-----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, jSuppqEqnjzkLccJlq8xlvKhKIBHNK06LoPACEyA19li3jct8ApAVVeh321WQboi kbwY9oOvj4ikb8dPHXuEYw== 0000355948-95-000002.txt : 19950509 0000355948-95-000002.hdr.sgml : 19950508 ACCESSION NUMBER: 0000355948-95-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19941130 FILED AS OF DATE: 19950112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RICHARDSON ELECTRONICS LTD/DE CENTRAL INDEX KEY: 0000355948 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 362096643 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12906 FILM NUMBER: 95501249 BUSINESS ADDRESS: STREET 1: 40W267 KESLINGER RD CITY: LAFOX STATE: IL ZIP: 60147 BUSINESS PHONE: 7082082200 MAIL ADDRESS: STREET 1: 40W267 KESLINGER ROAD CITY: LAFOX STATE: IL ZIP: 60147 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 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 number 0-12906 RICHARDSON ELECTRONICS, LTD. (Exact name of registrant as specified in its charter) Delaware 36-2096643 (State of incorporation or organization) (I.R.S. Employer Identification No.) 40W267 Keslinger Road, LaFox, Illinois 60147 (Address of principal executive offices and zip code) (Registrant's telephone number, including area code: (708) 208-2200 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of January 6, 1995, there were outstanding 8,190,386 shares of Common Stock, $.05 par value, and 3,247,159 shares of Class B Common Stock, $.05 par value, which are convertible into Common Stock on a share for share basis. This Quarterly Report on Form 10-Q contains 26 pages. An exhibit index is at page 13. (1) INDEX Page PART 1 - FINANCIAL INFORMATION Consolidated Condensed Balance Sheets 3 Consolidated Condensed Statements of Income 5 Consolidated Condensed Statements of Cash Flow 6 Notes to Consolidated Condensed Financial Statements 7 Management's Discussion and Analysis of the Financial Condition and Results of Operations 9 PART II - OTHER INFORMATION 12 (2) Richardson Electronics, Ltd. and Subsidiaries Consolidated Condensed Balance Sheets (in thousands) November 30 May 31 1994 1994 --------- --------- (Unaudited) (Audited) ASSETS Current Assets Cash and equivalents 9,850 $9,739 Receivables, less allowances of $1,208 and $1,405 36,204 34,901 Inventories 78,710 73,863 Assets held for disposition, less valuation reserves of $16,915 and $15,832 10,134 10,274 Other 7,621 8,190 --------- --------- TOTAL CURRENT ASSETS 142,519 136,967 Investments 13,177 17,836 Property, Plant and Equipment 39,499 41,608 Less accumulated depreciation (23,109) (24,676) --------- --------- 16,390 16,932 Other Assets 7,278 7,732 --------- --------- TOTAL ASSETS $179,364 $179,467 ========= ========= See notes to consolidated condensed financial statements. (3) Richardson Electronics, Ltd. and Subsidiaries Consolidated Condensed Balance Sheets (in thousands) November 30 May 31 1994 1994 --------- --------- (Unaudited) (Audited) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $10,885 $10,925 Accrued expenses 10,369 11,839 Liabilities related to disposition 16,117 15,842 Current portion of long-term debt 1,867 1,867 --------- --------- TOTAL CURRENT LIABILITIES 39,238 40,473 Long-term debt, less current portion 85,488 86,421 Stockholders' Equity: Common stock, $.05 par value; issued 8,190 at November 30, 1994 and 8,056 at May 31, 1994 410 403 Class B Common Stock, convertible, $.05 par value; issued 3,247 at November 30, 1994 and 3,247 at May 31, 1994 162 162 Preferred stock, $1.00 par value -- -- Additional paid-in capital 49,851 49,352 Retained earnings 5,934 4,912 Foreign currency translation adjustment (1,605) (2,383) Market valuation of investments, net of tax (114) 127 --------- --------- TOTAL STOCKHOLDERS' EQUITY 54,638 52,573 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $179,364 $179,467 ========= ========= See notes to consolidated condensed financial statements. (4) Richardson Electronics, Ltd. and Subsidiaries Consolidated Condensed Statements of Income (in thousands, except per share amounts) (Unaudited) Three Months Ended Six Months Ended November 30 November 30 -------------------- -------------------- 1994 1993 1994 1993 --------- --------- --------- --------- Net sales $51,008 $44,200 $97,415 $80,046 Costs and expenses: Cost of products sold 36,438 32,173 69,342 58,056 Selling, general and administrative expenses 11,545 9,544 22,525 18,418 --------- --------- --------- --------- 47,983 41,717 91,867 76,474 --------- --------- --------- --------- Operating income 3,025 2,483 5,548 3,572 --------- --------- --------- --------- Other (income) expense: Interest expense 1,568 1,891 3,117 3,753 Investment income (291) (663) (537) (1,664) Other, net 50 278 56 406 --------- --------- --------- --------- 1,327 1,506 2,636 2,495 --------- --------- --------- --------- Income before income taxes 1,698 977 2,912 1,077 Income taxes 570 380 1,000 420 --------- --------- --------- --------- Net income $1,128 $597 $1,912 $657 ========= ========= ========= ========= Net income per share $.10 $.05 $.17 $.06 ========= ========= ========= ========= Average shares outstanding 11,541 11,298 11,484 11,303 ========= ========= ========= ========= See notes to consolidated condensed financial statements. (5) Richardson Electronics, Ltd. and Subsidiaries Consolidated Condensed Statements of Cash Flows (in thousands)(unaudited) Six Months Ended November 30 ---------------------- 1994 1993 --------- --------- OPERATING ACTIVITIES Net income $1,912 $657 Non-cash charges to income: Depreciation 1,360 2,324 Amortization of intangibles and financing costs 172 467 Deferred income taxes 904 131 Common stock awards and contribution to employee stock ownership plan 505 130 --------- --------- Total non-cash charges 2,941 3,052 --------- --------- Net income, adjusted for non-cash charges 4,853 3,709 Changes in working capital, net of effects of currency translation: Receivables (947) (1,243) Inventories (3,831) (2,376) Other current assets 175 448 Accounts payable (437) (2,084) Other liabilities (1,232) (3,710) --------- --------- Net changes in working capital (6,272) (8,965) --------- --------- NET CASH USED IN OPERATING ACTIVITIES (1,419) (5,256) --------- --------- FINANCING ACTIVITIES Proceeds from borrowings -- 753 Payments on debt (933) (1,058) Cash dividends (890) (877) --------- --------- NET CASH USED IN FINANCING ACTIVITIES (1,823) (1,182) --------- --------- INVESTING ACTIVITIES Reduction in investments 4,264 6,846 Capital expenditures (1,197) (687) Other 286 (15) --------- --------- NET CASH PROVIDED BY INVESTING ACTIVITIES 3,353 6,144 --------- --------- DECREASE IN CASH AND EQUIVALENTS 111 (294) Cash and equivalents at beginning of year 9,739 7,098 --------- --------- CASH AND EQUIVALENTS AT END OF PERIOD $9,850 $6,804 ========= ========= See notes to consolidated condensed financial statements. (6) Richardson Electronics, Ltd. and Subsidiaries Notes to Consolidated Condensed Financial Statements Six Months Ended November 30, 1994 (Unaudited) Note A -- Basis of Presentation The accompanying unaudited Consolidated Condensed Financial Statements ("Statements") have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. In the opinion of management, all adjustments necessary for a fair presentation of the results of operations for the periods covered have been reflected in the Statements. Certain information and footnotes necessary for a fair presentation of the financial position and results of operations in conformity with generally accepted accounting principles have been omitted in accordance with the aforementioned instructions. It is suggested that the Statements be read in conjunction with the Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the year ended May 31, 1994. Note B -- Income Taxes The income tax provisions for the three- and six-month periods ended November 30, 1994 are based on the estimated effective tax rate of 34% for fiscal 1995 income, as expected state income taxes were offset by the U.S. foreign sales corporation tax benefit. The income tax provisions for the three- and six- month periods ended November 30, 1993 are based on the estimated effective tax rate of 39% for fiscal 1994 income. The fiscal 1994 rate differs from the applicable federal statutory rate of 34% principally as a result of state income taxes and foreign operating losses for which the related tax benefit will not be recognized until the future foreign earnings are realized. (7) Note C -- Phase-down of Manufacturing Operations The Company recorded a charge of $26,500,000 in the fourth quarter of 1994 to provide for the phase-down of its manufacturing operations, including $21,400,000 for planned sale or dissolution of its Brive, France facility and $5,100,000 for incremental costs related to a 1991 provision to phase down its domestic manufacturing operation. Negotiations are continuing with local management regarding their proposed buy-out of the Brive operation. Costs incurred in the first half of fiscal 1995 related to the manufacturing phase- down were consistent with management's projections included in the fiscal 1994 charge. (8) Richardson Electronics, Ltd. and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations Three- and Six- Month Periods Ended November 30, 1994 (Unaudited) Results of Operations Net sales for the quarter ended November 30, 1994 were a record $51,008,000, up 15% from last year's second quarter of $44,200,000. Sales for the six-month period were $97,415,000, a 22% increase from $80,046,000 in the prior year. Sales by the Company's strategic business units were as follows: Second Quarter First Six Months ------------------- ------------------- FY 1995 % FY 1995 % Sales Increase Sales Increase -------- -------- -------- -------- Electron Device Group $ 27,101 12% $ 50,941 16% Solid State & Components 12,198 17% 23,520 23% Display Products Group 8,513 26% 17,128 45% Security Systems Division 3,196 13% 5,826 12% -------- ------- Consolidated $ 51,008 15% $ 97,415 22% ======== ======== Sales on a geographic basis were as follows: Second Quarter First Six Months ------------------- ------------------- FY 1995 % FY 1995 % Sales Increase Sales Increase -------- -------- -------- -------- North America $ 29,247 16% $ 56,635 19% Europe 11,784 10% 21,951 23% Rest of the World 9,977 20% 18,829 28% -------- -------- Consolidated $ 51,008 15% $ 97,415 22% ======== ======== The gross margin for the first half was 28.8%, compared to 27.5% in the prior year, reflecting the elimination of charges for manufacturing inefficiencies at the Company's production facility in Brive, France. Underabsorbed costs included in the determination of operating results in the first half of 1995 were $525,000, all of which were associated with the Company's LaFox, Illinois facility. In the prior year comparable period, such costs were $3,117,000 relating to manufacturing in both LaFox and Brive. (9) Operating losses related to Brive and anticipated to be incurred during 1995 prior to the sale or dissolution of this operation were included in the 1994 charge (See Note C of the accompanying Notes to the Consolidated Condensed Financial Statements) and therefore did not affect 1995 first half results. A loss of approximately $98,000 related to Brive operations was charged against the 1994 reserve in the first half of 1995. Costs charged against the reserve, in the aggregate, were consistent with management's original estimate. The gross margin improvement related to manufacturing was partially offset by changes in product mix and competitive pricing, which caused product margins on distribution sales to decline to 30.7% from 32.7%. Selling, general, and administrative expenses for the first half of fiscal 1995 were $22,525,000, an increase of $4,107,000 from the prior year, primarily due to personnel additions for the specialty sales program and higher incentive payments related to gross margins. Selling, general and administrative expenses as a percent of sales increased slightly to 23.1% from 23.0%. Trends were similar on a quarterly basis. Interest expense for the first half declined 17% to $3,117,000, reflecting lower debt levels and the elimination of interest on a mortgage encumbering the Brive facility, as such interest expense was included in the determination of the Brive operating loss charged against the 1994 reserve. Investment income for the first half declined 68% to $537,000, reflecting lower investment levels in the current period and higher realized capital gains in last year's first half. Trends for interest expense and investment income were similar on a quarterly basis. Liquidity and Capital Resources Cash provided by operations, exclusive of working capital requirements, was $4,853,000 in the first half of fiscal 1995, compared to $3,709,000 for the first half last year. Higher working capital requirements in the first half of 1995 were $6,272,000, including a $3,831,000 increase in inventories to support sales growth in the DPG and SSC business units and $1,958,000 for severance, professional fees and other disbursements related to the phase-down of manufacturing operations. (10) Funding for the current year activity and for scheduled debt repayments was obtained through the liquidation of $4,264,000 from the long-term investment portfolio. Cash reserves, investments and funds from operations are expected to be adequate to meet the operational needs and future dividends of the Company. Additional working capital requirements in fiscal 1994 were $8,965,000, including a $2,000,000 payment to the Internal Revenue Service in settlement of audits for fiscal 1986 through 1990. Certain of the Company's loan agreements contain various financial and operating covenants which set benchmark levels for tangible net worth, the ratio of debt to tangible net worth and annual debt service coverage. The Company was in compliance with these covenants at November 30, 1994. In addition, certain of these agreements contain restrictions relating to the purchase of treasury stock or the payment of cash dividends. At November 30, 1994, $2,574,000 was available for such transactions. Payment of dividends will be considered quarterly based upon corporate performance. At November 30, 1994, the Company's non-current investment portfolio was $13,177,000, carried in the accompanying consolidated condensed balance sheet at market value. Included in the portfolio are high-yield investments for which management periodically evaluates the associated market risk. The investments are being maintained for corporate purposes which may include short-term operating needs and the evaluation of opportunities for the Company's expansion. (11) PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS No material developments have occurred in the matters reported under the category "Legal Proceedings" in the Registrant's Report on Form 10-K for the fiscal year ended May 31, 1994. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) At the Annual meeting of stockholders held October 11, 1994, the following directors were elected. It was noted that of the proxies voting it was believed 380,886 shares are broker votes and such brokers held another 177,473 shares entitled to vote and such shares were not voted. NUMBER OF WITHHELD NAME AFFIRMATIVE VOTES AUTHORITY Edward J. Richardson 38,380,374 91,829 Dennis R. Gandy 38,380,684 91,519 Joel Levine 38,376,063 96,140 Arnold R. Allen 38,366,301 105,902 Scott Hodes 38,375,184 97,019 Samuel Rubinovitz 38,374,484 97,719 Kenneth J. Douglas 38,374,884 97,319 Jacques Bouyer 38,375,562 96,641 William J. Garry 38,372,369 99,834 Harold L. Purkey 38,375,137 97,066 Shares not voted 1,839,806 Common and 35,120 Class B Votes not voted 2,191,006 ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit 10 - Employment agreement dated October 17, 1994 between the Company and Flint Cooper setting forth the terms of Mr. Cooper's employment by the Company. - page 15. Exhibit 27 - Financial Data Schedule - page 26. (b) Reports on Form 8-K - None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RICHARDSON ELECTRONICS, LTD. Date January 12 , 1995 By /s/ William J. Garry William J. Garry Vice President and Chief Financial Officer EX-10 2 EMPLOYMENT AGREEMENT This Agreement made this 17th day of October, 1994 by and between RICHARDSON ELECTRONICS, LTD. whose principal office is 40W267 Keslinger Road, LaFox, Illinois 60147 (hereinafter together with its subsidiaries called "Company") and FLINT COOPER of 48 Rollingwood Drive, Houston TX 77080 (hereinaf- ter called "Executive"). IT IS AGREED AS FOLLOWS: 1. Employment and Term. The Company employs the Executive, and the Executive accepts employment by the Company, for a period commencing November 2, 1994 and ending May 31, 1998, unless earlier terminated as hereinafter provided. The Agreement and Executive's employment shall renew automatically for additional consecutive three (3) year terms, unless either party declines to renew by written notice given not less than one (1) year prior to the expiration of any such term; and provided further that at any time after the initial term ending May 31, 1998, this Agreement and Executive's employment may be terminated by not less than one (1) year written notice given by one party to the other. In the event of such termination the Company may assign such duties or no duties to Executive as it, in its discretion, desires during such notice period. The Company may pay compensation in lieu of notice for the required balance of notice period. Executive shall render full time service to the Company upon the terms and conditions and for the compensation hereinafter set forth. Executive shall not engage in any other business activity, whether or not such business activity is pursued for gain or any other pecuniary advantage, without the prior written consent of the Company. The Company hereby consents to Executive's engaging in a tropical plant business so long as his activity in connection therewith does not interfere with his performance of his duties and obligations as an employee of the Company. 2. Duties. Executive shall perform such managerial duties and responsibilities in connection with the Company's Security Systems Division or its successor and such other duties and responsibilities as Edward J. Richardson or the Board of Directors of the Company may assign to Executive from time to time and shall devote his full time and attention to the same. All such duties and responsibilities shall be carried out by Executive as directed by and under the supervision of Edward J. Richardson, President, or such other employees of the Company as may from time to time be designated by the Board of Directors or the President of the Company. Executive agrees to perform such duties and responsibilities to the satisfaction of the President of the Company and to comply with the policies and procedures established by the Company from time to time, including, without limitation, its Code of Conduct. 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 thereof or any division of any thereof) on behalf of the Company, the Company agrees to pay Executive so long as he is employed hereunder, and the Executive agrees to accept, the following compensation: A. Salary. A fixed salary ("Salary") at the rate of One Hundred Thousand and No/100th Dollars ($100,000.00) per annum payable in install- ments in accordance with the Company's regular pay periods for employees generally. No additional compensation shall be payable to Executive by reason of the number of hours worked or by reason of hours worked on Saturdays, Sundays, holidays or otherwise. B. Bonus. A bonus ("Bonus") commencing for the period after January 1, 1995 computed annually for each fiscal year of the Company until the date on which Executive's employment with the Company is terminated in accordance with this Agreement (provided, however if termination is due to death or disability the Bonus will be computed through the end of the Company's fiscal quarter in which such termination takes place), on one of the following methods which shall be selected annually by Executive [and, in the absence of a written election to the contrary, by method (1)] (1) an amount equal to the amount which equals 50% of the cumulative net after tax profits for such period, if any, of the Company's Security System Division and after a charge (computed on a fiscal quarterly basis) for the Company's investment in such Division as hereinafter provided. In making the computation the following shall be taken into account: (a) The Company's investment in the Security Systems Division as of May 31, 1994 shall be deemed to be $3,422,000.00; (b) All additional investment in cash or in kind in the Security Systems Division by the Company shall be added to its investment in the Division as and when made from time to time, cash may be taken out and invested but such shall not reduce the Company's equity in the Security System Division; (c) The Company shall have added annually to its investment in the Security Systems Division an amount equal to 50% of the cumulative net after tax profits for such period, if any, of the Company's Security System Division and after a charge for the Company's investment in such Division as hereinafter provided; (d) The Company shall be entitled to an annual after-tax return on its investment in the Security Systems Division of 12.5% on the amount so invested from time to time; (e) If the Company does not withdraw the 12.5% return on its investment as provided for in (d) above monthly as it is earned the amount not withdrawn shall be deemed an additional investment by the Company in the Security Systems Division until such time as it is withdrawn; (f) To the extent withdrawals are made by the Company of excess cash, such amounts will be excluded from the calcula- tion of the 12.5% return contemplated in (d) above but will not reduce the ownership interest of the Company; (g) The Company shall maintain internal financial records which reflect the Security Systems Division as a discrete and separate business entity; and (h) The Security Systems Division financial records referred to in (g) above shall include all direct expenses of the Division, appropriate charges for expenses of the Company which are of a general nature and not directly chargeable to any one division as set forth in the Business Plan for the Security System Division approved for the year, and taxes computed as if the Security Systems Division stood alone as a separate entity not a part of the Company, and otherwise charges and computations shall be made in accordance with accepted accounting practices as generally applied by the Company. (2) an amount computed for Executive as manager of the Security Systems Division in the same manner and applying the same principles used in computing bonus for that fiscal year for other Strategic Business Unit Managers of the Company. If Executive shall be employed for only a portion of a fiscal year the Bonus for that year shall be reduced ratably for the portion of the year not employed. The chief financial officer of the Company shall make a computation of the Bonus amount, if any, for each fiscal year, or portion thereof, of the Company after the date Executive's employment commences as specified in paragraph 1. above, within 120 days after the end of each fiscal year of the Company's hereafter. Executive shall have fourteen (14) days to notify the Company in writing of any disagreement with the computation by specifying the particulars of such disagreement. If no notice of disagreement is received by the Company within such period such computation shall be in all respects final and binding upon the Company and upon the Executive. If notice of disagreement is received in a timely manner the parties shall seek to resolve the disagreement through discussion. If so resolved, the computation resulting from such resolution shall be in all respects final and binding upon the Company and upon the Executive. If the parties are unable to resolve the disagreement by discussion, either party by written notice to the other given not sooner than seven (7) days after the Executive's notice of disagreement, may submit the disagreement to the firm of independent public accountant's then acting as the Company's auditor. The decision of such audit firm shall be final and binding upon the Company and upon the Executive. The costs, expenses and fees of such audit firm in connection with resolving a disagreement shall be borne by the parties in proportion to the allowance of the amount in dispute by the audit firm, e.g. if the Executive is claiming an additional $10,000 of Bonus and the audit firm determines Executive is entitled to an additional $1,000, then the Executive will pay 90% and the Company 10% of the audit firm's costs, expenses and fees for such determination. C. Payment of Bonus. Subject to the provisions hereafter in this subparagraph C. regarding payment on termination of employment and the provisions of subparagraph F. of this paragraph 3. regarding payment in the event of certain action by the Company, no payment of Bonus shall be made or due until 120 days after the computation of the Bonus for the period ending May 31, 1998. Thereafter, upon election of Executive made by written notice to the Company during the 30 day period after the Company advises Executive of his Bonus account after the end of each fiscal year, the Company shall pay the amount of Bonus or portion thereof, if any, due to Executive which Executive shall specify in such notice of election. Subject to the other provisions of this Agreement (including, without limitation, those relating to termination of employment and those of subparagraph F. of this paragraph 3.) Executive may elect (as specified in the above mentioned notice of election to receive payment) to receive such Bonus in any form specified in clause (1), (2) or (3) below until the Company proposes an adjustment in the right to elect the form of payment because of a proposed initial public offering of equity securities of the separate corporation operating the business of the Company's Security Systems Division referred to in (2) below: (1) shares of Common Stock, $.05 par value, of the Company, at a price per share equal to the Fair Market Value of Common Stock on the date notice of election to take Bonus in the form of such stock is given; provided, however, that the Dollar amount of Bonus elected to be taken in the form of such stock shall be increased or decreased in value, as the case may be, in the same proportion that the Fair Market Value of Common Stock on the date notice of election to take Bonus in the form of such stock is given bears to the book value per share of such Common Stock as reflected on the Company's Balance Sheet for the Company's fiscal quarter ended prior to the election [e.g., if the Fair Market Value of Common Stock is $10 per share and the book value is $5 per share (i.e., 2 times book) then each $1 of Bonus being taken in the form of stock shall be increased in value to $2 (i.e., multiplied by 2) or if the Fair Market Value of Common Stock is $5 per share and the book value is $10 per share (i.e., .5 times book) then each $1 of Bonus being taken in the form of stock shall be reduced in value to $.50 (i.e., multiplied by .5)], or (2) if the Company has prior thereto created a separate corporation to operate the business of the Security System Division by transfer- ring the assets and liabilities of the Security Systems Division to such new corporation, common stock of such corporation created by the Company to operate the business of the Security Systems Division so that the shares issued to Executive shall be that number which represents that portion of the total number of shares of the new corporation held by him and the Company after the issuance which is the same as the portion of the total investment in such new corpora- tion by him and the Company (considering the Company's investment for such purpose to be the amount determined in the manner provided under B.(1)(a) through (h) above, or (3) partly in cash and partly in stock under C.(1) or (2) above, in which case the number of shares of stock shall be reduced to reflect the cash taken by Executive. No fractional shares shall be issued, cash shall be paid for any fractional share amount. Fair Market Value of Common Stock shall mean an amount equal to the mean of the closing bid and asked quotations for a share of Common Stock in the over-the-counter market as of the date for which such value is being determined, as reported by the National Association of Securities Dealers, Inc. through NASDAQ or, in the event that the Common Stock is listed on any exchange (including, without limitation, the NASDAQ National Market System), the price established by the last sale on such exchange on that date or, if there were no sales on that date, the mean of the bid and asked prices for Common Stock on that exchange at the close of business on that date. If Executive does not specify the form of payment of Bonus in his election to receive payment it shall be made in such form as the Company elects. Notwithstanding the foregoing, if on the date of notice of termination of Executive's employment with the Company hereunder, Executive has not theretofore or within ten (10) days thereafter made an election in writing as to one of the options indicated in C.(1) through (3) above with respect to any remaining Bonus, if any, which may be or become due him, then the Company may pay the same in such form as it elects. D. Withholding. The Company may, to the extent permitted by law, deduct from any payments or transfers of any kind due Executive (including, without limitation, Bonus) the amount of any federal, state, local or foreign taxes required by any governmental authority to be withheld or otherwise deducted or paid with respect to Salary, Bonus, or any other amount due or paid to Executive. E. Conditions Upon Issuance of Shares. The right to elect that shares of stock or other equity be issued pursuant to any election as to form of payment of Bonus under subparagraph C. of this paragraph 3. is subject to the Company's determination, in its discretion, that the listing, registration, or qualification upon any securities exchange or under any federal, state, or foreign law or the consent or approval of any governmen- tal authority is necessary or desirable as a condition of, or in connection with, the granting of such right, the exercise of such election or issuance of shares or other equity pursuant thereto and such election may not be exercised in whole or in part unless and until such listing, registration, qualification, consent, or approval shall have been effected or obtained, by and at the expense of Executive, free of any conditions not acceptable to the Company. F. No Effect on Corporate or Stockholder Action. The existence of the right to elect that the payment of Bonus be in the form of stock or other equity under subparagraph C. of this paragraph 3. shall not affect in any way the right or power of the Company or any subsidiary thereof or their respective stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company's or subsidiary's capital structure or business, or any merger or consolidation of the Company or any subsidiary, or the spin off of any business or part thereof, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting any stock or other equity to be issued upon exercise of election under subparagraph C. of this paragraph 3. or the rights thereof, or the dissolution or liquidation of the Company or any subsidiary, or any sale or transfer of all or any part of the assets or business of the Company or any subsidiary, or any other corporate act or proceeding of the Company or any subsidiary, whether of a similar character or otherwise. In the event of any such action by the Company or any subsidiary, the Company may, in its discretion, make such adjustment in the right to elect the form of payment of Bonus as it deems appropriate, including, without limitation, termination of right to elect form of payment (but not terminate the right to Bonus); provided the Company gives Executive 30 days notice thereof and permits Executive to exercise (subject to subparagraph E. of this paragraph 3.) his right to receive payment, as soon as practicable, of Bonus, if any, then accrued in any form permitted under subparagraph C. of this paragraph 3. within such 30 day period after such notice is given by the Company. G. Employee Benefits. In addition to the Salary and Bonus provided above Executive shall be entitled to participate in benefits generally offered to all Company employees for which and to the extent he is eligible and subject to the discretion of the Company provided thereunder, including vacations and holidays, profit sharing and pension plan, medical, dental, long term disability and life insurance as detailed in the Richardson Electronics Group Insurance Plan, Long Term Disability Plan, Employee Benefit Plan and the Employee Profit Sharing Trust and the Employees Stock Purchase Plan and other plans applicable to employees generally. In the event that the Executive shall, during the term of his employment hereunder, die or become disabled he shall be entitled to the benefits provided to employees generally under the Company's Employee Group Insurance and Long Term Disability Benefit Plans for executives and the Company shall have no further duty or obligation to pay the Salary or Bonus provided above beyond such date of death or disability. H. Expenses. Executive shall also be entitled to reimbursement for business and business related travel expenses in accordance with the Company's regular business and travel expense reimbursement policy in effect from time to time. I. Company's Rights. Nothing in this Agreement shall require the Company to maintain any benefit plan nor prohibit the Company from modifying any such plan as it sees fit from time to time. It is only intended that Executive shall be entitled to participate in any such plan offered for which he may qualify under the terms of any such plan as it may from time to time exist, in accordance with the terms thereof and subject to discretion of the Company reserved in any such plan. 4. Confidentiality. A. Definition of Proprietary Information. For purposes of this Agreement, the term "Proprietary Information" shall mean all of the following materials and information (whether or not reduced to writing and whether or not patentable) to which Executive has received or may receive, have access to or receive access to, or has developed or may develop, in whole or in part, as a direct or indirect result of his employment with the Company, its predecessors or its subsidiaries or in the course of his employment with the Company, its predecessors or its subsidiaries or through the use of any of the Company's, its predecessors' or its subsidiaries's facilities or resources: (1). Customer lists, including, but not limited to, customer names, customer requirements, and customer data; supplier lists, including, but not limited to, supplier names, supplier capabilities, and supplier data; marketing techniques; practices; methods; plans; systems; processes; purchasing information; price lists; pricing policies; quoting procedures; product information; operating policies and procedures; financial information; and other materials or information relating to the manner in which the Company, its predecessors or its subsidiaries does business; (2) Discoveries, concepts and ideas, whether patentable or not, or copyrightable or not, including, but not limited to, the nature and results of research and development activities, processes, formulas, techniques, "know-how", designs, drawings and specifications; (3) Any other materials or information related to the business or activities of the Company, its predecessors or its subsidiaries which are not generally known to others engaged in similar businesses or activities or which could not be gathered or obtained without significant expenditure of time, effort and money; and (4) All inventions and ideas which are derived from or relate to Executive's access to or knowledge of any of the above enumerated materials or information. The Proprietary Information shall not include any materials or information of the types specified above to the extent that such materials or information are publicly known or generally utilized by others engaged in the same business or activities in the course of which the Company, its predecessors or its subsidiaries utilized, developed or otherwise acquired such information or materials and which Executive has gathered or obtained from such other public sources by his own (other than on behalf of the Company, its predecessors or subsidiaries) expenditure of significant time, effort and money. Failure to mark any of the Proprietary Information as confidential shall not affect its status as part of the Proprietary Information under the terms of this Agreement. B. Ownership of Proprietary Information. Executive agrees that the Proprietary Information (including, without limitation, that which is developed, created or prepared by or for Executive) is and at all times shall remain the sole and exclusive property of the Company. All records relating to the Company's or any subsidiary's operations, investigations, and business, and any notes with respect to such records, made or received by Executive in connection with his services hereunder, and all copies of such records or notes made by, for, or with the consent of Executive, are and shall be the Company's property exclusively, and Executive shall keep the same at all times in his custody and subject to his control, and shall surrender the same to the Company at the Company's request but, in any event, no later than at the termination of his employment with the Company. C. Non-Disclosure of Proprietary Information. Executive represents, warrants and agrees that he will not (except in the proper course of his employment duties for the Company) either during or after the term of his employment with the Company, make use of, disseminate, publish, or disclose to any person, firm, company, association, or other entity, and shall use his best endeavors to prevent the use, dissemination, publication, or dis- closure of, any Proprietary Information. 5. Non Competition. A. Competition. Independent of any obligation under any other paragraph or subparagraph hereof, Executive 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 (except that if Executive's termination of employment is involuntary other than pursuant to the provisions of clause (i) of paragraph 8 below, then the period of restriction shall be for one year after the end of the period for which the Company has paid compensation to Executive, or if Executive's termination of employment is involuntary and pursuant to the provisions of clause (i) of paragraph 8 below, then the restriction shall terminate on the date of termination of employment, or if termination is by Executive because, and Company has not, provided the capital investment called for by the agreed to annual Business Plan, then the restriction shall terminate on the date of termination of employment) he will not, except with the approval of the 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, sharehold- er, creditor, partner, promoter, proprietor, associate, employee, representative or otherwise, become or be interested in, or associated with, any individual or entity, other than the Company (including its subsidiaries), engaged primarily in the business of distributing closed circuit television security systems, parts, components or services in the territories served by the Company's Security Systems Division and in the channels and to the customers served by such Division, provided, however, that, anything above to the contrary notwithstanding, Executive 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 or in the over-the- counter market, so long as the holdings of the Executive, directly or indirectly, in the aggregate, constitute less than 1% of the outstanding voting securities of such corporation. B. Customers or Suppliers. Independent of any obligation under any other paragraph or subparagraph hereof, Executive 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 (except that if Executive's termination of employment is involuntary other than pursuant to the provisions of clause (i) of paragraph 8 below, then the period of restriction shall be for one year after the end of the period for which the Company has paid compensa- tion to Executive, or if Executive's termination of employment is involuntary and pursuant to the provisions of clause (i) of paragraph 8 below, then the restriction shall terminate on the date of termination of employment, or if termination is by Executive because, and Company has not, provided the capital investment called for by the agreed to annual Business Plan, then the restriction shall terminate on the date of termination of employment) he will not, except with the approval of the 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 the twelve (12) month period prior to the termination of Executive's employment with the Company was a customer or supplier, or proposed customer or supplier, of the Company (including its subsidiaries) upon whom Executive called or whose account he supervised on behalf of the Company (including its subsid- iaries), to purchase (with respect to customers) or sell (with respect to suppliers) products or services of the types or kind sold by the Security Systems Division of the Company or any other division or part of the Company for which Executive has rendered services during his employment with the Company (including its subsidiaries) or which could be substituted for or which serve the same purpose or function as products or services sold by such division or part of the Company (including its subsidiaries), and Executive shall not approach, respond to, or otherwise deal with any such customer or supplier for such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity. C. Employees. Independent of any obligation under any other paragraph or subparagraph hereof, Executive 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 (except that if Executive's termination of employment is involuntary then the period of restriction shall be for one year after the end of the period for which the Company has paid compensation to Execu- tive,) he will not, directly or indirectly (whether or not for compensation or profit) work for or employ, or cause to be employed by another, any person who was an employee, officer, or agent of the Company or any of its subsidiaries at any time during the twelve (12) month period prior to the termination of Executive's employment with the Company; provided, however, that the restriction in this subparagraph C. shall not apply if the person or entity in which such employment is engaged is not engaged in the business of distributing closed circuit television security systems, parts, components or services. D. Remedies. In the event of a breach or threatened breach by the Executive of the provisions of this paragraph 5 or of paragraph 4 the Company shall be entitled to an injunction restraining the Executive 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 5 and paragraph 4 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 5 or 4 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. E. Survival. The provisions of this paragraph 5 and paragraph 4 shall survive the termination or expiration of this Agreement or Executive's employment for any reason. 6. The Company's Good Name. Executive agrees that he will at no time engage in conduct which demeans, defames, libels, slanders, destroys or diminishes in any way the reputation or goodwill of the Company, its subsidiar- ies, or their respective shareholders, directors, officers, employees, or agents or the products sold by the Company or any of its subsidiaries. 7. Executive Not Subject to Restrictions. The Company does not desire to acquire from Executive any secret or confidential know-how or information which he may have acquired from others nor does it wish to cause a breach of any non compete or similar agreement to which Executive may be subject. Executive represents and warrants that (i) other than for this Agreement, he is not subject to or bound by any confidentiality agreement or non disclosure or non compete agreement or any other agreement having a similar intent, effect or purpose, and (ii) he is free to use and divulge to the Company, without any obligation to or violation of any right of others, any and all information, data, plans, ideas, concepts, practices or techniques which he will use, describe, demonstrate, divulge, or in any other manner make known to the Company during the performance of services hereunder. 8. Termination. Anything in this Agreement to the contrary notwith- standing, the Company shall be entitled to terminate Executive's employment and right to receive compensation hereunder (including, without limitation, the right to receive any unpaid Bonus which might otherwise be or become due under any other provision hereof, unless the termination is pursuant to clause (i) below, in which event Bonus, if any, computed under the other provisions hereof to the date of termination shall be paid to Executive) if (i) he fails, or refuses, to perform the duties and responsibilities required of him under this Agreement, (ii) the Security Systems Division of the Company (or the successor entity to such business) fails in any fiscal year to meet the earnings goal therefor as set forth in the Business Plan (as defined in paragraph 9 below) for such fiscal year, (iii) he fails, or refuses to perform, or otherwise breaches any of the other covenants, agreements, or provisions of this Agreement, (iv) commits an act of fraud on the Company, (v) commits, or is arrested for, or is otherwise officially charged with a felony or any crime involving moral turpitude, or any other criminal activity or unethical conduct which, in the good faith opinion of the Company, would impair the Executive's ability to perform his duties hereunder or would impair the business or reputation of the Company, or (vi) commits an act, or omits to take action, in bad faith or in detriment of the Company. Executive's death or disability during the term of his employment hereunder shall not be deemed a breach by him of the provisions of this Agreement; however, in such event, the Company's obligation with respect to payment of compensation to Executive shall be as provided in its employee benefit package for executive employees generally (i.e. the Company's Employee Group Insurance and Long Term Disability Benefit Plans for employees as may be in effect) which shall be in lieu of any amounts otherwise provided in this Agreement after the date of such disability or death (except for Bonus which shall be computed and paid for the period through the end of the quarter in which such death or disability occurs). 9. Business Plan and Executive Authority. Attached hereto is a business plan for the Company's Security Systems Division (the "Business Plan"). The Company agrees to provide the capital investment for fiscal 1995 contemplated by the Business Plan. It is agreed that the parties will seek to agree prior to the end of each fiscal year on a business plan for the next fiscal year. Such agreed to plan shall then become the Business Plan. It is the intent of the parties that such plans will in general follow the 5 year component of the Business Plan attached hereto, will contain general corporate charges determined using principles used to determine such charges in the Business Plan attached hereto and will not require capital investment (in addition to cash generated by the Division) in excess of that contemplated by the 5 year plan portion of the attached Business Plan. Subject to general corporate law and the provisions of paragraph 2. hereof, the Executive shall have authority to operate the Division within the limitation of such agreed upon annual Business Plan, including the right to hire and fire anyone in the Division, to set up operations in Houston and to enter into agreements with customers and suppliers in the ordinary course of business; provided, such activities do not affect the Company as a whole or its other divisions or subsidiaries or violate other agreements or restrictions that may be applicable to the Company (for example its credit agreement with the Bank). Further anything not contemplated by the agreed to annual Business Plan shall require the prior approval of the Company's chief executive officer or its board of directors as the case may be. The Executive is authorized to control when bills of the Division are paid; provided that he shall not withhold payment for more than fourteen (14) days after the due date except in the case of a bona fide dispute, in which event only the amount in dispute shall be withheld. 10. Notices. All notices required to be given hereunder to the Company shall be in writing and delivered in person to the President of the Company or sent by certified or registered mail addressed to its principal executive office at 40W267 Keslinger Road, Lafox, Illinois 60147, Attention: President, or at such other address of which the Company notifies Executive pursuant to this paragraph. All notices required or to be given hereunder to Executive shall be in writing and delivered to him in person or sent by certified or registered mail addressed to him at his last known residence address appearing on the Company's personnel records. Notice shall be deemed given when delivered in person or, if mailed, when deposited in the United States Mail addressed as aforesaid. 11. Miscellaneous. A. Entire Agreement. This Agreement supersedes any and all other agreements, written or oral, between the parties hereto with respect to the employment of Executive by the Company and contains all of the covenants and agreements between the parties with respect to such employment. Each party acknowledges that no representations, inducements, promises, or agreements, written, oral or otherwise, have been made by any party, or anyone acting or purporting to act on behalf of any party, which are not embodied herein, and that no other agreement, statement, or promise not contained in this Agreement shall be valid and binding. B. Binding Effect. Subject to paragraph 11., this Agreement shall be binding upon the parties hereto, their heirs, legal representatives, successors and assigns and shall inure to their respective benefits. C. 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 4 or subparagraphs 5.A. through C. are held to be in any respect unreasonable restrictions upon Executive, 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. D. Waiver. The failure by the Company to insist upon strict compliance by the Executive 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. E. Captions. The captions of this Agreement are inserted for conve- nience only and are not to be construed as forming a part of this Agreement. F. Governing Law and Jurisdiction. This Agreement is made subject to and shall be governed and construed under the laws of the State of Illinois. The parties agree that the state and federal courts situated in Kane or Cook County in the State of Illinois shall have exclusive jurisdic- tion to enforce this Agreement and to resolve any disputes with respect to this Agreement, with each party irrevocably consenting to the jurisdiction thereof for any actions, suits or proceedings arising out of or relating to this Agreement and each party irrevocably waiving its rights to jury trials with respect thereto. Executive further agrees and consents to submit to the jurisdiction of any such Court over his person for purposes of enforcing any terms of this Agreement or resolving any disputes which arise under this Agreement. Further Executive specifically agrees to waive his right to remove or transfer any proceeding from any such Court. The judgments, orders and decrees of any such Court shall be entitled to full faith and credit in all other jurisdictions and the attempt to enforce the same in any other jurisdiction will not be contested. 12. Assignment. This is a personal services agreement, and Executive's performance and obligations hereunder shall not be assigned or delegated by Executive, and any purported assignment or delegation shall be void. Executive may assign, in whole or in part, any of the benefits to be provided to him under this Agreement, subject in all cases to compliance with all applicable laws, rules and regulations, including, without limitation, securities laws, rules and regulations. IN WITNESS WHEREOF, the parties hereto have duly executed this agreement the day and year first above written. EXECUTIVE RICHARDSON ELECTRONICS, LTD. /s/ Flint Cooper By: /s/ Edward J. Richardson Flint Cooper Edward J. Richardson, President EX-27 3
5 0000355948 RICHARDSON ELECTRONICS, LTD. 1000 6-MOS MAY-31-1995 NOV-30-1994 9,850 0 37,412 1,208 78,710 142,519 39,499 23,109 179,364 39,238 85,488 410 0 162 54,066 179,364 97,415 97,415 69,342 69,342 0 100 3,117 2,912 1,000 1,912 0 0 0 1,912 .17 .17
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