TERADYNE INC, 10-K, 1995-03-23

TERADYNE INC
10-K, 1995-03-23
INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER 1-6462
------------------------

TERADYNE, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
MASSACHUSETTS 04-2272148
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

321 HARRISON AVENUE, BOSTON, MASSACHUSETTS 02118
(Address of principal executive offices) (Zip Code)
</TABLE>

Registrant's telephone number, including area code: (617) 482-2700
------------------------

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
- --------------------------------------------- ---------------------------------------------
<S> <C>
COMMON STOCK, PAR VALUE $0.125 NEW YORK STOCK EXCHANGE
</TABLE>

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 the
filing requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or in any
amendment to this Form 10-K. / /

The aggregate market value of the voting stock held by nonaffiliates of
the registrant as of February 24, 1995 was $1,335.7 million based upon the
composite closing price of the registrant's Common Stock on the New York Stock
Exchange on that date.

The number of shares outstanding of the registrant's only class of Common
Stock as of February 24, 1995 was 36,847,959 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's proxy statement in connection with its 1995
annual meeting of shareholders are incorporated by reference into Part III.
- --------------------------------------------------------------------------------
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<PAGE> 2

TERADYNE, INC.

FORM 10-K

PART I

ITEM 1: BUSINESS

Teradyne, Inc. is a manufacturer of electronic test systems and backplane
connection systems used in the electronics and telecommunications industries.
For financial information concerning these two industry segments, see "Note L:
Industry Segment and Geographic Information" in Notes to Consolidated Financial
Statements. Unless the context indicates otherwise, the term "Company" as used
herein includes Teradyne, Inc. and all its subsidiaries.

ELECTRONIC TEST SYSTEMS

The Company designs, manufactures, markets, and services electronic test
systems and related software used by component manufacturers in the design and
testing of their products and by electronic equipment manufacturers for the
incoming inspection of components and for the design and testing of circuit
boards and other assemblies. Manufacturers use such systems and software to
increase product performance, to improve product quality, to shorten time to
market, to enhance manufacturability, to conserve labor costs, and to increase
production yields. The Company's electronic systems are also used by telephone
operating companies for the testing and maintenance of their subscriber
telephone lines and related equipment.

Electronic test systems produced by the Company include: (i) test systems
for a wide variety of semiconductors, including digital and analog integrated
circuits, (ii) test systems for circuit boards and other assemblies, and (iii)
test systems for telephone lines and networks. The Company's test systems are
all controlled by computers, and programming and operating software is supplied
both as an integral part of the product and as a separately priced enhancement.

The Company's systems are extremely complex and require extensive support
both by the customer and by the Company. Prices for the Company's systems range
from less than $100,000 to $5 million or more.

BACKPLANE CONNECTION SYSTEMS

The Company also manufactures backplane connection systems, principally for
the computer, telecommunications, and military/aerospace industries. A backplane
is a panel that supports the circuit boards in an electronic assembly and
carries the wiring that connects the boards to each other and to other elements
of a system. The Company produces both printed circuit and metal backplanes,
along with mating circuit-board connectors. Backplanes are custom-configured to
meet specific customer requirements. The Company has begun to extend the
manufacture of backplane connection systems to include the manufacture of fully
integrated electronic assemblies that incorporate backplane, card cage, cabling,
and related design and production services.

2
<PAGE> 3

MARKETING AND SALES

MARKETS

The Company sells its products across most sectors of the electronics
industry and to companies in other industries that use electronic devices in
high volume. The Company believes that it could suffer the loss of one or even a
few major customers without serious long-term adverse effects. Sales to
Motorola, Inc. were approximately 10% of net sales in 1994. No other customer
accounted for more than 10% of net sales in 1994.

Direct sales to United States government agencies accounted for less than
1% of net sales in 1994 and about 2% of net sales in 1993 and 1992. Sales are
also made within each of the Company's segments to customers who are government
contractors. About 22% of backplane connection systems sales and less than 10%
of electronic test systems sales fell into this category during 1994.

The Company's international customers are located primarily in Europe, the
Asia Pacific region, and Japan. The Company sells in these areas both directly
and through foreign sales subsidiaries. Substantially all of the Company's
manufacturing activities are conducted in the United States.

Sales to international customers accounted for 46% of net sales in 1994,
41% in 1993, and 42% in 1992. Identifiable assets of the Company's foreign
subsidiaries, consisting principally of operating assets, approximated $86.6
million at December 31, 1994, $65.0 million at December 31, 1993, and $86.0
million at December 31, 1992. Of these identifiable assets at December 31, 1994,
$42.6 million were in Europe, $40.3 million were in Japan, and $3.4 million were
in the Asia Pacific region. Since sales to international customers have little
correlation with the location of manufacture, it is not meaningful to present
operating profit by geographic area.

The Company is subject to the inherent risks involved in international
trade, such as political instability, restrictive trade policies, controls on
funds transfer, and foreign currency fluctuations. The Company attempts to
reduce the effects of currency fluctuations by hedging part of its exposed
position and by conducting some of its foreign transactions in U.S. dollars or
dollar equivalents.

DISTRIBUTION

The Company sells its electronic systems primarily through a direct sales
force. Backplane connection systems are sold by direct sales personnel as well
as by manufacturers' representatives. The Company has sales and service offices
throughout North America, Europe, the Asia Pacific region, and Japan.

COMPETITION

Competition is intense in each of the business areas that the Company
operates. In each market there are several significant competitors. Many of
these competitors have greater resources than the Company. Competition is
principally based on technical performance, equipment and service reliability,
reputation and accessibility to the vendor, and price. While relative positions
vary from year to year, the Company believes that it operates with a significant
market share position in each of its businesses.

BACKLOG

On December 31, 1994, the Company's backlog of unfilled orders for
electronic test systems and backplane connection systems was approximately
$337.8 million and $76.2 million, respectively, compared with $238.9 million and
$49.1 million, respectively, on December 31, 1993. Of the backlog at December
31, 1994, approximately 92% of the electronic test systems backlog, and
approximately 91% of the backplane connection systems backlog are expected to be
delivered in 1995. The Company's past experience indicates that a portion of
orders included in the backlog may be canceled. There are no seasonal or unusual
factors related to the backlog.

3
<PAGE> 4

RAW MATERIALS

The Company's products require a wide variety of electronic and mechanical
components. In the past, the Company has experienced occasional delays in
obtaining timely delivery of certain items. Additionally, the Company could
experience a temporary adverse impact if any of its sole source suppliers ceased
to deliver products. Management believes, however, that alternate sources could
be developed.

PATENTS AND LICENSES

The development of products by the Company, both hardware and software, is
largely based on proprietary information. The Company protects its rights in
proprietary information through various methods such as copyrights, trademarks,
patents and patent applications, software license agreements, and employee
agreements.

EMPLOYEES

As of December 31, 1994, the Company employed approximately 4,000 persons.
Since the inception of the Company's business, there have been no work stoppages
or other labor disturbances. The Company has no collective bargaining contracts.

ENGINEERING AND DEVELOPMENT ACTIVITIES

The highly technical nature of the Company's products requires a large and
continuing engineering and development effort. Engineering and development
expenditures for new and improved products were approximately $70.4 million in
1994, $62.4 million in 1993, and $62.0 million in 1992. These expenditures
amounted to approximately 10% of net sales in 1994, 11% in 1993, and 12% in
1992.

ENVIRONMENTAL AFFAIRS

The Company's manufacturing facilities are subject to numerous laws and
regulations designed to protect the environment, particularly from plant wastes
and emissions. These include laws such as the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), the Occupational
Safety and Health Act, the Clean Air Act, the Clean Water Act, the Hazardous and
Solid Waste Amendments of 1984 and Resource Conservation and Recovery Act of
1976. In the opinion of management, the costs associated with complying with
these laws and regulations has not had and will not have a material effect upon
the capital expenditures, earnings and competitive position of the Company.

4
<PAGE> 5

EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth the names of all executive officers of the
Company and certain other information relating to their positions held with the
Company and other business experience. Executive officers of the Company do not
have a specific term of office but rather serve at the discretion of the Board
of Directors.

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE FOR THE
EXECUTIVE OFFICER AGE POSITION PAST 5 YEARS
- ------------------------ ---- ------------------------- -------------------------------
<S> <C> <C> <C>
Alexander V.
d'Arbeloff............ 67 President and Chairman of Chairman of the Board of the
the Board Company since 1977; President
of the Company since 1971;
Director of the Company since
1960.

James A. Prestridge..... 63 Executive Vice President Executive Vice President of the
and Member of the Board Company since 1992; Vice
President of the Company from
1971 to 1992.

Owen W. Robbins......... 65 Executive Vice President Executive Vice President of the
and Member of the Board Company since 1992; Vice
President of the Company from
1977 to 1992.

George W. Chamillard.... 56 Executive Vice President Executive Vice President of the
Company beginning in 1994; Vice
President of the Company from
1981 to 1993.

George V. d'Arbeloff.... 50 Vice President Vice President of the Company
since 1980.

Ronald J. Dias.......... 51 Vice President Vice President of the Company
since 1988.

John P. McCabe.......... 50 Vice President Vice President of the Company
beginning in 1994; Controller
of the Company from 1975 to
1994.

Stuart M. Osattin....... 49 Vice President and Vice President of the Company
Treasurer beginning in 1994; Treasurer of
the Company since 1980.

Edward Rogas, Jr........ 54 Vice President Vice President of the Company
since 1984.

David L. Sulman......... 51 Vice President Vice President of the Company
beginning in 1994; Division
General Manager since 1993;
Division Engineering Manager
from 1982 to 1992.

Frederick T. Van Veen... 64 Vice President Vice President of the Company
since 1980.

Donald J. Hamman........ 43 Controller Controller of the Company
beginning in 1994; Director of
Corporate Accounting from 1986
to 1994.
</TABLE>

5
<PAGE> 6

ITEM 2: PROPERTIES

The Company's executive offices are in Boston, Massachusetts. Manufacturing
and other operations are carried on in several locations. The following table
provides certain information as to the Company's principal general offices and
manufacturing facilities:

<TABLE>
<CAPTION>
APPROXIMATE
PROPERTY SQ. FT. OF
LOCATION INTEREST FLOOR SPACE
--------------------------------------------------------- -------- ------------
<S> <C> <C>
ELECTRONIC TEST SYSTEMS INDUSTRY SEGMENT:
Boston, Massachusetts
321 Harrison Avenue............................ Own 245,000
179 Lincoln Street............................. Own 245,000
Agoura Hills, California............................ Own 360,000
Deerfield, Illinois................................. Own 65,000
Deerfield, Illinois................................. Lease 20,000
Walnut Creek, California............................ Lease 60,000

BACKPLANE CONNECTION SYSTEMS INDUSTRY SEGMENT:
Nashua, New Hampshire............................... Own 300,000
Dublin, Ireland..................................... Lease 46,000
</TABLE>

The Company owns most of its manufacturing and office facilities. In 1994,
construction began on 28,000 square feet of Electronic Test System manufacturing
space in Kumamoto, Japan. The Company intends to utilize this space beginning in
1995. Approximately 120,000 square feet of the Agoura Hills property listed
above was unoccupied through 1994. The Company plans to occupy this facility in
1995. The Company is subleasing an additional 85,000 square feet of space to a
third party in Walnut Creek through the expiration of the lease in June 1996.

ITEM 3: LEGAL PROCEEDINGS

The Company is not a party to any litigation that, in the opinion of
management, could reasonably be expected to have a material adverse impact on
the Company's financial position.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable.

6
<PAGE> 7

PART II

ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS

The following table shows the market range for the Company's Common Stock
based on reported sales prices on the New York Stock Exchange.

<TABLE>
<CAPTION>
PERIOD HIGH LOW
------------------------------------------------- ----- -----
<S> <C> <C> <C>
1993 First Quarter.................................... $18 1/8 $13 1/4
Second Quarter................................... 21 1/2 13
Third Quarter.................................... 29 5/8 20 1/2
Fourth Quarter................................... 28 1/4 20

1994 First Quarter.................................... 31 1/8 23 1/2
Second Quarter................................... 26 3/4 20 3/8
Third Quarter.................................... 32 23 1/2
Fourth Quarter................................... 34 1/4 25 5/8
</TABLE>

The number of record holders of the Company's Common Stock at February 24,
1995 was 3,056.

The Company has never paid cash dividends because it has been its policy to
use earnings to finance expansion and growth. While payment of future dividends
will rest within the discretion of the Board of Directors and will depend, among
other things, upon the Company's earnings, capital requirements and financial
condition, the Company presently expects to retain all of its earnings for use
in the business.

ITEM 6: SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales................................ $677,440 $554,734 $529,581 $508,923 $458,877
======== ======== ======== ======== ========
Income (loss) before extraordinary
item................................... $ 70,941 $ 35,923 $ 22,548 $ 18,253 $(21,332)
======== ======== ======== ======== ========
Income (loss) before extraordinary item
per common share....................... $ 1.91 $ 1.00 $ 0.67 $ 0.58 $ (0.71)
======== ======== ======== ======== ========
Total assets............................. $655,942 $544,443 $461,055 $420,533 $388,931
======== ======== ======== ======== ========
Long-term obligations.................... $ 8,806 $ 9,138 $ 23,647 $ 24,344 $ 25,045
======== ======== ======== ======== ========
</TABLE>

7
<PAGE> 8

ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

SELECTED RELATIONSHIPS WITHIN THE CONSOLIDATED
STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................................. $677,440 $554,734 $529,581
======== ======== ========
Income before extraordinary item.......................... $ 70,941 $ 35,923 $ 22,548
======== ======== ========
Increase in net sales from preceding year:
Amount.................................................. $122,706 $ 25,153 $ 20,658
======== ======== ========
Percentage.............................................. 22% 5% 4%
======== ======== ========
Increase in income before extraordinary item from
preceding year.......................................... $ 35,018 $ 13,375 $ 4,295
======== ======== ========
Percentage of net sales:
Net sales............................................... 100% 100% 100%
Expenses:
Cost of sales........................................ 56 57 59
Engineering and development.......................... 10 11 12
Selling and administrative........................... 20 23 24
--- --- ---
86 91 95
Net interest income..................................... 1
--- --- ---
Income before income taxes and extraordinary item....... 15 9 5
Provision for income taxes.............................. 5 3 1
--- --- ---
Income before extraordinary item........................ 10% 6% 4%
=== === ===
</TABLE>

RESULTS OF OPERATIONS:

1994 compared to 1993

Sales increased 22% in 1994 to $677.4 million. Sales increased in each of
the major product lines of the Company -- semiconductor test systems,
circuit-board test systems, telecommunications systems and backplane connection
systems. The largest increases in sales occurred in semiconductor test systems,
which increased 22%, and backplane connection systems, which increased 48%.
Sales of semiconductor test systems grew as semiconductor manufacturers
continued to add capacity in response to rising demand for their products. This
capacity expansion was evidenced by a number of new semiconductor manufacturing
plants coming on line. Sales of backplane connection systems increased in
response to the rising demand for the high technology products in the Company's
commercial customer base. As a result of the increase in sales, income before
extraordinary item almost doubled in 1994, increasing $35.0 million to $70.9
million.

Incoming orders grew faster than sales in 1994, increasing 28% to $803.4
million. The increase in orders, like the increase in sales, was primarily due
to increases in semiconductor test system orders, which increased 49%, and in
backplane connection systems, which increased 55%. As a result of the increase
in orders, the Company's backlog grew 44% in 1994, finishing the year at $414.0
million.

Cost of sales as a percentage of sales decreased from 57% in 1993 to 56% in
1994. The improvement was the result of the following two factors. First, the
increase in sales volume permitted increased utilization of certain fixed and
semi-variable components of the Company's overhead structure. Second, there was
an unfavorable change in mix as sales of backplane connection systems, whose
product margins are generally lower than those of electronic test systems, were
higher as a percentage of total Company sales.

8
<PAGE> 9

Engineering and development expenses declined as a percentage of sales from
11% in 1993 to 10% in 1994, as these expenses did not increase at the same rate
as sales. The dollar amount of these expenses grew $8.1 million in 1994 as a
result of increased investment in new product development of semiconductor test
systems. Selling and administrative expenses decreased to 20% of sales in 1994
compared with 23% of sales in 1993, as the dollar volume of these expenses grew
less than 3% while sales increased 22%.

Interest income increased 75% in 1994 to $6.4 million due to an increase in
the Company's average cash balance and higher interest rates during the year.
Interest expense decreased from $3.6 million in 1993 to $1.7 million in 1994 as
a result of the Company's retirement of its 9.25% convertible subordinated
debentures in the fourth quarter of 1993.

The Company's effective tax rate was 31% in 1994 compared with 30% in 1993.
The Company was able to operate with an effective tax rate below the federal
statutory rate of 35% in both years through the utilization of tax credit
carryforward and foreign loss carryforward amounts. The Company expects its tax
rate to approximate the statutory rate of 35% in 1995.

1993 Compared to 1992

Sales increased 5% in 1993, to $554.7 million. The increase in sales was
primarily due to a 13% increase in sales of semiconductor test systems and, to a
lesser extent, a 7% increase in sales of backplane connection systems. Sales of
semiconductor test systems increased as semiconductor manufacturers added
capacity in response to rising demand for their products. Sales of circuit-board
test systems and telecommunications systems declined 7% and 18%, respectively,
in 1993 compared to 1992. Incoming orders increased 19% in 1993 to $625.0
million over 1992 with increased orders occurring in each of the Company's major
groups. The Company's backlog grew during 1993 to $288.0 million.

Income before taxes increased by $25.3 million from 1992 to 1993 on a sales
increase of $25.2 million as the Company continued to control the growth in its
operating expenses. In addition, costs in 1993 were lower in the Company's
circuit-board test operations following actions taken by the Company in 1992 to
reduce the size of operations. These lower costs helped to offset the impact of
the reduced sales of circuit-board test systems.

Cost of sales decreased from 59% of sales in 1992 to 57% in 1993. While
sales increased in 1993, the fixed and semi-variable components of cost of sales
decreased as a result of the Company's cost reduction programs. The changes in
engineering and development expenses and selling and administrative expenses
were each less than 1% in 1993, compared with 1992. These expenses were
essentially flat for the period 1991 through 1993 as the Company controlled the
growth of its fixed costs.

Interest income increased 44% in 1993 as a result of a $76.2 million
increase in the Company's cash and cash equivalents balance during the year.
Interest expense decreased 12% in 1993 primarily as a result of the Company's
retirement of its 9.25% outstanding convertible subordinated debentures in the
fourth quarter.

The Company's effective tax rate increased from 13.5% in 1992 to 30% in
1993. The Company was able to utilize net operating loss carryforwards to lower
its United States taxable income for financial reporting purposes in 1992, while
in 1993 the U.S. carryforwards were no longer available. However, the Company's
tax rate in 1993 was below the United States statutory rate of 35%, as a result
of the utilization of tax credit carryforwards and foreign net operating loss
carryforwards. The Company adopted Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes" at the beginning of 1993. The effect of
this change in accounting principle was not material to the Company's
consolidated financial position. See "Note K: Income Taxes" in Notes to
Consolidated Financial Statements.

In connection with the retirement of the Company's outstanding 9.25%
convertible subordinated debentures, the Company incurred, in the fourth quarter
of 1993, an extraordinary charge of $0.7 million, net of income taxes, for the
costs of the redemption premium of 3.7% and the writeoff of unamortized debt
issuance costs.

9
<PAGE> 10

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash balance grew $39.2 million in 1994 following an increase
of $76.2 million in 1993. Cash flow generated from operations was $89.4 million
in 1994 and $91.8 million in 1993. Additional cash of $25.3 million in 1994 and
$33.6 million in 1993 was generated from the sale of stock to employees,
including the related tax benefit, under the Company's stock option and stock
purchase plans.

Cash was used to fund additions to property, plant and equipment of $29.6
million in 1994 and $32.2 million in 1993. The total capital spending over the
two years of $61.8 million was less than depreciation expense, creating a
decrease in the Company's net investment in property plant and equipment.
Property, plant and equipment declined from $185.1 million at the beginning of
1993 to $183.6 million at the end of 1994. The Company also invested $19.8
million in a U.S. Treasury Bill. In 1993 the Company's Board of Directors
authorized the repurchase of 1,000,000 shares of the Company's stock on the open
market. Cash of $24.6 million in 1994 and $2.3 million in 1993 was utilized for
this buyback of the Company's stock. Cash was also used to retire debt of $1.6
million in 1994 and $14.7 million in 1993. The debt retirement in 1993 included
$10.8 million for the repurchase of the Company's outstanding convertible
debentures.

The Company believes its cash and cash equivalents balance of $182.8
million, together with other sources of funds, including marketable securities
of $19.8 million, cash flow generated from operations, and the available
borrowing capacity of $80.0 million under its line of credit agreement, will be
sufficient to meet working capital and capital expenditure requirements in 1995.

Inflation has not had a significant long-term impact on earnings. If there
was inflation, the Company's efforts to cover cost increases with price
increases could be frustrated in the short-term by its relatively high backlog.

10
<PAGE> 11

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT ACCOUNTANTS

To the Directors and Shareholders of
TERADYNE, INC.:

We have audited the consolidated financial statements of Teradyne, Inc. and
Subsidiaries listed below. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Teradyne, Inc.
and Subsidiaries as of December 31, 1994 and 1993, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

Boston, Massachusetts
January 20, 1995

11
<PAGE> 12

CONSOLIDATED FINANCIAL STATEMENTS COVERED BY THE
REPORT OF INDEPENDENT ACCOUNTANTS

Consolidated Financial Statements filed in Item 8:

Balance Sheets as of December 31, 1994 and 1993

Statements of Income for the years ended December 31, 1994, 1993 and 1992

Statements of Cash Flows for the years ended December 31, 1994, 1993
and 1992

Statements of Changes in Shareholders' Equity for the years ended
December 31, 1994, 1993 and 1992

12
<PAGE> 13

TERADYNE, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993

ASSETS

<TABLE>
<CAPTION>
1994 1993
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................................. $182,811 $143,578
Marketable securities (Note B)............................................. 19,766
Accounts receivable - trade - less allowance for doubtful accounts
of $1,957 in 1994 and $1,990 in 1993..................................... 129,074 101,669
Inventories:
Parts................................................................. 49,216 43,452
Assemblies in process................................................. 42,667 34,258
-------- --------
91,883 77,710
Refundable income taxes.................................................... 1,064 2,049
Deferred tax assets (Note K)............................................... 14,767 10,973
Prepayments and other current assets....................................... 7,294 4,596
-------- --------
Total current assets.................................................. 446,659 340,575
Property (Note C):
Land....................................................................... 19,482 19,482
Buildings and improvements................................................. 113,660 112,290
Machinery and equipment.................................................... 255,039 245,151
Construction in progress................................................... 7,067 3,259
-------- --------
Total................................................................. 395,248 380,182
Less: Accumulated depreciation............................................. (211,606) (194,103)
-------- --------
Net property.......................................................... 183,642 186,079
Deferred charges and other assets.............................................. 25,641 17,789
-------- --------
Total assets.......................................................... $655,942 $544,443
========= =========
</TABLE>

LIABILITIES

<TABLE>
<S> <C> <C>
Current liabilities:
Notes payable - banks...................................................... $ 8,431 $ 7,574
Current portion of long-term debt (Note C)................................. 250 521
Accounts payable - trade................................................... 13,305 10,972
Accrued employees' compensation and withholdings........................... 38,263 34,856
Unearned service revenue and customer advances............................. 46,386 22,665
Other accrued liabilities.................................................. 27,088 28,942
Income taxes payable....................................................... 5,437 1,024
-------- --------
Total current liabilities............................................. 139,160 106,554
Deferred tax liabilities (Note K).............................................. 14,722 8,643
Long-term debt (Note C)........................................................ 8,806 9,138
Commitments (Notes E and F)....................................................
-------- --------
Total liabilities..................................................... 162,688 124,335
-------- --------
</TABLE>

SHAREHOLDERS' EQUITY

<TABLE>
<S> <C> <C>
Common stock $0.125 par value, authorized 75,000,000 shares, issued and
outstanding after deduction of reacquired shares, 36,351,527 in 1994
and 35,687,256 in 1993 (Notes D, G, H, I, and J)............................. 4,544 4,461
Additional paid-in capital..................................................... 248,497 247,843
Retained earnings.............................................................. 240,213 167,804
-------- --------
Total shareholders' equity............................................ 493,254 420,108
-------- --------
Total liabilities and shareholders' equity............................ $655,942 $544,443
========= =========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

13
<PAGE> 14

TERADYNE, INC.
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Net sales........................................ $677,440 $554,734 $529,581
Expenses:
Cost of sales............................... 378,933 314,596 312,478
Engineering and development................. 70,442 62,356 62,023
Selling and administrative.................. 129,935 126,508 127,427
-------- -------- --------
579,310 503,460 501,928
-------- -------- --------
Income from operations........................... 98,130 51,274 27,653
Other income (expense):
Interest income............................. 6,394 3,649 2,529
Interest expense............................ (1,712) (3,604) (4,114)
-------- -------- --------
Income before income taxes and extraordinary
item........................................... 102,812 51,319 26,068
Provision for income taxes (Note K).............. 31,871 15,396 3,520
-------- -------- --------
Income before extraordinary item................. 70,941 35,923 22,548
Extraordinary item, less applicable income taxes
of $313 (Note D)............................... (729)
-------- -------- --------
Net income....................................... $ 70,941 $ 35,194 $ 22,548
======== ======== ========
Income per common share:
Income before extraordinary item............ $ 1.91 $ 1.00 $ 0.67
Extraordinary item, net of income taxes..... (0.02)
-------- -------- --------
Net income per common share................. $ 1.91 $ 0.98 $ 0.67
======== ======== ========
Shares used in calculations of income per common
share (000's).................................. 37,095 35,832 33,850
======== ======== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

14
<PAGE> 15

TERADYNE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................... $ 70,941 $ 35,194 $ 22,548
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation.......................................... 31,544 30,767 31,066
Amortization.......................................... 3,756 3,775 4,270
Deferred income taxes................................. 1,494 3,828 (162)
Extraordinary loss on retirement of debt.............. 1,042
Other non-cash items, net............................. 1,752 1,544 282
Changes in operating assets and liabilities:
Accounts receivable................................. (27,405) 18,487 (8,237)
Inventories......................................... (14,173) (12,114) (3,773)
Refundable income taxes............................. 985 1 (1,140)
Other assets........................................ (13,547) (5,705) (4,145)
Accounts payable and accruals....................... 29,645 14,423 1,323
Income taxes payable................................ 4,413 556 (1,342)
-------- -------- --------
Net cash provided by operating activities........ 89,405 91,798 40,690
-------- -------- --------
Cash flows from investing activities:
Additions to property.................................... (24,556) (20,568) (19,471)
Increase in equipment manufactured by the Company........ (5,003) (11,633) (8,759)
Purchase of marketable securities........................ (19,766)
Proceeds from sale of investment in joint venture........ 1,395
-------- -------- --------
Net cash used in investing activities............ (49,325) (32,201) (26,835)
-------- -------- --------
Cash flows from financing activities:
Proceeds from long-term debt............................. 3,205
Payments of long-term debt............................... (1,584) (3,940) (741)
Payment to retire convertible subordinated debentures.... (10,780)
Issuance of common stock under stock option and stock
purchase plans........................................ 17,059 24,652 13,269
Tax benefit from stock options........................... 8,275 8,943 2,383
Acquisition of treasury stock............................ (24,597) (2,277)
-------- -------- --------
Net cash (used in) provided by financing
activities..................................... (847) 16,598 18,116
-------- -------- --------
Increase in cash and cash equivalents...................... 39,233 76,195 31,971
Cash and cash equivalents at beginning of year............. 143,578 67,383 35,412
-------- -------- --------
Cash and cash equivalents at end of year................... $182,811 $143,578 $ 67,383
======== ======== ========
Supplementary disclosure of cash flow information:
Cash paid during the year for:
Interest.............................................. $ 1,643 $ 4,434 $ 4,230
Income taxes.......................................... 15,716 1,755 3,781
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

15
<PAGE> 16

TERADYNE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

<TABLE>
<CAPTION>
SHARES COMMON ADDITIONAL
---------------------- STOCK PAID-IN RETAINED
ISSUED REACQUIRED PAR VALUE CAPITAL EARNINGS
---------- --------- --------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1991................ 31,793,201 468,600 $ 3,916 $191,002 $111,530
Issuance of stock to:
Employees under Stock Option Plans
(Note G)............................. 1,025,104 86,318 117 8,096
Trustees of Savings Plan (Note H)....... 200,000 25 1,875
Employees under Stock Purchase Plan
(Note I)............................. 582,273 73 3,083
Tax benefit from stock options............ 2,383
Net income................................ 22,548
---------- --------- --------- -------- --------
Balance, December 31, 1992................ 33,600,578 554,918 4,131 206,439 134,078
Tax benefit from stock options upon
adoption of SFAS 109 (Note K)........... 5,734
Issuance of stock to:
Employees under Stock Option Plans
(Note G)............................. 2,012,778 87,054 241 17,361
Trustees of Savings Plan (Note H)....... 335,000 42 3,141
Employees under Stock Purchase Plan
(Note I)............................. 295,867 37 3,830
Issuance of stock upon conversion of
convertible subordinated debentures
(Note D)................................ 210,585 26 4,656
Repurchase of stock....................... 125,580 (16) (2,261)
Tax benefit from stock options............ 8,943
Net income................................ 35,194
Pension adjustment (Note F)............... (1,468)
---------- --------- --------- -------- --------
Balance, December 31, 1993................ 36,454,808 767,552 4,461 247,843 167,804
Issuance of stock to:
Employees under Stock Option Plans
(Note G)............................. 919,850 17,303 113 9,620
Trustees of Savings Plan (Note H)....... 265,000 33 2,484
Employees under Stock Purchase Plan
(Note I)............................. 375,124 47 4,762
Repurchase of stock....................... 878,400 (110) (24,487)
Tax benefit from stock options............ 8,275
Net income................................ 70,941
Pension adjustment (Note F)............... 1,468
---------- --------- --------- -------- --------
Balance, December 31, 1994................ 38,014,782 1,663,255 $ 4,544 $248,497 $240,213
========== ========= ======= ======== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

16
<PAGE> 17

TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of Teradyne,
Inc. and its subsidiaries, all of which are wholly owned (referred to
collectively in these notes as the "Company"). All significant intercompany
balances and transactions are eliminated. Certain prior years' amounts have been
reclassified to conform to the current year presentation.

Inventories

Inventories are stated at the lower of cost (first-in, first-out basis) or
market (net realizable value).

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Leasehold improvements
and major renewals are capitalized and included in property, plant and equipment
accounts while expenditures for maintenance and repairs and minor renewals are
charged to expense. When assets are retired, the assets and related allowances
for depreciation and amortization are eliminated from the accounts and any
resulting gain or loss is reflected in operations.

The Company provides for depreciation of its property principally on the
straight-line method by charges to expense which are sufficient to write-off the
cost of the assets over their estimated useful lives.

Revenue Recognition

Revenue is recorded when products are shipped or, in instances where
products are configured to customer requirements, upon the successful completion
of test procedures. Service revenue is recognized ratably over applicable
contract periods or as services are performed. In certain situations, revenue is
recorded using the percentage of completion method based upon the completion of
measurable milestones, with changes to total estimated costs and anticipated
losses, if any, recognized in the period in which determined.

Engineering and Development Costs

The Company's products are highly technical in nature and require a large
and continuing engineering and development effort. All engineering and
development costs are expensed as incurred.

Income Taxes

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." Under
SFAS 109, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. The measurement of deferred tax
assets is reduced by a valuation allowance if, based upon weighted available
evidence, it is more likely than not that some or all of the deferred tax assets
will not be realized.

The Company's practice is to provide U.S. federal taxes on undistributed
earnings of the Company's foreign sales and service subsidiaries.

Translation of Foreign Currencies

Assets and liabilities of foreign subsidiaries which are denominated in
foreign currencies are remeasured into U.S. dollars at rates of exchange in
effect at the end of the fiscal year except fixed assets which are remeasured
using historical exchange rates. Revenue and expense accounts are remeasured
using an average of exchange rates in effect during the year. Net realized and
unrealized gains and losses resulting from foreign currency remeasurement are
included in operations.

17
<PAGE> 18

TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A. ACCOUNTING POLICIES - (CONTINUED)
Net Income Per Common Share

Net income per common share is based upon the weighted average number of
common and common equivalent shares (when dilutive) outstanding each year.
Common equivalent shares result from the assumed exercise of outstanding stock
options. The proceeds of which are then assumed to have been used to repurchase
outstanding common stock at the average market price during the year.

B. FINANCIAL INSTRUMENTS

Fair Value

The Company considers all highly liquid temporary cash investments with
maturities of three months or less at date of acquisition to be cash
equivalents. At December 31, 1994 marketable securities consist of a short-term
investment in a U.S. Treasury Bill with an original maturity of greater than
three months. Marketable securities and cash equivalents are carried at
amortized cost plus accrued interest, which approximates fair value. The
Company's debt consists of subsidized loans whose fair value is not practicable
to estimate. For all other balance sheet financial instruments, the carrying
amount approximates fair value.

Off-Balance Sheet Risk

The Company regularly enters into forward foreign exchange contracts in
European and Japanese currencies to hedge assets, liabilities, and transactions
denominated in foreign currencies, for periods consistent with its committed
exposures. These contracts are used to reduce the Company's risk associated with
exchange rate movements, as gains and losses on these contracts are intended to
offset foreign exchange losses and gains on the assets, liabilities, and
transactions being hedged. Forward foreign exchange contracts have maturities of
less than one year, unless they relate to long term sales contracts denominated
in foreign currency; these maturities are from one to three years.

At December 31, 1994 and 1993, the face amount of forward foreign exchange
contracts outstanding was $67.9 million and $51.9 million, respectively. The
fair value of such contracts at December 31, 1994, determined by applying the
year end foreign currency exchange rates to the contract amounts, was
immaterial.

The Company's policy is to defer gains and losses on these contracts until
the corresponding losses and gains are recognized on the items being hedged.
During 1994, the Company recorded in other current assets a $2.9 million loss on
a deferred forward foreign exchange contract relating to a long term sales
contract denominated in foreign currency. This loss will serve to offset foreign
exchange transaction gains to be recognized on the contract revenue.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash investments and trade
accounts receivable. Concentrations of credit risk with respect to trade
accounts receivable are limited due to the large number of diverse and
geographically dispersed customers. The Company maintains cash investments
primarily in U.S. government obligations which essentially have no credit risk.

18
<PAGE> 19

TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

C. DEBT

Long-term debt at December 31, 1994 and 1993 consisted of the following (in
thousands):

<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Mortgage note payable................................ $5,040 $4,500
Industrial revenue bonds............................. 1,333
Other long-term debt................................. 4,016 3,826
------ ------
Total...................................... 9,056 9,659
Less current maturities.............................. 250 521
------ ------
$8,806 $9,138
====== ======
</TABLE>

The total maturities of long-term debt for each of the next five years are
$0.3 million.

Revolving Credit Agreement

The Company has $80.0 million of revolving credit available through January
31, 1996 under a domestic line of credit agreement with its banks. Under the
terms of the agreement, any amounts outstanding at January 31, 1996 are
converted into a one year term note. As of December 31, 1994, no amounts were
outstanding under this agreement. The terms of this line of credit include
restrictive covenants regarding working capital, tangible net worth and
leverage. Interest rates on borrowings are either at the stated prime rate or
based upon Eurocurrency or certificate of deposit interest rates. Additional
borrowings up to $30.0 million are permitted outside the agreement provided that
the liabilities of the Company, exclusive of deferred income taxes and
subordinated debt, shall not exceed 100% of the Company's tangible net worth.

Mortgage Note Payable

The Company received a loan of $4.5 million from the Boston Redevelopment
Authority in the form of a 3% mortgage loan maturing March 31, 2013. This loan
is collateralized by a mortgage on the Company's property at 321 Harrison Avenue
which may, at the Company's option, become subordinated to another mortgage up
to a maximum of $5.0 million. Interest for the first 4 1/2 years of the note was
capitalized up to a principle amount of $5.0 million. Since September 30, 1987,
the Company has been making semi-annual interest payments.

Other Long-term Debt

At December 31, 1994, other long-term debt consists of a Japanese
yen-denominated note with an interest rate of 4.8%, secured by land in Kumamoto,
Japan, with interest only payable until March 31, 1995, and principal and
interest payable in monthly installments from April 28, 1995 to March 30, 2007.

Short-term Borrowings

The weighted average interest rate on short-term borrowings outstanding as
of December 31, 1994 and 1993 was 3.2% and 3.4%, respectively.

19
<PAGE> 20

TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

D. CONVERTIBLE SUBORDINATED DEBENTURES

During 1993, $5.0 million principle amount of debentures was converted into
210,585 shares of common stock resulting in an increase of $4.7 million of
shareholders' equity (net of the related $0.3 million unamortized debt issue
costs). On November 19, 1993, the Company exercised its option to repurchase the
remaining $10.4 million outstanding debentures. The Company used $10.8 million
of available cash from operations to repurchase the debentures at a premium of
103.7% of the principal amount. The premium amount and the write-off of the
remaining unamortized debt issue cost resulted in a charge of $1.0 million. This
charge, net of the related taxes of $0.3 million, is reflected as an
extraordinary loss in the Consolidated Statements of Income.

E. COMMITMENTS

Rental expense for the years ended December 31, 1994, 1993, and 1992 was
$10.2 million, $11.2 million, and $12.6 million, respectively. Minimum annual
rentals under all noncancellable leases are: 1995 - $6.5 million; 1996 - $3.2
million; 1997 - $1.7 million; 1998 - $1.4 million; 1999 - $1.1 million; and $5.7
million thereafter, totaling $19.6 million. Offsetting the future lease
payments, the Company's income from noncancellable subleases totals $0.7
million.

20
<PAGE> 21

TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

F. PENSION PLANS

The Company has defined benefit pension plans covering substantially all
domestic employees and employees of certain international subsidiaries. Benefits
under these plans are based on the employee's years of service and compensation.
The Company's funding policy is to make contributions to the plans in accordance
with local laws and to the extent that such contributions are tax deductible.
The assets of the plans consist primarily of equity and fixed income securities.

The components of net pension expense are summarized as follows (in
thousands):

<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Service cost (benefits earned during the period)........ $3,627 $2,876 $2,474
Interest cost on projected benefit obligation........... 3,708 3,065 2,408
Actual return on plan assets............................ 1,537 (3,802) (1,688)
Net amortization and deferral........................... (4,371) 863 (484)
------ ------ ------
Net pension expense..................................... $4,501 $3,002 $2,710
====== ====== ======
</TABLE>

The following table sets forth the plans' funded status at December 31 (in
thousands):

<TABLE>
<CAPTION>
1994 1993
-------------------- --------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Actuarial present value of projected benefit
obligation:
Vested benefits............................ $(32,673) $(5,134) $(33,874) $(4,051)
Non-vested benefits........................ (2,254) (603) (2,348) (522)
-------- -------- -------- --------
Accumulated benefit obligation.................. (34,927) (5,737) (36,222) (4,573)
Effect of projected future compensation
levels........................................ (5,483) (2,818) (7,731) (2,314)
-------- -------- -------- --------
Total projected benefit obligation.............. (40,410) (8,555) (43,953) (6,887)
Plan assets at fair market value................ 35,532 4,312 35,633 3,963
Projected benefit obligation in excess of plan
assets........................................ (4,878) (4,243) (8,320) (2,924)
Unrecognized prior service cost................. 3,613 2,000 4,585 1,930
Unrecognized net loss (gain).................... 7,133 (465) 10,718 (1,389)
Unrecognized net (asset) liability at
transition.................................... (485) (501) (727) (546)
Minimum pension liability adjustment............ (219) (6,844)
-------- -------- -------- --------
Net pension asset (liability)................... $ 5,383 $(3,428) $ (588) $(2,929)
======== ======== ======== ========
Actuarial assumptions:
Discount rate................................. 8.5% 5.5- 9.0% 7.5% 5.5- 9.0%
Average increase in compensation levels....... 5% 4.6- 7.0% 5% 4.6- 7.0%
Expected long-term return on assets........... 9% 5.5-10.5% 10% 5.5-10.5%
</TABLE>

In accordance with the provisions of Financial Accounting Standards No. 87,
the Company recorded a minimum pension liability adjustment of $6.8 million at
December 31, 1993, representing the excess of accumulated benefit obligations
over the fair value of plan assets and accrued pension liabilities. The
additional liability was offset by an intangible asset to the extent of
previously unrecognized prior service cost of $4.6 million. The amount in excess
of previously unrecognized prior service cost was recorded as a reduction of
shareholder's equity in the amount of $1.5 million, net of applicable deferred
income taxes of $0.7 million. In 1994, this adjustment was reversed as the plan
assets exceeded the accumulated benefit obligation.

In addition to the above plans, the Company in 1993 established an unfunded
supplemental defined benefit pension plan in the United States to provide
retirement benefits in excess of levels allowed by the Employee Retirement
Income Security Act (ERISA). The actuarial present value of accumulated plan
benefits totaled $1.3 million and $1.1 million at December 31, 1994 and 1993,
respectively. Net pension expense was $0.4 million in 1994 and 1993.

21
<PAGE> 22

TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

G. STOCK OPTION PLANS

Under its stock option plans, the Company granted options to certain
directors, officers and employees entitling them to purchase common stock at
100% of market value at the date of grant.

Information with respect to options granted, forfeited, and exercised is
set forth below:

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
SHARES AVAILABLE -----------------------------
FOR GRANT NUMBER OF SHARES PRICE RANGE
---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Balance -- December 31, 1991.................. 3,470,698 4,605,867 $ 4.25- $ 26.25
Options granted.......................... (1,157,450) 1,157,450 $ 16.63- $ 17.38
Options exercised........................ (1,025,104) $ 5.12- $ 12.25
Options canceled......................... 206,490 (206,490) $ 6.63- $ 26.25
Options terminated....................... (383,938) -- --
---------------- ----------------
Balance -- December 31, 1992.................. 2,135,800 4,531,723 $ 4.25- $ 17.38
Options authorized....................... 3,000,000 -- --
Options granted.......................... (1,214,350) 1,214,350 $ 14.13- $ 24.88
Options exercised........................ (2,012,778) $ 4.25- $ 17.75
Options canceled......................... 102,655 (102,655) $ 6.63- $ 17.38
Options terminated....................... (25,790) -- --
---------------- ----------------
Balance -- December 31, 1993.................. 3,998,315 3,630,640 $ 4.25- $ 24.88
Options granted.......................... (962,370) 962,370 $ 25.75- $ 29.63
Options exercised........................ (919,850) $ 6.63- $ 9.50
Options canceled......................... 99,760 (99,760) $ 4.25- $ 25.75
Options terminated....................... (16,640) -- --
---------------- ----------------
Balance -- December 31, 1994.................. 3,119,065 3,573,400 $ 6.63- $ 29.63
============ =============
Options exercisable on December 31, 1994...... 1,492,161 $ 6.63- $ 25.75
=============
</TABLE>

There were no charges to income in connection with these options other than
incidental expenses related to the issuance of shares.

H. SAVINGS PLAN

The Company sponsors a Savings Plan covering substantially all domestic
employees. Under this plan, employees may contribute up to 12% of their
compensation (subject to Internal Revenue Service limitations). The Company
annually matches employee contributions up to 6% of such compensation at rates
ranging from 50% to 100%. The Company's contributions vest after two years,
although contributions for those employees with five years of service vest
immediately.

The trustees of the Savings Plan were granted an option to purchase 900,000
shares of the Company's common stock, exercisable at $9.50 per share (the fair
market value of the Company's common stock at the date of the grant) in five
cumulative annual installments beginning in 1990. In 1994, the trustees
exercised the remaining 265,000 shares. Under the terms of the Plan, any gains
realized from the sale of option shares are first allocated to participants'
accounts to fund up to one-half of the minimum Company contribution. Any excess
is applied to additional funding.

In 1994, the Company established a Supplemental Savings Plan to provide
savings benefits in excess of those allowed by ERISA. The provisions of which
are the same as the Savings Plan.

Under these plans, the amount charged to operations was $2.0 million in
1994, 1993 and 1992.

22
<PAGE> 23

TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

I. EMPLOYEE STOCK PURCHASE PLAN

Under the 1979 Stock Purchase Plan, employees are entitled to purchase
shares of common stock through payroll deductions of up to 10% of their
compensation. The price paid for the common stock is equal to 85% of the lower
of the fair market value of the Company's common stock on either the first or
last business day of the year. In January 1995, the Company issued 245,229
shares of common stock to employees who participated in the Plan during 1994 at
a price of $22.74 per share. During 1994, the Company amended the Plan to
increase the number of shares authorized thereunder by 400,000 shares. Currently
there are 560,640 shares reserved for issuance.

J. STOCKHOLDER RIGHTS PLAN

The Company's Board of Directors adopted a Stockholder Rights Plan on March
14, 1990, under which a dividend of one Common Stock Purchase Right was
distributed for each outstanding share of Common Stock. The Plan entitles Stock
Purchase Right holders to purchase shares of Company Common Stock for $40 per
share in certain events, such as a tender offer to acquire 30% or more of the
Company's outstanding shares. Under some circumstances, such as a determination
by Continuing Directors that an acquiring party's interests are adverse to those
of the Company, the Plan entitles such holders (other than an acquiring party or
adverse party) to purchase $80 worth of Common Stock (or other securities or
consideration owned by the Company) for $40. The Plan will expire March 26, 2000
unless earlier redeemed by the Company.

K. INCOME TAXES

The components of income before income taxes and extraordinary item and the
provision for income taxes as shown in the Consolidated Statement of Income are
as follows (in thousands):

<TABLE>
<CAPTION>
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Income (loss) before income taxes and extraordinary
item:
Domestic........................................... $ 85,403 $51,142 $27,795
Foreign............................................ 17,409 177 (1,727)
-------- ------- -------
$102,812 $51,319 $26,068
======== ======= =======
Provision (credit) for income taxes:
Current:
Federal............................................ $ 23,795 $ 8,308 $ 2,676
Foreign............................................ 2,840 1,194 (19)
State.............................................. 3,742 1,753 1,025
-------- ------- -------
30,377 11,255 3,682
-------- ------- -------
Deferred:
Federal............................................ 1,386 3,590 96
Foreign............................................ 492 259 (58)
State.............................................. (384) 292 (200)
-------- ------- -------
1,494 4,141 (162)
-------- ------- -------
Total provision for income taxes........................ $ 31,871 $15,396 $ 3,520
======== ======= =======
</TABLE>

23
<PAGE> 24

TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Under SFAS 109, deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets (liabilities) as of
December 31, 1994 and 1993 are as follows (in thousands):

<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Deferred tax assets:
Inventory valuations............................ $ 1,104 $ 808
Accruals........................................ 2,249 2,703
Vacation........................................ 3,121 2,751
Deferred revenue................................ 7,262 777
Federal net operating loss carryforwards........ 2,939
Foreign net operating loss carryforwards........ 1,041 3,417
Tax credits..................................... 2,698 4,075
Other........................................... 2,044 1,786
-------- --------
Total deferred tax assets............................ 19,519 19,256
-------- --------
Deferred tax liabilities:
Excess of tax over book depreciation............ (11,613) (11,399)
Amortization.................................... (3,306)
Pension......................................... (1,948) (1,207)
Other........................................... (563) (969)
-------- --------
Total deferred tax liabilities....................... (17,430) (13,575)
-------- --------
Valuation allowance.................................. (2,044) (3,351)
-------- --------
Net deferred asset .................................. $ 45 $ 2,330
======== ========
</TABLE>

As of December 31, 1994, the valuation allowance principally applies to
U.S. foreign tax credit carryforwards that may not be fully utilized by the
Company. For foreign tax return purposes, the Company has approximately $3.0
million of net operating loss carryforwards which may be carried forward
indefinitely.

Below is a reconciliation of the effective tax rates for the three years
indicated:

<TABLE>
<CAPTION>
1994 1993 1992
---- ---- -----
<S> <C> <C> <C>
U.S. statutory federal tax rate........................... 35.0% 35.0% 34.0%
State income taxes, net of federal tax benefit............ 2.4 2.6 1.3
Utilization of operating loss carryforwards............... (0.8) (23.0)
Foreign losses not tax benefited.......................... 1.2 4.9
Tax credits............................................... (0.4) (3.5)
Foreign sales corporation................................. (2.9) (2.4) (2.3)
Change in valuation allowance............................. (1.3)
Other, net................................................ (1.8) (2.1) (1.4)
---- ---- -----
Effective tax rate........................................ 31.0% 30.0% 13.5%
==== ==== =====
</TABLE>

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." As
permitted by SFAS 109, the Company has elected not to restate its financial
statements for any periods prior to 1993. The effect on operations for 1993 was
immaterial. However, upon adoption of SFAS 109 the Company increased Additional
Paid-in Capital by $5.7 million relating to the tax benefits to be derived from
the utilization of U.S. net operating loss carryforward amounts resulting from
tax deductions pertaining to the issuance of the Company's stock to employees
under its benefit plans.

24
<PAGE> 25

TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

L. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates principally in two industry segments, which are the
design, manufacturing and marketing of electronic test systems and backplane
connection systems. Corporate assets consist principally of cash and cash
equivalents, marketable securities, accounts receivable and certain other
assets.

<TABLE>
<CAPTION>
ELECTRONIC BACKPLANE
TEST CONNECTION
SYSTEMS SYSTEMS CORPORATE
INDUSTRY INDUSTRY AND
SEGMENT SEGMENT ELIMINATIONS CONSOLIDATED
----------- ----------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1994 Sales to unaffiliated customers........ $ 545,638 $ 131,802 $ 677,440
Intersegment sales..................... 5,050 $ (5,050)
--------- --------- ---------- ----------
Net sales.............................. 545,638 136,852 (5,050) 677,440
Operating income....................... 92,986 18,449 (13,305) 98,130
Identifiable assets.................... 343,467 82,820 229,655 655,942
Property additions..................... 19,699 9,005 855 29,559
Depreciation and amortization expense.. 28,706 5,754 840 35,300

1993 Sales to unaffiliated customers........ $ 466,305 $ 88,429 $ 554,734
Intersegment sales..................... 4,185 $ (4,185)
--------- --------- ---------- ----------
Net sales.............................. 466,305 92,614 (4,185) 554,734
Operating income....................... 57,493 7,652 (13,871) 51,274
Identifiable assets.................... 322,437 64,705 157,301 544,443
Property additions..................... 26,374 5,526 301 32,201
Depreciation and amortization expense.. 27,944 5,545 1,053 34,542

1992 Sales to unaffiliated customers........ $ 446,885 $ 82,696 $ 529,581
Intersegment sales..................... 4,061 $ (4,061)
--------- --------- ---------- ----------
Net sales.............................. 446,885 86,757 (4,061) 529,581
Operating income....................... 32,436 6,075 (10,858) 27,653
Identifiable assets.................... 304,471 60,005 96,579 461,055
Property additions..................... 20,780 6,525 925 28,230
Depreciation and amortization expense.. 28,414 5,792 1,130 35,336
</TABLE>

The Company's sales to unaffiliated customers for the three years ended
December 31 were made to customers in the following geographic areas:

<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales to unaffiliated customers:
United States.................................... $366,302 $329,729 $308,635
Europe........................................... 127,895 95,877 97,681
Asia Pacific region.............................. 94,999 64,963 49,452
Japan............................................ 66,316 49,146 62,680
Other............................................ 21,928 15,019 11,133
-------- -------- --------
Total sales........................................... $677,440 $554,734 $529,581
======== ======== ========
</TABLE>

See "Item 1: Business - Marketing and Sales" elsewhere in this report for
information on the Company's export activities, identifiable assets of foreign
subsidiaries, and major customers.

25
<PAGE> 26

SUPPLEMENTARY INFORMATION
(UNAUDITED)

Quarterly financial information for 1994 and 1993 (in thousands of dollars,
except per share amounts):

<TABLE>
<CAPTION>
1994
--------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales........................................ $ 152,012 $ 156,497 $ 178,840 $ 190,091
Expenses:
Cost of sales............................... 85,662 87,342 99,964 105,965
Engineering and development................. 15,857 17,305 17,934 19,346
Selling and administrative.................. 31,871 31,764 32,148 34,152
----------- ----------- ----------- -----------
133,390 136,411 150,046 159,463
----------- ----------- ----------- -----------
Income from operations........................... 18,622 20,086 28,794 30,628
Other income (expense):
Interest income............................. 1,088 1,237 1,708 2,361
Interest expense............................ (470) (399) (413) (430)
----------- ----------- ----------- -----------
Income before income taxes....................... 19,240 20,924 30,089 32,559
Provision for income taxes....................... 5,772 6,277 9,729 10,093
----------- ----------- ----------- -----------
Net income....................................... $ 13,468 $ 14,647 $ 20,360 $ 22,466
======== ========= ======== ========
Net income per common share...................... $ 0.36 $ 0.40 $ 0.55 $ 0.60
======== ========= ======== ========
</TABLE>

<TABLE>
<CAPTION>
1993
--------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales........................................ $ 127,779 $ 139,336 $ 140,279 $ 147,340
Expenses:
Cost of sales............................... 73,476 80,666 78,213 82,241
Engineering and development................. 15,154 15,035 15,684 16,483
Selling and administrative.................. 31,141 32,557 32,073 30,737
----------- ----------- ----------- -----------
119,771 128,258 125,970 129,461
----------- ----------- ----------- -----------
Income from operations........................... 8,008 11,078 14,309 17,879
Other income (expense):
Interest income............................. 714 843 1,064 1,028
Interest expense............................ (1,028) (982) (937) (657)
----------- ----------- ----------- -----------
Income before income taxes and extraordinary
item........................................... 7,694 10,939 14,436 18,250
Provision for income taxes....................... 2,308 3,282 4,331 5,475
----------- ----------- ----------- -----------
Income before extraordinary item................. 5,386 7,657 10,105 12,775
Extraordinary item (net of income taxes)......... 0 0 0 (729)
----------- ----------- ----------- -----------
Net income....................................... $ 5,386 $ 7,657 $ 10,105 $ 12,046
======== ========= ======== ========
Income per common share:
Income before extraordinary item............ $ 0.16 $ 0.21 $ 0.28 $ 0.35
Extraordinary item.......................... (0.02)
----------- ----------- ----------- -----------
Net income.................................. $ 0.16 $ 0.21 $ 0.28 $ 0.33
======== ========= ======== ========
</TABLE>

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

26
<PAGE> 27

PART III

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Certain information relating to directors and executive officers of the
Company, executive compensation, security ownership of certain beneficial owners
and management, and certain relationships and related transactions is
incorporated by reference herein from the Company's definitive proxy statement
in connection with its Annual Meeting of Shareholders to be held on May 24,
1995, which proxy statement will be filed with the Securities and Exchange
Commission not later than 120 days after the close of the fiscal year. For this
purpose, the Management Compensation and Development Committee Report and
Performance Graph included in such proxy statement are specifically not
incorporated herein. (Also see "Item 1 - Executive Officers of the Company"
elsewhere in this report.)

ITEM 11: EXECUTIVE COMPENSATION

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

27
<PAGE> 28

PART IV

ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A) 1. FINANCIAL STATEMENTS

The following consolidated financial statements are included in Item 8:

Balance Sheets as of December 31, 1994 and 1993
Statements of Income for the years ended December 31, 1994, 1993
and 1992
Statements of Cash Flows for the years ended December 31, 1994, 1993
and 1992
Statements of Changes in Shareholders' Equity for the years ended
December 31, 1994, 1993 and 1992

(A) 2. FINANCIAL STATEMENT SCHEDULES

Financial statement schedules have been omitted since either they are not
required or the information is otherwise included.

(A) 3. LISTING OF EXHIBITS

The Exhibits which are filed with this report or which are incorporated by
reference herein are set forth in the Exhibit Index.

Executive Compensation Plans and Arrangements:

1. 1987 Non-Employee Director Stock Option Plan (filed as Exhibit
3.10(iii) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992).

2. Teradyne, Inc. Supplemental Executive Retirement Plan (filed as
Exhibit 3.10(iv) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992).

28
<PAGE> 29

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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 THIS 23RD DAY OF MARCH,
1995.

TERADYNE, INC.

By: OWEN W. ROBBINS

------------------------------------
Owen W. Robbins,
Executive Vice President

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------------ ---------------
<S> <C> <C>

ALEXANDER V. d'ARBELOFF President and Chairman of the Board March 23, 1995
- ---------------------------------------- (Principal Executive Officer)
Alexander V. d'Arbeloff

OWEN W. ROBBINS Executive Vice President March 23, 1995
- ---------------------------------------- and Director
Owen W. Robbins (Principal Financial Officer)

DONALD J. HAMMAN Controller March 23, 1995
- ----------------------------------------
Donald J. Hamman

Director March , 1995
- ----------------------------------------
Edwin L. Artzt

ALBERT CARNESALE Director March 23, 1995
- ----------------------------------------
Albert Carnesale

DANIEL S. GREGORY Director March 23, 1995
- ----------------------------------------
Daniel S. Gregory

Director March , 1995
- ----------------------------------------
Dwight H. Hibbard

Director March , 1995
- ----------------------------------------
Franklin P. Johnson, Jr.

JOHN P. MULRONEY Director March 23, 1995
- ----------------------------------------
John P. Mulroney

JAMES A. PRESTRIDGE Executive Vice President March 23, 1995
- ---------------------------------------- and Director
James A. Prestridge

RICHARD J. TESTA Director March 23, 1995
- ----------------------------------------
Richard J. Testa
</TABLE>

29
<PAGE> 30

EXHIBIT INDEX

The following designated exhibits are, as indicated below, either filed
herewith or have heretofore been filed with the Securities and Exchange
Commission and are referred to and incorporated by reference to such filings.

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------------ ------------------------------------------ ------------------------------------
<C> <S> <C>
3.1 Restated Articles of Organization of the Exhibit 4.1 to the Company's Form
Company, as amended S-3 Registration Statement No.
33-44347, effective December 12,
1991.

3.2 Amended and Restated Bylaws of the Company Exhibit 3.3(iii) to the Company's
Annual Report on Form 10-K for the
fiscal year ended December 31, 1990.

4.1 Indenture dated as of March 15, 1987 Exhibit 2.3 to the Company's
between Zehntel, Inc. and the Bank of Registration Statement on Form 8-A
California, National Association, Trustees No. 0-16446, effective February 17,
1988.

4.2 First Supplemental Indenture between the Exhibit 2.4 to the Company's
Company, Zehntel, Inc. and the Bank of Registration Statement on Form 8-A
California, National Association, Trustee, No. 0-16446, effective February 17,
dated as of December 1, 1987 1988.

4.3 Second Supplemental Indenture by and among Exhibit 3.4(iii) to the Company's
the Company, Zehntel, Inc. and Bankers Annual Report on Form 10-K for the
Trust Company of California, N.A. fiscal year ended December 31, 1989.

4.4 Instrument of Acknowledgment of Exhibit 3.4(iv) to the Company's
Satisfaction and Discharge of Indenture Annual Report on Form 10-K for the
and Securities executed by First Trust of fiscal year ended December 31, 1994.
California, National Association,
successor trustee

4.5 Rights Agreement between the Company and Exhibit 4.1 to the Company's Current
The First National Bank of Boston dated as Report on Form 8-K dated March 15,
of March 14, 1990 1990.

10.1 Multicurrency Revolving Credit Agreement Exhibit to the Company's Quarterly
dated April 29, 1991 Report on Form 10-Q for the
quarterly period ended March 30,
1991.

10.2 First Amendment to Multicurrency Revolving Exhibit 3.10 (ii) to the Company's
Credit Agreement dated as of March 5, 1993 Annual Report on Form 10-K for the
fiscal year ended December 31, 1992.

10.3 1987 Non-Employee Director Stock Option Exhibit 3.10(iii) to the Company's
Plan Annual Report on Form 10-K for the
fiscal year ended December 31, 1992.

10.4 Teradyne, Inc. Supplemental Executive Exhibit 3.10(iv) to the Company's
Retirement Plan Annual Report on Form 10-K for the
fiscal year ended December 31, 1992.

10.5 1991 Employee Stock Option Plan, as
amended

10.6 1979 Stock Purchase Plan, as amended

22.1 Subsidiaries of the Company

23.1 Consent of Coopers & Lybrand L.L.P.
</TABLE>

<PAGE> 1

EXHIBIT 10.5

TERADYNE, INC.

1991 EMPLOYEE STOCK OPTION PLAN

(Amended and Restated as of May 27, 1993)

1. PURPOSE. This 1991 Employee Stock Option Plan (the "Plan") is
intended to provide incentives (a) to the employees of Teradyne, Inc. (the
"Company"), its parent (if any) and any present or future subsidiaries of the
Company (collectively, "Related Corporations") by providing them with
opportunities to purchase stock in the Company pursuant to options which
qualify as "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), granted hereunder ("ISO" or "ISOs"); and
(b) to directors, employees and consultants of the Company and Related
Corporations by providing them with opportunities to purchase stock in the
Company pursuant to non-statutory stock options granted hereunder ("NSO" or
"NSOs"). Both ISOs and NSOs are referred to hereafter individually as an
"Option" and collectively as "Options." As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation" as those
terms are defined in Section 425 of the Code.

2. Administration of the Plan.
--------------------------

A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered
by the Board of Directors of the Company (the "Board") or by a
committee appointed by the Board (the "Committee"); PROVIDED, that
to the extent required by Rule 16b-3 of the Securities and Exchange
Commission ("Rule 16b-3") under the Securities and Exchange Act of
1934, as amended (the "1934 Act"), with respect to specific grants of
Options, the Plan shall be administered by a disinterested
administrator or administrators within the meaning of Rule 16b-3.
Hereinafter all references in this Plan to the "Committee" shall mean
the Board if no Committee has been appointed. Subject to ratification
of the grant of each Option by the Board (if so required by applicable
state law), and subject to the terms of the Plan, the Committee shall
have the authority to (i) determine the employees of the Company and
Related Corporations (from among the class of employees eligible under
paragraph 3 to receive ISOs) to whom ISOs may be granted, and to
determine the individuals and entities (from among the class of
individuals and entities eligible under paragraph 3 to receive NSOs) to
whom NSOs may be granted; (ii) determine the time or times at which
Options may be granted; (iii) determine the option price of shares
subject to each Option; (iv) determine whether each Option granted
shall be an ISO or a NSO; (v) determine (subject to paragraph 7) the
time or times when each Option shall become exercisable and the
duration of the exercise period;

<PAGE> 2

- 2 -

(vi) determine whether restrictions such as repurchase
options are to be imposed on shares subject to Options, and
the nature of such restrictions if any, and (vii) interpret
the Plan and prescribe and rescind rules and regulations
relating to it. The interpretation and construction by the
Committee of any provisions of the Plan or of any Option
granted under it shall be final unless otherwise determined
by the Board. The Committee may from time to time adopt such
rules and regulations for carrying out the Plan as it may
deem best. No member of the Board or the Committee shall be
liable for any action or determination made in good faith
with respect to the Plan or any Option granted under it.

3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted to
any employee of the Company or any Related Corporation. NSOs may
be granted to any employee, consultant or director of the Company
or any Related Corporation; PROVIDED, that no Option may be
granted hereunder to any non-employee director. Granting of any
Option to any individual or entity shall neither entitle that
individual or entity to, nor disqualify him from, participation
in any other grant of Options.

4. STOCK. The stock subject to Options shall be authorized
but unissued shares of Common Stock of the Company, par value
$.125 per share (the "Common Stock"), or shares of Common Stock
reacquired by the Company in any manner. The aggregate number of
shares which may be issued pursuant to the Plan is 6,000,000,
subject to adjustment as provided in paragraph 13. If any Option
granted under the Plan shall expire or terminate for any reason
without having been exercised in full or shall cease for any
reason to be exercisable in whole or in part, the unpurchased
shares subject thereto shall again be available for grants of
Options under the Plan.

5. GRANTING OF OPTIONS. Options may be granted under the
Plan at any time after March 13, 1991 and prior to March 13,
2001. The date of grant of an Option under the Plan will be the
date specified by the Committee at the time it grants the Option,
provided, however, that such date shall not be prior to the date
on which the Committee acts to approve the grant. The Committee
shall have the right, with the consent of the optionee, to
convert an ISO granted under the Plan to a NSO pursuant to
paragraph 16.

6. Minimum Option Price; ISO Limitations.
-------------------------------------

A. PRICE FOR NSOs. The price per share specified in the
agreement relating to each NSO granted under the Plan shall in
no event be less than the minimum legal consideration therefor
required under the laws of the Commonwealth of Massachusetts.
Not more than 200,000 NSOs may be granted under the Plan for less
than "fair market value" (as hereinafter defined).

<PAGE> 3

- 3 -

B. PRICE FOR ISOs. The price per share specified in the
agreement relating to each ISO granted under the Plan shall not be less
than the fair market value per share of Common Stock on the date of
such grant. In the case of an ISO to be granted to an employee owning
stock possessing more than ten percent of the total combined voting
power of all classes of stock of the Company or any Related
Corporation, the price per share specified in the agreement relating to
such ISO shall not be less than 110 percent of the fair market value of
Common Stock on the date of grant.

C. $100,000 ANNUAL LIMITATION ON ISOs. Each eligible employee
may be granted ISOs only to the extent that, in the aggregate under
this Plan and all incentive stock option plans of the Company and
any Related Corporation, such ISOs do not become exercisable for the
first time by such employee during any calendar year in a manner which
would entitle the employee to purchase more than $100,000 in fair
market value (determined at the time the ISOs were granted) of Common
Stock in that year. Any options granted to an employee in excess of
such amount will be granted as Non-Qualified Options.

D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option
is granted under the Plan, the Company's Common Stock is publicly
traded, "fair market value" shall be determined as of the date such
Option is granted and shall mean (i) the average (on that date) of the
high, low and closing prices of the Common Stock on the principal
national securities exchange on which the Common Stock is traded, if
the Common Stock is then traded on a national securities exchange; or
(ii) the last reported sale price (on that date) of the Common Stock on
the NASDAQ National Market List, if the Common Stock is not then traded
on a national securities exchange; or (iii) the closing bid price (or
average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common Stock
is not reported on the NASDAQ National Market List. However, if the
Common Stock is not publicly traded at the time an Option is granted
under the Plan, "fair market value" shall be deemed to be the fair
value of the Common Stock as determined by the Committee after taking
into consideration all factors which it deems appropriate, including,
without limitation, recent sale and offer prices of the Common Stock in
private transactions negotiated at arm's length.

7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10, each Option shall expire on the date specified by the
Committee, but not more than (i) ten years and one day from the date of grant
in the case of NSOs, (ii) ten years from the date of grant in the case of ISOs
generally, and

<PAGE> 4

- 4 -

(iii) five years from the date of grant in the case of ISOs
granted to an employee owning stock possessing more than ten
percent of the total combined voting power of all classes of
stock of the Company or any Related Corporation. Subject to
earlier termination as provided in paragraphs 9 and 10, the term
of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of
such ISO that is converted into a NSO pursuant to paragraph 16.

8. EXERCISE OF OPTION. Subject to the provisions of
paragraphs 9 through 12, each Option granted under the Plan shall
be exercisable as follows:

A. VESTING. The Option shall either be fully exercisable
on the date of grant or shall become exercisable thereafter in
such installments as the Committee may specify.

B. FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable it shall remain exercisable until expiration or
termination of the Option, unless otherwise specified by the
Committee.

C. PARTIAL EXERCISE. Each Option or installment may be
exercised at any time or from time to time, in whole or in part,
for up to the total number of shares with respect to which it is
then exercisable.

D. ACCELERATION OF VESTING. The Committee shall have the right
to accelerate the date of exercise of any installment of any Option;
PROVIDED, that the Committee shall not, without the consent of the
optionee, accelerate the exercise date of any installment of any Option
granted to any employee as an ISO (and not previously converted into
a NSO pursuant to paragraph 16) if such acceleration would violate the
annual vesting limitation contained in Section 422 of the Code, as
described in paragraph 6(C).

9. TERMINATION OF EMPLOYMENT. If an optionee ceases to be employed by
the Company and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments of his Options
shall become exercisable, and his Options shall terminate after the passage of
90 days from the date of termination of his employment; PROVIDED, that the
Committee may specify that NSOs may remain exercisable for more than 90 days
from the date of termination of employment; PROVIDED, FURTHER, that in no event
shall any Option or part or installment thereof become or remain exercisable
after its specified expiration date. Employment shall be considered as
continuing uninterrupted during any bona fide leave of absence (such as those
attributable to illness, military obligations or governmental service) provided
that the period of such leave does not exceed 90 days or, if longer, any period
during which such optionee's right to reemployment is guaranteed by statute. A

<PAGE> 5

- 5 -

bona fide leave of absence with the written approval of the Committee shall
not be considered an interruption of employment under the Plan, provided that
such written approval contractually obligates the Company or any Related
Corporation to continue the employment of the optionee after the approved
period of absence. Options granted under the Plan shall not be affected by any
change of employment within or among the Company and Related Corporations, so
long as the optionee continues to be an employee of the Company or any Related
Corporation. Nothing in the Plan shall be deemed to give any grantee of any
Option the right to be retained in employment or other service by the Company
or any Related Corporation for any period of time.

Notwithstanding anything to the contrary contained above, in the case
of normal retirement, NSOs granted to an optionee shall remain exercisable
until the date which is the earlier of (i) the NSOs' specified expiration date
or (ii) 90 days from the date upon which such optionee becomes employed by a
competitor of the Company, to the extent of the number of shares which have
vested prior to and during such period. The Committee shall have the absolute
discretion to determine whether and as of what date any optionee is employed by
a competitor of the Company.

10. Death; Disability.
-----------------

A. DEATH. If an optionee ceases to be employed by the
Company and all Related Corporations by reason of his death, any Option
of his may be exercised, to the extent of the number of shares with
respect to which he has theretofore been granted options (whether or
not such options have vested in accordance with their terms) by his
estate, personal representative or beneficiary who has acquired the
Option by will or by the laws of descent and distribution, (i) in the
case of ISOs, at any time prior to the earlier of the ISOs' specified
expiration date or 180 days from the date of the optionee's death or
(ii) in the case of NSOs, at any time prior to the earlier of the NSO's
specified expiration date or one year from the date of the optionee's
death.

B. DISABILITY. If an optionee ceases to be employed by the
Company and all Related Corporations by reason of his disability, any
Option theretofore granted to such optionee shall remain exercisable
until the date which is (i) in the case of ISOs, the earlier of the
ISOs' specified expiration date or 180 days from the date of the
termination of the optionee's employment or (ii) in the case of NSOs,
the earlier of the NSOs' specified expiration date or 33 months from
the date of the termination of the optionee's employment, to the
extent of the number of shares (a) which, in the case of ISOs, have
vested prior to and during the period specified in clause (i) and (b)
which, in the case of NSOs, have vested prior to and during the period
which is 30 months from the date the optionee ceases to be employed by

<PAGE> 6
- 6 -

the Company. For the purposes of this Plan, the term "disability"
shall mean "permanent and total disability" as defined in Section
22(e)(3) of the Code or any successor statute.

11. ASSIGNABILITY. No Option shall be assignable or transferable by
the optionee except by will or by the laws of descent and distribution, and
during the lifetime of the optionee each Option shall be exercisable only
by him.

12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may from time to time confer
authority and responsibility on one or more of its own members and/or one or
more officers of the Company to execute and deliver such instruments. The
proper officers of the Company are authorized and directed to take any and all
action necessary or advisable from time to time to carry out the terms of such
instruments.

13. ADJUSTMENTS. Upon the occurrence of any of the following events,
an optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the optionee and the Company relating to such Option:

A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common
Stock shall be subdivided or combined into a greater or smaller number
of shares or if the Company shall issue any shares of Common Stock as a
stock dividend on its outstanding Common Stock, the number of shares of
Common Stock deliverable upon the exercise of Options shall be
appropriately increased or decreased proportionately, and appropriate
adjustments shall be made in the purchase price per share to reflect
such subdivision, combination or stock dividend.

B. CONSOLIDATIONS OR MERGERS. If the Company is to be
consolidated with or acquired by another entity in a merger, sale of
all or substantially all of the Company's assets or otherwise (an
"Acquisition"), the Committee or the board of directors of any entity
assuming the obligations of the Company hereunder (the "Successor
Board"), shall, as to outstanding Options, either (i) make appropriate
provision for the continuation of such Options by substituting on an
equitable basis for the shares then subject to such Options
the consideration payable with respect to the outstanding

<PAGE> 7
- 7 -

shares of Common Stock in connection with the Acquisition; or (ii) upon
written notice to the optionees, provide that all Options must be
exercised, to the extent then exercisable, within a specified number of
days of the date of such notice, at the end of which period the Options
shall terminate; or (iii) terminate all Options in exchange for a cash
payment equal to the excess of the fair market value of the shares
subject to such Options (to the extent then exercisable) over the
exercise price thereof.

C. RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a
transaction described in subparagraph B above) pursuant to which
securities of the Company or of another corporation are issued with
respect to the outstanding shares of Common Stock, an optionee upon
exercising an Option shall be entitled to receive for the purchase
price paid upon such exercise the securities he would have received if
he had exercised his Option prior to such recapitalization or
reorganization.

D. MODIFICATION OF ISOs. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs A, B or C with respect to
ISOs shall be made only after the Committee, after consulting with
counsel for the Company, determines whether such adjustments would
constitute a "modification" of such ISOs (as that term is defined in
Section 425 of the Code) or would cause any adverse tax consequences
for the holders of such ISOs. If the Committee determines that such
adjustments made with respect to ISOs would constitute a modification
of such ISOs, it may refrain from making such adjustments.

E. DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at
such other time and subject to such other conditions as shall be
determined by the Committee.

F. ISSUANCES OF SECURITIES. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect,
and no adjustment by reason thereof shall be made with respect to, the
number or price of shares subject to Options. No adjustments shall be
made for dividends paid in cash or in property other than securities of
the Company.

G. FRACTIONAL SHARES. No fractional shares shall be issued
under the Plan and the optionee shall receive from the Company cash in
lieu of such fractional shares.

<PAGE> 8

- 8 -

H. ADJUSTMENTS. Upon the happening of any of the events
described in subparagraphs A, B or C above, the class and aggregate
number of shares set forth in paragraph 4 hereof that are subject to
Options which previously have been or subsequently may be granted under
the Plan shall also be appropriately adjusted to reflect the events
described in such subparagraphs. The Committee or the Successor Board
shall determine the specific adjustments to be made under this
paragraph 13 and, subject to paragraph 2, its determination shall be
conclusive.

If any person or entity owning restricted Common Stock obtained by
exercise of an Option receives shares or securities or cash in connection with
a corporate transaction described in subparagraphs A, B or C above as a result
of owning such restricted Common Stock, such shares or securities or cash shall
be subject to all of the conditions and restrictions applicable to the
restricted Common Stock with respect to which such shares or securities or cash
were issued, unless otherwise determined by the Committee or the Successor
Board.

14. MEANS OF EXERCISING OPTIONS. An Option (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Option being
exercised and specify the number of shares as to which such Option is being
exercised, accompanied by full payment of the purchase price therefor either
(a) in United States dollars in cash or by check, or (b) at the discretion of
the Committee, through delivery of shares of Common Stock having fair market
value equal as of the date of the exercise to the cash exercise price of the
Option, or (c) at the discretion of the Committee in exceptional cases, by
delivery of the optionee's personal recourse note bearing interest payable not
less than annually at no less than 100% of the lowest applicable Federal rate,
as defined in Section 1274(d) of the Code, or (d) at the discretion of the
Committee, by any combination of (a), (b) and (c) above. If the Committee
exercises its discretion to permit payment of the exercise price of an ISO by
means of the methods set forth in clauses (b) or (c) of the preceding sentence,
such discretion shall be exercised in writing at the time of the grant of the
ISO in question. Alternatively, payment may be made in whole or in part in
shares of the Common Stock of the Company already owned by the person or
persons exercising the option or shares subject to the option being exercised
(subject to such restrictions and guidelines as the Board may adopt from time
to time), or consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the option and an authorization
to the broker or selling agent to pay that amount to the Company, which sale
shall be at the participant's direction at the time of exercise. The holder of
an Option shall not have the rights of a shareholder with respect to the shares

<PAGE> 9

- 9 -

covered by his Option until the date of issuance of a stock certificate to him
for such shares. Except as expressly provided above in paragraph 13 with
respect to changes in capitalization and stock dividends, no adjustment shall
be made for dividends or similar rights for which the record date is before the
date such stock certificate is issued.

15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
March 13, 1991, and shall expire on the end of the day on March 13, 2001
(except as to Options outstanding on that date). The Board may at any time
terminate the Plan or make such modification or amendment thereof as it deems
advisable, PROVIDED, however, that the Board may not, without approval by the
affirmative vote of the holders of a majority of the securities of the Company
present, or represented, and entitled to vote at a meeting duly held in
accordance with the applicable laws of the state in which the Company is
incorporated, (i) materially increase the benefits accruing to participants
under the Plan; (ii) increase the number of shares for which options may be
granted under the Plan; or (iii) materially modify the requirements as to
eligibility for participation in the Plan. Termination or any modification or
amendment of the Plan shall not, without consent of a participant, affect his
rights under an option previously granted to him.

16. CONVERSION OF ISOs INTO NSOs; TERMINATION OF ISOS. The Committee,
with the written approval of any optionee, may in its discretion take such
actions as may be necessary to convert such optionee's ISOs (or any
installments of portions of installments thereof) that have not been exercised
on the date of conversion into NSOs at any time prior to the expiration of such
ISOs, regardless of whether the optionee is an employee of the Company or a
Related Corporation at the time of such conversion. Such actions may include,
but not be limited to, extending the exercise period or reducing the exercise
price of the appropriate installments of such Options. At the time of such
conversion, the Committee (with the consent of the optionee) may impose such
conditions on the exercise of the resulting NSOs as the Committee in its
discretion may determine, provided that such conditions shall not be
inconsistent with this Plan. Nothing in the Plan shall be deemed to give any
optionee the right to have such optionee's ISOs converted into NSOs, and no
such conversion shall occur until and unless the Committee takes appropriate
action. The Committee, with the consent of the optionee, may also terminate any
portion of any ISO that has not been exercised at the time of such termination.

17. APPLICATION OF FUNDS. The proceeds received by the Company from
the sale of shares pursuant to Options granted under the Plan shall be used for
general corporate purposes.

<PAGE> 10

- 10 -

18. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.

19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
NSO, the making of a Disqualifying Disposition (as defined in paragraph 20) or
the vesting of restricted Common Stock acquired on the exercise of an Option,
the Company, in accordance with Section 3402(a) of the Code, may require the
optionee to pay additional withholding taxes in respect of the amount that is
considered compensation includible in such person's gross income. The
Committee in its discretion may condition (i) the exercise of an Option or (ii)
the vesting of restricted Common Stock acquired by exercising an Option, on the
optionee's payment of such additional withholding taxes.

20. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. Each employee who
receives ISOs shall agree to notify the Company in writing immediately after
the employee makes a disqualifying disposition of any Common Stock received
pursuant to the exercise of an ISO (a "Disqualifying Disposition").
Disqualifying Disposition means any disposition (including any sale) of such
stock before the later of (a) two years after the employee was granted the ISO
under which he acquired such stock, or (b) one year after the employee acquired
such stock by exercising such ISO. If the employee has died before such stock
is sold, these holding period requirements do not apply and no Disqualifying
Disposition will thereafter occur.

21. GOVERNING LAWS; CONSTRUCTION. The validity and construction of
the Plan and the instruments evidencing Options shall be governed by the laws
of the Commonwealth of Massachusetts. In construing this Plan, the singular
shall include the plural and the masculine gender shall include the feminine
and neuter, unless the context otherwise requires.

<PAGE> 1

EXHIBIT 10.6

TERADYNE, INC.

1979 EMPLOYEE STOCK PURCHASE PLAN

(Amended as of June 15, 1994)

ARTICLE 1 - PURPOSE

This Employee Stock Purchase Plan (the "Plan") is intended as an
incentive and to encourage stock ownership by all eligible employees of
Teradyne, Inc. (the "Company"), participating subsidiaries, and acquired
businesses so that they may share in the growth of the Company by acquiring or
increasing their proprietary interest in the Company. It is intended that
options issued pursuant to the Plan shall constitute options issued pursuant to
an "employee stock purchase plan" within the meaning of Section 423 of the
Internal Revenue Code of 1986 (the "Code"), as amended.

ARTICLE 2 - ADMINISTRATION OF THE PLAN

The Plan may be administered by a committee appointed by the Board of
Directors of the Company (the "Committee"). The Committee shall consist of not
less than two members of the Company's Board of Directors. The Board of
Directors may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, howsoever caused, shall be filled by
the Board of Directors. The Committee may select on one of its members as
Chairman, and shall hold meetings at such times and places as it may determine.
Acts by a majority of the Committee, or acts reduced to or approved in writing
by a majority of the members of the Committee, shall be the valid acts of the
Committee.

The interpretation and construction by the Committee of any provisions
of the Plan or of any option granted under its shall be final unless otherwise
determined by the Board of Directors. The Committee may from time to time adopt
such rules and regulations for carrying out the Plan as it may deem best,
provided that any such rules and regulation shall be applied on a uniform basis
to all employees under the Plan. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it.

In the event the Board of Directors fails to appoint or refrains from
appointing a Committee, the Board of Directors shall have all powers and
authority to administer the Plan. In such event, the word "Committee" wherever
used herein shall be deemed to mean the Board of Directors.

ARTICLE 3 - ELIGIBLE EMPLOYEES

No option may be granted to any person serving as a member of the
Committee at the time of grant. Subject to this limitation,

<PAGE> 2

- 2 -

all Eligible Employees (as defined herein) of the Company or any of its
participating subsidiaries (as defined in Article 18) who have completed more
than 90 days of employment with the Company or any of its subsidiaries on or
before the first day of any Payment Period (as defined in Article 5) shall be
eligible to receive options under this Plan to purchase the Company's Common
Stock, and all Eligible Employees shall have the same rights and privileges as
defined in this Plan. In no event may an employee be granted an option if such
employee, immediately after the option is granted, owns stock possessing 5
percent or more of the total combined voting power or value of all classes of
stock of the Company or of its parent corporation or subsidiary corporation, as
the terms "parent corporation" and "subsidiary corporation" are defined in
Section 425 of the Code. For purposes of determining stock ownership under
this paragraph, the rules of Section 425(d) of the Code shall apply, and stock
which the employee may purchase under outstanding options shall be treated as
stock owned by the employee.

For purposes of this Plan the term "Eligible Employee" shall not
include an employee whose customary employment is less than 20 hours per week
or whose customary employment is for not more than 5 months in any calendar
year.

The Board of Directors shall have the authority to permit employees of
acquired businesses to participate in the Plan effective within the then
current Payment Period without compliance with the eligibility and
participation requirements of the Plan, to the extent permitted by the Code.

ARTICLE 4 - STOCK SUBJECT TO THE PLAN

The stock subject to the options shall be shares of the Company's
authorized but unissued shares of Common Stock or shares of Common Stock
re-acquired by the Company, including shares purchased in the open market. The
aggregate number of shares which may be issued pursuant to the Plan is
4,600,000, subject to adjustment as provided in Article 13. In the event any
option granted under the Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be exercisable
in whole or in part, the unpurchased shares subject thereto shall again be
available under the Plan.

ARTICLE 5 - PAYMENT PERIOD AND STOCK OPTIONS

The twelve-month period commencing annually on the first day of January
and ending annually on the last day of December is the Payment Period during
which payroll deductions will be accumulated under the Plan. Each Payment
Period includes only regular pay days falling within it.

<PAGE> 3

- 3 -

Annually on the first business day of the Payment Period, the Company
will grant to each Eligible Employee who has elected to participate in the Plan
an option to purchase on the last day of such Payment Period, at the Option
Price hereinafter provided for, such number of shares of the Common Stock of
the Company reserved for the purpose of the Plan as does not exceed the greater
of the number of shares equal to 10% of the employee's regular annual base pay
divided by the price determined in accordance with (i) below, or 3,000 shares,
on condition that such employee remains eligible to participate in the Plan
throughout such Payment Period. The participant shall be entitled to exercise
such options so granted only to the extent of his accumulated payroll
deductions on the last day of such Payment Period, but in no event to exceed
3,000 shares. The Option Price for each Payment Period shall be the lesser of
(i) 85% of the average market price of the Company's Common Stock on the first
business day of the Payment Period or (ii) 85% of the average market price of
the Company's Common Stock on the last business day of the Payment Period, in
either event rounded up to avoid fractions other than 1/4, 1/2 and 3/4. The
foregoing limitation on the number of shares which may be granted in any
Payment period and the Option Price per share shall be subject to adjustment as
provided in Article 13.

For purposes of the Plan the term "average market price" is the average
of the high and low prices of the Common Stock of the Company on the principal
national securities exchange on which it is so traded or such other national
securities exchange as shall be designated by the Committee.

For purposes of this Plan the term "business day" as used herein means
a day on which there is trading on the national securities exchange.

No Eligible Employee shall be granted an option which permits his
rights to purchase Common Stock under the Plan and any similar plans of the
Company or any parent or subsidiary corporations to accrue at a rate which
exceeds $25,000 of fair market value of such stock (determined at the time such
option is granted) for each calendar year in which such option is outstanding
at any time. The purpose of the limitation in the preceding sentence is to
comply with Section 423(b)(8) of the Code.

ARTICLE 6 - EXERCISE OF OPTION

Each Eligible Employee who continues to be a participant in the Plan on
the last business day of a Payment Period shall be deemed to have exercised his
option on such date and shall be deemed to have purchased from the Company such
number of full shares of Common Stock reserved for the purpose of the Plan as
his accumulated payroll deductions on such date will pay for at such Option
Price but in no event more than 3,000 shares.

<PAGE> 4

- 4 -

Subject to Article 15, if a participant is not an employee on the last business
day of a Payment Period, he shall not be entitled to exercise his option.

ARTICLE 7 - UNUSED PAYROLL DEDUCTIONS

Only full shares of Common Stock may be purchased under the Plan.
Unused payroll deductions remaining in an employee's account at the end of a
Payment Period shall be refunded to such participant without interest.

ARTICLE 8 - AUTHORIZATION FOR ENTERING PLAN

An Eligible Employee may enter the Plan by filling out, signing and
delivering to the Personnel Office an authorization:

A. Stating the amount to be deducted regularly from his pay;

B. Authorizing the purchase of stock for him in the Payment
Period in accordance with the terms of the Plan; and

C. Specifying the exact name in which stock purchased for
him is to be issued as provided under Article 12 hereof.

Such authorization must be received by the Personnel Office at least 15
days before the beginning date of the next Payment Period.

Unless an employee files a new authorization or withdraws from the
Plan, his deductions and purchases under the authorization he has on file under
the Plan will continue from one Payment Period to succeeding Payment Periods as
long as the Plan remains in effect.

The Company will accumulate and hold for the employee's account the
amounts deducted from his pay. No interest will be paid on it.

ARTICLE 9 - MINIMUM AND MAXIMUM AMOUNTS OF PAYROLL DEDUCTIONS

An Eligible Employee may authorize payroll deductions in an amount (in
whole percents) not less than 2% but not more than 10% of his regular annual
base pay.

ARTICLE 10 - NO CHANGE IN PAYROLL DEDUCTIONS

Deductions may not be increased or decreased during any Payment Period,
except to reflect changes in base pay during the Payment Period.

<PAGE> 5

- 5 -

ARTICLE 11 - WITHDRAWAL FROM THE PLAN

An Eligible Employee may withdraw from the Plan, in whole but not in
part, at any time prior to the last business day of each Payment Period by
delivering a Withdrawal Notice to the Personnel Office, in which event the
Company will refund the entire balance of his deductions as soon as practicable
thereafter.

To re-enter the Plan, an Eligible Employee who has previously withdrawn
must file a new authorization in accordance with Article 8. His re-entry into
the Plan cannot, however, become effective before the beginning of the next
Payment Period following his withdrawal.

ARTICLE 12 - ISSUANCE OF STOCK

Certificates for stock issued to participants will be delivered as soon
as practicable after each Payment Period.

Stock purchased under the Plan will be issued only in the name of the
Eligible Employee, or if his authorization so specifies, in the name of the
employee and another person of legal age as joint tenants with rights of
survivorship.

ARTICLE 13 - ADJUSTMENTS

Upon the happening of any of the following described events, an
optionee's rights under options granted hereunder shall be adjusted as
hereinafter provided:

A. In the event shares of Common Stock of the Company shall be
subdivided or combined into a greater or smaller number of shares or
if, upon a merger, consolidation, reorganization, split-up,
liquidation, combination, recapitalization or the like of the Company,
the shares of the Company's Common Stock shall be exchanged for other
securities of the Company or of another corporation, each optionee
shall be entitled, subject to the conditions herein stated, to purchase
such number of shares of Common Stock or amount of other securities of
the Company or such other corporation as were exchangeable for the
number of shares of Common Stock of the Company which such optionee
would have been entitled to purchase except for such action, and
appropriate adjustments shall be made in the purchase price per share
to reflect such subdivision, combination, or exchange; and

B. In the event the Company shall issue any of its shares as a stock
dividend upon or with respect to the shares of stock of the class which
shall at the time be subject to option hereunder, each optionee upon
exercising such an option shall be entitled to receive (for the
purchase price paid upon such exercise) the shares as to which he is
exercising his option and, in addition thereto (at no additional cost),
such number

<PAGE> 6

- 6 -

of shares of the class or classes in which such stock dividend or
dividends were declared or paid, and such amount of cash in lieu of
fractional shares, as is equal to the number of shares thereof and the
amount of cash in lieu of fractional shares, respectively, which he
would have received if he had been the holder of the shares as to which
he is exercising his option at all times between the date of the
granting of such option and the date of its exercise.

Upon the happening of any of the foregoing events, the class and
aggregate number of shares set forth in Article 4 hereof which are subject to
options which have heretofore been or may hereafter be granted under the Plan
shall also be appropriately adjusted to reflect the events specified in
paragraphs A and B above. The Committee shall determine the adjustments to be
made under this Article 13, and its determination shall be conclusive.

ARTICLE 14 - NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS

An employee's rights under the Plan are his alone and may not be
transferred or assigned to, or availed of by, any other person. Any option
granted to an employee may be exercised only by him.

ARTICLE 15 - TERMINATION OF EMPLOYEE'S RIGHTS

An employee's rights under the Plan will terminate when he ceases to be
an employee because of retirement, resignation, discharge, death, change of
status or for any other reason, except that if an employee is laid off on
account of an absence of work during the last three months of any Payment
Period, he shall nevertheless be deemed to be a participant in the Plan on the
last day of the Payment Period. A Withdrawal Notice will be considered as
having been received from the employee on the day his employment ceases, and
all payroll deductions not used to purchase stock will be refunded.

If an employee's payroll deductions are interrupted by any legal
process, a Withdrawal Notice will be considered as having been received from
him on the day the interruption occurs.

ARTICLE 16 - TERMINATION AND AMENDMENTS TO PLAN

The Plan may be terminated at any time by the Company's Board of
Directors but such termination shall not affect options then outstanding under
the Plan. It will terminate in any case when all or substantially all of the
unissued shares of stock reserved for the purposes of the Plan have been
purchased. If at any time shares of stock reserved for the purposes of the
Plan remain available for purchase but not in sufficient number to satisfy all
then unfilled purchase requirements, the available shares shall be apportioned
among participants in proportion to their options and the Plan shall terminate.
Upon such termination or any other termination of the Plan, all payroll
deductions not used to purchase stock will be refunded.

<PAGE> 7

- 7 -

The Board of Directors also reserves the right to amend the Plan from
time to time in any respect provided, however, that no amendment shall be
effective without prior approval of the stockholders which would (a) except as
provided in Article 13, increase the number of shares of Common Stock to be
offered under the Plan or (b) change the class of employees eligible to receive
options under the Plan.

ARTICLE 17 - LIMITATIONS ON SALE OF STOCK PURCHASED UNDER THE PLAN

The Plan is intended to provide Common Stock for investment and not for
resale. The Company does not, however, intend to restrict or influence any
employee in the conduct of his own affairs. An employee may, therefore, sell
stock purchased under the Plan at any time he chooses, subject to compliance
with any applicable Federal or state securities laws; provided, however, that
because of certain Federal tax requirements, each employee will agree by
entering the Plan, promptly to give the Company notice of any such stock
disposed of within two years after the date of grant of the applicable option
showing the number of such share disposed of. THE EMPLOYEE ASSUMES THE RISK OF
ANY MARKET FLUCTUATIONS IN THE PRICE OF THE STOCK.

ARTICLE 18 - PARTICIPATING SUBSIDIARIES

The term "participating subsidiaries" shall mean any subsidiary of the
Company which is designated by the Committee to participate in the Plan. The
Committee shall have the power to make such designation before or after the
Plan is approved by the stockholders.

ARTICLE 19 - OPTIONEES NOT STOCKHOLDERS

Neither the granting of an option to an employee nor the deductions
from his pay shall constitute such employee a stockholder of the shares covered
by an option until such shares have been purchased by and issued to him.

ARTICLE 20 - APPLICATION OF FUNDS

The proceeds received by the Company from the sale of Common Stock
pursuant to options granted under the Plan will be used for general corporate
purposes.

ARTICLE 21 - GOVERNMENTAL REGULATION

The Company's obligation to sell and deliver shares of the Company's
Common Stock under this Plan is subject to the approval of any governmental
authority required in connection with the authorization, issuance or sale of
such shares.

<PAGE> 8
- 8 -

ARTICLE 22 - APPROVAL OF STOCKHOLDERS

The Plan shall not take effect until approved by the holders of a
majority of the outstanding shares of the Common Stock of the Company, which
approval must occur within the period ending twelve months after the date the
plan was adopted by the Board of Directors. The Plan was adopted by the Board
of Directors on December 6, 1978. It was approved by the stockholders of the
Company on April 25, 1979. All subsequent amendments to the Plan adopted by
the Board of Directors have been approved by the stockholders.

<PAGE> 1

EXHIBIT 22.1

PRESENT SUBSIDIARIES

<TABLE>
<CAPTION>
PERCENTAGE
STATE OR OF VOTING
JURISDICTION OF SECURITIES
INCORPORATION OWNED
--------------------- ----------
<S> <C> <C>
Teradyne BeneLux, Inc (Ltd.)............................ Delaware 100%
Teradyne Canada Limited................................. Canada 100%
Teradyne GmbH........................................... West Germany 100%
Teradyne Holdings Limited............................... England 100%
Teradyne Limited................................... England 100%
Teradyne Hong Kong, Ltd................................. Delaware 100%
Teradyne International, Ltd............................. U.S. Virgin Islands 100%
Teradyne Ireland Limited................................ Ireland 100%
Teradyne Italia S.r.l................................... Italy 100%
Teradyne Japan, Ltd..................................... Delaware 100%
Teradyne K.K....................................... Japan 100%
Teradyne Korea, Ltd..................................... Delaware 100%
Teradyne Leasing, Inc................................... Massachusetts 100%
Teradyne Malaysia, Ltd.................................. Delaware 100%
Teradyne Netherlands B.V................................ Netherlands 100%
Teradyne Netherlands, Ltd............................... Delaware 100%
Teradyne Realty, Inc.................................... Massachusetts 100%
Teradyne S.A............................................ France 100%
Teradyne Scandinavia, Inc............................... Delaware 100%
Teradyne Software and Systems Test, Inc................. Delaware 100%
Teradyne Singapore, Ltd................................. Delaware 100%
Teradyne Taiwan, Ltd.................................... Delaware 100%
Zehntel Holdings, Inc................................... California 100%
Zehntel, SARL...................................... France 100%
1000 Washington, Inc.................................... Massachusetts 100%
</TABLE>

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration
statements of Teradyne, Inc. on Form S-8 (File Nos. 33-55123; 33-25868;
33-16077; 33-42352; and 33-38251) and Form S-3 (File No. 33-44347) of our
report dated January 20, 1995, on our audits of the consolidated financial
statements of Teradyne, Inc. and Subsidiaries as of December 31, 1994 and 1993,
and for the years ended December 31, 1994, 1993 and 1992, which report is
included in this Annual Report on Form 10-K.

COOPERS & LYBRAND L.L.P.

Boston, Massachusetts
March 23, 1995

32
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 182,811
<SECURITIES> 19,766
<RECEIVABLES> 131,031
<ALLOWANCES> 1,957
<INVENTORY> 91,883
<CURRENT-ASSETS> 446,659
<PP&E> 395,248
<DEPRECIATION> 211,606
<TOTAL-ASSETS> 655,942
<CURRENT-LIABILITIES> 139,160
<BONDS> 8,806
<COMMON> 4,544
0
0
<OTHER-SE> 488,710
<TOTAL-LIABILITY-AND-EQUITY> 655,942
<SALES> 677,440
<TOTAL-REVENUES> 677,440
<CGS> 378,933
<TOTAL-COSTS> 378,933
<OTHER-EXPENSES> 200,377
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,712
<INCOME-PRETAX> 102,812
<INCOME-TAX> 31,871
<INCOME-CONTINUING> 70,941
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,941
<EPS-PRIMARY> 1.91
<EPS-DILUTED> 1.91

</TABLE>