<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
TERADYNE, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing and registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
TERADYNE, INC.
321 HARRISON AVENUE
BOSTON, MASSACHUSETTS 02118
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------------------------------
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of Teradyne, Inc., a Massachusetts
corporation (the "Corporation"), will be held on Thursday, May 15, 1997, at
10:00 A.M., at The First National Bank of Boston, 100 Federal Street (Second
Floor), Boston, Massachusetts, for the following purposes:
1. To elect four members to the Board of Directors to serve for a
three-year term as Class II Directors.
2. To approve the adoption of the 1996 Non-Employee Director Stock
Option Plan.
3. To ratify the selection of the firm of Coopers & Lybrand L.L.P. as
auditors for the fiscal year ending December 31, 1997.
4. To transact such other business as may properly come before the
meeting and any adjournments thereof.
Shareholders entitled to notice of and to vote at the meeting shall be
determined as of the close of business on April 7, 1997, the record date fixed
by the Board of Directors for such purpose.
By Order of the Board of Directors,
RICHARD J. TESTA, Clerk
April 15, 1997
------------------------
SHAREHOLDERS ARE REQUESTED TO SIGN THE ENCLOSED PROXY CARD AND
RETURN IT IN THE ENCLOSED STAMPED ENVELOPE BY RETURN MAIL.
<PAGE> 3
TERADYNE, INC.
321 HARRISON AVENUE
BOSTON, MASSACHUSETTS 02118
---------------
PROXY STATEMENT
APRIL 15, 1997
Proxies in the form enclosed with this proxy statement ARE SOLICITED BY THE
BOARD OF DIRECTORS OF TERADYNE, INC. (the "Corporation") for use at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held on May 15, 1997, at
10:00 A.M., at The First National Bank of Boston, 100 Federal Street (Second
Floor), Boston, Massachusetts.
Only shareholders of record as of the close of business on April 7, 1997
(the "Record Date"), will be entitled to vote at the Annual Meeting and any
adjournments thereof. As of the Record Date, 83,517,155 shares (excluding
treasury shares) of Common Stock of the Corporation were issued and outstanding.
Each share outstanding as of the Record Date will be entitled to one vote, and
shareholders may vote in person or by proxy. Execution of a proxy will not in
any way affect a shareholder's right to attend the Annual Meeting and vote in
person. Any shareholder delivering a proxy has the right to revoke it only by
written notice to the Clerk delivered at any time before it is exercised,
including at the Annual Meeting.
The persons named as attorneys in the proxies are officers and directors of
the Corporation. All properly executed proxies returned in time to be cast at
the Annual Meeting will be voted. With respect to the election of Directors, any
shareholder submitting a proxy has a right to withhold authority to vote for any
individual nominee by writing that nominee's name in the space provided on the
proxy. The proxies will be voted as stated below under "Election of Directors."
In addition to the election of Directors, the shareholders will consider and
vote upon proposals (i) to approve the adoption of the 1996 Non-Employee
Director Stock Option Plan and (ii) to ratify the selection of auditors. Where a
choice has been specified on the proxy with respect to the foregoing matters,
the shares represented by the proxy will be voted in accordance with the
specification and will be voted FOR if no specification is indicated.
A majority in interest of the outstanding shares represented at the meeting
in person or by proxy shall constitute a quorum for the transaction of business.
Votes withheld from any nominee, abstentions and broker "non-votes" are counted
as present or represented for purposes of determining the presence or absence of
a quorum for the meeting. A "non-vote" occurs when a nominee holding shares for
a beneficial owner votes on one proposal, but does not vote on another proposal
because the nominee does not have discretionary voting power and has not
received instructions from the beneficial owner. Directors are elected by a
plurality of the votes cast by shareholders entitled to vote at the meeting. On
all other matters being submitted to shareholders, an affirmative vote of at
least a majority of the shares present, or represented, and entitled to vote at
the meeting is required for approval. An automated system administered by the
Corporation's transfer agent tabulates the votes. The vote on each matter
submitted to shareholders is tabulated separately. Abstentions are included in
the number of shares present or represented and voting on each separate matter.
Broker "non-votes" are not so included.
The Board of Directors knows of no other matter to be presented at the
Annual Meeting. If any other matter should be presented at the Annual Meeting
upon which a vote properly may be taken, shares represented by all proxies
received by the Board of Directors will be voted with respect thereto in
accordance with the judgment of the persons named as attorneys in the proxies.
<PAGE> 4
An Annual Report to Shareholders, containing financial statements for the
fiscal year ended December 31, 1996, has been mailed to all shareholders
entitled to vote at the Annual Meeting. This proxy statement and the
accompanying proxy were first mailed to shareholders on or about April 15, 1997.
ELECTION OF DIRECTORS
The Corporation's Board of Directors is divided into three classes. Each
class serves three years, with the terms of office of the respective classes
expiring in successive years. The present term of office for the directors in
Class II expires at the Annual Meeting. The nominees for election as Class II
directors are Messrs. Carnesale, Chamillard, Hibbard and Prestridge, each of
whom, except for Mr. Chamillard, was elected at the Annual Meeting of
Shareholders held May 26, 1994. Mr. Chamillard was appointed to the Board of
Directors in January 1996. If re-elected, the Class II nominees will hold office
until the Annual Meeting of Shareholders to be held in 2000, and until their
successors shall have been elected and shall have been qualified. Shares
represented by all proxies received by the Board of Directors and not so marked
as to withhold authority to vote for any individual nominee will be voted
(unless one or more nominees are unable or unwilling to serve) for the election
of the Class II nominees. The Board of Directors knows of no reason why any such
nominee should be unable or unwilling to serve, but if such should be the case,
proxies will be voted for the election of some other person or the Board of
Directors will fix the number of directors at a lesser number. Effective as of
January 28, 1997, the Board of Directors of the Corporation amended the
Corporation's By-Laws to provide that no person shall serve on the Corporation's
Board of Directors after the age of 72, unless such person was a member of the
Board of Directors on the effective date of such amendment. Mr. Artzt, currently
a Class I director, has informed the Board of Directors that he will resign from
the Board of Directors effective May 15, 1997. Patricia S. Wolpert was appointed
to the Board of Directors as a Class III director on September 5, 1996.
The following table sets forth the nominees to be elected at the Annual
Meeting and the other current directors, the year each nominee or director was
first appointed or elected a director, the principal occupation of each of the
nominees and directors during the past five years, and the ages of each of the
nominees and directors.
<TABLE>
<CAPTION>
NOMINEE'S OR DIRECTOR'S NAME PRINCIPAL OCCUPATION YEAR
AND YEAR NOMINEE OR DIRECTOR AND BUSINESS EXPERIENCE TERM WILL
FIRST BECAME DIRECTOR DURING THE LAST FIVE YEARS EXPIRE/CLASS
---------------------------- -------------------------- ------------
<S> <C> <C>
Alexander V. d'Arbeloff................. Chairman of the Board of Directors 1999/I
1960 and Chief Executive Officer(1)
Edwin L. Artzt.......................... Director(2) 1999/I
1987
James W. Bagley......................... Director(3) 1999/I
1996
Albert Carnesale........................ Director(4) 1997/II
1993
George W. Chamillard.................... Director and President(5) 1997/II
1996
Daniel S. Gregory....................... Director(6) 1999/I
1977
Dwight H. Hibbard....................... Director(7) 1997/II
1983
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NOMINEE'S OR DIRECTOR'S NAME PRINCIPAL OCCUPATION YEAR
AND YEAR NOMINEE OR DIRECTOR AND BUSINESS EXPERIENCE TERM WILL
FIRST BECAME DIRECTOR DURING THE LAST FIVE YEARS EXPIRE/CLASS
---------------------------- -------------------------- ------------
<S> <C> <C>
John P. Mulroney........................ Director(8) 1998/III
1983
James A. Prestridge..................... Vice Chairman of the Board of 1997/II
1992 Directors and Executive Vice
President(9)
Owen W. Robbins......................... Vice Chairman of the Board of 1998/III
1992 Directors and Executive Vice
President(10)
Richard J. Testa........................ Director, Secretary and Clerk(11) 1998/III
1973
Patricia S. Wolpert..................... Director(12) 1998/III
1996
</TABLE>
- ---------------
(1) Mr. d'Arbeloff, 69, has been Chairman of the Board of Directors since 1977,
was President of the Corporation from 1971 until January 1996, and has been
a director since 1960. Mr. d'Arbeloff continues as Chief Executive Officer
of the Corporation. Mr. d'Arbeloff is also a director of Stratus Computer,
Inc., BTU International, Inc., PRI Automation, Inc., and GeoTel
Communications Corporation. Mr. d'Arbeloff has informed the Board of
Directors that he will resign as Chief Executive Officer effective at the
Annual Meeting. Mr. d'Arbeloff will remain as Chairman of the Board of
Directors and will remain as an employee of the Corporation following the
Annual Meeting.
(2) Mr. Artzt, 67, served as Chairman of the Board of Directors and Chief
Executive Officer of the Procter & Gamble Corporation from 1990 until July
1995. Prior to that time, he served as director, Vice Chairman of the Board
of Directors and President of Procter & Gamble International. Mr. Artzt was
elected Chairman of the Executive Committee of the Board of Directors for
Procter & Gamble Corporation in July 1995. Mr. Artzt is also a director of
Procter & Gamble Corporation, GTE Corporation, Delta Air Lines, Inc., the
American Express Company, and Barilla, S.p.A. (Italy). Mr. Artzt, currently
a Class I director, has informed the Board of Directors that he will resign
from the Board of Directors effective as of May 15, 1997.
(3) Mr. Bagley, 58, has served as Chairman and Chief Executive Officer of
OnTrack Systems, Inc. since May 1996. Mr. Bagley served as President and
Chief Operating Officer of Applied Materials, Inc. from 1987 through 1994
and served as Vice Chairman of Applied Materials, Inc. from October 1995 to
May 1996. From January 1994 to October 1995, Mr. Bagley served as Vice
Chairman and Chief Operating Officer of Applied Materials, Inc. Mr. Bagley
is also a director of Tencor Instruments and Kulicke and Soffa Industries,
Inc.
(4) Mr. Carnesale, 60, has served as Provost of Harvard University since 1994
and was the Dean of the John F. Kennedy School of Government from 1991
through 1995. Mr. Carnesale has served as Professor of Public Policy at the
John F. Kennedy School of Government since 1974. Mr. Carnesale is also a
director of OneWave, Inc.
(5) Mr. Chamillard, 58, was appointed to the Board of Directors and elected as
President and Chief Operating Officer of the Corporation in January 1996.
Mr. Chamillard was an Executive Vice President of the Corporation from
January 1994 through January 1996. Prior to that time, Mr. Chamillard was a
Vice President of the Corporation. Mr. Chamillard is expected to be
appointed as Chief Executive Officer following Mr. d'Arbeloff's resignation
from that position effective at the Annual Meeting.
(6) Mr. Gregory, 68, has been a General Partner of various Greylock
partnerships since January 1965. From January 1991 to January 1992, Mr.
Gregory served as the Secretary of the Executive Office of Economic
3
<PAGE> 6
Affairs for the Commonwealth of Massachusetts. From 1976 to 1990, Mr.
Gregory served as Chairman of Greylock Management Corporation.
(7) Mr. Hibbard, 73, served as Chairman of Cincinnati Bell Inc. from October
1993 to May 1996 and served as Chief Executive Officer and Chairman of
Cincinnati Bell Inc. from 1984 to October 1993. Mr. Hibbard retired from
his position as Chairman of Cincinnati Bell Inc. effective in May 1996.
(8) Mr. Mulroney, 61, has served as Chief Operating Officer and President of
Rohm & Haas Co. since 1986. He is a director of Rohm & Haas Co. and
Aluminum Co. of America.
(9) Mr. Prestridge, 65, was appointed as Vice Chairman of the Board of
Directors in January 1996 and has served as Executive Vice President and
director of the Corporation since 1992. From 1982 to 1992, he served as
Vice President of the Semiconductor Test Group of the Corporation. Mr.
Prestridge has informed the Board of Directors that, effective at the
Annual Meeting, he will retire from the Corporation and will resign as
Vice-Chairman of the Board of Directors and Executive Vice President. Mr.
Prestridge will remain as a non-employee director following the Annual
Meeting. Mr. Prestridge will act as a consultant to the Corporation
following his resignation.
(10) Mr. Robbins, 67, was appointed as Vice Chairman of the Board of Directors
in January 1996 and has served as Executive Vice President, Chief Financial
Officer and director of the Corporation since 1992. From 1977 to 1992, he
served as Vice President of the Corporation. Mr. Robbins has informed the
Board of Directors that, effective at the Annual Meeting, he will retire
from the Corporation and will resign as Vice-Chairman of the Board of
Directors, Executive Vice President and Chief Financial Officer. Mr.
Robbins will remain as a non-employee director following the Annual
Meeting. Mr. Robbins will act as a consultant to the Corporation following
his resignation.
(11) Mr. Testa, 57, has been a partner at the law firm of Testa, Hurwitz &
Thibeault, LLP since 1973. Testa, Hurwitz & Thibeault, LLP serves as
general counsel to the Corporation.
(12) Ms. Wolpert, 47, was appointed to serve as a Class III director on
September 5, 1996. Ms. Wolpert has served as the General Manager, Northeast
Area, of International Business Machines Corporation since January 1996.
From March 1992 to December 1995, Ms. Wolpert served in various capacities
at International Business Machines Corporation, including Executive
Assistant of the Chairman's Office; General Manager, Northern New England;
and Vice President of Operations, Northeast Area.
4
<PAGE> 7
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board of Directors of the Corporation met four times and took action by
unanimous written consent twice during the fiscal year ended December 31, 1996.
The Audit and Finance Committee, which oversees the accounting and financial
functions of the Corporation, including matters relating to the appointment and
activities of the Corporation's independent auditors, met three times during
1996. Messrs. Carnesale, Gregory and Mulroney are currently members of the Audit
and Finance Committee. The Management Compensation and Development Committee
(the "Compensation Committee"), which determines the cash compensation of the
Corporation's executive officers, met three times during 1996. Messrs. Artzt,
Bagley, Hibbard and Testa and Ms. Wolpert are currently members of the
Compensation Committee. The Stock Option Committee, which was formed by the
Board of Directors on March 19, 1996 to administer the Corporation's stock
option and certain other benefit plans, met two times during 1996. Messrs.
Artzt, Bagley and Hibbard and Ms. Wolpert are currently members of the Stock
Option Committee. The Board Composition and Agenda Committee, which acts, in
part, as the Corporation's nominating committee, and is responsible for
recommending individuals to be nominated for election to the Board of Directors
and recommending the time, location and agenda of the meetings of the Board of
Directors, did not meet during 1996. Messrs. Artzt, d'Arbeloff, Mulroney and
Prestridge are currently members of the Board Composition and Agenda Committee.
Shareholders wishing to suggest nominees for election to the Board of Directors
should direct such suggestions to the Clerk of the Corporation at the
Corporation's principal address in accordance with the nomination procedure set
forth in the Corporation's By-Laws. All directors attended at least 75% of the
aggregate of the total number of meetings of the Board of Directors and the
total number of meetings of all committees of the Board on which they served.
DIRECTOR COMPENSATION
All non-employee directors are compensated at the rate of $20,000 per year
and $1,500 per meeting attended, plus reimbursement of reasonable expenses.
Directors who are employees of the Corporation receive no compensation in their
capacity as a director.
During the term of the 1987 Non-Employee Director Stock Option Plan, which
was adopted by the Board of Directors of the Corporation on March 12, 1987 and
approved by the shareholders on May 8, 1987 (the "1987 Non-Employee Director
Plan"), all new non-employee directors elected after January 1, 1992 received an
automatic grant of an option to purchase 20,000 shares of Common Stock. An
additional annual grant of 10,000 shares was automatically made to each
non-employee director pursuant to the 1987 Non-Employee Director Plan on the
date of the first meeting of the Board of Directors in each year. All options
granted under the 1987 Non-Employee Director Plan are non-statutory stock
options, have an exercise price equal to the fair market value on the date of
grant, vest annually at the rate of 25% and have a term of five years. The 1987
Non-Employee Director Plan was terminated by the Board of Directors on November
13, 1996 for purposes of granting further options.
As of December 31, 1996, options to purchase 305,000 shares of the
Corporation's Common Stock under the 1987 Non-Employee Director Plan were
outstanding at a weighted average exercise price of $15.30.
As more fully described beginning on page 17, shareholder approval is
requested for a new Non-Employee Director Stock Option Plan (the "1996
Non-Employee Director Plan"). The first grants of options to purchase an
aggregate of 60,000 shares of Common Stock under the 1996 Non-Employee Director
Plan were made on February 3, 1997.
5
<PAGE> 8
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 7, 1997 information relating to
the beneficial ownership of the Corporation's Common Stock by each Director,
each executive officer named in the Summary Compensation Table on page 9, and by
all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
NAME OWNERSHIP(1)(2) CLASS
---- --------------- ----------
<S> <C> <C>
Alexander V. d'Arbeloff....................... 1,939,772(3) 2.32%
Edwin L. Artzt................................ 46,600 *
James W. Bagley............................... 24,090 *
Albert Carnesale.............................. 30,400 *
George W. Chamillard.......................... 186,327 *
Daniel S. Gregory............................. 49,296 *
John E. Halter................................ 15,275 *
Dwight H. Hibbard............................. 35,200(4) *
John P. Mulroney.............................. 34,330 *
James A. Prestridge........................... 138,037(5) *
Owen W. Robbins............................... 215,769 *
Richard J. Testa.............................. 32,000 *
Patricia S. Wolpert........................... -- *
All executive officers and directors as a
group (21 people)(6)........................ 3,364,724 4.02%
</TABLE>
- ---------------
* less than 1%
(1) Unless otherwise indicated, the named person possesses sole voting and
dispositive power with respect to the shares.
(2) Includes shares of Common Stock which have not been issued but which are
subject to options which either are presently exercisable or will become
exercisable within 60 days, as follows: Mr. Alexander d'Arbeloff, 184,000
shares; Mr. Prestridge, 85,600 shares; Mr. Robbins, 138,400 shares; Mr.
Chamillard, 132,000 shares; Mr. Halter 14,205 shares; each non-employee
director of the Corporation (except Mr. Bagley, Mr. Carnesale, Mr. Testa and
Ms. Wolpert), 25,000 shares; Mr. Bagley 9,545 shares; Mr. Carnesale 30,000
shares; Mr. Testa, 20,000 shares; Ms. Wolpert no shares; all directors and
executive officers as a group, 1,165,650 shares.
(3) Includes 134,808 shares of Common Stock held by Mr. d'Arbeloff's wife and
11,200 shares of Common Stock held in trust for the benefit of Mr.
d'Arbeloff's children, as to all of which shares Mr. d'Arbeloff disclaims
beneficial ownership. Also includes 1,000 shares owned by The d'Arbeloff
Foundation, a private charitable foundation of which Mr. d'Arbeloff is the
founder and a co-trustee, as to all of which shares Mr. d'Arbeloff disclaims
beneficial ownership. In addition this amount includes 1,000 shares owned by
the d'Arbeloff Charitable Remainder Trust as to which shares Mr. d'Arbeloff
disclaims beneficial ownership.
(4) Includes 200 shares of Common Stock held by Mr. Hibbard's wife, as to all of
which shares Mr. Hibbard disclaims beneficial ownership.
6
<PAGE> 9
(5) Includes 52,437 shares of Common Stock held in a living trust for the
benefit of Mr. Prestridge and his wife.
(6) The group is comprised of the individuals named in the Summary Compensation
Table on page 9, the remaining executive officers of the Corporation, and
those persons who were directors of the Corporation on April 7, 1997.
Includes 1,165,650 shares which the directors and executive officers as a
group have the right to acquire by exercise of stock options granted under
the Corporation's stock plans. In addition, includes 210,445 shares held by
family members of executive officers and directors, as to which shares the
applicable officer or director disclaims beneficial ownership.
7
<PAGE> 10
Listed below are certain persons who to the knowledge of the Corporation
own beneficially, as of the date indicated above, more than five percent of the
Corporation's Common Stock outstanding at such date.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL HOLDER OF OWNERSHIP CLASS
-------------------- ----------------- -----------
<S> <C> <C>
The Capital Group Companies, Inc.(1)..... 5,343,600 6.40%
333 So. Hope Street, 52nd Floor
Los Angeles, California 90071
FMR Corporation(2)....................... 10,031,800 12.01%
82 Devonshire Street
Boston, Massachusetts 02109
Metropolitan Life Insurance(3)........... 4,821,700 5.77%
One Madison Avenue
New York, New York 10010
Pioneering Management Corporation(4)..... 6,095,500 7.30%
60 State Street
Boston, Massachusetts 02109
State Street Research & Management
Company(5)............................. 4,807,000 5.76%
One Financial Center, 30th Floor
Boston, Massachusetts 02111
</TABLE>
- ---------------
(1) According to a Schedule 13G filed on February 12, 1997. The Capital Group
Companies, Inc. is the parent holding company of a group of investment
management companies that hold investment power and, in some cases, voting
power over the shares. The Capital Group Companies, Inc. does not have
direct investment power or voting power over any of the shares; however, The
Capital Group Companies, Inc. may be deemed to "beneficially own" such
shares by virtue of Rule 13d-3 under the Securities Exchange Act of 1934.
(2) According to a Schedule 13G filed on February 13, 1997. According to
information submitted to the Corporation, as of December 13, 1996, Fidelity
Management & Research Company, a wholly owned subsidiary of FMR Corp.,
beneficially owned 8,799,100 shares of the common stock of the Corporation,
as a result of its serving as investment advisor to various investment
companies registered under Section 8 of the Investment Company Act of 1940
and as a result of acting as sub-adviser to Fidelity American Special
Situations Trust; 729,700 shares beneficially owned by Fidelity Management
Trust Company, as a result of its serving as investment manager of certain
institutional accounts; and 5,000 shares beneficially owned by Fidelity
International Limited, as a result of its serving as investment adviser to
various non-U.S. investment companies.
(3) According to a Schedule 13G filed on February 13, 1997. State Street
Research and Management Company, Inc. and subsidiaries of New England
Investment Companies L.P., Investment Advisers registered under Section 203
of the Investment Advisers Act and Metropolitan Life Insurance Company of
Canada, an affiliated Insurance Company, are the beneficial owners of
4,807,000, 500, and 14,200 shares, respectively, of the securities reported.
(4) According to a Schedule 13G filed on January 27, 1997.
(5) According to a Schedule 13G filed on February 14, 1997.
8
<PAGE> 11
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of the forms and written representations received by the
Corporation pursuant to Section 16(a) of the Securities Exchange Act of 1934,
the Corporation believes that during the fiscal year January 1, 1996 through
December 31, 1996, the directors and executive officers complied with all
applicable Section 16 filing requirements, except that David Sulman, a Vice
President of the Corporation, failed to file his Form 5 on a timely basis with
respect to one transaction, which was later included in an amended filing.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation
received by the Chief Executive Officer and the four other most highly
compensated executive officers of the Corporation for the three fiscal years
most currently ended.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS(3)
SECURITIES
ANNUAL COMPENSATION UNDERLYING
NAME AND ---------------------------- OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) SARS(#) COMPENSATION(4)
------------------ ---- --------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Alexander V. d'Arbeloff................... 1996 $382,374 $366,980 80,000 $45,117
Chairman of the 1995 307,532 449,675 80,000 37,033
Board of Directors 1994 294,546 378,593 80,000 30,151
and Chief Executive Officer
Owen W. Robbins........................... 1996 275,250 218,400 60,000 27,573
Vice Chairman of the 1995 220,517 262,698 60,000 23,606
Board of Directors and Executive 1994 211,512 214,690 60,000 19,353
Vice President
James A. Prestridge....................... 1996 275,250 218,400 60,000 27,573
Vice Chairman of the Board of 1995 220,517 262,698 60,000 23,606
Directors and Executive 1994 211,512 214,690 60,000 19,105
Vice President
George W. Chamillard...................... 1996 273,444 217,757 60,000 26,634
Director, President and 1995 209,880 247,214 60,000 21,228
Chief Operating Officer 1994 182,790 179,535 60,000 14,354
John E. Halter............................ 1996 285,577 223,750(5) -- 30,787
Vice President
</TABLE>
- ---------------
(1) The amounts in the "Salary" column represent the annual base salary for each
of the named executive officers, which is paid monthly.
(2) The amounts in the "Bonus" column represent the Variable Compensation earned
in 1996 pursuant to the Corporation's Cash Compensation Plan and Cash Profit
Sharing Plan.
(3) The named executive officers have not as of December 31, 1996 received from
the Corporation any grants of restricted stock as compensation.
(4) The amounts in the "All Other Compensation" column represent the matching
contributions that the Corporation makes to the Savings Plan and
Supplemental Savings Plan.
(5) Includes a $100,000 special acquisition bonus paid in 1996.
9
<PAGE> 12
The following table provides information with respect to stock option
grants by the Corporation to the named executive officers in 1996. The
Corporation did not grant any stock appreciation rights in 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
PERCENTAGE OF STOCK PRICE
NUMBER OF TOTAL OPTIONS APPRECIATION OVER
SECURITIES GRANTED TO THE OPTION TERM
UNDERLYING EMPLOYEES EXERCISE (2)
OPTIONS IN FISCAL PRICE EXPIRATION -------------------
NAME GRANTED(1) YEAR ($/SHARE) DATE 5% 10%
---- ---------- ------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Alexander V. d'Arbeloff...... 80,000 3.46 $ 11.63 7/24/01 $256,936 $567,768
Owen W. Robbins.............. 60,000 2.60 11.63 7/24/01 192,701 425,825
James A. Prestridge.......... 60,000 2.60 11.63 7/24/01 192,701 425,825
George W. Chamillard......... 60,000 2.60 11.63 7/24/01 192,701 425,825
John E. Halter............... -- -- -- -- -- --
</TABLE>
- ---------------
(1) Stock options were granted under the Corporation's 1991 Employee Stock
Option Plan at an exercise price equal to the fair market value of the
Corporation's Common Stock on the date of grant. The options have a term of
five years from the date of grant. The options become exercisable as
follows: 20% on the date of grant and, following the first year of grant,
20% on an annual basis.
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation (5% and 10%) of
the Corporation's Common Stock over the term of the options. These numbers
are calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect the Corporation's estimate of future stock
price increases. Actual gains, if any, on stock option exercises and Common
Stock holdings are dependent on the timing of such exercise and the future
performance of the Corporation's Common Stock. There can be no assurance
that the rates of appreciation assumed in this table can be achieved or that
the amounts reflected will be received by the individuals.
The following table provides information on stock option exercises in
fiscal 1996 by the named executive officers and the value of such officers'
unexercised options at December 31, 1996.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES
ACQUIRED NUMBER OF SECURITIES
UPON UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTION OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
EXERCISE DECEMBER 31, 1996 DECEMBER 31, 1996
DURING VALUE -------------------------- --------------------------
NAME 1996 REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alexander V. d'Arbeloff........ 30,000 $616,875 248,000 162,000 $3,276,000 $ 1,660,250
Owen W. Robbins................ 10,000 151,875 146,400 121,600 1,830,750 1,246,750
James A. Prestridge............ -- -- 83,600 121,600 895,625 1,246,750
George W. Chamillard........... -- -- 152,000 120,000 1,920,500 1,221,750
John E. Halter................. -- -- 85,577 28,410 851,619 281,827
</TABLE>
10
<PAGE> 13
RETIREMENT BENEFITS
The Corporation has established a Retirement Plan for the purpose of
providing a lifetime annual income upon retirement to substantially all
employees, including officers, of the Corporation and its United States
subsidiaries. Membership in the Retirement Plan begins after one year of
employment with the Corporation. The Retirement Plan provides for credit toward
retirement income for years of employment with the Corporation prior to January
1, 1994 based upon a formula tied to average compensation from 1989 to 1993. For
years of service after December 31, 1993, credit towards retirement income is
determined on a yearly basis and is equal to the sum for each year of credited
service under the Retirement Plan of (1) .75% of the employee's compensation for
the year which is under the defined covered compensation for the year and (2)
1.5% of the amount of the employee's compensation for the year that exceeds the
covered compensation for the year. The covered compensation under the Retirement
Plan is based on the average of the social security wage basis in effect during
the thirty-five years up to and including normal retirement age. However,
federal tax law limitations on the total amount of benefits which a participant
may receive under qualified retirement plans may limit some participants'
benefits under the Retirement Plan.
Under the Retirement Plan, for participants employed by the Corporation on
or after January 1, 1989, accumulated annual retirement income vests partially
after three years of service with the Corporation and becomes fully vested after
seven years of service or upon normal, early or disability retirement. Benefits
are payable in the form of an annuity either at normal retirement age, upon
early retirement or upon disability. The Retirement Plan also provides for
certain benefits to a surviving spouse.
The Corporation also maintains the Teradyne, Inc. Supplemental Executive
Retirement Plan (the "SERP"). Under the SERP, annual pensions for Messrs.
d'Arbeloff, Robbins, Prestridge, Chamillard, Halter and other senior managers
are computed based on model compensation. See discussion of model compensation
under Management and Compensation Development Committee Report. The pension
formula is identical to that of the qualified plan, except an employee's annual
pension is based on the average of the employee's last five years of model
compensation. The resulting benefit is reduced by the benefit received from the
qualified Retirement Plan.
11
<PAGE> 14
The following table shows the estimated annual benefits payable to covered
participants in the United States upon retirement at age 65 under both the
Retirement Plan and the SERP. The amounts shown are computed on a single life
annuity basis and are not subject to deductions for Social Security benefits or
other amounts. Remuneration for purposes of the table is based upon an
employee's average model compensation for the five year period preceding
retirement.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
FIVE YEAR AVERAGE --------------------------------------------------------------------------------------
COMPENSATION 10 15 20 25 30 35 40
- ----------------- -------- -------- -------- -------- -------- -------- --------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
$ 50,000 ................ $ 5,400 $ 8,100 $ 10,800 $ 13,500 $ 16,200 $ 19,000 $ 21,700
100,000 ................ 12,900 19,300 25,800 32,300 38,700 45,200 51,700
150,000 ................ 20,400 30,600 40,800 51,000 61,200 71,500 81,700
200,000 ................ 27,900 41,800 55,800 69,800 83,700 97,700 111,700
250,000 ................ 35,400 53,100 70,800 88,500 106,200 124,000 141,700
300,000 ................ 42,900 64,300 85,800 107,300 128,700 150,000 171,700
350,000 ................ 50,400 75,600 100,800 126,000 151,200 176,500 201,700
400,000 ................ 57,900 86,800 115,800 144,800 173,700 202,700 231,700
450,000 ................ 65,400 98,100 130,800 163,500 196,200 229,000 261,700
500,000 ................ 72,900 109,300 145,800 182,300 218,700 255,200 291,700
550,000 ................ 80,400 120,600 160,800 201,000 241,200 281,500 321,700
600,000 ................ 87,900 131,800 175,800 219,800 263,700 307,700 351,700
650,000 ................ 95,400 143,100 190,800 238,500 286,200 334,000 381,700
700,000 ................ 102,900 154,300 205,800 257,300 308,700 360,200 411,700
750,000 ................ 110,400 165,600 220,800 276,000 331,200 386,500 441,700
800,000 ................ 117,900 176,800 235,800 294,800 353,700 412,700 471,700
850,000 ................ 125,400 188,100 250,800 313,500 376,200 439,000 501,700
</TABLE>
The executive officers named in the Summary Compensation Table have been
credited as of January 1, 1997 with the following years of service: Mr.
d'Arbeloff, 35 years; Mr. Robbins, 25 years; Mr. Prestridge, 26 years; Mr.
Chamillard 26 years; and Mr. Halter, 1 year.
MANAGEMENT COMPENSATION AND
DEVELOPMENT COMMITTEE REPORT AND
STOCK OPTION COMMITTEE REPORT
OVERVIEW AND PHILOSOPHY
The Corporation's executive compensation program is administered by the
Management Compensation and Development Committee of the Board of Directors (the
"Compensation Committee"), which is composed entirely of outside directors. The
Compensation Committee is responsible for developing and making recommendations
to the Board of Directors with respect to the Corporation's compensation
policies other than with respect to stock option awards. In addition, the
Compensation Committee, pursuant to authority delegated by the Board of
Directors, determines on an annual basis the cash compensation to be paid to
each of the executive officers. The Stock Option Committee is comprised entirely
of non-employee directors. The Stock Option Committee is responsible for
developing and making recommendations to the Board of Directors with respect to
the Corporation's compensation policies in connection with the awarding of stock
options. In addition, the Stock Option Committee, pursuant to authority
delegated by the Board of Directors, determines on an annual basis the stock
option awards to be granted to each of the executive officers.
The executive compensation policies are designed to provide competitive
levels of compensation that assist the Corporation in attracting and retaining
qualified executives. In setting cash compensation levels for executive
officers, the Compensation Committee takes into account such factors as: the
Corporation's past history and future expectations; the general and
industry-specific business environment; annual and long-term performance goals;
and corporate and group performance.
12
<PAGE> 15
EXECUTIVE OFFICER COMPENSATION PROGRAM
The Corporation's executive officer compensation program consists of
compensation received pursuant to the Corporation's Cash Compensation Plan, Cash
Profit Sharing Plan, long-term compensation in the form of stock option, savings
and retirement plans and various other benefits generally available to employees
of the Corporation.
Under the Corporation's Cash Compensation Plan, the Compensation Committee
assigns to each senior employee of the Corporation, including all executive
officers, at the beginning of each year, a "model compensation" amount. The
model compensation amount is based on salary surveys of similarly sized
electronics companies, and on an as adjusted basis, larger sized companies, some
of which are represented in the S&P High Technology Composite Index appearing in
the Performance Graph on page 16 herein.
Once model compensation for each participant has been determined, the
actual cash compensation paid to each employee under the Cash Compensation Plan
is comprised of two components: (1) a fixed monthly salary and (2) an annual
variable amount based upon overall corporate and group performance (referred to
herein as "Variable Compensation"). The fixed salary amount is set at a level
which is below the model compensation, and the variable portion is based upon
factors which, if achieved, would entitle the employee to reach or exceed model
compensation.
The amount of Variable Compensation each participant receives is a function
of four factors:
(A) The employee's base annual salary as of the end of the year;
(B) Overall corporate performance versus goal;
(C) Performance of the individual business groups versus goal; and
(D) The employee's "variable compensation factor," which is determined
by the Compensation Committee on the basis of responsibility and experience
level.
An employee's "variable compensation factor" is a percentage of his or her
base annual salary starting at 10% for new participants. At greater levels of
responsibility and experience, the variable compensation factor may increase to
more than 150% of base annual salary. An employee's model compensation is set
assuming a 50% payout of the variable compensation factor. Accordingly, in a
given year an employee may achieve more or less than his or her model
compensation depending on corporate and business group performance.
At year end, the Compensation Committee evaluates the Corporation's overall
performance versus goal and each individual group's performance versus goal.
Given the dynamics of the business, the Corporation's Cash Compensation Plan
relies heavily on the Compensation Committee's subjective judgment of
performance.
Specifically for 1996, in determining Variable Compensation payouts, the
Compensation Committee took the following factors into consideration in
evaluating both overall corporate performance and the performance of the
Corporation's individual business groups: (1) the extent to which quantitative
and qualitative plans were met for the year, with an emphasis on profitability,
growth of sales, growth of bookings, and increase in market share; (2) the
extent to which each business group became a role model in the implementation of
"Total Quality Management"; (3) the extent to which the results for the year
verified each group's strategy and improved its strategic position; and (4) the
extent to which each group's 1997 mid-term plan and strategy contribute to the
Corporation's need for an aggressive and credible mid-term plan and adapt to
changes in the market place or environment. The Compensation Committee weighed
each of the four factors approximately equally in setting Variable Compensation
amounts. The factors are reviewed by the Compensation Committee based upon the
performance of the business group in which each executive officer serves rather
than upon the
13
<PAGE> 16
individual performance of the executive officer. In 1996, total cash
compensation for all executive officers from the Corporation's Cash Compensation
Plan ranged from 8% below model compensation to 1% above model compensation.
The Corporation's stock option program is the Corporation's long-term
incentive plan for employees, including executive officers. The objectives of
the program are to align executive return with shareholder return and to create
and implement a program which will attract and retain talented employees and
executives. Stock options are awarded annually to employees, including the Chief
Executive Officer, based upon an employee's relative contribution and
responsibility within the Corporation. The factors taken into account by the
Stock Option Committee in determining each executive officer's relative
contribution and responsibility within the Corporation include: the executive
officer's level of model compensation, the executive officer's position, the
responsibilities currently being performed by the executive officer, and the
responsibilities expected to be performed by the executive officer. The
individual factors are reviewed subjectively by the Stock Option Committee when
determining stock option awards for each executive officer. The Corporation
conducts surveys of various companies, some of which appear in the Performance
Graph's S&P High Technology Composite Index, to verify that the relative
percentages of stock options granted to its employees, its Chief Executive
Officer and its other executive officers, are consistent with high technology
industry practice, are within the range of stock options granted by the surveyed
companies, and are competitive with the relative percentages of stock options
granted by the surveyed companies.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. d'Arbeloff's cash compensation for 1996 awarded under the Corporation's
Cash Compensation Plan was $706,374, which is approximately 4.8% less than Mr.
d'Arbeloff's 1996 model compensation of $742,370. Mr. d'Arbeloff's 1996 cash
compensation awarded pursuant to the Corporation's Cash Compensation Plan is a
5.0% increase over his 1995 cash compensation. Mr. d'Arbeloff's fixed salary
amount was $382,374 for 1996 and was set by the Compensation Committee, in
conjunction with his model compensation amount, based upon salary surveys of
chief executive officers for similarly sized electronics companies. Mr.
d'Arbeloff's Variable Compensation payout was $324,000 for 1996. Mr.
d'Arbeloff's Variable Compensation payouts are determined based upon the same
factors as the Corporation's other executive officers who have general
responsibilities within the Corporation rather than responsibilities for one
specific business group within the Corporation. Each of such executive officer's
Variable Compensation payout is based 50% upon the performance of the
Corporation as a whole and 50% upon the average of the performances of each of
the individual business groups within the Corporation. Mr. d'Arbeloff also
received cash compensation in the amount of $42,980 in 1996 pursuant to the
Corporation's Cash Profit Sharing Plan. Cash compensation awards under such
plan, which are calculated on a uniform basis as a percentage of the recipient's
salary, are made to the employees of the Corporation on an equal basis.
The stock options granted to Mr. d'Arbeloff during fiscal 1996 are
consistent with the design of the overall program and are shown in the Summary
Compensation Table above. Mr. d'Arbeloff's 80,000 shares, which represented
3.46% of the total option shares awarded to all employees during fiscal 1996,
placed him at
14
<PAGE> 17
the median of the external surveys. In assessing Mr. d'Arbeloff's individual
performance for the year for purposes of his stock option awards, the Stock
Option Committee concluded that, on balance, Mr. d'Arbeloff had achieved overall
positive results for the individual factors for which he was evaluated. A
general description of these factors is detailed above under the description of
the Corporation's stock option program.
MANAGEMENT COMPENSATION AND
DEVELOPMENT COMMITTEE
Dwight H. Hibbard (Chairman)
Edwin L. Artzt
James W. Bagley
Richard J. Testa
Patricia S. Wolpert
STOCK OPTION COMMITTEE
Dwight H. Hibbard (Chairman)
Edwin L. Artzt
James W. Bagley
Patricia S. Wolpert
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
Messrs. Artzt, Bagley, Hibbard and Testa and, effective September 5, 1996,
Ms. Wolpert comprised the Compensation Committee for fiscal year 1996. Richard
J. Testa is a member of the law firm Testa, Hurwitz & Thibeault, LLP in Boston,
Massachusetts. Such law firm served as general counsel for the Corporation
during the fiscal year 1996 and the Corporation expects to retain the services
of such firm for the fiscal year 1997.
EMPLOYMENT AGREEMENT
The Corporation and Mr. Halter entered into a letter agreement dated
January 24, 1997 (the "Letter Agreement") pursuant to which the Corporation
modified the terms of its employment agreement with Mr. Halter. In accordance
with the Letter Agreement, Mr. Halter resigned from his position as a Vice
President of the Corporation, but otherwise agreed to remain an employee of the
Corporation through November 30, 1997. Pursuant to the terms of the employment
agreement, as modified by the Letter Agreement, Mr. Halter will be paid a fixed
monthly salary through November 30, 1997, at which time Mr. Halter's employment
with the Corporation shall cease. Mr. Halter is no longer eligible to
participate in the Corporation's Variable Compensation Plan.
15
<PAGE> 18
PERFORMANCE GRAPH (1)(2)
The following graph compares the change in the Corporation's cumulative
total shareholder return in its Common Stock with the Standard & Poor's 500
Index and the Standard & Poor's High Technology Composite Index. The comparison
assumes $100.00 was invested on December 31, 1991 in the Corporation's Common
Stock and in each of the foregoing indices and assumes reinvestment of
dividends, if any.
<TABLE>
Teradyne, Inc. S&P 500 Index S&P High Technology Composite Index
<S> <C> <C> <C>
1991 $100.00 $100.00 $100.00
1992 96.85 107.61 104.16
1993 174.81 118.41 128.11
1994 213.39 120.01 149.34
1995 316.56 164.95 215.07
1996 307.11 202.73 304.64
</TABLE>
- ---------------
(1) This graph is not "soliciting material," is not deemed filed with the
Securities and Exchange Commission and is not to be incorporated by
reference in any filing of the Corporation under the Securities Act of 1933
or the Securities Exchange Act of 1934 whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
(2) The stock price performance shown on the graph is not necessarily indicative
of future price performance. Information used on the graph was obtained from
Hewitt Associates, a source believed to be reliable, but the Corporation is
not responsible for any errors or omissions in such information.
16
<PAGE> 19
PROPOSAL TO APPROVE THE ADOPTION OF THE
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Corporation's 1996 Non-Employee Director Plan was adopted by the Board
of Directors on November 13, 1996. The complete text of the 1996 Non-Employee
Director Plan is attached hereto as Appendix A.
The 1996 Non-Employee Director Plan provides for the grant of options to
purchase a maximum of 800,000 shares of Common Stock to Non-Employee Directors
(as defined below) of the Corporation.
DESCRIPTION OF 1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The purpose of the 1996 Non-Employee Director Plan is to promote the
interests of the Corporation by providing an inducement to obtain and retain the
services of qualified persons who are not employees or officers of the
Corporation to serve as members of its Board of Directors.
The 1996 Non-Employee Director Plan authorizes the automatic grant, without
further action by the Board of Directors, (a) of an option to purchase 15,000
shares of Common Stock to each person who becomes a member of the Board of
Directors on or after January 1, 1997 and who is not an employee or officer of
the Corporation (a "Non-Employee Director") and (b) of an option to purchase
7,500 shares of Common Stock to each person who is a Non-Employee Director on
the first Monday of February in each year beginning on February 3, 1997. The
1996 Non-Employee Director Plan is administered by the Stock Option Committee of
the Board of Directors of the Corporation. Options granted to Non-Employee
Directors under the 1996 Non-Employee Director Plan vest annually at the rate of
25% per year.
The exercise price per share for all options granted under the 1996
Non-Employee Director Plan will be equal to the fair market value per share of
the Common Stock on the date of grant. The term of each option will be for a
period of five years from the date of grant. Options may not be assigned or
transferred except by will or by the laws of descent and distribution or
pursuant to a domestic relations order. If an optionee ceases to be a director
of the Company other than by reason of death, no further installments of his
options will become exercisable, and his options shall terminate after the
passage of three months from the date of termination of his directorship (but
not later than on their specified expiration dates). Notwithstanding the
foregoing, in the event a director of the Company (A) resigns from the Board of
Directors to enter government service or (B) retires from the Board of Directors
(i) at any time on or after age 55 but prior to age 65, provided that such
director has been a director of the Corporation continuously for at least ten
years or (ii) at any time on or after age 65, provided that such director has
been a director of the Corporation continuously for at least five years, such
director may exercise any option then held by him or her, within the original
term of the option, as to all or any of the shares covered thereby, at the time
or times such exercise is permitted under the terms of the option. If, however,
a director retires from the Corporation at any time and becomes a director of a
competitor of the Corporation, such director's options shall terminate after the
passage of three months from the date that such director becomes a director of a
competitor. If an optionee dies, any option of his may be exercised, to the
extent of the number of shares with respect to which he could have exercised it
on the date of his death, by his estate, personal representative or beneficiary
who acquires the option by will or by the laws of descent and distribution, at
any time prior to the earlier of the option's specified expiration date or six
months from the date of the optionee's death. The option shall terminate on the
earlier of such dates. No options may be granted under the 1996 Non-Employee
Director Plan after November 13, 2006.
Non-Employee Directors granted options under the 1996 Non-Employee Director
Plan are protected against dilution in the event of a stock dividend, stock
split, recapitalization, merger or similar transaction. The Board of Directors
may from time to time adopt amendments, certain of which are subject to
shareholder
17
<PAGE> 20
approval, and may terminate the 1996 Non-Employee Director Plan at any time
(although such action shall not affect options previously granted). Any shares
subject to an option which for any reason expires or terminates unexercised may
again be available for future grants under the 1996 Non-Employee Director Plan.
As of April 7, 1997, options to purchase 60,000 shares of Common Stock were
outstanding and 740,000 shares of Common Stock were available under the 1996
Non-Employee Director Plan for additional option grants. Executive officers and
employees of the Corporation are not eligible for grants under the 1996 Non-
Employee Director Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain federal income tax
considerations for directors receiving options under the 1996 Non-Employee
Director Plan and certain tax effects on the Corporation. However, the summary
does not address every situation that may result in taxation.
1. Options granted under the 1996 Non-Employee Director Plan do not
qualify as "Incentive Stock Options" under Section 422 of the Code.
2. A Non-Employee Director will not recognize any taxable income upon
the grant of an option under the 1996 Non-Employee Director Plan, but
generally will recognize ordinary compensation income at the time of
exercise of the option in an amount equal to the excess, if any, of the
fair market value of the shares on the date of exercise over the exercise
price.
3. If a Non-Employee Director exercises an option by delivering shares
of Common Stock to the Corporation in payment of the exercise price,
special rules will apply.
4. When a Non-Employee Director sells the Common Stock acquired upon
exercise of an option, he or she generally will recognize a capital gain or
loss equal to the difference between the amount realized upon sale of the
stock and his or her basis in the stock (in the case of a cash exercise,
the exercise price plus the amount, if any, taxed to the director as
compensation income as a result of his or her exercise of the option). If
the Non-Employee Director's holding period for the stock acquired upon
exercise of such option exceeds one year, the gain or loss on such stock
will be long-term capital gain or loss.
5. Generally, upon any grant or exercise of any option in which a
Non-Employee Director does not recognize compensation income, no federal
income tax deduction will be allowed to the Corporation. When a
Non-Employee Director recognizes compensation income as a result of the
exercise of an option under the 1996 Non-Employee Director Plan, the
Corporation generally will be entitled to a corresponding deduction for
federal income tax purposes.
6. Special rules apply if the Common Stock acquired through the
exercise of an option is subject to resale restrictions under federal
securities laws applicable to Non-Employee Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE ADOPTION
OF THE 1996 NON-EMPLOYEE DIRECTOR PLAN.
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Coopers & Lybrand L.L.P.,
independent certified public accountants, to serve as auditors for the fiscal
year ending December 31, 1997. Coopers & Lybrand L.L.P. has served as the
Corporation's auditors since 1968. It is expected that a member of the firm will
be present at the Annual Meeting of Shareholders with the opportunity to make a
statement if so desired and will be available to respond to appropriate
questions. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THIS
SELECTION.
18
<PAGE> 21
SHAREHOLDER PROPOSALS
Proposals of shareholders intended for inclusion in the proxy statement to
be furnished to all shareholders entitled to vote at the next annual meeting of
the Corporation must be received at the Corporation's principal executive
offices not later than January 15, 1998. In order to minimize controversy as to
the date on which a proposal was received by the Corporation, it is suggested
that proponents submit their proposals by Certified Mail -- Return Receipt
Requested.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Corporation, and
in addition to soliciting shareholders by mail through its regular employees,
the Corporation may request banks and brokers to solicit their customers who
have stock of the Corporation registered in the names of a nominee and, if so,
will reimburse such banks and brokers for their reasonable out-of-pocket costs.
Solicitation by officers and employees of the Corporation may also be made of
some shareholders in person or by mail, telephone or telegraph following the
original solicitation.
19
<PAGE> 22
APPENDIX A
TERADYNE, INC.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE. This Non-Qualified Stock Option Plan, to be known as the 1996
Non-Employee Director Stock Option Plan (hereinafter, this "Plan") is intended
to promote the interests of Teradyne, Inc. (hereinafter, the "Company") by
providing an inducement to obtain and retain the services of qualified persons
who are not employees or officers of the Company to serve as members of its
Board of Directors (the "Board").
2. AVAILABLE SHARES. The total number of shares of Common Stock, par value
$.125 per share, of the Company (the "Common Stock") for which options may be
granted under this Plan shall not exceed 800,000 shares, subject to adjustment
in accordance with paragraph 10 of this Plan. Shares subject to this Plan are
authorized but unissued shares or shares that were once issued and subsequently
reacquired by the Company. If any options granted under this Plan are
surrendered before exercise or lapse without exercise, in whole or in part, the
shares reserved therefor shall continue to be available under this Plan.
3. ADMINISTRATION. This Plan shall be administered by the Board or by a
committee appointed by the Board (the "Committee"). In the event the Board fails
to appoint or refrains from appointing a Committee, the Board shall have all
power and authority to administer this Plan. In such event, the word "Committee"
wherever used herein shall be deemed to mean the Board. The Committee shall,
subject to the provisions of the Plan, have the power to construe this Plan, to
determine all questions hereunder, and to adopt and amend such rules and
regulations for the administration of this Plan as it may deem desirable. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to this Plan or any option granted
under it.
4. AUTOMATIC GRANT OF OPTIONS. Subject to the availability of shares under
this Plan, (a) each person who becomes a member of the Board on or after January
1, 1997 and who is not an employee or officer of the Company (a "Non-Employee
Director") shall be automatically granted on the date such person is first
elected to the Board, without further action by the Board, an option to purchase
15,000 shares of the Common Stock, and (b) each person who is a Non-Employee
Director on the first Monday of February in each year beginning on February 3,
1997 during the term of this Plan shall be automatically granted on each such
date an option to purchase 7,500 shares of the Common Stock. The options to be
granted under this paragraph 4 shall be the only options ever to be granted at
any time to such member under this Plan. The number of shares covered by options
granted under this paragraph 4 shall be subject to adjustment in accordance with
the provisions of paragraph 10 of this Plan.
5. OPTION PRICE. The purchase price of the stock covered by an option
granted pursuant to this Plan shall be 100% of the fair market value of such
shares on the day the option is granted. The option price will be subject to
adjustment in accordance with the provisions of paragraph 10 of this Plan. For
purposes of this Plan, 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 last business day for which the prices or quotes discussed
in this sentence are available prior to the date such option is granted and
shall mean (i) the average (on that date) of the high and low 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, 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.
A-1
<PAGE> 23
6. PERIOD OF OPTION. Unless sooner terminated in accordance with the
provisions of paragraph 8 of this Plan, an option granted hereunder shall expire
on the date which is five (5) years after the date of grant of the option.
7. (a) VESTING OF SHARES AND NON-TRANSFERABILITY OF OPTIONS. Options
granted under this Plan shall not be exercisable until they become vested.
Options granted under this Plan shall vest in the optionee and thus become
exercisable, in accordance with the following schedule, provided that the
optionee has continuously served as a member of the Board through such vesting
date:
<TABLE>
<CAPTION>
PERCENTAGE OF OPTION
SHARES FOR WHICH
OPTION WILL BE EXERCISABLE DATE OF VESTING
-------------------------- ---------------
<C> <S>
0% Less than one year from the date of grant
25% One year from the date of grant
50% Two years from the date of grant
75% Three years from the date of grant
100% Four years from the date of grant
</TABLE>
The number of shares as to which options may be exercised shall be
cumulative, so that once the option shall become exercisable as to any shares it
shall continue to be exercisable as to said shares, until expiration or
termination of the option as provided in this Plan.
(b) NON-TRANSFERABILITY. Any option granted pursuant to this Plan shall
not be assignable or transferable other than by will or the laws of descent and
distribution or pursuant to a domestic relations order and shall be exercisable
during the optionee's lifetime only by him or her.
8. TERMINATION OF OPTION RIGHTS.
(a) If an optionee ceases to be a director of the Company other than by
reason of death, no further installments of his options will become exercisable,
and his options shall terminate after the passage of three months from the date
of termination of his directorship (but not later than on their specified
expiration dates). Notwithstanding the foregoing, in the event a director of the
Company (A) resigns from the Board of Directors to enter government service or
(B) retires from the Board of Directors (i) at any time on or after age 55 but
prior to age 65 provided that such director has been a director of the Company
continuously for at least ten years or (ii) at any time on or after age 65
provided that such director has been a director of the Company continuously for
at least five years, such director may exercise any option then held by him or
her, within the original term of the option, as to all or any of the shares
covered thereby, at the time or times such exercise is permitted under the terms
of the option. Notwithstanding the foregoing, if a director retires from the
Company at any time and becomes a director of a competitor of the Company, such
director's options shall terminate after the passage of three months from the
date that such director becomes a director of a competitor. Nothing in the Plan
shall be deemed to give any optionee the right to be nominated as a director by
the Company for any period of time.
(b) If an optionee dies, any option of his may be exercised, to the extent
of the number of shares with respect to which he could have exercised it on the
date of his death, by his estate, personal representative or beneficiary who
acquires the option by will or by the laws of descent and distribution, at any
time prior to the earlier of the option's specified expiration date or six
months from the date of the optionee's death. The option shall terminate on the
earlier of such dates.
9. EXERCISE OF OPTION. Subject to the terms and conditions of this Plan
and the option agreements, an option granted hereunder shall, to the extent then
exercisable, be exercisable in whole or in part by giving written notice to the
Company by mail or in person, at its principal executive offices, stating the
number of
A-2
<PAGE> 24
shares with respect to which the option is being exercised, accompanied by
payment in full for such shares. Payment may be (a) in United States dollars in
cash or by check, (b) 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), valued at fair market
value determined in accordance with the provisions of paragraph 5 or (c)
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. There shall be no such exercise
at any one time as to fewer than one hundred (100) shares or all of the
remaining shares then purchasable by the person or persons exercising the
option, if fewer than one hundred (100) shares. The Company's transfer agent
shall, on behalf of the Company, prepare a certificate or certificates
representing such shares acquired pursuant to exercise of the option, shall
register the optionee as the owner of such shares on the books of the Company
and shall cause the fully executed certificate(s) representing such shares to be
delivered to the optionee as soon as practicable after payment of the option
price in full. The holder of an option shall not have any rights of a
stockholder with respect to the shares covered by the option, except to the
extent that one or more certificates for such shares shall be delivered to him
or her upon the due exercise of the option.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION AND OTHER EVENTS. Upon the
occurrence of any of the following events, an optionee's rights with respect to
options granted to him or her hereunder shall be adjusted as hereinafter
provided:
(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) Recapitalization Adjustments. In the event of a reorganization,
recapitalization, merger, consolidation, or any other change in the
corporate structure or shares of the Company, to the extent permitted by
Rule 16b-3 under the Securities Exchange Act of 1934, adjustments in the
number and kind of shares authorized by this Plan and in the number and
kind of shares covered by, and in the option price of outstanding options
under this Plan shall be made if, and in the same manner as, such
adjustments are made to options issued under the Company's other stock
option plans. Notwithstanding the foregoing, no such adjustment shall be
made which would, within the meaning of any applicable provisions of the
Internal Revenue Code of 1986, as amended, constitute a modification,
extension or renewal of any Option or a grant of additional benefits to the
holder of an Option.
(c) 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.
(d) Adjustments. Upon the happening of any of the foregoing events,
the class and aggregate number of shares set forth in paragraphs 2 and 4 of
this Plan that are subject to options which previously have been or
subsequently may be granted under this Plan shall also be appropriately
adjusted to reflect such events. The Board shall determine the specific
adjustments to be made under this paragraph 10 and its determination shall
be conclusive.
A-3
<PAGE> 25
11. RESTRICTIONS ON ISSUANCE OF SHARES. Notwithstanding the provisions of
paragraphs 4 and 9 of this Plan, the Company shall have no obligation to deliver
any certificate or certificates upon exercise of an option until one of the
following conditions shall be satisfied:
(i) The issuance of shares with respect to which the option has been
exercised is at the time of the issue of such shares effectively registered
under applicable Federal and state securities laws as now in force or
hereafter amended; or
(ii) Counsel for the Company shall have given an opinion that the
issuance of such shares is exempt from registration under Federal and state
securities laws as now in force or hereafter amended; and the Company has
complied with all applicable laws and regulations with respect thereto,
including without limitation all regulations required by any stock exchange
upon which the Company's outstanding Common Stock is then listed.
12. LEGEND ON CERTIFICATES. The certificates representing shares issued
pursuant to the exercise of an option granted hereunder shall carry such
appropriate legend, and such written instructions shall be given to the
Company's transfer agent, as may be deemed necessary or advisable by counsel to
the Company in order to comply with the requirements of the Securities Act of
1933 or any state securities laws.
13. REPRESENTATION OF OPTIONEE. If requested by the Company, the optionee
shall deliver to the Company written representations and warranties upon
exercise of the option that are necessary to show compliance with Federal and
state securities laws, including representations and warranties to the effect
that a purchase of shares under the option is made for investment and not with a
view to their distribution (as that term is used in the Securities Act of 1933).
14. OPTION AGREEMENT. Each option granted under the provisions of this
Plan shall be evidenced by an option agreement, which agreement shall be duly
executed and delivered on behalf of the Company and by the optionee to whom such
option is granted. The option agreement shall contain such terms, provisions and
conditions not inconsistent with this Plan as may be determined by the officer
executing it.
15. TERMINATION AND AMENDMENT OF PLAN. Options may no longer be granted
under this Plan after November 13, 2006, and this Plan shall terminate when all
options granted or to be granted hereunder are no longer outstanding. The Board
may at any time terminate this Plan or make such modification or amendment
thereof as it deems advisable; provided, however, that the Board may not modify
or amend this Plan, without approval of the stockholders, if such approval is
required by the Federal securities laws or applicable regulatory authorities (at
the time of any such modification or amendment). Termination or any modification
or amendment of this Plan shall not, without consent of a participant, affect
his or her rights under an option previously granted to him or her.
16. WITHHOLDING OF INCOME TAXES. Upon the exercise of an option, the
Company, in accordance with Section 3402(a) of the Internal Revenue Code, may
require the optionee to pay withholding taxes in respect of amounts considered
to be compensation includible in the optionee's gross income.
17. COMPLIANCE WITH REGULATIONS. It is the Company's intent that the Plan
comply in all respects with Rule 16b-3 under the Securities Exchange Act of 1934
(or any successor or amended provision thereof) and any applicable Securities
and Exchange Commission interpretations thereof. If any provision of this Plan
is deemed not to be in compliance with Rule 16b-3, the provision shall be null
and void.
18. GOVERNING LAW. The validity and construction of this Plan and the
instruments evidencing options shall be governed by the laws of the Commonwealth
of Massachusetts, without giving effect to the principles of conflicts of law
thereof.
A-4
<PAGE> 26
DETACH HERE
TERADYNE, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
P MAY 15, 1997
SOLICITED BY THE BOARD OF DIRECTORS
R
O The undersigned hereby appoints ALEXANDER V. D'ARBELOFF and RICHARD J.
TESTA, and each or both of them, proxies, with full power of substitution
X to vote all shares of stock of the Corporation which the undersigned is
entitled to vote at the Annual Meeting of Shareholders of Teradyne, Inc. to
Y be held on Thursday, May 15, 1997, at 10:00 A.M., at The First National
Bank of Boston, 100 Federal Street (Second Floor), Boston, Massachusetts,
and at any adjournments thereof, upon matters set forth in the Notice of
Annual Meeting of Shareholders and Proxy Statement dated on or about April
15, 1997, a copy of which has been received by the undersigned. The proxies
are further authorized to vote, in their discretion, upon such other
business as may properly come before the meeting or any adjournments
thereof.
-----------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------
<PAGE> 27
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR THE ELECTION OF CLASS II DIRECTORS
AND FOR THE PROPOSALS IN ITEMS 2 AND 3.
1. To elect four members to the Board of Directors to
serve for a three-year term as Class II Directors.
NOMINEES: Albert Carnesale, George W. Chamillard,
Dwight H. Hibbard and James A. Prestridge
FOR WITHHELD
[ ] [ ]
[ ]
-----------------------------------------
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To approve the adoption of the [ ] [ ] [ ]
1996 Non-Employee Director Stock
Option Plan.
3. To ratify the selection of Coopers &
Lybrand L.L.P. as auditors for the [ ] [ ] [ ]
fiscal year ending December 31,
1997.
MARK HERE MARK HERE
FOR ADDRESS [ ] IF YOU PLAN [ ]
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
(Please sign exactly as your name appears hereon. If signing as
attorney, executor, trustee or guardian, please give your full title as
such. If stock is held jointly, each owner should sign. Please read
reverse side before signing.)
Signature: Date: Signature: Date:
----------------- ----- ------------------ -------
