Filed pursuant to Rule 424(b)(3)
File No. 333-75632
PROSPECTUS
[TERADYNE LOGO]
TERADYNE, INC.
$400,000,000
(AGGREGATE PRINCIPAL AMOUNT)
3.75% CONVERTIBLE SENIOR NOTES DUE OCTOBER 15, 2006 AND
THE COMMON STOCK ISSUABLE UPON THE CONVERSION OF THE NOTES
---------------------
We issued the notes in a private placement in October 2001. This prospectus
will be used by selling securityholders to resell their notes and the common
stock issuable upon conversion of their notes. We will not receive any proceeds
from this offering.
The notes are issued only in denominations of $1,000 and integral multiples
of $1,000 and mature on October 15, 2006. You may convert the notes into shares
of our common stock at any time prior to their maturity or their prior
redemption or repurchase by us. The conversion rate is 38.4615 shares of common
stock per each $1,000 principal amount of notes, subject to adjustment in
certain circumstances. This is equivalent to a conversion price of $26.00 per
share.
We will pay interest on the notes on April 15 and October 15 of each year.
The first such payment will be made on April 15, 2002. The notes will be issued
only in registered book-entry form, in denominations of $1,000 and integral
multiples of $1,000. The notes are senior unsecured obligations of Teradyne.
We may redeem the notes at the times and at the prices specified in this
prospectus. In the event of a change in control, you may require us to
repurchase any notes held by you.
The notes are not listed on any securities exchange or included in any
automated quotation system. The notes are currently eligible for trading on The
Portal(SM) Market. Our common stock is quoted on the New York Stock Exchange
under the symbol "TER". On February 13, 2002, the last reported sale price for
our common stock on the New York Stock Exchange was $33.28 per share. The
securities offered by this prospectus may be offered by the selling
securityholders in negotiated transactions or otherwise, at negotiated prices or
at the market prices prevailing at the time of sale.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
PROSPECTUS DATED FEBRUARY 14, 2002.
TABLE OF CONTENTS
PAGE
----
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS............. i
WHERE YOU CAN FIND MORE INFORMATION......................... iii
SUMMARY..................................................... 1
RECENT DEVELOPMENT.......................................... 4
RISK FACTORS................................................ 5
USE OF PROCEEDS............................................. 12
LEGAL PROCEEDINGS........................................... 12
DESCRIPTION OF THE NOTES.................................... 13
DESCRIPTION OF COMMON STOCK................................. 26
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS..... 29
SELLING SECURITYHOLDERS..................................... 34
PLAN OF DISTRIBUTION........................................ 37
LEGAL MATTERS............................................... 38
EXPERTS..................................................... 38
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
In addition to the other information contained or incorporated by reference
in this prospectus, investors should carefully consider the risk factors
disclosed in this prospectus, including those beginning on page 5, in evaluating
an investment in the notes or the common stock issuable upon conversion of the
notes. This prospectus includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act").
All statements other than statements of historical fact are "forward-looking
statements" for purposes of these provisions, including any projections of
earnings, revenues or other financial items, any statements of the plans and
objectives of management for future operations, any statements concerning
proposed new products or services, any statements regarding future economic
conditions or performance, and any statement of assumptions underlying any of
the foregoing. In some cases, forward-looking statements can be identified by
the use of terminology such as "may," "will," "expects," "plans," "anticipates,"
"estimates," "potential," or "continue" or the negative thereof or other
comparable terminology. Such forward-looking statements include statements as
to, among other things:
- projections, plans and objectives for Teradyne's business;
- financial condition;
- operating results;
- future operations; and
- future economic performance or statements relating to the sufficiency of
capital to meet working capital, planned capital expenditures and
expectations as to customer orders.
There can be no assurance that such expectations or any of the
forward-looking statements will prove to be correct, and actual results could
differ materially from those projected or assumed in forward-looking statements.
Teradyne's future financial condition and results of operations, as well as any
forward-looking statements, are subject to inherent risks and uncertainties,
including but not limited to the risk factors set forth below and those
described elsewhere in this prospectus. In particular, our business is dependent
on the current and anticipated market demand for electronics, which has been
impacted by the economic slowdown that began in the latter portions of 2000 and
by the negative effects on the economy resulting from the terrorist attacks of
September 11, 2001 and the resulting ongoing hostilities. The uncertainty
regarding the future growth rate of worldwide economies has caused many
companies to reduce capital investment and may cause further reduction of such
investments. These reductions have been particularly severe in the electronics
and semiconductor industry which Teradyne serves and have contributed to
Teradyne incurring losses in recent periods and may contribute to further
losses. In addition, the markets that Teradyne serves have historically been
quite cyclical and may continue to be so. Further, our backlog has and may
continue to be adversely affected as customers continue to defer or cancel
orders which previously had been accepted. All of these factors could result in
further decreased revenues. Our business is also affected by our ability to
develop and ship new and sometimes more complex products to address changing
customer needs, by new offerings by competitors and by intense competition
throughout the world in each of our operating segments from competitors having
substantial resources available for the engineering, manufacturing, marketing
and distribution of their products. The current economic decline and the
resulting oversupply could increase the possibility of intensified price
competition in certain markets and result in the need to lower our prices, which
could result in decreased revenues. In addition, our acquisition of GenRad, Inc.
during 2001 and any future acquisitions or divestitures could affect our ability
to manage and maintain our business. Further, as a result of our issuance of
$400 million aggregate principal amount of convertible senior notes in October
2001, together with the approximately $45 million mortgage financing which we
completed in December 2001, we have substantially increased our debt service
obligations and ratio of debt to total capitalization. If our cash flow should
be insufficient to meet these obligations, we might have to reduce or curtail
certain activities of our business. Finally, our ongoing expense control
measures may not have the intended effect on our future financial results. These
measures could have long-term negative effects on our business by reducing our
pool of
i
technical talent, decreasing improvements in our products and making it more
difficult for us to respond to large customer orders if the economy does not
recover.
All forward-looking statements and reasons why results may differ included
in this prospectus are made as of the date hereof, and Teradyne assumes no
obligation to update any such forward-looking statement or reason why actual
results might differ.
ii
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You can inspect and
copy the registration statement on Form S-3 of which this prospectus is a part,
as well as reports, proxy statements and other information filed by us, at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
You can obtain copies of such material from the Public Reference Room of the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You can
call the SEC at 1-800-SEC-0330 for information regarding the operation of its
Public Reference Room. The SEC also maintains an Internet site at
http://www.sec.gov that contains reports, proxy and information statements, and
other information regarding registrants, like us, that file electronically.
This prospectus provides you with a general description of the notes and
common stock being registered. This prospectus is part of a registration
statement that we have filed with the SEC. To see more detail, you should read
the exhibits and schedules filed with, or incorporated by reference into, our
registration statement.
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with the SEC. This means that we can disclose important
information to you by referring you to those documents. The information we
incorporate by reference is considered a part of this prospectus, and later
information we file with the SEC will automatically update and supersede this
information. We incorporate by reference our documents listed below and any
future filings we make with the SEC under Sections 13(a), 13(c), 14 and 15(d) of
the Securities Exchange Act of 1934 until this offering is completed:
- Annual Report on Form 10-K for the year ended December 31, 2000 and
related exhibits;
- Current Reports on Form 8-K filed on October 18, 2001, October 19, 2001,
October 24, 2001, and February 5, 2002 and related exhibits; and
- Quarterly Reports on Form 10-Q for the quarters ended April 1, 2001, July
1, 2001, and September 30, 2001 and related exhibits.
You may request these documents in writing or by telephone. We will provide
to you, at no cost, a copy of any or all information incorporated by reference
in the registration statement, of which this prospectus is a part. Requests
should be directed to our Investor Relations Department at our principal offices
which are located at 321 Harrison Avenue, Boston, Massachusetts 02118. You may
contact our investor relations department by calling us at (617) 482-2700.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. The selling
securityholders are not making an offer of these securities in any state where
the offer is not permitted. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front of the document.
iii
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this prospectus. You should consider
carefully the information set forth in this prospectus under the heading "Risk
Factors." All references to "Teradyne" or to the "Company" or to "we" or "us"
refer to Teradyne, Inc.
TERADYNE
We design, manufacture, market and service automated test and inspection
systems and related software, as well as backplanes and electronic connectors.
We currently have four principal product lines:
- semiconductor test systems;
- connection systems;
- circuit-board test and inspection systems; and
- broadband test systems.
Semiconductor Test Systems. We produce semiconductor test systems for use
by electronic component manufacturers in the design and testing of a wide
variety of semiconductor products, including logic, memory, mixed signal and
"system on a chip" integrated circuits. Semiconductor test systems are sold to
semiconductor manufacturers and subcontractors to the semiconductor industry.
Semiconductor manufacturers use our semiconductor test systems to:
- measure product performance;
- improve product quality;
- shorten time to market;
- enhance manufacturability;
- minimize labor costs; and
- increase production yields.
Connection Systems. Our connection systems include backplane assemblies,
connectors and electro-mechanical systems integration for customers in the
telecom, data networking, storage and server 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. Connection systems provide design and applications
engineering along with manufacturing for a total interconnect solution for our
customers. Connection systems product technology can be found in diverse
products such as Internet routers, computer servers, mass data storage and
telecom switches.
Circuit-Board Test and Inspection Systems. Electronic equipment
manufacturers use our circuit-board test and inspection systems for the design,
inspection and testing of circuit boards and other assemblies. We also sell
circuit-board test and inspection systems to customers across most sectors of
the electronics industry and to companies in other industries that use
electronic devices in high volume. Similar to semiconductor test systems, our
customers use their systems and related software to increase product
performance, to improve product quality, to shorten time to market, to enhance
manufacturability, to minimize labor costs, and to increase production yields.
Broadband Test Systems. Broadband test systems are used by the
communications industry for Internet testing, customer care and voice network
maintenance. Broadband test systems perform qualification testing for digital
subscriber line, or DSL, services, assist customer care centers in isolating
network service problems, and perform integrated surveillance and maintenance
for voice networks.
1
ORGANIZATION
We are a Massachusetts corporation. Our principal executive offices are
located at 321 Harrison Avenue, Boston, Massachusetts 02118, and our telephone
number is (617) 482-2700.
THE NOTES
SECURITIES OFFERED............ $400,000,000 aggregate principal amount of
3.75% Convertible Senior Notes due October 15,
2006.
INTEREST...................... We will pay interest on the notes semi-annually
on April 15 and October 15 of each year,
commencing April 15, 2002.
CONVERSION.................... You may convert the notes into shares of common
stock at a conversion rate of 38.4615 shares of
common stock per $1,000 principal amount of
notes, which is equivalent to a conversion
price of $26.00 per share. The conversion rate
is subject to adjustment in certain events.
You may convert the notes at any time before
the close of business on the maturity date,
unless we have previously redeemed or
repurchased the notes. Holders of notes called
for redemption or repurchase will be entitled
to convert the notes up to and including the
business day immediately preceding the date
fixed for redemption or repurchase, as the case
may be. See "Description of the
Notes -- Conversion Rights."
RANKING....................... The notes are senior unsecured obligations that
rank equally with our existing and future
unsecured and unsubordinated indebtedness. The
indenture under which the notes were issued
does not restrict us from incurring additional
senior or other indebtedness and other
liabilities. See "Description of the
Notes -- General."
OPTIONAL REDEMPTION BY US..... We may redeem the notes, at our option, in
whole or in part, on or after October 18, 2004,
at the redemption prices set forth in this
prospectus plus accrued interest to the
redemption date. See "Description of the
Notes -- Optional Redemption by Teradyne."
REPURCHASE AT OPTION OF
HOLDERS UPON A CHANGE IN
CONTROL....................... Upon a Change in Control, as that term is
defined in this prospectus, you will have the
right, subject to certain conditions and
restrictions, to require us to repurchase your
notes, in whole or in part, at 100% of their
principal amount, plus accrued interest to the
repurchase date. The repurchase price is
payable in cash or, at our option, in shares of
common stock. However, we may only pay the
repurchase price in common stock if we satisfy
prescribed conditions. If we pay the repurchase
price in common stock, the common stock will be
valued at 95% of the average closing sales
prices of the common stock for the five trading
days preceding and including the third trading
day prior to the repurchase date. See
"Description of the Notes -- Repurchase at
Option of Holders Upon a Change in Control."
2
EVENTS OF DEFAULT............. The following will be events of default under
the indenture for the notes:
- we fail to pay the principal of or any
premium on any note when due;
- we fail to pay any interest on any note when
due and that non-payment continues for 30
days;
- we fail to provide the notice that we are
required to give in the event of a Change in
Control;
- we fail to perform any other covenant in the
indenture and that failure continues for 60
days after written notice to us by the
trustee or the holders of at least 25% in
aggregate principal amount of outstanding
notes;
- we fail to pay when due the principal of, or
acceleration of, any indebtedness for money
borrowed by us or any of our subsidiaries in
excess of $30 million if the indebtedness is
not discharged, or the acceleration is not
annulled, within 30 days after written notice
to us by the trustee or the holders of at
least 25% in aggregate principal amount of
the outstanding notes; and
- events of bankruptcy, insolvency or
reorganization specified in the indenture.
See "Description of the Notes -- Events of
Default."
TRADING....................... Until registered pursuant to the registration
statement of which this prospectus is a part,
the notes are eligible for trading on the
PORTAL(SM) Market. Our common stock is traded
on the New York Stock Exchange under the symbol
"TER".
RISK FACTORS.................. You should read the "Risk Factors" section,
beginning on page 5 of this prospectus, so that
you understand the risks associated with an
investment in the notes and the common stock.
RATIO OF EARNINGS TO FIXED CHARGES
The following summary represents our computation of the ratio of earnings
to fixed charges (unaudited) for the respective periods:
YEAR ENDED DECEMBER 31,
-------------------------------- NINE MONTHS ENDED
1996 1997 1998 1999 2000 SEPTEMBER 30, 2001
---- ---- ---- ---- ---- ------------------
Ratio of earnings to fixed
charges(A)....................... 20.1 27.6 20.5 35.6 83.7 (B)
---------------
(A) The ratio of earnings to fixed charges is calculated by dividing (a)
earnings before income taxes and cumulative effect of change in accounting
principle adjusted for fixed charges by (b) fixed charges. Fixed charges
include interest expense under operating leases the Company deems a
reasonable approximation of the interest factor.
(B) Due to Teradyne's loss for the nine months ended September 30, 2001, the
ratio coverage was less than 1:1. Income before income taxes and cumulative
effect of change in accounting principle was insufficient to cover fixed
charges by $144.6 million.
3
RECENT DEVELOPMENT
On December 19, 2001, we completed an approximately $45 million mortgage
financing. In connection with the financing, we mortgaged certain of our real
estate assets located in California and granted a first deed of trust to such
real estate assets. Under the terms of the loan documents, we are required to
make monthly principal and interest payments based on a fixed rate of interest
and a twenty year amortization schedule, with all unpaid principal and interest
due on January 1, 2007. The notes, including all notes offered by the selling
securityholders under this prospectus, will be structurally subordinated to our
obligations under the mortgage financing to the extent of the value of the real
estate assets that secure our obligations. For a further discussion of
"structural subordination," see "Description of the Notes -- General." We are
currently considering whether to obtain any additional financing that would be
secured by certain of our owned real estate assets. However, there can be no
assurance that any additional real estate financing will be pursued or
completed.
4
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this prospectus, you should carefully consider the following risk factors.
This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward-looking statement as a result of the risk factors set
forth below and elsewhere in this prospectus. These factors should be considered
together with the other information included or incorporated by reference in
this prospectus.
RISKS RELATED TO THE COMPANY
TERADYNE'S BUSINESS IS IMPACTED BY THE SLOWDOWN IN ECONOMIES WORLDWIDE.
Teradyne's business has been negatively impacted by the slowdown in the
economies of the United States, Asia and elsewhere that began in the second half
of 2000. The uncertainty regarding the growth rate of the worldwide economies
has caused companies to reduce capital investment and may cause further
reduction of such investments. These reductions have been particularly severe in
the electronics and semiconductor industry which Teradyne serves and have
contributed to Teradyne incurring losses in recent periods. Teradyne cannot
predict if or when the growth rate of worldwide economies will rebound, whether
the growth rate of its business will rebound when the worldwide economies begin
to grow, or if or when Teradyne will return to profitability. While Teradyne's
diverse business may allow it to perform better than some companies in periods
of economic decline, the effects of the economic decline are being felt across
all of Teradyne's business segments and have significantly slowed customer
orders.
TERADYNE'S BUSINESS IS DEPENDENT ON THE CURRENT AND ANTICIPATED MARKET FOR
ELECTRONICS.
Teradyne's business and results of operations depend in significant part
upon capital expenditures of manufacturers of semiconductors and other
electronics, which in turn depend upon the current and anticipated market demand
for those products. The current and anticipated market demand for electronics
has been impacted by the economic slowdown that began in the latter portions of
2000 and by the terrorist attacks of September 11, 2001 and the resulting
ongoing hostilities. Historically, the electronic and semiconductor industry has
been highly cyclical with recurring periods of over-supply, which often have had
a severe negative effect on demand for test equipment, including systems
manufactured and marketed by Teradyne. Teradyne believes that the markets for
newer generations of electronic products such as those that Teradyne
manufactures and markets will also be subject to similar fluctuations. Teradyne
is dependent on the timing of customer orders and the deferral or cancellation
of previous customer orders could have an adverse effect on its results of
operations. Teradyne cannot assure you that the downward trend in new orders
will turn around in the future or that any increase in sales or new orders for a
calendar quarter will be sustained in subsequent quarters. In addition, any
factor adversely affecting the electronics industry or particular segments
within the electronics industry may adversely affect Teradyne's business,
financial condition and operating results.
TERADYNE HAS TAKEN AND EXPECTS TO CONTINUE TO TAKE MEASURES TO ADDRESS THE
CURRENT SLOWDOWN IN THE MARKET FOR ITS PRODUCTS WHICH COULD HAVE LONG-TERM
NEGATIVE EFFECTS ON TERADYNE'S BUSINESS.
Teradyne has taken and expects to take additional measures to address the
current slowdown in the market for its products. In particular, Teradyne has
reduced its workforce, frozen hiring, delayed salary increases, reduced the pay
of substantially all employees, implemented furloughs, discontinued its flash
memory product line, recorded asset impairment charges and reduced its planned
capital expenditures and expense budgets. These measures have reduced expenses
in the face of decreased revenues due to decreased or cancelled customer orders.
However, each measure Teradyne has taken and any additional measures taken in
the future to contain expenditures could have long-term negative effects on
Teradyne's business by reducing its pool of technical talent, decreasing or
slowing improvements in its products, and making it more difficult for Teradyne
to respond to customers or competitors.
5
TERADYNE'S BUSINESS MAY BE ADVERSELY IMPACTED BY ACQUISITIONS WHICH MAY AFFECT
ITS ABILITY TO MANAGE AND MAINTAIN ITS BUSINESS.
Since Teradyne's inception, it has acquired a number of businesses. In the
future, Teradyne may undertake additional acquisitions of businesses that
complement its existing operations. Such past or future acquisitions could
involve a number of risks, including:
- the possibility that one or more such acquisitions may not close due to
closing conditions in the acquisition agreements, the inability to obtain
regulatory approval, or the inability to meet conditions imposed for
government or court approvals for the transaction;
- the diversion of the attention of management and other key personnel;
- the inability to effectively integrate an acquired business into
Teradyne's culture, product and service delivery methodology and other
standards, controls, procedures and policies;
- the inability to retain the management, key personnel and other employees
of an acquired business;
- the inability to retain the customers of an acquired business;
- the possibility that Teradyne's reputation will be adversely affected by
customer satisfaction problems of an acquired business;
- potential known or unknown liabilities associated with an acquired
business, including but not limited to regulatory, environmental and tax
liabilities;
- the amortization of acquired identifiable intangibles, which may
adversely affect Teradyne's reported results of operations; and
- litigation which has or which may arise in the future in connection with
such acquisitions.
For example, Teradyne completed its acquisition of GenRad, Inc., a
Massachusetts corporation during the fourth quarter of 2001. Teradyne has
attempted to sell GenRad's Diagnostic Solutions line of business, however, there
can be no guarantee that such a transaction will be completed. Whether or not
such a sale is consummated, Teradyne may be required to spend significant
management time operating this non-core business unit and managing a potential
divestiture. Further, there can be no guarantee that the Diagnostic Solutions
line of business will break-even or operate at a profit in the near future, if
at all. Any losses from the Diagnostic Solutions line of business will have a
negative impact on Teradyne's operating results.
For further example, in connection with the August 2000 acquisition of each
of Herco Technology Corp., a California company, and Perception Laminates, Inc.,
a California company, a complaint was filed by the former owners of those
companies on or about September 5, 2001 naming as defendants Teradyne and two of
its executive officers. The case was originally filed in the Superior Court in
San Diego County, California, and was subsequently removed by the defendants to
federal court. An amended complaint was filed in the federal court on October
12, 2001. The amended complaint alleges, among other things, that the sale of
Teradyne's common stock to the former owners violated certain California
securities statutes and common law, and that Teradyne breached certain
contractual obligations in the agreements relating to the acquisitions. The
amended complaint seeks unspecified damages, including compensatory,
consequential and punitive damages, and recovery of reasonable attorney fees and
costs. On or about November 14, 2001, Teradyne filed a motion to dismiss the
amended complaint in its entirety. At the hearing on oral argument on January
28, 2002, the federal court ruled from the bench, granting in part and denying
in part Teradyne's motion to dismiss. The claims that were dismissed were
dismissed with prejudice. The federal court also invited the parties to submit
additional briefs on the adequacy of one of the claims that the federal court
did not dismiss at oral argument. Those supplemental briefs were filed on
February 1, 2002 and February 4, 2002, respectively. Teradyne disputes
plaintiffs' remaining claims and believes that they are without merit, and
intends to defend vigorously against this lawsuit. However, Teradyne could incur
substantial costs defending the lawsuit. The lawsuit could also divert the time
and attention of Teradyne's management. Teradyne cannot predict the outcome of
the lawsuit at this time, and can give no assurance that it will not materially
adversely affect Teradyne's financial condition or results of operations.
6
In addition to the foregoing, any acquired business could significantly
underperform relative to Teradyne's expectations.
WE CURRENTLY FACE, AND IN THE FUTURE MAY BE THE SUBJECT OF, SECURITIES CLASS
ACTION LITIGATION DUE TO PAST OR FUTURE STOCK PRICE VOLATILITY.
When the market price of a stock has been volatile, holders of that stock
sometimes institute securities class action litigation against the company that
issued the stock. Currently, Teradyne and two if its executive officers are
named as defendants in three purported class action complaints that were filed
in the United States District Court for the District of Massachusetts, Boston,
Massachusetts, on or about October 16, 2001, October 19, 2001 and November 7,
2001. The complaints allege, among other things, that the defendants violated
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, by making,
during the period from July 14, 2000 and October 17, 2000, material
misrepresentations and omissions to the investing public regarding Teradyne's
business operations and future prospects. The complaints seek unspecified
damages, including compensatory damages and recovery of reasonable attorney fees
and costs. Teradyne strongly believes that the purported class action complaints
lack merit and it intends to defend against the claims vigorously. However,
Teradyne could incur substantial costs defending the lawsuits. The lawsuits
could also divert the time and attention of Teradyne's management. Teradyne
cannot predict the outcome of the lawsuits at this time, and can give no
assurance that they will not materially adversely affect Teradyne's financial
condition or results of operations.
TERADYNE'S BUSINESS MAY BE ADVERSELY IMPACTED BY DIVESTITURES OF LINES OF
BUSINESS WHICH MAY AFFECT ITS ABILITY TO MANAGE AND MAINTAIN ITS BUSINESS.
Since Teradyne's inception, it has divested itself of certain lines of
business. In the future, Teradyne may undertake additional such divestitures.
Such past or future divestitures could involve a number of risks, including:
- the diversion of the attention of management and other key personnel;
- disruptions and other effects caused by the divestiture of a line of
business on Teradyne's culture, product and service delivery methodology
and other standards, controls, procedures and policies;
- customer satisfaction problems caused by the loss of a divested line of
business; and
- the decreased diversification of Teradyne's product lines caused by the
divestiture of a line of business may make Teradyne's operating results
subject to increased market fluctuations.
In addition, any divested line of business could significantly outperform
relative to Teradyne's expectations.
IF TERADYNE IS UNABLE TO PROTECT ITS INTELLECTUAL PROPERTY, TERADYNE MAY LOSE A
VALUABLE ASSET OR MAY INCUR COSTLY LITIGATION TO PROTECT ITS RIGHTS.
Teradyne's products incorporate technology that it protects in several
ways, including patents, copyrights and trade secrets. While Teradyne believes
that its patents, copyrights and trade secrets have value in general, no single
one is in itself essential. At times, Teradyne has been notified that it may be
in violation of patents held by others. An assertion of patent infringement
against Teradyne, if successful, could have a material adverse effect on its
ability to sell its products, or could require a lengthy and expensive defense
which could adversely affect its operating results.
IF TERADYNE FAILS TO DEVELOP NEW TECHNOLOGIES TO ADAPT TO ITS CUSTOMERS' NEEDS
AND IF ITS CUSTOMERS FAIL TO ACCEPT ITS NEW PRODUCTS, TERADYNE'S REVENUES WILL
BE ADVERSELY AFFECTED.
Teradyne believes that its technological position depends primarily on the
technical competence and creative ability of its engineers. Teradyne's
development of new technologies, commercialization of those
7
technologies into products, and market acceptance and customer demand for those
products is critical to its 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.
INTENSE COMPETITION IN TERADYNE'S INDUSTRY MAY AFFECT ITS REVENUES.
Teradyne faces substantial competition throughout the world in each of its
operating segments. Some of these competitors also have substantial financial
and other resources to pursue engineering, manufacturing, marketing and
distribution of their products. Teradyne also faces competition from internal
suppliers at several of its customers. Some of Teradyne's competitors have
introduced or announced new products with certain performance characteristics
which may be considered equal or superior to those Teradyne currently offers.
Teradyne 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 Teradyne's products. Moreover, increased competitive pressure
could lead to intensified price based competition, which could materially
adversely affect Teradyne's business, financial condition and results of
operations.
TERADYNE IS SUBJECT TO RISKS OF OPERATING INTERNATIONALLY.
Teradyne derives a significant portion of its total revenue from customers
outside the United States. Teradyne's international sales are subject to
significant risks and difficulties, including:
- unexpected changes in legal and regulatory requirements and in policy
changes affecting its markets;
- changes in tariffs and exchange rates;
- political and economic instability and acts of terrorism;
- difficulties in accounts receivable collection;
- difficulties in staffing and managing international operations; and
- potentially adverse tax consequences.
TERADYNE MAY INCUR SIGNIFICANT LIABILITIES IF IT FAILS TO COMPLY WITH
ENVIRONMENTAL REGULATIONS.
Teradyne is subject to environmental regulations relating to the use,
storage, discharge, site cleanup, and disposal of hazardous chemicals used in
our manufacturing processes. If we fail to comply with present and future
regulations, or are required to perform site remediation, we could be subject to
future liabilities or the suspension of production. Present and future
regulations may also:
- restrict our ability to expand our facilities;
- require us to acquire costly equipment; or
- require us to incur other significant costs and expenses.
8
TERADYNE'S OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY.
Teradyne'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 of customer orders and the deferral or cancellation of orders
previously received;
- write-offs of excess and obsolete inventory;
- changes in product mix;
- Teradyne's ability to introduce new products and technologies on a timely
basis;
- the introduction of products and technologies by Teradyne's competitors;
- market acceptance of Teradyne's and its competitors' products;
- fulfilling backlog on a timely basis;
- reliance on sole 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, due to the introduction of a number of new, complex test
systems in 2001 and the planned introduction of other such systems in 2002,
there can be no assurance that Teradyne will not experience delays in shipment
of its products or that its products will achieve customer acceptance.
As a result of the foregoing and other factors, Teradyne has and may
continue to 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.
WE MAY NEED ADDITIONAL FINANCING, WHICH COULD BE DIFFICULT TO OBTAIN.
We expect that our existing cash and investment balances, cash generated
from operations, the proceeds of the convertible senior note offering completed
on October 24, 2001 and the proceeds from the real estate mortgage financing
completed on December 19, 2001, will be sufficient to meet our cash requirements
to fund operations and expected capital expenditures for at least twelve months.
In addition, we are currently considering whether to obtain additional financing
on certain of our owned real estate assets. However, there can be no assurances
that any additional real estate financing will be pursued or completed. In the
event we may need to raise additional funds, we cannot be certain that we will
be able to obtain such additional financing on favorable terms, if at all.
Further, if we issue additional equity securities, stockholders may experience
additional dilution or the new equity securities may have rights, preferences or
privileges senior to those of existing holders of common stock. Future
financings may place restrictions on how we operate our business. If we cannot
raise funds on acceptable terms, if and when needed, we may not be able to
develop or enhance our products and services, take advantage of future
opportunities, grow our business or respond to competitive pressures or
unanticipated requirements, which could seriously harm our business.
PROVISIONS OF OUR CHARTER AND BY-LAWS AND MASSACHUSETTS LAW MAKE A TAKEOVER OF
OUR COMPANY MORE DIFFICULT.
Our basic corporate documents, our stockholder rights plan and
Massachusetts law contain provisions that could discourage, delay or prevent a
change in the control of our company, even if a change of control would be
beneficial to our stockholders.
9
RISKS RELATED TO THE NOTES
OUR DEBT SERVICE OBLIGATIONS MAY ADVERSELY AFFECT OUR CASH FLOW.
As a result of the issuance of the convertible senior notes, we have
substantially increased our debt service obligations and ratio of debt to total
capitalization. While the notes are outstanding, we will have debt service
obligations on the notes of approximately $15,000,000 per year in interest
payments. If we issue other debt securities in the future, our debt service
obligations will further increase. If we are unable to generate sufficient cash
to meet these obligations and must instead use our existing cash or investments,
we may have to reduce or curtail other activities of our business.
We intend to fulfill our debt service obligations from cash generated by
our operations, if any, and from our existing cash and investments. If
necessary, among other alternatives, we may add lease lines of credit to finance
capital expenditures and obtain other long-term debt, lines of credit and
mortgage financing.
Our indebtedness could have significant negative consequences, including:
- increasing our vulnerability to general adverse economic and industry
conditions;
- limiting our ability to obtain additional financing;
- requiring the dedication of a substantial portion of any cash flow from
operations to service our indebtedness, thereby reducing the amount of
cash flow available for other purposes, including capital expenditures;
- limiting our flexibility in planning for, or reacting to, changes in our
business and the industry in which we compete; and
- placing us at a possible competitive disadvantage to less leveraged
competitors and competitors that have better access to capital resources.
FUTURE INDEBTEDNESS COULD EFFECTIVELY RANK SENIOR TO THE NOTES.
The notes are unsecured and rank equally in right of payment with our
existing and future unsecured and unsubordinated indebtedness. The notes are
effectively subordinated to any existing and future secured debt to the extent
of the value of the assets that secure the indebtedness. The notes are also
"structurally subordinated" to all indebtedness and other liabilities, including
trade payables and lease obligations, of our subsidiaries. In the event of our
bankruptcy, liquidation or reorganization or upon acceleration of the notes,
payment on the notes could be less, ratably, than on any secured indebtedness.
We may not have sufficient assets remaining to pay amounts due on the notes then
outstanding.
The indenture governing the notes does not prohibit or limit us from
incurring additional indebtedness and other liabilities, or from pledging assets
to secure any indebtedness or liabilities. The incurrence of additional
indebtedness, and in particular the granting of a security interest to secure
that indebtedness, could adversely affect our ability to pay our obligations on
the notes. We anticipate that we will incur additional indebtedness in the
future. See "Description of Notes -- General."
BECAUSE THE NOTES WILL NOT BE LISTED ON AN EXCHANGE OR ON THE NEW YORK STOCK
EXCHANGE, IT IS UNLIKELY THAT A MARKET FOR THEM WILL DEVELOP SO YOU MAY HAVE TO
HOLD THEM TO MATURITY.
There is no public market for the notes, which may significantly limit:
- the liquidity of any market that may develop;
- your ability to sell your notes; and
- the price at which you will be able to sell your notes.
If a market were to develop, the notes could trade at prices that may be
higher or lower than the principal amount or purchase price, depending on many
factors, including prevailing interest rates, the market for
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similar notes and our financial performance. We do not intend to list the notes
for trading on any national securities exchange or on the New York Stock
Exchange, so you may have to hold the notes to maturity unless you convert them.
Goldman, Sachs & Co. and Banc of America Securities LLC, the initial
purchasers of the notes, have advised us that they intend to make a market in
the notes. However, they are not obligated to make a market for the notes, and
they may discontinue market-making activities at any time in their sole
discretion.
WE MAY NOT HAVE SUFFICIENT FUNDS TO REPAY OR REDEEM THE NOTES.
At maturity, the entire outstanding principal amount of the notes will
become due and payable by us. We cannot assure you that we will have sufficient
funds or will be able to arrange for financing to pay the principal amount due.
If there is a change in control of our company, you may be able to require us to
redeem some or all of your notes. Although the indenture allows us in certain
circumstances to pay the redemption price in shares of our common stock, if a
change in control were to occur, we may not have sufficient funds to pay the
redemption price for all the notes tendered by you and other holders. There is
no sinking fund for the notes. The requirement that we offer to repurchase the
notes upon a change in control does not apply to all possible transactions in
which a change of control may occur. See "Description of the Notes -- Repurchase
at Option of Holders Upon a Change in Control." Any future credit agreements or
other agreements relating to other indebtedness, including any senior debt, to
which we become a party may contain restrictions or prohibitions on our
redeeming the notes while that indebtedness is outstanding. If a change in
control occurs when we are prohibited from purchasing or redeeming the notes, we
could seek the consent of lenders to the purchase of the notes or could attempt
to refinance the borrowings that contain this prohibition. If we do not obtain a
consent or refinance those borrowings, we would remain prohibited from
purchasing or redeeming the notes. Our failure to redeem the notes would
constitute an event of default under the indenture under which we are issuing
the notes, which might constitute a default under the terms of other
indebtedness that we may enter into from time to time. In these circumstances,
the shortfall between cash available and the total amounts then due and payable
would likely restrict payments to you.
THE MARKET PRICE OF OUR COMMON STOCK IS HIGHLY VOLATILE, WHICH COULD RESULT IN
SUBSTANTIAL LOSSES FOR INVESTORS IN THE NOTES AND OUR COMMON STOCK.
The market price of our common stock has fluctuated widely and may continue
to do so. For example, during fiscal year 2000 the closing price of our stock
ranged from a high of $109.31 per share to a low of $24.31 per share. Similarly,
during the fiscal year 2001 the closing price of our stock ranged from a high of
$47.19 per share to a low of $19.00 per share, and from January 1, 2002 to
February 4, 2002 the closing price of our stock ranged from a high of $34.65 per
share to a low of $26.17 per share. Many factors could cause the market price of
our common stock to rise and fall. These factors include, but are not limited
to:
- variations in our quarterly operating results;
- announcements of technological innovations;
- introduction of new products or new pricing policies by us or our
competitors;
- announcements by us or our competitors of significant customer orders;
- acquisitions or strategic alliances by us or others in our industry;
- the hiring or departure of key personnel;
- changes in the semiconductor industry cycle;
- changes in market valuations of companies within the semiconductor
industry; and
- changes in estimates of our performance or recommendations by financial
analysts.
Because the notes are convertible into shares of our common stock, these
factors may also affect the value of the notes.
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SECURITIES WE ISSUE TO FUND OUR OPERATIONS COULD DILUTE YOUR OWNERSHIP.
We may decide to raise additional funds through public or private debt or
equity financing to fund our operations. If we raise funds by issuing equity
securities, the percentage ownership of current stockholders will be reduced and
the new equity securities may have rights prior to those of the common stock
issuable upon conversion of the notes. We may not obtain sufficient financing on
terms that are favorable to you or us. We may delay, limit or eliminate some or
all of our proposed operations if adequate funds are not available.
USE OF PROCEEDS
We will not receive any proceeds from the resale of the notes or the
underlying common stock by selling securityholders.
LEGAL PROCEEDINGS
On or about September 5, 2001, a complaint was filed in the Superior Court
in San Diego County, California, naming as defendants Teradyne and two of its
executive officers. On October 9, 2001, defendants removed the state court
complaint to the U.S. District Court for the District of Southern California. On
October 12, 2001, plaintiffs filed an amended complaint with the federal court.
The amended complaint alleges, among other things, that the sale of Teradyne
common stock in connection with Teradyne's acquisition of each of Herco
Technology Corp., a California company, and Perception Laminates, Inc., a
California company, violated certain California securities statues and common
law, and that Teradyne breached certain contractual obligations in the
agreements relating to the acquisitions. The amended complaint seeks unspecified
damages, including compensatory, consequential and punitive damages, and
recovery of reasonable attorneys' fees and costs. On or about November 14, 2001,
Teradyne filed a motion to dismiss the amended complaint in its entirety. At the
hearing on oral argument on January 28, 2002, the federal court ruled from the
bench, granting in part and denying in part Teradyne's motion to dismiss. The
claims that were dismissed were dismissed with prejudice. The federal court also
invited the parties to submit additional briefs on the adequacy of one of the
claims that the federal court did not dismiss at oral argument. Those
supplemental briefs were filed on February 1, 2002 and February 4, 2002,
respectively. Teradyne disputes plaintiffs' remaining claims and believes they
are without merit, and intends to defend vigorously against this lawsuit.
On or about October 16, 2001, October 19, 2001, and November 7, 2001, three
purported class action complaints were filed in the United States District Court
for the District of Massachusetts, Boston, Massachusetts, naming as defendants
Teradyne and two of its executive officers. The complaints allege, among other
things, that the defendants violated Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, by making, during the period from July 14, 2000 and
October 17, 2000, material misrepresentations and omissions to the investing
public regarding Teradyne's business operations and future prospects. The
complaints seek unspecified damages, including compensatory damages and recovery
of reasonable attorneys' fees and costs. Teradyne disputes the claims and
believes they are without merit, and intends to defend vigorously against the
lawsuits.
In addition, Teradyne is subject to legal proceedings and claims that arise
in the ordinary course of business. Management does not believe these actions
will have a material adverse effect on the financial position or results of
operations of Teradyne.
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DESCRIPTION OF THE NOTES
The 3.75% Convertible Senior Notes due October 15, 2006 or as referred to
herein, the notes, were issued under an indenture between us and State Street
Bank and Trust Company, as trustee. Because this section is a summary, it does
not describe every aspect of the notes and the indenture. The following
summaries of certain provisions of the indenture do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, the
detailed provisions of the notes and the indenture, including the definitions
therein of certain terms.
GENERAL
The notes are senior, unsecured obligations of Teradyne, Inc. The notes are
limited to $400,000,000 aggregate principal amount. We are required to repay the
principal amount of the notes in full on October 15, 2006.
The notes bear interest at the rate per annum shown on the front cover of
this prospectus from the date of original issuance, October 24, 2001. We will
pay interest on the notes on April 15 and October 15 of each year, commencing on
April 15, 2002. Interest payable per $1,000 principal amount of notes for the
period from the issue date to April 15, 2002 will be approximately $17.78.
You may convert the notes into shares of our common stock initially at the
conversion rate stated on the front cover of this prospectus at any time before
the close of business on the maturity date, unless the notes have been
previously redeemed or repurchased. Holders of notes called for redemption or
submitted for repurchase will be entitled to convert the notes up to and
including the business day immediately preceding the date fixed for redemption
or repurchase, as the case may be. The conversion rate may be adjusted as
described below.
We may redeem the notes at our option at any time on or after October 18,
2004, in whole or in part, at the redemption prices set forth below under
"-- Optional Redemption by Teradyne," plus accrued and unpaid interest to the
redemption date. If we experience a change in control, you will have the right
to require us to repurchase your notes as described below under "-- Repurchase
at Option of Holders Upon a Change in Control."
The notes rank equally with our other senior unsecured indebtedness. The
notes are "structurally subordinated" to all of our secured indebtedness and the
indebtedness and other liabilities of our subsidiaries, including trade payables
and lease obligations in existence on or after the date hereof. This occurs
because our right to receive any assets of our subsidiaries upon their
liquidation and reorganization, and your right to participate in those assets,
will be effectively subordinated to claims of that subsidiary's creditors,
including trade creditors, except to the extent that we are recognized as a
creditor of such subsidiary. If we are recognized as a creditor of that
subsidiary, our claims would still be subordinate to any security interest in
the assets of the subsidiary and any indebtedness of the subsidiary senior to
us. In addition, our secured creditors will be entitled to receive payment on
their claims by realizing on the collateral securing their claims prior to your
right and that of our other senior unsecured creditors in respect of that
collateral.
The indenture does not limit our ability to incur debt, including secured
debt, or our ability or the ability of our subsidiaries to incur any
indebtedness.
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
The notes are issued:
- only in fully registered form;
- without interest coupons; and
- in denominations of $1,000 and greater multiples.
The notes are currently evidenced by one or more global notes (collectively
referred to herein as, the global note), deposited with the trustee as custodian
for the Depository Trust Company (DTC) and registered
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in the name of Cede & Co., as nominee of DTC. The global note and any notes
issued in exchange for the global note will be subject to restrictions on
transfer and will bear a legend regarding those restrictions. Except as set
forth below, record ownership of the global note may be transferred, in whole or
in part, only to another nominee of DTC or to a successor of DTC or its nominee.
The global note will not be registered in the name of any person, or
exchanged for notes that are registered in the name of any person, other than
DTC or its nominee unless either of the following occurs:
- DTC notifies us that it is unwilling, unable or no longer qualified to
continue acting as the depositary for the global note; or
- an event of default with respect to the notes represented by the global
note has occurred and is continuing.
In those circumstances, DTC will determine in whose names any securities
issued in exchange for the global note will be registered.
DTC or its nominee will be considered the sole owner and holder of the
global note for all purposes, and as a result:
- you cannot receive notes registered in your name if they are represented
by the global note;
- you cannot receive physical certificated notes in exchange for your
beneficial interest in the global notes;
- you will not be considered to be the owner or holder of the global note
or any note it represents for any purpose; and
- all payments on the global note will be made to DTC or its nominee.
The laws of some jurisdictions require that certain kinds of purchasers,
such as insurance companies, can only own securities in definitive certificated
form. These laws may limit your ability to transfer your beneficial interests in
the global note to these types of purchasers.
Only institutions, such as a securities broker or dealer, that have
accounts with DTC or its nominee (called participants) and persons that may hold
beneficial interests through participants can own a beneficial interest in the
global note. The only place where the ownership of beneficial interests in the
global note will appear and the only way the transfer of those interests can be
made will be on the records kept by DTC (for their participants' interests) and
the records kept by those participants (for interests of persons held by
participants on their behalf). Please be advised that if you are not an
institution or a person that may hold beneficial interests through a
participant, you will not be able to trade the notes through DTC or obtain a
beneficial interest in the global note.
Secondary trading in bonds and notes of corporate issuers is generally
settled in clearinghouse (that is, next-day) funds. In contrast, beneficial
interests in a global note usually trade in DTC's same-day funds settlement
system, and settle in immediately available funds. As a result, purchasers of
notes are required to provide adequate funds to the seller of the notes on the
day of the transaction. It is possible that some prospective purchasers may not
be able to provide same-day funds to a prospective seller, thus, preventing the
consummation of the transaction. We make no representations as to the effect
that settlement in immediately available funds will have on trading activity in
those beneficial interests.
We will make cash payments of interest on and principal of and the
redemption or repurchase price of the global note, as well as any payment of
liquidated damages, to Cede, the nominee for DTC, as the registered owner of the
global note. We will make these payments by wire transfer of immediately
available funds on each payment date.
We have been informed that DTC's practice is to credit participants'
accounts on the payment date with payments in amounts proportionate to their
respective beneficial interests in the notes represented by the global note as
shown on DTC's records, unless DTC has reason to believe that it will not
receive payment on that payment date. Payments by participants to owners of
beneficial interests in notes represented by the
14
global note held through participants will be the responsibility of those
participants, as is now the case with securities held for the accounts of
customers registered in street name.
We will send any redemption notices to Cede. We understand that if less
than all the notes are being redeemed, DTC's practice is to determine by lot the
amount of the holdings of each participant to be redeemed.
We also understand that neither DTC nor Cede will consent or vote with
respect to the notes. We have been advised that under its usual procedures, DTC
will mail an omnibus proxy to us as soon as possible after the record date. The
omnibus proxy assigns Cede's consenting or voting rights to those participants
to whose accounts the notes are credited on the record date identified in a
listing attached to the omnibus proxy.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants, the ability of a person having a beneficial
interest in the principal amount represented by the global note to pledge the
interest to persons or entities that do not participate in the DTC book-entry
system, or otherwise take actions in respect of that interest, may be affected
by the lack of a physical certificate evidencing its interest.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes (including the presentation of notes for exchange) only at the
direction of one or more participants to whose account with DTC interests in the
global note are credited and only in respect of such portion of the principal
amount of the notes represented by the global note as to which such participant
or participants has or have given such direction.
DTC has also advised us as follows:
- DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a clearing
corporation within the meaning of the Uniform Commercial Code, as
amended, and a clearing agency registered pursuant to the provisions of
Section 17A of the Exchange Act;
- DTC was created to hold securities for its participants and facilitate
the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants;
- Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other
organizations;
- Certain participants, or their representatives, together with other
entities, own DTC; and
- Indirect access to the DTC system is available to other entities such as
banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly.
The policies and procedures of DTC, which may change periodically, will
apply to payments, transfers, exchanges and other matters relating to beneficial
interests in the global note. We and the trustee have no responsibility or
liability for any aspect of DTC's or any participant's records relating to
beneficial interests in the global note, including for payments made on the
global note. Further, we and the trustee are not responsible for maintaining,
supervising or reviewing any of those records.
CONVERSION RIGHTS
You may convert any portion of the principal amount of any note that is an
integral multiple of $1,000 into shares of our common stock at any time on or
prior to the close of business on the maturity date, unless the notes have been
previously redeemed or repurchased. The initial conversion rate is equal to
38.4615 shares per $1,000 principal amount of notes. The conversion rate is
equivalent to a conversion price of approximately $26.00 per share. Your right
to convert a note called for redemption or delivered for repurchase will
terminate at the close of business on the business day immediately preceding the
redemption date or repurchase date for that note, unless we default in making
the payment due upon redemption or repurchase.
15
You may convert all or part of any note by delivering the note at the
office of the trustee, 61 Broadway, 15th Floor, New York, New York 10006,
accompanied by a duly signed and completed conversion notice, a copy of which
may be obtained from the trustee. The conversion date will be the date on which
the note and the duly signed and completed conversion notice are so delivered.
As promptly as practicable on or after the conversion date, we will issue
and deliver to the trustee a certificate or certificates for the number of full
shares of our common stock issuable upon conversion, together with payment in
lieu of any fraction of a share. The certificate(s) will then be sent by the
trustee to the conversion agent for delivery to the holder of the note being
converted. The shares of our common stock issuable upon conversion of the notes
will be fully paid and nonassessable and will rank equally with the other shares
of our common stock.
If you surrender a note for conversion on a date that is not an interest
payment date, you will not be entitled to receive any interest for the period
from the immediately preceding interest payment date to the conversion date,
except as described below in this paragraph. Any note surrendered for conversion
during the period from the close of business on any regular record date to the
opening of business on the next succeeding interest payment date (except notes,
or portions thereof, called for redemption on a redemption date or to be
repurchased on a repurchase date for which the right to convert would terminate
during such a period) must be accompanied by payment of an amount equal to the
interest payable on such interest payment date on the principal amount of notes
being surrendered for conversion. In the case of any note that has been
converted after any regular record date but before the next succeeding interest
payment date, interest payable on such interest payment date shall be payable on
such interest payment date notwithstanding such conversion, and such interest
shall be paid to the holder of such note on such regular record date.
No other payment or adjustment for interest, or for any dividends in
respect of our common stock, will be made upon conversion. Holders of our common
stock issued upon conversion will not be entitled to receive any dividends
payable to holders of our common stock as of any record time or date before the
close of business on the conversion date. We will not issue fractional shares
upon conversion. Instead, we will pay cash in lieu of fractional shares based on
the market price of our common stock at the close of business on the conversion
date. For a summary of the U.S. federal income tax considerations relating to
conversion of a note, see "Certain United States Federal Income Tax
Considerations -- U.S. Holders -- Conversion of the Notes."
You will not be required to pay any taxes or duties relating to the issue
or delivery of our common stock on conversion but you will be required to pay
any tax or duty relating to any transfer involved in the issue or delivery of
our common stock in a name other than yours. Certificates representing shares of
our common stock will not be issued or delivered unless all taxes and duties, if
any, payable by you have been paid.
The conversion rate is subject to adjustment for, among other things:
- dividends and other distributions payable in our common stock on shares
of our capital stock;
- the issuance to all holders of our common stock of rights, options or
warrants entitling them to subscribe for or purchase our common stock at
less than the then current market price of such common stock as of the
record date for stockholders entitled to receive such rights, options or
warrants;
- subdivisions, combinations and reclassifications of our common stock;
- distributions to all holders of our common stock of evidences of our
indebtedness, shares of capital stock, cash or assets, including
securities, but excluding:
- those dividends, rights, options, warrants and distributions referred
to above;
- dividends and distributions paid exclusively in cash other than those
referred to the next two succeeding bullet points; and
- distributions upon mergers or consolidations discussed below;
16
- distributions consisting exclusively of cash, excluding cash distributed
upon a merger or consolidation discussed below, to all holders of our
common stock in an aggregate amount that, combined together with:
- other all-cash distributions made within the preceding 365-day period
in respect of which no adjustment has been made; and
- any cash and the fair market value of other consideration payable in
connection with any tender offer by us or any of our subsidiaries for
our common stock concluded within the preceding 365-day period in
respect of which no adjustment has been made,
exceeds 10% of our market capitalization, being the product of the current
market price per share of our common stock on the record date for such
distribution and the number of shares of common stock then outstanding; and
- the successful completion of a tender offer made by us or any of our
subsidiaries for our common stock which involves an aggregate
consideration that, together with:
- any cash and other consideration payable in a tender offer by us or any
of our subsidiaries for our common stock expiring within the 365-day
period preceding the expiration of that tender offer in respect of
which no adjustments have been made; and
- the aggregate amount of any cash distributions to all holders of our
common stock within the 365-day period preceding the expiration of that
tender offer in respect of which no adjustments have been made,
exceeds 10% of our market capitalization on the expiration of such tender offer.
We have issued rights to all of our holders of common stock pursuant to the
stockholder rights plan described under "Description of Common Stock." If any
holder converts notes prior to the rights trading separately from the common
stock, a "separation event," the holder will be entitled to receive rights in
addition to the common stock. Following the occurrence of a separation event,
holders will only receive common stock upon a conversion of any notes without
the right. Instead, upon the occurrence of the separation event, the conversion
ratio will be adjusted. If such an adjustment is made and the rights are later
redeemed, invalidated or terminated, then a reversing adjustment will be made.
We reserve the right to effect such increases in the conversion rate in
addition to those required by the foregoing provisions as we consider to be
advisable in order that any event treated for United States federal income tax
purposes as a dividend of stock or stock rights will not be taxable to the
recipients. We will not be required to make any adjustment to the conversion
rate until the cumulative adjustments amount to 1.0% or more of the conversion
rate. We will compute all adjustments to the conversion rate and will give
notice by mail to holders of the registered notes of any adjustments.
In the event that we consolidate or merge with or into another entity or
another entity is merged into us, or in case of any sale or transfer of all or
substantially all of our assets, each note then outstanding will become
convertible only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer by a holder of the
number of shares of common stock into which the notes were convertible
immediately prior to the consolidation or merger or sale or transfer. The
preceding sentence will not apply to a merger or sale of all or substantially
all of our assets that does not result in any reclassification, conversion,
exchange or cancellation of the common stock.
We may increase the conversion rate for any period of at least 20 days if
our board of directors determines that the increase would be in our best
interest. The board of directors' determination in this regard will be
conclusive. We will give holders of notes at least 15 days' notice of such an
increase in the conversion rate. Any increase, however, will not be taken into
account for purposes of determining whether the closing price of our common
stock exceeds the conversion price by 105% in connection with an event that
otherwise would be a change in control as defined below.
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If at any time we make a distribution of property to our stockholders that
would be taxable to such stockholders as a dividend for United States federal
income tax purposes, such as distributions of evidences of indebtedness or
assets by us, but generally not stock dividends on common stock or rights to
subscribe for common stock, and, pursuant to the anti-dilution provisions of the
indenture, the number of shares into which notes are convertible is increased,
that increase may be deemed for United States federal income tax purposes to be
the payment of a taxable dividend to holders of notes. See "Certain United
States Federal Income Tax Considerations -- U.S. Holders."
OPTIONAL REDEMPTION BY TERADYNE
On or after October 18, 2004, we may redeem the notes, in whole or in part,
at the prices set forth below. If we elect to redeem all or part of the notes,
we will give at least 30, but no more than 60, days' notice to you.
The redemption price, expressed as a percentage of principal amount, is as
follows for the following periods:
REDEMPTION
PERIOD PRICE
------ ----------
Beginning on October 18, 2004 and ending on October 14,
2005...................................................... 101.50%
Beginning on October 15, 2005 and ending on October 14,
2006...................................................... 100.75%
and thereafter equal to 100% of the principal amount. In each case, we will pay
interest to, but excluding the redemption date.
No sinking fund is provided for the notes, which means that the indenture
does not require us to redeem or retire the notes periodically.
We may, to the extent permitted by applicable law, at any time purchase
notes in the open market, by tender at any price or by private agreement. Any
note that we purchase may, to the extent permitted by applicable law and subject
to restrictions contained in the purchase agreement with the underwriters, be
re-issued or resold or may, at our option, be surrendered to the trustee for
cancellation. Any notes surrendered for cancellation may not be re-issued or
resold and will be canceled promptly.
PAYMENT AND CONVERSION
We will make all payments of principal and interest on the notes by dollar
check drawn on an account maintained at a bank in The City of Boston. If you
hold registered notes with a face value greater than $2,000,000, at your request
we will make payments of principal or interest to you by wire transfer to an
account maintained by you at a bank in The City of New York. Payment of any
interest on the notes will be made to the person in whose name the note, or any
predecessor note, is registered at the close of business on April 1 or October
1, whether or not a business day, immediately preceding the relevant interest
payment date (a "regular record date"). If you hold registered notes with a face
value in excess of $2,000,000 and you would like to receive payments by wire
transfer, you will be required to provide the trustee with wire transfer
instructions at least 15 days prior to the relevant payment date.
Payments on any global note registered in the name of DTC or its nominee
will be payable by the trustee to DTC or its nominee in its capacity as the
registered holder under the indenture. Under the terms of the indenture, we and
the trustee will treat the persons in whose names the notes, including any
global note, are registered as the owners for the purpose of receiving payments
and for all other purposes. Consequently, neither we, the trustee not any of our
agents or the trustee's agents has or will have any responsibility or liability
for:
- any aspect of DTC's records or any participant's or indirect
participant's records relating to or payments made on account of
beneficial ownership interests in the global note, or for maintaining,
supervising or reviewing any of DTC's records or any participant's or
indirect participant's records relating to the beneficial ownership
interests in the global notes; or
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- any other matter relating to the actions and practices of DTC or any of
its participants or indirect participants.
We will not be required to make any payment on the notes due on any day
which is not a business day until the next succeeding business day. The payment
made on the next succeeding business day will be treated as though it were paid
on the original due date and no interest will accrue on the payment for the
additional period of time.
Notes may be surrendered for conversion at the office of the trustee, 61
Broadway, 15th Floor, New York, New York 10006. Notes surrendered for conversion
must be accompanied by appropriate notices and any payments in respect of
interest or taxes, as applicable, as described above under "-- Conversion
Rights."
We have initially appointed the trustee as paying agent and conversion
agent. We may terminate the appointment of any paying agent or conversion agent
and appoint additional or other paying agents and conversion agents. However,
until the notes have been delivered to the trustee for cancellation, or moneys
sufficient to pay the principal of, premium, if any, and interest on the notes
have been made available for payment and either paid or returned to us as
provided in the indenture, the trustee will maintain an office or agency in the
Borough of Manhattan, New York for surrender of notes for conversion. Notice of
any termination or appointment and of any change in the office through which any
paying agent or conversion agent will act will be given in accordance with
"-- Notices" below.
All monies deposited with the trustee or any paying agent, or then held by
us, in trust for the payment of principal of, premium, if any, or interest on
any notes which remain unclaimed at the end of two years after the payment has
become due and payable will be repaid to us, and you will then look only to us
for payment.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE IN CONTROL
If a "change in control" as defined below occurs, you will have the right,
at your option, to require us to repurchase all of your notes not previously
called for redemption, or any portion of the principal amount thereof, that is
equal to $1,000 or an integral multiple of $1,000. The price we are required to
pay is 100% of the principal amount of the notes to be repurchased, together
with interest accrued but unpaid to, but excluding, the repurchase date.
At our option, instead of paying the repurchase price in cash, we may pay
the repurchase price in our common stock valued at 95% of the average of the
closing prices of our common stock for the five trading days immediately
preceding and including the third trading day prior to the repurchase date. We
may only pay the repurchase price in our common stock if we satisfy conditions
provided in the indenture.
Within 30 days after the occurrence of a change in control, we are
obligated to give to you notice of the change in control and of the repurchase
right arising as a result of the change of control. We must also deliver a copy
of this notice to the trustee. To exercise the repurchase right, you must
deliver on or before the 30th day after the date of our notice irrevocable
written notice to the trustee of your exercise of your repurchase right,
together with the notes with respect to which the right is being exercised. We
are required to repurchase the notes on the date that is 45 days after the date
of our notice.
A change in control will be deemed to have occurred at the time after the
notes are originally issued that any of the following occurs:
- any person acquires beneficial ownership, directly or indirectly, through
a purchase, merger or other acquisition transaction or series of
transactions, of shares of our capital stock entitling the person to
exercise 50% or more of the total voting power of all shares of our
capital stock that is entitled to vote generally in elections of
directors, other than an acquisition by us, any of our subsidiaries or
any of our employee benefit plans; or
- we merge or consolidate with or into any other person, any merger of
another person into us or we convey, sell, transfer or lease all or
substantially all of our assets to another person, other than any such
transaction:
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- that does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of our capital stock; and
- pursuant to which the holders of 50% or more of the total voting power of
all shares of our capital stock entitled to vote generally in elections
of directors immediately prior to such transaction have the entitlement
to exercise, directly or indirectly, 50% or more of the total voting
power of all shares of capital stock entitled to vote generally in the
election of directors of the continuing or surviving corporation
immediately after such transaction; or
- which is effected solely to change our jurisdiction of incorporation and
results in a reclassification, conversion or exchange of outstanding
shares of our common stock into solely shares of common stock of the
surviving entity.
However, a change in control will not be deemed to have occurred if:
- the closing price per share of our common stock for any five trading days
within the period of 10 consecutive trading days ending immediately after
the later of the change in control or the public announcement of the
change in control, in the case of a change in control relating to an
acquisition of capital stock, or the period of 10 consecutive trading
days ending immediately before the change in control, in the case of
change in control relating to a merger, consolidation or asset sale,
equals or exceeds 105% of the conversion price of the notes in effect on
each of those five trading days; or
- all of the consideration, excluding cash payments for fractional shares
and cash payments made pursuant to dissenters' appraisal rights, in a
merger or consolidation otherwise constituting a change of control under
the first and second bullet points in the preceding paragraph above
consists of shares of common stock, depository receipts or other
certificates representing common equity interest traded on a national
securities exchange or quoted on the NASDAQ National Market System, or
will be so traded or quoted immediately following such merger or
consolidation, and as a result of such merger or consolidation the notes
become convertible solely into such common stock, depository receipts or
other certificates representing common equity interests.
For purposes of these provisions:
- the conversion price is equal to $1,000 divided by the conversion rate;
- whether a person is a "beneficial owner" will be determined in accordance
with Rule 13d-3 under the Exchange Act; and
- a "person" includes any syndicate or group that would be deemed to be a
person under Section 13(d)(3) of the Exchange Act.
The rules and regulations promulgated under the Exchange Act require the
dissemination of prescribed information to security holders in the event of an
issuer tender offer and may apply in the event that the repurchase option
becomes available to you. We will comply with these rules to the extent they
apply at that time.
The definition of change in control includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of all or substantially all of
our assets. There is no precise, established definition of the phrase
"substantially all" under applicable law. Accordingly, your ability to require
us to repurchase your notes as a result of conveyance, transfer, sale, lease or
other disposition of less than all of our assets may be uncertain.
The foregoing provisions would not necessarily provide you with protection
if we are involved in a highly leveraged or other transaction that may adversely
affect you.
Although we have the right to repurchase the notes with our common stock,
subject to certain conditions, we cannot assure you that we would have the
financial resources, or would be able to arrange financing, to pay the
repurchase price in cash for all the notes that might be delivered by holders of
notes seeking to exercise the repurchase right. If we were to fail to repurchase
the notes when required following a change in control, an
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event of default under the indenture would occur. Some of the events
constituting a change in control could cause an event of default under the terms
of other debt instruments.
MERGERS AND SALES OF ASSETS BY TERADYNE
We may not consolidate with or merge into any other person or convey,
transfer, sell or lease our properties and assets substantially as an entirety
to any person other than to one or more of our subsidiaries, and we may not
permit any entity to consolidate with or merge into us or convey, transfer, sell
or lease such person's properties and assets substantially as an entirety to us
unless:
- the surviving entity formed by such consolidation or into or with which
we are merged or the surviving entity to which our properties and assets
are so conveyed, transferred, sold or leased, shall be a corporation,
limited liability company, partnership or trust organized and existing
under the laws of the United States, any State within the United States
or the District of Columbia and, if we are not the surviving entity, the
surviving entity executes and files with the trustee a supplemental
indenture assuming the payment of the principal of, premium, if any, and
interest on the notes and the performance of our other covenants under
the indenture;
- immediately after giving effect to the transaction, no event of default,
and no event that, after notice or lapse of time or both, would become an
event of default, will have occurred and be continuing; and
- other requirements as described in the indenture are met.
EVENTS OF DEFAULT
The following are events of default under the indenture:
- we fail to pay principal of or premium, if any, on any note when due;
- we fail to pay any interest, including any additional interest or
liquidated damages, on any note when due, which failure continues for 30
days;
- we fail to provide notice of a change in control;
- we fail to perform any other covenant in the indenture, which failure
continues for 60 days following notice as provided in the indenture;
- any indebtedness under any bonds, debentures, notes or other evidences of
indebtedness for money borrowed, or any guarantee thereof, by us or any
of our significant subsidiaries, in an aggregate principal amount in
excess of $30 million is not paid when due either at its stated maturity
or upon acceleration thereof, and such indebtedness is not discharged, or
such acceleration is not rescinded or annulled, within a period of 30
days after notice as provided in the indenture; and
- certain events of bankruptcy, insolvency or reorganization involving us
or any of our significant subsidiaries.
Subject to the provisions of the indenture relating to the duties of the
trustee in case an event of default shall occur and be continuing, the trustee
will be under no obligation to exercise any of its rights or powers under the
indenture at the request or direction of any holder, unless the holder shall
have furnished the trustee indemnity reasonably satisfactory to the trustee.
Subject to providing indemnification to the trustee, the holders of a majority
in aggregate principal amount of the outstanding notes will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee or exercising any trust or power conferred on the
trustee.
If an event of default other than an event of default arising from events
of insolvency, bankruptcy or reorganization occurs and is continuing, either the
trustee or the holders of at least 25% in principal amount of the outstanding
notes may accelerate the maturity of all notes. However, after such
acceleration, but before a judgment or decree based on acceleration, the holders
of a majority in aggregate principal amount of outstanding notes may, under
certain circumstances, rescind and annul the acceleration if all events of
default,
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other than the non-payment of principal of the notes that have become due solely
by such declaration of acceleration, have been cured or waived as provided in
the indenture. If an event of default arising from events of insolvency,
bankruptcy or reorganization occurs, then the principal of, and accrued interest
on, all the notes will automatically become immediately due and payable without
any declaration or other act on the part of the holders of the notes or the
trustee. For information as to waiver of defaults, see "Meetings, Modification
and Waiver" below.
You will not have any right to institute any proceeding with respect to the
indenture, or for any remedy under the indenture, unless:
- you give the trustee written notice of a continuing event of default;
- the holders of at least 25% in aggregate principal amount of the
outstanding notes have made written request and offered the trustee
indemnity reasonably satisfactory to the trustee to institute
proceedings;
- the trustee has not received from the holders of a majority in aggregate
principal amount of the outstanding notes a direction inconsistent with
the written request; and
- the trustee shall have failed to institute such proceeding within 60 days
of the written request.
However, these limitations do not apply to a suit instituted by you for the
enforcement of payment of the principal of, premium, if any, or interest,
including liquidated damages, on your note on or after the respective due dates
expressed in your note or your right to convert your note in accordance with the
indenture.
We are required to furnish to the trustee annually a statement as to our
performance of certain of our obligations under the indenture and as to any
default in such performance.
MEETINGS, MODIFICATION AND WAIVER
The indenture contains provisions for convening meetings of the holders of
notes to consider matters affecting their interests.
Certain limited modifications of the indenture may be made without the
necessity of obtaining the consent of the holders of the notes.
Other modifications and amendments of the indenture may be made, compliance
by us with certain restrictive provisions of the indenture may be waived and any
past defaults by us under the indenture (except a default in the payment of
principal, premium, if any, or interest) may be waived, either:
- with the written consent of the holders of not less than a majority in
aggregate principal amount of the notes at the time outstanding; or
- by the adoption of a resolution, at a meeting of holders of the notes at
which a quorum is present, by the holders of at least 66 2/3% in
aggregate principal amount of the notes represented at such meeting.
The quorum at any meeting called to adopt a resolution will be persons
holding or representing a majority in aggregate principal amount of the notes at
the time outstanding and, at any reconvened meeting adjourned for lack of a
quorum, 25% of such aggregate principal amount.
However, a modification or amendment requires the consent of the holder of
each outstanding note affected if it would:
- change the stated maturity of the principal or interest of a note;
- reduce the principal amount of, or any premium or interest on, any note;
- reduce the amount payable upon a redemption or mandatory repurchase;
- modify the provisions with respect to the repurchase rights of holders of
notes in a manner adverse to the holders;
- modify our right to redeem the notes in a manner adverse to the holders;
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- change the place or currency of payment on a note;
- impair the right to institute suit for the enforcement of any payment on
any note;
- modify the ranking of the notes in a manner that is adverse to the
holders of the notes;
- adversely affect the right to convert the notes other than a modification
or amendment required by the terms of the indenture;
- modify our obligation to deliver information required under Rule 144A to
permit resales of the notes and common stock issued upon conversion of
the notes if we cease to be subject to the reporting requirements under
the Exchange Act;
- reduce the above-stated percentage of the principal amount of the holders
whose consent is needed to modify or amend the indenture;
- reduce the percentage of the principal amount of the holders whose
consent is needed to waive compliance with certain provisions of the
indenture or to waive certain defaults; or
- reduce the percentage required for the adoption of a resolution or the
quorum required at any meeting of holders of notes at which a resolution
is adopted.
REGISTRATION RIGHTS
We have entered into a registration rights agreement with the initial
purchasers. In the registration rights agreement we have agreed, for the benefit
of the holders of the notes and the shares of common stock issuable upon
conversion of the notes, commonly referred to as the registrable securities,
that we will, at our expense:
- file with the SEC, within 90 days after the date the notes were
originally issued, this shelf registration statement covering resales of
the registrable securities;
- use our reasonable best efforts to cause this shelf registration
statement to be declared effective under the Securities Act within 180
days after the date the notes were originally issued; and
- use our reasonable best efforts to keep effective this shelf registration
statement until two years after the date the notes were issued or, if
earlier, until there are no outstanding registrable securities.
We will be permitted to suspend the use of the prospectus that is part of
this shelf registration statement in connection with the sale of registrable
securities during prescribed periods of time for reasons relating to pending
corporate developments, public filings with the SEC and other events. The
periods during which we can suspend the use of the prospectus may not, however,
exceed a total of 30 days in any 90-day period or a total of 90 days in any
365-day period. We will provide to each holder of registrable securities copies
of the prospectus that is a part of this shelf registration statement, notify
each holder when this shelf registration statement has been filed with the SEC
and when this shelf registration statement has become effective and take certain
other actions required to permit public resales of the registrable securities.
We may, upon written notice to all holders of notes, postpone having this
shelf registration statement declared effective for a reasonable period not to
exceed 90 days if we possess material non-public information the disclosure of
which would have a material adverse effect on us and our subsidiaries taken as a
whole. Notwithstanding any such postponement, additional interest referred to as
"liquidated damages," will accrue on the notes if either of the following
registration defaults occurs:
- on or prior to the 90th day following the date the notes were originally
issued, this shelf registration statement has not been filed with the
SEC; or
- on or prior to the 180th day following the date the notes were originally
issued, this shelf registration statement is not declared effective.
In that case, liquidated damages will accrue on any notes and shares issued
on conversion of the notes, which are then restricted securities from and
including the day following the registration default to but excluding the day on
which the registration default has been cured. Liquidated damages will be paid
semi-
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annually in arrears, with the first semi-annual payment due on the first
interest payment date following the date on which the liquidated damages began
to accrue.
The rates at which liquidated damages will accrue will be as follows:
- 0.25% of the principal amount per annum to and including the 90th day
after the registration default; and
- 0.5% of the principal amount per annum from and after the 91st day after
the registration default.
In addition, liquidated damages will accrue on any notes and shares issued
upon conversion of the notes if:
- this shelf registration statement ceases to be effective, or we otherwise
prevent or restrict holders of registrable securities from making sales
under this shelf registration statement, for more than 30 days, whether
or not consecutive, during any 90-day period; or
- this shelf registration statement ceases to be effective, or we otherwise
prevent or restrict holders of registrable securities from making sales
under this shelf registration statement, for more than 90 days, whether
or not consecutive, during any 365-day period.
In either event, liquidated damages will accrue at a rate of 0.50% per
annum from the 31st day of the 90-day period or the 91st day of the 365-day
period until the earlier of the following:
- the time this shelf registration statement again becomes effective or the
holders of registrable securities are again able to make sales under this
shelf registration statement, depending on which event triggered the
increase in interest rate; or
- two years after the date the notes are issued or, if earlier, until there
are no outstanding registrable securities.
A holder who elects to sell any registrable securities pursuant to this
shelf registration statement:
- will be required to be named as a selling securityholder in the related
prospectus;
- may be required to deliver a prospectus to purchasers;
- may be subject to certain civil liability provisions under the Securities
Act in connection with those sales; and
- will be bound by the provisions of the registration rights agreement that
apply to a holder making such an election, including certain
indemnification provisions.
We mailed a notice and questionnaire to the holders of registrable
securities not less than 30 calendar days prior to the time we intend in good
faith to have this shelf registration statement declared effective.
No holder of registrable securities will be entitled:
- to be named as a selling securityholder in this shelf registration
statement as of the date this shelf registration statement is declared
effective; or
- to use the prospectus forming a part of this shelf registration statement
for offers and resales of registrable securities at any time, unless such
holder has returned a completed and signed notice and questionnaire to us
by the deadline for response set forth in the notice and questionnaire.
Holders of registrable securities will, however, have at least 28 calendar
days from the date on which the notice and questionnaire was first mailed to
return a completed and signed notice and questionnaire to us.
Beneficial owners of registrable securities who have not returned a notice
and questionnaire by the questionnaire deadline described above may receive
another notice and questionnaire from us upon request. Following our receipt of
a completed and signed notice and questionnaire, we will include the registrable
securities covered thereby in this shelf registration statement, subject to
restrictions on the timing and number of supplements to this shelf registration
statement provided in the registration rights agreement.
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We agreed in the registration rights agreement to use our best efforts to
cause the shares of common stock issuable upon conversion of the notes to be
quoted on the New York Stock Exchange. However, if the common stock is not then
quoted on the New York Stock Exchange, we will use our best efforts to cause the
shares of common stock issuable upon conversion of the notes to be quoted or
listed on whichever market or exchange the common stock is then quoted or
listed, upon effectiveness of this shelf registration statement.
This summary of certain provisions of the registration rights agreement is
not complete and is subject to, and qualified in its entirety by reference to,
all the provisions of the registration rights agreement, a copy of which will be
made available to beneficial owners of the notes upon request to us.
NOTICES
Notice to holders of the registered notes will be given by mail to the
addresses as they appear in the security register. Notices will be deemed to
have been given on the date of such mailing.
Notice of a redemption of notes will be given not less than 30 nor more
than 60 days prior to the redemption date and will specify the redemption date.
A notice of redemption of the notes will be irrevocable.
REPLACEMENT OF NOTES
We will replace any note that becomes mutilated, destroyed, stolen or lost
at the expense of the holder upon delivery to the trustee of the mutilated notes
or evidence of the loss, theft or destruction satisfactory to us and the
trustee. In the case of a lost, stolen or destroyed note, indemnity satisfactory
to the trustee and us may be required at the expense of the holder of the note
before a replacement note will be issued.
PAYMENT OF STAMP AND OTHER TAXES
We will pay all stamp and other duties, if any, that may be imposed by the
United States or any political subdivision thereof or taxing authority thereof
or therein with respect to the issuance of the notes or of shares of stock upon
conversion of the notes. We are not required to make any payment with respect to
any other tax, assessment or governmental charge imposed by any government or
any political subdivision thereof or taxing authority thereof or therein.
GOVERNING LAW
The indenture, the notes, and the registration rights agreement shall be
governed by and construed in accordance with the laws of the State of New York,
United States of America.
THE TRUSTEE
If an event of default occurs and is continuing, the trustee will be
required to use the degree of care of a prudent person in the conduct of his own
affairs in the exercise of its powers as trustee under the indenture. Subject to
the terms of the indenture, the trustee will be under no obligation to exercise
any of its rights or powers under the indenture at the request of any of the
holders of notes, unless they shall have furnished to the trustee reasonable
security or indemnity.
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DESCRIPTION OF COMMON STOCK
OUR COMMON STOCK
Holders of Teradyne common stock are entitled to one vote for each share
held on all matters submitted to a vote of stockholders. Since holders of
Teradyne common stock do not have cumulative voting rights, the holders of more
than 50% of our common stock can elect all the directors if they so choose.
Holders of Teradyne common stock are entitled to receive ratably dividends, if
any, as may be declared by the Teradyne board of directors out of funds legally
available for payment of dividends. Upon the liquidation, dissolution or winding
up of Teradyne, holders of Teradyne common stock are entitled to receive ratably
the net assets of Teradyne available after the payment of all debts and other
liabilities of Teradyne. Holders of Teradyne common stock have no preemptive,
subscription, redemption or conversion rights, nor are they entitled to the
benefit of any sinking fund.
OUR RIGHTS PLAN
On November 16, 2000, the Teradyne board of directors declared a dividend
of one right for each outstanding share of Teradyne common stock outstanding on
November 27, 2000 to the stockholders of record on that date. Each right
entitled the registered holder to purchase from Teradyne one share of Teradyne
common stock at a price of $540.00 per share, subject to adjustment. The
description and terms of the rights are set forth in a rights agreement between
Teradyne and Fleet National Bank and are evidenced by a common stock certificate
with a copy of the summary of the rights.
The rights will be exercisable on the earlier to occur of:
- a public announcement that a person or group of affiliated or associated
persons, known as an acquiring person, has acquired beneficial ownership
of 20% or more of the outstanding shares of Teradyne common stock; or
- 10 business days (or such later date as may be determined by action of
the Teradyne board of directors prior to such time as any person becomes
an acquiring person) following the commencement of, or announcement of an
intention to make, a tender offer or exchange offer the consummation of
which would result in the beneficial ownership by a person or group of
20%, or more of such outstanding shares of Teradyne common stock.
Prior to the earlier of either of the two dates set forth above, sometimes
referred to as the distribution date, the rights are not exercisable. Until the
rights are exercised, the holder of the right will have no rights as a
shareholder of Teradyne, including but not limited to the right to receive
dividends.
The rights agreement provides that, until exercised, redeemed or their
expiration, the rights will be transferred with and only with the Teradyne
common stock. Further, until the rights are exercised, redeemed or their
expiration, certificates for Teradyne common stock issued after November 27,
2000 or upon transfer or new issuance of shares of Teradyne common stock will
contain a notation incorporating the rights agreement by reference. All
certificates outstanding on November 27, 2000 for Teradyne common stock
surrendered for transfer prior to the exercise, redemption or expiration of the
rights, even without a notation or a copy of the summary of the rights being
attached thereto, will also constitute the transfer of the rights associated
with each share of Teradyne common stock.
The rights will expire on November 27, 2010, unless extended or unless the
rights are earlier redeemed by Teradyne, in each case, as described below.
The purchase price payable, and the number of shares of Teradyne common
stock or other securities or property issuable upon exercise of the rights are
subject to adjustment from time to time to prevent dilution:
- in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the shares of Teradyne common stock;
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- upon the grant to holders of shares of Teradyne common stock of certain
rights or warrants to subscribe for or purchase shares of Teradyne common
stock at a price, or securities convertible into shares of Teradyne
common stock with a conversion price, less than the then current market
price of the shares of Teradyne common stock; or
- upon the distribution to holders of shares of Teradyne common stock of
evidences of indebtedness or assets (excluding regular periodic cash
dividends paid out of earnings or retained earnings or dividends payable
in shares of Teradyne common stock) or of subscription rights or warrants
(other than those referred to above).
From and after the date any person becomes an acquiring person, if the
rights are or were at any time on or after the earlier of (x) the date of such
event and (y) the distribution date acquired or beneficially owned by an
acquiring person or an associate or affiliate of an acquiring person, such
rights shall become void, and any holder of such rights shall thereafter have no
right to exercise such rights.
In the event that, at any time after a person becomes an acquiring person,
Teradyne is acquired in a merger or other business combination transaction or
50% or more of its consolidated assets or earning power are sold, proper
provision will be made so that each holder of a right will thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the right, that number of shares of common stock of the acquiring company
which at the time of such transaction will have a market value of two times the
exercise price of the right. In the event that any person becomes an acquiring
person, proper provision shall be made so that each holder of a right, other
than the rights beneficially owned by the acquiring person and its affiliates
and associates (which will thereafter be void), will thereafter have the right
to receive upon exercise that number of shares of Teradyne common stock having a
market value of two times the exercise price of the right. If Teradyne does not
have sufficient shares of Teradyne common stock to satisfy such obligation to
issue shares of Teradyne common stock, or if the Teradyne board of directors so
elects, Teradyne will deliver upon payment of the exercise price of a right an
amount of cash or securities equivalent in value to the shares of Teradyne
common stock issuable upon exercise of a right. However, if Teradyne fails to
meet such obligation within 30 days following the later of (x) the first
occurrence of an event triggering the right to purchase shares of Teradyne
common stock and (y) the date on which Teradyne's right to redeem the common
share purchase rights expires, Teradyne must deliver, upon exercise of a right
but without requiring payment of the exercise price then in effect, shares of
Teradyne common stock (to the extent available) and cash equal in value to the
difference between the value of the shares of Teradyne common stock otherwise
issuable upon the exercise of a right and the exercise price then in effect. The
Teradyne board of directors may extend the 30-day period described above for up
to an additional 90 days to permit the taking of action that may be necessary to
authorize sufficient additional shares of Teradyne common stock to permit the
issuance of shares of Teradyne common stock upon the exercise in full of the
rights.
At any time after any person becomes an acquiring person and prior to the
acquisition by any person or group of a majority of the outstanding shares of
Teradyne common stock, the Teradyne board of directors may exchange the rights
(other than rights owned by such person or group which have become void), in
whole or in part, at an exchange ratio of one share of Teradyne common stock per
right (subject to adjustment).
With certain exceptions, no adjustment in the purchase price will be
required until cumulative adjustments require an adjustment of at least 1% in
such purchase price. No fractional shares of Teradyne common stock will be
issued and in lieu thereof, an adjustment in cash will be made based on the
market price of the shares of Teradyne common stock on the last trading day
prior to the date of exercise.
At any time prior to the time any person becomes an acquiring person, the
Teradyne board of directors may redeem the rights in whole, but not in part, at
a price equal to $0.001 per right. The redemption of the rights may be made
effective at such time, on such basis and with such conditions as the Teradyne
board of directors in its sole discretion may establish. Immediately upon any
redemption of the rights, the right to exercise the rights will terminate and
the only right of the holders of rights will be to receive the redemption price.
27
The terms of the rights may be amended by the Teradyne board of directors
without the consent of the holders of the rights, except that from and after
such time as any person becomes an acquiring person no such amendment may
adversely affect the interests of the holders of the rights (other than the
acquiring person and its affiliates and associates).
MASSACHUSETTS LAW AND CERTAIN PROVISIONS OF OUR BY-LAWS
Teradyne is subject to the provisions of Chapter 110F of the Massachusetts
General Laws, the so-called Business Combination Statute. Under Chapter 110F, a
Massachusetts corporation with at least 200 stockholders, such as Teradyne, may
not engage in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
becomes an interested stockholder, unless (i) the interested stockholder obtains
the approval of the Board of Directors prior to becoming an interested
stockholder, (ii) the interested stockholder acquires 90% of the outstanding
voting stock of the corporation (excluding shares held by certain affiliates of
the corporation) at the time it becomes an interested stockholder, or (iii) the
business combination is approved by both the Board of Directors and the holders
of at least two-thirds of the outstanding voting stock of the corporation
(excluding shares held by the interested stockholder). An "interested
stockholder" is a person who, together with affiliates and associates, owns (or
at any time within the prior three years did own) 5% or more of the outstanding
voting stock of the corporation. A "business combination" includes a merger, a
stock or assets sale, and other transactions resulting in a financial benefit to
the stockholder. In addition, the classification of our Board of Directors under
our By-laws may deter a stockholder from voting to remove incumbent directors
and gaining control of the Board of Directors.
28
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax
considerations relating to the purchase, ownership and disposition of the notes
and common stock into which notes may be converted, but does not provide a
complete analysis of all potential tax considerations. This summary is based on
laws, regulations, rulings and decisions now in effect, all of which are subject
to change or differing interpretation, possibly with retroactive effect. Except
as specifically discussed below with regard to Non-U.S. Holders (as defined
below), this summary applies only to U.S. Holders (as defined below) that are
beneficial owners of notes and that will hold notes and common stock into which
notes may be converted as "capital assets" (within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the "Code")). For purposes of
this summary, "U.S. Holders" generally include citizens or resident individuals
of the United States and corporations organized under the laws of the United
States or any political subdivision thereof. Trusts are U.S. Holders if they are
subject to the primary supervision of a U.S. court and the control of one or
more U.S. persons. Persons other than U.S. Holders ("Non-U.S. Holders") are
subject to special U.S. federal income tax considerations, some of which are
discussed below. This discussion does not address tax considerations applicable
to an investor's particular circumstances or to investors that may be subject to
special tax rules such as banks, holders subject to the alternative minimum tax,
tax-exempt organizations, persons that have a functional currency other than the
U.S. dollar, persons holding notes or common stock in a tax deferred or tax
advantaged account, persons who are partners, shareholders or beneficiaries of
an entity that holds the notes or common stock, insurance companies, foreign
persons or entities (except to the extent specifically set forth below), dealers
in securities or currencies, persons that will hold notes as a position in a
hedging transaction, "straddle" or "conversion transaction" for tax purposes or
persons deemed to sell notes or common stock under the constructive sale
provisions of the Code. This summary discusses the tax considerations applicable
to the initial holders of the notes who purchase the notes at their "issue
price" as defined in Section 1273 of the Code and does not discuss the tax
considerations applicable to subsequent purchasers of the notes. We have not
sought any ruling from the Internal Revenue Service (the "IRS") or an opinion of
counsel with respect to the statements made and the conclusions reached in the
following summary. Accordingly, there can be no assurance that the IRS will not
challenge such statements and conclusions or that a court will not sustain such
a challenge. This summary does not consider the effect of the federal estate or
gift tax laws (except as set forth below with respect to Non-U.S. Holders) or
the tax laws of any applicable foreign, state, local or other jurisdiction.
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO
THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE
U.S. FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL OR
FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
U.S. HOLDERS
TAXATION OF INTEREST
Interest paid on the notes will be included in the income of a U.S. Holder
as ordinary income at the time it is treated as received or accrued, in
accordance with such holder's regular method of accounting for U.S. federal
income tax purposes.
In certain circumstances, we may be obligated to pay a holder amounts in
excess of stated interest and principal on the notes. For example, we may be
required to make additional payments as liquidated damages if we do not file or
cause to be declared effective this registration statement, as described under
"Description of the Notes -- Registration Rights." In addition, a holder may
require us to redeem some or all of the holder's notes in the event of a change
in control, and we may voluntarily redeem the notes at a premium at the times
and in the manner described under "Description of the Notes -- Optional
Redemption by Teradyne." Under Treasury Regulations, the possibility of an
additional payment under a note may be disregarded for purposes of determining
the amount of interest or original issue discount income to be recognized by a
holder in respect of
29
such note (or the timing of such recognition) if the likelihood of the payment,
as of the date the notes are issued, is remote. We believe that the likelihood
of a liquidated damages payment with respect to the notes or a "change of
control" or optional redemption is remote and do not intend to treat these
possibilities as affecting the yield to maturity of any note. Our determination
that this likelihood is remote is binding on you unless you disclose your
contrary position in a timely filed tax return for the taxable year in which you
acquire the note. In the event any such contingency occurs, it would affect the
amount and timing of the income that must be recognized by a U.S. Holder of
notes. There can be no assurance that the IRS will agree with such positions.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange (other than a conversion) or redemption of a note,
a U.S. Holder generally will recognize capital gain or loss equal to the
difference between (i) the sum of the amount of cash proceeds and the fair
market value of any property received on the sale, exchange or redemption
(except to the extent such cash or property is attributable to accrued interest
income, which will be taxable as such) and (ii) such holder's adjusted tax basis
in the note. A U.S. Holder's adjusted tax basis in a note generally will equal
the cost of the note to such holder. Such capital gain or loss will be long-term
capital gain or loss if the U.S. Holder's holding period in the note is more
than one year at the time of sale, exchange or redemption. Long-term capital
gains recognized by certain non-corporate U.S. Holders, including individuals,
will generally be subject to a maximum rate of tax of 20% (or 18% in the case of
the sale or exchange of notes held for more than five years). Capital gain
recognized by non-corporate U.S. Holders that is not long-term capital gain, and
all capital gain recognized by corporate U.S. Holders, is taxed at ordinary
income rates. The deductibility of capital losses is subject to limitations.
CONVERSION OF THE NOTES
A U.S. Holder generally will not recognize any income, gain or loss upon
conversion of a note into common stock except (i) with respect to cash received
in lieu of a fractional share of common stock and (ii) to the extent that the
common stock issued upon conversion is treated as attributable to accrued
interest on the note (which will be treated as interest for federal income tax
purposes). A U.S. Holder's tax basis in the common stock received on conversion
of a note will be the same as such holder's adjusted tax basis in the note at
the time of conversion (reduced by any basis allocable to a fractional share
interest), and the holding period for the common stock received on conversion
will generally include the holding period of the note converted. However, if a
U.S. Holder receives shares of common stock attributable to accrued interest,
the U.S. Holder's basis in such shares generally will equal the amount of such
accrued interest included in income, and the holding period for such shares will
begin on the date of conversion. In the event of a repurchase of a note upon a
change in control for common stock pursuant to such repurchase right, a U.S.
Holder may be subject to the same treatment as described above with respect to
conversion of a note; U.S. Holders should consult their tax advisors in such
circumstances.
Cash received in lieu of a fractional share of common stock upon conversion
will be treated as a payment in exchange for the fractional share of common
stock. Accordingly, the receipt of cash in lieu of a fractional share of common
stock generally will result in capital gain or loss (measured by the difference
between the cash received for the fractional share and the holder's adjusted tax
basis in the fractional share). Such capital gain or loss will be long-term
capital gain or loss if the U.S. Holder's holding period in the fractional share
(determined under the rules described in the immediately preceding paragraph) is
more than one year at the time of such exchange.
SALE OF COMMON STOCK
Upon the sale or exchange of common stock a U.S. Holder generally will
recognize capital gain or loss equal to the difference between (i) the sum of
the amount of cash and the fair market value of any property received upon the
sale or exchange and (ii) such U.S. Holder's adjusted tax basis in the common
stock. Such capital gain or loss will be long-term capital gain or loss if the
U.S. Holder's holding period in the common stock is more than one year at the
time of the sale or exchange. Long-term capital gains recognized by certain
30
non-corporate U.S. Holders, including individuals, will generally be subject to
a maximum rate of tax of 20% (or 18% in the case of the sale or exchange of
common stock held for more than five years). Capital gain recognized by
non-corporate U.S. Holders that is not long-term capital gain, and all capital
gain recognized by corporate U.S. Holders, is taxed at ordinary income rates. A
U.S. Holder's basis and holding period in common stock received upon conversion
of a note are determined as discussed above under "Conversion of the Notes." The
deductibility of capital losses is subject to limitations.
DIVIDENDS
Distributions, if any, made on the common stock after a conversion
generally will be included in the income of a U.S. Holder as ordinary dividend
income to the extent of our current and accumulated earnings and profits,
subject to a possible dividends-received deduction in the case of corporate
holders. Distributions in excess of our current and accumulated earnings and
profits generally will be treated as a return of capital to the extent of the
U.S. Holder's basis in the common stock and thereafter as capital gain.
ADJUSTMENTS IN THE CONVERSION PRICE OF THE NOTES
Holders of convertible debt instruments such as the notes may, in certain
circumstances, be deemed to have received distributions of stock if the
conversion price of such instruments is adjusted. Adjustments to the conversion
price made pursuant to a bona fide reasonable adjustment formula which has the
effect of preventing the dilution of the interest of the holders of the debt
instruments, however, will generally not be considered to result in a
constructive distribution of stock. Certain of the possible adjustments provided
in the notes (including, without limitation, adjustments in respect of taxable
dividends to our stockholders) will not qualify as being pursuant to a bona fide
reasonable adjustment formula. If such adjustments are made, the holders of the
notes may be deemed to have received constructive distributions taxable as
dividends (subject to a possible dividends-received deduction in the case of
corporate holders) to the extent of our current and accumulated earnings and
profits even though the holders have not received any cash or property as a
result of such adjustments, and without regard to whether the conversion
privilege is ever exercised. In certain circumstances, the failure to provide
for such an adjustment may result in taxable dividend income to the holders of
common stock, subject to a possible dividends-received deduction in the case of
corporate holders.
SPECIAL TAX RULES APPLICABLE TO NON-U.S. HOLDERS
In general, subject to the discussion below concerning backup withholding:
(a) Payments of principal, premium or interest on the notes by us or
any paying agent to a beneficial owner of a note that is a Non-U.S. Holder
will not be subject to U.S. federal income tax or U.S. withholding tax,
provided that, in the case of interest, (i) such Non-U.S. Holder does not
own, actually or constructively, 10% or more of the total combined voting
power of all classes of our stock entitled to vote within the meaning of
Section 871(h)(3) of the Code, (ii) such Non-U.S. Holder is not a
"controlled foreign corporation" within the meaning of Section 957(a) of
the Code with respect to which we are a "related person" within the meaning
of Section 864(d)(4) of the Code, and (iii) the certification requirements
under Section 871(h) or Section 881(c) of the Code and Treasury Regulations
thereunder (discussed below) are satisfied.
(b) A Non-U.S. Holder of a note or common stock will not be subject to
U.S. federal income tax on gains realized on the sale, exchange or other
disposition of such note or common stock unless (i) such Non-U.S. Holder is
an individual who is present in the U.S. for 183 days or more in the
taxable year of sale, exchange or other disposition, and certain conditions
are met, (ii) such gain is effectively connected with the conduct by the
Non-U.S. Holder of a trade or business in the U.S. and, if certain U.S.
income tax treaties apply, is attributable to a U.S. permanent
establishment maintained by the Non-U.S. Holder, (iii) the Non-U.S. Holder
is subject to Code provisions applicable to certain U.S. expatriates, or
(iv) in the case of common stock held by a person who holds more than 5% of
such stock, we are or have been, at any time within the shorter of the
five-year period preceding such sale or other disposition or the period
such Non-U.S. Holder held the common stock, a U.S. real property holding
corporation (a "USRPHC")
31
within the meaning of Section 897(c)(2) of the Code for U.S. federal income
tax purposes. We do not believe that we are currently a USRPHC or that we
will become one in the future.
(c) Interest on notes not excluded from U.S. federal income tax or
U.S. withholding tax as described in (a) above and dividends on common
stock after conversion generally will be subject to U.S. withholding tax at
a 30% rate, except where an applicable U.S. income tax treaty provides for
the reduction or elimination of such withholding tax and the Non-U.S.
Holder complies with applicable certification requirements by providing a
properly executed IRS Form W-8BEN. Under applicable U.S. Treasury
regulations, special procedures are provided for payments through qualified
intermediaries.
To satisfy the certification requirements referred to in (a)(iii) above,
Sections 871(h) and 881(c) of the Code and Treasury Regulations thereunder
require that either (i) the beneficial owner of a note certify, under penalties
of perjury, to us or our paying agent, as the case may be, that such owner is a
Non-U.S. Holder, or (ii) a securities clearing organization, bank or other
financial institution that holds customer securities in the ordinary course of
its trade or business (a "Financial Institution") and holds the note on behalf
of the beneficial owner thereof certify, under penalties of perjury, to us or
our paying agent, as the case may be, that such certificate has been received
from the beneficial owner and furnish the payor with a copy thereof. Such
requirement will be fulfilled if the beneficial owner of a note certifies on IRS
Form W-8BEN, under penalties of perjury, that it is a Non-U.S. Holder or any
Financial Institution holding the note on behalf of the beneficial owner files a
statement with the withholding agent to the effect that it has received such a
statement from the beneficial owner (and furnishes the withholding agent with a
copy thereof). As noted in (c) above, special procedures are provided for
payments through qualified intermediaries; Non-U.S. Holders should consult their
tax advisors with respect to such procedures.
If a Non-U.S. Holder of a note or common stock is engaged in a trade or
business in the United States and if interest or premium on the note, dividends
on the common stock, or gain realized on the sale, exchange or other disposition
of the note or common stock is effectively connected with the conduct of such
trade or business (and, if certain tax treaties apply, is attributable to a U.S.
permanent establishment maintained by the Non-U.S. Holder in the United States),
the Non-U.S. Holder, although exempt from U.S. withholding tax (provided that
the certification requirements discussed in the next sentence are met), will
generally be subject to U.S. federal income tax on such interest, premium,
dividends or gain on a net income basis in the same manner as if it were a U.S.
Holder. In lieu of the certificate described above, such a Non-U.S. Holder will
be required, under currently effective Treasury Regulations, to provide us or
our paying agent, as the case may be, with a properly executed IRS Form W-8ECI
in order to claim an exemption from U.S. tax withholding. In addition, if such
Non-U.S. Holder is a foreign corporation, it may be subject to a branch profits
tax equal to 30% (or such lower rate provided by an applicable U.S. income tax
treaty) of a portion of its effectively connected earnings and profits for the
taxable year.
U.S. FEDERAL ESTATE TAX
A note held by an individual who at the time of death is not a citizen or
resident of the United States (as specially defined for U.S. federal estate tax
purposes) will not be subject to U.S. federal estate tax if the individual did
not actually or constructively own 10% or more of the total combined voting
power of all classes of our stock and, at the time of the individual's death,
payments with respect to such note would not have been effectively connected
with the conduct by such individual of a trade or business in the United States.
Common stock held (or, under certain circumstances, previously transferred
subject to certain rights or powers or, under certain circumstances, transferred
by gift within three years of death) by an individual who at the time of death
is not a citizen or resident of the United States (as specially defined for U.S.
federal estate tax purposes) will be included in such individual's estate for
U.S. federal estate tax purposes, unless an applicable U.S. estate tax treaty
otherwise applies.
NON-U.S. HOLDERS SHOULD CONSULT WITH THEIR TAX ADVISORS REGARDING U.S. AND
FOREIGN TAX CONSEQUENCES WITH RESPECT TO THE NOTES AND COMMON STOCK.
32
BACKUP WITHHOLDING AND INFORMATION REPORTING
Backup withholding of U.S. federal income tax at a rate of 30.5% may apply
to payments pursuant to the terms of a note or common stock to a U.S. Holder
that is not an "exempt recipient" and that fails to provide certain identifying
information (such as the holder's taxpayer identification number) in the manner
required; under the Economic Growth and Tax Relief Reconciliation Act of 2001,
the backup withholding rate will be reduced for payments made prior to January
1, 2011. The rate will be reduced to 30% on January 1, 2002, 29% on January 1,
2004 and 28% on January 1, 2006. Generally, individuals are not exempt
recipients, whereas corporations and certain other entities are exempt
recipients. Payments made in respect of a note or common stock must be reported
to the IRS, unless the U.S. Holder is an exempt recipient or otherwise
establishes an exemption.
In the case of payments of interest or premium on a note to a Non-U.S.
Holder, backup withholding and information reporting will not apply to payments
with respect to which either requisite certification has been received or an
exemption has otherwise been established, provided that neither we nor a paying
agent has actual knowledge or reason to know that the holder is a U.S. Holder or
that the conditions of any other exemption are not in fact satisfied.
Dividends on the common stock paid to Non-U.S. Holders that are subject to
U.S. withholding tax, as described above, generally will be exempt from U.S.
backup withholding tax but will be subject to certain information reporting
requirements.
Payments of the proceeds of the sale of a note or common stock to or
through a foreign office of a U.S. Holder or a foreign office of a broker that
is a U.S. related person (either a "controlled foreign corporation" or a foreign
person, 50% or more of whose gross income from all sources for the three-year
period ending with the close of its taxable year preceding the payment was
effectively connected with the conduct of a trade or business within the United
States) or a foreign partnership (if at any time during its tax year, one or
more of its partners are U.S. persons who in the aggregate hold more than 50% of
the income or capital interests in the partnership, or such foreign partnership
is engaged in a U.S. trade or business) are subject to certain information
reporting requirements, unless the payee is an exempt recipient or such broker
has evidence in its records that the payee is a Non-U.S. Holder and no actual
knowledge or reason to know that such evidence is false and certain other
conditions are met. Such payments are not currently subject to backup
withholding.
Payments to a Non-U.S. Holder of the proceeds of a sale of a note or common
stock to or through the U.S. office of a broker will be subject to information
reporting and backup withholding unless the payee certifies under penalties of
perjury as to his or her status as a Non-U.S. Holder and satisfies certain other
qualifications (and no agent of the broker who is responsible for receiving or
reviewing such statement has actual knowledge or reason to know that it is
incorrect) and provides his or her name and address or the payee otherwise
establishes an exemption.
Any amounts withheld under the backup withholding rules from a payment to a
holder of a note or common stock will be allowed as a refund or credit against
such holder's U.S. federal income tax provided that the required information is
furnished to the IRS in a timely manner.
A holder of a note or common stock should consult with its tax advisor
regarding the application of the backup withholding rules to its particular
situation, the availability of an exemption therefrom and the procedure for
obtaining such an exemption, if available.
THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS IS
FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH
PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR U.S.
FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING
OF THE NOTES AND OUR COMMON STOCK. TAX ADVISORS SHOULD ALSO BE CONSULTED AS TO
THE U.S. ESTATE AND GIFT TAX CONSEQUENCES AND THE FOREIGN TAX CONSEQUENCES OF
PURCHASING, HOLDING AND DISPOSING OF THE NOTES AND OUR COMMON STOCK, AS WELL AS
THE CONSEQUENCES OF ANY PROPOSED OR EFFECTIVE CHANGE IN APPLICABLE LAWS.
33
SELLING SECURITYHOLDERS
We originally issued the notes in a private placement to Goldman, Sachs &
Co. and Banc of America Securities LLC. The notes were resold by the initial
purchasers to qualified institutional buyers within the meaning of Rule 144A
under the Securities Act in transactions exempt from registration under the
Securities Act. The notes and the shares of common stock issuable upon the
conversion of the notes that may be offered pursuant to this prospectus will be
offered by the selling securityholders, which includes their transferees,
distributees, pledgees or donees or their successors. The following table sets
forth certain information concerning the principal amount of notes beneficially
owned by each selling securityholder and the number of conversion shares that
may be offered from time to time pursuant to this prospectus.
The number of conversion shares shown in the table below assumes conversion
of the full amount of notes held by such holder at the initial conversion rate
of 38.4615 shares per $1,000 principal amount at maturity of notes. This
conversion rate is subject to certain adjustments. Accordingly, the number of
shares of common stock issuable upon conversion of the notes may increase or
decrease from time to time. Under the terms of the indenture, fractional shares
will not be issued upon conversion of the notes. Cash will be paid instead of
fractional shares, if any. As of February 4, 2002, we had 182,364,844 shares of
common stock outstanding.
NUMBER OF
PRINCIPAL AMOUNT AT CONVERSION
MATURITY OF NOTES PERCENTAGE SHARES THAT
BENEFICIALLY OWNED OF NOTES MAY BE
NAME THAT MAY BE SOLD OUTSTANDING SOLD
---- ------------------- ----------- -----------
White River Securities L.L.C. ....................... $ 2,500,000 * 96,153
Bear Stearns & Co. Inc. ............................. 2,500,000 * 96,153
First Union National Bank............................ 12,000,000 3.00% 461,538
First Union Securities Inc. ......................... 2,100,000 * 80,769
Lipper Convertibles, L.P. ........................... 1,750,000 * 67,307
Lipper Offshore Convertibles, L.P. .................. 1,750,000 * 67,307
The Class I C Company................................ 1,500,000 * 57,692
Stark International.................................. 2,538,000 * 97,615
Shepherd Investments International, Ltd. ............ 3,712,000 * 142,769
RCG Halifax Master Fund, LTD......................... 600,000 * 23,076
RCG Multi Strategy LP................................ 1,250,000 * 48,076
Ramius Capital Group................................. 500,000 * 19,230
RCG Latitude Master Fund, LTD........................ 3,350,000 * 128,846
Bank Austria Cayman Islands, LTD..................... 10,300,000 2.58% 396,153
JMG Convertible Investments, LP...................... 3,000,000 * 115,384
JMG Triton Offshore Fund, LTD........................ 5,000,000 1.25% 192,307
BNP Paribas Equity Strategies, SNC................... 3,164,000 * 121,692
Tribeca Investments L.L.C. .......................... 4,000,000 1.0% 153,846
Fidelity Devonshire Trust: Fidelity Equity-Income
Fund............................................... 3,390,000 * 130,384
Fidelity Puritan Trust: Fidelity Puritan Fund........ 2,000,000 * 76,923
Variable Insurance Products Fund: Equity Income
Portfolio.......................................... 1,610,000 * 61,923
Sturgeon Limited..................................... 409,000 * 15,730
Robertson Stephens................................... 7,000,000 1.75% 269,230
Deutsche Bank Alex Brown Inc. ....................... 17,475,000 4.37% 672,114
SG Cowen Securities Corporation...................... 3,000,000 * 115,384
Highbridge International L.L.C. ..................... 54,500,000 13.63% 2,096,151
Spear, Leeds & Kellogg, L.P. ........................ 2,000,000 * 76,923
Alta Partners Holdings, LDC.......................... 5,000,000 1.25% 192,307
34
NUMBER OF
PRINCIPAL AMOUNT AT CONVERSION
MATURITY OF NOTES PERCENTAGE SHARES THAT
BENEFICIALLY OWNED OF NOTES MAY BE
NAME THAT MAY BE SOLD OUTSTANDING SOLD
---- ------------------- ----------- -----------
Morgan Stanley Dean Witter Convertible Securities
Trust.............................................. 2,000,000 * 76,923
HFR CA Select Fund................................... 400,000 * 15,384
San Diego County Employee Retirement Association..... 2,000,000 * 76,923
Zazove Hedged Convertible Fund L.P. ................. 2,000,000 * 76,923
Zazove Income Fund L.P. ............................. 2,000,000 * 76,923
Zurich Institutional Benchmarks Masters Fund LTD..... 1,100,000 * 42,307
Grace Brothers Management LLC........................ 3,000,000 * 115,384
Aristeia International Limited....................... 9,750,000 2.44% 374,999
Aristeia Partners, LP................................ 2,750,000 * 105,769
Purchase Associates, LP.............................. 1,537,000 * 59,115
Levco Alternative Fund, Ltd. ........................ 5,377,000 1.34% 206,807
Common Fund Event Driven Company, Ltd. .............. 189,000 * 7,269
Lyxor Master Fund.................................... 397,000 * 15,269
Rockhaven Premier Dividend Fund...................... 700,000 * 26,923
Goldman, Sachs and Company(1)........................ 10,000,000 2.50% 384,615
TD Securities (USA) Inc. ............................ 7,000,000 1.75% 269,230
CooperNeff Convertible Strategies Fund, L.P. ........ 927,000 * 35,653
UBS AG London Branch................................. 38,750,000 9.69% 1,490,383
Salomon Brothers Asset Management Inc. .............. 50,486,000 12.62% 1,941,767
MLQA Convertible Securities Arbitrage Ltd. .......... 16,000,000 4.00% 615,384
Silvercreek Limited Partnership...................... 1,200,000 * 46,153
Silvercreek II Limited............................... 500,000 * 19,230
Onex Industrial Partners Limited..................... 1,400,000 * 53,846
Morgan Stanley....................................... 16,000,000 4.0% 615,384
Oppenheimer Convertible Securities Fund.............. 2,000,000 * 76,923
First Union International Capital Markets Inc. ...... 14,500,000 3.63% 557,691
Palladin Securities LLC.............................. 1,500,000 * 57,692
DeAm Convertible Arbitrage Ltd. ..................... 3,500,000 * 134,615
Oakwood Healthcare, Inc. Pension Plan................ 95,000 * 3,653
Oakwood Healthcare, Inc. ............................ 128,250 * 4,932
Pebble Capital Inc. ................................. 400,000 * 15,384
UBS Warburg LLC...................................... 8,275,000 2.07% 318,268
Any other holder of notes or future transferee from
any such holder(2)................................. 36,240,750 9.06% 1,393,897
---------------
* Less than 1%
(1)The investment banking division of Goldman, Sachs & Co. has, from time to
time and in exchange for fees, been engaged by Teradyne in connection with
various financial advisory and transactional matters, including acting as one
of the initial purchasers of the notes as described above.
(2) Information concerning other selling holders of notes will be set forth in
prospectus supplements from time to time, if required.
The preceding table has been prepared based upon the information furnished
to us by the selling securityholders named above.
35
Except as noted above, none of the selling securityholders has had any
position, office or other material relationship with us or our affiliates within
the past three years.
The selling securityholders identified above may have sold, transferred or
otherwise disposed of some or all of their notes since the date on which the
information in the preceding table is presented in transactions exempt from the
registration requirements of the Securities Act. Information concerning the
selling securityholders may change from time to time and, if necessary, we will
supplement this prospectus accordingly. We cannot give an estimate as to the
amount of the notes or conversion shares that will be held by the selling
securityholders upon the termination of this offering because the selling
securityholders may offer some or all of their notes or conversion shares
pursuant to the offering contemplated by this prospectus. See "Plan of
Distribution."
36
PLAN OF DISTRIBUTION
The selling securityholders and their successors, which includes their
transferees, distributees, pledgees or donees or their successors, may sell the
notes and the underlying common stock directly to purchasers or through
underwriters, broker-dealers or agents. Underwriters, broker-dealers or agents
may receive compensation in the form of discounts, concessions or commissions
from the selling securityholders or the purchasers. These discounts, concessions
or commissions may be in excess of those customary in the types of transactions
involved.
The notes and the underlying common stock may be sold in one or more
transactions at fixed prices:
- at prevailing market prices at the time of sale;
- at prices related to such prevailing market prices;
- at varying prices determined at the time of sale; or
- at negotiated prices.
Such sales may be effected in transactions in the following manner (which
may involve crosses or block transactions):
- on any national securities exchange or quotation service on which the
notes or the common stock may be listed or quoted at the time of sale;
- in the over-the-counter market;
- in transactions otherwise than on such exchanges or services or in the
over-the-counter market;
- through the writing of options, whether such options are listed on an
options exchange or otherwise; or
- through the settlement of short sales.
Selling securityholders may enter into hedging transactions with broker-dealers
or other financial institutions which may in turn engage in short sales of the
notes or the underlying common stock and deliver these securities to close out
such short positions, or loan or pledge the notes or the common stock into which
the notes are convertible to broker-dealers that in turn may sell these
securities.
From time to time, one or more of the selling securityholders may
distribute, devise, gift, pledge, hypothecate or grant a security interest in
some or all of the securities owned by them. Any such distributees, devisees or
donees will be deemed to be selling securityholders. Any such pledgees, secured
parties or persons to whom the securities have been hypothecated will, upon
foreclosure in the event of default, be deemed to be selling securityholders.
The aggregate proceeds to the selling securityholders from the sale of the
notes or underlying common stock will be the purchase price of the notes or
common stock less any discounts and commissions. A selling securityholder
reserves the right to accept and, together with their agents, to reject, any
proposed purchase of notes or common stock to be made directly or through
agents. We will not receive any of the proceeds from this offering.
Our outstanding common stock is listed for trading on the New York Stock
Exchange. We do not intend to list the notes for trading on any national
securities exchange or on the New York Stock Exchange. We cannot guarantee that
any trading market will develop for the notes.
The notes and underlying common stock may be sold in some states only
through registered or licensed brokers or dealers. The selling securityholders
and any underwriters, broker-dealers or agents that participate in the sale of
the notes and common stock into which the notes are convertible may be
"underwriters" within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities Act.
Selling securityholders who are "underwriters" within the meaning of Section
2(11) of the Securities Act will be subject to the prospectus delivery
requirements of the Securities Act. The selling securityholders have
37
acknowledged that they understand their obligations to comply with the
provisions of the Securities Exchange Act and the rules thereunder relating to
stock manipulation, particularly Regulation M, and have agreed that they will
not engage in any transaction in violation of such provisions.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. A selling
securityholder may not sell any notes or common stock described herein and may
not transfer, devise or gift such securities by other means not described in
this prospectus.
If required, the specific notes or common stock to be sold, the names of
the selling securityholders, the respective purchase prices and public offering
prices, the names of any agent, dealer or underwriter, and any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement of which this prospectus is a part.
Pursuant to the registration rights agreement filed as an exhibit to the
registration statement of which this prospectus is a part, we and the selling
securityholders will be indemnified by each other against certain liabilities,
including certain liabilities under the Securities Act or will be entitled to
contribution in connection with these liabilities.
We have agreed to pay substantially all of the expenses incidental to the
registration, offering and sale of the notes and underlying common stock to the
public other than applicable transfer taxes and commissions, fees and discounts
of underwriters, brokers, dealers and agents.
LEGAL MATTERS
Certain legal matters with respect to the issuance of the securities
offered hereby will be passed upon for Teradyne, Inc. by Testa, Hurwitz &
Thibeault, LLP, Boston, Massachusetts. As of the date of this prospectus,
certain attorneys with the firm of Testa, Hurwitz & Thibeault, LLP beneficially
own an aggregate of 70,126 shares of Teradyne's common stock. In addition,
Richard J. Testa is a member of the law firm Testa, Hurwitz & Thibeault, LLP and
serves as Clerk of Teradyne and on Teradyne's board of directors.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K for the year ended December 31, 2000, have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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$400,000,000
TERADYNE, INC.
3.75% CONVERTIBLE SENIOR NOTES
DUE OCTOBER 15, 2006
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[TERADYNE, INC. LOGO]
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