8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): January 25, 2006

TERADYNE, INC.

(Exact Name of Registrant as Specified in Charter)

Massachusetts	001-06462	04-2272148
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

321 Harrison Avenue, Boston, Massachusetts	02118
(Address of Principal Executive Offices)	(Zip Code)

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

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

2006 Variable Compensation Plan

On January 26, 2006, the Board of Directors (the “Board”) of Teradyne, Inc. (the “Company”) approved the Variable Compensation Plan for 2006 (the “2006 VC Plan”). Pursuant to the 2006 VC Plan, executive officers and certain eligible senior employees (each, a “VC Participant”) who are integral to the success of the business may receive a variable compensation payment from the Company as determined and approved by the Compensation Committee of the Board (or the full Board in the case of the CEO). The amount of variable compensation, if any, payable to each VC Participant (other than VC Participants in the corporate division, the CEO, CFO and certain other executives) is based on business unit performance during the prior year, as determined by the Compensation Committee and to the CEO, CFO and certain other executive officers is based on a weighted aggregation of the business unit performances, and, in each case, is calculated as a percentage of the VC Participant’s base annual salary (the “VC Factor”). The VC Factors for new VC Participants start at 10% and with greater levels of responsibility may be as high as 200%.

In evaluating individual business group performance, the Compensation Committee and the Board consider various factors, including, profitability, return on net assets, market share, strategic position, overall business strategy and quantitative vital goals.

The Board and/or Compensation Committee may at any time, in their sole discretion, further adjust, modify or terminate the 2006 VC Plan, in full or in part.

The 2006 VC Plan became effective on January 26, 2006, the date of its approval by the Board. The above description of the 2006 VC Plan is not a complete description of all terms and conditions of the 2006 VC Plan and is subject to and qualified in its entirety by the 2006 VC Plan, which is filed as Exhibit 99.1 to this Form 8-K.

Restricted Stock Unit Grant Agreements

In connection with the first grant of restricted stock units to executive officers and directors, the Board approved on January 26, 2006, the agreement forms for restricted stock unit grants for executive officers, including the CEO (the “Executive Grant Agreement”) and for the directors (the “Director Grant Agreement” and, together with the Executive Grant, the “Grant Agreements”). Awards under the Grant Agreements will be made pursuant to the Teradyne, Inc. 1997 Employee Stock Option Plan (the “1997 Plan”).

Under the terms of the Grant Agreements, awards to directors will vest after a one year period, with 100% of the award vesting on the first anniversary of the grant date. Awards to executive officers, including the CEO, will vest over two years, with 50% of the award subject to time-based vesting and 50% of the award subject to performance-based vesting. The performance criteria (which will be consistent with the performance criteria used for the 2006 VC Plan) for performance-based grants will be assessed on the first anniversary of the grant date and, in turn, determine the number of performance-based restricted stock units available for vesting over the two-year vesting period; portions of the performance-based grants not available for vesting will be forfeited.

Individuals receiving restricted stock unit awards will not have any right in, to or with respect to any shares covered by the award until the award is settled by issuance of shares to the individuals.

The above description of the Grant Agreements is not a complete description of all terms and conditions of the Grant Agreements and is subject to and qualified in its entirety by the forms of the Executive Grant Agreement and the Director Grant Agreement filed as Exhibits 10.1 and 10.2, respectively, to this Form 8-K.

Executive Compensation

On January 25, 2006, the Compensation Committee took the following actions regarding executive compensation:

1) Reviewed and approved base salaries and VC Factors for the executive officers for 2006, effective as of January 1, 2006. The Compensation Committee also recommended for Board approval, a salary increase for the CEO for 2006, effective as of January 1, 2006, which recommendation was approved by the Board on January 26, 2006. The new base salaries for the named executive officers is as follows: Mr. Bradley, $625,000; Mr. Beecher, $360,000; Mr. Jagiela, $348,571; Mr. Hotchkiss, $300,000 and Ms. Casal, $273,333. Mr. Jagiela and Ms. Casal are expected to be “named executive officers” as defined under Item 402(a)(3) of Regulation S-K for the fiscal year 2006.

2) Evaluated and assessed the overall corporate and individual business group performance under the Variable Compensation Plan for the 2005 performance period. In connection therewith, the Committee also approved the variable compensation payouts under the 2005 Variable Compensation Plan for the executive officers. The Compensation Committee also recommended for Board approval the payout for the CEO, which recommendation was approved by the Board on January 26, 2006.

3) Reviewed and approved the grant of time-based and performance-based restricted stock units under the 1997 Plan to executive officers and recommended for Board approval the grant of the restricted stock units to the CEO, which recommendation was approved by the Board on January 26, 2006. The grants to the CEO and executive officers became effective on January 26, 2006. The form of the Executive Grant Agreement for the executive officers, including the CEO, is set forth in Exhibit 10.1 and is described above.

Non-Employee Director Compensation

On January 26, 2006, the non-employee directors, including the Chairman of the Board, waived the annual automatic stock option grants that they would have received on February 6, 2006 under the 1996 Non-Employee Director Stock Option Plan (options for the purchase of 15,000 and 30,000 shares of Teradyne’s common stock for the directors and the Chairman, respectively) in exchange for the restricted stock units described below.

On January 26, 2006, the Board, based on the recommendation of the Compensation Committee, approved the grant of restricted stock units that will vest over a one year period to all non-employee directors and the Chairman of the Board. Grants to directors will have a value of $90,000 and the grant to the Chairman will

have a value of $180,000, in each case, based on the fair market value of Teradyne’s common stock on the grant date. These grants of restricted stock units will be made on February 6, 2006 under the 1997 Plan. In connection with the approval by the Board of the restricted stock unit awards, the Board also approved the terms of the Director Grant Agreement, the form of which is set forth in Exhibit 10.2 and is described above.

Item 8.01 Other Events

On January 26, 2006, the Board approved resolutions that authorize management to repurchase up to an aggregate of $300 million of the of 3.75% Convertible Senior Notes due October 15, 2006 (the “Notes”), which sum represents the remaining outstanding amount of the Notes, through open market purchases, privately negotiated transactions, and/or auctions for a price not to exceed 100% of the principal amount of the Notes.

On January 26, 2006, the Board approved a new policy regarding director election in the form of an amendment to the Teradyne, Inc. Corporate Governance Guidelines (the “Guidelines”). This modification to the Guidelines was implemented as a part of the Company’s continuing efforts to enhance corporate governance procedures. Under the modified Guidelines, in an uncontested election, any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” such election shall promptly tender his or her resignation following certification of the shareholder vote. The Nominating and Governance Committee or another committee of the Board (the “Committee”) will consider the resignation offer and recommend to the Board whether to accept it. The board will act on the Committee’s recommendation within 90 days following certification of the shareholder vote. Thereafter, the Board will promptly disclose their decision relative to the tendered resignation in a filing with the Securities and Exchange Commission. Any director who tenders his or her resignation pursuant to this provision will not participate in the Committee recommendation or Board action regarding whether to accept the resignation offer. The amended Guidelines became effective immediately upon its adoption by the Board. A copy of the Guidelines, as amended and restated, is filed as Exhibit 99.2 to this Form 8-K and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits

Exhibit No.	Description
10.1	Form of Restricted Stock Unit Grant Agreement under the 1997 Employee Stock Option Plan for Executive Officers (including CEO)
10.2	Form of Restricted Stock Unit Grant Agreement under the 1997 Employee Stock Option Plan for Directors
99.1	2006 Variable Compensation Plan
99.2	Teradyne, Inc. Corporate Governance Guidelines, as Amended on January 26, 2006

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TERADYNE, INC.
Dated: January 30, 2006	By:	/s/    GREGORY R. BEECHER
	Name:	Gregory R. Beecher
	Title:	V.P. & Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
10.1	Form of Restricted Stock Unit Grant Agreement under the 1997 Employee Stock Option Plan for Executive Officers (including CEO)
10.2	Form of Restricted Stock Unit Grant Agreement under the 1997 Employee Stock Option Plan for Directors
99.1	2006 Variable Compensation Plan
99.2	Teradyne, Inc. Corporate Governance Guidelines, as Amended on January 26, 2006

EX-10.1

Exhibit 10.1

Form of Restricted Stock Unit Grant Agreement

for Executive Officers

TERADYNE, INC. 1997 EMPLOYEE STOCK OPTION PLAN

NOTICE OF RESTRICTED STOCK UNIT GRANT AND TERMS

Name	Employee ID:
Division: Supervisor: Location:

In granting restricted stock units, Teradyne seeks to provide employees, consultants and/or directors with incentive to help drive the company’s future success and to share in the economic benefits of that success. We all look forward to your contributions to that effort.

In recognition of your contributions to Teradyne, you have been granted an award consisting of the right to receive up to XX shares of Teradyne common stock. This grant was approved effective XXX (the “Effective Date”).

This award is subject to the Restricted Stock Unit Terms attached hereto and the terms of the Teradyne 1997 Employee Stock Option Plan, as amended (the “Plan”). The shares covered by this award will be delivered over time and pursuant to certain Performance Criteria as described in and subject to the vesting conditions of the Restricted Stock Unit Terms.

The Plan prospectus, consisting of a “Participant Information” document that summarizes the Plan and the complete Plan, is available on “In-Site,” Teradyne’s internal Web site, for your review. To access the prospectus, log on to In-Site (http://www.corp.teradyne.com/), click on the “DirectLink Plus” icon for “Benefits and Forms” and select the “Stock Info” link for “Information about the 1997 Plan,” or simply type in https://directlink.corp.teradyne.com/mybenefits/stock/1997stk.asp

Please note that printed versions of the Plan prospectus documents are available to you, at no charge, upon request to James P. Dawson, Teradyne, Inc., 321 Harrison Avenue, Boston, MA 02118, (617) 422-2112.

TERADYNE, INC.

V.P., General Counsel and Secretary

(1997 RSU)

Grant #XX

RESTRICTED STOCK UNIT TERMS

This award is governed by and subject to Teradyne’s 1997 Employee Stock Option Plan, as amended (the “Plan”), which, together with the following provisions controls the meaning of terms and the rights of the recipient. Capitalized and defined terms used and not defined below will have the meaning set forth in the Plan.

1. Award Grant, Vesting and Transfer

(a) Payment of par value. Teradyne hereby grants to the recipient that number of shares of Teradyne common stock as is set forth on the Notice of Restricted Stock Grant attached hereto. When the underlying shares of Teradyne common stock are issued to the recipient, par value will be deemed paid by the recipient for each share by past services rendered by the recipient.

(b) This award vests yearly on the anniversary of the Effective Date. None of this grant will be vested on the Effective Date. On the first anniversary of the Effective Date, (i) 25% of the total grant will vest and (ii) a percentage ranging from 0 to 100% (the “Performance Award Percentage”) based on the variable compensation payout as determined by Teradyne’s Compensation Committee or Board of Directors (the “VC Payout”) of another 25% of the total grant will vest. On the second anniversary of the Effective Date, (i) another 25% of the total grant will vest and (ii) the Performance Award Percentage (as determine on the first anniversary of the Effective Date) of the remaining 25% of the total grant will vest.

The portion of the grant subject to vesting on each anniversary of the Effective Date that does not vest on such date will be forfeited. Subject to approval by Teradyne’s Compensation Committee or the Board of Directors, the committee appointed by Teradyne’s Board of Directors to administer the Plan (the “Committee”) shall have the right to accelerate the date that any installment of this award becomes vested.

(c) This award will not vest further after termination of employment or other business relationship except in limited certain circumstances. This award will not vest after the recipient’s employment or other business relationship ends, regardless of the reason, provided, however, that if the recipient’s employment or other business relationship with Teradyne or a Related Corporation ends on account of disability, that portion of this award which would have vested under the applicable rule stated in (b) above had the recipient’s employment or business relationship continued for 30 months following his or her termination of employment or business relationship on account of disability will vest.

Employment or another business relationship shall be considered as continuing uninterrupted during any bona fide leave of absence (such as those attributable to illness, military obligations or governmental service) provided that the period of such leave does not exceed 90 days or, in the case of an employee, if longer, any period during which the employee’s right to reemployment is guaranteed by statute. A bona fide leave of absence with the written approval of the Committee shall not be considered an interruption of employment or other business relationship, provided that such written approval contractually obligates the Company or any Related Corporation to continue the employment or other business relationship of the recipient after the approved period of absence.

(d) No rights as stockholder; Issuance. The recipient shall not have any right in, to or with respect to any shares which may be covered by this award (including but not limited to the right to vote or to receive dividends) until the award is settled by issuance of shares to the recipient. All vested shares issued in respect of this award will be transferred or issued to the recipient (or his or her estate, in the event of his or her death) promptly after the date they vest but in any event within 2 ¹/2 months following the calendar year in which they become vested (or any earlier date, after vesting, required to avoid characterization as non-qualified deferred compensation under Section 409A of the Code). Teradyne will not be required to transfer or issue any vested shares until arrangements satisfactory to it have been made to address any income, withholding and employment tax requirements which might arise by reason of the vesting and transfer or issuance of shares.

(e) This award may not be assigned or transferred. This award is not assignable or transferable (except by will or the laws of descent and distribution).

2. Capital Changes and Business Succession.

Section 13 of the Plan, containing provisions for adjusting the number of shares exercisable under an option granted under the Plan if a recapitalization, stock split, merger, etc. occurs, will apply on a substantially equivalent basis in the case of shares covered by this award which have not vested and been delivered at the time of such a recapitalization, stock split, merger, etc. In that event, the recipient of the award will be notified of the adjustment, if any.

3. Employment or Business Relationship.

Granting this award does not imply any right of continued employment or business relationship by the Company or a Related Corporation, and does not affect the right of the recipient or the Company or a Related Corporation to terminate employment or a business relationship at any time.

4. Stock Registration.

Shares to be issued under this award are currently registered under the Securities Act of 1933, as amended. If such registration is not in effect at the time of vesting, the recipient will be required to represent to the Company that he or she is acquiring such shares as an investment and not with a view to the sale of those shares.

5. Term.

This Agreement will terminate on _________, 20__ [three years from Effective Date].

EX-10.2

Exhibit 10.2

Form of Restricted Stock Unit Grant Agreement

for Directors

TERADYNE, INC. 1997 EMPLOYEE STOCK OPTION PLAN

NOTICE OF RESTRICTED STOCK UNIT GRANT AND TERMS

Name

In granting restricted stock units, Teradyne seeks to provide employees, consultants and/or directors with incentive to help drive the company’s future success and to share in the economic benefits of that success. We all look forward to your contributions to that effort.

In recognition of your contributions to Teradyne, you have been granted an award consisting of the right to receive up to XX shares of Teradyne common stock. This grant was approved effective XXX (the “Effective Date”).

This award is subject to the Restricted Stock Unit Terms attached hereto and the terms of the Teradyne 1997 Employee Stock Option Plan, as amended (the “Plan”). The shares covered by this award will be delivered over time as described in and subject to the vesting conditions of the Restricted Stock Unit Terms.

TERADYNE, INC.

V.P., General Counsel and Secretary

(1997 RSU)

Grant #XX

RESTRICTED STOCK UNIT TERMS

This award is governed by and subject to Teradyne’s 1997 Employee Stock Option Plan, as amended (the “Plan”), which, together with the following provisions controls the meaning of terms and the rights of the recipient. Capitalized and defined terms used and not defined below will have the meaning set forth in the Plan.

1. Award Grant, Vesting and Transfer

(a) Payment of par value. Teradyne hereby grants to the recipient that number of shares of Teradyne common stock as is set forth on the Notice of Restricted Stock Grant attached hereto. When the underlying shares of Teradyne common stock are issued to the recipient, par value will be deemed paid by the recipient for each share by past services rendered by the recipient.

(b) This award vests yearly on the anniversary of the Effective Date. None of this grant will be vested on the Effective Date. 100% of the total grant will vest on the first anniversary of the Effective Date. The Teradyne Board of Directors shall have the right to accelerate the date that any installment of this award becomes vested.

(c) This award will not vest further after termination of employment or other business relationship except in limited certain circumstances. This award will not vest after the recipient’s employment or other business relationship ends, regardless of the reason, provided, however, that if the recipient’s employment or other business relationship with Teradyne or a Related Corporation ends on account of disability, that portion of this award which would have vested under the applicable rule stated in (b) above had the recipient’s employment or business relationship continued for 30 months following his or her termination of employment or business relationship on account of disability will vest.

Employment or another business relationship shall be considered as continuing uninterrupted during any bona fide leave of absence (such as those attributable to illness, military obligations or governmental service) provided that the period of such leave does not exceed 90 days or, in the case of an employee, if longer, any period during which the employee’s right to reemployment is guaranteed by statute. A bona fide leave of absence with the written approval of the Committee shall not be considered an interruption of employment or other business relationship, provided that such written approval contractually obligates the Company or any Related Corporation to continue the employment or other business relationship of the recipient after the approved period of absence.

(d) No rights as stockholder; Issuance. The recipient shall not have any right in, to or with respect to any shares which may be covered by this award (including but not limited to the right to vote or to receive dividends) until the award is settled by issuance of shares to the recipient. All vested shares issued in respect of this award will be transferred or issued to the recipient (or his or her estate, in the event of his or her death) promptly after the date they vest but in any event within 2 ¹/2 months following the calendar year in which they become vested (or any earlier date, after vesting, required to avoid characterization as non-qualified deferred compensation under Section 409A of the Code). Teradyne will not be required to transfer or issue any vested shares until arrangements satisfactory to it have been made to address any income, withholding and employment tax requirements which might arise by reason of the vesting and transfer or issuance of shares.

(e) This award may not be assigned or transferred. This award is not assignable or transferable (except by will or the laws of descent and distribution).

2. Capital Changes and Business Succession. Section 13 of the Plan, containing provisions for adjusting the number of shares exercisable under an option granted under the Plan if a recapitalization, stock split, merger, etc. occurs, will apply on a substantially equivalent basis in the case of shares covered by this award which have not vested and been delivered at the time of such a recapitalization, stock split, merger, etc. In that event, the recipient of the award will be notified of the adjustment, if any.

3. Employment or Business Relationship. Granting this award does not imply any right of continued employment or business relationship by the Company or a Related Corporation, and does not affect the right of the recipient or the Company or a Related Corporation to terminate employment or a business relationship at any time.

4. Stock Registration. Shares to be issued under this award are currently registered under the Securities Act of 1933, as amended. If such registration is not in effect at the time of vesting, the recipient will be required to represent to the Company that he or she is acquiring such shares as an investment and not with a view to the sale of those shares.

5. Term. This Agreement will terminate on                     , 20    . [Two years from Effective Date]

EX-99.1

Exhibit 99.1

Variable Compensation Plan

The Variable Compensation Plan (“VC Plan”) provides a variable compensation payment to the Company’s executive officers and certain eligible senior employees each January based on individual business group (Divisional) performance during the prior year, as determined by the Compensation Committee of the Board of Directors (“Compensation Committee) or the Board of Directors. The amount of Variable Compensation each executive officer and senior employee receives is a function of three factors:

(A) The executive officer’s and employee’s base annual salary as of the end of the year;

(B) Performance of the individual business group (“Division”) versus goals. For the G&A corporate group, the payout is based 50% on the individual performance of the G&A corporate group and 50% on a weighted aggregation of the individual Divisional performances. For the CEO, CFO and certain other executive officers, the payout is based on a weighted aggregation of the individual Divisional performances; and

(C) The executive officer’s and employee’s “variable compensation factor” which is determined by the Compensation Committee on the basis of the individual’s responsibility and experience level. The CEO’s variable compensation factor is determined by the full Board of Directors.

Each executive officer’s and employee’s “variable compensation factor” is a percentage of his or her base annual salary, starting at 10% for new participants. At greater levels of responsibility and experience, the variable compensation factor may increase to or exceed 180% of base annual salary. Variable compensation factors are reviewed each year. A newly hired executive officer or employee, who is approved for eligibility under the VC Plan, will be eligible to receive a VC Plan payment for their first year of employment, pro-rated from the date of hire.

At year end, the Compensation Committee evaluates each individual Division’s performance versus goals, with emphasis on the vital goals. Given the dynamics of the business, the Company’s VC Plan relies heavily on the Compensation Committee’s or Board of Director’s evaluation and assessment of performance. Based on this evaluation, the Compensation Committee determines whether any variable compensation should be paid and, if so, the amount for distribution, except that the full Board of Directors determines whether any variable compensation should be paid to the CEO and, if so, the amount. The payments under the VC Plan will be made only after approval by the Compensation Committee and/or Board of Directors.

The following factors are considered in evaluating individual Divisional performance: (1) the extent to which quantitative and qualitative plans were met for the

year, with an emphasis on profitability, return on net assets and market share; (2) the extent to which process improvement results were achieved; (3) the extent to which yearly results verified each Division’s strategy and improved its strategic position; and (4) the extent to which each Division’s yearly mid-term plan and strategy was credible and contributed to the Company’s ability to adapt to changes in the marketplace or environment.

Administrative rules and procedures for the VC Plan are maintained, monitored and implemented by the Company’s Human Resources department.

The Compensation Committee has the sole discretion to interpret and apply the terms of this VC Plan, including the determination of whether any particular employee will receive a payment, and the amount of any such payment. The Board of Directors and the Compensation Committee reserve the right to adjust, modify or terminate the VC Plan, in full or in part, at any time, in its sole discretion. Subject to an amendment to or termination of this VC Plan by the Compensation Committee or the Board of Directors, this VC Plan shall commence in 2006 and renew annually each year thereafter.

EX-99.2

Exhibit 99.2

TERADYNE, INC.

CORPORATE GOVERNANCE GUIDELINES

The Board of Directors (the “Board”) of TERADYNE, INC. (the “Company”) has adopted the following Corporate Governance Guidelines (the “Guidelines”) to assist the Board in the exercise of its duties and responsibilities and to serve the best interests of the Company and its stockholders. The Guidelines should be applied in a manner consistent with all applicable laws and stock exchange rules and the Company’s charter and bylaws, each as amended and in effect from time to time. The Guidelines provide a framework for the conduct of the Board’s business. The Board may modify or make exceptions to the Guidelines from time to time in its discretion and consistent with its duties and responsibilities to the Company and its stockholders.

A. Director Qualification Standards

1. Independence. A majority of the members of the Board shall be independent directors. To be considered independent: (1) a director must be independent as defined by the SEC, the New York Stock Exchange Listed Company Manual and their related rules and (2) in the Board’s judgment, the director must not have a material relationship with the Company.

2. Other Directorships. A director shall limit the number of other public company boards on which he or she serves so that he or she is able to devote adequate time to his or her duties to the Company, including preparing for and attending meetings. Directors should notify the Chairman of the Board and the Chairman of the Nominating and Corporate Governance Committee in advance of accepting an invitation to serve on another public company board. Service on boards and/or committees of other organizations shall comply with the Company’s conflict of interest policies.

3. Retirement. Any director who attains 72 years of age shall immediately retire from his or her position as a Director of the Company, provided that this limitation shall not apply to any Director serving on January 28, 1997.

B. Director Selection Process

4. Selection of Director Candidates. Except where the Company is legally required by contract or otherwise to provide third parties with the authority to nominate directors, the Nominating and Corporate Governance Committee shall be responsible for (i) identifying individuals qualified to become Board members and (ii) recommending to the Board the persons to be nominated by the Board for election or re-election as directors at the annual or special meeting of stockholders and the persons to be elected by the Board to fill any vacancies on the Board. Director nominees shall be selected by the Nominating and Corporate Governance

Committee in accordance with these Guidelines, the policies and principles in its charter and the criteria set forth in Attachment A to these Guidelines. It is expected that the Nominating and Corporate Governance Committee will have direct input from the Chairman of the Board, and from the Chief Executive Officer. The Nominating and Corporate Governance Committee shall be responsible for reviewing with the Board, on an annual basis, the requisite skills and criteria for Board members as well as the composition of the Board as a whole.

5. Extending the Invitation to a New Director Candidate to Join the Board. The invitation to join the Board should be extended by the Chairman of the Board, on behalf of the Board, and the Chairman of the Nominating and Corporate Governance Committee, on behalf of such Committee.

C. Board Leadership

6. Selection of Chairman of the Board: Currently and historically, the Board of Directors has combined the role of the Chairman of the Board with the Chief Executive Officer. However, the Board has the flexibility to decide whether it is best for the Company, at any given point in time, for the roles of the Chief Executive Officer and the Chairman of the Board to be separate or combined and, if separate, whether the Chairman should be selected from the independent directors or be an employee.

7. Former Chief Executive Officer’s Board Membership. The continuation of a former Chief Executive Officer of the Company on the Board, including remaining in the position of Chairman, is a matter to be decided in each individual instance by the Board, upon recommendation of the Nominating and Corporate Governance Committee.

8. Lead Director. The Board utilizes a rotation system for lead director service. Each non-management director serves as the lead director from time to time as service rotates among directors on a per meeting basis. The Board may, at any time in its discretion, designate a lead direction for a specified term. The lead director chairs executive sessions of the non-management directors and performs such other duties as the Board may delegate from time to time to assist the Board in fulfillment of its responsibilities.

D. Board Composition

9. Size of the Board: The Company’s Bylaws require the Board to consist of 3-15 members.

10. Term and Tenure: Directors elected at the annual meeting of shareholders serve a three (3) year term. Directors who have been elected to fill a vacancy complete the remainder of the former Director’s three (3) year term. There are no limits on the number of terms that a Director can serve. Term limits could result in loss of directors who have been able to develop, over a period of time, increasing insight

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into the Company and its operations and an institutional memory that benefit the entire membership of the Board, as well as management. The re-nomination of existing directors should not be viewed as automatic but should be based on continuing qualification under the criteria set forth in Attachment A. The Nominating and Corporate Governance Committee shall consider the existing directors’ performance on the Board and any committee and review each director’s continuation on the Board annually.

11. Effect of Withheld Votes on an Uncontested Election. Any nominee for director in an uncontested election (i.e., an election where the number of nominees is not greater than the number of directors to be elected) who receives a greater number of votes “withheld” from his or her election than votes “for” such election shall, promptly following certification of the shareholder vote, offer his or her resignation to the Board for consideration in accordance with the following procedures, all of which procedures shall by completed within 90 days following certification of the shareholder vote:

a. The Committee (as defined below) shall evaluate the best interests of the Company and its shareholders and shall recommend to the Board the action to be taken with respect to such offered resignation (which can range from accepting the resignation, to maintaining the director but addressing what the Committee believes to be the underlying cause of the withhold votes, to resolving that the director will not be re-nominated in the future for election, to rejecting the resignation). In reaching its recommendation, the Committee shall consider all factors it deems relevant, including, as it deems appropriate, any stated reasons why shareholders withheld votes from such director, any alternatives for curing the underlying cause of the withheld votes, the director’s tenure, the director’s qualifications, the director’s past and expected future contributions to the Company and the overall composition of the Board, including whether accepting the resignation would cause the Company to fail to meet any applicable SEC or NYSE requirements.

b. The Board shall act on the Committee’s recommendation. In acting on the Committee’s recommendation, the Board will consider all of the factors considered by the Committee and such additional factors as it deems relevant.

c. Following the Board’s determination, the Company shall promptly publicly disclose in a document furnished or filed with the SEC the Board’s decision of whether or not to accept the resignation offer and an explanation of how the decision was reached, including, if applicable, the reasons for rejecting the offered resignation.

d. A director who is required to offer his or her resignation in accordance with this policy shall not be present during deliberations or voting of the Committee or the Board regarding whether to accept his or her resignation

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or, except as otherwise provided below, a resignation offered by any other director in accordance with this policy. Prior to voting, the Committee and the Board will afford the affected director an opportunity to provide the Committee or the Board with any information or statement that he or she deems relevant.

e. For purposes of this policy, the term “Committee” means (i) the Nominating and Corporate Governance Committee, provided such committee then consists of at least three directors, each of whom is an independent director (as defined in accordance with the Company’s Corporate Governance Guidelines) and none of whom is a director who is required to offer his or her resignation in accordance with this policy or (ii) if clause (i) is not satisfied, a committee of at least three directors designated by the Board, each of the members of which is an independent director (as defined in accordance with the Company’s Corporate Governance Guidelines) and none of the members of which is a director who is required to offer his or her resignation in accordance with this policy; provided, however, that if there are fewer than three independent directors then serving on the Board who are not required to offer their resignations in accordance with this policy, then the Committee shall be comprised of all of the independent directors and each independent director who is required to offer his or her resignation in accordance with this policy shall recuse himself or herself from the Committee and Board’s deliberations and voting with respect to his or her individual offer to resign.

f. The foregoing procedures will be summarized and disclosed each year in the proxy statement for the Company’s annual meeting of stockholders.

E. Director Responsibilities

1. Oversee Management of the Company. The principal responsibility of the directors is to oversee the management of the Company and, in so doing, to serve the best interests of the Company and its stockholders. This responsibility includes:

• Reviewing and approving fundamental operating, financial and other corporate plans, strategies and objectives.

• Evaluating the performance of the Company and its senior executives and taking appropriate action, including removal, when warranted.

• Evaluating the Company’s compensation programs on a regular basis and determining the compensation of its senior executives.

• Requiring and approving senior executive succession plans.

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• Establishing a corporate environment that promotes timely and effective disclosure (including robust disclosure controls, procedures and incentives), fiscal accountability, high ethical standards and compliance with all applicable laws and regulations.

• Establishing a process by which security holders can send communications directly to the Board, the “non-management” directors as a group, and/or individual directors.

• Reviewing and approving material transactions and commitments not entered into in the ordinary course of business.

• Developing a corporate governance structure that allows and encourages the Board to fulfill its responsibilities.

• Providing advice and assistance to the Company’s senior executives.

• Evaluating the overall effectiveness of the Board and its committees, at least annually.

2. Exercise Business Judgment. In discharging their fiduciary duties of care, loyalty and candor, directors are expected to exercise their business judgment to act in what they reasonably believe to be the best interests of the Company and its stockholders.

3. Understand the Company and its Business. Directors have an obligation to become and remain informed about the Company and its business, including the principal operational and financial objectives, strategies and plans of the Company and the problems, risks and success factors affecting the Company’s business.

4. Notification of Change in Corporate Affiliation. If a non-management director retires or changes the position he or she held upon first becoming a member of the Board, the director has an obligation to notify the Chairman of the Board and the Chairman of the Corporate Nominating and Governance Committee of any change in his or her affiliation or responsibility. This notice allows the Board, through the Nominating and Corporate Governance Committee, to review the appropriateness of Board membership under the changed circumstances.

5. Review of Systems. Directors are responsible for determining that effective systems are in place for the periodic and timely reporting to the Board on important matters concerning or affecting the Company.

6. Board and Committee Meetings. Directors are responsible for attending regularly scheduled and special Board meetings and meetings of committees on which they serve, and devoting the time needed, and meeting as frequently as necessary, to discharge their responsibilities properly.

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7. Reliance on Management and Advisors; Indemnification. The directors are entitled to rely on the Company’s senior executives and its outside advisors, auditors and legal counsel. The directors are also entitled to Company-provided indemnification, statutory exculpation, and directors’ and officers’ liability insurance.

F. Board Meetings

1. Selection of Agenda Items. The Chairman of the Board shall establish the agenda for each Board meeting. Each Board member is free to suggest the inclusion of agenda items and is free to raise at any Board meeting subjects that are not on the agenda for that meeting. During at least one meeting each year, the Board shall review the Company’s long-term strategic plans and the principal issues that the Company expects to confront in the future.

2. Frequency and Length of Meetings. The Chairman of the Board, in consultation with the members of the Board, shall establish the frequency and length of the Board meetings. Special meetings may be called from time to time as determined by the needs of the business. The Board meets a minimum of four (4) times per fiscal year and each member is expected to attend the annual meeting of shareholders.

3. Advance Distribution of Materials. Information and data that are important to the Board’s understanding of the business to be conducted at a Board or committee meeting are distributed in writing to the directors before the meeting, as necessary, and directors should review these materials in advance of the meeting.

4. Executive Sessions. The “non-management” directors, as defined by the rules of the New York Stock Exchange, shall meet in executive session at least semi-annually. The non-management directors will meet in executive session at other times at the request of any non-management director. Absent unusual circumstances, these sessions shall be held in conjunction with regular Board meetings.

5. Attendance of Non-Directors at Board Meetings. The Board welcomes regular attendance at each Board meeting of senior executives of the Company. Furthermore, the Board encourages the senior executives of the Company to bring, from time to time, Company personnel into Board meetings who (i) can provide additional insight into the items being discussed because of personal involvement in these areas or (ii) appear to be persons with future potential who should become known to the Board.

G. Board Committees

1. Key Committees. The Board shall have at all times an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Each such committee shall have a charter that has been approved by

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the Board. The Board may, from time to time, establish or maintain additional committees as necessary or appropriate.

2. Committee Charters. Charters shall be established for the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee in accordance with applicable SEC, NYSE and other regulatory rules. The Board shall, from time to time as it deems appropriate, review and reassess the adequacy of each charter and make appropriate changes.

3. Selection of Agenda Items. The chairman of each committee, in consultation with the committee members, shall develop the committee’s agenda.

4. Frequency and Length of Committee Meetings. The chairman of each committee, in consultation with the committee members, shall establish the frequency and length of the committee meetings consistent with any requirements set forth in the committee’s charter. Special meetings may be called from time to time as determined by the needs of the business and the responsibilities of the committees.

H. Director Access to Management and Independent Advisors

1. Access to Officers and Employees. Directors have full and free access to officers and employees of the Company. Any meetings or contacts that a director wishes to initiate may be arranged through the Chief Executive Officer or the Secretary or directly by the director.

2. Access to Independent Advisors. The Board and each committee shall have the power to hire and consult with independent legal, financial or other advisors for the benefit of the Board or such committee, as they may deem necessary, without consulting or obtaining the approval of any officer of the Company in advance. Such independent advisors may be the regular advisors to the Company. The Board or any such committee is empowered, without further action by the Company, to cause the Company to pay the compensation of such advisors as established by the Board or any such committee.

I. Director Compensation

1. Role of Board and Compensation Committee. The form and amount of director compensation shall be determined by the Board in accordance with the policies and principles set forth in items 2-4 below. The Compensation Committee shall review from time to time, but no less than once per year, the compensation of the Company’s directors.

2. Form of Compensation. Director compensation may contain a cash retainer, an equity award or a combination of both. Including equity as part of director compensation helps align the interest of directors with those of the Company’s stockholders.

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3. Amount of Consideration. The Company seeks to attract exceptional talent to its Board. Therefore, the Company’s policy is to compensate directors at least competitively in a manner and consistent with market practices.

4. Employee Directors. Directors who are also employees of the Company shall receive no additional compensation for Board or committee service.

J. Director Orientation and Continuing Education

1. Orientation: The Nominating and Corporate Governance Committee shall review the effectiveness of the orientation process for newly elected members of the Board.

2. Continuing Education. Each director is expected to be involved in continuing director education on an ongoing basis to enable him or her to better perform his or her duties and to recognize and deal appropriately with issues that arise. The Nominating and Corporate Governance Committee shall regularly assess the adequacy of and need for additional continuing director education programs. The Company shall pay all reasonable expenses related to continuing director education.

K. Management Evaluation and Succession

1. Selection of Chief Executive Officer. The Board selects and evaluates the Company’s Chief Executive Officer in the manner that it determines to be in the best interests of the Company’s stockholders.

2. Evaluation of Chief Executive Officer and Senior Executives. The Compensation Committee shall be responsible for overseeing the evaluation of the Company’s Chief Executive Officer and senior executives.

3. Succession of Senior Executives. The Nominating and Corporate Governance Committee shall be responsible for requiring and approving the Chief Executive Officer and senior executive succession plans.

L. Code of Business Conduct

The Company maintains, and the Audit Committee reviews and oversees compliance with, a code of business conduct and ethics for directors, officers, and all employees that shall address, at a minimum, conflicts of interest, corporate opportunities, confidentiality, proper use of Company assets, compliance with laws, rules and regulations, and reporting of any illegal or unethical behavior. The code of business conduct currently in effect shall be reviewed by the Audit Committee from time to time. Directors, as well as all officers and employees, are subject to the code of conduct with respect to their director related activities.

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M. Annual Performance Evaluation of the Board

The Nominating and Corporate Governance Committee shall oversee an annual self-evaluation of the Board to determine whether it and its committees are functioning effectively.

N. Periodic Review of the Corporate Governance Guidelines

The Nominating and Corporate Governance Committee shall, from time to time as it deems appropriate, review and reassess the adequacy of these Guidelines and recommend any proposed changes to the Board for approval.

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TERADYNE, INC.

Attachment A to Corporate Governance Guidelines

CRITERIA FOR SELECTION OF DIRECTOR NOMINEES

General Criteria

1. Nominees should have a reputation for integrity, honesty and adherence to high ethical standards.

2. Nominees should have demonstrated business acumen, experience and ability to exercise sound judgments in matters that relate to the current and long-term objectives of the Company and should be willing and able to contribute positively to the decision-making process of the Company.

3. Nominees should have a commitment to understand the Company and its industry and to regularly attend and participate in meetings of the Board and its committees.

4. Nominees should ensure that existing and future commitments would not materially interfere with the Board members obligations to the Company.

5. Nominees should not have, nor appear to have, a conflict of interest that would impair the nominee’s ability to represent the interests of all the Company’s stockholders and to fulfill the responsibilities of a director.

6. Nominees, excluding directors serving on Teradyne’s Board on January 28, 1997, must be 72 years or younger as of the date of their election or appointment.

Application of Criteria to Existing Directors

The renomination of existing directors should not be viewed as automatic, but should be based on continuing qualification under the criteria set forth above. In addition, the Nominating and Corporate Governance Committee shall consider the existing directors’ performance on the Board and any committee.

Criteria for Composition of the Board

The backgrounds and qualifications of the directors considered as a group should provide a significant breadth of experience, knowledge and abilities that shall assist the Board in fulfilling its responsibilities.

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