MEMORANDUM OF OPTION AGREEMENT
THIS MEMORANDUM OF AN OPTION AGREEMENT which was previously agreed to by
the parties is made and entered into at LaFox, Illinois as of the 12th day of
May, 1987, by and between Richardson Electronics, Ltd., a Delaware corporation
(such corporation together with its predecessor, Richardson Electronics, Ltd.,
an Illinois corporation, is hereby referred to as the "Company"), and Arnold
R. Allen (the "Optionee").
WHEREAS, the Company and the Optionee have entered into a letter
agreement dated August 23, 1985 supplemented by a memorandum dated December 3,
1985, regarding the employment by the Company of the Optionee (the "Employment
Agreement"); and
WHEREAS, the Employment Agreement provides that the Company and the
Optionee will enter into an agreement pursuant to which the Company will grant
to the Optionee the right to acquire stock in the Company; and
WHEREAS, a portion of that right was satisfied by the grant to Optionee
of an Option on September 4, 1985 to purchase 3,506 shares of Common Stock and
3,506 shares of Class B Common Stock at an exercise price of $14.26 per share
(adjusted for 3-for-2 stock split and recapitalization and reincorporation)
under the Company's Employee's Incentive Stock Option Plan; and
WHEREAS, the Company and the Optionee have now agreed upon the terms
upon which the balance of such rights will be granted.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements of the parties hereto herein contained, the parties hereby
agree as follows:
1. Grant of Option. In consideration of the services rendered and to
be rendered to the Company (or its subsidiaries) by the Optionee the Company
hereby grants to the Optionee an option to purchase a total (subject to
adjustment for fractions as provided below in this Section 1.) of up to 33,994
shares of the $.05 per share par value Common Stock of the Company and 33,994
shares of the $.05 per share par value Class B Common Stock of the Company for
an aggregate of 67,988 shares (the "Option Shares"), at a purchase price of
$14.25 per share, upon and subject to the terms and conditions set forth
herein (the "Option"). Upon its vesting and becoming available for purchase,
each Option Share shall entitle the Optionee (or his legal Representative as
defined below in Section 2(b)) to acquire one-half share of Common Stock and
one-half share of Class B Common Stock. No fractional shares will, however,
be issued upon exercise. Upon the exercise of any Option Share all fractional
shares of Class B Common Stock shall be converted into fractional shares of
Common Stock and be combined with the fraction of Common Stock for which the
Option is exercised to make a whole share.
2. Time of Exercise.
(a) Subject to the provisions of subparagraphs (b) and (c) of this
Section 2 set forth below, the Option may be exercised, in whole or in part,
and the option Shares may be purchased by the Optionee (or, in the event of
the Optionee's death, by his Legal Representative (as defined at Section
(e)(v) below)) in accordance with the provisions of Section 3 below, at any
time or times after the date of this Agreement as set forth above (the "Grant
Date").
(b) Anything to the contrary notwithstanding, the right of the
Optionee to acquire Option Shares hereunder shall vest and Option Shares shall
become available for purchase by the Optionee or by his Legal Representative
only at the following times and in the following increments:
(i) for the fiscal year commencing June 1, 1986 the number of
Option Shares which shall vest and first become available for purchase by the
Optionee on the Effective Date (as defined below at Section 2(e)(iii)) for
such year shall be equal to the excess, if any, of the product obtained by
multiplying (X) the Performance Percentage (as defined below at Section
2(e)(vi)) for such year by (Y) fifteen thousand (15,000) over (Z) 1,762;
(ii) in each fiscal year of the Company during the period
commencing on June 1, 1987 and terminating at such time as all of the Option
Shares have become available for purchase hereunder, a number of Option Shares
shall vest and first become available for purchase by Optionee on the
Effective Date for such year. The number of Option Shares which shall first
become available for purchase in each such fiscal year shall be equal to the
product of (X) the Performance Percentage for such fiscal year multiplied by
(Y) fifteen thousand (15,000).
Once Option Shares have become available for purchase, the Optionee shall
retain the right to acquire them until this Agreement or his rights hereunder
terminate.
(c) (i) In the event that the Optionee's full time employment with the
Company (or its subsidiaries) terminates, by reason of the death or disability
of the Optionee, or by virtue of the fact that the Optionee has failed to
perform his duties in a satisfactory manner, or by the voluntary act of the
Optionee, prior to the time at which all of the Option Shares become available
for purchase, the Optionee (or, in the event of Optionee's death, the Legal
Representative of the Optionee) shall have the Option to acquire the following
Option Shares:
(A) any Option Shares to which the Optionee held an unexercised
vested right to purchase at the time of such termination of employment, plus
(B) if the Optionee's employment is terminated after the
commencement of a fiscal year but prior to the Effective Date for such fiscal
year, any Option Shares which would have become vested and first available for
purchase upon the Effective Date for such fiscal year if the Optionee had been
then employed by the Company, plus
(C) a pro-rata portion (as hereinafter defined) of the Option
Shares which would have vested and first been available for purchase had the
Optionee remained in the employ of the Company until the Effective Date of the
next succeeding fiscal year. The term "pro-rata portion" shall mean the
product obtained by multiplying (X) the number of such Option Shares which
would have first become vested and available for purchase on such Effective
Date if the Optionee had been employed by the Company on such Effective Date
times (Y) a fraction the numerator of which fraction is the number of days in
the fiscal year which had elapsed as of the date of the termination of
employment of the Optionee and the denominator of which is 365.
(ii) In the event that the Company terminates the employment of
the Optionee for any reason other than as set forth in Section 2(c)(i), the
Optionee shall have the right to acquire all of the Option Shares. (iii) Any
Option Shares which the Optionee (or his legal representative) has the right to
purchase under this Section 2(c), shall first become available for purchase at
the times set forth in Section 2(b) hereof.
(d) Notwithstanding anything contained herein to the contrary, the
right of the Optionee or his Legal Representative to exercise any Options
hereunder shall terminate ninety (90) days after:
(i) the date of termination of employment with respect to Option
Shares available under subparagraph (c)(i)(A) above,
(ii) the Effective Date referred to in subparagraph (c)(i)(B)
above with respect to Option Shares available under subparagraph (c)(i)(B)
above, and
(iii) the Effective Date referred to in subparagraph (c)(i)(C)
above with respect to Option Shares available under subparagraph (c)(i)(C)
above, and.
(iv) the Effective Date on which the last remaining Option Share
becomes available for purchase with respect to Option Shares available under
subparagraph (c)(ii).
(e) For purpose of this Section 2 the following terms shall have the
meanings herein set forth.
(i) "Actual Profit" for any fiscal year shall be the net after tax
profit which is reported by the Company in its audited financial statements for
such year included in the annual report which the Company sends to its
shareholders for such year.
(ii) "Base Profit" for any fiscal year shall be the Actual Profit
of the Company for the immediately preceding fiscal year.
(iii) "Effective Date" for any fiscal year shall be the day on
which the then acting certified public accountant of the Company finally
certifies the. Actual Profit of the Company for the immediately preceding
fiscal year.
(iv) "Goal Profit" for any fiscal-year shall be that amount
established by the Company as such in its budget for such year. In the event
that the Company fails to establish a Goal Profit in its budget for a fiscal
year, the Goal Profit for such year shall be its Actual Profit for the
immediately preceding fiscal year increased by twenty percent (20%).
(v) "Legal Representative" shall mean the person or persons,
including any bank or trust company, who shall be the duly appointed, qualified
and acting executor or executors of the last will and testament of the Optionee
or the duly qualified and acting administrator will annexed, or administrator
to collect the estate of the Optionee.
(vi) "Performance Percentage" for any fiscal year shall be
(A) if Actual Profit is less than Goal Profit but exceeds Base
Profit, the percentage obtained by dividing:
(1) the excess, if any, of Actual Profit for the immediately
preceding fiscal year over the Base Profit for such immediately preceding
fiscal Year; by
(2) the excess, if any, of Goal Profit for the immediately
preceding fiscal year over the Base Profit for such immediately preceding
fiscal year; or
(B) if Actual Profit equals or exceeds Goal Profit, the percentage
obtained by dividing:
(1) Actual Profit for the immediately preceding fiscal year,
by
(2) Goal Profit for the immediately preceding year; or
(C) if Actual Profit is less than or equals Base Profit, zero.
(D) Notwithstanding anything contained herein to the contrary, in
the event that the Company, at any time hereafter or for any fiscal year or
part thereof, either revises the formula upon which executive bonuses are
calculated under the Executive Bonus Plan of the Company (a copy of which is
attached hereto as Exhibit A and made a part hereof by this reference) or
otherwise adjusts the manner in which such bonuses are calculated whether due
to projected losses or in order to reflect the effect upon corporate earnings
of any transaction entered into by the Company which is not in the ordinary
course of business, a corresponding revision or adjustment shall be made to the
Performance Percentage (or to one or more of its component factors, as the case
may be).
(f) This Agreement and the Option herein granted shall terminate on that
date when all rights to purchase Option Shares shall end as provided in
subparagraphs (c) and (d) of Section 2. Upon termination of this Agreement all
right to purchase vested an unpurchased Option Shares and unvested Option
Shares shall terminate.
3. Manner of Exercise. The Option may be exercised only by
appropriate written notice delivered to the Company in person or sent to the
Company by registered or certified mail, return receipt requested, postage
prepaid, at its principal offices at 40W267 Keslinger Road, LaFox, Illinois
60147, Attn: E. J. Richardson and W. G. Seils. Each such notice of exercise
shall state the number of Option Shares in respect of which the Option is being
exercised and shall be signed by the Optionee (or, in the event that the Option
is being exercised by the legal representative of the Optionee, shall be signed
by such legal representative and shall be accompanied by a copy of the
Optionee's death certificate and such other proof, satisfactory to counsel for
the Company, of the right of such person to exercise the Option). Notices sent
by registered or certified mail shall be effective only when received by the
Company. Each such notice shall be accompanied by (a) a copy of this Option
Agreement, (b) payment of the full aggregate purchase price of the Option
Shares purchased, (c) payment in full of the aggregate amount of the
withholding taxes, if any, attributable to the transfer of the stock pursuant
to the exercise of the Option, and (d) such other documents or instruments as
the Company may require to comply with the then current Federal or state income
tax or securities laws. The withholding taxes and the purchase price for such
Option Shares shall be paid either by cash or a certified or cashier's check
payable to the order of the Company. No Option Shares shall be issued in
connection with an exercise of the Option until payment both for such shares
and for their related withholding taxes has been made.
4. Delivery of Certificates. The Company shall deliver the
certificates for the Option Shares as soon as possible. The Company shall not,
however, be required to issue or deliver any certificate for the Option Shares
upon the exercise of the Option prior to compliance by the Company with any
requirements of the then current Federal or state securities laws or of any
stock exchange on which the Option Shares may at that time be listed. The
Optionee (or his legal representative) shall have no interest in the Option
Shares unless and until certificates for such Option Shares are issued to him.
5. Anti-Dilution Adjustment. In the event that the number of
outstanding shares of the common stock of the Company shall be changed by
reason of split-ups or combinations of shares or recapitalizations or by reason
of stock dividends, the number of Option Shares and the purchase price per
Option Share shall be appropriately adjusted, as determined by the Company, to
give proper effect to such changes.
6. Options are Non-Transferable. The Option may not be assigned,
transferred, pledged, or hypothecated in any way whether by operation of law or
otherwise (except for the laws of descent and distribution), and shall not be
subject to execution, attachment, or similar process. The Option may be
exercised only by the Optionee during his lifetime and, after his death, may be
exercised only by his Legal Representative (as that term is defined in Section
2). Any attempted assignment, transfer, pledge, hypothecation, or other
disposition of the Option contrary to the provisions hereof, and the levy of
any attachment or similar process upon the Option, shall be null and void and
without effect. The Company shall have the right to terminate the Option, in
the event of any such assignment, transfer, pledge, hypothecation, other
disposition of the Option, or levy of attachment or similar process, by notice
to that effect to the person then entitled to exercise the Option, provided,
however, that termination of the Option hereunder shall not prejudice any
rights or remedies which the Company or a subsidiary corporation may have under
this Agreement or otherwise.
7. No Guarantee of Employment. Nothing in this Agreement shall be
deemed or construed in any manner to constitute a contract of employment
between the Company and the Optionee and shall not affect the right of the
Company to terminate the employment of the Optionee.
8. Miscellaneous.
(a) The Option may not be exercised with respect to a fraction of any
Option Share.
(b) This Agreement contains all of the undertakings and understandings
between the Company and the Optionee regarding the subject matter of the
Option. No oral or unwritten undertaking or understandings exist with regard
to this Option and if claimed or believed by any person to exist shall be
disregarded and shall not be relied upon for any purpose. No modification or
amendment of any of the terms of the Option shall be valid if not made in
writing and no such writing shall be binding on the Company unless executed by
a duly authorized corporate officer and attested by its secretary or assistant
secretary.
(c) This Option shall be governed by and construed in accordance with
the laws of the State of Illinois.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
executed by its duly authorized corporate officers, and the Optionee has
hereunto set his hand and seal, all as of the date and year first above
written.
RICHARDSON ELECTRONICS, LTD.
By: /s/ Edward J. Richardson
Edward J. Richardson,
Chairman of the Board
ATTEST:
/s/ William G. Seils
William G. Seils
Secretary
OPTIONEE:
/s/ Arnold R. Allen
Arnold R. Allen