<PAGE> 1
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
For the fiscal year ended December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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 20, 1998 was $3.7 billion 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 20, 1998 was 83,968,395 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement in connection with its 1998
annual meeting of shareholders are incorporated by reference into Part III.
<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 N:
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.
Statements in this Annual Report on Form 10-K which are not historical
facts, so called "forward looking statements," are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that all forward looking statements involve risks and
uncertainties, including those detailed in the Company's filings with the
Securities and Exchange Commission. See also "Item 7: Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Certain Factors
That May Affect Future Results."
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
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 logic, memory, and mixed signal
integrated circuits ("semiconductor test systems"), (ii) test systems for
circuit boards and other assemblies ("circuit-board test systems"), (iii) test
systems for telephone lines and networks ("telecommunications test systems"),
and (iv) software test programs for communications networks, computerized
telecommunications systems, and other software products ("software test").
Semiconductor test systems accounted for 67% of consolidated net sales in 1997,
64% in 1996, and 69% in 1995. Circuit-board test systems accounted for 9% of
consolidated net sales in 1997, 13% in 1996, and 11% in 1995. Telecommunications
test systems accounted for 5% of consolidated net sales in 1997 and 7% in 1996
and 1995. Software test accounted for 2% of consolidated net sales in 1997 and
1% in 1996.
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 can
reach $5 million or more.
BACKPLANE CONNECTION SYSTEMS
The Company also manufactures backplane connection systems, principally for
the computer, communications, and military/aerospace industries. A backplane is
an assembly into which printed circuit boards are inserted that provides for the
interconnection of electrical signals between the circuit boards and the other
elements of the system. The Company produces both printed circuit and metal
backplanes, along with mating circuit-board connectors. Backplane connection
systems accounted for 17% of consolidated net sales in 1997, 15% in 1996, and
13% in 1995.
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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. No single customer accounted for 10% or more of consolidated net
sales in 1997. In 1997, the Company's three largest customers accounted for 26%
of consolidated net sales.
Direct sales to United States government agencies accounted for less than
2% of consolidated net sales in 1997, 1996, and 1995. Sales are also made within
each of the Company's segments to customers who are government contractors.
Approximately 11% of backplane connection systems sales and less than 2% of
electronic test systems sales fell into this category during 1997.
The Company's customers outside the United States are located primarily in
Europe, the Asia Pacific region, and Japan. The Company sells in these areas
both directly and through non U.S. sales subsidiaries. Substantially all of the
Company's manufacturing activities are conducted in the United States.
Sales to customers outside the United States accounted for 51% of
consolidated net sales in 1997, 54% in 1996, and 52% in 1995. Sales of products
and services from locations outside the United States accounted for less than
10% of consolidated net sales in all periods presented. Identifiable assets of
the Company's non U.S. locations, consisting principally of operating assets
used in support of domestic export sales, were approximately $129.4 million at
December 31, 1997, $130.3 million at December 31, 1996, and $125.2 million at
December 31, 1995. Of these identifiable assets at December 31, 1997, $69.2
million were in Europe, $50.1 million were in Japan, and $10.1 million were in
the Asia Pacific region.
The Company is subject to the inherent risks involved in international
trade, such as political and economic instability, restrictive trade policies,
controls on funds transfer, currency fluctuations, difficulties in managing
distributors, potentially adverse tax consequences, and the possibility of
difficulty in accounts receivable collection. The Company attempts to reduce the
effects of currency fluctuations by hedging part of its exposed position and by
conducting some of its international transactions in U.S. dollars or dollar
equivalents.
DISTRIBUTION
The Company sells its products primarily through a direct sales force. The
Company has sales and service offices throughout North America, Europe, the Asia
Pacific region, and Japan.
COMPETITION
The Company faces substantial competition throughout the world, primarily
from electronic test systems manufacturers located in the United States, Europe,
and Japan, as well as internal suppliers at several of the Company's customers.
Some of these competitors have substantially greater financial and other
resources with which to pursue engineering, manufacturing, marketing, and
distribution of their products. New product introductions by the Company's
competitors could cause a decline in sales or loss of market acceptance of
existing products.
BACKLOG
On December 31, 1997, the Company's backlog of unfilled orders for
electronic test systems and backplane connection systems was approximately
$772.5 million and $90.0 million, respectively, compared with $433.9 million and
$82.5 million, respectively, on December 31, 1996. Of the backlog at December
31, 1997, approximately 88% of the electronic test systems backlog, and
approximately 86% of the backplane connection systems backlog are expected to be
delivered in 1998. The electronic test systems backlog at December 31, 1997
includes $20.3 million of United States government orders for M900 VXI Digital
Test subsystems for the U.S. Navy's Consolidated Automated Support System (CASS)
which are unfunded. The unfunded orders are for shipments scheduled to be
delivered in 1999. The Company's past experience
2
<PAGE> 4
indicates that a portion of orders included in the backlog may be canceled.
There are no seasonal factors related to the backlog.
RAW MATERIALS
The Company's products require a wide variety of electronic and mechanical
components. The Company can experience 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. Any prolonged inability of the Company to obtain adequate yields or
deliveries, or any other circumstances that would require the Company to seek
alternative sources of supply could have a material adverse effect on the
Company's business, financial condition, and results of operations.
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. The Company relies on certain intellectual property protections to
preserve its intellectual property rights. Any invalidation of the Company's
intellectual property rights could have a material adverse effect on the
Company's business.
EMPLOYEES
As of December 31, 1997, the Company employed approximately 6,300 people.
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 $162.5 million in
1997, $143.9 million in 1996, and $123.5 million in 1995. These expenditures
amounted to approximately 13% of consolidated net sales in 1997, 12% in 1996,
and 10% in 1995.
ENVIRONMENTAL AFFAIRS
The Company's manufacturing facilities are subject to numerous laws and
regulations designed to protect the environment, particularly from manufacturing
plant wastes and emissions. These include laws such as the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, the Superfund
Amendment and Reauthorization Act of 1986, the Occupational Safety and Health
Act, the Clean Air Act, the Clean Water Act, the Resource Conservation and
Recovery Act of 1976, and the Hazardous and Solid Waste Amendments of 1984. In
the opinion of management, the costs associated with complying with these laws
and regulations have not had and are currently not expected to have a material
adverse effect upon the financial position of the Company.
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<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... 70 Chairman of the Board Chairman of the Board of the
Company since 1977; Chief
Executive Officer from 1996 to
1997; President of the Company
from 1971 to 1996; Director of
the Company since 1960.
George W. Chamillard...... 59 President, Chief Executive President and Chief Executive
Officer, and Member of the Officer beginning in 1997;
Board Director of the Company since
1996; President and Chief
Operating Officer from 1996 to
1997; Executive Vice President
of the Company from 1994 to
1996; Vice President of the
Company from 1981 to 1993.
Jeffrey R. Hotchkiss...... 50 Vice President and Chief Chief Financial Officer
Financial Officer beginning in 1997; Vice
President of the Company since
1990.
Michael A. Bradley........ 49 Vice President Vice President of the Company
since 1992.
John M. Casey............. 49 Vice President Vice President of the Company
since 1990.
Ronald J. Dias............ 54 Vice President Vice President of the Company
since 1988.
Donald J. Hamman.......... 46 Controller Controller of the Company since
1994; Director of Corporate
Accounting from 1986 to 1994.
John P. McCabe............ 53 Vice President Vice President of the Company
since 1994; Controller of the
Company from 1975 to 1994.
Stuart M. Osattin......... 52 Vice President and Treasurer Vice President of the Company
since 1994; Treasurer of the
Company since 1980.
Edward Rogas, Jr.......... 57 Vice President Vice President of the Company
since 1984.
David L. Sulman........... 54 Vice President Vice President of the Company
since 1994; Division General
Manager since 1993.
Jack A. VanWoerkom........ 44 Vice President and General Vice President and General
Counsel Counsel of the Company beginning
in 1998; Chief Legal Counsel and
Vice President Development of a
privately owned company from
1994 to 1997; Vice Chairman and
General Counsel of a real estate
investment firm from 1985 to
1993.
</TABLE>
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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 SQUARE FEET OF
LOCATION INTEREST FLOOR SPACE
-------- -------- --------------
<S> <C> <C>
ELECTRONIC TEST SYSTEMS INDUSTRY SEGMENT:
Boston, Massachusetts.................................. Own 492,000
Boston, Massachusetts.................................. Lease 67,000
Agoura Hills, California............................... Own 572,000
Deerfield, Illinois.................................... Own 63,000
Walnut Creek, California............................... Lease 69,000
Kumamoto, Japan........................................ Own 28,000
San Jose, California................................... Own 120,000
BACKPLANE CONNECTION SYSTEMS INDUSTRY SEGMENT:
Nashua, New Hampshire.................................. Own 430,000
Plano, Texas........................................... Lease 18,000
Dublin, Ireland........................................ Lease 46,000
</TABLE>
Included in the Agoura Hills property above is 212,000 square feet that the
Company is preparing for occupancy. In addition, 273,000 square feet of floor
space is under construction in North Reading, Massachusetts. The Company expects
to occupy the Agora Hills facility in 1998 and the North Reading facility in
1999.
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
None.
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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>
1997 First Quarter........................................ $32 7/8 $23 5/8
Second Quarter....................................... 44 3/4 27
Third Quarter........................................ 58 1/2 40 1/8
Fourth Quarter....................................... 59 3/16 27 1/4
1996 First Quarter........................................ $27 7/8 $16 3/8
Second Quarter....................................... 22 1/2 16
Third Quarter........................................ 18 1/2 11 1/8
Fourth Quarter....................................... 26 1/4 15 1/2
</TABLE>
The number of record holders of the Company's Common Stock at February 20,
1998 was 3,118.
The Company has never paid cash dividends because it has been its policy to
use earnings to finance expansion and growth. Payment of future cash 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,
----------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales........................... $1,266,274 $1,171,615 $1,191,022 777,731 $633,139
========== ========== ========== ======== ========
Income from continuing operations... $ 127,608 $ 93,574 $ 159,284 76,390 $ 41,202
========== ========== ========== ======== ========
Income from continuing operations
per common share -- basic......... $ 1.53 $ 1.12 $ 1.95 0.98 $ 0.56
========== ========== ========== ======== ========
Income from continuing operations
per common share -- diluted....... $ 1.48 $ 1.10 $ 1.89 0.95 $ 0.54
========== ========== ========== ======== ========
Total assets........................ $1,251,674 $1,096,816 $1,023,831 759,480 $621,607
========== ========== ========== ======== ========
Long-term obligations............... $ 13,141 $ 15,650 $ 18,679 9,111 $ 9,942
========== ========== ========== ======== ========
</TABLE>
6
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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,
------------------------------------
1997 1996 1995
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................................ $1,266,274 $1,171,615 $1,191,022
========== ========== ==========
Net income............................................... $ 127,608 $ 93,574 $ 159,284
========== ========== ==========
Increase (decrease) in net sales from preceding year:
Amount.............................................. $ 94,659 (19,407) $ 413,291
========== ========== ==========
Percentage.......................................... 8% (2)% 53%
========== ========== ==========
Increase (decrease) in net income from preceding year.... $ 34,034 $ (65,710) $ 82,894
========== ========== ==========
Percentage of net sales:
Net sales........................................... 100% 100% 100%
Expenses:
Cost of sales....................................... 58 62 54
Engineering and development......................... 13 12 10
Selling and administrative.......................... 15 15 15
---------- ---------- ----------
86 89 79
Other income (expense):
Merger expenses..................................... (1)
Net interest income................................. 1 1 1
---------- ---------- ----------
Income before income taxes.......................... 15 12 21
Provision for income taxes.......................... 5 4 8
---------- ---------- ----------
Net income............................................... 10% 8% 13%
========== ========== ==========
</TABLE>
RESULTS OF OPERATIONS:
1997 compared to 1996
In 1997, sales increased 8% to a record level of $1,266.3 million from
$1,171.6 million in 1996. The year to year increase in sales was primarily due
to a 12% increase in shipments of semiconductor test systems. Semiconductor test
systems sales increased due to an increase in orders from semiconductor device
manufacturers for capacity expansion following reduced demand in 1996. Sales of
backplane connection systems grew 23% as a result of growth in demand from
networking, data storage and other high technology customers. Sales of software
test systems, while 2% of total sales, were up 180% over 1996 and included the
results of two new acquisitions in 1997 -- Softbridge, Inc. and RSW, Inc.
Offsetting these increases, sales of telecommunications test systems and circuit
board test systems decreased 18% and 23%, respectively, in 1997. Net income
increased from $93.6 million in 1996 to $127.6 million in 1997. Excluding the
effect of pre-tax nonrecurring charges of $5.0 million ($3.2 million after
taxes) in 1997 and $48.9 million ($32.0 million after taxes) in 1996,
comparative net income increased $5.2 million from $125.6 million in 1996 to
$130.8 million.
Incoming orders increased 54%, from $1,045.1 million in 1996 to $1,612.4
million in 1997. The increase in incoming orders was led by a 78% increase in
semiconductor test systems orders including significant orders for several new
products introduced by the Company in the fourth quarter of 1996. As a result of
the increase in orders, the Company's backlog grew 67% in 1997, finishing the
year at $862.5 million.
Cost of sales, as a percentage of sales, decreased from 62% in 1996 to 58%
in 1997. Cost of sales in 1996 included a $34.1 million nonrecurring charge in
connection with the consolidation of the VLSI product lines of Megatest and
Teradyne. Excluding the product line consolidation charge, cost of sales, as a
percentage of 1996 sales, was 59%. The remaining decrease in cost of sales
percentage was the result of increased utilization of the fixed and
semi-variable components of the Company's overhead structure.
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Engineering and development expenses increased from 12% of sales in 1996 to
13% of sales in 1997, an increase of $18.6 million. The expense increases were
primarily due to increased investment in new product development of
semiconductor and software test systems.
Selling and administrative expenses were 15% of sales in both 1996 and
1997. Expenses in 1996 included a one time charge of $10.8 million for salary
continuation and enhanced medical and pension benefits associated with an early
retirement program and other workforce reductions. Excluding this non-recurring
charge selling and administration increased from 14% of sales in 1996 to 15% in
1997. The increase was primarily related to the introduction and marketing of
new semiconductor test system products.
The Company's effective tax rate was 34% in 1997 compared with 33% in 1996.
The Company utilized export sales corporation benefits and certain research and
development tax credits in 1997 and 1996 to operate below the U. S. statutory
rate of 35%.
1996 compared to 1995
In 1996, sales declined 2% to $1,171. 6 million from $1,191.0 million
reached after 53% sales growth in 1995. The decrease was primarily in the
semiconductor test systems product lines, which fell 8% as a result of a
reduction in orders from semiconductor device manufacturers. Sales of
telecommunications test systems also declined by 4% with the completion of the
line-test equipment installation at Deutsche Telekom in Germany. Sales increased
in the other two major product lines of the Company: circuit-board test systems
grew by 19% driven by fulfilling government contracts and increased sales to
commercial customers; and backplane connection systems grew by 15% with strong
demand from the high technology commercial customer base. Net income decreased
from $159.3 million in 1995 to $93.6 million in 1996. Excluding the effect of
pre-tax nonrecurring charges of $48.9 million ($32.0 million after taxes) in
1996 and $5.6 million ($5.6 million after taxes) in 1995, comparative net income
decreased by $39.3 million from $164.9 million to $125.6 million.
Incoming orders decreased 27%, from $1,432.1 million in 1995 to $1,045.1
million in 1996. The most significant decline was in semiconductor test systems
orders which fell 37%. Circuit-board test systems orders, excluding the effect
of $98.0 million in multi-year government contracts received in 1995, were down
8% while backplane connection systems and telecommunications systems increased
49% and 21%, respectively. As a result of the overall decrease in orders, the
Company's backlog fell in 1996, finishing the year at $516.4 million (as
adjusted for $16.4 million in cancellations).
Cost of sales, as a percentage of sales, increased from 54% in 1995 to 62%
in 1996. The 1996 cost of sales included $34.1 million in one time charges
resulting from the Company's decision to accelerate the consolidation of the
VLSI product lines of Megatest and Teradyne. Excluding the product line
consolidation charge, cost of sales, as a percentage of 1996 sales, was 59%. The
remaining increase in cost of sales percentage was the result of the
relationship of fixed manufacturing costs and the costs associated with new
product introductions to the lower level of sales. In addition, there was an
unfavorable change in mix as a greater percentage of total Company sales was
backplane connection systems and circuit-board test systems, whose product
margins are generally lower than semiconductor test systems.
Engineering and development expenses, as a percentage of sales, increased
2% from 10% in 1995 to 12% in 1996. These expenses grew $20.4 million in 1996
primarily as a result of increased investment in new product development of
semiconductor test systems. During 1996, the Company announced major new
products in each of the three semiconductor markets in which it participates.
Selling and administrative expenses were 15% of sales in 1996 and 1995. In
1996, the Company provided $10.8 million for salary continuation payments and
enhanced pension and medical benefits associated with an early retirement
program and other workforce reductions. Excluding this provision selling and
administrative expenses were 14% of sales in 1996.
Interest income increased 36% in 1996 to $19.3 million due to an increase
in the Company's average invested balances and higher interest rates. Interest
expense decreased from $3.0 million in 1995 to $2.4 million in 1996 as an
outstanding capital equipment note was paid.
The Company's effective tax rate was 33% in 1996 compared with 36% in 1995.
The Company utilized export sales corporation benefits and certain research and
development tax credits in 1996 to operate below the
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<PAGE> 10
U. S. statutory rate of 35%. In 1995, the effective rate was above the U. S.
statutory rate as certain merger expenses were nondeductible for income tax
purposes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and marketable securities balance
decreased $181.6 million in 1997, to $249.9 million. Cash generated from
operations decreased to $13.5 million in 1997 from $250.8 million in 1996,
principally due to increases in accounts receivable and inventory. Accounts
receivable increased $122.5 million in 1997 primarily as a result of a $150.4
million increase in sales in the fourth quarter of 1997 compared to the fourth
quarter of 1996. Inventories increased $133.4 million in 1997 in order to
support the Company's backlog commitment, which increased $346.1 million in
1997. Backlog at the end of 1997 includes a substantial number of the Company's
new products, which require longer manufacturing and test cycle times during
production ramp up. Cash was used to fund additions to property, plant and
equipment of $132.1 million in 1997 and $75.2 million in 1996. Property, plant
and equipment expenditures relate primarily to the expansion of production
capacity.
In 1996, the Company's Board of Directors authorized the repurchase of 5.0
million shares of the Company's stock on the open market. The Company purchased
2.6 million shares for $104.5 million in 1997 and 1.4 million shares for $29.8
million in 1996 under the buyback program. Cash of $44.1 million in 1997 and
$13.5 million in 1996 was generated from the sale of stock to employees under
the Company's stock option and stock purchase plans.
The Company believes its cash, cash equivalents, and marketable securities
balance of $249.9 million, together with other sources of funds, including cash
flow generated from operations and the available borrowing capacity of $120.0
million under its line of credit agreement, will be sufficient to meet working
capital and capital expenditure requirements in 1998.
Inflation has not had a significant long-term impact on earnings. If there
were inflation, the Company's efforts to cover cost increases with price
increases could be frustrated in the short-term by its relatively high backlog.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." Comprehensive income is the change in equity of an entity
during a period from transactions and other events from non-owner sources, such
as the cumulative effects from changes in accounting principles and changes in
equity due to fluctuating currency and investments. This statement requires that
changes in comprehensive income be shown in a financial statement that is
displayed with the same prominence as other financial statements. The statement
is effective for annual periods beginning after December 15, 1997 and the
Company will adopt its provisions in fiscal 1998. Reclassification for earlier
periods is required for comparative purposes. Management does not expect the
statement to have a material impact on its financial position or results of
operations.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information," which changes the manner in which public
companies report information about their operating segments. SFAS No. 131, which
is based on the management approach to segment reporting, establishes
requirements to report selected segment information quarterly and to report
entity-wide disclosures about products and services, major customers, and the
geographic locations in which the entity holds assets and reports revenue.
Management is currently evaluating the effects of this change on its reporting
of segment information. The Company will adopt SFAS No. 131 for its fiscal year
ending December 31, 1998.
In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 97-2, "Software Revenue Recognition," which
provides guidance on applying generally accepted accounting principles in
recognizing revenue on software transactions and supercedes SOP 91-1, "Software
Revenue Recognition." SOP 97-2 is effective for transactions entered into
beginning in 1998. Management does not expect the statement to have a material
impact on its financial position or results of operations.
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CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company, statements made by
its employees or information included in its filings with the Securities and
Exchange Commission (including this Form 10-K and the Company's Annual Report to
Shareholders) may contain statements which are not historical facts, so-called
"forward looking statements," which involve risks and uncertainties. In
particular, statements in "Item 1: Business" relating to the Company's delivery
time of unfilled orders, and in "Item 7: Management's Discussion and Analysis of
Financial Condition and Results of Operations" relating to the sufficiency of
capital to meet working capital and planned capital expenditure, may be forward
looking statements. The Company's actual future results may differ significantly
from those stated in any forward looking statements. Factors that may cause such
differences include, but are not limited to, the factors discussed below. Each
of these factors, and others, are discussed from time to time in the Company's
filings with the Securities and Exchange Commission.
The Company's future results are subject to substantial risks and
uncertainties. The Company's business and results of operations depend in
significant part upon capital expenditures of manufacturers of semiconductors,
which in turn depend upon the current and anticipated market demand for
semiconductors and products incorporating semiconductors. The semiconductor
industry has been highly cyclical with recurring periods of over supply, which
often have had a severe effect on the semiconductor industry's demand for test
equipment, including systems manufactured and marketed by the Company. The
Company believes that the markets for newer generations of semiconductors will
also be subject to similar fluctuations. The most recent downturn, which
occurred in 1996, contributed to a 37% decline in semiconductor test system
orders. There can be no assurance that any future increase in semiconductor test
systems bookings for a calendar quarter will be sustained in subsequent
quarters. In addition, any factor adversely affecting the semiconductor industry
or particular segments within the semiconductor industry may adversely affect
the Company's business, financial condition and operating results.
Also, the Company relies on certain intellectual property protections to
preserve its intellectual property rights. From time to time the Company is
notified that it may be in violation of patents held by others. Any invalidation
of the Company's intellectual property rights or assertions of patent
infringement against the Company which are ultimately successful, could have a
material adverse effect on the Company. Lengthy and expensive defense of the
Company's rights to technology used in its products could adversely affect the
Company's operating results.
The development of new technologies, commercialization of those
technologies into product, and market acceptance and customer demand for those
products is critical to the Company's success. Successful product development
and introduction depends upon a number of factors, including new product
selection, development of competitive products by competitors, timely and
efficient completion of product design, timely and efficient implementation of
manufacturing and assembly processes and product performance at customer
locations.
The Company faces substantial competition throughout the world, primarily
from electronic test systems manufacturers located in the United States, Europe
and Japan, as well as several of the Company's customers. Some of these
competitors have substantially greater financial and other resources to pursue
engineering, manufacturing, marketing and distribution of their products.
Certain of the Company's competitors have introduced or announced new products
with certain performance characteristics which may be considered equal or
superior to those currently offered by the Company. The Company expects its
competitors to continue to improve the performance of their current products and
to introduce new products or new technologies that provide improved cost of
ownership and performance characteristics. New product introductions by
competitors could cause a decline in sales or loss of market acceptance of the
Company's existing products. Moreover, increased competitive pressure could lead
to intensified price based competition, which could materially adversely affect
the Company's business, financial condition and results of operations.
The Company derives a significant portion of its total revenue from
customers outside the United States. International sales are subject to
significant risks, including unexpected changes in legal and regulatory
requirements and policy changes affecting the Company's markets, changes in
tariffs, exchange rates and other barriers, political and economic instability,
difficulties in accounts receivable collection, difficulties in
10
<PAGE> 12
managing distributors and representatives, difficulties in staffing and managing
international operations, difficulties in protecting the Company's intellectual
property and potentially adverse tax consequences.
In the recent past there has been significant economic instability in
several countries in Asia. Continued economic instability would increase the
likelihood of either a direct or indirect adverse impact on the Company's future
results.
The Company's quarterly and annual operating results are affected by a wide
variety of factors that could materially adversely affect revenues and
profitability, including: competitive pressures on selling prices; the timing
and cancellation of customer orders; changes in product mix; the Company's
ability to introduce new products and technologies on a timely basis;
introduction of products and technologies by the Company's competitors; market
acceptance of the Company's and its competitors' products; fulfilling backlog on
a timely basis; reliance on sole source suppliers; potential retrofit costs; the
level of orders received which can be shipped in a quarter; and the timing of
investments in engineering and development. In particular, the Company has
introduced a significant number of new, complex test systems in 1996 and 1997,
and there can be no assurance that the Company will not experience delays in
shipment of such products or that such products will achieve customer
acceptance. As a result of the foregoing and other factors, the Company may
experience material fluctuations in future operating results on a quarterly or
annual basis which could materially and adversely affect its business, financial
condition, operating results and stock price.
Many computer systems experience problems handling dates beyond the year
1999. Therefore, some computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. The Company is assessing
both the internal readiness of its computer systems and the compliance of its
computer products and software sold to customers for handling the year 2000. The
Company expects to implement successfully the systems and programming changes
necessary to address year 2000 issues, and does not believe that the cost of
such actions will have a material effect on the Company's results of operations
or financial condition. There can be no assurance, however, that there will not
be a delay in, or increased costs associated with, the implementation of such
changes, and the Company's inability to implement such changes could have an
adverse effect on future results of operations.
11
<PAGE> 13
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Shareholders of
TERADYNE, INC.:
We have audited the consolidated balance sheets of Teradyne, Inc. as of
December 31, 1997 and 1996, and the related consolidated statements of income,
cash flows, and changes in shareholders' equity for each of the three years in
the period ended December 31, 1997. 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.
as of December 31, 1997 and 1996, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
January 16, 1998
12
<PAGE> 14
TERADYNE, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................. $ 74,668 $ 201,452
Marketable securities.................................. 18,693 48,266
Accounts receivable, less allowance for doubtful
accounts of $1,938 in 1997 and $1,936 in 1996......... 300,933 178,430
Inventories:
Parts............................................. 168,385 91,792
Assemblies in process............................. 103,972 47,162
---------- ----------
272,357 138,954
Deferred tax assets.................................... 40,530 32,340
Prepayments and other current assets................... 19,902 17,666
---------- ----------
Total current assets.............................. 727,083 617,108
Property, plant, and equipment:
Land................................................... 35,515 22,823
Buildings and improvements............................. 150,938 133,809
Machinery and equipment................................ 480,887 393,790
Construction in progress............................... 25,492 13,163
---------- ----------
Total............................................. 692,832 563,585
Less: Accumulated depreciation......................... (349,707) (290,088)
---------- ----------
Net property, plant, and equipment................ 343,125 273,497
Marketable securities....................................... 156,574 181,776
Other assets................................................ 24,892 24,435
---------- ----------
Total assets...................................... $1,251,674 $1,096,816
========== ==========
LIABILITIES
Current liabilities:
Notes payable -- banks................................. $ 6,632 $ 7,316
Current portion of long-term debt...................... 1,807 1,778
Accounts payable....................................... 58,685 34,482
Accrued employees' compensation and withholdings....... 77,299 58,696
Unearned service revenue and customer advances......... 49,122 62,771
Other accrued liabilities.............................. 65,642 53,537
Income taxes payable................................... 18,786 6,677
---------- ----------
Total current liabilities......................... 277,973 225,257
Deferred tax liabilities.................................... 23,429 13,898
Long-term debt.............................................. 13,141 15,650
Commitments (Note F)
---------- ----------
Total liabilities................................. 314,543 254,805
---------- ----------
SHAREHOLDERS' EQUITY
Common stock: $0.125 par value, 250,000 shares authorized,
83,303 and 82,480 issued and outstanding in 1997 and 1996,
respectively.............................................. 10,413 10,310
Additional paid-in capital.................................. 322,985 355,576
Retained earnings........................................... 603,733 476,125
---------- ----------
Total shareholders' equity........................ 937,131 842,011
---------- ----------
Total liabilities and shareholders' equity........ $1,251,674 $1,096,816
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
13
<PAGE> 15
TERADYNE, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Net sales.............................................. $1,266,274 $1,171,615 $1,191,022
Expenses:
Cost of sales..................................... 734,370 724,624 646,382
Engineering and development....................... 162,500 143,931 123,487
Selling and administrative........................ 194,103 180,265 176,797
---------- ---------- ----------
1,090,973 1,048,820 946,666
---------- ---------- ----------
Income from operations................................. 175,301 122,795 244,356
Other income (expense):
Merger expenses................................... (5,600)
Interest income................................... 20,289 19,295 14,209
Interest expense.................................. (2,245) (2,427) (3,040)
---------- ---------- ----------
Income before income taxes............................. 193,345 139,663 249,925
Provision for income taxes............................. 65,737 46,089 90,641
---------- ---------- ----------
Net income............................................. $ 127,608 $ 93,574 $ 159,284
========== ========== ==========
Net income per common share -- basic................... $ 1.53 $ 1.12 $ 1.95
========== ========== ==========
Net income per common share -- diluted................. $ 1.48 $ 1.10 $ 1.89
========== ========== ==========
Shares used in net income per common share -- basic.... 83,434 83,262 81,629
========== ========== ==========
Shares used in net income per common share --
diluted.............................................. 86,319 85,060 84,253
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
14
<PAGE> 16
TERADYNE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................ $ 127,608 $ 93,574 $ 159,284
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation....................................... 57,983 49,577 41,807
Amortization....................................... 1,168 1,326 1,339
Product line consolidation......................... 34,100
Workforce reduction provision...................... 10,810
Deferred income tax provision (credit)............. 1,341 (14,607) 3,920
Other non-cash items, net.......................... 1,377 (260) 4,881
Changes in operating assets and liabilities:
Accounts receivable.............................. (122,503) 74,990 (114,708)
Inventories...................................... (131,014) 20,584 (57,111)
Other assets..................................... (3,861) (4,117) (18,567)
Accounts payable and accruals.................... 41,261 (10,638) 60,361
Income taxes payable............................. 40,092 (4,515) 34,334
--------- --------- ---------
Net cash provided by operating activities..... 13,452 250,824 115,540
--------- --------- ---------
Cash flows from investing activities:
Additions to property, plant, and equipment........... (106,436) (59,494) (79,197)
Increase in equipment manufactured by the Company..... (25,695) (15,735) (14,004)
Purchases of held-to-maturity marketable securities... (111,033) (250,594) (190,961)
Maturities of held-to-maturity marketable
securities......................................... 206,556 248,733 126,619
Purchases of available-for-sale marketable
securities......................................... (192,174) (142,600)
Maturities of available-for-sale marketable
securities......................................... 151,426 8,081
--------- --------- ---------
Net cash used in investing activities................. (77,356) (211,609) (157,543)
--------- --------- ---------
Cash flows from financing activities:
Net payments under short-term borrowing agreements.... (4,100)
Payments of long-term debt............................ (2,410) (3,550) (1,015)
Additions to long-term debt........................... 12,500
Issuance of common stock under stock option and stock
purchase plans..................................... 44,065 13,455 24,914
Acquisition of treasury stock......................... (104,535) (29,833)
--------- --------- ---------
Net cash provided (used) by financing
activities.................................. (62,880) (19,928) 32,299
--------- --------- ---------
Increase (decrease) in cash and cash equivalents........ (126,784) 19,287 (9,704)
Adjustment to conform fiscal year of Megatest........... (10,346)
Cash and cash equivalents at beginning of year.......... 201,452 182,165 202,215
--------- --------- ---------
Cash and cash equivalents at end of year................ $ 74,668 $ 201,452 $ 182,165
========= ========= =========
Supplementary disclosure of cash flow information:
Cash paid during the year for:
Interest........................................... $ 2,257 $ 2,426 $ 3,092
Income taxes....................................... 31,971 68,089 52,339
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
15
<PAGE> 17
TERADYNE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
SHARES COMMON ADDITIONAL
------------------- STOCK PAID-IN RETAINED
ISSUED REACQUIRED PAR VALUE CAPITAL EARNINGS
------ ---------- --------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994................... 41,275 1,663 $ 4,952 $ 329,887 $238,047
Adjustment to conform fiscal year of
Megatest Corporation.................. 3 9 (14,780)
Issuance of stock to employees under
benefit plans......................... 1,614 202 22,940
Tax benefit from stock options.......... 17,549
Two-for-one stock split effected in the
form of a 100% stock dividend......... 42,892 1,664 5,154 (5,154)
Issuance of stock to employees under
benefit plans after the two-for-one
stock split........................... 177 21 1,751
Payment for fractional shares resulting
from merger........................... (12)
Net income.............................. 159,284
------ ----- ------- --------- --------
Balance, December 31, 1995................... 85,961 3,327 10,329 366,970 382,551
Issuance of stock to employees under
benefit plans......................... 1,281 160 13,295
Tax benefit from stock options.......... 4,965
Repurchase of stock..................... 1,435 (179) (29,654)
Net income.............................. 93,574
------ ----- ------- --------- --------
Balance, December 31, 1996................... 87,242 4,762 10,310 355,576 476,125
Issuance of stock to employees under
benefit plans......................... 3,373 422 43,643
Tax benefit from stock options.......... 27,982
Repurchase of stock..................... 2,550 (319) (104,216)
Net income.............................. 127,608
------ ----- ------- --------- --------
Balance, December 31, 1997................... 90,615 7,312 $10,413 $ 322,985 $603,733
====== ===== ======= ========= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
16
<PAGE> 18
TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. THE COMPANY
Teradyne, Inc. (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 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.
The Company also manufactures backplane connection systems, principally for
the computer, telecommunications, and military/aerospace industries. A backplane
is an assembly into which printed circuit boards are inserted that provides for
the interconnection of electrical signals between the circuit boards and the
other elements of the system.
B. ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances and transactions are
eliminated. Certain prior years' amounts were reclassified to conform to the
current year presentation. On December 1, 1995, the Company completed its
acquisition of Megatest Corporation ("Megatest"), by means of a merger accounted
for as a pooling of interests. As a result of the merger, Megatest became a
wholly owned subsidiary of the Company.
Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates of
the financial statements and the reported amounts of revenues and expenses
during the reported periods. Actual results could differ from those estimates.
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 removed from the accounts and
any resulting gain or loss is reflected in operations.
The Company provides for depreciation of its assets principally on the
straight-line method with the cost of the assets being charged to expense over
their useful lives as follows: buildings and improvements -- 5 to 40 years; and
machinery and equipment -- 2 to 10 years.
Revenue Recognition
Revenue is recorded when products are shipped or, in instances where
products are configured to customer requirements, upon the successful completion
of final test procedures. Service revenue is recognized ratably over applicable
contract periods or as services are performed. In certain situations, revenue is
recorded
17
<PAGE> 19
TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
B. ACCOUNTING POLICIES -- (CONTINUED)
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
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 non U.S. sales and service subsidiaries.
Translation of Non U.S. Currencies
Assets and liabilities of non U.S. subsidiaries, which are denominated in
currencies other than the U.S. dollar, are remeasured into U.S. dollars at rates
of exchange in effect at the end of the fiscal year except nonmonetary assets
and liabilities which are remeasured using historical exchange rates. Revenue
and expense amounts are remeasured using an average of exchange rates in effect
during the year, except those amounts related to nonmonetary assets and
liabilities, which are remeasured at historical exchange rates. Net realized and
unrealized gains and losses resulting from currency remeasurement are included
in operations.
Net Income per Common Share
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share". Statement 128 replaced the calculation of primary
and fully diluted net income per share with basic and diluted net income per
share. Unlike primary net income per share, basic net income per share excludes
any dilutive effect of options, warrants and convertible securities. Diluted net
income per share is very similar to the previously reported fully diluted net
income per share, except that the new treasury stock method used in determining
the dilutive effect of options uses the average market price for the period
rather than the higher of the average market price or the ending market price.
All net income per common share amounts have been restated to conform to the
Statement 128 requirements.
C. MERGER -- POOLING OF INTERESTS
On December 1, 1995, the Company acquired through a merger all of the
authorized and outstanding common stock of Megatest in exchange for
approximately 6.8 million shares of the Company's common stock using an exchange
ratio of 0.9091 of one share of the Company's common stock for each Megatest
share. In addition, all outstanding Megatest stock options were converted, at
the common stock exchange ratio, into options to purchase the Company's common
stock. Megatest manufactures electronic test systems for the integrated circuit
industry. Prior to the merger, Megatest prepared its financial statements on an
August 31 fiscal year end. Megatest's fiscal year has been changed to December
31 to conform to the Company's year end. Total net sales of $1,191.0 million for
the year ended December 31, 1995 consisted of $1,059.4 million of Teradyne net
sales and $131.6 million of Megatest net sales. Net income of $159.3 million for
the same period consisted of Teradyne net income of $157.2 million, Megatest net
income of $2.3 million and $0.2 million in debits related to conforming
accounting adjustments.
18
<PAGE> 20
TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
C. MERGER -- POOLING OF INTERESTS -- (CONTINUED)
The combined financial results reflect the restatement of Megatest's
provision for income taxes in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". Due to the merger, Megatest's
previously unrecognized tax benefits of deductible temporary differences and
operating loss carryforwards were recognized by the combined company in the
restated period. The combined financial results also include adjustments, which
were immaterial to the combined financial statements, to conform accounting
policies of the two companies. Adjustments made to conform the accounting
policies of the two companies decreased net income by $0.2 million in 1995. All
other adjustments consist of reclassifications to conform financial statement
presentation. There were no intercompany transactions between the two companies
for the period presented. In connection with the merger, the Company recorded a
$5.6 million nonrecurring charge for transaction costs consisting primarily of
professional fees.
D. FINANCIAL INSTRUMENTS
Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less at date of acquisition to be cash
equivalents.
Marketable Securities
The Company classifies investments in marketable securities as trading,
available-for-sale or held-to-maturity at the time of purchase and periodically
re-evaluates such classification. There were no securities classified as trading
or held-to-maturity as of December 31, 1997, and no securities classified as
trading at December 31, 1996. Securities are classified as held-to-maturity when
the Company has the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are stated at cost with corresponding
premiums or discounts amortized over the life of the investment to interest
income. Securities classified as available-for-sale are reported at fair market
value. Unrealized gains or losses on available-for-sale securities, if material,
are included, net of tax, in shareholders' equity until disposition. Realized
gains and losses and declines in value judged to be other-than-temporary on
available-for-sale securities are included in interest income. The cost of
securities sold is based on the specific identification method.
The fair market value of cash equivalents and short-term and long-term
investments in marketable securities is substantially equal to the carrying
value and represents the quoted market prices at the balance sheet dates. The
short-term investments mature in less than one year. Long-term investments have
maturities of one to five years. At December 31, 1997 and 1996 these investments
are reported as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---------- ---------------------
AVAILABLE- AVAILABLE- HELD-TO-
FOR-SALE FOR-SALE MATURITY
---------- ---------- --------
<S> <C> <C> <C>
Short-term marketable securities:
U.S. Treasury and government agency
securities.................................... $ 14,665 $ 8,575 $34,476
Corporate debt securities....................... 4,028 5,215
-------- -------- -------
$ 18,693 $ 13,790 $34,476
======== ======== =======
Long-term marketable securities:
U.S. Treasury and government agency
securities.................................... $ 60,937 $ 74,675 $61,047
Corporate debt securities....................... 95,637 46,054
-------- -------- -------
$156,574 $120,729 $61,047
======== ======== =======
</TABLE>
19
<PAGE> 21
TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
D. FINANCIAL INSTRUMENTS -- (CONTINUED)
Other
For all other balance sheet financial instruments the carrying amount
approximates fair value.
Off-Balance Sheet Risk
The Company regularly enters into forward contracts in European and
Japanese currencies to hedge its overseas net monetary position and firm
commitments. 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 exchange losses and gains on underlying exposures. The
Company does not engage in currency speculation. Contracts related to an
anticipated transaction that is no longer likely to occur are terminated. Gains
or losses associated with the termination of the underlying contract for which a
firm commitment no longer exists are immediately included in selling, general
and administrative expenses. Forward currency contracts have maturities of less
than one year, unless they relate to long-term sales contracts denominated in a
non U.S. currency; these maturities are from one to three years.
At December 31, 1997, the Company had the following forward currency
contracts to buy U.S. dollars for non U.S. currencies and sell U.S. dollars for
non U.S. currencies for the following notional amounts (in millions):
<TABLE>
<CAPTION>
BUY SELL
--- ----
<S> <C> <C>
Japanese yen............................................ $48.2 $2.1
Belgian francs.......................................... 7.8 1.8
French francs........................................... 2.5
German deutschemarks.................................... 1.8 4.6
Italian lira............................................ 1.2
----- ----
$61.5 $8.5
===== ====
</TABLE>
At December 31, 1996 the face amount of outstanding forward currency contracts
to buy and sell U.S. dollars for non U.S. currencies was $48.8 million and $11.2
million, respectively.
The fair value of these contracts as of December 31, 1997 and 1996,
determined by applying year end currency exchange rates to the notional contract
amounts, represented a net unrealized gain of $4.1 million and $0.1 million,
respectively. 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. Both the contract gains and losses and the gains and losses on the
items being hedged are included in selling, general and administrative expenses.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash investments, forward
currency contracts, and accounts receivable. The Company maintains cash
investments primarily in U.S. Treasury and government agency securities and
corporate debt securities, rated A1 or higher, which have minimal credit risk.
The Company places forward currency contracts with high credit-quality financial
institutions in order to minimize credit risk exposure. Concentrations of credit
risk with respect to accounts receivable are limited due to the large number of
diverse and geographically dispersed customers.
20
<PAGE> 22
TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
E. DEBT
Long-term debt at December 31, 1997 and 1996 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Mortgage notes payable............................... $10,122 $10,294
Capital equipment notes payable...................... 2,440 3,701
Other long-term debt................................. 2,386 3,433
------- -------
Total........................................... 14,948 17,428
Less current maturities.............................. 1,807 1,778
------- -------
$13,141 $15,650
======= =======
</TABLE>
The total maturities of long-term debt for the succeeding five years and
thereafter are: 1998 - $1.8 million; 1999 -- $1.5 million; 2000 -- $4.9 million;
2001 -- $0.3 million; 2002 -- $0.3 million and $6.1 million thereafter.
Revolving Credit Agreement
The Company's available revolving credit line, in effect through January
31, 2000, is $120.0 million. At expiration of the revolver, any amounts
outstanding are converted into a two year term note. As of December 31, 1997, 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,
based upon Eurocurrency, or certificate of deposit interest rates. Pursuant to
the terms of the credit agreement, the Company may incur additional indebtedness
of up to $30.0 million 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 Notes 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 principal amount of $5.0 million. Since September 30, 1987,
the Company has been making semi-annual interest payments.
In conjunction with the purchase of operating facilities in San Jose, the
Company received a $5.5 million mortgage loan which matures on August 31, 2000.
The loan is collateralized by a mortgage on the San Jose facilities. The loan
bears interest at 8.1% per annum and is payable in 59 consecutive monthly
installments of $0.05 million with a $4.6 million balloon payment due at
maturity. The terms of this mortgage note payable require compliance with
certain restrictive financial covenants and principal prepayment clauses.
Short-term Borrowings
The weighted average interest rates on short-term borrowings outstanding as
of December 31, 1997 and 1996 were 2.1% and 2.0%, respectively.
F. COMMITMENTS
Rental expense for the years ended December 31, 1997, 1996, and 1995 was
$15.1 million, $14.6 million, and $13.1 million, respectively. Minimum annual
rentals under all noncancellable leases are: 1998 -- $8.0 million; 1999 -- $5.7
million; 2000 -- $3.3 million; 2001 -- $1.9 million; 2002 -- $1.1 million; and
$8.4 million thereafter, totaling $28.4 million.
21
<PAGE> 23
TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
G. NET INCOME PER COMMON SHARE
The following table sets forth the computation of basic and diluted net
income per common share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income......................................... $127,608 $93,574 $159,284
======== ======= ========
Shares used in net income per common
share -- basic................................... 83,434 83,262 81,629
Effect of dilutive securities:
Employee and director stock options........... 2,601 1,422 2,354
Employee stock purchase rights................ 284 376 270
-------- ------- --------
Dilutive potential common shares................. 2,885 1,798 2,624
-------- ------- --------
Shares used in net income per common
share -- diluted................................. 86,319 85,060 84,253
======== ======= ========
Net income per common share -- basic............... $ 1.53 $ 1.12 $ 1.95
======== ======= ========
Net income per common share -- diluted............. $ 1.48 $ 1.10 $ 1.89
======== ======= ========
</TABLE>
Options to purchase 400,170 shares of common stock in 1997, 1,727,761
shares in 1996, and 16,410 shares in 1995 were outstanding during the years
there ended, but were not included in the year to date calculation of diluted
net income per share because the options' exercise price was greater than the
average market price of the common shares during those periods.
H. RETIREMENT BENEFITS
The Company has defined benefit pension plans covering substantially all
domestic employees and employees of certain non U.S. subsidiaries. Benefits
under these plans are based on the employees' 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 periodic pension cost were (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost.......................................... $ 4,837 $4,398 $3,211
Interest cost......................................... 5,578 4,894 4,012
Actual return on plan assets.......................... (12,331) (6,676) (9,514)
Net amortization and deferral......................... 8,191 3,002 5,853
-------- ------ ------
$ 6,275 $5,618 $3,562
======== ====== ======
</TABLE>
22
<PAGE> 24
TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
H. RETIREMENT BENEFITS -- (CONTINUED)
The following table sets forth the plans' funded status at December 31 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
-------------------------- --------------------------
U.S. PLAN NON U.S. PLANS U.S. PLAN NON U.S. PLANS
--------- -------------- --------- --------------
<S> <C> <C> <C> <C>
Actuarial present value of projected
benefit obligation:
Vested benefits..................... $(62,911) $ (6,316) $(50,676) $(6,627)
Non-vested benefits................. (3,579) (1,561) (2,933) (952)
-------- -------- -------- -------
Accumulated benefit obligation...... (66,490) (7,877) (53,609) (7,579)
Effect of projected future
compensation levels............... (14,278) (2,378) (10,997) (2,606)
-------- -------- -------- -------
Total projected benefit
obligation........................ (80,768) (10,255) (64,606) (10,185)
Plan assets at fair market value......... 71,075 6,734 55,926 5,850
-------- -------- -------- -------
Projected benefit obligation in excess of
plan assets............................ (9,693) (3,521) (8,680) (4,335)
Unrecognized prior service cost.......... 2,318 2,697
Unrecognized net loss (gain)............. 10,065 (1,056) 8,673 (622)
Unrecognized net (asset) liability at
transition............................. 746 973
Minimum pension liability adjustment..... (259) (99)
-------- -------- -------- -------
Net pension asset (liability)............ $ 2,690 $ (4,090) $ 2,690 $(4,083)
======== ======== ======== =======
Actuarial assumptions:
Discount rate....................... 7.00% 4.50% - 6.50% 7.25% 4.50% - 7.75%
Average increase in compensation
levels............................ 5.00% 3.50% - 4.25% 5.00% 3.50% - 5.25%
Expected long-term return on
assets............................ 9.00% 4.50% - 8.50% 9.00% 4.50% - 9.25%
</TABLE>
In addition to the above plans, the Company has 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 $4.4
million and $2.7 million at December 31, 1997 and 1996, respectively. Net
pension expense for this plan was $1.0 million, $0.7 million, and $0.5 million
in 1997, 1996, and 1995, respectively.
In 1996, the Company offered a voluntary early retirement incentive program
to certain employees. The special termination benefits include enhanced pension
benefits to the employees and medical and dental benefits to the employees and
their spouses. Pension benefits of $2.6 million to be paid from the Company's
existing pension plans relating to this program were included in current
liabilities at December 31, 1997 and December 31, 1996. In addition, $2.3
million and $2.5 million for postretirement medical and dental benefits were
included in liabilities at December 31, 1997 and 1996, respectively.
I. STOCK REPURCHASE PROGRAM
During 1996, the Company's Board of Directors authorized the purchase in
the open market of up to 5.0 million shares of common stock. The Company
repurchased 2.6 million shares at a cost of $104.5 million in 1997, and
repurchased 1.4 million shares at a cost of $29.8 million in 1996.
J. STOCK BASED COMPENSATION
At December 31, 1997, the Company had both stock option plans and stock
purchase plans. The Company applies APB Opinion 25 and related interpretations
in accounting for its plans. As such, the Company does not recognize
compensation cost arising from the awarding of stock grants under those plans.
The Company is required to disclose pro forma net income and net income per
common share amounts had compensation cost for the Company's stock based
compensation plans been determined based on the fair value at the grant dates
for awards under those plans. The effects of this pro forma disclosure are not
indicative of
23
<PAGE> 25
TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
J. STOCK BASED COMPENSATION -- (CONTINUED)
future amounts. Additional awards in future years are anticipated. The Company's
net income and net income per common share would have been reduced to the pro
forma amounts indicated below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C> <C>
Net income........................... As reported $127,608 $93,574 $159,284
Pro forma 115,371 86,421 154,433
Net income per common share --
basic.............................. As reported $ 1.53 $ 1.12 $ 1.95
Pro forma 1.38 1.04 1.89
Net income per common share --
diluted............................ As reported $ 1.48 $ 1.10 $ 1.89
Pro forma 1.34 1.02 1.83
</TABLE>
Stock Option Plans
Under its stock option plans, all of which are fixed, 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. Stock options granted
generally have a maximum term of five years and vest over four years.
Stock option plan activity for the years 1997, 1996, and 1995 follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Outstanding at January 1................................. 8,503 7,230 7,637
Options granted..................................... 3,176 2,401 2,717
Options exercised................................... (2,850) (795) (2,790)
Options canceled.................................... (263) (333) (334)
------ ----- ------
Outstanding at December 31............................... 8,566 8,503 7,230
====== ===== ======
Exercisable at December 31............................... 3,394 3,995 2,606
====== ===== ======
Available for grant at December 31....................... 5,683 5,042 4,912
====== ===== ======
</TABLE>
Weighted average option exercise price information for the years 1997, 1996
and 1995 follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Outstanding at January 1................................ $13.53 $13.63 $ 8.92
Options granted.................................... $36.44 $12.13 $19.80
Options exercised.................................. $11.75 $ 8.11 $ 6.92
Options canceled................................... $18.80 $18.61 $11.10
Outstanding at December 31.............................. $22.48 $13.53 $13.63
Exercisable at December 31.............................. $17.50 $12.46 $11.00
</TABLE>
24
<PAGE> 26
TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
J. STOCK BASED COMPENSATION -- (CONTINUED)
Significant option groups outstanding at December 31, 1997 and related
weighted average price and life information follows (options in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------ -------------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED- WEIGHTED-
RANGE OF CONTRACTUAL AVERAGE AVERAGE
EXERCISE PRICE LIFE (YEARS) SHARES EXERCISE PRICE SHARES EXERCISE PRICE
-------------- ------------ ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C>
$ 3.31 - $11.63................. 2.86 2,445 $10.88 1,167 $10.15
$11.83 - $19.63................. 1.88 1,283 $13.21 859 $13.14
$20.69 - $32.80................. 2.48 1,846 $21.36 874 $20.87
$36.50 - $46.19................. 4.37 2,992 $36.62 494 $36.50
----- -----
Total...................... 3.16 8,566 $22.48 3,394 $17.50
===== =====
</TABLE>
The weighted average fair value at date of grant for options granted during
1997, 1996 and 1995 was $16.11, $4.79 and $8.69 per option, respectively. The
fair value of options at date of grant was estimated using the Black-Scholes
model with the following weighted average assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Expected life (years).................................... 4.3 3.9 4.2
Interest rate............................................ 6.5% 6.7% 7.3%
Volatility............................................... 44.2% 41.8% 39.9%
Dividend yield........................................... 0.0% 0.0% 0.0%
</TABLE>
Employee Stock Purchase Plans
During 1996, the Company adopted the 1996 Employee Stock Purchase Plan and
authorized 700,000 shares for future issuance. Under this plan, eligible
employees may 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 the
first business day in January (July for new hires) or the last business day of
December. In January 1998, the Company issued 561,615 shares of common stock to
employees who participated in the plan during 1997 at a weighted-average price
of $20.43 per share. Currently, there are 122,828 shares reserved for issuance.
The weighted-average fair value of purchase rights granted in 1997, 1996
and 1995 was $7.70, $8.37 and $5.09, respectively. The fair value of the
employees' purchase rights was estimated using the Black-Scholes model with the
following assumptions for 1997, 1996 and 1995, respectively; dividend yield of
0.0% for all years; an expected life of 1 year for all years; expected
volatility of 45.5%, 44.7% and 38.8%; and risk-free interest rates of 5.6%, 5.2%
and 7.1%.
K. SAVINGS PLANS
The Company sponsors a Savings Plan covering substantially all U.S.
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. In 1994, the Company established a Supplemental Savings Plan to
provide savings benefits in excess of those allowed by ERISA. The provisions of
this plan are the same as the Savings Plan. Under the Company's savings plans,
amounts charged to operations were $9.3 million in 1997, $6.3 million in 1996,
and $8.3 million in 1995.
25
<PAGE> 27
TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
L. 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 the Company's common stock for $20
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 $40 worth of Common Stock (or
other securities or consideration owned by the Company) for $20. The Rights will
expire March 26, 2000 unless earlier redeemed by the Company.
M. INCOME TAXES
The components of income before income taxes and the provision for income
taxes as shown in the consolidated statements of income are as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Income before income taxes:
United States................................. $161,942 $106,708 $212,551
Non U.S....................................... 31,403 32,955 37,374
-------- -------- --------
$193,345 $139,663 $249,925
======== ======== ========
Provision (credit) for income taxes:
Current:
U.S. Federal............................. $ 45,302 $ 40,033 $ 66,228
Non U.S. ................................ 13,053 14,802 12,604
State.................................... 6,041 5,861 7,889
-------- -------- --------
64,396 60,696 86,721
-------- -------- --------
Deferred:
U.S. Federal............................. 77 (13,667) (241)
Non U.S. ................................ 1,140 (632) 3,654
State.................................... 124 (308) 507
-------- -------- --------
1,341 (14,607) 3,920
-------- -------- --------
$ 65,737 $ 46,089 $ 90,641
======== ======== ========
</TABLE>
26
<PAGE> 28
TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
M. INCOME TAXES -- (CONTINUED)
Significant components of the Company's deferred tax assets (liabilities)
as of December 31, 1997 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Inventory valuations............................... $ 16,733 $ 19,148
Accruals........................................... 11,335 2,680
Vacation........................................... 6,907 4,200
In process research and development................ 2,456 2,726
Deferred revenue................................... 62 1,488
U.S. Federal operating loss carryforwards.......... 975 341
Tax credits........................................ 2,502 8,457
Other.............................................. 3,037 2,732
-------- --------
Total deferred tax assets............................... 44,007 41,772
-------- --------
Deferred tax liabilities:
Excess of tax over book depreciation............... (22,828) (14,919)
Amortization....................................... (818) (2,531)
Pension............................................ (827) (1,349)
Other.............................................. (2,433) (4,531)
-------- --------
Total deferred tax liabilities.......................... (26,906) (23,330)
-------- --------
Net deferred asset...................................... $ 17,101 $ 18,442
======== ========
</TABLE>
A reconciliation of the effective tax rate for the years 1997, 1996, and
1995 follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
U.S. statutory federal tax rate..................... 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit...... 2.1 2.6 2.0
Utilization of operating loss carryforwards......... 0.3
Tax credits......................................... (1.6) (1.0) (0.6)
Export sales corporation............................ (2.8) (2.9) (2.3)
Non-deductible costs related to acquisitions........ 0.7 0.8
Change in valuation allowance....................... (0.8)
Other, net.......................................... 0.6 (0.7) 1.9
----- ----- -----
34.0% 33.0% 36.3%
===== ===== =====
</TABLE>
At December 31, 1997 the Company has U.S. Federal operating loss
carryforwards of approximately $1.0 million that expire in the years 2000
through 2002. The Company has approximately $2.2 million of U.S. business tax
credit carryforwards that expire in the years 1998 through 2005. All of these
losses and credits are limited in their use by "change in ownership" rules as
defined in the Internal Revenue Code of 1986.
27
<PAGE> 29
TERADYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
N. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in two industry segments, which are the design,
manufacturing and marketing of electronic test systems and backplane connection
systems. Corporate assets consist of cash and cash equivalents, marketable
securities, 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>
1997
Sales to unaffiliated customers............. $1,047,742 $218,532 $1,266,274
Intersegment sales.......................... 16,235 $ (16,235)
---------- -------- --------- ----------
Net sales................................... 1,047,742 234,767 (16,235) 1,266,274
Operating income............................ 160,150 37,477 (22,326) 175,301
Identifiable assets......................... 771,353 155,213 325,108 1,251,674
Property additions.......................... 96,814 31,559 3,758 132,131
Depreciation and amortization expense....... 48,136 8,981 2,034 59,151
1996
Sales to unaffiliated customers............. $ 993,721 $177,894 $1,171,615
Intersegment sales.......................... 9,065 $ (9,065)
---------- -------- --------- ----------
Net sales................................... 993,721 186,959 (9,065) 1,171,615
Operating income............................ 112,036 29,561 (18,802) 122,795
Identifiable assets......................... 490,105 113,436 493,275 1,096,816
Property additions.......................... 54,694 16,666 3,869 75,229
Depreciation and amortization expense....... 42,039 7,448 1,416 50,903
1995
Sales to unaffiliated customers............. $1,035,721 $155,301 $1,191,022
Intersegment sales.......................... 12,325 $ (12,325)
---------- -------- --------- ----------
Net sales................................... 1,035,721 167,626 (12,325) 1,191,022
Operating income............................ 237,101 22,778 (15,523) 244,356
Identifiable assets......................... 640,597 91,205 292,029 1,023,831
Property additions.......................... 77,552 12,038 3,611 93,201
Depreciation and amortization expense....... 37,274 4,670 1,202 43,146
</TABLE>
The Company's sales, including domestic export and non U.S. jurisdictional
sales (which amounted to less than 10% of total net sales in all periods
presented), to unaffiliated customers for the three years ended December 31 were
made in the following geographic areas:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Sales to unaffiliated customers:
United States..................................... $ 616,838 $ 536,826 $ 566,337
Asia Pacific region............................... 299,624 209,429 256,901
Europe............................................ 190,220 241,244 222,194
Japan............................................. 114,212 139,095 94,706
Other............................................. 45,380 45,021 50,884
---------- ---------- ----------
$1,266,274 $1,171,615 $1,191,022
========== ========== ==========
</TABLE>
See "Item 1: Business -- Marketing and Sales" elsewhere in this report for
information on the Company's export and non U.S. jurisdictional activities,
identifiable assets of non U.S. subsidiaries, and major customers.
28
<PAGE> 30
SUPPLEMENTARY INFORMATION
(UNAUDITED)
The following sets forth certain unaudited consolidated quarterly
statements of operations data for each of the Company's last eight quarters. In
management's opinion, this quarterly information reflects all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation for the periods presented. Such quarterly results are not
necessarily indicative of future results of operations and should be read in
conjunction with the audited consolidated financial statements of the Company
and the notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
1997
--------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales.................................... $248,302 $289,541 $336,747 $391,684
Expenses:
Cost of sales........................... 152,935 164,648 190,651 226,136
Engineering and development............. 33,308 42,635 41,663 44,894
Selling and administrative.............. 40,783 47,449 51,685 54,186
-------- -------- -------- --------
227,026 254,732 283,999 325,216
-------- -------- -------- --------
Income from operations....................... 21,276 34,809 52,748 66,468
Other income (expense):
Interest income......................... 5,665 5,234 5,198 4,192
Interest expense........................ (541) (565) (553) (586)
-------- -------- -------- --------
Income before income taxes................... 26,400 39,478 57,393 70,074
Provision for income taxes................... 9,240 14,476 18,196 23,825
-------- -------- -------- --------
Net income................................... $ 17,160 $ 25,002 $ 39,197 $ 46,249
======== ======== ======== ========
Net income per common share -- basic......... $ 0.21 $ 0.30 $ 0.47 $ 0.55
======== ======== ======== ========
Net income per common share -- diluted....... $ 0.20 $ 0.29 $ 0.45 $ 0.54
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1996
--------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales.................................... $348,967 $319,690 $261,671 $241,287
Expenses:
Cost of sales........................... 186,637 214,718 163,747 159,522
Engineering and development............. 36,740 38,426 35,022 33,743
Selling and administrative.............. 46,929 42,556 41,535 49,245
-------- -------- -------- --------
270,306 295,700 240,304 242,510
-------- -------- -------- --------
Income (loss) from operations................ 78,661 23,990 21,367 (1,223)
Other income (expense):
Interest income......................... 3,759 4,162 5,089 6,285
Interest expense........................ (642) (610) (513) (662)
-------- -------- -------- --------
Income before income taxes................... 81,778 27,542 25,943 4,400
Provision for income taxes................... 28,623 9,640 6,374 1,452
-------- -------- -------- --------
Net income................................... $ 53,155 $ 17,902 $ 19,569 $ 2,948
======== ======== ======== ========
Net income per common share -- basic......... $ 0.64 $ 0.21 $ 0.23 $ 0.04
======== ======== ======== ========
Net income per common share -- diluted....... $ 0.63 $ 0.21 $ 0.23 $ 0.03
======== ======== ======== ========
</TABLE>
29
<PAGE> 31
ITEM 9: CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
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 21,
1998, 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
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 21,
1998, 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.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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 21,
1998, 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.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 21,
1998, 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.
30
<PAGE> 32
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, 1997 and 1996
Statements of Income for the years ended December 31, 1997, 1996, and
1995
Statements of Cash Flows for the years ended December 31, 1997, 1996, and
1995
Statements of Changes in Shareholders' Equity for the years ended
December 31, 1997, 1996, and 1995
(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.
(b) REPORT ON FORM 8-K
There have been no Form 8-K filings during the three months ended December
31, 1997.
31
<PAGE> 33
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 Company, as amended
3.2 Amendment, dated May 23, 1996, to Exhibit 3.2 to the Company's Annual
Restated Articles of Organization of Report on Form 10-K for the fiscal year
the Company, as amended ended December 31, 1996.
3.3 Amended and Restated Bylaws of the Exhibit 3.3 to the Company's Annual
Company Report on Form 10-K for the fiscal year
ended December 31, 1996.
4.1 Rights Agreement between the Company
and The First National Bank of Boston
dated as of March 14, 1990
10.1 Amended and Restated Multicurrency Exhibit 10.3 to the Company's Annual
Revolving Credit Agreement dated as of Report on Form 10-K for the fiscal year
January 1, 1996. ended December 31, 1995.
10.2 First Amendment to Amended and Restated
Multicurrency Revolving Credit
Agreement dated as of January 31, 1997
10.3 Second Amendment to Amended and
Restated Multicurrency Revolving Credit
Agreement dated as of May 20, 1997
10.4 Teradyne, Inc. Supplemental Executive
Retirement Plan
10.5 1991 Employee Stock Option Plan, as Exhibit 4.2 to the Company's
amended Registration Statement on Form S-8
(Registration Statement No. 333-07177).
10.6 Megatest Corporation 1990 Stock Option Exhibit 4.1 to the Company's
Plan Registration Statement on Form S-8
(Registration Statement No. 333-64683).
10.7 Megatest Corporation Director Stock Exhibit 4.2 to the Company's
Option Plan Registration Statement on Form S-8
(Registration Statement No. 333-64683).
10.8 1996 Stock Purchase Plan Exhibit 4.1 to the Company's
Registration Statement on Form S-8
(Registration Statement No. 333-07177).
10.9 Master Lease Agreement between Megatest Exhibit 10.10 to the Company's Annual
and General Electric Capital Report on Form 10-K for the fiscal year
Corporation dated August 10, 1995 ended December 31, 1995.
10.10 Loan and Security Agreement between Exhibit 10.11 to the Company's Annual
Megatest and the CIT Group/Equipment Report on Form 10-K for the fiscal year
Financing, Inc. dated August 14, 1995 ended December 31, 1995.
10.11 Deed of Trust, Financing Statement, Exhibit 10.12 to the Company's Annual
Security Agreement and Fixture Filing Report on Form 10-K for the fiscal year
between Megatest and the Sun Life ended December 31, 1995.
Assurance Company of Canada (U.S.)
dated August 25, 1995
</TABLE>
32
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ----------- ----------- ----------------------
<C> <S> <C>
10.12 1997 Employee Stock Option Plan Exhibit 10.14 to the Company's Annual
Report on Form 10-K for the fiscal year
ended December 31, 1996.
10.13 Letter Agreement dated January 24, 1997 Exhibit 10.15 to the Company's Annual
between the Company and Executive Report on Form 10-K for the fiscal year
Officer ended December 31, 1996.
10.14 1996 Non-Employee Director Stock Option
Plan
10.15 Letter Agreement dated June 1, 1997
between the Company and Member of Board
10.16 Letter Agreement dated June 1, 1997
between the Company and Member of Board
22.1 Subsidiaries of the Company
23.1 Consent of Coopers & Lybrand L.L.P.
27.1 Financial Data Schedule
27.2 Financial Data Schedule for the Form
10-Q for the nine months ended
September 28, 1997
27.3 Financial Data Schedule for the Form
10-Q for the six months ended June 29,
1997
27.4 Financial Data Schedule for the Form
10-Q for the three months ended March
30, 1997
27.5 Financial Data Schedule for the Form
10-K for the fiscal year ended December
31, 1996
27.6 Financial Data Schedule for the Form
10-Q for the nine months ended
September 29, 1996
27.7 Financial Data Schedule for the Form
10-Q for the six months ended June 30,
1996
27.8 Financial Data Schedule for the Form
10-Q for the three months ended March
31, 1996
27.9 Financial Data Schedule for the Form
10-K for the fiscal year ended December
31, 1995
</TABLE>
33
<PAGE> 35
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 26th day of March,
1998.
TERADYNE, INC.
BY:
----------------------------------
JEFFREY R. HOTCHKISS,
VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
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>
Chairman of the Board March 26, 1998
- ---------------------------------------------------
ALEXANDER V. D'ARBELOFF
President, Chief Executive March 26, 1998
- --------------------------------------------------- Officer, and Member of the Board
GEORGE W. CHAMILLARD
Vice President and Chief March 26, 1998
- --------------------------------------------------- Financial Officer
JEFFREY R. HOTCHKISS
Controller (Principal Accounting March 26, 1998
- --------------------------------------------------- Officer)
DONALD J. HAMMAN
Director March 26, 1998
- ---------------------------------------------------
JAMES W. BAGLEY
Director March 26, 1998
- ---------------------------------------------------
ALBERT CARNESALE
Director March 26, 1998
- ---------------------------------------------------
DANIEL S. GREGORY
Director March 26, 1998
- ---------------------------------------------------
DWIGHT H. HIBBARD
Director March 26, 1998
- ---------------------------------------------------
JOHN P. MULRONEY
Director March 26, 1998
- ---------------------------------------------------
VINCENT M. O'REILLY
Director March 26, 1998
- ---------------------------------------------------
JAMES A. PRESTRIDGE
Director March 26, 1998
- ---------------------------------------------------
OWEN W. ROBBINS
Director March 26, 1998
- ---------------------------------------------------
RICHARD J. TESTA
Director March 26, 1998
- ---------------------------------------------------
PATRICIA S. WOLPERT
</TABLE>
34
<PAGE> 1
Exhibit 3.1
FEDERAL IDENTIFICATION
NO. 04-2272148
--------------------
- --------
Examiner THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(GENERAL LAWS, CHAPTER 156B, SECTION 72)
- --------
Name We, George W. Chamillard , *President
Approved --------------------------------------------
and Donald G. Leka , *Assistant Clerk,
--------------------------------------------
of Teradyne, Inc. ,
--------------------------------------------
(Exact name of corporation)
located at 321 Harrison Avenue, Boston, Massachusetts 02118 ,
---------------------------------------------------------
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered:
Article 3
--------------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting held
on May 23, 1996, by vote of:
<TABLE>
<S> <C> <C>
63,652,370 shares of Common Stock of 71,452,818 shares outstanding,
------------- ------------------------------ -----------
(type, class & series, if any)
shares of of shares outstanding, and
------------- ------------------------------ -----------
(type, class & series, if any
shares of of shares outstanding,
------------- ------------------------------ -----------
(type, class & series, if any
</TABLE>
C [ ] (1) ** being at least a majority of each type, class or series
outstanding and entitled to vote thereon:
P [ ]
* Delete the inapplicable words. ** Delete the inapplicable clause.
(1) For amendments adopted pursuant to Chapter 156B, Section 70.
M [ ] (2) For amendments adopted pursuant to Chapter 156B, Section 71.
NOTE: IF THE SPACE PROVIDED UNDER ANY ARTICLE OR ITEM ON THIS FORM IS
INSUFFICIENT, ADDITIONS SHALL BE SET FORTH ON ONE SIDE ONLY OF
R.A. [ ] SEPARATE 8 1/2 X 11 SHEETS OF PAPER WITH A LEFT MARGIN OF AT LEAST
1 INCH. ADDITIONS TO MORE THAN ONE ARTICLE MAY BE MADE ON A SINGLE
SHEET SO LONG AS EACH ARTICLE REQUIRING EACH ADDITION IS CLEARLY
INDICATED.
- ----------
P.C.
<PAGE> 2
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common: Common: 125,000,000 $0.125
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Change the total authorized to:
- --------------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------------
Common: Common: 250,000,000 $0.125
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: ___________________.
SIGNED UNDER THE PENALTIES OF PERJURY, this 31 day of July, 1996,
/s/ George Chamillard
- --------------------------------
George Chamillard
*President
/s/ Donald G. Leka
- --------------------------------
Donald G. Leka
*Assistant Clerk
* Delete the inapplicable words.
<PAGE> 4
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(GENERAL LAWS, CHAPTER 156B, SECTION 72)
============================================
I hereby approve the within Articles of
Amendment and, the filing fee in the amount
of $ 125,000 having been paid, said articles
are deemed to have been filed with me this
31st day of July 1996.
Effective date: ____________________________
/s/ William F. Galvin
---------------------------------
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
Kevin M. Barry, Esq.
--------------------------------------------
Testa, Hurwitz & Thibeault, LLP
125 High Street
--------------------------------------------
Boston, Ma 02110
--------------------------------------------
<PAGE> 5
FEDERAL IDENTIFICATION
NO. 04-2272148
--------------------
- --------
Examiner THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(GENERAL LAWS, CHAPTER 156B, SECTION 72)
- --------
Name We, Owen W. Robbins , *Vice President
Approved --------------------------------------------
and Donald G. Leka , *Assistant Clerk,
--------------------------------------------
of Teradyne, Inc. ,
--------------------------------------------
(Exact name of corporation)
located at 321 Harrison Avenue, Boston, Massachusetts 02118 ,
---------------------------------------------------------
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered:
Article 3
--------------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting held
on May 24, 1995, by vote of:
<TABLE>
<S> <C> <C>
26,581,818 shares of Common Stock of 37,173,315 shares outstanding,
------------- ------------------------------ -----------
(type, class & series, if any)
shares of of shares outstanding, and
------------- ------------------------------ -----------
(type, class & series, if any
shares of of shares outstanding,
------------- ------------------------------ -----------
(type, class & series, if any
</TABLE>
C [ ] (1) ** being at least a majority of each type, class or series
outstanding and entitled to vote thereon:/
P [ ]
* Delete the inapplicable words. ** Delete the inapplicable clause.
(1) For amendments adopted pursuant to Chapter 156B, Section 70.
M [ ] (2) For amendments adopted pursuant to Chapter 156B, Section 71.
NOTE: IF THE SPACE PROVIDED UNDER ANY ARTICLE OR ITEM ON THIS FORM IS
INSUFFICIENT, ADDITIONS SHALL BE SET FORTH ON ONE SIDE ONLY OF
R.A. [ ] SEPARATE 8 1/2 X 11 SHEETS OF PAPER WITH A LEFT MARGIN OF AT LEAST
1 INCH. ADDITIONS TO MORE THAN ONE ARTICLE MAY BE MADE ON A SINGLE
SHEET SO LONG AS EACH ARTICLE REQUIRING EACH ADDITION IS CLEARLY
INDICATED.
- ----------
P.C.
<PAGE> 6
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common: Common: 75,000,000 $0.125
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Change the total authorized to:
- --------------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------------
Common: Common: 125,000,000 $0.125
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: ___________________.
SIGNED UNDER THE PENALTIES OF PERJURY, this 14th day of July, 1995,
/s/ Owen W. Robbins
- ---------------------------------------
Owen W. Robbins
*Executive Vice President
/s/ Donald G. Leka
- ---------------------------------------
Donald G. Leka
*Assistant Clerk
* Delete the inapplicable words.
<PAGE> 8
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(GENERAL LAWS, CHAPTER 156B, SECTION 72)
============================================
I hereby approve the within Articles of
Amendment and, the filing fee in the amount
of $50,000.00 having been paid, said articles
are deemed to have been filed with me this
17th day of July 1995.
/s/ William F. Galvin
---------------------------------
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
Kevin M. Barry, Esq.
--------------------------------------------
Testa, Hurwitz & Thibeault
53 State Street, Exchange Place
--------------------------------------------
Boston, Ma 02109
--------------------------------------------
<PAGE> 9
Federal Identification
No. 04-2272148
-------------
Fee: $250.00
- -----------
Examiner THE COMMONWEALTH OF MASSACHUSETTS
Michael Joseph Connolly
Secretary of State
One Ashburton Place, Boston, Massachusetts 02108
ARTICLES OF MERGER OF PARENT AND SUBSIDIARY CORPORATIONS
(General Laws Chapter 156B, Section 82)
We, Owen W. Robbins AND William B. Asher, Jr. Vice President* and
- ----------- --------------------------------------------
Name
Approval Assistant Clerk of Teradyne, Inc.
--------------------------------------------------
organized under the laws of MASSACHUSETTS and herein called the
parent corporation, do hereby certify as follows:
1. That the subsidiary corporation(s) to be merged into the parent
corporation are as follows:
NAME STATE OF ORGANIZATION DATE OF ORGANIZATION
AIDA Corporation California 6/15/84
Zehntel, Inc. Delaware 10/24/75
2. That the parent corporation owns at least ninety percent of the
outstanding shares of each class of the stock of each subsidiary
corporation to be merged into the parent corporation.
3. That in the case of each of the above-named corporations the
laws of the state of its organization, if other than Massachusetts,
permit the merger herein provided for and that all action required
under the laws of each such state in connection with this merger has
been duly taken. (If all the corporations are organized under the
laws of Massachusetts and if General Laws, Chapter 156B is
applicable to them, then Paragraph 3 may be deleted.)
* Delete the inapplicable words. In case the parent corporation is
organized under the laws of a state other than Massachusetts, these
articles are to be signed by officers having corresponding powers
and duties.
C [ ]
P [ ]
M [ ]
R.A. [ ]
- -----------
P.C.
<PAGE> 10
4. That at a meeting of the directors of the parent corporation, the following
vote, pursuant to General Laws, Chapter 156B, Section 82, was duly adopted:
See Continuation Sheets
NOTE: Votes for which the space provided above is not sufficient should be set
out on continuation sheets to be numbered 2A, 2B, etc. Continuation sheets must
have a left-hand margin 1 inch wide for binding. Only one side should be used.
<PAGE> 11
5. The effective date of the merger shall be the date approved and filed by
the Secretary of the Commonwealth. If a later effective date is desired, specify
such date, which shall not be more than thirty days after the date of filing:
IN WITNESS WHEREOF and under the penalties of perjury we have hereto signed
our names this 27th day of DECEMBER, 1989.
/s/ Owen W. Robbins
-----------------------------------
Owen W. Robbins
Vice President
/s/ William B. Asher
-----------------------------------
William B. Asher
Assistant Clerk
* Delete the inapplicable words. In case the parent corporation is organized
under the laws of a state other than Massachusetts, these articles are to be
signed by officers having corresponding powers and duties.
<PAGE> 12
Continuation Sheet
MERGER OF AIDA CORPORATION
VOTED: That the Agreement and Plan of Merger in the form attached
hereto, providing for the merger of the Corporation's
wholly-owned subsidiary, AIDA Corporation, with and into the
corporation, with the Corporation constituting the surviving
corporation, be, and hereby is, approved, with such changes
therein or additions thereto as the officers executing the same
shall approve, such approval to be evidenced conclusively by
their execution and delivery thereof; and that the President or
any Vice-President and Clerk or Assistant Clerk of the
Corporation be, and they hereby are, authorized and empowered to
execute and deliver the Agreement and Plan of Merger on behalf
of the Corporation.
VOTED: That the President or any Vice-President and the Clerk or
Assistant Clerk of the Corporation be, and hereby are,
authorized and empowered to execute, acknowledge and file on
behalf of the Corporation, the Certificate of Ownership in the
form attached hereto, with the office of the Secretary of State
for the State of California.
VOTED: At or after the effective date of the merger of AIDA Corporation
with and into the Corporation, all debts, liabilities and duties
of AIDA Corporation shall attach to the Corporation and may be
enforced against the Corporation to the same extent as if such
debts, liabilities and duties had been incurred or contracted by
the Corporation.
VOTED: That the president or any Vice President and the Clerk or
Assistant Clerk of the Corporation be, and hereby are,
authorized and empowered to execute, acknowledge and file on
behalf of the Corporation, the Articles of Merger in the form
attached hereto, with the office of the Secretary of State of
Massachusetts.
VOTED: That the effective date of such foregoing merger is and shall be
January 1, 1990
VOTED: That the proper officers of the Corporation be, and each of them
singly hereby is, authorized and empowered to execute and
deliver such documents, instruments and certificates, make any
payments and to take all actions as in his judgment may be
necessary, desirable or appropriate in order to effectuate the
intent and purposes of the foregoing resolutions.
<PAGE> 13
Continuation Sheet
Merger of Zehntel, Inc.
VOTED: That the Agreement and Plan of Merger in the form attached
hereto, providing for the merger of the Corporation's
wholly-owned subsidiary, Zehntel, Inc. with and into the
corporation, with the Corporation constituting the surviving
corporation, be, and hereby is, approved, with such changes
therein or additions thereto as the officers executing the same
shall approve, such approval to be evidenced conclusively by
their execution and delivery thereof; and that the President or
any Vice-President and Clerk or Assistant Clerk of the
Corporation be, and they hereby are, authorized and empowered to
execute and deliver the Agreement and Plan of Merger on behalf
of the Corporation.
VOTED: That the President or any Vice-President and the clerk or
Assistant clerk of the corporation be, and hereby are,
authorized and empowered to execute, acknowledge and file on
behalf of the Corporation, the Certificate of Ownership and
Merger in the form attached hereto, with the office of the
Secretary of State for the State of Delaware and a certified
copy thereof in the office of the Recorder of Deeds of New
Castle County in accordance with the General Corporation Law of
the State of Delaware.
VOTED: That the President or any Vice-President and the Clerk of
Assistant Clerk of the corporation be, and hereby are,
authorized and empowered to execute, acknowledge and file on
behalf of the Corporation, the Articles of Merger in the form
attached as hereto, with the office of the Secretary of State of
Massachusetts and a certified copy thereof in the Registry of
Deeds in accordance with the Business Corporation Law of
Massachusetts.
VOTED: That the effective date of such foregoing merger is and shall be
January 1, 1990.
VOTED: That the proper officers of the Corporation be, and each of them
singly hereby is, authorized and empowered to execute and
deliver such documents, instruments and certificates, make any
payments and to take all actions as in his judgment may be
necessary, desirable or appropriate in order to effectuate the
intent and purposes of the foregoing resolutions.
<PAGE> 14
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF MERGER OF PARENT AND SUBSIDIARY CORPORATIONS
(GENERAL LAWS, CHAPTER 156B, SECTION 82)
=====================================
I hereby approve the within Articles of Merger of Parent
and Subsidiary Corporations and, the filing fee in the
amount of $250.00, having been paid, said articles are
deemed to have been filed with me this 28th day of
DECEMBER, 1989
Effective date:1/1/90
/s/ Michael Joseph Connolly
------------------------------------
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Leslie S. White, Esq.
---------------------------------
c/o Testa Hurwitz & Thibeault
---------------------------------
53 State Street, Exchange Place
---------------------------------
Boston, MA 02109
---------------------------------
Telephone: (617) 367-7500
---------------------------------
<PAGE> 15
Federal Identification
No. 04-2272148
-------------
Fee: $250.00
- -----------
Examiner THE COMMONWEALTH OF MASSACHUSETTS
Michael Joseph Connolly
Secretary of State
One Ashburton Place, Boston, Massachusetts 02108
ARTICLES OF MERGER OF PARENT AND SUBSIDIARY CORPORATIONS
(General Laws Chapter 156B, Section 82)
We, Owen W. Robbins and William B. Asher, Jr. Vice President* and
- ----------- --------------------------------------------
Name
Approval Assistant Clerk of Teradyne, Inc.
--------------------------------------------------
organized under the laws of MASSACHUSETTS and herein called the
parent corporation, do hereby certify as follows:
1. That the subsidiary corporation(s) to be merged into the parent
corporation are as follows:
NAME STATE OF ORGANIZATION DATE OF ORGANIZATION
CASE Technology, Inc. California 1/21/83
Teradyne Central, Inc. Delaware 12/15/72
Teradyne Connection Massachusetts 10/16/68
Systems, Inc.
2. That the parent corporation owns at least ninety percent of the
outstanding shares of each class of the stock of each subsidiary
corporation to be merged into the parent corporation.
3. That in the case of each of the above-named corporations the
laws of the state of its organization, if other than Massachusetts,
permit the merger herein provided for and that all action required
under the laws of each such state in connection with this merger has
been duly taken. (If all the corporations are organized under the
C [ ] laws of Massachusetts and if General Laws, Chapter 156B is
applicable to them, then Paragraph 3 may be deleted.)
P [ ]
* Delete the inapplicable words. In case the parent corporation is
organized under the laws of a state other than Massachusetts, these
M [ ] articles are to be signed by officers having corresponding powers
and duties.
R.A. [ ]
- -----------
P.C.
<PAGE> 16
4. That at a meeting of the directors of the parent corporation, the
following vote, pursuant to General Laws, Chapter 156B, Subsection (a) was duly
adopted:
See Continuation Sheets
5. The effective date of the merger as specified in the vote set out under
paragraph 4 is
See Continuation Sheets
IN WITNESS WHEREOF and under the penalties of perjury we have hereto
signed our names this 27th day of December, 1989.
/s/ Owen W. Robbins
----------------------------
Owen W. Robbins
Vice President
/s/ William B. Asher
----------------------------
William B. Asher
Assistant Clerk
* Delete the inapplicable words. In case the parent corporation is organized
under the laws of a state other than Massachusetts, these articles are to be
signed by officers having corresponding powers and duties.
<PAGE> 17
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF MERGER OF PARENT AND SUBSIDIARY CORPORATIONS
(GENERAL LAWS, CHAPTER 156B, SECTION 82)
======================================
I hereby approve the within articles of merger of parent
and subsidiary corporations and, the filing fee in the
amount of $250.00, having been paid, said articles are
deemed to have been filed with me this 28th day of
December, 1989
Effective date: December 31, 1989
/s/ Michael Joseph Connolly
---------------------------------------
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Leslie S. White, Esq.
c/o Testa, Hurwitz & Thibeault
53 State Street, Exchange Place
Boston, MA 02109
----------------------------------
Telephone: (617) 367-7500
<PAGE> 18
Continuation Sheet
MERGER OF TERADYNE CENTRAL, INC.
VOTED: That the Agreement and Plan of Merger in the form attached
hereto, providing for the merger of the corporation's
wholly-owned subsidiary, Teradyne Central, Inc., with and into
the corporation, with the Corporation constituting the surviving
corporation, be, and hereby is, approved, with such changes
therein or additions thereto as the officers executing the same
shall approve, such approval to be evidenced conclusively by
their execution and delivery thereof; and that the President or
any Vice-President and Clerk or assistant Clerk of the
Corporation be, and they hereby are, authorized and empowered to
execute and deliver the Agreement and Plan of Merger on behalf
of the Corporation.
VOTED: That the President or any Vice-President and the clerk or
Assistant clerk of the corporation be, and hereby are,
authorized and empowered to execute, acknowledge and file on
behalf of the Corporation, the Certificate of Ownership and
Merger in the form attached hereto, with the office of the
Secretary of State for the State of Delaware and a certified
copy thereof in the office of the Recorder of Deeds of New
Castle County in accordance with the General Corporation Law of
the State of Delaware.
VOTED: That the President or any Vice-President and the Clerk of
Assistant Clerk of the corporation be, and hereby are,
authorized and empowered to execute, acknowledge and file on
behalf of the Corporation, the Articles of Merger in the form
attached as hereto, with the office of the Secretary of State of
Massachusetts and a certified copy thereof in the Registry Of
Deeds in accordance with the Business Corporation Law of
Massachusetts.
VOTED: That the effective date of such foregoing merger is and shall be
December 31, 1989.
VOTED: That the proper officers of the Corporation be, and each of them
singly hereby is, authorized and empowered to execute and
deliver such documents, instruments and certificates, make any
payments and to take all actions as in his judgment may be
necessary, desirable or appropriate in order to effectuate the
intent and purposes of the foregoing resolutions.
<PAGE> 19
Continuation Sheet
MERGER OF TERADYNE CONNECTION SYSTEMS, INC.
VOTED: That the Agreement and Plan of Merger in the form attached
hereto, providing for the merger of the Corporation's
wholly-owned subsidiary, Teradyne Connection Systems, Inc. with
and into the Corporation, with the Corporation constituting the
surviving corporation, be, and hereby is, approved, with such
changes therein or additions thereto as the officers executing
the same shall approve, such approval to be evidenced
conclusively by their execution and delivery thereof; and that
the President or any Vice-President and Clerk or Assistant Clerk
of the corporation be, and they hereby are, authorized and
empowered to execute and deliver the Agreement and Plan of
Merger on behalf of the Corporation.
VOTED: That the President or any Vice-President and the Clerk or
Assistant Clerk of the corporation be, and hereby are,
authorized and empowered to execute, acknowledge and file on
behalf of the Corporation, the Certificate of Ownership and
Merger in the form attached hereto, with the office of the
Secretary of State of State of Massachusetts and a certified
copy thereof in the office of the Registry of Deeds of in
accordance with the General Corporation Law of Massachusetts.
VOTED: That the effective date of such foregoing merger is and shall be
December 31, 1989.
VOTED: That the proper officers of the Corporation be, and each of them
singly hereby is, authorized and empowered to execute and
deliver such documents, instruments and certificates, make any
payments and to take all actions as in his judgment may be
necessary, desirable or appropriate in order to effectuate the
intent and purposes of the foregoing resolutions.
<PAGE> 20
Continuation Sheet
MERGER OF CASE TECHNOLOGY INC.
VOTED: That the Agreement and Plan of Merger in the form attached
hereto, providing for the merger of the Corporation's
wholly-owned subsidiary, CASE Technology Inc., with and into the
Corporation, with the corporation constituting the surviving
corporation, or additions thereto as the officers executing the
same shall approve, such approval to be evidenced conclusively
by their execution and delivery thereof; and that the President
or any Vice-President and Clerk or Assistant Clerk of the
Corporation be, and they hereby are, authorized and empowered to
execute and deliver the Agreement and Plan of Merger on behalf
of the Corporation.
VOTED: That the President or any Vice-President and the clerk or
Assistant clerk of the corporation be, and hereby are,
authorized and empowered to execute, acknowledge and file on
behalf of the Corporation, the Certificate of Ownership and
Merger in the form attached hereto, with the office of the
Secretary of State for the State of California.
VOTED: At and after the effective date of the merger of CASE Technology
Inc. with and into the Corporation, all debts, liabilities and
duties of CASE Technology Inc. shall attach to the Corporation
and may be enforced against the Corporation to the same extent
as if such debts, liabilities and duties had been incurred or
contracted by the Corporation.
VOTED: That the President or any Vice-President and the Clerk of
Assistant Clerk of the corporation be, and hereby are,
authorized and empowered to execute, acknowledge and file on
behalf of the Corporation, the Articles of Merger in the form
attached as hereto, with the office of the Secretary of State of
Massachusetts and a certified copy thereof in the Registry of
Deeds in accordance with the Business Corporation Law of
Massachusetts.
VOTED: That the effective date of such foregoing merger is and shall be
December 31, 1989.
VOTED: That the proper officers of the Corporation be, and each of them
singly hereby is, authorized and empowered to execute and
deliver such documents, instruments and certificates, make any
payments and to take all actions as in his judgment may be
necessary, desirable or appropriate in order to effectuate the
intent and purposes of the foregoing resolutions.
<PAGE> 21
THE COMMONWEALTH OF MASSACHUSETTS
__________ MICHAEL JOSEPH CONNOLLY FEDERAL
Examiner Secretary of State IDENTIFICATION NO.:
ONE ASHBURTON PLACE 04-2272148
BOSTON, MASS 02108
ARTICLES OF
MERGER OF PARENT AND SUBSIDIARY CORPORATION
PURSUANT TO GENERAL LAWS, CHAPTER 156B, SECTION 82
The fee for filing this certificate is prescribed by General Laws,
Chapter 156B, Section 114.
Make check payable to the Commonwealth of Massachusetts.
* * * *
We, Owen W. Robbins and William B. Asher, Vice President*
and Assistant Clerk* of Teradyne, Inc.,
organized under the laws of Massachusetts and herein called the parent
corporation, do hereby certify as follows:
1. That the subsidiary corporation(s) to be merged into the parent
corporation are/is as follows:
Name State of Organization Date of Organization
1. Teradyne Digitest, Inc. Delaware April 14, 1978
2. That the parent corporation owns at least ninety per cent of the
outstanding shares of each class of the stock of each subsidiary corporation to
be merged into the parent corporation.
3. That in the case of each of the above-named corporations the
laws of the state of its organization, if other than Massachusetts, permit the
merger herein provided for and that all action required under the laws of each
such state in connection with this merger has been duly taken. (If all the
corporations are organized under the laws of the Massachusetts and if General
Laws, Chapter 156B is applicable to them, then Paragraph 3 may be deleted).
- ---------
* Delete the inapplicable words. In case the parent corporation is organized
under the laws of a state other than Massachusetts these articles are to be
signed by officers having corresponding powers and duties.
<PAGE> 22
4. That at a meeting of the directors of the parent corporation the
following vote, pursuant to subsection (a) of General Laws. Chapter 156B,
Section 82, was duly adopted:
VOTED: That the Agreement and Plan of Merger in the form
attached as EXHIBIT A hereto, providing for the merger
of Teradyne Digitest, Inc. with and into Teradyne, Inc.,
with Teradyne, Inc. constituting the surviving
corporation, be, and hereby is, approved, with such
changes therein or additions thereto as the officers
executing the same shall approve, such approval to be
evidenced conclusively by their execution and delivery
thereof; and that the President or any Vice-President
and Clerk or Assistant Clerk of the Company be, and they
hereby are, authorized and empowered to execute and
deliver the Agreement and Plan of Merger on behalf of
Teradyne, Inc.
VOTED: That the President or any Vice-President and the Clerk
or Assistant Clerk of Teradyne, Inc. be, and hereby are,
authorized and empowered to execute, acknowledge and
file on behalf of Teradyne, Inc., the Articles of Merger
in the form attached as hereto, with the office of the
Secretary of State of Massachusetts.
VOTED: That the effective date of such foregoing merger is and
shall be December 31, 1988.
VOTED: That the proper officers of Teradyne, Inc. be, and each
of them singly hereby is, authorized and empowered to
execute and deliver such documents, instruments and
certificates, make any payments and to take all actions
as in his judgment may be necessary, desirable or
appropriate in order to effectuate the intent and
purposes of the foregoing resolutions.
NOTE: Votes for which the space provided above is not sufficient should be
set out on continuation sheets to be numbered 2A, 2B etc. Continuation
sheets must have a left-hand margin 1 inch wide for binding. Only one
side should be used.
<PAGE> 23
5. The effective date of the merger as specified in the vote set
out under Paragraph 4 is
December 31, 1988
6. (This Paragraph 6 may be deleted if the parent corporation is
organized under the laws of Massachusetts.) The parent corporation hereby agrees
that it may be sued in the Commonwealth of Massachusetts for any prior
obligation of any subsidiary corporation organized under the laws of
Massachusetts with which it has merged, and any obligation hereafter incurred by
the parent corporation, including the obligation created by subsection (e) of
General Laws, Chapter 156B, Section 82, so long as any liability remains
outstanding against the parent corporation in the Commonwealth of Massachusetts
and it hereby irrevocably appoints the Secretary of the Commonwealth as its
agent to accept service of process for the enforcement of any such obligations,
including taxes, in the same manner as provided in Chapter 181.
IN WITNESS WHEREOF and under the penalties of perjury we have hereto
signed our names this 29th day of December, 1988.
/s/ Owen W. Robbins
------------------------------------
Owen W. Robbins
Vice President*
/s/ William B. Asher
-------------------------------------
William B. Asher
Assistant Clerk*
* Delete the inapplicable words. In case the parent corporation is organized
under the laws of a state other than Massachusetts these articles are to be
signed by officers having corresponding powers and duties.
<PAGE> 24
COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF MERGER OF PARENT AND SUBSIDIARY CORPORATIONS
(General Laws, Chapter 156B, Section 82)
I hereby approve the within articles of merger of parent and subsidiary
corporations and, the filing fee in the amount of $200.00 having been paid, said
articles are deemed to have been filed with me this 29th day of December, 1988.
Effective Date
- --------------
December 31, 1988
- -----------------
/s/ Michael Joseph Connolly
--------------------------------
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
Photo Copy of Merger to Be Sent
TO: Leslie S. White, Esq.
c/o Testa, Hurwitz & Thibeault
53 State Street
Boston, MA 02109
Telephone: (617) 367-7500
<PAGE> 25
THE COMMONWEALTH OF MASSACHUSETTS
- -------- FEDERAL
Examiner IDENTIFICATION
NO. 04-2272148
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASS. 02108
ARTICLES OF AMENDMENT
General Laws, Chapter 156B, Section 72
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
amendment. The fee for filing this certificate is prescribed by General Laws,
Chapter 156B, Section 114. Make check payable to the Commonwealth of
Massachusetts.
---------
We, Alexander V. d'Arbeloff, President
and
Richard J. Testa, Clerk of
TERADYNE, INC.
- --------------------------------------------------------------------------------
(Name of Corporation)
located at 321 Harrison Avenue, Boston, Massachusetts 02118
________ do hereby certify that the following amendment to the articles of
approved reorganization of the corporation was duly adopted at a meeting held
on May 8, 1987, by vote of
17,740,199 shares of common stock out of 23,898,176 shares outstanding
CROSS OUT being at least:(1) two-thirds of each class
INAPPLICABLE outstanding and entitled to vote thereon and of
CLAUSE each class or series of stock whose rights are
adversely affected thereby:(2)
C [ ]
P [ ]
M [ ]
(1) For amendments adopted pursuant to Chapter 156B, Section 70.
(2) For amendments adopted pursuant to Chapter 156B Section 71.
Note: If the space provided under any amendments or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of
paper leaving a left hand margin of at least 1 inch for binding. Additions to
more than one Amendment may be continued on a single sheet so long as each
Amendment requiring each such addition is clearly indicated.
<PAGE> 26
TO CHANGE the number of shares and the par value, if any, of each class of stock
within the corporation fill in the following:
The total presently authorized is:
- --------------------------------------------------------------------------------
KIND OF STOCKS NO PAR VALUE WITH PAR VALUE
NUMBER OF SHARES NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
COMMON
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PREFERRED:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE the total authorized to:
- --------------------------------------------------------------------------------
KIND OF STOCKS NO PAR VALUE WITH PAR VALUE
NUMBER OF SHARES NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
COMMON
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PREFERRED:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 27
Article Six is hereby amended to add the following paragraph:
"No director shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
notwithstanding any provision of law imposing such liability; provided, that, to
the extent provided by applicable law, this provision shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section sixty-one or sixty-two of Chapter 156B of the
Massachusetts General Laws, or (iv) for any transaction from which the director
derived an improper personal benefit. This provision shall not eliminate the
liability of a director for any act or omission occurring prior to the date upon
which this provision becomes effective. No amendment to or repeal of this
provision shall apply to or have any effect upon the liability or alleged
liability of any director for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal."
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 156B, Section 6 of the General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this
8th day of May, in the year 1987.
/s/ Alexander V. d'Arbeloff
- ---------------------------------
Alexander V. d'Arbeloff
President
/s/ Richard J. Testa
- ---------------------------------
Richard J. Testa
Clerk
<PAGE> 28
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within articles
of amendment and, the filing fee in the
amount of $75.00 having been paid, said
articles are deemed to have been filed with
me this 12 day of May 1987.
/s/ Michael Joseph Connolly
---------------------------------
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
Photo Copy of Merger to Be Sent
TO: Richard D. Sloman, Esq.
c/o Testa, Hurwitz & Thibeault
53 State Street
Boston, MA 02109
Telephone: (617) 367-7500
<PAGE> 29
THE COMMONWEALTH OF MASSACHUSETTS
- -------- FEDERAL
Examiner IDENTIFICATION
NO. 04-2272148
MICHAEL JOSEPH CONNOLLY
Secretary of State
ONE ASHBURTON PLACE, BOSTON, MASS. 02108
RESTATED ARTICLES OF ORGANIZATION
GENERAL LAWS, CHAPTER 156B, SECTION 74
This certificate must be submitted to the Secretary of the
Commonwealth within sixty days after the date of the vote of stockholders
adopting the restated articles of organization. The fee for filing this
certificate is prescribed by General Laws, Chapter 156B, Section 114. Make check
payable to the Commonwealth of Massachusetts.
---------
We, Alexander V. d'Arbeloff ,President and
Richard J. Testa , Clerk of
TERADYNE, INC.
- --------------------------------------------------------------------------------
(Name of Corporation)
located at 321 Harrison Avenue, Boston Massachusetts 02118
do hereby certify that the following restatement of the articles of organization
of the corporation was duly adopted at a meeting held on May 14, 1984, by vote
of
15,720,764 shares of common stock out of 22,070,973 shares outstanding
being at least a majority of each class of stock outstanding and entitled to
vote and of each class or series of stock adversely affected thereby:-
1. The name by which the corporation shall be known is: -
Teradyne, Inc.
2. The purposes for which the corporation is formed are as follows: -
See Page 2A
C [ ]
P [ ]
M [ ]
RA [ ]
- ----------
P.C.
Note: If the space provided under any amendments or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets
of paper leaving a left hand margin of at least 1 inch for binding.
Additions to more than one Amendment may be continued on a single sheet
so long as each Amendment requiring each such addition is clearly
indicated.
<PAGE> 30
3. The total number of shares and the par value, if any, of each class of
stock which the corporation is authorized to issue is as follows:
CLASS OF STOCK WITHOUT PAR VALUE WITH PAR VALUE
NUMBER OF SHARES NUMBER OF SHARES PAR VALUE
Preferred NONE NONE --
Common NONE 75,000,000 $.125
*4. If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting powers,
qualifications, special or relative rights or privileges as to each
class thereof and any series now established:
NONE
*5. The restrictions, if any, imposed by the articles of organization upon
the transfer of shares of stock of any class are as follows:
NONE
*6. Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution,
or for limiting, defining, or regulating the powers of the corporation,
or of its directors or stockholders, or of any class of stockholders:
The directors may make, amend or repeal the By-Laws in whole or in part,
except with respect to any provision thereof which by law or by the
By-Laws requires action by the stockholders.
Meetings of the stockholders may be held anywhere in the United States.
The corporation may be a partner in any business enterprise.
* If there are no such provisions, state "None."
<PAGE> 31
2A
To design, develop, manufacture, assemble, produce, acquire, own, buy,
import, sell, export, dispose of and otherwise deal in electronic or
electromechanical products or components, and personal property of every kind
and description.
To acquire, buy, own and sell securities (including the securities of
this corporation), patents, licenses, trade marks, trade names and all rights of
every kind thereunder.
To acquire, buy, construct, own, lease, mortgage and sell real estate,
buildings or any interests therein necessary or desirable for the purposes of
the corporation.
To acquire all or any part of the goodwill, rights and property, and to
assume the whole or any part of the contracts or liabilities of any firm,
association, corporation or person, and to pay for such acquisition in cash,
stock or other securities of this corporation or otherwise.
To exercise any of the foregoing purposes of powers through subsidiary
or affiliated corporations, and in connection therewith and otherwise to have
all the powers conferred now or in future by the Commonwealth of Massachusetts
upon business corporations.
<PAGE> 32
* We further certify that the foregoing restated articles of
organization effect no amendments to the articles of organization of the
corporation as heretofore amended, except amendments to the following
articles
Article 3.
Briefly describe amendments in space below:
Article 3 is amended by increasing the number of shares of Common Stock,
$.125 par value, which the Corporation is authorized to issue from
30,000,000 shares to 75,000,000 shares.
IN WITNESS WHERE AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this 14th day of May in the year 1984
/s/ Alexander V. d'Arbeloff
- ------------------------------------
Alexander V. d'Arbeloff
President
/s/ Richard J. Testa
- ------------------------------------
Richard J. Testa
Clerk
<PAGE> 33
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
I hereby approve the within restated
articles of organization and, the filing fee
in the amount of $22,650.00 having been
paid, said articles are deemed to have been
filed with me this 21st day of May, 1984
/s/ Michael Joseph Connolly
---------------------------------
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
Photo Copy of Restated Articles of Organization to Be Sent
TO: Richard J. Testa, Esq.
c/o Testa, Hurwitz & Thibeault
Sixty State Street
Boston, MA 02109
Telephone: (617) 367-7500
<PAGE> 1
EXHIBIT 4.1
EXHIBIT D
---------
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of March 14, 1990 (the "Agreement"), between
TERADYNE, INC., a Massachusetts corporation (the "Company"), and THE FIRST
NATIONAL BANK OF BOSTON, a national banking association, as Rights Agent (the
"Rights Agent").
WITNESSETH
WHEREAS, on March 14, 1990 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company (the "Board") authorized and declared a
dividend distribution of one Right for each share of Common Stock (as
hereinafter defined) of the Company outstanding at the close of business on
March 26, 1990 (the "Record Date"), and has authorized the issuance of one Right
for each share of Common Stock of the Company issued (whether originally issued
or sold from the Company's treasury) between the Record Date and the
Distribution Date, each Right initially representing the right to purchase one
share of Common Stock upon the terms and conditions hereinafter set forth (the
"Rights");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 20% or more of the shares of Common Stock then outstanding, but shall not
include the Company, any Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to the terms
of any such plan.
(b) "Act" shall mean the Securities Act of 1933, as amended.
(c) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) hereof.
(d) "Adverse Person" shall mean any Person declared to be an Adverse
Person by the Continuing Directors upon determination that the criteria set
forth in Section 11(a)(ii)(D) hereof apply to such Person.
<PAGE> 2
(e) "Adverse Person Event" shall mean the determination by the
Continuing Directors, pursuant to Section 11(a)(ii)(D) hereof, that a Person is
an Adverse Person.
(f) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended and in effect on the date of
this Agreement (the "Exchange Act").
(g) "Agreement" shall mean this Rights Agreement as originally
executed or as it may from time to time be supplemented or amended pursuant to
the applicable provisions hereof.
(h) A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own", any securities:
(i) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding, whether or not in writing, or upon
the exercise of conversion rights, exchange rights, other rights, warrants or
options, or otherwise; PROVIDED, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own", (A) securities tendered
pursuant to a tender offer or exchange offer made by such Person or any of such
Person's Affiliates or Associates until such tendered securities are accepted
for purchase or exchange, or (B) securities issuable upon exercise of Rights at
any time prior to the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence of a Triggering
Event which Rights were acquired by such Person or any of such Person's
Affiliates or Associates prior to the Distribution Date or pursuant to Section
3(a) or Section 22 hereof (the "Original Rights") or pursuant to Section
11(a)(i) hereof in connection with an adjustment made with respect to any
Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act, or any comparable or successor
rule), including pursuant to any agreement, arrangement or understanding,
whether or not in writing; PROVIDED, however, that a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own", any security under this
subparagraph (ii) as a result of an agreement, arrangement or understanding to
vote such security if such agreement, arrangement or understanding: (A) arises
solely from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions
of the General Rules and Regulations under the Exchange Act, and (B) is not also
then reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly,
by any other Person (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding, whether or not in writing, for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as described in
<PAGE> 3
the proviso to subparagraph (ii) of this paragraph (d)) or disposing of any
voting securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding", when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
(i) "Board" means the Board of Directors of the Company.
(j) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the Commonwealth of
Massachusetts are authorized or obligated by law or executive order to close.
(k) "Close of Business" on any given date shall mean 5:00 P.M.,
Boston time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., Boston time, on the next succeeding
Business Day.
(l) "Common Stock" shall mean the common stock, $.125 par value,
of the Company, except that "Common Stock" when used with reference to any
Person other than the Company shall mean the capital stock of such Person with
the greatest voting power, or the equity securities or other equity interest
having power to control or direct the management, of such Person.
(m) "Common Stock Equivalents" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(n) "Company" shall mean the Person named as the "Company" in the
first paragraph of this Agreement until a successor corporation shall have
become such or until a Principal Party shall assume, and thereafter be liable
for, all obligations and duties of the Company hereunder, pursuant to the
applicable provisions of this Agreement, and thereafter "Company" shall mean
such successor corporation or Principal Party.
(o) "Continuing Director" shall mean (i) any member of the Board,
while such Person is a member of the Board, who is not an Acquiring Person, or
an Affiliate or Associate of an Acquiring Person, or a representative of an
Acquiring Person or of any such Affiliate or Associate, and was a member of the
Board prior to the date of this Agreement, or (ii) any Person who becomes a
member of the Board subsequent to the date of this Agreement, while such Person
is a member of the Board, who is not an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, or a representative of an Acquiring Person or
of any such Affiliate or Associate, if such Person's nomination for election or
election to the Board is recommended or approved by a majority of the Continuing
Directors.
(p) "Current Market Price" shall have the meaning set forth in
Section 11(d) hereof.
<PAGE> 4
(q) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(r) "Distribution Date" shall have the meaning set forth in
Section 3(a) hereof.
(s) "Equivalent Common Stock" shall have the meaning set forth in
Section 11(ii)(b) hereof.
(t) "Exchange Act" shall have the meaning set forth in Section 1
(f) hereof.
(u) "Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(v) "Final Amendment Date" shall mean the earlier of the
Distribution Date or the occurrence of an Adverse Person Event.
(w) "Final Expiration Date" shall mean the close of business on
March 26, 2000.
(x) "Independent Directors" shall mean the Continuing Directors
who are not executive officers of the Company.
(y) "Initial Exercise Price" shall be $40.00.
(z) "NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automated Quotation System.
(aa) "Original Rights" shall have the meaning set forth in
Section 1(h)(i) hereof.
(bb) "Person" shall mean any individual, firm, association,
corporation, partnership or other entity.
(cc) "Principal Party" shall have the meaning set forth in Section
13(b) hereof.
(dd) "Purchase Price" shall have the meaning set forth in Section
4(a) hereof.
(ee) "Record Date" shall have the meaning set forth in the
preamble of the Agreement.
(ff) "Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.
(gg) "Rights" shall have the meaning set forth in the preamble of
the Agreement.
(hh) "Rights Agent" shall mean the Person named as the "Rights
Agent" in the first paragraph of this Agreement until a successor Rights Agent
shall have become such pursuant to the applicable provisions hereof, and
thereafter "Rights Agent" shall mean such successor Rights Agent. If at any time
there is more than one Person appointed by the Company as Rights Agent
<PAGE> 5
pursuant to the applicable provisions of this Agreement, "Rights Agent" shall
mean and include each such Person.
(ii) "Rights Certificates" shall have the meaning set forth in
Section 3(a) hereof.
(jj) "Rights Dividend Declaration Date" shall have the meaning set
forth in the preamble of this Agreement.
(kk) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii)(A), (B), (C) or (D) hereof.
(ll) "Section 11(a)(ii) Trigger Date" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(mm) "Section 13 Event" shall mean any event described in clauses
(x), (y) or (z) of Section 13(a) hereof.
(nn) "Spread" shall have the meaning set forth in Section 11(a)
(iii) hereof.
(oo) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
(pp) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or which is otherwise controlled by such Person.
(qq) "Substitute Consideration" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(rr) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(ss) "Trading Day" shall have the meaning set forth in Section 11
(d) hereof.
(tt) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Stock) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such
<PAGE> 6
appointment. The Company may from time to time appoint such Co-Rights Agents as
it may deem necessary or desirable.
Section 3. ISSUE OF RIGHTS CERTIFICATES.
(a) Until the earliest of (i) the Close of Business on the tenth
day after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the Close of Business on the
Record Date), (ii) the Close of Business on the tenth Business Day (or, if such
tenth Business Day occurs before the Record Date, the Close of Business on the
Record Date), or such specified or unspecified later date on or after the Record
Date as may be determined by action of a majority of the Continuing Directors,
after the date that a tender offer or exchange offer by any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any such
plan) is first published or sent or given within the meaning of Rule 14d-2(a) of
the General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would be the Beneficial Owner of 30% or more of the shares
of Common Stock then outstanding or (iii) the Close of Business on the tenth
Business Day after an Adverse Person Event (the earliest of (i), (ii) and (iii)
being herein referred to as the "Distribution Date"), (x) the Rights will be
evidenced (subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Rights Agent will send by
first-class, postage prepaid mail, to each record holder of the Common Stock as
of the Close of Business on the Distribution Date, at the address of such holder
shown on the records of the Company, one or more rights certificates, in
substantially the form of Exhibit A hereto (the "Rights Certificates"),
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein. As of and after the Distribution Date, the Rights
will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights (the "Summary of Rights"), in
substantially the form attached hereto as Exhibit B, by first-class, postage
prepaid mail, to each record holder of the Common Stock as of the Close of
Business on the Record Date, at the address of such holder shown on the records
of the Company. With respect to certificates for the Common Stock outstanding as
of the Record Date, until the Distribution Date, the Rights will be evidenced by
such certificates for the Common Stock and the registered holders of the Common
Stock shall also be the registered holders of the associated Rights. Until the
earlier of the Distribution Date or the Expiration Date (as such term is defined
in Section 7 hereof), the transfer of any certificates representing shares of
Common Stock in respect of which Rights have been issued shall also constitute
the transfer of the Rights associated with such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common
Stock that are issued (whether originally issued or from the Company's treasury)
after the Record Date but prior to the
<PAGE> 7
earlier of the Distribution Date or the Expiration Date. Rights shall also be
issued to the extent provided in Section 22 in respect of all shares of Common
Stock which are issued (whether originally issued or from the Company's
treasury) after the Distribution Date and prior to the Expiration Date.
Certificates representing such shares of Common Stock in respect of which Rights
are issued pursuant to the first sentence of this Section 3(c) shall also be
deemed to be certificates for Rights, and commencing as soon as reasonably
practicable following the date hereof shall bear the following legend:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement between Teradyne, Inc. (the
"Company") and The First National Bank of Boston (the "Rights Agent")
dated as of March 14, 1990 (the "Rights Agreement"), the terms of which
are hereby incorporated herein by reference and a copy of which is on file
at the principal offices of the Company. Under certain circumstances, as
set forth in the Rights Agreement, such Rights will be evidenced by
separate certificates and will no longer be evidenced by this certificate.
The Company will mail to the holder of this certificate a copy of the
Rights Agreement, as in effect on the date of mailing, without charge
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or held
by, any Person who is, was or becomes an Acquiring Person, an Adverse
Person or any Affiliate or Associate thereof (as such terms are defined in
the Rights Agreement), whether currently held by or on behalf of such
Person or by any subsequent holder, may become null and void. The Rights
shall not be exercisable, and shall be void so long as held, by a holder
in any jurisdiction where the requisite qualification to the issuance to
such holder, or the exercise by such holder, of the Rights in such
jurisdiction shall not have been obtained or obtainable.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to
purchase, and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit A hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Record Date and on their face shall entitle the holders thereof
to purchase such number of shares of Common Stock as shall be set forth therein
at the price per share set
<PAGE> 8
forth therein (such exercise price per share hereinafter referred to as the
"Purchase Price"), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by (i) an Acquiring
Person, an Adverse Person or any Associate or Affiliate of an Acquiring Person
or an Adverse Person, (ii) a transferee of an Acquiring Person or an Adverse
Person (or of any such Associate or Affiliate) who becomes a transferee after
the acquiring Person becomes such, or (iii) a transferee of an Acquiring Person
or the Adverse Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person or the Adverse
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person or the Adverse
Person to holders of equity interests in such Acquiring Person or Adverse Person
or to any Person with whom such Acquiring Person or Adverse Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which a majority of the Continuing Directors has
determined is part of a plan, arrangement or understanding that has as a primary
purpose or effect avoidance of Section 7(e) hereof, and any Rights Certificate
issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any other Rights Certificate referred to in this
sentence, shall contain (to the extent feasible) the following legend (modified
to apply to an Acquiring Person or an Adverse Person, as applicable):
The Rights represented by this Rights Certificate are or were beneficially
owned by a Person who was or became an [Acquiring] [Adverse] Person or an
Affiliate or Associate of an [Acquiring] [Adverse] Person (as such terms
are defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its President or any Vice President and its Treasurer or any
Assistant Treasurer, either manually or by facsimile signature, and shall have
affixed thereto the Company's seal or a facsimile thereof. The Rights
Certificates shall be countersigned, either manually or by facsimile signature,
by the Rights Agent and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
<PAGE> 9
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated as the appropriate place for
surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates, the Rights Certificate number and the date of each of the Rights
Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the Close of Business on the Distribution
Date, and at or prior to the Close of Business on the Expiration Date, any
Rights Certificate or Certificates may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of shares of Common Stock (or other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged, with the form of assignment and certificate appropriately executed,
at the office of the Rights Agent designated for such purpose. Neither the
Rights Agent nor the Company shall be obligated to take any action whatsoever
with respect to the transfer of any such surrendered Rights Certificate or
Certificates until the registered holder shall have completed and signed the
certificate contained in the form of assignment set forth on the reverse side of
such Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
<PAGE> 10
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase set
forth on the reverse side thereof and the certificate contained therein
completed and duly executed, to the Rights Agent at the office of the Rights
Agent designated for such purpose, together with payment of the aggregate
Purchase Price with respect to the total number of shares of Common Stock (or
other securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earlier of (i) the
Final Expiration Date, (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof or (iii) the time at which the Rights expire
pursuant to Section 13(d) hereof (the earliest of (i), (ii) or (iii) being
herein referred to as the "Expiration Date").
(b) The Purchase Price for each share of Common Stock pursuant to
the exercise of a Right shall initially be the Initial Exercise Price, and shall
be subject to adjustment from time to time as provided in Sections 11 and 13(a)
hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase set forth on the reverse side
thereof and the certificate contained therein completed and duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price for the shares (or other securities, cash or other assets, as the case may
be) to be purchased as set forth below and an amount equal to any applicable
transfer tax, the Rights Agent shall, subject to Section 20(k) hereof, promptly
(i) requisition from any transfer agent of the shares of Common Stock (or make
available, if the Rights Agent is the transfer agent for the Common Stock)
certificates for the total number of shares of Common Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, (ii) requisition from the Company the amount of cash, if any, to
be paid in lieu of fractional shares of Common Stock in accordance with Section
14 hereof, (iii) after receipt of such certificates for shares of Common Stock,
cause the same to be delivered to or upon the order of the registered holder of
such Rights Certificate, registered in such name or names as may be designated
by such holder, and (iv) after receipt thereof, deliver such cash, if any, to or
upon the order of the registered holder of such Rights Certificate. The payment
of the Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iii) hereof) shall be made in cash or by certified check, cashier's check
or bank draft payable to the order of the Company. In the event that the Company
is obligated to issue other securities of the Company, pay cash or distribute
other property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash or other property are
available for distribution by the Rights Agent, if and when appropriate. The
Company reserves the right to require prior to the occurrence of a Triggering
Event that, upon any exercise of Rights, such number of Rights be exercised so
that only whole shares of Common Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing the Rights equivalent to the
<PAGE> 11
Rights remaining unexercised shall be issued by the Rights Agent and delivered
to, or upon the order of, the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder, subject to
the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of an event described in Section
11(a)(ii)(A) or (C) and from and after the Close of Business on the tenth day
after the occurrence of an event described in Section 11(a)(ii)(B) or (D), any
Rights beneficially owned by (i) an Acquiring Person, an Adverse Person or an
Associate or Affiliate of an Acquiring Person or Adverse Person, which a
majority of the Continuing Directors, in their sole discretion, determines is or
was involved in or caused or facilitated, directly or indirectly (including
through any change in the Board), such Section 11(a)(ii) Event, (ii) a
transferee of an Acquiring Person or Adverse Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person or Adverse Person
becomes such, or (iii) a transferee of an Acquiring Person or Adverse Person (or
of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person or Adverse Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person or Adverse Person to holders of equity
interests in such Acquiring Person or Adverse Person or to any Person with whom
the Acquiring Person or Adverse Person has any continuing agreement, arrangement
or understanding regarding the transferred Rights or (B) a transfer which a
majority of the Continuing Directors has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or other Person as
a result of its failure to make any determinations with respect to an Acquiring
Person or Adverse Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All Rights
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased
<PAGE> 12
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF COMMON STOCK.
(a) The Company covenants and agrees that following the later of
(i) the Distribution Date and (ii) the termination of any period during which
the exercisability of the Rights are suspended, it will cause to be reserved and
kept available out of its authorized and unissued shares of Common Stock and
other securities or out of its authorized and issued shares held in its
treasury, the number of shares of Common Stock or other securities that as
provided in this Agreement including Section 11(a)(iii) hereof, will be
sufficient to permit the exercise in full of all outstanding Rights.
(b) Following the later of (i) the Distribution Date and (ii) the
termination of any period during which the exercisability of the Rights are
suspended, and for so long as the shares of Common Stock and other securities
issuable and deliverable upon the exercise of the Rights may be listed on any
national securities exchange, the Company shall use its best efforts to cause
all shares reserved for such issuance to be listed on such exchange upon
official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with this Agreement, a
registration statement under the Act, with respect to the Common Stock or other
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the Expiration Date. The Company will
also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) days after the date set forth in clause (i) of
the first sentence of this Section 9(c), the exercisability of the Rights in
order to prepare and file such registration statement and permit it to become
effective. In addition, if the Company shall determine that a registration
statement is required following the Distribution Date, the Company may
temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective. Upon any suspension of the
exercisability of the Rights referred to in this Section 9(c), the Company shall
issue a public announcement stating that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable and shall be void
so long as held by a holder in any jurisdiction where the requisite
qualification to the issuance to such holder, or the exercise by such holder, of
the Rights in such jurisdiction shall not have been
<PAGE> 13
obtained or be obtainable, the exercise thereof shall not be permitted under the
applicable law or a registration statement shall not have been declared
effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Common Stock (or other
securities) delivered upon exercise of Rights shall, at the time of delivery of
the certificates for such shares (subject to payment of the Purchase Price), be
duly and validly authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges that
may be payable in respect of the issuance or delivery of the Rights Certificates
and of any certificates for shares of Common Stock (or other securities, as the
case may be) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax that may be payable in respect of any transfer
or delivery of Rights Certificates to a Person other than, or the issuance or
delivery of shares of Common Stock (or other securities, as the case may be) in
respect of a name other than that of, the registered holder of the Rights
Certificates evidencing Rights surrendered for exercise or to issue or deliver
any certificates for shares of Common Stock (or other securities, as the case
may be) in a name other than that of the registered holder upon the exercise of
any Rights until such tax shall have been paid (any such tax being payable by
the holder of such Rights Certificates at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is due.
Section 10. COMMON STOCK RECORD DATE. Each Person in whose name any
certificate for shares of Common Stock (or other securities, as the case may be)
is issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of the shares of Common Stock (or other securities,
as the case may be) represented thereby on, and such certificate shall be dated,
the date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and all applicable transfer
taxes) was made; PROVIDED, however, that if the date of such surrender and
payment is a date upon which the Common Stock (or other securities, as the case
may be) transfer books of the Company are closed, such Person shall be deemed to
have become the record holder of such shares on, and such certificate shall be
dated, the next succeeding Business Day on which the Common Stock (or other
securities, as the case may be) transfer books of the Company are open. Prior to
the exercise of the Rights evidenced thereby, the holder of a Rights Certificate
shall not be entitled to any rights of a stockholder of the Company with respect
to shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Common Stock payable in shares
of Common Stock, (B) subdivide the outstanding Common Stock, (C) combine the
outstanding Common Stock into a smaller
<PAGE> 14
number of shares, or (D) issue any shares of its capital stock in a
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) hereof, the Purchase Price in effect at the time of the record
date for such dividend or of the effective date of such subdivision, combination
or reclassification, and the number and kind of shares of Common Stock or
capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that if a holder of Rights after such time were to
exercise that number of Rights (or fraction thereof) which would result in the
aggregate amount of the Purchase Price payable upon such exercise (at the
Purchase Price then in effect) being equal to the amount of the Purchase Price
payable prior to such time upon exercise of a Right, he would be entitled to
receive the aggregate number and kind of shares of Common Stock or other capital
stock, as the case may be, which, if a Right had been exercised immediately
prior to such time and at a time when the Common Stock (or other capital stock,
as the case may be) transfer books of the Company were open, he would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs that would
require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.
(ii) In the event:
(A) any Acquiring Person or any Associate or
Affiliate of any Acquiring Person, at any time after the date of this Agreement,
directly or indirectly, (1) shall merge into the Company or otherwise combine
with the Company and the Company shall be the continuing or surviving
corporation of such merger or combination and the Common Stock of the Company
shall remain outstanding and unchanged, (2) shall merge or otherwise combine
with any Subsidiary of the Company, (3) shall, in one transaction or a series of
transactions, transfer any assets to the Company or to any of its Subsidiaries
in exchange (in whole or in part) for shares of Common Stock, for shares of
other equity securities of the Company or any Subsidiary of the Company, or for
securities exercisable for or convertible into shares of equity securities of
the Company or any Subsidiary of the Company (Common Stock or otherwise) or
otherwise obtain from the Company, with or without consideration, any additional
shares of equity securities of the Company or securities exercisable for or
convertible into shares of such equity securities of the Company (other than
pursuant to a pro rata distribution to all holders of Common Stock or upon the
exercise of a convertible security of the Company or any Subsidiary of the
Company in accordance with its terms), (4) shall sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or dispose of, in one
transaction or a series of transactions, to, from or with (as the case may be)
the Company or any of its Subsidiaries, assets on terms and conditions less
favorable to the Company than the Company would be able to obtain at arm's
length negotiation with an unaffiliated third party, other than pursuant to a
transaction set forth in Section 13(a) hereof, (5) shall sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or dispose of in one
transaction or a series of transactions, to, from or with (as the case may be)
the Company or any of the Company's Subsidiaries (other than incidental to the
lines of business, if any, engaged in as of the date hereof between the Company
and such Acquiring Person or Associate or Affiliate) assets having an aggregate
fair market value of more than $4,000,000 other
<PAGE> 15
than pursuant to a transaction set forth in Section 13(a) hereof, (6) shall
receive any compensation from the Company or any of the Company's Subsidiaries
other than compensation for full-time employment as a regular employee at rates
in accordance with the Company's (or its Subsidiaries') past practices, or (7)
shall receive the benefit, directly or indirectly (except proportionately as a
stockholder and except if resulting from a requirement of law or governmental
regulation), of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by the Company or
any of its Subsidiaries, or
(B) any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan), alone
or together with any Affiliates and Associates of such Person, shall, at any
time after the Rights Dividend Declaration Date, become the Beneficial Owner of
30% or more of the shares of Common Stock then outstanding, unless the event
causing the 30% threshold to be crossed is a transaction set forth in Section
13(a) hereof, or is an acquisition of shares of Common Stock pursuant to a
tender offer or an exchange offer for all outstanding shares of Common Stock at
a price and on terms determined by a majority of the Independent Directors,
after receiving advice from one or more investment banking firms, to be (a) at a
price that is fair to stockholders (taking into account all factors which such
members of the Board deem relevant including, without limitation, prices which
could reasonably be achieved if the Company or its assets were sold on an
orderly basis designed to realize maximum value) and (b) otherwise in the best
interest of the Company and its stockholders, or
(C) during such time as there is an Acquiring
Person, there shall be any reclassification of securities (including any reverse
stock split), or recapitalization of the Company, or any merger or consolidation
of the Company with any of its Subsidiaries or any other transaction or series
of transactions involving the Company or any of its Subsidiaries (whether or not
with or into or otherwise involving an Acquiring Person), other than a
transaction or transactions to which the provisions of Section 13(a) hereof
apply (whether or not with or into or otherwise involving an Acquiring Person),
which has the effect, directly or indirectly, of increasing by more than 1% the
proportionate share of the outstanding shares of any class of equity securities
of the Company or any of its Subsidiaries which is directly or indirectly
beneficially owned by any Acquiring Person or any Associate or Affiliate of any
Acquiring Person, or
(D) the Continuing Directors shall declare any
Person to be an Adverse Person, upon a determination that such Person, alone or
together with its Affiliates and Associates, has, at any time after the Rights
Dividend Declaration Date, become the Beneficial Owner of an amount of Common
Stock which the Continuing Directors determine to be substantial (which amount
shall in no event be less than 15% of the shares of Common Stock then
outstanding) and a majority of the Continuing Directors determines, after
reasonable inquiry and investigation, which may include a review of the public
record regarding such Person and any information such directors may request from
such Person and consultation with such persons as such directors shall deem
appropriate, that (1) such Beneficial Ownership by such Person is intended to
cause the Company to repurchase the Common Stock beneficially owned by such
Person or to cause
<PAGE> 16
pressure on the Company to take action or enter into a transaction or series of
transactions intended to provide such Person with short-term financial gain
under circumstances where such directors determine that the best long-term
interests of the Company and its stockholders (taking into account any impact on
the national security of the United States or the impact on any constituency
which Massachusetts law permits directors to consider in discharging their
fiduciary duty) would not be served by taking such action or entering into such
transactions or series of transactions at that time or (2) such Beneficial
Ownership is causing or reasonably likely to cause a material adverse impact
(including, but not limited to, impairment of relationships with customers or
impairment of the Company's ability to maintain its competitive position) on the
business or prospects of the Company,
then, immediately upon the occurrence of any event described in Section
11(a)(ii)(A) or (C) hereof, and upon the Close of Business ten (10) days after
the occurrence of any event described in Section 11(a)(ii)(B) or (D) hereof,
proper provision shall be made so that each holder of a Right (except as
provided below and in Section 7(e) hereof) shall thereafter have the right to
receive, upon exercise thereof at the then current Purchase Price in accordance
with the terms of this Agreement, such number of shares of Common Stock of the
Company as shall equal the result obtained by (x) multiplying the then current
Purchase Price by the then number of shares of Common Stock for which a Right
was or would have been exercisable immediately prior to the first occurrence of
a Section 11(a)(ii) Event, whether or not such Right was then exercisable and
(y) dividing that product (which, following such first occurrence, shall
thereafter be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by 50% of the Current Market Price per share of
Common Stock (determined pursuant to Section 11(d) hereof) on the date of such
first occurrence (such number of shares being referred to herein as the
"Adjustment Shares").
(iii) In lieu of issuing shares of Common Stock in accordance
with Section 7(c) or Section 11(a)(ii) hereof, if the Board of Directors of the
Company, with the consent of a majority of the Continuing Directors, determines
that the action described below in this Section 11(a)(iii) is necessary or
appropriate and not contrary to the interests of the holders of Rights (other
than any Acquiring Person, any Adverse Person and any Affiliates or Associates
of any such Person), the Company may: (A) determine (x) in the case of an
exercise of a Right prior to any adjustment pursuant to Section 11(a)(ii)
hereof, the Current Market Price per share of Common Stock on the date of the
exercise of that Right, or (y) in the case of an exercise of a Right following
any adjustment pursuant to Section 11(a)(ii) the value of the Adjustment Shares
issuable upon the exercise of a Right (the result of (x) or (y), as the case may
be, being referred to herein as the "Current Value"), and (B) with respect to
each Right (subject to Section 7(e) hereof), make adequate provision to
substitute, upon the exercise of a Right and payment of the applicable Purchase
Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or
other equity securities of the Company (including, without limitation, shares,
or units of shares, of preferred stock which the Board of Directors of the
Company has deemed to have the same value as shares of Common Stock (such shares
of preferred stock being referred to herein as "Common Stock Equivalents")), (4)
debt securities of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, as adjusted
(less the amount of any reduction in the Purchase Price), where such aggregate
value has been determined by the
<PAGE> 17
Board of Directors of the Company based upon the advice of a nationally
recognized investment banking firm selected by the Board of Directors of the
Company; PROVIDED, however, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty (30) days
following the later of (x) the first occurrence of a Section 11(a)(ii) Event and
(y) the date on which the Company's right of redemption pursuant to Section
23(a) expires (the later of (x) and (y) being referred to herein as the "Section
11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, upon
the surrender for exercise of a Right and without requiring payment of the
Purchase Price, shares of Common Stock (to the extent available) and then, if
necessary, cash, which shares or cash have an aggregate value equal to the
Spread. For purposes of the preceding sentence, the term "Spread" shall mean the
excess of (i) the Current Value over (ii) the Purchase Price. If the number of
shares of Common Stock that are authorized by the Company's Articles of
Organization, as amended, but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights are not sufficient to permit the
exercise in full of any Rights and the Board of Directors of the Company with
the consent of the Continuing Directors determines in good faith that it is
likely that sufficient additional shares of Common Stock could be authorized for
issuance upon exercise in full of the Rights, the thirty (30) day period set
forth above may be extended to the extent necessary, but not more than ninety
(90) days after the Section 11(a)(ii) Trigger Date, in order that the Company
may seek stockholder approval for the authorization of such additional shares
(such thirty (30) day period, as it may be extended, shall be referred to as the
"Substitution Period"). To the extent that the Company determines that some
action need be taken pursuant to the first or second sentences of this Section
11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that
such action shall apply uniformly to all outstanding Rights, and (y) may suspend
the exercisability of the Rights until the expiration of the Substitution Period
in order to seek any authorization of additional shares or to decide the
appropriate form of distribution to be made pursuant to such provisions and to
determine the value thereof. In the event of such suspension, the Company shall
issue a public announcement stating that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii), the
value of the Common Stock shall be the Current Market Price per share of the
Common Stock (as determined pursuant to Section 11(d) hereof) on the Section
11(a)(ii) Trigger Date and the per share or per unit value of any Common Stock
Equivalent shall be deemed to equal the Current Market Price per share of the
Common stock on such date.
(b) In case the Company shall fix a record date for the issuance
of rights (other than the Rights), options or warrants to all holders of Common
Stock entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Common Stock, shares
having the same rights, privileges and preferences as the shares of Common Stock
("Equivalent Common Stock") or securities convertible into Common Stock or
Equivalent Common Stock at a price per share of Common Stock or per share of
Equivalent Common Stock (or having a conversion price per share, if a security
convertible into Common Stock or Equivalent Common Stock) less than the Current
Market Price per share of Common Stock (as determined pursuant to Section 11(d)
hereof) on such record date, the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding on such record date,
plus the number of shares of Common
<PAGE> 18
Stock which the aggregate offering price of the total number of shares of Common
Stock or Equivalent Common Stock (or the aggregate initial conversion price of
the convertible securities so to be offered) would purchase at such Current
Market Price, and the denominator of which shall be the number of shares of
Common Stock outstanding on such record date, plus the number of additional
shares of Common Stock or Equivalent Common Stock to be offered for subscription
or purchase (or into which the convertible securities so to be offered are
initially convertible). In case such subscription price may be paid by delivery
of consideration part or all of which may be in a form other than cash, the
value of such noncash consideration shall be as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of the Rights. Shares of Common Stock owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights, options or warrants are
not so issued, the Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to all
holders of Common Stock (including any such distribution made in connection with
a consolidation or merger in which the Company is the continuing corporation) of
evidences of indebtedness, cash (other than a regular quarterly or other
periodic cash dividend out of the earnings or retained earnings of the Company),
assets (other than a dividend payable in Common Stock, but including any
dividend payable in stock other than Common Stock) or subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the Current Market Price per share of
Common Stock (as determined pursuant to Section 11(d) hereof) on such record
date, less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent) of the
portion of the cash, assets or evidences of indebtedness so to be distributed or
of such subscription rights or warrants applicable to a share of Common Stock
and the denominator of which shall be such Current Market Price per share of
Common Stock (as determined pursuant to Section 11(d) hereof). Such adjustments
shall be made successively whenever such a record date is fixed, and in the
event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such record
date had not been fixed.
(d) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the thirty (30)
consecutive Trading Days immediately prior to such date, and for the purposes of
computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date; PROVIDED, however,
that in the event that the Current Market Price per share of the Common Stock is
determined during a period following the announcement by the issuer of such
Common
<PAGE> 19
Stock of (A) any dividend or distribution on the Common Stock payable in shares
of the Common Stock or securities convertible into shares of Common Stock (other
than Rights), or (B) any subdivision, combination or reclassification of the
Common Stock, and prior to the expiration of the requisite thirty (30) Trading
Day or ten (10) Trading Day period, as set forth above, after the ex-dividend
date for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Current Market
Price shall be properly adjusted to take into account ex-dividend trading. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the shares of Common
Stock are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if the shares of
Common Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
NASDAQ or such other system then in use, or, if on any such date the shares of
Common Stock are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Common Stock selected by the Board of Directors of the Company. If on any
such date no market maker is making a market in the Common Stock, the fair value
of such shares on such date as determined in good faith by the Board of
Directors of the Company shall be used. The term "Trading Day" shall mean a day
on which the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading is open for the transaction of
business or, if the shares of Common Stock are not listed or admitted to trading
on any national securities exchange, a Business Day. If the Common Stock is not
publicly held or not so listed or traded, Current Market Price per share shall
mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
PROVIDED, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a share, as the case may
be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
any Right and the Purchase Price thereof shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect
<PAGE> 20
to the Common Stock contained in Sections 11(a), (b), (c), (e), (g), (h), (i),
(j), (k) and (m) hereof, and the provisions of Sections 7, 9, 10, 13 and 14
hereof with respect to the Common Stock shall apply on like terms to any such
other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of shares of Common Stock
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
shares of Common Stock obtained by (i) multiplying (x) the number of shares
covered by a Right immediately prior to this adjustment, by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price, and
(ii) dividing the product so obtained by the Purchase Price in effect
immediatedisafter such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in lieu of any adjustment
in the number of shares of Common Stock purchasable upon the exercise of a
Right. Each of the Rights outstanding after the adjustment in the number of
Rights shall be exercisable for the number of shares of Common Stock for which a
Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that number
of Rights (calculated to the nearest ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
<PAGE> 21
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of shares of Common Stock issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued may continue
to express the Purchase Price per share and the number of shares which were
expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value of the shares of Common
Stock issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the shares of Common Stock and other capital stock or securities of the Company,
if any, issuable upon such exercise over and above the shares of Common Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
PROVIDED, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares or securities upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Common Stock, (ii) issuance wholly for cash of any shares of
Common Stock at less than the Current Market Price, (iii) issuance wholly for
cash of shares of Common Stock or securities which by their terms are
convertible into or exchangeable for shares of Common Stock, (iv) stock
dividends, or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Common Stock shall
not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction that complies with Section
11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect that would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately
<PAGE> 22
after such consolidation, merger or sale, the stockholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 26 hereof, take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) The failure by the Continuing Directors to declare (or the
Independent Directors to concur therewith) a Person to be an Adverse Person
following such Person becoming the Beneficial Owner of 15% or more of the
outstanding Common Stock shall not imply that such Person is not an Adverse
Person or limit such directors' right at any time in the future to declare such
Person to be an Adverse Person.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Common Stock, a copy of such certificate, and (c) mail a brief summary thereof
to each holder of a Rights Certificate (or, if prior to the Distribution Date,
to each holder of a certificate representing shares of Common Stock) in
accordance with Section 25 hereof. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained and
shall not be deemed to have knowledge of any adjustment unless and until it
shall have received such certificate.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction that complies with Section 11(o) hereof), and the Company shall not
be the continuing or surviving corporation of such consolidation or merger, (y)
any Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of any other
Person or cash or any other property, or (z) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer),
in one transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
complies with Section 11(o) hereof), then, and in each such case and except as
contemplated in Section 13(d) hereof, proper provision shall be made so that:
(i) each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive, upon the exercise thereof
<PAGE> 23
at the then current Purchase Price in accordance with the terms of this
Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradeable shares of Common Stock of the Principal Party
(as such term is hereinafter defined), not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number of
shares of Common Stock for which a Right was exercisable immediately prior to
the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has
occurred prior to the first occurrence of a Section 13 Event, multiplying the
number of shares of Common Stock for which a Right was exercisable immediately
prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price
in effect immediately prior to such first occurrence), and dividing that product
(which, following the first occurrence of a Section 13 Event, shall be referred
to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by (2) 50% of the Current Market Price (determined pursuant to
Section 11(d) hereof) per share of the Common Stock of such Principal Party on
the date of consummation of such Section 13 Event; (ii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such Section 13
Event, all the obligations and duties of the Company pursuant to this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to such Principal
Party, it being specifically intended that the provisions of Section 11 hereof
shall apply only to such Principal Party following the first occurrence of a
Section 13 Event; (iv) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of shares of its
Common Stock) in connection with the consummation of any such transaction as may
be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its shares of Common
Stock thereafter deliverable upon the exercise of the Rights; and (v) the
provisions of Section 11(a)(ii) hereof shall be of no effect following the first
occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause
(x) or (y) of the first sentence of Section 13(a),
the Person that is the issuer of any securities into
which shares of Common Stock of the Company are
converted in such merger or consolidation, and if no
securities are so issued, the Person that is the
other party to such merger or consolidation; and
(ii) in the case of any transaction described in clause
(z) of the first sentence of Section 13(a), the
Person that is the party receiving the greatest
portion of the assets or earning power transferred
pursuant to such transaction or transactions;
PROVIDED, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered,
<PAGE> 24
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date of
any consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will
(i) prepare and file a registration statement under the
Act, with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Expiration Date; and
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that comply in all
respects with the requirements for registration on Form 10 under the Exchange
Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if (i) such transaction is consummated with a
Person or Persons who acquired shares of Common Stock pursuant to a tender offer
or exchange offer for all outstanding shares of Common Stock which complies with
the provisions of Section 11(a)(ii)(B), (or a wholly owned subsidiary of any
such Person or Persons), (ii) the price per share of Common Stock offered in
such transaction is not less than the price per share of Common Stock paid to
all holders of shares of Common Stock whose shares were purchased pursuant to
such tender offer or exchange offer, and (iii) the form of consideration being
offered to the remaining holders of shares of Common Stock pursuant to such
transaction is the same as the form of consideration paid pursuant to such
tender offer or exchange offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(i)
hereof, or to distribute Rights Certificates that evidence fractional Rights. If
the Company determines not to issue fractional Rights, there shall
<PAGE> 25
be paid in lieu thereof to the registered holders of the Rights Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For purposes of this Section 14(a), the current market value of a whole
Right shall be the closing price of the Rights for the Trading Day immediately
prior to the date on which such fractional Rights would have been otherwise
issuable. The closing price of the Rights for any day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading, or if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of shares
of Common Stock upon exercise of the Rights or to distribute certificates that
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one share of
Common Stock. For purposes of this Section 14(b), the current market value of
one share of Common Stock shall be the closing price per share of Common Stock
(determined pursuant to Section 11(d)(ii) hereof) on the Trading Day immediately
prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right.
Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, other than rights of action vested in the Rights Agent in Section 18
hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific
<PAGE> 26
performance of the obligations hereunder and injunctive relief against actual or
threatened violations of the obligations hereunder of any Person subject to this
Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office of the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms
and certificates duly completed and fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company
and the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; PROVIDED, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder,
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the shares of Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
<PAGE> 27
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or stock transfer business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto; PROVIDED, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the counter-signature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name
<PAGE> 28
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person or Adverse
Person and the determination of Current Market Price) be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Clerk or any Assistant Clerk of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificate after receipt of a certificate describing any
such adjustment furnished in accordance with Section 12); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock to be issued pursuant
to this Agreement or any Rights Certificate or as to whether any shares of
Common Stock will, when so issued, be validly authorized and issued, fully paid
and nonassessable.
<PAGE> 29
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
President, any Vice President, the Clerk, any Assistant Clerk, the Treasurer or
any Assistant Treasurer of the Company, and to apply to such officers for advice
or instructions in connection with its duties, and it shall not be liable for
any action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer. Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken or omitted by the Rights
Agent under this Rights Agreement and the date on or after which such action
shall be taken or such omission shall be effective. The Rights Agent shall not
be liable for any action by, or omission of, the Rights Agent in accordance with
a proposal included in any such application on or after the date specified
therein (which date shall not be less than five business days after the date any
such officer actually receives such application, unless any such officer shall
have consented in writing to an earlier date) unless, prior to taking any such
action (or the effective date in the case of an omission), the Rights Agent
shall have received written instructions in response to such application
specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; PROVIDED, however, reasonable care was exercised in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if there shall be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate contained in the form of
assignment or the form of election to
<PAGE> 30
purchase set forth on the reverse thereof, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 or 2 thereof,
the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon thirty (30) days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Stock, by registered or certified
mail, and to the holders of the Rights Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of thirty (30) days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by any registered holder of a Rights Certificate (who shall, with such notice,
submit his Rights Certificate for inspection by the Company), then any
registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be (a) a
corporation organized and doing business under the laws of the United States or
the Commonwealth of Massachusetts or the State of New York (or of any other
state of the United States so long as such corporation is authorized to do
business as a banking institution in the Commonwealth of Massachusetts or the
State of New York) in good standing, having a principal office in the
Commonwealth of Massachusetts or the State of New York, which is authorized
under such laws to exercise corporate trust or stock transfer powers and is
subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50,000,000 or (b) an affiliate of a corporation described
in clause (a) of this sentence. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock, and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of
<PAGE> 31
shares or other securities or property purchasable under the Rights Certificates
made in accordance with the provisions of this Agreement. In addition, in
connection with the issuance or sale of shares of Common Stock following the
Distribution Date and prior to the redemption or expiration of the Rights, the
Company (a) shall, with respect to shares of Common Stock so issued or sold
pursuant to the exercise of stock options or under any employee plan or
arrangement, or upon the exercise, conversion or exchange of securities, notes
or debentures issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; PROVIDED, however, that (i) no such Rights Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights Certificate
would be issued, and (ii) no such Rights Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.
Section 23. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may, at its option, at
any time prior to the earlier of (i) the Close of Business on the tenth day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the close of business on the tenth day
following the Record Date), or (ii) the Expiration Date, redeem all but not less
than all of the then outstanding Rights at a redemption price of $.01 per Right,
as such amount may be appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price"); PROVIDED,
however, that the Board may not redeem any Rights following an Adverse Person
Event and provided, further, that if the Board authorizes redemption of the
Rights in either of the circumstances set forth in clauses (i) and (ii) below,
then there must be Continuing Directors then in office and such authorization
shall require the concurrence of a majority of such Continuing Directors: (i)
such authorization occurs on or after the time a Person becomes an Acquiring
Person, or (ii) such authorization occurs on or after the date of a change
(resulting from a proxy or consent solicitation effected in compliance with
applicable law and the requirements of any national securities exchange on which
the Common Stock is listed) in a majority of the directors in office at the
commencement of such solicitation if any Person who is a participant in such
solicitation has stated (or, if upon the commencement of such solicitation, a
majority of the Board has determined in good faith) that such Person (or any of
its Affiliates or Associates) intends to take, or may consider taking, any
action which would result in such Person becoming an Acquiring Person or which
would cause the occurrence of a Triggering Event unless, concurrent with such
solicitation, such Person (or one or more of its Affiliates or Associates) is
making a cash tender offer pursuant to a Schedule 14D-1, (or any successor form)
filed with the Securities and Exchange Commission for all outstanding shares of
Common Stock not beneficially owned by such Person (or by its Affiliates or
Associates). If, following the occurrence of a Stock Acquisition Date and
following the expiration of the right of redemption set forth in the preceding
sentence but prior to any Triggering Event, (i) a Person who was an Acquiring
Person shall have transferred or otherwise disposed of a number of shares of
Common Stock in one or more transactions, not directly or indirectly involving
the Company or any of its
<PAGE> 32
Subsidiaries, which did not result in the occurrence of a Triggering Event such
that such Person is thereafter a Beneficial Owner of 10% or less of the
outstanding shares of Common Stock, and (ii) there are no other Persons,
immediately following the occurrence of the event described in clause (i), who
are Acquiring Persons, and (iii) the Board (with the concurrence of a majority
of the Continuing Directors) shall so approve, then the Company's right of
redemption set forth in the preceding sentence shall be reinstated and
thereafter be subject to the provisions of this Section 23. If following the
occurrence of a Stock Acquisition Date and following the expiration of the right
of redemption set forth in the first sentence hereof, but prior to any
Triggering Event the Board of Directors of the Company, may, at its option,
redeem all but not less than all the then outstanding Rights at the Redemption
Price, provided that (i) such redemption is effected in connection with the
approval by the Board of Directors of the Company of, and the execution and
delivery by the Company of an agreement providing for, a merger, consolidation,
sale or transfer of all or substantially all of the assets of the Company or
other business combination, in each case which involves the Company but does not
involve an Acquiring Person or an Affiliate or Associate of an Acquiring Person
or any other Person acting directly or indirectly on behalf of or in association
with any such Acquiring Person, Affiliate or Associate and (ii) such redemption
is approved by a majority of the Continuing Directors. Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be exercisable
after the first occurrence of a Section 11(a)(ii) Event until such time as the
Company's right of redemption set forth in the first sentence of this Section
23(a) has expired.
(b) The Company may, at its option, pay the Redemption Price in
cash, shares of Common Stock (based on the Current Market Price as defined in
Section 11(d) hereof, of the Common Stock at the time of redemption) or any
other form of consideration deemed appropriate by the Board of Directors of the
Company.
(c) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to all such holders at each holder's last address as it appears upon
the registry books of the Rights Agent or, prior to the Distribution Date, on
the registry books of the Transfer Agent for the Common Stock. Any notice which
is mailed in the manner herein provided shall be deemed given, whether or not
the holder receives the notice. Each such notice of the redemption will state
the method by which the payment of the Redemption Price will be made.
Section 24. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Common Stock or to make any other distribution to the holders of
Common Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company, or (ii) to offer to the holders of
<PAGE> 33
Common Stock rights or warrants to subscribe for or to purchase any additional
shares of Common Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Common Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Common Stock), or (iv) to effect any consolidation or merger into or
with any other Person (other than a Subsidiary of the Company in a transaction
which complies with Section 11(o) hereof), or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one transaction or a series of related transactions, of more
than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Company or any
of its Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding
up of the Company, then, in each such case, the Company shall give to each
holder of a Rights Certificate, to the extent feasible, in accordance with
Section 25 hereof, a notice of such proposed action, which shall specify the
record date for the purposes of such stock dividend or distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the shares of Common Stock, if
any such date is to be fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least twenty (20) days prior
to the record date for determining holders of the shares of Common Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Common Stock,
whichever shall be the earlier.
(b) In case any of the events set forth in Section 11(a)(ii)
hereof shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible, and in accordance with Section 25 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof and (ii) all
references in the preceding paragraph to Common Stock shall, to the extent
appropriate, also be deemed thereafter to refer to other securities.
Section 25. NOTICES. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Teradyne, Inc.
321 Harrison Avenue
Boston, Massachusetts 02118
Attention: President
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
<PAGE> 34
The First National Bank of Boston
Blue Hills Office Park
Mail Stop 45-02-16
150 Royall Street
Canton, Massachusetts 02021
Attention: Shareholder Services Division
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 26. SUPPLEMENTS AND AMENDMENTS. At any time prior to the Final
Amendment Date, and subject to the penultimate sentence of this Section 26, the
Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock. From and after the Final
Amendment Date and subject to the penultimate sentence of this Section 26, the
Company and the Rights Agent shall, if the Company so directs, supplement or
amend this Agreement without the approval of any holders of Rights Certificates
in order (i) to cure any ambiguity, (ii) to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, (iii) to shorten or lengthen any time period hereunder or
(iv) to change or supplement the provisions hereunder in any manner which the
Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other than an Acquiring Person,
an Adverse Person or an Affiliate or Associate of such Person); PROVIDED,
however, that this Agreement may not be supplemented or amended, (A) whether
before or after the Final Amendment Date, to lengthen a time period relating to
when the Rights may be redeemed or to modify the ability (or inability) of the
Continuing Directors to redeem the Rights, in either case at such time as the
Rights are not then redeemable or (B) after the Final Amendment Date, to
lengthen, pursuant to clause (iii) of this sentence, any other time period
unless such lengthening is for the purpose of protecting, enhancing or
clarifying the rights of or the benefits to the holders of Rights (other than
any Acquiring Person, an Adverse Person or an Associate or Affiliate of such
Person). Upon the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in compliance
with the terms of this Section 26, the Rights Agent shall execute such
supplement or amendment. Notwithstanding anything contained in this Agreement to
the contrary, no supplement or amendment shall be made which changes the
Redemption Price, the Final Expiration Date, the Purchase Price or the number of
shares of Common Stock for which a Right is exercisable. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.
<PAGE> 35
Section 27. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 28. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the provisions of the last sentence of Rule 13d-3(d)(l)(i) of the General Rules
and Regulations under the Exchange Act. The Board of Directors of the Company
(with, where specifically provided for herein, the concurrence of the Continuing
Directors) shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board (with, where specifically provided for herein, the concurrence of the
Continuing Directors) or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including, without limitation, the right
and power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights, to
declare that a Person is an Adverse Person or to amend the Agreement). All such
actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board of Directors of the Company (with, where
specifically provided for herein, the concurrence of the Continuing Directors )
in good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other parties, and (y) not
subject the Board of Directors of the Company, the Continuing Directors to any
liability to the holders of the Rights.
Section 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for this sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).
Section 30. SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated,
PROVIDED, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board determines
in its good faith judgment that severing the invalid language from this
Agreement would materially and adversely affect the purpose or effect of this
Agreement, the right of redemption set forth in Section 23 hereof shall be
reinstated and shall not expire until the close of business on the tenth day
following the date of such determination by the Board. Without limiting the
foregoing, if any provision requiring that a
<PAGE> 36
determination made by less than the entire Board is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, such
determination shall then be made by the entire Board.
Section 31. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the Commonwealth of Massachusetts and for all purposes shall be governed
by and construed in accordance with the laws of such Commonwealth applicable to
contracts made and to be performed entirely within such Commonwealth.
Section 32. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 33. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
Attest: TERADYNE, INC.
By: /s/ Donald G. Leka by: /s/ Alexander V. D'Arbeloff
------------------ ---------------------------
Name: Donald G. Leka Name: Alexander V. d'Arbeloff
Title: Assistant Clerk Title: President
Attest: THE FIRST NATIONAL BANK OF
BOSTON
By: /s/ Riva Joseph By: /s/ Darlene M. DioDato
--------------- ----------------------
Name: Riva Joseph Name: Darlene M. DioDato
Title: Account Manager Title: Assistant Vice
President
<PAGE> 38
EXHIBIT A
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER MARCH 26, 2000 OR EARLIER IF REDEEMED BY THE COMPANY. THE
RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ADVERSE
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. THE RIGHTS SHALL NOT BE
EXERCISABLE, AND SHALL BE VOID SO LONG AS HELD, BY A HOLDER IN ANY JURISDICTION
WHERE THE REQUISITE QUALIFICATION TO THE ISSUANCE TO SUCH HOLDER, OR THE
EXERCISE BY SUCH HOLDER, OF THE RIGHTS IN SUCH JURISDICTION SHALL NOT HAVE BEEN
OBTAINED OR BE OBTAINABLE. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE
ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN [ACQUIRING]
[ADVERSE] PERSON OR AN AFFILIATE OR ASSOCIATE OF AN [ACQUIRING] [ADVERSE] PERSON
(AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCE SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]
- -------------------------------
The portion of the legend in brackets shall be inserted only if
applicable, shall be modified to apply to an Acquiring Person or an
Adverse Person, as applicable, and shall replace the preceding sentence.
<PAGE> 39
Rights Certificate
TERADYNE, INC.
This certifies that __________________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of March 14, 1990 (the "Rights Agreement"),
between Teradyne, Inc., a Massachusetts corporation (the "Company"), and The
First National Bank of Boston, a Boston corporation (the "Rights Agent"), to
purchase from the Company at any time prior to 5:00 P.M. (Boston, Massachusetts
time) on March 26, 2000 at the office or offices of the Rights Agent designated
for such purpose, or its successors as Rights Agent, one fully paid and
nonassessable share of common stock, par value $.125 per share (the "Common
Stock"), of the Company, at a purchase price of $40.00 per share (the "Purchase
Price"), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase and related Certificate duly executed. The number
of Rights evidenced by this Rights Certificate (and the number of shares which
may be purchased upon exercise thereof) set forth above, and the Purchase Price
set forth above, are the number and Purchase Price of March 26, 1990 based on
the Common Stock as constituted as such date.
As more fully set forth in the Rights Agreement, following the occurrence
of a Section 11(a)(ii) Event (as such term is defined in the Rights Agreement),
if the Rights evidenced by this Rights Certificate are beneficially owned by (i)
an Acquiring Person, an Adverse Person or an Affiliate or Associate of any such
Person (as such terms are defined in the Rights Agreement), which the Company's
Continuing Directors (as defined in the Rights Agreement), in their sole
discretion, determine is or was involved in or caused or facilitated, directly
or indirectly (including through any change in the Board), such Section
11(a)(ii) Event, (ii) a transferee of any such Acquiring Person, Adverse Person,
Affiliate or Associate who becomes a transferee after such Acquiring Person,
Adverse Person, Affiliate or Associate becomes such, or (iii) under certain
circumstances specified in the Rights Agreement, a transferee of any such
Acquiring Person,
<PAGE> 40
Adverse Person, Affiliate or Associate who becomes a transferee prior to or
concurrently with such Acquiring Person or Adverse Person becoming such, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
The Rights evidenced by this Rights Certificate shall not be exercisable,
and shall be void so long as held, by a holder in any jurisdiction where the
requisite qualification to the issuance to such holder, or the exercise by such
holder, of the Rights in such jurisdiction shall not have been obtained or be
obtainable.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of shares of Common Stock or other securities, which may be purchased upon
the exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events, including
Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of shares of Common Stock as the Rights
evidenced by the Rights Certificate or Rights Certificates surrendered shall
have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive
<PAGE> 41
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may (unless the Continuing Directors shall have made a
determination that a Person is an Adverse Person) be redeemed by the Company at
its option at a redemption price of $.01 per Right at any time prior to the
earlier of the close of business on (i) the tenth day following the Stock
Acquisition Date (as defined in the Rights Agreement and as such time period may
be extended pursuant to the Rights Agreement), and (ii) the Expiration Date (as
defined in the Rights Agreement). Under certain circumstances set forth in the
Rights Agreement, the decision to redeem shall require the concurrence of a
majority of the Continuing Directors. After the expiration of the redemption
period, the Company's right of redemption may be reinstated if either (i) an
Acquiring Person reduces his beneficial ownership to less than 10% of the
outstanding shares of Common Stock in a transaction or series of transactions
not involving the Company or (ii) the Board approves the merger of the Company
with, or acquisition of the Company by, a Person unrelated to the Acquiring
Person, and such reinstatement is approved by the Company's Board of Directors
(with the concurrence of a majority of the Continuing Directors).
No fractional shares of Common Stock will be issued upon the exercise of
any Right or Rights evidenced hereby, but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Common Stock or
of any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the
<PAGE> 42
Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officer of the Company
under seal.
Dated as of ___________ __, 19__
TERADYNE, INC.
By___________________________
Title:
By___________________________
Title:
Countersigned:
THE FIRST NATIONAL
BANK OF BOSTON
By_________________________
Authorized Signature
<PAGE> 43
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
- ----------------------------------------------------------------
(Please print name and address of transferee)
- ----------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney, to
transfer the within Rights Certificate on the books of the within-named Company,
with full power of substitution.
Dated:_________________, 19__
------------------------------
Signature
Signature Guaranteed:
<PAGE> 44
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Person (as such terms
are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person, an Adverse Person
or an Affiliate or Associate of any such Person.
Dated:____________, 19__ ______________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
<PAGE> 45
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: TERADYNE, INC.
The undersigned hereby irrevocably elects to exercise ________ Rights
represented by this Rights Certificate to purchase the shares of Common Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to:
Please insert social security
or other identifying number
-------------------------------------------
(Please print name and address)
- ----------------------------------------------------------------
- ----------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
<PAGE> 46
Please insert social security
or other identifying number:
- ------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------
- ------------------------------------------------------------
Dated:_______________, 19__
-------------------------------
Signature
Signature Guaranteed:
<PAGE> 47
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person,
an Adverse Person or an Affiliate or Associate of any such Person (as such terms
are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person, an Adverse Person or an
Affiliate or Associate of any such Person.
Dated:_______________, 19__ ______________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE> 48
SUMMARY OF RIGHTS TO PURCHASE COMMON STOCK
On March 14, 1990, the Board of Directors of Teradyne, Inc. (the
"Company") declared a dividend distribution of one Right for each outstanding
share of Common Stock of the Company to stockholders of record at the close of
business on March 26, 1990. Each Right entitles the registered holder to
purchase from the Company one share of Common Stock at a purchase price of
$40.00, subject to adjustment (the "Purchase Price"). The description and terms
of the Rights are set forth in a Rights Agreement (the "Rights Agreement")
between the Company and The First National Bank of Boston, as Rights Agent.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 20% or more of the outstanding shares of Common Stock (the "Stock
Acquisition Date"), (ii) 10 business days following the commencement of a tender
offer or exchange offer that would result in a person or group beneficially
owning 30% or more of such outstanding shares of Common Stock or (iii) 10
business days after the Continuing Directors of the Company shall declare any
Person to be an Adverse Person, upon a determination that such person, alone or
together with its affiliates and associates, has become the Beneficial Owner of
an amount of Common Stock which the Continuing Directors determine to be
substantial (which amount shall in no event be less than 15% of the shares of
Common Stock then outstanding) and a majority of the Continuing Directors (with
the concurrence of a majority of the Independent Directors) determines, after
reasonable inquiry and investigation, including consultation with such persons
as such directors shall deem appropriate, that (a) such beneficial ownership by
such person is intended to cause the Company to repurchase the Common Stock
beneficially owned by such person or to cause pressure on the Company to take
action or enter into a transaction or series of transactions intended to provide
such person with short-term financial gain under circumstances where such
directors determine that the best long-term interests of the Company and its
stockholders (taking into account any impact on the national security of the
United States or the impact on any constituency which Massachusetts law permits
directors to consider in discharging their fiduciary duty) would not be served
by taking such action or entering into such transaction or series of
transactions at that time or (b) such beneficial ownership is causing or
reasonably likely to cause a material adverse impact (including, but not limited
to, impairment of relationships with customers or impairment of the Company's
ability to maintain its competitive position) on the business or prospects of
the Company.
Until the Distribution Date, (i) the Rights will be evidenced by the
Common Stock certificates and will be transferred with an only with such Common
Stock certificates, (ii) new Common Stock certificates issued after March 26,
1990 will contain a notation incorporating the
<PAGE> 49
Rights Agreement by reference and (iii) the surrender for transfer of any
certificates for Common Stock outstanding will also constitute the transfer of
the Rights associated with the Common Stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on March 26, 2000, unless earlier redeemed by the
Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
In the event that the Continuing Directors determine that a person is an
Adverse Person or, at any time following the Distribution Date, (i) the Company
is the surviving corporation in a merger with an Acquiring Person and its Common
Stock is not changed or exchanged, (ii) a Person becomes the beneficial owner of
30% or more of the then outstanding shares of Common Stock (except pursuant to
an offer for all outstanding shares of Common Stock which the Independent
Directors determine to be fair to and otherwise in the best interests of the
Company and its stockholders), (iii) an Acquiring Person engages in one or more
"self-dealing" transactions as set forth in the Rights Agreement, or (iv) during
such time as there is an Acquiring Person, an event occurs which results in such
Acquiring Person's ownership interest being increased by more than 1% (E.G., a
reverse stock split), each holder of a Right will thereafter have the right to
receive, upon exercise, Common Stock (or, in certain circumstances, cash,
property or other securities of the Company) having a value equal to two times
the exercise price of the Right. However, Rights are not exercisable following
the occurrence of either of the events set forth above until such time as the
Rights are no longer redeemable by the Company as set forth below.
Notwithstanding any of the foregoing, following the occurrence of any of the
events set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by an
Acquiring Person or an Adverse Person will be null and void.
For example, at an exercise price of $40.00 per Right, each Right not
owned by an Acquiring Person or an Adverse Person (or by certain related
parties) following an event set forth in the preceding paragraph would entitle
its holder to purchase $80.00 worth of Common Stock (or other consideration, as
noted above) for $40.00. Assuming that the Common Stock had a per share value of
$10.00 at such time, the holder of each valid Right would be entitled to
purchase eight shares of Common Stock for $40.00.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation (other than a merger
described in the second preceding paragraph or a merger which follows an offer
described in the second preceding paragraph), or (ii) more than 50% of the
Company's assets or earning power is sold or transferred, each holder of a Right
(except Rights which previously have been voided as set forth above) shall
thereafter have the
<PAGE> 50
right to receive, upon exercise, common stock of the acquiring company having a
value equal to two times the exercise price of the Right.
The Purchase Price payable, and the number of shares of Common Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Common
Stock, (ii) if holders of the Common Stock are granted certain rights or
warrants to subscribe for Common Stock or convertible securities at less than
the current market price of the Common Stock, or (iii) upon the distribution to
holders of the Common Stock of evidences of indebtedness or assets (excluding
regular quarterly or other periodic cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Common Stock will be issued and, in lieu thereof,
an adjustment in cash will be made based on the market price of the Common Stock
on the last trading date prior to the date of exercise.
In general, the Company may redeem the Rights in whole, but not in part,
at any time until ten days following the Stock Acquisition Date, at a price of
$.01 per Right (payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors). Under certain circumstances set forth in
the Rights Agreement, the decision to redeem shall require the concurrence of a
majority of the Continuing Directors. The Company may not redeem the Rights if
the Continuing Directors have previously declared a person to be an Adverse
Person. After the redemption period has expired, the Company's right of
redemption may be reinstated if either (i) an Acquiring Person reduces its
beneficial ownership to less than 10% of the outstanding shares of Common Stock
in a transaction or a series of transactions not involving the Company or (ii)
the Board approves the merger of the Company with, or acquisition of the Company
by, a Person unrelated to the Acquiring Person. Immediately upon the action of
the Board of Directors ordering redemption of the Rights, with, where required,
the concurrence of the Continuing Directors, the Rights will terminate and the
only right of the holders of Rights will be to receive the $.01 per Right
redemption price.
The term "Continuing Directors" means any member of the Board of Directors
of the Company who was a member of the Board prior to the date of the Rights
Agreement, and any person who is subsequently elected to the Board if such
person is recommended or approved by a majority of the Continuing Directors, but
shall not include an Acquiring Person, an Adverse Person or an affiliate or
associate of an Acquiring Person or an Adverse Person, or any representative of
the foregoing entities. The term "Independent Directors" means Continuing
Directors who are not officers of the Company.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights
<PAGE> 51
become exercisable for Common Stock (or other consideration) of the Company or
for common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the earlier to occur of the
determination that a person is an Adverse Person or the Distribution Date. After
the earlier of such events, the provisions of the Rights Agreement may be
amended by the Board (in certain circumstances, with the concurrence of the
Continuing Directors) in order to cure any ambiguity, to make changes which do
not adversely affect the interests of holders of Rights (excluding the interests
of any Acquiring Person or any Adverse Person), or to shorten or lengthen any
time period under the Rights Agreement; PROVIDED, however, that no amendment to
adjust the time period governing redemption shall be made at such time as the
Rights are not redeemable.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
March 15, 1990. A copy of the Rights Agreement is available free of charge from
the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by reference.
<PAGE> 1
EXHIBIT 10.2
- ------------------------------------------------------------------------------
FIRST AMENDMENT
TO AMENDED AND RESTATED MULTICURRENCY REVOLVING CREDIT AND TERM
LOAN AGREEMENT
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First Amendment dated as of January 31, 1997 to Amended and Restated
Multicurrency Revolving Credit and Term Loan Agreement (the "First Amendment"),
by and among (a) TERADYNE, INC. a Massachusetts corporation (the "Company"), (b)
THE FIRST NATIONAL BANK OF BOSTON, BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, STATE STREET BANK AND TRUST COMPANY, FLEET NATIONAL BANK and the
other lending institutions listed on SCHEDULE 1 to the Credit Agreement (as
hereinafter defined) (collectively, the "Banks") and (c) THE FIRST NATIONAL BANK
OF BOSTON in its capacity as agent for the Banks (the "Agent"), amending certain
provisions of the Amended and Restated Multicurrency Revolving Credit and Term
Loan Agreement dated as of January 31, 1996 (as amended and in effect from time
to time, the "Credit Agreement") by and among the Company, the Banks and the
Agent. Terms not otherwise defined herein which are defined in the Credit
Agreement shall have the same respective meanings herein as therein.
WHEREAS, the Company, the Banks and the Agent have agreed to modify
certain terms and conditions of the Credit Agreement as specifically set forth
in this First Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
SS 1. AMENDMENT TO SS .2 OF THE CREDIT AGREEMENT. Section 2 of the
Credit Agreement is hereby amended as follows:
(a) Section 2.2 of the Credit Agreement is hereby amended by deleting
the date "January 31, 1999" which appears in ss.2.2 and substituting in place
thereof the date "January 31, 2000";
(b) Section 2.5 of the Credit Agreement is hereby amended by deleting
the date "January 31, 1998" which appears in ss.2.5(b) and substituting in place
thereof the date "January 31, 1999";
(c) Section 2.10 of the Credit Agreement is hereby amended by (i)
deleting the words "commencing on April 30, 1999, and ending on January 31,
2001" which appear in ss.2.10(a) and substituting in place thereof the words
"commencing on April 30, 2000, and ending on January 31, 2002" and (ii) deleting
the words "on January 31, 2001 (the "Final Repayment Date")" which appear in
ss.2.10(a) and substituting in place thereof the words "on January 31, 2002 (the
"Final Repayment Date").
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SS 2. CONDITIONS TO EFFECTIVENESS. This First Amendment shall
not become effective until the Agent receives the following:
(a) a counterpart of this First Amendment, executed by the Company, the
Banks and the Agent; and
(b) certified copies of corporate certificates and resolutions
evidencing all necessary action on the part of the Company with respect to the
authorization of this First Amendment and the authorization of certain
officer(s) to execute, deliver and take all other actions required under this
First Amendment, and providing specimen signature of such officers.
SS 3. REPRESENTATIONS AND WARRANTIES. The Company hereby repeats, on
and as of the date hereof, each of the representations and warranties made by it
in ss.4 of the Credit Agreement (except to the extent of changes resulting from
matters contemplated or permitted by the Credit Agreement and the other Loan
Documents, changes occurring in the ordinary course of business that singly or
in the aggregate are not materially adverse, and to the extent that such
representations and warranties relate expressly to an earlier date), PROVIDED,
that all references therein to the Credit Agreement shall refer to such Credit
Agreement as amended hereby. In addition, the Company hereby represents and
warrants that the execution and delivery by the Company of this First Amendment
and the performance by the Company of all of its agreements and obligations
under the Credit Agreement as amended hereby are within the corporate authority
of the Company and have been duly authorized by all necessary corporate action
on the part of the Company, and further represents and warrants that the
execution and deliver by the Company of this First Amendment and the performance
by the Company of the transactions contemplated hereby will not contravene any
term or condition set forth in any agreement to which the Company is a party or
by which the Company is bound.
SS 4. RATIFICATION, ETC. Except as expressly amended hereby, the Credit
Agreement and all documents, instruments and agreements related thereto are
hereby ratified and confirmed in all respects and shall continue in full force
and effect. The Credit Agreement and this First Amendment shall be read and
construed as a single agreement. All references in the Credit Agreement, the
Loan Documents or any related agreement or instrument to the Credit Agreement
shall hereafter refer to the Credit Agreement as amended hereby.
SS 5. NO WAIVER. Nothing contained herein shall constitute a
waiver of, impair or otherwise affect any Obligations, any other obligation of
the Company or any rights of the Agent or any of the Banks consequent thereon.
SS 6. COUNTERPARTS. This First Amendment may be executed in one
or more counterparts, each of which shall be deemed an original but which
together shall constitute one and the same instrument.
SS 7. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
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IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as a document under seal as of the date first above written.
TERADYNE, INC.
By:____________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
INDIVIDUALLY AND AS AGENT
By:____________________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:____________________________________
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, N.A.
By:____________________________________
Name:
Title:
FLEET NATIONAL BANK
By:____________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.3
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SECOND AMENDMENT
TO AMENDED AND RESTATED MULTICURRENCY REVOLVING CREDIT AND TERM
LOAN AGREEMENT
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Second Amendment dated as of May 20, 1997 to Amended and Restated
Multicurrency Revolving Credit and Term Loan Agreement (the "Second Amendment"),
by and among (a) TERADYNE, INC. a Massachusetts corporation (the "Company"), (b)
BANKBOSTON, N.A. (FORMERLY KNOWN AS THE FIRST NATIONAL BANK OF BOSTON), BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, STATE STREET BANK AND TRUST
COMPANY, FLEET NATIONAL BANK and the other lending institutions listed on
SCHEDULE 1 to the Credit Agreement (as hereinafter defined) (collectively, the
"Banks") and (c) BANKBOSTON, N.A. in its capacity as agent for the Banks (the
"Agent"), amending certain provisions of the Amended and Restated Multicurrency
Revolving Credit and Term Loan Agreement dated as of January 31, 1996 (as
amended and in effect from time to time, the "Credit Agreement") by and among
the Company, the Banks and the Agent. Terms not otherwise defined herein which
are defined in the Credit Agreement shall have the same respective meanings
herein as therein.
WHEREAS, the Company, the Banks and the Agent have agreed to modify
certain terms and conditions of the Credit Agreement as specifically set forth
in this Second Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
SS.1. AMENDMENT TO SS.6 OF THE CREDIT AGREEMENT. Section 6.6 of
the Credit Agreement is hereby amended by deleting ss.6.6 in its entirety and
restating it as follows:
6.6. LIMITATION ON STOCK REPURCHASES. Make any payments on
account of the purchase or other acquisition, redemption or retirement
of any shares in the Company's capital of any class or any warrants or
options to purchase any such shares; PROVIDED, HOWEVER, notwithstanding
the foregoing, the Company shall be permitted to make such payments on
account of the purchase or other acquisition, redemption or retirement
of any shares in the Company's capital of any class or any warrants or
options to purchase any such shares so long as no Default or Event of
Default has occurred and is continuing or would exist as a result
thereof.
SS.2. CONDITIONS TO EFFECTIVENESS. This Second Amendment shall
not become effective until the Agent receives a counterpart of this Second
Amendment, executed by the Company, the Majority Banks and the Agent.
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SS.3. REPRESENTATIONS AND WARRANTIES. The Company hereby repeats, on
and as of the date hereof, each of the representations and warranties made by it
in ss.4 of the Credit Agreement (except to the extent of changes resulting from
matters contemplated or permitted by the Credit Agreement and the other Loan
Documents, changes occurring in the ordinary course of business that singly or
in the aggregate are not materially adverse, and to the extent that such
representations and warranties relate expressly to an earlier date), PROVIDED,
that all references therein to the Credit Agreement shall refer to such Credit
Agreement as amended hereby. In addition, the Company hereby represents and
warrants that the execution and delivery by the Company of this Second Amendment
and the performance by the Company of all of its agreements and obligations
under the Credit Agreement as amended hereby are within the corporate authority
of the Company and have been duly authorized by all necessary corporate action
on the part of the Company, and further represents and warrants that the
execution and deliver by the Company of this Second Amendment and the
performance by the Company of the transactions contemplated hereby will not
contravene any term or condition set forth in any agreement to which the Company
is a party or by which the Company is bound.
SS.4. RATIFICATION, ETC. Except as expressly amended hereby, the Credit
Agreement and all documents, instruments and agreements related thereto are
hereby ratified and confirmed in all respects and shall continue in full force
and effect. The Credit Agreement and this First Amendment shall be read and
construed as a single agreement. All references in the Credit Agreement, the
Loan Documents or any related agreement or instrument to the Credit Agreement
shall hereafter refer to the Credit Agreement as amended hereby.
SS.5. NO WAIVER. Nothing contained herein shall constitute a
waiver of, impair or otherwise affect any Obligations, any other obligation of
the Company or any rights of the Agent or any of the Banks consequent thereon.
SS.6. COUNTERPARTS. This Second Amendment may be executed in one
or more counterparts, each of which shall be deemed an original but which
together shall constitute one and the same instrument.
SS.7. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICT OF LAWS).
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IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as a document under seal as of the date first above written.
TERADYNE, INC.
By:____________________________________
Name:
Title:
BANKBOSTON, N.A.,
INDIVIDUALLY AND AS AGENT
By:_____________________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:_____________________________________
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, N.A.
By:_____________________________________
Name:
Title:
FLEET NATIONAL BANK
By:_____________________________________
Name:
Title:
<PAGE> 1
Exhibit 10.4
TERADYNE, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of January 1, 1993)
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TERADYNE, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of January 1, 1993)
TABLE OF CONTENTS
Article I- Establishment and Purpose.........................................1
1.1 Establishment.........................................................1
1.2 Applicability.........................................................1
1.3 Purpose...............................................................1
1.4 Illegality of Particular Provision....................................1
Article II. Definitions.....................................................2
2.1 Definitions...........................................................2
2.2 Gender and Number.....................................................5
Article III. Eligibility and Participation..................................6
3.1 Eligibility...........................................................6
3.2 Date of Participation.................................................6
Article IV. Retirement Benefits.............................................7
4.1 Retirement Benefits...................................................7
4.2 Commencement of Benefits..............................................7
4.3 Preretirement Death Benefit...........................................8
4.4 Form of Payment.......................................................9
4.5 Payment of Small Amounts..............................................9
4.6 Termination of Employment Prior to Retirement or Death................9
4.7 Non-Competition......................................................10
Article V. Rights of Members...............................................11
5.1 Vesting..............................................................11
5.2 Unsecured Interest...................................................11
5.3 Employment...........................................................11
5.4 Member's Rights......................................................11
Article VI. Administration and Financing...................................12
6.1 Administration.......................................................12
Finality of Determination................................................12
6.3 Indemnification......................................................12
6.4 Expenses.............................................................12
6.5 Financing............................................................12
Article VII. Claims Procedure..............................................14
7.1 Claims Procedure.....................................................14
Article VIII. Amendment and Termination....................................16
8.1 Amendment and Termination............................................16
Article IX. Miscellaneous..................................................17
9.1 Nontransferability...................................................17
9.2 Tax Withholding......................................................17
9.3 Applicable Law.......................................................17
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TERADYNE, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of January 1, 1993)
ARTICLE I- ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT. Teradyne, Inc. and certain Affiliates (the "Employer")
hereby establish a supplemental retirement plan which shall be known as the
"TERADYNE, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN" (the "Plan") as set
forth in this document.
1.2 APPLICABILITY. The provisions of this Plan are applicable only to
certain employees who, an or after January 1, 1993, are active employees of the
Employer.
1.3 PURPOSE. The purpose of this Plan is to provide Eligible Employees with
retirement benefits lost due to restrictions on the Retirement Plan imposed by
Code sections 401(a)(17) and 415 and to supplement the benefits payable to such
Employees from the Retirement Plan. The Plan is unfunded and is maintained
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees as described in sections 201(2),
301(a)(3), and 40-1(a)(1) of the Employee Retirement Income Security Act of
1974, as amended.
1.4 ILLEGALITY OF PARTICULAR PROVISION. The illegality of any particular
provision of this document shall not affect the other provisions, and the
document shall be construed in all respects as it such in-valid provision were
omitted.
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ARTICLE II. DEFINITIONS
2.1 DEFINITIONS. Whenever used herein, the following terms shall have the
respective meanings set forth below.
(a) ACCRUED BENEFIT has the same meaning such term has under the
Retirement Plan.
(b) ACTUARIAL EQUIVALENT has the same meaning such term has under the
Retirement Plan.
(c) AFFILIATE shall mean--
(1) any corporation other than the Company which together with the
Company is a member of a "controlled group" of corporations (as
defined in Code section 414(b));
(2) any organization which together with the Company is under "common
control" (as defined in Code section 414 (c) ) ;
(3) any organization which together with the Company is an
"affiliated service group" (as defined in Code section 414(m));
or
(4) any other entity required to be aggregated with the Company
pursuant to regulations under Code section 414(o).
(d) ANNUAL COMPENSATION has the same meaning such term would have under
the Retirement Plan if the limitations imposed by Code section 401 (a)
(17) were not imposed.
(e) BOARD shall mean the Board of Directors of the Company.
(f) BREAKPOINT has the same meaning such term has under the Retirement
Plan.
(g) CODE shall mean the Internal Revenue Code of 1986, as the same shall
from time to time be amended.
(h) COMPANY shall mean Teradyne, Inc.
(i) COMPENSATION shall mean an amount equal to (1) minus (2) plus (3)
where--
(1) is Annual Compensation,
(2) is the actual payments made under the Variable compensation Plan,
and
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(3) is the variable portion of the Employee's Model Compensation as
determined under the Variable Compensation Plan for the
applicable Plan Year.
(j) COVERED COMPENSATION shall mean for each Plan Year after 1988 shall be
the average, without indexing, of the taxable wage bases under the
Social Security Act in effect for each calendar year during the
35-year period ending with the last day of the calendar year in which
the Member attains Social security Retirement Age; provided that--
(1) in the case of a Member or Beneficiary who is receiving benefits
under the Plan, or
(2) in the case of a Member who has terminated employment with the
Company and has nonforfeitable rights to benefits, such benefits
are not decreased by reason of any increase in the wage base
under such Title II, if such increase takes place after the
earlier of the date of the first receipt of such benefits or the
date of such termination of employment, as the case may be.
In the case of a Member who continues employment with the
Company in a Plan Year commencing after the calendar- year in
which he attains Social Security Retirement Age, the Member's
Breakpoint for such Plan Year shall be equal to the Member's
Breakpoint for the Plan Year in which the Member attained Social
Security Retirement Age.
(k) CREDITED SERVICE has the same meaning such term has under the
Retirement Plan,
(1) DISABILITY has the same meaning such term has under the Retirement
Plan.
(m) EARLIEST RETIREMENT DATE has the same meaning such term has under the
Retirement Plan.
(n) EMPLOYEE shall mean an individual who is employed by the Employer.
(o) EMPLOYER shall mean the Company and any Affiliate which, by vote of
the Board, is included in the Plan with respect to all or any portion
of its eligible employees.
(p) ELIGIBLE EMPLOYEE shall mean an Employee who is--
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(1) an "eligible employee" as defined in the Retirement Plan, and
(2) either-- ,
(A) an officer of the Employer, or
(B) a Member in the Variable Compensation Plan with a factor of
40 percent or more.
(q) FINAL AVERAGE COMPENSATION shall mean the sum of the Employee's
Compensation during the five consecutive Plan Years during which the
Employee's Compensation was the highest, divided by five; or if the
Employee has fewer than five consecutive Plan Years of employment with
the Employer, the Employee's average compensation during all the Plan
Years of his or her employment with the Employer.
(r) MEMBER shall mean an Employee who has satisfied the requirements of
section 3.2 of the Plan.
(s) NORMAL RETIREMENT Date has the same meaning such term has under the
Retirement Plan.
(t) PLAN ADMINISTRATOR shall mean the Retirement Plan committee, as
described in the Retirement Plan.
(u) PLAN YEAR shall mean the calendar year.
(v) RETIREMENT BENEFITS shall mean the benefits provided under section 4.1
of this Plan.
(w) RETIREMENT PLAN shall mean the Retirement Plan for Employees of
Teradyne, Inc.
(x) SOCIAL SECURITY RETIREMENT AGE has the same meaning such term has
under the Retirement Plan.
(y) TERMINATION OF EMPLOYMENT shall mean the death, retirement, or
Disability of a Member which terminates such Member's employment
relationship with the company or any Affiliate.
(z) VARIABLE COMPENSATION PLAN shall mean the Teradyne, Inc. Variable
compensation Plan.
(aa) YEAR OF VESTING SERVICE has the same meaning such term has under the
Retirement Plan.
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2.2 GENDER AND NUMBER. Except where otherwise indicated by the context, any
masculine terminology used herein shall also include the feminine gender, the
definition of any term herein in the singular shall also include the plural, and
the definition of any term herein in the plural shall also include the singular.
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ARTICLE III. ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY. Any Eligible Employee shall be eligible to participate in
this Plan.
3.2 DATE OF PARTICIPATION. Each Eligible Employee shall become a Member on
the later of (a) January 1, 1993, or (b) the first day of the first
Plan Year during which the Employee first becomes an Eligible
Employee.
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ARTICLE IV. RETIREMENT BENEFITS
4.1 RETIREMENT BENEFITS.
(a) ELIGIBILITY. Except as provided in section 4.7, a Member who has a
Termination of Employment when eligible for an early, normal,
deferred, or Disability retirement benefit under the Retirement Plan,
as then in effect, shall be eligible for Retirement Benefits under
this Plan, calculated as of the Member's Termination of Employment.
(b) AMOUNT. A Member shall be entitled to a monthly Retirement Benefit
equal to one-twelfth of the result of (1) minus (2) where--
(1) is an amount payable in a straight life annuity form equal to the
product of (i) the Member's Credited Service and (ii) the sum of
(A) and (B) as follows:
(A) 0.75 percent of the Member's Final Average Compensation up
to the Covered Compensation,
(B) 1.50 percent of the Member's Final Average Compensation
above the Covered Compensation,
(2) is the Member's Accrued Benefit payable in a straight life
annuity form from the Retirement Plan; subject to the actuarial
reductions for early commencement under section 4.2, if
applicable.
4.2 COMMENCEMENT OF BENEFITS. A Member's benefit under this Article TV
shall commence on the first day of the month coincident with or next
following the later of--
(a) the Member's Termination of Employment, or
(b) the date on which such Member attains his or her Social Security
Retirement Age; provided, however, that the Board, in its sole discretion, may
instruct the Plan Administrator to commence payments on an earlier date if the
commencement of payments is either on account of the Member's financial hardship
or is in the best interests of the Employer. If payments commence before the
Member's Social Security Retirement Age, the Member shall be entitled to a
monthly Retirement Benefit which shall be the Actuarial Equivalent of the
benefit determined
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under section 4.1(b), determined by applying the early retirement factors under
the Retirement Plan.
4.3 PRERETIREMENT DEATH BENEFIT. Benefits under this section are only
payable if the member is married on the date of such Member's death and if such
Member dies before benefit payments commence under this Plan-
(a) ON OR AFTER ELIGIBILITY FOR RETIREMENT.
(1) TIMING. If a Member dies in active service at any time on or
after such Member's Earliest Retirement Date or Normal Retirement
Date under the Retirement Plan, and such Member is married on the
date of death, then the surviving spouse shall be entitled to
receive as a death benefit a monthly payment beginning on the
first day of the month following the Member's death and ending on
the first day of the month in which the death of the spouse
occurs.
(2) AMOUNT. The monthly benefit under this subsection (a) shall be
equal to 50 percent of the Retirement Benefit which would have
been payable under section 4.1(b) or (c), whichever is
applicable, to the Member if the Member had retired the day
before death and benefit payments had commenced on that date in
the form of a joint and 50 percent survivor annuity with the
surviving spouse as the contingent annuitant.
(b) PRIOR TO ELIGIBILITY FOR RETIREMENT.
(1) TIMING. If a Member dies prior to such Member's Earliest
Retirement Date under the Retirement Plan, and such Member is
married on the date of death, then the surviving spouse shall be
entitled to receive as a death benefit a monthly payment
beginning an the earlier of-(A) the date that would have been the
Member's Earliest Retirement Date, or (B) the date the Member
would have attained age 65, and ending on the first day of the
month in which the death of the spouse occurs.
(2) AMOUNT. The monthly benefit under this subsection (b) shall be
determined as if the Member:
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(A) terminated employment with the Employer on the day before
the date of death,
(B) began receiving Retirement Benefits in the form of a joint
and 50 percent survivor annuity on the date of the Member's
Termination of Employment, and
(C) died the day thereafter.
(c) SPECIAL PAYMENT FORM. Notwithstanding anything in this section 4.3 to
the contrary, the Plan Administrator, in its sole discretion, may
elect to pay any benefit under this section 4.3 to the surviving
spouse in one lump sum payment.
4.4 FORM OF PAYMENT. Benefit payments (other than as described in section
4.3) shall be paid in the straight life annuity form described in Article VII of
the Retirement Plan; provided, however, that if the Member is legally married on
the date of Termination of Employment, benefit payments shall be paid in the
form of a joint and 50 percent survivor annuity with the Member's spouse as the
contingent annuitant. The joint and 50 percent survivor annuity shall be the
Actuarial Equivalent of the straight life annuity form.
4.5 PAYMENT OF SMALL AMOUNTS. If the present value of the benefit under
section 4.1 or 4.3 is $3,500 or less and benefit payments have not yet
commenced, the Plan Administrator shall direct that the Actuarial Equivalent of
the monthly benefit be paid in a single sum to the Member or, if applicable, his
or her surviving spouse.
Should a Member who receives a benefit under this section be reemployed by the
Company, any Retirement Benefits payable under this Plan after his or her
reemployment shall be reduced by the Actuarial Equivalent of the benefits such
Member received under this section.
4.6 TERMINATION OF EMPLOYMENT PRIOR TO RETIREMENT OR DEATH. Notwithstanding
any provision herein to the contrary, a Member who terminates from employment
with the Employer prior to his or her Earliest Retirement Date or Normal
Retirement Date under the Retirement
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<PAGE> 12
Plan for a reason other than Disability or death shall not be entitled to any
Retirement Benefits under the Plan.
4.7 NON-COMPETITION The Plan Administrator shall have discretion to deny
payment of any Retirement Benefits that would otherwise be payable under this
Plan to a Member who, for any reason whatsoever, directly or indirectly, accepts
employment or renders services, within a country in which the Member had been
actively employed by the Employer at any time during the ten-year period
immediately prior to such Member's Termination of Employment, with or without
compensation, by or for any person,, firm, or organization engaged in the sale,
servicing, developing, manufacturing, or merchandising of products or services
in competition with any product or service of the Company--
(a) in the event of voluntary termination of employment, for a period of
three years immediately, following such termination, or
(b) in the event of involuntary termination of employment, for a period of
one year immediately following such termination.
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ARTICLE V. RIGHTS OF MEMBERS
5.1 VESTING. A Member shall have a nonforfeitable right to Retirement
Benefits payable pursuant to Article IV upon the earliest to occur of the
following:
(a) the Member's Normal Retirement Date under the Retirement Plan,
(b) the Member's Earliest Retirement Date under the Retirement Plan,
(c) the date the Member retires on account of Disability under the
Retirement Plan, and
(d) the Member's death.
5.2 UNSECURED INTEREST. No Member or surviving spouse shall have any
interest whatsoever in any specific asset of the Employer. To the extent any
person acquires a right to receive payments under this Plan, such right shall be
no greater than the right of any unsecured general creditor of the Employer.
5.3 EMPLOYMENT. Nothing in this Plan shall interfere with or limit in any
way the right of the Employer to terminate any Member's employment at any time,
nor confer upon any Member any right to continue in the employ of the Employer.
5.4 MEMBER'S RIGHTS Nothing contained in this Plan and no action taken
pursuant to the provisions of this Plan shall create or be construed to create a
fiduciary relationship between the Employer or the Plan Administrator and any
Member or surviving spouse. Members and surviving spouses have the status of
general unsecured creditors of the Employer. The Plan constitutes a mere promise
by the Employer to make benefit payments in the future. Neither Members nor
surviving spouses shall have any claim to any specific assets of the Employer,
including any assets transferred to any trust described in section 6.5 and all
such assets shall remain owned by the Employer at all times.
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ARTICLE VI. ADMINISTRATION AND FINANCING
6.1 ADMINISTRATION. The Plan will be administered by the Plan
Administrator, which shall have the exclusive right and full discretion--
(a) to interpret the Plan,
(b) to decide any and all matters arising hereunder (including the right
to remedy possible ambiguities, inconsistencies, or admissions),
(c) to make, amend, and rescind such rules as it deems necessary for the
proper administration of the Plan, and
(d) to make all other determinations necessary or advisable for the
administration of the Plan, including determinations regarding
eligibility for benefits under the Plan and the amount of benefits
payable under the Plan. All interpretations of the Plan Administrator
with respect to any matter hereunder shall be final, conclusive, and
binding on all persons affected thereby.
6.2 FINALITY OF DETERMINATION. The determination of the Plan Administrator
as to any disputed questions arising under this Plan, including questions of
construction and interpretation, shall be final, binding, and conclusive upon
all persons.
6.3 INDEMNIFICATION. To the extent permitted by law, the Plan
Administrator, and all agents and representatives of the Plan Administrator,
shall be indemnified by the Employer against any claims, and the expenses of
defending against such claims, resulting from any action or conduct relating to
the administration of the Plan except claims arising from gross negligence,
willful neglect, or willful misconduct.
6.4 EXPENSES. The cost of payment from this Plan and the expenses of
administering the Plan shall be borne by the Employer.
6.5 FINANCING. The Employer may pay benefits under this Plan from its
general assets or it may establish a trust and transfer to such trust assets
sufficient to pay benefits under
-12-
<PAGE> 15
this Plan. To the extent the amount in the trust is not sufficient to make any
benefit payment, such payment shall be 'made by the Employer. Any trust created
by the Employer and any assets held by the trust to assist it in meeting its
obligations under the Plan will conform to the terms of the model trust
described in Revenue Procedure 92-64. It is the intention of the Employer and
all other parties that the arrangements established under the Plan be unfunded
for tax purposes and for purposes of Title I of the Employee Retirement income
Security Act of 1974, as amended.
-13-
<PAGE> 16
ARTICLE VII. CLAIMS PROCEDURE
7.1 CLAIMS PROCEDURE.
(a) SUBMISSION OF CLAIMS. Claims for benefits under the Plan shall be
submitted in writing to the Plan Administrator or to an
individual designated by the Plan Administrator for this purpose.
(b) DENIAL OF CLAIM. If any claim for benefits is wholly or partially
denied, the claimant shall be given written notice within 90 days
following the date on which the claim is filed, which notice shall set
forth--
(1) the specific reason or reasons for the denial,
(2) specific references to pertinent Plan provisions on which
the denial is based,
(3) a description of any additional ma-material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is
necessary, and
(4) an explanation of the Plan's claim review procedure.
If special circumstances require an extension of time for
processing the claim, written notice of an extension shall be
furnished to the claimant prior to the end of the initial period
of 90 days following the date on which the claim is filed. Such
an extension may not exceed a period of 90 days beyond the end of
said initial period.
If the claim has not been granted, and if written notice of the
denial of the claim is not furnished within 90 days following the
date on which the claim is filed, the claim shall be deemed
denied for the purpose of proceeding to the claim review
procedure.
(c) CLAIM REVIEW PROCEDURE. The claimant or his or her authorized
representative shall have 60 days after receipt of written
notification of denial of a claim to request a review of the
denial by making written request to the Plan
-14-
<PAGE> 17
Administrator, and may review pertinent documents and submit
issues and comments in writing within such 60-day period.
Not later than 60 days after receipt of the request for review,
the Plan Administrator shall render and furnish to the claimant a
written decision which shall include specific reasons for the
decision, and shall make specific references to pertinent Plan
provisions on which it is based- If special circumstances require
an extension of time for processing, the decision shall be
rendered as soon as possible, but not later than 120 days after
receipt of the request for review, provided that written notice
and explanation of the delay are given to the claimant prior to
commencement of the extension. Such decision by the Plan
Administrator shall not be subject to further review. If a
decision on review is not furnished to a claimant within the
specified time period, the claim shall be deemed to have been
denied on review.
-15-
<PAGE> 18
ARTICLE VIII. AMENDMENT AND TERMINATION
8.1 AMENDMENT AND TERMINATION. The Employer expects the Plan to be
permanent but since future conditions affecting the Employer cannot be
anticipated or foreseen, the Employer necessarily must and does hereby reserve
the right to amend, modify, or terminate the Plan at any time by action of the
Board. Any such amendment, modification, or termination shall not reduce or
diminish such persons right to receive any benefit accrued hereunder prior to
the date of such amendment, modification, or termination. Notice of such
amendment or termination shall be given in writing to each Member and
beneficiary of a deceased Member having an interest in the Plan.
-16-
<PAGE> 19
ARTICLE IX. MISCELLANEOUS
9.1 NONTRANSFERABILITY. In no event shall the Employer make any payment
under this Plan to any assignee or creditor of a Member or a surviving spouse.
Prior to the time of payment hereunder, a Member or a surviving spouse shall
have no rights by way of anticipation or alienation nor shall such rights be
assigned or transferred by operation of law.
9.2 TAX WITHHOLDING. The Employer shall have the right to deduct from all
payments made from the Plan any federal, state, or local taxes required by law
to be withheld with respect to such payments.
9.3 APPLICABLE LAW. This Plan shall be governed and construed in accordance
with the laws of the Commonwealth of Massachusetts and the United States of
America.
IN WITNESS WHEREOF, TERADYNE, INC. has caused this instrument to be
executed, effective January 1, 1993, on this ______ day of
________________________, 1993.
TERADYNE, INC.
By:_________________________________
ATTEST
By:_____________________________
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<PAGE> 1
EXHIBIT 10.14
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
<PAGE> 2
-2-
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.
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:
PERCENTAGE OF OPTION
SHARES FOR WHICH
OPTION WILL BE EXERCISABLE DATE OF VESTING
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
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
<PAGE> 3
-3-
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 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.
<PAGE> 4
-4-
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.
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
<PAGE> 5
-5-
(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.
<PAGE> 6
-6-
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.
Date Approved by Board of Directors of the Company: November 13, 1996
<PAGE> 1
EXHIBIT 10.15
CONSULTING AGREEMENT
This CONSULTING AGREEMENT is made as of June 1, 1997 by and between
Teradyne, Inc., a Massachusetts corporation (the "Company"), and Owen W. Robbins
(the "Consultant").
WITNESSETH:
WHEREAS, the Consultant has been employed by the Company since 1970 and is
an Executive Vice President, the Chief Financial Officer and a Vice Chairman of
the Board of Directors of the Company;
WHEREAS, the Consultant has previously submitted his resignation as an
Executive Vice President, the Chief Financial Officer and a Vice Chairman of the
Board of Directors of the Company, and the Board of Directors of the Company has
authorized the acceptance of such resignation;
WHEREAS, the Consultant shall remain as a non-employee member of the Board
of Directors of the Company;
WHEREAS, the Company desires to continue to receive the benefits of the
Consultant's experience and knowledge of the Company's business by consulting
with and receiving advice from the Consultant, and the Consultant has agreed to
provide such consulting services to the Company, subject to and upon the terms
and conditions set forth in this Agreement; and
WHEREAS, in consideration for the Consultant providing consulting services
to the Company, the Consultant has been granted options to purchase up to 90,000
shares of Common Stock of the Company under the Company's 1991 Employee Stock
Option Plan, as amended, which options shall continue to vest over the period of
this Agreement, unless terminated earlier by either party pursuant to Section 5
hereof.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. CONSULTING AGREEMENT. Subject to the terms of this Agreement, for a
period from the date hereof until the earlier of (a) the third anniversary of
the date hereof and (b) the effective date of any termination of this Agreement
pursuant to Section 5 hereof (the "Consulting Period"), the Consultant shall
serve as a consultant to the Company. During the Consulting Period, the
Consultant shall render such services of an advisory or consulting nature as the
Chairman of the Board of Directors or President of the Company, and/or their
respective designees, may, from time to time, reasonably request, in order that
the Company may continue to have the benefit of the Consultant's experience and
knowledge of the Company's business and industry including, without limitation,
advising and consulting with the Company with respect to the initiation,
negotiation and consummation of acquisitions of businesses in and the
<PAGE> 2
-2-
development of the software testing business (the "Consulting Services"). The
Consultant shall at all times perform and discharge his duties and
responsibilities under this Agreement faithfully, diligently and to the best of
his ability.
2. CONFIDENTIALITY. The Consultant agrees that, for the benefit of the
Company and each of its Affiliates (as defined below), during the Consulting
Period, he shall not (nor shall the Consultant assist any other person to)
directly or indirectly furnish, divulge, reveal, report, publish or disclose
(other than as may be required under applicable law) any Confidential
Information (as hereinafter defined) to any person, firm, corporation or other
entity, or hereafter use (or assist any person to use) such Confidential
Information; PROVIDED, HOWEVER, that the Consultant may use or disclose
Confidential Information as directed by the Company in connection with the
provision of the Consulting Services under this Agreement. For purposes of this
Agreement, the term "Confidential Information" means all information or material
not generally known to the public, which gives the Company and any of its
Affiliates some competitive business advantage or the opportunity of obtaining
such advantage or the disclosure of which could be detrimental to the interests
of the Company and any of its Affiliates, including, without limitation, trade
secrets, inventions, technical and other proprietary information, research and
development and test results, marketing techniques and materials, marketing and
development plans, price lists, pricing policies, business plans, information
relating to customers and/or suppliers' identities, characteristics and
agreements, financial information and projections, and employee files.
"Confidential Information" also includes any information described above which
the Company or any of its Affiliates obtains from another party and which the
Company or such Affiliate treats as proprietary or designates as Confidential
Information, whether or not owned or developed by the Company or such Affiliate.
For purposes of this Agreement, the term "Affiliate" shall mean, with respect to
any person or entity (herein the "first party"), any other person or entity that
directly or indirectly controls, or is controlled by, or is under common control
with, such first party. The parties hereto acknowledge that the obligations of
the Consultant pursuant to this Section 2 shall be interpreted in a manner which
is consistent with the standards applicable generally to the Company's executive
officers.
3. PAYMENT/BENEFITS. (a) During the Consulting Period, as compensation in
full for providing the Consulting Services under this Agreement, the Company
shall pay the Consultant $22,353.00 per month, or such other amount as is
determined by the Compensation Committee of the Board of Directors of the
Company upon agreement with the Consultant.
(b) The Consultant acknowledges and agrees that as a consultant to the
Company he will no longer be eligible to participate in the Company's Variable
Compensation Plan, Cash Profit Sharing Plan or Supplemental Savings Plan or to
otherwise receive any cash compensation from the Company other than pursuant to
clause (a) of this Section 3 (or otherwise in connection with serving on the
Company's Board of Directors); provided, however, that the Consultant will be
eligible to receive his pro rata portion for fiscal 1997 of the benefits
afforded under such plans to the Consultant while he was an employee of the
Company.
(c) The Consultant acknowledges and agrees that as a consultant to the
Company he (i) will no longer be eligible to receive health, disability or life
benefits from the
<PAGE> 3
-3-
Company but (ii) will be eligible, as of June 1, 1997, to begin receiving
payments under each of the Company's Retirement Plan and Supplemental Executive
Retirement Plan pursuant to the terms and conditions of such plans.
4. EXPENSE REIMBURSEMENT. The Company shall, in addition to the payments
contemplated by Section 3 hereof, reimburse the Consultant for all reasonable
out-of-pocket, costs and expenses incurred by the Consultant in connection with
the performance of the Consulting Services hereunder. Such reimbursement shall
be made in accordance with Company policies and procedures applicable to all
employees.
5. TERMINATION. Either party may terminate this Agreement upon 60 days'
prior written notice to the other party. Upon the effective date of any such
termination, the Consultant shall no longer be eligible to receive the
compensation provided for in clause (a) of Section 3 hereof.
6. STATUS. The Company and the Consultant agree that the Consultant shall
be an independent contractor of the Company and that nothing in this Agreement
shall be construed or deemed to create any other relationship. Without limiting
the foregoing, the relationship between the Company and the Consultant shall not
be that of any employer-employee. The Company shall not make any deductions or
withholdings from the Consultant's compensation as might otherwise be required
by federal or state laws. The Consultant expressly understands and agrees that
he shall be solely responsible for all withholding and income taxes in
connection with the payment of all consulting fees, and that he will not be
covered by FICA, SDI or Workmen's Compensation laws during the Consulting
Period. The Consultant agrees to provide the Company with written evidence of
compliance with federal and state withholding requirements upon request.
7. OFFICER INDEMNIFICATION. The Company agrees that the Consultant shall
continue to be entitled to indemnification by the Company against liabilities
arising out of claims based upon action taken or omitted by the Consultant in
his capacity as an officer or director of the Company or while serving as such
or by reason of the fact that he was an officer of the Company or continues to
be a member of the Board of Directors, to the fullest extent permitted under the
Massachusetts Business Corporation Law, under the Articles of Organization or
By-Laws of the Company, any indemnification agreement between the Consultant and
the Company or votes adopted by its Board of Directors. The Company also agrees
that the Consultant shall be entitled to indemnification by the Company against
liabilities arising out of claims based upon action taken or omitted by the
Consultant while acting as a consultant to the Company to the same extent as if
the Consultant were an executive officer of the Company.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without regard to
the conflicts or choice of law provisions thereof.
9. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of,
and be binding upon, the successors of the Company by way of merger,
consolidation or transfer of all or substantially all of the assets of the
Company, and may not be assigned by the Consultant.
<PAGE> 4
-4-
10. NO CONFLICTING OBLIGATIONS. The Consultant hereby represents and
warrants to the Company that he is not now under, or bound to be under in the
future, any obligation to or agreement with any person, firm or corporation
which is or would be inconsistent or in conflict with this Agreement or would
prevent, limit or impair in any way the full and absolute performance by the
Consultant of his obligations hereunder. In addition, the Consultant covenants
that he will not enter into any such agreement during the Consulting Period
without the prior written agreement of the Company.
11. ENTIRE AGREEMENT; MODIFICATIONS. This Agreement (together with the
Stock Option Agreement dated May 15, 1997 and any other option agreements
entered into by the Consultant and the Company) constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements, representations, negotiations and
understandings of the parties, whether oral or written. No supplement,
modification or amendment to this Agreement shall be binding unless executed in
writing by all the parties hereto.
12. WAIVERS. The failure of any party to require the performance or
satisfaction of any term or obligation of this Agreement, or the waiver by any
party of any breach of this Agreement, shall not prevent subsequent enforcement
of such term or obligation or be deemed a waiver of any subsequent failure or
breach.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
14. NOTICES. All notices hereunder shall be in writing and shall be
delivered in person or mailed by certified or registered mail, return receipt
requested, addressed as follows:
If to the Company, to: Teradyne, Inc.
321 Harrison Avenue
Boston, MA 02118
Attention: Donald G. Leka, Esq.
If to the Consultant, at the Consultant's address set forth on the
signature page hereto.
15. RETIREMENT BENEFITS. Nothing contained herein shall be deemed to
modify, diminish or affect any rights or benefits that the Consultant may have
as a retiree from the Company under the Company's compensation and benefit plans
and policies applicable to all Company employees or directors.
<PAGE> 5
IN WITNESS WHEREOF, the parties have duly executed this Consulting
Agreement as of the date and year first written above.
TERADYNE, INC.
---------------------------------
Name:
Title:
CONSULTANT:
---------------------------------
Owen W. Robbins
199 Country Drive
Weston, MA 02193
<PAGE> 1
EXHIBIT 10.16
CONSULTING AGREEMENT
This CONSULTING AGREEMENT is made as of June 1, 1997 by and between
Teradyne, Inc., a Massachusetts corporation (the "Company"), and James A.
Prestridge (the "Consultant").
WITNESSETH:
WHEREAS, the Consultant has been employed by the Company since 1969 and is
an Executive Vice President and a Vice Chairman of the Board of Directors of the
Company;
WHEREAS, the Consultant has previously submitted his resignation as an
Executive Vice President and a Vice Chairman of the Board of Directors of the
Company, and the Board of Directors of the Company has authorized the acceptance
of such resignation;
WHEREAS, the Consultant shall remain as a non-employee member of the Board
of Directors of the Company;
WHEREAS, the Company desires to continue to receive the benefits of the
Consultant's experience and knowledge of the Company's business by consulting
with and receiving advice from the Consultant, and the Consultant has agreed to
provide such consulting services to the Company, subject to and upon the terms
and conditions set forth in this Agreement; and
WHEREAS, in consideration for the Consultant providing consulting services
to the Company, the Consultant has been granted options to purchase up to 90,000
shares of Common Stock of the Company under the Company's 1991 Employee Stock
Option Plan, as amended, which options shall continue to vest over the period of
this Agreement, unless terminated earlier by either party pursuant to Section 5
hereof.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. CONSULTING AGREEMENT. Subject to the terms of this Agreement, for a
period from the date hereof until the earlier of (a) the third anniversary of
the date hereof and (b) the effective date of any termination of this Agreement
pursuant to Section 5 hereof (the "Consulting Period"), the Consultant shall
serve as a consultant to the Company. During the Consulting Period, the
Consultant shall render such services of an advisory or consulting nature as the
Chairman of the Board of Directors or President of the Company, and/or their
respective designees, may, from time to time, reasonably request, in order that
the Company may continue to have the benefit of the Consultant's experience and
knowledge of the Company's business and industry including, without limitation,
advising and consulting with the Company with respect to the initiation,
negotiation and consummation of acquisitions of businesses in and the
development of the software testing business (the "Consulting Services"). The
Consultant shall
<PAGE> 2
-2-
at all times perform and discharge his duties and responsibilities under this
Agreement faithfully, diligently and to the best of his ability.
2. CONFIDENTIALITY. The Consultant agrees that, for the benefit of the
Company and each of its Affiliates (as defined below), during the Consulting
Period, he shall not (nor shall the Consultant assist any other person to)
directly or indirectly furnish, divulge, reveal, report, publish or disclose
(other than as may be required under applicable law) any Confidential
Information (as hereinafter defined) to any person, firm, corporation or other
entity, or hereafter use (or assist any person to use) such Confidential
Information; PROVIDED, HOWEVER, that the Consultant may use or disclose
Confidential Information as directed by the Company in connection with the
provision of the Consulting Services under this Agreement. For purposes of this
Agreement, the term "Confidential Information" means all information or material
not generally known to the public, which gives the Company and any of its
Affiliates some competitive business advantage or the opportunity of obtaining
such advantage or the disclosure of which could be detrimental to the interests
of the Company and any of its Affiliates, including, without limitation, trade
secrets, inventions, technical and other proprietary information, research and
development and test results, marketing techniques and materials, marketing and
development plans, price lists, pricing policies, business plans, information
relating to customers and/or suppliers' identities, characteristics and
agreements, financial information and projections, and employee files.
"Confidential Information" also includes any information described above which
the Company or any of its Affiliates obtains from another party and which the
Company or such Affiliate treats as proprietary or designates as Confidential
Information, whether or not owned or developed by the Company or such Affiliate.
For purposes of this Agreement, the term "Affiliate" shall mean, with respect to
any person or entity (herein the "first party"), any other person or entity that
directly or indirectly controls, or is controlled by, or is under common control
with, such first party. The parties hereto acknowledge that the obligations of
the Consultant pursuant to this Section 2 shall be interpreted in a manner which
is consistent with the standards applicable generally to the Company's executive
officers.
3. PAYMENT/BENEFITS. (a) During the Consulting Period, as compensation in
full for providing the Consulting Services under this Agreement, the Company
shall pay the Consultant $22,353.00 per month, or such other amount as is
determined by the Compensation Committee of the Board of Directors of the
Company upon agreement with the Consultant.
(b) The Consultant acknowledges and agrees that as a consultant to the
Company he will no longer be eligible to participate in the Company's Variable
Compensation Plan, Cash Profit Sharing Plan or Supplemental Savings Plan or to
otherwise receive any cash compensation from the Company other than pursuant to
clause (a) of this Section 3 (or otherwise in connection with serving on the
Company's Board of Directors); provided, however, that the Consultant will be
eligible to receive his pro rata portion for fiscal 1997 of the benefits
afforded under such plans to the Consultant while he was an employee of the
Company.
(c) The Consultant acknowledges and agrees that as a consultant to the
Company he (i) will no longer be eligible to receive health, disability or life
benefits from the Company but (ii) will be eligible, as of June 1, 1997, to
begin receiving payments under each of
<PAGE> 3
-3-
the Company's Retirement Plan and Supplemental Executive Retirement Plan
pursuant to the terms and conditions of such plans.
4. EXPENSE REIMBURSEMENT. The Company shall, in addition to the payments
contemplated by Section 3 hereof, reimburse the Consultant for all reasonable
out-of-pocket, costs and expenses incurred by the Consultant in connection with
the performance of the Consulting Services hereunder. Such reimbursement shall
be made in accordance with Company policies and procedures applicable to all
employees.
5. TERMINATION. Either party may terminate this Agreement upon 60 days'
prior written notice to the other party. Upon the effective date of any such
termination, the Consultant shall no longer be eligible to receive the
compensation provided for in clause (a) of Section 3 hereof.
6. STATUS. The Company and the Consultant agree that the Consultant shall
be an independent contractor of the Company and that nothing in this Agreement
shall be construed or deemed to create any other relationship. Without limiting
the foregoing, the relationship between the Company and the Consultant shall not
be that of any employer-employee. The Company shall not make any deductions or
withholdings from the Consultant's compensation as might otherwise be required
by federal or state laws. The Consultant expressly understands and agrees that
he shall be solely responsible for all withholding and income taxes in
connection with the payment of all consulting fees, and that he will not be
covered by FICA, SDI or Workmen's Compensation laws during the Consulting
Period. The Consultant agrees to provide the Company with written evidence of
compliance with federal and state withholding requirements upon request.
7. OFFICER INDEMNIFICATION. The Company agrees that the Consultant shall
continue to be entitled to indemnification by the Company against liabilities
arising out of claims based upon action taken or omitted by the Consultant in
his capacity as an officer or director of the Company or while serving as such
or by reason of the fact that he was an officer of the Company and continues to
be a member of the Board of Directors of the Company, to the fullest extent
permitted under the Massachusetts Business Corporation Law, under the Articles
of Organization or By-Laws of the Company, any indemnification agreement between
the Consultant and the Company or votes adopted by its Board of Directors. The
Company also agrees that the Consultant shall be entitled to indemnification by
the Company against liabilities arising out of claims based upon action taken or
omitted by the Consultant while acting as a consultant to the Company to the
same extent as if the Consultant were an executive officer of the Company.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without regard to
the conflicts or choice of law provisions thereof.
9. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of,
and be binding upon, the successors of the Company by way of merger,
consolidation or transfer of all or substantially all of the assets of the
Company, and may not be assigned by the Consultant.
<PAGE> 4
-4-
10. NO CONFLICTING OBLIGATIONS. The Consultant hereby represents and
warrants to the Company that he is not now under, or bound to be under in the
future, any obligation to or agreement with any person, firm or corporation
which is or would be inconsistent or in conflict with this Agreement or would
prevent, limit or impair in any way the full and absolute performance by the
Consultant of his obligations hereunder. In addition, the Consultant covenants
that he will not enter into any such agreement during the Consulting Period
without the prior written agreement of the Company.
11. ENTIRE AGREEMENT; MODIFICATIONS. This Agreement (together with the
Stock Option Agreement dated May 15, 1997 and any other option agreements
entered into by the Consultant and the Company) constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements, representations, negotiations and
understandings of the parties, whether oral or written. No supplement,
modification or amendment to this Agreement shall be binding unless executed in
writing by all the parties hereto.
12. WAIVERS. The failure of any party to require the performance or
satisfaction of any term or obligation of this Agreement, or the waiver by any
party of any breach of this Agreement, shall not prevent subsequent enforcement
of such term or obligation or be deemed a waiver of any subsequent failure or
breach.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
14. NOTICES. All notices hereunder shall be in writing and shall be
delivered in person or mailed by certified or registered mail, return receipt
requested, addressed as follows:
If to the Company, to: Teradyne, Inc.
321 Harrison Avenue
Boston, MA 02118
Attention: Donald G. Leka, Esq.
If to the Consultant, at the Consultant's address set forth on the
signature page hereto.
15. RETIREMENT BENEFITS. Nothing contained herein shall be deemed to
modify, diminish or affect any rights or benefits that the Consultant may have
as a retiree from the Company under the Company's compensation and benefit plans
and policies applicable to all Company employees or directors.
<PAGE> 5
IN WITNESS WHEREOF, the parties have duly executed this Consulting
Agreement as of the date and year first written above.
TERADYNE, INC.
-----------------------------
Name:
Title:
CONSULTANT:
-----------------------------
James A. Prestridge
22034 N. Golf Club Drive
Sun City West, Arizona 85375
<PAGE> 1
EXHIBIT 22.1
PRESENT SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENTAGE
STATE OR OF VOTING
JURISDICTION OF SECURITIES
INCORPORATION OWNED
--------------- ----------
<S> <C> <C>
Teradyne Assembly GmbH Ltd................................. Germany 100%
Teradyne Benelux, Inc. (Ltd.).............................. Delaware 100%
Teradyne Canada Limited.................................... Canada 100%
Teradyne Control Automation, Inc........................... Delaware 100%
Teradyne GmbH.............................................. Germany 100%
Teradyne Holdings, Inc..................................... New Hampshire 100%
Teradyne Holdings Limited.................................. United Kingdom 100%
Teradyne Limited...................................... United Kingdom 100%
Teradyne Hong Kong, Ltd.................................... Delaware 100%
Teradyne International, Ltd................................ Barbados 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 de Mexico, S.A. de C.V............................ Mexico 100%
Teradyne Midnight Networks Inc............................. Delaware 100%
Teradyne Netherlands B.V................................... Netherlands 100%
Teradyne Netherlands, Ltd.................................. Delaware 100%
Teradyne Realty, Inc....................................... Massachusetts 100%
Teradyne RSW Software, Inc................................. Delaware 100%
RSW Software, Inc..................................... Massachusetts 100%
Teradyne S.A............................................... France 100%
Teradyne Scandinavia, Inc.................................. Delaware 100%
Teradyne Singapore, Ltd.................................... Delaware 100%
Teradyne Software and Systems Test, Inc.................... Delaware 100%
Teradyne Taiwan, Ltd....................................... Delaware 100%
Kinetrix, Inc.............................................. Delaware 83%
Hammer Technologies, Inc................................... Massachusetts 100%
Megatest Corporation....................................... Delaware 100%
Megatest Limited...................................... United Kingdom 100%
Megatest SARL......................................... France 100%
Megatest GmbH......................................... Germany 100%
Megatest H.K. Ltd..................................... Hong Kong 100%
Teradyne Philippines Ltd.............................. California 100%
Megatest International Sales Corporation.............. Barbados 100%
Megatest Asia Pte. Ltd................................ Singapore 100%
Softbridge, Inc............................................ Delaware 100%
Zehntel Holdings, Inc...................................... California 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. 333-32547; 333-26045; 33-16077;
33-42352; 33-55123; 333-64683; and 333-07177) and Form S-3 (File No. 33-44347)
of our report dated January 16, 1998, on our audits of the consolidated
financial statements of Teradyne, Inc. as of December 31, 1997 and 1996, and for
each of the three years in the period ended December 31, 1997, which report is
included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 26, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1997 AND THE CONSOLIDATED STATEMENT
OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000097210
<NAME> TERADYNE, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1.00
<CASH> 74,668
<SECURITIES> 18,693
<RECEIVABLES> 302,871
<ALLOWANCES> 1,938
<INVENTORY> 272,357
<CURRENT-ASSETS> 727,083
<PP&E> 692,832
<DEPRECIATION> 349,707
<TOTAL-ASSETS> 1,251,674
<CURRENT-LIABILITIES> 277,973
<BONDS> 13,141
0
0
<COMMON> 10,413
<OTHER-SE> 926,718
<TOTAL-LIABILITY-AND-EQUITY> 1,251,674
<SALES> 1,266,274
<TOTAL-REVENUES> 1,266,274
<CGS> 734,370
<TOTAL-COSTS> 1,090,973
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,245
<INCOME-PRETAX> 193,345
<INCOME-TAX> 65,737
<INCOME-CONTINUING> 127,608
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127,608
<EPS-PRIMARY> 1.53
<EPS-DILUTED> 1.48
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 28, 1997 AND THE CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000097210
<NAME> TERADYNE, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-28-1997
<EXCHANGE-RATE> 1
<CASH> 85,981
<SECURITIES> 82,459
<RECEIVABLES> 259,160
<ALLOWANCES> 1,938
<INVENTORY> 223,415
<CURRENT-ASSETS> 696,867
<PP&E> 637,280
<DEPRECIATION> 336,231
<TOTAL-ASSETS> 1,174,378
<CURRENT-LIABILITIES> 231,027
<BONDS> 13,784
0
0
<COMMON> 10,473
<OTHER-SE> 905,251
<TOTAL-LIABILITY-AND-EQUITY> 1,174,378
<SALES> 874,590
<TOTAL-REVENUES> 874,590
<CGS> 508,234
<TOTAL-COSTS> 765,757
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,659
<INCOME-PRETAX> 123,271
<INCOME-TAX> 41,912
<INCOME-CONTINUING> 81,359
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81,359
<EPS-PRIMARY> 0.98
<EPS-DILUTED> 0.94
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 29, 1997 AND THE CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 29, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000097210
<NAME> TERADYNE, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-29-1997
<EXCHANGE-RATE> 1
<CASH> 46,479
<SECURITIES> 140,050
<RECEIVABLES> 252,825
<ALLOWANCES> 1,938
<INVENTORY> 185,076
<CURRENT-ASSETS> 673,218
<PP&E> 607,176
<DEPRECIATION> 323,524
<TOTAL-ASSETS> 1,132,137
<CURRENT-LIABILITIES> 221,113
<BONDS> 14,502
0
0
<COMMON> 10,435
<OTHER-SE> 872,244
<TOTAL-LIABILITY-AND-EQUITY> 1,132,137
<SALES> 537,843
<TOTAL-REVENUES> 537,843
<CGS> 317,583
<TOTAL-COSTS> 481,758
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,106
<INCOME-PRETAX> 65,878
<INCOME-TAX> 23,716
<INCOME-CONTINUING> 42,162
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,162
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.49
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 30, 1997 AND THE CONSOLIDATED
STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 30, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000097210
<NAME> TERADYNE, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-30-1997
<EXCHANGE-RATE> 1
<CASH> 91,689
<SECURITIES> 106,567
<RECEIVABLES> 194,704
<ALLOWANCES> 1,936
<INVENTORY> 151,662
<CURRENT-ASSETS> 594,211
<PP&E> 577,559
<DEPRECIATION> 308,392
<TOTAL-ASSETS> 1,096,814
<CURRENT-LIABILITIES> 196,413
<BONDS> 15,053
0
0
<COMMON> 10,438
<OTHER-SE> 861,012
<TOTAL-LIABILITY-AND-EQUITY> 1,096,814
<SALES> 248,302
<TOTAL-REVENUES> 248,302
<CGS> 152,935
<TOTAL-COSTS> 227,026
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 541
<INCOME-PRETAX> 26,400
<INCOME-TAX> 9,240
<INCOME-CONTINUING> 17,160
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,160
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.20
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1996 AND THE CONSOLIDATED STATEMENT
OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000097210
<NAME> TERADYNE, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 201,452
<SECURITIES> 48,266
<RECEIVABLES> 180,366
<ALLOWANCES> 1,936
<INVENTORY> 138,954
<CURRENT-ASSETS> 617,108
<PP&E> 563,585
<DEPRECIATION> 290,088
<TOTAL-ASSETS> 1,096,816
<CURRENT-LIABILITIES> 225,257
<BONDS> 15,650
0
0
<COMMON> 10,310
<OTHER-SE> 831,701
<TOTAL-LIABILITY-AND-EQUITY> 1,096,816
<SALES> 1,171,615
<TOTAL-REVENUES> 1,171,615
<CGS> 724,624
<TOTAL-COSTS> 1,048,820
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,427
<INCOME-PRETAX> 139,663
<INCOME-TAX> 46,089
<INCOME-CONTINUING> 93,574
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 93,574
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.10
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 29, 1996 AND THE CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 29, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000097210
<NAME> TERADYNE, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-29-1996
<EXCHANGE-RATE> 1
<CASH> 291,559
<SECURITIES> 59,352
<RECEIVABLES> 193,478
<ALLOWANCES> 3,335
<INVENTORY> 155,852
<CURRENT-ASSETS> 731,704
<PP&E> 554,758
<DEPRECIATION> 281,634
<TOTAL-ASSETS> 1,088,572
<CURRENT-LIABILITIES> 208,862
<BONDS> 15,807
0
0
<COMMON> 10,364
<OTHER-SE> 841,925
<TOTAL-LIABILITY-AND-EQUITY> 1,088,572
<SALES> 930,328
<TOTAL-REVENUES> 930,328
<CGS> 565,102
<TOTAL-COSTS> 806,310
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,765
<INCOME-PRETAX> 135,263
<INCOME-TAX> 44,637
<INCOME-CONTINUING> 90,626
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90,626
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.07
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996 AND THE CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30,1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000097210
<NAME> TERADYNE, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 204,354
<SECURITIES> 98,739
<RECEIVABLES> 225,984
<ALLOWANCES> 3,390
<INVENTORY> 168,752
<CURRENT-ASSETS> 729,804
<PP&E> 548,436
<DEPRECIATION> 270,264
<TOTAL-ASSETS> 1,092,451
<CURRENT-LIABILITIES> 223,216
<BONDS> 17,538
0
0
<COMMON> 10,433
<OTHER-SE> 831,086
<TOTAL-LIABILITY-AND-EQUITY> 1,092,451
<SALES> 668,657
<TOTAL-REVENUES> 668,657
<CGS> 401,355
<TOTAL-COSTS> 566,006
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,252
<INCOME-PRETAX> 109,320
<INCOME-TAX> 38,263
<INCOME-CONTINUING> 71,057
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71,057
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.84
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1996 AND THE CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000097210
<NAME> TERADYNE, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 171,593
<SECURITIES> 137,323
<RECEIVABLES> 270,598
<ALLOWANCES> 2,032
<INVENTORY> 204,547
<CURRENT-ASSETS> 821,558
<PP&E> 524,237
<DEPRECIATION> 260,246
<TOTAL-ASSETS> 1,110,642
<CURRENT-LIABILITIES> 254,179
<BONDS> 18,158
0
0
<COMMON> 10,422
<OTHER-SE> 812,172
<TOTAL-LIABILITY-AND-EQUITY> 1,110,642
<SALES> 348,967
<TOTAL-REVENUES> 348,967
<CGS> 186,637
<TOTAL-COSTS> 270,306
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 642
<INCOME-PRETAX> 81,778
<INCOME-TAX> 28,623
<INCOME-CONTINUING> 53,155
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,155
<EPS-PRIMARY> 0.64
<EPS-DILUTED> 0.63
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1995 AND THE CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<RESTATED>
<CIK> 0000097210
<NAME> TERADYNE, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 182,165
<SECURITIES> 93,662
<RECEIVABLES> 257,089
<ALLOWANCES> 2,269
<INVENTORY> 176,851
<CURRENT-ASSETS> 740,145
<PP&E> 512,986
<DEPRECIATION> 255,968
<TOTAL-ASSETS> 1,023,831
<CURRENT-LIABILITIES> 229,591
<BONDS> 18,679
0
0
<COMMON> 10,329
<OTHER-SE> 749,521
<TOTAL-LIABILITY-AND-EQUITY> 1,023,831
<SALES> 1,191,022
<TOTAL-REVENUES> 1,191,022
<CGS> 646,382
<TOTAL-COSTS> 946,666
<OTHER-EXPENSES> 5,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,040
<INCOME-PRETAX> 249,925
<INCOME-TAX> 90,641
<INCOME-CONTINUING> 159,284
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 159,284
<EPS-PRIMARY> 1.95
<EPS-DILUTED> 1.89
</TABLE>
