SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-4
Issuer Tender Offer Statement
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
RICHARDSON ELECTRONICS, LTD.
(Name of Issuer)
RICHARDSON ELECTRONICS, LTD.
(Name of Person(s) Filing Statement)
7-1/4% Convertible Subordinated Debentures Due December 15, 2006
(Title of Class of Securities)
763165AB3
(CUSIP Number of Class of Securities)
William G. Seils
Richardson Electronics, Ltd.
40W267 Keslinger Road
LaFox, IL 60147
(630) 208-2370
with copies to
Scott Hodes Jay R. Schifferli
Ross & Hardies Kelley Drye & Warren LLP
150 N. Michigan Avenue Two Stamford Plaza
Chicago, IL 60601-7567 281 Tresser Blvd.
(312) 750-2750 Stamford, CT 06901-3229
(203) 351-8023
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Person(s) Filing Statement)
December 18, 1996
(Date Tender Offer First Published, Sent or Given to Security Holders)
Calculation of Filing Fee
Transaction Valuation: *$34,800,000 Amount of Filing Fee: $6,960
_______________
*For purposes of calculating the filing fee pursuant to Rule 0-11 of the
Securities Exchange Act of 1934, as amended, the market value of the 7-1/4%
Convertible Subordinated Debentures due December 15, 2006 proposed to be
acquired was established by multiplying 87%, the average of the high and low
prices of such Debentures as reported on December 16, 1996 expressed as a
percentage of principal amount, by $40,000,000, the maximum principal amount
proposed to be accepted for exchange.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
Amount Previously Paid: Filing Party:
Form or Registration No.: Date Filed:
TENDER OFFER STATEMENT
Item 1. Security and Issuer.
(a) The name of the issuer is Richardson Electronics, Ltd.,
a Delaware corporation ("Richardson Electronics" or the "Company")
and its principal executive office is located at 40W267 Keslinger
Road, LaFox, Illinois 60147
(b) The securities being sought are Richardson Electronics 7-1/4%
Convertible Subordinated Debentures due December 15, 2006 (the
"Old Debentures") of which $70,825,000 in aggregate principal
amount are outstanding and held by persons other than Richardson
Electronics as of December 5, 1996. Richardson Electronics is
offering to exchange $1,000 principal amount of its 8-1/4%
Convertible Senior Subordinated Debentures due June 15, 2006 (the
"New Debentures") for each $1,000 principal amount of Old
Debentures for not less than $25,000,000 and not more than
$40,000,000 in aggregate principal amount of Old Debentures,
subject to the Company's right, in its sole discretion, to accept
a lesser or greater aggregate principal amount of Old Debentures
for exchange (the "Exchange Offer"). Exchange offers will be made
and exchanges will be accepted from any officer, director or
affiliate of Richardson Electronics who owns Old Debentures and
elects to exchange them under the same terms and conditions
applicable to all Old Debenture holders under the offer.
(c) The Old Debentures are traded in the over-the-counter market. The
trading volume of the Old Debentures has been very limited. The following
table sets forth the quarterly high and low average prices for the Old
Debentures (expressed as a percentage of principal amount) for the
indicated periods, as supplied by Forum Capital Markets L.P. The prices
below do not necessarily reflect actual transactions and do not take into
account all trading activities in the Old Debentures. On December 16, 1996
the Old Debentures were quoted in the over-the-counter market at 86 bid and
88 asked (expressed as a percentage of the principal amount).
Debentureholders are strongly urged to obtain current market quotations for
their Old Debentures.
High Low
Fiscal Year Ended May 31, 1996
First Quarter 83 74
Second Quarter 91 78
Third Quarter 88 85
Fourth Quarter 88 83
Fiscal Year Ending May 31, 1997
First Quarter 87 84
Second Quarter 88 84
Third Quarter
(through December 16, 1996) 88 86
(d) Not applicable.
Item 2. Source and Amount of Funds Or Other Consideration.
(a) The Company is offering to exchange $1,000 principal
amount of its 8-1/4% Convertible Senior Subordinated Debentures due
June 15, 2006 (the "New Debentures") for each $1,000 principal
amount of Old Debentures for not less than $25,000,000 and not more
than $40,000,000 in aggregate principal amount of Old Debentures,
subject to the Company's right, in its sole discretion, to accept
a lesser or greater aggregate principal amount of Old Debentures
for exchange (the "Exchange Offer"). No funds are being borrowed
for the purpose of such Exchange Offer.
(b) Not applicable.
Item 3. Purpose of the Tender Offer and Plans or Proposals of the
Issuer or Affiliate.
See "Purpose and Effects of the Tender Portion of the Exchange
Offer and The Proposed Amendments" on page 15 of the Offering
Circular and Consent Solicitation dated December 18, 1996 attached
hereto as Exhibit (a)(1) (the "Offering Circular"), which
information is specifically incorporated herein by reference.
Tendered Old Debentures accepted by Richardson Electronics in the
exchange offer will be used to satisfy mandatory redemption
requirements with respect to the Old Debentures in order of
scheduled maturity or other redemption payments, if required.
Tendered Old Debentures not so used, if any, will be delivered for
cancellation to the Trustee under the Indenture pursuant to which
the Old Debentures were issued.
(a) Although the Company has no current intention to do so, it reserves
the right in its sole discretion to purchase or make offers for any Old
Debentures that remain outstanding subsequent to the Expiration Date or, as
set forth under "Conditions of the Exchange Offer," to terminate the Exchange
Offer and, to the extent permitted by applicable law, purchase Old
Debentures in the open market, in privately negotiated transactions or
otherwise. Following consummation of the Exchange Offer, the terms of any
such purchases or offers could differ from the terms of the Exchange Offer.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g) Not applicable.
(h) Not applicable.
(i) Not applicable.
(j) Not applicable.
Item 4. Interested Securities of the Issuer.
Richardson Electronics has not effected and is not aware of
any executive officer or director of Richardson Electronics, any
person controlling Richardson Electronics or any executive officer
or director of any corporation ultimately in control of Richardson
Electronics having effected during the past 40 business days any
transaction in the Old Debentures.
Item 5. Contracts, Arrangements, Understandings or Relationships
With Respect to the Issuer's Securities.
See "The Exchange Offer - Financial Advisor" on page 24 of the
Offering Circular, which information is specifically incorporated
herein by reference.
Item 6. Persons Retained, Employed or To Be Compensated
No persons have been or will be employed, retained or
compensated by Richardson Electronics or by any person on behalf of
Richardson Electronics to make solicitations or recommendations in
connection with the Exchange Offer, except that regular employees
of Richardson Electronics who will not receive additional
compensation therefor, may solicit tenders and consents.
Item 7. Financial Information
(a)(1) The audited consolidated financial statements for
the two fiscal years required to be filed with the Company's most
recent annual report on Form 10-K are set forth on pages 14 through
23 on the Annual Report to Shareholders for the Company's fiscal
year ended May 31, 1996 which was previously filed as part of the
Company's Form 10-K for such year which is attached hereto as
Exhibit (a)(1) and which are incorporated herein by reference.
(a)(2) Unaudited balance sheets and condensed consolidated
income statements and condensed consolidated statements of cash
flows and related earnings per share amounts required to be
included in the Company's most recent Quarterly Report on Form 10-Q
are set forth on pages 3 through 6 on the Form 10-Q for the
Company's quarterly period ending August 31, 1996, which was
previously filed and is attached hereto as Exhibit (a)(1), which is
incorporated herein by reference.
(a)(3) See the ratio of earnings to fixed charges for the
two most recent fiscal years and the interim periods ending August
31, 1995 and 1996 which are respectively are set forth on page 11
of the Offering Circular.
(a)(4) Book value per share of the Company as of the most
recent fiscal year end on May 31, 1996 was $5.32 and as of its
latest interim balance sheet, provided in response to Item 7(a)(2)
above, on August 31, 1996 was $5.45.
(b) Not applicable.
Item 8. Additional Information.
(a) None other than those reflected in the Company's Annual
Report on Form 10-K for the period ending May 31, 1996 and its
Proxy Statement for its Annual Meeting of stockholders held on
October 1, 1996, both of which have been previously filed and are
incorporated herein by reference and the Employment Agreement with
Bruce K. Johnson which is filed herewith as Exhibit (c)(2) hereto.
(b) None, except for compliance with the Securities Exchange
Act of 1934 and Rule 13e-4 promulgated thereunder and compliance
with applicable requirements of state securities or "blue sky" laws
and compliance with the Trust Indenture Act of 1939.
(c) Not applicable.
(d) None relating to the Exchange Offer. For information
regarding other material litigation involving the Company see
"Litigation" on page 12 of the Offering Circular, which is
incorporated herein by reference.
(e) The Offering Circular should be read in its entirely and
is incorporated herein by reference.
Item 9. Material to be Filed as Exhibits.
(a)(1) Offering Circular and Consent Solicitation dated
December 18, 1996.
(a)(2) Consent and Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(b) Not applicable.
(c)(1) Indenture dated as of December 15, 1996 and Form of
Debenture.
(c)(2) Exchange Agreement dated as of December 16, 1996
between Richardson Electronics, Ltd. and American National Bank and
Trust Company of Chicago as Exchange Agent.
(c)(3) Letter agreement dated as of December 3, 1996
between Richardson Electronics, Ltd. and Forum Capital Markets L.P.
(c)(4) Employment Agreement dated as of November 7, 1996
between Richardson Electronics, Ltd. and Bruce W. Johnson.
(d) Not applicable.
(e) Not applicable.
(f) None.
23. Consent of independent auditors.
25. Form T-1 For Statements of Eligibility and Qualification
Under The Trust Indenture Act of 1939 of Corporations Designated to
Act as Trustees, American National Bank and Trust Company of
Chicago as Trustee.
Signature
After due inquiry and to the best of my knowledge and belief
I certify that the information set forth in this statement is true,
complete and correct.
December 18 , 1996
Date
Signature
/s/ Edward J. Richardson
Edward J. Richardson, Chairman,
and Chief Executive Officer
(Name and Title)
Item 9 (a)(1)
OFFERING CIRCULAR AND CONSENT SOLICITATION
RICHARDSON ELECTRONICS, LTD.
Offer to Exchange
Its
8 1/4% Convertible Senior Subordinated Debentures due June 15, 2006
(between $25,000,000 and $40,000,000 aggregate principal amount)
for Its
7 1/4% Convertible Subordinated Debentures due December 15, 2006
($70,825,000 principal amount outstanding)
and
Solicitation of Consents
(collectively the "Exchange Offer")
THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
JANUARY 31, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD DEBENTURES
TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN, AND CONSENTS
GRANTED PURSUANT TO THE EXCHANGE OFFER MAY BE REVOKED, AT ANY TIME PRIOR
TO 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THE EXPIRATION DATE.
Richardson Electronics, Ltd. ("Richardson" or the "Company") hereby
offers, upon the terms and subject to the conditions set forth in this
Offering Circular and Consent Solicitation (the "Offering Circular") and in
the accompanying Consent and Letter of Transmittal, the terms of which are
incorporated by reference, to exchange $1,000 principal amount of its 8-1/4%
Convertible Senior Subordinated Debentures due June 15, 2006 (the "New
Debentures") for each $1,000 of its 7-1/4% Subordinated Convertible
Debentures due December 15, 2006 (the "Old Debentures") (the "Tender
Portion" of the Exchange Offer). The Tender Portion of the Exchange Offer
is for not less than $25,000,000 and not more than $40,000,000 aggregate
principal amount of Old Debentures, subject to the Company's right, in its
sole discretion, to accept a lesser or greater aggregate principal amount
of Old Debentures for exchange. There are currently $70,825,000 aggregate
principal amount of Old Debentures outstanding and held by persons other
than the Company.
The Company is also soliciting (the "Solicitation" portion of the Exchange
Offer) consents ("Consents") from holders of the Old Debentures (the
"Debentureholders") representing at least a majority in aggregate principal
amount of the outstanding Old Debentures (the "Requisite Consents") to certain
amendments described herein (the "Proposed Amendments") to the indenture under
which the Old Debentures were issued (the "Old Indenture"). While the Tender
Portion of the Exchange Offer is not conditioned upon the Company receiving the
Requisite Consents, the Proposed Amendments will not become effective on the
remaining Old Debentures unless the current majority of the Old Debentures give
such Consents. Unless otherwise specified, the term "Exchange Offer" includes
the Tender Portion and the Solicitation.
The date of this Offering Circular and Consent Solicitation is December
18, 1996.
The New Debentures will be senior in right of payment to, and will mature
prior to, the Old Debentures, and will be subordinated in right of payment to
all Senior Indebtedness (as defined) of the Company. As of December 16, 1996,
the aggregate amount of Senior Indebtedness was $31,000,000. As with the Old
Debentures, the Indenture for the New Debentures (the "New Indenture") does not
limit or prohibit the incurrence of additional Senior Indebtedness. The New
Debentures will be convertible at any time prior to maturity (unless previously
redeemed) into shares of common stock of the Company, par value $.05 per share
(the "Common Stock"), at a conversion price of $18.00 per share. The Old
Debentures are convertible into Common Stock at a conversion price of $21.14
per share. The conversion prices are subject to adjustment under certain
circumstances. On December 16, 1996 the closing price of the Common Stock on
the Nasdaq National Market was $9.00 per share.
The New Debentures will bear interest at the rate of 8-1/4% from the date
of exchange payable semiannually in cash on each June 15 and December 15 (each
such date an "Interest Payment Date") commencing June 15, 1997. Holders of Old
Debentures accepted for exchange in the Exchange Offer will receive accrued
interest on such Old Debentures from December 15, 1996 to the date of exchange
at the stated 7-1/4% interest rate.
As with the Old Debentures currently outstanding, the Company has the
option to redeem the New Debentures at any time, in whole or in part, at 100%
of the principal amount of the New Debentures, plus accrued interest to the
redemption date.
If the Proposed Amendments become effective, each nonexchanging
Debentureholder will be bound by such amendments, whether or not such
Debentureholder consented to the Proposed Amendments. Consummation of the
Exchange Offer and adoption of the Proposed Amendments may have adverse
consequences for Debentureholders who elect not to tender in the Exchange Offer
or, although tendering, do not receive New Debentures in exchange for their Old
Debentures because fewer than all of the Old Debentures are accepted for
exchange by the Company. See "Certain Considerations For Nonexchanging
Debentureholders."
The principal purpose of the Exchange Offer is to improve the Company's
future liquidity and capital position through the Tender Portion of the Exchange
Offer by substantially eliminating the sinking fund payments of $6,225,000
annually under the Old Debentures. The Company believes this will enable it to
redeploy such funds into new and/or existing business areas. As a result of
open market purchases of Old Debentures, the Company has substantially
satisfied its sinking fund obligations until December 15, 1998. To a lesser
extent, while the Company has no present intentions of significantly altering
its current dividend or stock repurchase policies, the Proposed Amendments
will allow the Company more flexibility in its ability to pay future
dividends on, or make future repurchases of, shares of its Common Stock. As
such, management believes that the overall Exchange Offer will (i) increase
the Company's ability to obtain additional equity financing, and (ii) enhance
the Company's ability to take advantage of certain possible future
acquisitions and/or future stock repurchases should market conditions permit.
At the date of exchange the Company will increase such availability as of
August 31, 1996 from $13,100,000 to $21,900,000.
On December 16, 1996 the Old Debentures were quoted in the over-the-counter
market at 86 bid and 88 asked (expressed as a percentage of the principal
amount). Debentureholders are urged to obtain current market quotations for
their Old Debentures. There is no assurance that an active market in the New
Debentures will develop or that a market will continue for Old Debentures and no
assurance as to the prices at which the New Debentures or Old Debentures may be
traded in the future.
THE EXCHANGE OFFER IS BEING MADE BY THE COMPANY IN RELIANCE ON THE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED, AFFORDED BY SECTION 3(A)(9) THEREOF. THE COMPANY, THEREFORE, WILL NOT
PAY ANY COMMISSION OR OTHER REMUNERATION TO ANY BROKER, DEALER, SALESMAN OR
OTHER PERSON FOR SOLICITING TENDERS OF THE OLD DEBENTURES OR CONSENTS TO THE
PROPOSED AMENDMENTS. REGULAR EMPLOYEES OF THE COMPANY, WHO WILL NOT RECEIVE
ADDITIONAL COMPENSATION THEREFOR, MAY SOLICIT TENDERS AND CONSENTS FROM
DEBENTUREHOLDERS. NEITHER THIS TRANSACTION NOR THE SECURITIES OFFERED HEREBY
HAVE BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF THIS TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Company has no arrangement or understanding with any broker, dealer,
salesman or other person to solicit tenders of Old Debentures or Consents. No
person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained or incorporated by reference in this Offering Circular and, if
given or made, such other information or representations should not be relied
upon as having been authorized by the Company. This Offering Circular does not
constitute an offer to any person in any jurisdiction in which that offer would
be unlawful, and the Company will not accept tenders from Debentureholders in
any jurisdiction in which such acceptance would not be in compliance with the
securities or Blue Sky laws of such jurisdiction. Neither the delivery of
this Offering Circular nor the exchange of New Debentures for Old Debentures
pursuant to the Exchange Offer shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof or that the information herein is correct as of any time
subsequent to the date hereof.
Forum Capital Markets L.P. ("Forum Capital") is acting as Financial Advisor
to the Company in connection with the Exchange Offer, and will be compensated
therefor. For information regarding (i) the relationship of Forum Capital and
certain of its principals to the Company; and (ii) the fees to be paid to, and
indemnification provided for Forum Capital as part of the Exchange Offer, see
"The Exchange Offer - Financial Advisor".
Old Debentures held by officers or directors of the Company who elect to
tender them will be exchanged under the terms of the Exchange Offer on the same
terms and basis as all other Debentureholders.
American National Bank and Trust Company of Chicago (the "Exchange Agent")
has agreed to provide services as Exchange Agent for the Exchange Offer. If
Debentureholders or their agents require assistance with the Exchange Offer or
additional copies of this Offering Circular and/or the Consent and Letter of
Transmittal, please contact the Exchange Agent as set forth at the end of this
Offering Circular by calling Anjali Gottreich or Elizabeth Nelson at phone
number (312) 661-6055 or via fax at (312) 661-6491.
Questions regarding the Exchange Offer generally, as well as requests for
additional copies of the Offering Circular and other information, may also be
directed to William G. Seils, Senior Vice President, General Counsel and
Secretary of the Company, at Richardson Electronics, Ltd., 40W267 Keslinger
Road, LaFox, Illinois 60147, telephone (630) 208-2370.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission can be inspected and
copied (at prescribed rates) at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, and at the following regional offices of the
Commission: 13th Floor, Seven World Trade Center, New York, New York 10048
and Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. Copies of
such material can also be obtained by mail from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, at prescribed prices. Such reports, proxy statements and other
information may also be obtained from the Company, upon oral or written
request of any Debentureholder, at Richardson Electronics, Ltd., 40W267
Keslinger Road, LaFox, Illinois 60147, telephone (630) 208-2370, Attention:
Secretary. The Offering Circular has been included as an exhibit to the
Company's Issuer Tender Offer Statement on Schedule 13E-4 which has been
filed with the Commission pursuant to the Exchange Act. The Company has
also filed with the Commission an application on Form T-1 under the Trust
Indenture Act of 1939, as amended (the "TIA"), which contains additional
information about the New Indenture. Such documents and any amendments thereto
may be examined, and copies may be obtained from the Commission in the manner
set forth above. Copies of the New Indenture and the Old Indenture may also be
obtained from the Company upon request to the Company at its principal executive
offices. The Commission maintains a Web site that contains reports, proxy
statements and other information regarding registrants that file electronically
with the Commission. The address of the Commission's Web site is
http://www.sec.gov.
FORM 10-K, 10-Q AND PROXY STATEMENT
The Company's Annual Report on Form 10-K for its Fiscal Year ended May 31,
1996 (other than exhibits), its Form 10-Q for the quarter ended August 31, 1996
(other than exhibits) and its Proxy Statement for its Annual Meeting of
Stockholders held on October 1, 1996 which accompany this Offering Circular and
are hereby incorporated herein by reference thereto provide recent information
about the Company, its business, financial condition and results of operations,
its stock, the Old Debentures, its officers, directors and affiliates, and
litigation in which it is involved. DEBENTUREHOLDERS ARE URGED TO READ SUCH
ACCOMPANYING DOCUMENTS CAREFULLY, AS IT MAY BE HELPFUL IN DECIDING WHETHER OR
NOT TO EXCHANGE OLD DEBENTURES ON THE TERMS OFFERED HEREIN OR TO CONSENT TO THE
PROPOSED AMENDMENTS. EXHIBITS TO THE COMPANY'S FORMS 10-K AND 10-Q ARE NOT
INCLUDED. THE COMPANY WILL FURNISH TO ANY DEBENTUREHOLDER A COPY OF ANY OF SUCH
EXHIBITS UPON REQUEST MADE TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES AT
THE ADDRESS SET FORTH UNDER "AVAILABLE INFORMATION."
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Offering Circular and prior to
the Expiration Date shall be deemed to be incorporated herein by reference and
to be a part hereof from the respective dates of filing of such documents. Any
statement contained in a document incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Offering Circular to
the extent that a statement contained herein, or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Offering Circular.
SUMMARY
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Offering Circular and the accompanying
financial statements.
The Company
Richardson is a Delaware corporation, which along with its predecessors
has been in business since 1947. The Company operates in one industry as a
specialized, international, value-added distributor of electronic components,
including vacuum tubes, power semiconductors, related electronic components and
components for security systems. These devices are primarily used to control,
switch or amplify electrical power or signals, or as display devices in a
variety of industrial, communication, scientific and other applications. The
Company offers a wide range of value-added services, including among others,
labeling, testing, kitting and repackaging. The Company manufactures certain
of the electron tubes and other components it distributes. The Company's
worldwide customer base of more than 80,000 is served by 60 sales offices,
including 23 outside North America. Richardson's customers include:
industrial users, original equipment manufacturers, repair service
organizations and other distributors. Richardson's principal executive
offices are located at 40W267 Keslinger Road, LaFox, IL 60147 and its
telephone number is (630) 208-2200.
Purpose and Effects of The Exchange Offer
The principal purpose of the Exchange Offer is to improve the Company's
future liquidity and capital position through the Tender Portion of the Exchange
Offer by substantially eliminating the sinking fund payments of $6,225,000
annually under the Old Debentures. The Company believes this will enable it to
redeploy such funds into new and/or existing business areas. As a result of
open market purchases of Old Debentures, the Company has substantially
satisfied its sinking fund obligations until December 15, 1998. To a lesser
extent, while the Company has no present intentions of significantly altering
its current dividend or stock repurchase policies, the Proposed Amendments
will allow the Company more flexibility in its ability to pay future
dividends on, or make future repurchases of shares of its Common Stock. As
such, management believes that the overall Exchange Offer will (i) increase
the Company's ability to obtain additional equity financing and (ii) enhance
the Company's ability to take advantage of certain possible future
acquisitions and/or future stock repurchases should market conditions
permit. At the date of exchange the Company will increase such
availability as of August 31, 1996 from $13,100,000 to $21,900,000.
Registered holders of Old Debentures who validly tender in the Exchange
Offer and receive New Debentures will be consenting to the Proposed Amendments,
and will benefit from certain provisions of the New Debentures, including (1) an
increase in the interest rate to 8-1/4% from 7-1/4% per annum, and (2) a
reduction in the conversion price from $21.14 per share to $18.00 per share.
In addition, the New Debentures will rank senior in right of payment to,
and will mature prior to, the Old Debentures.
See "Purpose and Effects of the Tender Portion of the Exchange Offer and
the Proposed Amendments."
For a summary of the consequences to the holders of Old Debentures who do
not exchange their Old Debentures in the Exchange Offer, see "Summary - Certain
Consequences to Non-Exchanging Holders."
Market for the New Debentures
Prior to the Exchange Offer, there has been no public market for the New
Debentures and the New Debentures will not be listed on any national securities
exchange. The Company has been advised by Forum Capital that it intends to make
a market in both the New Debentures and the Old Debentures; however, there can
be no assurance as to the extent to which a trading market, if any, will develop
for the New Debentures and/or continue for the Old Debentures.
The Exchange Offer
The Tender Portion For each $1,000 principal amount of Old
Debentures properly tendered and accepted for
exchange, the exchanging holder will receive
$1,000 principal amount of New Debentures.
The Consents Registered holders of Old Debentures who tender
in the Exchange Offer and such holders who
separately execute the Consent are consenting to
an amendment to the Old Indenture which would (i)
modify the covenant limiting distributions and
dividends by increasing the amount available to
the Company for such purpose as of August 31,
1996 from $13,100,000 to $21,900,000, and (ii)
modify the covenant providing for an Event of
Default if a default occurs under other
Indebtedness by increasing the amount of such
other Indebtedness in default which would be a
cause for an Event of Default under the Old
Debentures from $1,000,000 to $5,000,000. If a
majority or more in principal amount of the
outstanding Old Debentures are accepted for
exchange in the Exchange Offer or Consent to the
Proposed Amendments, the Proposed Amendments will
become effective.
Expiration Date The Exchange Offer expires at 12:00 Midnight, New
York City time, on January 31, 1997, unless
extended by the Company. The date of such
expiration, as such may be extended pursuant to
the procedures described herein and is referred
to herein as the "Expiration Date."
Holders Entitled to Participate Debentureholders who wish to tender Old
Debentures for exchange must deliver
certificates for the Old Debentures and
thus there is no record date. Any
Debentureholder wishing only to consent to
the Proposed Amendments may do so by
executing and delivering a Consent and that
Debentureholder or any subsequent holder of
those Old Debentures may withdraw the
Consent at any time prior to the Company
certifying to the Trustee that the
Requisite Consents have been received. See
"The Exchange Offer."
Withdrawal Rights Old Debentures tendered in the Exchange Offer may be
withdrawn at any time prior to the Expiration Date, and
unless previously accepted for exchange by the Company
pursuant to the Exchange Offer, also may be withdrawn
at any time after February 28, 1997. Consents may be
revoked at any time prior to the date the Company
certifies to the Trustee that the Requisite Consents
have been received.
Conditions of the Tender Portion The Company's obligation to complete the
Tender Portion of the Exchange Offer is
subject to: (i) Old Debentures representing
not less than $25,000,000 in aggregate
outstanding principal amount of the Old
Debentures being validly tendered and not
withdrawn prior to the Expiration Date (the
"Minimum Condition"), and (ii) certain
other customary conditions. Any of the
foregoing conditions may be waived by the
Company.
Conditions to the Consents Consents to the adoption of the Proposed
Amendments are required to be received from a
majority in principal amount of the outstanding
Old Debentures to permit the Company to effect
the Proposed Amendments. If such Consents are
received the Company will proceed with the
Proposed Amendments whether or not the conditions
to the Tender Portion of the Exchange Offer are
satisfied or it is completed.
Procedures for Tendering
Old Debentures and Consenting Debentureholders electing to accept the Exchange
Offer or to Consent to the Proposed Amendments
must complete, sign, date and deliver the
accompanying Consent and Letter of Transmittal
(the "Letter of Transmittal") to the Exchange
Agent in accordance with the instructions
contained therein. Debentureholders who accept
the Exchange Offer must Consent to the adoption
of the Proposed Amendments. If the Consent
portion of the Letter of Transmittal is not
completed but the Letter of Transmittal is
otherwise completed, signed and dated, the
tendering Debentureholder will be deemed to have
consented to the Proposed Amendments as of the
Expiration Date. Debentureholders who do not
accept the Exchange Offer may Consent to the
Proposed Amendments. Tenders of Old Debentures
with respect to the Exchange Offer will be
accepted only in principal amounts of $1,000 and
integral multiples thereof. Only registered
holders of Old Debentures can effectively Consent
to the Proposed Amendments. HOLDERS OF OLD
DEBENTURES REGISTERED IN THE NAME OF A BROKER,
DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE
ARE URGED TO CONTACT SUCH REGISTERED HOLDER
PROMPTLY IF SUCH HOLDER DESIRES TO TENDER OLD
DEBENTURES. Certain financial institutions may
also effect tenders by book-entry delivery.
LETTERS OF TRANSMITTAL AND OLD DEBENTURES SHOULD
NOT BE SENT TO THE COMPANY.
Delivery of New Debentures Upon satisfaction or waiver of the conditions to
the Exchange Offer, the Company will accept all
Old Debentures up to an aggregate of $40,000,000
in principal amount (or such additional amount,
if any, which the Company determines, in its sole
discretion, to accept) properly tendered and will
issue the New Debentures promptly following
acceptance for exchange of the Old Debentures.
If fewer than all of the Old Debentures tendered
for exchange are to be accepted by the Company,
the Company will accept the Old Debentures
tendered up to the amount to be accepted on a
pro-rata basis.
Certain Tax Considerations The Company believes that the exchange of Old
Debentures for New Debentures will not be a
taxable transaction for federal income tax
purposes. However, if the New Debentures are
issued with original issue discount, a holder of
New Debentures will have gross income in the
amount of original issue discount accrued
thereon. Holders of Old Debentures should read
carefully "Certain Federal Income Tax
Considerations" and are urged to consult their
own tax advisors.
Certain Consequences to
Non-Exchanging Holders The completion of the Exchange Offer will have
significant adverse consequences for non-
exchanging holders of the Old Debentures. The
interest rate on the Old Debentures is 1% less
than on the New Debentures, the conversion price
is $21.14 per share compared to $18.00 per share
for the New Debentures and the New Debentures
mature prior to the Old Debentures. The New
Debentures will also rank senior in right of
payment to the Old Debentures. Accordingly,
holders of New Debentures will have claims in
bankruptcy or liquidation of the Company prior to
those of the holders of unexchanged Old
Debentures, which would in all likelihood reduce
the amounts realizable on Old Debentureholders'
claims in the event of bankruptcy.
Along with the aforementioned factors, the reduced
amount of outstanding Old Debentures as a
result of consummation of the Exchange Offer
may adversely affect the trading market,
liquidity and market price of the Old
Debentures. In addition, application of Old
Debentures accepted for exchange to fulfill
sinking fund obligations will extend the
average life of the unexchanged Old Debentures.
Accordingly, if the Exchange Offer is
consummated for in excess of $50,075,000
aggregate principal amount of Old
Debentures, the Company would not be obligated
to make any sinking fund payments on the Old
Debentures prior to their final maturity in 2006.
Interest The New Debentures will bear interest at the rate
of 8-1/4% from the date of exchange. Holders of
Old Debentures accepted for exchange in the
Exchange Offer will receive accrued interest on
such Old Debentures from December 15, 1996 to the
date of exchange at the stated 7-1/4% interest
rate. See "The Exchange Offer - Acceptance of
Old Debentures for Exchange; Delivery of New
Debentures."
Future Purchases of
Old Debentures Although the Company has no current plan or
intention to do so, it reserves the right in its
sole discretion to purchase or make offers for
any Old Debentures that remain outstanding
subsequent to the Expiration Date, or as set
forth under "The Exchange Offer - Conditions of
the Exchange Offer," to terminate the Exchange
Offer and, to the extent permitted by applicable
law, purchase Old Debentures in the open market,
in privately negotiated transactions or
otherwise.
Exchange Agent American National Bank and Trust Company of
Chicago is serving as Exchange Agent in
connection with the Exchange Offer. For
additional copies of the offering circular or
letter of transmittal please contact the exchange
agent at American National Bank and Trust
Company of Chicago, 33 North LaSalle Street, 13th
Floor, Chicago, Illinois 60690, Attn: Anjali
Gottreich or Elizabeth Nelson or by telephone at
(312) 661-6055.
Further Information For further information, contact the Company at
(630) 208-2370, Attention: William G. Seils.
The New Debentures
Interest Payments; Accrued Interest Cash interest on the New Debentures
will accrue from the date of exchange
at the rate of 8-1/4% per annum, and
will be payable semi-annually on each
June 15 and December 15, commencing
June 15, 1997. Holders of Old
Debentures accepted for exchange in
the Exchange Offer will receive
accrued interest on such Old
Debentures from December 15, 1996 to
the date of exchange at the stated
7-1/4% interest rate.
Mandatory Sinking Fund None.
Optional Redemption The Company has the option to redeem the
New Debentures, in whole or in part, at any
time at 100% of principal amount, plus
accrued interest to the date of redemption.
Subordination The New Debentures are subordinated in
right of payment to all existing and future
Senior Indebtedness (as defined in the New
Indenture). The New Indentures will rank
senior in right of payment to the Old
Debentures.
Conversion Convertible into Common Stock at $18.00 per
share at any time prior to maturity or
earlier redemption, subject to adjustment
under certain conditions.
Common Stock The Common Stock is traded on the Nasdaq
National Market under the symbol "RELL."
Comparison of New Debentures and Old Debentures
The following table compares the principal features of the New Debentures
and the Old Debentures. Such comparison is a summary which does not purport to
be complete and is qualified in its entirety by reference to the New Debentures,
the New Indenture, the Old Debentures and the Old Indenture. For further
details, see "Description of the New Debentures" and "Description of the Old
Debentures." Terms not otherwise defined herein have the meaning set forth in
the applicable indenture.
NEW DEBENTURES OLD DEBENTURES
Aggregate Principal Amount $25,000,000 to $70,825,000 (other than
$40,000,000. those held by Company).
Maturity June 15, 2006. December 15, 2006.
Interest Rate 8-1/4% per annum, 7-1/4% per annum.
retroactive to the
date of exchange.
Trustee American National First Trust of Illinois,
Bank and Trust National Association.
Company of Chicago.
Conversion Price $18.00 per share, $21.14 per share,
subject to certain subject to certain
adjustments after adjustments.
issuance.
Interest Payment Dates June 15, December 15. June 15, December 15.
Optional Redemption At any time at 100% At any time at 100% of
of principal amount principal amount plus
plus accrued interest. accrued interest.
Sinking Fund Provisions None. On each December 15
commencing December 15,
1996 through and
including December 15,
2005, the Company must
deposit with the Trustee
cash or Old Debentures
equal in amount to
$6,225,000. SEE
"CERTAIN CONSEQUENCES
TO NON-EXCHANGING
HOLDERS OF OLD
DEBENTURES."
Sinking Fund Timing N/A Based upon open market
purchases of Old
Debentures, the Company
has substantially
satisfied its sinking
fund obligations until
December 15, 1998.
Ranking The New Debentures The Old Debentures are
will be unsecured unsecured obligations
obligations of the of the Company,
Company, subordinated subordinated to all Senior
to all Senior indebtedness (as defined
Indebtedness (as in the Old Indenture,
defined in the New including, without
Indenture) of the limitation, the New
Company. The New Debentures) of the Company.
Debentures will rank As of December 16, 1996
senior in right of the aggregate amount of
payment to the Old such Senior Indebtedness
Debentures. As of was $31,000,000. If the
December 16, 1996 Exchange Offer is
the aggregate amount consummated, Senior
of Senior Indebtedness Indebtedness will
was $31,000,000. increase by the
aggregate principal
amount of New Debentures
issued in exchange for
Old Debentures.
Limitations on Future
Indebtedness None. None.
Dividend and Stock
Purchase
Restrictions May not exceed the May not exceed the sum
sum of (a) cumulative of (a) cumulative net
net income earned after income earned after
May 31, 1996, (b) net May 31, 1986, (b) net
proceeds of the sale proceeds of the sale or
or issuance of stock issuance of stock of the
of the Company after Company after May 31,
May 31, 1996, plus (c) 1986, plus (c)
$20,000,000. As of the $5,000,000. At August
date of exchange the 31, 1996 the Company
amount available as of had $13,100,000
August 31, 1996 will available under such
increase to $21,900,000 test. THE PROPOSED
from $13,100,000. AMENDMENTS WOULD MODIFY
THIS RESTRICTION TO BE
THE SAME AS THE NEW
DEBENTURES.
Events of Default Non-payment of Non-payment of principal
principal when due, when due, certain voluntary
certain voluntary acts acts in connection with
in connection with bankruptcy, and after the
bankruptcy, and after passage of time or notice
the passage of time or both upon the occurrence
or notice or both upon of certain other events,
the occurrence of including, without
certain other events, limitation, non-payment
including, without of interest, non-
limitation, non- compliance with Company's
payment of interest, other obligations under
non-compliance with the New Debentures or New
Company's other Indenture, certain
obligations under involuntary acts in
the New Debentures connection with bankruptcy,
or New Indenture, and default on other
certain involuntary Indebtedness in excess
acts in connection of $1,000,000. THE
with bankruptcy, and PROPOSED AMENDMENTS
default on other WOULD MODIFY THIS
Indebtedness in RESTRICTION TO BE THE
excess of $5,000,000. SAME AS THE NEW
DEBENTURES.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial data for the Company
presented below under the captions "Statement of Operations Data" and "Balance
Sheet Data" for and as of the end of each of the three years ended May 31, 1996
are derived from the audited consolidated financial statements of the Company.
The data that is presented for and as of the end of each of the three months
ended August 31, 1996 and 1995 is unaudited; however, in the opinion of
management, such data includes all adjustments (which were of a normal recurring
nature) necessary for a fair presentation of the information set forth therein.
This data should be read in conjunction with the Company's consolidated
financial statements and the related notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations,
which are set forth in the Company's Forms 10-K and 10-Q, each of which
accompany this Offering Circular. Except for the historical information
contained therein and herein, the matters discussed therein are forward-
looking statements relating to future events which involve certain risks and
uncertainties, including those identified therein and herein.
THREE MONTHS ENDED
AUGUST 31 YEARS ENDED MAY 31
<TABLE>
1996 1995 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales $57,544 $57,201 $239,667 $208,118 $172,094
Income before extraordinary
item $ 1,293 $ 1,730 $ 8,111 $ 2,481 $(19,809)
Extraordinary gain on bonds,
net of tax -- -- -- 527 --
_______ _______ ________ ________ _________
Net income $ 1,293 $ 1,730 $ 8,111 $ 3,008 $(19,809)
======= ======= ======== ======== =========
Net income per share:
Income before extraordinary
item $ .11 $ .15 $ .68 $ .21 $ (1.75)
Extraordinary gain on bonds,
net of tax -- -- -- .05 --
_______ _______ ________ ________ _________
Net income $ .11 $ .15 $ .68 $ .26 $ (1.75)
======= ======= ======== ======== =========
Average shares outstanding 12,209 11,710 12,002 11,566 11,299
======= ======= ======== ======== =========
</TABLE>
Note: 1995 results include an after tax charge of $2.3 million, or $.20 per
share, for settlement of a claim related to a 1989 contract. 1994 results
include a provision of $19.5 million, after tax, or $1.73 per share, for the
phase down of the Company's manufacturing operations.
OTHER FINANCIAL DATA
The ratio of earnings to fixed charges for the three months ended August
31, 1996 and 1995, and the years ended May 31, 1996 and 1995 and as adjusted to
give effect to the exchange of Old Debentures for New Debentures in the Exchange
Offer (assuming the maximum amount of the Old Debentures are tendered as of the
beginning of each of the periods presented), are set forth below:
THREE MONTHS ENDED
AUGUST 31 YEARS ENDED MAY 31
1996 1995 1996 1995 1994
Ratio of earnings to
fixed charges
Historical 2.07 2.77 2.81 1.41 N.A.
Proforma 1.96 2.60 2.65 1.32 N.A.
"Ratio of earnings to fixed charges" is based on income before interest expense,
taxes and extraordinary item divided by interest expense. Proforma calculations
assume $40.0 million of the 7.25% convertible debentures were exchanged for the
8.25% convertible debentures in each of the respective periods presented.
CURRENT DEVELOPMENTS
On November 7, 1996 the Company engaged Bruce W. Johnson, age 55, as its
President and Chief Operating Officer and elected him as an additional member of
the Board of Directors. Before joining the Company, Mr. Johnson was President
of Premier Industrial Corporation, a New York Stock Exchange listed company,
which 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 manufacturer of
high-performance fire-fighting equipment, and also served as Chief Operating
Officer of its Electronics Group, holding those positions from January 1992
through January 1996, and for more than five years prior thereto was Executive
Vice President of Premier Industrial Corporation. Premier was acquired by
Farnell Ltd. in April 1996. Pursuant to an employment agreement entered into as
of November 7, 1996 Mr. Johnson will be receiving a base salary of $300,000 per
annum with an opportunity for bonus of 50% of his base compensation, if the
corporation meets its goal earnings per share for the year with a pro-rata
portion of such amount paid for earnings per share between the prior year's
earnings per share and the current year's goal and no bonus if earnings per
share are less than the prior years earnings per share. Should earnings per
share exceed the goal, Mr. Johnson will receive additional bonus compensation
on a pro-rata basis without any limit as to the total amount of bonus that
could be earned. 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. Mr. Johnson was also granted a stock option under the
Employees 1996 Incentive Compensation Plan for 50,000 shares at an exercise
price of $7 per share which will vest at the rate of 20% per year over the
next 5 years and in the event there is a termination of his agreement in
connection with a change of control during that 5 year period will become
100% vested. Mr. Johnson has no other shares of Common Stock or Class B
Common Stock of the corporation.
LITIGATION
No material developments have occurred in the matter of Panache Broadcasting of
Pennsylvania, Inc. et al., Plaintiff, v. Richardson Electronics, Ltd., and
Varian Associates, Inc., in their own rights and as successors in interest to
Varian Supply Co., a joint venture, Defendants, Case No. 90C6400 (United States
District Court, Northern District of Illinois) originally served on the Company
on June 18, 1990. The complaint purports to be a class action on behalf of all
persons and businesses in the United States "who purchased electron power
tubes from one or more of the defendant corporations at any time during the
period from February 26, 1986 to the present," i.e., since the formation of
the VASCO joint venture with Varian Associates, Inc. The complaint alleged
restraints of trade in violation of Sherman Act Sec. 1, efforts to monopolize
the alleged market for electron power tubes in violation of Sherman Act Sec.
2, and acquisitions the effect of which is to substantially lessen
competition in violation of Clayton Act Sec. 7. The complaint sought treble
damages, injunctive relief, and attorneys fees. The Company filed an answer
denying the material allegations. The case is now pending before U.S.
District Judge John A. Nordberg and Magistrate Judge Rebecca R. Pallmeyer and
remains primarily in the preliminary discovery stage. Magistrate Pallmeyer
submitted a Report and Recommendation to Judge Nordberg on September 27, 1995
recommending that the Judge grant in part, and deny in part, plaintiff's
motion for class certification. Objections to the report were filed and
Judge Nordberg has not yet ruled on class certification.
In May, 1995, the Company reached an agreement with the U.S. Department of
Justice (DOJ) regarding a claim that the Company was civilly liable for damages
and penalties under the False Claims Act and the Lanham Act in connection with
a 1989 Department of Defense contract for night-vision tubes. The Company paid
$4,700,000 to the Government in return for a release from the Government of all
civil and criminal claims in connection with the contract. 1995 financial
results include an after tax charge of $2.3 million, or $.20 per share, with
respect to this settlement. The Government has not sought any administrative
remedies in connection with such matter and the Company cannot predict whether
or not further action will be taken or the financial impact, if any, of any such
action.
CERTAIN CONSIDERATIONS FOR NONEXCHANGING DEBENTUREHOLDERS
The consummation of the Exchange Offer and the adoption of the Proposed
Amendments may have certain adverse consequences to nonexchanging
Debentureholders which should be considered carefully.
If the Proposed Amendments become effective, each nonexchanging
Debentureholder will be bound by such amendments, whether or not such
Debentureholder consented to the Proposed Amendments.
Exchanged Old Debentures will be used to satisfy future mandatory
redemption requirements, in order of scheduled maturity. Therefore, to the
extent Old Debentures are tendered and accepted in the Exchange Offer the
Company's obligation to satisfy future sinking fund payments by redeeming or
repurchasing Old Debentures for cash will be met with such exchanged Old
Debentures. This will lengthen the average life of the Old Debentures that are
not exchanged; and, if $50,075,000 principal amount or more of outstanding Old
Debentures are tendered and accepted in the Exchange Offer, the Company's
sinking fund obligation will be eliminated entirely and the Old Debentures
that are not exchanged will not be payable until December 15, 2006.
The Old Debentures will not receive the higher rate of interest that the
New Debentures will bear and will not receive the benefits of the shorter
maturity of the New Debentures. The Company will continue to pay interest on
any Old Debentures not tendered and accepted for exchange in the Exchange
Offer at the 7-1/4% interest rate.
The Old Debentures will not receive the benefit of being convertible into
Common Stock of the Company at the reduced conversion price provided in the New
Debentures.
Depending upon the amount of Old Debentures tendered and accepted by the
Company in the Exchange Offer, trading volume in the Old Debentures may be
significantly reduced which may adversely affect the liquidity and future market
value of the Old Debentures.
The New Debentures will rank senior in right of payment to the Old
Debentures. Accordingly, holders of New Debentures will have claims in
bankruptcy or liquidation of the Company prior to those of the holders of
unexchanged Old Debentures. This situation could have an adverse impact on the
market price of Old Debentures and would in all likelihood reduce the amounts
realizable on such holders' claims in the event of bankruptcy.
See "Purpose and Effects of the Tender Portion of the Exchange Offer and
the Proposed Amendments."
PRICE RANGES OF THE OLD DEBENTURES AND THE COMMON STOCK
Old Debentures
The Old Debentures are traded in the over-the-counter market. The trading
volume of the Old Debentures has been very limited. The following table sets
forth the quarterly high and low average prices for the Old Debentures
(expressed as a percentage of principal amount) for the indicated periods, as
supplied by Forum Capital. The prices below do not necessarily reflect
actual transactions and do not take into account all trading activities in
the Old Debentures. On December 16, 1996 the Old Debentures were quoted in
the over-the-counter market at 86 bid and 88 asked (expressed as a percentage
of the principal amount). Debentureholders are strongly urged to obtain
current market quotations for their Old Debentures.
High Low
Fiscal Year Ended May 31, 1996
First Quarter 83 74
Second Quarter 91 78
Third Quarter 88 85
Fourth Quarter 88 83
Fiscal Year Ending May 31, 1997
First Quarter 87 84
Second Quarter 88 84
Third Quarter
(through December 16, 1996) 88 86
Common Stock
The Company's stock is traded on the Nasdaq National Market under the
symbol RELL. The number of registered stockholders of Common Stock and Class B
Common Stock at May 31, 1996 was 707 and 37, respectively. The quarterly market
price ranges of the Company's Common Stock were as follows:
High Low
Fiscal Year Ended May 31, 1996
First Quarter 9 7
Second Quarter 11-3/4 6-7/8
Third Quarter 11-1/4 9
Fourth Quarter 11-7/8 9-3/4
Fiscal Year Ending May 31, 1997
First Quarter 10-1/2 8-1/8
Second Quarter 10 7
Third Quarter
(through December 16, 1996) 9-3/4 8-1/2
On December 16, 1996 the last sale price of the Common Stock was $9.00 per
share. Debentureholders of the Company are strongly urged to obtain a current
market quotation for the Common Stock.
The Company has paid a dividend on its Common Stock of $.04 per share and
on its Class B Common Stock of $.036 per share for the last 34 consecutive
quarters. Annual dividend payments approximate $1,800,000. The policy
regarding payment of dividends is reviewed periodically by the Board of
Directors in light of the Company's operating needs and capital structure.
Any determination as to the payment of dividends will depend upon future
earnings, results of operations, capital requirements, the financial
condition of the Company and such other factors as the Board of Directors of
the Company may consider. In addition, the Old Indenture contains, and the
New Indenture will contain, a covenant restricting payments of dividends by
the Company. As of August 31, 1996, the latest calculation date, the Company
had $13,100,000 available for dividends under such formula. See "Description
of the New Debentures - Limitations on Dividends and Stock Purchases";
"Description of the Old Debentures - Limitations on Dividends and Stock
Purchases"; and "Proposed Amendments to the Old Indenture."
PURPOSE AND EFFECTS OF THE TENDER PORTION OF THE EXCHANGE
OFFER AND THE PROPOSED AMENDMENTS
The principal purposes of the Exchange Offer are to (i) enhance the ability
of the Company to finance its operations, including its expansion through future
acquisition opportunities as well as providing increased working capital for
current operations, and (ii) increase the Company's ability to obtain additional
financing. To a lesser extent, while the Company has no present intentions of
significantly altering its current dividend or stock repurchase policies, the
Proposed Amendments will allow the Company more flexibility in its ability to
pay future dividends on, or make future repurchases of shares of its Common
Stock. As such, management believes that the overall Exchange Offer will (i)
increase the Company's ability to obtain additional equity financing and (ii)
enhance the Company's ability to take advantage of certain possible future
acquisitions and/or future stock repurchases should market conditions permit.
At the date of exchange the Company will increase such availability as of
August 31, 1996, from $13,100,000 to $21,900,000.
The Tender Portion
The Old Indenture provides that the Company will deposit with the Trustee,
prior to December 15 in each year, commencing in the year 1996 and ending with
the year 2005, cash or Old Debentures sufficient to redeem 7.5% of the aggregate
principal amount of the Old Debentures originally issued (which amounts to
$6,225,000), plus interest accrued to the date of redemption. Old Debentures
accepted for exchange pursuant to the Exchange Offer will be utilized to fulfill
sinking fund obligations under the Old Indenture, which, assuming $40,000,000 of
Old Debentures are exchanged, will extend the average life of the unexchanged
Old Debentures. Accordingly, if the Exchange Offer is consummated and assuming
$40,000,000 of Old Debentures are exchanged, the Company would not be obligated
to make any material sinking fund payments on the Old Debentures prior to
December 15, 2004. This will provide increased working capital to the Company
during such period. Further, the Company believes that this would also
increase its ability to obtain additional financing.
Registered holders of Old Debentures who validly tender in the Exchange
Offer and receive New Debentures will be consenting to the Proposed Amendments
and will benefit from an increase in the interest rate to 8-1/4% from 7-1/4% per
annum and a reduction in the conversion price from $21.14 per share to $18.00
per share. In addition, the New Debentures will rank senior in right of
payment to, and will mature prior to, the Old Debentures.
If the Proposed Amendments are adopted, the Company will have a larger
amount available to pay dividends on, or repurchase or redeem, shares of its
capital stock, which the Company believes will also increase its ability to
obtain additional equity financing.
For a statement of certain of the consequences to the holders of Old
Debentures who do not exchange their Old Debentures in the Exchange Offer, see
"Summary - Certain Consequences to Non-Exchanging Holders of Old Debentures" and
"Certain Considerations for Nonexchanging Debentureholders."
See "Proposed Amendments to the Old Indenture" below.
Proposed Amendments to the Old Indenture
The discussion below is qualified in its entirety by reference to the Old
Indenture and the New Indenture. Capitalized terms used and not otherwise
defined herein have the meanings given them in the Old Indenture. The Company
will furnish to any Debentureholder a copy of any of the Old Indenture, the New
Indenture or the Amendment to the Old Indenture pursuant to which the Proposed
Amendments will be effected upon request made to the Company at its principal
executive offices at the address set forth under "Available Information."
The Proposed Amendments to the Old Indenture would:
1. Amend the Limitation on Dividends and Stock Purchases covenant to
increase the amount available for the payment of dividends, distributions,
purchases, redemption, or other acquisition or retirements, of or on its capital
stock or to its shareholders to the sum of (a) cumulative net income earned
after May 31, 1996, (b) net proceeds of the sale or issuance of stock of the
Company after May 31, 1996, plus (c) $20,000,000. At the date of exchange
this would increase the amount available as of August 31, 1996 from
$13,100,000 to $21,900,000.
2. Amend the Events of Default to provide for an event of default under
Indebtedness (as defined in the Old Debenture) in excess of $5,000,000 rather
than $1,000,000 (as presently provided) to be a cause for declaration of an
Event of Default under the Old Indenture.
THE EXCHANGE OFFER
Terms of the Exchange Offer
Upon the terms and subject to the conditions of the Exchange Offer
(including, if the Exchange Offer is amended or extended, the terms and
conditions of any extension or amendment), the Company will accept for exchange,
and will issue New Debentures in exchange for, Old Debentures of not less than
$25,000,000 and not more than $40,000,000 in aggregate principal amount (such
amounts being subject to increase or reduction at the discretion of the Company)
properly tendered under the Exchange Offer prior to the Expiration Date (and not
properly withdrawn) promptly after the later to occur of (i) the Expiration Date
and (ii) the satisfaction or waiver of the conditions set forth under
"Conditions of the Exchange Offer." Subject to applicable rules of the
Commission, the Company expressly reserves the right, in its discretion, to
delay acceptance for exchange of, or exchange for, Old Debentures pending
receipt of any regulatory approvals specified under "Conditions of the
Exchange Offer." For purposes of the Exchange Offer, the Company shall be
deemed to have accepted properly tendered Old Debentures when, as and if the
Company has given oral or written notice to the Exchange Agent. The Exchange
Agent will act as agent for the tendering holders of Old Debentures for the
purpose of receiving the New Debentures from the Company and transmitting the
New Debentures to each exchanging holder of Old Debentures.
The Exchange Offer is conditioned upon, among other things, satisfaction
of the Minimum Condition. The Exchange Offer is also subject to certain other
conditions set forth below under "Conditions of the Exchange Offer." If these
or any of the other conditions referred to as "Conditions of the Exchange
Offer" are not satisfied, or any events specified in "Conditions of the
Exchange Offer" have occurred or are determined by the Company to have
occurred prior to the Expiration Date, the Company reserves the right (but is
not obligated) to (i) decline to exchange any of the Old Debentures tendered
in the Exchange Offer and terminate the Exchange Offer, and return all
tendered Old Debentures to the tendering holders, or (ii) waive or amend any
or all conditions to the Exchange Offer, to the extent permitted by
applicable law, and, subject to complying with applicable rules and
regulations of the Commission, exchange Old Debentures validly tendered
subject to any remaining, amended or new terms and limitations
of the Exchange Offer.
If the Company makes a material change in the terms of the Exchange Offer
or the information concerning the Exchange Offer, or if it waives a material
condition of the Exchange Offer, the Company will extend the Exchange Offer to
the extent required by Rules 13e-4(e)(2), 13e-4(f)(1)(ii) and 14e-1 under the
Exchange Act.
Holders of Old Debentures who desire to tender their Old Debentures will
be required to Consent to the Proposed Amendments. REVOCATIONS OF CONSENTS TO
THE PROPOSED AMENDMENTS BY HOLDERS WHO HAVE TENDERED THEIR OLD DEBENTURES FOR
EXCHANGE MAY ONLY BE EFFECTED BY SUCH HOLDERS BY A PROPER REVOCATION OF CONSENT
AND WITHDRAWAL OF THE OLD DEBENTURES TO WHICH SUCH REVOCATIONS PERTAIN AS
DESCRIBED BELOW IN "WITHDRAWAL RIGHTS AND REVOCATION OF CONSENTS." SUCH
WITHDRAWAL WILL EXCLUDE THE WITHDRAWN OLD DEBENTURES FROM THE EXCHANGE OFFER.
ONLY REGISTERED HOLDERS OF OLD DEBENTURES CAN EFFECTIVELY CONSENT TO THE
PROPOSED AMENDMENTS. HOLDERS OF OLD DEBENTURES REGISTERED IN THE NAME OF A
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE ARE URGED TO CONTACT
SUCH REGISTERED HOLDER PROMPTLY IF SUCH HOLDER DESIRES TO TENDER OLD DEBENTURES.
As of December 16, 1996, $70,825,000 aggregate principal amount of the Old
Debentures was outstanding (excluding $12,175,000 principal amount of Old
Debentures acquired by the Company and held in treasury) and there were
approximately 23 registered holders. This Offering Circular, together with the
Letter of Transmittal, is being sent to all such registered holders as of
December 18, 1996.
Although the Company has no current intention to do so, it reserves the
right in its sole discretion to purchase or make offers for any Old Debentures
that remain outstanding subsequent to the Expiration Date or, as set forth under
"Conditions of the Exchange Offer," to terminate the Exchange Offer and, to the
extent permitted by applicable law, purchase Old Debentures in the open market,
in privately negotiated transactions or otherwise. Following consummation of
the Exchange Offer, the terms of any such purchases or offers could differ from
the terms of the Exchange Offer.
Tendering holders of Old Debentures will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Old Debentures
pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes, in connection with the
Exchange Offer. See "Payment of Expenses" below.
Expiration Date; Extensions; Termination; Amendments
The Exchange Offer will expire at 12:00 Midnight, New York City time, on
January 31, 1997, subject to extension by the Company by notice to the Exchange
Agent, as herein provided. The Company reserves the right to so extend the
Exchange Offer at its sole discretion, in which event the term "Expiration Date"
shall mean the time and date on which the Exchange Offer as so extended shall
expire. The Company shall notify the Exchange Agent of any extension by oral or
written notice and shall make a public announcement thereof, each prior to 9:00
A.M., New York City time, on the next business day after the previously
scheduled Expiration Date.
The Company expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend for any reason the period of time during
which the Exchange Offer is open, including the occurrence of any of the events
specified under "Conditions of the Exchange Offer," by giving oral or written
notice of such extension to the Exchange Agent. During any such extensions, all
Old Debentures previously tendered and not withdrawn will remain subject to the
Exchange Offer, subject to the rights of a tendering holder to withdraw its Old
Debentures.
Subject to the applicable regulations of the Commission, the Company also
expressly reserves the right, in its sole discretion, at any time and from time
to time, by giving oral or written notice thereof of such amendment to the
Exchange Agent and by making a public announcement thereof, to (i) delay
acceptance for exchange of or exchange for (regardless of whether such Old
Debentures were previously accepted for exchange), any Old Debentures pending
receipt of any regulatory approval described in this Offering Circular or to
comply with any other applicable law; (ii) terminate the Exchange Offer and
refuse to accept for exchange any Old Debentures and return all tendered Old
Debentures to tendering holders thereof, if any of the events set forth below
under "Conditions of the Exchange Offer" shall have occurred and shall not have
been validly waived by the Company, (iii) extend the Exchange Offer and retain
all tendered Old Debentures until the Expiration Date, subject, however, to all
withdrawal rights of the holders, see "Withdrawal Rights and Revocation of
Consents," (iv) waive or modify certain unsatisfied conditions with respect to
the Exchange Offer (other than the receipt of an order of the Commission
pursuant to the TIA, which cannot be waived) and accept all properly tendered
Old Debentures; or (v) amend the terms of the Exchange Offer in any respect,
including, without limitation, the removal of the Minimum Condition or to
increase the maximum amount of Old Debentures which will be accepted for
exchange.
The Company acknowledges that (i) Rule 13e-4(f)(5) under the Exchange Act
requires the Company to pay the consideration offered or return the Old
Debentures tendered promptly after the termination or withdrawal of the Exchange
Offer, and (ii) the Company may not delay acceptance for exchange of, or
exchange for (except as provided in clause (i) of the first sentence of the
preceding paragraph) any Old Debentures upon the occurrence of any of the
conditions specified under "Conditions of the Exchange Offer" without
extending the period of time during which the Exchange Offer is open.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, with such
announcement in the case of an extension to be made no later than 9:00 A.M., New
York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 13e-4(e)(2),
13e-4(f)(1)(ii) and 14e-1 under the Exchange Act, which require that material
changes be promptly disseminated to holders in a manner reasonably designed
to inform them of such changes) and without limiting the manner in which the
Company may choose to make any public announcement, the Company shall have
no obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a press release to the Dow Jones News
Service.
Solicitation of Consents; Consent Procedure
Holders of Old Debentures who wish to tender under the Exchange Offer must
Consent to the adoption of the Proposed Amendments to the Old Indenture.
Debentureholders who elect to Consent to such Proposed Amendments, whether or
not they tender Old Debentures pursuant to the Exchange Offer, should so
indicate by marking the appropriate box on, and signing and dating the
Consent portion of, the Letter of Transmittal and mailing or delivering the
same to the Exchange Agent in accordance with the instructions contained
therein. If the Consent portion of the Letter of Transmittal is not
appropriately checked but the Letter of Transmittal is otherwise completed,
signed and dated, the tendering holder will be deemed to have consented to
the Proposed Amendments.
Only a registered holder of Old Debentures (or such holder's legal
representative or attorney-in-fact) may execute a Letter of Transmittal.
However, pursuant to the terms of the Old Indenture, the transfer of Old
Debentures will not have the effect of revoking any Consent theretofore given by
the holder of such Old Debentures and such Consent will remain valid unless
revoked prior to delivery to the Trustee by the Company of certification that
Consents duly executed by holders of a majority in aggregate principal amount of
the outstanding Old Debentures have been received. Alternatively, such Letter
of Transmittal or Notice of Guaranteed Delivery must be accompanied by an
appropriate power of attorney, in a form satisfactory to the Company, in its
sole discretion, duly executed by the registered holder with the signature
guaranteed by an Eligible Institution (as defined below) confirming the
transfer of the Old Debentures or the right of the present holder to execute
the form of Consent.
Upon receipt of the Requisite Consents from Debentureholders, the Company
will certify in writing to the Trustee that holders of a majority in aggregate
principal amount of the outstanding Old Debentures have consented to the
adoption of the Proposed Amendments. Upon receipt of such certification, all
Consents to the Proposed Amendments theretofore received will be irrevocable.
Except as set forth under "Guaranteed Delivery Procedures" below, Consents
from tendering holders of Old Debentures will not be counted towards
determining whether the Company has received the Requisite Consents unless
the Company is prepared to accept the tender of the Old Debentures to which
such Consents relate. In addition, Consents with respect to any Old
Debentures will not be counted if the tender of such holders' Old Debentures
is defective, unless the Company waives such defect. Immediately prior to
acceptance of Old Debentures pursuant to the Exchange Offer, and after
receipt by the Trustee of, among other things, certification by the Company
that the Requisite Consents have been received, the Trustee and the Company
will execute a supplemental indenture to evidence the adoption of the
Proposed Amendments. The Company will not be obligated to issue the New
Debentures pursuant to the Exchange Offer unless, among other things, the
Requisite Consents to the adoption of the Proposed Amendments have been
received. See "Conditions of the Exchange Offer." The Exchange Agent, as
soon as practicable, will transmit a copy of such approved amendments to all
registered holders of Old Debentures which remain outstanding.
Procedures for Tendering
A tender of Old Debentures pursuant to one of the procedures set forth
below will constitute the tendering Debentureholder's acceptance of the terms
and conditions of the Exchange Offer set forth herein and in the Letter of
Transmittal. The Company's acceptance for exchange of Old Debentures tendered
pursuant to the Exchange Offer will constitute a binding agreement between the
tendering Debentureholder and the Company upon the terms and subject to the
conditions of the Exchange Offer. Tenders of Old Debentures for exchange will
be accepted only in principal amount of $1,000 and integral multiples thereof.
To the extent more than $40,000,000 in aggregate principal amount of Old
Debentures are properly tendered and not properly withdrawn prior to the
expiration of the Exchange Offer, the Company will accept up to $40,000,000 of
Old Debentures on a pro-rata basis.
To be tendered effectively, a properly completed Letter of Transmittal (or
facsimile thereof), duly executed by the registered holder thereof, with any
required signature guarantees, or an Agent's Message (as defined below) in
connection with a book-entry delivery of the Old Debentures, and any other
documents required by the Letter of Transmittal, must be received by the
Exchange Agent at the address set forth below at the end of the Offering
Circular prior to 12:00 Midnight, New York City time, on the Expiration Date,
and either (i) the Old Debentures must be received by the Exchange Agent at
such address or the Old Debentures must be tendered pursuant to the procedure
for book-entry transfer described below and confirmation of a book-entry
transfer (a "Book-Entry Confirmation") must be received by the Exchange
Agent, in such case prior to the Expiration Date, or (ii) the tendering
registered holder must comply with the guaranteed delivery procedures
described below. If the certificate for an Old Debenture is lost or
mutilated, please contact the Trustee, First Trust of Illinois, at 400 North
Michigan Avenue, Chicago, Illinois 60611, telephone (312) 836-6746 to obtain
information on obtaining a replacement certificate which will be required to
tender. LETTERS OF TRANSMITTAL AND OLD DEBENTURES SHOULD NOT BE SENT TO THE
COMPANY OR TO THE TRUSTEE.
Signatures on a Letter of Transmittal, a notice of withdrawal or a
revocation of Consent, as the case may be, must be guaranteed by an Eligible
Institution, as defined below, unless the Old Debentures tendered pursuant
thereto are tendered (i) by a registered holder who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
the Letter of Transmittal or (ii) for the account of an Eligible Institution.
In the event that signatures on a Letter of Transmittal, a notice of withdrawal
or a revocation of Consent, as the case may be, are required to be guaranteed,
such guarantee must be by a firm that is a member of the Medallion Signature
Guarantee Program or by any other "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
THE METHOD OF DELIVERY OF OLD DEBENTURES AND OTHER DOCUMENTS TO THE
EXCHANGE AGENT, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER ENTITY (AS
DEFINED BELOW), IS AT THE ELECTION AND RISK OF THE HOLDER AND WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS
BY MAIL IT IS SUGGESTED THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE
EXPIRATION DATE.
The Exchange Agent will make a request to establish accounts with respect
to the Old Debentures at The Depository Trust Company ("DTC"), the Midwest
Securities Transfer Company ("MSTC") and the Philadelphia Depository Company
("PHILADEP," and together with DTC and MSTC, collectively referred to as the
"Book Entry Transfer Facilities") for the purpose of the Exchange Offer promptly
after the date of this Offering Circular, and any financial institution that is
a participant in any of the Book Entry Transfer Facilities' systems may make
book entry delivery of the Old Debentures by causing a Book Entry Transfer
Facility to transfer such Old Debentures into the Exchange Agent's account in
accordance with such Book Entry Transfer Facility's procedure for such
transfer. Although delivery of Old Debentures may be effected through book
entry transfer in the Exchange Agent's account at a Book Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message and any other required documents,
must, in any case, be transmitted to and received or confirmed by the
Exchange Agent at one of its addresses set forth below prior to 12:00
Midnight, New York City time, on the Expiration Date or the tendering holder
must comply with the guaranteed delivery procedures described below.
DELIVERY OF DOCUMENTS TO A BOOK ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Exchange Agent forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Old Debentures, that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Company may enforce such agreement against such participant.
If the Letter of Transmittal or Notice of Guaranteed Delivery or any Old
Debentures is signed by a person other than the registered holder of any
certificate(s) listed therein, such certificate(s) must be endorsed or
accompanied by appropriate bond powers, in either case signed exactly as the
name or names of the registered holder or holders appear on the certificate(s).
If the Letter of Transmittal or Notice of Guaranteed delivery or any Old
Debentures or any certificates or bond powers are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority to so act must be submitted.
By executing a Letter of Transmittal as set forth above, or providing an
Agent's Message in connection with a book-entry transfer, a tendering registered
holder Consents to the Proposed Amendments. Such Consent may not be revoked
except by a proper withdrawal of the Old Debentures tendered in the Exchange
Offer to which such revocation pertains and in compliance with the additional
terms set forth below in "Withdrawal Rights and Revocation of Consents."
If any tendered Old Debentures are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein, the
withdrawal of tendered Old Debentures under circumstances, as described herein,
permitting such withdrawal or otherwise, or if Old Debentures are submitted for
a greater principal amount than the registered holder thereof desires to
exchange, any such unaccepted or non-exchanged Old Debentures will be returned,
without expense, to the tendering registered holder thereof (or, in the case of
the Old Debentures tendered by book-entry transfer, to an account maintained at
such Book-Entry Transfer Facility), as promptly as practicable after the
expiration or termination of the Exchange Offer.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Debentures tendered for exchange will be
determined by the Company in its sole discretion, whose determination will be
final and binding. The Company reserves the absolute right to reject any or all
tenders that are not in proper form or the acceptance of which would, in the
opinion of the Company or counsel for the Company, be unlawful. The Company
also reserves the right to waive certain of the conditions to the Exchange
Offer or any irregularities or defects in the tender of Old Debentures. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any irregularities in connection with
tenders of Old Debentures must be cured within such time as the Company shall
determine. Neither the Company, the Exchange Agent, nor any other person
shall be under any duty to give notification of defects or irregularities in
such tenders or shall incur any liability for failure to give such
notification. Tenders of Old Debentures will not be deemed to have been
made until such defects or irregularities have been cured or waived.
Guaranteed Delivery Procedure
If a holder of the Old Debentures desires to tender such Old Debentures,
and the Old Debentures are not immediately available, or time will not permit
such holder's Old Debentures or any other required documents to reach the
Exchange Agent before 12:00 Midnight, New York City time, on the Expiration Date
or the procedure for book-entry transfer cannot be completed on a timely basis,
a tender for exchange may be effected if:
(a) the tender for exchange is made by or through an Eligible
Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Company
herewith, is received by the Exchange Agent as provided below prior
to the Expiration date; and
(c) all tendered Old Debentures, or a Book-Entry Confirmation, together
with a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile thereof) with any required signature
guarantee (or in the case of book-entry transfer, an Agent's
Message) and any other documents required by such Letter of
Transmittal, are received by the Exchange Agent within three Nasdaq
trading days after the date of execution of the Notice of Guaranteed
Delivery.
Any notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Exchange Agent and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, acceptance of tendered Old
Debentures pursuant to the Exchange Offer will, in all cases, be made only after
timely receipt by the Exchange Agent of (i) the Old Debentures, or a Book-Entry
Confirmation of the delivery of such Old Debentures, if available, (ii) a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) or, in the case of book-entry transfer, an Agent's Message
and (iii) any other documents required by the Letter of Transmittal.
ISSUANCE OF NEW DEBENTURES IN EXCHANGE FOR OLD DEBENTURES WILL BE MADE ONLY
AGAINST RECEIPT OF THE TENDERED OLD DEBENTURES BY THE COMPANY.
Conditions of the Exchange Offer
Notwithstanding any other provisions of the Exchange Offer, and in addition
to (and not in limitation of) the Company's rights to extend and amend the
Exchange Offer at any time in its sole discretion, the Company shall not be
required to accept for exchange of or, subject to any applicable rules and
regulations of the Commission, including Rule 13e-4(f)(5) under the Exchange Act
(relating to the Company's obligation to pay for or return tendered Old
Debentures promptly after termination or withdrawal of the Exchange Offer),
exchange for, and may delay the acceptance for exchange of or, subject to the
restriction referred to above, the exchange for, any tendered Old Debentures,
and may terminate the Exchange Offer as to any Old Debentures not then
exchanged for, if (i) the Commission shall not have issued an order declaring
the New Indenture qualified under the TIA, (ii) the Minimum Condition has not
been satisfied, or (iii) at any time on or after December 18, 1996 and before
the time of issuance of the New Debentures, any of the following events shall
occur or shall be determined by the Company to have occurred:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental authority or other regulatory or
administrative agency, domestic or foreign, with respect to the
Exchange Offer which, in the sole judgment of the Company, might
materially impair the ability of the Company to proceed with the
Exchange Offer or have a material adverse effect on the contemplated
benefits of the Exchange Offer to the Company, or there shall have
occurred any material adverse developments in any existing action or
proceeding with respect to the Company or any of its subsidiaries;
(b) there shall have been proposed (including any proposed or pending
legislation in existence as of the date hereof), adopted, or enacted
into law any legislation, rule or regulation, or any action shall
have been taken or proposed (i) limiting the deductibility of
interest on indebtedness attributable, directly or indirectly, to
the Exchange Offer, (ii) that would materially increase the after-
tax cost of the Exchange Offer, or the transactions contemplated
hereby or (iii) might, in the sole judgment of the Company, have any
of the effects set forth in (a) above;
(c) there shall have occurred or be likely to occur any change, or
development involving a prospective change, in or affecting the
business or financial affairs of the Company or any of its
subsidiaries which, in the sole judgment of the Company, would or
might prohibit, restrict or delay consummation of the Exchange Offer
or materially impair the contemplated benefits of the Exchange Offer
to the Company;
(d) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation which, in the sole judgment of the Company, might
materially prohibit, restrict or delay consummation of the Exchange
Offer or materially impair the contemplated benefits of the Exchange
Offer to the Company; or
(e) there shall have occurred (i) any general suspension of, shortening
of hours for, or limitation on prices for, trading in securities
listed on the New York Stock Exchange, the American Stock Exchange,
the Nasdaq National Market, or in the over-the-counter market
(whether or not mandatory); (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks or
savings and loan associations by federal or state authorities in the
United States (whether or not mandatory); (iii) a commencement of
a war, armed hostilities or other international or national crisis
directly or indirectly involving the United States; (iv) any
limitation (whether or not mandatory) by any governmental authority
on, or other event having a reasonable likelihood of affecting, the
extension of credit by banks or other lending institutions in the
United States; (v) any significant change in the United States
currency exchange rates or a suspension of, or limitation on, the
markets therefor (whether or not mandatory); (vi) any significant
change in the United States securities or financial markets
generally; or (vii) in the case of any of the foregoing existing at
the time of the commencement of the Exchange Offer, a material
acceleration or worsening thereof.
If any of the foregoing events shall have occurred, the Company may (i)
delay acceptance for exchange of or exchange for (regardless of whether such Old
Debentures were previously accepted for exchange), any Old Debentures pending
receipt of any regulatory approval described above or to comply with any other
applicable law; (ii) terminate the Exchange Offer and refuse to accept for
exchange any Old Debentures and return all tendered Old Debentures to tendering
holders thereof; (iii) extend the Exchange Offer and retain all tendered Old
Debentures until the Expiration Date, subject, however, to all withdrawal rights
of the holders, see "Withdrawal Rights and Revocation of Consents," (iv) waive
or modify certain of the unsatisfied conditions with respect to the Exchange
Offer (other than the receipt of an order of the Commission pursuant to the TIA,
which cannot be waived) and accept all properly tendered Old Debentures subject
to the terms and limitations of the Exchange Offer; or (v) amend the terms of
the Exchange Offer in any respect. Although the Company has no present
intention of waiving or modifying any of the conditions of the Exchange
Offer, the Company expressly reserves the right to waive or modify, to the
extent permitted by law, any of such conditions to which the Company and/or
the holders of Old Debentures may be exposed or any additional risks which
cannot now be predicted or evaluated.
The foregoing conditions are for the sole benefit of the Company and may
be asserted by the Company regardless of the circumstances giving rise to such
conditions or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion, except that the Company may not waive
the condition that the Commission declare the New Indenture qualified under the
TIA. Any determination made by the Company concerning an event, development or
circumstance described or referred to above will be final and binding on all
parties. If the Company waives any material condition of the Exchange Offer,
the Company will promptly disclose such waiver and extend the Exchange Offer
to the extent required by Rules 13e-4(e)(2), 13e-4(f)(1)(ii) and 14e-1 under the
Exchange Act.
The minimum period during which the Exchange Offer must remain open
following material changes in the terms of the Exchange Offer or the information
concerning the Exchange Offer depends upon the facts and circumstances,
including the relative materiality of such terms or information. See
"Expiration Date; Extensions; Termination; Amendments." If, prior to the
Expiration Date, the Company increases the consideration to be offered per
Old Debenture pursuant to the Exchange Offer, the Company will pay such
increased consideration for all such Old Debentures tendered pursuant to the
Exchange Offer, whether or not such Old Debentures were tendered prior to
such increase in consideration.
Acceptance of Old Debentures for Exchange; Delivery of New Debentures
Tenders will be accepted only in principal amounts of $1,000 and integral
multiples thereof.
Unless waived or increased by the Company, only $40,000,000 in aggregate
principal amount of Old Debentures properly tendered and not withdrawn will be
accepted for exchange. If more than such amount (or such increased amount the
Company elects to accept) are properly tendered for exchange and not withdrawn,
the Company will accept Old Debentures that are properly tendered and not
properly withdrawn, up to the amount to be accepted on a pro-rata basis.
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance of Old Debentures properly tendered under the Exchange Offer and not
properly withdrawn, and delivery of the New Debentures will be made promptly
after the Expiration Date.
Holders of Old Debentures accepted for exchange in the Exchange Offer will
receive accrued interest on such Old Debentures from December 15, 1996 to the
date of exchange at the stated 7-1/4% interest rate.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted properly tendered Old Debentures when, as and if the Company has given
oral or written notice thereof to the Exchange Agent. The Exchange Agent will
act as agent for the tendering holders of Old Debentures for the purpose of
receiving the New Debentures from the Company.
If any tendered Old Debentures are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Debentures will be returned,
without expense, to the tendering holder thereof (or, in the case of the Old
Debentures tendered by book entry transfer, to an account maintained at such
Book Entry Transfer Facility) as promptly as practicable after the expiration or
termination of the Exchange Offer.
Withdrawal Rights and Revocation of Consents
Tenders of Old Debentures made in accordance with the Exchange Offer are
irrevocable, except that any holder of Old Debentures who has tendered Old
Debentures may withdraw the tender at any time prior to 12:00 Midnight, New York
City time, on the Expiration Date and, unless such tender has been previously
accepted, at any time after 12:00 Midnight, New York City time, February 28,
1997, by delivery of written notice of withdrawal, to the Exchange Agent.
If the Company extends the Exchange Offer, is delayed in its acceptance for
exchange or is unable to accept Old Debentures for exchange pursuant to the
Exchange Offer for any reason, then, without prejudice to the Company's rights
under the Exchange Offer, the Exchange Agent may, nevertheless, on behalf of the
Company, retain tendered Old Debentures, and such Old Debentures may not be
withdrawn except to the extent that tendering registered holders are entitled to
withdrawal rights as described herein.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at the
address set forth below, must have a guaranteed signature included thereon
(unless not required by the terms set forth above under "Procedures for
Tendering") and must specify the name of the person having tendered the Old
Debentures to be withdrawn and the name of the registered holder, if
different from that of the person who tendered such Old Debentures, and the
aggregate principal amount of Old Debentures to be withdrawn. If Old
Debentures have been delivered or otherwise identified to the Exchange Agent,
the name of the registered holder and the serial numbers of the particular
certificate(s) evidencing the Old Debentures withdrawn must also be so
furnished to the Exchange Agent as aforesaid prior to the physical release of
the certificate(s) for the withdrawn Old Debentures. If Old Debentures have
been tendered pursuant to the procedures for book entry tender as set forth
herein, any notice of withdrawal must also specify the name and number of the
account at the appropriate Book Entry Transfer Facility to be credited with
the withdrawn Old Debentures. Withdrawals of tenders of Old Debentures may
not be rescinded, and any Old Debentures withdrawn will thereafter be deemed
not validly tendered for purposes of the Exchange Offer; provided, however,
that withdrawn Old Debentures may be retendered by again following one
of the procedures described herein at any time prior to 12:00 Midnight, New York
City time, on the Expiration Date.
The withdrawal of Old Debentures will not constitute a revocation of the
Consent to the Proposed Amendments with respect to the withdrawn Old Debentures,
unless the procedures for revocation of Consents described below are followed.
Any holder of Old Debentures who has consented to (or whose predecessor in
interest with respect to such Old Debentures has consented to) the adoption of
the Proposed Amendments may revoke such Consent by delivering written notice of
such revocation to the Exchange Agent at any time prior to the delivery to the
Trustee by the Company of certification that the Requisite Consents have been
received. If such holder has tendered his Old Debentures for exchange he must
also properly withdraw his tender of such Old Debentures for exchange in
accordance with the procedures specified above. Failure to withdraw the
tendered Old Debentures properly shall render the withdrawal of Consent
ineffective. The Exchange Agent shall promptly deliver any such valid notice
of revocation of Consent to the Trustee. Any such notice of revocation should
indicate the certificate number or numbers of the Old Debentures to which it
relates and the aggregate principal amount represented by such Old Debentures
and must be signed by the holder in the same manner as the original Consent
or be accompanied by evidence satisfactory to the Company that the holder
revoking such Consent succeeded to ownership of such Old Debentures or
otherwise has the power to revoke such Consent. The revocation of a Consent
shall be effective with respect to the Old Debentures to which it relates,
unless otherwise specified in the notice of revocation.
All questions as to the validity (including time of receipt) of notices of
withdrawal or revocation of any Consent will be determined by the Company, whose
determination will be final and binding. Neither the Company, the Exchange
Agent nor any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or revocation or incur any
liability for failure to give any such notification.
Exchange Agent
American National Bank and Trust Company of Chicago has been appointed as
Exchange Agent for the Exchange Offer. The Company has agreed to indemnify the
Exchange Agent against certain liabilities and expenses. All correspondence in
connection with the Exchange Offer and requests for information or additional
copies of this Offering Circular or the Letter of Transmittal should be
addressed to the Exchange Agent, in the manner and at the address specified
at the end of this Offering Circular.
Financial Advisor
The Company has retained Forum Capital, an investment banking firm, to
advise it with respect to the Exchange Offer, including the appropriate terms,
from the Company's perspective, of the securities to be offered to holders of
Old Debentures. Forum Capital has not been retained to render an opinion as
to the fairness of the Exchange Offer or to solicit tenders or Consents in
connection with the Exchange Offer.
For the services of Forum Capital as financial advisor in connection with
the Exchange Offer, the Company has agreed to pay Forum Capital fees
aggregating $200,000. In addition, the Company will reimburse Forum Capital
for its reasonable expenses, including the reasonable fees and expenses of
its counsel. The Company has also agreed to indemnify Forum Capital against
certain liabilities and expenses, including liabilities under Federal
securities laws.
Forum Capital makes a market in certain securities of the Company,
including the Old Debentures. As of December 16, 1996 Forum Capital did not
hold any Old Debentures. Forum Capital has also performed brokerage and
financial advisory services for the Company for which it has received customary
compensation. In addition Mr. Harold L. Purkey, a principal of Forum Capital,
serves as a Director of the Company and has and will continue to receive
compensation from the Company for such service. See "Election of Directors -
Information Relating to Directors, Nominees and Executive Officers" and
"Election of Directors - Directors Compensation" in the Company's Proxy
Statement for its Annual Meeting of Stockholders held October 1, 1996.
Payment of Expenses
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptances of the Exchange Offer. The Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Offering Circular and related
documents to the beneficial owners of the Old Debentures and in handling or
forwarding tenders for their customers.
The cash expenses to be incurred in connection with the Exchange Offer,
including the fees and expenses of the Exchange Agent and printing, accounting
and legal fees, will be paid by the Company and, other than the fees and
expenses of Forum Capital, are estimated at $45,000.
The Company will pay all transfer taxes, if any, applicable to the transfer
and sale of Old Debentures to it or its order pursuant to the Exchange Offer.
If, however, New Debentures or substitute Old Debentures for principal amounts
not exchanged are to be delivered to, or are to be registered or issued in the
name of, any person other than the registered holder of the Old Debentures
tendered, or if tendered certificates are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the transfer and sale of Old Debentures to the
Company or its order pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder of Old Debentures. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted
herewith, the amount of such transfer taxes will be billed directly to such
tendering holder of Old Debentures.
DESCRIPTION OF THE NEW DEBENTURES
The New Debentures will be issued pursuant to an indenture, dated as of
December 16, 1996 (the "New Indenture"), between the Company and American
National Bank and Trust Company of Chicago, as trustee (the "New Trustee"). The
terms of the New Debentures include those stated in the New Indenture and those
made part of the New Indenture by reference to the TIA as in effect on the date
of the New Indenture. The New Debentures are subject to all such terms, and
holders of the New Debentures are referred to the New Indenture and the TIA for
a statement thereof. The following summary of certain provisions of the New
Indenture does not purport to be complete and is qualified in its entirety by
reference to the New Indenture, including definitions therein of certain terms
used below.
General
The New Debentures will bear interest from the date of exchange at a rate
of 8-1/4% per annum, payable on June 15 and December 15 in each year to holders
of record at the close of business on the June 1 and December 1 next preceding
the interest payment date. The New Debentures will be due on June 15, 2006 and
will be issued in denominations of $1,000 and integral multiples thereof.
The New Debentures will be general unsecured obligations of the Company
limited to an aggregate principal amount of $40,000,000 (subject to increase to
a maximum of $70,825,000 if the Company elects to increase the amount of Old
Debentures it will accept for exchange). They will be subordinated in right of
payment to Senior Indebtedness of the Company, as described under
"Subordination." The New Indenture does not limit the incurrence of Senior
Indebtedness or any other debt, secured or unsecured, of the Company or any
subsidiary (as defined in the New Indenture). As of December 16, 1996 the
outstanding amount of such Senior Indebtedness of the Company was $31,000,000.
The New Debentures rank senior to, and will mature prior to, the Old Debentures.
Conversion
The holder of any New Debenture will have the right, exercisable at any
time up to and including June 15, 2006, except in the case of New Debentures
called for redemption, to convert such New Debentures at the principal amount
thereof (or any portion thereof that is an integral multiple of $1,000) into
shares of Common Stock of the Company at the conversion price of $18.00 per
share, subject to adjustment as described below. In the case of New Debentures
called for redemption, conversion rights will expire at the close of business on
the redemption date. Notice of redemption must be mailed not less than 30 and
not more than 60 days prior to the redemption date. No payment or adjustment
for interest accrued on the New Debentures is to be made on conversion. No
fractional shares will be issued upon conversion and, if the conversion results
in a fractional interest, an amount will be paid in cash equal to the value of
such fractional interest based on the market price of the Company's Common Stock
on the last trading date prior to the date of conversion.
The conversion price is subject to adjustment upon the occurrence of
certain events, including (i) the payment of a dividend in shares of Common
Stock to holders of Common Stock or a dividend to holders of the Company's
Common Stock payable in shares of the Company's capital stock other than
Common Stock; (ii) the subdivision, combination or reclassification of
outstanding shares of Common Stock; (iii) the issuance to all holders of
Common Stock of the Company of rights or warrants entitling them to purchase
shares of Common Stock (or securities convertible into Common Stock) at a
price per share (or having a conversion price per share) less than the then
current per share market price for such Common Stock; (iv) the distribution
to holders of Common Stock of evidences of indebtedness or assets (excluding
cash dividends) or rights or warrants (other than those referred to above);
and (v) certain mergers, consolidations or sales of assets. No adjustment of
the conversion price will be made until cumulative adjustments amount to at
least $.10. There will be no adjustment of the conversion price in the event
of cash distributions or cash dividends paid out of Consolidated Net Income
(as defined below) or retained earnings plus $20,000,000.
Conversion price adjustments, or the omission to make such adjustments, may
in certain circumstances result in constructive distributions that could be
taxable as dividends, to holders of New Debentures or Common Stock issuable on
conversion thereof.
Redemption
The New Debentures will be redeemable at any time at the option of the
Company, as a whole or from time to time in part, at 100% of the principal
amount thereof together with interest accrued to the redemption date.
Selection of New Debentures for any redemption will be made by the New
Trustee on either a pro rata basis or by lot. New Debentures in denominations
larger than $1,000 may be redeemed in part. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
holder of New Debentures to be redeemed at his registered address. On and after
the redemption date, interest ceases to accrue on New Debentures or portions
thereof called for redemption.
Subordination
The indebtedness evidenced by the New Debentures is subordinate to the
prior payment when due of the principal of, premium, if any, and interest on all
Senior Indebtedness. Upon maturity of any Senior Indebtedness, payment in full
must be made on such Senior Indebtedness before any payment is made on or in
respect of the New Debentures. During the continuance of any default in payment
of principal of, premium, if any, or interest on Senior Indebtedness, no payment
may be made by the Company on or in respect of the New Debentures. Upon any
distribution of assets of the Company in any dissolution, winding-up,
liquidation or reorganization of the Company, payment of the principal of, and
interest on, the New Debentures will be subordinated, to the extent and in the
manner set forth in the New Indenture, to the prior payment in full of all
Senior Indebtedness. Such subordination will not prevent the occurrence of
any Event of Default (as defined). "Senior Indebtedness" means Indebtedness
of the Company outstanding at any time other than Indebtedness of the Company
to a subsidiary for money borrowed or advanced from any such subsidiary and
Indebtedness which by its terms is not superior in right of payment to the
New Debentures. "Indebtedness" means (1) any debt of the Company (i) for
borrowed money, capitalized leases and purchase money obligations or (ii)
evidenced by a note, debenture, letter of credit or similar instrument given
in connection with the acquisition, other than in the ordinary course of
business, of any property or assets; (2) any debt of others described in the
preceding clause which the Company has guaranteed or for which it is
otherwise liable; and (3) any amendment, renewal, extension or refunding of
any such debt.
By reason of such subordination, in the event of insolvency, holders of the
New Debentures may recover less ratably than the general creditors of the
Company.
New Debentures are by their terms superior in right of payment to the Old
Debentures.
Defaults and Remedies
The term "Event of Default" when used in the New Indenture means any one
of the following: (i) failure of the Company to pay interest for 30 days or
principal when due (whether or not prohibited by the subordination provisions);
(ii) failure to perform any other covenant for 30 days after notice; (iii)
acceleration of the maturity of any Indebtedness of the Company or any
subsidiary in any one case or in the aggregate in excess of $5,000,000, if
such acceleration is not rescinded, annulled or otherwise cured within 30
days after notice to the Company; and (iv) certain events of bankruptcy,
insolvency or reorganization of the Company or any subsidiary.
The New Indenture provides that the New Trustee will, within 90 days after
the occurrence of a default, give the Debentureholders notice of all uncured
defaults known to it (the term "default" to include the events specified above,
without grace or notice), provided that, except in the case of default in the
payment of principal or, premium, if any, or interest on any of the New
Debentures, the New Trustee shall be protected in withholding such notice if it
in good faith determines that the withholding of such notice is in the interest
of the Debentureholders.
In case an Event of Default occurs and is continuing, the New Trustee or
the holders of not less than 25% in aggregate principal amount of the New
Debentures then outstanding, by notice in writing to the Company (and to the New
Trustee if given by the holders of the New Debentures), may declare the
principal of and all accrued interest on all the New Debentures to be due and
payable immediately. Such declaration may be rescinded by holders of a
majority in principal amount of the New Debentures if all existing Events of
Default have been cured and waived (except nonpayment of principal or
interest that has become due solely because of the acceleration) and if the
rescission would not conflict with any judgment or decree.
Defaults (except, unless therefore cured, a default in payment of principal
of, premium, if any, or interest on the New Debentures or a default with respect
to a provision which cannot be modified under the terms of the New Indenture
without the consent of each holder of New Debentures affected) may be waived by
the holders of a majority in principal amount of the outstanding New Debentures
upon the conditions provided in the New Indenture.
The New Indenture requires the Company to file periodic reports with the
New Trustee as to the absence of defaults.
Limitation on Dividends and Stock Purchases
The Company may not declare or pay any dividend or make any distribution
on its capital stock or to its shareholders (other than dividends or
distributions payable in its capital stock) or purchase, redeem or otherwise
acquire or retire for value, or permit any subsidiary to purchase or otherwise
acquire for value, any capital stock of the Company (i) if at the time of such
action an Event of Default shall have occurred and be continuing or occurs as a
result thereof, or (ii) if, upon giving effect to such dividend, distribution,
purchase, redemption, other acquisition or retirement, the aggregate amount
expended for all such purposes (the amount expended for such purposes, if other
than in cash, to be determined by the Board of Directors, whose determination
shall be conclusive evidence and evidenced by a resolution of the Board filed
with the New Trustee) subsequent to May 31, 1996, shall exceed the sum of: (a)
the aggregate Consolidated Net Income (or net loss) of the Company earned on a
cumulative basis subsequent to May 31, 1996; (b) the aggregate net proceeds
including the fair market value of property other than cash (as determined by
the Board of Directors, whose determination shall be conclusive and evidenced
by a resolution of the Board filed with the New Trustee), received by the
Company from the issue or sale after May 31, 1996 of capital stock of the
Company, including capital stock issued upon the conversion of, or exchange
for, indebtedness (including the New Debentures); plus (c) $20,000,000.
"Consolidated Net Income," for any period, means the aggregate of the Net
Income of the Company and its subsidiaries for such period, on a consolidated
basis, determined in accordance with generally accepted accounting principles
provided that (i) the Net Income of any person in which the Company or any
subsidiary has a joint interest with a third party shall be included only to the
extent of the amount of dividends or distributions paid to the Company or a
subsidiary, and (ii) the Net Income of any person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded. "Net Income" of any person means the net income (loss) of
such person, determined in accordance with generally accepted accounting
principles; excluding, however, from the determination of Net Income any
gain (but not loss) realized upon the sale or other disposition (including,
without limitation, dispositions pursuant to leaseback transactions) of any
real property or equipment of such person, which is not sold or otherwise
disposed of in the ordinary course of business, or of any capital stock of
the Company or a subsidiary owned by such person.
Consolidation, Merger, Conveyance, Transfer or Assumption
The Company may not consolidate with, merge into, or transfer all or
substantially all of its assets to, any other person unless such (i) other
person is a corporation organized and existing under the laws of the United
States or a State thereof which expressly assumes all obligations of the
Company under the New Indenture and the New Debentures, (ii) such corporation
has a Consolidated Tangible Net Worth (after giving effect to such
transaction) at least equal to the Consolidated Tangible Net Worth of the
Company immediately prior thereto, and (iii) immediately after the
transaction no default exists. Thereafter all such obligations of the
Company terminate.
Modification of the New Indenture
The New Indenture contains provisions permitting the Company and the New
Trustee without the consent of any holder of New Debentures to supplement or
amend the New Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption of the Company's obligations by
a successor, to provide for uncertificated New Debentures in addition to
certificated New Debentures or to make any change that does not materially
adversely affect the rights of any holder of New Debentures. Otherwise, the
rights and obligations of the Company and the rights of holders of New
Debentures may be modified by the Company and the New Trustee only with the
consent of the holders of not less than a majority in principal amount of New
Debentures then outstanding. No waiver of a default in the payment of the
principal of or interest on a New Debenture or reduction in the principal of
or the premium or the interest rate on the New Debentures or a change in the
percentage of holders required for modification of the New Indenture and no
extension of the maturity of any New Debenture or in the time of payment of
interest and no change that materially and adversely affects the right to
convert a New Debenture will be effective against any holder of New
Debentures without such holder's consent.
Satisfaction and Discharge of the New Indenture
The New Indenture will be discharged and canceled if all the New Debentures
have been delivered to the New Trustee for cancellation or upon deposit with the
New Trustee, within not more than six months prior to the maturity or redemption
of all the New Debentures, of funds sufficient for such payment or redemption.
The New Trustee
American National Bank and Trust Company of Chicago will be the trustee
under the New Indenture. Such Bank is the Company's principal banking facility
at which the Company has maintained bank accounts and conducted normal banking
transactions for a number of years. The Company has obtained loans from the
Bank in the past and the Bank has extended a $35,000,000 line of credit to
the Company pursuant to an Amended and Restated Senior Revolving Note dated
as of August 20, 1996, of which $31,000,000 was in use as of December 16, 1996.
The holders of a majority in principal amount of all outstanding New
Debentures have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the New Trustee, providing
that such direction would not conflict with any rule of law or with the New
Indenture, would not be unduly prejudicial to the right of another holder of
and would not subject the New Trustee to personal liability. The New
Indenture provides that in case an Event of Default should occur and be known
to the New Trustee (and not be cured), the New Trustee will be required to use
the degree of care of a prudent man in the conduct of his own affairs in the
exercise of its rights and powers. Subject to such provisions, the New
Trustee will be under no obligation to exercise any of its rights or powers
under the New Indenture at the request of any of the holders of New
Debentures unless they shall have offered to the Trustee security and
indemnity satisfactory to it.
DESCRIPTION OF THE OLD DEBENTURES
The Old Debentures were issued pursuant to the Old Indenture. The terms
of the Old Debentures include those stated in the Old Indenture and those made
part of the Old Indenture by reference to the TIA as in effect on the date of
the Old Indenture. The Debentures are subject to all such terms, and holders
of the Old Debentures are referred to the Old Indenture and the TIA for a
statement thereof. The following summary of certain provisions of the Old
Indenture does not purport to be complete and is qualified in its entirety
by reference to the Old Indenture, including definitions therein of certain
terms used below.
General
The Old Debentures are issued in fully registered form under an Indenture
dated as of December 15, 1986 (the "Old Indenture"), between the Company and
First Trust of Illinois, a National Association, as successor to Continental
Illinois National Bank and Trust Company of Chicago, as Trustee (the
"Trustee"). The Debentures bear interest from December 15, 1986 at a rate of
7-1/4%, payable on June 15 and December 15 in each year to holders of record at
the close of business on the June 1 and December 1 next preceding the interest
payment date. The Old Debentures are due on December 15, 2006 and were issued
in denominations of $1,000 and integral multiples thereof.
The Old Debentures are general unsecured obligations of the Company limited
to an aggregate principal amount of $83,000,000. They are subordinated in right
of payment to Senior Indebtedness of the Company, as described under
"Subordination." The Old Indenture does not limit the incurrence of Senior
Indebtedness or any other debt, secured or unsecured, of the Company or any
subsidiary (as defined in the Old Indenture). As of December 16, 1996 the
outstanding amount of such Senior Indebtedness of the Company was $31,000,000.
The Old Debentures will be subordinated in right of payment to the New
Debentures.
Conversion
The holder of any Old Debenture has the right, exercisable at any time up
to and including December 15, 2006, except in the case of Old Debentures called
for redemption, to convert such Old Debentures at the principal amount thereof
(or any portion thereof that is an integral multiple of $1,000) into shares of
Common Stock of the Company at the conversion price which is currently $21.14
per share, subject to further adjustment as described below. In the case of Old
Debentures called for redemption, conversion rights will expire at the close of
business on the 10th business day next preceding the redemption date. Notice of
an optional redemption must be mailed not less than 30 and not more than 60 days
prior to the redemption date. No payment or adjustment for interest accrued on
the Old Debentures is to be made on conversion. No fractional shares will be
issued upon conversion and, if the conversion results in a fractional interest,
an amount will be paid in cash equal to the value of such fractional interest
based on the market price of the Company's Common Stock on the last trading date
prior to the date of conversion.
The conversion price is subject to adjustment upon the occurrence of
certain events, including (i) the payment of a dividend in shares of Common
Stock to holders of Common Stock or a dividend to holders of the Company's
Common Stock payable in shares of the Company's capital stock other than
Common Stock; (ii) the subdivision, combination or reclassification of
outstanding shares of Common Stock; (iii) the issuance to all holders of
Common Stock of the Company of rights or warrants entitling them to purchase
shares of Common Stock (or securities convertible into Common Stock) at a
price per share (or having a conversion price per share) less than the then
current per share market price for such Common Stock; (iv) the distribution
to holders of Common Stock of evidences of indebtedness or assets (excluding
cash dividends) or rights or warrants (other than those referred to above);
and (v) certain mergers, consolidations or sales of assets. No adjustment of
the conversion price is made until cumulative adjustments amount to at least
$.10. There will be no adjustment of the conversion price in the event of
cash distributions or cash dividends paid out of Consolidated Net Income (as
defined below) or retained earnings plus $5,000,000, which at August 31, 1996
aggregated $13,100,000. The Proposed Amendments will modify this provision.
See "Proposed Amendments to the Old Indenture."
Conversion price adjustments, or the omission to make such adjustments, may
in certain circumstances result in constructive distributions that could be
taxable as dividends, to holders of Old Debentures or Common Stock issuable on
conversion thereof.
Optional Redemption
The Old Debentures are redeemable at any time at the option of the Company,
as a whole or from time to time in part, at 100% of the principal amount thereof
together with interest accrued to the redemption date.
Sinking Fund
The Old Indenture requires the Company to provide for the retirement,
through the operation of a sinking fund, of an amount equal to 7.5% of the
principal amount of Old Debentures on December 15, 1996 and on each December 15
thereafter to and including December 15, 2005 at a redemption price equal to the
principal amount of the Old Debentures so retired, plus accrued interest to the
redemption date. The Company may, at its option, receive credit against sinking
fund payments for the principal amount of (a) Old Debentures acquired by the
Company and surrendered for cancellation (including converted or exchanged Old
Debentures), (b) Old Debentures redeemed or called for redemption otherwise than
through the operation of the sinking fund, and (c) Old Debentures purchased by
the Company in the open market. As of December 16, 1996 the Company has
purchased $12,175,000 in principal amount of Old Debentures in the open market
which will meet substantially its sinking fund requirements until December 15,
1998. The amount of any sinking fund payment required for any year ending
December 15 shall automatically be reduced by an amount equal to the aggregate
principal amount of any Old Debentures called for redemption through operation
of the sinking fund and converted into Common Stock on or before the sinking
fund redemption date.
Selection of Old Debentures for any redemption will be made by the Trustee
on either a pro rata basis or by lot. Old Debentures in denominations larger
than $1,000 may be redeemed in part. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
holder of Old Debentures to be redeemed at his registered address. On and after
the redemption date, interest ceases to accrue on Debentures or portions thereof
called for redemption.
Subordination
The indebtedness evidenced by the Old Debentures is subordinate to the
prior payment when due of the principal of, premium, if any, and interest on all
Senior Indebtedness. Upon maturity of any Senior Indebtedness, payment in full
must be made on such Senior Indebtedness before any payment is made on or in
respect of the Old Debentures. During the continuance of any default in payment
of principal of, premium, if any, or interest on Senior Indebtedness, no payment
may be made by the Company on or in respect of the Old Debentures. Upon any
distribution of assets of the Company in any dissolution, winding-up,
liquidation or reorganization of the Company, payment of the principal of,
and interest on, the Old Debentures will be subordinated, to the extent and
in the manner set forth in the Old Indenture, to the prior payment in full of
all Senior Indebtedness. Such subordination will not prevent the occurrence
of any Event of Default (as defined). "Senior Indebtedness" means
Indebtedness of the Company outstanding at any time other than Indebtedness
of the Company to a subsidiary for money borrowed or advanced from any such
subsidiary and Indebtedness which by its terms is not superior in right of
payment to the Old Debentures. Senior Indebtedness will include the New
Debentures. "Indebtedness" means (1) any debt of the Company (i) for
borrowed money, capitalized leases and purchase money obligations or (ii)
evidenced by a note, debenture, letter of credit or similar instrument given
in connection with the acquisition, other than in the ordinary course of
business, of any property or assets; (2) any debt of others described
in the preceding clause which the Company has guaranteed or for which it is
otherwise liable; and (3) any amendment, renewal, extension or refunding of any
such debt.
By reason of such subordination, in the event of insolvency, holders of the
Old Debentures may recover less ratably than the general creditors of the
Company and holders of the New Debentures.
Defaults and Remedies
The term "Event of Default" when used in the Old Indenture means any one
of the following: (i) failure of the Company to pay interest for 30 days or
principal or any sinking fund installment when due (whether or not prohibited by
the subordination provisions); (ii) failure to perform any other covenant for 30
days after notice; (iii) acceleration of the maturity of any Indebtedness of the
Company or any subsidiary in any one case or in the aggregate in excess of
$1,000,000 (this is being increased to $5,000,000 by the proposed amendments),
if such acceleration is not rescinded, annulled or otherwise cured within 30
days after notice to the Company; and (iv) certain events of bankruptcy,
insolvency or reorganization of the Company or any subsidiary.
The Old Indenture provides that the Trustee will, within 90 days after the
occurrence of a default, give the Debentureholders notice of all uncured
defaults known to it (the term "default" to include the events specified
above, without grace or notice), provided that, except in the case of default
in the payment of principal or, premium, if any, or interest on any of the
Old Debentures, or any Sinking Fund payment, the Trustee shall be protected
in withholding such notice if it in good faith determines that the
withholding of such notice is in the interest of the Debentureholders.
In case an Event of Default occurs and is continuing, the Trustee or the
holders of not less than 25% in aggregate principal amount of the Old Debentures
then outstanding, by notice in writing to the Company (and to the Trustee if
given by the Debentureholders), may declare the principal of and all accrued
interest on all the Old Debentures to be due and payable immediately. Such
declaration may be rescinded by holders of a majority in principal amount of the
Old Debentures if all existing Events of Default have been cured and waived
(except nonpayment of principal or interest that has become due solely because
of the acceleration) and if the rescission would not conflict with any judgment
or decree.
Defaults (except, unless therefore cured, a default in payment of principal
of, premium, if any, or interest on the Old Debentures or failure to make any
Sinking Fund payment or a default with respect to a provision which cannot be
modified under the terms of the Old Indenture without the consent of each
Debentureholder affected) may be waived by the holders of a majority in
principal amount of the outstanding Old Debentures upon the conditions
provided in the Indenture.
The Old Indenture requires the Company to file periodic reports with the
Trustee as to the absence of defaults.
Limitation on Dividends and Stock Purchases
The Company may not declare or pay any dividend or make any distribution
on its capital stock or to it shareholders (other than dividends or
distributions payable in its capital stock) or purchase, redeem or otherwise
acquire or retire for value, or permit any subsidiary to purchase or
otherwise acquire for value, any capital stock of the Company (i) if at the
time of such action an Event of Default shall have occurred and be continuing
or occurs as a result thereof, or (ii) if, upon giving effect to such
dividend, distribution, purchase, redemption, other acquisition or
retirement, the aggregate amount expended for all such purposes (the amount
expended for such purposes, if other than in cash, to be
determined by the Board of Directors, whose determination shall be conclusive
evidence and evidenced by a resolution of the Board filed with the Trustee)
subsequent to May 31, 1986, shall exceed the sum of: (a) the aggregate
Consolidated Net Income (or net loss) of the Company earned on a cumulative
basis subsequent to May 31, 1986; (b) the aggregate net proceeds including the
fair market value of property other than cash (as determined by the Board of
Directors, whose determination shall be conclusive and evidenced by a resolution
of the Board filed with the Trustee), received by the Company from the issue or
sale after May 31, 1986 of capital stock of the Company, including capital stock
issued upon the conversion of, or exchange for, indebtedness (including the
Debentures); and (c) $5,000,000. The Proposed Amendments would amend this
covenant to change the May 31, 1986 dates to May 31, 1996 and the $5,000,000
amount to $20,000,000 to make it consistent with the comparable covenant in the
New Indenture. As of August 31, 1996 $13,100,000 was available for such
purposes and upon adoption of the Proposed Amendments approximately
$21,900,000 will be so available. As such the Company would be increasing
the basket by $8,800,000.
"Consolidated Net Income," for any period, means the aggregate of the Net
Income of the Company and its subsidiaries for such period, on a consolidated
basis, determined in accordance with generally accepted accounting principles
provided that (i) the Net Income of any person in which the Company or any
subsidiary has a joint interest with a third party shall be included only to the
extent of the amount of dividends or distributions paid to the Company or a
subsidiary, and (ii) the Net Income of any person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded. "Net Income" of any person means the net income (loss) of
such person, determined in accordance with generally accepted accounting
principles; excluding, however, from the determination of Net Income any gain
(but not loss) realized upon the sale or other disposition (including, without
limitation, dispositions pursuant to leaseback transactions) of any real
property or equipment of such person, which is not sold or otherwise disposed
of in the ordinary course of business, or of any capital stock of the Company
or a subsidiary owned by such person.
Consolidation, Merger, Conveyance, Transfer or Assumption
The Company may not consolidate with, merge into, or transfer all or
substantially all of its assets to, any other person unless such other person is
a corporation organized and existing under the laws of the United States or a
State thereof which expressly assumes all obligations of the Company under the
Old Indenture and the Old Debentures, such corporation has a Consolidated
Tangible Net Worth (after giving effect to such transaction) at least equal to
the Consolidated Tangible Net Worth of the Company immediately prior thereto,
and immediately after the transaction no default exists. Thereafter all such
obligations of the Company terminate.
Modification of the Old Indenture
The Old Indenture contains provisions permitting the Company and the
Trustee without the consent of any Debentureholder to supplement or amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption of the Company's obligations by a successor, to provide for
uncertificated Old Debentures in addition to certificated Old Debentures or to
make any change that does not materially adversely affect the rights of any
Debentureholder. Otherwise, the rights and obligations of the Company and the
rights of Debentureholders may be modified by the Company and the Trustee only
with the consent of the holders of not less than a majority in principal amount
of Old Debentures then outstanding. No waiver of a default in the payment of
the principal of or interest on an Old Debenture or reduction in the
principal of or the premium or the interest rate on the Old Debentures or
change in the Sinking Fund requirements or in the percentage of holders
required for modification of the Old Indenture and no extension of the
maturity of any Old Debenture or in the time of payment of interest and no
change that materially and adversely affects the right to convert an Old
Debenture will be effective against any Debentureholder without his consent.
Satisfaction and Discharge of the Old Indenture
The Old Indenture will be discharged and canceled if all the Old Debentures
have been delivered to the Trustee for cancellation or upon deposit with the
Trustee, within not more than six months prior to the maturity or redemption of
all the Old Debentures, of funds sufficient for such payment or redemption.
The Trustee
First Trust of Illinois, a National Association as successor to Continental
Illinois National Bank and Trust Company of Chicago is the trustee under the Old
Indenture.
The holders of a majority in principal amount of all outstanding Old
Debentures have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, providing that
such direction would not conflict with any rule of law or with the Old
Indenture, would not be unduly prejudicial to the right of another
Debentureholder and would not subject the Trustee to personal liability. The
Old Indenture provides that in case an Event of Default should occur and be
known to the Trustee (and not be cured), the Trustee will be required to use
the degree of care of a prudent man in the conduct of his own affairs in the
exercise of its rights and powers. Subject to such provisions, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Old Indenture at the request of any of the Debentureholders unless they shall
have offered to the Trustee security and indemnity satisfactory to it.
Concerning the Trustee
The Old Indenture and the New Indenture contain provisions which permit the
Trustee and the New Trustee to engage in other transactions with the Company;
including, without limitation, as a creditor, as if it were not the Trustee.
DESCRIPTION OF CAPITAL STOCK
The Company is presently authorized to issue 30 million shares of Common
Stock, par value $.05 per share, 10 million shares of Class B Common Stock, par
value $.05 per share, and 5 million shares of Preferred Stock, par value $1.00
per share. The Preferred Stock may be issued in series at the election of the
Board of Directors which may fix the terms of each such series without further
shareholder action. No Preferred Stock is presently outstanding.
Shares of Class B Common Stock are subject to conversion into shares of
Common Stock on a share for share basis as described below. See "Terms of
Common Stock and Class B Common Stock - Conversion," below.
The statements relating to the Common Stock and Class B Common Stock are
summaries and do not purport to be complete. Such summaries use terms defined
in and are qualified in their entirety by express reference to Article Fourth of
the Restated Certificate of Incorporation of the Company. Copies of the
Restated Certificate of Incorporation of the Company are available from the
Company at 40W267 Keslinger Road, LaFox, Illinois 60147, Attn: William G. Seils.
The transfer agent and registrar of the Company's Common Stock is Harris
Trust and Savings Bank, 111 West Monroe Street, Chicago, Illinois 60690.
Terms of Common Stock and Class B Common Stock
The Common Stock and Class B Common Stock have the following rights,
powers, limitations and restrictions:
Voting Rights. Except as otherwise described below, and except for voting
by class in instances required by law, holders of Common Stock and Class B
Common Stock vote with holders of the Preferred Stock (if any are issued with
voting rights) as a single class on all matters including the election of
directors, with each share of Common Stock having one vote and each share of
Class B Common Stock having ten votes.
There is no cumulative voting in the election of directors and shareholders
voting a majority of the votes (including Edward J. Richardson, who presently
owns shares having approximately 84.39% of the voting power) at any annual
meeting will be able to elect all the directors to be elected, and the minority
will not be able to elect any.
Class Voting. Under the Delaware General Corporation Law, the holders of
Common Stock and Class B Common Stock are entitled to vote separately as a class
upon any proposed amendment to the Company's Restated Certificate of
Incorporation which would (i) increase or decrease the aggregate number of
authorized shares of the class in question or par value of such shares or (ii)
alter or change the powers, preferences or special rights of shares of such
class so as to affect the holders thereof adversely. In addition, except for
shares issued pursuant to options granted prior to December 10, 1986 under the
Company's stock purchase or option plans or in connection with stock splits,
dividends, reclassifications and other subdivisions, additional shares of
Class B Common Stock may only be issued upon the approval of holders of a
majority of the outstanding shares of Common Stock and Class B Common Stock,
each voting separately as a class.
Dividends, Stock Splits, Combinations, and Property Distributions. Subject
to the terms and preferences of the Preferred Stock if issued from time to time
and the limitations on cash dividends in the Old and New Indenture relating to
the Old and New Debentures (see "Description of Old Debentures - Limitation on
Dividends and Stock Purchases" and see "Description of New Debentures -
Limitation on Dividends and Stock Purchases"), a cash dividend may be declared
on either the Common Stock or Class B Common Stock, but only if a cash dividend
is paid simultaneously on the other class; provided, however, that the cash
dividend on Class B Common Stock shall be 90% of the cash dividend declared on
the Common Stock. Dividends on the Common Stock and Class B Common Stock are
not cumulative.
No other distribution, including upon liquidation, of assets, property,
rights to subscribe or evidence of indebtedness may be paid on either the Common
Stock or the Class B Common Stock unless a distribution in like kind and equal
per-share amount is paid simultaneously on the other class. If the Board of
Directors determines to pay a stock dividend on either the Common Stock or the
Class B Common Stock (which stock dividend may only be paid in shares of the
same class), or in the event of a stock split or a combination of shares of
either class, a proportionate stock dividend, stock split or combination of
shares must be paid or made in respect to the shares of the other class.
Transferability and Registration. The Common Stock is freely transferable
and shares of Common Stock may be registered as requested by the holder thereof.
Shares of Class B Common Stock may only be registered in the name of the
beneficial owner thereof and not in a "street" or "nominee" name. The
"beneficial owner" of shares of Class B Common Stock is defined as the person or
persons who, or the entity or entities which, possess the power to direct the
voting or the disposition of such shares.
Shares of Class B Common Stock (or any interest therein) are not freely
transferable. A record holder of shares of Class B Common Stock may transfer
such shares (whether by sale, assignment, gift, bequest, appointment or
otherwise) only to a "Permitted Transferee" (as defined below). Accordingly no
trading market will develop in the Class B Common Stock. A transfer of Class B
Common Stock to any person or entity other than a "Permitted Transferee" will
result in the automatic conversion of such Class B Common Stock into shares of
Common Stock on a share-for-share basis.
The "Permitted Transferees" of an individual holder of shares of Class B
Common Stock are generally described as follows:
(i) such shareholder's spouse;
(ii) any lineal descendant of a grandparent of such shareholder,
including adopted children, and any spouse of such lineal descendant (said
descendants and their spouses, together with such shareholders and their
spouses, being hereinafter referred to as "such Class B Stockholder's
family members");
(iii) a trust for the sole benefit of such Class B Stockholder's family
members and certain charitable organizations;
(iv) certain charitable organizations established by such Class B
Stockholder's family members;
(v) a partnership or corporation all of the beneficial ownership of
which is owned (and continues to be owned) by such shareholder and/or one
or more of his or her Permitted Transferees;
(vi) the estate of such shareholder; and
(vii) an employee stock ownership plan of the Company.
Shares of Class B Common Stock held by a partnership or corporation may be
transferred to a person who had transferred such shares to such partnership or
corporation (and to such person's Permitted Transferees) or, if record and
beneficial ownership of such shares of Class B Common Stock were acquired by
such partnership or corporation on or prior to December 10, 1986, to the
partners or stockholders as of such date, and to the Permitted Transferees of
such partners or stockholders. Shares held by trusts which are irrevocable
on December 10, 1986 may be transferred to any person to whom or for whose
benefit the principal of the trust may be distributed under the terms of the
trust and such person's Permitted Transferees. Shares held by all other
trusts (whether or not in existence as of December 10, 1986) may be
transferred to the person who transferred such Class B Common Stock to such
trust and such person's Permitted Transferees. Shares held by the estate of
a holder of Class B Common Stock may be transferred to Permitted Transferees
of such holder of Class B Common Stock. Shares held in any employee benefit
plan of the Company may be transferred to the participant for whose account
the shares were held or his Permitted Transferee.
The Company may require the furnishing of such affidavits or other proof
as it, in its sole discretion, deems necessary to establish that any person is
the beneficial owner of Class B Common Stock or is a Permitted Transferee.
Conversion. Shares of Class B Common Stock are convertible into Common
Stock on a share-for-share basis at all times at the option of the holder
without cost to the holder (except to the extent of any stamp or similar tax
payable where the converting holder of Class B Common Stock desires that the
certificate representing the resulting Common Stock be issued in a name other
than that of the converted Class B Common Stock). In general, such
conversion will be effective as of the date the Class B Common Stock is
surrendered to the Company for conversion.
Any transfer, pledge or other disposition of shares of Class B Common Stock
other than to a Permitted Transferee will result in an automatic conversion to
Common Stock, on a share-for-share basis.
If at any time the number of issued and outstanding shares of Class B
Common Stock falls below 10% of the aggregate number of issued and outstanding
shares of Common Stock, Class B Common Stock and Preferred Stock, all the
outstanding shares of Class B Common Stock immediately and automatically shall
be converted into shares of Common Stock. In the event of such a conversion,
certificates formerly representing outstanding shares of Class B Common Stock
will thereafter be deemed to represent a like number of shares of Common Stock.
All Shares of Class B Common Stock received by the Company upon conversion
thereof into Common Stock will be returned to the status of authorized but
unissued.
Shares of Common Stock are not convertible into shares of Class B Common
Stock.
Future Issuance. Additional shares of Common Stock may be issued or sold
by the Company for any lawful purpose. The Company will not issue any
additional shares of Class B Common Stock, except pursuant to exercise of
options already granted prior to December 10, 1986 under the Company's stock
purchase or option plans or in connection with stock splits, stock dividends,
reclassifications or other subdivisions, unless such issuance is authorized
by the vote of holders of a majority of the outstanding shares of Common
Stock and Class B Common Stock voting separately as a class.
The Board of Directors possesses the power to issue shares of authorized
but unissued Common Stock and Preferred Stock without further shareholder
action. In addition, all 5,000,000 shares of authorized Preferred Stock are
available for future issuance. If the Board of Directors would determine to
issue Preferred Stock which was convertible, such shares would only be
convertible into shares of Common Stock.
Other Terms. Shareholders of the Company do not have preemptive or other
rights to subscribe for additional shares of either Common Stock or Class B
Common Stock. Upon liquidation, dissolution or winding-up of the affairs of the
Company, the holders of the Common Stock and the Class B Common Stock as a
single class are entitled to share ratably in the net assets to be
distributed with respect to both the Common Stock and the Class B Common
Stock. Neither the Common Stock nor the Class B Common Stock is callable or
subject to optional or mandatory redemption, except that shares of Class B
Common Stock are subject to automatic conversion into shares of Common Stock
as described above under "Conversion." The shares of Common Stock and Class
B Common Stock now outstanding are validly issued, fully paid and nonassessable.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
This summary is based upon laws, regulations, rulings and judicial
decisions now in effect and upon proposed regulations, all of which are subject
to change (possibly with retroactive effect) by legislation, administrative
action or judicial decision. Moreover, substantial uncertainties, resulting
from the lack of definitive judicial or administrative authority and
interpretation, apply to various tax aspects of an exchange pursuant to the
Exchange Offer. The summary does not discuss all aspects of Federal income
taxation that may be relevant to a particular investor in light of his
personal investment circumstances or to certain types of investors subject to
special treatment under the Federal income tax laws (for example, life
insurance companies, tax-exempt organizations, foreign taxpayers and
taxpayers who may be subject to the alternate minimum tax) and it does not
discuss any aspects of state, local or foreign tax laws. The discussion of
the tax consequences to exchanging Debentureholders is limited to such
holders who hold an Old Debenture as a "capital asset" on the date of the
exchange and who will hold the New Debentures as a "capital asset" within the
meaning of section 1221 of the Internal Revenue Code of 1986, as amended
(the "Code").
The following summary is a general discussion of certain of the Federal
income tax consequences of the Exchange Offer and is included herein for general
information only. It is not intended as a substitute for careful tax planning.
Each holder of Old Debentures should consult his tax advisor with respect to the
specific tax consequences to him of the Exchange Offer, including the
consequences of any state, local, foreign and other tax consequences of the
Exchange Offer.
Tax Consequences to Exchanging Holders of Old Debentures
Tendering Holders of Old Debentures. The federal income tax consequences
of the exchange of Old Debentures for New Debentures pursuant to the Exchange
Offer (the "Exchange") depend on whether the Exchange is a "Recapitalization"
and on whether the Old Debentures and New Debentures are "securities" for
federal income tax purposes. An exchange of securities for securities, of like
principal amount, in a recapitalization is not taxable.
The Company believes that the Exchange is a "recapitalization," and that
the Old Debentures and New Debentures are "securities" for federal income tax
purposes. Thus, a holder who participates in the Exchange Offer should not
recognize gain or loss. Because such determinations are, in substantial part,
fact specific, there can be no assurance that the Internal Revenue Service will
respect such characterizations. If the Internal Revenue Service successfully
establishes that the Exchange is not a "recapitalization" or that the Old
Debentures and New Debentures are not "securities," then the Exchange would be
a taxable transaction and the holders of the Old Debentures would recognize gain
equal to the difference between the fair market value of the New Debentures and
the adjusted tax basis of the Old Debentures. Assuming the transaction is non-
taxable, a holder's initial tax basis in New Debentures would be equal to the
holder's adjusted tax basis in the Old Debentures exchanged therefor, and the
holding period of each New Debenture would include the holding period of the Old
Debentures exchanged therefor.
Market Discount on Old Debentures. In general, upon the disposition of a
"market discount" bond, any gain recognized by a holder is treated as ordinary
income to the extent of accrued market discount thereon. Market discount is
defined generally as the excess of (i) the stated redemption price at maturity
("SRPM") of a debt obligation less any unamortized original issue discount
("OID") over (ii) the tax basis of the debt obligation in the hands of the
holder immediately after its acquisition. The market discount rules apply
only to Old Debentures acquired after April 30, 1993.
Old Debentures held by the original holders do not bear market discount or
OID. In addition, under a de minimis exception, there would be no market
discount if the excess of the SRPM of the obligation over the holder's tax basis
is less than 0.25% of the SRPM multiplied by the number of complete years to the
maturity of the obligation.
Based on legislative history, regulations of the United States Department
of the Treasury ("Treasury Regulations") are expected to be issued that would
provide that exchanges of market discount bonds that do not result in full
recognition of gain to the holder (such as due to "recapitalization" treatment)
would not cause recognition of accrued market discount. If such regulations are
promulgated and are applicable to the Exchange, any accrued market discount on
Old Debentures would not be treated as ordinary income at the time of the
Exchange, but would carry over to the New Debentures issued in exchange
therefor.
Federal Income Tax Consequences Associated With New Debentures
Interest and Original Issue Discount. A holder of New Debentures will be
required to include in gross income for federal income tax purposes the stated
interest on such debentures in accordance with the holder's method of tax
accounting. In addition, if New Debentures are issued with OID, a holder of New
Debentures will be required to include in gross income the amount of OID accrued
thereon, determined using the New Debenture's yield to maturity (a holder may
elect another permissible method to include amounts in gross income). New
Debentures will be treated as issued with OID if (i) their stated principal
amount exceeds (ii) their "issue price" (subject to the de minimis exception).
The "issue price" will equal the fair market value of the New Debentures on the
date the New Debentures are issued, if the New Debentures are publicly traded.
If the New Debentures are not publicly traded the "issue price" will equal the
fair market value of the Old Debentures on the date the New Debentures are
issued. Under the de minimis exception, there will be no OID if the OID with
respect to the New Debentures is less than 0.25% of the SRPM multiplied by the
number of full years from the issue date to the maturity date. Thus if the
issue price of the New Debentures is greater than $977.50, there will be no
OID. A holder of New Debentures must include the accrued OID thereon in
gross income in advance of the receipt of cash in respect of such income.
The Company believes that the optional redemption provisions and
convertibility features applicable to New Debentures will not affect the
calculation of OID on such debentures. However, there can be no assurance that
the Internal Revenue Service will not take a contrary position, in which case a
holder may be required to include OID in income or include greater amounts of
OID in income than anticipated.
Acquisition Premium. The amount of OID, if any, required to be included
in gross income by a holder of the New Debentures is reduced if such holder's
adjusted tax basis in such New Debentures immediately after the acquisition
exceeds their "adjusted issue price" (i.e., generally the issue price of such
New Debentures). If a holder's adjusted tax basis in such New Debentures
immediately after the acquisition of such debentures exceeds their stated
principal amount, then such holder would not be required to include any OID
in income (any excess premium over their stated principal amount would be
governed by the "bond premium" provisions of the Code, as discussed below).
Tax Basis. Generally, a holder's tax basis in New Debentures will be
increased in the future by the amount of OID, if any, that is included in the
holder's income through the day preceding the date of disposition and will be
decreased by the amount of any principal payments received.
Sale or Redemption. The sale, exchange, redemption or other disposition
of a New Debenture generally will be a taxable event for federal income tax
purposes. A holder generally will recognize gain or loss equal to the
difference between (i) the amount of cash plus the fair market value of any
property received upon such sale, exchange, redemption or other taxable
disposition of a New Debenture (other than in respect of accrued interest
thereon) and (ii) the holder's adjusted tax basis in such debt instrument.
Subject to the rules relating to market discount discussed below, such gain
or loss will be capital gain or loss and would be long-term capital gain or
loss if New Debentures were held by the holder for the applicable holding
period (currently more than one year) at the time of such sale or other
disposition. The holding period of each New Debenture would include the
holding period of the Old Debentures exchanged therefor.
If the Company intended at the time of the original issuance of New
Debentures to call such debentures prior to maturity, any gain on the sale,
exchange, or redemption or other taxable disposition of New Debentures would be
considered ordinary income to the extent that the entire amount of OID with
respect to New Debentures exceeded the amount of OID previously includable in
the income of any holder. The Company does not have a present intention to
call New Debentures before their maturity.
Market Discount. Generally, gain recognized on the disposition of New
Debentures will be treated as ordinary income, and not capital gain, to the
extent of any accrued market discount, if any, carried over from Old
Debentures. The amount of market discount on New Debentures will be
determined in the same manner as described above under "Market Discount on
Old Debentures."
A holder of New Debentures having accrued market discount may elect to
include the market discount in income as it accrues. This election would apply
to all market discount obligations acquired by the electing holder on or after
the first day of the first taxable year to which the election applies and could
be revoked only with the consent of the Internal Revenue Service. If a holder
of New Debentures elects to include market discount in income, the above-
discussed rules with respect to ordinary income recognition resulting from sale
and certain other disposition transactions and to deferral of interest
deductions would not apply. A holder of New Debentures having accrued market
discount may be required to defer the deduction of all or a portion of any
interest expense on any indebtedness previously incurred or maintained to
purchase the Old Debentures or to carry such debentures.
Bond Premium. If the initial tax basis of a holder in New Debentures (as
discussed above, this amount is generally a carry-over basis from the Old
Debentures) exceeds the "amount payable on maturity" (such excess being the
"Bond Premium"), the holder may elect to amortize the Bond Premium over the
period from such debenture's acquisition date to its maturity date and, except
as Treasury Regulations may otherwise provide, reduce the amount of interest
included in income in respect of such New Debentures by such amount.
A holder who elects to amortize Bond Premium must reduce his adjusted basis
in such New Debentures by the amount of such allowable amortization. An
election to amortize Bond Premium would apply to amortizable Bond Premium on
all taxable bonds held at or acquired after the beginning of the holder's
taxable year as to which the election is made, and may be revoked
subsequently only with the consent of the Service.
Conversion Feature. The New Debentures are subject to adjustments in their
conversion price in certain events. See "Description of the New Debentures -
Conversion Rights." Under Section 305 of the Code, changes in the conversion
price of a security can in certain circumstances result in deemed taxable
dividends to the securities holders. However, under Treasury Regulations, a
change in the conversion price of convertible securities pursuant to a bona fide
reasonable adjustment formula (other than merely to compensate for payment of
cash or property dividends to shareholders) which has the effect of preventing
dilution of the interest of such security holders will not be considered to
result in a deemed distribution with respect to such securities. It is
anticipated that any adjustment to the conversion price would be made solely for
such reasonable anti-dilutive protection to the securities holders, and
therefore should not result in any taxable income if such change occurs,
except in the case of a change in the conversion price that is attributable
to a distribution of assets other than Common Stock, rights or warrants.
Backup Withholding. Unless the exchanging holder or other payee provides
his correct taxpayer identification number (employer identification number or
social security number) to the Company (as payor) and certifies that such number
is correct, generally under the federal income tax backup withholding rules, 31%
of the issue price of the New Debentures must be withheld and remitted to the
United States Department of the Treasury. Therefore, each exchanging holder
should complete and sign the Substitute Form W-9 included so as to provide the
information and certification necessary to avoid backup withholding. However,
certain exchanging holders (including, among others, certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
foreign recipient, that exchanging holder must submit a statement, signed
under penalties of perjury, attesting to that individual's exempt foreign
status. Such statements can be obtained from American National Bank and
Trust Company of Chicago. For further information concerning backup
withholding and instructions for completing the Substitute Form W-9
(including how to obtain a taxpayer identification number if you do not have
one and how to complete the Substitute Form W-9 if the Old Debentures are
held in more than one name), contact United States Trust Company of New York.
Withholding is not an additional federal income tax. Rather, the federal
income tax liability of a person subject to withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
Federal Income Tax Consequences To The Company
The Company will be required to recognize cancellation of indebtedness
income to the extent that the principal amount of the Old Debentures cancelled
in the exchange exceeds the adjusted issue price of the New Debentures issued in
exchange therefor. The Company believes that its net operating loss
carryforwards are sufficient so that the recognition of cancellation of
indebtedness income will not result in payment of any income tax.
The New Debentures will have OID in an amount equal to the cancellation of
indebtedness income recognized by the Company. The Company will be entitled to
deduct this OID over the term of the New Debentures on a yield to maturity
basis. The Company will not be entitled to deduct unamortized OID if the
New Debentures are converted into Common Stock of the Company.
THE FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER ARE COMPLEX. THE
FOREGOING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY. EACH
DEBENTUREHOLDER OF OLD DEBENTURES SHOULD CONSULT SUCH HOLDER'S TAX ADVISOR AS TO
THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE EXCHANGE OFFER, INCLUDING
THE APPLICATION OF AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
STATE AND LOCAL TAXES; FOREIGN PERSONS
Holders of Old Debentures should consult their tax advisors concerning the
tax implications of the Exchange Offer under applicable state, local and foreign
income and other tax laws. Foreign investors should also consult their tax
advisors regarding the tax consequences of the Exchange Offer.
THE EXCHANGE AGENT
By Registered or Certified Mail: By Facsimile: By Hand Delivery
American National Bank and Trust (312) 661-6491 American National Bank
Company of Chicago and Trust Company of Chicago
13th Floor 13th Floor
33 North LaSalle Street 33 North LaSalle Street
Chicago, IL 60690 Chicago, IL 60690
Attn. Anjali Gottreich or Attn. Anjali Gottreich or
Elizabeth Nelson Elizabeth Nelson
By Overnight Courier:
American National Bank and Trust
Company of Chicago
13th Floor
33 North LaSalle Street
Chicago, IL 60690
Attn. Anjali Gottreich or
Elizabeth Nelson
Confirm by Telephone:
Anjali Gottreich or Elizabeth Nelson
(312) 666-6055
ADDITIONAL COPIES
Requests for additional copies of this Offering Circular and Letter of
Transmittal should be directed to the Exchange Agent or the Company.
Table of Contents
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . .4
FORM 10-K, 10-Q AND PROXY STATEMENT. . . . . . . . . . . . . . .4
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
The Company . . . . . . . . . . . . . . . . . . . . . . . .5
Purpose and Effects of The Exchange Offer . . . . . . . . .5
Market for the New Debentures . . . . . . . . . . . . . . .5
The New Debentures. . . . . . . . . . . . . . . . . . . . .8
Comparison of New Debentures and Old Debentures . . . . . .9
SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . 11
CURRENT DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . 12
LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . 12
CERTAIN CONSIDERATIONS FOR NONEXCHANGING DEBENTUREHOLDERS. . . 13
PRICE RANGES OF THE OLD DEBENTURES AND THE COMMON STOCK. . . . 13
Old Debentures. . . . . . . . . . . . . . . . . . . . . . 13
Common Stock. . . . . . . . . . . . . . . . . . . . . . . 14
PURPOSE AND EFFECTS OF THE TENDER PORTION OF THE EXCHANGE OFFER AND THE
PROPOSED AMENDMENTS15
The Tender Portion. . . . . . . . . . . . . . . . . . . . 15
Proposed Amendments to the Old Indenture. . . . . . . . . 16
THE EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . . 16
Terms of the Exchange Offer . . . . . . . . . . . . . . . 16
Expiration Date; Extensions; Termination; Amendments. . . 17
Solicitation of Consents; Consent Procedure . . . . . . . 18
Procedures for Tendering. . . . . . . . . . . . . . . . . 19
Guaranteed Delivery Procedure . . . . . . . . . . . . . . 21
Conditions of the Exchange Offer. . . . . . . . . . . . . 21
Acceptance of Old Debentures for Exchange; Delivery of
New Debentures . . . . . . . . . . . . . . . . . . . . . 23
Withdrawal Rights and Revocation of Consents. . . . . . . 23
Exchange Agent. . . . . . . . . . . . . . . . . . . . . . 24
Financial Advisor . . . . . . . . . . . . . . . . . . . . 25
Payment of Expenses . . . . . . . . . . . . . . . . . . . 25
DESCRIPTION OF THE NEW DEBENTURES . . . . . . . . . . . . . . 26
General . . . . . . . . . . . . . . . . . . . . . . . . . 26
Conversion. . . . . . . . . . . . . . . . . . . . . . . . 26
Redemption. . . . . . . . . . . . . . . . . . . . . . . . 27
Subordination . . . . . . . . . . . . . . . . . . . . . . 27
Defaults and Remedies . . . . . . . . . . . . . . . . . . 27
Limitation on Dividends and Stock Purchases . . . . . . . 28
Consolidation, Merger, Conveyance, Transfer or Assumption 28
Modification of the New Indenture . . . . . . . . . . . . 29
Satisfaction and Discharge of the New Indenture . . . . . 29
The New Trustee . . . . . . . . . . . . . . . . . . . . . 29
DESCRIPTION OF THE OLD DEBENTURES. . . . . . . . . . . . . . . 29
General . . . . . . . . . . . . . . . . . . . . . . . . . 30
Conversion. . . . . . . . . . . . . . . . . . . . . . . . 30
Optional Redemption . . . . . . . . . . . . . . . . . . . 30
Sinking Fund. . . . . . . . . . . . . . . . . . . . . . . 31
Subordination . . . . . . . . . . . . . . . . . . . . . . 31
Defaults and Remedies . . . . . . . . . . . . . . . . . . 31
Limitation on Dividends and Stock Purchases . . . . . . . 32
Consolidation, Merger, Conveyance, Transfer or Assumption 33
Modification of the Old Indenture . . . . . . . . . . . . 33
Satisfaction and Discharge of the Old Indenture . . . . . 33
The Trustee . . . . . . . . . . . . . . . . . . . . . . . 33
Concerning the Trustee. . . . . . . . . . . . . . . . . . 33
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . 34
Terms of Common Stock and Class B Common Stock. . . . . . 34
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. . . . . . . . . . . . 36
Tax Consequences to Exchanging Holders of Old Debentures. 37
Federal Income Tax Consequences Associated With New
Debentures . . . . . . . . . . . . . . . . . . . . . . . 37
Federal Income Tax Consequences To The Company. . . . . . 39
STATE AND LOCAL TAXES; FOREIGN PERSONS . . . . . . . . . . . . 40
THE EXCHANGE AGENT . . . . . . . . . . . . . . . . . . . . . . 40
ADDITIONAL COPIES. . . . . . . . . . . . . . . . . . . . . . . 40
Item 9 (a)(2)
RICHARDSON ELECTRONICS, LTD.
CONSENT AND LETTER OF TRANSMITTAL
Offer to Exchange
Its
8 1/4% Convertible Senior Subordinated Debentures due June 15, 2006
(between $25,000,000 and $40,000,000 aggregate principal amount)
for Its
7 1/4% Convertible Subordinated Debentures due December 15, 2006
($70,825,000 principal amount outstanding)
and
Solicitation of Consents
(collectively the "Exchange Offer")
THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME
ON JANUARY 31, 1997, UNLESS EXTENDED
To: American National Bank and Trust Company of Chicago
(312) 661-6055
Anjali Gottreich or Elizabeth Nelson
Facsimile Transmission
Telephone Number (312) 661-6491
By Mail: By Hand:
American National Bank and Trust American National Bank and Trust
Company of Chicago Company of Chicago
Corporate Trust Department, 13th Floor Corporate Trust Department, 13th Floor
33 North LaSalle Street 33 North LaSalle Street
Chicago, IL 60690 Chicago, IL 60690
Attn: Anjali Gottreich or Attn: Anjali Gottreich or
Elizabeth Nelson Elizabeth Nelson
____________________
SIGN THE YELLOW PAGE
Delivery of this Consent and Letter of Transmittal to an address other than
as set forth above or Transmission of Instructions via facsimile number will not
constitute a valid delivery.
The undersigned acknowledges that receipt of the Offering Circular and
Consent Solicitation dated December 18, 1996 (the "Offering Circular") of
Richardson Electronics, Ltd. (the "Company") and this Consent and Letter of
Transmittal (the "Consent and Letter of Transmittal"), which together constitute
the Company's offer (the "Offer") to exchange $1,000 principal amount of its
8-1/4% Convertible Senior Subordinated Debentures due June 15, 2006 (the "New
Debentures") for each $1,000 of its 7-1/4% Subordinated Convertible Debentures
due December 15, 2006 (the "Old Debentures") (the "Tender Portion" of the
Exchange Offer). The Tender Portion of the Exchange Offer is for not less than
$25,000,000 and not more than $40,000,000 aggregate principal amount of Old
Debentures, subject to the Company's right, in its sole discretion, to accept a
lesser or greater aggregate principal amount of Old Debentures for exchange.
There are currently $70,825,000 aggregate principal amount of Old Debentures
outstanding and held by persons other than the Company.
The Company is also soliciting (the "Solicitation" portion of the Exchange
Offer) consents ("Consents") from holders of the Old Debentures (the
"Debentureholders") representing at least a majority in aggregate principal
amount of the outstanding Old Debentures (the "Requisite Consents") to certain
amendments described on page 15 of the Offering Circular (the "Proposed
Amendments") to the indenture under which the Old Debentures were issued (the
"Old Indenture"). While the Tender Portion of the Exchange Offer is not
conditioned upon the Company receiving the Requisite Consents, the Proposed
Amendments will not become effective on the remaining Old Debentures unless the
current majority of the Old Debentures give such Consents. Unless otherwise
specified, the term "Exchange Offer" includes the Tender Portion and the
Solicitation.
Debentureholders who exchange all or part of their Old Debentures hereby
are referred to as "Exchanging Holders." Unless otherwise indicated, defined
terms used in this Consent and Letter of Transmittal have the same meanings as
in the Offering Circular.
IMPORTANT: THIS CONSENT AND LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF
(TOGETHER WITH THE CERTIFICATES FOR OLD DEBENTURES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER OR A NOTICE OF GUARANTEED DELIVERY AND ALL OTHER REQUIRED DOCUMENTS)
MUST BE RECEIVED PRIOR TO 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
PLEASE READ THE ENTIRE CONSENT AND LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
The Consent and Letter of Transmittal may be used either if certificates
for Old Debentures are to be forwarded herewith or if tenders are to be made by
book-entry transfer to the account maintained by the Exchange Agent at DTC, MSTC
or PHILADEP. Delivery of documents to DTC, MSTC or PHILADEP does not constitute
delivery to the Exchange Agent.
Your bank or broker can assist you in completing this form. The
Instructions included with this Consent and Letter of Transmittal must be
followed. Questions and requests for assistance or for additional copies of the
Offering Circular and this Consent and Letter of Transmittal may be directed to
Anjali Gottreich or Elizabeth Nelson at the Exchange Agent, American National
Bank and Trust Company, (312) 661-6055 or the Company.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Old Debentures
indicated below. Subject to, and effective upon, the acceptance for exchange of
the Old Debentures tendered herewith, the undersigned hereby sells, assigns and
transfers to, or upon the order of, the Company all right, title and interest in
and to such Old Debentures as are being tendered hereby. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent also acts as the agent of the Company) with respect to such
Old Debentures with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest) to: (a) deliver
such Old Debentures or transfer ownership of such Old Debentures on the
account books maintained by The Depository Trust Company ("DTC"), the Midwest
Securities Trust Company ("MSTC") or the Philadelphia Securities Depository
Trust Company ("PHILADEP") and deliver, in any such case, all accompanying
evidences of transfer and authenticity to or upon the order of the Company
upon receipt by the Exchange Agent, as the undersigned's agent, of the New
Debentures to which the undersigned is entitled upon the acceptance by the
Company of such Old Debentures under the Exchange Offer; and (b) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Old Debentures, all in accordance with the terms of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Debentures
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Exchange Agent or the Company to be necessary or desirable to
complete the sale, assignment and transfer of the Old Debentures tendered
hereby. All authority conferred or agreed to be conferred in this Consent
and Letter of Transmittal and every obligation of the undersigned hereunder
shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in
accordance with the procedures set forth in the instructions contained in
this Consent and Letter of Transmittal.
Unless otherwise indicated herein under "Special Issuance and Delivery
Instructions" below, please deliver New Debentures (and, if applicable,
substitute Old Debentures for any principal amount of Old Debentures not
tendered or accepted for exchange) in the name of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions"
below, please send New Debentures (and, if applicable, substitute Old
Debentures for any principal amount of Old Debentures not tendered or
accepted for exchange) to the undersigned at the address shown below the
signature of the undersigned. The undersigned understands that
Debentureholders who deliver Old Debentures by book-entry transfer
("Book-Entry Debentureholders") may request that any Old Debentures not
tendered or accepted be returned by crediting the account maintained by DTC,
MSTC or PHILADEP as such Book-Entry Debentureholder may designate by making
an appropriate entry under "Special Issuance and Delivery Instructions." The
undersigned recognizes the Company has no obligation pursuant to the "Special
Issuance and Delivery Instructions" to transfer any Old Debentures from the
name of the registered holder thereof if the Company does not accept for
exchange any of the principal amount of such Old Debentures.
THE UNDERSIGNED, BY COMPLETING THE BOX BELOW AND/OR SIGNING THIS CONSENT
AND LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE TENDERED THE OLD DEBENTURES AS
SET FORTH IN THE BOX BELOW AND TO HAVE CONSENTED TO THE PROPOSED AMENDMENTS.
SIGNATURE BOX
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING AND/OR CONSENTING
DEBENTUREHOLDERS)
(See Instructions 1 and 3)
X ______________________________ _____________________
X ______________________________ _____________________
Signature(s) of Owner(s) Date
Area Code and Tel. No.:_________________________________
Must be signed by the registered holder(s) as the name(s) appear(s) on the
certificate(s) for Old Debentures or on a security position listing or by
person(s) authorized to become registered holder(s) by endorsements and
documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, please set forth full title. See Instruction 3.
Name(s): _________________________________________________
__________________________________________________________
(Please Print)
Capacity: ________________________________________________
Address: ________________________________________________
__________________________________________________________
(Include Zip Code)
SIGNATURE GUARANTEE
Signature(s) Guaranteed by an Eligible Institution: ________________
(If required by Instruction 3) (Authorized Signature)
________________________________________________
(Title)
________________________________________________
(Name of Firm)
Dated: ________________________________, 199__
TENDER AND CONSENT
This Consent is being solicited by the Company. Holders of the Old
Debentures who wish to tender Old Debentures must consent to the adoption of
the Proposed Amendments.
Box 1 I HEREBY TENDER the Old Debentures described below pursuant to
the terms of the Exchange Offer, and CONSENT to the adoption of
the Proposed Amendments.
Box 2 I DO NOT DESIRE TO TENDER any Old Debentures at this time, BUT I
HEREBY CONSENT to the adoption of the Proposed Amendments.
Box 3 I DO NOT DESIRE TO TENDER any Old Debentures at this time, AND
hereby WITHHOLD CONSENT to the adoption of the Proposed
Amendments.
NOTE:
Holders of Old Debentures who wish to tender Old Debentures pursuant to
the Exchange Offer should: (a) check box 1; (b) complete the "Description of
Old Debentures" box below; (c) complete, sign, date and mail or deliver
this Consent and Letter of Transmittal to the Exchange Agent, at the
appropriate address set forth above; and (d) tender their Old Debentures in
accordance with one of the procedures for tendering described in the
Instructions included in this Consent and Letter of Transmittal. See
Instruction 1.
Holders of Old Debentures who do not desire to tender any Old Debentures
but wish to consent or withhold consent to the adoption of the Proposed
Amendments should: (a) check Box 2 or Box 3, as appropriate; (b) complete
the "Description of Old Debentures" below; and (c) complete, sign, date and
mail or deliver this Consent and Letter of Transmittal to the Exchange Agent,
at the appropriate address set forth above.
If no box is checked above but this Consent and Letter of Transmittal is
otherwise completed, signed and dated, the undersigned will be deemed to have
consented to the adoption of the Proposed Amendments.
DESCRIPTION OF OLD DEBENTURES
Name(s) and
Addresses(s) of PRINCIPAL AMOUNT
Registered Holder(s) Principal Amount TENDERED**
(Please fill in, Certificate Represented by (Must be an integral
if blank) Number(s)* Certificate(s)* multiple of $1,000)
Total
* Need not be completed by Book-Entry Debentureholders (see below).
** Unless otherwise indicated in this column, a holder will be deemed to have
tendered the entire principal amount represented by the Old Debentures
indicated in the third column. See Instruction 3.
CHECK HERE IF TENDERED OLD DEBENTURES ARE ENCLOSED HEREWITH.
CHECK HERE IF TENDERED OLD DEBENTURES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE
EXCHANGE AGENT WITH A TRUST COMPANY SPECIFIED BELOW AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________
DTC MSTC PHILADEP (check one) Account Number: __________
Transaction Code Number: ___________________________________
CHECK HERE IF TENDERED OLD DEBENTURES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE
FOLLOWING (See Instruction 1):
Name of Registered Owner(s): _______________________________
Date of Execution of Notice of Guaranteed Delivery: ________
Name of Institution which guaranteed delivery: _____________
DTC MSTC PHILADEP (check one if applicable)
Account Number (if delivered by book-entry transfer: __________
SPECIAL ISSUANCE AND DELIVERY
INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if certificates for any
principal amount of Old Debentures not tendered or
accepted and/or New Debentures are to be registered in
the name of and sent to someone other than the person
whose signature appears in the Signature Box of this
Consent and Letter of Transmittal or if Old Debentures
delivered by book-entry transfer which are not tendered
or accepted are to be returned by credit to an account
maintained by DTC, MSTC or PHILADEP.
Issue and mail:
(check appropriate box(es)):
New Debentures to:
Old Debentures to:
Credit untendered or
unaccepted Old Debentures
delivered by book-entry
transfer to the
DTC, MSTC or PHILADEP
(check one) account set forth
below:
Name(s) _________________________
(Please print)
_________________________________
(Please print)
Address:_________________________
_________________________________
Zip Code
_________________________________
(DTC, MSTC, or PHILADEP Account Number)
_________________________________
Employer Identification or
Social Security No.
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if certificates for any
principal amount of Old Debentures not tendered or
accepted and/or New Debentures registered in the name
of the person whose signature appears in the Signature
Box of this Consent and Letter of Transmittal are to be
sent to someone other than such person or to such
person at an address other than that shown in the box
entitled "Description of Old Debentures" on the face of
this Consent and Letter of Transmittal.
Mail or deliver:
(check appropriate box(es)):
New Debentures to:
Old Debentures to:
Name(s) __________________________
(Please print)
__________________________________
(Please print)
Address: _________________________
__________________________________
Zip Code
__________________________________
Employer Identification or
Social Security No.
TO BE COMPLETED BY ALL TENDERING DEBENTUREHOLDERS
(See Instruction 5)
PAYOR'S NAME: RICHARDSON ELECTRONICS, LTD.
SUBSTITUTE
Form W-9
Department of the Treasury
Internal Revenue Service
Payor's Request for
Taxpayer Identification
Number (TIN)
Part 1 -- PLEASE PROVIDE
YOUR TIN IN THE BOX AT
RIGHT AND CERTIFY BY
SIGNING AND DATING BELOW.
Social Security Number
OR
Employer Identification Number
Part 2 - Awaiting TIN
CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT (1) the number
shown on this form is my correct taxpayer identification number (or I am
waiting for a number to be issued to me), (2) I am not subject to backup
withholding either because I have not been notified that I am subject to
backup withholding as a result of failure to report all interest or
dividends, or the Internal revenue Service has notified me that I am no longer
subject to backup withholding and (3) any other information provided on this
form is true and correct.
Signature: ___________________________ Date: __________________________
___________________________________________________________________________
You must cross out Item (2) above if you have been notified by
the Internal Revenue Service that you are subject to backup
withholding because of underreporting interest or dividends on
your tax return and you have not been advised by the Internal
Revenue Service that such withholding has been terminated.
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Delivery of the Consent and Letter of Transmittal and
Certificates. Certificates for Old Debentures, or any book-entry
transfer into the Exchange Agent's account at DTC of tendered Old
Debentures, as well as properly completed and duly executed copies
of this Consent and Letter of Transmittal (or facsimile thereof)
and Substitute Form W-9 and any other documents required by this
Consent and Letter of Transmittal, must be received by the Exchange
Agent at its address set forth herein or, in the case of tenders by
book-entry transfer, confirmed to the Exchange Agent on or prior to
the Expiration Date (as defined in the Offering Circular). THE
METHOD OF DELIVERY OF THIS TRANSMITTAL, THE OLD DEBENTURES AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
EXCHANGING HOLDER, BUT, EXCEPT AS OTHERWISE PROVIDED BELOW, THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR
CONFIRMED BY THE EXCHANGE AGENT. IF OLD DEBENTURES ARE DELIVERED
BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, BE USED.
Any questions as to validity, form, eligibility and acceptance
of any exchange hereunder will be determined by the Company (which
may delegate such power in whole or in part to the Exchange Agent)
and such determination shall be final and binding. All Exchanging
Holders, by execution of this Consent and Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the
acceptance of their tendered Old Debentures for exchange.
2. Partial Exchanges; Withdrawals. Exchanges of Old
Debentures will be accepted only in units (multiples of $1,000).
If less than the entire principal amount of any Old Debentures
evidenced by a submitted certificate is to be exchanged, the
Exchanging Holder should fill in the principal amount of Old
Debentures which are to be exchanged in the boxes entitled
"Principal Amount Tendered." A certificate for the principal
amount of Old Debentures not so exchanged will be sent to such
Exchanging Holder, unless otherwise provided in this Consent and
Letter of Transmittal, as soon as practicable following the
Expiration Date. The entire principal amount of all Old Debentures
delivered to the Agent will be exchanged unless otherwise indicated
or unless more than the principal amount of Old Debentures to be
accepted by the Company have been offered for exchange under the
Exchange Offer, in which case there shall be a pro rata allocation
of the Old Debentures to be exchanged. If less than the minimum
amount of Old Debentures to be accepted by the Company have been
offered for exchange they shall be returned to the Exchanging
Holder unless the Company determines to accept such lesser amount.
Tenders of Old Debentures made in accordance with the Exchange
Offer are irrevocable, except that any holder of Old Debentures who
has tendered Old Debentures may withdraw the tender at any time
prior to 12:00 Midnight, New York City time, on the Expiration Date
and, unless such tender has been previously accepted, at any time
after 12:00 Midnight, New York City time, February 28, 1997, by
delivery of written notice of withdrawal, to the Exchange Agent.
If the Company extends the Exchange Offer, is delayed in its
acceptance for exchange or is unable to accept Old Debentures for
exchange pursuant to the Exchange Offer for any reason, then,
without prejudice to the Company's rights under the Exchange Offer,
the Exchange Agent may, nevertheless, on behalf of the Company,
retain tendered Old Debentures, and such Old Debentures may not be
withdrawn except to the extent that tendering registered holders
are entitled to withdrawal rights as described herein.
To be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the
Exchange Agent at the address set forth above, must have a
guaranteed signature included thereon (unless not required by the
terms set forth under "Procedures for Tendering" in the Offering
Circular) and must specify the name of the person having tendered
the Old Debentures to be withdrawn and the name of the registered
holder, if different from that of the person who tendered such Old
Debentures, and the aggregate principal amount of Old Debentures to
be withdrawn. If Old Debentures have been delivered or otherwise
identified to the Exchange Agent, the name of the registered holder
and the serial numbers of the particular certificate(s) evidencing
the Old Debentures withdrawn must also be so furnished to the
Exchange Agent as aforesaid prior to the physical release of the
certificate(s) for the withdrawn Old Debentures. If Old Debentures
have been tendered pursuant to the procedures for book entry tender
as set forth herein, any notice of withdrawal must also specify the
name and number of the account at the appropriate Book Entry
Transfer Facility to be credited with the withdrawn Old Debentures.
Withdrawals of tenders of Old Debentures may not be rescinded, and
any Old Debentures withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer; provided, however,
that withdrawn Old Debentures may be retendered by again following
one of the procedures described herein at any time prior to 12:00
Midnight, New York City time, on the Expiration Date.
The withdrawal of Old Debentures will not constitute a
revocation of the Consent to the Proposed Amendments with respect
to the withdrawn Old Debentures, unless the procedures for
revocation of Consents described below are followed.
Any holder of Old Debentures who has consented to (or whose
predecessor in interest with respect to such Old Debentures has
consented to) the adoption of the Proposed Amendments may revoke
such Consent by delivering written notice of such revocation to the
Exchange Agent at any time prior to the delivery to the Trustee by
the Company of certification that the Requisite Consents have been
received. If such holder has tendered his Old Debentures for
exchange he must also properly withdraw his tender of such Old
Debentures for exchange in accordance with the procedures specified
above. Failure to withdraw the tendered Old Debentures properly
shall render the withdrawal of Consent ineffective. The Exchange
Agent shall promptly deliver any such valid notice of revocation of
Consent to the Trustee. Any such notice of revocation should
indicate the certificate number or numbers of the Old Debentures to
which it relates and the aggregate principal amount represented by
such Old Debentures and must be signed by the holder in the same
manner as the original Consent or be accompanied by evidence
satisfactory to the Company that the holder revoking such Consent
succeeded to ownership of such Old Debentures or otherwise has the
power to revoke such Consent. The revocation of a Consent shall be
effective with respect to the Old Debentures to which it relates,
unless otherwise specified in the notice of revocation.
All questions as to the validity (including time of receipt)
of notices of withdrawal or revocation of any Consent will be
determined by the Company, whose determination will be final and
binding. Neither the Company, the Exchange Agent nor any other
person will be under any duty to give notification of any defects
or irregularities in any notice of withdrawal or revocation or
incur any liability for failure to give any such notification.
3. Signatures on this Consent and Letter of Transmittal;
Bond Powers and Endorsements; Guarantee of Signature. If this
Consent and Letter of Transmittal is signed by the registered
holder(s) of the Old Debentures exchanged hereby, the signature
must correspond with the name(s) as written on the face of the
certificate without alteration, enlargement or any change
whatsoever.
If any of the Old Debentures exchanged hereby are owned of
record by two or more joint owners, all such owners must sign this
Consent and Letter of Transmittal.
If any exchanged Old Debentures are registered in different
names on several certificates, it will be necessary to complete,
sign and submit as many separate copies of this Consent and Letter
of Transmittal and any necessary accompanying documents as there
are different registrations of certificates.
When this Consent and Letter of Transmittal is signed by the
registered holder or holders of Old Debentures listed and tendered
hereby, no endorsements of certificates or separate bond powers are
required. If, however, certificates for the New Debentures are to
be issued, or certificates for Old Debentures for principal amounts
not exchanged are to be reissued, to a person other than the
registered holder, then endorsements of any certificates
transmitted hereby or separate bond powers are required with
signatures guaranteed by an Eligible Institution.
If this Consent and Letter of Transmittal is signed by a
person other than the registered holder or holders of any
certificate(s) listed, such certificate(s) must be endorsed or
accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders
appear on the certificate(s), with signatures guaranteed by an
Eligible Institution sufficient to establish a chain of assignments
to the Exchanging Holder.
Exchanging Holders who are not holders of record should (a)
obtain a properly completed Consent and Letter of Transmittal from
the record holder, (b) obtain and include with the Consent and
Letter of Transmittal a properly completed bond power from the
record holder with signatures guaranteed by an Eligible
Institution, or (c) effect a record transfer of their Old
Debentures prior to the Expiration Date. Any Old Debentures
properly tendered prior to the Expiration Date accompanied by a
properly completed Consent and Letter of Transmittal will be
transferred of record on the Expiration Date of accepted for
exchange.
If this Consent and Letter of Transmittal or any certificates
or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons
should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority so
to act must be submitted.
ENDORSEMENTS ON CERTIFICATES FOR OLD DEBENTURES OR SIGNATURES
ON BOND POWERS REQUIRED BY THIS INSTRUCTION 3 OR SIGNATURES OF
THOSE REGISTERED HOLDERS WHO HAVE COMPLETED THE BOX ENTITLED
"SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY INSTRUCTIONS"
ON THIS CONSENT AND LETTER OF TRANSMITTAL MUST BE GUARANTEED BY AN
ELIGIBLE INSTITUTION.
SIGNATURES ON THIS CONSENT AND LETTER OF TRANSMITTAL NEED NOT
BE GUARANTEED BY AN ELIGIBLE INSTITUTION, PROVIDED THE OLD
DEBENTURES ARE TENDERED: (i) BY A REGISTERED HOLDER OF SUCH OLD
DEBENTURES (WHICH TERM, FOR PURPOSES OF THIS LETTER, SHALL INCLUDE
ANY PARTICIPANT IN DTC WHOSE NAME APPEARS ON A SECURITY POSITION
LISTING AS THE OWNER OF OLD DEBENTURES) WHO HAS NOT COMPLETED THE
BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY
INSTRUCTIONS" ON THIS CONSENT AND LETTER OF TRANSMITTAL; OR (ii)
FOR THE ACCOUNT OF AN ELIGIBLE INSTITUTION.
4. Special Issuance, Payment and Delivery Instructions.
Exchanging Holders should indicate in the applicable box the name
and address to which the New Debentures and/or substitute Old
Debentures for principal amounts not exchanged are to be issued or
sent, if different from the name and address of the person signing
this Consent and Letter of Transmittal.
5. Tax Identification Number. Federal income tax law
requires that an Exchanging Holder must provide the payer with his
correct taxpayer identification number ("TIN"), which, in the case
of an individual, is his social security number. If the payer is
not provided with the correct TIN, the Exchanging Holder may be
subject to a $50 penalty imposed by the Internal Revenue Service.
In addition, payment for any interest with respect to the New
Debentures may be subject to backup withholding in an amount equal
to 20% of any such payment made to a holder of the New Debentures.
Certain Exchanging Holders (including, amount others, all
corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements.
To prevent backup withholding, each tendering Debentureholder
must provide his correct TIN by completing the "Substitute Form W-9" set
forth herein, certifying that the TIN provided is correct
(or that such Debentureholder is awaiting a TIN) and that (i) the
Debentureholder has not been notified by the Internal Revenue
Service that he is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal
Revenue Service has notified the Debentureholder that he is no
longer subject to backup withholding. In order to satisfy the
Exchange Agent that a foreign individual qualifies as an exempt
recipient, such Debentureholders must submit a statement signed
under penalty of perjury attesting to such exempt status. Such
statements may be obtained from the Exchange Agent. If the Old
Debentures are in more than one name or are not in the name of the
actual owner, consult the enclosed guidelines for information on
which TIN to report. If you do not have a TIN, consult the
enclosed guidelines for instructions on applying for a TIN, check
the box in Part 2 of the Substitute Form W-9, and write "applied
for" in lieu of your TIN. If you do not provide your TIN to the
payor within 60 days, backup withholding will begin and continue
until you furnish your TIN to the payor.
6. Transfer Taxes. The Company will pay all transfer taxes,
if any, applicable to the transfer and sale of Old Debentures to it
or its order pursuant to the Exchange Offer. If however, New
Debentures and/or substitute Old Debentures for principal amounts
not tendered are to be delivered to, or are to be registered or
issued in the name of, any person other than the registered holder
of the Old Debentures tendered hereby, or if tendered Old
Debentures are registered in the name of any person other than the
person signing this Consent and Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the transfer and
sale of Old Debentures to the Company or its order pursuant to the
Exchange Offer, the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be
payable by the tendering Debentureholder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted
herewith, the amount of such transfer taxes will be billed directly
to such tendering Debentureholder.
Except as provided in this Instruction 6, it will not be
necessary for transfer tax stamps to be affixed to the
certificate(s) listed in this Consent and Letter of Transmittal.
7. Waiver of Conditions. The Company reserves the absolute
right to waive satisfaction of any of the conditions enumerated in
the Offering Circular.
8. No Conditional Offers. No alternative, conditional,
irregular or contingent tenders will be accepted. All tendering
Debentureholders, by execution of this Consent and Letter of
Transmittal (or a facsimile thereof), shall waive any right to
receive notice of the acceptance of their Old Debentures for
exchange.
The Company, Exchange Agent or any other person is not
obligated to give notice of defects or irregularities in any
tender, nor shall any of them incur any liability for failure to
give any such notice.
9. Mutilated, Lost, Stolen or Destroyed Old Debentures. Any
Debentureholder whose Old Debentures have been mutilated, lost,
stolen or destroyed should contact the Exchange Agent at the
address indicated above for further instructions.
10. Requests for Assistance or Additional Copies. Questions
relating to the procedure for tendering, as well as requests for
additional copies of the Offering Circular and this Consent and
Letter of Transmittal, may be directed to Anjali Gottreich or
Elizabeth Nelson at the Exchange Agent at (312) 661-6055.
In addition, all questions relating to the Exchange Offer, as
well as requests for assistance or additional copies of the
Offering Circular and this Consent and Letter of Transmittal, may
be directed to William G. Seils, Senior Vice President, General
Counsel and Secretary of the Company, at Richardson Electronics,
Ltd., 40W267 Keslinger Road, LaFox, Illinois 60147, telephone (630)
208-2370.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give
the Payor. - Social Security numbers have nine digits separated by
two hyphens: i.e., 000-00-000. Employer identification numbers
have nine digits separated by only one hyphen: i.e., 00-0000000.
The table below will help determine the number to give the payer.
For this type of account: Give the SOCIAL SECURITY number of -
1. An individual's The individual (1)
account
2. Two or more The actual owner of the
individuals (joint account or, if combined
account) funds, any one of the
individuals (1)
3. Husband and wife The actual owner of the
(joint account) account or, if joint funds,
either person (1)
4. Custodian account of The minor (2)
a minor (Uniform Gift
to Minors Act)
5. Adult and minor The adult or, if the minor is
(joint account) the ony contributor, the
minor (1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person (3)
designated ward, minor,
or incompetent person
7. a. The usual revocable The grantor-trustee (1)
savings trust
account (grantor is
also trustee)
b. So-called trust The actual owner (1)
account that is not a
legal or valid trust
under State law.
8. Sole proprietorship The owner (4)
account
9. A valid trust, The legal entity (Do not
estate, or pension furnish the identifying
trust number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title.) (5)
10. Corporate account The corporation
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account The partnership
held in the name of the
business
13. Association, club, The organization
or other tax-exempt
organization
14. A broker or The broker or nominee
registered nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public entity
(such as a State or local
government, school district,
or prison) that receives
agricultural program
payments
1. List first and circle the name of the person whose number you furnish.
2. Circle the minor's name and furnish the minor's social security number
3. Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
4. Show the name of the owner.
5. List first and circle the name of the legal trust, estate, or pension
trust.
Note: If no name is circled when there is more than one name the number
will be considered to be that of the first name listed.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you don't have a taxpayer identification number or you
don't know your number, obtain Form SS-5, Application for
a Social Security Number Card, or Form SS-4, Application
for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue
Service and apply for a number.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on
ALL payments include the following:
A corporation.
A financial institution.
An organization exempt from tax under section
501(a), or an individual retirement plan.
The United States or any agency or instrumentality
thereof.
A State, the District of Columbia, a possession of
the United States, or any subdivision or
instrumentality thereof.
A foreign government, a political subdivision of a
foreign government, or any agency or
instrumentality thereof.
An international organization or any agency, or
instrumentality thereof.
A registered dealer in securities or commodities
registered in the U.S. or a possession of the U.S.
A real estate investment trust.
A common trust fund operated by a bank under
section 584(a).
An exempt charitable remainder trust, or a non-
exempt trust described in section 4947(a)(1).
An entity registered at all times under the
Investment Company Act of 1940.
A foreign central bank of issue.
Payments of dividends and patronage dividends not generally
subject to backup withholding include the following:
Payments to nonresident aliens subject to
withholding under section 1441.
Payments to partnerships not engaged in a trade or
business in the U.S. and which have at least one
nonresident partner.
Payments of patronage dividends where the
amount received is not paid in money.
Payments made by certain foreign organizations.
Payments made to a nominee.
Payments of interest not generally subject to backup
withholding include the following:
Payments of interest on obligations issued by
individuals. Note: You may be subject to backup
withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business
and you have not provided your correct taxpayer
identification number to the payer.
Payments of tax-exempt interest (including
exempt-interest dividends under section 852).
Payments described in section 6049(b)(5) to
nonresident aliens.
Payments on tax-free covenant bonds under section
1451.
Payments made by certain foreign organizations.
Payments made to a nominee.
Exempt payees described above should file Form W-9 to
avoid possible erroneous backup withholding. FILE THIS
FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON
THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST,
DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and
patronage dividends that are not subject to information
reporting are also not subject to backup withholding. For
details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
Privacy Act Notice. - Section 6109 requires most recipients
of dividend, interest, or other payments to give taxpayer
identification numbers to payers who must report the
payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Beginning January
1, 1984, payers must generally withhold 20% of taxable
interest, dividend, and certain other payments to a payee who
does not furnish a taxpayer identification number to a payer.
Certain penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification
Number.- If you fail to furnish your taxpayer identification
number to a payer, you are subject to a penalty of $50 for
each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments.
- - If you fail to include any portion of an includible payment
for interest, dividends, or patronage dividends in gross
income, such failure will be treated as being due to
negligence and will be subject to a penalty of 5% on any
portion of an under-payment attributable to that failure unless
there is clear and convincing evidence to the contrary.
(3) Civil Penalty for False Information with Respect to
Withholding.- If you make a false statement with no
reasonable basis which results in no imposition of backup
withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifyin Information.- Falsifying
certifications or affirmations may subject you to criminal
penalties including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR
TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
Item 9 (a)(3)
FORM OF
NOTICE OF GUARANTEED DELIVERY
FOR
RICHARDSON ELECTRONICS, LTD.
This form or one substantially equivalent hereto must be used
to accept the Exchange Offer and Consent Solicitation of Richardson
Electronics, Ltd. made pursuant to the Offering Circular and
Consent Solicitation dated December 18, 1996 (the "Offering
Circular") of Richardson Electronics, Ltd. if certificates for 7-1/4%
Convertible Subordinated Debentures due December 15, 2006 of
Richardson Electronics, Ltd. (the "Old Debentures") are not
immediately available or if the procedure for book-entry transfer
cannot be completed on a timely basis or time will not permit all
required documents to reach the Exchange Agent on or prior to the
Expiration Date of the Exchange Offer. Such form may be delivered
by hand or transmitted by telegram, telex, facsimile transmission
or letter to the Exchange Agent.
To: American National Bank and Trust Company of Chicago
(312) 661-6055
Anjali Gottreich or Elizabeth Nelson
Facsimile Transmission
Telephone Number (312) 661-6491
By Mail: By Hand:
American National Bank and Trust American National Bank and Trust
Company of Chicago Company of Chicago
Corporate Trust Department, 13th Floor Corporate Trust Department, 13th Floor
33 North LaSalle Street 33 North LaSalle Street
Chicago, IL 60690 Chicago, IL 60690
Attn: Anjali Gottreich or Attn: Anjali Gottreich or
Elizabeth Nelson Elizabeth Nelson
Delivery of this instrument to an address other than as set forth
above does not constitute a valid delivery.
Gentlemen:
The undersigned hereby tenders to Richardson Electronics, Ltd.
upon the terms and conditions set forth in the Offering Circular
and the Consent and Letter of Transmittal, receipt of which is
hereby acknowledged, the principal amount of Old Debentures set
forth below, pursuant to the guaranteed delivery procedure
described in the Offering Circular.
Signature(s): Address
Name(s):
Zip Code
Area Code and Tel. No.(s)
Principal Amount of
Old Debentures Tendered $ CHECK IF OLD DEBENTURES WILL
BE TENDERED BY BOOK-ENTRY TRANSFER
The Depository Trust Company
Midwest Securities Trust Company
Philadelphia Securities Depository
Trust Company
Certificate Nos. (if available) Account Number
Total Principal Amount Represented
by Old Debenture Certificate $
GUARANTEE
The undersigned, a member of a registered national securities
exchange, or a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States, hereby guarantees (i)
that either the certificate(s) representing the principal amount of
Old Debentures tendered hereby are in proper form for transfer, or
confirmation of the book-entry of such principal amount of Old
Debentures into the Exchange Agent's account at The Depository
Trust Company, the Midwest Securities Trust Company or the
Philadelphia Securities Depository Trust Company, in each case
together with any documents required by the Consent and Letter of
Transmittal, will be received by the Exchange Agent at one of its
addresses set forth above, no later than five NASDAQ trading days
after the Expiration Date (as defined in the Offering Circular)
hereof, (ii) that such tender of Old Debentures complies with Rule
10b-4 under the Securities Exchange Act of 1934 and (iii) that the
holder on whose behalf this tender is being made is deemed to own
the Old Debentures being tendered within the meaning of such Rule
10b-4.
Name of Firm Authorized Signature
Address Title
Name
Zip Code Please Type or Print
Area Code and Tel. No. Dated
Item 9 (c)(1)
RICHARDSON ELECTRONICS, LTD.
$70,825,000
8-1/4% Convertible Senior Subordinated Debentures
due June 15, 2006
INDENTURE
Dated as of December 16, 1996
American National Bank and Trust
Company of Chicago
Trustee
TABLE OF CONTENTS
ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE . . . . .1
SECTION 1.01. Definitions.. . . . . . . . . . . . . .1
SECTION 1.02. Other Definitions.. . . . . . . . . . .3
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act. . . . . . . . . . . . . . . . . . . . .3
SECTION 1.04. Rules of Construction . . . . . . . . .3
ARTICLE TWO THE SECURITIES . . . . . . . . . . . . . . . . . . .4
SECTION 2.01. Form and Dating.. . . . . . . . . . . .4
SECTION 2.02. Execution and Authentication. . . . . .4
SECTION 2.03. Registrar, Paying Agent and Conversion
Agent. . . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 2.04. Paying Agent to Hold Money in Trust.. .5
SECTION 2.05. Securityholder Lists. . . . . . . . . .5
SECTION 2.06. Transfer and Exchange.. . . . . . . . .5
SECTION 2.07. Replacement Securities. . . . . . . . .5
SECTION 2.08. Outstanding Securities. . . . . . . . .5
SECTION 2.09. Temporary Securities. . . . . . . . . .6
SECTION 2.10. Cancellation. . . . . . . . . . . . . .6
SECTION 2.11. Defaulted Interest. . . . . . . . . . .6
ARTICLE THREE REDEMPTION . . . . . . . . . . . . . . . . . . . .6
SECTION 3.01. Notices to Trustee. . . . . . . . . . .6
SECTION 3.02. Selection of Securities to be Redeemed.7
SECTION 3.03. Notice of Redemption. . . . . . . . . .7
SECTION 3.04. Effect of Notice of Redemption. . . . .8
SECTION 3.05. Deposit of Redemption Price.. . . . . .8
SECTION 3.06. Securities Redeemed in Part.. . . . . .8
ARTICLE FOUR COVENANTS . . . . . . . . . . . . . . . . . . . . .8
SECTION 4.01. Payment of Securities.. . . . . . . . .8
SECTION 4.02. Limitation on Dividends and Stock
Purchases. . . . . . . . . . . . . . . . . . . . . . .8
SECTION 4.03. SEC Reports.. . . . . . . . . . . . . .9
SECTION 4.04. Compliance Certificate. . . . . . . . .9
ARTICLE FIVE SUCCESSOR CORPORATION . . . . . . . . . . . . . . .9
SECTION 5.01. When Company May Merge, etc.. . . . . .9
ARTICLE SIX DEFAULTS AND REMEDIES. . . . . . . . . . . . . . . 10
SECTION 6.01. Events of Default.. . . . . . . . . . 10
SECTION 6.02. Acceleration. . . . . . . . . . . . . 11
SECTION 6.03. Other Remedies. . . . . . . . . . . . 11
SECTION 6.04. Waiver of Past Defaults.. . . . . . . 11
SECTION 6.05. Control by Majority.. . . . . . . . . 12
SECTION 6.06. Limitation on Suits.. . . . . . . . . 12
SECTION 6.07. Rights of Holders to Receive Payment. 12
SECTION 6.08. Collection Suit by Trustee. . . . . . 13
SECTION 6.09. Trustee May File Proofs of Claim. . . 13
SECTION 6.10. Priorities. . . . . . . . . . . . . . 13
SECTION 6.11. Undertaking for Costs.. . . . . . . . 13
ARTICLE SEVEN TRUSTEE. . . . . . . . . . . . . . . . . . . . . 14
SECTION 7.01. Duties of Trustee.. . . . . . . . . . 14
SECTION 7.02. Rights of Trustee.. . . . . . . . . . 15
SECTION 7.03. Individual Rights of Trustee. . . . . 15
SECTION 7.04. Trustee's Disclaimer. . . . . . . . . 15
SECTION 7.05. Notice of Defaults. . . . . . . . . . 15
SECTION 7.06. Reports by Trustee to Holders.. . . . 15
SECTION 7.07. Compensation and Indemnity. . . . . . 16
SECTION 7.08. Replacement of Trustee. . . . . . . . 16
SECTION 7.09. Successor Trustee by Merger, etc. . . 17
SECTION 7.10. Eligibility; Disqualification.. . . . 17
SECTION 7.11. Preferential Collection of Claims Against
Company. . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE EIGHT DISCHARGE OF INDENTURE . . . . . . . . . . . . . 17
SECTION 8.01. Termination of Company's Obligations. 17
SECTION 8.02. Application of Trust Money. . . . . . 18
SECTION 8.03. Repayment to Company. . . . . . . . . 18
ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS . . . . . . . 18
SECTION 9.01. Without Consent of Holders. . . . . . 18
SECTION 9.02. With Consent of Holders.. . . . . . . 18
SECTION 9.03. Compliance with Trust Indenture Act.. 19
SECTION 9.04. Revocation and Effect of Consents.. . 19
SECTION 9.05. Notation on or Exchange of Securities.19
SECTION 9.06. Trustee to Sign Amendments, etc.. . . 20
ARTICLE TEN CONVERSION . . . . . . . . . . . . . . . . . . . . 20
SECTION 10.01. Conversion Privilege.. . . . . . . . 20
SECTION 10.02. Conversion Procedure.. . . . . . . . 20
SECTION 10.03. Fractional Shares. . . . . . . . . . 21
SECTION 10.04. Taxes on Conversion. . . . . . . . . 21
SECTION 10.05. Company to Provide Stock.. . . . . . 21
SECTION 10.06. Adjustment for Change in Capital Stock.21
SECTION 10.07. Adjustment for Rights Issue. . . . . 22
SECTION 10.08. Adjustment for Other Distributions.. 23
SECTION 10.09. Voluntary Adjustment.. . . . . . . . 23
SECTION 10.10. Current Market Price.. . . . . . . . 23
SECTION 10.11. When Adjustment May Be Deferred. . . 24
SECTION 10.12. When Adjustment Is Not Required. . . 24
SECTION 10.13. Notice of Adjustment.. . . . . . . . 24
SECTION 10.14. Notice of Certain Transactions.. . . 24
SECTION 10.15. Consolidation, Merger or Sale of the
Company. . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 10.16. Company Determination Final. . . . . 25
SECTION 10.17. Trustee's Disclaimer.. . . . . . . . 25
ARTICLE ELEVEN SUBORDINATION . . . . . . . . . . . . . . . . . 25
SECTION 11.01. Securities Subordinated to Senior
Indebtedness.. . . . . . . . . . . . . . . . . . . . 25
SECTION 11.02. Company Not to Make Payments with Respect
to Securities in Certain Circumstances.. . . . . . . 26
SECTION 11.03. Securities Subordinated to Prior Payment
of All Senior Indebtedness on Dissolution, Liquidation or
Reorganization of the Company. . . . . . . . . . . . 27
SECTION 11.04. Securityholders to be Subrogated to
Rights of Holders of Senior Indebtedness.. . . . . . 28
SECTION 11.05. Obligation of the Company Unconditional.28
SECTION 11.06. Knowledge of Trustee.. . . . . . . . 29
SECTION 11.07. Application by Trustee of Monies
Deposited With It. . . . . . . . . . . . . . . . . . 29
SECTION 11.08. Subordination Rights Not Impaired by Acts
or Omissions of Company or Holders of Senior
Indebtedness.. . . . . . . . . . . . . . . . . . . . 29
SECTION 11.09. Securityholders Authorize Trustee to
Effectuate Subordination of Securities.. . . . . . . 29
SECTION 11.10. Right of Trustee to Hold Senior
Indebtedness.. . . . . . . . . . . . . . . . . . . . 30
SECTION 11.11. Article Eleven Not to Prevent Events of
Default. . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE TWELVE MISCELLANEOUS . . . . . . . . . . . . . . . . . 30
SECTION 12.01. Trust Indenture Act Controls.. . . . 30
SECTION 12.02. Notices. . . . . . . . . . . . . . . 30
SECTION 12.03. Communication by Holders with Other
Holders. . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 12.04. Certificate and Opinion as to Conditions
Precedent. . . . . . . . . . . . . . . . . . . . . . 31
SECTION 12.05. Statements Required in Certificate or
Opinion. . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 12.06. When Treasury Securities Disregarded.32
SECTION 12.07. Rules by Trustee and Agents. . . . . 32
SECTION 12.08. Legal Holidays.. . . . . . . . . . . 32
SECTION 12.09. Governing Law. . . . . . . . . . . . 32
SECTION 12.10. No Adverse Interpretation of Other
Agreements.. . . . . . . . . . . . . . . . . . . . . 32
SECTION 12.11. No Recourse Against Others.. . . . . 32
SECTION 12.12. Successors.. . . . . . . . . . . . . 32
SECTION 12.13. Duplicate Originals. . . . . . . . . 33
INDENTURE, dated as of December 16, 1996, between RICHARDSON
ELECTRONICS, LTD., a Delaware corporation (the "Company"), and
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a National
Banking Association (the "Trustee").
Intending to be legally bound hereby, each party agrees as
follows for the benefit of the other party and for the equal and
ratable benefit of the Holders of the Company's 8-1/4% Convertible
Senior Subordinated Debentures due June 15, 2006 (the
"Securities");
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Agent" means any Registrar, Paying Agent co-Registrar or
Conversion Agent. See Section 2.03.
"Board of Directors" means the Board of Directors of the
Company or any duly authorized committee of that Board.
"Common Shares" means the Common Stock, par value of $.05 per
share, of the Company as it exists on the date of this Indenture or
as it may be constituted from time to time.
"Company" means the party named as such in this Indenture
until a successor replaces it and thereafter means the successor.
"Consolidated Net Income", for any period, means the aggregate
of the Net Income of the Company and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with
generally accepted accounting principles, provided that (i) the Net
Income of any person in which the Company or any Subsidiary has a
joint interest with a third party shall be included only to the
extent of the amount of dividends or distributions paid to the
Company or a Subsidiary, and (ii) the Net Income or any person
acquired in a pooling of interests transaction for any period prior
to the date of such acquisition shall be excluded.
"Consolidated Tangible Net Worth", as applied to any person,
means the total stockholders' equity of such person and its
consolidated subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles, except
that there shall be deducted therefrom all intangible assets
(determined in accordance with generally accepted accounting
principles) including, without limitation, organization costs,
patents, trademarks, copyrights, franchises, research and
development expenses, and any amount reflected as treasury stock;
provided, however, that the following, whether existing on the date
hereof or arising hereafter, shall not be deducted from total
consolidated stockholders' equity: (i) goodwill arising from
acquisitions and (ii) unamortized debt expense.
"Conversion Agent" means the office or agency where Securities
may be presented for conversion and any additional Conversion
Agents.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"Holder" or "Securityholder" means the person in whose name a
Security is registered on the Registrar's books.
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Net Income" of any person means the net income (loss) of such
person, determined in accordance with generally accepted accounting
principles; excluding, however, from the determination of Net
Income any gain (but not loss) realized upon the sale or other
disposition (including, without limitation, dispositions pursuant
to leaseback transactions) of any real property or equipment of
such person, which is not sold or otherwise disposed of in the
ordinary course of business, or of any capital stock of the Company
or a Subsidiary owned by such person.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two
Officers or by an Officer and an Assistant Treasurer or an
Assistant Secretary of the Company.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an
employee of or counsel to the Company or the Trustee.
"Responsible Officer" when used with respect to the Trustee
means the Chairman or Vice Chairman of its board of directors, the
President, the Secretary, any Assistant Secretary, or the
Treasurer, or any Vice President, Trust Officer, or any other
officer of the Trustee customarily performing functions similar to
those performed by any of the above-designated officers and also
means, with respect to a particular corporate trust matter, any
other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities described above and issued
under the Indenture.
"Subsidiary" means a corporation, a majority of whose voting
stock is owned by the Company or a Subsidiary. Voting stock is
capital stock having voting power under ordinary circumstances to
elect directors.
"TIA" means the Trust Indenture Act of 1939 (15. U.S. Code Sections
77aaa-77bbbb) as in effect on the date of this Indenture.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and thereafter means the successor.
"United States" means the United States of America.
SECTION 1.02. Other Definitions.
Term Defined in Section
"Bankruptcy Law" 6.01
"Custodian" 6.01
"Event of Default" 6.01
"Indebtedness" 11.01
"Legal Holiday" 12.08
"Paying Agent" 2.03
"Registrar" 2.03
"Senior Indebtedness" 11.01
SECTION 1.03. Incorporation by Reference of Trust Indenture
Act. Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this
Indenture. The following TIA terms used in this Indenture have the
following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by
SEC rule have the meanings assigned to them.
SECTION 1.04. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted
accounting principles:
(3) "or" is not exclusive; and
(4) words in the singular include the plural, and in the
plural include the singular.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating. The Securities and the
Trustee's certificate of authentication shall be substantially in
the form set forth in Exhibit A. The Securities may have
notations, legends or endorsements required by law, stock exchange
rule or usage. The Company shall approve the form of the
Securities and any notation, legend or endorsement on them. Each
Security shall be dated the date of its authentication.
SECTION 2.02. Execution and Authentication. Two Officers
shall execute the Securities for the Company by facsimile
signature. The Company's seal shall be reproduced on the
Securities.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the
Security shall be valid nevertheless.
A Security shall not be valid until the Trustee manually signs
the certificate of authentication on the Security. The signature
shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate Securities for original issue
in the aggregate principal amount of up to $70,825,000 upon a
written order of the Company signed by two Officers or by an
Officer and an Assistant Treasurer of the Company. The aggregate
principal amount of the Securities outstanding at any time may not
exceed that amount except as provided in Sections 2.07 and 2.08.
SECTION 2.03. Registrar, Paying Agent and Conversion Agent.
The Company shall maintain an office or agency where Securities may
be presented for registration of transfer or for exchange
("Registrar"), an office or agency where Securities may be
presented for payment ("Paying Agent") and an office or agency
where Securities may be presented for conversion ("Conversion
Agent"). The Registrar shall keep a register of the Securities and
of their transfer and exchange. The Company may have one or more
co-Registrars, one or more additional paying agents and one or more
additional conversion agents. The term "Paying Agent" includes any
additional paying agent and the term "Conversion Agent" includes
any additional conversion agent.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture. The agreement shall
implement the provisions of this Indenture that relate to such
Agent. The Company shall notify the Trustee of the name and
address of any such Agent. If the Company fails to maintain a
Registrar, Paying Agent or Conversion Agent, the Trustee shall act
as such.
The Company initially appoints the Trustee Registrar, Paying
Agent and Conversion Agent.
SECTION 2.04. Paying Agent to Hold Money in Trust. Each
Paying Agent shall hold in trust for the benefit of the
Securityholders or the Trustee all moneys held by the Paying Agent
for the payment of principal of or interest on the Securities, and
shall notify the Trustee of any default by the Company in making
any such payment. If the Company or a Subsidiary acts as Paying
Agent, it shall segregate the money and hold it as a separate trust
fund. The Company at any time may require a Paying Agent to pay
all money held by it to the Trustee. Upon doing so the Paying
Agent shall have no further liability for the money.
SECTION 2.05. Securityholder Lists. The Trustee shall
preserve in as current a form as is reasonably practicable the most
recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee on or before each semiannual interest
payment date and at such other times as the Trustee may request in
writing a list in such form and as of such date as the Trustee may
reasonably require, of the names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange. Where a Security is
presented to the Registrar or a co-Registrar with a request to
register a transfer, the Registrar shall register the transfer as
requested if its requirements for such transactions are met. Where
Securities are presented to the Registrar or a co-Registrar with a
request to exchange them for an equal principal amount of
Securities of other denominations, the Registrar shall make the
exchange as requested if the same requirements are met. To permit
transfers and exchanges, the Trustee shall authenticate Securities
at the Registrar's request. Any exchange or transfer shall be
without charge, except that the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto.
SECTION 2.07. Replacement Securities. If the Holder of a
Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Security if the Trustee's requirements
are met. An indemnity bond must be sufficient in the judgment of
the Company and the Trustee to protect the Company, the Trustee or
any Agent from any loss which any of them may suffer if a Security
is replaced. The Company may charge for its expenses in replacing
a Security. Every replacement Security is an additional obligation
of the Company.
SECTION 2.08. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by the Trustee except
for those cancelled by it, those delivered to it for cancellation,
and those described in this Section. A Security does not cease to
be outstanding because the Company or one of its Subsidiaries holds
the Security.
If a Security is replaced pursuant to Section 2.07, it ceases
to be outstanding unless the Trustee receives proof satisfactory to
it that the replaced Security is held by a bona fide purchaser.
If the Paying Agent holds on a redemption date or maturity
date money sufficient to pay Securities payable on that date, then
on and after that date such Securities shall be deemed to be no
longer outstanding and interest on them shall cease to accrue.
SECTION 2.09. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the
Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive
Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay,
the Company shall prepare and the Trustee shall authenticate
definitive Securities in exchange for temporary Securities.
SECTION 2.10. Cancellation. The Company at any time may
deliver Securities to the Trustee for cancellation. The Registrar,
Paying Agent and Conversion Agent shall forward to the Trustee any
Securities surrendered to them for transfer, exchange, payment or
conversion. The Trustee and no one else shall cancel and destroy
all Securities surrendered for transfer, exchange, payment,
conversion or cancellation and deliver a certificate of such
destruction to the Company unless the Company instructs the Trustee
in writing to deliver the Securities to the Company. The Company
may not issue new Securities to replace Securities that it has paid
or delivered to the Trustee for cancellation or which have been
converted.
SECTION 2.11. Defaulted Interest. If the Company defaults in
a payment of interest on the Securities, it shall pay the defaulted
interest to the persons who are Securityholders on a subsequent
special record date. The Company shall fix the record date and
payment date. At least 15 days before the record date, the Company
shall mail to each Securityholder a notice that states the record
date, the payment date and the amount of defaulted interest to be
paid. The Company may pay defaulted interest in any other lawful
manner.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee. If the Company wants to
redeem Securities pursuant to paragraph 5 of the Securities, it
shall notify the Trustee of the redemption date and the principal
amount of Securities to be redeemed. In the case of any such
redemption, the Company shall deliver to the Trustee an Officers'
Certificate stating that such redemption will comply with the
condition contained in paragraph 5 of the Securities.
If the Company wants to reduce the principal amount of
Securities to be redeemed pursuant to paragraph 6 of the
Securities, it shall notify the Trustee of the amount of the
reduction and the basis for it. If the Company wants to credit
against any such redemption Securities not previously delivered to
the Trustee for cancellation, it shall deliver the Securities with
the notice
The Company shall give each notice provided for in this
Section at least 60 days before the redemption date or such lesser
amount of time as consented to by the Trustee.
SECTION 3.02. Selection of Securities to be Redeemed. If
less than all the Securities are to be redeemed, the Trustee shall
select the Securities to be redeemed, if the Securities are listed
on a national securities exchange, in accordance with rules of such
exchange or if the Securities are not so listed on either a pro
rata basis or by lot. The Trustee shall make the selection from
Securities outstanding and not previously called for redemption.
The Trustee may select for redemption portions of the principal of
Securities that have denominations larger $1,000. Securities and
portions of them it selects shall be in amounts of $1,000 or
integral multiples of $1,000. Provisions of this Indenture that
apply to Securities called for redemption also apply to portions of
Securities called for redemption.
SECTION 3.03. Notice of Redemption. At least 30 days but not
more than 60 days before a redemption date, the Company shall mail
a notice of redemption by first-class mail to each Holder of
Securities to be redeemed.
The notice shall identify the Securities to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price;
(3) the then current conversion price;
(4) the name and address of the Paying Agent and the
Conversion Agent;
(5) that the right to convert Securities called for
redemption shall terminate at the close of business on
the tenth business day prior to the redemption date;
(6) that Holders who want to convert Securities must satisfy
the requirements of paragraph 7 of the Securities;
(7) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(8) that interest on Securities called for redemption ceases
to accrue on and after the redemption date; and
(9) the paragraph of the Securities pursuant to which the
Securities are to be redeemed.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due
and payable on the redemption date and at the redemption price.
Upon surrender to the Paying Agent, such Securities shall be paid
at the redemption price, plus accrued interest to the redemption
date.
SECTION 3.05. Deposit of Redemption Price. Before the
redemption date, the Company shall deposit with the Paying Agent
money sufficient to pay the redemption price of, and accrued
interest on, all Securities to be redeemed on that date. The
Paying Agent shall return to the Company any money not required for
that purpose because of conversion of Securities.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of
a Security that is redeemed in part, the Trustee shall authenticate
for the Holder a new Security equal in principal amount to the
unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities. The Company shall pay
the principal of and interest on the Securities on the dates and in
the manner provided in the Securities.
The Company shall pay interest on overdue principal at the
rate borne by the Securities; it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. Limitation on Dividends and Stock Purchases.
The Company may not declare or pay any dividend or make any
distribution on its capital stock or to its shareholders (other
than dividends or distributions payable in its capital stock) or
purchase, redeem or otherwise acquire or retire for value, or
permit any Subsidiary to purchase or otherwise acquire for value,
any capital stock of the Company (i) if at the time of such action
an Event of Default shall have occurred and be continuing, or occur
as a consequence of any such action, or (ii) if, upon giving effect
to such dividend, distribution, purchase, redemption, or other
acquisition or retirement, the aggregate amount expended for all
such purposes (the amount expended for such purposes, if other than
in cash, to be determined by the Board of Directors, whose
determination shall be conclusive and evidenced by a resolution of
the Board of Directors filed with the Trustee) subsequent to May
31, 1996, shall exceed the sum of (a) the aggregate Consolidated
Net Income (or, in case such aggregate Consolidated Net Income
shall be a deficit, minus such deficit) of the Company earned on a
cumulative basis subsequent to May 31, 1996, (b) the aggregate net
proceeds, including the fair market value of property other than
cash (as determined by the Board of Directors, whose determination
shall be conclusive and evidenced by a resolution of the Board of
Directors filed with the Trustee), received by the Company from the
issue or sale, other than to a subsidiary, after May 31, 1996 of
capital stock of the Company, (c) the aggregate net proceeds
received by the Company from the issue or sale, other than to a
subsidiary, of any indebtedness (including the Securities) of the
Company issued subsequent to May 31, 1996 which has been converted
into capital stock of the Company, and (d) $30,000,000; provided,
however, that such Provisions will not prevent (i) the payment of
any dividend within 60 days after the date of declaration if the
payment complied with the foregoing provisions on the date of
declaration, (ii) the retirement of any shares of the Company's
capital stock by exchange for, or out of the proceeds of, the
substantially concurrent sale of other shares of its capital stock,
including without limitation, the conversion of the Company's Class
B Common Stock, $.05 par value, ("Class B Common Stock"), or (iii)
the call for redemption of any convertible preferred stock of the
Company under an agreement with a responsible underwriter designed
to insure that all such stock is converted rather than redeemed.
SECTION 4.03. SEC Reports. Within 15 days after the Company
files with the SEC copies of its annual reports and other
information, documents and reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations
prescribe) which it is required to file with the SEC pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Company shall file the same with the Trustee. The Company also
shall comply with the other provisions of TIA 314(a).
SECTION 4.04. Compliance Certificate. The Company shall
deliver to the Trustee within 120 days after the end of each fiscal
year of the Company (which on the date hereof is May 31) an
Officers' Certificate stating whether or not the signers know of
any Default by the Company in performing any of its obligations
under this Indenture. If they do know of such a Default, the
certificate shall describe the Default. The first certificate
shall be delivered to the Trustee by September 28, 1997.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, etc. The Company shall
not consolidate with or merge into, or transfer, all or
substantially all of its assets to, any other person unless (i)
such other person is a corporation organized and existing under the
laws of the United States or a State thereof which expressly
assumes by supplemental indenture all the obligations of the
Company under the Securities and this Indenture and (ii) such other
person has a Consolidated Tangible Net Worth immediately after such
transaction equal to or greater than the Consolidated Tangible Net
Worth of the Company and (iii) immediately after the transaction no
Default exists. Thereafter all such obligations of a predecessor
corporation shall terminate.
ARTICLE SIX
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default"
occurs if:
(1) the Company defaults in the payment of interest on any
Security when the same becomes due and payable and the
default continues for a period of 30 days whether or not
such payment shall be prohibited by the provisions of
Article Eleven;
(2) the Company defaults in the payment of principal of any
Security when the same becomes due and payable at
maturity, upon redemption (including payment pursuant to
paragraph 5 or paragraph 6 of the Securities) or
otherwise whether or not such payment shall be prohibited
by the provisions of Article Eleven:
(3) the Company fails to comply with any of its other
agreements in the Securities or this Indenture and the
default continues for the period and after the notice
specified below;
(4) the happening of an event of default as defined in any
mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced
any Indebtedness of the Company or any Subsidiary,
whether such Indebtedness now exists or shall hereafter
be created, which event of default shall have caused in
any one case or in the aggregate in excess of $5,000,000
aggregate principal amount of such Indebtedness to become
due and payable prior to the date on which it would
otherwise have become due and payable, without such
acceleration being rescinded, annulled or otherwise cured
within the period and after the notice specified below;
(5) The Company or any Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of it or
for all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors; or
(6) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Subsidiary
in an involuntary case,
(B) appoints a Custodian of the Company or any
Subsidiary or for all or substantially all of its
property, or
(C) orders the liquidation of the Company or any
Subsidiary,
and the order or decree remains unstayed and in effect
for 90 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar Federal or State law for the relief of debtors. The term
"Custodian" mean; any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
A default under clause (3) or (4) is not an Event of Default
until the Trustee or the Holders of at least 25% in principal
amount of the outstanding Securities notify the Company of the
default and the Company does not cure the default within 30 days
after receipt of the notice. The notice must specify the default,
demand that it be remedied and state that the notice is a "Notice
of Default". If the Holders of 25% in principal amount of the
outstanding Securities request the Trustee to give such notice on
their behalf, the Trustee shall do so.
SECTION 6.02. Acceleration. If an Event of Default occurs
and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the outstanding
Securities by notice to the Company and the Trustee, may declare
the principal of and all accrued interest on all the Securities to
be due and payable immediately. Upon such declaration such
principal and interest shall be due and payable immediately. The
Holders of a majority in principal amount of the outstanding
Securities by notice to the Trustee may rescind an acceleration and
its consequences if all existing Events of Default have been cured
or waived, except nonpayment of principal or interest that has
become due solely because of the acceleration, and if the
rescission would not conflict with any judgment or decree.
SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy by
proceeding at law or in equity to collect the payment of principal
of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in
the proceeding. A delay or omission by the Trustee or any
Securityholder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or constitute
a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are
cumulative.
SECTION 6.04. Waiver of Past Defaults. Subject to Section
9.02, the Holders of a majority in principal amount of the
outstanding Securities by notice to the Trustee may waive a past
Default and its consequences. When a default is waived, it is
cured.
SECTION 6.05. Control by Majority. The Holders of a majority
in principal amount of outstanding Securities may direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred
on the Trustee: provided, however:
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee shall not determine that the action so
directed would be unjustly prejudicial to the rights of
any Holder not taking part in such direction, and
(3) the Trustee shall have the right to decline to follow any
such direction if the Trustee, being advised by counsel,
determines that the action so directed may not lawfully
be taken or if the Trustee in good faith shall, by a
Responsible Officer, determines that the proceedings so
directed would involve it in personal liability or be
unduly prejudicial to the Holders not taking part in such
direction, and
(4) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such
direction.
SECTION 6.06. Limitation on Suits. A Securityholder may not
pursue any remedy with respect to this Indenture or the Securities
unless:
(1) the Holder gives to the Trustee written notice of
continuing Event of Default;
(2) the Holders of at least 25% in principal amount of the
outstanding Securities make a written request to the
Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of
indemnity; and
(5) during such 60-day period the Holders of a majority in
principal amount of the Securities do not give the
trustee a direction inconsistent with such request.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or
priority over another Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment. Subject
to Article Eleven and notwithstanding any other provision of this
Indenture, the right of any Holder of a Security to receive payment
of principal of, premium, if any, and interest on the Security, on
or after the respective due dates expressed in the Security, or to
bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the
consent of the Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default in payment of interest or principal specified in Section
6.01(1) or (2) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against
the Company for the whole amount of principal and interest
remaining unpaid.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the
Trustee and the Securityholders allowed in any judicial proceedings
relative to the Company, its creditors or its property. Nothing
herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment
or composition affecting the Securities or the rights of any holder
thereof, or to authorize the Trustee to vote in respect of the
claim of any Securityholder in any such proceedings.
SECTION 6.10. Priorities. If the Trustee collects any money
pursuant to this Article, it shall pay out the money in the
following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to holders of Senior Indebtedness to the extent
required by Article Eleven;
Third: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the Securities for principal and interest,
respectively; and
Fourth: to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section.
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any
suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of
the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against party litigant
in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder pursuant to
Section 6.07 or a suit by Holders of more than 10% in principal
amount of the outstanding Securities.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no
others.
(2) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions
expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the
requirements of this Indenture. The Trustee,
however, shall examine the certificates and
opinions submitted in accordance with Section 12.04
to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own
willful misconduct, except that:
(1) this paragraph does not limit the effect of
paragraph (b) of this Section.
(2) the Trustee shall not be liable for any error of
judgment made in good, faith by a Responsible
Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in
accordance with a direction received by it pursuant
to Section 6.05.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this
Section.
(e) The Trustee may refuse to perform any duty or exercise
any right or power unless it receives indemnity satisfactory to it
against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree with the Company.
(g) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
SECTION 7.02. Rights of Trustee.
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person.
The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The
Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on the certificate or opinion.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized
or within its rights or powers.
SECTION 7.03. Individual Rights of Trustee. The Trustee in
its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with the Company or
its affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. The Trustee,
however, must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee makes no
representation as to the validity or adequacy of this Indenture or
the Securities; it shall not be accountable for the Company's use
of the proceeds from the Securities; and it shall not be
responsible for any statement in the Securities other than its
certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall
mail to each Securityholder notice of the Default within 90 days
after it occurs. Except in the case of a Default in payment of
principal of, premium, if any, or interest on any Security, the
Trustee may withhold the notice if and so long as the board of
directors of the Trustee, the executive or any trust committee of
such board and/or responsible officers of the Trustee in good faith
determine(s) that withholding the notice is in the interests of
Securityholders.
SECTION 7.06. Reports by Trustee to Holders. Within 60 days
after each May 15 beginning with May 15, 1997, the Trustee shall
mail to each Securityholder a brief report dated as of such May 15
that complies with TIA Sec. 313(a). The Trustee also shall comply
with TIA Sec. 313(b)(2) and TIA Sec. 313(d).
A copy of each report at the time of its mailing to
Securityholders shall be filed by the Company with the SEC and each
stock exchange on which the Securities are listed. The Company
shall notify the Trustee when the Securities are listed on any
stock exchange.
SECTION 7.07. Compensation and Indemnity. The Company shall
pay to the Trustee from time to time reasonable compensation for
its services. The Trustee's compensation hereunder shall not be
limited by any law on compensation relating to the trustee of an
express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred by it.
Such expenses shall include the reasonable compensation and
expenses of the Trustee's agents and counsel. The Company shall
indemnify the Trustee against any loss of liability incurred by it
in connection with the administration of this trust and its duties
hereunder. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. The Company need not
reimburse any expense or indemnify against any loss or liability
incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section,
the Trustee shall have a lien prior to the Securities on all money
or property held or collected by the Trustee, except that held in
trust to pay principal of or interest on particular Securities.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Sections 6.01(5) or (6) occurs, the
expenses and the compensation for the services are intended to
constitute expenses of administration under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. A resignation or
removal of the Trustee and the appointment of a successor Trustee
shall become effective only upon the successor Trustee's acceptance
of appointment as provided in this Section. The Trustee may resign
by so notifying the Company. The Holders of a majority in
principal amount of the outstanding Securities may remove the
Trustee by so notifying the Trustee and the Company and may appoint
a successor Trustee with the Company's consent. The Company may
remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly
appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company.
Immediately after that, the retiring Trustee shall transfer all
property held by it as Trustee to the successor Trustee (subject to
the lien provided for in Section 7.07), the resignation or removal
of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its
succession to each Securityholder.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring
Trustee, the Company or the Holders of a majority in principal
amount of the outstanding Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor
Trustee.
SECTION 7.09. Successor Trustee by Merger, etc. If the
Trustee consolidates with, merges or converts into or transfers all
or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act
shall be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification. This Indenture
shall always have a Trustee who satisfies the requirements of TIA
Sec. 310(a)(1) and (2). The Trustee shall have a combined capital and
surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply
with TIA Sec. 310(b), including the optional provision permitted by
the second sentence of TIA Sec. 310(b)(9).
SECTION 7.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA Sec. 311(a) and (b),
excluding any creditor relationship arising as provided in TIA Sec.
311(b). A Trustee who has resigned or been removed shall be
subject to TIA Sec. 311(a) to the extent indicated.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations. The
Company may terminate all of its obligations under the Securities
and this Indenture if all Securities previously authenticated and
delivered (other than destroyed, lost or stolen Securities which
have been replaced or paid) have been delivered to the Trustee for
cancellation or if:
(1) the Securities mature within six months or all of them
are to be called for redemption within six months under
arrangements satisfactory to the Trustee or giving the
notice of redemption; and
(2) the Company irrevocably deposits in trust with the
Trustee money sufficient to pay principal of, premium, if
any, and interest on the outstanding Securities to
maturity or redemption, as the case may be. The Company
may make the deposit only if Article Eleven permits it.
Immediately after making the deposit, the Company shall
give notice of such event and the proposed date of
payment to each Securityholder.
The Company's obligations in paragraph 12 of the Securities
and in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 4.01, 7.07 and 7.08
and in Article Ten, however, shall survive until the Securities are
no longer outstanding. Thereafter, the Company's obligations in
such paragraph 12 and in Section 7.07 shall survive.
After a deposit, the Trustee upon request shall acknowledge in
writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving
obligations specified above.
SECTION 8.02. Application of Trust Money. The Trustee shall
hold in trust money deposited with it pursuant to Section 8.01. It
shall apply the deposited money through the Paying Agent and in
accordance with this Indenture to the payment of principal of and
interest on the Securities. Money so held in trust is not subject
to the subordination provisions of Article Eleven.
SECTION 8.03. Repayment to Company. The Trustee and the
Paying Agent shall promptly pay to the Company upon request any
excess money or securities held by them at any time. The trustee
and the Paying Agent shall pay to the Company upon request any
money held by them for the payment of principal or interest that
remains unclaimed for two years. After payment to the Company,
Securityholders entitled to the money must look to the Company for
payment as general creditors unless applicable abandoned property
law designates another person.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Company with
the consent of the Trustee may amend or supplement this Indenture
or the Securities without notice to or consent of any
Securityholders:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Sections 5.01 and 10.15;
(3) to provide for uncertificated Securities in addition to
certificated Securities; or
(4) to make any change that does not materially and adversely
affect the rights of any Securityholder.
SECTION 9.02. With Consent of Holders. The Company, with the
consent of the Trustee, may amend or supplement this Indenture or
the Securities without notice to any Securityholder but with the
written consent of the Holders of at least a majority in principal
amount of the outstanding Securities. The Holders of a majority in
principal amount of the outstanding Securities may waive compliance
by the Company with any provision of this Indenture or the
Securities without notice to any Securityholder. Without the
consent of each Securityholder affected, however, an amendment,
supplement or waiver, including a waiver pursuant to Section 6.04,
may not:
(1) reduce the amount of Securities whose Holders must
consent to an amendment, supplement or waiver:
(2) reduce the rate of or extend the time for payment of
interest on any Security
(3) reduce the principal of or extend the fixed maturity of
any Security;
(4) waive a default in the payment of the principal of,
premium, if any, or interest on any Security; or
(5) adversely affect the right to convert any Security into
Common Shares.
After an amendment under this Section becomes effective, the
Company shall mail to the Holders a notice briefly describing the
amendment.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed
supplement, but it shall be sufficient if such consent approves the
substance thereof.
SECTION 9.03. Compliance with Trust Indenture Act. Every
amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents. Until an
amendment, supplement or waiver becomes effective, a consent to an
amendment, supplement or waiver by a Holder of a Security is a
continuing consent by the Holder and every subsequent Holder of a
Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent
is not made on any Security. Any such Holder or subsequent Holder,
however, may revoke the consent as to his Security or portion of a
Security. Such revocation shall be effective only if the Trustee
receives the notice of revocation before the date the amendment,
supplement or waiver becomes effective.
After an amendment, supplement or waiver becomes effective, it
shall bind every Securityholder unless it makes a change described
in any of clauses (1) through (5) of Section 9.02. In that case
the amendment, supplement or waiver shall bind each Holder of a
Security who has consented to it and every subsequent Holder of a
Security or portion of a Security that evidences the same debt as
the consenting Holder's Security.
SECTION 9.05. Notation on or Exchange of Securities. If an
amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the
Security about the changed terms and return it to the Holder.
Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee
shall authenticate a new Security that reflects the changed terms.
SECTION 9.06. Trustee to Sign Amendments, etc. The Trustee
shall sign any amendment, supplement or waiver authorized pursuant
to this Article if the amendment, supplement or waiver does not
adversely affect the rights of the Trustee. If it does, the
Trustee may but need not sign it. The Company may not sign an
amendment or supplement until the Board of Directors approves it.
ARTICLE TEN
CONVERSION
SECTION 10.01. Conversion Privilege. A Holder of a Security
may convert it into Common Shares at any time, subject to the prior
redemption provisions of paragraph 5 of the Securities. The number
of Common Shares issuable upon conversion of a Security is
determined as follows: Divide the principal amount converted by
the conversion price in effect on the conversion date and round the
result to the nearest l/100th of a share.
The initial conversion price is stated in paragraph 7 of the
Securities. The conversion price is subject to adjustment. See
Sections 10.06 through 10.12.
A Holder may convert a portion of a Security if the portion is
$1,000 or an integral multiple of $1,000. Provisions of this
Indenture that apply to conversion of all of a Security also apply
to conversion of a portion of it.
SECTION 10.02. Conversion Procedure. To convert a Security
a Holder must satisfy the requirements in paragraph 7 of the
Securities. The date on which the Holder satisfies all those
requirements is the conversion date. As soon as practicable after
the conversion date, the Company shall deliver to the Holder
through the Conversion Agent a certificate for the number of Common
Shares issuable upon the conversion and a check for any fractional
share. The person in whose name the certificate is registered
becomes a stockholder of record on the conversion date.
No payment or adjustment will be made for accrued interest on
a converted Security.
If a Holder converts more than one Security at the same time,
the number of full shares issuable upon the conversion shall be
based on the total principal amount of the Securities converted.
Upon surrender of a Security that is converted in part, the
Trustee shall authenticate for the Holder a new Security equal in
principal amount to the unconverted portion of the Security
surrendered.
If the last day on which a Security may be converted is a
Legal Holiday in a place where a Conversion Agent is located, the
Security may be surrendered to that Conversion Agent on the next
succeeding day that is not a Legal Holiday.
SECTION 10.03. Fractional Shares. The Company will not issue
a fractional Common Share upon conversion of a Security. Instead,
the Company will deliver its check for the current market value of
a fractional share. The current market value of a fraction of a
share is determined as follows:
Multiply the current market price of a full share by the
fraction and round the result to the nearest cent.
The current market price of a Common Share for the purpose of
Section 10.03 is the closing bid price as reported by the National
Association of Securities Dealers Automated Quotation National
Market System, or if the Common Shares are listed on an exchange,
the last reported sale price on the principal exchange on which the
Common Shares are listed, on the last trading day prior to the
conversion date. In the absence of one or more such quotations,
the Board of Directors shall determine the current market price on
the basis of such quotation as it considers appropriate.
SECTION 10.04. Taxes on Conversion. If a Holder of a
Security converts it, the Company shall pay any documentary, stamp
or similar issue or transfer tax due on the issue of Common Shares
upon the conversion. The Holder, however, shall pay any such tax
which is due because the shares are issued in a name other than
his.
SECTION 10.05. Company to Provide Stock. The Company shall
reserve out of its authorized but unissued Common Shares or its
Common Shares held in treasury enough Common Shares to permit the
conversion of the Securities.
All Common Shares which may be issued upon conversion of the
Securities shall be validly issued, fully paid and nonassessable.
In order that the Company may issue Common Shares upon
conversion of the Securities, the Company will endeavor to comply
with all applicable Federal and State securities laws and will
endeavor to list such Shares on each national securities exchange
on which the Common Shares are listed.
SECTION 10.06. Adjustment for Change in Capital Stock. If
the Company:
(1) pays a dividend in Common Shares to holders of such
Shares;
(2) subdivides its outstanding Common Shares into a greater
number of Shares;
(3) combines its outstanding Common Shares into a smaller
number of Shares;
(4) makes a distribution on its Common Shares in shares of
its capital stock other than Common Shares: or
(5) issues by reclassification of its Common Shares any
shares of its capital stock.
then the conversion privilege and the conversion price in effect
immediately prior to such action shall be adjusted so that the
Holder of any Security thereafter converted may receive the number
of shares of capital stock of the Company which such Holder would
have owned immediately following such action if such Holder had
converted the security immediately prior to such action.
For a dividend or distribution, the adjustment shall become
effective immediately after the record date for the dividend or
distribution. For a subdivision, combination or reclassification,
the adjustment shall become effective immediately after the
effective date of the subdivision, combination or reclassification.
If after an adjustment a Holder of a Security upon conversion
of it may receive shares of two or more classes of capital stock of
the Company, the Board of Directors shall determine the allocation
of the adjusted conversion price between or among the classes of
capital stock. After such allocation, the conversion prices of the
classes of capital stock shall thereafter be subject to adjustment
on terms comparable to those applicable to Common Shares in this
Indenture.
SECTION 10.07. Adjustment for Rights Issue. If the Company
issues any rights or warrants to all holders of its Common Shares
entitling them for a period expiring within 45 days after the
record date mentioned below to purchase Common Shares (or
securities convertible into Common Shares) at a price per share (or
having a conversion price per share) less than the current market
price per share on that record date, the conversion price shall. be
adjusted in accordance with the formula:
O + (N x P)
------
C' = C x M
------------
O + N
where
C' = the adjusted conversion price.
C = the then current conversion price
O = the number of Common Shares outstanding on the record date.
N = the number of additional Common Shares offered.
P = the offering or conversion price per share of the additional
shares.
M = the current market price per Common Share on the record date.
See Section 10.10.
The adjustment shall be made successively whenever any such
rights or warrants are issued, and shall become effective
immediately after the record date for the determination of
stockholders entitled to receive the rights or warrants.
SECTION 10.08. Adjustment for Other Distributions. If the
Company distributes to all holders of its Common Shares any assets
or debt securities or any rights or warrants to purchase
securities, the conversion price shall be adjusted in accordance
with the formula:
C' = C x (O x M) - F
----------
O x M
where
C' = the adjusted conversion price.
C = the then current conversion price.
O = the number of Common Shares outstanding on the record date
mentioned below.
M = the current market price per Common Share on the record date
mentioned below. See Section 10.10.
F = the fair market value on the record date of the assets,
securities, rights or warrants distributed. The Board of Directors
shall determine the fair market value.
The adjustment shall be made successively whenever any such
distribution is made, and shall become effective immediately after
the record date for the determination of stockholders entitled to
receive the distribution.
This Section does not apply to cash dividends or cash
distributions paid out of Consolidated Net Income or retained
earnings as shown on the books of the Company maintained for
reporting in accordance with generally accepted accounting
principles. Also, this Section does not apply to rights or
warrants referred to in Section 10.07.
SECTION 10.09. Voluntary Adjustment. The Company at any time
may reduce the conversion price by any amount but in no event shall
such conversion price be less than the par value of the Common
Shares at the time such reduction is made.
SECTION 10.10. Current Market Price. In Sections 10.07 and
10.08 the current market price per Common Share on any date is the
average of the highest reported bid and the lowest reported asked
prices at the close of business as reported by the National
Association of Securities Dealers Automated Quotation National
Market System, or if the Common Shares are listed on an exchange,
the closing sale prices, on the principal exchange on which the
Common Shares are listed, for 30 consecutive trading days
commencing 45 trading days before the date in question. In the
absence of one or more such quotations, the Board of Directors
shall determine the current market price on the basis of such
quotation as it considers appropriate.
SECTION 10.11. When Adjustment May Be Deferred. No
adjustment in the conversion price need be made unless the
adjustment would require an increase or decrease of at least $.10
in the conversion price. Any adjustments which are not made shall
be carried forward and taken into account in any subsequent
adjustment.
All calculations under this Article shall be made to the
nearest cent or to the nearest l/100th of a share, as the case may
be.
SECTION 10.12. When Adjustment Is Not Required. Unless this
Article provides otherwise, no adjustment in the conversion price
shall be made because the Company issues, in exchange for cash,
property or services, Common Shares, or any securities convertible
into or exchangeable for Common Shares, or securities carrying the
right to purchase shares of Common Shares or such convertible or
exchangeable securities.
Furthermore, no adjustment in the conversion price need be
made under this Article for (i) sale of Common Shares pursuant to
a Company plan providing for reinvestment of dividends or interest
or in the event the par value of the Common Shares is changed; or
(ii) conversion of Class B Common Stock.
SECTION 10.13. Notice of Adjustment. Whenever the conversion
price is adjusted, the Company shall promptly mail to
Securityholders a notice of the adjustment and file with the
Trustee an Officers' Certificate briefly stating the facts
requiring the adjustment and the manner of computing it. The
certificate shall be conclusive evidence that the adjustment is
correct.
SECTION 10.14. Notice of Certain Transactions. If:
(1) the Company takes any action which would require an
adjustment in the conversion price:
(2) the Company consolidates or merges with, or transfers all
or substantially all of its assets to, another
corporation, and stockholders of the Company must approve
the transaction; or
(3) there is a dissolution or liquidation of the Company,
a Holder of a Security may want to convert it into Common Shares
prior to the record date for or the effective date of the
transaction so that he may receive the rights, warrants, securities
or assets which a holder of Common Shares on that date may receive.
Therefore, the Company shall mail to Securityholders and the
Trustee a notice stating the proposed record or effective date, as
the case may be. The Company shall mail the notice at least 10
days before such date. Failure to mail the notice or any defect in
it shall not affect the validity of any transaction referred to in
clause (1), (2) or (3) of this Section.
SECTION 10.15. Consolidation, Merger or Sale of the Company.
If the Company is a party to (x) a transaction described in Section
5.01 or (y) a merger which reclassifies or changes its outstanding
Common Shares, the successor corporation (or corporation
controlling the successor corporation or the Company, as the case
may be) shall enter into a supplemental indenture. The
supplemental indenture shall provide that the Holder of a Security
may convert it into the kind and amount of securities or cash or
other assets which he would have owned immediately after the
consolidation, merger or transfer if he had converted the Security
immediately before the effective date of such transaction. The
supplemental indenture shall provide for adjustments which shall be
as nearly equivalent as may be practical to the adjustments
provided for in this Article. The successor corporation shall mail
to each Securityholder a notice describing the supplemental
indenture.
If this Section applies, Sections 10.06, 10.07 and 10.08 shall
not apply.
SECTION 10.16. Company Determination Final. Any
determination which the Board of Directors must make pursuant to
Sections 10.03, 10.06, 10.08 or 10.10 is conclusive.
SECTION 10.17. Trustee's Disclaimer. The Trustee has no duty
to determine when an adjustment under this Article should be made,
how it should be made or what it should be. The Trustee has no
duty to determine whether any provisions of a supplemental
indenture under Section 10.15 are correct. The Trustee makes no
representation as to the validity or value of any securities or
assets issued upon conversion of Securities. The Trustee shall not
be responsible for the Company's failure to comply with this
Article.
ARTICLE ELEVEN
SUBORDINATION
SECTION 11.01. Securities Subordinated to Senior
Indebtedness. The Company agrees, and each holder of the
Securities by his or her acceptance thereof likewise agrees, that
the payment of the principal of, premium, if any, and interest on
the Securities is subordinated, to the extent and in the manner
provided in this Article, to the prior payment in full of all
Senior Indebtedness.
"Senior Indebtedness" means the principal of and interest on
Indebtedness of the Company outstanding at any time created other
than Indebtedness of the Company to a Subsidiary for money borrowed
or advanced from any such Subsidiary and Indebtedness which by its
terms is not superior in right of payment to the Securities and
other than the Company's 7-1/4% Subordinated Debentures due
December 15, 2006 issued pursuant to an Indenture dated as of
December 15, 1986, between the Company and Continental Illinois
National Bank and Trust Company of Chicago, as Trustee, to which
debentures the Securities shall be superior in right of payment.
"Indebtedness" means:
(1) any debt of the Company (i) for borrowed money,
capitalized lease obligations or purchase money
obligation or (ii) evidenced by a note, debenture, letter
of credit or similar instrument given in connection with
the acquisition, other than in the ordinary course of
business, of any property or assets;
(2) any debt of others described in the preceding clause
which the Company has guaranteed or for which it is
otherwise liable; and
(3) any amendment, renewal, extension or refunding of any
such debt.
This Article shall constitute a continuing offer to all
persons who, in reliance upon such provisions, become holders of,
or continue to hold, Senior Indebtedness, and such provisions are
made for the benefit of the holders of Senior Indebtedness, and
such holders are made obligees hereunder and they and/or each of
them may enforce such provisions.
SECTION 11.02. Company Not to Make Payments with Respect to
Securities in Certain Circumstances.
(a) Upon the maturity of any Senior Indebtedness by lapse of
time, acceleration or otherwise, all principal thereof, premium, if
any, thereon, and interest thereon shall first be paid in full, or
such payment duly provided for in cash or in a manner satisfactory
to the holders of such Senior Indebtedness, before any payment is
made on account of the principal of, premium, if any, or interest
on the Securities or to acquire any of the Securities.
(b) Upon the happening of any default in payment of the
principal of, premium, if any, or interest on any Senior
Indebtedness, then, unless and until such default shall have been
cured or waived or shall have ceased to exist, no payment shall be
made by the Company with respect to the principal of, premium, if
any, or interest on the Securities nor shall any payment be made by
the Company to acquire any of the Securities. Nothing in this
Article, however, shall relieve the holders of such Senior
Indebtedness or their representative from any notice requirements
set forth in the instrument evidencing such Senior Indebtedness.
(c) In the event that notwithstanding the provisions of this
Section 11.02 the Company shall make any payment to the Trustee on
account of the principal of or interest on the Securities, after
the happening of a default in payment of the principal of or
interest on Senior Indebtedness, then, unless and until such
default shall have been cured or waived or shall have ceased to
exist, such payment (subject to the provisions of Sections 11.06
and 11.07) shall be held by the Trustee, in trust for the benefit
of, and shall be paid forthwith over and delivered to, the holders
of Senior Indebtedness (pro rata as to each of such holders on the
basis of the respective amounts of Senior Indebtedness held by
them) or their representative or the trustee under the indenture or
other agreement (if any) pursuant to which Senior Indebtedness may
have been issued, as their respective interest may appear, for
application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to pay all Senior Indebtedness in
full in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior
Indebtedness.
The Company shall give prompt written notice to the Trustee of
any default in the payment of principal of or interest on any
Senior Indebtedness.
SECTION 11.03. Securities Subordinated to Prior Payment of
All Senior Indebtedness on Dissolution, Liquidation or
Reorganization of the Company. Upon any distribution of assets of
the Company in any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of
creditors or otherwise):
(a) the holders of all Senior Indebtedness shall first be
entitled to receive payment in full of the principal
thereof, premium, if any, and interest due thereon before
the Holders of the Securities are entitled to receive any
payment on account of the principal of or interest on the
Securities;
(b) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or
securities, to which the Holders of the Securities or the
Trustee on behalf of the Holders of the Securities would
be entitled except for the provisions of this Article
Eleven, including any such payment or distribution which
may be payable or deliverable by reason of the payment of
any other Indebtedness of the Company being subordinated
to the payment of the Securities, shall be paid by the
liquidating trustee or agent or other person making such
payment or distribution directly to the holders of the
Senior Indebtedness or their representative, or to the
trustee under any indenture under which Senior
Indebtedness may have been issued (pro rata as to each
such holder, representative or trustee on the basis of
the respective amounts of unpaid Senior Indebtedness held
or represented by each), to the extent necessary to make
payment in full of all Senior Indebtedness remaining
unpaid, after giving effect to any concurrent payment or
distribution or provision therefor to the holders of such
Senior Indebtedness, except that Holders of the
Securities would be entitled to receive securities that
are subordinated to Senior Indebtedness to at least the
same extent as the Securities; and
(c) in the event that notwithstanding the foregoing
provisions of this Section 11.03, any payment or
distribution of assets of the Company of any kind or
character, whether in cash, property or securities,
including any such payment or distribution which may be
payable or deliverable by reason of the payment of any
other Indebtedness of the Company being subordinated to
the payment of the Securities, shall be received by the
Trustee or the Holders of the Securities on account of
principal of, premium, if any, or interest on the
Securities before all Senior Indebtedness is paid in
full, or effective provision made for its payment, such
payment or distribution (subject to the provisions of
Sections 11.06 and 11.07) shall be received and held in
trust for and shall be paid over to the holders of the
Senior Indebtedness remaining unpaid or unprovided for or
their representative, or to the Trustee under any
indenture under which such Senior Indebtedness may have
been issued (pro rata as provided in subsection (b)
above), for application to the payment of such Senior
Indebtedness until all such Senior Indebtedness shall
have been paid in full, after giving effect to any
concurrent payment or distribution or provision therefor
to the holders of such Senior Indebtedness, except that
Holders of the Securities would be entitled to receive
securities that are subordinated to Senior Indebtedness
to at least the same extent as the Securities.
The Company shall give prompt written notice to the Trustee of any
dissolution, winding up, liquidation or reorganization of the
Company.
SECTION 11.04. Securityholders to be Subrogated to Rights of
Holders of Senior Indebtedness. Subject to the payment in full of
all Senior Indebtedness, the Holders of the Securities shall be
subrogated equally and ratably to the rights of the holders of the
Senior Indebtedness to receive payments or distributions of assets
of the Company applicable to the Senior Indebtedness until all
amounts owing on the Securities shall be paid in full, and for the
purpose of such subrogation no payments or distributions to the
holders of the Senior Indebtedness by or on behalf of the Company
or by or on behalf of the Holders of the Securities by virtue of
this Article which otherwise would have been made to the Holders of
the Securities shall, as between the Company, its creditors other
than holders of the Senior Indebtedness and the holder of the
Securities, be deemed to be payment by the Company to or on account
of the Senior Indebtedness, it being understood that the provisions
of this Article Eleven are intended solely for the purpose of
defining the relative rights of the Holders of the Securities, on
the one hand, and the holders of the Senior Indebtedness, on the
other hand.
SECTION 11.05. Obligation of the Company Unconditional.
Nothing contained in this Article Eleven or elsewhere in this
Indenture or in any Security is intended to or shall impair, as
between the Company, its creditors other than holders of Senior
Indebtedness and the Holders of the Securities, the obligation of
the Company, which is absolute and unconditional, to pay to the
Holders of the Securities the principal of, premium, if any, and
interest on the Securities as and when the same shall become due
and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the Holders of the Securities
and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the
Trustee or the Holder of any Security from exercising all remedies
otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article Eleven
of the holders of Senior Indebtedness in respect of cash, property
or securities of the Company received upon the exercise of any such
remedy. Upon any distribution of assets of the Company referred to
in this Article Eleven, the Trustee, subject to the provisions of
Section 7.01 and 7.02, and the Holders of the Securities shall be
entitled to rely upon any order or decree made by any court of
competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending, or a
certificate of the liquidating trustee or agent or other person
making any distribution to the Trustee or the Holders of the
Securities, for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to
this Article Eleven.
Nothing contained in this Article Eleven or elsewhere in this
Indenture or in any Security is intended to or shall affect the
obligation of the Company to make, or prevent the Company from
making, at any time except during the pendency of any dissolution,
winding up, liquidation or reorganization proceeding, and except
during the continuance of any default specified in Section ll.02
(not cured or waived), payments at any time of the principal of or
interest on the Securities.
SECTION 11.06. Knowledge of Trustee. Notwithstanding any
provision of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts which would prohibit the
making of any payment of moneys to or by the Trustee, or the taking
of any other action by the Trustee, until two business days after
the Trustee shall have received written notice thereof from the
Company, any Securityholder, any Paying or Conversion Agent or the
holder or representative of any class of Senior Indebtedness.
SECTION 11.07. Application by Trustee of Monies Deposited
With It. If prior to the date on which by the terms of this
Indenture any monies deposited with the Trustee or any Paying Agent
may become payable for any purpose (including, without limitation,
the payment of either the principal of, premium, if any, or the
interest on any Security) the Trustee shall not have received with
respect to such monies the notice provided for in Section 11.06,
then the Trustee shall have full power and authority to receive
such monies and to apply the same to the purpose for which they
were received and shall not be affected by any notice to the
contrary which may be received by it on or after such date. This
section shall be construed solely for the benefit of the Trustee
and Paying Agent and shall not otherwise affect the rights of
holders of such Indebtedness.
SECTION 11.08. Subordination Rights Not Impaired by Acts or
Omissions of Company or Holders of Senior Indebtedness. No right
of any present or future holders of any Senior Indebtedness to
enforce subordination as provided herein shall at any time in any
way be prejudiced or impaired by any act or failure to act on the
part of the Company or by any act or failure to act, in good faith,
by any such holder, or by any noncompliance by the Company with the
terms of this Indenture, regardless of any knowledge thereof which
any such holder may have or be otherwise charged with.
SECTION 11.09. Securityholders Authorize Trustee to
Effectuate Subordination of Securities. Each Holder of the
Securities by his or her acceptance thereof authorizes and
expressly directs the Trustee on his or her behalf to take such
action as may be necessary or appropriate to effectuate the
subordination provided in this Article Eleven and appoints the
Trustee his attorney-in-fact for such purpose, including, in the
event of any dissolution, winding up, liquidation or reorganization
of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or
otherwise) tending towards liquidation of the business and assets
of the Company, the immediate filing of a claim for the unpaid
balance of its or his or her Securities in the form required in
said proceedings and cause said claim to be approved. If the
Trustee does not file a proper claim or proof of debt in the form
required in such proceeding prior to 30 days before the expiration
of the time to file such claim or claims, then the holders of
Senior Indebtedness are hereby authorized to have the right to file
and are hereby authorized to file an appropriate claim for and on
behalf of the Holders of said Securities.
SECTION 11.10. Right of Trustee to Hold Senior Indebtedness.
The Trustee shall be entitled to all of the rights set forth in
this Article Eleven in respect of any Senior Indebtedness at any
time held by it to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall be construed to
deprive the Trustee of any of its rights as such holder.
SECTION 11.11. Article Eleven Not to Prevent Events of
Default. The failure to make a payment on account of principal or
interest by reason of any provision in this Article Eleven shall
not be construed as preventing the occurrence of an Event of
Default under Section 6.01.
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls. If any
provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
SECTION 12.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed
by first-class mail addressed as follows:
if to the Company:
Richardson Electronics, Ltd.
40W267 Keslinger Road
LaFox, Illinois 60147
Attention: Chairman of the Board
if to the Trustee:
American National Bank and Trust Company of Chicago
33 North LaSalle Street
Chicago, Illinois 60690
Attention: Division 501
with a copy to
Neal, Gerber & Eisenberg
Two North LaSalle Street, Suite 200
Chicago, Illinois 60602
Attention: Joel M. Hurwitz
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices
or communications.
Any notice or communication mailed to a Securityholder shall
be mailed to such Securityholder at the address which appears on
the registration books of the Registrar and shall be sufficiently
given to such Securityholder if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect
to other securityholders. If a notice or communication is mailed
in the manner provided above, it is duly given, whether or not the
addressee receives it. If the Company mails a notice or
communication to Securityholders it shall mail a copy of such
notice to the Trustee and each Agent at the same time. All other
notices or communication shall be in writing.
SECTION 12.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Sec. 312(b) with other
Securityholders with respect to their rights under this Indenture
or the Securities. The Company, the Trustee, the Registrar and
anyone else shall have the protection of TIA Sec. 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the
Trustee to take any action under this Indenture, the Company shall
furnish to the Trustee:
(1) an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with;
and
(2) an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent have been
complied with. In rendering such opinion, Counsel may
rely upon certificates of appropriate officers of the
Company.
SECTION 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such person, he or
she has made such examination or investigation as is
necessary to enable him or her to express an informed
opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement: as to whether cr not, in the opinion of such
person, such condition or covenant has been complied
with.
SECTION 12.06. When Treasury Securities Disregarded. In
determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent,
Securities owned by the Company or by any person directly or
indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded, except that
for the purpose of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so owned shall be so
disregarded.
SECTION 12.07. Rules by Trustee and Agents. The Trustee may
make reasonable rules for action by, or at a meeting of,
Securityholders. The Registrar, Paying Agent or Conversion Agent
may make reasonable rules for its functions.
SECTION 12.08. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institutions are not
required to be open in the city in which the Trustee administers
its corporate trust business. If a payment date is a Legal Holiday
at a place of payment, payment may be made at the place on the next
succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
SECTION 12.09. Governing Law. The laws of the State of
Illinois, without regards to the principles of conflicts of law,
shall govern this Indenture and the Securities.
SECTION 12.10. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or a Subsidiary. Any such
indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 12.11. No Recourse Against Others. Liabilities of
directors, officers, employees and stockholders, as such, of the
Company is waived and released as provided in paragraph 16 of the
Securities.
SECTION 12.12. Successors. All agreements of the Company in
this Indenture and the Securities shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 12.13. Duplicate Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an
original, but all of them together represent the same agreement.
SIGNATURES
RICHARDSON ELECTRONICS, LTD.
/s/ Edward J. Richardson
By: _____________________________
Title: Chairman
Attest:
/s/ William G. Seils, Secretary
_____________________________
(Corporate Seal)
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO,
As Trustee
/s/ Elizabeth Nelson
By: ______________________________
Title: Assistant Vice President
Attest:
___________________________
(Corporate Seal)
$
(FACE OF SECURITY)
RICHARDSON ELECTRONICS, LTD.
8-1/4% CONVERTIBLE SENIOR SUBORDINATED DEBENTURE DUE June 15, 2006
Promises to pay to CUSIP 763165AB3
or registered assigns
the principal sum of
Dollars on June 15, 2006.
The provisions on the back of this INTEREST
certificate are incorporated as if set Payment Dates: June 15 and
forth on the face of the certificate December 15
Record Dates: June 1 and
December 1
DATED:
Authenticated to be one of the (Seal)
Debentures described in the
Indenture referred to herein.
AMERICAN NATIONAL BANK AND TRUST RICHARDSON ELECTRONICS, LTD.
COMPANY OF CHICAGO
as Trustee
By: ____________________________________ By: _____________________________
Authorized Officer
By: _____________________________
(REVERSE OF SECURITY)
RICHARDSON ELECTRONICS, LTD.
8-1/4% CONVERTIBLE SENIOR SUBORDINATED DEBENTURE DUE JUNE 15, 2006
1. Interest. Richardson Electronics, Ltd., a Delaware
corporation (the "Company"), promises to pay interest on the
principal amount of this Debenture at the rate per annum shown
above. The Company will pay interest semiannually on June 15 and
December 15 of each year, beginning June 15, 1997. Interest on
the Debentures will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the
date on which these Debentures are first issued in exchange for
the Company's 7-1/4% Convertible Subordinated Debentures due
December 15, 2006 pursuant to the Exchange Offer set forth in the
Company's Offering Circular dated December 18, 1996. Interest
will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment. The Company will pay interest on the
Debentures (except defaulted interest) to the persons who are
registered holders of Debentures at the close of business on the
June 1 or December 1 preceding the interest payment date. Holders
must surrender Debentures to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of
the United States that at the time of payment is legal tender for
payment of public and private debts. The Company may, however,
pay principal and interest by its check payable in such money. It
may mail an interest check to a holder's registered address.
3. Paying Agent, Registrar and Conversion Agent.
Initially, American National Bank and Trust Company of Chicago
(the "Trustee") will act as Paying Agent, Registrar and Conversion
Agent. The Company may change any Paying Agent, Registrar,
Conversion Agent or co-Registrar without notice. The Company or
any of its Subsidiaries may act as Paying Agent, Registrar,
Conversion Agent or co-Registrar.
4. Indenture. The Company issued the Debentures under an
Indenture dated as of December 16, 1996 (the "Indenture") between
the Company and the Trustee. The terms of the Debentures include
those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sec.
77aaa-77bbbb) as in effect on the date of the Indenture. The
Debentures are subject to all such terms, and Debentureholders are
referred to the Indenture and the Act for a statement of them.
The Debentures are general unsecured obligations of the Company
limited to the aggregate principal amount of $70,825,000. The
Indenture does not limit other debt, secured or unsecured.
5. Optional Redemption. The Company may optionally redeem
the Debentures at any time. Upon an optional redemption, the
Company may redeem the Debentures as a whole, or from time to time
in part, on not less than 30 nor more than 60 days' mailed notice
at 100 percent of the principal amount, plus accrued interest to
the redemption date.
6. Selection and Notice of Redemption. Selection of
Debentures for any redemption will be made by the Trustee on
either a pro rata basis or by lot. Debentures in denominations
larger than $1,000 may be redeemed in part. Notice of redemption
will be mailed at least 30 days but not more than 60 days before
the redemption date to each holder of Debentures to be redeemed at
his registered address. On and after the redemption date,
interest ceases to accrue on Debentures or portions thereof called
for redemption.
7. Conversion. The holder of any Debenture has the right,
exercisable at any time up to and including June 15, 2006, except
in the case of Debentures called for redemption, to convert such
Debenture at the principal amount thereof (or any portion thereof
that is an integral multiple of $1,000) into Common Stock of the
Company at the conversion price of $18.00 per share, subject to
adjustment as described below. In the case of Debentures called
for redemption, conversion rights will expire at the close of
business on the redemption date. Notice of an optional redemption
must be mailed not less than 30 and not more than 60 days prior to
the redemption date. No payment or adjustment for interest
accrued on the Debentures is to be made on conversion. No
fractional shares will be issued upon conversion and, if the
conversion results in a fractional interest, an amount will be
paid in cash equal to the value of such fractional interest based
on the market price of the Company's Common Stock on the last
trading date prior to the date of conversion.
The conversion price is subject to adjustment upon the
occurrence of certain events, including (i) the payment of a
dividend in Common Stock to holders of Common Stock or a dividend
to holders of the Company's Common Stock payable in shares of the
Company's capital stock other than Common Stock; (ii) the
subdivision, combination or certain reclassifications of
outstanding Common Stock; (iii) issuance to all holders of Common
Stock of the Company of rights or warrants entitling them for a
period of not more than 45 days to purchase Common Stock (or
securities convertible into Common Stock) at a price per share (or
having a conversion price per share) less than the then current
per share market price for such Common Stock; (iv) the
distribution to holders of Common Stock of evidences of
indebtedness or assets (excluding cash dividends) or rights or
warrants (other than those referred to above); and (v) certain
mergers, consolidations or sales of assets. No adjustment of the
conversion price will be made until cumulative adjustments amount
to at least $.10. No adjustment of the conversion price will be
made for cash distributions or cash dividends paid out of
Consolidated Net Income (as defined in the Indenture) or retained
earnings.
To convert a Debenture a holder must (1) complete and sign
the conversion notice on the back of the Debenture, (2) surrender
the Debenture to a Conversion Agent, (3) furnish appropriate
endorsements or transfer documents if required by the Registrar or
Conversion Agent and (4) pay any transfer or similar tax if
required. A holder may convert a portion of a Debenture if the
portion is $1,000 or an integral multiple of $1,000.
8. Subordination. The indebtedness evidenced by the
Debentures is subordinate to the prior payment when due of the
principal of, premium if any, and interest on all Senior
Indebtedness. Upon maturity of any Senior Indebtedness, payment
in full must be made on such Senior Indebtedness before any
payment is made on or in respect of the Debentures. During the
continuance of any default in payment of principal of, premium, if
any, or interest on Senior Indebtedness, no payment may be made by
the Company on or in respect of the Debentures. Upon any
distribution of assets of the Company in any dissolution,
winding-up, liquidation or reorganization of the Company, payment
of the principal of and interest on the Debentures will be
subordinated, to the extent and in the manner set forth in the
Indenture, to the prior payment in full of all Senior
Indebtedness. Such subordination will not prevent the occurrence
of any event of default (as defined). "Senior Indebtedness" means
the principal or and interest on Indebtedness of the Company
outstanding at any time created, other than Indebtedness of the
Company to a Subsidiary for money borrowed or advanced from any
such Subsidiary and Indebtedness which by its terms is not
superior in right of payment to the Debentures and other than the
Company's 7-1/4% Subordinated Debentures due December 15, 2006
issued pursuant to an Indenture dated as of December 15, 1986
between the Company and the Continental Illinois National Bank and
Trust Company of Chicago, as Trustee, to which debentures the
Debentures shall be superior in right of payment. "Indebtedness"
means (1) any debt of the Company (i) for borrowed money,
capitalized lease obligations or purchase money obligations or
(ii) evidenced by a note, debenture or similar instrument given in
connection with the acquisition, other than in the ordinary course
of business, of any property or assets; (2) any debt of others
described in the preceding clause which the Company has guaranteed
or for which it is otherwise liable; and (3) any amendment,
renewal, extension or refunding or any such debt.
9. Denominations, Transfer, Exchange. The Debentures are
in registered form without coupons in denominations of $1,000 and
integral multiples of $1,000. A holder may transfer or exchange
Debentures in accordance with the Indenture. The Registrar may
require a holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need
not transfer or exchange any Debenture or portion of a Debenture
selected for redemption, or transfer or exchange any Debentures
for a period of 15 days before a selection of Debentures to be
redeemed.
10. Persons Deemed Owners. The registered holder of a
Debenture may be treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal
or interest remains unclaimed for two years, the Trustee or Paying
Agent will pay the money back to the Company at its request.
After that, holders entitled to the money must look to the Company
for payment as general creditors unless an "abandoned property"
law designates another person.
12. Amendment, Supplement, Waiver. Subject to certain
exceptions, the Indenture or the Debentures may be amended or
supplemented with the consent of the holders of at least a
majority in principal amount of the outstanding Debentures, and
any past default or compliance with any provision may be waived
with the consent of the holders of a majority in principal amount
of the outstanding Debentures. Without the consent of any
Debentureholder, the Company may amend or supplement the Indenture
or the Debentures to cure any ambiguity, omission, defect or
inconsistency or to provide for uncertificated Debentures in
addition to certificated Debentures or to make any change that
does not materially adversely affect the rights of any
Debentureholder.
13. Successor Corporation. When a successor corporation
assumes all the obligations of its predecessor under the
Debentures and the Indenture and immediately thereafter no default
exists, the predecessor corporation will be released from those
obligations.
15. Defaults and Remedies. An Event of Default is:
(i) failure of the Company to pay interest for 30 days or
principal or any sinking fund installment when due (whether or not
prohibited by the subordination provisions); (ii) failure to
perform any other covenant for 30 days after notice; (iii)
acceleration of the maturity of any Indebtedness of the Company or
any Subsidiary in any one case or in the aggregate in excess of
$5,000,000, if such acceleration is not rescinded, annulled or
otherwise cured within 30 days after notice to the Company; and
(iv) certain events of bankruptcy, insolvency or reorganization of
the Company or any Subsidiary.
The Indenture provides that the Trustee will, within 90 days
after the occurrence of a default, give the Debentureholders
notice of all uncured defaults known to it (the term "default" to
include the events specified above, without grace or notice),
provided that, except in the case of default in the payment of
principal of or interest on any of the Debentures, or any sinking
fund payment, the Trustee shall be protected in withholding such
notice if it in good faith determines that the withholding of such
notice is in the interest of the Debentureholders.
In case an Event of Default occurs and is continuing, the
Trustee or the holders of not less than 25% in aggregate principal
amount of the Debentures then outstanding, by notice in writing to
the Company (and to the Trustee if given by the Debentureholders),
may declare the principal of and all accrued interest on all the
Debentures to be due and payable immediately. Such declaration
may be rescinded by holders of a majority in principal amount of
the Debentures if all existing Events of Default have been cured
or waived (except nonpayment of principal or interest that has
become due solely because of the acceleration) and if the
rescission would not conflict with any judgment or decree.
Defaults (except, unless theretofore cured, a default in
payment of principal of or interest on the Debentures or a default
with respect to a provision which cannot be modified under the
terms of the Indenture without the consent of each Debentureholder
affected) may be waived by the holders of a majority in principal
amount of the outstanding Debentures upon the conditions provided
in the Indenture.
The Indenture requires the Company to file periodic reports
with the Trustee as to the absence of defaults.
15. Trustee Dealings with Company. American National Bank
and Trust Company of Chicago, the Trustee under the Indenture, in
its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company or its
affiliates, and may otherwise deal with the Company or its
affiliates, as if it were not Trustee.
16. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have
any liability for any obligations of the Company under the
Debentures or the Indenture or for any claim based on, in respect
of or by reason of, such obligations or their creation. Each
Debentureholder by accepting a Debenture waives and releases all
such liability. The waiver and release are part of the
consideration for the issue of the Debentures.
17. Authentication. This Debenture shall not be valid until
the Trustee signs the certificate of authentication on the other
side of this Debenture.
18. Abbreviations. Customary abbreviations may be used in
the name of a Debentureholder or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entities), JT TEN (=
joint tenants with right of survivorship and not as tenants in
common), CUST (= custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
The Company will furnish to any Debentureholder upon written
request and without charge a copy of the Indenture. Requests may
be made to: Investor Relations Department, Richardson
Electronics, Ltd., 40W267 Keslinger Road, LaFox, Illinois 60147.
Item 9 (c)(2)
EXCHANGE AGENT AGREEMENT
Between
RICHARDSON ELECTRONICS, LTD.
and
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO,
as Exchange Agent
Dated as of December 16, 1996
Richardson Electronics, Ltd.
$70,825,000
81/4% Convertible Senior Subordinated Debentures
due June 15, 2006
EXCHANGE AGENT AGREEMENT
THIS EXCHANGE AGENT AGREEMENT (this "Agreement") dated as of
December 16, 1996 made and entered into by and between AMERICAN
NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Exchange Agent
(the "Agent"), a national banking association, and RICHARDSON
ELECTRONICS, LTD. (the "Company"), a Delaware corporation;
WITNESSETH
RECITALS
WHEREAS, pursuant to an Offering Circular and Consent
Solicitation (the "Offering Circular") the Company is offering to
exchange $1,000 principal amount of its 8-1/4% Convertible Senior
Subordinated Debentures due June 15, 2006 (the "New Debentures")
for each $1,000 of its 7-1/4% Subordinated Convertible Debentures
due December 15, 2006 (the "Old Debentures") and also soliciting
consents ("Consents") from holders of the Old Debentures (the
"Debentureholders") representing at least a majority in aggregate
principal amount of the outstanding Old Debentures (the
"Requisite Consents") to certain amendments to the indenture
under which the Old Debentures were issued (the "Old Indenture")
(collectively, the offer to exchange and solicitation of Consents
are referred to herein as the "Exchange Offer"); and
WHEREAS, in connection with the Exchange Offer,
Debentureholders will be delivering their Old Debentures to the
Agent and requesting delivery of New Debentures and Consents to
the proposed amendments, and
WHEREAS, the Company has delivered or will deliver to the
Agent (i) a copy of the Consent and Letter of Transmittal (the
"Letter of Transmittal") to be sent to the Debentureholders, in
the form attached hereto as Exhibit A, (ii) copies of all other
documents or materials to be forwarded to the Debentureholders;
and (iii) a list showing the names and addresses of all
Debentureholders as of the close of business on December 17, 1996,
and the number of Old Debentures held by each Debentureholder as
of the close of business on such date (the "List"), and
WHEREAS, the New Debentures will be issued under an
Indenture dated as of December 16, 1996 (the "New Indenture")
between the Company and American National Bank and Trust Company
of Chicago, as trustee (the "Trustee"); and
WHEREAS, the Indenture will be signed by the Trustee and the
Company on or about December 17, 1996 (the "Closing Date"); and
WHEREAS, this Agreement will confirm the appointment of
American National Bank and Trust Company of Chicago as exchange
agent, and, in that capacity, authorization to act as agent for
the Debentureholders for the purpose of receiving from the
Company the New Debentures to be issued in exchange for the Old
Debentures and transmitting same to the Debentureholders upon
satisfaction of conditions set forth herein.
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS,
UNDERTAKINGS AND PROMISES HEREINAFTER SET FORTH AND FOR OTHER
GOOD AND VALUABLE CONSIDERATION AND THE ACCEPTANCE OF THE SUM OF
TEN DOLLARS ($10.00) DULY PAID BY EACH OF THE PARTIES TO THE
OTHER UPON THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
RECEIPT AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED AND
CONFESSED, THE PARTIES HERETO AGREE AS FOLLOWS:
1. Duties of Agent. The Agent will examine Letters of
Transmittal, Debentures and other documents delivered or mailed
to the agent by or for the Debentureholders, in order to
ascertain, to the extent reasonably determined by the Agent,
whether:
a) the Letters of Transmittal appear to be duly executed
and properly completed in accordance with the
instructions set forth therein;
b) the Old Debentures appear to be properly surrendered
and, if appropriate, endorsed for transfer;
c) the other documents, if any, used in the exchange
appear to be duly executed and properly completed and
in the proper form; and
d) the Old Debentures are free of restrictions on transfer
or stop orders except as set forth on the List.
In the event the Agent ascertains that any Letter of
Transmittal or other document has been improperly completed or
executed, that any of the Old Debentures are not in proper form
or some other irregularity exists, the Agent shall attempt to
resolve promptly the irregularity and may use its best efforts to
contact the appropriate Debentureholder by whatever means of
communication it deems most expedient in order to correct the
irregularity and, upon consultation with the Company, shall
endeavor to take such other reasonable action as may be necessary
to cause such irregularity to be corrected; and the determination
of any questions referred to the Company or its counsel by the
Agent as to the validity, form and eligibility, as well as the
proper completion or execution of the Letters of Transmittal and
other documents, shall be final and binding and the Agent may
rely thereon as provided in Section 8 hereof. Any costs of
contacting Debentureholders for the purpose of correcting
irregularities shall be charged to the Company.
2. Exchange of Debentures. As soon as practicable after
the Expiration Date and notification from the Company of the
satisfaction or waiver of the conditions to the Exchange Offer as
set forth in the Offering Circular and the principal amounts of
Old Debentures it is accepting for exchange and after surrender
to the Agent of all Old Debentures registered to a particular
Debentureholder and the return of a properly completed Letter of
Transmittal relating thereto, the Agent shall cause to be issued
and distributed to the Debentureholder in whose name such
certificates were registered New Debentures in the same principal
amount as the Old Debentures registered in the name of such
Debentureholder; provided, however, that if fewer than all of the
Old Debentures properly tendered for exchange are accepted by the
Company, properly tendered Old Debentures will be accepted and
New Debentures will be issued on a pro rata basis. Any Old
Debentures not accepted for exchange will be returned to the
Debentureholder.
If any New Debentures are to be issued in a name other than
that in which the Old Debentures surrendered in exchange therefor
is registered, it shall be a condition of the issuance thereof
that the Old Debenture so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person
requesting such exchange shall pay to the Agent any transfer or
other taxes required, or shall establish to the Agent's
satisfaction that such tax has been paid or is not payable.
New Debentures and returned Old Debentures to be delivered
by mail shall be forwarded by first class mail under the Agent's
blanket surety bond, which the Company understand protects the
Company and the Agent from loss or liability arising by virtue of
the non-receipt or non-delivery of such New Debentures. It is
understood that the face value of New Debentures in any one
shipment sent by first class mail under this procedure will not
be in excess of $500,000. In the event the face value shall
exceed $500,000 the New Debentures shall be mailed by registered
mail and shall be insured separately for the replacement value of
its contents at the time of mailing.
3. Lost, Stolen or Destroyed Debentures. In the event
that any Debentureholder claims that any Debenture registered in
their name is lost, stolen or destroyed, the Agent shall mail to
such Debentureholder an affidavit of loss and an indemnity bond.
The Agent shall make the distribution of New Debentures only upon
receipt of a properly completed affidavit of loss and an
indemnity bond.
4. Reports. The Agent shall furnish, until otherwise
notified, weekly reports to the Company showing the number of Old
Debentures surrendered for exchange, the number of New Debentures
issued in exchange therefor and the Consents received.
5. Copies of Documents. The Agent shall take such action
at the Company's expense as may from time to time be reasonably
requested by the Company to furnish copies of the Letters of
Transmittal to persons designated by the Company.
6. Maintenance of Records. The Agent will keep and
maintain complete and accurate records showing all Old Debentures
exchanged by the Agent. The Agent is authorized to cooperate
with and furnish information to any organization or its legal
representatives designated from time to time by the Company in
any manner reasonably requested by any of them in connection with
the Exchange Offer. Letters of Transmittal and telegrams,
telexes, facsimile transmissions and other materials submitted to
the Agent shall be preserved by the Agent until delivered to or
otherwise disposed of in accordance with the Company's
instructions at or prior to the termination hereof.
7. Delivery of Surrendered Debentures. All Old Debentures
surrendered to the Agent shall be retained by the Agent, and
following the exchange of such Old Debentures, shall be forwarded
to the Company or elsewhere as directed by the Company. Consents
shall be forwarded to the Company or elsewhere as directed by the
Company.
8. The Exchange Agent's Duties and Obligations. The
Agent, in its capacity as Exchange Agent under this Agreement:
a) will have no duties or obligations other than those
specifically set forth herein, or as may subsequently
be agreed to in writing by the Agent and the Company;
b) will be regarded as making no representations or
warranties and having no responsibilities regarding the
validity, sufficiency, value or genuineness of any Old
Debentures surrendered to the Agent or the New
Debentures delivered by the Agent; will not be required
or requested to make any representations as to the
validity, value or genuineness of such Debentures; and
will not be responsible in any manner whatsoever for
the correctness of the statements made herein or in the
Indenture or in any document furnished to the Agent by
the Company;
c) will not be obligated to institute or defend any
action, suit or legal proceeding in connection with the
Exchange Offer or the Agent's duties hereunder, or take
any other action which might, in the Agent's judgment
involve, or result in, expense or liability to the
Agent, unless the Company shall first furnish the Agent
an indemnity satisfactory to the Agent;
d) may rely on, and shall be protected in acting upon, any
certificate, instrument, opinion, representation,
notice, letter, telegram or other document delivered to
the Agent and believed by the Agent to be genuine and
to have been signed by the proper party or parties;
e) may rely on, and shall be protected in acting upon,
written or oral instructions given by any officer of,
or any party authorized by the Company with respect to
any matter relating to the Agent's actions under this
Agreement;
f) may consult with counsel satisfactory to the Agent
(including counsel for the Company or the Agent) and
the advice or opinion of such counsel shall be full and
complete authorization and, protection in respect of
any action taken, suffered or omitted by the Agent
hereunder in good faith and in accordance with such
advice or opinion of such counsel; and
g) may retain an agent or agents of the Agent's choice to
assist the Agent in performing its duties and
obligations hereunder.
9. Termination of Exchange Agent's Duties and Obligations.
This Agreement shall terminate when all New Debentures have been
issued and delivered. The Agent will make any final exchanges of
Debentures within a reasonable time following the expiration of
the Exchange Offer on January 31, 1996.
10. Indemnification of Exchange Agent. The Company hereby
covenants and agrees to reimburse, indemnify and hold the Agent
harmless from and against any and all claims, actions, judgments,
damages, losses, liabilities, costs, transfer or other taxes, and
expenses (including without limitation reasonable attorney's fees
and expenses) which, without gross negligence or willful
misconduct by the Agent, may be paid, incurred or suffered by the
Agent, or to which the Agent may become subject, arising out of
or incident to this Agreement or the administration of its duties
hereunder, or arising out of or incident to its compliance with
the instructions set forth herein or with any instructions
delivered to the Agent pursuant hereto, or as a result of
defending itself against any claim or liability resulting from
its actions as Agent, including any claim against the Agent by
any Debentureholder, which covenant agreement shall survive the
termination hereof. The Agent hereby represents that it will
notify the Company by telephone, confirmed in writing, of any
receipt by the Agent of a written assertion of a claim against
the Agent, or any action commenced against the Agent, within ten
(10) business days after its receipt of written notice of such
assertion or its having been served with the summons or other
first legal process giving information as to the nature and basis
of any such action. However, the Agent's failure to so notify
the Company shall not operate in any manner whatsoever to relieve
the Company from any liability it may have on account of this
Section 10 if no prejudice occurs. At its election, the Company
will assume the conduct of the Agent's defense in any such action
or claim at its sole cost and expense. In the event that the
Company elects to assume the defense of any such action or claim
and confirms to the Agent in writing that the indemnity provided
for in this Section 10 applies to such action or claim, the
Company shall not be liable for the fees and expenses of any
counsel thereafter retained by the Agent; the foregoing
notwithstanding, if the Escrow Agent shall reasonably believe
that separate counsel is necessary to protect its, interests, it
shall be entitled to retain its own counsel and the reasonable
fees and expenses of such counsel shall be payable by the
Company.
11. Modification. Except as otherwise provided in Section
14 hereof, (i) the instructions contained herein may be modified
or supplemented only by an authorized representative of
Company and (ii) any inconsistency between this Agreement and the
Indenture shall be resolved in favor of the Indenture.
12. Fees and Expenses. The Agent shall be entitled to
receive the fees and expenses set forth in the letter from the
Agent dated December 10, 1996 and accepted and agreed to by the
Company.
13. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed
to have been duly given when placed in the hands of a carrier for
delivery, charges pre-paid:
(a) If to the Company, to: Richardson Electronics, Ltd.
40W267 Keslinger Road
LaFox, Illinois 60147
Attention: William G. Seils
Telephone: (630) 208-2200
(630) 208-2950
(b) If to the Agent, to: American National Bank and
Trust Company of Chicago
33 North LaSalle Street
Chicago, Illinois 60690
Attn: Corporate Trust Division
Telephone: (312) 661-6055
Fax: (312) 661-6491
or to such other address or addresses as the Company or the Agent
may communicate in writing to each of the other parties.
14. Entire Agreement. This Agreement, the Indenture and
the other documents referred to herein contain all terms and
conditions agreed upon by the parties hereto, and no other
agreements, oral or otherwise, regarding the subject matter
hereof shall be deemed to exist or bind the parties hereto unless
in writing and executed by the Agent and the Company.
15. Benefit of the Agreement and Third Party Beneficiaries.
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and any successors and assigns. The Company
hereby acknowledges to any such successor and assign of the Agent
that the Company shall perform as to such successor and assign
all duties and obligations under this Agreement just as if such
successor or assign of the Agent had been originally named as a
party hereto and such successor and assign shall be a third party
beneficiary of this Agreement. The Company can assign and
transfer its rights under this Agreement with the consent of the
Agent, and such consent shall not be unreasonably withheld by the
Agent.
16. Governing Law and Severability. This Agreement shall
be governed by and construed in accordance with the laws of the
State of Illinois. The invalidity or unenforceability of any
provision of this Agreement shall not affect or impair the
validity, operation or enforceability of any other provision of
this Agreement.
17 Resolution of Inconsistent Provisions. In the event
any of the provisions of this Agreement and the Indenture are
inconsistent in any respect and cannot be reconciled, the
provisions of the Indenture shall control over the provisions of
this Agreement.
18. Execution and Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be an
original and all of which shall constitute but one and the same
instrument.
19. Headings. Section headings used in this Agreement are
for convenience of reference only and are not intended to be a
part of the provisions of this Agreement nor to control or affect
the meanings, construction or effect of the same.
20. Definition of Terms. For all purposes of this
Agreement, except as otherwise herein expressly provided or
unless the context otherwise requires, the terms and expressions
used in this Agreement shall have the same meaning as the
corresponding terms and expressions used in the Indenture and in
the Offering Circular.
21. Attachment; Compliance with Legal Orders. In the event
that any information or securities held hereunder shall be
attached, garnished, or levied upon by any court order, or the
delivery thereof shall be stayed or enjoined by an order of a
court, or any order, judgment or decree shall be made or entered
by any court order affecting the property deposited under this
Agreement, or any part thereof, the Exchange Agent is hereby
expressly authorized, in its sole direction, to obey and comply
with all writs, orders or decrees so entered or issued, which it
is advised by legal counsel of its own choosing is binding upon
it, whether with or without jurisdiction, and in the event that
the Exchange Agent obeys or complies with any such writ, order or
decree it shall not be liable to the Company or to any other
person, firm or corporation, by reason of such compliance
notwithstanding such writ, order or decree be subsequently
reversed, modified, annulled, set aside or vacated.
22. Conflicting Demands. In the event that conflicting
demands are made upon the Exchange Agent for any situation not
addressed in this Agreement, the Exchange Agent may withhold
performance of the terms of this Agreement until such time as
said conflicting demands shall have been withdrawn or the rights
of the respective parties shall have been settled by court
adjudication, arbitration, joint order or otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, as Exchange Agent
By: /s/ Elizabeth Nelson
Its: Assistant Vice President
RICHARDSON ELECTRONICS, LTD.
By: /s/ Edward J. Richardson
Its: Chairman
Item 9 (c)(3)
December 3, 1996
Richardson Electronics, Ltd.
40W267 Keslinger Road
LaFox, Illinois 60147
Attention: Mr. Edward J. Richardson
Chief Executive Officer
Dear Mr. Richardson:
This letter (this "Agreement") will confirm the agreement
between Richardson Electronics, Ltd. (the "Company") and Forum
Capital Markets L.P. ("Forum"), pursuant to which the Company has
agreed to retain Forum to render financial advisory and other
investment banking services to the Company in connection with an
Exchange Offer (as defined below) involving the Company's
existing 7 1/4% Convertible Subordinated Debentures due December
15, 2006 (the "Existing Securities"), in each case on the terms
and subject to the conditions set forth herein.
1. Engagement. The Company hereby agrees to retain Forum,
and Forum agrees to act, as exclusive financial advisor to the
Company in connection with the Exchange Offer, all on the terms
and conditions set forth herein. The services to be performed by
Forum with respect to the Exchange Offer will include (1)
performing financial analyses, (2) advising the Company with
respect to the terms of the new debt and the new capital
structure of the Company and (3) assisting the Company in the
preparation of the Exchange Offer Documents (as defined below).
It is anticipated that the Exchange Offer will be structured to
qualify for exemption from registration under the Securities Act
of 1933, as amended, pursuant to Section 3(a)(9) thereof, and
Forum will not be required to take any action which could
jeopardize the availability of such exemption. Forum will not
take any action other than those described in clauses (1), (2) or
(3) above without the prior written consent of the Company.
2. Certain Definitions. For purposes of this Agreement:
(i) The term "Exchange Offer" means each offer
(including any amendment thereto or modification thereof) by the
Company or any subsidiary or affiliate of the Company (a "Related
Entity") to holders of the Existing Securities (collectively, the
"Holders") to purchase or acquire in one or more transactions
(whether by tender offer, exchange offer, open market purchase,
private purchase or otherwise) Existing Securities and/or any
solicitation (including any amendment to or modification of any
solicitation) by the Company or any Related Entity with respect
to any Existing Securities, including each offer or solicitation
involving the issuance of new securities and/or the complete or
partial restructuring of the Company's capitalization and/or the
payment of other consideration (including cash) to Holders.
(ii) The term "Exchange Offer Documents" means each
offering circular, consent solicitation document and, if any,
each registration statement filed with the Securities and
Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, as the case may be, including, as applicable, each
related letter of transmittal, and each related letter to Holders
pertaining to the Exchange Offer and each amendment or supplement
to any of the foregoing.
3. Compensation. In full payment for services rendered
and to be rendered hereunder by Forum, the Company agrees to pay
Forum a cash fee of $200,000, payable upon the earlier of (a) the
date of mailing of the Exchange Offer Documents or (b) March 1,
1997.
4. Expenses. In addition to any fees that may be payable
to Forum hereunder, the Company hereby agrees to pay, to or on
behalf of Forum, promptly upon request from time to time,
reasonable travel and other out-of-pocket expenses incurred by
Forum, including, without limitation, the reasonable fees and
expenses of Forum's counsel; provided, however, that
reimbursement for expenses shall not exceed $35,000 unless
expenses in excess of such amount are approved by the Company.
5. Information. The Company shall furnish, or cause to be
furnished, to Forum all information requested by Forum for the
purpose of rendering services hereunder, including the Exchange
Offer Documents (collectively the "Information"). The Company
recognizes and confirms that Forum:
(a) will use and rely on the Information and on
information available from generally recognized public sources in
performing the services contemplated by this Agreement without
having independently verified the same;
(b) does not assume responsibility for the accuracy or
completeness of the Information and such other information
(except for that portion of the Information provided by Forum,
which consists only of the pricing information with respect to
the Existing Securities); and
(c) will not make any appraisals in connection with
any Exchange Offer (including, but not limited to, appraisals of
the Company, any Related Entity or any securities or assets
thereof).
6. Confidential Nature of Advice. All advice (written or
oral) given by Forum to the Company or any Related Entity in
connection with Forum's engagement hereunder is intended solely
for the use and benefit of the Company (including its management,
directors and counsel) and shall be treated as confidential. The
Company agrees that no such opinion or advice shall be otherwise
used or disclosed, in any manner or for any purpose, nor shall
any public references to Forum be made by the Company (or such
persons), without the prior consent of Forum.
7. Indemnification. (a) The Company will indemnify Forum
for and hold Forum harmless, to the extent lawful, from any and
all losses, claims, damages or liabilities, as incurred, (i)
arising out of any untrue statement of a material fact in any
offering material (including, without limitation, the Exchange
Offer Documents) provided by the Company or any omission of a
material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, or (ii) resulting from any breach of the terms of
this Agreement by the Company, or (iii) to which Forum may
otherwise become subject in connection with its rendering of
services hereunder; provided, however, that such indemnity will
not apply to losses, claims, damages or liabilities (x) arising
out of gross negligence or willful misconduct of Forum, (y)
arising out of the breach by Forum of its obligations hereunder
or (z) which result from any compromise or settlement not
approved by the Company in writing. The Company will promptly
reimburse Forum for any and all reasonable legal or other
expenses, as incurred, by Forum in connection with investigating,
preparing for or defending any such claims or any actions related
thereto. This indemnity will also extend on the same terms and
conditions as set forth herein to the directors, officers,
employees, agents, counsel and controlling persons of Forum (each
such person, including Forum, an "Indemnified Person"). If any
claim, action or proceeding is brought or asserted against an
Indemnified Person in respect of which indemnity may be sought
from the Company, such Indemnified Person will promptly notify
the Company in writing of such claim, action or proceeding;
provided, however, that the failure to notify the Company shall
not relieve the Company from any liability or obligation that it
may have under this Section 7 or otherwise to such Indemnified
Person (except to the extent that such failure prejudices the
Company's ability to defend such action, claim, complaint or
proceeding).
(b) In case any such investigation, litigation,
proceeding or other action within the scope of this Section 7
shall be brought against any Indemnified Person, the Company
shall be entitled to participate in such investigation,
litigation, proceeding or other action and, after written notice
from the Company to such Indemnified Person, to assume the
defense of such investigation, litigation, proceeding or other
action with counsel of its choice at the Company's expense;
provided, however, that such counsel shall be reasonably
satisfactory to such Indemnified Person. Notwithstanding the
election of the Company to assume the defense of such
investigation, litigation, proceeding or action, such Indemnified
Person shall have the right to employ separate counsel and to
participate in the defense of such investigation, litigation,
proceeding or action, and the Company shall bear the fees, costs
and expenses of such separate counsel if (i) the use of counsel
chosen by the Company to represent such Indemnified Person would
present such counsel with a conflict of interest; (ii) the
defendants in, or targets of, any such investigation, litigation,
proceeding or action include both an Indemnified Person and the
Company, and such Indemnified Person shall have reasonably
concluded that there may be legal defenses available to it which
are different from or additional to those available to the
Company; (iii) the Company shall not have employed counsel
satisfactory to such Indemnified Person in the exercise of such
Indemnified Person's reasonable judgment; or (iv) the Company
shall have notified the Indemnified Person that it may employ
separate counsel at the expense of the Company. In each such
case the Company shall not have the right to direct the defense
of such investigation, litigation, proceeding or action on behalf
of such Indemnified Person. In addition, the Indemnified Person
shall have the right to participate in any such investigation,
litigation, proceeding or action, and to employ separate counsel
in connection therewith, at any time at the Indemnified Person's
own cost and expense.
(c) In the event that the indemnity provided in this
Section 7 is unavailable or insufficient to hold harmless any
Indemnified Person, then the Company shall contribute to amounts
paid or payable by such Indemnified Person in respect of such
Indemnified Person's losses, claims, damages and liabilities as
to which such indemnity is unavailable or insufficient (i) in
such proportion as appropriately reflects the relative benefits
received by the Company, on the one hand, and Forum, on the other
hand, in connection with the matters as to which such losses,
claims, damages or liabilities relate, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law,
in such proportion as appropriately reflects not only the
relative benefits referred to in clause (i) above, but also the
relative fault of the Company, on the one hand, and Forum, on the
other hand, as well as any other equitable considerations. The
amounts paid or payable by a party in respect of losses, claims,
damages and liabilities referred to above shall be deemed to
include any legal or other fees and expenses incurred in any
investigation of and in defending any litigation, proceeding or
other action or claim. Notwithstanding the foregoing, the
Indemnified Persons' aggregate share of the liability hereunder
shall not be in excess of the amount of fees actually received by
Forum under this Agreement (excluding any amounts received as
reimbursement of expenses incurred by Forum).
(d) This Section 7 shall remain in full force and
effect whether or not any of the transactions contemplated by
this Agreement are consummated, shall survive the expiration or
termination of this Agreement and shall be in addition to any
liability that the Company might otherwise have to any
Indemnified Person under this Agreement or otherwise.
8. Use of Name. The Company agrees that any reference to
Forum or any affiliate of Forum in any Exchange Offer Document,
or any other release or communication, is subject to Forum's
prior approval. Except as required by law or regulations, if
Forum resigns prior to the dissemination of any Exchange Offer
Document or any other release or communication, no reference
shall be made therein to Forum.
9. Termination or Resignation. The term of Forum's
engagement hereunder commences on the date hereof and expires six
months from the date hereof. In addition, Forum shall have the
right to resign, and the Company shall have the right to
discharge Forum, at any time for any reason, by giving prior
written notice. If this Agreement is terminated prior to the
mailing of the Exchange Offer Documents to the Holders, Forum
shall not be entitled to receive the amounts provided in Section
3 hereof. If this Agreement is terminated or expires after
mailing of the Exchange Offer Documents to the Holders, Forum
shall be entitled to receive all of the amounts provided in
Section 3 hereof. Regardless of whether this Agreement is
terminated before or after the mailing of the Exchange Offer
Documents to the Holders, Forum and its counsel shall be entitled
to receive all of the amounts provided in Section 4 hereof up to
and including the effective date of such termination.
10. Notice. Notice given pursuant to any of the provisions
of this Agreement shall be in writing and shall be mailed or
delivered (a) to the Company, at its offices at 40W267 Keslinger
Road, LaFox, Illinois 60147, Attention: Mr. Edward J. Richardson,
Chief Executive Officer; and (b) to Forum at 53 Forest Avenue,
Old Greenwich, Connecticut 06870, Attention: Mr. Michael F.
McNulty, Managing Director.
11. Entire Agreement and Governing Law. This Agreement
incorporates the entire understanding of the parties and
supersedes all previous agreements between Forum and the Company
with respect to the subject matter hereof, and this Agreement
shall be governed by, and construed in accordance with, the laws
of the State of Connecticut without regard to principles of
conflicts of law.
12. Survival of Certain Provisions. Notwithstanding
anything to the contrary contained herein, the provisions hereof
concerning confidentiality, indemnity and the obligations of the
Company to pay accrued fees and reimburse expenses (including,
without limitation, those contained in Sections 3, 4, 6, 7 and 9
hereof) shall survive the termination or expiration of this
Agreement.
13. No Third Party Beneficiaries. This Agreement has been
and is made solely for the benefit of the Company, Forum and the
other indemnified persons referred to in Section 7 hereof and
their respective successors and assigns, and no other person
shall acquire or have any right under or by virtue of this
Agreement.
Please confirm that the foregoing is in accordance with your
understanding of our agreement by signing and returning to Forum
the duplicate of this letter enclosed herewith.
Very truly yours,
FORUM CAPITAL MARKETS L.P.
By: /s/ Michael F. McNulty
Michael F. McNulty
Managing Director
Agreed to and accepted as of
the date first written above:
RICHARDSON ELECTRONICS, LTD.
By: /s/ Edward J. Richardson
Edward J. Richardson
Chief Executive Officer
Item 9 (c)(4)
EMPLOYMENT AND BONUS AGREEMENT
EMPLOYMENT AND BONUS AGREEMENT ("Agreement") made and entered
into as of this 7th day of November, 1996 by and between RICHARDSON
ELECTRONICS, LTD., a corporation with its principal place of
business located at 40 W 267 Keslinger Road, LaFox, IL 60147 (the
"Employer"), and BRUCE W. JOHNSON, an individual whose current
residence is located at 5838 Teal Lane, Long Grove, IL 60047
("Employee").
RECITALS
WHEREAS, the Employer desires to employ Employee as its
President and Chief Operating Officer upon the terms and conditions
stated herein; and
WHEREAS, Employee desires to be so employed by the Employer at
the salary and benefits provided for herein; and
WHEREAS, Employee acknowledges and understands that during the
course of his employment, Employee will become familiar with
certain confidential information of the Employer which is
exceptionally valuable to the Employer and vital to the success of
the Employer's business; and
WHEREAS, the Employer and Employee desire to protect such
confidential information from disclosure to third parties or its
use to the detriment of the Employer; and
WHEREAS, the Employee acknowledges that the likelihood of
disclosure of such confidential information would be substantially
reduced, and that legitimate business interests of the Employer
would be protected, if Employee refrains from competing with the
Employer and from soliciting its customers and employees during and
following the term of the Agreement, and Employee is willing to
covenant that he will refrain from such actions.
NOW THEREFORE, in consideration of the promises and of the
mutual covenants and agreements hereinafter set forth, the parties
hereto acknowledge and agree as follows:
ARTICLE ONE
NATURE AND TERM OF EMPLOYMENT
1.01 Employment. The Employer hereby agrees to employ
Employee and Employee hereby accepts employment as the Employer's
President and Chief Operating Officer.
1.02 Term of Employment. Employee's employment pursuant to
this Agreement shall commence on November 12, 1996, or such earlier
date as may be agreed upon by Employee and the Employer and,
subject to the provisions of Article Four, the term of such
employment (the "Employment Term") shall continue indefinitely from
such commencement date on an "at will" basis.
1.03 Duties. The duties of Employee shall be as determined by
the Employer's Board of Directors (the "Board") consistent with his
position as President and Chief Operating Officer and Employee will
adhere to the policies and procedures of the Employer, including,
without limitation, its Code of Conduct, and will follow the
supervision and direction of the Chairman of the Board of the
Employer in the performance of such duties. Employee agrees to
devote his full working time, attention and energies to the
diligent and satisfactory performance of his duties hereunder.
Employee will not, during the Employment Term or during any period
during which Employee is receiving payments pursuant to Article 2
and/or Sections 5.04 or 5.05 or any other provision of this
Agreement, engage in any activity, other than on behalf of Employer
or any of its subsidiaries, which is intended or would reasonably
be expected to have a material adverse affect on the Employer's
reputation, goodwill or business relationships or which is intended
or would reasonably be expected to result in material economic harm
to the Employer.
ARTICLE TWO
COMPENSATION AND BENEFITS
For all services to be rendered by him in any capacity hereunder
(including as an officer, director, committee member or otherwise
of the Employer or any parent or subsidiary thereof or any division
of any thereof) on behalf of the Employer, the Employer agrees to
pay Employee so long as he is employed hereunder, and the Employee
agrees to accept, the compensation set forth in Sections 2.01 and
2.02.
2.01 Base Salary. During the term of Employee's employment
hereunder, the Employer shall pay to Employee an annual base salary
("Base Salary") of Three Hundred Thousand and 00/100 Dollars
($300,000), payable in installments as are customary under the
Employer's payroll practices from time to time. The Employer at
its sole discretion may, but is not required to, review and adjust
the Employee's Base Salary from year to year; provided, however,
that, except as may be expressly consented otherwise in writing by
Employee, (i) Employer may not decrease Employee's Base Salary, and
(ii) whenever Employer increases base salaries of all or
substantially all of its senior executive employees, Employer shall
increase Employee's Base Salary by a percentage amount no less than
the percentage amount of the average increase in base salary of
Employer's other senior executive employees. No additional
compensation shall be payable to Employee by reason of the number
of hours worked or by reason of hours worked on Saturdays, Sundays,
holidays or otherwise.
2.02 Management Incentive Plan. During the term of the
Employee's employment hereunder, the Employee shall be a
participant in the Bonus Plan, a copy of which is attached hereto
as Exhibit A, as modified from time to time with the written
consent of Employee (the "Annual Incentive Plan"). The Employee's
"target bonus percentage" for purposes of the Annual Incentive Plan
shall be fifty percent (50%) of his Base Salary. Except as
otherwise provided in this Agreement, (i) bonuses under the Annual
Incentive Plan shall be paid strictly in accordance with the Annual
Incentive Plan, and (ii) for any partial fiscal year the bonus
shall be computed and paid only for the portion of the fiscal year
Employee is employed hereunder.
2.03 Stock Options. To induce Employee to accept the
employment offered hereunder, on the date of commencement of
employment hereunder the Employer shall grant Employee options
under the Richardson Electronics, Ltd. Employee's 1996 Incentive
Compensation Plan to purchase an aggregate of 50,000 shares of
Employer's Common Stock, vesting 10,000 shares per year beginning
on the anniversary date of the grant, at an exercise price equal to
the fair market value (as defined in the Plan) of Employer's Common
Stock on the grant date. The Employer at its sole discretion may,
but is not required to, grant Employee additional options. Upon
the occurrence of a "material change" as defined in Section 5.06,
all options held by Employee shall be and become fully vested.
2.04 Vacation. Employee shall be entitled to paid vacation
each year during the term of this Agreement in accordance with the
Employer's vacation policy for senior executive officers as in
effect from time to time, which vacations shall be scheduled for
such times as Employee and the Chairman of the Board of Employer
shall mutually agree.
2.05 Other Benefits. Employer will provide to Employee such
benefits (other than bonus, severance and incentive compensation
benefits) as are generally provided by the Employer to its other
senior executive employees, including but not limited to,
automobile allowance, health/major medical insurance, dental
insurance, disability insurance, life insurance, sick days and
other employee benefits (collectively "Other Benefits"), all in
accordance with the terms and conditions of the applicable Other
Benefits plans. Nothing in this Agreement shall require the
Employer to maintain any benefit plan nor prohibit the Employer
from modifying any such plan as it sees fit from time to time. It
is only intended that Employee shall be entitled to participate in
any such plan offered for which he may qualify under the terms of
any such plan as it may from time to time exist, in accordance with
the terms thereof.
2.06 Withholding. All salary, bonus and other payments
described in this Agreement shall be subject to withholding for
federal, state or local taxes, amounts required to be withheld
under applicable benefit policies or programs, and any other
amounts that may be required to be withheld by law, judicial order
or otherwise.
ARTICLE THREE
CONFIDENTIAL INFORMATION
3.01 Definition of Confidential Information. For the purposes
of this Agreement, the term "Confidential Information" shall mean,
but shall not be limited to, any technical or non-technical data,
formulae, compilations, programs, devices, methods, techniques,
procedures, manuals, financial data, business plans, lists of
actual or potential customers or suppliers, lists of employees, and
any information regarding the Employer's products, marketing or
database, or that of any subsidiary of Employer, (whether or not
reduced to writing) which is not generally known to the public.
The Employer and Employee acknowledge and agree that such
Confidential Information is extremely valuable to the Employer and
may constitute trade secret information under applicable law. In
the event that any part of the Confidential Information becomes
generally known to the public through legitimate origins (e.g.,
other than by the breach of this Agreement by Employee or by other
misappropriation of the Confidential Information), that part of the
Confidential Information shall no longer be deemed Confidential
Information for the purposes of this Agreement, but Employee shall
continue to be bound by the terms of this Agreement as to all other
Confidential Information.
3.02 Ownership of Confidential Information. Employee agrees
that the Confidential Information (including, without limitation,
that which was or is developed, created or prepared by or for
Employee) is and at all times shall remain the sole and exclusive
property of the Employer. All records relating to the Employer's
or any subsidiary's operations, investigations, and business, and
any notes with respect to such records, made or received by
Employee in connection with his services hereunder, and all copies
of such records or notes made by, for, or with the consent of
Employee, are and shall be the Employer's property exclusively, and
shall surrender the same to the Employer at the Employer's request
but, in any event, no later than at the termination of his
employment with the Employer as provided in Section 3.04 below.
3.03 Non-Disclosure of Confidential Information. Except in
the course of the performance of Employee's duties with Employer
(or as required by law), Employee will not during, or after
termination of, Employee's employment by the Employer, in any form
or manner, directly or indirectly, knowingly divulge, disseminate,
disclose or communicate to any person, entity, firm, corporation or
any other third party, or knowingly utilize for Employee's personal
benefit or for the benefit of any competitor of the Employer, any
Confidential Information, and shall use his reasonable endeavors to
prevent the improper use, dissemination, publication, or disclosure
of, any Confidential Information.
3.04 Delivery Upon Termination. Upon termination of
Employee's employment with the Employer for any reason, Employee
shall promptly deliver to the Employer all correspondence, files,
manuals, letters, notes, notebooks, reports, programs, plans,
proposals, financial documents, and any other documents or data
concerning the Employer's customers, suppliers, database, business
plans, marketing or manufacturing strategies, or processes and/or
which contains Confidential Information, together will all other
property of the Employer or any affiliate in Employee's possession,
custody or control.
ARTICLE FOUR
NON-COMPETE AND NON-SOLICITATION COVENANTS
4.01 Covenant Not To Compete. During the Employment Term and
for a period of two years after termination of Employee's
employment for any reason, Employee will not, on behalf of himself
or on behalf of another person, corporation, partnership or entity,
canvas, call upon, solicit, entice, persuade, or induce any
individual or entity which was or is a customer or supplier of the
Employer during the last twelve (12) months of Employee's
employment and with whom Employee dealt on behalf of the Employer,
for the following:
(a) except on behalf of the Employer or any of its
subsidiaries, to purchase (with respect to customers)
Competing Products, or
(b) except on behalf of the Employer or any of its
subsidiaries, to request or advise any such customer or
supplier to withdraw, curtail or cancel its business with
the Employer, and
In addition, during the Employment Term and for a period of two
years after termination of Employee's employment for any reason,
Employee shall not approach, respond to, or otherwise deal with any
such customer or supplier for such purpose or authorize or
knowingly cooperate with the taking of any such actions by any
other person, corporation, partnership or entity, other than on
behalf of Employer or any of its subsidiaries, nor will Employee
otherwise attempt to interfere (to the Employer's detriment) in the
relationship between the Employer and any such customer or
supplier, other than on behalf of Employer or any of its
subsidiaries.
"Competing Products" as used in this Article means products or
services which are similar to, compete with, or can be used for the
same purposes as products or services sold or offered for sale by
Employer or which were in active development by Employer within the
last twelve (12) months of Employee's employment.
4.02 Covenant Not to Solicit Employees. During the Employment
Term and for a period of two years after termination of Employee's
employment for any reason, Employee will not, for any reason,
employ, solicit or endeavor to entice away from the Employer
(whether for his own benefit or on behalf of another person or
entity) any employees of the Employer who have had access to
Confidential Information to work for any competitor of the
Employer, nor will Employee otherwise attempt to interfere (to the
Employer's detriment) in the relationship between the Employer and
any of its employees, other than on behalf of Employer or any of
its subsidiaries.
4.03 Independent Obligations. Each obligation of each
section, subparagraph and provision of this Article shall be
independent of any obligation under any other section, subparagraph
or provision hereof, except that Employee's obligations are
contingent upon the Employer's performance of its obligations under
Articles Two and Five and Section 7.11 and shall be suspended at
any time that Employer is in breach of Article Two or Article Five
or Section 7.11.
ARTICLE FIVE
TERMINATION
5.01 Termination of Employee for Cause. The Employer shall
have the right to terminate Employee's employment at any time for
"cause." Prior to such termination, the Employer shall provide
Employee with written notification of any and all allegations
constituting "cause" and the Employee shall be given five (5)
working days after receipt of such written notification to respond
to those allegations in writing. Upon receipt of the Employee's
response, the Employer shall meet with the Employee (accompanied,
if desired by Employee, by his legal counsel) to discuss the
allegations. Employer may require that Employee not report to work
during such period.
For purposes hereof, "cause" shall mean (i) an act or acts of
personal dishonesty taken by the Employee and intended to result in
personal enrichment of the Employee, (ii) material violations by
the Employee of the Employee's obligations or duties under, or any
terms of, this Agreement, which are not remedied in a reasonable
period (not to exceed ten (10) days) after receipt of written
notice thereof from the Employer, or (iii) Employee being indicted
or convicted (by trial, guilty or no contest plea or otherwise) of
(a) a felony, (b) any other crime involving moral turpitude, or (c)
any violation of law which would impair the ability of the Employer
or any affiliate to obtain any license deemed necessary or
desirable for the conduct of its actual or proposed business.
5.02 Termination of Employee Because of Employee's Disability,
Injury or Illness. Either Employee or the Employer shall have the
right to terminate Employee's employment if Employee is unable to
perform the duties assigned to him by the Employer because of
Employee's disability, injury or illness, provided however, such
inability must have existed for a total of sixty (60) days in any
consecutive four (4) month period before such termination can be
made effective.
5.03 Termination as a Result of Employee's Death. The
Employee's employment shall automatically terminate upon Employee's
death.
5.04 Termination of Employee for any Other Reason. The
Employer shall have the right to terminate Employee's employment at
any time at will for any reason other than the reasons set forth in
Sections 5.01, 5.02 or 5.03 upon notice to Employee.
5.05 Termination by Employee for Good Reason. Employee shall
have the right to terminate his employment at any time for "good
reason". Prior to such termination, Employee shall provide
Employer with written notification of any and all allegations
constituting "good reason" and Employer shall be given five (5)
working days after receipt of such written allegations to respond.
Upon receipt of the Employer's response, Employee (accompanied, if
desired by Employee, by his legal counsel) shall meet with the
Employer (accompanied, if desired by Employer, by its legal
counsel) to discuss the allegations. Employee shall not be
required to report to work during such period.
For purposes hereof, "good reason" means material violation by
the Employer of the Employer's obligations or duties under, or any
terms of, this Agreement, which are not remedied in a reasonable
period (not to exceed ten (10) days) after receipt of written
notice thereof from Employee.
5.06 Termination by Employee after Material Change. Employee
shall have the right to terminate his employment at any time within
a period of 180 days after any "material change".
For purposes hereof, "material change" means (i) any sale or
other transfer of all or substantially all of the Employer's
assets, (ii) any merger, consolidation, share exchange, tender
offer, or other similar transaction involving the Employer, unless
the surviving entity is under control by the same person(s) or
entity(ies) as the Employer was prior to the transaction, (iii) any
change in control of the Employer as a result of a tender offer,
proxy contest or otherwise, or (iv) any plan is approved to
liquidate or dissolve the Employer.
5.07 Termination by Employee for any Other Reason. Employee
shall have the right to terminate his employment at any time for
any reason other than the reasons set forth in Sections 5.05 and 5
06.
5.08 Payments, etc. after Termination. Upon the termination
of Employee's employment, the Employer shall have the following
obligations, in addition to any obligations imposed by law and any
obligations under the terms and provisions of any plan or program
in which Employee is a participant;
(a) The Employer shall be obligated to pay Employee his Base
Salary, bonus under the Annual Incentive Plan, and Other Benefits
earned or accrued through the date of termination.
(b) In addition to the amounts payable under Section 5.08(a), if
Employee's employment is terminated as a result of Employee's
disability, injury or illness pursuant to Section 5.02 or
Employee's death pursuant to Section 5.03, the Employer shall be
obligated to pay Employee his bonus under the Annual Incentive Plan
for the full quarter in which his employment terminates.
(c) In addition to the amounts payable under Section 5.08(a), if
Employee's employment is terminated by the Employer other than for
"cause" pursuant to Section 5.01 or as a result of Employee's
disability, injury or illness pursuant to Section 5.02 or if
Employee's employment is terminated by Employee for "good reason"
pursuant to Section 5.05 or following a "material change" pursuant
to Section 5.06 or if Employee's employment is terminated pursuant
to Section 7.02 (except as provided otherwise in Section 7.02), the
Employer shall continue to pay to Employee (i) his then current
Base Salary for a period of one year following the termination of
his employment, plus (i) an amount, on the 90th, 180th, 270th and
360th day after the date of termination, equal to his bonus under
the Annual Incentive Plan for the last full quarter preceding the
date of termination. In addition, for a period of one year
following the termination of his employment, Employee shall
continue to receive the same Other Benefits (provided the Other
Benefits plans so permit, or, if the Other Benefits plans do not so
permit, a substantially equivalent benefit shall be provided to
Employee) and options granted to Employee shall vest as if Employee
had remained in the employ of Employer for such one year period and
for purposes of exercising the options he shall be deemed to have
terminated with the consent of Employer as of the end of such one
year period, and any deferred compensation, incentive compensation,
and any other compensation awarded to Employee shall become fully
and absolutely vested as of the date of termination.
(d) Employer may suspend any or all payments and other obligations
to Employee under this Article Five at any time that Employee is in
material breach of Articles Three or Four or Section 7.11.
ARTICLE SIX
REMEDIES
6.01 Injunction. Employee acknowledges that the restrictions
contained in this Agreement will not prevent him from obtaining
such other gainful employment he may desire to obtain or cause him
any undue hardship and are reasonable and necessary in order to
protect the legitimate interests of the Employer and that violation
thereof would result in irreparable injury to the Employer.
Employee therefor acknowledges and agrees that in the event of a
breach or threatened breach by Employee of the provisions of
Articles Three or Four or Section 7.11, the Employer shall be
entitled to an injunction restraining Employee from such breach or
threatened breach. Nothing herein shall be construed as
prohibiting or limiting the Employer from pursuing any other
remedies available to the Employer for such breach or threatened
breach, the rights hereinabove mentioned being in addition to and
not in substitution of such other rights and remedies, all of which
may be exercised concurrently. The period of restriction specified
in Article Four shall abate during the time of any violation
thereof, and the portion of such period remaining at the
commencement of the violation shall not begin to run until the
violation is cured.
6.02 Survival. The provisions of this Article Six and of
Articles Three and Four and Section 7.11 shall survive the
termination or expiration of this Agreement.
ARTICLE SEVEN
MISCELLANEOUS
7.01 Assignment. Employee and Employer acknowledge and agree
that the covenants, terms and provisions contained in this
Agreement constitute a personal employment contract and the rights
and obligations of the parties thereunder cannot be transferred,
sold, assigned, pledged or hypothecated, excepting that the rights
and obligations of the Employer under this Agreement may be
assigned or transferred pursuant to a sale of the business, merger,
consolidation, share exchange, sale of substantially all of the
Employer's assets, or other reorganization described in Section 368
of the Code, or through liquidation, dissolution or otherwise,
whether or not the Employer is the continuing entity, provided that
the assignee, or transferee is the successor to all or
substantially all of the assets of the Employer and such assignee
or transferee assumes the rights and duties of the Employer, if
any, as contained in this Agreement, either contractually or as a
matter of law.
7.02 Litigation with Prior Employer. In the event that
Employee shall be permanently enjoined by a court of competent
jurisdiction from being employed by Employer based on his prior
employment relationship, or in the event that Employer shall be
enjoined from employing Employee, Employee's employment shall
terminate on the effective date of such injunction and the Employer
shall have the obligations described in Section 5.08(a) and 5.08(c)
if such injunction is granted because of Employee's breach of his
confidentiality or non-compete obligations to his former employer
or its parent or their respective successors or assigns by reason
of any action or inaction of (i) Employee taken with the direction
of the Chairman of Employer given with knowledge that it may be a
breach of such obligations, or (ii) the Company that is not taken
at the direction of Employee, in all other events Employer's
obligation shall be to pay to Employee his then current Base Salary
and Other Benefits accrued up to and including the date on which
Employee's employment is so terminated as described in Section
5.08(a). Whether or not any such injunction is issued, Employer
shall also defend Employee against any and all claims, and
indemnify and hold harmless Employee with respect to any and all
attorneys' fees and other defense costs, judgments and expenses
that Employee may incur in connection with litigation with
Employee's previous employer (or its successor) arising out of or
relating to Employee's employment with the Employer and any actions
and things that Employee may take or do at the request or with the
approval of Employer.
7.03 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter
hereof and may not be modified except in writing by the parties
hereto. Furthermore, the parties hereto specifically agree that
all prior agreements, whether written or oral, relating to
Employee's employment by the Employer shall be of no further force
or effect from and after the date hereof.
7.04 Severability. If any phrase clause or provision of this
Agreement is declared invalid or unenforceable by a court of
competent jurisdiction, such phrase, clause or provision shall be
deemed severed from this Agreement, but will not affect any other
provisions of this Agreement, which shall otherwise remain in full
force and effect. If any restriction or limitation in this
Agreement is deemed to be unreasonable, onerous and unduly
restrictive by a court of competent jurisdiction, it shall not be
stricken, in its entirety and held totally void and unenforceable,
but shall be deemed rewritten and shall remain effective to the
maximum extent permissible within reasonable bounds.
7.05 Notices. Any notice, request or other communication
required to be given pursuant to the provisions hereof shall be in
writing and shall be deemed to have been given when delivered in
person or five (5) days after being deposited in the United States
mail, certified or registered, postage prepaid, return receipt
requested and addressed to the party at its or his last known
addresses. The address of any party may be changed by notice in
writing to the other parties duly served in accordance herewith.
7.06 Waiver. The waiver by the Employer or Employee of any
breach of any term or condition of this Agreement shall not be
deemed to constitute the waiver of any other breach of the same or
any other term or condition hereof.
7.07 Attorneys Fees and For Future. In the event that
Employee has been found to have violated in any material respect
any of the terms of Articles Three or Four or Section 7.11 of this
Agreement either after a preliminary injunction hearing or a trial
on the merits, Employee shall pay to the Employer the Employer's
costs and expenses, including attorneys fees, in enforcing the
terms of Articles Three or Four of this Agreement. In addition, in
the event of a material breach by Employee of Articles Three or
Four or Section 7.11, Employee shall lose all rights to receive any
future payments under the Annual Incentive Plan set forth in
Section 2.02 above and any payments pursuant to Article Five,
except as may be required by law not to be waivable or forfeitable.
7.09 Continuing Obligation. The obligations, duties and
liabilities of Employee pursuant to Articles Three and Four and
Section 7.11 of this Agreement are continuing, absolute and
unconditional and shall remain in full force and effect as provided
herein.
7.10 No Conflicting Obligations or Use. Employee represents
and warrants to Employer that his execution of this Agreement and
the performance of the terms and conditions contained herein does
not constitute a breach of any agreement to which he is a party that
has not been disclosed to the Employer (it being understood that
Employee makes no representation or warranty with respect to the
severance agreement dated May 30, 1996 between Employee and Premier
Farnell Corp.). In addition, Employee agrees not to knowingly use
in connection with his employment hereunder, or to knowingly
disclose to Employer, or knowingly induce the Employer to use, any
confidential or proprietary information or material belonging to any
previous employer or other person or entity. The foregoing
restriction shall not apply with respect to information and material
which is generally publicly available without restraint and thus is
not confidential or proprietary or any information which is used or
disclosed at the request or with the approval of the Employer.
7.11 The Employer's Good Name. Employee will at no time engage
in conduct or make any statements which falsely and materially
demean, defame, libel, slander, destroy or diminish in any way the
reputation or goodwill of the Employer, its parents or subsidiaries,
or their respective shareholders, directors, officers, employees,
or agents or the products sold by the Employer or any of its parents
or subsidiaries. The Employer, its parents or subsidiaries, and
their respective shareholders, directors, officers, employees, and
agents will at no time engage in conduct or make any statements
which falsely and materially demean, defame, libel, slander, destroy
or diminish in any way the reputation of Employee. These
obligations shall survive the termination of this Agreement.
7.12 Good Faith. Employee and the Employer (and the Employee's
officers and directors) shall at all times act fairly, reasonably
and in good faith in relation to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
EMPLOYEE EMPLOYER
/s/ Bruce W. Johnson /s/ Edward J. Richardson
__________________________ By: _______________________________________
Chairman
Title: ____________________________________
EXHIBIT A
Bonus Plan
For purposes hereof the following terms shall have the
following meaning:
"Company" shall mean Richardson Electronics, Ltd.
"Executive" shall mean the particular employee of the Company
participating in this Plan.
"Actual Earnings Per Share" for any fiscal year quarter shall
be that earnings per share as reported by the Company in its
quarterly report to its shareholders for such quarter with
final adjustment on its year end audited financial statement
for such year.
"Base Earning Per Share" for any fiscal year shall be that
earnings per share of the Company for its prior fiscal year as
reported to its shareholders on its year end audited financial
statement for such year and with respect to any fiscal quarter
in such year shall be equal to one fourth of the total for the
year.
"Goal Earnings Per Share" for any fiscal year shall be that
earnings per share established by the Company as such in its
budget for such year and with respect to any fiscal quarter in
such year shall be equal to one fourth of the total for the
year. Should the Company fail to establish a Goal Earnings
Per Share for a fiscal year in its budget then Goal Earnings
Per Share for such year shall be equal to Actual Earnings Per
Share for the prior fiscal year increased by 25%. The Goal
Earnings Per Share for Executive shall never exceed the Goal
Earnings Per Share for any other senior executive employee for
the purpose of any bonus plan.
"Target Bonus Percentage" shall mean the percentage of
Executive's Base Salary which he will receive as a bonus as
established in his employment agreement.
Executive shall receive a bonus equal to the Target Bonus
Percentage of his Base Salary (as defined in his employment
agreement) paid to him for the period for which the bonus is
calculated if the Actual Earnings Per Share is equal to Goal
Earnings Per Share and zero if Actual Earnings Per Share is equal
to or less than Base Earnings Per Share. If Actual Earnings Per
Share is greater than Base Earnings Per Share but more or less than
Goal Earnings Per Share, the bonus shall be a pro rata amount with
no maximum, computed on a scale with Base Earnings Per Share equal
to zero and Goal Earnings Per Share equal to 100% of Target Bonus
Percentage. For example, assume Salary for a fiscal year at
$300,000, Target Bonus Percentage for such period at 50%, Base
Earnings Per Share for such period at $0.68 and Goal Earnings Per
Share at $0.84.
The Bonus would be calculated as follows:
Bonus Potential for performance equal to Goal Earnings Per Share
$300,000 (Salary For Period)
x .50 (Target Bonus Percentage)
$150,000 (Bonus Potential for Goal Performance)
Bonus Potential for each $.01 of Earnings Per Share in excess of
Base Earnings Per Share
$0.84 (Goal Earnings Per Share)
- 0.68 (Base Earnings Per Share)
$ 16 (Cents Difference between Base and Goal)
$150,000.00 (Bonus Potential for Goal Performance see
calculation above)
divided by 16 (Cents Difference between Base and Goal see
calculation above)
$ 9,375.00 (Bonus Amount for each $.01 of Earnings Per
Share in excess of Base)
(a) Then assume Actual Earnings Per Share for period of $0.90
$0.90 (Actual Earnings Per Share)
$0.68 (Base Earnings Per Share)
22 (Cents Earnings Per Share in excess of Base)
x $9,375.00 (Bonus Amount for each $.01 of Earnings Per
Share in excess of Base)
$206,250.00 (Bonus Amount for $0.90 Earnings Per Share
performance)
(b) Then assume Actual Earnings Per Share for period of $0.80
$0.80 (Actual Earnings Per Share)
$0.68 (Base Earnings Per Share)
12 (Cents Earnings Per Share in excess of Base)
x $9,375.00 (Bonus Amount for each $.01 of Earnings Per
Share in excess of Base)
$112,500.00 (Bonus Amount for $0.80 Earnings Per Share
performance)
Bonus will be calculated and paid on a quarterly basis. Base
Earnings Per Share and Goal Earnings Per Share for the Company's
fiscal year ending May 31, 1997 are $0.68 and $0.84, respectively.
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference, in the Offering
Circular and Consent Solicitation of Richardson Electronics, Ltd.
for the Offer to Exchange its 8-1/4% Convertible Senior
Subordinated Debentures due June 15, 2006 for its 7-1/4%
Convertible Subordinated Debentures due December 15, 2006,
of our report dated July 10, 1996, with respect to the consolidated
financial statements and schedules of Richardson Electronics,
Ltd. included in the Annual Report on Form 10-K for the year
ended May 31, 1996.
Ernst & Young LLP
Chicago, Illinois
December 16, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
FOR STATEMENTS OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939
OF CORPORATIONS DESIGNATED TO ACT AS TRUSTEES
AMERICAN NATIONAL BANK AND TRUST COMPANY
OF CHICAGO
(Name of Trustee)
36-0727623
(I.R.S. employer identification No.)
33 NORTH LASALLE STREET, CHICAGO, ILLINOIS
(Address of principal executive offices)
60690
(zip code)
RICHARDSON ELECTRONICS, LTD.
(Name of obligor)
DELAWARE 36-2096643
(State or other jurisdiction of (I.R.S. employer identification No.)
incorporation or organization)
40W267 Keslinger Road
LaFox, Illinois 60147
(Address of principal executive offices) (zip code)
8 1/4% CONVERTIBLE SENIOR SUBORDINATED DEBENTURES
DUE JUNE 15, 2006
(Title of Indenture Securities)
GENERAL
1. General information. Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it is
subject.
Comptroller of the Currency, Washington, D.C.
Director of Financial Institutions, State of Illinois, Springfield, Illinois
(as to Trust Department only).
Chicago Clearing House Association, 164 West Jackson Boulevard, Chicago,
Illinois.
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System, Washington, D.C.
(b) Whether it is authorized to execute corporate trust powers.
The trustee is authorized to execute corporate trust powers.
2. Affiliations with obligor and underwriters. If the obligor or any
underwriter for the obligor is an affiliate of the trustee, describe each
affiliation.
No such affiliation exists. See Note, page 4 hereof.
12. Indebtedness of the Obligor to the Trustee.
As of December 10, 1996:
Nature of Indebtedness Amount Outstanding Date Due
Line of Credit* $20,558,300.00 11/30/98
Standby Letter of Credit* $ 336,350.00 11/30/98
Loan Guaranty* $ 250,000.00 11/30/98
Loan Guaranty* $ 5,550,000.00 11/30/98
Foreign Exchange Exposure* $ .00 11/30/98
Corporate Visa $ .00 11/30/97
*Unsecured
13. Defaults by the Obligor.
None.
15. Foreign Trustee.
Not applicable.
16. List of Exhibits.
Exhibit 1 A copy of the existing Articles of Association of the trustee.
(Filed herewith).
Exhibit 1(a) A copy of Certificate of Change of Name.*
Exhibit 2 A copy of the Certificate of Authority to commence business.*
Exhibit 3 A copy of the authorization to exercise corporate trust powers.*
Exhibit 4 A copy of existing by-laws of the trustee. (Filed herewith).
Exhibit 5 None.
Exhibit 6 The Consent of the trustee required by Section 321(b) of the Act.
(Filed herewith).
Exhibit 7 A copy of the latest report of condition of the trustee published
pursuant to law or requirements of its supervising authority.
(Filed herewith).
* These Exhibits are hereby incorporated by reference to Exhibits bearing
identical Exhibit numbers submitted by this trustee in its statement of
eligibility and qualification filed with Securities and Exchange Commission
with respect to the Indianapolis Power & Light Company First Mortgage Bonds,
51/8% Series due July 1996, Securities and Exchange Commission Registration
No. 2-24581.
NOTE
The answer to item 2 is based on incomplete information. To the best of our
knowledge and belief, however, there is no person, firm or corporation
ordinarily engaged in underwriting securities of the obligor:
(1) which is an affiliate of the trustee;
(2) of which any director or executive officer of the trustee is a director,
officer, partner, employee, appointee or representative;
(3) which individually owns, beneficially, more that 1% of the outstanding
Common Stock of the trustee or First Chicago NBD Corporation;
(4) whose securities are owned beneficially by the trustee as collateral
security for obligations in default.
This statement may therefore be considered as correct unless amended
contemporaneously with the filing by the obligor of the Amendment or
Supplement to its Registration Statement disclosing underwriters for the
Indenture securities.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a corporation organized
and existing under the laws of the United States of America, has duly caused
this Statement of Eligibility and Qualification to be signed on its behalf by
the undersigned thereunto duly authorized, all in the City of Chicago, State
of Illinois, on the 10th day of December, 1996.
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
By: s/Elizabeth Nelson
Its: Assistant Vice President
State of Illinois )
County of Cook )
The Undersigned, Elizabeth Nelson, hereby certifies that she is a duly
appointed and qualified Assistant Vice President of American National Bank
and Trust Company of Chicago, a corporation duly organized and existing as
a national banking association under the laws of the United States of
America, and has authority to execute this Certificate.
She further certifies that attached to this certificate are true and correct
copies of Amended Articles of Association and the By-Laws of said Association,
that said Articles and By-Laws were duly adopted by the Board of Directors of
said Association, and that said Amended Articles and By-Laws have never been
repealed and are still in full force and effect.
She further certifies that the Seal affixed to this certificate is the
corporate seal of said Association.
In witness whereof, the undersigned has set her hand and has affixed the
corporate seal of said association, this 10th day of December, 1996.
By: s/Elizabeth Nelson
Its: Assistant Vice President
(Seal)
EXHIBIT 1
_____________________________________________________________________________
_____________________________________________________________________________
Amended Articles of Association
of
American National Bank
and Trust Company of Chicago
(As Amended and Restated February 2, 1996)
Charter No. 13216
_______________________________________________________________________________
_______________________________________________________________________________
Amended Articles of Association
of
American National Bank and Trust Company
of Chicago
Charter No. 13216
First. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "American National
Bank and Trust Company of Chicago."
Second. The place where the main banking house or office of this Association
shall be located, its operations of discount and deposit carried on, and its
general business conducted, shall be Chicago, County of Cook, State of
Illinois.
Third. The Board of Directors of this Association shall consist of such
number of its shareholders, not less than five nor more than twenty-five, as
from time to time shall be determined by a majority of the votes to which
all of its shareholders are at the time entitled. By vote of a majority of
the full Board of Directors, the Board may increase such number, within such
maximum limit, by not more than two and appoint a person or persons to fill
the resulting vacancy or vacancies between meetings of the shareholders. A
majority of the Board of Directors shall be necessary to constitute
a quorum for the transaction of business.
Fourth. The regular annual meeting of the shareholders of this Association
shall be held at its main banking hours, or such other convenient place as
shall be duly authorized by the Board of Directors, on such day of each year
as is specified therefor in the By-Laws of the Association, at which
meeting a Board of Directors shall be elected; but, if no such election
shall be held on that day, it may be held on any subsequent day, in
accordance with the provisions of the banking laws of the United States.
Fifth. The amount of capital stock of this Association shall be divided
into 2,000,000 shares of common stock of the par value of Ten Dollars ($10)
each; but said capital stock may be increased or decreased from time to time,
in accordance with the provisions of the laws of the United States.
If the capital stock is increased by the sale of additional shares thereof,
each shareholder shall be entitled to subscribe for such additional shares
in proportion to the number of shares of said capital stock owned by him at
the time the increase is authorized by the shareholders, unless another time
subsequent to the date of the shareholders' meeting is specified in a
resolution adopted by the shareholders at the time the increase is
authorized. The Board of Directors shall have the power to prescribe a
reasonable period of time within which the pre-emptive rights to subscribe
to the new shares of capital stock must be exercised.
If the capital stock is increased by a stock dividend, each shareholder shall
be entitled to his proportionate amount of such increase in accordance with
the number of shares of capital stock owned by him at the time the increase
is authorized by the shareholders, unless another time subsequent to the
date of the shareholders' meeting is specified in a resolution adopted by the
shareholders at the time the increase is authorized.
Sixth. The Board of Directors shall appoint one of its members President of
this Association, who shall be Chairman of the Board; but the Board of
Directors may appoint a Director, in lieu of the President, to be Chairman of
the Board, who shall perform such duties as may be designated by the
Board of Directors. The Board of Directors shall have the power to appoint
one or more Vice-Presidents, at least one of whom shall also be a member of
the Board of Directors, and who shall be authorized, in the absence of the
President, to perform all acts and duties pertinent to the office of
President, except such as the President only is authorized by law to perform;
to appoint a Cashier and such other officers as may be required to transact
the business of this Association; to fix the salaries to be paid to all
officers of this Association; and to dismiss such officers, or any of them.
The Board of Directors shall have the power to define the duties of officers
and employees of this Association, to require bonds from them, and to fix
the penalty thereof; to regulate the manner in which Directors shall be
elected or appointed, and to appoint judges of the election; to make all by-
laws that it may be lawful for them to make for the general regulation of
the business of this Association and the management of its affairs; and
generally to do and perform all acts that it may be lawful for a Board of
Directors to do and perform.
Any person made a party to any action, suit or other proceeding, civil or
criminal, by reason of the fact that he is or was a director, officer, or
employee of the Association shall be indemnified by the Association against
judgments, fines, amounts paid in settlement and reasonable expenses,
including attorney's fees, actually and necessarily incurred by him in
connection with the defense of such proceeding, or in connection with any
appeal therein, except in relation to (i) any matter as to which it shall be
adjudged in such proceeding that he is liable for negligence or misconduct in
the performance of his duties to the Association, provided that in the case
of a criminal action, suit, or proceeding, a conviction or judgment shall
not be deemed in adjudication that the director, officer, or employee is
liable for negligence or misconduct in the performance of his duties to the
Association if it shall be determined that he was acting in good faith in
what he considered to be the best interests of the Association and without
reasonable cause to know that his acts were illegal; or (ii) any matter
settled or compromised unless it shall be determined that there is not
reasonable ground for such person being adjudged liable for negligence or
misconduct in the performance of his duties to the Association. All such
determinations hereunder shall be made by a majority of those members of the
Board of Directors who were not parties to such proceeding, or by one or
more disinterested persons to whom the question shall be referred by the
Board of Directors. Such right of indemnification shall not be deemed
exclusive of any other rights to which such director, officer, or employee
may be entitled apart from this provision.
Seventh. This Association shall have succession from the date of its
organization certificate until such time as it be dissolved by the act of
its shareholders in accordance with the provisions of the banking laws of
the United States, or until its franchise becomes forfeited by reason of
violation of law, or until terminated by either a general or a special act of
Congress, or until its affairs be placed in the hands of a receiver and
finally wound up by him.
Eighth. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten per centum of the
stock of this Association, may call a special meeting of shareholders at any
time: Provided, however, that, unless otherwise provided by law, not less
than ten days prior to the date fixed for any such meeting, a notice of the
time, place, and purpose of the meeting shall be given by first-class mail,
postage prepaid, to all shareholders of record of this Association at their
respective addresses as shown upon the books of the Association. These
Articles of Association may be amended at any regular or special meeting of the
shareholders by the affirmative vote of the shareholders owning at least a
majority of the stock of this Association, subject to the provisions of the
banking laws of the United States. The notice of any shareholders' meeting,
at which an amendment to the Articles of Association of this Association is
to be considered, shall be given as hereinabove set forth.
* * *
Certified to be a true copy of the Articles of Association of American
National Bank and Trust Company of Chicago, as amended, now in force and
effect.
Date: December 10, 1996
(Seal)
EXHIBIT 4
_______________________________________________________________________________
_______________________________________________________________________________
By-Laws
of
American National Bank
and Trust Company of Chicago
(As Amended and Restated February 2, 1996)
Charter No. 13216
_______________________________________________________________________________
_______________________________________________________________________________
February, 1996
TABLE OF CONTENTS
Page
Article I Meetings of Shareholders 1
Article II Directors 2
Article III Officers 4
Article IV Transfers of Real Estate 5
Article V Contracts and Voting 5
Article VI Authority to Sell Stocks, Bonds, etc. 6
Article VII Stock Certificates & the Transfer Thereof 6
Article VIII Increase of Stock 7
Article IX Banking Hours 7
Article X Seal 8
Article XI Trust Department 8
Article XII Amendments of By-Laws 9
BY-LAWS
of
AMERICAN NATIONAL BANK AND TRUST COMPANY
OF CHICAGO
(As Amended and Restated February 2, 1996)
Charter No. 13216
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of shareholders shall be
held on the first Friday of February each year or at such other date as is
from time to time designated by the Board of Directors (the "Board"), for
the purpose of electing directors and the transaction of such other business
as may come before the meeting. If the election of directors shall not be
held on the day designated for the annual meeting, or at any adjournment
thereof, the Board shall cause the election to be held at a meeting of the
shareholders as soon thereafter as possible.
SECTION 2. SPECIAL MEETINGS. The Board, or shareholders owning in the
aggregate not less than 10 percent of the stock of the Bank, may call a
special meeting of shareholders at any time for the purpose or purposes
stated in the call of the meeting.
SECTION 3. PLACE OF MEETINGS. Shareholder meetings shall be held at the
main banking office of the Bank or at such other convenient place established
by the Board.
SECTION 4. NOTICE OF MEETINGS. The Chairman of the Board or the Secretary
shall give written notice stating the place, day and hour of each meeting of
shareholders and, in case of a special meeting, the purpose or purposes for
which the meeting is called. Such notice shall be delivered not less than
ten, nor more than forty days before the date of the meeting, either
personally or by mail to each shareholder of record entitled to vote at such
meeting. If mailed, such notices shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder at his
address as it appears on the records of the Bank with postage thereon prepaid.
Such notice may be waived in writing.
SECTION 5. PRESIDING OFFICER. The Chairman of the Board, if present, shall
preside at all shareholder meetings. In the Chairman's absence, the
President, if present, shall preside. In the absence of the Chairman and
President, the shareholders may elect a Chairman pro tem to preside
at the meeting.
SECTION 6. QUORUM; MAJORITY VOTE. A majority of the outstanding shares of
stock, represented in person or by proxy, shall constitute a quorum at any
meeting of the shareholders, provided that if less than a majority of the
outstanding shares of stock are represented at said meeting, a majority of
the shares of stock so represented may adjourn the meeting from time to
time without further notice. If a quorum is present, the affirmative vote of
the majority of shares represented at the meeting shall be the act of the
shareholders.
SECTION 7. PROXIES. Proxies may be secured for annual and special meetings,
shall be dated, and shall be filed with the Secretary of the Bank before or
at the time of the meeting. At all meetings of the shareholders, a
shareholder may vote by proxy executed in writing by the shareholder or by
his attorney-in-fact. No proxy shall be valid eleven months from the date of
its execution, unless otherwise provided in the proxy. No officer or
employee of the Bank may act as proxy.
SECTION 8. VOTING RIGHTS. Each outstanding share shall be entitled to one vote
on each matter submitted to a vote at a meeting of shareholders.
SECTION 9. CONSENT OF SHAREHOLDERS IN LIEU OF ANNUAL OR SPECIAL MEETING.
Unless otherwise restricted by the Articles of Association or by law, any
action which may be taken at any annual or special shareholder meeting may be
taken without a meeting, without prior notice and without a vote, if written
consent setting forth the action so taken shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking
of the corporate action without a meeting by less than unanimous written
consent shall be given to those shareholders who did not give written
consent.
ARTICLE II
DIRECTORS
SECTION 1. AUTHORITY. The property and business of the Bank shall be
managed by the Board, which shall have all of the powers conferred by law,
the Articles of Association and these by-laws.
SECTION 2. NUMBER. The Board shall at all times consist of not less than
five nor more than twenty-five individuals. The exact number within such
minimum and maximum limits shall be fixed and determined from time to time
by resolution of a majority of the full Board or by resolution of the
shareholders at any meeting thereof; provided, however, that the Board may not
increase the number of directors to a number which: (i) exceeds by more than
two the number of directors last elected by shareholders where such number
was fifteen or less; or (ii) exceeds by more than four the number of
directors last elected by shareholders where such number was sixteen
or more, but in no event shall the number of directors exceed twenty-five.
SECTION 3. TERM OF OFFICE. Each director shall hold office from the date of
his election or appointment until the next annual shareholder meeting. Any
director ceasing to be the owner of the amount of stock required by law or
in any other manner becoming disqualified, shall thereby vacate his office
as director. A director who is an officer of the Bank or one of its
affiliates shall not stand for re-election to the Board at the annual
meeting coincident with or next following the date of his retirement or
other termination of employment from the Bank or such affiliate. A
director who is not an officer of the Bank or any such affiliate shall not
stand for re-election to the Board at the annual meeting of the Bank held in
the third year following the year in which he retired from his principal
occupation; provided, however, that no director shall be eligible for re-
election at the annual meeting of the Bank next following his 73rd birthday.
The Board may fill any vacancy which occurs in the Board at any regular
meeting of the Board or at a special meeting called for that purpose.
SECTION 4. COMPENSATION. By resolution, the Board may provide that a
reasonable fee be paid to any of its members or to the members of any duly
authorized committee for services rendered. No such payment shall preclude
any director from serving the Bank in any other capacity and receiving
compensation therefor.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board shall be held on
such dates, times and locations as determined by the Chairman of the Board
and communicated to the directors in writing by the beginning of each
calendar year for that calendar year.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board may be held at
any time and at any place upon the call of the Chairman of the Board or upon
the call of at least three directors. Notice of special meetings shall
state the meeting's purpose, and shall be given to each director in person,
by facsimile transmission, by telephone, by overnight delivery service, or by
U.S. first class mail addressed to his usual place of business or to his
residence. Personal notice or notice by facsimile transmission or telephone
shall be given not later than the second day before the meeting. A director's
attendance at a special meeting shall constitute a waiver of notice of such
meeting, except when the director attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
SECTION 7. QUORUM; MAJORITY VOTE. A quorum of directors shall be required to
transact business at any regular or special meeting of the Board. A majority
of the directors shall constitute a quorum. Each director shall be entitled
to one vote. A vote by a majority of the directors present at any regular or
special meeting of the Board at which a quorum is present shall be required
to approve any matter or proposal at any such meeting.
SECTION 8. PRESIDING OFFICER. The Chairman of the Board, if present, shall
preside at all meetings of the Board. The President, if present, shall
preside at meetings of the Board in the Chairman's absence. In the absence
of both the Chairman and the President, the Board shall designate another
one of their members to so preside.
SECTION 9. MINUTES OF MEETING. The Board shall appoint a Secretary, who
need not be a member of the Board, to take minutes at any regular or special
meeting of the Board. If the Secretary is not present at any such meeting,
the Chairman of the Board may designate a secretary pro tem to take minutes
at the meeting. The Secretary or secretary pro tem shall record the actions
and proceedings at each regular or special meeting of the Board as minutes
of the meeting and shall maintain such minutes in a minute book of
proceedings of such meetings of the Board. Minutes of each such meeting
shall be signed by the presiding officer and secretary of each meeting.
SECTION 10. PARTICIPATION IN MEETINGS BY TELEPHONE. Unless otherwise
restricted by the Articles of Association or by law, members of the Board or
any committee designated by the Board may participate in a meeting of the
Board or committee by means of conference telephone or similar communications
equipment which allows each person participating in the meeting to hear each
other. Participation in such a meeting shall constitute presence in
person at such meeting.
SECTION 11. CONSENT OF DIRECTORS IN LIEU OF MEETING. Unless otherwise
provided in the Articles of Association or by law, any action required to be
taken at a meeting of the Board or any action which may be taken at a regular
or special meeting of the Board or a committee thereof, may be taken without
a meeting, without prior notice and without a vote, if written consent
setting forth the action so taken is signed by all of the directors that
would be necessary to authorize or take such action at a regular or special
meeting of the board.
SECTION 12. COMMITTEES. The Board may, from time to time, establish such
committees as it deems appropriate and as required by law. Any such
committee shall be comprised of such members, shall have such authority and
shall conduct its activities in such manner as is provided in the resolution
establishing the committee. The members of any such committee who are not
officers of the Bank shall receive such compensation as the Board determines
from time to time. The Chairman of the Board shall be an ex-officio member
of all committees of the Board.
ARTICLE III
OFFICERS
SECTION 1. OFFICER TITLES. The titles of the officers of the Bank may
include the Chairman of the Board, one or more Vice Chairmen of the Board, a
President, one or more Executive Vice Presidents, one or more Senior Vice
Presidents, a Chief Credit Officer, a Chief Trust Officer, a Chief Financial
Officer, a General Auditor, a General Counsel, one or more Vice Presidents,
a Cashier, a Secretary, one or more Assistant Secretaries, one or more Trust
Officers, and such other officers as may be appropriate for the prompt and
orderly transaction of the business of the Bank. Individuals appointed as
Chairman and Vice Chairman of the Board and President must be members of the
Board. The same person may hold any two or more offices. The Chairman
of the Board and the President shall have the authority to establish all
officer titles below the level of Senior Vice President.
SECTION 2. ELECTION OF OFFICERS. The Chairman of the Board and the President
shall be elected by the Board for the current year for which such Board was
elected and each shall hold his office for such year unless he shall resign,
become disqualified or be removed. Officers at the level of Senior Vice
President and above shall be elected by the Board. The Chairman of the Board
and the President shall have the authority to appoint all other officers,
and to further delegate such authority to other officers of the Bank.
SECTION 3. AUTHORITY AND RESPONSIBILITY. The authorities and responsibilities
of all officers, in addition to those specifically prescribed herein, shall
be those usually pertaining to their respective offices, or as may be
designated by the Board or by the Chairman of the Board or by the President,
or by any officer of the Bank designated by one of the foregoing.
SECTION 4. MISCELLANEOUS. All officers and employees of the Bank who shall be
responsible for any moneys, funds or valuables of the Bank shall give bond,
or be covered by a blanket bond, in such penal sum and with such security as
shall be approved by the Board, conditioned for the faithful and honest
discharge of their duties as such officers or employees and that they will
faithfully apply and account for all such moneys, funds and valuables and
deliver the same on proper demand to the order of the Board of this Bank, or
to the person or persons authorized to receive the same.
SECTION 5. TERM OF OFFICE. Officers shall be appointed for an indefinite
term, and their employment may be terminated and/or they may be removed from
office at any time. The Bank's holding company, First Chicago NBD
Corporation, may terminate and/or remove the Chairman of the Board, the
President and the Chief Executive Officer. The Chairman of the Board, the
President, and their designates have the authority to terminate and/or
remove all other officers. The salary of any officer whose employment
terminates shall cease as of the date of his termination, and he shall cease
to be an officer as of the date of termination.
ARTICLE IV
TRANSFERS OF REAL ESTATE
The Chairman of the Board, the President and any Vice President or above of
the Bank shall have authority (without an order of the Board) to execute and
deliver on behalf of and in the name of the Bank, deeds or contracts for
deeds conveying any real estate owned by the Bank in its own right or in
which the Bank has an interest either with or without covenants of warranty,
and the same shall be attested to by any of such officers of the Bank other
than the officers so executing said instruments; provided, however, that
deeds, contracts or leases with respect to any real estate used by the Bank
as its banking quarters, must be executed by an executive vice president or
above, or an officer designated by an executive vice president or above. All
releases of mortgages or trust deeds shall be executed in the same manner as
provided in the preceding sentence in respect of transfers and conveyances of
real estate in which this Bank has an interest.
ARTICLE V
CONTRACTS AND VOTING
SECTION 1. EXECUTION OF INSTRUMENTS ON BEHALF OF BANK. Any officer of
the Bank and such other persons as may be authorized by the Chairman of the
Board or the President from time to time are severally and respectively
authorized to execute documents and take action(s) in the Bank's name in
connection with transactions conducted in the ordinary course of business
including, without limitation, to guarantee signatures, certify resolutions
and/or agreements, endorse checks, drafts and notes, sign orders for the
deposit of securities and for the withdrawal of securities deposited with
the bank correspondents of this Bank. Notwithstanding the foregoing, (i) all
notes evidencing obligations of the Bank must be executed and delivered by a
Vice President of the Bank or above, or the Cashier, (ii) letters of credit
must be signed and issued by two designated officers or by a designated
officer and any employee who shall be authorized to do so by the Chairman of
the Board or the President.
SECTION 2. VOTING. The vote of this Bank as stockholder in any corporation
in which it may hold stock or upon any securities carrying voting rights
which it shall have the right to vote in its individual capacity as a Bank,
shall be cast at any stockholders' meeting by any Vice President or
above, or the Cashier, in person, or by some person or persons authorized by
written proxy signed by one of said officers. In all cases where shares of
stock or other securities carrying voting rights and owned by this Bank
shall be held in the name of a nominee of the Bank, any Vice President or
above, or the Cashier may authorize such nominee to vote such stock or other
securities in person, either unconditionally or upon such terms, limitations,
or conditions as such officer may direct, or any such officer may authorize
such nominee to execute a proxy to vote such shares of stock or other
securities carrying voting rights, either unconditionally or upon such terms,
limitations or conditions as such officer shall approve.
ARTICLE VI
AUTHORITY TO SELL STOCKS, BONDS, ETC.
Any two officers from the group consisting of Vice Presidents and above and
the Cashier or such officers as authorized from time to time by the Board,
may at any time jointly:
(1) Sell, assign, and transfer any and all United States registered bonds
now standing, or which may hereafter stand in the name of the Bank;
(2) Sell, assign, and transfer any and all notes, bonds, certificates of
indebtedness or obligations of any corporation, firm or individual, which
notes, bonds, certificates of indebtedness or obligations are now registered
or may hereafter be registered in the name of this Bank, or are payable or
endorsed to this Bank; or
(3) Sell, assign, and transfer to any assignee or transferee, for and on
behalf of this Bank and in its name, any and all shares of capital stock of
any corporation or corporations held by this Bank.
ARTICLE VII
STOCK CERTIFICATES AND THE TRANSFER THEREOF
SECTION 1. TRANSFERABILITY OF SHARES. Shares of stock of this Bank shall be
transferable only upon the books of the Bank, subject to the provisions of
the National Bank Act. The Bank shall maintain a transfer book in which all
transfers of such stock shall be recorded. Transfers of stock may be
suspended preparatory to any election or payment of any dividends.
SECTION 2. RECORD DATE. The Board shall have power to fix a date of record
of stock holdings for purposes of notices of shareholders' meetings, voting
rights at such meetings, the payment of dividends, or any other proper purpose.
SECTION 3. MISCELLANEOUS. All stock certificates shall be signed with a
manual or facsimile signature by any Vice President or above, and by another
of such officers or the Secretary or Cashier, and the seal of the Bank shall
be impressed thereon or a facsimile thereof printed thereon. Each
certificate shall also be signed manually by the Chief Financial Officer or
General Auditor, on behalf of the Bank as registrar, and by a duly authorized
officer or employee of the trust department as transfer agent. Each
certificate shall recite on its face that the stock represented thereby is
transferable only upon the books of the Bank by the holder thereof, or the
holder's attorney, upon surrender of the certificate, and when stock is
transferred, the certificates thereof shall be returned to the Bank,
canceled, preserved, and new certificates issued. In case of loss of any
certificates a new one executed in the manner above provided, shall be issued
in lieu thereof upon proof satisfactory to the Chairman of the Board, the
President, any Executive Vice President, or the Chief Trust Officer of such
loss and upon appropriate indemnity if required by such officer.
ARTICLE VIII
INCREASE OF STOCK
In the event of any increase in the capital stock of this Bank, the
preemptive rights of the shareholders, if any, in respect of any such
increased stock shall be set forth in the Articles of Association. Any
warrants or certificates issuable to shareholders in connection with any
increase of the capital stock of this Bank shall be delivered to the
respective shareholders entitled thereto, either by hand or by mail,
first-class postage prepaid, addressed to their respective addresses as
shown on the books of the Bank. If, in the event of sale of additional
shares, any subscription rights shall not have been exercised at the
expiration of the specified subscription period, such unsubscribed new
shares may be issued and sold at such price, not less than the par value
thereof, to such persons and on such terms as the Directors may determine.
ARTICLE IX
BANKING HOURS
The Bank shall be open for business during such days of the year and during
such hours of the day as the Chairman of the Board or the President or their
designate shall determine.
ARTICLE X
SEAL
The seal of the Bank shall be circular in form and the words AMERICAN
NATIONAL BANK AND TRUST COMPANY OF CHICAGO-CORPORATE SEAL thereon. Such
seal or a facsimile thereof may be affixed to or printed on any instrument
requiring the same and attested by the Chief Financial Officer, the Cashier,
the Secretary, any Assistant Secretary, any Trust Officer, or any
other officer thereunto designated by the Board.
ARTICLE XI
TRUST DEPARTMENT
SECTION 1. EXERCISE OF FIDUCIARY POWERS. All fiduciary powers of the Bank
shall be exercised through the trust department, subject to all applicable
laws and governmental regulations. The Bank shall maintain separate books
and records for the trust department that are distinct from the other books
and records of the Bank.
SECTION 2. CHIEF TRUST OFFICER. All operations and fiduciary activities of
the trust department shall be the responsibility of the Chief Trust Officer,
subject to the powers and duties of the Board, the Committees appointed by
the Board, the Chairman of the Board, the President, and any Executive Vice
President. The Board may appoint one or more Vice Presidents and/or Trust
Officers in addition to the Chief Trust Officer to administer said trust
department, who shall have such powers and perform such duties as may be
prescribed by these By-laws or as may be delegated to them by the Chief
Trust Officer, the Board, the Chairman of the Board, the President,
or any Executive Vice President.
SECTION 3. EXECUTION OF INSTRUMENTS. Any Trust Officer or above, the
Secretary, any Assistant Secretary, the Cashier, the Chief Financial Officer,
or any other officer or person appointed by the Chairman of the Board or the
President or their designate, for that purpose, or for the purpose of
appointing vault custodians may sign, execute, acknowledge, deliver and
accept on behalf of the Bank all checks against any trust department account
or accounts and all agreements, indentures, mortgages, deeds, conveyances,
releases, transfers, assignments, certificates, declarations, receipts,
discharges, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings and other instruments or documents in
connection with the exercise of any of the fiduciary powers of the Bank in
the ordinary course of business of the trust department.
SECTION 4. AUTHENTICATION OF INSTRUMENTS. All authentication or
certificates by the Bank as trustee under any mortgage, deed of trust or
other instrument securing bonds, notes, debentures or other obligations of
any person or corporation, and all certificates as registrar or transfer
agent, and all certificates of deposit for stocks, bonds, or other
securities, and interim and trust certificates may be signed or
countersigned on behalf of the Bank by any of the officers designated in
the preceding Section hereof or by any other person appointed by the
Chairman of the Board or the President or their designate and when so
signed shall be binding on the Bank as the valid act of the Bank.
SECTION 5. VOTING. The vote of this Bank as stockholder in any corporation
in which it may hold capital stocks trustee or other fiduciary capacity may
be cast at the stockholders' meetings of such corporation by any Trust
Officer or above, the Secretary, any Assistant Secretary, in person or
by some person authorized by written proxy signed by one of said officers;
provided, however, that such proxy if given to any person not an officer or
director of this Bank shall be limited to a single meeting and shall either
be limited to voting for trustees or directors or shall direct how such proxy
holder shall vote. The above provision, however, shall not apply to stock
held by this Bank under a written agreement which expressly provides for the
giving of proxies. Whenever this Bank has been or may be appointed attorney
in fact with power of substitution in and about the transfer of shares
of capital stock of any corporation, any Second Vice President or above may
substitute by proper written instrument an attorney in fact to act in the
place and stead of this Bank in and about such transfer.
ARTICLE XII
AMENDMENTS OF BY-LAWS
The Board may amend these By-laws in any respect to the extent permitted at
law at any regular or special meeting of the Board or shareholders duly
called for that purpose, by a vote of a majority of the Board or a majority
of the shareholders.
EXHIBIT 6
CONSENT OF TRUST UNDER SECTION 321(b) OF THE
TRUST INDENTURE ACT OF 1939
The American National Bank and Trust Company of Chicago hereby consents that
reports of examination of said bank by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities
and Exchange Commission upon its request therefor.
Such reports shall be used for the purposes and subject to the limitations
and conditions set forth in Section 321(b) of the Trust Indenture Act of 1939.
Dated: December 10, 1996
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
By: s/Elizabeth Nelson
Its: Assistant Vice President
