Form 10-K

0000355948-03-000038.txt : 20030829 0000355948-03-000038.hdr.sgml : 20030829 20030829160739 ACCESSION NUMBER: 0000355948-03-000038 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20030531 FILED AS OF DATE: 20030829 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12906 FILM NUMBER: 03874385 BUSINESS ADDRESS: STREET 1: 40W267 KESLINGER RD CITY: LAFOX STATE: IL ZIP: 60147 BUSINESS PHONE: 7082082200 MAIL ADDRESS: STREET 1: 40W267 KESLINGER ROAD CITY: LAFOX STATE: IL ZIP: 60147 10-K 1 form10k.htm RELL FORM 10-K FOR FISCAL YEAR 2003 Form 10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
[X]		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
		EXCHANGE ACT OF 1934
		For the fiscal year ended May 31, 2003
		Or
[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
		SECURITIES EXCHANGE ACT OF 1934
		For the transition period from __________________________ to __________________________

Commission File Number 0-12906

RICHARDSON ELECTRONICS, LTD.

(Exact name of registrant as specified in its charter)


Delaware		36-2096643

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

40W267 Keslinger Road, P.O. Box 393		LaFox, Illinois 60147-0393

(Address of principal executive offices)

Registrant's telephone number, including area code (630) 208-2200


Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.05 Par Value

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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 requirements for the past 90 days.
[X] Yes [ ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
[X] Yes [ ] No

The aggregate market value of the registrant's common stock held by non-affiliates of the registrant as of November 30, 2002, was approximately $85,300,000.

As of August 20, 2003, there were outstanding 12,272,812 shares of Common Stock, $.05 par value, inclusive of 1,505,245 shares held in treasury, and 3,206,812 shares of Class B Common Stock, $.05 par value, which are convertible into Common Stock of the registrant on a share for share basis.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 2003 Annual Report to Stockholders of registrant for fiscal year ended May 31, 2003 are incorporated by reference in Parts I, II, and IV of this Report. Portions of the registrant’s Proxy Statement dated September 4, 2003 for the Annual Meeting of Stockholders scheduled to be held October 15, 2003, which will be filed pursuant to Regulation 14(A), are incorporated by reference in Part III of this Report. Except as specifically incorporated herein by reference, the above mentioned Annual Report to Stockholders and Proxy Statement are not deemed filed as part of this report.

The exhibit index is located at pages 16 through 21.

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TABLE OF CONTENTS

		Page


Part I
Item 1.	Business	4
Item 2.	Properties	10
Item 3.	Legal Proceedings	11
Item 4.	Submission of Matters to a Vote of Security Holders	11

Part II
Item 5.	Market for Registrant's Common Equity and Related Stockholder Matters	12
Item 6.	Selected Consolidated Financial Data	12
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	13
Item 8.	Financial Statements and Supplementary Data	13
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	13

Part III
Item 10.	Directors and Executive Officers of the Registrant	14
Item 11.	Executive Compensation	14
Item 12.	Security Ownership of Certain Beneficial Owners and Management	14
Item 13.	Certain Relationships and Related Transactions	14
Item 14.	Controls And Procedures	14

Part IV
Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	15

Signatures		22

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PART I

Item 1. Business

Introduction and Business Strategy

Richardson Electronics, Ltd. is a global provider of engineered solutions, serving the RF and wireless communications, industrial power conversion, security and display systems markets. The Company delivers engineered solutions for its customers’ needs through product manufacturing, systems integration, prototype design and manufacture, testing and logistics. The Company's products include RF and microwave components, power semiconductors, electron tubes, microwave generators, data display monitors and electronic security products and systems. These products are used to control, switch or amplify electrical power or signals, or as display, recording or alarm devices in a variety of industrial, communication and security applications.

The Company's objective is to be the preeminent global supplier of niche electronic components to industrial and commercial users. To fulfill this objective, the Company employs the following basic strategies:

Capitalize on Engineering and Manufacturing Expertise. Richardson believes that its success is largely attributable to its core engineering and manufacturing competency and skill in identifying cost competitive solutions for its customers. Historically, the Company's primary business was the distribution and manufacture of electron tubes and it continues to be a major supplier of these products. The Company has small-scale manufacturing and prototype capabilities supported by engineering and manufacturing expertise. Richardson uses this expertise to identify engineered solutions for customers' applications, not only in electron tube technology but also in each product area in which it specializes. Approximately 50% of the Company's sales are derived from products the Company designed-in, engineered, modified, manufactured, tested, or sold under its own brand names.

Specialize in Selected Niche Markets.The Company specializes in selected niche markets that demand technical service and where price is not the primary competitive factor. Richardson seldom competes against commodity distributors. In many parts of its business, the Company's principal competitors are not other distributors but rather original equipment manufacturers ("OEMs"). The Company offers engineered solutions to its customers including the design, manufacturing and/or electrical or mechanical modification and distribution of approximately 80,000 products ranging in price from $1 to $100,000 each. The Company estimates that over 40% of its sales are attributable to products intended for replacement and repair applications, in contrast to use as components in new original equipment.

Leverage Customer Base. The Company strives to grow by offering new products to its existing customer base. The Company has followed the migration of its customers from electron tubes to newer technologies, primarily semiconductors. Sales of products other than electron tubes represented approximately 83% of sales in the year ended May 31, 2003, compared to 57% five years ago.

Maintain Superior Customer Service.The Company maintains more than 300,000 part numbers in its inventory database. More than 80% of all orders received by 6:00 p.m. are shipped complete the same day.

Provide Global Service. Richardson has kept pace with the globalization of the electronics industry and addresses the growing demands in lesser developed countries for modern business and industrial equipment, related parts, service and technical assistance. Today, the Company's operations are worldwide in scope through 70 sales offices, including 48 located outside of the United States.

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The Company has offices in 26 countries and authorized representatives in an additional 27 countries. In fiscal 2003, approximately 56.9% of sales were to customers located outside of the United States. As Richardson continues to extend its geographic reach, the Company works with its vendors to include new geographies in its franchise agreements. In addition, Richardson's global presence is a competitive advantage and growth opportunity since many of its multi-national customers prefer local support.

Maintain State-of-the-Art Information Systems. Through a global information systems network, all offices have real-time access to the Company's database including customer information, product cross-referencing, market analysis, stock availability and quotation activity. Customers have on-line access to product information and purchasing capability via Richardson's web site, www.rell.com and catalog at catalog.rell.com. The Company offers electronic data interchange (EDI) to those customers requiring this service. All systems are available on a 24 hours a day, seven days a week schedule ("24/7"). The Company is committed to continually improve its technology, simultaneously improving efficiencies in asset utilization and reducing operating expenses as a percent of sales.

Growth Strategy

Richardson's long range plan for growth and profit maximization is defined in three broad categories, discussed in the following paragraphs:

Internal Growth. The Company believes that, in most circumstances, internal growth provides the best means of expanding its business. Both geographic and product line expansion have and will continue to be employed. In many instances, Richardson's original product line, electron tubes, provides the foundation for establishing new customer relationships, particularly in developing countries where older technologies are still predominately employed. From that base, the Company can identify and capitalize on new market opportunities for its other products. Over the last five years the Company has increased the number of sales offices to 70 to support its new business development efforts.

Expansion of the Company's product offerings is an on-going program. Of particular note, the following areas have, in recent years, generated significant sales gains: RF amplifiers; interconnect and passive devices; SCRs; custom and medical monitors; and digital CCTV security systems.

Continuous Operational Improvement.The Company has embarked on a vigorous program to improve operating efficiencies and asset utilization. Incentive programs were revised to heighten Richardson managers' commitment to these objectives. For fiscal 2004, the business units’ goals were set based on return on assets. Additional programs are ongoing, including a significant investment in a full suite of enterprise resource planning modules scheduled for installation over the next year.

Acquisitions. The Company has an extensive record of acquiring and integrating businesses. Since 1980, the Company has acquired 34 companies or significant product lines. The Company evaluates acquisition opportunities on an ongoing basis. The Company's acquisition criteria require that a target provide either (i) product line growth opportunities permitting Richardson to leverage its existing customer base, (ii) additional geographic coverage of Richardson's existing product offerings or, (iii) additional technical resources. The most significant acquisitions over the past five years included TRL Engineering (amplifier pallet design and engineering – RFWC) in 1999, Pixelink (display systems integration – DSG) in 1999, Adler Video (security systems - SSD) in 1999, Celti (fiber optic communication - RFWC) in 2001, Aviv (design-in services for active and passive components – RFWC) in 2001, and Sangus (RF and microwave applications – RFWC) in 2002.

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Strategic Business Units

The marketing, sales, product management and purchasing functions of the Company are organized as four strategic business units (SBUs): RF & Wireless Communications Group (RFWC), Industrial Power Group (IPG), Security Systems Division (SSD), and Display Systems Group (DSG), with operations in the major economic regions of the world: North America, Europe, Asia/Pacific, and Latin America. Medical Glassware (MG) business, sold in February of 2002, represented a portion of the former Medical Systems Group (MSG). The rest of MSG was reclassified into DSG and Corporate.

Common logistics, information systems, finance, legal, human resources and general administrative functions support the entire organization. These support organizations are highly centralized with most corporate functions located at the Company’s administrative headquarters and principal stocking facility in LaFox, Illinois.

RF & Wireless Communications Group (RFWC)

The RF & Wireless Communications Group serves the expanding global RF and wireless communications market, including infrastructure and wireless networks, as well as the fiber optics market. The Group's product and sales team of RF and wireless engineers assists customers in designing circuits, selecting cost effective components, planning reliable and timely supply, prototype testing and assembly.

Long-term growth in wireless applications is likely as the demand for all types of wireless communication gains in popularity worldwide. Wireless networking and infrastructure products for niche applications such as Telematics, RF identification (RFID) and Wireless LAN will need engineered solutions using the latest RF technology. In addition to voice communication, the demand for high-speed data transmission will require major investments in both system upgrades and new systems to handle broader bandwidth.

Richardson supports these growth opportunities by becoming associated with many of the key RF and wireless component manufacturers. One reason the Group is able to maintain a strong relationship with its existing vendors and is able to attract key new ones is Richardson's ability to supply its vendors with reliable worldwide forecasts for their existing products as well as products they have in development. Internal systems have been developed to capture forecasted product demand by potential design opportunity based on ongoing dialog between Richardson sales team and its customers. This information is shared with the Group's manufacturing suppliers to help them predict near and long-term demand and product life cycles. Richardson has global distribution agreements with such leading suppliers as AVX, ANADIGICS, Anaren, HUBER+SUHNER, M/A-COM, Motorola, TOKO, and WJ Communications. In addition, Richardson has relationships with many niche RF and wireless suppliers to form the most comprehensive RF and wireless resource in the industry.

The following is a description of RFWC's major product groups:

RF and Microwave Devices - a wide variety of components, such as RTF transistors, mixers, switches, amplifiers, oscillators and RF diodes, which are used in infrastructure, wireless networking, and other related markets, such as broadcast, cable TV, cellular and PCS, satellite, wireless LANs and various other wireless applications.

Interconnect Devices - passive components used to connect all types of electronic equipment including those employing RF technology.

Fiber Optics - components including laser diodes, photo detector, transamplifiers, and transceiver modules used in fiber optic communications for data communication and hybrid fiber coax and telecommunication markets.

Digital Broadcast - satellite, transmission, and RF components.

Richardson participates in most RF and wireless applications and markets in the world, focused on infrastructure rather than consumer-driven subscriber applications. In the past year, the Group believes it gained market share in RF and wireless applications used in industrial, broadcast, avionics and cellular markets.

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Industrial Power Group (IPG)

Industrial Power Group provides engineered solutions for customers in the steel, automotive, textile, plastics, semiconductor manufacturing, and transportation industries. Group's engineers design solutions for applications such as motor speed controls, industrial heating, laser technology, semiconductor manufacturing equipment, radar and welding.

IPG serves the industrial market’s need for both vacuum tube and solid-state technologies. The Group supports both replacement products for systems using electron tubes and the design and assembly of new systems employing power semiconductors.

Richardson is committed to a specialized strategy of providing engineered solutions for its customers. With its technical expertise and value-added capabilities, the Group offers the customer: design services, lower-cost product alternatives, complementary products, system integration, component modification and assembly. This broad array of services supports both OEMs and end-users.

IPG represents the leading manufacturers of electronics used in industrial power applications. Among the suppliers the Group supports are APT, Bussmann, Cornell-Dubilier, CPI, Ferraz, General Electric, Hitachi, International Rectifier, Jennings, Nissei-Arcotronics, Ohmite, Powerex, Toshiba, Triton, Tyco Electronics, United Chemi-Con, Varian, Wakefield, and Westcode.

The following is a description of IPG's major product groups:

Power Semiconductors - solid-state, high-frequency, high power products used in semiconductor manufacturing equipment, uninterruptible power supplies, medical radiation and industrial heating applications.

Silicon Controlled Rectifiers ("SCRs"), Heat Sink Assemblies and Power Semiconductor Modules - components used in many industrial control applications because of their ability to switch large amounts of power at high speeds. These silicon power devices are capable of operating at up to 4,000 volts at 2,000 amperes.

High Voltage and Power Capacitors - devices used in industrial, avionics, medical and broadcast applications for filtering, high-current by-pass, feed-through capacitance for harmonic attenuation, pulse shaping, grid and plate blocking, tuning of tank circuits, antenna coupling and energy discharge.

Power Amplifier / Oscillator Tubes- vacuum or gas-filled tubes used in applications where current or voltage amplification and/or oscillation is required. Applications include induction heating, diathermy equipment, communications and radar systems and power supplies for voltage regulation or amplification.

Microwave Generators - devices that incorporate magnetrons, which are high vacuum oscillator tubes used to generate energy at microwave frequencies. The pulsed magnetron is predominantly used to generate high-energy microwave signals for radar applications. Magnetrons are also used in vulcanizing rubber, food processing, packaging, wood / glue drying, in the manufacture of wafers for the semiconductor industry and other industrial heating applications such as microwave ovens and by the medical industry for sterilization and cancer therapy.

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Hydrogen Thyratrons - electron tubes capable of high speed and high voltage switching. They are used to control the power in laser and radar equipment and in linear accelerators for cancer treatment.

Thyratrons and Rectifiers - vacuum or gas-filled tubes used to control the flow of electrical current. Thyratrons are used to control ignitrons, electric motor speed controls, theatrical lighting and machinery such as printing presses and various types of medical equipment. Rectifiers are used to restrict electric current flow to one direction in power supply applications.

Ignitrons - mercury pool tubes used to control the flow of large amounts of electrical current. Their primary applications are in welding equipment, power conversion, fusion research and power rectification equipment.

Geographically, Richardson's vacuum tube revenue base is spread broadly throughout the world, while solid-state sales are concentrated in North America. The Company believes this imbalance represents an excellent opportunity to capitalize on its existing worldwide customer relationships and grow the industrial solid-state segment outside North America.

Security Systems Division (SSD)

Richardson is a global provider of closed circuit television ("CCTV"), fire, burglary, access control, sound and communication products and accessories for the residential, commercial, and government markets. The division specializes in CCTV design-in support, offering extensive expertise with applications requiring digital technology. The division's products are primarily used for security and access control purposes but are also utilized in industrial applications, mobile video, traffic management, and medical and dental applications.

SSD serves its worldwide market through a direct sales force averaging more than ten years of experience, a number of specialty catalogs and an e-commerce enabled web site, www.cctv.net.

Security Systems supports its customer base with products from more than 100 manufacturers including such well-known names as Aiphone, Panasonic, Paradox, Pelco, Sanyo, and Sony. In addition, the Company carries its own private label brands, "National Electronics" and "Capture™".

The following is a description of SSD's major product groups:

CCTV Products - Used in surveillance applications and for monitoring hazardous environments in the workplace. Products include: cameras, lenses, monitors, multiplexers, time lapse recorders, computerized digital video recorders, Internet-based video servers and associated accessories.

Burglar and Fire Alarms and Access Control Products - Devices used to detect unauthorized access to an area or the presence of smoke or fire.

Commercial Sound Systems - Sound reproduction components used in background music, paging and telephonic interconnect systems.

The security systems industry is moving to digital imaging technology. Richardson participates in this transition with new products under the "National Electronics" and "Capture™" brands including state-of-the-art equipment such as hard disk recording, Internet based transmission, covert applications, speed dome applications and telephone-control-based CCTV systems.

Display Systems Group (DSG)

The Display Systems Group is a global provider of integrated display products and systems to the public information, financial, point-of-sale, and medical imaging markets. DSG partners with leading hardware vendors to offer the highest quality liquid crystal display (LCD), plasma, cathode ray tube (CRT), and customized display monitors. The group's engineers design custom display solutions that include specialized finishes, touchscreens, protective panels, custom enclosures, and private branding.

The Group's legacy business, replacement CRTs continues to be an important market. The Company’s success in this area was achieved by the development of an extensive cross-reference capability. This database, coupled with custom mounting hardware installed by the Group, enables Richardson to provide replacement tubes for more than 200,000 original manufacturers' models.

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Richardson has long-standing relationships with key manufacturers including 3M, BarcoView, Clinton Electronics, IBM, Intel, NEC/Mitsubishi Displays, Panasonic Industrial, Philips-FIMI, Planar Systems, Siemens Displays, and Sony, among others. These vendor relationships give the Group a well-balanced and leading-edge line of products.

The Group has design and integration operations in LaFox, Illinois and Hudson, Massachusetts and stocking locations in LaFox, Hudson and Lincoln, England.

The following is a description of Display's major product groups:

Cathode Ray Tubes - vacuum tubes that convert an electrical signal into a visual image to display information on computer terminals or televisions. CRTs are used in various environments, including hospitals, financial institutions, airports and numerous other applications wherever large user groups share electronic data visually. The product line includes both monochrome and color tubes.

Data Display Monitors - peripheral components incorporating a color or monochrome CRT capable of displaying an analog or digitally generated video signal.

Flat Panel Displays - display monitors incorporating a liquid crystal or plasma panel, as an alternative to the traditional CRT technology, typically a few inches in depth and ranging from 10" to 52" measured diagonally. These displays will typically be integrated with touchscreen technology or special mounting configurations based on the customer's requirements.

High Resolution Medical Displays - an integral component of Picture and Archiving Communications Systems (“PACS”), displays are used in diagnostic and non-diagnostic imaging to display the digital image generated from computed tomography (CT), magnetic resonance imaging (MRI), radiography and other digital modalities.

Distribution and Marketing

The Company purchases RF and power semiconductors, vacuum tubes, monitors and flat panel displays, and electronic security products and systems from various suppliers as noted above. During fiscal 2003, Richardson added several new suppliers, including Celeritek, Honeywell's VCSEL product division, IBM Life Sciences, iTerra Communications, GE Interlogix, Lightel Technologies, Matrox, Panasonic Broadcast, Planar Systems, and Thermshield.

Customer orders are taken by the regional sales offices and supported by one of Richardson's principal distribution facilities in LaFox, Illinois; Houston, Texas; Vancouver, British Columbia; or Lincoln, England. There are 45 additional stocking locations throughout the world. The Company utilizes a sophisticated data processing network that provides on-line, real-time interconnection of all sales offices and central distribution operations, 24 hours per day, seven days per week, ("24/7"). Information on stock availability, cross-reference information, customers and market analyses are instantly obtainable throughout the entire distribution network.

Manufacturing

The Company distributes its proprietary products principally under the trade names "Amperex," "Capture™", "Cetron," "National," and "RF Gain." Approximately 30% of the Company's sales are from products it manufactures or modifies through value-added services and from products manufactured to its specifications by independent manufacturers under private labels. Additionally, an estimated 20% of the Company's sales are derived from products it designs-in or engineers into solutions that meet customers’ specific requirements.

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The products currently manufactured by the Company, or subcontracted on a proprietary basis for the Company, include RF amplifiers, transmitters and pallet assemblies, thyratrons and rectifiers, power tubes, ignitrons, CW magnetron tubes, phototubes, spark gap tubes, microwave generators, custom RF matching networks, heatsinks, SCR assemblies, large screen display monitors, LCD displays, DVRs, cameras, and CCTV equipment. The materials used in the manufacturing process consist of glass bulbs and tubing, nickel, stainless steel and other metals, plastic and metal bases, ceramics and a wide variety of fabricated metal components. These materials generally are readily available, but some components may require long lead times for production and some materials are subject to shortages or price fluctuations based on supply and demand.

Employees

As of May 31, 2003, the Company employed 1090 individuals on a full-time basis. Of these, 568 are located in the United States, including 83 employed in administrative and clerical positions, 390 in sales and distribution and 95 in value-added and product manufacturing. The remaining 522 individuals are employed by the Company’s international subsidiaries engaged in administration, sales, distribution, manufacturing and value-added operations. All of Richardson's employees are non-union. The Company's relationship with its employees is considered to be good.

Competition

Richardson believes that, on a global basis, it is a significant distributor of RF and power semiconductors and subassemblies, electron tubes, CRTs, custom and medical monitors, and security systems. For many of its product offerings, the Company competes against the OEM for sales of replacement parts and system upgrades to service existing installed equipment. In addition, the Company competes worldwide with other general line distributors and other distributors of electronic components.

Patents and Trademarks

The Company holds or licenses certain manufacturing patents and trademark rights, including the trademarks "National," "Cetron," "Amperex," and "Capture™". The Company believes that although its patents and trademarks have value, they will not determine the Company's success, which depends principally upon its core engineering capability, marketing technical support, product delivery and the quality and economic value of its products.

Website Access to SEC Reports

The Company maintains an Internet website at www.rell.com. Company’s periodic SEC reports (including annual reports on Form 10-K and quarterly reports on Form 10-Q) are accessible through the website, free of charge, as soon as reasonably practicable after these reports are filed electronically with the SEC. To access these reports, go to the Company’s website at www.rell.com/investor.asp

Item 2. Properties

The Company's corporate facility and largest distribution center is owned by the Company and is located on approximately 300 acres in LaFox, Illinois, consisting of approximately 255,000 square feet of manufacturing, warehouse and office space. Richardson also owns a building containing approximately 45,000 square feet of warehouse space on 1.5 acres in Geneva, Illinois. Owned facilities outside of the United States are located in England, Spain and Italy.

The Company also maintains leased branch sales offices in or near major cities throughout the world, including 31 locations in North America, 15 in Europe, 14 in Asia / Pacific Rim and 5 in Latin America.

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Item 3. Legal Proceedings

While the Company has several litigation matters pending against it that arose in the ordinary course of business, it is believed that, in the aggregate, they would not have a material adverse effect on the Company.

In fiscal 2003, the Company received notice that two customers of one of its subsidiaries are asserting claims against it in connection with product it sold to them by the subsidiary that the Company acquired pursuant to a distribution agreement with the manufacturer of the product. The claims are based on the product not meeting the specification provided by the manufacturer. The Company has notified the manufacturer and the Company's insurance carrier of these claims. The Company is unable to evaluate the outcome of these claims or the recovery from the manufacturer or insurance carrier as the investigation has not been completed. The Company intends to vigorously defend these claims and prosecute its claims against the manufacturer and insurer if it should have any liability.

The Company is engaged in litigation it has filed, Richardson Electronics, Ltd. v. Signal Technology Corporation, 03 L 002661 (Circuit Court, Cook County, Illinois) and Signal Technology Corporation v. Richardson Electronics, Ltd., C.A. No. 03-0335 (Superior Court Boston, Massachusetts). The Company filed suit in Illinois claiming damages in the amount of approximately $2.0 million resulting from Signal's refusal to take delivery of product on six purchase orders it had placed with the Company. Signal has filed a declaratory judgment suit in Massachusetts seeking a ruling that it has no liability to the Company. Signal has not asserted any claim against the Company.

The Company has asserted a claim against a former vendor in the amount of $593,000 for inventory it sought to return to the vendor pursuant to the terms of a Distribution Agreement between the two parties, that the vendor has refused to accept as of this time.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of stockholders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year ended May 31, 2003.

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PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters

Incorporated herein by reference from pages 14 (for dividends) and 29 (for market information) of the Company’s 2003 Annual Report for the fiscal year ended May 31, 2003 (Annual Report).

Item 6. Selected Consolidated Financial Data

Incorporated herein by reference from page 10 of the Annual Report.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Incorporated herein by reference from pages 11 to 17 of the Annual Report. Investors should consider carefully the following risk factors, in addition to the other information included and incorporated by reference in this annual report on Form 10-K. All statements other than statements of historical facts included in this report are statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. The words "expect," "estimate," "anticipate," "predict," "believe" and similar expressions and variations thereof are intended to identify forward-looking statements. Such statements appear in a number of places in this report and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things: (i) trends affecting the Company's financial condition or results of operations; (ii) the Company's financing plans; (iii) the Company's business and growth strategies, including potential acquisitions; and (iv) other plans and objectives for future operations. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those predicted in the forward-looking statements or which may be anticipated from historical results or trends. In addition to the information contained in the Company’s other filings with the Securities and Exchange Commission, factors which could affect future performance include, among others, the following:

- General economic or business conditions, domestic and foreign, may be less favorable than expected, resulting in lower sales or lower profit margins than expected and contrary to historical trends.

- 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.

- 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.

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- The potential future sale of Common Stock shares, possible anti-takeover measures available to the Company, dividend policies, as well as voting control of the Company by Edward J. Richardson, Chairman of the Board and Chief Executive Officer may affect the stock price.

- The continued availability of financing on favorable terms can not be assured.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Incorporated by reference from page 17 of the Annual Report "Risk Management and Market Sensitive Financial Instruments."

Item 8. Financial Statements and Supplementary Data

Incorporated herein by reference from pages 18 through 29 of the Annual Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Information concerning a change in accountants is included in the Company’s Form 8-K filed with the Securities and Exchange Commission on August 22, 2003.

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PART III

Item 10. Directors and Executive Officers of the Registrant

Information concerning Directors and Executive Officers of the Company is contained in the Company's Proxy Statement to be used in connection with its Annual Meeting of Stockholders scheduled to be held October 15, 2003, under the captions "ELECTION OF DIRECTORS - Information Relating to Directors, Nominees and Executive Officers", "ELECTION OF DIRECTORS - Affiliations" and "SECTION 16 FILINGS", which information is incorporated herein by reference.

Item 11. Executive Compensation

Incorporated herein by reference is information concerning executive compensation contained in the Company's Proxy Statement to be used in connection with its Annual Meeting of Stockholders scheduled to be held October 15, 2003, under the captions "ELECTION OF DIRECTORS - Directors Compensation" and "EXECUTIVE COMPENSATION", except for captions "REPORT ON EXECUTIVE COMPENSATION" and "PERFORMANCE GRAPH".

Item 12. Security Ownership of Certain Beneficial Owners and Management

Information concerning security ownership of certain beneficial owners and management is contained in the Company's Proxy Statement to be used in connection with its Annual Meeting of Stockholders scheduled to be held October 15, 2003, under the caption "ELECTION OF DIRECTORS - Information Relating to Directors, Nominees and Executive Officers" and "PRINCIPAL STOCKHOLDERS”, which information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

Information concerning certain relationships and related transactions is contained in the Company's Proxy Statement to be used in connection with its Annual Meeting of Stockholders scheduled to be held October 15, 2003, under the caption "ELECTION OF DIRECTORS - Information Relating to Directors, Nominees and Executive Officers," and “Executive Compensation – Certain Transactions” which information is incorporated herein by reference.

Item 14. Controls And Procedures

Under the supervision and with the participation of the Company’s management, including Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of its disclosure controls and procedures, as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective in enabling the Company to record, process, summarize and report information required to be included in its periodic SEC filings within the required time period. There has been no change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8‑K

(a) The following consolidated financial statements of the registrant and its subsidiaries included on pages 18 through 29 of the Annual Report are incorporated herein by reference:

	Filing Method
Report of Independent Accountants	E
1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets - May 31, 2003 and 2002	E
Consolidated Statements of Operations - Years ended May 31, 2003, 2002 and 2001	E
Consolidated Statements of Cash Flows - Years ended May 31, 2003, 2002 and 2001	E
Consolidated Statements of Stockholders' Equity - Years ended May 31, 2003, 2002 and 2001	E
Notes to Consolidated Financial Statements	E

The following consolidated financial information for the fiscal years 2003, 2002 and 2001 is submitted herewith:

2. FINANCIAL STATEMENT SCHEDULE:
Richardson Electronics, Ltd. and Subsidiaries Schedule II - Valuation and Qualifying Accounts
Description	Balance at beginning of period	Additions		Deductions	Balance at end of period
Description	Balance at beginning of period	Charged to expenses	Charged to other accounts	Deductions	Balance at end of period
Year ended May 31, 2003: Allowance for doubtful accounts Inventory overstock reserve	$ 2,646 $ 24,677	$ 869 (1) $ 11,361 (3)	- -	$ 165 (2) $ 2,067 (4)	$ 3,350 $ 33,971
Year ended May 31, 2002: Allowance for doubtful accounts Inventory overstock reserve	$ 2,639 $ 7,930	$ 1,568 (1) $ 17,067 (3)	- -	$ 1,561 (2) $ 320 (4)	$ 2,646 $ 24,677
Year ended May 31, 2001: Allowance for doubtful accounts Inventory overstock reserve	$ 2,991 $ 5,382	$ 968 (1) $ 2,872 (3)	- -	$ 1,320 (2) $ 324 (4)	$ 2,639 $ 7,930
(1) Charges to Bad debt expense (2) Uncollectable amounts written off, net of recoveries and foreign currency translation (3) Charges to Cost of sales (4) Inventory disposed of during the period

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All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore, have been omitted.

(b) REPORTS ON FORM 8-K.

Form 8-K dated March 25, 2003 reporting Richardson's Third Quarter Fiscal 2003 Earnings

Form 8-K dated April 8, 2003 announcing Richardson's Fourth Quarter Fiscal 2003 dividend

Form 8-K dated July 15, 2003 reporting Richardson's fiscal year-end 2003 results

Form 8-K dated July l6, 2003 announcing Richardson's First Quarter Fiscal 2004 dividend

Form 8-K dated August 22, 2003 announcing appointment of KPMG, LLP as Richardson’s independent auditor.

(c) EXHIBITS		Filing Method
3(b)	By‑laws of the Company, as amended, incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 1997.	NA
4(a)	Restated Certificate of Incorporation of the Company, incorporated by reference to Appendix B to the Proxy Statement / Prospectus dated November 13, 1986, incorporated by reference to the Company's Registration Statement on Form S‑4, Commission File No. 33‑8696.	NA
4(b)	Specimen forms of Common Stock and Class B Common Stock certificates of the Company incorporated by reference to Exhibit 4(a) to the Company's Registration Statement on Form S‑1, Commission File No. 33‑10834.	NA
4(c)	Indenture between the Company and Continental Illinois National Bank and Trust Company of Chicago (including form of 7¼% Convertible Subordinated Debentures due December 15, 2006) incorporated by reference to Exhibit 4(b) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1987.	NA
4(c)(1)	First Amendment to the Indenture between the Company and First Trust of Illinois, a National Association, as successor to Continental Illinois National Bank and Trust Company of Chicago, dated February 18, 1997, incorporated by reference to Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997.	NA
4(d)	Indenture between the Company and American National Bank and Trust Company, as Trustee, for 8¼% Convertible Senior Subordinated Debentures due June 15, 2006 (including form of 8¼% Convertible Senior Subordinated Debentures due June 15, 2006) incorporated by reference to Exhibit 10 of the Company's Schedule 13E-4, filed February 18, 1997.	NA
10(a)	The Corporate Plan for Retirement The Profit Sharing / 401(k) Plan Fidelity Basic Plan Document No. 07 dated June 1, 1996, incorporated by reference to Exhibit 10(d) to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 1996.	NA
10(a)(1)	Amendment to Richardson electronics, LTD. Employees Profit Sharing Plan and Trust Agreement	E
10(b)	The Company's Amended and Restated Incentive Stock Option Plan effective April 8, 1987 incorporated by reference to Exhibit 10(m) to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 1987.	NA
10(b)(1)	First Amendment to the Company's Amended and Restated Incentive Stock Option Plan effective April 11, 1989 incorporated by reference to Exhibit 10(l)(1) to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 1989.	NA
10(b)(2)	Second Amendment to the Company's Amended and Restated Incentive Stock Option Plan effective April 11, 1989 incorporated by reference to Exhibit 10(l)(2) to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 1991.	NA
10(b)(3)	Third Amendment to the Company's Amended and Restated Incentive Stock Option Plan effective April 11, 1989 dated August 15, 1996, incorporated by reference to the Company's Proxy Statement used in connection with its Annual Meeting of Stockholders held October 1, 1996.	NA
10(c)	Richardson Electronics, Ltd. Employees 1996 Stock Purchase Plan incorporated by reference to Appendix A of the Company's Proxy Statement dated September 3, 1996 for its Annual Meeting of Stockholders held on October 1, 1996.	NA
10(d)	Employees Stock Ownership Plan and Trust Agreement, effective as of June 1, 1987, dated July 14, 1994, incorporated by reference to Exhibit 10(f) to the Company's Annual Report on Form 10‑K for the fiscal year ended May 31, 1994.	NA
10(d)(1)	First Amendment to Employees Stock Ownership Plan and Trust Agreement, dated July 12, 1995, incorporated by reference to Exhibit 10(g)(1) to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 1995.	NA
10(d)(2)	Second Amendment to Employees Stock Ownership Plan and Trust Agreement, dated July 12, 1995, dated April 10, 1996, incorporated by reference to the Company's Proxy Statement used in connection with its Annual Meeting of Stockholders held October 1, 1996.	NA
10(d)(3)	Third Amendment to Employees Stock Ownership Plan and Trust Agreement, dated July 12, 1995, dated April 9, 1997 incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1998.	NA
10(e)(1)	Richardson Electronics, Ltd. Employees 1999 Stock Purchase Plan, incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 1999.	NA
10(e)(2)	Amendment to Richardson Electronics, Ltd. Employees 1999 Stock Purchase Plan, incorporated by reference to the Company's Proxy Statement used in connection with its Annual Meeting of Stockholders held October 15, 2002.	NA
10(f)	Stock Option Plan for Non‑Employee Directors incorporated by reference to Appendix A to the Company's Proxy Statement dated August 30, 1989 for its Annual Meeting of Stockholders held on October 18, 1989.	NA
10(g)	Richardson Electronics, Ltd. 1996 Stock Option Plan for Non-Employee Directors, incorporated by reference to Appendix C of the Company's Proxy Statement dated September 3, 1996 for its Annual Meeting of Stockholders held on October 1, 1996.	NA
10(h)	The Company's Employees' Incentive Compensation Plan incorporated by reference to Appendix A to the Company's Proxy Statement dated August 31, 1990 for its Annual Meeting of Stockholders held on October 9, 1990.	NA

10(h)(1)	First Amendment to Employees Incentive Compensation Plan incorporated by reference to Exhibit 10(p)(1) to the Company's Annual Report on Form 10‑K for the fiscal year ended May 31, 1991.	NA
10(h)(2)	Second Amendment to Employees Incentive Compensation Plan dated August 15, 1996, incorporated by reference to the Company's Proxy Statement used in connection with its Annual Meeting of Stockholders held October 1, 1996.	NA
10(i)	Richardson Electronics, Ltd. Employees’ 1994 Incentive Compensation Plan incorporated by reference to Exhibit A to the Company’s Proxy Statement dated August 31, 1994 for its Annual Meeting of Stockholders held on October 11, 1994.	NA
10(i)(1)	First Amendment to the Richardson Electronics, Ltd. Employees’ 1994 Incentive Compensation Plan dated August 15, 1996, incorporated by reference to the Company's Proxy Statement used in connection with its Annual Meeting of Stockholders held October 1, 1996.	NA
10(j)	Richardson Electronics, Ltd. 1996 Incentive Compensation Plan incorporated by reference to Appendix B of the Company's Proxy Statement dated September 3, 1996 for its Annual Meeting of Stockholders held on October 1, 1996.	NA
10(k)	Richardson Electronics, Ltd. 1998 Incentive Compensation Plan incorporated by reference to Appendix A of the Company's Proxy Statement dated September 3, 1998 for its Annual Meeting of Stockholders held on October 6, 1998.	NA
10(l)	Letter dated April 1, 1993 between the Company and Arnold R. Allen regarding Mr. Allen's engagement as consultant by the Company, incorporated by reference to Exhibit 10(i)(2) to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 1994.	NA
10(m)	Employment, Nondisclosure and Non-Compete Agreement dated June 1, 1998 between the Company and Flint Cooper setting forth the terms of Mr. Cooper’s employment by the Company, incorporated by reference to Exhibit 10(p) to the Company's Annual Report on Form 10-K for the fiscal year ended on May 31, 1998.	NA
10(n)	Employment, Nondisclosure and Non-compete Agreement entered into as of June 6th, 2000 by and between Richardson Electronics, LTD., and Robert Prince.	E
10(o)	Agreement dated August 6, 2002 between the Company and William J. Garry setting forth the terms of Mr. Garry’s employment termination with the Company, incorporated by reference to Exhibit 10(hh) of the Company’s Annual Report on Form 10-K for the year ended May 31, 2002.	NA
10(p)	Employment agreement dated as of November 7, 1996 between the Company and Bruce W. Johnson incorporated by reference to Exhibit (c)(4) of the Company’s Schedule 13 E-4, filed December 18, 1996.	NA
10(q)	Employment agreement dated as of May 10, 1993 as amended March 23, 1998 between the Company and Pierluigi Calderone incorporated by reference to Exhibit 10(d) of the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 1998.	NA
10(r)	Employment agreement dated as of September 26, 1999 between the Company and Murray Kennedy, incorporated by reference to Exhibit 10(w) of the Company’s Annual Report on Form 10-K for the year ended May 31, 2000.	NA
10(s)	Employment agreement dated as of November 22, 1999 between the Company and Gregory Peloquin, incorporated by reference to Exhibit 10(x) of the Company’s Annual Report on Form 10-K for the year ended May 31, 2000.	NA
10(t)	Employment agreement dated as of May 30, 2000 between the Company and Robert Heise, incorporated by reference to Exhibit 10(z) of the Company’s Annual Report on Form 10-K for the year ended May 31, 2000.	NA
10(u)	Employment, Nondisclosure and Non-compete Agreement dated as of May 31, 2002 between the Company and Dario Sacomani, incorporated by reference to Exhibit 10(gg) of the Company’s Annual Report on Form 10-K for the year ended May 31, 2002.	NA
10(v)(1)	The Company's Directors and Officers Executive Liability and Indemnification Insurance Policy renewal issued by Chubb Group of Insurance Companies - Policy Number 8125-64-60I	E
10(v)(2)	The Company's Directors and Officers Liability Insurance Policy issued by CNA Insurance Companies - Policy Number DOX600028634	E
10(v)(3)	The Company's Excess Directors and Officers Liability and Corporate Indemnification Policy issued by St. Paul Mercury Insurance Company - Policy Number 900DX0414	E
10(w)	Distributor Agreement, executed August 8, 1991, between Registrant and Varian Associates, Inc., incorporated by reference to Exhibit 10(d) of the Company's Current Report on Form 8-K for September 30, 1991.	NA
10(w)(1)	Amendment, dated as of September 30, 1991, between Registrant and Varian Associates, Inc., incorporated by reference to Exhibit 10(e) of the Company's Current Report on Form 8-K for September 30, 1991.	NA
10(w)(2)	First Amendment to Distributor Agreement between Varian Associates, Inc. and the Company as of April 10, 1992, incorporated by reference to Exhibit 10(v)(5) of the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992.	NA
10(w)(3)	Consent to Assignment and Assignment dated August 4, 1995 between Registrant and Varian Associates Inc., incorporated by reference to Exhibit 10(s)(4) of the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 1995.	NA
10(x)	Trade Mark License Agreement dated as of May 1, 1991 between North American Philips Corporation and the Company incorporated by reference to Exhibit 10(w)(3) of the Company's Annual Report on Form 10‑K for the fiscal year ended May 31, 1991.	NA
10(y)	Agreement among Richardson Electronics, Ltd., Richardson Electronique S.A., Covelec S.A. (now known as Covimag S.A.), and Messrs. Denis Dumont and Patrick Pertzborn, delivered February 23, 1995, translated from French, incorporated by reference to Exhibit 10(b) to the Company's Report on Form 8-K dated February 23, 1995.	NA

10 (aa)	Amended and Restated Revolving Credit Agreement, dated November 26, 2002, between Richardson Electronics and American National Bank and Trust Company of Chicago, Harris Trust and Savings Bank, LaSalle Bank National Association, and National City Bank, as lenders, and American National Bank and Trust Company of Chicago, as agent, incorporated by reference to the Company's Reports on Form 8-K dated December 18, 2002 and on Form 8-K dated December 9, 2002.	NA
10 (aa)(1)	First Amendment to Amended and Restated Revolving Credit Agreement, dated April 30, 2003, between Richardson Electronics and American National Bank and Trust Company of Chicago, Harris Trust and Savings Bank, LaSalle Bank National Association, and National City Bank, as lenders, and American National Bank and Trust Company of Chicago, as agent.	E
10 (aa)(2)	Second Amendment to Amended and Restated Revolving Credit Agreement, dated April 30, 2003, between Richardson Electronics and American National Bank and Trust Company of Chicago, Harris Trust and Savings Bank, LaSalle Bank National Association, and National City Bank, as lenders, and American National Bank and Trust Company of Chicago, as agent.	E
13	Annual Report to Stockholders for fiscal year ending May 31, 2003 (except for the pages and information thereof expressly incorporated by reference in this Form 10-K, the Annual Report to Stockholders is provided solely for the information of the Securities and Exchange Commission and is not deemed "filed" as part of this Form 10-K).	E
21	Subsidiaries of the Company.	E
23	Consent of Independent Auditors.	E
31	Certifications pursuant to the Section 302 of the Sarbanes-Oxley Act of 2002	E
32	Certifications pursuant to the Section 906 of the Sarbanes-Oxley Act of 2002	E

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

RICHARDSON ELECTRONICS, LTD.

By: /s/ Edward J. Richardson

       Edward J. Richardson,
       Chairman of the Board and
       Chief Executive Officer

By: /s/ Bruce W. Johnson

         Bruce W. Johnson,
         President and Chief Operating
         Officer

Date: August 25, 2003

By: /s/ Dario Sacomani

        Dario Sacomani
        Senior Vice President and
        Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Edward J. Richardson

       Edward J. Richardson, Chairman
       of the Board and Chief Executive
       Officer (principal executive officer)
       and Director
       August 25, 2003

/s/ Bruce W. Johnson

       Bruce W. Johnson,
       Chief Operating Officer and Director
       August 25, 2003

/s/ Dario Sacomani

       Dario Sacomani, Senior Vice
       President and Chief Financial
       Officer (principal financial and
       accounting officer) and Director
       August 25, 2003

/s/ Arnold R. Allen

Arnold R. Allen, Director
August 25, 2003

/s/ Jacques Bouyer

       Jacques Bouyer, Director
       August 25, 2003

/s/ Scott Hodes

Scott Hodes, Director
August 25, 2003

/s/ Ad Ketelaars

       Ad Ketelaars, Director
       August 25, 2003

/s/ John Peterson

John Peterson, Director
August 25, 2003

/s/ Harold L. Purkey

Harold L. Purkey, Director
August 25, 2003

/s/ Samuel Robinovitz

Samuel Rubinovitz, Director
August 25, 2003

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EX-10 3 exhibit10a1.htm AMENDMENT TO EMLOYEE PROFUT SHARIG PLAN AMENDMENT TO

Exhibit 10(a)(1)

AMENDMENT TO RICHARDSON ELECTRONICS, LTD.

EMPLOYEES PROFIT SHARING PLAN AND TRUST AGREEMENT

RICHARDSON ELECTRONICS, LTD., a Delaware corporation, hereby further amends the Adoption Agreement for the Richardson Electronics, Ltd. Employees Profit-Sharing Plan and Trust Agreement dated March 8, 1996, as thereafter amended, by amending Section 1.06(b) of said agreement effective April 1, 2003, as follows, to-wit:

The Early Retirement Age 55 shall not apply as to that portion of the Accounts of a Participant which are attributable to Matching Contributions described in Section 4.03 of the Plan, and to Discretionary Contributions described in Section 4.06 of the Plan, for Plan Years beginning after May 31, 2002 if such Participant (i) has not completed at least 3 Years of Service for Vesting as of April 1, 2003 and (ii) has not attained age 55 as of April 1, 2003.

IN WITNESS WHEREOF, the undersigned has caused this amendment to be executed as of this ____ day of ______________, 2003.

RICHARDSON ELECTRONICS, LTD.

By _/s/ William G. Seils_________

William G. Seils

Senior Vice President,

Secretary and General Counsel

RICHARDSON ELECTRONICS, LTD.

By__/s/ Linda L. Doherty_______

Linda L. Doherty

Corporate Benefits Manager,

Human Resources

Amendment to profit sharing plan re early retirement (CH360575).DOC

EX-10 4 exhibit10n.htm EMPLOYMENT AGREEMENT WITH ROBERT PRINCE

EMPLOYMENT, NONDISCLOSURE AND NON-COMPETE AGREEMENT

EMPLOYMENT, NONDISCLOSURE AND NON-COMPETE AGREEMENT("Agreement") made and entered into as of this 6th day of June, 2000 by and between RICHARDSON ELECTRONICS, LTD., a Delaware corporation with its principal place of business located at 40W267 Keslinger Road, P.O. Box 393, LaFox, IL 60147-0393 (the "Employer"), and ROBERT PRINCE, an individual whose current residence address is 25331 Prado De Las Estrellas, Calabasas, CA 91302 ("Employee").

RECITALS

WHEREAS, the Employer desires to continue to employ Employee as its Executive Vice President, Worldwide Sales upon the terms and conditions stated herein; and

WHEREAS, Employee desires to continue to be so employed by the Employer at the salary and benefits provided for herein; and

WHEREAS, Employee acknowledges and understands that during the course of his employment, Employee has and will become familiar with certain confidential information of the Employer which provides Employer with a competitive advantage in the marketplace in which it competes, is exceptionally valuable to the Employer, and is vital to the success of the Employer's business; and

WHEREAS, the Employer and Employee desire to protect such confidential information from disclosure to third parties or its use to the detriment of the Employer; and

WHEREAS, the Employee acknowledges that the likelihood of disclosure of such confidential information would be substantially reduced, and that legitimate business interests of the Employer would be protected, if Employee refrains from competing with the Employer and from soliciting its customers, suppliers, agents and employees during and following the term of the Agreement, and Employee is willing to covenant that he will refrain from such actions.

NOW THEREFORE, in consideration of the promises and of the mutual covenants and agreements hereinafter set forth, the parties hereto acknowledge and agree as follows:

ARTICLE ONE

NATURE AND TERM OF EMPLOYMENT

1.01 Employment. The Employer hereby agrees to employ Employee and Employee hereby accepts employment as the Employer's Executive Vice President, Worldwide Sales.

1.02 Term of Employment. Employee's employment pursuant to this Agreement shall commence upon its execution and, subject to the other provisions of this Agreement, the term of such employment (the "Employment Term") shall continue indefinitely on an "at will" basis.

1.03 Duties. Employee shall perform such managerial duties and responsibilities and such other duties and responsibilities as may be assigned by the President/COO, or such other person as the Employer may designate from time to time and Employee will adhere to the policies and procedures of the Employer, including, without limitation, its Code of Conduct, and will follow the supervision and direction of Employer=s President/COO or such other person as the Employer may designate from time to time in the performance of such duties. Employee agrees to devote his full working time, attention and energies to the diligent and satisfactory performance of his duties hereunder. Employee will not, during the Employment Term or during any period during which Employee is receiving payments pursuant to Article 2 and/or Section 5.04, engage in any activity, other than on behalf of Employer or any of its subsidiaries, which is intended or would reasonably be expected to have, a material adverse affect on the Employer's reputation, goodwill or business relationships or which is intended or would reasonably be expected to result in material economic harm to the Employer.

ARTICLE TWO

COMPENSATION AND BENEFITS

For all services to be rendered by Employee in any capacity hereunder (including as an officer, director, committee member or otherwise of the Employer or any parent or subsidiary thereof or any division of any thereof) on behalf of the Employer, the Employer agrees to pay Employee so long as he is employed hereunder, and the Employee agrees to accept, the compensation set forth below.

2.01 Base Salary. During the term of Employee's employment hereunder, the Employer shall pay to Employee an annual base salary ("Base Salary") at the rate of One Hundred Eighty Four Thousand and 00/100 Dollars ($184,000.00), payable in installments as are customary under the Employer's payroll practices from time to time. The Employer at its sole discretion may, but is not required to, review and adjust the Employee's Base Salary from year to year; provided, however, that, except as may be expressly consented otherwise in writing by Employee, Employer may not decrease Employee=s Base Salary. No additional compensation shall be payable to Employee by reason of the number of hours worked or by reason of hours worked on Saturdays, Sundays, holidays or otherwise.

2.02 Incentive Plan. During the term of the Employee's employment hereunder, the Employee shall be a participant in the Sales Incentive Plan, as modified from time to time (the "Annual Incentive Plan") and paid a bonus (“Bonus”) pursuant thereto. The Employee's "target bonus percentage" for purposes of the Annual Incentive Plan shall be fifty percent (50%). Such Bonus shall be determined and paid strictly in accordance with the Annual Incentive Plan as modified or reduced by Employer at its discretion, and for any partial fiscal year the Bonus shall be computed and paid only for the portion of the fiscal year Employee is employed hereunder.

2.03 Other Benefits. Employer will provide Employee such benefits (other than bonus, severance and incentive compensation benefits) as are generally provided by the Employer to its other employees, including but not limited to, health/major medical insurance, dental insurance, disability insurance, life insurance, sick days, and other employee benefits (collectively "Other Benefits"), all in accordance with the terms and conditions of the applicable Other Benefits Plan. The Employer at its sole discretion may, but is not required to, grant Employee options to acquire Common stock of Employer under Employer’s Stock Option Plans as they may exist from time to time. Nothing in this Agreement shall require the Employer to maintain any benefit plan nor prohibit the Employer from modifying any such plan as it sees fit from time to time. It is only intended that Employee shall be entitled to participate in any such plan offered for which he may qualify under the terms of any such plan as it may from time to time exist, in accordance with the terms thereof.

2.04 Disability. Any compensation Employee receives under any disability benefit plan provided by Employer during any period of disability, injury or illness shall be in lieu of the compensation which Employee would otherwise receive under Article Two during such period of disability, injury or sickness.

2.05 Withholding. All salary, bonus and other payments described in this Agreement shall be subject to withholding for federal, state or local taxes, amounts withheld under applicable benefit policies or programs, and any other amounts that may be required to be withheld by law, judicial order or otherwise.

ARTICLE THREE

CONFIDENTIAL INFORMATION

RECORDS AND

REPUTATION

3.01 Definition of Confidential Information. For purposes of this Agreement, the term "Confidential Information" shall mean all of the following materials and information (whether or not reduced to writing and whether or not patentable) to which Employee receives or has received access or develops or has developed in whole or in part as a direct or indirect result of his employment with Employer or through the use of any of Employer's facilities or resources:

(1) Marketing techniques, practices, methods, plans, systems, processes, purchasing information, price lists, pricing policies, quoting procedures, financial information, customer names, contacts and requirements, customer information and data, product information, supplier names, contacts and capabilities, supplier information and data, and other materials or information relating to the manner in which Employer, its customers and/or suppliers do business;

(2) Discoveries, concepts and ideas, whether patentable or not, or copyrightable or not, including without limitation the nature and results of research and development activities, processes, formulas, techniques, "know-how," designs, drawings and specifications;

(3) Any other materials or information related to the business or activities of Employer which are not generally known to others engaged in similar businesses or activities or which could not be gathered or obtained without significant expenditure of time, effort and money; and

(4) All inventions and ideas which are derived from or relate to Employee's access to or knowledge of any of the above enumerated materials and information.

The Confidential Information shall not include any materials or information of the types specified above to the extent that such materials or information are publicly known or generally utilized by others engaged in the same business or activities in the course of which Employer utilized, developed or otherwise acquired such information or materials and which Employee has gathered or obtained (other than on behalf of the Employer) after termination of his employment with the Employer from such other public sources by his own expenditure of significant time, effort and money after termination of his employment with the Employer. Failure to mark any of the Confidential Information as confidential shall not affect its status as part of the Confidential Information under the terms of this Agreement.

3.02 Ownership of Confidential Information. Employee agrees that the Confidential Information is and shall at all times remain the sole and exclusive property of Employer. Employee agrees immediately to disclose to Employer all Confidential Information developed in whole or part by him during the term of his employment with Employer and to assign to Employer any right, title or interest he may have in such Confidential Information.

Without limiting the generality of the foregoing, every invention, improvement, product, process, apparatus, or design which Employee may take, make, devise or conceive, individually or jointly with others, during the period of his employment by the Employer, whether during business hours or otherwise, which relates in any manner to the business of the Employer either now or at any time during the period of his employment), or which may be related to the Employer in connection with its business (hereinafter collectively referred to as AInvention@) shall belong to and be the exclusive property of the Employer and Employee will make full and prompt disclosure to the Employer of every Invention. Employee will assign to the Employer, or its nominee, every Invention and Employee will execute all assignments and other instruments or documents and do all other things necessary and proper to confirm the Employer=s right and title in and to every Invention; and Employee will perform all proper acts within his power necessary or desired by the Employer to obtain letters patent in the name of the Employer (at the Employer=s expense) for every Invention in whatever countries the Employer may desire, without payment by the Employer to Employee of any royalty, license fee, price or additional compensation.

3.03. Non Disclosure of Confidential Information. Except as required in the faithful performance of Employee's duties hereunder (or as required by law), during the term of his employment with Employer and for a period after the termination of such employment until the Confidential Information no longer meets the definition set forth above of Confidential Information with respect to Employee, Employee agrees not to directly or indirectly reveal, report, publish, disseminate, disclose or transfer any of the Confidential Information to any person or entity, or knowingly utilize for himself or any other person or entity, any of the Confidential Information for any purpose (including, without limitation, in the solicitation of existing Employer customers or suppliers), except in the course of performing duties assigned to him by Employer. Employee further agrees to use his best endeavors to prevent the use for himself or others, or dissemination, publication, revealing, reporting or disclosure of, any Confidential Information.

3.04 Protection of Reputation. Employee agrees that he will at no time, either during his employment with the Employer or at any time after termination of such employment, engage in conduct which injures, harms, corrupts, demeans, defames, disparages, libels, slanders, destroys or diminishes in any way the reputation or goodwill of the Employer, its subsidiaries, or their respective shareholders, directors, officers, employees, or agents, or the services provided by the Employer or the products sold by the Employer, or its other properties or assets, including, without limitation, its computer systems hardware and software and its data or the integrity and accuracy thereof.

3.05 Records and Use of Employer Facilities. All notes, data, reference materials, memoranda and records, including, without limitation, data on the Employer's computer system, computer reports, products, customers and suppliers lists and copies of invoices, in any way relating to any of the Confidential Information or Employer's business (in whatever form existing, including, without limit, electronic) shall belong exclusively to Employer, and Employee agrees to maintain them in a manner so as to secure their confidentiality and to turn over to Employer all copies of such materials (in whole or in part) in his possession or control at the request of Employer or, in the absence of such a request, upon the termination of Employee's employment with Employer. Upon termination of Employee's employment with Employer, Employee shall immediately refrain from seeking access to Employer's (a) telephonic voice mail, E-mail or message systems, (b) computer system and (c) computer databases and software. The foregoing shall not prohibit Employee from using Employer=s public Internet (not intranet) site.

ARTICLE FOUR

NON-COMPETE AND NON-SOLICITATION COVENANTS

4.01 Non-Competition and Non-Solicitation. Employee acknowledges that it may be very difficult for him to avoid using or disclosing the Confidential Information in violation of Article Three above in the event that he is employed by any person or entity other than the Employer in a capacity similar or related to the capacity in which he is employed by the Employer and that other person or entity is engaged in a business competitive with that of Employer. Accordingly, Employee agrees that (except as required in the faithful performance of Employee's duties hereunder) he will not, during the term of employment with Employer and for a period of one (1) year after the termination of such employment, irrespective of the time, manner or cause of such termination, directly or indirectly (whether or not for compensation or profit):

(1) Engage in any business or enterprise the nature of which is competitive with that of the Employer (a "Prohibited Business"); or

(2) Participate as an officer, director, creditor, promoter, proprietor, associate, agent, employee, partner, consultant, sales representative or otherwise, or promote or assist, financially or otherwise, or directly or indirectly own any interest in any person or entity involved in any Prohibited Business; or

(3) Canvas, call upon, solicit, entice, persuade, induce, respond to, or otherwise deal with, directly or indirectly, any individual or entity which, during Employee's term of employment with the Employer, was or is a customer or supplier, or proposed customer or supplier, of the Employer whom Employee called upon or dealt with, or whose account Employee supervised, for the following:

(a) to purchase (with respect to customers) or sell (with respect to suppliers) products of the types or kinds sold by the Employer or which could be substituted for (including, but not limited to, rebuilt products), or which serve the same purpose or function as, products sold by the Employer (all of which products are herein sometimes referred to, jointly and severally, as "Prohibited Products"), or

(b) to request or advise any such customer or supplier to withdraw, curtail or cancel its business with the Employer; or

(4) For himself or for or through any other individual or entity call upon, solicit, entice, persuade, induce or offer any individual who, during Employee=s term of employment with the Employer, was an employee or sales representative or distributor of the Employer, employment by, or representation as sales agent or distributor for, any one other than the Employer, or request or advise any such employee or sales agent or distributor to cease employment with or representation of the Employer, and Employee shall not approach, respond to, or otherwise deal with any such employee or sales representative or distributor of Employer for any such purpose, or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity.

4.02 Obligation Independent Each obligation of each subparagraph and provision of Section 4.01 shall be independent of any obligation under any other subparagraph or provision hereof or thereof.

4.03 Public Stock Nothing in Section 4.01, however, shall prohibit Employee from owning (directly or indirectly through a parent, spouse, child or other relative or person living in the same household with Employee or any of the foregoing), as a passive investment, up to 1% of the issued and outstanding shares of any class of stock of any publicly traded company.

4.04 Business Limitation If, at the termination of Employee=s employment and for the entire period of twelve (12) months prior thereto his duties and responsibilities are limited by the Employer so that he is specifically assigned to, or responsible for, one or more divisions, subsidiaries, business units or product lines of the Employer, then subparagraphs (1) through (3) of Section 4.01 shall apply only to any business which competes with the business of such divisions, subsidiaries or business units.

4.05 Area Limitation If at the termination of Employee=s employment and for the entire period of twelve (12) months prior thereto he or she has responsibility for only a designated geographic area, then subparagraphs (1) through (3) of Section 4.01 shall apply only within such area.

ARTICLE FIVE

TERMINATION

5.01 Termination of Employee for Cause. The Employer shall have the right to terminate Employee's employment at any time for "cause." Prior to such termination, the Employer shall provide Employee with written notification of any and all allegations constituting "cause" and the Employee shall be given five (5) working days after receipt of such written notification to respond to those allegations in writing. Upon receipt of the Employee's response, the Employer shall meet with the Employee to discuss the allegations.

For purposes hereof, "cause" shall mean (i) an act or acts of personal dishonesty taken by the Employee and intended to result in personal enrichment of the Employee, (ii) material violations by the Employee of the Employee's obligations or duties under, or any terms of, this Agreement, which are not remedied in a reasonable period (not to exceed ten (10) days) after receipt of written notice thereof from the Employer, (iii) any violation by the Employee of any of the provisions of Articles Three, or Four, or (iv) Employee being convicted (by trial, guilty or no contest plea or otherwise) of (a) a felony, (b) any other crime involving moral turpitude, or (c) any violation of law which would impair the ability of the Employer or any affiliate to obtain any license or authority deemed necessary or desirable for the conduct of its actual or proposed business.

5.02 Termination of Employee Because of Employee's Disability, Injury or Illness. The Employer shall have the right to terminate Employee's employment if Employee is unable to perform the duties assigned to him by the Employer because of Employee's disability, injury or illness, provided however, such inability must have existed for a total of one hundred eighty (180) consecutive days before such termination can be made effective. Any compensation Employee receives under any disability benefit plan provided by Employer during any period of disability, injury or illness shall be in lieu of the compensation which Employee would otherwise receive under Article Two during such period of disability, injury or sickness.

5.03 Termination as a Result of Employee's Death. The obligations of the Employer to Employee pursuant to this Agreement shall automatically terminate upon Employee's death.

5.04 Termination of Employee for any Other Reason. The Employer shall have the right to terminate Employee's employment at any time at will for any reason upon ten (10) days prior written notice to Employee. If Employee's employment is terminated by the Employer during the Employment Term for any reason other than the reason set forth in Sections 5.01, 5.02 or 5.03 above, the Employer shall continue to pay to Employee for a period of one (1) year, an aggregate amount equal to (a) one hundred percent (100%) of his then current Base Salary, plus (b) one hundred percent (100%) of the Bonus earned and paid during the 12 months prior to the date of termination; provided, however, that if within the 2-year period prior to the date of termination the Employer has modified the Annual Incentive Plan so as to reduce the potential amount of Bonus that Employee could earn, then the amount under this (b) shall be one hundred percent (100%) of the average-12 month Bonus earned and paid during the 24 months prior to the date of termination (for example, if Employee had received a Bonus of $92,000 during the 1^st through 12^th month of such 24-month period and a Bonus of $0 during the 13^th through 24^th month of such 24-month period, then Employee would receive $46,000 under this (b), in installments on the same dates as the Employer makes payroll payments under its customary practice, In addition, for a period of one year following the termination of his employment, Employee shall continue to receive the same Other Benefits (provided the Other Benefits plans so permit, or, if the Other Benefits plans do not so permit, a substantially equivalent benefit shall be provided to Employee.

5.05 Termination by Employee. Subject to the provisions of Articles Three and Four above and in addition to the right to terminate under Section 5.06 below, Employee may terminate his employment by the Employer at any time by written notice to Employer. If Employee's employment is so terminated, the Employer shall be obligated to continue to pay to Employee his then current Base Salary, Bonus and Other Benefits accrued up to and including the date on which Employee's employment is so terminated, however, Employee and the Employer acknowledge and agree to the fullest extent permitted by law, that Employee shall forfeit, and the Employer shall not be responsible to pay or fund, directly or indirectly, any accrued but unpaid accumulated but unpaid sick leave; accumulated but unpaid vacation time; deferred compensation; severance pay or benefits; any and all benefits which are accrued but not vested under any pension, profit sharing or other qualified retirement plan and all service credits under each such plan (subject to any reinstatement of such credits upon future reemployment with the Employer in accordance with federal law); and right to post-employment coverage under any health, insurance or other welfare benefit plan, including rights arising under Title X of COBRA or any similar federal or state law (except that continuation coverage rights of Employee's spouse and other dependents, if any, under such plans or laws shall be forfeited only with their consent); or any Other Benefits, if any, provided to Employee under any policy, program or plan of the Employer not specifically described above, after the date of termination to which Employee might otherwise be entitled under this Agreement but for his resignation.

5.06 Termination by Employee after Material Change. Employee shall have the right to terminate his employment at any time within a period of 180 days after any "material change".

For purposes hereof, "material change" means (i) any sale or other transfer of all or substantially all of the Employer's assets, (ii) any merger, consolidation, share exchange, tender offer, or other similar transaction involving the Employer, unless the surviving entity is under control by the same person(s) or entity(ies) as the Employer was prior to the transaction, (iii) any change in control of the Employer as a result of a tender offer, proxy contest or otherwise, or (iv) any plan is approved to liquidate or dissolve the Employer.

If Employee's employment is terminated by the Employee pursuant to this Section 5.06, the Employer shall continue to pay to Employee for a period of one (1) year, an aggregate amount equal to (a) one hundred percent (100%) of his then current Base Salary, plus (b) one hundred percent (100%) of the Bonus earned and paid during the 12 months prior to the date of termination; provided, however, that if within the 2-year period prior to the date of termination the Employer has modified the Annual Incentive Plan so as to reduce the potential amount of Bonus that Employee could earn, then the amount under this (b) shall be one hundred percent (100%) of the average-12 month Bonus earned and paid during the 24 months prior to the date of termination (for example, if Employee had received a Bonus of $92,000 during the 1^st through 12^th month of such 24-month period and a Bonus of $0 during the 13^th through 24^th month of such 24-month period, then Employee would receive $46,000 under this (b), in installments on the same dates as the Employer makes payroll payments under its customary practice, In addition, for a period of one year following the termination of his employment, Employee shall continue to receive the same Other Benefits (provided the Other Benefits plans so permit, or, if the Other Benefits plans do not so permit, a substantially equivalent benefit shall be provided to Employee.

ARTICLE SIX

REMEDIES

6.01 Employee acknowledges that the restrictions contained in this Agreement will not prevent him from obtaining such other gainful employment he may desire to obtain or cause him any undue hardship and are reasonable and necessary in order to protect the legitimate interests of Employer and that violation thereof would result in irreparable injury to Employer. Employee therefor acknowledges and agrees that in the event of a breach or threatened breach by Employee of the provisions of Article Three or Article Four or Section 1.03, Employer shall be entitled to an injunction restraining Employee from such breach or threatened breach and Employee shall lose all rights to receive any payments under Section 5.04. Nothing herein shall be construed as prohibiting or limiting Employer from pursuing any other remedies available to Employer for such breach or threatened breach, the rights hereinabove mentioned being in addition to and not in substitution of such other rights and remedies. The period of restriction specified in Article Four shall abate during the time of any violation thereof, and the portion of such period remaining at the commencement of the violation shall not begin to run until the violation is cured.

6.02 Survival. The provisions of this Article Six and of Articles Three and Four shall survive the termination or expiration of this Agreement.

ARTICLE SEVEN

MISCELLANEOUS

7.01 Assignment. Employee and Employer acknowledge and agree that the covenants, terms and provisions contained in this Agreement constitute a personal employment contract and the rights and obligations of the parties thereunder cannot be transferred, sold, assigned, pledged or hypothecated, excepting that the rights and obligations of the Employer under this Agreement may be assigned or transferred pursuant to a sale of the business, merger, consolidation, share exchange, sale of substantially all of the Employer's assets or of the business unit or division for which Employee is performing services, or other reorganization described in Section 368 of the Code, or through liquidation, dissolution or otherwise, whether or not the Employer is the continuing entity, provided that the assignee, or transferee is the successor to all or substantially all of the assets of the Employer or of the business unit or division for which Employee is performing services and such assignee or transferee assumes the rights and duties of the Employer, if any, as contained in this Agreement, either contractually or as a matter of law.

7.02 Severability. Should any of Employee's obligations under this Agreement or the application of the terms or provisions of this Agreement to any person or circumstances, to any extent, be found illegal, invalid or unenforceable in any respect, such illegality, invalidity or unenforceability shall not affect the other provisions of this Agreement, all of which shall remain enforceable in accordance with their terms, or the application of such terms or provisions to persons or circumstances other than those to which it is held illegal, invalid or unenforceable. Despite the preceding sentence, should any of Employee's obligations under this Agreement be found illegal, invalid or unenforceable because it is too broad with respect to duration, geographical or other scope, or subject matter, such obligation shall be deemed and construed to be reduced to the maximum duration, geographical or other scope, and subject matter allowable under applicable law.

The covenants of Employee in Articles Three and Four and each subparagraph of Section 4.01 are of the essence of this Agreement; they shall be construed as independent of any other provision of this Agreement; and the existence of any claim or cause of action of Employee against the Employer, whether predicated on the Agreement or otherwise shall not constitute a defense to enforcement by the Employer of any of these covenants. The covenants of Employee shall be applicable irrespective of whether termination of employment hereunder shall be by the Employer or by Employee, whether voluntary or involuntary, or whether for cause or without cause.

7.03 Notices. Any notice, request or other communication required to be given pursuant to the provisions hereof shall be in writing and shall be deemed to have been given when delivered in person or three (3) days after being deposited in the United States mail, certified or registered, postage prepaid, return receipt requested and addressed to the party at its or his last known addresses. The address of any party may be changed by notice in writing to the other parties duly served in accordance herewith.

7.04 Waiver. The waiver by the Employer or Employee of any breach of any term or condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition hereof. Failure by any party to claim any breach or violation of any provision of this Agreement shall not constitute a precedent or be construed as a waiver of any subsequent breaches hereof.

7.05 Continuing Obligation. The obligations, duties and liabilities of Employee pursuant to Articles Three and Four of this Agreement are continuing, absolute and unconditional and shall remain in full force and effect as provided herein and survive the termination of this Agreement.

7.06 No Conflicting Obligations or Use. Employer does not desire to acquire from Employee any secret or confidential know-how or information which he may have acquired from others nor does it wish to cause a breach of any non compete or similar agreement to which Employee may be subject. Employee represents and warrants that (i) other than for this Agreement, he is not subject to or bound by any confidentiality agreement or non disclosure or non compete agreement or any other agreement having a similar intent, effect or purpose, and (ii) he is free to use and divulge to Employer, without any obligation to or violation of any right of others, any and all information, data, plans, ideas, concepts, practices or techniques which he will use, describe, demonstrate, divulge, or in any other manner make known to Employer during the performance of services

7.07 Attorneys Fees. Should either party be required to institute legal action to enforce any of the provisions of this Agreement, the prevailing party shall be entitled to recover from the other party its attorneys' fees and costs incurred in connection with such action.

7.08 Advise New Employers. During Employee’s employment with the Employer and for one (1) year thereafter, Employee will communicate the contents of Articles Three and Four to any individual or entity which Employee intends to be employed by, associated with, or represent which is engaged in a business which is competitive to the business of Employer.

7.09 Captions. The captions of Articles and Sections this Agreement are inserted for convenience only and are not to be construed as forming a part of this Agreement.

EMPLOYEE ACKNOWLEDGES THAT HE HAS READ AND FULLY UNDERSTANDS EACH AND EVERY PROVISION OF THE FOREGOING AND DOES HEREBY ACCEPT AND AGREE TO THE SAME.

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

EMPLOYEE EMPLOYER

____________________________ By: _______________________________________

Title: _____________________________________

EXHIBIT A

ANNUAL INCENTIVE PLAN

EX-10 5 exhibit10v1.htm DIRECTORS AND OFFICERS INSURANCE POLICY BY CHUBB CHUBB Executive Protection Policy

Exhibit 10(v)(1)

CHUBB Executive Protection Policy -

ENDORSEMENT

Effective date of

this endorsement: MAY 31, 2003; Company: FEDERAL INSURANCE COMPANY

Endorsement No. 5

Coverage section: GENERAL TERMS To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that coverage is continued under this policy and that the

Policy Period in the Declarations is amended to read as follows:

Policy Period: From 12:01 A.M. on MAY 31, 2002

To 12:01 A.M. JUNE 30, 2003

Local time at the address shown above.

All other terms and conditions remain unchanged.

/signature/

Authorized Representative

June 4, 2003

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Executive Protection Policy for

RICHARDSON ELECTRONICS, LTD.

Form 14-02-0941 (Ed. 1-92) Page 1 of 5

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CHUBB Executive Protection Policy

DECLARATIONS

EXECUTIVE PROTECTION POLICY

Policy Number 8125-64-60J ILL

Federal Insurance Company, a stock insurance company,

incorporated under the laws of Indiana, herein called the

Company.

Item 1. Parent Organization:

RICHARDSON ELECTRONICS, LTD.

40W267 KESLINGER ROAD

LA FOX, ILLINOIS

60147

Item 2. Policy Period:

From 12:01 A.M. on MAY 31, 2002

To 12:01 A.M. MAY 31, 2003

Local time at the address shown in Item 1.

Item 3. Coverage Summary

Description

GENERAL TERMS AND CONDITIONS

EXECUTIVE LIABILITY AND INDEMNIFICATION

FIDUCIARY LIABILITY

CRIME INSURANCE

KIDNAP/RANSOM AND EXTORTION

EMPLOYMENT PRACTICES LIABILITY

Item 4. Termination of

Prior Policies: 8125-64-601

THE EXECUTIVE LIABILITY AND INDEMNIFICATION, FIDUCIARY LIABILITY, OUTSIDE

DIRECTORSHIP

LIABILITY AND EMPLOYMENT PRACTICES LIABILITY COVERAGE SECTIONS (WHICHEVER

ARE

APPLICABLE) ARE ALL WRITTEN ON A CLAIMS MADE BASIS. EXCEPT AS OTHERWISE

PROVIDED, THESE

COVERAGE SECTIONS COVER ONLY CLAIMS FIRST MADE AGAINST THE INSURED DURING

THE POLICY

PERIOD. PLEASE READ CAREFULLY.

In witness whereof, the Company issuing this policy has caused this policy

to be signed by its authorized officers,

but it shall not be valid unless also signed by a duly authorized

representative of the Company.

FEDERAL INSURANCE COMPANY

/signature/

Secretary

June 12, 2002

/signature/

President

/signature/

Authorized Representative

Page 2 of 5

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Executive Protection Policy

General Terms

and Conditions

Territory 1. Coverage shall extend anywhere in the world.

Terms and Conditions 2. Except for the General Terms and Conditions or

unless stated to the contrary in any coverage section, the terms and conditions of each coverage section of

this policy apply only to that section and shall not be construed to apply

to any other coverage section of this policy.

Limits of Liability and

Deductible Amounts 3.

Unless stated to the contrary in any coverage section, the limits of

liability and

deductible amounts shown for each coverage section of this policy are

separate

limits of liability and separate deductible amounts pertaining to the

coverage

section for which they are shown; the application of a deductible amount to

loss under one coverage section of this policy shall not reduce the

deductible

amount under any other coverage section of this policy.

Notice 4.

Notice to the Company under this policy shall be given in writing

addressed to:

Notice of Claim:

All Other Notices:

National Claims Department

Chubb Group of Insurance Companies

15 Mountain View Road

Warren, New Jersey 07059

Executive Protection Department

Chubb Group of Insurance Companies

15 Mountain View Road

Warren, New Jersey 07059

Such notice shall be effective on the date of receipt by the Company at such

address.

Investigation 5. The Company may make any investigation it deems necessary

and may, with

and Settlement the written consent of the Insured, make any settlement of a

claim it deems

expedient. If the Insured withholds consent to such settlement, the

Company's

liability for all loss on account of such claim shall not exceed the amount

for

which the Company could have settled such claim plus costs, charges and

expenses accrued as of the date such settlement was proposed in writing by

the

Company to the Insured.

Form 14-02-0941 (Ed. 1-92)

Page 3 of 5

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General Terms

and Conditions

Valuation and 6. All premiums, limits, retentions, loss and other amounts

under this policy are

Foreign Currency expressed and payable in the currency of the United States

of America. Except

as otherwise provided in any coverage section, if judgment is rendered,

settlement is denominated or another element of loss under this policy is

stated

in a currency other than United States of America dollars, payment under

this

policy shall be made in United States dollars at the rate of exchange

published

in the Wall Street Journal on the date the final judgment is reached, the

amount

of the settlement is agreed upon or the other element of loss is due,

respectively.

Subrogation 7. In the event of any payment under this policy, the Company

shall be subrogated

to the extent of such payment to all the Insured's rights of recovery, and

the

Insured shall execute all papers required and shall do everything necessary

secure and preserve such rights, including the execution of such documents

necessary to enable the Company effectively to bring suit in the name of the

Insured.

Action Against 8. No action shall lie against the Company unless, as a

condition precedent thereto,

the Company there shall have been full compliance with all the terms of this

policy. No person

or organization shall have any right under this policy to join the Company

as a

party to any action against the Insured to determine the Insured 's

liability nor

shall the Company be impleaded by the Insured or his legal representatives.

Bankruptcy or insolvency of an Insured or of the estate of an Insured shall

not

relieve the Company of its obligations nor deprive the Company of its rights

under this policy.

Authorization Clause 9. By acceptance of this policy, the Parent Organization

agrees to act on behalf

of all Insureds with respect to the giving and receiving of notice of claim

termination, the payment of premiums andthe receiving of any return premiums

that may become due under this policy, the negotiation, agreement to and

acceptance of endorsements, and the giving or receiving of any notice

provided

for in this policy (except the giving of notice to apply for the Extended

Reporting

Period), and the Insureds agree that the Parent Organization shall act on

their

behalf.

Alteration 10. No change in, modification of, or assignment of interest under

this policy shall

and Assignment be effective except when made by a written endorsement to

this policy which is

signed by an authorized representative of the Company.

Termination of This policy or any coverage section shall terminate at the

earliest of the following

Policy or * times:

Coverage Sectibvz .(A) sixty days after the receipt by the Parent

Organization of a written notice

of termination from the Company, _ _

(B) upon the receipt by the Company of written notice of termination from

the

Parent Organization,

Form 14-02-0941 (Ed. t-92) Page 4 of 5

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Executive Protection Policy

General Terms

and Conditions

Executive Protection Policy

Termination of (C) upon expiration of the Policy Period as set forth in Item

2 of the

Policy or Declarations of this policy, or

Coverage Section (D) at such other time as may be agreed upon by the Company

and the Parent

(continued)

Organization.

The Company shall refund the unearned premium computed at customary short

rates if the policy or any coverage section is terminated by the Parent

Organization. Under any other circumstances the refund shall be computed pro

rata.

Termination of

Prior Bonds

or Policies

12. Any bonds or policies issued by the Company or its affiliates and

specified in

Item 4 of the Declarations of this policy shall terminate, if not already

terminated,

as of the inception date of this policy. Such prior bonds or policies shall

not

cover any loss under the Crime or Kidnap/Ransom & Extortion coverage

sections

not discovered and notified to the Company prior to the inception date of

this

policy.

Definitions

13. When used in this policy:

Parent Organization means the organization designated in Item 1 of the

Declarations of this policy.

Policy Period means the period of time specified in Item 2 of the

Declarations

of this policy, subject to prior termination in accordance with Subsection

above. If this period is less than or greater than one year, then the

Limits of

Liability specified in the Declarations for each coverage section shall be

the

Company's maximum limit of liability under such coverage section for the

entire

period..

Form 14-02-0941 (Ed. 1-92)

Page 5 of 5

-------------------------------------------------------------

Executive Protection Policy

Effective date of

this endorsement: MAY 31, 2002

To be attached to and form part of - Company: FEDERAL INSURANCE COMPANY

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

The following is a schedule of forms attaching to and forming a part of

this policy:

GENERAL TERMS AND CONDITIONS

FORM NUMBER

14-02-0952 -

14 02 3104

14-02-0961

EXECUTWE LIABILITY AND INDEMNIFICATION

FORM NUMBER

14-02-1294

14 02 3028

14 02 3073

14 02 3094

14 02 3120

14 02 3147

14 02 3162

14 02 3189

14 02 319E

14 02 348.

14 02 4801

14-02-0961

14-02-096'

14-02-0961

14-02-096

14-02-0961

14-02-096

FIDUCIARY LIABILITY

FORM NUMBER

- 14-02-1168 - .

14 02 3028

14 02 3101

14 02 3126

Page 1 Continued

Form 14-02-1252 (Ed. 11/95)

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Executive Protection Policy

ENDORSEMENT

Coverage Section: GENERAL TERMS Company: FEDERAL INSURANCE COMPANY

Effective date of Endorsement No. 1

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

ILLINOIS AMENDATORY ENDORSEMENT

It is agreed that:

Subsection 11, "Termination of Policy or Coverage Section", of the General

Terms and Conditions is amended by

the following:

CANCELLATION

All notices of cancellation of insurance must be mailed at least 30 days

prior to the effective date of cancellation

during the-first 60 days of coverage. After the policy or coverage section

has been effective for 61 days or more,

all notices must be mailed at least 60 days prior to the effective date of

cancellation. All such notices shall include

a specific explanation of the reason or reasons for cancellation and shall

be mailed to the Parent Organization and

mortgagee or lien holder, if known, at the last mailing address known to

the company. However, where cancellation

is for nonpayment of premium, at least 10 days notice of cancellation shall

be given.

No policy or coverage section which has been in effect for 60 days may be

cancelled except for one of the following

reasons:

(a) Nonpayment of premium;

(b) The policy or coverage section was obtained through a material

misrepresentation;

coverage section;

(d) The risk originally accepted has measurably increased;

(e) Certification to the Director of the loss of reinsurance by the insurer

which provided coverage to the insurer

for all or a substantial part of the underlying risk insured; or,

(f) A determination by the Director that the continuation of the policy or

coverage section could place the

insurer in violation of the insurance laws of this state.

NONRENEWAL AND EXTENDED REPORTING PERIOD

No company shall fail to renew any policy or coverage section of insurance

unless it shall send by mail to the Parent

Organization at least 60 days advance notice of its intention not to renew.

The company shall maintain proof of the

mailing of such notice on one of the following forms: a recognized U.S.

Post Office form or a form acceptable to the

U.S. Post Office or other commercial mail delivery service. An exact and

unaltered copy of such notice shall also

be sent to the Parent Organization's broker, if known, or the agent of

record and to the mortgagee or lien holder

at the last mailing address known by the company. However, where

cancellation is for nonpayment of premium, at

least 10 days notice of cancellation shall be given.

Page 1 of 2

Form 14-02-0952 (Ed. 5/92)

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CHUBB Executive Protection Policy

ENDORSEMENT

Effective date of

this endorsement: MAY 31, 2002 Company: FEDERAL INSURANCE COMPANY

Endorsement No. 2

Coverage section: GENERAL TERMS To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that Investigation and Settlement, is amended by adding the

following to the second sentence:

However, this sentence shall not apply to any Claim under the following

coverage(s), if purchased:

EXECUTIVE LIABILITY AND INDEMNIFICATION

14-02-0943

All other terms and conditions remain unchanged.

/signature/

Authorized Representative

June 12, 2002

Date

Form 14-02-3104 (Ed. 11/99)

-------------------------------------------------------------------------

Executive Protection Policy

ENDORSEMEWT

Coverage Section: GENERAL TERMS Company: FEDERAL INSURANCE COMPANY

Effective date of - Endorsement No. 3

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-601 ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that Subsection 11, Termination of Policy or Coverage

Section (A) is deleted in its entirety.

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

/signature/

Authorized Representative

June 12, 2002

Date

Page 1 Last page

Form 14-02-0981 (Rev. 1-92)

-------------------------------------------------------------------------

Executive Protection Policy

ENDORSEMENT 4

Coverage Section: GENERAL TERMS Company: FEDERAL INSURANCE COMPANY

Effective date of Endorsement No. 4

this endorsement: MAY 31, 2002'

To be attached to and form part of

Policy No. 8125-64-601 ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that Item 1, Parent Organization's mailing address

of the Declarations page is amended to read as follows:

40W267 RESLINGER ROAD

P.O. BOX 393

LA FOX, ILLINOIS 60147

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

/signature/

Authorized Representative

March 3, 2003

Date

Page 1 Last page

Form 14-02-0981 (Rev. 1-92)

-------------------------------------------------------------------------

Executive Protection Policy

DECLARATIONS

EXECUTIVE LIABILITY AND INDEMNIFICATION COVERAGE SECTION

Item 1. Parent Organization:

RICHARDSON ELECTRONICS, LTD.

Item 2. Limits of Liability:

(A) Each Loss $15,000,000.

(B) Each Policy Period $15,000,000

Note that the limits of liability and any deductible or retention are

reduced or exhausted by Defense Costs.

Item 3. Coinsurance Percent: NONE

Item 4. Deductible Amount:

Insuring Clause 2 $ 100,000.

Item 5. Insured Organization:

RICHARDSON ELECTRONICS, LTD.

AND ITS SUBSIDIARIES.

Item 6. Insured Persons:

ANY PERSON WHO HAS BEEN, NOW IS, OR SHALL BECOME

A DULY ELECTED DIRECTOR OR A DULY ELECTED OR

APPOINTED OFFICER OF THE INSURED ORGANIZATION AND

WITH RESPECT TO ANY SUBSIDIARY OUTSIDE THE UNITED

STATES OF AMERICA, THEIR FUNCTIONAL EQUIVALENT.

Item 7. Extended Reporting Period:

_ (A) Additional Premium: 125% OF THE ANNUAL PREMIUM

' (B) Additional Period: ONE YEAR

Item 8. Pending or Prior Date: OCTOBER 12, 1983

Item 9. Continuity Date: OCTOBER 12, 1983

Form 14-02-0943 (Ed. 1/9) Page 1 of 11

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Form 14-02-0943 (Ed. 1192) Page 2 of 11

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Executive Liability

and Indemnification

Coverage Section

Executive Protection Policy

In consideration of payment of the premium and subject to the Declarations,

General

Terms and Conditions, and the limitations, conditions, provisions and other

terms of

this coverage section, the Company agrees as follows:

insuring Clauses

Executive 1. The Company shall pay on behalf of each of the Insured Persons

all Loss for

Liability Coverage which the Insured Person is not indemnified by the

Insured Organization and

Insuring Clause 1 which the Insured Person becomes legally obligated to pay

on account of any

Claim first made against him, individually or otherwise, during the Policy

Period

or, if exercised, during the Extended Reporting Period, for a Wrongful Act

committed, attempted, or allegedly committed or attempted by such Insured

Person before or during the Policy Period.

Executive 2. The Company shall pay on behalf of the Insured Organization all

Loss for

Indemnification which the Insured Organization grants indemnification to

each Insured

Coverage Person, as permitted or required by law, which the Insured Person

has

Insuring Clause 2 become legally obligated to pay on account of any Claim

first made against him,

individually or otherwise, during the Policy Period or, if exercised,

during the.

Extended Reporting Period, for a Wrongful Act committed, attempted, or

allegedly committed or attempted by such Insured Person before or during the

Policy Period.

Estates and Legal 3.

Representatives

Subject otherwise to the General Terms and Conditions and the limitations,

conditions, provisions and other terms of this coverage section, coverage

shall

extend to Claims for the Wrongful Acts of Insured Persons made against the

estates, heirs, legal representatives or assigns of Insured Persons who are

deceased or against the legal representatives or assigns of Insured Persons

who are incompetent, insolvent or bankrupt.

Extended 4. If the Company terminates or refuses to renew this coverage

section other than

Reporting Period for nonpayment of premium, the Parent Organization and the

Insured

Persons shall have the right, upon payment of the additional premium set

forth

in Item 7(A) of the Declarations for this coverage section, to an extension

of the

coverage granted by this coverage section for the period set forth in Item

7(B)

of the Declarations for this coverage section (Extended Reporting Period)

following the effective date of termination or nonrenewal, but only for any

Wrongful Act committed, attempted, or allegedly committed or attempted,

prior

to the effective date of termination or nonrenewal. This right of extension

shall

lapse unless written notice of such election, together with payment of the

additional premium due, is received by the Company within 30 days following

the

effective date of termination or nonrenewal. Any Claim made during the

Extended Reporting Period shall be deemed to have been made during the

immediately preceding Policy Period.

If the Parent Organization terminates or declines to accept renewal, the

Company may, if requested, at its sole option, grant an Extended Reporting

Period. The offer of renewal terms and conditions or premiums different from

those in effect prior to renewal shall not constitute refusal to renew.

Form 14-02-0943 (Ed. 1192)

Page 3 of 11

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Exclusions

Exclusions Applicable 5. The Company shall not be liable for Loss on account of any Claim made against to Insuring any Insured Person:

Clauses 1 and 2 (a) based upon, arising from, or in consequence of any circumstance if written notice of such circumstance has been given under any policy or coverage section of which this coverage section is a renewal or replacement and if such prior policy or coverage section affords coverage (or would afford such coverage except for the exhaustion of its limits of liability) for such Loss, in whole or in part, as a result of such notice;

(b) based upon, arising from, or in consequence of any demand, suit or other

proceeding pending, or order, decree or judgement entered against any

Insured on or prior to the Pending or Prior Date set forth in Item 8 of the

Declarations for this coverage section, or the same or any substantially

similar fact, circumstance or situation underlying or alleged therein;

(i) a Claim that is a derivative action brought or maintained on behalf of

an Insured Organization by one or more persons who are not

Insured Persons and who bring and maintain the Claim without the

solicitation, assistance or participation of any Insured,

(ii) a Claim brought or maintained by an Insured Person for the actual

or alleged wrongful termination of the Insured Person, or

(iii) a Claim brought or maintained by an Insured Person for contribution

or indemnity, if the Claim directly results from another Claim covered

under this coverage section;

(d) for an actual or alleged violation of the responsibilities, obligations

or duties imposed by the Employee Retirement Income Security Act of 1974 and

amendments thereto or similar provisions of any federal, state or local statutory law or common law upon fiduciaries of any pension, profit

sharing, health and welfare or other employee benefit plan or trust

established or maintained for the purpose of providing benefits to

employees of an Insured Organization;

(e) for bodily injury, mental or emotional distress, sickness, disease or

death of any person or damage to or destruction of any tangible property including loss of use thereof; or

(f) based upon, arising from, or in consequence of (i) the actual, alleged or

threatened discharge, release, escape or disposal of Pollutants into or on

real or personal property, water or the atmosphere; or (ii) any direction or

request that the Insured test for, monitor, clean up, remove, contain,

treat, detoxify or neutralize Pollutants, or any voluntary decision to do so;

including but not limited to any Claim for financial loss to the Insured

Organization, its security holders or its creditors based upon, arising

from, or in consequence of the matters described in (i) or (ii) of this exclusion.

Form 14-02-0943 (Ed. 7192) Page 4 of 11

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Executive Protection Policy

Exclusions

(continued)

Exclusions Applicable 6. The Company shall not be liable under Insuring

Clause 1 for Loss on account

to Insuring of any Claim made against any Insured Person:

Clause 1 Only (a) for an accounting of profits made from the purchase or sale

by such

Insured Person of securities of the Insured Organization within the

meaning of Section 16 (b) of the Securities Exchange Act of 1934 and

amendments thereto or similar provisions of any federal, state or local

statutory law or common law;

(b) based upon, arising from, or in consequence of any deliberately

fraudulent

act or omission or any willful violation of any statute or regulation by

such

Insured Person, if a judgement or other final adjudication adverse to the

Insured Person establishes such a deliberately fraudulent act or omission

or willful violation; or

having gained in fact any personal profit, remuneration or advantage to

which such Insured Person was not legally entitled.

Severability 7. With respect to the Exclusions in Subsections 5 and 6 of this

coverage section,

of Exclusions no fact pertaining to or knowledge possessed by any Insured

Person shall be

imputed to anv other Insured Person to determine if coveraae is available.

Limp of Liability, 8. For the purposes of this coverage section, all Loss

arising out of the same

Deductible and Wrongful Act and all Interrelated Wrongful Acts of any

Insured Person shall

Coinsurance be deemed one Loss, and such Loss shall be deemed to have

originated in the

earliest Policy Period in which a Claim is first made against any Insured

Person alleging any such Wrongful Act or Interrelated Wrongful Acts.

The Company's maximum liability for each Loss, whether covered under

Insuring Clause 1 or Insuring Clause 2 or both, shall be the Limit of

Liability for

each Loss set forth in Item 2(A) of the Declarations for this coverage

section.

The Company's maximum aggregate liability for all Loss on account of all

Claims first made during the same Policy Period, whether covered under

Insuring Clause 1 or Insuring Clause 2 or both, shall be the Limit of

Liability for

each Policy Period set forth in Item 2(B) of the Declarations for this

coverage

section.

The Company's liability under Insuring Clause 2 shall apply only to that

part of

each Loss which is excess of the Deductible Amount set forth in Item 4 of

the

Declarations for this coverage section and such Deductible Amount shall be

borne by the Insureds uninsured and at their own risk.

If a single Loss is covered in part under Insuring Clause 1 and in part

under

Insuring Clause 2, the Deductible Amount applicable to the Loss shall be the

Insuring Clause 2 deductible set forth in Item 4 of the Declarations for

this

coverage section.

Form 14-02-0943 (Ed. 1192) Page 5 of 11

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Limit of Liability, With respect to all Loss (excess of the applicable

Deductible Amount) originating

Deductible and in any one Policy Period, the Insureds shall bear uninsured

and at their own

Coinsurance risk that percent of all such Loss specified as the Coinsurance

Percent in Item

(continued) 3 of the Declarations for this coverage section, and the

Company's liability

hereunder shall apply only to the remaining percent of all such Loss.

Any Loss covered in whole or in part by this coverage section and the

Employment Practices Liability coverage section of this policy (if

purchased)

shall be subject to the limits of liability, deductible and coinsurance

percent

applicable to such other coverage section; provided, however, if any limit

liability applicable to such other coverage section is exhausted with

respect to

such Loss, any remaining portion of such Loss otherwise covered by this

coverage section shall be subject to the Limits of Liability and Coinsurance

Percent applicable to this coverage section, as reduced by the amount of

such

Loss otherwise covered by this coverage section which is paid by the Company

pursuant to such other coverage section.

For purposes of this Subsection 8 only, the Extended Reporting Period, if

exercised, shall be part of and not in addition to the immediately preceding

Policy Period.

Presumptive 9. If the Insured Organization:

Indemnification (a) fails or refuses, other than for reason of Financial

Impairment, to

indemnify the Insured Person for Loss; and

(b) is permitted or required to indemnify the Insured Person for such Loss

pursuant to:

(i) the by-laws or certificate of incorporation of the Insured

Organization in effect at the inception of this coverage section, or

(ii) any subsequently amended or superseding by-laws or certificate of

incorporation of the Insured Organization provided, however, that

such amended or superseding by-laws or certificate of incorporation

expand or broaden, and do not restrict or in any way limit, the Insured

Organization's ability to indemnify the Insured Person;

then, notwithstanding any other conditions, provisions or terms of this

coverage

section to the contrary, any payment by the Company of such Loss shall be

subject to (i) the Insuring Clause 2 Deductible Amount set forth in Item 4

of the

Declarations for this coverage section, and (ii) all of the Exclusions set

forth in

Subsections 5 and 6 of this coverage section.

For purposes of this Subsection 9, the shareholder and board of director

resolutions of the Insured Organization shall be deemed to provide

indemnification for such Loss to the fullest extent permitted by such

by-laws or

certificate of incorporation.

Form 14-02-0943 (Ed. 1192) Page 6 of 11

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Executive Protection Policy

Reporting

and Notice

10. The Insureds shall, as a condition precedent to exercising their rights

under this

coverage section, give to the Company written notice as soon as practicable

any Claim made against any of them for a Wrongful Act.

If during the Policy Period or Extended Reporting Period (if exercised) an

Insured becomes aware of circumstances which could give rise to a Claim and

gives written notice of such circumstance(s) to the Company, then any Claims

subsequently arising from such circumstances shall be considered to have

been

made during the Policy Period or the Extended Reporting Period in which the

circumstances were first reported to the Company.

The Insureds shall, as a condition precedent to exercising their rights

under this

coverage section, give to the Company such information and cooperation as it

may reasonably require, including but not limited to a description of the

Claim

or circumstances, the nature of the alleged Wrongful Act, the nature of the

alleged or potential damage, the names of actual or potential claimants,

and the

manner in which the Insured first became aware of the Claim or

circumstances.

Defense and

Settlement

Subject to this Subsection, it shall be the duty of the Insured Persons and

not

the duty of the Company to defend Claims made against the Insured

Persons.

The Insureds agree not to settle any Claim, incur any Defense Costs or

otherwise assume any contractual obligation or admit any liability with

respect

to any Claim without the Company's written consent, which shall not be

unreasonably withheld. The Company shall not be liable for any settlement,

Defense Costs, assumed obligation or admission to which it has not

consented.

The Company shall have the right and shall be given the opportunity to

effectively associate with the Insureds in the investigation, defense and

settlement, including but not limited to the negotiation of a settlement,

of any

Claim that appears reasonably likely to be covered in whole or in part by

this

coverage section.

The Insureds agree to provide the Company with all information, assistance

and

cooperation which the Company reasonably requests and agree that in the

event

of a Claim the Insureds will do nothing that may prejudice the Company's

position or its potential or actual rights of recovery.

Defense Costs are part of and not in addition to the Limits of Liability

set forth

in Item 2 of the Declarations for this coverage section, and the payment by

the

Company of Defense Costs reduces such Limits of Liability.

Allocation

Form 74-02-0943 (Ed. 1192)

If both Loss covered by this coverage section and loss not covered by this

coverage section are incurred, either because a Claim against the Insured

Persons includes both covered and uncovered matters or because a Claim is

made against both an Insured Person and others, including the Insured

Organization, the Insureds and the Company shall use their best efforts to

agree upon a fair and proper allocation of such amount between covered Loss

and uncovered loss.

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Allocation If the Insureds and the Company agree on an allocation of Defense

Costs, the

(continued) Company shall advance on a current basis Defense Costs allocated

to the

covered Loss. If the Insureds and the Company cannot agree on an allocation:

(a) no presumption as to allocation shall exist in any arbitration, suit or

other

proceeding;

(b) the Company shall advance on a current basis Defense Costs which the

Company believes to be covered under this coverage section until a

different allocation is negotiated, arbitrated or judicially determined; and

binding arbitration. The rules of the American Arbitration Association shall

apply except with respect to the selection of the arbitration panel, which

shall consist of one arbitrator selected by the Insureds, one arbitrator

selected by the Company, and a third independent arbitrator selected by

the first two arbitrators.

Any negotiated, arbitrated or judicially determined allocation of Defense

Costs

on account of a Claim shall be applied retroactively to all Defense Costs on

account of such Claim, notwithstanding any prior advancement to the

contrary.

Any allocation or advancement of Defense Costs on account of a Claim shall

not apply to or create any presumption with respect to the allocation of

other

Loss on account of such Claim.

Other 13. If any Loss arising from any Claim made against any Insured Persons

Insurance insured under any other valid policy(ies), prior or current, then

this coverage

section shall cover such Loss, subject to its limitations, conditions,

provisions

and other terms, only to the extent that the amount of such Loss is in

excess

of the amount of payment from such other insurance whether such other

insurance is stated to be primary, contributory, excess, contingent or

otherwise,

unless such other insurance is written only as specific excess insurance

over the

Limits of Liability provided in this coverage section.

Changes in

Exposure

Acquisition or 14. If the Insured Organization (i) acquires securities or

voting rights in another

Creation of organization or creates another organization, which as a result

of such

Another Organization acquisition or creation becomes a Subsidiary, or (ii)

acquires any organization

by merger into or consolidation with an Insured Organization, such

organization and its Insured Persons shall be Insureds under this coverage

section but only with respect to Wrongful Acts committed, attempted, or

allegedly committed or attempted, after such acquisition or creation unless

the

Company agrees, after presentation of a complete application and all

appropriate

information, to provide coverage by endorsement for Wrongful Acts committed,

attempted, or allegedly committed or attempted, by such Insured Persons

prior

to such acquisition or creation.

Form 14-02-0943 (Ed. 1/92) Page 8 of 11

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Executive Protection Policy

Changes in

Exposure

Acquisition or If the fair value of all cash, securities, assumed

indebtedness and other

Creation of consideration paid by t Insured Organization for any such

acquisition or

Another Organization creation exceeds 10% of the total assets of the Parent

Organization as

(continued) reflected in the P rent Organization's most recent audited

consolidated

financial statements, the Parent Organization shall give written notice of

such

acquisition or creation to the Company as soon as practicable together with

such

information as the Company may require and shall pay any reasonable

additional

premium required by the Company.

Acquisition of Parent 15.

Organization by

Another Organization

If (i) the Parent Organization merges into or consolidates with another

organization, or (ii) another organization or person or group of

organizations

and/or persons acting in concert acquires securities or voting rights which

result

in ownership or voting control by the other organization(s) or person(s) of

than 50% of the outstanding securities representing the present right to

vote for

the election of directors of the Parent Organization, coverage under this

coverage section shall continue until termination of this coverage section,

but

only with respect to Claims for Wrongful Acts committed, attempted, or

allegedly committed or attempted, by Insured Persons prior to such merger,,-.

consolidation or acquisition. The Parent Organization shall give written

notice

of such merger, consolidation or acquisition to the Company as soon as

practicable together with such information as the Company may require.

Cessation of

Subsidiaries

16. In the event an organization ceases to be a Subsidiary before or after

the

Inception Date of this coverage section, coverage with respect to such

Subsidiary and its Insured Persons shall continue until termination of this

coverage section but only with respect to Claims for Wrongful Acts

committed,

attempted or allegedly committed or attempted prior to the date such

organization ceased to be a Subsidiary.

Representations 17.

and Severability

In granting coverage to any one of the Insureds, the Company has relied upon

the declarations and statements in the written application for this coverage

section and upon any declarations and statements in the original written

application submitted to another insurer in respect of the prior coverage

incepting as of the Continuity Date set forth in Item 9 of the Declarations

for this

coverage section. All such declarations and statements are the basis of such

coverage and shall be considered as incorporated in and constituting part

of this

coverage section.

Such written application(s) for coverage shall be construed as a separate

application for coverage by each of the Insured Persons. With respect to the

declarations and statements contained in such written application(s) for

coverage, no statement in the application or knowledge possessed by any

Insured Person shall be imputed to any other Insured Person for the purpose

of determining if coverage is available.

Form 14-02-0943 (Ed. 1/92)

Page 9 of 11

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Definitions 18. When used in this coverage section:

Claim means:

(i) a written demand for monetary damages,

(ii) a civil proceeding commenced by the service of a complaint or similar

pleading,

(iii) a criminal proceeding commenced by a return of an indictment, or

(iv) a formal administrative or regulatory proceeding commenced by the filing

of a notice of charges, formal investigative order or similar document,

against any Insured Person for a Wrongful Act, including any appeal

therefrom.

Defense Costs means that part of Loss consisting of reasonable costs,

charges, fees (including but not limited to attorneys' fees and experts'

fees) and

expenses (other than regular or overtime wages, salaries or fees of the

directors,

officers or employees of the Insured Organization) incurred in defending or

investigating Claims and the premium for appeal, attachment or similar

bonds.

Financial Impairment means the status of the Insured Organization resulting

from (i) the appointment by any state or federal official, agency or court

of any

receiver, conservator, liquidator, trustee, rehabilitator or similar

official to take

control of, supervise, manage or liquidate the Insured Organization, or

(ii) the

Insured Organization becoming a debtor in possession.

Insured, either in the singular or plural, means the Insured Organization

and

any Insured Person.

Insured Capacity means the position or capacity designated in Item 6 of the

Declarations for this coverage section held by any Insured Person but shall

not

include any position or capacity in any organization other than the insured

Organization, even if the Insured Organization directed or requested the

Insured Person to serve in such other position or capacity.

Insured Organization means, collectively, those organizations designated in

Item 5 of the Declarations for this coverage section.

Insured Person, either in the singular or plural, means any one or more of

those

persons designated in Item 6 of the Declarations for this coverage section.

Interrelated Wrongful Acts means all causally connected Wrongful Acts.

Loss means the total amount which any Insured Person becomes legally

obligated to pay on account of each Claim and for all Claims in each Policy

Period and the Extended Reporting Period, if exercised, made against them

for

Wrongful Acts for which coverage applies, including, but not limited to,

damages, judgements, settlements, costs and Defense Costs. Loss does not

include (i) any amount not indemnified by the Insured Organization for which

the insured Person is absolved from payment by reason of any covenant,

agreement or court order, (ii) any amount incurred by the Insured

Organization

(including its board of directors or any committee of the board of

directors) in

connection with the investigation or evaluation of any Claim or potential

Claim

by or on behalf of the insured Organization, (iii) fines or penalties

imposed by

law or the multiple portion of any multiplied damage award, or (iv) matters

uninsurable under the law pursuant to which this coverage section is

construed.

Form 14-02-0943 (Ed. 1/92) Page 10 of 11

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Executive Protection Policy

Definitions Pollutants means any substance located anywhere in the world

exhibiting any

(Continued) hazardous characteristics as defined by, or identified on a list

of hazardous

substances issued by, the United States Environmental Protection Agency or a

state, county, municipality or locality counterpart thereof. Such

substances shall

include, without limitation, solids, liquids, gaseous or thermal irritants,

contaminants or smoke, vapor, soot, fumes, acids, alkalis, chemicals or

waste

materials. Pollutants shall also mean any other air emission, odor, waste

water,

oil or oil products, infectious or medical waste, asbestos or asbestos

products

and any noise.

Subsidiary, either in the singular or plural, means any organization in

which

more than 50% of the outstanding securities or voting rights representing

the

present right to vote for election of directors is owned or controlled,

directly or

indirectly, in any combination, by one or more Insured Organizations.

Wrongful Act means any error, misstatement, misleading statement, act,

omission, neglect, or breach of duty committed, attempted, or allegedly

committed or attempted, by an Insured Person, individually or otherwise, in

his

Insured Capacity, or any matter claimed against him solely by reason of his

serving in such Insured Capacity.

Form 14-02-0943 (Ed. 1192) Page 11 of 11

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Executive Protection Policy

ENDORSEMENT

Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of - Endorsement No. 1

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

ILLINOIS AMENDATORY ENDORSEMENT

It is agreed that:

Subsection 4, "Extended Reporting Period", shall be deleted and replaced by

the following:

EXTENDED REPORTING PERIOD

4. If the Company or the Insured terminates or refuses to renew this

coverage section, the Parent Organization

and the Insured Persons shall have the right, upon payment of the

additional premium set forth in Item 7(A)

of the Declarations for this coverage section, to an extension of the

coverage granted by the coverage section

for a period of one year as set forth in Item 7(B) of the Declarations for

this coverage section (Extended

Reporting Period) following the effective date of termination or

nonrenewal, but only for any Wrongful Act

committed, attempted, or allegedly committed or attempted, prior to the

effective date of termination or

nonrenewal. This right of extension shall lapse unless written notice of

such election, together with payment of

the additional premium due, is received by the Company within 30 days

following the effective date of

termination or nonrenewal. Any Claim made during the Extended Reporting

Period shall be deemed to have

been made during the immediately preceding Policy Period.

It is further agreed that Subsection 18, "Definitions", shall be amended by

deleting Defense Costs and replacing it

with the following:

Defense Costs means that part of Loss consisting of reasonable costs,

charges, fees (including but not limited

to attorneys' fees and experts' fees) and expenses (other than regular or

overtime wages, salaries or fees of

the directors, officers or employees of the Insured Organization or the

salaries of the employees, officers or

staff attorneys of the Company) incurred in defending or investigating

Claims and the premium for appeal,

attachment or similar bonds.

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

/signature/

Authorized Representative

June 12, 2002

Date

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Executive Protection Policy

CHUBB

ENDORSEMENT

Effective date of

this endorsement: MAY 31, 2002 Company: FEDERAL INSURANCE COMPANY

Endorsement No. 2

Coverage section: EXECUTIVE LIABILITY To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that if a Claim against an Insured Person includes a claim

against the Insured Person's lawful spouse

solely by reason of (i) such person's status as a spouse of the Insured

Person, or (ii) such spouse's ownership interest

in property which the claimant seeks as recovery for alleged Wrongful Acts

of the Insured Person, all loss which the

spouse becomes legally obligated to pay on account of the Claim shall be

treated as Loss which the Insured Person

becomes legally obligated to pay on account of the Claim made against the

Insured Person. All limitations, conditions,

provisions and other terms of coverage applicable to the Insured Person's

Loss shall also be applicable to the spousal

loss.

The coverage extension afforded by this Endorsement does not apply to any

Claim alleging any act or omission by the

Insured Person's spouse.

A11 other terms and conditions remain unchanged.

/signature/

Authorized Representative

June 12, 2002

Date

Form 14-02-3028 (Ed. 11/99)

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Executive Protection Policy

ENDORSEMENT

Effective date of

this endorsement: MAY 31, 2002 Company: FEDERAL INSURANCE COMPANY

Endorsement No. 3

Coverage section: EXECUTIVE LIABILITY To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that:

1. The Declarations are amended by adding the following as Insured Persons:

... and any elected or appointed officer of the Insured Organization in an

Outside Directorship.

2. The Definitions are amended by adding the following:

Outside Directorship means the position of a director, officer, trustee,

governor, or equivalent executive position

with an Outside Entity if service by an Insured Person in such position was

at the specific request of the Insured

Organization or was part of the duties regularly assigned to the Insured

Person by the Insured Organization.

Outside Entity means any non-profit corporation, community chest, fund

organization or foundation exempt from

federal income tax as an organization described in Section 501(c)(3),

Internal Revenue Code of 1986, as

amended.

3. The following is added;

Outside Directorships

Coverage provided to any Insured Person in an Outside Directorship shall:

(a) not extend to the Outside Entity or to any director, officer, trustee,

governor or any other equivalent

executive or employee of the Outside Entity, other than the Insured Person

serving in the Outside

Directorship;

(b) be specifically excess of any indemnity (other than any indemnity

provided by the Insured Organization) or

insurance available to such Insured Person by reason of serving in the

Outside Directorship, including

any indemnity or insurance available from or provided by the Outside Entity;

Person for a Wrongful Act

committed, attempted, or allegedly committed or attempted by such Insured

Person while serving in the

Outside Directorship if such Wrongful Act occurs after the date (i) such

Insured Person ceases to be an

officer of the Insured Organization, or (ii) service by such Insured Person

in the Outside Directorship

ceases to be at the specific request of the Insured Organization or a part

of the duties regularly assigned to

the Insured Person by the Insured Organization;

(d) not extend to Loss on account of any Claim made against any Insured

Person for a Wrongful Act which

occurs while such Insured Person is serving in the Outside Directorship

where such Claim is (i) by the

Outside Entity, or (ii) on behalf of the Outside Entity and a director,

officer, trustee, governor or equivalent

executive of the Outside Entity instigates such Claim, or (iii) by any

director, officer, trustee, governor, or

equivalent executive of the Outside Entity.

Form 14-02-3073 (Ed. 11/99) Page 1 of 2

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4. The Company's maximum liability to pay Loss including this endorsement, shall not exceed the Limit of Liability

set forth in the Declarations. This endorsement does not increase the

Company's maximum liability beyond the

Limits of Liability set forth in the Declarations.

5. Payment by the Company or any of its subsidiaries or affiliated companies

under another policy on account of a

Claim also covered pursuant to this endorsement shall reduce by the amount

of the payment the Company's

Limits of Liability with respect to such Claim.

All other terms and conditions remain unchanged.

/signature/

Authorized Representative

June 12, 2002

Date

Form 14-02-3073 (Ed. 1/99) Page 2 of 2

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Executive Protection Policy

ENDORSEMENT

Effective date of

this endorsement: MAY 31, 2002 Company: FEDERAL INSURANCE COMPANY

Endorsement No. 4

Coverage section: EXECUTIVE LIABILITY To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that the Extended Reporting Period provision is deleted in its

entirety and replaced by the following:

Extended Reporting Period

4. If coverage hereunder is canceled or nonrenewed for any reason other than

nonpayment of premium, the Insured

Organization and the Insured Persons shall have the right, upon payment of

the additional premium set forth in

the Declarations, to an extension of the coverage granted hereunder for the

period set forth in the Declarations

following the effective date of cancellation or nonrenewal, but only for

any Wrongful Act occurring prior to the

effective date of cancellation or nonrenewal. This right of extension shall

lapse unless written notice of such

election, together with payment of the additional premium due, is received

by the Company within 30 days

following the effective date of cancellation or nonrenewal. Any Claim made

during the Extended Reporting Period

shall be deemed to have been made during the immediately preceding Policy

Period. The offer of renewal terms

and conditions or premiums different from those in effect prior to renewal

shall not constitute refusal to renew.

All other terms and conditions remain unchanged.

/signature/

Authorized Representative

June 12, 2002

Date

Form 14-02-3094 (Ed. 11/99)

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Executive Protection Policy

ENDORSEMENT

Effective date of

this endorsement: MAY 31, 2002 Company: FEDERAL INSURANCE COMPANY

Endorsement No. 5

Coverage section: EXECUTIVE LIABILITY To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

In consideration of the premium paid, it is agreed that the Allocation

Clause, is deleted in its entirety and the following is

inserted:

Allocation

If both Loss covered hereunder and loss not covered hereunder are incurred,

either because a Claim against an

Insured Person includes both covered and uncovered matters or because a

Claim is made against both an

Insured Person and others, including the Insured Organization, the Insureds

and the Company shall allocate

such amount as follows:

(a) with respect to Defense Costs, to create certainty in determining a fair

and proper allocation of Defense

Costs, 80% of all Defense Costs which must otherwise be allocated as

described above shall be

allocated to covered Loss and shall be advanced by the Company on a current

basis; provided, however,

that no Defense Costs shall be allocated to the Insured Organization to the

extent the Insured

Organization is unable to pay by reason of Financial Impairment.

This Defense Cost allocation shall be the final and binding allocation of

such Defense Costs and shall not apply

to or create any presumption with respect to the allocation of any other

Loss;

(b) with respect to Loss other than Defense Costs:

(i) the Company shall also allocate such amount between covered Loss and

uncovered loss based on

the relative legal exposure of the Insureds and the Insureds and the

Company shall use their best

efforts to agree upon a fair and proper allocation of such amount between

covered Loss and

uncovered loss; and

(ii) if the Insureds and the Company cannot agree on any allocation, no

presumption as to allocation shall

exist in any arbitration, suit or other proceeding. The Company, if

requested by the Insureds, shall

submit the allocation dispute to binding arbitration. The rules of the

American Arbitration Association

shall apply except with respect to the selection of the arbitration panel,

which shall consist of one

arbitrator selected by the Insureds, one arbitrator selected by the

Company, and a third independent

arbitrator selected by the first two arbitrators.

Form t4-02-3120 (Ed. 11/99) Page l of 2

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All other terms and conditions remain unchanged.

/signature/

Authorized Representative

June 12, 2002

Date

Form 14-02-3120 (Ed. 11/99) Page 2 of 2

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Executive Protection Policy

ENDORSEMENT

Effective date of

this endorsement: MAY 31, 2002 Company: FEDERAL. INSURANCE COMPANY

Endorsement No.6

Coverage section: EXECUTIVE LIABILITY To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that:

1. The Definitions are amended as follows:

a. The definition of Loss is deleted in its entirety and the following is

inserted:

Loss means the total amount which any Insured Person becomes legally

obligated to pay on account of -.

each Claim and for all Claims in each Policy Period and the Extended

Reporting Period, if exercised, made

against them for Wrongful Acts for which coverage applies, including, but

not limited to, damages,

judgments, settlements, costs and Defense Costs. Loss does not include:

(i) any amount not indemnified by the Insured Organization for which the

Insured Person is absolved

from payment by reason of any covenant, agreement, or court order;

(ii) any amount incurred by the Insured Organization (including its board of

directors or any committee of

the board of directors) in connection with the investigation or evaluation

of any Claim or potential

Claim by or on behalf of the Insured Organization;

(iii) matters uninsurable under the law applicable to this coverage; or

(iv) fines or penalties imposed by law or the multiple portion of any

multiplied damage award. However,

fines, penalties or multiplied damage awards shall not include punitive or

exemplary damages in any

Claim, except Employment Claim, if such damages are insurable under the law

applicable to this

coverage. The law of the jurisdiction most favorable to the insurability of

those damages shall control

for the purpose of resolving any dispute between the Company and the

Insured regarding whether

such damages are insurable, provided that such jurisdiction is where:

(1) those damages were awarded or imposed;

(2) any Wrongful Act occurred for which such damages were awarded or imposed;

(3) any Insured Organization is incorporated or has its principal place of

business; or

(4) the Company is incorporated or has its principal place of business.

Form 14-02-3147 (Ed. 11199) Page 1 of 2

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b. The following definitions added:

Employment Claim means any Claim which is brought or maintained by or on

behalf of any past, present

or prospective employee(s) of the Insured Organization against any Insured

for any Wrongful Act in

connection with any actual or alleged wrongful dismissal, discharge or

termination of employment, breach of

any oral or written employment contract or quasi-employment contract,

employment-related

misrepresentation, violation of employment discrimination laws (including

workplace and sexual

harassment), wrongful failure to employ or promote, wrongful discipline,

wrongful deprivation of a career

opportunity, failure to grant tenure, negligent evaluation, invasion of

privacy, employment-related defamation

or employment-related wrongful infliction of emotional distress.

2. Solely with respect to a Claim for punitive or exemplary damages

insurable pursuant to section 1 a(iv) of this

endorsement, the Exclusions Applicable to Insuring Clause 1 Only are

amended by deleting paragraph (b) in

its entirety and inserting it as a new paragraph (g) in the Exclusions

Applicable to Insuring Clauses 1 and 2.

All other terms and conditions remain unchanged.

/signature/

Authorized Representative

June 12, 2002

Date

Form 14-02-3147 (Ed. 11/99) Page 2 of 2

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Executive Protection Policy

ENDORSEMENT

Effective date of

this endorsement: MAY 31, 2002 Company: FEDERAL. INSURANCE COMPANY

Endorsement No. 7

Coverage section: EXECUTIVE LIABILITY To be attached to and form part of

Policy No. 8125-64-60J ILL.

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that Exclusion 5(c) is deleted in its entirely but only with

respect to a Claim brought and maintained:

1. Solely and entirely in a jurisdiction other than the United States of

America, states, territories and possessions;

and

2. Subject to the substantive and procedural laws of a jurisdiction other

than the United States of America, states,

territories and possessions.

All other terms and conditions remain unchanged.

/signature/

Authorized Representative

June 12, 2002

Date

Form 14-02-3162(Ed.12/99)

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Executive Protection Policy

ENDORSEMENT

Effective date of

this endorsement: MAY 31, 2002 Company: FEDERAL INSURANCE COMPANY

Endorsement No. 8

Coverage section: EXECUTIVE LIABILITY To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that:

1. The Exclusions Applicable to Insuring Clauses 1 and 2 are amended by

deleting paragraph (5)(f) in its entirety and

replacing it with the following:

(f) Based upon, arising from, or in consequence of: -

(1) the actual, alleged or threatened discharge, release, escape, dispersal

or disposal of Pollutants into

or on real or personal property, water or the atmosphere; or

.(2) any direction or request that the Insured test for, monitor, clean up,

remove, contain, treat, detoxify or

neutralize Pollutants, or any voluntary decision to do so;

including but not limited to any Claim for financial loss to the Insured

Organization, its security holders or

its creditors based upon, arising from or in consequence of the matters

described in (1) and (2) above.

However, this exclusion shall not apply to Loss (i) which is on account of

any Claim brought by any

shareholder of the Insured Organization in his capacity as such, whether in

his own right or on behalf of the

Insured Organization, provided that such Claim is brought and maintained

without the assistance,

participation or solicitation of any Insured, and (ii) for which the

Insured Organization, either is not

permitted or required, or fails or refuses by reason of Financial

Impairment, to indemnity the Insured

Person(s). For purposes of this endorsement, the certificate of

incorporation, by-laws and shareholder and

board of director resolutions of the Insured Organization shall be deemed

to provide indemnification to the

Insured Person(s) to the fullest extent permitted by law.

2. This endorsement shall apply, and the above exclusion shall be amended as

provided herein, only with respect to

Claims first made in fact during the Policy Period. This endorsement shall

not apply, and the above exclusion

shall not be amended as provided herein, with respect to Claims first made

in fact after the Policy Period but

considered pursuant to the second paragraph of the Reporting and Notice

provision to have been made during the

Policy Period because such Claim arises out of circumstances noticed to the

Company during the Policy Period.

All other terms and conditions remain unchanged.

/signature/

Authorized Representative

June 12, 2002

Date

Form 14-02-3189(Ed.11/99)

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Executive Protection Policy

ENDORSEMENT

Effective date of

this endorsement: MAY 31, 2002 Company: FEDERAL INSURANCE COMPANY

Endorsement No. 9

Coverage section: EXECUTIVE LIABILITY To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that:

1. In the Declarations, the Insured Persons, are amended by adding the

following:

Past, present and future employees of the Insured Organization;

Provided, however, that coverage provided to employees hereunder shall

apply only to Employment Claims.

2. Solely with respect to the coverage provided by this endorsement, the

Exclusions Applicable to Insuring

Clauses 1 and 2 are amended by deleting paragraphs (c), (d) and (e) in

their entirety and inserting the following:

(i) a Claim that is a derivative action brought or maintained on behalf of an

Insured Organization by one or more persons who are not Insured Persons

and who bring and maintain the Claim without the solicitation, assistance,

participation of any Insured;

(ii) an Employment Claim;

(iii) a Claim brought or maintained by or on behalf of an Insured Person for

contribution or indemnity, if the Claim directly results from another Claim

covered hereunder;

(iv) a Claim brought or maintained by an Insured Person for the actual or

alleged wrongful termination of the Insured Person;

(d) for an actual or alleged violation of the responsibilities, obligations,

or duties imposed by the Employee

Retirement Income Security Act of 1974, the Fair Labor Standards Act

(except the Equal Pay Acf1, the

National Labor Relations Act, the Worker Adjustment and Retraining

Notification Act, the Consolidated

Omnibus Budget Reconciliation Act of 1985; the Occupational Safety and

Health Act, rules or

regulations promulgated thereunder and amendments thereto or similar

provisions of any federal,

state, or local statutory law or common law;

(e) for mental or emotional distress (except with respect to Employment

Claims), bodily injury, sickness,

disease or death of any person, or damage to or destruction of any tangible

property including loss of

use thereof; or

3. Where all of any part of a Claim is an Employment Claim, the Company

shall not be liable for Loss on account of

that part of a Claim against an Insured Person which is based upon, arising

from, or in consequence of any

demand, suit or other proceeding pending, or order, decree or judgment

entered against any insured on or prior to

May 31, 1999 , or the same or any substantially the same fact, circumstance

or situation underlying or

alleged therein;

Form 14-02-3195 (Ed. 11/99) Page 1 of 2

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4. The Exclusions Applicable Insuring Clauses 1 and 2 are amended by the following:

(g ) based upon, arising from or in consequence of any facts or

circumstances of which any officer of the

Insured Organization had knowledge, as of the date referenced in paragraph

3 of this endorsement, which

he or she had reason to suppose might give rise to a future Employment

Claim.

S. The Presumptive Indemnification provision is amended as follows, but only

with respect to Employment Claims:

a. Paragraph (b) is deleted in its entirety and replaced with the following:

is permitted or required to indemnify the Insured Person for such Loss

pursuant to the broadest application

of law;

b. The final paragraph of the Presumptive Indemnification Provision is

deleted in its entirety.

6. The Definitions are amended by adding the following:

Employment Claim means a Claim which is brought and maintained by or on

behalf of any past, present or

prospective employees of the Insured Organization against any Insured

Person for any Wrongful Act in

connection with any actual or alleged wrongful dismissal, discharge or

termination of employment, breach of any

oral or written employment contract or quasi-employment contract,

employment-related misrepresentation,

violation of employment discrimination laws (including workplace and sexual

harassment), wrongful failure to

employ or promote, wrongful discipline, wrongful deprivation of a career

opportunity, failure to grant tenure,

negligent evaluation, invasion of privacy, employment-related defamation or

employment-related wrongful infliction

of emotional distress.

All other terms and conditions remain unchanged.

/signature/

Authorized Representative

June 12, 2002

Date

Form 14-02-3195 (Ed. 11/99) Page 2 of 2

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Executive Protection Policy

ENDORSEMENT

Effective date of

this endorsement: MAY 31, 2002 Company: FEDERAL. INSURANCE COMPANY

Endorsement No.10

Coverage section: EXECUTIVE LIABILITY To be attached to and form part of

Policy No.8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that:

1. The following is added:

Investigative Costs Coverage

Insuring Clause 4

The Company shall pay on behalf of the Insured Organization all

Investigative Costs which such Insured

organization becomes legally obligated to pay on account of any Shareholder

Derivative Demand first made

during the Policy Period or, if exercised, the Extended Reporting Period,

for a Wrongful Act by an Insured

Person occurring before or during the Policy Period.

2. The Exclusions applicable to Insuring Clauses 1 and 2 shall apply to

Insuring Clause 4.

3. The Limit of Liability, Deductible and Coinsurance provision is amended

as follows:

a. The following is added to paragraph two:

The Company's maximum liability for all Investigative Costs covered under

Insuring Clause 4 on account of

all Shareholder Derivative Demands first made during the same Policy Period

shall be $250,000. This is a

sublimit which further limits and does not increase the Company's maximum

liability hereunder as set forth

in the Declarations.

b. The following is added to paragraph three:

No deductible amount shall apply to Investigative Costs covered under

Insuring Clause 4.

4. The Defense and Settlement provision, is amended for purposes of coverage

under Insuring Clause 4 by adding

the following solely with respect to the coverage provided by this

endorsement:

It shall be the duty of the Insured Organization and not the duty of the

Company to investigate and evaluate any

Shareholder Derivative Demand.

5. The Definitions, are amended by adding the following:

Investigative Costs means reasonable costs, charges, fees (including but

not limited to attorneys' fees and

experts' fees) and expenses (other than regular or overtime wages, salaries

or fees of the directors, officers or

employees of the Insured Organization) incurred by the Insured Organization

(including its board of directors or

any committee of the board of directors) in connection with the

investigation or evaluation of any Shareholder

Derivative Demand.

- Shareholder Derivative Demand means any written demand, by one or more

shareholders of an Insured

Organization, upon the board of directors of such Insured Organization, to

bring a civil proceeding in a court of

law against any Insured Person for a Wrongful Act by an Insured Person

occurring before or during the Policy

Period.

Form 14-02-3482 (Ed. 11/99) Page 1 of 2

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6. For purposes of coverage - Insuring Clause 4 only,

a. all references hereunder to Loss or Defense Costs shall only mean

Investigation costs; and

b. all references hereunder to Claim or to "Claim against any Insured

Person" shall only mean any

Shareholder Derivative Demand.

All other terms and conditions remain unchanged.

/signature/

Authorized Representative

June 12, 2002

Date

Form 14-02-3482 (Ed. 11/99) Page 2 of 2

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Executive Protection Policy

ENDORSEMENT

Effective date of

this endorsement: MAY 31, 2002 Company: FEDERAL INSURANCE COMPANY

Endorsement No.11

Coverage section: EXECUTIVE LIABILITY To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

In consideration of the premium charged, it is agreed that:

1. In the event of Loss arising from a Claim or Claims for which payment is

due under the provisions of this

coverage section but which Loss, in the aggregate, exceeds the remaining

available Limit of Liability of this

coverage section, upon the specific written request of the Insured

Organization, then this coverage section shall:

(i) first pay such Loss for which coverage is provided under Insuring Clause

1 of the coverage section, then

with respect to whatever remaining amount of the Limit of Liability is

available after payment of such Loss,

(ii) then pay such Loss for which coverage is provided by Insuring Clause 2

of the Coverage section.

2. In the event of Loss arising from a Claim for which payment is due under

the provisions of this coverage section

(including those circumstances described in paragraph (1) of this

endorsement), the Company shall at the written

request of the Insured Organization:

(i) first pay such Loss for which coverage is provided under Insuring Clause

1 of the coverage section, then

(ii) either pay or hold payment for such Loss for which coverage is provided

by Insuring Clause 2 of the

coverage section.

In the event that the Company withholds payment under Insuring Clause 2 of

the coverage section pursuant to the

above request, then the Company shall at any time in the future, at the

request of the Insured Organization,

release such Loss payment to the Insured Organization, or make such Loss

payment directly to an individual

director or officer in the event of covered Loss under any Claim covered

under this coverage section pursuant to

Insuring Clause 1 of the coverage section.

3. Nothing in this endorsement shall be construed to increase the limit of

liability of the Company under this coverage

section, which Limit of Liability shall remain the maximum liability of the

Company under all Claims under all

coverage under this coverage section combined.

All other terms and conditions remain unchanged.

/signature/

Authorized Representative

June 12, 2002

Date

Form 14-02-4801 (Ed. 2/00)

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Executive Protection Policy

ENDORSEMENT

Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of - Endorsement No. 12

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that subsection 5, EXCLUSIONS: EXCLUSIONS APPLICABLE

TO INSURING CLAUSES 1 AND 2, is amended by deleting paragraph (f)

in its entirety, but only with respect to a CLAIM brought and

maintained:

1. Solely and entirely in a jurisdiction other than the United

States of America, its territories and possessions; and

2. Subject to the substantive and prodedural laws of a jurisdic-

tion other than the United States of America, its territories

and possessions.

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

/signature/

Authorized Representative

June 12, 2002

Date

Page 1 Last page

Form 14-02-0961 (Rev. 1-92)

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Executive Protection Policy

ENDORSEMENT

Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of Endorsement No. 13

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that:

1. The following Insuring Clause is added:

INSURED ORGANIZATION COVERAGE - INSURING CLAUSE 3

The Company shall pay on behalf of any INSURED ORGANIZATION

all LOSS for which it becomes legally obligated to pay on

account of any SECURITIES CLAIM first made against it during

the POLICY PERIOD or, if exercised, during the Extended

Reporting Period, for a WRONGFUL ACT.

2. The Definitions are amended as follows:

a. The definition of WRONGFUL ACT is deleted in its entirety

and replaced with to following:

WRONGFUL ACT means:

(a) For purposes of coverage under Insuring Clause 1 or

2, any error, misstatement, misleading statement,

act, omission, neglect, or breach of duly committed,

attempted, or allegedly committed or attempted, by

any INSURED PERSON before or during the POLICY

PERIOD, individually or otherwise, in his INSURED

CAPACITY, or any matter claimed against him solely

by reason of serving in such INSURED CAPACITY;

(b) For purposes of coverage under Insuring Clause 3, any

error, misstatement, misleading statement, act,

omission, neglect, or breach of duty committed,

attempted, or allegedly committed or attempted, by

any INSURED, before or during the POLICY PERIOD.

b. The following definitions are added:

Page 1 Continued

Form 14.02-0961 (Rev. 1-92)

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CLAIM means:

(a) For

purposes of coverage under Insuring Clauses 1 or

(i) a written demand for monetary damages or non-

monetary relief;

(ii) a civil proceeding commenced by the service of

a complaint or similar pleading;

a criminal proceeding commenced by the return

of an indictment; or

(iv) a formal administrative or regulatory

proceeding commenced by the filing of a notice

of charges, formal investigative order or

similar document, against any INSURED PERSON

for a WRONGFUL ACT or INTERRELATED WRONGFUL

ACT, including any appeal therefrom;

(b) For purposes of coverage under Insuring Clause 3:

(i) a written demand for monetary damages or non-

monetary relief;

(ii) a civil proceeding commenced by the service

of a complaint or similar pleading; or

(iii) a criminal proceeding commenced by the return

of an indictment;

(iv) a formal administrative or regulatory

proceeding commenced by the filing of a notice

of charges, formal investigative order or

similar document, against any INSURED PERSON

for a WRONGFUL ACT or INTERRELATED WRONGFUL

ACT, including any appeal therefrom;

against any INSURED ORGANIZATION for a WRONGFUL ACT

or INTERRELATED WRONGFUL ACT, including any appeal

therefrom.

SECURITIES CLAIM means any CLAIM which in whole or in

part, is:

(a) based upon, arising from or in consequence-of a

SECURITIES TRANSACTION; or

(b) brought by or on behalf of any securities holder of

any INSURED ORGANIZATION.

SECURITIES TRANSACTION means the purchase or sale of, or

offer to purchase or sell, any securities issued by any

INSURED ORGANIZATION.

Page 2 Continued

Form 14-02-0967 (Rev. 7-92)

The definitions of INSURED PERSON and LOSS are amended

by adding the following:

INSURED PERSON also means:

(i) For purposes of coverage under Insuring Clause 1 or

2, any past, present or future employee of the

INSURED ORGANIZATION, but only for WRONGFUL ACTS

based upon, arising from or in consequence of any

SECURITIES TRANSACTION; and

For purposes of coverage under Insuring Clause-3,

the INSURED ORGANIZATION.

-------------------------------------------------------------------------

contribution or indemnity, if the CLAIM directly

results from another CLAIM covered hereunder; or

(iv) a CLAIM that is brought by any INSURED PERSON identified

in section 2c(i) of this endorsement for any WRONGFUL

ACT based upon, arising from or in consequence of any

SECURITIES TRANSACTION.

4. The following exclusions applicable to Insuring Clause 3 are

added:

3.1 The Company shall not be liable under Insuring Clause 3

for LOSS on account of any CLAIM made against any

INSURED ORGANIZATION based upon, arising from, or in

consequence of any deliberately fraudulent act or

omission or any willful violation of any statue or

regulation by any past, present or future chief

financial officer, President or Chariman if a judgment

or other final adjudication adverse to such INSURED

ORGANIZATION establishes such a deliberately fraudulent

act or omission or willful violation.

3.2 The Company shall not be liable under Insuring Clause 3

for that part of LOSS, other than DEFENSE COSTS:

(a) which is based upon, arising from, or in

consequence of the actual or proposed payment by

any INSURED ORGANIZATION of allegedly inadequate

or excessive consideration in connection with its

purchase of securities issued by any INSURED

ORGANIZATION; or

(b) which is based upon, arising from, or in

consequence of any INSURED ORGANIZATION having

gained in fact any profit or advantage to which it

was not legally entitled.

5. The Declarations are amended to add the following to the

Limits of Liability:

6. The Declarations are amended by adding the following to the

Deductible Amounts:

Insuring Clause 3

(D) The INSURED ORGANIZATION $ 250,000.

7. Paregraphs 5.2, 5.3, 5.4 and 5.5 of the Limits of Liability,

Deductible and Coinsurance provision, are deleted in their

entirety and replace with the following:

The Company's maximum liability for each LOSS, whether covered

under one or more Insuring Clauses, shall be the Limit of

Liability for each LOSS set forth in the Declarations.

The Company's maximum aggregate liability for all LOSS on

account of all CLAIMS first made during the same POLICY

PERIOD, whether covered under one or more Insuring Clauses,

shall be the Limit of Liability for each POLICY PERIOD set

forth in the Declarations.

The Company's liability under Insuring Clause 2 or Insuring

Page 4 Continued

Form 14-02-0961 (Rev. 1-92)

-------------------------------------------------------------------------

Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of Endorsement No. 13

this endorsement: MAY 31, 2002 -

To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

LOSS does not include any amount allocated to uncovered

loss pursuant to the ALLOCATION provision. LOSS includes

punitive or exemplary damages which any INSURED

ORGANIZATION becomes legally obligated to pay, provided

that the punitive or exemplary damages are on account of

a SECURITIES CLAIM which is otherwise covered and

provided such punitive or exemplary damages are insurable

under the law pursuant to which coverage hereunder is

construed.

The law of the jurisdiction most favorable to the

insurability of those damages shall control for the

purpose of resolving any dispute between the Company and

the INSURED regarding whether such damages are insurable,

provided that such jurisdiction is where:

(1) those damages were awarded or imposed;

(2) any WRONGFUL ACT occurred for which such damages

were awarded or imposed;

(3) any INSURED is incorporated or has its principal

place of business; or

(4) the Company is incorporated or has its principal

place of business.

3. The following exclusion, applicable to all Insuring Clauses,

is added:

The Company shall not be liable of LOSS on account of any

CLIAM made against any INSURED PERSON brought or maintained

by or on behalf of any INSURED except:

(i) a CLIAM that is a derivative action brought or main-

tained on behalf of an INSURED ORGANIZATION by one or

more persons who are not INSURED PERSONS and who bring

and maintain the CLAIM without the solicitation,

assistance or participation of any INSURED;

(ii) a CLAIM brought or maintained by an INSURED PERSON for

the actual or alleged wrongful termination of the

INSURED PERSON;

(iii) a CLAIM brought or maintained by an INSURED PERSON for

Page 3 Continued

Form 14-02-0961 (Rev. 1-92)

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Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of Endorsement No. 13

this endorsement: MAY 31, 2002 -

To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

Clause 3 shall apply only to that part of each LOSS which is

excess of the applicable Deductible Amount set forth in the

Declarations, and such Deductible Amount shall be borne by

the INSUREDS uninsured and at their own risk. However, the

Deductible Amount applicable to each LOSS on account of any

SECURITIES CLAIMS shall not apply if:

(i) a final adjudication with prejudice pursuant to a trial,

motion to dismiss or motion for summary judgment in such

SECURITIES CLAIM, or

(ii)'a complete and final settlement of such CLAIM with or

without prejudice, establishes that no INSURED in such

SECURITIES CLAIM is liable for any LOSS, other than

DEFENSE COSTS.

The Company shall reimburse any INSURED which has funded a

Deductible Amount if such amount subsequently becomes

inapplicable based upon (i) or (ii) above.

The maximum Deductible Amount applicable to a single LOSS

which is covered under more than one Insuring Clause shall

be the Insuring Clause 3 Deductible Amount set forth in the

Declarations.

8. The following Allocation provision is added:

(a) If a SECURITIES CLAIM covered, in whole or in part,

under Insuring Clauses 2 or 3 results in any INSURED

PERSON under Insuring Clause 2 of any INSURED

ORGANIZATION under Insuring Clause 3 incurring both

LOSS covered hereunder and loss not covered hereunder,

because such SECURITIES CLAIM includes both covered and

uncovered matters, the INSURED and the Company shall

allocate such amount to LOSS as follows:

(i) 100%. of such amount consulting DEFENSE COSTS shall

be allocated to covered LOSS; and

(ii) 100% of such amount other than DEFENSE COSTS shall

be allocated to covered LOSS.

(iii) Notwithstanding paragraphs 8(a)(i) and 8(a)<ii)

above, the INSUREDS and the Company shall allocate

Page 5 Continued

Form 14-02-0961 (Rev. 1-92)

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that part of LOSS subject to exclusions 6.1 a.-_

6.2 based upon the relative legal exposure of the

INSURED PERSONS and the INSURED ORGANIZATION.

(b) If any other CLAIM results in both LOSS covered hereunder

and LOSS not covered hereunder, because such CLAIM

includes both covered and uncovered matters or is made

against both covered and uncovered parties, the INSUREDS

and the Company shall allocate such amount between

covered LOSS and uncovered LOSS based upon the relative

legal exposures of the INSUREDS.

9. For purposes of coverage under Insuring Clause 3 only, the

second paragraph of the Representations and Severability

provision, is deleted in its entirety and replaced with the

following:

With respect to the declarations and statements contained in

the written application(s) for coverage, all declarations

and statements contained in such application and knowledge

possessed by any INSURED PERSON identified in the

Declarations shall be imputed to any INSURED ORGANIZATION for

the purpose of determining if coverage is available.

10. For purpose of coverage under Insuring Clause 3 only, the

Severability of Exclusions provision, paragraph 3.3, is

deleted in its entirety and replaced with the following:

With respect to the exclusions, only facts pertaining to

and knowledge possessed by any past, present or future

chief financial officer, President or Chairman of any

INSURED-ORGANIZATION shall be imputed to any INSURED

ORGANIZATION to determine if coverage is available for such

INSURED ORGANIZATION.

11. The following Presumptive Indemnification provision is added:

If the INSURED ORGANIZATION;

(a) fails or refuses, other than for reason of FINANCIAL

IMPAIRMENT, to indemnify the INSURED PERSON for LOSS;

and

(b) is permitted or required to indemnify the INSURED PERSON

for such LOSS pursuant to common or statutory law,

then notwithstanding any other conditions, provisions or

terms hereunder to the contrary, any payment by the Company

of such LOSS shall be subject to:

(i) the Insuring Clause 2 Deductible Amount set forth in the

Declarations, and

(ii) all of the exclusions.

For purposes of this provision:

(a) the shareholder and board of director resolutions of the

INSURED ORGANIZATION shall be deemed to provide

indemnification for such LOSS to the fullest extent

permitted by common or statutory law; and

(b) FINANCIAL IMPAIRMENT means the status of the INSURED

Page 6 Continued

Form 1402-0961 (Rev. 1-92)

-------------------------------------------------------------------------

CHUBB

Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of Endorsement No. 13

this endorsement: MAY 31, 2002 -

To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

ORGANIZATION resulting from (i) the appointment by any

state or federal official, agency or court of any

receiver, conservator, liquidator, trustee, rehabilitator

or similar official to take control, supervise, manage

or liquidate the INSURED ORGANIZATION, or (ii) the

INSURED ORGANIZATION becoming a debtor in possession.

Form 14-02-3211 (Ed. 2/99)

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

/signature/

Authorized Representative

June 12, 2002

Date

Page 7 Last page

Form 14-02-0961 (Rev. 1-92)

-------------------------------------------------------------------------

Executive Protection Policy

--ENDORSEMENT---

Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of Endorsement No. 14

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that:

1. Only with respect to a CLAIM brought and maintained solely

in australia or New Zealand, against an INSURED ORGANIZATION

organized pursuant to the laws thereof and with its principal

place of business therein:

a. Subsection 5, EXCLUSIONS, is amended by adding the

following to paragraph (c):

(iv) a CLAIM brought or maintained by an INSURED PERSON

for the actual or alleged denial of natural justice

relating to wrongful termination, defamation

relating to wrongful termination, discrimination or

sexual harassment of the INSURED PERSON;

(v) a CLAIM that is caused to be brought in the name of

the INSURED ORGANIZATION pursuant to Section 50 of

the Australian Securities Commission Act, 1989;

b. Subsection 18, DEFINITIONS, is amended as follows:

(1) The following is added to the definition of INSURED

PERSON:

(i) secretary or executive officer of the INSURED

ORGANIZATION,

(ii) receiver and manager of property of the

INSURED ORGANIZATION,

(iii) administrator, official manager or deputy

official manager of the INSURED ORGANIZATION;

(iv) trustee or other person administering a

compromise or arrangement made between the

INSURED ORGANIZATION and another person or

person;

but does not include:

(a) a receiver who is not also manager;

(b) a receiver and manager appointed by a court;

Page 1 Continued

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(2) The definition of SUBSIDIARY is amended by adding

the following:

SUBSIDIARY also means:

(i) any organization whose accounts are or were

consolidated with the accounts of the INSURED

ORGANIZATION-first named in Item 5 of the

Declarations, in accordance with Australian

Accounting Standard AASB 1024; Consolidated

Accounts, or any successor standard;

(ii) any organization in which one or more INSURED

ORGANIZATIONS control or controlled the

composition of the organization's board;

(iii) any organization in which one or more INSURED

ORGANIZATIONS are or were in a position to

to case, or control the casting of, more than

one-half of the maximum number of votes that

might be cast at a general meeting of the

organization; or

(iv) any organization in which one or more INSURED

ORGANIZATIONS holds or held more than one-

half of the issued share capital of the

organization (excluding any part of that

issued share capital that carries no right to

participate beyond a specified amount in a

distribution of either profits or capital).

c. The following subsection is added:

CONFIDENTIALITY AGREEMENT

It is a condition of this coverage section that the

INSURED PERSONS, INSURED ORGANIZATION and/or any persons

at their direction or on their behalf shall not disclose

the existence of this coverage section, its Limits of

Liability, the nature of the liability indemnified, or

the premium payable under it to any third party except

to the extent that:

(a) they are required by law to do so; or

(b) the Company consents, in writing, to such disclosure.

2. Only with respect to a CLAIM brought and maintained solely in

United Kingdom against an INSURED ORGANIZATION organized

pursuant to the laws thereof and with its principal place of

business therein:

a. The following subsections are added:

SPOUSAL LIABILITY

Subsection otherwise to all the terms and conditions of

this coverage section, if a CLAIM against an INSURED

PERSON includes a claim against the INSURED PERSON'S

lawful spouse solely by reason of (i) status as a spouse

if an INSURED PERSON, or (ii) such spouse's ownership

interest in property which the claimant seeks as

recovery for an alleged WRONGFUL ACT of the INSURED

PERSON, all loss which such spouse becomes legally

obligated to pay on account of such claim shall be -

treated as LOSS which the INSURED PERSON becomes legally

Page 2 Continued

Form 14-02-0961 (Rev. 1-92)

-------------------------------------------------------------------------

Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of Endorsement No. 14

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

obligated to pay on account of the CLAIM made against

the INSURED PERSON. All limitations, conditions,

provision and other terms of coverage (including the

deductible) applicable to the INSURED PERSON'S LOSS

shall also be applicable to such spousal loss. This

coverage does not apply to any claim alleging any

wrongful act or omission by the INSURED PERSON'S spouse.

EXTENDED REPORTING PERIOD - FINANCIAL IMPAIRMENT

If, due to or following FINANCIAL IMPAIRMENT of the

PARENT ORGANIZATION, the PARENT ORGANIZATION non-renews

or terminates this coverage section at the instigation of

an officially appointed liquidator, receiver,

administrator or similar official, the INSURED PERSONS

shall have the right to elect an Extended Reporting Period

on the same terms and conditions set forth in subsection 4

EXTENDED REPORTING PERIOD.

CHOICE OF LAW AND FORUM

Any dispute arising under this coverage section shall be

subject to the sole jurisdication of the courts of

Northern Ireland and English law shall apply.

b. Subsection 18, DEFINITIONS, is amended as follows:

(1) The definition of DEFENSE COSTS is amended by adding

the following:

DEFENSE COSTS shall also mean that part of LOSS

consisting of LEGAL REPRESENTATION EXPENSES.

(2) The definition of INSURED PERSON is amended by

adding the following:

INSURED PERSON also means any natural person who

has been, now is or shall become a company secretary

of the INSURED ORGANIZATION.

(3) The following definition is added:

Page 3 Continued

Form 14-02-0981 (Rev. 1-92)

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LEGAL REPRESENATION EXPENSES means that part o_

LOSS consisting of costs, charges, fees and expenses

(other than regular or overtime wages, salaries or

fees of the directors, officers or employees of the

INSURED ORGANIZATION) incurred with the prior written

consent of the Company (which shall not be unreason-

ably withheld) and arising out of the attendance by

an INSURED PERSON at any formal adminstrative or

investigative inquiry by a governmental body or

other institution or professional body that is

empowered by statue to investigate the affairs of

an INSURED PERSON or the INSURED ORGANIZATION.

3. Only with respect to a CLAIM brought and maintained solely in

Ireland, against an INSURED ORGANIZATION organized pursuant

to the laws thereof and with its principal place of

business therein:

a. The following subsections are added:

SPOUSAL LIABILITY

Subject otherwise to all the terms and conditions of this

coverage section, if a CLAIM against an INSURED PERSON

includes a claim against the INSURED PERSON'S lawful

spouse solely by reason of (i) status as a spouse of an

INSURED PERSON, or (ii) such spouse's ownership interest

in property which the claimant seeks as recovery for an

alleged WRONGFUL ACT of the INSURED PERSON, all loss

which such spouse becomes legally obligated to pay on

account of such claim shall be treated as LOSS which the

INSURED PERSON becomes legally obligated to pay on

account of the CLAIM made against the INSURED PERSON.

All limitations, conditions, provisions and other terms

of coverage (including the deductible) applicable to the

INSURED PERSON'S LOSS shall also be applicable to such

spousal loss. This coverage does not apply to any claim

alleging any wrongful act or omission by the INSURED

PERSON'S spouse.

EXTENDED REPORTING PERIOD - FINANCIAL IMPAIRMENT

If, due to or following FINANCIAL IMPAIRMENT of the PARENT

ORGANIZATION, the PARENT ORGANIZATION non-renews or

terminates this coverage section of the instigation of an

officially appointed liquidator, receiver, administrator

or similar official, the INSURED PERSONS shall have the

right to elect an Extended Reporting Period on the same

terms and conditions set forth in subsection 4, EXTENDED

REPORTING PERIOD.

CHOICE OF LAW AND FORUM

Any dispute arising under this coverage section shall be

subject to the sole jurisdication of the courts of the

Republic of Ireland and Irish law shall apply.

b. Subsection 18, DEFINITIONS, is amended as follows:

(1) The definition of DEFENSE COSTS is amended by adding

the following:

Page 4 Continued

Form 14-02-0961 (Rev. 1-92)

-------------------------------------------------------------------------

Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of Endorsement No. 14

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

DEFENSE COSTS shall also mean that part of LOSS

consisting of LEGAL REPRESENTATION EXPENSES.

(2) The definition of INSURED PERSON is amended by adding

the following:

INSURED PERSON also means any natural person who has

been, now is or shall become a company secretary of

the INSURED ORGANIZATION.

(3) The following definition is added:

LEGAL REPRESENTATION EXPENSES means that part of LOSS

consisting of costs, charges, fees and expenses

(other than regular or overtime wages, salaries or

fees of the directors, officers or employees of the

INSURED ORGANIZATION) incurred with the prior written

consent of the Company (which shall not be

unreasonably withheld) and arising out of the

attendance by an INSURED PERSON at any formal

administrative or investigative inquiry by a

governmental body or other institution or

professional body that is empowered by statue to

investigate the affairs of an INSURED PERSON or the

INSURED ORGANIZATION.

4. Only with respect to a CLAIM brought and maintained solely in

Germany, against and INSURED ORGANIZATION organized pursuant

to the laws thereof and with its principal place of business

therein:

a. Subsection 2, Insuring Clause 2, Executive Indemnification

Coverage, is deleted in its entirety.

b. Subsection 5, EXCLUSIONS, EXCLUSIONS APPLICABLE TO

INSURING CLAUSES 1 AND 2, is amended as follows:

(1) The following is added to paragraph (c):

- Provided, however, that this exclusion shal-1 not

apply to CLAIM brought solely in Germany:

Page 5 Continued

Form 14-02-0965 (Rev. 1-92)

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(i) where such, CLAIM is brought:

(a) on behalf of an AKTIENGESELLSCHAFT (AG)

or GESELLSCHAFT MIT BESCHRAENKTER HAFTUNG

(GMBH) by an INSURED PERSON in his or her

capacity as a member of the SUPERVISORY

BOARD of such AG or GMBH; and

(b) against an INSURED PERSON in his or her

capacity as a member of the MANAGEMENT

BOARD of an INSURED ORGANIZATION which has

a corporate seat in Germany and which is

organized under the legal form of an AG

or GMBH, or

(ii)' if such GMBH has no SUPERVISORY BOARD, where

such CLAIM is brought:

(a) on behalf of the GMBH pursuant to approval

by its owners at its GENERAL MEETING

(Gesellschafterversammlung), and

(b) against any INSURED PERSON in his capacity

as a Geschaeftsfuehrer of GMBH.

(2) The following exclusions are added, but solely with

respect to a CLAIM covered, in whole or in part,

pursuant to paragraph 4b (1) of this endorsement:

(i) based upon, arising from or in consequence of

WRONGFUL ACTS or INTERRELATED WRONGFUL ACTS

where all or any part of such acts were

committed, attempted, or allegedly committed

or attempted, prior to the effective date of

this endorsement;

c. The Limits of Liability set forth in Item 2 of the

Declarations are deceased as follows with respect to

any CLAIM for which coverage is provided, in whole or

in part, pursuant to paragraph 4b (1) of this endorsement:

FROM TO

(a) Each LOSS $15,000,000. $5,000,000.

(b) Each POLICY PERIOD $15,000,000. $5,000,000.

The Company's maximum limit of liability to pay any LOSS

under this coverage section, including this endorsement,

shall not exceed the amounts set forth in Item 2 of the

Declarations. This endorsement extends coverage with a

sublimt, which further limits and does not increase the

Company's maximum liability beyond the Limits of

Liability set forth in Item 2 of the Declarations.

d. Subsection 18, DEFINITIONS, is amended as follows:

(1) The following definitions are added:

AKTIENGESELLSCHAFT (AG) means a company traded by

shares and subject to the law of Aktiengesellschaften

(AKTG).

Page 6 Continued

Form 14-02-0961 (Rev. 1-92)

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Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of Endorsement No. 14

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

GESELLSCHAFT MIT BESCHRAENKTER HAFTUNG (GMBH) means

a company limited and subject to the law of limited

companies (GMBH)

GENERAL MEETING means the assembly of owners of a

GMBH.

SUPERVISORY BOARD means an Aufsichtsrat, which is a

group of natural persons elected by shareholders or

employees of an INSURED ORGANIZATION, pursuant to the

' articles of incorporation of such organization to

control and supervise the management of the

MANAGEMENT BOARD.

MANAGEMENT BOARD means Vorstand of an AG or

Geschaeftsfuehrung of a GMBH, which is one or a

group of natural persons appointed by the SUPERVISORY

BOARD or an INSURED ORGANIZATION, pursuant to the

articles of incorporation of such organization, to

control and supervise the management of such

organization.

(2) The definition of INSURED PERSON is amended by

adding the following:

INSURED PERSON also includes former, present and

future members of the board of directors, super-

visory board, administrative board, advisory

council, and board of officers of the INSURED

AKTIENGESELLSCHAFT (AG) or GESELLSCHAFT MIT

BESCHRAENKTER HAFTUNG (GMBH) and its SUBSIDIARIES.

(3) The definition of CLAIM is amended by deleting (i)

and (iv) in their entirety.

e. The following subsection is added:

APPLICABLE LAW AND JURISDICATION

This coverage section shall be construed and interpreted

in accordance with German law. Legal proceedings brought

Page 7 Continued

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against the Company shall be brought in Dusseldorf,

Germany.

Subsection 18, DEFINITIONS, is amended by adding the following

to the definition of INSURED PERSON, but only with respect to

a CLAIM brought and maintained solely in Belguim against an

INSURED ORGANIZATION organized pursuant to the laws thereof

and with its principal place of business therein:

INSURED PERSON also means any natural person who is a manager

or a member of the executive committee of the INSURED

ORGANIZATION; and natural person who would be held liable by

a court as a 'de facto' director of the INSURED ORGANIZATION.

6. Only with respect to a CLAIM brought and maintained solely

in the Netherlands, against an INSURED ORGANIZATION organized

pursuant to the laws thereof and with its principal place of

business therein:

a. Subsections 5 and 6, EXCLUSIONS, are amended as follows:

(1) Paragraph 5(b) is deleted in its entirety.

(2) Paragraph 5(e) is amended by deleting "mental or

emotional distress".

(3) The following exclusion is added to subsection 6:

(g) for libel or slander;

Subsection 18, DEFINITIONS, is amended by adding the

following to the definitions of INSURED PERSON:

INSURED PERSON also means any natural person who has

been, now is, or shall become a duly elected or appointed

member of the management of the INSURED ORGANIZATION.

Subsection 18, DEFINITIONS, is amended as follows:

The definition of LOSS is deleted in its entirety and

the following is inserted:

LOSS means the total amount which any INSURED PERSON

becomes legally obligated to pay on account of each CLAIM

and for all CLAIMS in each POLICY PERIOD and the Extended

Reporting Period, if exercised, made against them for

WRONGFUL ACTS for which coverage applies, including, but

not limited to, damages, judgments, settlements, costs

and DEFENSE COSTS. LOSS does not include:

(i) any amount not indemnified by the INSURED ORGANI-

ZATION for which the INSURED PERSON is absolved from

payment by reason of any covenant, agreement, or

court order;

any amount incurred by the INSURED ORGANIZATION

(including its board of directors or any committee

of the board of directors) in connection with the

investigation or evaluation of any CLAIM or

potential CLAIM by or on behalf of the INSURED

ORGANIZATION,

(iii) matters uninsurable under the law pursuant to which

this coverage section is construed; or

(iv) fines or penalties imposed by law or the multiple

portion of any multiplied damage award. However,

Page 8 Continued

-------------------------------------------------------------------------

Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of Endorsement No. 14

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

fines, penalties or multiplied damage awards shall

not include punitive or exemplary damages in any

CLAIM other than an EMPLOYMENT CLAIM, if such

circumstances are insurable under the law pursuant

to which this coverage section is construed. The

law of the jurisdiction most favorable to the

insurability of those damages shall control for the

purpose of resolving any dispute between the Company

and the INSURED regarding whether such damages are

insurable, provided that such jurisdiction is where:

' (1) those damages were awarded or imposed;

(2) any WRONGFUL ACT occurred for which such

damages were awarded or imposed;

(3) any INSURED ORGANIZATION is incorporated or

has its principal place of business; or

(4) the Company is incorporated or has its

principal place of business.

b. The following definition is added:

EMPLOYMENT CLAIM means any CLAIM which is brought or

maintained by or on behalf of any past, present or

prospective employee(s) of the INSURED ORGANIZATION

against any INSURED for any WRONGFUL ACT in connection

with any actual or alleged wrongful dismissal, discharge

or termination of employment, breach of any oral or

written employment contract or quasi-employment contract,

employment-related misrepresentation, violation of

employment discrimination laws (including workplace and

sexual harassment), wrongful failure to employ or promote,

wrongful discipline, wrongful deprivation of a career

opportunity, failure to grant tenure, negligent

evaluation, invasion of privacy, employment-related

defamation or employment-related wrongful infliction of

emotional distress.

8. Solely with respect to a CLAIM for punitive or exemplary

damages insurable pursuant to section 7a of this endorsement,

subsection 6, EXCLUSIONS: EXCLUSIONS APPLICABLE TO INSURING

CLAUSE 1 ONLY, is amended by deleting paragraph (b)-in its

entirety an inserting it as a new paragraph (g) in subsection

Page 9 Continued

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5, EXCLUSIONS: EXCLUSIONS APPLICABLE TO INSURING CLAUSES 1

AND 2.

9. Subsection 5, EXCLUSIONS: EXCLUSIONS APPLICABLE TO INSURING

CLAUSES 1 AND 2, is amended by deleting paragraphs (c) and

(f) in their entirety with respect to a CLAIM brought and

maintained:

a. Solely and entirely in jurisdiction other than the

United States of America, its territories and possessions;

and

b. Subject to the substantive and procedural laws of a

jurisdiction other than the United States of America,

its territories and possessions.

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

/signature/

Authorized Representative

June 12, 2002

Date

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Form 14-02-0961 (Rev. 1-92)

-------------------------------------------------------------------------

MARGINAL UNITED STATES P..J STATE TAX RATES means the marginal

rates of United States Federal, state and commonwealth income

taxation of the INSURED ORGANIZATION which pays the LOSS in

the United States for the tax year in which such LOSS is

written off and shall include, if any, foreign tax credits

accruing as a result of such LOSS.

4. Solely with respect to that part of LOSS covered pursuant to

paragraphs one and two of this endorsement, the Limits of

Liability specified in Item 3 of the Declarations are

decreased as follows:

FROM TO

(a) Each LOSS $15,000,000. $500,000.

(b) Each POLICY PERIOD $15,000,000. $500,000.

Such Limits are sublimits which are a part of and not in

addition to the Limits otherwise set forth in Item 3 of the,

Declarations.

5. The INSUREDS shall cooperate with any attempt by the Company

to pay the LOSS directly to the INSURED ORGANIZATION

sustaining the LOSS.

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

/signature/

Authorized Representative

June 12, 2002

Date

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Executive Protection Policy

ENDORSEMENT

Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of - Endorsement No. 15

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that:

1. The Company shall adjust the amount of LOSS PAYMENT in the

United States to compensate for additional United States

Federal, state or commonwealth tax liability incurred by

INSUREDS as a result of such LOSS PAYMENT in the United

States rather than in the country in which such LOSS was

sustained, provided the:

a. LOSS was sustained by an INSURED ORGANIZATION not subject

to United States Federal, state or commonwealth tax

provisions; and

b. such LOSS PAYMENT is reportable income under the United

States Internal Revenue Code, the tax laws of any state

or commonwealth of the United States, or rulings or

regulations promulgated thereunder.

2. LOSS PAYMENT shall be adjusted using the following formula:

FINAL PAYMENT=

LOSS PAYMENT times One minus the MARGINAL FOREIGN TAX RATE

divided by

One minus the sum of the MARGINAL UNITED

STATES AND STATE TAX RATES

3. Subsection 18, DEFINITIONS, is amended by adding the

following:

FINAL PAYMENT means the LOSS PAYMENT and the amount of the

tax adjustment described in paragraph two of this endorsement.

LOSS PAYMENT means LOSS paid prior to the tax adjustment

described in paragraph two of this endorsement.

MARGINAL FOREIGN TAX RATE means the marginal rate of income

taxation of the INSURED ORGANIZATION which sustained the

LOSS for the tax year in which such LOSS is written off.

Page 1 Continued

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Executive Protection Policy

ENDORSEMENT

Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of - Endorsement No. 16

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-60JILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that Subsection 14, CHANGE IN EXPOSURE, second

paragraph is deleted in its entirety and replaced with the

following: _

If the fair value of all cash, securities, assumed indebtedness

and other consideration paid by the INSURED ORGANIZATION for any

such acquisition or creation exceeds 25% of the total assets of

the PARENT ORGANIZATION as reflected in the PARENT ORGANIZATION'S

most recent audited consolidated financial statements, the

PARENT ORGANIZATION shall give written notice of such acquisition

or creation to the Company as soon as practicable together with

such information as the Company may require and shall pay any

reasonable additional premium required by the Company.

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

/signature/

Authorized Representative

June 12, 2002

Date

Page 1 Last page

Form 14-02-09B1 (Rev. 1-92)

-------------------------------------------------------------------------

Executive Protection Policy

ENDORSEMENT

Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of - Endorsement No. 17

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that Subsection 10, REPORTING AND NOTICE, is amended

by deleting the first paragraph in its entirety and replacing it

with the following:

The INSUREDS shall, as a condition precedent to exercising

their rights under this coverage section, give to the

Company written notice of a CLAIM made against any of them

For a WRONGFUL ACT as soon as practicable after the Risk

Management Department and General Counsel of the INSURED

ORGANIZATION first learns of such claim.

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

/signature?

Authorized Representative

June 12, 2002

Date

Page 1 Last page

Form 14-02-0867 (Rev. 1-92)

-------------------------------------------------------------------------

Executive Protection Policcy

ENDORSEMENT

Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of - Endorsement No. 18

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that Subsection 5, EXCLUSIONS: Exclusions Applicable

to Insuring Clauses 1 and 2, is amended by adding the following

to paragraph (c): -

(vi) a CLAIM (whether or not brought in the name of,

or behalf of, or in the right of the INSURED

ORGANIZATION) brought by or on behalf of a

' bankruptcy trustee, magistrate or any other person

appointed by a bankruptcy court or judge, or

authorized under applicable law to act on behalf of

a debtor or brought by or on behalf or any creditor

of the INSURED ORGANIZATION.

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

/signature/

Authorized Representative

June 12, 2002

Date

Page 1 Last page

Form 14-02-0961 (Rev. 1-92)

-------------------------------------------------------------------------

Executive Protection Policy

ENDORSEMENT

Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of - Endorsement No. 19

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-601 ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that with respect to each loss on account of any

claim, which in whole or in part, is based upon, arising from

or in consequence of any securities transaction, the deductible -

amount specified in Item 4 of the Declarations is increased as

follows:

FROM TO

INSURING-CLAUSE 3: $100,000. $250,000.

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

/signature/

Authorized Representative

June 12, 2002

Date

Page 1 Last page

Form 14-02-0961 (Rev. 1-92)

-------------------------------------------------------------------------

Executive Protection Policy

ENDORSEMENT

Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of Endorsement No. 20

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-60J ILL

Issued to: RICHARDSON ELECTRONICS, LTD.

It is agreed that Item 6, INSURED PERSONS, of the Declaration

page is amended to include the following:

-Any Employee of the Insured Organization with the title

Manager

-Trustees and Governors of corporate Insured Organizations

-General Counsel

-Risk Manager

-Board of Managers of any Insured Organization incorporated

in the United States of America

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

/signature/

Authorized Representative

June 12, 2002

Date

Page i Last page

Form 14-02-0967 (Rev. 1-92)

-------------------------------------------------------------------------

Executive Protection Policy

ENDORSEMENT

Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY

Effective date of - Endorsement No. 21

this endorsement: MAY 31, 2002

To be attached to and form part of

Policy No. 8125-64-601ILL

ISSUED to: RICHARDSON ELECTRONICS, LTD.

It is agreed that Item 7, Extended Reporting Period of the

Declarations page is amended to read as follows:

Item 7. Extended Reporting Period:

(A) Additional Premium: 75% OF THE ANNUAL PREMIUM

(B) Additional Period: ONE YEAR

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

/signature?

Authorized Representative

March 3, 2003

Date

Page 1 Last page

Form 14-02-0961 (Rev. 1-92y

-------------------------------------------------------------------------

EX-10 6 exhibit10v2.htm DIRECTORS AND OFFICERS INSURANCE POLICY BY STPAUL AMENDMENT OF PRIMARY POLICY DEFINITION TO FOLLOW CHUBB D&O COVERAGE

Exhibit 10(v)(2)

CNA INSURANCE COMPANIES CNA Plaza Chicago, IL 60685

DECLARATIONS EXCESS INSURANCE POLICY

NOTICE

THIS IS A "CLAIMS MADE" POLICY AND, SUBJECT TO ITS PROVISIONS, APPLIES ONLY

TO ANY CLAIM

FIRST MADE AGAINST THE INSUREDS DURING THE POLICY PERIOD. NO COVERAGE

EXISTS FOR ANY

CLAIM FIRST MADE AFTER THE END OF THE POLICY PERIOD UNLESS, AND TO THE

EXTENT, THE

EXTENDED REPORTING PERIOD APPLIES. THE LIMIT OF LIABILITY SHALL BE REDUCED

AMOUNTS INCURRED AS DEFENSE COSTS.

COVERAGE PROVIDED BY

Continental Casualty Company

ACCOUNT NUMBER

45386

POLICY NUMBER DOX 600028634

AGENCY 910 701862

AGENT Mesirow Insurance Services, IBC.

610 Central Ave.

Suite 200

Highland Park, IL 60035

Robina Fisher

NAMED ENTITY AND PRINCIPAL ADDRESS

Item 1. Richardson Electronics Ltd

40W267 Keslinger Road

P.O. Box 393

Lafox, IL 60147 Attn. Dario Sacomani

Item Policy Period:

5/31 /02 To 5/31 /03

12:01 A.M. Standard Time at the Principal Address stated in Item 1.

Item 3.

Limit of Liability (Inclusive of Defense Costs):

$ 5,000,000 Maximum aggregate Limit of Liability each Policy Period.

Item 4. Schedule of Underlying Insurance:

A. Primary Policy

Name of Carrier Policy No. Limits Ded/Ret. Amount

Federal Insurance Company 8125-64-60J ILL $15,000,000 0/0/$100,000

B. Underlying Excess Policy(ies):

*** SEE ATTACHED SCHEDULE ***

Item 5. Policy Premium $ 30,900

Item 6. Forms and Endorsements forming a part of this policy at inception:

G-11713-A12, FIG-1005-A, FIG-1006-A, FIG-1014-A, FIG-0787-A

These Declarations along with the completed and signed Application and the

Excess Insurance Policy, shall constitute the contract

between the Insureds, the Named Entity, and the Insurer. ,

Authorized Representative: /signature/

Chairman /signature/

Secretary /signature/

Date: 10/30/02

G-17728-A

(ED 04/92)

-------------------------------------------------------------------------

UDERLYING EXCESS POLICY SCHEDVLE

Directors' & Officers'

Name of Carrier St. Paul Fire and Marine Insurance Company

Policy No. 512CM0138

Limits

$15,000,000 Excess of

Underlying Limit $15,000,000

G-17728-A

(ED 04/92)

-------------------------------------------------------------------------

CNA

For All the Commitments You Make

EXCESS INSURANCE POLICY

In consideration of the payment of the premium and in reliance on all

statements made and information furnished to Continental

Casualty Company (hereinafter called the "Insurer'), and/or to the insurers

of the Underlying Insurance, including the statements

made in the Application made a part hereof and subject to all of the

provisions of this Policy, the Insurer and the Insureds agree

as follows:

1. INSURING AGREEMENT

The Insurer shall provide the Insureds with excess coverage over the

Underlying Insurance as set forth in Item 4 of the

Declarations during the Policy Period set forth in Item 2 of the

Declarations. Coverage hereunder shall attach only after

all such Underlying Insurance has been exhausted by payments for losses and

shall then apply in conformance with the

same provisions of the Primary Policy at its inception, except for premium,

limit of liability and as otherwise specifically

set forth in the provisions of this Policy.

II. POLICY DEFINITIONS

Application shall mean the written application for this Policy, including

any materials submitted therewith, which together

shall be on file with the Insurer and deemed a part of and attached hereto

as if physically attached to this Policy.

Named Entity means the organization named in Item 1 of the Declarations.

Insureds means those persons or organization(s) insured under the Primary

Policy, at its inception.

Policy Period means the period from the effective date and hour of this

Policy as set forth in Item 2 of the Declarations, to

the Policy expiration date and hour set forth in Item 2 of the

Declarations, or its earlier cancellation date or termination

date, if any.

Primary Policy means the Policy scheduled in Item 4 (a) of the Declarations.

Underlying Insurance means all those Policies scheduled in Item 4 of the

Declarations and any Policies replacing them.

III. MAINTENANCE OF UNDERLYING INSURANCE

All of the Underlying Insurance scheduled in Item 4 of the Declarations

shall be maintained during the Policy Period in

full effect, except for any reduction of the aggregate limit(s) of

liability available under the Underlying Insurance solely by

reason of payment of losses thereunder, Failure to comply with the

foregoing shall not invalidate this Policy but the

Insurer shall not be liable to a greater extent than if this condition had

been complied with. To the extent that any

Underlying Insurance is not maintained in full effect during the currency

of this Policy Period, then the Insureds shall

be deemed to have retained any loss for the amount of the limit of

liability of any Underlying Insurance which is not

maintained as set forth above.

In the event of any actual or alleged (a) failure by the Insureds to give

notice or to exercise any extensions under any

Underlying Insurance or (b) misrepresentation or breach of warranties by

any of the Insureds with respect to any

Underlying Insurance, the Insurer shall not be liable hereunder to a

greater extent than it would have been in the

absence of such actual or alleged failure, misrepresentation or breach.

It is further a condition of this Policy that the Insurer shall be notified

in writing, as soon as practicable of cancellation

and/or alteration of any provisions of any of the policies of Underlying

Insurance.

IV. LIMIT OF LIABILITY

The amount set forth in Item 3 of the Declarations shall be the maximum

aggregate Limit of Liability of the Insurer for the

Policy Period.

Costs of defense shall be part of and not in addition to the Limit of

Liability in Item 3 of the Declarations, and such costs of

defense shall reduce the Limit of Liability stated in Item 3 of the

Declarations.

G-17729-A(ED.04/92) Page1of4

-------------------------------------------------------------------------

V. DEPLETION OF UNDERLYING LIMIT(S)

In the event of the depletion of the limit(s) of liability of the

Underlying Insurance solely as the result of actual payment of

losses thereunder by the applicable insurers, this Policy shall, subject to

the Insurer's Limit of Liability and to the other

terms of this Policy, continue to apply to losses as Excess Insurance over

the amount of insurance remaining under such

Underlying Insurance. In the event of the exhaustion of all of the limits)

of liability of such Underlying Insurance solely

as a result of payment of losses thereunder, the remaining limits available

under this Policy shall, subject to the Insurer's

Limit of Liability and to the other provisions of this Policy, continue for

subsequent losses as primary insurance and any

retention specified in the Primary Policy shall be imposed under this

Policy as to each claim made; otherwise no

retention shall be imposed under this Policy.

This Policy only provides coverage excess of the Underlying Insurance. This

Policy does not provide coverage for any

loss not covered by the Underlying Insurance except and to the extent that

such loss is not paid under the Underlying

Insurance solely by reason of the reduction or exhaustion of the available

Underlying Insurance through payments of

loss thereunder. In the event the insurer of one or more of the Underlying

Insurance policies fails to pay loss in

connection with any claim covered under the Underlying Insurance as a

result of the insolvency, bankruptcy, or

liquidation of said insurer, then the Insureds hereunder shall be deemed to

have retained any loss for the amount of the

limit of liability of said insurer which is not paid as a result of such

insolvency, bankruptcy or liquidation.

If any Underlying Insurance bears an effective date which is prior to the

effective date of this Policy and if any such

insurance becomes exhausted or impaired by payment of loss with respect to

any claim which, shall be deemed to be

made prior to the effective date of this Policy, then with respect to any

claim made after the effective date of this Policy,

the Insureds shall be deemed to have retained any loss for the amount of

any such Underlying Insurance which is

exhausted or impaired by payment of loss with respect to such claim made

prior to the effective date of this Policy.

VI. CLAIM PARTICIPATION

The Insured shall not admit liability, consent to any judgment against

them, or agree to any settlement which is

reasonably likely to involve the Limit of Liability of this Policy without

the Insurer's consent, such consent not to be

unreasonably withheld.

The Insurer may, at its sole discretion, elect to participate in the

investigation, settlement or defense of any claim against

any of the Insureds for matters covered by this Policy even if the

Underlying Insurance has not been exhausted.

All provisions of the Underlying Insurance are considered as part of this

Policy except that it shall be the duty of the

Insureds and not the duty of the Insurer to defend any claims against any

of the Insureds.

VII. SUBROGATION - RECOVERIES

In that this Policy is "Excess Coverage", the Insureds and the Insurer's

right of recovery against any person or other

entity may not be exclusively subrogated. Despite the foregoing, in the

event of any payment under this Policy, the

Insurer shall be subrogated to all the Insured's rights of recovery against

any person or organization, and the Insureds

shall execute and deliver instruments and papers and do whatever else is

necessary to secure such rights.

Any amounts recovered after payment of loss hereunder shall be apportioned

in the inverse order of payment to the

extent of actual payment. The expenses of all such recovery proceedings

shall be apportioned in the ratio of respective

recoveries.

VIII. NOTICE

The Insurer shall be given notice in writing as soon as is practicable in

the event of (a) the cancellation of any Underlying

insurance and (b) any additional or return premiums charged or allowed in

connection with any Underlying Insurance.

Notice regarding (a) and (b) above shall be given to Manager, Directors and

Officers Liability Underwriting, CNA

Insurance Companies, CNA Plaza, Chicago, Illinois 60685.

G-17729-A(ED.04/92) Page2of4

-------------------------------------------------------------------------

The Insurer shall be given notice as soon as practicable of any notice of

claim or any situation that could give rise to a

claim under any Underlying Insurance. Notice of any claim to the Insurer

shall be given in writing to Manager,

Professional Liability Claims, CND, Insurance Companies, CNA Plaza,

Chicago, Illinois 60685.

IX. COMPANY AUTHORIZATION CLAUSE

By acceptance of this Policy, the Named Entity named in Item 1 of the

Declarations agrees to act on behalf of all the

Insureds with respect to the giving and receiving of notice of claim or

cancellations, the payment of premiums and the

receiving of any return premiums that may become due under this Policy; and

the Insureds agree that the Named Entity

shall in all cases be authorized to act on their behalf.

X. ALTERATION

No change in or modification of this Policy shall be effective except when

made by endorsement signed by an authorized

employee of the Insurer or any of its agents relating to this Policy.

XI. POLICY CANCELLATION

This Policy may be cancelled by the Named Entity at any time by written

notice or by surrender of this Policy to the

Insurer. This Policy may also be cancelled by or on behalf of the Insurer

by delivery to the Named Entity or by mailing

to the Named Entity, by registered, certified or other first class mail, at

the address shown in Item 1 of the Declarations,

written notice stating when, not less than thirty (30) days thereafter, the

cancellation shall become effective. The mailing

of such notice as aforesaid shall be sufficient proof of notice and this

Policy shall cancel at the date and hour specified in

such notice.

If the period of limitation relating to the giving of notice is prohibited

or made void by any law controlling the construction

thereof, such period shall be deemed to be amended so as to be equal to the

minimum period of limitation permitted by

such law.

The Insurer shall refund the unearned premium computed at less than

pro-rata if the Policy is cancelled in its entirety by

the Named Entity. Under any other circumstances the refund shall be

computed pro-rata.

XI1. EXCLUSIONS

Notwithstanding any provisions of the Underlying Insurance, the Insurer

shall not be liable to make payment for loss in

connection with any claim based upon, arising out of, relating to, directly

or indirectly resulting from, or in consequence of,

or in any way involving:

1. nuclear reaction, radiation, or contamination regardless of causes;

2. pollutants, including but not limited to loss arising out of any: ,

a. request, demand or order that any of the Insureds or others test for,

monitor, clean up, remove, contain,

treat, detoxify or neutralize, or in any way respond to, or assess the

effects of pollutants, or

b. claim by or on behalf of a governmental authority for damages because of

testing for, monitoring, cleaning up,

removing, containing, treating, detoxifying or neutralizing or in any way

responding to or assessing the effects

of pollutants.

Pollutants means any solid, liquid, gaseous or thermal irritant or

contaminant, including smoke, vapor, soot, fumes, acids,

alkalis, chemicals and waste. Waste includes materials to be recycled,

reconditioned or reclaimed.

G-17729-A (ED. 04/92) Page 3 of 4

-------------------------------------------------------------------------

XIII. CONDITIONS

No action shall be taken against the Insurer unless, as a condition

precedent, there shall have. been full compliance with

all the provisions of this Policy, nor until the amount of the Insureds

obligation to pay shall have been finally determined

either by final and nonappealable judgement against the Insureds after

trial, or by written agreement of the Insureds, the

claimant and the Insurer.

/signature/

Chairman of the Board

/signature/

Secretary

G-17729-A (ED. 04192) Page 4 of 4

-------------------------------------------------------------------------

STATE PROVISIONS - ILLINOIS

Any cancellation or non-renewal provisions contained in the policy to which

this endorsement is attached are deleted and replaced

by the following:

I. Cancellation

A. This policy can be cancelled by either the first named insured or the

insurer.

1. The named insured can cancel this policy at any time by mailing advance

written notice to the insurer

stating when the cancellation is to be effective.

2. The insurer can cancel this policy by giving written notice to the named

insured at least:

a. 10 days, if cancellation is for non-payment of premium. However, the

named insured may

continue the coverage by payment in full at any time prior to the effective

date of cancellation;

b. 30 days, if cancellation is for any other reason provided that the policy

has been in effect for 60

days or less; or

c. 60 days, if the policy has been in effect for more than 60 days and

cancellation is for any other

reason as set forth below;

before the effective date of cancellation..

B. The insurer will mail notice to the named insured at the last mailing

address known to the insurer, and a copy

shall also be mailed to the named insured's agent.

C. Notice of cancellation will state the effective date of cancellation. The

policy will end on that date. The specific

reason for such cancellation shall also be stated.

D. Proof of mailing will be sufficient proof of notice.

E. If this policy is cancelled, the insurer will send the first named

insured any premium refund due. If the insurer

cancels, the refund will be pro-rata. If the named insured cancels, the

refund may be less than pro-rata.

This endorsement, which forms a part of and is for attachment to the

following described Policy issued by the designated .

Insurers takes effect on the effective date of said Policy, unless another

effective date is shown below, at the hour stated in

said Policy and expires concurrently with said Policy.

Page 1 of 3

CNA INSURANCE COMPANIES

G-11713-A12

(ED. 10/87)

-------------------------------------------------------------------------

The cancellation will be effective even if the insurer has not made or

offered a refund.

If this policy has been in effect for more than 60 days, the insurer shall

not terminate this policy except for one or

more of the following conditions:

1. non-payment of premium;

2. material misrepresentation;

3. material increase in the hazard insured against;

4. violation of any terms or conditions of the policy by the named insured;

5. substantial loss of reinsurance by the insurer affecting this particular

type of insurance, certified to the insurance regulatory authority;

6. a determination by the insurance regulatory authority that continuation

of the policy will place the insurer

in violation of the insurance laws of the state.

II. Non-Renewal

If the insurer decides not to renew this policy, 60 days advance written

notice shall be mailed to the named insured as the

last known address. -

The notice shall include the specific reason for such non-renewal.

If the insurer offers to renew this policy at terms which involve an

increase in premium of 30 % or more or changes in

deductibles or coverage that materially alter the policy, such terms will

take effect on the renewal date if the insurer has

notified. the named insured of the terms at least 60 days prior to the

expiration date of this policy.

This endorsement, which forms a part of and is for attachment to the

following described Policy issued by the designated

Insurers takes effect on the effective date of said Policy, unless another

effective date is shown below, at the hour stated in

said Policy and expires concurrently with said Policy.

Page 2 of 3

CNA INSURANCE COMPANIES

G-11713-A12

(ED. 10/87)

-------------------------------------------------------------------------

This notice is to advise the named insured that should any complaints arise

regarding this insurance, the named insured may

contact the following:

CNA Insurance Companies

Attn: Consumer Affairs Department - 13S

CNA Plaza Chicago, IL 60685

and/or

Illinois Department of Insurance

Consumer Division or Public Service Section

Springfield, II, 62767

Page 3 of 3

G-11713-A12

(ED. 10/87)

-------------------------------------------------------------------------

PRIOR NOTICE EXCLUSION

In consideration of the premium paid for this policy, it is agreed that

SectionXII. EXCLUSIONS, is amended with the addition of the

following:

Any fact, circumstance, situation, transaction or event which constitutes

the basis of notice of claim to the Insurer or any insurance

carriers designated in Item 4. of the Declarations, prior to the inception

date of this policy.

All other provisions of the policy remain unchanged

Page 1 of 1

FIG-1005-A

(Ed. 07/94)

-------------------------------------------------------------------------

PRIOR OR PENDING LITIGATION EXCLUSION

In consideration of the premium paid for this policy, it is agreed that

Section XII is amended with the addition of the following:

3. Any fact, circumstance, situation, transaction or event underlying or

alleged in any prior and/or

pending litigation as of 5/31/91, regardless of the legal theory upon which

such

litigation is predicated.

All other provisions of the policy remain unchanged.

Page 1 of 1

FIG-1006-A

(ED. 07/94)

-------------------------------------------------------------------------

INAPPLICABILITY OF PRIMARY POLICY ENDORSEMENT

In consideration of the premium paid for this policy, it is agreed that for

the coverage afforded under this policy endorsement number

8. to the Primary Policy shall not apply to this Policy.

All other provisions of the Policy remain unchanged.

Page 1 of 1

FIG-1014-A

07/94

-------------------------------------------------------------------------

AMENDMENT OF PRIMARY POLICY DEFINITION TO FOLLOW CHUBB D&O COVERAGE

In consideration of the premium paid for this Policy, it is agreed that:

I. Item 4.A. of the Declarations is deleted and the following is substituted:

"A. Primary Policy

Name of Carrier: Federal Insurance Company

Policy No.8125-64-60J ILL

Applicable Coverage Section:

Executive Liability and Indemnification Coverage Section (Form 14-02-0943)

and any applicable

endorsements and General Terms and Conditions (Form 14-02-0941) pertaining

thereto

Limit of Liability of Primary Policy Applicable to Executive Liability and

Indemnification Coverage

Section

(a) each Loss: $15,000,000

(b) each Policy Period: $15,000,000

Deductible of Primary Policy Applicable to Executive Liability and

Indemnification Coverage

Section:

$100,000

2. II. POLICY DEFINITIONS is amended by deleting "Primary Policy means the

Policy scheduled in Item 4.A.

of the Declarations" and substituting the following:

"Primary Policy" means only the Executive Liability and Indemnification

Coverage Section (Form 14-02-

0943), and any applicable endorsements and General Terms and Conditions

(Form 14-02-0941) pertaining

thereto of the Executive Protection Policy issued by Federal Insurance

Company, as such policy is identified in

Item 4.A. of the Declarations, and shall not include any other coverage

section contained in such policy."

All other provisions of the Policy remain unchanged.

Page 1 of 1

FIG-0787-A

(ED. 12/93)

-------------------------------------------------------------------------

EX-10 7 exhibit10v3.htm DIRECTORS AND OFFICERS INSURANCE POLICY BY CNA CI-IVBB

Exhibit 10(v)(3)

The StPaul

ENDORSEMENT OR RIDER N0.

ATTACHED TO AND FORMING PART OF POLICY NO. 512CM0138

DATE ENDORSEMENT OR RIDER EXECUTED 08/16/02

EFFECTIVE DATE OF ENDORSEMENT OR RIDER

12:01 A.M. LOCAL TIME AS

SPECIFIED IN THE POLICY

5/3 I /02

ISSUED TO

RICHARDSON ELECTRONICS, LTD.

RENEWAL CERTIFICATE

XP048 Ed. 5/98,

Item 1. Insured and Insured's Address:

RICHARDSON ELECTRONICS, LTD.

40 WEST 267 KESLINGER ROAD

LA FOX, IL 60147

Item 2. Policy Period Item 3. Limit of Liability

From: 12:01 A.M.05/31/02 $15,000,000

To: 12:01 A.M. 05/31/03

Local time at the address shown in Item 1.

Item 4. Schedule of Underlying Insurer(s):

Underlying Insurer: FEDERAL INSURANCE COMPANY

Policy Number 8125 - 64 - 6OJ ILL

Policy Period 05/31/02 - 05/31/03

Limit of Liability $15,000,000

Retention Amount $100,000

Total Amount of Underlying Limit of Liability $15,000,000 plus any

applicable retentions or deductibles under the Primary Policy.

In consideration of the payment of the premium, and in reliance upon the

completeness and accuracy of the statements and

disclosures made to the Insurer or any underlying insurer by application,

including its attachments, the Insurer and the Insured(s)

agree that the above numbered policy is renewed for the Policy Period

specified above, subject to the Declarations and any

amendments thereto as stated above, the insuring agreement, terms,

conditions and limitations of this policy except as hereinafter

provided:

Exceptions:

EXCESS OF SPECIFIED COVERAGES, XP016 Ed. 05-98

Nothing herein contained shall be held to vary, alter, waive, or extend any

of the terms, conditions, provisions, agreements or

limitations of the above mentioned Policy, other than as above stated.

By COPY

AGENT Authorized Representative

-----------------------------------------------------------------------

The StPaul

ENDORSEMENT OR RIDER NO.

ATTACHED TO AND FORMING PART DATE ENDORSEMENT OR ' EFFECTIVE DATE OF

ENDORSEMENT OR RIDER

OF POLICY NO. RIDER EXECUTED 12:01 A.M. LOCAL TIME AS

- SPECIFIED IN THE POLICY

512CM0138 8/16/02 15/31/02

' ISSUED TO

RICHARDSON ELECTRONICS, LTD.

CANCEL AN EXISTING ENDORSEMENT

XPO10 Ed. 5/98

In consideration of the premium charged, it is understood and agreed that:

The attached policy is amended by canceling and terminating a certain

endorsement (hereinafter called

Canceled Endorsement) attached to the said policy and more fully described

as follows:

ENDORSEMENT NO.XP048 Ed. 05/98 - RENEWAL CERTIFICATE

so that from and after the effective date hereof the attached policy shall

continue in force without the

amendment contained in the said Canceled Endorsement.

Nothing herein contained shall be held to vary, alter, waive, or extend any

of the terms, conditions, provisions, agreements or

limitations of the above mentioned Policy, other than as above stated.

By COPY

Authorized Representative

AGENT

-----------------------------------------------------------------------

INSURING CLAUSE

In consideration of the payment of the premium, in reliance upon the

statements made to the Insurer by application

including its attachments, a copy of which is attached to and forms a part

of this policy, and any material submitted

therewith (which shall be retained on file by the Insurer and to be deemed

attached hereto), and except as hereinafter

otherwise provided or amended, this policy is subject to the same Insuring

Agreement(s), Terms, Conditions and

Limitations as provided by the policy stated in Item 8 of the Declarations

and any amendments thereto, provided:

A. 1. the Insurer has received prior written notice from the Insured(s) of

any amendments to the policy stated in

Item 8 of the Declarations, and

2. the Insurer has given to the Insured(s) its written consent to any

amendments to the policy stated in Item 8 of

the Declarations, and

3. the Insured has paid any required additional premium.

B. This policy is not subject to the same premium or the amount and Limit of

Liability of the policy stated in Item 8

of the Declarations.

TERMS, CONDITIONS AND LIMITATIONS

Section 1. UNDERLYING INSURANCE

A. It is a condition precedent to the Insured(s) rights under this policy

that the Insured(s) notify the Insurer, as soon

as practicable in writing, of a failure to maintain in full force and

effect, except as provided for under Section

2(B), and without alteration of any Terms, Conditions, Limit of Liability

or Retentions, any of the underlying

insurance policies as stated in Item 7 of the Declarations.

B. Failure to maintain, as set forth above, any of the underlying insurance

policies as stated in Item 7 of the

Declarations, except as provided for under Section 2(B), shall not

invalidate this policy, but the liability of the

Insurer for loss under this policy shall apply only to the same extent it

would have been liable had the underlying

insurance policies been maintained as set forth above. In no event shall

the Insurer be liable to pay loss under this

policy until the total amount of the Underlying Limit of Liability, as

stated in Item 7(E) of the Declarations, has

been paid solely by reason of the payment of loss.

Section 2. LIMIT OF LIABILITY

A. The Insurer shall only be liable to make payment under this policy after

the total amount of the Underlying Limit

of Liability as stated in Item 7(E) of the Declarations has been paid

solely by reason of the payment of loss.

B. In the event of the reduction or exhaustion of the total amount of the

Underlying Limit of Liability as stated in

Item 7(E) of the Declarations solely by reason of the payment of loss, this

policy shall:

I . in the event of such reduction pay excess of the reduced amount of the

Underlying Limit of Liability but not

to exceed the amount stated in Item 4 of the Declarations, or

2. in the event of exhaustion continue in force provided always that this

policy shall only pay the excess over the

Retention amount stated in Item 5 of the Declarations as respects each and

every loss hereunder, but not to

exceed the amount stated in Item 4 of the Declarations.

C. The Insurers' liability for loss subject to paragraphs (A) and (B) above

shall be the amount in Item 4 of the

Declarations which shall be the maximum liability of the Insurer in the

Policy Period stated in Item 3 of the

Declarations. The Limit of Liability of the Insurer for the Discovery

Period,-if elected, shall be part of, and not in

addition to, the Limit of Liability as stated in Item 4 of the Declarations.

50408 Ed. 1-90 Printed in U.S.A.

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Section 3. LOSS PROVISIONS

The Insured(s) shall as a condition precedent to the right to be

indemnified under this policy give to the Insurer notice

in writing, as soon as practicable and during the Policy Period or during

the Discovery Period, if effective, of any

claim made against the Insured(s).

Section 4. NOTICE

Notice hereunder shall be given to St. Paul Mercury Insurance Company, 385

Washington Street, St. Paul, MN 55102.

Section 5. CANCELLATION

This policy may be cancelled by the Corporation at any time by mailing

written notice to the Insurer at the address

shown in Section 4 stating when thereafter such cancellation shall be

effective or by surrender of this policy to the

Insurer or its authorized agent. This policy may also be cancelled by or on

behalf of the Insurer by delivering to the

Corporation or by mailing to the Corporation by registered, certified, or

other first class mail, at the Corporation's

address as shown in Item 2 of the Declarations, written notice stating

when, not less than sixty (60) days thereafter,

the cancellation shall be effective. The mailing of such notice as

aforesaid shall be sufficient proof of notice. The

Policy Period terminates at the date and hour specified in such notice, or

at the date and time of surrender.

If the period of limitation relating to the giving of notice is prohibited

or made void by law controlling the

construction thereof, such period shall be deemed to be amended so as to be

equal to the minimum period of

limitation permitted by such law.

Section 6. DISCOVERY PERIOD

If the Insurer shall cancel or refuse to renew (refusal to renew is

hereafter referred to as non-renewal) this policy, the

Corporation or the Insureds shall have the right, upon payment to the

additional premium of 75% of the premium

hereunder, to an extension of the cover granted by this policy to report

any claim or claims in accordance with Section

3, which claim or claims are made against the Insureds during the period of

twelve (12) months after the effective date

of cancellation or non-renewal, herein. called the Discovery Period, but

only for any Wrongful Act committed before

the effective date of such cancellation or non-renewal and otherwise

covered by this policy.

This right shall terminate, however, unless the Corporation of the Insureds

provide written notice of such election

together with the payment of the additional premium due and this is

received by the Insurer at the address shown in

Section 4 within ten (10) days after the effective date of cancellation or

non-renewal.

Discovery Period wherever used in this policy shall also mean optional

extension period or extended reporting period

as defined by the policy stated in Item 8 of the Declarations.

The offer by the Insurer of renewal terms, conditions, limits of liability

and/or premiums different from those of the

expiring policy shall not constitute non-renewal.

The provisions of this Section 6 and the rights granted herein to the

Corporation or the Insureds shall not apply to any

cancellation resulting from non-payment of premium.

Section 7. NUCLEAR ENERGY LIABILITY EXCLUSION

It is agreed that:

A. This policy does not apply:

1. Under any Liability Coverage, to bodily injury or property damage

50408 Ed. 1-90 Printed in U.S.A. 4

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a. with respect to which an Insured under this policy is also an Insured

under a nuclear energy liability

policy issued by Nuclear Energy Liability Insurance Association, Mutual

Atomic Energy Underwriters or

Nuclear Insurance Association of Canada, or would be an Insured under any

such policy but for its

termination upon exhaustion of its limit of liability; or

b. resulting from the hazardous properties of nuclear material and with

respect to which (1) any person or

organization is required to maintain financial protection pursuant to the

Atomic Energy Act of 1954, or

any law amendatory thereof, or (2) the Insured is, or had this policy not

been issued would be, entitled to

indemnity from the United States of America, or an agency thereof, under

any agreement entered into by

the United States of America, or any agency thereof with any person or

organization.

2. Under any Medical Payments coverage, or under any Supplementary Payments

provision relating to first aid,

to expenses incurred with respects to bodily injury resulting from the

hazardous properties of nuclear material

and arising out of the operation of a nuclear facility by any person or

organization.

3. Under any Liability Coverage, to bodily injury or property damage

resulting from the hazardous of nuclear

material, if

a. the nuclear material (1) is at any nuclear facility owned by, or operated

by or on behalf of an Insured or

(2) has been discharged or dispersed therefrom;

b. the nuclear material is contained in spent fuel or waste at any time

possessed, handled, used, processed,

stored, transported or disposed of by or on behalf of an Insured, or

c. the bodily injury or property damage arises out of the furnishing by an

Insured of services, materials,

parts or equipment in connection with the planning, construction,

maintenance, operation or use of any

nuclear facility, but if such facility is located within the United States

of America, its territories or

possessions or Canada, this exclusion (c) applies only to property damage

to such nuclear facility and any

property thereat.

B. As used in this exclusion:

"hazardous properties" include radioactive, toxic or explosive properties;

"nuclear material" means source material, special nuclear material or

by-product material;

"source material," "special nuclear material," and by-product material have

the meanings given them in the

Atomic Energy Act of 1954 or in any law amendatory thereof; .

"spent fuel" means any fuel element or fuel component, solid or liquid,

which has been used or exposed to

radiation in a nuclear reactor;

"waste" means any waste material (1) containing by-product material and (2)

resulting from the operation by any

person or organization of any nuclear facility included within the

definition of nuclear facility under paragraph (1)

or (2) thereof;

"nuclear facility" means

(1) any nuclear reactor,

(2) any equipment or device designed or used for (1) separating the

isotopes of uranium or plutonium,

(2)processing or utilizing spent fuel, or (3) handling, processing or

packaging waste, .

(3) any equipment or device used for the processing, fabricating or

alloying of special nuclear material if at any

time the total amount of such material in the custody of the Insured and

the premises where such equipment or

device is located consists of or contains more than 25 grams of plutonium

or uranium 233 or any combination

thereof, or more than 250 grams of uranium 235,

(4) any structure, basin, excavation, premises or place prepared or used

for the storage or disposal of waste

and includes the site on which any of the foregoing is located, and

operations conducted on such site and all

premises used for such operations; -

50408 Ed. 1-90 Printed in U.S.A. 5

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"nuclear reactor" means any apparatus designed or used to sustain nuclear

fission in a self-supporting chain

reaction or to contain critical mass of fissionable material, "property

damage" includes all forms of radioactive

contamination of property.

Section 8. ACTION AGAINST THE INSURER

No action shall lie against the Insurer unless, as a condition precedent

thereto, there shall have been full compliance

with all of the terms of this policy, not until the amount of the

Corporation's obligation to pay and/or the Insured's

obligation to pay have been finally determined either by judgment against

the Insureds after actual trial or by written

agreement of the Corporation and/or the Insureds, the claimant and the

Insurer.

Any person or organization or the legal representative thereof who has

secured such judgment or written agreement

shall thereafter be entitled to recover under this policy to the extent of

the insurance afforded by this policy. No

person or organization shall have any right under this policy to join the

Insurer as a party to any action against the

Corporation and/or Insureds to determine the Insureds' liability, nor shall

the Insurer be impleaded by the Corporation

and/or Insureds of their legal representatives. Bankruptcy or insolvency of

the Corporation or the Corporation's

estate, or bankruptcy or insolvency of the Insureds' estate shall not

relieve the Insurer of any of its obligations

hereunder.

IN WITNESS WHEREOF, the Insurer designated on the Declarations page has

caused this policy to be signed by its

President and Secretary and countersigned on the Declarations page by a

duly authorized representative of the Insurer.

/signature/

Secretary

/signature/

President

50408 Ed. 1-90 Printed in U.S.A.

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The StPaul

ENDORSEMENT OR RIDER NO. 4

ATTACHED TO AND FORMING PART

OF BOND OR POLICY N0.

DATE ENDORSEMENT OR * EFFECTIVE DATE OF ENDORSEMENT OR RIDER

RIDER EXECUTED

12:01 A.M. STANDARD TIME AS

SPECIFIED IN THE BOND OR POLICY

512CM0014

5/31 /98

REPORTED INCIDENTS EXCLUSION

M1117 Ed. 3-90

In consideration of the premium charged, it is hereby understood and agreed

that under this policy the

Insurer shall not be liable to make any payment for Loss in connection with

any claim or claims made

against the Insured(s) arising from any circumstances of which notice has

been given under any

insurance in force prior to the inception date of this policy including any

applicable discovery period.

Authorized Representative

INSURED

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The StPaul

ENDORSEMENT OR RIDER NO. 3

In consideration of the premium charged, it is hereby understood and agreed

that under this policy the

Insurer shall not be liable to make any payment for Loss in connection with

any claim or claims made

against the Insured(s) based upon, arising out of or attributable to or in

any way involving the

1. Panache Broadcasting of Pennsylvania, Inc. v. Richardson Electronics,

Ltd. ; Varian Associates,

Inc.; and Varian Supply Company ( Case No. 90 C 6400); or

2. A contract to supply tubes to the United States Government which was

completed in 1989 as

described in Note K - Litigation on page 23 of the Richardson Electronics,

Ltd. 1994 Annual Report;

3. Arius, Inc. v. Richardson Electronics, Ltd., Flint Cooper, William

Alexander, Kevin Dutton (case

number Cl. 95-202 in the Circuit Court of the Ninth Judicial Circuit in and

for Orange County,

Florida)

ACCEPTED BY INSURED By: Title:.

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ENDORSEMENT OR RIDER NO. 2

PRIOR AND PENDING LITIGATION EXCLUSION

M1150 Ed. 3-90

In consideration of the premium charged, it is hereby understood and agreed

that the Insurer shall not

be liable to make any payment for loss in connection with any claim or

claims made against the

Insured(s) arising from any prior or pending litigation as of 5-31-90, as

well as all future claims or

litigation based upon the pending or prior litigation or derived from the

same or essentially the same

facts (actual or alleged) that gave rise to the prior or pending litigation.

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ENDORSEMENT 1

The following spaces preceded by an asterisk ('J need not be completed if

this endorsement and

the policy have the same inception date.

ATTACHED TO AND FORMING ' EFFECTIVE DATE OF 'ISSUED TO

PART OF POLICY NO. ENDORSEMENT

512CM0014 5/31/98 RICHARDSON ELECTRONICS

ILLINOIS AMENDATORY ENDORSEMENT

M1137 Ed. 6-90

In Consideration of the premium charged, it is hereby understood and agreed

that:

1. The first paragraph under Section 5. CANCELLATION is hereby deleted in

its entirety

and substituted with the following:

This policy may be cancelled by the Corporation at any time by mailing

written notice to

the Insurer at the address shown in Section 4 stating when thereafter such

cancellation

shall be effective or by surrender of this policy to the Insurer or its

authorized agent.

This policy may also be cancelled by or on behalf of the Insurer by mailing

to the

Corporation, by registered, certified or other first class mail, at the

last mailing address _

known to the Insurer, written notice stating when, not less than sixty (60)

days

thereafter, the cancellation shall be effective. All such notices shall

contain the specific

reason(s) for cancellation. If this policy has been in effect for more than

sixty (60) days,

the cancellation must be for one of the following reasons:

A. Nonpayment of premium;

B. Misrepresentation or fraud made by or with the knowledge of the

Corporation or the

Insureds in obtaining the policy or in pursuing a claim under the policy;

C. A violation by any Insured of any of the terms and conditions of the

policy;

D. A substantial increase in the risk originally assumed;

E. Loss of reinsurance by the Insurer which provided coverage to the Insurer

for a

significant amount of the underlying risk insured. Certification of the

loss of

reinsurance must be given to the Director of Insurance.

F. A determination by the Director of Insurance that the continuation of the

policy

would place the Insurer in violation of the insurance laws of the State of

Illinois.

Page 1 of 2

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ATTACHED TO AND FORMING ' EFFECTIVE DATE OF 'ISSUED TO

PART OF POLICY NO. ENDORSEMENT

512CM0014 I 5/31/98 I RICHARDSON ELECTRONICS

It is further agreed that this policy may be non renewed by or on behalf of

the Insurer by

mailing written notice to the Corporation, by registered, certified, or

other first class mail,

at the last mailing address known to the Insurer. All such notices shall

contain the

specific reason(s) for non renewal. It is further agreed that non renewal

of this policy

will be effective sixty (60) days after receipt of the insured of written

notice from the

Insurer of its desire to non renew this policy, or at the time and date set

forth in the

notice of non renewal, provided sixty (60) days notice has been given the

Corporation

prior to said date.

2. It is further understood and agreed that Section 6. DISCOVERY PERIOD is

hereby

deleted in its entirety and replaced with the following:

If the Insurer or the Insured(s) shall cancel or refuse to renew (refusal

to renew is

hereafter referred to as non-renewal) this policy, the Corporation or the

Insured(s) shall

have the right, upon payment of the additional premium of seventy five

percent (75%) of

the expiring annual premium hereunder, to report any claim or claims in

accordance

with Section 3, which claim or claims are made against the Insured(s)

during the period

of twelve (12) months after the effective date of cancellation or

non-renewal, herein

called the Discovery Period, but only for any Wrongful Act committed before

the

effective date of such cancellation or non-renewal and otherwise covered by

this policy.

This right shall terminate, however, unless the Corporation or the

Insured(s) provide

written notice of such election together with the payment of the additional

premium due

and this is received by the Insurer at the address shown in Section 4

within thirty (30)

days after the effective date of cancellation or non-renewal.

The additional premium for the Discovery Period shall be fully earned at

the inception of

the Discovery Period. The Discovery Period is not cancellable.

Page 2of2

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EX-10 8 exhibit10aa1.htm FIRST AMENDMENT TO REVOLVING CREDIT FACILLITY FIRST AMENDMENT TO

Exhibit 10(aa)(1)

FIRST AMENDMENT TO

AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT

This First Amendment to Amended and Restated Revolving Credit Agreement (this “Amendment”) is entered into as of April 30, 2003 (the “Effective Date”) by and among (i) Richardson Electronics, Ltd., a Delaware corporation (the “US-Borrower”), (ii) Burtek Systems, Inc., a Canadian corporation, Richardson Electronics Canada, Ltd., a Canadian corporation (each a “Canada-Borrower”, and collectively, the “Canada-Borrowers”); (iii) Richardson Electronics Limited, an English limited liability company (the “UK-Borrower”); (iv) 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, (each a “Euro-Borrower” and collectively, the “Euro-Borrowers”), (v) Richardson Sweden Holding AB, a Swedish corporation (the “Krona-Borrower”) and (vi) Richardson Electronics KK, a company organized under the laws of Japan (the “Japan-Borrower”) (the US-Borrower, the Canada-Borrowers, the UK-Borrower, the Euro-Borrowers, the Krona-Borrower and the Japan-Borrower are collectively referred to as the “Borrowers”), the lenders party hereto (each, a “Lender” and collectively, the “Lenders”), Bank One, NA, London Branch as Eurocurrency Agent (the “Eurocurrency Agent”), Bank One, NA, Canada Branch as Canada Agent (the “Canada Agent”), Bank One, NA, Tokyo Branch as Japan Agent (the “Japan Agent”) and Bank One, NA, as administrative agent (in such capacity, the “Administrative Agent”) (the Eurocurrency Agent, the Canada Agent, the Japan Agent and the Administrative Agent are collectively referred to as the “Funding Agents” and each individually a “Funding Agent”).

RECITALS

WHEREAS, the Borrowers, the Lenders and the Funding Agents are parties to that certain Amended and Restated Revolving Credit Agreement dated as of November 26, 2002 (the “Existing Agreement”);

WHEREAS, the Borrowers, the Lenders and the Funding Agents wish to amend the Existing Agreement as set forth herein (as so amended, and as amended, supplemented or modified from time to time, the “Agreement”);

WHEREAS, in connection with the Existing Agreement, the Borrowers delivered a letter agreement regarding certain post-closing matters (the “Letter Agreement”), including an obligation of Burtek Systems, Inc. to obtain the release of certain security in favor of HSBC Bank Canada on or before February 26, 2003;

WHEREAS, Burtek Systems Inc. has not yet obtained the release of the security required by the Letter Agreement, and the Lenders and Funding Agents wish to extend the time for obtaining such release;

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree as follows:

1. Defined Terms. Capitalized terms used herein but not defined herein shall have the meaning ascribed thereto in the Existing Agreement, as amended hereby.

2. Amendments to Section 1.1.

(a) The definitions of the following terms contained in Section 1.1 of the Existing Agreement are hereby deleted in their entirety and replaced as follows:

““Aggregate Total Outstandings” means as of any date of determination with respect to any Facility, an amount equal to the total outstanding principal amount of Loans under such Facility, provided, that the Aggregate Total Outstandings under each of the UK Facility, the Canada Facility and the US Facility shall be deemed to include the Facility Letter of Credit Obligations then outstanding under each such respective Facility.

“Agreement” means this Amended and Restated Revolving Credit Agreement, as amended by that certain First Amendment to Amended and Restated Revolving Credit Agreement dated as of April 30, 2003, and as amended, supplemented or modified from time to time.

“Canada Facility” means the revolving loans denominated in Canadian Dollars and made available by the Canada Lenders to the Canada-Borrowers pursuant to the terms hereof. Loans under the Canada Facility may be either BA Rate Advances or Canadian Prime Advances (together with Letters of Credit to the extent set forth in Article 2, including those issued in U.S. Dollars at the Floating Rate).

“Canada Facility Commitment” means, (i) for each Canada Lender, the obligation of such Canada Lender to make Loans not exceeding the principal amount set forth opposite its signature below with respect to Canadian Dollars or as set forth in any Notice of Assignment relating to any assignment that has become effective pursuant to Section 12.3.3, as such amount may be modified from time to time pursuant to the terms hereof, and (ii) for the Issuer pursuant to Section 2.24, and subject to the terms and conditions of this Agreement, the obligation to issue Facility Letters of Credit with respect to Canadian Dollars and/or U.S. Dollars.

“Facility Letter of Credit Obligations” means, at any date of determination thereof, all liabilities, whether actual or contingent, of, as applicable (i) the US-Borrower in respect of the Facility Letters of Credit, including, without limitation, the sum of Reimbursement Obligations and the aggregate undrawn face amount of any outstanding Facility Letters of Credit, (ii) the UK-Borrower in respect of the Facility Letters of Credit, including, without limitation, the sum of Reimbursement Obligations and the aggregate undrawn face amount of any outstanding Facility Letters of Credit, or (iii) the Canada-Borrowers in respect of the Facility Letters of Credit, including, without limitation, the sum of Reimbursement Obligations and the aggregate undrawn face amount of any outstanding Facility Letters of Credit (with, in the case of the Canada-Borrowers, all such amounts calculated as the sum of such Canadian Dollars and Canadian Dollar Equivalents).

“Reimbursement Obligations” means, at any time, the aggregate of the obligations of the UK-Borrower, Canada Borrowers or US-Borrower, as applicable, to the Issuer and the Lenders in respect of all unreimbursed payments or disbursements made by the Issuer and the Lenders under or in respect of drawings under the Facility Letters of Credit.

“Swing Line Loan” means a Canada Swing Line Loan or a US Swing Line Loan, as applicable.”

(b) The definitions of “Swing Line Commitment” and “Swing Line Lender” are hereby deleted from Section 1.1 of the Agreement.

““Canadian Dollar Equivalent” of U.S. Dollars at any date shall mean the equivalent amount of Canadian Dollars, calculated at the prevailing exchange rate for U.S. Dollars as determined by the Canada Agent, on or as of such date.

“Canada Swing Line Commitment” means CAD 2,500,000, as such amount may be reduced from time to time in the sole discretion of the Canada Swing Line Lender.

“Canada Swing Line Lender” means Bank One, NA, Canada Branch in its capacity as a provider of Canada Swing Line Loans under this Agreement and its successors and assigns in such capacity.

“Canada Swing Line Loan” is defined in Section 2.23.

“US Swing Line Commitment” means $5,000,000, as such amount may be reduced from time to time in the sole discretion of the US Swing Line Lender.

“US Swing Line Lender” means Bank One, NA in its capacity as a provider of US Swing Line Loans under this Agreement and its successors and assigns in such capacity.”

“US Swing Line Loan” is defined in Section 2.23.

3. Amendment to Section 2.1(i). Section 2.1 of the Existing Agreement is hereby amended by deleting its clause “(i)” in its entirety and replacing such clause as follows:

“(i) the Aggregate Total Outstandings under the Canada Facility shall at no time exceed CAD 21,000,000 (including the Canadian Dollar Equivalent of any Facility Letters of Credit in U.S. Dollars issued under the Canada Facility),”

4. Amendment to Section 2.23. Section 2.23 of the Existing Agreement is hereby deleted in its entirety and replaced as follows:

“2.23 Swing Line Commitment.

2.23.2 Swing Line Loan Borrowing Procedures. The US-Borrower or Canada-Borrower, as applicable, shall give written irrevocable notice or telephonic notice (followed immediately by written confirmation thereof) to the applicable Swing Line Lender and the Administrative Agent or Canada Agent, as applicable, of each proposed Swing Line Loan not later than 12:00 p.m. Chicago time or 2:00 p.m. Toronto time (as applicable to the applicable Facility) on the proposed date of such Swing Line Loan. Each borrowing of a Swing Line Loan shall be on a Business Day. Each such notice shall be effective upon receipt by the applicable Swing Line Lender and the Administrative Agent or Canada Agent and shall specify the date, amount and maturity of such Swing Line Loan. If the Swing Line Lender elects to make the requested Swing Line Loan, the Swing Line Lender will, no later than 3:00 p.m. Chicago time or 5:00 p.m. Toronto time (as applicable to the applicable Facility) on the date of a proposed Swing Line Loan, provide the Administrative Agent or Canada Agent, as applicable, at the address specified pursuant to Schedule 1 with immediately available funds covering the amount of such Swing Line Loan and, so long as the Administrative Agent or Canada Agent has not received written notice that the conditions precedent set forth in Article 4 with respect to such Swing Line Loan have not been satisfied, the Administrative Agent or Canada Agent, as applicable, shall pay over the funds received by the Administrative Agent or Canada Agent to the applicable US-Borrower or Canada-Borrower on the requested borrowing date.

2.23.3 Participations; Reimbursement by US Lenders. Upon the earlier of (a) a Business Day occurring no less frequently than weekly, as determined by the Administrative Agent and notice of which has been provided to the US Lenders and (b) the Business Day on which written demand by the US Swing Line Lender, with a copy of such demand to the Administrative Agent, is received by each US Lender (such date, the “Settlement Date”), each other US Lender shall purchase from the US Swing Line Lender, and the US Swing Line Lender shall sell and assign to each such other US Lender, such other US Lender’s Percentage of such outstanding US Swing Line Loans as of such Settlement Date, by making available for the account of the US Swing Line Lender, by deposit at the office specified by the Administrative Agent, in same day funds, an amount equal to the portion of the outstanding principal amount, of such US Swing Line Loans to be purchased by such US Lender. The US-Borrower agrees to each such sale and assignment. If and to the extent any US Lender shall not have made the amount of such US Swing Line Loan available to the Administrative Agent by 2:00 p.m. (Chicago time) on the Settlement Date (it being understood that any such notice received after noon (Chicago time) on any Business Day shall be deemed to have been received on the next following Business Day), such US Lender agrees to pay interest on such amount to the Administrative Agent for the US Swing Line Lender’s account forthwith on demand for each day from the date such amount was to have been delivered to the Administrative Agent to the date such amount is paid, at a rate per annum equal to the Federal Funds Effective Rate for such day for the first three days and, thereafter, the interest rate applicable to US Swing Line Loans. Any US Lender’s failure to make available to the Administrative Agent its Percentage of any such US Swing Line Loan shall not relieve any other US Lender of its obligation hereunder to make available to the Administrative Agent such other US Lender’s Percentage of such US Swing Line Loan, but no US Lender shall be responsible for the failure of any other US Lender to make available to the Administrative Agent such other US Lender’s Percentage of any such US Swing Line Loan. If such US Lender shall pay to the Administrative Agent such amount for the account of the US Swing Line Lender on any Business Day, such amount so paid in respect of principal shall constitute a US Swing Line Loan made by such US Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the US Swing Line Loan made by the US Swing Line Lender shall be reduced by such amount on such Business Day.

2.23.4 Participations; Reimbursement by Canada Lenders. Upon the earlier of (a) a Business Day occurring no less frequently than weekly, as determined by the Canada Agent and notice of which has been provided to the Canada Lenders and (b) the Business Day on which written demand by the Canada Swing Line Lender, with a copy of such demand to the Canada Agent, is received by each Canada Lender (such date, the “Canada Settlement Date”), each other Canada Lender shall purchase from the Canada Swing Line Lender, and the Canada Swing Line Lender shall sell and assign to each such other Canada Lender, such other Canada Lender’s Percentage of such outstanding Canada Swing Line Loans as of such Canada Settlement Date, by making available for the account of the Canada Swing Line Lender, by deposit at the office specified by the Canada Agent, in same day funds, an amount equal to the portion of the outstanding principal amount, of such Canada Swing Line Loans to be purchased by such Canada Lender. The Canada-Borrowers agree to each such sale and assignment. If and to the extent any Canada Lender shall not have made the amount of such Swing Line Loan available to the Canada Agent by 4:00 p.m. (Toronto time) on the Canada Settlement Date (it being understood that any such notice received after 2:00 p.m. (Toronto time) on any Business Day shall be deemed to have been received on the next following Business Day), such Canada Lender agrees to pay interest on such amount to the Canada Agent for the Canada Swing Line Lender’s account forthwith on demand for each day from the date such amount was to have been delivered to the Canada Agent to the date such amount is paid, at a rate per annum equal to the Federal Funds Effective Rate for such day for the first three days and, thereafter, the interest rate applicable to Canada Swing Line Loans. Any Canada Lender’s failure to make available to the Canada Agent its Percentage of any such Swing Line Loan shall not relieve any other Canada Lender of its obligation hereunder to make available to the Canada Agent such other Canada Lender’s Percentage of such Swing Line Loan, but no Canada Lender shall be responsible for the failure of any other Canada Lender to make available to the Canada Agent such other Canada Lender’s Percentage of any such Swing Line Loan. If such Canada Lender shall pay to the Canada Agent such amount for the account of the Canada Swing Line Lender on any Business Day, such amount so paid in respect of principal shall constitute a Canada Swing Line Loan made by such Canada Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Canada Swing Line Loan made by the Canada Swing Line Lender shall be reduced by such amount on such Business Day.

2.23.5 Rights as Lender. In its capacity as a Lender, the US Swing Line Lender shall have the same rights and obligations as any other US Lender. In its capacity as a Lender, the Canada Swing Line Lender shall have the same rights and obligations as any other Canada Lender.

5. Amendment to Section 2.24. Section 2.24 of the Existing Agreement is hereby deleted in its entirety and replaced as follows:

“2.24 Facility Letters of Credit.

2.24.1 Obligation to Issue. From and including the date of this Agreement and prior to tenth (10^th) Business Day prior to the Facility Termination Date, (i) the Administrative Agent agrees, on the terms and conditions set forth in this Agreement and on behalf of each of the US Lenders, to issue for the account of the US-Borrower one or more Facility Letters of Credit in accordance with this Section 2.24, (ii) the Eurocurrency Agent agrees, on the terms and conditions set forth in this Agreement and on behalf of each of the UK Lenders, to issue for the account of the UK-Borrower one or more Facility Letters of Credit in accordance with this Section 2.24, and (iii) the Canada Agent agrees, on the terms and conditions set forth in this Agreement and on behalf of each of the Canada Lenders, to issue for the account of the Canada-Borrowers one or more Facility Letters of Credit in accordance with this Section 2.24 (the Administrative Agent, Canada Agent or Eurocurrency Agent in such capacity is referred to as the “Issuer”). Notwithstanding anything to the contrary in this Section 2.24, the parties acknowledge and agree that the Administrative Agent may, as agent of the Canada Agent, undertake certain of the actions required or permitted of the Canada Agent as an Issuer hereunder.

2.24.2 Types and Amounts. The Issuer shall not have any obligation to and shall not:

(i) issue any Facility Letter of Credit if the aggregate maximum amount then available for drawing under Letters of Credit issued by the Issuer, after giving effect to the Facility Letter of Credit requested hereunder, shall exceed any limit imposed by law or regulation upon the Issuer;

(ii) issue any Facility Letter of Credit if, after giving effect thereto, the sum of (a) the Facility Letter of Credit Obligations plus (b) the aggregate unpaid principal balance of the Advances (including Swing Line Loans) would exceed the Aggregate UK Facility Commitment, the Aggregate Canada Facility Commitment or the Aggregate US Facility Commitment, as applicable;

(iii) issue any Facility Letter of Credit which has an expiry date (a) later than twelve months after the Issuance Date thereof or (b) on or after five days prior to the Facility Termination Date; or

(iv) issue any Facility Letter of Credit if, after giving effect to such Facility Letter of Credit requested hereunder, the Facility Letter of Credit Obligations would exceed (A) $10,000,000 in the aggregate in the case of the US Facility, (B) GBP 1,000,000 in the aggregate in the case of the UK Facility, or (C) CAD 2,000,000 (including any Canadian Dollar Equivalents) in the aggregate in the case of the Canada Facility.

2.24.3 Conditions. In addition to being subject to the satisfaction of the conditions contained in Sections 4.1 and 4.2, the obligation of the Issuer to issue any Facility Letter of Credit is subject to the satisfaction in full of each of the following conditions:

(i) the Borrower shall have delivered to the Issuer at such times and in such manner as the Issuer may reasonably prescribe such documents and materials as may be required pursuant to the terms of the requested Facility Letter of Credit (it being understood that if any inconsistency exists between the Issuer’s Letter of Credit documents and the Documents, the terms of the Documents shall govern and control) and the requested Facility Letter of Credit shall be reasonably satisfactory to the Issuer as to form and content; and

(ii) on the Issuance Date, no order, judgment or decree of any court, arbitrator or governmental authority shall purport by its terms to enjoin or restrain the Issuer from issuing the requested Facility Letter of Credit and no law, rule or regulation applicable to the Issuer and no request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over the Issuer shall prohibit or request that the Issuer refrain from the issuance of Letters of Credit generally or the issuance of such requested Facility Letter of Credit in particular.

2.24.4 Procedure for Issuance of Facility Letters of Credit.

(a) The Borrower shall give the Issuer written notice not later than 12:00 p.m. Chicago time, 2:00 p.m. Toronto time or 12:00 p.m. London time (as applicable to the applicable Facility) at least three Business Days before the Issuance Date of any requested Facility Letter of Credit (each a “Facility Letter of Credit Request”) (except that, in lieu of such written notice, the Borrower may give the Issuer notice of such request by tested telex or other tested arrangement satisfactory to the Issuer). Such Facility Letter of Credit Request shall be irrevocable and shall specify:

(1) the stated amount of such requested Facility Letter of Credit (and, in the case of Canadian-Borrowers, whether such requested Facility Letter of Credit is to be in Canadian Dollars or U.S. Dollars);

(2) the Issuance Date (which day shall be a Business Day);

(3) the date on which such requested Facility Letter of Credit is to expire (which date shall be a Business Day and shall in no event be later than the earlier of (i) twelve months after the Issuance Date thereof and (ii) five days prior to the Facility Termination Date);

(4) the purpose for which such Facility Letter of Credit is to be issued;

(5) the Person for whose benefit the requested Facility Letter of Credit is to be issued; and

(6) whether the requested Facility Letter of Credit will be a Commercial Letter of Credit or a Standby Letter of Credit.

Prior to the issuance of the requested Facility Letter of Credit, the applicable Borrower shall provide the Issuer with a copy of the form of the Facility Letter of Credit it is requesting be issued. The Issuer will notify each Lender within a reasonable time following the issuance of each Facility Letter of Credit.

(b) Subject to the terms and conditions of this Section 2.24.4 and provided that the applicable conditions set forth in Sections 4.1 (in the case of the initial Facility Letter of Credit), 4.2 and 2.24.3 have been satisfied, the Issuer shall, on the applicable Issuance Date, issue a Facility Letter of Credit on behalf of the Borrower in accordance with the Issuer’s usual and customary business practices.

(c) The Issuer shall not extend or amend any Facility Letter of Credit unless the requirements of Sections 2.24.2, 2.24.3 and 2.24.4 are met.

2.24.5 Reimbursement Obligations.

(a) (i) The Issuer shall promptly notify the UK-Borrower, Canada-Borrowers or US-Borrower, as applicable, of any draw under such Facility Letter of Credit. The applicable Borrower shall reimburse the Issuer for drawings under Standby Letters of Credit (including the Issuer’s issuing costs) no later than the Business Day after the payment in respect of such Standby Letter of Credit by the Issuer, together with interest thereon at the Floating Rate (in the case of Letters of Credit under the US Facility and Letters of Credit in U.S. Dollars under the Canada Facility), the Canadian Prime Rate (in the case of Letters of Credit in Canadian Dollars under the Canada Facility) or the applicable Eurocurrency Rate (in the case of Letters of Credit under the UK Facility) from the date of payment on such Standby Letter of Credit by the Issuer to and including the date on which the Issuer is reimbursed for such payment by the Borrower. The applicable Borrower shall reimburse the Issuer for drawings under Commercial Letters of Credit (including the Issuer’s issuing costs) no later than the Business Day after the payment in respect of such Commercial Letter of Credit by the Issuer, together with interest thereon at the Floating Rate (in the case of Letters of Credit under the US Facility and Letters of Credit in U.S. Dollars under the Canada Facility), the Canadian Prime Rate (in the case of Letters of Credit in Canadian Dollars under the Canada Facility) or the applicable Eurocurrency Rate (in the case of Letters of Credit under the UK Facility) from the date of payment on such Commercial Letter of Credit by the Issuer to and including the date on which the Issuer is reimbursed for such payment by the Borrower; and

(ii) Any Reimbursement Obligation with respect to any Facility Letter of Credit under the US Facility which is not paid on the date when due in accordance with Section 2.24.5(a)(i) shall (A) if there is availability for such an Advance pursuant to Section 2.1, be automatically converted on such date into a Floating Rate Advance and shall bear interest at the Floating Rate or (B) if there is no availability for an Advance pursuant to Section 2.1, be payable on demand and bear interest until paid at a rate per annum equal to the sum of the Floating Rate plus 2% per annum.

(iii) Any Reimbursement Obligation with respect to any Facility Letter of Credit under the UK Facility which is not paid on the date when due in accordance with Section 2.24.5(a)(i) shall (A) if there is availability for such an Advance pursuant to Section 2.1, be automatically converted on such date into a Eurocurrency Advance with a one month Eurocurrency Interest Period and shall bear interest at the applicable Eurocurrency Rate or (B) if there is no availability for an Advance pursuant to Section 2.1, be payable on demand and bear interest until paid at a rate per annum equal to the sum of the Eurocurrency Rate plus 2% per annum.

(iv) Any Reimbursement Obligation with respect to any Facility Letter of Credit in Canadian Dollars under the Canada Facility which is not paid on the date when due in accordance with Section 2.24.5(a)(i) shall (A) if there is availability for such an Advance pursuant to Section 2.1, be automatically converted on such date into a Canadian Prime Advance and shall bear interest at the Canadian Prime Rate or (B) if there is no availability for an Advance pursuant to Section 2.1, be payable on demand and bear interest until paid at a rate per annum equal to the sum of the Canadian Prime Rate plus 2% per annum. Any Reimbursement Obligation with respect to any Facility Letter of Credit in U.S. Dollars under the Canada Facility which is not paid on the date when due in accordance with Section 2.24.5(a)(i) shall (X) if there is sufficient availability pursuant to Section 2.23, automatically trigger a Canada Swing Line Loan, bearing interest at the Canadian Prime Rate, in the amount determined by the Issuer, in its sole discretion, that is sufficient to pay such Reimbursement Obligation in U.S. Dollars (after converting the Canadian Dollars obtained pursuant to the Canada Swing Line Loan into U.S. Dollars, and paying all fees, costs and expenses in connection with such exchange), or (Y) if there is not sufficient availability for such a Canada Swing Line Loan pursuant to Section 2.23, be payable on demand and bear interest until paid at a rate per annum equal to the sum of the Floating Rate plus 2% per annum. In the case of any Canada Swing Line Loan triggered by this Section 2.24.5(a)(iv), the Canadian-Borrowers and Canada Lenders each hereby authorize the Issuer and the Canada Swing Line Lender to initiate such loan, to convert the resulting Canadian Dollars into U.S. Dollars, and to pay and/or collect all fees, expenses and costs incurred in connection with such currency exchange (including, without limitation, to have the Issuer, Canada Swing Line Lender, Canada Agent or any of their Affiliates effect such currency exchange and in such case to charge and collect, for its own account, any standard fees, costs or expenses it may charge for such an exchange).

(v) Any action taken or omitted to be taken by the Issuer under or in connection with any Facility Letter of Credit, if taken or omitted in the absence of willful misconduct or gross negligence, shall not put the Issuer under any resulting liability to any Lender or, assuming that the Issuer has complied with the procedures specified in Section 2.24.4(b) and such Lender has not given a notice contemplated by Section 2.24.6(a) that continues in full force and effect, relieve such Lender of its obligations hereunder to the Issuer. In determining whether to pay under any Facility Letter of Credit, the Issuer shall have no obligation relative to the Lenders or the applicable Borrower other than to confirm that any documents required to be delivered under such Facility Letter of Credit appear to comply on their face with the requirements of such Facility Letter of Credit.

2.24.6 Participation.

(a) Immediately upon issuance by the Issuer of any Facility Letter of Credit in accordance with the procedures set forth in Section 2.24.4, each UK Lender, each Canada Lender or each US Lender, as applicable, shall be deemed to have irrevocably and unconditionally purchased and received from the Issuer, without recourse or warranty, an undivided interest and participation equal to its Percentage in such Facility Letter of Credit (including, without limitation, all obligations of the applicable Borrower with respect thereto) and any security therefor or guaranty pertaining thereto; provided, that a Letter of Credit issued by the Issuer shall not be deemed to be a Facility Letter of Credit for purposes of this Section 2.24.6 if the Issuer shall have received written notice from any Lender on or before 10:00 a.m. Chicago time, 12:00 p.m. Toronto time or 10:00 a.m. London time (as applicable to the applicable Facility) on the Issuance Date of such Letter of Credit that one or more of the conditions contained in Section 4.2 is not then satisfied, and, in the event the Issuer receives such a notice, it shall have no further obligation to issue any Facility Letter of Credit until such notice is withdrawn by such Lender or such condition has been satisfied or has been effectively waived in accordance with the provisions of this Agreement.

(b) In the event that the Issuer makes any payment under any Facility Letter of Credit and the applicable Borrower shall not have repaid such amount to the Issuer pursuant to Section 2.24.5, the Issuer shall promptly notify each UK Lender, Canada Lender or US Lender, as applicable, of such failure, and each such Lender shall promptly and unconditionally pay to the Issuer for the Issuer’s account the amount of such Lender’s Percentage of the unreimbursed amount of any such payment (which payment, in the case of a Facility Letter of Credit in U.S. Dollars under the Canada Facility, may be made in Canadian Dollars in an amount determined using the Canadian Dollar Equivalent of the amount paid by the Issuer, calculated by the Issuer as of the date of payment by such Lender). The failure of any Lender to make available to the Issuer its Percentage of the unreimbursed amount of any such payment shall not relieve any other Lender of its obligation hereunder to make available to the Issuer its Percentage of the unreimbursed amount of any payment on the date such payment is to be made, but no Lender shall be responsible for the failure of any other Lender to make available to the Issuer its Percentage of the unreimbursed amount of any payment on the date such payment is to be made.

(c) Whenever the Issuer receives a payment on account of a Reimbursement Obligation, including any interest thereon, it shall promptly pay to the account of each Lender which has funded its participating interest therein, in immediately available funds, an amount equal to each such Lender’s Percentage thereof.

(d) The obligations of a Lender to make payments to the Issuer with respect to a Facility Letter of Credit shall be absolute, unconditional and irrevocable, not subject to any counterclaim, set-off, qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances. Nothing contained in this Section 2.24.6(d) shall impair or adversely affect any claim any Lender may have against the Issuer or any other Lender with respect to any gross negligence or willful misconduct of the Issuer or such other Lender in respect of any Facility Letter of Credit.

2.24.7 Payment of Reimbursement Obligations.

(a) The UK-Borrower, Canada-Borrowers or US-Borrower, as applicable, agrees to pay to the Issuer the amount of all Reimbursement Obligations, interest and other amounts payable to the Issuer under or in connection with each Facility Letter of Credit immediately when due, irrespective of any claim, set-off, defense or other right which such Borrower or any Subsidiary may have at any time against the Issuer, the Agent or any other Person, under all circumstances, including without limitation, any of the following circumstances:

(i) any lack of validity or enforceability of this Agreement or any of the other Documents;

(ii) the existence of any claim, setoff, defense or other right which the Borrower or any Subsidiary may have at any time against a beneficiary named in a Facility Letter of Credit or any transferee of any Facility Letter of Credit (or any Person for whom any such transferee may be acting), the Issuer, any Lender, or any other Person, whether in connection with this Agreement, any Facility Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transactions between the Borrower or any Subsidiary and the beneficiary named in any Facility Letter of Credit);

(iii) any draft, certificate or any other document presented under the Facility Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

(iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Documents;

(v) the occurrence of any Default or Unmatured Default.

(b) In the event any payment by the Borrower or any Subsidiary received by the Issuer with respect to a Facility Letter of Credit and distributed to the Lenders on account of their participation is thereafter set aside, avoided or recovered from the applicable Funding Agent in connection with any receivership, liquidation, reorganization or bankruptcy proceeding, each Lender which received such distribution shall, upon demand by the Issuer, contribute such Lender’s Percentage of the amount set aside, avoided or recovered together with interest at the rate required to be paid by the Issuer upon the amount required to be repaid by it.

2.24.8 Facility Letter of Credit Fees. In connection with each Facility Letter of Credit issued, the US-Borrower, Canada-Borrowers or UK-Borrower, as applicable, agrees to pay the Issuer thereof, ratably for the benefit of the US Lenders, Canada Lenders or UK Lenders, as applicable:

(a) with respect to each Standby Letter of Credit, on the Issuance Date thereof, a letter of credit fee computed at the “S/L/C Rate” (as defined below) on the maximum amount available to be drawn from time to time under such Standby Letter of Credit for the period from and including the date of issuance of such Standby Letter of Credit until the stated expiry date thereof. This fee shall be payable for the first year (or the entire stated period if less than one year) on the Issuance Date and quarterly in arrears the last Business Day of each November, February, May and August thereafter. As used herein, “S/L/C Rate” means the interest rate equal to the “Applicable Margin” in connection with the Eurocurrency Rate then in effect (including any increase or adjustment thereto due to Defaults or Unmatured Default).

(b) with respect to each Commercial Letter of Credit, on the Issuance Date thereof, such issuance fee as the US-Borrower, Canada-Borrower or UK-Borrower, as applicable, and the Issuer of such Facility Letter of Credit shall have agreed upon in writing.

The applicable Borrower shall also pay to the Issuer for its own account (i) at the time of issuance of each Facility Letter of Credit, a fronting fee in an amount to be agreed upon between the Issuer and the Borrower, and (ii) documentary and processing charges in connection with the issuance or modification of and draws under Facility Letters of Credit in accordance with the Issuer's standard schedule for such charges as in effect from time to time.”

6. Waiver and Extension regarding HSBC Security. Each of the Lenders and Funding Agents hereby waives the Default arising under the Agreement solely by reason of Burtek Systems Inc.’s failure to obtain the release of the HSBC Bank Canada security as required by the Letter Agreement by February 26, 2003; provided, that it shall be a Default under the Agreement if such release is not obtained on or before May 31, 2003. Nothing contained in this Section 6 shall be construed as a waiver, forbearance, amendment or other modification to any other provision of the Agreement, nor shall anything in this Section 6 be construed as a waiver in relation to any other Default or Unmatured Default.

7. Effectiveness. This Amendment shall not become effective unless the Administrative Agent shall have received on or before the Effective Date all of the following, all of which shall be in form and substance satisfactory to the Lender:

(a) This Amendment, executed by the requisite signatories;

(b) Copies, certified by the Secretary or Assistant Secretary of each Borrower, of its Board of Directors’ resolutions or of resolutions or actions of any other body authorizing the execution of this Amendment to which such Borrower is a party;

(c) A certificate, signed by the chief financial officer of each Borrower, stating that on the Effective Date (after giving effect to this Amendment) no Default or Unmatured Default has occurred and is continuing; and

(d) Such other documents, instruments, approvals (and, if requested by the Administrative Agent, certified duplicates of executed copies thereof) or opinions as the Administrative Agent may reasonably request.

8. Representations and Warranties. Each Borrower represents and warrants to the Lenders and Funding Agents (which representations and warranties shall become part of the representations and warranties made by such Borrower under the Existing Agreement) that:

(a) The execution, delivery and performance of this Amendment has been duly authorized by all necessary action and will not require any consent or approval of any person or entity, violate in any material respect any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to it or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which such Borrower is a party or by which it or its properties may be bound or affected;

(b) No consent, approval or authorization of or declaration or filing with any governmental authority or any non-governmental person or entity, including without limitation, any creditor or partner of any Borrower is required on the part of such Borrower in connection with the execution, delivery and performance of this Amendment or the transactions contemplated hereby and the execution, delivery and performance of this Amendment will not violate the terms of any contract or agreement to which such Borrower is a party;

(c) The Existing Agreement, as amended pursuant to this Amendment, is the legal, valid and binding obligation of each Borrower, enforceable against it in accordance with the terms thereof;

(d) After giving effect to the Amendment contained herein and effective pursuant hereto, the representations and warranties contained in Article 5 of the Existing Agreement are true and correct on and as of the Effective Date hereof in the same force and effect as if made on and as of such Effective Date;

(e) The most recent financial statements of each Borrower delivered to the Lender are complete and accurate in all material respects and present fairly the financial condition of such Borrowers as of such date in accordance with generally accepted accounting principles. There has been no adverse material change in the condition of the business, properties, operations or condition, financial or otherwise, of any Borrower since the date of such financial statements. There are no material liabilities of any Borrower, fixed or contingent, which are material but not reflected on such financial statements or in the notes thereto; and

(f) After giving effect to this Amendment (and the waiver herein) no Default or Event of Default has occurred or exists under the Existing Agreement as of the Effective Date hereof.

9. Acknowledgement and Reaffirmation. Each Borrower hereby ratifies and affirms all of the obligations and undertakings contained in the Existing Agreement and except as amended hereby, the Existing Agreement remains in full force and effect in accordance with its terms. Each Borrower hereby acknowledges, agrees and affirms that each document and instrument securing or supporting the obligations and indebtedness owing to the Lenders and Funding Agents prior to the date of this Amendment remains in full force and effect in accordance with its terms, and that such security and support remains in full force effect as to all obligations under the Existing Agreement, as amended hereby.

10. Expenses. The Borrowers jointly and severally agree to pay and save the Lenders and Funding Agents harmless from liability for the payment of all costs and expenses arising in connection with this Amendment, including the reasonable fees and expenses of Baker & McKenzie, counsel to certain of the Lenders, in connection with the preparation and review of this Amendment and any related documents.

11. Governing Law. This Amendment shall be governed by, and shall be construed and enforced in accordance with, the laws of the State of Illinois.

12. Counterparts; Facsimile. This Amendment may be executed in one or more counterparts, each of which together shall constitute the same agreement. One or more counterparts of this Amendment may be delivered by facsimile, with the intention that such delivery shall have the same effect as delivery of an original counterpart thereof.

13. Authority to Amend Stock Pledge Agreement. Each of the Lenders and the Funding Agents hereby authorize the Administrative Agent to enter into an amendment to the Stock Pledge Agreement between the Administrative Agent and the US-Borrower, in such form as is acceptable to the Administrative Agent, to (i) add as pledged stock certain shares of Calvert Electronics, Inc. and Adler Video Systems, Inc., and (ii) if the Administrative Agent so elects, to release from pledge certain shares of Richardson Electronics Delaware Holdings, Inc. in connection with the dissolution of such entity.

[The remainder of this page has been left blank intentionally]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the 30th day of April, 2003.

Borrowers:

RICHARDSON ELECTRONICS, LTD.

By:

Title:

BURTEK SYSTEMS, INC.

By:

Title:

RICHARDSON ELECTRONICS CANADA, LTD.

By:

Title:

RICHARDSON ELECTRONICS LIMITED

By:

Title:

RESA, SNC

By:

Title:

RICHARDSON ELECTRONIQUE SNC

By:

Title:

RICHARDSON ELECTRONICS IBERICA, S.A.

By:

Title:

RICHARDSON ELECTRONICS GMBH

By:

Title:

RICHARDSON ELECTRONICS BENELUX B.V.

By:

Title:

RICHARDSON SWEDEN HOLDING AB

By:

Title:

RICHARDSON ELECTRONICS KK

By:

Title:

FUNDING AGENTS:

BANK ONE, NA

By:

Title:

BANK ONE, NA, London Branch

By:

Title:

BANK ONE, NA, Canada Branch

By:

Title:

BANK ONE, NA, through its Tokyo Branch

By:

Title:

Lenders:

HARRIS TRUST AND SAVINGS BANK

By:

Title:

BANK OF MONTREAL

By:

Title:

NATIONAL CITY BANK, Canada Branch

By:

Title:

NATIONAL CITY BANK

By:

Title:

LASALLE BANK NATIONAL ASSOCIATION

By:

Title:

LASALLE BUSINESS CREDIT, a division

of ABN AMRO Bank N.V., Canada Branch

By:

Title:

BANK ONE, NA, London Branch

By:

Title:

BANK ONE, NA, Canada Branch

By:

Title:

&nb sp;

BANK ONE, NA, through its Tokyo Branch

By:

Title:

BANK ONE, NA

By:

Title:

BANK ONE EUROPE LTD.

By:

Title:

EX-10 9 exhibit10aa2.htm SECOND AMENDMENT TO REVOLVING CREDIT FACILLITY FIRST AMENDMENT TO

Exhibit 10(aa)(2)

SECOND AMENDMENT TO

AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT

This Second Amendment to Amended and Restated Revolving Credit Agreement (this “Amendment”) is entered into as of June 1, 2003 (the “Effective Date”) by and among (i) Richardson Electronics, Ltd., a Delaware corporation (the “US-Borrower”), (ii) Burtek Systems, Inc., a Canadian corporation, Richardson Electronics Canada, Ltd., a Canadian corporation (each a “Canada-Borrower”, and collectively, the “Canada-Borrowers”); (iii) Richardson Electronics Limited, an English limited liability company (the “UK-Borrower”); (iv) 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, (each a “Euro-Borrower” and collectively, the “Euro-Borrowers”), (v) Richardson Sweden Holding AB, a Swedish corporation (the “Krona-Borrower”) and (vi) Richardson Electronics KK, a company organized under the laws of Japan (the “Japan-Borrower”) (the US-Borrower, the Canada-Borrowers, the UK-Borrower, the Euro-Borrowers, the Krona-Borrower and the Japan-Borrower are collectively referred to as the “Borrowers”), the lenders party hereto (each, a “Lender” and collectively, the “Lenders”), Bank One, NA, London Branch as Eurocurrency Agent (the “Eurocurrency Agent”), Bank One, NA, Canada Branch as Canada Agent (the “Canada Agent”), Bank One, NA, Tokyo Branch as Japan Agent (the “Japan Agent”) and Bank One, NA, as administrative agent (in such capacity, the “Administrative Agent”) (the Eurocurrency Agent, the Canada Agent, the Japan Agent and the Administrative Agent are collectively referred to as the “Funding Agents” and each individually a “Funding Agent”).

RECITALS

WHEREAS, the Borrowers, the Lenders and the Funding Agents are parties to that certain Amended and Restated Revolving Credit Agreement dated as of November 26, 2002, as amended by that certain First Amendment to Amended and Restated Revolving Credit Agreement dated as of April 30, 2003 (as so amended, the “Existing Agreement”); and

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree as follows:

1. Defined Terms. Capitalized terms used herein but not defined herein shall have the meaning ascribed thereto in the Existing Agreement, as amended hereby.

2. Amendments to Section 1.1.

(a) The definitions of the following terms contained in Section 1.1 of the Existing Agreement are hereby deleted in their entirety and replaced as follows:

““Adjusted EBITDA” means, as at any date of determination thereof, EBITDA plus the Inventory Charge 2003 plus the Goodwill Reduction plus the Severance Charge plus SFAS 133 Charges minus SFAS 133 Gains.

“Agreement” means this Amended and Restated Revolving Credit Agreement, as amended by that certain First Amendment to Amended and Restated Revolving Credit Agreement dated as of April 30, 2003 and that certain Second Amendment to Amended and Restated Revolving Credit Agreement dated as of June 1, 2003, and as amended, supplemented or modified from time to time.

“Goodwill Reduction” means (i) on or before May 31, 2003, an amount equal to $22,000,000 (which represents a non-cash charge previously taken by the US-Borrower resulting from a reduction in goodwill of the US-Borrower), and (ii) after May 31, 2003, an amount equal to $0.

“Severance Charge” means (i) on or before November 30, 2003, an amount of up to $4,000,000 as certified to the Administrative Agent by an Authorized Officer of the US-Borrower (which amount shall represent charges taken by the US-Borrower relating to employee severance packages in accordance with Agreement Accounting Principles), and (ii) after November 30, 2003, an amount equal to $0.

“Tangible Net Worth” means, as at any date of determination thereof, the consolidated stockholders’ equity of the US-Borrower and its Subsidiaries, plus Subordinated Debt and minus the sum of the consolidated Intangible Assets of the US-Borrower and its Subsidiaries, all determined as of such date in accordance with Agreement Accounting Principles. In computing Tangible Net Worth from June 1, 2003 through November 30, 2003, the amount of the Severance Charge shall be added back into Tangible Net Worth (but only to the extent the underlying charges relating to employee severance packages have reduced Tangible Net Worth).”

(b) The definitions of “Inventory Charge 2002” and “Medical Glassware Sale Charge” are hereby deleted from Section 1.1 of the Agreement.

“Inventory Charge 2003” means (i) on or before February 29, 2004, an amount of up to $15,000,000 as certified to the Administrative Agent by an Authorized Officer of the US-Borrower (which amount shall represent a charge (largely non-cash) taken during the US-Borrower’s fiscal quarter ended May 31, 2003 resulting largely from the write down of inventory), and (ii) after February 29, 2004, an amount equal to $0.

3. Amendment to Section 6.12. Section 6.12 of the Existing Agreement is hereby amended by deleting its final paragraph in its entirety and replacing such paragraph as follows:

“Notwithstanding anything to the contrary in this Agreement, no Borrower or any of its Subsidiaries may lease, sell, or otherwise dispose of (or pledge or encumber) its interest in any real estate to any other Person; provided, that they may sell (A) up to a combined aggregate of ten (10) acres of real estate located at the US-Borrower’s headquarters in LaFox, Illinois at a net price of at least $30,000 per acre, without the consent of any Lender and without any corresponding reduction in the Aggregate Commitment, and (B) up to a combined aggregate of another two hundred twenty five (225) acres of real estate at the US-Borrower’s headquarters in LaFox, Illinois at a net price of at least $30,000 per acre, without the consent of any Lender but with a reduction in the Aggregate Commitment pursuant to the next sentence. In connection with any sale pursuant to clause (B) above, and to the extent the Required Lenders consent to any other lease, sale or disposal that would have been restricted by this Section 6.12, the Aggregate Commitment shall be reduced in an amount equal to the aggregate proceeds received in such lease, sale or disposal (with the allocation of such reduction amongst the various Facilities on a pro rata basis unless otherwise determined by the Required Lenders). The Borrowers shall deliver to the Administrative Agent copies of all documentation related to each sale of real estate made pursuant to this Section 6.12.”

4. Amendment to Section 6.26. Section 6.26 of the Existing Agreement is hereby deleted in its entirety and replaced as follows:

“6.26 Tangible Net Worth. The US-Borrower and its Subsidiaries will maintain, at all times, a Tangible Net Worth greater than the sum of (i) $119,797,964.00, plus (ii) fifty-percent (50%) of the Net Income of the US-Borrower and its Subsidiaries earned in each fiscal quarter beginning with the quarter ending August 31, 2003 (without deduction for losses), plus (iii) one hundred percent (100%) of the net proceeds (gross proceeds minus (A) ordinary and necessary out of pocket costs and expenses and (B) reasonable underwriting fees and discounts incurred with respect to such gross proceeds) received by the US-Borrower or its Subsidiaries on or after June 1, 2003 from additional paid in capital, including, but not limited to, equity investments and proceeds from the issuance and sale of capital stock (including the amount of all Indebtedness which is converted into equity in the US-Borrower or its Subsidiaries).”

5. Effectiveness. This Amendment shall not become effective unless the Administrative Agent shall have received all of the following, all of which shall be in form and substance satisfactory to the Lender:

(a) This Amendment, executed by the requisite signatories;

(b) A certificate, signed by the chief financial officer of each Borrower, stating that on the Effective Date (after giving effect to this Amendment) no Default or Unmatured Default has occurred and is continuing; and

(c) Such other documents, instruments, approvals (and, if requested by the Administrative Agent, certified duplicates of executed copies thereof) or opinions as the Administrative Agent may reasonably request.

6. Representations and Warranties. Each Borrower represents and warrants to the Lenders and Funding Agents (which representations and warranties shall become part of the representations and warranties made by such Borrower under the Existing Agreement) that:

(c) The Existing Agreement, as amended pursuant to this Amendment, is the legal, valid and binding obligation of each Borrower, enforceable against it in accordance with the terms thereof;

(f) After giving effect to this Amendment no Default or Event of Default has occurred or exists under the Existing Agreement as of the Effective Date hereof.

7. Acknowledgement and Reaffirmation. Each Borrower hereby ratifies and affirms all of the obligations and undertakings contained in the Existing Agreement and except as amended hereby, the Existing Agreement remains in full force and effect in accordance with its terms. Each Borrower hereby acknowledges, agrees and affirms that each document and instrument securing or supporting the obligations and indebtedness owing to the Lenders and Funding Agents prior to the date of this Amendment remains in full force and effect in accordance with its terms, and that such security and support remains in full force effect as to all obligations under the Existing Agreement, as amended hereby.

8. Expenses. The Borrowers jointly and severally agree to pay and save the Lenders and Funding Agents harmless from liability for the payment of all costs and expenses arising in connection with this Amendment, including the reasonable fees and expenses of Baker & McKenzie, counsel to certain of the Lenders, in connection with the preparation and review of this Amendment and any related documents.

9. Amendment Fee. Each US Lender shall receive an amendment fee of $10,000 from the Borrowers in connection with this Amendment (the “Amendment Fee”). Upon the effectiveness of this Amendment, the Administrative Agent is hereby expressly authorized by all parties hereto to withdraw $40,000 from any account of any Borrower held at the Administrative Agent to pay the Amendment Fee to the US Lenders.

10. Governing Law. This Amendment shall be governed by, and shall be construed and enforced in accordance with, the laws of the State of Illinois.

11. Counterparts; Facsimile. This Amendment may be executed in one or more counterparts, each of which together shall constitute the same agreement. One or more counterparts of this Amendment may be delivered by facsimile, with the intention that such delivery shall have the same effect as delivery of an original counterpart thereof.

[The remainder of this page has been left blank intentionally]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.

Borrowers:

RICHARDSON ELECTRONICS, LTD.

By:

Title:

BURTEK SYSTEMS, INC.

By:

Title:

RICHARDSON ELECTRONICS CANADA, LTD.

By:

Title:

RICHARDSON ELECTRONICS LIMITED

By:

Title:

RESA, SNC

By:

Title:

RICHARDSON ELECTRONIQUE SNC

By:

Title:

RICHARDSON ELECTRONICS IBERICA, S.A.

By:

Title:

RICHARDSON ELECTRONICS GMBH

By:

Title:

RICHARDSON ELECTRONICS BENELUX B.V.

By:

Title:

RICHARDSON SWEDEN HOLDING AB

By:

Title:

RICHARDSON ELECTRONICS KK

By:

Title:

FUNDING AGENTS:

BANK ONE, NA

By:

Title:

BANK ONE, NA, London Branch

By:

Title:

BANK ONE, NA, Canada Branch

By:

Title:

BANK ONE, NA, through its Tokyo Branch

By:

Title:

Lenders:

HARRIS TRUST AND SAVINGS BANK

By:

Title:

BANK OF MONTREAL

By:

Title:

NATIONAL CITY BANK, Canada Branch

By:

Title:

NATIONAL CITY BANK

By:

Title:

LASALLE BANK NATIONAL ASSOCIATION

By:

Title:

LASALLE BUSINESS CREDIT, a division

of ABN AMRO Bank N.V., Canada Branch

By:

Title:

BANK ONE, NA, London Branch

By:

Title:

BANK ONE, NA, Canada Branch

By:

Title:

BANK ONE, NA, through its Tokyo Branch

By:

Title:

BANK ONE, NA

By:

Title:

BANK ONE EUROPE LTD.

By:

Title:

EX-13 10 annualreport.htm ANNUAK REPORT TO SAHREHOLDERS

Exhibit 13. Annual Report to the Shareholders of Richardson Electronics

Engineered Solutions

Solution:“The process of solving a problem.”

Finding the missing “piece of the puzzle” needed to complete a unique manufacturing plan or complex design of a project can often be a daunting task for our customers. They may need only one piece, or all the pieces, of the puzzle to help them develop an effective solution. Richardson Electronics provides the solution.

We use the term “engineered solutions” to describe our core engineering and manufacturing expertise in identifying and supporting cost-effective solutions for our customers, which includes product manufacturing, systems integration, prototype design and manufacture, testing and logistics. More than 50 percent of the Company’s products are designed-in, modified, manufactured or assembled for customer specific requirements.

Economic conditions have accelerated the trend of customers outsourcing engineering services. Through our team of engineers, Richardson has capitalized on this opportunity by providing efficient design services and prototype assembly. In addition, we can completely assemble the product, including final testing, and deliver it to the desired location, on a global basis.

We possess the expertise, experience and relationships required to provide our customers with the “pieces of the puzzle” they need — from the right component to a fully integrated solution — in order for them to excel in their respective markets. Richardson is committed to delivering high quality engineered solutions that meet our customers’ requirements on a cost-effective basis.

Company at a Glance

2003 Achievements

-   Company sales from continuing operations increased 7.6%
- -   Record sales in Europe exceeded $100M
- -   Record sales in Asia/Pacific of $75M
- -   Security Systems Division — Record Sales of $92M and Gross Margin of 25%
- -   Highest number of design wins in the company’s history
- -   11 new and 8 expanded vendor distribution agreements were signed

Contents

                                     To Our Stockholders     4-5
                                     RF & Wireless Communications Group   6
                                     Industrial Power Group 7
                                     Display Systems Group 8
                                     Security Systems Division         9
                                     Five-Year Financial Review         10
                                     Management’s Discussion and Analysis of Financial Condition and Results of Operations   11-17
                                     Consolidated Balance Sheets    18
                                     Consolidated Statements of Operations 19
                                     Consolidated Statements of Cash Flows 20
                                     Consolidated Statements of Stockholders’ Equity            21
                                     Notes to Consolidated Financial Statements       22-29
                                     Market Price of Common Stock 29
                                     Report of Independent Auditors   30
                                     Stockholder Information 30
                                     Officers & Directors       31

To Our Stockholders

We are pleased to report the company’s sales reached $464.5M, up 7.6% from continuing operations. Although sales and earnings for the year were below expectations, we continued to gain market share during the second year of the most severe economic downturn we have experienced in the company’s history.

The demand for “Engineered Solutions”, including prototype design, systems integration, manufacturing, testing and logistics, continued to increase as the trend of our customers to outsource their engineering requirements was expanded during the year. The company’s geographic diversity and broad range of products, once again, provided stability on a global basis.

Success

Globally, from continuing operations, sales in North America increased 8.6% reversing last year’s decline, with Canada representing the highest growth area with record sales up 10.5%. The Asia/Pacific market continued to show good growth with a 15.6% increase over the prior year with the majority of the growth in Taiwan, up 46.7%, followed by Japan at 26.1% and China, up 19.3%. Europe produced record sales, exceeding $100 million for the first time in the company’s history. Sales were particularly strong in the UK, up 25.1%, followed by Spain at 13.1%.

The RF and Wireless Communications Group’s sales increased 10%, reversing the major decline that we experienced in FY02. The Security Systems Division had an excellent year, increasing their sales 8.2% with the largest increases coming from Europe, up 33.8% and Canada, up 19.1% with gross margin increasing to 25%. The Display Systems Group produced good growth with sales increasing 5.8% led by strong performance from our Pixelink custom monitor group, which grew sales 32% during the year and major contributions from our medical monitor product line which were up 31%. The Industrial Power Group’s sales increased 3.9% while producing the highest gross margin in the company at 33%.

Strategic Highlights

The severe economic downturn has accelerated the trend of commodity distributors to consolidate and de-emphasize technical service. However, during the last year, we were able to produce sales growth while leading electronic commodity distributors throughout the industry posted declines, which forced them to reduce their staffs and eliminate technical support for specialized products, particularly in the RF and wireless markets.

As a result, demand for engineered solutions service has never been higher, and the number of design wins produced by our engineers during fiscal 2003 surpassed all previous records. However, the majority of these programs are currently on hold pending economic improvement to enter full production. The revenue for our engineering services is derived from the production of the products we design and from the electronic components we provide to our customers.

Once the economy begins to recover, we believe our sales and earnings should rapidly accelerate. Our business strategy continues to gain market share, as vendors look for alternative channels to market to support the technical needs of their customers.

During the year, we continued to add RF and wireless engineers to support our engineered solutions strategy while expanding key vendor relationships to enhance the value of our technical support in bringing their products to market through our engineering design services.

The Richardson strategy

The market is rapidly moving towards a global structure. Through our 70 worldwide locations, we are able to service customers who may require engineering design in North America with a prototype build in Europe and full volume production in China. With Richardson engineers located throughout the world, we are able to serve the customer from design to production on a seamless basis.

The Richardson strategy enables us to participate in every stage of the design cycle providing engineering services to our customers and vendor partners throughout the production phase. The illustration below describes how Richardson’s participation, from device design to systems implementation, allows us to grow and gain market share even in times of an economic downturn.

Thank you for your continued investment in Richardson Electronics, Ltd.

Sincerely,

/s/ Edward J. Richardson

Edward J. Richardson
Chairman of the Board & Chief Executive Officer

/s/ Bruce W. Johnson

Bruce W. Johnson
President & Chief Operating Officer

July 31, 2003

RF & Wireless Communications Group

ENGINEERED SOLUTIONS

•                       Global design centers
•                       RF testing center
•                       Leading technology vendor partners
•                       Global design tracking system
•                       Applications support

The RF and Wireless Communications Group (RFWC) serves the expanding global RF and wireless communications market, including infrastructure and wireless networks, as well as the fiber optics market. Our product and sales team of RF and wireless engineers assist customers in designing circuits, selecting cost-effective components, planning reliable and timely supply, prototype testing and assembly.

How does your model support Engineered Solutions?

Richardson’s RFWC group is the world leader in the design-in and technical support of RF and wireless components. Richardson has strategically installed global design “centers of excellence”, with each focusing on specific technologies and solutions using state-of-the-art products. The global relationships and programs that we have established with the most technically advanced RF and wireless vendors facilitate the continuous support of our customers with solutions using the newest and highest quality components.

How does your model differentiate you from the competition?

Richardson’s RFWC group represents a true extension of our customers’ engineering departments by offering complete engineering and technical support from the design-in of RF and wireless components to the development of engineered solutions for their system requirements.

We also offer global visibility to our vendor partners. We track every identified RFWC design opportunity worldwide by application and supply this information to our vendor partners to facilitate improved forecasting and new product development. We know of no other company that offers design to production visibility of RF and wireless programs on a global basis.

How will your model sustain growth in the future?

Our engineered solutions strategy has allowed us to partner with world leaders in the manufacture of RF and wireless components. Through partnerships with companies like M/A-COM, Motorola, TOKO, AVX, ANADIGICS, Anaren, HUBER+SUHNER and WJ Communications, we offer our customers leading edge products and the newest technology enabling them to differentiate themselves from the competition while maintaining a cost competitive edge.

Economic conditions have accelerated the trend of RF and wireless communications customers to outsource engineering and design. While other companies have reduced capacity, RFWC continues to invest in resources for our global design centers and engineering teams, and is prepared to meet the increased demand from our customers.

Industrial Power Group

ENGINEERED SOLUTIONS

•           Power assemblies
•           High power, high frequency design services
•           Custom modules
•           Circuit analysis and custom design

The Industrial Power Group (IPG) provides engineered solutions for customers in the steel, automotive, textile, plastics, semiconductor manufacturing and transportation industries. Our engineers design solutions for applications such as motor speed controls, industrial heating, laser technology, semiconductor manufacturing equipment, radar and welding.

How does your model support Engineered Solutions?

IPG’s value is derived from understanding how components from various vendor partners can be integrated into a single circuit design that will perform to our customers’ requirements in a given application. Our field application engineers work side by side with our customers’ engineering teams to evaluate their needs and design optimal solutions, whereas our product management team utilizes its expertise in power conversion technology to partner with industry leading vendors to select the appropriate products. These products are then assembled to provide a complete integrated solution for our customers. The result is a high quality engineered solution tailored for each of our customer’s applications.

How does your model differentiate you from the competition?

From high power semiconductors to electron tubes, we work with our customers and vendor partners to select and design the best solution for each application. Our customers welcome the opportunity to outsource their design and manufacturing to a power conversion expert. Previously customers have worked through several different channels to realize a total solution for their applications, including contract vendors for manufacturing or assembly solutions, distributors for logistic services, and manufacturers for technical support. IPG provides our customers all of these services.

How will your model sustain growth in the future?

Our focus on high power and high frequency technology allows us to participate in several growth markets where new applications are being developed every day. As an example, our high power, high frequency expertise is in high demand in the semiconductor, medical and industrial laser markets with growth fueled by customers who benefit from an integrated solution. The level of integration we provide results in manufacturing efficiencies, and allows our customers to focus on new applications and designs.

Our model promotes both our customers’ and vendor partners’ businesses. We work with our customers as their technology requirements evolve and then communicate their needs to our vendor partners to ensure the development of appropriate new products. IPG continues to be at the forefront of growth, from our vendor partners to our customers, helping them achieve their future goals.

Display Systems Group

ENGINEERED SOLUTIONS

•           Custom display engineering
•           Touchscreen integration
•           PC integration
•           Prototype design
•           Technical services and logistics

The Display Systems Group (DSG) is a global provider of integrated display products and systems to the public information, financial, point-of-sale and medical imaging markets. DSG partners with leading hardware vendors to offer the highest quality liquid crystal display (LCD), plasma, cathode ray tube (CRT) and customized display monitors. Our engineers design custom display solutions that include specialized finishes, touchscreens, protective panels, custom enclosures and private branding.

How does your model support Engineered Solutions?

Providing custom display solutions is the core of DSG’s strategy, and we work with our customers to translate their requirements into the most cost-effective solution. We strategically select high quality vendor partners and products that are best suited to support our engineered solutions model. By collaborating with leading hardware vendors, including Intel® as a Premier Provider and NEC-Mitsubishi as a Select Integrator®, DSG is able to offer a high quality platform for a variety of integrated software and hardware applications.

As an example, our Medical Imaging Hardware Partnership Program represents a strategic sales initiative between Richardson and medical imaging software providers. This initiative combines Richardson’s hardware expertise in medical imaging engineered solutions with our software partners’ expertise in Picture Archiving and Communication Systems (PACS) to provide integrated workstation solutions to the end user.

How does your model differentiate you from the competition?

We look beyond the basic selling model by building value into the solutions we offer. Our dedicated display integration facilities provide us with capabilities to custom design integrated hardware solutions or modify existing products with features like touchscreens and custom enclosures. Customers benefit from our technical knowledge and support of the respective needs of each market segment. Our team of experienced field application engineers is unsurpassed in the industry.

How will your model sustain growth in the future?

Through product customization and aftermarket technical support, we continue to deliver lower cost of ownership and high quality engineered solutions to the display systems market. Our primary goal is to sustain our high level of customer satisfaction, gain customer loyalty and generate higher margins.

We are seeing increased demand for product integration from customers in all major target market segments, and our vendor partners, who also recognize this need, work with us to deliver the best-engineered solution for each customer application.

DSG is uniquely positioned to meet the needs of our customers by maintaining a broad product and technology portfolio. We deliver solutions for new applications such as PACS and digital signage, as well as supply CRTs to the OEM and repair markets. DSG will continue to stay at the forefront of the technology curve and provide engineering innovation as the display market grows and evolves.

Security Systems Division

ENGINEERED SOLUTIONS

•           Customized solutions
•           Systems integration support
•           Broad product portfolio of on-hand inventory
•           Experienced and extensive sales and engineering support

The Security Systems Division (SSD) is a global provider of closed circuit television (CCTV), fire, burglary, access control, sound and communications products, and accessories for the residential, commercial and government markets. SSD specializes in CCTV design-in support, offering extensive expertise with applications requiring digital technology. Our products are primarily used for security and access control purposes but are also utilized in industrial applications, mobile video, traffic management, and medical applications.

How does your model support Engineered Solutions?

SSD helps its customers — security, fire, electrical and sound integrators — qualify their end user requirements and design customized solutions. This includes identifying the right products and stocking an extensive line of name brand products, as well as private label products designed and manufactured to Richardson specifications for a quick, turnkey solution. We act as an extension to our vendor partners by providing equipment upgrades, training, technical support and service.

These relationships and services are especially critical in supporting digital products, one of the fastest growing yet most challenging segments within the security industry due to the maturing technology and network requirements. SSD is investing in resources to support its customers, adding Microsoft certified system engineers (MCSEs) and digital product specialists who work with our customers to identify and support application-specific solutions.

How does your model differentiate you from the competition?

Providing engineered solutions on a cost-effective basis is the key. As a result of the technology changes, integrators must become experts in networked security solutions, and they must have efficient access to technical assistance and inventory. Manufacturers are not staffed to provide this level of support, and we believe our major competitors do not offer the same level of independence and knowledge as SSD.

SSD enjoys strong partnerships with more than 100 of the world’s leading CCTV, sound, fire, burglary and access control vendors, as well as our own private label brands, National Electronics and Captureä, allowing us to provide the best solution for each customer’s application and positioning us as the best partner in the industry.

How will your model sustain growth in the future?

As the economy improves and the industry continues to upgrade from analog to digital, SSD strives to invest in the best products, people and services to remain ahead of the technology curve and take advantage of growing demand in both the private and government sectors. Homeland Security alone is slated to spend billions of dollars on new technology over the next five years. SSD will continue to build its unique line of National Electronics and CaptureTM branded products, including state-of-the-art digital and wireless equipment. Customer relationships are solidified by providing value added services, namely the experience, education, design and personal support embodied by Richardson’s “engineered solutions” concept.


Five-Year Financial Review				This information should be read in conjunction with the Company's consolidated financial statements and accompanying notes included elsewhere herein.

(in thousands, except per share amounts)					Year Ended May 31

Statement of Operations Data			2003 ⁽¹⁾	2002 ⁽²⁾		2001	2000	1999

Net sales			$ 464,517	$ 443,492		$ 502,369	$ 410,468	$ 323,959
Cost of products sold			365,427	349,326		370,819	301,561	233,644
	Gross margin		99,090	94,166		131,550	108,907	90,315
Selling, general and administrative expenses			100,749	94,519		94,444	82,464	71,572
Other expense, net			11,049	17,256		10,716	7,839	6,886
(Loss) income before income taxes			(12,708)	(17,609)		26,390	18,604	11,857
Income tax (benefit) provision			(3,012)	(6,339)		8,656	5,500	3,505
Cumulative effect of accounting change, net of tax ⁽³⁾			17,862	--		--	--	--
Net (loss) income			$(27,558)	$ (11,270)		$ 17,734	$ 13,104	$ 8,352


(Loss) income per share - basic
	Before cumulative effect of accounting change		$ (.81)	$ (.83)		$ 1.33	$ 1.03	$ .60
	Cumulative effect of accounting change, net of taxes		(1.19)	--		--	--	--
		Net (loss) income per share:	$ (2.00)	$ (.83)		$ 1.33	$ 1.03	$ .60

(Loss) income per share - diluted
	Before cumulative effect of accounting change		$ (.81)	$ (.83)		$ 1.21	$ 1.00	$ .60
	Cumulative effect of accounting change, net of taxes		(1.19)	--		--	--	--
		Net (loss) income per share:	$ (2.00)	$ (.83)		$ 1.21	$ 1.00	$ .60

Dividends per common share			$ .16	$ .16		$ .16	$ .16	$ .16

					Year Ended May 31

Net Sales by Strategic Business Unit⁽⁴⁾			2003	2002		2001	2000	1999

	RF & Wireless Communications Group (RFWC)		$222,448	$202,409		$244,381	$154,502	$104,347
	Industrial Power Group (IPG)		77,487	74,578		89,053	87,584	77,389
	Security Systems Division (SSD)		92,090	85,087		82,352	84,504	70,180
	Display Systems Group (DSG)		64,191	60,697		59,476	50,502	36,935
	Medical Glassware (MG)		1,269	12,940		15,966	20,193	22,722
	Corporate ⁽⁵⁾		7,032	7,781		11,141	13,183	12,386
		Consolidated	$464,517	$443,492		$502,369	$410,468	$323,959

						As of May 31

Balance Sheet Data			2003	2002		2001	2000	1999

Receivables, net			$ 85,355	$ 84,156		$ 90,069	$ 77,821	$ 62,448
Inventories			95,896	107,159		144,135	119,224	107,724
Working capital			184,483	186,743		225,436	174,270	161,640
Property, plant and equipment, net			31,088	28,827		28,753	25,851	23,047
Total assets			265,555	286,836		321,514	264,925	235,678
Long-term debt			138,396	132,218		155,134	117,643	113,658
Stockholders' equity			76,255	99,603		109,545	93,993	84,304

(1)	In the fourth quarter of fiscal 2003, the Company recorded a $16.1 million charge ($10.3 million, net of tax) principally related to inventory write-downs and restructuring charges. In addition, the Company recorded incremental tax provisions of $1.6 million to establish a valuation allowance related to the Company's deferred tax assets outside the United States.

(2)	In the third quarter of fiscal 2002, the Company recorded a $4.6 million loss ($2.9 million, net of tax) related to the disposition of its Medical glassware business. In the fourth quarter of fiscal 2002, the Company recorded a $16.1 million charge ($10.3 million, net of tax) primarily related to inventory obsolescence.

(3)	In the second quarter of fiscal 2003, the Company adopted SFAS 142 "Goodwill and Other Intangible Assets" and as a result recorded a cumulative effect adjustment of $17,862, net of tax of $3,725, to write off impaired goodwill. Additionally, effective at the beginning of fiscal 2003, the Company no longer amortized goodwill. (Loss) income before taxes included goodwill amortization of $577 in 2002, $612 in 2001, $368 in 2000, and $298 in 1999.

(4)	Certain amounts in prior periods were reclassified to conform to the 2003 presentation.

(5)	Includes freight billed to customers.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Description of Business

Results of Operations

Sales and Gross Margin Analysis

Consolidated sales in fiscal 2003 were $464.5 million, up 4.7% from 2002 sales of $443.5 million. Excluding Medical Glassware, sold in fiscal 2002, sales were up 7.6% in 2003 led by Wireless and Security Systems increasing 9.9% and 8.2%, respectively. In fiscal 2002, consolidated sales fell 11.7% from a record 2001 level of $502.4 million amid a severe electronics industry recession. Sales by SBU and percent of consolidated sales are presented in the following table (in thousands):

Sales	2003	%	2002	%	2001	%

RFWC	$ 222,448	47.9	$ 202,409	45.6	$ 244,381	48.7
IPG	77,487	16.7	74,578	16.8	89,053	17.7
SSD	92,090	19.8	85,087	19.2	82,352	16.4
DSG	64,191	13.8	60,697	13.7	59,476	11.8
MG	1,269	0.3	12,940	2.9	15,966	3.2
Corporate	7,032	1.5	7,781	1.8	11,141	2.2
Total	$ 464,517	100.0	$ 443,492	100.0	$ 502,369	100.0

Gross margin for each SBU and margin as a percent of sales are shown in the following table. Gross margin reflects the distribution product margin less manufacturing variances, customer returns, scrap and cycle count adjustments, engineering costs, and other provisions. Inventory obsolescence provisions, gross margins on freight, and miscellaneous costs are included under the caption “Corporate” (in thousands):

Gross Margin	2003	%	2002	%	2001	%

RFWC	$ 49,889	22.4	$ 47,467	23.5	$ 63,593	26.0
IPG	25,321	32.7	24,356	32.7	30,650	34.4
SSD	22,939	24.9	20,080	23.6	18,932	23.0
DSG	16,218	25.3	15,864	26.1	14,553	24.5
MG	164	12.9	2,727	21.1	3,765	23.6
	114,531	25.0	110,494	25.4	131,493	26.8
Corporate	(15,441)		(16,328)		57
Total	$ 99,090	21.3	$ 94,166	21.2	$ 131,550	26.2

In 2002, the Company recorded a pre-tax provision for inventory obsolescence and overstock of $15.3 million, $9.8 million, net of tax. The charge was driven by the industry wide decline in sales, a prolonged recovery period, and changes in the Company’s mix of business toward higher technology products, particularly in the telecommunications market. In 2003, the Company recorded an additional provision of $13.8 million, $8.8 million, net of tax, primarily for inventory obsolescence, overstock, and shrink to write down inventory to net realizable value as the Company aligned its inventory and cost structure to current sales levels amid continued economic slowdown and limited visibility.

The Company recently implemented new polices and procedures to strengthen its inventory management process while continuing to invest in system technology to further enhance its inventory management tools. The Company is committed to inventory management as an ongoing process as the business evolves and technology changes.

Sales and gross margin trends are analyzed for each strategic business unit in the following sections.

RF & Wireless Communications Group

RFWC serves the voice and data telecommunications market and the radio and television broadcast industry predominately for infrastructure applications. The RFWC team of sales engineers provides engineering design, prototype assembly and testing of discrete devices and components for the telecommunications market. In addition, the group provides solid-state components, systems design and integration services for the broadcast market.

As part of its business model to grow through both product line and geographic expansion, RFWC made a strategic acquisition in fiscal 2002. In July 2001, the Company acquired Sangus AB of Stockholm, Sweden, a leading distributor and manufacturers’ representative specializing in design-in and engineering support for RF, microwave and fiber optics to the wireless and communications markets in the Nordic region. The acquisition contributed $4.0 million to sales in 2002 and $5.9 million in 2003.

In fiscal 2003, RFWC sales were $222.4, up 9.9% from 2002 due to stronger US wireless communications demand, solid gains in passive and interconnect segments, and several large contract wins in North America. Sales decreased 17.2% in 2002 from a record $244.4 million in 2001 reflecting lower demand primarily in North America and Europe due to the general state of the economy, particularly in the telecommunications market. The 2002 decline was partially offset by revenues of the acquired business (Sangus) and growth in Asia/Pacific fueled by several key opportunities at top-tier Original Equipment Manufacturers (OEMs) in both Korea and China. Sales outside of the United States represented 65.4%, 66.2%, and 55.2% of RFWC’s sales in 2003, 2002, and 2001, respectively.

Gross margins continued to decline, dropping 110 basis points (bps) in 2003 and 250 bps in 2002 due in part to industry-wide competitive pricing pressure in recent years. The decline in margins was also affected by lower markups on several large contracts in the U.S. in 2003 and on an expanded customer base in Asia/Pacific in 2002.

Industrial Power Group

IPG serves a broad range of customers including the steel, automotive, textile, plastics, semiconductor manufacturing, and transportation industries. IPG’s specialized product and sales organization employs both vacuum tube and power semiconductor technologies to meet customer needs in applications such as motor speed controls, industrial heating, laser technology, semiconductor manufacturing equipment, radar and welding. Vacuum tube sales represented 64%, 66%, and 67% of IPG total sales in 2003, 2002, and 2001, respectively.

IPG’s sales in 2003 increased 3.9%, reflecting a 20% growth in the sale of power semiconductors partially offset by an essentially flat vacuum tube business. The sales decline of 16.3% in 2002 reflects lower investment levels for microwave equipment by the semiconductor industry as well as lower demand for both industrial and power conversion products. Sales outside of the United States represent 52.7%, 53.4%, and 48.0% of IPG’s sales in 2003, 2002, and 2001, respectively.

Gross margins were 32.7%, 32.7%, and 34.4% in 2003, 2002 and 2001, respectively. The recent IPG gross margin decline from 2001 levels was primarily due to several large volume contracts at lower margins and changes in product mix.

Security Systems Division

SSD provides security systems and related design services which include such products as closed circuit television (CCTV), fire, burglary, access control, sound and communication products and accessories with an emphasis on the fastest growing segment of the business, applications employing digital technology.

Sales were higher by 8.2% in 2003 and 3.3% in 2002 because of heightened concerns over security and acceleration in the conversion from analog to digital technology. Sales outside of the United States represented 70.2%, 63.2%, and 58.6% of SSD’s sales in 2003, 2002, and 2001, respectively.

Gross margins were up 130 bps in 2003 after advancing 60 bps in fiscal 2002 as higher margin digital technology products represented a larger percentage of sales.

Display Systems Group

DSG provides system integration and custom display solutions for the public information, financial, point-of-sale, and medical imaging markets. The medical monitor business was integrated into DSG in fiscal 2002 and serves the medical imaging market.

DSG sales increased 5.8% and 2.1% in 2003 and 2002, respectively. DSG continued its growth despite a decline in CRT sales of 10% in 2003 and 13% in 2002 with strong advances in custom flat panel monitor and medical monitor sales. The medical monitor business grew 31% in fiscal 2003 as the Company secured several large contracts with its new product offerings. Sales outside the United States represented 24.7%, 24.2%, and 22.1% of DSG’s sales in 2003, 2002, and 2001, respectively.

Gross margins declined 80 bps in fiscal 2003, following a 160 bps improvement in 2002. The 2003 margins were negatively affected by increased medical monitor sales as large orders, which fueled the sales growth, carry lower margins. In 2002, the gross margins reflected a general improvement in flat panel monitor and medical monitor margins driven by increased value added from the Company’s engineered solutions model.

Medical Systems Group

On February 22, 2002, the Company sold its Medical Glassware business, including the reloading and distribution of X-ray, CT, and image intensifier tubes, to Royal Philips Electronics amid continued decline in sales and gross margins due to increased competition in the replacement market and production inefficiencies in tube reloading. The Medical Glassware business at the time of sale represented more than half of the Company's MSG revenues with medical monitors and associated display products making up the majority of the balance. The retained medical monitor business is included in the Display Systems Group while the rest of MSG is now reported under Corporate and MG.

Medical Glassware sales fell 90.2% in 2003, following a 19.0% decrease in 2002, as a result of the sale of the business at the end of the third quarter in 2002. The 2003 revenues represent sale of residual inventory as well as certain camera tubes the Company still sells into multiple markets. Sales outside of the United States represented 48%, 30%, and 26% of MSG’s sales in 2003, 2002, and 2001, respectively.

Sales by Geographic Area

The Company has grown through a balanced emphasis on investment in both North America and other areas of the world and currently has 33 offices in North America, 18 in Europe, 14 in Asia/Pacific and 5 in Latin America. On a geographic basis, the Company primarily categorizes its sales by destination: North America, Europe, Asia/Pacific, Latin America, and Direct Export. The Direct Export category represents sales to export distributors in countries where the Company does not have offices. Prior years’ sales and gross margin of the former MSG’s Logistics business have been reclassified from North America to Corporate. Sales and gross margin by geographic area are as follows (in thousands):

Sales	2003	%	2002	%	2001	%

North America	$ 255,916	55.1	$ 241,767	54.5	$ 302,888	60.4
Europe	100,388	21.6	92,351	20.8	99,215	19.7
Asia/Pacific	74,746	16.1	65,534	14.8	51,411	10.2
Latin America	20,506	4.4	28,943	6.5	28,012	5.6
Direct Export	5,929	1.3	7,116	1.6	9,702	1.9
Corporate	7,032	1.5	7,781	1.8	11,141	2.2
Total	$ 464,517	100.0	$ 443,492	100.0	$ 502,369	100.0

Gross Margin	2003	%	2002	%	2001	%

North America	$ 64,913	25.4	$ 61,832	25.6	$ 78,373	25.9
Europe	26,389	26.3	24,261	26.3	28,241	28.5
Asia/Pacific	16,705	22.3	14,906	22.7	14,488	28.2
Latin America	5,065	24.7	7,736	26.7	7,751	27.7
Direct Export	1,459	24.6	1,759	24.7	2,640	27.2
	114,531	25.0	110,494	25.4	131,493	26.8
Corporate	(15,441)		(16,328)		57
Total	$ 99,090	21.3	$ 94,166	21.2	$ 131,550	26.2

North American sales increased 5.9% in 2003 after a steep decline of 20.2% in 2002. Excluding effects of the sold Medical Glassware business, North America sales increased 8.6% in 2003 as the Company benefited from improved demand in the US wireless communications market and continued gains in the Canadian security market, in which the Company’s SSD division, Burtek, is one of the leading suppliers. The decline in fiscal 2002 North American sales was a direct result of the general economic conditions particularly in telecommunications and semiconductor industries.

Europe sales reached a record $100 million in 2003, up 8.7% from 2002, propelled by the strong Euro and solid gains in SSD and DSG. In fiscal 2002, Europe sales decreased 6.9% amid global recession in the telecommunications market.

Asia/Pacific marked its fifth consecutive year of double-digit growth as sales increased 14.1% in 2003 following a 27.5% advance in fiscal 2002. Taiwan, Japan, and China posted the largest gains in 2003 as the Company opened a third sales office in China and had a strong RFWC performance in Japan. The growth in 2002 was driven by continued penetration in growing markets, particularly Korea and China, where sales were up 77% and 50%, respectively.

Latin America economies did not perform well during fiscal 2003 as they suffered from the effects of the global economic recession, weak investment inflows, political instability in several areas, and general uncertainty about the future economic policies of several countries. This was the main reason sales decreased 29.2 % in fiscal 2003 after a modest 3.3% growth in fiscal 2002. Effects of the sold Medical Glassware business and continued devaluation of local currencies also contributed to the sharp 2003 decline.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $6.2 million in fiscal 2003 to $100.7 million. Included in the SG&A expense is a restructuring charge of $1.7 million as the Company eliminated over 70 positions or approximately 6% of its workforce and terminated a property lease contract (See Note C). Increases in salaries, primarily resulting from employee merit increases, contributed over $2.0 million to the SG&A rise. Incentives were up $1.5 million in 2003 on higher sales while fringe benefits were up $1.0 million driven by increasing healthcare costs and higher payroll.

Selling, general and administrative expenses remained essentially flat at $94.5 million in 2002 compared with $94.4 million in 2001 as a direct result of strict cost control measures on certain discretionary expenses, partially offset by additional investments in the Company’s engineering staff.

Other Income and Expense

Interest expense decreased 18.7% in fiscal 2003 partially due to $1.1 million lower charges related to the fair market value adjustments of the fixed rate swaps. Also, the Company benefited from historically low interest rates as the Company’s weighted average interest rate decreased to 6.09% on May 31, 2003, compared to 6.35% a year ago. Interest expense increased 9.4% in 2002 from 2001 largely due to the effects of FAS 133 adoption.

Investment income includes realized capital losses of $61,000 in 2003 and gains of $49,000 in 2002 and $222,000 in 2001 related to the Company’s investment portfolio. Foreign exchange and other expenses primarily reflect changes in the value of the U.S. dollar relative to foreign currencies. In 2002, the Company recorded a loss of $4.6 million related to the sale of Medical Glassware.

Income Tax Provision

The Company’s effective tax rates were 23.7% in 2003, 36.0% in 2002, and 32.8% in 2001. Differences between the effective tax rate as compared to the prior year and as compared to the U.S. federal statutory rate of 34% in 2003 and 2002 and 35% in 2001 principally result from the Company’s geographical distribution of taxable income and losses, certain non-tax deductible charges, and the Company’s foreign sales corporation benefit on export sales, net of state income taxes. In fiscal 2003, due to the fact that the Company is in a loss position, the lower tax rate is indicative of a lower tax benefit being recorded. This primarily resulted from the establishment of a $1.6 million valuation reserve related to the Company’s deferred tax assets outside of the United States. As a result, no tax benefit was recognized on losses in certain foreign subsidiaries.

Net Income and Per Share Data

In fiscal 2003, the Company posted a net loss of $27.6 million. The loss includes, net of tax, $17.9 million goodwill impairment charge (see Note B), $8.8 million charge related to inventory, $1.1 million restructuring charge, and other charges of $2.0 million (See Note C). Excluding the effects of the charges, the net income for 2003 would have been $2.2 million or $.16 per share.

The Company recorded a net loss of $11.3 million in 2002 compared with net income of $17.7 million in 2001. Excluding after tax charges related to the Medical Glassware business disposition of $2.9 million, inventory obsolescence and overstock of $9.8 million, and other charges of $0.5 million, net income for 2002 would have been $1.9 million, or $.14 per share.

Management, as well as certain investors, uses these results of operations, excluding charges, to measure the Company’s current and future financial performance. These non-GAAP measurements do not replace the presentation of the Company's GAAP financial results. These measurements provide supplemental information to assist management and certain investors in analyzing the Company’s financial position and results of operations. Management has chosen to provide this information to investors to enable them to perform meaningful comparisons of past, present and future operating results and as a means to emphasize the results of core on-going operations.

Liquidity and Capital Resources

In recent years, the Company has financed its growth and cash needs largely through income from operations and borrowings under revolving credit facilities. Liquidity provided by the operating activities of the Company is reduced by working capital requirements, debt service, capital expenditures, dividends, and business acquisitions. Liquidity is increased by proceeds from borrowings and business dispositions.

The Company provides engineered solutions, including prototype design and assembly, in niche markets. Additionally, the Company specializes in certain products representing trailing-edge technology that may not be available from other sources, and may not be currently manufactured. In many cases, the Company’s products are components of production equipment for which immediate availability is critical to the customer. Accordingly, the Company enjoys higher gross margins, but has larger investments in inventory than those of a commodity electronics distributor.

Cash provided by operations was $8.2 million in 2003 and $33.3 million in 2002, while in 2001, $18.7 million of cash was used in operations. Working capital requirements increased by $3.2 million in 2003 as enhanced collection of receivables and improved inventory management did not fully offset a decrease in days payable. Working capital requirements decreased $22.2 million in 2002 in line with the 11.7% sales reduction. In 2001, additional investments in working capital to support sales growth were $44.4 million.

The Company spent approximately $6.1 million on capital projects during fiscal 2003 primarily related to capitalized PeopleSoft development costs ($3.0 million), facility improvements at the Corporate headquarters (over $1.0 million), as well as ongoing efficiencies in operating and information technology infrastructure. Capital expenditures for fiscal 2004 are currently expected to exceed fiscal 2003 levels as the PeopleSoft implementation progresses.

Annual dividend payments for fiscal 2003 amounted to $2.2 million. The policy regarding payment of dividends is reviewed periodically by the Board of Directors in light of the Company’s operating needs and capital structure. Over the last 15 years, the Company was in a position to regularly pay a quarterly dividend of $0.04 per common share and $0.036 per class B common share. Management currently expects this trend to continue in fiscal 2004.

As of the end of fiscal 2003, the Company maintained $138.4 million in long-term debt primarily in the form of two issues of convertible debentures and a multi-currency credit facility (see Note F). In fiscal 2004, the interest payments on the debentures of $2,767,000 each are scheduled for June and December of 2003. The Company has a multi-currency revolving credit facility agreement in the amount of $102.0 million. The agreement matures in September of 2005 and bears interest at applicable LIBOR rates plus a margin, varying with certain financial performance criteria. At May 31, 2003, the applicable margin was 225 basis points and $36.2 million was available under this facility.

The Company has interest rate exchange agreements to convert approximately $37.2 million of its floating rate debt to an average fixed rate of 8% through July 2004. At June 1, 2001, in connection with the adoption of SFAS No. 133, the Company recorded a transition adjustment relating to these agreements, which reduced other accumulated comprehensive income in shareholders' equity by $971,000, after tax. In addition, the Company recorded $789,000 in 2003 and $1,926,000 in 2002 related to these agreements as additional interest expense in the statement of operations.

See section "Risk Management and Market Sensitive Financial Instruments" for information regarding the effect on net income of market changes in interest rates.

Contractual obligations and other commercial commitments by expiration period are presented in the tables below:

Contractual Obligations and Contingent Commitments	Payments Due by Fiscal Period, in thousands
Contractual Obligations and Contingent Commitments	2004	2005	2006	2007	2008	Beyond	Total

Convertible debentures	$ -	$ 3,850	$ 6,225	$ 60,750	$ -	$ -	$ 70,825
Floating-rate multi-currency revolving credit facility	-	-	65,802	-	-	-	65,802
Financial instruments	1,618	135	-	-	-	-	1,753
Facility lease obligations	3,378	2,447	1,573	703	527	661	9,289
Performance bonds	645	-	-	-	-	-	645
Contingent and earnout payments	6,193	1,084	-	-	-	-	7,277
Other	46	16	-	-	-	-	62
Total	$ 11,880	$ 7,532	$ 73,600	$ 61,453	$ 527	$ 661	$ 155,653

Management of the Company believes that the existing sources of liquidity, including current cash and equivalents as well as cash provided by operating activities, supplemented as necessary with funds available under the Company’s credit arrangements, will provide sufficient resources to meet the Company’s present and future working capital and other cash requirements for at least the next twelve months.

Transactions with Related Parties

As of May 31, 2003, the Company does not have loans receivable from its executive officers, Board of Director members, or employees. Management is not aware of any other material transactions between the Company and related parties during fiscal 2003.

Critical Accounting Policies and Estimates

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to allowances for doubtful accounts, inventories, intangible assets, income taxes, and contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The polices discussed below are considered by management to be critical to understanding the Company’s financial position and results of operations. Their application involves more significant judgments and estimates in preparation of the Company’s consolidated financial statements. For all of these policies, management cautions that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.

Allowance for Doubtful Accounts.
The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The estimates are influenced by the following considerations: continuing credit evaluation of customers’ financial conditions; aging of receivables, individually and in the aggregate; large number of customers and their dispersion across wide geographic areas; collectability and delinquency history by geographic area; and the fact that no single customer accounts for 10% or more of net sales. Material changes in one or more of these considerations may require adjustments to the allowance affecting net income and net carrying value of Accounts Receivable. As of May 31, 2003, the balance in the account was $3,350,000.

Impairment of Investments.
The Company holds a portfolio of investment securities and periodically assesses its recoverability. In the event of a decline in fair value of an investment, the judgment is made whether the decline is other-than-temporary. Management’s assessment as to the nature of a decline is largely based on the duration of that market decline, financial health of and specific prospects for the issuer, and the Company’s cash requirements and intent to hold the investment. If an investment is impaired and the decline in market value is considered to be other-than-temporary, an appropriate write-down is recorded.

In fiscal 2003, an investment impairment of $72,000 was recorded in operating results. In addition, the carrying value of certain investments was $240,000 below cost based on the closing prices on May 31, 2003. In preparing fiscal 2003 financial statements, management concluded that these stock price declines were temporary and no additional write-down was required as of May 31, 2003.

Inventories.
The Company carries its inventories at the lower of cost or market. Provisions for obsolete or slow moving inventories are recorded based upon a regular analysis of stock rotation, obsolescence, and assumptions about future demand and market conditions. If future demand, changes in the industry, or market conditions differ from management‘s estimates, additional provisions may be necessary.

In fiscal 2003 and 2002, the Company recorded inventory obsolescence and overstock provisions of $13.8 million and $15.3 million, respectively, which were included in the cost of sales. The provisions were principally for obsolete and slow moving parts. The parts were written down to estimated realizable value.

Long-Lived and Intangible Assets.
The Company periodically evaluates the recoverability of the carrying amounts of its long-lived assets, including software, property, plant and equipment. Impairment is assessed when the undiscounted expected cash flows derived from an asset are less than its carrying amount. If impairment exists, the carrying value of the impaired asset is written down and impairment loss is recorded in operating results.

In assessing the potential impairment of the Company's goodwill and other intangible assets, management makes significant estimates and assumptions regarding the discounted future cash flows to determine the fair value of the respective assets on an annual basis. These estimates and their related assumptions include, but are not limited to, projected future operating results, industry and economy trends, market discount rates, indirect expense allocations, and tax rates. If these estimates or assumptions change in the future as a result of changes in strategy, Company profitability, or market conditions, among other factors, this could adversely affect future goodwill and other intangible assets valuations and result in additional impairment charges.

New accounting pronouncements

In June 2002, the FASB issued Statement of Financial Accounting Standard No. 146 (SFAS 146), Accounting for Costs Associated with Exit or Disposal Activities. SFAS 146 provides guidance on the accounting for recognizing, measuring and reporting of costs associated with exit and disposal activities, including restructuring activities. SFAS 146 adjusts the timing of when a liability for termination benefits is to be recognized based on whether the employee is required to render future service. A liability for costs to terminate an operating lease or other contract before the end of its term is to be recognized when the entity terminates the contract or ceases using the rights conveyed by the contract. All other costs associated with an exit or disposal activity are to be expensed as incurred. SFAS 146 requires the liability to be measured at its fair value with subsequent changes in fair value to be recognized each reporting period utilizing an interest allocation approach. The pronouncement is effective for exit or disposal activities initiated after December 31, 2002 (See Note C).

In November 2002, FASB issued Interpretation No. 45 (FIN 45), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires certain guarantees to be measured at fair value upon issuance and recorded as a liability. In addition, FIN 45 expands current disclosure requirements regarding guarantees issued by an entity, including tabular presentation of the changes affecting an entity’s aggregate product warranty liability. The recognition and measurement requirements of the interpretation are effective prospectively for guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for the Company commencing in its annual financial statements for the fiscal year ended May 31, 2003 (see Note A “Warranties”).

In December 2002, the FASB issued SFAS 148, Accounting for Stock-Based Compensation - Transition and Disclosure, an Amendment of FASB Statement No. 123. SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends certain provisions of SFAS 123 to require that disclosure of the pro forma effect of applying the fair value method of accounting for stock-based compensation be prominently displayed in an entity’s accounting policy in annual and interim financial statements. The Company is required to follow the prescribed format and provide the additional disclosures required by SFAS 148 in its annual financial statements for the fiscal year ended May 31, 2003, and must also provide the disclosures in its quarterly reports containing condensed financial statements for interim periods beginning with the quarterly period ending February 28, 2003.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities (VIE). FIN 46 requires that if a company holds a controlling financial interest in a VIE, the assets, liabilities and results of the VIE’s activities should be consolidated in the entity’s financial statements. The Company does not expect FIN 46 to have a material impact on its consolidated results of operations or financial position.

SFAS 149 was issued in April 2003 and amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS 149 is generally effective for derivative instruments, including derivative instruments embedded in certain contracts, entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The Company does not expect the adoption of SFAS 149 to have a material impact on its operating results or financial condition.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristic of Both Liabilities and Equity. This statement establishes standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial instrument that is within the scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim periods beginning after June 15, 2003. The pronouncement is not expected to have a material impact on Company’s consolidated results of operations or financial position.

Risk Management and Market Sensitive Financial Instruments

The Company's foreign denominated assets and liabilities are cash, accounts receivable, inventory and accounts payable, primarily in Canada and member countries of the European community and, to a lesser extent, in Asia/Pacific and Latin America. The Company monitors its foreign exchange exposures and has entered into forward contracts to hedge significant transactions. Such contracts are not significant at May 31, 2003. Other tools that may be used to manage foreign exchange exposures include the use of currency clauses in sales contracts and the use of local debt to offset asset exposures.

As discussed above, the Company’s debt financing, in part, varies with market rates exposing the Company to the market risk from changes in interest rates. Certain operations, assets and liabilities of the Company are denominated in foreign currencies subjecting the Company to foreign currency exchange risk. In order to provide the user of these financial statements guidance regarding the magnitude of these risks, the Securities and Exchange Commission requires the Company to provide certain quantitative disclosures based upon hypothetical assumptions. Specifically, these disclosures require the calculation of the effect of a 10% increase in market interest rates and a uniform 10% strengthening of the US dollar against foreign currencies on the reported net earnings and financial position of the Company.

Under these assumptions, additional interest expense, tax effected, would have increased the net loss by $81,000 in 2003 and $247,000 in 2002, respectively. These amounts were determined by considering the impact of the hypothetical 10% interest rate increase on the Company’s variable rate outstanding borrowings.

Had the US dollar strengthened 10% against various foreign currencies, sales would have been lower by an estimated $20.2 million in 2003 and $19.3 million in 2002. Total assets would have declined by $7.5 million and $8.1 million, while the total liabilities would have decreased by $4.4 million and $4.1 million in 2003 and 2002, respectively. These amounts were determined by considering the impact of the hypothetical 10% decrease in average foreign exchange rates against the US dollar on the sales, assets and liabilities of the Company’s international operations.

The interpretation and analysis of these disclosures should not be considered in isolation since such variances in interest rates and exchange rates would likely influence other economic factors. Such factors, which are not readily quantifiable, would likely also affect the Company’s operations.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Except for the historical information contained herein, the matters discussed in this Annual Report (including the Annual Report on Form 10-K) are forward-looking statements relating to future events which involve certain risks and uncertainties, including those identified herein and in the Annual Report on Form 10-K. Further, there can be no assurance that the trends reflected in historical information will continue in the future.


Consolidated Balance Sheets
		As of May 31

(in thousands, except per share amounts)		2003	2002

Assets
Current assets
Cash and equivalents		$ 17,498	$ 15,485
Receivables, less allowance of $3,350 and $2,646		85,355	84,156
Inventories		95,896	107,159
Prepaid expenses		6,919	4,880
Deferred income taxes		19,401	16,119
	Total current assets	225,069	227,799
Property, plant and equipment, net		31,088	28,827
Goodwill, net of amortization of $2,745 and $3,939		5,137	24,914
Other assets		4,261	5,296
	Total assets	$265,555	$286,836


Liabilities and stockholders' equity
Current liabilities
Accounts payable		$ 23,660	$ 27,387
Accrued liabilities		16,880	13,631
Current portion of long-term debt		46	38
	Total current liabilities	40,586	41,056
Long-term debt		138,396	132,218
Deferred income taxes		5,269	8,764
Non-current liabilities		5,049	5,195
	Total liabilities	189,300	187,233
Stockholders' equity
Common stock, $.05 par value; issued 12,258 shares at
May 31, 2003 and 12,144 at May 31, 2002		613	607
Class B common stock, convertible, $.05 par value;
issued 3,207 shares at May 31, 2003 and May 31, 2002		160	160
Preferred stock, $1.00 par value, no shares issued		--	--
Additional paid-in capital		91,962	91,013
Common stock in treasury, at cost; 1,506 shares at
May 31, 2003 and 1,584 at May 31, 2002		(8,922)	(9,386)
Retained earnings		6,703	36,420
Accumulated other comprehensive loss		(14,261)	(19,211)
	Total stockholders' equity	76,255	99,603
	Total liabilities and stockholders' equity	$265,555	$286,836

See notes to consolidated financial statements.


Consolidated Statements of Operations

		Year Ended May 31

(in thousands, except per share amounts)	2003		2002	2001

Net sales	$464,517		$443,492	$502,369
Cost of products sold	365,427		349,326	370,819
Gross margin	99,090		94,166	131,550
Selling, general and administrative expenses	100,749		94,519	94,444
Operating (loss) income	(1,659)		(353)	37,106
Other (income) expense:
Interest expense	9,917		12,197	11,146
Investment income	(124)		(352)	(575)
Loss from disposition of a business	--		4,551	--
Foreign exchange and other, net	1,256		860	145
	11,049		17,256	10,716
(Loss) income before income taxes and
cumulative effect of accounting change	(12,708)		(17,609)	26,390
Income tax (benefit) provision	(3,012)		(6,339)	8,656
(Loss) income before cumulative effect
of accounting change	(9,696)		(11,270)	17,734

Cumulative effect of accounting change,
net of tax of $3,725	(17,862)		--	--
Net (loss) income	$(27,558)		$(11,270)	$ 17,734

Net (loss) income per share - basic:
Net (loss) income per share before
cumulative effect of accounting change	$ (.70)		$ (.83)	$ 1.33
Cumulative effect of accounting change, net of tax	(1.30)		--	--
Net (loss) income per share	$ (2.00)		$ (.83)	$ 1.33
Net (loss) income per share - diluted:
Net (loss) income per share before
cumulative effect of accounting change	$ (.70)		$ (.83)	$ 1.21
Cumulative effect of accounting change, net of tax	(1.30)		--	--
Net (loss) income per share	$ (2.00)		$ (.83)	$ 1.21


Dividends per common share	$ .16		$ .16	$ .16

Statement of comprehensive income
Net (loss) income	$(27,558)		$(11,270)	$ 17,734
Foreign currency translation	5,097		1,297	(5,452)
FAS 133 transition adjustment	--		(971)	--
Fair value adjustment - cash flow hedges	(147)		320	--
Comprehensive (loss) income	$(22,608)		$(10,624)	$ 12,282

See notes to consolidated financial statements.


Consolidated Statements of Cash Flows

	Year Ended May 31

(in thousands)	2003	2002	2001

Operating activities:
Net (loss) income	$(27,558)	$(11,270)	$ 17,734

Adjustments to reconcile net (loss) income to cash
(used in) provided by operating activities:
Depreciation	5,093	5,182	4,956
Amortization of intangibles and financing costs	271	693	820
Deferred income taxes	(1,825)	(5,780)	885
Loss from disposition of a business	--	4,551	--
Provision for inventory obsolescence	10,037	15,279	--
Other charges	6,041	--	--
Goodwill and other intangible assets impairment, net of tax	17,862	--	--
Other non-cash items in net income	1,494	2,465	1,310
Net adjustments	38,973	22,390	7,971

Changes in working capital, net of currency
translation effects and business acquisitions:
Receivables	4,297	15,089	(9,370)
Inventories	2,484	14,455	(25,094)
Other current assets	(3,054)	732	(4,589)
Accounts payable	(8,252)	(2,927)	(5,443)
Other liabilities	1,319	(5,192)	126
Net changes in working capital	(3,206)	22,157	(44,370)
Net cash provided by (used in) operating activities	8,209	33,277	(18,665)

Financing activities:
Proceeds from borrowings	41,880	23,258	53,580
Payments on debt	(40,982)	(49,619)	(16,948)
Proceeds from issuance of common stock	1,134	1,606	4,044
Cash dividends	(2,694)	(1,609)	(2,084)
Other	(304)	--	--
Net cash (used in) provided by financing activities	(966)	(26,364)	38,592

Investing activities:
Capital expenditures	(6,125)	(5,727)	(7,883)
Business acquisitions	(1,108)	(8,785)	(8,316)
Proceeds from disposition of business	--	6,261	--
Other	(23)	480	1,283
Net cash used in investing activities	(7,256)	(7,771)	(14,916)

Effect of exchange rate changes on cash	2,026	397	(897)
Increase (decrease) in cash and equivalents	2,013	(461)	4,114

Cash and equivalents at beginning of year	15,485	15,946	11,832
Cash and equivalents at end of year	$ 17,498	$ 15,485	$ 15,946

Certain amounts in prior periods were reclassified to conform to the 2003 presentation.
See notes to consolidated financial statements.


Consolidated Statements of Stockholders' Equity
							Accumulated
	Shares Issued			Additional			Other
		Class B	Par	Paid-In	Treasury	Retained	Comprehensive
(in thousands)	Common	Common	Value	Capital	Stock	Earnings	Income (Loss)	Total

Balance May 31, 2000	11,670	3,232	$745	$84,514	$ (11,045)	$34,184	$ (14,405)	$93,993
Shares issued under ESPP
and stock option plan	276	--	14	3,513	517	--	--	4,044
Shares contributed to ESOP	--	--	--	850	460	--	--	1,310
Conversion of Class B
shares to common shares	25	(25)	--	--	--	--	--	--
Dividends	--	--	--	--	--	(2,084)	--	(2,084)
Currency translation	--	--	--	--	--	--	(5,452)	(5,452)
Net income	--	--	--	--	--	17,734	--	17,734
Balance May 31, 2001	11,971	3,207	759	88,877	(10,068)	49,834	(19,857)	109,545
Shares issued under ESPP
and stock option plan	173	--	8	1,676	256	--	--	1,940
Shares contributed to ESOP	--	--	--	460	426	--	--	886
Dividends	--	--	--	--	--	(2,144)		(2,144)
Currency translation	--	--	--	--	--	--	1,297	1,297
SFAS 133 transition adjustment	--	--	--	--	--	--	(971)	(971)
Fair value adjustments -
cash flow hedges	--	--	--	--	--	--	320	320
Net loss	--	--	--	--	--	(11,270)	--	(11,270)
Balance May 31, 2002	12,144	3,207	767	91,013	(9,386)	36,420	(19,211)	99,603
Shares issued under ESPP
and stock option plan	112	--	6	949	464	--	--	1,419
Dividends	--	--	--	--	--	(2,159)		(2,159)
Currency translation	--	--	--	--	--	--	5,097	5,097
Fair value adjustments -
cash flow hedges	--	--	--	--	--	--	(147)	(147)
Net loss	--	--	--	--	--	(27,558)	--	(27,558)
Balance May 31, 2003	12,256	3,207	$773	$91,962	$ (8,922)	$ 6,703	$ (14,261)	$76,255

See notes to consolidated financial statements.

Notes to Consolidated Financial Statements

(in thousands, except per share amounts)

Note A -- Significant Accounting Policies

Principles of Consolidation: The consolidated financial statements include the accounts and operations of the Company and its subsidiaries. All significant intercompany transactions are eliminated. The Company accounts for its results of operations on a 52/53 week year, ending on the Saturday nearest May 31. Fiscal 2003, 2002, and 2001 contained 52 weeks.

Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications: Certain amounts in the prior year’s financial statements have been reclassified to conform to the 2003 presentation.

Cash Equivalents: The Company considers short-term investments that have a maturity of three months or less, when purchased, to be cash equivalents. The carrying amounts reported in the balance sheet for cash and equivalents approximate the fair market value of these assets.

Inventories: Inventories are stated at the lower of cost or market. Inventory costs determined using the last-in, first-out (LIFO) method represent 78% of total inventories at May 31, 2003 and 80% at May 31, 2002. For the remaining inventories, cost is determined on the first-in, first-out (FIFO) method. If the FIFO method had been used for all inventories, the total amount of gross inventories would have decreased by $3,980 at May 31, 2003 and $2,413 at May 31, 2002. The reduction in FIFO value relative to LIFO reflects lowering costs in the electronics industry. Substantially all inventories represent finished goods held for sale.

Property, Plant and Equipment: Property, plant and equipment are stated at cost. Provisions for depreciation are computed principally using the straight-line method over the estimated useful life of the asset. Property, plant and equipment consist of the following:

May 31
	2003	2002

Land and improvements	$ 2,964	$ 2,864
Buildings and improvements	18,074	16,367
Computer and communications equipment	20,465	18,044
Machinery and other equipment	22,145	17,957
Property, at cost	63,648	55,232
Accumulated depreciation	(32,560)	(26,405)
Property, plant and equipment, net	$ 31,088	$ 28,827

The Company is in the application development stage of implementing enterprise resource management software (PeopleSoft). In accordance with Accounting Standards Executive Committee (AcSEC) Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, the Company capitalizes all direct costs associated with the application development of this software including software acquisition costs, consulting costs, and internal payroll costs. The Statement requires these costs to be depreciated once the application and development stage is complete. The unamortized balance of the aforementioned capitalized costs, included within computer and communications equipment, is $8,102 and $6,162 at May 31, 2003 and May 31, 2002, respectively. Depreciation expense for capitalized software costs that relate to PeopleSoft in the post-application development stage was $786, $709, and $558 in 2003, 2002, and 2001, respectively.

Other Assets: Other assets consist of the following:

May 31
	2003	2002

Investments (at market)	$ 2,587	$ 2,836
Notes receivable	786	1,425
Deferred financing costs, net	544	517
Other deferred charges, net	344	518
Other assets	$ 4,261	$ 5,296

The Company’s investments are primarily equity securities, all of which are classified as available-for-sale and are carried at their fair value based on the quoted market prices. Proceeds from the sale of the securities were $5,217 and $5,949 during fiscal 2003 and 2002, respectively, most of which were consequently reinvested. Gross realized gains on those sales were $351 in 2003 and $634 in 2002. Gross realized losses on those sales were $412 in 2003 and $584 in 2002. Net unrealized holding loss of $96 and net unrealized holding gain of $95 have been included in accumulated comprehensive income for fiscal 2003 and 2002, respectively.

Deferred financing costs and other deferred charges are amortized using the straight-line method.

Goodwill and Other Intangible Assets: Effective June 1, 2002, the Company adopted FASB Statement No. 142, Goodwill and Other Intangible Assets (SFAS 142), which requires that goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual impairment testing. Intangible assets with finite lives are amortized over their estimated useful lives.

Accordingly, the Company discontinued amortization of goodwill and certain intangible assets. Management reviews the valuation of goodwill and intangible assets not subject to amortization at least annually. The Company utilizes the comparison of reporting units fair value derived by discounted cash flow analysis and their book value as an indicator of potential impairment. The application of SFAS 142 transitional accounting provisions and the annual impairment test are discussed in Note B.

Accrued Liabilities: Accrued liabilities consist of the following:

May 31
	2003	2002

Compensation and payroll taxes	$ 7,431	$ 4,284
Interest	2,754	2,912
Income taxes	745	1,831
Warranty reserve	672	47
Other accrued expenses	5,278	4,557
Accrued liabilities	$ 16,880	$ 13,631

Warranties: The Company offers warranties for specific products it manufactures. The Company also provides extended warranties for some products it sells that lengthen the period of coverage specified in the manufacturer’s original warranty. Terms generally range from one to three years.

Warranty reserves are established for costs that are expected to be incurred after the sale and delivery of products under warranty. The warranty reserves are determined based on known product failures, historical experience, and other currently available evidence. Changes in the warranty reserve for fiscal 2003 were as follows (in thousands):

	Warranty Reserve

Balance at May 31,2002	$ 47

Accruals for warranties issued during the period	846
Utilization	(221)
Balance at May 31, 2003	$ 672

The increase in the warranty accrual primarily represents warranties related to a new product offering by the Company’s Display Systems Group beginning in the third quarter of fiscal 2003.

Non-current Liabilities: Non-current liabilities of $5,049 at May 31, 2003 and $5,195 at May 31, 2002 represent guaranteed payments for acquisitions made during fiscal 2001 as discussed in Note D.

Foreign Currency Translation: Foreign currency balances and financial statements are translated into U. S. dollars at end-of-period rates. Revenues and expenses are translated at the current rate on the date of the transaction. Gains and losses resulting from foreign currency transactions are included in income. Foreign currency transaction losses reflected in operations are $688, $95 and $151 in 2003, 2002, and 2001, respectively. Gains and losses resulting from translation of foreign subsidiary financial statements are credited or charged directly to stockholders' equity.

Revenue Recognition: The Company recognizes revenue when title passes to the customer, delivery has occurred or services have been rendered, and collectibility is reasonably assured. Sales are recorded net of discounts, rebates and returns based on the Company’s historical experience.

Shipping and Handling Fees and Costs: Shipping and handling costs billed to customers are reported as sales and the related costs in cost of sales.

Income Taxes: Deferred tax assets and liabilities are established for differences between financial reporting and tax accounting of assets and liabilities and are measured using the marginal tax rates. U.S. income taxes have not been provided on the undistributed earnings of foreign subsidiaries and affiliates as the Company intends to permanently reinvest such earnings.

Stock-Based Compensation: The Company accounts for its stock option plans in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. However, the exercise price of all grants under the Company's option plans has been equal to the fair market value on the date of grant. Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, requires estimation of the fair value of options granted to employees. Had the Company’s option plans and stock purchase plan been treated as compensatory under the provisions of SFAS No. 123, the Company’s net (loss) income and net (loss) income per share would have been affected as follows (see Note I for underlying assumptions):

	2003	2002	2001

Net (loss) income, as reported	$ (27,558)	$ (11,270)	$ 17,734
Proforma net (loss) income	(29,173)	(12,867)	16,582

Proforma net (loss) income per share:
Basic	$ (2.11)	$ (.95)	$ 1.24
Diluted	$ (2.11)	$ (.95)	$ 1.14

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 dilutive. The per share amounts presented in the Consolidated Statement of Operations are based on the following amounts:

	2003	2002	2001

Numerator for basic EPS:
Net (loss) income	$ (27,558)	$ (11,270)	$ 17,734

Denominator for basic EPS:
Shares outstanding, June 1	13,767	13,470	12,987
Additional shares issued	42	147	346
Average shares outstanding	13,809	13,617	13,333

Numerator for diluted EPS:
Net (loss) income	$ (27,558)	$ (11,270)	$ 17,734
Interest savings, net of tax, on assumed conversion of bonds	- -	- -	3,459
Adjusted net (loss) income	$ (27,558)	$ (11,270)	$ 21,193

Denominator for diluted EPS:
Average shares outstanding	13,809	13,617	13,333
Effect of dilutive stock options	-	-	355
Assumed conversion of bonds	-	-	3,680
Average shares outstanding	13,809	13,617	17,568

Out-of-the-money (exercise price higher than market price) stock options are excluded from the calculation. The Company’s 8¼% and 7¼% convertible debentures and common stock equivalent options are excluded from the calculation in 2002 and 2003 as assumed conversion would be anti-dilutive.

Derivatives and Hedging Activities: Effective June 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), which establishes accounting and reporting standards for derivative instruments and hedging activities. SFAS 133 requires that the Company recognize all derivatives as either assets or liabilities on the Consolidated Balance Sheets and measure those instruments at fair value.

The Company has interest rate exchange agreements to convert approximately $37.2 million of its floating rate debt to an average fixed rate of 8% for the term of the debt through July 2004. At June 1, 2001, in connection with the adoption of SFAS No. 133, the Company recorded a transition adjustment relating to these agreements, which reduced other accumulated comprehensive income in shareholders’ equity by $971, after tax. As a result of interest rate fluctuations, the Company recorded $789 in 2003 and $1,926 in 2002 as additional interest expense in the statement of operations.

Note B -- Goodwill and Other Intangible Assets

As discussed in Note A, the Company adopted the new rules on accounting for goodwill and other intangible assets effective June 1, 2002, and, accordingly, discontinued the amortization of goodwill and other intangible assets not subject to amortization.

The following table presents a reconciliation of reported net (loss) income to adjusted net (loss) income excluding amortization of goodwill and other intangible assets not subject to amortization, net of tax:

	2003	2002	2001

Reported net (loss) income	$ (27,558)	$ (11,270)	$ 17,734
Add back amortization of goodwill	-	369	411
Add back amortization of other intangible assets not subject to amortization	-	54	63
Adjusted net (loss) income	$ (27,558)	$ (10,847)	$ 18,208

Basic earnings per share	$ (2.00)	$ (0.83)	$ 1.33
Add back amortization of goodwill	-	0.03	0.03
Add back amortization of other intangible assets not subject to amortization	-	-	0.01
Adjusted basic earnings per share	$ (2.00)	$ (0.80)	$ 1.37

Diluted earnings per share	$ (2.00)	$ (0.83)	$ 1.21
Add back amortization of goodwill	-	0.03	0.02
Add back amortization of other intangible assets not subject to amortization	-	-	-
Adjusted diluted earnings per share	$ (2.00)	$ (0.80)	$ 1.23

During the second quarter of fiscal 2003, the Company completed both steps of the required impairment tests of goodwill and indefinite life intangible assets for each of the reporting units as required under the transitional accounting provisions of SFAS 142. In identifying reporting units, the Company evaluated its reporting structure as of June 1, 2002. The Company concluded that the following operating segments and their components qualified as reporting units: RF & Wireless Communications, Broadcast, Display Systems Group, Industrial Power Group, Burtek, and Security Systems Division excluding Burtek. The first step in the process of goodwill impairment testing is a screen for potential impairment of the goodwill and other long lived assets, while the second step measures the amount of the impairment. The Company used a discounted cash flow valuation (income approach) to determine the fair value of each of the reporting units. Sales, net income, and EBITDA multiples (market approaches) were used as a check against the impairment implications derived under the income approach. The first step indicated that goodwill and other long lived assets of RF & Wireless Communications, Broadcast and Security Systems Division excluding Burtek were impaired. In evaluating the amount of impairment, it was determined that all goodwill and other long lived assets were impaired for the aforementioned reporting units. Consequently, the Company recorded, effective at the beginning of fiscal 2003, an impairment loss of $21.6 million of which $21.5 million related to goodwill with the balance attributable to other intangible assets with indefinite useful lives. The impairment loss of $17.9 million, net of tax of $3.7 million, was recorded as a cumulative effect of a change in accounting principle.

The Company performed its annual impairment test during the fourth quarter of fiscal 2003. The same methodology was employed in completing the annual impairment test as in applying transitional accounting provisions of SFAS 142. The Company did not find any indication that additional impairment existed and, therefore, no additional impairment loss was recorded as a result of completing the annual impairment test.

The table below provides changes in carrying value of goodwill by reportable segment:

Goodwill

	Reportable segments
	RFWC	IPG	SSD	DSG	Total

Balance at May 31, 2002	$ 20,342	$ 864	$ 2,297	$ 1,411	$ 24,914
Additions	-	-	-	1,548	1,548
Cumulative effect of change in accounting principle	(20,345)	-	(1,131)	-	(21,476)
Foreign currency translation	3	9	139	-	151
Balance at May 31, 2003	$ -	$ 873	$ 1,305	$ 2,959	$ 5,137

The addition to goodwill during fiscal 2003 represents additional consideration for the Pixelink acquisition made in fiscal 1999 due to the acquired business achieving certain targeted operating levels.

The following table provides changes in carrying value of other intangible assets not subject to amortization which represent incorporation and acquisition costs:

Other intangible assets not subject to amortization

	Reportable segments
	RFWC	IPG	SSD	DSG	Total

Balance at May 31, 2002	$ 111	$ 9	$ 373	$ -	$ 493
Cumulative effect of change in accounting principle	(111)	-	-	-	(111)
Foreign currency translation	-	-	36	-	36
Balance at May 31, 2003	$ -	$ 9	$ 409	$ -	$ 418

Intangible assets subject to amortization as well as amortization expense are as follows:

Intangible assets subject to amortization as of May 31

	2003	2002	2001

Gross amounts:
Deferred financing costs	$ 2,191	$ 1,883	$ 1,735
Patents and trademarks	478	478	478
Total gross amounts	2,669	2,361	2,213

Accumulated amortization:
Deferred financing costs	1,647	1,366	1,215
Patents and trademarks	448	436	423
Total accumulated amortization	$ 2,095	$ 1,802	$ 1,638

Amortization of intangible assets subject to amortization

	2003	2002	2001

Deferred financing costs	$ 261	$ 148	$ 120
Patents and trademarks	12	13	35
Total	$ 273	$ 161	$ 155

The amortization expense associated with the intangible assets subject to amortization is expected to be $302, $183, $79, and $10 in fiscal 2004, 2005, 2006, and 2007, respectively. The weighted average number of years of amortization expense remaining is 2.3.

Note C -- Charges

During the fourth quarter of fiscal 2003, the Company took certain actions to align its inventory and cost structure to current sales levels amid continued weakness in the global economy and limited demand visibility. As a result, the Company recorded a non-cash inventory write-down charge of $13.8 million, a restructuring charge of $1.7 million, and other charges of $0.6 million. In addition, a valuation allowance tax provision in the amount of $1.6 million was established related to deferred income tax assets attributable to net operating losses in certain foreign subsidiaries. The net of tax effect of the aforementioned charges was $11.9 million on the Company’s results of operations.

The restructuring charge consisted of $1,536 for employee severance and $210 lease breakage costs and was included in fiscal 2003 selling, general and administrative expense (SG&A). The severance costs of $328 were paid in 2003 with the remaining balance payable in fiscal 2004. Terminations affected over 70 employees across various business functions, operating units and geographic regions. All terminations and termination benefits were communicated to the affected employees prior to 2003 year-end. Management has estimated annual savings of $3 million in SG&A expense beginning in fiscal 2004 as a direct result of the restructuring program.

In the fourth quarter of fiscal 2002, the Company reevaluated its inventory reserve estimate in light of the industry wide decline in sales, a prolonged recovery period, and changes in the Company’s mix of business toward higher technology products particularly in the telecommunications market. An inventory obsolescence and overstock adjustment of $15,279, or $9,778 net of tax, was included in cost of sales. Also in the fourth quarter of 2002, the Company recorded a provision for uncollectable accounts receivable and severance due to recent management changes. The charge was $794, or $509 net of tax, recorded in SG&A and other expense.

Note D -- Acquisitions

Fiscal 2003: The aggregate cash outlay in 2003 for business acquisitions was $1,108 representing additional consideration paid for certain business acquisitions made in prior periods due to the acquired businesses achieving certain targeted operating levels.

Fiscal 2002: In July 2001, the Company acquired Sangus Holdings AB (Sangus) which serves the Nordic countries of Sweden, Finland, Denmark and Norway. Sangus is a specialist in RF & microwave technology with annual revenues at the time of purchase of $9,600. The aggregate cash outlay in 2002 for this and all previous business acquisitions (earnout payments) was $8,785.

Fiscal 2001: In June 2000, the Company acquired the assets and liabilities of Celti Electronics, a French distributor of fiber optic communications products with annual sales of $3,600. In January 2001, the Company also acquired the assets and liabilities of Aviv Electronics of Israel, a distributor specializing in design-in services for active and passive electronic components with annual sales of $10,000. Baron Electronics, a distributor of electronic components in Latin America, was acquired in May 2001, with annual sales of $2,000.

The aggregate cash outlay in 2001 for business acquisitions was $8,316.

Each of the acquisitions was accounted for by the purchase method, and accordingly, their results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The impact of these acquisitions on results of operations was not significant and would not have been significant if they had been included for the entire year. If each of these acquisitions had occurred at the beginning of the year, consolidated sales would have increased by approximately $900 and $14,000 in 2002 an 2001, respectively.

The terms of certain of the Company’s acquisition agreements provide for additional consideration to be paid if the acquired entity’s results of operations exceed certain targeted levels. Such amounts are paid in cash and recorded when earned as additional consideration, and amounted to $1,108, $1,274, and $2,638 in 2003, 2002 and 2001, respectively. Assuming the goals established in all agreements outstanding at May 31, 2003, were met, additional consideration aggregating approximately $7,277 would be payable through July of 2004.

Note E-- Disposal of Product Line

On February 22, 2002, the Company sold certain assets of its Medical Systems Group (MSG), specifically, assets related to its glassware product line (Medical Glassware). Proceeds from the sale were $6.3 million. The loss on the sale of Medical Glassware was $4.6 million or $2.9 million, net of tax.

Remaining operations of MSG are primarily related to the design and sale of medical monitor and associated display products and systems. Subsequent to the sale of Medical Glassware, this medical monitor business has been integrated with and is reported as part of the Display Systems Group.

Note F-- Debt Financing

Long-term debt consists of the following:

May 31
	2003	2002

8¼% Convertible debentures, due June 2006	$ 40,000	$ 40,000
7¼% Convertible debentures, due December 2006	30,825	30,825
Floating-rate multi-currency revolving credit facility, due September 2005 (4.24% at May 31, 2003)	65,802	59,388
Financial instruments	1,753	1,949
Other	62	94
Total debt	138,442	132,256
Less current portion	(46)	(38)
Long-term debt	$ 138,396	$ 132,218

The 7¼% convertible debentures are unsecured and subordinated to other long-term debt, including the 8¼% convertible debentures. Each $1 of the 7¼% debenture is convertible into the Company’s Common Stock at any time prior to maturity at $21.14 per share and the 8¼% convertible debentures are convertible at $18.00 per share. The Company is required to make sinking fund payments of $3,850 in fiscal 2005 and $6,225 in fiscal 2006.

The Company has a multi-currency revolving credit facility agreement in the amount of $102.0 million. The agreement matures in September of 2005 and bears interest at applicable LIBOR rates plus a margin, varying with certain financial performance criteria. At May 31, 2003, the margin was 225 basis points and $36.2 was available under this facility.

In the following table, the fair values of the Company's 7¼% and 8¼% convertible debentures are based on quoted market prices at the end of the fiscal year. The fair values of the bank term loans are based on carrying value.

	2003		2002

	Carrying Value	Fair Value	Carrying Value	Fair Value

8¼% Convertible debentures	$ 40,000	$ 37,200	$ 40,000	$ 36,250
7¼% Convertible debentures	30,825	28,051	30,825	26,240
Floating-rate multi-currency revolving credit facility	65,802	65,802	59,388	59,388
Financial instruments	1,753	1,753	1,949	1,949
Other	62	62	94	94
Total	138,442	132,868	132,256	123,921
Less current portion	(46)	(46)	(38)	(38)
Total	$ 138,396	$ 132,822	$ 132,218	$ 123,883

The loan and debenture agreements contain financial covenants with which the Company was in full compliance at May 31, 2003. These covenants include benchmark levels for tangible net worth, a borrowing base, senior funded debt to cash flow and annual debt service coverage.

Aggregate maturities of debt during the next five years are: $46 in 2004, $3,866 in 2005, $72,027 in 2006, and $60,750 in 2007. Cash payments for interest were $10,246, $11,336, and $11,230 in 2003, 2002, and 2001, respectively.

Note G-- Facility Lease Obligations and Other Commitments

The Company leases certain warehouse and office facilities under non-cancelable operating leases. Rent expense for fiscal 2003, 2002, and 2001 was $3,608, $3,337 and $3,189, respectively. At May 31,2003, future lease commitments for minimum rentals, including common area maintenance charges and property taxes, were $3,378 in 2004, $2,447 in 2005, $1,573 in 2006, $703 in 2007, $527 in 2008, and $661 thereafter.

As of May 31, 2003, the Company has several performance bonds outstanding that were required by certain African and Latin American customers. The total amount of the bonds was $645 with expiration dates between July and December of 2003.

Note H-- Income Taxes

The components of (loss) income before income taxes are:

	2003	2002	2001

United States	$ (14,724)	$ (18,634)	$ 19,730
Foreign	2,016	1,025	6,660
(Loss) income before taxes	$ (12,708)	$ (17,609)	$ 26,390

The provision for income taxes differs from income taxes computed at the federal statutory tax rate of 34% in 2003 and 2002 and 35% in 2001 as a result of the following items:

	2003	2002	2001

Federal statutory rate	(34.0)%	(34.0) %	35.0 %
Effect of:
State income taxes, net of federal tax benefit	(2.2)	(2.3)	1.4
Export benefit	(4.8)	(2.9)	(2.2)
Foreign taxes at other rates	1.6	(0.2)	(2.7)
Valuation allowance for deferred tax assets	12.5	-	-
Other	3.2	3.4	1.3
Effective tax rate	(23.7)%	(36.0)%	32.8 %

The provisions for income taxes consist of the following:

	2003	2002	2001

Currently payable:
Federal	$ (2,111)	$ (1,075)	$ 5,622
State	(464)	(158)	133
Foreign	2,169	674	2,016
Total currently payable	(406)	(559)	7,771
Deferred:
Federal	(1,534)	(4,651)	443
State	(252)	(519)	430
Foreign	(820)	(610)	12
Total deferred	(2,606)	(5,780)	885
Income tax (benefit) provision	$ (3,012)	$ (6,339)	$ 8,656

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of May 31, 2003 and 2002 are as follows:

May 31
	2003	2002

Deferred tax assets:
Intercompany profit in inventory	$ 1,264	$ 1,075
NOL carryforward - foreign	4,615	-
Inventory valuation	12,329	10,652
Goodwill	2,690	(661)
Alternative minimum tax credit	1,189	-
Other	1,928	3,955
	24,015	15,021
Deferred tax liabilities:

Accelerated depreciation	(3,022)	(3,339)
Other	(5,721)	(4,327)
	(8,743)	(7,666)


Net deferred tax assets	15,272	7,355
Valuation allowance	(1,586)	-
Net deferred tax assets after valuation allowance	$ 13,686	$ 7,355

As of May 31, 2003, the Company has net operating losses (NOL) totaling $12,819 in various foreign jurisdictions. The majority of the NOL can be carried forward from 5 years to indefinitely. During fiscal 2003, the Company recorded a valuation allowance of $1,586 relating to deferred tax assets in certain foreign subsidiaries which sustained consecutive years of losses. As required by FAS 109, these subsidiaries should not continue to accrue future benefits. The Company also has an alternative minimum tax credit carryforward as of May 31, 2003, in the amount of $1,189 which has an indefinite carryforward period.

Income taxes paid, including foreign estimated tax payments, were $2,657, $952, and $7,125 in 2003, 2002, and 2001, respectively.

All current year positive earnings of the Company's foreign subsidiaries are considered permanently reinvested pursuant to APB 23. The current net earnings of these subsidiaries amount to $4,572.

Note I-- Stockholders' Equity

The Company has authorized 30,000 shares of Common Stock, 10,000 shares of Class B Common Stock, and 5,000 shares of Preferred Stock. The Class B Common Stock has ten votes per share. The Class B Common Stock has transferability restrictions; however, it may be converted into Common Stock on a share-for-share basis at any time. With respect to dividends and distributions, shares of common stock and Class B Common Stock rank equally and have the same rights, except that Class B Common Stock is limited to 90% of the amount of common stock cash dividends.

Total Common Stock issued and outstanding, excluding Class B at May 31, 2003, was 10,750 shares, net of treasury shares of 1,506. An additional 9,576 shares of Common Stock have been reserved for the potential conversion of the convertible debentures and Class B Common Stock and for future issuance under the Employee Stock Purchase Plan and Employee and Non-Employee Director Stock Option Plans.

The Employee Stock Purchase Plan (ESPP) provides substantially all employees an opportunity to purchase Common Stock of the Company at 85% of the stock price at the beginning or the end of the year, whichever is lower. At May 31, 2003, the plan had 16 shares reserved for future issuance.

The Employees’ 2001 Incentive Compensation Plan authorizes the issuance of up to 900 shares as incentive stock options, non-qualified stock options or stock awards. Under this plan and predecessor plans, 2,434 shares are reserved for future issuance. The Plan authorizes the granting of incentive stock options at the fair market value at the date of grant. Generally, these options become exercisable over staggered periods and expire up to ten years from the date of grant.

Under the 1996 Stock Option Plan for Non-Employee Directors and a predecessor plan, at May 31, 2003, 238 shares of Common Stock have been reserved for future issuance relating to stock options exercisable based on the passage of time. Each option is exercisable over a period from its date of grant at the market value on the grant date and expires after ten years.

The Company applies APB Opinion No. 25 and related interpretations in accounting for its option plans and, accordingly, has not recorded compensation expense for such plans. SFAS No. 123 requires the calculation of the fair value of each option granted. This fair value is estimated on the date of grant using the Black-Scholes option-pricing model with the assumptions indicated below:

Assumptions used in estimating options fair values
	2003	2002	2001

Risk-free interest rate	2.9%	4.0%	5.9%
Annual standard deviation of stock price	49%	50%	56%
Average expected life (years)	5.1	5.2	5.1
Annual dividend rate	$ .16	$ .16	$ .16
Average fair value per option	$ 4.12	$ 2.95	$ 7.07
Option value of ESPP per share	$ 1.91	$ 1.96	$ 2.55
Fair value of options granted during the year	$ 297	$ 1,206	$ 3,253

A summary of the share activity and weighted average exercise prices for the Company’s option plans is as follows:

	Outstanding		Exercisable
	Shares	Price	Shares	Price

At May 31, 2000	1,559	$ 7.82	755	$ 7.82
Granted	460	13.75
Exercised	(277)	7.24
Cancelled	(120)	10.96
At May 31, 2001	1,622	9.39	667	7.73
Granted	417	7.21
Exercised	(173)	7.24
Cancelled	(21)	10.49
At May 31, 2002	1,845	9.09	802	8.52
Granted	72	9.83
Exercised	(112)	6.75
Cancelled	(88)	9.69
At May 31, 2003	1,717	$ 9.25	1,111	$ 9.08

The following table summarizes information about stock options outstanding as of May 31, 2003:

Exercise Price Range	Outstanding			Exercisable
Exercise Price Range	Shares	Price	Life	Shares	Price	Life

$ 3.75 to $ 5.38	30	$ 4.57	3.5	30	$ 4.57	3.5
$ 6.00 to $ 7.50	828	7.01	6.4	448	7.01	5.3
$ 7.90 to $ 8.97	280	8.25	4.4	280	8.25	4.4
$10.64 to $13.81	579	13.16	7.2	353	12.75	7.1
Total	1,717			1,111

Note J-- Employee Retirement Plans

The Company's domestic employee retirement plans consist of a profit sharing plan and a stock ownership plan (ESOP). Annual contributions in cash or Company stock are made at the discretion of the Board of Directors. In addition, the profit sharing plan has a 401(k) provision whereby the Company matches 50% of employee contributions up to 4% of base pay. Charges to expense for discretionary and matching contributions to these plans were $660, $926, and $2,403 for fiscal 2003, 2002, and 2001, respectively. Such amounts included contributions in stock of $887 for 2001, based on the stock price at the date contributed. Shares are included in the calculation of earnings per share and dividends are paid to the ESOP from the date the shares are contributed. Foreign employees are covered by a variety of government mandated programs.

Note K-- Segment and Geographic Information

The following disclosures are made in accordance with the SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. The Company’s strategic business units (SBU’s) in 2003 were: RF & Wireless Communications Group (RFWC), Industrial Power Group (IPG), Security Systems Division (SSD), and Display Systems Group (DSG).

RFWC serves the voice and data telecommunications market and the radio and television broadcast industry predominately for infrastructure applications.

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

SSD provides security systems and related design services which includes such products as closed circuit television (CCTV), fire, burglary, access control, sound and communication products and accessories.

DSG provides system integration and custom display solutions for the public information, financial, point-of-sale, and medical imaging markets.

Medical Glassware (MG) represents a portion of the former Medical Systems Group (MSG). MG was sold in February of 2002.

Each SBU is directed by a Vice President and General Manager who reports to the President and Chief Operating Officer. The President evaluates performance and allocates resources, in part, based on the direct operating contribution of each SBU. Direct operating contribution is defined as gross margin less product management and direct selling expenses.

Accounts receivable, inventory, and goodwill are identified by SBU. Cash, net property and other assets are not identifiable by SBU. Operating results for each SBU are summarized in the following table:

	Sales	Gross Margin	Contribution	Assets

Fiscal 2003
RFWC	$ 222,448	$ 49,889	$ 25,255	$ 85,350
IPG	77,487	25,321	17,844	37,377
SSD	92,090	22,939	12,539	31,906
DSG	64,191	16,218	9,674	22,217
MG	1,269	164	(80)	276
Total	$ 457,485	$ 114,531	$ 65,232	$ 177,126
Fiscal 2002
RFWC	$ 202,409	$ 47,467	$ 24,876	$ 114,801
IPG	74,578	24,356	17,643	37,037
SSD	85,087	20,080	10,248	32,401
DSG	60,697	15,864	8,528	22,889
MG	12,940	2,727	1,267	1,868
Total	$ 435,711	$ 110,494	$ 62,562	$ 208,996
Fiscal 2001
RFWC	$ 244,381	$ 63,593	$ 42,395	$ 127,005
IPG	89,053	30,650	24,567	45,276
SSD	82,352	18,932	9,235	34,038
DSG	59,476	14,553	7,110	27,118
MG	15,966	3,765	1,852	15,050
Total	$ 491,228	$ 131,493	$ 85,159	$ 248,487

A reconciliation of sales, gross margin, direct operating contribution and assets to the relevant consolidated amounts is as follows. Other assets not identified include miscellaneous receivables, manufacturing inventories and other assets.


	2003	2002	2001

Segment sales	$ 457,485	$ 435,711	$ 491,228
Corporate	7,032	7,781	11,141
Sales	$ 464,517	$ 443,492	$ 502,369

Segment gross margin	$ 114,531	$ 110,494	$ 131,493
Inventory charges	(13,810)	(15,282)	-
Manufacturing variances and other costs	(1,631)	(1,046)	57
Gross Margin	$ 99,090	$ 94,166	$ 131,550

Segment contribution	$ 65,232	$ 62,562	$ 85,159
Inventory charges	(13,810)	(15,282)	-
Manufacturing variances and other costs	(1,631)	(1,046)	57
Regional selling expenses	(17,336)	(15,380)	(16,697)
Administrative expenses	(34,114)	(31,207)	(31,413)
Operating (loss) income	$ (1,659)	$ (353)	$ 37,106

Segment assets	$ 177,126	$ 208,996	$ 248,487
Cash and equivalents	17,498	15,485	15,946
Other current assets	26,320	20,999	19,329
Net property	31,088	28,827	28,753
Other assets	13,523	12,529	8,999
Total assets	$ 265,555	$ 286,836	$ 321,514

Geographic sales information is primarily grouped by customer destination into five areas: North America, Europe, Asia/Pacific, Latin America, and Direct Export. Sales to Mexico are included as part of Latin America. Direct Export includes sales to export distributors in countries where the Company does not have sales offices.

Sales and long-lived assets (net property and other assets, excluding investments) are presented in the table below.

	2003	2002	2001

Sales
United States	$ 197,184	$ 188,473	$ 246,319
Canada	58,732	53,294	56,569
North America	255,916	241,767	302,888
Europe	100,388	92,351	99,215
Asia/Pacific	74,746	65,534	51,411
Latin America	20,506	28,943	28,012
Direct Export	5,929	7,116	9,702
Total	$ 457,485	$ 435,711	$ 491,228

Assets
United States	$ 30,060	$ 37,608	$ 36,726
Canada	2,659	2,408	2,085
North America	32,719	40,016	38,811
Europe	3,192	13,953	8,394
Asia/Pacific	794	788	1,613
Latin America	1,194	1,445	622
Total	$ 37,899	$ 56,202	$ 49,440

The sharp decrease in long-lived assets from 2002 to 2003 is primarily due to the goodwill impairment recorded in 2003.

The Company sells its products to companies in diversified industries and performs periodic credit evaluations of its customers' financial condition. Terms are generally on open account, payable net 30 days in North America, and vary throughout Europe, Asia/Pacific, and Latin America. Estimates of credit losses are recorded in the financial statements based on periodic reviews of outstanding accounts and actual losses have been consistently within management's estimates.

Note L-- Litigation

The Company is engaged in litigation it has filed, Richardson Electronics, Ltd. v. Signal Technology Corporation, 03 L 002661 (Circuit Court, Cook County, Illinois) and Signal Technology Corporation v. Richardson Electronics, Ltd., C.A. No. 03-0335 (Superior Court Boston, Massachusetts). The Company filed suit in Illinois claiming damages in the amount of approximately $2.0 million resulting from Signal's refusal to take delivery of product on six purchase orders it had placed with the Company. Signal has filed a declaratory judgment suit in Massachusetts seeking a ruling that it has no liability to the Company. Signal has not asserted any claim against the Company.

The Company has asserted a claim against a former vendor in the amount of $593 for inventory it sought to return to the vendor pursuant to the terms of a Distribution Agreement between the two parties, that the vendor has refused to accept as of this time.

Note M-- Selected Quarterly Financial Data

(Unaudited)

Summarized quarterly financial data for 2003 and 2002 follow.

	First Quarter	Second Quarter	Third Quarter	Fourth Quarter

2003:
Net sales	$ 108,614	$ 118,958	$ 118,010	$ 118,935
Gross margin	27,154	28,913	28,202	14,821
Income (loss) before cumulative effect of accounting change	284	1,190	(5)	(11,163)
Per share: Basic and Diluted	0.02	0.09	-	(0.81)
Net (loss) income	(17,578)	1,190	(5)	(11,163)
Net (loss) income per share:
Basic and Diluted	(1.28)	0.09	-	(0.81)

2002:
Net sales	$ 104,681	$ 115,499	$ 109,431	$ 113,881
Gross margin	26,474	28,381	26,280	13,031
Net (loss) income	(354)	902	(2,743)	(9,075)
Net (loss) income per share:
Basic and Diluted	(0.03)	0.07	(0.20)	(0.66)

The first quarter of fiscal 2003 includes a cumulative effect of accounting change of $17,862, net of tax (see Note B). The third quarter of fiscal 2002 contains a net of tax loss of $2.9 million for the disposal of the Medical Glassware business (see Note E). The fourth quarters of fiscal 2003 and 2002 include charges of $11.9 million and $10.3 million, net of tax, respectively, primarily related to inventory write-downs (see Note C).

Market Price of Common Stock

The Common Stock is traded on the NASDAQ National Market System under the symbol "RELL". The number of stockholders on record of Common Stock and Class B Common Stock at July 20, 2003 was 974 and 18, respectively. The Company believes there are approximately an additional 2,400 holders who own shares of the Company’s Common Stock in street name. The quarterly close price ranges of the Company’s common stock were as follows:

	2003			2002

Fiscal Quarters	High	Low	High	Low

First	$ 11.13	$ 8.40	$ 14.96	$ 9.52
Second	8.77	5.68	12.50	6.36
Third	9.17	7.59	12.49	11.00
Fourth	9.05	7.53	13.16	10.59

Report of Independent Auditors

We have audited the accompanying consolidated balance sheets of Richardson Electronics, Ltd. and subsidiaries as of May 31, 2003 and 2002, and the related consolidated statements of operations, cash flows and stockholders’ equity for each of the three years in the period ended May 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Richardson Electronics, Ltd. and subsidiaries at May 31, 2003 and 2002, and the consolidated results of their operations and cash flows for each of the three years in the period ended May 31, 2003, in conformity with accounting principles generally accepted in the United States.

As discussed in the Notes to the consolidated financial statements, effective June 1, 2002, the Company changed its method for accounting for goodwill and other intangible assets to conform with SFAS No. 142, Goodwill and Other Intangible Assets. Effective June 1, 2001, the Company changed its method for accounting for derivative financial instruments to conform with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.

/s/ Ernst & Young LLP

Chicago, Illinois
July 2, 2003

Stockholder Information

Corporate Office
Richardson Electronics, Ltd.
40W267 Keslinger Road
P.O. Box 393
LaFox, Illinois 60147-0393
(630) 208-2200
Interne:www.rell.com/investor.asp
E-mail: info@rell.com

Annual Meeting
We encourage stockholders to attend the annual meeting scheduled for Tuesday, October 15, 2003, at 2:00 p.m. at the Company's corporate office. Further details are available in your proxy materials.

Independent Auditors
On August 22, 2003, the Company filed form 8-K with Securities and Exchange Commission announcing a change in independent auditors. The fiscal 2003 results were audited by Ernst & Young LLP, 233 South Wacker Drive, Chicago, IL 60606. The fiscal 2004 financial statements will be audited by KPMG LLP, 303 East Wacker Drive, Chicago, IL 60601.

Tax Compliance Services
Ernst & Young LLP
233 South Wacker Drive
Chicago, IL 60606

Transfer Agent and Registrar
LaSalle Bank
135 South LaSalle Street
Chicago, IL 60603

Brokerage Reports

Barrington Research Associates, Inc.
William Blair & Company
McDonald Investments Inc.

Market Makers

William Blair & Company
Knight Securities, Inc.
Southwest Securities, Inc.
Goldman, Sachs & Co.

Form 10K and Other Information
A copy of the Company’s Annual Report on Form 10K, filed with the Securities and Exchange Commission is available without charge upon request. All inquiries should be addressed to the Investor Relations Department, Richardson Electronics, Ltd., 40W267 Keslinger Road, P.O. Box 393, LaFox, Illinois 60147-0393. Press releases and other information can be found on the Internet at the Company’s home page at http://www.rell.com/investor.asp

Officers and Directors

Corporate Officers

Edward J. Richardson
Chairman of the Board and Chief Executive Officer

Bruce W. Johnson
President and Chief Operating Officer

Pierluigi Calderone
Vice President and Director, European Operations

Kevin M. Connor
Vice President of North American Sales,
RF & Wireless Communications Group

Flint Cooper
Executive Vice President and General Manager,
Security Systems Division

Gint Dargis
Vice President and Chief Information Officer

Lawrence T. Duneske
Vice President, Worldwide Logistics

Rudy Garcia
Treasurer

Alan S. Gray
Director of Tax & Compliance and Assistant Secretary

Joseph C. Grill
Senior Vice President, Human Resources

Robert J. Heise
Vice President and General Manager,
Display Systems Group

Murray J. Kennedy
Executive Vice President and General Manager,
Industrial Power Group

Kathleen M. McNally
Senior Vice President,
Marketing Operations and Customer Support

Kelly Phillips
Corporate Controller

Gregory J. Peloquin
Executive Vice President and General Manager,
RF & Wireless Communications Group

Robert Prince
Executive Vice President, Worldwide Sales

Dario Sacomani
Senior Vice President and Chief Financial Officer

William G. Seils
Senior Vice President, General Counsel and Secretary

Board of Directors

Edward J. Richardson (1)

Arnold R. Allen
Management Consultant

Jacques Bouyer (3,4,6)
Retired CEO and COB of Philips Components - France

Scott Hodes (2,3,5)
Partner, Law Firm of McGuire, Woods, Ross & Hardies

Bruce W. Johnson (1)

Ad Ketelaars (6)
CEO, Philips Business Communications

John Peterson (2,6)
Managing Director, Cleary Gull Inc.

Harold L. Purkey (2)
Retired Managing Director, First Union Securities, Inc.

Samuel Rubinovitz (1,3,4,5,6)
Management Consultant, Director, LTX Corporation,
and Director, Kronos Corporation

Dario Sacomani

(1) Executive Committee
(2) Audit Committee
(3) Compensation Committee
(4) Stock Option Committee
(5) Executive Oversight Committee
(6) Strategic Planning Committee

EX-21 11 exhibit21.htm SUBSIDIARIES OF THE COMAPNY SUBSIDIARIES OF Exhibit 21

Exhibit 21

SUBSIDIARIES OF RICHARDSON ELECTRONICS, LTD.

Richardson Electronics Canada, Ltd.	Canada
Richardson Electronics (UK) Limited	United Kingdom
RESA, SNC	France
Richardson Electronique SNC	France
Richardson Electronics Italy SRL	Italy
Richardson Electronics Iberica, S.A.	Spain
Richardson Electronics GmbH	Germany
Richardson Electronics Japan K.K.	Japan
Richardson Electronics Pte Ltd.	Singapore
Richardson Electronics S.A. de C.V.	Mexico
Richardson Electronics Benelux B.V.	The Netherlands
Richardson Electronics do Brasil Ltda.	Brasil
Richardson Electronics Pty Limited	Australia
Tubemaster, Inc.	United States
Richardson Electronics Korea Limited	Korea
Richardson Electronics (Thailand) Ltd.	Thailand
Burtek Systems Inc.	Canada
Richardson Electronics Argentina S.A.	Argentina
Richardson Electronics Colombia S.A.	Colombia
Ingenium S.R.L.	Italy
Richardson International, Inc.	United States
Richardson Electronics Trading (Shanghai) Co., Ltd.	China
Aviv-Richardson Electronics, Ltd.	Israel
Sangus Richardson A.B.	Sweden
Sangus Richardson OY	Finland
(CELTI)Composants Electroniques Technologie Internationale, SNC	France
Richardson Electronics FSC	Barbados
Baron Electronic Sales Co., Inc.	United States
Broadcast Richardson, Inc.	United States
Richardson Electronics, S.A.	Boliva
Richardson Sweden Holding AB	Sweden
Electronics (Peru) SA	Peru
Sangus Holding AB	Sweden
REL Holdings, Inc.	United States
Richardson LLC	United States
Richardson Electronics Distribution, Inc.	United States
TRL Technologies	United States

EX-23 12 exhibit23.htm CONSENT OF E&Y

Exhibit 23 Consent of Independent Auditors

We consent to the incorporation by reference in the Annual Report on Form 10-K for the year ended May 31, 2003 of Richardson Electronics, Ltd. of our report dated July 2, 2003, included in the 2003 Annual Report to Shareholders of Richardson Electronics, Ltd.

Our audit also included the financial statement schedule of Richardson Electronics, Ltd. listed in Item 15(a). This schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also consent to the incorporation by reference in Post Effective Amendment Number 1 to Registration Statement Number 2-89888 on Form S-8, Registration Statement Number 33-36475 on Form S-8, Registration Statement Number 33-54745 on Form S-8, Registration Statement Number 333-02865 on Form S-8, Registration Statement Number 333-03965 on Form S-8, Registration Statement Number 333-04071 on Form S-8, Registration Statement Number 333-04457 on Form S-8, Registration Statement Number 333-04767 on Form S-8, Registration Statement Number 333-49005 on Form S-2, Registration Statement Number 333-51513 on Form S-2, Registration Statement Number 333-66215 on Form S-8, Registration Number 333-76897 on Form S-8, Registration Statement Number 333-04457 on Form S-8, Registration Statement Number 333-70914 on Form S-8 and Registration Statement Number 33-60092 on Form S-8 of our report dated July 2, 2003, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule included in the Annual Report on Form 10-K for the year ended May 31, 2003 of Richardson Electronics, Ltd.

/s/ Ernst & Young LLP

Chicago, Illinois

August 26 , 2003

EX-3 13 exhibit31.htm 302 CERTIFICATIONS Form 10-K

Exhibit 31

CERTIFICATION OF EDWARD J. RICHARDSON, CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER, PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Edward J. Richardson, certify that:

1. I have reviewed this annual report on Form 10-K of Richardson Electronics, Ltd. for the period ended May 31, 2003;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

          4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d -15(e)) for the registrant and have:

                    a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

                    b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

                    c) Discussed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's fourth quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

          5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

                    a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

                    b) Any fraud, whether or not material, that involves management or other employees which have a significant role in the registrant's internal control over financial reporting.

Date: August 25, 2003                                                            Name:        Edward J. Richardson

                                                                                                 Signature:    /s/ Edward J. Richardson

                                                                                                 Title: Chairman of the Board and Chief Executive Officer

CERTIFICATION OF DARIO SACOMANI, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER,
PURSUANT TOSECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Dario Sacomani, certify that:

1. I have reviewed this annual report on Form 10-K of Richardson Electronics, Ltd. for the period ended May 31, 2003;

Date: August 25, 2003                                                            Name:        Dario Sacomani

                                                                                                 Signature:    /s/ Dario Sacomani

                                                                                                 Title: Senior Vice President and Chief Financial Officer

EX-3 14 exhibit32.htm 906 CERTIFICATIONS CERTIFICATION PURSUANT TO

Exhibit 32

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Richardson Electronic, Ltd. (the "Company") on Form 10-K for the period ending May 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Edward J. Richardson, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Edward J. Richardson

Edward J. Richardson

Chairman of the Board and Chief Executive Officer

August 29, 2003

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Richardson Electronic, Ltd. (the "Company") on Form 10-K for the period ending May 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Dario Sacomani, Senior Vice-president and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Dario Sacomani

Dario Sacomani

Senior Vice-president and Chief Financial Officer

August 29, 2003

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

Engineered Solutions

To Our Stockholders

RF & Wireless Communications Group

Industrial Power Group

Display Systems Group

Security Systems Division

Management's Discussion and Analysis of Financial Condition and Results of Operations

Notes to Consolidated Financial Statements

Note A -- Significant Accounting Policies

Note B -- Goodwill and Other Intangible Assets

Note C -- Charges

Note D -- Acquisitions

Note E-- Disposal of Product Line

Note F-- Debt Financing

Note G-- Facility Lease Obligations and Other Commitments

Note H-- Income Taxes

Note I-- Stockholders' Equity

Note J-- Employee Retirement Plans

Note K-- Segment and Geographic Information

Note L-- Litigation

Note M-- Selected Quarterly Financial Data

Market Price of Common Stock

Report of Independent Auditors

Stockholder Information

Officers and Directors

Corporate Officers

Board of Directors

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549