rell-def14a_100918.htm
 

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.)

 

 

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Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material under Rule 14a-12

 

RICHARDSON ELECTRONICS, LTD.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than Registrant)

 

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RICHARDSON ELECTRONICS, LTD.

40W267 Keslinger Road

P.O. Box 393

LaFox, Illinois 60147-0393

 

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 9, 2018

 

 

Dear Stockholders:

 

On behalf of the Board of Directors and Management of Richardson Electronics, Ltd., I invite you to attend the 2018 Annual Meeting of Stockholders. The Annual Meeting will be held on Tuesday, October 9, 2018, at 2:00 p.m. Central Time, at our corporate headquarters at 40W267 Keslinger Road, LaFox, Illinois 60147-0393.

 

The purpose of the Annual Meeting is to consider and vote on the following matters:

 

1. To elect six directors nominated by Richardsons Board of Directors for a term expiring at the 2019 Annual Meeting (Proposal 1);

 

2. To ratify the selection of BDO USA, LLP as the Companys independent registered public accounting firm for fiscal year 2019 (Proposal 2);

 

3. To approve, on an advisory basis, the compensation of our Named Executive Officers (Proposal 3);

 

4. To approve an amendment to the 2011 Long-Term Incentive Plan to increase the number of shares available under the plan (Proposal 4); and

 

5. To act upon any other business that may properly come before the meeting or at any adjournment or postponement thereof.

 

We currently are not aware of any other matters scheduled to come before the Annual Meeting. All stockholders are invited to attend the meeting, although only stockholders of record at the close of business as of August 10, 2018, are entitled to notice of, and to vote at, the Annual Meeting or at any adjournment or postponement thereof.

 

Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented and voted. You may vote by telephone, via the Internet, or by mail before the Annual Meeting or in person at the Annual Meeting. For specific instructions, please refer to the accompanying proxy card.

 

This year we are again taking advantage of Securities and Exchange Commission rules that allow us to furnish proxy materials to stockholders via the Internet. On or about August 24, 2018, we sent notices of Internet availability of proxy materials to holders of our common stock as of the record date. The notice describes how you can access our proxy materials beginning on August 24, 2018.

 

By Order of the Board of Directors,

 

 

EDWARD J. RICHARDSON

Chairman of the Board, Chief Executive Officer and President

 

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PROXY STATEMENT

 

TABLE OF CONTENTS

 

 

ANNUAL MEETING INFORMATION 3
General 3
Record Date and Quorum 3
How to Vote 3
Vote Required, Abstentions and Broker Non-Votes 4
Revocability of Proxies 4
Proxy Solicitation 4
PROPOSAL 1 – ELECTION OF DIRECTORS 4
CORPORATE GOVERNANCE 6
Independence of Directors 6
Board Leadership Structure 6
Board and Committee Information 6
Board Role in Risk Oversight 8
Compensation of Directors 8
Director Compensation Table 8
EXECUTIVE OFFICERS 9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 10
PROPOSAL 2 – RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 11
AUDIT MATTERS 11
Audit Committee Report 11
Independent Auditor’s Fees 12
RELATED PARTY TRANSACTIONS 12
COMPENSATION DISCUSSION AND ANALYSIS 13
REPORT OF THE COMPENSATION COMMITTEE 18
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION 18
COMPENSATION OF NAMED EXECUTIVE OFFICERS 18
Summary Compensation Table 18
Grants of Plan Based Awards for Fiscal 2018 19
Outstanding Equity Awards at Fiscal Year End 19
Option Exercises and Stock Vested 20
Employment Agreements 20
Potential Payment upon Termination or Change in Control 21
Median Employee to CEO Pay Ratio 21
PROPOSAL 3 – ADVISORY VOTE REGARDING COMPENSATION OF NAMED EXECUTIVE OFFICERS 22
PROPOSAL 4 – APPROVAL OF AN AMENDMENT TO THE 2011 LONG-TERM INCENTIVE PLAN 22
STOCKHOLDER PROPOSALS FOR 2019 ANNUAL MEETING 29
OTHER MATTERS 29
ANNEX I - AMENDMENT TWO TO THE RICHARDSON ELECTRONICS, LTD 2011 LONG-TERM INCENTIVE PLAN 31
ANNEX II - RICHARDSON ELECTRONICS, LTD 2011 LONG-TERM INCENTIVE PLAN SECTION I. DEFINITIONS 32
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RICHARDSON ELECTRONICS, LTD.

 

PROXY STATEMENT

 

ANNUAL MEETING INFORMATION

 

General

 

The Board of Directors of Richardson Electronics, Ltd. (the “Company,” “we,” “our” or “us”) is soliciting your proxy for the Annual Meeting of Stockholders to be held at our corporate headquarters located at 40W267 Keslinger Road, LaFox, Illinois 60147-0393, on Tuesday, October 9, 2018, at 2:00 p.m. Central Time, and at any and all adjourned or postponed sessions of the Annual Meeting. On or about August 24, 2018, we mailed our stockholders of record a notice of Internet availability of proxy materials, including this proxy statement and our Annual Report on Form 10-K for the fiscal year ended June 2, 2018. All stockholders receiving the notice will have the ability to access the proxy materials over the Internet and to request a paper copy by mail by following the instructions in the notice.

 

Record Date and Quorum

 

Stockholders of record at the close of business on August 10, 2018, the record date, are entitled to notice of and to vote their shares at the Annual Meeting. At the record date, 10,824,843 shares of our common stock, and 2,136,919 shares of our Class B common stock were issued and outstanding. The common stock is listed for trading on the NASDAQ Global Select Market under the symbol “RELL”. The presence in person or by proxy of the holders of record of a majority of the combined voting power of the outstanding shares of common stock and Class B common stock entitled to vote is required to constitute a quorum to transact business at the Annual Meeting. Abstentions and broker non-votes (as defined below) are considered as shares present at the Annual Meeting for the purpose of determining a quorum.

 

How to Vote

 

Stockholders can simplify their voting and reduce Company expenses by voting by telephone or via the Internet. If you vote by telephone or via the Internet, you do not need to mail back your proxy card. Telephone and Internet voting information is provided on your proxy card. A control number located on the proxy card is designed to verify your identity, allow you to vote your shares and confirm that your voting instructions have been properly recorded.

 

If your shares are held in the name of a bank or broker, you should follow the voting instructions you receive from the bank or broker. The availability of telephone or Internet voting will depend on your bank or broker’s voting process. If you choose not to vote by telephone or Internet, please return your proxy card properly signed, and the shares represented will be voted in accordance with your directions. You can specify your choices by marking the appropriate boxes on the proxy card.

 

The election of directors (Proposal 1), the non-binding advisory vote on executive compensation (Proposal 3), and the approval of the amendment to the 2011 Long-Term Incentive Plan (Proposal 4) are “non-discretionary” matters. Therefore, your broker may not vote your shares with respect to these items unless it receives your voting instructions, and if it does not, those votes will be counted as “broker non-votes.” “Broker non-votes” are shares that are held in street name by a bank or broker that indicates on its proxy that it does not have or did not exercise discretionary authority to vote on a particular matter.

 

If your proxy card is signed and returned without specifying choices, the persons named as proxies will vote in accordance with the recommendations of the Board of Directors. The Board’s recommendations are set forth together with the description of each matter in this Proxy Statement.

  

The Board of Directors recommends that you vote:

 

FOR the election of each director nominee (Proposal 1);
FOR the ratification of the selection of BDO USA, LLP as our independent registered public accounting firm for fiscal year 2019 (Proposal 2);
FOR the approval, on an advisory basis, of the compensation of our Named Executive Officers (Proposal 3); and
FOR the approval of an amendment to the 2011 Long-Term Incentive Plan (Proposal 4).

 

The Company knows of no other matters scheduled to come before the meeting. If any other matters properly come before the meeting, the proxies solicited hereby will be voted on such matters at the discretion of the persons named as proxies, except proxies that are marked to deny discretionary authority.

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We encourage you to vote your shares in advance of the Annual Meeting date even if you plan to attend the Annual Meeting.

 

Vote Required, Abstentions and Broker Non-Votes

 

Holders of common stock are entitled to one vote for each share of common stock held on the record date, and holders of the Class B common stock are entitled to ten votes for each share of Class B common stock held on the record date.

 

If a quorum is present at the Annual Meeting, the six candidates for director who receive the highest number of affirmative votes will be elected. A proxy marked to withhold authority for the election of one or more directors will not be voted with respect to the director or directors indicated.

 

The affirmative vote of shares representing a majority in voting power of the Company’s common stock present in person or represented by proxy at the meeting and entitled to vote is necessary for approval of Proposals 2, 3 and 4. Proxy cards marked as abstentions on Proposals 2, 3 and 4 will not be voted and will have the effect of a negative vote. Please note that a broker or other nominee will not be permitted to vote your shares on Proposals 1 (election of directors), 3 (advisory approval of executive compensation) or 4 (approval of amendment to the Long-Term Incentive Plan) absent specific instructions from you. Broker non-votes on Proposals 1 and 4 will have no effect; broker non-votes on Proposal 3 will have the effect of a negative vote on the proposal. Because Proposal 2 is a routine proposal on which a broker or other nominee generally has discretionary authority to vote, we do not expect any broker non-votes on Proposal 2.

 

Revocability of Proxies

 

You may revoke your proxy at any time before it is voted (in the case of proxy cards) by giving notice to the Secretary of the Company or by executing and mailing a later-dated proxy. To revoke a proxy given or change your vote cast, by telephone or via the Internet, you must do so by telephone or via the Internet, respectively (following the directions on your proxy card), by 11:59 p.m. Eastern Time (10:59 p.m. Central Time) on October 8, 2018.

 

Proxy Solicitation

 

We will bear the expense of soliciting proxies. Our officers and certain other employees, without additional remuneration, may also solicit proxies personally or by telephone, e-mail or other means.

 

PROPOSAL 1 – ELECTION OF DIRECTORS

 

At the Annual Meeting, stockholders will elect six directors to serve on our Board of Directors until the next annual meeting, or until their successors are elected and shall have qualified, subject to their earlier death, resignation or removal as permitted by law. Directors will be elected by a plurality of the votes cast at the meeting by the holders of shares represented in person or by proxy. Thus, assuming a quorum is present, the six persons receiving the greatest number of votes will be elected as directors and votes that are withheld will have no effect.

 

Our Board of Directors, acting through our Nominating Committee, is responsible for nominating a slate of directors that collectively have the complementary experience, qualifications, skills and attributes to guide the Company and function effectively as a Board.

 

The Nominating Committee has recommended Edward Richardson, Jacques Belin, James Benham, Kenneth Halverson, Robert Kluge and Paul Plante as nominees for election at the Annual Meeting.

 

We believe that each of our nominees has professional experience in areas relevant to our strategy and operations. All of our directors have managerial experience and are accustomed to dealing with complex problems. We also believe each of our nominees has other attributes necessary to create an effective Board, including high personal and professional ethics, the willingness to engage management and each other in a constructive and collaborative fashion, the ability to devote significant time to serve on our Board and its committees, and a commitment to representing the long-term interests of all our stockholders. In addition to these attributes, in each individual’s biography set forth below, we have highlighted specific experience, qualifications, and skills that led the Nominating Committee and the Board to conclude that each individual should be nominated to serve as a director of the Company.

 

Jacques Belin, age 67, has been a director of the Company since October 2013. He served as Managing Director of Thales Components and Subsystems from 2000 to 2011. He retired from Thales in October 2011. Prior to 2000 he served in multiple capacities including Quality and Production Engineer, Operations Manager and Factories Manager. In addition, Mr. Belin was heavily involved at Thales in areas including strategy, sales and marketing, and administration. Mr. Belin holds an engineering degree from Ecole Centrale in Paris. His entire career has been devoted to the electron tube and subsystems business. We believe Mr. Belin’s vast experience in the industry and knowledge of other advanced power generation, microwave, healthcare and detection technologies will be highly beneficial to the Company.

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James Benham, age 73, has been a director of the Company since October 2013. He has served as a Technical and Marketing Consultant to the Night Vision and Microwave Devices Industries since March 2013. He retired in March 2013 after 46 years in the Defense Electronics industry. Prior to his retirement, Mr. Benham was the President of L-3 Communications Narda West Division in Folsom, California from 2011 to 2013. For the previous 16 years, he was President of the Electron Devices Division of L-3 Communications. Mr. Benham received his BS in Chemistry from the State University of New York, and an MBA from Lynchburg College in Lynchburg, Virginia. He has also completed executive development programs at The Wharton School of the University of Pennsylvania, Harvard Business School and Stanford University. Additionally, Mr. Benham holds a patent in the night vision field. We believe Mr. Benham’s 45+ years of technology development, engineering and management experience will be a major asset to the future of the Company. Mr. Benham previously served as a director of Intevac Inc.

 

Kenneth Halverson, age 66, has been a director of the Company since October 2013. He has been a consultant with Halverson Consulting, LLC since 2009. Previously, he was Senior Vice President from 1999 to 2009 with MedAssets, Inc., one of the largest Group Purchasing Organizations in the country. MedAssets provides service to thousands of hospitals helping them to reduce their overall expenses. Mr. Halverson was with Comdisco Inc. from 1984 to 1999, serving as Senior Vice President and President of the Healthcare Group, which leased imaging and clinical equipment as well as refurbished and remarketed imaging equipment. Mr. Halverson holds an MBA in Finance from Northwestern University’s Kellogg School of Management and has held various executive positions with technology and healthcare companies throughout his career. We believe Mr. Halverson’s extensive experience with healthcare companies as well as his background in technology and finance will enable him to provide valuable insight into the Company’s strategy.

 

Robert H. Kluge, age 72, has been a director of the Company since October 2017. He has served as the General Manager, and later as President, of the Imaging Components Business at Varian Medical Systems, Inc. from February 1993 to February 2014 and as a Corporate Senior Vice President. He served as General Manager of X-Ray Products for Picker International from 1988 to 1993 and oversaw the diagnostic X-Ray product line, including X-Ray systems for Radiographic, R&F and Vascular applications, and was later given expanded responsibility for X-ray tubes. Mr. Kluge began his career in 1973 with General Electric Medical Systems as a participant in the Financial Management Program. He held a number of management positions at GE, including Service Business Marketing Manager and General Manager of Marketing and Strategy for the X-Ray Tube business. Mr. Kluge holds a B.S. in Economics and an MBA in Finance from the University of Wisconsin. Mr. Kluge’s qualifications to serve on our Board of Directors include his significant management experience in the design and manufacturing of diagnostic imaging components including CT tubes and flat panel detectors, and his extensive knowledge of marketing, strategy, and general management.

 

Paul J. Plante, age 60, has been a director since October 2011. From December 2008 to present, Mr. Plante has been the President and owner of Florida Fresh Vending, LLC., a privately held company, with vending machines throughout Central Florida. He has provided business consulting services to the electronics industry since 2008. Prior to that time he was Vice President, Medical Industry Solutions, for the Kimball Electronics Group from February 2007 until May 2008, after the purchase by Kimball Electronics of Reptron Electronics, Inc. From February 2004 to February 2007, Mr. Plante was President and Chief Executive Officer and a member of the Board of Directors of Reptron Electronics, Inc., a publicly held provider of electronics manufacturing services with a focus on the medical industry. From 1994 until 2004 he served as the President and Chief Operating Officer of Reptron. Mr. Plante negotiated and led Reptron Electronics, Inc. through a successful pre-arranged Chapter 11 reorganization period that strengthened the company’s balance sheet and liquidity with no significant loss of customers, employees, or suppliers. Prior to 1994, he was the Chief Financial Officer at Reptron and at K-Byte, Inc., a Michigan based software developer and electronics manufacturer. Mr. Plante has a degree in accounting and has been a licensed certified public accountant. We believe Mr. Plante is financially literate and qualifies as an “audit committee financial expert” under SEC rules. Mr. Plante’s qualifications to serve on our Board of Directors include his significant experience in the electronics industry, his experience managing electronics manufacturing companies and his extensive financial knowledge. Mr. Plante also serves as a director of SigmaTron International, Inc.

 

Edward J. Richardson, age 76, has been a director of the Company since 1965. He is currently the Chairman of the Board, Chief Executive Officer, and President of the Company. Mr. Richardson has been employed by the Company in various capacities since 1961. We believe Mr. Richardson’s qualifications to serve on our Board of Directors include his position as our Chief Executive Officer for over 40 years and his unique ability to bring historic knowledge and continuity to the Board.

 

The Company knows of no reason why any of the nominees for director would be unable to serve. In the event, however, that any nominee named should, prior to the election, become unable to serve as a director, your proxy (unless designated to the contrary) will be voted for such other person or persons as the Board of Directors may recommend.

 

Our Board of Directors recommends that you vote “FOR” the election of each director nominee.

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CORPORATE GOVERNANCE

 

Independence of Directors

 

The Board of Directors has determined that Messrs. Belin, Benham, Halverson, Kluge, and Plante, are independent as defined by NASDAQ listing standards. All members of the Audit, Compensation & Governance, and Nominating Committees are independent in accordance with applicable laws and NASDAQ rules for members of such committees.

 

Board Leadership Structure

 

The Company has no fixed policy on whether the roles of Chairman of the Board and Chief Executive Officer should be separate or combined, with this decision being made based on the best interests of the Company and its stockholders considering the circumstances at the time. Currently, these roles are combined with Mr. Richardson serving as both the Chairman of the Board and the Chief Executive Officer. Mr. Richardson possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing the Company and its business, and is responsible for the day-to-day operations of the Company. Therefore, the Board believes that Mr. Richardson is best positioned to efficiently develop agendas that ensure that the Board's time and attention are focused on the most critical matters and to execute strategic plans effectively, especially given the relatively small size of the Company's Board.

 

At the selection of the Board, Mr. Plante serves as lead independent director. The lead director acts as a key liaison with the Chief Executive Officer, assists the Chairman of the Board in setting the Board agenda, chairs executive sessions of the Board, and communicates Board member feedback to the Chief Executive Officer. In addition, the Company's non-management directors meet in regularly scheduled executive sessions without any members of management present. The purpose of these executive sessions is to promote open and candid discussion among the non-management directors. The Board believes this approach appropriately and effectively complements the combined role of Chairman of the Board and Chief Executive Officer.

 

Board and Committee Information

 

During our last fiscal year, the Board of Directors held five meetings, of which one was a teleconference meeting. Each director attended at least 75% of the aggregate number of such meetings and meetings of the committees on which he served. Although we have no formal policy about attendance at the Annual Meeting of Stockholders by our directors, it is encouraged. Last year, all directors attended the Annual Meeting.

 

During our last fiscal year, the Board of Directors had four standing committees: the Audit Committee, Compensation & Governance Committee, Executive Committee, and Nominating Committee.

 

During our last fiscal year, the members and chair of each committee were as follows:

 

Director Audit Compensation Executive Nominating
Jacques Belin  ✓  ✓    
James Benham  ✓  ✓    ✓
Kenneth Halverson  ✓  ✓    ✓
Paul Plante  ✓*  ✓*  ✓  ✓*
Edward Richardson      ✓*  

* chair

 

Executive Committee. The Executive Committee did not meet during the last fiscal year. This committee may exercise all authority of the Board of Directors in the management of the Company during the interval between meetings of the Board of Directors, except as otherwise provided in our by-laws or by applicable law.

 

Audit Committee. The Audit Committee held four meetings during the last fiscal year. This committee meets for the purpose of engaging and discharging the independent auditors (or recommending such actions); directing and supervising special investigations; reviewing with the independent auditors the plan and results of the auditing engagement; reviewing the scope and results of our procedures for internal auditing; approving each professional service provided by the independent auditors prior to the performance of such services; reviewing the independence of the independent auditors; considering the range of audit and non-audit fees for the independent auditors; reviewing the adequacy of the issuer’s system of internal accounting controls; and such other matters relating to our financial affairs and accounts as required by law or regulation or as it deems desirable or as the Board of Directors may assign to it. The Board of Directors has determined that the composition and functioning of the committee complies with the rules of the SEC and NASDAQ, including that each of its members is independent, as that term is defined in NASDAQ rules, and that one of its members, Mr. Plante, qualifies as an “Audit Committee Financial Expert,” as that term is defined in SEC rules. The Audit Committee has adopted a written charter approved by the Board of Directors. A copy of the charter is available on our website at www.rell.com.

 

The Audit Committee’s report is on page 11.

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Compensation & Governance Committee. The Compensation & Governance Committee (the “Compensation Committee”) held six meetings in the last fiscal year, of which two were teleconference meetings. The committee is comprised of four independent directors, and the Board of Directors has determined that the composition and functioning of this committee complies with the applicable NASDAQ and SEC requirements.

 

The committee’s responsibilities include:

 

Establishing, reviewing, and approving the base salary, non-equity incentive compensation, perquisites, and any other forms of non-equity compensation for our Chairman and Chief Executive Officer and for our executive officers;
Reviewing and monitoring our incentive compensation and retirement plans and performing the duties imposed on the Committee by the terms of those plans;
Administering our incentive compensation plans, including determining the employees to whom stock options and stock awards are granted, the number of shares subject to each option or award, and the date or dates upon which each option or award may be exercised;
Developing and reviewing the Company’s Corporate Governance Guidelines; and
Performing other duties deemed appropriate by the Board of Directors.

 

The Compensation Committee chairman reports the committee’s recommendations on executive compensation to the Board of Directors. The Compensation Committee has authority to retain, approve fees for, and terminate consultants as it deems necessary to assist in the fulfillment of its duties and responsibilities. The committee has adopted a written charter which is available on our website at www.rell.com.

 

The Compensation Committee report is on page 18.

 

Nominating Committee. The Nominating Committee met once during the last fiscal year. In considering whether to recommend any particular candidate for inclusion on the Board of Directors’ slate of recommended director nominees, the Nominating Committee applies the criteria set forth in our corporate governance guidelines. These criteria include the candidate’s integrity, business acumen, knowledge of our business and industry, experience, diligence, and the ability to act in the interests of all stockholders. The committee does not assign specific weights to particular criteria and no particular criterion is a prerequisite for each prospective nominee. The committee believes that the background and qualifications of our directors, considered as a group, should provide a composite mix of experience, knowledge, and abilities that will best allow the Board of Directors to fulfill its responsibilities.

 

Management and the Directors submit candidates for nomination for election to the Board of Directors for committee consideration. With respect to the election of director nominees at the Annual Meeting, the Nominating Committee recommended the Board nominate each of the directors currently serving on the Board.

 

Stockholders may also submit names of candidates for consideration by the Nominating Committee, provided that such submissions have been received by the Board of Directors no later than July 17, 2018. Stockholders may also nominate a candidate or candidates for election as a director during the annual meeting at which directors are elected.

 

The Company does not have a policy regarding the consideration of diversity in identifying director nominees. The committee has not adopted a written charter. The Company is utilizing the "Controlled Company" exemption pursuant to Nasdaq Rule 5615(c) for purposes of the Nominating Committee Charter Requirement. The determination is based on the fact that Mr. Richardson has close to 70% of the voting rights as of the record date.

 

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Board Role in Risk Oversight

 

Non-management Directors meet regularly in executive sessions without management. Executive sessions are held during each regularly scheduled Board meeting and the Company’s lead independent director presides over these sessions.

 

The Board and each of the Audit, Nominating, and Compensation & Governance Committees conduct annual self- evaluations, as contemplated by the Company’s Corporate Governance Guidelines and, as applicable, the charters of such Board Committees.

 

While the Company's management is responsible for day-to-day management of various risks facing the Company, the Board of Directors is responsible for evaluating the Company's exposure to risk and monitoring the steps management has taken to assess and control risk. In addition, the Board has delegated oversight of certain categories of risk to the Audit Committee and the Compensation Committee. The Audit Committee oversees risks related to the integrity of the Company’s financial statements and financial reporting, and the Compensation Committee oversees risks related to the Company’s compensation plans and practices. In performing its oversight responsibilities, the Board receives periodic reports from the Chief Executive Officer and other members of senior management on areas of risk facing the Company. The Audit and Compensation Committees report to the Board regularly on matters relating to the specific areas of risk the committees oversee.

 

Compensation of Directors

 

Non-employee directors receive a quarterly retainer of $4,500, meeting fees of $1,000 for each Audit Committee meeting, and $750 for other Board and committee meetings. The Chairman of the Audit Committee receives an additional quarterly retainer of $1,500.

 

Upon joining the Board, new directors receive a grant of 25,000 common stock options that vest over five years. After the five-year period, directors receive an annual grant of 5,000 common stock options that are fully vested on the date of grant.

 

Employee directors receive no additional compensation related to their service on our Board of Directors.

 

Director Compensation Table

Name of Director   Fees Earned or Paid in Cash ($)   Option Awards($)(1)   Stock Grant ($)(2)   Total ($)
Edward J. Richardson   $ —       $ —       $ 117,400     $ 117,400  
Jacques Belin     28,500       23,099       —         51,599  
James Benham     31,000       23,099       —         54,099  
Kenneth Halverson     31,000       23,099       —         54,099  
Robert Kluge     16,500       2,530       —         19,030  
Paul Plante     36,250       3,900       —         40,150  

 

(1)

Amounts represent the dollar amount recognized for financial statement reporting purposes with respect to fiscal 2018 for the fair value of stock options granted to each director, in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) 718, and do not correspond to the actual value that will be recognized by each director. For the relevant assumptions used in determining the fair value of stock option awards, refer to Note 3, Significant Accounting Policies - Share-Based Compensation, in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 2, 2018, filed with the SEC on August 2, 2018.

 

(2) The amounts shown are the aggregate grant date fair value computed in accordance with ASC Topic 718. The stock awards were granted under the Employees’ 2011 Long-Term Incentive Compensation Plan.

 

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EXECUTIVE OFFICERS

 

The following are our executive officers as of August 10, 2018:

 

Name Age Position
Edward J. Richardson 76 Chairman, Chief Executive Officer and President
Wendy S. Diddell 53 Executive Vice President, Chief Operating Officer
Gregory J. Peloquin 54 Executive Vice President, Power and Microwave Technologies Group (“PMT”)
Patrick Fitzgerald 52 Executive Vice President,Richardson Healthcare
Robert J. Ben 53 Executive Vice President, Chief Financial Officer, Chief Accounting Officer and Corporate Secretary
Jens Ruppert 45 Executive Vice President and General Manager, Canvys
Kathy McNally 59 Senior Vice President, Global Supply Chain

 

Mr. Richardson has been employed by the Company since 1961, holding several positions during this time. He was Chairman of the Board, Chief Executive Officer and President from September 1989 until November 1996. Since that time, Mr. Richardson has continued to hold the offices of Chairman of the Board, Chief Executive Officer and President. He also served as Chief Operating Officer from April 2006 until December 2015, and as the General Manager of the Electron Device Group from June 2009 to June 2014.

 

Ms. Diddell has been Executive Vice President since June 2007 and as of December 23, 2015, Ms. Diddell assumed the role of Chief Operating Officer. From June 2007 through December 2015, she held the role of Executive Vice President, Corporate Development. From June 2009 through June 2015, she also assumed the role of General Manager of our Canvys business. Prior to June 2007, Ms. Diddell was Executive Vice President and General Manager of our Security Systems Division since February 2006. Prior to that, Ms. Diddell was employed as Vice President and General Manager of the Security Systems Division since June 2004 and as a management consultant for the Security Systems Division since July 2003.

 

Mr. Peloquin has been Executive Vice President, Power and Microwave Technologies Group since June 2015. In June 2014, he re-joined the Company as Executive Vice President, Electron Device Group. From March 2011 to June 2014 Mr. Peloquin was President of Richardson RFPD, a division of Arrow Electronics. Prior to that, Mr. Peloquin was Executive Vice President of the RF Power & Wireless Division of the Company which was sold to Arrow Electronics in 2011.

 

Mr. Fitzgerald has been the Executive Vice President, Richardson Healthcare since August, 2014. Prior to joining Richardson Electronics, Mr. Fitzgerald was President of the Dunlee Division of Philips Healthcare. During his 15 years at Dunlee, he transformed an internally focused supplier into the leading supplier of replacement CT and X-ray tubes for hospitals and service providers.

 

Mr. Ben has been Executive Vice President, Chief Financial Officer and Corporate Secretary since August 17, 2015 and assumed the role of Chief Accounting Officer since October 16, 2016. Prior to joining Richardson Electronics, Mr. Ben was employed by Cobra Electronics Corporation as their Senior Vice President, Chief Financial Officer from 2011 to 2014, Vice President and Corporate Controller from 2008 to 2011, Senior Corporate Controller from 2006 to 2008 and Corporate Controller from 2000 to 2006.

 

Mr. Ruppert has been the Executive Vice President and General Manager, Canvys since July 2015. Prior to joining Richardson Electronics, Mr. Ruppert was the Managing Director of Envinet GmbH, a German based high-tech company. Prior to that, Mr. Ruppert was with NDS Surgical Imaging from April 2006 through December 2013. While with NDS Surgical Imaging, Mr. Ruppert held various management positions including Vice President and General Manager from January 2010 to December 2013. Prior to NDS Surgical Imaging, Mr. Ruppert held management positions at Heraeus-Med (Maquet/Getinge) and Gebrueder Martin (KLS Martin Group). Mr. Ruppert started his career as an engineer and worked his way up through sales, marketing and general management within the medical display and operating room equipment market.

 

Ms. McNally has been Senior Vice President, Global Supply Chain, since 2009. Previously she served as Senior Vice President of Marketing Operations and Customer Support from 2000 to 2009 and as Vice President and Corporate Officer of Marketing Operations from 1989 until 2000. Prior to that, she held various positions within the marketing department since joining the Company in 1979.

 

Executive officers are elected annually by the Board of Directors at the time of the annual stockholders meeting and serve until their earlier resignation, death or removal.

  9  
 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table shows the number of shares of common stock and Class B common stock beneficially owned by (1) each director, (2) each of our Named Executive Officers, (3) all directors and named executive officers of the Company as a group, and (4) each other person who is known by us to beneficially own more than 5% of our common shares. Percent of Class and Percent of Total Voting Rights are based on 12,961,762 shares outstanding as of August 10, 2018.

 

   

 

Shares of Common Stock (1) (2)

 

 

 

Percent of Class

Shares of Class B Common Stock (2) Percent of Class B Common Stock Percent of Total Voting Rights
Directors:            
  Jacques Belin 25,000 (3) * - * *
  James Benham 25,000 (4) * - * *
  Kenneth Halverson 25,000 (5) * - * *
  Paul J. Plante 35,000 (6) * - * *
  Robert Kluge 5,000 (7) * - * *
  Edward J. Richardson 2,164,632 (8) 16.7% 2,107,966 98.6% 65.7%
Non-Director Named Executive Officers:            
  Wendy S. Diddell 147,666 (9) * - * *
  Gregory J. Peloquin 33,520 (10) * - * *
  Robert J. Ben 11,833 (11) * - * *
  Patrick Fitzgerald 28,500 (12) * - * *
  All Named Executive Officers and Directors as a Group of 10 people 2,501,151 (13) 19.3% 2,107,966 98.6% 66.7%
Other Beneficial Owners:            
  BML Investment Partners LP 1,058,500 (14) 9.8% - * 3.3%
  Royce & Associates LP 1,058,451 (15) 9.8% - * 3.3%
  Renaissance Technologies 905,399 (16) 8.4% - * 2.8%
  Dimensional Fund Advisors LP 898,372 (17) 8.3% - * 2.8%
  Mutual of America Capital Management LLC 757,963 (18) 7.0% - * 2.4%
               
  *Less than 5%
(1) Except as noted, beneficial ownership of each of the shares listed is comprised of both sole investment and sole voting power, or investment power and voting power that is shared with the spouse of the director or officer.
(2) Common stock is entitled to one vote per share and Class B common stock is entitled to ten votes per share.
(3) Includes 25,000 shares of common stock to which Mr. Belin holds stock options exercisable within 60 days of August 10, 2018.
(4) Includes 25,000 shares of common stock to which Mr. Benham holds stock options exercisable within 60 days of August 10, 2018.
(5) Includes 25,000 shares of common stock to which Mr. Halverson holds stock options exercisable within 60 days of August 10, 2018.
(6) Includes 35,000 shares of common stock to which Mr. Plante holds stock options exercisable within 60 days of August 10, 2018.
(7) Includes 5,000 shares of common stock to which Mr. Kluge holds stock options exercisable within 60 days of August 10, 2018.
(8) Includes 2,107,966 shares of common stock which would be issued upon conversion of Mr. Richardson’s Class B common stock, 50,000 shares of common stock to which Mr. Richardson holds stock options exercisable within 60 days of August 10, 2018 and 6,666 restricted stock awards that will vest within 60 days of August 10, 2018.
(9) Includes 141,000 shares of common stock to which Ms. Diddell holds stock options exercisable within 60 days of August 10, 2018 and 6,666 restricted stock awards that will vest within 60 days of August 10, 2018.
(10) Includes 29,000 shares of common stock to which Mr. Peloquin holds stock options exercisable within 60 days of August 10, 2018 and 2,500 restricted stock awards that will vest within 60 days of August 10, 2018.
(11) Includes 6,000 shares of common stock to which Mr. Ben holds stock options exercisable within 60 days of August 10, 2018 and 3,333 restricted stock awards that will vest within 60 days of August 10, 2018.
(12) Includes 26,000 shares of common stock to which Mr. Fitzgerald holds stock options exercisable within 60 days of August 10, 2018 and 2,500 restricted stock awards that will vest within 60 days of August 10, 2018.
(13) Includes 2,107,966 shares of common stock issuable on conversion of Class B common stock, 367,000 shares of common stock issuable upon options exercisable within 60 days of August 10, 2018 and 21,665 restricted stock awards that will vest within 60 days of August 10, 2018.
(14) With respect to information relating to BML Investment Partners LP, we have relied solely on information supplied by such entity on a Schedule 13G filed with the SEC on January 30, 2018.  The address for BML Investment Partners LP is 65 E Cedar – Suite 2, Zionsville, IN 46077.
(15) With respect to information relating to Royce & Associates LP, we have relied solely on information supplied by such entity on a Schedule 13G filed with the SEC on January 23, 2018.  The address for Royce & Associates LP is 745 Fifth Avenue, New York, NY 10151.
(16) With respect to information relating to Renaissance Technologies, we have relied solely on information supplied by such entity on a Schedule 13G filed with the SEC on February 13, 2018.  The address for Renaissance Technologies is 800 Third Avenue, New York, NY 10022.
(17) With respect to information relating to Dimensional Fund Advisors LP, we have relied solely on information supplied by such entity on a Schedule 13G filed with the SEC on February 9, 2018.  The address for Dimensional Fund Advisors LP is 6300 Bee Cave Road, Building One, Austin, Texas 78746.
(18) With respect to information relating to Mutual of America Capital Management LLC, we have relied solely on information supplied by such entity on a Schedule 13G filed with the SEC on May 11, 2018.  The address for Mutual of America Capital Management LLC is 320 Park Avenue, New York, NY 10022.

 

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PROPOSAL 2 – RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit Committee expects to engage BDO USA, LLP(“BDO”) to serve as our independent registered public accounting firm for the fiscal year ending June 1, 2019.

 

Although the Audit Committee is not required to do so, it is submitting its expected selection of our independent registered public accounting firm for ratification at the Annual Meeting in order to ascertain the views of our stockholders. The Audit Committee will not be bound by the vote of the stockholders; however, if the proposed selection is not ratified, the Audit Committee would reconsider its expected selection.

 

One or more representatives of BDO are expected to be present at the Annual Meeting. The representatives will have an opportunity to make a statement if they desire and will be available to respond to questions from stockholders.

 

Our Board of Directors recommends that you vote “FOR” ratification of the selection of BDO USA, LLP as our independent registered public accounting firm for fiscal 2019.

 

 

AUDIT MATTERS

 

Audit Committee Report

 

The Audit Committee of the Board of Directors is comprised of directors that are “independent” as defined under the current NASDAQ listing standards and Rule 10A-3 under the Exchange Act. The Audit Committee has a written charter that has been approved by the Board of Directors. A copy of the charter is available on our website at www.rell.com.

 

The Audit Committees members are not professionally engaged in the practice of accounting or auditing, and they necessarily rely on the work and assurances of the Companys management and the independent registered public accounting firm. Management has the primary responsibility for the financial statements and the reporting process, including the process of internal control over financial reporting. The independent registered public accounting firm of BDO USA, LLP (“BDO”) is responsible for performing an independent audit of the Companys consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”) and expressing an opinion on the conformity of such audited financial statements with generally accepted accounting principles in the United States of America. In addition, the Companys independent registered public accounting firm is responsible for auditing as well as expressing an opinion on the effectiveness of the Companys internal control over financial reporting. The Audit Committee has reviewed and discussed with management the audited financial statements of the Company for the fiscal year ended June 2, 2018 (the “Audited Financial Statements”). In addition, the Audit Committee has discussed with BDO the matters required to be discussed by PCAOB Auditing Standard No. 1301, Communications with Audit Committees.

 

The Audit Committee has received the written disclosures and the letter from BDO required by applicable requirements of the Public Company Accounting Oversight Board, regarding communications concerning independence and has discussed with BDO its independence from the Company. The Audit Committee further considered whether the provision of non-audit related services by BDO to the Company is compatible with maintaining the independence of BDO with the Company. The Audit Committee has also discussed with management of the Company and BDO such other matters and received assurances from them as it deemed appropriate.

 

The Company’s internal auditors and BDO discussed with the Audit Committee the overall scope and plans for their respective audits. The Audit Committee meets regularly with the internal auditors and BDO, with and without management present, to discuss the results of their reviews, the evaluation of the Company’s internal control over financial reporting, and the overall quality of the Company’s accounting.

 

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Based on the above review and discussions, the Audit Committee recommended to the Board of Directors, and the Board approved, that the Audited Financial Statements of the Company be included in the Annual Report on Form 10-K for the fiscal year ended June 2, 2018, for filing with the SEC.

 

  Audit Committee of the Board of Directors
   
 

Paul Plante, Chairman

Kenneth Halverson

Jacques Belin

James Benham

 

Independent Auditor’s Fees

 

The following table sets forth the aggregate fees billed for each of the last two years for professional services rendered by our independent registered public accounting firm BDO for the respective years.

 

    2018   2017
Audit Fees (1)     684,713       633,950  
Tax Fees (2)     56,193       —    
Total     740,906       633,950  
         
(1) Audit Fees were for professional services rendered for the audits of our annual financial statements included in our Forms 10-K for the fiscal years ended June 2, 2018 and May 27, 2017 and for the reviews of the financial statements included in our quarterly reports on Forms 10-Q during such fiscal years, statutory audits for certain of our non-U.S. subsidiaries, and audits of our internal controls over financial reporting.
(2) Tax fees were for professional services rendered for transfer pricing studies and cash repatriations.

 

Audit Fees and Tax Fees are reviewed and specifically approved by the Audit Committee on an annual basis. The Audit Committee has established formal policies and procedures for the pre-approval of audit-related, tax and other fees. These procedures include a review and pre-approval of an annual budget covering the nature of an amount to be expended for auditor services by specific categories of services to be provided.

 

 

RELATED PARTY TRANSACTIONS

 

Pursuant to our Audit Committee Charter, related party transactions involving directors, executive officers or their immediate family members must be reviewed and approved by our Audit Committee prior to the Company entering into such transactions. Our Code of Conduct generally describes a prohibited related party transaction as one that would adversely influence an employee or director in the performance of his or her duties to the Company or one that is inconsistent with or opposed to the best interests of the Company. The Code of Conduct contains many standards and examples of potentially prohibited related party transactions, but the Board of Directors retains the discretion to determine whether each potential transaction is consistent with the standards described in the Code of Conduct. Other than the broad standards outlined in the Code of Conduct, we do not have written standards for reviewing and evaluating potential related party transactions. However, Directors may consider any factors that they deem consistent with their fiduciary duties to stockholders.

 

On June 15, 2015, the Company entered into a lease agreement for the IMES facility with LDL, LLC. The Executive Vice President of IMES, Lee A. McIntyre III (former owner of IMES), has an ownership interest in LDL, LLC. The lease agreement provides for monthly payments over five years with total future minimum lease payments of $0.3 million. Rental expense related to this lease amounted to $0.1 million for the fiscal year ended June 2, 2018. The Company shall be entitled to extend the term of the lease for a period of an additional five years by notifying the landlord in writing of its intention to do so within nine months of the expiration of the initial term.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

We believe that the performance and contribution of our executive officers are critical to the success of our long- term strategy. To attract, retain and motivate our executives to accomplish our business strategies, we have implemented executive compensation programs providing executives with the opportunity to earn compensation that rewards performance.

 

Objectives

 

The fundamental objectives of our executive compensation programs are to:

 

Attract and retain highly qualified executives by providing total compensation that is internally equitable and externally competitive;
Motivate executives by providing performance-based incentives to achieve our annual financial goals and long-term business strategies; and
Align the interests of executives with those of stockholders by rewarding our executives for individual and corporate performance measured against our goals and plans, and by granting stock options and other equity-based compensation.

 

To achieve our compensation objectives, we use both annual cash compensation, which includes a base salary and an annual cash incentive plan, and time-based equity awards. When making compensation decisions, the various components of compensation are evaluated together, and the level of compensation opportunity provided for one component may impact the level and design of other components. We attempt to balance the total executive compensation program to promote the achievement of both current and long-term goals.

 

The Compensation Committee reviews and analyzes our executive compensation policies, programs, and practices regularly in light of these objectives and our financial performance to ensure that our compensation practices are appropriately configured to achieve these objectives.

 

Say on Pay Feedback from Stockholders

 

A primary focus of our Compensation Committee is whether the Company’s executive compensation program serves the best interests of the Company’s stockholders. As part of its ongoing review of our executive compensation program, the Compensation Committee considered the affirmative stockholder advisory vote on executive compensation (“Say on Pay Votes”) at the Company’s 2017 Annual Meeting, where a majority of our stockholders approved the compensation program described in the proxy statement for that meeting.

 

At the annual meeting, the Company’s shareholders also voted, on an advisory basis, whether to hold future Say on Pay Votes every one, two or three years (the “Say on Frequency Vote”).  The shareholders voted overwhelmingly to recommend that future Say on Pay Votes be held annually. After consideration of the results of the Say on Frequency Vote, the Board of Directors determined that the Company will hold future Say on Pay Votes on an annual basis. The next Say on Frequency Vote is expected to occur at the Company’s 2023 Annual Meeting of Shareholders.

 

Named Executive Officers

 

For fiscal 2018, our Named Executive Officers were as follows:

 

Executive Name   Title
Edward J. Richardson   Chairman, Chief Executive Officer and President
Wendy S. Diddell   Executive Vice President, Chief Operating Officer
Gregory J. Peloquin   Executive Vice President, Power and Microwave Technologies Group
Patrick Fitzgerald   Executive Vice President, Richardson Healthcare
Robert J. Ben   Executive Vice President, Chief Financial Officer, Chief Accounting Officer and Corporate Secretary

 

Establishing Executive Compensation

 

Role of the Compensation Committee. The Compensation Committee is responsible for discharging the responsibilities of the Board of Directors with respect to executive compensation. Its role is to review and approve the Company’s compensation programs, policies and practices with respect to its executive officers. The Compensation Committee assists the Board in evaluating the performance of the Chief Executive Officer, which is conducted during executive sessions of the Board. The committee also reviews the Chief Executive Officer’s evaluation of the performance of the other executive officers in order to determine the base compensation and annual cash incentive and equity opportunities for the executive officers.

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The committee also administers the Company’s equity compensation plans and, in such capacity, determines equity compensation for its executive officers in the form of awards of stock, restricted stock, and stock options to support the objectives of its compensation programs.

 

Role of Management. The Chief Executive Officer (“CEO”) assists the Compensation Committee in reaching compensation decisions by developing recommended compensation for the executive officers. The CEO also develops performance objectives for each executive officer. The CEO meets with each executive officer formally on an annual basis to review past performance and to discuss performance objectives for the following year.

 

Role of Employment Agreements. The Company considers employment agreements to be an important part of recruiting and retaining qualified executive officers. All of the Named Executive Officers, other than Mr. Richardson and Mr. Fitzgerald, have entered into employment agreements. The employment agreements with each of the Named Executive Officers establish initial base compensation and ongoing annual cash incentive opportunity as a percentage of base compensation. These employment agreements are described in further detail beginning on page 20. Due to his substantial equity stake in the Company, the Compensation Committee does not believe that an employment agreement with Mr. Richardson is necessary to achieve the retention goals served by employment agreements with the other Named Executive Officers.

 

Role of Compensation Benchmarking. One of the fundamental objectives of the Company’s compensation program is that total compensation be externally competitive. To achieve this objective, the CEO and the Compensation Committee rely on publicly available information related to competitive compensation, internal equity comparisons, and general market trends in executive compensation.

 

Generally, the Compensation Committee uses data from public sources to determine whether the market for executive compensation has changed significantly. If the Compensation Committee believes the market has changed significantly, then it would instruct the CEO to commission a study of executive compensation at certain comparable companies for purposes of evaluating the Company’s compensation arrangements. If the Compensation Committee does not believe the market has changed significantly, then the Committee recommends a fixed percentage merit increase for executives. The Committee’s evaluation of competitive compensation and market trends is based on publicly available information. The Committee does not independently analyze executive compensation at any group of peer companies except when recruiting for new executives.

 

During fiscal 2018, the committee did not analyze executive compensation at any group of peer companies as a nominal 3% merit increase was given to all Named Executive Officers and their cash incentive target percentages were voluntarily reduced in fiscal 2018.

 

Role of Compensation Consultants. The Compensation Committee has the authority under its charter to retain compensation consultants to assist in the evaluation of executive officer compensation and benefits, and to approve the consultants’ fees and other retention terms. However, the Company and the Compensation Committee have not historically engaged compensation consultants in determining Named Executive Officer compensation. Instead, the Compensation Committee utilizes publicly available information and informal surveys from professional human resource organizations when determining executive compensation. The Compensation Committee did not retain a compensation consultant during fiscal 2018.

 

Elements of Executive Compensation

 

Most of the Company’s compensation elements fulfill one or more of its compensation objectives. The elements of total compensation for its Named Executive Officers are:

 

base compensation;
annual cash incentive compensation;
equity-based compensation;
profit sharing/401(k) plan; and
perquisites.
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Base Compensation. The Compensation Committee alone determines the CEO’s base compensation. In both fiscal 2016 and fiscal 2018 the Compensation Committee approved a 3% increase in base compensation for Mr. Richardson. Mr. Richardson’s increase in base compensation was temporarily suspended in fiscal 2017.

 

In fiscal 2016 all other executive officers, except Mr. Ben, received a 3% increase in base salary. In fiscal 2016, Ms. Diddell also received a 10% increase in base salary related to her promotion to Chief Operating Officer for a base compensation increase to $391,000. Mr. Peloquin joined the Company on June 26, 2014, as Executive Vice President PMT at a base salary of $309,000 pursuant to his employment agreement and received a 3% increase in base salary to $318,270 in fiscal 2016. Mr. Fitzgerald joined the Company on August 11, 2014 at a base salary of $300,000 and received a 3% increase in base salary to $309,000 in fiscal 2016. Mr. Ben joined the Company on August 17, 2015, as Executive Vice President, Chief Financial Officer and Corporate Secretary at a base salary of $270,000 pursuant to his employment agreement. In fiscal 2017, any increases in base compensation were temporarily suspended. In fiscal 2018, Ms. Diddell, Mr. Peloquin, Mr. Fitzgerald, and Mr. Ben each received a 3% merit increase.

 

The amount of base compensation for each of the Named Executive Officers, other than the CEO, is initially set upon the commencement of his or her employment as an executive officer with the Company and is stated in the Named Executive Officer’s employment agreement, if applicable. This initial amount is established with a goal of attracting talented executive officers to the Company and is recommended by the CEO and approved by the Compensation Committee. Thereafter, each of the Named Executive Officers' base compensation is reviewed annually by the CEO and the Compensation Committee.

 

In determining appropriate levels of base compensation for executive officers, the CEO considers the executive officer’s individual performance, the financial performance of the Company, and a base compensation that is externally competitive. The Compensation Committee annually reviews the base compensation of the executive officers set by the CEO. The Compensation Committee reports its findings and opinions with respect to base compensation to the Board for further discussion so that the Board may provide feedback to the CEO regarding its perception of how well the base compensation of the executive officers achieves the Company’s compensation objectives.

 

Annual Cash Incentive Compensation. In October 2012, the Compensation Committee recommended and the Board and stockholders approved the Amended and Restated Edward J. Richardson Incentive Compensation Plan whereby Mr. Richardson would be eligible to receive incentive compensation based on the greater of 2% of annual net income after tax or an incentive based upon achieving pre-established financial objectives set by the Compensation Committee.

 

In fiscal 2016, the Committee selected three metrics to evaluate Mr. Richardson’s performance: achieving revenue growth targets; achieving profitability goals from the Company’s most recent acquisition of IMES; and controlling SG&A expense as a percent of sales. In fiscal 2016, Mr. Richardson received an incentive payment of $160,000.

 

In both fiscal 2017 and fiscal 2018, the Committee selected three metrics to evaluate Mr. Richardson’s performance: achieving Company profitability goals; achieving revenue growth targets; and achieving cash and investing activity targets. In fiscal 2017, Mr. Richardson received an incentive payment of $114,000. The target incentive opportunity in both fiscal 2017 and fiscal 2018 for Mr. Richardson was voluntarily reduced to 25% of his base compensation (70% of his base compensation in all other years), which excludes car allowance, incentive, equity award and perquisites. In fiscal 2018, Mr. Richardson received an incentive payment of $187,000.

 

On an annual basis, management presents specific recommendations to the Compensation Committee regarding the financial metrics and other components to be included in the annual incentive plan, which are those metrics and components that management believes will provide the best incentive to achieve desired operating results. These recommendations were developed in light of achievement under prior plans and through consultation with the CEO. The Compensation Committee considers management’s recommendation and then determines the final components and structure of our incentive compensation plans based on the objectives of our compensation program.

 

The target incentive percentages for Named Executive Officers were initially set by the Compensation Committee with a goal of attracting talented executive officers to the Company, and are stated in the Named Executive Officer’s employment agreement, if we have an employment agreement with the Named Executive Officer. If we do not have an employment agreement with the Named Executive Officer, then the target incentive percentage is recommended by the CEO and approved by the Compensation Committee on an annual basis. Target incentive opportunities in both fiscal 2017 and fiscal 2018 for Ms. Diddell, Mr. Peloquin, Mr. Ben and Mr. Fitzgerald were voluntarily reduced to 25% of their base compensation (50% incentive is included in each Named Executive Officers employment agreement, if applicable), which excludes car allowance, incentive, equity awards and perquisites.

 

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For fiscal 2018, the Named Executive Officers were eligible for cash incentives based on the following metrics:

 

Fiscal 2018 Incentive Metrics

 

  Richardson Diddell Peloquin Fitzgerald Ben
Revenue 20% 20%     20%
Operating Income 60% 60% 50% 50% 60%
Cash & Investment Activity 20% 20%     20%
Power and Microwave Technologies Group Operating Income     50%    
Richardson Healthcare Operating Income       50%  
Total 100.0% 100.0% 100.0% 100.0% 100.0%

 

Targets for each of the financial metrics are established by the Compensation Committee for each fiscal year and correspond with the annual financial plan for the Company approved by the Board of Directors.

 

Payments for all metrics are capped at 100%.

 

The table below sets forth the incentive targets and percentage achievement for each of the Named Executive Officers for fiscal 2018.

 

Fiscal 2018 Incentive Actual Performance

 

    Richardson     Diddell     Peloquin     Fitzgerald     Ben  
Revenue                    
% Achievement     100.0 %     100.0 %     N/A       N/A       100.0 %
Eligible   $ 37,487     $ 19,924                   $ 13,760  
Earned   $ 37,487     $ 19,924                 $ 13,760  
                                         
Operating Income                                        
% Achievement     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %
Eligible   $ 112,460     $ 59,768     $ 40,548     $ 39,368     $ 41,280  
Earned   $ 112,460     $ 59,768     $ 40,548     $ 39,368     $ 41,280  
                                         
Cash & Investment Activity                                        
% Achievement     100.0 %     100.0 %     N/A       N/A       100.0 %
Eligible   $ 37,487     $ 19,924                 $ 13,760  
Earned   $ 37,487     $ 19,924                 $ 13,760  
                                         
PMT Operating Income                                        
% Achievement     N/A       N/A       100.0 %     N/A       N/A  
Eligible               $ 40,548                  
Earned               $ 40,548                  
                                         
Richardson Healthcare Operating Income                                        
% Achievement     N/A       N/A       N/A       50.0 %        
Eligible                     $ 39,368       N/A  
Earned                       $ 19,684          

 

Clawback Provision. The Compensation Committee approved a clawback policy allowing the Committee to clawback incentives for the Named Executive Officers in the event of fraud or illegal conduct. In addition, if the Company was required to prepare an accounting restatement due to material non-compliance with financial reporting requirements, the Committee has the right to recover incentive based compensation that was awarded based on the erroneous data.

 

Equity Based Compensation. Our 2011 Long-Term Incentive Compensation Plan (the “2011 Plan”) provides for grants of equity awards to our executive officers to encourage them to focus on long-term Company performance. The plan is administered by the Compensation Committee of the Board.

 

Consistent with our policy of providing a total compensation package that includes equity based components, the Compensation Committee makes periodic decisions (normally on an annual basis) regarding appropriate equity grants based on the Company’s achievement of its financial and strategic goals and the participants’ individual performance, based on recommendations from our CEO. The Compensation Committee has the discretion to determine whether equity awards will be granted to the Named Executive Officers and, if so, the number of shares subject to each award.

 

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The CEO submits to the Compensation Committee, on at least an annual basis, his recommendation for the amount and type of equity award to grant to each Named Executive Officer other than himself. Annual equity recommendations and grants are typically made after the completion of our first quarter and are based on the Company’s and the grant recipients’ performance in the prior fiscal year. In determining whether to approve or adjust the recommended grants, the Compensation Committee considers our financial performance in the prior fiscal year, the executive’s level of responsibility, and historical award data. The Compensation Committee does not assign a specific weight to any of these factors, but rather these factors are evaluated on an aggregate and qualitative basis.

 

When awarded, stock options are granted for an exercise price at the fair market value of our common stock on the date of the grant. Under the terms of the 2011 Plan, the fair market value of the stock is the closing sale price of the stock on the date of grant. Our stock options, therefore, have value only if the stock price appreciates following the date the options are granted. Stock option awards to the Named Executive Officers under the 2011 Plan vest over a five-year period with 20% of the stock option grant becoming exercisable 12 months after the date of grant. The remaining options vest and are exercisable in 20% increments over the next four years.

 

In fiscal 2017, each of the Named Executive Officers, other than Mr. Richardson, received a grant of options to purchase the Company’s common stock under the 2011 Long-Term Incentive Plan, as reported in the table for Grants of Plan-Based Awards on page 19. With respect to these awards, the CEO recommended to the Compensation Committee a number of option shares to be granted to the Named Executive Officers.

 

In fiscal 2018, each of the Named Executive Officers received a grant of restricted stock under the 2011 Long-Term Incentive Plan, as reported in the table for Grants of Plan-Based Awards on page 19. With respect to these awards, the CEO recommended to the Compensation Committee a number of restricted shares to be granted to the Named Executive Officers.

 

Profit Sharing/401(k) Plan. We offer retirement benefits to our employees, including all of the Named Executive Officers, through a tax-qualified Profit Sharing/401(k) Plan, which is a defined contribution plan designed to accumulate retirement funds for participating employees through individual and Company contributions. Participants are provided the opportunity to make salary reduction contributions to the plan on a pre-tax basis. We suspended the Company match component for fiscal 2017, but reinstated it in fiscal 2018.

 

Perquisites. We offer very few perquisites to our Named Executive Officers, primarily a car allowance. The perquisites provided to each Named Executive Officer in fiscal 2018 totaled less than $15,000 and less than 10% of total annual salary and incentive reported for each Named Executive Officer.

 

Compensation Policies and Practices as They Relate to Risk Management.  As stated above under “Corporate Governance—Board Role in Risk Oversight,” as part of its responsibilities, the Compensation Committee reviews the Company’s compensation plans and practices for all employees, including executive officers, to determine whether, in its judgment, our compensation programs encourage risk-taking likely to have a material adverse effect on the Company. The Compensation Committee determined that the performance measures and goals under our compensation programs were tied to our business, financial, and strategic objectives and, as such, that the programs do not encourage inappropriate or excessive risk-taking.

 

Subsequent Events

 

On August 20, 2018, the Compensation Committee approved grants by the Company of 69,633 shares of restricted stock and 240,195 stock options to officers and employees of the Company. The Compensation Committee took such action as certain officers and employees had undertaken voluntary reductions to their incentive packages in the Company’s 2018 fiscal year. With respect to the Named Executive Officers, Mr. Richardson received an award of 36,592 shares of restricted stock, Ms. Diddell received an award of 10,804 shares of restricted stock, Mr. Ben received an award of 7,462 shares of restricted stock, Mr. Peloquin received an award of 8,796 shares of restricted stock and Mr. Fitzgerald did not receive an award of restricted stock. However, he did receive an award of 8,965 incentive stock options, with an exercise price of $9.10 per share and an expiration date of August 20, 2028. In addition, Kathleen McNally, who is not a named executive officer, received an award of 5,979 shares of restricted stock. No other officer or employee received a restricted stock award. A total of 231,230 incentive stock options were awarded to employees of the Company other than the Named Executive Officers at an exercise price of $9.10 per share, which was at the closing price as of the date of the grant. The options expire on August 20, 2028. Of the 231,230 options referred to in the immediately preceding sentence, the following Directors each received an annual grant of 5,000 options that vest upon the grant date for their service as Directors: Messrs. Benham, Halverson, Belin and Plante; also, Mr. Kluge, a Director, received a discretionary grant of 5,000 options that vests over 5 years.

  17  
 

REPORT OF THE COMPENSATION COMMITTEE

 

The Compensation Committee has reviewed the foregoing Compensation Discussion and Analysis (the “CD&A”) for the year ended June 2, 2018, and discussed the CD&A with management. In reliance on the reviews and discussions referred to above, the Compensation Committee has recommended to the Board that the CD&A be included in the proxy statement for the year ended June 2, 2018, for filing with the Securities and Exchange Commission.

 

  Compensation Committee of the Board of Directors
  Paul Plante (Chairman)
  Kenneth Halverson
  James Benham
  Jacques Belin

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

The functions and members of the Compensation Committee are set forth above under “Corporate Governance - Board and Committee Information - Compensation Committee.” All Committee members are independent and none of the Committee members has served as an officer or employee of the Company or a subsidiary of the Company. None of our executive officers currently serves, or served during fiscal 2018, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our Board or Compensation Committee.

 

 

COMPENSATION OF NAMED EXECUTIVE OFFICERS

 

The following tables and accompanying narrative should be read in conjunction with the Compensation Discussion and Analysis. The tables present compensation for our CEO and CFO and each of the three most highly compensated executive officers active at the end of fiscal 2018.

 

Summary Compensation Table

Name and Principal Position   Fiscal Year   Salary ($)   Bonus ($)   Restricted Stock Awards ($) (1)  

Option Awards

($) (1)

 

Non-Equity

Incentive Plan

Compensation ($) (2)

 

All Other

Compensation ($) (3)

  Total ($)
Edward J. Richardson     2018       749,170       —         117,400       —         187,436       15,322       1,069,328  
Chairman of the Board, President,     2017       735,590       —         —         —         114,476       15,981       866,047  
And Chief Executive Officer     2016       727,349       —         —         —         160,000       27,950       915,299  
Wendy S. Diddell     2018       398,385       —         117,400       —         99,616       28,744       644,145  
Executive Vice President,     2017       390,942       —         —         28,500       61,300       12,336       493,078  
and Chief Operating Officer     2016       367,538       50,000       —         30,500       80,964       63,836       592,838  
Gregory J. Peloquin     2018       327,083       —         44,025       —         81,097       16,460       468,665  
Executive Vice President Power     2017       318,270       —         —         17,100       56,194       12,339       403,903  
and Microwave Technologies Group     2016       317,557       —         —         —         112,599       15,655       445,811  
Patrick Fitzgerald     2018       316,309       —         44,025       —         59,052       18,583       437,969  
Executive Vice President Richardson Healthcare     2017       309,000       21,065       —         17,100       22,934       12,339       382,438  
Robert J. Ben (4)     2018       276,231       —         58,700       —         68,799       17,104       420,834  
Executive Vice President, Chief Financial Officer,     2017       270,000       —         —         17,100       42,336       12,350       341,786  
Chief Accounting Officer, and Corporate Secretary     2016       212,885       —         —         17,700       102,870       13,132       346,587  

 

 

 

               
(1) Amounts in this column represent the aggregate grant date fair value of stock awards calculated in accordance with Financial Accounting Standards Board ASC topic 718. The amounts reflect our accounting expenses for these awards and do not correspond to the actual value that will be recognized by each named executive officer.  For the relevant assumptions used in determining the fair value of stock option awards, refer to Note 3, Significant Accounting Policies - Share-Based Compensation, in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K filed with the SEC on August 2, 2018.
(2) Amounts in this column represent annual incentive payments earned for fiscal 2018, 2017 and 2016 based on pre-set incentive goals established at the beginning of each fiscal year and tied to the Company’s financial goals and personal performance measures. Additional details regarding annual incentive payments made in 2018 are set forth in the Compensation Discussion and Analysis under “Annual Cash Incentive Compensation.”
(3) All Other Compensation for each Named Executive Officer includes: (a) $12,000 annually for car allowance; (b) matching contributions made to the 401(k) plan; and (c) imputed income for each Named Executive Officer’s group term life insurance in excess of a $50,000 death benefit. For Ms. Diddell, All Other Compensation also includes $47,826 accrued, but not paid, in fiscal 2016 in connection with termination payments payable to her. Ms. Diddell’s termination payments are discussed below under the heading “Employment Agreements.” The amounts accrued in fiscal 2016 represent an additional accrual due to an increase in her base salary.
(4) Mr. Ben joined the Company on August 17, 2015.  
                   
  18  
 

Grants of Plan Based Awards for Fiscal 2018

 

    Estimated Future Payments Incentive Plan Awards      

Estimated Future

Payouts Under Equity

  Base Price of
Restricted
  Grant Date
Name   Threshold ($)   Target ($)   Maximum ($)   Grant Date  

Incentive Plan
Awards Target (#)

  Stock
Awards
($/Sh)(1)
  Fair Value of Restricted
Stock Awards($)(2)
Edward J. Richardson   $ 71,030     $ 284,122     $ 426,182     10/9/2017     20,000     $ 5.87     $ 117,400  
Wendy S. Diddell     37,750       151,001       226,502     10/9/2017     20,000       5.87       117,400  
Gregory Peloquin     30,733       122,932       184,398     10/9/2017     7,500       5.87       44,025  
Patrick Fitzgerald     29,838       119,351       179,027     10/9/2017     7,500       5.87       44,025  
Robert J. Ben     26,072       104,288       156,431     10/9/2017     10,000       5.87       58,700  

 

 

(1) The base price of restricted stock awards is equal to the closing price of our common stock on the date of grant, as reported on NASDAQ.

 

(2) The amounts represent the aggregate grant date fair value computed in accordance with ASC Topic 718 pursuant to Item 402 of Regulation S-K.

 

 

Outstanding Equity Awards at Fiscal Year End

 

The following table sets forth information on the holdings of stock option and restricted stock awards by the Named Executive Officers as of the end of fiscal 2018.

 

    Option Awards   Restricted Stock Awards
Name   Number of Securities Underlying Unexercised Options Exercisable (#) (1)   Number of Securities Underlying Unexercised Options Unexercisable (#) (1)   Option Exercise Price ($)   Option Expiration Date (2)   Number of Shares or Units of Stock That Have Not Vested (#)(3)   Market Value of Shares or Units of Stock That Have Not Vested ($)(4)
Edward J. Richardson     50,000       —       $ 5.67       10/13/2019       —         —    
      —         —         —         —         20,000       194,000  
Wendy S. Diddell     9,000       —         5.03       10/21/2018       —         —    
      12,000       —         5.67       10/13/2019       —         —    
      25,000       —         13.47       4/12/2021       —         —    
      25,000       —         11.77       10/9/2022       —         —    
      20,000       5,000       11.14       10/8/2023       —         —    
      15,000       10,000       9.89       10/6/2024       —         —    
      10,000       15,000       5.98       10/5/2025       —         —    
      5,000       20,000       6.90       10/3/2026       —         —    
      —         —         —         —         20,000       194,000  
Gregory J. Peloquin     3,000       —         5.67       10/13/2019       —         —    
      15,000       10,000       9.99       6/26/2024       —         —    
      3,000       12,000       6.90       10/3/2026       —         —    
      —         —         —         —         7,500       72,750  
Patrick Fitzgerald     15,000       10,000       9.89       10/6/2024       —         —    
      3,000       12,000       6.90       10/3/2026       —         —    
      —         —         —         —         7,500       72,750  
Robert J. Ben     2,000       9,000       5.49       8/17/2025       —         —    
      3,000       12,000       6.90       10/3/2026       —         —    
      —         —         —         —         10,000       97,000  
(1) Options vest on the anniversary of the grant date and become exercisable in annual increments of 20%.

 

(2) The expiration date of each option occurs ten years after the date of grant of each option. The table below provides the grant date for each outstanding equity award at the end of fiscal 2018 and the respective vesting schedule.

 

(3) Restricted stock awards vest on the anniversary of the grant date in three equal installments.

 

(4) The market value is based on the closing market price of the Company as of June 1, 2018, being $9.70 per share.

 

  19  
 

The table below provides the grant date for each outstanding equity award at the end of fiscal 2018, total award, vesting years, vested shares and remaining vesting schedule.

 

    Remaining Vesting Period
Name   Grant Date(1)   Number of Stock Options Granted   Number of Restricted Stock Awards  

Vesting
Years

 

Vested
Shares

 

Fiscal
2019

 

Fiscal
2020

 

Fiscal
2021

 

Fiscal
2022

Edward J. Richardson     10/13/2009       50,000       —         5       50,000       —         —         —         —    
      10/9/2017       —         20,000       3       —         6,666       6,667       6,667       —    
Wendy S. Diddell     10/21/2008       15,000       —         5       15,000       —         —         —         —    
      10/13/2009       15,000       —         5       15,000       —         —         —         —    
      4/12/2011       25,000       —         5       25,000       —         —         —         —    
      10/9/2012       25,000       —         5       25,000       —         —         —         —    
      10/8/2013       25,000       —         5       20,000       5,000       —         —         —    
      10/6/2014       25,000       —         5       15,000       5,000       5,000       —         —    
      10/5/2015       25,000       —         5       10,000       5,000       5,000       5,000       —    
      10/3/2016       25,000       —         5       5,000       5,000       5,000       5,000       5,000  
      10/9/2017       —         20,000       3       —         6,666       6,667       6,667       —    
Gregory J. Peloquin     10/13/2009       15,000       —         5       15,000       —         —         —         —    
      10/6/2014       25,000       —         5       15,000       5,000       5,000       —         —    
      10/3/2016       15,000       —         5       3,000       3,000       3,000       3,000       3,000  
      10/9/2017       —         7,500       3       —         2,500       2,500       2,500       —    
Patrick Fitzgerald     10/6/2014       25,000       —         5       15,000       5,000       5,000       —         —    
      10/3/2016       15,000       —         5       3,000       3,000       3,000       3,000       3,000  
      10/9/2017       —         7,500       3       —         2,500       2,500       2,500       —    
Robert J. Ben.     8/17/2015       15,000       —         5       6,000       3,000       3,000       3,000       —    
      10/3/2016       15,000       —         5       3,000       3,000       3,000       3,000       3,000  
      10/9/2017       —         10,000       3       —         3,333       3,333       3,334       —    

 

(1) Share vest over the vesting period on the anniversary of the grant date.

 

 

Option Exercises and Stock Vested

 

The following table provides information for fiscal 2018 for our Named Executive Officers on stock option exercises during fiscal 2018, including the number of shares acquired on exercise, and the vesting of restricted stock, and, in each case, the values realized there from.

 

      Option Awards       Stock Awards  
      Number of Shares       Value Realized       Number of Shares       Value Realized  
      Acquired on Exercise       on Exercise       Acquired at Vesting       on Vesting  
Name     (#)       ($)       (#)       ($)  
                                 
Edward J. Richardson         $           $  
Wendy S. Diddell                    
Gregory J. Peloquin                    
Robert J. Ben     4,000     13,520            
Patrick Fitzgerald                    

 

 

 

Employment Agreements

 

Pursuant to the terms of her employment agreement dated June 1, 2004, as amended December 23, 2015,Wendy Diddell is employed as Executive Vice President, Chief Operating Officer. Under the terms of the employment agreement, Ms. Diddell received an initial base salary of $185,000 and a bonus opportunity of up to 50% of her then current base salary. Ms. Diddell’s base salary was increased to $390,942 as of December 23, 2015. Either the Company or Ms. Diddell may terminate her employment at any time for any reason, and upon any such a termination, the Company will be obligated to pay Ms. Diddell her then annual base salary for twelve months following such termination. During her employment term and for one year after termination for any reason, Ms. Diddell is prohibited from competing against the Company. Ms. Diddell’s employment with the Company is for an indefinite term, during which she is employed on an at-will basis.

  20  
 

 

 

Gregory J. Peloquin is employed as Executive Vice President, Power and Microwave Technologies Group under an employment agreement dated June 26, 2014, pursuant to which he received an initial base salary of $309,000 and a bonus opportunity of up to 50% of his then current base salary. Pursuant to the terms of his employment agreement, Mr. Peloquin's employment may be terminated by Mr. Peloquin by providing sixty-day written notice to the Company. If the Company terminates Mr. Peloquin for any reason other than for cause, disability or death, the Company will be obligated to pay Mr. Peloquin his then annual base salary for twelve months following such termination. During his employment term and for one year after termination for any reason, Mr. Peloquin is prohibited from competing against the Company. Mr. Peloquin's employment with the Company is for a five year term, during which he is employed on an at-will basis.

 

Robert J. Ben is employed as Executive Vice President, Chief Financial Officer and Corporate Secretary under an employment agreement dated August 4, 2015, pursuant to which he received an initial base salary of $270,000 and a bonus opportunity of up to 50% of his then current base salary. Mr. Ben also assumed the role of Chief Accounting Officer since October 16, 2016. Pursuant to the terms of his employment agreement, Mr. Ben’s employment may be terminated by Mr. Ben by providing sixty-day written notice to the Company. If the Company terminates Mr. Ben for any reason other than for cause, disability or death, the Company will be obligated to pay Mr. Ben his then annual base salary for twelve months following such termination. During his employment term and for one year after termination for any reason, Mr. Ben is prohibited from competing against the Company. Mr. Ben’s employment with the Company is for a three year term, during which he is employed on an at-will basis. The term shall be extended automatically for successive one-year periods unless written notice of nonrenewal is provided to Mr. Ben or the Company within 60 days prior to the expiration of the Employment Term.

 

Mr. Richardson does not have an employment agreement with the Company.

 

Mr. Fitzgerald does not have an employment agreement with the Company.

 

Potential Payment upon Termination or Change in Control

 

The following table shows potential payments to our Named Executive Officers under existing contracts, agreements, plans or arrangements for various scenarios under termination or a change in control, assuming a June 2, 2018, termination date or change in control.

 

Name     Termination for Cause or Voluntary Termination without Good Reason   Voluntary Termination
for Good Reason by Executive
  Death   Disability   Termination without
Cause by Company
  Change in Control   Termination
by
Executive for any Reason
Edward J. Richardson       $     $     $     $     $     $     $  
Wendy S. Diddell         (1)     402,670       402,670                   402,670       402,670       402,670  
Gregory J. Peloquin                               327,818              
Patrick Fitzgerald                                              
Robert J. Ben                                 278,100       278,100        
(1) Ms. Diddell’s severance would be an amount equal to her current base salary and would be paid in substantially equal installments on the Company’s regular payroll dates over a period of one year.

 

Median Employee to CEO Pay Ratio

 

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following ratio of the annual total compensation of our Chief Executive Officer to the annual total compensation of our median employee.

 

We identified the median employee by examining the fiscal 2018 total taxable compensation for all individuals, excluding our CEO, who were employed by us on June 2, 2018. We excluded three employees that had not yet been paid as of June 2, 2018. After excluding these three employees, our pay ratio was based on 417 total number of employees. We believe our use of total taxable compensation for these employees was appropriate because taxable income is a consistently applied compensation measure and the information is reasonably ascertainable.

 

After identifying the median employee based on total taxable compensation, we calculated the employee’s annual total compensation using the same methodology we use for our named executive officers as set forth in the 2018 Summary Compensation Table. Based on this information, we estimate that the total annual compensation of our median employee for 2018 is $61,836. As reported in the Summary Compensation Table, the annual total compensation for our CEO for 2018 is $1,069,328. As a result, we estimate that our 2018 CEO to median employee pay ratio is 17:1. SEC rules for identifying the median employee and determining the CEO pay ratio permit companies to employ a wide range of methodologies, estimates and assumptions. As a result, the CEO pay ratios reported by other companies are likely not comparable to our CEO pay ratio.

 

  21  
 

 

PROPOSAL 3 – ADVISORY VOTE REGARDING COMPENSATION OF NAMED EXECUTIVE OFFICERS

 

As required pursuant to Section 14A of the Securities Exchange Act of 1934, as amended, the Companys stockholders have the opportunity to approve, by means of a non-binding advisory vote, the compensation of its Named Executive Officers as disclosed in this proxy statement.

 

This proposal, popularly known as “say-on-pay,” enables stockholders to express or withhold their approval of the Companys executive compensation program in general. The vote is intended to provide an assessment by the Companys stockholders of its overall executive compensation program and not of any one or more particular elements of that program. The Compensation Committee and the full Board intend to consider and take into account the outcome of this non-binding advisory vote in making future executive compensation decisions. Because this vote is advisory and non-binding, it will not necessarily affect or otherwise limit any future compensation of any of the Named Executive Officers.

 

The Companys executive compensation program is described in the “Compensation Discussion and Analysis” section of this proxy statement and the related tables and narrative discussion. Stockholders are strongly urged to read this material in its entirety to obtain an informed understanding of the compensation programs for our executives.

 

The Company believes that its executive compensation program is aligned with the long-term interests of its stockholders. In addition to enabling the Company to attract and retain executive officers of the necessary caliber, its executive compensation program has as its objectives (i) motivating executives by providing performance-based incentives to achieve the Company’s annual financial goals and long-term business strategies; and (ii) aligning the interests of executives with those of stockholders by rewarding its executives for individual and corporate performance measured against its goals and plans and by granting stock options and other equity-based compensation.

 

The Company believes that its executive compensation program satisfies these objectives and does so in a straightforward manner. The Company’s executive compensation program consists of cash compensation and long-term incentive compensation. Cash compensation is paid in the form of a base salary and a performance bonus based on financial and personal performance, and long-term incentive compensation is paid in the form of stock options or restricted stock.

 

For these reasons and the reasons elaborated more fully in the “Compensation Discussion and Analysis” section and the related tables and narrative discussion, the Board of Directors requests stockholders to approve the following resolution:

 

Resolved, that the stockholders approve the compensation paid to the Companys Named Executive Officers, as disclosed in this proxy statement, including the “Compensation Discussion and Analysis” section and the related compensation tables and narrative discussion.

 

The Board of Directors has adopted a policy providing for annual "say-on-pay" advisory votes. Accordingly, the next "say-on-pay" vote will occur in 2019.

 

Our Board of Directors recommends that you vote “FOR” the approval of the compensation of our Named Executive Officers.

 

 

PROPOSAL 4 – APPROVAL OF AN AMENDMENT TO THE 2011 LONG-TERM INCENTIVE PLAN

 

At the Annual Meeting, stockholders will be asked to approve an amendment to the Richardson Electronics, Ltd. 2011 Long-Term Incentive Plan, as amended and restated (the “Stock Plan”), in order to increase the maximum number of shares of our common stock that may be issued under the Stock Plan by an additional 1,000,000 shares, to an aggregate of 2,500,000 shares. As of August 20, 2018, an aggregate of 1,547,968 shares of our common stock were subject to currently outstanding awards under the Stock Plan. Shares of our common stock that remained available for future issuance under plan include 144,456 related to the 2011 Long-Term Inventive Plan.

 

On July 19, 2011, the Board voted unanimously to approve and recommend to stockholders the approval of the Richardson Electronics, Ltd. 2011 Long-Term Incentive Plan. On July 22, 2014, the Board voted unanimously to approve and recommend to stockholders an amendment to the Stock Plan, which increased the number of shares issuable under the Stock Plan by 750,000, to an aggregate of 1,500,000 shares. On August 23, 2018, the Board voted unanimously to approve and recommend to stockholders the present amendment to the Stock Plan.

  22  
 

  

Summary of Stock Plan

 

The following is a summary of the material terms of the Stock Plan and is qualified in its entirety by the full text of the Stock Plan as set forth as Annex II to this Proxy Statement. The Board believes that stock-based awards are an important element of the Company’s compensation programs. The Stock Plan promotes the Company’s compensation philosophy and objectives in that the primary objectives of the Stock Plan are to provide incentives to certain officers, employees, directors, consultants and other service providers to manage the business of the Company and its affiliates in a manner that will provide for the long-term growth and profitability of the Company; to encourage stock ownership and provide such recipients with a proprietary interest in the Company; and to provide a further means of hiring, rewarding and retaining key personnel.

 

The Stock Plan allows the Company the flexibility to grant a variety of stock and stock-based awards (collectively, the “Awards”), including stock options and stock appreciation rights, granted separately or in tandem with each other, and restricted shares and restricted share units, both time vested and/or conditioned on the attainment of performance goals. The Stock Plan is also designed to allow compliance with Section 162(m) of the Internal Revenue Code (the “Code”). It is intended that Awards under the Stock Plan with a performance component (which does not include time-vested share Awards) generally will satisfy the requirements for performance-based compensation under Section 162(m) while granting the Compensation Committee the authority to grant nonperformance-based Awards where it deems appropriate. Section 162(m) generally places a $1,000,000 per employee limit on the tax deduction allowable for compensation paid (or accrued for tax purposes) with respect to the Chief Executive Officer and the three other highest-paid executives (excluding the chief financial officer) during a tax year, unless the compensation meets certain requirements. All stock incentive awards to the Company’s most highly compensated executives that may be made over the next few years are expected to be granted under the Stock Plan.

 

Shares Subject to the Stock Plan

 

The Board reserved 1,500,000 shares of the Company’s common stock for issuance pursuant to Awards granted under the Stock Plan, subject to adjustment as provided therein. Up to 100% of the shares reserved under the Stock Plan may be issued pursuant to incentive stock options, in the form of any other Award, or in any combination thereof. In the event all or a portion of an Award is forfeited, cancelled, expired, or terminated before becoming vested, paid, exercised, converted, or otherwise settled in full, that number of shares shall be again available under the Stock Plan and shall not count against the maximum number of reserved shares under the Stock Plan.

 

Applicable provisions of the Code restrict the Company’s ability, in the absence of stockholder approval, to grant incentive stock options under Code Section 421 and to claim deductions for performance-based compensation which may be restricted under Code Section 162(m). The maximum number of shares of common stock that may be granted during any calendar year as to any employee with respect to which options, stock appreciation rights, or other Awards that are denominated in shares of common stock and are intended to be performance-based compensation under Code Section 162(m) shall not exceed 200,000, subject to adjustment in accordance with the provisions of the Stock Plan. Furthermore, the maximum aggregate dollar amount that may be paid under any performance Award denominated in cash during any calendar year to an employee may not exceed $2,000,000.

 

Administration

 

The Stock Plan provides for administration by a committee appointed by the Board or, alternatively if no such committee is appointed, by the entire Board (the “Committee”). When appointing members to the Committee, the Board is to take into consideration the “outside director” standards contained in Code Section 162(m), the “non-employee” director standards contained in Rule 16b-3 of the Exchange Act, and, if applicable, the requirements of the national securities exchange or nationally recognized quotation or market system on which the Company’s common stock is then traded. Subject to the terms of the Stock Plan, the Committee has the authority to grant Awards under the Stock Plan and to make all other determinations that it may deem necessary or advisable for the administration of the Stock Plan, including, without limitation, the authority (i) to determine which Affiliates and which employees shall be covered by the Stock Plan; (ii) to determine the terms and provisions of the respective Awards and Award programs; (iii) to adopt, amend or rescind rules and procedures relating to the Stock Plan; and (iv) to make all determinations necessary or advisable for the proper administration of the Stock Plan. The Committee’s decisions relating to the administration of the Stock Plan and grants of Awards shall be final and binding on all persons.

 

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The Stock Plan permits the Committee to authorize one or more officers of the Company (i) to designate individuals (other than officers or directors of the Company or any Affiliate who are subject to Section 16 of the Exchange Act) to receive Awards under the Stock Plan and (ii) to determine the number of shares as to which an Award is granted, subject to the maximum number established by the Committee.

 

Types of Awards

 

The Stock Plan permits the Committee to make a variety of Awards, including incentive and nonqualified options to purchase shares of the Company’s common stock, stock appreciation rights, other stock-based Awards which are settled in either cash or shares of the Company’s common stock and are determined by reference to shares of stock, such as grants of restricted common stock, grants of rights to receive stock in the future, or dividend equivalent rights, and cash performance Awards, which are settled in cash and are not determined by reference to shares of the Company’s common stock. These discretionary Awards may be made on an individual basis or through a program approved by the Committee for the benefit of a group of eligible persons.

 

The number of shares of common stock as to which any Award is granted, the potential payout of any Award not denominated in shares of common stock and the eligible persons to whom Awards are granted will be determined by the Committee, subject to the provisions of the Stock Plan. Awards may be made exercisable or settled at the prices and may be made forfeitable or terminable under the terms established by the Committee, to the extent not otherwise inconsistent with the terms of the Stock Plan.

 

Structure of Individual Awards

 

The Committee may, but is not required to, structure any Award so as to qualify as performance-based compensation under Code Section 162(m). To the extent that the Committee intends for an Award to qualify as performance-based compensation under Code Section 162(m), the Committee shall make the vesting or payment of the Award subject to the achievement of one or any combination of the performance listed below during a specified period: (1) earnings per share; (2) book value per share; (3) operating cash flow; (4) free cash flow; (5) cash flow return on investments; (6) cash available; (7) net income (before or after taxes); (8) revenue or revenue growth; (9) total shareholder return; (10) return on invested capital; (11) return on shareholder equity; (12) return on assets; (13) return on common book equity; (14) market share; (15) economic value added; (16) operating margin; (17) profit margin; (18) stock price; (19) operating income; (20) EBIT or EBITDA; (21) expenses or operating expenses; (22) productivity of employees as measured by revenues, costs, or earnings per employee; (23) working capital; (24) improvements in capital structure; or (25) cost reduction goals.

 

The performance goals may be applied to the Company, any affiliate or any business unit, either individually, alternatively or in combination. In addition, the Committee may appropriately adjust the performance goals previously established with respect to a particular grant of an Award to remove the effect of equity compensation expense under FAS 123R; amortization of acquired technology and intangibles; asset write-downs; litigation or claim judgments or settlements; changes in or provisions under tax law, accounting principles or other such laws or provisions affecting report results; accruals for reorganization and restructuring programs; discontinued operations; and extraordinary and non-recurring items, except where such action would result in the loss of a tax deduction to the Company pursuant to Code Section 162(m).

 

The maximum number of shares of common stock that may be granted during any calendar year as to any employee with respect to which options, stock appreciation rights, or other Awards that are denominated in shares of common stock and are intended to be performance-based compensation under Code Section 162(m) shall not exceed 200,000, subject to adjustment in accordance with the provisions of the Stock Plan. Furthermore, the maximum aggregate dollar amount that may be paid under any performance Award denominated in cash during any calendar year to an employee may not exceed $2,000,000.

 

After the date of grant, the Committee, in its sole discretion and for such reasons as it determines to be appropriate, may modify the terms and conditions of an Award except to the extent inconsistent with other provisions of the Stock Plan. Such modifications may include, among others, changes to or waivers of any forfeiture provisions under an Award; changes to the settlement terms of any Award; waiver of any early expiration provisions; or adjustments to an Award in connection with a reorganization or change in control of the Company, as discussed in further detail below.

 

Awards generally shall not be transferable or assignable during a holder’s lifetime unless otherwise provided under the terms of the individual Award. However, incentive stock options may not be transferred except by will or by the laws of intestate succession.

 

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Options

 

At the time an option is granted, the Committee will determine whether the option is an incentive stock option or a nonqualified stock option. The Stock Plan provides that the exercise price of any option may not be less than the fair market value of the common stock of the Company on the date of the grant. The term of an incentive stock option may not exceed ten (10) years from the date of grant. In addition, an incentive stock option may only be granted under the Stock Plan within ten (10) years from the date the Stock Plan was adopted by the Board.

 

For incentive stock options, special rules relating to the option term and the exercise price apply for employees who, at the time the option is granted, own (directly or indirectly) more than 10% of the common stock of the Company or any subsidiary (an “Over 10% Owner”). Incentive stock options granted to an Over 10% Owner must be granted with an exercise price equal to 110% of the fair market value of the Company’s common stock on the date of the grant. Also, the term of an incentive stock option granted to an Over 10% Owner cannot exceed five (5) years from the date of grant. For purposes of determining an individual’s ownership percentage of common stock, any stock owned by such individual’s spouse, parents, grandparents, children, grandchildren and siblings will be attributed to such individual. In addition, any stock owned by a corporation, partnership, estate or trust in which an individual owns an interest is attributed to that individual on a pro rata basis based on the individual’s ownership percentage.

 

Subject to any further limitations in the Award agreement, in the event of a recipient’s termination of employment, the term of an incentive stock option will expire, terminate and become unexercisable no later than three months after the date of the termination of employment; provided, however, that if the termination of employment is due to death or disability, up to one year may be substituted for the three-month period. The Committee may, however, permit an incentive stock option to continue beyond these time limits, in which case the option will become a nonqualified stock option.

 

The Committee may permit an option exercise price to be paid in cash, by the delivery of previously-owned shares of the Company’s common stock, through a cashless exercise executed through a broker, or by having a number of shares of common stock otherwise issuable at the time of exercise withheld.

 

Reload grants are prohibited under the Stock Plan. Reload grants are new option grants that are made to an optionee to replace shares delivered by the optionee in payment of the exercise price and/or tax withholding obligation under any other option held by the optionee. The Committee may not directly or indirectly reduce the exercise price of an option after it is granted without the approval of the Company’s stockholders, except in connection with a merger, liquidation, or other similar reorganization of the Company. Surrendering an option in consideration of, or in exchange for, the grant of a new option with a lower exercise price, stock, cash, or any other award would be considered a reduction in the exercise price of the original option.

 

Stock Appreciation Rights

 

Stock appreciation rights may be granted separately or in connection with another Award. Each stock appreciation right allows the recipient to receive the appreciation per share of the Company’s common stock over a defined price which may not be less than the fair market value of a share of the Company’s common stock on the date the stock appreciation right is granted. If a stock appreciation right is granted in connection with another Award, it may only be exercised to the extent that the related Award has not been exercised, paid, or otherwise settled. Stock appreciation rights are exercisable or payable at a time or times certain or upon the occurrence or non-occurrence of certain events. Stock appreciation rights may be settled in shares of common stock or in cash, according to terms established by the Committee with respect to any particular Award. Stock appreciation rights have no defined expiration period under the Stock Plan, but an expiration period can be included in the applicable Award agreement or program.

 

The Committee may not directly or indirectly reduce the strike price of a stock appreciation right after it is granted without the approval of the Company’s stockholders, except in connection with a merger, liquidation, or other similar reorganization of the Company. Surrendering a stock appreciation right in consideration of, or in exchange for, the grant of a new stock appreciation right with a lower strike price, stock, cash, or any other award would be considered a reduction in the strike price of the original stock appreciation right.

 

Other Stock-Based Awards

 

The Stock Plan allows the Committee to grant stock-based incentives, other than options and stock appreciation rights, that entitle the recipient to receive payment of an amount equal to either the value of a specified number or a percentage or multiple of a specified number of shares of the Company’s common stock, or the value of dividends paid on a specified number of shares of common stock during a dividend period. Such Awards may be subject to such restrictions and other conditions, if any, as the Committee shall determine, and payment may be made in either cash or shares of the Company’s common stock, as the Committee may determine. Examples of such stock-based incentives that may be granted pursuant to the Stock Plan include restricted stock, restricted stock units, performance share Awards, and dividend equivalent rights.

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Cash Performance Awards

 

The Stock Plan also allows the Committee to grant cash performance Awards that entitle the recipient to receive payment in cash of an amount equal to the value of a specified number or a percentage or multiple of a specified number of units other than shares of the Company’s common stock. Such cash Awards may be subject to such restrictions and other conditions, if any, as the Committee shall determine.

 

Tax Reimbursement Payments

 

The Committee has the option to make cash tax reimbursement payments designed to cover tax obligations of recipients that result from the receipt or exercise of an Award.

 

Termination of Awards

 

The terms of a particular Award may provide that it terminates, among other reasons: upon the holder’s termination of employment or other status with respect to the Company or any affiliate of the Company; upon a specified date; upon the holder’s death or disability; or upon the occurrence of a change in control of the Company. Awards may include exercise, conversion or settlement rights to a holder’s estate or personal representative in the event of the holder’s death or disability. In the Committee’s discretion, Awards that are subject to termination may be cancelled, accelerated, paid or continued, subject to the terms of the applicable agreement reflecting the terms of an Award and to the provisions of the Stock Plan.

 

Reorganizations

 

The number of shares of common stock reserved for the grant or for issuance in connection with the exercise, settlement, vesting, or payment of an Award, as applicable, the exercise price of an option and the threshold price of a stock appreciation right, the specified number of shares of common stock to which an Award pertains and the annual limit on the number of shares of common stock subject to Awards or on the number of shares of common stock which may be used to settle an Award will be adjusted in the event of any stock dividend, stock split, spinoff, rights offering or recapitalization of the Company or similar event effected without the receipt of consideration.

 

In the event of a merger, consolidation, reorganization, extraordinary dividend, sale of substantially all of the Company’s assets, other change in the Company’s capital structure, tender offer or a change in control of the Company, Awards may be substituted, cancelled, accelerated, cashed-out or otherwise adjusted by the Committee, provided that the adjustment is not inconsistent with the terms of the Stock Plan or any agreement reflecting the terms of an Award. The Company may also use the Stock Plan to assume awards previously granted by the Company or a third party in favor of persons who become eligible to participate under the Stock Plan.

 

Amendment or Termination

 

The Stock Plan may be amended or terminated by the Board. No amendment may increase the number of shares available for the grant of incentive stock options, change the classes of persons who can receive incentive stock options, or change in the granting corporation or the shares available for purchase or grant under the Stock Plan without stockholder approval, provided that further stockholder approval will not be required in certain transactions if the Stock Plan is fully described in an agreement or other document, such as a consolidation agreement, reflecting the transaction, and the transaction is approved by the stockholders. No amendment or termination by the Board may adversely affect the rights of a holder of an Award without the holder’s consent.

 

Federal Income Tax Consequences

 

The following discussion outlines generally the federal income tax consequences of participation in the Stock Plan. Individual circumstances may vary and each participant should rely on his or her own tax counsel for advice regarding federal income tax treatment under the Stock Plan.

 

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Incentive Stock Options

 

A participant will not recognize income and will not be taxed upon the grant of an incentive stock option nor upon exercise of all or a portion of the option. Instead, the participant will be taxed at the time he or she sells the shares of common stock purchased on exercise of the incentive stock option. The participant will be taxed on the difference between the price he or she paid for the common stock and the amount for which he or she sells the common stock. If the participant does not sell the shares of common stock during the two-year period from the date of grant of the incentive stock option and the one-year period from the date the common stock is transferred to him or her, the gain will be capital gain, and the Company will not be entitled to a corresponding deduction. If the participant sells the shares of common stock at a gain prior to that time, the difference between the amount the participant paid for the common stock and the lesser of fair market value on the date of exercise or the amount for which the stock is sold will be taxed as ordinary income. If the participant sells the shares of common stock for less than the amount he or she paid for the stock prior to the one- or two-year periods indicated, no amount will be taxed as ordinary income and the loss will be taxed as a capital loss. Exercise of an incentive stock option may subject a participant to, or increase a participant’s liability for, the alternative minimum tax.

 

Nonqualified Options

 

A participant will not recognize income and will not be taxed upon the grant of a nonqualified option or at any time prior to the exercise of all or a portion of the option. At the time the participant exercises all or a portion of a nonqualified option, he or she will have compensation taxable as ordinary income in an amount equal to the excess of the fair market value of the common stock on the date the option is exercised over the price paid for the common stock, and the Company will then be entitled to a corresponding deduction. Depending upon the period shares of common stock are held after exercise, the sale or other taxable disposition of shares acquired through the exercise of a nonqualified option generally will result in a short- or long-term capital gain or loss equal to the difference between the amount realized on the disposition and the fair market value of the shares when the nonqualified option was exercised. Special rules apply to a participant who exercises a nonqualified option by paying the exercise price, in whole or in part, by the transfer of shares of common stock to the Company.

 

Stock Awards

 

A recipient will not be taxed upon the grant of a stock Award if such Award is not transferable by the recipient or is subject to a “substantial risk of forfeiture,” as defined in the Code. However, when the shares of common stock that are subject to the stock Award are transferable by the recipient and are no longer subject to a substantial risk of forfeiture, the recipient will recognize compensation taxable as ordinary income in an amount equal to the fair market value of the stock subject to the stock Award, less any amount paid for such stock, and the Company will then be entitled to a corresponding deduction. If a recipient so elects at the time of receipt of a stock Award, he or she may include the fair market value of the stock subject to the stock Award, less any amount paid for such stock, in income at that time and the Company also will be entitled to a corresponding deduction at that time.

 

Other Stock Incentives

 

Generally, a participant will not recognize income and will not be taxed upon the grant of a stock appreciation right, dividend equivalent right, restricted stock unit, or performance Award (collectively, the “Equity Incentives”). At the time a participant receives payment under any Equity Incentive, generally, he or she will have compensation taxable as ordinary income in an amount equal to the cash or fair market value of the common stock received, and the Company will then be entitled to a corresponding deduction.

 

Withholding Taxes

 

A participant may be liable for federal, state, or local tax withholding obligations as a result of the grant, exercise or settlement of an Award. The tax withholding obligation may be satisfied by payment in the form of cash, certified check, previously-owned shares of the Company’s common stock or, if a participant elects with the permission of the Committee, by a reduction in the number of shares to be received by the participant under the Award.

 

409A

 

The Stock Plan is intended to meet requirements for exemptions from coverage, or otherwise avoid triggering adverse tax consequences, under Code Section 409A governing nonqualified deferred compensation. In the event an Award which provides deferred compensation loses eligibility for such exemption, or otherwise triggers such adverse tax consequences, whether by design or by operational failure, such Award will be subject to adverse taxation under Code Section 409A (i.e., the Award and all similar types of deferred compensation will be (i) taxed upon vesting and (ii) subject to both an additional 20% tax and an interest assessment).

 

The foregoing is only a summary of the effect of federal income taxation upon participants and the Company with respect to the grant and exercise of Awards under the Stock Plan. It does not purport to be complete and does not discuss the tax consequences of a participant’s death or the provisions of the income tax laws of any municipality, state, or foreign country in which the participant may reside.

 

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Plan Benefits

 

Our directors and executive officers have an interest in this proposal as they would be eligible to receive equity awards under the Stock Plan. The selection of individuals who will receive awards under the Stock Plan, if the amendment proposal is approved by the shareholders, and the amount of any such awards, is discretionary and determined from time to time by the Committee and is therefore not presently determinable. The number of equity awards granted to each of our named executive officers during the last fiscal year is set forth under “Grants of Plan-Based Awards For Fiscal 2018” and options to purchase a total of approximately 135,000 shares of common stock were granted in fiscal 2018, of which options to purchase approximately 105,000 shares of common stock, or 78% were granted to employees other than named executive officers. The number of equity awards granted in the future may be different from the number granted in fiscal 2018.

Equity Compensation Plan Information

 

The following table sets forth information as of June 2, 2018, with respect to compensation plans under which equity securities are authorized for issuance:

 

Plan Category   Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights   Weighted Average Per Share Exercise Price of Outstanding Options, Warrants and Rights   Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column)
Equity Compensation Plans Approved by Security Holders     1,171,975     $ 8.81       523,917  
Equity Compensation Plans Not Approved by Security Holders     23,564 (1)   $ 12.95 (1)     —    
Total     1,195,539     $ 8.89       523,917  
(1)  Options issued in 1987 pursuant to an employment contract with a former officer and director of Richardson Electronics, Ltd.

 

Required Vote and Recommendation

 

The affirmative vote of the holders of shares representing a majority of the common shares present in person or represented by proxy and entitled to vote will be required to approve Proposal 4. The effect of an abstention is the same as a vote “AGAINST” Proposal 4, and a broker non-vote will have no effect on Proposal 4.

 

Recommendation

 

We believe strongly that the approval of the amendment to the Stock Plan is essential to our continued success. Our employees are one of our most valuable assets. Stock options and other Awards such as those provided under the Stock Plan are vital to our ability to attract and retain outstanding and highly skilled individuals. Such Awards also are crucial to our ability to motivate employees to achieve our goals. For the reasons stated above the stockholders are being asked to approve the amendment to the Stock Plan.

 

Our Board of Directors recommends that stockholders vote “FOR” the approval of an amendment to increase the number of shares issuable under the 2011 Long-Term Incentive Plan.

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STOCKHOLDER PROPOSALS FOR 2019 ANNUAL MEETING

 

Any stockholder proposal intended to be considered for inclusion in the proxy statement for presentation at the 2019 Annual Meeting must be received by the Company by April 29, 2019. The proposal must be in accordance with the provisions of Rule 14a-8 promulgated by the Securities and Exchange Commission. It is suggested that the proposal be submitted by certified mail, return receipt requested. Stockholders who intend to present a proposal at the 2019 Annual Meeting without including such proposal in the Company’s proxy statement must provide the Company notice of such proposal no later than July 13, 2019. The Company reserves the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements.

 

 

OTHER MATTERS

 

Annual Report

 

Our Annual Report on Form 10-K for the 2018 fiscal year accompanies this proxy statement, but is not deemed a part of the proxy soliciting material.

 

A copy of the 2018 Form 10-K report as required to be filed with the Securities and Exchange Commission, excluding exhibits, will be mailed to stockholders without charge upon written request to: Richardson Electronics, Ltd., 40W267 Keslinger Road, P.O. Box 393, LaFox, Illinois 60147-0393, Attention: Secretary. Exhibits to the Form 10-K will be mailed upon similar request and payment of specified fees. The 2018 Form 10-K is also available through the Securities and Exchange Commission’s Internet web site (www.sec.gov).

 

Householding Information

 

Some banks, brokers and other nominee record holders may be participating in the practice of “householding.” This means that only one copy of either the notice of Internet availability of the proxy statement or of this proxy statement and Annual Report on Form 10-K may have been sent to multiple stockholders sharing an address unless the stockholders provide contrary instructions. We will promptly deliver a separate copy of these documents to you if you call or write us at: Richardson Electronics, Ltd., 40W267 Keslinger Road, P.O. Box 393, LaFox, Illinois 60147-0393, Attention: Secretary; telephone (630) 208-2200.

 

If you want to receive separate copies of our proxy statements and annual reports to stockholders in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker or other nominee record holder, or you may contact us at the above address or telephone number.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who may be deemed to own beneficially more than 10 percent of our stock to file initial reports of ownership and reports of changes in ownership with the SEC and NASDAQ. Executive officers, directors and greater than 10 percent beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such forms furnished to us and written representations from our executive officers and directors, we believe that during fiscal 2018, all Section 16(a) filing requirements applicable to our executive officers, directors and greater than 10 percent beneficial owners were complied with on a timely basis.

 

Code of Conduct and Ethics

 

We have adopted a written code of conduct and ethics that applies to all directors, officers and employees, including the Chief Executive Officer and Chief Financial Officer. A current copy of the code is posted on our website, which is located at www.rell.com under “Investor Relations” and may be obtained without charge from our Corporate Secretary, Richardson Electronics, Ltd., 40W267 Keslinger Road, P.O. Box 393, LaFox, Illinois 60147-0393. In addition, we intend to post on our website all disclosures that are required by law or NASDAQ listing standards concerning any amendments to, or waivers from, any provision of the code.

 

Our policies and practices include ethical and legal standards that must be followed by employees in conducting our business. Compliance with laws and regulations is specifically required. Every employee has the right and duty to report to the Company, to the extent not contrary to local law, any conduct which does not conform to these ethical and legal standards. We established the Richardson Hot Line to receive reports of possible wrongdoing and to answer questions about business conduct. Calls go directly to our Internal Audit Representative, or Audit Committee Representative.

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Also, employees may report violations directly to appropriate government officials. Hotline posters explaining the procedure for making and handling Hot Line/Open Line calls are posted in our facilities and on our intranet for all employees to review. Employees at any level can call directly when they have a business conduct issue, without fear of reprisal.

 

Stockholder Communications

 

Stockholders may communicate with our Board of Directors by writing to Richardson Electronics, Ltd., Board of Directors, 40W267 Keslinger Road, P.O. Box 393, LaFox, Illinois 60147-0393.

 

Other Matters before the Annual Meeting

 

As of the date of this proxy statement, we know of no other business likely to be brought before the meeting. If other matters do come before the meeting, the persons named in the form of proxy or their substitute will vote said proxy according to their best judgment.

 

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ANNEX I - AMENDMENT TWO TO THE RICHARDSON ELECTRONICS, LTD 2011 LONG-TERM INCENTIVE PLAN

 

The Board of Directors of RICHARDSON ELECTRONICS, LTD., a Delaware corporation, does hereby certify the amendment of the Richardson Electronics, Ltd. 2011 Long-Term Incentive Plan (the “Plan”), effective August 23, 2018, subject to stockholders' approval, as follows:

 

1.       Section 2.2 of the Plan is deleted in its entirety and replaced with the following:

 

Stock Subject to the Plan. Subject to adjustment in accordance with Section 5.2, two million five hundred thousand (2,500,000) shares of Stock (the “Maximum Plan Shares”) are hereby reserved exclusively for issuance upon exercise, settlement, or payment pursuant to Awards, all or any of which may be pursuant to any one or more Award, including without limitation, Incentive Stock Options. Options and Stock Appreciation Rights awarded shall reduce the Maximum Plan Shares available for Awards by one share for every one share subject to such Award. Full value awards (all Awards other than Options and Stock Appreciation Rights) settled in shares of Stock shall reduce the Maximum Plan Shares available for Awards by two shares for every one share awarded. Shares of Stock shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash. The shares of Stock attributable to the nonvested, unpaid, unexercised, unconverted or otherwise unsettled portion of any Award that is forfeited or cancelled or expires or terminates for any reason without becoming vested, paid, exercised, converted or otherwise settled in full and shares of stock deducted or withheld to satisfy tax withholding (other than shares of Stock that are withheld from a Stock Award upon vesting) will again be available for purposes of the Plan.

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ANNEX II - RICHARDSON ELECTRONICS, LTD 2011 LONG-TERM INCENTIVE PLAN SECTION I. DEFINITIONS

 

1.1 Definitions. Whenever used herein, the masculine pronoun will be deemed to include the feminine, and the singular to include the plural, unless the context clearly indicates otherwise, and the following capitalized words and phrases are used herein with the meaning thereafter ascribed:

 

(a) “Affiliate” means:

 

(1) Any Subsidiary or Parent;

 

(2) An entity that directly or through one or more intermediaries controls, is controlled by, or is under common control with the Company, as determined by the Company; or

 

(3) Any entity in which the Company has such a significant interest that the Company determines it should be deemed an “Affiliate”, as determined in the sole discretion of the Company.

 

(b) “Award Agreement” means any written agreement, contract, or other instrument or document as may from time to time be designated by the Company as evidencing an Award granted under the Plan.

 

(c) “Award Program” means a written program established by the Committee, pursuant to which Awards are granted under the Plan under uniform terms, conditions and restrictions set forth in such written program.

 

(d) “Awards” means, collectively, Cash Performance Awards, Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, and Other Stock-Based Awards.

 

(e) “Board of Directors” means the board of directors of the Company.

 

(f) “Cash Performance Award” means an Award described in Section 3.5 that is settled in cash and does not have a value that is derivative of the value of, determined by reference to a number of shares of, or determined by reference to dividends payable on, Stock.

 

(g) “Code” means the Internal Revenue Code of 1986, as amended.

 

(h) “Committee” means the committee appointed by the Board of Directors to administer the Plan; provided that, if no such committee is appointed, the Board of Directors in its entirety shall constitute the Committee. The Committee shall consist solely of two or more members of the Board of Directors who are both “outside directors” as defined in Treas. Reg. § 1.162-27(e) as promulgated by the Internal Revenue Service and “non-employee directors” as defined in Rule 16b-3(b)(3) as promulgated under the Exchange Act, and if applicable, who satisfy the requirements of the national securities exchange or nationally recognized quotation or market system on which the Stock is then traded. Notwithstanding the foregoing, with respect to Awards granted by an officer or officers of the Company and/or the Chairperson of the Compensation Committee pursuant to Section 2.3(b), the “Committee” as used in the Plan shall mean such officer or officers and/or such Chairperson, unless the context would clearly indicate otherwise.

 

(i) “Company” means Richardson Electronics, Ltd, a Delaware corporation.

 

(j) “Disability” unless otherwise defined by the Committee in the applicable Award Agreement or Award Program, has the same meaning as provided in the long-term disability plan or policy maintained or, if applicable, most recently maintained, by the Company or, if applicable, any Affiliate of the Company for the Participant. If no long-term disability plan or policy was ever maintained on behalf of the Participant or, if the determination of Disability relates to an Incentive Stock Option, Disability means that condition described in Code Section 22(e)(3), as amended from time to time. In the event of a dispute, the determination of Disability will be made by the Committee and will be supported by advice of a physician competent in the area to which such Disability relates.

 

(k) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

 

(l) “Exercise Price” means the exercise price per share of Stock purchasable under an Option.

 

(m) “Fair Market Value” refers to the determination of the value of a share of Stock as of a date, determined as follows:

 

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(1) if the shares of Stock are actively traded on any national securities exchange or any nationally recognized quotation or market system (including, without limitation Nasdaq), Fair Market Value shall mean the price at which Stock shall have been sold on such date or on the trading day immediately preceding such date, as reported by any such exchange or system selected by the Committee on which the shares of Stock are then traded;

 

(2) if the shares of Stock are not actively traded on any such exchange or system, Fair Market Value shall mean the price for the Stock on such date, or on the trading day immediately preceding such date, as reported by such exchange or system; or

 

(3) if the shares of Stock are not actively traded or reported on any exchange or system on such date or on the business day immediately preceding such date, Fair Market Value shall mean the fair market value of a share of Stock as determined by the Committee taking into account such facts and circumstances deemed to be material by the Committee to the value of the Stock in the hands of the Participant.

 

Notwithstanding the foregoing, for purposes of Paragraph (1), (2), or (3) above, the Committee may use the closing price as of the indicated date, the average price or value as of the indicated date or for a period certain ending on the indicated date, the price determined at the time the transaction is processed, the tender offer price for shares of Stock, or any other method which the Committee determines is reasonably indicative of the fair market value of the Stock; provided, however, that for purposes of granting Nonqualified Stock Options or Stock Appreciation Rights, Fair Market Value of Stock shall be determined in accordance with the requirements of Code Section 409A, and for purposes of granting Incentive Stock Options, Fair Market Value of Stock shall be determined in accordance with the requirements of Code Section 422.

 

(n) “Incentive Stock Option” means an incentive stock option within the meaning of Section 422 of the Internal Revenue Code.

 

(o) “Nonqualified Stock Option” means a stock option that is not an Incentive Stock Option.

 

(p) “Option” means a Nonqualified Stock Option or an Incentive Stock Option.

 

(q) “Other Stock-Based Award” means an Award described in Section 3.4 that has a value that is derivative of the value of, determined by reference to a number of shares of, or determined by reference to dividends payable on, Stock and may be settled in cash or in Stock. Other Stock-Based Awards may include, but not be limited to, grants of Stock, grants of rights to receive Stock in the future, or dividend equivalent rights.

 

(r) “Over 10% Owner” means an individual who at the time an Incentive Stock Option to such individual is granted owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its Parent or Subsidiaries, determined by applying the attribution rules of Code Section 424(d).

 

(s) “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, with respect to Incentive Stock Options, at the time of the granting of the Option, each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A Parent shall include any entity other than a corporation to the extent permissible under Section 424(f) or regulations and rulings thereunder.

 

(t) “Participant” means an individual who receives an Award hereunder.

 

(u) “Performance Goals” means any one or more of the following performance goals, intended by the Committee to constitute objective goals for purposes of Code Section 162(m), either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or Affiliate, either individually, alternatively or in combination, and measured either quarterly, annually or cumulatively over a period of quarters or years, on an absolute basis or relative to a pre-established target, to previous quarters’ or years’ results or to a designated comparison group, in each case as specified by the Committee in the Award:

(i)    earnings per share;

(ii)    book value per share;

(iii)    operating cash flow;

(iv)    free cash flow:

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(v)    cash flow return on investments;

(vi)    cash available;

(vii)    net income (before or after taxes);

(viii)    revenue or revenue growth;

(ix)    total shareholder return;

(x)    return on invested capital;

(xi)    return on shareholder equity;

(xii)    return on assets;

(xiii)    return on common book equity;

(xiv)    market share;

(xv)    economic value added;

(xvi)    operating margin;

(xvii)    profit margin;

(xviii)    stock price;

(xix)    operating income;

(xx)    EBIT or EBITDA;

(xxi)    expenses or operating expenses;

(xxii)    productivity of employees as measured by revenues, costs, or earnings per employee;

(xxiii)    working capital;

(xxiv)    improvements in capital structure;

(xxv)    cost reduction goals; or

(xxvi)    any combination of the foregoing.

The Committee may appropriately adjust any evaluation of performance under a Performance Goal to remove the effect of equity compensation expense under FAS 123R; amortization of acquired technology and intangibles; asset write-downs; litigation or claim judgments or settlements; changes in or provisions under tax law, accounting principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs; discontinued operations; and any items that are extraordinary, unusual in nature, non-recurring or infrequent in occurrence, except where such action would result in the loss of the otherwise available exemption of the Award under Section 162(m) of the Code, if applicable.

 

(v) “Performance Period” means, with respect to an Award, a period of time within which the Performance Goals relating to such Award are to be measured. The Performance Period will be established by the Committee at the time the Award is granted.

 

(w) “Plan” means the Richardson Electronics 2011 Long-Term Incentive Plan.

 

(x) “Separation from Service” shall mean a termination of a Participant’s employment or other service relationship with the Company, subject to the following requirements:

 

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(1) in the case of a Participant who is an employee of the Company, a termination of the Participant’s employment where either (A) the Participant has ceased to perform any services for the Company and all affiliated companies that, together with the Company, constitute the “service recipient” within the meaning of Code Section 409A (collectively, the “Service Recipient”) or (B) the level of bona fide services the Participant performs for the Service Recipient after a given date (whether as an employee or as an independent contractor) permanently decreases (excluding a decrease as a result of military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the Participant retains a right to reemployment with the Service Recipient under an applicable statute or by contract) to no more than twenty percent (20%) of the average level of bona fide services performed for the Service Recipient (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of service if the Participant has been providing services to the Service Recipient for less than 36 months); or

 

(2) in the case of a Participant who is an independent contractor engaged by the Service Recipient, a termination of the Participant’s service relationship with the Service Recipient either (A) upon the expiration of the contract (or in the case of more than one contract, all contracts) under which services are performed for the Service Recipient if the expiration constitutes a good-faith and complete termination of the contractual relationship; or (B) if, with respect to amounts payable to the Participant under an Award upon the termination of the independent contractor’s relationship with the Service Recipient, no amount will be paid to the Participant before at least twelve (12) months after the day on which the contract expires under which the Participant performs services for the Service Recipient (or, in the case of more than one contract, all such contracts expire) and no amount payable to the Participant on that date will is actually paid to the Participant if, after the expiration of the contract (or contracts) and before that date, the Participant performs services for the Service Recipient as an independent contractor or an employee; or

 

(3) in any case, as may otherwise be permitted under Code Section 409A.

 

(y) “Stock” means the Company’s common stock.

 

(z) “Stock Appreciation Right” means a stock appreciation right described in Section 3.3.

 

(aa) “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the relevant time, each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. A “Subsidiary” shall include any entity other than a corporation to the extent permissible under Section 424(f) or regulations or rulings thereunder.

 

(bb) “Termination of Employment” means the termination of the employment relationship between a Participant and the Company and its Affiliates, regardless of whether severance or similar payments are made to the Participant for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, Disability or retirement. The Committee will, in its absolute discretion, determine the effect of all matters and questions relating to a Termination of Employment as it affects an Award, including, but not by way of limitation, the question of whether a leave of absence constitutes a Termination of Employment.

 

SECTION 2 THE LONG-TERM INCENTIVE PLAN

 

2.1 Purpose of the Plan. The Plan is intended to (a) provide incentives to certain officers, employees, directors, consultants, and other service providers of the Company and its Affiliates to stimulate their efforts toward the continued success of the Company and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the Company; (b) encourage stock ownership by certain officers, employees, directors, consultants, and other service providers by providing them with a means to acquire a proprietary interest in the Company, acquire shares of Stock, or to receive compensation which is based upon appreciation in the value of Stock; and (c) provide a means of obtaining, rewarding and retaining officers, employees, directors, consultants, and other service providers.

 

2.2 Stock Subject to the Plan. Subject to adjustment in accordance with Section 5.2, one million five hundred thousand (1,500,000) shares of Stock (the “Maximum Plan Shares”) are hereby reserved exclusively for issuance upon exercise, settlement, or payment pursuant to Awards, all or any of which may be pursuant to any one or more Award, including without limitation, Incentive Stock Options. Options and Stock Appreciation Rights awarded shall reduce the Maximum Plan Shares available for Awards by one share for every one share subject to such Award. Full value awards (all Awards other than Options and Stock Appreciation Rights) settled in shares of Stock shall reduce the Maximum Plan Shares available for Awards by two shares for every one share awarded. Shares of Stock shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash. The shares of Stock attributable to the nonvested, unpaid, unexercised, unconverted or otherwise unsettled portion of any Award that is forfeited or cancelled or expires or terminates for any reason without becoming vested, paid, exercised, converted or otherwise settled in full and shares of stock deducted or withheld to satisfy tax withholding (other than shares of Stock that are withheld from a Stock Award upon vesting) will again be available for purposes of the Plan.

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2.3 Administration of the Plan.

 

(a) The Plan is administered by the Committee. The Committee has full authority in its discretion to determine the officers, employees, directors, consultants, and other service providers of the Company or its Affiliates to whom Awards will be granted and the terms and provisions of Awards, subject to the Plan. Subject to the provisions of the Plan, the Committee has full and conclusive authority to interpret the Plan; to prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the respective Award Agreements and Award Programs and to make all other determinations necessary or advisable for the proper administration of the Plan. The Committee’s determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, Awards under the Plan (whether or not such persons are similarly situated). The Committee’s decisions are final and binding on all Participants. Each member of the Committee shall serve at the discretion of the Board of Directors and the Board of Directors may from time to time remove members from or add members to the Committee. Vacancies on the Committee shall be filled by the Board of Directors.

 

(b) Notwithstanding any other provision of this Plan, the Committee may by resolution authorize one or more officers of the Company to do one or both of the following: (1) designate individuals (other than officers or directors of the Company or any Affiliate who are subject to Section 16 of the Exchange Act) to receive Awards under the Plan, and (2) determine the number of shares of Stock subject to such Awards; provided however, that the resolution shall specify the total number of shares of Stock that may be granted subject to such Awards.

 

2.4 Eligibility and Limits. Awards may be granted only to officers, employees, directors, consultants, and other service providers of the Company or any Affiliate of the Company; provided, however, that an Incentive Stock Option may only be granted to an employee of the Company or any Parent or Subsidiary. In the case of Incentive Stock Options, the aggregate Fair Market Value (determined as of the date an Incentive Stock Option is granted) of Stock with respect to which stock options intended to meet the requirements of Code Section 422 become exercisable for the first time by an individual during any calendar year under all plans of the Company and its Parents and Subsidiaries may not exceed $100,000; provided further, that if the limitation is exceeded, the Incentive Stock Option(s) which cause the limitation to be exceeded will be treated as Nonqualified Stock Option(s). To the extent required under Section 162(m) of the Code and the regulations thereunder, as applicable, for compensation to be treated as qualified performance-based compensation, subject to adjustment in accordance with Section 5.2, the maximum number of shares of Stock with respect to which (a) Options, (b) Stock Appreciation Rights, or (c) other Awards (other than Other Stock-Based Awards that are payable in cash or Cash Performance Awards), to the extent they are granted with the intent that they qualify as qualified performance-based compensation under Section 162(m) of the Code, may be granted during any calendar year to any employee may not exceed two hundred thousand (200,000), and the maximum aggregate dollar amount that may be paid in any calendar year to any employee with respect to Other Stock-Based Awards that are payable in cash and Cash Performance Awards may not exceed Two Million Dollars ($2,000,000). If, after grant, an Option is cancelled, the cancelled Option shall continue to be counted against the maximum number of shares for which options may be granted to an employee as described in this Section 2.4. If an Option or Stock Appreciation Right is deemed to be cancelled as described in the preceding sentence, the Option or Stock Appreciation Right that is deemed to be canceled and the Option or Stock Appreciation Right that is deemed to be granted shall both be counted against the maximum number of shares for which Options or Stock Appreciation Rights may be granted to an employee as described in this Section 2.4.

 

SECTION 3 TERMS OF AWARDS

 

3.1 Terms and Conditions of All Awards.

 

(a) The number of shares of Stock as to which an Award may be granted or the amount of an Award will be determined by the Committee in its sole discretion, subject to the provisions of Section 2.2 as to the total number of shares available for grants under the Plan and subject to the limits in Section 2.4.

 

(b) Each Award will either be evidenced by an Award Agreement in such form and containing such terms, conditions and restrictions as the Committee may determine to be appropriate, including without limitation, Performance Goals or other performance criteria, if any, that must be achieved as a condition to vesting or settlement of the Award, or be made subject to the terms of an Award Program, containing such terms, conditions and restrictions as the Committee may determine to be appropriate, including without limitation, Performance Goals or other performance criteria, if any, that must be achieved as a condition to vesting or settlement of the Award. Performance Goals, if any, shall be established before twenty-five percent (25%) of the Performance Period has elapsed, but in no event later than within ninety (90) days after the first day of a Performance Period. At the time any Performance Goals are established, the outcome as to whether the Performance Goals will be met must be substantially uncertain. If any Performance Goals are established as a condition to vesting or settlement of an Award and such Performance Goal is not based solely on the increase in the Fair Market Value of the Stock, the Committee shall certify in writing that the applicable Performance Goals were in fact satisfied before such Award is vested or settled, as applicable. Each Award Agreement or Award Program is subject to the terms of the Plan and any provisions contained in the Award Agreement or Award Program that are inconsistent with the Plan are null and void. To the extent an Award is subject to Performance Goals with the intent that the Award constitute performance-based compensation under Code Section 162(m), the Committee shall comply with all applicable requirements under Code Section 162(m) and the rules and regulations promulgated thereunder in granting, modifying, and settling such Award. The Committee may, but is not required to, structure any Award so as to qualify as performance-based compensation under Code Section 162(m).

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(c) The date as of which an Award is granted will be the date on which the Committee has approved the terms and conditions of the Award and has determined the recipient of the Award and the number of shares, if any, covered by the Award, and has taken all such other actions necessary to complete the grant of the Award or such later date as may be specified in the approval of such Award.

 

(d) Any Award may be granted in connection with all or any portion of a previously or contemporaneously granted Award. Exercise or vesting of an Award granted in connection with another Award may result in a pro rata surrender or cancellation of any related Award, as specified in the applicable Award Agreement or Award Program.

 

(e) Awards are not transferable or assignable except by will or by the laws of descent and distribution governing the State in which the Participant was domiciled at the time of the Participant’s death, and are exercisable, during the Participant’s lifetime, only by the Participant; or in the event of the Disability of the Participant, by the legal representative of the Participant; or in the event of death of the Participant, by the legal representative of the Participant’s estate or if no legal representative has been appointed within ninety (90) days of the Participant’s death, by the person(s) taking under the laws of descent and distribution governing the State in which the Participant was domiciled at the time of the Participant’s death; except to the extent that the Committee may provide otherwise as to any Awards other than Incentive Stock Options.

 

(f) After the date of grant of an Award, the Committee may, in its sole discretion, modify the terms and conditions of an Award, except to the extent that such modification would adversely affect the rights of a Participant under the Award (except as otherwise permitted under the Plan or Award) or would be inconsistent with other provisions of the Plan.

 

3.2 Terms and Conditions of Options. Each Option granted under the Plan must be evidenced by an Award Agreement. At the time any Option is granted, the Committee will determine whether the Option is to be an Incentive Stock Option described in Code Section 422 or a Nonqualified Stock Option, and the Option must be clearly identified as to its status as an Incentive Stock Option or a Nonqualified Stock Option. Incentive Stock Options may only be granted to employees of the Company or any Subsidiary or Parent. At the time any Incentive Stock Option granted under the Plan is exercised, the Company will be entitled to legend the certificates representing the shares of Stock purchased pursuant to the Option to clearly identify them as representing the shares purchased upon the exercise of an Incentive Stock Option. An Incentive Stock Option may only be granted within ten (10) years from the earlier of the date the Plan is adopted or approved by the Company’s stockholders.

 

(a) Option Price. Subject to adjustment in accordance with Section 5.2 and the other provisions of this Section 3.2, the Exercise Price must be as set forth in the applicable Award Agreement, but in no event may it be less than the Fair Market Value on the date the Option is granted. With respect to each grant of an Incentive Stock Option to a Participant who is an Over 10% Owner, the Exercise Price may not be less than one hundred and ten percent (110%) of the Fair Market Value on the date the Option is granted.

 

(b) Option Term. Any Incentive Stock Option granted to a Participant who is not an Over 10% Owner is not exercisable after the expiration of ten (10) years after the date the Option is granted. Any Incentive Stock Option granted to an Over 10% Owner is not exercisable after the expiration of five (5) years after the date the Option is granted. The term of any Nonqualified Stock Option shall be as specified in the applicable Award Agreement.

 

(c) Payment. Payment for all shares of Stock purchased pursuant to exercise of an Option will be made in any form or manner authorized by the Committee in the Award Agreement or by amendment thereto, including, but not limited to, cash, cash equivalents, or, if the Award Agreement provides, but in any case subject to such procedures or restrictions as the Committee may impose:

 

(i) by delivery to the Company of a number of shares of Stock owned by the holder having an aggregate Fair Market Value of not less than the product of the Exercise Price multiplied by the number of shares the Participant intends to purchase upon exercise of the Option on the date of delivery;

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(ii) in a cashless exercise through a broker, except if and to the extent prohibited by law as to officers and directors, including without limitation, the Sarbanes-Oxley Act of 2002, as amended; or

 

(i) by having a number of shares of Stock withheld, the Fair Market Value of which as of the date of exercise is sufficient to satisfy the Exercise Price.
(ii)

Payment must be made at the time that the Option or any part thereof is exercised, and no shares may be issued or delivered upon exercise of an Option until full payment has been made by the Participant. The holder of an Option, as such, has none of the rights of a stockholder.

 

(d) Conditions to the Exercise of an Option. Each Option granted under the Plan is exercisable by whom, at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee specifies in the Award Agreement; provided, however, that subsequent to the grant of an Option, the Committee, at any time before complete termination of such Option, may modify the terms of an Option to the extent not prohibited by the terms of the Plan, including, without limitation, accelerating the time or times at which such Option may be exercised in whole or in part, including, without limitation, upon a change in control and may permit the Participant or any other designated person to exercise the Option, or any portion thereof, for all or part of the remaining Option term, notwithstanding any provision of the Award Agreement to the contrary.

 

(e) Termination of Incentive Stock Option. With respect to an Incentive Stock Option, in the event of Termination of Employment of a Participant, the Option or portion thereof held by the Participant which is unexercised will expire, terminate, and become unexercisable no later than the expiration of three (3) months after the date of Termination of Employment; provided, however, that in the case of a holder whose Termination of Employment is due to death or Disability, one (1) year will be substituted for such three (3) month period; provided, further that such time limits may be exceeded by the Committee under the terms of the grant, in which case, the Incentive Stock Option will be a Nonqualified Option if it is exercised after the time limits that would otherwise apply. For purposes of this Subsection (e), a Termination of Employment of the Participant will not be deemed to have occurred if the Participant is employed by another corporation (or a parent or subsidiary corporation of such other corporation) which has assumed the Incentive Stock Option of the Participant in a transaction to which Code Section 424(a) is applicable.

 

(f) Special Provisions for Certain Substitute Options. Notwithstanding anything to the contrary in this Section 3.2, any Option issued in substitution for an option previously issued by another entity, which substitution occurs in connection with a transaction to which Code Section 424(a) is applicable, may provide for an exercise price computed in accordance with such Code Section and the regulations thereunder and may contain such other terms and conditions as the Committee may prescribe to cause such substitute Option to contain as nearly as possible the same terms and conditions (including the applicable vesting and termination provisions) as those contained in the previously issued option being replaced thereby.

 

(g) No Reload Grants. Options shall not be granted under the Plan in consideration for and shall not be conditioned upon the delivery of shares of Stock to the Company in payment of the exercise price and/or tax withholding obligation under any other option held by a Participant.

 

(h) No Repricing. Except as provided in Section 5.2, without the approval of the Company’s stockholders the exercise price of an Option may not be reduced after the grant of the Option and an Option may not be surrendered in consideration of, or in exchange for, the grant of a new Option having an exercise price below that of the Option that was surrendered, Stock, cash, or any other Award.

 

3.3 Terms and Conditions of Stock Appreciation Rights. Each Stock Appreciation Right granted under the Plan must be evidenced by an Award Agreement. A Stock Appreciation Right entitles the Participant to receive the excess of (1) the Fair Market Value of a specified or determinable number of shares of the Stock at the time of payment or exercise over (2) a specified or determinable price, which may not be less than the Fair Market Value on the date of grant. A Stock Appreciation Right granted in connection with an Award may only be exercised to the extent that the related Award has not been exercised, paid or otherwise settled.

 

(a) Settlement. Upon settlement of a Stock Appreciation Right, the Company must pay to the Participant, at the discretion of the Committee, the appreciation in cash or shares of Stock (valued at the aggregate Fair Market Value on the date of payment or exercise) as provided in the Award Agreement or, in the absence of such provision, as the Committee may determine.

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(b) Conditions to Exercise. Each Stock Appreciation Right granted under the Plan is exercisable or payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee specifies in the Award Agreement; provided, however, that subsequent to the grant of a Stock Appreciation Right, the Committee, at any time before complete termination of such Stock Appreciation Right, may accelerate the time or times at which such Stock Appreciation Right may be exercised or paid in whole or in part.

 

(c) No Repricing. Except as provided in Section 5.2, without the approval of the Company’s stockholders the price of a Stock Appreciation Right may not be reduced after the grant of the Stock Appreciation Right, and a Stock Appreciation Right may not be surrendered in consideration of, or in exchange for, the grant of a new Stock Appreciation Right having a price below that of the Stock Appreciation Right that was surrendered, Stock, cash, or any other Award.

 

3.4 Terms and Conditions of Other Stock-Based Awards. An Other Stock-Based Award shall entitle the Participant to receive, at a specified future date, payment of an amount equal to all or a portion of either (i) the value of a specified or determinable number of shares of Stock granted by the Committee, (ii) a percentage or multiple of the value of a specified number of shares of Stock determined by the Committee or (iii) dividend equivalents on a specified, or a determinable number, or a percentage or multiple of specified number, of shares of Stock determined by the Committee. At the time of the grant, the Committee must determine the specified number of shares of Stock or the percentage or multiple of the specified number of shares of Stock, as may be applicable; and the Performance Goals, if any, applicable to the determination of the ultimate payment value of the Other Stock-Based Award. The Committee may provide for an alternate percentage or multiple under certain specified conditions.

 

(a) Payment. Payment in respect of Other Stock-Based Awards may be made by the Company in cash or shares of Stock (valued at Fair Market Value as of the date payment is owed) as provided in the applicable Award Agreement or Award Program or, in the absence of such provision, as the Committee may determine.

 

(b) Conditions to Payment. Each Other Stock-Based Award granted under the Plan shall be payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee may specify in the applicable Award Agreement or Award Program; provided, however, that subsequent to the grant of a Other Stock-Based Award, the Committee, at any time before complete termination of such Other Stock-Based Award, may accelerate the time or times at which such Other Stock-Based Award may be paid in whole or in part.

 

3.5 Terms and Conditions of Cash Performance Awards. A Cash Performance Award shall entitle the Participant to receive, at a specified future date, payment of an amount equal to all or a portion of either (i) the value of a specified or determinable number of units (stated in terms of a designated or determinable dollar amount per unit) granted by the Committee, or (ii) a percentage or multiple of a specified amount determined by the Committee. At the time of the grant, the Committee must determine the base value of each unit; the number of units subject to a Cash Performance Award, the specified amount and the percentage or multiple of the specified amount, as may be applicable; and the Performance Goals, if any, applicable to the determination of the ultimate payment value of the Cash Performance Award. The Committee may provide for an alternate base value for each unit or an alternate percentage or multiple under certain specified conditions.

 

(a) Payment. Payment in respect of Cash Performance Awards shall be made by the Company in cash.

 

(b) Conditions to Payment. Each Cash Performance Award granted under the Plan shall be payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee may specify in the applicable Award Agreement or Award Program; provided, however, that subsequent to the grant of a Cash Performance Award, the Committee, at any time before complete termination of such Cash Performance Award, may accelerate the time or times at which such Cash Performance Award may be paid in whole or in part.

 

3.6 Treatment of Awards on Termination of Service. Except as otherwise provided by Plan Section 3.2(e), any Award under this Plan to a Participant who has experienced a Termination of Employment, Separation from Service, or termination of some other service relationship with the Company and its Affiliates may be cancelled, accelerated, paid or continued, as provided in the applicable Award Agreement or Award Program, or, as the Committee may otherwise determine to the extent not prohibited by the Plan. The portion of any Award exercisable in the event of continuation or the amount of any payment due under a continued Award may be adjusted by the Committee to reflect the Participant’s period of service from the date of grant through the date of the Participant’s Termination of Employment, Separation from Service or termination of some other service relationship or such other factors as the Committee determines are relevant to its decision to continue the Award.

 

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SECTION 4 RESTRICTIONS ON STOCK

 

4.1 Escrow of Shares. Any certificates representing the shares of Stock issued under the Plan will be issued in the Participant’s name, but, if the applicable Award Agreement or Award Program so provides, the shares of Stock will be held by a custodian designated by the Committee (the “Custodian”). Each applicable Award Agreement or Award Program providing for transfer of shares of Stock to the Custodian may require a Participant to complete an irrevocable stock power appointing the Custodian or the Custodian’s designee as the attorney-in-fact for the Participant for the term specified in the applicable Award Agreement or Award Program, with full power and authority in the Participant’s name, place and stead to transfer, assign and convey to the Company any shares of Stock held by the Custodian for such Participant, if the Participant forfeits the shares under the terms of the applicable Award Agreement or Award Program. During the period that the Custodian holds the shares subject to this Section, the Participant is entitled to all rights, except as provided in the applicable Award Agreement or Award Program, applicable to shares of Stock not so held. Any dividends declared on shares of Stock held by the Custodian must, as provided in the applicable Award Agreement or Award Program, be paid directly to the Participant or, in the alternative, be retained by the Custodian or by the Company until the expiration of the term specified in the applicable Award Agreement or Award Program and shall then be delivered, together with any proceeds, with the shares of Stock to the Participant or to the Company, as applicable.

 

4.2 Restrictions on Transfer. The Participant does not have the right to make or permit to exist any disposition of the shares of Stock issued pursuant to the Plan except as provided in the Plan or the applicable Award Agreement or Award Program. Any disposition of the shares of Stock issued under the Plan by the Participant not made in accordance with the Plan or the applicable Award Agreement or Award Program will be void. The Company will not recognize, or have the duty to recognize, any disposition not made in accordance with the Plan and the applicable Award Agreement or Award Program, and the shares so transferred will continue to be bound by the Plan and the applicable Award Agreement or Award Program.

 

SECTION 5 GENERAL PROVISIONS

 

5.1 Withholding. The Company shall deduct from all cash distributions under the Plan any taxes required to be withheld by federal, state or local government. Whenever the Company proposes or is required to issue or transfer shares of Stock under the Plan or upon the vesting of any Award, the Company has the right to require the recipient to remit to the Company an amount sufficient to satisfy any federal, state and local tax withholding requirements prior to the delivery of any certificate or certificates for such shares or the vesting of such Award. A Participant may satisfy the withholding obligation in cash, cash equivalents, or if and to the extent the applicable Award Agreement, Award Program, or Committee procedure so provides, a Participant may elect to have the number of shares of Stock he is to receive reduced by, or tender back to the Company, the smallest number of whole shares of Stock which, when multiplied by the Fair Market Value of the shares of Stock, is sufficient to satisfy federal, state and local, if any, withholding obligation arising from exercise or payment of an Award.

 

5.2 Changes in Capitalization; Merger; Liquidation.

 

(a) The number of shares of Stock reserved for the grant of Options, Stock Appreciation Rights and Other Stock-Based Awards; the number of shares of Stock reserved for issuance upon the exercise, settlement, vesting, grant or payment, as applicable, of each outstanding Option, Stock Appreciation Right, and Other Stock-Based Award (if any); the Exercise Price of each outstanding Option, the threshold price of each outstanding Stock Appreciation Right, the specified number of shares of Stock to which each outstanding Option, Stock Appreciation Right, and Other Stock-Based Award pertains, the total number of shares of Stock that may be subject to Awards granted by one or more officers of the Company and/or the Chairperson of the Compensation Committee of the Board of Directors, and the maximum number of shares as to which Options, Stock Appreciation Rights, and other Awards may be granted to an employee during any calendar year, shall be proportionately adjusted for any nonreciprocal transaction between the Company and the holders of capital stock of the Company that causes the per share value of the shares of Stock underlying an Award to change, such as a stock dividend, stock split, spinoff, rights offering, or recapitalization through a large, nonrecurring cash dividend (each, an “Equity Restructuring”).

 

(b) In the event of a merger, consolidation, reorganization, extraordinary dividend, sale of substantially all of the Company’s assets, other change in capital structure of the Company, tender offer for shares of Stock, or a change in control of the Company (as defined by the Committee in the applicable Award Agreement or Award Program), that in each case does not constitute an Equity Restructuring, the Committee may make such adjustments with respect to Awards and take such other action as it deems necessary or appropriate, including, without limitation, the substitution of new Awards, the assumption of awards not originally granted under the Plan, or the adjustment of outstanding Awards, the acceleration of Awards, the removal of restrictions on outstanding Awards, or the termination of outstanding Awards in exchange for the cash value determined in good faith by the Committee of the vested and/or unvested portion of the Award, all as may be provided in the applicable Award Agreement or Award Program or, if not expressly addressed therein, as the Committee subsequently may determine in its sole discretion. Any adjustment pursuant to this Section 5.2 may provide, in the Committee’s discretion, for the elimination without payment therefor of any fractional shares that might otherwise become subject to any Award, but except as set forth in this Section may not otherwise diminish the then value of the Award.

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(c) Notwithstanding any other provision of this Plan to the contrary, in taking any action pursuant to Subsection (a) or (b) with respect to a Nonqualified Stock Option or a Stock Appreciation Right, the Committee shall consider any provisions of Code Section 409A and the regulations thereunder that are required to be followed as a condition of the Nonqualified Stock Option and the Stock Appreciation Right not being treated as the grant of a new Option or Stock Appreciation Right or a change in the form of payment. Any adjustment described in the preceding sentence may include a substitution in whole or in part of other equity securities of the issuer and the class involved in such Equity Restructuring in lieu of the shares of Stock that are subject to the Award.

 

(d) The existence of the Plan and the Awards granted pursuant to the Plan shall not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding.

 

5.3 Awards to Non-U.S. Employees. The Committee shall have the power and authority to determine which Affiliates shall be covered by this Plan and which employees outside the United States of America shall be eligible to participate in the Plan. The Committee may adopt, amend or rescind rules, procedures or sub-plans relating to the operation and administration of the Plan to accommodate the specific requirements of local laws, procedures, and practices. Without limiting the generality of the foregoing, the Committee is specifically authorized to adopt rules, procedures and sub-plans with provisions that limit or modify rights on death, disability or retirement or on Separation from Service or Termination of Employment; available methods of exercise or settlement of an Award; payment of income, social insurance contributions and payroll taxes; the withholding procedures and handling of any stock certificates or other indicia of ownership which vary with local requirements. The Committee may also adopt rules, procedures or sub-plans applicable to particular Affiliates or locations.

 

5.4 Cash Awards. The Committee may, at any time and in its discretion, grant to any holder of an Award the right to receive, at such times and in such amounts as determined by the Committee in its discretion, a cash amount which is intended to reimburse such person for all or a portion of the federal, state and local income taxes imposed upon such person as a consequence of the receipt of the Award or the exercise of rights thereunder.

 

5.5 Compliance with Code.

 

(a) Code Section 422. All Incentive Stock Options to be granted hereunder are intended to comply with Code Section 422, and all provisions of the Plan and all Incentive Stock Options granted hereunder must be construed in such manner as to effectuate that intent.

 

(b) Code Section 409A. Except to the extent provided otherwise by the Committee, Awards under the Plan are intended to satisfy the requirements of Section 409A of the Code (and the Treasury Department guidance and regulations issued thereunder) so as to avoid the imposition of any additional taxes or penalties under Code Section 409A. If the Committee determines that an Award, Award Agreement, Award Program, payment, distribution, deferral election, transaction or any other action or arrangement contemplated by the provisions of the Plan would, if undertaken, cause a Participant to become subject to any additional taxes or other penalties under Code Section 409A, then unless the Committee provides otherwise, such Award, Award Agreement, Award Program, payment, distribution, deferral election, transaction or other action or arrangement shall not be given effect to the extent it causes such result and the related provisions of the Plan, Award Agreement, and / or Award Program will be deemed modified, or, if necessary, suspended in order to comply with the requirements of Code Section 409A to the extent determined appropriate by the Committee, in each case without the consent of or notice to the Participant.

 

5.6 Right to Terminate Employment or Service. Nothing in the Plan or in any Award Agreement confers upon any Participant the right to continue as an officer, employee, director, consultant, or other service provider of the Company or any of its Affiliates or affect the right of the Company or any of its Affiliates to terminate the Participant’s employment or services at any time.

 

5.7 Non-Alienation of Benefits. Other than as provided herein, no benefit under the Plan may be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge; and any attempt to do so shall be void. No such benefit may, prior to receipt by the Participant, be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant.

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5.8 Restrictions on Delivery and Sale of Shares; Legends. Each Award is subject to the condition that if at any time the Committee, in its discretion, shall determine that the listing, registration or qualification of the shares covered by such Award upon any securities exchange or under any state or federal law is necessary or desirable as a condition of or in connection with the granting of such Award or the purchase or delivery of shares thereunder, the delivery of any or all shares pursuant to such Award may be withheld unless and until such listing, registration or qualification shall have been effected. If a registration statement is not in effect under the Securities Act of 1933 or any applicable state securities laws with respect to the shares of Stock purchasable or otherwise deliverable under Awards then outstanding, the Committee may require, as a condition of exercise of any Option or as a condition to any other delivery of Stock pursuant to an Award, that the Participant or other recipient of an Award represent, in writing, that the shares received pursuant to the Award are being acquired for investment and not with a view to distribution and agree that the shares will not be disposed of except pursuant to an effective registration statement, unless the Company shall have received an opinion of counsel that such disposition is exempt from such requirement under the Securities Act of 1933 and any applicable state securities laws. The Company may include on certificates representing shares delivered pursuant to an Award such legends referring to the foregoing representations or restrictions or any other applicable restrictions on resale, including without limitation a right of first refusal, as the Company, in its discretion, shall deem appropriate.

 

5.9 Listing and Legal Compliance. The Committee may suspend the exercise or payment of any Award so long as it determines that securities exchange listing or registration or qualification under any securities laws is required in connection therewith and has not been completed on terms acceptable to the Committee.

 

5.10 Termination and Amendment of the Plan. The Board of Directors at any time may amend or terminate the Plan without stockholder approval; provided, however, that the Board of Directors shall obtain stockholder approval for any amendment to the Plan that , except as provided under Section 5.2 of the Plan, increases the number of shares of Stock available under the Plan, materially expands the classes of individuals eligible to receive Awards, materially expands the type of awards available for issuance under the Plan, or would otherwise require stockholder approval under the rules of the applicable exchange. Unless the Award Agreement or Award Program explicitly provides otherwise, no such termination or amendment without the consent of the holder of an Award may adversely affect the rights of the Participant under such Award.

 

5.11 Stockholder Approval. The Plan shall be submitted to the stockholders of the Company for their approval within twelve (12) months before or after the adoption of the Plan by the Board of Directors of the Company. If such approval is not obtained, any Award granted hereunder will be void.

 

5.12 Choice of Law. The laws of the State of Illinois shall govern the Plan, to the extent not preempted by federal law, without reference to the principles of conflict of laws.

 

5.13 Effective Date of Plan. The Plan shall become effective as of the date the Plan was approved by the Board of Directors, regardless of the date the Plan is signed.

 

IN WITNESS WHEREOF, the Company has executed this Plan, and the Plan has become effective as of July 19, 2011.

 

RICHARDSON ELECTRONICS, LTD.

 

 

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***Exercise Your Right to Vote***
                       
Important Notice Regarding the Availability of Proxy Materials for the
Stockholder Meeting to be Held on October 9, 2018
                       
RICHARDSON ELECTRONICS, LTD.             Meeting Information
                  Meeting Type :  Annual Meeting
                  For holders as of :  August 10, 2018
                  Date :  October 9, 2018
                  Time :  2:00 PM CDT
                  Location : Corporate Headquarters
                  40W267 Keslinger Road
                LaFox, Illinois 60147
                   
                   
                       
RICHARDSON ELECTRONICS, LTD.
MICHELLE PERRICONE
40W267 KESLINGER ROAD
P.O. BOX 393
LAFOX, IL 60147-0393
                     
            You are receiving this communication because you hold shares in the above-named company.

This is not a ballot.  You cannot use this notice to vote these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet.  You may view the proxy materials online at www.proxyvote.com or easily request a paper copy (see reverse side).


See the reverse side of this notice to obtain proxy materials and voting instructions.

           
             
             
             
             
             
             
                       

 

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– Before You Vote –
How to Access the Proxy Materials
                       
                       
Proxy Materials Available to VIEW or RECEIVE:
 
1. Form 10-K
2. Notice & Proxy Statement
 
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– How To Vote –
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Vote By Mail:   You can vote by mail by requesting a paper copy of the materials, which will include a proxy card.
 

 

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Voting Items

 

The Board of Directors recommends you vote FOR the following:
 
1 Election of Directors     
                    
       
    Nominees                  
    01 Edward J. Richardson   02 Paul J. Plante   03 Jacques Belin          
    04 James Benham    05 Kenneth Halverson   06 Robert Kluge          
 
 
The Board of Directors recommends you vote FOR proposals 2, 3 and 4.
 
2 To ratify the selection of BDO USA, LLP as the Company's independent registered public accounting firm for fiscal 2019.
 
3 To approve, on an advisory basis, the compensation of the Company's Named Executive Officers. 
 
4 To approve an amendment to the 2011 Long-Term Incentive Plan.
 
NOTE: In their discretion the Proxies are authorized to vote upon such other business as may properly come before the meeting.

 

  45  
 
    VOTE BY INTERNET - www.proxyvote.com

Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.



ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS


If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.



VOTE BY PHONE - 1-800-690-6903


Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.



VOTE BY MAIL


Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
 
 
RICHARDSON ELECTRONICS, LTD.
MICHELLE PERRICONE
40W267 KESLINGER ROAD
P.O. BOX 393
LAFOX, IL 60147-0393
     
     
     
     
         
         
         
         
         
         
         
                       
                       
                       
                       
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:   KEEP THIS PORTION FOR YOUR RECORDS  
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.   DETACH AND RETURN THIS PORTION ONLY  
                       
          For All Withhold All For All Except To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.  
 
             
The Board of Directors recommends you vote FOR the following:
                       
1. Election of Directors                  
                       
  Nominees                  
  01 Edward J. Richardson 02 Paul J. Plante 03 Jacques Belin        
  04 James Benham  05 Kenneth Halverson 06 Robert Kluge        
                       
The Board of Directors recommends you vote FOR proposals 2, 3 and 4.
                For Against Abstain  
2. To ratify the selection of BDO USA, LLP as the Company's independent registered public accounting firm for fiscal 2019.  
                 
3. To approve, on an advisory basis, the compensation of the Company's Named Executive Officers.  
                       
4. To approve an amendment to the 2011 Long-Term Incentive Plan.                                                                                                                                                                                                                                                                                                                               
                       
NOTE:   In their discretion the Proxies are authorized to vote upon such other business as may properly come before the meeting.
                       

For address change/comments, mark here.  

 

                       
(see reverse for instructions)     Yes     No    
                       
Please indicate if you plan to attend this meeting            
                 

 

Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer

 

         
         
         
Signature [PLEASE SIGN WITHIN BOX] Date   Signature (Joint Owners) Date

 

  46  
 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Form 10-K, Notice & Proxy Statement is/are available at www.proxyvote.com

 

 

RICHARDSON ELECTRONICS, LTD.