned and paid for the period of employment shall be annualized and 50% of the annualized amount will be paid) in installments on the same dates as the Employer makes payroll payments under its customary practice. In such case Employee shall not be entitled to receive, unless otherwise required by law, any subsequent Other Benefits. 5.05 Termination by Employee. Subject to the provisions of Articles Three and Four above, Employee may terminate his employment by the Employer at any time by written notice to Employer. If Employee's employment is so terminated, the Employer shall be obligated to continue 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, however, Employee and the Employer acknowledge and agree to the fullest extent permitted by law, that Employee shall forfeit, and the Employer shall not be responsible to pay or fund, directly or indirectly, any accrued but unpaid bonus or award (howsoever described including the Annual Incentive Plan); accumulated but unpaid sick leave; accumulated but unpaid vacation time; deferred compensation; severance pay or benefits; any and all benefits which are accrued but not vested under any pension, profit sharing or other qualified retirement plan and all service credits under each such plan (subject to any reinstatement of such credits upon future reemployment with the Employer in accordance with federal law); and right to post-employment coverage under any health, insurance or other welfare benefit plan, including rights arising under Title X of COBRA or any similar federal or state law (except that continuation coverage rights of Employee's spouse and other dependents, if any, under such plans or laws shall be forfeited only with their consent); or any Other Benefits, if any, provided to Employee under any policy, program or plan of the Employer not specifically described above, after the date of termination to which Employee might otherwise be entitled under this Agreement but for his resignation. ARTICLE SIX REMEDIES 6.01 Employee acknowledges that the restrictions contained in this Agreement will not prevent him from obtaining such other gainful employment he or she may desire to obtain or cause him any undue hardship and are reasonable and necessary in order to protect the legitimate interests of Employer and that violation thereof would result in irreparable injury to Employer. Employee therefor acknowledges and agrees that in the event of a breach or threatened breach by Employee of the provisions of Article Three or Article Four or Section 1.03, Employer shall be entitled to an injunction restraining Employee from such breach or threatened breach and Employee shall lose all rights to receive any payments under Section 5.04. Nothing herein shall be construed as prohibiting or limiting Employer from pursuing any other remedies available to 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. 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 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 Severabili1y. Should any of Employee's obligations under this Agreement or the application of the terms or provisions of this Agreement to any person or circumstances, to any extent, be found illegal, invalid or unenforceable in any respect, such illegality, invalidity or unenforceability shall not affect the other provisions of this Agreement, all of which shall remain enforceable in accordance with their terms, or the application of such terms or provisions to persons or circumstances other than those to which it is held illegal, invalid or unenforceable. Despite the preceding sentence, should any of Employee's obligations under this Agreement be found illegal, invalid or unenforceable because it is too broad with respect to duration, geographical or other scope, or subject matter, such obligation shall be deemed and construed to be reduced to the maximum duration, geographical or other scope, and subject matter allowable under applicable law. The covenants of Employee in Articles Three and Four and each subparagraph of Section 4.01 are of the essence of this Agreement; they shall be construed as independent of any other provision of this Agreement; and the existence of any claim or cause of action of Employee against the Employer, whether predicated on the Agreement or otherwise shall not constitute a defense to enforcement by the Employer of any of these covenants. The covenants of Employee shall be applicable irrespective of whether termination of employment hereunder shall be by the Employer or by Employee, whether voluntary or involuntary, or whether for cause or without cause. 7.03 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 three (3) 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. 7.04 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. Failure by any party to claim any breach or violation of any provision of this Agreement shall not constitute a precedent or be construed as a waiver of any subsequent breaches hereof. 7.05 Continuing Obligation. The obligations, duties and liabilities of Employee pursuant to Articles Three and Four of this Agreement are continuing, absolute and unconditional and shall remain in full force and effect as provided herein and survive the termination of this Agreement. 7.06 No Conflicting Obligations or Use. Employer does not desire to acquire from Employee any secret or confidential know-how or information which he may have acquired from others nor does it wish to cause a breach of any non compete or similar agreement to which Employee may be subject. Employee represents and warrants that (i) other than for this Agreement, he is not subject to or bound by any confidentiality agreement or non disclosure or non compete agreement or any other agreement having a similar intent, effect or purpose, and (ii) he is free to use and divulge to Employer, without any obligation to or violation of any right of others, any and all information, data, plans, ideas, concepts, practices or techniques which he will use, describe, demonstrate, divulge, or in any other manner make known to Employer during the performance of services 7.07 Attorneys Fees. In the event that either party institutes litigation against the other party for violation of this Agreement the losing party in such litigation, after a hearing or a trial on the merits, shall pay to the other party the other parties' costs and expenses, including attorneys fees, in such litigation. 7.08 Advise New Employers. During Employee's employment with the Employer and for one (1) year thereafter, Employee will communicate the contents of Articles Three and Four to any individual or entity which Employee intends to be employed by, associated with, or represent which is engaged in a business which is competitive to the business of Employer. 7.09 Captions. The captions of Articles and Sections this Agreement are inserted for convenience only and are not to be construed as forming a part of this Agreement. EMPLOYEE ACKNOWLEDGES THAT HE OR SHE HAS READ AND FULLY UNDERSTANDS EACH AND EVERY PROVISION OF THE FOREGOING AND DOES HEREBY ACCEPT AND AGREE TO THE SAME. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. EMPLOYEE EMPLOYER /s/ Murray Kennedy By: /s/ Joseph Grill Title: Senior VP, Human Resources EX-10 4 0004.txt Exhibit 10(x) EMPLOYMENT, NONDISCLOSURE AND NON-COMPETE AGREEMENT EMPLOYMENT, NONDISCLOSURE AND NON-COMIPETE AGREEMENT ("Agreement") made and entered into as of this 22nd day of November, 1999 by and between RICHARDSON ELECTRONICS, LTD., a Delaware corporation with its principal place of business located at 40W267 Keslinger Road, LaFox, IL 60147 (the "Employer"), and Gregory Peloquin, an individual whose current residence is located at 106 Lakeside Drive, Apt. 131, St. Charles, IL 60174 (Employee"). RECITALS WHEREAS, the Employer desires to employ Employee as its Vice President and General Manager RF Wireless & Communications Division 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 has and will become familiar with certain confidential information of the Employer which provides Employer with a competitive advantage in the marketplace in which it competes, is exceptionally valuable to the Employer, and is 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 Vice President and General Manager, RF Power & Communications Division. 1.02 Term of Employment. Employee's employment pursuant to this Agreement shall commence on November 22, 1999 or such earlier date as may be agreed upon by Employee and the Employer and, subject to the other provisions of this Agreement, the term of such employment (the "Employment Term") shall continue indefinitely on an "at will" basis. 1.03 Duties. Employee shall perform such managerial duties and responsibilities in connection with the Company's RF Power & Communications Division or its successor, and such other duties and responsibilities as may be assigned by the President/COO, or such other person as the Employer may designate from time to time 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 Employer's President/COO or such other person as the Employer may designate from time to time 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 and to developing and improving the business and best interests of the Company. Employee will use all reasonable efforts to promote and protect the good name of the Company and will comply with all of his obligations, undertakings, promises, covenants and agreements as set forth in this Agreement. Employee will not, during the Employment Term or during any period during which Employee is receiving payments pursuant to Article 2 and/or Section 5.04, engage in any activity which would have, or reasonably be expected to have, an adverse affect on the Employer's reputation, goodwill or business relationships or which would result, or reasonably be expected to result, in economic harm to the Employer. ARTICLE TWO COMPENSATION AND BENEFITS For all services to be rendered by Employee 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 below. 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 One Hundred Twenty Five Thousand and 00/100 Dollars ($125,000.00), 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, Employer may not decrease Employee's Base Salary. 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 Incentive PI . During the term of the Employee's employment hereunder, the Employee shall be a participant in the SBU Incentive Plan, as modified from time to time (the "Annual Incentive Plan"). The Employee's "target bonus percentage" for purposes of the Annual Incentive Plan shall be fifty percent (50%) for calendar year 2000 (as if paid for a full year). Such bonus shall be paid strictly in accordance with the Annual Incentive Plan. For calendar year 2001 and thereafter, Employee's bonus shall be determined and paid strictly in accordance with the Annual Incentive Plan as modified or reduced by Employer at its discretion, and 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 Other Benefits. Employer will provide Employee such benefits (other than bonus, severance and incentive compensation benefits) as are generally provided by the Employer to its other employees, including but not limited to, 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 Plan. 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. 2.04 Disability. Any compensation Employee receives under any disability benefit plan provided by Employer during any period of disability, injury or illness shall be in lieu of the compensation which Employee would otherwise receive under Article Two during such period of disability, injury or sickness. 2.05 Withholding. All salary, bonus and other payments described in this Agreement shall be subject to withholding for federal, state or local taxes, amounts 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 RECORDS REPUTATION 3.01 Definition of Confidential Information. For purposes of this Agreement, the term "Confidential Information" shall mean all of the following materials and information (whether or not reduced to writing and whether or not patentable) to which Employee receives or has received access or develops or has developed in whole or in part as a direct or indirect result of his employment with Employer or through the use of any of Employer's facilities or resources: (1) Marketing techniques, practices, methods, plans, systems, processes, purchasing information, price lists, pricing policies, quoting procedures, financial information, customer names, contacts and requirements, customer information and data, product information, supplier names, contacts and capabilities, supplier information and data, and other materials or information relating to the manner in which Employer, its customers and/or suppliers do business; (2) Discoveries, concepts and ideas, whether patentable or not, or copyrightable or not, including without limitation the nature and results of research and development activities, processes, formulas, techniques, "know-how," designs, drawings and specifications; (3) Any other materials or information related to the business or activities of Employer which are not generally known to others engaged in similar businesses or activities or which could not be gathered or obtained without significant expenditure of time, effort and money; and (4) All inventions and ideas which are derived from or relate to Employee's access to or knowledge of any of the above enumerated materials and information. The Confidential Information shall not include any materials or information of the types specified above to the extent that such materials or information are publicly known or generally utilized by others engaged in the same business or activities in the course of which Employer utilized, developed or otherwise acquired such information or materials and which Employee has gathered or obtained (other than on behalf of the Employer) after termination of his employment with the Employer from such other public sources by his own expenditure of significant time, effort and money after termination of his employment with the Employer. Failure to mark any of the Confidential Information as confidential shall not affect its status as part of the Confidential Information under the terms of this Agreement. 3.02 Ownership of Confidential Information. Employee agrees that the Confidential Information is and shall at all times remain the sole and exclusive property of Employer. Employee agrees immediately to disclose to Employer all Confidential Information developed in whole or part by him during the term of his employment with Employer and to assign to Employer any right, title or interest he or she may have in such Confidential Information. Without limiting the generality of the foregoing, every invention, improvement, product, process, apparatus, or design which Employee may take, make, devise or conceive, individually or jointly with others, during the period of his employment by the Employer, whether during business hours or otherwise, which relates in any manner to the business of the Employer either now or at any time during the period of his employment), or which may be useful to the Employer in connection with its business (hereinafter collectively referred to as "Invention") shall belong to and be the exclusive property of the Employer and Employee will make full and prompt disclosure to the Employer of every Invention. Employee will assign to the Employer, or its nominee, every Invention and Employee will execute all assignments and other instruments or documents and do all other things necessary and proper to confirm the Employer's right and title in and to every Invention; and Employee will perform all proper acts within his power necessary or desired by the Employer to obtain letters patent in the name of the Employer (at the Employer's expense) for every Invention in whatever countries the Employer may desire, without payment by the Employer to Employee of any royalty, license fee, price or additional compensation. 3.03. Non Disclosure of Confidential Information. Except as required in the faithful performance of Employee's duties hereunder (or as required by law), during the term of his employment with Employer and for a period after the termination of such employment until the Confidential Information no longer meets the definition set forth above of Confidential Information with respect to Employee, Employee agrees not to directly or indirectly reveal, report, publish, disseminate, disclose or transfer any of the Confidential Information to any person or entity, or utilize for himself or any other person or entity any of the Confidential Information for any purpose (including, without limitation, in the solicitation of existing Employer customers or suppliers), except in the course of performing duties assigned to him by Employer. Employee further agrees to use his best endeavors to prevent the use for himself or others, or dissemination, publication, revealing, reporting or disclosure of, any Confidential Information. 3.04 Protection of Reputation. Employee agrees that he or she will at no time, either during his employment with the Employer or at any time after termination of such employment, engage in conduct which injures, harms, corrupts, demeans, defames, disparages, libels, slanders, destroys or diminishes in any way the reputation or goodwill of the Employer, its subsidiaries, or their respective shareholders, directors, officers, employees, or agents, or the services provided by the Employer or the products sold by the Employer, or its other properties or assets, including, without limitation, its computer systems hardware and software and its data or the integrity and accuracy thereof. 3.05 Records and Use of Employer Facilities. All notes, data, reference materials, memoranda and records, including, without limitation, data on the Employer's computer system, computer reports, products, customers and suppliers lists and copies of invoices, in any way relating to any of the Confidential Information or Employer's business shall belong exclusively to Employer, and Employee agrees to maintain them in a manner so as to secure their confidentiality and to turn over to Employer all copies of such materials (in whole or in part) in his possession or control at the request of Employer or, in the absence of such a request, upon the termination of Employee's employment with Employer. Upon termination of Employee's employment with Employer, Employee shall immediately refrain from seeking access to Employer's (a) telephonic voice mail, E-mail or message systems, (b) computer system and (c) computer data bases and software. The foregoing shall not prohibit Employee from using Employer's public Internet (not intranet) site. ARTICLE FOUR NON-COMPETE AND NON-SOLICITATION COVENANTS 4.01 Non-Competition and Non-Solicitation. Employee acknowledges that it may be very difficult for him to avoid using or disclosing the Confidential Information in violation of Article Three above in the event that he or she is employed by any person or entity other than the Employer in a capacity similar or related to the capacity in which he or she is employed by the Employer. Accordingly, Employee agrees that he or she will not, during the term of employment with Employer and for a period of one (1) year after the termination of such employment, irrespective of the time, manner or cause of such termination, directly or indirectly (whether or not for compensation or profit): (1) Engage in any business or enterprise the nature of which is directly competitive with that of the Employer (a "Prohibited Business"); or (2) Participate as an officer, director, creditor, promoter, proprietor, associate, agent, employee, partner, consultant, sales representative or otherwise, or promote or assist, financially or other wise, or directly or indirectly own any interest in any person or entity involved in any Prohibited Business; or (3) Canvas, call upon, solicit, entice, persuade, induce, respond to, or otherwise deal with, directly or indirectly, any individual or entity which, during Employee's term of employment with the Employer, was or is a customer or supplier, or proposed customer or supplier, of the Employer whom Employee called upon or dealt with, or whose account Employee supervised, for the following: (a) to purchase (with respect to customers) or sell (with respect to suppliers) products of the types or kinds sold by the Employer or which could be substituted for (including, but not limited to, rebuilt products), or which serve the same purpose or function as, products sold by the Employer (all of which products are herein sometimes referred to, jointly and severally, as "Prohibited Products"), or (b) to request or advise any such customer or supplier to withdraw, curtail or cancel its business with the Employer; or (4) For himself or for or through any other individual or entity call upon, solicit, entice, persuade, induce or offer any individual who, during Employee's term of employment with the Employer, was an employee or sales representative or distributor of the Employer, employment by, or representation as sales agent or distributor for, any one other than the Employer, or request or advise any such employee or sales agent or distributor to cease employment with or representation of the Employer, and Employee shall not approach, respond to, or otherwise deal with any such employee or sales representative or distributor of Employer for any such purpose, or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity. 4.02 Obligation independent Each obligation of each subparagraph and provision of Section 4.01 shall be independent of any obligation under any other subparagraph or provision hereof or thereof. 4.03 Public Stock Nothing in Section 4.01, however, shall prohibit Employee from owning (directly or indirectly through a parent, spouse, child or other relative or person living in the same household with Employee or any of the foregoing), as a passive investment, up to I % of the issued and outstanding shares of any class of stock of any publicly traded company. 4.04 Business Limitation If, at the termination of Employee's employment and for the entire period of twelve (12) months prior thereto his duties and responsibilities are limited by the Employer so that he or she is specifically assigned to, or responsible for, one or more divisions, subsidiaries or business units of the Employer, then subparagraphs (1) through (3) of Section 4.01 shall apply only to any business which competes with the business of such divisions, subsidiaries or business units. 4.05 Area Limitation If at the termination of Employee's employment and for the entire period of twelve (12) months prior thereto he or she has responsibility for only a designated geographic area, then subparagraphs (1) through (3) of Section 4.01 shall apply only within such area. 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 to discuss the allegations. 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, (iii) any violation by the Employee of any of the provisions of Articles Three, or Four, or (iv) 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 or authority to do any business deemed necessary or desirable for the conduct of its actual or proposed business. 5.02 Termination of Employee Because of Employee's Disabili1y. Injury or Illness. 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 one hundred eighty (180) consecutive days before such termination can be made effective. Any compensation Employee receives under any disability benefit plan provided by Employer during any period of disability, injury or illness shall be in lieu of the compensation which Employee would otherwise receive under Article Two during such period of disability, injury or sickness. 5.03 Termination as a Result of Employee's Death. The obligations of the Employer to Employee pursuant to this Agreement 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 upon ten (10) days prior written notice to Employee. If Employee's employment is terminated by the Employer during the Employment Term for any reason other than the reason set forth in Sections 5.01, 5.02 or 5.03 above, the Employer shall continue to pay to Employee for a period of twelve (12) months, an amount equal to one hundred percent (100%) of his then current Base Salary and one hundred percent (100%) of the Bonus earned and paid during the 12 months prior to the date of termination (if employed for less than 12 months prior to termination the Bonus earned and paid for the period of employment shall be annualized and 50% of the annualized amount will be paid) in installments on the same dates as the Employer makes payroll payments under its customary practice. In such case Employee shall not be entitled to receive, unless otherwise required by law, any subsequent Other Benefits. 5.05 Termination by Employee. Subject to the provisions of Articles Three and Four above, Employee may terminate his employment by the Employer at any time by written notice to Employer. If Employee's employment is so terminated, the Employer shall be obligated to continue 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, however, Employee and the Employer acknowledge and agree to the fullest extent permitted by law, that Employee shall forfeit, and the Employer shall not be responsible to pay or fund, directly or indirectly, any accrued but unpaid bonus or award (howsoever described including the Annual Incentive Plan); accumulated but unpaid sick leave; accumulated but unpaid vacation time; deferred compensation; severance pay or benefits; any and all benefits which are accrued but not vested under any pension, profit sharing or other qualified retirement plan and all service credits under each such plan (subject to any reinstatement of such credits upon future reemployment with the Employer in accordance with federal law); and right to post-employment coverage under any health, insurance or other welfare benefit plan, including rights arising under Title X of COBRA or any similar federal or state law (except that continuation coverage rights of Employee's spouse and other dependents, if any, under such plans or laws shall be forfeited only with their consent); or any Other Benefits, if any, provided to Employee under any policy, program or plan of the Employer not specifically described above, after the date of termination to which Employee might otherwise be entitled under this Agreement but for his resignation. ARTICLE SIX REMEDIES 6.01 Employee acknowledges that the restrictions contained in this Agreement will not prevent him from obtaining such other gainful employment he or she may desire to obtain or cause him any undue hardship and are reasonable and necessary in order to protect the legitimate interests of Employer and that violation thereof would result in irreparable injury to Employer. Employee therefor acknowledges and agrees that in the event of a breach or threatened breach by Employee of the provisions of Article Three or Article Four or Section 1.03, Employer shall be entitled to an injunction restraining Employee from such breach or threatened breach and Employee shall lose all rights to receive any payments under Section 5.04. Nothing herein shall be construed as prohibiting or limiting Employer from pursuing any other remedies available to 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. 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 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 Severabili1y. Should any of Employee's obligations under this Agreement or the application of the terms or provisions of this Agreement to any person or circumstances, to any extent, be found illegal, invalid or unenforceable in any respect, such illegality, invalidity or unenforceability shall not affect the other provisions of this Agreement, all of which shall remain enforceable in accordance with their terms, or the application of such terms or provisions to persons or circumstances other than those to which it is held illegal, invalid or unenforceable. Despite the preceding sentence, should any of Employee's obligations under this Agreement be found illegal, invalid or unenforceable because it is too broad with respect to duration, geographical or other scope, or subject matter, such obligation shall be deemed and construed to be reduced to the maximum duration, geographical or other scope, and subject matter allowable under applicable law. The covenants of Employee in Articles Three and Four and each subparagraph of Section 4.01 are of the essence of this Agreement; they shall be construed as independent of any other provision of this Agreement; and the existence of any claim or cause of action of Employee against the Employer, whether predicated on the Agreement or otherwise shall not constitute a defense to enforcement by the Employer of any of these covenants. The covenants of Employee shall be applicable irrespective of whether termination of employment hereunder shall be by the Employer or by Employee, whether voluntary or involuntary, or whether for cause or without cause. 7.03 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 three (3) 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. 7.04 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. Failure by any party to claim any breach or violation of any provision of this Agreement shall not constitute a precedent or be construed as a waiver of any subsequent breaches hereof. 7.05 Continuing Obligation. The obligations, duties and liabilities of Employee pursuant to Articles Three and Four of this Agreement are continuing, absolute and unconditional and shall remain in full force and effect as provided herein and survive the termination of this Agreement. 7.06 No Conflicting Obligations or Use. Employer does not desire to acquire from Employee any secret or confidential know-how or information which he may have acquired from others nor does it wish to cause a breach of any non compete or similar agreement to which Employee may be subject. Employee represents and warrants that (i) other than for this Agreement, he is not subject to or bound by any confidentiality agreement or non disclosure or non compete agreement or any other agreement having a similar intent, effect or purpose, and (ii) he is free to use and divulge to Employer, without any obligation to or violation of any right of others, any and all information, data, plans, ideas, concepts, practices or techniques which he will use, describe, demonstrate, divulge, or in any other manner make known to Employer during the performance of services 7.07 Attorneys Fees. In the event that either party institutes litigation against the other party for violation of this Agreement the losing party in such litigation, after a hearing or a trial on the merits, shall pay to the other party the other parties' costs and expenses, including attorneys fees, in such litigation. 7.08 Advise New Employers. During Employee's employment with the Employer and for one (1) year thereafter, Employee will communicate the contents of Articles Three and Four to any individual or entity which Employee intends to be employed by, associated with, or represent which is engaged in a business which is competitive to the business of Employer. 7.09 Captions. The captions of Articles and Sections this Agreement are inserted for convenience only and are not to be construed as forming a part of this Agreement. EMPLOYEE ACKNOWLEDGES THAT HE OR SHE HAS READ AND FULLY UNDERSTANDS EACH AND EVERY PROVISION OF THE FOREGOING AND DOES HEREBY ACCEPT AND AGREE TO THE SAME. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. EMPLOYEE EMPLOYER /s/ Gregory Peloquin By: /s/ Joseph Grill Title: Senior VP, Human Resources 15 EX-10 5 0005.txt Exhibit 10(y) EMPLOYMENT, NONDISCLOSURE AND NON-COMPETE AGREEMENT EMPLOYMENT, NONDISCLOSURE AND NON-COMPETE AGREEMENT ("Agreement") made and entered into as of this 7th day of December, 1999 by and between RICHARDSON ELECTRONICS, LTD., a Delaware corporation with its principal place of business located at 40W267 Keslinger Road, PO Box 393, LaFox, IL 60147-0393 (the "Employer"), and KEVIN C. OAKLEY, an individual whose current residence is located at 107 Greeley Circle, Liverpool, New York 13090 ("Employee"). RECITALS WHEREAS, the Employer desires to employ Employee as its Vice President and General Manager Medical Division 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 provides Employer with a competitive advantage in the marketplace in which it competes, is exceptionally valuable to the Employer, and is 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 this 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 Vice President and General Manager, Medical Division. 1.02 Term of Employment. Employee's employment pursuant to this Agreement shall commence on December 7, 1999, or such earlier date as may be agreed upon by Employee and the Employer and, subject to the other provisions of this Agreement, the term of such employment (the "Employment Term") shall continue indefinitely on an "at will" basis. 1.03 Duties. Employee shall perform such managerial duties and responsibilities in connection with the Company's Medical Division or its successor, and such other duties and responsibilities as may be assigned by the President/COO of Employer, or such other person as the Employer may designate from time to time, 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 Employer's President/COO or such other person as the Employer may designate from time to time 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 and to developing and improving the business and best interests of the Company. Employee will use all reasonable efforts to promote and protect the good name of the Company and will comply with all of his obligations, undertakings, promises, covenants and agreements as set forth in this Agreement. Employee will not, during the Employment Term or during any period during which Employee is receiving payments pursuant to Article 2 and/or Section 5.04, engage in any activity which would have, or reasonably be expected to have, an adverse affect on the Employer's reputation, goodwill or business relationships or which would result, or reasonably be expected to result, in economic harm to the Employer. ARTICLE TWO COMPENSATION AND BENEFITS For all services to be rendered by Employee 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 below. 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 One Hundred Twenty Five Thousand and 00/100 Dollars ($125,000), 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 thereafter from year to year; provided, however, that, except as may be expressly consented otherwise in writing by Employee, Employer may not decrease Employee's Base Salary. 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 Incentive Plan. During the term of the Employee's employment hereunder, the Employee shall be a participant in the SBU Incentive Plan, as modified from time to time (the "Annual Incentive Plan"). The Employee's "target incentive percentage" for purposes of the Annual Incentive Plan shall be fifty percent (50%) for fiscal year 2000 (as if paid for a full year). Such incentive shall be paid strictly in accordance with the Annual Incentive Plan. For fiscal year 2001 and thereafter, Employee's incentive shall be determined and paid strictly in accordance with the Annual Incentive Plan as modified or reduced by Employer at its discretion, and 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 Other Benefits. Employer will provide Employee such benefits (other than bonus, severance and incentive compensation benefits) as are generally provided by the Employer to its other employees including but not limited to, 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. 2.04 Disability. Any compensation Employee receives under any disability benefit plan provided by Employer during any period of disability, injury or illness shall be in lieu of the compensation which Employee would otherwise receive under Article Two during such period of disability, injury or sickness. 2.05 Withholding. All salary, bonus and other payments described in this Agreement shall be subject to withholding for federal, state or local taxes, amounts 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 RECORDS AND REPUTATION 3.01 Definition of Confidential Information. For purposes of this Agreement, the term "Confidential Information" shall mean all of the following materials and information (whether or not reduced to writing and whether or not patentable) to which Employee receives or has received access or develops or has developed in whole or in part as a direct or indirect result of his employment with Employer or through the use of any of Employer's facilities or resources: (1) Marketing techniques, practices, methods, plans, systems, processes, purchasing information, price lists, pricing policies, quoting procedures, financial information, customer names, contacts and requirements, other customer information and data, product information, supplier names, contacts and capabilities, other supplier information and data, and other materials or information relating to the manner in which Employer, its customers and/or suppliers do business; (2) Discoveries, concepts and ideas, whether patentable or not, or copyrightable or not, including without limitation the nature and results of research and development activities, processes, formulas, techniques, "know-how," designs, drawings and specifications; (3) Any other materials or information related to the business or activities of Employer which are not generally known to others engaged in similar businesses or activities or which could not be gathered or obtained without significant expenditure of time, effort and money; and (4) All inventions and ideas which are derived from or relate to Employee's access to or knowledge of any of the above enumerated materials and information. The Confidential Information shall not include any materials or information of the types specified above to the extent that such materials or information are publicly known or generally utilized by others engaged in the same business or activities in the course of which Employer utilized, developed or otherwise acquired such information or materials and which Employee has gathered or obtained (other than on behalf of the Employer) after termination of his employment with the Employer from such other public sources by his own expenditure of significant time, effort and money after termination of his employment with the Employer. Failure to mark any of the Confidential Information as confidential shall not affect its status as part of the Confidential Information under the terms of this Agreement. 3.02 Ownership of Confidential Information. Employee agrees that the Confidential Information is and shall at all times remain the sole and exclusive property of Employer. Employee agrees to disclose immediately to Employer all Confidential Information developed in whole or part by him during the term of his employment with Employer and to assign to Employer any right, title or interest he may have in such Confidential Information. Without limiting the generality of the foregoing, every invention, improvement, product, process, apparatus, or design which Employee may take, make, devise or conceive, individually or jointly with others, during the period of his employment by the Employer, whether during business hours or otherwise, which relates in any manner to the business of the Employer either now or at any time during the period of his employment), or which may be related to the Employer in connection with its business (hereinafter collectively referred to as "Invention") shall belong to and be the exclusive property of the Employer and Employee will make full and prompt disclosure to the Employer of every Invention. Employee will assign to the Employer, or its nominee, every Invention and Employee will execute all assignments and other instruments or documents and do all other things necessary and proper to confirm the Employer's right and title in and to every Invention; and Employee will perform all proper acts within his power necessary or desired by the Employer to obtain letters patent in the name of the Employer (at the Employer's expense) for every Invention in whatever countries the Employer may desire, without payment by the Employer to Employee of any royalty, license fee, price or additional compensation. 3.03. Non Disclosure of Confidential Information. Except as required in the faithful performance of Employee's duties hereunder (or as required by law), during the term of his employment with Employer and for a period after the termination of such employment until the Confidential Information no longer meets the definition set forth above of Confidential Information with respect to Employee, Employee agrees not to directly or indirectly reveal, report, publish, disseminate, disclose or transfer any of the Confidential Information to any person or entity, or utilize for himself or any other person or entity any of the Confidential Information for any purpose (including, without limitation, in the solicitation of existing Employer customers or suppliers), except in the course of performing duties assigned to him by Employer. Employee further agrees to use his best endeavors to prevent the use for himself or others, or dissemination, publication, revealing, reporting or disclosure of, any Confidential Information. 3.04 Protection of Reputation. Employee agrees that he will at no time, either during his employment with the Employer or at any time after termination of such employment, engage in conduct which injures, harms, corrupts, demeans, defames, disparages, libels, slanders, destroys or diminishes in any way the reputation or goodwill of the Employer, its subsidiaries, or their respective shareholders, directors, officers, employees, or agents, or the services provided by the Employer or the products sold by the Employer, or its other properties or assets, including, without limitation, its computer systems hardware and software and its data or the integrity and accuracy thereof. 3.05 Records and Use of Employer Facilities. All notes, data, reference materials, memoranda and records, including, without limitation, data on the Employer's computer system, computer reports, products, customers and suppliers lists and copies of invoices, in any way relating to any of the Confidential Information or Employer's business shall belong exclusively to Employer, and Employee agrees to maintain them in a manner so as to secure their confidentiality and to turn over to Employer all copies (in whole or in part) of such materials in his possession or control at the request of Employer or, in the absence of such a request, upon the termination of Employee's employment with Employer. Upon termination of Employee's employment with Employer, Employee shall immediately refrain from seeking access to Employer's (a) telephonic voice mail, E-mail or message systems, (b) computer system and (c) computer databases and software. The foregoing shall not prohibit Employee from using Employer's public Internet (not Intranet) site. ARTICLE FOUR NON-COMPETE AND NON-SOLICITATION COVENANTS 4.01 Non-Competition and Non-Solicitation. Employee acknowledges that it may be very difficult for him to avoid using or disclosing the Confidential Information in violation of Article Three above in the event that he is employed by any person or entity other than the Employer in a capacity similar or related to the capacity in which he is employed by the Employer. Accordingly, Employee agrees that he will not, during the term of employment with Employer and for a period of one (1) year after the termination of such employment, irrespective of the time, manner or cause of such termination, directly or indirectly (whether or not for compensation or profit): (1) Engage in any business or enterprise the nature of which is directly competitive with that of the Employer (a "Prohibited Business"); or (2) Participate as an officer, director, creditor, promoter, proprietor, associate, agent, employee, partner, consultant, sales representative or otherwise, or promote or assist, financially or otherwise, or directly or indirectly own any interest in any person or entity involved in any Prohibited Business; or (3) Canvas, call upon, solicit, entice, persuade, induce, respond to, or otherwise deal with, directly or indirectly, any individual or entity which, during Employee's term of employment with the Employer, was or is a customer or supplier, or proposed customer or supplier, of the Employer whom Employee called upon or dealt with, or whose account Employee supervised or had responsibility, or a customer of the portion of the Employer's business which he managed, for the following: (a) to purchase (with respect to customers) or sell (with respect to suppliers) products of the types or kinds sold by the Employer or which could be substituted for (including, but not limited to, rebuilt products), or which serve the same purpose or function as, products sold by the Employer (all of which products are herein sometimes referred to, jointly and severally, as "Prohibited Products"), or (b) to request or advise any such customer or supplier to withdraw, curtail or cancel its business with the Employer; or (4) For himself or for or through any other individual or entity call upon, solicit, entice, persuade, induce or offer any individual who, during Employee's term of employment with the Employer, was an employee or sales representative or distributor of the Employer, employment by, or representation as sales agent or distributor for, any one other than the Employer, or request or advise any such employee or sales agent or distributor to cease employment with or representation of the Employer, and Employee shall not approach, respond to, or otherwise deal with any such employee or sales representative or distributor of Employer for any such purpose, or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity. 4.02 Obligation Independent Each obligation of each subparagraph and provision of Section 4.01 shall be independent of any obligation under any other subparagraph or provision hereof or thereof. 4.03 Public Stock Nothing in Section 4.01, however, shall prohibit Employee from owning (directly or indirectly through a parent, spouse, child or other relative or person living in the same household with Employee or any of the foregoing), as a passive investment, up to 1% of the issued and outstanding shares of any class of stock of any publicly traded company. 4.04 Business Limitation If Employee's duties and responsibilities are limited by the Employer so that he is specifically assigned to, or responsible for, one or more divisions, subsidiaries or business units of the Employer during the period of twelve (12) months prior to termination of his employment, then subparagraphs (1) through (3) of Section 4.01 shall apply only to any business which competes with the business of such divisions, subsidiaries or business units to which he was assigned at the termination of Employee's employment and at any time during the period of twelve (12) months prior thereto. 4.05 Area Limitation If Employee has responsibility for only a designated geographic area or areas during the period of twelve (12) months prior to the termination of his employment, then subparagraphs (1) through (3) of Section 4.01 shall apply only within such area or areas for which he had responsibility at the termination of Employee's employment and at any time during the period of twelve (12) months prior thereto. 4.06 Permitted Activity Notwithstanding anything to the contrary in this Article Four, after termination of Employee's employment with Employer, Employee may work for a manufacturer of display devices as long as the sale of such display devices does not compete directly with Employer's sales to its customer base as existing on the date of Employee's termination of employment with Employer and provided Employee's activities would not violate any other provisions of this Agreement. 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 to discuss the allegations. 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, (iii) any violation by the Employee of any of the provisions of Articles Three, or Four, or (iv) Employee being charged, 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 or authority to do any business deemed necessary or desirable for the conduct of its actual or proposed business or which would have, or could reasonably be expected to have, an adverse affect on the Employer's reputation, goodwill or business relationships or which would result, or could reasonably be expected to result, in economic harm to the Employer. 5.02 Termination of Employee Because of Employee's Disability, Injury or Illness. 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 one hundred eighty (180) consecutive days before such termination can be made effective. Any compensation Employee receives under any disability benefit plan provided by Employer during any period of disability, injury or illness shall be in lieu of the compensation which Employee would otherwise receive under Article Two during such period of disability, injury or sickness. 5.03 Termination as a Result of Employee's Death. The obligations of the Employer to Employee pursuant to this Agreement 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 upon ten (10) days prior written notice to Employee. If Employee's employment is terminated by the Employer during the Employment Term for any reason other than the reason set forth in Sections 5.01, 5.02 or 5.03 above, the Employer shall continue to pay to Employee for a period of six (6) months, an amount equal to one hundred percent (100%) of his then current Base Salary and fifty percent (50%) of the incentive earned and paid during the twelve months prior to the date of termination in installments on the same dates as the Employer make payroll payments under its customary practice. In such case Employee shall not be entitled to receive, unless otherwise required by law, any subsequent Other Benefits after the date of termination. 5.05 Termination by Employee. Subject to the provisions of Articles Three and Four above, Employee may terminate his employment by the Employer at any time by written notice to Employer. If Employee's employment is so terminated, the Employer shall be obligated to continue 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, however, Employee and the Employer acknowledge and agree to the fullest extent permitted by law, that Employee shall forfeit, and the Employer shall not be responsible to pay or fund, directly or indirectly, any accrued but unpaid bonus or award (howsoever described including the Annual Incentive Plan); accumulated but unpaid sick leave; accumulated but unpaid vacation time; deferred compensation; severance pay or benefits; any and all benefits which are accrued but not vested under any pension, profit sharing or other qualified retirement plan and all service credits under each such plan (subject to any reinstatement of such credits upon future reemployment with the Employer in accordance with federal law); and right to post- employment coverage under any health, insurance or other welfare benefit plan, including rights arising under Title X of COBRA or any similar federal or state law (except that continuation coverage rights of Employee's spouse and other dependents, if any, under such plans or laws shall be forfeited only with their consent); or any Other Benefits, if any, provided to Employee under any policy, program or plan of the Employer not specifically described above, after the date of termination to which Employee might otherwise be entitled under this Agreement but for his resignation. ARTICLE SIX REMEDIES 6.01 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 Employer and that violation thereof would result in irreparable injury to Employer. Employee therefor acknowledges and agrees that in the event of a breach or threatened breach by Employee of the provisions of Article Three or Article Four or Section 1.03, Employer shall be entitled to an injunction restraining Employee from such breach or threatened breach and Employee shall lose all rights to receive any payments under Section 5.04. Nothing herein shall be construed as prohibiting or limiting Employer from pursuing any other remedies available to 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. 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 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 of the division or business unit to which Employee is assigned, 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 Severability. Should any of Employee's obligations under this Agreement or the application of the terms or provisions of this Agreement to any person or circumstances, to any extent, be found illegal, invalid or unenforceable in any respect, such illegality, invalidity or unenforceability shall not affect the other provisions of this Agreement, all of which shall remain enforceable in accordance with their terms, or the application of such terms or provisions to persons or circumstances other than those to which it is held illegal, invalid or unenforceable. Despite the preceding sentence, should any of Employee's obligations under this Agreement be found illegal, invalid or unenforceable because it is too broad with respect to duration, geographical or other scope, or subject matter, such obligation shall be deemed and construed to be reduced to the maximum duration, geographical or other scope, and subject matter allowable under applicable law. The covenants of Employee in Articles Three and Four and each subparagraph of Section 4.01 are of the essence of this Agreement; they shall be construed as independent of any other provision of this Agreement; and the existence of any claim or cause of action of Employee against the Employer, whether predicated on the Agreement or otherwise shall not constitute a defense to enforcement by the Employer of any of these covenants. The covenants of Employee shall be applicable irrespective of whether termination of employment hereunder shall be by the Employer or by Employee, whether voluntary or involuntary, or whether for cause or without cause. 7.03 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 three (3) 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. 7.04 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. Failure by any party to claim any breach or violation of any provision of this Agreement shall not constitute a precedent or be construed as a waiver of any subsequent breaches hereof. 7.05 Continuing Obligation. The obligations, duties and liabilities of Employee pursuant to Articles Three and Four of this Agreement are continuing, absolute and unconditional and shall remain in full force and effect as provided herein and survive the termination of this Agreement. 7.06 No Conflicting Obligations or Use. Employer does not desire to acquire from Employee any secret or confidential know- how or information which he may have acquired from others nor does it wish to cause a breach of any non compete or similar agreement to which Employee may be subject. Employee represents and warrants that (i) other than for this Agreement, he is not subject to or bound by any confidentiality agreement or non disclosure or non compete agreement or any other agreement having a similar intent, effect or purpose, and (ii) he is free to use and divulge to Employer, without any obligation to or violation of any right of others, any and all information, data, plans, ideas, concepts, practices or techniques which he will use, describe, demonstrate, divulge, or in any other manner make known to Employer during the performance of services 7.07 Attorneys Fees. In the event that Employee has been found to have violated any of the terms of Articles Three or Four of this Agreement either after a preliminary injunction hearing or a trial on the merits or otherwise, 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. 7.08 Advise New Employers. During Employee's employment with the Employer and for one (1) year thereafter, Employee will communicate the contents of Articles Three and Four to any individual or entity which Employee intends to be employed by, associated with, or represent which is engaged in a business which is competitive to the business of Employer. 7.09 Captions. The captions of Articles and Sections this Agreement are inserted for convenience only and are not to be construed as forming a part of this Agreement. EMPLOYEE ACKNOWLEDGES THAT HE HAS READ AND FULLY UNDERSTANDS EACH AND EVERY PROVISION OF THE FOREGOING AND DOES HEREBY ACCEPT AND AGREE TO THE SAME. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. EMPLOYEE EMPLOYER By: /s/ Joseph Grill /s/ Kevin C. Oakley Title: Senior VP, Human Resources EX-10 6 0006.txt Exhibit 10(z) EMPLOYMENT, NONDISCLOSURE AND NON-COMPETE AGREEMENT EMPLOYMENT, NONDISCLOSURE AND NON-COMIPETE AGREEMENT ("Agreement") made and entered into as of this 30th day of May, 2000 by and between RICHARDSON ELECTRONICS, LTD., a Delaware corporation with its principal place of business located at 40W267 Keslinger Road, LaFox, IL 60147 (the "Employer"), and Robert Heise, an individual whose current residence is located at 3N845 Baert Lane, St. Charles, IL 60175 (Employee"). RECITALS WHEREAS, the Employer desires to employ Employee as its Vice President Display Systems Group 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 has and will become familiar with certain confidential information of the Employer which provides Employer with a competitive advantage in the marketplace in which it competes, is exceptionally valuable to the Employer, and is 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 Vice President Display Systems Group. 1.02 Term of Employment. Employee's employment pursuant to this Agreement shall commence on May 30, 2000 or such earlier date as may be agreed upon by Employee and the Employer and, subject to the other provisions of this Agreement, the term of such employment (the "Employment Term") shall continue indefinitely on an "at will" basis. 1.03 Duties. Employee shall perform such managerial duties and responsibilities in connection with the Company's Display Systems Group or its successor, and such other duties and responsibilities as may be assigned by the President/COO, or such other person as the Employer may designate from time to time 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 Employer's President/COO or such other person as the Employer may designate from time to time 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 and to developing and improving the business and best interests of the Company. Employee will use all reasonable efforts to promote and protect the good name of the Company and will comply with all of his obligations, undertakings, promises, covenants and agreements as set forth in this Agreement. Employee will not, during the Employment Term or during any period during which Employee is receiving payments pursuant to Article 2 and/or Section 5.04, engage in any activity which would have, or reasonably be expected to have, an adverse affect on the Employer's reputation, goodwill or business relationships or which would result, or reasonably be expected to result, in economic harm to the Employer. ARTICLE TWO COMPENSATION AND BENEFITS For all services to be rendered by Employee 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 below. 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 One Hundred Ten Thousand and 00/100 Dollars ($110,000.00), 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, Employer may not decrease Employee's Base Salary. 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 Incentive Plan . During the term of the Employee's employment hereunder, the Employee shall be a participant in the SBU Incentive Plan, as modified from time to time (the "Annual Incentive Plan"). The Employee's "target bonus percentage" for purposes of the Annual Incentive Plan shall be fifty percent (50%) for calendar year 2000 (as if paid for a full year). Such bonus shall be paid strictly in accordance with the Annual Incentive Plan. For calendar year 2001 and thereafter, Employee's bonus shall be determined and paid strictly in accordance with the Annual Incentive Plan as modified or reduced by Employer at its discretion, and 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 Other Benefits. Employer will provide Employee such benefits (other than bonus, severance and incentive compensation benefits) as are generally provided by the Employer to its other employees, including but not limited to, 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 Plan. 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. 2.04 Disability. Any compensation Employee receives under any disability benefit plan provided by Employer during any period of disability, injury or illness shall be in lieu of the compensation which Employee would otherwise receive under Article Two during such period of disability, injury or sickness. 2.05 Withholding. All salary, bonus and other payments described in this Agreement shall be subject to withholding for federal, state or local taxes, amounts 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 RECORDS REPUTATION 3.01 Definition of Confidential Information. For purposes of this Agreement, the term "Confidential Information" shall mean all of the following materials and information (whether or not reduced to writing and whether or not patentable) to which Employee receives or has received access or develops or has developed in whole or in part as a direct or indirect result of his employment with Employer or through the use of any of Employer's facilities or resources: (1) Marketing techniques, practices, methods, plans, systems, processes, purchasing information, price lists, pricing policies, quoting procedures, financial information, customer names, contacts and requirements, customer information and data, product information, supplier names, contacts and capabilities, supplier information and data, and other materials or information relating to the manner in which Employer, its customers and/or suppliers do business; (2) Discoveries, concepts and ideas, whether patentable or not, or copyrightable or not, including without limitation the nature and results of research and development activities, processes, formulas, techniques, "know-how," designs, drawings and specifications; (3) Any other materials or information related to the business or activities of Employer which are not generally known to others engaged in similar businesses or activities or which could not be gathered or obtained without significant expenditure of time, effort and money; and (4) All inventions and ideas which are derived from or relate to Employee's access to or knowledge of any of the above enumerated materials and information. The Confidential Information shall not include any materials or information of the types specified above to the extent that such materials or information are publicly known or generally utilized by others engaged in the same business or activities in the course of which Employer utilized, developed or otherwise acquired such information or materials and which Employee has gathered or obtained (other than on behalf of the Employer) after termination of his employment with the Employer from such other public sources by his own expenditure of significant time, effort and money after termination of his employment with the Employer. Failure to mark any of the Confidential Information as confidential shall not affect its status as part of the Confidential Information under the terms of this Agreement. 3.02 Ownership of Confidential Information. Employee agrees that the Confidential Information is and shall at all times remain the sole and exclusive property of Employer. Employee agrees immediately to disclose to Employer all Confidential Information developed in whole or part by him during the term of his employment with Employer and to assign to Employer any right, title or interest he or she may have in such Confidential Information. Without limiting the generality of the foregoing, every invention, improvement, product, process, apparatus, or design which Employee may take, make, devise or conceive, individually or jointly with others, during the period of his employment by the Employer, whether during business hours or otherwise, which relates in any manner to the business of the Employer either now or at any time during the period of his employment), or which may be useful to the Employer in connection with its business (hereinafter collectively referred to as "Invention") shall belong to and be the exclusive property of the Employer and Employee will make full and prompt disclosure to the Employer of every Invention. Employee will assign to the Employer, or its nominee, every Invention and Employee will execute all assignments and other instruments or documents and do all other things necessary and proper to confirm the Employer's right and title in and to every Invention; and Employee will perform all proper acts within his power necessary or desired by the Employer to obtain letters patent in the name of the Employer (at the Employer's expense) for every Invention in whatever countries the Employer may desire, without payment by the Employer to Employee of any royalty, license fee, price or additional compensation. 3.03. Non Disclosure of Confidential Information. Except as required in the faithful performance of Employee's duties hereunder (or as required by law), during the term of his employment with Employer and for a period after the termination of such employment until the Confidential Information no longer meets the definition set forth above of Confidential Information with respect to Employee, Employee agrees not to directly or indirectly reveal, report, publish, disseminate, disclose or transfer any of the Confidential Information to any person or entity, or utilize for himself or any other person or entity any of the Confidential Information for any purpose (including, without limitation, in the solicitation of existing Employer customers or suppliers), except in the course of performing duties assigned to him by Employer. Employee further agrees to use his best endeavors to prevent the use for himself or others, or dissemination, publication, revealing, reporting or disclosure of, any Confidential Information. 3.04 Protection of Reputation. Employee agrees that he or she will at no time, either during his employment with the Employer or at any time after termination of such employment, engage in conduct which injures, harms, corrupts, demeans, defames, disparages, libels, slanders, destroys or diminishes in any way the reputation or goodwill of the Employer, its subsidiaries, or their respective shareholders, directors, officers, employees, or agents, or the services provided by the Employer or the products sold by the Employer, or its other properties or assets, including, without limitation, its computer systems hardware and software and its data or the integrity and accuracy thereof. 3.05 Records and Use of Employer Facilities. All notes, data, reference materials, memoranda and records, including, without limitation, data on the Employer's computer system, computer reports, products, customers and suppliers lists and copies of invoices, in any way relating to any of the Confidential Information or Employer's business shall belong exclusively to Employer, and Employee agrees to maintain them in a manner so as to secure their confidentiality and to turn over to Employer all copies of such materials (in whole or in part) in his possession or control at the request of Employer or, in the absence of such a request, upon the termination of Employee's employment with Employer. Upon termination of Employee's employment with Employer, Employee shall immediately refrain from seeking access to Employer's (a) telephonic voice mail, E-mail or message systems, (b) computer system and (c) computer data bases and software. The foregoing shall not prohibit Employee from using Employer's public Internet (not intranet) site. ARTICLE FOUR NON-COMPETE AND NON-SOLICITATION COVENANTS 4.01 Non-Competition and Non-Solicitation. Employee acknowledges that it may be very difficult for him to avoid using or disclosing the Confidential Information in violation of Article Three above in the event that he or she is employed by any person or entity other than the Employer in a capacity similar or related to the capacity in which he or she is employed by the Employer. Accordingly, Employee agrees that he or she will not, during the term of employment with Employer and for a period of one (1) year after the termination of such employment, irrespective of the time, manner or cause of such termination, directly or indirectly (whether or not for compensation or profit): (1) Engage in any business or enterprise the nature of which is directly competitive with that of the Employer (a "Prohibited Business"); or (2) Participate as an officer, director, creditor, promoter, proprietor, associate, agent, employee, partner, consultant, sales representative or otherwise, or promote or assist, financially or other wise, or directly or indirectly own any interest in any person or entity involved in any Prohibited Business; or (3) Canvas, call upon, solicit, entice, persuade, induce, respond to, or otherwise deal with, directly or indirectly, any individual or entity which, during Employee's term of employment with the Employer, was or is a customer or supplier, or proposed customer or supplier, of the Employer whom Employee called upon or dealt with, or whose account Employee supervised, for the following: (a) to purchase (with respect to customers) or sell (with respect to suppliers) products of the types or kinds sold by the Employer or which could be substituted for (including, but not limited to, rebuilt products), or which serve the same purpose or function as, products sold by the Employer (all of which products are herein sometimes referred to, jointly and severally, as "Prohibited Products"), or (b) to request or advise any such customer or supplier to withdraw, curtail or cancel its business with the Employer; or (4) For himself or for or through any other individual or entity call upon, solicit, entice, persuade, induce or offer any individual who, during Employee's term of employment with the Employer, was an employee or sales representative or distributor of the Employer, employment by, or representation as sales agent or distributor for, any one other than the Employer, or request or advise any such employee or sales agent or distributor to cease employment with or representation of the Employer, and Employee shall not approach, respond to, or otherwise deal with any such employee or sales representative or distributor of Employer for any such purpose, or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity. 4.02 Obligation independent Each obligation of each subparagraph and provision of Section 4.01 shall be independent of any obligation under any other subparagraph or provision hereof or thereof. 4.03 Public Stock Nothing in Section 4.01, however, shall prohibit Employee from owning (directly or indirectly through a parent, spouse, child or other relative or person living in the same household with Employee or any of the foregoing), as a passive investment, up to I % of the issued and outstanding shares of any class of stock of any publicly traded company. 4.04 Business Limitation If, at the termination of Employee's employment and for the entire period of twelve (12) months prior thereto his duties and responsibilities are limited by the Employer so that he or she is specifically assigned to, or responsible for, one or more divisions, subsidiaries or business units of the Employer, then subparagraphs (1) through (3) of Section 4.01 shall apply only to any business which competes with the business of such divisions, subsidiaries or business units. 4.05 Area Limitation If at the termination of Employee's employment and for the entire period of twelve (12) months prior thereto he or she has responsibility for only a designated geographic area, then subparagraphs (1) through (3) of Section 4.01 shall apply only within such area. 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 to discuss the allegations. 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, (iii) any violation by the Employee of any of the provisions of Articles Three, or Four, or (iv) 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 or authority to do any business deemed necessary or desirable for the conduct of its actual or proposed business. 5.02 Termination of Employee Because of Employee's Disabili1y. Injury or Illness. 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 one hundred eighty (180) consecutive days before such termination can be made effective. Any compensation Employee receives under any disability benefit plan provided by Employer during any period of disability, injury or illness shall be in lieu of the compensation which Employee would otherwise receive under Article Two during such period of disability, injury or sickness. 5.03 Termination as a Result of Employee's Death. The obligations of the Employer to Employee pursuant to this Agreement 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 upon ten (10) days prior written notice to Employee. If Employee's employment is terminated by the Employer during the Employment Term for any reason other than the reason set forth in Sections 5.01, 5.02 or 5.03 above, the Employer shall continue to pay to Employee for a period of twelve (12) months, an amount equal to one hundred percent (100%) of his then current Base Salary and one hundred percent (100%) of the Bonus earned and paid during the 12 months prior to the date of termination (if employed for less than 12 months prior to termination the Bonus earned and paid for the period of employment shall be annualized and 50% of the annualized amount will be paid) in installments on the same dates as the Employer makes payroll payments under its customary practice. In such case Employee shall not be entitled to receive, unless otherwise required by law, any subsequent Other Benefits. 5.05 Termination by Employee. Subject to the provisions of Articles Three and Four above, Employee may terminate his employment by the Employer at any time by written notice to Employer. If Employee's employment is so terminated, the Employer shall be obligated to continue 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, however, Employee and the Employer acknowledge and agree to the fullest extent permitted by law, that Employee shall forfeit, and the Employer shall not be responsible to pay or fund, directly or indirectly, any accrued but unpaid bonus or award (howsoever described including the Annual Incentive Plan); accumulated but unpaid sick leave; accumulated but unpaid vacation time; deferred compensation; severance pay or benefits; any and all benefits which are accrued but not vested under any pension, profit sharing or other qualified retirement plan and all service credits under each such plan (subject to any reinstatement of such credits upon future reemployment with the Employer in accordance with federal law); and right to post-employment coverage under any health, insurance or other welfare benefit plan, including rights arising under Title X of COBRA or any similar federal or state law (except that continuation coverage rights of Employee's spouse and other dependents, if any, under such plans or laws shall be forfeited only with their consent); or any Other Benefits, if any, provided to Employee under any policy, program or plan of the Employer not specifically described above, after the date of termination to which Employee might otherwise be entitled under this Agreement but for his resignation. ARTICLE SIX REMEDIES 6.01 Employee acknowledges that the restrictions contained in this Agreement will not prevent him from obtaining such other gainful employment he or she may desire to obtain or cause him any undue hardship and are reasonable and necessary in order to protect the legitimate interests of Employer and that violation thereof would result in irreparable injury to Employer. Employee therefor acknowledges and agrees that in the event of a breach or threatened breach by Employee of the provisions of Article Three or Article Four or Section 1.03, Employer shall be entitled to an injunction restraining Employee from such breach or threatened breach and Employee shall lose all rights to receive any payments under Section 5.04. Nothing herein shall be construed as prohibiting or limiting Employer from pursuing any other remedies available to 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. 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 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 Severabili1y. Should any of Employee's obligations under this Agreement or the application of the terms or provisions of this Agreement to any person or circumstances, to any extent, be found illegal, invalid or unenforceable in any respect, such illegality, invalidity or unenforceability shall not affect the other provisions of this Agreement, all of which shall remain enforceable in accordance with their terms, or the application of such terms or provisions to persons or circumstances other than those to which it is held illegal, invalid or unenforceable. Despite the preceding sentence, should any of Employee's obligations under this Agreement be found illegal, invalid or unenforceable because it is too broad with respect to duration, geographical or other scope, or subject matter, such obligation shall be deemed and construed to be reduced to the maximum duration, geographical or other scope, and subject matter allowable under applicable law. The covenants of Employee in Articles Three and Four and each subparagraph of Section 4.01 are of the essence of this Agreement; they shall be construed as independent of any other provision of this Agreement; and the existence of any claim or cause of action of Employee against the Employer, whether predicated on the Agreement or otherwise shall not constitute a defense to enforcement by the Employer of any of these covenants. The covenants of Employee shall be applicable irrespective of whether termination of employment hereunder shall be by the Employer or by Employee, whether voluntary or involuntary, or whether for cause or without cause. 7.03 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 three (3) 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. 7.04 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. Failure by any party to claim any breach or violation of any provision of this Agreement shall not constitute a precedent or be construed as a waiver of any subsequent breaches hereof. 7.05 Continuing Obligation. The obligations, duties and liabilities of Employee pursuant to Articles Three and Four of this Agreement are continuing, absolute and unconditional and shall remain in full force and effect as provided herein and survive the termination of this Agreement. 7.06 No Conflicting Obligations or Use. Employer does not desire to acquire from Employee any secret or confidential know-how or information which he may have acquired from others nor does it wish to cause a breach of any non compete or similar agreement to which Employee may be subject. Employee represents and warrants that (i) other than for this Agreement, he is not subject to or bound by any confidentiality agreement or non disclosure or non compete agreement or any other agreement having a similar intent, effect or purpose, and (ii) he is free to use and divulge to Employer, without any obligation to or violation of any right of others, any and all information, data, plans, ideas, concepts, practices or techniques which he will use, describe, demonstrate, divulge, or in any other manner make known to Employer during the performance of services 7.07 Attorneys Fees. In the event that either party institutes litigation against the other party for violation of this Agreement the losing party in such litigation, after a hearing or a trial on the merits, shall pay to the other party the other parties' costs and expenses, including attorneys fees, in such litigation. 7.08 Advise New Employers. During Employee's employment with the Employer and for one (1) year thereafter, Employee will communicate the contents of Articles Three and Four to any individual or entity which Employee intends to be employed by, associated with, or represent which is engaged in a business which is competitive to the business of Employer. 7.09 Captions. The captions of Articles and Sections this Agreement are inserted for convenience only and are not to be construed as forming a part of this Agreement. EMPLOYEE ACKNOWLEDGES THAT HE OR SHE HAS READ AND FULLY UNDERSTANDS EACH AND EVERY PROVISION OF THE FOREGOING AND DOES HEREBY ACCEPT AND AGREE TO THE SAME. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. EMPLOYEE EMPLOYER /s/ Robert Heise By:Joseph Grill Title:Senior VP, Human Relations EX-13 7 0007.txt Five-Year Financial Review
(in thousands, except per share amounts) Statement of Operations Data Year Ended May 31 2000 1999 1998 1997(1) 1996 --------- --------- --------- --------- --------- Net sales $407,178 $320,941 $304,172 $255,139 $239,667 Cost of products sold 299,246 231,328 217,509 187,675 169,123 Selling, general and administrative expenses 81,489 70,870 65,393 62,333 52,974 Other expense, net 7,839 6,886 7,334 7,856 5,559 --------- --------- --------- --------- --------- Income (loss) before income taxes and extraordinary item 18,604 11,857 13,936 (2,725) 12,011 Income tax provision (benefit) 5,500 3,505 4,200 (1,720) 3,900 --------- --------- --------- --------- --------- Income (loss) before extraordinary item 13,104 8,352 9,736 (1,005) 8,111 Extraordinary gain (loss), net of tax -- -- -- (488) -- --------- --------- --------- --------- --------- Net income (loss) $ 13,104 $ 8,352 $ 9,736 $ (1,493) $ 8,111 ========= ========= ========= ========= ========= Income (loss) per share - basic: Before extraordinary item $ 1.03 $ .60 $ .79 $ (.08) $ .70 Extraordinary gain (loss), net of tax -- -- -- (.04) -- --------- --------- --------- --------- --------- Net income (loss) per share $ 1.03 $ .60 $ .79 $ (.12) $ .70 ========= ========= ========= ========= ========= Income (loss) per share - diluted: Before extraordinary item $ 1.00 $ .60 $ .77 $ (.08) $ .68 Extraordinary gain (loss), net of tax -- -- -- (.04) -- --------- --------- --------- --------- --------- Net income (loss) per share $ 1.00 $ .60 $ .77 $ (.12) $ .68 ========= ========= ========= ========= ========= Dividends per common share $ .16 $ .16 $ .16 $ .16 $ .16 ========= ========= ========= ========= ========= Net Sales by Strategic Business Unit (2) Year Ended May 31 2000 1999 1998 1997 1996 --------- --------- --------- --------- --------- Net Sales by Strategic Business Unit: RF & Wireless Communications Group (Wireless) $154,502 $104,347 $100,358 $ 89,115 $ 83,768 Industrial Power Group (Industrial) 87,584 77,389 84,587 81,427 82,799 Medical Systems Group (Medical) 39,461 37,523 23,849 17,261 11,261 Security Systems Group (Security) 84,504 70,180 66,362 37,853 25,614 Display Systems Group (Display) 41,127 31,502 29,016 29,483 36,225 --------- --------- --------- --------- --------- Consolidated $407,178 $320,941 $304,172 $255,139 $239,667 ========= ========= ========= ========= ========= Balance Sheet Data Year Ended May 31 2000 1999 1998 1997 1996 --------- --------- --------- --------- --------- Receivables $ 77,821 $ 62,448 $ 63,431 $ 53,333 $ 48,232 Inventories 119,224 107,724 96,443 92,194 94,327 Working capital, net 174,270 161,640 149,577 140,821 133,151 Property, plant and equipment, net 25,851 23,047 18,477 17,526 16,054 Total assets 264,925 235,678 209,700 192,514 180,158 Long-term debt 117,643 113,658 87,427 107,275 92,025 Stockholders' equity 93,993 84,304 91,585 59,590 62,792
(1)In 1997, the Company recorded special charges for severance and other costs related to a corporate reorganization and a re-evaluation of reserve estimates which increased cost of products sold by $7,200 and selling, general and administrative expenses by $3,800. Net of tax, these charges reduced income by $6,712, or $.56 per share. The Company also recorded an extraordinary loss of $800, less a related tax benefit of $312, or $.04 per share, on the exchange of certain of the Company's debentures.(See Note B to the Consolidated Financial Statements.) (2)The Company reorganized in 2000 from a product-oriented to a market-focused structure. Historical data for 1996 through 1999 have been restated to conform to the new organization. (12) Management's Discussion and Analysis Results of Operations Sales and Gross Margin Analysis Richardson Electronics, Ltd. is a specialized global distributor serving the RF and wireless communications, industrial power conversion, medical imaging, security and display systems markets. The marketing and sales structure of the Company consists of five strategic business units (SBUs): RF & Wireless Communications Group (Wireless), Industrial Power Group (Industrial), Medical Systems Group (Medical), Security Systems Group (Security) and Display Systems Group (Display). The Company completed its reorganization in 2000 from a product-oriented to a market-focused structure. Historical data for 1999 and 1998 has been restated to conform to the new organization. Consolidated sales in fiscal 2000 were a record $407.2 million. Sales by SBU and percent of consolidated sales are presented in the following table (in thousands): Sales (in thousands) 2000 % 1999 % 1998 % -------- ----- -------- ----- -------- ----- Wireless $154,502 37.9 $104,347 32.5 $100,358 33.1 Industrial 87,584 21.5 77,389 24.1 84,587 27.8 Medical 39,461 9.7 37,523 11.7 23,849 7.8 Security 84,504 20.8 70,180 21.9 66,362 21.8 Display 41,127 10.1 31,502 9.8 29,016 9.5 -------- ----- -------- ----- -------- ----- Consolidated $407,178 100.0 $320,941 100.0 $304,172 100.0 ======== ===== ======== ===== ======== ===== Gross margin for each SBU and margin as a percent of sales are shown in the following table. Gross margin reflects the distribution product margin less customer returns, engineering costs, overstock, and other provisions. Manufacturing variances, warranty provisions, LIFO provisions and miscellaneous costs are included under the caption "Corporate" (in thousands): Gross Margins (in thousands) 2000 % 1999 % 1998 % -------- ----- -------- ----- -------- ----- Wireless $40,524 26.2 $28,764 27.6 $27,269 27.2 Industrial 31,037 35.4 27,861 36.0 30,117 35.6 Medical 7,430 18.8 7,923 21.1 5,363 22.5 Security 19,846 23.5 16,184 23.1 15,335 23.1 Display 10,273 25.0 10,344 32.8 10,094 34.8 -------- ----- -------- ----- -------- ----- Total 109,110 26.8 91,076 28.4 88,178 29.0 Corporate (1,178) (1,463) (1,515) -------- ----- -------- ----- -------- ----- Consolidated $107,932 26.5 $89,613 27.9 $86,663 28.5 ======== ===== ======== ===== ======== ===== Sales and gross margin trends are analyzed for each strategic business unit in the following sections. RF & Wireless Communications Group Wireless serves the rapidly expanding voice and data telecommunications market and the radio and television broadcast industry. Wireless' team of sales engineers provides engineering design, prototype assembly and testing of discrete devices and components for the telecommunications market and both vacuum tube and solid state components, systems design and integration services for the broadcast market. Sales increased 48.1% in 2000 to $154.5 million, including a 65.3% gain in telecommunications. Sales growth in 1999 was 4.0%, due to a general weakness in the semiconductor industry. Sales outside of the United States represented 52.4%, 51.2% and 49.8% of Wireless's sales in 2000, 1999 and 1998, respectively. The largest sales gains in 2000 outside the United States for Wireless telecommunications were in Asia / Pacific, up 93.2%, and Europe, up 60.9%. In June 1998, the Company acquired TRL Technologies, Inc. Although the acquisition added only $800,000 to fiscal 1999 sales, their RF & wireless engineering and manufacturing capabilities resulted in design and assembly contracts generating $7.4 million sales in 2000 and backlog of $18.3 million at May 31, 2000. Gross margin as a percent of sales was 26.2% in 2000, compared to 27.6% in 1999 and 27.2% in 1998. The decline in margin in 2000 reflects research and development, engineering charges and start-up costs related to the TRL contracts and, to a lesser extent, competitive pricing pressures in the broadcast market and changes in product mix. Industrial Power Group Industrial serves a broad range of customers including the steel, automotive, textile, plastics, semiconductor, marine and avionics industries. Industrial's specialized product and sales organization employs both vacuum tube and power semiconductor technologies to meet customer needs in applications such as motor speed controls, industrial heating, laser technology, semiconductor manufacturing equipment, radar and welding. Industrial's sales gain of 13.2% in 2000 reflects a 36.1% growth in the sale of power semiconductors and components and a 15.7% gain in magnetrons, microwave generators and related products, offset by flat sales of vacuum tube products. A strong recovery in the semiconductor wafer fabrication market contributed to the sales growth. Sales in 1999 reflect a 7.5% contraction as the core business was adversely affected by economic difficulties in Latin America and weak demand for microwave products used in the manufacture of semiconductors. Foreign sales as a percent of total sales for Industrial were 50.1%, 50.6% and 49.8% in 2000, 1999 and 1998, respectively. Gross margin for the Industrial market has been stable, at 35.4%, 36.0% and 35.6% in 2000, 1999 and 1998, respectively. Medical Systems Group Medical serves the medical imaging market, providing upgrades and integration services in addition to a wide range of diagnostic imaging components. Products include glassware, medical imaging intensifiers and tubes, high- resolution color and monochrome displays, generators, cable assemblies and test equipment. (13) Management's Discussion and Analysis Medical sales increased 5.2% to $39.5 million in 2000, following a 57.3% increase in 1999. Sales growth slowed in 2000 as original equipment manufacturers, the Company's principal competition, focused more of their efforts on the medical products replacement market. Sales outside of the United States represented 23.2%, 26.2% and 32.2% of Medical's sales in 2000, 1999 and 1998, respectively. Gross margin as a percent of sales was 18.8% in 2000, compared to 21.1% in 1999 and 22.5% in 1998. The gross margin trend reflects the increased competition in the replacement market. The gross margin in 2000 was also affected by production inefficiencies in tube reloading. Security Systems Division Security provides security systems and related design services with an emphasis on closed circuit television (CCTV). Sales increased 20.4% in 2000 and 5.8% in 1999. In December 1998, the Company acquired Adler Video Systems, a distributor in southern California with annual sales of approximately $8.4 million. This purchase followed the acquisition of a Canadian distributor, Security Service International, Inc. in August 1997, with annual sales of $20.0 million. Excluding the effect of acquisitions, sales increased 7.1% in 2000 and declined 4.4% in 1999. Security's sales in 1999 were affected by a soft Canadian economy and by foreign exchange, as a 7.0% decline in the value of the Canadian dollar generated a 3.4% reduction in reported sales. Sales outside of the United States represented 56.5% of Security's sales in 2000, 59.5% in 1999, and 63.5% in 1998. Gross margin was 23.5% of sales in 2000 and 23.1% of sales in 1999 and 1998. Inventory turnover rates achieved by Security are significantly higher than the Company's other SBU's, mitigating the effect of lower gross margin rates. Display Systems Group Display provides system integration and custom product solutions for the public information display, financial, point-of-sale and general data display markets. Display sales increased 30.6% in 2000 and 8.6% in 1999. The sales growth in both years reflects the expansion of the Display product line to include monitors, flat panel displays and related systems integration. Revenues of Eternal Graphics, acquired in March 1998, and Pixelink, in March 1999, were responsible for 1999 sales growth. Acquisition revenues had a nominal effect on sales growth in 2000. Sales outside the United States represented 29.7%, 43.7% and 48.8% of Display's sales in 2000, 1999 and 1998, respectively. Growth in monitor sales in the U.S. was the predominant cause of the shift in geographic sales. Gross margin as a percent of sales was 25.0% in 2000, compared to 32.8% in 1999 and 34.8% in 1998. The margin trend reflects a shift in product mix from CRT's to monitors and other display products. The gross margin rate in 2000 was also affected by several large contracts at lower margins. Sales by Geographic Area On a geographic basis, the Company categorizes its sales by destination: North America, Europe, Latin America, Asia/Pacific and Other. Prior year data has been restated to reflect this categorization. Other includes sales to export distributors and to countries where the Company does not have offices. Sales and gross margin by geographic area are as follows (in thousands): Sales (in thousands) 2000 % 1999 % 1998 % -------- ----- -------- ----- -------- ----- North America $265,569 65.3 $205,013 63.9 $189,116 62.2 Europe 77,792 19.1 67,668 21.1 62,706 20.6 Asia/Pacific 34,305 8.4 24,208 7.5 21,155 7.0 Latin America 19,316 4.7 16,734 5.2 20,755 6.8 Other 10,196 2.5 7,318 2.3 10,440 3.4 -------- ----- -------- ----- -------- ----- Consolidated $407,178 100.0 $320,941 100.0 $304,172 100.0 ======== ===== ======== ===== ======== ===== Gross Margins (in thousands) 2000 % 1999 % 1998 % -------- ----- -------- ----- -------- ----- North America $70,029 26.4 $55,569 27.1 $53,372 28.2 Europe 22,942 29.5 20,607 30.5 19,449 31.0 Asia/Pacific 11,042 32.2 7,169 29.6 6,427 30.4 Latin America 5,410 28.0 4,729 28.3 5,763 27.8 Other 3,573 35.0 3,002 41.0 3,167 30.3 -------- ----- -------- ----- -------- ----- Total 112,996 27.8 91,076 28.4 88,178 29.0 Corporate (5,064) (1,463) (1,515) -------- ----- -------- ----- -------- ----- Consolidated $107,932 26.5 $89,613 27.9 $86,663 28.5 ======== ===== ======== ===== ======== ===== North American sales increased 29.5% in 2000 and 8.4% in 1999. The 2000 increase primarily reflects the strong growth in Wireless and Display markets. The 1999 increase includes 5.9% as a result of acquisitions and 2.5% due to internal growth. Sales in Europe increased 15.0% in 2000 and 7.9% in 1999. Growth in both years was adversely affected by foreign exchange as the U.S. dollar strengthened relative to local currencies. Sales in Asia/Pacific markets increased 41.7% in 2000 and 14.4% in 1999. Sales in the first half of 1999 were affected by the economic slowdown and monetary crisis in Asia. Performance improved significantly in the second half of 1999 and continued to improve in 2000, primarily due to the recovery in semiconductor markets. Sales in Latin America increased 15.4% in 200 after a decline of 19.4% in 1999. Shortly after the Asian crisis, the Brazilian market declined. Latin American sales remained depressed throughout 1999, but began a steady recovery in 2000. Sales denominated in currencies other than U. S. dollars were 39.0%, 40.2% and 39.0% of total sales in 2000, 1999 and 1998, respectively. Foreign currency exchange rate changes reduced foreign sales by an average of 2.5%, 3.0% and 5.9% in 2000, 1999 and 1998, respectively. Average selling prices, excluding the effects of exchange rate changes declined 1.3%, 0.4% and 0.3% in 2000, 1999 and 1998 respectively. (14) Management's Discussion and Analysis Other Cost of Sales The following table reconciles product margin to gross margin reported in the Consolidated Statements of Operations: (% of sales) 2000 1999 1998 -------- -------- -------- Product margin 28.0 % 29.0 % 29.6 % Customer returns and scrap (0.5)% (0.4)% (0.6)% Engineering costs (0.3)% (0.1)% 0.0 % Freight costs not inventoried (0.3)% (0.3)% (0.3)% Overstock provisions (0.1)% 0.0 % 0.1 % Other costs (0.3)% (0.3)% (0.3)% -------- -------- -------- Gross margin 26.5 % 27.9 % 28.5 % ======== ======== ======== Fluctuations in product margin primarily reflect the shift in product mix as Security sales have increased as a percent of consolidated sales and as monitor sales have replaced CRT sales in the Display group. Selling, General and Administrative Expenses Selling, general and administrative expenses represented 20.0% of sales in 2000, 22.1% in 1999 and 21.5% in 1998. In the third quarter of 1999, the Company adjusted staffing in light of current sales levels, resulting in a reduction in annual operating costs of approximately $2.5 million, beginning in the fourth quarter. Related severance costs were $340,000. In the fourth quarter of 1999, the Company recorded a $500,000 provision for potential losses on certain Latin American accounts receivable. During fiscal 2000, the Company recorded additional provisions of $469,000 as prospects for a partial recovery on these receivables diminished. These accounts were fully reserved at May 31, 2000. Other (Income) Expense Interest expense increased 15.8% in 2000, reflecting higher borrowing levels to support the growth of the Company and higher interest rates. Interest expense decreased 4.9% in 1999, reflecting lower borrowing levels during the year. Investment income includes realized capital gains of $877,000, $39,000 and $506,000 in 2000, 1999 and 1998. Foreign exchange and other expenses primarily reflect changes in the value of the U. S. dollar relative to foreign currencies. Income Tax Provision The effective tax rates were 29.6% in fiscal 2000 and 1999 and 30.1% in 1998. The rates differ from the statutory rate of 34.0% primarily due to the Company's foreign sales corporation benefit on export sales and , in 2000, realization of tax benefit on prior years' foreign losses, offset by state income taxes. Net Income and per Share Data Net income increased 56.9% in 2000, to $13.1 million, or $1.00 per share, from $8.4 million, or $.60 per share in 1999. Financial Condition Liquidity The Company provides engineered solutions, including prototype design and assembly, in niche markets. Additionally, the Company specializes in certain products representing trailing-edge technology that may not be available from other sources, and may not be currently manufactured. In many cases, the Company's products are components of production equipment for which immediate availability is critical to the customer. Accordingly, the Company enjoys higher gross margins, but necessarily has larger investments in inventory than those of a commodity electronics distributor. Liquidity is provided by the operating activities of the Company, adjusted for non-cash items, and is reduced by working capital requirements, debt service, capital expenditures, dividends, business acquisitions and, in 1999, purchases of treasury stock. Cash provided by operations was $4.1 million in 2000 and 1999 and $6.3 million in 1998. Additional investments in working capital to support sales growth were $15.4 million, $10.2 million and $10.6 million in 2000, 1999 and 1998, respectively. The Company proposed a plan, which has been accepted by the Illinois Environmental Protection Agency, to monitor and process soil and groundwater at the LaFox facility. Contamination is believed to have resulted from practices previously employed at the site. The present value of the estimated future remediation costs was charged to operations in 1996. The balance of the reserve is $520,000 and is included in accrued liabilities at May 31, 2000. Financing At May 31, 2000, the Company had a $50.0 million floating-rate revolving credit agreement. Loans under the agreement bore interest at prime or 125 basis points over the London Inter-Bank Offered Rate (LIBOR), at the Company's option. At May 31, 2000, $10.4 million was available under this line. A Canadian subsidiary of the Company had a revolving credit and term loan agreement aggregating $12.1 million with a Canadian affiliate of the Company's primary bank. The loan was guaranteed by the Company and bore interest at the Canadian prime rate. On July 28, 2000, the Company refinanced the revolving credit facility and the Canadian credit agreement with an $80.0 million multi-currency revolving credit facility. The agreement matures in July 2004 and bears interest at applicable LIBOR rates plus a margin, varying with certain financial performance criteria. At initial funding, the margin was 150 basis points. In addition, the Company entered into certain interest rate swap arrangements for the term of the facility, fixing the interest rate on $33.9 million at an average rate of 8.3%. (15) Management's Discussion and Analysis In fiscal 1999, the Company purchased a suite of enterprise resource planning software utilizing state-of-the-art technology. The Company entered into a financing arrangement with quarterly payments through March 2001 at an implicit interest rate of 7.5%. In fiscal 1998, the Company sold 2.1 million shares of its Common Stock in a public offering at a price of $12.50 per share. The net proceeds to the Company, after deducting an underwriting discount of 6% and issuance costs of $253,000, were $24.1 million. The proceeds were used to reduce borrowings under the Company's revolving debt agreement. In fiscal 1999, the Company purchased 2.0 million shares of its Common Stock at an average cost of $5.76 per share. Based on shares outstanding at May 31, 2000, annual dividend payments approximate $2.0 million. 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. Currency Fluctuations The Company's foreign denominated assets and liabilities are cash, accounts receivable, inventory and accounts payable, primarily in Canada and member countries of the European community and, to a lesser extent, in Asia / Pacific and Latin America. The Company monitors its foreign exchange exposures and, while historically has not, may in the future enter into forward contracts to hedge significant transactions. Other tools that may be used to manage foreign exchange exposures include the use of currency clauses in sales contracts and the use of local debt to offset asset exposures. There are no outstanding forward exchange contracts at May 31, 2000. Conversion to the Euro On January 1, 1999, eleven member countries of the European Union began conversion to a common currency, the Euro. From January 1, 1999 until January 1, 2002, companies operating in Europe must be able to process business transactions either in legacy currencies or in Euros. After January 1, 2002, all transactions will be processed only in Euros. The Company has modified its transaction processing systems to accommodate the Euro and dual currency processing requirements without significant additional costs. While the exact impact on pricing is indeterminable, the Company believes that since most of its pricing is based on U.S. dollar costs, the effect of conversion to the Euro has not been significant. Risk Management and Market Sensitive Financial Instruments As discussed above, the Company's debt financing, in part, varies with market rates and certain of its operations and assets and liabilities are denominated in foreign currencies that subject the Company to foreign exchange risk. In order to provide the user of these financial statements guidance regarding the magnitude of these risks, the Securities and Exchange Commission requires the Company to provide certain disclosures based upon hypothetical assumptions. Specifically, these disclosures require the calculation of the effect a 10% increase in market interest rates and a uniform 10% strengthening of the U. S. dollar against foreign currencies would have on the reported net earnings of the Company. Under these assumptions, additional interest expense, tax effected, would have reduced net income by $210,000 in 2000 or $150,000 in 1999 and foreign currency exchange rates would have decreased net income by $250,000 in 2000 or 140,000 in 1999. The interpretation and analysis of these disclosures should not be considered in isolation since such variances in interest rates and exchange rates would likely influence other economic factors. Such factors, which are not readily quantifiable, would likely also affect the Company's operations. Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 Except for the historical information contained herein, the matters discussed in this Annual Report (including the Annual Report on Form 10-K) are forward- looking statements relating to future events which involve certain risks and uncertainties, including those identified herein and in the Annual Report on Form 10-K. Further, there can be no assurance that the trends reflected in historical information will continue in the future. (16) Consolidated Balance Sheets As of May 31 (in thousands) 2000 1999 --------- --------- Assets Current assets Cash and equivalents $ 11,832 $ 12,569 Receivables, less allowance of $2,991 and $2,584 77,821 62,448 Inventories 119,224 107,724 Other 13,346 12,817 --------- --------- Total current assets 222,223 195,558 Property, plant and equipment, net 25,851 23,047 Other assets 16,851 17,073 --------- --------- Total assets $264,925 $235,678 ========= ========= Liabilities and stockholders' equity Current liabilities Accounts payable 30,882 21,829 Accrued liabilities 14,452 10,259 Notes and current portion of long-term debt 2,619 1,830 --------- --------- Total current liabilities 47,953 33,918 Long-term debt 117,643 113,658 Deferred income taxes 5,336 3,798 --------- --------- Total liabilities 170,932 151,374 Stockholders' equity Common Stock, $.05 par value 583 570 Class B Common Stock, convertible, $.05 par value 162 162 Preferred Stock, $1.00 par value -- -- Additional paid-in capital 84,514 82,309 Treasury stock (11,045) (11,532) Retained earnings 34,184 23,044 Foreign currency translation adjustment (14,405) (10,249) --------- --------- Total stockholders' equity 93,993 84,304 --------- --------- Total liabilities and stockholders' equity $264,925 $235,678 ========= ========= See notes to consolidated financial statements. (17) Consolidated Statements of Operations Year Ended May 31 (in thousands, except per share amounts) 2000 1999 1998 --------- --------- --------- Net sales $407,178 $320,941 $304,172 Cost of products sold 299,246 231,328 217,509 --------- --------- --------- Gross margin 107,932 89,613 86,663 Selling, general and administrative expenses 81,489 70,870 65,393 --------- --------- --------- Operating income 26,443 18,743 21,270 Other (income) expense: Interest expense 8,911 7,689 8,084 Investment income (1,032) (636) (1,005) Foreign exchange and other (40) (167) 255 --------- --------- --------- 7,839 6,886 7,334 --------- --------- --------- Income before income taxes 18,604 11,857 13,936 Income tax provision 5,500 3,505 4,200 --------- --------- --------- Net income $ 13,104 $ 8,352 $ 9,736 ========= ========= ========= Net income per share: Basic $ 1.03 $ .60 $ .79 Diluted $ 1.00 $ .60 $ .77 Dividends per common share $ .16 $ .16 $ .16 Comprehensive income: Net income $ 13,104 $ 8,352 $ 9,736 Foreign currency translation adjustment (4,156) (3,663) (2,983) --------- --------- --------- Comprehensive income $ 8,948 $ 4,689 $ 6,753 ========= ========= ========= See notes to consolidated financial statements. (18) Consolidated Statements of Cash Flows Year Ended May 31 (in thousands) 2000 1999 1998 -------- -------- --------- Operating Activities: Net income $13,104 $ 8,352 $ 9,736 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 4,415 3,605 3,477 Amortization of intangibles and financing costs 744 633 632 Deferred income taxes 1,292 1,237 2,779 Stock contribution to employee ownership plan -- 485 285 -------- -------- -------- Net adjustments 6,451 5,960 7,173 -------- -------- -------- Changes in working capital, net of currency translation effects and business acquisitions: Receivables (17,072) 1,108 (9,170) Inventories (11,307) (10,985) (3,658) Other current assets (351) (3,015) 186 Accounts payable 9,130 3,172 4,366 Accrued liabilities 4,159 (509) (2,350) -------- -------- -------- Net changes in working capital (15,441) (10,229) (10,626) -------- -------- -------- Net cash provided by operating activities 4,114 4,083 6,283 -------- -------- -------- Financing activities: Proceeds from borrowings 12,316 31,528 16,731 Payments on debt (7,641) (3,743) (35,642) Proceeds from sales of common stock 2,716 385 26,933 Purchases of treasury stock (11) (11,527) -- Cash dividends (1,964) (2,150) (1,976) -------- -------- -------- Net cash provided by financing activities 5,416 14,493 6,046 -------- -------- -------- Investing activities: Capital expenditures (7,026) (3,795) (6,798) Business acquisitions (2,356) (7,647) (4,116) Other (885) (2,596) (3,396) -------- -------- -------- Net cash used in investing activities (10,267) (14,038) (14,310) -------- -------- -------- Increase (decrease) in cash and equivalents (737) 4,538 (1,981) Cash and equivalents at beginning of year 12,569 8,031 10,012 -------- -------- -------- Cash and equivalents at end of year $11,832 $12,569 $ 8,031 ======== ======== ======== (19)
Consolidated Statements of Stockholders' Equity Shares Issued Accumulated --------------- Additional Other (shares and dollars Class B Par Paid-in Treasury Retained Comprehensive in thousands) Common Common Value Capital Stock Earnings Income(Loss) Total ------- ------- ----- --------- --------- -------- ------------ -------- Balance June 1, 1997 8,721 3,243 $ 599 $ 53,512 $ -- $ 9,082 $ (3,603) $59,590 Shares contributed to ESOP 34 -- 2 283 -- -- -- 285 Shares issued under ESPP 354 -- 19 2,845 -- -- -- 2,864 Public stock offering 2,070 -- 103 23,966 -- -- -- 24,069 Conversion of Class B 4 (4) -- -- -- -- -- -- Dividends -- -- -- -- -- (1,976) -- (1,976) Currency translation -- -- -- -- -- -- (2,983) (2,983) Net income -- -- -- -- -- 9,736 -- 9,736 ------- ------- ----- --------- --------- -------- ------------ -------- Balance May 31, 1998 11,183 3,239 723 80,606 -- 16,842 (6,586) 91,585 Shares contributed to ESOP 12 -- 1 484 -- -- -- 485 Shares issued under ESPP 189 -- 8 1,219 (5) -- -- 1,222 Purchase of 2,000 shares of common stock -- -- -- -- (11,527) -- -- (11,527) Conversion of Class B shares to common 6 (6) -- -- -- -- -- -- Dividends -- -- -- -- -- (2,150) -- (2,150) Currency translation -- -- -- -- -- -- (3,663) (3,663) Net income -- -- -- -- -- 8,352 -- 8,352 ------- ------- ----- --------- --------- -------- ------------ -------- Balance May 31, 1999 11,390 3,233 732 82,309 (11,532) 23,044 (10,249) 84,304 Shares issued under ESPP 279 -- 13 2,205 498 -- -- 2,716 Purchase of Common Stock -- -- -- -- (11) -- -- (11) Conversion of Class B shares of common stock 1 (1) -- -- -- -- -- -- Dividends -- -- -- -- -- (1,964) -- (1,964) Currency translation -- -- -- -- -- -- (4,156) (4,156) Net income -- -- -- -- -- 13,104 -- 13,104 ------- ------- ----- --------- --------- -------- ------------ -------- Balance May 31, 2000 11,670 3,232 $745 $ 84,514 $(11,045) $34,184 $ (14,405) $93,993 ======= ======= ===== ========= ========= ======== ============ ========
See notes to consolidated financial statements Note A -- Significant Accounting Policies Principles of Consolidation: The consolidated financial statements include the accounts and operations of the Company and its subsidiaries. All significant intercompany transactions are eliminated. The Company accounts for its results of operations on a 52/53 week year, ending on the Saturday nearest May 31. Fiscal 2000 contained 53 weeks, including 14 weeks in the first quarter. Fiscal 1999 and 1998 each contained 52 weeks. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications: Certain amounts in the 1999 and 1998 financial statements are reclassified to conform to the 2000 presentation. Cash Equivalents: The Company considers short-term investments that have a maturity of three months or less, when purchased, to be cash equivalents. The carrying amounts reported in the balance sheet for cash and equivalents approximate the fair market value of these assets. Inventories: Inventories are stated at the lower of cost or market. Inventory costs determined using the last-in, first-out (LIFO) method represent 79% of total inventories at May 31, 2000 and 78% at May 31, 1999. For the remaining inventories, cost is determined on the first-in, first-out (FIFO) method. If the FIFO method had been used for all inventories, the total amount of inventories would have been increased by $542 and $2,058 at May 31, 2000 and 1999, respectively. As a result of overstock reserves, the LIFO carrying value of all inventories approximated market value at May 31, 2000 and 1999. Substantially all inventories represent finished goods held for sale. Property, Plant and Equipment: Property, plant and equipment are stated at cost. Provisions for depreciation are computed principally using the straight- line method over the estimated useful life of the asset. Property, plant and equipment consist of the following: May 31 2000 1999 --------- --------- Land and improvements $ 2,770 $ 2,764 Buildings and improvements 19,310 18,776 Machinery and equipment 42,011 36,003 --------- -------- Property, at cost 64,091 57,543 Accumulated depreciation (38,240) (34,496) --------- --------- Property,plant and equipment net $ 25,851 $ 23,047 ========= ========= Other Assets: Deferred financing costs, goodwill and other deferred charges are amortized using the straight-line method. Goodwill is generally amortized over a period of 20 to 40 years. The Company continually evaluates the carrying value of goodwill based upon its recoverability from related projected undiscounted cash flows. Other assets consist of the following: May 31 2000 1999 --------- --------- Investments (at market) $ 3,497 $ 2,603 Notes receivable 544 5,680 Deferred financing costs, net 370 436 Goodwill, net 9,844 7,126 Property held for sale 1,732 - Other deferred charges, net 864 1,228 --------- --------- Other assets, net $ 16,851 $ 17,073 ========= ========= Accrued Liabilities: Accrued liabilities consist of the following: May 31 2000 1999 --------- --------- Compensation and payroll taxes $ 5,986 $ 4,048 Interest 3,042 2,758 Income taxes 2,452 1,042 Other accrued expenses 2,972 2,411 --------- --------- Accrued liabilities $ 14,452 $ 10,259 ========= ========= Foreign Currency Translation: Foreign currency balances and financial statements are translated into U. S. dollars at end-of-period rates, except that revenues and expenses are translated at the current rate on the date of the transaction. Gains and losses resulting from foreign currency transactions are included in income currently. Foreign currency transaction gains (losses) reflected in operations are $60, $77, and $(299) in 2000, 1999, and 1998, respectively. Gains and losses resulting from translation of foreign subsidiary financial statements are credited or charged directly to a separate component of stockholders' equity. Revenue Recognition: Revenues are recorded when title passes to the customer. Income Taxes: Deferred tax assets and liabilities are established for differences between financial reporting and tax accounting of assets and liabilities and are measured using the marginal tax rates. Stock-Based Compensation: The Company accounts for its stock option plans in accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. However, all grants under the Company's option plans have been made at the fair market value on the date of grant. Statement of Financial Accounting Standards (SFAS) No. 123 "Accounting for Stock-Based Compensation", requires estimation of the fair value of options granted to employees. As permitted by SFAS No. 123, the Company presents this estimated fair value information in Note E. (25) Notes to Consolidated Financial Statements (In thousands, except per share amounts) Earnings per Share: Basic earnings per share is calculated by dividing net income by the weighted average number of Common and Class B Common shares outstanding. Diluted earnings per share is calculated by dividing net income (adjusted for interest savings, net of tax, on assumed bond conversions) by the actual shares outstanding and share equivalents that would arise from the exercise of stock options and the assumed conversion of convertible bonds. The per share amounts presented in the Consolidated Statement of Operations are based on the following amounts: 2000 1999 1998 -------- -------- -------- Numerator for basic EPS: Net income $13,104 $ 8,352 $ 9,736 ======== ======== ======== Denominator for basic EPS: Shares outstanding, June 1 12,623 14,422 11,964 Additional shares issued 61 106 300 Reduction of shares acquired - (706) - -------- -------- -------- Average shares outstanding 12,684 13,822 12,264 ======== ======== ======== Numerator for diluted EPS: Net income $13,404 $ 8,352 $ 9,736 Interest saving, net of Tax, on assumed conversions of bonds 3,459 - - -------- -------- -------- Adjusted net income $16,563 $ 8,352 $ 9,736 ======== ======== ======== Denominator for diluted EPS: Average shares outstanding 12,684 13,822 12,264 Effect of dilutive stock options 216 204 425 Assumed converstion of bonds 3,680 - - -------- -------- -------- Adjusted shares outstanding 16,580 14,026 12,689 ======== ======== ======== Out-of-the-money (exercise price higher than market price) stock options are excluded from the calculation because they are anti-dilutive. The Company's 81/4% and 71/4% convertible debentures are excluded from the calculation in 1999 and 1998 as assumed conversion would be anti-dilutive. Note B -- Acquisitions Fiscal 2000: In December 1999, the Company's Wireless unit acquired the assets and liabilities of Apoio Technico, a distributer of broadcast transmitters and equipment in Brazil with annual sales of $8,000. In May 2000, the Wireless unit also acquired the assets and liabilities of Broadcast Richmond, a global distributer and installer of broadcast equipment located in Richmond, Indiana, with annual sales of $2,000. The aggregate cash outlay for business acquisitions made in 2000 was $391. Additional non-cash payments of $5,058 were made in the form of the foregiveness of an account receivable. Fiscal 1999: In December 1998, the Company's Security unit acquired Adler Video Systems, a southern California based distributor of closed circuit television (CCTV) systems with annual sales of $8,400. The Company also made three smaller acquisitions with annual sales of approximately $2,000 each. These acquisitions included TRL Industries, a manufacturer of amplifier circuits for the Wireless business unit's wireless communications operations; Sahab S.A., a Mexican distributer of broadcast transmitters for the Wireless business unit; and Pixelink, a systems integrator specializing in monitors for the Display business unit. The aggregate cash outlay for business acquisitions made in 1999 was $2,868. Additional non-cash payments of $1,113 were made in the form of the Company's Common Stock and the foregiveness of a note receivable. Fiscal 1998: In August 1997 the Company's Security unit acquired the assets of Security Service International, Inc., a Canadian distributor of security systems with annual sales of approximately $20,000. In March, 1998, the Company acquired Eternal Graphics, a systems integrator specializing in financial applications for the Display business unit with annual sales of $4,200. The aggregate cash outlay for business acquisitions made in 1998 was $5,742. Each of the acquisitions was accounted for by the purchase method, and accordingly, their results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The impact of these acquisitions on results of operations was not significant and would not have been significant if they had been included for the entire year. If each of these acquisitions had occurred at the beginning of the year, consolidated sales would have increased by approximately $6,000, $6,900 and $6,000 in 2000, 1999 and 1998, respectively. The terms of certain of the Company's acquisition agreements provide for additional consideration to be paid if the acquired entity's results of operations exceed certain targeted levels. Such amounts are paid in cash and recorded when earned as additional consideration, and amounted to $1,965, $927 and $1,056 in 2000, 1999 and 1998, respectively. Assuming the goals established in all agreements outstanding at May 31, 2000 were met, additional consideration aggregating approximately $4,783 would be payable through 2004. Note C -- Debt Financing Long-term debt consists of the following: May 31 2000 1999 --------- --------- 8 1/4% Convertible debentures, due June 2006 $ 40,000 $ 40,000 7 1/4% Convertible debentures, due December 2006 30,825 30,825 Floating-rate revolving credit facility, due June 2001 (7.46% at May 31, 2000) 39,582 33,582 Revolving credit and term loan due June 2001 (6.95% at May 31, 2000) 7,646 7,694 Software financing 1,588 2,673 Other 621 714 --------- --------- Long-term debt 120,262 115,488 Less current portion (2,619) (1,830) --------- --------- Long-term debt $117,643 $113,658 ========= ========= The 7 1/4% convertible debentures are unsecured and subordinated to other long-term debt, including the 8 1/4% convertible debentures. Each $1,000 of the 7 1/4% debenture is convertible into the Company's Common Stock at any time prior to maturity at $21.14 per share and the 8 1/4% convertible debentures are convertible at $18.00 per share. The Company is required to make sinking fund payments of $3,850 in 2004 and $6,225 in 2005. (22) Notes to Consolidated Financial Statements (In thousands, except per share amounts) At May 31, 2000, the Company had a $50,000 floating-rate revolving credit facility expiring June 2001. Loans under the agreement bore interest at the Company's option at prime or at a premium over LIBOR. The premium over LIBOR varied with certain performance benchmarks. At May 31, 2000, the premium was 125 basis points, and $10,400 was available for future borrowing. A Canadian subsidiary of the Company had a revolving credit and term loan agreement aggregating $12,100 with a Canadian affiliate of the Company's primary bank. The loan was guaranteed by the Company and bore interest at the Canadian prime rate. On July 28, 2000, the Company refinanced the revolving credit facility and the Canadian credit agreement with an $80,000 multi-currency revolving credit facility. The agreement matures in July 2004 and bears interest at applicable LIBOR rates plus a margin, varying with certain financial performance criteria. At initial funding, the margin was 150 basis points. In addition, the Company entered into certain interest rate swap arrangements for the term of the facility, fixing the interest rate on $33.9 million at an average rate of 8.3%. In fiscal 1999, the Company purchased a suite of enterprise resource planning software utilizing state-of the-art client-server technology. The Company entered into a financing arrangement with quarterly payments through March 2001 at an average implicit interest rate of 7.5%. In the following table, the fair values of the Company's 7 1/4% and 8 1/4% convertible debentures are based on quoted market prices at the end of the fiscal year. The fair values of the bank term loans are based on carrying value, adjusted for market interest rate changes. 2000 1999 ------------------ ------------------ Carrying Fair Carrying Fair Value Value Value Value --------- --------- --------- --------- 8 1/4% Convertible debentures $ 40,000 $ 34,400 $ 40,000 $ 33,800 7 1/4% Convertible debentures 30,825 24,352 30,825 22,965 Floating-rate revolving credit facility 39,582 39,582 33,582 33,582 Revolving credit and term loan 7,646 7,646 7,694 7,694 Software financing arrangment 1,588 1,674 2,673 3,036 Other 621 621 714 714 --------- --------- --------- --------- Total 120,262 108,275 115,488 101,791 Less current portion (2,619) (2,619) (1,830) (1,830) --------- --------- --------- --------- Total $117,643 $105,656 $113,658 $ 99,961 ========= ========= ========= ========= The loan and debenture agreements contain financial covenants with which the Company was in full compliance at May 31, 2000. The most restrictive covenants set benchmark levels for tangible net worth, debt to tangible net worth ratio, cash flow to senior funded debt and annual debt service coverage. Aggregate maturities of debt during the next five years are: $2,619 in 2001, $263 in 2002, $3,850 in 2004 and $45,807 in 2005. Cash payments for interest were $8,627, $7,477 and $8,387 in 2000, 1999 and 1998, respectively. Note D -- Income Taxes The components of income before income taxes are: 2000 1999 1998 ---------- --------- --------- United States $ 16,199 $ 9,531 $ 11,070 Foreign 2,405 2,326 2,866 ---------- ---------- --------- Income (loss) before taxes and extraordinary item $ 18,604 $ 11,857 $ 13,936 ========== ========== ========= The provision for income taxes differs from income taxes computed at the federal statutory tax rate of 34% as a result of the following items: 2000 1999 1998 ---------- ---------- ---------- Federal statutory rate 34.0 % 34.0 % 34.0 % Effect of: State income taxes, net of federal tax benefit 3.2 2.8 3.5 FSC benefit on export sales (4.4) (7.2) (6.2) Realization of tax benefit on prior years' foreign losses (2.8) - - Foreign taxes at other rates 0.5 0.5 (0.3) Other (0.9) (0.5) (0.9) ---------- ---------- ---------- Effective tax rate 29.6 % 29.6 % 30.1 % ========== ========== ========== The provisions for income taxes consist of the following: 2000 1999 1998 ---------- ---------- ---------- Currently payable: Federal $ 2,224 $ 1,294 $ 973 State 192 (44) 155 Foreign 1,792 1,018 293 ---------- ---------- ---------- Total currently payable 4,208 2,268 1,421 Deferred: Federal 2,023 730 1,867 State 739 545 275 Foreign (1,470) (38) 637 ---------- ---------- ---------- Total deferred 1,292 1,237 2,779 ---------- ---------- ---------- Income tax provision $ 5,500 $ 3,505 $ 4,200 ========== ========== ========== (23) Notes to Consolidated Financial Statements (In thousands, except per share amounts) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of May 31, 2000 and 1999 are as follows: Balance Sheet Presentation Current Noncurrent Asset (1) Liability ---------- ---------- At May 31, 2000: Deferred tax assets: Intercompany profit in inventory $ 1,469 $ - Inventory valuation 5,898 - Environmental and other reserves - 545 Other, net 73 71 ---------- ---------- Deferred tax assets 7,440 616 Deferred tax liabilities: Accelerated depreciation - (4,182) Other, net - (1,770) ---------- ---------- Net deferred tax $ 7,440 $ (5,336) At May 31, 1999: Deferred tax assets: Intercompany profit in inventory 1,492 - Inventory valuation 5,674 - Environmental and other reserves - 756 Other, net 11 - ---------- ---------- Deferred tax assets 7,177 756 Deferred tax liabilities: Accelerated depreciation - (3,834) Other, net - (720) ---------- ---------- Net deferred tax $ 7,177 $ (3,798) ========== ========== (1) Included in other current assets on the balance sheet In 1995, due to the timing and nature of a claim settlement, the Company utilized a ten-year carryback provision under the Internal Revenue Code. The Company's U. S. federal tax returns have been examined through 1995. As part of this examination, in December 1997, the Internal Revenue Service contested the Company's carryback of the aforementioned claim settlement. The Company is appealing the IRS position. However, if the Company were ultimately unsuccessful, the claim would be available for carryforward at the then current statutory rate and the impact on the Company's financial position and results of operations would not be material. Income taxes paid were $2,313, $1,758, and $850 in 2000, 1999 and 1998, respectively. Note E -- Stockholders' Equity The Company has authorized 30,000 shares of Common Stock, 10,000 shares of Class B Common Stock, and 5,000 shares of Preferred Stock. The Class B Common Stock has ten votes per share. The Class B Common Stock has transferability restrictions; however, it may be converted into Common Stock on a share-for- share basis at any time. With respect to dividends and distributions, shares of common stock and Class B common stock rank equally and have the same rights, except that Class B common stock is limited to 90% of the amount of common stock cash dividends. In May 1998, the Company sold 2,070 shares of its common stock through a public offering at a price of $12.50 per share. The net proceeds to the Company, after deducting an underwriting discount of 6% and issuance costs of $253 were $24,069. Proceeds were used to pay down the revolving credit facility. In fiscal 1999, the Company purchased 2,000 shares of Common Stock at an average cost of $5.76 per share. Total Common Stock issued and outstanding at May 31, 2000 was 9,755 shares. An additional 9,430 shares of Common Stock have been reserved for the potential conversion of the convertible debentures and Class B Common Stock and for future issuance under the Employee Stock Option Plans. The Employee Stock Purchase Plan (ESPP) provides substantially all employees an opportunity to purchase Common Stock of the Company at 85% of the stock price at the beginning or the end of the year, whichever is lower. At May 31, 2000, the plan had 64 shares reserved for future issuance. The Employees' 1998 Incentive Compensation Plan authorizes the issuance of up to 800 shares as incentive stock options, non-qualified stock options or stock awards. Under this plan and predecessor plans, 2,069 shares are reserved at May 31, 2000 for future issuance. The Plan authorizes the granting of incentive stock options at the fair market value at the date of grant. Generally, these options become exercisable over staggered periods and expire up to ten years from the date of grant. Under the 1996 Stock Option Plan for Non-Employee Directors and a predecessor plan, at May 31, 2000, 382 shares of Common Stock have been reserved for future issuance relating to stock options exercisable based on the passage of time. Each option is exercisable over a period from its date of grant at the market value on the grant date and expires after ten years. The Company applies APB Opinion No. 25 and related interpretations in accounting for its option plans and, accordingly, has not recorded compensation expense for such plans. SFAS No. 123 requires the calculation of the fair value of each option granted. (25) Notes to Consolidated Financial Statements (In thousands, except per share amounts) This fair value is estimated on the date of grant using the Black-Scholes option-pricing model with the assumptions indicated below. Had the Company's option plans and stock purchase plan been treated as compensatory under the provisions of SFAS No. 123, the Company's net income and net income per share would have been affected as follows: 2000 1999 1998 ------- ------- ------- Net income, as reported $13,104 $ 8,352 $ 9,736 Proforma net income 12,300 7,629 9,261 Profoma net income per share: Basic $ .97 $ .55 $ .76 Assuming full dilution .95 .54 .73 Assumptions used: Risk-free interest rate 6.0% 5.4% 5.5% Annual standard deviation of stock price 55% 50% 40% Average expected life (years) 5.5 6.1 5.6 Annual dividend rate $ .16 $ .16 $ .16 Average fair value per option $ 3.59 $ 3.31 $ 3.49 Option value of ESPP per share $ 1.24 $ 1.13 $ 1.19 Fair value of options granted during the year $ 991 $ 1,115 $ 948 The effect of applying SFAS No. 123 in this proforma disclosure is not indicative of the effects on future years, because SFAS No. 123 does not apply to grants issued prior to fiscal 1996. A summary of the share activity and weighted average exercise prices for the Company's option plans is as follows: Outstanding Exercisable -------------------- ------------------- Shares Price Shares Price -------- -------- -------- -------- At June 1, 1997 1,489 $ 7.31 936 $ 7.21 Granted 291 8.70 Exercised (308) 6.57 Cancelled (99) 7.26 -------- At May 31, 1998 1,373 7.74 697 7.52 Granted 338 7.19 Exercised (20) 4.68 Cancelled (5) 7.86 -------- At May 31, 1999 1,686 7.66 855 7.62 Granted 296 7.81 Exercised (292) 6.98 Cancelled (131) 7.66 -------- At May 31, 2000 1,559 7.82 755 7.82 The following table summarizes information about stock options outstanding as of May 31, 2000: Outstanding Exercisable ------------------- ------------------- Exercise Price Range Shares Price Life Shares Price Life - ----------------- ------- ----- ---- ------- ----- ---- $3.75 to $5.375 87 $4.46 6.1 72 $4.27 4.2 $6.00 to $7.50 793 6.90 6.3 308 6.83 4.5 $8.00 to $8.50 505 8.23 7.1 277 8.15 4.8 $10.813 to $13.25 174 12.52 5.8 98 12.59 3.8 ------- ------- Total 1,559 755 ======= ======= Note F -- Employee Retirement Plans The Company's domestic employee retirement plans consist of a profit sharing plan and a stock ownership plan (ESOP). Annual contributions in cash or Company stock are made at the discretion of the Board of Directors. In addition, the profit sharing plan has a 401(k) provision whereby the Company matches 50% of employee contributions up to 4% of base pay. Charges to expense for discretionary and matching contributions to these plans were $1,790, $1,370 and $1,341 in 2000, 1999 and 1998, respectively. Such amounts included contributions in stock of $1,310 for 2000 and $285 for 1998, based on the stock price at the date contributed. Shares are included in the calculation of earnings per share and dividends are paid to the ESOP from the date the shares are contributed. Foreign employees are covered by a variety of government mandated programs. Note G -- Industry and Market Information The following disclosures are made in accordance with the SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information". The Company completed the reorganization of its marketing and sales structure into five strategic business units (SBU's) in fiscal 2000. Historical data for 1999 and 1998 have been restated to conform to the new organization structure. The new units are: RF & Wireless Communications Group (Wireless), Industrial Power Group (Industrial), Medical Systems Group (Medical), Security Systems Division (Security) and Display Systems Group (Display). Wireless serves the rapidly expanding wireless voice and data telecommunications industry and radio and television broadcast industry. Industrial serves a broad range of customers including the steel, automotive, textile, plastics, semiconductor, marine and avionics industries. Medical serves the medical imaging market, providing system upgrade and integration services in addition to a wide range of diagnostic imaging components. Security is a full-line distributor of CCTV, fire, burglary, access control, sound and communication products and accessories. Display provides system integration and custom product solutions for the public information display, financial, point-of-sale and general data display markets. (25) Notes to Consolidated Financial Statements (In thousands, except per share amounts) Each SBU is directed by a Vice President and General Manager who reports to the President and Chief Operating Officer. The President evaluates performance and allocates resources, in part, based on the direct operating contribution of each SBU. Direct operating contribution is defined as gross margin less product management and direct selling expenses. In North America and Europe, the sales force is organized by SBU and, accordingly, these costs are included in direct expenses. In Latin America, Asia / Pacific and the rest of the world, the regional sales force is shared and, accordingly, is not included in direct expenses. Inter-segment sales are not significant. Accounts receivable, inventory, goodwill and certain notes receivable are identified by SBU. Cash, net property and other assets are not identifiable by SBU. Accordingly, depreciation, amortization expense and financing costs are not identifiable by SBU. Operating results for each SBU are summarized in the following table: Gross Sales Margin Contribution Assets ---------- --------- ------------ --------- Fiscal 2000 Wireless $ 154,502 $ 40,524 $ 26,694 $ 86,638 Industrial 87,584 31,037 24,117 42,449 Medical 39,461 7,430 4,065 26,654 Security 84,504 19,846 9,699 33,470 Display 41,127 10,273 5,758 19,825 ---------- --------- ------------ --------- Total $ 407,178 $109,110 $ 70,333 $209,036 ========== ========= ============ ========= Fiscal 1999 Wireless $ 104,347 $ 28,764 $ 18,042 $ 63,751 Industrial 77,389 27,861 21,318 43,661 Medical 37,523 7,923 4,817 25,870 Security 70,180 16,184 7,179 31,685 Display 31,502 10,344 6,517 20,918 ---------- --------- ----------- --------- Total $ 320,941 $ 91,076 $ 57,873 $185,885 ========== ========= =========== ========= Fiscal 1998 Wireless $ 100,358 $ 27,269 $ 17,764 $ 56,687 Industrial 84,587 30,117 23,659 45,558 Medical 23,849 5,363 2,619 19,853 Security 66,362 15,335 7,084 30,245 Display 29,016 10,094 7,458 16,900 ---------- --------- ----------- --------- Total $ 304,172 $ 88,178 $ 58,584 $169,243 ========== ========= =========== ========= A reconciliation of gross margin, direct operating contribution and assets to the relevant consolidated amounts is as follows. (Other assets not identified includes miscellaneous receivables, manufacturing inventories and other assets.) 2000 1999 1998 --------- --------- --------- Segment gross margin $109,110 $ 91,076 $ 88,178 Manufacturing variances and other costs (1,178) (1,463) (1,515) --------- --------- --------- Gross margin 107,932 89,613 86,663 ========= ========= ========= Segment contribution 70,333 57,873 58,584 Manufacturing variances and other costs (1,178) (1,463) (1,515) Regional selling expenses (14,489) (12,842) (12,357) Administrative expenses (28,223) (24,825) (23,442) --------- --------- --------- Operating income 26,443 18,743 21,270 ========= ========= ========= Segment assets 209,036 185,885 169,243 Cash and equivalents 11,832 12,569 8,031 Other current assets 13,346 12,817 9,681 Net property 25,851 23,047 18,477 Other assets 4,860 1,360 4,268 --------- --------- --------- Total assets $264,925 $235,678 $209,700 ========= ========= ========= Geographic sales information is grouped by customer destination into five areas: North America, Europe, Latin America, Asia/Pacific and Other. Sales to Mexico are included as part of Latin America. Other includes sales to export distributors and to countries where the Company does not have sales offices. The United States and Canada are the only countries for which sales disclosure under SFAS No. 131 is required. Fiscal 2000 sales and long-lived assets (net property and other assets, excluding investments) were as follows: Sales Assets --------- -------- United States $212,376 $31,213 Canada 53,193 2,260 --------- -------- North America 265,569 33,473 Europe 77,792 2,929 Asia / Pacific 34,305 625 Latin America 19,316 2,178 Other 10,196 0 --------- -------- Total $407,178 $39,205 ========= ======== The Company sells its products to companies in diversified industries and performs periodic credit evaluations of its customers' financial condition. Terms are generally on open account, payable net 30 days in North America and Latin America, and vary throughout Europe and the Far East. Estimates of credit losses are recorded in the financial statements based on periodic reviews of outstanding accounts and actual losses have been consistently within management's estimates. (26) Notes to Consolidated Financial Statements (In thousands, except per share amounts) Note H -- Litigation On June 19, 1990, the Company was served with a complaint in Panache Broadcasting of Pennsylvania, Inc. v. Richardson Electronics, Ltd.; Varian Associates, Inc.; and Varian Supply Company (VASCO - a joint venture between the Company and Varian Associates, Inc.), in U. S. District Court for the Eastern Division of Pennsylvania alleging violations of Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act. This is a class action for the purpose of determining liablility only on behalf of all persons and businesses in the U. S. who purchased electron tubes (1) encompassed in the VASCO agreement, (2) related to the dud tube collection program of the defendants or (3) related to acquisitions arising out of VASCO between February 26, 1986 to May 13, 1999. The suit seeks treble damages alleged to be in excess of $100, injunctive relief and attorneys' fees. The litigation has been transferred to the U. S. District Court for the Northern District of Illinois, Eastern Division as cause No. 90C6400, and is in the discovery stage. The Company is defending itself against this action. It is not possible at this time to predict the outcome of this legal action. Note I -- Selected Quarterly Financial Data (Unaudited) Summarized quarterly financial data for 2000 and 1999 follow. There were no material fourth quarter adjustments in 2000. The fourth quarter of fiscal 1999 includes a $500 provision for bad debts in Latin America which reduced net income by $305 or $.02 per share. First Second Third Fourth -------- -------- -------- --------- 2000: Net sales $ 95,564 $ 97,578 $ 98,874 $ 115,162 Gross margin 25,668 26,561 25,780 29,923 Net income 2,701 3,269 2,528 4,606 Net income per share: Basic $ .21 $ .26 $ .20 $ .36 Dilutive $ .21 $ .26 $ .20 $ .32 1999: Net sales $ 76,038 $ 82,232 $ 77,092 $ 85,579 Gross margin 21,712 23,262 21,388 23,251 Net income 2,501 3,279 693 1,879 Net income per share: Basic $ .17 $ .23 $ .05 $ .15 Dilutive $ .17 $ .23 $ .05 $ .15 (27) Report of Independent Auditors Stockholders and Directors Richardson Electronics, Ltd. LaFox, Illinois We have audited the accompanying consolidated balance sheets of Richardson Electronics, Ltd. and subsidiaries as of May 31, 2000 and 1999, and the related consolidated statements of operations, cash flows and stockholders' equity for each of the three years in the period ended May 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Richardson Electronics, Ltd. and subsidiaries at May 31, 2000 and 1999, and the consolidated results of their operations and cash flows for each of the three years in the period ended May 31, 2000, in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP Chicago, Illinois July 18, 2000, except for information in Note C, as to which the date is July 28,2000 (28) Officers and Directors Corporate Officers Edward J. Richardson Chairman of the Board and Chief Executive Officer Bruce W. Johnson President and Chief Operating Officer Pierluigi Calderone Vice President and Director of European Operations Kevin M. Connor Vice President of Sales, RF & Wireless Communications Group Flint Cooper Executive Vice President and General Manager, Security Systems Division Lawrence T. Duneske Vice President, Worldwide Logistics William J. Garry Senior Vice President, Finance and Chief Financial Officer Joseph C. Grill Senior Vice President, Human Resources Robert J. Heise Vice President and General Manager, Display Systems Group Gregory J. Peloquin Vice President and General Manager, RF & Wireless Communications Group Kathleen M. McNally Senior Vice President, Marketing Operations Murray J. Kennedy Vice President and General Manager, Industrial Power Group Kevin C. Oakley Vice President and General Manager, Medicaly Systems Group Robert Prince Executive Vice President, Worldwide Sales Kevin F. Reilly Senior Vice President and Chief Information Officer William G. Seils Senior Vice President, General Counsel and Corporate Secretary Ronald G. Ware Treasurer and Assistant Secretary Board of Directors Edward J. Richardson (1) Arnold R. Allen Consultant Jacques Bouyer (3,4,6) Consultant John Peterson, (2,6) Managing Director, Tucker Anthony Cleary Gull William J. Garry Scott Hodes (2,3,5) Partner, Law Firm of Ross & Hardies Bruce W. Johnson (1) Ad Ketelaars (6) CEO, Comsys Holding B.V. Harold L. Purkey (2) President, Forum Capital Markets Samuel Rubinovitz (1,3,4,5,6) Consultant and Chairman of the Board, LTV Corporation (1) Executive Committee (2) Audit Committee (3) Compensation Committee (4) Stock Option Committee (5) Executive Oversight Committee (6) Strategic Planning Committee (29) Stockholder Information Corporate Office Richardson Electronics, Ltd. 40W267 Keslinger Road P.O. Box 393 LaFox, Illinois 60147-0393 (630) 208-2200 Annual Meeting We encourage stockholders to attend the annual meeting scheduled for Tuesday, October 3, 2000 at 3:15 p.m. at the Company's corporate office. Further details are available in your proxy materials. Transfer Agent and Registrar Continental Stock Transfer Company 2 Broadway, 19th Floor New York, NY 10004 Independent Auditors Ernst & Young LLP 111 North Canal Street Chicago, Illinois 60606 Brokerage Reports Barrington Research McDonald & Company Securities, Inc. Stifel, Nicolaus & Company, Inc. Tucker Anthony Cleary Gull Market Makers Barrington Research William Blair & Co. Forum Capital Markets McDonald & Company Securities, Inc. Smith Barney Shearson Stifel, Nicolaus & Company, Inc. Tucker Anthony Cleary Gull Wechsler & Krumholz, Inc. Form 10K and Other Information A copy of the Company's Annual Report on Form 10K, filed with the Securities and Exchange Commission is available without charge upon request. All inquiries should be addressed to the Investor Relations Department, Richardson Electronics, Ltd., 40W267 Keslinger Road, P.O. Box 393, LaFox, Illinois 60147- 0393. Press releases and other information can be found on the Internet at the Company's home page at http://www.rell.com. Market Price of Common Stock The Common Stock is traded on the NASDAQ National Market System under the symbol "RELL".The number of stockholders of record of Common Stock and Class B Common Stock at May 31, 2000 was 689 and 20, respectively. The Company believes there are approximately an additional 1,300 holders who own shares of the Company's Common Stock in street name. The quarterly market price ranges of the Company's common stock were as follows: 2000 1999 ----------------- ----------------- Fiscal Quarters High Low High Low -------- -------- -------- -------- First 7 15/16 5 25/32 14 7 1/2 Second 9 1/16 6 5/8 8 3/4 6 7/16 Third 11 7/16 6 5/16 10 5 1/4 Fourth 13 5/8 10 6 7/8 4 7/8 (30) Richardson Electronics, Ltd. and Subsidiaries Schedule II - Valuation and Qualifying Accounts (in thousands)
COL. A COL. B COL. C COL. D COL. E ADDITIONS - ------------------------------ ---------- ------------------------ --------- ---------- (1) (2) Balance Charged Charged to Balance at to Costs Other at Beginning and Accounts- Deductions- End of DESCRIPTION of Period Expenses Describe Describe Period - ------------------------------ ---------- ---------- ---------- ---------- ---------- Year ended May 31, 2000: Allowance for sales returns and doubtful accounts $ 2,584 $1,461 $ - $1,054 $ 2,991 Other reserves $ 1,236 $ 12 $ - $ 219 $ 1,029 Year ended May 31, 1999: Allowance for sales returns and doubtful accounts $ 2,230 $ 934 $ - $ 580 $ 2,584 Other reserves $ 1,362 $ 46 $ - $ 172 $ 1,236 Year ended May 31, 1998: Allowance for sales returns and doubtful accounts $ 2,102 $ 431 $ - $ 303 $ 2,230 Other reserves $ 1,956 $ 41 $ - $ 635 $ 1,362 (F1) Uncollectible amounts written off, net of recoveries and foreign currency translation. (F2) Provision to increase EPA groundwater remediation reserve (F3) Expenditures made for reserved items
EX-21 8 0008.txt Exhibit 21 SUBSIDIARIES OF RICHARDSON ELECTRONICS, LTD. Richardson Electronics Canada, Ltd. Canada Richardson Electronics (Europe) Ltd. United Kingdom RESA, SNC France Richardson Electronique SNC France Richardson Electronics Italy SRL Italy Richardson Electronics Iberica, S.A. Spain Richardson Electronics GmbH Germany Richardson Electronics Japan K.K. Japan Richardson Electronics Pte Ltd. Singapore Richardson Electronics S.A. de C.V. Mexico Richardson Electronics Benelux B.V. The Netherlands Richardson Electronics do Brasil Ltda. Brasil Richardson Electronics Pty Limited Australia Tubemaster, Inc. United States Richardson Electronics Korea Limited Korea Richardson Electronics (Thailand) Ltd. Thailand Burtek Systems Inc. Canada Richardson Electronics Argentina S.A. Argentina Richardson Electronics Colombia S.A. Colombia Ingenium S.R.L. Italy Richardson Electronics Trading (Shanghai) Co., Ltd. China Tromp Medical Engineering, B.V. The Netherlands Broadcast Richmond, Inc. United States Celti SA France EX-23 9 0009.txt Exhibit 23 Consent of Independent Auditors We consent to the incorporation by reference in the Annual Report on Form10-K for the year ended May 31, 2000 of Richardson Electronics, Ltd. of our report dated July 18, 2000, included in the 2000 Annual Report to Shareholders of Richardson Electronics, Ltd. Our audit also included the financial statement schedule of Richardson Electronics, Ltd. listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in Post Effective Amendment Number I to Registration Statement Number 2-89888 on Form S-8, Registration Statement Number 33-36475 on Form S-8, Registration Statement Number 33- 54745 on Form S-8, Registration Statement Number 333-02865 on Form S-8, Registration Statement Number 333-03965 on Form S-8, Registration Statement Number 333-04071 on Form S-8, Registration Statement Number 333-04457 on Form S-8, Registration Statement Number 333-04767 on Form S-8, Registration Statement Number 333-49005 on Form S-2, Registration Statement Number 333-51513 on Form S-2, Registration Statement Number 333-66215 on Form S-8 and Registration Statement Number 333-76897 on Form S-8 of our report dated July 18, 2000, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule included in the Annual Report on Form 10-K for the year ended May 31, 2000 of Richardson Electronics, Ltd. /s/ Ernst & Young Chicago, Illinois August 28, 2000 EX-27 10 0010.txt
5 1000 12-MOS MAY-31-2000 MAY-31-2000 11832 0 77821 2991 119224 222223 64091 38240 264925 47953 117643 0 0 745 93248 264925 407178 407178 299246 299246 0 1061 8911 18604 5500 13104 0 0 0 13104 1.03 1.00
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