-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NV7+n9fi3zJ/V1VGzrEGpasntxRSGWkP1ByzrPcGp/fUy6cdP7e6PNiXk+Wcj12n +nY2hRf3Uyfn6fwZk8199w== 0000893877-99-000645.txt : 19991018 0000893877-99-000645.hdr.sgml : 19991018 ACCESSION NUMBER: 0000893877-99-000645 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990828 FILED AS OF DATE: 19991008 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEKTRONIX INC CENTRAL INDEX KEY: 0000096879 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 930343990 STATE OF INCORPORATION: OR FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04837 FILM NUMBER: 99725755 BUSINESS ADDRESS: STREET 1: 2660 SW PKWY CITY: WILSONVILLE STATE: OR ZIP: 97070 BUSINESS PHONE: 5036277111 MAIL ADDRESS: STREET 1: P O BOX 100 CITY: WILSONVILLE STATE: OR ZIP: 97070-1000 10-Q 1 QUARTERLY REPORT ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarter ended August 28, 1999, or, [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________________ to ________________. Commission File Number 1-4837 TEKTRONIX, INC. (Exact name of registrant as specified in its charter) OREGON 93-0343990 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 26600 SW PARKWAY WILSONVILLE, OREGON 97070-1000 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (503) 627-7111 NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] AT SEPTEMBER 25, 1999 THERE WERE 47,248,734 COMMON SHARES OF TEKTRONIX, INC. OUTSTANDING. (Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.) TEKTRONIX, INC. AND SUBSIDIARIES - -------------------------------- INDEX PAGE NO. - ----- -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Condensed Consolidated Balance Sheets - 2 August 28, 1999 and May 29, 1999 Condensed Consolidated Statements of Operations - 3 for the Quarter ended August 28, 1999 and the Quarter ended August 29, 1998 Condensed Consolidated Statements of Cash Flows - 4 for the Quarter ended August 28, 1999 and the Quarter ended August 29, 1998 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial 10 Condition and Results of Operations PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 17 Item 6. Exhibits and Reports on Form 8-K 17 SIGNATURE 18 1
TEKTRONIX, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) Aug. 28, May 29, (In thousands) 1999 1999 - ----------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 43,063 $ 39,747 Accounts receivable - net 300,916 313,274 Inventories 292,403 273,370 Other current assets 96,142 93,267 ---------- ---------- Total current assets 732,524 719,658 Property, plant and equipment - net 433,620 442,257 Deferred tax assets 55,795 56,405 Other long-term assets 143,282 141,045 ---------- ---------- Total assets $1,365,221 $1,359,365 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt $ 127,803 $ 115,687 Accounts payable 269,454 251,349 Accrued compensation 94,183 110,001 Deferred revenue 25,660 20,009 ---------- ---------- Total current liabilities 517,100 497,046 Long-term debt 150,653 150,722 Other long-term liabilities 83,026 90,035 Shareholders' equity: Common stock 150,512 143,263 Retained earnings 444,500 458,613 Accumulated other comprehensive income 19,430 19,686 ---------- ---------- Total shareholders' equity 614,442 621,562 ---------- ---------- Total liabilities and shareholders' equity $1,365,221 $1,359,365 ========== ========== The accompanying notes are an integral part of these condensed consolidated financial statements.
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TEKTRONIX, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Quarter ended Aug. 28, Aug. 29, (In thousands except for per share amounts) 1999 1998 - ---------------------------------------------------------------------------------------------- Net sales $ 436,151 $ 418,979 Cost of sales 265,195 247,511 ---------- ---------- Gross profit 170,956 171,468 Research and development expenses 49,433 51,172 Selling, general, and administrative expenses 103,180 119,658 Equity in business ventures' loss 318 7,998 Charges related to the sale of the Video and Networking division 26,100 - ---------- ---------- Operating loss (8,075) (7,360) Interest expense (4,502) (3,216) Other income - net 284 3,718 ---------- ---------- Loss before taxes (12,293) (6,858) Income tax benefit (3,811) (2,195) ---------- ---------- Net loss $ (8,482) $ (4,663) ========== ========== Net loss per share - basic and diluted $ (0.18) $ (0.09) Dividends per share $ 0.12 $ 0.12 Average shares outstanding - basic and diluted 46,991 49,475 The accompanying notes are an integral part of these condensed consolidated financial statements.
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TEKTRONIX, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Quarter ended Aug. 28, Aug. 29, (In thousands) 1999 1998 - ---------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (8,482) $ (4,663) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization expense 19,596 18,277 Charges related to the sale of the Video and Networking division 26,100 - Gain on sale of investments - (4,107) Equity in business ventures' loss 332 7,998 Changes in operating assets and liabilities: Accounts receivable 12,358 73,804 Inventories (19,033) (10,763) Other current assets (2,875) (15,181) Accounts payable (7,996) (47,389) Accrued compensation (15,818) (40,441) Other-net (2,084) 2,493 ---------- ---------- Net cash provided by (used in) operating activities 2,098 (19,972) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment (12,846) (24,188) Proceeds from sale of fixed assets 1,209 44 Proceeds from sale of investments - 6,204 ---------- ---------- Net cash used in investing activities (11,637) (17,940) CASH FLOWS FROM FINANCING ACTIVITIES Net change in short-term debt 12,116 53,170 Issuance of long-term debt - 823 Repayment of long-term debt (69) (191) Issuance of common stock 6,439 - Repurchase of common stock - (78,815) Dividends (5,631) (5,984) ---------- ---------- Net cash provided by (used in) financing activities 12,855 (30,997) ---------- ---------- Net increase (decrease) in cash and cash equivalents 3,316 (68,909) Cash and cash equivalents at beginning of period 39,747 120,541 ---------- ---------- Cash and cash equivalents at end of period $ 43,063 $ 51,632 ========== ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOWS Income taxes paid - net $ 679 $ 8,596 Interest paid 7,634 6,129 The accompanying notes are an integral part of these condensed consolidated financial statements.
4 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS BASIS OF PRESENTATION The condensed consolidated financial statements and notes have been prepared by the company without audit. Certain information and footnote disclosures normally included in annual financial statements, prepared in accordance with generally accepted accounting principles, have been condensed or omitted. Management believes that the condensed statements include all necessary adjustments, which are of a normal and recurring nature and are adequate to present financial position, results of operations and cash flows for the interim periods. The condensed information should be read in conjunction with the financial statements and notes incorporated by reference in the company's latest annual report on Form 10-K. The company's fiscal year is the 52 or 53 weeks ending the last Saturday in May. Fiscal years 2000 and 1999 are 52 weeks. SUBSEQUENT EVENT On September 22, 1999, the company announced it had reached an agreement with Xerox Corporation (Xerox) to sell the net assets of the Color Printing and Imaging division for $950.0 million in cash. The transaction is expected to close by the end of calendar 1999, subject to regulatory approval, and is expected to result in a significant after-tax gain to Tektronix. SALE OF VIDEO AND NETWORKING On August 9, 1999, the company announced it had reached an agreement to sell substantially all of the assets of its Video and Networking division to Grass Valley Group, Inc. During the first quarter of 2000, Tektronix recorded pre-tax charges of $26.1 million for losses expected to be incurred in connection with the transaction. These charges were calculated based upon the excess of the estimated net book value of net assets transferred over the proceeds, as well as asset impairments expected to be incurred as a result of the sale. On September 24, 1999, the companies closed the transaction. Tektronix received cash of $23.7 million, a note receivable of $24.5 million, and a 10% equity interest in the new company. NON-RECURRING CHARGES In the second quarter of 1999, the company announced and began to implement a series of actions (the plan) intended to align worldwide operations with current market conditions and to improve the profitability of its operations. These actions include a net reduction of approximately 15% of the company's worldwide workforce, the exit from certain facilities and the streamlining of product and service offerings. Management expects that the majority of the actions will be substantially completed by the end of the third quarter of 2000 and expects to require $36.1 million in cash to be used in connection with actions not yet completed, primarily for severance and future lease payments on abandoned facilities. Major actions are summarized by each of the three business divisions. Measurement's service business was consolidated from several depots in the United States and Europe into two depots in each of these geographies. This consolidation resulted in headcount reduction and the write-down and disposal of redundant inventory through the first quarter of 2000. Measurement closed the Bend, Oregon manufacturing facility during the third quarter of 1999 and consolidated that process into its Beaverton, Oregon facilities. This action resulted in headcount reduction and lease settlements. Measurement reduced headcount throughout the division, primarily in manufacturing. During the second quarter of 1999, Color Printing and Imaging discontinued three product lines wide format, dye sublimation and B-size solid ink. This action resulted in write-offs of disposed inventory. Color Printing and Imaging also reduced headcount throughout the division, primarily in manufacturing. During 1999, Video and Networking discontinued development, manufacturing, and sales of non-linear digital editing products sold under the Lightworks name. This decision resulted in headcount reduction, write-offs of disposed inventory, incremental sales returns and bad debts, and costs to fulfill commitments to deliver software enhancements on previously sold product. Outside of the divisions, selective 5 involuntary terminations have occurred and will occur throughout corporate functions and in the company's foreign subsidiaries through the third quarter of 2000. The company recorded pre-tax charges of $125.7 million to account for these actions, including restructuring charges of $115.8 million and other non-recurring charges of $9.9 million for related actions. The $115.8 million in restructuring charges include $27.1 million in charges to cost of sales for the write-off of excess inventory resulting from discontinued product lines and consolidation of service centers worldwide, $56.9 million in severance expense related to employee separation, $14.8 million in charges to facilities for lease cancellation fees and $17.0 million in charges to long-term assets associated with discontinued product lines. The $9.9 million for related actions include $5.1 million of expected sales returns of previously sold product, $0.8 million of bad debt expense related to existing accounts receivable that will not be collected and $4.0 million of costs to fulfill commitments to deliver software enhancements on previously sold product, all associated with exiting the non-linear digital editing business. The pre-tax charges incurred under the plan impacted the company's results of operations for the year ended May 29, 1999 as follows:
Location of charge in the consolidated statements of (In thousands) operations - -------------------------------------------------------------------------------- Severance and benefits Non-recurring charges $ 56,924 Inventory write-offs Cost of sales 27,070 Lease buy-outs and abandonment of facilities Non-recurring charges 16,942 Asset write-offs and impairments Non-recurring charges 14,804 Sales returns and allowances Net sales 5,120 Commitment for enhancements related to discontinued products Research and development expenses 4,019 Bad debt expense related to Selling, general and discontinued products administrative expenses 803 -------- $125,682 ========
The pre-tax charges incurred under the plan affected the company's financial position in the following manner:
Equipment Payables Accrued and other and other (In thousands) compensation Inventories assets liabilities - ------------------------------------------------------------------------------------------------ Original charges $ 54,680 $ 27,760 $ 18,200 $ 19,894 1999 activity: Cash paid out (20,844) - - (7,415) Non-cash disposals or write-offs - (27,070) (17,055) - Adjustments to plan 2,244 (690) (455) 4,049 --------- --------- --------- --------- Balance May 29, 1999 $ 36,080 $ - $ 690 $ 16,528 --------- --------- --------- --------- 2000 activity: Cash paid out (11,258) - - (5,272) Non-cash disposals or write-offs - - (690) - Adjustments to plan - - - - --------- --------- --------- --------- Balance August 28, 1999 $ 24,822 $ - $ - $ 11,256 ========= ========= ========= =========
6 The charge of $54.7 million in accrued compensation reflects original planned headcount reduction of 1,371 employees worldwide. This charge was increased by a net $2.2 million during the fourth quarter of 1999. The $2.2 million consists of an $8.6 million reserve for severance of an additional 282 employees worldwide across all responsibilities, offset in part by reversal of a $6.4 million reserve for pension settlement that was not needed as settlement accounting was not appropriate during the year. Headcount reduction under the current plan of reorganization now totals 1,653 employees worldwide. Approximately 1,100 employees have been terminated under the plan. Severance of $32.1 million has been paid to approximately 1,025 of these employees, while the other 75 employees will be paid severance in the second quarter of 2000. As a result of the agreement to sell the Color Printing and Imaging division, the company will need to evaluate the severance reserves to determine whether all of the remaining amounts are required. This process will take place after the transaction closes and all employees have been identified as employees of Tektronix, employees of Xerox, voluntarily separated, or to be terminated. Any excess reserve will be reversed to non-recurring charges. The $27.8 million charge to inventories includes inventories related to the consolidation of Measurement service offerings, the discontinuation of three Color Printing and Imaging product lines and the discontinuation of non-linear digital editing products sold under the Lightworks name, which were written off during the second quarter of 1999. The charge of $18.2 million for equipment and other assets includes asset impairments of $17.4 million and $0.8 million in reserve for bad debt expense. The impaired assets are primarily related to discontinued product lines in Color Printing and Imaging and Video and Networking and include manufacturing assets of $6.2 million, goodwill and other intangibles of $6.5 million, and leasehold improvements and other assets of $4.7 million. The $19.9 million charge for payables and other liabilities includes reserves for lease buy-outs and abandonment of facilities, sales returns and allowances and commitments for enhancements related to discontinued products. This reserve was increased by $4.0 million during 1999 to provide for additional costs to exit certain sales and service offices worldwide and to fulfill certain contractual commitments, partly offset by a decrease in original sales returns allowances. The $11.3 million reserve remaining at the end of the period mainly represents future lease payments on abandoned facilities that will continue over the lives of the lease contracts. RECEIVABLES On September 10, 1996, the company entered into a five-year revolving receivables purchase agreement with Citibank NA to sell, without recourse, an undivided interest of up to $50.0 million in a defined pool of trade accounts receivable. Receivables of $30.0 million were sold under this agreement as of August 28, 1999 and are therefore not reflected in the accounts receivable balance in the accompanying Condensed Consolidated Balance Sheet. INVENTORIES Inventories consisted of:
Aug. 28, May 29, (In thousands) 1999 1999 - -------------------------------------------------------------------------------- Materials and work in process $ 119,117 $ 118,624 Finished goods 173,286 154,746 ---------- ---------- Inventories $ 292,403 $ 273,370 ========== ==========
7 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of:
Aug. 28, May 29, (In thousands) 1999 1999 - -------------------------------------------------------------------------------- Land $ 5,930 $ 5,764 Buildings 256,315 255,314 Machinery and equipment 587,552 591,210 ---------- ---------- 849,797 852,288 Accumulated depreciation and amortization (416,177) (410,031) ---------- ---------- Property, plant and equipment - net $ 433,620 $ 442,257 ========== ==========
COMPREHENSIVE INCOME (LOSS) Comprehensive loss and its components, net of tax, are as follows:
Quarter ended Aug. 28, Aug. 29, (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Net loss $ (8,482) $ (4,663) Other comprehensive income (loss): Currency translation adjustment, net of taxes of $33 and $2,327 (50) (3,491) Unrealized loss on available-for-sale securities, net of taxes of $146 and $1,980 (217) (4,106) Reclassification adjustment for realized (gains) losses, net of taxes of $(8) and $1,643 11 (2,464) ---------- ---------- Total comprehensive loss $ (8,738) $ (14,724) ========== ==========
BUSINESS SEGMENTS The company is organized based on the products and services that it offers. During the periods reported, the company operated in three main segments: Measurement, Color Printing and Imaging, and Video and Networking. The information provided below is obtained from internal information that is provided to the company's chief operating decision-maker for the purpose of corporate management. Assets, liabilities and expenses attributable to corporate activity are not allocated to the three operating segments. Inter-segment sales are not material and are included in net sales to external customers below. Figures shown for the first quarter of 1999 have been restated to include results for the VideoTele.com product family within Measurement and exclude them from Video and Networking.
Quarter ended Aug. 28, Aug. 29, (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Net sales to external customers (by division): Measurement $ 228,034 $ 211,158 Color Printing and Imaging 155,404 155,378 Video and Networking 52,713 52,443 ---------- ---------- Net sales $ 436,151 $ 418,979 ========== ========== 8 Net sales to external customers (by region): United States $ 230,994 $ 222,797 Europe 122,343 117,138 Pacific 38,668 41,771 Japan 24,813 18,041 Americas 19,333 19,232 ---------- ---------- Net sales $ 436,151 $ 418,979 ========== ========== Operating income (loss): Measurement $ 22,658 $ 11,391 Color Printing and Imaging 3,985 6,744 Video and Networking (8,303) (17,576) Charges related to the sale of the Video and Networking division (26,100) - Business ventures' loss and other (315) (7,919) ---------- ---------- Operating loss $ (8,075) $ (7,360) ========== ==========
INCOME TAXES The provision for income tax benefit consisted of:
Quarter ended Aug. 28, Aug. 29, (In thousands) 1999 1998 - -------------------------------------------------------------------------------- United States $ (5,271) $ (7,779) State (930) (1,373) Foreign 2,390 6,957 ---------- ---------- Income tax benefit $ (3,811) $ (2,195) ========== ==========
The effective rate used to calculate income tax benefit for the first quarter of 2000 was 31%. Subsequent to the end of the quarter, the company reached an agreement with Xerox to sell the Color Printing and Imaging division. Should this transaction receive regulatory approval and successfully close, Tektronix would realize a significant gain. Management expects this gain would lead the company to exit the year with an effective tax rate of approximately 35%. The annual effective rate used to calculate 1999 income tax benefit was 32%. FUTURE ACCOUNTING CHANGES In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." The new statement will require recognition of all derivatives as either assets or liabilities on the balance sheet at fair value. The new statement is effective for fiscal year 2002, as deferred by SFAS No. 137, but early adoption is permitted. Management has not yet completed an evaluation of the effects this standard will have on the company's consolidated financial statements. 9 Item 2. Management's Discussion and Analysis of Financial - ------- ------------------------------------------------- Condition and Results of Operations ----------------------------------- GENERAL During the periods reported, the company operated in three major business divisions: Measurement, Color Printing and Imaging, and Video and Networking, as well as in five major geographies: the United States; Europe; the Americas, including Mexico, Canada and South America; the Pacific, excluding Japan; and Japan. On August 9, 1999, the company announced it had reached an agreement to sell substantially all of the assets of its Video and Networking division to Grass Valley Group, Inc. During the first quarter of fiscal year 2000, Tektronix recorded pre-tax charges of $26.1 million for losses expected to be incurred in connection with the transaction. These charges were calculated based upon the excess of the estimated net book value of net assets transferred over the proceeds, as well as asset impairments expected to be incurred as a result of the sale. On September 24, 1999, the companies closed the transaction. Tektronix received cash of $23.7 million, a note receivable of $24.5 million, and a 10% equity interest in the new company. On September 22, 1999, the company announced it had reached an agreement with Xerox Corporation to sell the net assets of the Color Printing and Imaging division for $950.0 million in cash. The transaction is expected to close by the end of calendar 1999, subject to regulatory approval, and is expected to result in a significant after-tax gain to Tektronix. NON-RECURRING CHARGES In the second quarter of fiscal year 1999, the company announced and began to implement a series of actions intended to align worldwide operations with current market conditions and to improve the profitability of its operations. The company expects that, when fully implemented, these actions will reduce ongoing annual costs by approximately $70.0 million. The actions include a net reduction of approximately 15% of the company's worldwide workforce, the exit from certain facilities and the streamlining of product and service offerings. Management expects that the majority of the actions will be substantially completed by the end of the third quarter of 2000 and expects to require $36.1 million in cash to be used in connection with actions not yet completed, primarily for severance and future lease payments on abandoned facilities. Major actions are summarized by each of the three business divisions. Measurement's service business was consolidated from several depots in the United States and Europe into two depots in each of these geographies. This consolidation resulted in headcount reduction and the write-down and disposal of redundant inventory through the first quarter of 2000. Measurement closed the Bend, Oregon, manufacturing facility during the third quarter of 1999 and consolidated that process into its Beaverton, Oregon, facilities. This action resulted in headcount reduction and lease settlements. Measurement reduced headcount throughout the division, primarily in manufacturing. During the second quarter of 1999, Color Printing and Imaging discontinued three product lines wide format, dye sublimation and B-size solid ink. This action resulted in write-offs of disposed inventory. Color Printing and Imaging also reduced headcount throughout the division, primarily in manufacturing during the third and fourth quarters of 1999. During 1999, Video and Networking discontinued development, manufacturing, and sales of non-linear digital editing products sold under the Lightworks name. This decision resulted in headcount reduction, write-offs of disposed inventory, incremental sales returns and bad debts, and costs to fulfill commitments to deliver software enhancements on previously sold product. Outside of the divisions, selective involuntary terminations have occurred and will occur throughout corporate functions and in the company's foreign subsidiaries through the third quarter of 2000. The company recorded pre-tax charges of $125.7 million to account for these actions, including restructuring charges of $115.8 million and other non-recurring charges of $9.9 million for related actions. The $115.8 million in restructuring charges include $27.1 10 million in charges to cost of sales for the write-off of excess inventory resulting from discontinued product lines and consolidation of service centers worldwide, $56.9 million in severance expense related to employee separation, $14.8 million in charges to facilities for lease cancellation fees and $17.0 million in charges to long-term assets associated with discontinued product lines. The $9.9 million for related actions include $5.1 million of expected sales returns of previously sold product, $0.8 million of bad debt expense related to existing accounts receivable that will not be collected and $4.0 million of costs to fulfill commitments to deliver software enhancements on previously sold product, all associated with exiting the non-linear digital editing business. RESULTS OF OPERATIONS 13 Weeks Ended August 28, 1999 vs. 13 Weeks Ended August 29, 1998 The company recognized a net loss of $8.5 million, or $0.18 per diluted share, during the first quarter of 2000, compared to a net loss of $4.7 million, or $0.09 per diluted share recognized during the same period of 1999. Excluding pre-tax charges of $26.1 million related to the sale of substantially all of the assets of the Video and Networking division, the company would have realized net earnings of $9.5 million, or $0.20 per diluted share. Fiscal year 1999 results included the company's 27% interest in the net loss reported by Merix Corporation for the quarter, or $0.09 per share. Sales for the first quarter of 2000 were $436.2 million, up 4% over first quarter 1999 sales of $419.0 million. Sales were up in all geographies except the Pacific, where sales declined $3.1 million or 7% from 1999. Both Measurement and Video and Networking experienced declines in sales to this region. The United States and Japan experienced the largest sales increases, up $8.2 million or 4% and $6.8 million or 38%, respectively. The increase in sales to the United States can be attributed mainly to Measurement and Video and Networking, while the increase in sales to Japan can be attributed mainly to Measurement and Color Printing and Imaging. Orders were up over 1999 across all geographies. Measurement experienced an increase in orders, while the other two business divisions experienced declines. The net result was an overall $35.9 million or 9% increase over the first quarter of 1999. The United States and Europe experienced the largest increases in orders, up $10.8 million or 5% and $9.6 million or 9%, respectively. Both Color Printing and Imaging and Video and Networking saw decreases in orders from these regions, while Measurement experienced increases. Measurement sales for the first quarter of 2000 were $228.1 million, up $16.9 million or 8% over sales of $211.2 million for the first quarter of 1999. The largest increase was in sales to the United States, up $13.2 million or 12%. The majority of the increase was realized in sales of oscilloscopes, wireless communication test products and logic analyzers. Sales of these products increased due to the launch of new products, continued growth in wireless communication infrastructure and resurgence in the semiconductor industry. Measurement orders for the quarter were $243.7 million, up $54.4 million or 29% over $189.3 million in 1999. The order increase resulted mainly from increases in orders from the United States and Europe of $28.7 million or 29% and $12.9 million or 28%, respectively. Orders from the United States were impacted by the same favorable conditions that impacted sales. European orders increased due to positive market response to the division's newly-introduced oscilloscope. Color Printing and Imaging sales were flat at $155.4 million for the first quarter of 2000 and 1999. Sales to the United States declined $7.9 million or 9% from 1999, while sales to all other regions improved. Although the division experienced a 9% increase in unit sales, lower average selling prices caused sales to the United States to decline. During the quarter, the division revised its strategy for sales to distributors, which resulted in a reduction of inventory in the distribution channel. Excluding this reduction, unit sales would have grown approximately 30%. Sales to Europe and Japan increased over 1999, up $3.4 11 million or 7% and $2.0 million or 102%, respectively. European purchases of consumables increased as the installed printer base consumed supplies included with the initial sale. Sales to Japan increased due to the availability of recently introduced Tektronix products that are more competitive with those available from Japanese vendors. Color Printing and Imaging orders for the quarter were $146.7 million, down $9.7 million or 6% from the first quarter of 1999. The decline in orders was experienced across all regions except Asia, including the Pacific and Japan, which contributed a $4.1 million combined increase. The largest order decline was realized in the United States, down $12.0 million or 13% due mainly to a large order placed in 1999 with no single comparable order placed in 2000, as well as lower average selling prices. Video and Networking sales were $52.7 million, nearly flat as compared to sales of $52.4 million for 1999. Increased sales to the United States were nearly offset by declines in sales to all other regions. The largest decline was experienced in the Pacific, where sales were down $1.7 million or 26%. Excluding sales recorded in the prior year associated with Network Displays, a product line the company exited in December 1998, Video and Networking sales increased $12.5 million or 31%. The increase was realized mainly in sales of editing products distributed under agreement with Avid Technology, Inc. (Avid) and sales of digital video storage products. Tektronix did not distribute Avid products in the first quarter of 1999. Sales of digital video storage products were particularly weak in the first quarter of 1999 as the industry delayed purchases in anticipation of the move from analog to digital transmission. Video and Networking orders were down $8.8 million or 18% compared to the first quarter of 1999. The decline was realized across all geographies except the Americas where orders were up slightly over the prior year. Excluding orders recorded in 1999 associated with Network Displays, orders increased $2.2 million or 6%. The order increase was led by orders for products distributed under agreement with Avid, offset in part by a decline in orders of system solutions and Grass Valley products. Systems solutions orders declined mainly as a result of the cancellation and delay of orders due to the transition in ownership of the business. The decline in Grass Valley product orders was mainly a result of orders delayed in anticipation of the introduction of new products. The company's gross profit decreased $0.5 million from the first quarter of 1999 to $171.0 million for the first quarter of 2000. As a percentage of net sales, gross profit decreased from 40.9% to 39.2%. Measurement gross margin improved as compared to 1999, while Color Printing and Imaging and Video and Networking margins declined. Measurement gross margin improved due to higher margins on oscilloscopes introduced during the third and fourth quarters of 1999. Color Printing and Imaging gross margin decreased mainly due to lower average selling prices and lower margins on consumables. The division experienced a temporary shift in sales mix from one that is normally weighted with more profitable solid ink consumables to one that was weighted with less profitable laser consumables. Video and Networking gross margin declined due to an unfavorable sales mix. The largest sales increase was in distributed products, which contribute lower margin than manufactured products. Operating expenses decreased by $25.9 million from the first quarter of 1999, due mainly to a decrease in selling, general and administrative expenses, as well as a decrease in losses realized on investments accounted for under the equity method. Selling, general and administrative expenses were $103.2 million for the quarter, a decrease of $16.5 million or 14% from the same period in 1999 as a result of restructuring and other cost-cutting actions taken by the company. Losses on investments accounted for under the equity method were $7.7 million or 96% lower than those recognized in the first quarter of 1999 when Merix Corporation recorded a $30.0 million restructuring charge. Research and development expenses decreased $1.7 million or 3% to $49.4 million due mainly to the discontinuation of three Color Printing and Imaging product lines and the introduction of new printer products in the second quarter of 1999. Income tax benefit increased from $2.2 million for the first quarter of 1999 to $3.8 million for the first quarter of 2000 as a result of increased losses before taxes. The effective rate used to calculate income tax benefit for first quarter of 2000 was 31%. Subsequent to the end of the quarter, the company reached an agreement with Xerox to sell the Color Printing and Imaging division. Should this transaction receive regulatory 12 approval and successfully close, Tektronix would realize a significant gain. Management expects this gain would lead the company to exit the year with an effective tax rate of approximately 35%. The annual effective rate used to calculate 1999 income tax benefit was 32%. FINANCIAL CONDITION At August 28, 1999, the company had $43.1 million of cash and cash equivalents and bank credit facilities totaling $310.3 million, of which $175.1 million was unused. Unused facilities include $119.3 million in lines of credit and $55.8 million under revolving credit agreements with United States and foreign banks. Net cash proceeds from the sale of the Color Printing and Imaging division, assuming the transaction receives regulatory approval, may be used to pay down outstanding debt, returned to shareholders through the repurchase of common stock or the payment of a special dividend, or used for other corporate purposes. The company realized a decrease in working capital of $7.2 million from the end of 1999. Current assets increased $12.9 million during the quarter, with cash and cash equivalents increasing $3.3 million, accounts receivable decreasing $12.4 million, inventory increasing $19.0 million, and other current assets increasing $2.9 million. Cash and cash equivalents increased $3.3 million while short-term debt increased $12.1 million, for a total of approximately $15.4 million of cash consumed during the quarter. Cash requirements included capital expenditures of $12.8 million, severance of $11.3 million, dividends of $5.6 million, and other operating, investing and financing requirements. Accounts receivable decreased and inventory increased during the quarter due to an overall sequential sales decline. Other current assets increased primarily from an increase in net current tax benefits due to timing differences on taxes related to restructuring actions and the tax benefit related to the net loss realized during the quarter. Current liabilities increased $20.1 million during the first quarter of 2000, with an increase in short-term debt of $12.1 million, an increase in accounts payable of $18.1 million, and an increase in deferred revenue of $5.7 million, offset in part by a decrease in accrued compensation of $15.8 million. Accounts payable increased as a result of charges related to the sale of substantially all of the assets of the Video and Networking division. The increase in deferred revenue resulted as short-term deferred revenue was transferred from long-term deferred revenue. Accrued compensation decreased mainly due to payment of severance, as well as payment of year-end accruals of incentives and commissions. Other long-term assets increased $2.2 million due mainly to increases in investments in affiliates and non-affiliates, as well as an increase in capitalized expenses. Shareholders' equity decreased by $7.1 million from the end of 1999 due to the net loss of $8.5 million, dividends of $5.6 million, a net increase of $7.3 million in paid-in capital, including issuance and forfeiture of common shares as well as a stock option exchange, a $0.2 million decrease in unrealized holding gains and a $0.1 million decrease in the accumulated currency translation adjustment. 13 YEAR 2000 UPDATE Tektronix, Inc.'s Year 2000 Program (Program) is proceeding as planned. The Program is addressing the issue of computer programs and embedded computer chips being unable to distinguish between the year 1900 and the year 2000. To improve access to business information through common, integrated computing systems across the company, Tektronix replaced worldwide business systems with an enterprise system that uses programs primarily from Oracle Corporation. This new enterprise system makes substantially all of the company's business computer systems year 2000 ready. Other information technology projects have not been delayed due to the implementation of the Year 2000 Program. Program Tektronix' Program is divided into three major sections: (1) infrastructure (information, logistics and other technology used in the company's business, including hardware and software, which is sometimes referred to as IT); (2) products (hardware and software products delivered to customers); and (3) external suppliers and providers (vendors, manufacturers and suppliers to the company). The general phases common to all sections are: (1) identification and prioritization of various systems through an extensive inventory of all items used throughout the company including customer products and services and material third party manufacturers, suppliers and vendors; (2) remediation of material systems through replacement or updates; (3) testing, including the sending, receiving and processing of various information types to ensure ongoing functionality, integrity and accuracy; and (4) contingency planning to establish alternate solutions for any material systems determined not to be year 2000 compliant. Material items are those believed by the company to have a risk involving the safety of individuals or that may cause damage to property or the environment, or affect the continuation of business activities or materially affect revenues. All phases for all three sections are substantially complete. The company's products that are not year 2000 ready have been identified, and the company has determined to what extent upgrades will be made available to make non-compliant products ready. All newly introduced products will be year 2000 ready. The company maintains a website for customers to review product readiness, including product upgrades, customer-serviceable fixes, and non-compliant products for which upgrades will not be available. Material external suppliers have been identified and prioritized. Tektronix has evaluated the preparedness of material external suppliers. Contingency plans, which are complete, address alternatives in the event that a material supplier is unable to supply materials or services due to a lack of preparedness. Evaluating supplier readiness included written representations from suppliers regarding their year 2000 readiness programs, as well as onsite assessments. Assessments were conducted using the criteria established by the High Tech Consortium, LLC, an organization consisting of approximately 15 other high technology companies that was organized for the purpose of developing review criteria and sharing the results of common supplier readiness assessments. Costs Costs associated with modifications to become year 2000 ready, as well as the total cost of the Year 2000 Program (but not including the costs of the Oracle enterprise system), are estimated as follows: (In thousands) - ----------------------------------------------------------------------- Costs incurred through August 28, 1999 $ 2,346 Estimated remaining costs 371 --------- Total costs $ 2,717 ========= The total costs associated with required modifications to become year 2000 ready, as well as the total costs of the Year 2000 Program, are not expected to be material to the 14 company's financial position or operating results. Such costs are expensed as incurred in accordance with generally accepted accounting principles. Risks The failure to correct a material year 2000 problem could result in an interruption in, or a failure of, certain normal business activities or operations. Such failures could materially and adversely affect the company's results of operations, liquidity and financial condition. Due to the general uncertainty inherent in the year 2000 problem, resulting in part from the uncertainty of the year 2000 readiness of third-party suppliers and customers, the company is unable to determine at this time whether the consequences of year 2000 failures will have a material impact on the company's results of operations, liquidity or financial condition. The Year 2000 Program is expected to significantly reduce the company's level of uncertainty about the year 2000 problem and, in particular, about the year 2000 compliance and readiness of its material third-party suppliers. The company believes that, with the implementation of new business systems and completion of the Program as scheduled, the possibility of significant interruptions of normal operations should be reduced. Tektronix believes that its most reasonably likely worst-case year 2000 scenarios would relate to problems with the systems of third parties rather than with the company's internal systems or its products. The company believes the risks are greatest with transportation supply chains and critical suppliers of materials, because the company has less control over assessing and remediating the year 2000 problems of third parties. A worst-case scenario involving a transportation supply chain or a critical supplier of materials would be the partial or complete shutdown of transportation facilities or the supplier, with the resulting inability to provide critical materials to the company on a timely basis. The company does not maintain the capability to replace most third-party materials with internal production. Contingency planning includes alternatives where efforts to work with critical suppliers to ensure year 2000 capability have not been successful. The company is not in a position to identify or to avoid all possible scenarios. Contingency planning includes assessing scenarios and taking steps to mitigate the impact of various scenarios if they were to occur. While substantially complete, contingency planning will continue through 1999, as the company learns more about the preparations and vulnerabilities of third parties regarding year 2000 issues. Due to the large number of variables involved, the company cannot provide an estimate of the damage it might suffer if any of these scenarios were to occur. The above contains forward-looking statements including, without limitation, statements relating to the company's plans, strategies, objectives, expectations, intentions and resources and are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that forward-looking statements contained in the "Year 2000 Update" should be read in conjunction with the company's disclosures under "Forward-looking Statements." FORWARD-LOOKING STATEMENTS Statements and information included in this Form 10-Q that relate to the company's goals, strategies and expectations as to future results and events are based on the company's current expectations. They constitute forward-looking statements subject to a number of risk factors that could cause actual results to differ materially from those currently expected or desired. As with many high technology companies, risk factors that could cause the Company's actual results or activities to differ materially from these forward-looking statements include, but are not limited to: worldwide economic and business conditions in the electronics industry; competitive factors, including pricing pressures, technological developments and new products offered by competitors; changes in product and sales mix, and the related effects on gross margins; the Company's ability to deliver a timely flow of competitive new products, and market acceptance of these products; the availability of parts and supplies from third-party suppliers on a timely basis and at reasonable prices; inventory 15 risks due to changes in market demand or the Company's business strategies; changes in effective tax rates; customer demand; currency fluctuations; and the fact that a substantial portion of the Company's sales are generated from orders received during the quarter, making prediction of quarterly revenues and earnings difficult. Tektronix has other risk factors in its business, including, but not limited to: the ability of Tektronix to complete the sale of the Color Printing and Imaging business and complete the strategic restructuring plan, including reducing its expenditures; the potential disruption in the company's business and to its employee base during the process of the restructuring and the sale of the Color Printing and Imaging business; the effects of year 2000 compliance issues; the timely introduction of new products scheduled during the current year, which could be affected by engineering or other development program slippage, the ability to ramp up production or to develop effective sales channels; customers' acceptance of and demand for new products; and other risk factors listed from time-to-time in the company's Securities and Exchange Commission reports and press releases. 16 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders - ------- --------------------------------------------------- At the company's annual meeting of shareholders on September 23, 1999, the shareholders voted on the election of five directors to the company's board of directors. Pauline Lo Alker, A. Gary Ames, Paul C. Ely, Jr. and Frank C. Gill were elected to serve three-year terms ending at the 2002 annual meeting of shareholders, and Ralph V. Whitworth was elected to serve a one-year term ending at the 2000 annual meeting of shareholders. The voting for each director was as follows: 41,485,108 shares voted for Pauline Lo Alker, and 319,470 withheld; 41,480,332 voted for A. Gary Ames, and 324,246 withheld; 41,482,914 voted for Paul C. Ely, Jr., and 321,664 withheld; 41,492,931 voted for Frank C. Gill, and 311,647 withheld; and 41,358,656 voted for Ralph V. Whitworth, and 445,922 withheld. The term of office of the company's other directors continued after the 1999 annual meeting of shareholders, as follows: Gerry B. Cameron, Jerome J. Meyer, and William D. Walker until the 2000 annual meeting of shareholders; and David N. Campbell, A.M. Gleason, Merrill A. McPeak until the 2001 annual meeting of shareholders. Item 6. Exhibits and Reports on Form 8-K - ------- -------------------------------- (a) Exhibits: (10) +(i) 1998 Stock Option Plan, as amended. +(ii) Non-Employee Directors Stock Compensation Plan, As Amended Through Amendment No. 2. +(iii) Non-Employee Directors' Deferred Compensation Plan, 1999 Restatement. (27) (i) Financial Data Schedule. -------------- + Compensatory Plan or Arrangement. (b) Reports on Form 8-K: Tektronix filed a report on Form 8-K on July 1, 1999 with respect to its announcement that its board of directors approved a plan to separate into two independent companies, and that it intends to sell or find a strategic alliance for its Video and Networking division, excluding the VideoTele.com business unit. 17 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. October 8, 1999 TEKTRONIX, INC. By CARL W. NEUN -------------------------------------- Carl W. Neun Senior Vice President and Chief Financial Officer 18 EXHIBIT INDEX Exhibit No. Exhibit Description ------- ------------------- (10) +(i) 1998 Stock Option Plan, as amended. +(ii) Non-Employee Directors Stock Compensation Plan, As Amended Through Amendment No. 2. +(iii) Non-Employee Directors' Deferred Compensation Plan, 1999 Restatement. (27) (i) Financial Data Schedule. -------------- + Compensatory Plan or Arrangement. EX-10.(I) 2 1998 STOCK OPTION PLAN, AS AMENDED. TEKTRONIX, INC. 1998 STOCK OPTION PLAN, [As Amended by the Board of Directors on March 17, 1999] 1. Purpose. The purpose of this Stock Option Plan (the "Plan") is to enable Tektronix, Inc. (the "Company") to attract and retain as employees, officers and directors, people of initiative and ability and to provide additional incentives to employees, officers and directors. 2. Shares Subject to the Plan. Subject to adjustment as provided below and in paragraph 8, the shares to be offered under the Plan shall consist of Common Shares of the Company, and the total number of Common Shares that may be issued under the Plan shall not exceed 4,000,000 Common Shares. The shares issued under the Plan may be authorized and unissued shares or reacquired shares. If an option granted under the Plan expires, terminates or is cancelled, the unissued shares subject to such option shall again be available under the Plan 3. Effective Date and Duration of Plan. (a) Effective Date. The Plan was adopted by the Board of Directors on June 17, 1998. The Plan shall become effective when approved by the shareholders of the Company. (b) Duration. The Plan shall continue in effect until all shares available for issuance under the Plan have been issued. The Board of Directors may suspend or terminate the Plan at any time except with respect to options then outstanding under the Plan. Termination shall not affect any outstanding options issued under the Plan. 4. Administration. (a) Board of Directors. The Plan shall be administered by the Board of Directors of the Company, which shall determine and designate from time to time the employees, officers and directors to whom options shall be granted, the amount of the options and the other terms and conditions of the grants. Subject to the provisions of the Plan, the Board of Directors may from time to time adopt and amend rules and regulations relating to administration of the Plan, accelerate any exercise date, extend any exercise period, amend any provision applicable to options and make all other determinations in the judgment of the Board of Directors as necessary or desirable for the administration of the Plan. The interpretation and construction of the provisions of the Plan and related agreements by the Board of Directors shall be final and conclusive. The Board of Directors may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any related agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect, and it shall be the sole and final judge of such expediency. (b) Committee. The Board of Directors may delegate to a committee of the Board of Directors (the "Committee") any or all authority for 1 administration of the Plan. If authority is delegated to a Committee, all references to the Board of Directors in the Plan shall mean and relate to the Committee except that only the Board of Directors may amend or terminate the Plan as provided in paragraphs 3 and 11. The Board of Directors may designate a committee of officers of the Company that shall have all authority of the Committee to grant and amend options under the Plan to employees who are not officers. 5. Types of Options; Eligibility; Limitations on Certain Awards. The Board of Directors may, from time to time, take the following action, under the Plan: (i) grant Incentive Stock Options, as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), as provided in paragraph 6(b); (ii) grant options other than Incentive Stock Options ("Non-Statutory Stock Options") as provided in paragraph 6(c); and (iii) grant foreign qualified options as provided in paragraph 7. Any such awards may be made to employees, officers and directors, of the Company or its subsidiaries, except that Incentive Stock Options can only be granted to employees. The Board of Directors shall select the participants to whom awards shall be made. The Board of Directors shall specify the action taken with respect to each participant to whom an award is made under the Plan. No participant may be granted options under the Plan for more than an aggregate of 600,000 Common Shares in connection with the hiring of the participant or 200,000 Common Shares in any fiscal year otherwise. 6. Option Grants. (a) Grant. With respect to each option grant, the Board of Directors shall determine the number of shares subject to the option, the option price, the period of the option (which shall not exceed ten years from the date of grant), the time or times at which the option may be exercised and whether the option is an Incentive Stock Option or a Non-Statutory Stock Option. (b) Incentive Stock Options. Incentive Stock Options shall be subject to the following terms and conditions: (i) No employee may be granted Incentive Stock Options under the Plan such that the aggregate fair market value, on the date of grant, of the Common Shares with respect to which Incentive Stock Options are exercisable for the first time by that employee during any calendar year under the Plan and under any other incentive stock option plan (within the meaning of Section 422 of the Code) of the Company or any parent or subsidiary of the Company exceeds $100,000. (ii) An Incentive Stock Option may be granted under the Plan to an employee possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or of any parent or subsidiary of the Company only if the option price is at least 110 percent of the fair market value of the Common Shares subject to the option on the date it is granted, as described in paragraph 6(b)(iv), and the option term does not exceed five years from the date of grant. 2 (iii) The option price per share shall be determined by the Board of Directors at the date of grant. Except as provided in paragraph 6(b)(ii), the option price shall not be less than 100 percent of the fair market value of the Common Shares covered by the Incentive Stock Option at the time the option is granted. The fair market value shall be deemed to be the closing price of the Common Shares as reported in the NYSE Composite Transactions in The Wall Street Journal on the day preceding the date the option is granted, or if there has been no sale on that date, on the last preceding date on which a sale occurred, or such other reported value of the Common Shares as shall be specified by the Board of Directors. (iv) No Incentive Stock Option shall be granted on or after June 17, 2008. (v) The Board of Directors may at any time without the consent of the optionee convert an Incentive Stock Option to a Non-Statutory Stock Option. (vi) Subject to adjustment as provided in paragraph 8, the total number of Common Shares that may be issued under the Plan upon exercise of Incentive Stock Options shall not exceed 4,000,000 shares. (c) Non-Statutory Stock Options. The option price for Non-Statutory Stock Options shall be determined by, or in the manner specified by, the Board of Directors at the time of grant. The option price may not be less than 100 percent of the fair market value of the shares on the valuation date selected by the Board of Directors. The Board of Directors may select the valuation date from among the following dates: (i) the date of commitment by the Company to grant the option; (ii) the date of approval of the option grant by the Board of Directors or (iii) the effective date of the option. The fair market value of shares covered by a Non-Statutory Stock Option shall be deemed to be the closing price of the Common Shares as reported in the NYSE Composite Transactions in The Wall Street Journal on the date preceding the valuation date, or if there has been no sale on that date, on the last preceding date on which a sale occurred, or such other reported value of the Common Shares, or average closing prices for a period of not more than 10 trading days preceding the valuation date, as shall be specified by the Board of Directors. (d) Exercise of Options. Except as provided in paragraph 6(f) or otherwise determined by the Board of Directors, no option granted under the Plan to an employee may be exercised unless at the time of such exercise the optionee is employed by the Company or any subsidiary of the Company and shall have been so employed continuously since the date such option was granted. Absence on leave or on account of illness or disability under rules established by the Board of Directors shall not, however, be deemed an interruption of employment for this purpose. Except as provided in paragraphs 6(f), 8 and 9, options granted under the Plan may be exercised from time to time over the period stated in each option in such amounts and at such times as shall be prescribed by the Board of Directors, provided that options shall not be exercised for fractional shares. Unless otherwise determined by 3 the Board of Directors, if the optionee does not exercise an option in any one year with respect to the full number of shares to which the optionee is entitled in that year, the optionee's rights shall be cumulative and the optionee may purchase those shares in any subsequent year during the term of the option. (e) Nontransferability. Each Incentive Stock Option and, unless otherwise determined by the Board of Directors, each other option granted under the Plan by its terms shall be nonassignable and nontransferable by the optionee, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or country of the optionee's domicile at the time of death, and each option by its terms shall be exercisable during the optionee's lifetime only by the optionee. (f) Termination of Employment, Disability or Death. (i) Unless otherwise determined by the Board of Directors, in the event the employment of the optionee by the Company or a subsidiary terminates for any reason other than because of death or disability or when eligible for retirement as provided in paragraphs 6(f)(ii), (iii) and (iv), the option may be exercised at any time prior to the expiration date of the option or the expiration of three months after the date of such termination of employment, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of such termination. (ii) Unless otherwise determined by the Board of Directors, in the event of the termination of an optionee's employment when eligible for retirement on or after age 55 under the Tektronix Pension Plan (other than because of death as provided in paragraph 6(f)(iv) or because of disability as provided in paragraph 6(f)(iii)), the option may be exercised at any time prior to the expiration date of the option, the expiration of one year after the date of such termination, or the expiration of three months after the optionee's death following termination, whichever is the shortest period, but only if and to the extent the optionee was entitled to exercise the option on the date of termination. The Board of Directors may, in its sole discretion, cancel any such options at any time prior to the exercise thereof unless the following conditions are met: (A) The optionee shall not render services for any organization or engage directly or indirectly in any business which, in the judgment of the Chief Executive Officer of the Company, is or becomes competitive with the Company, or which is or becomes otherwise prejudicial to or in conflict with the interests of the Company. The judgment of the Chief Executive Officer shall be based on the optionee's positions and responsibilities while employed by the Company, the optionee's post-employment responsibilities and position with the other organization or business, the extent of past, current and potential competition or conflict between the Company and the other organization or business, the effect on the Company's 4 customers, suppliers and competitors of the optionee's assuming the post-employment position, and such other considerations as are deemed relevant given the applicable facts and circumstances. The optionee shall be free, however, to purchase as an investment or otherwise, stock or other securities of such organization or business so long as they are listed upon a recognized securities exchange or traded over-the-counter, and such investment does not represent a substantial investment to the optionee or a greater than 10 percent equity interest in the organization or business. (B) The optionee shall not, without prior written authorization from the Company, disclose to anyone outside the Company, or use in other than the Company's business, any confidential information or material, as defined in the Company's employee confidentiality agreement, relating to the business of the Company, acquired by the optionee either during or after employment with the Company. (C) The optionee, pursuant to the Company's employee confidentiality agreement, shall disclose promptly and assign to the Company all right, title, and interest in any invention or idea, patentable or not, made or conceived by the optionee during employment by the Company, relating in any manner to the actual or anticipated business, research or development work of the Company and shall do anything reasonably necessary as requested by the Company to enable the Company to secure a patent where appropriate in the United States and in foreign countries. (iii) Unless otherwise determined by the Board of Directors, in the event of the termination of employment because of disability as defined in the applicable option agreement, the option shall become exercisable in full and may be exercised by the optionee at any time prior to the expiration date of the option or the expiration of one year after the date of such termination, whichever is the shorter period. (iv) Unless otherwise determined by the Board of Directors, in the event of the death of an optionee while in the employ of the Company or a subsidiary, the option shall become exercisable in full and may be exercised at any time prior to the expiration date of the option or the expiration of one year after the date of such death, whichever is the shorter period, but only by the person or persons to whom such optionee's rights under the option shall pass by the optionee's will or by the laws of descent and distribution of the state or country of domicile at the time of death. (v) The Board of Directors, at the time of grant or at any time thereafter, may extend the three-month and one-year expiration periods any length of time not later than the original expiration date of the option, and 5 may increase the portion of an option that is exercisable, subject to such terms and conditions as the Board of Directors may determine. (vi) To the extent that the option of any deceased optionee or of any optionee whose employment terminates is not exercised within the applicable period, all further rights to purchase shares pursuant to such option shall cease and terminate. (g) Purchase of Shares. Unless the Board of Directors determines otherwise, shares may be acquired pursuant to an option granted under the Plan only upon receipt by the Company of notice in writing from the optionee of the optionee's intention to exercise, specifying the number of shares as to which the optionee desires to exercise the option and the date on which the optionee desires to complete the transaction, and if required in order to comply with the Securities Act of 1933, as amended, containing a representation that it is the optionee's present intention to acquire the shares for investment and not with a view to distribution. Unless the Board of Directors determines otherwise, on or before the date specified for completion of the purchase of shares pursuant to an option, the optionee must have paid the Company the full purchase price of such shares in cash (including, with the consent of the Board of Directors, cash that may be the proceeds of a loan from the Company) or, with the consent of the Board of Directors, in whole or in part, in Common Shares of the Company valued at fair market value. The fair market value of Common Shares provided in payment of the purchase price shall be the closing price of the Common Shares as reported in the NYSE Composite Transactions in The Wall Street Journal, or such other reported value of the Common Shares as shall be specified by the Board of Directors, on the trading day preceding the date the option is exercised. No shares shall be issued until full payment therefor has been made. With the consent of the Board of Directors an optionee may request the Company to apply automatically the shares to be received upon the exercise of a portion of a stock option (even though stock certificates have not yet been issued) to satisfy the purchase price for additional portions of the option. Each optionee who has exercised an option shall immediately upon notification of the amount due, if any, pay to the Company in cash amounts necessary to satisfy any applicable federal, state and local tax withholding requirements. If additional withholding is or becomes required beyond any amount deposited before delivery of the certificates, the optionee shall pay such amount to the Company on demand. If the optionee fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the optionee, including salary, subject to applicable law. With the consent of the Board of Directors an optionee may satisfy this obligation, in whole or in part, by having the Company withhold from the shares to be issued upon the exercise that number of shares that would satisfy the withholding amount due or by delivering to the Company Common Shares to satisfy the withholding amount. Upon the exercise of an option, the number of shares reserved for issuance under the Plan shall be reduced by the number of shares issued upon exercise of the option, less the number of shares surrendered in payment of the option exercise or surrendered or withheld to satisfy withholding obligations. 6 7. Foreign Qualified Grants. Options may be granted under the Plan to such officers and employees of the Company and its subsidiaries or directors of the Company who are residing in foreign jurisdictions as the Board of Directors may determine from time to time. The Board of Directors may adopt such supplements to the Plan as may be necessary to comply with the applicable laws of such foreign jurisdictions and to afford participants favorable treatment under such laws; provided, however, that no option be granted under any such supplement with terms which are significantly more beneficial to the participants than the terms permitted by the Plan. 8. Changes in Capital Structure. If the outstanding Common Shares of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any reorganization, merger, consolidation, plan of exchange, recapitalization, reclassification, stock split-up, combination of shares or dividend payable in shares, appropriate adjustment shall be made by the Board of Directors in the number and kind of shares available for awards under the Plan. In addition, the Board of Directors shall make appropriate adjustment in the number and kind of shares as to which outstanding options, or portions thereof then unexercised, shall be exercisable, to the end that the optionee's proportionate interest is maintained as before the occurrence of such event. Notwithstanding the foregoing, the Board of Directors shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Board of Directors. Any such adjustments made by the Board of Directors shall be conclusive. In the event of dissolution of the Company or a merger, consolidation or plan of exchange affecting the Company in lieu of providing for options as provided above in this paragraph 8, the Board of Directors may, in its sole discretion, provide a 30-day period prior to such event during which optionees shall have the right to exercise options in whole or in part without any limitation on exercisability and upon the expiration of such 30-day period all unexercised options shall immediately terminate. 9. Special Acceleration in Certain Events. (a) Special Acceleration. Notwithstanding any other provisions of the Plan, a special acceleration ("Special Acceleration") of options outstanding under the Plan shall occur with the effect set forth in paragraph 9(b) at any time when any one of the following events has taken place: (i) The shareholders of the Company approve one of the following ("Approved Transactions") and either (x) such Approved Transaction is consummated or (y) the Board of Directors determines that consummation of such Approved Transaction is likely and establishes an option exercise period in connection with the consummation of the Approved Transaction: (1) Any consolidation, merger or plan of exchange involving the Company ("Merger") in which the Company is not the continuing or surviving corporation or pursuant to which Common Shares would be converted into cash, securities or other property, other than a Merger involving the Company in which the holders of 7 Common Shares immediately prior to the Merger have the same proportionate ownership of Common Shares of the surviving corporation after the Merger; or (2) Any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company or the adoption of any plan or proposal for the liquidation or dissolution of the Company; or (ii) A tender or exchange offer, other than one made by the Company, is made for Common Shares (or securities convertible into Common Shares) and such offer results in a portion of those securities being purchased and the offeror after the consummation of the offer is the beneficial owner (as determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), directly or indirectly, of at least 20 percent of the outstanding Common Shares (an "Offer"); or (iii) During any period of 12 months or less, individuals who at the beginning of such period constituted a majority of the Board of Directors cease for any reason to constitute a majority thereof unless the nomination or election of such new directors was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period. The terms used in this paragraph 9 and not defined elsewhere in the Plan shall have the same meanings as such terms have in the Exchange Act and the rules and regulations adopted thereunder. (b) Effect on Outstanding Options. Upon a Special Acceleration pursuant to paragraph 9(a), all options then outstanding under the Plan shall immediately become exercisable in full for the remainder of their terms or until earlier terminated pursuant to paragraph 8, except that a Special Acceleration shall have no effect on outstanding options if the Board of Directors determines, after consulting with its independent public accountants, that such acceleration could adversely affect the Company's eligibility to be a party to a transaction accounted for as a pooling-of-interests. 10. Corporate Mergers, Acquisitions, etc. The Board of Directors may also grant options under the Plan having terms, conditions and provisions that vary from those specified in the Plan provided that any such options are granted in substitution for, or in connection with the assumption of, existing options granted by another corporation and assumed or otherwise agreed to be provided for by the Company pursuant to or by reason of a transaction involving a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation to which the Company or a subsidiary is a party. 11. Amendment of Plan. The Board of Directors may at any time, and from time to time, modify or amend the Plan in such respects as it shall deem advisable because of changes in the law while the Plan is in effect or for any other reason. Except as provided in 8 paragraphs 6(f), 8, and 9, however, no change in an option already granted shall be made without the written consent of the holder of such option. 12. Approvals. The obligations of the Company under the Plan are subject to the approval of state and federal authorities or agencies with jurisdiction in the matter. The Company will use its best efforts to take steps required by state or federal law or applicable regulations, including rules and regulations of the Securities and Exchange Commission and any stock exchange on which the Company's shares may then be listed, in connection with the grants under the Plan. The foregoing notwithstanding, the Company shall not be obligated to issue or deliver Common Shares under the Plan if such issuance or delivery would violate applicable state or federal securities laws. 13. Employment Rights. Nothing in the Plan or any award pursuant to the Plan shall confer upon (i) any employee any right to be continued in the employment of the Company or any subsidiary or shall interfere in any way with the right of the Company or any subsidiary by whom such employee is employed to terminate such employee's employment at any time, for any reason, with or without cause, or to increase or decrease such employee's compensation or benefits, or (ii) any person engaged by the Company any right to be retained or employed by the Company or to the continuation, extension, renewal, or modification of any compensation, contract, or arrangement with or by the Company. 14. Rights as a Shareholder. The recipient of any grant under the Plan shall have no rights as a shareholder with respect to any Common Shares until the date of issue to the recipient of a stock certificate upon the exercise of an option. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. Adopted by the Board of Directors on June 17, 1998. Approved by the Shareholders on September 24, 1998. Amendment No. 1 adopted by the Board of Directors on March 17, 1999. I, H. Paul Montgomery, Assistant Secretary of Tektronix, Inc., an Oregon corporation, hereby certify that the attached 1998 Stock Option Plan, incorporating Amendment No. 1, was duly adopted by the Board of Directors on March 17, 1999. H. PAUL MONTGOMERY ----------------------------------------- H. Paul Montgomery Assistant Secretary (SEAL) September 24, 1999 ----------------------------------------- Date 9 EX-10.(II) 3 NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN TEKTRONIX, INC. NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN, AS AMENDED THROUGH AMENDMENT NO. 2 1. Purpose. The purpose of this Non-Employee Directors Stock Compensation Plan (the "Plan") is to enable Tektronix, Inc. (the "Company") to attract and retain highly qualified directors. The Company considers it desirable that members of the board of directors, who represent shareholders, be shareholders of the Company. In order to supplement the personal efforts of the directors towards this end, the Plan is intended to increase the ownership interest of non-employee directors through awards of Common Shares of the Company. The Company intends to increase the community of interest of the shareholders at large and the Company's directors and to make share ownership a dynamic influence on the attitudes of the board. 2. Administration. The Plan shall be administered by the Secretary of the Company or such other person designated by the chief executive officer of the Company (the "Administrator") who may delegate all or part of that authority and responsibility. The Administrator shall interpret the Plan, arrange for the purchase and delivery of shares, determine forfeitures and otherwise assume general responsibility for administration of the Plan. Any decision by the Administrator shall be final and binding on all parties. 3. Awards. 3.1 Each non-employee director of the Company shall participate in the Plan as follows: (a) Directors in office at the time of the adoption of the Plan shall participate as of September 22, 1990. Directors elected or appointed after the adoption of the Plan shall participate as of the later of (i) the date of their election or appointment or (ii) September 22, 1990. Employee directors who cease to be employees of the Company but continue as directors shall become participants as of the later of (i) the date they cease to be employees or (ii) September 22, 1990. (b) A director's date of participation shall be the award date. Each annual meeting of shareholders after that date shall be an anniversary date. 3.2 As of the award date a participant shall, subject to Section 3.3, be awarded Common Shares of the Company as follows: (a) For award dates prior to the 1995 annual meeting of shareholders of the Company (the "1995 Annual Meeting"), the number of shares awarded shall be stock valued at $37.500 at the time of purchase as described in Section 3.2(b). For award dates on or after the 1995 Annual Meeting, the number of shares awarded shall be stock equivalent in value to one-half of the then current annual retainer for non-employee directors of the Company (the "Annual Retainer"), multiplied by five, valued at the time of purchase as described in Section 3.2(b). In the event that the Annual Retainer is increased each participant shall be awarded in Common Shares one-half of such increase in the Annual Retainer multiplied by the number of years (including fraction of a year) remaining until the participant's next award date under Section 3.4. (b) As soon as practicable after the award date the Administrator shall deliver cash in the amount of the award and applicable commissions to one or more brokers or other third persons with instructions to purchase Common Shares of the Company in the open market. The Administrator may delay the purchase depending on market conditions and securities laws affecting open market purchases by a corporation of its own shares. (c) When several participants have the same award date, all of the stock shall be purchased and then divided equally among the participants so that each participant receives the same number of shares regardless of any changes in price that occur while purchases are being carried out. (d) When all of the stock has been purchased, certificates in the names of the participants for their respective shares shall be delivered to the Administrator. Except with respect to shares deferred pursuant to the Company's Non-employee Directors' Deferred Compensation Plan or any amendment, restatement or replacement thereof (the "Deferral Plan"), each participant shall deposit with the Administrator a blank stock power duly executed and guaranteed in a form satisfactory to the Administrator for each certificate for shares standing in the participant's name. (e) The Administrator shall hold the certificates and stock powers until the shares are vested and released from time to time as provided in Section 4.7, except that the shares shall be delivered to a trustee in accordance with instructions from the participants pursuant to the Deferral Plan. 3.3 If, assuming that the participant were reelected, a participant's term as a director would end because of age before the fifth anniversary date after an award date, the amount awarded shall be reduced by one-fifth for each anniversary date that would fall after the date the term ends. 3.4 If a participant continues to be a non-employee director after all of the shares from an award have vested, the award cycle shall be repeated for such participant. The award date for the next award shall be the date of the annual meeting of shareholders coinciding with the last anniversary date for the prior award. Each subsequent award shall be an amount of stock equivalent in value (at the time of purchase in accordance with Section 3.2(b)) to one-half of the Annual Retainer, multiplied by five subject to Section 3.3. Such stock shall be acquired, vest and otherwise be subject to all the provisions of the Plan. 2 3.5 Beginning with respect to the Annual Retainer payable for services rendered after the 1995 Annual Meeting and subject to compliance with Rule 16b-3 of the Securities and Exchange Commission, each participant may elect to receive in Common Shares, in lieu of cash payments, all of the remaining Annual Retainer not automatically awarded in Common Shares pursuant to Section 3.2(a) ("Election Shares"). Such an election shall apply with respect to all of the remaining Annual Retainer for services to be rendered in all years until the next award date under Section 3.4. Such an election shall be made prior to an award date, except that in order to implement this election procedure in accordance with Rule 16b-3 each non-employee director shall be given one opportunity to make such an election with respect to Annual Retainers expected to be received for services rendered until the next award date. Following such an election, the Administrator shall purchase Election Shares under the procedures set forth in Section 3.2. The value of the Election Shares purchased shall be equal to one-half of the Annual Retainer multiplied by five subject to Section 3.3 (or the number of years, including a fraction of a year, remaining until the participant's next award date under Section 3.4). In the event that the Annual Retainer is increased, each participant who has so elected shall receive Common Shares equal in value of one-half of such increase in the Annual Retainer multiplied by the number of years (including a fraction of a year) remaining until the participant's next award date under Section 3.4. 4. Vesting; Delivery of Shares; Forfeitures. 4.1 Subject to Sections 4.2 through 4.6, awarded shares shall vest as follows: Cumulative Percent Vested Percent -------------- ---------- Award Date 0% 0% First Anniversary Date 20 20 Second Anniversary Date 20 40 Third Anniversary Date 20 60 Fourth Anniversary Date 20 80 Fifth Anniversary Date 20 100 4.2 If a participant receives a reduced award under Section 3.3, the vesting percentages for such shares and any related Election Shares shall be accelerated so that the entire award shall vest evenly over the anniversary dates that fall on or before the date the director's term ends. For example, if the award were reduced to three-fifths of the amount of stock that would otherwise be awarded one-third of the shares would vest on each of the first three anniversary dates. If a participant receives an award for an increase in the Annual Retainer pursuant to Section 3.2(a), the vesting schedule for such shares and any related Election Shares shall be revised so that shares representing any fraction of a year shall vest on the first anniversary date and the remaining award shall vest equally over the subsequent anniversary dates that fall on or before the next award date. 3 4.3 Subject to Sections 4.5 and 4.6, the following shall apply with respect to awards to a participant whose award date is not the date of an annual meeting of shareholders: (a) The shares which would otherwise vest on the first anniversary date shall instead vest on the date six months immediately following the date certificates for the shares are delivered to the Administrator under Section 3.2(d), or one year after the date for the award, whichever is later. (b) Notwithstanding (a), if the participant's term as a director ends because of age on the first anniversary date, the shares which would otherwise vest at a later date under (a) shall instead vest on the first anniversary date. 4.4 If a participant ceases to be a non-employee director on an anniversary date, that anniversary date shall be included in determining the number of shares vested for that participant. 4.5 If a participant dies while serving as a non-employee director the participant's awarded shares scheduled to vest on the next anniversary date shall instead vest as of the date of death. 4.6 If a participant ceases, for any reason other than death, to be a non-employee director on a date other than an anniversary date, the participant's awarded shares scheduled to vest on the immediately following anniversary date shall vest as of the date the participant ceases to be a non-employee director prorata based on the number of days the participant served as a non-employee director that year. 4.7 The certificate and stock power covering vested shares (other than shares previously delivered to a trustee under the Deferral Plan) shall be delivered to the participant or in accordance with Section 6.2 as soon as practicable after the shares vest. 4.8 If a participant ceases to be a non-employee director, awarded shares remaining unvested shall be forfeited. The Administrator, acting for the participant pursuant to the blank stock power, shall transfer the unvested shares to the Company. The participant or the participant's representative shall execute any documents reasonably requested by the Administrator to facilitate the transfer. 5. Status Before Full Vesting 5.1 Each participant shall be a shareholder of record with respect to all shares awarded, whether or not vested, and shall be entitled to all of the rights of such a holder, except that a participant's share certificates shall be held by the Administrator (or a trustee pursuant to the Deferral Plan) until delivered in accordance with Section 4.7. 5.2 Any dividend checks or communications to shareholders received by the Administrator with respect to shares held by the Administrator shall 4 promptly be transmitted to the participant. The participant shall furnish to the Administrator or the Company a current mailing address for such purpose. 5.3 No participant may transfer any interest in unvested shares to any person other than the Company and the trustee pursuant to the Deferral Plan. 6. Death of a Participant. 6.1 Any vested shares held by the Administrator for a participant who has died shall be delivered as soon as practicable to the participant's beneficiary under Section 6.2. 6.2 Any vested shares to be delivered on death of a participant under Section 6.1 shall go to a participant's beneficiary in the following order of priority: (a) to the surviving beneficiary designated by the participant in writing to the Administrator; (b) to the participant's surviving spouse; or (c) to the participant's estate. 7. Election to Receive Chair and Meeting Fees in Common Shares of the Company. 7.1 Each non-employee director of the Company may elect to receive Common Shares of the Company instead of a cash payment for committee chair fees, committee meeting fees, and board meeting fees (collectively, the "Fees"). 7.2 The election shall be made by delivering a notice of election to the Company Secretary on or before December 20, and shall be effective as to all Fees earned for the next calendar year, beginning January 1 and ending December 31. Once made, an election may be terminated by notice to the Secretary on or before December 20, effective as to all fees earned for the immediately following calendar year. 7.3 As soon as reasonably practicable, but not more often than once each calendar quarter, the Administrator shall cause to be purchased Common Shares of the Company in the open market in an amount equal to the accumulated Fees since last purchase. The number of shares acquired shall be equal to the accumulated fees, less appropriate commissions and transaction fees, divided by the purchase price of the stock. The Administrator may delay purchases in accordance with paragraph 3.2(b) above, depending on market conditions and securities law requirements. In the event that shares must be purchased in a fashion requiring multiple purchases at different prices, such purchases shall be allocated in a fashion that treats each director equally. 7.4 Purchased shares shall be in the name of and distributed to the director, except that if the director has elected to defer receipt of the stock 5 pursuant to the Deferral Plan described in paragraph 3.2(d), the shares shall be delivered to the trustee in accordance with that plan. 8. Amendment or Termination; Miscellaneous. 8.1 The Board of Directors of the Company may amend or terminate the Plan at any time. No amendment or termination shall adversely affect any then outstanding award. 8.2 Subject to the rights of amendment and termination in Section 8.1, the Plan shall continue indefinitely and future awards will be made in accordance with Sections 3.1 and 3.4. 8.3 Nothing in the Plan shall create any obligation on the part of the Board of Directors of the Company to nominate any director for reelection by the shareholders. Adopted by the Board of Directors on August 16, 1990. TEKTRONIX, INC. By: ROBERT W. LUNDEEN ------------------------------------- Robert W. Lundeen Chairman of the Board Amendment No. 1 adopted by the Board of Directors on June 21, 1995. Amendment No. 2 adopted by the Board of Directors on June 24, 1999. 6 EX-10.(III) 4 NON-EMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN TEKTRONIX NON-EMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN 1999 RESTATEMENT July 1, 1999 Tektronix, Inc. an Oregon corporation P.O. Box 1000 Wilsonville, Oregon 97070 Tektronix TEKTRONIX NON-EMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN 1999 RESTATEMENT July 1, 1999 Tektronix, Inc. an Oregon corporation P.O. Box 1000 Wilsonville, Oregon 97070 Tektronix Members of the Tektronix Board of Directors who are not employees of Tektronix or an affiliate (Non-Employee Directors) are paid annual retainers and meeting fees, in cash, for service as directors of the company (Directors' Fees). They also receive shares of Tektronix's common stock (Award Shares) pursuant to the Tektronix, Inc. Non-Employee Directors Stock Compensation Plan (Stock Plan). In addition, they may elect under the Stock Plan to receive shares of Tektronix's common stock (Election Shares) in lieu of cash for the remainder of the annual retainer (Retainer Election Shares) and for all of their committee chair and meeting fees (Fee Election Shares). The unvested portion of the Award Shares is forfeited in the event the Non-Employee Directors' service on the Tektronix Board of Directors terminates prior to full vesting of the award, which is generally on the fifth anniversary of the date of the award. In order to provide greater incentives for qualified persons to serve as Non-Employee Directors, Tektronix adopts this plan to allow the Non-Employee Director to elect from time to time to defer receipt of Directors' Fees, of Award Shares, and of Election Shares. 1. Plan Administration The Chief Executive Officer of Tektronix or delegate shall appoint one or more employees of Tektronix as Administrator of the plan. The Administrator shall interpret and administer the plan and for that purpose may make, amend or revoke rules and regulations at any time. 2. Deferral Election 2.1 A Non-Employee Director may elect as provided below to defer the receipt of all or a specified part of the Directors' Fees, Award Shares, and Election Shares. An election shall be in writing on a form provided by the Administrator and shall specify the time and manner of payment of the deferred amounts in accordance with other provisions of this plan. 2.2 An election to defer Directors' Fees and Fee Election Shares shall be effective as follows: (a) Except as provided in (b) and 2.4, an election received by the Administrator on or before December 20 of any year shall be effective for Directors' Fees and Fee Election Shares payable for succeeding calendar years. (b) An initial election shall be effective for all Directors' Fees and Fee Election Shares payable after it is received if that occurs within 30 days after notice to a Director of whichever of the following is applicable: (1) Adoption of this Plan. (2) Commencement of the Director's eligibility to participate in this plan. 2.3 An election to defer Award Shares and Retainer Election Shares shall be effective as follows: (a) Except as provided in (b), (c) and 2.5, an election received by the Administrator before an annual meeting of shareholders of Tektronix shall be effective for Award Shares with an award date on or after such annual meeting and Retainer Election Shares as to which a Non-Employee Director has elected to receive Retainer Election Shares in lieu of cash payment of annual retainer fees payable for periods after such annual meeting. (b) If a Non-Employee Director is elected or appointed to the Tektronix Board of Directors, an election to defer shall be effective for all of the Award Shares awarded as of the date the Director is elected or appointed and any Retainer Election Shares the Director elects to receive in lieu of cash payments of annual retainer fees payable for periods after the date the Director is elected or appointed, if the election is received by the Administrator within 30 days after the date the Director is elected or appointed. (c) An election to defer shall be effective for the portion of the Award Shares becoming vested as of a date after the election is received by the Administrator. For this purpose, Award Shares become vested on the anniversary date, or other date, through which the Non-Employee Director must continue in service on the Board of Directors to reach an increment in the percent vested under the vesting schedule in the Stock Plan. 2.4 An election to defer Directors' Fees and Fee Election Shares shall continue in effect through the year in which the Director terminates it in writing or changes the amount deferred by submitting a new election. Such a notice or new election received on or before December 20 of any year shall be effective for succeeding calendar years and shall not affect fees deferred under the prior election. 2.5 An election to defer Award Shares and Retainer Election Shares shall continue in effect until an annual meeting of Tektronix shareholders before which the Director terminates it in writing. Such a notice of termination shall be effective for Award Shares with an award date as of such annual meeting and any subsequent awards, or Retainer Election Shares elected in lieu of cash payment of annual retainer fees payable for periods after such annual meeting, but shall not affect Retainer Election Shares deferred under the prior election. 2.6 Tektronix may withhold from any deferral or from nondeferred fees payable at the same time any amounts required by applicable law and regulations. 2.7 Deferral of Retainer Election Shares shall be controlled by elections under 2.3 and not by elections under 2.2 3. Deferred Compensation Account, Trust 3.1 Tektronix shall credit to a Director's deferred compensation account (the Account) each amount of Directors' Fees deferred by the Director under this plan. The Account shall be credited as of the day a deferred fee would otherwise have been paid to the Director. 3.2 Until full payment of a Director's Account has been made to the Director or beneficiaries under this plan, Tektronix shall credit interest to the Account as follows: (a) The interest rate for each calendar quarter shall be the yield to maturity of the most recent 10 year U.S. Treasury Notes as of the close of the quarter. (b) Interest on undistributed balances shall accrue from the date deferrals are credited under 3.1 until the last installment is paid. (c) Interest shall be added to principal during the deferral period as of the last day of each calendar quarter. Installment payments shall be calculated by dividing the adjusted principal by the number of installments to be paid. Interest during the payment period shall be added to the second and subsequent installments of principal. 3.3 Each Director's Account shall be maintained on the books of Tektronix until full payment has been made to the Director or beneficiaries under this plan. No funds shall be set aside or earmarked for the Account, which shall be purely a bookkeeping device. 3.4 The Administrator of the Stock Plan shall transfer the certificates for any Award Shares and Election Shares deferred under Section 2 to the trustee of the Tektronix Executive Compensation Trust (the Trust), which shall be the owner of record of such Award Shares and Election Shares. Dividends on deferred Award Shares and Election Shares shall be paid to the trustee of the Trust. The Investment Committee established under the Trust shall invest the dividends in a money market fund or other financial assets selected in its discretion. 4. Time and Manner of Payment 4.1 Subject to 4.6 and 5.1 the Account shall be paid or payment commenced in the next January after one of the following Payment Dates as selected under 4.3: (a) The date the Director's service on the Tektronix Board ends. (b) The date the Director reaches age 65 or a later age specified by the Director in the selection under 4.3. (c) The date that the criteria in both (a) and (b) have been met. 4.2 Subject to 4.6 and 5.1 the Account shall be paid in one of the following ways as selected under 4.3: (a) In a single lump sum. (b) In not more than five substantially equal annual installments of principal plus interest. 4.3 The time and manner of payment under 4.1 and 4.2 shall be selected by the Director as follows: (a) The selection shall be made in the deferral election. (b) The selection shall be irrevocable for the portion of the Account attributable to amounts deferred under the election in which the selection is made. (c) If the time or method of payment is different under different elections, the Account shall be appropriately divided for distribution. 4.4 The trustee of the Trust shall transfer all the deferred Award Shares and Election Shares to the Director in the next January after one of the Payment Dates described in 4.1, as selected under 4.3. At the same time the trustee shall pay the Director the amount of all dividends received on the deferred Award Shares and Election Shares, adjusted for investment returns during the period held by the Trust. 4.5 Tektronix may withhold from any payments any income tax or other amounts as required by law. 4.6 If a Director has elected to defer payment of an amount, the Administrator may in its discretion make or commence payments earlier than the deferred date if, on application by the Director, the Administrator finds that financial hardship exists because of illness, accident, disability or other unexpected event creating a financial need. 5. Death 5.1 A Director's Account and deferred Award Shares and Election Shares shall be distributable under 5.2 on the Director's death regardless of the provisions of 4 above. 5.2 On death of a Director the Account shall be paid in a single lump sum within 30 days after death. At the same time the trustee of the Trust shall distribute the Director's deferred Award Shares and Election Shares plus the dividends received on such Award Shares and Election Shares, adjusted for investment return during the period held by the Trust. Such payment and distribution shall be made to a beneficiary determined in the following order of priority: (a) To the surviving beneficiaries designated by the Director in writing to the Administrator. (b) To the Director's surviving spouse. (c) To the Director's estate. 6. Termination; Amendment 6.1 Tektronix may terminate this plan as to deferral of Directors' Fees and Fee Election Shares effective the first day of any year after notice to the Non-Employee Directors. Tektronix may terminate this plan as to deferral of Award Shares and Retainer Election Shares effective with any annual meeting of shareholders after notice to the Non-Employee Directors. Upon termination of the plan, no further deferral shall be permitted of Directors' Fees, Award Shares, or Election Shares, whichever applies. Amounts in an Account shall remain to the credit of the Account, shall continue to be credited with interest and shall be paid out in accordance with 3 and 4 above. Award Shares and Election Shares in the Trust shall continue to be held, along with dividends received on them, and distributed in accordance with 3 and 4 above. 6.2 The Board of Directors may amend this plan at any time effective after notice to the Non-Employee Directors. 6.3 If the Internal Revenue Service rules that any amounts deferred under this plan will be subject to current income tax, all amounts to which the ruling is applicable shall be paid within 30 days to the Directors. 7. Claims Procedure 7.1 Any person claiming a benefit, requesting an interpretation or ruling under the plan, or requesting information under the plan shall present the request in writing to the Administrator, who shall respond in writing as soon as practicable. 7.2 If the claim or request is denied, the written notice of denial shall state the following: (a) The reasons for denial, with specific reference to the plan provisions on which the denial is based. (b) A description of any additional material or information required and an explanation of why it is necessary. (c) An explanation of the plan's review procedure. 7.3 The initial notice of denial shall normally be given within 90 days after receipt of the claim. If special circumstances require an extension of time, the claimant shall be so notified and the time limited shall be 180 days. 7.4 Any person whose claim or request is denied or who has not received a response within 30 days may request review by notice in writing to the Administrator. The original decision shall be reviewed by the Administrator which may, but shall not be required to, grant the claimant a hearing. On review, whether or not there is a hearing, the claimant may have representation, examine pertinent documents and submit issues and comments in writing. 7.5 The decision on review shall ordinally be made within 60 days. If an extension of time is required for a hearing or other special circumstances, the claimant shall be so notified and the time limit shall be 120 days. The decision shall be in writing and shall state the reasons and the relevant plan provisions. All decisions on review shall be final and bind all parties concerned. 8. General Provisions 8.1 Subject to the rights of the Non-Employee Directors under the Trust, all amounts of deferred compensation under this plan shall remain at all times the unrestricted assets of Tektronix and the promise to pay the deferred amounts shall at all times remain unfunded as to the Directors. The rights of Directors and beneficiaries under the plan shall only be as general creditors of Tektronix. 8.2 Any notice under this plan shall be in writing or by electronic means and shall be received when actually delivered or, if mailed, when deposited postpaid as first class mail. Mail should be directed to Tektronix at the address stated in this plan, to a Director at the address stated in the Director's election or to such other address as either party may specify by notice to the other party. 8.3 The interests of a Director or beneficiary under this plan are personal and no such interest may be assigned, seized by legal process or in any way subjected to the claims of any creditor. 9. Effective Date This Restatement of the plan shall be effective July 1, 1999. Adopted June 23, 1999 TEKTRONIX, INC. By: JAMES F. DALTON ------------------------------------- James F. Dalton Executed: September 23, 1999 EX-27.(I) 5 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 3-MOS MAY-27-2000 AUG-28-1999 43,063 0 300,916 0 292,403 732,524 849,797 416,177 1,365,221 517,100 150,653 0 0 150,512 463,930 1,365,221 436,151 436,151 265,195 265,195 179,031 0 4,502 (12,293) (3,811) (8,482) 0 0 0 (8,482) (0.18) (0.18) Amount represents net accounts receivable. Amount includes retained earnings and other comprehensive income.
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