-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, J/pvV2TQ7Q8l6QnebZHczXebo9Pq535EwwCjgVC+j7j4ZkLAXnpEUqjSIJBA/8Zf fXGQzvIwa7t1QVrey7r0Rg== 0000355948-94-000014.txt : 19940902 0000355948-94-000014.hdr.sgml : 19940902 ACCESSION NUMBER: 0000355948-94-000014 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19940531 FILED AS OF DATE: 19940826 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RICHARDSON ELECTRONICS LTD/DE CENTRAL INDEX KEY: 0000355948 STANDARD INDUSTRIAL CLASSIFICATION: 5065 IRS NUMBER: 362096643 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12906 FILM NUMBER: 94546525 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 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended May 31, 1994 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 No. 0-12906 RICHARDSON ELECTRONICS, LTD. (Exact name of registrant as specified in its charter) Delaware 36-2096643 (State of incorporation) (I.R.S. Employer Identification No.) 40W267 Keslinger Road, LaFox, Illinois 60147 (Address of principal executive offices and zip code) (Registrant's telephone number including area code): (708) 208-2200 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.05 par value Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of August 24, 1994, there were outstanding 8,190,249 shares of Common Stock,$.05 par value, and 3,247,296 shares of Class B Common Stock, $.05 par value, which are convertible into Common Stock on a share for share basis, of the registrant and the aggregate market value of such shares, held by non-affiliates of the registrant was approximately $27,500,000. (Cover page continued) DOCUMENTS INCORPORATED BY REFERENCE Part of Form 10-K Document Part I Item 1 - Business Page 11, Note B on pages 18 and 19, and Note J on page 22 of regis trant's Annual Report to Stock holders for the fiscal year ended May 31, 1994 Part II Item 5 - Market for the Pages 15 (for dividends), 20 (for Registrant's Common dividend restriction) and 24 (for Stock and Related stock prices) of registrant's Security Holder Matters Annual Report to Stockholders for the fiscal year ended May 31, 1994 Item 6 - Selected Page 10 of registrant's Annual Financial Data Report to Stockholders for the fiscal year ended May 31, 1994 Item 7 - Management's Pages 11 to 13 of registrant's Discussion and Analysis Annual Report to Stockholders for of Results of Operations the fiscal year ended May 31, 1994 and Financial Condition Item 8 - Financial Pages 14 to 23 of the registrant's Statements and Annual Report to Stockholders for Supplementary Data the fiscal year ended May 31, 1994 Part III Item 10 - Directors and Registrant's Proxy Statement to be Executive Officers of used in connection with its Annual Registrant Meeting of Stockholders scheduled to be held October 11, 1994, captions ELECTION OF DIRECTORS - Information Relating to Directors, Nominees and Executive Officers, ELECTION OF DIRECTORS - Af filiations, and SECTION 16 FILINGS Item 11 - Executive Registrant's Proxy Statement to be Compensation used in connection with its Annual Meeting of Stockholders scheduled to be held October 11, 1994, captions ELECTION OF DIRECTORS - Directors Compensation, and EXECUTIVE COMPENSATION, except captions REPORT ON EXECUTIVE COM PENSATION and PERFORMANCE GRAPH Item 12 - Security Registrant's Proxy Statement to be Ownership of Certain used in connection with its Annual Beneficial Owners and Meeting of Stockholders scheduled Management to be held October 11, 1994, captions ELECTION OF DIRECTORS - Information Relating to Directors, Nominees and Executive Officers, and PRINCIPAL STOCKHOLDERS Item 13 - Certain Registrant's Proxy Statement to be Relationships and used in connection with its Annual Related Transactions Meeting of Stockholders scheduled to be held October 11, 1994, c aption EXECUTIVE COMPENSATION - Compensation / Stock Option Commit tee Interlocks and Insider Participation Part IV Item 14 - Exhibits, Exhibits and Financial Statement Financial Statements and Schedules as specified in Item 14 Schedules, and Reports on Form 8-K 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. PART I Item 1. Business The registrant (herein with its subsidiaries referred to as the "Company" or "Richardson") operates in one industry as a distributor of electronic components, including vacuum tubes, semiconductors and related products. These devices are used primarily to control electrical power, amplify signals, or as display devices in a variety of industrial, communication and scientific applications. Historically, the Company manufactured certain of the electron tubes it distributed. See Note B of the "Notes to Consolidated Financial Statements" of the Annual Report to Stockholders for the Year Ended May 31, 1994 discussing the phase-down of its involvement in manufacturing operations. In addition, the Company distributes a variety of closed circuit television ("CCTV") equipment and other security systems related products. Consolidated sales in 1994 set a new record at $172.1 million, up 8.1 percent over the prior year. The Company believes that much of its growth is attributable to its concentration on specialized areas of the electronics market. Historically, the Company's primary business was the distribution of electron tubes and it continues to be a major distributor of these products. In recent years, the Company has followed the migration of its customers to newer technologies, capitalizing on its expertise as a value-added distributor. In 1994, due to the significant increase in new product offerings including solid state components and cathode ray tubes, such products represented 47% of consolidated sales compared to 23% five years ago. The addition of new product lines is primarily based upon compatibility with the Company's existing customer base. The Company also seeks new applications and customers (including, without limitation, through new and expanded distribution franchises) for its existing product lines. A significant portion of the Company's sales are of replacement parts. Specialized areas of the original equipment industry and research and development applications are also served by the Company. The marketing and sales organization of the Company is divided into four strategic business units (SBUs): Electron Device Group (EDG), Solid State and Components Group (SSC), Display Products Group (DPG), and Security Systems Division (SSD). EDG distributes power grid tubes and continuous wave magnetrons for industrial heating applications and also thyratrons, ignitrons, receiving tubes and special purpose tubes which are sold to many industries, including automotive, steel, plastics and textiles companies. EDG also distributes high voltage switch tubes and x-ray tubes used in x-ray imaging equipment and specialty tubes for analytical equipment, as well as camera tubes, photomultipliers, switch tubes, magnetrons, hydrogen thyratrons and imaging equipment to the medical industry. Power grid tube and camera tube product lines are sold by EDG to the radio and television broadcast industry. In addition, EDG assists other SBU's to market cathode ray tubes (CRTs), semiconductors and other products to the broadcast industry. EDG also serves the avionics, marine, microwave and communications markets with product lines including traveling wave tubes, klystrons, planar triodes, hydrogen thyratrons, magnetrons and display storage tubes. SSC distributes RF transistors and amplifiers, communi cations modules, passive components, silicon controlled rectifiers, integrated circuits, semiconductors, high voltage capacitors, resistors, broadcast amplifiers, and other RF and microwave semiconductors for avionics, broadcast, communications, data display and industrial applications. DPG markets data display and instrumentation CRTs that are used in data display, marine, medical, radar, and avionic applications. It also distributes flyback transformers and various components for monitor and terminal repair. SSD distributes closed-circuit television (CCTV) equipment, as well as fiber optic, microwave, intercommunication, access control and other security related products, equipment and accessories, for both initial installation and replacement. In addition, SSD is an approved repair service organization. Sales trends for each SBU are summarized and analyzed in Management's Discussion and Analysis on page 11 of the Annual Report to Stockholders for the Year Ended May 31, 1994. Sales in the global market for electron tubes in which the Company participates, principally through EDG, is estimated by the Company to have been approximately $2.2 billion in 1993. The Company participates through SSC in specialized segments of the semiconductor portion of the market by distributing power semicon ductors and RF and microwave semiconductors. According to industry estimates, European, United States and Japan-based factory sales for power semiconductors were approximately $4.5 billion in 1993. Richardson estimates the portion of this market it serves at $650 million. DPG estimates factory sales of CRTs in the global market were approximately $5 billion in 1993. Richardson estimates the available market it serves for replacement CRTs is approximately $150 million. The Company esti mates that annual wholesale sales for CCTV and related security equipment in which the Company participates as a distributor, principally through SSD, were approximately $220 million in 1993. Sales of solid state components, primarily RF semiconduc tors, have grown rapidly in recent years. Semiconductors have been replacing electron tubes in a number of applications, such as low power television and radio transmitters. However, in many applications, including higher power broadcasting and industrial equipment, electron tubes are more suitable than semiconductors due to the higher power capabilities of tubes and their ability to withstand severe environmental and other conditions which often damage semiconductors. Semiconductors, however, continue to expand the range of their applications. Consequently, many parts of the market for electron tubes in which the Company participates, have been declining. EDG sales, which serve the Company's traditional electron tube market, have declined 6% in 1994, 5% in 1993 and 11% in 1992. Last year the decrease was principally attributable to general market trends, poor economic conditions in Europe and Latin America, and foreign exchange rate fluctuations (see "Management's Discussion and Analysis of Results of Operations and Financial Condition - Sales Analysis, EDG" in the accompanying financial statements). In response to this trend, EDG is seeking to add additional products and expand existing marketing agreements. The Company has found that a replacement market for power semiconductors exists and that many of its tube customers have semiconductor requirements as well. In addition SSC's sales to original equipment manufacturers has grown and accounted for approximately 59% of the SBU's 1994 sales. SSC's sales have increased 34% in 1994, 15% in 1993 and 15% in 1992 (see "Management's Discussion and Analysis of Results of Operations and Financial Condition - Sales Analysis, SSC" in the Annual Report to Stockholders for the Year Ended May 31, 1994.) The Company's sales of CRT's and other display products have increased 42% in 1994, 17% in 1993 and 50% in 1992 (see "Management's Discussion and Analysis of Results of Operations and Financial Condition - Sales Analysis, DPG" in the Annual Report to Stockholders for the Year Ended May 31, 1994.) SSD's sales increased 2% in 1994, declined 13% in 1993 and increased 17% in 1992. (see "Management's Discussion and Analysis of Results of Operations and Financial Condition - Sales Analysis, SSD" in the Annual Report to Stockholders for the Year Ended May 31, 1994.) Developments in the Past Fiscal Year In 1993, the Company developed a plan to reorganize its sales staff on a specialty basis by SBU wherever possible. This plan was implemented throughout North America in fiscal 1994. In addition to Corporate Account Managers, who continue to sell the Company's full line of products to large national and international accounts, the Company utilizes a specialty sales staff for selling products for specific SBUs. In addition, several sales engineers were added to the sales staff in the United States and Europe to improve technical service to customers who purchase SSC products. The specialty sales staff is deployed based upon their sales and technical experience to service the products and achieve the growth objectives of the SBU they represent. As part of the Department of Justice (DOJ) settlement reached in October 1991, the Company agreed not to make further acquisitions of power grid tube product lines without the approval of the government. This affected the Company's ability to acquire product lines to fully utilize the capacity of its manufacturing facilities in LaFox, Illinois and Brive, France. The LaFox facility, which has been phasing down its operations, experienced underutilization and manufacturing inefficiencies of $.5 million, $.1 million and $1.4 million in 1994, 1993 and 1992, respectively. The Brive facility has sustained similar inefficiencies of $3.7 million, $3.1 million and $2.2 million in 1994, 1993 and 1992. In addition, the company incurred warranty costs on manufactured products of $.8 million, $.4 million and $.3 million in 1994, 1993 and 1992. In response to the persistent underutilization and production inefficiencies which were not resolved by other actions taken, the Board of Directors approved management's plan to phase down the Company's involvement in the manufacture of electron tubes. In developing this plan, the Company solicited offers for the sale of the Brive operation from strategic buyers, including local management who has expressed preliminary interest in a management buy-out. The Board has authorized the Company to pursue the buy-out proposal as well as other alternatives. The plan includes a $26.5 million charge against 1994 earnings for the estimated cost of the phase-down. Of this charge, $21.4 million consists of asset write-downs and costs related to the sale or disposition of the Brive facility. The balance, $5.1 million, represents an increase in the provision for the phase-down of domestic manufacturing and settlement of certain litigation, originally established at $20.0 million in 1991. See details of management's plan, the related costs and employees affected in Note B of the "Notes to Consolidated Financial Statements" of the Annual Report to Stockholders for the Year Ended May 31,1994. The plan will be completed in fiscal 1995. Products The following is a description of some of the Company's products: Power Amplifier / Oscillator Tubes are vacuum or gas filled tubes used in applications where current or voltage amplification and/or oscillation is required. Some areas of use are: induction heating, diathermy equipment, sonic generators, communications and radar systems and power supplies for voltage regulation or amplification. Thyratrons and Rectifiers are vacuum or gas filled tubes used to control the flow of electrical current. Thyratrons are used to control ignitrons, electric motor speed controls, theatri cal 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. RF Power Transistors are "solid state" high-frequency power amplifiers used in land mobile, aircraft and satellite communications and in many types of electronic instrumentation. Closed-circuit Television ("CCTV") products include cameras, lenses, monitors, scanners, time lapse recorders and associated accessories. CCTV products are used in surveillance applications and monitoring hazardous environments in the work-place. Magnetrons are high vacuum oscillator tubes which are 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 heating applications such as microwave ovens and devices used by the medical industry. Receiving/Industrial Receiving Tubes are vacuum tubes used to regulate or amplify small amounts of power in a wide variety of electrical and electronic equipment. Communications, medical instrumentation, consumer electronics, and industrial controls are typical applications for this product. Planar Triodes are high frequency triodes manufactured using a special process to enable them to operate at several thousand megahertz (MHZ). Aircraft instrumentation and television translators use planar triodes. Klystrons are vacuum tubes used to amplify or generate power at microwave frequencies by means of velocity modulation. Applications include radar and telecommunications systems. Silicon Controlled Rectifiers (SCR's) and Power Semicon ductor Modules are used in many industrial control applications, and have spawned new 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. Ignitrons are mercury pool tubes used to control the flow of large amounts of electrical current. They are used most often in welding equipment, power conversion and power rectification equipment. Electronic Display Tubes are small gas filled tubes which contain multiple elements which can display either numerical or alphabetical characters on command. These display tubes are used in scientific and medical equipment and in various commercial applications. Camera Tubes are vacuum tubes used to change a visible light image to electronic signals which are then transmitted to a monitor for conversion back to a visible image. Camera tubes are used in broadcast, security and medical applications. Traveling Wave Tubes are high vacuum microwave amplifiers whose electrical signal can be adjusted by means of electrostatic or magnetic fields. Applications include satellite as well as ground telecommunications and electronic countermeasure devices. Cathode Ray Tubes ("CRTs") are vacuum tubes which convert an electrical signal into a visual image to display information on computer terminals or televisions used in the medical, scientific and publishing industries as well as in general business applications. High Voltage and Power Capacitors are 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. Microwave Diodes are specialized diodes intended for use at microwave and RF frequencies for oscillator, mixer, switching, and power control, and amplifier applications in broadcast, avionic, telecommunication, medical and industrial equipment. Distribution and Marketing The Company buys, warehouses and distributes more than 55,000 types of tubes and semiconductors ranging in price from $1 to $21,000 for tubes and $.10 to $2,500 for semiconductors and related components. The Company processes approximately 550 orders per day averaging more than $1,250 each (for an average total of $687,000 per day). The Company distributes electron tubes it manufactures as well as electron tubes, power, RF and microwave semiconductors and related products purchased from other sources, including Varian Associates, Inc., Motorola, Inc., Clinton Electronics Corp., Burle Industries, Inc., Panasonic Industrial Company, Philips, SGS Thomson, ITT Electron Technology Division, RF Products, Microwave Associates, Powerex, M/A-COM, Joslyn Jennings, Semtech Corp. and Dale Electronics. No single outside supplier currently accounts for more than 10% of the Company's purchases in any year, other than Varian which accounted for approximately 17%, 22% and 21% of purchases in fiscal 1994, 1993 and 1992, respectively. The Company believes that the loss of any one supplier, other than Varian, would not cause a material adverse impact on its earnings and revenues. The Company believes that relationships with Varian are satisfactory. The Company has entered into marketing distribution agreements with various manufacturers in the tube, semiconductor, and CCTV industries. The most significant is a distributor agreement with the Electron Device Group of Varian Associates, Inc. ("Varian") under which the Company is Varian's exclusive distributor of power grid tubes throughout the world with the exception of the United States and certain former Eastern Bloc countries where the Company is one of Varian's stocking distributors. This distributor agreement replaces the joint venture between the Company and Varian named Varian Supply Company ("VASCO") which was dissolved in fiscal 1992 as part of the Company's settlement of the DOJ's investigation of the Company. Such settlement also included an agreement by the Company to obtain DOJ approval, except under limited circumstances, for the acquisition of any company (or its power grid tube assets) engaged in the rebuilding, manufacture, or distribution of power grid tubes. (See Note K of the "Notes to Consolidated Financial Statements" of the Annual Report to Stockholders for the Year Ended May 31,1994.) Varian product accounted for 18%, 20% and 25% of net sales of the Company in fiscal 1994, 1993 and 1992, respectively. Customer orders are taken by the regional sales offices and directed to the Company's headquarters and distribution facility in LaFox, Illinois or to one of its international distribution centers. The Company utilizes a sophisticated data processing network which provides on-line, real-time interconnection of all sales offices, manufacturing facilities and central distribution operations. Information on stock availability, customers, and competitive market analyses are instantly obtainable by management and the entire distribution network. Most of the products distributed by Richardson are critical to the function of the equipment in which they are used, therefore, Richardson utilizes this system to facilitate same day shipment of over 90% of its customer orders received. In 1994 the Company reorganized its sales staff on a specialty basis wherever possible (see Part I, Item 1., Business - - - Developments in the Past Fiscal Year".) The Company markets its products to manufacturers and users of equipment in, among others, the areas of communications, industrial heating, marine, medical care and avionics. The Company also sells to customers who purchase for resale, including electronics distributors and service companies. The Company has established supply contracts, generally for a one- year term, with certain customers, and is committed pursuant to these contracts to maintain minimum inventories so as to provide product without significant delay. Management believes that for the past two fiscal years approximately 20% of the Company's sales were made under such supply contracts. During the past five years no single customer has represented more than 10% of the Company's sales. The Company emphasizes sales to replacement markets. Some of these markets may expand as new equipment utilizing electron tubes continues to be sold. For example: equipment such as video monitors and computer display terminals which use cathode ray tubes also present expanding market opportunities for replacement purposes; new communications equipment using microwave devices such as traveling wave tubes and klystrons and RF transistors continues to be developed for applications with high power or high-frequency requirements that tube technology alone can provide. Richardson sales include products for use in applications in the following industries: automotive, avionics, broadcasting, closed-circuit television, communications, food processing, marine, medical, steel, and telecommunications, as well as federal, state and local governments. The Company's backlog of firm orders scheduled for future delivery within 12 months was $29,700,000, $22,400,000 and $21,400,000 as of May 31, 1994, 1993 and 1992, respectively. The Company's backlog consists primarily of commercial contracts that require future shipping dates. The level of the Company's backlog is not indicative of future sales. International International sales represented approximately 46% of the Company's fiscal 1994 sales. These sales were $79,123,000, $75,101,000, and $77,916,000 in fiscal years 1994, 1993 and 1992, respectively. Export sales shipped directly from the United States, principally to European and Latin American customers, were $29,667,000, $28,396,000 and $29,839,000 in 1994,1993 and 1992. The Company has 33 locations throughout the world. See Note J of the "Notes to Consolidated Financial Statements" of the Annual Report to Stockholders for the Year Ended May 31,1994 for details of the Company's international operations, including sales, operating income and identifiable assets. Manufacturing The Company distributes its manufactured products principally under the trade names "National", "Cetron" and "Amperex". Located in LaFox, Illinois and Brive, France, the Company's manufacturing operations, including value-added, accounted for approximately 18% of its product distribution requirements in fiscal 1994. Such manufacturing operations contributed sales of approximately $30 million in fiscal 1994, $33 million in fiscal 1992 and $35 million in fiscal 1992. The products currently manufactured by the Company include thyratrons and rectifiers, power tubes, ignitrons, electronic display tubes, phototubes, SCR Assemblies, CW and pulsed magnetrons and spark gap tubes. The materials used in the manufacturing process are readily available and 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. See above, Part I, Item 1. Business, Developments in the Past Fiscal Year for information on the Company's planned phase- down of manufacturing operations. These plans include the sale or disposition of the Company's Brive operations. As part of any sale, the Company intends to enter into purchase commitments with the buyer in order to assure an uninterrupted source of supply for its customers. It is anticipated that the higher earnings levels and stability which will result from the elimination of manufacturing inefficiencies will be partially offset by reduced profit margins on distributed product. Research and Development The objective of the Company's research and development is to increase the number of applications for its products and to develop existing technology with respect to advanced products. The Company emphasizes product development rather than basic research. The ability of the Company to compete is, in part, dependent upon its ability to anticipate changing market needs and to provide the required products. At present, a staff of 11 persons are involved, on a full- or part-time basis, in various phases of product development. The Company's expenditures in this area were $358,000, $584,000 and $548,000 in fiscal 1994, 1993 and 1992. Employees As of May 31, 1994, the Company employed 392 individuals on a full time basis at U.S. locations. Of these, 53 are employed in administrative and clerical positions, 219 are employed in sales and distribution, and 120 are employed in value-added and product manufacturing. The Company's foreign subsidiaries employ an additional 262 individuals of which 119 individuals are engaged in administrative, sales and distribution and 143 in manufacturing. All of the Company's U.S. employees are non-union. A portion of the Company's employees in Brive, France are represented by unions. The Company's relations with such unions have been satisfactory. Competition Although the Company believes it is an important distributor of electron tubes and semiconductors in the United States, it competes worldwide with other general line distributors and manufacturers and other distributors of electronic components (including original equipment manufacturers), many of which are substantially larger and have greater resources than the Company. The Company also competes against manufacturers of semiconductors, which have replaced electron tubes in many applications. Also see above Part I, Item 1, Business, Develop ments in the Past Fiscal Year. Patents and Trademarks The Company acquired certain manufacturing patents and trademarks in connection with acquisitions, including the trademarks "National", "Cetron," and "Amperex." The Company believes that although the patents and trademarks it has obtained have value, they will not be determinative of the Company's success, which depends principally upon its marketing technical support, product dlivery and upon the quality and economic value of its products. Item 2. Properties The Company owns facilities on approximately 300 acres in LaFox, Illinois, consisting of a modern, single and two-story concrete, brick and steel constructed building containing approximately 255,000 square feet of manufacturing, warehouse and office space. The Company also owns a four-story building containing approximately 45,000 square feet of warehouse space on 1.5 acres in Geneva, Illinois. The Company's United Kingdom subsidiary owns a 12,000 square foot single story brick building in Lincoln, England which it utilizes as a sales office and warehouse hub for European sales distribution. The Company's Spanish subsidiary owns a 3,510 square foot office and warehouse space in a 55,000 square foot industrial concrete building constructed in 1988 in Madrid, Spain. The Company's Italian subsidiary owns an office and warehouse facility located in Florence, Italy which consists of approximately 6,400 square feet of a brick and concrete industrial building. A French subsidiary of the Company owns a single and two-story concrete, brick and steel constructed building of approximately 130,000 square feet in Brive, France, which it uses for manufacturing, warehouse and office. The Company also rents branch sales offices on a short-term basis in or near Boston, New York, Orlando, Dallas, San Francisco, Los Angeles, Seattle and Miami; and in Montreal, Canada; and Munich, Germany. Additional sales offices, which include warehouse space, leased on a short-term basis, are located in or near Toronto, Canada; Paris, France; Tokyo, Japan and Singapore. Additional warehouse space in Geneva, Illinois is also rented on a short-term basis. The Company also leases a facility from a trust, of which Edward J. Richardson, Chairman of the Board of the Company, is the principal beneficiary. Such facility is used by SSD as its sales office and warehouse. Under the terms of this lease, the Company is obligated to make rental payments of $68,705 per year, expiring in 1996. In the opinion of management, the lease is on terms no less favorable to the Company than similar leases which would be available from unre lated third parties. Item 3. Legal Proceedings No material developments have occurred in the matter of Panache Broadcasting of Pennsylvania, Inc. v. Richardson Electron ics, Ltd., Varian Associates, Inc., and Varian Supply Company, pending in the United States District Court for the Northern District of Illinois, Eastern Division, docket no. 90 C 6400. The complaint alleges violations of Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act As previously reported the matter remains primarily in the discovery stage and the Court has not determined whether the matter may be maintained as a class action. The United States Government advised the Company in March 1994 that the Government may assert a claim for damages and penalties against the Company under the False Claims Act and the Lanham Act for conduct in connection with a $3.1 million contract completed in 1989 to supply certain tubes. The False Claims Act permits the Government to seek a civil penalty for each violation of not less than $5,000 nor more than $10,000, plus three times its damages. The Company believes it has not violated these statutes and is discussing the resolution of the matter with the Government. If such discussions are not satisfactorily concluded, the Company plans to vigorously defend itself against any litigation the Government may initiate. 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, 1994. PART II Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters Incorporated herein by reference to pages 15 (for dividend payments), 20 (for dividend restriction) and 24 (for market data) of the Annual Report to Stockholders for the Year Ended May 31, 1994. Item 6. Selected Financial Data Incorporated herein by reference to page 10 of the Annual Report to Stockholders for the Year Ended May 31, 1994. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Incorporated herein by reference to pages 11 to 13 of the Annual Report to Stockholders for the Year Ended May 31, 1994. Item 8. Financial Statements and Supplementary Data Incorporated herein by reference to pages 14 through 23 of the Annual Report to Stockholders for the Year Ended May 31, 1994. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. No event has occurred within the 24 month period prior to the date of Company's most recent financial statements, which would require disclosure under Item 9 of this Report. 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 11, 1994, 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 is contained in the Company's Proxy Statement to be used in connection with its Annual Meeting of Stockholders scheduled to be held October 11, 1994, 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 11, 1994, 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 11, 1994, under the caption "EXECUTIVE COMPENSATION - Compensation Committee Interlocks and Insider Participation," which information is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) The following consolidated financial statements of the registrant and its subsidiaries included on pages 14 through 23 of its Annual Report to Stockholders for the fiscal year ended May 31, 1994 are incorporated herein by reference: Filing Method Report of Independent Accountants E - Exhibit 13 1. FINANCIAL STATEMENTS E - Exhibit 13 Consolidated Balance Sheets - May 31, 1994 and E 1993 Consolidated Statements of Operations - Years E ended May 31, 1994, 1993 and 1992 Consolidated Statements of Cash Flows -Years E ended May 31, 1994, 1993 and 1992 Consolidated Statements of Stockholders' Equity - E Years ended May 31, 1994, 1993 and 1992 Notes to Consolidated Financial Statements E The following consolidated financial information for the fiscal years 1994, 1993 and 1992 is submitted herewith: 2. FINANCIAL STATEMENT SCHEDULES: VIII Valuation and Qualifying Accounts E - Exhibit 99.1 IX Short-Term Borrowings E - Exhibit 99.2 XIII Other Investments E - Exhibit 99.3 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. There were no reports on Form 8-K during the last quarter of the period covered by this report. (c) EXHIBITS Filing Method 3(a) Restated Certificate of Incorporation of the NA Company, incorporated by reference to Appendix B to the Proxy Statement/ Pro spectus dated November 13, 1986, included in the Company's Registration Statement on Form S-4 Commission File No. 33-8696. 3(b) By-laws of the Company, as amended. E 4(a) Specimen forms of Common Stock and Class B NA 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. 4(b) Indenture between the Company and Conti NA nental Illinois National Bank and Trust Company of Chicago (including form of 7-1/4% Convertible Subordinated Debentures due December 15, 2006) incorporated by reference to Exhibit 4(b) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1990. 10(a) $13,000,000 Senior Term Note dated March 28, NA 1994 delivered to American National Bank, incorporated by reference to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended February 28, 1994. 10(b) Industrial Building Lease, dated April 14, NA 1993 between the Company and the American National Bank & Trust, as trustee under Trust No. 56120 dated 2-23-83, incorporated by reference to Exhibit 10(b) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1994. 10(c) The Company's Employees Profit Sharing Plan E and Trust Agreement, (as amended and restated effective June 1, 1989) dated July 14, 1994. 10(d) The Company's Amended and Restated Incentive NA 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. 10(d)(1) First Amendment to the Company's Amended and NA 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. 10(d)(2) Second Amendment to the Company's Amended NA 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. 10(e) The Company's Amended and Restated Employees NA Stock Purchase Plan, incorporated by reference to the Company's Proxy Statement used in connection with its Annual Meeting of Stockholders held October 2, 1985. 10(e)(1) First Amendment to Amended and Restated NA Employees Stock Purchase Plan, incorporated by reference to Appendix D to the Company's Proxy Statement/Prospectus dated November 13, 1986 included in its Registration Statement on Form S-4, Commission File No. 33-8696. 10(e)(2) Second Amendment to Amended and Restated NA Employees Stock Purchase Plan, incorporated by reference to Appendix E to the Company's Proxy Statement/Prospectus dated November 13, 1986 included in its Registration Statement on Form S-4, Commission File No. 33-8696. 10(e)(3) Third Amendment to Amended and Restated NA Employees Stock Purchase Plan incorporated by reference to Exhibit 10(m)(3) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1990. 10(e)(4) Fourth Amendment to Amended and Restated NA Employees Stock Purchase Plan incorporated by reference to Exhibit 10(m)(4) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1991. 10(e)(5) Fifth Amendment to Amended and Restated NA Employees Stock Purchase Plan incorporated by reference to Exhibit 10(m)(5) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1991. 10(f) Employees Stock Ownership Plan and Trust E Agreement, effective as of June 1, 1987, dated July 14, 1994. 10(g) Stock Option Plan for Non-Employee directors NA 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. 10(h) The Company's Employees' Incentive Compen NA sation 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. 10(h)(1) First Amendment to Employees Incentive NA 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. 10(i) Richardson Electronics, Ltd. Employees' 1994 NA 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. 10(j) Correspondence outlining Agreement between NA the Company and Arnold R. Allen with respect to Mr. Allen's employment by the Company, incorporated by reference to Exhibit 10(v) to the Company's Annual Report on Form 10-K, for the fiscal year ended May 31, 1985. 10(j)(1) Letter dated February 3, 1992 between the NA Company and Arnold R. Allen outlining Mr. Allen's engagement as a consultant by the Company, incorporated by reference to Exhibit 10 (r)(1) to the Company's Annual Report on Form 10-K, for the fiscal year ended May 31, 1992. 10(j)(2) Letter dated April 1, 1993 between the NA 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. 10(k) Letter dated January 14, 1992 between the NA Company and Jacques Bouyer setting forth the terms of Mr. Bouyer's engagement as a management consultant by the Company for Europe, incorporated by reference to Exhibit 10(t)(1) to the Company's Annual Report on Form 10-K for the fiscal year ended on May 31, 1992. 10(k)(1) Letter dated January 15, 1992 between the NA Company and Jacques Bouyer setting forth the terms of Mr. Bouyer's engagement as a management consultant by the Company for the United States, incorporated by reference to Exhibit 10(t)(1) to the Company's Annual Report on Form 10-K for the fiscal year ended on May 31, 1992. 10(l) Letter dated November 27, 1992 between the NA Company and Ad Ketelaars setting forth the terms of Mr. Ketelaars' employment by the Company, incorporated by reference to Exhibit 10(k) to the Company's Annual Report on Form 10-K for the fiscal year ended on May 31, 1994. 10(m) Letter dated January 13, 1994 between the E Company and Samuel Rubinovitz setting forth the terms of Mr. Rubinovitz' engagement as management consultant by the Company. 10(n) Letter dated April 1, 1994 between the E Company and Leonard R. Prange setting forth the terms of Mr. Prange's employment by the Company. 10(o) Letter dated April 4, 1994 between the E Company and Bart F. Petrini setting forth the terms of Mr. Petrini's employment by the Company. 10(p) Letter dated May 20, 1994 between the E Company and William J. Garry setting forth the terms of Mr. Garry's employment by the Company. 10(q) The Company's Directors and Officers Lia NA bility Insurance Policy issued by Chubb Group of Insurance Companies Policy Number 8125-64-60A incorporated by reference to Exhibit 10(u) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1991. 10(q)(1) The Company's Directors and Officers Lia E bility Insurance Policy renewal issued by Chubb Group of Insurance Companies Policy Number 8125-64-60B. 10(q)(2) The Company's Directors and Officers Lia E bility Insurance Policy issued by National Union Fire Insurance Policy Number 4392020. 10(q)(3) The Company's Directors and Officers Lia E bility Insurance Policy issued by CNA In surance Companies Policy Number DOX600028634. 10(r) Plea Agreement, dated September 30, 1991, NA executed by Registrant in the matter of United States of America v. Richardson Electronics, Ltd., filed in the United States District Court for the Northern District of Illinois, Eastern Division, as Docket No. 91 CR 0791, with Information attached, incorporated by reference to Exhibit 10(a) of the Company's Current Report on Form 8-K for September 30, 1991. 10(r)(1) Stipulation, dated September 30, 1991, NA executed by Registrant in the matter of United States of America v. Richardson Electronics, Ltd., filed in the United States District Court for the Northern District of Illinois, Eastern Division, as Docket No. 91 C 6211, with proposed Final Judgment attached, incorporated by reference to Exhibit 10(b) of the Company's Current Report on Form 8-K for September 30, 1991. 10(r)(2) Settlement Agreement, dated September 30, NA 1991, between Registrant and the United States of America, incorporated by reference to Exhibit 10(c) of the Company's Current Report on Form 8-K for September 30, 1991. 10(r)(3) Distributor Agreement, executed August 8, NA 1991, between Registrant and Varian Asso ciates, Inc., incorporated by reference to Exhibit 10(d) of the Company's Current Report on Form 8-K for September 30, 1991. 10(r)(4) First Amendment to Distributor Agreement NA (which is Exhibit 10(v)(4) hereto) 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. 10(r)(5) Amendment, dated as of September 30, 1991, NA 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. 10(r)(6) Final Judgment, dated April 1, 1992, in the NA matter of United States of America v. Richardson Electronics, Ltd., filed in the United States District Court for the Northern District of Illinois, Eastern Division, as Docket No. 91 C 6211 incorpo rated by reference to Exhibit 10(v)(7) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992. 10(s) Trade Mark License Agreement dated as of May NA 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. 10(t) Amended and Restated Administrative NA Agreement between the Company and the Company's National Electronics Division and the Defense Logistics Agency dated February 3, 1992, incorporated by reference to Exhibit 10(x)(2) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992. 11 Statement re computation of net income per E share. 13 Annual Report to Stockholders for fiscal E year ending May 31, 1994 (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). 21 Subsidiaries of the Company. E 23 Consent of Independent Accountants. E 99.1 Schedule VIII E 99.2 Schedule IX E 99.3 Schedule XIII E 99.4 Appendix E 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. RlCHARDSON ELECTRONICS, LTD. By: /S/ Edward J. Richardson, Chairman of the Board and President By: /S/ William J. Garry, Vice President and Chief Financial Officer Date: August 26, 1994 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, /s/ Dennis R Gandy, Chairman of the Board Director (principal executive August 26, 1994 officer), President and Director August 26, 1994 /s/ Arnold R Allen, /s/ David Gilden, Director Director August 26, 1994 August 26, 1994 /s/ Joel Levine, /s/ Scott Hodes, Director Director August 26, 1994 August 26, 1994 /s/Leonard R. Prange, /s/ Samuel Rubinovitz, Director Director August 26, 1994 August 26, 1994 /s/ Jacques Bouyer, /s/ Kenneth J. Douglas, Director Director August 26, 1994 August 26, 1994 EX-3.B 2 EXHIBIT 3(b) BY-LAWS OF RICHARDSON ELECTRONICS, LTD. ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE.--The registered office shall be established and maintained at the Office of the United States Corporation Company, in the City of Dover, in the County of Kent, in the State of Delaware, and said corporation shall be the registered agent of this corporation in charge thereof. SECTION 2. OTHER OFFICES.--The corporation may have other offices, either within or without the State of Delaware, at such place or places as the Board of Directors may from time to time appoint or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. ANNUAL MEETINGS.--Annual meetings of stockholders for the election of directors and for such other business as may be stated in the notice of the meeting, shall be held at such place, either within or without the State of Delaware, and at such time and date as the Board of Directors, by resolution, shall determine and as set forth in the notice of the meeting. In the event the Board of Directors fails to so determine the time, date and place of meeting, the annual meeting of stockholders shall be held at the registered office of the corporation in Delaware on the first Thursday in October of each year. If the date of the annual meeting shall fall upon a legal holiday, the meeting shall be held on the next succeeding business day. At each annual meeting, the stockholders entitled to vote shall elect a Board of Directors and they may transact such other corporate business as shall be stated in the notice of the meeting. SECTION 2. OTHER MEETINGS.--Meetings of stockholders for any purpose other than the election of directors may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting. SECTION 3. VOTING.--Each stockholder entitled to vote in accordance with the terms of the Certificate of Incorporation and in accordance with the provisions of these By-Laws shall be entitled to such number of votes, in person or by proxy, for each share of stock entitled to vote held by such stockholder as provided in the Certificate of Incorporation or the resolution or resolutions of the directors establishing the voting rights, if any, of Preferred Stock or any series thereof, but no proxy shall be voted after three years from its date unless such proxy provides for a longer period. Upon the demand of any stockholder, the vote for directors and the vote upon any question before the meeting, shall be by ballot. All elections for directors shall be decided by plurality vote; all other questions shall be elected by majority vote except as otherwise provided by the Certificate of Incorporation or the laws of the State of Delaware. A complete list of the stockholders entitled to vote at the ensuing election, arranged in alphabetical order, with the address of each, and the number of shares held by each, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 4. QUORUM.--Except as otherwise required by Law, by the Certificate of Incorporation or by these By-Laws, the presence, in person or by proxy, of stockholders holding stock of the corporation entitled to vote having a majority of voting power shall constitute a quorum at all meetings of the stockholders. In case a quorum shall not be present at any meeting, a majority in voting interest of the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of stock entitled to vote shall be present. At any such adjourned meeting at which the requisite amount of stock entitled to vote shall be represented, any business may be transacted which might have been transacted at the meeting as originally noticed; but only those stockholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments thereof. SECTION 5. SPECIAL PURPOSES.--Special meetings of the stockholders for any purpose or purposes may be called by the Chairman of the Board, President or Secretary, or by resolution of the directors. SECTION 6. NOTICE OF MEETINGS.--Written notice, stating the place, date and time of the meeting, and the general nature of the business to be considered, shall be given to each stockholder entitled to vote thereat at his address as it appears on the records of the corporation, not less than ten nor more than sixty days before the date of the meeting. SECTION 7. ACTION WITHOUT MEETING.--Unless otherwise provided by the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting, may be taken without a meeting without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS SECTION 1. NUMBER AND TERM.--The number of directors shall be ten (10). The directors shall be elected at the annual meeting of the stockholders and each director shall be elected to serve until his successor shall be elected and shall qualify. SECTION 2. RESIGNATIONS.--Any director, member of a committee or other officer may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the Chairman of the Board, President or Secretary. The acceptance of a resignation shall not be necessary to make it effective. SECTION 3. VACANCIES.--If the office of any director, member of a committee or other officer becomes vacant, the remaining directors in office, though less than a quorum by a majority vote, may appoint any qualified person to fill such vacancy, who shall hold office for the unexpired term and until his successor shall be duly chosen. SECTION 4. REMOVAL.--Except as hereinafter provided, any director or directors may be removed either for or without cause at any time by the affirmative vote of the holders of the shares of stock outstanding and entitled to vote having a majority of the voting power, at a special meeting of the stockholders called for the purpose and the vacancies thus created may be filled, at the meeting held for the purpose of removal, by the affirmative vote of a majority in voting interest of the stockholders entitled to vote. Unless the Certificate of Incorporation otherwise provides, stockholders may effect removal of a director who is a member of a classified Board of Directors only for cause. If the Certificate of Incorporation provides for cumulative voting and if less than the entire board is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire board of directors, or, if there be classes of directors, at an election of the class of directors of which he is a part. If the holders of any class or series are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, these provisions shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. SECTION 5. INCREASE OF NUMBER.--The number of directors may be increased by amendment of these By-Laws by the affirmative vote of a majority of the directors, though less than a quorum, or, by the affirmative vote of a majority in voting interest of the stockholders, at the annual meeting or at a special meeting called for that purpose, and by like vote the additional directors may be chosen at such meeting to hold office until the next annual election and until their successors are elected and qualify. SECTION 6. POWERS.--The Board of Directors shall exercise all of the powers of the corporation except such as are by law, or by the Certificate of Incorporation of the corporation or by these By-Laws conferred upon or reserved to the stockholders. SECTION 7. COMMITTEES.--The Board of Directors may, by resolution or resolutions passed by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, or in these By-Laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the By-Laws of the corporation; and, unless the resolution, these By-Laws, or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. SECTION 8. MEETINGS.--The newly elected directors may hold their first meeting for the purpose or organization and the transaction of business, if a quorum be present, immediately after the annual meeting of the stockholders; or the time and place of such meeting may be fixed by consent in writing of all the directors. Regular meetings of the directors may be held without notice at such places and times as shall be determined from time to time by resolution of the directors. Special meetings of the board may be called by the Chairman of the Board or by the Secretary on the written request of any two directors on at least two day's notice to each director and shall be held at such place or places as may be determined by the directors, or as shall be stated in the call of the meeting. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. SECTION 9. QUORUM.--A majority of the directors shall constitute a quorum for the transaction of business. If at any meeting of the board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at the meeting which shall be so adjourned. SECTION 10. COMPENSATION.--By resolution of the Board, Directors may be compensated for their services as directors or as members of committees, and receive a fixed fee and expenses of attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent or otherwise, and receiving compensation therefor. SECTION 11. ACTION WITHOUT MEETING.--Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the board, or of such committee as the case may be, and such written consent is filed with the minutes of proceedings of the board or committee. ARTICLE IV OFFICERS SECTION 1. OFFICERS.--The officers of the corporation shall be a Chairman of the Board, a President, a Chief Financial Officer, a Treasurer, and a Secretary, all of whom shall be elected by the Board of Directors and who shall hold office until their successors are elected and qualified. In addition, the Board of Directors may elect one or more Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as they may deem proper. None of the officers of the corporation need be directors. The officers shall be elected at the first meeting of the Board of Directors after each annual meeting. More than two offices may be held by the same person. SECTION 2. OTHER OFFICERS AND AGENTS.--The Board of Directors may appoint such other officers and agents as it may deem advisable, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. SECTION 3. CHAIRMAN.--The Chairman of the Board of Directors shall be the chief executive officer of the corporation. He or she shall preside at all meetings of the stockholders and of the Board of Directors; and, subject to the direction and control of the Board of Directors, he or she shall be in charge of the business of the corporation and shall direct the policy and management of the corporation. In general he or she shall discharge all the duties incident to the position of chief executive officer and such other duties as may be prescribed by the Board of Directors from time to time. He or she may sign certificates for shares of the corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors have authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed, and he or she may accomplish such execution either under or without the seal of the corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors or these By-Laws, according to the requirements of the form of the instrument. He or she may vote or execute consents or proxies with respect to all securities which the corporation is entitled to vote except as and to the extent such authority shall be vested in a different officer or agent of the corporation by the Board of Directors. SECTION 4. PRESIDENT.--The President shall be the chief operating officer of the corporation and, subject to the direction and control of the Board of Directors and Chairman of the Board, shall in general supervise, manage and control all of the operations, business and affairs of the corporation. In the absence of the Chairman of the Board, he or she shall preside at all meetings of the stockholders and of the Board of Directors. He or she may sign certificates for shares of the corporation, any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors have authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed, and he or she may accomplish such execution either under or without the seal of the corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors or these By-Laws, according to the requirements of the form of the instrument. In general he or she shall perform all duties incident to the office of President and such other duties as may be prescribed by the Chairman of the Board or by the Board of Directors from time to time. SECTION 5. VICE-PRESIDENT.--The Vice President (or in the event there be more than one Vice President, each of the Vice Presidents) shall assist the Chairman of the Board and President in the discharge of their duties as the Chairman of the Board and President may direct and shall perform such other duties as from time to time may be assigned to him or her by the Chairman of the Board or President or by the Board of Directors. In the absence of the President or in the event of his or her inability or refusal to act, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Board of Directors, or by the Chairman of the Board if the Board of Directors has not made such a designation, or by the President if neither the Chairman of the Board nor the Board of Directors has made such a designation, or in the absence of any designation, then in the order of seniority of tenure as Vice President) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the Board of Directors or these By-Laws, the Vice President (or each of them if there are more than one) may execute for the corporation certificates for its shares and any contracts, deeds, mortgages, bonds or other instruments which the Board of Directors has authorized to be executed, and he or she may accomplish such execution either under or without the seal of the corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors, according to the requirements of the form of the instrument. SECTION 6. CHIEF FINANCIAL OFFICER.--The Chief Financial Officer shall be the chief financial officer and principal accounting officer of the corporation having the duties, responsibility and authority incident to such position for all financial and accounting matters involving the corporation. He or she shall have such other duties, responsibilities and authority as may be determined by and be responsible to, the Board of Directors, the Audit Committee, the Chairman of the Board, and the President. SECTION 7. TREASURER.--The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the corporation. He or she shall deposit all moneys and other valuables in the name and to the credit of the corporation in such depositaries as may be designated by the Board of Directors or pursuant to their authorization. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, or the Chairman of the Board or the President, or the Chief Financial Officer, taking proper vouchers for such disbursements. He or she shall render to the Chairman of the Board, the President, the Chief Financial Officer and Board of Directors at the regular meetings of the Board of Directors, or whenever they may request it, an account of all his or her transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, he or she shall give the corporation a bond for the faithful discharge of his or her duties in such amount and with such surety as the board shall prescribe. He or she shall be responsible to the Chief Financial Officer. SECTION 8. SECRETARY.--The Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors, and all other notices required by law or by these By-Laws, and in case of his or her absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the Chairman of the Board or the President, or by the directors, or stockholders, upon whose requisition the meeting is called as provided in these By-Laws. He or she shall record all the proceedings of the corporation and of the directors in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him or her by the directors or Chairman of the Board or the President. He or she shall have the custody of the seal of the corporation and shall affix the same to all instruments requiring it, when authorized by the directors or the Chairman of the Board or the President, and attest the same. SECTION 9. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. - - --Assistant Treasurers and Assistant Secretaries, if any, shall be elected and shall have such powers and shall perform such duties as shall be assigned to them, respectively, by the directors. ARTICLE V MISCELLANEOUS SECTION 1. CERTIFICATES OF STOCK.--Certificates of stock, signed by the Chairman of the Board, President or Vice-President, and the Treasurer or an Assistant Treasurer, or Secretary or an Assistant Secretary, shall be issued to each stockholder certifying the number of shares owned by him in the corporation. Any of or all the signatures may be facsimiles. SECTION 2. LOST CERTIFICATES.--A new certificate of stock may be issued in the place of any certificate theretofore issued by the corporation, alleged to have been lost or destroyed, and the directors may, in their discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the corporation a bond, in such sum as they may direct, not exceeding double the value of the stock, to indemnify the corporation against any claim that may be made against it on account of the alleged loss of any such certificate, or the issuance of any such new certificate. SECTION 3. TRANSFER OF SHARES.--The shares of stock of the corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates shall be surrendered to the corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other person as the directors may designate, by whom they shall be cancelled, and new certificates shall thereupon be issued. A record shall be made of each transfer and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer. SECTION 4. STOCKHOLDERS RECORD DATE.--In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 5. DIVIDENDS.--Subject to the provisions of the Certificate of Incorporation, the Board of Directors may, out of funds legally available therefor at any regular or special meeting, declare dividends upon the capital stock of the corporation as and when they deem expedient. Before declaring any dividend there may be set apart out of any funds of the corporation available for dividends, such sum or sums as the directors from time to time in their discretion deem proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends or for such other purposes as the directors shall deem conducive to the interests of the corporation. SECTION 6. SEAL.--The corporate seal shall be circular in form and shall contain the name of the corporation, the year of its creation and the words "CORPORATE SEAL DELAWARE." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. SECTION 7. FISCAL YEAR.--The fiscal year of the corporation shall be determined by resolution of the Board of Directors. SECTION 8. CHECKS.--All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner as shall be determined from time to time by resolution of the Board of Directors. SECTION 9. NOTICE AND WAIVER OF NOTICE.--Whenever any notice is required by these By-Laws to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if given by depositing the same in the United States mail, postage prepaid, addressed to the person entitled thereto at his address as it appears on the records of the corporation, and such notice shall be deemed to have been given on the day of such mailing. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by Statute. Whenever any notice whatever is required to be given under the provisions of any law, or under the provisions of the Certificate of Incorporation of the corporation or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE VI AMENDMENTS These By-Laws may be altered or repealed and By-Laws may be made at any annual meeting of the stockholders or at any special meeting thereof if notice of the proposed alteration or repeal or By-Law or By-Laws to be made be contained in the notice of such special meeting, by the affirmative vote of the stock issued and outstanding and entitled to vote thereat having a majority of the voting power, or by the affirmative vote of a majority of the Board of Directors, at any regular meeting of the Board of Directors, or at any special meeting of the Board of Directors, if notice of the proposed alteration or repeal, or By-Law or By-Laws to be made, be contained in the notice of such special meeting. ARTICLE VII INDEMNIFICATION SECTION 1. GENERAL.--The corporation shall indemnify, and advance Expenses (as hereinafter defined) to, Indemnitee (as hereinafter defined) as provided in this Article and to the fullest extent permitted by applicable law, as the same exists or may hereafter be amended. SECTION 2. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION.--Indemnitee shall be entitled to the rights of indemnification provided in this Section 2 if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to any Proceeding (as hereinafter defined), other than a Proceeding by or in the right of the corporation. Pursuant to this Section 2, Indemnitee shall be indemnified against Expenses, judgments, penalties, fines (including, without limitation, excise taxes assessed on an Indemnitee with respect to an employee benefit plan) and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if he acted in Good Faith. SECTION 3. PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION.--Indemnitee shall be entitled to the rights of indemnification provided in this Section 3 if, by reason of his Corporate Status, he is, or is threatened to be made, a party to any Proceeding brought by or in the right of the corporation to procure a judgment in its favor. Pursuant to this Section, Indemnitee shall be indemnified against Expenses, judgments, penalties and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such Proceeding if he acted in Good Faith. Notwithstanding the foregoing, no indemnification against such Expenses, judgments, penalties and amounts paid in settlement shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the corporation if applicable law prohibits such indemnification; provided, however, that, if applicable law so permits, indemnification against Expenses, judgments, penalties and amounts paid in settlement shall nevertheless be made by the corporation in such event if and only to the extent that the Court of Chancery of the State of Delaware, or the court in which such Proceeding shall have been brought or is pending, shall determine. SECTION 4. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY SUCCESSFUL.--Notwithstanding any other provision of this Article, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified to the maximum extent permitted by law against all Expenses, judgments, penalties, fines, and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the corporation shall indemnify Indemnitee to the maximum extent permitted by law against all Expenses, judgments, penalties, fines, and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. SECTION 5. INDEMNIFICATION FOR EXPENSES OF A WITNESS.--Notwithstanding any other provision of this Article, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. SECTION 6. ADVANCEMENT OF EXPENSES.--Notwithstanding any provisions to the contrary in Section 7, the corporation shall advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding within twenty days after the receipt by the corporation of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any advance and undertaking to repay pursuant to this Section 6 shall be unsecured and interest free. SECTION 7. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.-- (a) To obtain indemnification under this Article, Indemnitee shall submit to the corporation a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the corporation shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification. (b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 7(a) hereof, a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case: (i) if a Change in Control (as hereinafter defined) shall have occurred, by Independent Counsel (as hereinafter defined) (unless Indemnitee shall request that such determination be made by the Board of Directors or the stockholders, in which case by the person or persons or in the manner provided for in clauses (ii) or (iii) of this Section 7(b)) in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; (ii) if a Change of Control shall not have occurred, (A) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee or (C) by the stockholders of the corporation; or (iii) as provided in Section 8(b) of this Article; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the corporation (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the corporation hereby indemnifies and agrees to hold Indemnitee harmless therefrom. (c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7(b) of this Article, the Independent Counsel shall be selected as provided in this Section 7(c). If a Change of Control shall not have occurred, the Independent Counsel shall be selected by the Board of Directors, and the corporation shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change of Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the corporation advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the corporation, as the case may be, may, within 7 days after such written notice of selection shall have been given, deliver to the corporation or to Indemnitee, as the case may be, a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 13 of this Article, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is made, the Independent Counsel so selected may not serve as Independent Counsel unless and until a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 7(a) hereof, no Independent Counsel shall have been selected and not objected to, either the corporation or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the corporation or Indemnitee to the other's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom an objection is so resolved or the person so appointed shall act as Independent Counsel under Section 7(b) hereof. The corporation shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 7(b) hereof, and the corporation shall pay all reasonable fees and expenses incident to the procedures of this Section 7(c), regardless of the manner in which such Independent Counsel was selected or appointed. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 9(a)(iii) of this Article, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). SECTION 8. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.-- (a) In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Article if Indemnitee has submitted a request for indemnification in accordance with Section 7(a) of this Article, and the corporation shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. (b) If the person, persons or entity empowered or selected under Section 7 of this Article to determine whether Indemnitee is entitled to indemnification shall not have made such determination within 60 days after receipt by the corporation of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 8(b) shall not apply (i) if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 7(b) of this Article and if (A) within 15 days after receipt by the corporation of the request for such determination the Board of Directors has resolved to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within 75 days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within 15 days after such receipt for the purpose of making such determination, such meeting is held for such purpose within 60 days after having been so called and such determination is made thereat, or (ii) if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7(b) of this Article. (c) The termination of any Proceeding or of any claim, issue or matter therein by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Article) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in Good Faith. (d) For purposes of any determination of Good Faith, Indemnitee shall be deemed to have acted in Good Faith if Indemnitee's action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise. The provisions of this Section 7(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Article. (e) The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Article. SECTION 9. REMEDIES OF INDEMNITEE.- (a) In the event that (i) a determination is made pursuant to Section 7 of this Article that Indemnitee is not entitled to indemnification under this Article, (ii) advancement of Expenses is not timely made pursuant to Section 6 of this Article, (iii) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7(b) of this Article and such determination shall not have been made and delivered in a written opinion within 90 days after receipt by the corporation of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5 of this Article within ten (10) days after receipt by the corporation of a written request therefor, or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 8 of this Article, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 9(a). The corporation shall not oppose Indemnitee's right to seek any such adjudication or award in arbitration. (b) In the event that a determination shall have been made pursuant to Section 7 of this Article that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 9 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 9 the corporation shall have the burden of proving that Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. (c) If a determination shall have been made or deemed to have been made pursuant to Section 7 or 8 of this Article that Indemnitee is entitled to indemnification, the corporation shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 9, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law. (d) The corporation shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 9 that the procedures and presumptions of this Article are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the corporation is bound by all the provisions of this Article. (e) In the event that Indemnitee, pursuant to this Section 9, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Article, Indemnitee shall be entitled to recover from the corporation, and shall be indemnified by the corporation against, any and all expenses (of the types described in the definition of Expenses in Section 13 of this Article) actually and reasonably incurred by him in such judicial adjudication or arbitration, but only if he prevails therein. If it shall be determined in said judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advancement of expenses sought, the expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated. SECTION 10. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.-- (a) The rights of indemnification and to receive advancement of Expenses as provided by this Article shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the By-Laws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. The rights conferred by this Article shall be deemed contract rights and no amendment, alteration or repeal of this Article or of any provision hereof shall be effective as to any Indemnitee with respect to any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. The provisions of this Article shall continue as to an Indemnitee whose Corporate Status has ceased and shall inure to the benefit of his heirs, executors and administrators. (b) To the extent that the corporation maintains an insurance policy or policies providing liability insurance for directors, officers, employees, agents or fiduciaries of the corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the corporation, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. (c) In the event of any payment under this Article, the corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the corporation to bring suit to enforce such rights. (d) The corporation shall not be liable under this Article to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. (e) The corporation shall have the express authority to enter into such agreements as the Board of Directors deems appropriate for the indemnification of present or future directors, officers, employees or agents of the corporation in connection with their service to, or status with, any Enterprise. SECTION 11. SEVERABILITY.--If any provision or provisions of this Article shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Article (including without limitation, each portion of any Section of this Article containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Article (including, without limitation, each portion of any Section of this Article containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. SECTION 12. CERTAIN PERSONS NOT ENTITLED TO INDEMNIFICATION OR ADVANCEMENT OF EXPENSES.--Notwithstanding any other provision of this Article, no person shall be entitled to indemnification or advancement of Expenses under this Article with respect to any Proceeding, or any claim therein other than to enforce indemnification rights under this Article, brought or made by him against the corporation. SECTION 13. DEFINITIONS.--For purposes of this Article: (a) "Change in Control" means a change in control of the corporation occurring after the Effective Date of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934 (the "Act"), whether or not the corporation is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have occurred if after the Effective Date (i) any "person" (as such term is used in Sections 1 3(d) and 1 4(d) of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the corporation representing 50% or more of the combined voting power of the corporation's then outstanding securities without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person attaining such percentage interest; (ii) the corporation is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any new director whose election or nomination for election by the corporation's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors. (b) "Corporate Status" describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the corporation. (c) "Disinterested Director" means a director of the corporation who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee. (d) "Effective Date" means September 11, 1986. (e) "Enterprise" shall mean the corporation and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the corporation as a director, officer, employee, agent or fiduciary. (f) "Expenses" shall include all reasonable attorneys' fees, retainers, court costs transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding. (g) "Good Faith" shall mean Indemnitee having acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal Proceeding, having had no reasonable cause to believe Indemnitee's conduct was unlawful. (h) "Indemnitee" includes any person who is, or is threatened to be made, a witness in or a party to any Proceeding as described in Sections 2, 3, 4 or 5 of this Article by reason of his Corporate Status. (i) "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent (i) the corporation or Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the corporation or Indemnitee in an action to determine Indemnitee's rights under this Article. (j) "Proceeding" includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other threatened, pending or completed proceeding whether civil, criminal, administrative or investigative, except one initiated by an Indemnitee. For purposes of the foregoing sentence, a "Proceeding" shall not be deemed to have been initiated by Indemnitee where Indemnitee seeks pursuant to Section 9 of this Article to enforce his rights under this Article. SECTION 14. NOTICES.--Any notice, request or other communication required or permitted to be given to the corporation under this Article shall be in writing and either delivered in person or sent by telex, telegram or certified or registered mail, postage prepaid, return receipt requested, to the Secretary of the corporation and shall be effective only upon receipt by the Secretary. SECTION 15. MISCELLANEOUS.--Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. EX-10.C 3 RICHARDSON ELECTRONICS, LTD. EMPLOYEES PROFIT-SHARING PLAN AND TRUST AGREEMENT As Amended and Restated Effective June 1, 1989 TABLE OF CONTENTS Page ARTICLE I--TITLES AND PURPOSE. . . . . . . . . . . . . . . . . . . . . . .2 1.1 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 1.2 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 1.3 Exclusive Benefit. . . . . . . . . . . . . . . . . . . . . . . . . .2 1.4 Type of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 ARTICLE II--DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . .3 24. "Account". . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.4 "Account Balance". . . . . . . . . . . . . . . . . . . . . . . . . .4 2.3 "Administrator". . . . . . . . . . . . . . . . . . . . . . . . . . .4 2.4 "Anniversary Date" . . . . . . . . . . . . . . . . . . . . . . . . .4 2.5 "Annual Addition". . . . . . . . . . . . . . . . . . . . . . . . . .4 2.6 "Beneficiary". . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2.7 "Benefit Commencement Date". . . . . . . . . . . . . . . . . . . . .4 2.8 "Break in Service" . . . . . . . . . . . . . . . . . . . . . . . . .5 2.9 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.10 "Committee". . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.11 "Compensation" . . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.12 "Computation Period" . . . . . . . . . . . . . . . . . . . . . . . .7 2.13 "Effective Date" . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.14 "Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.15 "Employer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.16 "Entry Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.17 "ERISA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.18 "Highly Compensated Employee". . . . . . . . . . . . . . . . . . . .7 2.19 "Hour of Service". . . . . . . . . . . . . . . . . . . . . . . . . .9 2.20 "Key Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.21 "Leave of Absence" . . . . . . . . . . . . . . . . . . . . . . . . 13 2.22 "Limitation Year". . . . . . . . . . . . . . . . . . . . . . . . . 13 2.23 "Non-Key Employee" . . . . . . . . . . . . . . . . . . . . . . . . 13 2.24 "Normal Retirement Date" . . . . . . . . . . . . . . . . . . . . . 13 2.25 "Participant". . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.26 "Permanent Disability" . . . . . . . . . . . . . . . . . . . . . . 13 2.27 "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.28 "Plan Year". . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.29 "Qualified Domestic Relations Order" . . . . . . . . . . . . . . . 14 2.30 "Related Employer" . . . . . . . . . . . . . . . . . . . . . . . . 15 2.31 "Richardson" . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.32 "Spouse" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.33 "Termination of Employment". . . . . . . . . . . . . . . . . . . . 15 2.34 "Top-Heavy Determination Date" . . . . . . . . . . . . . . . . . . 15 2.35 "Top-Heavy Year" . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.36 "Trust". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.37 "Trustee". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.38 "Valuation Date" . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.39 "Vested Account Balance" . . . . . . . . . . . . . . . . . . . . . 18 2.40 "Year of Service". . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE III--PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . 19 3.1 Eligibility To Participate . . . . . . . . . . . . . . . . . . . . 19 3.2 Duration of Participation; Re-employment . . . . . . . . . . . . . 19 ARTICLE IV--CONTRIBUTIONS BY EMPLOYER. . . . . . . . . . . . . . . . . . 21 4.1 Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 4.2 Limitation on Matching Contributions . . . . . . . . . . . . . . . 22 4.3 Time for Payment . . . . . . . . . . . . . . . . . . . . . . . . . 25 4.4 Binding Determination by Administrator . . . . . . . . . . . . . . 25 ARTICLE V--ELECTIVE, SUPPLEMENTAL AND ROLLOVER CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . 26 5.1 Manner and Amount of Elective Contributions. . . . . . . . . . . . 26 5.2 Limitation on Elective Contributions . . . . . . . . . . . . . . . 26 5.3 Excess Elective Contributions. . . . . . . . . . . . . . . . . . . 28 5.4 Elective Contribution Agreement. . . . . . . . . . . . . . . . . . 28 5.5 Voluntary Contributions. . . . . . . . . . . . . . . . . . . . . . 29 5.6 Rollover Contributions . . . . . . . . . . . . . . . . . . . . . . 29 ARTICLE VI--ALLOCATION OF EMPLOYER CONTRIBUTIONS . . . . . . . . . . . . 30 6.1 Manner of Allocation . . . . . . . . . . . . . . . . . . . . . . . 30 6.2 Allocations in Top-Heavy Years . . . . . . . . . . . . . . . . . . 31 6.3 Administrator to Notify Trustee. . . . . . . . . . . . . . . . . . 33 ARTICLE VII--ACCOUNTS OF PARTICIPANTS. . . . . . . . . . . . . . . . . . 34 7.1 Separate Accounts. . . . . . . . . . . . . . . . . . . . . . . . . 34 7.2 Adjustments to Accounts. . . . . . . . . . . . . . . . . . . . . . 34 7.3 Crediting of Employer Contributions. . . . . . . . . . . . . . . . 35 7.4 Crediting of Forfeitures . . . . . . . . . . . . . . . . . . . . . 36 7.5 Crediting of Rollover Contributions. . . . . . . . . . . . . . . . 36 7.6 Limitation on Allocations. . . . . . . . . . . . . . . . . . . . . 36 7.7 Combined Plan Limitation . . . . . . . . . . . . . . . . . . . . . 38 7.8 Correction of Error. . . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE VIII--VESTING OF INTEREST IN TRUST . . . . . . . . . . . . . . . 41 8.1 Normal Retirement. . . . . . . . . . . . . . . . . . . . . . . . . 41 8.2 Disability Retirement. . . . . . . . . . . . . . . . . . . . . . . 41 8.3 Death. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 8.4 Other Termination of Employment. . . . . . . . . . . . . . . . . . 41 8.5 Treatment of Forfeited Amounts; Reinstatement. . . . . . . . . . . 41 8.6 Computation of Years of Service. . . . . . . . . . . . . . . . . . 42 8.7 Vesting on Termination of Trust or Termination of Employer's Agreement to Contribute . . . . . . . . . . . . . . . 42 8.8 Vesting Following Plan Amendment . . . . . . . . . . . . . . . . . 43 8.9 Vesting Following Partial Distributions. . . . . . . . . . . . . . 43 8.10 Participant Contribution Accounts and Rollover Accounts. . . . . . . . . . . . . . . . . . . . . . 44 ARTICLE IX--DISTRIBUTIONS AND WITHDRAWALS. . . . . . . . . . . . . . . . 45 9.1 Benefit Commencement Date. . . . . . . . . . . . . . . . . . . . . 45 9.2 Payment to Participants. . . . . . . . . . . . . . . . . . . . . . 46 9.3 Payment to Beneficiaries . . . . . . . . . . . . . . . . . . . . . 47 9.4 Extent of Further Participation in Trust . . . . . . . . . . . . . 48 9.5 Payment to Persons Under Legal Disability. . . . . . . . . . . . . 48 9.6 Payment in Installments. . . . . . . . . . . . . . . . . . . . . . 49 9.7 Withdrawals of 1986 Plan Voluntary Contributions . . . . . . . . . 51 9.8 Election of Pre-TEFRA Distribution . . . . . . . . . . . . . . . . 51 9.9 Hardship Withdrawals . . . . . . . . . . . . . . . . . . . . . . . 52 9.10 Compliance with Regulations. . . . . . . . . . . . . . . . . . . . 53 9.11 Direct Rollovers . . . . . . . . . . . . . . . . . . . . . . . . . 53 9.12 Withdrawals Due to Permanent Disability. . . . . . . . . . . . . . 55 ARTICLE X--DESIGNATION OF BENEFICIARIES. . . . . . . . . . . . . . . . . 56 10.1 Participants to Name Beneficiaries . . . . . . . . . . . . . . . . 56 10.2 No Beneficiary Designated; Death of Beneficiary. . . . . . . . . . 56 10.3 No Liability for Payment to Beneficiaries. . . . . . . . . . . . . 56 10.4 Qualified Domestic Relations Orders. . . . . . . . . . . . . . . . 57 ARTICLE XI--FIDUCIARY CAPACITY AND RESPONSIBILITY. . . . . . . . . . . . 58 11.1 General Fiduciary Standard of Conduct. . . . . . . . . . . . . . . 58 11.2 Allocation of Responsibility Among Fiduciaries . . . . . . . . . . 58 11.3 Administrator. . . . . . . . . . . . . . . . . . . . . . . . . . . 59 11.4 Powers and Duties of Administrator . . . . . . . . . . . . . . . . 59 11.5 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . . . 60 11.6 Indemnification by Employer. . . . . . . . . . . . . . . . . . . . 62 11.7 Service in Multiple Capacities . . . . . . . . . . . . . . . . . . 62 ARTICLE XII--THE COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . 63 12.1 Appointment and Membership . . . . . . . . . . . . . . . . . . . . 63 12.2 Compensation and Expenses. . . . . . . . . . . . . . . . . . . . . 63 12.3 Committee Procedures and Actions . . . . . . . . . . . . . . . . . 63 12.4 Resignation or Removal of Committee Member . . . . . . . . . . . . 64 ARTICLE XIII--THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . 65 13.1 Creation and Acceptance of Trust . . . . . . . . . . . . . . . . . 65 13.2 Appointment of Trustee . . . . . . . . . . . . . . . . . . . . . . 65 13.3 Trustee Capacity . . . . . . . . . . . . . . . . . . . . . . . . . 65 13.4 Compensation, Expenses and Taxes . . . . . . . . . . . . . . . . . 65 13.5 Trustee Procedures and Actions . . . . . . . . . . . . . . . . . . 65 13.6 Resignation or Removal of Trustee. . . . . . . . . . . . . . . . . 66 13.7 Powers and Duties of Trustee . . . . . . . . . . . . . . . . . . . 67 13.8 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 13.9 Controversies. . . . . . . . . . . . . . . . . . . . . . . . . . . 68 13.10 Legal Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . 69 13.11 Supplemental Trusts. . . . . . . . . . . . . . . . . . . . . . . . 69 ARTICLE XIV--INVESTMENT OF TRUST ASSETS. . . . . . . . . . . . . . . . . 70 14.1 Pooled Investment Fund . . . . . . . . . . . . . . . . . . . . . . 70 14.2 Investment Powers. . . . . . . . . . . . . . . . . . . . . . . . . 70 14.3 Loans to Participants. . . . . . . . . . . . . . . . . . . . . . . 73 14.4 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . 75 14.5 Investment in Qualifying Employer Securities . . . . . . . . . . . 75 ARTICLE XV--INVESTMENT MANAGER . . . . . . . . . . . . . . . . . . . . . 77 15.1 Appointment of Investment Manager. . . . . . . . . . . . . . . . . 77 15.2 Acceptance of Appointment. . . . . . . . . . . . . . . . . . . . . 77 15.3 Notice to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . 77 15.4 Investment Authority . . . . . . . . . . . . . . . . . . . . . . . 77 15.5 Resignation or Removal of Investment Manager . . . . . . . . . . . 78 15.6 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 ARTICLE XVI--INVESTMENT FUNDS. . . . . . . . . . . . . . . . . . . . . . 79 16.1 Directed Investments . . . . . . . . . . . . . . . . . . . . . . . 79 16.2 Investment Elections . . . . . . . . . . . . . . . . . . . . . . . 79 16.3 Transfers Between Investment Funds . . . . . . . . . . . . . . . . 80 16.4 Authority to Revise Election Procedures. . . . . . . . . . . . . . 80 ARTICLE XVII--AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . 81 17.1 Right to Amend . . . . . . . . . . . . . . . . . . . . . . . . . . 81 17.2 Retroactivity of Amendments. . . . . . . . . . . . . . . . . . . . 81 17.3 Limitations on Right to Amend. . . . . . . . . . . . . . . . . . . 81 ARTICLE XVIII--ADOPTION, WITHDRAWAL AND TERMINATION. . . . . . . . . . . 82 18.1 Adoption of Agreement. . . . . . . . . . . . . . . . . . . . . . . 82 18.2 Withdrawal from Plan . . . . . . . . . . . . . . . . . . . . . . . 82 18.3 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 ARTICLE XIX--MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 84 19.1 No Reversion to Employer . . . . . . . . . . . . . . . . . . . . . 84 19.2 Evidence of Action; Necessary Parties. . . . . . . . . . . . . . . 85 19.3 Rights of Participants Limited . . . . . . . . . . . . . . . . . . 85 19.4 Assignment and Alienation. . . . . . . . . . . . . . . . . . . . . 86 19.5 Missing Participants or Beneficiaries. . . . . . . . . . . . . . . 87 19.6 Merger and Consolidation of Plan . . . . . . . . . . . . . . . . . 87 19.7 Severability of Agreement. . . . . . . . . . . . . . . . . . . . . 88 19.8 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . 88 THIS AGREEMENT, executed at LaFox, Illinois, this 14th day of July, 1994, by and between RICHARDSON ELECTRONICS, LTD., a corporation organized and existing under the laws of the State of Delaware ("Richardson"), and SCOTT HODES and WILLIAM G. SEILS, as Trustees (collectively, the "Trustee"). W I T N E S S E T H: WHEREAS, effective as of May 31, 1970, Richardson adopted the Richardson Electronics, Ltd. and Subsidiaries Employees Profit- Sharing Plan and Trust (the "Agreement"), a profit-sharing plan and trust qualified under Section 401(a) of the Internal revenue Code of 1986 (the "Code") and entitled to tax exemption under Section 501(a) of the Code; and WHEREAS, Richardson has reserved the right to amend the Agreement at any time; WHEREAS, effective as of June 1, 1984 Richardson amended and restated the Agreement (the "1986 Plan"); WHEREAS, effective as of June 1, 1987 Richardson further amended and restated the Agreement in order to incorporate a cash or deferred provision (the "1987 Plan"); WHEREAS, effective as of June 1, 1989 Richardson again amended and restated the Agreement, in part to incorporate changes required by the Tax Reform Act of 1986, other applicable legisla- tion and applicable regulations and rulings thereunder (collective- ly, "TRA"); and WHEREAS, as Richardson now desires further to amend the Agreement in order to incorporate into a single document both all amendments to the 1987 Plan which have previously been made and new amendments required in order to comply with the applicable provisions of TRA. NOW, THEREFORE, based upon the mutual covenants contained herein and other good and valuable consideration, it is hereby agreed by Richardson and the Trustee that the Agreement shall again be amended and restated as follows, effective as of June 1, 1989 (except as otherwise set forth herein): ARTICLE I TITLES AND PURPOSE 1.1 Titles The Plan and the Trust as amended and restated herein shall be known, respectively, as the RICHARDSON ELECTRONICS, LTD. EMPLOYEES PROFIT-SHARING PLAN (the "Plan") and the RICHARDSON ELECTRONICS, LTD. EMPLOYEES PROFIT-SHARING TRUST (the "Trust"). The Plan and the Trust shall collectively be known as the RICH- ARDSON ELECTRONICS, LTD. EMPLOYEES PROFIT-SHARING PLAN AND TRUST AGREEMENT (as amended and restated effective June 1, 1989) (hereinafter called the "Agreement"). 1.2 Purpose The purpose of the Plan is to establish a retirement fund out of the profits of the Employer which will help to provide for the future security of the Participants. 1.3 Exclusive Benefit The Trust shall be for the exclusive benefit of the Participants and their Beneficiaries. In no event shall the income or principal of the Trust be paid or revert to the Employer or any Related Employer, except as otherwise provided in Section 19.1. 1.4 Type of Plan For purposes of Section 401(a)(27)(B) of the Code, the Plan is intended to qualify as a profit-sharing plan that includes a cash-or-deferred arrangement within the meaning of Code Section 401(k). ARTICLE II DEFINITIONS When used herein, the words and terms set forth below shall have the respective meanings indicated, unless a different meaning is clearly required by the context. Whenever appropriate, words used in the singular shall be deemed to include the plural, and vice versa, and the masculine gender shall be deemed to include the feminine and neuter genders, unless a different meaning is clearly required by the context. 2.1 "Account": Collectively, all of the following separate accounts maintained under the Plan for the benefit of a Participant, including all adjustments thereto under Article VII, unless a specific reference is made to one of such separate accounts: (a) The separate Employer Contribution Account maintained for each Participant for the purpose of recording his share of the contributions made by the Employer pursuant to Section 4.l(a)(1) and forfeitures; (b) The separate Elective Contribution Account maintained for each Participant for the purpose of recording Elective Contributions pursuant to Section 5.1(a); (c) The separate Supplemental Contribution Account maintained for each Participant for the purpose of recording Supplemental Contributions pursuant to Section 5.1(b); (d) The separate Matching Contribution Account maintained under the Plan for the purpose of recording Matching Contributions pursuant to Section 4.1(a)(3); (e) In the case of a Participant who incurs a Break in Service, the separate Forfeiture Suspense Account maintained for the Employee under Section 8.5; (f) In the case of a Participant who is re-employed after incurring a Break in Service, the separate Pre- Break Account, if any, required to be maintained under Section 8.9(b); (g) In the event that a contribution is made by or on behalf of a Participant pursuant to Section 5.6, the separate Rollover Contribution Account maintained under the Plan for the purpose of recording such contribution; and (h) In the event that contributions were made by or on behalf of a Participant pursuant to provisions of Section 5.1 of the 1986 Plan, the separate Participant Contribution Account maintained under the Plan for the purpose of recording such contributions. The term "Account" shall not, unless otherwise specifically provided herein, include the Excess Contribution Account, if any, or the Excess Forfeiture Account, if any, established pursuant to Section 7.6. 2.2 "Account Balance": The total amount held for the benefit of a Participant in his Account (or in the specific separate account referred to), as determined on the immediately preceding Valuation Date in accordance with the provisions of Article VII. 2.3 "Administrator": The person administering the Plan pursuant to Section 11.3. 2.4 "Anniversary Date": The last day of each Plan Year. 2.5 "Annual Addition:" With respect to a Participant for any Limitation Year, the sum of (a) Employer contributions allocated on behalf of such Participant for such Limitation Year under the Plan and under any other qualified defined contribution plan maintained by the Employer; (b) forfeitures, if any, allocated on behalf of such Participant for such Limitation Year under any such qualified defined contribution plan; (c) such Participant's voluntary non-deductible contributions under any qualified plan of the Employer for such Limitation Year; (d) amounts allocated on behalf of such Participant for such Limitation Year to an individu- al medical account, as defined in Section 415(1)(2) of the Code, which is part of a pension or annuity plan maintained by the Employer; and (e) amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after said date, which are attributable to post-retirement medical benefits allocated for such Limitation Year to the separate account of such Participant under a welfare fund, as defined in Section 419(e) of the Code, maintained by the Employer, if he is a Key Employee for such year. For purposes of this Section 2.5, "Employer" shall include any Related Employer. 2.6 "Beneficiary": Any person (natural or otherwise) entitled to receive any benefits which may become payable upon or after a Participant's death. 2.7 "Benefit Commencement Date": The date on which the payment of a Participant's Vested Account Balance commences, as determined in accordance with the provisions of Section 9.1. 2.8 "Break in Service": (a) Except as otherwise provided under Section 2.8(b), one or more consecutive Computation Periods during each of which an Employee has not completed more than 500 Hours of Service. For eligibility purposes, an Employee shall not incur a Break in Service solely because he fails to complete more than 500 Hours of Service during the Computation Period beginning on his hire date. (b) Notwithstanding Section 2.8(a), a Computation Period beginning in 1985 or thereafter shall not be included in a Break in Service if the sum of the Employee's Hours of Service completed during such Computation Period plus the Employee's "Childbirth Leave Hours" (as hereafter defined) attributable to such Computa- tion Period exceeds 500. For purposes of this Section 2.8(b), an Employee's Childbirth Leave Hours shall be the number of Hours of Service (but not in excess of 501 for any one continuous period of absence) which the Employee would have completed but for the fact that the Employee is absent from the employment of the Employer and all Related Employers for a period commencing on or after the first day of the Computation Period beginning in 1985 (1) by reason of the pregnancy of the Employee, (2) by reason of the birth of a child of the Employee, (3) by reason of the placement of a child with the Employee in connection with the adoption of such child by the, Employee or (4) for purposes of caring for such child for period beginning immediately following such birth or placement; provided, however, that in the case of any Employee with respect to whom it is not possible to determine the number of Hours of Service which such Employee would have completed but for such absence, such Employee shall be credited with 8 Childbirth Leave Hours for each work day of such absence; and provided further, that an hour which is considered an Hour of Service under Section 2.19(b) shall not also be considered a Childbirth Leave Hour. All Childbirth Leave Hours for any period of absence shall be attributed to the Computation Period during which such period of absence begins if the result of such attribution is to prevent such Computation Period from being considered a Break in Service; otherwise, all Childbirth Leave Hours shall be attributed to the immediately following Computation Period. The Administrator shall adopt regulations under which an Employee may be required to furnish reasonable information on a timely basis establishing the number of Childbirth Leave Hours to which such Employee is entitled with respect to any period of absence from employment, and any Employee who fails to furnish such information with respect to any period of absence shall not be credited with any Childbirth Leave Hours for such period of absence. (c) Notwithstanding Section 2.8(a), a Computation Period shall not be included in a Break in Service if the Employee would have completed at least 500 Hours of Service but for a period of absence due to layoff (for not more than 6 months), jury duty or Leave of Absence, other than a period of absence described in Section 2.8(b). 2.9 "Code": The Internal Revenue Code of 1986, as now in effect or as hereafter amended, and any regulation issued pursuant thereto by the Internal Revenue Service. Whenever any provision of the Code is renumbered or otherwise amended, this Agreement shall, to the extent possible, be construed by reference to the successor to such provision. 2.10 "Committee": The committee, if any, established pursuant to the provisions of Article XII to assist the Adminis- trator in the administration of the Plan. 2.11 "Compensation": (a) Except as otherwise provided in this Section 2.11, the term "Compensation" shall mean wages, within the meaning of Section 3401(a) of the Code, and all other payments of compensation paid to a Participant by the Employer (during the course of the Employer's trade or business) during a Plan Year for services rendered by him as an Employee for which the Employer is required to furnish the Employee a written statement under Sections 6041(d) and 6051(a)(3) of the Code, determined without regard to any rules under Section 3401(a) which limit the remuneration included in wages based upon the nature or location of the employment or the services performed [such as the exception for agricultural labor in Section 3401(a)(2)]. Except as provided in Section 6.1(e), in the case of an individual who was a Participant for a period consisting of less than the entire Plan Year, his Compensation shall be deemed to include only the taxable remuneration paid to him for the period while he was a Participant. The Compensation of each Participant taken into account for any Plan Year shall not exceed $200,000 (subject to cost-of-living adjustments prescribed by the Secretary of the Treasury), except that effective for Plan Years beginning after December 31, 1993 the Compensation of each Participant taken into account for any Plan Year shall not exceed $150,000 (subject to cost-of-living adjustments prescribed by the Secretary of the Treasury). In connection with determining the Compensation of a Participant for purposes of the limitation in the preceding sentence, the family aggregation rules in Section 414(q)(6) of the Code shall apply, except that in applying such rules with respect to a particular 12-month period, the term "family" shall include only the spouse of a Participant and any lineal descendants of such Participant who have not attained the age of 19 before the close of such period. (b) Except for purposes of Sections 7.6 and 7.7, notwithstanding the provisions of Section 2.11(a), there shall be included in Compensation any amount contributed by the Employer or a Related Employer pursuant to a salary reduction agreement with the Employee and excluded from his gross income under Sections 125, 402(e)(3), 402(h) or 403(b) of the Code. 2.12 "Computation Period": For eligibility purposes, the Computation Period is the 12-month period beginning on an Employee's employment date or re-employment date, subject to Sections 2.40 and 3.2(b) and (c). For all other purposes under the Plan, including without limitation vesting, the Computation Period is the Plan Year. 2.13 "Effective Date": June 1, 1989 (except as otherwise set forth herein). 2.14 "Employee": Any person employed by and receiving Compensation from the Employer or any Related Employer (or who would be receiving such remuneration except for a Leave of Absence). The term "Employee" shall not include any person who is a "leased employee" within the meaning of Code Section 414(n)(2). 2.15 "Employer": Richardson and any successor to it. The term "Employer" shall also include any corporation or other unincorporated business organization which adopts the Agreement for the exclusive benefit of its Employees pursuant to the provisions of Section 18.1. Anything to the contrary notwithstanding, a mere change in the identity, form or organization of the Employer shall not affect its status under the Plan or the Trust in any manner. 2.16 "Entry Date": November 30 of each Plan Year and the last day of each Plan Year. 2.17 "ERISA": The Employee Retirement Income Security Act of 1974, as now in effect or as hereafter amended, and any regulation issued pursuant thereto by the Internal Revenue Service, the Department of Labor or the Pension Benefit Guaranty Corpora- tion. Whenever any provision of ERISA is renumbered or otherwise amended, this Agreement shall, to the extent possible, be construed by reference to the successor to such provision. 2.18 "Highly Compensated Employee": (a) Except as otherwise provided in this Section 2.18, an Employee shall be considered a Highly Compensated Employee for any Plan Year, if, during such Plan Year or the immediately preceding Plan Year (the "Lookback Year"), he: (1) Was at any time described in Section 2.20(a) (3); (2) Received Compensation in excess of $75,000 [as adjusted by the Secretary of the Treasury pursuant to Section 414(q)(1) of the Code]; (3) Received Compensation in excess of $50,000 [as adjusted pursuant to Section 414(q)(1) of the Code], and was a member of the Top-Paid Group [as defined in Section 2.18(c)]; or (4) At any time was an officer described in Section 2.20(a)(1), taking into account the limitation provided in Section 2.20(b), provided that if no officer is described in Section 2.20(a)(1), the officer who earns the highest Compensation for such Plan Year or Lookback Year shall be treated as described in Section 2.20(a)(1) for purposes of this Section 2.18. (b) Notwithstanding the provisions of Section 2.18(a), an Employee shall not be treated as described in Sections 2.18(a) (2), (3) or (4) for any Plan Year if such Employee was not described in any of such sections in the immediately preceding Plan Year [determined without regard to this Section 2.18(b)], unless such Employee is also a member of the group consisting of the 100 Employees who received the greatest Compensation in such Plan Year with respect to which such determination is being made. (c) For any Plan Year, the "Top-Paid Group" shall consist of the group consisting of the top 20% of Employees when ranked on the basis of Compensation paid during such Plan Year. For purposes of this Section 2.18(c), there shall be excluded (1) Employees who have not completed 6 months of service; (2) Employees who normally work less than 17-1/2 hours per week; (3) Employees who normally work during not more than 6 months during any Plan Year; (4) Employees who have not attained the age of 21; and (5) except as otherwise provided in Treasury Regulations issued under Section 414(q) of the Code, Employees who are included in a unit of Employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and the Employer or a Related Employer. (d) A former Employee shall be treated as Highly Compensated Employee if he was a Highly Compensated Employee either when his employment was terminated or at any time after attaining age 55. (e) A nonresident alien who receives no earned income [within the meaning of Section 911(d)(2) of the Code] which constitutes income from sources within the United States [within the meaning of Section 861(a)(3) of the Code] from the Employer or any Related Employer during any Plan Year shall not be considered an Employee for such Plan Year for any purpose of this Section 2.18. (f) For purposes of Sections 4.2 and 5.2, if an Employee is a member of the family (as defined below) of either (1) a shareholder who owns more than 5% of the stock of the Employer or (2) a Highly Compensated Employee who is a member of the group which consists of the 10 Highly Compensated Employees who were paid the greatest Compensation by the Employer during the Plan Year (including for this purpose any Elective, Matching or Supplemental Contributions made on behalf of such Highly Compensated Employee by the Employer pursuant to Article IV during that calendar year), then such Employee shall not be treated as being a separate Employee for purposes of determining which individuals are the Highly Compensated Employees. Further, any Compensation paid to such Employee and any Elective, Matching or Supplemental Contribu- tions made on behalf of such Employee pursuant to Article IV shall be treated as if it were paid to or on behalf of such 5% owner or Highly Compensated Employee. For purposes of this Section 2.18, the term "family" shall mean an Employee's spouse and lineal ascendants or descendants and the spouses of such lineal ascendants or descendants. (g) The purpose of this Section 2.18 is to conform to the definition of "highly compensated employee" set forth in Section 414(q) of the Code, which is incorporated herein by reference, and to the extent that this Section 2.18 shall be inconsistent with Section 414(q) of the Code, either by excluding Employees who would be classified as "highly compensated employees" thereunder or by including Employees who would not be so classi- fied, the provisions of Section 414(q) of the Code shall govern and control. The Administrator may make any elective adjustment to the definition of Highly Compensated Employee permitted by Section 414(q) of the Code, including specifically the elections referred to the in last sentence of Section 414(q)(8) or in Section 414(q)(12), in accordance with Treasury Regulations issued thereun- der. 2.19 "Hour of Service": (a) Each Employee shall be credited with an Hour of Service for: (1) Each hour for which he is directly or indi- rectly paid or entitled to payment by the Employer or any Related Employer for the performance of duties. Service rendered at overtime or other premium rates shall be credited at the rate of one Hour of Service for each hour worked, regardless of the rate of compensation in effect. These hours shall be credited to the Employee for the Computation Period(s) during which the duties are per- formed. An Employee who is not compensated on an hourly basis, or for whom information regarding the number of hours worked is not readily available, shall be credited with the following number of Hours of Service for each payroll period during which he completes at least one Hour of Service: (i) 45 Hours of Service for each weekly payroll period; (ii) 90 Hours of Service for each bi- weekly payroll period; (iii) 95 Hours of Service for each semi- monthly payroll period; or (iv) 190 Hours of Service for each monthly payroll period. Hours of Service credited to a payroll period which includes an Anniversary Date shall be credited entirely to the Plan Year commencing on the date following such Anniversary Date. An Employee who is not compensated on the basis of a regular payroll period shall be credited with 10 Hours of Service for each day on which he completes at least one Hour of Service. (2) Each hour (up to a maximum of 501 hours in any one continuous period) for which he is directly or indirectly paid or entitled to payment by the Employer or any Related Employer on account of a period during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. In the case of payments which are computed on the basis of specific periods of time during which no duties are performed, the Employee shall receive credit for Hours of Service as if he had actually worked during such periods of time, computed and credited as provided in Section 2.19(a)(1). In the case of all other payments, the Employee's Hours of Service shall be computed and credited in the manner prescribed in 29 C.F.R Sections 2530.200b-2(b) and (c), which are hereby incorporated herein by reference. (3) Each hour for which back pay, irrespective of mitigation of damages, has been either awarded or agreed to by the Employer or any Related Employer. These hours shall be credited to the Employee for the computation period (or periods) to which the award, agreement or payment pertains rather than the computation period (or periods) during which the award, agreement or payment was made. (b) Notwithstanding the foregoing, no credit shall be granted for any period with respect to which an Employee receives payment or is entitled to payment under a plan maintained solely for the purpose of complying with applicable worker's compensation or disability insurance laws; or for a payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee. (c) Service by an individual on behalf of any of the following entities before he became an Employee shall be considered service on behalf of the Employer for purposes of this Section 2.19, to-wit: Amperex Division of North American Phillips Corp.; B-Scan, Inc.; Calvert Electronics, Inc.; Calvert Holding Co., Inc.; Calvert Semi-Conductor, Inc.; Ceco Communications, Inc.; Cetron Electronic Corporation; and National Electronics Division of Varian Associates, Inc. 2.20 "Key Employee": (a) Except as otherwise provided in this Section 2.20, an Employee shall be considered a Key Employee for any Plan Year if, at any time during the Key Employee Test Period [as defined in Section 2.20(f)], he is or was: (1) An officer of the Employer or any Related Employer whose Compensation [as modified for all purposes of this Section 2.20 in accordance with Section 2.20(g)] exceeds 50% of the annual dollar limitation set forth in Section 415(b)(1)(A) of the Code; (2) A shareholder of the Employer who owns at least .5% of the stock of the Employer or any Related Employer and whose Compensation exceeds the annual defined contribution dollar limitation set forth in Section 415(c)(l)(A) of the Code, unless at least 10 other Employees whose Compensation exceeds the annual defined contribution dollar limitation set forth in Section 415(c)(l)(A) of the Code own or owned during any Plan Year in the Key Employee Test Period a percentage share of the stock of the Employer which is greater than such shareholder's percentage share; (3) A shareholder who owns more than 5% of the stock of the Employer; or (4) A shareholder who owns more than 1% of the stock of the Employer and whose Compensation for any Plan Year in which he owns such percentage exceeds $150,000. (b) The number of Employees classified as Key Employees solely because they are described in Section 2.20(a)(1) shall not exceed the greater of (1) 3 or (2) 10% of the largest number of Employees during any of the Plan Years in the Key Employee Test Period; provided, however, that in no event shall such number exceed 50. If more than such number of Employees would otherwise be classified as Key Employees by reason of being described in Section 2.20(a)(1), the Employees classified as Key Employees by reason of being described in Section 2.20(a)(1) shall be those described in Section 2.20(a)(1) who had the highest Compensation during any of the Plan Years in the Key Employee Test Period during which they were described in Section 2.20(a)(1). (c) For purposes of Section 2.20(a)(2), in the event that 2 or more Employees own the same percentage share of the Employer, the Employee who had the highest Compensation of such Employees for the Plan Year during the Key Employee Test Period in which his Compensation was the highest and in which he owned such interest in the Employer for part of the Plan Year shall be treated as owning the largest percentage share of the stock of the Employer. If an Employee's percentage interest in the stock of the Employer changes during a Plan Year, his interest for such Plan Year shall be the highest percentage he held at any time during such Plan Year. (d) For purposes of this Section 2.20, an Employee shall be considered to own any stock of the Employer or Related Employer which would be attributed to him under Section 318 of the Code [as modified by substituting "5%" for "50%" in Section 318(a)(2) of the Code]. In the case of an Employer or Related Employer which has issued more than one class of stock, the applicable test shall be satisfied if the Employee's stock ownership meets the test on the basis of either the value or the voting power of the stock. In the case of an Employer or Related Employer which is not a corporation, such tests shall be applied in accordance with regulations promulgated under Section 416(i)(l)(B)(iii)(II) of the Code. (e) Any Employee who meets any of the 4 tests set forth in Section 2.20(a) as of any Top-Heavy Determination Date shall continue to be a Key Employee for the remainder of the Key Employee Test Period, commencing with the Plan Year which includes such Top- Heavy Determination Date, whether or not he remains an Employee, and, if such Employee dies during such Key Employee Test Period his Beneficiaries shall be classified as Key Employees for the balance of such Key Employee Test Period, unless such Employee is a Key Employee solely by reason of Section 2.20(a)(1) and is subsequently excluded from the group of officers having the highest Compensation by reason of the limitation set forth in Section 2.20(b) in subsequent Plan Years or solely by reason of Section 2.20(a)(2) and is subsequently excluded from the group of the 10 Employees owning the largest percentage shares of the stock of the Employer in subsequent Plan Years. (f) The term "Key Employee Test Period" for any Plan Year shall mean the period consisting of 5 Plan Years (or, if fewer, the total number of Plan Years during which the Plan and all other employee plans qualified under Section 401(a) of the Code maintained by the Employer or any Related Employer have been in effect) ending with the Plan Year which includes the Top-Heavy Determination Date for such Plan Year. (g) The purpose of this Section 2.20 is to conform to the definition of "key employee" set forth in Section 416(i)(1) of the Code, which is incorporated herein by reference, and to the extent that this Section 2.20 shall be inconsistent with Section 416(i)(1) of the Code, either by excluding Employees who would be classified as "key employees" thereunder or by including Employees who would not be so classified, the provisions of Section 416(i) (1) of the Code shall govern and control. 2.21 "Leave of Absence": Authorized leave of absence, sick or disability leave, service in the Armed Forces of the United States (provided that the absence is caused by war or other emergency or provided that the Employee is required to serve under the laws of conscription in time of peace) or any absence with the advance approval of the Employer or any Related Employer; provided, however, that a period shall not be considered a Leave of Absence unless the Employee retires or returns to work for the Employer or any Related Employer within the time specified in his Leave of Absence (or, in the case of a military absence, within the period provided by law). In granting such leaves, the Employer and any Related Employer shall treat all Employees under similar circum- stances alike under rules uniformly and consistently applied. 2.22 "Limitation Year": The period coinciding with the Plan Year, except that effective with the Plan Year beginning May 30, 1987, "Limitation Year" shall mean the period beginning on the second day of the Plan Year and ending on the first day of the following Plan Year, thus creating the following Limitation Years: May 31, 1987 through May 28, 1988; May 29, 1988 through May 27, 1989; May 28, 1989 through May 26, 1990; May 27, 1990 through June 1, 1991; and June 2, 1991 through May 30, 1992. The limitations of Code Section 415 shall be separately applied to the "limitation periods" consisting of (a) May 30, 1987 and (b) May 31, 1992 to May 28, 1993, and for this purpose the dollar limitation in Section 7.6(a)(1) shall be determined by multiplying the applicable dollar limitation for the calendar year in which such "limitation period" ends by a fraction whose numerator is the number of months (including any fractional parts of a month) in such "limitation period" and the denominator of which is 12. Effective with the Plan Year beginning May 29, 1993, "Limitation Year" shall mean the period coinciding with the Plan Year. 2.23 "Non-Key Employee": Any Employee who for any Plan Year is not a Key Employee. 2.24 "Normal Retirement Date": The date a Participant attains age 65. 2.25 "Participant": Any Employee who participates in the Plan as provided in Article III. 2.26 "Permanent Disability": The inability of a Partici- pant to perform a substantial portion of his duties by reason of any medically-determinable physical or mental impairment which can be expected to be of long-continued and indefinite duration. Permanent Disability shall be determined solely by the Administra- tor, either at the request of the Employee or a member of his family or at the Administrator's initiative, upon medical evidence from a physician selected by the Administrator. A determination of Permanent Disability pursuant to the provisions of the Plan shall not be construed to be an admission of disability by the Employer in regard to any other claim of disability brought by the Partici- pant against the Employer. A Participant who is receiving disability benefits under the Social Security Act shall be presumed to be Permanently Disabled. 2.27 "Plan": The Richardson Electronics, Ltd. Profit- Sharing Plan, as amended and restated herein. The term "1986 Plan" refers to the amendment and restatement of the Richardson Electron- ics, Ltd. Profit-Sharing Plan on February 14, 1986. The term "1987 Plan" refers to the amendment and restatement of the Richardson Electronics, Ltd. Profit-Sharing Plan on July 1, 1987. 2.28 "Plan Year": The fiscal year adopted by the Employer for Federal income tax purposes. 2.29 "Qualified Domestic Relations Order": (a) Except as provided in Section 2.29(b), any order (including a judgment, a decree or an approval of a property settlement agreement entered by any court) which the Administrator determines (1) is made pursuant to any state domestic relations law (including a community property law), (2) relates to the provision of child support, alimony payments or marital property rights of a spouse, former spouse, child or other dependent of a Participant (an "Alternate Payee") and (3) clearly specifies (i) the name and last known mailing address (if any) of the Participant and the name and mailing address of each Alternate Payee covered by the order, (ii) the amount or percentage of the Participant's benefits to be paid by the Plan to each Alternate Payee, or the manner in which such amount or percentage is to be determined, (iii) the number of payments or period to which such order applies and (iv) the employee benefit plan to which such order applies. (b) An order shall in no event be considered a Qualified Domestic Relations Order if the Administrator determines that such order (1) requires the Plan to provide benefits to Alternate Payees, the actuarial present value of which in the aggregate is greater than the benefits which would otherwise have been provided to the Participant, (2) requires the Plan to pay benefits to an Alternate Payee, which benefits are required to be paid to a different Alternate Payee under another order previously determined to be a Qualified Domestic Relations Order or (3) requires the Plan to provide any type or form of benefit, or any option, not otherwise provided under the Plan, except that a Qualified Domestic Relations Order may require the Trustee to distribute a portion of the Participant's Vested Account Balance prior to the time the Participant has incurred a Termination of Employment but after the Participant has attained the age of 50. 2.30 "Related Employer": Any trade or business (whether or not incorporated) that is, along with the Employer, a member of a controlled group of related entities [as defined in Sections 414(b) and (c) of the Code, as modified for purposes of Sections 7.6 and 7.7 by Section 415(h) of the Code] a member of an affiliat- ed service group [as defined in Section 414(m) of the Code] or a member of a group the members of which are required to be aggregat- ed pursuant to Section 414(o) of the Code. Anything to the contrary notwithstanding, a mere change in the identity, form or organization of a Related Employer shall not affect its status under the Plan or the Trust in any manner and, if the name of a Related Employer is hereafter changed, all references herein to such Related Employer shall be deemed to refer to such Related Employer as it is then known. 2.31 "Richardson": Richardson Electronics, Ltd., a Delaware corporation. 2.32 "Spouse": The person who is married to the Partic- ipant at the time relevant to such determination except to the extent that a Qualified Domestic Relations Order provides that a former spouse is to be treated as the Participant's Spouse; provided, however, that, solely for purposes of Section 9.3(c), the person to whom a Participant is married at the time of his death shall be considered his Spouse only if they had been married at least one year prior to his death. 2.33 "Termination of Employment": An Employee shall be deemed to have incurred a Termination of Employment as a result of: (a) A retirement, a resignation or a dismissal for any reason; (b) A failure to return to work promptly upon the request of the Employer or Related Employer at the end of a layoff; or (c) A failure to retire or return to work at the end of a Leave of Absence. A transfer of employment between the Employer and any Related Employer, or between Related Employers, or a transfer from a job category eligible to participate in the Plan to one not so eligible or vice versa, shall not be considered to be a Termination of Employment. 2.34 "Top-Heavy Determination Date": For any Plan Year, the Anniversary Date of the immediately preceding Plan Year. 2.35 "Top-Heavy Year": (a) Except as otherwise provided in Section 2.35(b) below, a Top-Heavy Year shall be any Plan Year if, as of the Top- Heavy Determination Date for such Plan Year, the aggregate Account Balances of all Key Employees under the Plan exceed 60% of the aggregate Account Balances of all Participants under the Plan. (b) Notwithstanding Section 2.35(a), if during any Plan Year (1) at least one Participant is a Key Employee, (2) as of the Top-Heavy Determination Date for such Plan Year the Employer or any Related Employer has adopted any other employee plan qualified under Section 401(a) of the Code and (3) either (i) a Key Employee participates in such other plan or (ii) the Plan or such other plan has satisfied the requirements of Section 401(a)(4) or Section 410 of the Code only by treating the Plan and such other plan as a single plan, then such Plan Year shall be considered a Top-Heavy Year if and only if the Account Balances of all Key Employees under the Plan and the aggregate balances in the accounts of all Key Employees under all such other plans exceed 60% of the aggregate balances in the accounts of all Participants under the Plan and all such other plans. (c) Notwithstanding Sections 2.35(a) and (b), if as of any Top-Heavy Determination Date the Employer or any Related Employer has adopted any other employee plan qualified under Section 401(a) of the Code which is not a plan described in Section 2.35(b), but which plan may be considered as a single plan with the Plan and all plans described in Section 2.35(b) without causing any of such plans to violate the requirements of either Section 401(a)(4) or Section 410 of the Code, the Plan Year shall not be considered a Top-Heavy Year if the Account Balances of all Key Employees under the Plan and the aggregate balances in the accounts of all Key Employees under all plans described in Section 2.32(b) and all plans described in this Section 2.35(c) do not exceed 60% of the aggregate balances in the accounts of all Participants under all such plans. (d) If any of the plans described in either Sections 2.35(b) or (c) are defined benefit plans, then the tests set forth in said sections shall be applied by using the present value of all benefits accrued under such plans (as determined by the Administra- tor, using actuarial assumptions which are uniform for all such plans and are reasonable in the aggregate) in lieu of the account balances in such plans. The accrued benefits of the Non-Key Employees under such plans shall be determined in accordance with Section 416(g)(4)(F) of the Code. If any of such plans have a "determination date" [as defined in Section 416(g)(4)(C) of the Code] for purposes of determining top-heavy status which is different from the Top-Heavy Determination Date, the account balances (or the present value of the accrued benefits, in the case of a defined benefit plan) in such plan shall be determined as of the determination date for such plan which occurs in the same Plan Year as the Top-Heavy Determination Date. (e) For purposes of this Section 2.35, account balances shall include (1) all contributions which the Employer or any Related Employer has paid or is legally obligated to pay to any employee plan as of the Top-Heavy Determination Date (including contributions made thereafter if they are allocated as of the Top- Heavy Determination Date) and all forfeitures allocated as of the Top-Heavy Determination Date and (2) all distributions made to a Participant or his Beneficiary during the Key Employee Test Period (or, in the case of a defined benefit plan, the actuarial present value as of the Top-Heavy Determination Date of such distribu- tions). If any plan that was terminated within the Key Employee Test Period would, if it had not been terminated, be a plan described in Section 2.35(b), distributions made under such plan shall also be taken into account. For purposes of this Section 2.32, account balances shall also include amounts which are attributable to contributions made by the Participants (other than deductible voluntary contributions under Section 219 of the Code) but shall not include any rollover [as defined in Section 402(a) (5) of the Code] or a direct transfer from the trust of any employee plan qualified under Section 401(a) of the Code if such plan is not maintained by the Employer or any Related Employer and such rollover or transfer is made at the request of the Participant after December 31, 1983. (f) Anything to the contrary notwithstanding, if an Employee has not performed any services for the Employer or any Related Employer at any time during the Key Employee Test Period, his account balance (in the case of a defined contribution plan) or his accrued benefit (in the case of a defined benefit plan) shall not be taken into consideration in the determination of whether the Plan Year is a Top-Heavy Year. (g) The purpose of this Section 2.35 is to conform to the definition of "top-heavy plan" set forth in Section 416(g) of the Code, which is incorporated herein by reference, and to the extent that this Section 2.35 shall be inconsistent with Section 416(g) of the Code, either by causing any Plan Year during which the Plan would be classified as a "top-heavy plan" not to be a Top- Heavy Year or by causing any Plan Year during which it would not be classified as a "top-heavy plan" to be a Top-Heavy Year, the provisions of Section 416(g) of the Code shall govern and control. 2.36 "Trust": The trust forming a part of the Plan and known as the Richardson Electronics, Ltd. Employees Profit-Sharing Trust. 2.37 "Trustee": Collectively, the person or persons (including any corporation) who shall from time to time be acting as Trustee hereunder, and their duly appointed successors. As of the Effective Date, the Trustees hereunder are Scott Hodes and William G. Seils. 2.38 "Valuation Date": The Anniversary Date and each other date during the Plan Year specified by the Administrator (in a manner which does not discriminate in favor of Highly Compensated Employees) as to which Accounts are adjusted pursuant to Article VII. 2.39 "Vested Account Balance": At any date, the portion of a Participant's Account Balance which would be nonforfeitable if he incurred a Termination of Employment on such date, as determined under Article VIII. 2.40 "Year of Service": (a) Any Computation Period during which an Employee has completed at least 1,000 Hours of Service. (b) For purposes of Article III, as soon as an Employee completes at least 1,000 Hours of Service during the initial Computation Period specified in Section 2.12, he shall be credited with a Year of Service even if fewer than 12 consecutive calendar months have passed. If such Employee fails to complete at least 1,000 Hours of Service during the initial 12-month Computation Period specified in Section 2.12, the second 12-month Computation Period shall consist of the Plan Year which includes the first anniversary of his employment or re-employment commencement date, and the succeeding 12-month Computation Periods shall also be based on the Plan Year. ARTICLE III PARTICIPATION 3.1 Eligibility To Participate (a) Each Employee shall be eligible to participate in the Plan, provided that he (1) has completed one Year of Service, (2) is not a member of a collective bargaining unit in which retirement benefits were the subject of good faith bargaining between the Employer or any Related Employer and one or more employee representatives, (3) is not a non-resident alien described in Code Section 410(b)(3)(C) and (4) is not a United States citizen employed by the Employer in a nation other than the United States ("Foreign Country") who would be subject to tax under the laws of such Foreign Country upon receiving an allocation to his Account pursuant to Section 6.1. (b) Except as provided in Section 3.3, each Employee who participated in the Plan in accordance with its terms prior to the Effective Date shall continue as a Participant. Each other Employee who satisfies the eligibility requirements of Section 3.1(a) shall become a Participant on the later of the Effective Date or the Entry Date coincident with or immediately following the date on which he satisfies such eligibility requirements, provided that he is still employed by the Employer on such date. (c) An Employee who has not yet completed one Year of Service but who is otherwise eligible to participate in the Plan may make an Elective Contribution [as defined in Section 5.1(a)] beginning as of the first June 1, September 1, December 1 or March 1 following his hire date. An Employee who has not yet completed one Year of Service but who is otherwise eligible to participate in the Plan may also contribute or have contributed to the Plan an amount described in Section 5.6. An Employee making any contribu- tion described in the preceding two sentences, or who has a contribution described in the preceding sentence made in his behalf, shall thereupon be considered a Participant for all purposes of the Plan, except that he shall not have the right to receive Employer Profit-Sharing Contributions described in Section 4.1(a)(1) or Employer Matching Contributions described in Section 4.1(a)(3), nor shall he have the right to share in forfeiture allocations pursuant to Section 7.4, prior to the Entry Date specified in Section 3.1(b). 3.2 Duration of Participation; Re-employment (a) Subject to the provisions of Sections 3.2(b) and (c) below, an Employee shall cease to be a Participant for purposes of Section 5.1 upon ceasing to be employed by the Employer, but shall remain a Participant for all other purposes hereunder until such time as his Vested Account Balance is paid to him in full in accordance with Article IX, at which time his participation in the Plan shall cease. (b) Each Participant who incurs a Termination of Employment and is re-employed after incurring a Break in Service shall again become a Participant as of his re-employment date for all purposes under the Plan except Sections 4.1(a)(1), 4.1(a)(3) and 7.4, and shall again become a Participant for purposes of Sections 4.1(a)(1), 4.1(a)(3) and 7.4 on the Entry Date coincident with or immediately following the date on which he completes one Year of Service following such re-employment; provided, however, that if either (1) such Participant had a vested right to any portion of his Account Balance (other than such balance as is attributable to his Rollover Account and Participant Contribution Account) when he incurred his Termination of Employment, (2) the number of Computation Periods in such Break in Service is fewer than the number of Years of Service completed by the Participant prior to such Break in Service or (3) the number of Computation Periods such Break in Service is fewer than 5, then his participa- tion for all purposes under the Plan shall be retroactive to his date of re-employment. (c) Each Employee or each Participant who incurs a Termination of Employment and is re-employed prior to incurring a Break in Service shall be treated, for purposes of eligibility to participate in the Plan, as though he never incurred a Termination of Employment. (d) An Employee's participation in the Plan shall not be affected by the fact that he continues to be employed after his Normal Retirement Date. ARTICLE IV CONTRIBUTIONS BY EMPLOYER 4.1 Amount (a) The Administrator shall determine the aggregate amount to be contributed by all of the Employers for each Plan Year. Each Employer hereby agrees to contribute its portion of such amount. Subject to Section 4.1(b) and Section 4.2, each Employer shall contribute to the Trust each Plan Year with respect to each Participant eligible to share in such Employer's contribu- tion for such Plan Year pursuant to Section 6.1 an amount equal to: (1) Such Employer's share, as defined below, of an amount which has been determined by the Board of Direc- tors of Richardson, in its sole discretion (the "Profit- Sharing Contribution"). For purposes of this Section 4.1(a)(1), the term "Employer's share" shall mean the product obtained by multiplying (i) the Profit-Sharing Contribution for such Plan Year times (ii) a fraction, the numerator of which is the total Compensation paid or accrued by such Employer to all Participants for the immediately preceding Plan Year and the denominator of which is the total Compensation paid or accrued by all of the Employers to all of the Participants for such Plan Year; plus (2) The Elective Contribution [as that term is defined in Section 5.1(a) hereof], if any; plus (3) Subject to Section 4.2 below, with respect to each Participant who elects to have an Elective Contri- bution made on his behalf, an amount equal to 50% of such Elective Contribution (the "Matching Contribution"); provided, however, the amount of the Matching Contribu- tion shall in no event exceed the lesser of (i) 1.5% of said Participant's Compensation or (ii) the amount of such Matching Contribution after adjustment pursuant to Section 4.2; plus (4) The Supplemental Contribution [as that term is defined in Section 5.1(b) hereof], if any; plus (5) Any amount required by Section 6.2. (b) Effective with respect to Employer Profit-Sharing Contributions made after December 31, 1992, as to Plan Years ending on or after May 29, 1993, Section 4.1(a)(1) shall read as follows: "(1) Such Employer's share, as defined below, of an amount which has been determined by the Board of Direc- tors of Richardson, in its sole discretion (the 'Profit- Sharing Contribution'). For purposes of this Section 4.1(a)(1), the term 'Employer's share' shall mean the product obtained by multiplying (i) the Profit-Sharing Contribution for such Plan Year times (ii) a fraction, the numerator of which is the total Compensation paid or accrued by such Employer to all Participants for such Plan Year and the denominator of which is the total Compensation paid or accrued by all of the Employers to all of the Participants for such Plan Year; plus" (c) If any Employer is unable to make its full contri- bution for any Plan Year, the remaining Employers may (but, except to the extent required by Section 6.2 hereof, shall not be obligated to) make all or a portion of such Employer's contribu- tions on its behalf, subject to Section 4.1(d). (d) The amount which an Employer shall otherwise pay pursuant to Sections 4.1(a)(3) and (4) shall be reduced by the balance in the Excess Contribution Account under Section 7.6(d) and by the balance in the Excess Forfeiture Account pursuant to Section 7.6(e). The contribution for any Plan Year shall not exceed the maximum amount deductible by the Employer for such Plan Year under the provisions of Section 404 of the Code. The Employer's contribution shall be in the form of cash or property (except real property of the Employer) at its fair market value, or a combina- tion thereof. (e) All contributions made by the Employer under this Plan are expressly conditioned upon such contributions being deductible by the Employer under Section 404 of the Code, and any amount which is subsequently determined to be nondeductible, or which is otherwise based upon a good faith mistake of fact, shall be returned to the Employer in accordance with Section 19.1(b). 4.2 Limitation on Matching Contributions (a) In any Plan Year the Average Contribution Percentage (as hereinafter defined) for Participants who are Highly Compensat- ed Employees shall not exceed the greater of (1) the Average Contribution Percentage for Participants who are not Highly Compensated Employees multiplied by 1.25 or (2) the lesser of (i) 200% of the Average Contribution Percentage for Participants who are not Highly Compensated Employees or (ii) the Average Contribu- tion Percentage for Participants who are not Highly Compensated Employees plus 2 percentage points. The "Average Contribution Percentage" of a group of participants shall be a fraction (expressed as a percentage and calculated to the nearest 1/100 of 1%) the numerator of which is an amount equal to the sum of the Contribution Percentages (as hereinafter defined) of all of the members of that group of Participants and the denominator of which is the number of Participants in such group. The term "Contribu- tion Percentage" shall mean, with respect to a Participant, the fraction (expressed as a percentage and calculated to the nearest 1/100 of 1%) the numerator of which is an amount equal to the Matching Contributions made on behalf of the Participant for the Plan Year pursuant to Section 4.1(a)(3) and the denominator of which is an amount equal to the Participant's Compensation for such Plan Year. The attribution rules of Code Section 414(g) shall be applied to determine the Contribution Percentage of any Participant who is a Highly Compensated Employee. (b) If at the end of any Plan Year, the Matching Contributions made to the Plan pursuant to Section 4.1(a)(3) for the Highly Compensated Employees, as a group, exceed the limita- tions imposed by Section 4.2(a), then pursuant to the procedure set forth below, the Contribution Percentages of certain Highly Compensated Employees shall be reduced to the extent necessary in order for the Plan to comply with one of the 2 tests set forth in Section 4.2(a). The Contribution Percentage of that Highly Compensated Employee who has the highest Contribution Percentage of all of the Highly Compensated Employees shall be reduced to a percentage which is equal to the Contribution Percentage of that Highly Compensated Employee having the second highest such Contribution Percentage. The procedure shall be continued until the Matching Contributions made to the Plan for the Highly Compensated Employees pursuant to Section 4.1(a)(3) no longer exceed the limitations of Section 4.2(a). The reduction of the Contribution Percentage of a Participant who is a Highly Compen- sated Employee and whose Contribution Percentage is determined under the family aggregation rules of Code Section 414(q)(6) shall be accomplished in accordance with the regulations promulgated under Code Section 401(m). (c) No later than the close of the Plan Year following the Plan Year for which an Average Contribution Percentage is calculated, the Employer shall distribute to each Highly Compen- sated Employee who has had his Contribution Percentage reduced pursuant to Section 4.2(b) an amount equal to the amount of such reduction plus the income or loss allocable thereto. Income or loss shall be allocated in accordance with Treasury Regulation Sec- tion 1.401(m)-1(e)(3)(ii), excluding, for Plan Years beginning after December 31, 1992, income or loss for the period between the end of such Plan Year and the date of distribution. If there is a loss allocable to the amount distributable pursuant to the first sentence of this Section 4.2(c), the distribution shall in no event be less than the lesser of the Participant's Matching Contribution Account or the amount contributed by the Employer on behalf of the Participant pursuant to Section 4.1(a)(3) for the Plan Year. (d) If in any Plan Year the Plan is subject to the Multiple Use of the Alternative Limitation (as that term is defined below) then, notwithstanding any other provision of either this Section 4.2 or Section 5.2, the test set forth in Section 4.2(a)(2) shall not be used to determine whether limitations placed by the Section 4.2(a) have been exceeded with respect to Matching Contributions if the test in Section 5.2(a)(2) has been used to determine whether the limitations placed by Section 5.2(a) have been exceeded with respect to Elective Contributions for such Plan Year. The Administrator shall decide, in its sole and absolute discretion, whether to apply the test set forth in Section 4.2(a)(2) to satisfy the requirements of this Section 4.2, or to use the test set forth in Section 5.2(a)(2) to satisfy the requirements of Section 5.2 for such Plan Year. The Plan shall be subject to a "Multiple Use of the Alternative Limitation" in any Plan Year in which all of the following conditions are present: (1) At least one Highly Compensated Employee is eligible both to have Elective Contributions made to the Plan on his behalf pursuant to Section 5.1 and to have Matching Contributions allocated to his Matching Contri- butions Account for such Plan Year; (2) The sum of the Average Deferral Percentage [as defined in Section 5.2(b)] of the Participants who are Highly Compensated Employees as a group, plus the Average Contribution Percentage of the Participants who are Highly Compensated Employees, as a group, for such Plan Year exceeds the Aggregate Limit, as defined in Section 4.2(e); (3) The Average Deferral Percentage of the Par- ticipants who are Highly Compensated Employees, as a group, exceeds the product obtained by multiplying the Average Deferral Percentage of all Participants who are not Highly Compensated Employees, as a group, by 125%; and (4) The Average Contribution Percentage of the Participants who are Highly Compensated Employees, as a group, exceeds the product obtained by multiplying the Average Contribution Percentage of Participants who are not Highly Compensated Employees, as a group, by 125%. (e) The term "Aggregate Limit" shall mean an amount equal to the greater of: (1) The sum of (i) the product obtained by multi- plying 1.25 times the Relevant Average Deferral Per- centage (as that term is defined below) or the Relevant Average Contribution Percentage (as that term is defined below), and (ii) 2 percentage points plus the lesser of the relevant Average Deferral Percentage or the Relevant Average Contribution Percentage. In no event, however, shall this amount exceed twice the lesser of the Relevant Average Deferral Percentage or the Relevant Average Contribution Percentage; or (2) The sum of (i) 1.25 times the lesser of the Relevant Average Deferral Percentage or the Relevant Average Contribution Percentage, and (ii) 2 percentage points plus the greater of the Relevant Average Deferral Percentage or the Relevant Average Contribution Percent- age. In no event, however, shall this amount exceed twice the greater of the Relevant Average Deferral Percentage or the Relevant Average Contribution Percent- age. For purposes of this Section 4.2(e), the term "Relevant Average Deferral Percentage" shall mean the Average Deferral Percentage of the group of Participants who are not Highly Compensated Employees, and the term "Relevant Average Contribution Percentage" shall mean the Average Contribution Percentage of the group of Participants who are not Highly Compensated Employees. 4.3 Time for Payment (a) All contributions by the Employer, other than Elective Contributions made pursuant to Section 4.1(a)(2), shall be delivered to the Trustee not later than the date fixed by law for the filing of the Employer's Federal income tax return for the Plan Year which includes the Anniversary Date as of which such contribu- tion is to be allocated (including any extensions of time granted by the Internal Revenue Service for the filing of such return). (b) All Elective Contributions made pursuant to Section 4.1(a)(2) shall be collected by the Employer and remitted to the Trustee on a regular basis, but not less frequently than monthly, and until so remitted shall constitute a trust fund in the hands of the Employer. 4.4 Binding Determination by Administrator The determination of the Administrator as to the amount to be contributed by an Employer hereunder shall in all respects be final, binding and conclusive upon all persons or parties claiming any rights either under the Plan or the Trust. ARTICLE V ELECTIVE, SUPPLEMENTAL AND ROLLOVER CONTRIBUTIONS 5.1 Manner and Amount of Elective Contributions (a) Each Participant may elect to defer under the Plan Compensation which would otherwise be payable to him during the calendar year and to have his Employer make contributions to the Trust on his behalf by entering into an Elective Contribution Agreement at the time and in the manner described below at Section 5.4. The amount which a Participant may elect to have the Employer contribute to the Plan on his behalf (the "Elective Contribution") shall, however, be expressed as a percentage of his Compensation (in multiples of one percentage point each) and shall not exceed an amount equal to the lesser of: (1) 15% of his Compensation for such calendar year; or (2) $7,000, as adjusted to take into account any cost-of-living increase provided for under Code Section 402(g) as may then be in effect; provided, however, that such contribution shall also be subject to the limitations set forth at Section 5.2 hereof. In the event that any Participant has a fiscal year other than a calendar year, this Section 5.1(a) shall be applied by substituting the phase "taxable year" for "calendar year." (b) In addition, the Employer shall have the right to contribute an amount for a Plan Year to be allocated among all Participants who are not Highly Compensated Employees in proportion to their Compensation for such Plan Year, which will cause the requirements of Sections 4.2(a) or 5.2(b) to be satisfied ("Supple- mental Contribution"). (c) All elections pursuant to this Section 5.1 shall be irrevocable after such amounts have been contributed to the Trust. (d) Any amounts with respect to which the Participant has made an election pursuant to Section 5.1(a) shall be deducted from the wages or other Compensation payable to the Participant in any manner which is acceptable to the Administrator, including payroll deductions authorized by the Participant. 5.2 Limitation on Elective Contributions (a) Subject to the additional limitations set forth in Section 4.2(e), in any Plan Year the Average Deferral Percentage (as hereinafter defined) for Participants who are Highly Compen- sated Employees shall not exceed the greater of (1) the Average Deferral Percentage for Participants who are not Highly Compensated Employees multiplied by 1.25 or (2) the lesser of (i) 200% of the Average Deferral Percentage for Participants who are not Highly Compensated Employees or (ii) the Average Deferral Percentage for Participants who are not Highly Compensated Employees plus 2 percentage points. The "Average Deferral Percentage" of a group of Participants shall be a fraction (expressed as a percentage calculated to the nearest 1/100 of 1%), the numerator of which is an amount equal to the sum of the Deferral Percentages (as hereinafter defined) of all of the members of that group of Participants and the denominator of which is the number of Participants in such group. The term "Deferral Percentage" shall mean, with respect to a Participant, the fraction (expressed as a percentage and calculated to the nearest 1/100 of 1%) of the numerator of which is an amount equal to the Elective Contributions made on behalf of a Participant for the Plan Year pursuant to Sections 5.1(a) and (b) and the denominator of which is an amount equal to the Participant's Compensation for such Plan Year. (b) If at the end of any Plan Year the Elective Contributions made to the Plan pursuant to Section 5.1 on behalf of the Highly Compensated Employees, as a group, exceed the limita- tions imposed by Section 5.2(a), then, pursuant to the procedure set forth below, the Deferral Percentages of certain Highly Compensated Employees shall be reduced to the extent necessary in order for the Plan to comply with one of the 2 tests set forth in Section 5.2(a). The Deferral Percentage of that Highly Compensated Employee who has the highest Deferral Percentage of all the Highly Compensated Employees shall be reduced to a percentage which is equal to the Deferral Percentage of that Highly Compensated Employee having the second highest such Deferral Percentage. The procedure shall be continued until the Elective Contributions made to the Plan by the Highly Compensated Employees pursuant to Section 5.1 no longer exceed the limitations of Section 5.2(a). The reduction of the Deferral Percentage of a Participant who is a Highly Compensated Employee and whose Deferral Percentage is determined under the family aggregation rules of Code Section 414(q)(6) shall be accomplished in accordance with the regulations promulgated under Code Section 401(k). (c) No later than the close of the Plan Year following the Plan Year for which an Average Deferral Percentage is calcu- lated, the Employer shall distribute to each Highly Compensated Employee who has had his Deferral Percentage reduced pursuant to Section 5.2(c) an amount equal to the amount of such reduction plus the income or loss allocable thereto. Income or loss shall be allocated in accordance with Treasury Regulation Section 1.401(k)- 1(f)(4)(ii), excluding, for Plan Years beginning after December 31, 1992, income or loss for the period between the end of such Plan Year and the date of distribution. If there is a loss allocable to the amount distributable pursuant to the first sentence of this Section 5.2(c), the distribution shall in no event be less than the lesser of the Participant's Elective Contribution Account or the amount contributed by the Participant pursuant to Section 5.1(a) for such Plan Year. 5.3 Excess Elective Contributions (a) No later than the first April 15 following the close of a Participant's taxable year, he may notify the Administrator of the amount by which the limitation in Section 5.1(a)(2) was exceeded for such taxable year. A Participant shall be deemed to have notified the Plan of such amount to the extent his Elective Contributions under this Plan, and any comparable contributions by him under other plans of the Employer, exceed such limitation. In the event such limitation is exceeded with respect to a Partici- pant, the Administrator shall direct the Trustee to distribute the excess amount, and any income allocable to such amount, to such Participant not later than the first April 15 following the close of his taxable year. If there is a loss allocable to such excess amount, the distribution shall in no event be less than the lesser of the Participant's Elective Contribution Account or the amount contributed by the Participant pursuant to Section 5.1(a) for such taxable year. Income or loss shall be allocated to such excess amount in accordance with Regulation Section 1.402(g)-1(e)(5), excluding, for Plan Years beginning after December 31, 1992, income or loss for the period between the end of such taxable year and the date of distribution. (b) In the event that a Participant is also a par- ticipant in (1) another qualified cash-or-deferred arrangement [as defined in Code Section 401(k)], (2) a simplified employee pension [as defined in Code Section 408(k)] or (3) a salary reduction arrangement [within the meaning of Code Section 3121(a)(5)(D)] and the elective deferrals, as defined in Code Section 402(g)(3), made under such other arrangement(s) and this Plan cumulatively exceed the dollar limitation in Section 5.1(a)(2) for such Participant's taxable year, the Participant may, not later than March 1 following the close of his taxable year, notify the Administrator in writing of such excess and request that his contributions pursuant to Section 5.1(a) under this Plan be reduced by an amount specified by the Participant. Such amount may then be distributed in the same manner as provided in Section 5.3(a). 5.4 Elective Contribution Agreement (a) Except as provided in Section 5.4(b), any Elective Contribution Agreement entered into by a Participant pursuant to Section 5.1, and any amendment or revocation of such an agreement, shall be in writing and shall be signed by him. Any Elective Contribution Agreement, and any amendment or revocation of an Elective Contribution Agreement, shall be effective as of the first June 1, September 1, December 1, or March 1 following the receipt by the Administrator of such Elective Contribution Agreement or amendment thereto. (b) The Administrator may unilaterally amend or revoke any Elective Contribution Agreement at any time if it determines that such amendment or revocation is necessary to ensure that the Annual Additions to the Accounts of a Participant do not exceed the limitations set forth at Sections 5.1, 5.2 and 7.6 hereof. (e) Any Elective Contribution, revocation, or amendment shall be made in accordance with the uniform and nondiscriminatory rules established by the Administrator. 5.5 Voluntary Contributions Except as set forth in Sections 5.1 and 5.6, no Partic- ipant shall be required or permitted to make any contributions to the Plan. 5.6 Rollover Contributions Any Participant, with the Administrator's prior consent, may contribute cash or other property to the Trust if such contribution: (a) Constitutes a rollover amount [as described in Code Section 402(a)(5)] from another employee plan qualified under Section 401(a) of the Code or constitutes a rollover contribution described in Code Section 408(d)(3)(A)(ii); or (b) Is a direct transfer from the trustee of another employee trust exempt from tax under Code Section 501(a), provided that such trust forms part of an employee plan qualified under Code Section 401(a) and provided further that Code Section 401(a)(11) does not apply to such plan. Effective January 1, 1993, Clause (a) of the preceding sentence shall read as follows: "(a) Constitutes an eligible rollover distribution [as defined in Code Section 402(c)] from another employee plan qualified under Code Section 401(a) or constitutes a rollover contribution described in Code Section 408(d)(3)(A)(ii); or" The Administrator may require a Participant to demonstrate that such a contribution qualifies under this Section 5.6 prior to directing the Trustee to accept such contribution. ARTICLE VI ALLOCATION OF EMPLOYER CONTRIBUTIONS 6.1 Manner of Allocation (a) All contributions made by an Employer pursuant to Section 4.l(a)(1) for any Plan Year, including the Employer contribution pursuant to Section 4.l(a)(1) made in 1992 for the Plan Year ending May 29, 1993, shall be allocated among the Accounts of (1) Participants who are Employees of such Employer on the last work day of the immediately preceding Plan Year (including Participants who incurred a Termination of Employment on such day and who are credited with a Year of Service for such immediately preceding Plan Year), (2) Participants who retired on or after their Normal Retirement Date during such immediately preceding Plan Year and (3) Participants who terminated employment during such immediately preceding Plan Year due to death, Permanent Disability, or involuntary Termination of Employment (other than Termination of Employment for cause) and shall be allocated among the Employer Contribution Accounts of such Participants in the proportion that the Compensation paid or accrued to each such Participant during such immediately preceding Plan Year bears to the Compensation paid or accrued to all such Participants during such immediately preceding Plan Year. Effective with respect to contributions pursuant to Section 4.1(a)(1) made after December 31, 1992 as to Plan Years ending on or after May 29, 1993, the preceding sentence shall read as follows: "All contributions made by an Employer pursuant to Section 4.l(a)(1) for any Plan Year shall be allocated among the Accounts of (1) Participants who are Employees of such Employer on the last work day of such Plan Year (including Participants who incurred a Termination of Employment on such day and who are credited with a Year of Service for such Plan Year), (2) Participants who retired on or after their Normal Retirement Date during such Plan Year and (3) Participants who terminated employment during such Plan Year due to death, Permanent Disability, or involuntary Termination of Employment (other than Termination of Employment for cause) and shall be allocated among the Employer Contribution Accounts of such Participants in the proportion that the Compensation paid or accrued to each such Participant during such Plan Year bears to the Compensation paid or accrued to all such Participants during such Plan Year." (b) All contributions made by an Employer pursuant to Sections 4.1(a)(3) and (4) for any Plan Year shall be allocated among the Accounts of (1) Participants who are Employees of such Employer on the last work day of such Plan Year (including Participants who incurred a Termination of Employment on such date) and who are credited with a Year of Service for such Plan Year, (2) Participants who retired on or after their Normal Retirement Date during such Plan Year and (3) Participants who terminated employ- ment during such Plan Year due to death, Permanent Disability or involuntary Termination of Employment (other than a Termination of Employment for cause). The amounts contributed pursuant to Sections 4.1(a)(3) and (4) shall be allocated among the Matching Contribution Accounts and Supplemental Contribution Accounts, respectively, of the Participants entitled to such contributions in proportion to the amounts determined under such sections for each such Participant. (c) Elective Contributions made pursuant to Section 4.1(a)(2) shall be allocated to the respective Elective Contri- bution Accounts of the electing Participants. (d) Anything to the contrary notwithstanding, the allocation of the Employer's contributions shall be subject to the limitations set forth in Sections 7.6 and 7.7, and, in any Top- Heavy Year, the requirements of Section 6.2. (e) For purposes of Sections 6.1(a) and 7.4, there shall be included in the Compensation of a Participant who commenced participation in the Plan during a Plan Year the portion of his Compensation paid or accrued prior to the Entry Date on which he became a Participant. 6.2 Allocations in Top-Heavy Years (a) Anything to the contrary notwithstanding, for any Plan Year which is a Top-Heavy Year, the aggregate allocation of the Employer's contribution to the Company Contribution Accounts (as hereinafter defined) of each Non-Key Employee who is a Participant (including those who are employed by the Employer on the last work day of such Plan Year but who are not credited with a Year of Service for such Plan Year), plus the amount, if any, allocated to his Elective Contribution Account pursuant to Article V for such Plan Year, shall not be less than 3% of such Non-Key Employee's Compensation for such Plan Year. For purposes of this Section 6.2, the term "Company Contribution Accounts" shall be defined as being (1) the Supplemental Contribution Account, (2) the Matching Contribution Account, and (3) the Employer Contribution Account. (b) If, in any Top-Heavy Year, the Key Employee Percentage (as hereinafter defined) for each Key Employee who is a Participant is less than 3%, the highest Key Employee Percentage shall be substituted for 3% in Section 6.2(a) unless a defined benefit plan [as defined in Section 414(j) of the Code] which is described in Section 2.35(d) must be combined with the Plan in order to satisfy the requirements of Section 401(a) or Section 410 of the Code. For purposes of this Section 6.2, the "Key Employee Percentage" for each Key Employee shall be the aggregate amount of the Employer's contribution allocated to such Key Employee's Company Contribution Accounts, plus the amount, if any, allocated to his Elective Contribution Account pursuant to Article V, for such Plan Year (taking into account adjustments pursuant to this Section 6.2) as a percentage of such Key Employee's Compensation. (c) In the event that the allocation of the Employer's contribution to any Non-Key Employee under Section 6.1 in a Top- Heavy Year would otherwise violate the provisions of this Section 6.2, the aggregate amount allocated to the Company Contribution Accounts of the Key Employees shall be reallocated (in proportion to the amount otherwise allocated to each Key Employee) to the Company Contribution Accounts of the Non-Key Employees (in proportion to the difference between the amount otherwise allocated to each Non-Key Employee and the amount required to be allocated under this Section 6.2) until the requirements of this Section 6.2 are satisfied. (d) In the event that a Non-Key Employee is a partici- pant in any other defined contribution plan [as defined in Section 414(i) of the Code] maintained by the Employer or any Related Employer, the amount required to be allocated to such Non-Key Employee under this Section 6.2 shall be reduced by the aggregate amount allocated to the Non-Key Employee's accounts under all such other plans. (e) In the event that a Non-Key Employee is a partici- pant in any defined benefit plan [as defined in Section 414(j) of the Code] maintained by the Employer or any Related Employer which is a "top-heavy plan" (as defined in Section 416(g) of the Code}, then, if the accrued benefit of such plan satisfies the require- ments of Section 416(c)(1) of the Code [taking into account the modifications required by Section 416(h)(2)(A)(ii) of the Code if Section 6.2(e) applies], then Section 6.2(a) shall not apply to such Non-Key Employee. If such accrued benefit does not satisfy such requirements, then "5%" shall be substituted for "3%" in Section 6.2(a) with respect to such Non-Key Employee, and Section 6.2(b) shall not apply to such Non-Key Employee. (f) If Section 7.7(c) applies for any Plan Year, then "4%" shall be substituted for "3%" in Section 6.2(a), and "7.5%" shall be substituted for "5%" in Section 6.2(e). (g) For purposes of this Section 6.2, contributions by the Employer shall include forfeiture allocations. 6.3 Administrator to Notify Trustee As soon as practicable after the close of each Plan Year, the Administrator shall furnish the Trustee with a statement showing allocation of contributions among the Participants for such Plan Year. ARTICLE VII ACCOUNTS OF PARTICIPANTS 7.1 Separate Accounts The Administrator shall create and maintain adequate records to disclose the interest in the Trust of each Participant (or Beneficiary of a deceased Participant). For accounting purposes, a separate Account shall be maintained for each Partici- pant, reflecting his proportionate share of all contributions, forfeitures, net increases or decreases in the value of the Trust assets and distributions to the Participant (or his Beneficiary). Credits and charges shall be made to such Accounts in the manner described herein. The maintenance of such separate Accounts shall not require the segregation of any assets from any other assets held in the Trust. 7.2 Adjustments to Accounts (a) As of each Valuation Date, the Trustee shall: (1) First, charge to the proper Accounts all payments or distributions made from the Accounts since the immediately preceding Valuation Date. (2) Second, adjust the Account Balances upward or downward, on a proportional basis, according to the net gain or loss of the Trust assets from investments (as reflected by interest payments, dividends, realized and unrealized gains and losses on securities and other investment transactions) and from the payment of expens- es, so that the aggregate Account Balances equal the fair market value, as determined by the Trustee, of the Trust assets on such Valuation Date. The adjustments required by the preceding sentence shall be determined separately with respect to each of the Investment Funds established pursuant to Section 16.1(d). For purposes of this Section 7.2(a)(2), Account Balances shall not include any asset of an Account the gain or loss from which is, pursuant to Article XIV, allocated to a specific Partici- pant's Account. All gain or loss (whether realized or unrealized) attributable to an Account described in the preceding sentence shall be allocated directly to such Account, and the fair market value of the balance in all such Accounts, after such allocation (or, in the case of an asset allocated to a specific Participant's Account, the fair market value of such asset) shall be subtracted from the fair market value of the Trust's assets (and, if applicable, from the Account Balance to which such asset is allocated), prior to the adjustment set forth herein. (3) Third, if such Valuation Date is an Anniversary Date, allocate and credit the balances, if any, in the Excess Contribution Account and the Excess Forfeiture Account in accordance with Sections 7.6(d) and (e). (4) Fourth, if such Valuation Date is an Anniversa- ry Date, allocate and credit the Employer contributions in accordance with Section 7.3 and forfeitures, if any, in accordance with Section 7.4, in either case except to the extent modified by Sections 7.6, 7.7 and 6.2. (5) Fifth, allocate and credit any rollover contributions made by a Participant that are to be credited as of that date in accordance with Section 7.5. (b) Every adjustment made pursuant to Sections 7.2(a)(3) and (4) shall be considered as having been made on the Anniversary Date of the applicable Plan Year regardless of the dates of actual entries or receipt by the Trustee of the contributions made by the Employer for such Plan Year; provided, however, that Employer contributions pursuant to Section 4.1(a)(1) for the Plan Years ending in 1988 through 1992, inclusive, as well as the Employer contribution made in 1992 for the Plan Year ended May 29, 1993, shall be considered as having been made as of the first day of the applicable Plan Year regardless of the dates of actual entries or receipt by the Trustee of such contributions, and provided further that Elective Contributions pursuant to Section 5.1 which are attributable to Compensation for a particular Plan Year and which are received by the Trustee within 30 days following the Anniversa- ry Date for such Plan year shall be allocated as of such Anniversa- ry Date. (c) The Trustee's determination as to the value of the assets of the Trust and the charges or credits to the Accounts of the Participants shall be conclusive and binding on all persons. For purposes of allocating the net gain or loss of the Trust assets from investments and from the payment of expenses among the Elective Contribution Account Balances of Participants pursuant to Section 7.2(a)(2) as of any Valuation Date, the Trustee may make appropriate adjustments to such Elective Contribution Account Balances so that the amount of net gain or loss which is allocated reasonably reflects Elective Contributions credited to such Elective Contribution Accounts since the preceding Valuation Date. 7.3 Crediting of Employer Contributions (a) Each Participant's Employer Contribution Account shall be credited with that portion of the Employer's contribution for the current Plan Year to which such Participant is entitled, pursuant to Sections 6.1(a) and 6.2. (b) Each Participant's Elective Contribution Account shall be credited with all elective contributions made on his behalf during such Plan Year (or within 30 days after the Anni- versary Date of such Plan Year) pursuant to Section 6.1(c). (c) Each Participant's Matching Contribution Account shall be credited with all matching contributions made on his behalf during such Plan Year (or within 30 days after the Anni- versary Date of such Plan Year) pursuant to Section 6.1(b). (d) Each Participant's Supplemental Contribution Account shall be credited with all Supplemental Contributions made on his behalf during or for such Plan Year pursuant to Section 6.1(b). 7.4 Crediting of Forfeitures Forfeitures, if any, occurring during the Plan Year pursuant to Section 8.5 and allocated from the Forfeiture Suspense Account, together with any amounts allocated from the Excess Forfeiture Account pursuant to Section 7.6(e), shall be allocated for the benefit of (a) Participants who are Employees on the last work day of such Plan Year (including Participants who incurred a Termination of Employment on such day) and who are credited with a Year of Service during such Plan Year, (b) Participants who retired on or after their Normal Retirement Date during such Plan Year and (c) Participants who terminated employment during such Plan Year due to death, Permanent Disability or involuntary Termination of Employment (other than Termination of Employment for cause) and shall be allocated among the Employer Contribution Accounts of such Participants in the proportion that the Compensation paid or accrued to each such Participant during such Plan Year bears to the Compensation paid or accrued to all such Participants during such Plan Year. 7.5 Crediting of Rollover Contributions Each Participant's Rollover Contribution Account shall be credited with all contributions made by him, or on his behalf, pursuant to Section 5.6. 7.6 Limitation on Allocations (a) Notwithstanding any other provision of the Plan, the Annual Additions with respect to any Participant for any Limitation Year shall not exceed an amount equal to the lesser of (1) $30,000, or such higher amount as may be permitted at the relevant time under applicable law, or (2) 25% of the Compensation paid to the Participant by the Employer (or any Related Employer) during such year. An amount credited to a Participant's Account in order to correct an error made in a previous Limitation Year shall be treated for purposes of this Section 7.6(a) as having been credited to such Account in the Limitation Year to which the error relates. (b) If the allocation of the Employer's contribution to a Participant's Employer Contribution Account in a particular Limitation Year would cause the limitations of Section 7.6(a) to be exceeded with respect to such Participant, the excess contribution shall, subject to the limitations of Section 7.6(a), be reallocated among the Employer Contribution Accounts of all other Participants eligible to share in the Employer's contribution for the Plan Year ending in or coinciding with such Limitation Year, in proportion to their Compensation for such Plan Year. If, following such reallocation, there remains an excess portion of the Employer's contribution which cannot be allocated to the Employer Contribution Account of any eligible Participant without exceeding the limita- tions of Section 7.6(a), such excess portion shall be placed in a suspense account, designated the "Excess Contribution Account." (c) If, following the allocation of the Employer's contribution for a particular Plan Year [including all realloca- tions required pursuant to Section 7.6(b)], the allocation of forfeitures to a Participant's Employer Contribution Account would cause the limitations of Section 7.6(a) to be exceeded with respect to such Participant, the excess forfeiture shall, subject to the limitations of Section 7.6(a), be reallocated among the Employer Contribution Accounts of all other Participants eligible to share in forfeitures for such Plan Year, in accordance with Section 7.4. If, following such reallocation, there remains an excess portion of the forfeitures which cannot be allocated to the Employer Contribu- tion Account of any eligible Participant without exceeding the limitations of Section 7.6(a), such excess portion shall be placed in a suspense account, designated the "Excess Forfeiture Account." (d) As of the Anniversary Date for a Plan Year, the balance in the Excess Contribution Account shall first be applied to reduce the Employer's contribution under Sections 4.1(a)(3) and (4). The balance, if any, remaining in the Excess Contribution Account shall be included in the Employer's contribution for such Plan Year for purposes of Section 6.1. Section 7.6(b) shall apply to any amount which cannot be allocated pursuant to the preceding sentences. (e) As of the Anniversary Date for a Plan Year, the balance in the Excess Forfeiture Account shall first be applied to reduce the Employer's contribution under Sections 4.1(a)(3) and (4), after the application of Section 7.6(d). Any remaining balance in such Excess Forfeiture Account shall be allocated as a forfeiture under Section 7.4. Section 7.6(c) shall apply to any amount which cannot be allocated pursuant to the preceding sentences. (f) For purposes of Section 7.6(a)(2) and Section 7.7, "Compensation" shall have the meaning set forth in Section 2.11; provided, however, that notwithstanding any provision of Section 2.11, for purposes of Section 7.6(a)(2) Compensation shall not include: any contributions made by the Employer or any Related Employer to this Plan or any other plan qualified under Section 401(a) of the Code to the extent excludable from the Employee's income, or any distributions from this Plan or any such qualified plan; contributions made to any simplified employee pension plan described in Section 408(k) of the Code, to the extent deductible by the Employee; amounts included in the Employee's income under Section 83 of the Code [other than by reason of an election under Section 83(b)]; amounts realized from the sale, exchange or other disposition of stock acquired upon exercise of a qualified stock option; or other amounts which receive special tax benefits under the Code, such as contributions to a health or accident plan which are excludable from the Employee's income or contributions towards the purchase of an annuity contract described in Section 403(b) of the Code (whether or not excludable from the Employee's income). Notwithstanding the foregoing, Compensation shall include any amounts deferred under a nonqualified, unfunded plan of deferred compensation in the Plan Year received by the Employee. If so elected by the Administrator pursuant to Treasury Regulations 1.415-2(d)(5), items of compensation shall be included in Compensa- tion for purposes of this Section 7.6 and Section 7.7 in the Limitation Year in which they are accrued by the Employer or a Related Employer rather than the Limitation Year in which they are received by or made available to the Participant, provided that the making or revocation of such an election shall not have the effect of causing any such item to be included in Compensation for more than one Limitation Year. (g) The Administrator of this Plan shall co-ordinate the application of this Section 7.6 with the application of the corresponding provisions of the instrument establishing the Richardson Electronics, Ltd. Employees Stock Ownership Plan (the "ESOP") by the administrator of the ESOP in circumstances where the limitations under Section 7.6(a) and the corresponding provisions of the instrument establishing the ESOP would be exceeded, so as to determine under which of the 2 plans (or both plans, if such administrators so determine) the adjustments required by Sections 7.6(b) and (c) and the corresponding provisions of the instrument establishing the ESOP shall be made. 7.7 Combined Plan Limitation (a) Anything to the contrary notwithstanding, if during any Limitation Year a Participant also participates in a "defined benefit plan" [as defined in Section 414(j) of the Code] maintained by the Employer or any Related Employer, the otherwise permissible Annual Addition on behalf of any Participant under the Plan may be further reduced to the extent necessary, as determined by the Administrator in its sole discretion, to comply with the additional limitations set forth in Sections 7.7(b) and (c). (b) In the event that a Participant also participates in a defined benefit plan as described in Section 7.7(a), the sum of the Defined Benefit Plan Fraction and the Defined Contribution Plan Fraction (as hereafter defined) for any Limitation Year shall not exceed 1.0. For purposes of this Section 7.7, the "Defined Benefit Plan Fraction" for any Limitation Year is a fraction, the numerator of which is the Participant's projected annual benefit under the defined benefit plan (determined as of the close of its plan year) and the denominator of which is the lesser of: (1) the product of 1.25 multiplied by the maximum dollar limitation in effect under Section 415(b)(l)(A) of the Code for such Limitation Year, or (2) the product of 1.4 multiplied by the amount which may be taken into account under Section 415(b)(l)(B) of the Code for such Limitation Year. The "Defined Contribution Plan Fraction" for any Limitation Year is a fraction, the numerator of which is the sum of the annual additions to the Participant's Account (as determined under Section 7.6) as of the close of the Limitation Year and the denominator of which is the sum of the lesser of the following amounts determined for such Limitation Year and each prior Year of Service [assuming, for this purpose, that Section 415(c) of the Code had been in effect during such prior Years of Service]: (1) the product of 1.25 multiplied by the maximum dollar limitation in effect under Section 415(c)(l)(A) of the Code for such Year (determined without regard to Section 415(c) (6) of the Code), or (2) the product of 1.4 multiplied by the maximum amount which may be taken into account under Section 415(c)(1)(B) of the Code for such Limitation Year. (c) Notwithstanding the foregoing, "1.0" shall be substituted for "1.25" wherever it appears in Section 7.7(b) for any Plan Year in or coinciding with a Limitation Year which is a Top-Heavy Year, except as hereinafter provided. If as a result of such substitution the amount credited to any Employee's Account would exceed the limitations of this Section 7.7, then such substitution shall not be made and the allocations to Non-Key Employees shall be revised in accordance with Section 6.2(f), unless such Plan Year would still be a Top-Heavy Year if "90%" were substituted for "60%" in all provisions of Section 2.35. (d) For purposes of this Section 7.7, all defined benefit plans of the Employer or any Related Employer, whether or not terminated, are to be treated as one defined benefit plan, and all defined contribution plans of the Employer or any Related Employer, whether or not terminated, are to be treated as one defined contribution plan. The extent to which the annual allocations made under this Plan shall be reduced as compared with the extent to which the annual benefit under a defined benefit plan shall be reduced in order to achieve compliance with the limita- tions of Sections 415 and 416 of the Code shall be determined by the Administrator in such a manner so as to maximize the aggregate benefits payable to such Participant. If such reduction is under this Plan the Administrator shall advise affected Participants of any additional limitation on their annual allocations required by this Section 7.7(d). (e) The provisions of this Section 7.7 are intended to comply with the provisions of Section 415 of the Code, as modified by Section 416 of the Code, so that the maximum benefits provided by the Employer or any Related Employer shall be exactly equal to the maximum amounts allowed under the Code. If there is any inconsistency between this Section 7.7 and the provisions of Section 415 of the Code, as modified by Section 416 of the Code, such inconsistency shall be resolved in such a way so as to give full effect to the provisions of the Code. 7.8 Correction of Error In the event of an error in the adjustment of a Parti- cipant's Account, the Administrator, in its sole discretion, may correct such error either by crediting or charging the adjustment required to make such correction to or against the income and expenses of the Trust for the Plan Year in which the correction is made or the Employer may make an additional contribution to permit the correction of the error. Except as provided in this Section 7.8, the Accounts of other Participants shall not be readjusted on account of such error. ARTICLE VIII VESTING OF INTEREST IN TRUST 8.1 Normal Retirement The Vested Account Balance of a Participant who retires on or after his Normal Retirement Date shall be 100% of his Account Balance. 8.2 Disability Retirement The Vested Account Balance of a Participant who retires prior to his Normal Retirement Date because of a Permanent Disability shall be 100% of his Account Balance. 8.3 Death The Vested Account Balance of a Participant who dies prior to incurring a Termination of Employment shall be 100% of his Account Balance. 8.4 Other Termination of Employment Upon a Participant's Termination of Employment prior to his Normal Retirement Date for any reason other than death or Permanent Disability, such Participant's Vested Account Balance shall be the sum of (a) 100% of (1) his Participant Contribution Account Balance, (2) his Elective Contribution Account Balance, (3) his Supplemental Contribution Account Balance and (4) his Pre-Break Account Balance; plus (b) A percentage of his Employer Contribution Account Balance and his Matching Contribution Account Balance based upon the number of completed Years of Service according to the following schedule: Completed Years of Service Vested Percentage Less than 2 years 0% 2 years but less than 3 years 20% 3 years but less than 4 years 40% 4 years but less than 5 years 60% 5 years but less than 6 years 80% 6 years or more 100% 8.5 Treatment of Forfeited Amounts; Reinstatement (a) The excess of a Participant's Account Balance over his Vested Account Balance shall be transferred from such Parti- cipant's Employer Contribution Account to his Forfeiture Suspense Account as of the date on which such Participant incurs a Break in Service, and shall be forfeited on the date on which such Partici- pant incurs a Break in Service consisting of 5 Computation Periods. (b) If a Participant returns to the employment of the Employer or any Related Employer before incurring a Break in Service consisting of at least 5 Computation Periods, any amount transferred to the Forfeiture Suspense Account from such Partici- pant's Employer Contribution Account pursuant to Section 8.5(a) shall be restored to the Participant's Employer Contribution Account. 8.6 Computation of Years of Service All Years of Service with the Employer or any Related Employer (including the Computation Period in which a Termination of Employment occurs, if the Participant completes 1,000 Hours of Service in such Computation Period) shall be taken into account in computing Years of Service for purposes of this Article VIII, except that: (a) If an Employee incurs a Break in Service, Years of Service before such Break in Service shall be disre- garded until he has completed one Year of Service after his re-employment by the Employer or any Related Employ- er. (b) If a Participant who does not have a nonfor- feitable right to any portion of his Account Balance (other than such balance as is attributable to his Rollover Account and his Participant Contribution Account) incurs a Break in Service consisting of at least 5 Computation Periods, Years of Service before such Break in Service shall be disregarded if the number of Computa- tion Periods in such Break in Service equals or exceeds the aggregate number of Years of Service completed prior to such Break in Service. (c) In any Computation Period during which a Participant completes less than 1,000 Hours of Service but does not incur a Break in Service, he shall not receive credit for a Year of Service, but shall continue to be a Participant, shall be credited with earnings of the Trust and shall remain in his present position on the vesting schedule in Section 8.4 without advancement. 8.7 Vesting on Termination of Trust or Termination of Employer's Agreement to Contribute The Vested Account Balance of each Participant shall be 100% of such Participant's Account Balance in the event that (a) the Plan is terminated or partially terminated, (b) the Employer shall permanently discontinue contributions to the Trust or (c) the Employer's agreement to make contributions to the Trust shall be permanently or partially terminated, whether by withdrawal from the Plan, by amendment to the Plan or by bankruptcy, liquidation or discontinuance of the business of such Employer, or by merger, consolidation or reorganization of such Employer without the adoption of this Plan within 180 days thereafter by such merged, consolidated or reorganized corporation, or by operation of law or otherwise. If the Plan is partially terminated, the provisions of this Section 8.7 shall apply only to Participants affected by the partial termination. 8.8 Vesting Following Plan Amendment In the event that any amendment is adopted to the Plan which affects, directly or indirectly: (a) The Vested Account Balance of each Participant shall not, as a result of such amendment, be less than it would have been had the Participant incurred a Termina- tion of Employment on the day immediately preceding the day such amendment was adopted; and (b) The Vested Account Balance of a Participant who, on the day the amendment is adopted, had completed at least 3 Years of Service shall thereafter be equal to the greater of the amount determined under the Plan as so amended or the amount determined under the Plan without regard to such amendment. 8.9 Vesting Following Partial Distributions (a) If a Participant receives a distribution of all or a portion of his Employer Contribution Account Balance at a time when it is possible for him to increase the vested percentage of his Employer Contribution Account (including a Participant who received a distribution upon incurring a Termination of Employment who returns to the employment of the Employer or any Related Employer before incurring a Break in Service consisting of at least 5 Computation Periods), then such Participant's Vested Account Balance at any time after he is re-employed shall be determined by (1) increasing the Participant's Employer Contribution Account Balance at such time by the amount of the Adjusted Distribution (as hereinafter defined), (2) then multiplying the Employer Contribu- tion Account Balance (as so increased) by the relevant vesting percentage under Section 8.4 and (3) then subtracting the amount of such distribution from the product obtained. For purposes of this Section 8.9(a), the "Adjusted Distribution" shall be an amount equal to the product obtained by multiplying the amount of the distribution by a fraction, the numerator of which is the Participants' Account Balance at the time the formula is applied and the denominator of which is the Account Balance immediately following the distribution (without regard to forfeitures). (b) If a Participant returns to the employment of the Employer or any Related Employer after incurring a Break in Service consisting of at least 5 Computation Periods, and such Participant did not receive payment of the full amount of his Vested Account Balance, his Vested Account Balance remaining unpaid shall be placed in a separate Pre-Break Account for the Participant. Such Pre-Break Account shall be treated in the same manner as the Employer Contribution Account of the Participant, except that it shall not be credited with the Employer's contributions and such Participant shall be 100% vested in such Pre-Break Account. 8.10 Participant Contribution Accounts and Rollover Accounts All Participant's Participant Contribution Account Balances and Rollover Account Balances shall be 100% vested at all times. ARTICLE IX DISTRIBUTIONS AND WITHDRAWALS 9.1 Benefit Commencement Date (a) Except as provided in Section 9.1(b), unless a Participant requests a later date, his Benefit Commencement Date shall not be later than the 60th day after the close of the Plan Year in which the latest of the following events occurs: (1) His Normal Retirement Date; (2) The 10th anniversary of the Entry Date on which he commenced participation in the Plan; or (3) His Termination of Employment; provided, however, that a Participant who has incurred a Termina- tion of Employment may request an earlier Benefit Commencement Date. (b) Except as provided in Section 9.8, a Participant's Benefit Commencement Date shall not be later than the April l of the calendar year following the calendar year determined below: (1) In the case of a Participant not described in any other clause of this Section 9.1(b), the calendar year in which he attains the age of 70-1/2. (2) In the case of a Participant who attained the age of 70-1/2 prior to January 1, 1988, and who was not described in Section 2.20(a)(3) during the Plan Year which included the last day of the calendar year in which he attained the age of 66-1/2 or any subsequent Plan Year, the later of (i) the calendar year in which he attains the age of 70-1/2 or (ii) the calendar year in which he retires. (3) In the case of a Participant who attained the age of 70-1/2 prior to January 1, 1988, and who was described in Section 2.20(a)(3) during the Plan Year which included the last day of the calendar year in which he attained the age of 66-1/2 or a subsequent Plan Year, the later of (i) the calendar year in which he attains the age of 70-1/2 or (ii) the earlier of the calendar year in which he retires or the calendar year which includes the last day of the Plan Year in which he was first described in Section 2.20(a)(3). (4) In the case of a Participant who attained the age of 70-1/2 during the calendar year 1988, who was not described in Section 2.20(a)(3) during the Plan Year which includes the last day of the calendar year in which he attained the age of 66-1/2 or any subsequent Plan Year, and who is still alive on January 1, 1989, the calendar year 1989. The provisions of this Section 9.1(b) shall apply to all Partici- pants whose Account Balances were not completely distributed prior to January 1, 1985, subject, however, to the transitional rules set forth in Proposed Treasury Regulations Section 1.401(a)(9)-1, Part I, which are hereby incorporated herein. (c) The Benefit Commencement Date of a Participant whose Vested Account Balance exceeds $3,500 shall not be earlier than his Normal Retirement Date unless the Participant consents in writing to an earlier date. A Participant who requests, in writing, the distribution of his Vested Account Balance prior to his Normal Retirement Date shall be considered to have consented to such distributions. If the value of a Participant's Vested Account Balance, determined at the time of a distribution to him, Exceeds $3,500, then such value at any subsequent time shall be deemed to exceed $3,500. (d) The date upon which the payment of a deceased Participant's Vested Account Balance to his Beneficiary commences shall be determined under Section 9.3. 9.2 Payment to Participants (a) Each Participant who does not elect to receive installment payments under Section 9.2(b) shall receive a single lump sum payment on his Benefit Commencement Date equal to his Vested Account Balance on such date. (b) Any Participant whose Vested Account Balance on his Benefit Commencement Date exceeds $3,500 may elect to receive his Vested Account Balance in a series of annual installments deter- mined in accordance with Section 9.6 commencing with his Benefit Commencement Date. The first such installment shall be paid for the calendar year which is not later than the calendar year specified in the applicable clause of Section 9.1(b). An election pursuant to this Section 9.2(b) may be made or revoked at any time prior to the Benefit Commencement Date in accordance with rules established by the Administrator. After installment payments have commenced, a Participant may revoke his election, in which event his full remaining Vested Account Balance shall be distributed to him in a single lump sum as soon as practicable, but in no event later than the date upon which the next installment payment would have been required to have been made. 9.3 Payment to Beneficiaries (a) If a Participant dies after his Benefit Commencement Date but before his Vested Account Balance has been distributed in full, all remaining payments which would have been made to the Participant shall be made instead at the same time and in the same amounts to his Beneficiaries; provided, however, that either the Participant prior to his death, or all Beneficiaries following his death, may elect to have the remaining Vested Account Balance distributed in a single lump sum payment, subject to the provisions of Section 9.3(c). (b) If a Participant dies prior to his Benefit Com- mencement Date (whether or not still employed by the Employer), his Vested Account Balance shall be paid to his Beneficiaries as follows: (1) If neither the Participant nor his Beneficia- ries elect installment payments under Section 9.3(b)(2), then the Participant's Vested Account Balance shall be distributed to his Beneficiaries in a single lump sum payment as soon as practicable, but in no event later than December 31 of the calendar year that includes the fifth anniversary of the Participant's death. (2) Either the Participant prior to his death or a Beneficiary after his death may elect to have such Beneficiary's share of the Participant's remaining Vested Account Balance distributed in a series of annual installments determined in accordance with Section 9.6 provided that such share exceeds $3,500. The first such installment shall be paid for the calendar year which is not later than the calendar year which includes the first anniversary of the Participant's death; provided that, if the Beneficiary is the Participant's surviving Spouse, it shall be not later than the calendar year in which the Participant would have attained the age of 70-1/2. If the Participant's surviving Spouse dies before install- ment payments commence, the provisions of this Section 9.3(b)(2) shall apply to the Spouse's share of the Vested Account Balance as if the Spouse had been the Partici- pant, except that, if the Spouse had remarried after the Participant's death, the foregoing proviso shall not apply to the Spouse's surviving spouse. An election pursuant to this Section 9.3(b)(2) may be made or revoked at any time prior to the December 31 of the calendar year for which the first installment is required to be paid pursuant to this Section 9.3(b)(2) or, if earlier, December 31 of the calendar year which includes the fifth anniversary of the Participant's death, and after such date shall be irrevocable. (c) Any election and any revocation of any election made under this Section 9.3 shall be in accordance with rules estab- lished by, and shall be subject to the approval of, the Administra- tor; provided that any election which has the effect of causing any portion of the Vested Account Balance to be paid to any Beneficiary other than the surviving Spouse of the Participant, shall be effective only if (1) such election identifies the designated Beneficiary, and is consented to, in writing, by the Spouse and the Spouse's signature is witnessed either by a representative designated by the Administrator or by a notary public, or (2) it is established, to the satisfaction of the Administrator, that the Participant had no surviving Spouse, or that the consent of the Spouse cannot be obtained because the Spouse cannot be located or because of such other circumstances as may be specified in regulations promulgated under Section 417(a)(2)(B) of the Code. The Spouse's consent, if given, shall be irrevocable, but shall not be binding upon any future Spouse. Such election may be revoked by the Participant at any time prior to his Benefit Commencement Date without the Spouse's consent, but any change in such election (including any change in the Beneficiary specified therein) shall require the Spouse's consent as set forth above. (d) Anything else in this Section 9.3 to the contrary notwithstanding, if a Participant's Beneficiary is his estate pursuant to Section 10.2, his Vested Account Balance shall be paid to his estate in a single lump sum. 9.4 Extent of Further Participation in Trust (a) Upon the distribution of the full amount of a Participant's Vested Account Balance in a lump sum pursuant to the provisions of Sections 9.2(a) or 9.3(b)(1), such Participant (and his Beneficiaries) shall cease to have any interest in the Trust and all obligations hereunder of the Trustee and the Employer or any Related Employer to them shall cease. (b) The Account of a Participant who dies or incurs a Termination of Employment shall continue to share in all alloca- tions of gains and losses of the Trust pursuant to Section 7.2 until it is completely distributed. 9.5 Payment to Persons Under Legal Disability In the event that any amount hereunder shall become payable to a minor or to a person under legal or other disability who, in the opinion of the Administrator, is unable to administer such distribution, such amount may be paid to any person(s) the Administrator deems best for the maintenance, care, support and education of such minor or disabled person, including, in the case of minors, to a custodian under a Uniform Transfers to Minors Act or a Uniform Gifts to Minors Act. Any such payment in accordance with the provisions of this Section 9.5 shall be a complete discharge of any liability for the making of such payment under the provisions of the Plan, and no fiduciary under the Plan shall be under any duty to see to the application of any such payment. 9.6 Payment in Installments (a) If a Participant or Beneficiary elects to have an Account distributed in annual installments pursuant to Section 9.2(b) or 9.3(b)(2), the installment for each calendar year shall be paid not later than December 31 of such calendar year. Not- withstanding the foregoing, if the first calendar year for which an installment payment is to be made pursuant to Section 9.2(b) is the calendar year specified under the applicable clause of Section 9.1(c), payment of such installment may be deferred until not later than the date set forth in Section 9.1(c), but such deferral shall not affect the date by which the installment for the next succeed- ing year must be paid. (b) The amount of the installment payment for any calendar year shall be equal to the Vested Account Balance as of the Anniversary Date which occurs in the immediately preceding calendar year, divided by the divisor determined under Section 9.6 (c). For purposes of determining the amount of the installment payment, the Vested Account Balance shall include all income, expenses, gains, losses, contributions and forfeitures allocated as of such Anniversary Date, and shall be reduced by distributions made after the Anniversary Date only (1) if the Anniversary Date is other than a December 31 and such distributions are made on or before December 31 of the calendar year in which the Anniversary Date occurs, or (2) to the extent that, as permitted by the second sentence of Section 9.6(a), a portion of the first installment payment required under Section 9.2(b) is paid after the end of the calendar year for which such installment is required. To the extent that any amount is distributed for any calendar year in excess of the installment payment required for such calendar year, such excess shall not reduce the amount of the installment payment required for any subsequent year. (c) The divisor used to determine the amount of each installment payment shall be determined as follows: (1) Unless the person making the election elects to redetermine life expectancies each year in accordance with Section 9.6(c)(2), the divisor for the first year for which an installment payment is to be made (hereinaf- ter the "initial divisor") shall be a number specified by the person making the election, and the divisor for each succeeding year shall be equal to the divisor for the immediately preceding year reduced by one. If the first year for which an installment payment will be made is the latest calendar year for which installment payments are allowed to commence pursuant to Section 9.2(b) or Section 9.2(c)(2), the initial divisor shall not be greater than, in the case of installments payable under Section 9.2(b), the life expectancy of the Participant (or, if applica- ble, the joint and last survivor life expectancy of the Participant and Beneficiary) or, in the case of install- ments payable under Section 9.3(b)(2), the life expectan- cy of the Beneficiary, determined as of the Participant's and/or Beneficiary's birthday which occurs in such calendar year. If installments commence in a calendar year earlier than the latest calendar year for which they are required to begin, the initial divisor shall not be greater than the maximum initial divisor as set forth in the preceding sentence, increased by one for each calendar year prior to the latest year for which install- ments are required to begin. If the person making the election fails to specify the initial divisor, or specifies an improper initial divisor, the initial divisor shall be the largest initial divisor that the person making the election could have specified. (2) If the person electing to receive installments is either the Participant or the Participant's Spouse, such person may also elect to redetermine the life expectancy of the Participant, the Participant's Spouse, or both, on an annual basis. Such election may be made or revoked, in writing, at any time prior to the time at which the first installment is required to be paid pursuant to Section 9.2(b) or Section 9.3(b)(2). Thereafter, such election or failure to elect shall be irrevocable. If such election is made, then the divisor for each year for installments payable pursuant to Section 9.2(b) shall be the remaining life expectancy of the Participant (or, if applicable, the remaining joint and last survivor life expectancy of the Participant and his Beneficiary) determined as of their respective birthdays attained in such year; provided, however, that if the Participant's Beneficiary is other than the Participant's Spouse, or if the Participant has not elected to redetermine his Spouse's life expectancy, then the divisor shall be determined in accordance with Proposed Treasury Regulations Section 1.401(a)(9)-1, Q&A E-8(b). The divisor for each year for installments payable to the Participant's surviving Spouse under Section 9.3(b)(2) shall be the remaining life expectancy of the surviving Spouse as of his birthday attained in such year. (3) For all purposes of this Section 9.6, life expectancies shall be determined in accordance with the expected return multiplies set forth in Tables V and VI of Treasury Regulations Section 1.72-9 as in effect at the time the life expectancy is being determined. (4) Anything else contained herein to the contrary notwithstanding, the divisor for any year shall not be less than the divisor required by the minimum distribu- tion incidental benefit requirement as set forth in Proposed Treasury Regulations Section 1.401(a)(9)-2, Q&A 4. (d) Installments may be paid at regular intervals of less than a year, provided that the total amount paid in any year shall not be less than the annual installment required for such year pursuant to this Section 9.6. 9.7 Withdrawals of 1986 Plan Voluntary Contributions (a) Upon written application to the Administrator, a Participant's voluntary contributions which were made pursuant to Section 5.1 of the 1986 Plan may be withdrawn by him from his Participant Contribution Account. The Trustee may require up to 30 days prior written notice for the purpose of honoring such withdrawals. A Participant shall be entitled to only one withdraw- al during each Plan Year. Anything to the contrary notwithstand- ing, in the event that a Participant has obtained a loan from the Plan, as permitted pursuant to Section 14.3, which took into consideration, for purposes of determining the amount of such loan, his Participant Contribution Account Balance, such Participant shall not be permitted to withdraw any voluntary contributions previously made by him until such loan is repaid in full. (b) Earnings or gains, whether realized or unrealized, on contributions made by a Participant pursuant to Article V of the 1986 Plan, and contributions made by or on behalf of a Participant pursuant to Section 5.6 above (including all earnings or gains, whether realized or unrealized thereon) may not be withdrawn until a Participant's death or Termination of Employment. 9.8 Election of Pre-TEFRA Distribution Anything in this Article IX to the contrary notwith- standing, if any Participant has delivered to the Administrator, on or before December 31, 1983, an election as to the form in which his Vested Account Balance is to be distributed, which election is qualified under Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act of 1982, and if such election has not been revoked, the distribution of the Participant's Vested Account Balance shall be made in accordance with the express terms of such election. In the event such an election is revoked after the date by which distributions from the Plan would otherwise be required by Section 401(a)(9) to commence, the provisions of Treasury regula- tions Section 1.401(a)(9)-1, Q&A J-4 shall apply. 9.9 Hardship Withdrawals (a) In the event of hardship, a Participant may withdraw the Elective Contributions credited to his Elective Contribution Account (but not the earnings or gains thereon); provided, however, that a Participant shall be required to have withdrawn the entire portion of the amount, if any, permitted under Section 9.7 to him before he may make any withdrawal pursuant to this Section 9.9. A distribution is made on account of hardship only if the distribu- tion is made on account of an immediate and heavy financial need of the Participant and is necessary to satisfy such need. The amount of any distribution made pursuant to this Section 9.9 may not exceed the amount required to meet the immediate and heavy financial need created by the hardship and the amount distributed may not be reasonably available to the Participant from other sources. The form of any hardship withdrawal shall be determined pursuant to Section 9.2. (b) For purposes of this Section 9.9, an immediate and heavy financial need will be presumed to be present only if the distribution is for: (1) Expenses for medical care described in Code Section 213(d) incurred by the Participant, the Parti- cipant's Spouse, or any "dependent" (as that term if defined in Code Section 152) of the Participant or necessary for these persons to obtain medical care described in Code Section 213(d); (2) Costs directly related to the purchase (ex- cluding mortgage payments) of a principal residence for the Participant; (3) Payment of tuition and related educational fees for the next 12 months of post-secondary education for the Participant, his Spouse, children, dependents (as defined in Code Section 152); or (4) Payments necessary to prevent the eviction of the Participant from his principal residence or fore- closure on the mortgage of the employee's principal residence. (c) For purposes of this Section 9.9, distribution will not be deemed to be necessary to satisfy the immediate and heavy financial needs of the Participant unless the Participant repre- sents in writing to the Administrator that such needs cannot be relieved: (1) Through reimbursement or compensation by insur- ance or otherwise; (2) By the reasonable liquidation of the Partici- pant's assets (including the assets of his spouse and minor children that are reasonably available to the Participant). (3) By cessation of Elective Contributions; or (4) By other distributions or nontaxable (at the time of the loan) loans from other qualified retirement plans maintained by the Employer, any Related Employer, by an other person who has employed the Participant, or by borrowing from commercial sources on commercially reasonable terms. (d) In the event that a Participant receives a hardship distribution from the Plan pursuant to this Section 9.9, the Participant's election pursuant to Sections 5.1 and 5.4 shall automatically and immediately terminate and the Participant shall not be eligible to make a new election thereunder for 12 months after receipt of the hardship distribution. In the event that a Participant receives a distribution from his Elective Contribution Account under the Plan pursuant to this Section 9.9 (or under any other plan maintained by the Employer or any Related Employer) the Participant's Elective Contributions for his next taxable year shall be limited to an amount equal to the excess, if any, of the applicable limit under Code Section 402(g) minus the amount of the Elective Contribution which the Participation made in the Plan Year in which the hardship distribution occurred. 9.10 Compliance with Regulations The provisions of this Article IX are intended to comply with the minimum distribution requirements of Section 401(a)(9) of the Code and of Proposed Treasury Regulations Section 1.401(a)(9)-1 promulgated thereunder, including the incidental death benefit requirement as set forth in Proposed Treasury Regulations Section 1.401(a)(9)-2. Anything else contained in this Agreement to the contrary notwithstanding, all distributions shall be made in accordance with Section 401(a)(9) and said Regulations, which shall override any provisions of this Agreement which are inconsistent therewith. Upon the promulgation of final Treasury Regulations replacing Proposed Treasury Regulations Section 1.401(a)(9)-1 and - - -2, the provisions of this Article IX shall be construed by reference to such final Treasury Regulations and shall be imple- mented accordingly. 9.11 Direct Rollovers (a) This Section 9.11 applies to distributions made on or after January 1, 1993. (b) Notwithstanding any other provision of the Plan to the contrary which would otherwise limit the election of a Distributee (as hereinafter defined) under this Section 9.11, a Distributee may elect, at the time and in the manner permitted by the Administrator, to have any portion of an Eligible Rollover Distribution (as hereinafter defined) paid directly to an Eligible Retirement Plan (as hereinafter defined) specified by the Distribu- tee in a Direct Rollover (as hereinafter defined). (c) For purposes of this Section 9.11, the following terms shall have the meanings indicated: (1) "Direct Rollover": A payment by the Plan to the Eligible Retirement Plan specified by a Distributee. (2) "Distributee": A Participant who is an Employee or former Employee. In addition, (i) such a Partici- pant's spouse or former spouse who is the alternate payee under a "qualified domestic relations order," as defined in section 414(p) of the Code, and (ii) the surviving spouse of a deceased Participant who was an Employee or former Employee, are Distributees with regard to the interest of such spouse or former spouse in the Plan. (3) "Eligible Retirement Plan": An individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust de- scribed in Section 401(a) of the Code, which accepts a Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to a Distributee who is surviving spouse, an "Eligible Retirement Plan" means an individual retirement account or individual retirement annuity. (4) "Eligible Rollover Distribution": Any distri- bution of all or any portion of the balance to the credit of the Distributee under the Plan, except that an Eligible Rollover Distribution shall not include: (i) any distribution which is one of a series of substantial- ly equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectan- cies) of the Distributee and the Distributee's designated beneficiary, or for a specified period of 10 years or more; (ii) any distribution to the extent such distribu- tion is required under Section 401(a)(9) of the Code; and (iii) the portion of any distribution which is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to Employer securities). The enumeration in the preceding sentence of any form of payment shall not imply that any person has the right to receive benefits under the Plan in such form unless otherwise specifically provided under the Plan. 9.12 Withdrawals Due to Permanent Disability In the event a Participant becomes Permanently Disabled, but has not yet incurred a Termination of Employment, he or his legal representative may withdraw all or a portion of his Vested Account Balance. The form of any such withdrawal shall be determined pursuant to Section 9.2. ARTICLE X DESIGNATION OF BENEFICIARIES 10.1 Participants to Name Beneficiaries Each Participant may file with the Administrator, in such form as the Administrator shall from time to time require, a written designation of a Beneficiary or Beneficiaries (including contingent or successive Beneficiaries) who shall be entitled to receive any benefits which may become payable upon the Partici- pant's death. If more than one Beneficiary is designated, such designation shall also specify the manner in which payments are to be divided. In the absence of such designation, all payments shall be divided per capita, or, if the Beneficiaries are the Partici- pant's descendants, per stirpes. The Beneficiaries may be changed at any time or times by the filing of a new designation with the Administrator, without the necessity of obtaining the written consent of any Beneficiary, subject to the rights of the Partici- pant's Spouse under Section 9.3(c). No designation of a Beneficia- ry or change thereof shall be effective until it has been received by the Administrator. The Administrator shall be entitled to rely upon the last designation filed by the Participant prior to his death. The Trustee may require such proof of death or evidence of the right of a person to receive payment of a deceased Partici- pant's benefits as the Trustee may deem to be desirable. 10.2 No Beneficiary Designated; Death of Beneficiary If a Participant dies without having a Beneficiary designation in force, or if at the time of the Participant's death (or the date on which a subsequent installment payment is due) all designated Beneficiaries have died or are no longer in existence (in the case of Beneficiaries who are not individuals), payment shall be made to the deceased Participant's surviving Spouse; or if there is no surviving Spouse (or if the surviving Spouse dies before a subsequent installment payment is due), to the deceased Participant's descendants (including adopted descendants), per stirpes; or if there are no living descendants, to the deceased Participant's estate. 10.3 No Liability for Payment to Beneficiaries The Administrator shall determine the identity of Beneficiaries, and in so doing, may act upon such information as, on reasonable inquiry, it may deem reliable with respect to heirship, relationship, survivorship, or any other fact relative to the distributes; and the Trustee and Administrator shall be indemnified and saved harmless by the Employer with respect to all payments required to be made hereunder, if made in good faith and without actual notice or knowledge of the changed condition or status of any person receiving payments. The Administrator may rely on any list or notice furnished by the Employer or any Related Employer as to the facts, the occurrence of any events, or the existence of any situation, and shall not be bound to inquire as to the basis of any such decision, list, or notice, and shall be indemnified and saved harmless by the Employer for any action taken or suffered to be taken by him in reliance thereon. In the event any question or dispute shall arise as to the proper person or persons to whom any payment shall be made, the Trustee may withhold such payment until a determination of such question or dispute shall have been made, or until the Trustee shall have been adequately indemnified against loss to his satisfaction. In consideration of being permitted to designate his Beneficiaries, the Participant hereby waives, for himself and all persons claiming by or through him, any claim against the Committee, the Administra- tor, the Trustee and the Employer or any Related Employer as a result of any determination made in good faith as to the persons entitled to receive any distribution of the Participant's Vested Account Balance. 10.4 Qualified Domestic Relations Orders To the extent provided in any Qualified Domestic Relations Order, and subject to the provisions of Section 19.4(b) the person or persons named therein shall be considered the Participant's Beneficiary. ARTICLE XI FIDUCIARY CAPACITY AND RESPONSIBILITY 11.1 General Fiduciary Standard of Conduct Each fiduciary under this Agreement shall discharge his duties hereunder solely in the interest of the Participants and their Beneficiaries and for the exclusive purpose of providing benefits to the Participants and their Beneficiaries and defraying the reasonable expenses of administering the Plan and the Trust. Each fiduciary shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of a like character and with like aims, in accordance with the documents and instruments governing the Plan and the Trust, insofar as such documents and instruments are consistent with this standard. 11.2 Allocation of Responsibility Among Fiduciaries (a) The fiduciaries shall have only those specific powers, duties, responsibilities and obligations as are specifi- cally given to them under this Agreement. The Employer shall have the sole responsibility for making the contributions provided for under Article IV, and to amend or terminate, in whole or in part, the Plan and the Trust. The Committee shall have the sole responsibility for assisting the Administrator in the administra- tion of the Plan, which responsibility is specifically described in the Plan. The Trustee shall have the sole responsibility for the administration of the Trust and the management of the assets held under the Trust (unless otherwise managed by an investment manager), all as specifically provided in this Agreement. Each fiduciary warrants that any directions given, information furnished or action taken by him shall be in accordance with the provisions of the Plan or the Trust authorizing or providing for such direction, information or action. Each fiduciary may rely upon any such direction, information or action of another fiduciary as being proper under the Plan and the Trust, and is not required to inquire into the propriety of any such direction, information or action. No fiduciary guarantees the Trust in any manner against investment loss or depreciation in asset value. The Administrator, the members of the Committee, the Trustee and the investment manager, if any, shall each be a "named fiduciary" as defined in Section 402(a)(2) of ERISA. The Administrator may appoint such other named fiduciaries as it may determine are necessary or appropriate for the administration of the Plan. (b) A fiduciary shall not be liable for the acts or omissions of another fiduciary unless (1) the fiduciary knowingly participates in, or knowingly attempts to conceal the act or omission of, another fiduciary and knows the act or omission is a breach of a fiduciary responsibility by the other fiduciary; or (2) the fiduciary has knowledge of a breach by the other fiduciary and shall not make reasonable efforts to remedy the breach; or (3) the fiduciary's breach of his own fiduciary responsibility permits the other fiduciary to commit a breach. (c) At such time as there shall be more than one Trustee acting hereunder, the Trustees shall jointly manage and control the assets of the Trust unless they shall allocate specific responsibilities, obligations and duties among themselves. If the Trustees shall make such an allocation, then the specified Trustee shall be responsible for the duties allocated to him and the other Trustee shall not be liable for any breach of fiduciary responsibility for the duties allocated except as set forth in Section 11.2(b). 11.3 Administrator (a) Richardson, or such person as it shall designate pursuant to Section 11.3(b), shall serve as the Administrator of the Plan. The Administrator shall be the "plan administrator" as defined in Section 414(g) of the Code, and the "administrator" as defined in Section 3(16)(A) of ERISA. The Administrator shall have the duty to file such plan descriptions and annual reports as may be required by ERISA or similar legislation and shall be designated to accept service of legal process and any other notices for the Plan. The Administrator shall also furnish each Participant with a summary plan description and provide each Participant with a statement of his Account Balance and his Vested Account Balance as of each Anniversary Date. (b) Richardson shall have the authority to appoint another corporation or one or more persons to serve as the Administrator hereunder, in which event such corporation or person (or persons) shall exercise all of the powers, duties, responsibil- ities and obligations of the Administrator hereunder. 11.4 Powers and Duties of Administrator The Administrator shall have all necessary power to accomplish its duties under the Plan in its discretion, including without limitation the power to: (a) Construe and interpret the Plan, decide all questions of eligibility and determine the amount, manner and time of payment of any benefits hereunder (which determinations shall, in the absence of abuse of discre- tion, be binding upon all parties); (b) Prescribe procedures to be followed by Par- ticipants or Beneficiaries filing applications for benefits; (c) Assist any Participant regarding any rights, benefits or elections available under the Plan; (d) Adopt reasonable procedures for determining whether any order, judgment or decree constitutes a Qualified Domestic Relations Order, and notify the Participant and all alternate payees affected or their designated representatives as to the results of its determinations; (e) Determine whether to permit assets of the Trust to be used for loans to Participants and/or the purchase of insurance on the lives of Participants pursuant to Sections 14.3 and 14.4, and, if such use is to be permitted, adopt reasonable procedures to implement such determination and give all instructions to the Trustee relating thereto; (f) Direct the Trustee with respect to the amount and type of benefits to which any Participant or Bene- ficiary shall be entitled hereunder and with respect to other disbursements from the Trust; (g) Receive from the Employer and from Participants such information as shall be necessary for the proper administration of the Plan; (h) Maintain all the necessary records for the administration of the Plan; (i) Receive, review and keep on file (as it deems convenient and proper) reports of benefit payments made by the Trustee and reports of disbursements for expenses directed by it; (j) Make, or instruct the Trustee to make, equi- table adjustments for any mistakes or errors made in the administration of the Plan; and (k) Do all other acts which the Administrator deems necessary or proper to accomplish and implement its responsibilities under the Plan. 11.5 Claims Procedure (a) A Participant or Beneficiary, or an authorized representative acting on his behalf (hereinafter called the "Claimant"), may notify the Administrator of a claim for benefits under the Plan. Such notice shall be in writing and may be in any form provided by or acceptable to the Administrator and shall set forth the basis of such claim and shall authorize the Administrator to conduct such examinations as may be necessary to determine the validity of the claim and to take such steps as may be necessary to facilitate the payment of any benefits to which the claimant may be entitled under the terms of the Plan. A Claimant shall have no right to seek review of a denial of benefits, or to bring any action in any court to enforce a claim for benefits prior to his filing a claim for benefits and exhausting his rights to review under this Section 11.5. (b) When a claim for benefits has been filed properly, such claim for benefits shall be evaluated and the Claimant shall be notified of the approval or the denial within 90 days after the receipt of such claim unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 90-day period which shall specify the special circumstances requiring an extension and the date by which a final decision will be reached (which date shall not be later than 180 days after the date on which the claim was filed). A Claimant shall be given a written notice in which the Claimant shall be advised as to whether the claim is granted or denied, in whole or in part. If a claim is denied, in whole or in part, the Claimant shall be given written notice which shall contain (1) the specific reasons for the denial, (2) references to pertinent plan provisions upon which the denial is based, (3) a description of any additional material or informa- tion necessary to perfect the claim and an explanation of why such material or information is necessary and (4) the Claimant's rights to seek review of the denial. (c) If a claim is denied, in whole or in part, the Claimant shall have the right to request that the Administrator review the denial, provided that the Claimant files a written request for review with the Administrator within 60 days after the date on which the Claimant received written notification of the denial. A Claimant (or his duly authorized representative) may review pertinent documents and submit issues and comments in writing to the Administrator. Within 60 days after a request for review is received, the review shall be made and the Claimant shall be advised in writing of the decision on review, unless special circumstances require an extension of time for processing the review, in which case the Claimant shall be given a written notification within such initial 60-day period specifying the reasons for the extension and when such review shall be completed (provided that such review shall be completed within 120 days after the date on which the request for review was filed). The decision on review shall be forwarded to the Claimant in writing and shall include specific reasons for the decision and references to plan provisions upon which the decision is based. A decision on review shall be final and binding on all persons for all purposes. If a Claimant shall fail to file a request for review in accordance with the procedures described in this Section 11.5, such Claimant shall have no right to review and shall have no right to bring action in any court and the denial of the claim shall become final and binding on all persons for all purposes. 11.6 Indemnification by Employer The Employer shall indemnify the members of the Commit- tee, the Administrator and each Trustee for, and hold them harmless from and against, any and all liabilities, losses, costs or expenses (including reasonable attorneys fees) of whatsoever kind and nature which may be imposed on, incurred by or asserted against them at any time by reason of their service under the Plan or the Trust as long as they did not act dishonestly or engage in willful misconduct or gross negligence in their official capacities hereunder. 11.7 Service in Multiple Capacities Any person may serve in more than one fiduciary capacity hereunder, including but not limited to service both as a member of the Committee and as a Trustee. ARTICLE XII THE COMMITTEE 12.1 Appointment and Membership The Administrator may, but shall not be obligated to, appoint a Committee to assist it in its administration of the Plan. If a Committee is appointed, it shall consist of such number of members as the Administrator shall determine, who shall be appointed by and serve at the pleasure of the Administrator. The Administrator may delegate to the Committee any of its specific duties, rights and authorities under the Plan, or may delegate the Committee general authority to administer the Plan, in which event this Agreement shall be construed as though the term "Committee" were substituted for "Administrator" wherever the latter appears other than in this Article XII; provided that neither the Committee nor any member of the Committee shall be deemed to be the Administrator pursuant to Section 11.3(a) unless the Committee or such member is specifically so designated. 12.2 Compensation and Expenses The members of the Committee shall serve without compensation for their services hereunder. All expenses of the Committee, including expenses incurred in the hiring of consul- tants, advisors, investment managers, attorneys and accountants, shall be paid by the Employer to the extent that such expenses are not paid out of the Trust. 11.3 Committee Procedures and Actions (a) The Committee shall act by a majority of its members at the time in office and such action may be taken either by vote at a meeting or in writing without a meeting. (b) The Committee may adopt such by-laws, rules and regulations as it deems necessary, desirable or appropriate for the conduct of its affairs. All rules and decisions of the Committee shall be uniformly and consistently applied to all Participants and Beneficiaries in similar circumstances. When making a determina- tion or calculation, the Committee shall be entitled to rely upon information furnished 'by a Participant or Beneficiary, the Employer or any Related Employer, the Administrator or the Trustee, and shall have no duty or responsibility to verify such informa- tion. (c) The Committee may authorize any one or more of its members to execute any instrument or document on its behalf. (d) The Committee shall periodically (but no less frequently than annually) consult with the Trustee (or any investment manager) with regard to the investment policy of the Plan and the methods to be used to carry out the Plan's objectives. 12.4 Resignation or Removal of Committee Member (a) Any member of the Committee may resign from office at any time by notifying the Administrator, the other members of the Committee and the Trustee in writing, at least 10 days in advance, of such resignation; provided, however, that such notice may, at the option of the parties, be waived. (b) Any member of the Committee may be removed from office by the Administrator at any time, with or without cause. Such removal shall be effectuated by the tendering to such member, the other members of the Committee and the Trustee of a written notice of removal, to take effect on the date specified therein; provided, however, that such notice may, at the option of the parties, be waived. A member of the Committee who is a Participant shall automatically be removed from the Committee upon his retirement, Permanent Disability or Termination of Employment. (c) Upon such resignation or removal of a member of the Committee, or upon his death, the Administrator shall promptly appoint a successor member of the Committee, who may be any individual, whether or not a Participant, and shall give prompt written notice thereof to the other members of the Committee and the Trustee. In the event of the failure of the Administrator to appoint such successor by the effective date of such resignation or removal, or within 10 days after such death, the remaining members of the Committee may appoint such successor. (d) Each successor member of the Committee shall have all the powers, duties, responsibilities and obligations conferred by the Plan as if originally named to the Committee. No successor member of the Committee shall be personally liable for any act or failure to act of his predecessor or have any duty to review the actions of his predecessor. 12.5 Committee/Administrator Decisions Final The Committee and the Administrator have discretionary authority to determine matters within their jurisdiction and the decisions of the Committee and of the Administrator in matters within its jurisdiction shall be final, binding and conclusive upon the Employer and the Trustee and upon each Employee, Participant, former Participant, Beneficiary and every other person or party interested or concerned. ARTICLE XIII THE TRUSTEE 13.1 Creation and Acceptance of Trust The Trustee, by joining in the execution of this Agreement, agrees to act in accordance with the express provisions, terms and conditions hereof. 13.2 Appointment of Trustee The Trustee shall be appointed by and shall serve at the pleasure of the Administrator. 13.3 Trustee Capacity The Trustee may be a bank, trust company or any other corporation possessing trust powers under applicable federal or state law, or one or more individuals, or any combination thereof. 13.4 Compensation, Expenses and Taxes The Trustee shall receive such reasonable compensation as may be from time to time determined by agreement with the Adminis- trator, except that a Trustee who is an Employee shall serve without compensation for his services hereunder. The Trustee, in performing his duties under the Trust, may employ counsel, accountants and any other agents as he shall deem advisable. The Trustee may employ other fiduciaries or investment managers only after securing the written approval of, or written directions from, the Administrator. The compensation of the Trustee, if any, and all expenses incurred by the Trustee in the administration of the Trust, including but not limited to the compensation of counsel, accountants, investment managers, other agents or fiduciaries, shall be paid by the Employer to the extent that such expenses are not paid out of the Trust. All taxes that may be levied or assessed under existing or future laws upon, or in respect to, the Trust, its assets or the income therefrom shall be a charge upon the Trust, to the extent not paid directly by the Employer, and the Trustee may pay such sum or sums as may be required to satisfy any such tax obligation. 13.5 Trustee Procedures and Actions (a) If the Trustee is more than one individual, the Trustee shall act by majority rule and such action may be taken either by a vote at a meeting or in writing without a meeting. (b) The Trustee shall keep a record of all decisions and forward all necessary communications to the Administrator, the Committee and any investment manager. All data, records, documents and papers pertaining to the Trustee's management of the Trust shall be retained by him. (c) If the Trustee is more than one individual, any one or more of such individuals may be authorized to execute any instrument or document on behalf of the Trustee, in which event the Trustee shall notify the Administrator and the Committee and any investment manager of such action and the name or names of those so designated. The Administrator, the Committee and the investment manager shall thereafter accept and rely conclusively upon any instrument or document executed by such authorized Trustee as representing action by the Trustee until the Trustee shall file with the Administrator, the Committee and the investment manager a written revocation of such designation. (d) Any act performed by any authorized Trustee shall have the same force and effect as if the act had been performed by all of the Trustees. Any person, corporation or other entity may deal with any Trustee and may accept the signature of any Trustee in the same manner and with the same force and effect as if the individual were the sole Trustee. No person receiving such documents or written instructions and acting in good faith and in reliance thereon shall be obliged to ascertain the validity of such action under the terms of this Agreement. 13.6 Resignation or Removal of Trustee (a) Any Trustee may resign at any time by notifying the Administrator in writing, at least 10 days in advance, of such resignation; provided, however, that such notice may, at the option of the parties, be waived. (b) Any Trustee may be removed from office by the Administrator at any time, with or without cause. Such removal shall be effectuated by the tendering to the Trustee of a written notice of removal, to take effect on the date specified therein; provided, however, that such notice may, at the option of the parties, be waived. A Trustee who is a Participant shall be removed automatically as Trustee upon his retirement, Permanent Disability or Termination of Employment. (c) In the case of the resignation or removal of a Trustee, the resigned or removed Trustee shall have the right to a settlement of his account, which, at the option of said Trustee, may be made either: (1) By judicial settlement in an action instituted by said Trustee in a court of competent jurisdiction; or (2) By written agreement of settlement between said Trustee and the Administrator. (d) If a settlement of the Trustee's final account is made by judicial settlement, the necessary parties to any such accounting, litigation or other proceeding shall include only the Trustee, the Administrator and the Committee, and the settlement or judgment in any such case in which the Administrator and the Committee are duly served or cited shall be binding upon the Participants and their Beneficiaries, and upon all persons claiming by, through or under them. (e) After the settlement, if any, of the resigned or removed Trustee's account, said Trustee shall promptly transfer and deliver the assets of the Trust to the successor Trustee, after reserving such reasonable amount as he shall deem necessary to provide for his expenses in connection with the settlement of his account or otherwise and any sum chargeable against the Trust for which he may be liable. The balance, if any, of the reserve remaining after the payment of such sums shall be paid over to the successor Trustee. Within 30 days, the resigned or removed Trustee shall furnish to the Administrator and the successor Trustee an account of his administration of the Trust from the date of his last account. (f) Upon the resignation, removal, death or dissolution of a Trustee, the Administrator may (and, if as a result there would be no remaining Trustee, shall) appoint a successor Trustee. In the event of the failure of the Administrator to appoint such successor Trustee by the effective date of such resignation or removal, or within 10 days after such death, the remaining Trustee may appoint such successor. The successor Trustee must signify his acceptance as a fiduciary in writing and agree to act in accordance with the provisions of this Trust. (g) Each successor Trustee shall succeed to the title of the assets in the Trust which are vested in his predecessor without the signing or filing of any further instrument. Any resigning or removed Trustee shall execute all documents and do all acts necessary to vest such title of record in any successor Trustee. (h) Each successor Trustee shall have all the powers, duties, responsibilities and obligations conferred by the Trust as if originally named as Trustee. No successor Trustee shall be personally liable for any act or failure to act of a predecessor Trustee in the administration of the Trust or have any duty to review the actions or accounting of any predecessor Trustee. 13.7 Powers and Duties of Trustee (a) The powers and duties of the Trustee shall be in accordance with the provisions of the Trust and no other or further powers or duties shall be imposed or implied by the Administrator without the Trustee's consent thereto. (b) The Trustee shall be responsible for the safekeeping and administration of the assets of the Trust Fund in accordance with the provisions of the Trust. The Trustee shall have no duty to require that any contributions be made or to determine whether contributions delivered by the Employer to the Trustee comply with the provisions of the Plan. (c) If at any time there shall be a dispute as to the person to whom payment or delivery of monies or property should be made by the Trustee, or regarding any action to be taken by the Trustee, the Trustee may postpone such payment, delivery or action, retaining the funds or property involved, until such dispute shall have been resolved in a court of competent jurisdiction or the Trustee shall have been indemnified to his satisfaction or until he has received written direction from the Administrator. 13.8 Accounting (a) The Trustee shall keep accurate and detailed accounts of all investments, receipts, disbursements and other transactions hereunder. All accounts, books and records relating to such transactions shall be open to inspection and audit at all reasonable times by any person designated by the Administrator. Within 120 days following the close of each Plan Year, the Trustee shall file with the Administrator a written account setting forth all investments, receipts, disbursements and other transactions effected by him during such Plan Year and setting forth the current value of the Trust assets. Upon the expiration of 30 days from the date of filing of such annual or other account, the Trustee shall be forever released and discharged from all liability and account- ability to anyone with respect to the propriety of his acts and transactions shown in such account, except with respect to any such acts or transactions as to which the Administrator shall file with the Trustee written objections within such 30-day period. The approval of any accounting, act or procedure by the Administrator shall fully discharge the Trustee with respect thereto. (b) The Trustee shall use the accrual method of accounting as to Plan Years beginning prior to May 27, 1989 and as to Plan Years beginning after June 1, 1991. For the Plan Years beginning May 27, 1989, May 26, 1990 and June 1, 1991, the Trustee shall use the modified cash method of accounting. 13.9 Controversies In the event that any controversy shall arise between the Trustee and any other person, including without limitation the Committee, the Employer or any Related Employer, the Administrator or any Participant or Beneficiary, with respect to the interpreta- tion of the Plan or the duties of the Trustee or any other fiduciary, the Trustee may require that the issue be decided by a court of competent jurisdiction, and pending such determination the Trustee shall not be obligated to take any other action in connection with the matter involved in the controversy. 13.10 Legal Actions The Trustee shall have the power, but at no time the obligation, to institute any legal action or to become a party to any legal action until he shall have been indemnified to his satisfaction by the Employer for any fees, costs and expenses to be incurred in connection with the litigation. 13.11 Supplemental Trusts If the Employer shall adopt or establish one or more other trusts certified by the Employer as being qualified as an "exempt organization" as defined in Section 501 of the Code for the purpose of implementing the Plan ("Supplemental Trusts") and shall so notify the Trustee in writing, then the Trustee: (a) Shall transfer and pay over to the trustee of any such other trust such cash and other property as the Employer, with the written consent of the Administrator, shall from time to time direct in writing; (b) Shall receive and hold as a part of the Supplemental Trust assets such cash and other property as may from time to time be delivered to it by the trustee of any such other trust; and (c) May, in determining its proposed investments and sales for the purpose of achieving adequate diver- sification, take into consideration the nature and value of the assets held by such other trust or trusts to the extent reported to it by the trustee or trustees thereof or by the employer. For the purposes of this Section 13.11(c), an insurance contract issued for the purposes of funding benefits under the Plan shall be considered to be a trust established for the purpose of implementing the Plan. ARTICLE XIV INVESTMENT OF TRUST ASSETS 14.1 Pooled Investment Fund The assets of the Trust shall be invested and reinvested by the Trustee (or a duly appointed investment manager) as a pooled investment fund, except as may otherwise be provided hereunder. 14.2 Investment Powers The Trustee shall have full discretion, power and authority to invest and manage the assets of the Trust, except with respect to any assets under the control or direction of any duly appointed investment manager and except as provided in Article XVI. Subject to and in accordance with the provisions of ERISA, the Trustee shall have all the rights and powers conferred by law generally, including but not limited to the rights and powers, which he may or may not wish to exercise, to: (a) Invest all or any portion of the Trust in any combination of common or preferred stocks, interests or shares in common stock funds, mutual funds, money market funds, open-end or closed-end funds or trusts, voting trust certificates, beneficial interests in land trusts, real estate investment trusts or savings and loan or building and loan associations, United States retirement plan bonds, corporate bonds, debentures, convertible debentures, commercial paper, U.S. Treasury bills, notes or bonds, improved or unimproved real estate situated in the United States, insurance contracts, mortgages, notes, interests in limited or general partnerships or joint ventures or other property of any kind, real or personal, as a prudent man would do under like circumstances with due regard for the purposes of the Plan, provided that any investment made or retained by the Trustee in good faith must be a kind constituting a diversification considered by law suitable for trust investments; (b) Retain in cash so much of the Trust as he may deem advisable to satisfy the liquidity needs of the Plan and deposit any cash held in the Trust in a bank account in the name of the Trust without liability for the highest rate of interest available, including, if a bank is acting as Trustee, specific authority to invest in the bank deposits of the Trustee; (c) Cause all or any portion of the Trust assets to be invested in a common or group trust fund established and maintained for the collective investment of fiduciary funds, including a common trust fund described in Section 584 of the Code or a group trust which is a qualified trust under Section 401(a) of the Code and exempt from income tax under Section 501(a) of the Code, in which event the Declaration of Trust creating such common or group trust fund, as it may be amended from time to time, shall be incorporated into this Agreement by reference and made a part hereof; (d) Manage, control, purchase, sell at public or private sale, contract to purchase or sell, grant options to purchase or sell, convey, exchange, petition, divide, subdivide, transfer, abandon, improve, repair, insure, lease for any term even though commencing in the future or extending beyond the term of the Trust, and otherwise deal with the Trust property, real or personal, on such terms and conditions as the Trustee shall decide, and to purchase and carry insurance in such amount against such hazards as the Trustee may deem advisable; (e) Compromise, contest, prosecute or abandon claims in favor of or against the Trust, and to insti- tute, compromise and defend actions and proceedings; (f) Employ agents, attorneys and proxies and to delegate to them such powers as the Trustee considers desirable; (g) Open and maintain one or more savings accounts or checking accounts and rent one or more safe deposit boxes or vaults with any bank, trust company, safe deposit box company, savings and loan association or building and loan association, public or private, wherever located, even if, in the case of a bank or trust company, such bank or trust company shall be acting as Trustee; (h) Credit and distribute the Trust as directed by the Administrator; provided, however, that the Trustee shall be accountable only to the Administrator for any payment or distribution made by him in good faith on the order or direction of the Administrator; (i) Hold any securities or other property in the name of the Trustee or his nominee, or retain the investment in unregistered form or in a form permitting transfer by delivery only, or in another form as he may deem best, with or without disclosing the Trust rela- tionship; provided, however, that the books and records of the Trustee shall at all times indicate the actual ownership thereof, and further provided, however, that except as authorized by regulations issued by the Secretary of Labor, the indicia of ownership of the assets of the Trust shall not be maintained outside the jurisdiction of the district courts of the United States; (j) Retain any funds or property subject to any dispute without liability for the payment of interest, and decline to make payment or delivery of the funds or property until final adjudication is made by a court of competent jurisdiction; (k) Vote any stock, bonds or other securities of any corporation or other issuer at any time held in the Trust; otherwise consent to or request any action on the part of any such corporation or other issuer; give general or special proxies or powers of attorney, without power of substitution; participate in any reorganization, recapitalization, consolidation, merger or similar transaction with respect to such securities in any voting trusts, or with any protective or like committee, or with the Trustee, or with the depositories designated thereby; exercise any subscription rights and conversion privileg- es; and generally do all such acts, execute all such instruments, take all such proceedings and exercise all such rights, powers and privileges with respect to the stock or other securities or property constituting the Trust as if the Trustee were the absolute owner thereof; (l) If instructed by the Administrator, loan money to a Participant pursuant to Section 14.3 and/or invest the assets of a Participant's Account in insurance policies on a Participant's life pursuant to Section 14.4; (m) Collect and receive any and all monies and other property due hereunder and to give full discharge and release therefor; settle, compromise or submit to arbitration any claims, debts or damages due to or owing to or from the Trust; commence or defend suits or legal proceedings wherever, in his judgment, any interest of the Trust requires it; and represent the Trust in law or equity or before any other body or tribunal; (n) Make, execute, acknowledge and deliver any and all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted; (o) Require, before making any payment, such releases, amenities or other documents from the payee or any releases or other documents from any lawful taxing authority or governmental body, department or agency as he may consider necessary for his protection without any liability for payment of interest on funds retained by him pending receipt by him of such releases, indemnities or other documents; (p) Abandon any property, real or personal, which the Trustee shall deem to be worthless or not of suffi- cient value to warrant keeping, protecting or maintain- ing; to abstain from the payment of installments due on purchase contracts or mortgages, taxes, rents, assess- ments, repairs and maintenance with respect to any such property; to permit any such property to be lost by foreclosure, tax sale or other proceedings; to convey any such property for a nominal consideration or without consideration; to permit the expiration of any renewal, sale, exchange or purchase option with respect to any property or lease thereof; (q) Buy, to sell, to spread, to exercise, to allow to lapse or to deliver upon assignment, any option, including, but not limited to options on stocks, bonds, notes, mortgages, commodities or any other obligation written or purchased on any exchange or recognized stock option market and to borrow stock in order to deliver upon assignment; (r) Do all acts, whether or not expressly autho- rized, which the Trustee in the exercise of his fiduciary responsibility may deem necessary or desirable for the protection of the Trust and the assets thereof; and (s) Assume, until advised to the contrary, that the Plan and the Trust is qualified under Section 401(a) of the Code and is entitled to a tax exemption under Section 501(a) of the Code. 14.3 Loans to Participants (a) If the Administrator determines, in its sole discretion, to permit loans to Participants, it shall specify a form of written loan application. After receiving and reviewing a Participant's application for a loan and such other material as may reasonably be required, the Administrator may, in its sole discretion, direct the Trustee to make a loan to a Participant. Any borrowing by a Participant shall not affect his participation in the Plan. Loans shall be made available to all Participants on a reasonably equivalent basis, and shall not be made available to Highly Compensated Employees in an amount greater than that which is made available to other Participants. (b) Each Participant may borrow not more than the lesser of (1) $50,000 reduced by the excess, if any, of (i) the highest outstanding balance of loans made to the Participant from the Plan during the one-year period ending on the day before the date on which such loan was made, over (ii) the outstanding balance of loans made to the Participant from the Plan on the date on which such loan was made, or (2) 50% of his Vested Account Balance. In determining if these limitations have been exceeded, all loans previously made to a Participant from the Plan (or from any other employee plan qualified under Section 401(a) of the Code maintained by the Employer or any Related Employer) shall be taken into consideration, to the extent of the highest outstanding balances of such loans during the one-year period ending on the date on which the loan from this Plan is made. (c) Anything to the contrary notwithstanding, all loans from the Plan shall be deemed to be a directed investment of the Participant's Account. For purposes of determining the annual value of the assets of the Trust, the amount of any loan to a Participant shall be valued separately from the other assets of the Trust as provided in Section 7.2(a)(2), although any loan shall be considered at all times to be part of a Participant's Account for all other purposes of the Plan. (d) All loans from the Plan shall be at a reasonable rate of interest as determined from time to time by the Adminis- trator. All interest paid by a Participant on a loan shall be credited directly to his Account. (e) All loans shall be evidenced by a written promissory note executed by the Participant which shall contain the terms of repayment. As security for a loan, the Participant shall execute an irrevocable pledge and assignment to the Trustee of 50% of his entire right, title and interest in and to his Account. (f) All loans shall be repaid by the Participant in such manner and upon such terms as shall be elected by the Participant and approved by the Administrator in accordance with guidelines established from time to time by the Administrator; provided, however, that any repayment terms shall be subject to the following guidelines: (1) Any loan [other than a loan described in Section 14.3(f)(2)] shall be required, by its terms, to be repaid by the Participant within 5 years. (2) Any loan which is used by the Participant to acquire any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as the principal residence of the Participant shall be required, by its terms, to be repaid by the Participant within a period of time as determined by the Administra- tor, which period may exceed 5 years. (3) Any loan shall be required, by its terms, to be amortized in level payments, made not less frequently than quarterly, over the term of the loan. Such amorti- zation may be made by level payments of combined interest and principal, or by equal payments of principal with interest actually earned. (g) The Administrator shall have the authority to adopt such rules and procedures as may be necessary in its sole discre- tion to implement the provisions contained in this Section 14.3, provided that such rules and procedures are not inconsistent with the provisions of ERISA. The Administrator may, it its sole discretion and in a non-discriminatory manner, suspend or terminate the making of loans at any time. 14.4 Insurance Policies The Administrator may in its sole discretion authorize the Trustee to invest any portion or all of the Trust in the purchase of group or individual whole life insurance, retirement income or endowment policies issued on the respective lives of and for the benefit of each Participant, or in any combination of such policies, subject to the following conditions: (a) Premiums attributable to any such policy shall be charged against the Account of the Participant on whose life such contract is purchased and shall consti- tute an investment of such Account for purposes of Section 7.2(a)(2), and dividends paid on any such contract shall be credited to the Account of the Par- ticipant on whose life the contract is purchased. (b) Each Participant must consent to the issuance of the policy on his life. (c) The aggregate premiums paid for life insurance with respect to any Participant shall not at any time 49% with respect to premiums paid for whole life insurance, or 25% with respect to premiums paid for term life insurance of the aggregate contributions by the Employer which have been allocated to his Employer Contribution Account. (d) The Administrator shall have the authority to adopt such rules and procedures as may be necessary in its sole discretion to implement the provisions contained in this Section 14.4, provided that such rules and procedures are not inconsistent with the provisions of ERISA. 14.5 Investment in Qualifying Employer Securities Anything to the contrary notwithstanding, the Trustee shall have full power and authority to utilize all or any portion of the assets of the Trust Fund for the acquisition and holding of "qualifying employer securities." For purposes of this Section 14.5, qualifying employer securities shall mean both the common stock, par value $.05 per share of Richardson and the Class B common stock, par value $.05 per share of Richardson. ARTICLE XV INVESTMENT MANAGER 15.1 Appointment of Investment Manager (a) Anything to the contrary notwithstanding, the Administrator may, by written notice, direct the segregation of all or any portion of the Trust into a separate investment account and, in such event, may appoint an investment manager to direct the investment and re-investment of any such segregated investment account pursuant to this Article XV. This appointment shall be evidenced and accepted in writing, an executed copy of which must be retained by the Administrator. (b) No person shall be appointed as an investment manager unless such person is a bank, savings and loan, insurance company or investment adviser currently registered and in good standing under the Investment Advisers Act of 1940. 15.2 Acceptance of Appointment Upon an investment manager s appointment, he shall acknowledge, in a written investment agreement with the Adminis- trator, that he (a) has accepted such appointment and has received a copy of the Agreement, (b) has undertaken a fiduciary responsi- bility and (c) will act as an investment manager. 15.3 Notice to Trustee Upon the investment manager's appointment, the Adminis- trator shall deliver to the Trustee a copy of the instrument appointing the investment manager and evidencing his acceptance of such appointment, an acknowledgement by the investment manager that it is a fiduciary, and a certificate, if applicable, evidencing the investment manager's qualification under Section 15.1(b), as amended. The Trustee shall be fully protected in relying upon such instruments and certificate until otherwise notified in writing by the Administrator. 15.4 Investment Authority The Trustee shall follow the directions of the investment manager regarding the investment and re-investment of the Trust, or such portion thereof as shall be under management by the investment manager, and shall exercise the investment powers set forth in Section 14.2 and vote any securities held as directed by the investment manager. The Trustee shall be under no duty or obligation to review any investment to be acquired, held or disposed of pursuant to such directions nor to make any recommen- dations with respect to the disposition or continued retention of any such investment or the exercise or non-exercise of the investment powers set forth in Section 14.2. The Trustee shall have no liability or responsibility for acting or not acting pursuant to the direction of, or failing to act in the absence of any direction from, the investment manager, unless the Trustee knows that by such action or failure to act he would be himself committing or participating in a breach of fiduciary duty by the investment manager. The Employer shall indemnify the Trustee and hold him harmless from and against any such claim or liability which may be asserted against the Trustee by reason of his acting or not acting pursuant to any direction from the investment manager or failing to act in the absence of any such direction. 15.5 Resignation or Removal of Investment Manager In the event that an investment manager should resign or be removed by the Administrator, the Trustee shall manage the investment of the Trust pursuant to Article XIV unless and until he shall be notified of the appointment of another investment manager with respect thereto, as provided in Section 15.1. 15.6 Accounts The accounts, books and records of the Trustee shall reflect the segregation, pursuant to the provisions of Section 15.1, of any portion of the Trust in a separate investment account, but such investment account shall be considered part of the Trust Fund for all purposes of this Agreement, including specifically Section 7.2(a)(2). ARTICLE XVI INVESTMENT FUNDS 16.1 Directed Investments (a) The Trustee shall segregate all of the Accounts of each Participant in order to enable such Participant to direct the investment of such accounts in accordance with Section 404(c) of ERISA. The Trustee's responsibility with respect to the invest- ments credited to such Accounts shall be limited to holding title to such investments and complying with the instructions of such Participant, and neither the Trustee, the Administrator the Committee, any investment manager, nor any other fiduciary of the Plan or Trust shall have any liability or responsibility whatsoever for any loss, or by reason of any breach, that results from such Participant's direction of the investments of his Account. (b) The Administrator shall have the authority to establish reasonable and non-discriminatory rules regarding the direction of investments of Participants, and may either permit Participants, on a non-discriminatory basis, to elect to direct the investment of their Accounts, or require all Participants to do so. All such rules shall comply in all respects with regulations issued pursuant to the Department of Labor under Section 404(c) of ERISA. (c) The Trustee shall be responsible for investing the Forfeiture Suspense Account, the Excess Contributions Account and the Excess Forfeitures Account. (d) The Administrator shall have the power to specify the investment funds (the "Investment Funds") from which a Participant may direct the investment of his Account to the extent permitted or required under this Section 16.1. 16.2 Investment Elections Until such time, if ever, as they are modified by the Administrator pursuant to Section 16.4 below, the following rules shall govern the investment elections (the "Investment Elections" or "Elections") made by Participants. (a) Each Participant may make an Investment Election with regard to the contributions to be made on his behalf by the Employer. Such Investment Election shall be in writing, be filed with the Administrator, and shall direct that such contributions (in 10% increments), be allocated to and invested in one or more of the Investment Funds. (b) A Participant may change his Investment Election not more frequently than once each calendar month. Once made an Investment Election shall continue in effect for all future contributions until such Election is changed or revoked by a subsequent Election of the Participant made in a proper and timely fashion according to the procedures established by the Adminis- trator for this purpose. 16.3 Transfers Between Investment Funds Subject to any restrictions on the transfer from or to a particular Investment Fund which may be established by the Investment Fund itself, by the Trustee or which are contained in Section 16.2, as such restrictions may be modified from time to time, each Participant may elect, not more frequently than once each calendar month, to transfer all or any portion of the amounts credited to his Accounts under an Investment Fund to his Accounts under any other Investment Fund. 16.4 Authority to Revise Election Procedures The Administrator shall have the sole responsibility for and complete discretion in establishing and, if it deems it necessary, amending the rules and procedures governing the time and manner in which Participants may make, modify or revoke any investment election pursuant to Sections 16.2 and 16.3. The discretion of the Administrator in which regard shall only be limited by the general requirement that such discretion be exercised in a non-discriminatory manner. ARTICLE XVII AMENDMENT 17.1 Right to Amend The Employer shall have the right at any time or times to amend this Agreement, in whole or in part. 17.2 Retroactivity of Amendments No amendment to this Agreement may be made effective retroactively to a date prior to the beginning of the Plan Year in which it is adopted, except amendments which are necessary to establish or maintain, without interruption, the qualification of the Agreement for tax exemption under the provisions of the Code. 17.3 Limitations On Right To Amend No amendment shall be made to this Agreement which shall: (a) Directly or indirectly operate to give the Employer or any Related Employer any interest in the Trust or to deprive any Participant or Beneficiary of his interest in the Trust, or cause any part of the income or corpus of the Trust to be used for, or diverted to, purposes other than for the exclusive benefit of the Participants or their Beneficiaries, except as provided in Section 19.1; (b) Increase the powers, duties, responsibilities or obligations of the Trustee without his written consent; or (c) Eliminate an optional form of benefit or eliminate or reduce an "early retirement benefit" or a "retirement-type subsidy" [as defined in Section 411(d)(6)(B) of the Code]. ARTICLE XVIII ADOPTION, WITHDRAWAL AND TERMINATION 18.1 Adoption of Agreement (a) With the written consent of the Administrator, any other corporation, including a Related Employer, may adopt this Agreement for the exclusive benefit of its eligible employees by appropriate resolution, which shall specify the effective date of such adoption and which may contain such changes and variations in the Plan and Trust as the Administrator shall approve, and by agreeing to be bound by the terms of this Agreement. (b) Each participating Employer shall pay a propor- tionate part of the expenses incurred in the administration of the Plan and the Trust to the extent that such expenses are not paid directly out of the Trust. 18.2 Withdrawal from Plan A participating Employer may withdraw from the Plan by giving written notice to the Administrator and the Trustee, which notice shall specify the effective date of the withdrawal, which, unless such requirement is waived by the Administrator, shall not be less than 30 days after such notice is given. If the date of withdrawal is not an Anniversary Date, the Trustee shall value all Trust assets as of the effective date of the withdrawal in the manner provided in Section 7.2 as if such date were an Anniversary Date, but shall not allocate the participating Employers' contribu- tion. The withdrawal by an Employer shall be treated as a termination of the Plan with respect to Participants employed by the withdrawing Employer (unless the Plan is adopted by a successor to the business of such Employee), and such Participants shall be 100% vested in their Account Balance as of the date of withdrawal, and such Account Balance shall be valued as of such date and distributed as provided in Article IX. 18.3 Termination (a) The Agreement may be terminated at any time by Richardson. (b) Upon termination of the Plan and Trust, the Administrator shall direct the Trustee to value the Trust in accordance with Section 7.2 and to distribute in accordance with the terms of the Plan all assets remaining in the Trust (after payment or reserving funds for payment of any fees, taxes and expenses properly chargeable against the Trust) to the Participants in accordance with the value of the credits standing to each Participant's Accounts as of the date of such termination, in cash or in kind valued at fair market at the date of distribution, in such manner as the Trustee shall determine. (c) In the event of the sale by an Employer of sub- stantially all of its assets and business, the successor to the Employer shall be substituted for and shall exercise and have all the rights and obligations of the Employer hereunder upon the filing, in writing, of its election to do so with the Trustee. ARTICLE XIX MISCELLANEOUS 19.1 No Reversion to Employer No part of the corpus or income of the Trust shall revert to the Employer or any Related Employer or be used for, or diverted to, purposes other than for the exclusive benefit of the Partici- pants and their Beneficiaries; provided, however, that: (a) Any balance remaining in the Excess Contribu- tion Account or the Excess Forfeiture Account (as defined in Section 7.6) at the time the Plan is terminated, and which cannot be allocated in the final Plan Year of the Plan without violating the limitations of Sections 7.6 or 7.7, shall be returned to the Employer (and, in the event that there is more than one participating Employer, such reversion shall be in the proportion that the aggregate contributions made by each such Employer in all Plan Years with respect to which amounts were credited to either of such accounts bears to the aggregate contribu- tions made by all participating Employers in all such Plan Years); and (b) In the event that any portion of a contribution is made by the Employer to the Plan because of either a good faith mistake of fact or a good faith mistake in determining that such contribution is deductible under Section 401 of the Code, the Trustee shall return to the Employer, upon written notice thereof, an amount equal to the portion of such contribution which would not have been made but for such mistake of fact, or which is determined to be non-deductible, as the case may be, subject to the following conditions and limitations. No amount shall be returned to the Employer pursuant to this Section 19.1(b) unless such amount is returned not later than one year after the date on which the contribution was made in the case of a contribution based on a mistake of fact was made, or the date on which the deduction is disallowed in case of a contribution mistakenly believed to be deductible. For purposes of the preceding sen- tence, a deduction shall be considered to be disallowed on either (1) the day on which the Employer voluntarily files an amended federal income tax return correcting the error; (2) the day on which the Internal Revenue Service issues a statutory notice of deficiency, notice of final partnership or S corporation administrative adjustment, or other determination from which no further administra- tive appeal is possible, which notice is based in whole or part upon disallowance of such deduction, provided that, if applicable, no person files a timely petition for judicial review of such determination; or (3) if such a petition for judicial review is filed, the day on which a final judgment is entered dismissing such petition or upholding the disallowance of such deduction from which judgment no further appeal is possible, or as to which the time for filing an appeal expires. The amount returned to the Employer shall not include any earnings attributable to the erroneous contribution, but shall be reduced by any losses attributable thereto. Notwith- standing the provisions of Article VIII, an erroneous contribution may be returned in accordance with this Section 19.1(b) after such contribution has been allocat- ed and credited to the Participants' Accounts, in which event the amount so returned shall be charged to the Accounts in the same proportion that the contribution was originally allocated; provided, however, that in no event shall the Account Balance of any Participant be reduced as a result of the return of an erroneous contribution to less than it would have been had the erroneous contri- bution not been made, and the amount returned to the Employer shall be reduced to the extent necessary to avoid such a reduction. 19.2 Evidence of Action; Necessary Parties (a) Evidence required of anyone under this Agreement may be by certificate, affidavit, endorsement or any other written instrument which the person acting in reliance thereon believes to be pertinent, reliable and genuine, and to have been signed, made or presented by the proper and duly authorized party or parties. (b) Necessary parties to any accounting, litigation or other proceedings shall include only the Trustee and the Employer, and the settlement or judgment in any such case in which the Employer is duly served or cited shall be binding upon all persons entitled to benefits under the Plan, the estate of any such person, and upon all persons claiming by, through or under them. 19.3 Rights of Participants Limited Neither the adoption of the Plan nor anything contained in the Plan or the Trust shall be construed as giving any Partic- ipant, Beneficiary or Employee any equity or other interest in the assets, business or affairs of the Employer or any Related Employer, or the right to complain about any action taken by the officers, directors or stockholders of, or about any policy adopted or pursued by, the Employer or any Related Employer, or the right to examine the books and records of the Employer or any Related Employer, or as giving any Employee the right to be retained in the service of the Employer or any Related Employer, and all Employees shall remain subject to discharge to the same extent as if the Plan and the Trust had never been executed. Prior to the time that distributions are made in conformity with the provisions of the Plan, neither the Participants, nor their spouses, Beneficiaries, heirs-at-law, or legal representatives shall receive cash or any other thing of current exchangeable value from the Employer or any Related Employer or the Trustee as a result of the Trust. 19.4 Assignment and Alienation (a) No payment to any person under any of the provisions of the Plan or the Trust, nor the right to receive such payment or payments, nor any interest in the Trust, shall be subject to assignment, alienation, transfer or anticipation, either by the voluntary or involuntary act of any Participant or Beneficiary or by operation of law, nor, except for the repayment of loans to Participants authorized under Section 14.3 and payments pursuant to a Qualified Domestic Relations Order in accordance with Section 19.4(b), shall such payment or right or interest be subject to the demands or claims of any creditor of such person, nor be liable in any way for such person's debts, obligations or liabilities. (b) Upon receiving any order, judgment or decree which may be a Qualified Domestic Relations Order, the Administrator shall promptly notify the Participant involved and any Alternate Payee [as defined in Section 2.24(a)] who may be affected by such order or their designated representatives of the receipt of the order and of the Plan's procedure for determining whether the order is a Qualified Domestic Relations Order, and shall proceed to determine whether the order is a Qualified Domestic Relations Order. During the period during which it is being determined whether such order is a Qualified Domestic Relations Order, any payments which would, under such order, be payable to an Alternate Payee, shall be placed in a separate account in the Trust. If, within 18 months after receipt of such order, the Administrator determines that such order is a Qualified Domestic Relations Order, the amount of such separate account, with any earnings thereon, shall be paid to the Alternate Payees as provided in such order. If the status of such order has not been established within such 18-month period, or if it is determined that the order is not a Qualified Domestic Relations Order, the amount of such separate account shall be paid to the Participant, or, if it would not otherwise have been payable currently, shall be restored to the Participant's Account. Any determination made more than 18 months after the receipt of such order that such order is a Qualified Domestic Relations Order shall be applied prospectively only. (c) In the event that any Participant's benefits are garnished or attached by order of any court, the Trustee may bring an action for a declaratory judgment in a court of competent jurisdiction to determine the proper recipient of the benefits to be paid by the Trust. During the pendency of said action, any benefits that become payable shall be paid into the court as they become payable, to be distributed by the court to the recipient it deems proper at the close of said action. 19.5 Missing Participants or Beneficiaries (a) Each Participant shall file with the Employer, in writing, his post office address, the post office address of each of his Beneficiaries, and each change of post office address. Any communication, statement or notice addressed to Participant or Beneficiary with postage prepaid at his last post office address filed with the Employer, or if no address is filed with the Employer, then at his last post office address as shown on the Employer's records, will be binding on the Participant and his Beneficiary for all purposes of the Plan. Neither the Trustee nor the Administrator is required to search for or locate Participant or Beneficiary. (b) If the Administrator or Trustee shall send by registered or certified mail, postage prepaid, to the last known address of a Participant or Beneficiary, a notification that he is entitled to a distribution hereunder and if either (1) such notification is returned because the addressee cannot be located at such address and neither the Employer nor the Trustee shall have any knowledge of such Participant's or Beneficiary's whereabouts within 3 years from the date such notification was mailed, or (2) within 3 years after such notification was mailed to such Partici- pant or Beneficiary, he does not respond thereto by informing the Trustee of his whereabouts, then, upon the Anniversary Date coincident with or immediately following the third anniversary of the mailing of said notification, the then undistributed Account Balance of such Participant or Beneficiary shall be paid to the person or persons who would have been entitled to take in the event of the death of the Participant or Beneficiary whose whereabouts is unknown, assuming that such death had occurred on the Anniversary Date immediately succeeding the third anniversary of the mailing of said notification. (c) If any check in payment of a benefit hereunder which has been mailed by regular United States mail to the last address of the payee furnished the Trustee by the Administrator is returned unclaimed, the Trustee shall notify the Administrator and shall discontinue further payments to such payee until it receives the further instructions of the Administrator. 19.6 Merger and Consolidation of Plan In the case of any merger or consolidation with, or transfer of assets and liabilities to, any other employee plan qualified under Section 401(a) of the Code, provisions shall be made so that each Participant in the Plan on the date thereof would receive a benefit immediately after the merger, consolidation or transfer (if the other employee plan terminated on that date) which is equal to or greater than the benefit he would have been entitled to receive immediately prior to the merger, consolidation or transfer (if the Plan had then terminated). 19.7 Severability of Agreement In case any provision of this Agreement shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions, but shall be fully severable and this Agreement shall be construed and enforced as if said illegal or invalid provision had never been inserted herein. 19.8 Applicable Law This Agreement shall be construed and enforced and the Trust shall be administered in accordance with the laws of the State of Illinois, to the extent that such laws are not preempted by the laws of the United States of America. IN WITNESS WHEREOF, Richardson has caused this Agreement to be executed, and each Trustee has hereunto set his respective hand and seal, all as of the date and year first written above. RICHARDSON ELECTRONICS, LTD. By: /s/ Joseph C. Grill Title: Vice President, Human Resources TRUSTEES: /s/Scott Hodes /s/William G. Seils EX-10.F 4 RICHARDSON ELECTRONICS, LTD. EMPLOYEES STOCK OWNERSHIP PLAN As Amended and Restated Effective June 1, 1989 TABLE OF CONTENTS ARTICLE I--TITLES AND PURPOSE. . . . . . . . . . . . . . . . 2 1.1 Titles . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 Purpose. . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 Exclusive Benefit. . . . . . . . . . . . . . . . . . . 2 1.4 Status of Plan . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II--DEFINITIONS. . . . . . . . . . . . . . . . . . . 3 2.1 Account. . . . . . . . . . . . . . . . . . . . . . . . 3 2.2 Account Balance. . . . . . . . . . . . . . . . . . . . 3 2.3 Administrator. . . . . . . . . . . . . . . . . . . . . 3 2.4 Anniversary Date . . . . . . . . . . . . . . . . . . . 3 2.5 Annual Addition. . . . . . . . . . . . . . . . . . . . 4 2.6 Beneficiary. . . . . . . . . . . . . . . . . . . . . . 4 2.7 Benefit Commencement Date. . . . . . . . . . . . . . . 4 2.8 Break in Service . . . . . . . . . . . . . . . . . . . 4 2.9 Code . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.10 Committee. . . . . . . . . . . . . . . . . . . . . . . 5 2.11 Compensation . . . . . . . . . . . . . . . . . . . . . 5 2.12 Computation Period . . . . . . . . . . . . . . . . . . 6 2.13 Effective Date . . . . . . . . . . . . . . . . . . . . 6 2.14 Employee . . . . . . . . . . . . . . . . . . . . . . . 6 2.15 Employer . . . . . . . . . . . . . . . . . . . . . . . 6 2.16 Entry Date . . . . . . . . . . . . . . . . . . . . . . 7 2.17 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 Hour of Service. . . . . . . . . . . . . . . . . . . . 7 2.19 Key Employee . . . . . . . . . . . . . . . . . . . . . 8 2.20 Leave of Absence . . . . . . . . . . . . . . . . . . . 10 2.21 Limitation Year. . . . . . . . . . . . . . . . . . . . 11 2.22 Non-Key Employee . . . . . . . . . . . . . . . . . . . 11 2.23 Normal Retirement Date . . . . . . . . . . . . . . . . 11 2.24 Participant. . . . . . . . . . . . . . . . . . . . . . 11 2.25 Permanent Disability . . . . . . . . . . . . . . . . . 11 2.26 Plan . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.27 Plan Year. . . . . . . . . . . . . . . . . . . . . . . 12 2.28 Qualified Domestic Relations Order . . . . . . . . . . 12 2.29 Related Employer . . . . . . . . . . . . . . . . . . . 12 2.30 Richardson . . . . . . . . . . . . . . . . . . . . . . 12 2.31 Spouse . . . . . . . . . . . . . . . . . . . . . . . . 13 2.32 Stock. . . . . . . . . . . . . . . . . . . . . . . . . 13 2.33 Termination of Employment. . . . . . . . . . . . . . . 13 2.34 Top-Heavy Determination Date . . . . . . . . . . . . . 14 2.35 Top-Heavy Year . . . . . . . . . . . . . . . . . . . . 14 2.36 Trust. . . . . . . . . . . . . . . . . . . . . . . . . 16 2.37 Trust Agreement. . . . . . . . . . . . . . . . . . . . 16 2.38 Trustee or Trustees. . . . . . . . . . . . . . . . . . 16 2.39 Valuation Date . . . . . . . . . . . . . . . . . . . . 16 2.40 Vested Account Balance . . . . . . . . . . . . . . . . 16 2.41 Year of Service. . . . . . . . . . . . . . . . . . . . 16 ARTICLE III--PARTICIPATION . . . . . . . . . . . . . . . . . 17 3.1 Eligibility To Participate . . . . . . . . . . . . . . 17 3.2 Duration of Participation; Re-Employment . . . . . . . 17 ARTICLE IV--CONTRIBUTIONS BY EMPLOYER. . . . . . . . . . . . 19 4.1 Amount . . . . . . . . . . . . . . . . . . . . . . . . 19 4.2 Time for Payment . . . . . . . . . . . . . . . . . . . 20 ARTICLE V--CONTRIBUTIONS BY PARTICIPANTS . . . . . . . . . . 21 5.1 Contributions by Participants. . . . . . . . . . . . . 21 ARTICLE VI--ALLOCATION OF EMPLOYER CONTRIBUTIONS . . . . . . 22 6.1 Manner of Allocation . . . . . . . . . . . . . . . . . 22 6.2 Allocations in Top-Heavy Years . . . . . . . . . . . . 23 6.3 Administrator to Notify Trustee. . . . . . . . . . . . 24 ARTICLE VII--ACCOUNTS OF PARTICIPANTS. . . . . . . . . . . . 25 7.1 Separate Accounts. . . . . . . . . . . . . . . . . . . 25 7.2 Adjustments to Accounts. . . . . . . . . . . . . . . . 25 7.3 Crediting of Employer Contributions. . . . . . . . . . 26 7.4 Crediting of Forfeitures . . . . . . . . . . . . . . . 26 7.5 Limitation on Allocations. . . . . . . . . . . . . . . 26 7.6 Combined Plan Limitation . . . . . . . . . . . . . . . 29 7.7 Correction of Error. . . . . . . . . . . . . . . . . . 30 7.8 Transfer Accounts. . . . . . . . . . . . . . . . . . . 31 ARTICLE VIII--VESTING OF INTEREST IN TRUST . . . . . . . . . 32 8.1 Normal Retirement. . . . . . . . . . . . . . . . . . . 32 8.2 Disability Retirement. . . . . . . . . . . . . . . . . 32 8.3 Death. . . . . . . . . . . . . . . . . . . . . . . . . 32 8.4 Other Termination of Employment. . . . . . . . . . . . 32 8.5 Treatment of Forfeited Amounts; Reinstatement. . . . . 33 8.6 Computation of Years of Service. . . . . . . . . . . . 33 8.7 Vesting on Termination of Trust or of Employer's Agreement to Contribute. . . . . . . . . . . . . . . 34 8.8 Vesting Following Plan Amendment . . . . . . . . . . . 34 8.9 Vesting Following Partial Distributions. . . . . . . . 34 ARTICLE IX--PAYMENT OF VESTED ACCOUNT BALANCES . . . . . . . 36 9.1 Benefit Commencement Date. . . . . . . . . . . . . . . 36 9.2 Payment to Participants. . . . . . . . . . . . . . . . 37 9.3 Payment to Beneficiaries . . . . . . . . . . . . . . . 38 9.4 Extent of Further Participation in Trust . . . . . . . 40 9.5 Payment to Persons Under Legal Disability. . . . . . . 40 9.6 Payment in Installments. . . . . . . . . . . . . . . . 41 9.7 Compliance with Regulations. . . . . . . . . . . . . . 43 9.8 Distributions of Stock and Dividends . . . . . . . . . 43 9.9 Right of First Refusal and Options on Stock. . . . . . 44 9.10 Direct Rollovers . . . . . . . . . . . . . . . . . . . 45 9.11 Withdrawals Due to Permanent Disability. . . . . . . . 46 ARTICLE X--DESIGNATION OF BENEFICIARIES. . . . . . . . . . . 47 10.1 Participants to Name Beneficiaries . . . . . . . . . . 47 10.2 No Beneficiary Designated; Death of Beneficiary. . . . 47 10.3 No Liability for Payment to Beneficiaries. . . . . . . 47 10.4 Qualified Domestic Relations Orders. . . . . . . . . . 48 ARTICLE XI--FIDUCIARY CAPACITY AND RESPONSIBILITY. . . . . . 49 11.1 General Fiduciary Standard of Conduct. . . . . . . . . 49 11.2 Allocation of Responsibility Among Fiduciaries . . . . 49 11.3 Administrator. . . . . . . . . . . . . . . . . . . . . 50 11.4 Powers and Duties of Administrator . . . . . . . . . . 50 11.5 Claims Procedure . . . . . . . . . . . . . . . . . . . 51 11.6 Indemnification by Employer. . . . . . . . . . . . . . 52 11.7 Service in Multiple Capacities . . . . . . . . . . . . 53 11.8 Voting of Stock by Participants and Beneficiaries. . . 53 ARTICLE XII--THE COMMITTEE . . . . . . . . . . . . . . . . . 54 12.1 Appointment and Membership . . . . . . . . . . . . . . 54 12.2 Compensation and Expenses. . . . . . . . . . . . . . . 54 12.3 Committee Procedures and Actions . . . . . . . . . . . 54 12.4 Resignation or Removal of Committee Member . . . . . . 55 12.5 Committee/Administrator Decisions Final. . . . . . . . 55 ARTICLE XIII--THE TRUST. . . . . . . . . . . . . . . . . . . 56 13.1 Trust Agreement. . . . . . . . . . . . . . . . . . . . 56 ARTICLE XIV--LOANS TO PARTICIPANTS; LOANS TO ACQUIRE STOCK; DIRECTED INVESTMENTS. . . . . . . . . . . . 57 14.1 Loans to Participants. . . . . . . . . . . . . . . . . 57 14.2 Loans to Acquire Stock . . . . . . . . . . . . . . . . 58 14.3 Directed Investments . . . . . . . . . . . . . . . . . 59 ARTICLE XV--AMENDMENT. . . . . . . . . . . . . . . . . . . . 62 15.1 Right to Amend . . . . . . . . . . . . . . . . . . . . 62 15.2 Retroactivity of Amendments. . . . . . . . . . . . . . 62 15.3 Limitations on Right to Amend. . . . . . . . . . . . . 62 ARTICLE XVI--ADOPTION, WITHDRAWAL AND TERMINATION. . . . . . 63 16.1 Adoption of Plan . . . . . . . . . . . . . . . . . . . 63 16.2 Withdrawal from Plan . . . . . . . . . . . . . . . . . 63 16.3 Termination. . . . . . . . . . . . . . . . . . . . . . 63 ARTICLE XVII--MISCELLANEOUS. . . . . . . . . . . . . . . . . 65 17.1 No Reversion to Employer . . . . . . . . . . . . . . . 65 17.2 Evidence of Action by Necessary Parties. . . . . . . . 66 17.3 Rights of Participants Limited . . . . . . . . . . . . 66 17.4 Assignment and Alienation. . . . . . . . . . . . . . . 67 17.5 Missing Participants or Beneficiaries. . . . . . . . . 68 17.6 Merger and Consolidation of Plan . . . . . . . . . . . 68 17.7 Severability . . . . . . . . . . . . . . . . . . . . . 69 17.8 Applicable Law . . . . . . . . . . . . . . . . . . . . 69 17.9 Method of Accounting . . . . . . . . . . . . . . . . . 69 THIS PLAN, executed at LaFox, Illinois, this 14th day of July, 1994 by RICHARDSON ELECTRONICS, LTD., a corporation organized and existing under the laws of the State of Delaware ("Richardson"). W I T N E S S E T H: WHEREAS, effective as of June 1, 1987, Richardson adopted the Richardson Electronics, Ltd. and Subsidiaries Employees Stock Ownership Plan and Trust (the "Plan"), a stock bonus plan qualified under Section 401(a) of the Internal Revenue Code of 1986 (the "Code") and entitled to tax exemption under Section 501(a) of the Code and an employee stock ownership plan within the meaning of Section 4975(e)(7) of the Code, with William G. Seils and Scott Hodes, as Trustees; and WHEREAS, Richardson has reserved the right to amend the Plan at any time and has amended the Plan on December 21, 1988, January 17, 1989 and May 30, 1990; and WHEREAS, on February 23, 1990 Marine Midland Bank, N.A. replaced Messrs. Hodes and Seils as Trustee of the trust forming a part of the Plan, pursuant to a Trust Agreement by and between said bank and Richardson and dated February 23, 1990; and WHEREAS, as Richardson now desires further to amend the Plan order to incorporate all amendments required in order to comply with the applicable provisions of the Tax Reform Act of 1986, other applicable legislation and applicable regulations and rulings thereunder. NOW, THEREFORE, the Plan is hereby restated effective June 1, 1989 (except as otherwise stated herein) to read as follows: ARTICLE I TITLES AND PURPOSE 1.1 Titles The Plan shall be known as the RICHARDSON ELECTRONICS, LTD. EMPLOYEES STOCK OWNERSHIP PLAN. 1.2 Purpose The purpose of the Plan is to establish a retirement fund out of the profits of the Employer which will help to provide for the future security of the Participants. 1.3 Exclusive Benefit The Trust shall be for the exclusive benefit of the Participants and their Beneficiaries. In no event shall the income or principal of the Trust be paid or revert to the Employer or any Related Employer, except as otherwise provided in Section 17.1. 1.4 Status of Plan The Plan is intended to continue to be a stock bonus plan qualified under Section 401(a) of the Code which is an employee stock ownership plan within the meaning of Code Section 4975(e)(7). ARTICLE II DEFINITIONS When used herein, the following words and terms shall have the respective meanings hereinafter set forth, unless a different meaning is clearly required by the context. Whenever appropriate, words used in the singular shall be deemed to include the plural, and vice versa, and the masculine gender shall be deemed to include the feminine and neuter genders, unless a different meaning is clearly required by the context. 2.1 "Account": Collectively, all of the following separate accounts maintained under the Plan for the benefit of a Participant, including all adjustments thereto under Article VII, unless a specific reference is made to one of such separate accounts: (a) The separate Employer Contribution Account maintained for each Participant for the purpose of recording his share of the contributions made by the Employer and forfeitures; (b) In the case of a Participant who is re- employed after incurring a Break in Service, the separate Pre-Break Account, if any, required to be maintained under Section 8.9(b); and (c) In the case of a Participant for whom a Transfer Account is being maintained under Section 7.8 for the purpose of recording his share of the assets transferred from the Richardson Electronics, Ltd. Employees Profit-Sharing Plan, such Transfer Account. The term "Account" shall not, unless otherwise specifically provided herein, include the Excess Contribution Account, if any, or the Excess Forfeiture Account, if any, established pursuant to Section 7.5, or the Suspense Account, if any, established pursuant to Section 14.2(c). 2.2 "Account Balance": The total amount held for the benefit of a Participant in his Account (or in the specific separate account referred to), as determined on the immediately preceding Anniversary Date in accordance with the provisions of Article VII. 2.3 "Administrator": The person administering the Plan pursuant to Section 11.3. 2.4 "Anniversary Date": The last day of each Plan Year. 2.5 "Annual Addition:" With respect to a Participant for any Limitation Year, the sum of (a) Employer contributions allocated on behalf of such Participant for such Limitation Year under the Plan and under any other qualified defined contribution plan maintained by the Employer; (b) forfeitures, if any, allocated on behalf of such Participant for such Limitation Year under any such qualified defined contribution plan; (c) such Participant's voluntary non-deductible contributions under any qualified plan of the Employer for such Limitation Year; (d) amounts allocated on behalf of such Participant for such Limitation Year to an individual medical account, as defined in Section 415(1)(2) of the Code, which is part of a pension or annuity plan maintained by the Employer; and (e) amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after said date, which are attributable to post-retirement medical benefits allocated for such Limitation Year to the separate account of such Participant under a welfare fund, as defined in Section 419(e) of the Code, maintained by the Employer, if he is a Key Employee for such year. For purposes of this Section 2.5, "Employer" shall include any Related Employer. 2.6 "Beneficiary": Any person (natural or otherwise) entitled to receive any benefits which may become payable upon or after a Participant's death. 2.7 "Benefit Commencement Date": The date on which the payment of a Participant's Vested Account Balance commences, as determined in accordance with the provisions of Section 9.1. 2.8 "Break in Service": (a) Except as otherwise provided under Section 2.8(b), one or more consecutive Computation Periods during each of which an Employee has not completed more than 500 Hours of Service. For eligibility purposes, an Employee shall not incur a Break in Service solely because he fails to complete more than 500 Hours of Service during the Computation Period beginning on his hire date. (b) Notwithstanding Section 2.8(a), a Computation Period beginning in 1985 or thereafter shall not be included in a Break in Service if the sum of the Employee's Hours of Service completed during such Computation Period plus the Employee's "Childbirth Leave Hours" (as hereafter defined) attributable to such Computation Period exceeds 500. For purposes of this Section 2.8(b), an Employee's Childbirth Leave Hours shall be the number of Hours of Service (but not in excess of 501 for any one continuous period of absence) which the Employee would have completed but for the fact that the Employee is absent from the employment of the Employer and all Related Employers for a period commencing on or after the first day of the Computation Period beginning in 1985 (1) by reason of the pregnancy of the Employee, (2) by reason of the birth of a child of the Employee, (3) by reason of the placement of a child with the Employee in connection with the adoption of such child by the, Employee or (4) for purposes of caring for such child for period beginning immediately following such birth or placement; provided, however, that in the case of any Employee with respect to whom it is not possible to determine the number of Hours of Service which such Employee would have completed but for such absence, such Employee shall be credited with 8 Childbirth Leave Hours for each work day of such absence; and provided further, that an hour which is considered an Hour of Service under Section 2.18(b) shall not also be considered a Childbirth Leave Hour. All Childbirth Leave Hours for any period of absence shall be attributed to the Computation Period during which such period of absence begins if the result of such attribution is to prevent such Computation Period from being considered a Break in Service; otherwise, all Childbirth Leave Hours shall be attributed to the immediately following Computation Period. The Administrator shall adopt regulations under which an Employee may be required to furnish reasonable information on a timely basis establishing the number of Childbirth Leave Hours to which such Employee is entitled with respect to any period of absence from employment, and any Employee who fails to furnish such information with respect to any period of absence shall not be credited with any Childbirth Leave Hours for such period of absence. (c) Notwithstanding Section 2.8(a), a Computation Period shall not be included in a Break in Service if the Employee would have completed at least 500 Hours of Service but for a period of absence due to layoff (for not more than 6 months), jury duty or Leave of Absence, other than a period of absence described in Section 2.8(b). 2.9 "Code": The Internal Revenue Code of 1986, as now in effect or as hereafter amended, and any regulation issued pursuant thereto by the Internal Revenue Service. Whenever any provision of the Code is renumbered or otherwise amended, this Plan shall, to the extent possible, be construed by reference to the successor to such provision. 2.10 "Committee": The committee established pursuant to the provisions of Article XII to assist the Administrator in the administration of the Plan. 2.11 "Compensation": (a) Except as otherwise provided in this Section 2.11, the term "Compensation" shall mean wages, within the meaning of Section 3401(a) of the Code, and all other payments of compensation paid to a Participant by the Employer (during the course of the Employer's trade or business) during a Plan Year for services rendered by him as an Employee for which the Employer is required to furnish the Employee a written statement under Sections 6041(d) and 6051(a)(3) of the Code, determined without regard to any rules under Section 3401(a) which limit the remuneration included in wages based upon the nature or location of the employment or the services performed [such as the exception for agricultural labor in Section 3401(a)(2)]. Except as provided in Section 6.1(e), in the case of an individual who was a Participant for a period consisting of less than the entire Plan Year, his Compensation shall be deemed to include only the taxable remuneration paid to him for the period while he was a Participant. The Compensation of each Participant taken into account for any Plan Year shall not exceed $200,000 (subject to cost-of-living adjustments prescribed by the Secretary of the Treasury), except that effective for Plan Years beginning after December 31, 1993 the Compensation of each Participant taken into account for any Plan Year shall not exceed $150,000 (subject to cost-of-living adjustments prescribed by the Secretary of the Treasury). In connection with determining the Compensation of a Participant for purposes of the limitation in the preceding sentence, the family aggregation rules in Section 414(q)(6) of the Code shall apply, except that in applying such rules with respect to a particular 12-month period, the term "family" shall include only the spouse of a Participant and any lineal descendants of such Participant who have not attained the age of 19 before the close of such period. (b) Except for purposes of Sections 7.5 and 7.6, notwithstanding the provisions of Section 2.11(a), there shall be included in Compensation any amount contributed by the Employer or a Related Employer pursuant to a salary reduction agreement with the Employee and excluded from his gross income under Sections 125, 402(e)(3), 402(h) or 403(b) of the Code. 2.12 "Computation Period": For eligibility purposes, the Computation Period is the 12-month period beginning on an Employee's employment date or re-employment date, subject to Sections 2.40 and 3.2(b) and (c). For all other purposes under the Plan, including without limitation vesting, the Computation Period is the Plan Year. 2.13 "Effective Date": June 1, 1989 (except as otherwise set forth herein). 2.14 "Employee": Any person employed by and receiving Compensation from the Employer or any Related Employer (or who would be receiving such remuneration except for a Leave of Absence). The term "Employee" shall not include any person who is a "leased employee" within the meaning of Code Section 414(n)(2). 2.15 "Employer": Richardson and any successor to it. The term "Employer" shall also include any corporation or other unincorporated business organization which adopts the Plan for the exclusive benefit of its Employees pursuant to the provisions of Section 16.1. Anything to the contrary notwithstanding, a mere change in the identity, form or organization of the Employer shall not affect its status under the Plan or the Trust in any manner. 2.16 "Entry Date": November 30 of each Plan Year and the last day of each Plan Year. 2.17 "ERISA": The Employee Retirement Income Security Act of 1974, as now in effect or as hereafter amended, and any regulation issued pursuant thereto by the Internal Revenue Service, the Department of Labor or the Pension Benefit Guaranty Corporation. Whenever any provision of ERISA is renumbered or otherwise amended, this Plan shall, to the extent possible, be construed by reference to the successor to such provision. 2.18 "Hour of Service": (a) Each Employee shall be credited with an Hour of Service for: (1) Each hour for which he is directly or indi- rectly paid or entitled to payment by the Employer or any Related Employer for the performance of duties. Service rendered at overtime or other premium rates shall be credited at the rate of one Hour of Service for each hour worked, regardless of the rate of compensation in effect. These hours shall be credited to the Employee for the Computation Period(s) during which the duties are per- formed. An Employee who is not compensated on an hourly basis, or for whom information regarding the number of hours worked is not readily available, shall be credited with the following number of Hours of Service for each payroll period during which he completes at least one Hour of Service: (i) 45 Hours of Service for each weekly payroll period; (ii) 90 Hours of Service for each bi-weekly payroll period; (iii) 95 Hours of Service for each semi- monthly payroll period; or (iv) 190 Hours of Service for each monthly payroll period. Hours of Service credited to a payroll period which includes an Anniversary Date shall be credited entirely to the Plan Year commencing on the date following such Anniversary Date. An Employee who is not compensated on the basis of a regular payroll period shall be credited with 10 Hours of Service for each day on which he completes at least one Hour of Service. (2) Each hour (up to a maximum of 501 hours in any one continuous period) for which he is directly or indirectly paid or entitled to payment by the Employer or any Related Employer on account of a period during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. In the case of payments which are computed on the basis of specific periods of time during which no duties are performed, the Employee shall receive credit for Hours of Service as if he had actually worked during such periods of time, computed and credited as provided in Section 2.19(a)(1). In the case of all other payments, the Employee's Hours of Service shall be computed and credited in the manner prescribed in 29 C.F.R Sections 2530.200b-2(b) and (c), which are hereby incorporated herein by reference. (3) Each hour for which back pay, irrespective of mitigation of damages, has been either awarded or agreed to by the Employer or any Related Employer. These hours shall be credited to the Employee for the computation period (or periods) to which the award, agreement or payment pertains rather than the computation period (or periods) during which the award, agreement or payment was made. (b) Notwithstanding the foregoing, no credit shall be granted for any period with respect to which an Employee receives payment or is entitled to payment under a plan maintained solely for the purpose of complying with applicable worker's compensation or disability insurance laws; or for a payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee. (c) Service by an individual on behalf of any of the following entities before he became an Employee shall be considered service on behalf of the Employer for purposes of this Section 2.19, to-wit: Amperex Division of North American Phillips Corp.; B-Scan, Inc.; Calvert Electronics, Inc.; Calvert Holding Co., Inc.; Calvert Semi-Conductor, Inc.; Ceco Communications, Inc.; Cetron Electronic Corporation; and National Electronics Division of Varian Associates, Inc. 2.19 "Key Employee": (a) Except as otherwise provided in this Section 2.19, an Employee shall be considered a Key Employee for any Plan Year if, at any time during the Key Employee Test Period [as defined in Section 2.19(f)], he is or was: (1) An officer of the Employer or any Related Employer whose Compensation [as modified for all purposes of this Section 2.19 in accordance with Section 2.19(g)] exceeds 50% of the annual dollar limitation set forth in Section 415(b)(1)(A) of the Code; (2) A shareholder of the Employer who owns at least .5% of the stock of the Employer or any Related Employer and whose Compensation exceeds the annual defined contribution dollar limitation set forth in Section 415(c)(l)(A) of the Code, unless at least 10 other Employees whose Compensation exceeds the annual defined contribution dollar limitation set forth in Section 415(c)(l)(A) of the Code own or owned during any Plan Year in the Key Employee Test Period a percentage share of the stock of the Employer which is greater than such shareholder's percentage share; (3) A shareholder who owns more than 5% of the stock of the Employer; or (4) A shareholder who owns more than 1% of the stock of the Employer and whose Compensation for any Plan Year in which he owns such percentage exceeds $150,000. (b) The number of Employees classified as Key Employees solely because they are described in Section 2.19(a)(1) shall not exceed the greater of (1) 3 or (2) 10% of the largest number of Employees during any of the Plan Years in the Key Employee Test Period; provided, however, that in no event shall such number exceed 50. If more than such number of Employees would otherwise be classified as Key Employees by reason of being described in Section 2.19(a)(1), the Employees classified as Key Employees by reason of being described in Section 2.19(a)(1) shall be those described in Section 2.19(a)(1) who had the highest Compensation during any of the Plan Years in the Key Employee Test Period during which they were described in Section 2.19(a)(1). (c) For purposes of Section 2.19(a)(2), in the event that 2 or more Employees own the same percentage share of the Employer, the Employee who had the highest Compensation of such Employees for the Plan Year during the Key Employee Test Period in which his Compensation was the highest and in which he owned such interest in the Employer for part of the Plan Year shall be treated as owning the largest percentage share of the stock of the Employer. If an Employee's percentage interest in the stock of the Employer changes during a Plan Year, his interest for such Plan Year shall be the highest percentage he held at any time during such Plan Year. (d) For purposes of this Section 2.19, an Employee shall be considered to own any stock of the Employer or Related Employer which would be attributed to him under Section 318 of the Code [as modified by substituting "5%" for "50%" in Section 318(a)(2) of the Code]. In the case of an Employer or Related Employer which has issued more than one class of stock, the applicable test shall be satisfied if the Employee's stock ownership meets the test on the basis of either the value or the voting power of the stock. In the case of an Employer or Related Employer which is not a corporation, such tests shall be applied in accordance with regulations promulgated under Section 416(i)(l)(B)(iii)(II) of the Code. (e) Any Employee who meets any of the 4 tests set forth in Section 2.19(a) as of any Top-Heavy Determination Date shall continue to be a Key Employee for the remainder of the Key Employee Test Period, commencing with the Plan Year which includes such Top- Heavy Determination Date, whether or not he remains an Employee, and, if such Employee dies during such Key Employee Test Period his Beneficiaries shall be classified as Key Employees for the balance of such Key Employee Test Period, unless such Employee is a Key Employee solely by reason of Section 2.19(a)(1) and is subsequently excluded from the group of officers having the highest Compensation by reason of the limitation set forth in Section 2.19(b) in subsequent Plan Years or solely by reason of Section 2.19(a)(2) and is subsequently excluded from the group of the 10 Employees owning the largest percentage shares of the stock of the Employer in subsequent Plan Years. (f) The term "Key Employee Test Period" for any Plan Year shall mean the period consisting of 5 Plan Years (or, if fewer, the total number of Plan Years during which the Plan and all other employee plans qualified under Section 401(a) of the Code maintained by the Employer or any Related Employer have been in effect) ending with the Plan Year which includes the Top-Heavy Determination Date for such Plan Year. (g) The purpose of this Section 2.19 is to conform to the definition of "key employee" set forth in Section 416(i)(1) of the Code, which is incorporated herein by reference, and to the extent that this Section 2.19 shall be inconsistent with Section 416(i)(1) of the Code, either by excluding Employees who would be classified as "key employees" thereunder or by including Employees who would not be so classified, the provisions of Section 416(i) (1) of the Code shall govern and control. 2.20 "Leave of Absence": Authorized leave of absence, sick or disability leave, service in the Armed Forces of the United States (provided that the absence is caused by war or other emergency or provided that the Employee is required to serve under the laws of conscription in time of peace) or any absence with the advance approval of the Employer or any Related Employer; provided, however, that the Employee retires or returns to work for the Employer or any Related Employer within the time specified in his Leave of Absence (or, in the case of a military absence, within the period provided by law). In granting such leaves, the Employer and any Related Employer shall treat all Employees under similar circumstances alike under rules uniformly and consistently applied. 2.21 "Limitation Year": The period coinciding with the Plan Year, except that effective with the Plan Year beginning May 30, 1987, "Limitation Year" shall mean the period beginning on the second day of the Plan Year and ending on the first day of the following Plan Year, thus creating the following Limitation Years: May 31, 1987 through May 28, 1988; May 29, 1988 through May 27, 1989; May 28, 1989 through May 26, 1990; May 27, 1990 through June 1, 1991; and June 2, 1991 through May 30, 1992. The limitations of Code Section 415 shall be separately applied to the "limitation periods" consisting of (a) May 30, 1987 and (b) May 31, 1992 to May 28, 1993, and for this purpose the dollar limitation in Section 7.5(a)(1) shall be determined by multiplying the applicable dollar limitation for the calendar year in which such "limitation period" ends by a fraction whose numerator is the number of months (including any fractional parts of a month) in such "limitation period" and the denominator of which is 12. Effective with the Plan Year beginning May 29, 1993, "Limitation Year" shall mean the period coinciding with the Plan Year. 2.22 "Non-Key Employee": Any Employee who for any Plan Year is not a Key Employee. 2.23 "Normal Retirement Date": The date a Participant attains age 65. 2.24 "Participant": Any Employee who participates in the Plan as provided in Article III. 2.25 "Permanent Disability": The inability of a Participant to perform a substantial portion of his duties by reason of any medically determinable physical or mental impairment which can be expected to be of long-continued and indefinite duration. Permanent Disability shall be determined solely by the Administrator upon medical evidence from a physician selected by the Administrator. A determination of Permanent Disability pursuant to the provisions of the Plan shall not be construed to be an admission of disability by the Employer in regard to any other claim of disability brought by the Participant against the Employer. A Participant who is receiving disability benefits under the Social Security Act shall be presumed to be Permanently Disabled. 2.26 "Plan": The Richardson Electronics, Ltd. Employee Stock Ownership Plan, as amended and restated herein. 2.27 "Plan Year": The fiscal year adopted by the Employer for Federal income tax purposes. 2.28 "Qualified Domestic Relations Order": (a) Except as provided in Section 2.28(b), any order (including a judgment, a decree or an approval of a property settlement agreement entered by any court) which the Administrator determines (1) is made pursuant to any state domestic relations law (including a community property law), (2) relates to the provision of child support, alimony payments or marital property rights of a spouse, former spouse, child or other dependent of a Participant (an "Alternate Payee") and (3) clearly specifies (i) the name and last known mailing address (if any) of the Participant and the name and mailing address of each Alternate Payee covered by the order, (ii) the amount or percentage of the Participant's benefits to be paid by the Plan to each Alternate Payee, or the manner in which such amount or percentage is to be determined, (iii) the number of payments or period to which such order applies and (iv) the employee benefit plan to which such order applies. (b) An order shall in no event be considered a Quali- fied Domestic Relations Order if the Administrator determines that such order (1) requires the Plan to provide benefits to Alternate Payees, the actuarial present value of which in the aggregate is greater than the benefits which would otherwise have been provided to the Participant, (2) requires the Plan to pay benefits to an Alternate Payee, which benefits are required to be paid to a different Alternate Payee under another order previously determined to be a Qualified Domestic Relations Order or (3) requires the Plan to provide any type or form of benefit, or any option, not otherwise provided under the Plan, except that a Qualified Domestic Relations Order may require the Trustee to distribute a portion of the Participant's Vested Account Balance prior to the time the Participant has incurred a Termination of Employment but after the Participant has attained the age of 50. 2.29 "Related Employer": Any trade or business (whether or not incorporated) that is, along with the Employer, a member of a controlled group of related entities [as defined in Sections 414(b) and (c) of the Code, as modified for purposes of Sections 7.5 and 7.6 by Section 415(h) of the Code] or a member of an affiliated service group [as defined in Section 414(m) of the Code]. Anything to the contrary notwithstanding, a mere change in the identity, form or organization of a Related Employer shall not affect its status under the Plan or the Trust in any manner and, if the corporate name of a Related Employer is hereafter changed, all references herein to such Related Employer shall be deemed to refer to such Related Employer as it is then known. 2.30 "Richardson": Richardson Electronics, Ltd., a Delaware corporation. 2.31 "Spouse": The person who is married to the Partic- ipant at the time relevant to such determination except to the extent that a Qualified Domestic Relations Order provides that a former spouse is to be treated as the Participant's Spouse; provided, however, that, solely for purposes of Section 9.3(c), the person to whom a Participant is married at the time of his death shall be considered his Spouse only if they had been married at least one year prior to his death. 2.32 "Stock": Capital stock issued by the Employer [or by a corporation which is a member of the same "controlled group" (as defined in Section 409(1)(4) of the Code) of the Employer] and which is either: (a) Common stock which is readily tradable on an established securities market; or (b) If no such corporation has common stock out- standing which is readily tradable on an established securities market, common stock which has a combination of voting power and dividend rights equal to or in excess of that class of common stock of any such corporation which has the greatest voting power and that class of common stock of any such corporation which has the greatest dividend rights; or (c) Preferred stock which is noncallable and which is convertible at any time into common stock described in either Sections 2.32(a) or (b) at a conversion price which is reasonable (at the time such stock is acquired by the Trust). To the extent provided in regulations issued under Section 409(l)(3) of the Code, preferred stock shall be treated as noncallable if after the call there will be a reasonable opportunity for such a conversion. 2.33 "Termination of Employment": An Employee shall be deemed to have incurred a Termination of Employment as a result of: (a) A retirement, a resignation or a dismissal for any reason; (b) A failure to return to work promptly upon the request of the Employer or Related Employer at the end of a layoff; or (c) A failure to retire or return to work at the end of a Leave of Absence. A transfer of employment between the Employer and any Related Employer, or between Related Employers, or a transfer from a job category eligible to participate in the Plan to one not so eligible or vice versa, shall not be considered to be a Termination of Employment. 2.34 "Top-Heavy Determination Date": For any Plan Year, the Anniversary Date of the immediately preceding Plan Year. 2.35 "Top-Heavy Year": (a) Except as otherwise provided in Section 2.35(b) below, a Top-Heavy Year shall be any Plan Year if, as of the Top- Heavy Determination Date for such Plan Year, the aggregate Account Balances of all Key Employees under the Plan exceed 60% of the aggregate Account Balances of all Participants under the Plan. (b) Notwithstanding Section 2.35(a), if during any Plan Year (1) at least one Participant is a Key Employee, (2) as of the Top-Heavy Determination Date for such Plan Year the Employer or any Related Employer has adopted any other employee plan qualified under Section 401(a) of the Code and (3) either (i) a Key Employee participates in such other plan or (ii) the Plan or such other plan has satisfied the requirements of Section 401(a)(4) or Section 410 of the Code only by treating the Plan and such other plan as a single plan, then such Plan Year shall be considered a Top-Heavy Year if and only if the Account Balances of all Key Employees under the Plan and the aggregate balances in the accounts of all Key Employees under all such other plans exceed 60% of the aggregate balances in the accounts of all Participants under the Plan and all such other plans. (c) Notwithstanding Sections 2.35(a) and (b), if as of any Top-Heavy Determination Date the Employer or any Related Employer has adopted any other employee plan qualified under Section 401(a) of the Code which is not a plan described in Section 2.35(b), but which plan may be considered as a single plan with the Plan and all plans described in Section 2.35(b) without causing any of such plans to violate the requirements of either Section 401(a)(4) or Section 410 of the Code, the Plan Year shall not be considered a Top-Heavy Year if the Account Balances of all Key Employees under the Plan and the aggregate balances in the accounts of all Key Employees under all plans described in Section 2.32(b) and all plans described in this Section 2.35(c) do not exceed 60% of the aggregate balances in the accounts of all Participants under all such plans. (d) If any of the plans described in either Sections 2.35(b) or (c) are defined benefit plans, then the tests set forth in said sections shall be applied by using the present value of all benefits accrued under such plans (as determined by the Administra- tor, using actuarial assumptions which are uniform for all such plans and are reasonable in the aggregate) in lieu of the account balances in such plans. The accrued benefits of the Non-Key Employees under such plans shall be determined in accordance with Section 416(g)(4)(F) of the Code. If any of such plans have a "determination date" [as defined in Section 416(g)(4)(C) of the Code] for purposes of determining top-heavy status which is different from the Top-Heavy Determination Date, the account balances (or the present value of the accrued benefits, in the case of a defined benefit plan) in such plan shall be determined as of the determination date for such plan which occurs in the same Plan Year as the Top-Heavy Determination Date. (e) For purposes of this Section 2.35, account balances shall include (1) all contributions which the Employer or any Related Employer has paid or is legally obligated to pay to any employee plan as of the Top-Heavy Determination Date (including contributions made thereafter if they are allocated as of the Top- Heavy Determination Date) and all forfeitures allocated as of the Top-Heavy Determination Date and (2) all distributions made to a Participant or his Beneficiary during the Key Employee Test Period (or, in the case of a defined benefit plan, the actuarial present value as of the Top-Heavy Determination Date of such distribu- tions). If any plan that was terminated within the Key Employee Test Period would, if it had not been terminated, be a plan described in Section 2.35(b), distributions made under such plan shall also be taken into account. For purposes of this Section 2.32, account balances shall also include amounts which are attributable to contributions made by the Participants (other than deductible voluntary contributions under Section 219 of the Code) but shall not include any rollover [as defined in Section 402(a) (5) of the Code] or a direct transfer from the trust of any employee plan qualified under Section 401(a) of the Code if such plan is not maintained by the Employer or any Related Employer and such rollover or transfer is made at the request of the Participant after December 31, 1983. (f) Anything to the contrary notwithstanding, if an Employee has not performed any services for the Employer or any Related Employer at any time during the Key Employee Test Period, his account balance (in the case of a defined contribution plan) or his accrued benefit (in the case of a defined benefit plan) shall not be taken into consideration in the determination of whether the Plan Year is a Top-Heavy Year. (g) The purpose of this Section 2.35 is to conform to the definition of "top-heavy plan" set forth in Section 416(g) of the Code, which is incorporated herein by reference, and to the extent that this Section 2.35 shall be inconsistent with Section 416(g) of the Code, either by causing any Plan Year during which the Plan would be classified as a "top-heavy plan" not to be a Top- Heavy Year or by causing any Plan Year during which it would not be classified as a "top-heavy plan" to be a Top-Heavy Year, the provisions of Section 416(g) of the Code shall govern and control. 2.36 "Trust": The trust forming a part of the Plan and known as the Richardson Electronics, Ltd. Employees Stock Ownership Trust. 2.37 "Trust Agreement": (a) With respect to the period June 1, 1989 to February 23, 1990, the agreement dated July 17, 1987 by and among Richardson and Scott Hodes and William G. Seils, as Trustees. (b) Effective February 23, 1990, the agreement dated such date by and between Richardson and Marine Midland Bank, N.A. 2.38 "Trustee" or "Trustees": The person or persons who shall from time to time be acting as the Trustee under the Trust Agreement and their duly appointed successors. 2.39 "Valuation Date": The Anniversary Date and each other date during the Plan Year specified by the Administrator [in a manner which does not discriminate in favor of Participants who are "highly compensated employees," as defined in Section 414(q) of the Code] as to which Accounts are adjusted pursuant to Article VII. 2.40 "Vested Account Balance": At any date, the portion of a Participant's Account Balance which would be nonforfeitable if the Participant incurred a Termination of Employment on such date, as determined under Article VIII. 2.41 "Year of Service": (a) Any Computation Period during which an Employee has completed at least 1,000 Hours of Service. (b) For purposes of Article III, as soon as an Employee completes at least 1,000 Hours of Service during the initial Computation Period specified in Section 2.12, he shall be credited with a Year of Service even if fewer than 12 consecutive calendar months have passed. If such Employee fails to complete at least 1,000 Hours of Service during the initial 12-month Computation Period specified in Section 2.12, the second 12-month Computation Period shall consist of the Plan Year which includes the first anniversary of his employment or re-employment commencement date, and the succeeding 12-month Computation Periods shall also be based on the Plan Year. ARTICLE III PARTICIPATION 3.1 Eligibility To Participate (a) Each Employee shall be eligible to participate in the Plan, provided that he (1) has completed at least one Year of Service and (2) is not a member of a collective bargaining unit in which retirement benefits were the subject of good faith bargaining between the Employer or any Related Employer and one or more employee representatives, (3) is not a nonresident alien described in Code Section 410(b)(3)(C), and (4) is not a United States citizen employed by the Employer in a nation other than the United States (the "Foreign Country") who would be subject to tax under the laws of such Foreign Country upon receiving an allocation to his Account pursuant to Section 6.1. (b) Each Employee who participated in the Plan in accordance with its terms prior to the Effective Date shall continue as a Participant. Each other Employee who satisfies the eligibility requirements of Section 3.1(a) shall become a Participant on the later of the Effective Date or the Entry Date coincident with or immediately following the date on which he satisfies such eligibility requirements, provided that he is still employed by the Employer on such date. 3.2 Duration of Participation; Re-Employment (a) Subject to the provisions of Sections 3.2(b) and (c), an Employee shall cease to be a Participant for purposes of Section 6.1 upon ceasing to be employed by the Employer, but shall remain a Participant for all other purposes hereunder until such time as his Vested Account Balance is paid to him (or his Beneficiaries) in full in accordance with Article IX, at which time his participation in the Plan shall cease. (b) Each Participant who incurs a Termination of Employment and is re-employed after incurring a Break in Service shall again become a Participant as of his re-employment date for all purposes under the Plan except Sections 4.1(a) and 7.4, and shall again become a Participant for purposes of Sections 4.1(a) and 7.4 on the Entry Date coincident with or immediately following the date on which he completes one Year of Service following such re-employment; provided, however, that if either (1) such Partici- pant had a vested right to any portion of his Account Balance when he incurred his Termination of Employment, (2) the number of Computation Periods in such Break in Service is fewer than the number of Years of Service completed by the Participant prior to such Break in Service or (3) the number of Computation Periods such Break in Service is fewer than 5, then his participation for all purposes under the Plan shall be retroactive to his date of re- employment. (c) Each Employee or each Participant who incurs a Termination of Employment and is re-employed prior to incurring a Break in Service shall be treated, for purposes of eligibility to participate in the Plan, as though he never incurred a Termination of Employment. (d) An Employee's participation in the Plan shall not be affected by the fact that he continues to be employed after his Normal Retirement Date. ARTICLE IV CONTRIBUTIONS BY EMPLOYER 4.1 Amount (a) The Board of Directors of the Administrator shall determine the aggregate amount to be contributed by all Employers for each Plan Year. Such aggregate amount shall not, however, be less than the amount required to permit the Trust to make all payments then due under any debt incurred by the Trust pursuant to Section 14.2. Subject to Section 4.1(d), each Employer hereby agrees to contribute to the Trust for a Plan Year its share of the aggregate amount, in the proportion that the total Compensation paid or accrued by such Employer to all Participants for the immediately preceding Plan Year bears to the total Compensation paid or accrued to all Participants by all Employers for such Plan Year; provided, however, that he contribution made by any Employer for any Plan Year shall not exceed the maximum amount deductible by such Employer for that Plan Year under the provisions of Section 404 of the Code. Effective as to Plan Years ending on or after May 29, 1993, the preceding sentence shall read as follows: "Subject to Section 4.1(d), each Employer hereby agrees to contribute to the Trust for a Plan Year its share of the aggregate amount, in the proportion that the total Compensation paid or accrued by such Employer to all Participants for such Plan Year bears to the total Compensation paid or accrued to all Participants by all Employers for such Plan Year; provided, however, that he contribution made by any Employer for any Plan Year shall not exceed the maximum amount deductible by such Employer for that Plan Year under the provisions of Section 404 of the Code." (b) If any Employer is unable to make its full contribution for any Plan Year, the remaining Employers may (but shall not be obligated to) make all or a portion of such Employer's contribution on its be behalf, subject to the foregoing limitations. (c) The Employer's contribution shall be in the form of cash or stock at its fair market value, or a combination thereof; provided that at all times at least 51% of the total balance in all Employer Contribution Accounts and the Suspense Account (excluding amounts held to make current debt payments and dividends held pending distribution pursuant to Section 9.6) shall be in the form of Stock or other stock of the Employer. (d) The Employer shall be required to contribute [in the same proportion as provided in Section 4.1(a)] the amount of any previously forfeited amounts which are require to be restored to any re-employed Participant's Employer Contribution Account during such Plan Year pursuant to Section 8.5(b), reduced by any forfeitures for such Plan Year and by any excess Employer contributions and any excess forfeitures allocated pursuant to Sections 7.5(c), (d) and (e). (e) The determination of the Administrator as to the amount to be contributed by each Employer hereunder shall in all respects be final, binding and conclusive upon all persons or parties claiming any rights either under the Plan or the Trust. 4.2 Time for Payment All contributions by the Employer shall be delivered to the Trustee not later than the date fixed by law for the filing of the Employer's Federal income tax return for the Plan Year which includes the Anniversary Date as of which such contribution is to be allocated (including any extensions of time granted by the Internal Revenue Service for the filing of such return). ARTICLE V CONTRIBUTIONS BY PARTICIPANTS 5.1 Contributions by Participants Participants shall not be required or permitted to make any contributions to the Plan. ARTICLE VI ALLOCATION OF EMPLOYER CONTRIBUTIONS 6.1 Manner of Allocation (a) All contributions made by any Employer under Section 4.1(a) for a Plan Year, and all stock released from the Suspense Account for such Plan Year under Section 14.2, shall be allocated among the Employer Contribution Accounts of the eligible Participants [as defined in Section 6.1(b)] in the proportion that the Compensation paid or accrued to each Participant during the immediately preceding Plan Year bears to the total Compensation paid or accrued to all such Participants during such Plan Year. Effective as to Plan Years ending on or after May 29, 1993, the preceding sentence shall read as follows: "All contributions made by any Employer under Section 4.1(a) for a Plan Year, and all stock released from the Suspense Account for such Plan Year under Section 14.2, shall be allocated among the Employer Contribution Accounts of the eligible Participants [as defined in Section 6.1(b)] in the proportion that the Compensation paid or accrued to each Participant during such Plan Year bears to the total Compensation paid or accrued to all such Participants during such Plan Year." To the extent that such contributions are used to repay debt incurred under Section 14.2, the payment shall be charged to the Participants' Employer Contribution Accounts in the same proportion. (b) The Participants who shall be eligible to receive an allocation under this Section 6.1 with respect to a Plan Year shall be limited to: (1) Participants who are Employees on the last work day of the immediately preceding Plan Year (including Participants who incurred a Termination of Employment on such date) and who are credited with a Year of Service for such Plan Year, (2) Participants who retired on or after their Normal Retirement Date during such immediately preceding Plan Year, and (3) Participants who terminated employment during such immediately preceding Plan Year due to death or Permanent Disability. Effective as to Plan Years ending on or after May 29, 1993, the preceding sentence shall read as follows: "The Participants who shall be eligible to receive an allocation under this Section 6.1 with respect to a Plan Year shall be limited to: (1) Participants who are Employees on the last work day of such Plan Year (including Participants who incurred a Termination of Employment on such date) and who are credited with a Year of Service for such Plan Year, (2) Participants who retired on or after their Normal Retirement Date during such Plan Year, and (3) Participants who terminated employment during such Plan Year due to death or Permanent Disability." (c) Anything to the contrary notwithstanding, the allocation of the Employer's contributions shall subject to the limitations set forth in Sections 7.5 and 7.6, and, in any Top- Heavy Year, the limitations of Section 6.2. (d) Contributions required by Section 4.1(d) shall be restored to the Employer Contribution Account of the re-employed Participant. (e) For purposes of Sections 6.1(a) and 7.4, there shall be included in the Compensation of a Participant who commenced participation in the Plan during a Plan Year the portion of his Compensation paid or accrued prior to the Entry Date on which he became a Participant. 6.2 Allocations in Top-Heavy Years (a) Anything to the contrary notwithstanding, for any Plan Year which is a Top-Heavy Year, the aggregate allocation of the Employer's contribution to the Employer Contribution Account of each Non-Key Employee who is a Participant (including those who are employed by the Employer on the last work day of such Plan Year but who are not credited with a Year of Service for such Plan Year) shall not be less than 3% of such Non-Key Employee's Compensation for such Plan Year. (b) If, in any Top-Heavy Year, the Key Employee Percentage (as hereinafter defined) for each Key Employee who is a Participant is less than 3%, the highest Key Employee Percentage shall be substituted for 3% in Section 6.2(a) unless a defined benefit plan [as defined in Section 414(j) of the Code] which is described in Section 2.35(d) must be combined with the Plan in order to satisfy the requirements of Section 401(a) or Section 410 of the Code. For purposes of this Section 6.2, the "Key Employee Percentage" for each Key Employee shall be the aggregate amount of the Employer's contribution allocated to such Key Employee's Employer Contribution Account for such Plan Year (taking into account adjustments pursuant to this Section 6.2) as a percentage of such Key Employee's Compensation. (c) In the event that the allocation of the Employer's contribution to any Non-Key Employee under Section 6.1 in a Top- Heavy Year would otherwise violate the provisions of this Section 6.2, the aggregate amount allocated to the Employer Contribution Accounts of the Key Employees shall be reallocated (in proportion to the amount otherwise allocated to each Key Employee) to the Company Contribution Accounts of the Non-Key Employees (in proportion to the difference between the amount otherwise allocated to each Non-Key Employee and the amount required to be allocated under this Section 6.2) until the requirements of this Section 6.2 are satisfied. (d) In the event that a Non-Key Employee is a partici- pant in any other defined contribution plan [as defined in Section 414(i) of the Code] maintained by the Employer or any Related Employer, the amount required to be allocated to such Non-Key Employee under this Section 6.2 shall be reduced by the aggregate amount allocated to the Non-Key Employee's accounts under all such other plans. (e) In the event that a Non-Key Employee is a partici- pant in any defined benefit plan [as defined in Section 414(j) of the Code] maintained by the Employer or any Related Employer which is a "top-heavy plan" (as defined in Section 416(g) of the Code}, then, if the accrued benefit of such plan satisfies the require- ments of Section 416(c)(1) of the Code [taking into account the modifications required by Section 416(h)(2)(A)(ii) of the Code if Section 6.2(e) applies], then Section 6.2(a) shall not apply to such Non-Key Employee. If such accrued benefit does not satisfy such requirements, then "5%" shall be substituted for "3%" in Section 6.2(a) with respect to such Non-Key Employee, and Section 6.2(b) shall not apply to such Non-Key Employee. (f) If Section 7.6(c) applies for any Plan Year, then "4%" shall be substituted for "3%" in Section 6.2(a), and "7.5%" shall be substituted for "5%" in Section 6.2(e). (g) For purposes of this Section 6.2, contributions by the Employer shall include forfeiture allocations. 6.3 Administrator to Notify Trustee As soon as practicable after the close of each Plan Year, the Administrator shall furnish the Trustee with a statement showing the Compensation paid to each Participant for such Plan Year. ARTICLE VII ACCOUNTS OF PARTICIPANTS 7.1 Separate Accounts The Administrator shall create and maintain adequate records to disclose the interest in the Trust of each Participant (or Beneficiary of a deceased Participant). For accounting purposes, a separate Account shall be maintained for each Partici- pant, reflecting his proportionate share of all contributions, forfeitures, net increases or decreases in the value of the Trust assets and distributions to the Participant (or his Beneficiary). Credits and charges shall be made to such Accounts in the manner described herein. The maintenance of such separate Accounts shall not require the segregation of any assets from any other assets held in the Trust. 7.2 Adjustments to Accounts (a) As of each Valuation Date, the Administrator shall: (1) First, charge to the proper Accounts all payments or distributions made from the Accounts since the immediately preceding Valuation Date. (2) Second, adjust the Account Balances upward or downward, on a proportional basis, according to the net gain or loss of the Trust assets from investments (as reflected by interest payments, dividends, realized and unrealized gains and losses on securities and other investment transactions) and from the payment of expens- es, so that the aggregate Account Balances equal the fair market value, as determined by the Trustee, of the Trust assets on such Valuation Date. For purposes of this Section 7.2(a)(2), Account Balances shall not include (i) any Account which has been segregated for the payment of installments pursuant to Section 9.4(b) or (ii) any asset of an Account the gain or loss from which is, pursuant to Article XIV, allocated to a specific Participant's Account. All gain or loss (whether realized or unrealized) attributable to an Account described in the preceding sentence shall be allocated directly to such Account, and the fair market value of the balance in all such Accounts, after such allocation (or, in the case of an asset allocated to a specific Participant's Account, the fair market value of such asset) shall be subtracted from the fair market value of the Trust's assets (and, if applicable, from the Account Balance to which such asset is allocated), prior to the adjustment set forth herein. (3) Third, if such Valuation Date is an Anniversary Date, allocate and credit the balances, if any, in the Excess Contribution Account and the Excess Forfeiture Account in accordance with Sections 7.5(d) and (e). (4) Fourth, if such Valuation Date is an Anniversary Date, allocate and credit the Employer contributions and Stock released from the Suspense Account in accordance with Section 7.3 and forfeitures, if any, in accordance with Section 7.4, in either case except to the extent modified by Sections 7.5, 7.6 and 7.7. (b) Every adjustment made pursuant to this Section 7.2 shall be considered as having been made as of the Anniversary Date of the applicable Plan Year regardless of the dates of actual entries or receipt by the Trustee of the contribution made by the Employer for such Plan Year; provided, however, that Employer contributions pursuant to Section 4.1(a) for the Plan Years ending in 1988 through 1992, inclusive, as well as the Employer contribution made in 1992 for the Plan Year ended May 29, 1993, shall be considered as having been made as of the first day of the applicable Plan Year regardless of the dates of actual entries or receipt by the Trustee of such contributions. (c) The determination as to the value of the assets of the Trust and the charges or credits to the Accounts of the Participants shall be conclusive and binding on all persons. 7.3 Crediting of Employer Contributions Each Participant's Employer Contribution Account shall be credited with that portion of the Employer's contribution for the current Year and Stock released from the Suspense Account for the current year to which such Participant is entitled, as provided in Section 6.1. 7.4 Crediting of Forfeitures Forfeitures, if any, from any Account occurring as a result of the Termination of Employment of Participants during the Plan Year shall first be allocated to the Employer Contribution Accounts of re-employed Participants as required by Section 8.5(b), and any excess shall be allocated among the Employer Contribution Accounts of all Participants eligible to receive an allocation of the Employer's contribution under Section 6.1(a) in the proportion which the Compensation paid or accrued to each such Participant during such Plan Year bears to the total Compensation paid or accrued to all such Participants during such Plan Year. 7.5 Limitation on Allocations (a) Notwithstanding any other provisions of the Plan, the Annual Additions with respect to a Participant for any Limitation Year shall not exceed the lesser of (1) $30,000, or such higher amount as may be permitted at the relevant time under applicable law, or (2) 25% of the Compensation paid to the Participant by the Employer (or any Related Employers) during such year. The limitations in the preceding sentence shall not apply to amounts credited to a Participant's Employer Contribution Account pursuant to Section 8.5(b). An amount credited to a Participant's Account in order to correct an error made in a previous Limitation Year shall be treated for purposes of this Section 7.5(a) as having been credited to such Account in the Limitation Year to which the error relates. (b) If the allocation of the Employer's contribution to a Participant's Employer Contribution Account in a particular Limitation Year would cause the limitations of Section 7.5(a) to be exceeded with respect to such Participant, the excess contribution shall, subject to the limitations of Section 7.5(a), be reallocated among the Employer Contribution Accounts of all other Participants eligible to share in the Employer's contribution for the Plan Year ending in or coinciding with such Limitation Year, in proportion to their Compensation for such Plan Year. If, following such reallocation, there remains an excess portion of the Employer's contribution which cannot be allocated to the Employer Contribution Account of any eligible Participant without exceeding the limita- tions of Section 7.6(a), such excess portion shall be placed in a suspense account, designated the "Excess Contribution Account." (c) If, following the allocation of the Employer's contribution for a particular Plan Year [including all realloca- tions required pursuant to Section 7.5(b)], the allocation of forfeitures to a Participant's Employer Contribution Account would cause the limitations of Section 7.5(a) to be exceeded with respect to such Participant, the excess forfeiture shall, subject to the limitations of Section 7.5(a), be reallocated among the Employer Contribution Accounts of all other Participants eligible to share in forfeitures for such Plan Year, in accordance with Section 7.4. If, following such reallocation, there remains an excess portion of the forfeitures which cannot be allocated to the Employer Contr- ibution Account of any eligible Participant without exceeding the limitations of Section 7.5(a), such excess portion shall be placed in a suspense account, designated the "Excess Forfeiture Account." (d) As of the Anniversary Date for a Plan Year, the balance in the Excess Contribution Account shall first be applied to reduce the Employer's contribution under Section 4.1(b). The balance, if any, remaining in the Excess Contribution Account shall be included in the Employer's contribution for such Plan Year for purposes of Section 6.1. Section 7.5(b) shall apply to any amount which cannot be allocated pursuant to the preceding sentences. (e) As of the Anniversary Date for a Plan Year, the balance in the Excess Forfeiture Account shall first be applied to reduce the Employer's contribution under Section 4.1(b) after the application of Section 7.5(d). Any remaining balance in such Excess Forfeiture Account shall be allocated as a forfeiture under Section 7.4. Section 7.5(c) shall apply to any amount which cannot be allocated pursuant to the preceding sentences. (f) For purposes of Section 7.5(a)(2) and Section 7.6, "Compensation" shall have the meaning set forth in Section 2.11; provided, however, that notwithstanding any provision of Section 2.11, for purposes of Section 7.5(a)(2) Compensation shall not include: any contributions made by the Employer or any Related Employer to this Plan or any other plan qualified under Section 401(a) of the Code to the extent excludable from the Employee's income, or any distributions from this Plan or any such qualified plan; contributions made to any simplified employee pension plan described in Section 408(k) of the Code, to the extent deductible by the Employee; amounts included in the Employee's income under Section 83 of the Code [other than by reason of an election under Section 83(b)]; amounts realized from the sale, exchange or other disposition of stock acquired upon exercise of a qualified stock option; or other amounts which receive special tax benefits under the Code, such as contributions to a health or accident plan which are excludable from the Employee's income or contributions towards the purchase of an annuity contract described in Section 403(b) of the Code (whether or not excludable from the Employee's income). Notwithstanding the foregoing, Compensation shall include any amounts deferred under a nonqualified, unfunded plan of deferred compensation in the Plan Year received by the Employee. If so elected by the Administrator pursuant to Treasury Regulations 1.415-2(d)(5), items of compensation shall be included in Compensa- tion for purposes of this Section 7.5 and Section 7.6 in the Limitation Year in which they are accrued by the Employer or a Related Employer rather than the Limitation Year in which they are received by or made available to the Participant, provided that the making or revocation of such an election shall not have the effect of causing any such item to be included in Compensation for more than one Limitation Year. (g) The Administrator of this Plan shall co-ordinate the application of this Section 7.5 with the application of the corresponding provisions of the instrument establishing Richardson Electronics, Ltd. Employees Profit-Sharing Plan (the "Profit- Sharing Plan") by the administrator of Profit-Sharing Plan in circumstances where the limitations under Section 7.5(a) and the corresponding provisions of the instrument establishing the Profit- Sharing Plan would be exceeded, so as to determine under which of the 2 plans (or both plans, if such administrators so determine) the adjustments required by Sections 7.5(b) and (c) and the corresponding provisions of the instrument establishing the Profit- Sharing Plan shall be made. (f) If, in any Limitation Year, not more than 1/3 of the total amount allocated under Section 6.1(b) which are deductible under Section 404(a) of the Code is allocated to the Employer Contribution Accounts of Participants who are "highly compensated employees," as defined in Section 414(q) of the Code, the following rules shall apply: (1) The dollar limitation set forth in Section 7.5(a)(1) shall be increased by the lesser of such dollar limitation or the amount of Stock contributed under Section 6.1(b), or purchased with cash contributed under Section 6.1(b), for such Limitation Year; and (2) The following allocations to a Participant's Account shall be disregarded in applying Section 7.5(a): (A) Any forfeitures of Stock which was acquired by a loan under Section 14.2; or (B) Any Employer contributions to the Plan which are deductible under Code Section 404(a)(9)(B) and charged against such Participant's Account. Section 7.5(f)(1) shall not apply to Plan Years beginning after July 12, 1989. 7.6 Combined Plan Limitation (a) Anything to the contrary notwithstanding, if during any Limitation Year a Participant also participates in a "defined benefit plan" [as defined in Section 414(j) of the Code] maintained by the Employer or any Related Employer, the otherwise permissible Annual Addition on behalf of any Participant under the Plan may be further reduced to the extent necessary, as determined by the Administrator in its sole discretion, to comply with the additional limitations set forth in Sections 7.6(b) and (c). (b) In the event that a Participant also participates in a defined benefit plan as described in Section 7.6(a), the sum of the Defined Benefit Plan Fraction and the Defined Contribution Plan Fraction (as hereafter defined) for any Limitation Year shall not exceed 1.0. For purposes of this Section 7.6, the "Defined Benefit Plan Fraction" for any Limitation Year is a fraction, the numerator of which is the Participant's projected annual benefit under the defined benefit plan (determined as of the close of its plan year) and the denominator of which is the lesser of: (1) the product of 1.25 multiplied by the maximum dollar limitation in effect under Section 415(b)(l)(A) of the Code for such Limitation Year, or (2) the product of 1.4 multiplied by the amount which may be taken into account under Section 415(b)(l)(B) of the Code for such Limitation Year. The "Defined Contribution Plan Fraction" for any Limitation Year is a fraction, the numerator of which is the sum of the annual additions to the Participant's Account (as determined under Section 7.5) as of the close of the Limitation Year and the denominator of which is the sum of the lesser of the following amounts determined for such Limitation Year and each prior Year of Service [assuming, for this purpose, that Section 415(c) of the Code had been in effect during such prior Years of Service]: (1) the product of 1.25 multiplied by the maximum dollar limitation in effect under Section 415(c)(l)(A) of the Code for such Year (determined without regard to Section 415(c) (6) of the Code), or (2) the product of 1.4 multiplied by the maximum amount which may be taken into account under Section 415(c)(1)(B) of the Code for such Limitation Year. (c) Notwithstanding the foregoing, "1.0" shall be substituted for "1.25" wherever it appears in Section 7.6(b) for any Plan Year in or coinciding with a Limitation Year which is a Top-Heavy Year, except as hereinafter provided. If as a result of such substitution the amount credited to any Employee's Account would exceed the limitations of this Section 7.6, then such substitution shall not be made and the allocations to Non-Key Employees shall be revised in accordance with Section 6.2(f), unless such Plan Year would still be a Top-Heavy Year if "90%" were substituted for "60%" in all provisions of Section 2.35. (d) For purposes of this Section 7.6, all defined benefit plans of the Employer or any Related Employer, whether or not terminated, are to be treated as one defined benefit plan, and all defined contribution plans of the Employer or any Related Employer, whether or not terminated, are to be treated as one defined contribution plan. The extent to which the annual allocations made under this Plan shall be reduced as compared with the extent to which the annual benefit under a defined benefit plan shall be reduced in order to achieve compliance with the limita- tions of Sections 415 and 416 of the Code shall be determined by the Administrator in such a manner so as to maximize the aggregate benefits payable to such Participant. If such reduction is under this Plan the Administrator shall advise affected Participants of any additional limitation on their annual allocations required by this Section 7.6(d). (e) The provisions of this Section 7.6 are intended to comply with the provisions of Section 415 of the Code, as modified by Section 416 of the Code, so that the maximum benefits provided by the Employer or any Related Employer shall be exactly equal to the maximum amounts allowed under the Code. If there is any inconsistency between this Section 7.6 and the provisions of Section 415 of the Code, as modified by Section 416 of the Code, such inconsistency shall be resolved in such a way so as to give full effect to the provisions of the Code. 7.7 Correction of Error In the event of an error in the adjustment of a Parti- cipant's Account, the Administrator, in its sole discretion, may correct such error either by crediting or charging the adjustment required to make such correction to or against the income and expenses of the Trust for the Plan Year in which the correction is made or the Employer may make an additional contribution to permit the correction of the error. Except as provided in this Section 7.7, the Accounts of other Participants shall not be readjusted on account of such error. 7.8 Transfer Accounts (a) The Plan shall accept from the Trustees of the Richardson Electronics, Ltd., Employees Profit-Sharing Trust (the "Profit-Sharing Trust") all of the Stock held by the Profit-Sharing Trust (the "Transfer Stock") as of the Transfer Date. For purposes of this Section 7.8, the term "Transfer Date" shall mean a date selected by Richardson, as Administrator of both this Plan and of the Richardson Electronics, Ltd. Profit-Sharing Plan (the "Profit- Sharing Plan"), in its sole and absolute discretion; provided, however, in no event shall the Transfer Date be any earlier than 30 days after the date on which the notice required by Code Section 6058(b) has been filed with the Internal Revenue Service nor any later than December 31, 1989. (b) The Transfer Stock shall be credited among the Transfer Accounts created and maintained under this Plan for the purpose of recording each Participant's share, if any, of such Transfer Stock. The Transfer Account of each Employee who participated in the Profit-Sharing Plan on the Transfer Date shall initially be credited with that number of shares of Transfer Stock which is identical to the number of shares of Transfer Stock credited to his account in the Profit-Sharing Plan as of the Transfer Date. Separate sub-accounts shall be established with respect to those shares of Transfer Stock acquired with Employer contributions to the Profit-Sharing Trust and those shares of Transfer Stock acquired with Participants' after-tax contributions to said trust. Thereafter, each such sub-account shall be credited with all dividends on the Transfer Stock allocated to such sub- account and all net increases or decreases in the value of such Transfer Stock and shall be debited with all distributions to the Participant (or his Beneficiary) on whose behalf such sub-account was established. A Participant shall always be 100% vested in that sub-account of his Transfer Account which is attributable to Transfer Stock acquired with his after-tax contributions to the Profit-Sharing Trust. ARTICLE VIII VESTING OF INTEREST IN TRUST 8.1 Normal Retirement The Vested Account Balance of a Participant who retires on or after his Normal Retirement Date shall be 100% of his Account Balance. 8.2 Disability Retirement The Vested Account Balance of a Participant who retires prior to his Normal Retirement Date because of a Permanent Disability shall be 100% of his Account Balance. 8.3 Death The Vested Account Balance of a Participant who dies prior to incurring a Termination of Employment shall be 100% of his Account Balance. 8.4 Other Termination of Employment Upon a Participant's Termination of Employment prior to his Normal Retirement Date for any reason other than death or Permanent Disability, such Participant's Vested Account Balance shall be the sum of: (a) 100% of his Pre-Break Account Balance; plus (b) 100% of the balance in the sub-account of his Transfer Account which is described in the last sentence of Section 7.8(b); plus (c) A percentage of his Employer Contribution Account Balance, and that portion of his Transfer Account Balance other than the sub-account balance referred to in the last sentence of Section 7.8(b), based upon the number of completed Years of Service according to the following schedule: Completed Years of Service Vested Percentage Less than 2 years 0% 2 years but less than 3 years 20% 3 years but less than 4 years 40% 4 years but less than 5 years 60% 5 years but less than 6 years 80% 6 years or more 100% 8.5 Treatment of Forfeited Amounts; Reinstatement (a) The excess of a Participant's Account Balance over his Vested Account Balance shall be forfeited as of the date of the Participant's Termination of Employment. The forfeited amount shall be allocated as provided in Section 7.4 as of the Anniversary Date coincident with or immediately following the date the Participant incurs such a Termination of Employment (or, if later, the date the Participant fails to return to work following a layoff or a Leave of Absence as provided in Section 2.20). (b) If a Participant returns to the employment of the Employer or any Related Employer before incurring a Break in Service consisting of at least 5 Years, any amount forfeited upon such Participant's Termination of Employment shall be reinstated by using forfeitures in accordance with Section 7.4 and thereafter, to the extent necessary, by an additional Employer contribution allocated to the Participant's Employer Contribution Account. 8.6 Computation of Years of Service All Years of Service with the Employer or any Related Employer (including the Plan Year in which a Termination of Employment occurs, if the Participant completes 1,000 Hours of Service in such Plan Year) shall be taken into account in computing Years of Service for purposes of this Article VIII, except that: (a) If an Employee incurs a Break in Service, Years of Service before such Break in Service shall be disregarded until he has completed one Year of Service after his re-employment by the Employer or any Related Employer. (b) If a Participant who does not have a nonfor- feitable right to any portion of his Employer Contribution Account Balance incurs a Break in Service consisting of at least 5 Computation Periods, Years of Service before such Break in Service shall be disregarded if the number of Computation Periods in such Break in Service equals or exceeds the aggregate number of Years of Service completed prior to such Break in Service. (c) In any Plan Year during which a Participant completes more than 500 Hours of Service but less than 1,000 Hours of Service, the Participant shall not receive credit for a Year of Service for such Plan Year, but shall continue to be a Participant, shall be credited with earnings of the Trust and shall remain in his present position on the vesting schedule in Section 8.4 without advancement. 8.7 Vesting on Termination of Trust or of Employer's Agreement to Contribute The Vested Account Balance of each Participant shall be 100% of such Participant's Account Balance in the event that (a) the Plan is terminated or partially terminated, (b) the Employer shall permanently discontinue contributions to the Trust or (c) the Employer's agreement to make contributions to the Trust shall be permanently or partially terminated, whether by withdrawal from the Plan, by amendment to the Plan or by bankruptcy, liquidation or discontinuance of the business of such Employer, or by merger, consolidation or reorganization of such Employer without the adoption of this Plan within 180 thereafter by such merged, consolidated or reorganized corporation, or by operation of law or otherwise. If the Plan is partially terminated, the provisions of this Section 8.7 shall apply only to Participants affected by the partial termination. 8.8 Vesting Following Plan Amendment In the event that any amendment is adopted to the Plan which affects, directly or indirectly, the computation of the Participants' Vested Account Balances: (a) The Vested Account Balance of each Participant shall not, as a result of such amendment, be less than it would have been had the Participant incurred a Termination of Employment on the day immediately preceding the day such amendment was adopted; and (b) The Vested Account Balance of a Participant who, on the day the amendment is adopted, had completed at least 3 Years of Service shall thereafter be equal to the greater of the amount determined under the Plan as so amended or the amount determined under the Plan without regard to such amendment. 8.9 Vesting Following Partial Distributions (a) If a Participant receives a distribution of all or a portion of his Employer Contribution Account Balance at a time when it is possible for him to increase the vested percentage of his Employer Contribution Account (including a Participant who received a distribution upon incurring a Termination of Employment, who returns to the employment of the Employer or any Related Employer before incurring a Break in Service consisting of at least 5) Computation Periods, then such Participant's Vested Account Balance at any time after he is re-employed shall be determined by (1) increasing the Participant's Employer Contribution Account Balance at such time by the Adjusted Distribution (as hereafter defined), (2) then multiplying the Employer Contribution Account Balance (as so increased) by the relevant vesting percentage under Section 8.4, and (3) then subtracting the Adjusted Distribution from the product obtained. For purposes of this Section 8.9(a), the "Adjusted Distribution" shall be equal to the amount of the distribution multiplied by a fraction, the numerator of which is the Participant's Account Balance at the time the formula is applied and the denominator of which is the Account Balance immediately following the distribution (without regard to forfeitures). (b) If a Participant returns to the employment of the Employer or any Related Employer after incurring a Break in Service consisting of at least 5 Computation Periods, and such Participant did not receive payment of the full amount of his Vested Account Balance, his Vested Account Balance remaining unpaid shall be placed in a separate Pre-Break Account for the Participant. The Pre-Break Account shall be treated in the same manner as the Employer Contribution Account of the Participant, except that it shall not be credited with the Employer's contributions and the Participant shall be 100% vested in such Pre-Break Account. ARTICLE IX PAYMENT OF VESTED ACCOUNT BALANCES 9.1 Benefit Commencement Date (a) Subject to the remaining provisions of this Section 9.1, the Benefit Commencement Date for each Participant shall be as soon as practicable after the Participant has incurred both a Termination of Employment and a Break in Service consisting of at least 5 years. (b) Unless the Participant requests, in writing, a later commencement date, the Benefit Commencement Date shall not be later than one Plan Year after the close of the Plan Year in which the latest of the following events occurs: (1) Termination of Employment due to having retired upon reaching the Participant's Normal Retirement Date, disability, or death; or (2) The Participant's Termination of Employment for any other reason (provided the Participant has not been re-employed by the Employer or any Related Employer prior to that time); or (3) To the extent that a Participant's Account Balance consists of Stock which was acquired with the proceeds of a loan incurred pursuant to Section 14.2, the Plan Year in which such loan is fully repaid. (b) Except as provided in Section 9.8, a Participant's Benefit Commencement Date shall not be later than the April l of the calendar year following the calendar year determined below: (1) In the case of a Participant not described in any other clause of this Section 9.1(b), the calendar year in which he attains the age of 70-1/2. (2) In the case of a Participant who attained the age of 70-1/2 prior to January 1, 1988, and who was not described in Section 2.19(a)(3) during the Plan Year which included the last day of the calendar year in which he attained the age of 66-1/2 or any subsequent Plan Year, the later of (i) the calendar year in which he attains the age of 70-1/2 or (ii) the calendar year in which he retires. (3) In the case of a Participant who attained the age of 70-1/2 prior to January 1, 1988, and who was described in Section 2.19(a)(3) during the Plan Year which included the last day of the calendar year in which he attained the age of 66-1/2 or a subsequent Plan Year, the later of (i) the calendar year in which he attains the age of 70-1/2 or (ii) the earlier of the calendar year in which he retires or the calendar year which includes the last day of the Plan Year in which he was first described in Section 2.19(a)(3). (4) In the case of a Participant who attained the age of 70-1/2 during the calendar year 1988, who was not described in Section 2.19(a)(3) during the Plan Year which includes the last day of the calendar year in which he attained the age of 66-1/2 or any subsequent Plan Year, and who is still alive on January 1, 1989, the calendar year 1989. The provisions of this Section 9.1(b) shall apply to all Partici- pants whose Account Balances were not completely distributed prior to January 1, 1985, subject, however, to the transitional rules set forth in Proposed Treasury Regulations Section 1.401(a)(9)-1, Part I, which are hereby incorporated herein. (c) The Benefit Commencement Date of a Participant whose Vested Account Balance exceeds $3,500 shall not be earlier than his Normal Retirement Date unless the Participant consents in writing to an earlier date. A Participant who requests, in writing, the distribution of his Vested Account Balance prior to his Normal Retirement Date shall be considered to have consented to such distributions. If the value of a Participant's Vested Account Balance, determined at the time of a distribution to him, Exceeds $3,500, then such value at any subsequent time shall be deemed to exceed $3,500. (d) The date upon which the payment of a deceased Participant's Vested Account Balance to his Beneficiary commences shall be determined under Section 9.3. 9.2 Payment to Participants (a) Each Participant who does not elect to receive installment payments under Section 9.2(b) shall receive a single lump sum payment on his Benefit Commencement Date equal to his Vested Account Balance on such date. (b) Any Participant whose Vested Account Balance on his Benefit Commencement Date exceeds $3,500 may elect to receive his Vested Account Balance in a series of not more than 10 annual installments determined in accordance with Section 9.6 commencing with his Benefit Commencement Date; provided, however, that the number of installments shall not be more than the number of years of the Participant's remaining life expectancy (or the remaining joint and last survivor life expectancy of the Participant and his designated Beneficiary) as of the Benefit Commencement Date; and provided further, that except as otherwise provided in Section 9.6 the amount of any installment shall not be less than the Participant's remaining Vested Account Balance as of the date on which such installment is paid, divided by the remaining life expectancy of the Participant (or by the remaining joint and last survivor life expectancy of the Participant and his designated Beneficiary), determined as of the first day of the calendar year in which such installment payment is made. For purposes of this Section 9.2(b), life expectancy shall be determined by the Administrator in accordance with the regulations promulgated under Section 72 of the Code. The first such installment shall be paid for the calendar year which is not later than the calendar year specified in the applicable clause of Section 9.1(b). An election pursuant to this Section 9.2(b) may be made or revoked at any time prior to the Benefit Commencement Date in accordance with rules established by the Administrator. After installment payments have commenced, a Participant may revoke his election, in which event his full remaining Vested Account Balance shall be distributed to him in a single lump sum as soon as practicable, but in no event later than the date upon which the next installment payment would have been required to have been made. 9.3 Payment to Beneficiaries (a) If a Participant dies after his Benefit Commencement Date but before his Vested Account Balance has been distributed in full, all remaining payments which would have been made to the Participant shall be made instead at the same time and in the same amounts to his Beneficiaries; provided, however, that either the Participant prior to his death, or all Beneficiaries following his death, may elect to have the remaining Vested Account Balance distributed in a single lump sum payment, subject to the provisions of Section 9.3(c). (b) If a Participant dies prior to his Benefit Commencement Date (whether or not still employed by the Employer), then his Vested Account Balance shall be paid to his Beneficiaries as follows: (1) If neither the Participant nor his Beneficiaries elect installment payments under Section 9.3(b)(2), then the Participant's Vested Account Balance shall be distributed to his Beneficiaries in a single lump sum payment as soon as practicable, but in no event later than 5 years after the Participant's death. (2) If either the Participant prior to his death, or his Beneficiaries following his death, so elect in accordance with the provisions of Section 9.3(c), then each Beneficiary's share of such Vested Account Balance shall be distributed in a series of annual installment payments which meet either of the following requirements: (i) The Beneficiary's entire share of such Vested Account Balance shall be distributed within 5 years after the Participant's death; or (ii) The first installment payment shall be made to the Beneficiary within one year after the Participant's death, and each installment payment made to such Beneficiary shall be at least equal to such Beneficiary's share of the Participant's remaining Vested Account Balance divided by such Beneficiary's remaining life expectancy as of the first day of the calendar year in which such payment is made (determined in accordance with regulations promulgated under Section 72 of the Code). In the case of a Beneficiary who is the surviving Spouse of the Participant, the first payment made under Section 9.3(b)(2)(ii) may be made not later than the day on which the Participant would have attained age 70-1/2, and if such surviving Spouse dies before such date, such surviving Spouse's share of the Participant's Vested Account Balance shall be distributed in accordance with the provisions of this Section 9.3(b) as though such surviving Spouse were the Participant. For purposes of the preceding sentence, the Administrator may, to the extent of regulations promulgated under Section 401(a)(9)(F) of the Code, treat amounts payable to a child of the Participant as made to his surviving Spouse if such amounts will become payable to such Spouse upon such child reaching the age of majority or upon such other event occurring as may be specified in such regulations. (c) Any election and any revocation of any election made under this Section 9.3 shall be in accordance with rules established by, and shall be subject to the approval of, the Administrator; provided that any election which has the effect of causing any portion of the Vested Account Balance to be paid to any Beneficiary other than the surviving Spouse of the Participant, shall be effective only if (1) such election identifies the designated Beneficiary, and is consented to, in writing, by the Spouse and the Spouse's signature is witnessed either by a representative designated by the Administrator or by a notary public, or (2) it is established, to the satisfaction of the Administrator, that the Participant had no surviving Spouse, or that the consent of the Spouse cannot be obtained because the Spouse cannot be located or because of such other circumstances as may be specified in regulations promulgated under Section 417(a)(2)(B) of the Code. The Spouse's consent, if given, shall be irrevocable, but shall not be binding upon any future Spouse. Such election may be revoked by the Participant at any time prior to his Benefit Commencement Date without the Spouse's consent, but any change in such election (including any change in the Beneficiary specified therein) shall require the Spouse's consent as set forth above. (d) Anything else in this Section 9.3 to the contrary notwithstanding, if a Participant's Beneficiary is his estate pursuant to Section 10.2, his Vested Account Balance shall be paid to his estate in a single lump sum. 9.4 Extent of Further Participation in Trust (a) Upon the distribution of the full amount of a Participant's Vested Account Balance in a lump sum pursuant to the provisions of Sections 9.2(a) or 9.3(b)(1), such Participant (and his Beneficiaries) shall cease to have any interest in the Trust and all obligations hereunder of the Trustee and the Employer or any Related Employer to them shall cease. (b) In the event that the distribution of a Participant's Vested Account Balance is made in installments pursuant to the provisions of Sections 9.2(b) or 9.3(b)(2), such Participant's Vested Account Balance remaining payable from time to time shall constitute a liability of the Trust and at the election of the Participant or his Beneficiary, as the case may be, shall either (1) continue to share in the gains and losses of the Trust pursuant to Section 7.2 until it is completely distributed or (2) shall be segregated and placed in an account at a national bank or other comparable financial institution insured by the Federal Deposit Insurance Corporation and shall be credited with any interest earned on such account. Such Participant's Vested Account Balance remaining payable from time to time, after it is segregated, shall not participate in gains or losses of the Trust or in the Employer's contributions thereto. The Administrator shall adopt such rules as it deems necessary or advisable to permit Participants to make elections and, if it so determines, to revoke or to modify such elections under this Section 9.4(b). (c) Each Account of a Participant who dies or incurs a Termination of Employment shall continue to share in all allocations of gains and losses of the Trust pursuant to Section 7.2 until it is completely distributed or segregated pursuant to Sections 9.4(a) or (b), as the case may be. 9.5 Payment to Persons Under Legal Disability In the event that any amount hereunder shall become payable to a minor or to a person under legal or other disability who, in the opinion of the Administrator, is unable to administer such distribution, such amount may be paid to any person(s) the Administrator deems best for the maintenance, care, support and education of such minor or disabled person. Any such payment in accordance with the provisions of this Section 9.5 shall be a complete discharge of any liability for the making of such payment under the provisions of the Plan. 9.6 Payment in Installments (a) If a Participant or Beneficiary elects to have an Account distributed in annual installments pursuant to Section 9.2(b) or 9.3(b)(2), the installment for each calendar year shall be paid not later than December 31 of such calendar year. Not- withstanding the foregoing, if the first calendar year for which an installment payment is to be made pursuant to Section 9.2(b) is the calendar year specified under the applicable clause of Section 9.1(c), payment of such installment may be deferred until not later than the date set forth in Section 9.1(c), but such deferral shall not affect the date by which the installment for the next succeed- ing year must be paid. (b) The amount of the installment payment for any calendar year shall be equal to the Vested Account Balance as of the Anniversary Date which occurs in the immediately preceding calendar year, divided by the divisor determined under Section 9.6 (c). For purposes of determining the amount of the installment payment, the Vested Account Balance shall include all income, expenses, gains, losses, contributions and forfeitures allocated as of such Anniversary Date, and shall be reduced by distributions made after the Anniversary Date only (1) if the Anniversary Date is other than a December 31 and such distributions are made on or before December 31 of the calendar year in which the Anniversary Date occurs, or (2) to the extent that, as permitted by the second sentence of Section 9.6(a), a portion of the first installment payment required under Section 9.2(b) is paid after the end of the calendar year for which such installment is required. To the extent that any amount is distributed for any calendar year in excess of the installment payment required for such calendar year, such excess shall not reduce the amount of the installment payment required for any subsequent year. (c) The divisor used to determine the amount of each installment payment shall be determined as follows: (1) Unless the person making the election elects to redetermine life expectancies each year in accordance with Section 9.6(c)(2), the divisor for the first year for which an installment payment is to be made (hereinaf- ter the "initial divisor") shall be a number specified by the person making the election, and the divisor for each succeeding year shall be equal to the divisor for the immediately preceding year reduced by one. If the first year for which an installment payment will be made is the latest calendar year for which installment payments are allowed to commence pursuant to Section 9.2(b) or Section 9.2(c)(2), the initial divisor shall not be greater than, in the case of installments payable under Section 9.2(b), the life expectancy of the Participant (or, if applica- ble, the joint and last survivor life expectancy of the Participant and Beneficiary) or, in the case of install- ments payable under Section 9.3(b)(2), the life expectan- cy of the Beneficiary, determined as of the Participant's and/or Beneficiary's birthday which occurs in such calendar year. If installments commence in a calendar year earlier than the latest calendar year for which they are required to begin, the initial divisor shall not be greater than the maximum initial divisor as set forth in the preceding sentence, increased by one for each calendar year prior to the latest year for which install- ments are required to begin. If the person making the election fails to specify the initial divisor, or specifies an improper initial divisor, the initial divisor shall be the largest initial divisor that the person making the election could have specified. (2) If the person electing to receive install- ments is either the Participant or the Participant's Spouse, such person may also elect to redetermine the life expectancy of the Participant, the Participant's Spouse, or both, on an annual basis. Such election may be made or revoked, in writing, at any time prior to the time at which the first installment is required to be paid pursuant to Section 9.2(b) or Section 9.3(b)(2). Thereafter, such election or failure to elect shall be irrevocable. If such election is made, then the divisor for each year for installments payable pursuant to Section 9.2(b) shall be the remaining life expectancy of the Participant (or, if applicable, the remaining joint and last survivor life expectancy of the Participant and his Beneficiary) determined as of their respective birthdays attained in such year; provided, however, that if the Participant's Beneficiary is other than the Participant's Spouse, or if the Participant has not elected to redetermine his Spouse's life expectancy, then the divisor shall be determined in accordance with Proposed Treasury Regulations Section 1.401(a)(9)-1, Q&A E-8(b). The divisor for each year for installments payable to the Participant's surviving Spouse under Section 9.3(b)(2) shall be the remaining life expectancy of the surviving Spouse as of his birthday attained in such year. (3) For all purposes of this Section 9.6, life expectancies shall be determined in accordance with the expected return multiplies set forth in Tables V and VI of Treasury Regulations Section 1.72-9 as in effect at the time the life expectancy is being determined. (4) Anything else contained herein to the contrary notwithstanding, the divisor for any year shall not be less than the divisor required by the minimum distribu- tion incidental benefit requirement as set forth in Proposed Treasury Regulations Section 1.401(a)(9)-2, Q&A 4. (d) Installments may be paid at regular intervals of less than a year, provided that the total amount paid in any year shall not be less than the annual installment required for such year pursuant to this Section 9.6. 9.7 Compliance with Regulations The provisions of this Article IX are intended to comply with the minimum distribution requirements of Section 401(a)(9) of the Code and of Proposed Treasury Regulations Section 1.401(a)(9)-1 promulgated thereunder, including the incidental death benefit requirement as set forth in Proposed Treasury Regulations Section 1.401(a)(9)-2. Anything else contained in this Plan to the contrary notwithstanding, all distributions shall be made in accordance with Section 401(a)(9) and said Regulations, which shall override any provisions of this Plan which are inconsistent therewith. Upon the promulgation of final Treasury Regulations replacing Proposed Treasury Regulations Section 1.401(a)(9)-1 and - - -2, the provisions of this Article IX shall be construed by reference to such final Treasury Regulations and shall be imple- mented accordingly. 9.8 Distributions of Stock and Dividends (a) Anything else in this Article IX to the contrary notwithstanding, any Stock held in the Account of a Participant as of his Benefit Commencement Date or the date of his death shall be distributed to such Participant or his Beneficiaries in kind, unless such Participant or his Beneficiaries affirmatively elect, in writing, to receive a distribution of the value of such Stock in cash; provided, however, that the value of any fractional share of Stock shall be distributed in cash. To the extent the value of such Stock is distributed in cash, such Stock shall be reallocated among the Employer Contribution Accounts of the remaining Partici- pants, and the amount of such cash distribution shall be charged against such Employer Contribution Accounts, in proportion to the balances therein. (b) If any dividend is paid on Stock held by the Trust, the Administrator may, in its discretion, direct the Trustee to distribute such dividend among the Participants in proportion to the Stock allocated to their Accounts as of the end of the Plan Year in which such dividend is paid, not later than 90 days after the end of such Plan Year. 9.9 Right of First Refusal and Options on Stock (a) Subject to Section 9.9(c), all shares of such distributed to any Participant or Beneficiary may, as determined by the issuer of the Stock or the Administrator, be subject to a right of first refusal. Such right shall provide that prior to any subsequent transfer, the Stock must first be offered by written offer to the Trust, and then, if refused by the Trust, to the issuer. In the event that the proposed transfer constitutes a gift or other transfer at less than fair market value, the price per share shall be determined by an independent appraiser (appointed by the Administrator) as of the Anniversary Date coinciding with or immediately preceding the date of exercise. In the event of a proposed purchase by a prospective bona fide purchaser, the price shall be the greater of the fair market value, as so determined, or the price offered by the prospective bona fide purchaser. Valuations must be made in good faith and based on all relevant factors for determining the fair market value of securities. The Trust may accept the offer at any time during a period not exceeding seven days after receipt of such offer. In the event the Trust does not accept such offer, the issuer may accept such offer at any time during a period not exceeding seven days thereafter. Payment for Stock purchased pursuant to a right of first refusal with respect to a proposed gift shall be either in cash, not later than 30 days after the right is exercised, or in not more than five annual installments, the first to be paid within 30 days of exercise, and the remaining four to bear interest at the rate designated under Section 483(c)(l)(B) of the Code from time to time. In the case of a proposed sale, payment shall be made in accordance with the payment terms offered by the proposed purchaser. (b) Any Participant (or Beneficiary) to whom Stock is distributed shall have the right to require the issuer of such Stock to purchase such Stock, by written notice delivered to such issuer, either within 60 days after such distribution is received or within the first 60 days of the next succeeding Plan Year. The Purchase price in either case shall be the fair market value [determined as provided in Section 9.9(a)] as of the Anniversary Date preceding the exercise of the option. The purchase price shall be paid either in cash within 30 days of exercise or in not more than 5 annual installments, the first to be paid within 30 days of exercise, and the remaining 4 to bear interest at the rate designated under Section 483(c)(l)(B) of the Code from time to time. If any Participant notifies such issuer that he is exercising his option, such issuer shall notify the Trustee, which shall have the right to assume the rights and obligations of such issuer under this Section 9.9(b). (c) Sections 9.9(a) and (b) shall not apply to any Stock which is readily tradable on an established market. (d) Except as otherwise provided in this Section 9.7, no Stock shall be subject to any option, right of first refusal, buy-sell agreement, or similar restriction. No amendment shall be adopted to the Plan which shall cause any Stock to be subject to any such restriction, whether or not the Plan continues to be an employee stock ownership plan as defined in Code Section 4975(a). 9.10 Direct Rollovers (a) This Section 9.10 applies to distributions made on or after January 1, 1993. (b) Notwithstanding any other provision of the Plan to the contrary which would otherwise limit the election of a Distributee (as hereinafter defined) under this Section 9.10, a Distributee may elect, at the time and in the manner permitted by the Administrator, to have any portion of an Eligible Rollover Distribution (as hereinafter defined) paid directly to an Eligible Retirement Plan (as hereinafter defined) specified by the Distribu- tee in a Direct Rollover (as hereinafter defined). (c) For purposes of this Section 9.10, the following terms shall have the meanings indicated: (1) "Direct Rollover": A payment by the Plan to the Eligible Retirement Plan specified by a Distributee. (2) "Distributee": A Participant who is an Em- ployee or former Employee. In addition, (i) such a Participant's spouse or former spouse who is the alter- nate payee under a "qualified domestic relations order," as defined in section 414(p) of the Code, and (ii) the surviving spouse of a deceased Participant who was an Employee or former Employee, are Distributees with regard to the interest of such spouse or former spouse in the Plan. (3) "Eligible Retirement Plan": An individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust de- scribed in Section 401(a) of the Code, which accepts a Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to a Distributee who is surviving spouse, an "Eligible Retirement Plan" means an individual retirement account or individual retirement annuity. (4) "Eligible Rollover Distribution": Any distri- bution of all or any portion of the balance to the credit of the Distributee under the Plan, except that an Eligible Rollover Distribution shall not include: (i) any distribution which is one of a series of substantial- ly equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectan- cies) of the Distributee and the Distributee's designated beneficiary, or for a specified period of 10 years or more; (ii) any distribution to the extent such distribu- tion is required under Section 401(a)(9) of the Code; and (iii) the portion of any distribution which is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to Employer securities). The enumeration in the preceding sentence of any form of payment shall not imply that any person has the right to receive benefits under the Plan in such form unless otherwise specifically provided under the Plan. 9.11 Withdrawals Due to Permanent Disability In the event a Participant becomes Permanently Disabled, but has not yet incurred a Termination of Employment, he or his legal representative may withdraw all or a portion of his Vested Account Balance. The form of any such withdrawal shall be determined pursuant to Section 9.2. ARTICLE X DESIGNATION OF BENEFICIARIES 10.1 Participants to Name Beneficiaries Each Participant may file with the Administrator, in such form as the Administrator shall from time to time require, a written designation of a Beneficiary or Beneficiaries (including contingent or successive Beneficiaries) who shall be entitled to receive any benefits which may become payable upon the Partici- pant's death. If more than one Beneficiary is designated, such designation shall also specify the manner in which payments are to be divided. In the absence of such designation, all payments shall be divided per capita, or, if the Beneficiaries are the Participant's descendants, per stirpes. The Beneficiaries may be changed at any time or times by the filing of a new designation with the Administrator, without the necessity of obtaining the written consent of any Beneficiary, subject to the rights of the Participant's spouse under Section 9.3(c). No designation of a Beneficiary or change thereof shall be effective until it has been received by the Administrator. The Administrator shall be entitled to rely upon the last designation filed by the Participant prior to his death. 10.2 No Beneficiary Designated; Death of Beneficiary If a Participant dies without having a Beneficiary designation in force, or if at the time of the Participant's death (or the date on which a subsequent installment payment is due) all designated Beneficiaries have died or are no longer in existence (in the case of Beneficiaries who are not individuals), payment shall be made to the deceased Participant's surviving Spouse; or if there is no surviving Spouse (or if the surviving Spouse dies before a subsequent installment payment is due), to the deceased Participant's descendants (including adopted descendants), per stirpes; or if there are no living descendants, to the deceased Participant's estate. 10.3 No Liability for Payment to Beneficiaries The Administrator shall determine the identity of Beneficiaries, and in so doing, may act upon such information as, on reasonable inquiry, it may deem reliable with respect to heirship, relationship, survivorship, or any other fact relative to the distributes; and the Trustee and Administrator shall be indemnified and saved harmless by the Employer with respect to all payments required to be made hereunder, if made in good faith and without actual notice or knowledge of the changed condition or status of any person receiving payments. The Administrator may rely on any list or notice furnished by the Employer or any Related Employer as to the facts, the occurrence of any events, or the existence of any situation, and shall not be bound to inquire as to the basis of any such decision, list, or notice, and shall be indemnified and saved harmless by the Employer for any action taken or suffered to be taken by him in reliance thereon. In the event any question or dispute shall arise as to the proper person or persons to whom any payment shall be made, the Trustee may withhold such payment until a determination of such question or dispute shall have been made, or until the Trustee shall have been adequately indemnified against loss to his satisfaction. In consideration of being permitted to designate his Beneficiaries, the Participant hereby waives, for himself and all persons claiming by or through him, any claim against the Administrator, the Committee, the Trustee and the Employer or any Related Employer as a result of any determination made in good faith as to the persons entitled to receive any distribution of the Participant's Vested Account Balance. 10.4 Qualified Domestic Relations Orders To the extent provided in any Qualified Domestic Relations Order, and subject to the provisions of Section 17.4(b) the person or persons named therein shall be considered the Participant's Beneficiary. ARTICLE XI FIDUCIARY CAPACITY AND RESPONSIBILITY 11.1 General Fiduciary Standard of Conduct Each fiduciary under the Plan shall discharge his duties hereunder solely in the interest of the Participants and their Beneficiaries and for the exclusive purpose of providing benefits to the Participants and their Beneficiaries and defraying the reasonable expenses of administering the Plan and the Trust. Each fiduciary shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of a like character and with like aims, in accordance with the documents and instruments governing the Plan and the Trust, insofar as such documents and instruments are consistent with this standard. 11.2 Allocation of Responsibility Among Fiduciaries (a) The fiduciaries shall have only those specific powers, duties, responsibilities and obligations as are specifically given to them under this Plan. The Employer shall have the sole responsibility for making the contributions provided for under Article IV, and to amend or terminate, in whole or in part, the Plan and the Trust. The Committee shall have the sole responsibility for assisting the Administrator in the administra- tion of the Plan, which responsibility is specifically described in the Plan. The Trustee shall have the sole responsibility for the administration of the Trust and the management of the assets held under the Trust (unless otherwise managed by an investment manager), all as specifically provided in the Trust. Each fidu- ciary warrants that any directions given, information furnished or action taken by him shall be in accordance with the provisions of the Plan or the Trust authorizing or providing for such direction, information or action. Each fiduciary may rely upon any such direction, information or action of another fiduciary as being proper under the Plan and the Trust, and is not required to inquire into the propriety of any such direction, information or action. No fiduciary guarantees the Trust in any manner against investment loss or depreciation in asset value. The Administrator, the members of the Committee, the Trustee and any investment manager shall each be a "named fiduciary" as defined in Section 402(a)(2) of ERISA. The Administrator may appoint such other named fiduciaries as it may determine are necessary or appropriate for the administration of the Plan. (b) A fiduciary shall not be liable for the acts or omissions of another fiduciary unless (1) the fiduciary knowingly participates in, or knowingly attempts to conceal the act or omission of, another fiduciary and knows the act or omission is a breach of a fiduciary responsibility by the other fiduciary; or (2) the fiduciary has knowledge of a breach by the other fiduciary and shall not make reasonable efforts to remedy the breach; or (3) the fiduciary's breach of his own fiduciary responsibility permits the other fiduciary to commit a breach. 11.3 Administrator (a) Richardson, or such person as the Employer shall designate pursuant to paragraph (b), shall serve as the Administrator of the Plan. The Administrator shall be the "plan administrator" as defined in Section 414(g) of the Code, and the "administrator" as defined in Section 3(16)(A) of ERISA. The Administrator shall have the duty to file such plan descriptions and annual reports as may be required by ERISA or similar legis- lation and shall be designated to accept service of legal process and any other notices for the Plan. The Administrator shall also furnish each Participant with a summary plan description and provide each Participant with a statement of his Account Balance and his Vested Account Balance as of each Anniversary Date. The Administrator shall provide the notice required by Section 402(f) of the Code, with each distribution made after December 31, 1984, which constitutes a qualifying rollover distribution as defined by Section 402(a)(5)(E) of the Code. (b) The Employer shall have the authority to appoint another corporation or one or more persons to serve as the Admin- istrator hereunder, in which event such corporation or person (or persons) shall exercise all of the powers, duties, responsibilities and obligations of the Administrator hereunder. 11.4 Powers and Duties of Administrator The Administrator shall have all necessary power to accomplish its duties under the Plan in its discretion, including without limitation the power to: (a) Construe and interpret the Plan, decide all questions of eligibility and determine the amount, manner and time of payment of any benefits hereunder (which determinations shall, in the absence of abuse of discre- tion, be binding upon all parties); (b) Prescribe procedures to be followed by Par- ticipants or Beneficiaries filing applications for benefits; (c) Assist any Participant regarding any rights, benefits or elections available under the Plan; (d) Adopt reasonable procedures for determining whether any order, judgment or decree constitutes a Qualified Domestic Relations Order, and notify the Participant and all alternate payees affected or their designated representatives as to the results of its determinations; (e) Determine whether to permit assets of the Trust to be used for loans to Participants pursuant to Section 14.1 and, if such use is to be permitted, adopt reasonable procedures to implement such determination and give all instructions to the Trustee relating thereto; (f) Direct the Trustee with respect to the amount and type of benefits to which any Participant or Bene- ficiary shall be entitled hereunder and with respect to other disbursements from the Trust; (g) Receive from the Employer and from Partici- pants such information as shall be necessary for the proper administration of the Plan; (h) Maintain all the necessary records for the administration of the Plan; (i) Receive, review and keep on file (as it deems convenient and proper) reports of benefit payments made by the Trustee and reports of disbursements for expenses directed by it; (j) Make, or instruct the Trustee to make, equi- table adjustments for any mistakes or errors made in the administration of the Plan; and (k) Do all other acts which the Administrator deems necessary or proper to accomplish and implement its responsibilities under the Plan. 11.5 Claims Procedure (a) A Participant or Beneficiary, or an authorized representative acting on his behalf (hereinafter called the "Claimant"), may notify the Administrator of a claim for benefits under the Plan. Such notice shall be in writing and may be in any form provided by or acceptable to the Administrator and shall set forth the basis of such claim and shall authorize the Administrator to conduct such examinations as may be necessary to determine the validity of the claim and to take such steps as may be necessary to facilitate the payment of any benefits to which the claimant may be entitled under the terms of the Plan. A Claimant shall have no right to seek review of a denial of benefits, or to bring any action in any court to enforce a claim for benefits prior to his filing a claim for benefits and exhausting his rights to review under this Section 11.5. (b) When a claim for benefits has been filed properly, such claim for benefits shall be evaluated and the Claimant shall be notified of the approval or the denial within 90 days after the receipt of such claim unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 90-day period which shall specify the special circumstances requiring an extension and the date by which a final decision will be reached (which date shall not be later than 180 days after the date on which the claim was filed). A Claimant shall be given a written notice in which the Claimant shall be advised as to whether the claim is granted or denied, in whole or in part. If a claim is denied, in whole or in part, the Claimant shall be given written notice which shall contain (1) the specific reasons for the denial, (2) references to pertinent plan provisions upon which the denial is based, (3) a description of any additional material or informa- tion necessary to perfect the claim and an explanation of why such material or information is necessary and (4) the Claimant's rights to seek review of the denial. (c) If a claim is denied, in whole or in part, the Claimant shall have the right to request that the Administrator review the denial, provided that the Claimant files a written request for review with the Administrator within 60 days after the date on which the Claimant received written notification of the denial. A Claimant (or his duly authorized representative) may review pertinent documents and submit issues and comments in writing to the Administrator. Within 60 days after a request for review is received, the review shall be made and the Claimant shall be advised in writing of the decision on review, unless special circumstances require an extension of time for processing the review, in which case the Claimant shall be given a written notification within such initial 60-day period specifying the reasons for the extension and when such review shall be completed (provided that such review shall be completed within 120 days after the date on which the request for review was filed). The decision on review shall be forwarded to the Claimant in writing and shall include specific reasons for the decision and references to plan provisions upon which the decision is based. A decision on review shall be final and binding on all persons for all purposes. If a Claimant shall fail to file a request for review in accordance with the procedures described in this Section 11.5, such Claimant shall have no right to review and shall have no right to bring action in any court and the denial of the claim shall become final and binding on all persons for all purposes. 11.6 Indemnification by Employer The Employer shall indemnify the members of the Commit- tee, the Administrator and each Trustee for, and hold them harmless from and against, any and all liabilities, losses, costs or expenses (including reasonable attorneys fees) of whatsoever kind and nature which may be imposed on, incurred by or asserted against them at any time by reason of their service under the Plan or the Trust as long as they did not act dishonestly or engage in willful misconduct or gross negligence in their official capacities hereunder. 11.7 Service in Multiple Capacities Any person may serve in more than one fiduciary capacity hereunder, including but not limited to service both as a member of the Committee and as a Trustee. 11.8 Voting of Stock by Participants and Beneficiaries With respect to any Stock which is entitled to vote and which is a "registration-type class of securities," within the meaning of Code Section 409(e)(4), each Participant or Beneficiary to whose Account shares of such Stock have been allocated shall be entitled to direct the Trustee as to the manner in which such shares are to be voted. With respect to any Stock not described in the preceding sentence, each Participant or Beneficiary to whose Account shares of such Stock have been allocated shall be entitled to direct the Trustee as to the manner in which the voting rights with respect to such Stock are to be exercised with respect to any corporate matter which involves the voting of such shares with respect to the approval or disapproval of any corporate merger or consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially all of the assets of a trade or business or such similar transaction as the Secretary of the Treasury may prescribe in regulations. ARTICLE XII THE COMMITTEE 12.1 Appointment and Membership The Administrator shall appoint a Committee to assist it in its administration of the Plan. The Committee shall consist of such number of members as the Administrator shall determine, who shall be appointed by and serve at the pleasure of the Administrator. The Administrator may delegate to the Committee any of its specific duties, rights and authorities under the Plan, or may delegate the Committee general authority to administer the Plan, in which event this Plan shall be construed as though the term "Committee" were substituted for "Administrator" wherever the latter appears other than in this Article XII; provided that neither the Committee nor any member of the Committee shall be deemed to be the Administrator pursuant to Section 11.3(a) unless the Committee or such member is specifically so designated. 12.2 Compensation and Expenses The members of the Committee shall serve without compensation for their services hereunder. All expenses of the Committee, including expenses incurred in the hiring of con- sultants, advisors, investment managers, attorneys and accountants, shall be paid by the Employer to the extent that such expenses are not paid out of the Trust. 12.3 Committee Procedures and Actions (a) The Committee shall act by a majority of its members at the time in office and such action may be taken either by vote at a meeting or in writing without a meeting. (b) The Committee may adopt such by-laws, rules and regulations as it deems necessary, desirable or appropriate for the conduct of its affairs. All rules and decisions of the Committee shall be uniformly and consistently applied to all Participants and Beneficiaries in similar circumstances. When making a deter- mination or calculation, the Committee shall be entitled to rely upon information furnished by a Participant or Beneficiary, the Employer or any Related Employer, the Administrator or the Trustee, and shall have no duty or responsibility to verify such information. (c) The Committee may authorize any one or more of its members to execute any instrument or document on its behalf. (d) The Committee shall periodically (but no less frequently than annually) consult with the Trustee (or any investment manager) with regard to the investment policy of the Plan and the methods to be used to carry out the Plan's objectives. 12.4 Resignation or Removal of Committee Member (a) Any member of the Committee may resign from office at any time by notifying the Administrator, the other members of the Committee and the Trustee in writing, at least 10 days in advance, of such resignation; provided, however, that such notice may, at the option of the parties, be waived. (b) Any member of the Committee may be removed from office by the Administrator at any time, with or without cause. Such removal shall be effectuated by the tendering to such member, the other members of the Committee and the Trustee of a written notice of removal, to take effect on the date specified therein; provided, however, that such notice may, at the option of the parties, be waived. A member of the Committee who is a Participant shall automatically be removed from the Committee upon his retirement, Permanent Disability or Termination of Employment. (c) Upon such resignation or removal of a member of the Committee, or upon his death, the Administrator shall promptly appoint a successor member of the Committee, who may be any individual, whether or not a Participant, and shall give prompt written notice thereof to the other members of the Committee and the Trustee. In the event of the failure of the Administrator to appoint such successor by the effective date of such resignation or removal, or within 10 days after such death, the remaining members of the Committee may appoint such successor. (d) Each successor member of the Committee shall have all the powers, duties, responsibilities and obligations conferred by the Plan as if originally named to the Committee. No successor member of the Committee shall be personally liable for any act or failure to act of his predecessor or have any duty to review the actions of his predecessor. 12.5 Committee/Administrator Decisions Final The Committee and the Administrator have discretionary authority to determine matters within their jurisdiction and the decisions of the Committee and of the Administrator in matters within its jurisdiction shall be final, binding and conclusive upon the Employer and the Trustee and upon each Employee, Participant, former Participant, Beneficiary and every other person or party interested or concerned. ARTICLE XIII THE TRUST 13.1 Trust Agreement All matters relating to the establishment of the Trust, the investment of the Trust assets and the appointment, resignation or removal, compensation, powers and duties of the Trustees are set forth in the Trust Agreement, except to the extent Article XIV applies. ARTICLE XIV LOANS TO PARTICIPANTS; LOANS TO ACQUIRE STOCK; DIRECTED INVESTMENTS 14.1 Loans to Participants (a) If the Administrator determines, in its sole discretion, to permit loans to Participants, it shall specify a form of loan application. After receiving and reviewing a Participant's application for a loan and such other material as may reasonably be required, the Administrator may, in its sole discretion, direct the Trustee to make a loan to a Participant. Any borrowing by a Participant shall not affect his participation in the Plan. Loans shall be made available to all Participants on a reasonably equivalent basis, and shall not be made available to Highly Compensated Employees [as defined in Section 414(q) of the Code] in an amount greater than that which is made available to other Participants. (b) Each Participant may borrow not more than the lesser of (1) $50,000 reduced by the excess, if any, of (i) the highest outstanding balance of loans made to the Participant from the Plan during the one year period ending on the day before the date on which such loan was made, over (ii) the outstanding balance of loans made to the Participant from the Plan on the date on which such loan was made, or (2) 50% of his Vested Account Balance. In determining if these limitations have been exceeded, all loans previously made to a Participant from the Plan [or from any other employee plan qualified under Section 401(a) of the Code maintained by the Employer or any Related Employer] shall be taken into consideration, to the extent of the highest outstanding balances of such loans during the one year period ending on the date on which the loan from this Plan is made. (c) Anything to the contrary notwithstanding, all loans from the Plan shall be deemed to be a directed investment of the Participant's Account. For purposes of determining the annual value of the assets of the Trust, the amount of any loan to a Participant shall be valued separately from the other assets of the Trust as provided in Section 7.2(a)(2), although any loan shall be considered at all times to be part of a Participant's Account for all other purposes of the Plan. (d) All loans from the Plan shall be at a reasonable rate of interest as determined from time to time by the Administrator. All interest paid by a Participant on a loan shall be credited directly to his Account. (e) All loans shall be evidenced by a written promissory note executed by the Participant which shall contain the terms of repayment. As security for a loan, the Participant shall execute an irrevocable pledge and assignment to the Trustee of his entire right, title and interest in and to his Account. (f) All loans shall be repaid by the Participant in such manner and upon such terms as shall be elected by the Participant and approved by the Administrator in accordance with guidelines established from time to time by the Administrator; provided, however, that any repayment terms shall be subject to the following guidelines: (1) Any loan [other than a loan described in Section 14.1(f)(2)] shall be required, by its terms, to be repaid by the Participant within 5 years. (2) Any loan which is used by the Participant to acquire any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as a principal residence of the Participant shall be required, by its terms, to be repaid by the Participant within a period of time as determined by the Administrator. (3) Any loan shall be required, by its terms, to be amortized in level payments, made not less frequently than quarterly, over the term of the loan. Such amorti- zation may be made by level payments of combined interest and principal, or by equal payments of principal with interest actually earned. (g) The Administrator shall have the authority to adopt such rules and procedures as may be necessary in its sole discretion to implement the provisions contained in this Section 14.1, provided that such rules and procedures are not inconsistent with the provisions of ERISA. 14.2 Loans to Acquire Stock (a) The Administrator may at any time direct the Trustee to cause the Trust to borrow money from a "disqualified person" (as defined in Section 4975 of the Code), or to incur a debt guaranteed by a disqualified person if the entire proceeds of such loan are used in a reasonable time to either purchase Stock, or to repay a loan previously incurred under this Section 14.2 and the loan otherwise meets the requirements of this Section 14.2. (b) Any debt incurred pursuant to Section 14.2(a) must: (1) Be for the primary benefit of Participants; (2) Be on terms such that the repayment will not cause other assets of the Trust to be depleted; (3) If the lender is not an independent party, Be on terms at least as favorable to the Trust as the terms of a comparable loan from an independent party; (4) Provide that, on default, the value of trust assets transferred in satisfaction of the loan do not exceed the amount of the default; and, if the lender is a disqualified person, must provide that a default consists only of failure to make payments when due and is limited to the amount of such payments; (5) Be at a reasonable rate of interest; and (6) Comply with all other regulations and rulings applicable to a loan described in Section 4975(d)(3) of the Code. (c) All Stock acquired with the proceeds of a loan described in Section 14.2(a), whether or not pledged or otherwise encumbered, shall be credited to a Suspense Account. Each Plan Year, there shall be released from the Suspense Account, and allocated in accordance with Section 6.1(b), a number of shares of stock equal to the total number of shares held in the Suspense Account immediately prior to such release multiplied by a fraction, the numerator of which is the principal and interest paid on such loan during the Plan Year and the denominator of which is the sum of the numerator and all principal and interest payments remaining unpaid at the end of the Plan Year; without regard to possible renewals or extensions. If the interest rate on the loan is variable, such fraction shall be computed by assuming that the interest rate in effect at the end of the Plan Year shall remain in effect for the remaining term of the loan. The terms of any loan made pursuant to Section 14.2(a) must provide for a definitely ascertainable number and amount of payments, and the terms of any pledge or other encumbrance of the Stock which secures such loan must permit the release of a sufficient number of shares of stock to satisfy this Section 14.2(c). 14.3 Directed Investments (a) Each Qualified Participant (as hereinafter defined) may make an election (the "Election") within 90 days after each Anniversary Date during the Qualified Election Period (as defined below) to direct the Plan to diversify the investment of a portion of his Account Balance equal to his Diversification Amount (as hereinafter defined). An Election shall be made in, in writing, on a form to be supplied by the Administrator for such purpose. A Participant shall become a "Qualified Participant" on the first day on or after which he has both attained age 55 and completed 10 years of participation in the Plan. The "Qualified Election Period" shall be the 5-year period commencing with the Plan Year which begins after the Plan Year in which the Participant becomes a Qualified Participant. During any one of the first 4 Plan Years of the Qualified Election Period, the "Diversification Amount" shall be an amount equal to the excess, if any, of 25% of the sum of: (1) the Qualified Participant's Account Balance as of the end of the immediately preceding Plan Year plus all prior distributions of cash made to such Qualified Participant pursuant to this Section 14.3 during the Qualified Election Period; over (2) any amounts as to which such Qualified Participant has previously made an Election during the Qualified Election Period. In the last Plan Year of the Qualified Election Period, the preceding sentence shall be applied by substituting "50%" for "25%." (b) Not later than 90 days after the close of each 90 day period described in Section 14.3(a), the Administrator shall implement the Participant's Election by either (1) distributing to the Participant cash in an amount equal to the amount as to which the Participant has made the Election in that year or (2) offering the Participant the opportunity to direct the investment of such amount in at least 3 investment funds which satisfy the requirements of the regulations promulgated under Code Section 401(a)(28) (the "Investment Funds"). (c) To the extent provided in the Trust Agreement, Richardson may appoint investment managers to manage any of the Investment Funds, including the power to acquire and dispose of assets of such funds. (d) The Administrator shall have the sole responsibility for and complete discretion in establishing and, if it deems it necessary, amending the rules and procedures governing the time and manner in which Qualified Participants may make, modify or revoke any Election pursuant to this Section 14.3 and Qualified Participants may invest in the various Investment Funds and allocate or reallocate their account balances among such Investment Funds. The discretion of the Administrator in this regard shall only be limited by the general requirement that such discretion be exercised in a non-discriminatory manner and in compliance with the requirements of Code Section 401(a)(28) and the regulations promulgated thereunder. (e) The purpose of this Section 14.3 is to conform to the requirements of Code Section 401(a)(28) which is incorporated herein by this reference. To the extent that this Section 14.3 is inconsistent with Section 401(a)(28) of the Code, the provisions of Section 401(a)(28) of the Code shall govern and control. ARTICLE XV AMENDMENT 15.1 Right to Amend Richardson shall have the right at any time or times to amend this Plan, in whole or in part. 15.2 Retroactivity of Amendments No amendment to this Plan may be made effective retroactively to a date prior to the beginning of the Plan Year in which it is adopted, except amendments which are necessary to establish or maintain, without interruption, the qualification of the Plan for tax exemption under the provisions of the Code. 15.3 Limitations On Right To Amend No amendment shall be made to this Plan which shall: (a) Directly or indirectly operate to give the Employer or any Related Employer any interest in the Trust or to deprive any Participant or Beneficiary of his interest in the Trust, or cause any part of the income or corpus of the Trust to be used for, or diverted to, purposes other than for the exclusive benefit of the Participants or their Beneficiaries, except as provided in Section 17.1. (b) Impose any duties, responsibilities or obligations on the Trustee without its written consent; or (c) Eliminate an optional form of benefit or eliminate or reduce an "early retirement benefit" or a "retirement-type subsidy" [as defined in Section 411(d)(6)(B) of the Code]. ARTICLE XVI ADOPTION, WITHDRAWAL AND TERMINATION 16.1 Adoption of Plan (a) With the written consent of the Administrator, any other corporation, including a Related Employer, may adopt this Plan for the exclusive benefit of its eligible employees by appropriate resolution, which shall specify the effective date of such adoption and which may contain such changes and variations in the Plan and Trust as the Administrator shall approve, and by agreeing to be bound by the terms of this Plan. (b) Each participating Employer shall pay a proportionate part of the expenses incurred in the administration of the Plan and the Trust to the extent that such expenses are not paid directly out of the Trust. 16.2 Withdrawal from Plan A participating Employer may withdraw from the Plan by giving written notice to the Administrator and the Trustee, which notice shall specify the effective date of the withdrawal, which, unless such requirement is waived by the Administrator, shall not be less than 30 days after such notice is given. If the date of withdrawal is not an Anniversary Date, the Trustee shall value all Trust assets as of the effective date of the withdrawal in the manner provided in Section 7.2 as if such date were an Anniversary Date, but shall not allocate the participating Employers' contribution. The withdrawal by an Employer shall be treated as a termination of the Plan with respect to Participants employed by the withdrawing Employer, and such Participants shall be 100% vested in their Account Balance as of the date of withdrawal, and such Account Balance shall be distributed as provided in Article IX. 16.3 Termination (a) The Agreement may be terminated at any time by Richardson. (b) Upon termination of the Plan and Trust, the Administrator shall direct the Trustee to value the Trust in accordance with Section 7.2 and to distribute in accordance with the terms of the Plan all assets remaining in the Trust (after payment or reserving funds for payment of any fees, taxes and expenses properly chargeable against the Trust) to the Participants in accordance with the value of the credits standing to each Participant's Accounts as of the date of such termination, in cash or in kind valued at fair market at the date of distribution, in such manner as the Trustee shall determine. (c) In the event of the sale by an Employer of sub- stantially all of its assets and business, the successor to the Employer shall be substituted for and shall exercise and have all the rights and obligations of the Employer hereunder upon the filing, in writing, of its election to do so with the Trustee. ARTICLE XVII MISCELLANEOUS 17.1 No Reversion to Employer No part of the corpus or income of the Trust shall revert to the Employer or any Related Employer or be used for, or diverted to, purposes other than for the exclusive benefit of the Participants and their Beneficiaries; provided, however, that: (a) Any balance remaining in the Excess Contribution Account or the Excess Forfeiture Account at the time the Plan is terminated, and which cannot be allocated in the final Plan Year of the Plan without violating the limitations of Section 7.6, shall be returned to the Employer (and, in the event that there is more than one participating Employer, such reversion shall be in the proportion that the aggregate contributions made by each such Employer in all Plan Years with respect to which amounts were credited to either of such accounts bears to the aggregate contributions made by all participating Employers in all such Plan Years). (b) In the event that any portion of a contribu- tion is made by the Employer to the Plan because of either a good faith mistake of fact or a good faith mistake in determining that such contribution is de- ductible under Section 401 of the Code, the Trustee shall return to the Employer, upon written notice thereof, an amount equal to the portion of such contribution which would not have been made but for such mistake of fact, or which is determined to be non-deductible, as the case may be, subject to the following conditions and limitations. No amount shall be returned to the Employer pursuant to this Section 17.1(b) unless such amount is returned not later than one year after the date on which the contribution was made in the case of a contribution based on a mistake of fact was made, or the date on which the deduction is disallowed in case of a contribution mistakenly believed to be deductible. For purposes of the preceding sentence, a deduction shall be considered to be disallowed on either (1) the day on which the Employer voluntarily files an amended federal income tax return correcting the error; (2) the day on which the Internal Revenue Service issues a statutory notice of deficiency, notice of final partnership or S corporation administrative adjustment, or other determination from which no further administrative appeal is possible, which notice is based in whole or part upon disallowance of such deduction, provided that, if applicable, no person files a timely petition for judicial review of such determination; or (3) if such a petition for judicial review is filed, the day on which a final judgment is entered dismissing such petition or upholding the disallowance of such deduction from which judgment no further appeal is possible, or as to which the time for filing an appeal expires. The amount returned to the Employer shall not include any earnings attributable to the erroneous contribution, but shall be reduced by any losses attributable thereto. Notwithstanding the provisions of Article VIII, an erroneous contribution may be returned in accordance with this Section 17.1(b) after such contribution has been allocated and credited to the Participants' Accounts, in which event the amount so returned shall be charged to the Accounts in the same proportion that the contribution was originally allocated; provided, however, that in no event shall the Account Balance of any Participant be reduced as a result of the return of an erroneous contribution to less than it would have been had the erroneous contribution not been made, and the amount returned to the Employer shall be reduced to the extent necessary to avoid such a reduction. 17.2 Evidence of Action by Necessary Parties (a) Any action by the Employer pursuant to the provisions of this Plan shall be evidenced by a resolution of its Board of Directors, or by written instrument executed by any person authorized by its Board of Directors to take such action. (b) Necessary parties to any accounting, litigation or other proceedings shall include only the Trustee and the Employer, and the settlement or judgment in any such case in which the Employer is duly served or cited shall be binding upon all persons entitled to benefits under the Plan, the estate of any such person, and upon all persons claiming by, through or under them. 17.3 Rights of Participants Limited Neither the adoption of the Plan nor anything contained in the Plan or the Trust shall be construed as giving any Participant, Beneficiary or Employee any equity or other interest in the assets, business or affairs of the Employer or any Related Employer, or the right to complain about any action taken by the officers, directors or stockholders of, or about any policy adopted or pursued by, the Employer or any Related Employer, or the right to examine the books and records of the Employer or any Related Employer, or as giving any Employee the right to be retained in the service of the Employer or any Related Employer, and all Employees shall remain subject to discharge to the same extent as if the Plan and the Trust had never been executed. Prior to the time that distributions are made in conformity with the provisions of the Plan, neither the Participants, nor their spouses, Beneficiaries, heirs-at-law, or legal representatives shall receive cash or any other thing of current exchangeable value from the Employer or any Related Employer or the Trustee as a result of the Trust. 17.4 Assignment and Alienation (a) No payment to any person under any of the provisions of the Plan or the Trust, nor the right to receive such payment or payments, nor any interest in the Trust, shall be subject to assignment, alienation, transfer or anticipation, either by the voluntary or involuntary act of any Participant or Beneficiary or by operation of law, nor, except for the repayment of loans to Participants authorized under Section 14.1 and payments pursuant to a Qualified Domestic Relations Order in accordance with Section 17.4(b), shall such payment or right or interest be subject to the demands or claims of any creditor of such person, nor be liable in any way for such person's debts, obligations or liabilities. (b) Upon receiving any order, judgment or decree which may be a Qualified Domestic Relations Order, the Administrator shall promptly notify the Participant involved and any Alternate Payee [as defined in Section 2.28(a)] who may be affected by such order of the receipt of the order and of the Plan's procedure for determining whether the order is a Qualified Domestic Relations Order, and shall proceed to determine whether the order is a Qualified Domestic Relations Order. During the period during which it is being determined whether such order is a Qualified Domestic Relations Order, any payments which would, under such order, be payable to an Alternate Payee, shall be placed in a separate account in the Trust. If, within 18 months after receipt of such order, the Administrator determines that such order is a Qualified Domestic Relations Order, the amount of such separate account, with any earnings thereon, shall be paid to the Alternate Payees as provided in such order. If the status of such order has not been established within such 18-month period, or if it is determined that the order is not a Qualified Domestic Relations Order, the amount of such separate account shall be paid to the Participant, or, if it would not otherwise have been payable currently, shall be restored to the Participant's Account. Any determination made more than 18 months after the receipt of such order that such order is a Qualified Domestic Relations Order shall be applied prospectively only. (c) In the event that any Participant's benefits are garnished or attached by order of any court, the Trustee may bring an action for a declaratory judgment in a court of competent jurisdiction to determine the proper recipient of the benefits to be paid by the Trust. During the pendency of said action, any benefits that become payable shall be paid into the court as they become payable, to be distributed by the court to the recipient it deems proper at the close of said action. 17.5 Missing Participants or Beneficiaries (a) Each Participant shall file with the Employer, in writing, his post office address, the post office address of each of his Beneficiaries, and each change of post office address. Any communication, statement or notice addressed to Participant or Beneficiary with postage prepaid at his last post office address filed with the Employer, or if no address is filed with the Employer, then at his last post office address as shown on the Employer's records, will be binding on the Participant and his Beneficiary for all purposes of the Plan. Neither the Trustee nor the Administrator is required to search for or locate Participant or Beneficiary. (b) If the Administrator or Trustee shall send by registered or certified mail, postage prepaid, to the last known address of a Participant or Beneficiary, a notification that he is entitled to a distribution hereunder and if either (1) such notification is returned because the addressee cannot be located at such address and neither the Employer nor the Trustee shall have any knowledge of such Participant's or Beneficiary's whereabouts within 3 years from the date such notification was mailed, or (2) within 3 years after such notification was mailed to such Partici- pant or Beneficiary, he does not respond thereto by informing the Trustee of his whereabouts, then, upon the Anniversary Date coincident with or immediately following the third anniversary of the mailing of said notification, the then undistributed Account Balance of such Participant or Beneficiary shall be paid to the person or persons who would have been entitled to take in the event of the death of the Participant or Beneficiary whose whereabouts is unknown, assuming that such death had occurred on the Anniversary Date immediately succeeding the third anniversary of the mailing of said notification. (c) If any check in payment of a benefit hereunder which has been mailed by regular United States mail to the last address of the payee furnished the Trustee by the Administrator is returned unclaimed, the Trustee shall notify the Administrator and shall discontinue further payments to such payee until it receives the further instructions of the Administrator. 17.6 Merger and Consolidation of Plan In the case of any merger or consolidation with, or transfer of assets and liabilities to, any other employee plan qualified under Section 401(a) of the Code, provisions shall be made so that each Participant in the Plan on the date thereof would receive a benefit immediately after the merger, consolidation or transfer (if the other employee plan terminated on that date) which is equal to or greater than the benefit he would have been entitled to receive immediately prior to the merger, consolidation or transfer (if the Plan had then terminated). 17.7 Severability In case any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions, but shall be fully severable and this Agreement shall be construed and enforced as if said illegal or invalid provision had never been inserted herein. 17.8 Applicable Law This Plan shall be construed and enforced and the Trust shall be administered in accordance with the laws of the State of Illinois, to the extent that such laws are not preempted by the laws of the United States of America. 17.9 Method of Accounting The Plan shall use the accrual method of accounting as to Plan Years beginning prior to May 27, 1989 and as to Plan Years beginning after June 1, 1991. For the Plan Years beginning May 27, 1989, May 26, 1990 and June 1, 1991, the Plan shall use the modified cash method of accounting. IN WITNESS WHEREOF, Richardson has caused this Plan to be executed as of the date and year first written above. RICHARDSON ELECTRONICS, LTD. By: ______________________________ Title:________________________ EX-10.M 5 EXHIBIT 10(m) January 13, 1994 Mr. Samuel Rubinovitz 3 Bowser Rd. Lexington MA 02173 Dear Sam: This is to confirm our agreement pursuant to which you will provide consulting services to our Company. In broad lines we expect from you: 1. Through inputs from you, contribution to the strategy of our Corporation, and, in particular such tasks and assistance you may agree to perform at the request of the Strategic Planning Committee of our Board of Directors which are beyond your duties as a member of the Board or such Committee. 2. Other advice and assistance, relevant to our business, which we may mutually agree to require from you. We will periodically meet to review your consulting program which I will personally set in agreement with you. You will work for us as such an independent contractor consultant for one (1) year beginning as of January 13, 1994. The agreement shall automatically renew for additional one year terms unless either party gives the other party written notice of non-renewal at least ninety (90) days prior to the next renewal date. You shall determine your working hours and the manner, means and methods of carrying out requested service and projects, subject at all times, however, to the specific directions, statements and input from our Company's personnel concerning Company policy, objectives and needs. As full and complete compensation for your services for consultation required by us hereunder and for discharge of all your obligations hereunder, we shall pay you a fee in advance at the rate of $10,000 per quarter. The first quarterly payment will be made on February 1, 1994, and thereafter quarterly payments will be made on each May 1, August 1, November 1 and February 1 that you continue to be retained as a consultant hereunder. In addition, we shall reimburse you for all out-of-pocket expenses (transportation, hotel, meals) necessarily incurred by you in connection with any trip made at our request and with our prior approval. Reimbursement shall be made by payment within 15 days after receipt of invoice, rendered by you. In the performance of all services hereunder you shall be deemed to be and shall be an independent contractor and as such: (a) you shall not be entitled to any benefits applicable to employees of our Company such as profit sharing, life insurance, medical or heath benefits or other social benefits; and (b) you shall have sole responsibility for the payment of all applicable governmental taxes and for all employment and disability insurance, social taxes and other similar taxes as may be applicable, the Company will not be required to make any deductions or contribution for any such items and you agree to hold us harmless and indemnify us from liability, cost or expense, in connection therewith. Notwithstanding the foregoing, the Company may, in its sole discretion, make such withholding for taxes as is appropriate or required. The information and knowledge divulged to you by our Company or which you acquire in connection or as a result of your services hereunder shall be regarded by you as confidential. Without limiting the generality of the foregoing, you recognize that, unless and until published, all features of the plans, programs, applications and methods developed by you hereunder or heretofore or hereafter used or developed by us (or by any of our predecessors in business) are and shall be our trade secrets. You shall not use, nor shall you disclose, any such information, knowledge or trade secrets to any person either during or after the period of this agreement, except to our employees as may be necessary in the regular course of your duties hereunder, or except as otherwise authorized by us. All records and notes and copies thereof relating to our operations, investigations and business made or received by you in connection with your consulting services hereunder during the period of this agreement are and shall be our property exclusively, and you shall keep the same at all times in your custody and subject to your control, and shall surrender the same at the termination of this agreement if not before. You shall indemnify and hold harmless our Company from and against any and all liability, loss, cost, expense, damage, claims or demands arising out of or resulting in any manner from or occurring in connection with your performance of services hereunder, including, without limitation, on account of injuries (including death) to you or loss of or damage to your property. If the foregoing is in accordance with your understanding please indicate your agreement to the same by executing and returning the enclosed copy of this letter. Very truly yours, RICHARDSON ELECTRONICS, LTD. /s/ Edward J. Richardson Edward J. Richardson Chairman Agreed to: /s/ Samuel Rubinovitz EX-10.N 6 EXHIBIT 10(n) EMPLOYMENT AGREEMENT WITH CONSULTING SERVICES UPON TERMINATION This Agreement made this 1st day of April, 1994 by and between RICHARDSON ELECTRONICS, LTD. whose principal office is 40W267 Keslinger Road, LaFox, Illinois 60147 (hereinafter together with its subsidiaries called the "Company") and LEONARD R. PRANGE of 1010 Willow Creek Rd., West Chicago IL 60185 (hereinafter called the "Employee"). WITNESSETH: WHEREAS,the Employee has been an employee and executive officer of the Company for many years and the parties wish to provide for his continuing employment and future services upon terms and conditions set forth in this agreement; NOW, THEREFORE, IT IS AGREED AS FOLLOWS: 1. Employment and Term. The Company continues to employ the Employee, and the Employee agrees to and hereby does continue in the employ of the Company to render full time service to the Company until notice of termination of employment is given by one party to the other and thereafter to provided consulting services to the Company for a two year period as provided in paragraph 5 below, all upon the terms and conditions and for the consideration hereinafter set forth. 2. Duties. Until further action by the Board of Directors of the Company, Employee shall be the Chief Financial Officer of the Company having the duties and responsibilities assigned to that position by the Company and shall have such other offices and duties and responsibilities as are assigned to him from time to time. Should the Board of Directors of the Company remove the Employee as Chief Financial Officer he shall be a Group Vice President reporting to the Chief Executive Officer of the Company and in such position shall have such duties and responsibilities and other offices as are assigned to him from time to time by the Chief Executive Officer of the Company. The Employee shall carry out his duties and responsibilities to the best of his abilities and with the same level of professional attention previously devoted to his employment with the Company. 3. Compensation. For all services to be rendered by him in any capacity hereunder (including as an officer, director, committee member or otherwise of the Company or any subsidiary or division) on behalf of the Company, the Company agrees to pay Employee so long as he is employed hereunder: (a) Salary. A fixed salary ("Salary") at the rate of One Hundred Forty Thousand Seven Hundred Ninety Five Dollars ($140,795.00) per annum payable in installments in accordance with the Company's regular pay periods for employees generally; (b) Bonus. In addition to the Salary set forth in (a) above, a bonus ("Bonus") which would provide the Employee with an annual Bonus of up to 50% of the annual Salary set forth in (a) above if Employee meets all individual objectives as established by the Chief Executive Officer of the Company from time to time; provided, however, that a minimum of 50% of the Bonus (25% of Salary) will be payable during employment under this agreement and the Bonus will be payable in accordance with the Company's regular pay periods; and (c) Contingent Compensation. Upon termination of his employment, except as otherwise provided and subject to the conditions set forth in paragraph 5 below, contingent compensation ("Contingent Compensation"), if and to the extent payable, for a period of twenty four (24) months thereafter commencing on the first day of the month following the date on which his employment terminates, at the rate of Fourteen Thousand Six Hundred Sixty Seven Dollars ($14,667.00) per month so long as he has not accepted other full time employment and if he has accepted, or thereafter during the period of payment of Contingent Compensation accepts, other full time employment, then the amount of Contingent Compensation shall be reduced to the rate of Seven Thousand Three Hundred Thirty Three Dollars ($7,333.00) per month beginning on the first day of the month following the date he has accepted other full time employment. 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. 4. Benefits. During the term of full time employment hereunder, in addition to the Salary and Bonus provided above, Employee shall be entitled to participate in benefits generally offered to all Company officer employees for which he is eligible, including vacations commensurate with length of service and holidays, stock options, profit sharing and pension plan, health care and life insurance, as detailed in the Richardson Employee Benefit Plans. In the event that the Employee shall, during the term of his full time employment hereunder, die or become disabled he shall be entitled to the benefits provided to officer employees generally under the Company's Employee Group Insurance and Benefit Plans for employees and the Company shall have no further duty or obligation to pay the Salary and Bonus or Contingent Compensation provided above in paragraph 3. beyond such date of death or disability. During the period of payment of contingency compensation provided for in paragraph 3.(c) above Employee shall be entitled to participate in health care plans which the Company then offers generally to its officer employees on the same terms as such officer employees, but shall not be entitled to participate in any other benefits. 5. Contingent Compensation and Consulting Services. The Contingent Compensation provided for in paragraph 3.(c) above shall be payable if and when but not unless: (a) Termination. The employment of Employee shall have been terminated by other than the Employee's death or disability entitling him or his heirs, estate or beneficiaries to benefits provided to officer employees generally under the Company's Employee Group Insurance and Benefit Plans for employees: and (b) Conditions. The Employee shall, if and as long as such Contingent Compensation shall be paid (but in any event for a period of at least 24 months following termination of his employment) and without additional compensation, fee, or other payment by the Company (other that the payment by the Company for health care coverage as provided for in paragraph 4. above and other than the payment or reimbursement of reasonable actual out-of-pocket travel and other approved expenses) (i) Consulting. Render such consulting and advisory services as the Company may from time to time reasonably request, having in mind the Employee's health, residence, and personal circumstances, in connection with any matter on which the Employee was working at time of the termination of his employment or with respect to which the Employee might be expected to have special competence by reason of his former employment by the Company or otherwise; (ii) Non-Compete. Refrain (independently of and without reference to paragraph 8 hereof), after the expiration of a period of thirty (30) days from the mailing to him of written notice by the Secretary of the Company of a direction to do so, from engaging in the operation or management of a business, whether as owner, shareholder, partner, officer, employee or otherwise, which then shall be in competition with any business which the Company or any of its subsidiaries was engaged at the time of the termination of the Employee's employment, provided that ownership as an investor of not more than one per cent (1%) of the outstanding shares of stock of any company listed on a national securities exchange shall not in itself constitute a violation of these provisions; (iii) Confidential Information. Refrain (independently of and without reference to paragraph 7 hereof) from disclosing to unauthorized persons information relative to the business of the Company or any of its subsidiaries which he shall have reason to believe is confidential; and (iv) Company's Interest. Refrain (independently of and without reference to paragraph 6 hereof) from otherwise acting or conducting himself in a manner which he shall have reason to believe is inimical or contrary to the best interests of the Company. In the event that the Employee shall fail to comply with any provision of paragraph 5.(b) hereof, the Company's obligation to make any further payment of the Contingent Compensation provided for in paragraph 3.(c) above shall forthwith terminate. The Employee by written notice to the Company during his lifetime signed by him and witnessed by at least two persons, may designate one or more persons or entities (including a trust or trusts or his estate) to receive any balance of his Contingent Compensation in the event of his death prior to full payment thereof but subsequent to the time before which his death would terminate his right to receive Contingent Compensation as provided in paragraph 4. above, and if he shall designate more than one, the proportion in which each is to receive such payments. He may also designate the person or persons who shall succeed to the rights of the person or persons originally designated in case the latter should die. He may from time to time change any designation so made and the last written notice given by him before his death shall be controlling. In the absence of a designation made by the Employee pursuant to this paragraph 5. or, in the event of the death of a person to whom payments were being made pursuant to this paragraph 5. before such payments are completed and, failing any other designation by the Employee, such balance of payments shall be paid to the legal representatives of Employee. 6. Company's Good Name. Employee agrees that he will at no time engage in conduct which demeans, defames, libels, slanders, destroys or diminishes in any way the property, assets or rights, or the reputation or goodwill of the Company, its subsidiaries, or their respective shareholders, directors, officers, employees, or agents or the products sold by the Company. 7. Confidentiality. The Employee shall not (except in the proper course of his duties hereunder) either during the period of his employment with the Company or thereafter make use of, disseminate or divulge to any person, firm, company, association or other entity, and shall use his best endeavors to prevent the use, dissemination, publication or disclosure of, any information, knowledge or data disclosed to Employee or known by Employee as a consequence of or through his employment or relationship with the Company or any of its predecessors or subsidiaries (including information, knowledge or data conceived, originated, discovered or developed by Employee) not generally known in the business of manufacturing or distributing electron tubes, semiconductors, or data display products, about the Company's or its predecessors' or subsidiaries' businesses, products, processes and services, including without limitation information relating to financial matters, purchasing, sales, research, development, methods, policies, procedures, systems, practices, merchandising, suppliers or customers. It is not intended to limit or restrict Employee's right to utilize financial related ideas, concepts or structures of a general nature so long as they are not used in a business competitive with that of the Company. 8. Non Competition. (a) Engage in a Competing Business. Independent of any obligation under any other paragraph or subparagraph hereof or any other agreement, Employee agrees that during the term of his employment, and during a further period of two years after leaving the employ of the Company, whether upon expiration of this agreement or otherwise, he will not, except with the approval of the Chairman of the Board or President of the Company, directly or indirectly (whether or not for compensation or profit) through any other individual or entity whether as an officer, director, shareholder, creditor, partner, promoter, proprietor, associate, employee, owner, agent, representative or otherwise, become or be interested in, or associated with, any individual or entity, other than the Company, engaged in any business or enterprise the nature of which is competitive with that of the Company in the territories served by the Company' provided, however, that, anything above to the contrary notwithstanding, Employee may, after the date of this Agreement, own as an inactive investor, securities of any corporation engaged in any prohibited business as described above which is publicly traded on a national securities exchange, so long as the holdings of the Employee, directly or indirectly, in the aggregate, constitute less than 1% of the outstanding voting securities of such corporation. (b) Solicit. Independent of any obligation under any other paragraph or subparagraph hereof or any other agreement, Employee agrees that during the term of his employment, and during a further period of two years after leaving the employ of the Company, whether upon expiration of this Agreement or otherwise, he will not, except with the approval of the Chairman of the Board or President of the Company, directly or indirectly (whether or not for compensation or profit) through any other individual or entity call upon, solicit, entice, persuade or induce any individual or entity which during Employee's term of employment with the Company was a customer or supplier, or proposed customer or supplier, of the Company upon whom Employee called or dealt with or whose account he supervised on behalf of the Company, to purchase (with respect to customers) or sell (with respect to suppliers) products of the types or kind sold by the Company or which could be substituted for or which serve the same purpose or function as products sold by the Company or services of the type or kind provided to or obtained from such customer or supplier during Employee's employment or request or advise any such customer or supplier to withdraw, curtail or cancel its business with the Company, and Employee shall not approach, respond to, or otherwise deal with any such customer or supplier for any such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity. (c) Remedies. In the event of a breach or threatened breach by the Employee of the provisions of this paragraph 8 or of paragraphs 6 or 7 the Company shall be entitled to an injunction restraining the Employee from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to the Company for such breach or threatened breach. The parties hereto desire that this paragraph 8 and paragraphs 6 and 7 shall be fully enforceable in accordance with the terms hereof and thereof but if any portion is held unenforceable or void or against public policy by any court of competent jurisdiction, the remainder shall continue to be fully enforceable in accordance with its terms or as it may be modified by such court. The period of restriction specified in paragraphs 6, 7 or 8 shall abate during the time of any violation thereof and the remaining portion at the commencement of the violation shall not begin to run until the violation is cured. (d) Survival. The provisions of this paragraph 8 and paragraphs 6 and 7 shall survive the termination or expiration of this Agreement or Employee's employment for any reason. 9. Termination. Upon termination of Employee's employment hereunder the Company, without any payment by Employee, shall: (a) Auto. Transfer ownership and title to the automobile, if any, belonging to the Company and then being used by the Employee; (b) Computer Equipment. Transfer ownership and title to the laptop personal computer and/or desktop personal computer, if any, belonging to the Company and then being used by the Employee; (c) Loans. Forgive the then outstanding principal balance and interest on personal loans made by the Company to Employee in 1987/88 and now having a principal balance of $41,000; (d) References. Provide Employee references indicating that the Employee's separation was amicable and was the result of differences in business philosophy: (e) Indemnification. Provide Employee with indemnification, including any related legal costs, as provided under the Company's by-laws for all action of Employee during the course of his employment with the Company; and (f) Outplacement. Provide outplacement services by a reputable firm or firms such as Right Associates. Employee acknowledges and agrees that the consideration from the Company provided for in this agreement constitutes full settlement of all claims that Employee may have against the Company, its successors, assigns, affiliates, or any of its officers, directors, shareholders, employees, agents, or representatives, for compensation or otherwise in connection with his employment or its termination, and Employee, except for claims under this agreement, hereby releases all such claims or rights, including without limitation any amounts for termination due under any Company policy. 10. Miscellaneous. (a) Binding Effect. This Agreement shall be binding upon the parties hereto, their heirs, legal representatives, successors and assigns and shall inure to their respective benefits. (b) Modification. This Agreement shall not be subject to change, modification, or discharge, in whole or in part, except by written instrument signed by the parties; provided, however, that if any of the terms, provisions or restrictions of paragraph 6, 7 or 8 are held to be in any respect unreasonable restrictions upon Employee, then the court so holding shall reduce the territory to which it pertains and/or the period of time in which it operates or effect any other change to the extent necessary to render any of said terms, provisions or restrictions enforceable. (c) Waiver. The failure by the Company to insist upon strict compliance by the Employee with respect to any of the terms or conditions hereof shall not be deemed a waiver or relinquishment of any other terms or conditions nor shall any failure to exercise any right or power hereunder at one or more times be deemed a waiver or relinquishment of such right or power at any other time or times. (d) Captions. The captions of this Agreement are inserted for convenience only and are not to be construed as forming a part of this Agreement. (e) Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Illinois. (f) Notices. All notices required to be given hereunder to the Company shall be addressed to its principal executive office at 40W267 Keslinger Road, LaFox, Illinois 60147; attention: William G. Seils, by certified or registered mail. All notices required or to be given hereunder to the Employee shall be addressed to the Employee at his residence as last reflected on the records of the Company, by certified or registered mail. Notice shall be deemed given if delivered in person to William G. Seils on behalf of the Company or to the Employee, or if mailed, when deposited in the United States Mail addressed as aforesaid. (g) Assignment. This is a personal services agreement, and Employee's performance and obligations hereunder shall not be assigned or delegated by Employee, and any purported assignment or delegation shall be void. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement the day and year first above written. EMPLOYEE RICHARDSON ELECTRONICS, LTD. /s/ Leonard R. Prange /s/ Edward J. Richardson Leonard R. Prange By: Edward J. Richardson, President and CEO EX-10.O 7 EXHIBIT 10(o) April 4, 1994 Mr. Bart Petrini 1767 Garland Road Knoxville, TN 37922 Dear Bart: I am pleased to present the following offer to become the Vice President and General Manager of the Electron Device Group of Richardson Electronics. The details of our offer of employment are outlined below. Position: The position being offered is that of Vice President and General Manager of the Electron Device Group. Reporting Relationship: You will become a member of the executive staff and report directly to me. Annual Base Salary: Your annual base salary will be set at $130,000. You will receive a performance appraisal and merit salary increase on an annual basis on the anniversary of the date of your employment. Bonus Plan: You will have an opportunity to receive an incentive equal to fifty percent of your base salary based upon attainment of business unit and corporate objectives. This incentive will be paid on a quarterly basis. Fifty percent of this bonus will be guaranteed for the first year of employment and will be paid as an incentive to join the Company once your employment begins. A copy of the incentive plan as it currently exists is enclosed for your reference. Company Automobile: You will be eligible to receive a company automobile. A copy of the executive automobile plan is enclosed. Please note that the current purchase price of an automobile under the plan is $33,000. All insurance, title, taxes, gasoline, maintenance and repairs are included as part of the plan. Stock Options: I will recommend to the Stock Option Committee of the Board of Directors that 25,000 shares of Richardson Electronics common stock be granted to you as an incentive to join the Company. The price of the stock is based on the market closing price on the date the Board meets to authorize these options. This date will be no later than the next regularly scheduled meeting of the Board of Directors. These options are vested and exercisable at 20 percent per year as outlined in the enclosed information on the stock option plan. The stock option plan is subject to the approval of the Board of Directors. Employee Benefits: In addition to the compensation package presented above, you will be eligible for participation in all employee benefit programs including medical, dental, life and disability insurance. You will also be eligible to participate in the Company's profit sharing, 401K plan, employee stock ownership plan, and employee stock purchase plan. A description of these plans is enclosed. Please note that our medical plan has a thirty day waiting period for all new employees. You will be entitled 4 weeks vacation in each calendar year of your employment, prorated for any particular year. Relocation: The enclosed employee relocation policy is available to you. Relocation should be coordinated with Joe Grill, Vice President of Corporate Administration. Effective Date: As soon as possible and as mutually agreed upon. I believe you will find the position of Vice President and General Manager of the Electron Device Group both challenging and rewarding. I am confident that you can make a significant contribution to the continued growth and success of Richardson Electronics. Please feel free to contact me or Joe Grill if you have any questions or concerns. I look forward to hearing from you soon. Sincerely, RICHARDSON ELECTRONICS, LTD. /s/ Edward J. Richardson Edward J. Richardson Chairman & CEO Accepted this 8 day of April 1994. /s/ Bart Petrini EX-10.P 8 EXHIBIT 10(p) May 20, 1994 Mr. William Garry 1920B North Maud Street Chicago, IL 60614 Dear Bill: I am pleased to present the following offer to become the Vice President of Finance and Chief Financial Officer of Richardson Electronics. The details of our offer of employment are outlined below. Position: The position being offered is that of Vice President of Finance and Chief Financial Officer Reporting Relationship: You will become a member of the executive staff and report directly to me. Annual Base Salary: Your annual base salary will be set at $165,000. You will receive a performance appraisal and merit salary increase on an annual basis on the anniversary of the date of your employment. Bonus Plan: You will have an opportunity to receive an incentive equal to fifty percent of your base salary based upon attainment of personal and corporate objectives. This incentive will be paid on a quarterly basis. A copy of the incentive plan as it currently exists is enclosed for your reference. Company Automobile: You will be eligible to receive a company automobile. A copy of the executive automobile plan is enclosed. Please note that the current purchase price of an automobile under the plan is $33,000. All insurance, title, taxes, gasoline, maintenance and repairs are included as part of the Plan. Stock Options: I will recommend to the Stock Option Committee of the Board of Directors that 35,000 shares of Richardson Electronics common stock be granted to you as an incentive to join the Company. The price of the stock is based on the market closing price on the date the Board meets to authorize these options. This date will be no later than the next regularly scheduled meeting of the Board of Directors. These options are vested and exercisable at 20 percent per year as outlined in the enclosed information on the stock option plan. The stock option plan is subject to the approval of the Board of Directors. Employee Benefits: In addition to the compensation package presented above, you will be eligible for participation in all employee benefit programs including medical, dental, life and disability insurance. You will also be eligible to participate in the Company's profit sharing, 401K plan, employee stock ownership plan, and employee stock purchase plan. A description of these plans is enclosed. Please note that our medical plan has a thirty day waiting period for all new employees. You will be entitled 4 weeks vacation in each calendar year of your employment, prorated for any particular year. Relocation: The enclosed employee relocation policy is available to you. Reimbursement for expenses will include the tax affect of any amounts treated as compensation under Internal Revenue Service regulations. Relocation should be coordinated with Joe Grill, Vice President of Corporate Administration. Effective Date: June 13, 1994 or as soon as possible and as mutually agreed upon. I believe you will find the position of Vice President of Finance and Chief Financial Officer both challenging and rewarding. I am confident that you can make a significant contribution to the continued growth and success of Richardson Electronics. Please feel free to contact me if you have any questions or concerns. I look forward to hearing from you soon. Sincerely, RICHARDSON ELECTRONICS, LTD. /s/ Edward J. Richardson Edward J. Richardson Chairman & CEO Accepted this 31st day of May 1994. /s/ William Garry EX-10.Q1 9 EXHIBIT 10(Q)(1) CHUBB Executive Protection Policy DECLARATIONS EXECUTIVE PROTECTION POLICY Policy Number 81 25-64-60C 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, 1994 To 12:01 A.M. MAY 31, 1995 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 Item 4. Termination of Prior Policies: 8125-64-60B 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 Henry G. Gulick Dean R. O'Hare Secretary President 6/1/94 James R. Maschmeyer Date Authorized Representative CHUBB 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 a 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: National Claims Department Chubb Group of Insurance Companies 15 Mountain View Road Warren, New Jersey 07059 All Other Notices: 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 and Settlement 5. The Company may make any investigation it deems necessary and may, with 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. Valuation and Foreign Currency 6. All premiums, limits, retentions, loss and other amounts under this policy are 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 to 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 the Company 8. No action shall lie against the Company unless, as a condition precedent thereto, 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 or termination, the payment of premiums and the 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 and Assignment 10. No change in, modification of, or assignment of interest under this policy shall be effective except when made by a written endorsement to this policy which is signed by an authorized employee of Chubb & Son Inc. Termination of Policy or Coverage Section 11. This policy or any coverage section shall terminate at the earliest of the following times: (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, (C) upon expiration of the Policy Period as set forth in Item 2 of the Declarations of this policy, or (D) at such other time as may be agreed upon by the Company and the Parent 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 11 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. CHUBB Executive Protection Policy ENDORSEMENT Coverage Section: GENERAL TERMS Company: FEDERAL INSURANCE COMPANY Endorsement No: 1 Effective date of this endorsement: MAY 31, 1994 To be attached to and form part of Policy No. 8125-64-60C 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; (c) Any insured violated any of the terms and conditions of the policy or 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. Should a company fail to comply with the notice requirements, the policy or coverage section shall terminate only as provided in this Subsection. In the event notice is provided at least 31 days, but less than 60 days prior to expiration of the policy or coverage section, the policy or coverage section shall be extended for a period of 60 days or until the effective date of any similar insurance procured by the Insured, whichever is less, on the same terms and conditions as the policy or coverage section sought to be terminated. In the event notice is provided less than 31 days prior to the expiration of the policy or coverage section, the policy or coverage section shall be extended for a period of one year or until the effective date of any similar insurance procured by the insured, whichever is less, on the same terms and conditions as the policy or coverage section sought to be terminated unless the insurer has manifested its willingness to renew at a premium which represents an increase not exceeding 30%. The premium for coverage shall be prorated in accordance with the amount of the last year's premium, and the company shall be entitled to this premium for the extension of coverage and such extension may be contingent upon the payment of such premium. Renewal of a policy or coverage section does not constitute a waiver or estoppel with respect to grounds for cancellation which existed before the effective date of such renewal. In all notices of intention not to renew any policy or coverage section for insurance, the company shall provide a specific explanation of the reasons for nonrenewal. ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED. James R. Maschmeyer Authorized Representative 6/1/94 Date CHUBB 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 $ 1,000,000. 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. Item 7. Extended Reporting Period: (A) Additional Premium: 75% 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 CHUBB Executive Protection Policy Executive Liability and Indemnification Coverage Section 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 Liability Coverage Insuring Clause 1 1. The Company shall pay on behalf of each of the Insured Persons all Loss for which the Insured Person is not indemnified by the Insured Organization and 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 Indemnification Coverage Insuring Clause 2 2. The Company shall pay on behalf of the Insured Organization all Loss for which the Insured Organization grants indemnification to each Insured Person, as permitted or required by law, which the Insured Person has 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 Representatives 3. 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 Reporting Period 4. If the Company terminates or refuses to renew this coverage section other than 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. Exclusions Exclusions Applicable to Insuring Clauses 1 and 2 5. The Company shall not be liable for Loss on account of any Claim made against any Insured Person: (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; (c) brought or maintained by or on behalf of any Insured except: (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. Exclusions Applicable to Insuring Clause 1 Only 6. The Company shall not be liable under Insuring Clause 1 for Loss on account of any Claim made against any Insured Person: (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 (c) based upon, arising from, or in consequence of such Insured Person having gained in fact any personal profit, remuneration or advantage to which such Insured Person was not legally entitled. Severability of Exclusions 7. With respect to the Exclusions in Subsections 5 and 6 of this coverage section, no fact pertaining to or knowledge possessed by any Insured Person shall be imputed to any other Insured Person to determine if coverage is available. Limit of Liability, Deductible and Coinsurance 8. For the purposes of this coverage section, all Loss arising out of the same Wrongful Act and all Interrelated Wrongful Acts of any Insured Person shall 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. With respect to all Loss (excess of the applicable Deductible Amount) originating in any one Policy Period, the Insureds shall bear uninsured and at their own risk that percent of all such Loss specified as the Coinsurance Percent in Item 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 of 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 Indemnification 9. 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: (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. 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 of 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 11. 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 12. 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. If the Insureds and the Company agree on an allocation of Defense Costs, the 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 (c) the Company, if requested by the Insureds, shall submit the 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. 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 Insurance 13. If any Loss arising from any Claim made against any Insured Persons is 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 Creation of Another Organization 14. If the Insured Organization (i) acquires securities or voting rights in another organization or creates another organization, which as a result of such 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. 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 10% 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. Acquisition of Parent Organization by Another Organization 15. 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 more 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 and Severability 17. 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. 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. Pollutants means any substance located anywhere in the world exhibiting any 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. CHUBB Executive Protection Policy ENDORSEMENT Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY Endorsement No: 1 Effective date of this endorsement: MAY 31, 1994 Issued to: RICHARDSON ELECTRONICS, LTD. To be attached to and form part of Policy No. 8125-64-60C 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. The offer of renewal terms and conditions or premiums different from those in effect prior to renewal shall not constitute refusal to renew. 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. James R. Maschmeyer Authorized Representative 6/1/94 Date CHUBB Executive Protection Policy ENDORSEMENT Coverage Section: EXECUTIVE LIABILITY Company: FEDERAL INSURANCE COMPANY Endorsement No: 2 Effective date of this endorsement: MAY 31, 1994 Issued to: RICHARDSON ELECTRONICS, LTD. To be attached to and form part of Policy No. 8125-64-60C It is agreed that Item 6 of the Declarations page, Insured Persons, is amended to include the following: Microwave Business Unit Manager Broadcast Business Unit Manager Export/Middle East/Africa/Reg. Sls. Mgr. Regional Sales Manager - REI/GEB Industrial Business Unit Manager General Manager - RESA Solid State Components Bus. Unit Manager Director General - REISA Regional Sales Manager - RESA Medical Business Unit Manager Canada Region Sales Manager Western Region Sales Manager Eastern Region Sales Manager Director Marketing Administration ROW Regional Sales Manager - GmbH ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED. James R.Maschmeyer Authorized Representative 6/1/94 Date EX-10.Q2 10 EXHIBIT 10(q)(2) NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH,PA. POLICY NUMBER: A CAPITAL STOCK COMPANY 443 01 66 ADMINISTRATIVE OFFICE: RIN 441 05 87 70 PINE STREET, NEW YORK, N.Y.10270 The Company agrees with the Insured named below, in consideration of the premium paid and subject to all terms and conditions set forth below that the insurance afforded by this policy shall follow all the terms and conditions of Policy Number 8125-64-60C issued by Federal Insurance Company (but not including any renewal or rewrite thereof unless otherwise specifically agreed in writing by the Company), except for any endorsements attached hereto. NAMED INSURED: RICHARDSON ELECTRONICS, LTD. ADDRESS: 40W267 KESLINGER ROAD LAFOX, IL 60147 POLICY PERIOD: May 31,1994 to May 31,1995 COVERAGE EXCESS DIRECTORS AND OFFICERS LIABILITY AND CORPORATE REIMBURSEMENT LIMIT OF LIABILITY: $15,000,000 EXCESS OF $15,000,000 PREMIUM: $110,000 RATE: FLAT IN WITNESS WHEREOF, the Company has caused this policy to be signed by its President and Secretary at New York, New York and countersigned by a duly authorized representative of the Company. Elizabeth M. Tuck William D. Smith SECRETARY President IRLAND, JOHN E. & COMPANY 230 WEST MONROE STREET CHICAGO, IL 60606 June M. Clifford Authorized Representative JUN 24 94 ENDORSEMENT # 1 This endorsement, effective 12:01 AM, May 31, 1994 forms a part of policy number 443-01-66 issued to RICHARDSON ELECTRONICS LTD by National Union Fire Insurance Company of Pittsburgh, Pa. In consideration of the premium charged, it is hereby expressly agreed that liability for any covered Loss with respect to claims first made and reported during the Policy Period shall attach to the Insurer only after the Insurers of the Primary and Underlying excess policies, the Company, and/or the Insureds shall have paid, admitted or been held liable to pay the full amount of the Limits of Liability of the Primary and Underlying excess policies, and the Company and/or the Insureds shall have paid, admitted or been held liable to pay the full amount of the applicable Retention amount for such Policy Period. It is further understood and agreed that in the event of the reduction of the aggregate limits of liability under the Primary and Underlying excess policies (as scheduled below) by reason of Losses paid thereunder, this policy shall, subject to its terms, conditions and exclusions: (1) in the event of reduction, pay the excess of the reduced Primary and Underlying excess limits; (2) in the event of exhaustion, continue in force as Primary Insurance; provided always that in the latter event this policy shall only pay excess of the retention amount stated in the primary policy. Nothing on this endorsement shall be construed to provide coverage for claims within this policy's layer of liability which are otherwise excluded or limited by this policy, including such terms and conditions, if any, which are attached to this policy by endorsement or otherwise and differ from that of the Primary and Underlying excess policy. It is a condition of this policy that the Primary and Underlying excess policies shall be maintained in effect at all times when this policy is in effect, and that such Primary and Underlying excess policies shall be valid and collectible. If the foregoing condition is breached, unless the Insurer otherwise agrees, this policy shall: (1) immediately and automatically terminate on the date ENDORSEMENT# 1 (Continued) This endorsement, effective 12:01 AM, May 31, 1994 forms a part of policy number 443-01-66 issued to RICHARDSON ELECTRONICS LTD by National Union Fire Insurance Company of Pittsburgh, Pa. any of the Primary and Underlying excess policies ceases to be in effect; and (2) automatically terminate 30 days following the date an insurer of any Primary or Underlying excess policy becomes subject to a receivership, liquidation, dissolution, rehabilitation or any similar proceeding or is taken over by any regulatory authority unless the Company obtains replacement coverage for such Primary and Underlying Policies within such 30 day period. In the event this policy automatically terminates, the Insurer shall retain the pro-rata proportion of the premium. Payment or tender of any unearned premium by the Insurer shall not be a condition precedent to the effectiveness of such termination, but such payment shall be made as soon as practicable. Schedule of Primary and Underlying excess policies Insurer Policy Number Limits Policy Period Primary Policy Federal Insurance 8125-64-60C $15,000,000 May 31, 1994 to May 31, 1995 June M. Clifford AUTHORIZED REPRESENTATIVE ENDORSEMENT # 2 This endorsement, effective 12:01 AM, May 31, 1994 forms a part of policy number 443-01-66 issued to RICHARDSON ELECTRONICS LTD by National Union Fire Insurance Company of Pittsburgh, Pa. In consideration of the premium charged, it is hereby understood and agreed that notice hereunder shall be given in writing to National Union Fire Insurance Company of Pittsburgh, Pa., Financial Services Claims Department, 10 Pine Street, New York, N.Y. 102l0-0150. (herewritten the "Insurer") (a) The Company or the Insureds shall, as a condition precedent to the obligations of the Insurer under this policy, give written notice to the Insurer as soon as practicable during the Policy Period, or during the Extended Discovery Period (if applicable), of any claim made against the Insureds. (b) If during the Policy Period or during the Extended Discovery Period (if applicable) written notice of a claim has been given to the Insurer pursuant to Clause (a) above, then any claim which is subsequently made against the Insureds and reported to the Insurer alleging, arising out of, based upon or attributable to the facts alleged in the claim of which such notice has been given, or alleging any Wrongful Act which is the same as or related to any Wrongful Act alleged in the claim of which such notice has been given, shall be considered made at the time such notice was given. (c) The Insurer does not, however, under this policy, assume any duty to defend. The Insureds shall not admit or assume any liability, enter into any settlement agreement, stipulate to any judgment or incur any Defense Costs without the prior written consent of the Insurer. Only those settlements, stipulated judgments and Defense Costs which have been consented to by the Insurer shall be recoverable as Loss under the terms of this policy. The Insurer consent shall not be unreasonably withheld, provided that the Insurer shall be entitled to effectively associate in the defense and the negotiation of any settlement of any claim in order to reach a decision as to reasonableness. (d) The Insurer shall have the right to effectively associate with the Company and the Insureds in the defense and settlement of any claim that appears ENDORSEMENT# 2 (Continued) This endorsement, effective 12:01 AM, May 31, 1994 forms a part of policy number 443-01-66 issued to RICHARDSON ELECTRONICS LTD by National Union Fire Insurance Company of Pittsburgh, Pa. reasonably likely to involve the Insurer, including but not limited to effectively associating in the negotiation of a settlement. The Insureds shall defend and contest any such claim. The Company and the Insureds shall give the Insure full cooperation and such information as it may reasonably require. (e) With respect to the Defense Costs and any joint settlement of any claim made against the Company and the Insureds, such Defense Costs and joint settlement having been consented to by the Insurer the Company and the Insureds and the Insurer agree to use their best efforts to determine a fair and proper allocation of the amounts as between the Company and the Insureds and the Insurer. June M. Clifford AUTHORIZED REPRESENTATIVE ENDORSEMENT# 3 This endorsement, effective 12:01 AM, May 31, 1994 forms a part of policy number 443-01-66 issued to RICHARDSON ELECTRONICS LTD by National Union Fire Insurance Company of Pittsburgh, Pa. In consideration of the premium charged, it is hereby understood and agreed that as respects to the Limit of Liability $10,000,000 excess of $15,000,000 the Company shall not be liable to make any payment for Loss in connection with any claim or claims made against the Insured(s) alleging, arising out of, based upon or attributable to any pending or prior litigation as of May 31, 1991 or alleging or derived from the same or essentially the same facts as alleged in such pending or prior litigation. It is further understood and agreed that as respects to the Limit of Liability $5,000,000 excess of $25,000,000 the Company shall not be liable to make any payment for Loss in connection with any claim or claims made against the Insured(s) alleging, arising out of, based upon or attributable to any pending or prior litigation as of May 31, 1990 or alleging or derived from the same or essentially the same facts as alleged in such pending or prior litigation. June M. Clifford AUTHORIZED REPRESENTATIVE ENDORSEMENT# 4 This endorsement, effective 12:01 AM, May 31, 1994 forms a part of policy number 443-01-66 issued to RICHARDSON ELECTRONICS LTD by National Union Fire Insurance Company of Pittsburgh, Pa. ODL EXCLUSION FOR AN EXCESS POLICY In consideration of the premium charged, it is hereby understood and agreed that National Union Fire Insurance Company of Pittsburgh, Pa. shall not be liable to make payment for Loss in connection with any claim or claims against the Directors or Officers alleging, arising out of, based upon or attributable to any act or omission in their capacities as directors or officers of any other entity other than Richardson Electronics, Ltd. or by reason of their status as a director or officer of such other entity. June M. Clifford AUTHORIZED REPRESENTATIVE ENDORSEMENT# 5 This endorsement, effective 12:01 AM, May 31, 1994 forms a part of policy number 443-01-66 issued to RICHARDSON ELECTRONICS LTD by National Union Fire Insurance Company of Pittsburgh, Pa. In consideration of the premium charged, it is hereby understood and agreed that this policy follows the terms and conditions of the Federal Insurance Company's policy number 8125 64 60- ("Underlying Policy") subject to the terms and conditions of this and any other endorsement attached hereto to this policy as follows: FOLLOWED COVERAGE SECTIONS Coverage Section Form Number Executive Liability and 14-02-0943 (Ed. 1-92) Indemnification Coverage Applicable Sections of General 14-02-0941 (Ed. 1-92) Term and Conditions In no event shall this policy be construed to provide coverage for or follow the terms and conditions of any other coverage section of said Underlying Policy or provide Fiduciary Liability Coverage, Crime Coverage, Kidnap/Ransom and Extortion Coverage, Outside Directorship Liability Coverage, and Employment Practices Liability Coverage. June M. Clifford AUTHORIZED REPRESENTATIVE ENDORSEMENT# 6 This endorsement, effective 12:01 AM, May 31, 1994 forms a part of policy number 443-01-66 issued to RICHARDSON ELECTRONICS LTD by National Union Fire Insurance Company of Pittsburgh, Pa. Renewal Application Endorsement (Standard Form-Public Company) In consideration of the premium charged, it is hereby understood and agreed that for the purposes of coverage as is afforded by this policy, the term "Application" or "Renewal Application" shall mean the insurance application(s) or request(s) made to the Insurer for the insurance as is provided by this policy and incorporates all written statements and materials furnished to the Insurer in conjunction therewith. It also incorporates the following public documents produced by the Company within the last twelve (12) months, whether or not furnished to the Insurer, the Company's Annual Report(s), 10K(s) filed with the SEC, 10Q(s) filed with the SEC, Proxy Statements/Notice to Shareholders and Registration Statements filed with the SEC. It is agreed that the Renewal Application is a supplement to the application(s) which are part of the Expiring Policy, and that those application(s) together with the Renewal Application, constitute the complete Application that is the basis of this policy and forms a part hereof. June M. Clifford AUTHORIZED REPRESENTATIVE EX-10.Q3 11 EXHIBIT 10(q)(3) CNA Commercial Governance Liability Financial Insurance Division DATE: May 26, 1994 FAX: (708) 564-4169 TO: Robina Fisher FROM: Mark Tomlinson TEL: (312) 822-2137 FAX: (312) 822-5716 RE: Richardson Electronics Ltd.: Policy #600028634 Robina; Please accept this as evidence that coverage, as quoted, has been bound on the above captioned insured effective 5/31/94. If you need anything else please call. Sincerely, Mark EX-11 12 Exhibit 11 Richardson Electronics, Ltd. and Subsidiaries Computation of Net Income per Share Net income (loss) per share for 1994, 1993 and 1992 was computed by dividing net income (loss) by the weighted average number of common and common share equivalents outstanding. The treasury stock method was applied to those stock options that would have a dilutive effect on net income per share. The average market price of the Company's stock was used in determining primary income per share, while the year-end market price (if greater than the average market price) was used in determining fully diluted net income per share. The Company's 7 1/4% Convertible Debentures have not been included in the calculation of income per share because their effect would be anti-dilutive. Fully diluted income per share has not been presented on the face of the income statement because it does not differ significantly from primary income per share for each year. (Shares and Amounts in Thousands) 1994 1993 1992 -------- -------- -------- Primary net income (loss) per share: Weighted average shares outstanding 11,285 11,251 11,199 Effect of dilutive stock options 14 84 31 -------- -------- -------- Total 11,299 11,335 11,230 ======== ======== ======== Net income (loss) $(19,809) $2,802 $1,707 ======== ======== ======== Net income (loss) per share $(1.75) $0.25 $0.15 ======== ======== ======== Fully diluted net income per share: Weighted average shares outstanding 11,285 11,251 11,199 Effect of dilutive stock options 14 98 45 -------- -------- -------- Total 11,299 11,349 11,244 Net income (loss) $(19,809) $2,802 $1,707 ======== ======== ======== Net income (loss) per share $(1.75) $0.25 $0.15 ======== ======== ======== EX-13 13 The following portions of the Company's Annual Report to Stockholders for the Year Ended May 31, 1994 are incorporated by reference. The page numbers as indicated are the same as the printed copy which was distributed to the shareholders. Five-Year Financial Review Statement of Operations Data
Year Ended May 31 (in thousands, except per share amounts) 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- Net sales $172,094 $159,215 $158,789 $161,146 $160,101 Cost of products sold 124,703 111,620 109,600 115,401 105,637 Phase-down of manufacturing operations (1) 26,500 -- -- 20,000 -- Special charges (2) -- -- -- -- 8,000 Selling, general and administrative expenses 41,226 38,070 40,947 41,890 39,778 Other expense, net 5,874 5,023 5,385 8,397 6,099 -------- -------- -------- -------- -------- Income (loss) before income taxes and extraordinary item (26,209) 4,502 2,857 (24,542) 587 Income tax provision (benefit) (6,400) 1,700 1,150 (8,329) (425) -------- -------- -------- -------- -------- Income (loss) before extraordinary item (19,809) 2,802 1,707 (16,213) 1,012 Extraordinary gain on bond repurchase -- -- -- 2,290 -- -------- -------- -------- -------- -------- Net income (loss) $(19,809) $2,802 $1,707 $(13,923) $1,012 ======== ======== ======== ======== ======== Net income (loss) per share: Before extraordinary item $(1.75) $.25 $.15 $(1.46) $.09 Extraordinary gain on bond repurchase -- -- -- .21 -- -------- -------- -------- -------- -------- Net income (loss) per share $(1.75) $.25 $.15 $(1.25) $.09 ======== ======== ======== ======== ======== Dividends per common share $.16 $.16 $.16 $.16 $.16 ======== ======== ======== ======== ======== Balance Sheet and Other Data May 31 (dollars in thousands) 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- Receivables $34,901 $30,267 $27,488 $26,711 $30,675 Inventories 73,863 86,955 84,427 88,661 80,477 Working capital, net 96,494 103,987 103,165 97,332 100,172 Investments 17,836 29,080 28,785 31,056 49,865 Property, plant and equipment, net 16,932 36,242 39,328 42,013 32,006 Total assets 179,532 205,043 205,837 214,723 215,689 Long-term debt 86,421 98,855 101,456 103,163 99,610 Stockholders' equity 52,573 75,417 76,009 73,383 89,779 Employees 654 683 655 693 727 Stockholders 785 778 819 789 732
(1) In 1991, the Company established a $20,000,000 provision for the estimated costs of the settlement of the Department of Justice investigation and related matters and the phase-down of domestic manufacturing operations. In 1994, the Company established a $26,500,000 provision, which included $21,400,000 for the estimated costs of a plan to dispose of its manufacturing operations in Brive, France, and $5,100,000 for incremental costs related to the 1991 provision. (2) Includes special charges for manufacturing restructuring costs and disposal of inventory at reduced values. Page 10 Management's Discussion and Analysis Results of Operations Sales Analysis The Company operates in one industry segment as a value-added distributor of electronic components, including electron and special purpose vacuum tubes and semiconductors. The marketing and sales organization of the Company is divided into four strategic business units (SBUs): Electron Device Group (EDG), Solid State and Components (SSC), Display Products Group (DPG) and Security Systems Division (SSD). Consolidated sales in fiscal 1994 were a record $172.1 million, detailed by SBU as follows: (in thousands) 1994 1993 1992 -------- -------- -------- Electron Device Group $91,736 $97,846 $102,783 Solid State and Components 42,274 31,619 27,388 Display Products Group 27,150 19,076 16,278 Security Systems Division 10,934 10,674 12,340 -------- -------- -------- Consolidated $172,094 $159,215 $158,789 ======== ======== ======== On a geographic basis, United States sales increased 4% in 1993 and 11% in 1994 to $93.0 million. International sales declined 4% in 1993, but increased 5% in 1994 to $79.1 million. International sales were negatively impacted in 1993 and 1994 by economic conditions, particularly in Europe, and by changes in exchange rates as the U.S. dollar strengthened. Approximately one-third of the Company's sales are denominated in currencies other than the U.S. dollar. Foreign exchange rate changes reduced these sales by an average of 9% in 1994 and 6% in 1993. Sales trends are analyzed for each strategic business unit in the following sections. (Chart amounts are in millions). Electron Device Group (Sales trend chart inserted here, reflecting following sales data: 1990- $123.6, 1991- $115.9, 1992- $102.8, 1993- $97.80, 1994- $91.7) The vacuum tube industry, in which EDG operates, is characterized by mature products, the emergence of tube rebuilders, and vigorous price competition. EDG sales results reflect the effects of this market environment, declining 5% in 1993 and 6% in 1994, to $91.7 million. Several initiatives are underway to provide new growth areas for EDG. Primary among these is the Group's entry into the medical electronics replacement market. Demand for x-ray, computed tomography (CT), medical resonance imaging (MRI) and radiation therapy components is expected to increase in response to the desire to control rising medical costs. International sales represented 54%, 55% and 56% of EDG's sales in 1994, 1993 and 1992, respectively. Solid State and Components (Sales trend chart inserted here, reflecting following sales data: 1990- $20.3, 1991- $23.9, 1992- $27.4, 1993- $31.6, 1994- $42.3) This group operates in several markets, including the highly competitive and rapidly growing wireless and telecommunications markets. Sales increased 15% in 1993 and 34% in 1994 to $42.3 million. The reorganization and expansion of the sales force on a specialty basis was a major factor in the acceleration of SSC's growth rate. A significant portion of the increase in sales represents expansion of product lines and the addition of major manufacturers of RF and microwave components to support expanding technologies. SSC's international sales are increasing, but not as rapidly as domestic sales. As a result, international sales represented 37%, 40% and 41% of SSC's sales in 1994, 1993 and 1992, respectively. Display Products Group (Sales trend chart inserted here, reflecting following sales data: 1990- $7.4, 1991- $10.9, 1992- $16.3, 1993- $19.1, 1994- $27.2) DPG sales increased 17% in 1993 and 42% in 1994 to $27.2 million. Sales growth in North America benefited from the implementation of the specialty sales force and the addition of significant new customers for major original equipment manufacturer and multi-vendor repair programs. Sales growth is expected to continue in the replacement market for cathode ray tubes and related products. The product mix for DPG is shifting from monochrome CRTs to higher priced color CRTs, which have increased from 6% of units sold in 1992 to 9% in 1993 and 20% in 1994. International sales represented 33%, 30% and 29% of DPG's sales in 1994, 1993 and 1992, respectively. Security Systems Division (Sales trend chart inserted here, reflecting following sales data: 1990- $8.8, 1991- $10.5, 1992- $12.3, 1993- $10.7, 1994- $10.9) This group's sales grew 2% in 1994 to $10.9 million, after a 13% decline in 1993. In response to the 1993 results, the Company reorganized SSD to specialize primarily in closed circuit television and other security related products. This strategy contributed to the 1994 sales growth. International sales, primarily in Canada, represented 40%, 34% and 37% of SSD's sales in 1994, 1993 and 1992, respectively. Page 11 Cost of Sales and Gross Margins The following table shows the product margin on distribution activities and reconciles to the gross margins reported in the Statements of Operations: (% of sales) 1994 1993 1992 ------- ------- ------- Product margin on distribution 32.2 % 33.8 % 35.2 % Manufacturing underabsorption, inefficiencies and warranties (2.9)% (2.2)% (2.5)% Overstock provisions (0.9)% (0.8)% (1.0)% Other costs (0.9)% (0.9)% (0.7)% ------- ------- ------- Gross margin 27.5 % 29.9 % 31.0 % ======= ======= ======= The distribution margin fluctuations reflect the effects of higher product costs, foreign exchange rate variations, changes in product mix and, in 1993 and 1994, the inclusion of value-added costs in the cost of the product. This reclassification from selling expense was made to provide better cost data, to improve pricing decisions and to encourage productivity improvements. Average selling prices, excluding the effects of foreign currency changes, increased 0.7% in 1994 and 2.1% in 1993. Gross margins for all three years were negatively impacted by underutilization of capacity, manufacturing inefficiencies and manufactured product warranties at both of the Company's facilities. These persistent problems have distracted the Company from its primary focus as a value-added distributor. Management has therefore developed a plan to phase down its involvement in manufacturing operations. In developing this plan, the Company solicited offers for the sale of the Brive, France operation from strategic buyers, including local management who has expressed preliminary interest in a management buy-out. At May 31, 1994, the Company recorded a charge of $26.5 million to provide for the anticipated costs and asset write-downs from the phase-down of its involvement in manufacturing operations. Of the related charge, $21.4 million consists of asset write-downs and costs related to management's plan to sell or dispose of the Brive facility. The balance of $5.1 million is an increase in the provision for the phase-down of domestic manufacturing operations and settlement of certain litigation, originally established at $20.0 million in 1991. Details of management's plan, the related costs and employees affected are presented in Note B to the accompanying consolidated financial statements. As part of any sale, the Company intends to enter into purchase commitments with the buyer in order to assure an uninterrupted source of supply for Richardson's customers. It is anticipated that the higher earnings levels and stability which will result from the elimination of manufacturing inefficiencies will be partially offset by reduced profit margins on distributed product. Selling, General and Administrative Expenses Selling, general and administrative expense represented 24.0% of sales in 1994, 23.9% in 1993 and 25.8% in 1992. The 1993 reduction reflects the reclassification of value-added costs to cost of sales (1.1% of sales) and a cost reduction program initiated in the third quarter of fiscal 1992. Other (Income) Expense Investment income was $2.4 million in 1994, $3.2 million in 1993 and $1.9 million in 1992. The decrease in 1994 reflects lower investment levels and lower realized capital gains. The 1993 increase over 1992 was due to higher realized capital gains. Interest expense remained essentially the same for all three years. The remaining other (income) expense is primarily the result of foreign exchange (gains) losses, which were $0.6 million in 1994, $0.5 million in 1993 and $(0.3) million in 1992. Income Tax Provision The effective tax rates were 24% in fiscal 1994, 38% in 1993 and 40% in 1992. The 1994 rate differs from the 34% U.S. statutory rate as a result of the provision for the sale or disposition of the Company's French manufacturing operations, which for financial reporting purposes resulted in a U.S. tax benefit at a lower rate (See Note F to the accompanying consolidated financial statements). The rates in 1993 and 1992 were higher than the federal statutory rate due to state income taxes and foreign net operating losses for which no benefit has been realized. Net Income (Loss) and per Share Data Net income (loss) was $(19.8) million in 1994, $2.8 million in 1993 and $1.7 million in 1992. The 1994 loss includes the provision for the phase-down of manufacturing operations, which had an after-tax effect of $(19.5) million, or $(1.73). Net income (loss) per share was $(1.75), $.25 and $.15, respectively. Page 12 Financial Condition Liquidity Liquidity is provided by the operating contributions of the Company, adjusted for non-cash items, and is reduced by debt service, capital equipment and working capital requirements. Cash provided by operations, exclusive of working capital requirements, was $5.8 million in fiscal 1994, $9.1 million in 1993 and $12.8 million in 1992. Higher working capital requirements of $8.1 million in 1994, $3.1 million in 1993 and $4.4 million in 1992 and debt service and dividend payments were met from cash generated by operations and by liquidation of investments. Working capital requirements included higher receivables resulting from strong fourth quarter sales in 1993 and 1994, and, in 1994, the payment of a $2 million IRS tax settlement. The Company's market niche as a distributor of electron tubes and semiconductors for replacement results in relatively high levels of inventory due to the nature of the product carried and the markets served. Many of these products represent trailing edge technology which may not be available from other sources, and may not be currently manufactured. Also, in many cases, the products are components of production equipment for which immediate availability is critical to the customer. Cash requirements in 1995 in addition to routine disbursements for debt repayment, dividends and capital expenditures are expected to include approximately $6.3 million for severance, legal and other costs related to the phase-down of manufacturing operations. Financing In March 1994, the Company entered into a $13 million term loan agreement. The proceeds were used to repay then outstanding term loans. In connection with the December 1986 debt issuance, certain restrictions were placed on the Company relating to the purchase of treasury stock and the payment of cash dividends. At May 31, 1994, $1.0 million was free of such restrictions. Payment of dividends will be considered quarterly. Investments At May 31, 1994, the Company's non-current investments totaled approximately $17.8 million. Management regularly monitors its investment portfolio performance, including its high-yield bonds. These funds are being maintained for corporate purposes, which may include short-term operating needs, and the evaluation of joint venture or potential acquisition candidates. Effective May 31, 1994, the Company adopted a new accounting principle whereby the portfolio is carried at fair market value. (See Note D to the accompanying consolidated financial statements for further information.) Currency Fluctuations The Company's foreign denominated assets and liabilities are accounts receivable, accounts payable and bank loans, primarily in member countries of the European community, and, to a lesser extent, in Canada, Singapore and Japan. The Company monitors its foreign exchange exposures and will enter into forward contracts to hedge significant transactions. Other tools 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. Page 13 Consolidated Balance Sheets May 31 (in thousands) 1994 1993 --------- --------- Assets Current assets Cash and equivalents $9,739 $7,098 Receivables, less allowance of $1,405 and $1,456 34,901 30,267 Inventories - Note A 73,863 86,955 Assets held for disposition, less valuation reserve of $15,832 - Notes B and E 10,274 -- Other 8,190 7,967 --------- --------- Total current assets 136,967 132,287 Investments - Note D 17,836 29,080 Property, plant and equipment, net - Note A 16,932 36,242 Other assets - Note A 7,797 7,434 --------- --------- Total assets $179,532 $205,043 ========= ========= Liabilities and stockholders' equity Current liabilities Accounts payable $10,925 $11,902 Liabilities related to disposition - Note B 15,842 -- Accrued expenses - Note G 11,839 13,264 Current portion of long-term debt - Note E 1,867 3,134 --------- --------- Total current liabilities 40,473 28,300 Long-term debt, less current portion - Note E 86,421 98,855 Deferred income taxes - Note F 65 2,471 --------- --------- Total liabilities 126,959 129,626 --------- --------- Stockholders' equity - Notes E and H Common Stock, $.05 par value 403 401 Class B Common Stock, convertible, $.05 par value 162 162 Preferred Stock, $1.00 par value -- -- Additional paid-in capital 49,352 49,158 Retained earnings 4,912 26,475 Foreign currency translation adjustment (2,383) (779) Market appreciation on investments, net of tax - Note D 127 -- --------- --------- Total stockholders' equity 52,573 75,417 --------- --------- Total liabilities and stockholders' equity $179,532 $205,043 ========= ========= See notes to consolidated financial statements Page 14 Consolidated Statements of Operations Year Ended May 31 (in thousands, except per share amounts) 1994 1993 1992 --------- --------- --------- Net sales $172,094 $159,215 $158,789 Costs and expenses: Cost of products sold 124,703 111,620 109,600 Phase-down of manufacturing operations - Note B 26,500 -- -- Selling, general and administrative expenses 41,226 38,070 40,947 --------- --------- --------- 192,429 149,690 150,547 --------- --------- --------- Operating income (loss) (20,335) 9,525 8,242 Other (income) expense: Interest expense 7,631 7,676 7,783 Investment income - Note D (2,442) (3,216) (1,902) Other 685 563 (496) --------- --------- --------- 5,874 5,023 5,385 --------- --------- --------- Income (loss) before income taxes (26,209) 4,502 2,857 Income tax provision (benefit) - Note F (6,400) 1,700 1,150 --------- --------- --------- Net income (loss) $(19,809) $2,802 $1,707 ========= ========= ========= Net income (loss) per share $(1.75) $.25 $.15 ========= ========= ========= Average shares outstanding 11,299 11,335 11,230 ========= ========= ========= Dividends per common share $.16 $.16 $.16 ========= ========= ========= See notes to consolidated financial statements. Page 15 Consolidated Statements of Cash Flows Year Ended May 31 (in thousands) 1994 1993 1992 --------- --------- --------- Operating Activities: Net income (loss) $(19,809) $2,802 $1,707 Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities: Depreciation 4,753 5,150 4,812 Amortization of intangibles and financing costs 964 1,353 1,149 Deferred income taxes (6,717) (309) 4,660 Stock contribution to employee ownership plan 125 125 500 Phase-down of manufacturing operations - Note B 26,500 - - --------- --------- --------- Net adjustments 25,625 6,319 11,121 --------- --------- --------- Net income (loss) adjusted for non-cash items 5,816 9,121 12,828 Changes in working capital, net of effects of currency translation: Receivables (5,132) (3,182) (215) Inventories 1,197 (3,574) 5,492 Other current assets (928) 1,105 (382) Accounts payable (770) 1,728 (4,783) Accrued expenses (2,485) 812 (4,547) --------- --------- --------- Net changes in working capital (8,118) (3,111) (4,435) --------- --------- --------- Net cash (used in) provided by operating activities (2,302) 6,010 8,393 --------- --------- --------- Financing Activities: Proceeds from borrowings 13,770 6,390 1,320 Payments on debt (16,641) (8,811) (5,191) Proceeds from sale of common stock 71 118 114 Cash dividends (1,754) (1,749) (1,739) --------- --------- --------- Net cash used in financing activities (4,554) (4,052) (5,496) --------- --------- --------- Investing Activities: Capital expenditures (2,164) (2,313) (3,186) Reduction (increase) in investments 11,453 (295) 2,271 Other 208 (325) 528 --------- --------- --------- Net cash provided by (used in) investing activities 9,497 (2,933) (387) --------- --------- --------- Increase (decrease) in cash and equivalents 2,641 (975) 2,510 Cash and equivalents at beginning of year 7,098 8,073 5,563 --------- --------- --------- Cash and equivalents at end of year $9,739 $7,098 $8,073 ========= ========= ========= See notes to consolidated financial statements. Page 16 Consolidated Statements of Stockholders' Equity
Shares Issued Addi- --------------- tional Market (shares and dollars Class B Par Paid-in Treasury Retained Foreign Appre- in thousands) Common Common Value Capital Stock Earnings Currency ciation Total ------ ------ ------ ------- ------ ------- ------- ------ ------- Balance June 1, 1991 7,941 3,250 $559 $48,691 $(824) $25,892 $(935) $ -- $73,383 Shares contributed to ESOP - Note I 20 -- 1 113 824 (438) -- -- 500 Shares issued under ESPP and stock option plan - Note H 24 -- 1 113 -- -- -- -- 114 Conversion of Class B to Common shares 2 (2) -- -- -- -- -- -- -- Dividends -- -- -- -- -- (1,739) -- -- (1,739) Currency translation -- -- -- -- -- -- 2,044 -- 2,044 Net income -- -- -- -- -- 1,707 -- -- 1,707 ------ ------ ------ ------- ------ ------- ------- ------ ------- Balance May 31, 1992 7,987 3,248 561 48,917 -- 25,422 1,109 -- 76,009 Shares contributed to ESOP - Note I 15 -- 1 124 -- -- -- -- 125 Shares issued under ESPP and stock option plan - Note H 17 -- 1 117 -- -- -- -- 118 Dividends -- -- -- -- -- (1,749) -- -- (1,749) Currency translation -- -- -- -- -- -- (1,888) -- (1,888) Net income -- -- -- -- -- 2,802 -- -- 2,802 ------ ------ ------ ------- ------ ------- ------- ------ ------- Balance May 31, 1993 8,019 3,248 563 49,158 -- 26,475 (779) -- 75,417 Shares contributed to ESOP - Note I 20 -- 1 124 -- -- -- -- 125 Shares issued under ESPP and stock option plan - Note H 17 -- 1 70 -- -- -- -- 71 Dividends -- -- -- -- -- (1,754) -- -- (1,754) Currency translation -- -- -- -- -- -- (1,604) -- (1,604) Cumulative effect of adoption of FASB statement 115 - Note D -- -- -- -- -- -- -- 127 127 Net loss -- -- -- -- -- (19,809) -- -- (19,809) ------ ------ ------ ------- ------ ------- ------- ------ ------- Balance May 31, 1994 8,056 3,248 $565 $49,352 $ -- $4,912 $(2,383) $127 $52,573 ====== ====== ====== ======= ====== ======= ======= ====== =======
See notes to consolidated financial statements. Page 17 Notes to Consolidated Financial Statements Note A -- Significant Accounting Policies Principles of Consolidation: The consolidated financial statements include the accounts and operations of the Company and its subsidiaries. All significant intercompany transactions are eliminated. 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% and 74% of total inventories at May 31, 1994 and 1993, respectively. The remaining inventories are costed on the first-in, first-out (FIFO) method. If the FIFO method, which approximates current costs, had been used for all inventories, the total amount of inventories would have been increased by $5,653,000 and $5,288,000 at May 31, 1994 and 1993, respectively. The components of inventories are as follows (1994 amounts reflect reclassifications and write-downs of $10,989,000, as explained in Note B): May 31 (in thousands) 1994 1993 -------- -------- Finished products $72,136 $76,294 Work in process 1,049 3,961 Materials 678 6,700 -------- -------- Total inventories $73,863 $86,955 ======== ======== Property, Plant and Equipment: Property, plant and equipment are stated at cost. Provisions for depreciation are computed principally using the straight-line method for financial reporting purposes and accelerated methods for income tax purposes. Property, plant and equipment consist of the following (1994 amounts reflect reclassifications and write-downs of $15,738,000, as explained in Note B): May 31 (in thousands) 1994 1993 -------- -------- Land and improvements $2,618 $3,035 Buildings and improvements 18,508 31,283 Machinery and equipment 20,482 29,013 -------- -------- Property at cost 41,608 63,331 Accumulated depreciation (24,676) (27,089) -------- -------- Property, net $16,932 $36,242 ======== ======== Other Assets: Goodwill and other deferred charges are amortized using the straight-line method over the expected economic life of the assets. Deferred financing costs are amortized over the term of the related indebtedness by the interest method. Deferred income taxes reverse as benefits are realized. Other assets consist of the following (1994 amounts reflect reclassifications and write-downs of $1,981,000, as explained in Note B): May 31 (in thousands) 1994 1993 -------- -------- Deferred income taxes $3,470 $ - Deferred financing costs 2,634 2,927 Goodwill 3,651 4,985 Other deferred charges 1,609 6,399 -------- -------- Other assets, at cost 11,364 14,311 Accumulated amortization (3,567) (6,877) -------- -------- Other assets, net $7,797 $7,434 ======== ======== Foreign Currency Translation: Foreign currency transactions and financial statements are translated into U.S. dollars at current rates, except that revenues, costs and expenses are translated at average current rates during each reporting period. Gains and losses resulting from foreign currency transactions are included in income currently. Foreign currency transaction gains (losses) reflected in operations were $(607,000), $(480,000), and $260,000 in 1994, 1993 and 1992, respectively. Gains and losses resulting from translation of foreign financial statements are credited or charged directly to a separate component of shareholders' equity. Revenue Recognition: Revenues are recorded when shipments are made. Income Taxes: Deferred tax liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted marginal tax rates and laws. Earnings per Share: Earnings per share are based on the weighted average number of Common and Class B shares outstanding and share equivalents that would arise from the exercise of stock options. The 7 1/4% Convertible Subordinated Debentures were not included as share equivalents because the effect of conversion would be anti-dilutive. Reclassification: Certain balance sheet items at May 31, 1993 and certain statement of cash flow items for 1992 and 1993 were restated to conform to the 1994 financial statement presentation. Note B -- Phase-down of Manufacturing Operations In 1994, the Company recorded a charge of $26,500,000 to provide for the anticipated costs and asset write-downs from the phase-down of its involvement in manufacturing operations. Of the related charge, $21,400,000 consists of the write-down of assets to net realizable value and the accrual of severance and other costs associated with the Brive facility. The balance of the charge, $5,100,000, relates to an increase in the provision for the phase-down of domestic manufacturing operations and settlement of certain litigation, originally established at $20,000,000 in 1991. The increase in the original estimate relates primarily to remaining inventory after substantially completing the market requirements program started in 1991. Page 18 The Brive operations, which were acquired in 1989, have consistently operated at a loss as a result of under-utilization of capacity, manufacturing inefficiencies and product warranty claims. While considerable progress has been made in improving product quality, continuing under-utilization and inefficiencies have detracted from the Company's primary focus as a value- added distributor. In developing its plan, management solicited offers for the sale of the Brive operations from strategic buyers, including local management who has expressed preliminary interest in a management buy-out. The Board of Directors has authorized the Company to pursue the management buy-out proposal as well as other alternatives. The major components of these provisions are listed in the following table. The asset write-downs represent non-cash items, while the remaining charges are expected to require future cash outlays. French Domestic (in thousands) Operations Operations -------- -------- Asset write-downs to net realizable value $15,832 $3,738 Severance and related costs 2,580 533 Operating loss until disposition 1,366 - Other costs 1,622 829 -------- -------- Provision for phase-down $21,400 $5,100 ======== ======== Asset write-downs are primarily for net property, inventory and intangible assets, including goodwill and purchased manufacturing technology. Severance costs reflect the retirement or termination of 54 employees in France and 7 employees in the United States. Other costs for the French operations include the translation loss on investment and appraisal and related costs. Other costs for the phase-down of domestic operations include provisions for estimated legal and environmental clean-up costs. The assets, adjusted to net realizable value, and the liabilities of the French manufacturing operations have been segregated and classified as current assets and liabilities on the balance sheet at May 31, 1994. Management's plans for the sale or disposition of French manufacturing operations and for the phase-down of domestic manufacturing operations will be completed during fiscal 1995. The French provision is based on the successful completion of the management buy-out agreement or similar alternative. If such an agreement is not completed, revision of the estimated cost of the phase-down will be required for additional severance and for any incremental net asset impairment resulting from such change in circumstances. Management estimates the potential impact on net income of such a revision to be less than $4 million. Note C -- Marketing Agreements The Company has entered into several marketing distribution agreements with various manufacturers in the electron tube and semiconductor businesses. The most significant is a distribution agreement with the Electron Device Group of Varian Associates, Inc. Product sales under this distribution agreement or prior agreements accounted for 18%, 20% and 25%, of net sales of the Company in fiscal 1994, 1993 and 1992, respectively. Note D -- Investments In May 1993, the Financial Accounting Standards Board issued Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (the Statement). The Company adopted the provisions of the Statement for investments held as of May 31, 1994. The Statement requires investments to be classified as trading, available-for-sale or held-to-maturity. Management has determined these investments are properly classified as available-for-sale. In accordance with the Statement, prior period financial statements have not been restated to reflect the change in accounting principle. The cumulative effect, at May 31, 1994, of adopting the Statement increased shareholders' equity by $127,000 (net of $82,000 in deferred income taxes) to reflect the net unrealized gains on securities classified as available-for-sale previously carried at cost. The investment portfolio at May 31, 1993 is stated at cost. Under the Statement, the investment portfolio at May 31, 1994 is stated at fair value based on quoted market prices or dealers' quotes and consists of securities available-for-sale, as follows: Gross Gross Estimated Unrealized Unrealized Fair (in thousands) Cost Gains Losses Value ------- ------- ------- ------- At May 31, 1994: Corporate bonds $8,357 $18 $(35) $8,340 Convertible bonds 1,954 152 (39) 2,067 Other bonds 1,318 48 (27) 1,339 Equity securities 5,998 349 (257) 6,090 ------- ------- ------- ------- Total investments $17,627 $567 $(358) $17,836 ======= ======= ======= ======= At May 31, 1993: Equity securities $5,466 $264 $(257) $5,473 Total investments $29,080 (a) (a) $28,892 (a) Not reported in 1993 The maturity schedule for securities available-for-sale at May 31, 1994 is as follows: Estimated Fair (in thousands) Cost Value ------- ------- Due in one year or less $3,866 $3,882 Due after one year through five years 6,053 6,089 Due after five years through ten years 773 707 Due after ten years 937 1,068 ------- ------- Total bonds 11,629 11,746 Equity securities 5,998 6,090 ------- ------- Total investments $17,627 $17,836 ======= ======= Interest and dividend income are accrued as earned. Gains and losses are recognized in income on the investment portfolio when securities are sold or to reflect a decline in market value estimated by management to be of a Page 19 permanent nature. Investment income includes capital gains of $1,292,000 in 1994, $1,526,000 in 1993 and $284,000 in 1992. Of these amounts, sales of equity securities generated gains of $739,000, $1,301,000 and $453,000, respectively. Note E -- Long-Term Financing Long-term debt consists of the following: (in thousands) 1994 1993 -------- -------- 7 1/4% Convertible subordinated debentures due 2006 $75,735 $75,735 Floating-rate bank term loan due November 1998 (5 1/2% at May 31, 1994) 12,536 - Floating-rate bank term loans - 14,375 7 1/4% Building mortgage (Brive, France) due 2004 10,233 11,346 Other 58 533 -------- -------- Total debt 98,562 101,989 Less current maturities 1,867 3,134 Less liabilities related to disposition 10,274 - -------- -------- Long-term debt, net $86,421 $98,855 ======== ======== The 7 1/4% convertible subordinated debentures are unsecured and subordinated to other long-term debt. Each $1,000 debenture is convertible into the Company's Common Stock at any time prior to maturity at $21.14 per share and is redeemable by the Company at a premium through 1996. The Company is required to make sinking fund payments on December 15 of each year from 1996 to 2005 in order to retire 75% of the original $83,000,000 issue prior to maturity, of which $7,265,000 has been repurchased. Sinking fund requirements for the next five years are $5,185,000 and $6,225,000 due in fiscal 1998 and 1999, respectively. The debenture agreement restricts the use of retained earnings for the payment of dividends or purchase of treasury stock. As of May 31, 1994, $1,047,000 was free of such restrictions. In March 1994, the Company entered into a $13,000,000 term loan agreement with American National Bank. The proceeds of the loan were used to repay then outstanding floating-rate term loans. The term loan requires quarterly principal payments of $464,000 beginning April 30, 1994 and a balloon payment at maturity in November 1998. The loan bears interest at the bank's prime rate or the London Inter-Bank Offered Rate (LIBOR), adjusted based on the Company's financial performance. Financial covenants under the agreement set benchmark levels for tangible net worth, debt to tangible net worth ratio and annual debt service coverage. The 7 1/4% building mortgage is payable in equal annual installments through December 7, 2004. Land and building in Brive, France with a net book value of $10,274,000 is pledged as collateral. The mortgage and certain other debt were reclassified on the balance sheet at May 31, 1994 to liabilities related to disposition. Aggregate maturities of long-term debt during the next five years, excluding liabilities related to disposition, are as follows: $1,867,000 in 1995, $1,865,000 in 1996, $1,857,000 in 1997, $7,042,000 in 1998 and $11,332,000 in 1999. Cash payments for interest were $7,710,000, $7,801,000 and $7,827,000 in 1994, 1993 and 1992, respectively. In the following table, the fair value of the Company's 7 1/4% convertible debentures is based on quoted market prices. The fair value of floating rate bank term loans is based on carrying value. At May 31, 1993, the carrying value was adjusted by the value of then existing swap agreements. The fair value of other loans is based on current market rates for similar instruments. (in thousands) 1994 1993 Carrying Fair Carrying Fair Value Value Value Value ------- ------- ------- ------- 7 1/4% Convertible debentures $75,735 $56,044 $75,735 $63,617 Bank term loans 12,536 12,536 14,375 14,877 Other loans 10,291 10,790 11,879 12,468 ------- ------- ------- ------- Total $98,562 $79,370 $101,989 $90,962 ======= ======= ======= ======= Note F -- Income Taxes The components of income (loss) before income taxes are: (in thousands) 1994 1993 1992 -------- -------- -------- United States $(2,284) $4,282 $2,208 Foreign (23,925) 220 649 -------- -------- -------- Income (loss) before taxes $(26,209) $4,502 $2,857 ======== ======== ======== The 1994 financial statement loss was created by the provision for the phase-down of manufacturing operations, most significantly the sale or disposition of the Company's French operations (See Note B). The Company will submit a request to the Internal Revenue Service for a private letter ruling in conjunction with the planned ordinary loss deduction for U.S. federal income tax purposes. For financial statement purposes, an estimated tax benefit of $5,000,000 has been recorded, based on alternate tax strategies. Additional tax benefits of $3,000,000 realizable based on treatment as an ordinary loss have not been recorded pending a favorable determination by the IRS. The differences between the provision (credit) for income taxes and income taxes computed at the federal statutory tax rate of 34% are as follows: (in thousands) 1994 1993 1992 -------- -------- -------- Federal income tax at statutory rate $(8,911) $1,531 $971 Effect of: Non-deductible foreign losses 9,036 233 100 Estimated U.S. tax benefit on provision for disposition of French manufacturing (5,000) - - State income taxes, net of federal tax benefit (1,203) 226 105 FSC benefit on export sales (258) (247) (243) Other (64) (43) 217 -------- -------- -------- Income tax provision (benefit) $(6,400) $1,700 $1,150 ======== ======== ======== Page 20 The provisions (credits) for income taxes consist of the following: (in thousands) 1994 1993 1992 -------- -------- -------- Currently payable: Federal $137 $937 $(3,070) State - 170 (759) Foreign 196 885 329 -------- -------- -------- Total currently payable 333 1,992 (3,500) -------- -------- -------- Deferred: Federal (4,455) 174 3,741 State (1,822) 97 917 Foreign (456) (563) (8) -------- -------- -------- Total deferred (6,733) (292) 4,650 -------- -------- -------- Income tax provision (benefit) $(6,400) $1,700 $1,150 ======== ======== ======== 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. Non-current deferred tax assets and liabilities are offset on the balance sheet within tax jurisdictions. Significant components of the Company's deferred tax assets and liabilities as of May 31, 1994 and 1993 are as follows: Non- Non- Current current current (in thousands) Asset(1) Asset(2) Liability -------- -------- -------- At May 31, 1994: Deferred tax assets: Phase-down of manufacturing operations $ - $5,793 $ - Elimination of intercompany profit in inventory 2,470 - - Inventory valuation 1,775 - - Other, net - 625 - -------- -------- -------- Deferred tax assets 4,245 6,418 - Deferred tax liabilities: Accelerated depreciation - (2,948) (65) -------- -------- -------- Net deferred tax $4,245 $3,470 $(65) ======== ======== ======== At May 31, 1993: Deferred tax assets: Phase-down of manufacturing operations $(133) $ - $ - Elimination of intercompany profit in inventory 1,928 - - Inventory valuation 1,634 - - Other, net (41) - 496 -------- -------- -------- Deferred tax assets 3,388 - 496 Deferred tax liabilities: Accelerated depreciation - - (2,967) -------- -------- -------- Net deferred tax $3,388 $ - $(2,471) ======== ======== ======== (1) Included in other current assets on the balance sheet (2) Included in other assets on the balance sheet Net income taxes paid (refunds received) were $3,053,000, $(1,792,000) and $(2,002,000) in 1994, 1993 and 1992, respectively. The Company's United States tax returns have been audited through 1990. Note G -- Accrued Liabilities Accrued liabilities consist of the following: May 31 (in thousands) 1994 1993 -------- -------- Compensation and payroll taxes $4,178 $3,939 Accrual for phase-down of domestic manufacturing 2,598 2,954 Interest 2,544 2,622 Income taxes 386 1,967 Other accrued expenses 2,133 1,782 -------- -------- Accrued expenses $11,839 $13,264 ======== ======== Note H -- Stockholders' Equity The Company has authorized 30,000,000 shares of Common Stock, 10,000,000 shares of Class B Common Stock and 5,000,000 shares of Preferred Stock. The Class B Common Stock has ten votes per share and generally votes together with the Common Stock. 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 cash dividends declared on Common Stock. Total Common Stock issued at May 31, 1994 was 8,055,877 shares. An additional 8,206,119 shares of Common Stock have been reserved for future issuance under the Employee Stock Purchase and Option Plans and potential conversion of the 7 1/4% Debentures and Class B Common Stock. The Employee Stock Purchase Plan (ESPP) provides substantially all employees an opportunity to purchase Common Stock of the Company at 85% of its fair market value. The plan has reserved 247,500 shares, of which 181,918 shares had been purchased by employees through May 31, 1994. The Incentive Stock Option Plan expired in August 1993. The Plan authorized 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. On July 13, 1994, the Board of Directors approved the Employees' 1994 Incentive Compensation Plan, subject to shareholder approval. This plan, if approved, will authorize the issuance of up to 500,000 shares as incentive stock options, non-qualified stock options or stock awards. Non-qualified stock options, exercisable based on earnings performance, have reserved 74,787 shares for future issuance. Non-qualified stock options, exercisable based on the passage of time, have reserved 499,580 shares for future issuance to employees and 300,000 shares for issuance to non-employee directors of the Company. Each option is exercisable over a period from its date of grant at the market value on the date of grant and expires ten years from the date of grant. Page 21 The following table contains further information on the stock option plans: Incentive Stock Options 1994 1993 1992 -------- -------- -------- Outstanding, June 1 444,813 390,283 217,533 Granted 40,150 73,500 181,800 Cancelled (50,742) (18,970) (9,050) -------- -------- -------- Outstanding, May 31 434,221 444,813 390,283 ======== ======== ======== Price range at May 31 $6.00 $6.00 $6.00 to to to $8.125 $8.125 $16.14 Exercisable at May 31 199,111 136,334 74,563 Available for grant at May 31 - 40,907 95,437 Non-Qualified Stock Options 1994 1993 1992 -------- -------- -------- Outstanding, June 1 493,532 373,121 379,036 Granted 208,100 152,500 - Cancelled (31,742) (32,089) (5,915) -------- -------- -------- Outstanding, May 31 669,890 493,532 373,121 ======== ======== ======== Price range at May 31 $5.25 $7.25 $7.25 to to to $12.95 $12.95 $12.95 Exercisable at May 31 345,026 304,823 138,450 Available for grant at May 31 204,477 380,805 501,216 Note I -- 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 3% of base pay. Charges to expense for discretionary and matching contributions to these plans were $740,000 in 1994, $718,000 in 1993 and $703,000 in 1992. Foreign employees are covered by a variety of primarily government mandated programs. Note J -- Industry and Market Information The Company operates in one industry as a distributor of electronic components, including vacuum tubes and semiconductors. Historically, the Company manufactured certain of the electronic tubes it distributed. See Note B for further information. The Company invoices its customers and makes shipments from two primary geographic locations: North America (which services the U.S., Canada, Latin America and the Far East) and Europe. (in thousands) 1994 1993 1992 -------- -------- -------- Sales: North America $154,205 $142,197 $142,477 Less intersegment transfers 13,691 12,762 15,086 -------- -------- -------- To unaffiliated customers 140,514 129,435 127,391 -------- -------- -------- Europe 40,367 36,048 37,883 Less intersegment transfers 8,787 6,268 6,485 -------- -------- -------- To unaffiliated customers 31,580 29,780 31,398 -------- -------- -------- Consolidated $172,094 $159,215 $158,789 ======== ======== ======== Operating income (loss): North America $6,235 $10,700 $8,740 Europe (25,054) 399 1,124 Corporate expenses (1,516) (1,574) (1,622) -------- -------- -------- Consolidated $(20,335) $9,525 $8,242 ======== ======== ======== Identifiable assets: North America $119,098 $120,721 $124,870 Europe 35,310 48,564 45,408 Corporate assets 25,124 35,758 35,559 -------- -------- -------- Consolidated $179,532 $205,043 $205,837 ======== ======== ======== Intersegment transfers originate mainly from the United States or France and are accounted for on an "arm's length" basis with profits eliminated in consolidation. Export sales shipped directly from the United States, principally to European and Canadian customers, were $29,667,000 in 1994, $28,396,000 in 1993 and $29,839,000 in 1992. Operating income in fiscal 1994 has been reduced by $5,100,000 in North America and by $21,400,000 in Europe for the provision for phase-down of manufacturing operations, as described in Note B. Corporate assets consist primarily of cash and investments. 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. Credit losses are recorded in the financial statements based on periodic reviews of outstanding accounts and consistently have been within management's estimates. Sales by product line are summarized in Management's Discussion and Analysis. Note K -- Litigation On September 30, 1991, the Company reached a settlement with the U.S. Department of Justice (DOJ) which prohibits the Company from collecting tube carcasses otherwise available to tube rebuilders, provides certain restrictions on its dealings with Varian Associates, Inc. with respect to power grid tubes and requires the Company to obtain DOJ approval for the acquisition of any company (or its power grid tube assets) engaged in the rebuilding, manufacture or distribution of power grid tubes, except under limited circumstances. On June 19, 1990, the Company was served with a complaint in Panache Broadcasting of Pennsylvania, Inc. v. Richardson Electronics, Ltd.; Varian Page 22 Associates, Inc.; and Varian Supply Company (VASCO - a joint venture between the Company and Varian Associates, Inc.), in U.S. District Court for the Eastern Division of Pennsylvania alleging violations of Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act. This action purports to be a class action on behalf of all persons and businesses in the U.S. "who purchased electron power tubes from one or more of the defendant corporations at any time" since the formation of VASCO. The suit seeks treble damages alleged to be in excess of $100,000, injunctive relief and attorneys' fees. The litigation has been transferred to the U.S. District Court for the Northern District of Illinois, Eastern Division as cause No. 90C6400, and is in the discovery stage. The Court has not determined whether the action may be maintained on behalf of a class. The Company is vigorously defending itself and the VASCO joint venture against this action. The United States Government has advised the Company that the Government is considering making a claim for damages and penalties against the Company under the False Claims Act and the Lanham Act for conduct in connection with a $3.1 million contract to supply certain tubes which was completed in 1989. The False Claims Act permits the Government to seek a civil penalty for each violation of not less than $5,000 nor more than $10,000, plus three times its damages. The Company believes it has not violated these statutes and is discussing the resolution of the matter with the Government. If such discussions are not satisfactorily concluded, the Company plans to vigorously defend itself against any litigation the Government may initiate. While it is not possible at this time to predict the outcome of these legal actions, in the opinion of management, the disposition of the lawsuits and other matters mentioned above is not likely to have a material effect on financial position. Note L -- Selected Quarterly Financial Data (Unaudited) Summarized quarterly financial data for 1994 and 1993 follow. Fourth quarter adjustments in 1994 include $675,000 in excess of original estimates for overstock inventory and $365,000 for a LIFO reserve requirement. See Note B regarding provision for the phase-down of manufacturing operations. In 1993, fourth quarter adjustments included $415,000 for a LIFO reserve requirement. (in thousands, except per share amounts) First Second Third Fourth ------- ------- ------- ------- 1994: Net sales $35,846 $44,200 $43,051 $48,997 Gross profit 9,963 12,027 12,099 13,302 Phase-down of manufacturing - - - (26,500) Net income 60 597 258 (20,724) Net income per share $.01 $.05 $.02 $(1.83) 1993: Net sales $36,593 $41,214 $38,086 $43,322 Gross profit 11,671 12,961 11,300 11,663 Net income 950 1,193 236 423 Net income per share $.08 $.11 $.02 $.04 Report of Independent Auditors Stockholders and Directors Richardson Electronics, Ltd. LaFox, Illinois We have audited the accompanying consolidated balance sheets of Richardson Electronics, Ltd. and subsidiaries as of May 31, 1994 and 1993, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended May 31, 1994. 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 generally accepted auditing standards. 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, 1994 and 1993, and the consolidated results of their operations and cash flows for each of the three years in the period ended May 31, 1994, in conformity with generally accepted accounting principles. As discussed in Note D to the consolidated financial statements, at May 31, 1994 the Company changed its method of accounting for its investments. Ernst & Young LLP Chicago, Illinois, July 13, 1994 Page23 Stockholder Information Corporate Offices Richardson Electronics, Ltd. 40W267 Keslinger Road LaFox, Illinois 60147 Annual Meeting We encourage all stockholders to attend the annual meeting scheduled for Tuesday, October 11, 1994 at 3:15 p.m. at American National Bank, One North LaSalle Street, Chicago, IL 60690. Further details are available in your proxy materials. Transfer Agent and Registrar Harris Trust and Savings Bank 111 West Monroe Street Chicago, Illinois 60690 Auditors Ernst & Young LLP 233 South Wacker Drive Chicago, Illinois 60606 Form 10K 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, LaFox, Illinois 60147. Market Price of Common Stock The common stock is traded on the NASDAQ National Market System under the symbol "RELL". The number of stockholders of Common Stock and Class B Common Stock at May 31, 1994 was 739 and 46, respectively. The quarterly market price ranges of the Company's common stock were as follows: 1994 1993 Fiscal Quarters High Low High Low ------- ------- ------- ------- First 7 3/4 6 8 1/2 6 3/4 Second 6 3/4 5 1/2 8 1/2 6 3/4 Third 6 3/4 5 3/4 10 1/2 8 1/2 Fourth 6 1/2 4 1/2 9 7/8 7 1/2 Corporate Officers Edward J. Richardson Chairman of the Board, President & Chief Executive Officer Charles J. Acurio Vice President,Display Products Group Page Y. Chiang Vice President & General Manager, Security Systems Division Dennis R. Gandy Executive Vice President, Corporate Development & Assistant Secretary William J. Garry Vice President, Finance & Chief Financial Officer David Gilden Vice President, Latin American Sales Joseph C. Grill Vice President, Human Resources Ad Ketelaars Vice President & Managing Director of Europe Francis J. Leonard Treasurer Joel Levine Senior Vice President & General Manager, Solid State & Components Kathleen M. McNally Vice President, Marketing Operations Bart Petrini Vice President & General Manager, Electron Device Group Leonard R. Prange Group Vice President & Assistant Secretary Robert L. Prince Vice President, Sales Kevin F. Reilly Vice President, Information Systems William G. Seils Senior Vice President, General Counsel & Corporate Secretary George W. Snyder Group Vice President Board of Directors Edward J. Richardson (1) Arnold R. Allen Consultant Jacques Boyer (5) Consultant Kenneth J. Douglas (2,3) Chairman of the Board, West Suburban Hospital Medical Center Dennis R. Gandy (1) David Gilden Scott Hodes (2,3,4) Partner, Law Firm of Ross & Hardies Leonard R. Prange Joel Levine Samuel Rubinovitz (1,3,4,5) Consultant (1) Executive Committee (2) Audit Committee (3) Compensation / Stock Option Committee (4) Executive Oversight Committee (5) Strategic Planning Committee Page 24 EX-21 14 EXHIBIT 21 SUBSIDIARIES OF RICHARDSON ELECTRONICS, LTD. Name of Immediate Jurisdiction of Owner(s) and its/their Subsidiary Incorporation Percentage of Ownership Richardson Delaware Richardson International, Inc. Electronics, Ltd. 100% Richardson Virgin Islands Richardson Electronics Foreign International, Inc. Sales Corporation 100% Cetron Delaware Richardson International International, Inc. Sales Corporation 100% Richardson Canada Richardson Electronics Canada, International, Inc. Ltd. 100% Richardson United Kingdom Richardson Electronics (Europe) International, Inc. Ltd. 100% Richardson France Richardson Electronique S.A. International Inc. 97%, Richardson Electronics, Ltd. 2% and Ceco Communications, Inc., National Electronics, Inc., Cetron Electronic Corp., RFG, Ltd. and Richardson Electronics (Europe) Ltd., 1%. Richardson France France Richardson Electronique SNC S.A. 99% and Richardson International, Inc. 1% Richardson Italy Richardson International, Electronics Inc. 90% and Italy SRL Richardson Electronics, Ltd. 10% Richardson Spain Richardson International, Electronics Inc. 88% and Richardson Iberica, S.A. Electronics, Ltd., 12% Richardson Germany Richardson International Electronics GmbH Inc., 98% and Richardson Electronics, Ltd., 2% Richardson Japan Richardson International, Electronics Japan Inc. 100% K.K. Richardson Singapore Richardson International, Electronics Pte Ltd. Inc. 100% Richardson Mexico Richardson Electronics, Electronics S.A. Ltd. 100% de C.V. EX-23 15 EXHIBIT 23 Consent of Independent Auditors We 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 and Registration Statement Number 33-54745 on Form S-8 of our report dated July 13, 1994, with respect to the consolidated financial statements and schedules of Richardson Electronics, Ltd. included in the Annual Report on Form 10-K for the year ended May 31, 1994. Ernst & Young LLP Chicago, Illinois August 24, 1994 EX-99.1 16 Richardson Electronics, Ltd. and Subsidiaries Schedule VIII - Valuation and Qualifying Accounts
COL. A COL. B COL. C COL. D COL. E -------------------------------------- ----------- ------------------------ ----------- ----------- ADDITIONS ------------------------ (1) (2) Balance at Charged to Charged to Balance at DESCRIPTION Beginning Costs and Other Account Deductions - End of of Period Expenses - Describe Describe Period -------------------------------------- ----------- ----------- ----------- ----------- ----------- Year ended May 31, 1994: Allowance for sales returns and doubtful accounts $1,456,000 $199,000 $ - $250,000 (1) $1,405,000 Assets held for disposition $ - $15,832,000 $ - $ - $15,832,000 Liabilities related to disposition $ - $5,568,000 $ - $ - $5,568,000 Accrual for phase-down of domestic manufacturing $2,954,000 $5,100,000 $ - $5,456,000 (2) $2,598,000 Year ended May 31, 1993: Allowance for sales returns and doubtful accounts $1,435,000 $328,000 $ - $307,000 (1) $1,456,000 Accrual for phase-down of domestic manufacturing $4,510,000 $ - $ - $1,556,000 (3) $2,954,000 Year ended May 31, 1992: Allowance for sales returns and doubtful accounts $1,288,000 $158,000 $ - $11,000 (1) $1,435,000 Accrual for phase-down of domestic manufacturing $9,000,000 $ - $ - $4,490,000 (4) $4,510,000 (1) Uncollectible amounts written off, net of recoveries and foreign currency translation. (2) Primarily costs incurred for the phase-down of domestic manufacturing and the disposition of manufactured inventory. (3) Primarily costs incurred for the phase-down of domestic manufacturing and the transfer of certain product lines to the Brive, France facility. (4) Includes $2 million in fines and damages paid for litigation settlement and $2,490,000 of other costs incurred.
EX-99.2 17 Richardson Electronics, Ltd. and Subsidiaries Schedule IX - Short-term Borrowings
COL. A COL. B COL. C COL. D COL. E COL. F --------------------------------- ------------ ---------- ------------ -------------- ------------- Maximum Average Weighted Weighted Amount Amount Average Balance Average Outstanding Outstanding Interest CATEGORY OF AGGREGATE at end Interest During During Rate During SHORT-TERM BORROWINGS of Period Rate the Period the Period the Period --------------------------------- ------------ ---------- ------------ -------------- ------------- Year ended May 31, 1994: Notes payable to bank $ - - $1,127,000 $505,000 (1) 7.3 % (2) Year ended May 31, 1993: Notes payable to bank $403,000 8.1 % $403,000 $127,000 (1) 8.1 % (2) Year ended May 31, 1992: Notes payable to bank $ - - $876,000 $253,000 (1) 11.6 % (2) (1) The average amount outstanding during the period was computed by dividing the total month-end outstanding principal balances by 12. (2) The weighted average interest rate during the period was computed by dividing the actual interest expense by the average monthly notes payable outstanding.
EX-99.3 18 Richardson Electronics, Ltd. and Subsidiaries Schedule XIII - Other Investments May 31, 1994
COL. A COL. B COL. C COL. D COL. E -------------------------------------------- ------------- ---------------- ---------------- -------------- Number of Amount at Shares or Market Value Which Each Units-Principal of Each Issue Issue is Amount of at Balance Carried on Bonds Cost of Each Sheet the Balance NAME OF ISSUER AND TITLE OF EACH ISSUE and Notes Issue Date Sheet -------------------------------------------- ------------- ---------------- ---------------- -------------- NON - CURRENT INVESTMENTS AVAILABLE FOR SALE Corporate Notes: IBM Credit Corp., 6.33%, due 4/95 500,000 500,000 502,795 502,795 Merrill Lynch & Co., 9.25%, due 11/94 650,000 696,234 660,861 660,861 J P Morgan & Co., 8.875%, due 8/94 1,000,000 1,067,020 1,005,650 1,005,650 Assoc. Corp. of North America, 8.8%, due 350,000 373,457 356,202 356,202 Assoc. Corp. of North America, 9.0%, due 500,000 534,910 519,960 519,960 Boeing Co., 8.375%, due 3/96 500,000 534,945 515,625 515,625 E I DuPont, 8.65%, due 12/97 500,000 539,545 528,265 528,265 IBM Credit Corp., 6.125%, due 11/94 500,000 507,095 501,045 501,045 ITT Corp., 8.375%, due 3/96 400,000 420,000 411,044 411,044 Mobil Corp., 8.625%, due 7/94 500,000 532,200 501,485 501,485 Baxter International, 9.25%, due 9/96 400,000 432,740 420,944 420,944 Procter & Gamble Co., 7.1%, due 9/94 200,000 205,552 200,844 200,844 Coca Cola Co., 7.75%, due 2/96 1,000,000 1,066,570 1,025,690 1,025,690 Kellogg Co., 5.9%, due 7/97 1,000,000 995,030 979,960 979,960 Pepsico Inc., 7.875%, due 8/96 1,000,000 1,062,690 1,027,440 1,027,440 Plus Accrued Interest 207,078 207,078 207,078 -------------- -------------- ------------ 9,675,066 9,364,888 9,364,888 Mortgage Bonds: Old Dominion Electric, 7.27%, due 12/97 500,000 500,000 504,105 504,105 Plus Accrued Interest 18,074 18,074 18,074 -------------- -------------- ------------ 518,074 522,179 522,179 Common Stock: Anthem Electronics, Inc. 2,000 $64,200 $53,250 $53,250 Astro Medical Inc. 20,000 220,000 185,000 185,000 Authentic Fitness Corp. 14,600 214,480 213,525 213,525 Baker Michael Corp. 10,000 90,000 68,750 68,750 Beckman Instruments, Inc. 5,000 130,377 121,875 121,875 Beverly Enterprises 10,000 134,750 137,500 137,500 Corrpro Companies, Inc. 12,600 201,600 215,775 215,775 D H Technology 10,000 153,038 210,000 210,000 Grossman's Inc. 40,000 175,320 145,000 145,000 Haagen Alexander Properties 20,000 360,000 365,000 365,000 Hillhaven Corp. Nev. 5,000 109,250 95,000 95,000 International Business Machines 5,000 292,260 318,125 318,125 International Game Tech. 3,000 75,000 65,625 65,625 Littlefuse, Inc. 5,000 125,500 110,000 110,000 Litton Industries 5,000 165,710 156,875 156,875 Marietta Corp. 17,000 134,307 146,625 146,625 Mid-America Realty 25,000 270,310 243,750 243,750 Mid-Atlantic Realty 20,000 194,350 185,000 185,000 Myers Industries 14,000 286,268 287,000 287,000 National Medical Enterprises 5,000 88,800 83,750 83,750 Petsmart Inc. 8,500 251,675 250,750 250,750 Philadelphia Consolidated Holding Corp. 2,000 25,625 20,000 20,000 Quixote Corp. 7,000 118,741 141,750 141,750 Rural Metro Corp. 10,000 145,000 140,000 140,000 Shared Medical Systems 5,000 130,300 116,250 116,250 Sizeler Property 32,500 422,113 410,312 410,312 Southernwestern Properties 20,000 267,150 255,000 255,000 Sun Healthcare Group Inc. 10,000 197,500 197,500 197,500 Thermedics 10,000 133,581 146,250 146,250 Thermo Cardio Systems 16,800 158,155 352,800 352,800 Thermolase Inc. 20,000 100,000 100,000 100,000 Stockrights 20,000 100,000 100,000 100,000 UJB Financial Corp. 2,500 74,625 70,937 70,937 Warnaco Group Inc. 11,500 388,413 380,937 380,937 -------------- -------------- ------------ 5,998,398 6,089,911 6,089,911 High Yield Bonds: Vis Capital Corp., 12.375%, due 7/1/98 243,000 $267,375 $223,560 $223,560 Rule Industries, 12.50%, due 6/1/97 438,000 348,270 385,440 385,440 Bally Park Place, 11.875%, due 8/15/99 200,000 200,000 211,250 211,250 Other High Yield Bonds 100,000 100,000 100,000 100,000 Plus Accrued Interest 47,669 47,669 47,669 -------------- -------------- ------------ 963,314 967,919 967,919 Convertible Bonds: TPI Enterprises, 8.25%, due 7/02 120,000 120,000 147,600 147,600 Novacare Inc., 5.5%, due 1/00 500,000 500,000 461,250 461,250 Meditrust, 7%, due 3/98 250,000 250,000 265,000 265,000 National Health Investors (P), 7.375%, d 250,000 250,000 255,000 255,000 Sterling Software, 5.75%, due 2/03 100,000 96,500 115,830 115,830 Beverly Enterprises, 7.625%, due 3/03 100,000 100,500 100,000 100,000 Sterling Software, 5.75%, due 2/03 200,000 196,000 235,170 235,170 Mediplex Group Inc., 6.5%, due 8/03 200,000 200,000 224,000 224,000 Centerpoint Property, 8.22%, due 1/04 200,000 200,000 223,000 223,000 Plus Accrued Interest 39,745 39,745 39,745 -------------- -------------- ------------ 1,952,745 2,066,595 2,066,595 Miscellaneous Money market funds and other cash equivalents $1,825,334 $1,825,334 $1,825,334 -------------- -------------- ------------ 20,932,931 20,836,826 20,836,826 Reclass to short-term investments (3,000,000) (3,000,000) (3,000,000) -------------- -------------- ------------ $17,932,931 $17,836,826 $17,836,826 ============== ============== ============ Carrying value is market value at May 31, 1994. It is management's current intention to use the non-current investments to meet future business needs of the Company. As such, these investments are considered "available for sale" under the Financial Accounting Standards Board 115. Selected corporate notes have first call options by the issuer ranging from one to four years. Amount represents investments reclassified at May 31, 1994, primarily to provide for a semi-annual interest payment due June 15, 1994.
EX-99.4 19 Appendix Graphic images in Annual Report to Stockholders for the Year Ended May 31, 1994: Page 11 - Management's Discussion and Analysis of Results of Operations and Financial Condition: 1. Electron Device Group sales history 2. Solid State and Components sales history 3. Display Products Group sales history 4. Security Systems Division sales history -----END PRIVACY-ENHANCED MESSAGE-----