Form 10Q

0000355948-01-500028.txt : 20011019 0000355948-01-500028.hdr.sgml : 20011019 ACCESSION NUMBER: 0000355948-01-500028 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010831 FILED AS OF DATE: 20011015 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RICHARDSON ELECTRONICS LTD/DE CENTRAL INDEX KEY: 0000355948 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 362096643 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12906 FILM NUMBER: 1758557 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-Q 1 form10q.htm FORM 10Q Form 10Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended _______August 31, 2001 ______ OR [ ] TRANSITION REPORT PURSUANT TO SECTINO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period from _____________ to ______________ Commission file number 0-12906
RICHARDSON ELECTRONICS, LTD. (Exact name of registrant as specified in its charter)
DELAWARE (State of incorporation or organization)	36-2096643 (I.R.S. Employer Identification No.)
40W267 Keslinger Road, PO Box 393, LaFox, Illinois 60147 (Address of principal executive offices and zip code)
(630) 208-2200 (Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requiremens for the past 90 days. YES [ X ] NO [ ] As of October 10, 2001, there were outstanding 12,238,860 shares of Common Stock, $.05 par value, and 3,206,812 shares of Class B Common Stock, $.05 par value, which are convertible into Common Stock on a share-for-share basis. This Quarterly Report on Form 10-Q contains 16 pages. An exhibit index is at page 15.

Richardson Electronics, Ltd. and Subsidiaries
Form 10-Q
For the Three-Month Period Ended August 31, 2001

INDEX

	Page
PART I - FINANCIAL INFORMATION
Consolidated Condensed Balance Sheets	3
Consolidated Condensed Income Statements	4
Consolidated Condensed Statements of Cash Flows	5
Notes to Consolidated Condensed Financial Statements	6
Management's Discussion and Analysis of Results of Operations and Financial Condition	10
PART II - OTHER INFORMATION	15

Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Balance Sheets
(in thousands)

	August 31 2001	May 31 2001
ASSETS	(Unaudited)
Current Assets:
Cash and equivalients	$ 11,496	$ 15,946
Receivables, less allowance of $2,640 and $2,639	81,957	90,069
Inventories	146,313	144,135
Other	20,385	19,329
Total current assets	260,151	269,479
Property, plant and equipment	52,789	50,884
Less accumulated depreciation	(23,564)	(22,131)
Property, plant and equipment, net	29,225	28,753
Other assets	30,167	23,282
Total assets	319,543	321,514
LIABILITES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable	$ 31,576	$ 28,491
Accrued expenses	11,798	15,347
Notes payable and current portion of long-term debt	50	205
Total current liabilities	43,424	44,043
Long-term debt, less current portion	151,613	155,134
Deferred income taxes	7,322	7,492
Non-current liabilities	5,390	5,300
Total liabilities	207,749	211,969
Stockholders' equity:
Common stock, $.05 par value; issued 12,012 shares at August 31, 2001 and 11,971 shares at May 31, 2001	601	599
Class B common stock, convertible, $.05 par value; issued 3,207 shares at August 31, 2001 and at May 31, 2001	160	160
Additional paid-in capital	89,729	88,877
Common stock in treasury, at cost; 1,632 shares at August 31, 2001 and 1,708 at May 31, 2001	(9,618)	(10,068)
Retained earnings	49,354	49,834
Foreign currency translation adjustment	(18,432)	(19,857)
Total stockholders' equity	111,794	109,545
Total liabilities and stockholders' equity	$ 319,543	$ 321,514

Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Income Statements
For the Three-Month Period Ended August 31, 2001 and 2000
(Unaudited) (in thousands, except per share amounts)

	2001	2000
Net sales	$ 104,681	$ 121,095
Cost of products sold	78,207	89,106
Gross margin	26,474	31,989
Selling, general and administrative expenses	23,542	22,650
Operating income	2,932	9,339
Other (income) expense:
Interest expense	2,973	2,475
Investment income	(201)	(42)
Other, net	83	26
	2,855	2,459
Income before Income taxes	77	6,880
Income taxes	26	2,200
Net income	$ 51	$ 4,680
Net income per share - basic:
Net income per share	$ -	$ .35
Average shares outstanding	13,526	13,200
Net income per share - diluted:
Net income per share	$ -	$ .32
Average shares outstanding	13,960	17,528
Dividends per common share	$ .04	$ .04
Comprehensive income:
Net income	$ 51	$ 4,680
Foreign currency translation	1,425	(919)
Comprehensive income	$ 1,476	$ 3,761

Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
For the Three-Month Period Ended August 31, 2001 and 2000
(Unaudited) (in thousands)

	2001	2000
Operating Activites:
Net income	$ 51	$ 4,860
Non-cash charges to income:
Depreciation	1,269	1,358
Amortization of intangibles and financing costs	160	193
Deferred income taxes	(69)	(58)
Contribution to employee stock ownership plan	887	1,310
Total non-cash charges	2,247	2,803
Changes in working capital, net of effects of currency translation and business acquisitions
Accounts receivable	13,838	(7,100)
Inventories	(663)	(9,241)
Other current assets	(739)	(343)
Accounts payable	433	4,254
Other Liabilities	(5,056)	(3,262)
Net changes in working capital	7,813	(15,692)
Net cash provided by (used in) operating activities	10,111	(8,209)
Financing Activities:
Proceeds from borrowings	15,190	21,597
Payments on debt	(19,747)	(12,333)
Proceeds from stock issuance	416	2,920
Cash dividends	(531)	(518)
Net cash provided by (used in) financing activities	(4,672)	11,666
Investing Activities:
Capital expenditures	(1,570)	(2,274)
Business acquisitions	(8,458)	(1,535)
Investments, notes receivable and other	139	(285)
Net cash used in investing activities	(9,889)	(4,094)
Decrease in cash and equivalents	(4,450)	(637)
Cash and equivalents at beginning of year	15,946	11,832
Cash and equivalents at end of period	$ 11,496	$ 11,195

Richardson Electronics, Ltd. and Subsidiaries
Notes to Consolidated Condensed Financial Statements
Three-Month Period Ended August 31, 2001
(Unaudited)

Note A -- Basis of Presentation
The accompanying unaudited Consolidated Condensed Financial Statements (Statements) have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. In the opinion of management, all adjustments necessary for a fair presentation of the results of operations for the periods covered have been reflected in the Statements. Certain information and footnotes necessary for a fair presentation of the financial position and results of operations in conformity with generally accepted accounting principles have been omitted in accordance with the aforementioned instructions. It is suggested that the Statements be read in conjunction with the Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2001.

Note B -- Income Taxes
The income tax provisions for the three-month periods ended August 31, 2001 and August 31, 2000 are based on the estimated annual effective tax rates of 34% and 32%, respectively. The effective rate is less than the U.S. federal statutory rate of 35% due to U.S. foreign sales corporation tax benefits and foreign taxes at other rates, partially offset by state income taxes.

Note C -- Calculation of 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 when such assumptions have a dilutive effect on the calculation. 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 8¼% and 7¼% convertible debentures are excluded from the calculation in fiscal 2002 as assumed conversion would be anti-dilutive. The per share amounts presented in the Consolidated Condensed Income Statement are based on the following amounts (in thousands):

	First Quarter
Numerator for basic EPS:
Net income	$ 51	$ 4,680
Denominator for basic EPS:
Beginning shares outstanding	13,470	12,987
Additional shares issued	56	213
Average shares outstanding	13,526	13,200
Numerator for diluted EPS:
Net income	$ 51	$ 4,680
Interest savings, net of tax, on assumed conversion of bonds	-	865
Adjusted net income	$ 51	$ 5,545
Denominator for diluted EPS:
Average shares outstanding	13,526	13,200
Effect of dilutive stock options	434	648
Assumed conversion of bonds	-	3,680
Average shares outstanding	13,960	17,528

Note D -- Industry and Market Information
The marketing and sales structure of the Company consists of five strategic business units (SBU's): 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 global RF and wireless communications market and the radio and television broadcast industry, predominately for infrastructure applications.

Industrial serves a broad range of customers including the steel, automotive, textile, plastics, semiconductor, and transportation industries.

Medical serves the medical imaging market, providing system upgrade and integration services in addition to a wide range of diagnostic imaging components.

Display provides custom display solutions and system integration services for the public information, financial, point-of-sale and general data display markets.

Security is a full-line distributor of close circuit television (CCTV), fire, burglary, access control, sound, and communication products and accessories.

SBUs are managed by Vice Presidents and General Managers who report 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, some of the regional sales force is shared and, accordingly, is not included in direct expenses. Administrative expenses including finance, legal, information technology, human resources, logistics, and facility costs are not allocated to SBU results. Intersegment sales are not significant.

Accounts receivable, inventory, goodwill and certain notes receivable are identified by SBU. Cash, net property, plant and equipment, and other assets are not identifiable by SBU. Accordingly, depreciation, amortization expense other than amortization of goodwill, and financing costs are not identifiable by SBU. Operating results for the three-month periods ended August 31, 2001 and August 31, 2000 and identifiable assets as of the end of the respective periods by SBU are summarized in the following table (in thousands):

First Quarter	Sales	Margin	Contribution	Assets
FY 2002
Wireless	$ 44,463	$ 11,190	$ 5,056	$ 126,596
Industrial	18,784	6,397	4,772	45,342
Medical	9,334	2,194	1,077	23,126
Security	20,389	4,785	2,405	35,333
Display	10,854	2,618	1,326	22,558
Total	$ 103,824	$ 27,184	$ 14,636	$ 252,955
FY 2001
Wireless	$ 57,106	$ 15,052	$ 10,375	$ 102,331
Industrial	22,531	7,994	6,607	42,524
Medical	9,896	2,207	1,315	26,645
Security	20,665	4,807	2,240	34,758
Display	9,908	2,344	1,108	20,714
Total	$ 120,106	$ 32,404	$ 21,645	$ 226,972

A reconciliation of sales, gross margin, direct operating contribution and assets to the relevant consolidated amounts follows. (Other assets include miscellaneous receivables, manufacturing inventories and sundry assets.) (in thousands):

	First Quarter
	FY2002	FY2001
Sales - segments total	$ 103,824	$ 120,106
Freight	857	989
Sales	$ 104,681	$ 121,095
Gross margin - segments total	$ 27,184	$ 32,404
Manufacturing variances and other costs	(710)	(415)
Gross Margin	$ 26,474	$ 31,989
Segment profit contribution	$ 14,636	$ 21,645
Manufacturing variances and other costs	(710)	(415)
Regional selling expenses	(3,846)	(4,046)
Administrative expenses	(7,148)	(7,845)
Operating income	$ 2,932	$ 9,339
Segment assets	$ 252,955	$ 226,972
Cash and equivalents	11,496	11,195
Other current assets	20,385	12,645
Net property	29,225	26,738
Other assets	5,482	6,348
Total assets	$ 319,543	$ 283,898

The Company sells its products to companies in a wide range of 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.

Results of Operations

Sales and Gross Margin
General economic conditions and, in particular, softness in the telecommunications industry effected the comparison of sales and operating results for the first quarter of fiscal 2002 against the prior year. Net sales for the first quarter of fiscal 2002 were $104.7 million compared to last year's first quarter of $121.1 million. Gross margin as a percent of sales in fiscal 2002 were effected by manufacturing variances from lower utilization rates. Sales, percentage changes from the prior year, gross margins and gross margin percent of sales by SBU are summarized in the following table. Gross margins for each SBU include provisions for returns and overstock. Provisions for LIFO, manufacturing charges and other costs are included under the caption "Corporate" (in thousands).

	Sales			Gross Margin
First Quarter	FY 2002	FY 2001	% Change	FY 2002	GM % of Sales	FY 2001	GM % of Sales
Wireless	$ 44,463	$ 57,106	- 22.1 %	$ 11,190	25.2 %	$ 15,052	26.4 %
Industrial	18,784	22,531	-16.6 %	6,397	34.1 %	7,994	35.5 %
Medical	9,334	9,896	- 5.7 %	2,194	23.5 %	2,207	22.3 %
Security	20,389	20,665	- 1.3 %	4,785	23.5 %	4,807	23.3 %
Display	10,854	9,908	9.5 %	2,618	24.1 %	2,344	23.7 %
Corporate	857	989		(710)		(415)
Total	$ 104,681	$ 121,095	- 13.6 %	$ 26,474	25.3 %	$ 31,989	26.4 %

Wireless' first quarter sales decreased 22.1% from fiscal 2001 levels, reflecting lower demand primarily in the North American telecommunications industry. Gross margins as a percent of sales decreased from 26.4% in the prior year's first quarter to 25.2% in fiscal 2002 primarily due to a decline in operating efficiency in the Company's engineering design and assembly facilities. In July 2001, the Company purchased Sangus Holdings AB (Sangus), which serves the Nordic countries of Sweden, Finland, Denmark, and Norway. Current year sales results include sales of $1.7 million recorded by Sangus from the date of acquisition.

Industrial's first quarter sales decreased 16.6% due to general economic conditions and softness in the demand for equipment used in the manufacture of semiconductors. Gross margins declined from 35.5% to 34.1% due to product mix.

Medical's sales decreased 5.7% in fiscal 2002 from the prior year's first quarter. Sales of high-resolution monitors increased 19.3% in the first quarter of fiscal 2002 from fiscal 2001 levels offset by lower sales of x-ray tubes and other diagnostic imaging components and equipment. Gross margins increased to 23.5% of sales in fiscal 2002 compared to 22.3% in the first quarter of fiscal 2001 reflecting improved product margins on high-resolution medical monitors.

Security sales and gross margins in the first quarter of fiscal 2002 were essentially comparable to the prior year.

First quarter sales for Display increased 9.5% in fiscal 2002 from 2001 levels as high-resolution monitors sales increased by 33.6% from the prior year including a $2.2 million sale to a customer in the energy industry. Gross margins as a percent of sales increased to 24.1% in fiscal 2002 from 23.7% in fiscal 2001, reflecting improved margins on monitor sales.

Sales, percentage change from the prior year, gross margins and gross margin percent of sales by geographic area are summarized in the following table. Prior year amounts have been restated to be comparable with the current year's classifications. The caption, "other", includes sales to export distributors and to countries where the Company does not have offices. Provisions for LIFO, manufacturing charges and other costs are included under the caption "Corporate" (in thousands).

	Sales			Gross Margin
First Quarter	FY 2002	FY 2001	% Change	FY 2002	GM % of Sales	FY 2001	GM % of Sales
North America	$ 61,478	$ 78,370	- 21.6 %	$ 15,774	25.7 %	$ 20,503	26.2 %
Europe	20,775	21,296	- 2.4 %	5,689	27.4 %	6,008	28.2 %
Asia/Pacific	13,074	11,710	11.6 %	3,395	26.0 %	3,451	29.5 %
Latin America	6,707	6,114	9.7 %	1,881	28.0 %	1,719	28.1 %
Other	1,790	2,616	- 31.6 %	445	24.9 %	723	27.6 %
Corporate	857	989		(710)		(415)
Total	$ 104,681	$ 121,095	- 13.6 %	$ 26,474	25.3 %	$ 31,989	26.4 %

North American sales declined 21.6% from the prior year, primarily due to softness in Wireless markets, particularly in the telecommunications industry. Asia Pacific sales increased by 11.6% in the first quarter, primarily benefiting from growth in the sale of Wireless and Display products. Latin American sales increased 9.7% from the prior year's first quarter as a result of sales growth in both Wireless and Security products. Europe sales in the current year were effected by the decline in the euro relative to the U.S. dollar, reducing reported sales for Europe by approximately 6%. Europe sales include sales of Sangus from the date of acquisition, July 1, 2001.

Selling, General, and Administrative Expenses
Selling, general and administrative expenses were $23,542 in the first quarter of fiscal year 2002 compared to $22,650 in the prior year's first quarter. Operating expenses of Sangus, severance costs incurred in the quarter and the full year impact of mid-year fiscal 2001 additions to staff accounted for the increase.

Interest and Other Expenses
Higher interest costs in fiscal 2002 compared to fiscal 2001 are due to increased borrowings primarily to finance business acquisitions during the latter part of fiscal 2001 and the first quarter of fiscal 2002.

Net Results
Net income for the quarter was $51,000 compared to $4.7 million in the prior year.

Liquidity and Capital Resources
Cash provided by operations was $10.1 million in the first quarter of fiscal 2002, compared to cash used in operations of $8.2 million in the prior year period. Accounts receivable decreased $13.8 million in 2002 and increased $7.1 million in 2001. Inventories increased by $663,000 compared to an increase in the prior year first quarter of $9.2 million.

Effective August 31, 2001, the Company increased its multi-currency revolving credit facility agreement to $111.3 million from $105.0 million. The agreement matures in July 2004 and bears interest at applicable LIBOR rates plus a margin, varying with certain financial performance criteria.

The Company's loan agreements contain various financial and operating covenants which set benchmark levels for tangible net worth, debt / tangible net worth ratio and annual debt service coverage. The Company was in compliance with these covenants at August 31, 2001.

Cash reserves, investments, funds from operations and credit lines are expected to be adequate to meet the operational needs and future dividends of the Company. 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.

Euro Currency Conversion
On January 1, 1999, eleven member countries of the European Union began conversion to a common currency, the Euro. 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.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Investors should consider carefully the following risk factors, in addition to the other information included in this quarterly report on Form 10-Q. 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.
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.

Part II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

No material developments have occurred in the matters reported under the category "Legal Proceedings" in the Registrant's Report on Form 10-K for the fiscal year ended May 31, 2001.

ITEM 2. CHANGES IN SECURITIES

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits -

10 (a) Third Amendment to the Revolving Credit Agreement effective August 31, 2001 among various subsidiaries of Richardson Electronics, Ltd., various lending institutions, and Bank One, N.A. London Branch, as Euro Funding Agent and American National Bank and Trust Company of Chicago, as Administrative Agent.

10 (b) Share purchase agreement between Richardson Electronics, Ltd. and the principal officer's and directors of Sangus Holdings AB for the purchase of the Sangus Holdings AB dated July 19, 2001.

(b) Reports on Form 8-K - None

SIGNATURE

Pursuant to the requirements 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.

Date: October 12, 2001

RICHARDSON ELECTRONICS, LTD.

By /S/William J. Garry
William J. Garry
Senior Vice President and
Chief Financial Officer

EX-10 4 exhibit10a.htm EXHIBIT-10(A) Exhibit 10(a)

Execution Copy

THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT

This Third Amendment to the Revolving Credit Agreement ("Third Amendment") is entered as of August 31, 2001 by and among (i) Burtek Systems, Inc., a Canadian corporation, Richardson Electronics Canada, Ltd., a Canadian corporation; (ii) Richardson Electronics Limited f/k/a Richardson Electronics (Europe) Ltd., an English limited liability company; (iii) RESA, SNC, a French partnership, Richardson Electronique SNC, a French partnership, Richardson Electronics Iberica, S.A., a Spanish corporation, Richardson Electronics GmbH, a German limited liability company, Richardson Electronics Benelux B.V., a Dutch private limited liability company, (iv) Richardson Sweden Holding AB, a Swedish corporation (the "Borrowers"), the lenders from time to time parties hereto (each, a "Lender" and collectively, the "Lenders"), Bank One, N.A. London Branch as Eurocurrency Agent (the "Eurocurrency Agent"), Bank One, N.A., Canada Branch, as Canada Agent (the "Canada Agent") (the Eurocurrency Agent and the Canada Agent are collectively referred to as the "Funding Agents" and each individually a "Funding Agent"), and American National Bank and Trust Company of Chicago, as administrative agent (in such capacity, the "Administrative Agent").

WHEREAS, the Borrowers, the Lenders, the Eurocurrency Agent, the Canada Agent, and the Administrative Agent have entered into that certain Revolving Credit Agreement, dated July 1, 2000 (as amended or modified from time to time, the "Agreement"); all capitalized terms stated in this Third Amendment and not defined herein shall have the same meaning as set forth in the Agreement;

WHEREAS, the Lenders have made Loans to the Borrowers pursuant to the Agreement as amended by a First Amendment entered into as of February 13, 2001 and further amended by a letter agreement dated July 23, 2001;

WHEREAS, the Borrowers have asked the Lenders and the Lenders have agreed to add Richardson Sweden Holding AB ("Richardson Sweden") as a Borrower under the Agreement; and

WHEREAS, the Borrowers have asked the Euro Lender to extend a Krona Facility Commitment not exceeding Swedish Krona 64,200,000 and otherwise amend certain 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.

a. Amendment to the Preamble

The preamble shall be amended by adding (i) the phrase "; and (iv) Richardson Sweden Holding AB, a Swedish corporation (the "Krona-Borrower")" after the phrase "each a 'Euro-Borrower' and collectively, the 'Euro-Borrowers')" contained in the eighth line thereof and (ii) the phrase "the Krona-Borrower" after the reference to "the UK-Borrower" contained in the ninth line thereof.

b. Amendment to Article I - Definitions

Article I of the Agreement is amended as follows:

1. A new definition of "Aggregate Krona Facility Commitment" appearing after the definition of 'Aggregate UK Facility Commitment' shall be added to read as follows:

"'Aggregate Krona Facility Commitment' means the aggregate of the Commitments of the Lenders under the Krona Facility."

2. The definition of 'Agreed Currencies' in the Agreement is amended by adding "Swedish Krona," after "French Francs" in the third line thereof.

3. The definition of 'Commitment' is amended by adding the phrase "the Krona Facility" after the phrase "the Euro Facility" in the second and fourth lines thereof.

4. The definition of 'Facilities' is amended by adding the phrase "the Krona Facility" after 'the Euro Facility' in the first line thereof.

5. A new definition of "Krona-Borrower" appearing after the definition of 'Investment' shall be added to read as follows:

"'Krona-Borrower' has the meaning specified in the preamble."

6. A new definition of "Krona Facility" appearing after the definition of 'Krona-Borrower' shall be added to read as follows:

"'Krona Facility' means the revolving loans denominated in Swedish Krona and made available by the Krona Lenders to the Krona-Borrowers pursuant to the terms hereof."

7. A new definition of "Krona Facility Commitment" appearing after the definition of 'Krona Facility' shall be added to read as follows:

"'Krona Facility Commitment' means, for each Krona Lender, the obligation of such Krona Lender to make Loans not exceeding in the principal amount set forth opposite its signature below with respect Swedish Krona or as set forth in any Notice of Assignment relating to any assignment that has become effective pursuant to Section 12.3.2, as such amount may be modified from time to time pursuant to the terms hereof."

8. A new definition of "Krona Lenders" appearing after the definition of 'Krona Facility Commitment' shall be added to read as follows:

"'Krona Lenders' shall mean such of the Lenders having Commitments to lend in SEK as set forth on the signature pages hereto."

9. A new definition of "Swedish Krona" appearing after the definition of 'Substantial Portion', shall be added to read as follows:

"'Swedish Krona or SEK' means the lawful currency of Sweden."

c. Amendment to Section 2.1 of the Agreement

Section 2.1 of the Agreement shall be amended in its entirety to read as follows:

"Credit Facilities. From and including the date of this Agreement and prior to the Facility Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make available the Canada Facility, the Euro Facility, the Krona Facility, and UK Facility, to the extent of such Lender's Commitment, to the Canada-Borrowers, the Euro-Borrowers, the Krona-Borrower, and the UK-Borrower, respectively. Each Lender agrees, on the terms and conditions set forth herein and only to the extent such Lender has a Commitment to provide such Agreed Currency under the appropriate Facility, to make Advances to any Borrower in the applicable Agreed Currency from time to time in amounts not to exceed, in respect of such Facility, in the aggregate at any one time outstanding its Commitment in respect of such Facility, provided that (i) the Aggregate Total Outstandings under the Canada Facility shall at no time exceed CAD 29,600,000, (ii) the Aggregate Total Outstandings under the Euro Facility shall at no time exceed EUR 11,400,000 or its Equivalent Amount (iii) the Aggregate Total Outstandings under the Krona Facility shall at no time exceed SEK 64,200,000 and (iv) the Aggregate Total Outstandings under the UK Facility shall at no time exceed GBP 3,200,000. Advances under the Canada Facility shall be extended solely by the Canada Lenders to the Canada-Borrowers; Advances under the Euro Facility shall be extended solely by the Euro Lenders to the Euro-Borrowers; Advances under the Krona Facility shall be extended solely by the Krona Lenders to the Krona-Borrower; and Advances under the UK Facility shall be extended solely by the UK Lenders to the UK-Borrower. Subject to the terms of this Agreement, any Borrower may borrow, repay and reborrow at any time prior to the Facility Termination Date. The Commitments to lend hereunder shall expire on the Facility Termination Date."

d. Amendment of Section 2.2.1 of the Agreement

Section 2.2.1 of the Agreement shall be amended by deleting the reference to "or (iii)" in the eighth line thereof and replacing said reference by "(iii) the Aggregate Total Outstandings in respect of the Krona Facility exceed the Aggregate Krona Facility Commitment, or (iv)".

e. Amendment to Section 2.2 of the Agreement

Section 2.2 of the Agreement shall be amended to add the following sentence at the conclusion thereof:

"Notwithstanding anything contained in this Section 2.2 or any other provision of this Revolving Credit Agreement to the contrary, the Krona Borrower's liability for the Obligations shall be limited to such of the Obligations comprised by Advances actually received by the Krona Borrower (whether lent directly by an applicable Lender or contributed to the Krona Borrower by another Borrower in the form of proceeds of an Advance), together with interest thereon and expenses related thereto at the rates and terms provided for in this Revolving Credit Agreement."
f. Amendment of Section 2.2.2 of the Agreement

Section 2.2.2 of the Agreement shall be amended by adding the phrase "the minimum of SEK 5,000,000 or any integral multiples of SEK 1,000,000 in excess thereof in the case of the Krona Facility" after the phrase "in the case of the UK Facility," in the ninth line thereof.

g. Amendment of Section 2.3 of the Amendment

Section 2.3 of the Agreement shall be amended by replacing the reference to "and (iii)" in the fifth line thereof by "(iii) their respective Krona Facility Commitment bears to the Aggregate Krona Facility Commitment and (iv)".

h. Amendment to Section 2.4.2 of the Agreement

Section 2.4.2 of the Agreement shall be amended by adding the phrase "SEK 10,000,000 in the case of the Krona Facility" after the phrase "Canada Facility" in the fourth line thereof and adding the phrase "Aggregate Krona Facility Commitment" after the phrase "Aggregate Euro Facility Commitment" in the seventh line thereof.

i. Amendment of Section 2.5 of the Agreement

Section 2.5 of the Agreement shall be amended by adding the phrase "in a minimum of SEK 10,000,000 and in multiple of SEK 1,000,000 if in excess thereof in the case of the Krona Facility" after the phrase "in the case of the Euro Facility," in the seventh line thereof.

j. Amendment of Section 2.7.1 of the Agreement

Section 2.7.1 of the Agreement shall be amended by deleting the first sentence of the second full paragraph in its entirety and replacing such sentence by the following:

"Subject to the terms of Section 2.5, so long as no Default has occurred and is continuing, any Borrower may elect from time to time to continue all or any part of an Advance denominated in the same Agreed Currency in the case of the Canada Facility, the Krona Facility and the UK Facility and in any other Agreed Currency (other than Canadian Dollars, Swedish Krona and British Pounds Sterling) in the case of the Euro Facility; provided that any conversion in respect of currency of any Advance shall be made on, and only on, the last day of the Interest Period applicable thereto."

k. Amendment to Section 2.10 of the Agreement

Section 2.10 of the Amendment shall be amended by adding the phrase "the Krona Facility" after the phrase "the Euro Facility" in the seventeenth line thereof.

l. Amendment to Section 6.2 of the Agreement

Section 6.2 of the Agreement shall be amended by adding the following sentence at the end of the paragraph:

"Notwithstanding the above, the Advances made under the Krona Facility shall be used solely to repay the bridge loan that was extended to Richardson Holding AB Sweden by Bank One, N.A, London Branch as described in that certain Waiver, Consent and Amendment Letter dated July 23, 2001 by and among the Borrowers, the Lenders, the Eurocurrency Agent, the Canada Agent, and the Administrative Agent".

m. Amendment to Section 6.10 of the Agreement.

Section 6.10 of the Agreement shall be amended by adding a new subsection after subsection (ix) to read as follows:

"(x) Unsecured Indebtedness (in addition to the Obligations under the Agreement) to ANB and/or its Affiliates in an amount not exceeding the Equivalent Amount in an Agreed Currency of $5,000,000 at any one time outstanding and a maturity for each advance with respect to such Indebtedness not to exceed one year from the date of such advance."

n. Amendment to add the Krona Facility Commitment

The Krona Facility Commitment shall be added by adding the number "SEK 32,100,000" appearing next to the signature block for Bank One, N.A., London Branch in its capacity as a Lender and by adding the number "SEK 32,100,000" appearing next to the signature block for LaSalle Bank National Association in its capacity as a Lender.

Section 2. Reaffirmation Of Guaranty

The Guarantor hereby confirms that it is familiar with the terms of the Agreement and with the financial condition of each Borrower and, after giving effect to all of the terms and conditions contained in this Third Amendment, including, without limitation, the addition of Richardson Sweden as a Borrower, the addition of a Krona Facility Commitment in the amount set forth herein, the Guaranty remains in full force and effect, and includes all obligations of each Borrower under the Agreement, as amended by this Third Amendment. All references to the "Borrowers" or terms of like import contained in the Guaranty shall include the definition of "Borrowers" after giving effect to this Third Amendment and any other defined terms in the Agreement incorporated by reference to the Agreement shall have the respective meanings assigned thereto after giving effect to this Third Amendment. The reaffirmation of the Guaranty contained in this Section 2 is not intended to affect or limit the continuing and unlimited nature of the Guaranty and all other terms of the Guaranty are hereby reaffirmed and remain in full force and effect.

Section 3. Conditions Precedent

The effectiveness of this Third Amendment is conditioned upon each of the Borrowers, as the case may be, furnishing to the Administrative Agent:

a. Delivery of a duly executed original of this Third Amendment.

b. Copies of the constitutive documents of Richardson Sweden, together with all amendments, and certificates of good standing (where available for issuance by relevant governmental bodies) certified by the appropriate governmental officers or, if not available, an Authorized Officer of Richardson Sweden together with copies, certified by its Secretary or Assistant Secretary, of its Board of Directors' resolutions and of resolutions or actions of any other body authorizing the execution and delivery of this Third Amendment, together with the Notes and other agreements entered into pursuant hereto.

c. Copies, certified by the Secretary or Assistant Secretary of each Borrower, of their respective Board of Directors' resolutions and of resolutions or actions of any other body authorizing the execution of this Third Amendment. In the case of each Borrower other than Richardson Sweden, a certificate of the Secretary or Assistant Secretary of such Borrower certifying that there has been no change to any of the underlying corporate documents since July 1, 2000 and that such Borrower retains its legal existence.

d. An incumbency certificate, executed by the Secretary or Assistant Secretary of Richardson Sweden, which shall identify by name and title and bear the signatures of the Authorized Officers and any other officers of Richardson Sweden authorized to sign this Amendment, and in case of each Borrower other than Richardson Sweden, a certificate of the Secretary or Assistant Secretary of such Borrower, certifying that there has been no change to the officers since July 1, 2000, in each case, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by the applicable Borrower.

e. A written opinion of Richardson Sweden's counsel, addressed to the Lenders, substantially in the form of Exhibit A hereto.

f. A written opinion of Guarantor's counsel addressed to the Lenders, substantially in the form of Exhibit B hereto.

g. A Note pursuant to Section 2.13 of the Agreement entered into by each Borrower payable to the order of each Lender.

h. Payment of the expenses as set forth in Section 8 hereof.

Section 4. Representations and Warranties.

Each Borrower and the Guarantor represents and warrants to the Administrative Agent and the Lenders that:

a. The representations and warranties contained in the Agreement and in the Guaranty 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, such representations and warranties being incorporated herein by this reference to "Documents" or terms of like import shall include this Third Amendment and all documents, instruments and agreements entered into pursuant thereto; and

b. Each Borrower and the Guarantor is in compliance with all the terms and provisions set forth in the Agreement and in the Guaranty and no Default or Unmatured Default has occurred and is continuing.

Section 5. Full Force and Effect.

Except as expressly provided herein, the Documents 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 Third Amendment.

Section 6. APPLICABLE LAW.

THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

Section 7. Counterparts.

This Third 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 8. Expenses.

The Guarantor agrees to pay all out-of-pocket expenses incurred by the Agent in connection with the preparation, execution and delivery of this Third Amendment and the other documents incident hereto, including, but not limited to, the reasonable fees and disbursements of Baker & McKenzie, counsel for the Administrative Agent.

Section 9. Headings.

The headings of this Third Amendment are for the purposes of reference only and shall not affect the construction of this Third Amendment.

IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be duly executed by their duly authorized officers, all as of the date and year first above written.

BORROWERS:		ADMINISTRATIVE AGENT:
BURTEK SYSTEMS, INC. BY: /S/ WILLIAM J. GARRY TITLE: TREASURER		AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO BY: TITLE:
RICHARDSON ELECTRONICS CANADA, LTD. BY: /S/ WILLIAM J. GARRY TITLE: TREASURER		FUNDING AGENTS: BANK ONE, N.A., London Branch BY: TITLE:
RICHARDSON ELECTRONICS LIMITED (f/k/a RICHARDSON ELECTRONICS (EUROPE), LTD.) BY: /S/ WILLIAM J. GARRY TITLE: DIRECTOR		BANK ONE, N.A., CANADA BRANCH (Successor by assignment from Bank One Canada) BY: TITLE:
RESA, SNC BY: /S/ WILLIAM J. GARRY TITLE: CO-GERANT		LENDERS: HARRIS TRUST AND SAVINGS BANK BY: TITLE:
RICHARDSON ELECTRONIQUE SNC BY: /S/ WILLIAM J. GARRY TITLE: CO-GERANT		BANK OF MONTREAL BY: TITLE:
RICHARDSON ELECTRONICS IBERICA, S.A. BY: /S/ WILLIAM J. GARRY TITLE: MANAGING DIRECTOR, PRESIDENTE		NATIONAL CITY BANK, CANADA BRANCH (successor by assignment from National City Canada, Inc.) BY: TITLE:
RICHARDSON ELECTRONICS GMBH BY: /S/ WILLIAM J. GARRY TITLE: GESCHAFTSFUHRER		NATIONAL CITY BANK BY: TITLE:
RICHARDSON ELECTRONICS BENELUX B.V. BY: /S/ WILLIAM J. GARRY TITLE: MANAGING & SUPERVISING DIRECTOR		LASALLE BANK NATIONAL ASSOCIATION BY: TITLE:
RICHARDSON SWEDEN HOLDING AB BY: /S/ WILLIAM J. GARRY TITLE: DIRECTOR		LASALLE BUSINESS CREDIT, a division of ABN AMRO Bank Canada BY: TITLE:
		BANK ONE, N.A., London Branch BY: TITLE:
		BANK ONE, N.A., CANADA BRANCH (Successor by assignment from Bank One Canada) BY: TITLE:
		BANK ONE CAPITAL MARKETS LIMITED (f/k/a First Chicago Ltd.) BY: TITLE:
GUARANTOR:
Acknowledged and agreed to or of the day and year first above written. RICHARDSON ELECTRONICS, LTD. BY: TITLE:

EXHIBIT A

FORM OF BOROWER OPINION

The Agents and the Lenders who are parties to the
Revolving Credit Agreement described below.
Gentlemen/Ladies:

We are counsel for Richardson Sweden Holding AB (the "Borrower"), and have represented the Borrower in connection with its execution and delivery of a Third Amendment (the "Third Amendment") to the Revolving Credit Agreement dated as of July 1, 2000 (as amended by the First Amendment dated February 13, 2001 and by the Second Amendment and Consent dated July 23, 2001, and as may be further amended from time to time, the "Agreement") among the Borrower, the parties designated as the "Borrowers" therein, the Lenders named therein, American National Bank and Trust Company of Chicago, as Administrative Agent, Bank One, N.A., London Branch, as Eurocurrency Agent, and Bank One, N.A., Canada Branch, as Canada Agent and providing for Advances in an aggregate principal amount not exceeding CAD 29,600,000; EUR 11,400,000; SEK 64,200,000; and GBP 3,200,000, at any one time outstanding. All capitalized terms used in this opinion and not otherwise defined herein shall have the meanings attributed to them in the Agreement.

We have examined the Borrower's [describe, if applicable, appropriate evidence of authority to enter into the transaction and constitutive documents, articles, statutes, etc.] (the "Constitutive Documents") of Borrower, the Third Amendment, the Documents and such other matters of fact and law which we deem necessary in order to render this opinion. Based upon the foregoing, it is our opinion that:

Each of the Borrower and its Subsidiaries is a corporation, partnership or limited liability company duly and properly incorporated or organized, as the case may be, validly existing and (to the extent such concept applies to such entity) in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted.
The execution and delivery by the Borrower of the Third Amendment and each Note and the performance by the Borrower of its obligations thereunder and under the Agreement have been duly authorized by such proper corporate proceedings (if any) on the part of the Borrower as may be required under the laws of Borrower's jurisdiction of organization and Borrower's Constitutive Documents and will not:
(a) require any consent of the Borrowers shareholders or members (other than any such consent as has already been given and remains in full force and effect);

(b) violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award known to us after due inquiry to be binding on the Borrower or any of its Subsidiaries or (ii) the Borrower's or any Subsidiary's Constitutive Documents, as the case may be, or (iii) the provisions of any indenture, instrument or agreement known to us after due inquiry to which the Borrower or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder; or

(c) result in, or require, the creation or imposition of any Lien in, of or on the Property of the Borrower or a Subsidiary pursuant to the terms of any indenture, instrument or agreement known to us after due inquiry to be binding upon the Borrower or any of its Subsidiaries.
The Third Amendment and each Note have been duly executed and delivered by the Borrower and constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their terms except to the extent the enforcement thereof may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and subject also to the availability of equitable remedies if equitable remedies are sought.
To the best of our knowledge after due inquiry, there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or threatened against the Borrower or any of its Subsidiaries which, if adversely determined, could reasonably be expected to have a Material Adverse Effect.
No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority, or any subdivision thereof, which has not been obtained by the Borrower or any of its Subsidiaries, is required to be obtained by the Borrower or any of its Subsidiaries in connection with the execution and delivery of the Third Amendment, the Documents, the borrowings under the Agreement, the payment and performance by the Borrower of the Obligations, or the legality, validity, binding effect or enforceability of any of the Documents or the Third Amendment.
(i) The governing law clause, subjecting the Third Amendment and the Documents to Illinois law, are valid under the law of the Borrower's country.

(ii) Under the law of the Borrower's country, Illinois law will be applied to any agreement such as the Third Amendment and the Documents, which under the law of the Borrower's country have been validly subjected to Illinois law, except to the extent that any term of such agreements or any provision of Illinois law applicable to such Third Amendment or the Documents violates an important public policy of the Borrower's country.

(iii) None of the terms of the Third Amendment or the Documents violates an important public policy of the Borrower's country.

(iv) Assuming that the Third Amendment and the Documents are legal, valid, binding and enforceable under Illinois law, the Third Amendment and the Documents are enforceable against the Borrower in accordance with their respective terms under the laws, including the civil procedure rules, of the Borrower's country, except that the enforceability of the Third Amendment or the Documents may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally.
A final and conclusive judgment (even though subject to appeal) for a definite sum awarded against the Borrower by an Illinois State or a United States Federal court sitting in Illinois will be enforced, without re-examination or re-litigation of the matters adjudicated, by the courts of the Borrower's country, provided that (i) the judgment was not obtained by fraud, (ii) enforcement of the judgment would not be contrary to the public policy of the Borrower's country, (iii) the judgment is not inconsistent with a judgment of a court in the Borrower's country in respect of the same matter, (iv) the judgment is not for multiple damages and (v) enforcement proceedings are instituted within _____ after the date of the judgment.
There is no tax, levy, impost, deduction, charge or withholding imposed by the Borrower's country or any political subdivision or taxing authority thereof or therein either (i) on or by virtue of the execution or delivery of the Third Amendment and the Documents or any other document to be furnished thereunder or (ii) on any payment to be made by the Borrower pursuant to the Third Amendment or the Documents.
To ensure the validity and enforceability or admissibility in evidence of the Third Amendment and the Documents in the courts of the Borrower's country, it is not necessary that the Third Amendment, the Documents or any other document be filed or recorded with any governmental, administrative or other authority or court in the Borrower's country or that any stamp or similar tax be paid on or in respect of the Third Amendment or the Documents.

This opinion may be relied upon by the Agents, the Lenders and their participants, assignees and other transferees.

Very truly yours,

EXHIBIT B

FORM OF GUARANTOR OPINION

The Agents and the Lenders who are parties to the
Revolving Credit Agreement described below.

Gentlemen/Ladies:

I am General Counsel for Richardson Electronics, Ltd. (the "Guarantor"), and have represented the Guarantor in connection with its execution and delivery of the Third Amendment to Revolving Credit Agreement dated as of August 31, 2001 (the "Third Amendment") entered into by and among the Lenders named therein, Bank One, N.A. London Branch and Bank One, N.A., Canada Branch, as Funding Agents, and American National Bank and Trust Company of Chicago, as Administrative Agent. The Third Amendment modifies the obligations of the Guarantor under the terms of the Guaranty dated as of July 1, 2000 (the "Guaranty") entered into pursuant to the Revolving Credit Agreement, dated July 1, 2000 (as amended by the First Amendment dated February 13, 2001, by the Second Amendment and Consent dated July 23, 2001, by the Third Amendment, and as may be further amended from time to time) entered into by and among the Borrowers, the Lenders and Bank One, N.A., London Branch, as Eurocurrency Agent, Bank One Canada, as Canada Agent, and the Administrative Agent (as so amended, the "Agreement"). Pursuant to the Agreement, the Lenders agreed to provide for Advances in an aggregate principal amount not exceeding CAD 29,600,000; EUR 11,400,000; SEK 64,200,000; and GBP 3,200,000, at any one time outstanding. All capitalized terms used in this opinion and not otherwise defined herein shall have the meanings attributed to them in the Agreement.

I have examined the Guarantor's [describe constitutive documents of Guarantor and appropriate evidence of authority to enter into the transaction], the Third Amendment, the Agreement and other Documents and such other matters of fact and law which I deem necessary in order to render this opinion. In connection with opinion 3, I understand you have received the opinions of Richardson Sweden's counsel in connection with the existence and authority of Richardson Sweden to execute, deliver and perform its obligations under the Agreement, together with appropriate certificates of officers of the other Borrowers related to such matters and for purposes of such opinion I have assumed such valid existence and authority. Based upon the foregoing, it is my opinion that:

The Guarantor is a corporation duly and properly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted.
The execution and delivery by the Guarantor of the Third Amendment and the performance by the Guarantor of its obligations thereunder have been duly authorized by such proper corporate proceedings on the part of the Guarantor and will not:
(a) require any consent of the Guarantor's stockholders (other than any such consent as has already been given and remains in full force and effect);

(b) violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award known to me after due inquiry to be binding on the Guarantor or (ii) the Guarantor's certificate of incorporation or by-laws, or (iii) the provisions of any indenture, instrument or agreement known to me after due inquiry to which the Guarantor is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder; or

(c) result in, or require, the creation or imposition of any Lien in, of or on the Property of the Guarantor pursuant to the terms of any indenture, instrument or agreement known to me after due inquiry to be binding upon the Guarantor.
The Third Amendment and the Guaranty, as reaffirmed thereby, have been duly executed and delivered by the Guarantor and constitute the legal, valid and binding obligations of the Guarantor enforceable against the Guarantor in accordance with their respective terms except to the extent the enforcement thereof may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and subject also to the availability of equitable remedies if equitable remedies are sought.
To the best of my knowledge after due inquiry, there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, threatened against the Guarantor which, if adversely determined, could reasonably be expected to have a Material Adverse Effect.
No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority, or any subdivision thereof, which has not been obtained by the Guarantor, is required to be obtained by the Guarantor in connection with the execution and delivery of the Third Amendment, the borrowings under the Agreement, the payment and performance by the Guarantor of the Obligations, or the legality, validity, binding effect or enforceability of any of the Documents.

This opinion may be relied upon by the Agents, the Lenders and their participants, assignees and other transferees.

Very truly yours,

EXHIBIT C

NOTE

August 31, 2001

_____________________, a __________ (the "Borrower"), promises to pay to the order of __________________ (the "Lender") the aggregate unpaid principal amount of all Loans made by the Lender to the Borrower pursuant to Article 2 of the Agreement (as hereinafter defined), in immediately available funds at the place specified pursuant to Article 2 of the Agreement, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The Borrower shall pay the principal of and accrued and unpaid interest on the Loans in full on the Facility Termination Date.

The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date and amount of each Loan and the date and amount of each principal payment hereunder.

This Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Revolving Credit Agreement dated as of July 1, 2000 (amended or modified from time to time, the "Agreement"), among the Borrowers party thereto, the lenders party thereto, including the Lender, American National Bank and Trust Company of Chicago, as Administrative Agent, Bank One, N.A., London Branch as Eurocurrency Agent, and Bank One, N.A., Canada Branch, as Canada Agent, to which Agreement reference is hereby made for a statement of the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity date accelerated. This Note is guaranteed pursuant to the Guaranty, all as more specifically described in the Agreement, and reference is made thereto for a statement of the terms and provisions thereof. Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement.

______________________________________

By: ___________________________________

Print Name: ____________________________

Title: _________________________________

NOTE

As of August 31, 2001

Burtek Systems, Inc., a Canadian corporation, Richardson Electronics Canada, Ltd., a Canadian corporation, Richardson Electronics Limited f/k/a Richardson Electronics (Europe) Ltd., an English limited liability company, RESA, SNC, a French partnership, Richardson Electronique SNC, a French partnership, Richardson Electronics Iberica, S.A., a Spanish corporation, Richardson Electronics GmbH, a German limited liability company, Richardson Electronics Benelux B.V., a Dutch private limited liability company, and Richardson Sweden Holding AB, a Swedish corporation, (the "Borrowers"), promise to pay to the order of Bank of Montreal (the "Lender") the aggregate unpaid principal amount of all Loans made by the Lender to the Borrowers pursuant to Article 2 of the Agreement (as hereinafter defined), in immediately available funds at the place specified pursuant to Article 2 of the Agreement, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The Borrowers shall pay the principal of and accrued and unpaid interest on the Loans in full on the Facility Termination Date.
The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date and amount of each Loan and the date and amount of each principal payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Revolving Credit Agreement dated as of July 1, 2000 (which, as it may be amended or modified and in effect from time to time, is herein called the "Agreement"), among the Borrowers party thereto, the lenders party thereto, including the Lender, and American National Bank and Trust Company of Chicago, as Administrative Agent, Bank One, N.A., London Branch as Eurocurrency Agent, and Bank One, N.A., Canada Branch, as Canada Agent, to which Agreement reference is hereby made for a statement of the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity date accelerated. This Note is guaranteed pursuant to the Guaranty, all as more specifically described in the Agreement, and reference is made thereto for a statement of the terms and provisions thereof. Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement.

BURTEK SYSTEMS, INC.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Treasurer

RICHARDSON ELECTRONICS
CANADA, LTD.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Treasurer

RICHARDSON ELECTRONICS LIMITED
(f/k/a RICHARDSON ELECTRONICS (EUROPE), LTD.)

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Director

RESA, SNC.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Co-Gerant

RICHARDSON ELECTRONIQUE SNC

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Co-Gerant

RICHARDSON ELECTRONICS
IBERICA, S.A.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Managing Director & Presidente

RICHARDSON ELECTRONICS GmbH

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Geschaftsfuhrer

RICHARDSON ELECTRONICS
BENELUX B.V.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Managing & Supervising Director

RICHARDSON SWEDEN HOLDING AB

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Director

SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO NOTE OF THE BORROWERS LISTED ON THE SIGNATURE PAGES THERETO DATED AUGUST 31, 2001
Date	Principal Amount of Loan	Maturity of Interest Period	Principal Amount Paid	Unpaid Balance

SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO NOTE OF ____________________________ DATED AUGUST 31, 2001
Date	Principal Amount of Loan	Maturity of Interest Period	Principal Amount Paid	Unpaid Balance

NOTE

As of August 31, 2001

BURTEK SYSTEMS, INC.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Treasurer

RICHARDSON ELECTRONICS
CANADA, LTD.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Treasurer

RICHARDSON ELECTRONICS LIMITED
(f/k/a RICHARDSON ELECTRONICS (EUROPE), LTD.)

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Director

RESA, SNC.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Co-Gerant

RICHARDSON ELECTRONIQUE SNC

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Co-Gerant

RICHARDSON ELECTRONICS
IBERICA, S.A.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Managing Director & Presidente

RICHARDSON ELECTRONICS GmbH

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Geschaftsfuhrer

RICHARDSON ELECTRONICS
BENELUX B.V.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Managing & Supervising Director

RICHARDSON SWEDEN HOLDING AB

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Director

SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO NOTE OF THE BORROWERS LISTED ON THE SIGNATURE PAGES THERETO DATED AUGUST 31, 2001
Date	Principal Amount of Loan	Maturity of Interest Period	Principal Amount Paid	Unpaid Balance

NOTE

As of August 31, 2001

This Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Revolving Credit Agreement dated as of July 1, 2000 (which, as it may be amended or modified and in effect from time to time, is herein called the "Agreement"), among the Borrowers party thereto, the lenders party thereto, including the Lender, and American National Bank and Trust Company of Chicago, as Administrative Agent, Bank One, N.A., London Branch as Eurocurrency Agent, and Bank One, N.A., Canada Branch, as Canada Agent, to which Agreement reference is hereby made for a statement of the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity date accelerated. This Note is guaranteed pursuant to the Guaranty, all as more specifically described in the Agreement, and reference is made thereto for a statement of the terms and provisions thereof. Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement.

BURTEK SYSTEMS, INC.
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Treasurer

RICHARDSON ELECTRONICS
CANADA, LTD.
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Treasurer

RICHARDSON ELECTRONICS LIMITED
(f/k/a RICHARDSON ELECTRONICS (EUROPE), LTD.)
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Director

RESA, SNC.
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Co-Gerant

RICHARDSON ELECTRONIQUE SNC
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Co-Gerant

RICHARDSON ELECTRONICS
IBERICA, S.A.
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Managing Director & Presidente

RICHARDSON ELECTRONICS GmbH
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Geschaftsfuhrer

RICHARDSON ELECTRONICS
BENELUX B.V.
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Managing & Supervising Director

RICHARDSON SWEDEN HOLDING AB
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Director

SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO NOTE OF THE BORROWERS LISTED ON THE SIGNATURE PAGES THERETO DATED AUGUST 31, 2001
Date	Principal Amount of Loan	Maturity of Interest Period	Principal Amount Paid	Unpaid Balance

NOTE

As of August 31, 2001

BURTEK SYSTEMS, INC.
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Treasurer

RICHARDSON ELECTRONICS
CANADA, LTD.
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Treasurer

RICHARDSON ELECTRONICS LIMITED
(f/k/a RICHARDSON ELECTRONICS (EUROPE), LTD.)
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Director

RESA, SNC.
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Co-Gerant

RICHARDSON ELECTRONIQUE SNC
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Co-Gerant

RICHARDSON ELECTRONICS
IBERICA, S.A.
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Managing Director & Presidente

RICHARDSON ELECTRONICS GmbH
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Geschaftsfuhrer

RICHARDSON ELECTRONICS
BENELUX B.V.
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Managing & Supervising Director

RICHARDSON SWEDEN HOLDING AB
By: /s/ William J. Garry
Print Name: William J. Garry
Title: Director

SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO NOTE OF THE BORROWERS LISTED ON THE SIGNATURE PAGES THERETO DATED AUGUST 31, 2001
Date	Principal Amount of Loan	Maturity of Interest Period	Principal Amount Paid	Unpaid Balance

NOTE

As of August 31, 2001

BURTEK SYSTEMS, INC.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Treasurer

RICHARDSON ELECTRONICS
CANADA, LTD.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Treasurer

RICHARDSON ELECTRONICS LIMITED
(f/k/a RICHARDSON ELECTRONICS (EUROPE), LTD.)

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Director

RESA, SNC.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Co-Gerant

RICHARDSON ELECTRONIQUE SNC

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Co-Gerant

RICHARDSON ELECTRONICS
IBERICA, S.A.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Managing Director & Presidente

RICHARDSON ELECTRONICS GmbH

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Geschaftsfuhrer

RICHARDSON ELECTRONICS
BENELUX B.V.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Managing & Supervising Director

RICHARDSON SWEDEN HOLDING AB

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Director

SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO NOTE OF THE BORROWERS LISTED ON THE SIGNATURE PAGES THERETO DATED AUGUST 31, 2001
Date	Principal Amount of Loan	Maturity of Interest Period	Principal Amount Paid	Unpaid Balance

NOTE

As of August 31, 2001

BURTEK SYSTEMS, INC.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Treasurer

RICHARDSON ELECTRONICS
CANADA, LTD.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Treasurer

RICHARDSON ELECTRONICS LIMITED
(f/k/a RICHARDSON ELECTRONICS (EUROPE), LTD.)

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Director

RESA, SNC.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Co-Gerant

RICHARDSON ELECTRONIQUE SNC

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Co-Gerant

RICHARDSON ELECTRONICS
IBERICA, S.A.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Managing Director & Presidente

RICHARDSON ELECTRONICS GmbH

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Geschaftsfuhrer

RICHARDSON ELECTRONICS
BENELUX B.V.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Managing & Supervising Director

RICHARDSON SWEDEN HOLDING AB

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Director

SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO NOTE OF THE BORROWERS LISTED ON THE SIGNATURE PAGES THERETO DATED AUGUST 31, 2001
Date	Principal Amount of Loan	Maturity of Interest Period	Principal Amount Paid	Unpaid Balance

NOTE

As of August 31, 2001

          Burtek Systems, Inc., a Canadian corporation, Richardson Electronics Canada, Ltd., a Canadian corporation, Richardson Electronics Limited f/k/a Richardson Electronics (Europe) Ltd., an English limited liability company, RESA, SNC, a French partnership, Richardson Electronique SNC, a French partnership, Richardson Electronics Iberica, S.A., a Spanish corporation, Richardson Electronics GmbH, a German limited liability company, Richardson Electronics Benelux B.V., a Dutch private limited liability company, and Richardson Sweden Holding AB, a Swedish corporation, (the "Borrowers"), promise to pay to the order of LaSalle Business Credit, a division of ABN AMRO Bank Canada, (the "Lender") the aggregate unpaid principal amount of all Loans made by the Lender to the Borrowers pursuant to Article 2 of the Agreement (as hereinafter defined), in immediately available funds at the place specified pursuant to Article 2 of the Agreement, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The Borrowers shall pay the principal of and accrued and unpaid interest on the Loans in full on the Facility Termination Date.

          The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date and amount of each Loan and the date and amount of each principal payment hereunder.

          This Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Revolving Credit Agreement dated as of July 1, 2000 (which, as it may be amended or modified and in effect from time to time, is herein called the "Agreement"), among the Borrowers party thereto, the lenders party thereto, including the Lender, and American National Bank and Trust Company of Chicago, as Administrative Agent, Bank One, N.A., London Branch as Eurocurrency Agent, and Bank One, N.A., Canada Branch, as Canada Agent, to which Agreement reference is hereby made for a statement of the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity date accelerated. This Note is guaranteed pursuant to the Guaranty, all as more specifically described in the Agreement, and reference is made thereto for a statement of the terms and provisions thereof. Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement.

BURTEK SYSTEMS, INC.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Treasurer

RICHARDSON ELECTRONICS
CANADA, LTD.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Treasurer

RICHARDSON ELECTRONICS LIMITED
(f/k/a RICHARDSON ELECTRONICS (EUROPE), LTD.)

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Director

RESA, SNC.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Co-Gerant

RICHARDSON ELECTRONIQUE SNC

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Co-Gerant

RICHARDSON ELECTRONICS
IBERICA, S.A.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Managing Director & Presidente

RICHARDSON ELECTRONICS GmbH

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Geschaftsfuhrer

RICHARDSON ELECTRONICS
BENELUX B.V.

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Managing & Supervising Director

RICHARDSON SWEDEN HOLDING AB

By: /s/ William J. Garry

Print Name: William J. Garry

Title: Director

SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO NOTE OF THE BORROWERS LISTED ON THE SIGNATURE PAGES THERETO DATED AUGUST 31, 2001
Date	Principal Amount of Loan	Maturity of Interest Period	Principal Amount Paid	Unpaid Balance

NOTE

As of August 31, 2001

SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO NOTE OF THE BORROWERS LISTED ON THE SIGNATURE PAGES THERETO DATED AUGUST 31, 2001
Date	Principal Amount of Loan	Maturity of Interest Period	Principal Amount Paid	Unpaid Balance

NOTE

As of August 31, 2001

SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO NOTE OF THE BORROWERS LISTED ON THE SIGNATURE PAGES THERETO DATED AUGUST 31, 2001
Date	Principal Amount of Loan	Maturity of Interest Period	Principal Amount Paid	Unpaid Balance

EX-10 5 exhibit10b.htm EXHIBIT-10(B) Exhibit 10(b) SHARE PURCHASE AGREEMENT

THIS SHARE PURCHASE AGREEMENT, entered into as of the 19th day of July, 2001, by and among LEIF SANDBERG, residing at Hågavägen 41, SE-168 54 Bromma, Sweden, and RONNY GUSTAFSSON, residing at Silverdalsvägen 13, SE-178 34 Ekerö, Sweden (Leif Sandberg and Ronny Gustafsson are herein collectively called "Sellers" and individually "Seller"), and NYBYGGAREN 10:1036 AB, under name change to RICHARDSON SWEDEN HOLDING AB, a Swedish company with corporate registration number 556601-4410 and registered address at c/o Baker & McKenzie, P.O. Box 5719, SE-114 87 Stockholm, Sweden, (herein called "Purchaser") and RICHARDSON ELECTRONICS, LTD., a Delaware corporation, having its principal place of business at 40 W 267 Keslinger Road, PO Box 393, LaFox, IL 60147-0393, U.S.A. (herein called "Parent");

W I T N E S S E T H:

WHEREAS, Sellers are the owners of all of the issued and outstanding shares and the principal officers and the directors of Sangus Holding AB, a Swedish corporation with corporate registration number 556589-5538 and its principal place of business at Hågavägen 41, SE-168 54 Bromma, Sweden (herein called "the Company"), are fully familiar with the business and operations of the Company and are willing to be employed by or provide consulting services to the Company and not to compete with Purchaser; and

WHEREAS, Sellers desire to sell to Purchaser, and Purchaser desires to purchase from Sellers, all of the Company's issued and outstanding shares of all classes and series (herein "Shares"), in accordance with all the terms and subject to all of the conditions herein set forth;

NOW, THEREFORE, in consideration of the premises hereof (which the parties agree are hereby incorporated into and made a part of their agreement herein) and of the mutual covenants and agreements herein set forth, it is hereby agreed as follows:

Definitions.

1.1 "Accounting Date" shall mean June 30, 2001.

1.2 "Agreement" shall mean this Share Purchase Agreement.

1.3 "Applicable Law" means, in respect of any Person, property, transaction or event, all applicable laws, statutes, regulations, treaties, orders, judgments and decrees and all applicable official directives, rules, guidelines, standards, orders and policies of any Governmental Authority having authority over any of the foregoing.

1.4 "Closing Balance Sheet" shall mean the consolidated balance sheet of the Company as of the Accounting Date, to be prepared in accordance with Article 8 hereof.

1.5 "Closing Date" shall mean the date of this Agreement.

1.6 "CPA Firm" shall mean KPMG.

1.7 "DD Information" means the due diligence information and materials made available by Sellers for review by Purchaser prior to the date hereof and specified in Schedule 4.7 as well as any information contained or referred to in this Agreement or the Schedules or Exhibits hereto.

1.8 "Environmental Activity" means any activity, event or circumstance in respect of a Hazardous Substance, including, without limitation, its storage, use, holding, collection, purchase, accumulation, assessment, generation, transportation or its Release into the natural environment including movement through or in the air, soil, subsoil, surface water or groundwater.

1.9 "Environmental Laws" means any and all national and local statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, grants, licenses, agreements or other governmental restrictions of Sweden, Finland and Norway and their respective provinces and applicable Governmental Authorities with respect to the Company, the Subsidiaries or their respective operations, in each case relating to the environment, health and safety, health protection or any Environmental Activity.

1.10 "Financial Statements" shall mean collectively the audited consolidated balance sheet and the audited consolidated profit and loss statement as of and for the period ended December 31, 2000, together with accompanying schedules and notes thereto, of the Company.

1.11 "Finnish Subsidiary" means Sangus OY, a Finnish corporation.

1.12 "Finnish Transaction" means the acquisition on or prior to the date hereof by the Swedish Subsidiary from Mr. Pauli Leinonen of all shares in the Finnish Subsidiary not already owned by the Swedish Subsidiary, as result of which the Swedish Subsidiary becomes the sole owner of all shares in the Finnish Subsidiary, in accordance with the terms and conditions of the agreement dated August 4, 2000 between Mr. Leinonen on the one side and the Company and the Swedish Subsidiary on the other side.

1.13 "Governmental Authority" means the government of any nation, state, province, municipality or other political subdivision thereof, and any entity exercising executive, legislative, regulatory or administrative functions.

1.14 "Group" shall mean the Company together with the Subsidiaries.

1.15 "Hazardous Substances" shall mean any and all pollutants, contaminants, dangerous, hazardous or toxic materials, substances or wastes, including petrochemical products and wastes, of any description whatsoever, and including, without limitation, those defined as such in any applicable Environmental Law, or under any other applicable federal, state or local law, statute, regulation, order or decree regulating substances threatening or potentially threatening to life, health, welfare, public safety or the environment.

1.16 "Lien" means any mortgage, charge, lien, hypothec, trust, encumbrance, charge, pledge, assignment, security interest, title retention, or any other security arrangement of whatsoever nature, kind or description, other than any Permitted Lien.

1.17 "Nordic Operations" means any operations, whether directly or indirectly, in the Nordic Region.

1.18 "Nordic Region" means Denmark, Finland, Norway and Sweden.

1.19 "Operating Profit" shall mean, for any period, sales and commissions less cost of sales, plus exchange gains and losses realised on billings to customers and payments to suppliers and less selling, general and administrative expenses, but excluding any bonus payable to any of Sellers relating to their employment or consultancy relationship, as the case may be, with the Group attributable to any period of time after the Accounting Date, including depreciation (excluding financial income and expense), calculated on a consolidated basis.

1.20 "Parent Reference Amount" means the amount in SEK which is equal to the Operating Profit of the Parent's Nordic Operations for the twelve-month period ended on the Accounting Date, as agreed upon or determined pursuant to section 8.3 or 8.4.

1.21 "Permitted Liens" means (i) Liens for taxes, assessments or governmental charges or levies, (ii) Liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations, (iii) Liens arising out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation and (iv) Liens securing obligations representing the deferred purchase price of goods or services, if, in each case under (i) through (iv), the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings, and for which reserves in the full amount necessary to satisfy the Lien shall have been set aside on the Closing Balance Sheet.

1.22 "Person" means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, Governmental Authority, authority or entity however designated or constituted.

1.23 "Proprietary Rights" means all patents, patent applications, trademarks, trademark applications, trade names, service marks, label filings, domain names, copyrights, royalty rights, brand names, logos, applications therefor and registrations thereof and inventions.

1.24 "Reference Equity" shall mean SEK 44.6 million.

1.25 "Released" means, with respect to any Hazardous Substance, the method by which such Hazardous Substance comes to be in the environment at large and includes, without limitation, discharging, spraying, injection, abandonment, depositing, spilling, leaking, seeping, pouring, emission, emptying, throwing, dumping, placing and exhausting, and when used as a noun has a similar meaning.

1.26 "Subsidiary" or "the Subsidiaries" means the Swedish Subsidiary and the Finnish Subsidiary, collectively.

1.27 "Swedish Subsidiary" means Sangus AB, a Swedish corporation with corporate registration number 556461-0714.
Agreement of Sale and Purchase of Shares.

Subject to the terms and conditions of this Agreement, the Sellers hereby agree to and do hereby sell, assign, deliver and transfer to Purchaser and Purchaser hereby agrees to and does hereby buy from each of the Sellers, the number of Shares set forth opposite the respective signatures of the Sellers at the end of this Agreement.
Purchase Price and Payment.

3.1 Purchase Price. Purchaser agrees to pay to Sellers, and Sellers agree to accept, as the aggregate purchase price hereunder for the Shares (herein called the "Purchase Price"), an amount equal to the initial payment provided for in section 3.1.1 below, subject to the adjustment provided for in section 3.1.2 below, and the amount ultimately paid to Sellers under section 3.1.3 below.

3.1.1 Concurrently with the signing of this Agreement, Purchaser shall pay to Sellers in immediately available funds to Sellers' account or accounts as directed by Sellers, an aggregate sum in SEK of 104,200,000.

3.1.2 If the amount in SEK shown as shareholders' equity (Sw.: eget kapital) in the Closing Balance Sheet is greater or less than the Reference Equity, Purchaser or Sellers, as applicable, shall within seven (7) calendar days from the day on which the parties reached agreement on, or from receipt of notice of the final determination of, the Closing Balance Sheet as provided for in section 8.1 or 8.4 pay by wire transfer of immediately available funds to a bank account designated for this purpose by the other party, as adjustment of the Purchase Price an amount equal to such surplus or shortfall, as the case may be.

3.1.3 Within ten (10) days after the Operating Profit of the Company and the Operating Profit of the Parent's Nordic Operations for the annual periods ending on each anniversary, respectively, of the Accounting Date through the third anniversary thereof have been agreed or determined as provided in sections 8.3 and 8.4 below, the Purchaser shall pay to Sellers, in immediately available funds to Sellers' account or accounts as directed by Sellers,

(i) With respect to the one-year anniversary period, an aggregate sum in SEK equal to one third of the following amount: the sum of (S1) and (R1) multiplied by two reduced by SEK 30 million, where (S1) shall be the Operating Profit of the Company for the period and (R1) shall be the amount by which the Operating Profit of the Parent's Nordic Operations for the period exceeds the Parent Reference Amount,

(ii) With respect to the two-year anniversary period, an aggregate sum in SEK equal to two thirds of the following amount less the amount paid by Purchaser with respect to the first anniversary period as provided for in (i) above: the sum of (S2) and (R2) reduced by SEK 30 million, where (S2) shall be the cumulative Operating Profit of the Company for the two-year period ending on the second anniversary of the Accounting Date and (R2) shall be the amount by which the cumulative Operating Profit of the Parent's Nordic Operations for such two-year period exceeds an amount equal to two times the Parent Reference Amount, and

(iii) With respect to the three-year anniversary period, an aggregate sum in SEK equal to the following amount less the net aggregate amount (taking into account any reimbursement made by Sellers due to the amount calculated in (ii) being negative, as provided for below) paid by Purchaser with respect to the one-year and two-year anniversary periods as provided for in (i) and (ii) above: two thirds of the sum of (S3) and (R3) reduced by SEK 30 million, where (S3) shall be the cumulative Operating Profit of the Company for the three-year period ending on the third anniversary of the Accounting Date and (R3) shall be the amount by which the cumulative Operating Profit of the Parent's Nordic Operations for such three-year period exceeds an amount equal to three times the Parent Reference Amount.

For the avoidance of doubt, it is agreed as follows. If the amount calculated in (i) above is negative, Purchaser shall not as a result thereof be entitled to any payment from Sellers. If the amount calculated in (ii) above is negative, such negative amount shall be reimbursed within ten (10) days to Purchaser by Sellers up to the aggregate amount they received as payment with respect the first period. If the amount calculated in (iii) above is negative, such negative amount shall be reimbursed within ten (10) days to Purchaser by Sellers up to the aggregate net amount they received as payment with respect to the first and second periods.
Representations, Warranties and Covenants of Sellers.

Each Seller hereby, severally and not jointly, represents, warrants and covenants to Purchaser and Parent that the following statements are true and correct as of the Accounting Date and the Closing Date:

4.1 Shares. Schedule 4.1 sets forth the Company's registered share capital, its shares of all classes and series outstanding, and the record and beneficial owners of such shares, each of which outstanding shares has been and is duly and validly authorized and issued, fully paid and non-assessable, and not issued in violation of any preemptive right of shareholders or of any Applicable Law. Such shares are owned free and clear of all Liens, claims, shareholder agreements, and voting trusts, contracts, arrangements, commitments or understandings of any nature, kind or description. There is no commitment, plan, or arrangement to issue or transfer, and no outstanding option, warrant, or other right calling for the issuance or transfer of any share capital of the Company or any security convertible into or exchangeable for share capital of the Company, nor is there any outstanding security convertible into or exchangeable for share capital of the Company. The Shares to be sold hereunder are all the issued and outstanding shares of equity securities of any class and any series of the Company. Upon execution and delivery of this Agreement and the share certificates by Sellers as provided in Article 7, Purchaser will have good and valid title to all of the Shares, which constitute all of the issued share capital of the Company, and the certificates representing the same, free and clear of all Liens, claims, shareholders' agreements, voting trusts, contracts, arrangements, commitments or understandings of any nature, kind or description.

4.2 Organization and Capitalization. The Company is a company duly organized and validly existing under the laws of Sweden. The directors and officers of the Company are set forth on Schedule 4.2 and the Company has no committees of its Board of Directors, except as reflected on such Schedule. The Company has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now conducted. The Company is duly licensed or qualified as a foreign corporation in all jurisdictions where the nature of its business or the property owned, leased or operated by it so requires and failure to be so licensed or qualified would have a material adverse effect upon it or its business or assets. The Company has no subsidiary nor owns any other interest in any other enterprise, except the Subsidiaries.

4.3 Subsidiary Shares. Schedule 4.3 sets forth, respectively, the Subsidiaries' registered share capital, their shares of all classes and series outstanding, all of which are owned of record and beneficially by, with respect to the Swedish Subsidiary, the Company, or, with respect to the Finnish Subsidiary (subject to completion of the Finnish Transaction), the Swedish Subsidiary, and each of which outstanding shares has been and is duly and validly authorized and issued, fully paid and nonassessable, and not issued in violation of any preemptive right of shareholders or of any Applicable Law. Such shares are owned free and clear of all Liens, claims, shareholder agreements, and voting trusts, contracts, arrangements, commitments or understandings of any nature, kind or description. There is no commitment, plan, or arrangement to issue or transfer, and no outstanding option, warrant, or other right calling for the issuance or transfer of any share capital of the Subsidiaries or any security convertible into or exchangeable for share capital of the Subsidiaries, nor is there any outstanding security convertible into or exchangeable for share capital of the Subsidiaries, subject to the completion of the Finnish Transaction.

4.4 The Subsidiaries' Organization and Capitalization

4.4.1 The Swedish Subsidiary is a corporation duly organized and validly existing under the laws of Sweden. The directors and officers of the Swedish Subsidiary are set forth on Schedule 4.4.1 and the Swedish Subsidiary has no committees of its Board of Directors, except as reflected on such Schedule. The Swedish Subsidiary has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now conducted. The Swedish Subsidiary is duly licensed or qualified as a foreign corporation in all jurisdictions where the nature of its business or the property owned, leased or operated by it so requires and failure to be so licensed or qualified would have a material adverse effect upon it or its business or assets. The Swedish Subsidiary has no subsidiary nor owns any other interest in any other enterprise other than the Finnish Subsidiary.

4.4.2 The Finnish Subsidiary is a corporation duly organized and validly existing under the laws of Finland. The directors and officers of the Finnish Subsidiary are set forth on Schedule 4.4.2 and the Finnish Subsidiary has no committees of its Board of Directors, except as reflected on such Schedule. The Finnish Subsidiary has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now conducted. The Finnish Subsidiary is duly licensed or qualified as a foreign corporation in all jurisdictions where the nature of its business or the property owned, leased or operated by it so requires and failure to be so licensed or qualified would have a material adverse effect upon it or its business or assets. The Finnish Subsidiary has no subsidiary nor owns any other interest in any other enterprise.

4.5 Authority and Binding Obligation. All action necessary to authorize the execution and delivery by such Seller of this Agreement and the other documents required to be executed by such Seller hereunder and the performance of his obligations hereunder and thereunder have been duly taken on or prior to the Closing Date. The execution and delivery of this Agreement and the other documents required to be executed by such Seller hereunder and the performance of such Seller's covenants and agreements herein and therein contained do not and will not violate or conflict with any provision of, constitute or result in any material breach of any of the terms, conditions or provisions of, or constitute a default or provide a right to terminate under, any provision of law known to such Seller or any agreement or other instrument of which such Seller, the Company, the Swedish Subsidiary or the Finnish Subsidiary is a party or by which any of them may be bound, or any order, decree, judgment or regulation of any arbitrator, court or governmental body having jurisdiction over Sellers, the Company, the Swedish Subsidiary or the Finnish Subsidiary, their respective businesses or assets, or result in the creation of any Lien upon any of the Shares, the shares of the Swedish Subsidiary or the Finnish Subsidiary, or the Group's business or assets, and do not and will not require the consent or approval of any other person (except as specified in Schedule 4.5), court or Governmental Authority; in each case except as would not have a material adverse effect on the transactions contemplated hereunder or on the business of the Group. This Agreement is a legal, valid and binding obligation of such Seller, enforceable in accordance with its terms, except as the enforceability hereof may be limited by bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally or the availability of equitable remedies.

4.6 Compliance with Laws. The businesses and operations of the Company, the Swedish Subsidiary and the Finnish Subsidiary have been and are being conducted in compliance with their respective corporate charter and licenses, if any, and in all material respects with all Applicable Laws and any authorization, permit, grant, license, consent, right, privilege, registration, filing, commitment, approval, or direction issued or granted by law or by any Governmental Authority and, to the Group's and such Seller's knowledge, are not subject to any judicial, governmental, regulatory or other investigations, proceedings, inquiries or notices. Neither the Company, nor the Swedish Subsidiary, nor the Finnish Subsidiary, nor such Seller, has received any notice of non-compliance under any Applicable Law not previously corrected with reference to the Group's operations or its business or assets or has any knowledge of any facts which would give rise to a notice of non-compliance under any Applicable Law, authorization, permit, grant, license, consent, right, privilege, registration, filing, commitment, approval, or direction issued or granted by law or by any Governmental Authority.

4.6.1 There are no hazardous building materials subject to exposure or release (including, but not limited to, friable asbestos or similar substances) present in any portion of the Group's assets.

4.6.2 There neither is nor has been, any Hazardous Substance or Environmental Activity at, upon, under, over, within or with respect to Group's business or properties on which it operates with the exception of the handling, use or storage in accordance with Environmental Laws.

4.6.3 All Hazardous Substances and other wastes, materials and substances handled, used, disposed of, transported, Released, discharged, emitted, treated or stored (i) on or off-site of any location at which Group operates its business, or (ii) into or upon the air, surface water, groundwater or land, with respect to the Group's operations, whether hazardous or non-hazardous, have been since the commencement of such operations, handled, used, disposed of, transported, Released, discharged, emitted, treated and stored, in compliance with all Applicable Laws.

4.6.4 Neither the Company, nor the Swedish Subsidiary, nor the Finnish Subsidiary, nor such Seller has received any notice, or has any knowledge of any facts that reasonably likely could give rise to any notice, that the Company, the Swedish Subsidiary or the Finnish Subsidiary is a potentially responsible party for a national, provincial, state, municipal or local cleanup site or corrective action under any Environmental Law or other Applicable Law.

4.6.5 Neither the Company, nor the Swedish Subsidiary, nor the Finnish Subsidiary, nor such Seller, has had an environmental audit conducted with respect to Group's operations or any location at which the Group operates its business. For purposes hereof, an environmental audit shall mean any evaluation, assessment, study or test performed by or at the request of Sellers, the Company, the Swedish Subsidiary or the Finnish Subsidiary or at the request of or on behalf of any national or local administrative, regulatory or governmental agency or authority.

4.7 Due Diligence Materials. In addition to the Schedules and Exhibits hereto, Sellers have provided Purchaser with the materials listed on Schedule 4.7, each of which, to the knowledge of such Seller, fairly presents and reflects all of the information and transactions purported to be covered thereby and are not contradicted by any undisclosed document or are otherwise impaired, bear genuine signatures, if signed, and if unsigned are true, correct and complete copies of agreements which have been duly signed by appropriate parties thereto, and if copies, conform to the originals.

4.8 Books and Records. The Company's, the Swedish Subsidiary's and the Finnish Subsidiary's books of account and other financial records have been kept in accordance with all Applicable Laws, and fairly present and reflect all of the transactions entered into by the Company, the Swedish Subsidiary and the Finnish Subsidiary, respectively, and as to which the Company, the Swedish Subsidiary or the Finnish Subsidiary is a party. The DD Information contains complete and accurate copies of the Articles of Association of the Company, the Swedish Subsidiary and the Finnish Subsidiary, as amended to the date hereof. The DD Information contains complete and accurate record for the last five years of any and all meetings, of the shareholders and the board of directors of the Company, the Swedish Subsidiary and the Finnish Subsidiary and copies of the respective share registers of the Company, the Swedish Subsidiary and the Finnish Subsidiary, which contain complete and accurate records of all of the issued and outstanding shares of the Company, the Swedish Subsidiary and the Finnish Subsidiary, respectively, subject to the Finnish Transaction. The minutes of all general meetings of shareholders and all board meetings of the Company, the Swedish Subsidiary and the Finnish Subsidiary, respectively, have been kept in accordance with all Applicable Laws.

4.9 Financial Statements. The DD Information contains true and correct copies of the Financial Statements. The Financial Statements have been prepared in accordance with all Applicable Laws and consequently present fairly in all material respects the consolidated financial position of the Company and the consolidated results of its operations as of the date and for the period specified therein in conformity with generally accepted accounting principles in Sweden applied on a consistent basis, except as otherwise set forth in the notes to such Financial Statements, if any. The balance sheet included in the Financial Statements contains and reflects such reserves as were required under generally accepted accounting principles in Sweden applied on a consistent basis, except as otherwise set forth in the notes to such Financial Statements, if any. Neither the Company, nor the Swedish Subsidiary, nor the Finnish Subsidiary has or will have any liability or obligation of any nature, kind or description (whether absolute, accrued, contingent or otherwise, and whether due or to become due) with respect to any period ending on or before the Closing Date other than as provided for on the Closing Balance Sheet.

4.10 No Material Adverse Change. Save for economic and market changes affecting trading companies, that are active in the same industry as the Group, as a whole, since December 31, 2000, there has not been any material adverse change in the business, financial condition or results of operations of the Group including in their properties, assets, revenues, earnings, inventory, relationships with suppliers and customers, labor or labor relations.

4.11 Taxes. True and complete copies of all national, local and foreign income tax returns of the Company and the Subsidiaries have been included in the DD Information for the fiscal years 1996-2000, as applicable . The Company and the Subsidiaries have filed all tax returns and reports which are required by law to be filed, including, but not limited to, returns for national, local and foreign income and other taxes and governmental charges upon any of their respective properties, assets, income or franchises and all taxes, interest, penalties, assessments or deficiencies which have become due have been paid in full. The Closing Balance Sheet shall reserve or provide in full for all accrued but unpaid taxes for which the Company or any of the Subsidiaries is liable at the Accounting Date in respect of all periods up to the Accounting Date. Neither the Company nor either Subsidiary has ever been audited by the tax authorities.

4.12 Title to Assets. The Company and the Subsidiaries have good and marketable title, free and clear of any claim, liability, restriction or adverse right of use or ownership, or Liens, other than under Applicable Laws, to all of their respective assets.

4.13 Customer Orders. All unfilled customer orders and commitments to customers of the Group on hand as of the Closing Date have been made in the usual and ordinary course of business and are at a price which will generate a gross margin for the Company or the Subsidiaries, except to the extent reflected in the Closing Balance Sheet.

4.14 Purchase Orders. All unfilled purchase orders and commitments of the Group to suppliers of goods marketed by the Group on hand as of the Closing Date have been made in the usual and ordinary course of business in normal quantities and at normal market prices prevailing at the time when such orders and commitments were made and the Sellers have no reason to believe that such goods can not be sold at sales prices which will generate a gross margin for the Company or the Subsidiaries, as the case may be, except to the extent reflected in the Closing Balance Sheet.

4.15 Leases. The DD Information contains true and complete copies of all leases (including subleases) to which the Company or any of the Subsidiaries is a party as of the Closing Date. Each such lease is valid and subsisting and in full force and effect. The Company and the Subsidiaries, and to the best of such Seller's knowledge, the lessor (or sublessor) thereof have performed in all material respects their respective obligations, and there is no breach thereof, default thereunder, or event which, with the giving of notice, the passage of time or both, would result in a breach or default on the part of the Company or either Subsidiary or, to the best of such Seller's knowledge, such lessor, under any such lease. Neither the Company nor the Subsidiaries have assigned, hypothecated, pledged, mortgaged or encumbered its interests, or any part thereof, as lessee under any such lease. All property leased by the Group has been maintained in accordance with the terms of the applicable leases and all personal property leased by the Group is in good working condition, ordinary wear and tear excepted.

4.16 Contracts. There have been disclosed in the DD Information (i) all long-term, unusual, material or significantly onerous contracts and commitments of the Group now outstanding or which will become capable of giving rise to such a contract by an order or acceptance by another party, (ii) all outstanding supplier, agency, distribution or license agreements which are material to the business of the Group (herein called "Contracts"). The Company, the Subsidiaries and, to the best of such Seller's knowledge, the other parties thereto have performed in all material respects their respective obligations and duties under all such Contracts and there is no breach thereof or default thereunder, or event which, with the giving of notice, the passage of time or both, would result in a breach or default on the part of the Company, either Subsidiary or, to the best of such Seller's knowledge, any such other party, under any such Contracts.

4.17 Permits, Licenses and Consents. All material permits, licenses, certificates, consents and other authorizations (herein collectively called "Permits") that relate to and are necessary for the operation of the business of the Group as presently conducted or to own the property presently owned by the Group or lease the property presently leased by the Group have been obtained by the Group and are included in the DD Information. The Company and each Subsidiary are in compliance with all such Permits, and all such Permits are in full force and effect.

4.18 Proprietary Rights. All registered Proprietary Rights owned by and all material Proprietary Rights licensed to the Company and either Subsidiary (pursuant to license agreements or otherwise), if any, have been specified in the DD Information. With respect to the Proprietary Rights used by the Group in its business as presently conducted:

4.18.1 The transactions contemplated by this Agreement in no way adversely alter or impair the Company's or either Subsidiary's right to any Proprietary Rights used in the business of the Group as presently conducted.

4.18.2 Neither such Seller, nor the Company, nor either Subsidiary has received any notice or claim of infringement, or any claim challenging or questioning the validity or effectiveness, of any of the Proprietary Rights used in the business of the Group and such Seller does not know of any valid basis for any such claim. The validity or effectiveness of any such Proprietary Rights has not been challenged or questioned in any prior or pending litigation to which the Company or any of the Subsidiaries is a party.

4.18.3 Neither the Company nor either Subsidiary is liable, nor have any of them made any contract or arrangement whereby any of them is or may become liable, to any person for any royalty or other compensation for use of any of the Proprietary Rights used in the business of the Group as presently conducted, except as disclosed in the DD Information.

4.19 Accounts Receivable. All of the Group's receivables which will be reflected in the Closing Balance Sheet will be paid at full book value within six (6) months following the Closing Date, except to the extent that provision for non-collection will be reflected in the Closing Balance Sheet, and provided that the Group continue to use the present methods and routines used by the Group in the collection of its receivables and that Sellers shall have the right to acquire against payment in cash each such receivable when it has fallen due. Such receivables shall not include any amount with respect to shipments on consignment or approval.

4.20 Litigation. There is no legal action, suit, arbitration, or other legal, administrative or governmental proceeding pending or, to the knowledge of such Seller, threatened against or relating to the Company or either Subsidiary, their businesses or assets, Sellers, the Shares or the shares of the Subsidiaries, at law, in equity, or before any governmental department, commission, board or agency, nor is such Seller aware that there is a basis for any of the foregoing. Neither the Company nor any Subsidiary is in default with respect to any judgment, injunction, order or decree of any court or any Governmental Authority by which it or any of its assets is bound or subject. No such judgment, injunction, order or decree is now in effect which in any way restrains or limits the Company or either Subsidiary in the conduct of its business as presently conducted.

4.21 Inventories. The inventories of Group as of the Accounting Date included in the Closing Balance Sheet will consist of items of a quality and quantity which are deemed good, usable and saleable in the usual and ordinary course of business of the Group (within one year based on historical sales of such products by the Company or the Subsidiaries, as the case may be) at customary prices therefore and do not include any items which are damaged, obsolete or below standard quality. Products with less than one year's sales history are equivalent to specifications of the manufacturer's current production of such items and to such Seller's knowledge saleable in the next year. Inventory that does not meet the above conditions shall be reflected in the Closing Balance Sheet at no value.

4.22 Fixed Assets. All of the equipment, properties and tangible assets of the Company and the Subsidiaries are in good condition and repair, ordinary wear and tear excepted, and are suitable for the present uses thereof.

4.23 Product Warranties. Neither the Company nor either Subsidiary has prior to the date of this Agreement made any express warranty or guaranty with respect to products shipped or delivered by the Company or either Subsidiary that deviate from the standard warranties provided by the manufacturers of such products which in the form as they are currently in effect have been made available to Purchaser for its review, or the warranties in the customer agreements included in the DD Information.

4.24 Labor Contracts and Controversies. Neither the Company nor either Subsidiary is a party to any collective bargaining agreement with any labor union or any local or subdivision thereof. To such Seller's knowledge, there is no current union organizing activity among any of the employees of the Company or either Subsidiary or any union representative petition pending or threatened. There are no controversies pending before any court or governmental agency or pursuant to any internal grievance procedure, or to such Seller's knowledge, threatened, including, without limitation, any unfair labor practice charges involving the Company or either Subsidiary.

4.25 Retirement and Benefit Plans. All medical, health, hospitalization, life insurance, retirement and other employee benefit plans, policies and programs, including, without limit, vacation and sick pay, in effect provided by the Company or the Subsidiaries to any of the employees of the Company or the Subsidiaries are in compliance with the provisions of all Applicable Laws. There are no liabilities or obligations of the Company or either Subsidiary under or in connection with any such plan (including, without limitation, for contributions for any prior years or the current year if one were to be made as in accord with prior years) attributable to any period of time prior to the Accounting Date except as will be included on the Closing Balance Sheet.

4.26 Employees. The particulars disclosed in the DD Information in respect of the employees of the Group are in all material respects true and correct and include descriptions of all bonus arrangements to which the Company or any of the Subsidiaries is a party.

4.27 Bank and Safe Deposit Arrangement. The DD Information contains a true, correct and complete list of all bank accounts and safe deposit boxes, and all authorized signatories on said bank accounts and safe deposit boxes of the Company and the Subsidiaries.

4.28 Insurance. The DD Information contains descriptions of all policies of insurance covering the Company and the Subsidiaries, their businesses or assets and the nature and extent of the coverage thereunder. All such policies are (i) valid, outstanding and enforceable policies and in full force and effect and (ii) provide adequate insurance coverage for the assets and the operations of the Company and the Subsidiaries, as the case may be. Neither the Company nor any Subsidiary has been refused any insurance with respect to any of its assets or any aspect of the operations of its business, nor has its coverage been limited by any insurance carrier to which it has applied for insurance or with which it has carried insurance during the last three years. There are no pending insurance claims for losses related to the assets or business of the Company and the Subsidiaries.

4.29 Suppliers. The DD Information contains a true and correct list of all major suppliers and vendors, by SEK volume of purchases sales for the fiscal year ended December 31, 2000, which currently supply the Company and the Subsidiaries with products which are currently marketed by the Group. Such Seller has no knowledge of any impending termination, cancellation, limitation, modification or adverse change to the Company or the Subsidiaries' relationships with any such supplier or vendor, or which is likely to result from the consummation of the sale of the Shares to Purchaser, except as specified in Schedule 4.5.

4.30 Customers. The DD Information contains a true and correct list of all major customers of the Company and the Subsidiaries by SEK volume of sales for the fiscal year ended December 31, 2000, and for the five-month period ending on May 31, 2001. Such Seller has no knowledge of any impending termination, cancellation, limitation, modification or adverse change to the Company or Subsidiaries' relationship with any customer, or which is likely to result from the consummation of the sale of the Shares to Purchaser.

4.31 Transactions With Related Parties. Neither any Seller, nor any of their respective spouses, children or any person closely related to any of them owns any equity interest, directly or indirectly, in any proprietorship, firm, company, corporation, partnership or other business entity which (i) is a competitor of the Company or either Subsidiary, (ii) is a customer or supplier of the Company or either Subsidiary, or (iii) has any contractual or business relationship with the Company or either Subsidiary; provided that the foregoing does not apply to the ownership by any of them of not more than two per cent (2%) of the outstanding securities of any corporation or partnership listed on a national securities exchange.

4.32 Sufficiency of Assets. The assets of the Company and the Subsidiaries together with assets that are leased or licensed to them are sufficient to enable them to conduct the business of the Group substantially as presently being conducted by it.

4.33 No Brokers or Finders. No person, firm or corporation has or will have as a result of any action taken on or prior to the Closing Date of the Company, either Subsidiary, Sellers or the Company's or the Subsidiaries' employees, agents or representatives, any right, interest or valid claim against the Company or any of the Subsidiaries or the Purchaser or Parent for any commission, fee or other compensation as a finder or broker, or for acting in any similar capacity in connection with this Agreement or the transactions provided for herein.

4.34 Post Accounting Date. Since the Accounting Date, except as disclosed in the Agreement or the Schedules hereto, the Company has conducted its business in a manner not materially different from its past practices and only in the usual and ordinary course, and consistent therewith the Company and each Subsidiary:

4.34.1 Has preserved intact the present business organization, kept available the services of its employees, and preserved its relationships with its customers and suppliers.

4.34.2 Has maintained all of its assets and properties in customary repair, order and condition, reasonable wear and use and damage by fire or unavoidable casualties excepted.

4.34.3 Has maintained its books, accounts and records in the usual and regular manner on a basis consistent with prior years.

4.34.4 Has duly complied with all laws and regulations applicable to its business.

4.34.5 Has not issued or sold, or issued any rights to purchase or subscribe to, or subdivide or otherwise change, any shares of its stock of any class.

4.34.6 Has not declared, set aside, or paid any dividends on, or made any distribution in respect of common stock of any class.

4.34.7 Has not purchased, redeemed or otherwise acquired, directly or indirectly, any of the Company's stock of any class.

4.34.8 Has not sold all or substantially all of its assets and properties, or changed in any manner the rights of its shares of capital stock or the character of its business.

4.34.9 Has not encumbered, mortgaged, pledged or permitted any Lien to exist against any of it assets.

4.34.10 Has not sold, assigned or otherwise disposed of any interest in any tangible or intangible asset, or cancelled any debt or claim, except in the ordinary course of business and for fair and adequate consideration in money's worth, except for write-downs and write-offs of accounts receivable to reflect uncollectible amounts.

4.34.11 Has not made or promised any increase in salaries or other compensation, other remuneration or employment benefits of any officer, director or other employee, except for customary adjustments made in the ordinary course of business.

4.34.12 Has not instituted, settled or agreed to settle any action or proceeding materially affecting any of its assets or its capital shares which is before any court or other body.

4.34.13 Has not incurred any liability except in the ordinary course of business consistent with past practices.
Representations, Warranties and Covenants of Purchaser.

Purchaser represents, warrants and covenants to each of the Sellers that the following statements are true and correct as of the Accounting Date and Closing Date:

5.1 Organization, Good Standing and Power. Each of Parent and Purchaser is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation , and has all requisite corporate power and authority to own, lease and operate its properties, to carry on its business as now being conducted, and to enter into this Agreement and perform its obligations hereunder. Each of Parent and Purchaser is authorized to do business and is in good standing in all jurisdictions where the nature of its business or the property owned, leased or operated by it so requires and failure to be so qualified would have a material adverse effect upon it.

5.2 Authority and Binding Obligation. All corporate action necessary to authorize the execution and delivery by each of Parent and Purchaser of this Agreement and the other documents required to be executed by each of Parent and Purchaser hereunder, and the performance of its obligations hereunder and thereunder have been duly taken. The execution and delivery of this Agreement and the other documents required to be executed by Parent or Purchaser hereunder and the performance of Parent's and Purchaser's covenants and agreements herein and therein contained do not and will not violate or conflict with any provision of the Articles of Incorporation or By-Laws of Parent or Purchaser, constitute or result in any material breach of any of the terms, conditions or provisions of, or constitute a default under, any provision of law known to Parent or Purchaser or any indenture, agreement or other instrument of which Parent or Purchaser is a party or by which it may be bound, or any order, decree, judgment, regulation or law of any court or governmental body having jurisdiction over Parent or Purchaser and, with respect to the Parent and Purchaser, do not and will not require the consent or approval of any other person, court or governmental authority. This Agreement is a legal, valid and binding obligation of Parent and Purchaser, enforceable in accordance with its terms, except as the enforceability hereof may be limited by bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally or the availability of equitable remedies.

5.3 No Brokers or Finders. No person, firm or corporation has or will have as a result of any action by Parent or Purchaser or Parent's or Purchaser's employees agents or representatives any right, interest or valid claim for any commission, fee or other compensation as a finder or broker, or for acting in any similar capacity, in connection with this Agreement or the transactions provided for herein.

5.4 Based on information in Parent's or Purchaser's possession, neither Parent nor Purchaser is aware that Purchaser has an actual existing claim under any representation, warranty or covenant given by such Seller in this Agreement. Schedule 5.4 lists all of the due diligence reports prepared by Parent, Purchaser and their advisors in connection with the transactions contemplated by this Agreement, copies of which have been delivered to each Seller.
Additional Agreements.

6.1 Access to Information. Sellers have made available to Purchaser and its authorized representatives all such information concerning the affairs of the Company and the Subsidiaries, including all properties, books, records, accounts and other documents, for their inspection and review, and such access to the Company's and each Subsidiary's officers and employees, and agents and representatives of the Company and the Subsidiaries, including the Company's and the Subsidiaries' accountants and their work papers, at their respective offices, as Purchaser has requested from time to time.

6.2 Accounting of Payments of Account Receivables. All reasonable collection expenses, including without limitation attorneys' fees, and other costs incurred in connection with the collection of an account receivable shall be charged against the account receivables collections. It is agreed that all payments received from any account that pays a specific invoice shall be applied to the invoice being paid. If any payments are received from any account that does not specify or otherwise pay a specific invoice, said payment shall be applied first against the oldest invoice remaining due from such account; provided that this method shall not be used if the account at any time shall in writing deny or question its liability in whole or in part for any invoice, in which event said invoice shall not be considered as paid until it is actually paid.

6.3 Product Warranties. Sellers shall, on a several but not joint basis, be responsible for all costs incurred, net of any tax consequences, by any member of the Group relating to any claims made by customers within the applicable period arising under any warranties or guarantees relating to products shipped or delivered by the Company or the Subsidiaries on or prior to the Closing Date, except to the extent such claims can be satisfied under warranties provided by the manufacturers of such products; provided, however, that Sellers shall have no liability with respect to such customer claims until same exceed any reserve therefor reflected on the Closing Balance Sheet. Seller's liability under this section 6.3 shall be subject to each of the limitations set forth in Sections 9.2.2, 9.2.4 and Article 10 hereof. If a customer makes such a claim within the applicable period, and in the judgment of Purchaser the claim is proper, Purchaser shall advise Sellers thereof in writing and the Company or a Subsidiary, as the case may be, will perform appropriate repairs, rework and replacements with respect thereto. Purchaser shall report to Sellers, quarterly, in writing, of the status of warranty claims received, setting forth the estimated amount of each claim, the claims resolved, the costs incurred on each claim and such other data as Sellers may reasonably request. Any payments made by Sellers to Purchaser under this Section 6.3 shall be treated as a reduction in the Purchase Price.

6.4 Discharge from Liability of Directors. Purchaser shall procure that each current board member and managing director of the Company and either Subsidiary is granted discharge from liability as regards the period of his office until the Closing Date at the respective next annual general meetings of shareholders, provided that the respective auditors recommend that such discharge be granted, but such discharge shall not affect any such director's obligations as a Seller under this Agreement.

6.5 Registration of Resignations. Purchaser shall procure that any resignation as a director of any member of the Group by any of the Sellers is duly registered forthwith upon such Seller giving notice of such resignation.

6.6 Specific Waiver. The Sellers waive any and all rights they may have under any agreement, provision of statute, rule, regulation, Article of Association, bylaw or other corporate document or otherwise to acquire any equity shares of the any of the Company, the Swedish Subsidiary or the Finnish Subsidiary.
Closing Deliveries.

Concurrently with the execution of this Agreement the parties have made the following deliveries:

7.1 Purchaser's Deliveries. Concurrently herewith, Purchaser has executed and delivered, or caused to be executed and delivered, the following:

7.1.1 Certified copy of the appropriate proceedings of the Board of Directors of Purchaser authorizing and approving this Agreement and the transactions and documents contemplated herein.

7.1.2 Wire transfer of immediately available funds, as directed by Sellers, in the amount of the initial payment of Purchase Price determined as provided in section 3.1.1.

7.2 Sellers' Deliveries. Concurrently herewith, Sellers have executed and delivered, or caused to be executed or delivered, the following:

7.2.1 Certificates evidencing the Shares, duly endorsed to Purchaser.

7.2.2 Sellers' Consultancy or Employment Agreements, duly executed by the Sellers.

7.2.3 The share ledger of each member of the Group.

7.2.4 Amendment to Pauli Leinonen's Employment Agreement duly executed by the parties thereto.

7.2.5 Resignation letters from the directors of the Company.

7.2.6 The Share Purchase Agreement between the Swedish Subsidiary and Pauli Leinonen regarding the Finnish Transaction.
Closing Balance Sheet.

8.1 Preparation of Closing Balance Sheet. Immediately after the Closing Date, the parties shall cause the preparation of the Closing Balance Sheet in accordance with generally accepted accounting principles in Sweden consistently applied and on a basis consistent with the Financial Statements, except as otherwise provided in this Agreement. The parties shall co-operate with the objective of agreeing upon the Closing Balance Sheet within sixty (60) calendar days after the Closing Date. If the parties are unable to agree on the Closing Balance Sheet within such sixty-day period, the Sellers shall submit in writing to Purchaser its calculation of the Closing Balance. Purchaser will then have thirty (30) calendar days after the date of its receipt of such submission to review it and shall no later than on the last day of such review period notify Sellers in writing whether or not Purchaser accepts the calculations set forth in such submission, and, if Purchaser does not accept such calculations, of its objections, such objections to be reasonably detailed and setting forth an alternative calculation, failing which (to timely give such notice) Purchaser shall be deemed to have conclusively and irrevocably accepted Sellers' calculation of the Closing Balance Sheet. Unless the parties have agreed on the Closing Balance Sheet within fifteen (15) days of Purchaser having timely informed Sellers of its objections, each party may refer the parties' differences to the CPA Firm.

8.2 Bonus. The Closing Balance Sheet will include all liabilities and obligations of the Company or either Subsidiary under or in connection with any bonus arrangement attributable to any period of time prior to the Accounting Date.

8.3 Computation of Parent Reference Amount and Operating Profits. Immediately after the Closing Date, Purchaser shall compute the Parent Reference Amount in accordance with generally accepted accounting principles in Sweden consistently applied and present such computation to Sellers. The parties shall co-operate with the objective of agreeing upon the Parent Reference Amount within sixty (60) calendar days after the Closing Date. Furthermore, Purchaser shall compute the Company's Operating Profit and the Operating Profit of the Parent's Nordic Operations for the periods from the Accounting Date through the first, second and third anniversary, respectively, of the Accounting Date, and for each such period the amount, if any, to be paid by Purchaser to Sellers under section 3.1.3. Such computations shall be made on a consistent basis (including, with respect to the Operating Profit of the Parent's Nordic Operations, on a basis consistent with the Parent Reference Amount), in SEK and in accordance with generally accepted accounting principles in Sweden. The parties shall co-operate with the objective of agreeing upon such respective computations within sixty (60) calendar days following each such anniversary of the Accounting Date. If the parties are unable to reach an agreement as provided in this section 8.3 within the applicable time period set forth herein, then Purchaser shall, not later than on the last day of such time period, submit in writing to Sellers its calculations and determination of the relevant amount(s) along with a written statement supporting such calculations. Sellers will then review such submission. Unless the parties then agree on the relevant amount(s), Sellers may refer the computation and determination thereof to the CPA Firm.

8.4 The CPA Firm. The CPA Firm shall, acting as arbitrator (and not as expert), make a determination as to each of the items in any dispute which has been submitted to it under any of the foregoing sections in this Article 8. Such determination shall be in writing, furnished to each party as promptly as practicable and in any event not later than ninety (90) days after such submission and final and conclusive and binding upon each party. Each party shall co-operate fully with the CPA Firm and make readily available all relevant books and records and work papers and the CPA Firm shall have full and free access to the data involved at all reasonable times during business hours. All parties shall be jointly and severally liable for the fees and expenses of the CPA Firm. Such fees and expenses shall be borne between the parties as determined by the CPA Firm, which in conjunction with its determination shall allocate such fees and costs between the parties in accordance with the principles set forth in Chapter 18 of the Swedish Code of Judicial Procedure.

8.5 Co-operation. Each party agrees and undertakes to co-operate and provide each other party, including its external financial advisers or auditors, full and free access to such information, books, records and work papers and personnel as the other party may reasonably request in connection with the subject matters of this Article 8.
Indemnification and Survival.

9.1 Indemnification by Sellers. Notwithstanding any investigation by or knowledge of Purchaser, each Seller hereby agrees, severally, to defend, indemnify and hold Purchaser harmless from and against any and all losses, liabilities, damages, costs and expenses, including reasonable legal fees and expenses relating thereto, net of tax consequences to the extent there are tax consequences ("Losses") incurred by the Purchaser or any entity of the Group arising out of or resulting from or in connection with any misrepresentation or breach of warranty made by Sellers in Article 4 of this Agreement. Each Seller's liability to compensate the Purchaser shall be several and not joint.

9.2 Limitation of Sellers' Liability. Notwithstanding anything to the contrary in this Agreement, the parties specifically agree that each Seller's liability under this indemnification with respect to representations and warranties shall be subject to each of the following limitations:

9.2.1 All claims payable to Purchaser under this Article 9 shall be treated as a reduction in the Purchase Price.

9.2.2 If Purchaser or any member of the Group recovers any payment or reduces any cost in respect of a Loss for which either Seller previously has compensated Purchaser under this Article 9, Purchaser shall, or shall cause, a refund to such Seller of the recovered amount or the amount of reduced cost relating to such Loss.

9.2.3 Such Seller's liability is limited to liability for breaches of the representations and warranties expressly set forth in Article 4 and indemnification pursuant to this Article 9 shall be the only remedy available in case of breach of such representations and warranties.

9.2.4 No claim may be made by Purchaser and no liability shall arise in respect of any Loss to the extent such Loss

(i) occurs as a result of any legislation, regulations or tax rates not in force at the Closing Date, or which take effect retroactively, or occurs as a result of any change in the generally established practice of relevant Governmental Authorities; or

(ii) is recoverable under a policy of insurance in force at the Closing Date which would have been recoverable had the insurance protection level which existed at the Closing Date continued to the extent of such recovery; or

(iii) is the subject of an accrual, allowance, provision or reserve in the Closing Balance Sheet to the extent such Loss and all other similar items included within such accrual, allowance or provision does not, in the aggregate, exceed such accrual, allowance or provision; or

(iv) is indirect or consequential (including but not limited to loss of profit, loss of business opportunities and loss of goodwill for Purchaser or any entity within the Group); or

(v) reduces any amount payable by Purchaser to Sellers under Section 3.1.3 because such Loss adversely affects the Operating Profit of the Company or the Operating Profit of Parent's Nordic Operations.

9.3 Defense of Third-Party Claims. Purchaser shall give written notice as promptly as is reasonably practicable to the Sellers of the assertion of any third-party claim of which indemnity is claimed by the Purchaser under this Article 9, but delay in giving such notice shall not relieve Sellers of their obligations in this Article 9, except to the extent such delay shall have adversely prejudiced the Sellers. The Sellers shall have the right to control the handling and defense, at their expense, and with counsel and representatives selected by them that are reasonably acceptable to the Purchaser, of any third-party claim for which they may be liable for indemnification, and the Sellers shall have the right to compromise or settle said third-party claim being handled by them as they deem advisable with the prior consent of the Purchaser, which consent shall not be unreasonably withheld. The Purchaser shall have the right to participate in, but not to control, the handling and defense of any such third-party claim, at its expense, and with counsel and representatives selected by it. If the remedy sought in any such third-party claim for which the Sellers may be liable for indemnification shall be for other than a sum certain, payable in cash, or, in the reasonable judgment of the Purchaser, would have a material adverse affect upon the business of the Company, either Subsidiary or Purchaser, the Purchaser may at any time elect to conduct and control such third-party claim with counsel and representatives selected by it, and in such case the fees and expenses of such counsel and representatives shall be borne by the Sellers. The Sellers shall cooperate fully therein at its own expense and the Sellers shall have the right to participate in, but not control, the handling and defense of such third-party claim, at their own expense and with counsel and representatives selected by them. The Purchaser shall have the right to compromise or settle any such third-party claim so being handled by it, as it reasonably deems advisable. If any proposed compromise or settlement involves solely money damages for a sum certain, payable in cash, and such settlement is objected to by the Purchaser, the Sellers shall not consummate said settlement; provided that the Sellers shall be fully relieved of and released from all liability for indemnification or otherwise with respect thereto by tendering to the Purchaser the amount of such proposed settlement, and the Purchaser shall assume all responsibility for said third-party claim.

Notwithstanding anything set forth herein to the contrary, the Purchaser, the Company or any Subsidiary shall not be required to refrain from paying any claim which has matured by a court judgment or decree, unless an appeal is duly taken therefrom and execution thereof has been stayed, nor shall the Purchaser, the Company or either Subsidiary be required to refrain from paying any claim where delay in paying such claim would result in the foreclosure of any lien upon any of Purchaser's, the Company's or either Subsidiary's assets or where any delay in payment would cause the Purchaser, the Company or either Subsidiary a material economic hardship; provided, however, that such action by the Purchaser, the Company or either Subsidiary shall not in any way be determinative or presumptive as to the existence or extent, if any, of the Sellers' liability to indemnify such claim hereunder.

9.4 Survival. All of the respective representations, warranties and covenants contained in this Agreement or in any other document or instrument delivered by or on behalf of any party hereunder or pursuant hereto, shall survive the execution and delivery and consummation of this Agreement.
General Limits.

10.1 Notwithstanding anything to the contrary in this Agreement, each Seller's aggregate liability for all claims under this Agreement shall in no event exceed a maximum amount of SEK 32.5 million.

10.2 Notwithstanding anything to the contrary in this Agreement, no Seller shall be liable to compensate Purchaser in respect of any claim under this Agreement unless such claim is notified to such Seller not later than two (2) years after the Closing Date, provided, however, that with respect to any claim arising out of or related to (i) taxes such limitation period shall be coterminous with the applicable statutory limitations period with respect to such taxes plus ninety (90) days, (ii) any claim asserted by third parties including environmental matters and claims by Governmental Authorities (other than claims arising out of or related to taxes) such limitation period shall be extended to three (3) years, (iii) any breach by such Seller of the Covenant Not to Compete, such limitation shall be coterminous with the expiration of the non-compete period plus one hundred eighty (180) days, and (iv) with respect to any breach of such Seller's warranty of title under Section 4.1, the foregoing limitation shall not apply and such claim shall survive the Closing Date without any such limitation period being applicable.

10.3 Notwithstanding anything to the contrary in this Agreement, no Seller shall be liable to compensate Purchaser in respect of any claim under this Agreement unless such Seller has received not later than fourty (40) calendar days from the date on which the Parent or the Purchaser obtained actual knowledge (Sw. faktisk vetskap) of the circumstances giving rise to such claim, a written notice of such claim from Purchaser accompanied by reasonable particulars of the nature and amount of such claim to the extent reasonably practicable.
Covenant Not to Compete.

Each of the Sellers covenants and agrees that he shall not, during his employment or consultancy relationship, as the case may be, with the Company, either Subsidiary, Parent or Purchaser or an affiliate of Purchaser and continuing through the period which is two (2) years following termination of such employment or consultancy agreement, as the case may be, directly or indirectly, as a director, principal, partner, agent or employee on his own behalf or on behalf of any other person, firm, company or other organization engage in the design, manufacture, sale or distribution of products which serve or perform the same purpose or function as products sold or offered for sale by the Company, the Subsidiaries, Parent or any of their subsidiaries or affiliates on or before the Closing Date in any geographic area in which the Company or either Subsidiary was engaged in business on or before the Closing Date. Each of the Sellers covenants and agrees that for a period for seven (7) years from the expiry of such employment or consultancy agreement, as the case may be, he will not solicit any employee, customer or supplier of the Company, any Subsidiary, Parent, Purchaser or its affiliates to terminate his, her or its employment or business relationship with the Company, any Subsidiary, Parent, Purchaser or its affiliates. Further, each of the Sellers covenants and agrees that he will not use or reveal any secret or confidential information relating to the business of the Company, any Subsidiary, Parent, Purchaser or its affiliates; provided, however, that the foregoing shall not apply to any information which, following the Closing Date, is received by Sellers from a third person other than the Company, any Subsidiary, Parent, Purchaser or its affiliates who is lawfully in possession of such information and not in the violation of any contractual or legal obligation to the Company, a Subsidiary, Parent or Purchaser with respect to such information, or which is public knowledge or within the public domain other than as a result of disclosures by such Seller after the Closing Date. It is the desire and intent of the parties that the terms and provisions of this Article 11 are enforced to the fullest extent permissible under the law and public policy applied by any jurisdiction in which enforcement is sought. Accordingly, if and to the extent that any portion of this Article 11 shall be adjudicated to be invalid or unenforceable because it covers too extensive a geographical area or too long a period of time, then said portion shall be deemed reformed to the least extent necessary to make such portion valid and enforceable.
Notices.

All notices, requests, demands and other communications hereunder shall be in writing, and shall be deemed to have been given when delivered in person or received by first class, registered or certified mail, return receipt requested, postage and registration or certification fees prepaid, or delivered by reliable overnight delivery service, providing a receipt or other evidence of delivery, or by facsimile with a copy also delivered by any of the foregoing means:

If to Purchaser or Parent:

Richardson Electronics, Ltd.
40 W 267 Keslinger Road
PO Box 393
LaFox, IL 60147-0393
U.S.A.
Attention: Legal Dept.
Fax: +1 (630) 208-2950

If to any Seller:

Ronny Gustafsson
Silverdalsvägen 13
SE-178 34 EKERÖ
Sweden
Fax +46-522-64 19 10
and
Leif Sandberg
Hågavägen 41
SE-168 54 BROMMA
Sweden

or at such other address as hereafter shall be furnished by a notice sent in like manner by such addressee to the others.
Miscellaneous.

13.1 Severability. Every provision of this Agreement is intended to be severable, and, if any term or provision is determined to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the legality or validity of the remainder of this Agreement.

13.2 Schedules, Exhibits and Headings. The Schedules and Exhibits to this Agreement are hereby made a part hereof and shall be construed with and as an integral part of this Agreement. The headings of the various Articles and paragraphs of this Agreement have been inserted for convenience only, are not a part of this Agreement, and shall not be deemed in any manner to modify, explain, enlarge, or restrict any of the provisions of this Agreement.

13.3 Expenses. Except where otherwise expressly provided for in this Agreement, each of the parties hereto shall pay their own expenses, including without limitation the fees and expenses of their respective attorneys and accountants, and Sellers shall bear the Company's or the Subsidiaries' expenses, in connection with this Agreement and the transactions contemplated herein.

13.4 Waiver. Failure or delay on the part of any of the parties hereto to exercise any right, power or privilege hereunder, or under any instrument executed pursuant hereto, shall not operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or of any other right, power or privilege. All waivers hereunder must be in writing.

13.5 Further Assurances. Following the Closing, the parties, without further consideration of any kind, shall each execute and deliver, or cause to be executed and delivered, such other instruments, and take, or cause to be taken, such other action, as shall reasonably be requested by another party hereto to more effectively assign, transfer and convey the Shares to Purchaser or to more effectively carry out the other terms and provisions of this Agreement. Sellers shall use reasonable efforts to assist Purchaser in effecting a smooth transition in ownership and operation of the Company and the Subsidiaries after the date hereof, but Sellers shall not be required to incur any cost or expense other than as specifically provided herein.

13.6 Entire Agreement. This Agreement (including the Schedules and other documents referred to herein as having been delivered or furnished by either party to the other) constitutes the entire Agreement and supersedes all prior agreements and understandings, oral and written, between the parties hereto with respect to the subject matter hereof. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, personal representatives, successors and assigns, and, if a corporate party, their respective parents, subsidiaries, affiliates, successors and assigns.

13.7 Amendments. This Agreement may not be modified or changed except by an instrument or instruments in writing signed by the parties hereto.

13.8 Governing Law. This Agreement shall be governed and construed and enforced in accordance with the laws of Sweden without regard to its conflicts of law provisions.

13.9 Gender and Number. Whenever the context requires or permits, words used in the singular shall be construed to mean or include the plural and vice versa, and pronouns of any gender or neuter shall be deemed to mean or include any other gender and neuter.

13.10 Counterparts. This Agreement may be executed in as many counterparts as may be deemed necessary or convenient, each of which when so executed shall be deemed an original, but all such counterparts shall constitute one and the same instrument.

13.11 Public Announcement. No Seller will make any public announcement or disclosure or publicity release pertaining to the existence of this Agreement or the subject matter contained herein without the prior consent of Purchaser; provided, however, that each party shall be permitted to make such disclosures to the public or to governmental agencies as its counsel shall deem necessary to comply with any Applicable Law.

13.12 Specific Performance and Injunctive Relief. The parties hereto expressly acknowledge and agree that the Shares are special and unique and that a breach of any of the terms or provisions of this Agreement in respect to the sale and purchase thereof will result in irreparable injury for which there is no adequate remedy at law, and therefore, Purchaser shall be entitled to equitable relief and specific performance to compel compliance hereunder.

13.13 Fax Copies. Purchaser and Sellers agree that "Facsimile" transmissions of signed documents shall be regarded and accepted as if they bore original signatures. Promptly after such Facsimile transmission the original documents bearing the original signatures shall be provided to the other party.

13.14 Arbitration. Except for matters to be resolved as provided in section 8.4, any other dispute, controversy or claim arising out of or relating to this Agreement or the breach, termination or invalidity thereof shall be finally settled by arbitration in accordance with the Rules of the Arbitration Institute of the Stockholm Chamber of Commerce. The arbitration tribunal shall be composed of three arbitrators. The place of the arbitration shall be Stockholm and the arbitral proceedings shall be conducted in the English language.

13.15 Parent Obligation. The Parent hereby guarantees as for its own debt (Sw. såsom för egen skuld) the due performance of Purchaser's obligations under this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.

	*Sellers:*		*Shares:*
		\s\ Ronny Gustafsson Ronny Gustafsson	500
		\s\ Leif Sandberg Leif Sandberg	500
	*Purchaser:*
		Nybyggaren 10:1036 AB under change of name to Richardson Sweden Holding AB. By:\s\ Pierluigi Calderone, Director Pierluigi Calderone, Director
	*Parent:*
[Corporate Seal]		Richardson Electronics, Ltd. \s\ Edward J. Richardson Edward J. Richardson, Chairman of the Board
*Attest By:*
By: \s\ William G. Seils William G. Seils, Secretary