-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PUeutaOv5+yf3tMHoibCKd/FasvDdfplm0u3WGQkykmmtwHaC5cqo2yUVegLgVK1 iLJ5sP8LyAlNKLQI01V7LA== 0000355948-98-000017.txt : 19980915 0000355948-98-000017.hdr.sgml : 19980915 ACCESSION NUMBER: 0000355948-98-000017 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980903 FILED AS OF DATE: 19980903 SROS: NASD 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: DEF 14A SEC ACT: SEC FILE NUMBER: 000-12906 FILM NUMBER: 98703597 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 DEF 14A 1 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [x ] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ]Preliminary Proxy Statement [ ] Confidential, for Use of The Commission Only (as permitted by Rule 14a-6(e)(2)) [ x] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12 RICHARDSON ELECTRONICS, LTD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Name of Registrant as Specified In Its Charter) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Name of Person(s) Filing Proxy Statement, if other than Registrant) Payment of Filing Fee (Check the appropriate box): [ x ] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a- 6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2) Aggregate number of securities to which transaction applies: . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11: (Set forth the amount on which the filing fee is calculated and state how it was determined.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4) Proposed maximum aggregate value of transaction: . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5) Total fee paid: . . . . . . . . . . . . . . . . . . . . . . . . . . . . [ ] Fee paid previously with Preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2) Form, Schedule or Registration Statement No. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3) Filing Party: . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4) Date Filed: . . . . . . . . . . . . . . . . . . . . . . . . . . . . RICHARDSON ELECTRONICS, LTD. 40W267 Keslinger Road LaFox, Illinois 60147 _____________________________ NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 6, 1998 To the Stockholders of Richardson Electronics, Ltd. The Annual Meeting of Stockholders of Richardson Electronics, Ltd., a Delaware corporation, will be held on Tuesday, October 6, 1998 at 3:15 P.M., Chicago time, at the offices of the Corporation, 40W267 Keslinger Road, LaFox, Illinois, for the following purposes: 1. To elect ten directors; 2. To approve the adoption of the Richardson Electronics, Ltd. Employees' 1998 Incentive Compensation Plan, the granting of Options, Stock Awards and Cash Bonuses thereunder and the issuance of shares upon the exercise of such Options. 3. To transact such other business as may properly come before the meeting and any adjournments thereof. All stockholders are cordially invited to attend the meeting, although only stockholders of record at the close of business as of August 20, 1998 are entitled to notice of, and to vote at, the Annual Meeting and at any adjournment thereof. If you would like directions to the location of the Annual Meeting, please contact the company at (630) 208-2371. By order of the Board of Directors EDWARD J. RICHARDSON Chairman of the Board and Chief Executive Officer LaFox, Illinois September 3, 1998 RICHARDSON ELECTRONICS, LTD. PROXY STATEMENT INFORMATION CONCERNING THE SOLICITATION The enclosed proxy is solicited by Richardson Electronics, Ltd. (the "Company") whose principal executive offices are located at 40W267 Keslinger Road, P.O. Box 393, LaFox, Illinois 60147-0393, for use at the Annual Meeting of Stockholders of the Company, to be held Tuesday, October 6, 1998 at 3:15 P.M., Chicago Time, at the offices of the Company, 40W267 Keslinger Road, LaFox, Illinois, or at any adjournments thereof. In addition to solicitation of proxies by mail, proxies may be solicited by the Company's directors, officers and regular employees by personal interview or telephone, telegram or similar means, and the Company will request brokers and other custodians, nominees and fiduciaries to forward proxy soliciting material to the beneficial owners of shares which are held of record by them. The expense of all such solicitation, including printing and mailing, will be paid by the Company. Any proxy may be revoked at any time before its exercise, by written notice to the Secretary of the Company, by executing a subsequent proxy or by attending the meeting and electing to vote in person. This Proxy Statement and accompanying proxy were first sent or given to stockholders on or about September 3, 1998. Only stockholders of the Company of record at the close of business on August 20, 1998 are entitled to vote at the meeting or any adjournment thereof. As of that date there were outstanding 11,288,726 shares of Common Stock, par value $.05 per share, and 3,235,621 shares of Class B Common Stock, par value $.05 per share. Holders of Common Stock are entitled to one (1) vote per share and holders of Class B Common Stock are entitled to ten (10) votes per share on all matters voted upon at the meeting. The Common Stock and the Class B Common Stock will vote together as a single class on all proposals presented in this Proxy Statement. Outstanding shares of the Company, represented in person or by proxy, having a majority of the voting power shall constitute a quorum at the meeting. A plurality of the voting power of the shares represented at the meeting is required to elect directors and the ten nominees who receive the most votes will be elected. The affirmative vote of a majority of the voting power of the shares represented at the meeting is required to approve the adoption of the Richardson Electronics, Ltd. Employees' 1998 Incentive Compensation Plan, the granting of Options, Stock Awards and Cash Bonuses thereunder and the issuance of shares upon the exercise of such Options. A proxy in the accompanying form which is properly signed, dated, returned and not revoked will be voted in accordance with the instructions contained therein. Unless authority to vote for the election of directors (or for any nominee) is withheld, proxies will be voted for the directors proposed by the Board, and, if no contrary instructions are given, proxies will be voted for approval of the Richardson Electronics, Ltd. Employees' 1998 Incentive Compensation Plan, the granting of Options, Stock Awards and Cash Bonuses thereunder and the issuance of shares upon the exercise of such Options. Discretionary authority is provided in the proxy as to any matters not specifically referred to therein. Management is not aware of any other matters which are likely to be brought before the meeting. However, if any such matters properly come before the meeting, it is understood that the proxy holder or holders are fully authorized to vote thereon in accordance with his or their judgment and discretion. Stockholders of record who are present at the meeting in person or by proxy and who abstain, including brokers holding customers' shares of record who cause abstentions to be recorded at the meeting, are considered stock holders who are present and entitled to vote and they count toward the quorum. Brokers holding shares of record for customers generally are not entitled to vote on certain matters unless they receive voting instructions from their customers. As used herein, "uninstructed shares" means shares held by a broker who has not received instructions from its customers on such matters and the broker has so notified the Company on a proxy form in accordance with industry practice or has otherwise advised the Company that it lacks voting authority. As used herein, "broker non-votes" means the votes that could have been cast on the matter in question by brokers with respect to uninstructed shares if the brokers had received their customers' instructions. An abstention and broker non-vote will have the same effect as a negative vote on the approval of the adoption of the Richardson Electronics, Ltd. 1998 Incentive Compensation Plan. However, if a stockholder specifies that a proxy is being voted for less than all shares registered in the stockholder's name it will be counted as present for quorum purposes and voted only for the number of shares specified. ELECTION OF DIRECTORS A Board of ten directors will be elected to serve until the next annual meeting, or until their successors are elected and shall have qualified subject to their earlier resignation or removal as permitted by law. The proxies returned pursuant to this solicita tion will be voted by the persons named therein for the election as directors of the persons named below under "Information Relating to Directors, Nominees and Executive Officers" as nominees for election as directors unless specifically directed to withhold authority in the proxy. Should any nominee be unable to accept the office of director (which is not presently anticipated), the persons named in the proxies will vote for the election of such other persons as they shall determine. Information Relating to Directors, Nominees and Executive Officers The following table sets forth the name, principal occupation and position and offices with the Company, age, and length of service of each of the directors, nominees for director and executive officers of the Company and ownership of Common Stock and Class B Common Stock of the Company (by number of shares and as a percent age of the total outstanding shares of each class and as a percentage of the total voting power of all outstanding voting shares combined) of each director and nominee and each executive officer named in the "Summary Compensation Table" below and of all executive officers and directors as a group. Because Class B Common Stock is convertible into Common Stock the number of shares listed as owned under the Common Stock column in the table also includes the number of shares listed under the Class B Common Stock column. The information in the table has been furnished to the Company by the persons listed. Name, Principal Common Stock and Class B Common Stock Occupation and Director Beneficially Owned Company Position Age Since As of August 20, 1998
Percent of Number of Total Voting Number of Shares of if Class Shares of Percent Class B Percent voting not Common (1)(2) of Class Common (2) of Class applicable (3) Directors and Nominees for Election as Director Edward J. Richardson (4)(25) 56 1965 3,787,106(10) 26.14% 3,191,421 98.63% 74.47% Chairman of the Board, and Chief Executive Officer of the Company Scott Hodes(5)(6)(7)(8) 61 1983 48,424(11) * 3,712 * * Partner, Ross & Hardies, Attorneys at Law, which firm provides legal services to the Company Samuel Rubinovitz 68 1984 45,431(12) * 825 * * (4)(5)(6)(8)(9) Management Consultant and Chairman of the Board, LTX Corporation Arnold R. Allen 66 1986 75,000(13) * 11,782(14) * * Management Consultant Kenneth J. Douglas 75 1987 51,344(15) * 1,347 * * (5)(6)(7) Chairman of the Board, West Suburban Hospital Medical Center Jacques Bouyer (9) 70 1990 42,000(16) * 0 * * Management Consultant William J. Garry (26) 50 1994 48,215(17) * 0 * * Senior Vice President of Finance and Chief Financial Officer of the Company Harold L. Purkey (7) 54 1994 22,000(18) * 0 * * President Forum Capital Markets Ad Ketelaars (9) 41 1996 57,200(19) * 0 * * Consultant Bruce W. Johnson (4) (27) 57 1996 33,524(20) * 0 * * President and Chief Operating Officer of the Company Non-Director Executive Officers of Company Charles J. Acurio (28) 39 N.A. 25,170(21) * 0 * * Executive Vice President - Display Products Group William G. Seils (29) 63 N.A. 66,657(22) * 0 * * Senior Vice President, General Counsel and Secretary Joseph C. Grill (30) 53 N.A. Vice President-Human Resources Bart F. Petrini (31) 59 N.A. Executive Vice President-Electron Device Group Flint Cooper (32) 36 N.A. Executive Vice President- Security Systems Division Robert Prince (33) 36 N.A. Executive Vice President of Worldwide Sales Norman A. Hilgendorf (34) 37 N.A. Vice President- Solid State & Components Pierlugi Calderone (35) 40 N.A. Vice President and Managing Director of European Operations Executive Officers and Directors 4,416,768(23) 29.41% 3,209,087(24) 98.82% 76.28% as a group (18 persons)
(*) Less than 1%. (1) Includes the number of shares listed under the column "Number of Shares of Class B Common." (2) Except as noted, beneficial ownership of each of the shares listed is comprised of either sole investment and sole voting power, or investment power and voting power that is shared with the spouse of the Director or officer, or voting power that is shared with the Trustees of the Company's Employees Stock Ownership Plan ("ESOP") with respect to shares identified as allocated to the individual's ESOP account. (3) Common Stock is entitled to one vote per share and Class B Common Stock is entitled to ten votes per share. Computation assumes that Class B Common Stock held or subject to acquisition pursuant to stock option is not converted. (4) Member of Executive Committee. (5) Member of Compensation Committee. (6) Member of Stock Option Committee. (7) Member of Audit Committee. (8) Member of Directors' Executive Oversight Committee. (9) Member of Strategic Planning Committee. (10) Includes 3,191,421 shares of Common Stock which would be issued upon conversion of Mr. Richardson's Class B Common Stock, 23,591 shares of Common Stock allocated to the account of Mr. Richardson under the ESOP and 804 shares of Common Stock which would be issued upon conversion of $17,000 principal amount of the Corporation's 7-1/4% Convertible Subordinated Debentures, and 4,611 shares of Common Stock which would be issued upon conversion of $83,000 principal amount of the Corporation's 8-1/4% Convertible Senior Subordinated Debentures owned by a Trust of which Mr. Richardson is a Co-Trustee and as such shares investment and voting power. Does not include 10,900 shares of Common Stock held by William G. Seils as custodian for Mr. Richardson's sons, Alexander and Nicholas, as to which Mr. Richardson disclaims beneficial ownership. (11) Includes 3,712 shares of Common Stock which would be issued upon conversion of Mr. Hodes' Class B Common Stock. Also includes 40,000 shares of Common Stock to which Mr. Hodes holds stock options exercisable within 60 days. (12) Includes 825 shares of Common Stock which would be issued upon conversion of Mr. Rubinovitz' Class B Common Stock. Also includes 40,000 shares of Common Stock to which Mr. Rubinovitz holds stock options exercisable within 60 days. (13) Includes 11,781 shares of Common Stock to which Mr. Allen holds stock options exercisable within 60 days and an additional 11,782 shares of Common Stock which would be issued upon conversion of 11,782 shares of Class B Common Stock as to which he also holds stock options exercisable within 60 days. (14) Includes 11,782 shares of Class B Common Stock as to which Mr. Allen holds stock options exercisable within 60 days. (15) Includes 1,347 shares of Common Stock which would be issued upon conversion of Mr. Douglas' Class B Common Stock. Also includes 40,000 shares of Common Stock to which Mr. Douglas holds stock options exercisable within 60 days. (16) Includes 40,000 shares of Common Stock to which Mr. Bouyer holds stock options exercisable within 60 days. (17) Includes 25,000 shares of Common Stock to which Mr. Garry holds stock options exercisable within 60 days. Also includes 1,776 shares of Common Stock allocated to the account of Mr. Garry under the ESOP. (18) Includes 20,000 shares of Common Stock as to which Mr. Purkey holds stock options exercisable within 60 days. (19) Includes 57,200 shares of Common Stock as to which Mr. Ketelaars holds stock options exercisable within 60 days, provided however that 2,400 shares are subject to forfeiture if leaves Company employment prior to August 23, 1998, 2,400 shares are subject to forfeiture if he leaves prior to August 23, 1999 and 2,400 shares are subject to forfeiture if he leaves prior to August 23, 2000. (20) Includes 20,000 shares of Common Stock for which Mr. Johnson holds stock options exercisable within 60 days. Also includes 524 shares of Common Stock allocated to the account of Mr. Johnson under the ESOP. (21) Includes 16,500 shares of Common Stock as to which Mr. Acurio holds stock options exercisable within 60 days and 5,570 shares of Common Stock allocated to the account of Mr. Acurio under the ESOP. (22) Includes 56,970 shares of Common Stock as to which Mr. Seils holds stock options exercisable within 60 days. Also includes 8,504 shares of Common Stock allocated to the account of Mr. Seils under the ESOP. Does not include shares held as custodian - see (10). (23) Does not include 10,900 shares of Common Stock held by certain members of such group as custodians under Uniform Gift to Minors Acts. Includes 3,191,421 shares of Common Stock which would be issuable on conversion of Class B Common Stock, 512,989 shares of Common Stock issuable upon options exercisable within 60 days, 11,782 shares of Common Stock which would be issuable on conversion of Class B Common Stock issuable upon options exercisable within 60 days, 804 shares of Common Stock which would be issued upon conversion of $17,000 principal amount of the Corporation's 7-1/4% Convertible Subordinated Debentures, and 4,611 shares of Common Stock which would be issued upon conversion of $83,000 principal amount of the Corporation's 8-1/4% Convertible Senior Subordinated Debentures. Includes 50,164 shares of Common Stock held in trust for the benefit of the Company's profit sharing trust and ESOP allocated to the accounts of all executive officers and directors as a group; such shares are ratably forfeitable in the event the officer leaves the employ of the Company prior to completing six years of service. (24) Includes 11,782 shares of Class B Common Stock issuable upon exercise of options exercisable within 60 days. (25) Mr. Richardson has been employed by the Company or its predecessor since 1961, holding several positions. He was Chairman of the Board, President and Chief Executive Officer of the Company from September 1989 until November 1996 when Mr. Johnson became President. Mr. Richardson continues to hold the offices of Chairman of the Board and Chief Executive Officer. (26) Mr. Garry was Vice President of Finance, Chief Financial Officer and Director since joining the Company in June 1994 and was elected Senior Vice President of Finance in July 1998. Prior to joining the Company he was vice president of finance and chief financial officer and a director of GEO International Corporation of Chicago, Illinois from August 1986 until May 1994. GEO International Corporation filed a Voluntary Petition for Bankruptcy Protection in October 1993 and emerged from bankruptcy under a plan of reorganization effective May 12, 1995. (27) Mr. Johnson has been President, Chief Operating Officer and Director since joining the Company in November 1996. Prior thereto, from January 1992 until January 1996, he was president of Premier Industrial Corporation, a New York Stock Exchange listed company which was acquired by Farnell Ltd. in April 1996. He was executive vice president of Premier from February 1987 until January 1992. Premier is a full service business to business supplier of electronic components for industrial and consumer products, essential maintenance and repair products for industrial, commercial and institutional applications, and manufactured high-performance fire-fighting equipment. (28) Mr. Acurio has been Executive Vice President - DPG since February 1998. He was Vice President - DPG from April 1993 until February 1998 and prior thereto held the titles of CRT Division Manager and DPG Strategic Business Unit Manager since June 1988. (29) Mr. Seils has been Senior Vice President since January 1992 and General Counsel and Secretary since May 1986. Prior to joining the Company in 1986, he was a partner in the law firm of Arvey, Hodes, Costello and Burman, Chicago, Illinois. (30) Mr. Grill has served as an officer of the Company since 1987 and became an executive officer in the position of Vice President - Corporate Administration in 1992. In 1994 his title was changed to Vice President, Human Resources. (31) Mr. Petrini has been Executive Vice President - EDG since February 1998. He was Vice President - EDG from April 1994 until February 1998. From June 1989 until joining the Company in April 1994, he was a consultant with Petrini, Frank & Co. (32) Mr. Cooper has been Executive Vice President - SSD since joining the Company in November 1994. He was director of CCTV Sales with Arius, Inc. from February 1991 until November 1994 and purchasing agent at ADT Security Systems, a distributor of electronic security equipment, from August 1988 to January 1991. (33) Mr. Prince has been Executive Vice President of Worldwide Sales since February 1998 and was Vice President of Worldwide Sales from November 1996 until February 1998. He was Vice President of Sales from November 1991 until November 1996 and held several other positions since joining the Company in November 1978. (34) Mr. Hilgendorf has been Vice President - SSC since January 1998. He joined the Company in May 1994 ands has served as Product Manager and Business Unit Manager in SSC from May 1994 until January 1998. From June 1990 until May 1994 he was employed by W.W. Grainger, Inc. (35) Mr. Calderone has been Vice President and Managing Director for European Operations since March 1998. He joined the Company in July 1990 as District Sales Manager for Italy and served as Regional Sales Manager of Italy from February 1991 until March 1998. Each nominee's and executive officer's principal occupation and employment for the last five years has been as listed in the table or footnotes thereto, except as follows: Mr. Allen joined the Company as its President and Chief Operating Officer in September 1995. He retired as President of the Company in September 1989. Since his retirement, Mr. Allen has been a management consultant and presently provides management consulting services to the Company. He served as Chairman of the Strategic Planning Committee of the Company's Board of Directors from April 1991 until April 1992. Mr. Hodes is a partner at the law firm of Ross & Hardies, which firm provides legal services to the Company. Mr. Rubinovitz serves the Company as a consultant. He was Executive Vice President of EG&G, Inc., a diversified manufacturer of instruments and components, from April 1989 until his retirement in January 1994. He is also chairman of the board of directors of LTX Corporation, and a director of KLA-Tencor Corporation and Kronos, Inc. Mr. Douglas was vice chairman of Dean Foods Company for the period from December 1988 to September 1992, when he retired. Prior to becoming vice chairman, he served as chairman of Dean Foods for many years. He is now the chairman of the board of West Suburban Hospital Medical Center. He is also a dirctor of Andrew Corporation. Mr. Bouyer served as chairman of the board of Philips Composants of Paris, France, engaged in the manufacture and sale of electronic components and a subsidiary of N.V. Philips of The Netherlands, from April 1, 1990 until January 1, 1994 when he became honorary chairman of the board and a director until December 31, 1995. Mr. Bouyer also was vice chairman of the BIPE Institute for Economic and Market Research from 1981 until 1997. He has been a consultant in business strategies and management since January 1994. Mr. Bouyer is serving the Company as an independent management consultant principally with respect to European matters. He is also a director of LTX Corporation. Mr. Purkey has been President of Forum Capital Markets since May 1997 and senior managing director of such company since May 1994. From July 1990 until February 1994 he was employed by Smith Barney Shearson, holding the position of senior managing director and manager of the convertible bond department. Mr. Ketelaars presently serves the Company as an employee of certain foreign subsidiaries. He joined the Company as Vice President and Managing Director of Europe in May 1993 and resigned from that position effective May 31, 1996 to become chief executive officer of EnerTel, a new telecommunications company established by Dutch electric utility companies and CATV companies from which position he resigned on July 10, 1998. Prior to joining the Company he was general manager of Philips Printed Circuit Boards since 1988 and product group manager professional tubes of Philips Components since 1987. Executive officers serve for a term until their respective resignation, death or removal. Board and Committee Meetings During the last fiscal year, the Company's Board of Directors held 4 meetings and acted once by consent without a meeting. Each Director attended at least 75% of the aggregate number of such meetings, and meetings of the Committee(s) on which he served. The Board's Executive Committee did not meet during the last fiscal year, but acted on 1 occasion by unanimous written consent. The Executive Committee, during the interval between meetings of the Board of Directors, may exercise all authority of the Board in the management of the Company, except as otherwise provided in the Company's By-laws or by applicable law. The Board's Audit Committee held 3 meetings in the last fiscal year. It meets for the purpose of reviewing and making recommendations regarding the engagement of an independent accounting firm for the Company; the scope of the independent accountants' audit procedures; the adequacy and implementation of internal controls; and such other matters relating to the Company's financial affairs and accounts as it deems desirable or in the best interest of the Company. The Board's Directors' Executive Oversight Committee held 4 meetings in the last fiscal year. It is charged with monitoring the Company's Government contracting activities and compliance with its Code of Conduct, and policies on ethical business practices and reporting on the same. The Board's Compensation Committee held 1 meeting in the last fiscal year. It is responsible for reviewing and establishing the compensation policy and guidelines for executive officers and the compensation of the chief executive officer. The Board's Stock Option Committee held 3 meetings in the last fiscal year. It administers the Company's Incentive Stock Option Plan, Incentive Compensation Plan, 1994 Incentive Compensation Plan, 1996 Incentive Compensation Plan, Stock Purchase Plan and 1996 Stock Purchase Plan, including determining the employees to whom stock options, awards or cash bonuses are granted, the number of shares subject to each option or award, and the date or dates upon which each option or award may be exercised. The Board's Strategic Planning Committee which is responsible for developing and reviewing long term strategic plans for the Company met 2 times in the last fiscal year. The Company has no standing Nominating Committee or committee performing a similar function. Directors Compensation Directors who are not Company employees receive a quarterly fee of $3,000 and a fee of $500 for each Board or Committee meeting attended, plus travel expenses. In addition each current "Non-Employee Director" has received a grant of options to acquire 25,000 shares of the Company's Common Stock at exercise prices ranging from $5.25 to $12.875 per share (the fair market value on the date of grant) under the Company's Stock Option Plan for Non-Employee Directors ("Directors' Plan"). In addition, each current Non-Employee Director, in April 1996, other than Mr. Purkey, received a grant of an option to acquire an additional 5,000 shares of the Company's Common Stock at an exercise price of $10.8125 per share (the fair market value on the date of grant), in April 1997, an additional 5,000 shares of the Company's Common Stock at an exercise price of $7.375 per share (the fair market value on the date of grant), and in April 1998, an additional 5,000 shares of the Company's Common Stock at an exercise price of $12.50 per share (the fair market value on the date of grant) under the Company's 1996 Stock Option Plan for Non-Employee Directors ("1996 Directors' Plan"). Under the Directors' Plan and the 1996 Directors' Plan, options are granted to any director of the Company who is not an officer or employee of the Company or any of its subsidiaries or affiliates and who has not been such for a period of one year prior to his first being elected to the Board ("Non-Employee Director"). Options issued under the Directors' Plan and 1996 Directors' Plan are intended to be non-qualified stock options, not entitled to special tax treatment under Section 422A of the Internal Revenue Code of 1986, as amended, from time to time. The Directors' Plan and the 1996 Directors' Plan are administered by the Board of Directors of the Company which has the sole responsibility for construing and interpreting said Plans. Each option granted is evidenced by an option agreement between the optionee and the Company and, subject to the provisions of the Directors' Plan or the 1996 Directors' Plan, contains such terms and conditions as may be approved by the Board. The purchase price of each share that may be purchased upon exercise of an option is the fair market value of the share on the date the option is granted. These options are exercisable for a period of approximately ten years. Under the Directors' Plan, any new "Non-Employee Director" elected or appointed was granted an option to purchase 25,000 shares of the Company's Common Stock on the date such director took office. All options granted under the Directors' Plan vest over a five-year period from the date of grant with 20% of the option shares becoming first exercisable on each anniversary of the grant date. The Directors' Plan was terminated with respect to future grants on April 10, 1996. Under the 1996 Directors' Plan, any new non-employee director elected or appointed after April 30, 1996 is granted an option to purchase 25,000 shares of the Company's Common Stock on the date such director takes office. All such options granted to new non-employee directors vest over a five-year period from the date of grant with 20% of the option shares becoming first exercisable on the anniversary of the grant date. On each April 30 (after April 30, 1996) which is on or after the fifth anniversary of a non-employee director's initial election as a director, such director is granted an additional option for 5,000 shares (subject to adjustment). Unless earlier terminated by the Board, the 1996 Directors' Plan shall terminate on June 1, 2006. The Directors' Plan and the 1996 Directors' Plan provide, among other things, that the option of any optionee, whose status as a director terminates because of retirement, or removal from the Board within one year after a change of control (as defined in the Directors' Plan and 1996 Directors' Plan), shall become fully exercisable with respect to all shares covered thereby and not previously purchased upon exercise of the option and shall remain fully exercisable until the option expires by its terms. Messrs. Allen, Bouyer and Rubinovitz are serving as consultants to the Company and received $14,000, $40,000 and $40,000, respectively, for such services in fiscal 1998. Mr. Allen also has non-qualified stock options for 11,781 shares of Common Stock and 11,782 shares of Class B Common Stock at an exercise price of $12.95 per share. Affiliations There is no family relationship between any director and any other director or nominee for director or executive officer of the Company. No nominee or director is a director of any other public company, except Mr. Rubinovitz is a director of KLA Instruments, Inc., Kronos, Inc., and LTX Corporation, Mr. Douglas is a director of Andrew Corporation, Mr. Bouyer is a director of LTX Corporation and Mr. Purkey is a director of Hybridon, Inc. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's executive officers and directors, and persons who may be deemed to own beneficially more than ten percent of the Company's stock to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission and NASDAQ. Executive officers, directors and greater than ten percent beneficial owners are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such forms furnished to the Company and written representations from the Company's executive officers and directors, the Company believes that during fiscal 1998 all Section 16(a) filing requirements applicable to its executive officers, directors and greater than ten percent beneficial owners were complied with on a timely basis, except that 1 report covering 1 transaction involving 3,000 shares was filed late by Charles Acurio, an executive officer of the Company. PRINCIPAL STOCKHOLDERS As of August 20, 1998, no person or firm owned of record, and, so far as it is known to the Company, no person or firm owned beneficially 5% or more of the outstanding Common Stock or Class B Common Stock of the Company, except for Edward J. Richardson whose ownership of Common Stock and Class B Common Stock is set forth above in the table under the caption "Election of Directors - Information Relating to Directors, Nominees and Executive Officers"; and those entities identified and whose ownership of Company stock is set forth in the following table: Common Stock and Class B Common Stock Beneficially Owned As of August 20, 1998
Percent of Number of Total Voting Shares of if Class Name of Beneficial Number of Shares Percent Class B Percent Voting not Owner of Common of Class Common of Class applicable Royce & Associates,Inc., 1,402,633 12.15% 0 0 3.19% Royce Management Company and Charles M. Royce T. Rowe Price 753,651 6.66% 0 0 1.73% Associates, Inc. Loomis Sayles & 1,090,691 9.00% 0 0 2.45% Company, L.P. Kalmar Investments, Inc. 662,414 5.87% 0 0 1.52% Charles M. Royce may be deemed a controlling person of Royce & Associates, Inc. ("Royce") and Royce Management Company ("RMC") and as such may be deemed to beneficially own the shares of Common Stock beneficially owned by Royce and RMC which own 1,145,178 shares of Common Stock and 53,122 shares of Common Stock which would be issued upon conversion of the Company's 7-1/4% Convertible Subordinated Debentures and 204,333 shares of Common Stock which would be issued upon conversion of the Company's 8-1/4% Convertible Senior Subordinated Debentures owned by Royce and RMC. Mr. Royce does not own any shares outside of Royce and RMC, and disclaims beneficial ownership of the shares held by Royce and RMC. Information disclosed in this table was obtained from Royce on August 6, 1998. The address for Royce is 1414 Avenue of the Americas, New York, NY 10019. Includes 23,651 shares of Common Stock which would be issued on conversion of the Company's 7-1/4% Convertible Subordinated Debentures owned by T. Rowe Price. These securities are owned by various individual and institutional investors including T. Rowe Price Small Cap Value Fund, Inc. which owns 700,000 shares, representing 6.47% of the shares outstanding, which T. Rowe Price Associates, Inc. ("Price Associates") serves as investment advisor with power to direct investments and/or sole power to vote the securities. For purposes of the reporting requirements of the Securities Exchange Act of 1934, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact the beneficial owner of such securities. Price Associates has sole dispositive power for all 753,651 shares of Common Stock and sole voting power for 30,000 shares of Common Stock. Information disclosed in this table was obtained from Price Associates on August 12, 1998. The address for Price Associates is 100 East Pratt Street, Baltimore, MD 21202. Loomis Sayles & Company, L. P. ("Loomis"), an investment advisor, shares the power to dispose of the shares and shares the power to vote 255,434 shares of the 1,090,691 shares held by Loomis (9.00%). Clients of Loomis have the economic interest but no one client has such an interest relating to more than 5% of the class. Loomis indicates that the shares reported for Loomis relate to such party's ownership of the Company's convertible debentures. Information disclosed in this table was obtained from Loomis on August 10, 1998. The address for Loomis is One Financial Center, Boston, MA 02111. Kalmar Investments, Inc. ("Kalmar"), is an investment advisor having sole power to dispose of these shares. Information disclosed in this table was obtained from Kalmar Investments, Inc. on August 5, 1998. The address for Kalmar is Barley Mill House, 37601 Kenner Pike, Greenville, DE 19807.
EXECUTIVE COMPENSATION The following table sets forth the annual and long-term compensation for the Company's chief executive officer and the four highest paid executive officers (named executives), as well as the total compensation paid to each such individual for the Company's two prior fiscal years: Summary Compensation Table
Long-Term Compensation ----------------------------------- Annual Compensation Awards Payouts --------------------------------- ---------------------- --------- Other Long- All Annual Restricted Stock Term Other Name and Compen- Stock Option Incentive Compen- Principal Position Year Salary Bonus sation Awards SARs Payouts sation - - ---------------------- ---- --------- --------- --------- --------- --------- --------- --------- Edward J. Richardson 1998 $387,541 $195,740 $ - - - $- $9,679 Chairman and Chief 1997 374,783 - - - - - 7,263 Executive Officer 1996 361,783 162,220 - - - - 7,998 Bruce W. Johnson 1998 312,000 162,324 - 10,000 15,000 - 9,679 President and Chief 1997 160,385 - - 50,000 - - 7,263 Operating Officer 1996 - - - - - - - William G. Seils 1998 177,217 108,425 - - 10,000 - 9,679 Senior Vice President, 1997 172,056 75,950 - - 10,000 - 7,263 General Counsel and 1996 172,056 98,873 - - 10,000 - 7,998 Secretary William J. Garry 1998 176,748 90,000 - - 10,000 - 9,679 Senior Vice President, 1997 169,855 58,226 - - 10,000 - 7,263 Finance and Chief 1996 168,173 84,226 - - 10,000 - 7,998 Financial Officer Charles J. Acurio 1998 160,700 83,144 - - 15,000 - 9,679 Executive Vice President 1997 154,067 54,860 - - 15,000 - 7,263 Display Product Group 1996 150,000 182,302 - - 15,000 - 7,998 While officers enjoy certain perquisites, such perquisites do not exceed the lesser of $50,000 or 10% of such officer's salary and bonus. The restricted stock issued to Bruce W. Johnson vests in five equal annual installments. These amounts represent the Company's discretionary and 401(k) matching contributions to the Company's Profit Sharing Plan. Mr. Johnson's salary and bonus is paid pursuant to an employment agreement entered into as of November 7, 1996. See "Report on Executive Compensation" below. The agreement also provides that in the event of termination by the Company, other than for cause, or by Mr. Johnson for cause or within 6 months after a change in control of the Company, Mr. Johnson will be entitled to receive compensation, including bonus for a period of one year after termination.
The following table sets forth certain information concerning Options granted during fiscal 1998 to the named executives: OPTION GRANTS IN LAST FISCAL YEAR
% of Total Options Exercise Fair Options Granted to or Base Value Granted Employees Price Expiration at Grant Name in FY98 ($/sh) Date Date - - ----------------------- ---------- ---------- ---------- ---------- ---------- Edward J. Richardson - - $ - - $- Bruce W. Johnson 15,000 6.0% 8.500 9/22/07 50,400 William G. Seils 10,000 4.0% 8.500 9/22/07 33,600 William J. Garry 10,000 4.0% 8.500 9/22/07 33,600 Charles J. Acurio 15,000 6.0% 8.500 9/22/07 50,400 Options granted become exercisable in annual increments of 20% beginning September 22, 1998. Options granted under the option plan are exercisable for a period of up to ten years from the date of grant. Options terminate upon the optionee's termination of employment with the Company, except under certain circumstances. The fair value of the option at the grant date was calculated using the Black-Scholes option-pricing model, using the following assumptions: $.16 annual dividend per share, expected annual standard deviation of stock price of 40% and a risk-free interest rate of 5.5%.
The following table summarizes options exercised during fiscal year 1998 and presents the value of the unexercised options held by the named executives at fiscal year end: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR END AND FISCAL YEAR END OPTION / SAR VALUES At May 31, 1998
Number of Unexercised Value of Unexercised, Options Exercised Options held at In-the-money options --------------------- Fiscal Year end at Fiscal Year end Shares Value ----------------------- ----------------------- Name Acquired Realized Exercisable Unexercisable Exercisable Unexercisable - - ------------------------ --------- --------- ---------- ---------- ---------- ---------- Edward J. Richardson - $- - - $- $- Bruce W. Johnson - - 10,000 55,000 51,875 277,813 William G. Seils - - 50,970 24,000 306,657 124,750 William J. Garry 5,000 26,200 31,000 24,000 270,563 124,750 Charles J. Acurio 53,000 342,336 7,500 36,000 42,844 187,125 Represents the difference between $13.1875 per share (the closing price of the Company's common stock on May 29, 1998) and the exercise price of the options.
Compensation Committee Interlocks and Insider Participation Edward J. Richardson, Chief Executive Officer of the Company participated in determining the compensation of other executive officers for fiscal 1998. The Company leased facilities in Franklin Park, Illinois from a trust, of which Edward J. Richardson is the principal beneficiary, for a term which expired June 30, 1998 and the facility was vacated at that time. Under the terms of this net lease, the Company made rental payments of $68,705 per year. In the opinion of management, the lease was on terms no less favorable to the Company than similar leases which would have been available from unrelated third parties. Report on Executive Compensation Traditionally, the Company's executive officers' compensation has been determined by the Company's Chief Executive Officer due to the relatively small number of other executive officers and the Chief Executive Officer's personal knowledge of the relative performance and responsibilities of each executive officer. Compensation for the Company's executive officers, other than the Chief Executive Officer, for the fiscal year ended May 31, 1998 was established in this manner, except for long-term incentive compensation in the form of stock option grants which was established by the Stock Option Committee. The compensation for the Company's Chief Execu- tive Officer for fiscal 1998 was determined pursuant to a formula set by the Board of Directors in 1983, prior to the effective date of the Securities and Exchange Commission rules mandating disclosure of bases for such compensation, at a fixed base salary of $250,000, adjusted annually on each June 1 for changes in the cost of living, and a bonus equal to 2% of the Company's after tax profits. Mr. Richardson's bonus for fiscal 1998, based on 2% of net income was $195,740. The Company expects that the Chief Executive Officer will continue to set compensation for the Company's other executive officers with the advice and guidance of the Compensation Committee of the Board of Directors and the Company's President, Bruce W. Johnson, with respect to other executive officers, that the Stock Option Committee will determine the granting of options, and that the Chief Executive Officer's compensation will be set by the Compensation Committee. Bruce W. Johnson became the Company's President and Chief Operating Officer on November 12, 1996 pursuant to an agreement dated as of November 7, 1996, which provides for an annual base salary of $300,000, subject to adjustment in certain circumstances, and a bonus if the Company's earnings per share for the year exceeds its earnings per share for the prior fiscal year with the amount of such bonus, if any, determined by the Company's actual earnings per share performance in relation to the Company's budgeted earnings per share for the year. Mr. Johnson's base salary for fiscal year 1998 was $312,000 and his bonus was $162,324. The agreement also provides for payments to Mr. Johnson for one year equal to his salary and bonus and other employee benefits if his employment is terminated under certain circumstances, including, without cause or from a change-in-control, or a breach by the Company. Mr. Johnson also received an option under the Company's Employees' 1996 Incentive Compensation Plan for 50,000 shares at an exercise price of $7.00 per share (the fair market value on the grant date) vesting at the rate of 10,000 shares per year on each anniversary date of the grant and on September 5, 1997 an option under the Company's Employee's 1996 Incentive Compensation Plan for 15,000 shares at an exercise price of $8.50 per share (the fair market value on the grant date) vesting at the rate of 3,000 shares per year on each anniversary date of the grant. Mr. Johnson also received a Restricted Stock Award in the amount of 10,000 shares in November 1997 which will vest at the rate of 2,000 shares per year on each anniversary date of the grant. Individual compensation has been established to maintain equitable internal relationships taking into account the responsibilities, experience, seniority, and work performance of the individual executive, the overall performance of the Company and the unit or area of responsibility of the executive, and the strategic objectives and budget considerations of the Company. The relative weight given to each of these factors varies from individual to individual and from year to year. Increases in executive officers' base salaries for the year ended May 31, 1998 ranged from 3% to 38%, and increases of 4% in base salaries of executive officers are planned for the year ending May 31, 1999. A significant portion of each executive officer's compensation is in the form of a bonus (in fiscal 1998 it was budgeted to be from 40 to 60% of base compensation depending on the executive) which is performance-related. Bonuses are designed to reward executives for achieving and exceeding Company performance goals and/or individual performance goals. Bonuses or portions thereof, in fiscal 1998, were based upon targeted levels of the Company's earnings and were paid at 104% of the target bonus. For bonuses or portions thereof based upon individual performance, the performance criteria or goals varied with each executive as set by the chief executive officer in his annual review with the executive. For example, an executive responsible for a business unit may receive a bonus or a portion thereof based upon the business unit meeting its financial goals while an executive in charge of other functions may receive a bonus or portion thereof based upon his achieving individual performance objectives which are generally subjective, established specifically for him by the Chief Executive Officer. For the fiscal year ended May 31, 1998 such individual performance bonuses or portions thereof were paid at percentages of target, ranging from 57% to 109%. Financial measures (e.g. earnings per share, return on invested capital, gross margin) and targets for each executive officer are set at the beginning of the fiscal year by the Chief Executive Officer, or of the Chief Operating Officer and reviewed by the Chief Executive Officer, although discretionary adjustments are possible should unforeseen events occur. Salary levels, bonus criteria and performance objectives for the Company's executive officers are examined each year to take into account factors discussed above and other additional factors believed appropriate at the time. Executive compensation structures and levels for each year's targeted overall Company and individual performance goals are determined following regular structured annual reviews of each executive officer conducted by the Chief Executive Officer and/or Chief Operating Officer. Target performance levels take into account historic patterns of Company performance and strategic objectives. Individual stock option grants in fiscal 1998 were determined giving consideration to the factors discussed above and previous option grants and to give the executive officers additional incentive to improve the overall performance of the Company. This resulted in total options granted to executive officers in fiscal 1998 of 111,000 shares. Options granted in fiscal 1998 to the President totaled 15,000 and grants to the rest of the executive officers remained the same in fiscal 1998 as in fiscal 1997. The President also was granted a stock award of 10,000 shares in November, 1997. The Chief Executive Officer is not eligible for option grants. In addition all executive officers, including the Chief Executive Officer, participate in broad based benefits generally available to all U.S. employees of the Company, such as medical, dental, disability, life insurance, profit sharing (which includes a 401(k) feature), employees stock ownership and employees stock purchase plans. The Omnibus Budget Reconciliation Act of 1993 (the "Act") amended the Internal Revenue Code, section 162(m), to limit deductibility for the Company for income tax purposes of compensation paid to the Chief Executive Officer and the 4 other highest paid executive officers to $1 million per year, per person, subject to certain exceptions. The Company does not currently have any executive exceeding that limitation. If at a future date it appears likely that such limitation may be exceeded, the Committee will consider recommending restructuring of executive compensation programs in light of the requirements of the Act and the regulations that may be promulgated thereunder to permit them to meet the exceptions to the limitation so such compensation may continue to be deductible. Kenneth J. Douglas Edward J. Richardson Scott Hodes Samuel Rubinovitz The following graph sets forth the cumulative total stockholder return (assuming reinvestment of dividends) to the Company's stockholders during the five-year period ended May 31, 1998, as well as an broad equity market index (NASDAQ Stock Market (US & Foreign) Index) and a published industry index (NASDAQ Electronic Component Stock Index). All three indices reflect the value of an investment of $100 made on June 1, 1993. The stock price performance shown below is not necessarily indicative of future stock price performance. PERFORMANCE GRAPH Comparison of Five Year Cumulative Total return among Richardson Electronics Stock Index, NASDAQ Composite Index, and NASDAQ Electronic Components Index Measurement Period REL NASDAQ Elec Comp (Fiscal Year Covered) Measurement Pt 6/1/93 100 100 100 FYE 5/31/94 65 105 180 FYE 5/31/95 107 124 211 FYE 5/31/96 148 180 361 FYE 5/31/97 120 202 473 FYE 5/31/98 195 256 746 PROPOSAL TO APPROVE THE RICHARDSON ELECTRONICS, LTD. EMPLOYEES' 1998 INCENTIVE COMPENSATION PLAN On July 14, 1998, the Board of Directors of the Company adopted, subject to stockholder approval, the Richardson Electronics, Ltd. Employees' 1998 Incentive Compensation Plan ("Plan") providing for the grant of stock options ("Options"), stock awards ("Awards") and cash bonuses ("Bonuses") to permit the Company to continue to offer these Options, Awards and Bonuses as incentive compensation to attract and retain capable executives and other key employees. The options and awards authorized under similar prior plans are nearly exhausted. The new Plan is proposed to permit continuation of the stock option and stock award program for the recruitment, motivation and retention of employees. The full text of the Plan is set forth in Exhibit A to this proxy statement. The following description of the Plan is qualified in its entirety by reference to the text of such Plan. The Plan is designed to comply with the requirements of Section 16(b) of the Securities Exchange Act of 1934. Under the Plan, Options, Awards and Bonuses may be granted to key administrative, managerial or executive employees of the Company. Options permit the Grantee to purchase (at a price fixed by the Compensation/Stock Option Committee) shares of the Company's Common Stock, $.05 par value, upon exercise of the Option. Options may be either options intended to be incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, (the "Code"), or non-qualified stock options not intended to meet the requirements of Section 422 of the Code. Incentive Stock Options which first become exercisable in any calendar year for shares with a fair market value on the date of grant in excess of $100,000 are treated as non-qualified stock options to the extent of such excess. Awards are a grant of shares of Common Stock without the payment of additional consideration by the employee Grantee and may be unrestricted or restricted, in which the employees' right to the shares vest over time. Bonuses, if granted, generally are intended to be in an amount and with timing that would approximate the tax payable by a Grantee of an Option or an Award to encourage the Grantee to hold the shares acquired rather than sell them to pay taxes. The purpose of the Plan is to attract and retain capable executives and other key employees in the employ of the Company (currently approximately 130 persons) by giving these individuals the opportunity to acquire or increase their equity interest in the Company. 800,000 shares of the Company's Common Stock, $.05 par value, subject to adjustment in accordance with the provisions of the Plan, are being reserved for issuance on exercise of Options granted pursuant to the Plan or for Awards granted pursuant to the Plan. No one Grantee may receive Options and Awards for more than 100,000 shares in any one year. Such shares may be either authorized but unissued shares of the Company, or shares which have been or may be reacquired by the Company, including treasury shares. The Plan is administered by the members of the Stock Option Committee appointed by the Board of Directors who are "Non-Employee Directors" as that term is defined in Rule 16b-3 of the Securities and Exchange Commission. No member of the Committee is eligible to participate in the Plan. The Committee has the authority to grant Options, Awards and Bonuses to eligible employees, to determine the terms of those Options and Awards and to interpret the Plan. The Plan will continue until April 9, 2006. Neither the grant of an Option or of an Award by the Company shall create any obligation on the Company to retain the services of the Grantee for any stated period of time. Options and Awards granted under the Plan shall be evidenced by an Option or Restricted Stock Award agreement between the Optionee or Grantee, as the case may be, and the Company, and subject to the provisions of the Plan. The Committee has the discretion to fix the purchase price of each share that may be purchased upon exercise of an Option, so long as it is not less than 50% of the fair market value on the date of grant for non- qualified stock options and 100% of the fair market value on the date of grant for incentive stock options. Options granted may be exercisable for such period of time as fixed by the Committee, but in no event for a period greater than ten years from the date of grant. The Committee has the discretion to determine what if any vesting schedule shall apply with respect to the Options and the Awards granted under the Plan. Except for any vesting restrictions that the Committee may place upon any Option, it may be exercised at any time or from time to time during the Option period as to all or any part of the shares of Common Stock subject to the Option. Options granted under the Plan may be exercised by (i) cash payment of the full amount of the exercise price, or (ii) in the discretion of the Committee, through the delivery of shares of the Company's Common Stock previously held by the Optionee with a fair market value equal to the full amount of the exercise price, or (iii) by a combination of such methods. Neither Awards nor Options intended to qualify as incentive stock options granted under the Plan are transferable, except by will or by the laws of descent and distribution, so that during the life of the Grantee, the Grantee's Options and Awards may be exercised or received only by the Grantee. The Committee may provide for transferability of non- qualified Options to the Grantee's family members, trusts for such family members or partnerships of such family members. The Committee may in its sole discretion permit the option holder to exercise the Option after his termination of employment. The exercise of an Option shall be subject to such other requirements, if any, as may in the opinion of the Committee be necessary or advisable for the purpose of complying with applicable statues and regulations (including securities laws and regulations), and the rules of the stock exchange or the over-the-counter market in which the Company's Common Stock is traded. The Board of Directors may from time to time amend, consistent with applicable laws and regulations, suspend, or terminate the Plan, without action by the Company's stockholders, except for an amendment which would increase the aggregate number of shares of the Company's Common Stock subject to the Plan or reduce the minimum Option price (unless to conform to the Code or governing law), and no amendment, suspension or termination of the Plan shall impair or adversely alter any outstanding Option or Award without the consent of the Grantee. Federal Income Tax Consequences The federal income tax consequences of Options, Stock Awards and Cash Bonuses are summarized below. The Company expresses no opinion as to the tax consequences of an Option, Stock Award or Cash Bonus as to any particular employee. (1) Options. Options granted under the Plan may be either intended to qualify or not qualify as "incentive stock options" under Section 422A of the Internal Revenue Code at the discretion of the Committee. (a) Non-Qualified Options. The employee will not realize ordinary income upon the grant of a non-qualifying Option, but at the time of exercise will realize ordinary income for federal income tax purposes in an amount equal to the excess of the fair market value of the stock acquired over the Option Price. The Company will be entitled to an income tax deduction in the amount of ordinary income realized by the employee at the time the income is recognized subject to the limitations of Section 162 (m) of the Code. If shares so acquired are later sold or exchanged, the difference between the sale price and the fair market value on the date of exercise of the Option will generally be treated for tax purposes as capital gain or loss to the employee. If the employee pays the Option Price, in whole or in part, with previously acquired shares, the employee will be deemed to have exchanged previously acquired shares for an equal number of new shares, and to have received any additional new shares for the other consideration, if any, paid. No gain or loss is recognized upon delivery of the previously acquired shares to the Company. The shares received by the grantee equal in number to the previously acquired shares exchanged therefor will have the same basis and holding period as the previously acquired shares, and the employee will not recognize income in respect of the receipt of such shares. Employees will recognize taxable income with respect to shares received in excess of the number of previously acquired shares in accordance with the rules described above and such shares will have a basis equal to the consideration paid, if any, plus the amount of ordinary income recognized. The employee's holding period for such shares commences as of the date ordinary income is recognized. (b) Incentive Stock Options. In general, an employee will not be subject to tax at the time an Incentive Stock Option is granted or exercised. However, the excess of the fair market value of the shares received upon exercise of the Incentive Stock Option over the Option Price is potentially subject to the alternative minimum tax. Upon disposition of the shares acquired upon exercise of an Incentive Stock Option, capital gain or capital loss will be recognized in an amount equal to the difference between the sale price and the Option Price, provided that the employee has not disposed of the shares within two years of the date of grant or within one year from the date of exercise and further provided that the employee has been employed by the Company at all times from the Grant Date until the date three months before the date of exercise (one year in the case of permanent disability). If the employee disposes of the shares without satisfying both the holding period and employment requirements (a "Disqualifying Disposition"), the employee will recognize ordinary income at the time of such Disqualifying Disposition to the extent of the difference between the Option Price and the lesser of the fair market value of the shares on the date the Incentive Stock Option is exercised or the amount realized on such Disqualifying Disposition. Any remaining gain or loss is treated as a capital gain or capital loss. If the employee pays the Option Price, in whole or in part, with previously acquired shares, the exchange will not affect the tax treatment of the exercise. Upon such exchange, and except for Disqualifying Dispositions, no gain or loss is recognized upon the delivery of the previously acquired shares to the Company, and the shares received by the employee equal in number to the previously acquired shares exchanged therefor will have the same basis and holding period for capital gain or capital loss purposes as the previously acquired shares. However, the excess of the fair market value of the shares received upon exercise of the Incentive Stock Option over the Option Price is potentially subject to the alternative minimum tax. Shares received by the employee in excess of the number of previously acquired shares will have a basis equal to the gain, if any, on exercise of the Incentive Stock Option and any cash paid on the exercise. The holding period for such shares commences as of the date the shares are issued to the employee. If such an exercise is effected using shares previously acquired through the exercise of an Incentive Stock Option, the exchange of the previously acquired shares will be considered a disposition of such shares for the purpose of determining whether a Disqualifying Disposition has occurred. The Company is not entitled to a tax deduction upon either the exercise of an Incentive Stock Option or upon disposition of the shares acquired pursuant to such exercise, except to the extent that the employee recognized ordinary income in a Disqualifying Disposition and in such event subject to the limitations of Section 162(m) of the Code. (2) Stock Awards. In the case of a Stock Award, an employee will generally realize income for federal income tax purposes only when his rights to the underlying stock either become transferable or are no longer subject to a substantial risk of forfeiture. For most employees this will occur when their rights vest under their Stock Award. An employee may also elect to recognize income as of the date on which the Stock Award is granted as described below. In any event, the amount of income so realized is equal to the value of the shares of Common Stock at the time the employee realizes income. The Company will be entitled to an income tax deduction in the amount of ordinary income realized by the employee at the time the income is recognized subject to the limitations of Section 162(m) of the Code. If shares so acquired are later sold or exchanged, the difference between the sale price and the fair market value on the date of recognition of income for tax purposes will generally be taxable as long-term capital gain or loss depending upon whether the shares have been held for more than one year. The Code may permit a grantee of a Restricted Stock Award to elect to have the Restricted Stock Award treated as taxable income in the year of the Award and to pay tax at ordinary income rates on the fair market value of all of the shares awarded based on the price of the shares on the date the recipient receives a beneficial interest in such shares. The election must be made promptly within the time limits prescribed by the Code. Any appreciation in value thereafter would be taxed at capital gain rates when the restrictions lapse and the Common Stock is subsequently sold. However, should the market value of the Common Stock, at the time the Common Stock is sold, be lower than at the date acquired, the grantee would have a capital loss, to the extent of the difference. In addition, if after electing to pay tax on the Award in the year received the recipient subsequently forfeits the Award for any reason, the tax previously paid is not recoverable. (3) Cash Bonuses. At the time the Cash Bonus is paid, the recipient will receive compensation income and the Company will receive a deduction for compensation income in the amount of the Cash Bonus. Interests of Directors, Nominees and Executive Officers No director or nominee (unless he is an employee of the Company other than Mr. Richardson) is eligible for a grant of an Option, Award or Cash Bonus. All executive officers of the Company, except Mr. Richardson, are eligible to participate. However, except as set forth in the above described limitations in the Plan, it is not possible to identify the persons who will be granted Options, Awards or Bonuses under the Plan, the number of shares subject to any Option or constituting any Award, the amount of any Bonus, or the terms and conditions, if any, of any Option, Award or Bonus, because these matters will be determined by the Committee in the future. Stockholder Vote The affirmative vote of the holders of shares possessing a majority of the voting power present in person or represented by proxy and entitled to vote at the meeting is required to adopt the proposed Plan. The Plan and all options granted thereunder will terminate and become null and void if the Plan is not approved by the stockholders. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE PROPOSED RICHARDSON ELECTRONICS, LTD. EMPLOYEES' 1998 INCENTIVE COMPENSATION PLAN. RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS The Company's independent public accountants for the current year are Ernst & Young LLP who have been the Company's independent accountants since December 1981. A representative of Ernst & Young LLP is expected to be present at the meeting, with the opportunity to make a statement if such representative desires to do so, and such representative is expected to be available to respond to appropriate questions from stockholders. ANNUAL REPORT The Company's Annual Report to Stockholders for the year ended May 31, 1998, including financial statements accompanies this Proxy Statement. However, no action is proposed to be taken at the meeting with respect to the Annual Report, and it is not to be considered as constituting any part of the proxy soliciting material. STOCKHOLDER PROPOSALS From time to time stockholders present proposals which may be proper subjects for inclusion in the proxy statement and for consideration at a meeting. To be considered, proposals must be submitted on a timely basis. Proposals for the 1999 stockholders' meeting submitted pursuant to SEC Rule 14a-8 must be received by the Company no later than May 6, 1999. Any such proposals, as well as any questions related thereto, should be directed to the Secretary of the Company. Any stockholder proposal proposed for submission at our next annual meeting outside the process of SEC Rule 14a-8 after July 20, 1998 shall be considered untimely. If such a proposal is submitted after that date the proxy holder or holders may exercise their discretionary authority, as conferred in the proxy, in voting on such proposal. OTHER MATTERS The management knows of no other business likely to be brought before the meeting. If other matters do come before the meeting, the persons named in the form of proxy or their substitute will vote said proxy according to their best judgment. A COPY OF THE COMPANY'S 1998 10-K REPORT IS AVAILABLE WITHOUT CHARGE TO STOCK-HOLDERS UPON WRITTEN REQUEST TO INVESTOR RELATIONS DEPARTMENT, RICHARDSON ELECTRONICS, LTD., 40W267 KESLINGER ROAD, LAFOX, IL 60147. By order of the Board of Directors EDWARD J. RICHARDSON Chairman of the Board and Chief Executive Officer September 3, 1998 EXHIBIT A RICHARDSON ELECTRONICS, LTD. EMPLOYEES' 1998 INCENTIVE COMPENSATION PLAN ARTICLE I Purpose The purposes of the Plan are to attract and retain capable executives and other key employees in the employ of Richardson Electronics, Ltd., a Delaware corporation (the "Company") and its subsidiaries by giving these individuals the opportunity either to acquire an equity interest or to increase their present equity interest in the Company. The Company intends that certain of the Options granted pursuant to the Plan will qualify and that certain other of the Options will not qualify as "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code, and the terms of the Options shall be interpreted in accordance with their designation in the Option Agreement. ARTICLE II Definitions As used in this Plan, the following terms shall each have the meaning set forth in this Article, 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 gender. 2.1 Board shall mean the Board of Directors of the Company. 2.2 Cash Bonus shall mean the right granted by the Committee pursuant to Section 6.11 with respect to certain Options and pursuant to Section 8.4.9 with respect to certain Stock Awards, which right shall entitle the Grantee to a cash payment from the Company in addition to the shares of Common Stock subject to such Option or Stock Award. 2.3 Code shall mean 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. 2.4 Committee shall mean the Committee appointed by the Board in accordance with the provisions of Article IV to administer the Plan. 2.5 Common Stock shall mean the common stock, $.05 par value, of the Company. 2.6 Company shall mean Richardson Electronics, Ltd., a Delaware corporation, and any successor to it. 2.7 Disinterested Person shall mean any member of the Board, who at the time discretion under the Plan is exercised is not eligible, and who has not at any time for one year prior thereto been eligible, for selection as a Grantee either under this Plan or as a grantee under any other plan of the Company, or any of the affiliates (as that term is used in the Securities Exchange Act of 1934, as amended) of the Company entitling the participants therein to acquire stock, stock appreciation rights, or stock options of the Company or any of its affiliates; provided that a member of the Board who is not an Employee shall not fail to qualify as a Disinterested Person solely as a result of having received a stock option upon becoming a member of the Board without any exercise of discretion by the Board. 2.8 Effective Date shall mean July 14, 1998, subject to the approval of a majority of the stockholders of the Company entitled to vote thereon at the next annual meeting of the stockholders of the Company or any adjournment thereof. In the event the stockholders of the Company shall fail to so approve the Plan, each Option or Restricted Stock Award granted under the Plan on or after the Effective Date shall be and become null and void. 2.9 Employee shall mean any individual employed by and receiving compensation from the Company or any Subsidiary. 2.10 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. 2.11 Grantee shall mean an Employee who is granted either an Option or a Stock Award by the Committee under the Plan. 2.12 Incentive Stock Option means an Option qualifying as an "incentive stock option" under Section 422 of the Code. 2.13 Nonqualified Stock Option means an Option which is not an Incentive Stock Option. 2.14 Option shall mean an option to purchase a specific number of shares of the Common Stock that is granted by the Committee on or subsequent to the Effective Date pursuant to the terms of the Plan. 2.15 Option Agreement shall mean a written agreement evidencing the right of the Grantee to purchase Common Stock pursuant to the terms of this Plan which agreement shall be in the form described in Article VI. 2.16 Option Price means the purchase price for Common Stock under an Option as determined pursuant to Article VI below. 2.17 Plan shall mean the Richardson Electronics, Ltd. Employees' 1998 Incentive Compensation Plan, as set forth herein, as amended from time to time. 2.18 Restricted Stock Agreement shall mean a written agreement evidencing the right of the Grantee to receive Common Stock pursuant to the terms of this Plan which agreement shall be in the form described in Article VIII. 2.19 Stock Award shall mean a grant by the Committee of a specific number of shares of Common Stock to an eligible Employee pursuant to the terms of the Plan in recognition of the services performed by such Employee for the Company and without payment of any other consideration by the Employee. 2.20 Subsidiary shall mean any corporation that at the time qualifies as a subsidiary of the Company under the definition of "subsidiary corporation" contained in Section 424(f) of the Code, as that section may be amended from time to time. ARTICLE III Shares Subject to Plan 3.1 Number of Shares Available for Grant. Subject to adjustment as provided in Section 3.2 and Article X, the aggregate number of shares of Common Stock which may be issued under the Plan is Eight Hundred Thousand (800,000) and no Grantee may be issued Options and Stock Awards under the Plan for more than One Hundred Thousand (100,000) shares in any one year. 3.2 Shares Subject to Options and Awards that Terminate. In the event that any Option terminates for any reason (whether vested or non-vested at the time of termination) without having been exercised in full, a number of shares of the Common Stock equal to the number of unpurchased shares of Common Stock subject to that Option shall become available for issuance under the Plan. In the event that any of the shares of Common Stock that have been issued in connection with any Stock Award are subsequently forfeited, such shares shall once again become available for issuance under the Plan but only if the Grantee received no benefits of ownership from such shares, such as dividends. 3.3 Source of Shares. The shares of Common Stock issued under the Plan shall be made available, in the discretion of the Board, either from the authorized but unissued Common Stock or from any outstanding Common Stock which has been reacquired by the Company. ARTICLE IV Administration 4.1 Authority of Committee. The authority to control and manage the operations and administration of the Plan shall be vested exclusively in the Committee which shall be appointed by the Board and shall consist of not less than two (2) members of the Board. All members of the Committee shall be Disinterested Persons. Members of the Committee shall serve at the pleasure of the Board. The Board may appoint new members to the Committee to fill any vacancies occurring in the membership of the Committee. 4.2 Determinations to be made by Committee. Subject to the provisions of this Plan, the Committee shall determine: (1) the Grantees, (2) the number of shares of Common Stock subject to an Option or Stock Award, (3) the dates upon which Options and Stock Awards are granted, (4) subject to Section 6.3, the date or dates upon which an Option may be exercised, (5) the manner in which an Option may be exercised, (6) whether and for what period the Option may be exercised after the Grantee ceases to be an Employee, (7) whether or not the Option is to an Incentive Stock Option, (8) such other terms to which an Option or Stock Award is subject (including the time at which it vests and whether it entitles the Grantee to receive a Cash Bonus), and (9) the form of any Option Agreements and of any Restricted Stock Agreements. 4.3 Interpretation of Plan. The Committee shall interpret the Plan and from time to time may adopt such rules and regulations for carrying out the terms and purposes of the Plan and may take such other actions in the administration of the Plan as it deems advisable. The interpretation and construction by the Committee of any provisions of, and the determination of any question arising under the Plan, any such rule or regulation, or any Option Agreement or Restricted Stock Agreement shall be final and binding on all persons interested in the Plan. Option Agreements or Restricted Stock Agreements may be amended by the Committee consistent with the Plan, provided that no such amendment may become effective without the consent of the Grantee except to the extent that such amendment operates solely to the benefit of the Grantee. 4.4 Actions by Committee. The Committee shall maintain written minutes of its proceedings. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present or acts approved in writing by all the members, shall be the acts of the Committee. The Committee shall make such rules and regulations for the conduct of its business as it deems advisable. 4.5 Actions Performed in Good Faith. No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan. ARTICLE V Eligibility All key administrative, managerial and executive Employees, as determined in the sole discretion of the Committee, shall be eligible to receive both Options and Stock Awards. ARTICLE VI Terms and Conditions of Options All Options granted by the Committee under the Plan shall be evidenced by an Option Agreement which shall be in such form as the Committee may from time to time approve and shall be executed on behalf of the Company by one or more officers of the Company. Each such Option Agreement shall be subject to the terms and conditions of the Plan as well as such other terms and conditions as the Committee may deem desirable, including but not limited to the period or times at which the Grantee's rights vest, and shall provide in substance as follows: 6.1 Number of Shares and Option Price. Each Option Agreement shall specify the number of shares of Common Stock subject to such Option and the purchase price per share for such shares. The purchase price per share shall not be less than 50% of the Fair Market Value of the Common Stock on the date that the Option is granted and the purchase price per share of Common Stock subject to an Incentive Stock Option shall not be less than the Fair Market Value of the Common Stock on the date that the Option is granted. The number of shares and the purchase price per share shall be subject to adjustment as provided in Article X. For all Incentive Stock Options granted, the aggregate Fair Market Value of the Common Stock (determined at the time the Option is granted) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time in any calendar year (together with options granted under all incentive stock option plans of the Company, any parent corporation or Subsidiary) shall not exceed One Hundred Thousand Dollars ($100,000) for any one Grantee. 6.2 Transferability of Options. At the direction of the Committee, exercised upon grant of an Option, each Option Agreement shall provide either: (i) that during the life of the Grantee the Option is non-transferable and non-assignable by the Grantee and may be exercised (to the extent vested) only by the Grantee or his guardian or legal representative and in the event the Grantee dies prior to the expiration of the term of the Option, the Option (to the extent vested) may be exercised only by the Grantee's designated Beneficiary or in the absence of such designation by his legal representative or other successor in trust; or (ii) that during the life of the Grantee the Option is non-transferable and non-assignable by the Grantee except that it may be transferred and assigned to members of the Grantee's family, trusts for such family members, or partnerships whose only partners are such family members and may be exercised (to the extent vested) only by the Grantee or his guardian or legal representative or such permitted assignee and in the event the Grantee dies prior to the expiration of the term of the Option, the Option (to the extent vested) may be exercised only by the Grantee's designated Beneficiary or in the absence of such designation by his legal representative or other successor in trust, or if assigned prior to his death only by the permitted assignee to whom assigned. For purposes hereof a family member of a Grantee shall mean the Grantee's spouse, children and grandchildren. No consideration may be received by the Grantee for the transfer or assignment of an Option. The assignee of any Option transferred or assigned by a Grantee shall be subject to all conditions of the Option prior to its transfer or assignment and may not make any further assignments or transfers of the Options. These restrictions shall be set forth in the Option Agreement. 6.3 Maximum Term. Each Option Agreement shall set forth the period during which it may be exercised; provided, however, that any Option granted pursuant to this Plan shall expire not more than ten (10) years from the date that the Option is granted. 6.4 Exercise of Options Upon Termination of Employment. Except as otherwise provided in this Plan each Option Agreement shall provide that: (a) If a Grantee ceases to be an Employee, for any reason other than the Grantee's death, disability, or termination for cause, the Grantee may exercise his or her Options in accordance with their terms for a period of three months after such termination of employment unless such Option provides otherwise, but only to the extent the Grantee was entitled to exercise the Options on the date of termination. For purposes of the Plan: (i) a leave of absence, duly authorized in writing by the Company, for military service or for any other purpose approved by the Company if the period of such leave does not exceed 90 days; and (ii) a leave of absence in excess of 90 days, duly authorized in writing by the Company, provided the Employee's right to reemployment is guaranteed either by statute or contract, shall not be deemed a termination of employment. (b) If a Grantee ceases to be an Employee due to the Grantee's disability, he or she may exercise his or her Option in accordance with its terms for one year after he or she ceases to be employed unless such Option earlier expires by its terms, but only to the extent that the Grantee was entitled to exercise the Option on the date of such termination. (c) If a Grantee dies either while an Employee or otherwise during a time when the Grantee could have exercised an Option, the Options issued to such Grantee shall be exercisable in accordance with their terms by the Grantee's designated Beneficiary or in the absence of such designation by the personal representative of such Grantee or other successor to the interest of the Grantee for a period of one year after such Grantee's death to the extent that the Grantee was entitled to exercise the Option on the date of death but not beyond the original term of the Option. (d) If a Grantee's employment is terminated for cause, the Grantee shall have no further right to exercise any Option previously granted him or her. 6.5 Intra-Corporate Transfers. Each Option Agreement shall provide that a transfer of employment from the Company to a Subsidiary or vice versa or between two such Subsidiaries shall not be deemed a termination of employment. 6.6 Method of Exercise of Options. Each Option Agreement shall provide that the Option shall be exercised by delivering a written notice of exercise to the Company and payment of the purchase price as hereinafter provided. Each such notice shall state the number of shares of Common Stock with respect to which the Option is being exercised and shall be signed by the person (or persons) exercising the Option and, in the event the Option is being exercised by any person other than the Grantee, shall be accompanied by proof, satisfactory to counsel for the Company, of the right of such person to exercise the Option. A certified or cashier's check in full payment of the purchase price for the number of shares of Common Stock specified in the notice must accompany such notice; provided, however, the purchase price may be paid in such other manner or form as the Committee may approve, including, without limitation, by delivery of a certificate or certificates for shares of Common Stock owned by the Grantee having a Fair Market Value at the date of exercise equal to the purchase price for such shares, or any combination of the foregoing. Any stock certificate or certificates delivered must be endorsed, or accompanied by an appropriate stock power, to the order of the Company, with the signature guaranteed by a bank or trust company or by a member firm of the New York Stock Exchange. No shares of Common Stock shall be issued in connection with an exercise of the Option until payment for such shares has been made. The Company may make appropriate arrangements with a broker or other institution to receive sale or loan proceeds in the amount of the exercise price upon delivery of an appropriate irrevocable exercise notice and instructions to promptly deliver the sale or loan proceeds or similar arrangements satisfactory to the Committee. The delivery of such notice and instructions or compliance with similar arrangements approved by the Committee shall be deemed conditional payment of the purchase price authorizing delivery of the shares by the Company. 6.7 Forfeiture. An Option Agreement may provide for such conditions on the right of the Grantee to exercise his Option as the Committee, in its sole discretion, deems appropriate, which conditions may, without limitation, include conditions based upon either (i) the completion by the Grantee of a further period of continued employment or (ii) the performance of the Company, of any Subsidiary, or any division thereof, or of the Grantee. Without limiting the foregoing, an Option Agreement may provide that the Committee may, in its sole discretion, terminate in whole or in part any portion of the Option which has not yet become vested if it determines that the Grantee is not satisfactorily performing the duties to which he was assigned on the date the Option was granted or duties of at least equal responsibility. 6.8 Withholding. Each Option Agreement shall provide that the Company shall have the right to require the Grantee to remit and the Grantee shall have the obligation to remit to the Company, or to withhold from other amounts due to the Grantee as compensation or otherwise (including, but not limited to the Cash Bonus, if any, granted as part of the Option or Option shares), an amount sufficient to satisfy all applicable withholding taxes. At the Committee's election, such amount shall be satisfied with cash or shares of Common Stock. 6.9 Beneficiaries. Each Option Agreement may provide that the Grantee may designate the person or persons (collectively the "Beneficiary") who, in the event of the death of the Grantee, may exercise the Option(s) held by the Grantee at the time of his death and may also include restrictions on the ability of Beneficiaries to exercise the Grantee's Options. Any designation of a Beneficiary shall be in writing, shall be signed by the Grantee, and shall be effective only when filed with the Committee. In the event that the Grantee fails to designate a Beneficiary or that none of his Beneficiaries survive the Grantee, the legal representative of the Grantee may exercise the Grantee's vested Options to the same extent as a Beneficiary. A Beneficiary designation may be changed at any time and from time to time by the Grantee; provided, however, that any such change shall become effective only when filed with the Committee. 6.10 Section 422A(b) Statement. Each Option Agreement which is intended to be a Non Qualified Stock Option shall contain the statement "This Option shall not be treated as an Incentive Stock Option within the meaning of Internal Revenue Code Section 422A." 6.11 Cash Bonus. In the event that the Committee, in its sole discretion, grants a Cash Bonus to the Grantee as part of the Option, then in addition to the provisions described above, the Option Agreement shall contain provisions describing the amount of such Cash Bonus, and the time or times at which the Grantee's right to such Cash Bonus vests. 6.12 Surrender of Prior Options. An Option Agreement may, in the Committee's discretion, provide that the Option is contingent upon the Grantee agreeing to the cancellation without exercise of another stock option granted under the Plan or any other plan maintained by the Company or any Subsidiary. In the event that the stockholders of the Company fail to approve the Plan as provided in Section 2.8 above, then any option which has been surrendered for cancellation without exercise pursuant to this Section 6.12 shall remain in effect as originally granted and the agreement evidencing such option shall be returned to the grantee of such option. ARTICLE VII Exercise of Options 7.1 Date of Exercise. For all purposes the date of exercise of the Option shall be the date on which the notice described in Section 6.6 shall have been delivered to the Company and pays the purchase price for the shares then being purchased, but the exercise of that Option shall not be effective unless and until the person (or persons) exercising the Option complies with all the provisions of the Plan, Option Agreement or of the Committee governing the exercise of the Option within a reasonable time after the delivery of such notice. 7.2 Delivery of Certificate. The Company shall deliver certificates for the shares of Common Stock subject to the Option, within a reasonable period of time after the day on which the exercise of the Option is effective provided that the Company shall not be required, upon the exercise of any Option, to issue or deliver any shares of Common Stock prior to the completion of such registration or other qualification of the Common Stock under any applicable law, rule or regulation as the Company shall determine to be necessary, and compliance with all other applicable laws, rules or regulations as the Company shall determine to be necessary, and in any such event the date of delivery shall be extended for the period necessary and to assure and obtain compliance with all other applicable laws, rules or regulations as the Company shall determine to be necessary. No one shall be or be deemed to be the holder of any Common Stock subject to an Option unless and until certificates for the shares of such Common Stock are issued to that person. ARTICLE VIII Terms and Conditions of Stock Awards 8.1 Generally. The Committee shall, in its sole and absolute discretion, determine whether a Stock Award shall take the form of (i) an unrestricted grant of shares of Common Stock or (ii) a grant of shares of Common Stock which are subject to the risk of forfeiture. 8.2 Fully Vested Grant of Stock. If the Committee determines that the Stock Award shall take the form of an unrestricted grant of shares of Common Stock, then it shall, after the payment of applicable withholding taxes by the Grantee, cause a certificate representing such shares to be delivered to the Grantee. 8.3 Grant of Stock Subject to the Risk of Forfeiture. If the Committee determines that the Stock Award shall take the form of a grant of shares of Common Stock which are to remain subject to the risk of forfeiture for a period of time, then it shall take or cause to be taken the steps set forth in this Section 8.3: 8.3.1 Restricted Stock Agreement. The Committee shall cause the Stock Award to be evidenced by a Restricted Stock Agreement which, subject to Section 8.4, shall be in such form as the Committee may from time to time approve and shall be executed on behalf of the Company by one or more officers of the Company. 8.3.2 Stock Certificates. (a) The Company shall cause a certificate or certificates representing the shares subject to the Restricted Stock Agreement to be registered in the name of the Grantee which certificate(s) shall bear the following legend: The shares represented by this certificate have been issued pursuant to the terms of a Restricted Stock Award made under the Richardson Electronics, Ltd. Employees' 1998 Incentive Compensation Plan and may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of until such time as is set forth in that certain Restricted Stock Agreement dated the day of , ____, by and between Richardson Electronics, Ltd. and . (b) In order to enforce the restrictions on the shares subject to the Restricted Stock Agreement, the Committee shall require the Grantee, immediately upon receipt of a certificate or certificates representing such shares, to deposit such certificates, together with stock powers and other instruments of transfer, appropriately endorsed in blank, with the Company or an escrow agent designated by the Company under an escrow agreement in such form as shall be determined by the Committee. (c) At such time as any number of the shares of Common Stock are no longer subject to the restrictions, terms, and conditions of the Grantee's Restricted Stock Agreement (the "Unrestricted Shares"), the Committee shall cause a new certificate to be delivered to the Grantee, without the legend set forth above, for the Unrestricted Shares. The shares remaining subject to the Restricted Stock Agreement shall either be canceled or, if appropriate under the terms of the Restricted Stock Agreement, continue to be held by the Company or held in escrow subject to the restrictions, terms, and conditions of the Restricted Stock Agreement. (d) In the event that a Grantee becomes entitled to receive any new, additional, or different securities by virtue of a stock dividend, stock split, recapitalization, reorganization, merger, consolidation, split-up, or any similar change affecting the Common Stock subject to the Participant's Restricted Stock Agreement, such securities shall be subject to the same restrictions, terms and conditions as apply to the shares of Common Stock subject to such Restricted Stock Agreement. 8.4 Form of Restricted Stock Agreement. Each Restricted Stock Agreement shall be subject to the terms and conditions of the Plan as well as such other terms and conditions as the Committee may deem desirable and shall provide in substance as follows: 8.4.1 Number of Shares. Each Restricted Stock Agreement shall specify the number of shares of Common Stock subject to such Restricted Stock Agreement. 8.4.2 Non-Transferability of Restricted Stock. Each Restricted Stock Agreement shall provide: (i) that during the life of the Grantee the shares subject to the Restricted Stock Agreement may not be transferred or assigned by the Grantee, and that such shares may be received (to the extent vested) only by the Grantee or his guardian or legal representative, and (ii) that upon the death of the Grantee the shares of Common Stock (to the extent vested) subject to any Restricted Stock Agreement held by him at the time of his death which have not been previously delivered to the Grantee shall be distributed to his designated Beneficiary or in the absence of such designation to his legal representative or other successor in interest. 8.4.3 Intra-Corporate Transfers. Each Restricted Stock Agreement shall provide that a transfer of employment from the Company to a Subsidiary or vice versa or between two such Subsidiaries shall not be deemed a termination of employment. 8.4.4 Forfeiture. In addition to any other condition or other vesting requirement, a Restricted Stock Agreement may provide that a Grantee may forfeit in whole or in part any portion of the shares of Common Stock subject to such Restricted Stock Agreement which have not yet become vested if the Committee may, in its sole discretion, determine that the Grantee is not satisfactorily performing the duties to which he was assigned on the date the Stock Award was granted or duties of at least equal responsibility. 8.4.5 Vesting. Each Restricted Stock Agreement shall contain a schedule setting forth the period over which or the conditions upon which the Grantee's rights in the shares of Common Stock subject to the Restricted Stock Agreement vest (which may include any conditions described in Section 6.7) and shall also provide whether the Restricted Stock Agreement becomes vested, in whole or in part, if the Grantee dies before his rights would otherwise have become fully vested. 8.4.6 Stockholder Rights. Each Restricted Stock Agreement shall provide that during its term the Grantee shall be entitled to receive all dividends paid on all of the shares of Common Stock subject to such Restricted Stock Agreement, to vote all such shares, and to enjoy all other stockholder rights, except that the Grantee shall neither (i) be entitled to the delivery of the certificate evidencing shares except as provided in Section 8.3 above nor (ii) be able to sell, assign, transfer, pledge, hypothecate or otherwise dispose of such shares until such time he has received a certificate evidencing such shares. 8.4.7 Beneficiary. Each Restricted Stock Agreement shall provide that the Grantee may designate the person or persons (collectively the "Beneficiary") who, in the event of the death of the Grantee, shall receive the certificate(s) evidencing shares of Common Stock (to the extent vested) subject to the Restricted Stock Agreement held by the Grantee at the time of his death. Any such designation shall be in writing, shall be signed by the Grantee, and shall be effective only when filed with the Committee. In the event that the Grantee fails to designate a Beneficiary or that none of his Beneficiaries survive the Grantee, the legal representative of the Grantee shall receive the certificate(s) evidencing the shares of Common Stock (to the extent vested) subject to the Grantee's Restricted Stock Agreement. A Beneficiary designation may be changed at any time and from time to time by the Grantee; provided, however, that any such change shall become effective only when filed with the Committee. 8.4.8 Withholding. Each Restricted Stock Agreement shall provide that the Company shall have the right to require the Grantee to remit and the Grantee shall have the obligation to remit to the Company, or to withhold from other amounts due the Grantee, as compensation or otherwise (including but not limited to any Cash Bonus granted in connection with the related Stock Award), an amount sufficient to satisfy all applicable withholding tax requirements. At the Committee's election, such amount shall be satisfied with cash or Common Stock. 8.4.9 Cash Bonus. In the event that the Committee grants a Cash Bonus in connection with the Stock Award, then in addition to the provisions described above, the Restricted Stock Agreement shall contain provisions describing the amount of such Cash Bonus, and the time or times at which the Grantee's right to such Cash Bonus vests. ARTICLE IX Terms and Conditions of Cash Bonuses 9.1 Grant of Cash Bonuses. The Committee may, in its sole discretion, grant Cash Bonuses as part of any Option or Stock Award granted under the Plan. Such Cash Bonuses may be granted at any time during the term of the Option or Stock Award to which it relates. 9.2 Amount and Vesting of the Cash Bonuses. (a) In the case of Cash Bonuses granted in connection with an Option, the Grantee's (or his Beneficiary) right to receive a Cash Bonus shall vest each time he purchases shares of Common Stock subject to such Option. The amount of such Cash Bonus shall be equal to the product obtained by multiplying (A) the excess, if any, of the Fair Market Value (determined pursuant to paragraph (d) below) of the shares so purchased over the purchase price for such shares times (B) a fraction, the numerator of which is an amount equal to the Combined Marginal Rate of Tax (as that term is defined in Section 9.5 below) and the denominator of which is an amount equal to the excess of one (1) over the Combined Marginal Rate of Tax. (b) In the case of Cash Bonuses granted in connection with a Stock Award described in Section 8.2, the Grantee's right to a Cash Bonus shall vest at the time the certificate representing the shares subject to the Stock Award is delivered to the Grantee (or his Beneficiary). The amount of the Cash Bonus shall be equal to the product obtained by multiplying the Fair Market Value (determined pursuant to paragraph (d) below) of such shares times a fraction, the numerator of which is an amount equal to the Combined Marginal Rate of Tax and the denominator of which is an amount equal to the excess of one (1) over the Combined Marginal Rate of Tax. (c) In the case of Cash Bonuses granted in connection with a Stock Award described in Section 8.3, the Grantee shall be entitled to receive a Cash Bonus vesting at the times set forth in this subparagraph (c). Right to a Cash Bonus shall vest when a certificate representing Unrestricted Shares is delivered to the Grantee (or his Beneficiary) pursuant to Section 8.3.2(c) or if the employee makes an election under Section 83(b) of the Code, when a certificate is issued in accordance with Section 8.3.2(a). The amount of such Cash Bonus shall be equal to the product obtained by multiplying the Fair Market Value (determined pursuant to paragraph (d) below) of the Unrestricted Shares evidenced by such certificate times a fraction, the numerator of which is an amount equal to the Combined Marginal Rate of Tax and the denominator of which is an amount equal to the excess of one (1) over the Combined Marginal Rate of Tax. (d) For purposes of this Section 9.2, the Fair Market Value of the shares shall be determined as of the date on which the shares "first become transferable or are not subject to a substantial risk of forfeiture," (within the meaning of Code Section 83) whichever occurs earlier as determined by the Committee in its sole and absolute discretion. 9.3 Payment of Cash Bonus. The Company may either pay the Cash Bonus to a Grantee or withhold all or a portion of the Cash Bonus and apply such amount to the payment of withholding taxes due in connection with amounts received by the Grantee pursuant to the Plan. 9.4 Combined Marginal Rate of Tax. For purposes of this Article IX, the term Combined Marginal Rate of Tax shall mean an amount equal to the sum of the highest marginal rates of federal, state and local income taxes applicable to individuals residing in the state and city where the Grantee resides, giving effect to the deductibility for federal income tax purposes of state and local income taxes. In the event that the Grantee is neither a resident nor citizen of the United States, this Section 9.4 shall be applied by replacing the term "federal, state and local income taxes" with the term "all applicable income taxes" wherever it appears herein. 9.5 Construction. It is the intention of the Company that the amount of a Cash Bonus be calculated at the time at which the ownership of the shares of Common Stock subject to the related Option or Stock Award results in the inclusion of income by the Grantee pursuant to Code Section 83 and this Section shall be so construed and applied. Nothing contained herein shall be construed as a guarantee by the Company that the Internal Revenue Service, or other taxing authority, will agree with the determination of the Committee as to the date upon which such inclusion income occurs or the amount thereof. In the event of any such disagreement, nothing contained herein shall be construed as a promise of an additional payment by the Company to the Grantee. ARTICLE X Effect of Certain Changes 10.1 Anti-Dilution. If there is any change in the number of shares of Common Stock through the declaration of stock dividends or through a recapitalization which results in stock splits or reverse stock splits, the number of shares of Common Stock available for issuance under the Plan, the number of such shares covered by outstanding Options and Restricted Stock Awards, and the price per share of such Options, shall be proportionately adjusted by the Committee to reflect any increase or decrease in the number of issued shares of Common Stock; provided, however, that any fractional shares resulting from such adjustment shall be eliminated. 10.2 Change in Par Value. In the event of a change in the Common Stock of the Company, as presently constituted as of the date of this Amendment and Restatement of the Plan, which is limited to a change of all of its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any such change shall be deemed to be the Common Stock within the meaning of the Plan. 10.3 Mergers, Recapitalization, Etc. In the event that the Company enters into an agreement or plan to merge or consolidate with any other corporation, to reclassify, reorganize or otherwise substantially alter its capital or business structure, to sell all or a substantial part of its business or assets, or to dissolve, the Committee may make such changes in the terms of outstanding Option Agreements and Restricted Stock Agreements as may be equitable and appropriate in the context of such transaction, including without limitation substituting for the shares of Stock subject to such Agreements equity interests in any entity which will succeed to the business of the Company pursuant to such transaction, accelerating the vesting schedule in such Agreement, and providing that outstanding Options will lapse if not exercised during a reasonable period prior to such transaction. 10.4 Adjustments to be made by Committee. The foregoing adjustments shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. 10.5 Rights of Option Grantee. A Grantee of an Option shall not have any of the rights or privileges of a stockholder of the Company unless and until certificates evidencing the shares of Common Stock subject to such Option have been issued and delivered to the Grantee. 10.6 Right of Company to Make Adjustments. The grant of an Option or a Stock Award shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structures or to merge or to consolidate or to dissolve, liquidate or sell or transfer all or part of its business or assets. ARTICLE XI Amendment and Termination The Board shall have the right to amend or suspend, or terminate the Plan at any time, provided that unless first approved by the stockholders of the Company, no amendment shall be made to the Plan (except to conform the Plan, the Option Agreements or Restricted Stock Agreements thereunder to changes in the Code or governing law) which: (1) increases the total number of shares of Common Stock which may be issued under the Plan, or (2) lowers the minimum option price specified in Article VI. No amendment to the Plan shall be made by the Board that materially changes the terms of the Plan as to impair or adversely alter the rights of a Grantee or other option holder without such person's consent. ARTICLE XII Application of Funds Any proceeds received by the Company as a result of the exercise of Options granted under the Plan may be used for any valid corporate purpose. ARTICLE XIII Notice Any notice to the Company required under this Plan shall be in writing and shall either be delivered in person or sent by registered or certified mail, return receipt requested, postage prepaid, to the Company at its offices at 40W267 Keslinger Road, P.O. Box 393, LaFox, Illinois 60147-0393, Attention: Stock Option Committee. ARTICLE XIV Term of Plan The Board may terminate the Plan at any time but if not sooner terminated it shall terminate at the close of business on April 9, 2006. Options may not be granted and Restricted Stock Awards may not be made after the Plan terminates. Termination of the Plan shall not, however, affect the rights of Grantees under previously granted Options or Restricted Stock Awards, and all unexpired Options and Restricted Stock Awards shall continue in force and operation after termination of the Plan until they are exercised, lapse or terminate by their own terms and conditions, and the Plan shall continue in effect solely with respect to such Options and Restricted Stock Awards for so long as they remain outstanding. ARTICLE XV No Contract of Employment Neither the adoption of the Plan nor the grant of any Option or Restricted Stock Award shall be deemed to obligate either the Company or any Subsidiary to continue the employment of any Employee. ARTICLE XVI Section 16 of the Securities Exchange Act With respect to Grantees subject to Section 16 of the Securities Exchange Act of 1934 ("1934 Act"), transactions under this plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. RICHARDSON ELECTRONICS, LTD. PROXY 40W267 Keslinger Road P.O. Box 393 LaFox, Illinois 60147-0393 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned hereby appoints Edward J. Richardson and William G. Seils as Proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated below, all the shares of Common Stock of Richardson Electronics, Ltd. held of record by the undersigned on August 20, 1998 at the Annual Meeting of stockholders to be held on October 6, 1998 or any adjournment thereof. 1. ELECTION OF DIRECTORS [__] FOR ALL nominees listed below [__] WITHHOLD AUTHORITY (except as marked to the contrary below) to vote for all nominees listed below Edward J. Richardson, Scott Hodes, Samuel Rubinovitz, Arnold R. Allen, Kenneth J. Douglas, Jacques Bouyer, William J. Garry, Harold L. Purkey, Ad Ketelaars, Bruce W. Johnson INSTRUCTION: To withhold authority to vote for any individual nominee write that nominee's name in the space provided below: 2. To approve the adoption of the Richardson Electronics, Ltd. Employees' 1998 Incentive Compensation Plan, the granting of Options, Stock Awards and Cash Bonuses thereunder and the issuance of shares upon the exercise of such Options. 3. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. This proxy when properly executed will be voted in the manner directed herein by the undersigned stockholder. If no direction is made, this proxy will be voted for Proposals 1 and 2. Please sign exactly as name appears below. For joint tenants, all tenants should sign. If signing for an estate, trust, corporation, partnership or other entity, title or capacity should be stated. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person. DATED: 1998 Signature _______________________________________ Signature if held jointly -----END PRIVACY-ENHANCED MESSAGE-----